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Trean Insurance GroupWhitehaven Coal
Annual Report 2018
Whitehaven Coal is proud to be the largest
Australian-owned producer of HELE (high
efficiency, low emissions) power station coal.
Our story began nearly 20 years ago as a private
company operating out of the Gunnedah Coal
Basin in North West New South Wales – an area
which remains our home and the focal point
of our growing business.
Since then, we have evolved into one of the largest
coal mining producers listed on the Australian
Securities Exchange and have developed a reputation
for excellence in operations and project delivery.
We are the single largest non-government employer
in the region, with a workforce of around 1,600 men
and women working across six mines. In the past
five years alone we have invested $1.5 billion in the
North West NSW economy.
Our high-quality coal is exported to established
and emerging markets across Asia where it is used
to produce electricity and steel, delivering the
essential building blocks for sustainable economic
development in a more carbon-conscious world.
Whether it is the local communities where we operate
and invest, or the advanced and developing economies
where our product is put to work, we are proud to be
‘powering the region’ while creating value for all our
shareholders, large and small.
Whitehaven’s ASX code is WHC and the company
had 1,026,045,885 shares on issue as at 30 June 2018.
More information on corporate governance can be
found elsewhere in this report and is also available
on our website, www.whitehavencoal.com.au
Whitehaven Coal’s Annual General Meeting (AGM)
will be held on 25 October 2018.
CONTENTS
| OVERVIEW
| COAL
| STRATEGY
| OPERATIONS
| SUSTAINABILITY
| RESOURCES & RESERVES
| LEADERSHIP & MANAGEMENT
| FINANCIAL REPORT
2
14
24
32
40
54
56
62
Section 1
Introduction
Group Financial Highlights
Group Operational Highlights
Delivering Shareholder Value
Economic Contribution Highlights
Our Assets
Chairman’s Statement
Managing Director and CEO Statement
3
4
5
6
7
8
10
12
2 | SECTION 1 OVERVIEW
INTRODUCTION
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OUR MISSION
OUR BUSINESS
OUR PILLARS
To be the leading Australian
producer of HELE (High
Efficiency Low Emissions)
coal, supporting sustainable
economic growth and
development both at home
and abroad.
The world wants reliable
and affordable energy
but with lower carbon
emissions. We are ideally
placed to meet this strong
and growing demand.
Our goal is simple: to reliably
supply coal that meets
our customers’ exacting
specifications and to
operate safely, sustainably
and in the best interests
of our shareholders.
We currently produce
more than 20 million
tonnes of saleable (100%
basis) thermal and
metallurgical coal per
annum from our portfolio
of mines. In the past
decade, the company
has established itself as
a major player in the Pacific
Seaborne coal market with
more growth to come.
Our coal travels from the
Gunnedah Basin by rail
to the Port of Newcastle
before being shipped to
customers mainly in Japan,
Korea, Taiwan and India.
Our pillars form the
foundations of our culture
and the way we work.
−− Safety in all
our operations
−− Social and environmental
responsibility
−− Continuous improvement
−− Operational excellence
and sustainable growth
−− Openness with customers
and partners
−− Professionalism and
integrity in all we do
−− Transparent
communication.
Whitehaven Coal Annual Report 2018 | 3
GROUP FINANCIAL
HIGHLIGHTS
HIGHLIGHTS OF THE YEAR
−− Record profit of $525.6m, up 30% on previous year
−− Returned to dividend paying status with $595m paid to shareholders in FY2018/19.
WHITEHAVEN COAL FIVE YEAR FINANCIAL RECORD
FY2018
FY2017
FY2016
FY2015
FY2014
Revenue ($m)
Underlying EBITDA ($m)
Profit/(Loss) attributal to the Group ($m)
EPS cents
DPS cents
Net debt ($m)
2,257.4
1,773.2
1,164.4
940.0
525.6
52.2
40.0
270.4
714.2
405.4
40.7
20.01
311.1
224.1
20.5
2.1
–
763.3
130.3
(342.7)
(33.3)
–
755.4
90.4
(38.4)
(3.9)
–
839.0
936.0
685.0
Group net assets ($m)
3,489.8
3,292.3
2,889.0
2,865.0
3,207.0
Cash operating costs ex royalties ($/t)
Achieved price ex royalties ($/t)
62
121
58
104
56
70
61
74
69
79
1 Capital component of 14 cents per share.
ANNUAL REVENUE ($M)
ANNUAL EBITDA ($M)
2500
2000
1500
1000
500
0
1000
800
600
400
200
0
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
NET DEBT ($M)
ANNUAL NPAT ($M)
1000
800
600
400
200
0
2014
2015
2016
2017
2018
4 | SECTION 1 OVERVIEW
600
400
200
0
-200
-400
2014
2015
2016
2017
2018
GROUP OPERATIONAL
HIGHLIGHTS
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HIGHLIGHTS OF THE YEAR
−− Record ROM coal production
−− Record saleable coal production and sales.
TOTAL GROUP (EQUITY BASIS)
ROM coal production (‘000 t)
Saleable coal production (‘000 t)
Sales of produced coal (‘000 t)
Sales of purchased coal (‘000 t)
Total sales (‘000 t)
FY2018
FY2017
FY2016
FY2015
FY2014
17,727
16,160
16,109
1,256
17,365
17,718
15,769
15,487
328
15,815
15,760
15,072
15,432
79
12,205
11,253
10,859
–
15,511
10,859
9,177
8,160
8,215
511
8,726
ROM COAL PRODUCTION (MT)
SALEABLE COAL PRODUCTION (MT)
20
18
16
14
12
10
8
6
4
2
0
20
18
16
14
12
10
8
6
4
2
0
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
COAL SALES INC PURCHASED COAL (MT)
SAFETY TRIFR AT END OF YEAR
20
18
16
14
12
10
8
6
4
2
0
20
18
16
14
12
10
8
6
4
2
0
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Whitehaven Coal Annual Report 2018 | 5
DELIVERING SHAREHOLDER VALUE
FY18 AT A GLANCE
Period to 30 June 2018
WHC TSR ASX 200 TSR
1 year
2 year
3 year
118%
483%
377%
13%
29%
30%
SHAREHOLDER
RETURN
(TSR)
118%
UNDERLYING
EBITDA BEFORE
SIGNIFICANT ITEMS
$940.0M
SHAREHOLDER
DISTRIBUTIONS
AND DIVIDENDS
40c/SHARE
FY17: 167%
FY17: $714.2M
FY17: 20C PER SHARE
WHITEHAVEN COAL SHAREHOLDER RETURN VERSUS ASX200
600%
500%
400%
300%
200%
100%
0%
5
1
n
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5
1
g
u
A
5
1
t
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O
5
1
c
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D
6
1
b
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F
6
1
r
p
A
6
1
n
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J
6
1
g
u
A
6
1
t
c
O
6
1
c
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D
7
1
b
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F
7
1
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7
1
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7
1
g
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7
1
t
c
O
7
1
c
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D
8
1
b
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F
8
1
r
p
A
8
1
n
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Whitehaven Coal Limited – Total Return
S&P ASX 200 – Total Return
6 | SECTION 1 OVERVIEW
ECONOMIC CONTRIBUTION
HIGHLIGHTS
WE HAVE INVESTED
MORE THAN
$1.5BN
in the North West NSW
economy in the past five years
$12M
in salaries to indigenous
workforce flowing back
into communities each year
WE MADE PAYMENTS OF
WE PAID
$172.1M
to employees last year
$283.9M
in taxes and royalties payments
to governments last year
WE DONATED
$445K
to local community groups
and organisations last year
75%
of our workforce live in
the area of our operations
$1.9M
in voluntary planning agreement
payments for local community
infrastructure last year
WE SPENT
$293.2M
with local suppliers
during the past year
11%
of employees self-identify
as Aboriginal or Torres
Strait Islander
Whitehaven Coal Annual Report 2018 | 7
1 OVERVIEW OUR ASSETS
NEW SOUTH WALES
Narrabri
Maules Creek Mine
QLD Winchester South Project
Winchester South Project
Winchester South Project
Tarrawonga Mine
AUSTRALIA
NSW
Gunnedah
Gunnedah
Sydney
Sydney
PACIFIC OCEAN
Whitehaven Coal
shipped to premium
Asian markets
Narrabri Mine
Gunnedah CHPP
Sunnyside Mine
Boggabri
Gunnedah
Vickery Project
Rocglen Mine
Tamworth
Gunnedah
Coal Basin
Werris Creek Mine
Gloucester
Muswellbrook
NEW SOUTH
WALES
Singleton
0
50
km
100
Key:
Whitehaven Assets
Railway
QUEENSLAND
Newcastle
(PWCS and
NCIG Coal
Terminals)
Sydney
Port of Abbot Point
Bowen
QLD
Winchester South Project
AUSTRALIA
NSW
Gunnedah
Sydney
Mackay
Port of Hay Point
Moranbah
Winchester South Project
PACIFIC OCEAN
0
50
km
100
Key:
Whitehaven Assets
Railway
Rockhampton
Blackwater
Port of Gladstone
Gladstone
8 | SECTION 1 OVERVIEW
WHITEHAVEN BOASTS A QUALITY PORTFOLIO OF PRODUCTION
ASSETS, A ROBUST DEVELOPMENT PIPELINE IN NSW AND QLD,
A STRONG BALANCE SHEET, AND DIRECT ACCESS TO MARKETS
WITH A GROWING APPETITE FOR OUR QUALITY PRODUCT.
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Whitehaven Coal Annual Report 2018 | 9
CHAIRMAN’S STATEMENT
BUILDING A BIGGER, STRONGER COMPANY
On behalf of the Board, I am pleased to present you with our
2018 Annual Report.
Over the course of the year, we
have continued to focus on further
consolidating its status as the leading
Australian producer of premium
thermal and metallurgical coal.
We have successfully leveraged our
unique position as the dominant
player in Australia’s only emerging
high-quality coal basin against
a backdrop of increasing demand in
traditional and new export markets.
We have expanded our portfolio of
assets consistent with our growth
ambitions, and sought to maintain
a relentless focus on excellence and
efficiency across the business. On
any measure, it has been another
busy and transformative year.
Pleasingly, our effort has yielded the
type of result we set out to achieve
12 months ago. Our record profit
after tax of $525.6 million for the
year ended 30 June 2018 is more
than a reflection of the external price
environment and strong demand
for our product; it is testament
to careful execution on an agreed
strategic vision and to a culture that
values hard work, respect, diversity
and recognition. As Chairman, I am
proud of what has been achieved
and of the individual and collective
performances that have helped
underpin the result. Once again,
I would like to acknowledge the work
of Paul Flynn and his executive group
for providing outstanding leadership
to our nearly 1,600-strong team.
Looking beyond the headline profit
figure, we shipped and marketed
in excess of 20 million tonnes of
coal, which led the company to
achieve revenue of $2,257.4 million
and earnings of $525.6 million. Our
balance sheet is stronger than at any
point in the company’s history as an
ASX-listed entity, with year average
costs of $62/t within the guidance
range and debt all but eliminated.
Total shareholder return for the year
was 118% which included 33 cents
per share in dividends and capital
return payments.
The Board has declared a dividend
alongside the FY18 results of 27
cents per share. The declaration
reflects both the record financial
performance over the past year
and the Board’s confidence in the
company’s future growth prospects.
The FY18 dividend and other returns
to shareholders during this period
brings the total annual shareholder
cash return to $595.2 million for
the year.
Longstanding shareholders and
newer entrants to our register alike
can be assured their company
is on a sound footing for future
success. In this context, it has been
a milestone year across a number of
areas. In addition to recording our
largest ever profit and eliminating
debt, we meaningfully entered
the ASX100 index, submitted the
Environmental Impact Statement
for the development of the Vickery
Extension Project and took full
ownership of the Winchester
South tenement in Queensland’s
Bowen Basin.
These achievements all point to
a bigger, more resilient and more
sustainable company overall, and
one which will be well-positioned
to take advantage of forecast
new demand for high quality coal
emerging in our region.
From a governance perspective,
Whitehaven remains focused on
building the long-term capability
of the Board and ensuring it
has the right blend of skills,
professional experience and
diversity to support the company’s
strategic growth agenda.
During the course of the year,
Christine McLoughlin retired as
a Director of Whitehaven after
serving nearly six years on the
Board. I would like to take this
opportunity to thank Christine
once again for her valuable
contribution and wish her well
in her future endeavours.
10 | SECTION 1 OVERVIEW
We were pleased to welcome Fiona
Robertson to the Board as a new
independent non-executive Director.
Fiona has extensive experience in the
resources industry having worked
as a senior executive and in non-
executive director roles for a number
of ASX-listed mining companies.
Fiona brings significant skills and
insight to the Board as we continue
on our growth path.
From a corporate governance
perspective, the year has also seen
changes at Committee level. Fiona
Robertson was appointed to the
Audit & Risk Management and the
Remuneration Committees, John
Conde was appointed Chair of the
Remuneration Committee and Julie
Beeby was appointed Chair of the
Health, Safety, Environment and
Community Committee.
Looking back on what
represents a period of significant
achievement, I would like conclude
by taking this opportunity to pay
tribute once again to my fellow
directors, senior management and
the entire Whitehaven workforce,
and to thank our Joint Venture
Partners, banking syndicate and our
shareholders for their continued
support. Our sector is not without
its challenges but, as a company,
we have never been more strongly
positioned for future success.
We look forward to another
outstanding year in FY2019.
The Hon. Mark Vaile AO
Chairman
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Whitehaven Coal Annual Report 2018 | 11
MANAGING DIRECTOR AND
CEO STATEMENT
POWERING THE REGION
Our 10th year as an ASX listed entity has seen the company
continue on its growth path and deliver even greater value for
our shareholders. We have, of course, recorded our largest ever
profit, but this could not have been achieved without shared
vision and strategic purpose across the company. It is pleasing
that, in spite of greater scale and complexity, we find ourselves
more aligned, more committed and better positioned than ever
before to capture the opportunity represented by the wave of
new electricity demand emerging in our region.
Our company has grown from
relatively humble beginnings to
become the largest Australian
pure coal company listed on the
Australian Securities Exchange.
We have established the dominant
presence in Australia’s only emerging
high-quality coal basin and built a
reputation for excellence in both
operations and project delivery.
The year marked a significant turning
point in the company’s evolution
with the acquisition from Rio Tinto
of the Winchester South tenement
in the Bowen Basin. It was a timely
transaction which has given us
a footprint in one of the world’s
premier coking coal basins and now
sees our company straddling both
of Australia’s best coal producing
jurisdictions in Queensland and
New South Wales.
We are at an exciting stage in the
development of our company. We
boast a quality portfolio of production
assets, a robust development pipeline
with our Vickery and Winchester
South projects, an enviable balance
sheet position and direct access
to markets in our region that have
a strong and growing appetite
for the quality product we offer.
We are on a clear path to becoming
not only bigger, but more resilient,
sustainable and efficient.
Arriving at this point has been
a shared enterprise across our
executive leadership group, joint
venture partners, banking syndicate
and, of course, the men and women
that make up our proudly locally
based workforce. I would like to take
this opportunity to express my thanks
for a remarkable team effort which
reflects not only the hard work to
date, but what we are capable of
in the future.
OPERATIONS
Turning to our operational highlights,
I am pleased to report we have
delivered on the objectives we set out
to achieve 12 months ago. We have
maintained a focus on safety, met
our production guidance, repaid debt
and held costs in the first quartile.
Key features of the FY18 include:
−− Group TRIFR at the end of June
2018 of 6.9 – a record low for the
company
−− Managed ROM coal production of
22.9Mt and sales of coal of 22.1Mt,
respectively in-line and 7% higher
than previously
−− Record full year ROM production
of 11Mt at Maules Creek, 13% higher
than the previous year
−− Grew metallurgical sales in line with
expectations, comprising 17% total
sales for the year.
While we reported a record low TRIFR
for the year, we have been reminded
there can be no complacency when it
comes to ensuring our workers arrive
home safely to their families at the
end of each shift. A bigger company
and extra tonnes cannot come at the
expense of safety, and we remain
focused on keeping our TRIFR well
below industry average by enshrining
our Safehaven Rules through every
aspect of our operations, behaviour
and philosophy.
While our Narrabri Underground Mine
did not meet full year production
guidance, it is important to provide
some additional context and
reassurance around this result:
1. Localised weighting issues are
a known feature of underground
mines as they progress deeper
12 | SECTION 1 OVERVIEW
2. We are managing weighting at
Narrabri somewhat sooner than
modelled but it was a task
we knew would arise, and with
which we were prepared to deal
3. By any measure, 6.3Mt for the
year still places Narrabri in the
top percentile for underground
mines in Australia.
Our experience with Narrabri has
also underscored the importance
of holding a balanced portfolio of
production assets where production
shortfalls in one area are able to be
offset elsewhere, as has transpired
this year with record production from
Maules Creek and a strong finish
by the smaller Gunnedah open cuts.
POWERING THE REGION
Recently we launched a local
digital communications campaign
to support the development of our
Vickery Extension Project under
the banner ‘Powering the Region’.
We are hopeful the campaign has
inspired those who have shared
in the economic dividend of our
presence to voice their support for
Vickery to ensure its full economic
potential is realised.
The campaign slogan was
deliberately chosen for its double
meaning, reflecting the company’s
significant economic contribution
to local communities in North West
New South Wales and the fact that
coal produced in this region is quite
literally helping to power a new wave
of economic development in South
and Southeast Asia.
COMMUNITY
Although our company has grown
significantly over the years, we have
never lost sight of the fact that local
communities and local people are the
lifeblood of Australia’s mining sector.
This is why we have always said
local communities must be the main
beneficiaries of our presence and
be able to trust us and talk to us as
they would any good neighbour.
We are proud to be the largest
non-government employer in the
region, with more than 1,500 men
and women working across our six
operational mines. We do not employ
a fly-in, fly-out workforce, and today
more than 75% of our employees
live permanently in and around the
towns where we operate including
Narrabri, Boggabri, Werris Creek
and Gunnedah.
Our goal continues to be that,
as we grow, the local community
continues to see and share in the
benefits of our presence, whether
that is as an employee, a young
Indigenous trainee, a local contractor
or supplier, a student at the
Whitehaven-sponsored Aboriginal
Girls Academy in Gunnedah or
a farmer working land owned by
Whitehaven or benefiting from
our local water-sharing initiative
at Werris Creek.
We believe that being community-
focused starts with listening.
This year we will undertake our
fourth bi-annual round of community
sentiment research that most
recently showed that in Gunnedah
where our local office is located,
two thirds of the entire community
supports mining. Across the region
more broadly, 70% of the population
considers that Whitehaven has a
positive effect on the local economy.
OUTLOOK
In the recently released IEA World
Energy Outlook 2017 report, the
IEA has forecast coal demand in
Southeast Asia to grow from 187Mt
in 2016 to 452Mt in 2040, an
additional 265Mt of coal. The
growth is more than Australia’s
current exports and provides
a great opportunity for Australian
coal producers. With Maules Creek
continuing to ramp production and
our new projects – Vickery and
Winchester South, Whitehaven
is well placed to participate in this
growth over the next decade.
Thank you for your support.
Paul Flynn
Managing Director and CEO
Whitehaven Coal Annual Report 2018 | 13
1 OVERVIEW Section 2
Responding To Global Challenges
Coal In Society
Coal In The World And The Region
Electricity and Coal In Australia
Coal’s Contribution To Australian Economy
Sales And Marketing
Outlook Statement
15
16
18
20
21
22
23
14 | SECTION 2 COAL
RESPONDING TO
GLOBAL CHALLENGES
Coal is a critical building block for economic and social development. According to the
International Energy Agency World Energy Outlook 2017 (WEO2017) report, coal provided
37% of the world’s electricity in 2016. Coal is essential in the production of steel and cement
and other energy intensive products vital for modern life.
There are 1.1 billion people
in the world today without
access to electricity, deprived
of modern healthcare, education
and balanced nutrition.
About 2.5 billion people, half of
whom live in India and China, do
not have access to clean cooking
facilities. This leads to 4.3 million
premature deaths globally each
year from household air pollution.
Thankfully this is changing.
According to the WEO2017, world
electricity production is expected
to grow by 59% from 24,765TWh
in 2016 to 39,289TWh in 2040
under the “New Policies” scenario.
By 2040, the electrification
rate in Asia will reach 99%,
helping to significantly reduce
the number of premature deaths
from household pollution.
In aiming to meet emissions
reduction targets, many countries
have announced massive investments
in renewable intermittent generation
infrastructure, 2.5 times more than
in new fossil-fuel powered capacities.
However, IEA predicts the share of
total electricity produced by wind,
solar and biofuel will rise from 5%
in 2016 to just 19% by 2040.
Subsidies paid for renewable
generation were US$120 billion in
2015. These subsidies are expected
to be over US$207 billion in 2040
with trillions of dollars spent in the
intervening years.
Coal’s share of electricity generation
is expected to be 26% in 2040, more
than for wind and solar combined.
The cost of renewable generation
has decreased, however the low
concentration of natural energy
and intermittency remain key
weaknesses. For example, it takes
roughly 1m2 of land to produce 1W
of wind power and for solar power
it takes the same area to produce
5W in countries with limited sunshine
(such as Germany), rising to 20W
in sunny deserts.
Average capacity utilisation around
the world is 17% for solar and 29% for
wind so without backup intermittent
renewables cannot possibly provide
24/7 electricity.
While wind and solar power emit
no CO₂ during end use, their
manufacture and construction
involve materials made by carbon-
intensive technologies. For example,
it takes 550 tonnes of iron and steel
to produce 1MW of wind power,
compared with 35 tonnes for coal-
fired and 5 tonnes for gas-fired
power stations.
Coal and gas will remain the two
most widely used power sources
for several decades to come at
least, accounting for 26% and 23%
respectively of electricity generation
in 2040, according to the WEO2017.
The affordability, versatility and
cost-effectiveness of coal, allied
with its relative ease of extraction
and transportation, will ensure
demand for many years to come.
Coal will provide power and heat
for many regions where economic
or natural reasons make other
sources unaffordable.
THERE ARE 1.1 BILLION PEOPLE IN THE WORLD TODAY WITHOUT
ACCESS TO ELECTRICITY, DEPRIVED OF MODERN HEALTHCARE,
EDUCATION AND BALANCED NUTRITION.
Whitehaven Coal Annual Report 2018 | 15
2 COAL COAL IN SOCIETY
New steel is the product of iron ore and coking coal. Every tonne of steel needs about
800 kilograms of coal. That means every car on the road is a product of the coal industry.
CARS = COAL
Electrical steels
for starter motors
and alternators
Electrolated strip for
brake and fuel lines,
and electrical parts
Gear steels tuned
for machinability
and hardenability
High strength steels
for crash performance
Alloy steel rod for high-
temperature applications,
eg. engine valves
Ultra-clean steels
for precision parts,
eg. diesel injectors
Steel tubes for
hydroformed
subframes and
other chassis parts
Spring steels for
suspension components
Billets for suspension and
engine part forgings
16 | SECTION 2 COAL
Thick section strip
and tube for structural
reinforcements and
seat structures
Deep drawing
quality steels for
complex shapes
Deep drawing quality
for surface appearance
High-grade wire rod
drawn into tyre cord
Bake-hardenable
steel for door skins
and bonnets
Ultra high strength
steels for ‘B’ pillars
Steel for chassis
bolts and rivets
Advanced high strength
steels for lighter vehicle
structures
Aluminium-coated strip
for exhausts
Source: IEA World Energy Outlook 2017,
UN Secretary–General Report “Progress towards
the Sustainable Development Goals – July 2017.
Graphics courtesy of Minerals Council of Australia.
Information from www.tatasteelautomotive.com
Whitehaven Coal Annual Report 2018 | 17
2 COAL COAL IN THE WORLD AND
THE REGION
A total of 24 countries,
including some of the world’s
largest users of coal – China,
India and Japan – have
included a role for coal in
the respective Nationally
Determined Contributions
(NDCs) in response to the
Paris COP21 meeting.
According to the IEA in 2016, 83GW
of coal fired generating capacity
was installed in the world, more than
any other single technology. More
than 210GW of coal fired generating
capacity was under construction –
90GW in China, 50GW in India and
25GW in Southeast Asia.
Under the IEA New Policy Scenario
(that is, as if all the NDCs were
implemented), over the next 22 years
coal demand will grow by 247Mt
of coal equivalent per annum.
Countries around the world are
increasingly turning to the installation
of supercritical and ultra-supercritical
power stations – commonly termed
HELE for high efficiency, low
emissions technology.
The key to coal’s inclusion in s
o many NDCs lies in the need for
countries to deliver affordable
and reliable electricity. HELE coal,
combined with new technology,
is allowing this to be done more
efficiently and with lower emissions.
GROWING
SOUTHEAST ASIA
Southeast Asia is the key growth
market for Australian coal miners
such as Whitehaven. Coal demand
is forecast to grow strongly out
to 2040 for both power generation
and industrial activity.
Demand grows from 187Mt to 450Mt,
an increase of more than 260Mt which
is more than Australia’s current total
thermal coal exports today.
A number of these countries are
already buying coal from Whitehaven.
DEPLOYMENT OF
HELE TECHNOLOGY
IN SOUTHEAST ASIA
HELE coal is a key feature of
many NDCs because it is affordable
and reliable, and can help meet
growing electricity demand in
a more carbon-constrained world.
These Southeast Asian countries are
choosing HELE because they know its
air quality outcomes are approaching
that of gas, that HELE generates
cheaper electricity than gas and
is the best technology available to
meet those three limbs of the energy
trilemma: reliability, affordability
and emissions reductions.
These factors will continue
to drive the need for high-quality
Australian coal.
HELE GENERATES CHEAPER
ENERGY THAN GAS AND IS THE
BEST TECHNOLOGY AVAILABLE
TO MEET THOSE THREE
LIMBS OF THE ENERGY
TRILEMMA: RELIABILITY,
AFFORDABILITY AND
EMISSIONS REDUCTIONS.
Isogo power plant, south of Tokyo, owned and
operator by J-Power, a joint venture partner of
Whitehaven, which has been recognised as one
of the world’s cleanest coal-fired power stations.
COAL DEMAND GROWTH
BY SECTOR IN SE ASIA (MT)
INSTALLED CAPACITY
BY TECHNOLOGY (GW)
500
400
300
200
100
Industry
Power
0
2016
2040
Source: IEA Southeast Asia Energy Outlook 2017 – New Policy Scenario
18 | SECTION 2 COAL
Ultra-supercritical
Super critical
Subcritical
180
160
140
120
100
80
60
40
20
0
2016
2025
2030
2035
2040
The Whitehaven Coal Board of Directors met with the Australian Ambassador to Japan, The Hon Richard Court AC, during a visit to Japan to meet
joint venture partners and customers in early 2018.
CASE STUDY – JAPAN
Japan is our largest customer, purchasing 61% of the
thermal coal and 11% of the metallurgical coal produced
by the company in FY2018. Japan currently generates
about 30% of its electricity from coal fired generators
and by 2040 coal is still expected to represent at least
22% of supplied electricity, double the contribution
from renewables (wind and solar). In the event that
nuclear power does not reach current forecasts in
2040, then coal’s contribution is likely to be higher
than the 22% indicated in current forecasts.
Japan’s fleet of coal fired power plants has achieved
the highest average efficiency of 42% and least
amount of pollutants in the world. For example,
the Isogo power station in Yokohama city runs
at 43% efficiency with emissions of 20ppm SOX,
10ppm NOX and PM 5mg/m3. These are the
equivalent of emissions from gas fired power
stations. The efficiency of the fleet in Japan will
continue to improve as the fleet is renewed with
more HELE capacity power stations.
JAPAN ELECTRICITY GENERATION 2015
JAPAN COP21 TARGET MIX 2030
3%
1%
1%
4%
8%
1%
40%
10%
33%
Coal
Oil
LNG
Nuclear
Hydro
Biomass
Wind
Solar
Other
8%
1%
2%
2%
9%
21%
26%
3%
27%
Coal
Oil
LNG
Nuclear
Hydro
Biomass
Wind
Solar
Other
Whitehaven Coal Annual Report 2018 | 19
2 COAL ELECTRICITY AND COAL
IN AUSTRALIA
CASE STUDY
– ELECTRICITY PRICES
Australia is a significant energy producer and exporter
of LNG and thermal coal into the Asian region.
Historically, Australia’s electricity prices were among
the lowest in the world as domestic coal and gas
was used for electricity generation. In recent years,
however, wholesale prices have increased to a point
where Australian residential customers now pay
some of the highest electricity prices in the world.
New South Wales, where coal provides most of
the electricity, and South Australia, which utilises
renewables and gas, provide examples of how
electricity prices have increased since 2008.
The combination of Renewable Energy Target
Subsidies (RET) established to encourage the
development of renewable generation, closure of
coal fired power stations and grid upgrades to cope
with intermittent renewable electricity have increased
electric prices in both states. South Australia has the
highest prices in the country.
The average wholesale electricity price in the period
from 2008 until the closure of the Northern Power
Station in South Australia, in March 2012, was $37 per
MWh in New South Wales and $49 per MWh in South
Australia. The combination of increasing penetration
of renewables and closure of the Hazelwood Power
Station in Victoria in March 2017, led to further increases
in wholesale electricity prices to an average of $86
per MWh in New South Wales and $108 per MWh in
South Australia. This continues the trend where South
Australia, with the highest penetration of renewables,
has the highest electricity prices in Australia.
NSW AND SA WHOLESALE ELECTRICITY PRICES ($/MW)
250
200
150
100
50
0
Northern
closure
Hazelwood
closure
8
0
n
a
J
9
0
n
a
J
0
1
n
a
J
1
1
n
a
J
NSW
Source: AEMO (Australian Energy Market Operator).
20 | SECTION 2 COAL
2
1
n
a
J
3
1
n
a
J
4
1
n
a
J
5
1
n
a
J
6
1
n
a
J
7
1
n
a
J
8
1
n
a
J
SA
Average
COAL’S CONTRIBUTION
TO AUSTRALIAN ECONOMY
Coal is forecast to be Australia’s
largest export earner in 2018–19,
just ahead of iron ore, according
to the latest commodity forecast
from the Department of Industry’s
Office of the Chief Economist.
The June 2018 Resources and
Energy Quarterly shows coal is
expected to earn $60.2 billion
in 2017–18 – its highest-ever
annual level. The total comprises
$37.5 billion (182Mt methallurgical
coal) and $22.7 billion (200.5Mt
thermal coal).
Historically, coal has been
Australia’s biggest export earner
and the latest forecasts confirm
its ongoing significance to the
Australian economy.
Coal is the largest export contributor
in both New South Wales and
Queensland, and is sold into
established north Asian markets
and the rapidly-growing markets
of Southeast Asia and India.
The past 18 months show the market
fundamentals for Australian coal are
positive. The high productivity of our
coal companies, their proximity to
major markets and strong regional
economic and population growth
underpins coal exports over the
long term.
Analysis by Commodity Insights’
forecast import demand for thermal
coal alone across Asia could expand
by up to 400Mt by 2030.
High-quality Australian coal
supports both energy production
and steel making. The high-energy,
low ash qualities of Australian
coal ideally match the needs of
the many HELE coal-fired power
plants operating and being built
throughout Asia, and our high-grade
metallurgical coals are amongst
the best in the world for modern
steel making.
In addition to export revenue, coal
continues to make a significant
contribution to the Australian
economy. It provides 75% of
generation in the National Electricity
Market, more than 51,000 direct
jobs and $6 billion in state royalties
annually to pay for police, nurses,
teachers and other vital services
and infrastructure.
THE HIGH-ENERGY, LOW ASH QUALITIES OF AUSTRALIAN COAL IDEALLY MATCH
THE NEEDS OF THE MANY HELE COAL-FIRED POWER PLANTS OPERATING AND
BEING BUILT THROUGHOUT ASIA.
The NCIG Terminal in Newcastle, NSW.
Whitehaven Coal Annual Report 2018 | 21
2 COAL SALES AND MARKETING
We continue to increase
sales into a strongly growing
Southeast Asia market.
Managed sales for the year were
22.1Mt including purchased coal.
While Japan remains the dominant
market for our premium product,
increased sales of this high-quality
coal to Taiwan has seen that country
overtake Korea as the second largest
consumer of our thermal product.
With metallurgical coal, the sales
destination and spread of customers
continues to increase as more
customers trial semi soft coking
coal from the Maules Creek mine.
MAJOR SALES DESTINATIONS
KOREA
REPUBLIC
JAPAN
TAIWAN
INDIA
KEY
Thermal Coal
Met Coal
WHITEHAVEN
COAL HQ
THERMAL COAL SALES FY2018
METALLURGICAL COAL SALES FY2018
4%
4%
3%
4%
11%
14%
22 | SECTION 2 COAL
Japan
Taiwan
Korea
Indonesia
Malaysia
Other Asia
Other
61%
11%
11%
8%
12%
31%
India
Korea
China
Vietnam
Japan
Taiwan
Other
15%
13%
OUTLOOK STATEMENT
OPERATIONS
DEMAND
With the Vickery EIS now lodged
and with the acquisition of the
Winchester South project completed,
production is set to grow strongly
over the next decade. Saleable coal
production guidance for FY2019
is forecast to be in the range of
22Mt to 23Mt. Narrabri production
should stabilise and Maules Creek
will continue to ramp up to its fully
approved rate of 13Mtpa ROM coal.
Production from the smaller open
cuts is expected to be on trend with
the most recent five-year average.
PRICING
Thermal coal prices have traded well
above consensus forecasts for the
past year and reached six-year highs
at the end of the financial year. With
continuing Asian demand, prices
are likely to remain strong. Recent
analysis, by respected industry
consultants CRU, is expecting
globalCOAL Newc Index prices to
remain over US$90/t for the next
five years, an increase of about
US$10/t over their forecasts earlier
this year. Demand remains strong
particularly in Asia and the supply
response has been limited. These
factors underpin a favourable price
outlook for the next year.
Metallurgical coal prices have also
remained high for the year with hard
coking coal trading above US$200/t
for most of the period. Strong
demand from steelmakers and
recent railing issues in Queensland
have seen prices trade well
above market expectations. With
Queensland rail issues unresolved
and the dispute between Aurizon
and the regulator ongoing, prices
for higher quality metallurgical coals
are likely to remain well supported
over 2018 and into 2019.
Global coal demand increased by 2%
in CY 2017. Strong demand growth in
China, India and Southeast Asia more
than offset the decline in Europe.
Industry analysts are indicating that
global demand should grow by a
further 1.8% (110Mt) in 2018 and at a
steady and similar rate for the next
five years, adding almost 600Mt
to annual consumption by 2022.
Demand for thermal coal in the
seaborne market is being driven by
strong economic growth in Asia and
the ongoing deployment of new coal
fired power stations in the Asian
region. In China, power generation
increased by 6.2% year-on-year in
2017 and was up by another 8.6%
year-on-year to May 2018. This
has increased China’s draw on the
seaborne market as domestic coal
production has been constrained
by infrastructure bottlenecks and
ongoing safety and environmental
inspections at many mines. Several
other countries in the region, such
as Malaysia, Vietnam and Philippines,
have increased coal imports as
domestic gas production starts
to decline. In addition, Pakistan
and Bangladesh are deploying new
ultra supercritical units and will look
to the seaborne market for fuel
in the near future.
Thermal coal supply is being
constrained in a number of
exporting countries. Australian
production has failed to increase
in response to higher prices. Only
the United States and Indonesia
have responded to the higher
prices by increasing exports. Coal
mining companies are reluctant
to commit capital to new thermal
coal mines in response to the poor
market conditions that prevailed
between 2012 and 2016. With
limited investment in new mines,
and the lead times for new projects
extending, very few new mines are
likely to begin production before
2022. Combining these factors leads
to a thermal coal market likely to
be undersupplied for several years.
Metallurgical coal has also been
in strong demand as steelmakers
increase production in an effort
to capture the high margins on
offer. Under this scenario the
demand for higher quality
coking coals has been strong as
steelmakers require higher quality
coke to make their steel products.
INDUSTRY ANALYSTS
ARE INDICATING THAT
GLOBAL DEMAND SHOULD
GROW BY A FURTHER
1.8% (110Mt) IN 2018
AND AT A STEADY AND
SIMILAR RATE FOR THE
NEXT FIVE YEARS, ADDING
ALMOST 600Mt TO
ANNUAL CONSUMPTION
BY 2022.
Whitehaven Coal Annual Report 2018 | 23
2 COAL Section 3
Strategy Introduction
Our Process From Pit To Port
Risk And Governance
Global Action On Climate Change
Reducing Emissions
Royalties And Tax
25
26
28
29
30
31
24 | SECTION 3 STRATEGY
STRATEGY
INTRODUCTION
Our strategy is focused on consolidating the strong position we have established
as a coal supplier of choice, employer of choice and coal mining investment of choice.
As we continue to grow our business, our long-term priorities are:
GROW PREMIUM
COAL MARKET SHARE
GROW PORTFOLIO
OF QUALITY ASSETS
RECRUIT AND RETAIN
TOP TALENT
We continue to strengthen
relationships with established
customers throughout the key
markets of Japan, Korea and Taiwan,
while generating new opportunities
across Southeast Asia and beyond.
Our high-quality coal ensures
we are aligned to the Asian markets
that require a premium product.
Having delivered the tier one Maules
Creek mine ahead of schedule and
below budget, we have a track record
of efficient project delivery. As we
look forward to another 10 years
of success, the proposed Vickery
Extension Project is next in our
pipeline of projects to meet market
needs. This year’s purchase of the
Winchester South project provides
another high quality growth option
both in tonnes and product diversity.
We are committed to developing the
skills of its people, working together to
build a culture of respect, transparency
and efficiency, while continuing to
attract and retain the right people
with the right skills to meet the
future demands of the business.
KEEP COSTS DOWN
We continue to have a long-term
commitment to reduce and contain
costs, wherever it is safe to do so.
By doing so, we have been able
to grow margins and productivity
to support future growth and
capital improvements.
The Whitehaven senior executive team. (Not pictured is Michael Van Maanen, EGM Corporate and External Affairs).
Whitehaven Coal Annual Report 2018 | 25
3 STRATEGY OUR PROCESS
FROM PIT TO PORT
OPEN CUT MINING
OUR MINES
Maules Creek
Tarrawonga
Werris Creek
Rocglen
Sunnyside
Vickery Project
Winchester South Project
KEY HIGHLIGHT
Our Maules Creek mine
uses state-of-the-art
ultra-class mining fleet.
UNDERGROUND
MINING
OUR MINE
Narrabri
KEY HIGHLIGHT
Our Narrabri
longwall mine is
one of the most
productive
in Australia.
1.
2.
Open cut and underground
mining: Our cost-efficient
mining delivers a sustainable
supply of high-quality
thermal and metallurgical
coal. Using open-cut mining
methods at Maules Creek,
Sunnyside, Tarrawonga,
Werris Creek and Rocglen
and underground mining
at Narrabri, we produce
high quality coal. Ongoing
sustaining capital investment
ensures operations maintain
a low cost position.
Washing and processing:
Washing plants and
processing facilities improve
the quality of coal and
enables the production of
higher value metallurgical
coal. Washing reduces ash,
increases energy content
and improves the market
value. Coal is also crushed
and screened so that it can
precisely meet customers’
size specifications. We
operate washing and
processing facilities at
Maules Creek, Narrabri
and Gunnedah.
26 | SECTION 3 STRATEGY
3
S
T
R
A
T
E
G
Y
KEY HIGHLIGHT
Our coal from the Gunnedah Basin
is some of the highest quality
among Australian producers –
attracting premium pricing from
our Asian partners and customers.
It also helps customers reduce
carbon emissions in modern
power stations.
3.
4.
Sales: Our extensive
sales network ensures
reliable coal supplies to
customers across Asia.
Our marketing offices in
Newcastle and Tokyo help
mitigate business risk.
Transport: Our coal is
transported by train to
the Port of Newcastle
before being loaded on
ships which deliver the
coal to our customers in
Asia. The location of our
assets, with good access
to key transport and port
infrastructure, enables
us to reliably supply the
major markets of the
Asia Pacific region.
KEY HIGHLIGHT
Where applicable,
disturbed land is
generally rehabilitated
to align with pre-
mining vegetation
communities such as
pasture, woodland and
forest. Rehabilitation
monitoring is conducted
in accordance with each
site's mining operations
plan and relevant
management plans.
Whitehaven Coal Annual Report 2018 | 27
RISK AND GOVERNANCE
Our Board is focused on high standards of governance,
compliance, business conduct, safety and environmental
performance. High-quality corporate governance supports
long-term value creation for shareholders and other
stakeholders. With this in mind, we have reviewed
our corporate governance and reporting practices.
Our corporate governance statement is available on our
website in the section titled Corporate Governance: www.
whitehavencoal.com.au/about_us/corporate_governance.cfm
A summary of our material issues is below. Further detail can be found
in our Directors Report on pages 71 and 72.
Our Health, Safety, Environment and Community Committee sets
the direction for our continuing commitment to the highest safety,
environmental management and community engagement standards.
Working with our executive and senior management teams, the Committee
helps ensure we have the leadership, capabilities, systems and reporting
procedures required to achieve zero harm. We regularly reports our
activities to Community Consultative Committees that have been established
for each mine that we operate. Documents on our website include the:
−− Employee Code of Conduct
−− Diversity Policy
−− Continuous Disclosure Policy
−− Securities Trading Policy
−− Political Donation Policy
−− Anti-Corruption Policy
−− Donations and Sponsorship Policy.
MATERIAL
ISSUES
−− Political and legislative
uncertainty and change
−− Operating efficiency
−− High quality products and
customer satisfaction
−− Industry skills and capacity
−− Reputation and trust
−− Health, safety and well-being
−− Corporate responsibility
and business ethics
−− Stakeholder relationships
−− Sustainable procurement
of materials.
STRATEGY
PILLARS
−− Managed growth of business
−− Delivering to our customers
and communities
−− Building skills and leadership
−− Operating responsibly
THE COMMITTEE HELPS ENSURE WE HAVE THE
LEADERSHIP, CAPABILITIES, SYSTEMS AND REPORTING
PROCEDURES REQUIRED TO ACHIEVE ZERO HARM.
WE REGULARLY REPORT OUR ACTIVITIES TO COMMUNITY
CONSULTATIVE COMMITTEES THAT HAVE BEEN ESTABLISHED
FOR EACH MINE THAT WE OPERATE.
−− Working with partners
and the supply chain.
28 | SECTION 3 STRATEGY
GLOBAL ACTION
ON CLIMATE CHANGE
INTERNATIONAL
ENERGY AGENCY
PROJECTIONS
The International Energy Agency
(IEA) through its annual World
Energy Outlook makes projections
about world coal demand based on
various future scenarios for energy
development. The scenarios used
by the IEA for these projections
change over time as the scenario-
based approach incorporates
revised policies.
The main scenarios in the WEO2017
are the New Policies Scenario, the
Current Policies Scenario and the
Sustainable Development Scenario.
They are differentiated primarily by
the assumptions they make about
government policies. The New
Policies Scenario is designed to show
where existing policies as well as
announced policy intentions might
lead the energy sector. The Current
Policies Scenario provides a point
of comparison by considering only
those policies and measures enacted
into legislation by mid-2017. The
Sustainable Development Scenario
examines what it would take to
achieve the main energy-related
components of the ‘2030 Agenda for
Sustainable Development’ adopted in
2015 by member states of the United
Nations. The three energy-related
goals are: to achieve universal energy
access to modern energy by 2030; to
take urgent action to combat climate
change; and to dramatically reduce
the pollutant emissions that cause
poor air quality.
Different scenarios used by the
IEA in its projections of energy
demand have different implications
for coal usage. Projected coal
usage is highest in the Current
Policies Scenario.
The New Policies Scenario is the
central scenario of WEO2017, and
aims to provide a sense of where
today’s policy ambitions seem likely to
take the energy sector. The Nationally
Determined Contributions (NDCs)
made for the Paris Agreement provide
important guidance as to these policy
intentions in many countries.
The way that policy intentions,
including the NDCs, are reflected in
the New Policies Scenario depends on
the extent to which their realisation
is supported by specific policies
and implementing measures. Where
these are in place, announced targets
are assumed to be met, or indeed
exceeded, where macroeconomic,
cost or demand trends point to this.
However, given that announced
policy intentions are often not yet
fully incorporated into legislation or
regulation, the prospects and timing
for their full realisation depend on the
IEA’s assessment of the institutional
context and relevant political,
regulatory, market, infrastructure
and financing constraints.
Although the New Policies Scenario
is the IEA’s central scenario, the IEA
does not endorse any particular
scenario as being a more probable
forecast than the others.
Further details are available to
the public directly from IEA,
including through the IEA’s website:
www.iea.org/publications/
scenariosandprojections
Whitehaven Coal Annual Report 2018 | 29
3 STRATEGY REDUCING EMISSIONS
CLIMATE CHANGE
We recognise the production of
coal and coal-fired generation are
associated with greenhouse gas
emissions and we are aware of our
responsibilities to help preserve
the environment for current and
future generations. As a major coal
producer, we also recognise our
responsibility to continue providing
the energy people need.
Energy must be abundant,
reliable and inexpensive to meet
growing demand. Access to such
energy is critical to meet basic
needs, improve living standards,
reduce poverty, enable urbanisation
and strengthen economies. In
addition, access to low-cost energy
correlates with human development
indicators such as increased
life expectancy, education
and economic development.
The task we share with
many others is to support,
develop and introduce new coal-
production and energy-generation
technologies and working practices
to meet global energy demands
more sustainably.
The trend to new, more efficient coal-
fired generation in the Asia-Pacific
region is critical to Australia’s role as
a key energy exporter. High-quality
Australian coal is ideally suited to
help bring about a lower emissions
future, today.
We produce some of the best
quality coal in the world, high in
energy and low in ash, sulphur and
other impurities. Our coal assists
the Governments of Japan, Korea
and Taiwan, reduce their carbon
emissions by up to 30%. This stance
is fully supported by the 24 countries
that have included coal use in their
respective NDCs as part of their Paris
COP21 commitments. Several large
carbon emitters including China,
India and Japan are in the group
of 24 countries.
The IEA World Energy Outlook 2017
report forecasts that coal demand
will continue to increase out to
2040. While coal’s share of total
electricity generation in the world
will decline during the period, the
absolute level of coal consumed
will grow under the New Policies
scenario. Several other industry
forecasters support this outlook
or are more optimistic about the
increased demand for coal in
electricity generation and steel
making. The 2018 BP Statistical
Review of World Energy confirmed
coal consumption increased in 2017.
We have extensive contact with
investors, shareholders and research
analysts during each year (over 1,100
meetings and calls in FY2018) and
regularly discusses climate change
related issues with those stakeholders.
We meet with ESG teams in
investment funds and are able to
respond to their questions ensuring
that these funds remain fully informed
about their investment in Whitehaven.
To assess how carbon policy and
regulation will impact our business,
we closely monitor national and
international climate and energy
policy developments. We advocate
for policies that are environmentally
effective, economically efficient and
do not erode shareholder value.
OUR COAL ASSISTS THE
GOVERNMENTS OF JAPAN,
KOREA AND TAIWAN,
REDUCE THEIR CARBON
MISSIONS BY UP TO 30%.
30 | SECTION 3 STRATEGY
ROYALTIES AND TAX
We are committed
to ensuring communities
benefit from the growth
and development of our
business. We are proud
of our contribution to
the state and the nation’s
economic strength.
Tax payments are an important
element of meeting our obligations
to the Australian community. As
a proudly Australian company, we
operate transparently and in good
faith with the Australian Tax Office.
And seek to have good working,
collaborative relationships with
the revenue authorities where
our business is undertaken. The
Company is fully compliant with
the prevailing tax laws of all
jurisdictions in which we operate.
WHITEHAVEN TOTAL
TAX CONTRIBUTIONS
We operate and are based in
Australia. The Company pays taxes
according to Australian law. Taxes
applicable to our business include:
−− Company taxes
−− Royalties
−− Comprehensive employer taxes
such as fringe benefits taxes,
payroll taxes and various
employee insurances
−− Council rates
−− Land taxes
−− Voluntary Planning
Agreement payments.
We also collect and pay a number
of additional taxes beyond those
directly attributable to the Company.
These include PAYG withholding
tax from salary and wages paid
to employees.
As our principal operations are
located in Australia, the majority
of the Company’s tax liabilities are
paid in Australia. A summary of our
financial year tax obligations and
tax history is detailed below.
During the year, we adopted
a formal Tax Management and
Governance Policy which is included
with other Governance Policies on
our website.
WE OPERATE TRANSPARENTLY AND IN GOOD FAITH WITH THE AUSTRALIAN
TAX OFFICE. AND SEEK TO HAVE GOOD WORKING, COLLABORATIVE RELATIONSHIPS
WITH THE REVENUE AUTHORITIES WHERE OUR BUSINESS IS UNDERTAKEN.
TOTAL TAX CONTRIBUTION ($M)
Whitehaven Coal Annual Report 2018 | 31
3 STRATEGY 050100150200250300FederalStateLocalFY2015FY2016FY2017FY2018 Section 4
Summary And Results In Detail
Maules Creek
Narrabri
Gunnedah Open Cuts
Infrastructure And Logistics
Growth: Vickery
Growth: Winchester South
33
34
35
36
37
38
39
32 | SECTION 4 OPERATIONS
4
O
P
E
R
A
T
I
O
N
S
SUMMARY AND RESULTS IN DETAIL
WHITEHAVEN MANAGED ROM COAL PRODUCTION
Gunnedah Open Cuts
Narrabri
Maules Creek
FY2018
FY2017
FY2016
FY2015
FY2014
5,682
6,289
10,953
6,142
7,267
9,729
5,791
6,888
7,826
5,498
7,703
2,614
5,874
5,659
–
WHITEHAVEN MANAGED SALEABLE COAL PRODUCTION
Gunnedah Open Cuts
Narrabri
Maules Creek
FY2018
FY2017
FY2016
FY2015
FY2014
5,377
5,840
9,664
4,811
6,987
8,986
5,038
7,269
7,384
5,140
7,193
2,231
5,060
5,249
–
WHITEHAVEN MANAGED COAL SALES INC PURCHASED COAL
Gunnedah Open Cuts
Narrabri
Maules Creek
Purchased Coal
SAFETY STATISTICS
FY2018
FY2017
FY2016
FY2015
FY2014
5,321
5,760
9,641
1,339
4,616
6,823
8,879
354
5,095
7,532
7,421
79
5,147
7,071
1,769
–
5,206
5,145
–
490
TRIFR
6.9
7.4
10.6
9.7
14.6
FY2018
FY2017
FY2016
FY2015
FY2014
WHITEHAVEN MANAGED ROM
COAL PRODUCTION (‘000 T)
WHITEHAVEN MANAGED SALEABLE
COAL PRODUCTION (‘000 T)
25000
20000
15000
10000
5000
0
2014
2015
2016
2017
2018
Maules
Creek
Narrabri
Gunnedah
Open Cuts
25000
20000
15000
10000
5000
0
Maules
Creek
Narrabri
Gunnedah
Open Cuts
2014
2015
2016
2017
2018
WHITE MANAGED COAL SALES
INC PURCHASED COAL (‘000 T)
WHITEHAVEN SAFETY PERFORMANCE
(TRIFR)
25000
20000
15000
10000
5000
0
2014
2015
2016
2017
2018
Purchased
Coal
Maules
Creek
Narrabri
Gunnedah
Open Cuts
16
14
12
10
8
6
4
2
0
2014
2015
2016
2017
2018
Whitehaven Coal Annual Report 2018 | 33
MAULES CREEK
Our newest mine performed strongly during the year producing a record 11.0Mt
ROM coal. In the final quarter the mine operated at an annualised rate of 11.7Mt ROM coal.
The introduction of an additional mining fleet in the second half of FY2018 will enable the
mine to operate at its approved rate of 13.0Mt ROM coal. Production will progressively
increase until FY2020 when this will be achieved.
Given the large reserves at the
mine, we have begun to examine
the possibility of further expansion
opportunities at the operation.
Potentially a further 3.0Mtpa of ROM
coal production could be achieved
without adding to the current mining
lease area. Further work will take
place over the next 18 months
to fully evaluate the opportunity.
Mining of the first coal below the
Braymont seam occurred during
the year as the open cut gradually
deepened. Current analysis of the coal
quality in several of the deeper seams
indicates that the coking properties
improve which should enhance the
marketability of these coals.
Metallurgical coal production for the
year was 2.6Mt, representing 26%
of total saleable coal production for
the year. Sales of the metallurgical
coal was constrained by the strong
pricing environment for the high-
quality thermal coal produced at
Maules Creek. The price premium
achieved for the thermal coal
averaged 9% over the globalCOAL
Newc Index price for the year and
MAULES CREEK SALEABLE COAL PRODUCTION
(‘000 T)
12000
10000
8000
6000
4000
2000
0
2015
2016
-
2017
2018
led to increased sales of thermal coal
versus metallurgical coal. It may take
longer than the originally anticipated
five years to move to a 50:50
metallurgical thermal product coal
split if the current price differential
between thermal and metallurgical
coals endures.
Production guidance for FY2019
is in the range of 11.8Mt to 12.2Mt
ROM coal. Actual production
of 11.0Mt ROM coal in FY2018
exceeded the initial guidance
provided last year.
34 | SECTION 4 OPERATIONS
NARRABRI SALEABLE COAL PRODUCTION
(‘000 T)
8000
6000
4000
2000
0
2014
2015
2016
2017
2018
NARRABRI
Narrabri is one of Australia’s
most productive underground
coal mines. In FY2018
production was 6.3Mt ROM,
lower than the previous year.
Mining in LW107 panel, the
first 400-metre wide panel at
Narrabri began late in FY2017
and continued through
FY2018. Mining was delayed
by several mechanical
problems, each of which
have been rectified by the
manufacturer over the course
of the year. Production lost
with these disruptions was
not able to be recovered.
A number of localised
weighting events also slowed
the retreat of the longwall
and impacted production.
Pleasingly, the longwall successfully
advanced through a large fault zone in
the middle of the panel. The learnings
from the success will be taken into
the next two panels which are also
impacted by the fault.
With the depth of cover increasing
to more than 250 metres, ground
conditions and ground support
requirements changed, leading to
the early introduction of a secondary
support regime. Mine planning had
anticipated this development which
was expected to impact deeper panels
later in the mine life. The early onset
of the changed conditions resulted
in a acceleration of additional support
in roadways previously developed.
Extra crews were engaged to install
the additional support.
Production guidance for FY2019 is
in the range of 6.5Mt to 6.8Mt ROM
coal and incorporates a full longwall
changeout during the first quarter
of FY2019.
THE EARLY ONSET OF THE CHANGED CONDITIONS RESULTED IN A ACCELERATION
OF ADDITIONAL SUPPORT IN ROADWAYS PREVIOUSLY DEVELOPED.
Whitehaven Coal Annual Report 2018 | 35
4 OPERATIONS GUNNEDAH OPEN CUTS
GUNNEDAH OPEN CUTS
Our three foundation mines – Tarrawonga, Rocglen and Werris Creek – along with the
Sunnyside rehabilitation project performed strongly and ahead of budget for the year.
ROM coal production from all the mines was 5.7Mt, higher than guidance range of 5.0Mt
to 5.4Mt ROM coal. Another important factor has been the cost reduction seen at the mines
with all of them operating inside the first quartile of the cost curve.
We purchased Idemitsu’s 30% joint
venture interest in the Tarrawonga mine
to move to 100% ownership during the
year. The acquisition will add about
0.7Mt ROM coal to the company’s
equity share of production in the future.
Regrettably, FY2019 will be the final
year in the life of the Rocglen mine
with reserves due to be exhausted
by the end of the financial year.
The Sunnyside mine was taken out of
care and maintenance during the year
with the aim of mining the remaining
0.8Mt ROM coal. The coal sales from
the mine will effectively fund the full
and final rehabilitation of the mine site,
providing a contemporary example
of a rehabilitation programme to the
local community. All of the remaining
coal will be mined during FY2019.
Production guidance including
Sunnyside is in the range of 4.6Mt
to 5.0Mt ROM coal for FY2019.
GUNNEDAH OPEN CUTS
SALEABLE COAL PRODUCTION (‘000 T)
6000
4000
2000
0
2014
2015
2016
2017
2018
36 | SECTION 4 OPERATIONS
INFRASTRUCTURE
AND LOGISTICS
RAIL TRACK
RAIL HAULAGE
PORT CAPACITY
We contract rail capacity with the
Australian Rail Track Corporation
(ARTC). The capacity framework
that governs this contract is into
its second term. We continue
to work with ARTC to expand
effective capacity within the
Gunnedah Basin without requiring
additional rail infrastructure through
improved operating efficiencies
and investment in new information
technology systems. The objective
of this work is to improve supply
chain productivity and increase
train path availability.
We have rail haulage contracts
with each of the major rail haulage
providers, Pacific National and
Aurizon. These contracts have an
expiry date in 2026. They provide
for the haulage of all currently
projected expansion tonnes before
Vickery. We are able to align planned
increases in production with contract
rail haulage capacity by giving notice
to the rail providers of the need for
additional capacity. This supports the
planned increases in our managed
production levels, whilst minimising
fixed cost exposure.
We maintain contracts at the
Port of Newcastle with both
terminal operators, Newcastle
Coal Infrastructure Group and
Port Waratah Coal Services that
support all planned shipments.
To provide for the forecast
production ramp up over the next
five years we will secure surplus
capacity available at the port. This
is sufficient to allow for both short-
term surge and long-term annual
shipping requirements.
Whitehaven Coal Annual Report 2018 | 37
4 OPERATIONS GROWTH: VICKERY
The Vickery Extension Project
(Vickery) is the next major
development planned for
our portfolio of assets in the
Gunnedah Coal Basin. The EIS
for the project was submitted
to government authorities
in early August 2018.
There is already an existing
approval covering the site for
a 4.5Mtpa operation. Our new
development application seeks
to increase the size of the project
to 10Mtpa over the 25-year mine life.
Subject to approval, the Vickery
Extension Project (Vickery) will
entail the construction of a new
open cut mine and associated
on-site infrastructure (new coal
processing plant and rail spur)
about 25 kilometres to the north
of Gunnedah, directly between
two of our existing mines
at Tarrawonga and Rocglen.
Critically, even though the Vickery
Extension Project footprint covers
an area only slightly larger than the
currently approved version, it offers
significant additional economic and
community benefits in terms of
making Vickery, and our neighbouring
operations, more efficient and more
sustainable over the longer term,
including the hundreds of jobs
these operations support.
We estimate it will generate
approximately 170 new jobs
in locally based businesses that
will provide contracting and
mine-support services.
As with other Whitehaven projects,
there will be substantial direct
economic benefits locally, including
$230 million in incremental
disposable incomes that will help
stimulate and support the local
economy and businesses.
Over its 25-year life, Vickery will
contribute more than $1 billion in
royalties to the NSW Government –
money that will help fund schools,
hospitals, roads and other state
government priorities.
The mine strikes the right
balance between economic and
environmental considerations and
it is important to note that the vast
majority of the project area has
previously been extensively mined.
38 | SECTION 4 OPERATIONS
GROWTH: WINCHESTER SOUTH
The next development in our continuing growth and evolution is a move into Queensland and
one of the world’s premier coking coal basins through the acquisition of the Winchester South
Project, a high-quality coking coal project approximately 30km south east of Moranbah.
Winchester South is well positioned
from an infrastructure perspective,
with one of the main rail lines in the
Goonyella System transgressing
the tenement and the Queensland
electricity power grid nearby. Coal
can be delivered by rail to either
Dalrymple Bay, Gladstone or Abbot
Point for export.
The development forms a key part
of our longer term growth plan and
complements the Vickery project
in the Gunnedah Basin as another
high-quality asset that will help us
respond to the strong and growing
demand for premium coking coal
in Asian markets.
A project director has been
appointed to lead the development
with work to commence on the EIS
and feasibility study in the next
year. Production will start once
all approvals have been granted.
THE DEVELOPMENT FORMS A KEY PART OF OUR LONGER
TERM GROWTH PLAN AND COMPLEMENTS THE VICKERY
PROJECT IN THE GUNNEDAH BASIN.
Port of Abbot Point
Bowen
QLD
Moranbah
AUSTRALIA
Brisbane
NSW
Gunnedah
Sydney
Mackay
Port of Hay Point
Moranbah
Winchester South Project
PACIFIC OCEAN
0
50
km
100
Key:
Whitehaven Assets
Railway
Rockhampton
Blackwater
Port of Gladstone
Gladstone
Whitehaven Coal Annual Report 2018 | 39
4 OPERATIONS Section 5
Sustainability Review
Performance Data
Safety
Health
People
Diversity
Community
Environment
41
42
44
45
46
48
50
52
40 | SECTION 5 SUSTAINABILITY
40 | SECTION 5 SUSTAINABILITY
SUSTAINABILITY
REVIEW
As an Australian miner with a local focus, we want our projects to be sustainable and for the
local community to benefit from our presence over the long term. We have a proud history
in the Gunnedah Basin where our mines, workforce and community contributions are centred.
We are committed to continuously
improving our performance in
health, safety, environmental
stewardship and community
engagement.
We aim to foster sustainable
growth wherever we can, creating
shared value for our business,
local communities, government
and other stakeholders.
We recognise our mining operations
have an impact on the environment
and our neighbouring communities.
Our goal is to reduce our
environmental footprint wherever
possible, including through more
efficient use of resources such as
energy and water.
Our resources are finite and we
incorporate rehabilitation and
mine closure into our life of mine
plans. More information about
our sustainability performance
is in this report and at
www.whitehavencoal.com.au.
AWARDS AND
ACHIEVEMENTS
We strive for operational excellence.
In recent years, we have won
awards for operational excellence.
The company has in recent years
won awards for our operational
performance, our Indigenous
employment program, our
apprenticeship program and
for two previous editions of our
Annual Report.
WE STRIVE FOR OPERATIONAL EXCELLENCE. IN RECENT YEARS, WE HAVE
WON AWARDS FOR OPERATIONAL EXCELLENCE.
Whitehaven Coal Annual Report 2018 | 41
5 SUSTAINABILITY PERFORMANCE DATA
SAFETY AND PEOPLE
Number of employees
Female representation in company
Percentage of workforce identifying as Aboriginal and/or Torres Strait Islander
Fatalities
Total recordable injury frequency rate per million hours worked (TRIFR)
Lost time injury frequency rate per million hours worked (LTIFR)
ENVIRONMENT
Year to
30 June 2018
Year to
30 June 2017
Year to
30 June 2016
1,027
10.3%
11%
0
6.9
2.5
960
10.3%
11%
0
7.4
2.2
843
11.0%
11%
0
10.6
2.8
Year to
30 June 2018
Year to
30 June 2017
Year to
30 June 2016
Environmental Enforcement Action Frequency Rate (EEAFR)1
2.1
4.2
8.1
Land owned/leased (hectares)
Land disturbed (hectares)
Land rehabilitated (hectares)
Land leased for agriculture (hectares)
Land based biodiversity offset (hectares)
69,840
68,314
65,487
3,168
751
31,711
20,078
2,942
668
27,572
20,078
2,672
653
29,382
21,741
1 An Environmental Enforcement Action is defined as a warning letter, an official caution, an order, a penalty or a prosecution. Where a single piece of
enforcement correspondence notes a breach of more than one approval/license condition, each breach is counted separately.
ENERGY
Greenhouse gas emissions (kilotonnes CO2-e)
Intensity – greenhouse gas emissions (tonnes CO2-e per tonne ROM coal)
Total energy use (terajoules)
Intensity – total energy use (gigajoules per tonne ROM coal)
*Most recent reportable period.
Year to
30 June 2017*
Year to
30 June 2016
Year to
30 June 2015
1,350
0.059
4,926
0.215
1,162
0.057
3,968
0.193
762
0.048
3,128
0.198
42 | SECTION 5 SUSTAINABILITY
WATER
Water license allocation (mL)
River/bore water extraction (mL)
Water used (mL)
Water recycled (mL)
Water exported for irrigation (mL)
COMMUNITY
Year to
30 June 2018
Year to
30 June 2017
Year to
30 June 2016
9,978
3,034
5,316
3,591
42
9,924
1,456
3,649
2,826
–
9,925
1,580
3,964
1,985
–
Year to
30 June 2018
Year to
30 June 2017
Year to
30 June 2016
Wages and salaries ($m)
Taxes and royalties paid to governments ($m)
Payments to businesses and suppliers in North West NSW ($m)
Voluntary planning agreement expenditure ($m)
$172.1
$283.9
$293.2
$1.9
$159.4
$226.3
$237.7
$3.5
Donations and sponsorships ($’000)
$445.3
$296.4
$139.3
$166.0
$203.0
$6.4
$217.3
Whitehaven Coal Annual Report 2018 | 43
5 SUSTAINABILITY On an operation-by-operation basis,
the Gunnedah CHPP achieved 2,000
Lost Time Injury Free days during
the course of the year, illustrating
the priority that safety has in the
role of the organisation each day.
Over the year all high-risk incidents
were investigated and necessary
measures taken to prevent similar
incidents reoccurring.
WE ARE CONTINUALLY
SCRUTINISING THE SAFETY
ASPECTS OF HOW WE WORK,
AND IT IS NOT ONLY WHEN
THINGS GO WRONG THAT
WE PAY ATTENTION.
PERFORMANCE
Everyone in the organisation is
involved in our safety program called
‘Safehaven’ that we introduced in
2014. We know that no one behaves
in a deliberately unsafe way, but it is
human nature to lose concentration
from time to time. What stops
that leading to catastrophe is a
combination of robust processes,
good habits and a culture that allows
anyone to bring a potential problem
to the attention of others.
The Safehaven program incorporates
a set of safety rules to follow on
site and is supported by safety
standards, pre-task planning,
supervision training, along with
signage, promotional material and
an information video.
In FY2018 our TRIFR (Total
Recordable Injury Frequency Rate
per million hours worked) was 6.91.
This compares with 7.42 in FY2017.
Our overall TRIFR has more than
halved since the Safehaven program
began in 2014.
SAFETY
Providing a safe working
environment for our people
and minimising the risks
related to coal production
are key targets.
As we continue to grow, we
proactively review and improve our
practices, responses and training
procedures. We collaborate with
internal and external specialists
to educate, communicate and
engage our expanding workforce.
Our goal is for zero workplace
injuries or illness and for every
person to go home safely and
healthy after each work day.
We are continually scrutinising the
safety aspects of how we work,
and it is not only when things go
wrong that we pay attention. We
also examine just as closely every
occasion when things have nearly
gone wrong. In other words, we
take every opportunity we can to
learn and continuously improve
our processes to safeguard our
employees and the public.
44 | SECTION 5 SUSTAINABILITY
HEALTH
Ensuring we maintain a fit
and healthy work force is
a priority.
We take care of workers by
preventing and reducing exposure
to noise, dust and vibration. We also
place focus on fatigue management
and use a range of methods to
reduce harm.
Since 2016 all our sites have been
smoke-free and wellness campaigns
have taken place around obesity,
mental health, stretching, hydration
and skin cancer.
This year, we launched the
Healthhaven program to better
promote these programs and to align
with our overall Safehaven program.
The focus of the Healthhaven
program this year was on general
fitness, well-being and promoting
a healthy lifestyle. All employees
were offered the opportunity to
take part in a range of activities
and challenges, with the support
and advice of an occupational
nurse. Some 300 employees took
part in the challenge competing
as individuals and against other
Whitehaven sites.
CASE STUDY –
MENTAL HEALTH
FORMER NRL star Dan
Hunt visited the workforce
for a session on mental
health awareness.
The ex-St George Illawara
Dragons prop, who is part of
the Mental Health Movement
organisation, delivered
presentations to some of
our team during a tour
of the region.
Pictured is Dan with
Whitehaven’s Jessica Pereira,
Group Superintendent –
Health, who helped organise
the sessions.
CASE STUDY –
HEALTHHAVEN
As part of our annual
Safehaven safety day, winners
and high-achievers in this year’s
first Healthhaven challenges
were recognised.
Some 300 employees took part
in a general health improvement
and physical activity challenge
as part of a program focusing
on general fitness, well-being
and a general health lifestyle.
Pictured at the Safehaven
Conference are some of the
winners and participants
in the challenges.
THIS YEAR, WE LAUNCHED THE HEALTHHAVEN PROGRAM
TO BETTER PROMOTE A HEALTHY LIFESTYLE.
Whitehaven Coal Annual Report 2018 | 45
5 SUSTAINABILITY PEOPLE
We are increasing our focus on recruiting a new generation of young talent and are building the skills we need for our long-term future.
We invest in our people, developing their skills and leadership potential from the early stages
of employment. We are working hard to ensure Whitehaven is a great place to work.
in disciplines such as Mining
Engineering, Mechanical Engineering,
Electrical Engineering, Mechatronics,
Geology, Environmental Science
and Surveying.
Many of these Vacation Employment
students are offered graduate positions
upon completing their degree.
Our two-year graduate program
provides exposure to and experience
in underground and open cut mining.
We have increased the number
of graduate positions offered in
the past three years.
We are committed to the longevity
of our employees’ careers and upon
successful completion of the two-
year program we will transition
our graduates into permanent
employees where a position exists.
We are increasing our focus on
recruiting a new generation of
young talent and building the
skills we need for our future by
investing in on-the-job training
and programmes that provide
our employees with the right
skills and knowledge.
LOCAL EMPLOYMENT
FOCUS
As the single largest non-
government sector employer in
North West NSW, we are proud
of our jobs record from Tamworth
through to Werris Creek, Gunnedah,
Boggabri and Narrabri.
Looking to the next decade as we
grow, we are committed to doing
more. This means adding to our
existing local workforce, 75% of which
already lives locally. It also means
recruiting the skills for the future
economy and an increasingly diverse
workforce through our Aboriginal
employment program along with
striving for more gender balance.
We are providing development
opportunities for our employees
including our apprenticeship,
cadet and graduate programs, and
providing mentoring opportunities
for women in the mining industry.
As at 30 June 2018, our overall
workforce including contractors was
nearly 1,600, of whom more than 1,000
are full-time equivalent employees.
46 | SECTION 5 SUSTAINABILITY
GROWING OUR
FUTURE TALENT
To ensure we develop talent for the
long-term, this year we continued
to increase our focus on recruiting
and developing apprentices, cadets,
vacation employment students and
graduates across a wide array
of disciplines.
We have expanded opportunities
across all of these programs.
The continuing success of our
apprenticeship program currently sees
20 apprentices across all stages of
their tenure developing their on-the-job
skills and experience at Whitehaven.
We also offer opportunities via a
Cadetship Program where up to
four Year 12 students from the
Narrabri/Gunnedah regional area
are offered financial support and
work experience throughout the
duration of their university studies.
We are pleased to have offered a
number of cadets the opportunity
to return to the local region in
graduate positions.
The Vacation Employment
Program provides opportunities
for up to 15 university students
to gain experience through paid
employment for up to 12 weeks
during their summer holidays.
We encourage applications from
students from all year levels,
including post-graduates,
TOTAL EMPLOYEES (FTES): 2016, 2017, 2018
1200
1000
800
600
400
200
0
2016
2017
2018
As a big part of the local community and the largest employer in the region, we are proud of its
long-standing community links in North West NSW. About 75% of our people live locally.
STAFF TURNOVER: 2016, 2017, 2018
100%
80%
60%
40%
20%
0%
2016
2017
2018
Our ambition is to have a more stable, experienced and engaged workforce.
GRADUATE POSITIONS OFFERED: 2016, 2017, 2018
12
9
6
3
0
2016
2017
2018
We have increased the number of graduate positions across the business and are seeing an
increasing number of Whitehaven Cadets being offered graduate positions.
Whitehaven Coal Annual Report 2018 | 47
Gabrielle White, was a Whitehaven Cadet before
being offered a Graduate Mechanical Engineering
position at Narrabri, while Georgia Foley is an
electrical apprentice with Whitehaven.
WHAT MATTERS
TO OUR PEOPLE?
Our employees are looking for a
fulfilling career at Whitehaven; one
in which they can build their skills,
be supported and be rewarded for
their success. This year we held
our latest Workforce Engagement
Survey, our first since 2016. The
survey received a 59% response
rate. Our people told us they want
good workplaces, at our sites and
in our offices, and health and safety
at work is very important. They also
want development opportunities to
be available and expect open and
honest communication. This year
we increased the number of staff
newsletters and also launched a
company App to distribute news and
alerts to registered users. Managers
at all levels are encouraged to
communicate openly and directly
with their people and we seek
feedback on initiatives and systems,
welcoming diverse opinions and
innovative ideas.
5 SUSTAINABILITY DIVERSITY
Our ongoing focus is to ensure we build, support and benefit from a workforce that is reflective
of the general population of the region in which we operate. To further attract, support and
retain a diverse population of valued population, this year progress was made in a variety
of areas.
Our diversity policy, which is
reported in accordance with the
requirements of the Workplace
Gender Equality Act 2012 (Act),
shows that we continue to make
good progress on increasing female
participation in our workforce.
Whitehaven’s annual public report
lodged with the Workplace Gender
Equality Agency can be accessed
at www.whitehavencoal.com.au/
gender-diversity.
GENDER EQUALITY
Females represent 10%
of employees at Whitehaven.
Further progress toward gender
equality was achieved over the last
year including increasing the rate of
female participation in the workforce,
with a 5% increase in female
operators. We continue to ensure
the representation of women at the
board level with two of our six non-
executive directors being female.
We continued to improve pay
equality between females and males
across each area of the business, and
will continue efforts in this area in
years ahead. Our paid parental leave
program, providing up to 18 weeks
of paid parental leave for eligible
employees, was expanded since
being introduced last year. Among
the recipients this year was our first
male operator.
The leadership development program
was expanded to invest in people
managers across the business, and
to provide coaching and support
to women in senior roles.
GENDER DIVERSITY
As at 30 June 2018
Board
Senior management
Other employees
TOTAL
48 | SECTION 5 SUSTAINABILITY
We increased our support of women in the mining industry by continuing its sponsorship of the WIMnet NSW
Mentoring Program.
We increased our support of women
in the mining industry by continuing
our sponsorship of the WIMnet NSW
Mentoring Program, which provides
women in the mining industry with
mentors from whom they can learn
and receive career guidance and
development. We are pleased that
four female Whitehaven employees
have now had the opportunity
to participate as mentees in
the program.
We are a proud sponsor of the
inaugural WIMnet Achieve and
Inspire Conference designed
to encourage and support men
and women to build their careers
in the mining industry.
Females
2
3
103
106
%
29%
9%
10%
10%
Males
5
32
889
921
%
71%
91%
90%
90%
ABORIGINAL RELATIONS
In 2015, we began executing on
the objectives set out in our first
Reconciliation Action Plan (RAP).
Our RAP operates across all areas of
the business and contains practical
and meaningful objectives to address
issues affecting local Aboriginal and
Torres Strait Islander people.
Since launching the inaugural RAP
in September 2015, we have achieved
the following:
−− More than $12m in annual salaries
and wages flowing through our
Indigenous workforce back into
local communities
−− 80 Indigenous people employed
at our Maules Creek mine.
−− Around 11% of employees
self-identify as Aboriginal
and/or Torres Strait Islander
−− Spent $2m with Aboriginal
businesses in 2017/18
−− Donated $100k to local
Aboriginal groups in FY2018
−− Our Indigenous employment
program at Maules Creek was
recognised by the NSW Minerals
Council as ‘best in class’ within the
industry and was included as a
case study in the Prime Minister’s
Closing the Gap report for 2017
−− This year launched our second
Reconciliation Action Plan
endorsed at the Stretch level
by Reconciliation Australia.
Our approach goes beyond direct
employment. We support programs
that facilitate access to education
from kindergarten through to
university and mature age.
These include:
−− The Winanga-Li Aboriginal Child
and Family Centre in Gunnedah,
which was the first of nine
Aboriginal Child and Family
Centres to open its doors in NSW
−− Our partnership with the
Girls Academy, which will
assist Gunnedah High School
participants on a pathway
to tertiary education and/or
securing long term employment.
Our commitment to assisting new
and developing local Aboriginal and
Torres Strait Islander businesses
continues to progress and moving
forward we are working with our
major contracting companies and
suppliers to encourage support
for Aboriginal and Torres Strait
Islander employment and business
development within their spheres
of influence.
Pictured at the launch of the RAP (from left to
right) are Bob Sutherland, Whitehaven’s Aboriginal
Community Relations Officer, Karen Mundine,
CEO Reconciliation Australia, Steven Gal, Director,
Regional Co-ordination, Aboriginal Affairs NSW,
and Paul Flynn, Whitehaven Coal CEO and
Managing Director.
OUR RELATIONSHIP WITH THE ABORIGINAL AND TORRES STRAIT ISLANDER
COMMUNITIES IN OUR REGION HAS SIGNIFICANTLY STRENGTHENED OVER
THE PAST THREE YEARS.
Whitehaven marked NAIDOC week across the company including with the unveiling of a commissioned artwork by artist Leah Brideson.
Whitehaven Coal Annual Report 2018 | 49
5 SUSTAINABILITY COMMUNITY
OVER THE PAST THREE YEARS WE HAVE CONTRIBUTED NEARLY $1M TO LOCAL
GROUPS IN THE AREAS OF HEALTH, EDUCATION, WHOLE OF COMMUNITY BENEFIT
AND REPRESENTATIVE LEVEL INDIGENOUS SPORT.
We pride ourself on our deep
community links and long history
in the north west NSW region.
We employ locals, support local
businesses, use local suppliers
and contribute to local causes and
organisations. The Vickery Extension
Project (see page 38) will allow us to
be an even bigger contributor to the
local economy and community over
the long-term.
Since 2012 we have contributed more
than $1.5bn to the local economy in
North West NSW. This is made up of
wages to employees, payments to
councils, support for local businesses
and suppliers, and donations to
community groups and organisations.
Over the past three years, we
have contributed nearly $1m to
local groups in the areas of health,
education, whole of community
benefit and representative level
indigenous sport.
In FY2018, we spent $293.2m in
the Gunnedah, Narrabri, Tamworth
and Liverpool Plains regions.
We also committed $1.9m to local
infrastructure and service upgrades,
and made charitable grants,
donations and sponsorships of
$445k to community groups.
Each mine has a voluntary planning
agreement with the relevant local
council, which contributes funds to
community infrastructure.
Other major activities we supported
this year included the Narrabri
Education Foundation, Boggabri Multi
Purpose Centre, Westpac Rescue
Helicopter, Narrabri, Gunnedah and
and Quirindi Shows, North Narrabri,
Boggabri Drovers Campfire, Boggabri
Health, Winanga-Li Aboriginal Child
and Family Centre in Narrabri, Girls
Academy, Narrabri and Gunnedah
Education Fund, and a range of other
community organisations.
COMMUNITY
SPIRIT
We opened the doors of a
number of mines to the public
for family and community
open days. The events were
an opportunity for locals
to learn more about mining
operations and the extent
of our presence in North
West NSW, including our
growing local workforce and
strong record of community
contribution. More than
1,000 people attended the
open days.
50 | SECTION 5 SUSTAINABILITY
WHAT THE
COMMUNITY TELLS US
Engagement with local communities
happens in a variety of ways.
We regularly report activities to
community consultative committees
and through newsletters, media
releases and advertising while
feedback can be provided through
a dedicated office in the Gunnedah
central business district. We
carry out formal consultations, an
annual community survey and hold
community days including this year
hosting a family day at the Maules
Creek, Tarrawonga and Werris
Creek mines along with numerous
site visits by community and local
interest groups.
Independent research by Newgate
Research tells us that in Gunnedah,
two thirds of the community support
mining, and 70% of the broader
community agree that we have a
positive effect on the local economy.
Community perceptions of
Whitehaven continue to improve
with almost half of people surveyed
in our areas of operation saying they
have a positive view or opinion of
our company. People with a positive
or neutral view of our company has
also climbed 11% to 72% since 2015.
Listening to the community, this year
we revised the Environmental Impact
Statement for our Vickery Extension
Project to remove a portion of land
known as Blue Vale from the mine
plan after concerns were raised
about its proximity to the Namoi
river which Whitehaven recognises
is a valuable water resource and
ecological feature of our community.
MINING JOBS
BOOSTING
REGIONAL
ECONOMY
There are more coal mining
jobs in the Gunnedah region
than ever before. The most
recent figures from Coal
Services Pty Ltd show that
at February 2018 there
was a record number of
2,420 people working in
the Gunnedah region’s coal
mines. The new figures show
encouraging growth in the
local mining industry with
an additional 2,000 people
employed in the mining
industry since early 2000.
Whitehaven Coal Annual Report 2018 | 51
5 SUSTAINABILITY ENVIRONMENT
We are committed to safe,
responsible and sustainable
environmental management
across all aspects of our
operations.
We are mindful of the impact of
our operations on the environment
and surrounding communities and
undergo extensive assessments
for surface water, groundwater,
flood impact, flora and fauna,
Aboriginal cultural heritage, historical
heritage, air quality, agriculture and
geochemistry impacts.
As we have grown as a business, we
have worked to ensure our business
maintains strong sustainability
practices throughout every stage
of the mining process – from
prior to commencement, during
operations, until well after eventual
close. Each Whitehaven operation
also implements rehabilitation
plans, working to minimise potential
impacts on the local environment
and where appropriate returns
mining areas to pre-mining
vegetation communities such
as pasture, woodland forest for
future use. Our website provides
an extensive library of resources,
including regulatory approvals,
monitoring data, performance
reviews and factsheets.
AGRICULTURE
We license our non-mining land
to local farmers under agreements
that include requirements to
maintain and improve the integrity
of agricultural land. One such
arrangement is with Boggabri farmer
Keith Blanch (pictured above, with
Tim Muldoon, Group Manager
Community Relations and Property).
About 2% of our land is involved in
current mining activities or is being
rehabilitated after mining. Where
industry activity intersects with
agriculture, we seek to put land to
productive use. More than 30,000
hectares of land are being used for
agricultural purposes. Maintaining
the integrity of the farming asset
is important to us. A strategy of
combining properties to license out
for longer periods has attracted good
quality local farmers as Licensees.
52 | SECTION 5 SUSTAINABILITY
We work proactively with a number of local farmers and landholders.
AIR QUALITY
NOISE MANAGEMENT
Air emissions from our coal mines
are tightly regulated. All coal mines
have in place systems for monitoring
and managing air quality, particularly
dust from excavation and haul truck
activity and emissions arising from
the use of explosives. Monitoring
results are made available through
each site’s Community Consultative
Committee and on our website.
This year, two new air quality
monitoring stations constructed
in Gunnedah and Narrabri began
publicly reporting real-time data
on air quality for the region.
Establishment of this monitoring
network has been supported by
the local mining industry as a way
of providing scientific, timely
information to the community
about air quality in the region.
The data from the first months
of monitoring showed air quality
was good at the Narrabri and
Gunnedah monitors, with average
levels of daily particulate matter
air quality standards much better
than other monitoring locations
throughout NSW.
We operate under stringent
noise guidelines, set by the NSW
Government. A number of sites
utilise predictive meteorological
systems to plan operations to
minimise noise impacts. Real-time
monitoring is in place to allow
our site-based staff to undertake
adaptive management to minimise
noise impacts. We also implement
a range of other noise management
measures such as sound attenuation
on mining equipment.
WASTE AND
RECYCLING
We generate various types of waste
during exploration, construction,
operation and closure activities
across our mining facilities.
Our strategy for mineral waste
management includes segregation
and placement of overburden
and coal reject materials in waste
emplacements which are designed
to be safe, stable and non-polluting.
Wherever possible we segregate
recyclable materials and engages
specialist contractors for collection
and reprocessing.
This year’s significant offset-related
work includes:
−− 132,000 trees planted
−− an additional 2,000 hectares of
revegetation has been prepared
−− 5 kilometres of new fencing
installed
−− 4.4 kilometres of old fencing
removed
−− 11,500 hectares sprayed for
weed control.
PROGRESSIVE
REHABILITATION
We apply an integrated approach
to land management to ensure
responsible rehabilitation practices
are reflected throughout every
stage of the mining life cycle.
Where applicable, disturbed land is
generally rehabilitated to align with
pre-mining vegetation communities
such as pasture, woodland and
forest. Rehabilitation monitoring
is conducted in accordance with
each site’s Mining Operations Plan
and relevant management plans.
CLOSURE PLANNING
Rehabilitation plans and financial
provisions to execute these plans
are developed and maintained for all
of our sites. Closure planning plays
an important role in the planning
and development of our projects
and operations to ensure that the
legacy impacts of our operations are
minimised. A key component in the
development and fulfilment of our
closure plans is the consultation and
engagement with key stakeholders
to ensure that land is returned
in a state that supports future
opportunity and long-term benefit.
Our closure plans are subject to
external review and approval.
FOR DETAIL
RELATING TO
CLIMATE CHANGE
PLEASE SEE
PAGES 29 TO 30.
WATER MANAGEMENT
Each of our operations are guided
by site-specific Water Management
Plans. In FY2018, our total water
allocation across all operations was
9,978 megalitres. The total amount
used was 5,316 megalitres – around a
half of our available allocation. Much
of the water used by our operations
is obtained from rainfall captured in
dams at our sites and is used to assist
mining activities, coal washing and
dust suppression. Mine water cannot
be released off site, except on certain
regulated occasions at our Werris
Creek operation. Sediment-laden
water is permitted to be released
following specific rainfall events or
under controlled release scenarios
where the water quality complies
with strict criteria.
BIODIVERSITY
We have more than 20,000
hectares of land being managed as
biodiversity offset areas. These areas
are established conservation areas
to offset impacts that cannot be
avoided, managed or mitigated due
to the nature of the coal resource.
These offset areas are based on
guidance from independent experts
and regulatory authorities to ensure
they represent like-for-like, or better,
biodiversity values than the area
impacted by operations.
Whitehaven staff monitor the progress of agricultural cropping from off-site irrigation near the Werris Creek mine.
Whitehaven Coal Annual Report 2018 | 53
5 SUSTAINABILITY Section 6
COAL RESOURCES – AUGUST 2018
Tenement
Maules Creek
Open cut*
CL375 AUTH346
ML1701 ML1719
Narrabri North
Underground**
Narrabri South
Underground**
ML1609
EL6243
Tarrawonga
Open cut
Tarrawonga
Underground
Werris Creek
Open cut
Rocglen
Open cut
Rocglen
Underground
Vickery
Open cut
Vickery
Underground
Gunnedah
Open cut
EL5967 ML1579
ML1685 ML1693
EL5967 ML1579
ML1685 ML1693
ML1563 ML1672
ML1620
ML1620
CL316 EL4699
EL5831 EL7407
EL8224 ML1464
ML1471 ML1718
ML1624 EL5183
CCL701
Gunnedah
Underground
ML1624 EL5183
CCL701
Bonshaw
Open cut
Ferndale
Open cut
Ferndale
Underground
EL6450 EL6587
EL7430
EL7430
Oaklands North
Open cut
EL6861
Pearl Creek
Open cut***
EPC862
TOTAL COAL RESOURCES
Measured
Resource
(A)
Indicated
Resource (B)
Measured +
Indicated
(A + B)
Inferred
Resource
(C)
Competent
Person
Report
Date
Mt
410
160
–
40
10
13
4
–
230
–
7
2
–
103
–
110
–
Mt
200
180
300
18
15
2
4
3
165
95
47
138
4
135
–
260
14
Mt
610
340
300
58
25
15
8
3
395
95
54
140
4
238
–
370
14
1089
1580
2669
Mt
10
–
5
13
14
–
–
1
110
135
89
24
7
134
73
580
38
1233
1
2
2
3
3
2
3
3
3
3
3
3
3
4
4
3
5
Mar-18
Mar-18
Mar-18
Mar-18
Apr-14
Mar-18
Mar-18
Mar-15
Jul-15
Jul-15
Jun-14
Jun-14
Jun-14
Jan-13
Jan-13
Jun-14
Nov-12
1. Shaun Tamplin, 2. Mark Benson, 3. Benjamin Thompson, 4. Greg Jones, 5. Phill Sides.
* Maules Creek Joint Venture – Whitehaven owns 75% share.
** Narrabri Joint Venture – Whitehaven owns 70% share.
*** Dingo Joint Venture – Whitehaven owns 70% share.
# The Coal Resources for active mining areas are current to the pit surface as at the report date.
54 | SECTION 6 RESOURCES & RESERVES
COAL RESERVES – AUGUST 2018
Recoverable
Reserves
Marketablte
Reserves
Competent
Person
Report
Date
Proved
Mt
Probable
Mt
Total
Mt
Proved
Mt
Probable
Mt
Total
Mt
360
140
500
120
440
Tenement
Maules Creek
Open cut*
CL375
AUTH346
Narrabri North
Underground**
Narrabri South
Underground**
ML1609
EL6243
Tarrawonga
Open cut
EL5967 ML1579
ML1685 ML1693
Werris Creek
Open cut
ML1563
ML1672
Rocglen
Open cut
Vickery
Open cut
CL316 EL4699
EL7407
TOTAL COAL RESERVES
1. Doug Sillar, 2. Michael Barker.
320
103
–
23
11
5
114
9
1
107
–
28
11
5
121
11
1
112
121
39
12
1.2
ML1620
0.9
0.3
0.7
0.3
–
507
200
478
200
985
–
458
178
427
1
2
2
1
1
1
1
Mar-18
Mar-18
Mar-18
Mar-18
Mar-18
Mar-18
Mar-15
108
114
32
12
1.0
178
885
* Maules Creek Joint Venture – Whitehaven owns 75% share.
** Narrabri Joint Venture – Whitehaven owns 70% share.
# The Coal Reserves for active mining areas are current as at report date.
## Coal Reserves are quoted as a subset of Coal Resources.
### Marketable Reserves are based on geological modeling of the anticipated yield from Recoverable Reserves.
The Coal Resources and Reserves for active mining areas are as at the 31st of March 2018. Production for the
quarter ended 30 June 2018 is detailed in the June 2018 Quarterly Report. Please see the Whitehaven Coal website
(www.whitehavencoal.com.au) for the Coal Resource and Coal Reserve Table 1 details for all of Whitehaven’s
Coal Reserves.
Information in this report that relates to Coal Resources and Coal Reserves is based on and accurately reflects
reports prepared by the Competent Person named beside the respective information. Greg Jones is a principal
consultant with JB Mining Services. Phillip Sides is a senior consultant with JB Mining Services. Benjamin Thompson
is a Geologist with Whitehaven Coal. Mark Benson is a Geologist with Whitehaven Coal. Doug Sillar is a full-time
employee of RPM Advisory Services Pty Ltd. Shaun Tamplin is a full-time employee of Tamplin Resources Pty Ltd.
Michael Barker is a full-time employee of Palaris Australia Pty Ltd.
Named Competent Persons consent to the inclusion of material in the form and context in which it appears.
All Competent Persons named are Members of the Australasian Institute of Mining and Metallurgy and/or The
Australian Institute of Geoscientists and have the relevant experience in relation to the mineralisation being reported
on by them to qualify as Competent Persons as defined in the Australian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (The JORC Code, 2012 Edition).
Whitehaven Coal Annual Report 2018 | 55
6 RESOURCES & RESERVES Section 7
Board Of Directors
Senior Executive Team
57
60
56 | SECTION 7 LEADERSHIP & MANAGEMENT
56 | SECTION 7 LEADERSHIP & MANAGEMENT
BOARD OF DIRECTORS
THE HON. MARK VAILE
AO
JOHN C CONDE AO
BSc, BE (Electrical) (Hons), MBA (Dist)
Deputy Chairman and
Non-executive Director
Appointed: 3 May 2007
John has over 30 years of broad
based commercial experience
across a number of industries,
including the energy sector, and
was Chairman of the company
prior to the merger with Aston
Resources. John is Chairman of
Cooper Energy Limited and The
McGrath Foundation. He is also
President of the Commonwealth
Remuneration Tribunal and a non-
executive director of the Dexus
Property Group. He recently retired
as Chairman of Bupa Australia
and New Zealand. He retired as
Chairman of the Sydney Symphony
Orchestra in May 2015. He was
previously Chairman of Ausgrid
(formerly Energy Australia) and
Destination NSW. He was formerly
Chairman and Managing Director
of Broadcast Investment Holdings,
as well as a non-executive director
of BHP Billiton Limited and Excel
Coal Limited.
Chairman and
Non-executive Director
Appointed: 3 May 2012
As Deputy Prime Minister of Australia
and Leader of the National Party
from 2005 to 2007, Mark established
an extensive network of contacts
throughout Australia and East
Asia. His focus at home was with
regional Australia and particularly
northern NSW. As one of Australia’s
longest serving Trade Ministers from
1999 through until 2006, Mark led
negotiations which resulted in Free
Trade Agreements being concluded
with the United States of America,
Singapore and Thailand as well as
launching negotiations with China,
Japan and ASEAN. Importantly,
early in his ministerial career as the
Minister for Transport and Regional
Services, Mark was instrumental
in the establishment of the ARTC,
which operates the Hunter Valley
rail network.
Mark brings significant experience
as a company director, having been
Chairman of Aston Resources and
CBD Energy Limited, and is currently
an independent Director on the
boards of Virgin Australia Limited
and Servcorp Limited which are
both listed on the ASX. Mark is also
a Director of Stamford Land Corp
which is listed on the Singapore
Stock Exchange, a Director Trustee of
HostPlus Superfund and Chairman of
Palisade Regional Infrastructure Fund.
DR JULIE BEEBY
BSc (Hons I), PhD (Physical Chemistry),
MBA, FAICD
Non-executive Director
Appointed: 17 July 2015
Julie has more than 25 years’
experience in the minerals and
petroleum industries in Australia
including major Australian and US
resources companies and as Chief
Executive Officer of WestSide
Corporation, an ASX listed,
Queensland-based coal-seam
gas company. Julie has technical,
operations and strategy expertise
and has held senior and executive
positions in coal mining, mining
services and coal-seam gas after
commencing her career in coal and
mineral processing research.
Julie is currently the Chairman of the
Queensland Electricity Transmission
Corporation Limited, Powerlink
Queensland. Julie has previously
held non-executive director positions
on the Boards of Gloucester Coal
Limited, OzMinerals Limited,
Forge Group Limited, CRC Mining,
Queensland Resources Council
and Australian Coal Research.
Whitehaven Coal Annual Report 2018 | 57
7 LEADERSHIP & MANAGEMENT BOARD OF DIRECTORS
TONY HAGGARTY
FIONA ROBERTSON
MComm, FAICD, CPA
MA (Oxon) geology, FAICD, MAusIMM
Non-executive Director
from 25 March 2013
Previously Managing Director
to 24 March 2013
Appointed: 3 May 2007
Tony has over 30 years’ experience
in the development, management
and financing of mining companies,
and was co-founder and Managing
Director of Excel Coal Limited from
1993 to 2006. Prior to this, Tony
worked for BP Coal and BP Finance
in Sydney and London, and for
Agipcoal as the Managing Director
of its Australian subsidiary. Tony
was appointed to the Board of
Whitehaven on 3 May 2007 and was
appointed Managing Director on
17 October 2008 until 27 March 2013.
Non-executive Director
Appointed: 16 February 2018
Fiona has a corporate finance
background, with more than
20 years’ experience as CFO of
ASX-listed emerging and mid-tier
mining and oil & gas companies,
preceded by 14 years with Chase
Manhattan Bank in London, New
York and Sydney, in corporate
banking, credit management and
mining finance roles.
Previous non-executive directorships
include ASX-listed oil and gas
producer, Drillsearch Energy
where she chaired the Audit &
Risk Committee. Through active
involvement with the AusIMM’s
WIMnet, Fiona has sought to foster
the attraction and retention of
women in the resources industry and,
in 2017 was named Gender Diversity
Champion in Australian Resources
by WIRNA and in NSW Mining in
the NSW Minerals’ Council’s Women
in Mining Awards.
Currently Fiona is non-executive
director of ASX-listed Heron
Resources which is developing the
Woodlawn base metals mine in NSW.
PAUL FLYNN
BComm, FCA
Managing Director
Appointed: 25 March 2013
Previously Non-executive Director
Appointed: 3 May 2012
Paul has extensive experience in the
mining, infrastructure, construction
and energy sectors gained through
20 years as a professional advisor
at Ernst & Young. Paul was formerly
Chief Executive Officer and Managing
Director of the Tinkler Group and
was instrumental in the merger
of Whitehaven Coal with Aston
Resources. Paul joined the Board
of Whitehaven on 3 May 2012 and
assumed the role of Managing
Director and CEO on 27 March 2013.
Prior to joining the Tinkler Group, Paul
was the Managing Partner of Ernst &
Young’s Sydney office and a member
of its Oceania executive team.
As a partner for over eight years,
Paul managed many of the firm’s
largest mining and energy clients
across Australia, Asia, South and
North America. Paul has also
fulfilled various leadership roles with
large corporations on secondment
including as the CFO of a top 50
listed company.
58 | SECTION 7 LEADERSHIP & MANAGEMENT
7
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RAYMOND ZAGE
BSc Finance
Non-executive Director
Appointed: 27 August 2013
Raymond is the founder and CEO
of Tiga Investments Pte Ltd. He is
also a senior advisor to Farallon
Capital Asia which is responsible for
investing capital in Asia on behalf
of Farallon Capital Management,
one of the largest alternative asset
managers in the world. Raymond
has been involved in investments
throughout Asia in various industries
including financial services,
infrastructure, manufacturing,
energy and real estate. Previously
Raymond was the Managing
Director and CEO of Farallon Capital
Asia, and prior to that worked in
the investment banking division of
Goldman, Sachs & Co. in Singapore,
New York and Los Angeles.
Whitehaven’s board of directors and senior management visited joint venture partners and
customers in Japan in early 2018.
Whitehaven Coal Annual Report 2018 | 59
SENIOR EXECUTIVE TEAM
PAUL FLYNN
BComm, FCA
Managing Director and
Chief Executive Officer
See biography on Board of Directors
page on page 58.
TIMOTHY BURT
B.Ec, LLB (Hons) LLM
General Counsel and
Company Secretary
Timothy joined Whitehaven as
General Counsel and Company
Secretary in July 2009. He has
20 years ASX Listed company
legal, secretarial and governance
experience across a range
of industries. Prior to joining
Whitehaven, Timothy held senior
roles at ASX listed companies
Boral Limited, UGL Limited and
Australian National Industries
Limited. He holds a Master of Laws
from the University of Sydney.
BRIAN COLE
BE (Civil-H1), M Eng Science, MBA,
Fellow IE Aust, C P Eng., M AIMM
Executive General Manager
– Project Delivery
Brian has more than 35 years of
experience in heavy engineering
projects and operations at an
executive level in the energy-related
sector and has been focused on
the Maules Creek project and
other brownfields capital projects
within the Whitehaven portfolio.
Most recently Brian managed the
construction of the three stages of
the third coal terminal in Newcastle
for NCIG with a combined capital
cost circa $2.8 billion. Brian was
appointed Executive General
Manager – Project Delivery
in June 2012.
KEVIN BALL
BComm, CA
Chief Financial Officer
Appointed as Chief Financial
Officer of Whitehaven Coal in
October 2013, Kevin Ball has
over 25 years experience working
in the mineral and energy industry
across coal, oil and gas and in
complex consulting practices.
Kevin was the Commercial Manager
at Springvale Coal for a number of
years, CFO at the Milestone Group
and CFO of Delhi Petroleum. Kevin
later gained experience in listed
companies in roles that combined
finance and operational divisional
leadership as the General Manager
Finance at Chandler Macleod
Group and, as the Group Financial
Controller of Environmental Group.
A finance graduate of the University
of New South Wales, Kevin is
a Chartered Accountant having
spent 11 years with Ernst & Young
at the commencement of his
career predominantly in EY’s
natural resources group and
has a graduate Diploma in
Geoscience (Mineral Economics)
from Macquarie University.
60 | SECTION 7 LEADERSHIP & MANAGEMENT
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JAMIE FRANKCOMBE
SCOTT KNIGHTS
BE (Mining), MBA (Technology)
BEcons (Hons)
Executive General Manager –
Marketing and Logistics
Scott was appointed Executive
General Manager – Marketing
in August 2014. Prior to joining
Whitehaven he was Vice President
Sales, Marketing and Logistics for
Peabody Energy Australia. Scott
has over 25 years of experience
in a wide range of commercial
roles including marketing, sales,
logistics, management and
business strategy in the
commodities sector, working for
Peabody Energy, Rio Tinto, PwC and
Renison Goldfields Consolidated.
Chief Operating Officer
Jamie was appointed Executive
General Manager – Operations in
February 2013 and his title amended
to Chief Operating Officer in June
2018. Jamie was previously Director
Operations at Fortescue Metals
Group Ltd. Prior to that he has had
extensive senior experience in coal
mine operations and development
including as the Chief Operating
Officer of PT Adaro Indonesia,
Executive General Manager –
Americas for Xstrata Coal and
General Manager Operations for
Xstrata Coal’s Hunter Valley open
cut operations.
Jamie holds a Bachelor of
Engineering (Mining) from
Wollongong University and a
Master of Business Administration
(Technology) from APESMA Deakin
University. Additionally he holds
First Class Certificate of Competency
qualifications for both the NSW and
Queensland coal industry.
MICHAEL VAN
MAANEN
BA (Hons)
Executive General Manager
Corporate and External Affairs
Michael has nearly 20 years of
experience working in corporate
communications and public policy
roles in both the government and
private sectors. He was appointed
Executive General Manager Corporate
and External Affairs in May 2018.
Prior to joining Whitehaven, Michael
was a founding Partner of Newgate
Communications, one of Australia’s
largest and most respected strategic
communications agencies. At
Newgate, Michael led the firm’s
mining and resources practice
group and advised emerging and
established companies – including
Whitehaven Coal – on navigating
complex public policy, regulatory
and communications issues. Prior
to consultancy Michael was a senior
ministerial adviser in the Howard
Government and worked in a range of
national security policy roles for the
Department of the Prime Minister and
Cabinet, the Department of Foreign
Affairs and Trade and the Department
of Defence. Michael has a Bachelor
of Arts with First Class Honours from
the University of Western Australia.
Whitehaven Coal Annual Report 2018 | 61
Section 8
Directors’ Report
Remuneration Report (audited)
63
75
Consolidated Statement of Comprehensive Income 102
Consolidated Statement of Financial Position
103
Consolidated Statement of Changes in Equity
104
Consolidated Statement of Cash Flows
105
Notes to the Consolidated Financial Statements
106
Directors’ Declaration
Auditor’s Report
ASX Additional Information
Glossary of Terms and Abbreviations
143
144
150
152
62 | SECTION 8 FINANCIAL REPORT
62 | SECTION 8 FINANCIAL REPORT
DIRECTORS’ REPORT
For the year ended 30 June 2018
8
The Directors present their report together with the consolidated financial report of Whitehaven Coal
Limited (‘the Company’ or ‘Whitehaven’), being the Company, its subsidiaries, and the Group’s interest
in joint operations for the year ended 30 June 2018 and the auditor’s report thereon.
1. PRINCIPAL ACTIVITIES
The principal activity of Whitehaven Coal Limited and its controlled entities (the ‘Group’) during the period was the development
and operation of coal mines in New South Wales.
In the opinion of the directors, there were no significant changes in the state of affairs of the Group that occurred during the
financial year that have not been noted in the review of operations.
2. DIRECTORS AND EXECUTIVES
2A. DIRECTORS
See pages 57 to 59.
2B. SENIOR EXECUTIVES
See pages 60 to 61.
2C. 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 section 205G(1) of the Corporations Act 2001, at the date of this report
is as follows:
Mark Vaile
John Conde
Julie Beeby
Paul Flynn1
Tony Haggarty
Fiona Robertson
Raymond Zage
Ordinary shares
2,049,882
888,620
55,000
1,241,391
1,000,000
10,000
–
1 Mr Flynn held 2,608,430 options issued by the Company as at the date of this report.
2D. 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
Directors’ Meetings
Audit & Risk
Management
Committee
Meetings
Remuneration
Committee
Meetings
Health, Safety,
Environment
& Community
Committee
Meetings
Governance
& Nomination
Committee
Meetings
Mark Vaile
John Conde
Julie Beeby
Paul Flynn
Tony Haggarty
Christine McLoughlin
Raymond Zage
Fiona Robertson
A
15
15
15
15
15
8
15
7
B
15
15
15
15
14
8
15
7
A
6
6
–
–
6
–
–
1
B
6
6
–
–
5
–
–
1
A
3
3
–
–
–
2
–
1
B
3
3
–
–
–
2
–
1
A
1
–
4
–
4
3
–
–
B
1
–
4
–
4
2
–
–
A
2
2
–
–
–
2
–
–
B
2
2
–
–
–
2
–
–
A Number of meetings held during the time the Director held office during the year.
B Number of meetings attended.
Whitehaven Coal Annual Report 2018 | 63
FINANCIAL REPORT 8
DIRECTORS’ REPORT
For the year ended 30 June 2018
3. OTHER
3A. DIVIDENDS
PAID DURING THE YEAR
Dividends of $188,052,000 (2017: nil) and a capital return of $138,884,000 (2017: nil) were paid during the year ended
30 June 2018.
DECLARED AFTER END OF YEAR
On the 14 August 2018, the Directors declared an unfranked dividend of 27 cents per share totalling $268 million
to be paid on 13 September 2018 and be comprised of a final dividend of 14 cents and a special dividend of 13 cents.
3B. SHARE OPTIONS
SHARES ISSUED ON EXERCISE OF OPTIONS
During the reporting period no options have been exercised.
UNISSUED SHARES UNDER OPTIONS
At the date of this report there were 7,788,735 unissued ordinary shares of the Company under options. Refer to note
5.5 of the financial statements for further details of the options outstanding.
3C. INDEMNIFICATION AND INSURANCE OF OFFICERS
INDEMNIFICATION
The Company has agreed to indemnify, to the fullest extent permitted by law, all current and former directors of the Company
against liabilities that may arise from their position as directors of the Company and its controlled entities. The agreement
stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses.
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 persons who are or have been directors or officers of the Company
or its controlled entities against certain liabilities (subject to certain exclusions).
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.
3D. INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms
of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount).
No payment has been made to indemnify Ernst & Young during or since the financial year.
3E. ROUNDING
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 and dated 24 March 2016 and, in accordance
with that Class Order, all financial information presented in Australian dollars has been rounded to the nearest thousand unless
otherwise stated.
64 | SECTION 8 FINANCIAL REPORT
4. OPERATING AND FINANCIAL REVIEW
FINANCIAL HEADLINES
– Net profit after tax (“NPAT”) increased to $525.6m
– Operating EBITDA before corporate development costs increased to $940.0m
– Cash generated from operations increased to $854.0m
– Net debt of $270.4m at 30 June 2018 and gearing reduced to 7%.
The following table summarises the key reconciling items between the Group’s operating EBITDA before significant items and
its statutory profit.
WHITEHAVEN COAL LIMITED – CONSOLIDATED
Revenue
Net profit before significant items
Significant items after tax (refer to note 2.2)
Net profit after tax
Underlying EBITDA before significant items
Significant items before tax and financing (refer to note 2.2)
Net interest expense (refer to note 5.2)
Other financial expenses
Depreciation and amortisation
Corporate development costs
Profit before tax
FY2018
FY2017
$ MILLION
$ MILLION
2,257.4
1,773.2
525.6
–
525.6
940.0
–
(21.7)
(7.2)
(141.0)
(9.7)
760.4
367.2
38.2
405.4
714.2
(55.0)
(42.0)
(7.9)
(133.9)
–
475.4
REVIEW OF FINANCIAL PERFORMANCE
FY2018 NPAT before significant items of $525.6m represents an increase of $158.4m compared to $367.2m in FY2017.
The strong FY2018 NPAT result was underpinned by FY2018 underlying EBITDA of $940.0 million, an increase
of $225.8 million compared to $714.2 million in FY2017.
The improvement in the underlying EBITDA result was driven by a significant increase in the EBITDA margin to $59/t
in FY2018, up on the $46/t margin achieved in FY2017. This improvement was driven by a strong operating performance
coupled with the continued strength of the coal price environment, particularly in respect of high-quality thermal coal.
The key factors that contributed to the FY2018 NPAT before significant items result for the year include:
– Strong safety performance.
– Gross revenue increased to $2,257.4m in FY2018 from $1,773.2m in FY2017. The increase was driven by the A$18/t
increase in A$ realised prices to an average A$130/t in FY2018 from A$112/t in FY2017 and by an increase in sales
of produced coal to 16.1Mt in FY2018 from 15.5Mt in FY2017.
– The key drivers of A$ realised prices during the period were:
– The globalCOAL Newc Index price averaged US$100/t for high-quality thermal coal in FY2018, US$19/t above the
average of US$81/t recorded in FY2017.
– The Group realised an average price of US$119/t in FY2018 for its sales of metallurgical coal products. The realised price
reflects a combination of quarterly benchmark linked and index-based contracts.
– The high quality of thermal coal from the Maules Creek mine which typically achieved both quality and energy
premiums relative to the globalCOAL Newc Index price during the period. Sales of Maules Creek coal achieved an
average price of 9% higher than the globalCOAL Newc index price during the year. Thermal coal sales from Narrabri,
Rocglen and Tarrawonga broadly received the Index price during the year.
– A strengthened currency partially offset some of the benefits of improved prices – the A$ increased to average 0.78
in FY2018 from an average of 0.75 in FY2017.
– The increase in prices for thermal coal in particular during FY2018 was underpinned by the return of the market to
supply/demand balance in FY2017 following production cuts in a number of key coal producing countries namely
China, Indonesia, the USA and Australia. Global demand for thermal coal continued to grow in FY2018 due to an
increasing appetite for high-quality thermal coal in the Asian region. In particular, the growth in thermal coal demand
was supported by year-on-year growth in Chinese power demand of 8.5% in the first five months of the 2018 calendar
year. Domestic production and infrastructure constraints in China have resulted in an increased draw on the seaborne
coal market.
Whitehaven Coal Annual Report 2018 | 65
FINANCIAL REPORT 8 DIRECTORS’ REPORT
For the year ended 30 June 2018
4. OPERATING AND FINANCIAL REVIEW (CONT.)
– Metallurgical coal sales mix reduced from 21% in FY2017 to 17% in FY2018. This reflects the narrowing spread between
the globalCOAL Newc Index thermal coal price and the Platts Index semi-soft coking coal price which, combined with
the quality premiums that Maules Creek thermal coal is achieving in the market, has resulted in Maules Creek’s production
being marketed as thermal coal during much of FY2018.
– FOB costs per tonne of A$62/t in FY2018 remain in the best cost quartile. The increase in FOB costs per tonne compared
to the A$58/t result in FY2017 was a result of a range of factors including increasing input prices (i.e. diesel) in line with the
broader strengthening of demand in the sector, longer and steeper hauls at Maules Creek (temporary) as the working pit
expands and an increase in costs at Narrabri due to increasing depth of cover. The increased depth of cover at Narrabri has
resulted in an increase in secondary support costs while production rates have been impacted by localised weighting events
and some longwall face mechanical issues.
– Increased production from Maules Creek continues to increase the resilience of Whitehaven’s portfolio both from a volume
and quality perspective. This has helped to reduce the impact of below expectation production rates at Narrabri during
FY2018 as well as ensuring consistent coal availability during Narrabri longwall changeouts.
– Selling and distribution costs reflect the benefits of larger-scale operations, and utilisation of contracted infrastructure
capacities.
– Administration costs were lower than the prior period.
Whitehaven’s investment in the development of Maules Creek at the bottom of the coal price cycle ensured that the
Group continues to be well positioned to capitalise on a robust coal price environment. Maules Creek delivered production
in the second half of FY2018 at an annualised rate of 11.7Mt with competitve costs and a high-quality product that attracted
significant premiums to the prevailing thermal prices. This is reflected in the significant contribution that Maules Creek has made
to Whitehaven’s FY2018 underlying EBITDA result. Whitehaven’s portfolio is expected to strengthen further in the coming
years with greenfield opportunities at Vickery and at the Winchester South project in Queensland.
Whitehaven has a policy to maintain a strong capital base so as to maintain investor, creditor and debt market confidence
and to ensure that the business is well positioned to support attractive future growth opportunities.
CASH FLOWS & CAPITAL MANAGEMENT
FY2018
FY2017
$ MILLION
$ MILLION
831.5
(449.8)
381.7
(357.0)
87.1
111.8
607.6
(93.7)
513.9
(528.3)
101.5
87.1
30 June 2018
30 June 2017
$ MILLION
$ MILLION
270.4
725.0
7%
0.3
311.1
775.0
9%
0.4
CASH FLOW SUMMARY
Operating cash flows
Investing cash flows
Net free cash flow
Financing cash flows
Cash at the beginning of the period
Cash at the end of the period
CAPITAL MANAGEMENT
Net debt
Undrawn syndicated facility
Gearing ratio1 (%)
Leverage2 (times)
1 Net Debt / (Net Debt plus Equity).
2 Net Debt / EBITDA before significant items and corporate development costs.
66 | SECTION 8 FINANCIAL REPORT
CASH FLOW AND CAPITAL MANAGEMENT COMMENTARY
Operating cash flows of $831.5m in FY2018 increased by 37% compared to FY2017. The increase in operating cash flows has been
underpinned by the growth in underlying EBITDA to $940.0 million in FY2018 and reflects the resilience and strength of the coal
price recovery and strong operational performance. FOB costs per tonne for FY2018 remain within the best cost quartile of the
industry cost curve.
The strength of the operating cash flow performance also reflects increased volumes which have been supported by the
increasing scale that Maules Creek brings to the Whitehaven portfolio.
Interest payments were lower as drawn debt was reduced to $382.2m at 30 June 2018 from $398.3m at 30 June 2017.
There was a minor investment of working capital in FY2018.
Investing cash outflows of $449.8m in the year ended 30 June 2018 were significantly higher than the $93.7 million outflow
in FY2017. Growth capital has been allocated toward the acquisition of the Winchester South Project in Queensland, the
acquisition of Idemitsu’s 30% interest in Tarrawonga and expenditure to progress the Environmental Impact Statement (EIS)
required for Government approval for an expanded Vickery mine (10Mtpa). Throughout the cycle Whitehaven has continued
to allocate sustaining capital at each of its mines to maintain safe and productive operations.
Whitehaven’s liquidity position strengthened during FY2018. There was $111.8m in cash and $725.0m in undrawn facilities
available at 30 June 2018. Net debt of $270.4m at 30 June 2018 was a reduction of $40.7m from 30 June 2017. Whitehaven
remains within its target range on all its key capital management metrics.
The increased strength and resilience of Whitehaven’s cash flow generation has driven strong returns to shareholders in
FY2018. A distribution of 20 cents per share was paid in respect of FY2017. This comprised a 14 cents per share capital
return and a 6 cent per share unfranked dividend and resulted in a total cash distribution to shareholders of $198.4 million
in November 2017. An interim dividend in respect of FY2018 of 13 cents per share, $128.9m in total, was paid in March 2018.
As a result of the strength of Whitehaven’s balance sheet, its scale of operations, and its improved earnings and cash flow
generation, Whitehaven is well placed to expand its operations from its existing portfolio of opportunities and to take
advantage of external growth opportunities that may arise.
CONSOLIDATED EQUITY PRODUCTION, SALES AND COAL STOCKS
WHITEHAVEN TOTAL (‘000 T)
FY2018
FY2017
Movement
ROM Coal Production
Saleable Coal Production
Sales of Produced Coal
Sales of Purchased Coal
Total Coal Sales
Coal Stocks at Year End
1
Includes Sunnyside sales of produced coal of 100 kt.
Significant highlights for FY2018 include:
17,727
16,160
16,1091
1,256
17,365
2,621
17,718
15,769
15,487
328
15,815
2,371
0%
2%
4%
283%
10%
11%
– ROM and saleable coal production for the year were similar to the previous year
– Coal sales of 17.4Mt were 10% higher due to increased sales of produced coal and increased sales of purchased coal
– Coal production at Maules Creek continues to ramp up with the mine operating at 11.0Mtpa for the year and 11.7Mtpa
annualised rate in the second half of the year
– Production from the smaller open cuts exceeded expectations with costs moving into the best quartile
– Production at Narrabri was impacted by localised weighting events associated with increased depth and some mechanical
issues with the longwall however costs remained in the best quartile.
The Group’s total workforce including contractors was approximately 1,600 people at the end of June 2018, making
Whitehaven Coal the largest private sector employer in the North West NSW region. Employee and contractor numbers
have grown from the beginning of the year as Maules Creek continued to ramp up production.
Whitehaven Coal Annual Report 2018 | 67
FINANCIAL REPORT 8 DIRECTORS’ REPORT
For the year ended 30 June 2018
4. OPERATING AND FINANCIAL REVIEW (CONT.)
REVIEW OF OPERATIONS – SAFETY
Providing a safe working environment for employees is critical at Whitehaven Coal and is key to the Group’s improving
financial performance. Whitehaven Coal provides training, equipment, resources and systems to create the safest possible
work environment at each site. Building a culture of safety awareness is the foundation for continuous improvement to exceed
targets and to exceed industry averages.
As part of the Company’s Health and Safety Policy, Whitehaven Coal aims to:
– achieve zero workplace injuries and illnesses
– achieve zero plant and equipment damage
– achieve zero environmental incidents.
2018 PERFORMANCE
Safety performance continued to improve during the year. Whitehaven’s Total Recordable Injury Frequency Rate (TRIFR)
of 6.9 recordable injuries per million hours at the end of June fell from 7.4 at June 2017.
Whitehaven’s TRIFR is well below the NSW coal mining average of 14.7.
MAULES CREEK
Ownership: Whitehaven 75% and Operator; ICRA MC Pty Ltd (an entity associated with Itochu Corporation) 15%;
J-Power Australia Pty Ltd 10%
MAULES CREEK 100% (‘000 T)
ROM Coal Production
Saleable Coal Production
Sales of Produced Coal
Coal Stocks at Year End
FY2018
FY2017
Movement
10,953
9,664
9,641
646
9,729
8,986
8,879
636
13%
8%
9%
2%
Maules Creek performed strongly during FY2018 producing 11.0Mt ROM coal. In the second half of the year the mine operated
at an annualised rate of 11.7Mt ROM coal. Additional mining equipment was added to the existing fleet in the second half
of 2018, enabling the mine to operate at its approved rate of 13.0Mt ROM. ROM coal production is scheduled to reach
its approved limit of 13Mt per annum in FY2020, five years after the commencement of commercial production.
Mining of the first coal below the Braymont seam occurred during the year. Analysis of the coal quality in several of the deeper
seams indicates that the coking properties improve with depth enhancing the marketability of these coals.
Metallurgical coal production for the year was 2.6Mt, representing 26% of total saleable coal production for the year. Metallurgical
coal production was recalibrated during FY2018 to align with the strong thermal pricing and narrow pricing spreads between
high-quality thermal coal and semi-soft coking coal prices. The price premium achieved for Maules Creek thermal coal averaged
9% over the globalCOAL Newc Index price for the year leading to a focus on sales of thermal coal.
Production guidance for FY2019 is in the range of 11.8Mt to 12.2Mt ROM coal.
NARRABRI
Ownership: Whitehaven 70% and Operator; J-Power 7.5%; EDF Trading 7.5%; Upper Horn Investments Limited 7.5%;
Daewoo International Corporation and Korea Resources Corporation 7.5%
NARRABRI MINE 100% (‘000 T)
ROM Coal Production
Saleable Coal Production
Sales of Produced Coal
Coal Stocks at Year End
FY2018
FY2017
Movement
6,289
5,840
5,760
639
7,267
6,987
6,823
318
(13%)
(16%)
(16%)
101%
Narrabri is one of Australia’s most productive underground coal mines. In FY2018 production at Narrabri was 6.3Mt ROM coal
compared to 7.3Mt ROM coal the previous year. Mining in panel 107, the first 400-metre wide panel at Narrabri, began late in
FY2017 and continued throughout FY2018. Mining was impacted by difficult roof conditions associated with the increasing
depth of the mine and some mechanical issues with the longwall that have since been resolved. These issues slowed
production rates at times during FY2018.
The longwall successfully advanced through a large fault zone in panel 107. The learnings from this success will underpin
the approach to mining the next two panels which are also impacted by the fault.
68 | SECTION 8 FINANCIAL REPORT
With the depth of cover increasing to over 250 metres, ground conditions and ground support requirements changed,
leading to the early introduction of a secondary support regime. Extra crews were engaged to install the additional support,
with the work currently being ahead of schedule.
Production guidance for FY2019 is in the range of 6.5Mt to 6.8Mt ROM coal and incorporates a full longwall changeout during the
first quarter of FY2019.
OPEN CUT MINES (EXCLUDING THE MAULES CREEK MINE)
Ownership: Werris Creek Whitehaven 100%; Rocglen Whitehaven 100%; Tarrawonga Whitehaven 100%;
Sunnyside Whitehaven 100%
OPEN CUTS 100% (‘000 T)
ROM Coal Production
Saleable Coal Production
Sales of Produced Coal
Coal Stocks at Year End
FY2018
FY2017
Movement
5,682
5,377
5,321
1,690
6,142
4,811
4,616
1,886
(7%)
12%
15%
(10%)
Whitehaven’s three foundation mines – Tarrawonga, Rocglen and Werris Creek – along with the Sunnyside rehabilitation
project performed strongly and ahead of budget for the year. ROM coal production for these mines totalled 5.7Mt, higher
than guidance range of 5.0Mt to 5.4Mt ROM coal.
On 30 April 2018, Whitehaven acquired Idemitsu’s 30% joint venture interest in the Tarrawonga mine to move to 100%
ownership. The acquisition will add about 0.7Mt ROM coal to the company’s equity share of production in the future.
FY2019 will be the final year of production at the Rocglen mine with Reserves due to be exhausted by the end of the
financial year.
The Sunnyside mine was taken out of care and maintenance during the year with the aim of mining the remaining 0.8Mt
ROM coal. The coal sales from the mine will effectively fund the full and final rehabilitation of the mine site, providing
a contemporary example of a rehabilitation programme to the local community.
Production guidance is in the range of 4.6Mt to 5.0Mt ROM coal for FY2019.
DEVELOPMENT PROJECTS
VICKERY
Ownership: Whitehaven 100%
A significant milestone was achieved during the year when the rail corridor access agreements were concluded with the relevant
parties in support of the development of the high-quality Vickery project. The various impact assessments required by regulators
and associated peer reviews are also complete. Work concluded on the final components of the Environmental Impact Statement
(EIS) in July and the EIS has been lodged with the Department of Planning and Environment.
Timing for start-up of the Vickery project remains market dependent but, given recent conditions, is likely to occur rapidly after
all approvals are received. Discussions with numerous parties that have expressed interest in joint venture partner opportunities
in Vickery will commence following EIS lodgement.
WINCHESTER SOUTH
Ownership: Whitehaven 100%
Whitehaven completed the acquisition of the Winchester South project during the year. This project provides another
growth option for the company in addition to the Vickery project and will expand the company’s metallurgical coal offering
to the market with the inclusion of hard-coking coal. Whitehaven acquired the Winchester South metallurgical coal project
in 2018 at a total cost of US$262.5 million, paying US$212.5 million and having a further US$50 million to pay in June 2019.
The Winchester South project is located near infrastructure in the Bowen Basin of central Queensland. Annual production
of coal is likely to be in the range of 3.8Mt to 7.5Mt from a large open cut mine. Whitehaven has commenced integrating
the Winchester South project into its Technical Services and Long Term Mine Planning Team and will move the project
through the approval and study process as quickly as possible.
EXPLORATION PROJECTS
Whitehaven maintains several exploration and potential development projects in Queensland and New South Wales.
These are early stage projects with spending limited to keeping the tenements in good standing.
Whitehaven Coal Annual Report 2018 | 69
FINANCIAL REPORT 8 DIRECTORS’ REPORT
For the year ended 30 June 2018
4. OPERATING AND FINANCIAL REVIEW (CONT.)
INFRASTRUCTURE
Rail Track
Whitehaven contracts its below rail capacity with the Australian Rail Track Corporation (ARTC). The capacity framework which
governs this contract has been recently renegotiated for a further five-year term with a material reduction in track access
costs. Whitehaven continues to work with ARTC to expand effective capacity within the Gunnedah Basin without requiring
additional physical infrastructure through improved operating efficiencies. The objective of this work is to improve supply chain
productivity and reduce costs.
Rail Haulage
Whitehaven has two rail haulage contracts, one with Pacific National and one with Aurizon. These contracts have a common
expiry date in 2026. These contracts provide for the haulage of up to 30Mtpa, which allows for all currently projected
brownfield expansions. The company is able to align planned increases in production with contract rail haulage capacity by
giving notice to the rail providers of the need for additional capacity. This supports the planned increases in Whitehaven’s
managed production levels, whilst minimising fixed-cost exposure.
Port Capacity
Whitehaven holds contracts at the Port of Newcastle – either at NCIG or PWCS – to support planned shipments. Whitehaven
will require additional port capacity for the forecast production ramp up over the next five years. There is currently surplus
port capacity available at the port for both short-term surge and long-term annual requirements.
EVENTS SUBSEQUENT TO REPORTING DATE
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
Group, the results of those operations, or the state of affairs of the Group, in future financial years, other than the following:
Subsequent to the end of the financial period, the Directors have proposed a 27 cent per share unfranked dividend
to be paid on 13 September 2018 and be comprised of a final dividend of 14 cents and a special dividend of 13 cents.
OUTLOOK AND LIKELY DEVELOPMENTS
OPERATIONS
Managed saleable coal production guidance for FY2019 is forecast to be in the range of 22Mt to 23Mt. Narrabri production
should increase and Maules Creek will continue its ramp up towards its fully approved rate of 13Mtpa ROM coal. Production
from the smaller open cuts is expected to be lower than in FY2018.
Maules Creek and Narrabri are tier one assets with long mine lives and industry leading low-cost structures. There are
opportunities to increase production at both mines in the near and medium term, while prospects also exist for life-of-mine
extensions. These mines are now firmly established as key pillars underpinning Whitehaven’s future success.
DEMAND
Global coal demand increased by 2% in 2017.
Demand for thermal coal in the seaborne market is being driven by the strong economic growth in Asia and the ongoing
deployment of coal fired power stations in the Asian region. In China power generation increased by 6.2% year on year in 2017
and was up by another 8.6% year on year to May 2018. This has increased China’s draw on the seaborne market as domestic coal
production has been constrained by infrastructure bottlenecks and ongoing safety and environmental inspections at many
mines. Several other countries in the region, including Malaysia, Vietnam and Philippines, have increased coal imports as domestic
gas production runs down. In addition, Pakistan and Bangladesh are deploying new ultra supercritical units and will look to the
seaborne market for fuel in the near future.
Thermal coal supply is being constrained in a number of exporting countries. For example, Eskom in South Africa is purchasing
export coal for its domestic generators and Australian production has failed to respond to higher prices. Only the United States
and Indonesia have been able to respond to the higher prices and increase exports. With investment in new mines constrained
and the lead times for new projects lengthening, no major new mines are likely to begin production before 2022. Combining
these factors leads to a market for high quality thermal coal which is likely to be undersupplied and tight.
Metallurgical coal has also been in strong demand as steel makers increase production in an effort to capture the high margins
on offer. Under this scenario the demand for higher quality coking coals has been strong as steelmakers require higher quality
coke to make their steel products. The demand for lower quality coking coals, such as semi-soft coking coal, will be reduced
under this scenario.
70 | SECTION 8 FINANCIAL REPORT
PRICING
Thermal coal prices have traded well above consensus forecasts for the past year and have reached six year highs
in recent weeks.
Recent analysis by the respected industry consultant CRU, is expecting globalCOAL Newc Index prices to remain over
US$90/t for the next five years, an increase of about US$10/t over the consultant’s forecasts made earlier this year.
Metallurgical coal prices have also remained high for the year with hard-coking coal trading above US$200/t for most of the
period. Strong demand from steelmakers and recent railing issues in Queensland have seen prices trade well above market
expectations for the year. With the rail issues unresolved in Queensland and the dispute between Aurizon and the regulator
ongoing, prices of the higher quality metallurgical coals are likely to remain well supported.
RISKS RELATING TO WHITEHAVEN’S FUTURE PROSPECTS
Whitehaven operates in the coal sector. There are many factors, both specific to Whitehaven and to the coal industry in general,
which may, either individually or in combination, affect the future operating and financial performance of the Group, its prospects
and/or the value of Whitehaven. Many of the circumstances giving rise to these risks are beyond the control of the Whitehaven
Directors and its management. The major risks believed to be associated with investment in Whitehaven are as follows:
VOLATILITY IN COAL PRICES
The Company’s future financial performance will be impacted by future coal prices. Factors which affect coal prices include
the outcome of future sales contract negotiations, general economic activity, industrial production levels, changes in foreign
exchange rates, changes in coal demand, changes in the supply of seaborne coal, changes in international freight rates and
the cost of substitutes for coal. The Company does not currently hedge against coal price volatility.
FOREIGN CURRENCY RISK
As the Company’s sales are predominately denominated in US dollars, adverse fluctuations in the US$/A$ exchange rate may
negatively impact the Group’s financial position.
The Company uses forward exchange contracts to hedge some of this currency risk in accordance with a hedging policy
approved by the Board of Directors.
OPERATING RISKS
The Company’s coal mining operations are subject to operating risks that could impact the amount of coal produced at its coal
mines, delay coal deliveries or increase the cost of mining for varying lengths of time. Such difficulties include weather and
natural disasters, unexpected maintenance or technical problems, failure of key equipment, higher than expected rehabilitation
costs, industrial action and higher than expected labour costs.
Geological uncertainty is also an inherent operational risk which could result in pit wall failures or rock falls, mine collapse,
cave-ins or other failures to mine infrastructure.
The Company has in place a framework for the management of operational risks and a comprehensive group insurance program
which provides insurance coverage for a number of these operating risks.
INFRASTRUCTURE RISKS
Coal produced from Whitehaven’s mining operations is transported to customers by a combination rail and ship. A number
of factors could disrupt these transport services, including a failure of infrastructure providers to increase capacity in order
to meet future export requirements.
Rail and port capacity is obtained predominantly through long-term contract arrangements which include take-or-pay
provisions which require payments to be made irrespective of whether the service is used. In the event utilised capacity
is below contracted capacity, there is a risk Whitehaven will be required to pay take-or-pay charges for capacity which
is not used. Whitehaven seeks to align these take-or-pay infrastructure obligations with the Company’s forecasted
future production.
GEOLOGY RISKS
There are inherent risks associated with estimating coal Resources and Reserves, including subjective judgements and
determinations as to coal quality, geological conditions, tonnage and strip ratio. The Company’s Resource and Reserve
estimates are determined by suitably qualified competent persons in accordance with the Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves (JORC Code).
Whitehaven Coal Annual Report 2018 | 71
FINANCIAL REPORT 8 DIRECTORS’ REPORT
For the year ended 30 June 2018
4. OPERATING AND FINANCIAL REVIEW (CONT.)
ENVIRONMENT AND SAFETY RISKS AND LICENCE TO OPERATE
A range of health, safety and environmental risks exist with coal mining activities. Accidents, environmental incidents and
real or perceived threats to the environment or the amenity of local communities could result in a loss of the Company’s
social licence to operate leading to delays, disruption or the shut-down of operations. Potential environment and safety risks
include equipment failure, human errors in underground operations, vehicle and mining equipment interactions in open cut
operations, roof fall hazards in underground operations and spontaneous combustion risks.
The Company engages with a number of different stakeholders in the communities within which it operates. Stakeholder related
risks include:
– the requirement to comply with the Native Title Act 1993 (Cth) which can delay the grant of mining tenements and impact the
timing of exploration, development and production operations
– the ability to reach agreement with local landholders in relation to acquisition and/or access terms which may delay the timing
of project development, and
– notwithstanding the contributions made to the communities within which the Company operates, local communities
may become dissatisfied with the impact of operations or oppose new development projects. There is also the possibility
of anti-coal activism targeted towards the Company’s projects.
Whitehaven has a comprehensive environmental, health and safety management system to mitigate the risk of incidents
and to ensure compliance with environmental and safety laws. The Company also has a dedicated community relations
team that engage with local communities to ensure that community issues are understood and addressed appropriately.
Details of how the Company engages effectively with the communities in which we operate and steps which the
Company takes to maintain its social licence to operate are set out in the Sustainability Report contained in the
Company’s Annual Report.
ENVIRONMENTAL REGULATION
The coal sector is subject to a broad range of environmental laws, regulations and standards including in relation
to greenhouse gas emissions. Evolving regulation and standards could result in increased costs, regulatory action,
litigation or, in extreme cases, threaten the viability of an operation.
Whitehaven actively monitors legislative and regulatory developments and engages appropriately with legislative and
regulatory bodies to manage this risk.
ACQUISITIONS AND COMMERCIAL TRANSACTIONS
Acquisitions and commercial transactions undertaken with the objective of growing the Company’s portfolio of assets
are subject to a number of risks which may impact the ability to deliver anticipated value. Risks associated with
acquisitions include:
– operational performance of acquired assets not meeting expectations
– anticipated synergies or cost savings being delayed or not being achieved
– adverse market reaction to proposed transactions, and
– the imposition of unfavourable or unforeseen conditions, obligations or liabilities.
Whitehaven’s commercial processes are designed to reduce the likelihood of these risks materialising as a result
of a commercial transaction.
COUNTERPARTY RISK
The Company deals with a number of counterparties, including joint venture partners, suppliers and customers.
Counterparty risks include:
– non-supply or changes to the quality of key inputs which may impact costs and production at operations
– failure to reach agreement with joint venture partners which could impact the Company’s ability to optimise value
from its projects, and
– failure of customers to perform against long-term take-or-pay agreements.
Counterparty risk is assessed prior to entry into any new arrangements and, if necessary, appropriate risk control mechanisms
are put in place. Whitehaven proactively engages with its counterparties to manage instances of non-supply and quality
control and to ensure alignment of expectations.
DEVELOPMENT RISKS
There is a risk that circumstances (including unforeseen circumstances) may cause delays to project development, exploration
milestones or other operating factors, resulting in the receipt of revenue at a date later than expected. Additionally, the
construction of new projects/expansion by the Company may exceed the currently envisaged timeframe or cost for
a variety of reasons outside of the control of the Company.
72 | SECTION 8 FINANCIAL REPORT
5. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
5A. AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration forms part of the Directors’ report for financial year ended 30 June 2018.
It is set out on page 99.
5B. NON-AUDIT SERVICES
During the year Ernst & Young, 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 & 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 & Risk Management 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 or payable to the auditor of the Company, Ernst & Young, and their related practices for
non-audit services provided during the year are set out below.
Non-audit services
Ernst & Young
Taxation services
Due diligence services
Other non-audit services
Consolidated
2018
Consolidated
2017
$
$
63,978
836,881
71,226
972,085
20,000
–
66,100
86,100
Whitehaven Coal Annual Report 2018 | 73
FINANCIAL REPORT 8 74 | SECTION 8 FINANCIAL REPORT
REMUNERATION REPORT
(Audited)
SUMMARY
We present the Remuneration Report for the financial
year ended 30 June 2018 (FY2018) for which we seek your
support at our Annual General Meeting (AGM) in October.
Our objective is to provide a Remuneration Report containing
the key elements that are important to our shareholders
and to present that information in a way that is clear and
readily understood, including detail on realised remuneration
outcomes for our Key Management Personnel (KMP) and
on performance against the Short Term Incentive (STI)
Key Performance Indicators (KPIs) and Long Term Incentive
(LTI) performance conditions.
We believe we have a fair and responsible executive
remuneration framework which is aligned with shareholder
interests and which operates effectively to incentivise and
reward senior executives appropriately to execute our
strategy to build a portfolio of assets that is cost competitive
and to develop and operate that portfolio of assets in a safe
and sustainable manner. The Board believes that the current
framework is effective.
At the 2017 AGM, shareholders voted 99.76% in favour
of the resolution to approve the Remuneration Report.
WHITEHAVEN COAL’S PERFORMANCE IN FY2018
FY2018 has been another year of strong performance which
has translated into tangible benefits for our shareholders.
In FY2018 the Company delivered a total shareholder
return of 118% and ranked 4th in the ASX 200 for the year.
The Company also returned to dividend-paying status and
returned $327m to shareholders. The Company’s balance
sheet strength underpins the decision by the Board to pay
a further $268m in dividends (27 cents per share)
to shareholders from the FY2018 results.
Managing Director and Chief Executive Officer, Paul Flynn
(CEO), is supported by a strong executive leadership group
and the Board believes that the Company is well positioned,
with its asset development pipeline and strength of existing
operations, to continue to improve Company performance
and to deliver continuing value for shareholders. Whitehaven’s
costs of production in the past four financial years have
been very competitive, and when combined with the recent
recovery in coal prices has assisted in the achievement
of this year’s record operating profit and to support the
capital management decisions taken by the Board.
REMUNERATION OUTCOMES FOR FY2018
Aligning Executive KMP remuneration with shareholder
interests and experience is a critical component of our
remuneration framework. This framework is built around
key business performance drivers and equity components
in both the LTI and the deferred component of the STI.
LTI and deferred STI equity remuneration outcomes for the
Executive KMP in FY2018 reflected the strong performance
of the Company over the past three financial years.
STI awards to Executive KMP for their performance during the
year were assessed at 75% of the possible award. 50% of each
Executive KMP’s FY2018 STI award will be deferred into two
equity tranches that vest following the completion of service
conditions in FY2019 and FY2020.
Four awards of the LTI were eligible to vest during FY2018.
Details are set out in this report. Following sustained,
successful efforts in executing the Company’s strategy,
the hurdles that were tested during FY2018 have been
satisfied and the respective LTIs have vested.
NO CHANGES TO REMUNERATION FRAMEWORK
FOR FY2018
There were no changes to Executive KMP remuneration
for FY2018. The Board continues to consider Executive
KMP remuneration in the context of our strategy, relevant
benchmarks and retaining and appropriately rewarding our
leadership team.
At the 2017 AGM shareholders voted 99.41% in favour of the
CEO’s LTI grant. Details of the upcoming LTI grant and hurdles
for FY2019 for the CEO will be included in the Notice for
our upcoming AGM (at which shareholders will be asked
to approve the grant).
Some changes have been made to Executive KMP
remuneration effective from 1 July 2018. Having considered
external advice about the structure and quantum of our
remuneration rewards, we have made some increases to fixed
remuneration (base pay) and we have increased some of the
long-term at-risk elements for our most senior executives.
These changes are aligned with shareholder interests and
market benchmarks to drive strong performance and have
been approved by the Board. Details of the changes are set
out in sections 2.3 and 4 of this report.
NON-EXECUTIVE DIRECTORS’ FEES
As foreshadowed in our FY2017 Remuneration Report,
Non-executive Directors’ fees were reviewed for FY2018.
The Company had not increased Directors’ fees since the 2012
merger. While the maximum aggregate Directors’ fee pool
was not changed, the Board Chairman’s fee was increased
by $25,000, and the Remuneration Committee and Health,
Safety, Environment & Community Committee fees have
been aligned with Audit & Risk Management Committee
fees to reflect the workload of all committees.
We thank our Executive KMP and their teams for their
continued commitment and contribution to Whitehaven.
Whitehaven Coal Annual Report 2018 | 75
FINANCIAL REPORT 8 REMUNERATION REPORT
TABLE OF REMUNERATION REPORT CONTENTS
1.
INTRODUCTION
4.
EXECUTIVE KMP EMPLOYMENT CONTRACTS
1.1 Key management personnel for FY2018
1.2 Summary of Company performance
2. REMUNERATION GOVERNANCE
2.1 Role of the Board and Remuneration Committee
2.2 Use of external remuneration advisors
2.3 Executive KMP remuneration principles
and framework
5.
EXECUTIVE KMP REMUNERATION TABLES
5.1 Executive KMP – statutory remuneration table
5.2 STI deferred equity awards granted in FY2018
5.3 LTI awards granted in FY2018
6. NON-EXECUTIVE DIRECTOR REMUNERATION
6.1 Setting Non-executive Director fees
6.2 Current Non-executive Director fee remuneration
3. REMUNERATION OF THE EXECUTIVE KMP FOR FY2018
6.3 Non-executive Director fees – statutory disclosures
3.1 Mix and timing of Executive KMP remuneration
3.2 Benchmarking total remuneration
3.3 Fixed remuneration
3.4 STI awards and structure for FY2018 performance
3.5 Awards and structure of LTI grants made in FY2018
3.6 Executive KMP realised remuneration outcomes
3.7 Executive KMP STI outcomes in FY2018
3.8 Executive KMP LTI outcomes in FY2018
7.
RELATED PARTY TRANSACTIONS AND
ADDITIONAL DISCLOSURES
7.1 Loans with Executive KMP and
Non-Executive Directors
7.2 Other KMP transactions
7.3 Movement in options and rights over equity
instruments held by Executive KMP
7.4 Additional disclosures relating to ordinary shares
76 | SECTION 8 FINANCIAL REPORT
1.
INTRODUCTION
This Remuneration Report forms part of the Directors’ Report.
In accordance with Section 308 (3C) of the Corporations Act 2001 (Cth) (Corporations Act), the external auditors,
Ernst & Young, have audited this Remuneration Report.
This report details the remuneration and fees during FY2018 of the Key Management Personnel (KMP) of the Company,
who are listed in the table below. For the remainder of this Remuneration Report, the KMP are referred to as either
Executive KMP or Non-executive Directors.
1.1 KEY MANAGEMENT PERSONNEL FOR FY2018
This report details the remuneration during FY2018 of:
Name
Role held during FY2018
Committee positions held
NON-EXECUTIVE DIRECTORS
The Hon. Mark Vaile AO
Chairman and
Non-executive Director
Chairman of Governance & Nomination Committee
Member of Audit & Risk Management Committee
Member of Remuneration Committee
Member of Health, Safety, Environment & Community Committee
(effective 16 February 2018)
John Conde AO
Deputy Chairman and
Non-executive Director
Chairman of Remuneration Committee
(effective 16 February 2018)
Dr Julie Beeby
Non-executive Director
Tony Haggarty
Non-executive Director
Member of Audit & Risk Management Committee
Member of Governance & Nomination Committee
Chairman of Health, Safety, Environment & Community Committee
(effective 16 February 2018)
Member of Governance & Nomination Committee
(effective 16 February 2018)
Chairman of Audit & Risk Management Committee
(effective 16 February 2018)
Member of Health, Safety, Environment & Community Committee
Christine McLoughlin
(resigned 16 February 2018)
Fiona Robertson
(commenced 16 February 2018)
Non-executive Director
Chairman of Remuneration Committee
Member of Governance & Nomination Committee
Member of Health, Safety, Environment & Community Committee
Non-executive Director
Member of Remuneration Committee
Member of Audit & Risk Management Committee
Raymond Zage
Non-executive Director
Executive KMP
Paul Flynn
Kevin Ball
Timothy Burt
Brian Cole
Jamie Frankcombe
Scott Knights
Michael van Maanen
Role held during FY2018
Managing Director and Chief Executive Officer (CEO)
Chief Financial Officer and Executive General Manager – Human Resources (CFO)
General Counsel and Company Secretary
Executive General Manager (EGM) – Project Delivery
Chief Operating Officer (COO)
Executive General Manager (EGM) – Marketing and Logistics
Executive General Manager (EGM) – Corporate and External Affairs (Commenced 28 May 2018)
Whitehaven Coal Annual Report 2018 | 77
FINANCIAL REPORT 8 REMUNERATION REPORT
1.
INTRODUCTION (CONT.)
1.2 SUMMARY OF COMPANY PERFORMANCE
FY18 AT A GLANCE
HOW DID WE PERFORM IN FY18?
TOTAL SHAREHOLDER
RETURN (TSR) ONE YEAR
118%
OPERATING EBITDA
BEFORE SIGNIFICANT ITEMS
$930.3M
SHAREHOLDER
DISTRIBUTIONS*
40c/SHARE
TWO YEAR TSR: 483%
THREE YEAR TSR: 377%
FY17: $714.2M
FY17: 20c/SHARE
* Distributions represent: Capital return/
dividend of 20c, Interim dividend
of 13c, Final dividend of 27c.
WHC TOTAL SHAREHOLDER RETURN SINCE 1 JULY 2017
120%
100%
80%
60%
40%
20%
0%
-20%
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WHC TSR
ASX 200 TSR
The Remuneration Committee believes that the Executive KMP have continued to execute our strategy successfully and that
remuneration outcomes for FY2018 are aligned to company performance. In FY2018 the Executive KMP have focused on key
projects and initiatives including:
– improving safety, environmental and community engagement outcomes
– delivering almost 23Mt ROM production and 22Mt of coal sales
– continuing to deliver industry-leading cost performance
– acquiring the Winchester South metallurgical coal development project, and
– completing the Company’s submission in support of a 10Mtpa operation at Vickery.
78 | SECTION 8 FINANCIAL REPORT
The Gunnedah open cut operations have delivered a best quartile cost performance while Maules Creek has increased
ROM coal production, saleable coal production and coal sales. These positive performances have largely offset the below
expectations production performance of Narrabri underground, allowing Whitehaven to capitalise on strengthened coal prices
in FY2018 and to report a record Net Profit After Tax of $525.6m.
The key highlights in FY2018 were:
TRIFR of 6.9 improved by 7%
Net Profit After Tax of $525.6m
ROM production of 22.9Mt decreased by 1%
Operating EBITDA of $930.3m increased by 30%
Saleable production of 20.9Mt flat
Cash generated from operations of $854.0m increased by 30%
Coal sales of 22.1Mt increased by 7%
Costs of production $62/t which are competitive
As a result of investments made by the Company since the merger in 2012 to bring Narrabri and Maules Creek coal mines
on line and ramp up their production, Whitehaven has been well positioned in FY2018 to strengthen its balance sheet, invest
in sustaining capital and growth assets, and provide shareholders with increased returns. In FY2018 Whitehaven returned a total
of $327m to shareholders and a further $268m in dividends in the first quarter of FY2019.
COMPANY PERFORMANCE FOR THE LAST FIVE YEARS
A snapshot of key Company performance for the past five years is set out below:
Revenue ($m)
Operating EBITDA before significant items ($m)
Profit / (loss) attributable to the Group ($m)
Share price at year end (dollars per share)
Basic EPS (cents per share)
Diluted EPS (cents per share)
Shareholder distributions paid (cents per share)
Total Reportable Injury Frequency Rate (TRIFR)
Environmental Enforcement Action Frequency Rate (EEAFR)1
Managed saleable production – Mt
2018
2,257.4
930.3
525.6
$5.78
53.2
52.2
33
6.9
2.1
20.9
2017
1,773.2
714.2
405.4
$2.87
41.2
40.7
–
7.4
4.2
20.8
2016
1,164.4
224.1
20.5
$1.08
2.1
2.1
–
10.6
8.1
19.7
2015
763.3
130.3
(342.7)
$1.32
(33.3)
(33.3)
–
11.3
2.9
11.3
2014
755.4
90.4
(38.4)
$1.432
(3.9)
(3.9)
–
14.1
1.9
8.2
1 An Environmental Enforcement Action is defined as a warning letter, an official caution, an order, a penalty or a prosecution. Where a single piece of enforcement
correspondence notes a breach of more than one approval/licence condition, each breach is counted separately.
2 The opening share price for 2014 was $2.30.
2. REMUNERATION GOVERNANCE
This section describes the role of the Board, Remuneration Committee and external remuneration advisers when making remuneration
decisions, and sets out an overview of the principles and policies that underpin the Company’s remuneration framework.
2.1 ROLE OF THE BOARD AND REMUNERATION COMMITTEE
The Board is responsible for ensuring that the Company’s remuneration structures are equitable and aligned with the
long-term interests of the Company and its shareholders. Consistent with this responsibility, the Board has established
a Remuneration Committee, whose role is to:
– review and approve the remuneration of the Executive KMP
– review and approve the remuneration policies and practices for the Group generally, including incentive plans and other
benefits, and
– review and make recommendations to the Board regarding the remuneration of Non-executive Directors.
The Remuneration Committee comprises three Non-executive Directors: John Conde (Committee Chairman) – who replaced
Christine McLoughlin upon her resignation on 16 February 2018 – Mark Vaile, and Fiona Robertson. The Remuneration Committee
has a formal charter, which sets out its roles and responsibilities, composition structure and membership requirements. A copy
of this charter can be viewed on Whitehaven’s website.
Further information regarding the Remuneration Committee’s role, responsibilities and membership is set out in the Company’s
Corporate Governance Statement.
Whitehaven Coal Annual Report 2018 | 79
FINANCIAL REPORT 8 REMUNERATION REPORT
2. REMUNERATION GOVERNANCE (CONT.)
2.2 USE OF EXTERNAL REMUNERATION ADVISORS
From time to time, the Remuneration Committee seeks and considers advice from external advisors who are engaged by and
report directly to the Remuneration Committee. Such advice will typically cover Non-executive Director fees, Executive KMP
remuneration and advice in relation to equity plans.
The Corporations Act requires companies to disclose specific details regarding the use of remuneration consultants.
The mandatory disclosure requirements apply only to those advisers that provide a ‘remuneration recommendation’
as defined in the Corporations Act. The Committee did not receive any remuneration recommendations in FY2018.
2.3 EXECUTIVE KMP REMUNERATION PRINCIPLES AND FRAMEWORK
The Company’s Executive KMP remuneration framework is based on a set of core principles and is comprised of both fixed and
at-risk remuneration components. Details of the core principles, framework components and how they applied during FY2018
are described below and in section 3.
Attract and retain
skilled executives
Structures are equitable
and reinforce relevant
Company policies
Incentives are challenging and
linked to the creation of sustainable
shareholder returns
Incentives are aligned with the
long-term interests of the Company
and its shareholders
Fixed remuneration (TFR)
At-risk STI
At-risk LTI
Cash
Equity
–
includes salary and
superannuation
– 50% of STI is delivered
as cash
–
reviewed annually
by the Remuneration
Committee
– determined based on a mix
of financial and non-financial
performance conditions
– 50% of STI is deferred into rights
to receive shares in the Company
subject to meeting service-based
vesting conditions (with vesting
periods of 12 and 24 months)
– provides the Remuneration
Committee with the flexibility to
determine the nature, terms and
conditions of the grant each year
– ability of the Remuneration
Committee to reduce the
number of deferred equity
instruments that vest if
subsequent events show such
a reduction to be appropriate
(clawback)
– operated in FY2018 as an award of
50% performance rights and 50%
options (i.e. a right to receive a share
for no cost or an option to acquire
a share on payment of an exercise
price, in each case if specified
performance hurdles are satisfied)
– benchmarked against
– STI opportunity is set between
peer companies
70% and 100% of TFR for
target performance and
between 87.5% and 125% of
TFR for stretch performance
–
set based on individual
performance and
experience
REMUNERATION FRAMEWORK SUMMARY
CEO
COO
Other Executive KMP
Form of delivery
TFR
Benchmarked
Benchmarked
Benchmarked
Salary &
Superannuation
Performance period
N/A
Further explanation
1 As a % of TFR.
Section 3.1 to 3.3
and Section 4
80 | SECTION 8 FINANCIAL REPORT
–
the face value of the LTI opportunity
is currently set between 80% and
100% of TFR
– vesting is subject to two independent
performance hurdles – Relative TSR
and Costs Target
LTI1
FY2018
100%
90%
80%
LTI1
FY2019
120%
100%
80%
At-risk % of TFR
STI
TARGET – STRETCH 1
100% – 125%
80% – 100%
70% – 87.5%
Cash 50%
Performance
Rights 50%
Performance Rights
and Options
Performance
Rights
1 year (with up to
2 years further deferral)
3 & 4 years
3 & 4 years
Section 3.4
Section 3.5
Section 4
3. REMUNERATION OF THE EXECUTIVE KMP FOR FY2018
This section describes in greater detail the different components of Executive KMP remuneration for FY2018.
3.1 MIX AND TIMING OF EXECUTIVE KMP REMUNERATION
Executive KMP remuneration is delivered as a mix of fixed and at-risk remuneration. At-risk remuneration can be earned
through both STI and LTI and is delivered to Executive KMP over multi-year timeframes to create a layered retention
effect and to encourage sustained performance.
The graphs below illustrate the remuneration mix for Executive KMP for FY2018 (assuming target performance for
at-risk components).
CEO
COO
Other Executive KMP
33.33%
33.33%
33%
37%
32%
40%
33.33%
30%
28%
Fixed TFR
At-risk STI
At-risk LTI
The diagram below shows timing for determining and delivering Executive KMP remuneration for FY2018.
FY2018
FY2019
FY2020
FY2021
FY2022
Total Fixed
Remuneration
Determined based on:
– Market benchmarking
– FY2017 performance
FY2018
Executive
KMP
Remuneration
Short-Term Incentive
At risk based
on financial and
non-financial KPI’s
Restriction period for
Tranche 1 of STI Deferred
Equity Instruments
Service Based
Vesting Period
– Tranche 2
Long-Term Incentive
At risk based on performance against
relative TSR measure & cost hurdle
Vesting period
for Tranche 1
Service Based
Vesting Period
– Tranche 2
Whitehaven Coal Annual Report 2018 | 81
FINANCIAL REPORT 8 REMUNERATION REPORT
3. REMUNERATION OF THE EXECUTIVE KMP FOR FY2018 (CONT.)
3.2 BENCHMARKING TOTAL REMUNERATION
While benchmarking is a useful starting point, it is only one input used by the Board when determining total remuneration for
Executive KMP. Actual market positioning for each individual may deviate from the positioning policy (above or below) due
to considerations such as internal relativities, experience, tenure in role, individual performance and retention considerations.
Remuneration is benchmarked against an appropriate market comparator group adopted by the Board. The Board considers
company size, complexity and business challenges when it builds its remuneration comparator group.
The market comparator group consists of Australian listed companies, which have been identified as relevant competitors
of Whitehaven that operate in similar business environments.
The objective of the Board’s positioning is to meet the market so as to attract and retain a leading management team while
observing appropriate restraint in respect of executive remuneration.
3.3 FIXED REMUNERATION
Fixed remuneration received by Executive KMP is subject to approval by the Remuneration Committee. Fixed remuneration is
comprised of base salary and superannuation. In line with Company policy and executives’ service agreements, remuneration
levels are reviewed annually having regard to market benchmarking and individual performance.
Fixed remuneration will typically be positioned between the 50th and 75th percentile of the market comparator group
adopted by the Board.
3.4 STI AWARDS AND STRUCTURE FOR FY2018 PERFORMANCE
The terms of the STI that applied during FY2018 were:
Who
participated?
What was the
performance
period?
What was
the target
STI award?
How is the STI
calculated?
What were the
performance
conditions, why
were they chosen
and how were
they assessed?
All Executive KMP.
The STI for FY2018 operated over a 12-month performance period from 1 July 2017 to 30 June 2018.
Executive KMPs’ target STI was between 70% and 100% of TFR over the 12-month performance period with a total of
between 87.5% and 125% of TFR for stretch performance. The STI amount actually awarded to each Executive KMP
in FY2018 is shown in section 3.7.
STI awards are calculated as follows:
Value of
STI Award
=
TFR
X
Target
Opportunity
X
Level of
KPI result
Whitehaven has chosen performance conditions that link to our strategy and motivate outperformance of annual business
plans. The following KPIs were adopted as performance conditions and applied to the FY2018 STI:
– Safety (TRIFR)
– Net Profit After Tax (NPAT)
– ROM production (managed basis)
– FOB cost per saleable tonne (equity basis)
– Environmental Enforcement Action Frequency Rate (EEAFR)
– Leadership and individual key performance indicators as agreed between the CEO and the Board, for example
community engagement and project development targets.
The Board set target KPIs at the commencement of FY2018. Against a strong prior year performance the Board set target
KPI’s that, if achieved, would continue the strong performance of the Company.
The Remuneration Committee and the Board assessed and approved the STI performance conditions applying to the CEO’s
STI award. The performance conditions for other Executive KMP were assessed by the CEO and approved by the Board.
The weighting of each performance condition is set out in the following table:
Safety (TRIFR)
NPAT
ROM production
FOB cost per saleable tonne
Environmental (EEAFR)
Individual leadership KPIs
Company
Secretary/
General
Counsel
EGM
Project
Delivery
20%
25%
20%
15%
10%
10%
10%
25%
10%
15%
10%
30%
COO
20%
25%
20%
15%
10%
10%
CEO
CFO
20%
25%
20%
15%
10%
10%
20%
25%
20%
15%
10%
10%
EGM
Marketing
and
Logistics
EGM Corporate
and External
Affairs1
20%
25%
20%
15%
10%
10%
n/a
n/a
n/a
n/a
n/a
n/a
1 Commenced on 28 May 2018 – no entitlement to STI in FY2018.
82 | SECTION 8 FINANCIAL REPORT
The table below summarises details in relation to each KPI and the performance levels achieved for FY2018.
What
performance
level was
achieved?
Performance
condition
Safety
KPI
measure
TRIFR
Actual KPI
result
STI
Outcome
Comment
6.9
The emphasis on a safe working environment has
resulted in the sustained reduction in the TRIFR. The
Whitehaven view that “tonnes cannot come at the
expense of safety” is embedded in the Company’s
culture. Our operations have performed safely – our
TRIFR of 6.9 is superior to the NSW coal industry
average, and is a 7% improvement when compared
with FY2017. The progress of the Company to improve
safety processes and standards supports our goal of
being the industry leader in safety.
While difficult operating conditions affected both
the open cut and the underground mines, tight cost
control was enforced. Gunnedah basin coal quality, and
particularly the quality of the Maules Creek products,
assisted the Group’s marketing team to penetrate new
markets, win new customers, win quality adjustments to
price which helped to deliver substantial value from the
sustained strength in coal prices and deliver a record
operating profit for the Group.
In FY2018, ROM coal production was impacted adversely
by geological issues at Narrabri underground mine.
Despite the impact of these factors managed ROM
production of 22.9Mt for the year was only a 1% decrease
year-on-year. Within the Group result, Maules Creek
produced a record 11.0Mt ROM production, an increase
of 13% year-on-year.
Our goal continues to maintain low, industry-leading
unit costs. The Narrabri underground mine has been
impacted by a series of longwall face mechanical issues
and by localised weighting events. These resulted in
below trend production rates at Narrabri. The lower
contribution of Narrabri coal to the Group portfolio
along with cost pressures at Maules Creek have resulted
in an increase in unit costs for the year. Consequently,
unit costs for FY2018 of $62/t were 7% higher than
the previous year. Unit costs continue to be in the
best quartile and in line with business plans.
In FY2017 the Board elevated the operational
environmental KPI into the Executive KMP STI
programme stressing the importance of compliance
with environmental approval conditions and maintaining
the Group’s standing in the community. The Group
strives to adopt and achieve industry best practice.
The Environmental Enforcement Action Frequency Rate
(EEAFR) for FY2018 represented a 50% improvement
year-on-year falling to 2.1 from the previous year of 4.2.
The leadership performance of the CEO is assessed
annually by the Board. Awards to individual Executive
KMP ranged from at target to stretch. A stretch result
was awarded to the CEO.
NPAT
Net profit
after tax
$525.6m
ROM
production
ROM production
(managed)
22.9Mt
FOB cost
FOB cost per
saleable tonne
$62/tonne
Environmental
EEAFR
2.1
Individual
leadership
Individual
based
Individual
based
KEY:
Stretch
Between Target and Stretch
Below Gateway
Whitehaven Coal Annual Report 2018 | 83
FINANCIAL REPORT 8
REMUNERATION REPORT
3. REMUNERATION OF THE EXECUTIVE KMP FOR FY2018 (CONT.)
3.4 STI AWARDS AND STRUCTURE FOR FY2018 PERFORMANCE (CONT.)
How will
the STI be
delivered?
50% of the STI award is paid to the Executive KMP in cash in September 2018. The remaining 50% of the STI award is
deferred into rights to receive Whitehaven ordinary shares (Deferred Equity), which will vest and become exercisable
subject to meeting service conditions. In accordance with the service conditions, half of the Deferred Equity will vest and
become exercisable following the completion of FY2019, while the other half will vest and become exercisable following the
completion of FY2020.
There is no exercise price payable upon vesting or exercise of Deferred Equity. Upon exercise of Deferred Equity, each
right entitles the recipient to one ordinary share in the Company. Vested Deferred Equity that has not been exercised
by 16 August 2028 (the expiry date) will automatically be exercised.
Deferred Equity will not vest if the Executive KMP resigns or is terminated for cause or the Board applies its discretion
to clawback some or all of the Deferred Equity.
STI awards do not have any dividend or voting rights prior to exercise. However, following exercise of vested STI awards the
recipient is entitled to receive a Dividend Equivalent Payment (DEP) in respect of the period between grant and exercise.
Any DEP made to participants may be made in cash or provided as additional fully paid ordinary shares in the Company,
as determined by the Board.
Executive KMP are required to comply with the Company’s securities trading policy in respect of their Deferred Equity, which
includes a prohibition on hedging or otherwise protecting the value of their unvested STI awards. In the event of a takeover
or any proposed transaction that, in the Board’s opinion, is likely to result in a change of control, the Deferred Equity will vest
and become exercisable.
3.5 AWARDS AND STRUCTURE OF LTI GRANTS MADE IN FY2018
The terms of the FY2018 LTI grants to Executive KMP were:
Who
participated?
How will LTI be
delivered?
What was the
value of LTI
awards granted?
How are the
LTI awards
calculated?
All Executive KMP.
FY2018 LTI awards that vest will be delivered half in the form of performance rights, being rights to receive ordinary
shares at no cost, and half in the form of options to acquire shares on payment of a market-value exercise price, in each
case subject to meeting performance conditions and exercise by the Executive KMP.
The value of LTI awards granted to the Executive KMP for FY2018 remain unchanged from the previous year
(i.e. the percentages of TFR – refer section 2.3).
The CEO was granted LTI awards with a face value equal to 100% of his TFR and the COO was granted LTI awards with
a face value equal to 90% of his TFR. Other Executive KMP were granted LTI awards with a face value equal to 80%
of their TFR.
LTI awards were granted half in performance rights and half in options. The number of performance rights granted was
determined with reference to the volume weighted average price of the Company’s shares over the 20-day trading period
commencing 10 trading days prior to 30 June 2017. The number of options granted was calculated by dividing 50% of
the total LTI award value for each Executive KMP by the fair value of an option as determined by an independent third
party using the Black-Scholes methodology. No discount was applied to the valuation in respect of the probability of the
performance conditions being met. Shareholder approval was obtained at the 2017 Annual General Meeting for the FY2018
grant of LTI awards to the CEO.
The value of LTI awards and the number of performance rights and options granted is calculated as follows:
TFR
X
Target
Opportunity
=
Value of
LTI Award
X
X
50% ÷
VWAP of
performance right
50% ÷
Fair value
of option
=
=
Number of performance
rights granted
Number of
options granted
What is the
exercise price for
LTI awards?
There is no exercise price payable on vesting or exercise of the performance rights. On exercise, each performance right
entitles the recipient to one ordinary share in the Company.
LTI awards granted as options in FY2018 have an exercise price of $2.85 (being the volume weighted average price of the
Company’s shares over the 20-day trading period commencing 10 trading days prior to 30 June 2017).
Vested rights have a last date for exercise that is 10 years following the grant date while vested options have a last date for
exercise up to five years following the grant date (Last Exercise Dates). On these Last Exercise Dates, vested but unexercised
rights will be exercised automatically and vested but unexercised options will lapse.
84 | SECTION 8 FINANCIAL REPORT
What are the
performance
conditions?
Why were these
performance
conditions
chosen?
What are the
performance
periods?
How will the
performance
condition be
calculated for
the TSR Awards?
The LTI award was split into the following components:
– TSR Awards: 50% of the award is subject to a relative total shareholder return (TSR) performance hurdle (TSR Hurdle),
which compares the TSR performance of the Company with the TSR performance of a peer group of companies
operating in the Australian resources sectors, and
– Costs Target Awards: 50% of the award is subject to the Company achieving a defined cost per tonne target
(Costs Target Hurdle).
The TSR Hurdle was chosen because:
1.
It allows for an objective external assessment of the shareholder value created by the Company relative to a group
of peers over a sustained period, and
2.
It is a widely adopted metric that is well understood by markets.
The Costs Target Hurdle was chosen because:
1.
It provides a structural incentive to LTI participants to ensure that the Company is competitively positioned against
Australian coal producer
2. This structural incentive is aligned with shareholder interests
3. Tight control of costs of production i.e. competitively positioned is a key plank in our strategy. For this reason we have
a cost metric in both our STI and LTI structures
4. Competitive costs protect and preserve shareholder value in difficult times and support enhanced returns when the
commodity cycle recovers, and
5. When costs are competitive the Company has access to lower cost debt and larger liquidity pools, it is able to raise cost-
effective equity, and its suppliers have confidence in the Company’s sustainability.
Each TSR Award is divided into two equal tranches capable of vesting and becoming exercisable after a three-and four-year
performance period, with each performance period commencing on 1 July 2017.
The Costs Target Awards is based on the FOB cost per saleable tonne achieved on a Company-wide basis for the year ending
30 June 2020 with Costs Target Awards being tested at that time. Half the awards will be capable of vesting immediately and
half will be subject to deferral for a further year.
For the TSR Hurdle, the TSR of the Company for the FY2018 LTI grant is measured as a percentile ranking compared to the
below comparator group of listed entities over the relevant performance period for the tranche. The TSR comparator group
was established before the commencement of the respective performance period.
BHP Billiton
Mineral Resources
South32
Rio Tinto
Oil Search
Woodside Petroleum
Newcrest Mining
Saracen Mineral Holding
Santos
Fortescue Metals Group
Sandfire Resources
WorleyParsons
New Hope Corp
OZ Minerals
Syrah Resources
Beach Energy
Evolution Mining
Iluka Resources
Western Areas
Northern Star Resources
Independence Group
The level of vesting will be determined based on the ranking against the comparator group companies in accordance
with the following schedule:
– at the 75th percentile or above – 100% of the TSR Awards vest
– between the 50th and 75th percentile – vesting will occur on a pro rata straight line basis
– at the 50th percentile – 50% of the TSR Awards vest, and
– below the 50th percentile – no TSR Awards vest.
Unless the Remuneration Committee determines otherwise, the TSR of a company for a performance period will
be calculated adopting the following determination of the relevant opening and closing share prices:
–
–
the volume weighted average share price over the 20-day trading period commencing 10 trading days before
30 June 2017 (opening share price), and
the volume weighted average share price over the corresponding 20 trading day period at the conclusion of the
performance period ending 30 June 2020 and 30 June 2021, as applicable (closing share price).
Whitehaven Coal Annual Report 2018 | 85
FINANCIAL REPORT 8 REMUNERATION REPORT
3. REMUNERATION OF THE EXECUTIVE KMP FOR FY2018 (CONT.)
3.5 AWARDS AND STRUCTURE OF LTI GRANTS MADE IN FY2018 (CONT.)
How will the
performance
condition be
calculated for
the Costs Target
Awards?
The Remuneration Committee has set the LTI Costs Target Hurdle having regard to the Company’s budgeted cost
forecasts and to the coal industry cost curve as measured by a recognised expert. The Board is satisfied that the
LTI Costs Target Hurdle is challenging and that achievement of the performance condition will place the Company
in a competitive position on the then current coal industry cost curve.
Testing will occur following the completion of FY2020 based on the average costs achieved on a Company-wide basis
over the 12-month period from 1 July 2019 to 30 June 2020. Full vesting will only occur if the Board is satisfied that
performance meets or exceeds the target as set out below. The Board may, where it is appropriate to do so, revise
the targets below to take account of mergers, acquisitions and divestments or other exceptional circumstances.
Vesting will occur based on the following schedule:
– Target or above – 100% of the Costs Target Awards vest
– Between Gateway and Target – vesting will occur on a pro rata straight line basis up to target performance
– Gateway – 50% of the Costs Target Awards vest, and
– Below Gateway – no Costs Target Awards vest.
Due to the commercially sensitive nature of this hurdle, the exact target will not be disclosed until the year of testing.
However, retrospective disclosure of the outcomes against the target will be provided in the Remuneration Report
for the year of testing.
To the extent that the Costs Target Hurdle is satisfied at the end of FY2020:
– 50% of the Costs Target Awards that vest will become exercisable, and
– The remaining 50% will be subject to a further one year service condition prior to vesting and becoming exercisable.
Notwithstanding the vesting schedule above, the Board retains discretion to lapse any or all Costs Target Awards
if the Board considers that vesting would be inappropriate in light of the intent and purpose of the target.
Re-testing
All performance awards that do not vest following testing will lapse immediately. There is no re-testing of awards that
do not vest.
Do the
performance
rights and options
attract dividend
and voting rights?
LTI awards do not have any dividend or voting rights prior to exercise.
Upon exercise of vested LTI awards the recipient is entitled to receive a DEP in respect of the period between grant and
exercise. Any DEP made to participants may be made in cash or provided as additional fully paid ordinary shares in the
Company, as determined by the Board.
Shares allocated on exercise of performance rights and options rank equally with other ordinary shares on issue, including
in relation to dividend and voting rights. Participants are required to comply with the Company’s securities trading policy in
respect of their performance rights, options and any shares they receive upon exercise. They are prohibited from hedging
or otherwise protecting the value of their performance rights and options.
What happens
in the event
of a change
in control?
What happens
if an executive
ceases
employment
during the
performance
period?
In the event of a takeover bid or other transaction, event or state of affairs that in the Board’s opinion is likely
to result in a change in control of the Company, the Board has discretion to determine that vesting of some or all
of any unvested performance awards should be accelerated.
In general, unless the Board determines otherwise, where an executive’s employment is terminated:
for cause or due to resignation: unvested performance awards will lapse.
–
– by mutual agreement with the Company: unvested performance awards will remain on foot and subject to the original
–
performance hurdle. However, the Board may at its discretion determine to lapse any or all of the unvested performance
awards and ordinarily, in the case of a resignation, would be expected to do so.
for any other reason: unvested performance awards will remain on foot and subject to the original performance hurdle,
with Board discretion to determine that some of the performance awards (up to a pro rata portion based on how much
of the performance period remains) will lapse. The performance awards that remain on foot will be tested in the normal
course following the end of the relevant performance period.
86 | SECTION 8 FINANCIAL REPORT
3.6 EXECUTIVE KMP REALISED REMUNERATION OUTCOMES
As set out in Section 1.2 the Remuneration Committee is of the view that the Executive KMP have continued to successfully
execute our strategy. The table below is designed to give shareholders a better understanding of the actual remuneration
outcomes for Executive KMP in FY2018. It includes:
– Fixed remuneration earned in FY2018
– STI earned in respect of FY2018 performance
(including cash payable in September 2018 and
Deferred Equity for FY2018 which may vest and
become exercisable in later years)
– LTI that reached the end of its performance period
in FY2018 including the impact of share price growth
between the grant date and the test date
– any termination benefits provided in FY2018, and
– any non-monetary benefits provided to Executive
KMP in FY2018 (including fringe benefits).
The amounts disclosed in the table, while not in accordance with accounting standards, may be more helpful for shareholders
to consider the linkage between Company performance and remuneration outcomes for Executive KMP for FY2018.
Executive KMP
FY
TFR1
STI2
Cash
Total
Cash
FY2018
Deferred
Equity STI5
LTI3
Vested
at face
value
of award Other4
Total
remuneration
Vested
LTI7 Share
Price
Growth
Total
Including
Share Price
Growth
Paul Flynn
CEO
Kevin Ball
CFO
Timothy Burt
GC/Company Secretary
Brian Cole
EGM Project Delivery
Jamie Frankcombe
COO
Scott Knights
EGM Marketing
and Logistics
Michael van Maanen6
EGM Corporate
and External Affairs
2018
1,352,520 636,983
1,989,503
636,983
1,129,962
12,660
3,769,108 3,762,412
7,531,520
2017
1,352,520
773,942
2,126,462
773,942
832,001
12,500
3,744,905
587,251
4,332,156
2018
612,000
201,759
813,759
201,759
420,803
2017
612,000 245,036
857,036
245,036
251,817
–
–
1,436,321
1,397,755
2,834,076
1,353,889
204,522
1,558,411
2018
520,200
171,495
691,695
171,495
387,682
12,660
1,263,532
1,279,355
2,542,887
2017
520,200
201,541
721,741
201,541
377,336
12,500
1,313,118
180,250
1,493,368
2018
676,260
223,122
899,382
223,122
504,026
635
1,627,165
1,663,282
3,290,447
2017
676,260
264,141
940,401
264,141
502,727
10,432
1,717,701
233,671
1,951,372
2018
910,350
342,991
1,253,341
342,991
719,496
12,660
2,328,488 2,385,627
4,714,115
2017
910,350
410,365
1,320,715
410,365
518,001
12,500
2,261,581
378,971
2,640,552
2018
525,000
173,078
698,078
173,078
362,161
2017
525,000
210,292
735,292
210,292
180,000
2018
36,308
2017
–
–
–
36,308
–
–
–
–
–
–
–
–
–
1,233,317
1,198,778
2,432,095
1,125,584
171,371
1,296,955
36,308
–
–
–
36,308
–
1 TFR comprises base salary and superannuation.
2 STI represents the amount of cash STI that each Executive KMP will be paid in September 2018 based on FY2018 performance. Refer to section 3.4 and section 3.7
for further details.
3 LTI represents LTI awards for which the test period was in FY2018 and which have vested for awards made between 2014 and 2015. The amounts shown are the
face value of the awards at grant. Refer to section 3.8 for further details.
4 Other includes parking, motor vehicle benefits and other similar items.
5 Deferred Equity STI refers to the amount of STI deferred into rights that are the subject to further service conditions. Whilst not yet granted, the STI is expected
to be issued at a VWAP of $5.70. It is expected that rights issued under the STI will vest and become exercisable following the completion of FY2019 and FY2020.
Refer to Section 3.4 for further details.
6 Commenced on 28 May 2018.
7 LTI Share Price Growth is the amount of the LTI award delivered by an increase between the face value VWAP used for the award that was granted and the VWAP
of a share at the award test date for those awards which vested. Whitehaven Coal share price performance over the 3 and 4 year periods is shown in the graph
below and outcomes are explained further in section 3.8 of this report.
Whitehaven Coal Annual Report 2018 | 87
FINANCIAL REPORT 8 REMUNERATION REPORT
3. REMUNERATION OF THE EXECUTIVE KMP FOR FY2018 (CONT.)
3.6 EXECUTIVE KMP REALISED REMUNERATION OUTCOMES (CONT.)
WHC SHARE PRICE GROWTH
$6.50
$6.00
$5.50
$5.00
$4.50
$4.00
$3.50
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
3 year vesting period
4 year vesting period
Share
Price
Growth
$4.33
Opening
Share
Price
$1.45
4
1
l
u
J
5
1
n
u
J
6
1
n
u
J
7
1
n
u
J
WHC Share Price
8
1
n
u
J
The graphs below illustrate how the remuneration mix for Executive KMP for FY2018 was delivered. A significant proportion
of the remuneration mix for FY2018 was from LTI awards, which is a reflection of the significant share price growth achieved
to the end of FY2018.
REALISED REMUNERATION MIX FOR EXECUTIVE KMP FOR FY2018
100
80
60
40
20
0
CEO
COO
Other
Executive KMP
88 | SECTION 8 FINANCIAL REPORT
CEO
COO
TFR and
STI cash
27%
LTI Awards
65%
27%
66%
STI
Deferred
Equity
8%
7%
Other
Executive
KMP
28%
65%
7%
3.7 EXECUTIVE KMP STI OUTCOMES IN FY2018
The individual STI outcome for each Executive KMP for FY2018 is set out in the table below.
Executive KMP
Paid as cash
Deferred equity
$
$
Total
$
Percentage
of STI received
Percentage
of STI forfeited
Paul Flynn
Kevin Ball
Timothy Burt
Brian Cole
Jamie Frankcombe
Scott Knights
Michael van Maanen1
1 Commenced 28 May 2018.
636,983
636,983
1,273,966
201,759
171,495
223,122
342,991
173,078
–
201,759
171,495
223,122
342,991
173,078
–
403,518
342,990
446,244
685,982
346,156
–
75%
75%
75%
75%
75%
75%
–
25%
25%
25%
25%
25%
25%
–
Details of the remuneration of Executive KMP prepared in accordance with statutory obligations and accounting standards are
contained in section 5 of this Remuneration Report.
3.8 EXECUTIVE KMP LTI OUTCOMES IN FY2018
VESTING
PERIOD
2014-2018
VESTING
PERIOD
2015-2018
WHC 4YR TSR
PERFORMANCE
+325%
WHC 3YR TSR
PERFORMANCE
+377%
WHC TSR RANK
VS PEER GROUP
1ST
VESTING OF 2014-
2018 LTI (TSR)
100%
WHC TSR RANK
VS PEER GROUP
2ND
VESTING OF 2015-
2018 LTI (TSR)
100%
This is only the second year since the 2012 merger that LTI awards have vested. The Board believes that the Company is well
positioned to continue its strong performance and to deliver value for shareholders. In FY2018 the Company delivered a TSR of
118% and ranked 4th in the ASX 200 for the year. The Company also returned $327m to shareholders. The Company’s balance
sheet strength, quality of operations and forecast modest future capital needs underpin the decision by the Board to pay
a further $268m in dividends (27 cents per share) to shareholders from the FY2018 results.
The table below sets out the LTI awards that were tested in FY2018 (or for which the test period concluded on 30 June 2018)
and the results of the relevant test.
LTI Year
Tranche
Test type
Performance
2014
2015
2015
2 of 2
1 of 2
Relative TSR
Relative TSR
1 in 21
2 in 23
n/a
Costs Hurdle
$61.86/t Actual
$60/t Target
Outcomes
Vested
100%
100%
80%
Lapsed
0%
0%
20%
TSR
OF 118%
#4 RANKED
IN THE ASX200
FOR 2018
COSTS HURDLE TARGET
In 2015, as coal prices continued their retreat from the 2011 highs, the Board set the Gateway and Target for FY2018. Saleable
production in FY2015 was 11.3Mt while costs for FY2015 were $61/tonne. In 2015 the target of $60/t was chosen as being within
the best cost quartile.
The actual cost result for FY2018 was $61.86/t. The Board believes that the cost structure in the Company is sustainable and
competitive. FY2018 costs were well positioned against the Company’s competitors and were within the best cost quartile.
Accordingly, the Board has approved vesting of 80% of the award. 50% of Costs Hurdle Target awards vest immediately while
the remaining 50% are subject to a further service vesting period of one year.
Whitehaven Coal Annual Report 2018 | 89
FINANCIAL REPORT 8 REMUNERATION REPORT
3. REMUNERATION OF THE EXECUTIVE KMP FOR FY2018 (CONT.)
3.8 EXECUTIVE KMP LTI OUTCOMES IN FY2018 (CONT.)
EXECUTIVE KMP LTI AWARDS VESTING IN FY2018
2014
Tranche 2
TSR Hurdle
2015
Tranche 1
TSR Hurdle
2014
Tranche 2
Costs Target
Hurdle
2015
Tranche 1
Costs Target
Hurdle
Gross
up for
Capital
Return1
LTI shares vested
Vested
LTI at face
value of
award2
Vested LTI
share price
appreciation2
$
$
LTI
value
$
213,699
308,372
142,466
164,466
29,308
4,892,374
1,129,962
3,762,412
82,192
82,192
111,628
94,884
54,795
54,795
59,536
10,894
1,818,558
420,803
1,397,755
50,605
9,987
1,667,037
387,682
1,279,355
106,866
123,349
71,244
65,787
12,983
2,167,308
504,026
1,663,282
Executive KMP
Paul Flynn
Kevin Ball
Timothy Burt
Brian Cole
Jamie Frankcombe
143,836
186,802
Scott Knights
73,973
92,093
Michael van Maanen3
–
–
95,891
49,315
–
99,628
18,602
3,105,123
719,496
2,385,627
49,117
9,351
1,560,939
362,161
1,198,778
–
–
–
–
–
Award test date
30 June 2018
30 June 2018
30 June 2018 30 June 2018
VWAP – face value
$1.46
$1.29
$1.46
$1.29
VWAP –
Award test date
$5.70
$5.70
$5.70
$5.70
1 Refer to the Notice of 2017 Annual General Meeting, Resolution 6.
2 As presented in section 3.6.
3 Commenced 28 May 2018.
POLICIES AND CONDITIONS RELATING TO WHITEHAVEN’S EQUITY INCENTIVE PLANS
Malus and Clawback
Change of Control
The Board has the ability to reduce the number of deferred
equity instruments that vest if subsequent events show
such a reduction to be appropriate (clawback).
The Board retains discretion to lapse any or all Costs
Target Awards if the Board considers that vesting
would be inappropriate in light of the intent and purpose
of the target.
Prohibition on Hedging
Participants are required to comply with the Company’s
securities trading policy in respect of their performance
rights, options and any shares they receive upon exercise.
They are prohibited from hedging or otherwise protecting
the value of their performance rights and options.
In the event of a takeover or any proposed transaction
that, in the Board’s opinion, is likely to result in a change
of control, the STI Deferred Equity will vest and become
exercisable.
Treatment of Incentives on Cessation of Employment
Deferred Equity will not vest if the Executive KMP
resigns or is terminated for cause or the Board applies its
discretion to clawback some or all of the Deferred Equity.
Treatment of unvested incentives is dealt with
in accordance with the terms of grant.
In general, under STI and LTI arrangements, unvested
entitlements will be forfeited where an executive
is terminated for cause or, subject to the Board’s
discretion, where they resign.
90 | SECTION 8 FINANCIAL REPORT
4. EXECUTIVE KMP EMPLOYMENT CONTRACTS
This section sets out an overview of key terms of employment for the Executive KMP, as provided in their service agreements.
All Executive KMP contracts give the Company discretion to make payment in lieu of notice. No notice is required where
termination is for cause. The contracts do not provide for any termination payments other than payment in lieu of notice.
Treatment of unvested incentives is dealt with in accordance with the terms of grant. In general, under the STI and LTI
arrangements, unvested entitlements will be forfeited where an executive is terminated for cause or, subject to the Board’s
discretion, where they resign. In all other circumstances where the Board considers the executive to be a ‘good leaver’,
outgoing executives will generally retain their entitlements (subject to any applicable performance conditions in the case
of LTI arrangements).
MANAGING DIRECTOR AND CEO
Paul Flynn was appointed as Managing Director and CEO of the Company on 27 March 2013. This table outlines the key terms
of Mr Flynn’s contract of employment.
Fixed remuneration
Mr Flynn’s annual TFR for FY2019 is $1,500,000 (FY2018:$1,352,520). It includes salary, superannuation
contributions, any components under Whitehaven’s salary packaging guidelines and all Director fees.
TFR is reviewed annually.
Short-term incentive
Mr Flynn is eligible to participate in the annual STI plan, as described in section 3.4. At Target performance,
his FY2019 STI opportunity is 100% of TFR (FY2018: 100%), with up to 125% of TFR for Stretch performance
(FY2018: 125%).
Long-term incentive
Mr Flynn is eligible to participate in the LTI plan as described in section 3.5, subject to receiving required shareholder
approval. Mr Flynn’s LTI grant in FY2019 will be 120% of his TFR (FY2018: 100%). The form of the Award will be
provided 100% as rights to acquire shares; each right held will entitle Mr Flynn to receive one ordinary share in the
Company subject to satisfaction of the relevant performance conditions. The FY2018 award was in the form of 50%
options and 50% rights.
Other key terms
Other key terms of Mr Flynn’s service agreement include the following:
– his employment is ongoing, subject to 12 months’ notice of termination by Whitehaven or six months’ notice
–
–
of termination by Mr Flynn
the Company may terminate without notice in certain circumstances, including serious misconduct or negligence
in the performance of duties. Mr Flynn may terminate immediately in the case of fundamental change to his role
(i.e. there is a substantial diminution in his responsibilities), in which case his entitlements will be the same as if the
Company terminated him without cause
the consequences for unvested incentive awards on termination of Mr Flynn’s employment will be in accordance
with the Company’s STI and LTI plans.
Mr Flynn will have post-employment restraints for a period of three months. No additional amounts will be payable
in respect of this restraint period.
OTHER EXECUTIVE KMP CONTRACTS
A summary of the notice periods and key terms of the current Executive KMP contracts are set out in the table below.
All of the contracts below are of ongoing duration.
Name and position (at year-end)
Kevin Ball
Chief Financial Officer
Appointed 16 December 2013
Timothy Burt
General Counsel and Company Secretary
Appointed 29 July 2009
Brian Cole
Executive General Manager – Project Delivery
Appointed 1 July 2012
Jamie Frankcombe
Chief Operating Officer
Appointed 4 February 2013
Scott Knights
Executive General Manager – Marketing and Logistics
Appointed 18 August 2014
Michael van Maanen
Executive General Manager – Corporate and External Affairs
Appointed 28 May 2018
Notice
3 months by employee
6 months by the Company
3 months by employee
12 months by the Company
6 months by employee
or the Company
3 months by employee
6 months by the Company
6 months by employee
or the Company
3 months by employee
6 months by the Company
Whitehaven Coal Annual Report 2018 | 91
FINANCIAL REPORT 8 REMUNERATION REPORT
5. EXECUTIVE KMP – STATUTORY REMUNERATION TABLES
5.1 EXECUTIVE KMP – STATUTORY REMUNERATION TABLE
The following table sets out the statutory remuneration disclosures required under the Corporations Act and has been prepared
in accordance with the appropriate accounting standards and has been audited.
$
FY
EXECUTIVE DIRECTORS
Salary
& fees
Non –
monetary
benefits
Super–
annuation
benefits
A
Termination
benefits
Shares
STI
B
Rights
and
options
C
Share–based
payments
Total
remun-
eration
Perfor-
mance
related
Paul Flynn
2018
1,327,520
12,660
25,000
1,248,639
2017
1,317,520
12,500
35,000
1,216,379
OTHER EXECUTIVE KMP
Kevin Ball
2018
587,000
2017
587,000
–
–
25,000
401,275
25,000
398,300
Timothy Burt 2018
508,377
12,660
11,823
339,554
2017
490,000
12,500
30,000
334,342
Brian Cole
2018
2017
651,260
635
25,000
440,583
641,260
10,432
35,000
434,056
Jamie
Frankcombe
2018
885,350
12,660
25,000
677,136
2017
875,350
12,500
35,000
666,684
Scott
Knights
2018
500,000
2017
500,000
Michael van
Maanen*
2018
2017
33,750
–
–
–
–
–
25,000
343,275
25,000
337,503
2,558
–
–
–
Total
2018
4,493,257
38,615
139,381
3,450,462
2017
4,411,130
47,932
185,000
3,387,264
* Commenced 28 May 2018.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,033,472
4,647,291
896,355
3,477,754
738,135
1,751,410
325,679
1,335,979
632,604
1,505,018
301,368
1,168,210
822,393
1,939,871
393,150
1,513,898
1,237,869
2,838,015
565,718
2,155,252
602,005
1,470,280
198,333
1,060,836
–
–
36,308
–
6,066,478
14,188,193
2,680,603
10,711,929
A The amounts disclosed as non-monetary benefits relate to car spaces, motor vehicle benefits and other similar items.
B Comprises the cash component of current year STI (refer to section 3.6 and section 3.7 for details) and the fair value at each grant date of STI Deferred Equity
expensed over the service vesting conditions. The fair value for STI grants is based on the volume weighted average price of Whitehaven shares over the
20-day trading period commencing 10 trading days prior to 30 June of each respective grant.
C The fair value for LTI performance rights granted to the KMP is based on the fair value at each grant date. The factors and assumptions used in determining
the fair value are set out in note 5.5 to the financial statements.
92 | SECTION 8 FINANCIAL REPORT
%
71%
61%
65%
54%
65%
54%
65%
55%
67%
57%
64%
51%
–
–
5.2 STI DEFERRED EQUITY AWARDS GRANTED IN FY2018
Details of the Deferred Equity component arising from FY2017 Executive KMP STI award performance granted in FY2018
are set out below.
Executive KMP
Paul Flynn
Kevin Ball
Timothy Burt
Brian Cole
Jamie Frankcombe
Scott Knights
Michael van Maanen*
* Commenced 28 May 2018.
Number of
rights granted
Performance
hurdle1
Fair value per right
at grant date2
Latest
vesting date3
135,780
135,779
42,989
42,989
35,359
35,358
46,341
46,341
71,995
71,994
36,894
36,893
–
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
n/a
$2.85
$2.85
$2.85
$2.85
$2.85
$2.85
$2.85
$2.85
$2.85
$2.85
$2.85
$2.85
n/a
August 2018
August 2019
August 2018
August 2019
August 2018
August 2019
August 2018
August 2019
August 2018
August 2019
August 2018
August 2019
n/a
1 The Deferred Equity component of FY2017 STI is subject to service conditions of one and two years, respectively. There is no exercise price payable on vesting or
exercise of the Deferred Equity rights. On exercise of Deferred Equity, each right entitles the recipient to one ordinary share in the Company. Vested Deferred Equity
rights that have not been exercised by 31 August 2027 (Last Exercise Date) will automatically be exercised.
2 The fair value for awards granted to the Executive KMP is based on the total deferred portion of STI divided by the volume weighted average price of Whitehaven
shares over the 20-day trading period commencing 10 trading days prior to 30 June 2017 being $2.85.
3 The Vesting Dates for Deferred Equity rights are the respective dates when the financial results for each of FY2018 and FY2019 are released to the market.
5.3 LTI AWARDS GRANTED IN FY2018
A summary of the LTI awards granted in FY2018 (i.e. the value and the fair value of the LTI granted to each Executive KMP)
is set out in the table below.
Number of
performance
rights granted
Number
of options
granted
Value of
performance
rights granted
237,285
85,895
73,011
94,914
143,740
73,685
–
786,349
284,652
241,954
314,540
476,346
244,187
–
$
676,260
244,800
208,080
270,504
409,658
210,000
–
Value of
options
granted
$
676,260
244,800
208,080
270,504
409,657
210,000
–
Fair value of
performance
rights at
grant date
Fair value
of options at
grant date
$
725,498
262,623
223,231
290,200
439,485
225,291
–
$
517,024
187,159
159,085
206,810
313,198
160,553
–
Executive KMP
Paul Flynn
Kevin Ball
Timothy Burt
Brian Cole
Jamie Frankcombe
Scott Knights
Michael van Maanen*
* Commenced 28 May 2018.
The value of the LTI performance rights was calculated based on value of grant using the volume weighted average price of Whitehaven shares over the 20-day
trading period commencing 10 trading days prior to 30 June 2017, being $2.85. The value of the LTI options grant represents the face value of the grant at the start
of the performance period.
The fair value for LTI performance rights and options granted to the Executive KMP was based on the fair value at 27 October 2017 being the grant date. The factors
and assumptions used in determining the fair value are set out in note 5.5 to the financial statements. Each option has an exercise price of $2.85.
Whitehaven Coal Annual Report 2018 | 93
FINANCIAL REPORT 8 REMUNERATION REPORT
REMUNERATION REPORT
5. EXECUTIVE KMP – STATUTORY REMUNERATION TABLES (CONT.)
5.3 LTI AWARDS GRANTED IN FY2018 (CONT.)
Details of the LTI awards which were granted to Executive KMP on 27 October 2017 are shown below:
Executive KMP
Paul Flynn
Kevin Ball
Timothy Burt
Brian Cole
Jamie Frankcombe
Scott Knights
Number of
rights granted
Number of
options granted
Performance
hurdle
Fair value
per right at
grant date1
Fair value
per option at
grant date1
Latest
Vesting
date
59,322
59,321
118,642
21,474
21,474
42,947
18,253
18,253
36,505
23,729
23,728
47,457
35,935
35,935
71,870
18,422
18,421
36,842
196,588
196,587
TSR
TSR
393,174
Costs hurdle2
71,163
71,163
Costs hurdle2
TSR
TSR
142,326
Costs hurdle2
60,489
60,488
Costs hurdle2
TSR
TSR
120,977
Costs hurdle2
78,635
78,635
Costs hurdle2
TSR
TSR
157,270
Costs hurdle2
119,087
119,086
238,173
61,047
61,047
Costs hurdle2
TSR
TSR
Costs hurdle2
Costs hurdle2
TSR
TSR
122,093
Costs hurdle2
Costs hurdle2
$2.43
$2.50
$3.65
$3.65
$2.43
$2.50
$3.65
$3.65
$2.43
$2.50
$3.65
$3.65
$2.43
$2.50
$3.65
$3.65
$2.43
$2.50
$3.65
$3.65
$2.43
$2.50
$3.65
$3.65
n/a
$0.61
30 June 2020
$0.61
30 June 2021
$0.72
30 June 2020
$0.69
30 June 2021
$0.61
30 June 2020
$0.61
30 June 2021
$0.72
30 June 2020
$0.69
30 June 2021
$0.61
30 June 2020
$0.61
30 June 2021
$0.72
30 June 2020
$0.69
30 June 2021
$0.61
30 June 2020
$0.61
30 June 2021
$0.72
30 June 2020
$0.69
30 June 2021
$0.61
30 June 2020
$0.61
30 June 2021
$0.72
30 June 2020
$0.69
30 June 2021
$0.61
30 June 2020
$0.61
30 June 2021
$0.72
30 June 2020
$0.69
30 June 2021
n/a
n/a
Michael van Maanen3
–
–
n/a
1 The fair value for awards granted to the Executive KMP is based on the fair value at 27 October 2017 being the grant date. The factors and assumptions used
in determining the fair value are set out in note 5.5 to the financial statements. The options have an exercise price of $2.85.
2 To the extent that the Costs Target Hurdle is satisfied at the end of FY2020, 50% of the Costs Target Awards will vest and become exercisable immediately and
the remaining 50% will continue on foot, subject to a further one-year service condition.
3 Michael van Maanen commenced on 28 May 2018.
94 | SECTION 8 FINANCIAL REPORT
6. NON-EXECUTIVE DIRECTOR REMUNERATION
This section explains the fees paid to Non-executive Directors during FY2018.
6.1 SETTING NON-EXECUTIVE DIRECTOR FEES
Non-executive Directors fees are designed to ensure that the Company can attract and retain suitably qualified and experienced
Non-executive Directors.
Non-executive Directors do not receive shares, share options or any performance-related incentives as part of their fees from
the Company. Although there is no formal minimum shareholding, Non-executive Directors are encouraged to hold shares.
Non-executive Directors are also reimbursed for travel and other expenses reasonably incurred when attending meetings
of the Board or in connection with the business of the Company.
The Remuneration Committee reviews and makes recommendations to the Board with respect to Non-executive Directors’ fees
and Committee fees.
In 2012 the shareholders approved a total aggregate maximum amount of Non-executive Directors’ fees of $2,500,000
per annum. No change is being sought to the total aggregate Non-executive Directors’ fee pool for FY2019.
6.2 CURRENT NON-EXECUTIVE DIRECTOR FEE LEVELS AND FEE POOL
The table below sets out the Board and Committee fees in Australian dollars for FY2018.
The Board adjusted Non-executive Directors fees for FY2018. The Company had not increased Directors fees since the 2012
merger. For the upcoming financial year no changes are proposed.
Board
Audit & Risk Management Committee
Remuneration Committee
Governance & Nomination Committee
Health, Safety, Environment & Community Committee
Chairman
$375,0001
$40,000
$40,000
No fee
$40,000
Deputy Chairman
$262,5001
–
–
–
–
Member
$140,000
$20,000
$20,000
No fee
$20,000
1 The Chairman and Deputy Chairman of the Board do not receive Committee fees in addition to their Board fees.
The fees set out above exclude mandatory statutory superannuation contributions made on behalf of the Non-executive Directors.
In addition to the meetings that the Non-executive Directors attended (as shown on page 63), the Non-executive Directors
participated in visits to Japanese customers, finance providers and equipment suppliers, site visits to mines, coal handling
and preparation plants and participated in the Company’s annual safety day.
Whitehaven Coal Annual Report 2018 | 95
FINANCIAL REPORT 8 REMUNERATION REPORT
6. NON-EXECUTIVE DIRECTOR REMUNERATION (CONT.)
6.3 NON-EXECUTIVE DIRECTOR FEES – STATUTORY DISCLOSURES
The statutory disclosures required under the Corporations Act and in accordance with the Accounting Standards are set out
in the table below.
$
NON–EXECUTIVE DIRECTORS
The Hon.
Mark Vaile AO
(Chairman)
John Conde AO
(Deputy Chairman)
Dr Julie Beeby
Tony Haggarty
Raymond Zage
Fiona Robertson2
Christine McLoughlin3
Total
FY
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Short–term
benefits
Post–employment
benefits
Board &
Committee
fees
Non–
monetary
benefits
Other benefits
(non–cash)
Superannuation
benefits
Total fees for services as a
Non–executive Director
375,000
350,000
262,500
262,500
167,500
152,500
200,000
185,000
–1
–1
67,500
–
125,000
177,500
1,197,500
1,127,500
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,049
19,616
20,049
19,616
15,913
14,487
19,000
17,575
–
–
6,412
–
11,875
16,862
93,298
88,156
395,049
369,616
282,549
282,116
183,413
166,987
219,000
202,575
–
–
73,912
–
136,875
194,362
1,290,798
1,215,656
1 Mr Zage elected not to receive any Board & Committee fees in FY2018 and FY2017.
2 Ms Robertson commenced on 16 February 2018.
3 Ms McLoughlin resigned on 16 February 2018.
7. RELATED PARTY TRANSACTIONS AND ADDITIONAL DISCLOSURES
7.1 LOANS WITH EXECUTIVE KMP AND NON-EXECUTIVE DIRECTORS
There were no loans outstanding to any Executive KMP or any Non-executive Director or their related parties, at any time
in the current or prior reporting periods.
7.2 OTHER KMP TRANSACTIONS
Apart from the details disclosed in this report, no Executive KMP or Non-executive Director or their related parties have
entered into a material contract with the consolidated entity since the end of the previous financial year and there were
no material contracts involving those people’s interests existing at year end.
96 | SECTION 8 FINANCIAL REPORT
7.3 MOVEMENT IN OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS HELD BY EXECUTIVE KMP
The movement during the reporting period, by number and value of equity instruments in the Company held by each
Executive KMP is detailed below.
Balance
as at 1
July 2017
(number)
Granted
(number)
Granted
(value)
(A)
(B) $
Vested
during
the year
(number)
Exercised
(number)
Exercised
(value)
Lapsed
(number)
(C) $
Lapsed
(year of
grant)
(D)
Balance
as at 30
June 2018
(number)
Vested and
exercisable at
30 June 2018
2,594,583
237,285
725,498
497,983
497,983
380,811
153,636
2013
2,180,249
Executive
KMP
Instrument
Paul Flynn
Performance
Rights (LTI)
Kevin Ball
Deferred
Rights (STI)
Performance
Rights (LTI)
Deferred
Rights (STI)
Timothy
Burt
Performance
Rights (LTI)
Brian Cole
Deferred
Rights (STI)
Performance
Rights (LTI)
Deferred
Rights (STI)
Jamie
Frankcombe
Performance
Rights (LTI)
Options (LTI)
1,822,081
786,349
517,024
–
–
–
455,324
271,559
773,942
193,020
359,616
456,248
896,571
85,895
262,623
160,119
160,119
138,890
25,058
2013
797,289
Options (LTI)
659,577
284,652
187,159
–
–
–
121,393
85,978
245,036
79,592
79,592
99,330
847,040
73,011
223,231
177,702
177,702
151,374
44,106
2013
698,243
Options (LTI)
560,641
241,954
159,085
–
–
–
178,623
70,717
201,541
74,777
141,638
179,754
1,107,029
94,914
290,200
233,833
233,833
198,794
60,366
2013
907,744
Options (LTI)
728,833
314,540
206,810
–
–
–
224,318
92,682
264,141
93,264
180,183
228,905
–
–
– 2,608,430
–
367,267
–
–
–
–
944,229
127,779
–
–
–
–
802,595
107,702
–
–
–
–
1,043,373
136,817
1,596,936
143,740
439,485
314,727
314,727
267,566
81,250
2013 1,344,699
Options (LTI)
1,103,761
476,346
313,198
–
–
–
Deferred
Rights (STI)
Scott
Knights
Performance
Rights (LTI)
300,720
143,989
410,365
133,402
235,996
299,257
727,106
73,685
225,291
123,288
123,288
110,219
Options (LTI)
565,814
244,187
160,553
–
–
–
Deferred
Rights (STI)
Michael van
Maanen*
n/a
* Commenced 28 May 2018.
97,037
73,787
210,292
62,720
62,720
78,163
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,580,107
208,713
677,503
810,001
108,104
–
(A) The number of rights granted during FY2018 includes:
(C) Tranche 2 of the 2013 LTI performance rights vested at a rate of 48%. The 2014
a. The FY2017 LTI awards. Further details are provided in section 5.3.
b. The Deferred Equity component of the FY2017 STI award, calculated
by reference to the volume weighted average price of the Company’s
shares for the 20-day trading period commencing 10 trading days prior
to 30 June 2017. The granting of rights occurred on 27 October 2017.
Further details are provided in section 5.2.
(B) The value of LTI performance rights granted in the year is the fair value
of the performance rights at grant date.
The value of deferred STI rights granted in the year has been calculated using
the volume weighted average price of the Company’s shares for the 20-day
trading period commencing 10 trading days prior to 30 June 2017. Unvested
LTI and STI awards have a minimum value of zero if they do not meet the
relevant performance or service conditions.
The maximum value of unvested LTI and STI awards is the sale price of the
Company’s shares at the date of vesting, or where applicable, exercise
(plus the value of any dividend equivalent payment attaching to the award
on vesting or, where applicable exercise).
LTI Rights TSR Hurdle Tranche 1 fully vested during the year. The 2014 LTI Rights
Costs Target Hurdle met the performance condition with 50% vesting during
the year and the remaining 50% subject to a further 12 month service condition.
The value of LTI performance rights vested in the year is the fair value of the
performance rights at grant date.
Tranche 1 of the FY2016 STI Deferred Equity rights vested during the period.
The vested value of rights exercised has been calculated using the volume
weighted average price of the Company’s shares for the 20-day trading period
commencing 10 trading days prior to 1 July 2016.
Tranche 2 of the FY2015 STI Deferred Equity rights vested during the period.
The vested value has been calculated using the volume weighted average
price of the Company’s shares for the 20-day trading period commencing
10 trading days prior to 1 July 2015.
(D) The year in which the lapsed performance rights, options or deferred shares
were granted. 52% of the 2013 LTI Rights TSR Hurdle Tranche 2 award lapsed
due to the performance conditions not being met.
Whitehaven Coal Annual Report 2018 | 97
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
FINANCIAL REPORT 8
REMUNERATION REPORT
7. RELATED PARTY TRANSACTIONS AND ADDITIONAL DISCLOSURES (CONT.)
7.4 ADDITIONAL DISCLOSURES RELATING TO ORDINARY SHARES
The movement during the reporting period in the number of ordinary shares in the Company held, directly, indirectly
or beneficially, by each Executive KMP and each Non-executive Director, including their related parties is as follows:
Held at
1 July 2017
Received on vesting and
exercise of STI/LTI
Received as
remuneration
Other
net change
Held at
30 June 2018
2,043,132
888,620
55,000
383,792
11,934,485
75,000
–
–
136,011
227,556
87,774
374,963
–
–
–
–
–
857,599
–
–
–
–
239,711
319,340
414,016
550,723
186,008
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,750
2,049,882
–
–
–
888,620
55,000
1,241,391
(10,934,485)
1,000,000
n/a
–
n/a
–
10,000
10,000
–
(176,752)
–
(425,686)
(186,008)
–
375,722
370,144
501,790
500,000
–
–
No. of shares
DIRECTORS
The Hon. Mark Vaile AO
John Conde AO
Dr Julie Beeby
Paul Flynn
Tony Haggarty
Christine McLoughlin1
Raymond Zage
Fiona Robertson2
EXECUTIVE
Kevin Ball
Timothy Burt
Brian Cole
Jamie Frankcombe
Scott Knights
Michael van Maanen3
1 Resigned 16 February 2018.
2 Commenced 16 February 2018.
3 Commenced 28 May 2018.
Signed in accordance with a resolution of the Directors:
The Hon. Mark Vaile AO
Chairman
Dated at Sydney this 14th day of August 2018
98 | SECTION 8 FINANCIAL REPORT
AUDITOR’S INDEPENDENCE DECLARATION
Whitehaven Coal Annual Report 2018 | 99
FINANCIAL REPORT 8 100 | SECTION 8 FINANCIAL REPORT
FINANCIAL REPORT
For the year ended 30 June 2018
TABLE OF CONTENTS
Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
102
103
104
105
106
143
144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS INDEX
1.
ABOUT THIS REPORT
6. GROUP STRUCTURE
6.1 Acquisition of business
6.2 Group’s subsidiaries
6.3
Interest in joint operations
6.4 Parent entity information
6.5 Deed of cross guarantee
6.6 Related parties
7. OTHER NOTES
7.1 Employee benefits
7.2 Auditors’ remuneration
7.3 Commitments
7.4 Contingencies
7.5 Subsequent events
7.6 New accounting standards
and interpretations
2. GROUP PERFORMANCE
2.1 Segment reporting
2.2 Significant items
2.3 Taxes
2.4 Earnings per share
3. WORKING CAPITAL AND CASH FLOWS
3.1 Trade and other receivables
3.2
Inventories
3.3 Trade and other payables
3.4 Reconciliation of cash flows from
operating activities
4. RESOURCE ASSETS AND LIABILITIES
4.1 Property, plant and equipment
4.2 Exploration and evaluation
4.3
Intangible assets
4.4 Provisions
5. CAPITAL STRUCTURE AND FINANCING
5.1
Interest-bearing loans and borrowings
5.2 Finance income and expense
5.3 Financial risk management objectives and policies
5.4 Share capital and reserves
5.5 Share-based payments
Whitehaven Coal Annual Report 2018 | 101
FINANCIAL REPORT 8
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2018
Revenue
Other income
Operating expenses
Coal purchases
Selling and distribution expenses
Royalties
Depreciation and amortisation
Impairment of assets
Administrative expenses
Corporate development costs
Share-based payments expense
Foreign exchange gain / (loss)
Profit before net financial expense
Financial income
Financial expenses
Net financial expense
Profit before tax
Income tax expense
Net profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net movement on cash flow hedges
Income tax effect
Other comprehensive income for the period, net of tax
Total comprehensive income for the period, net of tax
Net profit / (loss) for the period attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive income / (loss) for the period, net of tax attributable to:
Owners of the parent
Non-controlling interests
Earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
NOTE
2.1
2.2
5.5(a)
5.2
2018
$’000
2017
$’000
2,257,446
1,773,242
6,767
7,698
(664,062)
(555,675)
(175,069)
(287,294)
(169,941)
(141,024)
–
(22,033)
(9,701)
(9,927)
4,141
(33,416)
(311,947)
(133,407)
(133,882)
(54,963)
(24,423)
–
(4,760)
(3,088)
789,303
525,379
1,600
(30,491)
(28,891)
1,409
(51,362)
(49,953)
760,412
475,426
2.3(a)
(234,836)
(70,059)
525,576
405,367
5.2
2.3(b)
5.2
(372)
112
(260)
2,618
(785)
1,833
525,316
407,200
525,576
406,445
–
(1,078)
525,316
408,278
–
(1,078)
2.4
2.4
53.2
52.2
41.2
40.7
The consolidated statement of comprehensive income is to be read in conjunction with the notes to the consolidated
financial statements.
102 | SECTION 8 FINANCIAL REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2018
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Total current assets
Trade and other receivables
Investments
Property, plant and equipment
Exploration and evaluation
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Trade and other payables
Interest bearing loans and borrowings
Employee benefits
Provisions
Derivative financial instruments
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax liability
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share-based payments reserve
Hedge reserve
Retained earnings
Equity attributable to owners of the parent
Non-controlling interest
Total equity
NOTE
3.1
3.2
5.3(d)
3.1
4.1
4.2
4.3
2.3(c)
3.3
5.1
7.1
4.4
5.3(e)
5.1
2.3(c)
4.4
2018
$’000
111,777
97,698
124,567
2,595
2017
$’000
87,138
113,278
99,144
2,413
336,637
301,973
11,732
37
10,853
37
3,550,890
3,442,467
508,552
22,200
–
156,781
22,200
32,729
4,093,411
3,665,067
4,430,048
3,967,040
223,984
166,054
35,137
22,560
6,136
1,136
23,560
20,071
5,188
582
288,953
215,455
347,083
374,715
201,995
102,201
651,279
940,232
–
84,574
459,289
674,744
3,489,816
3,292,296
5.4(a)
2,993,458
3,136,941
13,948
1,022
7,827
1,282
481,388
146,246
3,489,816
3,292,296
–
–
3,489,816
3,292,296
The consolidated statement of financial position is to be read in conjunction with the notes to the consolidated
financial statements.
Whitehaven Coal Annual Report 2018 | 103
FINANCIAL REPORT 8
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2018
Share
Based
Payment
Reserve
Issued
Capital
Hedge
Reserve
Retained
Earnings
Total
Non-
controlling
interest
Total
equity
NOTE
$’000
$’000
$’000
$’000
$’000
$’000
$’000
3,144,944
18,417
(551)
(275,172)
2,887,638
1,078
2,888,716
–
406,445
406,445
(1,078)
405,367
1,833
–
1,833
–
1,833
1,833
406,445
408,278
(1,078)
407,200
Opening balance
at 1 July 2016
Profit for the period
Other comprehensive income
Total comprehensive income for
the year
Transactions with owners
in their capacity as owners:
Share-based payments
5.5(a)
–
–
–
–
–
–
–
4,760
377
(1,170)
–
(14,180)
Transfer on exercise
of share-based payments
Transfer on lapse
of share-based payments
Purchase of shares through
employee share plan
Closing balance
at 30 June 2017
Opening balance
at 1 July 2017
Profit for the period
Other comprehensive income
Total comprehensive income for
the year
Transactions with owners
in their capacity as owners:
Dividends paid
Capital return
Transfer on exercise
of share-based payments
Transfer on lapse
of share-based payments
Purchase of shares through
employee share plan
Closing balance
at 30 June 2018
–
–
–
–
–
4,760
793
14,180
–
–
–
(8,380)
5.4(a)
(8,380)
–
3,136,941
7,827
1,282
146,246
3,292,296
3,136,941
7,827
1,282
146,246
3,292,296
–
–
–
–
(138,884)
–
–
–
–
–
6,188
(3,474)
–
–
(332)
5.4(a)
(10,787)
–
–
525,576
525,576
(260)
–
(260)
(260)
525,576
525,316
–
–
–
–
–
–
(188,052)
(188,052)
–
–
(138,884)
9,927
(2,714)
332
–
–
–
(10,787)
2,993,458
13,948
1,022
481,388
3,489,816
Share-based payments
5.5(a)
–
9,927
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,760
–
–
(8,380)
3,292,296
3,292,296
525,576
(260)
525,316
(188,052)
(138,884)
9,927
–
–
(10,787)
3,489,816
The consolidated statement of changes in equity is to be read in conjunction with the notes to the consolidated
financial statements.
104 | SECTION 8 FINANCIAL REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2018
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest paid
Interest received
NOTE
2018
$’000
2017
$’000
2,274,205
1,737,063
(1,420,191)
(1,081,737)
854,014
(24,132)
1,596
655,326
(49,087)
1,405
Net cash from operating activities
3.4
831,478
607,644
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Exploration and evaluation expenditure
Acquisition of joint venture interest, net of cash acquired
Acquisition of Winchester South
Net cash used in investing activities
Cash flows from financing activities
Purchase of shares
Proceeds from borrowings
Finance lease borrowings
Repayment of borrowings
Payment of finance facility upfront costs
Payment of finance lease borrowings
Payment of capital return to shareholders
Payment of dividends
Net cash used in financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
6.1
4.2
804
971
(143,258)
(89,462)
(9,589)
(20,214)
(277,564)
(5,161)
–
–
(449,821)
(93,652)
(10,787)
415,000
64,888
(8,380)
18,687
–
(476,907)
(519,299)
(8,695)
(13,581)
(138,884)
(188,052)
(607)
(18,708)
–
–
(357,018)
(528,307)
24,639
87,138
111,777
(14,315)
101,453
87,138
The consolidated statement of cash flows is to be read in conjunction with the notes to the consolidated financial statements.
Whitehaven Coal Annual Report 2018 | 105
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
1. ABOUT THIS REPORT
1.1 REPORTING ENTITY
Whitehaven Coal Limited (‘Whitehaven’ or ‘Company) is
a for-profit entity, and the principal activity of Whitehaven
and its controlled entities (referred to as the ‘Group’) is the
development and operation of coal mines in New South Wales.
The consolidated general purpose financial report of the
Group for the year ended 30 June 2018 was authorised for
issue in accordance with a resolution of the directors on
14 August 2018. Whitehaven Coal Limited is a company
limited by shares incorporated and domiciled in Australia
whose shares are publicly traded on the Australian Securities
Exchange. The address of the Company’s registered office
is Level 28, 259 George Street, Sydney NSW 2000.
1.2 BASIS OF PREPARATION
The financial report is a general purpose financial report, which
has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards (AAS)
and other authoritative pronouncements of the Australian
Accounting Standards Board (AASB). The financial report also
complies with International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board (IASB)
and interpretations of the International Financial Reporting
Interpretations Committee (IFRIC).
The financial report has been prepared on a historical cost
basis, except for derivative financial instruments that have
been measured at fair value (refer to note 5.3).
The Company is of a kind referred to in ASIC Corporations
Instrument 2016/191 and dated 24 March 2016 and in accordance
with that Class Order, all financial information has been presented
in Australian dollars and rounded to the nearest thousand
dollars unless otherwise stated.
1.3 SIGNIFICANT ACCOUNTING JUDGEMENTS,
ESTIMATES AND ASSUMPTIONS
In the process of applying the Group’s accounting policies,
management has made a number of judgements and applied
estimates of future events of which form the basis of the
carrying values of assets and liabilities that are not readily
apparent from other sources. Judgements and estimates
which are material to the financial report are found in the
following notes:
2.3
Taxes
4.1
Property, plant and equipment
4.2 Exploration and evaluation
4.4 Provisions
6.3
Group’s subsidiaries and
interests in joint operations
page 113
page 119
page 120
page 122
page 137
106 | SECTION 8 FINANCIAL REPORT
1.4 SUMMARY OF OTHER SIGNIFICANT
ACCOUNTING POLICIES
The accounting policies set out below, and in the notes, have
been applied consistently to all periods presented in these
consolidated financial statements and have been applied
consistently by all subsidiaries in the Group. Other significant
accounting policies are contained in the notes to the
consolidated financial statements to which they relate.
I.
BASIS OF CONSOLIDATION
The consolidated financial report of the Company for
the financial year ended 30 June 2018 comprises the
Company and its subsidiaries and the Group’s interest
in joint operations (together referred to as the ‘Group’).
II. FOREIGN CURRENCY TRANSLATION
Transactions in foreign currencies are initially recorded
in the functional currency by applying the exchange
rates ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies
are retranslated at the rate of exchange ruling at the
balance date. Foreign exchange differences arising on
translation are recognised in the consolidated statement
of comprehensive income.
Both the functional and presentation currency of the
Company and of all entities in the Group is Australian
dollars ($).
III. GOODS AND SERVICES TAX
Revenues, expenses and assets (excluding receivables)
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 consolidated statement of
financial position.
Cash flows are included in the consolidated statement of
cash flows on a gross basis and 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.
IV. NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
The notes to these consolidated financial statements
have been organised into logical groupings to present
more meaningful and dynamic information to users.
To the extent possible the relevant accounting policies
and numbers have been provided in the same note.
The Group has also reviewed the notes for materiality
and relevance and provided additional information where
considered material and relevant to the operations,
financial position and performance of the Group.
2. GROUP PERFORMANCE
2.1 SEGMENT REPORTING
IDENTIFICATION OF REPORTABLE SEGMENTS
The Group identifies its operating segments based on the internal reports that are reviewed and used by the executive
management team in assessing performance and in determining the allocation of resources. The performance of operating
segments is evaluated at least monthly based on revenues and profit before taxes and is measured in accordance with the
Group’s accounting policies.
The Group has determined that it has two reportable segments: Open Cut Operations and Underground Operations.
Unallocated operations includes coal trading, corporate, marketing and infrastructure functions which are managed
on a group basis and are not allocated to reportable segments.
The Group’s financing (including finance costs and finance income), depreciation and income taxes are managed on a group
basis and are not allocated to reportable segments.
The following table represents revenue and profit information for reportable segments:
YEAR ENDED 30 JUNE 2018
Revenue
Sales to external customers
Total segment revenue
Total revenue per consolidated statement of comprehensive income
Result
Segment result
Depreciation and amortisation
Income tax expense
Net finance expense
Open Cut
operations
Underground
operations
Unallocated
operations
$’000
$’000
$’000
1,582,505
1,582,505
507,199
507,199
167,742
167,742
701,476
224,242
4,609
Net profit after tax per consolidated statement of comprehensive income
Capital expenditure
Segment expenditure
Total
$’000
2,257,446
2,257,446
2,257,446
930,327
(141,024)
(234,836)
(28,891)
525,576
88,299
56,873
7,769
152,941
Whitehaven Coal Annual Report 2018 | 107
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
2. GROUP PERFORMANCE (CONT.)
2.1 SEGMENT REPORTING (CONT.)
YEAR ENDED 30 JUNE 2017
Revenue
Sales to external customers
Total segment revenue
Total revenue per consolidated statement of comprehensive income
Result
Segment result
Depreciation and amortisation
Income tax expense
Significant items before income tax and financing
(see note 2.2)
Net finance expense
Net profit after tax per consolidated statement of comprehensive income
Capital expenditure
Segment expenditure
Open Cut
operations
Underground
operations
Unallocated
operations
$’000
$’000
$’000
1,216,746
1,216,746
515,669
515,669
40,827
40,827
Total
$’000
1,773,242
1,773,242
1,773,242
484,042
238,031
(7,849)
714,224
(133,882)
(70,059)
(54,963)
(49,953)
405,367
19,926
54,609
17,279
91,814
REPORTABLE SEGMENTS 2018 ($’000)
Open Cut Operations
$88,299
Underground Operations
Unallocated Operations
$56,873
$7,769
TOTAL CAPITAL EXPENDITURE
$152,941
REPORTABLE SEGMENTS 2017 ($’000)
Open Cut Operations
$19,926
Underground Operations
Unallocated Operations
TOTAL CAPITAL EXPENDITURE
$54,609
$17,279
$91,814
2018/2017 Comparison
Capital
Expenditure
2017
2018
108 | SECTION 8 FINANCIAL REPORT
OTHER SEGMENT INFORMATION
Revenue from external customers is attributed to geographic location based on final shipping destination.
Revenue by geographic location
Japan
Taiwan
Korea
India
China
Malaysia
Indonesia
Vietnam
Philippines
Chile
Other
Domestic
Total revenue
2018
$’000
1,168,965
302,279
252,039
128,540
87,184
63,352
60,410
47,323
30,836
30,410
80,810
5,298
2017
$’000
921,048
185,686
148,010
171,474
108,952
39,972
24,382
31,427
12,241
44,729
79,578
5,743
2,257,446
1,773,242
2018/2017 Comparison
Revenue by
geographic location
2017
2018
2018/2017 Comparison
Revenue
by product
Revenue by product
Thermal
Metallurgical
2018
$’000
2017
$’000
1,816,270
1,326,931
441,176
446,311
Total revenue
2,257,446
1,773,242
2017
2018
Whitehaven Coal Annual Report 2018 | 109
FINANCIAL REPORT 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
2. GROUP PERFORMANCE (CONT.)
2.1 SEGMENT REPORTING (CONT.)
MAJOR CUSTOMERS
The Group has three major customers which account for 27.4% (2017: 30.5%) of external revenue.
RECOGNITION AND MEASUREMENT:
Revenue from the sale of coal is recognised and measured at the fair value of consideration received or receivable to the extent that:
i.
it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured
ii.
the significant risks and rewards of ownership have been transferred to the buyer, and
iii. transfer of risk and rewards are considered to have passed to the buyer under the terms of the individual contracts.
2.2 SIGNIFICANT ITEMS
The items below are significant to the understanding of the overall results of the consolidated group. The Company believes the
disclosure of these items provides readers of the financial statements with further meaningful insights to understand the financial
performance of the Group.
Included within the balances presented on the face of the Consolidated Statement of Comprehensive Income:
Impairment of assets:
Impairment of exploration and related assets1
Significant items before tax
Applicable income tax benefit
Recognition of unbooked tax losses2
Significant items after tax
2018
$’000
–
–
–
–
–
2017
$’000
(54,963)
(54,963)
16,490
76,672
38,199
1 During the year ended 30 June 2017, an impairment charge of $55m was recognised in respect of early-stage exploration assets. The impairment charge reflects
the Group’s current focus on Vickery and brownfield expansion opportunities. As a consequence, the development of early-stage exploration projects, although
prospective, is not imminent.
2 During the year ended 30 June 2017, the Group recognised a deferred tax asset in respect of previously unrecognised income tax losses. The recognition of these tax
losses was in accordance with the principles of AASB 112 Income taxes which requires the recognition of a deferred tax asset in respect of tax losses where sufficient
taxable temporary differences exist or utilisation of the income tax losses is probable in the foreseeable future.
110 | SECTION 8 FINANCIAL REPORT
2.3 TAXES
A.
INCOME TAX (EXPENSE)/BENEFIT
Current tax expense
Current period
Deferred tax benefit
Origination and reversal of temporary differences
Recognition of tax losses
2018
$’000
2017
$’000
(204,368)
(148,029)
(30,468)
–
1,298
76,672
Income tax expense reported in the consolidated statement of comprehensive income
(234,836)
(70,059)
Reconciliation between tax expense and profit before tax
Profit before tax
Income tax expense using the Company’s domestic tax rate of 30% (2017: 30%)
Non-deductible expenses:
Share-based payments
Other non-deductible expenses
Recognition of tax losses
Total income tax expense
B.
INCOME TAX RECOGNISED DIRECTLY IN OTHER COMPREHENSIVE INCOME
Deferred income tax related to items charged directly to equity
Derivatives
Income tax expense recorded in equity
760,412
475,426
(228,124)
(142,628)
(2,978)
(3,734)
–
(1,428)
(2,675)
76,672
(234,836)
(70,059)
112
112
(785)
(785)
Whitehaven Coal Annual Report 2018 | 111
FINANCIAL REPORT 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
2. GROUP PERFORMANCE (CONT.)
2.3 TAXES (CONT.)
C. RECOGNISED TAX ASSETS AND LIABILITIES
2018
2018
2017
2017
Current income tax
payable
Deferred
income tax
Current income tax
payable
Deferred
income tax
Opening balance
$’000
–
$’000
32,729
$’000
–
Charged to income – corporate tax
(204,368)
(30,468)
(148,029)
Charged to equity
–
112
–
$’000
103,573
1,298
(785)
(Utilisation) / recognition of deferred
tax asset on current year losses
Recognition of tax losses
Closing balance
204,368
(204,368)
148,029
(148,029)
–
–
–
(201,995)
–
–
76,672
32,729
Deferred income tax assets and liabilities are attributable to the following:
Property, plant and equipment
Exploration and evaluation
Receivables
Investments
Deferred stripping
Deferred foreign exchange gain
Provisions
Tax losses
Other items
Tax assets / (liabilities)
Set off of tax (liabilities) / assets
Net tax assets / (liabilities)
Assets
2018
$’000
–
7,954
–
358
–
–
37,093
100,361
3,892
149,658
(149,658)
–
2017
$’000
–
9,424
–
358
–
456
32,153
305,320
8,377
356,088
(323,359)
32,729
Liabilities
2018
$’000
2017
$’000
(343,115)
(319,062)
–
(1,275)
–
(6,430)
(833)
–
–
–
(351,653)
149,658
(201,995)
–
(1,998)
–
(2,299)
–
–
–
–
(323,359)
323,359
–
112 | SECTION 8 FINANCIAL REPORT
D. UNRECOGNISED DEFERRED TAX ASSETS
There were no unrecognised income tax losses at 30 June 2018 (2017: nil). During the prior year the Group recognised
a deferred tax asset of $76.7m in respect of previously unrecognised income tax losses at which point there were
no remaining unrecognised income tax losses for the Group.
RECOGNITION AND MEASUREMENT:
Income tax on the profit or loss for the year comprises current and
deferred tax. Income tax relating to items recognised directly in
other comprehensive income is recognised in other comprehensive
income and not in the net profit or loss for the year.
Current tax
Current tax assets and liabilities are measured at the amount
expected to be recovered or paid to the taxation authorities based
on the taxable income for the year, using tax rates enacted or
substantively enacted at the balance date.
Deferred tax
Deferred tax expense is the movement in the temporary differences
between the carrying amount of an asset or liability in the
consolidated statement of financial position and its tax base.
Deferred tax liabilities are recognised for all taxable temporary
differences. Deferred tax assets, including unused tax losses, are
recognised in relation to deductible temporary differences and
carried forward income tax losses only to the extent that it is
probable that sufficient future taxable profits will be available to
utilise them. Deferred tax assets and liabilities are not recognised
for taxable temporary differences that arise from goodwill or
from the initial recognition (other than in a business combination)
of assets and liabilities in a transaction that affects neither
accounting profit nor the taxable profit.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part
of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply in the period in which the liability is settled
or the asset is realised, based on tax rates and laws that have been
enacted or substantively enacted at the balance date.
Offsetting deferred tax balances
Deferred tax assets and liabilities are offset only if a legally
enforceable right exists to offset current tax assets and liabilities
and the deferred tax assets and liabilities relate to income taxes
levied by the same taxation authority on the same taxable entity.
Tax consolidation
Whitehaven Coal Limited and its wholly owned Australian resident
subsidiaries have formed a tax consolidated group with effect
from 29 May 2007 and are therefore taxed as a single entity from
that date. Whitehaven Coal Limited is the head entity of the tax
consolidated group. The entities within the tax consolidated group
have entered into a tax-sharing arrangement which provides
for 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.
The entities within the tax consolidated group have also entered
into a tax-funding agreement. The Group has applied the Group
allocation approach in determining the appropriate amount
of current taxes and deferred taxes to allocate to members of
the tax consolidated group. Under the terms of the tax-funding
arrangement Whitehaven Coal Limited and each of the entities
in the tax consolidated group have agreed to pay (or receive)
a tax equivalent payment to (or from) the head entity, based
on the current tax liability or current tax asset of the entity.
Whitehaven Coal Limited and the subsidiaries in the tax consolidated
group continue to account for their own current and deferred tax
amounts. The amounts are measured as if each entity in the tax
consolidated group continues to be a standalone tax payer in its own
right. The current tax balances are then transferred to Whitehaven
Coal Limited via intercompany balances.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Deferred tax assets, including those arising from unrecouped tax
losses, capital losses and temporary differences, are recognised
only where it is considered more likely than not that they will be
recovered, which is dependent on the generation of sufficient
future taxable profits.
Assumptions about the generation of future taxable profits depend
on management’s estimates of future cash flows. These depend on
estimates of future production and sales volumes, operating costs,
rehabilitation costs, capital expenditure, dividends and other
capital management transactions. Judgements are also required
about the application of income tax legislation. These judgements
and assumptions are subject to risk and uncertainty, hence there
is a possibility that changes in circumstances will alter expectations,
which may impact the amount of deferred tax assets and deferred
tax liabilities recognised on the consolidated statement of financial
position and the amount of other tax losses and temporary
differences not yet recognised which may require adjustment,
resulting in a corresponding credit or charge to the consolidated
statement of comprehensive income.
Whitehaven Coal Annual Report 2018 | 113
FINANCIAL REPORT 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
2. GROUP PERFORMANCE (CONT.)
2.4 EARNINGS PER SHARE
BASIC EARNINGS PER SHARE
The calculation of basic earnings per share is based on the profit attributable to ordinary shareholders and a weighted average
number of ordinary shares outstanding during the year calculated as follows:
Profit attributable to ordinary shareholders
Net profit attributable to ordinary shareholders ($‘000)
525,576
406,445
2018
2017
Weighted average number of ordinary shares
Issued ordinary shares at 1 July (‘000)
Effect of shares acquired during the year (‘000)
Weighted average number of ordinary shares at 30 June (‘000)
992,026
(3,667)
992,026
(5,959)
988,359
986,067
Basic earnings per share attributable to ordinary shareholders (cents)
53.2
41.2
DILUTED EARNINGS PER SHARE
The calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders and a weighted average
number of ordinary shares outstanding adjusted for the diluting impact of potential equity instruments calculated as follows:
Profit attributable to ordinary shareholders (diluted)
Net profit attributable to ordinary shareholders (diluted) ($’000)
525,576
406,445
2018
2017
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares (basic) (‘000)
Effect of share options / performance rights on issue (‘000)
Weighted average number of ordinary shares (diluted) (‘000)
988,359
17,604
1,005,963
986,067
12,902
998,969
Diluted earnings per share attributable to ordinary shareholders (cents)
52.2
40.7
114 | SECTION 8 FINANCIAL REPORT
3. WORKING CAPITAL AND CASH FLOWS
3.1 TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Other receivables and prepayments
Receivables due from joint operations
Non-current
Other receivables and prepayments
2018
$’000
51,705
32,397
13,596
97,698
2017
$’000
84,570
18,674
10,034
113,278
11,732
10,853
RECOGNITION AND MEASUREMENT:
Trade receivables, which generally have between five and 21 day terms, are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method, less any allowance for impairment. Recoverability of trade receivables is reviewed
on an ongoing basis.
3.2 INVENTORIES
Coal stocks1
Consumables and stores
1 Coal stocks include run of mine and product coal.
RECOGNITION AND MEASUREMENT:
99,435
25,132
124,567
73,671
25,473
99,144
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. Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the tonnes of
contained coal are based on assay data, and the estimated recovery percentage is based on the expected processing method. Stockpile
tonnages are verified by periodic surveys.
3.3 TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables and accruals
47,295
176,689
64,902
101,152
223,984
166,054
RECOGNITION AND MEASUREMENT:
Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost when goods and services are
received, whether or not billed to the Group, prior to the end of the reporting period. Due to their short-term nature they are not discounted.
The amounts are unsecured and are usually paid within 30 days of recognition.
Whitehaven Coal Annual Report 2018 | 115
FINANCIAL REPORT 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
3. WORKING CAPITAL AND CASH FLOWS (CONT.)
3.4 RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period
Adjustments for:
Depreciation and amortisation
Amortisation of deferred development costs
Development costs deferred
Write-off of finance facility upfront costs
Amortisation of finance facility upfront costs
Non cash interest income / (expense) accruals
Foreign exchange losses / (gain) unrealised
Write-off of assets
Unwinding of discounts on provisions
Share-based compensation payments
Gain on sale of non-current assets
Subtotal
Change in trade and other receivables
Change in inventories and deferred stripping
Change in trade and other payables
Change in provisions and employee benefits
Change in deferred taxes
Cash flows from operating activities
RECOGNITION AND MEASUREMENT:
NOTE
4.1
4.1
2.2
4.4
5.5(a)
2018
$’000
2017
$’000
525,576
405,367
141,024
37,835
133,882
55,389
(102,238)
(86,206)
841
2,082
1,365
(5,206)
–
2,182
9,927
(315)
613,073
15,829
(32,004)
(5,873)
5,538
234,915
831,478
1,194
5,999
(6,718)
4,571
54,963
1,882
4,760
(227)
574,856
(46,617)
(28,224)
35,066
2,504
70,059
607,644
Cash and cash equivalents comprise cash at bank and in hand and short term deposits. For the purpose of the consolidated statement
of cash flows, cash and cash equivalents is equal to the balance disclosed in the consolidated statement of financial position.
116 | SECTION 8 FINANCIAL REPORT
4. RESOURCE ASSETS AND LIABILITIES
4.1 PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED 30
JUNE 2018
Cost
Balance at
1 July 2017
Additions
Transfers
PPE acquired
as part of
Tarrawonga
acquistion
Disposals / mined
out panels
BALANCE AT 30
JUNE 2018
Freehold
land
Plant and
equipment
Leased
plant and
equipment
Mining
property and
development
Subtotal
Deferred
development
Deferred
stripping
Subtotal
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Total
$’000
171,921
850,732
90,019
2,857,382
3,970,054
404,777
1,107,888
1,512,665
5,482,719
10,306
36,243
65,178
36,243
147,970
102,238
415,188
517,426
665,396
(72,267)
–
–
–
2,115
(12,089)
–
–
–
72,267
–
28,609
30,724
–
–
–
–
–
149,014
149,014
179,738
–
(12,089)
(210,909)
–
(210,909)
(222,998)
109,960
877,001
155,197
2,994,501
4,136,659
296,106
1,672,090
1,968,196
6,104,855
Accumulated depreciation
Balance at
1 July 2017
Depreciation
charge for the
year
Disposals / mined
out panels
PPE acquired
as part of
Tarrawonga
acquisition
BALANCE
AT 30 JUNE
2018
Carrying amount
at 30 June 2018
–
–
–
–
–
(289,315)
(44,837)
(327,728)
(661,880)
(278,146)
(1,100,226)
(1,378,372)
(2,040,252)
(43,048)
(9,735)
(87,514)
(140,297)
(37,835)
(401,417)
(439,252)
(579,549)
11,580
(1,705)
–
–
–
11,580
210,909
–
210,909
222,489
(5,934)
(7,639)
–
(149,014)
(149,014)
(156,653)
(322,488)
(54,572)
(421,176)
(798,236)
(105,072)
(1,650,657)
(1,755,729)
(2,553,965)
109,960
554,513
100,625
2,573,325
3,338,423
191,034
21,433
212,467
3,550,890
Whitehaven Coal Annual Report 2018 | 117
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
4. RESOURCE ASSETS AND LIABILITIES (CONT.)
4.1 PROPERTY, PLANT AND EQUIPMENT (CONT.)
YEAR ENDED 30
JUNE 2017
Cost
Balance at
1 July 2016
Additions
Transfers
Transfer to
intangible assets
Revisions in
rehabilitation
assets
Disposals
BALANCE AT 30
JUNE 2017
Freehold
land
Plant and
equipment
Leased
plant and
equipment
Mining
property and
development
Subtotal
Deferred
development
Deferred
stripping
Subtotal
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Total
$’000
162,457
777,551
129,683
2,861,031
3,930,722
318,571
777,218
1,095,789
5,026,511
14,746
54,716
46
17,183
86,691
86,206
330,670
416,876
503,567
(5,282)
24,599
(2,501)
–
–
–
–
–
–
–
(19,317)
–
–
(2,501)
(1,515)
(1,515)
(3,633)
(39,710)
–
(43,343)
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,501)
(1,515)
(43,343)
171,921
850,732
90,019
2,857,382
3,970,054
404,777
1,107,888
1,512,665
5,482,719
Accumulated depreciation
Balance at
1 July 2016
Depreciation
charge for the
year
Disposals
BALANCE AT 30
JUNE 2017
Carrying amount
at
30 June 2017
–
–
–
–
(244,678)
(45,923)
(246,175)
(536,776)
(222,757)
(769,365)
(992,122)
(1,528,898)
(47,143)
(9,377)
(81,553)
(138,073)
(55,389)
(330,861)
(386,250)
(524,323)
2,506
10,463
–
12,969
–
–
–
12,969
(289,315)
(44,837)
(327,728)
(661,880)
(278,146)
(1,100,226)
(1,378,372)
(2,040,252)
171,921
561,417
45,182
2,529,654
3,308,174
126,631
7,662
134,293
3,442,467
RECOGNITION AND MEASUREMENT:
Property, plant and equipment
Property, plant and equipment are measured at cost less
accumulated depreciation and any accumulated impairment
losses. Cost includes expenditure that is directly attributable to the
acquisition of the items and costs incurred in bringing assets into
use. Costs of dismantling and site rehabilitation are also capitalised,
if the recognition criteria is met. Subsequent expenditure is
capitalised when it is probable that the future economic benefits
associated with the expenditure will flow to the Group.
Depreciation
Depreciation and amortisation is charged to the consolidated
statement of comprehensive income on a straight line basis at the
rates indicated below. Depreciation commences on assets when
it is deemed they are capable of operating in the manner intended
by management:
freehold land
–
– plant and equipment
–
– mining property and development, deferred
leased plant and equipment
not depreciated
2% – 50%
3% – 14%
units of production
development and deferred stripping
118 | SECTION 8 FINANCIAL REPORT
The residual value, the useful life and the depreciation method
applied to an asset are reassessed at least annually. Any changes
are accounted for prospectively.
When an asset is surplus to requirements or no longer has an
economic value, the carrying amount of the asset is written down
to its recoverable amount.
Mining property and development
Mining 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. After transfer, all subsequent mine
development expenditures is similarly capitalised, to the extent
that commercial viability conditions continued to be satisfied.
Biodiversity assets are included within mining property and
development and relate to land acquired and managed to fulfil the
biodiversity obligations associated with mine approval. The cost
of the land is capitalised as a mining, property and development
asset which is subsequently depreciated via the units of
production method.
Leased plant and equipment
Assets held under lease, which transfer to the Group substantially
all the risks and benefits incidental to ownership of the leased item,
are capitalised as property, plant and equipment at the inception
of the lease at the lower of the fair value of the leased asset or the
estimated present value of the minimum lease payments. Lease
assets are depreciated over the shorter of the estimated useful life
of the asset and the lease term.
The corresponding finance lease obligation is included within
interest bearing liabilities (refer to Note 5.1). Finance charges
are recognised as an expense in the consolidated statement of
comprehensive income over the lease term to reflect a constant
rate of interest over the remaining balance of the obligation.
Operating lease payments are recognised as an expense in the
consolidated statement of comprehensive income on a straight-line
basis over the lease term. Operating lease incentives are recognised as
a liability when received and subsequently reduced by allocating lease
payments between rental expense and a reduction of the liability.
Ongoing contracted commitments under financing and operating
leases are disclosed within Note 7.3.
Deferred development
Deferred development mainly comprises capitalised costs
(deferred development expenditure) related to underground
mining incurred to expand the capacity of an underground mine
and to maintain production.
Deferred stripping
Expenditure incurred to remove overburden or waste material
during the production phase of an open cut 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. The stripping activity asset is subsequently
depreciated on a units of production basis over the life of the
identified component of the ore body that became more accessible
as a result of the stripping activity.
For the purposes of assessing impairment, deferred stripping assets
are grouped with other assets of the relevant cash generating unit.
Impairment
The carrying amounts of the Group’s non-financial assets are
reviewed at each balance 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.
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’). The recoverable amount of an asset or cash-generating unit is
the greater of its value in use and its fair value less costs of disposal
(‘FVLCD’). In assessing FVLCD, 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.
An impairment loss is recognised whenever the carrying amount of
an asset or its cash-generating unit exceeds its recoverable amount.
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.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Recoverable amount of assets
The Group assesses at the end of each period, whether there is
any indication that an asset may be impaired. If any such indication
exists, the Group estimates the recoverable amount of the asset.
The determination of FVLCD for a CGU is considered to be a Level 3
fair value measurement, as they are derived from valuation techniques
that include inputs that are not based on observable market data.
The Group considers the inputs and the valuation approach to be
consistent with the approach taken by market participants.
The recoverable amounts of cash-generating units and individual
assets are determined based on the higher of value-in-use
calculations and FVLCD. These calculations require the use
of estimates and assumptions.
Expected future cash flows used to determine the FVLCD of
tangible assets are inherently uncertain and could materially
change over time. They are significantly affected by a number
of factors including reserves and production estimates, together
with economic factors such as spot and future coal prices,
discount rates, foreign currency exchange rates, estimates of
costs to produce reserves, stripping ratio, production rates and
future capital expenditure. It is reasonably possible that these
assumptions may change which may then impact the estimated
life of mine which could result in a material adjustment to the
carrying value of tangible assets.
Mineral reserves and resources
The estimated quantities of economically recoverable Reserves
and Resources are based upon interpretations of geological and
geophysical models and require assumptions to be made requiring
factors such as estimates of future operating performance, future
capital requirements and short-and long-term coal prices. The
Group is required to determine and report Reserves and Resources
under the Australian Code for Reporting Mineral Resources
and Ore Reserves December 2012 (the JORC Code). The JORC
Code requires the use of reasonable investment assumptions to
calculate reserves and resources. Changes in reported Reserves
and Resources can impact the carrying value of property, plant
and equipment, provision for rehabilitation as well as the amount
charged for amortisation and depreciation.
Whitehaven Coal Annual Report 2018 | 119
FINANCIAL REPORT 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
4. RESOURCE ASSETS AND LIABILITIES (CONT.)
4.2 EXPLORATION AND EVALUATION
Exploration and evaluation assets
Balance at 1 July 2017
Exploration and evaluation expenditure
Acquisition of Winchester South
Balance at 30 June 2018
Balance at 1 July 2016
Exploration and evaluation expenditure
Impairment
Balance at 30 June 2017
$’000
156,781
9,589
342,182
508,552
206,583
5,161
(54,963)
156,781
During the year ended 30 June 2018, the Group acquired a 100% interest in the Winchester South coking coal project
for total consideration of US$262.5 million (US$212.5 million paid on completion with US$50 million payable 12 months
post completion).
During the year ended 30 June 2017, an impairment charge of $55m was recognised in respect of early stage exploration assets,
which is not allocated to a segment. Exploration and evaluation assets are carried at cost. This value represents the Group’s view
of these assets. The impairment charge reflects the Group’s current focus on Vickery and brownfield expansion opportunities.
As a consequence, the development of early-stage exploration projects, although prospective, is not imminent.
Exploration and evaluation assets include tenements granted by the Queensland State Government which are subject
to periodic relinquishment requirements of up to 20% per year.
RECOGNITION AND MEASUREMENT:
Exploration and evaluation assets, including the costs of acquiring
licences, are capitalised on an area of interest basis and only after
the Company has obtained the legal rights to explore the area.
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.
ii.
sufficient data exists to determine technical feasibility and
commercial viability, and
facts and circumstances suggest that the carrying amount
exceeds the recoverable amount. For the purposes of
impairment testing, exploration and evaluation assets are
not allocated to cash-generating units.
Where a potential impairment is indicated, an assessment is
performed for each area of interest or at the CGU level, in line with
the assessment disclosed at note 4.1. To the extent that capitalised
expenditure is not expected to be recovered it is charged to the
consolidated statement of comprehensive income. 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 to mining property
and development assets within property, plant and equipment.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement in determining
whether future economic benefits are likely, which may be based on assumptions about future events or circumstances. Estimates
and assumptions made may change if new information becomes available. If, after expenditure is capitalised, information becomes
available indicating that the recovery of expenditure is unlikely, the amount capitalised is written off in the consolidated statement
of comprehensive income in the period when the new information becomes available. The recoverability of the carrying amount of
exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective
areas of interest.
120 | SECTION 8 FINANCIAL REPORT
4.3 INTANGIBLE ASSETS
Balance at 1 July 2017
Transfer from property, plant & equipment
Reimbursement of costs
Less: Amortisation charge
Balance at 30 June 2018
Balance at 1 July 2016
Transfer from property, plant & equipment
Reimbursement of costs
Less: Amortisation charge
Balance at 30 June 2017
Water access
rights
Rail access
rights1
$’000
11,082
–
–
–
11,082
8,581
2,501
–
–
11,082
$’000
11,118
–
–
–
11,118
11,237
–
(119)
–
11,118
Total
$’000
22,200
–
–
–
22,200
19,818
2,501
(119)
–
22,200
1 As part of the agreement to cancel previously existing infrastructure sharing arrangements, Whitehaven agreed to pay 10.1% of the construction cost of the shared
portion of the Boggabri – Maules Creek rail spur. In return, Whitehaven receives access to rail tonnes on the joint rail spur.
RECOGNITION AND MEASUREMENT:
Water access rights
Rail access rights
The Group holds water access rights, which have been determined
to have an indefinite life. The water access rights have been
recognised at cost and are assessed annually for impairment.
Rail access rights have a finite useful life and are carried at cost
less, where applicable, any accumulated amortisation and
accumulated impairment losses. Rail access rights are amortised
over the access agreement.
4.4 PROVISIONS
Balance at 1 July 2017
Provisions made during the period
Provisions used during the period
Acquisition of business
Unwind of discount
Balance at 30 June 2018
Current
Non-current
Balance at 30 June
Mine rehabilitation
and closure
$’000
89,762
7,627
–
8,766
2,182
Total
$’000
89,762
7,627
–
8,766
2,182
108,337
108,337
2018
$’000
6,136
102,201
108,337
2017
$’000
5,188
84,574
89,762
Whitehaven Coal Annual Report 2018 | 121
FINANCIAL REPORT 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
4. RESOURCE ASSETS AND LIABILITIES (CONT.)
4.4 PROVISIONS (CONT.)
RECOGNITION AND MEASUREMENT:
Provisions are recognised when:
–
–
–
the Group has a present legal or constructive obligation
as a result of a past event
it is probable that resources will be expended to settle
the obligation, and
the amount of the provision can be measured reliably.
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. The nature of rehabilitation activities includes
dismantling and removing operating facilities, re-contouring and
top soiling the mine, and restoration, reclamation and revegetation
of affected areas. 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 cash flows.
The obligation to rehabilitate arises at the commencement of the
mining project and/or when the environment is disturbed at the
mining location. At this point, the provision is recognised as
a liability with a corresponding asset included in mining property
and development assets. Additional disturbances or changes in
the rehabilitation costs are reflected in the present value of the
rehabilitation provision, with a corresponding change in the cost
of the associated asset. In the event the restoration provision is
reduced, the cost of the related asset is reduced by an amount
not exceeding its carrying value.
The unwinding of the effect of discounting the provision is
recorded as a finance cost in the consolidated statement of
comprehensive income. The carrying amount capitalised as
a part of mining, property and development is depreciated
over the useful life of the related asset.
For closed mines, changes to estimated costs are recognised
immediately in the consolidated statement of comprehensive
income.
The amount of the provision relating to rehabilitation of
environmental disturbance caused by on-going production
and extraction activities is recognised in the consolidated
statement of comprehensive income as incurred.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Significant estimates and assumptions are made in determining the provision for mine rehabilitation as there are numerous factors that will
affect the ultimate liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes,
regulatory changes, cost increases, and changes in discount rates. Those uncertainties may result in future actual expenditure differing from
the amounts currently provided. The provisions at balance date represent management’s best estimate of the present value of the future
rehabilitation costs required.
122 | SECTION 8 FINANCIAL REPORT
5. CAPITAL STRUCTURE AND FINANCING
5.1 INTEREST-BEARING LOANS AND BORROWINGS
Current liabilities
Finance lease liabilities
Secured loans
Capitalised borrowing costs
Non-current liabilities
Senior bank facility
Finance lease liabilities
Secured loans
Capitalised borrowing costs
Financing facilities
Facilities utilised at reporting date
Facilities not utilised at reporting date
2018
$’000
29,359
11,908
(6,130)
35,137
2017
$’000
17,682
11,908
(6,030)
23,560
275,000
325,000
56,982
28,353
(13,252)
347,083
382,220
17,353
40,261
(7,899)
374,715
398,275
1,126,602
1,187,204
401,602
412,204
725,000
775,000
FINANCING ACTIVITIES DURING THE FINANCIAL YEAR
During the current year the Group refinanced its senior bank facility provided by a syndicate of Australian and international
banks. The new facility is comprised of a $1.0 billion drawable revolver and a $0.2 billion guarantee facility. The new facility’s
$1.0 billion drawable line for credit is for general corporate purposes and has a maturity of July 2021.
During the current year $465 million of debt drawn under the senior bank facility was repaid (30 June 2017: $510 million) and
$415 million was redrawn (30 June 2017: nil). The group repaid $11.9 million of the ECA facility during the year (30 June 2017:
$9.3 million). The senior bank facility and the ECA facility are secured via a fixed and floating charge over majority of the
Group’s assets.
$64.9 million of finance leases was drawn down during the year (30 June 2017: nil). Finance lease liabilities are secured over the
leased assets to which they relate.
The fair values of interest bearing liabilities materially approximate their respective carrying values as at 30 June 2018 and
30 June 2017.
RECOGNITION AND MEASUREMENT:
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.
Whitehaven Coal Annual Report 2018 | 123
FINANCIAL REPORT 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
5. CAPITAL STRUCTURE AND FINANCING (CONT.)
5.2 FINANCE INCOME AND EXPENSE
Recognised in the statement of comprehensive income
Interest income
Financial income
Interest expense on finance lease liabilities
Interest on drawn debt facility
Other financing costs
Interest and financing costs
Net interest expense
Unwinding of discounts on provisions
Amortisation of finance facility upfront costs
Other financial expenses
Net financial expense
Recognised directly in equity
Net change in cash flow hedges
Income tax effect
Financial income recognised directly in other comprehensive, net of tax
2018
$’000
1,600
1,600
(1,943)
(6,696)
(14,699)
(23,338)
(21,738)
(2,182)
(4,971)
(7,153)
2017
$’000
1,409
1,409
(3,202)
(26,254)
(14,025)
(43,481)
(42,072)
(1,882)
(5,999)
(7,881)
(28,891)
(49,953)
(372)
112
(260)
2,618
(785)
1,833
RECOGNITION AND MEASUREMENT:
Finance income comprises interest income on funds invested and foreign currency gains. Interest income is recognised as it accrues,
using the effective interest method.
Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions, foreign currency losses in relation
to finance leases, 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 the Statement of
Comprehensive Income 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.
5.3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
A. OVERVIEW
B. CAPITAL MANAGEMENT
The Group’s overall risk management program seeks
to mitigate risks and reduce the volatility of the Group’s
financial performance. Financial risk management is carried
out centrally by the Group’s Audit & Risk Management
Committee under policies approved by the Board of
Directors. The Committee reports regularly to the Board on
its activities and also reviews policies and systems regularly
to reflect changes in market conditions and Group’s activities.
The Group’s principal financial risks are associated with:
– market risk
– credit risk
– liquidity risk.
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 Group defines capital
as total shareholders’ equity and debt. The Board manages its
capital structure and makes adjustments in light of changes
in economic conditions and the requirements of the financial
covenants. To maintain or adjust the capital structure, the
Group may adjust the dividend payment to shareholders, return
capital to shareholders or issue new shares. The Group monitors
capital using a gearing ratio, which is net debt divided by total
capital plus net debt.
There were no changes in the Group’s approach to capital
management during the year.
The Group’s gearing ratio is calculated as net debt divided by
total equity plus net debt.
124 | SECTION 8 FINANCIAL REPORT
CAPITAL MANAGEMENT
10
8
6
4
2
0
9%
7%
2018
2017
GEARING RATIO
COMPARISON (%)
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2018
2017
NET DEBT
COMPARISON
($’000)
Interest-bearing loans
and borrowings
2018
$’000
2017
$’000
382,220
398,275
Less: cash and cash equivalents
(111,777)
(87,138)
Net debt
Equity
270,443
311,137
3,489,816
3,292,296
Equity and net debt
3,760,259
3,603,433
Gearing ratio
7%
9%
C. RISK EXPOSURES AND RESPONSES
Market Risk – Foreign currency risk
The Group is exposed to currency risk on sales, purchases and demurrage that are denominated in a currency other than the
respective functional currency of the Group, the Australian dollar (AUD). The currency in which these transactions primarily are
denominated is US Dollars (USD).
The Group may use forward exchange contracts (FECs) to hedge its currency risk in relation to contracted sales where both volume
and US dollar price are fixed.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group 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.
During the current year ended 30 June 2018, a net foreign exchange gain of $4.1m was recognised (2017: net foreign exchange
loss of $3.6m).
The Group designates its forward exchange contracts in cash flow hedges and measures them at fair value.
The fair value of forward exchange contracts used as hedges at 30 June 2018 was $1.7m (2017: $2.4m), comprising assets and
liabilities that were recognised as derivatives.
At 30 June 2018, the Group had the following financial instruments that were not designated in cash flow hedges that were
exposed to foreign currency risk:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Net statement of financial position exposure
The following exchange rates applied during the year:
2018
$’000
USD
23,254
20,189
(10,010)
33,433
2017
$’000
USD
13,073
38,100
(9,506)
41,667
FIXED RATE INSTRUMENTS
USD
Average rate
Reporting date spot rate
2018
0.7753
2017
0.7545
2018
0.7391
2017
0.7662
Whitehaven Coal Annual Report 2018 | 125
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
5. CAPITAL STRUCTURE AND FINANCING (CONT.)
5.3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
C. RISK EXPOSURES AND RESPONSES (CONT.)
Market Risk – Foreign currency risk (CONT.)
Sensitivity analysis
A change in 10% of the Australian dollar against the following currencies at 30 June would have increased / (decreased) equity
and pre-tax profit or loss by the amounts shown below. The analysis assumes that all other variables, in particular interest
rates, remain constant. The analysis was performed on the same basis for 2017.
30 JUNE 2018
AUD:USD strengthening by 10%
AUD:USD weakening by 10%
30 JUNE 2017
AUD:USD strengthening by 10%
AUD:USD weakening by 10%
Market Risk – Interest rate risk
Equity
Profit or (loss)
$’000
$’000
(1,940)
2,368
7,559
(9,238)
(4,112)
5,026
(4,944)
6,042
The Group‘s borrowings comprise both variable and fixed rate instruments. The variable rate borrowings expose the Group
to a risk of changes in cash flows due to the changes in interest rates.
Management analyses interest rate exposure on an ongoing basis and uses interest rate swaps to mitigate interest rate risk.
At the reporting date the interest rate profile of the Group‘s interest-bearing financial instruments was:
FIXED RATE INSTRUMENTS
Finance lease liabilities
VARIABLE RATE INSTRUMENTS
Financial assets
Financial liabilities
Net exposure
Carrying amount
2018
$’000
(86,341)
(86,341)
2017
$’000
(35,035)
(35,035)
111,777
87,138
(315,261)
(377,169)
(203,484)
(290,031)
(289,825)
(325,066)
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 2017.
30 JUNE 2018
100bp increase
100bp decrease
30 JUNE 2017
100bp increase
100bp decrease
126 | SECTION 8 FINANCIAL REPORT
Equity
Profit or (loss)
$’000
$’000
122
(125)
302
(311)
(2,035)
2,035
(2,900)
2,900
Market Risk – Commodity price risk
The Group’s major commodity price exposure is to the price of coal. The Group has chosen not to hedge against the movement
in coal prices.
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade receivables, available
for sale financial assets, derivative financial instruments and the granting of financial guarantees. The Group‘s exposure to
credit risk arises from potential default of the counter party, with a maximum exposure equal to the carrying amount of the
financial assets, as outlined below.
Exposure to credit risk
The Group’s maximum exposure to credit risk at the reporting date was:
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Investments
NOTE
3.1
5.3(d)
Carrying amount
2018
$’000
111,777
51,705
2,595
37
2017
$’000
87,138
84,570
2,413
37
166,114
174,158
The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Asia
Europe
Australia
TRADE RECEIVABLES
45,169
5,398
1,138
51,705
74,041
8,925
1,604
84,570
The Group‘s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics
of the Group’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 27.4% of the Group’s revenue is attributable to sales transactions with three customers
(2017: 30.5% with three customers).
The Group trades only with recognised, creditworthy third parties and generally does not require collateral in respect
of trade receivables.
Receivable balances are monitored on an ongoing basis and as a result the exposure to bad debts is not significant.
The Group recognised an impairment loss for trade receivables of $nil during the year ended 30 June 2018 (2017: $nil).
The aging of the Group’s trade receivables at the reporting date was:
GROSS
Not past due
Past due 0–30 days
Past due 31–120 days
Past due 121 days to one year
More than one year
Guarantees
2018
$’000
44,334
4,105
3,266
–
–
2017
$’000
83,900
526
144
–
–
51,705
84,570
The policy of the Group is to provide financial guarantees for statutory bonding requirements associated with the mining
operations and other purposes such as security of leased premises. Guarantees are provided under the senior secured bank
facility and $60.2 million of secured bilateral bank guarantee facilities. Details of outstanding guarantees are provided in note 7.4.
Whitehaven Coal Annual Report 2018 | 127
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
5. CAPITAL STRUCTURE AND FINANCING (CONT.)
5.3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
C. RISK EXPOSURES AND RESPONSES (CONT.)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’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 Group’s reputation.
Typically, the Group ensures that it has 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.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the
impact of netting agreements:
30 June 2018
Carrying
amount
Contractual
cash flows
6 mths
or less
6–12 mths
1–2 years
2–5 years
More than
5 years
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Financial liabilities
Finance lease liabilities
86,341
96,138
26,107
6,769
13,537
49,725
Senior bank facility
275,000
275,000
–
–
–
275,000
–
–
Secured loans
40,261
44,282
6,788
6,645
12,885
11,227
6,737
Trade and other payables
223,984
223,984
223,984
–
Forward exchange contracts:
Outflow
Inflow
(16,138)
14,429
112,086
44,564
67,522
(108,289)
(43,671)
(64,618)
–
–
–
–
–
–
–
–
–
623,877
643,201
257,772
16,318
26,422
335,952
6,737
30 June 2017
Carrying
amount
Contractual
cash flows
6 mths
or less
6–12 mths
1–2 years
2–5 years
More than
5 years
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Financial liabilities
Finance lease liabilities
35,035
37,261
7,762
11,862
17,637
–
Senior bank facility
325,000
325,000
–
–
–
325,000
–
–
58,265
7,063
6,920
13,433
20,810
10,039
Secured loans
Trade and other payables
Forward exchange contracts:
52,169
166,054
166,054
166,054
Outflow
Inflow
80,267
83,225
83,225
(82,680)
(85,698)
(85,698)
–
–
–
–
–
–
–
–
–
–
–
–
575,845
584,107
178,406
18,782
31,070
345,810
10,039
128 | SECTION 8 FINANCIAL REPORT
D. NET FAIR VALUES
The Group complies with AASB 7 Financial Instruments: Disclosures which requires disclosure of fair value measurements
by level of the following fair value measurement hierarchy:
– Level 1 measurements based upon quoted prices (unadjusted) in active markets for identical assets or liabilities
– Level 2
measurements based upon inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (as prices) or indirectly (derived from prices), and
measurements based on inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
– Level 3
The Group held the following financial instruments carried at fair value in the consolidated statement of financial position:
Assets measured at fair value
Equity shares
Forward exchange contracts – receivable
Liabilities measured at fair value
Forward exchange contracts – payable
Interest rate swaps – payable
Assets measured at fair value
Equity shares
Forward exchange contracts – receivable
Liabilities measured at fair value
Forward exchange contracts – payable
Interest rate swaps – payable
30 June 2018
$’000
Level 1
$’000
Level 2
$’000
Level 3
$’000
37
2,595
2,632
(888)
(248)
(1,136)
–
–
–
–
–
–
–
2,595
2,595
(888)
(248)
(1,136)
37
–
37
–
–
–
30 June 2017
$’000
Level 1
$’000
Level 2
$’000
Level 3
$’000
37
2,413
2,450
–
(582)
(582)
–
–
–
–
–
–
–
2,413
2,413
–
(582)
(582)
37
–
37
–
–
–
The fair value of derivative financial instruments is derived using valuation techniques based on observable market inputs, such
as forward currency rates, at the end of the reporting period. The amounts disclosed in the consolidated statement of financial
position are the fair values and are classified under level 2 in the fair value measurement hierarchy.
The fair value of the Group’s investment in unlisted shares is classified under level 3 in the fair value measurement hierarchy.
The Group’s holding in unlisted shares is minor and any reasonably possible change in assumptions would not have a material
impact on the Group’s financial statements.
The carrying values of financial assets and financial liabilities recorded in the financial statements materially approximates their
respective net fair values, determined in accordance with the accounting policies disclosed in note 3.1, 3.3 and 5.1 to the
financial statements.
Whitehaven Coal Annual Report 2018 | 129
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
5. CAPITAL STRUCTURE AND FINANCING (CONT.)
5.3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT.)
E. FINANCIAL ASSETS AND LIABILITIES BY CATEGORIES
2018
Loans and
receivables1
NOTE
$’000
Financial assets
Cash and cash equivalents
Trade and other receivables
3.1
Investments
Other financial assets2
5.3(d)
Total financial assets
111,777
109,430
–
–
221,207
2017
Loans and
receivables1
$’000
87,138
124,131
–
–
211,269
Other2
$’000
–
–
37
2,595
2,632
Other2
$’000
–
–
37
2,413
2,450
1 Loans and receivables are non-derivatives with fixed or determinable payments and are not quoted on an active market. Loans and receivables are valued at
amortised cost.
2 Other financial assets include $2.6 million (2017: $2.4 million) relating to derivatives in designated hedges.
2018
2017
Loans at
amortised cost1
NOTE
$’000
3.3
5.1
5.3(d)
223,984
382,220
–
606,204
Other2
$’000
–
–
1,136
1,136
Loans at
amortised cost1
$’000
166,054
398,275
–
564,329
Other2
$’000
–
–
582
582
Financial liabilities
Trade and other payables
Borrowings
Other financial liabilities2
Total financial liabilities
1 Loans at amortised cost are non-derivatives with fixed or determinable payments and are not quoted on an active market. Loans and payables are valued
at amortised cost.
2 Other financial liabilities include $1.1 million (2017: $0.6 million) relating to derivatives in designated hedges.
F. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
Current interest-bearing liabilities
Current finance lease liabilities
1 July 2017
Cash flows
New leases
Other
30 June 2018
$’000
11,908
17,682
$’000
(11,908)
(13,581)
$’000
10,693
$’000
11,908
14,565
$’000
11,908
29,359
Non-current interest-bearing liabilities
365,261
(50,000)
(11,908)
303,353
Non-current finance leases liabilities
17,353
–
54,194
(14,565)
56,982
Total liabilities from financing activities
412,204
(75,489)
64,887
–
401,602
The ‘Other’ column indicates the effect of reclassification of non-current portion of interest-bearing loans and borrowings,
including obligations under finance leases to current due to the passage of time, and the effect of accrued but not yet paid
interest on interest-bearing loans and borrowings. The Group classifies interest paid as cash flows from operating activities.
130 | SECTION 8 FINANCIAL REPORT
RECOGNITION AND MEASUREMENT:
Derivative financial instruments
The Group uses derivative financial instruments to hedge
its risks associated with foreign currency and interest rate
fluctuations arising from operating activities. Derivative financial
instruments are initially recognised at fair value on the date on
which a derivative contract is entered into, and are subsequently
remeasured to fair value.
Cash flow hedges
Cash flow hedges are hedges of exposure to variability in cash
flows that is attributable to a particular risk associated with
forecast sales and purchases that could affect profit or loss.
Changes in the fair value of the hedging instrument designated as
a cash flow hedge are recognised directly in other comprehensive
income 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.
Amounts taken to other comprehensive income are transferred out
of other comprehensive income and included in the measurement
of the hedged transaction (coal sales and asset purchases) when
the forecast transaction occurs.
Each designated cash flow hedge is tested for hedge effectiveness
at each balance date, both retrospectively and prospectively, by
using the dollar offset method. If the testing falls within the 80:125
range, the hedge is considered to be highly effective and continues
to be designated as a cash flow hedge.
If the hedging instrument expires or is sold, terminated or exercised
without replacement or rollover, or if it no longer meets the
criteria for hedge accounting, hedge accounting is discontinued
prospectively. The cumulative gain or loss previously recognised
in other comprehensive income remains in other comprehensive
income until the forecast transaction occurs.
Economic hedges
Derivatives which do not qualify for hedge accounting are
measured at fair value with changes in fair value recognised
in statement of comprehensive income.
5.4 SHARE CAPITAL AND RESERVES
A. SHARE CAPITAL
2018
2017
NO. OF SHARES
$’000
NO. OF SHARES
$’000
Fully paid ordinary share capital
1,026,045,885
2,993,458
1,026,045,885
3,136,941
Ordinary share capital at the beginning of the period
1,026,045,885
3,136,941
1,026,045,885
3,144,944
Transfer of shares by share plan
Shares purchased by share plan
Capital return
–
–
–
6,188
(10,787)
(138,884)
–
–
–
377
(8,380)
–
Ordinary share capital at the end of the period
1,026,045,885
2,993,458
1,026,045,885
3,136,941
At 30 June 2018, a trust on behalf of the Company held 3,916,379 (30 June 2017: 5,669,939) ordinary fully paid shares in the Company. These were purchased during the
year for the purpose of allowing the Group to satisfy performance rights to certain management of the Group. Refer to Note 5.5 for further details on the performance
rights plan.
TERMS AND CONDITIONS OF ISSUED CAPITAL
Ordinary shares are classified as equity. Fully paid ordinary shares carry one vote per share, either in person or by proxy, at a
meeting of the Company and carry the right to receive dividends as declared. In the event of a winding up of the Company, fully
paid ordinary shares carry the right to participate in the proceeds from the sale of all surplus assets in proportion to the number
of and amounts paid up on shares held. Under the terms of the acquisition of Boardwalk Resources Limited, 34,020,000 ordinary
shares are subject to a restriction deed which removes their entitlement to vote, receive dividends as declared or participate
in the proceeds from the sale of all surplus assets. These restrictions will be released on reaching certain milestones.
Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from
equity, net of any related income tax benefit.
B. NATURE AND PURPOSE OF RESERVES
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.
Share-based payment reserve
The share-based payment reserve is used to record the value of share-based payments provided to director related entities
and senior employees under share option and long-term incentive plans. Refer to note 5.5 for further details of these plans.
Whitehaven Coal Annual Report 2018 | 131
FINANCIAL REPORT 8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
5. CAPITAL STRUCTURE AND FINANCING (CONT.)
5.4 SHARE CAPITAL AND RESERVES (CONT.)
C. DIVIDENDS
Dividends of $188,052,000 (2017: nil) and a capital return of $138,884,000 (2017: nil) were paid during the year ended
30 June 2018.
On the 14 August 2018 the Directors declared an unfranked dividend of 27 cents per share totalling $268 million to be paid
on 13 September 2018 and be comprised of a final dividend of 14 cents and a special dividend of 13 cents. The financial effect
of this dividend has not been brought to account in the financial statements for this period.
DIVIDEND FRANKING ACCOUNT
As at 30 June 2018 there were no franking credits available to shareholders of Whitehaven Coal Limited for subsequent financial
years (2017: nil).
5.5 SHARE-BASED PAYMENTS
A. RECOGNISED SHARE-BASED PAYMENT EXPENSES
EMPLOYEE EXPENSES
Share options and performance rights – senior employees
2018
$’000
9,927
2017
$’000
4,760
RECOGNITION AND MEASUREMENT:
The grant date fair value of options and performance rights 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. Once the
instruments have vested, no further expenses are recognised nor reserves reversed in respect to costs already charged. However, where the
share rights or options have lapsed after vesting the Group transfers the equivalent amount of the cumulative cost for the lapsed awards from
the share-based payments reserve to another component of equity.
B. TYPES OF SHARE-BASED PAYMENT PLANS
PERFORMANCE RIGHT AND OPTION GRANT TO CEO AND SENIOR EMPLOYEES
The Company issued performance rights and options to the CEO and senior employees under the Company’s medium
and long term incentive programs in FY2017 and FY2018. The terms and conditions of the grant are as follows.
PERFORMANCE
RIGHTS
NUMBER
OF INSTRUMENTS
VESTING AND
EXPIRATION DATE
NUMBER
OF INSTRUMENTS
VESTING AND
EXPIRATION DATE
FY2018
FY2017
MTI
LTI tranche 1
LTI tranche 2
LTI tranche 3
Total
OPTIONS
LTI tranche 1
LTI tranche 2
LTI tranche 3
Total
742,121
371,147
371,139
30 June 2020
30 June 2020
30 June 2021
1,460,547
836,056
836,045
30 June 2019
30 June 2019
30 June 2020
742,275
30 June 2020/211
1,672,090
30 June 2019/201
2,226,682
4,804,738
FY2018
FY2017
NUMBER OF
INSTRUMENTS
VESTING AND
EXPIRATION DATE
NUMBER OF
INSTRUMENTS
VESTING AND
EXPIRATION DATE
587,009
587,006
1,174,013
2,348,028
30 June 2020
30 June 2021
30 June 2020/211
1,360,181
1,360,175
2,720,351
5,440,707
30 June 2019
30 June 2020
30 June 2019/201
1 To the extent that the Costs Target Hurdle is satisfied at the end of FY2021, 50% of the Awards will vest and become exercisable immediately and the remaining 50%
will continue on foot, subject to a further one year service condition.
132 | SECTION 8 FINANCIAL REPORT
The performance rights and options are subject to a performance measure linked to relative total shareholder return (TSR) and
a costs hurdle. The TSR performance measure compares the TSR performance of the Company with the TSR performance of
a peer group of companies operating in the Australian resources sector. The costs hurdle performance measure relates to the
Company’s achieving a defined cost per tonne target. Detailed disclosures of LTI outcomes against the target are provided in the
Remuneration Report.
There were no MTI awards that were subject to testing in FY2018.
C. MOVEMENT IN OPTIONS AND PERFORMANCE RIGHTS
The following table illustrates the number and weighted average exercise prices of, and movements in, options and performance
rights during the year:
Outstanding at beginning of period
Exercised during the period
Granted during the period
Forfeited during the period
Lapsed during the period
Outstanding at 30 June
Exercisable at 30 June
Weighted
average exercise
price
Number of
options/rights
Weighted
average exercise
price
Number of
options/rights
2018
$0.30
$0.00
$1.10
$0.00
$0.00
$0.58
$0.00
2018
22,067,094
(4,542,478)
6,086,6821
(132,440)
(526,223)
22,952,635
328,083
2017
$1.76
$0.00
$0.58
$0.00
$3.92
$0.30
$0.00
2017
22,146,025
(977,608)
11,288,0162
(440,550)
(9,948,789)
22,067,094
466,804
1
2
Includes 1,011,972 performance rights granted during the year under the FY2017 STI scheme.
Includes 1,042,571 performance rights granted during the year under the FY2016 STI scheme.
The outstanding balance as at 30 June 2018 is represented by:
i. 5,440,707 options over ordinary shares having an exercise price of $1.21, exercisable between 30 June 2019 and
31 August 2021
ii. 2,348,028 options over ordinary shares having an exercise price of $2.85, exercisable between 30 June 2020 and
27 October 2022
iii. 1,748,118 performance rights over ordinary shares having an exercise price of nil, exercisable on 14 August 2018
iv. 4,578,052 performance rights over ordinary shares having an exercise price of nil, exercisable between 14 August 2018
and 13 August 2025
v. 5,099,076 performance rights over ordinary shares having an exercise price of nil, exercisable between 14 August 2018
and 31 August 2026
vi. 3,738,654 performance rights over ordinary shares having an exercise price of nil, exercisable between 14 August 2018
and 27 October 2027.
No share options were exercised during the year ended 30 June 2018 (2017: nil).
The weighted average remaining contractual life of share options and performance rights outstanding at 30 June 2018
is 4.6 years (2017: 3.7 years).
Whitehaven Coal Annual Report 2018 | 133
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
5. CAPITAL STRUCTURE AND FINANCING (CONT.)
5.5 SHARE-BASED PAYMENTS (CONT.)
D. OPTION PRICING MODELS
The fair value of performance rights granted under the LTI program with a TSR performance hurdle is measured using a Monte
Carlo Simulation model incorporating the probability of the performance hurdles being met. The fair value of performance
rights with the non-market performance hurdle (costs target) is measured using the Black-Scholes option pricing formula.
The fair value of options with a TSR performance hurdle and non-market performance hurdle is measured using a combination
of the Monte Carlo Simulation model and Binomial Option Pricing methods.
The following table lists the inputs to the models used for the years ended 30 June 2018 and 30 June 2017:
FY2018
Performance
hurdle
MTI
TSR
MTI
Cost
Rights
LTI
TSR
LTI
TSR
LTI
Cost
LTI
Cost
LTI
TSR
LTI
TSR
LTI
LTI
Cost
Cost
Options
Grant date
27 Oct 17
27 Oct 17
27 Oct 17
27 Oct 17
27 Oct 17
27 Oct 17
27 Oct 17
27 Oct 17
27 Oct 17
27 Oct 17
Vesting date
30 Jun 20 30 Jun 20 30 Jun 20
30 Jun 21
30 Jun 20
30 Jun 21
30 Jun 20
30 Jun 21 30 Jun 20
30 Jun 21
Fair value at
grant date
$2.43
$3.65
$2.43
$2.50
$3.65
$3.65
$0.61
$0.61
$0.72
$0.69
Share price
$3.65
$3.65
$3.65
$3.65
$3.65
$3.65
$3.65
$3.65
$3.65
$3.65
Exercise price
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$2.85
$2.85
$2.85
$2.85
Expected
volatility
Performance
Right life
Expected
dividends
Risk-free interest
rate
30%
30%
30%
30%
30%
30%
30%
30%
30%
30%
10 years
10 years
10 years
10 years
10 years
10 years
4 years
5 years
4 years
5 years
8.34%
8.34%
8.34%
8.34%
8.34%
8.34%
8.34%
8.34%
8.34%
8.34%
2.0%
2.0%
2.0%
2.1%
2.0%
2.1%
2.0%
2.1%
2.0%
2.1%
FY2017
Performance
hurdle
MTI
TSR
MTI
Cost
Rights
LTI
TSR
LTI
TSR
LTI
Cost
LTI
Cost
LTI
TSR
LTI
TSR
LTI
LTI
Cost
Cost
Options
Grant date
17 Mar 17
17 Mar 17
17 Mar 17
17 Mar 17
17 Mar 17
17 Mar 17
17 Mar 17
17 Mar 17
17 Mar 17
17 Mar 17
Vesting date
30 Jun 19
30 Jun 19
30 Jun 19
30 Jun 20
30 Jun 19
30 Jun 20
30 Jun 19 30 Jun 20
30 Jun 19 30 Jun 20
Fair value at
grant date
$2.31
$2.56
$2.31
$2.20
$2.56
$2.46
$1.58
$1.56
$1.64
$1.60
Share price
$2.760
$2.760
$2.760
$2.760
$2.760
$2.760
$2.760
$2.760
$2.760
$2.760
Exercise price
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$1.21
$1.21
$1.21
$1.21
Expected
volatility
Performance
Right life
Expected
dividends
Risk-free interest
rate
60%
60%
60%
60%
60%
60%
60%
60%
60%
60%
10 years
10 years
10 years
10 years
10 years
10 years
5 years
5 years
5 years
5 years
3.84%
3.84%
3.84%
3.84%
3.84%
3.84%
3.84%
3.84%
3.84%
3.84%
1.9%
1.9%
2.0%
2.2%
2.0%
2.2%
2.0%
2.2%
2.0%
2.2%
All shared-based payments are equity settled.
134 | SECTION 8 FINANCIAL REPORT
6. GROUP STRUCTURE
6.1 ACQUISITION OF BUSINESS
ACQUISITIONS IN THE YEAR ENDED 30 JUNE 2018
On 30 April 2018, the Group acquired 30% interest in the Tarrawonga Coal Project Joint Venture from Idemitsu, of which the
Group already owns 70%. Details of the purchase consideration, the net assets acquired and the impact of the acquisition
on the Group are as follows:
A. PURCHASE CONSIDERATION:
Cash consideration
Total consideration
Less: cash acquired as part of the acquisition
Net cash flow on acquisition
$’000
21,512
21,512
(1,298)
20,214
B. ASSETS ACQUIRED AND LIABILITIES ASSUMED:
The fair values of the identifiable assets and liabilities of the 30% share in the Tarrawonga Coal Project Joint Venture at the date
of acquisition were as follows:
Assets
Cash and cash equivalents
Trade and other receivables
Inventory
Property, plant and equipment
Liabilities
Trade and other payables
Provision for decommissioning costs
Total identifiable net assets at fair value
Fair value
recognised on
acquisition
$’000
1,298
3,147
7,921
23,085
35,451
(5,173)
(8,766)
(13,939)
21,512
C.
IMPACT OF THE ACQUISITION ON THE RESULTS OF THE GROUP
From the date of acquisition, the 30% share in the Tarrawonga Coal Project Joint Venture contributed $12,831,000 of revenue
and $4,808,000 to profit before tax of the Group as disclosed in the consolidated statement of comprehensive income for the
year ended 30 June 2018.
Whitehaven Coal Annual Report 2018 | 135
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
6. GROUP STRUCTURE (CONT.)
6.2 GROUP’S SUBSIDIARIES
The below is a list of the Group’s subsidiaries, all of which are incorporated in Australia, unless otherwise noted:
Ownership interest
2018
2017
Ownership interest
2018
2017
PARENT ENTITY
Whitehaven Coal Limited
SUBSIDIARIES
Whitehaven Coal Mining Limited1
Namoi Mining Pty Ltd1
Namoi Agriculture & Mining Pty Ltd
Betalpha Pty Ltd1
Betalpha Unit Trust
Tarrawonga Coal Pty Ltd1
Whitehaven Coal Holdings Pty Ltd1
Whitehaven Coal Infrastructure Pty Ltd1
Narrabri Coal Pty Ltd1
Narrabri Coal Operations Pty Ltd1
Narrabri Coal Sales Pty Ltd1
Creek Resources Pty Ltd1
Werris Creek Coal Sales Pty Ltd1
Werris Creek Coal Pty Ltd1
WC Contract Hauling Pty Ltd1
Whitehaven Blackjack Pty Ltd1
Whitehaven Project Pty Ltd1
Whitehaven Employee Share Plan Pty Ltd1
Aston Resources Limited1
Aston Coal 2 Pty Ltd1
Aston Coal 3 Pty Ltd1
Maules Creek Coal Pty Ltd1
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100% Boardwalk Resources Limited1
100% Boardwalk Coal Management Pty Ltd1
100% Boardwalk Coal Marketing Pty Ltd1
100% Boardwalk Sienna Pty Ltd1
100% Boardwalk Monto Pty Ltd1
100% Boardwalk Dingo Pty Ltd1
100% Boardwalk Ferndale Pty Ltd1
100% Coalworks Limited1
100% Yarrawa Coal Pty Ltd1
100% Loyal Coal Pty Ltd
100% Ferndale Coal Pty Ltd
100% Coalworks (Oaklands North) Pty Ltd1
100% CWK Nominees Pty Ltd1
100% Oaklands Land Pty Ltd1
100% Coalworks (Vickery South) Pty Ltd1
100% Coalworks Vickery South Operations Pty Ltd1
100% Vickery South Marketing Pty Ltd1
100% Vickery South Operations Pty Ltd1
100% Vickery Pty Ltd1
100% Winchester South WS Pty Ltd
100% Winchester South Coal Operations Pty Ltd
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
92.5%
92.5%
92.5%
92.5%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
1 These subsidiaries entered into a Class Instrument 2016/785 dated 28 September 2016 and related deed of cross guarantee with Whitehaven Coal Limited.
Refer to Note 6.5 for further information.
RECOGNITION AND MEASUREMENT:
Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed to, or has rights to, variable returns from its
involvement with an entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date on which control commences until that control ceases. All intercompany
balances and transactions have been eliminated in preparing the consolidated financial statements.
136 | SECTION 8 FINANCIAL REPORT
6.3 INTEREST IN JOINT OPERATIONS
The Group has interests in the following joint operations which are proportionately consolidated in the consolidated
financial statements:
Tarrawonga Coal Project Joint Venture1,2
Narrabri Coal Joint Venture2
Maules Creek Joint Venture2
Dingo Joint Venture2
Ferndale Joint Venture2
Boggabri-Maules Creek Rail Spur Joint Venture2
Tarrawonga Coal Sales Pty Ltd1,3
Maules Creek Marketing Pty Ltd3
Boggabri-Maules Creek Rail Pty Ltd3
COUNTRY OF INCORPORATION
Australia
Australia
Australia
Ownership interest
and voting rights
2018
100%1
70%
75%
70%
92.5%
39%
100%1
75%
39%
2017
70%
70%
75%
70%
92.5%
39%
70%
75%
39%
1 During the financial year ended 30 June 2018 the Group acquired Idemitsu’s 30% interest in the Tarrawonga Coal project Joint Venture. Refer to note 6.1.
2 These entities have been classified as joint operations under AASB11 Joint Arrangements, as these joint arrangements are not structured through separate vehicles.
3 The joint operations above operate as the sales and marketing vehicles or manager of the related unincorporated joint operations and require joint consent from all joint
venture partners on all significant management and financial decisions. The group recognises its share of assets, liabilities, revenues and expenses of the above entities
as joint operations under AASB11 Joint Arrangements.
RECOGNITION AND MEASUREMENT:
Joint arrangements are arrangements in which two or more parties have joint control. Joint control is the contractually agreed sharing of
control over an arrangement, which exists only when decisions about relevant strategic and/or key operating decisions require unanimous
consent of the parties sharing control. The Group recognises its interest in jointly controlled operations by recognising its share in the assets
and liabilities of the joint operation. The Group also recognises the expenses it incurs and its share of the income that
it earns from the sale of goods or services by the joint operation.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The Group assesses whether it has the power to direct the relevant activities of the investee by considering the rights it holds with respect
to the work programme and budget approval, investment decision approval, voting rights in joint operating committees and changes to joint
arrangement participant holdings. Where the Group has joint control, judgement is also required to assess whether the arrangement is a joint
operation or a joint venture.
6.4 PARENT ENTITY INFORMATION
INFORMATION RELATING TO WHITEHAVEN COAL LIMITED:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Retained earnings
Share-based payments reserve
Total shareholders’ equity
Profit of the parent entity
Total comprehensive income of the parent entity
Company
2018
$’000
359,623
20171
$’000
86,510
3,484,062
3,416,036
–
–
3,136,412
333,702
13,948
–
–
3,275,296
132,913
7,827
3,484,062
3,416,036
391,780
391,780
92,661
92,661
1 The comparative period has been restated to reclassify intercompany receivables from ‘Current liabilities’ to ‘Current assets’ and to reclassify net deferred tax balances
to ‘Total assets’. Prior year comparatives have been adjusted to reflect the reversal of prior period impairments in subsidiaries not previously recognised during the year
ended 30 June 2016.
Whitehaven Coal Annual Report 2018 | 137
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
6. GROUP STRUCTURE (CONT.)
6.5 DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations Instrument 2016/785 dated 28 September 2016, the wholly owned subsidiaries listed
in Note 6.2 (refer footnote 1) are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement
of financial reports, and directors’ reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee
(the ‘Deed’). 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 Corporations Act 2001, 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 Company and each of the relevant subsidiaries entered into the deed on 27 June 2008 with subsequent assumption deeds
entered into on 27 June 2012 and 25 June 2013.
The following consolidated statement of comprehensive income and statement of financial position comprises the Company
and its controlled entities which are party to the Deed of Cross Guarantee (the ‘Closed Group’) after eliminating all transactions
between parties to the Deed.
STATEMENT OF COMPREHENSIVE INCOME
Profit before tax
Income tax expense
Profit after tax
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net movement on cash flow hedges
Income tax effect
Other comprehensive income for the period, net of tax
Total comprehensive income for the period, net of tax
STATEMENT OF FINANCIAL POSITION
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Total current assets
Trade and other receivables
Investments
Property, plant and equipment
Exploration and evaluation
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
138 | SECTION 8 FINANCIAL REPORT
Closed group
2018
$’000
760,412
(234,836)
2017
$’000
471,271
(68,811)
525,576
402,460
(373)
112
(261)
2,618
(785)
1,833
525,315
404,293
111,653
377,173
124,567
2,595
87,014
114,883
99,144
2,413
615,988
303,454
11,732
37
10,853
37
3,550,593
3,442,170
166,331
22,200
–
156,781
22,200
33,976
3,750,893
3,666,017
4,366,881
3,969,471
STATEMENT OF FINANCIAL POSITION
Liabilities
Trade and other payables
Interest-bearing loans and borrowings
Employee benefits
Provisions
Derivative financial instruments
Total current liabilities
Non-current liabilities
Interest-bearing loans and borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Issued capital
Share-based payments reserve
Hedge reserve
Retained earnings
Equity
6.6 RELATED PARTIES
COMPENSATION TO EXECUTIVE KMP AND NON-EXECUTIVE DIRECTORS OF THE GROUP
Short-term employee benefits
Contributions to superannuation plans
Share-based compensation payments
Total compensation
7. OTHER NOTES
7.1 EMPLOYEE BENEFITS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Wages and salaries
Contributions to superannuation plans
Other associated personnel expenses
Increase in liability for annual leave
Increase / (decrease) in liability for long-service leave
Share-based compensation payments1
Closed group
2018
$’000
157,763
35,137
22,560
6,136
1,136
2017
$’000
164,454
23,560
20,071
5,188
582
222,732
213,855
347,083
374,715
201,995
102,201
651,279
874,011
–
84,572
459,287
673,142
3,492,870
3,296,329
2,990,954
3,134,437
13,948
1,022
7,827
1,282
486,946
152,783
3,492,870
3,296,329
2018
$’000
7,479
233
7,767
15,479
2018
$’000
153,966
10,019
6,251
1,713
162
9,927
182,038
2017
$’000
8,974
273
2,681
11,928
2017
$’000
143,325
9,272
4,530
2,382
(115)
4,760
164,154
Whitehaven Coal Annual Report 2018 | 139
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
7. OTHER NOTES (CONT.)
7.1 EMPLOYEE BENEFITS (CONT.)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Salaries and wages accrued
Liability for long-service leave
Liability for annual leave
2018
$
7,007
431
15,122
22,560
2017
$
6,393
269
13,409
20,071
RECOGNITION AND MEASUREMENT:
Wages, salaries, annual leave and sick leave
Long-term service benefits
Liabilities for wages, salaries, annual leave and sick
leave are recognised in respect of employees’ services
up to the reporting date. They are measured at the
amounts expected to be paid when the liabilities are
settled i.e. at undiscounted amounts based on remuneration
wage and salary rates including related on-costs, such
as workers compensation insurance and payroll tax.
Liabilities for long-service leave and other long-term benefits are
recognised and measured at the present value of the estimated
future cash outflows resulting from employees’ services provided
up to the reporting date. Long-term benefits not expected to be
settled within 12 months are discounted using the rates attached
to the high quality corporate bonds at the reporting date, which
most closely match the maturwity dates of the related liability.
Defined contribution superannuation funds
Obligations for contributions to defined contribution
superannuation funds are recognised as an expense in the
consolidated statement of comprehensive income as incurred.
7.2 AUDITOR’S REMUNERATION
Auditors of the Company – Ernst & Young
Assurance services:
Audit and review of statutory financial statements current year
Audit of joint operations
Other assurance services:
Non-statutory assurance services
Review of National Greenhouse Energy Reporting Act requirements
Total assurance services
Non-audit services:
Auditors of the Company – Ernst & Young
Taxation services
Due diligence services
Other non-audit services
7.3 COMMITMENTS
A. CAPITAL EXPENDITURE COMMITMENTS
Plant and equipment and intangibles
Contracted for but not provided for and payable:
Within one year1
1 There were no commitments for capital expenditure beyond one year.
140 | SECTION 8 FINANCIAL REPORT
2018
$
2017
$
551,000
522,000
314,000
298,000
865,000
820,000
98,954
58,568
157,522
1,022,522
63,978
836,881
71,226
972,085
–
56,451
56,451
876,451
20,000
–
66,100
86,100
2018
$’000
2017
$’000
13,081
13,151
B. OPERATING LEASE COMMITMENTS
The Group leases mining equipment, office equipment and office space under operating leases. The leases typically run for
one to five years on commercial terms. None of the leases includes contingent rentals. The operating lease expenses recognised
in the statement of comprehensive income in the current year amounted to $58,611,000 (2017: $48,575,000).
Future minimum rentals payable under non-cancellable operating leases as at 30 June 2018 are as follows:
Less than one year
Between one and five years
More than five years
2018
$’000
75,665
121,315
49,012
2017
$’000
55,306
130,712
–
245,992
186,018
C. FINANCE LEASE COMMITMENTS
Finance leases relate to property, plant and equipment with lease terms of between one to five years. At 30 June 2018,
the Group’s finance lease liabilities are secured by the leased assets of $100,625,000 (2017: $45,182,000), as in the event
of a default, ownership of the leased assets reverts to the lessor.
Within one year
Between one and five years
Minimum lease payments
Future finance charges
Total lease liabilities
Included in the financial statements in note 5.1 as:
Current borrowings
Non-current borrowings
7.4 CONTINGENCIES
A. BANK GUARANTEES
The Group provided bank guarantees to
i. Government departments as a condition of continuation of mining and exploration licenses
ii. Rail capacity providers
iii. Port capacity providers
iv. Electricity network access supplier
vi. Other
B. LITIGATION
2018
$’000
32,888
63,262
96,150
(9,809)
86,341
29,359
56,982
86,341
2018
$’000
153,297
30,503
104,240
24,522
2,629
315,191
2017
$’000
19,625
17,636
37,261
(2,226)
35,035
17,682
17,353
35,035
2017
$’000
118,907
30,503
97,163
25,511
3,195
275,279
There is a number of legal and potential claims against the Group which have arisen in the ordinary course of business. As the Group
believes that it has no liability for such matters, a provision has not been made for any potential adverse outcome. The Group will defend
these claims and believes that any adverse outcome would not be material based on information currently available to the Group.
C. BIODIVERSITY OBLIGATIONS
Under the terms of its mining licenses, the Group is required to comply with certain biodiversity obligations. There are various options
available to the Group to perform or settle its obligations. The Group will continue to assess estimates of these obligations as further
developments occur, however based on current estimates these obligations are not financially significant to the Group.
Whitehaven Coal Annual Report 2018 | 141
FINANCIAL REPORT 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2018
7. OTHER NOTES (CONT.)
7.5 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
Group, the results of those operations, or the state of affairs of the Group, in future financial years, other than the following:
Subsequent to the end of the financial period, the Directors have proposed a 27 cent per share unfranked dividend to be paid on
13 September 2018 and be comprised of a final dividend of 14 cents and a special dividend of 13 cents.
7.6 NEW ACCOUNTING STANDARDS AND INTERPRETATIONS
I. CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those of the
previous financial year, except for the adoption of new standards and interpretations effective as of 1 July 2017.
Several amendments apply for the first time in the current year. However, they do not impact the annual consolidated financial
statements of the Group.
II. ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective,
which are applicable to the Group, are outlined below:
AASB 9 FINANCIAL INSTRUMENTS
A finalised version of AASB 9 has been issued which contains accounting requirements for financial instruments, replacing
AASB 139 Financial Instruments: Recognition and Measurement. The standard contains requirements in the areas of
classification and measurement, impairment, hedge accounting and derecognition. The Group has determined that the impact
of the new standard on the Group’s financial report will be immaterial. This standard applies to annual reporting periods
beginning on or after 1 January 2018 and will be applicable for the Group for the annual reporting period beginning 1 July 2018.
AASB 15 REVENUE FROM CONTRACTS WITH CUSTOMERS
The core principle of AASB 15 is that an entity recognises revenue in accordance with the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. New disclosures about revenue are also introduced. The Group has undertaken a comprehensive
analysis of the impact of the new standard in order to determine how the contractual terms of the Group’s principle revenue
streams should be treated under AASB 15. As the majority of the Group’s revenue is derived from the sale of coal in which
the transfer of risks and rewards, under current accounting, occurs at the same time as the transfer of control under AASB
15, it is expected that there will be no material changes in respect of the timing and amount of revenue currently recognised
by the Group. This standard applies to annual reporting periods beginning on or after 1 January 2018 and will be applicable
for the Group for the annual reporting period beginning 1 July 2018.
AASB 16 LEASES
AASB 16 provides a new lessee accounting model which requires a lessee to recognise assets and liabilities for all leases
with a term of more than 12 months, unless the underlying asset is of low value. A lessee measures right-of-use assets
similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. At the commencement date
of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the
right to use the underlying asset during the lease term (i.e., the right-of-use asset). Assets and liabilities arising from a
lease are initially measured on a present-value basis. The measurement includes non-cancellable lease payments (including
inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain
to exercise an option to extend the lease, or not to exercise an option to terminate the lease. AASB 16 also contains new
disclosure requirements for lessees. This standard applies to annual reporting periods beginning on or after 1 January 2019
however the Group intends to early adopt this Standard and apply for the annual reporting period beginning 1 July 2018
using the full retrospective method. The Group has undertaken a comprehensive analysis of all current contracts within
the Group and determined their eligibility to be classified as a lease under AASB 16. It is expected that upon adoption
of AASB 16, the impact of the new standard on the Group’s financial statements will be an increase in lease liabilities of
approximately $200 million and a corresponding increase in property, plant and equipment for the right of use asset of
approximately $190 million being recognised on the statement of financial position (pre-tax at 1 July 2018). This will be
unwound and amortised to the statement of comprehensive income over the remaining term of the leases.
142 | SECTION 8 FINANCIAL REPORT
DIRECTORS’ DECLARATION
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Whitehaven Coal Limited, I state that:
In the opinion of the Directors:
a. the financial statements and notes of Whitehaven Coal Limited are in accordance with the
Corporations Act 2001, including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018
and of its 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 statements and notes also comply with International Financial Reporting
Standards as disclosed in note 1, 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
d. this declaration has been made after receiving the declarations required to be made to the
Directors in accordance with section 295A of the Corporations Act 2001 for the financial year
ending 30 June 2018
e. as at the date of this declaration, there are reasonable grounds to believe that the members
of the Closed Group identified in note 6.5 will be able to meet any obligations or liabilities
to which they are or may become subject, by virtue of the Deed of Cross Guarantee.
On behalf of the Board
The Hon. Mark Vaile AO
Chairman
Sydney
14th August 2018
Paul Flynn
Managing Director
and Chief Executive Officer
Whitehaven Coal Annual Report 2018 | 143
FINANCIAL REPORT 8 AUDITOR’S REPORT
For the year ended 30 June 2018
144 | SECTION 8 FINANCIAL REPORT
Whitehaven Coal Annual Report 2018 | 145
FINANCIAL REPORT 8 AUDITOR’S REPORT
For the year ended 30 June 2018
146 | SECTION 8 FINANCIAL REPORT
Whitehaven Coal Annual Report 2018 | 147
FINANCIAL REPORT 8 AUDITOR’S REPORT
For the year ended 30 June 2018
148 | SECTION 8 FINANCIAL REPORT
Whitehaven Coal Annual Report 2018 | 149
FINANCIAL REPORT 8 ASX ADDITIONAL INFORMATION
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 recorded as owned by substantial shareholders and their associates in the most recent substantial
shareholder notices advised to the Company by these shareholders are set out below:
Shareholder
Farallon Capital Management LLC
Fritz Kundrun*
Hans Mende*
AMCI Group*
Percentage
of capital held
Number of ordinary
shares held
Date of substantial
shareholder notice
14.23%
12.09%
11.13%
8.40%
146,007,208
124,042,252
114,190,086
86,170,596
23 Nov 2017
17 Oct 2014
17 Oct 2014
17 Oct 2014
*The holdings of Mr Kundrun and Mr Mende both include the 86,170,596 shares owned by AMCI Group.
VOTING RIGHTS
Ordinary shares
Refer to note 5.4 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
Number of equity security holders
2,026
2,303
663
690
101
5,783
There are 6 holders of options over ordinary shares.
Refer to section 7.3 of the Remuneration Report.
The number of shareholders holding less than
a marketable parcel of ordinary shares is 363.
150 | SECTION 8 FINANCIAL REPORT
SECURITIES EXCHANGE
The Company is listed on the Australian Securities Exchange.
OTHER INFORMATION
Whitehaven Coal Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
TWENTY LARGEST SHAREHOLDERS (LEGAL OWNERSHIP)
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LTD
CITICORP NOMINEES PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
NATIONAL NOMINEES LIMITED
AET SFS PTY LTD
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