Western Areas Ltd Annual Report 2013

Plain-text annual report

T +61 8 9334 7777 F +61 8 9486 7866 E info@westernareas.com.au Registered Oﬃ ce Level 2, 2 Kings Park Road, West Perth WA 6005 PO BOX 1891 West Perth 6872 W E S T E R N A R E A S L T D 2 0 1 3 A N N U A L R E P O R T ABN 68 091 049 357 2013 ANNUAL REPORT CORPORATE DIRECTORY Directors Terry Streeter (Chairman) Robin Dunbar Julian Hanna Dan Lougher David Southam Rick Yeates Ian Macliver Company Secretary Joseph Belladonna Auditors Crowe Horwath Level 6 256 St Georges Terrace Perth WA 6000 Bankers ANZ Banking Group Limited 77 St Georges Terrace Perth WA 6000 Share Registry Computershare Investor Services Pty Ltd Level 2 45 St Georges Terrace Perth WA 6000 Stock Exchange Australian Securities Exchange Limited Code: WSA Solicitors Allion Legal Level 2 50 Kings Park Road West Perth WA 6005 Registered Oﬃ ce Level 2 2 Kings Park Road West Perth WA 6005 Phone (08) 9334 7777 Fax (08) 9486 7866 Competent Person Statement: “The information within this report as it relates to mineral resources, reserves and mine development activities is based on information compiled by Mr Dan Lougher of Western Areas Ltd. Mr Lougher is a members of AusIMM and is a full time employee of the Company. Mr Lougher has suﬃ cient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Persons as deﬁ ned in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.’ Mr Lougher consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.” Forward Looking Statements: This release contains certain forward-looking statements. Forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability to control or predict which could cause actual events or results to diﬀ er materially from those anticipated in such forward- looking statements. This announcement does not include reference to all available information on the Company or the Forrestania Nickel Project and should not be used in isolation as a basis to invest in Western Areas. Any potential investors should refer to Western Area’s other public releases and statutory reports and consult their professional advisers before considering investing in the Company. For Purposes of Clause 3.4 (e) in Canadian instrument 43-101, the Company warrants that Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. Designed by Dash Digital ANNUAL REPORT 2013 TABLE OF CONTENTS Chairman’s Letter Managing Director’s Report Operations Review Directors’ Report Corporate Governance Statements Auditor’s Independence Declaration Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes In Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Opinion Tenement Listing Shareholder Information PAGE 2 4 6 22 39 43 44 45 46 47 48 49 91 92 94 100 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 1 CHAIRMAN’S LETTER Terry Streeter - Chairman “Several business development announcements that support Western Areas targeted approach to growth were made throughout FY2013.” Dear shareholders, On behalf of your Board of Directors, I am pleased to present to you our Annual Report for the ﬁ nancial year ending 30 June 2013 (FY2013). Thank you to each and every one of you for your continued support throughout what has been a challenging but positive year for your Company. Throughout FY2013, we achieved strong output and record results from our operations with 27,819 tonnes of nickel in concentrate sold. Our sales for the month of June 2013 surpassed expectations and we were pleased to report a positive cash ﬂ ow from our operations of A$112.1 million (M) for the full year. Most importantly, we achieved it safely. Proudly, our team’s record for keeping our people safe is one of the best in the mining industry. Despite these eﬀ orts in managing the aspects of our business we can control well, the parts of our business shaped by the global economy, being a sustained weak nickel price and high Australian dollar worked against our underlying ﬁ nancial results. These factors combined contributed to a reported net loss after tax of $94.1M for Western Areas in FY2013. Notwithstanding some negative market headwinds, the Company managed to repay signiﬁ cant debt totalling $A150.5M and delivered an underlying net proﬁ t after tax of $5.5M when most nickel companies across the globe reported losses. I am very encouraged to see a solid and sound balance sheet leading into the new ﬁ nancial year. We have witnessed pressure from the high Australian dollar ease in more recent times, but it is no reason to be complacent, there is no immunity from future ﬂ uctuations so it is imperative that we continue to be prudent with our costs. This is a task which our 2 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T Managing Director, Dan Lougher, who reached his ﬁ rst year anniversary with Western Areas in February 2013, has performed outstandingly. Western Areas is still in the lowest quartile of worldwide nickel production costs. In this current volatile market, your Board of Directors determined that it would be more prudent capital management to refrain from paying a ﬁ nal dividend for the year, after having paid a fully franked interim dividend (two cents per share) to shareholders. This was obviously a decision which required careful consideration but it was decided that the most important thing for your company, in this environment, was to retain its balance sheet strength and ﬂ exibility. Several business development announcements that support Western Areas targeted approach to growth were made throughout FY2013. In particular, a non- binding Strategic Alliance Deed with China’s largest nickel producer Jinchuan Group Limited was reached. Under the alliance, Western Areas and Jinchuan will share the assessment and due diligence on future evaluation of base metal projects. Together we will consider potential global mining opportunities including exploration, development and operation of the projects. Western Areas has a proven track record of exploring, ﬁ nding, developing and producing proﬁ table mines and this mutually beneﬁ cial partnership will support and enhance our capacity to do this. Under our exploration program, a new high grade nickel sulphide discovery was made at the New Morning deposit in January this year. This exciting discovery is made in close proximity (within 3km) of both the high grade Flying Fox and Spotted Quoll mines. Drilling since the end of the ﬁ nancial year has revealed further high grade intersections and assessment will take place throughout the year so the Board of Directors can make an informed decision on how to proceed with this potential new mining project. These strategies and new opportunities for growth, the predicted rallying of the nickel market and the forecast steady demand for resources from China provide Western Areas with an optimistic outlook for FY2014. Our production costs are lower and our product grade higher than the majority of our peers and throughout the year we will focus on maintaining a sound and stable balance sheet. On Saturday, 7 September 2013, we welcomed Australia’s decision to vote out the government who had failed to promote or support growth and opportunities within the resources sector. The government had sought only to exploit the sector for immediate yet unsustainable cash beneﬁ t. They instigated poorly designed tax policies such as initially proposed Resource Super Proﬁ ts Tax (RSPT) and later imposed the fundamentally ﬂ awed Minerals Resource Rent Tax (MRRT). We applaud the commitment of the Abbott Coalition Government to abolish the MRRT and reinstate economic conﬁ dence amongst Australians. Thank you to all of you for continuing to support our company and I look forward to a safe and prosperous year ahead with you. Terry Streeter Chairman W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 3 MANAGING DIRECTOR’S REPORT “Importantly, the Company is maintaining an excellent safety record (LTIFR 0.83) in all our operations and this is constantly reviewed for improvement.” Against a backdrop of a challenging nickel price environment, I am pleased to report that the operations at Western Areas have performed well over the year. The 100% owned Forrestania Operations exceeded our production forecast whilst delivering costs lower than budget for the year and did so with an excellent safety record. Financially, the year was dominated by the downward movement in the nickel price coupled with the continued high Australian dollar through to 30 June 2013. This has seen us deliver an underlying net proﬁ t after tax (NPAT) of $A5.6M for the year, on a statutory Net Loss After Tax (NLAT) of A$94.1M. Since the end of the ﬁ nancial year, we’ve seen signiﬁ cant falls in the value of the Australian dollar which, if sustained over the course of the coming year, should help oﬀ set an unsustainably low nickel price. The NLAT arises from our recognition of a tax eﬀ ected non-cash impairment charge of $99.7M which predominately related to historical exploration and the Diggers South project. Again, our decision to review past historical expenditure arose from the nickel price environment. After more than 10 years exploring the Forrestania Belt we built up signiﬁ cant capitalised expenditure, not all of which will one day lead to a nickel mine. This does not diminish our desire to explore the Forrestania region – the same exploration program delivered us Flying Fox, Spotted Quoll and the recent New Morning discovery. We will remain active explorers, building the future of our Company. Despite the ﬁ nancial headwinds, we’ve been able to generate signiﬁ cant cash ﬂ ow from the business over the year as well as pay down over A$150.5M in Convertible Bonds and Borrowings. Daniel Lougher - Managing Director In common with our peers in the industry, controlling costs continues to be a major focus for management over the year. As expected, the change from open pit mining to underground mining at Spotted Quoll added to the absolute costs line, however cost savings have been eﬀ ective in maintaining our position in the bottom quartile cash costs of nickel producers. This has been demonstrated by our cash ﬂ ow pre-ﬁ nancing cost and repayments (after all capital expenditure and exploration) reaching A$33.0M for the year, compared to A$35.4M on the same measure for FY2012 which had the beneﬁ t of a signiﬁ cantly higher nickel price. Having reported a NLAT resulting from the impairment charge and recognition of the low nickel price environment, the Board took the dec ision not to pay a ﬁ nal dividend this year. The dividends declared for the year (2 cents per share interim dividend) represent a payout ratio of approximately 70% of the underlying NPAT, in comparison to an average of around 30% to 35% of NPAT in the past two years. The Board remains committed to providing sustainable returns to shareholders which match our proﬁ tability whilst retaining suﬃ cient cash to invest in the future growth of the Company. With a continued focus on prudent capital management, Western Areas remains in a solid ﬁ nancial position with balance sheet ﬂ exibility to pursue growth objectives. Importantly, the Company is maintaining an excellent safety record (LTIFR 0.83) in all our operations and this is constantly reviewed for improvement. We maintain a high level of safety training for staﬀ and contractors with a focus on occupational health for site based employees. Western Areas also maintains the highest possible environmental standards in all its operations from exploration and mining to exporting nickel concentrate to China. 4 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T FY12 FY13 Lost Time Injury Frequency Rate (LTIFR) 1.5 0.83 Total Ore Mined (tns) Average Mined Grade 634,122 555,736 4.9% 5.0% Contained Nickel Mined (tns) 31,102 27,639 Total Ore Processed (tns) 547,668 586,254 Average Processed Grade Average Recovery 5.1% 92% 5.1% 91% Contained Nickel Processed (tns) 25,641 26,918 Nickel Sold (tns) 26,637 27,819 Average Nickel Price Received (US$/tn) 17,791 16,112 Cash Costs before smelting/reﬁ ning (A$/lb) Average Exchange Rate USD/AUD 2.43 1.03 2.68 1.03 In October 2012, Western Areas won two prestigious awards at the Western Australian Industry and Export Awards; the Premier’s Award for Excellence and the Minerals and Energy Export Award. These awards demonstrate the Company’s commitment to deliver value through our nickel concentrate sales. At an operational level, Spotted Quoll underground mining remains ahead of the feasibility study schedule and during the year reached the 10,000 nickel tonnes per annum run rate which will be increased in FY2014 to 12,000 tonnes per annum. Spotted Quoll, clearly a world class deposit, now has a mine life greater than 10 years and remains open at depth. After the purchase of Kagara Ltd’s nickel assets in March last year, the operational team at Flying Fox have fully integrated the Lounge Lizard deposit into the mine plan. Flying Fox continues to perform extremely well with an excellent safety record. In support of the two mines, the Cosmic Boy Concentrator continues to perform above its nameplate capacity of 550,000 tonnes of ore per annum. In February 2013, a new oﬀ take contract (3rd) commenced with Jinchuan for 26,000 tonnes of nickel in concentrate which should be completed during the March quarter in 2015. This new contract resulted in improved payable terms for the Company. The strategy of tendering our oﬀ take contracts has proven to be very successful for Western Areas in past years as there is growing consensus the world’s nickel smelters will be short of high quality nickel concentrates in future years. On the exploration front, with our continued focus on organic exploration at Forrestania, we have had success with the new high grade discovery at New Morning complimented by the execution of a Farm-in and JV agreement with Traka Resources in the Musgraves. These will provide excellent opportunities in the coming year for nickel and copper exploration. During the year, we opted to discontinue activities in the Sandstone, Kawana, Mt Jewel and Koolyanobbing project areas, in order to prioritise areas we felt had higher potential to deliver our next mine. The current challenging funding situation for junior exploration companies continues to oﬀ er Western Areas a wealth of opportunities to enter relatively advanced exploration projects, for attractive entry prices. Looking overseas, the Company has taken the option to reduce its activities in Canada, but still holds a 19.9% interest in Mustang Minerals. Minor investments in Finland have seen an increased holding to an 84% interest in FinnAust Mining PLC. The intent now is to list FinnAust on the London AIM stock exchange by the end of 2013, market conditions permitting. It is expected that suﬃ cient funds will be raised to conduct a two year surface drilling program. During FY2013, we saw a signiﬁ cant drop in the nickel price (9.5%) and the operations of many in the nickel industry outside Western Areas are now in a non-proﬁ table situation. This has been exacerbated by ﬂ at demand for stainless steel in the world market (ex-China) and further reductions in the cost of Nickel Pig Iron (NPI) production due to the introduction of a new processing method called Rotary Kiln Electric Arc Furnace (RKEF). However, this production is totally dependent on high grade (>1.8% nickel) and low iron (<25% Fe) Indonesian Laterite ore and a potential ban on ore export from that country in early 2014 should positively impact the nickel price. In this challenging environment the Company spends a signiﬁ cant amount of time on cost and production control. To this end, all employees contribute to ways in which the Company can continue to drive eﬃ ciency improvements. Further, every major service provider has committed to reduce their cost structure in the coming year. It’s this dedication to details and critical analysis, together with the high quality of our mines, that ensures we have been able to maintain our position as the lowest cost nickel producer in Australia with the strongest operational margins. A high standard of environmental management has been maintained at the Forrestania Operations. The Company continues to support a series of biodiversity initiatives such as the funding of the Carnaby’s Black Cockatoo research program within the south eastern wheatbelt and is a major sponsor of Perth Zoo’s Western Quoll exhibit. Part of this sponsorship results in admission passes to the Perth Zoo which the Company donates to The Starlight Children’s Foundation. Involvement has also been initiated in the Energy Eﬃ ciency Opportunities program which aims to encourage industry to assess and ﬁ nd opportunities to reduce their energy usage and carbon emissions. To conclude, I would like to thank all of our staﬀ , contractors and support companies for their dedication and commitment in making Western Areas a strong company with outstanding assets. I look forward to another successful year during FY2014. Thank you for your support. Daniel Lougher Managing Director W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 5 OPERATIONS OPERATIONS REVIEW REVIEW GROUP OVERVIEW Western Areas Ltd is an Australian-based nickel miner listed on the ASX. The main asset is the 100% owned Forrestania Nickel Operations, 400km east of Perth. Western Areas is currently targeting total annual production from the Flying Fox and Spotted Quoll mines of 25,000t to 26,000t nickel in ore for FY14. The Forrestania Nickel Operations (FNO) is comprised of two 100% owned underground nickel mines, i.e. Flying Fox and Spotted Quoll operations, the Cosmic Boy nickel concentrator and the associated Cosmic Boy accommodation village. Flying Fox is one of the highest grade nickel mines in Australia and has been in production since 2006 and the second mine, Spotted Quoll, commenced underground high grade nickel ore production in November 2011. STRUCTURE Western Areas is a Company limited by shares that is incorporated and domiciled in Australia. Western Areas has prepared a consolidated ﬁ nancial report incorporating the material entities that it controlled during the ﬁ nancial year, which are shown below along with the principal assets of each: Bacterial Heap Leach Worldwide Patents Full Laboratory and Management Team Finland VMS Deposits Polymetallic Outokumpu Copper FinnAust Mining PL C 84 % B i o heap Ltd 100% East Bull Lake (65%) - Ni/PGM Makwa - Ni/PGM Mayville (M2) - Cu/PGM Corp M usta oratio n g C a n n ( a 1 M i n e r a d 9 a . 9 l s % ) ) Bullﬁnch North - Ni Mt Alexander - Ni Southern Cross Goldﬁleds Traka Resources A u s t E x p l o A s s e t r s a t i s a e r A n r e t s e % 0 0 1 ( . d t L y t el P k Western Areas Ltd 2 Operating Mines Flying Fox - Ni Spotted Quoll - Ni o n Forresta n i a W (100%) (Ni , A u ) Nic Lounge Lizard - Ni Diggers South - Ni Sunrise - Ni Mt Gibb - Ni New Morning - Ni Cosmic Boy - Ni Lake King - Ni Daybreak - Ni Hatters Hill - Ni Gold Rights FORRESTANIA SAFETY At the end of January 2013, the FNO 12 month rolling Loss Time Injury (LTI) frequency rate dropped to zero for the ﬁ rst time since operations began in December 2004. However, the LTI Frequency Rate rose to 0.83 at the end of June, ending a 509 day period of zero LTI’s. This was due to a soft tissue strain injury requiring remedial surgery resulting in a single LTI. Underpinning this excellent safety performance is Western Areas and its contractor’s ongoing commitment to proactive risk management. At the end of FY13, the Flying Fox mine has been 684 days Lost Time Injury (LTI) free and the Spotted Quoll mine has not recorded any LTI’s to date (806 days). The Western Areas management, safety teams and site contractors have worked closely and collaboratively to investigate incidents and close out corrective actions as soon as possible. 6 6 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T Rope Rescue Training at Forrestania Native seedlings ready for rehabilitation planting During the year, training in the Incident Cause Analysis Method (ICAM) Incident Investigation methodology was conducted and work continues to improve the quality and outcomes of incident investigations. Safety training has focused on the needs of the various work areas and the special skills required by the Emergency Response Team. Training has included Senior First Aid, vehicle extrication, conﬁ ned space rescue, vertical (rope) rescue and ﬁ re ﬁ ghting. A series of interactive on-line training modules have been developed to include company policy awareness and other OH&S subjects. FORRESTANIA ENVIRONMENTAL ACTIVITIES A high standard of environmental management has been maintained at the FNO for the ﬁ nancial year with all activities compliant with statutory regulations and licence conditions. Some of the notable environmental undertakings onsite for the year include the following: • • Continued support of biodiversity conservation initiatives within the Forrestania area and regional Western Australia. These commitments include; funding of a research program over a ﬁ ve year period studying the Carnaby’s Black Cockatoo within the south eastern wheatbelt area; sponsorship of the Perth Zoo’s Western Quoll exhibit and a continuation of our sponsorship of the Eastern Wheatbelt Declared Species Group wild dog control program which aims to reduce impact of wild dog incursions on livestock holdings in the eastern wheatbelt agricultural zone. • • Voluntary reporting of greenhouse gas emissions and assessment of climate change risks and opportunities has been undertaken through the international Carbon Disclosure Project (CDP). Participation in the CDP provides a valuable tool for analysis of climate change related risks and opportunities aﬀ ecting our environmental performance. • • Involvement, as a member of the core planning team and as a stakeholder, in the Shire of Kondinin Gondwana Link group who are developing a conservation action plan for the portions of the Great Western Woodlands located in both the Shire of Kondinin and the Shire of Dundas. Development of the plan is ongoing. • • Participation in the Energy Eﬃ ciency Opportunities program provided by the Commonwealth Government Department of Resources, Energy and Tourism. This program aims to encourage industry to assess and ﬁ nd opportunities to reduce their energy usage and carbon emissions. • • Participation in the Jobs and Competitiveness Program run by the Commonwealth Government Department of Industry, Innovation, Climate Change, Science, Research and Tertiary Education. This program is aimed at providing assistance over the ﬁ rst ﬁ ve years of carbon pricing to companies that produce signiﬁ cant carbon pollution but which are constrained in their capacity to pass through costs in the global market place (i.e. trade exposed). • • Substantial completion of the FNO Mine Closure Plan in line with the Department of Mines and Petroleum and Environmental Protection Authority guidelines. • • Progressive rehabilitation continues throughout the Forrestania operations in line with our commitment to return the areas disturbed by mining to a stable, self sustaining vegetation complex similar to the surrounding landforms. During the ﬁ nancial year, 9,000 seedlings were planted across both the Flying Fox and Spotted Quoll minesites. • • Commencement of planning for the development of Western Areas inaugural Sustainability Report which will summarise company performance against selected key sustainability indicators. Environmental Technician, Duane Byrnes, undertaking seedling planting at Spotted Quoll W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 7 7 OPERATIONS REVIEW FLYING FOX MINE SPOTTED QUOLL MINE By the end of the ﬁ nancial year, the Hanna Decline was advanced to a depth of 410m (990m RL) below the surface with over 2.2km of lateral decline metres. Approximately 2.8km of capital mine development has been completed, as well as approximately 7.2km of total development. The top stoping block between 1230 and 1125 levels has progressed well for the year with two full levels fully extracted (1195 and 1185). A second stoping block between the 1125 and 1110 levels was brought online with two stope panels completed during the last quarter. The development of the second stoping block will facilitate Spotted Quoll steady state production at 12,000 nickel tonnes per year. The paste-ﬁ ll plant started operation in October 2012 and by the end of the ﬁ nancial year had delivered a total of 21,800 m^3 into stope voids, which was in-line with budget targets. The paste-ﬁ ll plant and associated reticulation network has performed very well for the year and paste-ﬁ lling is now established as a reliable production activity. By the end of the ﬁ nancial year, the Streeter Decline was advanced to a depth of 1,191m below surface, with total decline development at just over 8.0km. Approximately 22.3km of capital mine development has also been completed, as well as approximately 35.6km of total development. Decline capital development was not a priority throughout the year as current mining levels already provide full access to all T5 ore reserves above the 335 level. The Streeter Decline was advanced approximately 360m laterally during the year to access ore below the 335 horizon. Development of both the T4 and T5 orebodies is eﬀ ectively complete, however minimal small proﬁ le development was undertaken on the southern fringes of the orebody. Some narrow vein development was undertaken on several T4 and T5 levels, whilst bulk Avoca longhole mining methods were continued in the T5 core area. The mine has continued to operate as a predominately production focussed mine with stoping methods generating the majority of ore production. Geotechnical conditions below 1km depth continue to be relatively benign and ground conditions in the production stopes are as expected. The use of hand held air-leg techniques on the narrower fringes of both the T4 and T5 ore zones continued during the year and enabled the mine to eﬀ ectively extract these narrower sections of the orebody without excessive waste rock dilution. No major geotechnical issues have occurred throughout the year and mine dewatering quantities have remained at relatively low levels. High-grade Nickel-bearing massive sulphide (pentlandite) - Nickel tenor = 12% Ni Face Grade = 10.6% Ni 4.5m Disseminated meta-sediment 1% Ni 5.5m 295 South ore drive showing face of massive sulphide Massive sulphides in the 1095 Ore Drive face 8 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T Cosmic Boy Concentrator at dawn MINE ORE PRODUCTION Tonnes Mined Flying Fox Ore Tonnes Mined Grade Ni Tonnes Mined Spotted Quoll - Underground Ore Tonnes Mined Grade Ni Tonnes Mined Total - Ore Tonnes Mined Grade Total Ni Tonnes Mined FLYING FOX PRODUCTION 2012/2013 Sep Qtr Dec Qtr Mar Qtr Jun Qtr 102,218 5.0% 5,129 43,581 5.4% 2,375 89,846 4.9% 4,380 50,907 5.1% 2,577 82,668 4.9% 4,081 59,335 5.2% 3,066 145,799 140,753 142,003 5.1% 7,504 4.9% 6,957 5.0% 7,147 73,716 4.7% 3,447 53,465 4.8% 2,584 127,181 4.7% 6,031 FY Total 348,448 4.9% 17,037 207,288 5.1% 10,602 555,736 5.0% 27,639 Tn's Ni % Tn's Tn's Ni % Tn's Tn's Ni % Tn's During the year, Western Areas mined a total of 348,448 ore tonnes at an average grade of 4.9% nickel for 17,037 contained nickel tonnes which included 109,008 ore tonnes @ 4.4% for 4,750 nickel tonnes from the Lounge Lizard tenements. SPOTTED QUOLL PRODUCTION During the year, Western Areas mined a total of 207,288 ore tonnes at an average grade of 5.1% for 10,602 contained nickel tonnes. COSMIC BOY CONCENTRATOR PRODUCTION Tonnes Milled and Sold Sep Qtr Dec Qtr Mar Qtr Jun Qtr 2012/2013 FY Total Ore Processed Grade Ave. Recovery Ni Tonnes in Concentrate Ni Tonnes in Concentrate Sold Total Nickel Sold Tns % % Tns Tns Tns 142,795 151,855 145,348 146,256 586,254 5.3% 92% 6,951 6,923 6,923 4.9% 90% 6,722 6,829 6,829 5.0% 91% 6,611 6,845 6,845 5.1% 89% 6,634 7,222 7,222 5.1% 91% 26,918 27,819 27,819 For the ﬁ nancial year 2013, the Cosmic Boy Concentrator treated 586,254 tonnes at an ore grade of 5.1% nickel. A total of 181,608 tonnes of concentrate was produced at 14.8% nickel containing 26,918 nickel tonnes. Nickel recovery for the year averaged 91%. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 9 OPERATIONS REVIEW NICKEL SALES A total of 190,840 tonnes of concentrate was delivered into the oﬀ take contracts during FY 2013. This concentrate contained a total of 27,819 tonnes of nickel. The second oﬀ take agreement with Jinchuan for 15,000 tonnes of nickel in concentrate was completed ahead of schedule in February 2013. The third oﬀ take with Jinchuan commenced in March 2013. To date, 6,615 tonnes of nickel in concentrate has been delivered under this oﬀ take arrangement. The 30 June 2013 concentrate stockpile at Cosmic Boy stands at 1,383 tonnes at a grade of 14.1% nickel containing 195 tonnes of nickel metal. The reduction in the concentrate stockpile over the year reﬂ ected ongoing logistical improvements with container turnaround times from Asia. Stockpiles Ore Grade Concentrate Grade Contained Ni in Stockpiles COST OF PRODUCTION 2012/2013 Sep Qtr Dec Qtr Mar Qtr Jun Qtr 179,968 168,866 160,884 138,862 4.2% 7,118 14.3% 8,625 4.3% 5,872 14.2% 8,074 4.3% 2,989 14.8% 7,330 4.0% 1,383 14.1% 5,700 Tns % Tns % Tns The annual cash cost of nickel in concentrate was A$2.68/lb which puts Western Areas as the lowest cost nickel miner in Australia. Financial Statistics Group Production Cost/lb Mining Cost (*) Haulage Milling Admin By Product Credits Cash Cost Ni in Con (***) A$/lb A$/lb A$/lb A$/lb A$/lb A$/lb Cash Cost Ni in Con (***) US$/lb (**) Exchange Rate US$ / A$ 2012/2013 Sep Qtr Dec Qtr Mar Qtr Jun Qtr 1.82 0.09 0.40 0.20 (0.02) 2.49 2.59 1.04 2.27 0.05 0.41 0.17 (0.02) 2.89 3.00 1.04 2.23 0.05 0.41 0.19 (0.02) 2.86 2.97 1.04 1.87 0.05 0.38 0.18 (0.02) 2.46 2.44 0.99 FY Total 2.05 0.06 0.40 0.19 (0.02) 2.68 2.75 1.03 (*) Mining Costs are net of deferred waste costs and inventory stockpile movements (**) US$ FX for Relevant Quarter is RBA ave daily rate (Jun Qtr = A$1:US$0.99) (***) Payable terms are not disclosed due to conﬁ dentiality conditions of the oﬀ take agreements. Cash costs exclude royalties. Note: Grade and recovery estimates are subject to change until the ﬁ nal assay data are received. 10 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T OPERATIONS REVIEW FLYING FOX ORE RESERVES / MINERAL RESOURCES The T5 orebody mineral resource estimate was updated following additional drilling. During the September quarter 2012 the upgrade resulted in an increase of 1,196 nickel tonnes, net of mining depletion. A long section of the T5 orebody is shown below. Indicated Mineral Resources (Excluding Disseminated Zone) 1,509,983 tonnes @ 5.7% Ni (86,548 Ni Tonnes) Inferred Mineral Resources (Excluding Disseminated Zone) 166,594 tonnes @ 5.0% Ni (8,308 Ni Tonnes) T4T4 n e p O n o i t a s i l a r e n M i T5T5 T7T7 Mineralisation open at depth Figure 1: Flying Fox longitudinal section Deposit Classiﬁ cation Ore tonnes Grade (Ni%) Ni tonnes T1 South T1 North T4 T5 Flying Fox T5 Lounge Lizard T7 Indicated 65,600 Inferred 35,200 Indicated 45,400 Inferred 12,700 Indicated 147,000 Inferred 14,680 Indicated 562,500 Inferred 12,400 Indicated 628,800 Inferred 82,100 Indicated 60,593 Inferred 9,514 Flying Fox Total 1,676,487 3.9 4.9 4.2 4.8 5.0 3.9 6.2 4.3 5.8 5.6 5.4 3.1 5.7 2,580 1,720 1,900 610 7,380 580 34,860 540 36,560 4,560 3,268 298 94,856 Flying Fox mineral resource statement (excluding Disseminated Resources) An updated Flying Fox ore reserve estimate was completed during the December 2012 quarter. The 30 June 2012 ore reserve, net of mining depletion, is summarised in the table below. Deposit Classiﬁ cation Ore tonnes Grade (Ni%) Ni tonnes Flying Fox Probable 1,670,900 4.0 67,000 Flying Fox ore reserve statement W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 11 OPERATIONS REVIEW SPOTTED QUOLL ORE RESERVES / MINERAL RESOURCES During the past 12 months, the mineral resource statement for Spotted Quoll North was updated based on additional surface drilling results which resulted in an overall resource increase of approximately 51,000 tonnes @ 11% Ni for 5,700 Ni tonnes at the end of September. A longitudinal section of the Spotted Quoll deposit is shown below. Indicated Mineral Resource 2,379,500 tonnes @ 6.0% Ni (144,010 Ni Tns) Inferred Mineral Resource 539,700 tonnes @ 5.1% Ni (27,510 Ni Tns) m 0 0 9 240m Figure 2: Longitudinal section of the Spotted Quoll main and north deposit with Mineral Resources as at 30 June 2013 The updated Spotted Quoll mineral resource statement, net of mining depletion, is summarised in the table below. Classiﬁ cation Ore tonnes Grade (Ni%) Ni tonnes Indicated Inferred Total 2,379,500 539,700 2,919,200 6.0 5.1 5.9 144,010 27,510 171,520 Spotted Quoll mineral resource statement The updated Spotted Quoll ore reserve statement, net mining depletion at year end is summarised in the table below. Classiﬁ cation Ore tonnes Grade (Ni%) Ni tonnes Probable 2,898,500 4.2 121,400 Spotted Quoll ore reserve statement Scanning electron microscopy image of BioHeap’s mineral leaching microbes (yellow, rod-shaped) attached to sulphide minerals (purple- blue crystals) at 4,500 magniﬁ cation. BIOHEAP During the year, signiﬁ cant third party testwork has progressed to variability testing in an external laboratory using a commercial ﬂ uidised bed reactor (FBR). This work will continue for several months to enable the client to evaluate the FBR before potentially moving to an onsite pilot test program. The BioHeap team received approaches from prospective clients to conduct testwork on base metal and gold projects. BioHeap proposals are generally conﬁ dential in nature and the model for generating returns for Western Areas will vary depending on the type of work being undertaken. Additional proposals were prepared for other companies following presentations on BioHeap’s new high pH leaching microbial culture and the use of diagnostic testwork utilised in the early stages of testing at the ALTA 2013 Nickel Cobalt Copper, Uranium and Gold conference in Perth. The presentation and trade booth were well received and the conference has generated interests which have lead to potential clients for BioHeap work. Testwork on a process stream from the Cosmic Boy Concentrator (CBC) was completed and the encouraging results are being used to conduct a preliminary engineering study. The testwork on the process stream from CBC has veriﬁ ed the capability of BioHeap’s high pH microbial cultures. This study has the potential for BioHeap to provide unique solutions to concentrators around the world for process streams that world normally be rejected from ﬁ nal concentrates. The data generated from the developmental and CBC test on work using BioHeap’s high pH leaching microbial culture was also used to strength its patent application. Procedural, technology and equipment enhancements continue to be made at BioHeap’s laboratory to further improve eﬃ ciency and reliability of research and testwork programs with the aim of reducing the administrative load on BioHeap’s key scientists and researchers, allowing them to focus on innovating and improving the technology. A marketing campaign is planned for the coming year to promote the BioHeap™ technology to the mining industry and to invite companies considering processing options for sulphide ores to consider the use of the BioHeap™ technology. Alliances and working relationships with research institutes, engineering ﬁ rms and testwork facilities continue to be formed and strengthened. INFRASTRUCTURE FNP Internal Haul Road The 16km internal haul road between the Spotted Quoll minesite and the Cosmic Boy concentrator plus a buried 110mm diameter potable water pipeline following the haul road route, was completed and operational by the end of October 2012. The new internal haul road has almost halved surface ore haulage costs from both mines to the Cosmic Boy concentrator. 12 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T OPERATIONS REVIEW WESTERN AREAS ORE RESERVE / MINERAL RESOURCE STATEMENT - EFFECTIVE DATE 30TH JUNE 2013 Deposit Ore Reserves 1. Flying Fox Area 2. Spotted Quoll 3. Diggers Area TOTAL ORE RESERVES Mineral Resources 1. Flying Fox Area Digger South Digger Rocks T1 South T1 North T4 FF T5 FF Massive Zone LL Massive Zone T6 T7 FF Total High Grade FF- LL T5 FF Disseminated Zone T5 LL Disseminated Zone Total Disseminated FF - LL Total Flying Fox - Lounge Lizard New Morning / Daybreak Massive Zone Disseminated Zone Total New Morning / Daybreak Spotted Quoll Total Spotted Quoll TOTAL WESTERN BELT Beautiful Sunday 2. Cosmic Boy Area Cosmic Boy Seagull TOTAL COSMIC BOY AREA 3. Diggers Area Diggers South - Core Diggers South - Halo Digger Rocks - Core Digger Rocks - Core Digger Rocks - Halo Purple Haze TOTAL DIGGERS AREA TOTAL MINERAL RESOURCES Tonnes Grade Ni% Ni Tns JORC Classiﬁ cation 1,670,900 2,898,500 2,016,000 93,000 6,678,400 65,600 35,200 45,400 12,700 147,000 14,680 562,500 12,400 628,800 82,100 - 60,593 9,514 1,676,487 197,200 357,800 4,428,000 4,983,000 6,659,487 321,800 93,100 1,069,800 659,200 2,143,900 2,379,500 539,700 2,919,200 480,000 12,202,587 180,900 195,000 375,900 3,000,000 4,800,000 54,900 172,300 1,441,000 560,000 10,028,200 22,606,687 4.0 4.2 1.4 2.0 3.3 3.9 4.9 4.2 4.8 5.0 3.9 6.2 4.3 5.8 5.6 0.0 5.4 3.1 5.7 0.9 1.0 0.8 0.8 2.0 3.7 3.5 0.9 0.9 1.4 6.0 5.1 5.9 1.4 2.8 2.8 2.0 2.4 1.5 0.7 3.7 1.1 0.7 0.9 1.0 2.0 67,000 Probable Ore Reserve 121,400 Probable Ore Reserve 28,950 1,850 219,200 Probable Ore Reserve Probable Ore Reserve Probable Ore Reserve 2,580 1,720 1,900 610 7,380 Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource 580 Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Indicated Mineral Resource Indicated Mineral Resource Indicated Mineral Resource Indicated Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Inferred Mineral Resource Indicated Mineral Resource 34,860 540 36,560 4,560 - 3,268 298 94,856 1,590 3,460 36,000 41,050 135,906 12,010 3,260 9,650 5,780 30,700 144,010 27,510 171,520 6,720 344,846 5,050 3,900 8,950 44,700 35,600 2,030 1,850 10,350 5,040 99,570 453,366 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 13 OPERATIONS REVIEW EXPLORATION FORRESTANIA EXPLORATION Western Areas continues to actively explore the wholly owned and Joint Venture tenement package at Forrestania. The area comprises some 900km2 and covers over a 125km strike length of prospective stratigraphy, Figure 3. The exploration activities are directed towards identifying new deposits, evaluating potential extensions to the existing Flying Fox and Spotted Quoll deposits as well as new discoveries, such as those recently announced at New Morning. The majority of the work continues to take place along what the Company describes as the Western Ultramaﬁ c Belt (“WUB”) which runs for 25km and contains the bulk of the known high grade deposits at Forrestania, including Flying Fox, Spotted Quoll and New Morning. The WUB has a total known endowment of over 450,000t of contained nickel metal. The decision to direct exploration resources to the WUB, starting at New Morning, has in a relatively short time period, delivered the Sunrise discovery and more recently the discovery below the existing New Morning deposit. The 6km zone between the Flying Fox and Spotted Quoll mines remains largely untested with no eﬀ ective deep drill testing (T5 depth equivalent) and the evaluation of this area continues and will remain a priority in the coming year. Assessment of the existing resources outside the main deposits was undertaken, including that at Seagull (2km north of Cosmic Boy) and Beautiful Sunday (7.5 km north of Flying Fox), with active exploration at Beautiful Sunday still in progress. Prospectivity reviews and subsequent generation of drill targets to locate new nickel sulphide deposits in the Forrestania Project region are undertaken on a continual basis. With a strong portfolio of projects, priority areas where exploration activities have either been undertaken or are planned to commence include the area between New Morning and Spotted Quoll, New Morning north, the Boojum area (7km south of Spotted Quoll), the South Ironcap area (12km south of Cosmic Boy), Hatters Hill (34km south of Cosmic Boy), and Mt Gibb (30km south of Diggers South). In addition to the above, activities are also being undertaken on the ground acquired from Kagara, including at Lounge Lizard (south of the Flying Fox Mine), T15 (12km south of Spotted Quoll) and Northern Estates areas (43km north of Flying Fox). 14 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T Figure 3: Plan showing Forrestania tenements; mines and key prospects OPERATIONS REVIEW New Morning The New Morning area, situated approximately half way between the existing Flying Fox and Spotted Quoll operating mines, continues to be one of the key priority targets for exploration. The New Morning mineralisation comprises both the “basal contact” style as well as the mineralisation discovered at Sunrise, 300m south east of the high grade New Morning deposit, which occurs in the hanging wall stratigraphy. This horizon is known to occur along the length of the WUB but has received little testing in the past, opening up the opportunity to locate further deposits of this type. The drilling at Sunrise is now complete and work at estimating a resource for this new discovery is in progress. The New Morning “basal contact” style mineralisation is associated with a thick cumulate ultramaﬁ c body (lava channel?) which has a mineralised strike length of some 800m. The current resources include both high grade massive nickel sulphides as well as disseminated sulphides. During the later part of 2012, an assessment of the potential for further high grade mineralisation within the New Morning system highlighted the untested area below the T3 fault (akin to the position of the T5 ore body at Flying Fox). Drilling to test this area commenced during the December quarter. The initial holes, NMD 161 (and W1), intersected the mineralised contact (albeit weak) but indicated the contact (T5 panel) much further west than anticipated (a reverse fault). This lead to a hole (NMD177), being drilled some 200m to the south, to intersect an interpreted embayment in the footwall. NMD177 intersected 3.0m at 6.3% nickel, including 2.4m at 7.6% nickel from 1237.2m, released on 24 January 2013 and 2 February 2013. The technical challenges of completing the subsequent drilling from the hanging wall resulted in the decision to commence a new parent hole from surface drilling from the footwall position. The footwall hole (NMD182) has allowed subsequent wedges to be drilled with increased eﬃ ciency with the drilling occurring in more favourable ground conditions. It should also result in an early assessment of footwall ground conditions if underground mining in this area is to proceed. NMD182 successfully intersected high grade nickel sulphides, released on 19 July 2013, intersecting 1.7m at 5.6% Ni from 1241.9m. Most recently, the drilling has returned both the highest and widest intercept to date (NMD182, released on 30 August 2013 and 6 September 2013), 4.4m at 7.4% nickel, including 3.6m at 8.7% nickel. Importantly the recent drilling has conﬁ rmed an approximate 150m down plunge extent of mineralisation below the reverse fault. The mineralised extent remains open below and laterally to this. Initial geological interpretations continue to indicate that the mineralised position lies below the reverse fault, in a similar manner to the T4 mineralisation relative to the T3 fault junction at Flying Fox. Further holes will be drilled from the parent hole (NMD182), in combination with data from down hole electro magnetic surveys, to test both the down plunge extensions of the existing intersections and also the interpretation that the mineralisation is getting better with depth. Further testing of the strike continuity of the existing intersections will also be undertaken. The exploration eﬀ orts remain ﬁ rmly committed to fully test the newly discovered high grade mineralisation at New Morning. The ability to access any discovery in this zone is believed to be extremely capital eﬃ cient due to the proximity to mature infrastructure in the form of underground development. The Company considers that the infrastructure investment in either Spotted Quoll or Flying Fox would be used in accessing any economic deposit. Figure 4: Interpreted Long Projection of the Western Belt footwall contact extending 6km from Spotted Quoll to Flying Fox W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 15 OPERATIONS REVIEW Drilling the footwall hole at New Morning Forrestania Project Exploration As part of the review of the prospectivity of the WUB, approximately 10km long strike of highly prospective basal ultramaﬁ c contact north of Flying Fox was assessed. At Beautiful Sunday, located some 8km north of Flying Fox and on the northern end of the WUB, a program of drilling has been designed to test the interpreted potential mineralisation down-plunge to the south and to test the extent and plunge direction of the existing mineralisation. The ‘true footwall’, is under tested with most previous holes terminating in banded-iron formation. Drilling to date has intersected minor nickel sulphides. As this work is at an early stage, it is not possible to determine the signiﬁ cance of the results. This evaluation work is expected to continue through the coming year. As part of the continued priority assessment of the 6km corridor between Spotted Quoll and Flying Fox mines, the Company is assessing the highly prospective section between the Lounge Lizard deposit (currently mined from Flying Fox) and the New Morning deposit, Figure 5. The majority of the northern portion of this area was formally held by Kagara Limited (Kagara), but was acquired as part of the purchase of Kagara’s nickel tenements in 2012. The Lounge Lizard area has had little deep drilling and the majority of the near surface drilling was directed towards gold exploration. In the coming year, the intention is to test for extensions of the existing mineralisation, both north of New Morning and south of Flying Fox as well testing the area in between with deeper holes, drilled at the equivalent level of the T1/T2 Flying Fox mineralisation. With the purchase of Kagara’s nickel tenements, approximately 4.5km of the southern portion of the WUB was acquired in the T15, Arrowhead and Boojum areas. Previous exploration of this area has been limited. Evaluation of this area, some 10km south of Spotted Quoll, continued with the drill testing of EM/ DHEM anomalies at the T15 prospect and targets where cumulate ultramaﬁ cs are known to occur at the other prospects. Although the presence of cumulate ultramaﬁ cs was conﬁ rmed, the EM anomalies were shown to be sourced from non nickeliferous massive sulphides. Data from the completed programs are being used to generate further drilling priorities and targets in this area, particularly where the magnetic signatures associated with the cumulate rocks indicate they extend into areas where there has been no drilling. Exploration activities, including drilling, were also undertaken at a number of prospects outside the WUB in the Forrestania area, including the Purple Haze area, Crazy Chameleon, Hatters Hill, and Mt Gibb and Northern Estates areas. At Purple Haze, a program of 9 RC holes for 1,812m tested a number of areas that had returned anomalous results indentiﬁ ed from previous drilling. Although a number of long intervals of lower grade nickel assays were returned from the drilling, no high grade nickel sulphides were intersected. Further work will be undertaken to determine if the anomalous results are associated with a halo to higher grade mineralisation. 16 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T OPERATIONS REVIEW Geologists examining core at Forrestania Figure 5: Interpreted Long Projection of the footwall contact at New Morning W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 17 OPERATIONS REVIEW Mt Gibb (WSA 70% interest) REGIONAL EXPLORATION The Mt Gibb Project comprises a Joint Venture with Great Western Exploration Limited (GTE) over a 303km2 tenement area in part of the Forrestania region. The bulk of the Project area lies along the south-eastern margin of Western Areas Forrestania tenements. During the year, two drilling programs (initial RC drilling - 6 holes for 940m, with follow up diamond 2 DDH holes for 205.1m) was undertaken on targeting gold mineralisation. Assay results from four of the holes has returned patchy elevated results with the best result from HCRC005, which returned 5m @ 3 g/t from 48m. The two subsequent diamond holes targeted gold intersections from the previous RC drilling. Twinning (HCD003) of the previous hole HCRC005 (which intersected 9m at 1.9 g/t from 43m, including 5m at 3.0 g/t from 47m) returned 10.5m at 3.06 g/t from 48.5m, including 5m at 5.25 g/t from 53m, and 6m at 1.17 g/t from 78m. Further drilling following up these results is planned later in the year. A review of the previous drilling by Western Areas indicates there are areas of potential mineralisation that was not tested previously. Further exploration activities are planned by the Company to test the nickel potential, including further testing of the southern portion of the project area with EM geophysics and subsequent drill testing of any anomalies generated in the coming year. Western Areas has consolidated substantial nickel interests in the “Central Yilgarn Nickel Province” which extends approximately 450km. During the last 12 months, results from a number of the projects determined that there was no potential to discover economic mineralisation and as a consequence the number of the Company’s active projects within the area was lessened. At Sandstone, the outcomes of a detailed prospectivity analysis of the Project have shown that the extensive exploration programs completed by both Western Areas and Troy Resources have eﬀ ectively screened the belt for a camp scale nickel deposit. While nickel sulphides were discovered in the belt during the exploration work (the ﬁ rst of their kind), the volume and nature of the mineralisation and host ultramaﬁ cs suggests that the stratigraphy is likely not to be prospective for large komatiitic nickel sulphide deposits. On this basis, the Company elected to exit from the Sandstone Nickel Joint Venture re-focusing its regional exploration and resources to other more prospective areas. At Koolyanobbing, exploration during the year included testing the extents of the known nickel mineralisation and EM anomalies that were identiﬁ ed during the previous phase of exploration. No signiﬁ cant anomalism was returned from the drilling and no further work is planned. The outcomes were similar for the Kawana Joint Venture and Mt Jewel projects with no further work being justiﬁ ed. 18 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T Figure 6: Regional geology showing WSA interests OPERATIONS REVIEW Exploration activities will continue to be conducted over the remaining projects including the Southern Cross Goldﬁ elds Joint Venture, the Lake King Joint Venture and Mt Gibb Joint Venture (see below). BHP Billiton continues to manage the Mt Alexander Joint Venture with the Company retaining a 25% interest. With the evaluation of other areas of higher prospectivity, the identiﬁ cation of the West Musgrave area in the eastern portion of Western Australia saw the Company enter into a Farm-in and JV with Traka Resources over selected Traka tenements in that district. Southern Cross Goldﬁ elds Limited Nickel JV (WSA 70% interest) Target generation activities covering the other areas within the Joint Venture tenure are now well advanced. A number of prospective areas have been identiﬁ ed for follow-up. This includes the Marda area, which is interpreted to be a tectonic intersection of the known mineralised stratigraphy at Koolyanobbing (nickel), Trough Well (nickel) and Copper Bore (base metals prospect). Regional ﬁ eld activities have been planned and are expected to commence shortly, initially involving aircore drilling at the priority targets. Lake King Joint Venture (WSA 70%) The Lake King Joint Venture tenements cover a 40km long nickel prospective belt located approximately 70km south of Forrestania. WSA has acquired 70% of Southern Cross Goldﬁ elds Limited (SXG) nickel rights across much of its 3,300km2 tenement portfolio in the Marda and Southern Cross regions of Western Australia. The SXG tenement package covers the north western portion of the Southern Cross-Bullﬁ nch Greenstone Belt within the “Central Yilgarn Nickel Province”. Work on the project area during the last 12 months included the evaluation of prospective areas known to contain cumulate ultramaﬁ c rocks. Several programs of MLEM surveys, aircore drilling (68 drill holes for 3,271m) and, where warranted, follow up diamond drill testing was completed over a number priority targets. Initial work commenced within the Bullﬁ nch North region, at the Trough Well area, where previous drilling had intersected several zones of nickel sulphides over a strike length of 800m within a classic Kambalda-style setting. Although the presence of nickel sulphides was conﬁ rmed (TWD027 0.34m at 3.97% Ni from 42.7m), there was not signiﬁ cant encouragement to justify further exploration. Although no nickel sulphides were identiﬁ ed in the programs, the “stratigraphic” drilling successfully identiﬁ ed further ultramaﬁ c rocks, some along the prospective “Nickel Hill” trend, and these will be the focus of the next phase of exploration during the coming year. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 19 Aircore drilling at Lake King Nickel JV OPERATIONS REVIEW Musgrave Nickel-Copper Joint Venture (WSA to earn up to 70% interest) On 1 July 2013 the Company announced the execution of a Farm-in and Joint Venture Agreement with Traka Resources Limited (“Traka”). The Agreement provides a staged program for Western Areas to acquire up to a 70% interest in a number of Traka’s core tenements within the Musgrave region of Western Australia. The total area included under the proposed Musgrave JV Project is approximately 1,075km2. The Musgrave region of Western Australia is known to contain signiﬁ cant amounts of nickel, copper and PGEs, namely within the giant Nebo-Babel and recently discovered Succoth deposits. The area also contains lesser known (and smaller), but equally signiﬁ cant high-grade nickel and copper deposits. Western Areas plans to build on the results generated by Traka’s exploration activities as well as utilising its extensive in-house experience to focus on the discovery of these higher grade maﬁ c hosted ore-bodies. Additionally, further target deﬁ nition work will be undertaken on an existing EM anomaly (Finlay) that has been conﬁ rmed with ground geophysics recently undertaken by Traka. It is anticipated these activities will continue through to December 2013. The Company’s goal with this project is to locate a high grade intrusive orebody, rather than multi million tonnages of low grade sulphides. CANADIAN EXPLORATION East Bull Lake Project - Ontario (WSA earning 65%) Western Areas has a joint venture with Mustang Minerals (TSX:MUM) to explore the East Bull Lake Project. East Bull Lake is a 20km long maﬁ c intrusive complex which consists of two separate zoned intrusions joined by a 5km long feeder dyke. Exploration activities are advancing, with the initial program of Moving-Loop Electro-Magnetic (MLEM) surveys over the most prospective target areas in progress, Figure 7. The assessment to determine the eﬀ ectiveness of the exploration completed to date is continuing. This work will be used both in resolving the prospectivity of the project and establishing future work requirements. Figure 7: Interpreted geology of the JV tenure (blue), indicating known Ni-Cu deposits (green stars), Finlay untested EM anomaly and priority target areas (red circles) 20 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T OPERATIONS REVIEW FINNAUST MINING PLC FinnAust is exploring a number of base metal projects in south-eastern Finland. The Company considers this region represents a highly prospective metal province based on favourable geology, widespread past mining activity and numerous base metal occurrences. A project review was conducted during 2012 which concluded that: 1. 2013 drilling should focus on deﬁ ning potential resources in the Outokumpu Copper Project and Hammaslahti VMS Project, 50km east of Outokumpu. Both projects have signiﬁ cant historic copper production and exploration potential. 2. The prospective Outokumpu Mine Sequence (OKU) appears to be widespread and relatively unexplored along FinnAust’s holdings in the western part of the Outokumpu copper belt. 3. Preliminary interpretation of data from an extensive ZTEM survey conducted in mid 2012 suggests that ZTEM is deﬁ ning conductors and geological structures to over 1km depth. 4. Western Areas is considering a number of options to fund ongoing exploration in Finland and drill six high priority targets at the Outokumpu and Hammaslahti projects in 2013. The 2013 drilling program (13 holes for 2,474.3m) was completed on two targets, Teyrisuo and Kuusjärvi 15, in the Outokumpu Copper Project and on the Hammaslahti East target in the Hammaslahti Project area (Figure 8). Drilling at Kuusjärvi 15 prospect showed the geophysical target modelling has correctly interpreted the geology with all but one hole intersecting rocks of the prospective Outokumpu Mine Sequence, though no copper mineralisation was intersected. Further drilling is warranted at Kuusjärvi 15 where over a 5km section of this same prospective prospect stratigraphy remains untested, especially along strike towards Outokumpu. Drilling at Teyrisuo between the old Outokumpu and Vuonos mines on the Outokumpu Belt failed to intersect a new Outokumpu assemblage with signiﬁ cant size. However, even a thin intercept of these rocks on a new position requires further geophysical interpretation and modelling. Drilling within the Hammaslahti VMS Project area tested for potential extensions and repetitions 2km east of the existing mine, where a strong ZTEM conductor is interpreted to occur in a favourable structural setting. The drilling intersected a number of conductive zones (the interpreted source of the ZTEM anomaly). At the end of the drilling program, the two last drill holes intersected a similar lithological contact to that which hosts the Hammaslahti Cu-ore deposit. Hydrothermal alteration on the contact is not as strong as at the Hammaslahti mine, but this alteration zone remains completely untested along strike and with depth. Further geophysical modelling and drilling is required to test this zone in the future. Western Areas is currently advancing the potential listing of FinnAust onto the London AIM. Should market conditions and other factors be favourable, FinnAust will be raising enough equity to fund two years of exploration activity. Western Areas is targeting to complete the listing by the end of 2013. Figure 8: Magnetic image showing the Outokumpu Copper Project and Hammaslahti VMS Project W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 21 DIRECTORS’ REPORT Left to right: Rick Yeates, Julian Hanna, Ian Macliver, Terry Streeter, Dan Lougher, David Southam, Robin Dunbar, Joe Belladonna. The Directors of Western Areas Ltd submit herewith the ﬁ nancial report of the Company for the ﬁ nancial year ended 30 June 2013. Unless noted, all amounts in this report refer to Australian dollars. In order to comply with the provisions of the Corporations Act 2001, the Directors’ Report follows: INFORMATION ABOUT THE DIRECTORS Directors Terry Streeter Dan Lougher David Southam Ian Macliver Julian Hanna Robin Dunbar Rick Yeates Non-Executive Chairman. Mr Streeter is a Perth based businessman with extensive experience in exploration and mining companies and has held various interests in the nickel sulphide industry for over 30 years. Mr Streeter is a member of the Remuneration, Nomination and Treasury Committees. Managing Director. Mr Lougher is a qualiﬁ ed Mining Engineer with over 30 years experience in all facets of resource and mining, project exploration, feasibility, development and operational activities in Australia and overseas. Mr Lougher is a member of AUSIMM. Mr Lougher serves on the Nomination Committee. Executive Director. Mr Southam is a Certiﬁ ed Practicing Accountant with more than 20 years experience in accounting, banking and ﬁ nance across the resources and industrial sectors. Mr Southam was responsible for completing one of Australia’s largest project ﬁ nancing transactions for 2010 and in securing life of mine oﬀ take contracts with consortiums out of China. Lead Independent Non-Executive Director. Mr Macliver is Managing Director of Grange Consulting Group Pty Limited which provides specialist corporate advisory services to both listed and unlisted companies. He has many years experience as a senior Executive and Director of both resource and industrial companies, with particular responsibility for capital raising and other corporate initiatives. Mr Macliver chairs the Treasury and Audit & Risk Management Committees and is a member of the Remuneration and Nomination Committee. During the year, the Board unanimously endorsed appointing Mr Macliver as the Lead Independent Non-Executive Director. Non-Executive Director. Mr Hanna is a geologist with over 30 years experience in gold and base metal exploration and mine development. He has a BSc. in geology, is a member of AusIMM and has been involved in the discovery and development of several gold and base metal deposits. Non-Executive Director. Mr Dunbar is based in Toronto, Canada and has held a number of senior positions in both the commercial and corporate banking sectors and is currently the President of Mustang Minerals Corp. Mr Dunbar is a member of the Audit & Risk, Nomination, Treasury and Remuneration Committees. Non-Executive Director. Mr Yeates is a Geologist with more than 30 years mining industry experience in various roles and he has signiﬁ cant experience across a wide range of resource projects around the world. He is familiar with the ASX regulatory environments and has had exposure to international resource funds and ﬁ nancial institutions. Mr Yeates chairs the Remuneration and Nomination Committee and is a member of the Treasury and Audit & Risk Management Committees. 22 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T DIRECTORSHIPS OF OTHER LISTED COMPANIES Name T Streeter J Hanna D Lougher R Dunbar Company Period of Directorship Midas Resources Limited (Ceased) February 2003 - April 2013 Fox Resources Limited Since June 2005 Waratah Resources Ltd (Ceased) January 2012 - October 2012 Mustang Minerals Corp MOD Resources Ltd Since December 2006 Since January 2013 Mustang Minerals Corp Since January 2011 Mustang Minerals Corp Lexam VG Gold Inc. Aquila Resources Inc. Since November 1997 Since September 2005 Since May 2006 D Southam Padbury Mining Ltd (Ceased) September 2011 - December 2011 R Yeates I Macliver Middle Island Resources Ltd Since March 2010 Stratatel Ltd Select Exploration Ltd Otto Energy Ltd Since July 2000 Since September 2010 Since January 2004 Mt Gibson Iron Ltd (Ceased) February 2001 - November 2011 Port Bouvard Ltd (Ceased) December 1994 - April 2011 Car Parking Technologies Ltd (Ceased) May 2006 - February 2011 INTERESTS IN SHARES AND OPTIONS OF THE COMPANY As at the date of this report, the interest of the Directors or associates of the Directors in the shares and options of the Company are: Name Ordinary Shares Performance Rights (*) T Streeter D Lougher J Hanna D Southam R Dunbar R Yeates I Macliver 23,937,630 79,957 723,791 - 112,500 10,000 23,948 - 408,691 - 273,254 - - - (*) None of the performance rights have vested at 30 June 2013. All equity transactions with speciﬁ ed Directors and speciﬁ ed Executives, other than those arising from the exercise of options, have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 23 DIRECTORS’ REPORT COMPANY SECRETARY Mr Joseph Belladonna is a Certiﬁ ed Practicing Accountant and has been employed at Western Areas Ltd since 2005, originally as Financial Controller and then as the Company Secretary and Chief Financial Oﬃ cer. In his time at the Company, he has been intimately involved in the accounting, debt ﬁ nancing, corporate governance, capital raising and ﬁ nancial initiatives at the Company. Mr Belladonna has over 10 years experience in the resources industry including listed gold and base metal companies in a range of management positions. REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT Information about the remuneration of Directors and senior management is set out in the remuneration report of this Directors’ Report on page 35. PERFORMANCE RIGHTS GRANTED TO DIRECTORS AND SENIOR MANAGEMENT Performance Rights granted to Directors and senior management during the ﬁ nancial year ended 30 June 2013 is set out in the Remuneration Report of this Directors’ Report on page 37. PRINCIPAL ACTIVITIES The principal activities of the Consolidated Entity during the year consisted of mining, processing and sale of nickel sulphide concentrate, the continued feasibility and development of the high grade nickel mines and the exploration for nickel sulphides, other base metals and platinum group metals. OPERATING AND FINANCIAL REVIEW Income Statement Consolidated revenue for the year decreased by 7.3% to $306.5 million, while gross proﬁ t decreased by $49.5 million to $46.7 million. This has resulted from a fall in the realised nickel price and the ore feed for the Group now being sourced from two underground mines, rather than one open cut and one underground mine. Consolidated net loss after tax (NLAT) for the Group amounted to $94.1 million, a decrease of $134.3 million from the results reported for the year ended 30 June 2012. The primary driver impacting the change in earnings were impairment and write-oﬀ charges to the Income Statement of $142.4 million ($99.7 million tax eﬀ ected) and a reduction in the average realised nickel price from US$8.07/lb in the prior ﬁ nancial year to US$7.31/lb for the year ended 30 June 2013. Impacting net loss after tax of $94.1 million for the year were the following pre-tax non-cash items: • • Depreciation charges of $12.9 million • • Amortisation charges of $70.2 million • • Impairment and write-oﬀ charges of $142.4 million • • Convertible bond accretion expense of $7.5 million These non-cash items amounted to $233.0 million. Statement of Financial Position Total assets at reporting date were $518.0 million, representing a decrease of $257.0 million from 2012. Cash and cash equivalents decreased by $84.8 million, mainly as a result of the retiring convertible bond of $105.5 million. Mine development decreased by $53.9 million, which includes impairment and write-oﬀ charges of $48.3 million. Exploration and evaluation expenditure decreased by $101.1 million, which includes impairment and write-oﬀ charges of $94.1 million and a transfer of exploration expenditure to mine development of $30 million. Stockpiles decreased by $11.8 million mainly due to lower concentrate stockpiles and the planned throughput of stockpiled ore from the Tim King Pit. Total liabilities at reporting date were $275.0 million, a decrease of $210.1 million from 2012. The decrease is mainly attributable to the repayment of the $105.5 million convertible bond in July 2012 and the full repayment of the $45.0 million drawn portion of the corporate loan facility. The deferred tax liability decreased by $30.6 million, mainly due to impairment charges, and trade and other payables decreased by $29.5 million. Total equity attributable to the shareholders has decreased by $46.9 million to $242.9 million. This includes a capital raising of $65.0 million, oﬀ set by dividend payments to shareholders totalling $14.7 million, and accounting losses of $94.1 million. 24 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T DIRECTORS’ REPORT Statement of Cash Flows Cash at bank on 30 June 2013 totalled $80.7 million. The decrease of $84.8 million from the corresponding period resulted from cash repayment of $105.5 million of the convertible bond, full repayment of the $45 million corporate facility and $14.3 million for the purchase of the Outokumpu royalty. This was partially oﬀ set by a capital raising of $65.0 million. The average monthly nickel price weakened from US$8.07 in the prior ﬁ nancial year to US$7.31 for the year ended 30 June 2013, while the Australian Dollar traded at an average of $1.03 to the US$ during the ﬁ nancial year. Consolidated cash ﬂ ow from operations was $112.1 million, representing a decrease of $47.1 million from the prior year. This decrease was mainly driven by a weaker average realised nickel price, lower net interest received, higher operating expenses with a shift to underground mines and increased tax payments. Partially oﬀ setting was an increase in sales volumes and slightly lower royalties associated with a weaker nickel price. Net cash used in investing activities decreased from the corresponding period by $117.2 million to $93.7 million as a result of the purchase of Kagara Nickel Pty Ltd for $71.1 million (including stockpiles and stamp duty) in the prior year. Mine development and asset purchases decreased by $26.5 million to $54.7 million for the year. $24.5 million was invested in exploration and evaluation activities, representing a decrease of $18.2 million from the prior year. Exploration and evaluation includes the Company’s investment into FinnAust which amounted to $4.3 million for the current ﬁ nancial year. Net cash from ﬁ nancing activities decreased by $111.4 million, primarily due to the repayment of the convertible bond of $105.5 million and the full repayment of the $45.0 million corporate loan facility, partially oﬀ set by a capital raising of $65.0 million. Two dividend payments totalling $14.7 million were paid during the ﬁ nancial year. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS No signiﬁ cant changes in the Consolidated Group’s state of aﬀ airs occurred during the ﬁ nancial year. SUBSEQUENT EVENTS There have been no subsequent events after 30 June 2013 which has a material eﬀ ect on the ﬁ nancial statements for the year ended 30 June 2013. FUTURE DEVELOPMENTS Disclosure of information regarding likely developments in the operations of the Consolidated Entity in future ﬁ nancial years and the expected results of those operations is likely to result in unreasonable prejudice to the Consolidated Entity. Accordingly, this information has not been disclosed in this report. ENVIRONMENTAL REGULATION AND PERFORMANCE The Consolidated Entity has conducted exploration and development activities on mineral tenements. The right to conduct these activities is granted subject to State and Federal environmental legislation and regulations, tenement conditions and Mining Proposal commitments. The Consolidated Entity aims to ensure that a high standard of environmental management is achieved and, as a minimum, to comply with all relevant legislation and regulations, tenement conditions and Mining Proposal commitments. WSA has achieved a high level of compliance with all environmental conditions set for its projects and actively strives for continual improvement. DIVIDENDS PAID OR RECOMMENDED In respect of the ﬁ nancial year ended 30 June 2012, the Directors declared the payment of a ﬁ nal, 30% partially franked dividend of 6 cents per share to the holders of fully paid ordinary shares to be paid on 12 October 2012. In respect of the half year ended 31 December 2012, an interim fully franked dividend of 2 cents per share was declared and subsequently paid to the holders of fully paid ordinary shares on 4 April 2013. Given the result for the ﬁ nancial year and in recognition of low commodity prices, the Board has decided not to pay a ﬁ nal dividend in respect of the ﬁ nancial year ended 30 June 2013. The Board believes this represents prudent capital management, and note that dividends declared for the year (2 cents per share interim dividend) represents a payout ratio of approximately 70% of underlying NPAT. SHARE OPTIONS No options were issued during the ﬁ nancial year and all existing options expired. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 25 25 DIRECTORS’ REPORT INDEMNIFICATION OF OFFICERS AND DIRECTORS During the ﬁ nancial year, the parent entity paid a premium under a contract insuring all Directors and Oﬃ cers of the Company against liability incurred in that capacity. Disclosure of the nature of liabilities insured and the premium is subject to a conﬁ dentiality clause under the contract of insurance. The Company has not otherwise, during or since the end of the ﬁ nancial year, except to the extent permitted by law, indemniﬁ ed or agreed to indemnify an oﬃ cer or auditor of the Company against a liability incurred as such an oﬃ cer or auditor. DIRECTORS’ MEETINGS The following table sets out the number of meetings of the parent entity’s Directors and meetings of the sub-committees of the Board held during the year ended 30 June 2013 and the number of meetings attended by each Director. Directors Meetings Audit & Risk Management Remuneration Nomination (*) Treasury (*) Meetings of Committees Number of Meetings held: Number of Meetings attended: T Streeter D Lougher D Southam J Hanna R Dunbar R Yeates I Macliver 10 10 10 10 10 10 10 10 3 3 - - - 3 3 3 2 2 - - - 2 2 2 - - - - - - - - - - - - - - - - (*) Regular June 2013 meeting was held in July 2013. Board composition is discussed as a regular Board agenda item. DIRECTORS’ BENEFITS No Directors of the Consolidated Entity have, since the end of the previous ﬁ nancial year, received or become entitled to receive a beneﬁ t (other than a beneﬁ t included in the total amount of emoluments received or due and receivable by Directors shown on page 35 of the Directors’ Report) by reason of a contract made by the parent entity or a related body corporate with the director or with any entity in which the Director has a substantial ﬁ nancial interest, with the exception of beneﬁ ts that may be deemed to have arisen in relation to the transactions entered into in the ordinary course of business as disclosed in Note 30 to the accounts. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied for leave of the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. AUDITOR’S INDEPENDENCE DECLARATION The Auditor’s Independence Declaration to the Directors of Western Areas Ltd on page 43 forms part of the Directors’ Report for the year ended 30 June 2013. NON-AUDIT SERVICES The entity’s auditor, Crowe Horwath, provided non-audit services amounting to $7,500 during FY13 (FY12: Nil). The Board has the following procedures in place before any non-audit services are obtained from the auditors: • • all non audit services are reviewed and approved by the Board and the Audit & Risk Management Committee prior to commencement to ensure they do not adversely aﬀ ect the integrity and objectivity of the auditor; and • • the nature of the services provided does not compromise the general principles relating to auditor independence as set out in APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. 26 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) This report outlines the remuneration arrangements in place for Directors and Executives of Western Areas Ltd. Key Changes/Events from FY12 to FY13 • • Reduction in the quantum of the maximum Short Term Incentive (“STI”) payment available to Executives, via the reduction of the percentage of base salary per employee available to be paid as an STI bonus. • • Executive and Management team forfeited a minimum of 50% of their STI payment that was triggered and earned via achievement of the individual KPI’s. These have been cancelled not deferred. • • The Company has frozen salaries going into the new ﬁ nancial year. • • The second tranche of the FY12 Long Term Incentive (“LTI”) allocation has not vested due to the relative total shareholder return minimum threshold not being reached. The report is comprised of the following key sections: • • Section A: Who this report covers • • Section B: Remuneration governance and philosophy • • Section C: Voting and comments made at the Company’s 2012 Annual General Meeting • • Section D: Use of remuneration consultants • • Section E: Executive remuneration framework • • Section F: Non-Executive Director remuneration • • Section G: Service contracts • • Section H: Link between performance and remuneration outcomes • • Section I: Details of remuneration SECTION A: WHO THIS REPORT COVERS The following persons acted as Directors of the Company during the ﬁ nancial year: Mr T Streeter (Non-Executive Chairman) Mr D Lougher (Managing Director) Mr D Southam (Executive Director) Mr I Macliver (Lead Independent, Non-Executive Director) Mr J Hanna (Non-Executive Director) Mr R Dunbar (Independent, Non-Executive Director) Mr R Yeates (Independent, Non-Executive Director) Other Key Management Personnel (“KMP”) of the Company during the ﬁ nancial year were: Mr J Belladonna (Chief Financial Oﬃ cer/Company Secretary) Mr C Wilkinson (General Manager, Exploration) Mr G Marshall (General Manager, Commercial) Mr W Jones (General Manager, Operations - appointed 1 August 2012) SECTION B: REMUNERATION GOVERNANCE AND PHILOSOPHY Remuneration Committee The Remuneration Committee is a sub-committee of the Board. It is responsible for assisting the Board in fulﬁ lling its responsibilities relating to the remuneration of Directors, the remuneration and incentivisation of the Managing Director and other KMP, and remuneration practices, strategies and disclosures generally. Remuneration levels and other terms of employment for the Directors and the senior management team are reviewed at least annually by the Remuneration Committee, having regard to qualiﬁ cations and experience, relevant market conditions, and performance against goals set each year. The Remuneration Committee assesses the appropriateness of remuneration levels to ensure the Company is able to attract and retain high quality Executives. The Remuneration Committee utilises independent salary reports to assist in this regard. The Corporate Governance Statement set out on pages 39 to 42 provides further information on the role of the Remuneration Committee. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 27 DIRECTORS’ REPORT REMUNERATION PHILOSOPHY The Company recognises that it operates in a global environment and to prosper in such an environment, it must attract, motivate and retain personnel of the highest calibre. The principles supporting the Company’s remuneration policy are that: • • Reward reﬂ ects the competitive global market in which we operate; • • Individual reward is based on performance across a range of disciplines that apply to delivering results for the Company; • • Executive remuneration is linked to the creation of shareholder value; and • • Remuneration arrangements are equitable, fair and facilitate the deployment of senior management across the Company. SECTION C: VOTING AND COMMENTS MADE AT THE COMPANY’S 2012 ANNUAL GENERAL MEETING Western Areas received more than 97% of “yes” votes on its remuneration report for the 2012 ﬁ nancial year. The Company did not receive any speciﬁ c feedback at the AGM or throughout the year on its remuneration practices. SECTION D: USE OF REMUNERATION CONSULTANTS Western Areas engaged PwC as Remuneration Consultants during the 2013 ﬁ nancial year to provide assistance with the implementation of the LTI plan, however no “remuneration recommendations” as deﬁ ned in the Corporation Act 2001 were made. SECTION E: EXECUTIVE REMUNERATION FRAMEWORK “The key principle of our remuneration strategy is to pay for performance” The Company aims to reward Executives with a level and mix of remuneration commensurate with their position, experience and responsibilities within the Company. The objective is to: • • Reward Executives for their individual performance against targets set by reference to appropriate benchmarks; • • Align the interests of Executives with those of the shareholders; and • • Ensure that total remuneration is competitive by market standards. The Company’s Executive reward structure provides a combination of ﬁ xed and variable pay, and is comprised of: • • Fixed remuneration, inclusive of base pay, superannuation, allowances, and salary-sacriﬁ ce components; • • Short term incentives; and • • Long term incentives. Remuneration mixes In accordance with the Company’s objective to ensure that Executive remuneration is aligned to company performance, a signiﬁ cant portion of Executives’ remuneration is placed “at risk”. The relative proportion of target FY13 total remuneration packages split between ﬁ xed and variable remuneration is shown below: Fixed Remuneration Target STI Target LTI Executive Directors Mr D Lougher Mr D Southam Executives Mr J Belladonna Mr C Wilkinson Mr G Marshall Mr W Jones 39% 43% 43% 53% 53% 53% 22% 24% 24% 21% 21% 21% 39% 33% 33% 26% 26% 26% During the 2013 ﬁ nancial year, adjustments were made to Executives’ remuneration mix via a reduction in the maximum STI opportunity available, resulting in increased emphasis on LTI. This further aligns management with Shareholders and long term value generation. Refer to Section H: Link between performance and remuneration outcomes for details of Executives’ actual remuneration mix for FY13. 28 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T DIRECTORS’ REPORT Fixed remuneration “Fixed remuneration is positioned around the median of the external market for comparable roles” Fixed remuneration consists of base salary, superannuation, allowances, and any salary sacriﬁ ce components. The ﬁ xed remuneration component is reviewed annually by the Remuneration Committee. Base salary for each Executive is benchmarked against market data for comparable roles in the market and the Remuneration Committee refers to external independent salary reports to ensure that the remuneration levels set meet the objectives of the Company. There is no guaranteed base pay increases included in any Executives’ contracts. Short Term Incentive (“STI”) “The STI plan is designed to motivate and reward Executives for the achievement of short term business goals” The objective of STI’s is to link the achievement of key company operational targets with the remuneration received by those Executives charged with meeting those targets. The STI plan involves linking key performance indicators (“KPIs”) with the opportunity to earn a cash bonus. Target STI opportunity for Executives was reduced by 10% in FY13 down to ranges of between 55% to 40% of their base salary. Challenging KPIs are set to ensure payouts are only triggered to reward high performing employees for outperformance. It is the Company’s policy to cap STI payments at target STI levels. Target STI for each KMP during FY13 is outlined below: Name Executive Directors Mr D Lougher Mr D Southam Executives Mr J Belladonna Mr C Wilkinson Mr G Marshall Mr W Jones (*) Base salary FY2013 Target STI quantum (% of base salary) Target STI quantum ($) $680,000 $510,106 $320,000 $327,690 $297,901 $385,000 55% 55% 55% 40% 40% 40% $374,000 $280,500 $176,000 $135,000 $119,000 $154,000 (*) Annualised salary for the GM Operations position. The KPIs used span across key focus areas of the business (operations, corporate and exploration), and the respective KPIs and their weightings will vary by role and are designed to align to those measures relevant to the responsibilities of each role. The KPIs for Executives in FY13 were selected from the below (note that not all the below KPIs are used in the scorecard for each role): Overview KPI Why KPI was set Operations Forrestania safety performance Forrestania unit cash cost Based on Lost Time Injury performance in each quarter. Motivate and reward the continued focus on safety standards. Focused on average unit cash costs for Flying Fox (FF) and Spotted Quoll (SQ) mines per pound of nickel produced. Above budget performance required. Motivate and reward the stringent management of production costs outcomes that exceed the Board’s set business plan. Forrestania nickel in ore production Need to exceed set budget nickel metal in ore from combined production of FF and SQ mines. Motivate and reward nickel production outcomes that exceed Board set business plans. Forrestania mill recoveries Achieve a set threshold recovery above budget levels for the combined ore feed from FF and SQ mines. Motivate and reward nickel production outcomes that exceed Board set business plans. Forrestania nickel in concentrate sales Sale of nickel metal in concentrate to exceed a set tonnes per quarter target (above budget). Motivate and reward nickel production outcomes that exceed Board set business plans. Forrestania environmental incidents Based on the number of reportable environmental incidents per quarter. Motivate and reward the continued focus on best practice environmental management. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 29 DIRECTORS’ REPORT Corporate Earnings Cash ﬂ ow Overview KPI Why KPI was set Achieve EBIT target above budget. Motivate and reward ﬁ nancial outcomes that exceed Board set business plans. Achieve pre-funding cash ﬂ ow target above budget. Motivate and reward ﬁ nancial outcomes that exceed Board set business plans. Oﬀ take contracts Securing oﬀ take contracts at more favourable commercial terms than existing contracts. Motivate and reward contractual outcomes that exceed Board set business plans and beneﬁ t shareholders. Business development Successful completion of business development transactions that add value to the Company and shareholders. Motivate and reward business development initiatives that enhance the corporate capital structure and beneﬁ ts shareholders. Exploration New nickel resources Establishing new published nickel resources exceeding a targeted nickel tonnage levels. Motivate and reward economic nickel discovery. New nickel discovery Discovery of a new nickel deposit. Motivate and reward economic nickel discovery. The Remuneration Committee is responsible for determining the STI to be paid based on an assessment of whether the KPIs are met. To assist in this assessment, the Remuneration Committee receives detailed reports on performance which are veriﬁ ed against outcomes. Based on the achievements of the Company in FY13, the Remuneration Committee determined that Executives achieved between 51% to 75% of their target STI opportunity. In making this assessment, the Remuneration Committee considered the following factors: • • An exceptional safety performance across the Group and below industry benchmark injury frequency rate. • • The high level of environmental management and no reportable environmental incidences. • • Mine and Concentrator nickel production and recovery rates were a minimum of 10% above budgeted expectation. • • Achieving nickel sales quantities over and above a Board set limit. • • Net pre-ﬁ nancing cash ﬂ ow performance was a minimum 15% above the Board approved budget expectation. • • The discovery of a new exploration project area. In recognition of the diﬃ cult commodity price environment and its impact on earnings, the Executive Directors and Executives elected to voluntarily forfeit 50% of their respective STI payments earned FY13. Performance achieved during FY13 against the above KPIs has resulted in Executives earning the following STI payments: Name Executive Directors Mr D Lougher Mr D Southam Executives Mr J Belladonna Mr C Wilkinson Mr G Marshall Mr W Jones Target STI quantum ($) STI quantum earned ($) Adjusted STI quantum ($) ^ STI forfeited ($) $374,000 $280,500 $176,000 $135,000 $119,000 $154,000 $214,000 $155,000 $90,000 $70,000 $79,000 $115,000 $107,000 $77,500 $45,000 $35,000 $39,500 $57,500 $267,000 $203,000 $131,000 $100,000 $79,500 $96,500 ^ In recognition of the diﬃ cult commodity price environment, the Executive Directors and Executives have elected to voluntarily forfeit 50% of their respective STI payments earned during FY13. Adjusted STI quantum reﬂ ects the actual STI payments to be made to Executives. Long Term Incentive (“LTI”) “The objective of the LTI plan is to reward senior management in a manner that aligns this element of remuneration with the creation of shareholder wealth” The Performance Rights plan (“LTI plan”) was approved by shareholders at the Annual General Meeting held in November 2011 and was implemented during FY12. The initial two years of the plan’s operation involved a transition towards a three year testing period which is now complete. As such, from the FY14 grant onwards, grants will be measured against TSR over a three year period such that no vesting occurs until the end of the three year period. This ensures Executives are focused on long term shareholder value generation. 30 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T DIRECTORS’ REPORT Grant frequency and quantum Under the remuneration structure, Executives will receive a grant of Performance Rights each year, such that the LTI now forms a key component of Executives’ Total Annual Remuneration. The LTI dollar value that Executives will be entitled to receive is set at a ﬁ xed percentage of their base salary, ranging from 50% to 100% of base salary, depending on the participant’s position within the Company. This level of LTI remains in line with current market practice. The number of Performance Rights to be granted is determined by dividing the LTI dollar value of the award by the fair value of a Performance Right. The quantum of LTI grants made during FY13 is as follows: Name Base salary Executive Directors LTI quantum (% of base salary) LTI quantum ($) Number of Performance Rights issued * Fair value per Performance Right at grant date ^ Exercise date Expiry date Mr D Lougher(&) $680,000 100%(&) $680,000 294,800 $2.31 Upon receipt of a vesting notice issued in FY15 30 June 2016 Mr D Southam $510,106 75% $382,580 165,900 $2.31 As above 30 June 2016 Executives Mr J Belladonna $320,000 Mr C Wilkinson Mr G Marshall Mr W Jones $327,690 $297,901 $379,780 75% 50% 50% 50% $240,000 104,074 $163,845 $148,951 $189,890 71,050 64,591 83,476 $2.31 $2.31 $2.31 $2.31 As above As above As above As above 30 June 2016 30 June 2016 30 June 2016 30 June 2016 & Mr Lougher increased to the 100% level in line with his appointment to Managing Director in 2012. * The number of Performance Rights to be issued to each participant is determined by undertaking an indicative valuation at 1 July of each respective year for allocation and Board ratiﬁ cation purposes. The average FY13 valuation at 1 July 2012 was $2.31/right. ^ Fair value as required under AASB 2. Valuation is determined at the date of the Annual General Meeting held in each respective year. The quantum of grants made during FY12 is as follows: Name Base salary Executive Directors LTI quantum (% of base salary) LTI quantum ($) Number of Performance Rights issued * Fair value per Performance Right at grant date ^ Exercise date Expiry date Mr D Lougher $515,597 75% $386,698 113,891 $3.75 Upon receipt of a vesting notice issued in FY14 30 June 2015 Mr D Southam $486,000 75% $364,500 107,354 $3.75 As above 30 June 2015 Executives Mr J Belladonna $291,600 Mr C Wilkinson Mr G Marshall Mr W Jones $315,087 $286,443 $368,280 75% 50% 50% 50% $218,700 $157,544 $143,221 $184,140 64,411 46,399 42,182 54,234 $3.75 $3.75 $3.75 $3.75 As above As above As above As above 30 June 2015 30 June 2015 30 June 2015 30 June 2015 * The number of Performance Rights to be issued to each participant is determined by undertaking an indicative valuation at 1 July of each respective year for allocation and Board ratiﬁ cation purposes. The average FY12 valuation at 1 July 2011 was $3.75/right. ^ Fair value as required under AASB 2. Valuation is determined at the date of the Annual General Meeting held in each respective year. Performance conditions Careful consideration was given to ensure that the selected performance condition would only reward Executives where shareholder value is generated, as determined via the change in the Company’s share price. Reﬂ ecting on market practice, the Board has decided that the most appropriate performance measure to track share price performance is via a relative total shareholder return (“TSR”) measure. TSR measures the return received by shareholders from holding shares in a company over a particular period and is calculated by taking into account the growth in a company’s share price over the period as well as the dividends received during that period. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 31 DIRECTORS’ REPORT The Company’s TSR performance will be assessed against a customised peer group comprising the following 23 companies: Aditya Birla Minerals Ltd Alumina Ltd Aquarius Platinum Ltd Atlas Iron Ltd Beadell Resources Ltd Bouganville Copper Ltd Cudeco Ltd Discovery Metals Ltd Gindalbie Metals Ltd Independence Group NL Medusa Mining Ltd Mincor Resources NL Mirabela Nickel Ltd Mt Gibson Iron OM Holdings Ltd Oz Minerals Ltd PanAust Ltd Paladin Energy Ltd Panoramic Resources Ltd Perilya Ltd Rex Minerals Ltd Sandﬁ re Resources Ltd Zimplats Holdings Ltd No Performance Rights will vest unless the percentile ranking of the Company’s TSR for the relevant performance year, as compared to the TSR’s for the peer group companies, is at or above the 50th percentile. The following table sets out the vesting outcome based on the Company’s relative TSR performance: Relative TSR performance Performance Vesting Outcomes Less than 50th percentile At the 50th percentile 0% vesting 50% vesting Between 50th and 75th percentile Pro-rata / progressive vesting from 50% - 100% At or above 75th percentile 100% vesting Performance period and vesting For grants made under the LTI plan during FY13, vesting will occur subject to the meeting of service and performance conditions as follows: • • Two-thirds of the rights will be performance tested against the relative TSR measure for the period 1 July 2012 to 30 June 2014. • • One-third of the rights will be performance tested against the relative TSR measure for the period 1 July 2012 to 30 June 2015. The FY13 grants will also be subject to a service based vesting condition which will provide that, notwithstanding the passing of the performance test, no Performance Rights will vest and become exercisable into shares unless the participant remains employed as at 30 June 2015. As noted above, FY13 concludes the LTI transition period and as such, from FY14 onwards, LTI grants will be subject to performance assessed over a three year period such that no vesting will occur until the end of the three year period. Share trading policy The trading of shares issued to participants under any of the Company’s employee equity plans is subject to, and conditional upon, compliance with the Company’s employee share trading policy contained in the Corporate Code of Conduct. Executives are prohibited from entering into any hedging arrangements over unvested performance rights under the LTI plan. The Company would consider a breach of this policy as gross misconduct which may lead to disciplinary action and potentially dismissal. SECTION F: NON-EXECUTIVE DIRECTOR REMUNERATION Non-Executive Directors remuneration policy and structure The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain Directors of the highest calibre whilst incurring a cost that is acceptable to shareholders. The aggregate remuneration of Non-Executive Directors (“NEDs”) is determined from time to time by shareholders in a General Meeting. An amount not exceeding the approved amount is then divided between the Directors as determined by the Remuneration Committee. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed annually. The Board and the Remuneration Committee considers independent salary reports as well as the fees paid to NEDs of comparable companies when undertaking this annual review. 32 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T DIRECTORS’ REPORT It is an objective of the Company to encourage Directors to own shares in Western Areas. However, share based payments in the form of options or equity in the Company are not oﬀ ered to NEDs as encouraged by Corporate Governance guidelines. There is no scheme to provide retirement beneﬁ ts to NEDs, other than statutory superannuation. Non-Executive Directors fees limits NED fees are determined within an aggregated fee limit of $1,000,000, which was approved by shareholders at the 2012 AGM. The following fees (including statutory superannuation) were applicable for the year: Fees $187,238 $162,273 Board Chair Board Member For the second consecutive year, the Remuneration Committee resolved not to increase NED remuneration levels for FY14. NED fees have not been increased since 1 July 2011. Non-Executive Directors fee structure NED remuneration consists of a base Directors fee for their role as Board members, and is inclusive of compensation for any role on nominated Board sub-committees. That is, no separate committee fees are payable. NEDs do not receive any performance-based pay. SECTION G: SERVICE CONTRACTS Executives A summary of the key contractual provisions for each of the current Executives is set out below: Name & job title D Lougher, Managing Director* D Southam, Finance Director* J Belladonna, Chief Financial Oﬃ cer/ Company Secretary * W Jones, General Manager, Operations C Wilkinson, General Manager, Exploration G Marshall, General Manager, Commercial Base salary $ (&) Contract duration Notice period required by employee or WSA Termination provision 680,000 No ﬁ xed term 3 months 510,106 No ﬁ xed term 3 months 320,000 No ﬁ xed term 3 months 379,780 No ﬁ xed term 1 month 327,690 No ﬁ xed term 1 month 297,900 No ﬁ xed term 1 month 12 months termination payment and accrued leave entitlements 12 months termination payment and accrued leave entitlements 6 months termination payment and accrued leave entitlements 6 months termination payment and accrued leave entitlements 6 months termination payment and accrued leave entitlements 2 months termination payment and accrued leave entitlements & The Company pays superannuation at a rate of 11% of the employee’s base salary. * In the event that there is a takeover of, or merger with, the Company, the Company must pay the Executive a bonus within 10 days of that takeover or merger occurring. The amount of the takeover bonus will be calculated as follows: (a) The positive diﬀ erence (expressed as a percentage of the 20 day VWAP) between the bid price for the Company’s shares as a result of a takeover or merger bid, and the volume weighted share price of the Company’s share price for the 20 days immediately preceding the takeover or merger bid; and (b) Multiplied by 3, as a percentage of the Executive’s base annual salary at the time that such a bid is completed. All other senior management contracts are as per the Group’s standards terms and conditions and there are no contracted entitlements to cash bonuses, options or performance rights. Non-Executive Directors Non-Executive Directors receive a letter of appointment before commencing duties on the Board. The letter outlines compensation arrangements relevant to the Oﬃ cer or Director. Non-Executive appointments have no end date, retirement, redundancy or minimum notice periods included in their contracts. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 33 DIRECTORS’ REPORT SECTION H: LINK BETWEEN PERFORMANCE AND REMUNERATION OUTCOMES The remuneration framework detailed above has been tailored with the objective of attracting and retaining the highest calibre staﬀ who contribute to the success of the Company, while maintaining alignment between Company performance and individual rewards. The remuneration policies seek a balance between the interests of stakeholders and competitive market remuneration levels. Company Performance Year Ended 30 June Net Proﬁ t / (Loss) after Tax EPS Dividends Market capitalisation Closing share price TSR – 1 year (%’ile) ranking TSR – 3 year rolling (%’ile) ranking 2013 (94,105) (49.8) 0.02 456.7M 2.32 48 75 2012 40,181 22.4 0.11 729.7M 4.06 80 39 2011 134,973 75.1 0.25 2010 14,212 8.0 0.06 2009 (35,172) (20.9) - 1,060.4M 679.4M 1,053.6M 5.90 67 41 3.78 2 57 5.90 75 80 The second tranche of the FY12 (“LTI”) has not vested due to the relative total shareholder return minimum threshold not being reached by a small margin. This highlights the link between shareholder outcomes and Executive remuneration. Furthermore, as at 30 June 2013, the TSR ranking for all FY13 grants is currently below the minimum 50th percentile rank for the TSR performance hurdle. As mentioned above, in recognition of the diﬃ cult commodity price environment, the Executive Directors and Executives have elected to voluntarily forfeit at least 50% of their respective STI payments earned during the 2013 ﬁ nancial year. The percentage of the maximum STI payment that was paid and forfeited during FY13 is outlined in the table below: Name Executive Directors Mr D Lougher Mr D Southam Executives Mr J Belladonna Mr C Wilkinson Mr G Marshall Mr W Jones Percentage of max STI awarded Percentage of max STI forfeited 29% 28% 26% 26% 33% 37% 71% 72% 74% 74% 67% 63% The table below represents the Executives’ actual remuneration mix of ﬁ xed remuneration, short term incentives and long term incentives based upon remuneration paid or expensed during FY13. It is the Company’s policy to ensure that a suitable portion of Executive remuneration is placed “at-risk” and subject to performance against appropriately set targets. Executive Directors Mr D Lougher Mr D Southam Executives Mr J Belladonna Mr C Wilkinson Mr G Marshall Mr W Jones Fixed Remuneration STI 63% 65% 67% 74% 72% 79% 8% 8% 7% 6% 8% 10% LTI1 29% 27% 26% 20% 20% 11% 1 LTI refers to the value of the Options and Performance Rights that were expensed during the FY13. No Options have been granted over the last two ﬁ nancial years. 34 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T DIRECTORS’ REPORT SECTION I: DETAILS OF REMUNERATION Short Term Employee Beneﬁ ts STI Payments / Bonuses (iii) Allowances Non Monetary Long Term Employee Beneﬁ ts Post Em- ployment Long Service Leave Share Based Payments LTI (i) Superan- nuation TOTAL 2013 Base Salary Non-Executive Directors T Streeter J Hanna (ii) R Dunbar R Yeates I Macliver 168,683 146,192 162,273 146,192 146,192 Executive Directors - - - - - D Lougher D Southam 729,800 541,218 107,000 77,500 Executive Oﬃ cers J Belladonna 330,126 W Jones C Wilkinson G Marshall 395,981 336,701 306,093 45,000 57,500 35,000 39,500 - - - - - 3,667 3,667 3,667 1,742 3,667 3,667 45,806 - - - - 38,162 48,148 43,586 30,847 35,003 33,126 - - - - - - - - - - 18,555 16,081 - 16,081 16,081 233,044 162,273 162,273 162,273 162,273 6,800 5,101 359,930 256,566 25,000 25,000 1,270,359 957,200 3,200 3,850 3,277 2,979 157,282 61,575 110,407 100,372 25,000 25,000 27,034 24,577 607,861 576,495 551,089 510,314 5,355,454 Short Term Employee Beneﬁ ts Long Term Employee Beneﬁ ts Post Em- ployment 2012 Base Salary STI Payments / Bonuses Allowances / Termina- tion Non Monetary Long Service Leave Share Based Payments LTI (i) Superan- nuation TOTAL Non-Executive Directors T Streeter 168,683 J Hanna D Cooper R Dunbar R Yeates I Macliver 60,913 36,548 162,273 146,192 109,644 Executive Directors J Hanna D Lougher D Southam 367,857 579,390 514,460 Executive Oﬃ cers J Belladonna 302,759 130,000 C Wilkinson G Marshall 307,087 286,443 80,000 65,000 - - - - - - - - - - - - 95,000 1,091,873 290,000 270,000 - - - - - 35,893 - - - - - 19,657 30,633 41,602 31,541 29,187 29,627 - - - - - - 3,679 5,156 4,860 2,916 3,151 2,864 - - - - - - 18,555 6,700 4,020 - 16,081 12,061 223,131 67,613 40,568 162,273 162,273 121,705 32,848 175,324 134,192 40,465 1,651,379 45,836 24,997 1,126,339 990,111 93,220 70,705 59,080 22,914 42,660 48,883 583,350 532,790 491,897 6,153,429 (i) LTI refers to the value of Options and Performance Rights that were expensed during the FY13. No Options were granted during the year. (ii) Mr J Hanna receives separate consulting fees for services performed beyond his duties as a NED, the details of which are separately outlined below under “Consulting fees”. (iii) Includes all paid and accrued bonuses for FY13. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 35 DIRECTORS’ REPORT Consulting fees After stepping down as Managing Director, Mr Hanna agreed to remain on the Board as a NED and as a consultant to assist with identifying and developing new growth opportunities for the Company. In addition to receiving fees for his role as a NED of the Board, Mr Hanna was paid arms-length consulting fees for his services as a consultant to the value of $50,000 during FY13. Options held by Key Management Personnel There were no options held by key management personnel at the end of FY13. There were no options issued during FY13 and all historical options have now lapsed. As such, no portion of any KMP’s remuneration for FY13 consisted of options. Balance at 1 July 2012 Granted as Remuneration On Exercise of Options Purchases / (Sales) Expired / Lapsed Balance at 30 June 2013 Options Vested D Lougher J Hanna C Wilkinson G Marshall J Belladonna TOTAL 200,000 200,000 100,000 50,000 100,000 650,000 - - - - - - - - - - - - - - - - - - 200,000 200,000 100,000 50,000 100,000 650,000 - - - - - - - - - - - - Shareholding by Key Management Personnel D Lougher T Streeter J Hanna R Dunbar R Yeates I Macliver C Wilkinson J Belladonna W Jones TOTAL Balance at 1 July 2012 64,884 25,889,410 1,134,666 102,500 10,000 20,000 7,000 60,000 60,000 27,348,460 Granted as Remuneration On Exercise of Options Other Changes During the Year Balance at 30 June 2013 - - - - - - - - - - - - - - - - - - - - 15,073 79,957 (1,951,780) 23,937,630 (410,875) 10,000 - 3,948 - 3,948 - 723,791 112,500 10,000 23,948 7,000 63,948 60,000 (2,329,686) 25,018,774 36 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T DIRECTORS’ REPORT Performance Rights held by Key Management Personnel Details of Performance Rights granted under the LTI plan during FY13 are outlined below: Grant date Number granted Vesting conditions Fair value at grant date Exercise price Exercise date D Lougher 22/11/12 294,800 (a) $2.31 Nil D Southam 22/11/12 165,900 C Wilkinson G Marshall 22/11/12 22/11/12 71,050 64,591 J Belladonna 22/11/12 104,074 W Jones TOTAL 22/11/12 83,476 783,891 (a) (a) (a) (a) (a) $2.31 $2.31 $2.31 $2.31 $2.31 Nil Nil Nil Nil Nil Upon receipt of a vesting notice issued in FY14 As above As above As above As above As above Expiry date 1/7/16 1/7/16 1/7/16 1/7/16 1/7/16 1/7/16 Number vested - - - - - - - a) Performance rights granted during FY13 were granted under the LTI plan and will vest subject to the meeting of service and performance conditions as follows: • • • • One-third of the rights will be performance tested against the relative TSR measure for the period 1 July 2012 to 30 June 2015. Two-thirds of the rights will be performance tested against the relative TSR measure for the period 1 July 2012 to 30 June 2014. The FY13 grants will also be subject to a service based vesting condition which will provide that, notwithstanding the passing of the performance test, no Performance Rights will vest and become exercisable into shares unless the participant remains employed as at 30 June 2015. Balance at 1 July 2012 Number granted as Remuneration Number exercised Number expired / lapsed Balance at 30 June 2013 Portion vested (%) D Lougher D Southam C Wilkinson G Marshall J Belladonna W Jones TOTAL 113,891 107,354 46,399 42,182 64,411 - 374,237 294,800 165,900 71,050 64,591 104,074 83,476 783,891 - - - - - - - - - - - - - - 408,691 273,254 117,449 106,773 168,485 83,476 1,158,128 - - - - - - The second tranche of the FY12 (“LTI”) has not vested due to the relative total shareholder return minimum threshold not being reached. End of audited remuneration report. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 37 DIRECTORS’ REPORT Rounding of Amounts The Company is a company of the kind referred to in ASIC Class Order 98/100, dated 10 July 1998, and in accordance with that Class Order, amounts in the Directors’ Report and the ﬁ nancial statements are rounded oﬀ to the nearest thousand dollars, unless otherwise indicated. Corporate Governance In recognising the need for the highest standards in corporate behaviour and accountability, the Directors of Western Areas Ltd support and, unless otherwise stated, adhere to the Australian Stock Exchange Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice Recommendations”. The Company’s corporate governance statement is contained in the following section of this report. Signed in accordance with a resolution of the Board of Directors. D Lougher Managing Director Perth, 27 August 2013 38 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T CORPORATE GOVERNANCE STATEMENTS The Board of Directors of Western Areas Ltd is responsible for the corporate governance of the Consolidated Entity. The Board guides and monitors the business and aﬀ airs of Western Areas Ltd on behalf of the shareholders by whom they are elected and to whom they are accountable. In accordance with the Australian Stock Exchange Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice Recommendations” (the “Recommendations”), the Corporate Governance Statement must contain certain speciﬁ c information and must disclose the extent to which the Company has followed the guidelines during the period. Where a recommendation has not been followed; that fact must be disclosed, together with the reasons for the departure. During the current ﬁ nancial year, the Board of Directors have monitored, developed and implemented changes to ensure that an appropriate level of corporate governance was in place during this year. The Board has taken into consideration the nature of the governance matter, the impact of immediate or accelerated change to comply on the Company and the issues (particularly risks) associated with deferred implementation. Where compliance has not been achieved, explanations are provided. Other than as highlighted in this Statement, Western Areas’ corporate governance practices were in place throughout the year and were compliant with the Council’s best practice recommendations. For further information on corporate governance policies adopted by the Company, refer to our website: www.westernareas.com.au BOARD COMPOSITION The skills, experience and expertise relevant to the position held by each Director in oﬃ ce at the date of the Annual Report is included on page 22. One of the Council’s recommendations is that the Board of Directors should comprise a majority of independent Directors. Directors of Western Areas Ltd are considered to be independent when they are independent of management and free from any business or other relationships that could materially interfere with, or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgement. Composition Developments Lead Independent Director During the 2013 ﬁ nancial year, Mr Ian Macliver was appointed as the Western Areas’ Board Lead Independent Non- Executive Director (“LINED”, or “Lead Independent”). The appointment of a Lead Independent Director was to provide the Board an independent alternative to the Chairman should a real or perceived conﬂ ict arise during Board proceedings or voting. Mr Macliver also serves as the Chairman of the Audit and Risk Committee and it was thought that the combination of these two roles would be complementary. Independence In the context of Director independence, “materiality” is considered from both the Company and individual Director’s perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors which point to the actual ability of the Director in question to inﬂ uence the direction of the Company. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 39 CORPORATE GOVERNANCE STATEMENTS In accordance with the deﬁ nition of independence above, and the materiality thresholds set, the following Directors of Western Areas Ltd are considered to be independent: Name I Macliver R Dunbar R Yeates Position Lead Independent Non-Executive Director Non-Executive Director Non-Executive Director Council Recommendations At the date of this report and throughout the ﬁ nancial year, Western Areas Ltd complied with the Council’s recommendations with the exception of recommendation 2.1 – Majority of the Board comprise Independent Directors and recommendation 2.2 – that the Chair be an Independent Director. While not complying with recommendation 2.1, the Directors of Western Areas believe that the Board operates eﬃ ciently and eﬀ ectively. It continues to evaluate and monitor the available pool of independent Directors via a specialist Non-Executive Director search consultant for suitable candidates. Regarding recommendation 2.2 related to Chairman Independence, the Board believes that the current Chair is the best person that exists on the Board to hold the oﬃ ce at this time. While the Chair is Non-Executive they are not independent due to Western Areas’ share ownership only. The Board has in place a Charter which deﬁ nes the role and structure of the Board. It also outlines the Board’s ability to delegate authority to the Managing Director and Senior Management of the Company and highlights the procedures in place to enable Directors, in furtherance of their duties, to seek independent professional advice at the Company’s expense. ETHICAL STANDARDS The Board acknowledges the importance of maintaining high levels of ethical conduct. A code of conduct is in place and contained inside the Company’s Corporate Governance Statement. The key provisions of the code of conduct are to: • • Act honestly and with integrity. • • Act in the best interests of the Company and shareholders. • • Avoid and disclose any conﬂ icts of interest both real and perceived. • • Comply with the law. • • Keep all material information conﬁ dential, until released to the wider market. • • Not use their position for personal gain. • • Ensure compliance with the code of conduct. DIVERSITY POLICY The Company’s policy regarding Diversity is contained in the Western Areas Code of Conduct. Diversity in the context of the policy includes, but is not limited to, gender, age, ethnicity and cultural background. The policy ensures that roles and positions are ﬁ lled by the best possible candidate available without discrimination. The Diversity Policy outlines the requirements of the Board to develop measurable objectives for achieving diversity, and annually assess both the objectives and the progress in achieving those objectives. Over the next few years the Company aims to increase diversity in senior appointments as positions become available. All appointments will be based on merit and expertise required to discharge the duties of such roles. Women on the Board Women in Senior Management Women employees in total 30 June 2013 0 1 21 % 0 7(*) 16 30 June 2012 0 1 21 % 0 5 15 (*) Percentage increase relates to the retirement of a Manager that has not been replaced. To assist in fostering diversity, the policy includes the requirement for a least one female candidate to be shortlisted for all senior appointments (including Director appointments), if a suitably qualiﬁ ed candidate exists in the applications. 40 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T CORPORATE GOVERNANCE STATEMENTS TRADING POLICY The Company’s policy regarding Directors and Employees trading in securities is published in the Western Areas Code of Conduct and is also available on the Company’s website. The policy contains provisions on trading in Company securities, including when trading windows are available, restricted periods and prohibited periods. The policy deﬁ nes Insider Trading and restricts Directors and Employees from acting on material information until it has been released to the market and adequate time has elapsed for this to be reﬂ ected in the securities price. NOMINATION COMMITTEE The Board has established a Nomination Committee to assess the necessary and desirable competencies of a Board member and to evaluate the Board’s performance. The Nomination Committee shall also review Board succession plans and make recommendations for the appointment and removal of Directors. The Nomination Committee operates under a charter approved by the Board. For details of the Directors that are members of the Nomination Committee and their attendance at meetings of the Nomination Committee, refer to page 26 of the Directors’ Report. The Nomination Committee conducted one Board performance evaluation. The performance assessment involved each member of the Board to rate the Board’s performance against speciﬁ c qualitative and quantitative criteria. AUDIT & RISK MANAGEMENT COMMITTEE The Board has an established Audit & Risk Management Committee which operates under a charter approved by the Board. It is the Board’s responsibility to ensure that an eﬀ ective internal control framework exists within the entity. This includes internal controls to deal with both the eﬀ ectiveness and eﬃ ciency of signiﬁ cant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of ﬁ nancial information, as well as non-ﬁ nancial considerations such as the benchmarking of operational key performance indicators. The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and ethical standards for the management of the Consolidated Entity to the Audit & Risk Management Committee. The Committee also provides the Board with additional assurance regarding the reliability of ﬁ nancial information included in the ﬁ nancial reports and the independence of the Company’s Auditor. The majority of the members of the Audit & Risk Committee are Independent Non-Executive Directors. Refer to page 26 of the Directors’ Report for a list of committee members and the number of meetings of the Audit & Risk Management Committee attended throughout the year. RISK MANAGEMENT Management of material risks There is an established Risk Management Policy, which deﬁ nes our commitment to maintaining a risk management culture to eﬀ ectively manage risk and protect our business from value destroying events. To enable an integrated and systematic approach to managing risk, senior management has designed and implemented the Western Areas Risk Management Program (“RMP”). The RMP supports the identiﬁ cation, evaluation and management of material risks within all areas of the business. It establishes standard criteria for the assessment of risk, WSA’s risk tolerance parameters and reporting requirements. The Risk Management Policy can be located on the Company’s website. The RMP is the subject of ongoing development and enhancement to ensure it continues to meet our needs and supports our corporate governance requirements. Reporting on material risks Senior management has regularly reported to the Board on the eﬀ ectiveness of the management of material risks against the RMP criteria. Risk and control reporting is undertaken six monthly, comprising a statement of relevant business objectives, a summary of risk and control proﬁ les against those objectives, a commentary on the eﬀ ectiveness of the risk management system and key activities. Any deterioration of controls over material risks is highlighted. Reporting is also provided on progress against the RMP annual schedule and upcoming activities. The Board has received assurance from the Managing Director and the Chief Financial Oﬃ cer that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating eﬀ ectively in all material respects in relation to ﬁ nancial reporting risks. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 41 CORPORATE GOVERNANCE STATEMENTS Activity In 2013, the Company continued enhancing its approach to risk management developing a whole of business approach, recognising the importance of risk management to business success and in meeting Corporate Governance requirements. The integration of risk management across the business is designed to facilitate the capture of all signiﬁ cant risks and to ensure senior management and the Board are made aware of material risks in operations, projects and corporate activities. This occurs by applying a standard approach, including the assessment and communication of risks. The Company has an ongoing operational risk management program, with a strong emphasis on safety and emergency risk management embedded in our Health and Safety management system. Within the new program we have, or intend to, focus workshops on risk management in four key areas, Strategy, Business as Usual, Sustainability and Resilience. The Company engages MYR Consulting Pty Ltd to assist in development of the risk management framework, activities and policies. REMUNERATION The Board has established a Remuneration Committee, which operates under a charter approved by the Board. It is the Company’s objective to provide maximum stakeholder beneﬁ t from the retention of a high quality Board and Executive team by remunerating Directors and key Executives fairly and appropriately with reference to relevant employment market conditions and the review of independent employment statistics such as the McDonald Remuneration Report. The Remuneration Committee will also engage independent remuneration consultants to provide impartial advice in respect of remuneration trends and Executive employment contracts. To assist in achieving this objective, the Remuneration Committee links the nature and amount of Executive Directors’ and Oﬃ cers’ emoluments to the Company’s ﬁ nancial and operational performance. The expected outcomes of the remuneration structure are: • • Retention and motivation of key Executives; • • Attraction of quality management to the Company; and • • Performance incentives which allow Executives to share the rewards of the success of the Company. A full discussion of the Company’s remuneration philosophy and framework along with details on the amount of remuneration received by Directors and Executives during the year is provided in the Remuneration Report, which is contained within the Directors’ Report. For details on the members, number of meetings held and member attendance of the Remuneration Committee meetings held during the year refer to page 26 of the Directors’ Report. For further details regarding the Board’s committees refer to our website www.westernareas.com.au TREASURY The Board established a Treasury Committee that operates within policies set by the Board. The aim of the Treasury Committee is to maintain the Treasury Risk Management policy and ensure that the Company only enters hedging contracts as approved by the Board to prudently manage currency and nickel price risk in a balanced and measured way, while still maintaining adequate exposure to the spot nickel price. For details on the Treasury Committee members, number of meetings held and meeting attendance during the year refer to page 26 of the Directors’ Report. BOARD AND EXECUTIVE PERFORMANCE The performance of the Board and Key Management Personnel is reviewed against both measurable and qualitative indicators. The performance criteria against which Directors and Executives are assessed is aligned with the ﬁ nancial and non-ﬁ nancial objectives of the Company. SHAREHOLDER RIGHTS Shareholders are entitled to vote on signiﬁ cant matters impacting on the business, which include the election and remuneration of Directors, changes to the constitution and receipt of annual and interim ﬁ nancial statements. Shareholders are strongly encouraged to attend and participate in the Annual General Meeting of Western Areas Ltd, to lodge questions to be responded to at the meeting, and are able to appoint proxies. 42 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T AUDITOR’S INDEPENDENCE DECLARATION AUDITOR’S INDEPENDENCE DECLARATION In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Western Areas Ltd for the year ended 30 June 2013, 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. CROWE HORWATH PERTH SEAN MCGURK Partner Signed at Perth, 27 August 2013 Liability limited by a scheme approved under Professional Standards Legislation Crowe Horwath Perth is a Crowe Horwath Australasia Group Firm and a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 43 CONSOLIDATED INCOME STATEMENT Year Ended 30 June 2013 Sales Cost of sales Gross proﬁ t Other income Finance costs Employee beneﬁ t expense Foreign exchange gain Administration and other expenses Business combination acquisition costs Share based payments Impairment / write-oﬀ of non-current assets Realised derivative gains Changes in fair value of derivatives (Loss) / Proﬁ t before income tax Income tax beneﬁ t / (expense) (Loss) / Proﬁ t for the year Basic (loss) / earnings per share (cents per share) Diluted (loss) / earnings per share (cents per share) The accompanying notes form part of these ﬁ nancial statements. Notes Consolidated Entity 2013 $’000 306,541 (259,838) 46,703 6,980 (26,736) (8,800) 2,303 (6,934) - (1,159) (142,421) 2,978 (1,472) (128,558) 34,453 (94,105) 2012 $’000 330,698 (234,524) 96,174 8,763 (37,441) (7,664) 663 (6,304) (3,618) (882) (79) 9,030 (1,181) 57,461 (17,280) 40,181 (49.8) (49.8) 22.4 22.4 2 3 35 11, 12 3 3 4 19 19 44 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year Ended 30 June 2013 (Loss) / proﬁ t for the year Other comprehensive income/(loss), net of tax Items that may be reclassiﬁ ed to proﬁ t or loss Changes in fair value of hedging instruments Changes in fair value of available for sale ﬁ nancial assets Exchange diﬀ erences on translation of foreign controlled entities Notes Consolidated Entity 2013 $’000 2012 $’000 (94,105) 40,181 (1,460) (2,625) 1,459 970 (4,070) (607) Total comprehensive (loss) / income for the year (96,731) 36,474 (Loss) / Proﬁ t attributable to: Members of the parent entity Non controlling interest Total Comprehensive (Loss) / Income attributable to: Members of the parent entity Non controlling interest (93,986) (119) (94,105) (96,612) (119) (96,731) 40,301 (120) 40,181 36,594 (120) 36,474 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 45 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As At 30 June 2013 Current Assets Cash and cash equivalents Trade and other receivables Inventories Derivative ﬁ nancial instruments Total Current Assets Non Current Assets Property, plant and equipment Intangible assets Exploration & evaluation expenditure Mine properties Available for sale ﬁ nancial assets Total Non Current Assets Total Assets Current Liabilities Trade and other payables Borrowings Provisions Current tax liabilities Derivative ﬁ nancial instruments Total Current Liabilities Non Current Liabilities Borrowings Provisions Deferred tax liabilities Total Non Current Liabilities Total Liabilities Net Assets Equity Contributed equity Other reserves Retained earnings Equity attributable to members of the parent entity Non controlling interest Total Equity The accompanying notes form part of these ﬁ nancial statements. 46 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T Notes Consolidated Entity 2013 $’000 2012 $’000 20 (b) 6 7 17 9 10 11 12 8 14 15 16 17 15 16 13 18 32 80,719 18,610 30,318 663 130,310 112,110 525 32,182 241,776 1,120 387,713 518,023 36,911 104 1,932 324 1,906 41,177 216,915 6,298 10,629 233,842 275,019 165,502 25,360 42,121 1,973 234,956 107,111 525 133,282 295,634 3,460 540,012 774,968 66,444 150,392 1,374 10,606 284 229,100 208,688 6,096 41,219 256,003 485,103 243,004 289,865 266,043 42,140 (65,286) 242,897 107 243,004 202,611 75,739 11,289 289,639 226 289,865 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year Ended 30 June 2013 CONSOLIDATED ENTITY Issued Capital Capital Raising Costs Share Based Payment Reserve Hedge Reserve Investment Reserve Convert- ible Note Reserve Foreign Exchange Reserve Retained Earnings Non- Controlling Interest Total Equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Total Equity at 1 July 2011 Comprehensive income Proﬁ t for the year Other comprehensive income for the year Total comprehensive income for the year Transactions with owner in their capacity as owner, and other transfers Share based payments expense Dividends paid Total Equity at 30 June 2012 Comprehensive income Loss for the year Other comprehensive loss for the year Total comprehensive loss for the year Transactions with owner in their capacity as owner, and other transfers Contributions of equity Transaction costs on equity Share based payments expense Transfer of convertible note reserve Dividends paid Total Equity at 30 June 2013 212,833 (10,222) 16,159 - (2,695) 65,090 10 6,937 346 288,458 40,301 (120) 40,181 970 (4,070) (607) (3,707) 970 (4,070) (607) 40,301 (120) 36,474 882 (35,949) 882 (35,949) 212,833 (10,222) 17,041 970 (6,765) 65,090 (597) 11,289 226 289,865 (93,986) (119) (94,105) (1,460) (2,625) 1,459 (2,626) (1,460) (2,625) 1,459 (93,986) (119) (96,731) 65,009 (1,577) 1,159 65,009 (1,577) 1,159 - (14,721) (32,132) 32,132 (14,721) 277,842 (11,799) 18,200 (490) (9,390) 32,958 862 (65,286) 107 243,004 The accompanying notes form part of these ﬁ nancial statements. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 47 CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended 30 June 2013 Notes Consolidated Entity 2013 $’000 2012 $’000 Cash ﬂ ows from operating activities Receipts from customers Payments to suppliers and employees Interest received Royalties paid Other receipts Interest paid Realisation on settlement of derivatives Income tax paid Net cash inﬂ ow from operating activities 20(a) 313,929 (175,590) 1,621 (12,011) 4,958 (21,113) 6,741 (6,420) 112,115 326,808 (144,403) 10,257 (16,344) 12 (24,252) 8,699 (1,524) 159,253 Cash ﬂ ows from investing activities Payments for property, plant and equipment (19,052) (13,721) Rental deposit Mine development expenditure Exploration & evaluation expenditure Payment for termination of royalty agreement Payment for acquisition of subsidiary 35 Purchase of available for sale ﬁ nancial assets Net cash outﬂ ow from investing activities Cash ﬂ ows from ﬁ nancing activities Proceeds from borrowings Repayment of borrowings Proceeds from issues of shares Share issue transaction costs Finance lease payments Borrowing costs Dividends paid to Company’s shareholders Net cash (outﬂ ow) / inﬂ ow from ﬁ nancing activities Net decrease in cash and cash equivalents held Cash and cash equivalents as at the beginning of the ﬁ nancial year 20 (35,527) (24,510) (14,317) - (285) 9 (67,417) (42,677) (14,926) (71,100) (1,085) (93,671) (210,917) - 45,000 (150,500) 65,009 (1,577) (68) (1,370) (14,721) (103,227) (84,783) 165,502 - - - (69) (764) (35,949) 8,218 (43,446) 208,948 Cash and cash equivalents at end of ﬁ nancial year 20(b) 80,719 165,502 The accompanying notes form part of these ﬁ nancial statements. 48 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS Year Ended 30 June 2013 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES These consolidated ﬁ nancial statements and notes represent those of Western Areas Ltd and Controlled Entities (the “Consolidated Group” or “Group”). The separate ﬁ nancial statements of the parent entity, Western Areas Ltd, have not been presented within this ﬁ nancial report as permitted by amendments made to Corporation Act 2001 eﬀ ective as at 28 June 2010. The Group is a for proﬁ t entity for ﬁ nancial reporting purposes under Australian Accounting Standards. The ﬁ nancial report was approved by the Board of Directors on 27 August 2013. Basis of Preparation These general purpose ﬁ nancial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a ﬁ nancial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the ﬁ nancial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this ﬁ nancial report are presented below and have been consistently applied unless stated otherwise. Except for cash ﬂ ow information, the ﬁ nancial statements have been prepared on an accruals basis and are based on historical costs, modiﬁ ed, where applicable, by the measurement at fair value of selected non-current assets, ﬁ nancial assets and ﬁ nancial liabilities. Adoption of new and revised Accounting Standards None of the new standards and amendments to standards that are mandatory for the ﬁ rst time for the ﬁ nancial year beginning 1 July 2012 aﬀ ected any of the amounts recognised in the current period or any prior period and are not likely to aﬀ ect future periods. However, amendments made to AASB 101 Presentation of Financial Statements eﬀ ective 1 July 2012 now require the Statement of Comprehensive Income to show the items of comprehensive income grouped into those that are not permitted to be classiﬁ ed to proﬁ t or loss in a future period and those that may have to be reclassiﬁ ed if certain conditions are met. These changes are included in the Income Statement and Statement of Comprehensive Income. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 49 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Principles of Consolidation The consolidated ﬁ nancial statements incorporate the assets, liabilities and results of entities controlled by Western Areas Ltd at the end of the reporting period. A controlled entity is an entity over which Western Areas Ltd has the power to govern the ﬁ nancial and operating policies so as to obtain beneﬁ ts from its activities. Where controlled entities have entered or left the Group during the year, the ﬁ nancial performance of those entities are included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 8(a) to the ﬁ nancial statements. In preparing consolidated ﬁ nancial statements, all inter-group balances and transactions between entities in the Consolidated Group have been eliminated in full on consolidation. Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are shown separately within the equity section of the Consolidated Statement of Financial Position and Statement of Comprehensive Income. The non-controlling interest in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date. Business Combinations Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identiﬁ able assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exceptions). The acquisition may result in the recognition of goodwill or a gain from a bargain purchase. The method adopted for the measurement of goodwill will impact on the measurement of any non-controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree. The acquisition date fair value of the consideration transferred for a business shall form the cost of the investment in the separate ﬁ nancial statements. When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classiﬁ ed as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classiﬁ ed as an asset or a liability is remeasured each reporting period to fair value through the Income Statement unless the change in value can be identiﬁ ed as existing at acquisition date. All transaction costs incurred in relation to the business combination are expensed to the Income Statement. As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated ﬁ nancial statements as well as their results for the year then ended. The accounting policies of the subsidiaries have been changed where necessary to ensure consistency with the policies applied by the parent entity. All consolidated entities have a 30 June ﬁ nancial year end. (b) Revenue Revenue from the sale of nickel is recognised when the risks and rewards of the products pass to the buyer, currently being the point at which the product is delivered on site to the buyer or passes the ships’ rail or as otherwise agreed between Western Areas and the buyer. Revenue is recognised at estimated sales value. The estimated sales value is determined by reference to the estimated metal content, metal recovery, the metal price and exchange rate. An adjustment is made to reﬂ ect the ﬁ nal sales value when the actual metal content and metal recovery has been determined. The ﬁ nal metal content and metal recovery is generally known between 30 and 90 days after delivery to the customer. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the ﬁ nancial assets. All revenue is stated net of the amount of goods and services tax (GST). 50 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to prepare for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognised in the Income Statement in the period in which they are incurred. (d) Inventories Inventories are measured at the lower of cost and net realisable value. Costs, including an appropriate portion of ﬁ xed and variable overhead expenses, are assigned to inventories on hand by the method most appropriate to each class of inventory with the majority being valued on an average cost basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. The cost of mining stocks includes direct materials, direct labour, transportation costs and variable and ﬁ xed overhead costs relating to mining activities. The cost of consumables and spare parts includes cost of materials and transportation costs. (e) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Property Freehold land and buildings are carried at their fair value (being the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction), based on periodic, but at least triennial, valuations by external independent valuers, less accumulated depreciation for buildings. Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation surplus in equity. Decreases that oﬀ set previous increases of the same asset are recognised against revaluation surplus directly in equity; all other decreases are recognised in proﬁ t or loss. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Plant and Equipment Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in proﬁ t or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(m) for details of impairment). The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash ﬂ ows that will be received from the asset’s employment and subsequent disposal. The expected net cash ﬂ ows have been discounted to their present values in determining recoverable amounts. The cost of ﬁ xed assets constructed within the Consolidated Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of ﬁ xed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁ ts associated with the item will ﬂ ow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in proﬁ t or loss during the ﬁ nancial period in which they are incurred. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 51 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Property, Plant and Equipment (Continued) Depreciation The depreciable amount of all property, plant and equipment is depreciated on a straight line basis over their useful lives or the estimated life of mine, if shorter. Land is not depreciated. The depreciation rates used for each major type of depreciable assets are: Class of Fixed Asset Depreciation Rate Property 2-20% Plant and equipment 2-33% or unit of production basis over the life of mine Motor vehicles 20% Furniture and ﬁ ttings 6-27% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in proﬁ t or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. (f) Exploration and Evaluation Expenditure Exploration, evaluation and development expenditures incurred are capitalised in respect of each identiﬁ able area of interest. These costs are only capitalised to the extent that they are expected to be recovered through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written oﬀ in full against proﬁ t or loss in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Where it is determined that uncertainty exists as to the ability to recoup carry forward exploration, evaluation and development costs an impairment loss will be raised against the asset and charged against proﬁ t in the year that determination is made. (g) Mine Development Development expenditure incurred by or on behalf of the Consolidated Entity is accumulated separately for each area of interest in which economically recoverable resources have been identiﬁ ed. Such expenditure comprises costs directly attributable to the construction of a mine, the related infrastructure and capitalised exploration and evaluation expenditure transferred from capitalised exploration and evaluation expenditure account. Amortisation is charged using the units-of production method, with separate calculations being made for each area of interest. The units-of-production basis results in an amortisation charge proportional to the depletion of proved and probable reserves. Mine properties are tested for impairment in accordance with the policy in Note 1(m). Costs of site restoration are provided for over the life of the facility from when exploration commences and are included in the costs from that stage. Site restoration costs include obligations relating to dismantling and removing mining plant, reclamation, waste dump rehabilitation and other costs associated with restoration and rehabilitation of the site. Such costs have been determined using estimates for current costs and current legal requirements and technology. Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. 52 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (h) Income Tax The income tax expense for the year comprises current income tax expense and deferred tax expense. The charge for current income tax expense is based on the proﬁ t for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date. Current income tax expense charged to the proﬁ t or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reﬂ ects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the proﬁ t or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary diﬀ erences arising between the tax bases of assets and liabilities and their carrying amounts in the ﬁ nancial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no eﬀ ect on accounting or taxable proﬁ t or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reﬂ ects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary diﬀ erences and unused tax losses are recognised only to the extent that it is probable that future taxable proﬁ t will be available against which the beneﬁ ts of the deferred tax asset can be utilised. Current tax assets and liabilities are oﬀ set where a legally enforceable right of set-oﬀ exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are oﬀ set where a legally enforceable right of set-oﬀ exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or diﬀ erent taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which signiﬁ cant amounts of deferred tax assets or liabilities are expected to be recovered or settled. The amount of beneﬁ ts brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive suﬃ cient future assessable income to enable the beneﬁ t to be realised and comply with the conditions of deductibility imposed by the law. Tax Consolidation Western Areas Ltd and its wholly owned Australian subsidiaries have formed an income tax consolidated group under the Tax Consolidation Regime from 1 July 2002. Western Areas Ltd is responsible for recognising the current and deferred tax assets and liabilities for the tax consolidated group. Each entity in the Group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The tax consolidated group has entered into a tax funding arrangement whereby each company in the Group contributes to the income tax payable by the Group in proportion to their contribution to the Group’s taxable income. Diﬀ erences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity. (i) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Oﬃ ce. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST. Cash ﬂ ows are presented in the cash ﬂ ow statement on a gross basis, except for the GST component of investing and ﬁ nancing activities, which are disclosed as operating cash ﬂ ows. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 53 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (j) Employee Beneﬁ ts Provision is made for the Consolidated Entity’s liability for employee beneﬁ ts arising from services rendered by employees to balance date. Employee beneﬁ ts expected to be settled within one year together with entitlements arising from salaries and wages, annual leave and sick leave have been measured at their nominal amount. Employee beneﬁ ts that are expected to be settled after one year have been discounted to the present value of the future expected cash outﬂ ow to be made for those beneﬁ ts. Contributions are made by the Consolidated Entity to employee superannuation funds and are charged as expenses when incurred. Share based payment transactions The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reﬂ ect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share- based payment is measured to reﬂ ect such conditions and there is no true-up for diﬀ erences between expected and actual outcomes. (k) Leases Leases of ﬁ xed assets, where substantially all the risks and beneﬁ ts incidental to the ownership of the asset – but not the legal ownership – are transferred to entities in the consolidated group, are classiﬁ ed as ﬁ nance leases. Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and beneﬁ ts remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. (l) Financial Instruments Initial recognition and measurement Financial assets and ﬁ nancial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For ﬁ nancial assets, this is equivalent to the date that the Company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classiﬁ ed “at fair value through proﬁ t or loss”, in which case transaction costs are expensed to the Income Statement immediately. Classiﬁ cation and Subsequent Measurement Financial instruments are subsequently measured at either of fair value, amortised cost using the eﬀ ective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as: a) the amount at which the ﬁ nancial asset or ﬁ nancial liability is measured at initial recognition; b) less principal repayments; c) plus or minus the cumulative amortisation of the diﬀ erence, if any, between the amount initially recognised and the maturity amount calculated using the eﬀ ective interest method; and d) less any reduction for impairment. 54 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) Financial Instruments (Continued) The eﬀ ective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the ﬁ nancial instrument to the net carrying amount of the ﬁ nancial asset or ﬁ nancial liability. Revisions to expected future net cash ﬂ ows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in proﬁ t or loss. Financial assets at fair value through proﬁ t and loss Financial assets are classiﬁ ed at “fair value through proﬁ t or loss” when they are either held for trading for the purpose of short term proﬁ t taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of ﬁ nancial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in proﬁ t or loss. Loans and receivables Loans and receivables are non-derivative ﬁ nancial assets with ﬁ xed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period (all other loans and receivables are classiﬁ ed as non-current assets). Available-for-sale ﬁ nancial assets Available-for-sale ﬁ nancial assets are non-derivative ﬁ nancial assets that are either not suitable to be classiﬁ ed into other categories of ﬁ nancial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a ﬁ xed maturity nor ﬁ xed or determinable payments. Available-for-sale ﬁ nancial assets are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period (all other ﬁ nancial assets are classiﬁ ed as current assets). Financial liabilities Non-derivative ﬁ nancial liabilities (excluding ﬁ nancial guarantees) are subsequently measured at amortised cost. De-recognition Financial assets are de-recognised where the contractual rights to receipt of cash ﬂ ows expires or the asset is transferred to another party whereby the entity no longer has any signiﬁ cant continuing involvement in the risks and beneﬁ ts associated with the asset. Financial liabilities are de-recognised where the related obligations are either discharged, cancelled or expired. The diﬀ erence between the carrying value of the ﬁ nancial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in proﬁ t or loss. Impairment At each reporting date, the Group assesses whether there is objective evidence that a ﬁ nancial instrument has been impaired. In the case of available for sale ﬁ nancial instruments, a prolonged decline in the value of the instrument is considered to determine whether impairment has arisen. Impairment losses are recognised in the Income Statement. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 55 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (l) Financial Instruments (Continued) Derivative ﬁ nancial instruments Derivative ﬁ nancial instruments are used by the Consolidated Entity to hedge exposures to commodity prices and foreign currency exchange rates. The Group documents at the inception of a transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly eﬀ ective in oﬀ setting changes in fair values or cash ﬂ ows of hedged items. Derivatives are initially recognised at fair value on the date the contract is entered into and are subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Hedging derivatives are either Fair Value Hedges or Cash ﬂ ow Hedges. Fair Value Hedges Changes in the fair value of derivatives classiﬁ ed as fair value hedges are recognised in the Income Statement, together with any changes in the fair value of the hedge asset or liability that are attributable to the hedged risk. Cash Flow Hedge The eﬀ ective portion of changes in the fair value of derivatives that qualify as cash ﬂ ow hedges are recognised in equity in the hedging reserve. The ineﬀ ective portion is recognised directly in the Income Statement. Amounts accumulated in equity are classiﬁ ed to proﬁ t or loss in the periods when the hedged item aﬀ ects proﬁ t or loss (for instance when the forecast sale that is hedged takes place). All Other Derivatives Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised in the Income Statement. (m) Impairment of Assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition proﬁ ts. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the Income Statement. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Reversal of impairment losses An impairment loss recognised in prior periods for an asset/CGU is reversed if there has been a change in the estimates used to determine the asset’s/CGU’s recoverable amount. When an impairment loss subsequently reverses, the carrying amount of the asset/CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset/CGU in prior years. Impairment testing is performed annually for goodwill and intangible assets with indeﬁ nite lives. (n) Rounding Amounts The parent entity has applied the relief available to it under the ASIC Class Order 98/100 and accordingly, amounts in the ﬁ nancial report have been rounded to the nearest $1,000. (o) Joint Ventures The Group’s share of the assets, liabilities, revenue and expenses of joint venture operations are included in the appropriate items of the consolidated ﬁ nancial statements. Details of the Group’s interests are shown at Note 28. 56 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (p) Cash and Cash Equivalents Cash and cash equivalents comprise cash-on-hand, cash in banks and investments in money market instruments, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the Statement of Financial Position. (q) Provisions Provisions are recognised where the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outﬂ ow of economic beneﬁ ts will result and that outﬂ ow is able to be reliably measured. (r) Convertible Bonds The component of the convertible bond that exhibits characteristics of a liability is recognised as a liability in the Statement of Financial Position, net of transaction costs. On issuance of the convertible bonds, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this is carried as a long term liability. The increase in the liability due to the passage of time is recognised as a ﬁ nance cost. The remainder of the proceeds are allocated and included in shareholder equity, net of transaction costs. The carrying amount of the convertible bond is not remeasured in subsequent years. (s) Foreign Currency Transactions and Balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated ﬁ nancial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost, continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange diﬀ erences arising on the translation of monetary items are recognised in the Income Statement, except where deferred in equity as a qualifying cash ﬂ ow or net investment hedge. Exchange diﬀ erences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss can be directly recognised in equity, otherwise the exchange diﬀ erence is recognised in the Income Statement. The ﬁ nancial results and position of foreign operations whose functional currency is diﬀ erent from the Group’s presentation currency are translated as follows: • • assets and liabilities are translated at year-end exchange rates prevailing at the end of the reporting period; • • income and expenses are translated at average exchange rates for the period; and • • retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange diﬀ erences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve in the Statement of Financial Position. These diﬀ erences are recognised in the Statement of Comprehensive Income in the period in which the operation is disposed. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 57 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (t) Critical Accounting Estimates and Balances The Directors evaluate estimates and judgements incorporated into the ﬁ nancial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key estimates i) Impairment The Group assesses each asset or cash generating unit (CGU) at each reporting period to determine whether any indication of impairment exists. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made. Recoverable amounts for the Group’s CGU, being the Forrestania Nickel Project, are determined using a fair value less cost to sell (FVLCS) approach. These calculations incorporate various assumptions and estimates as detailed in Notes 11 and 12. ii) Reserve estimates Estimates of recoverable quantities of proven and probable reserves include assumptions regarding commodity prices, exchange rates, discount rates, production and transportation costs for future cash ﬂ ows. It also requires interpretation of complex and diﬃ cult geological and geophysical models in order to make an assessment of the size, shape, depth and quality of reserves and their anticipated recoveries. The economic, geological and technical factors we use to estimate reserves may change from period to period. Changes in reported reserves can impact asset carrying values, the provision for restoration and the recognition of deferred tax assets, due to changes in expected cash ﬂ ows. Reserves are integral to the amount of depreciation, depletion and amortisation charged to the Income Statement and the calculation of inventory. The Group prepares reserve estimates in accordance with the JORC Code, guidelines prepared by the Joint Ore Reserves Committee of The Australian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia. Key judgements i) Provision for restoration and rehabilitation Provision is made for the costs of Restoration and Rehabilitation when the related environmental disturbance takes place as outlined in Note 16. The provision recognised represents management’s best estimate of the costs that will be incurred, but signiﬁ cant judgement is required as many of these costs will not crystallise until the end of the life of the mine. Estimates are reviewed annually and are based on current regulatory requirements and the estimated useful of the life of mine. Engineering and feasibility studies are undertaken periodically, however signiﬁ cant changes in the estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period. ii) Exploration and evaluation expenditure The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement to determine whether it is likely that future economic beneﬁ ts are likely, from either future exploitation or sale, or whether activities have not reached a stage that permits a reasonable assessment of the existence of commercially viable quantities of reserves. The policy requires management to make certain estimates and assumptions about future events or circumstances, in particular, whether an economically viable extraction operation can be established. Estimates and assumptions may change if new information becomes available. If, after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalised is impaired or written oﬀ in the Income Statement in the period when the new information becomes available. 58 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (u) Contributed equity Ordinary shares are classiﬁ ed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. If the entity reacquires its own equity instruments, for example, as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the proﬁ t and loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity. (v) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identiﬁ ed as the Board of Directors. (w) Earnings per share Basic earnings per share Basic earnings per share are calculated by dividing: • • The proﬁ t 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 ﬁ nancial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares (Note 19). Diluted earnings per share Diluted earnings per share adjusts the ﬁ gures used in the determination of basic earnings per share to take into account: • • The after income tax eﬀ ect of interest and other ﬁ nancing costs associated with dilutive potential ordinary shares, and • • The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (x) Comparative ﬁ gures Where necessary, comparative ﬁ gures have been restated to conform with changes in presentation for the current year. (y) Intangibles Expenditure during the research phase of a project is recognised as an expense when incurred. Patents and trademarks are capitalised only when technical feasibility studies identify that the project will deliver future economic beneﬁ ts and these beneﬁ ts can be measured reliably. Patents and trademarks have a ﬁ nite life and are amortised on a systematic basis matched to the future economic beneﬁ ts over the useful life of the project. (z) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the eﬀ ective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. The amount of the impairment loss is recognised in proﬁ t or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written oﬀ against the allowance account. Subsequent recoveries of amounts previously written oﬀ are credited against other expenses in proﬁ t or loss. (aa) Trade and other payables Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 59 NOTES TO THE FINANCIAL STATEMENTS NOTE 2: OTHER INCOME - Interest income - Sundry income - Income on sale of carbon credits Total other income NOTE 3: PROFIT BEFORE INCOME TAX Proﬁ t before income tax includes the following speciﬁ c expenses: - Depreciation of property, plant and equipment - Amortisation of mine development asset - Rental expenditure relating to operating leases - Realised derivative gains - Changes in fair value of derivatives - Employee beneﬁ ts expense Consolidated Entity 2013 $’000 2012 $’000 1,493 344 5,143 6,980 8,624 139 - 8,763 Notes Consolidated Entity 2013 $’000 2012 $’000 9 12 12,861 70,225 1,270 2,978 1,472 15,258 76,423 849 9,030 1,181 Deﬁ ned contribution superannuation expense 1,996 2,143 - Finance costs: Interest expense – borrowings Provisions: unwinding of discount Bond accretion expense Interest expense – ﬁ nance leases Borrowing costs amortised Total borrowing costs NOTE 4: INCOME TAX The components of the tax expense comprise: - Current tax - Deferred tax - R&D Tax oﬀ set - Adjustment of current tax for prior periods Income tax (beneﬁ t) / expense 16,758 298 7,483 15 2,182 26,736 24,367 284 9,083 5 3,702 37,441 Notes Consolidated Entity 2013 $’000 2012 $’000 324 (30,590) (5,547) 1,360 (34,453) 12,130 5,150 - - 17,280 The prima facia tax on the proﬁ t from ordinary activities before income tax at the statutory income tax rate to income tax expense at the Groups’ eﬀ ective income tax rate is as follows: Prima facia tax on (loss)/proﬁ t before income tax at 30% (2012: 30%) (38,567) 17,238 Adjusted for the tax eﬀ ect of: - Changes in fair value of derivatives - Share based payment expense - Other non allowable items - Share issue costs deductible - Other temporary diﬀ erences - Royalty buy back - Convertible bond accretion expense Tax Expense 60 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 442 348 7 (200) 1,272 - 2,245 (34,453) 354 265 136 (109) 1,132 (4,461) 2,725 17,280 NOTES TO THE FINANCIAL STATEMENTS NOTE 5: DIVIDENDS Dividends paid Final ordinary dividend of 6 cents (2011: 15 cents) per share for the year ended 30 June 2012, 30% franked and 70% unfranked. Interim fully franked ordinary dividend of 2 cents (2012: 5 cents unfranked) per share Consolidated Entity 2013 $’000 2012 $’000 10,784 3,937 14,721 26,962 8,987 35,949 Dividends proposed No ﬁ nal dividend proposed for the year ended 30 June 2013 (2012: 6 cents per share). - 10,784 NOTE 6: TRADE AND OTHER RECEIVABLES Trade debtors Other debtors GST refund due Prepayments Notes Consolidated Entity 2013 $’000 2012 $’000 14,372 1,582 1,150 1,506 18,610 21,765 780 1,741 1,074 25,360 There are no balances within trade and other receivables that contain assets that are past due. It is expected the balances will be received when due. NOTE 7: INVENTORIES Ore stockpiles – at cost Nickel concentrate stockpiles – at cost Consumables and spare parts – at cost NOTE 8: FINANCIAL ASSETS Available for sale ﬁ nancial assets include the following classes of ﬁ nancial assets: Non-current assets Listed securities: - Equity securities (a) Investments in subsidiaries Name Western Platinum NL Australian Nickel Investments Pty Ltd Bioheap Ltd FinnAust Mining PLC Western Areas Nickel Pty Ltd (formerly known as Kagara Nickel Pty Ltd) (Note 35) 24,926 1,473 3,919 30,318 1,120 1,120 31,319 7,089 3,713 42,121 3,460 3,460 Percentage of equity held Country of Incorporation Australia Australia Australia United Kingdom Australia 2013 % 100% 100% 100% 84% 100% 2012 % 100 % 100 % 100% 81% 100% All the entities above, except FinnAust Mining PLC, are members of the tax consolidated group of which Western Areas Ltd is the head entity. Western Areas Ltd is the parent entity and is incorporated and domiciled in Australia. Australian Nickel Investments Pty Ltd has a controlling interest in one unlisted company. Due to the immaterial value of the ﬁ nancial results of this company, the ﬁ nancial information of this company has not been consolidated into the Consolidated Entity. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 61 NOTES TO THE FINANCIAL STATEMENTS NOTE 9: PROPERTY, PLANT AND EQUIPMENT Property – at cost Accumulated depreciation Plant & equipment – at cost Accumulated depreciation Plant & equipment under lease Accumulated depreciation Total property, plant & equipment – at cost Accumulated Depreciation Total Consolidated Entity 2013 $’000 2012 $’000 40,925 (11,316) 29,609 127,415 (45,290) 82,125 990 (614) 376 169,330 (57,220) 112,110 22,871 (6,481) 16,390 127,820 (37,357) 90,463 779 (521) 258 151,470 (44,359) 107,111 Assets Pledged as Security The property, plant and equipment are assets over which a mortgage has been granted as security over project loans. The terms of the mortgage preclude the assets from being sold or being used as security for further mortgages without the permission of the existing mortgagor. Assets under lease are pledged as security for the associated lease liabilities. Movement in carrying amounts: Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current year: Property Written down value at the beginning of the year - Additions / transfers - Depreciation expense Written down value at the end of the year Plant & Equipment Written down value at the beginning of the year - Additions / transfers - Depreciation expense Written down value at the end of the year Plant & Equipment under Lease Written down value at the beginning of the year - Additions - Depreciation expense Written down value at the end of the year 62 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T Consolidated Entity 2013 $’000 2012 $’000 16,390 18,054 (4,835) 29,609 90,463 (405) (7,933) 82,125 258 211 (93) 376 16,240 1,934 (1,784) 16,390 95,310 8,552 (13,399) 90,463 133 200 (75) 258 NOTES TO THE FINANCIAL STATEMENTS NOTE 10: INTANGIBLE ASSETS Capitalised patents and trademarks costs – at cost NOTE 11: EXPLORATION & EVALUATION EXPENDITURE Exploration & Evaluation Expenditure consists of: - At cost - Transferred to mine development - Accumulated impairment loss Total Exploration and Evaluation Expenditure Movement in carrying amount: Consolidated Entity 2013 $’000 2012 $’000 525 525 Notes Consolidated Entity 2013 $’000 2012 $’000 204,786 (76,000) (96,604) 32,182 198,844 (46,000) (19,562) 133,282 Movement in the carrying amounts for exploration and evaluation expenditure between the beginning and the end of the current period: Exploration & Evaluation Expenditure Written down value at the beginning of the year - Expenditure incurred during the year - Transferred to mine development - Write-oﬀ - Impairment charge Written down value at the end of the year Impairment and write-oﬀ 133,282 23,015 (30,000) (17,073) (77,042) 32,182 91,875 46,486 (5,000) - (79) 133,282 Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation asset may exceed its recoverable amount. Management regularly evaluates the recoverability of exploration and evaluation assets. At 30 June 2013, Management have assessed that: • • Exploration activities are inherently risky, but can be ultimately very rewarding. In recognition of the risk involved in exploration, speciﬁ c amounts of exploration and evaluation expenditure are unlikely to be recovered through successful development or sale, and as such have impaired those assets by $77.0 million; and • • Exploration expenditure in relation to speciﬁ c areas of interest have not lead to the discovery of commercially viable quantities of mineral resources and have therefore decided to discontinue activities at this time in these areas, as such $17.0 million has been written oﬀ . Carry Forward Exploration & Evaluation Expenditure The recovery of the costs of exploration and evaluation expenditure carried forward is dependent upon the discovery of commercially viable mineral and other natural resource deposits and their development and exploitation or alternatively their sale. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 63 NOTES TO THE FINANCIAL STATEMENTS NOTE 12: MINE PROPERTIES Capitalised development expenditure consists of: - Mine development - Acquisition of mining assets - Exploration expenditure transfer - Deferred mining expenditure - Capitalised restoration costs - Capitalised interest - Accumulated impairment loss - Accumulated amortisation Total Mine Development Movement in carrying amount: Notes Consolidated Entity 2013 $’000 2012 $’000 180,041 59,796 76,000 244,810 5,843 11,175 (39,896) 191,457 59,796 46,000 207,131 5,843 11,175 - (295,993) (225,768) 241,776 295,634 Movement in the carrying amounts for mine development expenditure between the beginning and the end of the current period: Development Expenditure Written down value at the beginning of the year - Additions - Exploration expenditure transfer - Impairment charge - Write-oﬀ - Amortisation charge for the year Written down value at the end of the year Write-oﬀ of mine property expenditure 295,634 34,673 30,000 (39,896) (8,410) (70,225) 241,776 209,454 157,603 5,000 - - (76,423) 295,634 Management has reviewed the recoverable amount of each asset or group of assets within the Group’s Cash Generating Unit (CGU), being the Forrestania Nickel Project, and written oﬀ $8.4 million. The major element of this was a charge of $6.5 million relating to the Diggers South assets. Impairment of Forrestania Nickel Project The past six months has seen a deterioration in the nickel price. This, combined with management’s understanding of the fundamental drivers of nickel supply and demand, triggered the Group to undertake an impairment assessment. For assets within the Group’s CGU where it was not possible to determine the recoverable amount of individual assets or group of assets, the recoverable amount has been determined based on the CGU using a fair value less cost to sell (FVLCS) approach. Given the nature of the Group’s activities, information on the fair value of an asset is usually diﬃ cult to obtain unless negotiations with potential purchasers or similar transactions are taking place. Consequently, the FVLCS for the CGU was determined based on the net present value of the future cash ﬂ ows expected (discounted cash ﬂ ow model) to be generated by the CGU and are based on the most recent life of mine plans and are adjusted to ensure these reﬂ ect those assumptions a market participant would apply. The cash ﬂ ows were discounted using a nominal after-tax discount rate that reﬂ ects current market assessment. Other key inputs in the discounted cash ﬂ ow model included: • • Nickel price – future nickel prices were based on the 30 June 2013 consensus views from market participants; • • Nickel production – future nickel production was based on the Group’s Life of Mine Plan; 64 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 12: MINE PROPERTIES (CONTINUED) • • Operating and capital cost – these costs were based on management’s best estimates of direct and allocated costs at the time of the impairment testing; • • Foreign exchange rates – US dollar to AU dollar exchange rates were based on consensus views from market participants; • • Taxation – a 30% corporate tax rate; and • • Discount rate – a post–tax nominal discount rate of 10% (pre-tax 13%). The carrying value of the CGU was determined to be greater than the recoverable amount and accordingly, an impairment loss of $39.9 million was recognised. NOTE 13: DEFERRED TAX LIABILITIES The balance comprises temporary diﬀ erences attributable to: (a) Liabilities - Exploration & evaluation expenditure - Property, plant and equipment - Other (b) Assets - Provisions - Mine development - Other Net deferred tax liabilities (c) Reconciliation (i) Gross movement Consolidated Entity 2013 $’000 2012 $’000 (24,120) (5,036) (706) (29,862) 2,469 16,764 - 19,233 (10,629) (58,108) 5,623 (773) (53,258) 1,829 9,966 244 12,039 (41,219) The overall movement in the deferred tax account is as follows: Opening balance Credit / (Debit) to Income Statement Closing balance (41,219) 30,590 (10,629) (36,069) (5,150) (41,219) (ii) Deferred tax liability The movement in the deferred tax liabilities for each temporary diﬀ erence during the year is as follows: Exploration & development expenditure Opening balance Credit / (Debit) to Income Statement Closing balance Property, plant and equipment Opening balance (Debit) / Credit to Income Statement Closing balance Other Opening balance Credit to Income Statement Closing balance (58,108) 33,988 (24,120) 5,623 (10,659) (5,036) (773) 67 (706) (44,126) (13,982) (58,108) 2,026 3,597 5,623 (2,106) 1,333 (773) W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 65 NOTES TO THE FINANCIAL STATEMENTS NOTE 13: DEFERRED TAX LIABILITIES (CONTINUED) (i) Deferred tax assets The movement in the deferred tax assets for each temporary diﬀ erence during the year is as follows: Consolidated Entity 2013 $’000 2012 $’000 - - - 1,829 640 2,469 9,966 6,798 16,764 244 (244) - 8,670 20,728 7,513 36,911 - - - 104 104 168 (168) - 1,837 (8) 1,829 5,023 4,943 9,966 1,109 (865) 244 15,214 39,377 11,853 66,444 45,000 105,500 (156) 48 150,392 15 (a) 15 (b) 15 (c) & 21 (b) 15 (b) 221,046 213,563 15 (c) & 21 (b) (2,597) 275 (1,809) (4,367) 187 (695) 216,915 208,688 Deferred tax assets due to tax losses Opening balance Credit to Income Statement Closing balance Provisions Opening balance Credit / (Debit) to Income Statement Closing balance Mine development Opening balance Credit to Income Statement Closing balance Other Opening balance Credit to Income Statement Closing balance NOTE 14: TRADE & OTHER PAYABLES Trade payables Accrued expenses Accrued interest NOTE 15: BORROWINGS Current Corporate loan facility Convertible bond Convertible bond borrowing cost Lease liabilities Non Current Convertible bonds Convertible bond borrowing costs Lease liabilities Corporate loan facility borrowing cost 66 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 15: BORROWINGS (CONTINUED) (a) Corporate loan facility The Corporate Loan facility is available for broad company purposes as agreed between the Australia and New Zealand Banking Group Ltd (ANZ) and Western Areas Ltd. In February 2013, the Company executed a revised loan facility that both extends and enlarges the existing loan facility between ANZ and Western Areas Ltd. The facility is for $125M, is undrawn as at 30 June 2013 and remains in place until March 2016. The carrying value of assets secured under the corporate loan facility is as follows: Mine development Property, plant & equipment (b) Convertible bonds Current Convertible bond (Issued June 2007) Non-current Convertible bond (Issued April 2010) Convertible bond (Issued November 2010) Total non-current Total convertible bond borrowing Consolidated Entity 2013 $’000 241,776 111,733 353,509 2012 $’000 295,634 106,853 402,487 - 105,500 115,563 105,483 221,046 221,046 111,934 101,629 213,563 319,063 (i) The convertible bond issued in November 2010 and April 2010 mature on 2 July 2014 and 2 July 2015 respectively. The November 2010 and April 2010 convertible bond are convertible into fully paid ordinary share at $6.41/share and $7.47/share respectively prior to maturity. (ii) Interest is payable on the convertible note as follows: • • 6.4% on convertible bond issued in April 2010 • • 6.375% on convertible bond issued in November 2010 (c) Lease liabilities The lease liabilities are secured over the assets under the lease. The ﬁ nance leases have an average term of three years and an average implicit discount rate of 6.4%. Refer to Note 9 for the carrying value of the assets under lease. 16 (a) 1,932 1,374 NOTE 16: PROVISIONS Current Employee entitlements Non Current Rehabilitation and restoration cost Opening balance Unwinding of discount Rehabilitation expenditure incurred during the period Closing balance 16 (b) (a) Employee entitlements relate to balance of annual leave and long service leave accrued by the Consolidated Entity’s employees. Recognition and measurement criteria have been disclosed in Note 1. (b) Rehabilitation and restoration cost relates to an estimate of restoration costs that will result from the development of the Forrestania Nickel Project. The current mine life is 10 years, after which time the rehabilitation activities will be undertaken. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 67 6,096 297 (95) 6,298 6,122 284 (310) 6,096 NOTES TO THE FINANCIAL STATEMENTS NOTE 17: DERIVATIVE FINANCIAL INSTRUMENTS Current Assets Foreign exchange collar options Current Liabilities Foreign exchange collar options Consolidated Entity 2013 $’000 2012 $’000 29 (c) 29 (c) 663 663 1,906 1,906 1,973 1,973 284 284 Collar options are used to hedge cash ﬂ ow risk associated with future transactions. Gains and losses arising from changes in the fair value of derivatives are initially recognised directly in the Statement of Comprehensive Income. At the date of the transaction, amounts included in the hedge reserve are transferred from equity and included in the Income Statement. NOTE 18: ISSUED CAPITAL a) Issued capital 196,843,803 fully paid ordinary shares (2012: 179,735,899) b) Movements in issued capital 2013 Balance at beginning of the ﬁ nancial year - Share issue expense - Issued via share placement Consolidated Entity 2013 $’000 266,043 2012 $’000 202,611 Number of Shares 179,735,899 - 17,107,904 $’000 202,611 (1,577) 65,009 Balance at end of the ﬁ nancial year 196,843,803 266,043 2012 There was no movement in issued capital during the prior year. Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor, and market conﬁ dence and to sustain future development of the business. There were no changes to the Consolidated Entity’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. The Board eﬀ ectively manages the Group’s capital by assessing the Group’s ﬁ nancial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues. c) Share options Information relating to options issued, exercised, lapsed during the year and the options outstanding at the end of the year are detailed in Note 31 Share Based Payments. d) Terms and conditions of ordinary shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. 68 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 19: EARNINGS PER SHARE (Loss) / earnings used to calculate basic / diluted earnings per share Weighted average number of ordinary shares outstanding during the year used in calculating basic earnings per share Weighted average number of dilutive options outstanding* Consolidated Entity 2013 $’000 2012 $’000 (94,105) 40,181 2013 Number 2012 Number 196,843,803 179,735,899 - - Weighted average number of ordinary shares outstanding during the year used in calculating dilutive earnings per share 196,843,803 179,735,899 * As at 30 June 2012 and 30 June 2013, none of the outstanding options were dilutive as the weighted average exercise price of the options were higher than the weighted average share price for the year. NOTE 20: CASH FLOW INFORMATION a) Reconciliation of the net proﬁ t after tax to net cash provided by operating activities (Loss) / Proﬁ t after income tax Depreciation expense Amortisation expense Convertible bond accretion expense Impairment expenses Interest receivable Others Share based payment expense Changes in fair value of derivatives Stamp duty on acquisition of subsidiary (Note 35) Change in Assets and Liabilities (Decrease) / increase in trade and other payables Decrease / (increase) in inventories Decrease / (increase) in trade and other receivables (Decrease) / increase in interest payable (Decrease) / increase in tax liabilities Net cash provided by operating activities b) Reconciliation of Cash and Cash Equivalents Cash and cash equivalents comprises: Cash on hand and at bank Consolidated Entity 2013 $’000 2012 $’000 (94,105) 12,861 72,407 7,483 142,421 128 1,406 1,159 1,472 - (6,693) 11,802 6,986 (4,340) (40,872) 112,115 40,181 15,258 80,125 9,083 79 1,633 461 882 1,181 3,487 688 (7,875) (1,806) 120 15,756 159,253 Consolidated Entity 2013 $000 2012 $000 80,719 165,502 The cash at bank on 30 June 2013 includes restricted cash of $7.5M interest on convertible bonds payable on 2 July 2013. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 69 NOTES TO THE FINANCIAL STATEMENTS NOTE 20: CASH FLOW INFORMATION (CONTINUED) c) Financing Facilities Available As at the reporting date the Consolidated Entity had the following ﬁ nancing facilities in place: Banking Facilities:- ANZ Banking Group - Cash advance facility* Performance Guarantees:- ANZ Banking Group - Security bond facility Commonwealth Bank - Security bond facility Total Facility Utilised at Balance Date Available Facilities (*) $’000 $’000 $’000 125,000 - 125,000 10,000 71 135,071 6,998 71 7,069 3,002 - 128,002 * The facility is made available to the Company upon satisfaction of conditions precedent typically associated with corporate loans. d) Non Cash Financing Activities During the year, the Consolidated Entity acquired plant & equipment by means of a ﬁ nance lease to the value of $212k (2012: $200k). NOTE 21: COMMITMENTS The Directors are not aware of any commitments as at the date of these ﬁ nancial statements other than those listed below. a) Operating Lease Commitments Non-cancellable operating leases contracted for but not capitalised in the accounts. - no later than 1 year - later than 1 year and not later than 5 years Lease expenditure contracted for at year end Consolidated Entity 2013 $’000 912 3,757 4,669 2012 $’000 876 3,610 4,486 The operating leases are for miscellaneous oﬃ ce equipment and oﬃ ce premises in West Perth. The West Perth oﬃ ce lease expires September 2018. b) Finance Lease Commitments - no later than 1 year - later than 1 year and not later than 5 years Total Minimum Lease Payments - future ﬁ nance charges Total Lease Liability - current - non current 104 275 379 37 416 134 282 416 48 187 235 28 263 61 202 263 The ﬁ nance lease commitments relate primarily to the motor vehicles, but also include some oﬃ ce equipment. Motor vehicles are ﬁ nance leased under three year contracts at normal commercial rates, balloon payments are generally required at the expiry of the ﬁ nance lease, at which point the Company takes ownership of the vehicle. 70 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 21: COMMITMENTS (CONTINUED) c) Capital Expenditure Commitments - no later than 1 year - later than 1 year and not later than 5 years Total minimum commitments (d) Exploration Expenditure Commitments - no later than 1 year - later than 1 year and not later than 5 years Total minimum payments Consolidated Entity 2013 $’000 2012 $’000 - - - 4,866 19,468 24,334 - - - 5,138 20,552 25,690 Under the terms and conditions of the Company’s title to its various tenements, it has an obligation to meet tenement rentals and minimum levels of exploration expenditure as gazetted by the Department of Mines and Petroleum. NOTE 22: AUDITOR REMUNERATION During the year, the following fees were paid or payable for services provided by the auditor of the Company: - Audit and review of ﬁ nancial statements - Audit of Jobs and Competitiveness Program Assistance Application Consolidated Entity 2013 $’000 2012 $’000 171 7 178 159 - 159 NOTE 23: MATERIAL CONTRACTS The Company has two main customers. A summary of the key terms of the oﬀ -take agreements entered into with these customers are detailed below. Credit risk associated with these customers is detailed in Note 29. In May 2009, the Company entered a Concentrate Purchase Agreement (“CPA”) with BHP Billiton Ltd. Under the terms of this agreement, BHP Billiton are entitled to purchase up to 10,000 tonnes per annum of nickel in concentrate produced from the Forrestania tenements. The agreement is for a term of 7.5 years. In March 2012, the quantity of nickel in concentrate sold to BHP was increased to 12,000 tonnes per annum. In March 2013, the Company entered into a new Sale and Purchase Agreement for Nickel Concentrates with Jinchuan Group Ltd (“Jinchuan”) to deliver up to 26,000 tonnes of nickel in concentrate for a period of two years. NOTE 24: CONTINGENT LIABILITIES The Directors are not aware of any contingent liabilities as at the date of these ﬁ nancial statements. NOTE 25: SUBSEQUENT EVENTS There have been no subsequent events after 30 June 2013 which has a material eﬀ ect on the ﬁ nancial statements for the year ended 30 June 2013. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 71 NOTES TO THE FINANCIAL STATEMENTS NOTE 26: STATEMENT OF OPERATIONS BY SEGMENTS Identiﬁ cation of reportable segment The Group identiﬁ es its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Group operates primarily in nickel mining and exploration in Australia and exploration in Finland. The ﬁ nancial information in relation to the operations in Finland is not reported separately to the chief operating decision maker and as a result, the ﬁ nancial information presented in the Income Statements and Statement of Financial Position is the same as that presented to chief operating decision maker. Basis of accounting for purposes of reporting by operating segments Accounting policies adopted Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision maker is in accordance with accounting policies that are consistent to those adopted in the annual ﬁ nancial statements of the Group. NOTE 27: KEY MANAGEMENT PERSONNEL Key Management Personnel Key management personnel of the Consolidated Entity (as deﬁ ned by AASB 124: Related Party transactions) include the following: T Streeter I Macliver J Hanna R Dunbar R Yeates D Lougher D Southam J Belladonna W Jones C Wilkinson G Marshall Chairman (Non-Executive) Lead Independent Director (Non-Executive) Director (Non-Executive) Director (Non-Executive) Director (Non-Executive) Managing Director Executive Director Chief Financial Oﬃ cer / Company Secretary General Manager Operations (Appointed 1 August 2012) General Manager Exploration General Manager Commercial Refer to the remuneration report contained in the Directors’ Report for details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 30 June 2013. The total of remuneration paid to key management personnel of the Consolidated Entity during the year is detailed below: Short term employee beneﬁ ts Share based payments Post-employment beneﬁ ts 2013 $’000 2012 $’000 3,815 1,045 343 5,203 5,813 646 324 6,783 Performance Rights held by Key Management Personnel 2013 Balance at 1 July 2012 Granted as Remuneration Exercised Expired / Lapsed Balance at 30 June 2013 Performance Rights Vested D Lougher D Southam C Wilkinson G Marshall J Belladonna W Jones TOTAL 113,891 107,354 46,399 42,182 64,411 - 374,237 294,800 165,900 71,050 64,591 104,074 83,476 783,891 - - - - - - - - - - - - - - 408,691 273,254 117,449 106,773 168,485 83,476 1,158,128 - - - - - - 72 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 27: KEY MANAGEMENT PERSONNEL (CONTINUED) Performance Rights held by Key Management Personnel 2012 D Lougher D Southam C Wilkinson G Marshall J Belladonna TOTAL Balance at 1 July 2011 Granted as Remuneration Exercised Expired / Lapsed Balance at 30 June 2012 Performance Rights Vested - - - - - - 113,891 107,354 46,399 42,182 64,411 374,237 - - - - - - - - - - - - 113,891 107,354 46,399 42,182 64,411 374,237 - - - - - - Shareholding by Key Management Personnel 2013 J Hanna T Streeter R Dunbar I Macliver R Yeates D Lougher D Southam W Jones (*) C Wilkinson J Belladonna TOTAL Balance at 1 July 2012 1,134,666 25,889,410 102,500 20,000 10,000 64,884 - 60,000 7,000 60,000 27,348,460 Granted as Remuneration On Exercise of Options Other Changes During the Year Balance at 30 June 2013 - - - - - - - - - - - - - - - - - - - - - - (410,875) 723,791 (1,951,780) 23,937,630 10,000 3,948 - 15,073 - - - 3,948 112,500 23,948 10,000 79,957 - 60,000 7,000 63,948 (2,329,686) 25,018,774 * Mr Jones was promoted to General Manager Operations on 1 August 2012 and held the above shares at that time. Shareholding by Key Management Personnel 2012 J Hanna T Streeter R Dunbar D Cooper (*) I Macliver (**) R Yeates D Lougher D Southam C Wilkinson J Belladonna TOTAL Balance at 1 July 2011 1,293,987 25,809,410 102,500 1,000,000 - 6,000 50,884 - 7,000 60,000 28,329,781 Granted as Remuneration On Exercise of Options Other Changes During the Year Balance at 30 June 2012 - - - - - - - - - - - - - - - - - - - - (159,321) 80,000 - (1,000,000) 20,000 4,000 14,000 - - - 1,134,666 25,889,410 102,500 - 20,000 10,000 64,884 - 7,000 60,000 (1,041,321) 27,288,460 * Mr D Cooper resigned as Non-Executive Director on 30 September 2011 and held the above shares at that time. ** Mr I Macliver joined the Board on 1 October 2011 and held the above shares at that time. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 73 NOTES TO THE FINANCIAL STATEMENTS NOTE 27: KEY MANAGEMENT PERSONNEL (CONTINUED) Options held by Key Management Personnel 2013 Balance at 1 July 2012 Granted as Remuneration On Exercise of Options Purchases / (Sales) Expired / Lapsed Balance at 30 June 2013 Options Vested (*) J Hanna D Lougher C Wilkinson G Marshall 200,000 200,000 100,000 50,000 J Belladonna 100,000 TOTAL 650,000 - - - - - - - - - - - - - - - - - (200,000) (200,000) (100,000) (50,000) (100,000) (650,000) - - - - - - - - - - - - (*) 100% of options that have vested with the Directors and Executives are exercisable at any time up until expiry. Options held by Key Management Personnel 2012 Balance at 1 July 2011 Granted as Remuneration On Exercise of Options Purchases / (Sales) Expired / Lapsed Balance at 30 June 2012 Options Vested (*) J Hanna D Lougher 200,000 200,000 C Wilkinson 100,000 G Marshall 50,000 J Belladonna 100,000 TOTAL 650,000 - - - - - - - - - - - - - - - - - - - - - - - 200,000 200,000 200,000 200,000 100,000 100,000 50,000 50,000 100,000 100,000 650,000 650,000 (*) 100% of options that have vested with the Directors and Executives are exercisable at any time until expiry. NOTE 28: INTERESTS IN JOINT VENTURES At balance date, the Consolidated Entity had entered into the following material unincorporated joint ventures. The Consolidated Entity and percentage interest and share of non-current assets after impairment write oﬀ is listed below: Joint Venture % Interest Principal Activities Koolyanobbing (3 JV’s) 51%-100% Nickel & Gold exploration Sandstone Project 51%-70% Nickel exploration Mt Alexander 25% Nickel & Copper exploration Great Western Project 51%-70%% Nickel & Copper exploration Kawana Project 70%-80% Nickel & Copper exploration Consolidated Entity 2013 $’000 2012 $’000 1,574 - 100 2,174 390 832 5,625 100 1,772 304 The principal activities of the Consolidated Entity joint ventures are to explore tenement interests for exploitable mineral resources. 74 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 29: FINANCIAL RISK MANAGEMENT Financial Risk Management Policies The Treasury Committee consisting of senior management and Non-Executive Board members meets on a regular basis to analyse and discuss amongst other issues, monitoring and managing ﬁ nancial risk exposures of the Consolidated Entity. The Treasury Committee monitors the Consolidated Entity ﬁ nancial risk management policies and exposures and approves ﬁ nancial transactions within the scope of its authority. It also reviews the eﬀ ectiveness of internal controls relating to commodity price risk, counter party credit risk, currency risk, ﬁ nancing risk and interest rate risk. The Treasury Committee’s overall risk management strategy seeks to assist the Consolidated Entity in meeting its ﬁ nancial targets, while minimising potential adverse eﬀ ects on ﬁ nancial performance. Its functions include the review of the use of hedging derivative instruments, credit risk policies and future cash ﬂ ow requirements. Speciﬁ c Financial Risk Exposures and Management The main risks the Group is exposed to through its ﬁ nancial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk, foreign currency risk and commodity and equity price risk. a) Credit Risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in ﬁ nancial loss to the Consolidated Entity. The Consolidated Entity has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of ﬁ nancial loss from defaults. The Consolidated Entity does not have any signiﬁ cant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The carrying amount of ﬁ nancial assets exposed to credit risk is detailed below: Cash and cash equivalents Trade and other receivables Available for sale ﬁ nancial assets Derivative ﬁ nancial instruments 2013 ‘000 80,719 18,610 1,120 663 2012 ‘000 165,502 25,360 3,460 1,973 Cash and cash equivalents and derivative ﬁ nancial instruments The credit risk on liquid funds and derivative ﬁ nancial instruments is limited because the counterparties are banks with high credit-ratings. Trade and other receivables The Consolidated Entity does not have signiﬁ cant credit risk exposure to trade receivables as the Consolidated Entity’s customers are considered to be of high credit quality. There were no balances within trade and other receivables that are past due. It is expected these balances will be received when due. Available for sale ﬁ nancial assets Credit risk on available for sale ﬁ nancial assets is minimised by undertaking transactions with recognised counterparties on recognised exchanges. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 75 NOTES TO THE FINANCIAL STATEMENTS NOTE 29: FINANCIAL RISK MANAGEMENT (CONTINUED) b) Liquidity Risk Liquidity risk arises from the possibility that the Group might encounter diﬃ culty in settling its debts or otherwise meeting its obligations related to ﬁ nancial liabilities. The Group manages this risk through the following mechanisms which include: • • preparing forward looking cash ﬂ ow analysis in relation to its operational, investing and ﬁ nancing activities • • using derivatives that are only traded in highly liquid markets • • monitoring undrawn credit facilities, to the extent that they exist • • obtaining funding from a variety of sources • • maintaining a reputable credit proﬁ le • • managing credit risk related to ﬁ nancial assets • • investing surplus cash only with major ﬁ nancial institutions • • comparing the maturity proﬁ le of ﬁ nancial liabilities with the realisation proﬁ le of ﬁ nancial assets The tables below reﬂ ect an undiscounted contractual maturity analysis for ﬁ nancial assets and liabilities. Cash ﬂ ows realised from ﬁ nancial assets reﬂ ect management’s expectation as to the timing of realisation. Actual timing may therefore diﬀ er from that disclosed. The timing of cash ﬂ ows presented in the table to settle ﬁ nancial liabilities reﬂ ects the earliest contractual settlement dates and does not reﬂ ect management’s expectations that banking facilities will be rolled forward. Financial liability and ﬁ nancial asset maturity analysis The Consolidated Entity’s contractual maturity analysis of ﬁ nancial assets and ﬁ nancial liabilities is shown below: 2013 Consolidated Entity Financial Assets – Non Derivative Cash and Cash Equivalents Trade and Other Receivables Financial Assets – Derivative Nickel Collar Options (net settled) Financial Liabilities – Non Derivative Trade and Other Payables Convertible bonds Lease liabilities Financial Liabilities – Derivative Collar options (net settled) Net Financial Assets/(Liabilities) 1 year or less $’000 Over 1 to 5 years More than 5 Years $’000 $’000 Total contractual cash ﬂ ows $’000 80,719 18,610 663 99,992 36,911 - 104 1,906 38,921 61,071 - - - - - 255,262 275 - 255,537 (255,537) - - - - - - - - - - 80,719 18,610 663 99,992 36,911 255,262 379 1,906 294,458 (194,466) 76 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 29: FINANCIAL RISK MANAGEMENT (CONTINUED) b) Liquidity Risk (Continued) 2012 Consolidated Entity Financial Assets – Non Derivative Cash and Cash Equivalents Trade and Other Receivables Financial Assets – Derivative Nickel Collar Options (net settled) Financial Liabilities – Non Derivative Trade and Other Payables Convertible bonds Corporate loan facility Lease liabilities Financial Liabilities – Derivative Collar options (net settled) Net Financial Assets/(Liabilities) c) Market Risk 1 year or less $’000 Over 1 to 5 years More than 5 Years $’000 $’000 Total contractual cash ﬂ ows $’000 165,502 25,360 1,973 192,835 66,444 105,500 45,000 61 284 217,289 (24,454) - - - - - 273,212 - 202 - 273,414 (273,414) - - - - - - - - - - - 165,502 25,360 1,973 192,835 66,444 378,712 45,000 263 284 490,703 (297,868) Market risk is the risk that the fair value or future cash ﬂ ows of a ﬁ nancial instrument will ﬂ uctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, price risk and currency risk. i) Interest Rate Risk Exposure to interest rate risk arises on ﬁ nancial assets and ﬁ nancial liabilities recognised at reporting date whereby a future change in interest rates will aﬀ ect future cash ﬂ ows or the fair value of ﬁ xed rate ﬁ nancial instruments. Interest rate risk is managed using a mix of ﬁ xed and ﬂ oating rate debt. At the reporting date, the interest rate risk proﬁ le of the Consolidated Entity’s interest bearing ﬁ nancial instruments was as follows: 2013 Consolidated Entity Fixed Interest maturing in: Floating Interest Rate $’000 1 year or less Over 1 to 5 years More than 5 Years $’000 $’000 $’000 Financial Assets Cash and Cash Equivalents 80,719 Trade and Other Receivables - Financial Liabilities Trade and Other Payables Convertible bonds Lease liability 80,719 - - - - - - - - - 104 104 - - - - 218,449 275 218,724 Net Financial Assets/(Liabilities) 80,719 (104) (218,724) - - - - - - - - Non- Interest Bearing $’000 - 18,610 18,610 Total $’000 80,719 18,610 99,329 Weighted Average Interest Rate 4.1% 36,911 36,911 - - 218,449 379 6.4% 6.4% 36,911 255,739 (18,301) (156,410) W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 77 NOTES TO THE FINANCIAL STATEMENTS NOTE 29: FINANCIAL RISK MANAGEMENT (CONTINUED) c) Market Risk (Continued) 2012 Consolidated Entity Fixed Interest maturing in: Floating Interest Rate $’000 1 year or less Over 1 to 5 years More than 5 Years $’000 $’000 $’000 Non- Interest Bearing $’000 Total $’000 Weighted Average Interest Rate Financial Assets Cash and Cash Equivalents 165,502 Trade and Other Receivables - 165,502 Financial Liabilities Trade and Other Payables Corporate loan facility Convertible bonds Lease liability - - - - - - - - - 45,000 - - - - - 105,344 209,196 48 187 150,392 209,383 Net Financial Assets/(Liabilities) 165,502 (150,392) (209,383) - - - - - - - - - - 165,502 3.75% 25,360 25,360 25,360 190,862 66,444 - - - 66,444 45,000 314,540 235 66,444 426,219 (41,084) (235,357) 5.4% 7.05% 6.4% Interest rate sensitivities have not been included in the ﬁ nancial report as the changes in proﬁ t before tax due to changes in interest rate is not material to the results of the Consolidated Entity. ii) Price Risk a) Equity Price Risk The Consolidated Entity is exposed to equity securities price risk. This arises from investments held by the Group and classiﬁ ed on the Statement of Financial Position as available-for-sale. A majority of the Consolidated Entity’s equity investments are publicly traded and are quoted either on the ASX or the TSX. The table below summarises the impact of increases/decreases of these two indexes on the Consolidated Entity’s comprehensive income. The analysis is based on the assumption that the equity indexes had increased by 10% / decreased by 10% (2012 – increased by 10% / decreased by 10%) and foreign exchange rate increased by 5% / decrease by 5% (2012 increased by 5% / decrease by 5%) with all other variables held constant and all the Consolidated Entity’s equity instruments moved according to the historical correlation with the index. The percentages are the sensitivity rates used when reporting equity price risk internally to key management personnel and represents management’s assessment of the possible change in equity prices. Available for sale ﬁ nancial assets Index ASX TSX Impact on comprehensive income 30 June 2012 30 June 2013 $’000 $’000 7 46 27 143 Comprehensive income would increase/decrease as a result of gains/losses on equity securities classiﬁ ed as available- for-sale. A decrease in the share price and exchange rate would result in a further decrease in fair value compared to cost. Management is satisﬁ ed that the decrease in fair value will not require an impairment loss to be recognised in the Income Statement. 78 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 29: FINANCIAL RISK MANAGEMENT (CONTINUED) c) Market Risk (Continued) b) Commodity Price Risk The Consolidated Entity is exposed to commodity price risk. Commodity price risk arises from the sale of nickel. The entity manages its commodity price risk exposure arising from future commodity sales through sensitivity analysis, cash ﬂ ow management and forecasting and where appropriate utilise derivative ﬁ nancial instruments to reduce price risk. The following table details the Consolidated Entity’s sensitivity to a USD 500 increase and decrease in the nickel price. USD 500 is the sensitivity rate used when reporting commodity price risk internally to key management personnel and represents management’s assessment of the possible change in commodity price. The table below assumes all other variables remaining constant. Sensitivity analysis Year Ended 30 June 2013 +- $500 / tonne nickel Year Ended 30 June 2012 +- $500 / tonne nickel Nickel Collar Options Proﬁ t $‘000 Equity $‘000 +1,974 -1,974 Proﬁ t $‘000 Equity $‘000 +-1,143 +-1,143 The Consolidated Entity enters into ﬁ nancial transactions in the normal course of business and in line with Board guidelines for the purpose of hedging and managing its expected exposure to nickel prices. The hedges are treated as cash ﬂ ow hedges in accordance with AASB 139 “Financial Instruments: Recognition and Measurement”. As at 30 June 2013, the Consolidated Entity did not have any open nickel collar options. (2012: Nil) iii) Currency Risk Currency risk arises when future commercial transactions and recognised ﬁ nancial assets and liabilities are denominated in a currency that is not the entity’s functional currency. The Consolidated Entity manages its foreign currency risk exposure through sensitivity analysis, cash ﬂ ow management, forecasting and where appropriate, utilises derivative ﬁ nancial instruments. The carrying amount of the Consolidated Entity’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows: US$ ‘000 Euros ‘000 30 June 2013 Financial liabilities Financial assets 30 June 2012 Financial liabilities Financial assets - - 16,754 200 - - 24,231 1,207 The following table details the Consolidated Entity’s sensitivity to a 5% increase and decrease in the Australian Dollar against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 79 NOTES TO THE FINANCIAL STATEMENTS NOTE 29: FINANCIAL RISK MANAGEMENT (CONTINUED) c) Market Risk (Continued) Sensitivity analysis Year Ended 30 June 2013 + 5% in $A/$US - 5% in $A/$US Year Ended 30 June 2012 + 5% in $A/$US - 5% in $A/$US Foreign exchange collar options Proﬁ t $‘000 Equity $‘000 (2,690) 2,973 (2,690) 2,973 Proﬁ t $‘000 Equity $‘000 (1,796) 1,985 (1,796) 1,985 The Consolidated Entity had open foreign exchange collar options at 30 June 2013 relating to highly probable forecast transactions and recognised ﬁ nancial assets and ﬁ nancial liabilities. These contracts commit the Group to buy and sell speciﬁ ed amounts of foreign currencies in the future at speciﬁ ed exchange rates. The hedges are treated as cash ﬂ ow hedges in accordance with AASB 139 “Financial Instruments: Recognition and Measurement”. The following table summarises the notional amounts of the Consolidated Entity’s commitments in relation to foreign exchange collar options. The notional amounts do not represent amounts exchanged by the transaction counter parties and are therefore not a measure of the exposure of the Consolidated Entity through the use of these contracts. Consolidated Group Buy AUD / Sell USD Settlement — — less than 6 months 6 months to 1 year d) Net fair values Notional Amounts Exchange Rate 2013 $000 2012 $000 2013 $ Put Call 2012 $ Put Call 40,000 30,000 40,000 20,000 1.000 0.920 0.960 0.802 1.007 0.903 1.007 0.903 The fair values of ﬁ nancial assets and ﬁ nancial liabilities are presented in the following table and can be compared to their carrying values as presented in the balance sheet. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Fair values derived may be based on information that is estimated or subject to judgement, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgement and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash ﬂ ow analysis and other valuation techniques commonly used by market participants. Diﬀ erences between fair values and carrying values of ﬁ nancial instruments with ﬁ xed interest rates are due to the change in discount rates being applied by the market since their initial recognition by the Group. Most of these instruments which are carried at amortised cost are to be held until maturity and therefore the net fair value ﬁ gures calculated bear little relevance to the Group. 80 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 29: FINANCIAL RISK MANAGEMENT (CONTINUED) d) Net fair values (Continued) Financial Assets Cash and cash equivalents Available-for-sale assets at fair value Derivative ﬁ nancial assets Loans and receivables Financial Liabilities Trade and other payables Convertible bonds Derivative ﬁ nancial liabilities Corporate loan facility Other liabilities 2013 2012 Carrying Amount $’000 Net Fair Value $’000 Carrying Amount $’000 Net Fair Value $’000 80,719 1,120 663 18,610 101,112 80,719 1,120 663 18,610 101,112 165,502 165,502 3,460 1,973 25,360 196,295 3,460 1,973 25,360 196,295 2013 2012 Carrying Amount $’000 Net Fair Value $’000 Carrying Amount $’000 Net Fair Value $’000 36,911 218,449 1,906 - 379 36,911 235,198 1,906 - 379 66,444 314,540 284 44,305 235 66,444 333,500 284 44,500 235 257,645 274,394 425,808 444,963 (i) (ii) (iii) (i) (i) (iv) (iii) (iv) (i) The fair values disclosed in the above table have been determined based on the following methodologies: i) Cash and cash equivalents, trade and other receivables and trade and other liabilities are short term instruments in nature whose carrying value is equivalent to fair value. Trade and other payables exclude amounts provided for annual leave, which is not considered a ﬁ nancial instrument. ii) Quoted closing bid prices at reporting date. iii) Fair valuation performed by ﬁ nancial risk management ﬁ rm which include valuation techniques incorporating observable market data relevant to the hedged position. iv) Discounted cash ﬂ ow models are used to determine the fair values of loans and advances. Discount rates used on the calculations are based on interest rates existing at reporting date for similar types of loans and advances. Diﬀ erences between fair values and carrying values largely represent movements of the eﬀ ective interest rate determined on initial recognition and current market rates. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 81 NOTES TO THE FINANCIAL STATEMENTS NOTE 29: FINANCIAL RISK MANAGEMENT (CONTINUED) d) Net fair values (Continued) Financial Instruments Measured at Fair Value The ﬁ nancial instruments recognised at fair value in the Statement of Financial Position have been analysed and classiﬁ ed using a fair value hierarchy reﬂ ecting the signiﬁ cance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels: • • quoted prices in active markets for identical assets or liabilities (Level 1); • • inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and • • inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). Consolidated Group 2013 Financial assets: Available-for-sale ﬁ nancial assets Derivative ﬁ nancial instrument Total ﬁ nancial assets Financial liabilities Level 1 $000 Level 2 $000 Level 3 $000 Total $000 1,120 - 1,120 - 663 663 Derivative ﬁ nancial instruments - 1,906 2012 Financial assets: Available-for-sale ﬁ nancial assets Derivative ﬁ nancial instrument Total ﬁ nancial assets Financial liabilities 3,460 - 3,460 - 1,973 1,973 Derivative ﬁ nancial instruments - 284 - - - - - - - - 1,120 663 1,783 1,906 3,460 1,973 5,433 284 NOTE 30: RELATED PARTY TRANSACTIONS Mr Julian Hanna received $50K for consulting services provided through Ravelstone Consulting Ltd. There were no other related party transactions during the ﬁ nancial year, except for the key management compensation as disclosed in the Directors’ Report. 82 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 31: SHARE BASED PAYMENTS (a) Expenses arising from share based transactions Equity settled share options and performance rights granted during: Year ended 30 June 2012 Year ended 30 June 2013 Total expense recognised as employee costs (b) Performance rights Consolidated Entity 2013 $’000 2012 $’000 535 623 1,158 535 - 535 Under the Performance Rights plan, Executives are granted a right to be issued a share in the future subject to the performance based vesting conditions being met. The Company’s share price performance is measured via a relative total shareholder return (“TSR”). The Company’s TSR will be measured against a customised peer group of companies. For grants made under the Long Term Incentive (“LTI”) plan during FY12, vesting will occur subject to the meeting of service and performance conditions as follows: • • One-third of the rights will be performance tested against the relative TSR measure for the period 1 July 2011 to 30 June 2012. • • One-third of the rights will be performance tested against the relative TSR measure for the period 1 July 2012 to 30 June 2013. • • One-third of the rights will be performance tested against the relative TSR measure for the period 1 July 2013 to 30 June 2014. For grants made under the LTI plan during FY13, vesting will occur subject to the meeting of service and performance conditions as follows: • • Two-thirds of the rights will be performance tested against the relative TSR measure for the period 1 July 2012 to 30 June 2013. • • One-third of the rights will be performance tested against the relative TSR measure for the period 1 July 2013 to 30 June 2014. All of the grant will be subject to a service based vesting condition which will provide that, notwithstanding the passing of the performance test, no Performance Rights will vest and become exercisable into shares unless the participant remains employed as at 30 June 2014. The following table sets out the vesting outcome based on the Company’s relative TSR performance: Relative TSR performance Less than 50th percentile At the 50th percentile Performance Vesting Outcomes 0% vesting 50% vesting Between 50th and 75th percentile Pro-rata / progressive vesting from 50% - 100% At or above 75th percentile 100% vesting W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 83 NOTES TO THE FINANCIAL STATEMENTS NOTE 31: SHARE BASED PAYMENTS (CONTINUED) (b) Performance rights (Continued) No Performance Rights will vest unless the percentile ranking of the Company’s TSR for the relevant performance year, as compared to the TSRs for the peer group companies, is at or above the 50th percentile. The valuation inputs used in determining the fair value of performance rights issued during the year is detailed below: Underlying share price Exercise price of rights Risk free rate Volatility factor Dividend yield Eﬀ ective life Entitled number of employees 2013 $4.06 Nil 2.40% 2012 $5.66 Nil 3.12% 35% to 55% 35% to 55% 4.0% 4.0% 3.0 years 2.58 years 7 6 Performance Rights held by Key Management Personnel at 30 June 2013 Balance at 1 July 2012 Granted as Remuneration Exercise of Performance Rights Expired / Lapsed Balance at 30 June 2013 Performance Rights Vested D Lougher D Southam C Wilkinson G Marshall J Belladonna W Jones 113,891 107,354 46,399 42,182 64,411 - 294,800 165,900 71,050 64,591 104,074 83,476 TOTAL 374,237 783,891 - - - - - - - Performance Rights held by Key Management Personnel at 30 June 2012 Balance at 1 July 2011 Granted as Remuneration Exercise of Performance Rights Expired / Lapsed D Lougher D Southam C Wilkinson G Marshall J Belladonna TOTAL - - - - - - 113,891 107,354 46,399 42,182 64,411 374,237 - - - - - - - - - - - - - - - - - - - 408,691 273,254 117,449 106,773 168,485 83,476 1,158,128 - - - - - - Balance at 30 June 2012 Performance Rights Vested 113,891 107,354 46,399 42,182 64,411 374,237 - - - - - - 84 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 31: SHARE BASED PAYMENTS (CONTINUED) (c) Option plans Options issued to employees under the Western Areas Employee Share Option Scheme and Directors incentive options vest as detailed below: (i) The $7.25 employee options issued in September 2009, expiring in September 2012, vest as follows: half vest 12 months before expiry and half vest 24 months before expiry date. (ii) The $7.50 Directors’ options issued in November 2009, expiring in September 2012, vest as follows: half vest 12 months before the expiry date and half vest 24 months before expiry date. The weighted average contractual life remaining for the current outstanding options is three months. The following options were outstanding at 30 June 2013: Opening balance Options cancelled Options Expired Closing balance Vested balance Consolidated Entity 2013 2012 Number of options 1,900,000 - (1,900,000) - - Weighted average exercise price 7.32 - 7.32 - - Number of options 2,010,000 (110,000) - 1,900,000 1,900,000 Weighted average exercise price 7.32 7.32 - 7.32 7.32 The movement in the various classes of options for the year ended 30 June 2013 were as follows: Opening balance Options cancelled Closing balance Option Terms (Exercise Price and Maturity) Director $7.50 Sep 12 Employee $7.25 Sep 12 TOTAL 600,000 1,300,000 1,900,000 (600,000) (1,300,000) (1900,000) - - - The movement in the various classes of options for the year ended 30 June 2012 were as follows: Opening balance Options issued Options Expired Options Cancelled Options exercised Closing balance Option Terms (Exercise Price and Maturity) Director $7.50 Sep 12 Employee $7.25 Sep 12 TOTAL 600,000 1,410,000 2,010,000 - - - - - - - - (110,000) (110,000) - - 600,000 1,300,000 1,900,000 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 85 NOTES TO THE FINANCIAL STATEMENTS NOTE 32: RESERVES (i) Option equity reserve The option reserve records the items recognised as expenses on valuation of employee share options. (ii) Hedge reserve The hedge reserve records revaluations of items designated as hedges. (iii) Investment Revaluation reserve The investment revaluation reserve records revaluations of available for sale ﬁ nancial assets. (iv) Convertible Bond Reserve The Convertible bond reserve records the equity proportion value of the convertible bond. NOTE 33: NEW ACCOUNTING STANDARDS FOR APPLICATION IN THE FUTURE PERIODS The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Group. The Group has decided not to early adopt any of the new and amended pronouncements. The Group’s assessment of the new and amended pronouncements that are relevant to the Group but applicable in future reporting periods is set out below: – AASB 9: Financial Instruments (December 2010) and AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010). These Standards are applicable retrospectively and include revised requirements for the classiﬁ cation and measurement of ﬁ nancial instruments, as well as recognition and derecognition requirements for ﬁ nancial instruments. The key changes made to accounting requirements include: - - - - simplifying the classiﬁ cations of ﬁ nancial assets into those carried at amortised cost and those carried at fair value; simplifying the requirements for embedded derivatives; removing the tainting rules associated with held-to-maturity assets; removing the requirements to separate and fair value embedded derivatives for ﬁ nancial assets carried at amortised cost; - allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in proﬁ t or loss and there is no impairment or recycling on disposal of the instrument; - - requiring ﬁ nancial assets to be reclassiﬁ ed where there is a change in an entity’s business model as they are initially classiﬁ ed based on: (a) the objective of the entity’s business model for managing the ﬁ nancial assets; and (b) the characteristics of the contractual cash ﬂ ows; and requiring an entity that chooses to measure a ﬁ nancial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the eﬀ ects of changes in the credit risk of the liability) in proﬁ t or loss. 86 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 33: NEW ACCOUNTING STANDARDS FOR APPLICATION IN THE FUTURE PERIODS (CONTINUED) These Standards were mandatorily applicable for annual reporting periods commencing on or after 1 January 2013. However, AASB 2012–6: Amendments to Australian Accounting Standards – Mandatory Eﬀ ective Date of AASB 9 and Transition Disclosures (issued September 2012) defers the mandatory application date of AASB 9 from 1 January 2013 to 1 January 2015. In light of the change to the mandatory eﬀ ective date, the Group is expected to adopt AASB 9 and AASB 2010–7 for the annual reporting period ending 31 December 2015. Although the Directors anticipate that the adoption of AASB 9 and AASB 2010–7 may have a signiﬁ cant impact on the Group’s ﬁ nancial instruments, it is impracticable at this stage to provide a reasonable estimate of such impact. – AASB 10: Consolidated Financial Statements, AASB 11: Joint Arrangements, AASB 12: Disclosure of Interests in Other Entities, AASB 127: Separate Financial Statements (August 2011) and AASB 128: Investments in Associates and Joint Ventures (August 2011) (as amended by AASB 2012–10: Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments), and AASB 2011–7: Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (applicable for annual reporting periods commencing on or after 1 January 2013). AASB 10 replaces parts of AASB 127: Consolidated and Separate Financial Statements (March 2008, as amended) and Interpretation 112: Consolidation – Special Purpose Entities. AASB 10 provides a revised deﬁ nition of “control” and additional application guidance so that a single control model will apply to all investees. The Group has not yet been able to reasonably estimate the impact of these pronouncements on its ﬁ nancial statements. – AASB 11 replaces AASB 131: Interests in Joint Ventures (July 2004, as amended). AASB 11 requires joint arrangements to be classiﬁ ed as either “joint operations” (where the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities) or “joint ventures” (where the parties that have joint control of the arrangement have rights to the net assets of the arrangement) The Group has not yet been able to reasonably estimate the impact of these pronouncements on its ﬁ nancial statements. – AASB 12 contains the disclosure requirements applicable to entities that hold an interest in a subsidiary, joint venture, joint operation or associate. AASB 12 also introduces the concept of a “structured entity”, replacing the “special purpose entity” concept currently used in Interpretation 112, and requires speciﬁ c disclosures in respect of any investments in unconsolidated structured entities. This Standard will aﬀ ect disclosures only and is not expected to signiﬁ cantly impact the Group’s ﬁ nancial statements. To facilitate the application of AASBs 10, 11 and 12, revised versions of AASB 127 and AASB 128 have also been issued. The Group has not yet been able to reasonably estimate the impact of these pronouncements on its ﬁ nancial statements. – AASB 13: Fair Value Measurement and AASB 2011–8: Amendments to Australian Accounting Standards arising from AASB 13 (applicable for annual reporting periods commencing on or after 1 January 2013). AASB 13 deﬁ nes fair value, sets out in a single Standard a framework for measuring fair value, and requires disclosures about fair value measurement. AASB 13 requires: - inputs to all fair value measurements to be categorised in accordance with a fair value hierarchy; and - enhanced disclosures regarding all assets and liabilities (including, but not limited to, ﬁ nancial assets and ﬁ nancial liabilities) to be measured at fair value. These Standards are expected to result in more detailed fair value disclosures, but are not expected to signiﬁ cantly impact the amounts recognised in the Group’s ﬁ nancial statements. – AASB 2011–4: Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements (applicable for annual reporting periods beginning on or after 1 July 2013). W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 87 NOTES TO THE FINANCIAL STATEMENTS NOTE 33: NEW ACCOUNTING STANDARDS FOR APPLICATION IN THE FUTURE PERIODS (CONTINUED) This Standard makes amendments to AASB 124: Related Party Disclosures to remove the individual key management personnel disclosure requirements (including paras Aus29.1 to Aus29.9.3). These amendments serve a number of purposes, including furthering trans-Tasman convergence, removing diﬀ erences from IFRSs, and avoiding any potential confusion with the equivalent Corporations Act 2001 disclosure requirements. This Standard is not expected to signiﬁ cantly impact the Group’s ﬁ nancial report as a whole because: - some of the disclosures removed from AASB 124 will continue to be required under s 300A of the Corporations Act, which is applicable to the Group; and - AASB 2011–4 does not aﬀ ect the related party disclosure requirements in AASB 124 applicable to all reporting entities, and some of these requirements require similar disclosures to those removed by AASB 2011–4. – AASB 119: Employee Beneﬁ ts (September 2011) and AASB 2011–10: Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) (applicable for annual reporting periods commencing on or after 1 January 2013). These Standards introduce a number of changes to the presentation and disclosure of deﬁ ned beneﬁ t plans, including: - removal of the “corridor” approach from AASB 119, thereby requiring entities to recognise all changes in a net deﬁ ned beneﬁ t liability/(asset) when they occur; and - disaggregation of changes in a net deﬁ ned beneﬁ t liability/(asset) into service cost, net interest expense and remeasurements and recognition of: (i) service cost and net interest expense in proﬁ t or loss; and (ii) remeasurements in other comprehensive income. AASB 119 (September 2011) also includes changes to the criteria for determining when termination beneﬁ ts should be recognised as an obligation. The Directors anticipate that the application of the amendments to AASB 119 will not have an impact on the amounts reported as the Group does not have a deﬁ ned beneﬁ t plan. – AASB 2012–5: Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 (applicable for annual reporting periods commencing on or after 1 January 2013). This Standard amends a number of Australian Accounting Standards as a consequence of the issuance of Annual Improvements to IFRSs 2009–2011 Cycle by the International Accounting Standards Board, including: - AASB 1: First-time Adoption of Australian Accounting Standards to clarify the requirements in respect of the application of AASB 1 when an entity discontinues and then resumes applying Australian Accounting Standards; - AASB 101: Presentation of Financial Statements and AASB 134: Interim Financial Reporting to clarify the requirements for presenting comparative information; - AASB 116: Property, Plant and Equipment to clarify the accounting treatment of spare parts, stand-by equipment and servicing equipment; - AASB 132 and Interpretation 2: Members’ Shares in Co-operative Entities and Similar Instruments to clarify the accounting treatment of any tax eﬀ ect of a distribution to holders of equity instruments; and - AASB 134 to facilitate consistency between the measures of total assets and liabilities an entity reports for its segments in its interim and annual ﬁ nancial statements. The Group has not yet been able to reasonably estimate the impact of these pronouncements on its ﬁ nancial statements. 88 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T NOTES TO THE FINANCIAL STATEMENTS NOTE 34: PARENT INFORMATION The following information has been extracted from the books of the Parent and has been prepared in accordance with the accounting standards. Statement of Financial Position Assets Current Assets Non Current Assets Total Assets Liabilities Current Liabilities Non Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Retained Earnings Total Equity Statement of Comprehensive Income Proﬁ t for the year Total comprehensive income for the year Guarantees Parent Entity 2013 $’000 2012 $’000 128,914 411,637 540,551 44,955 233,842 278,797 232,009 548,814 780,823 227,388 256,003 483,391 261,754 297,432 266,043 41,277 (45,566) 261,754 (81,463) (84,086) 202,611 76,335 18,486 297,432 46,640 43,540 Western Areas Ltd has not entered into any guarantees, in the current or previous ﬁ nancial year, in relation to the debts of its subsidiaries. Contingent Liabilities The Directors are not aware of any contingent liabilities as at the date of these ﬁ nancial statements. Contractual Commitments Refer to Note 21 as all commitments entered into were by Western Areas Ltd. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 89 NOTES TO THE FINANCIAL STATEMENTS NOTE 35: BUSINESS COMBINATION Acquisition of Kagara Nickel Pty Ltd On 29 February 2012, Western Areas Ltd acquired 100% of the paid-up capital of Kagara Nickel Pty Ltd from Kagara Ltd. Kagara Nickel Pty Ltd is principally engaged in nickel mining and exploration and owns the high grade Lounge Lizard nickel deposit, located adjacent to Western Areas’ 100% owned Flying Fox nickel mine, at the Forrestania Nickel Project. The purchase consideration of $68M was paid from cash reserves of $23M and $45M utilising the ANZ corporate facility. As part of the agreement, a further $3.1M was paid from cash reserves in April as consideration for the ore stockpiles. Net Identiﬁ able Assets Acquired and Liabilities Assumed at Fair Value at Date of Acquisition Inventory Receivables Property, plant and equipment Mine development Exploration and evaluation expenditure Cash consideration paid 2012 $’000 3,128 150 26 59,796 8,000 71,100 71,100 Kagara Nickel Pty Ltd did not generate any revenue or incur any expenses since 29 February 2012. Had the results of Kagara Nickel Pty Ltd been consolidated from 1 July 2011, revenue of the Consolidated Group would have been $330.7M and consolidated proﬁ t would have been $40.2M for the year ended 30 June 2012. NOTE 36: ADDITIONAL COMPANY INFORMATION Western Areas Ltd is a Public Company, incorporated and domiciled in Australia. Registered oﬃ ce and Principal place of business: Level 2 2 Kings Park Road West Perth WA 6005 Tel: +61 8 9334 7777 Fax: +61 8 9486 7866 Web: www.westernareas.com.au Email: info@westernareas.com.au 90 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T DIRECTORS’ DECLARATION 1. In the opinion of the Directors of Western Areas Ltd: (a) the Consolidated Entity’s ﬁ nancial statements and notes set out on pages 44 to 90 are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Consolidated Entity’s ﬁ nancial position as at 30 June 2013 and of its performance, for the ﬁ nancial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australia Accounting Interpretations) and the Corporations Regulations 2001; (b) the ﬁ nancial report also complies with International Financial Reporting Standards as set out in Note 1; (c) the remuneration disclosures that are contained in the remuneration report in the Directors’ Report comply with Australian Accounting Standard AASB 124 Related Party Disclosures, the Corporations Act 2001 and the Corporations Regulations 2001; (d) there are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable. 2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Oﬃ cer, Managing Director, Financial Director and Chief Financial Oﬃ cer for the ﬁ nancial year ended 30 June 2013. Signed in accordance with a resolution of the Board of Directors. D Lougher Managing Director Dated this 27th day of August 2013 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 91 INDEPENDENT AUDITOR’S OPINION (cid:3) INDEPENDENT AUDIT REPORT TO MEMBERS OF WESTERN AREAS LTD AND ITS CONTROLLED ENTITIES (cid:58)(cid:72)(cid:3) (cid:75)(cid:68)(cid:89)(cid:72)(cid:3) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:58)(cid:72)(cid:86)(cid:87)(cid:72)(cid:85)(cid:81)(cid:3) (cid:36)(cid:85)(cid:72)(cid:68)(cid:86)(cid:3) (cid:47)(cid:87)(cid:71)(cid:15)(cid:3) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:76)(cid:86)(cid:72)(cid:86)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) 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Statements(cid:15)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:92)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17)(cid:3)(cid:3) (cid:3) Auditor’s Responsibility 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(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)Corporations Regulations 2001(cid:30)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3)(cid:3) (cid:11)(cid:76)(cid:76)(cid:12)(cid:3) (cid:11)(cid:69)(cid:12)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)International Financial Reporting Standards (cid:68)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:49)(cid:82)(cid:87)(cid:72)(cid:3)(cid:20)(cid:17)(cid:3) Liability limited by a scheme approved under(cid:3) Professional Standards Legislation(cid:3) Crowe Horwath Perth is a Crowe Horwath Australasia Group Firm and a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. 92 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T (cid:3) REPORT ON THE REMUNERATION REPORT (cid:58)(cid:72)(cid:3) (cid:75)(cid:68)(cid:89)(cid:72)(cid:3) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3) (cid:76)(cid:81)(cid:3) (cid:83)(cid:68)(cid:74)(cid:72)(cid:86)(cid:3)(cid:21)(cid:26)(cid:3) (cid:87)(cid:82)(cid:3)(cid:22)(cid:26)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:92)(cid:72)(cid:68)(cid:85)(cid:3) (cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:22)(cid:19)(cid:3) (cid:45)(cid:88)(cid:81)(cid:72)(cid:3) (cid:21)(cid:19)(cid:20)(cid:22)(cid:17)(cid:3) (cid:55)(cid:75)(cid:72)(cid:3) (cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:76)(cid:81)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:22)(cid:19)(cid:19)(cid:36)(cid:3) (cid:82)(cid:73)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) Corporations Act 2001(cid:17)(cid:3) (cid:50)(cid:88)(cid:85)(cid:3) (cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3) (cid:76)(cid:86)(cid:3) (cid:87)(cid:82)(cid:3) (cid:72)(cid:91)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3) (cid:68)(cid:81)(cid:3) (cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3) (cid:82)(cid:81)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:15)(cid:3) (cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3) (cid:82)(cid:81)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3) (cid:70)(cid:82)(cid:81)(cid:71)(cid:88)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17)(cid:3) (cid:3) Auditor’s Opinion (cid:44)(cid:81)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:53)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:82)(cid:73)(cid:3) (cid:58)(cid:72)(cid:86)(cid:87)(cid:72)(cid:85)(cid:81)(cid:3) (cid:36)(cid:85)(cid:72)(cid:68)(cid:86)(cid:3) (cid:47)(cid:87)(cid:71)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:87)(cid:75)(cid:72)(cid:3) (cid:92)(cid:72)(cid:68)(cid:85)(cid:3) (cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3) (cid:22)(cid:19)(cid:3) (cid:45)(cid:88)(cid:81)(cid:72)(cid:3) (cid:21)(cid:19)(cid:20)(cid:22)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:86)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:22)(cid:19)(cid:19)(cid:36)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)Corporations Act 2001. (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:38)(cid:53)(cid:50)(cid:58)(cid:40)(cid:3)(cid:43)(cid:50)(cid:53)(cid:58)(cid:36)(cid:55)(cid:43)(cid:3)(cid:51)(cid:40)(cid:53)(cid:55)(cid:43)(cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:54)(cid:40)(cid:36)(cid:49)(cid:3)(cid:48)(cid:38)(cid:42)(cid:56)(cid:53)(cid:46)(cid:3) (cid:51)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:3) (cid:3) (cid:54)(cid:76)(cid:74)(cid:81)(cid:72)(cid:71)(cid:3)(cid:68)(cid:87)(cid:3)(cid:51)(cid:72)(cid:85)(cid:87)(cid:75)(cid:15)(cid:3)(cid:21)(cid:26)(cid:3)(cid:36)(cid:88)(cid:74)(cid:88)(cid:86)(cid:87)(cid:3)(cid:21)(cid:19)(cid:20)(cid:22)(cid:3) (cid:3) Liability limited by a scheme approved under(cid:3) Professional Standards Legislation(cid:3) Crowe Horwath Perth is a Crowe Horwath Australasia Group Firm and a member of Crowe Horwath International, a Swiss verein. Each member firm of Crowe Horwath is a separate and independent legal entity. W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 93 TENEMENT LISTING Year Ended 30 June 2013 Tenement No Status Company's Interest Applicant / Holder Tenement No Status Company's Interest Applicant / Holder Forrestania E74/00470 E74/00499 E77/01865 E77/02099 G70/00226 G70/00231 L70/00111 L74/00011 L74/00012 L74/00025 L74/00044 L77/00104 L77/00141 L77/00182 L77/00197 L77/00203 L77/00204 Granted Granted Granted Pending Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted L77/00217 Pending M74/00057 M74/00058 M74/00064 M74/00065 M74/00081 M74/00090 M74/00091 M74/00092 M77/00098 M77/00215 M77/00216 M77/00219 M77/00284 M77/00285 M77/00286 M77/00329 M77/00335 M77/00336 M77/00389 M77/00399 M77/00458 M77/00542 M77/00545 M77/00550 M77/00568 M77/00574 M77/00582 M77/00583 M77/00584 Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted Granted 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Forrestania (Continued) M77/00585 M77/00586 M77/00587 M77/00588 M77/00589 M77/00911 M77/00912 E77/00806 Granted Granted Granted Granted Granted Granted Granted Granted 100% 100% 100% 100% 100% 100% 100% 100% E77/01086 Granted 100% Western Areas Ltd (100) E77/01399 Granted 100% Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) E77/01400. Granted 100% E77/01416 Granted 100% Western Areas Ltd (100) E77/01436 Granted 100% Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) E77/01581 Granted 100% G77/00037 Granted 100% G77/00038 Granted 100% G77/00045 Granted 100% Western Areas Ltd (100) G77/00047 Granted 100% Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) G77/00048 Granted 100% G77/00049 Granted 100% G77/00050 Granted 100% G77/00068 Granted 100% Western Areas Ltd (100) G77/00070 Granted 100% Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) G77/00071 Granted 100% G77/00072 Granted 100% G77/00073 Granted 100% L77/00059 Granted 100% Western Areas Ltd (100) L77/00096 Granted 100% Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) L77/00107 Granted 100% M77/00099 Granted 100% M77/00467 Granted 100% M77/00468 Granted 100% 94 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Ltd (100) Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Tenement No Status Forrestania (Continued) Company's Interest M77/00544 Granted 100% P77/03733 Granted 100% P77/03734 Granted 100% P77/03735 Granted 100% P77/03736 Granted 100% P77/03737 Granted 100% P77/03738 Granted 100% P77/03743 Granted 100% P77/03748 Granted 100% P77/03749 Granted 100% P77/03750 Granted 100% P77/03751 Granted 100% P77/03752 Granted 100% P77/03758 Granted 100% P77/03836 Granted 100% P77/03837 Granted 100% P77/03838 Granted 100% P77/03839 Granted 100% P77/03840 Granted 100% P77/03846 Granted 100% P77/03847 Granted 100% P77/03860 Granted 100% P77/03861 Granted 100% P77/03862 Granted 100% P77/03863 Granted 100% P77/03864 Granted 100% P77/03865 Granted 100% P77/04065 Granted 100% P77/04067 Pending 100% Applicant / Holder Tenement No Status Company's Interest Applicant / Holder Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd Forrestania (Continued) P77/04075 Pending 100% M77/00324* Granted 100% Mt Alexander E29/00638 Granted 25% Western Areas Nickel Pty Ltd Western Areas Nickel Pty Ltd BHP Billiton Nickel West Pty Ltd Western Areas Ltd Koolyanobbing E77/01004 Granted E77/01307 Granted 100% Ni rights 100% Ni rights Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd Granted 100% Western Areas Ltd (100) E77/01407 L77/00214 Granted M77/00606 Granted M77/00607 Granted M77/00611 Granted 100% Ni rights 100% Ni rights 100% Ni rights 100% Ni rights Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd M77/00676 Granted 100% Western Areas Ltd (100) M77/00839 Granted 100% Western Areas Ltd (100) M77/00988 Granted M77/00989 Granted M77/00990 Granted P77/03482 Granted 100% Ni rights 100% Ni rights 100% Ni rights 100% Ni rights Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd Cliﬀ s Asia Paciﬁ c Iron Ore Pty Ltd P77/03807 Granted 100% Western Areas Ltd (100) Mt Gibb E74/00305 Granted 100% E74/00313 Granted 100% E74/00368 Granted 100% E74/00428 Granted 100% E74/00445 Granted 100% E74/00446 Granted 100% E77/01545 Granted 100% E77/01546 Granted 100% E77/01547 Granted 100% E77/01590 Granted 100% Great Western Exploration Ltd Great Western Exploration Ltd Great Western Exploration Ltd Great Western Exploration Ltd Great Western Exploration Ltd Great Western Exploration Ltd Great Western Exploration Ltd Great Western Exploration Ltd Great Western Exploration Ltd Great Western Exploration Ltd *This tenement is in the process of being transferred to Western Areas Nickel Pty Ltd W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 95 TENEMENT LISTING Applicant / Holder Tenement No Status Company's Interest Applicant / Holder Tenement No Status Mt Gibb (Continued) Company's Interest E77/01677 Granted 100% P74/00251 Granted 100% P74/00322 Granted 100% Great Western Exploration Ltd Great Western Exploration Ltd Great Western Exploration Ltd Southern Cross (Continued) E77/01320 Granted E77/01321-I Granted E77/01322-I Granted E77/01537 Lake King Granted 100% Jindalee Resources Ltd E77/01342-I Granted E70/02148 Granted E70/04028 Granted E70/04029 Granted E70/04430 Granted E74/00532 Pending E74/00533 Pending P70/01641 Pending P70/01642 Pending Southern Cross E29/00564-I Granted E29/00593-I Granted E29/00653-I Granted E29/00654-I Granted E29/00655-I Granted E30/00331-I Granted E77/01034-I Granted E77/01063 Granted E77/01117-I Granted E77/01141-I Granted E77/01164-I Granted E77/01171 Granted E77/01233 Granted E77/01268-I Granted E77/01275-I Granted E77/01293-I Granted E77/01295-I Granted E77/01314-I Granted 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights Swanoak Holdings Pty Ltd E77/01353-I Granted Western Areas & Swanoak Holdings Pty Ltd Western Areas & Swanoak Holdings Pty Ltd Western Areas & Swanoak Holdings Pty Ltd Western Areas & Swanoak Holdings Pty Ltd Western Areas & Swanoak Holdings Pty Ltd Swanoak Holdings Pty Ltd E77/01368 Granted E77/01371-I Granted E77/01372 Granted E77/01373 Granted E77/01374-I Granted E77/01376-I Granted Swanoak Holdings Pty Ltd E77/01380 Granted E77/01384-I Granted Southern Cross Goldﬁ elds E77/01390 Granted Southern Cross Goldﬁ elds E77/01391-I Granted Southern Cross Goldﬁ elds E77/01423 Granted Southern Cross Goldﬁ elds E77/01424 Granted Southern Cross Goldﬁ elds E77/01427-I Granted Southern Cross Goldﬁ elds E77/01459 Granted Southern Cross Goldﬁ elds E77/01474 Granted Southern Cross Goldﬁ elds E77/01477 Granted Southern Cross Goldﬁ elds E77/01488-I Granted Southern Cross Goldﬁ elds E77/01490 Granted Southern Cross Goldﬁ elds E77/01496 Granted Southern Cross Goldﬁ elds E77/01497-I Granted Southern Cross Goldﬁ elds E77/01498 Granted Southern Cross Goldﬁ elds E77/01499 Granted Southern Cross Goldﬁ elds E77/01500-I Granted Southern Cross Goldﬁ elds E77/01505 Granted Southern Cross Goldﬁ elds E77/01508 Pending Southern Cross Goldﬁ elds E77/01509 Granted 96 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds TENEMENT LISTING Tenement No Status Southern Cross (Continued) E77/01566 Granted E77/01599 Granted E77/01630 Granted E77/01642 Granted E77/01649-I Granted E77/01650-I Granted E77/01653-I Granted E77/01654-I Granted E77/01657-I Granted E77/01658-I Granted E77/01659-I Granted E77/01699 Granted E77/01721 Pending E77/01726-I Granted E77/01728-I Granted E77/01741-I Granted E77/01742 Granted E77/01765-I Granted E77/01766 Granted E77/01773 Granted E77/01775 Granted E77/01776 Granted E77/01777-I Granted E77/01778-I Granted E77/01790-I Granted E77/01791 Pending E77/01803 Granted E77/01814 Granted E77/01817 Granted E77/01837 Pending E77/01874 Granted Company's Interest Applicant / Holder Tenement No Status Company's Interest Applicant / Holder 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights Southern Cross Goldﬁ elds E77/01878 Pending Southern Cross (Continued) Southern Cross Goldﬁ elds E77/01879 Pending Southern Cross Goldﬁ elds E77/01880 Pending Southern Cross Goldﬁ elds G77/00035 Granted Southern Cross Goldﬁ elds L77/00211 Granted Southern Cross Goldﬁ elds L77/00221 Pending Southern Cross Goldﬁ elds L77/00223 Pending Southern Cross Goldﬁ elds L77/00224 Pending Southern Cross Goldﬁ elds L77/00225 Pending Southern Cross Goldﬁ elds L77/00226 Pending Southern Cross Goldﬁ elds M77/00123 Granted Southern Cross Goldﬁ elds M77/00166 Granted Southern Cross Goldﬁ elds M77/00228 Granted Southern Cross Goldﬁ elds M77/00394 Granted Southern Cross Goldﬁ elds M77/00576 Granted Southern Cross Goldﬁ elds M77/00581 Granted Southern Cross Goldﬁ elds M77/00646 Granted Southern Cross Goldﬁ elds M77/00824 Granted Southern Cross Goldﬁ elds M77/00931 Granted Southern Cross Goldﬁ elds M77/00948 Granted Southern Cross Goldﬁ elds M77/00962 Granted Southern Cross Goldﬁ elds M77/01025 Granted Southern Cross Goldﬁ elds M77/01044 Granted Southern Cross Goldﬁ elds M77/01064 Granted Southern Cross Goldﬁ elds M77/01089 Granted Southern Cross Goldﬁ elds M77/01090 Granted Southern Cross Goldﬁ elds M77/01094 Granted Southern Cross Goldﬁ elds M77/01101 Granted Southern Cross Goldﬁ elds M77/01102 Granted Southern Cross Goldﬁ elds M77/01103 Granted Southern Cross Goldﬁ elds M77/01246 Granted 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 97 TENEMENT LISTING Tenement No Status Southern Cross (Continued) M77/01250 Granted M77/01253-I Granted M77/01256 Granted P29/01922-I Granted P29/01923-I Granted P29/01924-I Granted P29/01925-I Granted P29/01926-I Granted P29/01927-I Granted P30/01011-I Granted P77/03304 Granted P77/03333 Granted P77/03412 Granted P77/03413 Granted P77/03414 Granted P77/03425 Granted P77/03427 Granted P77/03428 Granted P77/03429 Granted P77/03430 Granted P77/03447 Granted P77/03458 Granted P77/03459 Granted P77/03460 Pending P77/03461 Pending P77/03462 Pending P77/03470-I Granted P77/03476 Granted P77/03477 Granted P77/03552 Granted P77/03553-I Granted Company's Interest Applicant / Holder Tenement No Status Company's Interest Applicant / Holder 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights Southern Cross Goldﬁ elds P77/03554-I Granted Southern Cross (Continued) Southern Cross Goldﬁ elds P77/03555-I Granted Southern Cross Goldﬁ elds P77/03564-I Granted Southern Cross Goldﬁ elds P77/03565-I Granted Southern Cross Goldﬁ elds P77/03597 Granted Southern Cross Goldﬁ elds P77/03601 Granted Southern Cross Goldﬁ elds P77/03602 Granted Southern Cross Goldﬁ elds P77/03603 Granted Southern Cross Goldﬁ elds P77/03604 Granted Southern Cross Goldﬁ elds P77/03624-I Granted Southern Cross Goldﬁ elds P77/03624-I Granted Southern Cross Goldﬁ elds P77/03624-I Granted Southern Cross Goldﬁ elds P77/03625 Granted Southern Cross Goldﬁ elds P77/03626 Granted Southern Cross Goldﬁ elds P77/03627 Granted Southern Cross Goldﬁ elds P77/03628 Granted Southern Cross Goldﬁ elds P77/03629 Granted Southern Cross Goldﬁ elds P77/03630-I Granted Southern Cross Goldﬁ elds P77/03631-I Granted Southern Cross Goldﬁ elds P77/03632-I Granted Southern Cross Goldﬁ elds P77/03633-I Granted Southern Cross Goldﬁ elds P77/03634-I Granted Southern Cross Goldﬁ elds P77/03635-I Granted Southern Cross Goldﬁ elds P77/03636-I Granted Southern Cross Goldﬁ elds P77/03645 Granted Southern Cross Goldﬁ elds P77/03646 Granted Southern Cross Goldﬁ elds P77/03647 Granted Southern Cross Goldﬁ elds P77/03648 Granted Southern Cross Goldﬁ elds P77/03649 Granted Southern Cross Goldﬁ elds P77/03650 Granted Southern Cross Goldﬁ elds P77/03651 Granted 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds 98 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T TENEMENT LISTING Company's Interest Applicant / Holder Tenement No Status Company's Interest Applicant / Holder Southern Cross Goldﬁ elds P77/03902 Granted Southern Cross (Continued) Southern Cross Goldﬁ elds P77/03903 Granted Southern Cross Goldﬁ elds P77/03907 Granted Southern Cross Goldﬁ elds P77/03908 Granted Southern Cross Goldﬁ elds P77/03936 Granted Southern Cross Goldﬁ elds P77/03957 Granted Southern Cross Goldﬁ elds P77/03958 Granted Southern Cross Goldﬁ elds P77/03959 Granted Southern Cross Goldﬁ elds P77/03967 Granted Southern Cross Goldﬁ elds P77/03978 Pending Southern Cross Goldﬁ elds P77/03979 Pending Southern Cross Goldﬁ elds P77/03994 Pending Southern Cross Goldﬁ elds P77/03996 Granted Southern Cross Goldﬁ elds P77/03997 Granted Southern Cross Goldﬁ elds P77/04016 Granted Southern Cross Goldﬁ elds P77/04022 Granted Southern Cross Goldﬁ elds P77/04028 Granted Southern Cross Goldﬁ elds P77/04029 Granted Southern Cross Goldﬁ elds P77/04032 Granted Southern Cross Goldﬁ elds P77/04033-I Pending Southern Cross Goldﬁ elds P77/04036 Pending Southern Cross Goldﬁ elds P77/04037 Pending Southern Cross Goldﬁ elds P77/04038 Pending Southern Cross Goldﬁ elds P77/04055 Pending 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds Southern Cross Goldﬁ elds 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights 70% Ni rights Tenement No Status Southern Cross (Continued) P77/03652 Granted P77/03653 Granted P77/03656 Granted P77/03657 Granted P77/03658 Granted P77/03659 Granted P77/03660 Granted P77/03661 Granted P77/03662 Granted P77/03663 Granted P77/03664 Granted P77/03670-I Granted P77/03698 Granted P77/03699 Granted P77/03801 Granted P77/03802 Granted P77/03808 Granted P77/03809 Granted P77/03810 Granted P77/03811 Granted P77/03812 Granted P77/03813 Granted P77/03816 Granted P77/03817 Granted P77/03818 Granted P77/03830 Granted P77/03868 Granted P77/03898 Granted P77/03899 Granted P77/03900 Granted P77/03901 Pending W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 99 SHAREHOLDER INFORMATION The Shareholder Information set out below shows the position as at 31 August 2013 A) DISTRIBUTION OF SHAREHOLDINGS i) Distribution schedule of holdings: Ordinary Shares* 1 – 1,000 1,001 – 5,000 5001 – 10,000 10,001 – 100,000 100,001 – over Total number of holders Number of holders of less than a marketable parcel Number of overseas holders Percentage held by 20 largest holders ii) iii) iv) *All ordinary shares carry one vote per share without restriction. B) LARGEST SECURITY HOLDERS Names of the 20 largest holders of Ordinary Shares are listed below: Name Mr Terrence EJ Streeter JCP Investment Partners Mr & Mrs Allan R Greenwell Celeste Funds Mgt BT Investment Mgt Concise Asset Mgt Antares Equities Avoca Investment Mgt Tribeca Investment Partners Mr Giovanni Santalucia Colonial First State - Global Resources Colonial First State - Growth Australian Equities Kinetic Investment Partners Colonial First State - Core Australian Equities Kosmos Asset Mgt Dimensional Fund Advisors UBS Global Asset Mgt JPMorgan Asset Mgt Mount Kellett Capital Mgt Legg Mason Asset Mgt Australia C) SUBSTANTIAL SHAREHOLDERS Name Mr Terrence EJ Streeter Mr & Mrs Allan R Greenwell Mr Giovanni Santalucia No of Shares Held 23,937,630 16,666,940 9,897,801 8,106,160 6,825,314 6,436,311 6,127,675 4,835,030 4,695,026 4,638,548 4,395,233 4,368,782 4,100,218 3,861,728 3,277,279 3,265,657 3,265,343 3,252,710 3,060,980 3,025,548 No of Shares Held 23,937,630 9,897,801 4,638,548 100 W E S T E R N A R E A S 2 0 1 3 A N N U A L R E P O R T 1,591 1,902 607 673 98 4,871 408 182 65.0% % 12.2% 8.5% 5.0% 4.1% 3.5% 3.3% 3.1% 2.5% 2.4% 2.4% 2.2% 2.2% 2.1% 2.0% 1.7% 1.7% 1.7% 1.7% 1.6% 1.5% % 12.2% 5.0% 2.4% CORPORATE DIRECTORY Directors Terry Streeter (Chairman) Robin Dunbar Julian Hanna Dan Lougher David Southam Rick Yeates Ian Macliver Company Secretary Joseph Belladonna Auditors Crowe Horwath Level 6 256 St Georges Terrace Perth WA 6000 Bankers ANZ Banking Group Limited 77 St Georges Terrace Perth WA 6000 Share Registry Computershare Investor Services Pty Ltd Level 2 45 St Georges Terrace Perth WA 6000 Stock Exchange Australian Securities Exchange Limited Code: WSA Solicitors Allion Legal Level 2 50 Kings Park Road West Perth WA 6005 Registered Oﬃ ce Level 2 2 Kings Park Road West Perth WA 6005 Phone (08) 9334 7777 Fax (08) 9486 7866 Competent Person Statement: “The information within this report as it relates to mineral resources, reserves and mine development activities is based on information compiled by Mr Dan Lougher of Western Areas Ltd. Mr Lougher is a members of AusIMM and is a full time employee of the Company. Mr Lougher has suﬃ cient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as Competent Persons as deﬁ ned in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.’ Mr Lougher consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.” Forward Looking Statements: This release contains certain forward-looking statements. Forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability to control or predict which could cause actual events or results to diﬀ er materially from those anticipated in such forward- looking statements. This announcement does not include reference to all available information on the Company or the Forrestania Nickel Project and should not be used in isolation as a basis to invest in Western Areas. Any potential investors should refer to Western Area’s other public releases and statutory reports and consult their professional advisers before considering investing in the Company. For Purposes of Clause 3.4 (e) in Canadian instrument 43-101, the Company warrants that Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. Designed by Dash Digital T +61 8 9334 7777 F +61 8 9486 7866 E info@westernareas.com.au Registered Oﬃ ce Level 2, 2 Kings Park Road, West Perth WA 6005 PO BOX 1891 West Perth 6872 W E S T E R N A R E A S L T D 2 0 1 3 A N N U A L R E P O R T ABN 68 091 049 357 2013 ANNUAL REPORT

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