Western Areas Ltd
Annual Report 2016

Plain-text annual report

Annual Report 2016 Corporate Directory Directors Ian Macliver Dan Lougher David Southam Richard Yeates Craig Readhead Tim Netscher Company Secretary Joseph Belladonna Auditors Crowe Horwath Level 5 45 St Georges Terrace Perth WA 6000 Bankers ANZ Banking Group Limited 77 St Georges Terrace Perth WA 6000 Stock Exchange Australian Securities Exchange Limited Code: WSA Solicitors Ashurst Level 10 & 11 123 St Georges Terrace Perth WA 6000 Registered Office Level 2 2 Kings Park Road West Perth WA 6005 PO Box 1891 West Perth WA 6872 Phone: +61 (0) 8 9334 7777 +61 (0) 8 9486 7866 Fax: info@westernareas.com.au Email: ABN: 68 091 049 357 Share Registry Computershare Investor Services Pty Ltd Level 11 172 St Georges Terrace Perth WA 6000 Competent Person’s Statement: The information in the Annual Report was compiled by Western Areas management, but the information as it relates to mineral resources and reserves was prepared by Mr Charles Wilkinson, Mr Daniel Lougher and Mr Andre Wulfse who are Competent Persons and members of the Australian Institute of Mining and Metallurgy (AusIMM). They are full-time employees of Western Areas Ltd and have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’(2012 JORC Code). Mr Wilkinson, Mr Lougher and Mr Wulfse consent to the inclusion in the report of the matters based on the information in the form and context in which it appears. The information contained in this report in relation to the New Morning Deposit was prepared and first disclosed under the 2004 Edition of the JORC Code. It has not been updated since to comply with the 2012 JORC Code on the basis that the information has not materially changed since it was last reported. Forward Looking Statement: This Annual Report contains certain forward-looking statements including nickel production targets. Often, but not always, forward looking statements can generally be identified by the use of forward looking words such as “may”, “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “continue”, and “guidance”, or other similar words and may include, without limitation, statements regarding plans, strategies and objectives of management, anticipated production and expected costs. These 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 differ materially from those anticipated in such forward-looking statements. This Annual Report does not include reference to all available information on the Company 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. 02 Contents Highlights 2015-2016 Chairman’s Letter Managing Director’s Report Operations Review Explorations Review Ore reserve/mineral resource statement Directors Report Remuneration Report (Audited) 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 Independant Auditor’s Opinion Tenements listing Shareholder Information 05 06 07 11 22 27 29 35 44 45 46 47 48 49 50 83 84 86 90 03 From Mine To Port Western Areas is Australia’s highest grade, lowest cash cost nickel producer and its main asset, the 100% owned Forrestania Nickel Project, is located 400km east of Perth in Western Australia. Western Areas is also Australia’s second largest sulphide nickel miner producing approximately 25,000 nickel tonnes per annum from its Flying Fox and Spotted Quoll mines - two of the lowest cost and highest grade nickel operations in the world. An active nickel explorer at the Cosmos Nickel Complex and the Western Gawler region in Australia, the Company also holds significant exploration interests in Canada, Finland and Greenland through shareholdings in Mustang Minerals and FinnAust Mining Plc. The Board remains focused on the core business of low cost, long life nickel production, new nickel discoveries and generating returns to shareholders. It has put in place the cost structure and capabilities to prosper throughout the cycle by adopting prudent capital management strategies and an opportunistic approach to project assessment. 04 04 Highlights 2015-2016 Safety Environmental Maintained an industry leading safety record. Zero Lost Time Injuries recorded for FY16. Continued support of local and regional programs, including local schools and associations, the Western Quoll enclosure at the Perth Zoo and the Starlight Children’s Foundation. Cosmic Boy Concentrator Production Costs Record throughput from the Cosmic Boy Concentrator, processing 616,279 tonnes of ore during the year. Forrestania operations continued to generate positive operating cash flow. Sustainable cost reductions, improved efficiency and innovation resulted in a unit cash cost of A$2.26/lb of nickel in concentrate. Spotted Quoll Mine Flying Fox Mine Record production from Spotted Quoll, production in excess of 15,000 nickel tonnes. Flying Fox continues to deliver consistent production, mining over 12,000 tonnes of nickel for FY16. Exploration Balance Sheet The Cosmos Nickel Complex and Western Gawler project offering exciting growth and exploration opportunities. Western Areas remains debt free with a reported net cash position of A$75.7m at 30 June 2016. 05 05 Chairman’s Letter Ian Macliver Independent Non-Executive Chairman Dear Fellow Shareholder, On behalf of your Board of Directors, I am pleased to present to you the Annual Report for the year ended 30 June 2016. Western Areas has had a solid year operationally, meeting production guidance and maintaining an excellent safety record. This operational performance coupled with our strong balance sheet and high quality assets leaves the Company extremely well positioned to endure a difficult nickel price environment. Western Areas financial results show that the Company has remained cash flow positive throughout the period, a major achievement in light of nickel price weakness. The nickel price has had an impact on profitability through it’s direct impact on revenues and indirect impact on write-offs and impairments on some non-core assets. Western Areas has been extremely focussed on controlling costs to further optimise its business and respond to the nickel price environment. Continued operational efficiency and cost reduction programs have lowered cash costs of production and delivered positive operating margins and cash flow from operations, an outstanding achievement in a difficult environment. We expect to continue this strong focus on cash margins in the coming year. Operationally, Western Areas is in a very strong position with the Company reporting record mill throughput in 2016 and record Spotted Quoll ore tonnes. Western Areas is a consistent performer and is pleased to have met or exceeded its production guidance for the last 6 years. The Company is extremely proud of its safety record and is over 2 years LTI free. The Company is also very proud to report positive operational cash flow even at the current low nickel price. Western Areas has been a prudent manager of shareholder capital, ensuring the Company is in a solid position to weather nickel price weakness. The Board has decided not to pay a dividend for the full year, a decision that is consistent with the previous half and the Company’s dividend policy. Western Areas has a track record of paying-dividends over the last five years and while it is the Board’s desire to pay dividends it must consider the prevailing nickel price and future capital requirements. 06 To provide further balance sheet strength, Western Areas completed a capital raising of $75 million and during the year deferred $34 million of capital costs from FY16 to FY17. These measures have given the Company flexibility at a time of low nickel prices and allowed us to remain debt free at the end of the year. Western Areas is now extremely well positioned with $76 million in cash at bank and zero debt at the end of the reporting period. There is no doubt that the current nickel price environment is challenging, in fact, the nickel price is now trading below the 50th percentile on the cost curve, implying that more than 60% of producers are losing money. That said, the Company’s high grade assets and low cost of production places us in a favourable position to deal with nickel price weakness. In the medium to longer term, the nickel outlook is brighter with many analysts predicting demand increases to outstrip supply, in part driven by fast growing markets for nickel such as the battery sector. Going forward, the Company’s focus will be on continuing to preserve financial strength, manage operations carefully with a specific emphasis on cash generation rather than raw production numbers. Western Areas is also looking into the future and remains committed to development of Cosmos and continued exploration at both Cosmos and Western Gawler region. In closing, I would like to acknowledge and thank the Company’s Managing Director, Dan Lougher, the executive team and all of the employees, contractors and suppliers of Western Areas for their hard work and dedication throughout the year. The valuable insights and hard work of my fellow directors has been instrumental in keeping the focus on the core business of low cost, long life nickel production and new discoveries for Western Areas. Ian Macliver Independent Non-Executive Chairman Managing Director’s Report Daniel Lougher Managing Director & Chief Executive Oficer The 2016 financial year (FY16) has been a strong year operationally for Western Areas. The Company has delivered financial results that are underpinned by significant reductions in spending factors under management control in response to the challenging nickel price environment. The Company’s operations remained cash flow positive through this period, which is a significant achievement and a testament to the high grade mines, outperforming mill and the management approach to ensuring low cash cost operations. Importantly, all of this was achieved with no Lost Time Injuries (LTI’s) recorded across the Company. Western Areas remains debt free and reported a net cash position of A$75.7m at year-end. During the year the Company repaid A$125m of convertible bond debt which significantly reduced the interest charges in FY16. On 31 March the Company announced an underwritten A$60m share placement followed in April by a Share Purchase Plan of A$15.0m. The funds raised allowed the Company to repay the A$25m corporate facility held with the ANZ Bank as well as completing the final payment of A$12.7m for the acquisition of the Cosmos Nickel Project (Cosmos). For the sixth consecutive year, Western Areas reported key operational metrics that either met or exceeded guidance demonstrating the exceptional consistency of the Company’s operations. The guidance result in FY16 was assisted by record production from the Spotted Quoll mine and record throughput from the Cosmic Boy Concentrator above name plate capacity. Flying Fox and Spotted Quoll mines, based on reported Ore Reserves, have mine lives of five and eight years respectively and remain two of the highest grade nickel mines in the world. As a Company we are exceptionally proud of our safety record with ZERO LTI’s for FY16, taking the Company to over two years without an LTI. A particularly pleasing outcome was achieved at Spotted Quoll mine and Cosmic Boy Concentrator, where they have successfully operated four years and three years respectively without an LTI and a full year without a Medically Treated Injury. This is an outstanding achievement and great credit must be given to the teams involved. Controlling costs and optimising operations was a key focus which will continue into the coming year. The Company has continued to drive down its operational and corporate cost base, whilst improving efficiency through many staff driven initiatives and innovation. As a result, the Company was able to deliver a reduction in unit cash costs of production of nickel in concentrate to A$2.26/lb. These actions have ensured that positive operating margins and cash flow from operations were maintained in FY16 despite the external influence of decade low nickel prices. This demonstrated resilience has helped the Company maintain its position as one of the world’s lowest cost pure-play nickel producers. Department Lost Time Injury Frequency Rate (LTIFR) FY16 FY15 0.0 0.0 Total Ore Mined (tns) 590,246 540,268 Average Mined Grade 4.7% 4.9% Contained Nickel Mined (tns) 27,607 26,524 Total Ore Processed (tns) 616,279 609,727 Average Processed Grade Average Recovery 4.5% 90% 4.7% 90% Contained Nickel Processed (tns) 25,009 25,801 Nickel Sold (tns) 24,793 26,036 Average Nickel Price Received (US$/tn) Cash Costs before smelting/refining (A$/tn) Average Exchange Rate USD/AUD 9,083 14,514 2.26 0.73 2.31 0.84 07 During the year the Company announced a prudent approach to capital expenditure and exploration spend given the nickel price headwinds. This resulted in the deferral of $34.0m of capital spend which was only possible due to the significant investment in capital in prior years. As part of that deferral the Mill Enhancement Project was postponed, however due to our confidence in the fundamentals of this project, all long lead items were ordered and have been subsequently delivered to site. Notwithstanding the ongoing challenging nickel price environment, the Forrestania operations continued to generate positive operating cash flow, with additional benefits from the capital deferral program being fully implemented during the year. The measured approach to discretionary exploration expenditure continued at both Cosmos and Western Gawler projects. The decline in the nickel price over FY16 is no doubt well understood by our shareholders. However, Western Areas was able to insulate itself to a degree by virtue of its high grade assets, low cost of production, debt free balance sheet and the support of shareholders. There are a number of factors which influenced the nickel price in FY16 including record high LME and Chinese nickel stockpiles, the ramp up for Filipino laterite exports following the Indonesian nickel laterite export ban and Chinese nickel pig iron production. However, history and logic suggests that nickel prices are not sustainable at this level and we can see a number of potential catalysts for nickel price improvements, some of which have transpired post FY16. Some potential catalysts include recent comments and actions by the Philippines government regarding stronger environmental controls being imposed on nickel laterite operators. Furthermore, we see encouraging signs of continuing growth in 300 series stainless steel demand, which contains the highest nickel content of any stainless steel product. Potential further drivers to a price improvement include a reduction in supply due to some closures of high cost mines (some of which occurred in late FY16), an upturn in global stainless steel demand and the use of nickel in lithium-ion batteries that power electric vehicles. We are confident that the nickel price cycle will turn and whilst we cannot control the timing we can control the operational and corporate aspects of our business to ensure Western Areas is best positioned for this price upswing. Consistent with past practice, the Company will be commencing a formal tender process during the first half of FY17 for its nickel concentrate off-take contracts beyond CY16. This will be the first year that both the Jinchuan and the bulk of the BHPB contracts will mature together. In anticipation of off-take becoming available, the Company has been working with globally significant commodity companies on developing alternative markets for nickel concentrates whilst also actively marketing our highly sought after concentrate to traditional smelters and commodity traders. Western Areas has delivered on its previously stated intention to invest in exploration at Forrestania, Western Gawler JV and the newly acquired Cosmos project. During the year, Cosmos transitioned from care and maintenance to an exploration site with progress highlights including the commencement of drilling at Ulysses, completion of a Surface Moving Loop EM (MLEM) survey and continuation of near mine target generation activities. The Company is also pleased to have completed an update to the Xstrata scoping study for the Odysseus Project and has now commenced a pre-feasibility study. The Company continues to believe that Cosmos is one of the most prospective nickel belts in Australia and is significantly under-explored. At our Western Gawler project, the Company earned 100% ownership in the Monax tenements and continued its earn-in into the Strandline JV tenements. Extensive geophysical surveys (fixed and MLEM and gravity surveys), combined with reverse circulation drilling were also completed over various targets. Initial drilling results exceeded expectations with prospective mafic intrusions identified during the first round of RC drilling. The Company is very committed to the long term exploration investment in this region and believes that there is potential to find a significant discovery in this belt. At Forrestania, exploration and resource extension drilling activities continued at Spotted Quoll, Flying Fox and the New Morning project, with the pace of activity moderated in line with the Company focus on cash flow and controlling costs. Studies completed to date indicate that the New Morning Project may be amenable to an open pit mine at improved nickel prices. The Company is undertaking comprehensive metallurgical test-work to evaluate the potential for the use of the Bioheap technology in the nickel extraction process. During the year there has been significant activity in the Lithium space. Western Areas consequently received a number of corporate approaches and enquiries regarding the Lithium potential of our tenements. Accordingly, the Company has commenced some limited and low key activities to determine the lithium endowment potential. Initial results from re-assaying historical core has delivered interesting results as reported in the Quarterly Reports. On completion of work in early FY17, it is the Company’s intention to identify the most appropriate solution to maximise value of these tenements, with the understanding that Lithium is likely to be a non-core activity for the Company. A high standard of environmental management has been maintained during the financial year across the Company with no major reportable environmental incidents. Ongoing environmental monitoring programs of the declared rare flora health adjacent to the Spotted Quoll mine operations and Western Quoll population surveys continued. Environmental weed and feral animal eradication programs were ongoing during the year in conjunction with seed collection for rehabilitation. Approximately 9.5kg of seed was processed and stored which has the potential to produce approximately 50,000 plants and rehabilitate 45 hectares of land. 08 The Company also continued to support a number of programs relevant to its corporate social responsibilities. Some examples included the sponsorship of the Chuditch (Western Quoll) enclosure at the Perth Zoo, and supporting fundraising activities for the Starlight Children’s Foundation. More locally we hosted school groups and supported important programs in the Forrestania area. Western Areas recently released key operational and financial guidance metrics for FY17. Looking ahead, the Company’s focus will be on continuing to maintain a strong balance sheet, managing operations safely and priority given to cash generation rather than raw production numbers. The Company will continue to focus on prudent capital management but will maintain sufficiently flexibility to increase productivity should market conditions improve. Exploration efforts will be focussed on the three organic growth projects of Forrestania, Cosmos and Western Gawler. Feasibility work is focussed on the Odysseus Pre-Feasibility Study which is scheduled for completion towards the end of CY16. In conclusion, Western Areas has attractive organic growth options, a strong balance sheet, low production costs and high grade assets, putting it in an exceptional position to benefit from an improvement in the nickel price. I would like to take this opportunity to thank all of our staff, contractors and suppliers for their support throughout the year. I look forward to be working with you all again in the coming year in what should be a year of better commodity prices and hopefully less volatile market conditions. Daniel Lougher Managing Director and Chief Executive Officer 09 09 Our operation remains extremely resilient with positive operating cashflow and a workforce continuing to drive innovation and productivity improvements across the business. 10 10 Western Areas 2016 Annual ReportOperations Review Group Overview Western Areas is an Australian based high grade, low cash cost nickel producer. The Company is listed on the Australian Securities Exchange (ASX) under the ticker symbol “WSA” and has been a member of the ASX 200 for many years. The Company’s main asset is the 100% owned Forrestania Nickel Project located 400km east of Perth in Western Australia. Western Areas is also Australia’s second largest sulphide nickel miner producing approximately 25,000 nickel tonnes per annum from its Flying Fox and Spotted Quoll mines which are two of the lowest cost and highest grade nickel operations in the world. The high grade nickel ore mined is processed through the Cosmic Boy Concentrator (CBC) and sold into offtake agreements with BHP Billiton for 12,000tpa nickel in concentrate and 13,000tpa with Jinchuan for a total 25,000tpa nickel in concentrate. The Company is an active nickel explorer at both the Cosmos Nickel Complex located in Western Australia and Western Gawler region located in South Australia and the Company also holds significant exploration interests in Canada, Finland and Greenland through shareholdings in Mustang Minerals and FinnAust Mining Plc. The Board remains focused on the core business of low cost, long life nickel production, new nickel discoveries and generating returns to shareholders. It has put in place the cost structure and capabilities to prosper throughout the cycle by adopting prudent capital management and an opportunistic approach to joint venture opportunities and asset acquisition. Structure Western Areas Ltd is a company limited by shares that is incorporated and domiciled in Australia. Western Areas Ltd has prepared a consolidated financial report incorporating the material entities that it controlled during the financial year, which are shown below along with the principal assets of each. Bacterial Heap Leach Worldwide Patents Full Laboratory and Management Team Bioheap 100% Finland Polymetallic UMS deposits Greenland Mineral Sands Exploration FinnAust Mining PL C 37% Makwa - Ni/PGM Mayville (M2) - Cu/PGM M C u o r s t a p o r a n g C M tio in e r a n a n (1 d a 9.9 als ) % Mt Alexander JV - Ni Southern Cross Goldfield JV - Ni Western Gawler - JV - Ni, Cu, Au Aust Exploration Assets Western Areas Ltd 2 Operating Mines Flying Fox - Ni Spotted Quoll - Ni Australian Nickel Investement Pty Ltd (100%) Cosmos Nickel Complex Forestania (100%) Lounge Lizard - Ni Diggers South - Ni New Morning - Ni Forestania (70 %) Mt Gibb - Ni, Au Lake King JV - Ni Sunrise - Ni Cosmic Boy - Ni Gold Rights 11 Western Areas 2016 Annual ReportOperations ReviewWestern Areas Safety There were no Lost Time Injuries (LTI) for FY16 which is an excellent achievement considering the Forrestania Nickel Operations (FNO) runs a concentrator, two deep underground mines, surface exploration program and a trucking logistics function from FNO to Kambalda and Esperance Port. Two significant milestones were achieved during the year; firstly, the CBC achieved three years with no LTI’s and secondly, the concentrator and the Spotted Quoll mine achieved 12 months without a LTI, medically treated injury (MTI) and restricted duty injury (RDI). A summary detailing the LTI free days by operating department at year end is shown in the table below. Rope Rescue exercise Department Surface Exploration Spotted Quoll UG mine Cosmic Boy Village Cosmic Boy Concentrator Flying Fox UG mine Surface Haulage LTI free days 2,921 1,904 1,612 1,103 1,086 820 The Company set an ambitious target of reducing the combined FNO work-place Total Recordable Injury Frequency Rate (TRIFR; recordable injuries are those which require medical treatment, restricted duty or result in lost time) by 25% for the year and managed to achieve an excellent 32% decrease from 15.2 to 10.4. Senior managers and department safety representatives have been active and visible in the workplace with a 20% increase in work-place safety inspections and audits (118 from 96). Reviews of safety plans, procedures and other documents continue in order to improve the safety management system. All FNO departments and contractors continue to ensure that safety and risk management remain a high priority in the workplace. During the year the Department of Mines and Petroleum (DMP) focussed on work-place mental health with a subsequent FNO mental health audit completed by the DMP inspectors in April. The audit resulted in an excellent rating for the Company. As part of our commitment to continuous improvement in this area, our emergency response co-ordinators have completed dedicated workplace mental health training to better equip our personnel. 12 Breathing Apparatus exercise Hazardous Materials scenario Fire fighting exercise Western Areas 2016 Annual ReportOperations ReviewThe Emergency Response Team (ERT) took part in its second Perth based WA Mines Emergency Response Competition in November, where the team performed very well with a third place in the Breathing Apparatus exercise and Emergency Response Readiness exercises plus a second place in the Fire Fighting exercise. In November and December the ERT assisted the Department of Fire and Emergency Services (DFES) teams and local community fire-fighting volunteers to control and extinguish bush-fires to the north of FNO. Despite hot weather and difficult conditions over a three week period, the fires were effectively managed with no injuries sustained. Forrestania Environmental Activities Environmental compliance was maintained at a high standard throughout the financial year with only five minor environmental incidents reported which included a small hydrocarbon spill, two small water spills, one procedural and one vegetation incident. The environmental impact from these was minimal and the causes addressed to prevent re-occurrence. The Department of Environment Regulation (DER) revised the Prescribed Premises Licence in April 2016 to streamline licence conditions. As part of the licence revision, the permitted annual throughput of the process plant was increased by 80,000t to 680,000t/year. Various environmental permitting applications for surface infrastructure upgrades were submitted and approved by the relevant regulators throughout the year, which included the WA Department of Mines and Petroleum (DMP) and Department of Environmental Regulation (DER) approval for the raise of the Cosmic Boy Tailings Storage Facility (TSF), CBC scats storage area and Spotted Quoll return-airway raise- bore shaft. In addition, a number of clearing permits to cover exploration and infrastructure works in environmentally sensitive areas were also granted. Rehabilitation activities were ongoing with the collection and development of approximately 10kg of native seed during the year, sufficient to propagate 50,000 plants and rehabilitate 45ha of land. Vegetation transect monitoring continued during the year as well as the monitoring of Declared Rare Flora. Monitoring programs for Malleefowl (Leipoa ocellata) and Chuditch (Dasyurus geoffroii) continued during the year using motion sensor cameras with good success. Monitoring efforts for Malleefowl, in particular, are continuing to improve the knowledge of the species in the area. Both the Malleefowl and the Chuditch are listed as Schedule 1 Threatened Fauna at a State level and as ‘vulnerable’ at a Commonwealth level and Western Areas is committed to supporting these activities as part of the Company’s sustainability programme. The Company also continued its involvement with the Carbon Disclosure Project (CDP) by submitting carbon emission data as part of CDPs annual reporting requirements. Community During the financial year, the Company re-committed to sponsorship agreements with the Perth Zoo for the Western Quoll enclosure, the Department of Parks and Wildlife (DPaW) in support of the Western Shield wildlife recovery program, the WA Museum for the Caraby’s Cockatoo Research Program and Eastern Wheatbelt Biosecurity Group for feral animal control. Western Areas has developed an excellent relationship with the Tjiwarl Claimant Group at Cosmos. As an extension of this relationship, Western Areas recently presented a package of sewing machines and aboriginal material to the Leonora Women’s Group, nyunnga gu. The nyunnga gu womens group aims to empower local women by providing a safe environment to learn new life skills and socialise, and therefore avoid local issues such as drug and alcohol abuse and high suicide rates. Being a long-term supporter of the Starlight Children’s Foundation (Starlight), Western Areas enjoys getting involved with various fundraising initiatives that assists Starlight to continue to deliver vital in-hospital and community programs for sick kids, teens and their families. The Company also provided sponsorship to Hyden Primary School in support of their small marsupial conservation initiative and supported the Forrestdale primary school year 6 careers initiative as shown below. Forrestdale Primary School careers visit 13 Western Areas 2016 Annual ReportOperations ReviewCosmos Western Areas conducted care and maintenance environmental monitoring of the Cosmos mine-site following purchase and possession of site in October 2015. Environmental compliance was maintained at a high standard throughout the financial year which included water quality and groundwater depths associated with key infrastructure and aquifers plus weed management and feral animal control. Community consultation also commenced in November with the local Tjiwarl native title claimant group who have a registered native title claim over an area of land which includes the Cosmos mine-site. The Company is committed to developing and maintaining a good working relationship with the traditional owners of the land and a number of meetings were held during the year with the Tjiwarl claimant group and their representatives, Central Desert Native Title Services. The Tjiwarl group also provided cross cultural awareness training to Company staff which was informative and well received. In June, the Company entered into a Deed of Agreement with the Tjiwarl group to allow heritage surveys of the Lake Miranda area. Subsequently the Tjiwarl group cleared a number of surface exploration drill-hole sites and the Company looks forward to future good working relationships with the Tjiwarl group. Flying Fox Mine The Streeter Decline advanced 144m for the year, with 826m of associated lateral capital development to establish the 230 and 215 stope blocks and intersect ore at the 180 level. There was also 25m of capital vertical development to extend the escape-way ladder system from the 230 to 245 level. The lowest development level now sits at 1,262m below surface. At the end of the financial year, the T4 ore body was mined out from the 655 level to the 760 level leaving the 615, 630 and 640 levels which were completed by September 2016. Flying Fox production continued to be sourced predominantly via longhole methods from the T5 area of the 385, 410, 527, 515 (finished), 335, 255, 295 and 285 stopes plus minimal flat-back stoping at the 230 level. Narrow vein stoping using specialist contractors supplemented production with high-grade ore from the 760 and 730 stopes. Retro-fitted surface to underground paste-fill capability was successfully commissioned in July with 53,300m3 of paste-fill poured for the year. This has allowed the mine at the 285 level, to transition from a ‘bottom-up’ with rock-fill to a ‘top-down’ with paste-fill stoping sequence which is more suited to the geotechnical environment in the lower levels of the mine. Flying Fox mine is now in its 10th year of ore production with a remaining reserve mine life of 5yrs. It continues to be one of the highest grade nickel mines in the world. 14 Massive ore in the 200 south ore drive with an average face grade of 5.0 nickel Flying Fox Infrastructure A second sand pit was established in the last quarter to maintain sand supply for paste-fill blends. The pit is located 2.5km from Flying Fox and 6.0km from Spotted Quoll mine-sites and will provide lower haulage costs compared to the original sand pit located on the internal haul road to CBC. The seismic network expansion included the addition of four additional sensors located in the deeper areas of the mine to cover new development and future stoping, plus extra computer hardware to accommodate the additional processing of information. An extension to the main paste reticulation network to the 230 level plus replacement of the 600m surface to underground sacrificial paste bore-hole casing was completed in the third quarter. Spotted Quoll Mine The Hanna Decline advanced to a depth of 662m (738m RL) below the surface and accessed the 750 level by June 2016. Mining of the North lode orebody was completed in the year, with a preliminary final total production of 68,750 tonnes of ore at an average grade of 4.8% nickel for 3,290 nickel tonnes. This has removed the requirement to maintain the 1155 and 1215 North lode ore drive access floor pillars allowing stoping of the 1140 level. The majority of the ore production for the year was sourced from the 1020 to 915m RL and mainly from the 1005, 997, 990, 971 and 962 levels. Production continued between the 1125 to 1020m RL with the completion of the 1065, 1050 and 1035 levels. Western Areas 2016 Annual ReportOperations ReviewThe single-boom jumbo area (932 to 710m RL) using specialist contractors, successfully commenced long-hole production from the 911 panel 1 stope in early March. Smaller ore drive development (nominal 3.5m x 3.5m profile) continued from the 881 to 852 levels and 832 to 812 levels. The mine continues to plan production from three main lode stopes concurrently to ensure a continuous flow of ore. Split firing at the narrower ends of the lower ore drives has proved successful with additional high grade ore extracted, thereby ensuring no economic mineralisation is left behind. The now well established ‘top-down’ longhole benching using paste-fill continues to be a reliable, safe and productive stoping method with nearly 76,000m3 poured for the financial year. The paste-fill allows for quicker stope void filling resulting in more efficient turnaround times for stopes. Spotted Quoll Infrastructure Site establishment for the surface to underground 4.5m diameter raisebore return-airway (RAW) shaft commenced in January 2016 with raisebore collar and sub footings. The pre-pilot drill- hole (640mm diameter) was successfully drilled though the 50m weathered and transitional zones to primary rock. This was subsequently cement cased and the pilot hole (480mm diameter) commenced using the self-steering directional “rotary vertical drilling system” (RVDS) to minimise drill-hole deviation. At the end of June the pilot hole was at 410m depth below surface and on schedule to break through into the 790 level (design depth 610m). The completion of the RAW will occur during the first half of FY17 and represents the last remaining, large one-off sustaining capital items at the mine. 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 Tns Ni % Tns Tns Ni % Tns Tns Ni % Tns Sep Qtr Dec Qtr Mar Qtr Jun Qtr 2014/2015 67,400 4.7% 3,155 80,702 4.8% 3,905 76,163 4.2% 3,183 81,318 4.6% 3,734 62,017 4.6% 2,876 82,711 4.7% 3,922 68,161 4.7% 3,218 71,774 5.0% 3,614 148,102 157,481 144,728 139,935 4.8% 7,060 4.4% 6,917 4.7% 6,798 4.9% 6,832 YTD Total 273,741 4.5% 12,432 316,505 4.8% 15,175 590,246 4.7% 27,607 15 Western Areas 2016 Annual ReportOperations ReviewFlying Fox Production Spotted Quoll Production Flying Fox mined a total of 273,741 ore tonnes at an average grade of 4.5% nickel for 12,426 contained nickel tonnes which included 95,108 ore tonnes @ 4.5% for 4,319 nickel tonnes from the Lounge Lizard tenement. Total nickel produced was ahead of plans with lower dilution achieved, helping to increase the overall ore grade. Spotted Quoll mined a total of 316,505 ore tonnes at an average grade of 4.8% for 15,175 contained nickel tonnes, which was the highest annual production of both ore and nickel tonnes to date. Production Co-ordinator Peter Burrows conducting a tailings storage facility (TSF) survey Maintenance Technicians Luke Hamon & Rob Watts testing the new Crusher Mantle Maintenance Frame Cosmic Boy Mill Production Tonnes Milled and Sold 2014/2015 Sep Qtr Dec Qtr Mar Qtr Jun Qtr YTD Total Ore Processed Grade Ave. Recovery Ni Tonnes in Concentrate Total Nickel Sold Tns % % Tns Tns 153,540 152,435 156,190 154,114 616,279 4.6% 89% 6,252 6,233 4.6% 89% 6,256 6,281 4.4% 90% 6,180 6,011 4.5% 90% 6,321 6,268 4.5% 90% 25,009 24,793 The CBC processed a record 616,279 tonnes of ore at an average grade of 4.5% nickel which is an exceptional achievement given that its nameplate capacity is 550kt. A total of 162,038 tonnes of concentrate was produced at 15.4% nickel containing 25,009 nickel tonnes with an average recovery of 90%. This excellent result is largely due to the well planned and executed preventative maintenance program (98% mechanical availability) plus a process improvement to the grinding circuit, which involved the installation of a control valve enabling better density control in the ball mill and therefore a throughput increase. During the month of June this process improvement enabled the CBC to achieve a record monthly throughput of 55,386 tonnes (77tph) which is approximately 20% above the original CBC nameplate capacity (64tph or 550,000tpa). 16 Western Areas 2016 Annual ReportOperations ReviewMill Recovery Enhancement Project Nickel Sales The Company decided to minimise capital expenditure due to the sustained low nickel price and consequently the Mill Recovery Enhancement Project (MREP) was restricted to purchasing long lead items and completing detailed engineering for a total cost of approximately $6.5m. The long lead items have all been delivered to CBC in readiness for a recommencement of the project. While the MREP is on hold, a study to investigate downstream processing to produce a nickel sulphate product from the MREP nickel sulphide precipitate was commenced, with encouraging test-work results. A nickel sulphate precipitate would enable the Company to generate two well sought-after nickel products, being either high grade nickel sulphide concentrate or a relatively pure nickel sulphate precipitate to target the growing lithium ion battery market. Western Areas continued to deliver its high quality and sought after nickel concentrate into the off-take contracts of its two current customers, BHPB Nickel West (NW) and Jinchuan Group. A total of 162,643 tonnes of concentrate was delivered during FY16 which contained 24,793 tonnes of nickel. Both the main NW agreement and the Jinchuan agreement for concentrate offtake are expected to be completed by December and negotiations have commenced with these parties for contract renewals. Notwithstanding, demand is also coming from potential new customers and accordingly a new tender process will be conducted. Nickel sulphate produced by BioHeap. Cost of Production The unit cash cost of production of nickel in concentrate (excluding smelting/refining charges, concentrate logistic and royalties) was A$2.26/lb (US$1.64/lb) for the full year. This result at the lower end of the full year guidance range has been achieved following significant cost reductions and positive ore tonnes and grade reconciliations above those used to generate the full year guidance range. The Company is maintaining focus on embedding cost reductions into the operation for the long term, across all cost centres in the business. Financial Statistics Group Production Cost/lb Mining Cost (*) Haulage Milling Admin By product credits Cash cost Ni in Con (**) A$/lb A$/lb A$/lb A$/lb A$/lb A$/Ib Cash cost Ni in Con/lb (**) US$/lb Exchange Rate US$/A$ US$/A$ Sep Qtr Dec Qtr Mar Qtr Jun Qtr 2015/2016 1.58 0.06 0.45 0.19 (0.02) 2.26 1.64 0.73 1.63 0.05 0.41 0.17 (0.02) 2.24 1.61 0.72 1.66 0.05 0.41 0.17 (0.02) 2.27 1.64 0.72 1.60 0.05 0.44 0.18 (0.02) 2.25 1.68 0.75 (*) Mining Costs are net of deferred waste costs and inventory stockpile movements (**) Payable terms are not disclosed due to confidentiality conditions of the offtake agreements. Cash costs exclude royalties and concentrate logistics costs. Note: Grade and recovery estimates are subject to change until the final assay data are received. YTD Total 1.62 0.05 0.43 0.18 (0.02) 2.26 1.64 0.73 17 Western Areas 2016 Annual ReportOperations ReviewFlying Fox Ore Reserves/ Mineral Resources Spotted Quoll Ore Reserves/ Mineral Resources During the year, there was further upgrading of the Mineral Resource and Ore Reserve at Flying Fox which has resulted in an increased Ore Reserve and mine life. The Flying Fox Mineral Resource and Ore Reserve Summaries at the end of the financial year are as follows; The Spotted Quoll Mineral Resource and Ore Reserve Summaries at the end of the financial year are as follows: • Mineral Resource: 2.27 million tonnes of ore at a grade of 5.3% for 119,756 nickel tonnes; and • Ore Reserve: 2.42 million tonnes of ore at a grade of 4.0% • Mineral Resource: 2.02 million tonnes of ore at a grade of for 97,030 nickel tonnes. 5.0% nickel for 102,212 tonnes of nickel; and • Ore Reserve: 1.20 million tonnes of ore at a grade of 4.0% nickel for 48,280 tonnes of nickel. The longitudinal section below shows the Flying Fox mine with mineral resources and reserves depleted for mining production during the year. The longitudinal section below shows the Spotted Quoll Mine with mineral resources and reserves depleted for mining production for the year. 18 Western Areas 2016 Annual ReportOperations ReviewWestern Areas 2016 Annual Report New Morning/Daybreak As part of our future planning for Western Areas, the Company has been steadily working on potential start-up and trade-off studies associated with New Morning/Daybreak deposit. Further shallow (less than 70m deep) surface drilling to test the open-pit potential of the New Morning/Daybreak orebody was completed. A total of ten surface drill-holes using large diameter core (PQ) were completed for a total of 668m along the strike length of the New Morning and Daybreak deposits (see long-section schematic below). Preliminary resource models using nominal cut off grades of 0.5% Ni and 0.7% Ni respectively, were completed with encouraging results showing a significant increase in nickel by volume (+ 20%) when compared to the previous models. 19 Western Areas 2016 Annual ReportOperations ReviewCosmos Nickel Complex (“Cosmos”) Cosmos was acquired from Xstrata Australasia Nickel Operations Pty Ltd (XNAO), a subsidiary of Glencore plc with settlement and site possession completed on the 1st October 2015, which has provided the following advantages to the Company: • Substantial exploration potential in a highly endowed nickel province; • A potential third underground mine with Odysseus high grade deposit, hosting a total Mineral Resource of 7.3 million tonnes @ 2.4% nickel containing 174,000 tonnes of nickel; • Extensive surface infrastructure with a 450ktpa concentrator, new SAG mill & 520 person Village to support an early start up. Cosmos transitioned from a ‘care and maintenance’ status to an exploration site with a geophysical team and Boart Longyear operating a surface diamond drill rig. The Village capacity is currently 25 rooms with a fully functioning dry mess to cater for the small on-site team, which can be increased at relatively short notice. The update of the Odysseus Xstrata Scoping Study was completed early in the June quarter which recommended transitioning to a Prefeasibility Study (PFS). Following Board approval, the PFS started in May, focussing on the Odysseus and Odysseus North metallurgical, geotechnical and mining sections, with planned completion in the December 2016 quarter. At this juncture, the Board will make a decision on whether to proceed to a definitive feasibility study. View of the Cosmos mill at sunset 20 Western Areas 2016 Annual ReportOperations Review2121 Western Areas 2016 Annual ReportCosmos Nickel Complex (100% WSA) On 1 October 2015, the Company announced that, through its 100% owned subsidiary Australian Nickel Investments Pty Ltd, it had completed the acquisition of Cosmos from XNAO, a subsidiary of Glencore Plc. Exploration activities, of a purpose-fit program that has been designed to be conducted over a 24 month period, commenced immediately after the Cosmos acquisition. These activities have already been successful in generating prospective targets to be drill tested in the coming year. Three key areas were identified as exploration priorities, Figure below, and included; • Surface Moving Loop EM (MLEM) surveys using the best new electro-magnetic (EM) methods and technologies available to cover most of the prospective ultramafic host stratigraphy; • Drill testing the Ulysses target area, which lies to the north of the Odysseus ore bodies; and • The application of three-component DHEM to refine the known, untested EM anomalies, and to identify potential new high grade mineralisation along the near-mine corridor. Explorations Review Western Areas has an active, targeted and balanced exploration program directed at both replacing existing resources and reserves and also targeting new discoveries in known areas and new or greenfield terrains. With the acquisition of the Cosmos Nickel Complex (“Cosmos”) from Xstrata Australasia Nickel Operations Pty Ltd (“XNAO”) in October 2015 this project became a key component of the Company’s exploration portfolio. The Company believes the Cosmos tenements host large, cumulative, ultramafic bodies associated with high tenor nickel sulphides, and accordingly is encouraged by the strong prospectivity of the area. Work to date has already been successful in defining drill worthy targets. Cosmos will provide Western Areas with substantial additional exploration upside and a potential second mining operation to sit alongside its premium mines and exploration opportunities at the Company’s existing Forrestania Nickel Operation. Significant progress was also made on the Company’s ground holding in the Western Gawler region of South Australia. This included the identification of the right host rocks for mineralisation and geochemical anomalism in a number of areas, as well as the identification of further potential prospective target areas. With an expanded portfolio the Company now holds some 4,450km2 of the prospective Western Gawler terrain. The Company considers the area has the potential to host significant mafic-ultramafic, intrusive-related poly-metallic (nickel, copper +/- PGEs) deposits. During the year BHP Billiton sold its interest in the Mt Alexander Joint Venture tenure to St George Mining Limited (SGQ). The Joint Venture (in regard to E29/638 only) is held by SGQ (75%), with SGQ as the Manager of the Project, and Western Areas retaining a 25% non-contributing interest in the Project until there is a decision to mine. SGQ announced they have intersected further high grade nickel (+/- copper) massive sulphides at the Cathedrals and Strickland prospects. In addition, work was undertaken focussing on locating high grade nickel sulphide mineralisation associated with komatiitic lava flows within its Forrestania tenement package. This large tenement holding, comprising some 900km2, covers over 125km strike length of ultramafic hosting stratigraphy and is made up of both wholly owned Western Areas and Joint Venture tenements, Figure on page 25. The majority of the work in FY16 was directed at assessing the Eastern Ultramafic Belt (EUB) including existing projects and a number of new areas. Outside of traditional nickel exploration, some early stage work was conducted on the EUB for Lithium. This work was driven by numerous approaches from third parties to obtain access, purchase or joint venture Western Areas’ Lithium rights. The initial work has already identified a number of areas for follow-up with very high grade intersections of Li2O assayed from historical samples. Again it is worth noting that the Company’s exploration activities were completed LTI free and with no reportable environmental incidents. 22 Western Areas 2016 Annual ReportExplorations ReviewMLEM survey work commenced late in 2015 covering most of the prospective ultramafic host stratigraphy, including the high priority Neptune area, which lies south of the Prospero and Tapinos high grade nickel deposits. This area is interpreted to contain the highest volume of cumulate ultramafics in the Cosmos Nickel Belt. The survey work was also extended to the north. A number of MLEM anomalies were identified from the survey, some in highly favorable stratigraphic settings. Three single peak anomalous responses were observed in the survey in the Neptune area. Encouragingly these anomalies occur along the western (basal) margin of the interpreted ultramafic package, where there has been minimal deep drill testing. In addition to the above, a number of moderate to weak, short strike length anomalies were also detected in the Apollo area. Some of these lie adjacent to the interpreted Camelot ultramafic stratigraphy and in areas of other known ultramafic rocks. These anomalies have not been explained by previous drilling. These anomalies and the ultramafic stratigraphy in the Apollo area, as well as those in the Neptune area, will be tested in the coming year. A drilling focused heritage clearance survey was conducted around the Neptune area in conjunction with the Tjiwarl Native Title Claimant group. A total of 8 sites have been cleared for drilling, including key locations to test the high priority MLEM anomalies that were defined in the previous phase of exploration (Figure on page 22). The planned exploration program will include the first deep drilling to test the prospective ultramafics at depth and below the dry lake, and will also provide a platform for further down-hole geophysics (DHEM/DHMMR). Exploration at Ulysses targeted untested historical EM anomalies with the potential to extend the Odysseus ultramafic and disseminated nickel sulphides to the north. Two drill holes WAD001 and WAD001a, a wedge from WAD001, successfully intersected the target area, but no ultramafics rocks, instead encountering pegmatite, mixed with intermittent rafts of felsic volcanic host rocks. WAD001 and WAD001a have confirmed the extensive nature of the pegmatite to the north of the Odysseus Complex, likely marks a regional scale structure with a potentially large offset. The possibility still remains that any ultramafic (and associated nickel mineralisation) may be offset or displaced from the main mineralised trend and, as such, remains a compelling target. A review and modelling of the felsic intrusives and structures in the area is underway to assess the potential for further mineralisation in the Ulysses area. Significant volumes of disseminated nickel sulphides, with zones of network textured sulphides, are located between the Cosmos/ Alex Maires and the Prospero/Tapinos orebodies. Only about 30% of the basal contact of the main mineralisation trend has been tested by previous drilling. Some of the untested EM targets may represent accumulations of massive nickel sulphides. Whilst most of the historic drill holes were routinely surveyed with DHEM, these surveys used technology that is more limited in capability and effectiveness than the modern, digital, three component DHEM instrumentation used today, particularly in the detection of highly conductive massive nickel sulphides. A detailed review of the near-mine and brownfield DHEM opportunities has highlighted a number of untested existing anomalies. The application of three-component DHEM will aim to refine the known, untested EM anomalies, and to identify potential new high grade mineralisation along the near-mine corridor. Drilling activities aimed at cleaning out old drill holes and assisting with the DHEM surveys have already commenced and will continue into the new financial year. Western Gawler Nickel-Copper Joint Venture (WSA 100% and earning up to 90% interest) In October 2014, the Company executed separate Farm-in and Joint Venture Agreements with Gunson Resources Limited (now Strandline Resources Limited) and Monax Mining Limited in a number of key tenements within the Western Gawler region of South Australia. Since that time the Company has gained a 100% interest in the Monax ground and continues with the staged program to acquire up to 90% in the Strandline tenements. The Company also continued to consolidate its land holding in the Western Gawler Project area with the addition of exploration license EL 5688. This license forms one of two new additions (ELA 2014/252 is still under application) that cover prospective ground on the western margin of the Fowler Domain, to the west of the initial project area. With a combined area of approximately 4,450km2 the Company holds a strategic position in the Western Gawler region, an area of increasing interest for gold and base-metal exploration. The Western Gawler region is known to host mafic-ultramafic intrusive rocks and determining the extent, exact age and prospectivity of these is the primary objective of the exploration activities. The results from the initial phases of exploration are very encouraging, with the identification of olivine gabbro-norite intrusive rocks and geochemical anomalism in a number of areas. The results confirm the initial observations regarding the prospectivity of the Western Gawler region for intrusive related nickel, copper and gold mineralisation. These types of mafic intrusives are well known for hosting significant nickel and copper orebodies in western and central Australia, including Nova-Bollinger and Nebo-Babel. 23 Western Areas 2016 Annual ReportExplorations ReviewImportant milestones and key highlights have been achieved in the project. These include; • Drilling of 115 holes for 10,430.6m; • Funding ($100,000) by the South Australian Government as part of the PACE Discovery Drilling 2015; • Prospective mafic/ultramafic intrusions have been identified in multiple areas; • Potential for other metal types e.g. gold and copper mineralisation highlighted, • Systematic gravity surveys commenced and in progress; • Completion of targeted Electro Magnetic (EM) in key areas; and • Follow-up drilling in progress. A comprehensive review of the geochemical data collected from the initial extensive broad scale drilling (RC/air-core) program completed to date was undertaken. The anomalous element concentrations identified from the drill assays are (as expected) below economic levels but have been found to form coherent trends, both chemically and spatially. As the drilling is widely spaced, these results are highly encouraging for the project and further follow-up exploration has commenced. Importantly, new areas of interest have been identified by the latest review, and these will also be targeted in the current exploration program. Detailed surface gravity surveys have also commenced, with the aim of generating new targets, and adding to the current project wide-geophysical datasets. The gravity surveys, in conjunction with detailed magnetics, can help delineate features that may represent mafic/ultramafic intrusions. The initial surveys have been designed to cover key areas known to host prospective intrusions, and to extend the geological interpretation into unexplored areas. A number of features have already been identified and ranked for follow-up, and these are being tested, along with a number of other targets, in the current drilling program. The current target and reconnaissance drilling is shown on Coordinate System - GDA 1994 MGAZ53. Any positive results will be followed up with further RC and diamond drilling, and geophysics. Western Areas continues to build its relationships with the traditional owners and the Far West Coast Aboriginal Corporation (FWCAC), with heritage clearance surveys being completed in support of the drilling programs. The FWCAC has also been supporting the exploration program by assisting with rehabilitation activities in the Yellabinna Regional Reserve. Ongoing dialogue with the Aboriginal Land Council continues to facilitate sustained exploration into the existing and new areas of the region. 24 Western Areas 2016 Annual ReportExplorations ReviewForrestania Project (100% WSA) During the reporting period, considerable effort went into assessing the Eastern Ultramafic Belt (EUB). Exploration activities aimed at locating economic nickel sulphide mineralisation were undertaken at Mount Hope, Northern Estates, Parker Dome, Cosmic Boy, Cosmic Boy South (Hang Dog), South Ironcap, West Quest and South Quest areas/ prospects. Whilst the work was successful in locating cumulate ultramafic rocks, intersecting the basal contact, and locating disseminated lower grade nickel sulphide mineralisation, no significant massive nickel sulphides were intersected in this work. Work also continued on the Western Ultramafic Belt (WUB) particularly south of the Spotted Quoll mine. A technical review to evaluate the lithium potential at Western Areas’ Forrestania tenements was commenced with positive results generated from re-sampling previously drilled holes at the South Ironcap prospect. The prospectivity of the Mt Hope area, located approximately 30km northeast of Flying Fox, was assessed during the year. The area contains a significant volume of cumulate ultramafic rocks (known as the Mt Hope Dunite) over a strike length of 8km. Previous work identified the upper cumulate contact as being prospective. Hole MHD036, drilled during the FY15 September quarter, returned 12m @1.1% nickel from 529m close to the upper contact at 556m depth. Despite encouraging results, further drilling of the upper contact did not intersect economic nickel sulphides. Geological logging indicates the contact is often faulted and consequently is not always preserved. The data from the recent holes was integrated with DHEM surveys without further targets being generated. The Company commenced drill testing anomalous responses from the previously completed EM ground geophysical surveys over the approximate 10km strike length of ultramafic stratigraphy in the West Quest and South Quest prospect areas. Drilling also targeted a number of stratigraphic/geochemical targets coincident favourable basal ultramafic stratigraphy in this limited drilled section of the EUB. A total of 13 RC/DDH holes were drilled during the reporting period for a total of 2,369m. Thick ultramafic sequences were encountered in several holes in the central portion of the drilling accompanied by localised intervals of disseminated sulphide. Follow up drilling failed to enhance the level of nickel mineralisation intersected in the first phase of drilling. In addition, work was carried out on the WUB, south of Spotted Quoll mine, where six diamond holes were drilled and subsequently assessed with DHEM. Whilst the results from the DHEM did not return any significant conductors associated with the logged basal ultramafic contacts, a subsequent hole BD059 intersected 2.08m @ 1.16% Ni from 578m. A thorough reinterpretation of the geology and structures across this portion of the Western Ultramafic Belt, with the overall aim of understanding how it relates to the Spotted Quoll mineralised system further to the north is in progress. LOW RES Plan showing Forrestania tenements; mines and key prospects – to be updated 25 Western Areas 2016 Annual ReportExplorations ReviewDuring the later portion of FY16, a technical review to evaluate the lithium potential at Western Areas’ Forrestania tenements and pursue options that will maximise the value of these assets to the Company was commenced. 5. The true distribution of the pegmatites is currently difficult to assess as the information relies heavily on the drilling from historic nickel exploration which is biased towards the ultramafic stratigraphy; and The key results from the above work indicates: 6. There are large parts of the tenement holding that have 1. The Forrestania tenement package does contain strongly Li2O mineralised (spodumene) pegmatites; 2. There are numerous occurrences of granites and pegmatites throughout the Forrestania geological succession, typically flat lying or very shallowly dipping, with a flat or arcuate strike; 3. Lithium bearing pegmatites were only returned from the EUB; 4. Western Areas holds a considerable extent of the EUB (some 170km strike length) under licence; not been assessed with regard to lithium. Sampling of some existing holes from the South Ironcap area returned numerous intercepts of pegmatites containing grades >1% Li2O (see table below). The assay results confirm that the southern deeper portions of the pegmatite, with wide widths (30-50m) over a strike length of at least 900m, at a depth of 150-200m below surface. Importantly assay results reported in the June quarter indicate the pegmatites are shallowing to the north. This northern area will be drill tested in the coming year to confirm the nature and extent of the shallower pegmatites and potential for further lithium mineralisation. Whilst the initial results from the lithium potential evaluation are very encouraging, further work (geological compilation, re-sampling of existing drilling and new drilling) is being undertaken to assess and realise the true potential for economic lithium deposits within the tenement holding. HOLE ID Easting Northing RL EOH(m) Type SID014 760432 6380128 429 281.2 DD 760431.7 6380128 SID014 SID018 760671.4 6379838 SID020A 760881.4 6379526 760719.2 6379711 SID023 760349.8 6380080 SID025 760348.1 6380079 SID029 6380165 760242 SID032 429.3 418.3 409.1 420.9 432.2 432.2 431.2 281.2 450.7 285.0 351.3 461.9 528.7 469.0 DD DD DD DD DD DD DD DIP -58 -58 -70 -55 -55 -63 -72 -65 Azimuth Width (m) Li20 % From (m) 62 including 90 86 85 86 89 91 89 50.6 9 21.5 23.6 33.8 21.9 6.7 5.7 9.37 0.95 2.58 1.61 1.36 1.22 1.48 1.82 1.43 1.14 176.8 202 250.3 178.4 215.0 269.5 183.5 177.5 118.23 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. Work on the project area during the last 12 months concentrated on the ultramafic rocks along the prospective Nickel Hill trend. Black Oak (formally Southern Cross Goldfields) Joint Venture (WSA 70% interest) Western Areas has acquired 70% of Southern Cross Goldfields Limited (Black Oak Ltd- BOK) nickel rights across much of its 3,300km2 tenement portfolio in the Marda and Southern Cross regions of Western Australia. The BOK tenement package covers the north western portion of the Southern Cross-Bullfinch Greenstone Belt within the ‘Central Yilgarn Nickel Province’. The Company continues to review the prospectivity of the Joint Venture tenure, particularly those tenements adjacent to the Forrestania project. 26 Western Areas 2016 Annual ReportExplorations ReviewOre reserve/mineral resource statement Ore reserves at the 30th of June 2016 were the following: 30/06/2016 Deposit Flying Fox Area Spotted Quoll Digger South Diggers Rock Tonnes 1,200,080 236,950 2,179,880 2,016,000 93,000 Total Ore Reserves 5,725,910 Grade Ni% 4.0 4.2 4.0 1.4 2.0 3.2 Ni Tns 48,280 9,940 87,090 28,950 1,850 176,110 Ore reserves at the 30th of June 2015 were the following: 30/06/2015 Deposit Flying Fox Area Spotted Quoll Digger South Diggers Rock Tonnes 1,525,506 338,860 2,366,413 2,016,000 93,000 Total Ore Reserves 6,339,779 Grade Ni% 4.2 4.4 4.0 1.4 2.0 3.2 Ni Tns 64,146 14,961 95,186 28,950 1,850 205,093 JORC Classification Probable Ore Reserves JORC Code 2012 Proved Ore Reserves Probable Ore Reserves Probable Ore Reserves Probable Ore Reserves 2012 2012 2004 2004 JORC Classification Probable Ore Reserves JORC Code 2012 Proved Ore Reserves Probable Ore Reserves Probable Ore Reserves Probable Ore Reserves 2012 2012 2004 2004 During Financial Year 2016, the planned mined volumes were extracted and new data collected from Spotted Quoll and Flying Fox mines. The combination of planned depletion of the assets, as per budgeted targets, and the mineral resources models built from interpretation of new data resulted in the estimation for Financial Year 2017. Governance and Internal Controls Western Areas geology and mining departments have implemented a set of rules and working practices to control the mineral resource and ore reserves estimation and reconciliation process, as well as the quality of the data used. The Mineral Resources and Ore Reserves are reported in accordance with the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (the JORC Code) 2012 Edition. Mineral Resources are quoted inclusive of Ore Reserves. Competent Persons named are Members of the Australasian Institute of Mining and Metallurgy and qualify as Competent Persons as defined in the JORC Code. The Western Areas risk management program includes assessment of the risks associated with the estimations of mineral resources and ore reserves and the controls in place to ensure that robust resource and reserve calculations are reported. The risk management processes measures the likelihood of errors or misstatement and monitors the controls in place that mitigate this outcome. 27 27 Western Areas 2016 Annual ReportOre Reserve/Mineral ResourceOre Reserves 1. Flying Fox Area 2. Spotted Quoll Area 3. Diggers Area Digger South Digger Rocks Total Forrestania Ore Reserve Mineral Resources 1. Flying Fox Area T1 South T1 North OTZ Sth Massive Zone OTZ Sth Massive Zone T4 Massive Zone T5 Massive Zone + Pegs T6 Massive Zone T7 Massive Zone Total High Grade T5 Flying Fox Disseminated Zone T5 Lounge Lizard Disseminated Zone Total Disseminated Flying Fox/Lounge Lizard Total FF/LL New Morning / Daybreak Massive Zone Disseminated Zone Total New Morning / Daybreak 2. Spotted Quoll Area Spotted Quoll Total Spotted Quoll Beautiful Sunday Total Western Belt 3. Cosmic Boy Area Cosmic Boy Seagull Total Cosmic Boy Area 4. Diggers Area Diggers South - Core Diggers South - Halo Digger Rocks - Core Digger Rocks - Core Digger Rocks - Halo Purple Haze Total Diggers Area Total Forrestania Mineral Resource 5. Cosmos Area AM5 AM6 Odysseus Odysseus North - Disseminated Odysseus North - Massive Total Cosmos Area 6. Mt Goode Area Mt Goode Diggers South - Halo Digger Rocks - Core Total Mt Goode Area Total Cosmos Mineral Resource Tonnes Grade Ni% Ni Tonnes Classification JORC Code 1,200,080 236,950 2,179,880 2,016,000 93,000 5,725,910 64,550 35,200 55,779 20,560 162,338 154,748 1,226,930 47,840 256,977 2,024,922 197,200 357,800 4,428,000 4,983,000 7,007,922 321,800 93,100 1,069,800 659,200 2,143,900 616,537 1,440,082 212,089 2,268,708 480,000 11,900,530 180,900 195,000 375,900 3,000,000 4,800,000 54,900 172,300 1,441,000 560,000 10,028,200 22,304,630 479,914 26,922 1,704,548 329,443 3,884,857 169,165 1,631,495 1,586,175 48,043 9,860,562 13,563,000 27,363,000 12,009,000 52,935,000 62,795,562 4.0 4.2 4.0 1.4 2.0 3.2 4.0 4.9 5.9 4.1 4.0 5.8 5.7 5.3 2.1 5.0 0.8 1.0 0.8 0.8 2.9 3.7 3.5 0.9 0.9 1.4 5.7 5.1 5.4 5.3 1.4 2.5 2.8 2.0 2.4 1.5 0.7 3.7 1.1 0.7 0.9 1.0 1.8 2.6 1.9 2.7 2.5 2.2 2.1 2.8 2.2 11.6 2.4 0.8 0.6 0.5 0.6 0.9 48,280 Probable Ore Reserve Proved Ore Reserve Probable Ore Reserve Probable Ore Reserve Probable Ore Reserve Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Indicated Mineral Resource Indicated 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 Measured 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 Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Inferred Mineral Resource Indicated Mineral Resource Measured Mineral Resource Indicated Mineral Resource Inferred Mineral Resource 9,940 87,090 28,950 1,850 176,110 2,560 1,720 3,290 843 6,574 8,921 70,476 2,525 5,303 102,212 1,590 3,460 36,000 41,050 143,262 12,010 3,260 9,650 5,780 30,700 35,370 72,866 11,520 119,756 6,720 300,438 5,050 3,900 8,950 44,700 35,600 2,030 1,850 10,350 5,040 99,570 408,958 12,430 509 45,171 8,203 84,301 3,603 45,519 35,054 5,563 240,353 105,791 158,705 62,447 326,943 567,296 2012 2012 2012 2004 2004 2004 2004 2012 2012 2012 2012 2012 2012 2012 2004 2004 2004 2004 2004 2004 2004 2012 2012 2012 2004 2004 2004 2004 2004 2004 2004 2004 2004 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 2012 TOTAL WESTERN AREAS MINERAL RESOURCE 85,100,192 1.1 976,254 28 Western Areas 2016 Annual ReportOre Reserve/Mineral Resource Directors Report Directors Report The Directors of Western Areas Limited submit herewith the financial report of the Company for the financial year ended 30 June 2016. 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 The following persons were directors of Western Areas Ltd for the entire financial year and up to the date of this report unless otherwise stated. Ian Macliver Non-Executive Independent Chairman Mr Macliver is a Chartered Accountant with many years experience as a senior executive and Director of both resource and industrial companies, with particular responsibility for capital raising and other corporate development initiatives. Mr Macliver is Managing Director of Grange Consulting Group Pty Limited which provides specialist corporate advisory services to both listed and unlisted companies. Mr Macliver is a member of the Audit and Risk, Treasury, Remuneration and Nomination Committee. Daniel Lougher Managing Director & CEO Mr Lougher is a qualified Mining Engineer with over 30 years experience in all facets of mining project exploration, feasibility, development and operational activities in Australia and overseas. Mr Lougher is a member of the Australasian Institute of Mining & Metallurgy. Mr Lougher serves on the Nomination Committee. David Southam Executive Director Mr Southam is a Certified Practicing Accountant with over 20 years experience in accounting, banking and finance across the resources and industrial sectors. Mr Southam has been responsible for completing significant capital management initiatives and commodity offtake contracts with large domestic and international companies. Richard Yeates Non-Executive & Independent Director Mr Yeates is a Geologist with more than 30 years mining industry experience in various roles and has significant 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 financial institutions. Mr Yeates is Chairman of the Remuneration and Nomination Committee. Craig Readhead Non-Executive & Independent Director Tim Netscher Non-Executive & Independent Director Mr Readhead is a lawyer with over 30 years legal and corporate advisory experience with specialisation in the resources sector, including the implementation of large scale mining projects both in Australia and overseas. Mr Readhead is a former president of the Australian Mining and Petroleum Law Association and until recently was a partner of specialist mining and corporate law firm, Allion Legal. Mr Readhead is a member of the WA Council of the Australian Institute of Company Directors. Mr Readhead is Chairman of the Treasury and Audit & Risk Management Committees. Mr Netscher has significant broad-based international resources experience at senior levels, in roles spanning marketing, operations management, project management and business development in Australia and Internationally. Mr Netscher has considerable experience in the nickel industry with senior executive roles at Impala Platinum Ltd, PT Inco and QNI Pty Ltd. Mr Netscher is a Chartered Engineer and holds a BSc in Chemical Engineering, Bachelor of Commerce, a MBA, is a fellow of the Institution of Chemical Engineers and is a member of the Australian Institute of Company Directors. Mr Netscher is a member of the Treasury, Audit & Risk and Remuneration Committees. Julian Hanna Non-Executive Director Mr Hanna resigned as a Director of Western as at 15 June 2016. 29 Western Areas 2016 Annual ReportDirectors ReportDirectorships of Other Listed Companies Name Company I Macliver Otto Energy Ltd J Hanna D Lougher D Southam R Yeates C Readhead T Netscher Rent.com.au Ltd (Ceased) Range Resources Ltd (Ceased) JCurve Solutions Limited (Ceased) MOD Resources Ltd Mustang Minerals Corp (Ceased) FinnAust Mining Plc Mustang Minerals Corp (Ceased) Troy Resources Ltd Sundance Resources Ltd (Ceased) Middle Island Resources Ltd Atherton Resources Limited (Ceased) Beadell Resources Ltd Eastern Goldfields Ltd - (Formerly Swan Gold Mining Ltd) Redbank Copper Ltd General Mining Corporation Ltd (Ceased) Heron Resources Ltd (Ceased) Galaxy Resources Ltd (Ceased) St Barbara Ltd Gold Road Resources Ltd Toro Energy Ltd (Ceased) Deep Yellow Ltd (Ceased) Aquila Resources Ltd (Ceased) Gindalbie Metals Ltd (Ceased) (*) Date co-insides with de-listing from the Australian Stock Exchange. 30 Period of Directorship Since January 2004 September 2010 – June 2015 June 2014 – August 2014 July 2000 – October 2013 Since January 2013 December 2006 – February 2015 December 2013 – March 2016 January 2011 – October 2015 Since July 2016 September 2013 – January 2016 Since March 2010 October 2014 – November 2015 Since April 2010 Since March 2013 Since April 2013 August 2007 – October 2015 January 2000 – April 2015 June 2006 - November 2013 Since February 2014 Since September 2014 October 2015 – August 2016 January 2013 – December 2015 November 2013 – July 2014 (*) April 2011 – October 2013 Western Areas 2016 Annual ReportDirectors ReportInterests in Shares and Options of the Company Indemnification of Officers and Directors As at 30 June 2016, the interest of the Directors or associates of the Directors in the shares and options of the Company are: Name Ordinary Shares I Macliver D Lougher J Hanna (ii) D Southam R Yeates C Readhead 36,448 246,178 400,091 128,135 10,000 - T Netscher (i) None of the performance rights had vested at 30 June 2016. (ii) Shareholding of Mr Hanna as at 15 June 2016. 7,000 Performance Rights (i) 970,640 546,093 - - - - - All equity transactions with Directors and Executives, other than those arising from the employee share scheme, have been entered into under terms and conditions no more favourable than those the entity would have adopted if dealing at arm’s length. Share Options During the financial year, the parent entity paid a premium under a contract insuring all Directors and Officers of the Company against liability incurred in that capacity. Disclosure of the nature of liabilities insured and the premium is subject to a confidentiality clause under the contract of insurance. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company against a liability incurred as such an officer or auditor. Directors’ Benefits No Directors of the Consolidated Entity have, since the end of the previous financial year, received or become entitled to receive a benefit (other than a benefit included in the total amount of emoluments received or due and receivable by Directors shown on page 41 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 financial interest, with the exception of benefits that may be deemed to have arisen in relation to the transactions entered into in the ordinary course of business as disclosed in Note 29 to the accounts. No options were issued, cancelled or remained outstanding during the financial year. 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 2016 and the number of meetings attended by each Director. Company Secretary Mr J Belladonna is a Certified Practicing Accountant and has been employed at Western Areas Limited since 2005, originally as Financial Controller and then as the Company Secretary and Chief Financial Officer. In his time at the Company he has been intimately involved in the accounting, debt financing, corporate governance, capital raising and financial initiatives at the Company. Mr Belladonna has over 15 years experience in the resources industry including listed gold and base metal companies in a range of management positions. Directors Meetings Audit & Risk Mgmt Remuneration Nomination Treasury Meetings held : Meetings attended : I Macliver D Lougher D Southam J Hanna (i) R Yeates C Readhead 13 13 13 13 12 13 13 2 2 - - - - 2 T Netscher (i) Mr Hanna resigned from the Board on 15 June 2016, attending all Board meetings until that date. 13 2 2 2 - - - 2 - 2 1 1 1 - - 1 - - 1 1 - - - - 1 1 31 Western Areas 2016 Annual ReportDirectors Report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 The nickel concentrator processed a record 616,279 ore tonnes compared to the 609,727 ore tonnes for the previous financial year, with the variance attributed to improved mill throughput rates and increased plant availability. The Company continued its exceptional safety performance across the group maintaining a lost time injury frequency rate of zero for the financial year. In addition, the continued high level of environmental management has resulted in no significant environmental incidences occurring throughout the year. Performance Rights granted to directors and senior management during the financial year ended 30 June 2016 is set out in the Remuneration Report of this Directors’ Report on page 42. Financial Metrics Income Statement Proceedings on behalf of the Company Full Financial Year – Earnings Results Summary 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. Principal Activities The principal activities of the Consolidated Entity during the year consisted of mining, processing and sale of nickel sulphide concentrate, the continued assessment of development feasibility of the high grade nickel mines and the exploration for nickel sulphides, other base metals and platinum group metals. Review of Operations Operational metrics The Company provides detailed operating reports at the end of every quarter outlining quarterly and year to date production and sales statistics, some of which are shown below. Financial Year - Physical Summary 2015/16 2014/15 Tonnes Mined Tns 590,246 540,268 Nickel Grade (average) % 4.7% 4.9% Tonnes Milled Milled Grade (average) Recovery Tns 616,279 609,727 % % 4.5% 90% 4.7% 90% Revenue Gross (Loss)/Profit (LBIT)/EBIT (Loss)/Profit Before Tax Net (Loss)/Profit After Tax 2015/16 2014/15 Change $M $M $M 209.1 312.7 (103.6) (5.7) (36.0) (38.5) (29.8) 76.2 63.5 48.1 35.0 (81.9) (99.5) (86.6) (64.8) Consolidated net loss after tax (NLAT) for the group was $29.8 million, a decrease of $64.8 million from the results reported in the previous financial year. The overriding factor impacting the change in earnings was the substantial decline in the nickel price. Accordingly, consolidated revenue for the year was down $103.6 million with the main contributor being the 28% fall in the average realised nickel price compared to the prior year. The average realised nickel price for the year decreased from US$6.58/lb (A$7.87) in the prior financial year to US$4.14/ lb (A$5.69) for the year ended 30 June 2016. The Company continued to have an unrelenting focus on key controllable items, being cost management and productivity improvements. This focus resulted in cost of sales reducing by $21.7 million for the year, with the bulk of these savings embedded into future periods. Other pre-tax non-cash items which impacted NLAT of $29.8 million for the year included: • Depreciation charges of $17.0 million; • Amortisation charges of $45.2 million; • Write-off of non-current assets of $7.8 and • Impairment losses of $7.0 million. Nickel in Concentrate Tns 25,009 25,801 These non-cash items amounted to $77.0 million. Nickel Sales in Concentrate Tns 24,793 26,036 Total mine ore production increased year on year due to the Spotted Quoll mine reaching full production allowing mining rate optimisation for delivery of a consistent and reliable ore feed blend to the concentrator, while maintaining appropriate stockpile levels. 32 Western Areas 2016 Annual ReportDirectors ReportStatement of Financial Position Statement of Cash Flows Full Financial Year - Balance Sheet Summary Full Financial Year – Cashflow Summary 2015/16 2014/15 Change $M $M $M Cash at bank 75.7 195.4 (119.7) Net Operating Cashflow Current Assets Total Assets Current Liabilities Total Liabilities Net Equity 119.9 489.2 26.3 55.2 434.0 234.7 597.6 168.6 196.5 401.1 (114.8) (108.4) (142.3) (141.3) 32.9 Cash at bank decreased by $119.7 million to finish the year at $75.7 million. This was mainly due to the scheduled repayment of the $125.0 million of convertible bonds early in the financial year, the completion of the Cosmos acquisition payments of $24.2 million and lower receipts due to record low nickel prices. This was partially offset by a $75.0 million capital raising and share purchase plan completed in April 2016. Total assets at reporting date were $489.2 million, representing a decrease of $108.4 million from the prior year, primarily driven by the decrease in cash of $119.7 million. Mine development decreased by $16.9 million as a result of amortisation charges of $43.7 million being offset by new development of $27.8 million. Capitalised exploration and evaluation expenditure increased by $19.4 million, the increase due to recognition of the newly acquired Cosmos exploration assets valued at $27.1 million, offset by the deconsolidation of $11.5 million FinnAust exploration assets and $7.0 million impairment provision raised against the FinnAust exploration assets. Exploration expenditure for the year of $12.9 million related to the Company’s ongoing investment in exploration at Forrestania and the other regional projects. Inventories decreased by $8.6 million mainly as a result of a decrease in ore stockpiles. Total liabilities of $55.2 million represented a decrease of $141.3 million from the prior year, due to the repayment of the Company’s final convertible bonds and a decrease in income tax liabilities. Total equity attributable to the shareholders increased by $32.9 million to $434.0 million, primarily due to a capital raising of $75.0 million, offset by the NLAT of $29.8 million. 2015/16 2014/15 Change $M 15.6 (72.4) (62.8) $M $M 148.5 (132.9) (71.9) (111.8) (0.5) 49.0 Net Investing Cashflow Net Financing Cashflow Net Cashflow (119.6) (35.2) (84.4) As outlined earlier in the Directors Report, the 28% reduction in the nickel price for the year had a significant impact on the cash generation of the Company. Notwithstanding, decisive action was taken throughout the year which included a significant reduction in operating costs and the deferral of mine development, capital projects and exploration expenditure. In respect of capital and exploration expenditure, the Company reduced its spend by $22.0 million versus the prior financial year with a significant portion of this saving generated in the second half. Furthermore the Company became debt free for the first time in many years following the repayment of $125.0 million in convertible bonds in July. The flow on impact of this debt reduction was a significant fall in interest payments of $6.8 million. Working capital movements included a higher debtors balance at the end of financial year mainly reflected timing differences with June sales. 33 Western Areas 2016 Annual ReportDirectors ReportMaterial Business Risks Strategic Long Term Economic Risks • Exploration In order to maintain and enhance our economic base of mineral resources, the Company continues to invest in exploration. It must be recognised that investing in exploration does not guarantee that additional mineral resources will be discovered. However exploration is essential in order to sustain ore reserves at the Forrestania Nickel Operations and establish new profit generating projects. Strategically the Company continues to invest in the application of modern exploration techniques within proven nickel regions such as the Forrestania Nickel Operations (“FNO”), the Cosmos Nickel Complex (“Cosmos”) and the highly prospective green field West Gawler Project. • Inorganic Growth & Investment Western Areas’ strategy includes investment in business development activities (joint ventures, mergers, acquisitions and innovation) to enhance the current project portfolio. Western Areas is debt free and continues to generate positive cash flows from FNO. With any transaction there is a risk that through the lifecycle of the project, the investment does not deliver the forecast returns to the Company. Any material investment is subject to strict governance and due diligence processes to ensure the opportunities and risks are understood and managed in a way that provides the greatest level of return to shareholders. • Metal & Currency Markets As a mining company, Western Areas is exposed to currency and nickel price fluctuations. Over the past twelve months the Company has managed to maintain a financially robust business in the face of historically low nickel prices. Being debt free, and having high grade operations, provides a significant level of resilience against adverse market conditions. The Company has a number of strategies available to smooth out the effects of a low Australian dollar nickel price, including hedging when market conditions permit. Operating Risks • Business Interruption A significant disruption to FNO could have a significant adverse effect on Western Areas revenue from operating activities. FNO consists of the Spotted Quoll and Flying Fox underground mines, the Cosmic Boy concentrator and fully developed supporting infrastructure. These assets are all within the same geographic area, and are our only revenue generating assets at this time. Therefore, a significant failure event at one of these assets has the potential to substantially reduce nickel production and consequent revenue from nickel sales. Western Areas has well established risk and business continuity management practices that mitigate and respond to known business interruption risks. This resilience extends throughout our supply chain to the point of delivery to customers. • Offtake Parties Western Areas relies on nickel offtake customers to purchase and financially settle on nickel concentrate deliveries. The financial failure of one or more of our offtake customers could result in delayed payments receipts or new/revised offtake contract terms. Western Areas conducts due diligence prior to entering into nickel offtake contracts and maintains strong relationships with its customers. The Company stays abreast of the nickel concentrate market, while also monitoring alternative and emerging markets for nickel products. • Counter Parties Western Areas relies on a number of contractor entities to support exploration and production activities. The financial failure of a key contractor could result in interruptions to production plans, and affect the operating costs. Western Areas conducts due diligence prior to awarding contracts, and continues to actively manage and monitor the activities of our contractors and suppliers. In addition, through the Company’s Risk Management Framework there are contingency plans in place for such events. Sustainability Risks • Safety The safety and well-being of people undertaking activities on behalf of the Company is a key priority. There are a number of inherent hazards associated with exploration, mining, mineral processing and logistics that require ongoing management and assurance to ensure our safety performance is in line with the high standards expected. Western Areas continues to demonstrate excellence in safety performance and continues to work with our contractors and partners to ensure Western Areas is a safe and rewarding place to work. • License to Operate The Company has a number of statutory and regulatory obligations to fulfil including corporate, financial, heritage, health and safety, environmental, land management, tenure, and human resources. Western Areas readily accepts that fulfilling compliance obligations is a necessary and important part of maintaining its license to operate. Compliance management is built into planning processes and day to day activities, and is an accepted part of Western Areas culture. Subsequent Events Other than matters detailed above, there have been no subsequent events after 30 June 2016 which have a material effect on the financial statements for the year ended 30 June 2016. Dividends Paid or Recommended No dividends have been declared or paid in relation to the 30 June 2016 financial year. In respect of the financial year ended 30 June 2015, the Board declared and paid a final 4 cent, fully franked dividend. 34 Western Areas 2016 Annual ReportDirectors Report Remuneration Report (Audited) This report outlines the remuneration arrangements in place for Non-Executive Directors, Executives and other Key Management Personnel of Western Areas Ltd. There has been no material change to the remuneration structures or incentive programmes during the 2016 financial year (FY16). Other Key Management Personnel (‘KMP’) of the Company during the financial year were: Mr J Belladonna Chief Financial Officer & Company Secretary Mr W Jones General Manager Operations Key 2016 financial year changes • 10% reduction in all Director and Key Management Personnel base salaries effective 1 March 2016 in recognition of the low nickel price environment. This returns base salary levels to pre-financial year 2012 equivalents. • Base salaries have been frozen for the 2017 financial year (FY17). There has only been one base salary increase in the last 5 years. • Non-executive director remuneration frozen at the reduced levels. • Reduction in number of Non-Executive Directors resulting in a further director fee reduction. The report is comprised of the following key sections: • Section A: Who this report covers • Section B: Remuneration governance and philosophy • Section C: 2015 Annual General Meeting voting • 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 B: REMUNERATION GOVERNANCE AND PHILOSOPHY Remuneration Committee The Remuneration Committee is responsible for assisting the Board in fulfilling its responsibilities relating to the remuneration of Directors, the Managing Director and KMP, 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 performance against goals set each year, qualifications and experience, relevant market conditions and independent remuneration benchmarking reports. 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. 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 reflects the competitive global market in which we operate; SECTION A: WHO THIS REPORT COVERS The following persons acted as directors of the Company during the financial year: Mr I Macliver Independent Non-Executive Chairman • Individual reward is based on performance across a range of disciplines that apply to delivering results and executing strategies for the Company; • Executive remuneration is linked to the creation of shareholder value; and Mr D Lougher Managing Director Mr D Southam Executive Director • Remuneration arrangements are equitable, fair and facilitate the deployment of senior management across the Company. Mr R Yeates Independent Non-Executive Director Mr C Readhead Independent Non-Executive Director SECTION C: 2015 ANNUAL GENERAL MEETING VOTING Mr T Netscher Independent Non-Executive Director Mr J Hanna Non-Executive Director (Resigned - 15 June 2016) Western Areas received 97% “yes” votes for the Remuneration Report resolution at the 2015 Annual General Meeting and remuneration practices have remained consistent with the prior year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. However, various advisory groups and associations publish critiques and opinions on a subscription basis. 35 Western Areas 2016 Annual ReportRemuneration Report (Audited)In the event of serious misconduct or a material misstatement in the Company’s financial statements, the Remuneration Committee can cancel or defer performance based remuneration that has not yet been vested or paid. There is currently no formal claw back of performance based remuneration paid in prior financial years. The Company notes that the STI performance indicators are a blend of physical and financial targets which limits the target reward potentially payable based on financial targets or metrics. Fixed remuneration Fixed remuneration consists of base salary, superannuation, allowances, and any salary sacrifice components. The fixed 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 are set to meet the objectives of the Company while remaining competitive in the wider employment market. Effective 1 March 2016 a 10% reduction in KMP base salary was implemented during FY16 and no remuneration increases have been awarded for FY17. There is no guaranteed base pay increases included in any Executives’ contracts. Short term incentive (‘STI’) The objective of STI’s is to link Executives’ remuneration with the achievement of the Company’s key operational and financial targets. The STI plan provides Executives with an opportunity to earn a cash bonus on achievement of individual and group key performance indicators (‘KPIs’). Challenging KPIs are set to ensure payments are only made to high performing employees. It is the Company’s policy to cap STI payments at a targeted STI level. The percentage is applied against the relevant Executive’s base salary only and excludes all allowances and superannuation. The KPIs used span across key focus areas of the business (operations, corporate, resource replenishment and exploration), and the respective KPIs and their weightings will vary by role and are designed to align to those measures relevant to the individual’s area of influence. The full list of KPIs set for Executives in FY16 is opposite. For each Executive, KPIs relevant to their area of influence are selected from the list below and assigned each year. Rarely is 100% of target STI achieved, which the Company believes demonstrates the challenging nature of the KPI targets. SECTION D: USE OF REMUNERATION CONSULTANTS Western Areas engaged PwC as Remuneration Consultants during FY16 to provide assistance with documentation management and ongoing market trend monitoring and development in relation to the Long Term Incentive (“LTI”) plan, however no ‘remuneration recommendations’ as defined in the Corporation Act 2001 were made or supplied by PwC. SECTION E: EXECUTIVE REMUNERATION FRAMEWORK 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 fixed and variable pay, and is comprised of: • Fixed remuneration, inclusive of base pay, superannuation, allowances, and salary-sacrifice 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 significant portion of executives’ remuneration is placed “at risk”. The relative proportion of target FY16 total remuneration packages split between fixed 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 W Jones 39% 43% 43% 53% 22% 24% 24% 21% 39% 33% 33% 26% Calculation based on 1 July 2015 salary level prior to the 10% salary reduction The target remuneration mix of higher level KMP has been designed with emphasis on LTI exposure. This further aligns executives with shareholders and a focus on long term value generation. Refer to Section H: Link between performance and remuneration outcomes for details of Executives’ actual remuneration mix for FY16. 36 Western Areas 2016 Annual ReportRemuneration Report (Audited)Operations Forrestania safety performance Overview KPI Why KPI was set Based on Lost Time Injury performance in each quarter. Motivate and reward the continued focus on safety standards and procedures. Forrestania environmental incidents Based on a minimum reportable environmental incidents quarter. Forrestania unit cash cost Forrestania nickel in ore production Forrestania mill recoveries Focused on average unit cash costs for Flying Fox (FF) and Spotted Quoll (SQ) mines per pound of nickel produced. Performance better than budget is required. Must exceed the budgeted nickel metal in ore production target from FF and SQ mines. Achieve a set threshold recovery above budget levels for the combined ore feed from FF and SQ mines. Motivate and reward the continued focus on best practice environmental management. Motivate and reward the stringent management of production costs outcomes that exceed the Board set business plan. Motivate and reward nickel production outcomes that exceed Board set business plans. 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 tonnage target. Motivate and reward nickel sales outcomes that exceed Board set business plans. Corporate Earnings Cashflow Business development Mineral Resources and Exploration Nickel resource New nickel resources New nickel discovery Achieve EBIT target above budget. Motivate and reward financial outcomes that exceed Board set business plans. Achieve pre-funding cashflow target above budget. Motivate and reward financial outcomes that exceed Board set business plans. Based on business development activities and project pipeline development that provides opportunities to add value or protect value in the Company and for the shareholders. Motivate and reward business development initiatives that provide market intelligence and enhance corporate growth opportunity identification. Establishing replacement nickel reserves or mining inventory tonnages. Motivate and reward mine life extension outcomes at Board set levels. Establishing new published nickel resources exceeding a targeted nickel tonnage levels. Discovery of a new Nickel deposit. Motivate and reward economic nickel discovery. 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 verified against outcomes. Based on the achievements of the Company in FY16, the Remuneration Committee determined that Executives achieved between 50% to 65% of their target STI opportunity. It is noted that no employee achieved 100% of their target STI award and no financial based STI payments were triggered or awarded in FY16 due to the lower than budgeted nickel price and its impact on earnings. In making this assessment, the Remuneration Committee considered the following factors: • An exceptional safety performance across the group and a continued lost time injury frequency rate of zero; • The high level of environmental management and no significant environmental incidences; • Mine and concentrator nickel production and sales volume were above the Board set budgeted expectation due to productivity and efficiency gains; • Achievement of specific corporate objectives, recommendations and outcomes related to business development activities; and • Achievement of challenging operating cost parameters. 37 Western Areas 2016 Annual ReportRemuneration Report (Audited)Performance achieved during the year against the above KPIs has resulted in Executives earning the following STI payments: Name Target STI quantum (% of base salary) Target FY16 STI quan- tum ($) STI quantum earned ($) STI quantum Forfeited ($) Executive Directors Mr D Lougher Mr D Southam Executives Mr J Belladonna 55% 55% 55% Mr W Jones Target STI was calculated based on 1 July 2015 base salary prior to the 10% salary reduction 40% $404,000 $303,000 $204,000 $160,000 $204,000 $175,000 $122,000 $100,000 $200,000 $128,000 $82,000 $60,000 Long Term Incentive (‘LTI’) The LTI plan was reapproved by shareholders at the 2014 Annual General Meeting and has been in operation since FY12. All grants are measured against a 3 year TSR period such that no vesting occurs until the end of the third year. This ensures executives are focused on long-term shareholder value generation. Grant frequency and quantum Under the remuneration structure, Executives will receive a grant of Performance Rights each year, such that the LTI now forms a key component of Executives’ Total Annual Remuneration. The LTI dollar value that Executives will be entitled to receive is set at a fixed percentage of their base salary, ranging from 50% to 100%, depending on the participant’s position within the Company. This level of LTI remains in line with current market practice. The number of Performance Rights to be granted is determined by dividing the LTI dollar value of the award by the fair value of a Performance Right as calculated by an independent valuation expert. The quantum of LTI grants made during FY16 was as follows: Name Executive Directors Mr D Lougher Mr D Southam Executives Mr J Belladonna LTI quantum (% of base salary) (i) LTI quantum ($) Number of Performance Rights issued (ii) Fair value per Performance Right at grant date (iii) Exercise date Expiry date 100% $734,400 299,750 $2.45 Upon receipt of a vesting notice issued in FY19 30/6/19 75% $413,185 168,640 $2.45 As above 30/6/19 75% $278,400 113,630 $2.45 As above 30/6/19 Mr W Jones (i) of base salary was calculated on salary applicable 1 July 2015. (ii) 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 ratification purposes rounded to zero. The FY16 valuation at 1 July 2015 was $2.45/right. (iii) Fair value as required under AASB 2. Valuation is determined at the date of the Annual General Meeting held in each respective year. $200,200 As above 81,710 $2.45 50% 30/6/19 38 Western Areas 2016 Annual ReportRemuneration Report (Audited) Performance conditions Careful consideration was given to the selection of the performance conditions attached to Performance Rights. Based on market practice and the factors controllable by executives, the Board decided that the most appropriate performance measure to track shareholder outcomes 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 change in a company share price over the period as well as the dividends received during that period. Western Areas TSR performance for the FY16 grant will be assessed against a customised peer group comprising the following 24 companies: Aditya Birla Minerals Ltd Mt Gibson Iron Aquarius Platinum Ltd Northern Star Resources Ltd Altona Mining Ltd Alumina Ltd OM Holdings Ltd Oz Minerals Ltd Beadell Resources Ltd Paladin Energy Ltd Bouganville Copper Ltd Panoramic Resources Ltd Cudeco Ltd Poseidon Nickel Ltd Gindalbie Metals Ltd Rex Minerals Ltd Hillgrove Resources Ltd Sandfire Resources Ltd Independence Group NL Syrah Resources Ltd Medusa Mining Ltd Talisman Resources Ltd Mincor Resources NL 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 Less than 50th percentile Performance Vesting Outcomes 0% vesting At the 50th percentile 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 FY16 grants made under the LTI plan will only vest subject to meeting the minimum service period and the relative TSR performance condition tested against the peer group over a 3 year period (1 July 2015 to 30 June 2018). The FY16 grants service based vesting condition provides 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 2018. 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 Director 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. 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 offered to NEDs as encouraged by Corporate Governance guidelines. There is no scheme to provide retirement benefits to NEDs, other than statutory superannuation. Non-Executive Director 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 Actual Fin. Year Board Chair Board Member 2016 $186,855 $161,570 NED’s agreed to a 10% reduction in Directors fees, effective from 1 March 2016. 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. 39 Western Areas 2016 Annual ReportRemuneration Report (Audited)SECTION G: SERVICE CONTRACTS Executives A summary of the key contractual provisions for each of the current executives as at 30 June 2016 is set out below, noting a 10% base salary reduction was implemented as at 1 March 2016: Name & job title Base salary Notice period Termination provision $660,960 3 months Super- annuation 11% Contract duration No fixed term $495,823 11% No fixed term 3 months $334,080 11% No fixed term 3 months 12 months termination payment and accrued leave entitlements 12 months termination payment and accrued leave entitlements 6 months termination payment and accrued leave entitlements D Lougher, Managing Director* D Southam, Executive Director* J Belladonna, Chief Financial Officer / Company Secretary* 11% $360,360 W Jones, General Manager Operations *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 difference (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. (This contractual position is a legacy item that has not been applicable to any new executive appointment in over 5 years.) 6 months termination payment and accrued leave entitlements No fixed term 1 month 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 Director. Non-Executive appointments have no end date, retirement, redundancy or minimum notice periods included in their contracts. 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 FY16 has been a challenging year with regard to nickel price, seeing the lowest nickel price environment for more than 10 years. Controllable metrics have been consistent or improved year on year on year despite the commodity price challenges. Year Ended 30 June Lost time injury frequency rate Nickel tonnes Sold (tns) Nickel Price – US$ Reported Cash Cost US$/lb (*) Net Profit / (Loss) after Tax (‘000) EPS Dividend Cents/share Market capitalisation ($) Closing share price ($) 2016 0 24,793 $4.14/lb $1.64/lb (29,783) (12.3) - 582M 2.15 TSR – 3 year peer ranking (%’ile) (*) Cash cost of production before smelting & refining, concentrate haulage and royalties. 74th 2015 0 26,036 $6.58/lb $1.94/lb 35,013 15.1 7.0 753M 3.23 84th 2014 1.9 25,756 $7.46/lb $2.28/lb 25,460 12.2 5.0 1,073M 4.62 93rd 2013 0.83 27,819 $7.30/lb $2.75/lb (94,105) (49.8) 2.0 457M 2.32 75th 2012 1.5 26,637 $8.06/lb $2.50/lb 40,181 22.4 11.0 730M 4.06 39th 40 Western Areas 2016 Annual ReportRemuneration Report (Audited)The table below represents the Executives’ actual remuneration mix of fixed remuneration, short-term incentives and long-term incentives based upon remuneration paid or expensed during FY16. 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 W Jones 1 LTI refers to the value of Performance Rights that were expensed during FY16. SECTION I: DETAILS OF REMUNERATION Fixed Remuneration 48% 51% 54% 60% STI 12% 13% 14% 13% Short Term Employee Benefits Post Employ- ment Long Term Employee Benefits (accounting valuation) Base Salary STI Payments / Bonuses (ii) Allowances Non Monetary Super- annuation Long Service Leave Share Based Payments LTI (i) LTI1 40% 36% 32% 27% Total Non-executive Directors I Macliver FY2015 167,952 173,743 C Readhead 145,559 FY2015 T Netscher FY2015 R Yeates FY2015 J Hanna (iv) FY2015 R Dunbar FY2015 167,142 161,570 153,213 145,559 150,578 139,912 150,578 - 83,570 - - - - - - - - - - - - - - - - - - - - - Executive Directors D Lougher (iii) 753,009 204,000 FY2015 780,180 341,000 D Southam 561,130 175,000 FY2015 581,514 275,000 Executive Officers J Belladonna 368,298 122,000 FY2015 W Jones FY2015 382,032 187,000 394,630 100,000 409,444 157,000 4,000 4,000 4,000 4,000 4,000 4,000 1,900 1,900 51,785 48,262 51,013 51,032 42,107 50,595 35,302 38,408 18,475 19,112 16,011 - - - 16,011 16,564 15,390 16,564 - - 35,000 35,000 27,500 30,000 30,000 30,000 35,000 35,000 - - - - - - - 186,427 192,855 161,570 167,142 161,570 153,213 161,570 167,142 155,302 167,142 - 83,570 - - - - - - - 16,512 705,741 1,770,047 12,203 562,311 1,782,956 12,386 459,291 1,290,320 9,154 292,709 1,243,409 8,346 6,168 9,002 6,653 274,613 849,364 202,406 862,201 218,392 794,226 145,948 794,353 Total FY2016 5,530,396 Total FY2015 5,613,983 (i) (ii) (iii) LTI refers to the value of Performance Rights that were expensed during the FY16. No Options were granted or remain outstanding at the end of the financial year. Includes all paid and/or accrued bonuses for the applicable year. Mr Lougher received a payment in lieu of annual leave in October 2015 to the value of $67,932, this was for the purpose of reducing the balance sheet liability for accrued leave and did not affect the Income Statement. (iv) Mr Hanna resigned from the Board on 15 June 2016. 41 Western Areas 2016 Annual ReportRemuneration Report (Audited)Related Party Transactions There were no related party transactions with KMP during FY16. However, Mr Craig Readhead was a partner of Allion Legal until 30 June 2015. Allion is a law firm that the Company engages from time to time for the provision of legal services and advice in relation to operational matters. Fees paid to Allion during FY16 totalled $47,124 (FY15 - $121,080). Mr Readhead provided some services as a consultant to Allion during the financial year, none of which involved any matters related to Western Areas. Mr Readhead ceased consulting to Allion by the end of FY16 and has no ongoing relationship with Allion. Western Areas uses global law firm Ashurst for all corporate, capital raising or substantial legal matters. Ashurst is by far the dominant supplier of legal services to the Company. Shareholding by Key Management Personnel The number of shares held by KMP (and their related parties) in the Group during the financial year is as follows: Balance at 1 July 2015 Granted as Remuneration On Vesting of Performance Rights Other Changes During the Year Balance at 30 June 2016 I Macliver D Lougher D Southam J Hanna (i) R Yeates T Netscher J Belladonna W Jones Total 28,948 126,378 36,735 600,091 10,000 - 70,000 - 872,152 - - - - - - - - - - 294,800 165,900 - - 104,074 83,476 648,250 7,500 (175,000) (74,500) (200,000) 7,000 7,500 - - 36,448 246,178 128,135 400,091 10,000 7,000 181,574 83,476 (427,500) 1,092,902 (i) Shareholding of Mr Hanna as at 15 June 2016. Options held by Key Management Personnel There were no options held by key management at any time during FY16. Performance Rights held by Key Management Personnel Details of Performance Rights held by KMP and granted but not yet vested under the LTI plan at 30 June 2016 are outlined below: Balance at 1 July 2015 965,690 448,990 346,223 271,247 Number granted as Remuneration 299,750 168,640 113,630 81,710 Number vested (294,800) (165,900) (104,074) (83,476) Number expired / Other(*) - 94,363 - - 970,640 546,093 355,779 269,481 2,032,150 663,730 (648,250) 94,363 2,141,993 D Lougher D Southam J Belladonna W Jones Total - - - - - 100% 100% 100% 100% 100% Balance at 30 June 2016 Portion vested (%) Portion unvested (%) (*) Rights granted related to prior financial years that were approved at the 2015 Annual General Meeting. All Performance Rights issued during FY16 were allotted in accordance with the shareholder approved Western Areas LTI plan. The rights were granted on 27 November 2015 and have a zero exercise price. No Performance Rights will vest unless they meet a relative TSR measure for the period 1 July 2015 to 30 June 2018 as measured against the peer group and satisfaction of the service based vesting condition which requires the participant remains employed as at 30 June 2018. Upon satisfaction of the performance and service condition, the Performance Rights will vest upon receipt of a vesting notice during the 2019 financial year. End of audited Remuneration Report. 42 Western Areas 2016 Annual ReportRemuneration Report (Audited)Significant Changes in the State of Affairs No significant changes in the consolidated group’s state of affairs occurred during the financial year. Future Developments Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial 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. The Company has achieved a high level of compliance with all environmental conditions set for its projects and actively strives for continual improvement. Auditor’s Independence Declaration The Auditor’s Independence Declaration to the Directors of Western Areas Ltd on page 44 forms part of the Directors’ Report for the year ended 30 June 2016. Non – Audit Services The entity’s auditor, Crowe Horwath, provided non-audit services, related to renewable energy lodgements, amounting to $4,500 during FY16 (FY15: $13,750). 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 affect 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. 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 financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated. Signed in accordance with a resolution of the Board of Directors. D Lougher Managing Director Perth, 25 August 2016 43 Western Areas 2016 Annual ReportRemuneration Report (Audited)Auditor’s independence declaration 44 Western Areas 2016 Annual ReportAuditor’s Independence Declaration AUDITOR’S INDEPENDENCE DECLARATIONIn 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 2016, 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 CYRUS PATELL Partner Signed at Perth, 25 August 2016 Crowe Horwath Perthis a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. AUDITOR’S INDEPENDENCE DECLARATIONIn 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 2016, 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 CYRUS PATELL Partner Signed at Perth, 25 August 2016 Crowe Horwath Perthis a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees.Consolidated income statement Year Ended 30 June 2016 Sales Cost of sales Other income Profit on deconsolidation Finance costs Employee benefit expense Foreign exchange gain/(loss) Write off of non-current assets Share based payments Impairment losses Realised derivative gain Changes in fair value of derivatives Administration expenses Care and maintenance expense Share of loss of associates accounted for using the equity method Expense related to deconsolidated entity (Loss)/profit before income tax Income tax benefit/(expense) (Loss)/profit for the year (Loss)/profit attributable to: Members of the parent entity Non controlling interest Basic (loss)/earnings per share (cents per share) Diluted (loss)/earnings per share (cents per share) The accompanying notes form part of these financial statements. Notes 2 4 6,11,12 30 11 4 4 8 7 19 19 Consolidated Entity 2016 $’000 209,117 2015 $’000 312,680 (214,762) (236,474) 2,670 875 (2,546) (9,569) 670 (7,820) (2,507) (6,963) - - (6,231) (592) (140) (747) (38,545) 8,762 (29,783) (26,700) (3,083) (29,783) (12.3) (12.3) 5,517 - (15,472) (9,967) (1,468) - (1,569) (247) 2,181 231 (6,642) - - (704) 48,066 (13,053) 35,013 35,761 (748) 35,013 15.1 14.9 45 Western Areas 2016 Annual ReportConsolidated StatementsConsolidated statement of comprehensive income Year Ended 30 June 2016 (Loss)/profit for the year Other comprehensive (loss)/income, net of tax Items that may be reclassified to profit or loss Changes in fair value of hedging instruments Changes in financial assets at fair value through other comprehensive income Exchange differences on translation of foreign controlled entities Notes Consolidated Entity 2016 $’000 (29,783) 394 327 (1,191) 2015 $’000 35,013 281 (426) 1,114 Total comprehensive (loss)/income for the year (30,253) 35,982 Total Comprehensive (loss)/income attributable to: Members of the parent entity Non controlling interest The accompany notes form part of these financial statements. (27,170) (3,083) (30,253) 36,730 (748) 35,982 46 Western Areas 2016 Annual ReportConsolidated StatementsConsolidated statement of financial position As At 30 June 2016 Current Assets Cash and cash equivalents Trade and other receivables Inventories Derivative financial instruments Total Current Assets Non Current Assets Property, plant and equipment Intangible assets Exploration & evaluation expenditure Mine properties Financial assets at fair value through other comprehensive income Investments accounted for using the equity method Total Non Current Assets Total Assets Current Liabilities Trade and other payables Borrowings Provisions Current tax liabilities Derivative financial 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 financial statements. Notes 20 (b) 5 6 17 9,10 10,11 12 8 14 15 16 17 15 10,16 13 18 31 Consolidated Entity 2016 $’000 75,706 29,275 14,761 171 2015 $’000 195,355 15,974 23,407 - 119,913 234,736 96,365 506 80,360 183,579 1,281 7,164 369,255 489,168 22,723 196 3,363 - - 99,981 506 60,979 200,453 954 - 362,873 597,609 29,364 126,786 2,457 9,795 224 26,282 168,626 123 22,649 6,113 28,885 55,167 210 13,523 14,135 27,868 196,494 434,001 401,115 442,963 15,403 (24,365) 434,001 - 434,001 369,936 32,757 (7,473) 395,220 5,895 401,115 47 Western Areas 2016 Annual ReportConsolidated StatementsConsolidated statement of changes in equity Year Ended 30 June 2016 9 6 9 3 1 0 5 3 , ) 8 4 7 ( 1 6 7 5 3 , 2 8 9 5 3 , ) 8 4 7 ( 1 6 7 5 3 , 4 1 1 1 , 4 1 1 1 , - - ) 6 2 4 ( ) 6 2 4 ( 1 8 2 1 8 2 ) 1 9 1 ( 3 3 7 9 6 5 1 , ) 1 8 2 6 1 ( , - - 7 4 5 1 , 7 4 5 1 , 3 1 8 3 1 , ) 1 8 2 6 1 ( , ) 3 1 8 3 1 ( , ) 1 9 1 ( 3 3 7 9 6 5 1 , l a t o T y t i u q E 0 0 0 $ ’ - n o N - n o C g n i l l o r t t s e r e t n I 0 0 0 $ ’ d e n i a t e R i s g n n r a E i n g e r o F e v r e s e R e g n a h c x E l e b i e t o N e v r e s e R - t r e v n o C t n e m - t s e v n I e v r e s e R 0 0 0 $ ’ 0 0 0 $ ’ 0 0 0 $ ’ 0 0 0 $ ’ 6 5 7 7 7 3 , 6 9 0 5 , ) 6 6 7 0 4 ( , 7 7 8 5 9 2 3 , ) 7 9 1 9 ( , e g d e H e v r e s e R 0 0 0 $ ’ ) 4 0 5 ( e r a h S d e s a B e v r e s e R t n e m y a P 0 0 0 $ ’ l a t i p a C g n i s i a R s t s o C 0 0 0 $ ’ d e u s s I l a t i p a C 0 0 0 $ ’ 6 5 1 0 2 , ) 8 4 2 4 1 ( , 4 8 1 4 8 3 , r a e y e h t r o f t fi o r p e v i s n e h e r p m o c r e h t O r a e y e h t r o f t fi o r p e v i s n e h e r p m o c l a t o T y t i c a p a c r i e h t n i r e n w o h t i w s n o i t c a s n a r T s r e f s n a r t r e h t o d n a , r e n w o s a s t n e m y a p d e s a b e r a h s d e l t t e s h s a C e s n e p x e s t n e m y a p d e s a b e r a h S s t h g i r e c n a m r o f r e p n o t e s s a x a t d e r r e f e D t s e r e t n i g n i l l o r t n o c - n o n n i s e g n a h C e v r e s e r e t o n e b i t r e v n o c l f o r e f s n a r T d i a p s d n e d i v i D 4 1 0 2 y u l j 1 t a y t i u q e l a t o T e m o c n i e v i s n e h e r p m o C r a e y e h t r o f t fi o r P 48 5 1 1 1 0 4 , 5 9 8 5 , ) 3 7 4 7 ( , 1 9 1 1 , 5 4 1 9 1 , ) 3 2 6 9 ( , ) 3 2 2 ( 7 6 2 2 2 , ) 8 4 2 4 1 ( , 4 8 1 4 8 3 , 5 1 0 2 e n u j 0 3 t a y t i u q e l a t o T ) 3 8 7 9 2 ( , ) 3 8 0 3 ( , ) 0 0 7 6 2 ( , ) 0 7 4 ( ) 1 9 1 1 ( , ) 3 5 2 0 3 ( , ) 3 8 0 3 ( , ) 0 0 7 6 2 ( , ) 1 9 1 1 ( , 7 2 3 7 2 3 4 9 3 4 9 3 ) 3 7 9 1 ( , 0 0 0 5 7 , ) 6 4 2 ( 7 0 5 2 , - ) 7 3 3 9 ( , ) 2 1 8 2 ( , ) 2 1 8 2 ( , ) 7 3 3 9 ( , 5 4 1 9 1 , ) 5 4 1 9 1 ( , ) 6 4 2 ( 7 0 5 2 , ) 3 7 9 1 ( , 0 0 0 5 7 , e h t r o f t fi o r p / ) s s o l ( e v i s n e h e r p m o c r e h t O r a e y y t i c a p a c r i e h t n i r e n w o h t i w s n o i t c a s n a r T s r e f s n a r t r e h t o d n a , r e n w o s a t fi o r p / ) s s o l ( e v i s n e h e r p m o c l a t o T r a e y e h t r o f s t h g i r e c n a m r o f r e p n o t e s s a x a t d e r r e f e D t s e r e t n i g n i l l o r t n o c - n o n n i s e g n a h C e v r e s e r e t o n e b i t r e v n o c l f o r e f s n a r T d i a p s d n e d i v i D e s n e p x e s t n e m y a p d e s a b e r a h S y t i u q e n o s t s o c n o i t c a s n a r T y t i u q e f o s n o i t u b i r t n o C e m o c n i e v i s n e h e r p m o C r a e y e h t r o f t fi o r p ) s s o L ( 1 0 0 4 3 4 , - ) 5 6 3 4 2 ( , - - ) 6 9 2 9 ( , 1 7 1 8 2 5 4 2 , ) 1 2 2 6 1 ( , 4 8 1 9 5 4 , 6 1 0 2 e n u j 0 3 t a y t i u q e l a t o T . s t n e m e t a t s l a i c n a n fi e s e h t f o t r a p m r o f i s e t o n g n y n a p m o c c a e h T Western Areas 2016 Annual ReportConsolidated Statements Consolidated statement of cash flows Year Ended 30 June 2016 Cash flows 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 inflow from operating activities 20(a) Cash flows from investing activities Payments for property, plant and equipment Proceeds from insurance refund of property, plant & equipment Mine development expenditure Exploration & evaluation expenditure Purchase of Cosmos Nickel Complex Purchase of financial assets at fair value through other comprehensive income Net cash outflow from investing activities Cash flows from financing activities 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 outflow from financing activities Net decrease in cash and cash equivalents held Cash and cash equivalents as at the beginning of the financial year Cash and cash equivalents at end of financial year The accompanying notes form part of these financial statements. Notes Consolidated Entity 2016 $’000 2015 $’000 198,117 (154,482) 778 (12,938) 396 (4,289) 728 (12,747) 15,563 (8,603) 1,584 (27,615) (13,592) (24,158) - (72,384) 331,073 (154,039) 5,109 (15,951) 768 (11,113) 1,828 (9,206) 148,469 (13,610) (40) (42,403) (15,723) - (117) (71,893) (125,000) (95,198) 75,000 (1,973) (262) (1,256) (9,337) (62,828) (119,649) 195,355 75,706 - - (268) (11) (16,281) (111,758) (35,182) 230,537 195,355 49 Western Areas 2016 Annual ReportConsolidated StatementsNotes to the financial statements For The Year Ended 30 June 2016 Note 1: Statement of Significant Accounting Policies These consolidated financial statements and notes represent those of Western Areas Ltd and Controlled Entities (the “consolidated group” or “group”). The separate financial statements of the parent entity, Western Areas Ltd, have not been presented within this financial report as permitted by amendments made to Corporation Act 2001 effective as at 28 June 2010. The group is a for profit entity for financial reporting purposes under Australian Accounting Standards. The Financial Report was approved by the Board of Directors on 25 August 2016. Basis of Preparation These general purpose financial 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 financial report containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Adoption of new and revised Accounting Standards The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. (a) Principles of Consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Western Areas Limited (‘company’ or ‘parent entity’) as at 30 June 2016 and the results of all subsidiaries for the year then ended. Western Areas Limited and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the income statement and statement of comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non- controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non- controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. (b) 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 identified as the board of directors. (c) Foreign Currency Transactions and Balances The financial statements are presented in Australian dollars, which is Western Areas Limited’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the 50 Western Areas 2016 Annual ReportNotes To The Financial Statementstransactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. (d) Revenue recognition Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Sale of Goods 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 reflect the final sales value when the actual metal content and metal recovery has been determined. The final metal content and metal recovery is generally known between 30 and 90 days after delivery to the customer. Interest Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. All revenue is stated net of the amount of goods and services tax (GST). Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. (e) Finance Costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. (f) Inventories Inventories are measured at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed 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 fixed overhead costs relating to mining activities. The cost of consumables and spare parts includes cost of materials and transportation costs. (g) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost as indicated less, where applicable, any accumulated depreciation and impairment losses. Property Land and buildings are carried at cost, less accumulated depreciation for buildings. 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 profit 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(o) 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 flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed 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 benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred. Depreciation The depreciable amount of all property, plant and equipment is depreciated on a straight line basis over their useful lives or t he 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 Property Plant and equipment Depreciation Rate 2-20% 2-33% or unit of production basis over the life of mine Motor vehicles Furniture and fittings 20% 6-27% 51 Western Areas 2016 Annual ReportNotes To The Financial Statements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 profit or loss in the period in which they arise. (h) Exploration and Evaluation Expenditure Exploration and evaluation expenditures incurred are capitalised in respect of each identifiable area of interest. These costs are only capitalised for areas of interest where rights of tenure are current, 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 and active and significant operation in relation to the area of interest are continuing. Accumulated costs in relation to an abandoned area are written off in full against profit 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 profit in the year that determination is made. (i) Mine Properties 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 identified. Such expenditure comprises costs directly attributable to the construction of a mine, the related infrastructure and expenditure transferred from the capitalised exploration and evaluation expenditure phase. 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 a 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 (o). 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, 52 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. (j) Income Tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entity’s which intend to settle simultaneously. Western Areas Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable Western Areas 2016 Annual ReportNotes To The Financial Statementsfrom or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. (k) 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 Office. 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 flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (l) Employee Benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits obligations The liabilities for long service leave and annual leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised as non-current liabilities and are therefore measured at the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of government bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments The consolidated entity has provided benefits to its Key Management Personnel in the form of share-based payments, whereby services were rendered partly or wholly in exchange for shares or rights over shares. The Remuneration Committee approved the grant of performance rights as incentives to attract Executives and to maintain their long term commitment to the Company. These benefits are awarded at the discretion of the Board, or following approval by shareholders (equity-settled transactions). The costs of these equity-settled transactions are measured by reference to the fair value of the equity instruments at the date on which they are granted. The fair value of performance rights granted is determined using the Black Scholes Option Pricing Model (“BSM”) that includes a Monte Carlo Simulation Model to value the Rights, further details of which are disclosed in Note 30. The costs of these equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and / or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the equity instrument (vesting date). At each subsequent reporting date until vesting, the cumulative charge to the income statement is the product of (i) the fair value at grant date of the award; (ii) the current best estimate of the number of equity instruments that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met and (iii) the expired portion of the vesting period. The charge to the income statement for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding credit to equity. Until an equity instrument has vested, any amounts recorded will be adjusted if more or fewer equity instruments vest than were originally anticipated to do so. Any equity instrument subject to a market condition is considered to vest irrespective of whether or not that market condition is fulfilled, provided that all other conditions are satisfied. If the terms of an equity-settled award are modified, as a minimum, an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share based payment arrangement, or is otherwise beneficial to the recipient of the award, as measured at the date of modification. If an equity-settled transaction is cancelled (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied), it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new equity instrument is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new equity instrument are treated as if they were a modification of the original award, as described in the preceding paragraph. (m) Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits. Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability. 53 Western Areas 2016 Annual ReportNotes To The Financial StatementsLeased assets acquired under a finance lease are depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership at the end of the lease term. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. The group is required to reclassify all affected debt investments when and only when its business model for managing those assets changes. Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over the term of the lease. (n) Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial 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 classified ‘at fair value through profit or loss’, in which case transaction costs are expensed to the income statement immediately. Classification and Subsequent Measurement Financial instruments are subsequently measured at either of fair value, amortised cost using the effective 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 financial asset or financial liability is measured at initial recognition; b). less principal repayments; c). plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and d). less any reduction for impairment. The effective 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 financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss. Financial assets at fair value through profit and loss As from 1 July 2013 the group classifies its financial assets in the following measurement categories: those to be measured subsequently at fair value, and those to be measured at amortised cost. • • 54 At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value and is not part of a hedging relationship is recognised in profit or loss and presented net in the income statement within other income or other expenses in the period in which it arises. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the financial asset is derecognised or impaired and through the amortisation process using the effective interest rate method. The group subsequently measures all equity investments at fair value. Where the group’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments continue to be recognised in profit or loss as other revenue when the group’s right to receive payments is established and as long as they represent a return on investment. This treatment has been selected as the equity investments in Mustang Minerals Inc, and St George Mining Limited, as these are deemed to be strategic equity investments. Loans and receivables Loans and receivables are non-derivative financial assets with fixed 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 classified as non-current assets). Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. De-recognition Financial assets are de-recognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are de-recognised where the related obligations are discharged, cancelled or expired. The difference between the carrying value of the financial 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 profit or loss. Derivative financial instruments Derivative financial instruments are used by the consolidated entity to hedge exposures to commodity prices and foreign currency exchange rates. Western Areas 2016 Annual ReportNotes To The Financial Statements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 effective in offsetting changes in fair values or cash flows 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 Cashflow Hedges. Fair Value Hedges Changes in the fair value of derivatives classified 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 Cash flow hedges are used to cover the consolidated entity’s exposure to variability in cash flows that is attributable to particular risk associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised directly in equity, whilst the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the measurement of the hedged transaction when the forecast transaction occurs. Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to ensure that each hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no longer expected to occur, amounts recognised in equity are transferred to profit or loss. If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes ineffective and is no longer a designated hedge, amounts previously recognised in equity remain in equity until the forecast transaction occurs. All Other Derivatives Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised in the Income Statement. (o) 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 profits. 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 since the last impairment loss was recognised. 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 indefinite lives. (p) Rounding Amounts The parent entity has applied the relief available to it under the ASIC Class Order 98/100 and accordingly, amounts in the financial report have been rounded to the nearest $1,000. (q) 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. (r) 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 outflow of economic benefits will result and that outflow is able to be reliably measured. (s) Convertible Bonds The component of the convertible bonds 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 finance cost. The remainder of the proceeds are allocated and included in shareholder equity, net of transaction costs. The carrying amount of the convertible bonds is not remeasured in subsequent years. (t) Critical Accounting Estimates and Balances The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. 55 Western Areas 2016 Annual ReportNotes To The Financial StatementsShare-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Provision for impairment of inventories The provision for impairment of inventories assessment requires a degree of estimation and judgement. Costs incurred in or benefits of the productive process are accumulated as stockpiles, nickel and other metals in process, ore on run of mine ore pads and product inventory. Net realisable value tests are performed at least annually and represent the estimated future sales price of the product based on prevailing metal prices, less estimated costs to complete production and bring the product to sale. Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number contained metal tonnes based on assay data, and the estimated recovery percentage based on the expected processing method. Although the quantity of recoverable metal is reconciled by comparing the grades of the ore to the quantities of metals actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor recoverability levels. As a result the metallurgical balancing process is constantly monitored and the engineering estimates are refined based on actual results over time. Fair value measurement hierarchy The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. It is reasonably possible that the underlying metal price assumption may change which may then impact the estimated life of mine determinant and may then require a material adjustment to the carrying value of mining plant and equipment, mining infrastructure and mining development assets. Furthermore, the expected future cash flows used to determine the value-in-use of these assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including reserves and production estimates, together with economic factors such as metal spot prices, discount rates, estimates of costs to produce reserves and future capital expenditure. At 30 June 2016, there was $7.0M impairment charge made to Exploration, Evaluation and Development. Income tax The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. 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 significant 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 life of the mine. Engineering and feasibility studies are undertaken periodically, however significant changes in the estimates of contamination, restoration standards and techniques will result in changes to provisions from period to period. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Employee benefits provision As discussed in note (l), the liability for employee benefits expected to be settled more than 12 months from the reporting date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases through promotion and inflation have been taken into account. 56 Western Areas 2016 Annual ReportNotes To The Financial Statements(u) Contributed equity Ordinary shares are classified 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 profit and loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity. (v) Comparative figures Where necessary, comparative figures have been restated to conform with changes in presentation for the current year. (w) 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 benefits and these benefits can be measured reliably. Patents and trademarks have a finite life and are amortised on a systematic basis matched to the future economic benefits over the useful life of the project. (x) 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. (y) Business Combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquire is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. (z) Trade and other receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date. The amount of the impairment loss is recognised in profit 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 profit or loss. (aa) Earnings per share Basic earnings per share Basic earnings per share are calculated by dividing: • The profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares. • By the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year (note 19). Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: • The after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and • The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. 57 Western Areas 2016 Annual ReportNotes To The Financial StatementsIn the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. The consolidated entity will adopt this standard from 1 July 2019 but the impact of its adoption is yet to be assessed by the consolidated entity. (bb) New Accounting Standards and Interpretations not yet mandatory or early adopted AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2017. The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate performance obligations within the contract; determine the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity’s statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity’s performance and the customer’s payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will adopt this standard from 1 July 2017 but the impact of its adoption is yet to be assessed by the consolidated entity. AASB 16 Leases This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 ‘Leases’ and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a ‘right-of-use’ asset will be capitalised in the statement of financial position, measured as the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a ‘right-of-use’ asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). 58 Western Areas 2016 Annual ReportNotes To The Financial StatementsNotes Note 2: Other income - Interest income - Other income - Insurance proceeds - Income on sale of carbon credits Total other income Note 3: Dividends Dividends proposed No final dividend is proposed for the year ended 30 June 2016 (2015: 4 cents fully franked). . Dividends paid A fully franked final dividend of 4 cents per share was paid for the year ended 30 June 2015 (2014: 4 cents). No interim dividend for 2016 (2015: 3 cent fully franked) per share Note 4: Profit before income tax Profit before income tax includes the following specific expenses: - Depreciation of property, plant and equipment - Depreciation of disposed property, plant and equipment - Amortisation of mine development asset - Rental expenditure relating to operating leases 9 9 12 - Realised derivative (gains) / losses - Changes in fair value of derivatives - Employee benefits expense Defined contribution superannuation expense - Finance costs: Interest expense – borrowings Provisions: unwinding of discount Bond accretion expense Interest expense – finance leases Borrowing costs amortised Total borrowing costs Note 5: Trade and Other Receivables Trade debtors Other debtors Income tax prepaid GST refund due Prepayments Consolidated Entity 2016 $’000 780 702 1,188 - 2,670 2015 $’000 4,749 - - 768 5,517 - 9,337 9,337 - 9,337 16,474 515 43,682 1,345 - - 2,221 267 767 - 21 1,491 2,546 21,300 718 3,448 551 3,258 29,275 9,292 6,989 16,281 15,077 - 50,737 1,403 (2,181) (231) 2,288 8,046 725 5,429 33 1,239 15,472 11,278 830 - 629 3,237 15,974 There are no balances within trade and other receivables that contain amounts that are past due. It is expected the balances will be received when due. 59 Western Areas 2016 Annual ReportNotes To The Financial Statements Note 6: Inventories Ore stockpiles – at cost Nickel concentrate stockpiles – at cost Consumables and spare parts – at cost Notes Consolidated Entity 2016 $’000 9,911 958 3,892 14,761 2015 $’000 18,357 1,143 3,907 23,407 Inventory write-off Due to the continuing low nickel price an inventory stockpile of Flying Fox low grade ore was written off that carried an historic cost of $4.6 million. This is in accordance with “AASB 102 Inventory” where inventory must be carried at the lower of cost or net realisable value. Note 7: Income Tax The components of the tax expense comprise: - Current tax - Deferred tax - R&D Tax offset - Adjustment of current tax for prior periods - Income tax benefit on share based payments Income tax (benefit)/expense 13 - (8,022) (1,656) 1,154 (238) (8,762) 12,585 2,893 (1,688) 371 (1,108) 13,053 The prima facie tax on the profit from ordinary activities before income tax at the statutory income tax rate compared to the income tax expense at the groups’ effective income tax rate is reconciled as follows: Prima facie tax on (loss)/profit before income tax at 30% (2015: 30%) (11,564) 14,420 Adjusted for the tax effect of: - Changes in fair value of derivatives - Exploration write-off - Share based payment expense - Other non allowable items - Foreign branch losses (FinnAust mining Plc) - Share issue costs deductible - Other temporary differences - Income tax benefit on share based payments - Convertible bond accretion expense Tax (Benefit)/Expense - 686 752 - 2,313 (242) (469) (238) - (8,762) (69) - 471 71 - (242) (2,119) (1,108) 1,629 13,053 60 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 8: Investments Accounted for Using the Equity Method Non-current assets Associates: Consolidated Entity 2016 $’000 7,164 2015 $’000 - Interests in associates are accounted for using the equity method of accounting. Information relating to associates that are material to the consolidated entity is set out below: Name FinnAust Mining Plc Country of Incorporation United Kingdom Percentage of equity held 2016 37% 2015 60% On 8 March 2016, FinnAust Mining Plc completed a placement of 124M shares to Bluejay Mining Limited. Western Areas Ltd did not participate in the placement. As a result, Western Areas’ shareholding in FinnAust Mining Plc decreased to 37%. In line with AASB 10 “Consolidated Financial Statements”, Western Areas is deemed to have lost control of FinnAust Mining Plc due to: - Western Areas Ltd owning less than half of the voting power of FinnAust Mining Plc; and - Not having control of the Board of FinnAust Mining as the majority of board members have no association with Western Areas. As a result, FinnAust Mining Plc has been deconsolidated as at 8 March 2016, now being accounted for using the equity method of accounting. Summarised financial information Summarised financial information of the subsidiary with non-controlling interests that are material to the consolidated entity is set out below FinnAust Mining Pc Summarised Statement of Financial Position Current Assets Non Current Assets Total Assets Current Liabilities Non Current Liabilities Total Liabilities Net Assets Summarised statement of profit or loss and other comprehensive income for the period 9 March 2016 to 30 June 2016 Revenue Expenses Loss before income tax Income tax Loss after income tax Other comprehensive expenses Total Comprehensive loss Interest in associate (37%) 2016 $’000 1,083 22,709 23,792 708 673 1,381 22,411 - (380) (380) - (380) - (380) (140) 2015 $’000 1,734 17,286 19,020 479 128 607 18,413 - (1,870) (1,870) - (1,870) - (1,870) - 61 Western Areas 2016 Annual ReportNotes 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 FinnAust Mining Pc 2016 $’000 47,177 (24,042) 23,135 150,806 (78,123) 72,683 1,594 (1,047) 547 199,577 (103,212) 96,365 2015 $’000 44,264 (19,530) 24,734 141,000 (66,334) 74,666 1,455 (874) 581 186,719 (86,738) 99,981 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: Consolidated Entity Property Written down value at the beginning of the year - Additions - Disposals - Depreciation on disposals - Depreciation expense Written down value at the end of the year Plant & Equipment Written down value at the beginning of the year - Additions - Deconsolidated assets - Depreciation expense on deconsolidated assets - 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 2016 $’000 24,734 3,805 (892) 497 (5,009) 23,135 74,666 9,850 (44) 18 (11,807) 72,683 581 139 (173) 547 2015 $’000 25,721 3,203 - - (4,190) 24,734 76,003 9,411 - - (10,748) 74,666 566 154 (139) 581 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 10: Asset Acquisition The Cosmos Nickel Complex (“Cosmos”) is located approximately 370 kilometres northwest of Kalgoorlie in Western Australia and prior to its acquisition by WSA, the project was owned by Xstrata Nickel Australasia Operations Pty Ltd. On 19 June 2015, the Company announced that it had reached an agreement with Xstrata Nickel Australasia Operations Pty Ltd, a subsidiary of Glencore International plc to purchase Cosmos subject to certain conditions precedent. On 1 October 2015, these conditions were satisfied and the transaction was completed. Under the Sale and Purchase Agreement (“SPA”), the total consideration paid by WSA amounted to $24.5 million, comprising a cash payment of $11.5 million on completion of the SPA and deferred payments of $7.0 million and $6.0 million to be settled in nine months and 18 months after completion respectively. The company settled the deferred amount in full on 27 April 2016. The accounting treatment of the acquisition has been considered not to be a business combination under AASB 3, but the acquisition of a group of assets that do not constitute a business. The fair values of the acquired assets and liabilities have been independently assessed as at the acquisition date as per the table below: Property, plant & equipment Exploration assets Rehabilitation liability Net Assets acquired and liabilities assumed These have been included on the balance sheet under their respective categories Note 11: Exploration & Evaluation Expenditure Exploration & Evaluation Expenditure consists of: - At cost - Cosmos exploration at fair value Total Exploration and Evaluation Expenditure Consolidated Entity 2016 $’000 53,255 27,105 80,360 Movement in carrying amount: Movement in the carrying amounts for exploration and evaluation expenditure between the beginning and the end of the current period: Written down value at the beginning of the year - Expenditure incurred during the year - Cosmos exploration assets valuation - Deconsolidated exploration assets - Impairment on deconsolidated exploration assets - Write-off Written down value at the end of the year 60,979 12,912 27,105 (11,454) (6,963) (2,219) 80,360 $’00 $’000 4,100 27,100 (7,400) 23,800 2015 $’000 60,979 - 60,979 47,008 14,199 - - - (228) 60,979 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 subsequent development and exploitation or alternatively their sale. Impairment and write-off 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. 63 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 11: Exploration & Evaluation Expenditure (continued...) As reported in the Interim Financial Statements at 31 December 2015 the following write off and impairment adjustments were accounted for: (i) Exploration and evaluation In accordance with “AASB 6 Exploration and Evaluation Assets” are regularly assessed for impairment where circumstances suggest that the carrying amount of an asset may exceed its recoverable amount. • Regional exploration expenditure in relation to specific areas of interest that have not lead to the discovery of economic mineral resources, or are currently not scheduled for continued activities, resulted in a $2.2 million write off. • The company had a 60% interest in FinnAust Mining Plc (FinnAust), an exploration company listed on AIM in the UK and was consolidated into the group result. FinnAust had announced a new strategic direction and as such the exploration projects were assessed and historic amounts of exploration and evaluation expenditure that were unlikely to be recovered through successful development or sale have been impaired by $7.0 million. The company’s interest has subsequently decreased to 37% and as a result FinnAust has been deconsolidated on 8 March 2016 (note 8). 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 amortisation Total Mine Development Consolidated Entity 2016 $’000 146,203 59,796 76,000 338,210 11,645 11,175 (459,450) 183,579 2015 $’000 144,544 59,796 76,000 313,061 11,645 11,175 (415,768) 200,453 Movement in carrying amount: 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 - Evaluation and Feasibility write-off for the year - Amortisation charge for the year Written down value at the end of the year 200,453 27,772 (964) (43,682) 183,579 206,434 44,756 - (50,737) 200,453 Write-off of mine property expenditure Management has reviewed the recoverable amount of each asset or group of assets within the Group’s Cash Generating Unit and has written off $1.0 million feasibility expenditure relating to early stage evaluation projects. 64 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 13: Deferred Tax Liabilities The balance comprises temporary differences attributable to: (a) Liabilities - Exploration & evaluation expenditure - Property, plant and equipment - Other (b) Assets - Provisions - Mine development - Tax losses - Employee share trust - Other Net deferred tax liabilities (c) Reconciliation i) Gross movement The overall movement in the deferred tax account is as follows: Opening balance Debit to income statement Closing balance ii) Deferred tax liability The movement in the deferred tax liabilities for each temporary difference during the year is as follows: Exploration & development expenditure Opening balance Debit to income statement Closing balance Property, plant and equipment Opening balance Credit to income statement Closing balance Other Opening balance (Debit)/credit to income statement Closing balance Consolidated Entity 2016 $’000 (50,782) (1,938) (286) (53,006) 5,583 27,673 11,378 965 1,294 46,893 (6,113) (14,135) 8,022 (6,113) (46,858) (3,924) (50,782) (3,106) 1,168 (1,938) (40) (246) (286) 2015 $’000 (46,858) (3,106) (40) (50,004) 4,794 29,742 - 1,222 111 35,869 (14,135) (11,242) (2,893) (14,135) (27,929) (18,929) (46,858) (4,106) 1,000 (3,106) (376) 336 (40) 65 Western Areas 2016 Annual ReportNotes To The Financial Statements 2015 $’000 4,532 262 4,794 16,571 13,171 29,742 - - - - - 1,222 1,222 66 45 111 2,421 22,943 4,000 29,364 Note 13: Deferred Tax Liabilities (continued...) (c) Reconciliation (continued...) Consolidated Entity 2016 $’000 4,532 1,051 5,583 29,742 (2,069) 27,673 - 11,378 11,378 1,222 (257) 965 111 1,183 1,294 8,555 14,168 - 22,723 iii) Deferred Tax Assets The movement in the deferred tax assets for each temporary difference during the year is as follows: Provisions Opening balance Credit to income statement Closing balance Mine development Opening balance (Debit)/credit to income statement Closing balance Tax losses Opening balance Credit to income statement Closing balance Employee share trust Opening balance (Debit)/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 on convertible bonds (note 15b) 66 Western Areas 2016 Annual ReportNotes To The Financial Statements Note 15: Borrowings Current Corporate loan facility Convertible bonds Insurance funding Lease liabilities Non Current Lease liabilities (a) Corporate loan facility Notes 15 (a) 15 (b) 15 (c) & 21 (b) 15 (c) & 21(b) Consolidated Entity 2016 $’000 - - - 196 196 123 123 2015 $’000 - 125,000 1,568 218 126,786 210 210 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 December 2015, at the Company’s request, a variation to the loan facility was executed reducing the existing loan facility maximum facility limit to $50M. The amortising available limit as at 30 June 2016 was $30M, the facility remains undrawn with an expiry date in March 2017. The carrying value of assets secured under the corporate loan facility is as follows: Mine properties Property, plant & equipment (b) Convertible bonds Current 183,579 95,818 279,397 200,453 99,400 299,853 Convertible bonds (Issued April 2010) - 125,000 The convertible bonds issued in April 2010 were repaid on 2 July 2015. (c) Lease liabilities The lease liabilities are secured over the assets under the lease. The finance leases have an average term of 3 years and an average implicit discount rate of 4.07%. Refer to note 9 for the carrying value of the assets under lease. 67 Western Areas 2016 Annual ReportNotes To The Financial Statements Note 16: Provisions Current Employee Entitlements Non Current Rehabilitation and restoration cost Opening balance Additional provision raised Cosmos rehabilitation provision Unwinding of discount Rehabilitation expenditure incurred during the period Closing balance Notes 16 (a) 16 (b) 16 (b) 16 (c) Consolidated Entity 2016 $’000 3,363 13,523 959 7,400 767 - 22,649 2015 $’000 2,457 12,798 - - 725 - 13,523 (a) Employee entitlements relate to the 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 costs relate to an estimate of restoration costs that will result from the development of the Forrestania Nickel Project. Based on the current known mine life restoration activities are not expected to commence within the next 10 years, following full exhaustion of mine life rehabilitation activities will be undertaken. (c) Rehabilitation costs associated with the Cosmos Nickel Complex (note 10) was valued at $7.4M. Note 17: Derivative financial instruments Current Assets Nickel collar options Foreign exchange options Total Current Liabilities Nickel collar options Foreign exchange options Total 28 (c) 28 (c) - 171 171 - - - - - - - 224 224 Collar options are used to hedge cash flow 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 settlement, amounts included in the hedge reserve are transferred from equity and included in the income statement. 68 Western Areas 2016 Annual ReportNotes To The Financial Statements Note 18: Issued Capital 270,924,958 fully paid ordinary shares (2015: 233,149,778) Movements in issued capital 2016 Balance at beginning of the financial year - Issued via share placement - Issued via share purchase plan - Share issue expense - Performance rights vested issued as shares Balance at end of the financial year 2015 Balance at beginning of the financial year - Performance rights vested issued as shares Balance at end of the financial year Consolidated Entity 2016 $’000 2015 $’000 442,963 369,936 Number of shares $’000 233,149,778 30,000,000 7,500,053 - 275,127 270,924,958 232,310,014 839,764 233,149,778 369,936 60,000 15,000 (1,973) - 442,963 369,936 - 369,936 Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor, and market confidence 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 effectively manages the Group’s capital by assessing the Group’s financial 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. Performance rights Information relating to performance rights issued, exercised, lapsed during the year and the performance rights outstanding at the end of the year are detailed in Note 30 Share Based Payments. 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 upon shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. 69 Western Areas 2016 Annual ReportNotes To The Financial StatementsConsolidated Entity 2016 $’000 (29,783) 2016 Number 2015 $’000 35,013 2015 Number 241,940,446 232,559,757 245,133,933 234,847,060 (29,783) 16,989 45,173 (1,188) - 14,783 875 (458) 2,507 767 906 (1,191) (2,049) 4,076 (10,335) (4,000) (21,509) - 15,563 35,013 15,077 51,976 - 5,429 247 - 659 1,569 725 304 1,114 (319) 15,914 18,401 (3,034) 3,847 1,547 148,469 75,706 195,355 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 earnings per share Weighted average number of ordinary shares outstanding during the year used in calculating dilutive earnings per share Note 20: Cash Flow Information (a) Reconciliation of the net profit after tax to net cash provided by operating activities (Loss)/profit after income tax Depreciation expense Amortisation expense Profit on insured assets written off Convertible bonds accretion expense Impairment / write-off expenses Profit on deconsolidation Other Share based payment expense Rehabilitation provision interest unwound Provision for employee entitlements Derecognising foreign currency translation reserve Change in Assets and Liabilities Decrease in trade and other payables Decrease / (increase) in inventories Decrease / (increase) in trade and other receivables Decrease in interest payable (Decrease) / Increase in tax liabilities Movement in non-controlling interest Net cash provided by operating activities (b) Reconciliation of Cash and Cash Equivalents Cash and cash equivalents comprises : Cash on hand and at bank 70 Western Areas 2016 Annual ReportNotes 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 financing facilities in place: Banking Facilities:- ANZ Banking Group - Cash advance facility* Performance Guarantees:- ANZ Banking Group - Security bond facility Total Facility Utilised at Balance Date Available Facilities (*) $’000 $’000 $’000 30,000 - 30,000 5,000 35,000 636 636 4,364 34,364 * 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 December 2015, at the Company’s request, a variation to the loan facility was executed reducing the existing loan facility maximum facility limit to $50M. The amortising available limit as at 30 June 2016 was $30M, the facility remains undrawn with an expiry date in March 2017. (d) Non Cash Financing Activities During the year, the consolidated entity acquired plant & equipment by means of a finance lease to the value of $139k (2015: $154k). Note 21: Commitments The Directors are not aware of any commitments as at the date of these financial 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 2016 $’000 685 2,602 3,287 2015 $’000 968 2,956 3,924 The operating leases are for miscellaneous office equipment and office premises in West Perth. The West Perth office lease expires August 2021. (b) Finance Lease Commitments - no later than 1 year - later than 1 year and not later than 5 years Total Minimum Lease Payments - future finance charges Total Lease Liability - current - non current 196 123 319 13 332 205 127 332 218 210 428 22 450 227 223 450 The finance lease commitments relate primarily to motor vehicles, but also include some office equipment. Motor vehicles are finance leased under 3 year contracts at normal commercial rates, balloon payments are generally required at the expiry of the finance lease, at which point the Company takes ownership of the vehicle. (c) Capital Expenditure Commitments - no later than 1 year - later than 1 year and not later than 5 years Total minimum commitments - 15,706 15,706 34,500 11,377 45,877 71 Western Areas 2016 Annual ReportNotes To The Financial Statements Note 21: Commitments (continued...) (c) Capital Expenditure Commitments (continued...) Consolidated Entity 2016 $’000 2015 $’000 On 21 July 2015, the Company announced the commencement of the mill enhancement project with GR Engineering. A total of $6.5m has been spent on long lead items this financial year. This project has been delayed and is expected commence in the financial year beginning 1 July 2018. (d) Exploration Expenditure Commitments - no later than 1 year - later than 1 year and not later than 5 years Total Minimum Payments 6,255 25,020 31,275 4,170 16,678 20,848 Under the terms and conditions of the Company’s title to its various tenements, it has an obligation to meet tenement rents 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 financial statements - Audit of Jobs and Competitiveness Program Assistance Application Note 23: Material Contracts 105 5 110 125 14 139 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 28. In May 2009 the Company entered a Concentrate Purchase Agreement (“CPA”) with BHP Billiton Ltd (BHP). Under the terms of this agreement BHP 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 a second contract was entered into with BHP for the supply of a further 2,000 tonnes of nickel in concentrate. The second agreement was for a term of 7 years. In November 2014, 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. This equates to approximately 2 years of nickel shipments. Note 24: Contingent Liabilities The Directors are not aware of any contingent liabilities as at the date of these financial statements. Note 25: Subsequent Events There have been no subsequent events after 30 June 2016 which had a material effect on the financial statements for the year ended 30 June 2016. Note 26: Statement of Operations by Segments Identification of reportable segment The group identifies 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. 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 financial statements of the Group. 72 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 27: Key Management Personnel Key Management Personnel Key management personnel of the Consolidated Entity (as defined by AASB 124: Related Party transactions) include the following: I Macliver R Yeates C Readhead T Netscher J Hanna D Lougher D Southam J Belladonna W Jones Chairman (Non-Executive) Director (Non-Executive) Director (Non-Executive) Director (Non-Executive) Director (Non-Executive) (Resigned 15 June 2016) Managing Director Executive Director Chief Financial Officer / Company Secretary General Manager Operations 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 2016. The total of remuneration paid to key management personnel of the Consolidated Entity during the year is detailed below: Short term employee benefits Share based payments Post-employment benefits Consolidated Entity 2016 $’000 3,631 1,658 241 5,530 2015 $’000 4,194 1,203 217 5,614 Note 28: 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 financial risk exposures of the consolidated entity. The Treasury Committee monitors the consolidated entity financial risk management policies and exposures and approves financial transactions within the scope of its authority. It also reviews the effectiveness of internal controls relating to commodity price risk, counter party credit risk, currency risk, financing risk and interest rate risk. The Treasury Committee’s overall risk management strategy seeks to assist the consolidated entity in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of the use of hedging derivative instruments, credit risk policies and future cash flow requirements. Specific Financial Risk Exposures and Management The main risks the Group is exposed to through its financial 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 financial 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 financial loss from defaults. 73 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 28: Financial Risk Management (continued...) (a) Credit Risk (continued...) The carrying amount of financial assets exposed to credit risk is detailed below: Cash and cash equivalents Trade and other receivables Financial assets at fair value through other comprehensive income Derivative financial instruments Consolidated Entity 2016 $’000 75,706 29,275 1,281 171 2015 $’000 195,355 15,974 954 - Cash and cash equivalents and derivative financial instruments The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings. Trade and other receivables The consolidated entity does not have significant 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. Export sales are conducted under an irrevocable letter of credit. Financial assets at fair value through other comprehensive income Credit risk on financial assets at fair value through other comprehensive income is minimised by undertaking transactions with recognised counterparties on recognised exchanges. (b) Liquidity Risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms which include: • preparing forward looking cash flow analysis in relation to its operational, investing and financing 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 profile • managing credit risk related to financial assets • investing surplus cash only with major financial institutions • comparing the maturity profile of financial liabilities with the realisation profile of financial assets The tables below reflect an undiscounted contractual maturity analysis for financial assets and liabilities. Cash flows realised from financial assets reflect management’s expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates and does not reflect management’s expectations that banking facilities will be rolled forward. 74 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 28: Financial Risk Management (continued...) (b) Liquidity Risk (continued...) Financial liability and financial asset maturity analysis The Consolidated Entity’s contractual maturity analysis of financial assets and financial liabilities is shown below: 2016 Consolidated Entry 1 year or less $’000 Over 1 to 5 years $’000 More than 5 Years $’000 75,706 29,275 - 171 105,152 22,723 196 22,919 82,233 - - - - - - 123 123 (123) - - 1,281 - 1,281 - - 1,281 1 year or less $’000 Over 1 to 5 years $’000 More than 5 Years $’000 195,355 15,974 - 211,329 29,364 125,000 1,568 218 224 156,374 54,955 - - - - - - - 210 - 210 (210) - - 954 954 - - - - - 954 Total contractual cash flows $’000 75,706 29,275 1,281 171 106,433 22,723 319 23,042 83,391 Total contractual cash flows $’000 195,355 15,974 954 212,283 29,364 125,000 1,568 428 224 156,584 55,699 Financial Assets – Non Derivative Cash and Cash Equivalents Trade and Other Receivables Financial assets at fair value through other comprehensive income Financial Assets –Derivative Derivative Collar Options (net settled) Financial Liabilities – Non Derivative Trade and Other Payables Lease Liabilities Net Financial Assets/(Liabilities) 2015 Consolidated Entity Financial Assets – Non Derivative Cash and Cash Equivalents Trade and Other Receivables Financial assets at fair value through other comprehensive income Financial Liabilities – Non Derivative Trade and Other Payables Convertible Bonds Insurance funding Lease Liabilities Financial Liabilities –Derivative Derivative Collar Options (net settled) Net Financial Assets/(Liabilities) (c) Market Risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, price risk and currency risk. i) Interest Rate Risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. Interest rate risk is managed using a mix of fixed and floating rate debt. 75 Western Areas 2016 Annual ReportNotes To The Financial Statements 76 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 28: Financial Risk Management (continued...)(c) Market Risk (continued...)i) Interest Rate Risk (continued...)At the reporting date, the interest rate risk profile of the consolidated entity’s interest bearing financial instruments was as follows:2016 Consolidated EntryFloatingInterest Rate$’000Fixed Interest maturing in:Non-InterestBearing$’000Total$’000Weighted Average Interest Rate1 year or less$’000Over 1 to 5 years$’000More than 5 Years$’000Financial AssetsCash and Cash Equivalents75,706----75,7062.9%Trade and Other Receivables----29,27529,275Financial assets at fair value through other comprehensive income----1,2811,28175,706---30,556106,262Financial LiabilitiesTrade and Other Payables---(22,723)(22,723)Lease liability-(196)(123)--(319)5.1%-(196)(123)-(22,723)(23,042)Net Financial Assets / (Liabilities)75,706(196)(123)-7,83383,2202015 Consolidated EntityFloatingInterest Rate$’000Fixed Interest maturing in:Non-InterestBearing$’000Total$’000Weighted Average Interest Rate1 year or less$’000Over 1 to 5 years$’000More than 5 Years$’000Financial AssetsCash and Cash Equivalents195,355195,3552.0%Trade and Other Receiva-bles15,97415,974Financial assets at fair value through other comprehensive income954954195,355---16,928212,283Financial LiabilitiesTrade and Other Payables----(29,786)(29,786)Convertible bonds-(125,000)---(125,000)6.4%Insurance funding-(1,568)---(1,568)2.5%Lease liability-(218)(210)--(428)5.1%-(126,786)(210)-(29,786)(156,782)Net Financial Assets/ (Liabilities)195,355(126,786)(210)-(12,858)55,501Interest rate sensitivities have not been included in the financial report as the changes in profit before tax due to changes in interest rate is not material to the results of the Consolidated Entity.Note 28: Financial Risk Management (continued...) (c) Market Risk (continued...) 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 classified on the statement of financial position as financial assets at fair value through other comprehensive income. 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% (2015 – increased by 10% / decreased by 10%) and foreign exchange rate increased by 5% / decrease by 5% (2015 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. Financial assets at fair value through other comprehensive income Index ASX TSX Consolidated Entity 30 Jun 2016 $’000 30 Jun 2015 $’000 25 127 7 182 Comprehensive income would increase/decrease as a result of gains/losses on equity securities classified as financial assets at fair value through other comprehensive income. A decrease in the share price and exchange rate would result in a further decrease in fair value compared to cost. 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 flow management and forecasting and where appropriate utilise derivative financial instruments to reduce price risk. The following table details the Consolidated Entity’s sensitivity to a USD 500 / tonne 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 2016 +- $500 / tonne nickel Year Ended 30 June 2015 +- $500 / tonne nickel Profit $’000 +/-996 +/-499 Equity $’000 +/-996 +/-499 Nickel Collar Options The consolidated entity enters into financial transactions in the normal course of business and in line with Board guidelines for the purpose of hedging and managing its expected exposure to nickel prices. The hedges are treated as cashflow hedges in accordance with AASB 9 “Financial Instruments: Recognition and Measurement”. There were no nickel collar options and swaps open at 30 June 2016. iii) Currency Risk Currency risk arises when future commercial transactions and recognised financial assets and liabilities are denominated in a currency that is not the entity’s functional currency. The Consolidated Entity manages its foreign currency risk exposure through sensitivity analysis, cash flow management, forecasting and where appropriate, utilises derivative financial instruments. The carrying amount of the Consolidated Entity’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows: 77 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 28: Financial Risk Management (continued...) (c) Market Risk (continued...) iii) Currency Risk (continued...) US$ ‘000 UK Stirling ‘000 30 June 2016 30 June 2015 Financial liabilities - - Financial assets Financial liabilities - - 6,960 - Financial assets 24,224 795 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. Sensitivity analysis Year Ended 30 June 2016 + 5% in $A/$US - 5% in $A/$US Year Ended 30 June 2015 + 5% in $A/$US - 5% in $A/$US Profit $’000 1,082 (979) 612 (554) Equity $’000 1,082 (979) 612 (554) Foreign exchange collar options The consolidated entity had open foreign exchange collar options at 30 June 2016 relating to highly probable forecast transactions and recognised financial assets and financial liabilities. These contracts commit the Group to buy and sell specified amounts of foreign currencies in the future at specified exchange rates. The hedges are treated as cash flow hedges in accordance with AASB 9 “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 2016 $000 2015 $000 2016 $ 2015 $ Put Call Put Call 15,000 - 40,000 15,000 0.70-0.75 - 0.83-0.72 0.78-0.70 The fair values of financial assets and financial 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 judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgment 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 flow analysis and other valuation techniques commonly used by market participants. Differences between fair values and carrying values of financial instruments with fixed 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 figures calculated bear little relevance to the Group. 78 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 28: Financial Risk Management (continued...) (d) Net Fair Values (continued...) Financial Assets Cash and cash equivalents Financial assets at fair value through other comprehensive income Derivative financial assets Loans and receivables Financial Liabilities Trade and other payables Convertible bonds Derivative financial liabilities Insurance premium facility Other liabilities i) ii) iii) i) i) iii) i) 2016 Carrying Amount $’000 Net Fair Value $’000 2015 Carrying Amount $’000 Net Fair Value $’000 75,706 75,706 195,355 195,355 1,281 171 29,275 106,433 22,723 - - - 319 23,042 1,281 171 29,275 106,433 22,723 - - - 319 23,042 954 - 15,974 212,283 29,364 125,000 224 1,568 428 156,584 954 - 15,974 212,283 29,364 125,000 224 1,568 428 156,584 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 financial instrument. ii) Quoted closing bid prices at reporting date. iii) Fair valuation performed by financial risk management firm which include valuation techniques incorporating observable market data relevant to the hedged position. Financial Instruments Measured at Fair Value The financial instruments recognised at fair value in the statement of financial position have been analysed and classified using a fair value hierarchy reflecting the significance 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). Level 1 $000 Level 2 $000 Level 3 $000 Level 4 $000 2016 Financial assets: Financial assets at fair value through other comprehensive income Derivative financial instruments 2015 Financial assets: Financial assets at fair value through other comprehensive income Financial liabilities Derivative financial instruments 1,281 1,281 - 171 171 954 - - 224 - - - - 1,281 171 1,452 954 224 79 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 29: Related Party Transactions There were no other related party transactions during the financial year other than those included in the key management compensation as disclosed in the Remuneration Report contained in the Directors’ Report. Note 30: Share Based Payments (a) Expenses arising from share based transactions Equity settled share options and performance rights granted during: Year ended 30 June 2016 Year ended 30 June 2015 Year ended 30 June 2014 Year ended 30 June 2013 Total expense recognised as employee costs (b) Performance Rights Consolidated Entity 30 Jun 2016 $’000 30 Jun 2015 $’000 655 898 954 - 2,507 - 551 761 257 1,569 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 LTI plan during FY14, vesting will occur subject to the meeting of a 3 year service condition to 30 June 2016 and the performance condition tested against the relative TSR measure for the period 1 July 2013 to 30 June 2016. For grants made under the LTI plan during FY15, vesting will occur subject to the meeting of a 3 year service condition to 30 June 2017 and the performance condition tested against the relative TSR measure for the period 1 July 2014 to 30 June 2017. For grants made under the LTI plan during FY16, vesting will occur subject to the meeting of a 3 year service condition to 30 June 2018 and the performance condition tested against the relative TSR measure for the period 1 July 2015 to 30 June 2018. 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 Between 50th and 75th percentile At or above 75th percentile Performance Vesting Outcomes 0% vesting 50% vesting Pro-rata / progressive vesting from 50% - 100% 100% vesting 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: 2016 $2.45 Nil 2.1% 45% 1.5% 2015 $4.29 Nil 2.5% 45% 1.2% 3.0 years 3.0 years 20 16 Underlying share price Exercise price of rights Risk free rate Volatility factor Dividend yield Effective life Entitled number of employees 80 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 30: Share Based Payments (continued...) (b) Performance Rights (continued...) Performance Rights held by Key Management Personnel at 30 June 2016 Balance at 1 July 2015 965,690 448,990 346,223 271,247 2,032,150 Granted as Remuneration 299,750 168,640 113,630 81,710 663,730 Exercise of Performance Rights (294,800) (165,900) (104,074) (83,476) (648,250) Lapsed / Cancelled / Other - 94,363 - - 94,363 Balance at 30 June 2016 970,640 546,093 355,779 269,481 2,141,993 Performance Rights Vested - - - - - D Lougher D Southam J Belladonna W Jones Total Performance Rights held by Key Management Personnel at 30 June 2015 Balance at 1 July 2014 836,971 434,465 270,584 149,396 1,691,416 Granted as Remuneration 205,140 86,560 118,859 121,851 532,410 Exercise of Performance Rights (76,421) (72,035) (43,220) - (191,676) Expired / Lapsed / Cancelled - - - - - Balance at 30 June 2015 965,690 448,990 346,223 271,247 2,032,150 Performance Rights Vested - - - - - D Lougher D Southam J Belladonna W Jones Total (c) Option Plans There were no options outstanding as at 30 June 2016. Note 31: Reserves i) Share Based Payment Reserve The share based payment reserve records the items recognised as expenses on valuation of employee share options and performance rights. ii) Hedge Reserve The hedge reserve records revaluations of items designated as hedges. iii) Investment Revaluation Reserve The investment revaluation reserve records revaluations of financial assets at fair value through other comprehensive income. iv) Convertible Bond Reserve The Convertible bond reserve records the equity proportion value of the convertible bonds. v) Foreign Exchange Reserve The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to Australian dollars. Note 32: Interests in Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in accordance with the accounting policy described in note 1: Name Western Platinum NL Australian Nickel Investments Pty Ltd Bioheap Ltd Western Areas Nickel Pty Ltd Western Areas Employee Share Trust Country of Incorporation Australia Australia Australia Australia Australia Percentage of equity held 2016 100% 100% 100% 100% 100% 2015 100% 100% 100% 100% 100% All the entities above 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. 81 Western Areas 2016 Annual ReportNotes To The Financial StatementsNote 33: Parent Information The following information has been extracted from the books of the parent and has been prepared in accordance with the accounting standards. Parent Entity 30 Jun 2016 $’000 30 Jun 2015 $’000 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 (Loss)/Income (Loss)/profit for the year Total comprehensive (loss)/income for the year 118,016 405,697 523,713 25,726 42,973 68,699 455,014 442,963 15,403 (3,352) 455,014 (31,097) (30,376) 236,312 398,112 634,424 169,761 45,227 214,988 419,436 369,936 31,565 17,935 419,436 37,371 38,340 Guarantees Western Areas Ltd has not entered into any guarantees, in the current or previous financial 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 financial statements. Contractual Commitments Refer to Note 21, all commitments were entered into by Western Areas Ltd. Note 34: Additional Company Information Western Areas Ltd is a Public Company, incorporated and domiciled in Australia. Registered office 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 82 Western Areas 2016 Annual ReportNotes To The Financial StatementsDirectors Declaration 1) In the opinion of the Directors of Western Areas Ltd: (a) the Consolidated Entity’s financial statements and notes set out on pages 45 to 82 are in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2016 and of its performance, for the financial year ended on that date; and ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; (b) the financial 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 Officer, Managing Director, Executive Director and Chief Financial Officer for the financial year ended 30 June 2016. Signed in accordance with a resolution of the Board of Directors. D Lougher Managing Director Dated – 25 August 2016 83 Western Areas 2016 Annual ReportDirectors Declaration Independant Auditor’s Opinion 84 Western Areas 2016 Annual ReportIndependant Auditor’s Opinion INDEPENDENT AUDIT REPORT TO THE MEMBERS OF WESTERN AREAS LTD We have audited the accompanying financial report of Western Areas Ltd, which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial ReportThe directors of thecompany are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s ResponsibilityOur responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Crowe Horwath Perthis a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. AUDITOR’S INDEPENDENCE DECLARATIONIn 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 2016, 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 CYRUS PATELL Partner Signed at Perth, 25 August 2016 Crowe Horwath Perthis a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees.85 Western Areas 2016 Annual ReportIndependant Auditor’s Opinion Crowe Horwath Perth is a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees. Auditor’s Opinion In our opinion: (a)the financial report of Western Areas Ltd is in accordance with the Corporations Act 2001,including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;and(b)the consolidated financial report also complies with International Financial Reporting Standards as disclosed in Note 1. REPORT ON THE REMUNERATION REPORT We have audited the Remuneration Report included in pages 35 to 42 of the directors’ report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s Opinion In our opinion, the Remuneration Report of Western Areas Ltd for the year ended 30 June 2016 complies with section 300A of the Corporations Act 2001. CROWE HORWATH PERTH CYRUS PATELL PartnerSigned at Perth, 25 August 2016 AUDITOR’S INDEPENDENCE DECLARATIONIn 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 2016, 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 CYRUS PATELL Partner Signed at Perth, 25 August 2016 Crowe Horwath Perthis a member of Crowe Horwath International, a Swiss verein. Each member of Crowe Horwath is a separate and independent legal entity. Liability limited by a scheme approved under Professional Standards Legislation other than for the acts or omissions of financial services licensees.WSA Interest Applicant Holder Name Lease Status Tenements listing Name Lease Status Forrestania E74/0470 Granted E77/1734 Granted E77/1865 Granted E77/2099 Granted G70/0226 Granted G70/0231 Granted L70/0111 Granted L74/0011 Granted L74/0012 Granted L74/0025 Granted L74/0044 Granted L77/0104 Granted L77/0141 Granted L77/0182 Granted L77/0197 Granted L77/0203 Granted L77/0204 Granted M74/0057 Granted M74/0058 Granted M74/0064 Granted M74/0065 Granted M74/0081 Granted M74/0090 Granted M74/0091 Granted M74/0092 Granted M77/0098 Granted M77/0215 Granted M77/0216 Granted M77/0219 Granted M77/0284 Granted M77/0285 Granted M77/0286 Granted M77/0329 Granted M77/0335 Granted M77/0336 Granted M77/0389 Granted M77/0399 Granted M77/0458 Granted M77/0542 Granted M77/0543 Granted M77/0545 Granted M77/0550 Granted M77/0568 Granted 86 100% 200% 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 Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd M77/0574 Granted M77/0582 Granted M77/0583 Granted M77/0584 Granted M77/0585 Granted M77/0586 Granted M77/0587 Granted M77/0588 Granted M77/0589 Granted M77/0911 Granted M77/0912 Granted E77/2127 Pending E77/2228 Pending E77/2235 Pending E77/2236 Pending E77/2261 Pending P77/4278 Granted P77/4279 Granted WSA Interest 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% E77/1086 Granted 100% E77/1399 Granted 100% E77/1400 Granted 100% E77/1416 Granted 100% E77/1436 Granted 100% E77/1581 Granted 100% M77/0099 Granted 100% M77/0324 Granted 100% M77/0467 Granted 100% M77/0468 Granted 100% M77/0544 Granted 100% P77/3735 Granted 100% P77/3736 Granted 100% P77/3737 Granted 100% P77/3738 Granted 100% Applicant Holder Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas Ltd Western Areas 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 2016 Annual ReportTenements ListingName Lease Status WSA Interest Applicant Holder Name Lease Status WSA Interest P77/3743 Granted 100% P77/3748 Granted 100% P77/3749 Granted 100% P77/3750 Granted 100% P77/3751 Granted 100% P77/3752 Granted 100% P77/3758 Granted 100% P77/3836 Granted 100% P77/3837 Granted 100% P77/3838 Granted 100% P77/3839 Granted 100% P77/3840 Granted 100% P77/3846 Granted 100% P77/3847 Granted 100% P77/3862 Granted 100% P77/3865 Granted 100% P77/4067 Granted 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 Lake King JV E70/2148 Granted 70% Ni Rights Swanoak Holdings Pty Ltd E70/4029 Granted E70/4428 Granted E70/4429 Granted E70/4430 Granted 70% Ni Rights 70% Ni Rights 70% Ni Rights 70% Ni Rights Western Areas Ltd & Swanoak Holdings Pty Ltd Western Areas Ltd & Swanoak Holdings Pty Ltd Western Areas Ltd & Swanoak Holdings Pty Ltd Western Areas Ltd & Swanoak Holdings Pty Ltd Mt Gibb JV E74/0603 PENDING 70% Western Areas Ltd Mt Alexander BHPB JV E29/00638 Granted 25% Cosmos M36/0127 Granted 100% St George Mining Limited Xstrata Nickel Australasian Operations Pty Limited M36/0180 Granted 100% M36/0302 Granted 100% M36/0303 Granted 80.6% M36/0305 Granted 100% M36/0329 Granted 80.6% M36/0330 Granted 80.6% M36/0332 Granted 100% M36/0349 Granted 100% M36/0371 Granted 100% M36/0377 Granted 100% M36/0467 Granted 100% M36/0632 Granted 100% M36/0633 Granted 100% M36/0659 Granted 100% L36/0042 Granted L36/0067 Granted L36/0068 Granted L36/0069 Granted 200% 100% 100% 100% Applicant Holder Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited and Alkane Resources Ltd Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited and Alkane Resources Ltd Xstrata Nickel Australasian Operations Pty Limited and Alkane Resources Ltd Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited BHP Billiton BHP Billiton BHP Billiton 87 Western Areas 2016 Annual ReportTenements ListingApplicant Holder Name Lease Status WSA Interest Applicant Holder Name Lease Status L36/0070 Granted L36/0071 Granted L36/0072 Granted L36/0073 Granted L36/0074 Granted L36/0075 Granted L36/0076 Granted L36/0077 Granted L36/0078 Granted L36/0079 Granted L36/0080 Granted L36/0081 Granted L36/0094 Granted L36/0095 Granted WSA Interest 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% L36/0118 Granted 100% L36/0119 Granted 100% L36/0145 Granted 100% L36/0148 Granted 100% L36/0159 Granted 100% L36/0171 Granted 100% L36/0172 Granted 100% L36/0189 Granted 100% L36/0194 Granted 100% L36/0199 Granted 100% BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton BHP Billiton Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Xstrata Nickel Australasian Operations Pty Limited Western Gawler EL 4440 EL 5077 EL 5199 EL 5200 Granted Granted Granted Granted Earning In Strandline Resources Limited 100% 100% 100% Western Areas Ltd Western Areas Ltd Western Areas Ltd 88 Southern Cross Goldfields JV EL 5688 Granted 100% Western Areas Ltd ELA2014 /00252 Pending 100% Western Areas Ltd E77/1164 Granted E77/1322 Granted E77/1376 Granted E77/1380 Granted E77/1462 Granted E77/1474 Granted E77/1477 Granted E77/1508 Pending E77/1509 Granted E77/1721 Pending E77/1741 Granted E77/1791 Pending E77/1814 Granted E77/1817 Granted E77/1911 Granted E77/1965 Granted E77/1997 Granted E77/2025 Granted E77/2032 Granted E77/2067 Granted E77/2077 Granted E77/2091 Granted E77/2105 Pending E77/2109 Granted E77/2110 Granted E77/2124 Granted E77/2141 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 Black Oak Minerals Limited Black Oak Minerals Limited Polaris Metals Pty Ltd Black Oak Minerals Limited Polaris Metals Pty Ltd Black Oak Minerals Limited Black Oak Minerals Limited Julian Uncovich Black Oak Minerals Limited Polaris Metals Pty Ltd Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Polaris Metals Pty Ltd Black Oak Minerals Limited Polaris Metals Pty Ltd Black Oak Minerals Limited Jayvee Resources Pty Ltd Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Western Areas 2016 Annual ReportTenements ListingName Lease Status E77/2146 Granted E77/2150 Granted E77/2171 Granted E77/2172 Granted E77/2186 Granted E77/2242 Granted E77/2247 Granted E77/2269 Granted E77/2272 Granted E77/2273 Granted E77/2274 Granted E77/2275 Granted E77/2276 Granted E77/2288 Granted G77/35 Granted L77/221 Granted L77/223 Granted M77/166 Granted M77/394 Granted M77/576 Granted M77/646 Granted M77/824 Granted M77/931 Granted M77/962 Granted M77/1025 Granted M77/1044 Granted M77/1256 Granted M77/1264 Pending P77/3461 Granted WSA Interest 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 Applicant Holder Name Lease Status Black Oak Minerals Limited Polaris Metals Pty Ltd Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Flatrock Resources Pty Ltd Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited P77/3462 Granted P77/3645 Granted P77/3801 Granted P77/3898 Granted P77/3899 Granted P77/3901 Granted P77/3903 Granted P77/3936 Granted P77/3994 Granted P77/4055 Granted P77/4076 Granted P77/4101 Granted P77/4170 Granted P77/4171 Granted P77/4179 Granted P77/4180 Granted P77/4181 Granted P77/4185 Granted P77/4194 Granted P77/4204 Granted P77/4226 Granted P77/4227 Granted P77/4228 Granted P77/4229 Granted P77/4230 Granted P77/4238 Granted P77/4239 Granted P77/4240 Granted WSA Interest 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 Applicant Holder Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited Black Oak Minerals Limited 89 Western Areas 2016 Annual ReportTenements ListingShareholder Information (as at 31 August 2016) Distribution of Shareholdings i. Distribution schedule of holdings 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – over Total number of holders ii. Number of holders of less than a marketable parcel iii. Number of overseas holders iv. Percentage held by 20 largest holders * All ordinary shares carry one vote per share without restriction Largest Security Holders Names of the 20 largest holders of Ordinary Shares are listed below: Name Wellington Mgt Company Schroder Investment Mgt - Sydney Antares Equities Paradice Investment Mgt Tribeca Investment Partners JCP Investment Partners Ausbil Investment Mgt Mr & Mrs Allan R Greenwell Avoca Investment Mgt BlackRock Investment Mgt Highclere International Investors Dimensional Fund Advisors NovaPort Capital Martin Currie Australia Schroder Investment Mgt - London State Street Global Advisors Helaba Invest Vanguard Investments Australia Colonial First State - Global Resources Colonial First State - Core Australian Equities Total Substantial Shareholders Name Commonwealth Bank of Australia Schroder Investment Mgt Wellington Mgt Group LLP Australian Super Pty Ltd National Australia Bank Limited 90 Ordinary shares* 1913 2145 750 941 100 5849 580 179 56.92% % 5.58% 4.88% 4.30% 3.88% 3.86% 3.83% 3.56% 3.31% 3.25% 2.83% 2.35% 2.22% 2.12% 1.76% 1.74% 1.58% 1.57% 1.48% 1.46% 1.37% 56.92% % 9.36% 7.54% 6.76% 6.21% 6.23% No. of shares 15,204,119 13,289,957 11,697,160 10,561,384 10,511,537 10,427,223 9,684,975 9,009,862 8,855,739 7,698,275 6,387,306 6,043,407 5,781,195 4,778,914 4,735,946 4,288,562 4,264,700 4,021,817 3,972,639 3,730,106 154,944,823 No. of Shares held 25,376,834 20,427,308 18,305,012 16,350,171 14,539,432 Western Areas 2016 Annual ReportShareholder InformationThis page has been left blank intentionally. 91 Registered Office Level 2 2 Kings Park Road West Perth WA 6005 PO Box 1891 West Perth WA 6872 Phone: +61 (0) 8 9334 7777 +61 (0) 8 9486 7866 Fax: info@westernareas.com.au Email: westernareas.com.au 

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