WHITEHAVEN COAL LIMITED ABN 68 124 425 396 ANNUAL REPORT 2008 Annual Report For personal use only cONTENTs Chairman’s Letter............................................................................................................................ 1 Xxxxxxxxxx .. .. .. .. .. ................................................ .... .. ... ... .. ... ... .. ... ... .. ... ... .. . .. .. . .. . .. .. . .. . .. .. . .. .. . .. ... .. .. . .. . .. .. . .. . .. .. . .. . .. .. . .. . . XX Xxxxxxxx .. .. .. .. ... .. .. ... .................................... ...... .. ... ... .. ... ... .. ... ... .. ... ... .. ... .... .... .... .... .. . . ... . .. .. . .. .. . .. .. . . ... . . .. .. . .. .. . . ... . . .. .. . .. .. 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XX Achievements ................................................................................................................................... 4 Managing Director’s Report ......................................................................................................... 6 Directors’ Report ..........................................................................................................................12 Income Statements ..................................................................................................................... 39 Statements of Changes in Equity ........................................................................................... 40 Balance Sheets .............................................................................................................................41 Statements of Cash Flows .........................................................................................................42 Notes to the financial statements ............................................................................................43 Directors’ Declaration ..................................................................................................................92 Independent Auditor’s Report ...................................................................................................93 ASX Additional Information ........................................................................................................95 Corporate Directory ......................................................................................................................97 2008 Annual Report For personal use only chAiRmAN’s LETTER dear Whitehaven shareholder, This has been an exciting year for Whitehaven coal Limited (Whitehaven). since the company was listed on the Australian securities Exchange in June 2007, significant progress has been made developing the company’s coal projects and mines. prOfIT Profit for the year was $51.9 million. Coal prices remained high but infrastructure constraints limited the tonnages shipped. Also, long vessel queues at the Newcastle port caused substantial demurrage costs. ACHIEVEMENTs fOr 2008 Managed saleable coal production for the year increased by 20% to 2.753 million tonnes from 2.288 million tonnes in FY 2007. Production for the first full year of operations at the Tarrawonga mine offset reduced production from Canyon. Construction has begun at the Narrabri and Rocglen projects and a Development Application has been submitted to the NSW Department of Planning for our new project at Sunnyside. Additional drilling increased the JORC reserves at both Narrabri North and Werris Creek. Whitehaven increased its equity in the Werris Creek Joint Venture (JV) from 40% to 100% utilising proceeds from a capital raising and has agreed to increase its equity in the Bonshaw prospect from 67% to 100%. In addition we have sold a 7.5% interest in the Narrabri JV to Upper Horn Investments Pty Ltd (part of China’s Yudean Group) for $67.5 million. We have also accepted offers from Europe’s EdF Trading and Japan’s Electric Power Development Co Ltd for those companies each to acquire 7.5% of the Narrabri JV at prices of US$120 million and $125 million respectively. The sales are subject to formal documentation, due diligence and usual regulatory approvals, conditional on FIRB approval and are expected to be completed during September and October 2008. All three companies are leading coal consumers, and have entered into long term market based off-take contracts. We believe that the Narrabri JV is strengthened by their participation. After the balance sheet date the Company declared a dividend of 1.7 cents per share or $6,662,000, fully franked. COrpOrATE Mr Keith Ross retired as Managing Director in March 2008. Mr Ross was integral in the development of Whitehaven and on behalf of shareholders, directors and all staff, I thank him for his leadership and vision throughout his long association with the Company. Mr Rob Stewart was appointed Managing Director effective 1 April 2008, having joined Whitehaven as Chief Executive Officer in October 2007. sAfETy Safety continues to be a priority for directors and management. Whitehaven has an excellent safety record since it commenced mining in the Gunnedah region in 2000. To the end of June 2008, only two lost time injuries had been recorded during this eight year period. fuTurE OuTLOOk The market for coal continues to be strong. We expect managed production to increase in FY 2009 with production improvements at Tarrawonga and Werris Creek and with the commissioning of the Rocglen and Sunnyside mines. Improved infrastructure arrangements and access will be critical to support our increased production. On behalf of the Board, I compliment the Managing Director and all Whitehaven staff on a successful year and thank shareholders for their support. John C. Conde, AO 1 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only highLighTs • Net Profit after Tax up 115% from the previous year to $51.9 million. • Coal sales up 91% from the previous year to 2.8 million tonnes (Mt). • Acquisition of 60% of the Werris Creek mine, bringing Whitehaven’s ownership to 100%. • Planning Approval for Narrabri Stage 1 granted in November 2007 and Mining Lease granted in January 2008. • Planning Approval for the Rocglen open cut mine granted in May 2008, followed by the grant of a Mining Lease in June 2008. • Sale of a 7.5% interest in the Narrabri project to China’s Yudean Group for A$67.5 million. • Exceptional safety record maintained with only one lost time injury recorded in FY08. Financial Performance (A$ millions) fy 2008 fy 2007 Revenue EBiTdA Net Profit 256.5 90.7 51.9 106.2 25.6 24.1 2 2008 Annual Report For personal use only NsW cOALFiELds QUEENSLAND N ASHFORD BASIN Bonshaw 0 50 100 Ashford Bonshaw Project KILOMETRES NEW SOUTH WALES Moree R a i l w a y GUNNEDAH COALFIELD Narrabri Project Narrabri Tarrawonga Mine Canyon Mine Rockglen Project Whitehaven CHPP Gunnedah Sunnyside Project GUNNEDAH BASIN Werris Creek Mine Dunedoo GLOUCESTER BASIN Gloucester Gulgong Mudgee Ulan Muswellbrook Bylong WESTERN COALFIELD HUNTER COALFIELD Singleton PACIFIC OCEAN SYDNEY BASIN Cessnock NEWCASTLE COALFIELD Newcastle Whitehaven Assets Rylstone Kandos Lithgow Railway Sydney AUSTRALIA NSW Campbelltown Picton SOUTHERN COALFIELD Mossvale Bomaderry Goulburn ACT Wollongong Port Kembla NSW 3 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report For personal use only AchiEvEmENTs Consolidated Equity Production and Sales year-to-Date* (Thousand tonnes) fy 2008 fy 2007 % Variance ROm coal Production saleable coal Production sales of produced coal sales of purchased coal** Total sales Coal stocks at end of period * All figures are on an equity basis. ** Sales of externally purchased coal. 2,275 2,079 2,192 594 2,788 212 4 1,731 1,395 1,315 144 1,460 251 31% 49% 67% 314% 91% (15%) 2008 Annual Report For personal use only milestones Rocglen mining Lease granted Rocglen Project approval Yundean Group acquires 7.5% of Narrabri Project Narrabri mining Lease granted Narrabri Project Approval $130 million capital raising completed June 2008 April 2008 March 2008 January 2008 November 2007 November 2007 Whitehaven moves to full ownership of Werris Creek Mine November 2007 8 0 0 2 t r o p e R l a u n n A - d e t i m L i 2008 Annual Report 5 l a o C n e v a h e t i h W For personal use only mANAgiNg diREcTOR’s REPORT Whitehaven achieved significant growth in the year ended 30 June 2008 (FY 2008) as it navigated the challenges associated with the successful approval and development of two new projects, Narrabri North and Rocglen, and the expansion of its existing mines. Most importantly, we continued to achieve exceptional safety and environmental performance and to maintain strong relations with the community in the Gunnedah region. Net Profit after Tax for the year increased by 115% from the previous year to $51.9 million, including $38.9 million from the sale of 7.5% of the Narrabri Joint Venture (JV). At the same time, coal sales were up 91% from the previous year to 2.8 million tonnes (Mt) and revenue up 142% from the previous year to $256.5 million. During the year we reported an increase in JORC coal resources by 77.6 Mt to 712.9 Mt, with marketable coal reserves increased by 19.9 Mt to 137.9 Mt. In addition to these achievements in terms of sustainability and operational performance, Whitehaven’s balance sheet was strengthened by the sale of a 7.5% interest in the Narrabri JV to China’s Yudean Group for A$67.5 million. Since 30 June 2008, we have also accepted offers from Electric Power Development Co Ltd and EDF Trading for those companies to each acquire a financial performance And Balance sheet 7.5% stake in the Narrabri JV for A$125 million and US$120 million respectively. The sale of these interests in the Narrabri project and a strong cash position, gives Whitehaven the financial capacity to fully fund its program of new project development. (A$ millions) Cash on Hand Interest Cover Ratio1 (times) Interest Bearing Liabilities Net Cash/(Net Debt) Net Assets Gearing Ratio2 (%) 1 EBIT to Interest Expense (excluding FX in financing expense). 2 Net Debt to Net Debt plus Equity. FY 2008 105.9 109.7 times (55.2) 50.7 489.5 (11.6%) FY 2007 21.2 3.2 times (76.7) (55.5) 252.5 18% 6 2008 Annual Report For personal use only OpErATINg pErfOrMANCE Consolidated Equity production and sales (Thousand tonnes) ROM Coal Production Saleable Coal Production Sales of produced coal Sales of purchased coal2 Total Sales Coal stocks at end of period 1 All figures are on an equity basis. 2 Sales of externally purchased coal. Whitehaven Mining precinct (WMp) (Thousand tonnes) ROM Coal Production Saleable Coal Production Sales of produced coal Sales of purchased coal2 Total Sales Coal stocks at end of period 1 All figures are on an 100% basis. 2 Sales of externally purchased coal. 2008 Annual Report Year-to-Date1 FY 2008 FY 2007 % Variance 2,275 2,079 2,192 594 2,788 212 FY 2008 1,876 1,642 1,743 575 2,318 198 7 1,731 1,395 1,315 144 1,460 251 Year-to-Date1 FY 2007 1,388 997 893 128 1,021 286 31% 49% 67% 314% 91% (15%) % Variance 35% 65% 95% 349% 127% (31%) 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only mANAgiNg diREcTOR’s REPORT The WMP includes the Canyon (100% owned by Whitehaven), Tarrawonga (70% owned by Whitehaven) and Rocglen (100% owned by Whitehaven) open cut mines and the Whitehaven Coal Handling and Preparation Plant and train load-out facility (“CHPP”) (100% owned by Whitehaven). FY 2008 saleable coal production of 1.642 Mt was 65% above the previous year. The increase in WMP production reflects an 80% increase in production at Tarrawonga, partially offset by a 33% reduction in production at Canyon due to a higher strip ratio as the mine comes to the end of its life. During the year, planning approval was granted for work to expand the CHPP to increase annual washing capacity from 2 Mt per annum (Mtpa) to 3 Mtpa and to lift annual train loading capacity from 3 Mtpa to 4 Mtpa. This work will be completed in FY 2009. Werris Creek (100% owned by Whitehaven) (Thousand tonnes) ROM Coal Production Saleable Coal Production Sales of produced coal Sales of purchased coal2 Total Sales Coal stocks at end of period 1 All figures are on an 100% basis. 2 Sales of externally purchased coal. Year-to-Date1 FY 2008 FY 2007 % Variance 1,116 1,111 1,112 25 1,137 69 8 1,289 1,291 1,320 41 1,361 56 (13%) (14%) (16%) (39%) (16%) 23% 2008 Annual Report For personal use only Whitehaven completed the acquisition of a further 60% of the Werris Creek mine in the period giving the Group 100% ownership. Full ownership will provide the benefit of operational and marketing synergies with our other projects. Coal production from the mine was affected by a number of operational factors, but production has now improved through the introduction of a new blasting contractor, a new mine plan and the positive impact of other operational improvements. FY 2008 saleable coal production of 1.11 Mt was 14% below the previous year. However, productivity improvements have been achieved in the last quarter of FY08. Further gains are required and options to improve productivity are being investigated. Further exploration and mine planning has increased coal resources from 26 Mt to 38 Mt, with marketable reserves of 19.9 Mt. This increase in resources and reserves provides Whitehaven with the potential to extend the life of Werris Creek up to 13 years, at the planned production rate of 1.5 Mtpa. Narrabri (92.5% owned) rocglen (100% owned) Following Planning Approval in May, the Mining Lease for the Rocglen mine was granted by the NSW State Government in June 2008. The Mining Lease allows for the full development of a new open cut coal mine, located 28km north of Gunnedah within the Gunnedah Basin. Rocglen is expected to produce around 1.5 million tonnes per annum of high quality thermal and PCI coal. Construction at Rocglen commenced in June 2008 with a local road upgrade and the development of a 6.2km private coal haulage and access road, site facilities and workshop, coal handling and crushing plant, and a box cut and ramp to access the coal seam. Total construction and development cost is expected to be approximately $35 million, with 30-40 contractors employed during construction and an ongoing workforce of around 50 people during production. Overburden removal commenced in July 2008 and first coal is expected from this new mine in Q2 of FY 2009. One of the highlights of the year for Whitehaven was the approval of the development application for the Narrabri Coal Project Stage One in November 2007 and the granting of the Mining Lease in January 2008. The project is progressing well, but a delay in gaining approvals to commence construction and the decision to reduce the grade of access drifts have resulted in the date for producing first coal to be revised to the first quarter of FY 2010. Works are well advanced on the site access road, office and workshop area, boxcut, dams and rail loop. Contracts have now been awarded for more than 60% of the Stage 1 work. These include contracts for the supply of initial coal mining equipment; construction of the transmission substation; drift conveyor; train load out facility; rail track components and skyline stackout conveyor. There has been some increase in the forecast capital cost of Stage One caused by higher costs of materials and a decision to reduce the grade of the drifts which will reduce long term operating costs. A drill program has been completed to undertake a detailed evaluation of coal seam gas in the first two longwall panels and further drilling is under way to improve detailed understanding of the conditions of early mining areas. 9 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report For personal use only mANAgiNg diREcTOR’s REPORT sunnyside (100% owned) INfrAsTruCTurE sAfETy Ensuring adequate infrastructure to deliver our coal to customers continues to be a major focus for Whitehaven. Under an agreement completed with the Australian Rail Track Corporation and NSW Government, the company has committed to underwrite 60% of the funding of a major upgrade of the Muswellbrook to Narrabri rail infrastructure which will increase the capacity of that line to more than 15 million tonnes per annum over the next two years. The first stage has been commissioned and will provide a 70% increase of the current capacity. The process for allocation of available capacity from the existing coal terminal at Newcastle port and the rate of its expansion remain of major concern to Whitehaven. The NSW government’s decision on future arrangements for this terminal is imminent. Progress on construction of the new coal terminal at Newcastle port is advancing toward first coal shipments in calendar 2010. The Environmental Assessment for the Sunnyside Project came off Public Exhibition on 19 May 2008 and Whitehaven has responded to all submissions received. Planning Approval is expected by early October 2008. Granting of the Mining Lease in October 2008 would enable first coal production from Sunnyside in the second quarter of FY 2009. Additional exploration has allowed the reclassification of 0.8 Mt from inferred to indicated status, and 4.1 Mt from indicated to measured. A further resource of 65.9 Mt has been identified within the Sunnyside EL area. Bonshaw (100% owned) Whitehaven reached an agreement in July 2008 for the purchase of Republic Coal Pty Ltd’s one-third share of the Bonshaw project in northern NSW. This brings our ownership of the project to 100%. Whitehaven will pay Republic Coal a total of $2.87M for the acquisition in two tranches. The first tranche of $1.87M will be paid on transfer of the tenements and the balance is payable on the earlier of development consent being granted or Whitehaven selling or transferring a majority interest in the tenements. Whitehaven has maintained its exceptional safety record in FY 2008 with only one lost time injury (LTI) recorded. Since commencing operations in 2000, we have recorded only two LTIs over the eight year period. We are extremely pleased with this result and safety remains a significant focus for our organisation. During FY 2009 the Company will appoint a senior safety professional to continue our drive for improved safety management procedures and their implementation as the Company’s activities expand. ENVIrONMENT Responsible management of the environment within which we operate remains a high priority for Whitehaven Coal directors, management, and employees. There is a strong focus on maintaining all of our operations within the very strict conditions imposed by the relevant authorities under our Development Consents and to minimise any adverse impact on the communities in which we operate. All of our operations are managed in accordance with consent and lease requirements. We have maintained our commitment to progressive rehabilitation. More than 70% of the area disturbed at the Canyon site has been rehabilitated to either pasture or native woodland, with approximately 3,000 native seedlings planted last year. 10 2008 Annual Report For personal use only COAL prICEs AND fOrEIgN ExCHANgE The medium term demand for thermal and PCI coal remains strong and is reflected in the higher US$ contract prices achieved for Whitehaven’s products in FY 2009. The company has entered into new coal sales contracts with steel industry users for approximately 1.0 million tonnes per year of semi-soft coking coal (SSCC) and pulverised coal injection (PCI) coal for the next three years. These contracts will be supplied at prevailing market prices, fixed annually. The average sales price secured for FY 2009 under these contracts is A$250 per tonne FOB. Whitehaven has also secured approximately 0.6 Mt of new thermal coal contracts for FY 2009 at an average price of approximately A$135 per tonne FOB. These new contracts are with prime customers in the major Asian markets and will further underpin our significant production growth in the Gunnedah region. The Whitehaven foreign exchange risk management policy is to hedge US$ revenue using Forward Exchange Contracts (FEC) where the volume and price are fixed. At June 30, 2008 Whitehaven had US$411.7M in FECs at an effective rate of A$1:00 = US$0.8298. OuTLOOk Managed production will increase in FY 2009 with production improvements at Tarrawonga and Werris Creek and commissioning of the new Rocglen and Sunnyside open cut mines replacing Canyon, which is at the end of its reserves. However, shipping allocation is yet to be granted for calendar 2009 to Whitehaven at the existing Newcastle coal terminal and this will be critical to achieving Whitehaven’s planned increase in sales. Our strategy to maximise conversion of thermal coal to PCI to maximise supply to higher value markets will continue, consistent with commitments to previously contracted sales. I would like to thank our employees for their commitment and contribution during the year and the Directors for their confidence in my appointment and for their support. I pay tribute to Keith Ross who resigned as Managing Director in March for his vision and commitment in getting Whitehaven to where it is today. rob stewart Managing Director Tarrawonga has had 18ha subject to rehabilitation treatment with some 2,000 seedlings planted to facilitate woodland establishment. Our strong community links are also being maintained with the local Aboriginal community and other community groups through their involvement in our rehabilitation program. Whitehaven maintains a plant propagation unit in conjunction with Red Chief Local Aboriginal Land Council to propagate seed collected from on and surrounding our project sites, and also utilises the services of Red Chief Local Aboriginal Land Council and Gunnedah West Rotary Club for tube-stock planting campaigns. The Soil Conservation Service (Dept of Lands), which is recognised as the lead experts in soil conservation and erosion control, is involved in the design and development of drainage structures on Whitehaven’s rehabilitated areas. Whitehaven’s environmental programs during the current year include ongoing rehabilitation at our Canyon and Tarrawonga sites, preliminary rehabilitation work at Rocglen, Narrabri and Sunnyside Operations and finalisation of a regional biodiversity offset proposal currently under consideration through the Department of Planning and Department of Environment and Climate Change. This offset proposal offers up to 1,000ha of relatively undisturbed woodland in a regional corridor context as offset for the areas disturbed by our mining activities. 11 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report For personal use only diREcTORs’ REPORT Left to right: John Conde, Rob Stewart, Neil Chatfield, Tony Haggarty The directors present their report together with the financial report of Whitehaven Coal Limited (“the Company”) and of the consolidated entity, being the Company, its subsidiaries, and the consolidated entity’s interest in joint ventures for the year ended 30 June 2008 and the auditor’s report thereon. 1. DIrECTOrs The directors of the Company at any time during or since the end of the financial year are: JOHN CONDE Bsc, BE (Electrical) (Hons), MBA (Dist) chairperson independent Non-Executive director Appointed: 3 May 2007 Age: 60 John has over 30 years of broad based commercial experience across a number of industries, including the energy sector. He was chairman and managing director of Broadcast Investment Holdings, the owner of a number of media assets including Channel 9 South Australia and radio stations 2UE and 4BC, as well as being a former non-executive director of BHP Billiton Limited and Excel Coal Limited. John is currently the chairman of Energy Australia, MBF Australia Limited and Sydney Symphony Limited and President of the Commonwealth Remuneration Tribunal. rOB sTEWArT ME Mining, BE Civil (Hons) managing director Appointed: 1 April 2008 Age: 57 Rob joined Whitehaven in October 2007 as CEO and was appointed Managing Director in April 2008. Rob has 35 years experience in the construction and mining industries. He joined the Company in October 2007 as Chief Executive Officer following 10 years with Thiess Pty Ltd where his most recent roles included General Manager NSW where he was responsible for Thiess’ mining, construction and building business in New South Wales and as Executive Manager Mining. Rob spent the earlier part of his career with the State Electricity Commission of Victoria in a variety of management and technical roles associated with that company’s mining and construction activities. NEIL CHATfIELD fCpA, fAICD independent Non-Executive director Appointed: 3 May 2007 Age: 54 Neil has over 30 years experience in the transport and resources sectors and until September 2008 was a director and Chief Financial Officer for Toll Holdings Limited. Neil is currently a director of Seek Limited and the Chairman of Virgin Blue Holdings Limited, both ASX-listed companies. Neil’s previous roles involved senior finance positions in the coal industry including Chief Financial Officer of Cyprus Australia Coal and Oakbridge Limited. TONy HAggArTy MComm Non-Executive director Appointed: 3 May 2007 Age: 50 Tony has over 30 years experience in the development, management and financing of mining projects. He was a co-founder and the Managing Director of Excel Coal Limited from 1993 to late-2006. Prior to this he worked for BP Coal and BP Finance in Sydney and London, and for Agipcoal as the Managing Director of its Australian subsidiary. He is the non-executive Chairman of King Island Scheelite Limited and a non-executive Director of IMX Resources NL. 12 2008 Annual Report For personal use only Left to right: Alex Krueger, Hans Mende, Andy Plummer, Keith Ross ANDy pLuMMEr Bsc Mining Eng Non-Executive director Appointed 3 May 2007 Age: 58 Andy has over 35 years experience in the investment banking and mining industries. He was most recently an executive director of Excel Coal Limited, responsible for the company’s business development activities. He has worked in the Australian banking and finance industry since 1985 with Eureka Capital Partners, Resource Finance Corporation and Westpac. Prior to that, he was employed in a variety of management and technical positions with ARCO Coal, Utah International and Consolidation Coal. He is also a non-executive director of King Island Scheelite Ltd and Chairman of Ranamok Glass Prize Ltd. fOrMEr DIrECTOr kEITH rOss BE Mining (Hons) managing director Appointed: 3 May 2007 Resigned: 31 March 2008 Age: 74 Keith has over 50 years experience in the coal industry, both operational and managerial, in a number of board and senior executive positions. His previous experience has included Managing Director of AMCI (Australia), Executive Director and then Managing Director of Oakbridge Limited, General Manager of the minerals division of McIlwraith McEacharn Operations, Managing Director/General Manager of the Cook Colliery for Coal Resources of Queensland Limited and a General Manager for Bellambi Coal Company Limited. Keith has a Bachelor of Engineering (Mining) Honours 1st Class from the Sydney University and is a certificated Colliery Manager. ALEx kruEgEr Bs (finance) Bs (Chemical Engineering) Non-Executive director Appointed: 3 May 2007 Age: 34 Alex is a Managing Director of First Reserve Corporation (“FRC”). He is also a director of Foundation Coal Holdings Inc. Alex is a senior member of the FRC investment team and his responsibilities range from deal origination and structuring to due diligence, execution and monitoring. He is involved in investment activities in all areas of the worldwide energy industry, with particular expertise in the coal sector. Prior to joining FRC, Alex worked in the Energy Group of Donaldson, Lufkin & Jenrette in Houston. HANs MENDE Non-Executive director Appointed: 3 May 2007 Age: 64 Hans has been President of the AMCI Group since he co-founded the company in 1986. He is also a Director of MMX Mineracao, New World Resources, Excel Maritime and a non-executive director of Felix Resources Limited an Australian listed company. Prior to starting AMCI Group, Mr. Mende was employed by the Thyssen group of companies in various senior executive positions. Mr. Mende graduated from the University of Cologne, Germany in 1966. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 13 For personal use only diREcTORs’ REPORT 2. COMpANy sECrETArIEs LEIgH WHITTON B.Com, MBA, CpA (company secretary) Appointed: 3 May 2007 Leigh has been with the Whitehaven Group since 2005 as Chief Financial Officer and Company Secretary. He has over 20 years experience in the resources industry including senior roles with Jellinbah Resources, Cyprus Australia Coal and Oakbridge. He holds a Bachelor of Commerce and a Masters of Business Administration and is a Certified Practising Accountant. pAuL MArsHALL LLB, grad Dip Acc & fin, CA (company secretary) Appointed: 15 March 2007 Paul Marshall is a Chartered Accountant. He holds a Bachelor of Laws degree and a post Graduate Diploma in Accounting and Finance. He has more than 20 years in the accountancy profession having worked for the accountancy firm Ernst and Young for ten years, and subsequently over ten years spent in commercial roles as Company Secretary and CFO for a number of listed and unlisted companies mainly in the resources sector. 3. DIrECTOrs’ INTErEsTs The relevant interest of each director in the shares and options issued by the Company, as notified by the directors to the Australian Securities Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows: Ordinary shares Options over ordinary shares John Conde Rob Stewart Neil Chatfield Tony Haggarty Alex Krueger Hans Mende Andy Plummer 301,887 – 11,887 3,000,000 301,887 – 26,144,478 11,170,583 131,650,000 81,040,210 – – Granted on 5 September 2007 (refer details in Section 7.3 of this report) Granted on 3 May 2007 (refer to details in Section 7.3 of this report) 26,038,753 11,170,583 Granted on 3 May 2007 (refer to details in Section 7.3 of this report) 14 2008 Annual Report For personal use only 4. DIrECTOrs’ MEETINgs The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are: Director John Conde Rob Stewart * Neil Chatfield Tony Haggarty Alex Krueger Hans Mende Andy Plummer Keith Ross ** Board Meetings Audit and Risk Committee Meetings Remuneration and Nomination Committee Meetings A 12 3 12 12 11 8 12 9 B 12 3 12 12 12 12 12 9 A 4 – 6 6 – – – – B 6 – 6 6 – – – – A 3 – 3 – – – 3 – B 3 – 3 – – – 3 – A – Number of meetings attended. B – Number of meetings held during the time the director held office during the year. * Mr Rob Stewart appointed 1 April 2008. ** Mr Keith Ross retired 31 March 2008. 5. COrpOrATE gOVErNANCE sTATEMENT This statement outlines the main corporate governance practices in place throughout the financial year, which comply with the ASX Corporate Governance Council recommendations, unless otherwise stated. scope of responsibility of Board Responsibility for the Company’s proper corporate governance rests with the Board. The Board’s guiding principle in meeting this responsibility is to act honestly, conscientiously and fairly, in accordance with the law, in the interests of the Company’s shareholders (with a view to building sustainable value for them) and those of employees and other stakeholders. The Board’s broad function is to: (a) determine strategy and set financial targets for the Whitehaven Group; (b) monitor the implementation and execution of strategy and performance against financial targets; and (c) appoint and oversee the performance of executive management and generally to take and fulfil an effective leadership role in relation to the consolidated entity. 2008 Annual Report 15 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only diREcTORs’ REPORT 5. COrpOrATE gOVErNANCE sTATEMENT (CONTINuED) scope of responsibility of Board (continued) Power and authority in certain areas is specifically reserved to the Board – consistent with its function as outlined above. These areas include: (a) composition of the Board itself including the appointment and removal of Directors; (b) oversight of the consolidated entity including its control and accountability system; (c) appointment and removal of senior management and the Company Secretary; (d) reviewing and overseeing systems of risk management and internal compliance and control, codes of ethics and conduct, and legal and statutory compliance; (e) monitoring senior management’s performance and implementation of strategy; and (f) approving and monitoring financial and other reporting and the operation of committees. Composition of Board The Board performs its roles and function, consistent with the above statement of its overall corporate governance responsibility, in accordance with the following principles: (a) the Board should comprise at least five directors; (b) at least half of the Board should be non-executive directors; and (c) the chairman of the Board should be one of the independent non-executive directors. Board charter and policy The Board has adopted a charter (which will be kept under review and amended from time to time as the Board may consider appropriate) to give formal recognition to the matters outlined above. This charter sets out various other matters that are important for effective corporate governance. These initiatives, together with the other matters provided for in the Board’s charter, are designed to “institutionalise” good corporate governance and generally, to build a culture of best practice in the Company’s own internal practices and in its dealings with others. Audit and risk management committee The purpose of this committee is to advise on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the consolidated entity. Its current members are: (a) Neil Chatfield (Chairman); (b) John Conde; and (c) Tony Haggarty. The committee performs a variety of functions relevant to risk management and internal and external reporting and reports to the Board following each meeting. Meetings are held at least four times each year. A broad agenda is laid down for each regular meeting according to an annual cycle. The committee invites the external auditors to attend each of its meetings. remuneration and nominations committee The purpose of this committee is to assist the Board and report to it on remuneration and issues relevant to remuneration policies and practices including those for senior management and non-executive Directors and make recommendations to the Board in relation to the appointment of new Directors (both executive and non-executive) and senior management. Its current members are: (a) John Conde (Chairman); (b) Neil Chatfield; and (c) Andy Plummer. 16 2008 Annual Report For personal use only Among the functions performed by the committee are the following: (a) review and evaluation of market practices and trends on remuneration matters; (b) recommendations to the Board in relation to the consolidated entity’s remuneration policies and procedures; (c) oversight of the performance of senior management and non-executive Directors; (d) recommendations to the Board in relation to the remuneration of senior management and non-executive Directors; (e) development of suitable criteria (as regards skills, qualifications and experience) for Board candidates; (f) identification and consideration of possible candidates, and recommendation to the Board accordingly; and (g) establishment of procedures, and recommendations to the Chairman, for the proper oversight of the Board and management. Meetings are held at least three times each year. Best practice commitment The Company is committed to achieving and maintaining the highest standards of conduct and has undertaken various initiatives, as outlined in this section, that are designed to achieve this objective. The Company’s corporate governance charter is intended to “institutionalise” good corporate governance and, generally, to build a culture of best practice both in the Company’s own internal practices and in its dealings with others. The following are a tangible demonstration of the Company’s corporate governance commitment. Independent professional advice With the prior approval of the Chairman, which may not be unreasonably withheld or delayed, each Director has the right to seek independent legal and other professional advice concerning any aspect of the Company’s operations or undertakings in order to fulfil their duties and responsibilities as directors. Any costs incurred are borne by the Company. Code of ethics and values The Company has developed and adopted a detailed code of ethics and values to guide Directors in the performance of their duties. Code of conduct for transactions in securities The Company has developed and adopted a formal code to regulate dealings in securities by Directors and senior management and their associates. This is designed to ensure fair and transparent trading in accordance with both the law and best practice. Charter The code of ethics and values and the code of conduct for transactions in securities (referred to above) both form part of the Company’s corporate governance charter which has been formally adopted and can be inspected on its website at www.whitehaven.net.au. Compliance with Asx corporate governance guidelines and best practice recommendations The ASX document, “Principles of Good Corporate Governance and Best Practice Recommendations” (Guidelines) applying to listed entities was published in March 2003 by the ASX Corporate Governance Council with the aim of enhancing the credibility and transparency of Australia’s capital markets. The Board has assessed the Company’s current practice against the Guidelines and outlines its assessment below: 8 0 0 2 t r o p e R l a u n n A - d e t i m L i 2008 Annual Report 17 l a o C n e v a h e t i h W For personal use only diREcTORs’ REPORT 5. COrpOrATE gOVErNANCE sTATEMENT (CONTINuED) principle 1 – Lay solid foundations for management and oversight The role of the Board and delegation to management have been formalised as described above in this section and will continue to be refined, in accordance with the Guidelines, in light of practical experience gained in operating as a listed company. The Company complies with the Guidelines in this area. principle 2 – structure the Board to add value Six of the Board (which comprises 7 Directors in total) are non-executives. The roles of chairperson and chief executive officer are not exercised by the same individual. The directors are able to obtain independent advice at the expense of the Company. Together the Directors have a broad range of experience, expertise, skills, qualifications and contacts relevant to the business of the Company. Director J Conde R Stewart N Chatfield T Haggarty A Krueger H Mendes A Plummer Independent Yes No – employed in an executive capacity Yes No – substantial shareholder No – substantial shareholder No – substantial shareholder No – substantial shareholder Non-executive Term in Office Yes No Yes Yes Yes Yes Yes 1 year 6 months 1 year 1 year 1 year 1 year 1 year The Company did not comply with recommendation 2.1 of the ASX Corporate Governance best practice recommendations as during the year, following the acquisition of shares by two of the directors resulting in them becoming substantial shareholders of the Company, a majority of the Board are not considered to be independent when considered in accordance with the criteria set out in recommendation 2.1. The Board believe that the individuals on the Board can and do make quality and independent judgements in the best interest of the Company and other stakeholders. principle 3 – promote ethical and responsible decision making The Board has adopted a detailed code of ethics and values and a detailed code of conduct for transactions in securities. The purpose of these codes is to guide Directors in the performance of their duties and to define the circumstances in which both they and management, and their respective associates, are permitted to deal in securities. The Board will ensure that restrictions on dealings in securities are strictly enforced. Both codes have been designed with a view to ensuring the highest ethical and professional standards, as well as compliance with legal obligations, and therefore compliance with the Guidelines. principle 4 – safeguard integrity in financial reporting The Board requires the chief executive officer and the chief financial officer to state in writing to the Board that the financial reports of the Company present a true and fair view, in all material respects, of the financial condition and operational results of the Company and are in accordance with relevant accounting standards. The audit and risk committee (with its own charter) complies with the Guidelines. All the members of the audit committee are financially literate. The committee, which advises and reports to the Board, is appropriately constituted in that it is comprised of 3 non-executive Directors, it consists of a majority of independent directors and it is chaired by an independent chairman who is not the chairman of the Board. principle 5 – Make timely and balanced disclosure The Company’s current practice on disclosure is consistent with the Guidelines. Policies and procedures for compliance with ASX Listing Rule disclosure requirements are included in the Company’s corporate governance charter. 18 2008 Annual Report For personal use only principle 6 – respect the rights of shareholders The Board recognises the importance of this principle and strives to communicate with shareholders both regularly and clearly – both by electronic means and using more traditional communication methods. Shareholders are encouraged to attend and participate at general meetings. The Company’s auditors always attend the annual general meeting and are available to answer shareholders’ questions. The Company’s policies comply with the Guidelines in relation to the rights of shareholders. principle 7 – recognise and manage risks The Board, together with management, has constantly sought to identify, monitor and mitigate risk. Internal controls are monitored on a continuous basis and, wherever possible improved. The whole issue of risk management is formalised in the Company’s corporate governance charter (which complies with the Guidelines in relation to risk management) and will continue to be kept under regular review. Review takes place at both committee level (audit and risk management committee), with meetings are least four times each year, and Board level. The chief executive officer and the chief financial officer are required to state to the Board in writing that: (i) that the accounts are true and fair and comply with accounting standards, are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and (ii) the Company’s risk management and internal compliance is operating efficiently and effectively in all material respects. principle 8 – Encourage enhanced performance The corporate governance charter adopted by the Board requires individual performance review and evaluation to be conducted formally on an annual basis. In addition, an external review of the performance of Directors and key executives is planned to take place after the completion of previous financial year audit and prior to the convening of the next annual general meeting, and this external review process will be repeated on a regular basis (at intervals not exceeding three years) to ensure independent professional scrutiny and benchmarking against developing best market practice. The Board acknowledges that performance can always be enhanced and will continue to seek and consider ways of further enhancing performance both individually and collectively. The Company’s practice complies with the Guidelines in this area. principle 9 – remunerate fairly and responsibly The Company’s current practices in this area are reviewed regularly and comply with the Guidelines. Remuneration of Directors and executives is fully disclosed in the annual report. The remuneration committee, which advises and reports to the Board, is appropriately constituted in that it is comprised of 3 non-executive Directors two of whom are independent. principle 10 – recognise the legitimate interests of stakeholders The Board recognises the importance of this principle (which it believes represents not only sound ethics but also good business sense and commercial practice) and continues to develop and implement procedures to ensure compliance with legal and other obligations to legitimate stakeholders. The Company and its policies and practices comply with the Guidelines in this area. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i 2008 Annual Report 19 l a o C n e v a h e t i h W For personal use only diREcTORs’ REPORT 6. DIVIDENDs There were no dividends paid or declared by the Company to members during the financial year. declared after end of year After the balance sheet date the following dividend was proposed by the directors. The dividend has not been provided and there are no income tax consequences. Director Final ordinary (Fully franked) Cents per share 1.7 Total amount $’000 6,662 Franked amount per security Date of payment 100% 30 September 2008 The record date for determining entitlement to the dividend was 29 August 2008. The financial effect of these dividends has not been brought to account in the financial statements for the year ended 30 June 2008 and will be recognised in subsequent financial reports. rEMuNErATION rEpOrT – AuDITED 7. 7.1 principles of compensation – audited Remuneration is referred to as compensation throughout this report. Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company and the consolidated entity, including directors of the Company and other executives. Key management personnel comprise the directors of the Company and executives for the Company and the consolidated entity. Compensation levels for key management personnel and secretaries of the Company and key management personnel of the consolidated entity are competitively set to attract and retain appropriately qualified and experienced directors and executives. The remuneration and nominations committee obtains independent advice on the appropriateness of compensation packages of both the Company and the consolidated entity given trends in comparative companies both locally and internationally and the objectives of the Company’s compensation strategy. The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account: • the capability and experience of the key management personnel • the key management personnel’s ability to control performance • the consolidated entity’s performance including: – the consolidated entity’s earnings – the growth in share price and delivering constant returns on shareholder wealth – the amount of incentives within each key management person’s compensation. Compensation packages may include a mix of fixed compensation and short and long-term incentives. In addition to their salaries, the consolidated entity also provides non-cash benefits to its key management personnel. Fixed compensation Fixed compensation consists of base compensation (which is calculated on a total cost basis and includes any FBT charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds. Compensation levels are reviewed annually by the remuneration and nomination committee through a process that considers individual and overall performance of the consolidated entity. In addition, external consultants provide analysis and advice to ensure the directors’ and senior executives’ compensation is competitive in the market place. A senior executive’s compensation is also reviewed on promotion. 20 2008 Annual Report For personal use only short-term incentive bonus Each year, the Managing Director assesses the performance of senior executives and may recommend the payment of a short term incentive bonus to the Board for approval. Long-term incentive The objective of LTI compensation is to reward and retain key management personnel in a manner which aligns this element of compensation with the creation of shareholder wealth. As such LTI grants are made to employees who are able to influence the generation of shareholder wealth and therefore have a direct impact on the Company’s performance. LTI grants to executives are delivered in the form of options. Other benefits Other benefits include motor vehicles and some minor benefits. Employment contracts It is the consolidated entity’s policy that service contracts are entered into with key management personnel. These contracts vary in term but are capable of termination by the consolidated entity at short notice should the specified executive commit any serious breach of any of the provisions of their agreement or is guilty of any grave misconduct or wilful neglect in the discharge of their duties. Rob Stewart, Managing Director has a contract of employment that is unlimited in term but capable of termination by the Company other than for misconduct with 5 weeks notice or by the executive with 5 weeks notice. The contract includes provision for a termination benefit to be paid upon redundancy of six months salary excluding superannuation. Leigh Whitton, Chief Financial Officer and Joint Company Secretary has accepted a redundancy package and will not relocate when the Company moves its head office from Brisbane to Sydney at the end of March 2009. At that time he will be compensated with three weeks payment for each year of service and a retention bonus equal to six months salary. Casper Dieben, General Manager Open Cut Operations has a contract of employment that is dated 30 April 2007. The contract is for a three year term and can be terminated by the Company other than for misconduct by payment of the outstanding contract balance. Non-executive directors The constitution of the Company provides that the Directors may be paid, as remuneration for their services as Directors, a sum determined from time to time by the Company’s shareholders in general meeting, with that sum to be divided amongst the Directors in such manner and proportion as they agree. The maximum aggregate amount which was approved by Shareholders for fees to the Directors is $500,000 per annum. An amount of $446,900 was paid during the year ended 30 June 2008. Remuneration provided to Executive Directors may be in addition to the sum approved by Shareholders. With the exception of shares and options granted to entities related to Andy Plummer and Tony Haggarty under the terms of the Equity Participation and Option Deed in the 2007 financial year (refer section 7.2), non-executive directors do not receive equity instruments. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 21 For personal use only diREcTORs’ REPORT rEMuNErATION rEpOrT – AuDITED (CONTINuED) 7. 7.2.1 Directors’ and executive officers’ remuneration (Company and Consolidated) – audited Details of the nature and amount of each major element of remuneration of each director of the Company and each of the five named Company executives and relevant consolidated entity executives who receive the highest remuneration and other key management personnel are shown in the table below. Options issued to entitities associated with Andy Plummer and Tony Haggarty under the Equity Participation and Option Deed are also disclosed in this table. Short-term Post- employment Share-based payments STI cash bonus (A) $ Salary & Fees $ Non- monetary benefits $ Other benefits (B) $ Super- annuation benefits $ Total $ Options issued to senior employees (C) $ Shares $ In AUD Directors Non-executive directors John Conde (Chairman) 2008 120,000 2007 30,000 Neil Chatfield 2008 75,000 2007 18,749 Tony Haggarty 2008 65,400 2007 16,350 Alex Krueger 2008 54,500 2007 13,625 Hans Mende 2008 54,500 2007 13,625 Andy Plummer 2008 59,950 2007 14,988 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 120,000 10,800 30,000 75,000 2,700 6,750 18,749 1,689 65,400 16,350 54,500 13,625 54,500 13,625 59,950 14,988 – – – – – – – – – – – – – – – – – – – Executive directors Rob Stewart (appointed 1 April 2008)* Keith Ross (Managing Director) (resigned 31 March 2008) 2008 301,111 – 21,295 400,000 722,406 75,779 54,979 2008 435,561 2007 338,000 – – 32,747 27,394 – 468,308 69,483 – 365,394 – – – – – – – – – – – – – – – – – – Options issued under the Equity Participation and Option Deed (D) $ Value of options as proportion of total value % – – – – – – – 1,309,614 27,500 95.2 62.7 – – – – 1,309,614 27,500 – – – – – – – 95.6 64.7 6.4 – – * Rob Stewart was appointed as Chief Executive Officer 22 October 2007 and further appointed Managing Director 1 April 2008. Non-executive directors were appointed 3 May 2007, they were paid from 1 April 2007 for services associated with the IPO. 22 2008 Annual Report For personal use only Short-term Post- employment Share-based payments STI cash bonus (A) $ Non- monetary benefits $ Other benefits (B) $ Salary & Fees $ Super- annuation benefits $ Total $ Options issued to senior employees (C) $ Shares $ Options issued under the Equity Participation and Option Deed (D) $ Value of options as proportion of total value % 2008 286,320 – 30,153 2007 211,000 10,000 16,792 2008 350,890 – 6,168 2007 176,658 10,000 14,138 2008 229,964 2007 – – – 30,299 4,388 2008 220,165 – 15,189 2007 160,000 10,000 18,987 2008 39,600 2007 6,600 – – – – – – – – – – – – – – 316,473 40,711 6,286 – 237,792 31,650 500 1,000 357,058 95,428 200,796 45,439 260,263 102,121 4,388 47,744 – – – – – – – 1,000 235,354 100,000 6,286 – 188,987 100,000 500 1,000 39,600 6,600 – – – – – – – – – – – – – – – – 1.7 0.2 – – – – 1.8 0.2 – – In AUD Executives Leigh Whitton (CFO/Company Secretary) Chris Burgess (General Manager New Projects)* Casper Deiben (General Manager Operations) (appointed 1 May 2007) Tony Galligan (Managing Director, Whitehaven Coal Infrastructure) Paul Marshall (Joint Company Secretary) * Chris Burgess resigned 15 August 2008. 7.2.2 Notes in relation to the table of directors’ and executive officers’ remuneration – audited A. B. C. The short-term incentive bonus is for performance during the 30 June 2006 and 30 June 2005 year. An amount of $400,000 was paid to Mr Rob Stewart in two payments of $200,000 each on 24 October 2007 and 28 April 2008 as consideration for agreeing to hold the position of Chief Executive Officer effective from 22 October 2007. The fair value for share options granted to the senior employees is based on the fair value of options granted, measured using a Black Scholes model. The following factors and assumptions were used in determining the fair value of options on grant date: Grant Date Managing Director 5/9/07 5/9/07 5/9/07 Executives 3/5/07 3/5/07 3/5/07 Expected option life/ Expiry date Fair value per option Exercise price Price of shares on grant date Expected volatility Risk free interest rate Dividend yield $1.64 $1.64 $1.64 $1.00 $1.00 $1.00 30% 30% 30% 30% 30% 30% 6.75% 6.75% 6.75% 5.88% 5.88% 5.88% 10% 10% 10% 10% 10% 10% 22/10/12 22/10/12 22/10/12 2.0 cents 4.8 cents 6.9 cents 30/6/08 10.7 cents 30/6/09 10.7 cents 30/6/10 10.7 cents $2.50 $2.50 $2.50 $1.00 $1.00 $1.00 23 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report For personal use only diREcTORs’ REPORT rEMuNErATION rEpOrT – AuDITED (CONTINuED) 7. 7.2.2 Notes in relation to the table of directors’ and executive officers’ remuneration – audited (continued) D. Equity Participation and Option Deed The fair value for options issued under the Equity Participation and Option Deed is based on the fair value of options granted, measured using a Black Scholes model. The following factors and assumptions were used in determining the fair value of options on grant date: Grant Date 3/5/07 Expected option life/ Expiry date Fair value per option Exercise price Price of shares on grant date Expected volatility Risk free interest rate 10 years 7.2 cents $1.00 $1.00 30% 5.88% Dividend yield 10% During the year ended 30 June 2007, the consolidated entity entered into an Equity Participation and Option Deed (the Deed) with entities related to Directors Andy Plummer and Tony Haggarty. In accordance with the Deed, the following shares and options in the Company have been issued to these related entities. shares The related entities of Andy Plummer and Tony Haggarty hold 30 million shares in the Company (15 million shares each). The 30 million shares were issued at $0.50 per share. These shares comprise Tranche 1 (15 million shares) and Tranche 2 (15 million shares). Tranche 2 shares have been escrowed and will be released from escrow over a five year period but will be released earlier if the Company’s share price reaches $2.50 or the options referred to below lapse. Dividends (net of an allowance for tax) attaching to the escrowed shares will be held in escrow accounts and released at the time the shares are released. The company’s share price reached $2.50 during the year ended 30 June 2008 and accordingly, the Tranche 2 shares have been released from escrow. For accounting purposes, the difference between the consideration received by the Company and the fair value of the issued shares of $15,000,000 was recognised in the profit and loss for the period ended 30 June 2007 (2008: $nil). Options The related entities of Andy Plummer and Tony Haggarty were also granted 6 options each to acquire additional shares in the Company. The number of option shares is the percentage (the “Grant percentage” set out in the table below) of a deemed amount of issued shares. For the purposes of the Deed, the deemed number of shares is 300 million shares plus any shares issued under previous exercised options. Each option is exercisable when the share price reaches a certain level (as set out in the table below). All share prices will be considered attained when the volume weighted average price of ordinary shares on the ASX measured over 10 consecutive trading days reaches the required amount. Options 1 and 2 were exercised during the year ended 30 June 2008. Option 3 reached the target share price during the year ended 30 June 2008 and was exercised subsequent to year end. Option 4 also reached the target share price during the year ended 30 June 2008 and the director related entities have applied to exercise the option on 25 September 2008 with shares to be issued subsequent to the date of this financial report. All options have an exercise price of $1 and must be exercised by the related entities within 90 days of being notified the Company’s share price has reached the target share price. The number of option shares to be received will be reduced if a specified percentage of the Tranche 2 shares formerly held in escrow are not held at the time of the Company’s share price reaching the target share price specified in the option. For example if for option 5, only 50% of the Tranche 2 shares are held, then the number of option shares will be reduced to 50%/60% of the relevant grant percentage in the table below. 24 2008 Annual Report For personal use only Option No. Grant percentage 1 2 3 4 5 6 0.835% 1.5% 1.2% 1.195% 1.1% 1.1% Maximum number of potential shares each 2,505,000 4,575,150 3,769,924 3,844,317 3,623,277 3,702,989 22,020,657 Percentage of the Tranche 2 shares released from escrow to be held 100% 90% 80% 70% 60% 50% Share price $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 The options were granted for nil consideration. The fair value of the options at grant date was 7.2 cents per option share. For accounting purposes the fair value of these options attributable to the period ended 30 June 2008 of $2,619,228 (2007: $55,000) has been recognised in the profit and loss. 7.3 Equity instruments – audited All options refer to options over ordinary shares of Whitehaven Coal Limited. 7.3.1 Options over equity instruments granted as compensation – audited Details on options over ordinary shares in the Company that were granted to each key management person during the reporting period and details on options that were vested during the reporting period are as follows: Number of options granted during 2008 Fair value per option at grant date Exercise price per option Grant date Expiry date Vesting date Managing Director Rob Stewart 1,000,000 5 Sep 2007 1,000,000 5 Sep 2007 2.0 cents 4.8 cents 1,000,000 5 Sep 2007 6.9 cents $2.50 $2.50 $2.50 22 Oct 2012 22/10/08 22 Oct 2012 22/10/09 22 Oct 2012 22/10/10 The fair value of these options attributable to the period ended 30 June 2008 of $54,979 has been recognised in the profit and loss of the Company. No options have been granted since the end of the financial year. The options were provided at no cost to the recipients. All executive options expire on the earlier of their expiry date or termination of the individual’s employment. The options are exercisable over a period of three years from grant date. 7.3.2 Modification of terms of equity-settled share-based payment transactions – audited No terms of equity-settled share-based payment transactions have been altered or modified by the issuing entity during the reporting period. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 25 For personal use only diREcTORs’ REPORT rEMuNErATION rEpOrT – AuDITED (CONTINuED) 7. 7.3.3 Exercise of options granted as compensation – audited During the reporting period the following shares were issued on the exercise of options previously granted: Director related entities Tony Haggarty Andy Plummer Executives Leigh Whitton Tony Galligan Number of shares Amount paid $/share 7,080,150 7,080,150 33,333 33,333 1.00 1.00 1.00 1.00 There are no unpaid amounts on the shares issued as a result of the exercise of the options in the 2008 financial year. 7.3.4 Analysis of options and rights over equity instruments granted as compensation – audited Details of vesting profile of the options granted to each of the named executives and director related entities are detailed below. Executives Rob Stewart Leigh Whitton Tony Galligan Options granted Number Date % vested in year % Forfeited in year Financial years in which grant vests 1,000,000 5 Sept 2007 1,000,000 5 Sept 2007 1,000,000 5 Sept 2007 33,333 33,333 33,334 33,333 33,333 33,334 3 May 2007 3 May 2007 3 May 2007 3 May 2007 3 May 2007 3 May 2007 – – – 100 – – 100 – – – – – – – – – – – 2009 2010 2011 2008 2009 2010 2008 2009 2010 26 2008 Annual Report For personal use only Director related entities Tony Haggarty Andy Plummer Options granted Number Date % vested in year % Forfeited in year Share price at which grant vests 2,505,000 3 May 2007 4,575,150 3 May 2007 3,769,924 3 May 2007 3,844,317 3 May 2007 3,623,277 3 May 2007 3,702,989 3 May 2007 2,505,000 3 May 2007 4,575,150 3 May 2007 3,769,924 3 May 2007 3,844,317 3 May 2007 3,623,277 3 May 2007 3,702,989 3 May 2007 100 100 100 100 – – 100 100 100 100 – – – – – – – – – – – – – – $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 The options provided to the related entities of Mr Haggarty and Mr Plummer vest when the volume weighted average price of the ordinary shares on the ASX measured over 10 consecutive trading days reaches the specified share price. 7.3.5 Analysis of movements in options – audited The movement during the reporting period, by value, of options over ordinary shares in the Company held by each director related entities and each key management person is detailed below. Executives Rob Stewart Leigh Whitton Tony Galligan Director related entities Tony Haggarty Andy Plummer Granted in year $ (A) Value of Options Exercised in year $ (B) Lapsed in year $ (C) 137,000 – – – – – 93,332 93,332 12,368,520 12,368,520 – – – – – (A) (B) (C) The value of options granted in the year is the fair value of the options calculated at grant date using the Black Scholes model. The total value of the options granted is included in the table above. This amount is allocated to remuneration over the vesting period (i.e. in years 1 July 2008 to 1 July 2012). The value of options exercised during the year is calculated as the market price of shares of the Company as at close of trading on the date the options were exercised after deducting the price paid to exercise the option. The value of options exercised that lapsed during the year represents the benefit forgone and is calculated at the date the option lapsed using the Black Scholes model. No options lapsed in the year. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 27 For personal use only diREcTORs’ REPORT 8. prINCIpAL ACTIVITIEs The principal activity of the Group during the period was the development and operation of coal mines in New South Wales. During the year ended 30 June 2008, Whitehaven Coal Limited and its controlled entities (“the Group”) completed the acquisition of Creek Resources Pty Ltd, resulting in it holding a 100% interest in the Werris Creek coal mine, and was granted development approval for the Narrabri project and the Rocglen project. The mining lease for Narrabri was granted in January 2008 allowing for the full development of a new underground coal mine. There were no other significant changes in the nature of the activities of the Group during the period. 9 OpErATINg AND fINANCIAL rEVIEW 9.1 Overview of the consolidated entity Whitehaven Coal Limited was incorporated on 15 March 2007 and legally acquired Whitehaven Coal Mining Limited and its controlled entities on 29 May 2007. During the year ended 30 June 2008, the consolidated entity acquired Creek Resources Pty Ltd, the 60% partner in the Werris Creek Joint Venture and the balance of the associated entities Werris Creek Coal Sales Pty Ltd and Werris Creek Coal Pty Ltd and purchased assets from an associate of Creek Resources to establish WC Contract Hauling Pty Ltd. 9.2 shareholder returns Highlights from the year include the following: • Net Profit after Tax up 115% from the previous year to $51.9 million, including an after tax gain of $38.9 million from the sale of 7.5% of the Narrabri project. • EBITDA increased 255% from the previous year to $91.0 million, including a pre tax gain of $55.6 million from the sale of 7.5% of the Narrabri project. • Tonnes of coal sold up 91% from the previous year to 2.8 million tonnes (Mt). • Revenue up 142% from the previous year to $256.5 million. • A fully franked dividend declared of $6.7 million (1.7 cents per share) for FY2008, to be paid in September 2008. • JORC coal resources increased by 77.6 Mt to 712.9 Mt, with marketable coal reserves increased by 19.9 Mt to 137.9 Mt. • Acquisition of 60% of the Werris Creek mine, bringing Whitehaven’s ownership to 100%. • Planning Approval for Narrabri Stage 1 granted in November 2007 and Mining Lease granted in January 2008. • Construction of the Narrabri project is progressing well and is on track to produce first coal in Q1 FY2010. • Planning Approval for the Rocglen open cut mine was granted in May 2008, followed by the grant of a Mining Lease in June 2008. Mining at Rocglen commenced in July 2008 with first coal expected in Q2 FY2009. • A 7.5% interest in the Narrabri project was sold to China’s Yudean Group for A$67.5 million. • Since 30 June 2008, Whitehaven has accepted offers from Electric Power Development Co Ltd and EDF Trading for those companies to each acquire a 7.5% stake in the Narrabri project for A$125 million and US$120 million respectively. The sales are subject to formal documentation, due diligence and usual regulatory approvals, conditional on FIRB approval and are expected to be completed during September and October 2008. • Demand for Whitehaven’s low ash, low sulphur coal continues to increase. New coal sales contracts were obtained recently for approximately 1.0 Mt per year of semi soft coking coal (SSCC) and pulverized coal injection coal (PCI) for the next three years. • Sales prices for FY2009 have recently been settled, with averages of A$250 per tonne achieved for SSCC and PCI and A$135 per tonne for thermal coal. • Whitehaven maintained its exceptional safety record in FY2008 with only one lost time injury recorded. Since commencing operations in 2000, Whitehaven has only had two lost time injuries over the eight year period. 28 2008 Annual Report For personal use only 9.2 shareholder returns The operating results are summarised below: Revenue Net profit for the period attributable to members Earnings per share (cents) 2008 $000 256,462 51,854 14.5 2007 $000 Movement % 106,201 24,095 8.0 141% 115% 81% The consolidated entity’s operations during the year focused on operating and developing coal mines. There were three operating projects during the year with total coal production (on an equity basis) of 2,275,000 tonnes compared to 1,731,000 tonnes in the 2007 year. The share price at 30 June 2008 was $4.47. 9.3 Investments for future performance The consolidated entity has interests in three operating mines (Canyon, Tarrawonga and Werris Creek) that produce thermal coal, semi-soft coking coal and PCI coal. Most of this coal is exported out of Newcastle to major steel mills and international power utilities. During FY2009 and FY2010, the consolidated entity plans to commence mining at two additional open cut mines (Rocglen and Sunnyside) within the Whitehaven Mining Precinct and a large underground project at Narrabri North. The consolidated entity’s key assets include: (a) Whitehaven Mining Precinct (Canyon: 100%, Tarrawonga: 70%, Rocglen: 100% and Sunnyside: 100%); (b) Werris Creek (100% ); and (c) Narrabri (North 92.5% and South 92.5%). These projects are expected to result in aggregated managed production of approximately 11,000,000 tonnes per annum by FY2011. These production forecasts do not include possible additional production from the Narrabri South, Tarrawonga underground, Canyon West, West Blue Vale or Bonshaw exploration projects. Under agreements with the NSW Government and the Australian Rail Track Corporation, the consolidated entity has committed to underwrite 60% of the funding of a major upgrade of the Muswellbrook to Narrabri rail infrastructure which will increase the capacity of that line to more than 15 million tonnes per annum (Mtpa) over the next three years. The first stage was commissioned at the end of July 2008 lifting capacity from 4 Mtpa to 7 Mtpa. The remaining upgrades will progressively increase capacity through to 2010. 2008 Annual Report 29 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only diREcTORs’ REPORT 9. OpErATINg AND fINANCIAL rEVIEW (CONTINuED) 9.4 review of financial condition capital structure and treasury policy At 30 June 2008, the Company had 391,918,453 shares on issue with a total of 1,235 shareholders (2007: 323,000,000 shares on issue). Liquidity and funding The consolidated balance sheet shows the consolidated entity is well positioned for growth and with a portfolio of projects that can be used to raise the finance required for their development. Cash on Hand (A$ millions) Interest Cover Ratio1 Interest Bearing Liabilities (A$ millions) Net Cash/(Net Debt) Net Assets (A$ millions) Gearing Ratio2 (%) 1 EBIT to Interest Expense (excluding FX in financing expense). 2 Net Debt to Net Debt plus Equity. 9.5 Operations FY 2008 105.9 FY 2007 21.2 109.7 times 3.2 times (55.2) 50.7 489.5 (11.6%) (76.7) (55.5) 252.5 18% Details of the mine operations of the consolidated entity that operated during the 2007/08 financial year are as follows: Whitehaven mining Precinct Thousand Tonnes* ROM Coal Production Saleable Coal Production Sales of produced coal Sales of purchased coal** Total Sales Coal stocks at end of period * All figures are on a 100% basis. ** Includes purchased coal. FY 2008 1,876 1,613 1,743 356 2,099 198 FY 2007 1,388 997 893 128 1,021 286 % Variance 35% 62% 95% 178% 106% (31%) The Whitehaven Mining Precinct (WMP) currently includes the Canyon and Tarrawonga open cut mines and the Whitehaven Coal Handling and Preparation Plant and train load-out facility. There was one Lost Time Injury recorded in the Whitehaven Mining Precinct in FY2008 (2007: nil). Saleable coal production of 1.613 million tonnes was 62% above the previous corresponding period. The increase in production reflects the increasing production at Tarrawonga (+80%), partially offset by reduced production at Canyon (-33%) due to a higher strip ratio as the mine comes to the end of its life. Planning approval was granted for work to expand the Coal Handling and Preparation Plant to increase annual washing capacity from 2 Mt per annum (Mtpa) to 3 Mtpa and to lift annual train loading capacity from 3 Mtpa to 4 Mtpa . The work will be completed in FY09. 30 2008 Annual Report For personal use only Werris Creek Thousand Tonnes* ROM Coal Production Saleable Coal Production Sales of produced coal Sales of purchased coal** Total Sales Coal stocks at end of period * All figures are on a 100% basis. ** Includes purchased coal. FY 2008 FY 2007 % Variance 1,116 1,111 1,112 25 1,137 69 1,289 1,291 1,320 41 1,361 56 (13%) (14%) (16%) (39%) (16%) 23% There were no Lost Time Injuries recorded at Werris Creek in FY2008 (2007: nil). development Projects Narrabri The development application was approved for Narrabri Coal Project Stage 1 in November 2007 and the Mining Lease granted in January 2008. The project is progressing well, but a delay in gaining approvals to commence construction and design changes have resulted in the date for producing first coal to be revised to Q1 of FY 2010. Works are well advanced on the site access road, office and workshop area, boxcut, dams and rail loop. Contracts have now been awarded for more than 60% of the Stage 1 work. Recent awards include: transmission substation; drift conveyor; train load out facility; rail track components, skyline stackout conveyor and drift construction. There has been some increase in the forecast capital cost of Stage 1 caused by higher costs of materials and a decision to reduce the grade of the drifts which will reduce long term costs. A drill program has been completed to undertake a detailed evaluation of coal seam gas in the first two longwall panels and further drilling is under way to improve detailed understanding of the conditions of early mining areas. Rocglen Following Planning Approval in May, the Mining Lease for the Rocglen mine was granted by the NSW Government in June 2008. Overburden removal commenced in July 2008 and first coal is expected from this new mine in second quarter of 2009 financial year. Sunnyside The Environmental Assessment came off Public Exhibition on 19th May 2008 and Whitehaven has responded to all submissions received. Planning Approval is expected in October 2008. The Mining Lease for Sunnyside should be approved promptly following Planning Approval. Granting of the Mining Lease in September 2008 will enable first coal production from Sunnyside in Q2 FY 2009. Bonshaw Agreement has been reached in July 2008 for the purchase of the 1/3rd share of the Bonshaw project in northern NSW from Republic Coal Pty Ltd. This brings Whitehaven to 100% ownership of the project. Whitehaven will pay Republic Coal a total of $2.87M for the acquisition in two tranches. The first tranche of $1.87M will be paid on transfer of the tenements and the balance is payable on the earlier of development consent being granted or Whitehaven selling or transferring a majority interest in the tenements. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 31 For personal use only diREcTORs’ REPORT 9. OpErATINg AND fINANCIAL rEVIEW (CONTINuED) 9.5 Operations (continued) Resources and Reserves (100% Basis) Whitehaven’s coal resources and reserves statements have been updated for both Werris Creek and Sunnyside as at 30 April 2008. At Werris Creek, further exploration and mine planning has increased coal resources from 26 Mt to 38 Mt, with marketable reserves of 19.9 Mt. This increase in resources and reserves provides Whitehaven with the potential to extend the life of Werris Creek up to 13 years, at the planned production rate of 1.5 Mtpa. At Sunnyside, additional exploration has allowed the reclassification of 0.8 Mt from inferred to indicated status, and 4.1 Mt from indicated to measured. A further resource of 65.9 Mt has been identified within the Sunnyside EL area. Whitehaven’s JORC Coal Resources total 712.9 Mt1 , an increase of 77.6 Mt (12%), with JORC Marketable Reserves of 137.9 Mt2,3 an increase of 19.9 Mt (17%). Ownership Status Measured Indicated Inferred Mine/Project Canyon Tarrawonga Opencut Tarrawonga Seam Underground Tarrawonga Underground – other Belmont Opencut Sunnyside Opencut Sunnyside – EL 5183 other Canyon West Blue Vale WMp Total Narrabri North Narrabri South Narrabri Total 100% 70% 100% 100% 100% 100% 100% 100% 100% Operating Operating Feasibility Exploration Project Project Exploration Exploration Exploration 92.5% 92.5% Project Exploration TBD 8.3 2.7 7.3 – 4.1 3.4 TBD 2.8 28.6 88.6 30.6 119.2 30.0 TBD 177.8 TBD 11.0 8.0 26.0 14.2 2.2 23.5 TBD 1.5 86.4 81.0 103.0 184.0 5.4 TBD 275.8 TBD 24 5 53 – – 39 TBD 0.7 121.7 60.0 75.0 135.0 2.6 TBD 259.3 Total TBD 43.3 15.7 86.3 14.2 6.3 65.9 TBD 5.0 236.7 229.6 208.6 438.2 38.0 TBD 712.9 Werris Creek Opencut 100% Operating Bonshaw – Arthur’s Seat 66.67% Exploration Total 1 The coal resources and reserves have not been amended to reflect any coal extracted since the date of the relevant JORC report. 2 The JORC marketable reserves are based on geological modeling of the anticipated yield from recoverable reserves. 3 The JORC reserves are included in the JORC resources. 32 2008 Annual Report For personal use only Mine/Project Canyon Tarrawonga Open Cut Tarrawonga Seam Underground Tarrawonga Seam-other RocGlen (Belmont) Sunnyside Canyon West West Blue Vale WMp Total Narrabri North Narrabri South Narrabri Total Werris Creek Ashford – Arthur’s Seat Total Resources and Reserves statement Recoverable Reserves (Proved+Probable) (Mt) Marketable Reserves (Mt) From Proved From Probable Total – 8.9 – – 10.8 – – – 19.7 112.0 – 112.0 19.9 – 151.6 – – – – – – – – – 51.1 – 51.1 17.6 – 68.7 – 7.7 – – 7.6 – – – 15.3 51.6 – 51.6 2.3 – 69.2 7.7 – 7.6 – – – 15.3 102.7 – 102.7 19.9 – 137.9 The information in this report that relates to Coal Resources and Reserves of the Whitehaven Group is based on information compiled by Mr David West, who is a Member of the Australasian Institute of Mining & Metallurgy. Mr West MAusIMM is a qualified geologist and is a full time employee of Whitehaven Coal Mining Ltd. Mr West has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration results, Mineral resources and Ore Reserves”. Mr West consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 10. sIgNIfICANT CHANgEs IN THE sTATE Of AffAIrs In the opinion of the directors, there were no significant changes in the state of affairs of the consolidated entity that have not been noted in the review of operations that occurred during the financial year. 2008 Annual Report 33 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only diREcTORs’ REPORT 11. EVENTs suBsEquENT TO rEpOrTINg DATE There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, other than the following: • The Group has committed to acquire the remaining one third balance of the Bonshaw Project for $2,873,000. • Further sell downs of the Narrabri Coal Project have been agreed to: On 1 August 2008, the Group announced receipt of further offers from Electric Power Development Co., Ltd. (“J-Power”) and EDF Trading (“EDFT”) for those companies to each acquire a 7.5% stake in the Narrabri Coal Project for A$125 million and US$120 million, respectively. The sales are subject to formal documentation, due diligence and usual regulatory approvals, conditional on FIRB approval and are expected to be completed during September and October 2008. • The directors have resolved to pay a fully franked dividend of 1.7 cents per ordinary share. The financial effect of the above matters has not been brought to account in the financial statements for the year ended 30 June 2008 but will be recognised in future financial periods. 12. LIkELy DEVELOpMENTs The consolidated entity will continue with the operation and development of its coal projects. Further information about likely developments in the operations of the consolidated entity and the expected results of those operations in future financial years has not been included in this report because disclosure of this information would be likely to result in unreasonable prejudice to the consolidated entity. 13. sHArE OpTIONs 13.1 Options granted to directors and officers of the Company During or since the end of the financial year, the Company granted options for no consideration over unissued ordinary shares in the Company to the following of the five most highly remunerated officers of the Company as part of their remuneration: Officers Rob Stewart Rob Stewart Rob Stewart Number of options granted 1,000,000 1,000,000 1,000,000 Exercise price Expiry date $2.50 $2.50 $2.50 22 Oct 2010 22 Oct 2011 22 Oct 2012 All options were granted during the financial year. No options have been granted since the end of the financial year. These options do not entitle the holder to participate in any share issue of the Company or any other body corporate. 13.2 shares issued on exercise of options During or since the end of the financial year, the Company issued the following ordinary shares as a result of the exercise of options (there are no amounts unpaid on the shares issued). Officers Director related entities Tony Haggarty Andy Plummer Executives Leigh Whitton Tony Galligan Number of shares Amount paid $/share 10,850,074 10,850,074 33,333 33,333 1.00 1.00 1.00 1.00 34 2008 Annual Report For personal use only 13.3 unissued shares under options At the date of this report unissued ordinary shares of the Company under option are: Expiry date 30 June 2009 30 June 2010 22 October 2010 22 October 2011 22 October 2012 No expiry date Exercise price $1.00 $1.00 $2.50 $2.50 $2.50 $1.00 Number of shares 66,666 66,668 1,000,000 1,000,000 1,000,000 22,341,166 All options expire on the earlier of their expiry date or termination of the employee’s employment or resignation as a director of the Company. For details of options issued to key management personnel refer to section 7 of the Director’s report. 14. INDEMNIfICATION AND INsurANCE Of OffICErs 14.1 Indemnification The Company has agreed to indemnify all current and former directors of the Company against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. 14.2 Insurance premiums During the financial year the Company has paid premiums in respect of directors’ and officers’ liability and legal expenses insurance contracts. Such insurance contracts insure against certain liability (subject to certain exclusions) persons who are or have been directors or officers of the Company or its controlled entities. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability and legal expenses’ insurance contracts, as such disclosure is prohibited under the terms of the contract. 15. ENVIrONMENTAL rEguLATION The consolidated entity’s operations are subject to various environmental regulations under both Commonwealth and State legislation. The board is only aware on one environmental incident. The EPA has commenced proceedings against Werris Creek Coal Pty Ltd over a 2007 incident that occurred when the Group held a minority interest. The sale agreement for the controlling interest includes an indemnity for 60% of any costs or penalties that may arise from the incident. Given the indemnity and the recency of the EPA notice, no amounts have been provided as directors believe it is too early to assess a reliable estimate. Directors do not believe that the proceedings will have a major financial impact on the Company. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 35 For personal use only diREcTORs’ REPORT 16. NON-AuDIT sErVICEs During the year KPMG, the Company’s auditor, has performed certain other services in addition to their statutory duties. The Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the audit and risk management committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the audit committee to ensure they do not impact the integrity and objectivity of the auditor; and • the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for non-audit services provided during the year are set out below. In AUD Other assurance services Accounting advice – KPMG Australia Due diligence services – KPMG related practice Other services – kpMg Australia Taxation services Consolidated 2008 2007 4,200 29,726 – 210,158 225,377 232,555 229,577 472,439 17. LEAD AuDITOr’s INDEpENDENCE DECLArATION The Lead auditor’s independence declaration is set out on page 37 and forms part of the directors’ report for financial year ended 30 June 2008. 18. rOuNDINg The Company is of a kind referred to in ASIC Class Order 98/100 and dated 10 July 1998 and in accordance with that Class Order, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated. Signed in accordance with a resolution of the directors: John Conde Chairman Dated at Melbourne this 26th day of September 2008 36 2008 Annual Report For personal use only AUdiTOR’s iNdEPENdENcE dEcLARATiON Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To: the directors of Whitehaven Coal Limited To: the directors of Whitehaven Coal Limited I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2008 there have been: I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2008 there have been: • • no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. no contraventions of any applicable code of professional conduct in relation to the audit. • • KPMG KPMG Jason Adams Partner Jason Adams Partner Brisbane 26 September 2008 Brisbane 26 September 2008 2008 Annual Report KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. Liability limited by a scheme approved under Professional Standards Legislation. Liability limited by a scheme approved under Professional Standards Legislation. 37 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only FiNANciAL REPORT Income Statements .................................................................................................................... 39 Statements of Changes in Equity .......................................................................................... 40 Balance Sheets ........................................................................................................................... 41 Statements of Cash Flows ....................................................................................................... 42 Notes to the Financial Statements ........................................................................................ 43 Directors’ Declaration ................................................................................................................ 92 Auditor’s Report........................................................................................................................... 93 ASX Additional Information ...................................................................................................... 95 38 2008 Annual Report For personal use only iNcOmE sTATEmENTs FOR ThE YEAR ENDED 30 JuNE 2008 In thousands of AUD Revenue Cost of sales gross profit Other income Selling and distribution expenses Administrative expenses Other expenses profit/(loss) before financing income Financial income Financial expenses Net financing income/(expense) profit/(loss) before tax Note 8 9 10 12 12 Consolidated Company 2008 2007 2008 2007 256,462 106,201 (196,039) (67,206) 60,423 56,475 38,995 1,140 (24,631) (28,231) (7,061) (6,824) (12,646) (15,172) 72,560 (10,092) 8,912 (7,443) 1,469 74,029 20,612 (5,126) 15,486 5,394 18,701 – – – – – (5) (2,687) (2,692) 334 (5,043) (4,709) (7,401) (99) – – – – – (61) (15,163) (15,224) 4,073 (6) 4,067 (11,157) 42 Income tax (expense)/benefit 13 (22,175) profit for the year attributable to equity holders of the parent Earnings per share: 51,854 24,095 (7,500) (11,115) Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 39 39 14.5 14.4 8.0 8.0 The income statements are to be read in conjunction with the notes to the financial statements set out on pages 43 to 91. 2008 Annual Report 39 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only sTATEmENTs OF chANgEs iN EqUiTy FOR ThE YEAR ENDED 30 JuNE 2008 Consolidated In thousands of AUD Balance at 1 July 2006 Net profit for the period Total recognised income and expense for the period Share based payments Shares issued Share issue costs Balance at 30 June 2007 Balance at 1 July 2007 Effective portion of changes in fair value of cash flow hedges Change in fair value of cash flow hedges transferred to profit and loss Total income and expense recognised directly in equity Profit for the period Total recognised income and expense Share based payments Share options exercised Shares issued Share issue costs Balance at 30 June 2008 Company In thousands of AUD Balance at 1 July 2006 Net loss for the period Total recognised income and expense for the period Share based payments Shares issued Share issue costs Balance at 30 June 2007 Balance at 1 July 2007 Net loss for the period Total recognised income and expense for the period Share based payments Share options exercised Shares issued Share issue costs Balance at 30 June 2008 Note 36 29 29 36 29 29 29 Share capital 31,000 – – – 162,046 (163) 192,883 192,883 – – – – – – 14,227 145,366 (2,622) Retained earnings 20,314 24,095 24,095 15,163 – – 59,572 59,572 – – – 51,854 51,854 2,687 – – – Hedge reserve – – – – – – – – Total 51,314 24,095 24,095 15,163 162,046 (163) 252,455 252,455 33,643 (8,081) 33,643 (8,081) 25,562 – 25,562 – – – – 25,562 51,854 77,416 2,687 14,227 145,366 (2,622) 349,854 114,113 25,562 489,529 Note Share capital Retained earnings Hedge reserve – – – – 322,046 (163) 321,883 321,883 – – – 14,227 145,366 (2,622) 478,854 – (11,115) (11,115) 15,163 – – 4,048 4,048 (7,500) (7,500) 2,687 – – – (765) 36 29 29 36 29 29 29 – – – – – – – – – – – – – – – Total – (11,115) (11,115) 15,163 322,046 (163) 325,931 325,931 (7,500) (7,500) 2,687 14,227 145,366 (2,622) 478,089 Where applicable the amounts recognised directly in equity are net of tax. The statements of changes in equity are to be read in conjunction with the notes to the financial statements set out on pages 43 to 91. 40 2008 Annual Report For personal use only BALANcE shEETs AS AT 30 JuNE 2008 In thousands of AUD Assets Cash and cash equivalents Trade and other receivables Inventories Deferred stripping Current tax receivable Derivative financial instruments Total current assets Trade and other receivables Biological assets Investments Property, plant and equipment Exploration and evaluation Other intangible assets Deferred tax assets Derivative financial instruments Total non-current assets Total assets Liabilities Trade and other payables Interest-bearing loans and borrowings Employee benefits Current tax payable Deferred income Provisions Total current liabilities Non-current liabilities Payables Interest-bearing loans and borrowings Deferred tax liabilities Deferred income Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Hedge reserve Retained earnings/(accumulated deficit) Total equity Consolidated Company Note 2008 2007 2008 2007 14 15 16 23 17 15 18 19 20 21 22 23 17 24 25 26 23 27 24 25 23 27 105,867 48,996 9,353 23,132 – 26,670 214,018 2,217 – 37 21,185 14,336 10,768 11,425 25 5,202 62,941 2,214 80 37 50 170,400 2,815 1,318 – – – – – – – – 170,450 4,133 – – – – 464,750 464,750 367,818 267,612 1,774 17,382 – 20,106 409,334 623,352 37,871 22,959 2,159 10,143 123 593 1,672 920 7,876 8,870 289,281 352,222 465,704 636,154 – – – 954 – – – – 2,152 – 466,902 471,035 16,135 22,294 1,380 – 62 708 148,070 145,104 – – 9,995 – – – – – – – 73,848 40,579 158,065 145,104 10,431 32,267 9,957 513 6,807 59,975 133,823 489,529 – 54,401 – 262 4,525 59,188 99,767 252,455 – – – – – – – – – – – – 158,065 478,089 145,104 325,931 29(a) 29(d) 349,854 192,883 478,854 321,883 25,562 114,113 489,529 – 59,572 – (765) – 4,048 252,455 478,089 325,931 The balance sheets are to be read in conjunction with the notes to the financial statements set out on pages 43 to 91. 41 2008 Annual Report 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only sTATEmENTs OF cAsh FLOWs FOR ThE YEAR ENDED 30 JuNE 2008 In thousands of AUD Note 2008 2007 2008 2007 Consolidated Company – (1,379) (1,379) (6) 67 – (1,318) – – – – – – – – – – 4,296 – (163) – – – – 4,133 2,815 – 2,815 Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations Interest paid Interest received Income taxes (paid)/received Net cash from operating activities Cash flows from investing activities Proceeds from sell down of Narrabri project Proceeds from sale of property, plant and equipment Acquisition of subsidiary, net of cash acquired 34 9 7 236,464 108,668 (218,612) (101,905) 17,852 (4,916) 3,398 (4,348) 11,986 67,500 3,021 (36,730) 6,763 (2,489) 2,428 (1,739) 4,963 – – – Cash acquired in business combination – 17,179 Acquisition of property, plant and equipment (40,025) (22,244) – (5) (5) – 334 (4,610) (4,281) – – – – – – – Acquisition of intangible Exploration and evaluation expenditure Issuance of loans to related entities Loans repaid by related entities Net cash from investing activities Cash flows from financing activities Proceeds from the issue of share capital Proceeds from the exercise of share options Transaction costs paid on issue of share capital Proceeds from the issuance of borrowings Repayment of borrowings Payment of finance lease liabilities Dividends paid Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July (861) (104) (7,943) 11,338 (3,804) (92) (604) (2,514) (144,262) – – (8,275) (144,262) 29 29 135,366 4,296 135,366 14,227 (3,815) – (163) 14,227 (3,815) – 35,812 (61,223) (11,226) (8,055) – 76,500 84,682 21,185 (3,478) (2,500) 22,741 19,429 1,756 21,185 – – – – 145,778 (2,765) 2,815 50 Cash and cash equivalents at 30 June 14 105,867 The statements of cash flows are to be read in conjunction with the notes to the financial statements as set out on pages 43 to 91. 42 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 1. rEpOrTINg ENTITy Whitehaven Coal Limited (the “Company”) is a Company domiciled in Australia. The address of the Company’s registered office is Ground Floor 895 Ann Street, Fortitude Valley QLD 4006. The consolidated financial report of the Company for the financial year ended 30 June 2008 comprises the Company and its subsidiaries (together referred to as the “consolidated entity”) and the consolidated entity’s interest in jointly controlled operations. The consolidated entity primarily develops and operates coal mines in New South Wales. 2. BAsIs Of prEpArATION a) statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The financial report also complies with the IFRSs and interpretations adopted by the International Accounting Standards Board (IASB). The financial statements were approved by the Board of Directors on 26 September 2008. b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments which are measured at fair value. The methods used to measure fair values are discussed further in note 4. c) functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency and the functional currency of all entities in the consolidated entity. The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated. d) use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes: • Note 7 – business combinations • Note 17 – valuation of financial instruments • Notes 20 and 22 – estimates of useful lives and impairment of property, plant and equipment and intangibles • Note 23 – utilisation of tax loss • Notes 27 and 33 – provisions and contingencies • Note 36 – measurement of share-based payments 8 0 0 2 t r o p e R l a u n n A - d e t i m L i 2008 Annual Report 43 l a o C n e v a h e t i h W For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by all subsidiaries in the consolidated entity. Certain comparative amounts have been reclassified to conform with the current year’s presentation. a) Basis of consolidation (i) subsidiaries Subsidiaries are entities controlled by the consolidated entity. Control exists when the consolidated entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the consolidated entity. Investments in subsidiaries are carried at their cost of acquisition in the Company’s financial statements. (ii) Jointly controlled operations The interest of the consolidated entity in unincorporated joint ventures are brought to account by recognising in its financial statements the assets it controls, the liabilities that it incurs, the expenses it incurs and its share of income that it earns from the sale of goods or services by the joint venture. (iii) Transactions eliminated on consolidation Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. b) foreign currency Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. c) financial instruments (i) Non derivative financial instruments Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below. A financial instrument is recognised if the consolidated entity becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the consolidated entity’s contractual rights to the cash flows from the financial assets expire or if the consolidated entity transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the consolidated entity commits itself to purchase or sell the asset. Financial liabilities are derecognised if the consolidated entity’s obligations specified in the contract expire or are discharged or cancelled. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment loss. 44 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs (CONTINuED) c) financial instruments (continued) (ii) derivative financial instruments The consolidated entity uses derivative financial instruments to hedge its exposure to foreign exchange risks arising from operating activities. In accordance with its treasury policy, the consolidated entity does not hold or issue derivative financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments. During the year ended 30 June 2008, the consolidated entity converted its hedge book comprising foreign currency options to forward exchange contracts. Derivative financial instruments are recognised initially at fair value with attributable transaction costs recognised in the income statement when incurred. Subsequent to initial recognition, derivative financial instruments are measured at fair value and changes therein are accounted for as described below. Cash flow hedges Changes in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the carrying amount of the asset when it is recognised. In other cases the amount recognised in equity is transferred to profit or loss in the same period that the hedged item affects profit or loss. Economic hedges Derivatives which do not qualify for hedge accounting are measured at fair value with changes in fair value recognised in the profit and loss. (iii) share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any related income tax benefit. Dividends Dividends are recognised as a liability in the period in which they are declared. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i 2008 Annual Report 45 l a o C n e v a h e t i h W For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs (CONTINuED) d) property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Borrowing costs related to the acquisition or construction of qualifying assets are capitalised as part of the cost of the asset. Mine property and development assets include costs transferred from exploration and evaluation assets once technical feasibility and commercial viability of an area of interest are demonstrable and subsequent costs to develop the mine to production phase. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” in profit or loss. (ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the consolidated entity and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. (iii) depreciation Depreciation is charged to the income statement on a straight-line or units of production basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. Mining property and development assets are depreciated on a units of production basis over the life of the economically recoverable reserves. The depreciation rates used in the current and comparative periods are as follows: • plant and equipment • leased plant and equipment 2 – 20% 11 – 14% • mining property and development assets units of production The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually. 46 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs (CONTINuED) e) Intangible assets (i) Exploration and evaluation assets Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets on an area of interest basis. Costs incurred before the consolidated entity has obtained the legal rights to explore an area are recognised in the income statement. Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either: i. the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or ii. activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity related. The cash generating unit shall not be larger than the area of interest. Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from intangible assets to mining property and development assets within property, plant and development. (ii) Water access rights The consolidated entity holds water access rights having a perpetual life, which have been determined to have an indefinite life. The water access rights have been recognised at cost and are assessed annually for impairment. (iii) Rail access rights Rail access rights have a finite useful life and are carried at cost less, where applicable, any accumulated amortisation and accumulated impairment losses. The carrying values of rail access rights are reviewed to ensure they are not in excess of their recoverable amounts. Rail access rights are amortised over the life of the mine or access agreement using a unit of production basis. (iv) Other intangible assets Other intangible assets that are acquired by the consolidated entity, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged to the income statement on a units of production basis over the estimated useful life of the mining property to which the intangible relates. (v) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred. f) Deferred stripping costs Expenditure incurred to remove overburden or waste material during the production phase of a mining operation is deferred to the extent it gives rise to future economic benefits and charged to operating costs on a units of production basis using the estimated average stripping ratio for the area being mined. Changes in estimates of average stripping ratios are accounted for prospectively. For the purposes of assessing impairment, deferred stripping costs are grouped with other assets of the relevant cash generating unit. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 47 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs (CONTINuED) g) Leased assets Leases in terms of which the consolidated entity assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and the leased assets are not recognised on the consolidated entity’s balance sheet. h) Inventories Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of coal inventories is determined using a weighted average basis. Cost includes direct material, overburden removal, mining, processing, labour, mine rehabilitation costs incurred in the extraction process and other fixed and variable overhead costs directly related to mining activities. i) Impairment (i) Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in profit or loss. (ii) Non-financial assets The carrying amounts of the consolidated entity’s non-financial assets, other than biological assets, inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”). An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (group of units) on a pro rata basis. 48 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs (CONTINuED) j) Employee benefits (i) defined contribution superannuation funds A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution superannuation funds are recognised as an expense in the income statement as incurred. (ii) Long-term service benefits The consolidated entity’s net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using the rates attached to the Commonwealth Government bonds at the balance sheet date which have maturity dates approximating to the terms of the consolidated entity’s obligations. (iii) short-term benefits Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as medical care, housing, cars and free or subsidised goods and services, are expensed based on the net marginal cost to the consolidated entity as the benefits are taken by the employees. A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the consolidated entity has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (iv) share-based payment transactions The grant date fair value of options granted to employees is recognised as an expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the options. The amount recognised is adjusted to reflect the actual number of share options that vest, except for those that fail to vest due to market conditions not being met. k) provisions A provision is recognised in the balance sheet when the consolidated entity has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (i) mine rehabilitation and closure Provisions are made for the estimated cost of rehabilitation relating to areas disturbed during the mine’s operation up to reporting date but not yet rehabilitated. Provision has been made in full for all disturbed areas at the reporting date based on current estimates of costs to rehabilitate such areas, discounted to their present value based on expected future cashflows. The estimated cost of rehabilitation includes the current cost of re-contouring, topsoiling and revegetation employing legislative requirements. Changes in estimates are dealt with on a prospective basis as they arise. Significant uncertainty exists as to the amount of rehabilitation obligations which will be incurred due to the impact of changes in environmental legislation. The amount of the provision relating to rehabilitation of mine infrastructure and dismantling obligations is recognised at the commencement of the mining project and/or construction of the assets where a legal or constructive obligation exists at that time. The provision is recognised as a non-current liability with a corresponding asset included in mining property and development assets. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 49 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs (CONTINuED) k) provisions (continued) (i) mine rehabilitation and closure (continued) At each reporting date the rehabilitation liability is re-measured in line with changes in discount rates, and timing or amount of the costs to be incurred. Changes in the liability relating to rehabilitation of mine infrastructure and dismantling obligations are added to or deducted from the related asset, other than the unwinding of the discount which is recognised as a finance cost in the income statement as it occurs. If the change in the liability results in a decrease in the liability that exceeds the carrying amount of the asset, the asset is written-down to nil and the excess is recognised immediately in the income statement. If the change in the liability results in an addition to the cost of the asset, the recoverability of the new carrying amount is considered. Where there is an indication that the new carrying amount is not fully recoverable, an impairment test is performed with the write-down recognised in the income statement in the period in which it occurs. The amount of the provision relating to rehabilitation of environmental disturbance caused by on-going production and extraction activities is recognised in the income statement as incurred. l) revenue (i) coal sold Revenue from the sale of coal is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Risk and rewards are considered to have passed to the buyer at the time of delivery which is usually on a Free On Board (FOB) basis. (ii) Rental income Revenue received before it is earned is recorded as unearned lease income in the balance sheet at its net present value determined by discounting the expected notional future cash flows at a pre-tax rate that reflects current market assessments of the time value of money. Rental income is recognised in the income statement on a straight-line basis over the term of the lease. (iii) hire of plant The consolidated entity hires plant under operating leases to its subsidiaries and joint ventures. Revenue from the plant hire is recognised in the income statement as earned. m) Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. n) finance income and expense Finance income comprises interest income on funds invested, dividend income, changes in the fair value of financial assets at fair value through profit or loss and foreign currency gains. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the consolidated entity’s right to receive payment is established. Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions, foreign currency losses, changes in the fair value of financial assets at fair value through profit or loss, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised in profit or loss using the effective interest method, except where capitalised as part of a qualifying asset. Foreign currency gains and losses are reported on a net basis. 50 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs (CONTINuED) o) Income tax Income tax on the profit or loss for the year comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of recognised assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a set basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend. (i) Tax consolidation The Company and its wholly-owned Australian resident entities, including subsidiaries acquired in the current year, have formed a tax-consolidated group with effect from 29 May 2007 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Whitehaven Coal Limited. Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the “separate taxpayer within a consolidated group” approach by reference to the carrying amounts of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries is assumed by the head entity in the tax-consolidated group and are recognised as amounts payable (receivable) to/(from) other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution or distribution. The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 51 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs (CONTINuED) o) Income tax (continued) (ii) Nature of tax funding arrangements and tax sharing arrangements The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability/(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivable/ (payable) equal in amount to the tax liability/(asset) assumed. The inter-entity receivables/(payables) are at call. Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities. The head entity, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote. p) goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. q) Earnings per share The consolidated entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees. 52 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 3. sIgNIfICANT ACCOuNTINg pOLICIEs (CONTINuED) r) New standards and interpretations not yet adopted The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2008, but have not been applied in preparing this financial report: • Revised AASB 3 Business Combinations changes the application of acquisition accounting for business combinations and the accounting for non-controlling (minority) interests. Key changes include: the immediate expensing of all transaction costs; measurement of contingent consideration at acquisition date with subsequent changes through the income statement; measurement of non-controlling (minority) interests at full fair value or the proportionate share of the fair value of the underlying net assets; guidance on issues such as reacquired rights and vendor indemnities; and the inclusion of combinations by contract alone and those involving mutuals. The revised standard becomes mandatory for the consolidated entity’s 30 June 2010 financial statements. The consolidated entity has not yet determined the potential effect of the revised standard on the consolidated entity’s financial report. • AASB 8 Operating Segments introduces the “management approach” to segment reporting. AASB 8, which becomes mandatory for the consolidated entity’s 30 June 2010 financial statements, will require the disclosure of segment information based on the internal reports regularly reviewed by the consolidated entity’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. Currently the consolidated entity presents segment information in respect of its business and geographical segments (see note 6). The consolidated entity has not yet determined the potential impact of the revised standard on the consolidated entity’s financial report. • Revised AASB 101 Presentation of Financial Statements introduces as a financial statement (formerly “primary” statement) the “statement of comprehensive income”. The revised standard does not change the recognition, measurement or disclosure of transactions and events that are required by other AASBs. The revised AASB 101 will become mandatory for the consolidated entity’s 30 June 2010 financial statements. The consolidated entity has not yet determined the potential effect of the revised standard on the consolidated entity’s disclosures. • Revised AASB 123 Borrowing Costs removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The revised AASB 123 will become mandatory for the consolidated entity’s 30 June 2010 financial statements. There will be no impact upon adoption of the revised standard to the consolidated entity’s financial report as the consolidated entity’s policy is to capitalise such costs. • AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payment: Vesting Conditions and Cancellations changes the measurement of share-based payments that contain non-vesting conditions. AASB 2008- 1 becomes mandatory for the consolidated entity’s June 2010 financial statements. The consolidated entity has not yet determined the potential effect of the amending standard on the consolidated entity’s financial report. • AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project and AASB 2008-6 Further amendments to Australian Accounting Standards arising from the Annual Improvements Project become mandatory for the consolidated entity’s 30 June 2010 and 30 June 2011 financial statements, respectively. The consolidated entity has not yet determined the potential effect of the amending standards on the consolidated entity’s financial report. 2008 Annual Report 53 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 4. DETErMINATION Of fAIr VALuEs A number of the consolidated entity’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. a) property, plant and equipment The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value of items of plant and equipment is based on the quoted market prices for similar items. b) Intangible assets The fair value of water access rights with indefinite useful lives is based on the outcome of recent transactions for similar assets within the same industry, less estimated costs of disposal. c) Inventories The fair value of inventories acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and sell the inventories. d) Derivatives The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). The fair value of foreign currency options is the estimated amount the consolidated entity would pay or receive to terminate the derivative at the balance sheet date, taking into account quoted market rates and the current creditworthiness of the counterparties. e) Non-derivative financial liabilities Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements. f) share-based payment transactions The fair value of services received in return for share options granted to the directors is based on the fair value of share options granted, measured using Black Scholes barrier options techniques, incorporating the probability of the performance hurdles being met. The fair value of services received in return for share options granted to the senior employees is based on the fair value of share options granted, measured using a Black Scholes model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information of publicly listed companies operating in the same industry with similar operating characteristics), weighted average expected life of the instruments (based on historical experience of similar instruments and similar option holder characteristics), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. 54 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 5. fINANCIAL rIsk MANAgEMENT Overview The Company and consolidated entity have exposure to the following risks from their use of financial instruments: • credit risk • liquidity risk • market risk This note presents information about the Company’s and consolidated entity’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board has established the Audit and Risk Management Committee, which is responsible for developing and monitoring risk management policies. The committee reports regularly to the Board of Directors on its activities. Risk management policies are established to identify and analyse the risks faced by the Company and consolidated entity, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s and consolidated entity’s activities. The Company and consolidated entity, through their training and management standards and procedures, aim to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The consolidated entity’s Audit and Risk Management Committee oversees how management monitors compliance with the Company’s and consolidated entity’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company and consolidated entity. Credit risk Credit risk is the risk of financial loss to the consolidated entity if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the consolidated entity’s receivables from customers. For the Company it arises from receivables due from subsidiaries. Trade and other receivables The Company’s and consolidated entity’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the consolidated entity’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. Approximately 29 percent of the consolidated entity’s revenue is attributable to sales transactions with two customers (2007: 25%). More than 90 percent of the consolidated entity’s customers have been transacting with the consolidated entity for over 5 years, losses have occurred infrequently. The consolidated entity’s trade and other receivables relate mainly to coal customers. The consolidated entity does not require collateral in respect of trade and other receivables. The consolidated entity trades only with recognised, creditworthy third parties. Receivable balances are monitored on an ongoing basis with the result that the consolidated entity’s exposure to bad debts is not significant. The Company and consolidated entity have not recognised any impairment loss for trade and other receivables during the year ended 30 June 2008 (2007: Nil). 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 55 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 5. fINANCIAL rIsk MANAgEMENT (CONTINuED) guarantees The policy of the consolidated entity is to provide financial guarantees for statutory bonding requirements associated with the mining operations and for construction of the rail upgrade and other purposes such as security of leased premises. Guarantees are provided under a $50,000,000 facility. Details of outstanding guarantees are provided in note 33. Liquidity risk Liquidity risk is the risk that the Company and consolidated entity will not be able to meet their financial obligations as they fall due. The consolidated entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the consolidated entity’s reputation. Typically, the Company and consolidated entity ensures that they have sufficient cash on demand to meet all expected operational expenses as and when due, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the consolidated entity maintains the following lines of credit: • $1,000,000 overdraft facility that is secured by a fixed and floating charge over the assets of the consolidated entity. Interest would be payable at the rate of BBSY plus 100 basis points. • $13,280,000 that can be drawn down to meet short-term financing needs. The facility has a 30-day maturity that renews automatically at the option of the consolidated entity. Interest would be payable at a rate of BBSY plus 150 basis points. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company and consolidated entity’s income or the value of their holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The Company and consolidated entity enters into forward exchange contracts and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by the Audit and Risk Management Committee. Where possible, the Company and consolidated entity seeks to apply hedge accounting in order to manage volatility in profit or loss. Currency risk The Company and consolidated entity is exposed to currency risk on sales, purchases and demurrage that are denominated in a currency other than the respective functional currency of the consolidated entity, the Australian dollar (AUD). The currency in which these transactions primarily are denominated is US Dollars (USD). The Company and consolidated entity uses forward exchange contracts (FECs) to hedge its currency risk. During the period the consolidated entity converted its economic hedge book held at 30 June 2007, comprising foreign currency options to FECs. The foreign currency options did not qualify for hedge accounting and were recognised at fair value through the income statement. The Hedging Policy of the consolidated entity is to utilise forward exchange contracts to cover: • 100% of contracted sales where both volume and US dollar price are fixed; • 90% of provisional pricing where volume is fixed but pricing is provisional; • 80% of planned sales from existing operations over a 12 month period; • a maximum of 50% of planned sales from existing operations for between 12 and 24 months; and • No cover should be taken out beyond 24 months other than contracted sales where both volume and US dollar prices are fixed. 56 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 5. fINANCIAL rIsk MANAgEMENT (CONTINuED) In respect of other monetary assets and liabilities denominated in foreign currencies, the consolidated entity ensures that its net exposure is kept to an acceptable level by buying and selling foreign currencies at spot rates when necessary to address short-term imbalances. The consolidated entity classifies its forward exchange contracts hedging forecasted transactions as cash flow hedges and measures them at fair value. The fair value of forward exchange contracts used as hedges at 30 June 2008 was $46,776,000, comprising assets that were recognised as fair value derivatives. The fair value of foreign currency options held at 30 June 2007 was $14,072,000, comprising assets that were recognised as fair value derivatives. Interest rate risk The consolidated entity’s borrowings comprise both variable and fixed rate instruments. The variable rate borrowings expose the consolidated entity to a risk of changes in cash flows due to the changes in interest rates. The Company does not hold interest bearing liabilities. Details of the variable and fixed rate borrowings are included in note 28. 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. The consolidated entity defines capital as total shareholders’ equity. The Board of Directors monitors the capital structure on a regular basis including the level of dividends paid to ordinary shareholders. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. There were no changes in 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. 6. sEgMENT rEpOrTINg Business and geographical segments The consolidated entity operates within the coal industry in Australia. Revenue is derived from the sale of coal and hire of plant to customers in Asia and Australia. sales revenue by geographical location of customer In thousands of AUD Asia Australia 2008 2007 249,239 101,774 7,231 4,427 256,462 106,201 2008 Annual Report 57 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 7. ACquIsITION Of suBsIDIArIEs Acquisition of Creek resources pty Limited On 30 November 2007 the Group acquired Creek Resources Pty Ltd, which holds a 60% interest in the Werris Creek Joint Venture. Subsequent to the acquisition, the Group owns 100% of the Werris Creek coal mine in NSW. The Group has determined, on a provisional basis, that the acquisition had the following effect on the Group’s assets and liabilities on acquisition date: In thousands of AUD Cash and cash equivalents Property, plant and equipment Trade and other receivables Inventories Deferred stripping Deferred tax asset/(liability) Trade and other payables Interest-bearing loans and borrowings Unsecured loans Provisions Net identifiable assets and liabilities Goodwill on acquisition Consideration paid, satisfied through issuance of shares* Future consideration payable*** Consideration paid, satisfied in cash** Cash acquired Net cash outflow Pre-acquisition carrying amounts Fair value adjustments Recognised values on acquisition 3,917 11,197 4,582 1,764 1,913 (619) (6,229) (4,638) (11,076) (1,461) (650) 61,095 633 61,728 3,917 72,292 4,582 1,764 1,913 14 (6,229) (4,638) (11,076) (1,461) 61,078 – (10,000) (10,431) 40,647 (3,917) 36,730 * Whitehaven Coal Limited issued 3,610,108 ordinary shares. ** Includes transaction costs of $322,000. *** Consideration payable when development consent approved for JORC reserves, which is estimated to be December 2009. Refer to Note 24 for details of deferred purchase consideration in relation to the acquisition. Pre-acquisition carrying amounts were determined based on applicable AASBs immediately before the acquisition. The values of assets and liabilities recognised on acquisition are their estimated fair values. Since its acquisition on 30 November 2007, Creek Resources Pty Ltd has contributed a loss of $1,479,000, net of tax benefit of $634,000 to the consolidated entity’s net profit for the year ended 30 June 2008. If the acquisition had occurred on 1 July 2007, management estimates the consolidated revenue would have been $274,734,000 and consolidated profit for the period would have been $50,658,000. Acquisition of hauling business On 30 November 2007, the Group incorporated a wholly-owned subsidiary, WC Contract Hauling Pty Ltd, to acquire a business which provides hauling services. The cost of the acquisition was $2,860,000 paid in cash, which was allocated to property, plant and equipment of $1,560,000 and a contract-related intangible of $1,300,000. Since its acquisition on 30 November 2007, WC Contract Hauling Pty Ltd has not contributed a material amount to the consolidated entity’s revenue or net profit for the year ended 30 June 2008. 58 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 In thousands of AUD 8. rEVENuE Sale of coal Hire of plant Rental income 9. OTHEr INCOME Gain on sale of scrap materials Gain on sale of cattle Gain on sale of interest in Narrabri project* Sundry income Consolidated Company 2008 2007 2008 2007 252,000 103,461 4,450 12 2,622 118 256,462 106,201 – 23 55,629 823 56,475 186 17 – 937 1,140 – – – – – – – – – – – – – – – – – – * In March 2008, the consolidated entity sold 7.5% of its Narrabri Coal Project to Upper Horn Investments (Australia) Pty Limited, part of the Guandong Yudean Group for $67,500,000, resulting in a gain on sale of $55,629,000. The tax impact on the gain was $16,689,000, resulting in an after tax gain of $38,940,000. Further sell downs of the Narrabri Coal Project have been agreed to subsequent to year end, refer to note 35. In thousands of AUD 2008 2007 2008 2007 Consolidated Company 10. OTHEr ExpENsEs Loss on sale of non-current assets Impairment of cattle Contract termination payments Share based compensation payments 11. pErsONNEL ExpENsEs Wages and salaries Contributions to superannuation plans Other associated personnel expenses Increase in liability for annual leave Increase in liability for long-service leave Share-based compensation payments 5 84 9,870 2,687 12,646 15,535 1,297 241 533 60 2,687 20,353 9 – – 15,163 15,172 9,762 1,255 75 123 48 15,163 26,426 – – – – – – 2,687 2,687 15,163 15,163 – – – – – – – – – – 2,687 2,687 15,163 15,163 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 59 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 In thousands of AUD 2008 2007 2008 2007 Consolidated Company 12. fINANCE INCOME AND ExpENsE recognised in profit and loss Interest income on bank facilities Dividend income Net foreign exchange gain Gains from derivatives not qualifying for hedge accounting Gains from ineffective portion of hedges financial income Interest expense on secured bank loans Interest expense on finance lease liabilities Interest expense on unsecured loan from related entity Unwinding of discounts on provisions Losses on derivatives not qualifying for hedge accounting Net foreign exchange loss Other interest charges financial expenses Net financing income recognised directly in equity 3,394 308 3,200 – 2,010 8,912 (633) (2,357) (704) (452) (2,985) – (312) (7,443) 1,469 Effective portion of changes in fair value of cash flow hedges 48,061 Net change in fair value of cash flow hedges transferred to profit or loss – sale of coal Income tax on income and expense recognised directly in equity finance income recognised directly in equity, net of tax (11,544) (10,955) 25,562 897 4 5,881 13,830 – 20,612 (1,822) (1,768) (957) (374) – – (205) (5,126) 15,486 – – – – 334 – – – – 67 – 4,006 – – 334 4,073 – – – – – (5,043) – (5,043) (4,709) – – – – – – – – – – (6) (6) 4,067 – – – – 60 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 In thousands of AUD 2008 2007 2008 2007 Consolidated Company 13. INCOME TAx (ExpENsE)/BENEfIT Current tax expense Current period Adjustment for prior periods Deferred tax (expense)/benefit Origination and reversal of temporary differences Income tax (expense)/benefit Numerical reconciliation between tax benefit/ (expense) and profit before tax Profit for the period Total income tax (expense)/benefit profit excluding income tax Income tax using the Company’s domestic tax rate of 30% (2007: 30%) Non-deductible expenses (14,959) 1,035 (13,924) (799) – (799) (8,251) (22,175) 19,500 18,701 140 – 140 (239) (99) – – – 42 42 51,854 (22,175) 74,029 (22,209) (901) 24,095 18,701 5,394 (1,618) (5,705) (7,500) (11,115) (99) 42 (7,401) (11,157) 2,220 (2,319) 3,347 (3,305) Tax benefit from joining tax consolidated group – 25,955 Change in unrecognised temporary differences Under/(over) provided in prior periods (100) 1,035 (10) 79 – – – Income tax recognised directly in equity Derivatives Transaction costs on issue of share capital (22,175) 18,701 (99) (10,955) 1,193 (9,762) – – – – 1,193 1,193 – – – 42 – – – 2008 Annual Report 61 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 In thousands of AUD 2008 2007 2008 2007 Consolidated Company 14. CAsH AND CAsH EquIVALENTs Cash and cash equivalents 105,867 21,185 50 2,815 The weighted average interest rate for cash balances at 30 June 2008 is 6.94% (2007: 5.69%). 15. TrADE AND OTHEr rECEIVABLEs Current Trade receivables Other trade receivables and prepayments Receivables due from related parties Non-current Other trade receivables and prepayments 16. INVENTOrIEs Coal stocks Consumables and stores 17. DErIVATIVE fINANCIAL INsTruMENTs Current assets Forward exchange contracts – receivable Foreign currency options – receivable Non-current assets Forward exchange contracts – receivable Foreign currency options – receivable 31,791 15,579 1,626 48,996 2,217 2,217 7,225 2,128 9,353 26,670 – 26,670 20,106 – 20,106 6,446 2,640 5,250 – 33 170,367 14,336 170,400 – 120 1,198 1,318 2,214 2,214 10,579 189 10,768 – 5,202 5,202 – 8,870 8,870 – – – – – – – – – – – – – – – – – – – – – – 62 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 17. DErIVATIVE fINANCIAL INsTruMENTs (CONTINuED) Instruments used by the consolidated entity The consolidated entity enters into forward exchange contracts to sell specified amounts of foreign currencies in the future at stipulated exchange rates. The objective of entering into the forward exchange contracts is to reduce the foreign exchange rate related volatility of the consolidated entity’s revenue stream and thereby assist in risk management for the consolidated entity. Forward exchange contracts are entered for future sales undertaken in US dollars. The contracts are timed to mature when funds for coal sales are forecast to be received. At 30 June 2008, the forward exchange contracts are designated as cash flow hedges and are expected to impact profit and loss in the periods specified below. The details of outstanding forward exchange contracts at balance date are set out below. 2008 – forward exchange contracts In thousands of AUD (except exchange rates) sell Us dollars Less than 6 months 6 months to 1 year 1 year to less than 2 years 2 years to less than 3 years 3 years to less than 4 years 2007 – foreign currency options In thousands of AUD (except exchange rates) sell us dollars Less than 6 months 6 months to 1 year 1 year to less than 2 years 2 years to less than 3 years 3 years to less than 4 years Fair Value 2008 Average Exchange Rates 2008 Fair Value 2007 Average Exchange Rates 2007 18,224 8,446 13,647 6,048 411 46,776 0.8176 0.8175 0.8170 0.8189 0.8215 0.8178 – – – – – – – – – – – – Fair Value 2008 Average Exchange Rates 2008 Fair Value 2007 Average Exchange Rates 2007 – – – – – – – – – – – – 2,181 3,021 4,610 2,930 1,330 14,072 0.7677 0.7647 0.7684 0.7521 0.7521 0.7626 Consolidated Company In thousands of AUD 2008 2007 2008 2007 18. BIOLOgICAL AssETs Cattle 19. INVEsTMENTs Non-current investments Investment in unlisted shares Investments in subsidiaries – 80 37 – 37 37 – 37 – – – – 464,750 464,750 464,750 464,750 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 63 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 20. prOpErTy, pLANT AND EquIpMENT In thousands of AUD Note Consolidated Freehold land Plant and equipment Leased plant and equipment Mining property and development Cost Balance at 1 July 2006 Acquisitions Acquisition through business combinations Transfer from exploration and evaluation assets Transfer from mining property and development Disposals Balance at 30 June 2007 Balance at 1 July 2007 Acquisitions Acquisition through business combinations Transfer from mining property and development Transfer to other inventory Disposals Balance at 30 June 2008 Depreciation Balance at 1 July 2006 Depreciation charge for the year Disposals Balance at 30 June 2007 Balance at 1 July 2007 Depreciation charge for the year Transfer to mining property and development Disposals Balance at 30 June 2008 Carrying amounts At 1 July 2006 At 30 June 2007 At 1 July 2007 At 30 June 2008 21 7 9,023 6,915 3,246 – – – 19,184 19,184 12,529 2,854 – – (3,068) 31,499 Total 88,853 49,868 34,325 5,949 5,481 31,584 40,024 5,420 – – 3,389 (117) 43,546 43,546 4,689 5,918 (1,667) (503) (36) – – – – 37,065 37,065 18,066 1,062 147,970 151,216 812 812 (3,389) – – (117) 190,837 290,632 190,837 290,632 24,033 64,018 59,317 73,852 – – – 1,667 – – (503) (11,390) (14,494) 51,947 56,193 269,165 408,804 – – – – – – – – – (4,374) (4,386) 117 (8,643) (8,643) (6,535) 102 36 (1,492) (3,032) – (4,524) (4,524) (5,976) – – (4,976) (4,877) (10,842) (12,295) – 117 (9,853) (9,853) (5,491) (102) – (23,020) (23,020) (18,002) – 36 (15,040) (10,500) (15,446) (40,986) 9,023 19,184 19,184 31,499 29,951 34,903 34,903 36,907 3,989 32,541 32,541 45,693 35,048 180,984 180,984 253,719 78,011 267,612 267,612 367,818 The Company did not hold property, plant and equipment at 30 June 2008 or 30 June 2007. 64 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 20. prOpErTy, pLANT AND EquIpMENT (CONTINuED) Leased plant and machinery The consolidated entity leases mining equipment under a number of finance lease agreements. At 30 June 2008, the consolidated entity’s net carrying amount of leased plant and machinery was $45,693,000 (2007: $32,541,000). The Company does not hold leased plant and machinery. The leased equipment secures lease obligations. security The assets of the consolidated entity are subject to a fixed and floating charge to secure bank loans. 21. ExpLOrATION AND EVALuATION In thousands of AUD Balance at 1 July 2006 Exploration and evaluation expenditure Transfer to mining property and development Balance at 30 June 2007 Balance at 1 July 2007 Exploration and evaluation expenditure Transfer to mining property and development Balance at 30 June 2008 Exploration and evaluation assets Consolidated Company Cost 1,880 604 (812) 1,672 1,672 102 – 1,774 Impairment losses Cost Impairment losses – – – – – – – – – – – – – – – – – – – – – – – – The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective area of interest. 2008 Annual Report 65 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 22. OTHEr INTANgIBLE AssETs In thousands of AUD Water access rights Contract related intangible Less: Accumulated amortisation Rail access rights In thousands of AUD Consolidated Balance at 1 July 2007 Acquired during the year Less: Accumulated amortisation Balance at 30 June 2008 Consolidated Company 2008 953 1,300 (89) 15,218 17,382 2007 920 – – – 920 Water access rights Contract related intangible 920 33 – 953 – 1,300 (89) 1,211 2008 2007 – – – – – Rail access rights – – – – – – Total 920 15,218 16,551 – (89) 15,218 17,382 23. INCOME TAx AssETs AND LIABILITIEs Current tax assets and liabilities The current tax liability for the consolidated entity of $10,143,000 (2007: $nil) and Company of $9,995,000 (2007: $nil) represents the amount of income taxes payable in respect of current periods and that arise from the payment of tax not in excess of the amounts due to the relevant tax authority. The current tax asset for the consolidated entity of $nil (2007: $25,000) and for the Company of $nil (2007: $nil) represent the amount of income taxes receivable in respect of prior financial periods. The Company liability includes the income tax payable by all members for the tax consolidated group. unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: In thousands of AUD Tax losses – capital Consolidated Company 2008 21,530 21,530 2007 20,985 20,985 2008 2007 – – – – The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the consolidated entity can utilise the benefits there from. 66 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 23. INCOME TAx AssETs AND LIABILITIEs (CONTINuED) recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: In thousands of AUD Consolidated Assets Liabilities Net 2008 2007 2008 2007 2008 2007 Property, plant and equipment (164) (116) 13,446 9,232 13,282 9,116 Receivables Derivatives Investments Inventories Deferred stripping Deferred revenue – – – – – – Deferred foreign exchange gain (58) – – – – – – – Mining tenement Provisions Unearned income Restructure costs Other items (15,727) (18,775) (7,419) (190) – (1,557) (1,980) (97) (661) (10) Tax loss carry-forwards – (2,152) 90 9,054 1 12 6,939 – 51 914 4,565 – – – – – 848 – 152 3,427 114 1,193 892 – – – 57 – Tax (assets)/liabilities (25,115) (23,791) 35,072 15,915 Set off of tax 25,115 15,915 (25,115) (15,915) Net tax (assets)/liabilities – (7,876) 9,957 Company Investments Tax (assets)/liabilities Set off tax (954) (2,152) – – Net tax (assets)/liabilities (954) (2,152) – – – – – – – 90 9,054 1 12 6,939 – (7) – 848 – 152 3,427 114 1,193 (14,813) (17,883) (2,854) (1,980) (190) – (1,557) – 9,957 – (97) (661) 47 (2,152) (7,876) – 9,957 (7,876) (954) (2,152) – – (954) (2,152) 2008 Annual Report 67 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 24. TrADE AND OTHEr pAyABLEs In thousands of AUD Current Trade payables Other payables and accrued expenses Payable to controlled entities Amounts payable to joint venture partner Non-current Deferred purchase consideration Consolidated Company 2008 2007 2008 2007 6,003 31,868 – – 12,383 3,022 – 730 – – – – 148,070 145,104 – – 37,871 16,135 148,070 145,104 10,431 10,431 – – – – – – 25. INTErEsT-BEArINg LOANs AND BOrrOWINgs This note provides information about the contractual terms of the consolidated entity’s interest-bearing loans and borrowings. In thousands of AUD Current liabilities Secured bank loans Finance lease liabilities Other loans unsecured Unsecured loan from related entity Non-current liabilities Secured bank loans Finance lease liabilities Unsecured loan from related entity financing facilities Secured bank loans Bank overdraft facility facilities utilised at reporting date Secured bank loans facilities not utilised at reporting date Secured bank loans Bank overdraft facility Consolidated Company Note 2008 2007 2008 2007 – – – – – – – – – – – – – – – – – – 37 37 – 7,741 15,218 – 22,959 – 32,267 – 32,267 55,226 13,280 1,000 14,280 – – 13,280 1,000 14,280 3,360 6,904 – 12,030 22,294 13,280 22,007 19,114 54,401 76,695 16,640 – 16,640 16,640 16,640 – – – – – – – – – – – – – – – – – – – – – 68 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 25. INTErEsT-BEArINg LOANs AND BOrrOWINgs (CONTINuED) financing arrangements Bank loans Bank loans were repaid during the year ended 30 June 2008. In the year ended 30 June 2007 the non-current bank loans were payable on or before 30 June 2011. The loan bore interest at the quarterly “BBSY” rate plus 1.5% (2007: 1.0% to 1.5%). The bank loans are secured by registered first mortgages over a number of the consolidated entity’s freehold properties, certain items of property, plant and equipment, cash deposits, trade receivables and guarantees from related parties. The carrying values of the pledged non-current assets were as follows: In thousands of AUD Freehold land Property, plant and equipment Unsecured loan from related entity Consolidated Company 2008 31,499 2007 19,184 290,626 215,887 322,125 235,071 2008 2007 – – – – – – AMCI Investments Pty Ltd, a related entity, made loans totalling $35,812,000 to the consolidated entity during the year ended 30 June 2007 denominated in United States Dollars. The loans earned interest of 5% on the outstanding balance of the loan. The contract terms provided for the consolidated entity to repay the loan and interest through delivery of coal. The consolidated entity repaid the outstanding loan and interest payable balances of $33,506,000 during the year ended 30 June 2008. Finance lease facility At 30 June 2008, the consolidated entity’s lease liabilities are secured by the leased assets of $45,693,000 (2007:$32,541,000), as in the event of default, the leased assets revert to the lessor. The Company did not have any lease liabilities at 30 June 2008 (2007: nil). Finance lease liabilities Finance lease liabilities of the consolidated entity are payable as follows: In thousands of AUD Less than one year Between one and five years More than five years Consolidated Minimum lease payments 2008 10,586 34,644 2,928 48,158 Interest 2008 2,845 5,284 21 8,150 Principal 2008 7,741 29,360 2,907 40,008 Minimum lease payments 2007 8,747 25,053 – Interest 2007 1,843 3,046 – Principal 2007 6,904 22,007 – 33,800 4,889 28,911 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 69 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 In thousands of AUD 2008 2007 2008 2007 Consolidated Company 26. EMpLOyEE BENEfITs Current Salaries and wages accrued Liability for long service leave Liability for annual leave 27. prOVIsIONs Mine rehabilitation and closure Current Non-current Consolidated In thousands of AUD Balance at 1 July 2007 Acquired in business combination Provisions made during the period Provisions used during the period Provisions reversed during the period Unwind of discount Balance at 30 June 2008 428 9 1,722 2,159 7,400 593 6,807 7,400 460 89 831 1,380 5,233 708 4,525 5,233 – – – – – – – – – – – – – – – – Mine rehabilitation and closure 5,233 1,461 782 (103) (425) 452 7,400 Provision for the rehabilitation of mine sites is made in accordance with note 3(k). Provision is made for separate categories of rehabilitation and reported separately. Additional provisions for rehabilitation were recorded during the year after review of costs to rehabilitate. 70 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 28. fINANCIAL INsTruMENTs Credit risk Exposure to credit risk The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure. The consolidated entity’s maximum exposure to credit risk at the reporting date was: In thousands of AUD Cash and cash equivalents Trade and other receivables Derivative financial instruments Available-for-sale financial assets Carrying amount Note 2008 14 15 17 19 105,867 51,213 46,776 37 2007 21,185 16,550 14,072 37 203,893 51,844 The Company’s maximum exposure to credit risk at the reporting date was $170,400,000 (2007: $1,318,000) arising from receivables owing from subsidiaries. The consolidated entity’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: In thousands of AUD Asia Australia impairment losses Carrying amount 2008 30,574 1,217 31,791 2007 1,359 5,087 6,446 None of the Company’s receivables are past due (2007: $nil). The aging of the consolidated entity’s trade receivables at the reporting date was: In thousands of AUD Not past due Past due 0 - 30 days Past due 31-120 days Past due 121 days to one year More than one year Gross 2008 Impairment 2008 29,336 2,305 50 69 31 31,791 – – – – – – Gross 2007 5,938 363 101 34 10 6,446 Impairment 2007 – – – – – – Based on historic default rates, the consolidated entity believes that no impairment allowance is necessary in respect of trade receivables. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 71 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 28. fINANCIAL INsTruMENTs (CONTINuED) Liquidity risk The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: Consolidated 30 June 2008 In thousands of AUD financial liabilities Finance lease liabilities Trade and other payables forward exchange contracts Outflow Inflow Consolidated 30 June 2007 In thousands of AUD financial liabilities Secured bank loans Finance lease liabilities Unsecured loan from related entity Trade and other payables foreign currency option contracts Outflow Inflow Company 30 June 2008 In thousands of AUD – – – Carrying amount Contractual cash flows 6 mths or less 6-12 mths 1-2 years 2-5 years More than 5 years 40,008 48,302 48,158 49,649 5,315 37,871 5,271 10,541 24,103 2,928 – 11,778 – – 452,834 111,829 66,004 154,310 120,691 (46,776) (503,488) (130,361) (74,977) (169,695) (128,455) 41,534 47,153 24,654 (3,702) 6,934 16,339 2,928 Carrying amount Contractual cash flows 6 mths or less 6-12 mths 1-2 years 2-5 years More than 5 years 16,640 28,911 31,144 16,135 17,930 33,800 1,810 4,388 1,810 4,359 3,620 7,016 10,690 18,037 32,701 6,316 6,316 8,259 11,810 16,135 16,135 – – – – 186,091 36,617 34,392 58,207 56,875 (14,072) (206,561) (40,311) (38,523) (64,871) (62,856) 78,758 80,096 24,955 8,354 12,231 34,556 – – – – – – – Carrying amount Contractual cash flows 6 mths or less 6-12 mths 1-2 years 2-5 years More than 5 years Loans from subsidiaries 148,037 148,037 148,037 30 June 2007 Loans from subsidiaries 145,104 145,104 145,104 – – – – – – – – 72 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 28. fINANCIAL INsTruMENTs (CONTINuED) Currency risk Exposure to currency risk The consolidated entity’s gross balance sheet exposure to foreign currency risk at balance date was as follows, based on notional amounts: In thousands of AUD Cash Trade and other receivables Unsecured loan from related parties Trade and other payables Finance Lease liabilities Gross balance sheet exposure USD 30 June 2008 USD 30 June 2007 3,811 36,093 – (20,350) (10,424) 9,130 4,450 3,614 (31,144) (2,404) (15,073) (40,557) Currency risk exposure arising from derivative financial instruments is disclosed in note 17. The Company’s exposure to foreign currency payable risk was AUD148,037,000/EUR 90,244,000 (2007: AUD142,994,000/EUR 90,244,000). The following significant exchange rates applied during the year: AUD USD EUR Average rate Reporting date spot rate 2008 0.9038 – 2007 0.7857 – 2008 0.9626 0.6096 2007 0.8487 0.6311 2008 Annual Report 73 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 28. fINANCIAL INsTruMENTs (CONTINuED) Currency risk (continued) sensitivity analysis A 10 percent strengthening of the Australian dollar against the following currencies at 30 June would have increased/ (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2007. Effect in thousands of AUD 30 June 2008 USD EUR 30 June 2007 USD EUR Consolidated Company Equity Profit or loss Equity Profit or loss 36,696 – – – 168 – 16,321 – – – – – – 13,458 – 13,000 A 10 percent weakening of the Australian dollar against the above currencies at 30 June would have increased/(decreased) equity and profit or loss by the amounts shown below. Effect in thousands of AUD 30 June 2008 USD EUR 30 June 2007 USD EUR Consolidated Company Equity Profit or loss Equity Profit or loss (44,808) (1,537) – – – – (22,623) – – – – – – (16,448) – (15,887) 74 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 28. fINANCIAL INsTruMENTs (CONTINuED) Interest rate risk Profile At the reporting date the interest rate profile of the Company’s and the consolidated entity’s interest-bearing financial instruments was: In thousands of AUD fixed rate instruments Financial liabilities Variable rate instruments Financial assets Financial liabilities Consolidated Carrying amount Consolidated Carrying amount Note 2008 2007 2008 2007 25 (40,008) (60,055) (40,008) (60,055) 15 25 105,867 21,185 (15,218) (16,640) 90,649 4,545 – – 50 – 50 – – 2,815 – 2,815 Fair value sensitivity analysis for fixed rate instruments The consolidated entity does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a change in interest rates at the reporting date would not affect profit or loss. cash flow sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2007. Consolidated Effect in thousands of AUD 30 June 2008 Variable rate instruments Cash flow sensitivity (net) 30 June 2007 Variable rate instruments Cash flow sensitivity (net) fair values Fair values versus carrying amounts Profit or loss Equity 100bp increase 100bp decrease 100bp increase 100bp decrease 906 906 45 45 (906) (906) (45) (45) – – – – – – – – The fair values of the Company and consolidated entity’s financial assets and financial liabilities at 30 June 2008 and 30 June 2007 approximate their carrying amounts. Estimation of fair values The methods used in determining the fair values of financial instruments are discussed in note 4. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 75 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 29. sHArE CApITAL AND rEsErVEs In thousands of AUD (except for shares) 2008 2007 2008 2007 Consolidated Company a) share capital Authorised, issued and fully paid up ordinary shares 391,918,453 (2007: 323,000,000) b) Movements in shares on issue Ordinary shares 349,854 192,883 478,854 321,883 Consolidated Company 2008 2007 2008 2007 Nos of shares 000’s Nos of shares 000’s 000’s Nos of shares 000’s Nos of shares 000’s 000’s 000’s 000’s 323,000 192,883 31,000 31,000 323,000 321,883 – – 51,081 135,366 5,143 4,296 51,081 135,366 5,143 4,296 In thousands of AUD Beginning of the financial year Issued for cash Exercise of share options 14,227 14,227 – – 14,227 14,227 Acquisition of Narrabri Coal Pty Ltd Acquisition of Whitehaven Coal Mining Ltd Acquisition of Whitehaven Coal Holdings Pty Ltd Acquisition of Creek Resources Pty Ltd Share split Issued to settle contract Issued to employees Costs of shares issued, net of tax – – – – – – 140,000 140,000 – – 30,000 15,000 3,610 10,000 – – – – 114,000 2,750 107 – – 2,750 – – – – – – – – – – – – – – – 3,610 10,000 – – – – 147,000 147,000 168,000 168,000 – – 2,750 107 – – 2,750 – – – – (2,622) – (163) (2,622) – (163) 391,918 349,854 323,000 192,883 391,918 478,854 323,000 321,883 The Company has also issued share options (see note 36). The Company’s and the consolidated entity’s share capital differ as a result of reverse acquisition accounting in the prior year. The adjustment to share capital represents a net adjustment for the replacement of the legal parent’s equity with that of the deemed acquirer. c) Terms and conditions of issued capital Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital. Accordingly the Company does not have authorised capital or par value in respect of its issued shares. Ordinary shareholders have the right to receive dividends as declared and, in the event of winding up of the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on share held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. 76 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 29 sHArE CApITAL AND rEsErVEs (CONTINuED) d) Hedge reserve The hedging reserve comprises the effective portion of the cumulative change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. e) Dividends Since the end of the financial year the directors have resolved to pay a fully franked dividend of 1.7 cents per ordinary share to be paid on 30 September 2008 in respect of the year ended 30 June 2008 (2007: Nil). The record date for entitlement to the dividend was 29 August 2008. Dividend franking account In thousands of AUD 30 per cent franking credits available to shareholders of Whitehaven Coal Limited for subsequent financial years Company 2008 2007 16,849 2,993 The above available amounts are based on the balance of the dividend franking account at year-end adjusted for: (a) franking credits that will arise from the payment of the current tax liabilities; and (b) franking debits that will arise from the payment of dividends recognised as a liability at the year end; (c) franking credits that will arise from the receipt of dividends recognised as receivables by the tax consolidated entity at the year-end; and (d) franking credits that the entity may be prevented from distributing in subsequent years. The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. In accordance with the tax consolidation legislation, the Company as the head entity in the tax-consolidated consolidated entity has also assumed the benefit of $nil (2007: $nil) franking credits. 30. OpErATINg LEAsEs Leases as lessee Non-cancellable operating lease rentals are payable as follows: In thousands of AUD Less than one year Between one and five years More than five years Consolidated Company 2008 164 112 – 276 2007 165 276 – 441 2008 2007 – – – – – – – – The consolidated entity leases office equipment and office space under operating leases. The leases typically run for three to five years with an option to renew on the office space. None of the leases includes contingent rentals. During the year rental expense of $178,000 (2007: $99,000) was recorded under these contracts in the income statement. Leases as lessor The consolidated entity leases out land it will use for future mining operations under operating leases. All lease payments have been received upfront under these contracts and have been recorded as deferred income on the balance sheet. At 30 June 2008 $7,135,000 (2007: $3,247,000) of land was leased under these operating leases. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 77 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 31. CApITAL ExpENDITurE COMMITMENTs In thousands of AUD 2008 2007 2008 2007 Consolidated Company plant and equipment and intangibles Contracted but not provided for and payable: Within one year One year or later and no later than five years Later than five years 77,970 – – 77,970 196 – – 196 – – – – – – – – 32. ExpLOrATION ExpENDITurE COMMITMENTs In order to maintain current rights of tenure to exploration tenements, the consolidated entity is required to perform minimum exploration work to meet the minimum expenditure requirements specified by various State governments. These obligations are subject to renegotiation when application for a mining lease is made and at other times. These obligations are not provided for in the financial report and are payable: In thousands of AUD Within one year One year or later and no later than five years Later than five years 33. CONTINgENCIEs Consolidated Company 2008 1,061 1,899 – 2,960 2007 809 1,882 – 2,691 2008 2007 – – – – – – – – The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement. In thousands of AUD guarantees Consolidated Company 2008 2007 2008 2007 (i) The consolidated entity provided bank guarantees to the Department of Mineral Resources NSW as a condition of continuation of mining and exploration licenses. 16,901 10,736 (ii) The consolidated entity provided bank guarantees 28,820 to Rail Infrastructure Corporation. (iii) The consolidated entity provided bank guarantees to the 28 – – Salvation Army Property Trust. 45,749 10,736 – – – – – – – – Contractual claim The consolidated entity has received a claim in relation to the performance of its obligations under a coal sales contract. Based on legal advice, the directors do not expect the outcome of the claim to have a material effect on the consolidated entity’s financial position. In the directors’ opinion, disclosure of any further information would be prejudicial to the interests of the consolidated entity. 78 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 33. CONTINgENCIEs (CONTINuED) Environmental incident The EPA has commenced proceedings against Werris Creek Coal Pty Ltd over a 2007 incident that occurred when the Group held a minority interest. The terms of the purchase agreement for the consolidated entity’s controlling interest included an indemnity for 60% of any costs or penalties that may arise from the incident. Given the indemnity and the recency of the EPA notice, no amounts have been provided in the financial statements as the directors believe it is too early to assess a reliable estimate. The directors do not believe that the proceedings will have a material effect on the consolidated entity’s financial position. 34. rECONCILIATION Of CAsH fLOWs frOM OpErATINg ACTIVITIEs In thousands of AUD Note 2008 2007 2008 2007 Consolidated Company Cash flows from operating activities Profit/(loss) for the period 51,854 24,095 (7,500) (11,115) Adjustments for: Depreciation Amortisation Foreign exchange losses/(gains) unrealised Unwinding of discounts on provisions Share based compensation payments Gain on sale of interest in Narrabri project Loss on sale of non-current assets Operating profit before changes in working capital and provisions Change in trade and other receivables 20 22 27 36 9 10 89 1,702 452 2,687 (55,629) 5 19,162 (33,334) 18,002 12,295 – – – – – (16,437) 5,043 (4,006) 374 15,163 – 9 35,499 1,466 – – 2,687 15,163 – – 230 – – 42 (5,709) (1,318) Change in inventories and deferred stripping (6,615) (15,963) Change in trade and other payables Change in unearned revenue Change in provisions and employee benefits Change in tax payable Change in deferred taxes 13,971 312 664 10,168 3,278 86 1,038 (1,013) – – – – – – – – – – 7,658 (19,428) 1,198 (42) Cash flows from operating activities 11,986 4,963 (4,281) (1,318) 35. suBsEquENT EVENTs In the interval between the end of the financial year and the date of this report there has not arisen any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future financial years other than the following: • The consolidated entity has committed to acquire the remaining one third balance of the Bonshaw Project for $2,873,000. • The directors have resolved to pay a fully franked dividend of 1.7 cents per ordinary share (refer below). • Further sell downs of the Narrabri Coal Project have been agreed to (refer below): On 1 August 2008, the Group announced receipt of further offers from Electric Power Development Co., Ltd. (“J-Power”) and EDF Trading (“EDFT”) for those companies to each acquire a 7.5% stake in the Narrabri Coal Project for A$125 million and US$120 million, respectively. The sales are subject to formal documentation, due diligence and usual regulatory approvals, conditional on FIRB approval and are expected to be completed during September and October 2008. The financial effect of the above matters has not been brought to account in the financial statements for the year ended 30 June 2008 but will be recognised in future financial periods. 79 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 36. sHArE-BAsED pAyMENTs Option issuances In the current year, the Company issued share options to the CEO/Managing Director. In the prior year the Company issued share options to two key management personnel and entities related to two directors. The terms and conditions of the grants are as follows: Option grant to CEO/Managing Director on 5 September 2007 The Company issued share options to the Managing Director when he was appointed as Chief Executive Officer in October 2007. The terms and conditions of the grant are as follows. Option Tranche 1 Tranche 2 Tranche 3 Exercise price Number of instruments Vesting conditions Expiration date $2.50 $2.50 $2.50 1,000,000 1st anniversary of employment 22 October 2012 1,000,000 2nd anniversary of employment 22 October 2012 1,000,000 3rd anniversary of employment 22 October 2012 3,000,000 If employment is terminated within three years of commencement, any options that have not been vested will be forfeited. Option grant to director related entities on 3 May 2007 Option Option 1 Option 2 Option 3 Option 4 Option 5 Option 6 Exercise price $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 Maximum potential shares each Grant percentage % Vesting conditions Percentage of Tranche 2 shares released from escrow to be held 2,505,000 4,575,150 3,769,924 3,844,317 3,623,277 3,702,989 22,020,657 0.835 $2.50/share 1.5 1.2 $3.00/share $3.50/share 1.195 $4.00/share 1.1 1.1 $4.50/share $5.00/share 100 90 80 70 60 50 In the year ended 30 June 2007, the related entities of directors Andy Plummer and Tony Haggarty were granted six options each to acquire additional shares in the Company under the terms of the Equity Participation and Option Deed (the Deed). The number of potential shares under the options is the “grant percentage” (set out in the table above) of a deemed amount of issued shares. For the purposes of the Deed, the deemed number of shares is 300 million shares plus any shares issued under previous exercised options. Each option is exercisable when the share price reaches a certain level (as set out in the table above). All share prices will be considered attained when volume weighted average price of ordinary shares on the ASX measured over ten consecutive trading days reaches the required amount. Options 1 and 2 were exercised during the year ended 30 June 2008. Option 3 reached the target share price during the year ended 30 June 2008 and was exercised subsequent to year end. Option 4 also reached the target share price during the year ended 30 June 2008 and the director related entities have applied to exercise the option on 25 September 2008 with shares to be issued subsequent to the date of this financial report. All options have an exercise price of $1 and must be exercised by the related entities within 90 days of being notified the Company’s share price has reached the target share price. The maximum number of potential shares will be reduced if the relevant percentage shown in the table above of the Tranche 2 shares released from escrow are not held at the time of exercising the option on a pro rata basis. Refer below for further discussion on the Tranche 2 shares. The options have no expiry date. Upon resignation by the director, any options that have not been vested will be forfeited. 80 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 36 sHArE-BAsED pAyMENTs (CONTINuED) Option issuances (continued) Option grant to senior employees on 3 May 2007 Option Tranche 1 Tranche 2 Tranche 3 Exercise price $1.00 $1.00 $1.00 Number of instruments 66,666 66,666 66,668 200,000 Vesting conditions Expiration date 1st anniversary after listing 30 June 2008 2nd anniversary after listing 30 June 2009 3rd anniversary after listing 30 June 2010 If employment is terminated within three years of commencement, any options that have not been vested will be forfeited. Number and weighted average exercise prices of options Movement in options Outstanding at beginning of period Exercised during the period Granted during the period Outstanding at 30 June Exercisable at 30 June Weighted average exercise price 2008 $1.00 $1.00 $2.50 $1.14 $1.00 Number of options 2008 Weighted average exercise price 2007 44,241,314 (14,226,966) 3,000,000 33,014,348 15,228,482 – – $1.00 $1.00 – Number of options 2007 – – 44,241,314 44,241,314 – The senior employee options outstanding at 30 June 2008 have an exercise price in the range of $1 to $2.50 and a weighted average contractual life of 4 years. The weighted average share price at the date of exercise for share options exercised during the year ended 30 June 2008 was $2.75 (2007: $nil). The fair value of options granted to entities associated with the directors is measured using Black Scholes barrier options techniques, incorporating the probability of the performance hurdles being met, with the following inputs. The fair value of options granted to the senior employees is measured using a Black Scholes model, with the following inputs. Fair value of share options and assumptions 2008 2007 2008 2007 Director related entities Senior employees fair value at grant date Share price Exercise price Expected volatility (weighted average volatility) Option life (expected weighted average life) Expected dividends Risk-free interest rate (based on government bonds) – – – – – – – 7.2 cents 4.6 cents 10.7 cents $1 $1 30% 10 years 10% 5.88% $1.64 $2.50 30% 5 years 10% 6.75% $1 $1 30% 3 years 10% 5.88% 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 81 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 36. sHArE-BAsED pAyMENTs (CONTINuED) share issuances shares issued to director related entities In the year ended 30 June 2007, the Company issued 30,000,000 shares to entities related to directors Andy Plummer and Tony Haggarty for $0.50 per share under the terms of the Equity Participation and Option Deed (the Deed). The fair value of shares issued was measured using a Black Scholes model. This amounted to 30,000,000 shares issued at the $1 per share listing price. The 30,000,000 shares issued to the investment entities comprised Tranche 1 (15 million shares) and Tranche 2 (15 million shares). Tranche 1 shares were issued on receipt of the initial subscription amount. Tranche 2 were escrowed and were to be released from escrow over a five year period but released earlier if the share price reaches $2.50 or the director related entities’ options referred to above lapse. Dividends (net of an allowance for tax) attaching to the escrowed shares will be held in escrow accounts and released at the time the shares are released. The Company’s share price reached $2.50 during the year ended 30 June 2008 and accordingly, the Tranche 2 shares have been released from escrow. shares issued to employees The Company issued 1,000 shares to each employee in the consolidated entity in the prior year for no consideration upon listing on the ASX in the 2007 financial year. The fair value of services received in return for shares issued was based on the fair value of the shares issued measured using a Black Scholes model. This amounted to 107,000 shares issued at the $1 per share listing price. The following inputs were used to value these shares: Fair value of share options and assumptions 2008 2007 2008 2007 Director related entities Employees fair value at grant date Share price Exercise price Expected volatility (weighted average volatility) Option life (expected weighted average life) Expected dividends Risk-free interest rate (based on government bonds) Employee Expenses In thousands of AUD Share options – director related entities Share options – senior employees Shares – director related entities Shares – employees – – – – – – – $1 $1 $1 30% – – 5.88% – – – – – – – Consolidated Company 2008 2,619 68 – – 2007 55 1 15,000 107 2008 2,619 68 – – $1 $1 $1 30% – – 5.88% 2007 55 1 15,000 107 2,687 15,163 2,687 15,163 82 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 37. rELATED pArTIEs The following were key management personnel of the consolidated entity at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period: Name Position Non-executive directors John Conde Neil Chatfield Tony Haggarty Alex Krueger Hans Mende Andy Plummer Executive directors Rob Stewart Keith Ross Executives Leigh Whitton Tony Galligan Chris Burgess Casper Dieben Chairman (appointed 3 May 2007) Director (appointed 3 May 2007) Director (appointed 3 May 2007) Director (appointed 3 May 2007) Director (appointed 3 May 2007) Director (appointed 3 May 2007) Managing Director (appointed 1 April 2008) Managing Director (resigned 31 March 2008) Chief Financial Officer and Company Secretary Managing Director Whitehaven Coal Infrastructure Pty Ltd General Manager New Projects General Manager Operations (appointed 1 May 2007) key management personnel compensation The key management personnel compensation included in “personnel expenses” (see note 11) is as follows: In thousands of AUD Wages and salaries Other associated personnel expenses Increase in liability for annual leave Increase in liability for long service leave Consolidated Company 2008 2007 2008 2007 2,885,208 1,252,217 135,851 276,541 32,284 181,325 84,228 30,262 – – – – – – – – Share-based compensation payments 2,686,779 15,059,000 2,686,779 15,059,000 6,016,663 16,607,032 2,686,779 15,059,000 Individual directors and executives compensation disclosures Information regarding individual directors and executives compensation and some equity instruments disclosures as permitted by Corporations Regulations 2M.3.03 and 2M.6.04 are provided in the Remuneration Report in the Directors’ report. Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the consolidated entity since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year-end. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 83 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 37. rELATED pArTIEs (CONTINuED) Loans from key management personnel and their related parties Details regarding loans outstanding at the reporting date to key management personnel and their related parties, at any time in the reporting period, are as follows: AMCI Investments Pty Ltd, an entity jointly controlled by Hans Mende was repaid USD loans including accrued interest totalling $33,506,000 (2007: $nil) during the year. The balance outstanding at 30 June 2008 was nil (2007: $12,030,000 – current and $19,114,000 – non-current). The consolidated entity paid interest of 5% on the outstanding balance of the loan, recognising interest expense of $704,000 during the year ended 30 June 2008 (2007: $957,000). Other key management personnel transactions A number of key management persons, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities. These entities transacted with the Company or its subsidiaries in the reporting period. The terms and conditions of the transactions with management persons and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s length basis. The aggregate amounts recognised during the year relating to key management personnel and their related parties were as follows: Transactions value year ended 30 June Balance outstanding as at 30 June Transaction Note 2008 2007 2008 2007 Key management person and their related parties In AUD Other related parties Hans Mende – AMCI International AG Marketing fees Hans Mende – AMCI Investments Pty Ltd Foreign exchange derivatives Keith Ross and Hans Mende – LD Operations Pty Ltd Namoi Agricultural and Mining Pty Ltd Mining consultant services Royalty payments (i) (ii) (iii) (iv) 48,000 373,000 1,567,500 1,567,500 1,867,000 (8,710,000) – – 375,000 18,000 – – – 8,710,000 – – 84 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 37. rELATED pArTIEs (CONTINuED) Other key management personnel transactions (continued) (i) The consolidated entity uses the marketing services of AMCI International AG, a company jointly controlled by Hans Mende, under a contract renewable annually. In conjunction with the Company’s listing on the ASX, the Company issued AMCI International AG $1,567,500 in shares to prepay the marketing contract, which was determined to be the fair value of the remaining services to be provided under the contract. Contract terms are based on market rates for these types of services. (ii) In the prior year, the consolidated entity had entered into foreign currency options with AMCI Investments Pty Ltd, a company jointly controlled by Hans Mende. The foreign currency options were entered to economically hedge certain sales and mature over a four-year period. The consolidated entity recorded current derivative receivables of $1,874,000 and non-current derivative receivables of $6,836,000 on the balance sheet at 30 June 2007 (2008: $nil), and foreign currency gains of $8,710,000 were recognised under the options during the year ended 30 June 2007 (2008: loss of $1,867,000). (iii) In the prior year, the consolidated entity had used the services of LD Operations Pty Ltd (LDO), a mine development company providing consulting, management and operating services to a number of coal companies in NSW and Queensland. Keith Ross and Hans Mende resigned as directors during the year and are no longer shareholders of LDO, there were no transactions during this period. (iv) Keith Ross and Chris Burgess are shareholders of Namoi Agriculture and Mining Pty Ltd (NAM). This company has entered into an arrangement with Whitehaven for the sale of gravel by NAM from the Canyon mine site. NAM pays a royalty to Whitehaven of 20 cents per cubic metre of gravel sold. Consolidated Company 2008 2007 2008 2007 Assets and liabilities arising from the above transactions Amounts receivable from and payable to key management personnel and other related parties at reporting date arising from these transactions were as follows: Derivative financial instruments – current Derivative financial instruments – non-current Total assets Current interest bearing liability/current liabilities Non-current interest bearing liability/non-current liabilities Total interest bearing liabilities/total liabilities – – – – – – 1,874,000 6,836,000 8,710,000 12,030,000 19,114,000 31,144,000 – – – – – – – – – – – – 2008 Annual Report 85 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 37. rELATED pArTIEs (CONTINuED) Movements in shares The movement during the reporting period in the number of ordinary shares in Whitehaven Coal Limited held, directly, indirectly or beneficially, by each key management person, including their related parties is as follows: Held at 1 July 2007 Issued on acquisition of subisidaries Issued as share based compensation Received on exercise of options Directors John Conde Neil Chatfield 250,000 250,000 Tony Haggarty 15,150,000 Alex Krueger Hans Mende Andy Plummer Executive directors Rob Stewart Keith Ross Executives Leigh Whitton Tony Galligan Chris Burgess Casper Dieben 131,650,000 75,379,833 15,000,000 – 14,235,227 201,000 26,000 5,261,480 50,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 33,333 33,333 – – Purchased under the Equity Participation and Option Deed Other Purchases Sales Held at 30 June 2008 – – 51,887 51,887 – – 301,887 301,887 7,080,150 254,404 (110,000) 22,374,554 – – – 5,660,377 7,080,150 188,679 – – – – – – 11,887 327,356 5,661 – – 20,020 – – – – – – – – – 131,650,000 81,040,210 22,268,829 11,887 N/A 239,994 59,333 5,261,480 70,020 Held at 1 July 2006 Issued on acquisition of subisidaries Issued as share based compensation Received on exercise of options Purchased under the Equity Participation and Option Deed Other Purchases Sales Held at 30 June 2007 Directors John Conde Neil Chatfield Tony Haggarty Alex Krueger Hans Mende Andy Plummer Executive director Keith Ross Executives Leigh Whitton Tony Galligan Chris Burgess Casper Dieben – – – – – – – – – – – – – – 131,650,000 75,379,833 – 14,215,227 – – 5,261,480 – – – – – – – – 1,000 1,000 – 1,000 – – – – 250,000 250,000 – – 250,000 250,000 – 15,000,000 160,000 (10,000) 15,150,000 – – – – – – – – 15,000,000 – – – – – – – – 20,000 200,000 25,000 – 49,000 – – – – – – – – 131,650,000 75,379,833 15,000,000 14,235,227 201,000 26,000 5,261,480 50,000 86 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 37. rELATED pArTIEs (CONTINuED) Options and rights over equity instruments The movement during the reporting period in the number of options over ordinary shares in the Company held, directly, indirectly or beneficially, by each key management person and director related entities, including their related parties, is as follows: Director related entities Tony Haggarty Andy Plummer Executives Rob Stewart Leigh Whitton Tony Galligan Director related entities Tony Haggarty Andy Plummer Executives Leigh Whitton Tony Galligan Held at 1 July 2007 Granted Exercised 30 June 2008 Held at Vested during the year Vested and exercisable at 30 June 2008 22,020,657 22,020,657 – – 7,080,150 14,940,507 14,694,391 7,614,241 7,080,150 14,940,507 14,694,391 7,614,241 – 3,000,000 – 3,000,000 100,000 100,000 Held at 1 July 2006 – – 33,333 33,333 66,667 66,667 Held at Granted Exercised 30 June 2007 – 33,333 33,333 – – – Vested during the year Vested and exercisable at 30 June 2007 – – – – 22,020,657 22,020,657 100,000 100,000 – – – – 22,020,657 22,020,657 100,000 100,000 – – – – – – – – No options held by key management personnel were vested but not exercisable at 30 June 2007. Changes in key management personnel in the period after the reporting date and prior to the date when the financial report is authorised for issue Mr Chris Burgess, General Manager new Projects resigned 15 August 2008. Mr Leigh Whitton, CFO has not accepted the offer to relocate to Sydney but has agreed to remain as the Chief Financial Officer and Joint Company Secretary until 31 March 2009. Other related party disclosures Parent The Company has loans payable totalling $148,037,000 to two subsidiaries at 30 June 2008 (2007: $142,994,000) in current liabilities on the balance sheet. The loans are interest free and repayable on demand but are not intended to be called by the subsidiaries during the next twelve months. subsidiaries Loans are made by the Company to wholly owned subsidiaries for operating activities. Loans outstanding between the Company and its subsidiaries are repayable on demand and are non-interest bearing. During the financial year ended 30 June 2008, such loans to subsidiaries totalled $170,367,000 (2007: $1,318,000). 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 87 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 38. CONsOLIDATED ENTITy’s suBsIDIArIEs AND INTErEsTs IN JOINT VENTurEs Ownership interest Country of Incorporation 2008 2007 parent entity Whitehaven Coal Limited subsidiaries Whitehaven Coal Mining Limited Namoi Mining Pty Ltd Betalpha Pty Ltd Betalpha Unit Trust Tarrawonga Coal Pty Ltd Tarrawonga Coal Sales Pty Ltd Whitehaven Coal Holdings Limited Whitehaven Coal Infrastructure Pty Ltd Narrabri Coal Pty Ltd Narrabri Coal Operations Pty Ltd Narrabri Coal Sale Pty Ltd Creek Resources Pty Ltd Werris Creek Coal Sales Pty Ltd Werris Creek Coal Pty Ltd WC Contract Hauling Pty Ltd Australian Coal Inter Holdings (NL) II B.V. Australian Coal Inter Holdings (NL) IIA B.V. Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 70 100 100 100 92.5 100 100 100 100 100 100 100 The consolidated entity has interests in the following jointly controlled operations, whose principal activities involve the development and mining of coal: Tarrawonga Coal Project Joint Venture Werris Creek Coal Joint Venture Narrabri Coal Joint Venture 2008 70% 100% 92.5% Subsequent to 30 June 2008, further sell downs of the Narrabri Coal project have been agreed to (see note 35). 100 100 100 100 100 70 100 100 100 – – – – – – 100 100 2007 70% 40% – 88 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 39. EArNINgs pEr sHArE Basic earnings per share The calculation of basic earnings per share at 30 June 2008 was based on the profit attributable to ordinary shareholders of $51,854,000 (2007: $24,095,000) and a weighted average number of ordinary shares outstanding during the year of 357,041,000 (2007: 301,933,000) calculated as follows: In thousands of AUD profit attributable to ordinary shareholders Net profit attributable to ordinary shareholders Weighted average number of ordinary shares Issued ordinary shares at 1 July Effect of shares issued at 3 December 2007 Effect of shares issued at 7 December 2007 Effect of shares issued at 24 January 2008 Effect of shares issued at 24 March 2008 Effect of shares issued at 6 June 2008 Consolidated 2008 2007 51,854 24,095 323,000 300,000 21,248 1,933 2,038 8,294 2,457 4 – – – – Weighted average number of ordinary shares at 30 June 357,041 301,933 Diluted earnings per share The calculation of diluted earnings per share at 30 June 2008 was based on the profit attributable to ordinary shareholders of $51,854,000 (2007: $24,095,000) and a weighted average number of ordinary shares outstanding during the year of 360,253,000 (2007:301,951,000) calculated as follows: In thousands of AUD profit attributable to ordinary shareholders (diluted) Consolidated 2008 2007 Net profit attributable to ordinary shareholders (diluted) 51,854 24,095 Weighted average number of ordinary shares (diluted) Weighted average number of ordinary shares (basic) Effect of share options on issue Weighted average number of ordinary shares (diluted) 357,041 301,933 3,212 18 360,253 301,951 The options issued to director with hurdle rates of $4.50/share and $5.00/share were not included in the calculation of 2008 diluted earnings per share as they were anti-dilutive. Refer to note 36 for further information regarding the options issued to director related entities. 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 89 For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 40. AuDITOrs’ rEMuNErATION In AUD Audit services: Auditors of the Company – KPMG Australia Consolidated Company 2008 2007 2008 2007 Audits and reviews of statutory financial statements – 2008 259,900 – 15,000 Audits and reviews of statutory financial statements – 2007 Audits of joint ventures – 2008 Audits of joint ventures – 2007 Reviews of financial statements to support listing Other regulatory audit services 72,858 62,440 8,071 – 4,000 176,733 – 40,600 42,373 3,650 – – – – – – 20,000 – – – – Other auditors Audit of financial statements Other services: Auditors of the Company – KPMG Australia Accounting advice Taxation services Auditors of the Company – KPMG related practices Due diligence services 407,269 263,356 15,000 20,000 – 3,800 – – 407,269 267,156 15,000 20,000 4,200 225,377 – 229,577 29,726 232,555 210,158 472,439 – – – – – – 30,000 30,000 90 2008 Annual Report For personal use only NOTEs TO ThE FiNANciAL sTATEmENTs 30 JuNE 2008 41 DEED Of CrOss guArANTEE Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and directors’ report. It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up. The subsidiaries subject to the Deed are: • Whitehaven Coal Mining Limited • Namoi Mining Pty Ltd • Betalpha Pty Ltd • Tarrawonga Coal Pty Ltd • Whitehaven Coal Holdings Limited • Whitehaven Coal Infrastructure Pty Ltd • Narrabri Coal Pty Ltd • Narrabri Coal Operations Pty Ltd • Narrabri Coal Sales Pty Ltd • Creek Resources Pty Ltd • Werris Creek Coal Sales Pty Ltd • Werris Creek Coal Pty Ltd • WC Contract Hauling Pty Ltd The Company and each of the subsidiaries entered into the deed on 27 June 2008. The income statement and balance sheet of the consolidated entity represents the Company and subsidiaries that are a part to the Deed of Cross Guarantee. 2008 Annual Report 91 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W For personal use only diREcTORs’ dEcLARATiON 1. In the opinion of the directors of Whitehaven Coal Limited (“the Company”): a) the financial statements and notes 1 to 41 and the remuneration disclosures that are contained in the Remuneration report in the Directors’ report, set out on pages 12 to 91, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2008 and of their performance, for the financial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2 (a); and c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. There are reasonable grounds to believe that the Company and the group entities identified in note 41 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those group entities pursuant to ASIC Class Order 98/1418. 3. The directors have been given the declarations by the chief executive officer and chief financial officer for the financial year ended 30 June 2008 pursuant to section 295A of the Corporations Act 2001. Dated at Sydney this 26th day of September 2008. Signed in accordance with a resolution of the directors: John Conde Chairman 92 2008 Annual Report For personal use only iNdEPENdENT AUdiTOR’s REPORT TO ThE mEmBERs OF WhiTEhAvEN cOAL LimiTEd Independent auditor’s report to the members of Whitehaven Coal Limited Report on the financial report Independent auditor’s report to the members of Whitehaven Coal Limited We have audited the accompanying financial report of Whitehaven Coal Limited (the Report on the financial report Company), which comprises the balance sheets as at 30 June 2008, and the income statements, statements of changes in equity and cash flow statements for the year ended on that date, a We have audited the accompanying financial report of Whitehaven Coal Limited (the summary of significant accounting policies and other explanatory notes 1 to 41 and the Company), which comprises the balance sheets as at 30 June 2008, and the income statements, directors’ declaration of the consolidated entity comprising the Company and the entities it statements of changes in equity and cash flow statements for the year ended on that date, a controlled at the year’s end or from time to time during the financial year. summary of significant accounting policies and other explanatory notes 1 to 41 and the directors’ declaration of the consolidated entity comprising the Company and the entities it Directors’ responsibility for the financial report controlled at the year’s end or from time to time during the financial year. The directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Directors’ responsibility for the financial report Accounting Interpretations) and the Corporations Act 2001. This responsibility includes The directors of the Company are responsible for the preparation and fair presentation of the establishing and maintaining internal control relevant to the preparation and fair presentation of financial report in accordance with Australian Accounting Standards (including the Australian the financial report that is free from material misstatement, whether due to fraud or error; Accounting Interpretations) and the Corporations Act 2001. This responsibility includes selecting and applying appropriate accounting policies; and making accounting estimates that establishing and maintaining internal control relevant to the preparation and fair presentation of are reasonable in the circumstances. In note 2 (a), the directors also state, in accordance with the financial report that is free from material misstatement, whether due to fraud or error; Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the selecting and applying appropriate accounting policies; and making accounting estimates that financial report, comprising the financial statements and notes, complies with International are reasonable in the circumstances. In note 2 (a), the directors also state, in accordance with Financial Reporting Standards. Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial report, comprising the financial statements and notes, complies with International Auditor’s responsibility Financial Reporting Standards. Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Auditor’s responsibility Standards require that we comply with relevant ethical requirements relating to audit Our responsibility is to express an opinion on the financial report based on our audit. We engagements and plan and perform the audit to obtain reasonable assurance whether the conducted our audit in accordance with Australian Auditing Standards. These Auditing financial report is free from material misstatement. Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the An audit involves performing procedures to obtain audit evidence about the amounts and financial report is free from material misstatement. 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 An audit involves performing procedures to obtain audit evidence about the amounts and due to fraud or error. In making those risk assessments, the auditor considers internal control disclosures in the financial report. The procedures selected depend on the auditor’s judgement, relevant to the entity’s preparation and fair presentation of the financial report in order to including the assessment of the risks of material misstatement of the financial report, whether design audit procedures that are appropriate in the circumstances, but not for the purpose of due to fraud or error. In making those risk assessments, the auditor considers internal control expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes relevant to the entity’s preparation and fair presentation of the financial report in order to evaluating the appropriateness of accounting policies used and the reasonableness of accounting design audit procedures that are appropriate in the circumstances, but not for the purpose of estimates made by the directors, as well as evaluating the overall presentation of the financial expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes report. 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 We performed the procedures to assess whether in all material respects the financial report report. presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards (including the Australian Accounting Interpretations), a view which is consistent with We performed the procedures to assess whether in all material respects the financial report our understanding of the Company’s and the consolidated entity’s financial position and of their presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting performance. Standards (including the Australian Accounting Interpretations), a view which is consistent with our understanding of the Company’s and the consolidated entity’s financial position and of their We believe that the audit evidence we have obtained is sufficient and appropriate to provide a performance. basis for our audit opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. Liability limited by a scheme approved under Professional Standards Legislation. 93 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report For personal use only Independent audItor’s report to the members of WhItehaven Coal lImIted Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the financial report of Whitehaven Coal Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. (b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2 (a). Report on the remuneration report We have audited the Remuneration Report included in sections 7.1, 7.2 and 7.3 of the directors’ report for the year ended 30 June 2008. 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 auditing standards. Auditor’s opinion In our opinion, the Remuneration Report of Whitehaven Coal Limited for the year ended 30 June 2008, complies with Section 300A of the Corporations Act 2001. KPMG Jason Adams Partner Brisbane 26 September 2008 94 2008 Annual Report For personal use only AsX AddiTiONAL iNFORmATiON Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below. sHArEHOLDINgs substantial shareholders The number of shares held by substantial shareholders and their associates as advised in substantial shareholder notices to the Company are set out below: Shareholder FRC Whitehaven Holdings BV AMCI International AG Anthony Haggarty and HFTT Pty Ltd as trustee for the Haggarty Family Trust Ranamok Pty Ltd as trustee for the Plummer Family Trust Mr Hans Mende & Ingrid Mende as trustees of the Mende Family Trust Fritz Kundrun as trustee of the Kundrun Family Trust Percentage of capital held Number of ordinary shares held 33.59 13.77 5.71 5.68 5.47 5.47 131,650,000 53,951,500 22,374,554 22,268,829 21,428,333 21,428,333 Voting rights Ordinary shares Refer to note 29 in the financial statements Options There are no voting rights attached to the options. Distribution of equity security holders Category 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over There are 5 holders of options over ordinary shares. Refer to note 36 in the financial statements. The number of shareholders holding less than a marketable parcel of ordinary shares is nil. sECurITIEs ExCHANgE The Company is listed on the Australian Securities Exchange. The home exchange is Brisbane. Number of equity security holders 571 1,353 593 519 52 3,088 8 0 0 2 t r o p e R l a u n n A - d e t i m L i l a o C n e v a h e t i h W 2008 Annual Report 95 For personal use only AsX AddiTiONAL iNFORmATiON OTHEr INfOrMATION Whitehaven Coal Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. Twenty largest shareholders Name FRC Whitehaven Holdings BV ANZ Nominees Limited (Cash Income A/C) UBS Wealth Management Australia Nominees Pty Ltd AMCI International AG HFTT Pty Ltd (Haggarty Family A/C) Ranamok Pty Ltd (Plummer Family A/C) National Nominees Limited Fritz Kundrun (Kundrun Family A/C) Mr Hans Mende & Mrs Ingrid Mende (Mende Family A/C) HSBC Custody Nominees (Australia) Ltd Mr MIchael Jack Quillen (Quillen Family A/C) J P Morgan Nominees Australia Limited Nicola Investments II LLC Mr Michael Jack Quillen (Quillen Family A/C) MR Keith Ross Keith Ross & Alison Ross (Ross Family A/C) Kirstin Investments II LLC Markus Investments II LLC Citicorp Nominees Pty Ltd Mr Christopher John Burgess + Ms Julie Ann Mammen Number of ordinary share held 131,650,000 Percentage of capital held 32.96 35,890,591 29,501,578 26,975,750 26,038,753 26,038,753 13,643,128 10,714,167 10,714,167 9,162,662 7,164,750 7,123,747 5,660,377 4,164,750 3,646,114 3,461,500 2,830,189 2,830,188 2,542,935 1,938,440 8.98 7.39 6.75 6.52 6.52 3.42 2.68 2.68 2.29 1.79 1.78 1.42 1.04 0.91 0.87 0.71 0.71 0.64 0.49 361,692,539 90.55 96 For personal use only corporate directory Directors John Conde, Chairman Rob Stewart, Managing Director Neil Chatfield Tony Haggarty Alex Krueger Hans Mende Andy Plummer company secretaries Leigh Whitton Paul Marshall registereD anD principal aDministrative office Ground Floor, 895 Ann Street Fortitude Valley QLD 4006 Ph: +61 7 3000 5690 Fax: +61 7 3000 5699 australian Business numBer ABN 68 124 425 396 stock exchange listing Australian Securities Exchange Ltd ASX Code: WHC auDitor KPMG Level 16, Riparian Plaza 71 Eagle Street Brisbane Qld 4000 Ph: +61 7 3233 3111 Fax: +61 7 3233 3100 share registry Computershare Investor Services Pty Limited GPO Box 523 Brisbane QLD 4001 Ph: 1300 850505 Fax: +61 7 3237 2100 legal aDvisers McCullough Robertson Level 12, Central Plaza Two 66 Eagle Street Brisbane Qld 4000 country of incorporation Australia WeB aDDress www.whitehaven.net.au . . . u a m o c e e r p u d w w w p u o r G n g s e D e e r p u D i : n o i t c u d o r p d n a i n g s e D Cert no. 2008 Annual Report For personal use only www.whitehaven.net.au 2008 Annual Report For personal use only