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Soltec PowerPOWERING
POWERING
HUMAN
HUMAN
POTENTIAL
POTENTIAL
ANNUAL REPORT 2019
YANCOAL
AUSTRALIA LTD
(INCORPORATED IN VICTORIA, AUSTRALIA WITH LIMITED LIABILITY)
ASX STOCK CODE: YAL HKEX STOCK CODE: 3668 ACN 111 859 119
B
POWERING
POWERING
HUMAN
HUMAN
POTENTIAL
POTENTIAL
Advancing lives and economies.
Every day across Australia, our people produce coal that powers and builds
Asian economies. Our coal enables countries to pursue development and
work to improve their people’s prospects and future. At home, we are proud
to have a regional workforce at the heart of many thriving rural communities.
We know the world is on a path of transitioning to a low-carbon future.
Our people and communities provide the resources to power big thinking,
which is required to drive new technologies. We expect to remain essential
in powering growth and empowering the human potential that will develop
the technologies to drive low-emission solutions.Yancoal is empowering
human potential to advance lives and economies.
1
1
POWERING
POWERING
EXCELLENCE
EXCELLENCE
Excellence is implementing
best practice - always.
We want all our people to share the
common goal of achieving excellence.
To look for excellence in everything
they do and to reward their colleagues
for behaviours and achievements that
drive our business forward. Striving
for excellence requires our people
to know what is required to go from
merely good to great. The pursuit of
excellence makes our people proud
to be part of Yancoal.
2
2
“ As an engineering apprentice,
for me excellence means taking
the time to do my work properly.
I never have to rush. They actually
value that it takes as long as it
takes. For them it’s about quality,
which is also very safety wise.”
~ Sarah North
Diesel Mechanic Apprentice,
Moolarben Coal Mine
3
3
POWERING
POWERING
SAFETY
SAFETY
Safety is not optional.
We want our people to thrive,
not just to survive.
Our people are committed to safe
work practices. Yancoal proactively
engages with all our people and
equips them with the power and the
accountability to identify and address
safety risks – to stop activities and
operations that could cause harm.
Our improving safety performance
in 2019 supports our view that we
are effective in these efforts.
4
“ I believe safety is a natural
progression of valuing
lives. If people are not well,
secure and thriving, then
there is simply no safety.
For us, that means looking
out for each other - having
each other’s back on the
job and off.”
~ Sharif Burra
General Manager, Safety
5
POWERING
POWERING
INNOVATION
INNOVATION
Innovation continuously improves
our people and our business.
We strive to be better than we were last year, last month,
last week or even yesterday. We want our people to
be curious, to have a voice, and to take the initiative.
We want our people to generate ideas, to share them,
and to work together to make them happen. These
ideas drive Yancoal’s innovation and ensure we satisfy
our customers and create value for shareholders.
6
“ We are deeply committed to
innovation and support cancer
research at the Queensland
University of Technology. We
provide funding for two fulltime
cancer researchers to advance
their research and help facilitate
cancer clinical trials, which
will benefit all Australians.”
~ Matthew Gerber
General Manager, Corporate Affairs
77
POWERING
POWERING
INTEGRITY
INTEGRITY
Integrity - we do things
because they are right,
not just because we should.
Inspiring our people to act with
integrity means getting our people
to think about their actions and the
consequences. We want our people
to make decisions based on how
their actions may impact others,
the environment and the community.
We know that this is not always
easy, but it is always rewarding.
The integrity of our people shapes
Yancoal’s reputation and our future
as a business.
8
8
“ As temporary custodians of the land we
have a strong responsibility to restore or
improve the land for the users that come
after us. Many of our workers know the land
intimately, as they have come from farming
families or are farmers themselves.”
~ Mark Jacobs
Executive General Manager,
Environment & Community
99
POWERING
POWERING
COMMUNITY
COMMUNITY
Local communities thrive with involvement
of our people and the support of our business.
Our people value being members of local communities
and, in turn, Yancoal values the support these communities
provide to our people and the business. We seek to ensure
that these communities are sustainable and prosperous.
Every year across Australia we spend almost $3 billion
on goods and services from thousands of local businesses
and make voluntary donations of around $1.6 million to
hundreds of community organisations.
10
“ It’s striking how many people think
of Mudgee as a wine and tourist
destination. But underneath this
image we are really a mining town...
A wine region with mining money.”
~ Scott Fittler
Community Relations Coordinator
11
POWERING
POWERING
PEOPLE
PEOPLE
People are the heart of
Yancoal – over 4,000 people
across eleven operations.
Our people guide our direction. We value
involvement from everyone and encourage
engagement – after all, our people have
most, if not all, the knowledge we need as
a business. Our people provide the energy
and enterprise that generates value for our
customers and shareholders. Yancoal
people are proud of our company culture,
enrich our communities and make
a difference in our world.
12
“ Most of us work here for more than
just money. It’s this solid sense of
mateship, comradery, and that
we are all in it together. We work
together, we play together. It’s just
a great bunch of people.”
~ Neil Lee
Warehouse Supervisor,
Moolarben Coal Mine
13
FINANCIAL SUMMARY
FINANCIAL
SUMMARY
14
YANCOAL ANNUAL REPORT 2019
$4.46b
REVENUE
$1.64b
OPERATING EBITDA
$719m
PROFIT AFTER TAX
$417m
TOTAL DIVIDEND
(31.56 CPS)
35.6m TONNES
ATTRIBUTABLE SALEABLE
COAL PRODUCTION
$61/TONNE
CASH COSTS
(EXCLUDING ROYALTIES)
$111/TONNE
AVERAGE SALE PRICE
(FOR COMBINED THERMAL
AND MET. COAL SALES)
29%
NET GEARING RATIO
15
SALES VOLUME
ATTRIBUTABLE MINE PRODUCTION SOLD
All our coal is exported. It supports
economic growth throughout the region.
SALEABLE COAL PRODUCTION
MILLION TONNES, 100% BASIS
The majority of our coal production is generated
by three large-scale, low-cost operations.
1,747
1,548
408
(108)
(24)
CUSTOMER REVENUE
BY COUNTRY
OPERATING CASH FLOW
A$ MILLIONS
Yancoal has a diverse customer mix; we do not
depend on any single country for our revenue.
Operating cash flow has changed with production
and pricing; it excludes capital expenditure.
YANCOAL ANNUAL REPORT 2019
45%
38%
36%
14%
OPERATING EBITDA
A$ MILLIONS / MARGIN %
EBITDA remained robust in 2019, despite
lower international coal prices.
Profitability has improved sharply
over recent years.
507
40%
417
58%
The gearing ratio is at a manageable level,
but we intend to make further debt repayments.
Yancoal has made sizable distributions
over the past two years.
POWERING
STRONG
PERFORMANCE
1616
M E S S A G E F R O M O U R C H A I R M A N
“ Coal continues to play a key role in delivering economic
growth and improved quality of life across the Asian region”
Yancoal is committed to safe work
practices. There is active and
consistent engagement with all
employees empowering them to
identify and address foreseeable
safety risks and injuries and we
actively supported industry-wide
initiatives in response to a number
of tragic industry events in 2019.
Pleasingly, our stable safety
performance in 2019 demonstrated
that we continue to be effective in
our safety efforts.
Despite the challenging market
conditions in which lower coal prices
and cost inflation were experienced,
Yancoal performed well in 2019.
Significant achievements in 2019
included reduced operating
costs, increased production and
an improved financial position.
Yancoal remains resolutely focused
on efficient operations optimising
output from our low-cost operations
to generate shareholder value.
Reducing our unit cost per tonne
to $61/tonne was particularly
impressive during a period in which
industry cost inflation was evident.
Throughout the year, the Yancoal
team worked hard to consolidate
our expanded asset base and deliver
the operational efficiencies that drive
returns for our investors. Consistent
with our Corporate Strategy, we
continue to balance opportunities
for asset reinvestment with the
generation of shareholder returns
through dividends and ongoing
debt reduction.
After another year of healthy
cashflow, the total distribution for
2019 was $0.3156/share, or $417
million. Over the past two years
Yancoal has made early debt
repayments totalling US$1.4 billion.
In response to changes in the
international coal market during
2019, Yancoal matched its sales mix
and volumes with customer needs
and trade conditions. The ability
to optimise coal products through
blending from our suite of low-cost,
long-life mines is central to the
Company’s ability to successfully
navigate market challenges; it
enables us to continue investing in
assets, which will be beneficial when
the next upturn in the commodity
cycle occurs.
2020 OUTLOOK
The year began with two unforeseen
and significant challenges; serious
bushfires across much of Australia
and the COVID-19 pandemic.
Yancoal has responded admirably
to both these events.
Showing a commitment to their
local communities, many Yancoal
employees stepped away from the
coalface and volunteered to help
fight the ferocious bushfires. In
addition to localised assistance to
fire brigades within their communities
through the donation of equipment
and provisions, Yancoal Australia
also donated $500,000 directly to the
New South Wales Rural Fire Service,
which will be distributed to help
provide additional training, fire
shed equipment and fire
shed maintenance.
Yancoal responded rapidly to
the COVID-19 pandemic. Our
focus on the health and safety of
all our employees intensified as
we responded to the COVID-19
pandemic and we implemented work
practices to mitigate transmission
risks and our operations experienced
minimal disruption. Yancoal also
worked closely with relevant industry
groups and government to develop
protocols to ensure the mining sector
continued to operate and contribute
to the Australian economy.
During 2019, the demand profile
for thermal coal in the Asia-Pacific
region softened as a result of
several factors. As a consequence
of evolving market conditions, index
coal prices moved lower, and the
premium for high-grade thermal
coal relative to lower grade indices
narrowed. Although the metallurgical
coal market displayed better price
stability during the first half of 2019,
it too deteriorated during the second
half of the year.
In 2020, international coal markets
face the additional challenge of the
economic response to COVID-19
measures applied by governments.
New coal power generation
commencing operation in the Asia-
Pacific region will be countered
by coal-powered generation
being closed in Europe. However,
improvements in the coal price could
be possible if there were supply
disruptions due to weather events
or supply closures resulting from
margin pressure. In the context
of the COVID-19 situation, we are
monitoring the state of international
coal markets, especially supply and
demand dynamics resulting from the
pandemic, and the critical supply
chains that link Yancoal operations
with our customers across Asia.
Coal has continued to play a key
role in delivering economic growth
and improved quality of life across
Asian countries, including through
the introduction of electricity for the
first time to parts of this region’s
growing population. Yancoal believes
its higher-quality coal will remain
a key component of the regional
energy mix, and the Company has
a long-term strategic commitment
to ongoing growth, including
the expansion and extension of
existing projects.
B a o c a i Z h a n g
C h a i r m a n of t h e B o a r d
17
17
1818
M E S S A G E F R O M O U R C E O
POWERING
STRONG
LEADERSHIP
“ Looking beyond Yancoal’s annual financial
statements, we have positive impacts
locally and globally. Our coal supports
development efforts throughout Asia
and Yancoal contributes $8.6 billion
across the Australian economy.”
Yancoal continued a trajectory of
strong operational performance
in 2019, achieving the objectives
we set for controllable elements of
the business, such as improving
production, lowering operating costs
and maintaining capital expenditure.
This focus on delivering operational
outcomes, allowed us to continue to
pay dividends to shareholders and
to lower our gearing ratio, despite
the weaker global coal market
experienced during the year.
While important, Yancoal’s
annual operational and financial
performance is just one element of
what our Company contributes more
broadly, both locally and globally.
Yes, we mine safely, efficiently,
responsibly and profitably,
producing high-quality products for
export. And yes, over the past two
years our profitability has allowed
us to pay dividends to shareholders
totalling almost $1 billion (or $0.70
per share). But we sometimes forget
to consider the broader benefits that
Yancoal generates to people
and societies.
thermal coal exports in 2019 would
have powered around 30 million
households in the region. To put this
into another perspective, Yancoal
produced enough thermal coal
to power electricity production in
Australia for a year. The metallurgical
coal we exported in 2019, could
have produced the equivalent of 3.5
million tonnes of steel. Again, to put
this in perspective, this is equivalent
to the amount of steel required to
construct around 70 Sydney
Harbour Bridges.
values are People and Safety.
Our people and their safety are
paramount, reflecting a genuine and
real belief that Yancoal is its people.
The benefits that Yancoal provides to
our customers, shareholders and the
Australian economy all start with our
truck drivers, operators, cleaners,
maintenance crews and the various
assortment of teams across our
organisation. I thank our workers for
their efforts and hard work and look
forward to further success
over coming years.
In producing coal for our Asian
customers, our operations provide
jobs for thousands of people, pay
wages and salaries in excess
of $0.5 billion, and contribute
$0.72 billion to government revenues
across all levels. But this is only
part of the story. When all direct
and indirect effects are considered,
Yancoal’s total annual impact to the
Australian economy is over $8.6
billion and includes supporting
43,300 full time equivalent jobs that
earn $3.2 billion, predominantly in
regional areas.
I am proud to work for Yancoal
and I am proud to work in the
coal industry. I am proud of all
our workers, their families and
the communities that support
Yancoal, especially given the recent
challenges we have faced in terms
of bushfires and coronavirus.
I am proud of what Yancoal and
its people have achieved together,
both in terms of our operational and
financial performances, and beyond,
and I look forward to an even more
successful future.
It is generally accepted that coal
plays an important part in economic
growth and development throughout
Asia. For example, Yancoal’s
However, none of this would be
possible without the drive, energy
and focus of Yancoal’s people.
The two most important Yancoal
D a v i d M o u l t
C E O
19
19
OUR STRATEGY
OUR
STRATEGY
C OMPLIANCE
LE PR OJE C T S R E L A T I ONSHIPS PRODUC
ANSPARENCY
BETTER WAY
EXCELLENCE
RIGHT WAY
INTEGRITY
SAFE WAY
SAFETY
TR
E
F
F
I
C
T
S
I
E
N
C
Y
O
P
T
I
M
P
O
E
P
PATH WAY
PEOPLE
HIGH WAY
INNOVATION
R
E
I
N
V
E
PRIMARY P U R S U I T
D I V I
STMENT
E
D
G
R
O
W
T
H O
P
P
ORTUNITIES
DISCRETIONARY P U R S U I
D R ETURNS
T R E D U CTION
B
E
D
N
T
I
S
A
T
I
O
N
03
04
01
02
20
YANCOAL ANNUAL REPORT 2019
Yancoal has a clear strategy to create value and
returns for shareholders. Our competitive advantages,
beliefs and values allow the business to efficiently
generate cashflow and profits. Through disciplined
capital allocation, these funds are then reinvested
for growth, returned to shareholders or used to
maintain a healthy balance sheet.
Leveraging our competitive and
strategic advantages, and applying
Yancoal’s core beliefs and values to
our decisions and behaviour enable
us to sustain effective and efficient
operations that generate healthy
revenue and cashflow.
01 CORE BELIEFS
Business Transparency, Compliance
and Efficiency – Yancoal asks its sites
and corporate functions to operate to
the highest governance standards –
applying transparent, compliant and
efficient processes to meet the needs
of all stakeholders.
02 STRATEGIC ADVANTAGES
People – Yancoal attracts, retains and
develops people with the right skills.
Our assets deliver because our people
are skilled, innovative and collaborative.
Projects – Yancoal has a strong asset
portfolio, in which Tier-1 assets with robust
operating margins underpin the business.
Relationships – Yancoal has built and
maintained strong relationships with
customers throughout Asia, including
essential markets in Japan, South Korea
and China.
Products – Yancoal produces high-quality
coal for the international market. We meet
our customers’ evolving demands and
maximise price through our ability to blend
product from our asset portfolio.
Optimisation – Yancoal continues to drive
and deliver cost efficiencies. Optimising
operations, maintenance, procurement
and product blending to improve sustained
financial performance.
03 CORE VALUES
People, Safety, Integrity, Excellence,
Innovation – Yancoal’s values start
with our people. We want our people
to; work safely; act with integrity; strive
for excellence; and seek improvement
through innovation.
Healthy revenues and cashflows
allow us to concurrently pursue
reinvestment, dividend payments,
debt reduction, and the funding of
both organic and acquisitive growth
opportunities. Disciplined capital
allocation ensures continued growth,
a healthy balance sheet and returns
for our shareholders.
04 CAPITAL ALLOCATION
Cash from operations was $1.55 billion
in 2019, similar to $1.75 billion in 2018.
Increased production and lower operating
costs contributed to this outcome.
REINVESTMENT
Future operating cashflow depends on
asset availability and utilisation, which
requires reinvestment in operations
and equipment. The level of capital and
sustaining expenditure changes from
year-to-year.
DIVIDEND RETURNS
Shareholders have direct exposure to
the Company’s performance via a payout
ratio based dividend policy. In 2019 the
total Dividend allocation was $417 million;
this was a payout ratio of 58% relative to
full-year profit after tax.
DEBT REDUCTION
Early debt repayment remains a Company
goal. US$1.4 billion of debt has been
repaid ahead of schedule since late 2017.
The debt repayment brought the gearing
ratio down to 29% at the end of December
20191. The Group also aims to optimise
the existing loan facilities.
GROWTH OPPORTUNITIES
Yancoal has identified additional
annual production to pursue within its
existing asset base at Moolarben and
Mount Thorley Warkworth. Examining
opportunities for corporate acquisitions
is an ongoing effort, but the emphasis is
on value accretion, not volume accretion.
In the Capital Allocation Cycle:
Asset Reinvestment and Growth
Opportunities support future growth;
Dividends reward the investors;
and Debt Reduction improves the
capacity for all other steps.
1 Gearing calculated as Net Debt divided by the sum of Net Debt and Equity.
21
REVIEW OF OPERATIONS
REVIEW OF
OPERATIONS
MOOLARBEN
NSW
Truck and shovel
open-cut and longwall
underground minig
complex producing
thermal coal;
operated by Yancoal
MOUNT
THORLEY
WARKWORTH
NSW
Dragline, Truck
and shovel open-
cut mine producing
semi-soft coking coal
and thermal coal;
operated by Yancoal
YARRABEE
MIDDLEMOUNT
CAMEBY DOWNS*
MOUNT THORLEY WARKWORTH
STRATFORD DURALIE
ASHTON (WATAGAN)
HUNTER VALLEY OPERATIONS
DONALDSON (WATAGAN)
AUSTAR (WATAGAN)
PREMIER*
MOOLARBEN
*MANAGED, NOT OWNED, BY YANCOAL
HUNTER
VALLEY
OPERATIONS
NSW
A multi-pit mine using
dragline, truck and
shovel operations
to produce semi-
soft coking coal
and thermal coal;
operated by Hunter
Valley Joint Venture
YARRABEE
QLD
Truck and shovel
open-cut mine
producing ultra low
volatile pulverised
coal injection (PCI)
coal; operated
by Yancoal
85%
95% FROM 1 JAN 2020
82.9%
51%
100%
192Mn
TONNES
(ATTRIBUTABLE)
176Mn
TONNES
(ATTRIBUTABLE)
332Mn
TONNES
(ATTRIBUTABLE)
15.2Mn
TONNES
(ATTRIBUTABLE)
9.9Mn
TONNES
(ATTRIBUTABLE)
6.9Mn
TONNES
(ATTRIBUTABLE)
T ~710
N
U
O
C
D
A
E
H
EMPLOYEES &
CONTRACTORS
~1,300
EMPLOYEES &
CONTRACTORS
NOT MANAGED
BY YANCOAL
22
22
42Mn
TONNES
(ATTRIBUTABLE)
2.8Mn
TONNES
(ATTRIBUTABLE)
~400
EMPLOYEES &
CONTRACTORS
N
O
I
T
P
I
R
C
S
E
D
T
S
E
R
E
T
N
I
I
C
M
O
N
O
C
E
S
E
V
R
E
S
E
R
E
L
B
A
T
E
K
R
A
M
T
U
P
T
U
O
L
A
O
C
E
L
B
A
E
L
A
S
9
1
0
2
STRATFORD-
DURALIE
NSW
Truck and shovel
open-cut mine
producing thermal
coal; operated
by Yancoal
2019
TOTALS
Yancoal enters the
export market. End
users are located
across the Asia-
Pacific basin
All coal produced by
Truck and shovel
The Ashton longwall
MIDDLE-
MOUNT
QLD
WATAGAN
NSW
open-cut mine
producing low
volatility pulverised
coal injection (PCI)
coal; operated
by Middlemount
Joint Venture
mine produces a semi-
soft coking coal.
The Austar mine
(semi-soft coking
coal) has joined the
Donaldson mine on
‘care and maintenance’
~50%
(EQUITY ACCOUNTED)
100%
(EQUITY ACCOUNTED)
100%
11Mn
TONNES
(ATTRIBUTABLE)
0.8Mn
TONNES
(ATTRIBUTABLE)
~100
EMPLOYEES &
CONTRACTORS
753Mn
TONNES
MARKETABLE
RESERVES
(ATTRIBUTABLE)
31Mn
TONNES
89Mn
TONNES
(EQUITY ACCOUNTED)
(EQUITY ACCOUNTED)
35.6Mn
TONNES PRODUCTION
1.3Mn
TONNES
2.2Mn
TONNES
(ATTRIBUTABLE)
(EQUITY ACCOUNTED)
(EQUITY ACCOUNTED)
NOT MANAGED
BY YANCOAL
~450
EMPLOYEES &
CONTRACTORS
MOUNT
THORLEY
HUNTER
VALLEY
MOOLARBEN
WARKWORTH
OPERATIONS
YARRABEE
NSW
NSW
NSW
QLD
Truck and shovel
Dragline, Truck
A multi-pit mine using
Truck and shovel
open-cut and longwall
and shovel open-
dragline, truck and
open-cut mine
underground minig
cut mine producing
shovel operations
complex producing
semi-soft coking coal
to produce semi-
thermal coal;
and thermal coal;
soft coking coal
producing ultra low
volatile pulverised
coal injection (PCI)
operated by Yancoal
operated by Yancoal
and thermal coal;
coal; operated
operated by Hunter
by Yancoal
Valley Joint Venture
85%
95% FROM 1 JAN 2020
82.9%
51%
100%
192Mn
TONNES
(ATTRIBUTABLE)
176Mn
TONNES
(ATTRIBUTABLE)
332Mn
TONNES
(ATTRIBUTABLE)
15.2Mn
TONNES
(ATTRIBUTABLE)
9.9Mn
TONNES
(ATTRIBUTABLE)
6.9Mn
TONNES
(ATTRIBUTABLE)
U
O
N
T ~710
D
A
C
E
H
EMPLOYEES &
CONTRACTORS
~1,300
EMPLOYEES &
CONTRACTORS
NOT MANAGED
BY YANCOAL
42Mn
TONNES
(ATTRIBUTABLE)
2.8Mn
TONNES
(ATTRIBUTABLE)
~400
EMPLOYEES &
CONTRACTORS
N
O
I
T
P
I
R
C
S
E
D
T
S
E
R
E
T
N
I
C
I
M
O
N
O
C
E
S
E
V
R
E
S
E
R
E
L
B
A
T
E
K
R
A
M
T
U
P
T
U
O
L
A
O
C
E
L
B
A
E
L
A
S
9
1
0
2
YANCOAL ANNUAL REPORT 2019
MIDDLE-
MOUNT
QLD
Truck and shovel
open-cut mine
producing low
volatility pulverised
coal injection (PCI)
coal; operated
by Middlemount
Joint Venture
WATAGAN
NSW
The Ashton longwall
mine produces a semi-
soft coking coal.
The Austar mine
(semi-soft coking
coal) has joined the
Donaldson mine on
‘care and maintenance’
~50%
(EQUITY ACCOUNTED)
100%
(EQUITY ACCOUNTED)
31Mn
TONNES
(EQUITY ACCOUNTED)
89Mn
TONNES
(EQUITY ACCOUNTED)
END USE OF
OUR PRODUCT
Supporting
Asia-Pacific
developed
and emerging
economies.
STRATFORD-
DURALIE
NSW
Truck and shovel
open-cut mine
producing thermal
coal; operated
by Yancoal
2019
TOTALS
All coal produced by
Yancoal enters the
export market. End
users are located
across the Asia-
Pacific basin
753Mn
TONNES
MARKETABLE
RESERVES
(ATTRIBUTABLE)
100%
11Mn
TONNES
(ATTRIBUTABLE)
0.8Mn
TONNES
(ATTRIBUTABLE)
~100
EMPLOYEES &
CONTRACTORS
35.6Mn
TONNES PRODUCTION
(ATTRIBUTABLE)
1.3Mn
TONNES
(EQUITY ACCOUNTED)
2.2Mn
TONNES
(EQUITY ACCOUNTED)
NOT MANAGED
BY YANCOAL
~450
EMPLOYEES &
CONTRACTORS
23
HEALTH, SAFETY AND ENVIRONMENT
HEALTH,
SAFETY AND
ENVIRONMENT
SAFETY
ENVIRONMENT
The safety of our people, as well as the
contractors and service providers that
support our operations, is Yancoal’s
utmost priority. The Board’s Health, Safety,
Environment and Community (HSEC)
Committee leads our group-wide objective
to achieve ‘Zero Harm’.
Our focus on safety was reflected in the
improved Total Recordable Injury Frequency
Rate (TRIFR) that was achieved in 2019:
TRIFR was 7.27 at the end of 2019, down
from 8.01 at the end of 2018.
Yancoal reached an important safety
milestone in 2019 with the implementation
of all 15 Core Hazards and 75 Critical
Controls across all operations. These
hazards and controls will continue to be
monitored and reviewed to ensure they are
operating as intended for the safety of our
people and to prevent fatal incidents and
catastrophic events.
Operating to stringent environmental
management conditions, Yancoal continues
to work with State and Federal Government
departments and the community to
ensure full transparency in environmental
reporting. Yancoal’s HSEC Committee sets
the direction for the Company’s continued
commitment to operating its mines to the
highest environmental standards and in
accordance with legislative requirements.
Each Yancoal operation implements
proactive strategies to manage its
environmental activities to meet its
obligations. Yancoal is progessively
developing rehabilitation and end-of-mine
plans, to ensure mined areas are restored
to productive and sustainable future uses.
Yancoal continues to apply robust water,
dust and noise management practices
across all operations, and we have the
capacity to respond promptly to changing
weather and operating conditions.
Yancoal has a role to play in mitigating the
emissions generated by its operations and
supporting investment into low emission
technology to assist the reduction of
downstream emissions. We understand
the growing interest of our stakeholders
in relation to the potential risks and
opportunities posed to our business,
and the broader sector, because of climate
change and the anticipated global transition
towards a lower-carbon economy. The
Board continues to consider the adoption
of the Taskforce on Climate-related Financial
Disclosures (TCFD) Recommendations
as the framework to guide our climate-
related disclosures.
The Board also regularly assesses how
climate change may drive changes to
physical, regulatory, commercial and
operating environments, and develops
strategies that will address these challenges
in medium- and long-term scenarios.
24
BEYOND COMPLIANCE
Yancoal has an Independent Environmental
Assurance Audit (IEAA) program that
operates on a two-year cycle.
Yancoal carried out IEAA audits at eight mines
over the past two years; all eight identified
excellent documentation, management plans
and environmental performance.
REPORTING ON EMISSIONS
Yancoal reports its operational direct (Scope 1) and
indirect (Scope 2) emissions on an annual basis in line
with the National Greenhouse and Energy Reporting
legislation. Overall, on an operational control basis, our
total Scope 1 and Scope 2 emissions for the period
ended 30 June 2019 totaled 1.98 million tonnes of
carbon dioxide equivalent (tCo2-e), which represented
a 6% decrease on the prior year.
While we do not currently track Scope 3 emissions
associated with the consumption of our coal products,
we actively support the development of technologies
aimed at reducing the emissions intensity of these
downstream activities.
NATIONAL GREENHOUSE ENERGY
REPORTING (NGER)
Emissions
Reporting
Period
Scope 1
Emissions
(Mn Tco2-E)
Scope 2
Emissions
(Mn Tco2-E)
Scope 1
And Scope 2
Emissions
(Tco2-E)
2017 - 2018
1.75
2018 - 2019
1.62
0.36
0.37
2.11
1.98
YANCOAL ANNUAL REPORT 2019
6% 7.27
EMISSIONS DROP
OVER THE 12 MONTHS
TO JUNE 2019
TOTAL RECORDABLE
INJURY FREQUENCY RATE
DOWN FROM 8.01
POWERING
POWERING
COMMERCIAL
COMMERCIAL
AGRICULTURE
AGRICULTURE
Yancoal has approximately
30,000 hectares of agricultural
lands that are managed in
strategic partnership with key
licensees. Our current agricultural
land holdings support commercial
agricultural operations in beef,
sheep (both wool and lambs)
and dairy. Yancoal’s rural property
strategy aims to support local
communities associated with
each of our mine sites and to
create sustainable rural holdings.
25
OUR COMMUNITY
OUR
COMMUNITY
Yancoal is committed to making
a genuine positive difference in the
communities in which it operates,
financially supporting projects and
initiatives with the potential to make
a lasting difference.
YANCOAL COMMUNITY
SUPPORT PROGRAM
Yancoal understands the value of making
a financial contribution to support the
future growth and sustainability of local
and regional communities. Yancoal is
proud to be investing into local and
regional Australia, helping build stronger
communities across the country.
Going beyond its established role as a
key employer, Yancoal is committed to
investing in its communities and partnering
with community groups to achieve
meaningful outcomes.
Yancoal’s Community Support Program is
specifically designed to invest in projects,
programs and initiatives capable of making
a difference to the lives of others.
Each year Yancoal allocates funds at both a
site and corporate level to financially support
community groups and programs operating
across the areas of:
• Health;
• Social and community;
• Environment; and
• Education and training.
To ensure our sites are actively engaged
and informed of issues and activities in
their local communities: we coordinate
and participate in community consultative
committees; distribute local newsletters;
foster close contact with local media
organisations; arrange community days;
and maintain site-specific websites that
provide updated information.
In 2019, the Yancoal Community Support
Program invested approximately $1.6 million
into local initiatives across Australia,
including activities to:
EXAMPLES OF
YANCOAL-SUPPORTED
COMMUNITY INITIATIVES:
•
•
•
•
•
Support critical research into
the detection and prevention of
cervical cancer;
Aid in the rescue and rehabilitation of
protected local wildlife;
Sponsor key community events, groups
and clubs;
Refurbish community facilities; and
Support disadvantaged community-
support groups, which may
otherwise struggle to achieve their
funding requirements.
As Yancoal continues to grow, it will maintain
and expand its responsibility of working
co-operatively with community stakeholders.
•
•
A commitment of $1.5 million over three
years to support the Westpac Rescue
Helicopter Service (WRHS) - Australia’s
leading aeromedical and rescue service.
The WRHS fleet of three “on duty”
helicopters, each with critical care
medical teams, has undertaken almost
1,500 missions across Northern New
South Wales during 2019.
Queensland University of Technology’s
Cancer and Ageing Research Program
(CARP). CARP is a comprehensive
research initiative working towards a
universal cancer treatment that may also
positively impact on ageing diseases
such as Alzheimer’s.
26
COMMUNITY INITIATIVES
We support the Cancer and Ageing
Research Program at Queensland‘s
University of Technology.
We committed $1.5m over three years to
support the Westpac Rescue Helicopter Service.
We provide $100,000 each year throughout
Australia to support indigenous youth
education and employment pathways
with the Clondarf Foundation.
YANCOAL ANNUAL REPORT 2019
$1.6m
INVESTED INTO 177
LOCAL INITIATIVES ACROSS
AUSTRALIA IN 2019
•
•
•
•
•
Support of $100,000 per annum for the Clontarf
Foundation, to support indigenous youth education
and employment pathway services throughout Australia.
The Mount Thorley Warkworth (MTW) and Ashton Coal
operations jointly funded the Singleton Business Chamber
Excellence Awards. The awards recognise excellence
in business leadership, entrepreneurship, innovation,
sustainability, business growth and employment practices
in the Singleton local government area.
Millfield Public School near Cessnock has extended their
community garden thanks to a donation from the Austar
Coal Mine. The garden is used to teach the children
the importance of fresh grown fruit and vegetables and
promotes healthy eating. The extension to the garden has
allowed students, their families and the local community
to benefit from the learning experience, whilst also
accessing freshly grown produce.
Moolarben sponsored the Sculptures in the Garden Event.
Revenue raised on the day is donate to Guide Dogs NSW.
The sponsorship from Moolarben is used to acquire a
public art sculpture, which is added to the sculpture walk
collection in Mudgee’s Lawson Park for all to admire.
The Yarrabee Coal Mine sponsored the MacKenzie
River Fish Stocking Association in their annual Saratoga
Spectacular fishing competition. The event is a fundraiser
with the proceeds used to purchase fingerlings that are
later released back in to the river system.
POWERING
POWERING
COMMUNITY
COMMUNITY
WELLBEING
WELLBEING
The Mudgee Men’s Shed has
received support over the
years for additional wood
and metal working equipment
and assistance with repairs
to damage from a fire. The most
recent assistance from Yancoal’s
Community Support Program
has been the establishment of an
onsite gym featuring a treadmill,
bicycle, weights and rowing
machine. This is creating long
lasting benefits for the people
that will use it, whether it’s mental
health or physical health.
27
COAL RESERVES AND RESOURCES
COAL RESERVES
AND RESOURCES
The Coal Resources and Coal Reserves statement presented
in this report are extracted from an announcement made on
20 March 2020. The original announcement was produced in
accordance with the Australasian Code for reporting of Mineral
Resources and Ore Reserves 2012 Edition (the Joint Ore Reserves
Committee (JORC) Code).
Yancoal is not aware of any new information or data that materially
affects the information included in this report and at the time of this
report all technical parameters underpinning the estimates continue
to apply and have not materially changed.
Coal Resources and Coal Reserves are reported in 100 per cent
terms (unless otherwise stated). Coal Resources are reported
inclusive of the Coal Resources that have been converted to Coal
Reserves (i.e. Coal Resources are not additional to Coal Reserves).
On an attributable basis Yancoal group’s total year end 31
December 2019 position is as follows:
• Measured, Indicated and Inferred Coal Resources are 6,911Mt2
– (6,442Mt 2018).
• Recoverable Proved and Probable Coal Reserves are
1,212Mt1,2 – (1,240Mt 2018).
COAL RESOURCES FOR YEAR ENDING 31 DECEMBER 2019
• Marketable Proved and Probable Coal Reserves are 880Mt1,2 –
(891Mt 2018).
Notes
• 2019 Coal Resources have been rounded in line with the JORC
Code and the Yancoal reporting standards to reflect the relative
uncertainty of the estimates.
• All Coal Resources are inclusive of Coal Reserves and are
reported on a 100% basis with Yancoal’s ownership percent
reported for each deposit. The attributable share total is the
total Coal Resources when the Yancoal ownership percent (as
at 31 December 2019) is applied.
• Coal Resources detailed in table are as at 31 December 2019.
• Met = Metallurgical Coal
• Semi = Semi-soft coking coal
• PCI = Pulverised Coal Injection
• Mt = Million tonnes
• OC = Open Cut
• UG = Underground
MOISTURE
BASIS
%
MEASURED
COAL RESOURCES
(MT)
INDICATED
COAL RESOURCES
(MT)
INFERRED
COAL RESOURCES
(MT)
TOTAL
COAL RESOURCES
(MT)
PROJECT
YANCOAL
OWNERSHIP
%
COAL TYPE
Moolarben (OC & UG)
85%
Thermal
Mt Thorley (OC & UG)
80% Semi/Thermal
6 to 8%
Warkworth (OC & UG)
84.47% Semi/Thermal
6 to 8%
51% Semi/Thermal
6 to 8%
HVO (OC)3
Yarrabee (OC)
Gloucester (OC)4
Middlemount (OC)
Austar (UG)5
100%
PCI/Thermal
100%
Met/Thermal
50%
Met/Thermal
100%
Met
Ashton (OC & UG)5
100% Semi/Thermal
Donaldson (OC & UG)5
100%
Met/Thermal
Monash (UG)
100%
Met/Thermal
Total Coal Resources (100% Basis)
Yancoal Attributable Share
2019
6.0%
5.5%
6.0%
5.0%
5.0%
6.5%
4.0%
6.0%
2019
2018
2019
760
300
610
810
80
8
73
110
85
190
0
710
210
460
704
95
8
73
110
80
190
0
180
160
420
1300
85
195
54
40
85
400
17
3026
2640
2936
2018
240
200
550
1430
80
195
54
40
70
400
17
3276
2019
200
180
470
2018
200
150
460
2400
1654
50
110
8
70
90
100
80
20
110
8
70
110
100
80
3758
2962
2019
1140
640
1500
4510
215
313
135
220
260
690
97
9720
6911
1 Where required the component Coal Reserve numbers for each site making up this total have been depleted by production from the JORC report date to 31 December 2019.
2
2019 Coal Resources and Coal Reserves have been rounded (significant figure) by the Competent Persons in line with the JORC Code and the Yancoal Coal Resource and
Reserve reporting standards to reflect the relative uncertainty of the estimates.
HVO - 2018 Coal Resources quoted for HVO are as at 30th June 2018 (No production depletions have been applied).
Gloucester comprises the Stratford, Duralie and Grant & Chainey deposits.
On 17 February 2016, Yancoal announced a new financing arrangement; it secured US$775 million in debt-funding via the issuing of nine-year secured debt bonds by a newly
established Yancoal subsidiary, Watagan Mining Company Pty Ltd (“Watagan”), to Industrial Bank Co. Ltd, BOCI Financial Products Limited and United NSW Energy Limited.
Under the arrangement, Yancoal’s interests in the assets of Ashton, Austar and Donaldson were transferred to and held by Watagan.
3
4
5
28
YANCOAL ANNUAL REPORT 2019
COAL RESERVES FOR YEAR ENDING 31 DECEMBER 2019
PROJECT
Moolarben (OC)
Moolarben (UG)
YANCOAL
STAKE %
85%
85%
COAL TYPE
Thermal
Thermal
Mount Thorley (OC)
80.0% Semi/Thermal
Warkworth (OC)
84.47% Semi/Thermal
HVO (OC)3
Yarrabee (OC)
Gloucester (OC)4
Middlemount (OC)6
Austar (UG)5,7
Ashton (AWOC)5
Ashton (UG)5
Donaldson (UG)5
51% Semi/Thermal
100%
PCI/Thermal
100%
Met/Thermal
50%
Met/Thermal
100%
Met
100% Semi/Thermal
100% Semi/Thermal
100% Semi/Thermal
Total Coal Reserves (100% Basis) - Rounded
Yancoal Attributable Share
PROJECT
Moolarben (OC)
Moolarben (UG)
YANCOAL
STAKE %
85%
85%
COAL TYPE
Thermal
Thermal
Mount Thorley (OC)
80.0% Semi/Thermal
Warkworth (OC)
84.47% Semi/Thermal
HVO (OC)3
Yarrabee (OC)
Gloucester (OC)4
51% Semi/Thermal
100%
PCI/Thermal
100%
Met/Thermal
PROVED COAL RESERVES (MT)
PROBABLE COAL RESERVES (MT)
TOTAL COAL RESERVES (MT)
RECOVERABLE COAL RESERVE
2019
197
46
7
187
440
33
0
45
0.2
0
10
0
966
2018
199
52
0
180
333
33
0
48
2
0
21
0
868
2019
6
13
37
61
460
18
19
37
0
17
21
110
799
2018
10
13
0
135
463
19
44
37
38
0
11
110
880
2019
204
59
44
248
900
51
19
82
0.2
17
31
110
1765
1196
MOISTURE
BASIS %
ASH %
PROVED
COAL RESERVES (MT)
PROBABLE
COAL RESERVES (MT)
TOTAL COAL
RESERVES (MT)
MARKETABLE COAL RESERVE
2019
2018
2019
10%
9%
9%
9%
10%
9.0%
8%
2019
22%
16%
10-13%
10-13%
12.9%
10%
14%
2019
161
47
5
133
320
27
0
35
0.2
0
6
0
2018
161
53
0
129
229
26
0
38
2
0
12
0
5
13
25
47
330
15
11
27
0
9
12
62
8
13
0
97
325
14
26
27
30
0
5.7
62
607
2019
166
60
30
180
650
42
11
62
0.2
9
18
62
1289
872
Middlemount (OC)6
50%
Met/Thermal
10.5% Coking
9% PCI
10% Coking
11% PCI
Austar (UG)5,7
Ashton (AWOC)5
Ashton (UG)5
Donaldson (UG)5
100%
Met
100% Semi/Thermal
100% Semi/Thermal
100% Semi/Thermal
5%
9.5%
8.5%
8%
5.5%
9.5%
9.5%
17%
Total Coal Reserves (100% Basis) - Rounded
737
650
552
Yancoal Attributable Share
YANCOAL 2019 EXPLORATION DRILLING
The total payments for capitalised exploration and evaluation activities in 2019 was $13 million. There were no development activities
related to mining structures or infrastructure undertaken in 2019. The reporting period is from 1 January to 31 December 2020. The
drilling totals provided exclude pre-production drilling.
MOOLARBEN
MTW
HVO
YARRABEE
GLOUCESTER
NO. OF
HOLES
TOTAL
DRILLED, M
NO. OF
HOLES
TOTAL
DRILLED, M
NO. OF
HOLES
TOTAL
DRILLED, M
NO. OF
HOLES
TOTAL
DRILLED, M
NO. OF
HOLES
TOTAL
DRILLED, M
Non-core holes
Core holes
150
15
6330
951
38
45
10233
10897
18
3
3911
1235
0
0
0
0
0
0
0
0
MIDDLEMOUNT
AUSTAR
ASHTON
DONALDSON
MONASH
NO. OF
HOLES
TOTAL
DRILLED, M
NO. OF
HOLES
TOTAL
DRILLED, M
NO. OF
HOLES
TOTAL
DRILLED, M
NO. OF
HOLES
TOTAL
DRILLED, M
NO. OF
HOLES
TOTAL
DRILLED, M
Non-core holes
Core holes
15
10
2907
1635
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6
7
This project has two product types for Marketable Coal Reserves each with a different Moisture basis, Coking at 10.5%, PCI at 9% and Ash of 10% for Coking and 11% for PCI.
The Austar mine suspended production and transitioned to ‘care and maintenance’ operations after 31-March-2020. Yancoal continues to evaluate mining opportunities to
re-commence production at Austar. The reported coal reserves reflected the estimated remaining production at 31-December-2020.
29
PROJECT
HVO
COAL RESERVES AND RESOURCES
YANCOAL AUSTRALIA TENEMENTS AS AT 31 DECEMBER 2019
PROJECT
Moolarben
MTW
Yarrabee
TITLE TENEMENT
TENEMENT TYPE
EL 6288
EL 7073
EL 7074
ML 1605
ML 1606
ML 1628
ML 1691
ML 1715
CCL 753
CL 219
EL 7712
EL 8824
ML 1412
Part ML 1547
(sublease)
ML 1590
ML 1751
ML 1752
MLA 548
EPC 621
EPC 717
EPC 1177
EPC 1429
EPC 1668
EPC 1684
MDL 160
ML 1770
Exploration Licence
Exploration Licence
Exploration Licence
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Consolidated Coal Lease
Coal Lease
Exploration Licence
Exploration Licence
Mining Lease
Sublease
Mining Lease
Mining Lease
Mining Lease
Mining Lease Application
Exploration Permit for Coal
Exploration Permit for Coal
Exploration Permit for Coal
Exploration Permit for Coal
Exploration Permit for Coal
Exploration Permit for Coal
Mineral Development Licence
Mining Lease
ML 80049
Mining Lease
ML 80050
Mining Lease
ML 80096
Mining Lease
ML 80104
ML 80172
ML 80195
ML 80196
ML 80197
ML 80198
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
TITLE TENEMENT
TENEMENT TYPE
ALA 52
ALA 58
ALA 59
Auth 72
Part CCL 708
(sublease)
CCL 714
CCL 755
CL 327
CL 359
CL 360
CL 398
CL 584
CML 4
EL 5291
EL 5292
EL 5417
EL 5418
EL 5606
EL 8175
EL 8821
ML 1324
ML 1337
ML 1359
ML 1406
ML 1428
ML 1465
ML 1474
ML 1482
ML 1500
ML 1526
ML 1560
ML 1589
ML 1622
ML 1634
ML 1682
Assessment Lease Application
Assessment Lease Application
Assessment Lease Application
Authorisation
Sublease
Consolidated Coal Lease
Consolidated Coal Lease
Coal Lease
Coal Lease
Coal Lease
Coal Lease
Coal Lease
Consolidated Mining Lease
Exploration Licence
Exploration Licence
Exploration Licence
Exploration Licence
Exploration Licence
Exploration Licence
Exploration Licence
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
30
TITLE TENEMENT
TENEMENT TYPE
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
PROJECT
HVO
Ashton
Austar
ML 1704
ML 1705
ML 1706
ML 1707
ML 1710
ML 1732
ML 1734
ML 1748
ML 1753
MLA 489
MLA 495
MLA 496
MLA 520
MLA 534
MLA 535
MLA 542
MLA 543
EL 4918
EL 5860
ML 1529
ML 1533
ML 1623
ML 1696
MLA 351
MLA 394
MLA 500
CCL 728
CCL 752
CML 2
DSL 89
EL 6598
ML 1157
ML 1283
ML 1345
ML 1388
YANCOAL ANNUAL REPORT 2019
PROJECT
Austar
TITLE TENEMENT
TENEMENT TYPE
ML 1550
ML 1661
ML 1666
ML 1677
MPL 23
MPL 204
MPL 217
MPL 233
MPL 269
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Purpose Lease
Mining Purpose Lease
Mining Purpose Lease
Mining Purpose Lease
Mining Purpose Lease
Mining Lease Application
Mining Lease Application
MPL 1364
Mining Purpose Lease
MLA 521
Mining Lease Application
Mining Lease Application
Donaldson
Mining Lease Application
Mining Lease Application
Mining Lease Application
Mining Lease Application
Mining Lease Application
Exploration Licence
Exploration Licence
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease Application
ALA 70
ALA 71
ALA 72
EL 5337
EL 5497
EL 5498
EL 6964
ML 1461
ML 1555
ML 1618
ML 1653
ML 1703
ML 1756
Assessment Lease Application
Assessment Lease Application
Assessment Lease Application
Exploration Licence
Exploration Licence
Exploration Licence
Exploration Licence
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Mining Lease Application
Middlemount
MDL 282
Mineral Development Licence
Mining Lease Application
Consolidated Coal Lease
Consolidated Coal Lease
Consolidated Mining Lease
Dam Site Lease
Exploration Licence
Mining Lease
Mining Lease
Mining Lease
Mining Lease
Monash
Oaklands
Rhondda
ML 700014
Mining Lease
ML 700027
Mining Lease
ML 70379
ML 70417
ALA 73
EL 6123
EL 7579
AL 18
CCL 774
ML 1787
Mining Lease
Mining Lease
Assessment Lease Application
Exploration Licence
Exploration Licence
Assessment Lease
Consolidated Coal Lease
Mining Lease
31
FINANCIAL REPORT
FINANCIAL
REPORT
MANAGEMENT DISCUSSION
AND ANALYSIS
DIRECTORS’ REPORT
AUDITOR’S
INDEPENDENCE
DECLARATION
CONTINUING CONNECTED
TRANSACTIONS
CORPORATE GOVERNANCE
STATEMENT
CONSOLIDATED
STATEMENT OF PROFIT
OR LOSS AND OTHER
COMPREHENSIVE INCOME
CONSOLIDATED
BALANCE SHEET
CONSOLIDATED
STATEMENT
OF CHANGES IN EQUITY
CONSOLIDATED
STATEMENT
OF CASH FLOWS
NOTES TO THE FINANCIAL
STATEMENTS
DIRECTORS’
DECLARATION
INDEPENDENT
AUDITOR’S REPORT
SHAREHOLDING
STATISTICS
CORPORATE
DIRECTORY
34
54
71
72
78
101
102
103
104
105
175
176
182
184
32
YANCOAL ANNUAL REPORT 2019
33
BUSINESS OVERVIEW
Yancoal operates a diversified portfolio of world class assets
consisting of both large scale open cut and underground mines
comprising five coal mine complexes in Australia.
As a leading low cost coal producer in the global seaborne
market, Yancoal’s coal mining operations produce a mix of
premium thermal, semi-soft coking, and pulverised coal
injection (“PCI”) coals, together with mid-to–high ash thermal
coals. The Group’s financial results are largely dependent
on the demand for thermal and metallurgical coal, which in
turn depends on macroeconomic trends, including regional
and global economic activity, and the price and availability
of alternative forms of energy production.
Our customers are located throughout the Asia-Pacific
region with Japan, Singapore, China, South Korea and Taiwan
accounting for approximately 78% of our revenue from coal
sales in the year ended 31 December 2019.
Thermal coal is primarily used in electricity generation and
its ends users are typically power and utilities companies.
Metallurgical coal is primarily used to produce coke for blast
furnace steel production and its end users are typically steel
plants. We also sell coal to customers in the commodities
trading business, who purchase the Group’s coal for trading
purposes or to on-sell to their end customers. Commodity
traders are similarly exposed to regional and global demand
trends in the coal market.
The Group’s export thermal coal is generally priced on either
an index price, an annual fixed price or on a spot price basis.
Generally, lower ash products are priced relative to the
GlobalCOAL Newcastle index and higher ash products are
priced relative to the Argus/McCloskey API5 index. Annual
fixed price contracts are mostly priced against the Japanese
Power Utility (“JPU”) Reference Price, which is the contract
price agreed between major Australian Suppliers and Japanese
Power Utilities. The balance of our sales are priced on a fixed
spot price negotiated at the time of settlement that also
reflect t he term of the arrangement.
The Group’s export metallurgical coal is either priced on a
benchmark or spot price basis. Most term contracts are priced
against a benchmark pricing mechanism which is negotiated
on a quarterly price basis between major Australian suppliers
and Japanese steel mills. Spot sales are priced relative to the
market at the time and are mostly done on a fixed price basis.
The large majority of the Group’s semi-soft coking coal out of
Newcastle and low volatile PCI coal out of Queensland is priced
relative to the quarterly benchmark.
During the year ended 31 December 2019 (“Period”), the
demand profile for thermal coal in the Asia-Pacific region
softened as a result of several factors and supply options
strengthened. As a consequence of evolving market
conditions, index coal prices moved lower and the premium
for high-grade thermal coal relative to lower grade indices
narrowed. In the latter half of the Period strong supply of
metallurgical coal saw prices reduce.
Yancoal actively considers the effect that its supply level can have
on specific coal markets and responds appropriately to prevailing
market conditions. To counter the anticipated short term
volatility in thermal coal price indices, we continue to optimise
the product quality and volume we place into the market.
Australia is expected to retain a market share of around 26% of
the growing world seaborne thermal coal requirement and to
play a critical role as a primary source of premium grade coals.
Ongoing challenges associated with obtaining development
approvals for greenfield projects has the potential to support
premium coal prices and domestic exporters with brownfield
expansion opportunities, such as Yancoal, should benefit from
such conditions.
The Group’s coal sales revenue is typically recognised on a
Free in Board (“FOB”) basis when coal is loaded at the load
port in Australia.
The Group’s overall average ex-mine selling price of coal
decreased by 16% from $132 per tonne in 2018 to $111 per
tonne in 2019, mainly as a result of (i) a decrease in global
US$ coal prices and (ii) a higher proportion of thermal coal
sales being Moolarben’s higher ash product partially offset
by the Australian dollar weakening against the US dollar from
an average of 0.7479 in 2018 to 0.6952 in 2019. The Group’s
average selling price of thermal coal decreased from
$123 per tonne to $100 per tonne and the average selling
price of metallurgical coal decreased from $182 per tonne
to $167 per tonne.
The Group’s overall average cash operating costs per ex-mines
sales tonne, excluding government royalties, decreased from
$63 per tonne in 2018 to $61 per tonne in 2019.
The table below sets out the Run of Mine (“ROM”) and
saleable production for each Yancoal owned mine on a 100%
basis during the Group’s period of ownership.
YEAR ENDED 31 DECEMBER
OWNERSHIP
%1
85
82.9
51
100
100
~50
100
85
82.9
51
100
100
~50
100
ROM production
Moolarben
MTW
HVO
Yarrabee
Stratford Duralie
Middlemount
Watagan
Total – 100% basis
Saleable production
Moolarben
MTW
HVO
Yarrabee
Stratford Duralie
Middlemount
Watagan
Total – 100% basis
2019
MT
20.5
17.6
19.2
3.4
1.2
3.4
3.7
69.0
17.8
12.1
13.7
2.8
0.8
2.7
2.2
52.1
2018
MT
CHANGE
%
18.6
17.6
19.0
3.5
0.7
4.8
2.4
66.6
16.5
12.1
13.3
2.6
0.5
3.8
1.2
50.0
10%
-%
1%
(3%)
71%
(29%)
54%
4%
8%
-%
3%
8%
60%
(29%)
83%
4%
1 Ownership percentage stated as at 31 December 2019.
34
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS The Group’s saleable coal production, excluding Middlemount,
was up 8% from 32.9Mt in 2018 to 35.6Mt in 2019 and
including Middlemount was up 6% from 34.8Mt in 2018 to
36.9Mt in 2019. This included an increase in the three tier-one
assets of Moolarben, MTW and HVO of 7% from 29.8Mt in
2018 to 32.0Mt in 2019.
The saleable production contribution of the Group’s tier-one
assets increased from 86% in 2018 to 87% in 2019.
Thermal coal saleable production increased by 11% from
27.3Mt in 2018 to 30.2Mt in 2019 and metallurgical coal
saleable production decreased by 11% from 7.5Mt in 2018 to
6.7Mt in 2019. Thermal coal represented 82% of total saleable
coal production in 2019 a small increase from 78% in 2018.
The key risks affecting the Group’s operations and where
applicable, the strategies and measures taken to manage these
risks are detailed in the Corporate Governance Statement
included in this report.
ROM coal production was up 4% from 66.6Mt in 2018 to
69.0Mt in 2019. This included an increase in the three tier-one
assets (being Moolarben, MTW and HVO) of 4% from 55.2Mt in
2018 to 57.3Mt in 2019.
Saleable coal production was up 4% from 50.0Mt in 2018 to
52.1Mt in 2019. This included an increase in the three tier-one
assets of 4% from 41.9Mt in 2018 to 43.6Mt in 2019.
Moolarben’s ROM production increased by 1.9Mt (10%) and
its saleable production increased by 1.3Mt (8%) with 1.1Mt
of the increase in ROM attributable to the open cut and 0.8Mt
attributable to the underground. The smaller increase in
saleable production was primarily attributable to a reduced
proportion of bypass coal.
MTW’s ROM and saleable production was flat across the two
reporting periods.
HVO’s ROM production increased by 0.2Mt (1%) whilst its
saleable production increased by 0.4Mt (3%). The larger
increase in saleable production was primarily attributable
to 1.5Mt of bypass coal.
The below table sets out the Group’s ongoing economic
interest in the saleable production for each Yancoal owned
mine that contributes to the financial results of the Group.
i.e. excludes Watagan.
YEAR ENDED 31 DECEMBER
OWNERSHIP
%1
85
82.9
51
100
100
~50
Saleable production
Moolarben
MTW
HVO
Yarrabee
Stratford Duralie
Middlemount
(equity- accounted)
Total – equity basis
Thermal
Metallurgical
2019
MT2
15.2
9.9
6.9
2.8
0.8
35.6
1.3
36.9
30.2
6.7
36.9
2018
MT2
13.3
9.7
6.8
2.6
0.5
32.9
1.9
34.8
27.3
7.5
34.8
CHANGE
%
14%
2%
1%
8%
60%
8%
(32%)
6%
11%
(11%)
6%
1 Ownership percentage stated as at 31 December 2019
2
Includes saleable production of (i) 81% of the Moolarben unincorporated
joint venture up to and including 30 November 2018 and 85% thereafter
(ii) 51% of the unincorporated HVO joint venture representing the Group’s
ongoing economic interest (iii) 64.1% of the unincorporated MTW joint
venture up to and including 28 February 2018 and 82.9% thereafter
(iv) 100% of Yarrabee and Stratford Duralie (v) ~50% of Middlemount
although equity accounted.
35
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL RESULTS REVIEW
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2019
For the management discussion and analysis, the Group’s operating results for the year ended 31 December 2019 are compared
with the operating results for the year ended 31 December 2018.
All financial numbers included below and in the commentary to follow are stated in Australian dollars (A$ or $) unless otherwise stated.
Revenue
Other income
Changes in inventories of finished
goods and work in progress
Raw materials and consumables
Employee benefits
Transportation
Contractual services and plant hire
Government royalties
Coal purchases
Other operating expenses
Share of profit of equity- accounted
investees, net of tax
EBITDA
EBITDA %
Depreciation and amortisation
EBIT
EBITDA %
Net finance costs
Non-operating items
Profit before income tax
Profit before income tax %
Income tax expense
Income tax one-off
Profit after income tax
Profit after income tax %
Attributable to:
– Owners of Yancoal
– Non–controlling interests
IFRS REPORTED
$M
4,460
101
39
(707)
(525)
(562)
(388)
(310)
(332)
(145)
(24)
1,607
36
(607)
1,000
22
(233)
–
767
17
(48)
–
719
16
719
–
2019
NON-
OPERATING
$M
65
(93)
–
–
–
–
–
–
–
56
–
28
–
28
621
(90)
–
–
(219)
219
–
–
–
–
YEAR ENDED 31 DECEMBER
OPERATING
$M
4,525
IFRS REPORTED
$M
4,850
8
39
(707)
(525)
(562)
(388)
(310)
(332)
(89)
(24)
1,635
36
(607)
1,028
23
(171)
(90)
767
17
(267)
219
719
16
719
–
150
31
(669)
(518)
(537)
(418)
(347)
(332)
(278)
56
1,988
41
(523)
1,465
30
(293)
–
1,172
24
(320)
852
18
852
–
2018
NON-
OPERATING
$M
41
(82)
–
–
–
–
29
–
–
204
–
192
–
–
192
–
231
(215)
–
–
–
–
–
–
–
OPERATING
$M
4,891
68
31
(669)
(518)
(537)
(389)
(347)
(332)
(74)
56
2,180
45
(523)
1,657
34
(270)
(215)
1,172
24
(320)
852
18
852
–
CHANGE
%
(15%)
(712%)
26%
6%
1%
5%
(–%)
(11%)
–
20%
(143%)
(25%)
16%
(38%)
(37%)
58%
(35%)
17%
–
(16%)
(16%)
–
1
Includes the reclassification of interest income of $125 million (2018: $119 million) from Other income to Net finance costs and Bank fees and other charges
of $56 million (2018: $96 million) from Other operating expenses to Net finance costs as these amounts are excluded from Operating EBITDA. Also, includes
$7 million of interest received on the arbitration award settled in 2020 which has been treated as non-operating (refer to Overview of non-operating items below).
To supplement the Group’s consolidated financial statements, which are presented in accordance with International Financial
Reporting Standards (“IFRSs”) the Group also uses adjusted Operating EBITDA and Operating EBIT as additional financial
measures, as set out in the table above, which are unaudited and not required by or presented in accordance with, IFRSs.
These financial measures are presented because they are used by management to evaluate the Group’s financial performance.
These non-IFRSs measures provide additional information to investors and others in understanding and evaluating the
consolidated results of operations in the same manner as they help management compare the financial results across accounting
periods with those of our peer companies, by removing one-off or non-operating items.
As presented by the management, Operating EBITDA represents profit or loss before income tax for the year as adjusted for net
finance costs, depreciation and amortisation and any significant non-operating items, while Operating EBIT represents profit or
loss before income tax as adjusted for net finance costs and any significant non-operating items.
36
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
Profit after income tax decreased by 16% from $852 million in
2018 to $719 million in 2019 and was fully attributable to the
owners of Yancoal with no non-controlling interests.
Profit attributable to the owners of Yancoal of $719 million
was impacted by a number of non-operating items during
2019. These totaled a net loss before tax impact of $90 million
comprising a $190 million fair value loss recycled from the
hedge reserve, a $56 million favourable arbitration award
including $7 million of interest, a $12 million contingent royalty
revaluation gain and a $32 million royalty revaluation gain. In
addition, a one-off tax benefit of $219 million was recognised
relating to the finalisation of the tax base attributable to the
Group on the acquisition of Coal & Allied on 1 September
2017 (“C&A Acquisition”). These are discussed in more detail
separately below, refer “Overview of non-operating items”,
and have been excluded from the operating commentary.
OVERVIEW OF OPERATING RESULTS
The below comparison of the financial results for the years
ended 31 December 2019 and 31 December 2018 is impacted
by changes in the Group’s portfolio of assets, most significantly
the acquisition of a further 28.9% interest in the Warkworth
joint venture effective from 1 March 2018; the disposal of a
16.6% interest in the HVO joint venture from 4 May 2018 and
the acquisition of a further 4% interest in the Moolarben joint
venture from 1 December 2018.
The analysis in this section includes ex-mine sales tonnes
and ex-mine revenue comprising (i) 81% of the Moolarben
unincorporated joint venture up to and including 30 November
2018 and 85% thereafter (ii) 67.6% of the unincorporated
HVO joint venture up to and including 3 May 2018 and 51%
thereafter (iii) 64.1% of the unincorporated MTW joint venture
up to and including 28 February 2018 and 82.9% thereafter (iv)
100% of Yarrabee and Stratford Duralie.
The result of HVO includes the 16.6% interest subsequently
sold to Glencore Coal Pty Ltd (“Glencore”) on 4 May 2018
as during the first four months of 2018 the Group included
the operating results of the 16.6% in its income statement
and balance sheet. The economic interest of the said
16.6% interest was effectively transferred to Glencore on
1 September 2017 however this was compensated through an
agreed reduced settlement price mechanism.
The results of Middlemount and Watagan are excluded from
the line by line commentary below because their results, as
incorporated equity-accounted investments, are included in
share of profits of equity-accounted investees, net of tax in the
statement of profit and loss and is discussed separately below.
REVENUE
Ex-mine coal sales1
Sale of purchased coal
Other
Sale of coal
Mining service fees
Sea freight
Other
Revenue
YEAR ENDED 31 DECEMBER
2019
$M
3,932
415
18
4,365
43
83
34
2018
$M
4,416
287
37
4,740
46
66
39
4,525
4,891
CHANGE
%
(11%)
39%
(5%)
(8%)
(7%)
26%
13%
(7%)
1
Ex-mine coal sales include only coal that has been produced at one of the
Group’s mines. They exclude the sale of coal that has been purchased from
third parties.
Total revenue decreased by 7 % from $4,891 million in 2018 to
$4,525 million in 2019, primarily due to an 8% decrease in coal
sales revenue from $4,740 million in 2018 to $4,365 million in
2019. With respect to coal sales revenue, the key factors were:
Thermal coal
Average selling price
(A$ per tonne)
Sales volume (Mt)
% of total ex-mine sales
volume
Total ex-mine thermal
coal revenue
(A$ million)
Metallurgical coal
Average selling price
(A$ per tonne)
Sales volume (Mt)
% of total ex-mine sales
volume
Total ex-mine
metallurgical coal
revenue (A$ million)
Total coal
Average selling price
(A$ per tonne)
Total ex-mine sales
volume (Mt)
Total ex-mine coal
revenue (A$ million)
YEAR ENDED 31 DECEMBER
2019
100
30.1
85
2018
CHANGE %
123
28.4
85
(19%)
6%
–
3,015
3,484
(13%)
167
5.5
15
917
111
35.6
182
5.1
15
932
132
33.5
3,932
4,416
(8%)
8%
–
(2%)
(16%)
6%
(11%)
37
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS A decrease in the Group’s overall average ex-mine selling price
of coal of 16% from $132 per tonne in 2018 to $111 per tonne
in 2019 resulting from (i) a decrease in global US$ coal prices
with the weekly average GlobalCOAL Newcastle thermal coal
index price falling by US$30/t (28%) during the same period
and the average semi-soft coking coal benchmark price falling
by US$18/t (13%) during the same period and (ii) a higher
proportion of thermal coal sales being Moolarben’s higher ash
product partially offset by the Australian dollar weakening
against the US dollar by 7% from an average of 0.7479 in 2018
to 0.6952 in 2019. Global US$ thermal coal prices have fallen
during the Period due to the demand profile for thermal
coal in the Asia-Pacific region softening as a result of several
factors and supply options strengthened. As a consequence
of evolving market conditions, index coal prices moved lower
and the premium for high-grade thermal coal relative to lower
grade indices narrowed. In the latter half of the Period strong
supply of metallurgical coal saw prices depreciate. The Group’s
average selling price of thermal coal decreased from $123 per
tonne to $100 per tonne. The Group’s average selling price
of metallurgical coal decreased from $182 per tonne to $167
per tonne.
An increase in the Group’s ex-mine sales volume of coal of 6%
from 33.5Mt in 2018 to 35.6Mt in 2019, mainly due to a 1.6Mt
increase in sales at Moolarben.
YEAR ENDED 31 DECEMBER
2019
2018
AMOUNT
$’M
1,139
% OF
REVENUE
26%
AMOUNT
$’M
1,055
% OF
REVENUE
22%
683
546
533
465
453
338
208
16%
13%
12%
11%
10%
8%
4%
739
664
518
861
295
343
265
16%
14%
11%
18%
6%
7%
6%
Japan
China
South Korea
Taiwan
Singapore
Australia
Thailand
Others1
Total revenue from
external customers
4,365
100%
4,740
100%
1 Others includes Germany, Malaysia, Vietnam, India, Luxembourg and USA.
Sales by customer location as a percentage of total coal sales
revenue remained largely stable across 2018 and 2019 with
several notable exceptions.
The increase in Japan was primarily due to targeted end user
business in these typically premium priced markets increasing
the volume of direct sales.
The decrease in Singapore was primarily due to a continued
focus on developing end user business and reducing coal sales
to traders, some of whom are located in Singapore.
The increase in Australia was primarily on higher sales to other
local coal producers for their blending purposes, rather than
local coal traders.
Other income
Net gain on foreign exchange
Sundry income
Other income
YEAR ENDED 31 DECEMBER
2019
$M
-
8
8
2018
$M
61
7
68
CHANGE
%
–
14%
(88%)
Other income decreased from $68 million in 2018 to $8 million
in 2019. In 2018 this included a net gain on foreign exchange of
$61 million primarily recognised on holding US$ cash balances
as the Australian dollar weakened during 2018. In 2019 this is
a net loss on foreign exchange of $5 million and is included in
Other operating expenses.
Changes in inventories of finished goods and work in
progress
Changes in inventories of finished goods and work in progress
increased from $31 million in 2018 to $39 million in 2019.
PRODUCTION COSTS
All-in total production costs, which include cash and non-
cash operating costs, represent costs directly attributable to
the production, transportation and selling of coal as well as
indirect corporate costs, in particular, corporate employee
costs, but excluding transaction costs. Cash operating costs
comprise the cost of raw materials and consumables used,
employee benefits, contractual services and plant hire and
transportation. Non-cash operating costs include depreciation
and amortisation.
PER EX-MINE SALES TONNE1
Cash operating costs
Raw materials and
consumables used
Employee benefits
Transportation
Contractual services and
plant hire2
Cash operating costs
(excluding royalties)
Royalties
Cash operating costs
Non-cash operating costs
Depreciation and amortisation2
Total production costs
Total production costs
(excluding royalties)
YEAR ENDED 31 DECEMBER
2019
$/T
2018
$/T
20
15
16
11
61
9
70
17
87
78
20
16
16
11
63
10
73
16
89
79
1
Ex-mine sales tonnes includes (i) 81% of the Moolarben unincorporated
joint venture up to and including 30 November 2018 and 85% thereafter
(ii) 67.6% of the unincorporated HVO joint venture up to and including
3 May 2018 and 51% thereafter (iii) 64.1% of the unincorporatedMtW joint
venture up to and including 28 February 2018 and 82.9% thereafter (iv)
100% of Yarrabee and Stratford Duralie.
2
Effective from 1 January 2019 the Group has adopted the new accounting
standard AASB 16 Leases. Under the new standard all lease arrangements
38
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS are treated as “on balance sheet” replacing the previous operating and
finance lease distinctions. The result of the change is that an operating
lease expense is no longer included in the profit and loss as a contractual
services and plant hire expense in the period incurred rather a “value in
use” asset and lease liability is recognised on the balance sheet similar to
the previous finance lease accounting treatment. The result of this change
is a decrease in the Group’s cash operating costs with a largely offsetting
increase in depreciation and interest. The 2018 numbers included above
have been restated to enhance the comparability.
Raw materials and consumables used
Raw materials and consumables used increased by 6% from
$669 million in 2018 to $707 million in 2019, primarily due to
increased production. Per ex-mine sales tonne raw materials
and consumables remained flat at $20 over the same period.
Employee benefits
Employee benefits expenses increased by 1% from
$518 million in 2018 to $525 million in 2019, primarily due to
increased production being partially offset by improved labour
productivity and a lower corporate expense. This contributed
to a decrease in per ex-mines sales tonne employee benefits
expenses from $16 to $15 over the same period.
Transportation
Transportation costs increased by 5% from $537 million in
2018 to $562 million in 2019, primarily due to increased sales
volume of coal requiring additional payments for rail and
freight services. Per ex-mine sales tonne transportation costs
remained flat at $16 over the same period.
Contractual services and plant hire
Contractual services and plant hire expenses decreased by -%
from $389 million in 2018 to $388 million in 2019. The 2018
number included $16 million of operating lease expenses no
longer recognised in 2019. After adjusting for this amount
contractual services and plant hire expenses would have
increased by 4% from $373 million in 2018 to $388 million in
2019 primarily due to increased production. Per ex-mine sales
tonne contractual services and plant hire costs, adjusted for
the new lease accounting standard, remained flat at $11 over
the same period.
Government royalties
Government royalty expenses decreased by 11% from
$347 million in 2018 to $310 million in 2019, primarily due to
an 11% decrease in ex-mine coal sales revenue. Royalties are
determined on an ad valorem basis by reference to the value
of coal sold, the type of mine and the State the mine is located
in and are payable to the appropriate State government.
This contributed to a decrease in per ex-mines sales tonne
government royalties from $10 to $9 over the same period.
Coal purchases
Coal purchases remained flat at $332 million in both 2018 and
2019 reflecting a consistent level of coal purchases.
Other operating expenses
Other operating expenses increased by 20% from $74 million in
2018 to $89 million in 2019, and included a $5 million net loss
on foreign exchange (2018: $61 million net gain recognised in
Other income). After adjusting for this amount other operating
expenses increased by 14% impacted by several one-off items.
Share of profit of equity-accounted investees, net of tax
Share of profit of equity-accounted investees, net of tax
decreased by 143% from $56 million in 2018 to a net loss
of $24 million in 2019 primarily due to the declining profit
after tax performance of the incorporated Middlemount
joint venture negatively impacted by an increase in strip
ratio due to setting back the high wall and a 32% decrease in
saleable production impacted by the unfortunate fatality at
the mine in July 2019 together with the ongoing challenging
geotechnical conditions and a 7% decrease in realised A$ coal
price. At 31 December 2019 the Group’s equity-accounted
investment in Watagan is held on the balance sheet at nil value
such that the loss after tax of the Watagan group of $856
million for the year ended 31 December 2019, including a $973
million impairment provision, before tax, is not reflected in
the Group’s statement of profit and loss for the same period.
Operating EBITDA and operating EBITDA margin
Operating EBITDA decreased by 25% from $2,180 million in
2018 to $1,635 million in 2019. The $545 million decrease
was due to (i) a $426 million (9%) decrease in revenue and
other income primarily due to lower coal prices; (ii) a $54
million (2%) increase in costs primarily due to increased
production; and (iii) a decrease in share of profit from
Middlemount of $80 million; partially offset by a $15 million
reduction in contractual services and plant hire due to the
new lease accounting standard. Operating EBITDA margin as
a percentage of operating revenue decreased from 45% in
2018 to 36% in 2019.
Depreciation and amortization
Depreciation and amortisation expenses increased by 16%
from $523 million in 2018 to $607 million in 2019 including
the impact of the new lease accounting standard. The 2019
number includes $25 million of additional depreciation on
leases that was not recognised in 2018. After adjusting for this
amount depreciation and amortisation would have increased
by 11% over the same period primarily due to increased
production, particularly on the Moolarben underground
which carries a higher per tonne depreciation charge and the
impact of some accelerated depreciation recognised at HVO
and Stratford Duralie. Per ex-mine sales tonne depreciation
and amortisation costs, adjusted for the new lease accounting
standard, increased from $16 to $17 over the same period.
Operating EBIT and operating EBIT margin
Operating EBIT decreased by 38% from $1,657 million in 2018
to $1,028 million in 2019 primarily due to 25% decrease in
Operating EBITDA and a 16% increase in depreciation and
amortisation as noted above. Operating EBIT margin as a
percentage of operating revenue decreased from 34% in 2018
to 23% in 2019.
Net finance costs
Net finance costs decreased by 37% from $270 million in 2018
to $171 million in 2019, primarily due to (i) an overall reduction
in interest-bearing liabilities during 2019 compared to 2018
following several voluntary loan repayments; (ii) a reduction in
the Yanzhou guarantee fee provided on the Group’s syndicated
facility; and (iii) a decrease in the Group’s variable interest
loans from an average of 7.10% in 2018 to an average of 6.59%
39
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS in 2019 partially offset by a decrease in the A$:US$ exchange
rate during the period from an average of 0.7479 in 2018 to
an average of 0.6952 in 2019 resulting in an increase in the
Australian dollar value finance charge, where the Group’s loans
are denominated in US dollars.
Profit before income tax and profit before income tax margin
As a result of the aforementioned reasons, profit before
income tax decreased by 35% from $1,172 million in 2018 to
$767 million in 2019. Profit before income tax margin as a
percentage of operating revenue decreased from 24% to 17%
over the same period.
Income tax expense
Income tax expense decreased by 17% from $320 million in
2018 to $267 million in 2019. The effective tax rate was 27.3%
and 34.8% in the same periods, respectively, compared to
the Australian corporate income tax rate of 30%. In 2019
the higher effective tax rate primarily resulted from non-
deductible equity-accounted losses and prior year true ups.
In 2018 the lower effective tax rate primarily resulted from
certain non-assessable income items including part of the
gain on the partial disposal of HVO partially offset by certain
non-deductible items including the re-measurement and
impairment of financial assets relating to Wiggens Island Coal
Export Terminal (“WICET”) and stamp duty.
Profit after income tax and profit after income tax margin
As a result of the aforementioned reasons, profit after income
tax decreased by 16% from $852 million in 2018 to $719
million in 2019. Profit after income tax margin as a percentage
of operating revenue decreased from 18% to 16% over the
same period.
OVERVIEW OF NON-OPERATING ITEMS
Non-operating items in the year ended 31 December 2019 and
2018 included the following:
YEAR ENDED 31 DECEMBER
Non-operating items
Fair value losses recycled from hedge
reserve
Arbitration award
Re-measurement of royalty receivable
Re-measurement of contingent royalty
Gain on disposal of interest in joint
venture
Re-measurement of financial assets
Impairment of financial assets
Stamp duty expensed
Transaction costs
Profit before tax impact
Tax base finalisation
Profit after tax impact
2019
$M
(190)
56
32
12
–
–
–
–
–
(90)
219
129
2018
$M
(160)
–
4
(33)
78
(29)
(21)
(25)
(29)
(215)
–
(215)
Fair value losses recycled from the hedge reserve of
$190 million (2018: $160 million) represent retranslation
losses on the Group’s US dollar-denominated loans which
are attributable to changes in US$:A$ foreign exchange
rates. Under the Group’s natural hedge policy, such losses
are recycled to the statement of profit and loss based on the
scheduled loan maturity dates. The amount of any fair value
loss or gain recycled from the hedge reserve in a period is a
function of the amount of the hedged US dollar loan scheduled
to mature in that period and the respective US$:A$ exchange
rates at the time the hedge was put in place and at the time
the loan matured.
Arbitration award of $56 million (2018: nil) relates to an
international arbitration award to the Group in the second half
of the year over a commercial dispute. The award itself was for
$49 million with $7 million of interest also received. The full
amount of the award has been received by the Group.
Re-measurement of the royalty receivable of $32 million
(2018: $4 million) relates to the change in the estimated fair
value of the Group’s Middlemount royalty receivable recognised
on its right to receive a royalty of 4% of Free on Board
Trimmed Sales on 100% of the Middlemount mine coal sales.
Re-measurement of contingent royalty up by $12 million
(2018: down by $33 million) represents a decrease in the
provision recognised on the C&A Acquisition with respect to
the contingent coal price-linked royalty potentially payable
to Rio Tinto from 1 September 2020 due to a softening of the
thermal coal price forecasts.
Tax base finalisation of $219 million (2018: nil) relates to the
finalisation of the tax base attributable to the Group on the
C&A Acquisition.
In 2018 non-operating items also included a $78 million gain
on the disposal of a 16.6% interest in HVO, a $29 million
re- measurement of financial assets and a $21 million
impairment of financial assets both related to the decrease
in the carrying value of the Group’s investments in the WICET
issued E Class Wiggens Island preference Securities and WICET
issued Gladstone Island Long Term Securities, $25 million
of stamp duty on the acquisition of a further 28.9% interest
in the Warkworth joint venture, a further 4% interest in the
Moolarben joint venture and the final true up on the C&A
acquisition and $29 million of transaction costs recognised
on the Hong Kong Initial Public Offering (IPO) (excluding
capitalised equity raise costs) and the finalisation of the
Warkworth, Moolarben and C&A acquisitions.
CASH FLOW ANALYSIS
Net operating cash
flows
Net investing cash flows
Net financing cash flows
Net increase in cash
YEAR ENDED 31 DECEMBER
2019
$M
1,548
(392)
(1,209)
(53)
2018
$M
1,747
(55)
(904)
788
CHANGE
$M
(199)
(337)
(305)
(841)
Net operating cash flows
Net operating cash inflows decreased by $199 million (11%)
to $1,548 million reflecting a decrease in net receipts from
customers over payments to suppliers primarily due to a 7%
decrease in revenue over the same period.
40
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS Net investing cash flows
Net investing cash outflows increased by $337 million
(613%) to $392 million mainly reflecting the acquisitions
and disposals undertaken by the Group. In 2019 investing
cash outflows included (i) a $42 million instalment payment
for a further 4% in the Moolarben joint venture; (ii) $285
million of capital expenditure, including exploration; and (iii)
a net $66 million provided to Watagan under the Watagan
loan facility. In 2018 the net investing cash inflows included
outflows of (i) $353 million paid for a further 28.9% interest
in the Warkworth joint venture and instalment payments
for a further 4% interest in the Moolarben joint venture,
net of cash acquired; (ii) $198 million of capital expenditure,
including exploration; (iii) a net $123 million provided to
Watagan under the Watagan loan facility; and (iv) $119 million
of non-contingent royalty payments relating to the C&A
acquisition. These outflows were partially offset by inflows
including (i) $524 million received on the disposal of a 16.6%
interest in the HVO joint venture, net of cash disposed and
(ii) $117 million received as a loan repayment from the
Middlemount joint venture.
Net financing cash flows
Net financing cash outflows increased by $305 million (34%)
to an outflow of $1,209 million. In 2019 the net financing cash
outflow included (i) $698 million (US$500 million) of voluntary
debt repayments; and (ii) $514 million of dividends. In 2018 the
net cash outflow included (i) $1,014 million (US$750 million)
of voluntary debt repayments; (ii) $130 million interim
dividend; and (iii) $268 million of gross proceeds from the
Hong Kong IPO.
FINANCIAL RESOURCES AND LIQUIDITY
YEAR ENDED 31 DECEMBER
Current assets
Current liabilities
Net current assets
Total assets
Total liabilities
Total equity
2019
$M
1,773
(2,112)
(339)
11,093
(4,930)
6,163
2018
$M
1,922
(913)
1,009
11,379
(5,541)
5,838
CHANGE
$M
(149)
(1,199)
(1,348)
(286)
611
325
Current assets decreased by $149 million to $1,773 million
at 31 December 2019 mainly reflecting a decrease in cash
on hand of $69 million and trade and other receivables of
$99 million partially offset by an increase in inventories of
$35 million.
Current liabilities increased by $1,199 million to $2,112 million
at 31 December 2019 mainly reflecting the reclassification of
$1,236 million (US$866 million) of interest-bearing liabilities
from non-current to current due to two debt tranches
maturing in the next 12 months; US$300 million in June 2020
and US$566 million in December 2020.
Total assets decreased by $286 million to $11,093 million at
31 December 2019 reflecting the decrease in current assets
of $149 million noted above together with a $171 million
decrease in mining tenements due to amortisation during
the Period.
Total liabilities decreased by $611 million to $4,930 million
at 31 December 2019 mainly reflecting the voluntary debt
repayments of $698 million noted above.
Total equity increased by $325 million to $6,163 million at
31 December 2019 mainly reflecting the $719 million profit
after income tax for the year and the $122 million decrease in
the hedging reserve partially offset by dividend payments of
$514 million.
The Group’s primary source of liquidity was operating cash flows
that contributed $1,548 million in the year ended 31 December
2019. This enabled the payment of dividends of $514 million
and the further repayment of interest-bearing liabilities of
$698 million during the year ended 31 December 2019.
For the year ending 31 December 2020 the primary source of
liquidity is expected to continue to be operating cash flows
for ongoing business supplemented by refinancing existing
interest-bearing liabilities due within the next 12 months
and potentially additional interest-bearing liabilities for any
possible transactions. Historically, the Group’s primary sources
of liquidity have consisted of operating cash flows, interest-
bearing liabilities, including shareholder loans, and new equity.
The Group’s capital structure and gearing ratio is set out in the
table below.
Interest-bearing
liabilities
Less: cash and cash
equivalents
Net debt
Total equity
Net debt + total equity
Gearing ratio1
YEAR ENDED 31 DECEMBER
2019
$M
3,498
2018
$M
4,124
CHANGE
$M
(626)
(962)
(1,031)
2,536
6,163
8,699
0.29
3,093
5,838
8,931
0.35
69
(557)
325
(232)
1
The Group’s gearing ratio is defined as net debt (being interest-bearing
liabilities less cash and cash equivalents) divided by net debt + total equity.
The Group’s objective when managing its capital structure
is to provide sustainable dividends to equity holders, pay
down interest-bearing liabilities to a supportable level whilst
providing capital towards sustaining capital expenditure and
organic and inorganic expansion opportunities.
The gearing ratio reduced from 35% to 29% during the Period.
The Group’s Interest-bearing liabilities include secured
bank loans of $2,240 million (2018: $2,572 million) and
unsecured loans from related parties of $1,164 million
(2018: $1,510 million) both denominated in US dollars and
lease liabilities of $94 million (2018: $42 million) denominated
in Australian dollars.
Secured bank loans carry a floating interest rate calculated
with reference to the 3 month LIBOR rate for which the
average all-in rate for the year ended 31 December 2019 was
6.59% (2018: 7.10%). Unsecured loans from related parties
carry a fixed interest rate for which the rate for the year ended
31 December 2019 was 7.00% (2018: 7.00%).
41
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS The Group’s cash and cash equivalents includes $395 million
(2018: $282 million), US$346 million (2018: US$395 million)
and HK$396 million (2018: HK$1,046 million).
While the Group operates entirely in Australia and its costs
are primarily denominated in its functional currency, the
A$, foreign currency exposure arises particularly in relation
to coal supply contracts, which generally are priced and
payable in US$, procurement of diesel and imported plant
and equipment, which can be priced in US$ or other foreign
currencies, and debt denominated in US$.
The impact of exchange rate movements will vary depending
on factors such as the nature, magnitude and duration of the
movements, the extent to which currency risk is hedged under
forward exchange contracts or other hedging instruments and
the terms of these contracts.
The hedging policy of the Company aims to protect against
the volatility of cash expenditures or reduced collection in the
abovementioned transactions as well as to reduce the volatility
of profit or loss for retranslation of US dollar denominated
loans at each period end.
Operating foreign exchange risk that arises from firm
commitments or highly probable transactions is managed
through the use of bank issued forward foreign currency
contracts and collar option contracts. The Company hedges a
portion of contracted US$ sales and asset purchases settled
in foreign currencies in each currency to mitigate the adverse
impact on cash flow due to the future rise or fall in the A$
against the relevant currencies.
More details on interest-bearing liabilities, cash and cash
equivalents and equity including types of instrument used,
security provided, maturity profile of interest-bearing
liabilities, interest rates and hedging strategies are included in
notes D2, D4 and D9 to the financial statements in this report.
Available debt facilities
As at 31 December 2019 the Group has $583 million of
undrawn debt under its $1,400 million unsecured facility from
related parties.
As at 31 December 2019 the Group has $115 million of
undrawn bank guarantee facilities that are provided for
operational purposes in favour of port, rail, government
departments and other operational functions in the normal
course of business.
CAPITAL EXPENDITURE AND COMMITMENTS
During the year ended 31 December 2019 capital
expenditure cash flows of the Group amounted to
$285 million (2018: $198 million) comprising $282 million
(2018: $194 million) of property, plant and equipment and
$3 million (2018: $4 million) of exploration.
As at 31 December 2019 commitments of the Group comprised
capital commitments of $53 million.
SIGNIFICANT INVESTMENTS
The Company continues to look for high quality acquisition
opportunities. The Company has not completed any significant
inorganic investments since the end of 2019 but will inform
the market as required if and when any transaction occurs.
The Group focuses on organic growth opportunities and
business as usual capital expenditure.
The Group continues to pursue its long-term strategy for
organic growth, with a commitment to progressing its
brownfield expansion and extension projects.
In the year ahead, the Group will continue to focus on
exploration and expansion works across the tier-one assets
of MTW, HVO and Moolarben, to be funded from operating
cash flows.
Key projects include finalising the pre-feasibility study for an
underground development at MTW with an estimated capacity
6 million ROM tonnes per annum, which will be completed in
June 2020.
We will continue to increase production at Moolarben
where maximising extraction rates in both the open cut and
underground mines is a priority for the Company.
A revised HVO Life of Mine plan is being developed targeting
further synergy opportunities.
Organic growth opportunities are expected to be funded
through operating cashflows as part of the group’s overall
capital expenditure program.
Funding of any inorganic opportunities will be assessed on a
case by case basis and could include funding from operating
cashflows, interest-bearing liabilities or equity. It is noted as
part of the Hong Kong listing HK$392 million (A$72 million) was
reserved for future M&A activity and is currently still available.
MATERIAL ACQUISITIONS AND DISPOSALS
During the Period, the Group made no material acquisitions
or disposals.
EMPLOYEES
As at 31 December 2019, the Group had approximately 2,900
people working at the mines it owns and operates (including
contract labour who are full time equivalents), all located
in Australia, in addition to other contractors and service
providers who support the Group’s operations by delivering
fixed scopes of work. For the year ended 31 December 2019,
the total employee costs (including director’s emoluments,
HVO employees who are not included in the employee number
above and excluding contract labour, contractors and service
providers whose costs are included in Contractual services and
plant hire) amounted to $525 million (2018: $518 million).
Remuneration packages and benefits are determined in
accordance with market terms, industry practice as well
as the nature of duties, performance, qualifications and
experience of employees and are reviewed an on annual
basis. Remuneration packages include base wages or salaries,
short-term site production bonuses, short and long-term staff
incentives, non-monetary benefits, superannuation and long
service leave contributions and insurance.
The Group’s remuneration policies ensure remuneration is
equitable, aligns with the long-term interests of the Group and
Shareholders, comply with the diversity policy, provide market
competitive remuneration to attract and retain skilled and
motivated employees and structure incentives to link rewards
with performance.
42
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS Details of the Group’s incentive plans are included in the
Remuneration Report in the Directors’ Report in this report.
The Company believes that capable and competent employees
contribute to the success of the Group. The Group invests
in competence development and assurance programs to
ensure statutory compliance and zero harm to its employees.
The Group also contributes to the ongoing professional
development of its employees. This investment contributes to
a pipeline of employees who are ready to transition into new
roles as well as creating a value proposition for new employees
looking to join the Group.
EVENTS OCCURRING AFTER THE REPORTING DATE
Other than as disclosed below, no matters or circumstances
have occurred subsequent to the end of the Period which
has significantly affected, or may significantly affect, the
operations of the Group, the results of those operations or the
state-of-affairs of the Group.
On 28 February 2020, the Directors declared a final unfranked
dividend totalling $280 million (21.2 cents per share), with
a record date of 16 March 2020 and payment date of 29
April 2020.
On 9 March 2020, Mr David James Moult was appointed as
Chief Executive Officer (CEO) of the Company and resigned
as an Independent Non-Executive Director, the chairman of the
Health, Safety, Environment and Community Committee and
members of the Nomination and Remuneration Committee
and the Audit and Risk Management Committee. Mr Reinhold
Hans Schmidt resigned as CEO of the Company effective 8
March 2020.
On 20 March 2020, Mr Ning Zhang was appointed as an
Executive Director and Vice-Chair of the Company. Mr Zhang
was also appointed as Chair of the Executive Committee and
a member of the Health, Safety, Environment and Community
Committee. Mr Fucun Wang resigned as an Executive Director,
Vice-Chair of the Company and Chair of the Executive
Committee and a member of the Health, Safety, Environment
and Community Committee, effective 20 March 2020.
On 20 March 2020, Mr Lei Zhang resigned as Chief Financial
Officer (CFO).
On 31 March 2020, the Company announced the completion of
its acquisition through a wholly owned subsidiary for a further
10% interest in the tier-1 Moolarben complex for $300 million
including completion and deferred payments.
On 1 April 2020, the Company issued 1,449,459 performance
share rights under its short term equity incentive plan to
certain senior executives of the Company.
The Directors note the recent and ongoing global impacts of
the coronavirus (“COVID-19”) which at the date of this report
has not had a material impact on the Group’s operations. It
is unknown what impact, if any, potential changes to federal
or state laws implemented by the Government or the further
spread of COVID-19 may cause.
FINANCIAL AND OTHER RISK MANAGEMENT
The Group is exposed to financial risks arising from its
operations and the use of financial instruments. The key
financial risks include currency risk, price risk, interest rate
risk, credit risk and liquidity risk. The Board reviews and
agrees policies and procedures for management of these risks.
Currency Risk
The Group operates entirely in Australia and its costs
are primarily denominated in its functional currency, the
Australian dollar.
Export coal sales are denominated in US dollars and a
strengthening of the Australian dollar against the US dollar
has an adverse impact on earnings and cash flow settlement.
Liabilities for some plant and equipment purchases and loans
are denominated in currencies other than the Australian
dollar and a weakening of the Australian dollar against other
currencies has an adverse impact on earnings and cash flow
settlement.
The hedging policy of the Group aims to protect against
the volatility of cash expenditures or reduced collections
in the above-mentioned transactions as well as to reduce
the volatility of profit or loss for retranslation of US dollar
denominated loans at each period end. The latter is achieved
through the use of a natural cash flow hedge whereby
unrealised foreign exchange gains or losses arising on US dollar
denominated loans are deferred on the balance sheet in a
hedge reserve included in equity. Such deferred gains or losses
are recycled to the profit or loss during the six-month period in
which the loan is scheduled to be repaid. There is no guarantee
that that this natural cash flow hedge will be sufficient to offset
any foreign exchange losses, and material foreign exchange
losses could negatively impact our financial condition.
See note D9(a)(i) to the financial statements in this report for
further details on foreign currency exposure and a sensitivity
analysis of the impact of hypothetical increases and decreases
in the Australian dollar against relevant foreign currencies.
Price Risk
The price risk of the Group includes coal price risk.
The Group does not enter into commodity contracts other than
coal purchases to meet the Group’s expected usage and sales
requirements, such contracts are not settled net. The royalty
receivable from Middlemount is exposed to fluctuations in
coal price. The Group currently does not have any derivative
hedges in place against the movement in the spot coal price.
See note D9(d)(iii) to the financial statements in this report for
the royalty receivable coal price sensitivity analysis.
Coal sales are predominately provisionally priced initially.
Provisionally priced sales are those for which price finalisation,
referenced to the relevant index, is outstanding at the
reporting date. Provisional pricing mechanisms embedded
within these sales arrangements have the character of a
commodity derivative and are carried at fair value through
profit and loss as part of trade receivables. The final sales
price is determined normally 7 to 90 days after delivery to
the customer. At 31 December 2019, there are $114 million
of provisionally priced sales still to be finalised, of which
43
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS
$99 million is yet to be received. If prices were to increase by
10% provisionally priced sales would increase by $11 million.
standby facilities in place] in accordance with the Board’s risk
management policy.
Interest Rate Risk
The Group is subject to interest rate risk that arises from
borrowings and cash and cash equivalents. Generally, no
variable interest is receivable or payable on the Group’s trade
and other receivables or payables where applicable as they
are fixed in nature and therefore they are not exposed to the
interest rate risk.
The Group’s cash flow interest rate risk for assets primarily
arises from cash at bank and deposits subject to market bank
rates. Floating rate borrowings bearing LIBOR rates are re-set
on a quarterly basis.
See note D9(a)(iii) to the financial statements in this report for
a sensitivity analysis of the impact of hypothetical increases in
interest rates.
Credit Risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to
the Group. As at 31 December 2019 the Group’s maximum
exposure to credit risk which will cause a financial loss to
the Group due to failure to discharge an obligation by the
counterparties and financial guarantees provided by the Group
arises from the carrying amount of the respective recognised
financial assets as stated in the Consolidated Balance Sheet
and the amount of contingent liabilities in relation to financial
guarantees issued by the Group.
In order to minimise credit risk, management has delegated
a team responsible for determination of credit limits, credit
approvals and other monitoring procedures to ensure
that follow-up action is taken to recover overdue debts.
Letters of Credit in favour of Yancoal are requested from some
customers. In addition, the Group reviews the recoverable
amount of each individual trade debt at the end of the
reporting period to ensure that adequate impairment losses
are made for irrecoverable amounts. In this regard, the
Directors consider that the Group’s credit risk is significantly
reduced. The Group maintains its cash and cash equivalents
with reputable banks. Therefore, the Directors consider that
the credit risk for such amounts are minimal.
See note D9(b) to the financial statements in this report for
further details on the Group’s overall credit risk exposure.
Liquidity Risk
Liquidity risk includes the risk that the Group will not be able
to meet its financial obligations as they fall due. The Group will
be impacted in the following ways:
i. will not have sufficient funds to settle transactions on the
due date;
ii. will be forced to sell financial assets at a value which is less
than what they are worth; or
iii. may be unable to settle or recover a financial asset at all.
Liquidity risk is managed by maintaining sufficient cash
and liquid deposit balances and [having readily accessible
See note D9(c) to the financial statements in this report for
further details on the remaining contractual maturity of the
Group’s financial liabilities.
CONTINGENT LIABILITIES
The contingent liabilities of the Group as at 31 December
2019 comprise (i) $921 million (2018: $875 million) of bank
guarantees comprising $417 million (2018: $471 million)
of performance guarantees provided to third parties and
$504 million (2018: $404 million) of guarantees provided in
respect of the cost of restoration of certain mining leases
given to government departments as required by statute with
respect to the Group’s owned and managed mines (ii) a letter
of support provided to the Middlemount Coal Pty Limited
joint venture and (iii) a number of claims that have been made
against the Group, including in respect of personal injuries,
and in relation to contracts which Group members are party
to as part of the Group’s day to day operations.
See note D8 to the financial statements in this report for
further details on the Group’s contingent liabilities.
Charges on Assets
The Group has a Syndicated Bank Guarantee Facility provided
by a syndicate of seven Australian and International banks
totalling $1 billion. As at 31 December 2019 the facility was
drawn to $885 million.
The Group has a Syndicated Term Loan facility provided
by a syndicate of five Australian and International banks
totalling US$300 million. As at 31 December 2019 the facility
was fully drawn.
The Syndicated Bank Guarantee and Term Loan facilities
are both secured by the assets of the consolidated group of
Yancoal Resources Ltd and Coal & Allied Industries Ltd (both
wholly owned subsidiaries of Yancoal Australia) with a carrying
value of $6,435 million as at 31 December 2019.
FUTURE PROSPECTS
Yancoal will maintain strong cost discipline, with 2020 cash
costs (excluding government royalties) expected to remain flat
at around $61/t (2019: $61/t).
2020 guidance for saleable coal production is approximately
36 Mt (attributable). Expected 2020 capital expenditure cash
flow is around $380 million (attributable)1.
Yancoal has a long-term strategic commitment to organic
growth, through brownfield expansion and extension projects.
The current focus remains on exploration and expansion works
across MTW and Moolarben.
For 2020 and subject to the ongoing cash needs of the business
Yancoal will target a dividend payout of (A) 50% of net profit
after tax (pre-Abnormal Items); or (B) 50% of the free cash flow
(pre-Abnormal Items), whichever is higher.
1
Expected capital expenditure as at the time of printing 14-Apr-2020.
44
YANCOAL ANNUAL REPORT 2019MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS The Directors present their report on the consolidated entity
(“Yancoal” or “the Group”) consisting of Yancoal Australia Ltd
(“the Company”) and the entities it controlled at the end of, or
during, the year ended 31 December 2019.
DIRECTORS
The following persons were Directors of Yancoal Australia Ltd
during the financial year and until the date of this report.
Directors were in office for this entire period unless
otherwise stated.
Baocai Zhang
Fucun Wang
Cunliang Lai
Xiangqian Wu
Fuqi Wang
Qingchun Zhao
Xing Feng
Gregory James Fletcher
Geoffrey William Raby
David James Moult
Helen Jane Gillies
COMPANY SECRETARY
The name of the Company Secretary in office during the whole
of the financial year and up to the date of this report is as
follows: Laura Ling Zhang
REVIEW OF OPERATIONS
Safety
Yancoal employs approximately 2,900 people in addition
to the contractors and service providers who support the
Group’s operations.
Yancoal’s Total Recordable Injury Frequency Rate (“TRIFR”) for
the reporting period was 7.27, an improvement on 7.40 in the
previous year.
On 27 June 2019 there was a fatality at the Middlemount Joint
Venture; Yancoal is a part owner, but not the operator.
Yancoal continues to operate its mines to legislative and safety
standards. Under the direction of the Board and the Health,
Safety, Environment and Community Committee, Yancoal
remains committed to operating safely and transparently to
achieve its objective of zero harm.
Yancoal continues to implement its Core Hazard and Critical
Controls across all operations, identifying key hazards
within the workplace and instituting effective controls.
These continue to be managed and verified to check that
they are operating as intended for the safety of our people.
Financial performance
Revenue from continuing operations for 2019 was
$4,460 million, down $390 milion from $4,850 million in 2018.
Total Operating EBITDA (earnings before interest, tax,
depreciation and amortisation) was $1,635 million, down
$545 million from $2,180 million in 2018. The Operating
EBITDA Margin for the period was 36%.
Total Operating EBIT (earnings before interest and tax)
was $1,028 million before tax, down $629 million from
$1,657 million in 2018.
Yancoal’s profit after income tax was $719 million, down
$133 million from $852 million in 2018.
Yancoal’s financial performance was strongly influenced by
the deterioration in international coal price indices during
2019. The production and operating costs, which met the 2019
targets, improved on the prior year. In weaker coal market
conditions the sustained high production rates at its low-cost
tier-one assets preserves Yancoal’s strong competitive position
within the industry.
Yancoal continues to implement productivity and cost
efficiency initiatives throughout 2019, maximising blended
products across the New South Wales operations (both
managed and operated) in order to meet the aim of
maintaining stable unit cost of production despite cost
pressures across the broader coal mining industry.
Cash flow
The full year’s net operating cash inflow of $1,548 million
was down from $1,747 million in the prior year. The assets
in production during the period were the same as the
previous year, save for minor adjustments in ownership.
The Moolarben, Mount Thorley Warkworth (“MTW”) and
Hunter Valley Operations (“HVO”) mines, which provide the
bulk of the Company’s saleable coal product, each had outputs
equivalent or better than 2018. Lower coal price was the main
driver of reduced cashflow in 2019.
Net cash outflows from investing activities was $392 million,
with payment for property plant and equipment and
exploration the primary expenditure, $285 million. The balance
of repayments of borrowing from associates, $227 million, and
advance of borrowing to associates, $293 million, resulted in a
net outflow of $66 million. The final payment of the 4% stake
in Moolarben of $42 million was also an outflow.
Cash flows from financing activities included the net
repayment of $698 million in interest-bearing liabilities and
$514 million in dividend payments. The total net cash outflow
from financing activities was $1,209 million.
Corporate activities
During the year ended 31 December 2019, neither Yancoal
nor any of its subsidiaries purchased, sold or redeemed any
of Yancoal’s listed securities.
Yancoal completed a voluntary US$500 million debt
repayment on 26 February 2019. The Company continues
to look for opportunities to reduce its debt profile through
early repayments.
Yancoal paid a 2018 unfranked final dividend of $211 million
and a special dividend of $166 million in April 2019.
The 2019 unfranked interim dividend of $137 million was paid
in September 2019. The 2019 interim dividend was equivalent
to the 2018 interim dividend on a per share basis after
adjusting for the share consolidation in 2018.
Yancoal’s board of directors (“Board”) was unchanged
during 2019.
45
YANCOAL ANNUAL REPORT 2019DIRECTORS’ REPORTDIRECTORS’ REPORT Mining operations (all asset figures reported on a 100% basis)
ROM COAL PRODUCTION
Moolarben1
MTW2
HVO
Yarrabee
Stratford Duralie
Middlemount
Watagan
Total – 100% Basis
Total – Attributable3
SALEABLE COAL PRODUCTION
Moolarben1
MTW2
HVO
Yarrabee
Stratford Duralie
Middlemount
Watagan
Total – 100% Basis
Total – Attributable3
OWNERSHIP
85%
82.9%
51%
100%
100%
~50%
100%
85%
82.9%
51%
100%
100%
~50%
100%
2019
20.5
17.6
19.2
3.4
1.2
3.4
3.7
69.0
46.5
17.8
12.1
13.7
2.8
0.8
2.7
2.2
52.1
35.6
2018
18.6
17.6
19.0
3.5
0.7
4.8
2.4
66.6
42.9
16.5
12.1
13.3
2.6
0.5
3.8
1.2
50.0
32.9
CHANGE
10%
-%
1%
(3%)
71%
(29%)
54%
4%
8%
8%
-%
3%
8%
60%
(29%)
83%
4%
8%
Strong production across Yancoal’s tier-one operations (Moolarben, MTW, HVO), consolidated the step up in production achieved
the prior year. Annual total saleable coal production record was 52.1Mt (35.6Mt attributable), up 4% from 50.0Mt (32.9 Mt
attributable) in 2018, and total Run of Mine (“ROM”) coal production was 69.0Mt (46.5Mt attributable), up 4% from 66.6Mt
(42.9Mt attributable) in 2018.
Yancoal achieved total coal sales of 35.6Mt (attributable4) for the year, with a sales split (attributable) for the period of 30.1 Mt
thermal coal and 5.5Mt metallurgical coal.
Yancoal continued to manage the Cameby Downs and Premier Coal operations in Queensland and Western Australia respectively,
on behalf of its majority shareholder Yanzhou Coal Mining Company Limited (“Yanzhou”) throughout the reporting period.
Production from these operations are not captured in this report.
Yancoal continued to manage the Austar, Ashton and Donaldson operations on behalf of Watagan Mining Company Pty Ltd
(“Watagan”).
New South Wales (all figures reported on a 100% basis)
In New South Wales (“NSW”), Yancoal operates the Moolarben, MTW and Stratford Duralie mines and manages the Austar,
Ashton and Donaldson mines on behalf of Watagan.
Moolarben (Yancoal ownership: 85%) achieved total ROM production of 20.5Mt (2018: 18.6Mt) and saleable coal production of
17.8Mt (2018: 16.5Mt) for the reporting period.
MTW, consisting of Mount Thorley (Yancoal ownership: 80%) and Warkworth (Yancoal ownership: 84.5%), achieved ROM
production of 17.6Mt (2018: 17.6Mt) and saleable coal production of 12.1Mt (2018: 12.1Mt) for the reporting period.
HVO (Yancoal ownership: 51%) achieved ROM production of 19.2Mt (2018: 19.0Mt) and saleable coal production of 13.7Mt
(2018: 13.3Mt) for the reporting period.
The Stratford Duralie (Yancoal ownership: 100%) open cut mine achieved total ROM coal production of 1.2Mt (2018: 0.7Mt)
and saleable coal production of 0.8Mt (2018: 0.5Mt) for the reporting period.
1
2
3
4
2018 attributable figures include 81% attributable production for Moolarben up to and including 30 November 2018, and 85% thereafter.
2018 attributable figures include 64.1% attributable production for Mount Thorley Warkworth up to and including 28 February 2018, and 82.9% thereafter.
Attributable share is the attributable production as it relates to Yancoal’s financial statements and does not include production from Middlemount
(incorporated joint venture and accounted for as an equity-accounted investment) and Watagan (equity-accounted investment and deconsolidated from
Yancoal in March 2016). Attributable share includes: Moolarben (85%); Mt Thorley Warkworth (82.9%); Hunter Valley Operations (51%); Stratford Duralie
(100%); and Yarrabee (100%).
Attributable sales volume excludes purchased coal.
46
YANCOAL ANNUAL REPORT 2019DIRECTORS’ REPORTDIRECTORS’ REPORT
Queensland (all figures reported on a 100% basis)
In Queensland (“QLD”), Yancoal operates the Yarrabee
open cut operation and has a near 50% equity interest in
Middlemount Coal Pty Ltd (“Middlemount”) joint venture
throughout the reporting period.
Yarrabee (Yancoal ownership: 100%) open cut achieved total
ROM coal production of 3.4Mt (2018: 3.5Mt) and total saleable
coal production of 2.8Mt (2018: 2.6Mt) for the reporting
period.
The Middlemount joint venture (Yancoal ownership: ~50%)
achieved total ROM coal production of 3.4Mt (2018: 4.8Mt)
and total saleable coal production of 2.7Mt (2018: 3.8Mt) for
the reporting period.
Watagan Assets (100% ownership) (all figures reported on
a 100% basis)
Production at the Ashton and Austar underground mines
produced a combined total ROM coal production of 3.7Mt
(2018: 2.4Mt) and saleable coal production of 2.2Mt (2018:
1.2Mt) for the reporting period.
Infrastructure
Yancoal exports 100% of its product through five eastern
Australian ports into the Asian market, with current allocations
sufficient to meet existing and potential brownfield expansion
needs. The Group has ownership interests in three of
these ports.
Port Waratah Coal Services (“PWCS”) 30.0%
Yancoal has take-or-pay contracts with PWCS for the export
of coal through the terminals at Newcastle, New South Wales,
with a port allocation of approximately 35.1Mt per annum
(100% basis).
Newcastle Coal Infrastructure Group (“NCIG”) 27%
Yancoal continues to be one of five company shareholders
involved in the NCIG export coal terminal in Newcastle, New
South Waleswith a port allocation allocation of approximately
19.6Mt per annum (100% basis).
Wiggins Island Coal Export Terminal (“WICET”) 9.7%
Yancoal is one of four owners of WICET for the export of coal
at Gladstone, Queensland, which has a capacity of 27.0Mt per
annum. Yancoal’s contracted capacity is 1.5Mt per annum,
allocated to the Yarrabee Mine.
Rail
Yancoal is supported by the following rail networks to
transport product from mine to port:
•
The NSW Hunter Valley Coal Chain supports the
Moolarben, Mount Thorley Warkworth, Hunter Valley
Operations, Austar, Ashton, Stratford Duralie, and
Donaldson operations, with coal transported to the Port
of Newcastle;
• The QLD Blackwater System supports the Yarrabee
operation, with coal transported to the Port of Gladstone;
and
• The QLD Goonyella System supports the Middlemount
operation, with coal transported to the Port of Hay Point
and Abbot Point Coal Terminal.
Description of possible risks and uncertainties that the Group
may be facing can be found in the Corporate Governance
Statement on pages 78 to 100 of this report. The financial
risk management objectives and policies of the Group can
be found in Note D9 to the consolidated financial statements.
During the year, the Company was not aware of any non-
compliance with any relevant laws and regulations that had
a significant impact on it.
All references herein to other sections of this report form part
of this Director’s Report.
Community and Environment
Yancoal’s Health, Safety, Environment and Community
Committee sets the direction for the Company’s continued
commitment to operating its mines to the highest
environmental standards and in accordance with legislative
requirements.
Each mine implements proactive strategies to update
and monitor its environmental management systems and
practices to meet its mine plan approvals and individual
licenses to operate.
Operating to stringent environmental management conditions,
including the on and off-site management and monitoring of
potential dust and noise impacts, Yancoal continues to work
with State and Federal Government departments to ensure
full transparency in its environmental reporting.
In 2019, Yancoal contributed $1.6 million via its Community
Support Program into local and regional health,
environmental, education, arts, culture and community
initiatives capable of making a positive difference in the
regions in which it operates.
Yancoal continues to work co-operatively with its community
stakeholders, relying upon community consultative
committees, local newsletters, local media, community days
and site-specific websites to help ensure the communities
are engaged and informed of relevant matters related to
nearby operations.
Greenhouse gas and energy data reporting requirements
As Australia’s largest pure play thermal coal producer,
we acknowledge we have a role to play in mitigating the
emissions generated by our operations and supporting
investment into low emission technology to assist the
reduction of downstream emissions from the consumption
of coal products.
We also understand the growing interest by stakeholders
regarding the potential risks and opportunities posed to our
business and the broader sector as a result of an anticipated
global shift towards a lower-carbon economy.
47
YANCOAL ANNUAL REPORT 2019DIRECTORS’ REPORTDIRECTORS’ REPORT Recognising this, we continue to consider the adoption
of the Taskforce on Climate-related Financial Disclosures
(“TCFD”) Recommendations, established by the G20 Financial
Stability Board, as the framework to guide our climate-related
disclosures. This includes the desire for greater transparency
in the way we identify and mitigate potential risks posed by
changes to our external environment at a policy, legal, market
demand, reputational and technological perspective.
Governance
Governance of climate-related matters, including risks and
opportunities, sits within Yancoal’s governance framework.
The Board has ultimate responsibility for the oversight
and approval of risk management and financial investment
decisions, including those relating to climate change.
The Audit and Risk Management Committee and Health,
Safety, Environment and Community Committee are
specifically responsible for the consideration of climate-
related risks and related risk management strategies.
The Board regularly considers how climate change may drive
changes to physical, regulatory, commercial, and operating
environments to inform the development of medium-to-long
term goals and strategies.
Reporting on our emissions
Yancoal reports its operational direct (scope 1) and indirect
(scope 2) emissions on an annual basis in line with the National
Greenhouse and Energy Reporting Act 2007.
The Group has implemented systems and processes for the
collection and calculation of the data required and submitted
its 2018/2019 S19 Energy and Emissions Report to the Federal
Clean Energy Regulator on 31 October 2019.
Overall, on an operational control basis, our total scope
1 and scope 2 emissions for the period ended 30 June
2019 totalled 1,983,298 tCO2-e, a 6% decrease on the year
prior. The majority of scope 1 emissions relate to fugitive
emissions associated with the underground and open cut
mining operations, while scope 2 emissions stem from the
consumption of electricity purchased from the grid.
Summary of Greenhouse Emissions
EMISSIONS
REPORTING
PERIOD
2017/2018
2018/2019
% Variance
SCOPE 1
EMISSIONS
(TCO2-E)5
1,754,907
1,615,597
-8%
SCOPE 2
EMISSIONS
(TCO2-E)
359,620
367,701
-2%
SCOPE 1 AND
SCOPE 2 EMISSIONS
(TCO2-E)
2,114,527
1,983,298
-6%
While we do not track our scope 3 emissions associated with
the consumption of our coal products, we actively support the
development of technologies aimed at reducing the emissions
intensity of these downstream activities. This includes
supporting the development and installation of high efficiency,
low emissions technologies in coal fired power stations and
investment in carbon capture and storage technology.
Significant changes in the state of affairs
There have been no significant changes during the financial
year that significantly affected the operations of the Group,
the results of those operations or the state of affairs of Yancoal
or the Group.
Matters subsequent to the end of the financial year
On 28 February 2020, the Directors recommended a final
unfranked dividend totaling $280 million (21.21 cents per
share), with a record date of 16 March 2020 and a payment
date of 29 April 2020.
Other than as disclosed above, no matters or circumstances
have occurred subsequent to the end of the financial period
which have significantly affected, or may significantly affect,
the operations of the Group, the results of those operations
or the state of affairs of the Group in the subsequent
financial period.
Likely developments and expected results of operations
Yancoal continues to pursue its long-term strategy for organic
growth via the progression of brownfield expansion and
extension projects.
Key projects include the conceptual underground mine at
Mount Thorley Warkworth with an estimated 6Mtpa ROM.
Work is underway to inform a pre-feasibility study due to be
submitted to the Board for review by mid-2020.
At Moolarben, the optimisation process continues after
receiving Federal Government approval to increase open
cut mine production in September 2019. Yancoal continues
to maximise improved extraction rates in both the open cut
and underground mines; this includes working with external
stakeholders to ease rail capacity constraints.
Yancoal will maintain strong cost discipline, with 2020 cash
costs (excluding government royalties) expected to remain flat
at around $61/t (2018: $63/t).
Guidance for attributable saleable coal production in 2020 is
approximately 36 million tonnes (2018: 35.6Mt).
The forecast for 2020 capital expenditure is around
$380 million (attributable).
5
tCO2-e: tonnes of carbon dioxide equivalent.
48
YANCOAL ANNUAL REPORT 2019DIRECTORS’ REPORTDIRECTORS’ REPORT INFORMATION ON DIRECTORS
Baocai Zhang. Non- Executive Director (26 June 2012 –
19 January 2014, 8 June 2018 – current), Co-Vice
Chairman (20 December 2013 – 8 June 2018), Executive
Director (20 January 2014 – 8 June 2018), Chairman of the
Board (8 June 2018 – current). EMBA.
Experience and expertise
Mr Zhang, aged 52, joined Yanzhou’s predecessor in 1989
and was appointed as the Head of the Planning and Finance
department of Yanzhou in 2002. He was appointed as a
Director and Company Secretary of Yanzhou in 2006 and
Deputy General Manager in 2011. Mr Zhang was appointed
as Non-Executive Director of Yancoal on 26 June 2012, and
subsequently appointed a Co-Vice Chairman of Yancoal on
20 December 2013. He became the Chair of the Executive
Committee of Yancoal on 20 January 2014. In October 2015,
he became a director and a standing member of the Party
Committee of Yankuang Group Company Limited. Mr Zhang
was appointed as the Chair of the Board of Yancoal on
8 June 2018. Mr Zhang planned and played a key role in
the acquisition of Felix Resources Limited and the merger
with Gloucester Coal Ltd in Australia. He also led Yanzhou’s
acquisition of potash exploration permits in Canada in 2011.
He has considerable experience in capital management and
business development in the coal industry, in particular in
financial control, corporate governance and compliance for
listed companies in Australia and overseas.
Mr Zhang graduated from Nankai University. He is a senior
accountant with an EMBA degree.
Other current key directorships
Director of Yankuang Group Company Limited
Chairman and Director of Yankuang Group Finance Co., Ltd
Chairman of Shandong Geo-Mineral Co.Ltd
Former directorships in last three years
Director of Yanzhou Coal Yulin Neng Hua Co., Ltd
Director of Inner Mongolia Haosheng Coal Mining Limited
*Director of Yanzhou Coal Mining Company Limited (1171 HK)
(10 November 2006 – 3 June 2016)
Director of Yancoal International (Holding) Co., Ltd
Special responsibilities
Chairman of the Board
Chairman of the Strategy and Development Committee
Member of the Nomination and Remuneration Committee
Interests in shares and options
274,404 fully paid Yancoal ordinary shares
and the Director of the Strategic Planning and Decision Centre
of Yankuang Group. Mr Wang successively served as the
Deputy Director of Planning Department, the Deputy Director
and Director of the Department of Planning and Development
of Yankuang Group previously.
Mr Wang holds a master degree and completed a Masters
of Business Administration degree from Hebei Industrial
University in China in June 2014.
Other current key directorships
Director of various subsidiaries of Yancoal Australia Ltd
Special responsibilities
Co-Vice Chairman of the Board Chairman of the Executive
Committee
Member of the Health, Safety, Environment and Community
Committee
Interests in shares and options
None
Cunliang Lai. Executive Director (18 November 2004 –
19 January 2014), Co-Vice Chairman (26 June 2012 – 6 June
2018), Non-Executive Director (20 January 2014 – Current).
DE, EMBA.
Experience and expertise
Mr Lai, aged 59, joined Yanzhou’s predecessor in 1980.
He was appointed as the Head of Xinglongzhuang Coal
Mine of Yanzhou in 2000. In 2005, he was appointed as the
Deputy General Manager of Yanzhou. Before the merger
with Gloucester Coal Ltd, Mr Lai was an Executive Director
of Yancoal and was appointed the Co-Vice Chairman and
Chair of the Executive Committee in 2012. Mr Lai successfully
completed the acquisition of the Austar Coal Mine and the
establishment of an appropriate corporate governance
structure for Yancoal. Mr Lai has also successfully applied
the Longwall Top Coal Caving technology in Australia and
has gained considerable experience in Australian coal
business management.
Mr Lai graduated from Nankai University and the Coal
Science Research Institute. He is a researcher in engineering
technology application with a Doctorate degree in Engineering
and an EMBA degree.
Other current key directorships
None
Former directorships in last three years
Director of Bauxite Resources Limited (ASX: BAU)
(7 March 2014 – 21 January 2016)
Fucun Wang. Executive Director and Chair of the Executive
Committee (8 June 2018 – current), Co-Vice Chairman
(8 June 2018 – current). MBA.
Special responsibilities
None
Experience and expertise
Mr Fucun Wang, aged 56, started his career in July 1983.
He holds a master’s degree of business administration.
Mr Wang is a senior statistician. He was formerly the Deputy
Chief Economist of Yankuang Group and served concurrently
as the Head of the Investment and Development Department
Interests in shares and options
None
49
YANCOAL ANNUAL REPORT 2019DIRECTORS’ REPORTDIRECTORS’ REPORT Qingchun Zhao. Non-Executive Director (28 April 2017 –
Current). EMBA
Experience and expertise
Mr Zhao, aged 51, is a senior accountant with an EMBA degree,
and is a Director and the Chief Financial Officer of Yanzhou.
Mr Zhao joined Yanzhou’s predecessor in 1989 and was
appointed as the Chief Accountant of the Finance Department
in 2002 and Director of the Planning and Finance Department
of Yanzhou in 2006. In March 2011, he was appointed as
the Vice Chief Financial Officer and the Director of the
Finance Department of Yanzhou. In March 2014, Mr. Zhao
was appointed Assistant General Manager and the Director
of the Finance Management Department of Yanzhou.
In January 2016, he was appointed as the Chief Financial Officer
of Yanzhou and in June 2016, he was appointed as a director of
Yanzhou. Mr Zhao graduated from Nankai University.
Other current key directorships
*Director of Yanzhou Coal Mining Company Limited (1171 HK)
(June 2016 – current)
Director of Zhongyin Financial Leasing Co., Ltd
Director of Shanghai CIFCO Co., Ltd
Director of Yancoal International (Holding) Co.Ltd
Director of Yancoal International Trading Co. Ltd
Director of Yancoal International Resources Co., Ltd
Director of Yancoal International Technology
Development Co., Ltd
Chairman of Shanghai Jujiang Asset Management Co., Ltd
Director of Yanzhou Coal Yulin Neng Hua Co., Ltd
Director of Inner Mongolia Haosheng Coal Mining Limited
Director of Yankuang Group Finance Co., Ltd
Director of Qilu Bank Co.,Ltd
Director of Shanghai Mid-Term Futures Co., Ltd
Former directorships in last three years
Director of Duanxin Investment Holding (Shenzhen) Co., Ltd
Director of Qingdao Zhongyin International Trade Co., Ltd
Special responsibilities
Member of the Strategy and Development Committee
Member of the Audit and Risk Management Committee
Interests in shares and options
None
Fuqi Wang. Non-Executive Director (23 April 2015 – Current).
ME, EMBA.
Experience and expertise
Mr Fuqi Wang, aged 55, is a research fellow in applied
engineering technology with an EMBA degree and Master of
Engineering, and serves as the Chief Engineer of Yanzhou.
Mr Wang joined Yanzhou’s predecessor in 1985. In 2000,
he was appointed as the Chief Engineer of Production and
Technology Division of Yankuang Group. In 2002, he served
as the director of Production and Technique Department
of Yanzhou. In 2003, he was appointed as the Deputy
Chief Engineer and Director of Production and Technique
Department of Yanzhou. In March 2014, he was appointed
as the Chief Engineer of Yanzhou. Mr Wang graduated from
Northeastern University and Nankai University.
Other current key directorships
Director of Yanmei Heze Neng Hua Co., Ltd
Director of Shanxi Future Energy Chemical Co. Ltd.
Former directorships in last three years
None
Special responsibilities
Member of the Health, Safety, Environment and Community
Committee
Member of the Strategy and Development Committee
Interests in shares and options
None
Xiangqian Wu. Non-Executive Director (28 April 2017 –
Current). DE
Experience and expertise
Mr Wu, aged 53, joined Yanzhou’s predecessor in 1988.
In 2003, he was appointed as the Deputy Head of Jining
No.3 Coal Mine of Yanzhou.
In 2004, he was appointed as the Deputy Head and Chief
Engineer of Jining No.3 Coal Mine of Yanzhou. In 2006, he was
appointed as the Head of Jining No.3 Coal Mine of Yanzhou.
From April 2014 to January 2016, he was the Chairman and
General Manager of Yanzhou Coal Ordos Neng Hua Co., Ltd. and
Chairman of Inner Mongolia Haosheng Coal Mining Co., Ltd.
In May 2014, he was appointed as a Director of the Yanzhou
Coal Mining Company Limited. In January 2016, he was
appointed as the General Manager of Yanzhou. Mr. Wu
graduated from Shandong University of Science and
Technology and China University of Mining and Technology.
Mr Wu is a Research Fellow in Applied Engineering Technology
and a Doctor of Engineering.
Other current key directorships
*Director of Yanzhou Coal Mining Company Limited (1171 HK)
(14 May 2014 – current)
Director of Yancoal International (Holding) Co. Ltd
Director of Yancoal International Trading Co. Ltd
Director of Yancoal International Resources Co., Ltd
Director of Yancoal International Technology Development Co., Ltd
Former directorships in last three years
None
Special responsibilities
Member of the Nomination and Remuneration Committee
Interests in shares and options
None
50
YANCOAL ANNUAL REPORT 2019DIRECTORS’ REPORTDIRECTORS’ REPORT Xing Feng. Non-Executive Director (15 December
2017 – Current). EMBA
Mr Fletcher holds a Bachelor of Commerce and he is a
Chartered Accountant.
Experience and expertise
Mr Feng, aged 46, started his career with China Cinda Asset
Management Co., Limited (Cinda) in 1999, and has served in
various capacities in the Department of General Management,
Department of General Business and Department of
Investment and Financing. He has abundant experience in
corporate governance, investment and financing.
He was appointed Assistant General Manager of Cinda’s
Strategic Client Department in 2017, where he is responsible
for implementing the Department’s development strategy
plan, involvement in business review and leading the
implementation of the investment plan. He has successfully
completed a number of overseas M&A investments and
mixed-ownership reform of SOE projects.
Mr. Feng holds a Bachelor of Engineering (Electrical
Engineering and Automation) from Tsinghua University
and an EMBA degree from Peking University.
Other current key directorships
Director of China Broadcasting and Telecommunications
Corporation
Director of China Cinda (Hong Kong) Holdings Company
Limited
Former directorships in last three years
None
Special responsibilities
Member of the Strategy and Development Committee
Interests in shares and options
None
Gregory James Fletcher. Independent Non-Executive Director
(26 June 2012 – Current), Co-Vice Chairman (1 March 2018 –
current). BCom, CA.
Experience and expertise
Mr Fletcher, aged 63, was a Director of Gloucester Coal Ltd
from June 2009. He was appointed a Director of Yancoal after
the merger of Yancoal and Gloucester Coal Ltd in June 2012.
Mr Fletcher was elected a Co-Vice Chairman of Yancoal in 2018.
Prior to 2009 Mr Fletcher was a senior partner of Deloitte
for 16 years during which he held many senior roles as well
as working with major Australian listed companies with
operations internationally including the Asia Pacific region.
He also worked closely with organisations in China, Indonesia
and Mongolia in enhancing governance practices.
Since 2009 Mr Fletcher has taken on Board and Audit Committee
roles. He has been a member of the NSW Auditor General’s
Audit and Risk Committee, on the Board of Railcorp and WDS
Limited and Chairman of the Roads and Maritime Audit and
Risk Committee and City of Sydney Audit and Risk Committee.
*
Listed company
Other current key directorships
Chairman of SMEG Australia Pty Ltd
*Director of Saunders International Limited, Chairman Audit
and Risk Committee and Member of the Remuneration and
Nomination Committee (ASX:SND) (1 July 2015 – current)
Director of TAFE NSW, Member of the Audit and Risk
Committee and Member of the Minister’s Priority
Implementation Committee
Chairman of NSW Electoral Commission Audit and Risk
Committee Chairman of NSW HealthShare/eHealth Audit
and Risk Committee
Member of Audit and Risk Committee, Railcorp
Member of Audit, Risk and Committee, NSW Health
Infrastructure Member of Audit and Risk Committee NSW
State Transit Authority
Former directorships in last three years
Director of Yancoal SCN Limited (ASX:YCN) (21 November 2014
– 30 August 2018)
Special responsibilities
Co-Vice Chairman
Chairman of the Audit and Risk Management Committee
Chairman of the Independent Board Committee
Member of the Nomination and Remuneration Committee
Interests in shares and options
2,100 fully paid Yancoal ordinary shares.
Dr Geoffrey William Raby. Independent Non-Executive
Director (26 June 2012 - Current). BEc (Hons), MEc and PhD
(Economics).
Experience and expertise
Dr Geoffrey Raby, aged 66, was appointed a Director of
Yancoal in 2012.
Dr Raby was formerly Australia’s Ambassador to the People’s
Republic of China from 2007 to 2011. Prior to that, he was a
Deputy Secretary in the Department of Foreign Affairs and
Trade (DFAT). Dr Raby has extensive experience in international
affairs and trade, having been Australia’s Ambassador to the
World Trade Organisation (1998 to 2001), Australia’s APEC
Ambassador (2003 to 2005), Head of DFAT’s Office of Trade
Negotiations and Head of the Trade Policy Issues Division at
the OECD, Paris. Between 1986 and 1991 he was Head of the
Economic Section at the Australian Embassy, Beijing. He has
been the Chair of DFAT’s Audit Committee and served as an ex-
officio member of the Boards of Austrade and Export Finance
and Insurance Corporation.
Dr Geoffrey Raby holds a Bachelor of Economics, a Masters of
Economics and a Doctor of Philosophy in Economics.
Other current key directorships
*Director of OceanaGold Corporation Limited (ASX:OGC)
(5 August 2011 – current)
51
YANCOAL ANNUAL REPORT 2019DIRECTORS’ REPORTDIRECTORS’ REPORT David James Moult. Independent Non-Executive Director
(30 January 2018 – Current). C. Eng (Mining), MBA, FAusIMM,
FIMMM, MAICD
Experience and expertise
David Moult, aged 63, was appointed as a Director of
Yancoal in January 2018. He has over 40 years’ global coal
mining experience. He was Managing Director and CEO of
Centennial Coal Company Limited from 2011 to 2017, then
a non- executive director of Centennial Coal from May 2017
until January 2018. He previously held the position of Chief
Operating Officer of Centennial Coal from 1998 to 2011.
Mr Moult has worked with Joy Mining Machinery in the USA
and Australia, RJB Mining PLC and British Coal in the UK.
Mr Moult is a former Chairman and Director of the Australian
Coal Association Low Emissions Technology Ltd, former
Director of the Minerals Council of Australia, former Chairman
and Director of the New South Wales Minerals Council and
former Director of the Newcastle Coal Infrastructure Group
and Port Kembla Coal Terminal.
Mr Moult is a Member of the University of NSW Education
Trust Advisory Committee.
Mr. Moult holds a Master of Business Administration, and a
Higher National Diploma in Mining. Mr Moult is a Chartered
Mining Engineer in the United Kingdom, a Fellow of the
Australasian Institute of Mining and Metallurgy, a Fellow of
the Institute of Materials, Minerals and Mining, an European
Engineer of European Federation of National Engineering
Associations and a member of the Australia Institute of
Company Directors.
Mr Moult was awarded the New South Wales Minerals Council
award for Outstanding Contribution to Mining 2017.
Other current key directorships
Director of Coal Services Pty Ltd Director of Coal Mines
Insurance Pty Ltd
Director of Mines Rescue Pty Ltd
Former directorships in last three years
Non-Executive Director Centennial Coal Company Limited
Managing
Director and CEO of Centennial Coal Company Limited
Director of the Minerals Council of Australia
Chairman and Director of the Australian Coal Association Low
Emissions Technology Ltd
Director of the New South Wales Minerals Council
Special responsibilities
Chairman of the Health, Safety, Environment and Community
Committee Member of the Nomination and Remuneration
Committee
Member of the Audit and Risk Management Committee
Interests in shares and options
None
Former directorships in last three years
*Director of Fortescue Metals Group (ASX:FMG)
(18 August 2011 – 5 December 2016)8
*Director of SmartTrans Holding Limited (now Orcoda Limited)
(ASX:ODA) (6 August 2011 – 1 April 2016)
*Director of YPB Group Ltd (ASX:YPB) (31 July 2014
– 5 March 2016)
*Director of iSentia Group Ltd (ASX:ISD) (9 May 2014
– 20 July 2018)
*Chairman of Wiseway Group (ASX:WWG) (18 July 2018 –
30 April 2019)
Special responsibilities
Member of the Strategy and Development Committee
Member of the Health, Safety, Environment and Community
Committee
Interests in shares and options
22,858 fully paid Yancoal ordinary shares.
Helen Jane Gillies. Independent Non-Executive Director
(30 January 2018 – Current). MBA, MConstrLaw, LLB(Hons),
BCom, AICD
Experience and expertise
Helen Gillies is an experienced Director and legal, risk and
compliance professional.
Ms Gillies, aged 55, was appointed as a Non-Executive Director
of Bankstown and Camden Airports in September 2017 and a
Non-Executive Director of ASX-listed company Monadelphous
Group Limited and Red Flag Group Limited in 2016. Previously,
she served as a director of Sinclair Knight Merz Management
Pty Limited from October 2002 to September 2008 and Sinclair
Knight Merz Management Pty Limited from September 2010
to December 2013; she was the general manager (risk) and
general counsel of Sinclair Knight Merz from 1995 to 2013, and
a non-executive director of Civil Aviation Safety Authority from
2009 to 2014.
Ms Helen Gillies holds a Master of Business Administration
and a Master of Construction Law, as well as undergraduate
degrees in Commerce and Law. Ms Gillies is a Fellow of the
Australian Institute of Company Directors.
Other current key directorships
Director of Red Flag Group (Holdings) Limited
*Director or Monadelphous Group Limited (ASX:MND)
(5 September 2016 – current)
Director of BAC Holdings Pty Ltd
Former directorships in last three years
None
Special responsibilities
Chair of the Nomination and Remuneration Committee
Member of the Audit and Risk Management Committee
Interests in shares and options
None
*
Listed company
52
YANCOAL ANNUAL REPORT 2019DIRECTORS’ REPORTDIRECTORS’ REPORT CHANGES IN DIRECTORS’ INFORMATION PURSUANT TO RULE 13.51B(1) OF THE HK LISTING RULES
The changes in Directors’ information as required to be disclosed pursuant to Rule 13.51B(1) of the Rules governing the listing of
securities on The Stock Exchange of Hong Kong Limited (“HK Listing Rules”) are set out below:
Baocai Zhang. Non- Executive Director
Appointed as a director of Shandong Geo-Mineral Co. Ltd, a company incorporated in China, with effect from 27 August 2019.
Dr Geoffrey William Raby. Independent Non-Executive Director
*Resigned as the Chairman of Wiseway Group (ASX:WWG) with effect from 1 May 2019.
COMPANY SECRETARY, CHIEF LEGAL, COMPLIANCE, CORPORATE AFFAIRS OFFICER
Laura Ling Zhang (6 September 2005 – Current). BA, MA, EMBA, AGIA, FCIS, GAICD
Laura Ling Zhang, aged 42, was appointed as the Company Secretary on 6 September 2005.
Ms. Zhang is one of the founding executives of the Company and has been the Company Secretary since September 2005. She has
over 20 years in the mining industry and currently also holds the office of Chief Legal, Compliance and Corporate Affairs Officer.
She oversees the Company’s corporate governance, group legal issues, corporate compliance, projects/corporate initiatives,
investor relations, corporate affairs and media communications functions.
Ms. Zhang graduated with a Bachelor of Arts degree and a Master of Arts degree in language literature and cross-cultural
communication from China University of Mining. Ms. Zhang also had graduate diploma of applied corporate governance from
Governance Institute of Australia (formerly known as Chartered Secretaries Australia) in 2008, and foundations of directorship
certificate of Australian Institute of Company Directors in 2013. Ms Zhang completed her EMBA degree at Australian Graduate
School of Management in the University of New South Wales in 2019. Ms. Zhang was previously a Fellow of the Governance
Institute of Australia and since June 2018, is a Fellow member of the Hong Kong Institute of Chartered Secretaries. Ms. Zhang
has been a member of the Australian Institute of Company Directors since 2009.
MEETINGS OF DIRECTORS
The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended
31 December 2019, and the numbers of meetings attended by each Director were:
GENERAL MEETINGS
MEETINGS OF THE
BOARD OF DIRECTORS
MEETINGS OF COMMITTEES
ANNUAL GENERAL
MEETING
FULL MEETINGS OF
DIRECTORS
AUDIT AND RISK
MANAGEMENT
HEALTH, SAFETY AND
ENVIRONMENT
NOMINATION AND
REMUNERATION
STRATEGY AND
DEVELOPMENT
Baocai Zhang
Fucun Wang
Cunliang Lai
Xiangqian Wu
Fuqi Wang
Qingchun Zhao
Gregory James Fletcher
Geoffrey William Raby
Helen Jane Gillies
David James Moult
Xing Feng
A
1
1
0
0
0
0
1
1
1
1
0
A = Number of meetings attended.
B
1
1
1
1
1
1
1
1
1
1
1
A
9
9
9
6
9
9
9
9*
8
9
9
B
9
9
9
9
9
9
9
9
9
9
9
A
B
3
4
4
4
4
4
4
4
A
4
3
4
4
B
4
4
4
4
A
3
2
3
3
3
B
3
3
3
3
3
A
3
3
2
3
3
B
3
3
3
3
3
B = Number of meetings held during the time the Director held office or was a member of the Committee during the year.
* Dr Raby on 18 December 2019 left the meeting at 3pm, immediately after the closure of the Directors’ in-camera session.
*
Listed company
53
YANCOAL ANNUAL REPORT 2019DIRECTORS’ REPORTDIRECTORS’ REPORT
DIRECTOR’S REPORT
DIRECTOR’S REPORT
Dear Shareholder,
I am pleased to introduce the Yancoal Australia Ltd (the “Company”) and its controlled entities (the “Group” or “Yancoal”) 2019
Remuneration Report.
2019 PERFORMANCE
Yancoal has continued to deliver strong performance in 2019, as our increased production and robust cost management approach
has enabled us to navigate challenging coal prices. Key performance highlights include:
• Attributable ROM tonnes increased by 8% on the prior year; and
• Attributable saleable coal production increased by 8% on the prior year.
People and Safety, in addition to Innovation, Excellence and Integrity; are at the core of everything we do. Hence, we are also
pleased to report a significant improvement in the results from our second staff engagement survey, which demonstrates the
positive impact of the culture programs introduced across each site.
REMUNERATION FRAMEWORK REVIEW
Over 2019 the Nomination and Remuneration Committee continued to review the Company’s remuneration framework to ensure
remuneration arrangements were in line with sound corporate governance for an Australian and Hong Kong listed company and
for a company of Yancoal’s size.
In 2019, a change was made to the Board and Board Committee fees with fees being adjusted to be sufficient to attract and retain
high quality directors. This was the first adjustment to Board and Committee fees since 2012 and reflects the size and complexity
of Yancoal. No changes were made to the executive remuneration framework in 2019 following the changes implemented in 2018
to better align management with shareholder interests.
This report sets out remuneration information for the Company’s Key Management Personnel for the 12 months ended
31 December 2019.
Yours sincerely,
Helen Gillies
Chair of the Nomination and Remuneration Committee
54
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
1. KEY MANAGEMENT PERSONNEL
The Board delegates responsibility for the day to day management of the Company’s affairs and implementation of the strategy
and policy initiatives set by the Board to the Chairman of the Executive Committee and the Chief Executive Officer. The Executive
Committee is a management committee comprising the Chairman of the Executive Committee, the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer and any other officers that the Board resolves will be members of the
Executive Committee.
Consistent with the Constitution, the Company’s majority shareholder, Yanzhou Coal Mining Company Ltd (“Yanzhou”), can
nominate a director to the position of the Chairman of the Executive Committee and the Chairman of the Board can recommend
a person to the position of Chief Financial Officer.
No Board or Committee changes took place during 2019.
The Key Management Personnel (“KMP”) comprise directors of the Company (“Directors”) and nominated members of the
Executive Committee (“Executive KMPs”). Details of the KMP are set out in Table 1.
Together, the Executive Director and Executive KMPs are referred to as “Executives” in this report.
TABLE 1: Details of KMP
NAME
NON-EXECUTIVE DIRECTORS
Baocai Zhang
POSITION
Director
Chairman of the Board
Chairman of the Strategy and Development Committee
Member of the Nomination and Remuneration Committee
Cunliang Lai
Fuqi Wang
Director
Director
Member of the Health, Safety, Environment and Community Committee
Member of the Strategy and Development Committee
Qingchun Zhao
Director
Member of the Audit and Risk Management Committee
Member of the Strategy and Development Committee
Xiang Qian Wu
Director
Xing Feng
Director
Member of the Strategy and Development Committee
Member of the Nomination and Remuneration Committee
Gregory James Fletcher
Independent Director
Co-Vice Chairman
Chairman of the Audit and Risk Management Committee
Member of the Nomination and Remuneration Committee
Geoffrey William Raby
Independent Director
Member of the Health, Safety, Environment and Community Committee
Member of the Strategy and Development Committee
Helen Jane Gillies
Independent Director
David James Moult
Independent Director
Chairman of the Nomination and Remuneration Committee
Member of the Audit and Risk Management Committee
EXECUTIVE DIRECTORS
Fucun Wang
EXECUTIVE KMP
Reinhold Schmidt
Lei Zhang
Paul Stringer
Chairman of the Health, Safety, Environment and Community Committee
Member of the Nomination and Remuneration Committee
Member of the Audit and Risk Management Committee
Director, Co-Vice Chairman
Chairman of the Executive Committee (“CEC”)
Member of the Health, Safety, Environment and Community Committee
Chief Executive Officer (“CEO”)
Chief Financial Officer (“CFO”)
Chief Operating Officer (“COO”)
TIME IN ROLE
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
Full year
55
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
INFORMATION ON SENIOR MANAGEMENT
Reinhold Schmidt. Chief Executive Officer (26 August 2013
– current). ME (Mining Engineering), MSc (Mineral Economics),
BE (Mining).
Experience and expertise
Mr Schmidt, aged 54, was appointed as the Chief Executive
Officer of the Company on 26 August 2013.
Mr. Schmidt has over 20 years’ experience in the mining
industry. Prior to joining the Group, he served as the executive
general manager of Wandoan Project for Xstrata Coal Pty Ltd
from February 2008 to February 2009 and the chief operating
officer there from March 2009 to June 2013. He was also
formerly the president of the Colombian coal assets of
Glencore International.
Mr. Schmidt graduated with a Bachelor degree in Engineering
(Mining) (cum laude) from the University of Pretoria in
South Africa in March 1989, a Master of Engineering
(Mining Engineering) degree and Master of Science in
Engineering (Mineral Economics) degree from the University
of Witwatersrand, Johannesburg, South Africa in June 1991
and December 1991, respectively.
Current directorships and key positions within Group
1 AMH (Chinchilla Coal) Pty Ltd
2 Abakk Pty Ltd
3 Ashton Coal Mines Limited
4 Ashton Coal Operations Pty Limited
5 Athena Coal Operations Pty Ltd
6 Athena Coal Sales Pty Ltd
7 Austar Coal Mine Pty Limited
8 Australian Coal Resources Limited
9 Black Hill Land Pty Ltd
10 Catherine Hill Bay Land Pty Ltd
11 CNA Bengalla Investments Pty Limited
12 CNA Resources Limited
13 CNA Warkworth Australasia Pty Limited
14 CNA Warkworth Pty Ltd
15 Coal & Allied Industries Limited
16 Coal & Allied Mining Services Pty Limited
17 Coal & Allied (NSW) Pty Limited
18 Coal & Allied Operations Pty Ltd
19 CIM Duralie Pty Ltd
20 CIM Mining Pty Ltd
21 CIM Services Pty Ltd
22 CIM Stratford Pty Ltd
23 Donaldson Coal Finance Pty Limited
24 Donaldson Coal Holdings Limited
25 Donaldson Coal Pty Ltd
26 Duralie Coal Marketing Pty Ltd
27 Duralie Coal Pty Ltd
28 Eucla Mining N.L.
29 Felix NSW Pty Ltd
30 Gloucester (SPV) Pty Ltd
31 Gloucester (Sub Holdings 1) Pty Limited
32 Gloucester (Sub Holdings 2) Pty Limited
33 Gloucester Coal Ltd
34 Gwandalan Land Pty Ltd
35 Kalamah Pty Ltd
36 Lower Hunter Land Holdings Pty Ltd
37 Minmi Land Pty Ltd
38 Miller Pohang Coal Co Pty Ltd
39 Monash Coal Holdings Pty Limited
40 Monash Coal Pty Ltd
41 Moolarben Coal Mines Pty Limited
42 Moolarben Coal Operations Pty Ltd
43 Moolarben Coal Sales Pty Ltd
44 Mount Thorley Coal Loading Ltd
45 Mount Thorley Operations Pty Limited
46 Namoi Valley Coal Pty Limited
47 Newcastle Coal Company Pty Ltd
48 Nords Wharf Land Pty Ltd
49 Northern (Rhondda) Collieries Pty Ltd
50 Novacoal Australia Pty Limited
51 Oaklands Coal Pty Limited
52 Parallax Holdings Pty Limited
53 Primecoal International Pty Ltd
54 Proserpina Coal Pty Ltd
55 R.W. Miller (Holdings) Limited
56 SASE Pty Ltd
57 Stratford Coal Marketing Pty Ltd
58 Stratford Coal Pty. Ltd.
59 Warkworth Coal Sales Ltd
60 Warkworth Mining Limited
61 Warkworth Pastoral Co Pty Ltd
62 Warkworth Tailings Treatment Pty Ltd
63 Westralian Prospectors N.L.
64 White Mining (NSW) Pty Limited
65 White Mining Limited
66 White Mining Services Pty Limited
67 Yancoal Australia Sales Pty Ltd
68 Yancoal Moolarben Pty Ltd
69 Yancoal Resources Limited
70 Yancoal SCN Limited
71 Yarrabee Coal Company Pty. Ltd
72 Watagan Mining Company Pty Ltd
Interests in shares and options
312,278 fully paid Yancoal ordinary shares
56
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
Lei Zhang. Chief Financial Officer (31 March 2014 – current).
PhD, MBA, CPA
Experience and expertise
Dr. Lei Zhang, aged 47, was appointed as the Chief Financial
Officer of the Company on 31 March 2014.
Prior to joining the Group, Dr. Zhang served as the senior vice
president and managing director of SK Great China private
equity fund & principal investment from February 2013 to
March 2014, general manager of mergers and acquisitions and
commercial finance at Shell Far East from July 2012 to March
2013, executive director and chief financial officer of Chinalco
Mining Corp. International from September 2010 to June 2012,
vice president and chief financial officer of Chinalco Overseas
Holdings from September 2010 to June 2012, and was with
Siemens from April 1997 to September 2010 including serving
as vice president of Siemens Ltd. China and cluster chief
financial officer of Siemens Real Estate North East Asia from
September 2008 to September 2010.
Dr. Zhang graduated with a Doctor of Economics from
Graduate School of Chinese Academy of Social Sciences
in Beijing, China in June 2010, and a Master of Business
Administration degree from Peking University in China in June
2005, respectively. Dr. Zhang is a qualified Certified Practising
Accountant (CPA) and China Inter-bank Market Dealer and
also holds a China Bond Custody Qualifying Certificate.
Current directorships and key positions within Group
Current directorships within Group
1 AMH (Chinchilla Coal) Pty Ltd
2 Athena Coal Operations Pty Ltd
3 Athena Coal Sales Pty Ltd
4 Australian Coal Resources Limited
5 Black Hill Land Pty Ltd
6 Catherine Hill Bay Land Pty Ltd
7 CNA Bengalla Investments Pty Limited
8 CNA Resources Limited
9 CNA Warkworth Australasia Pty Limited
10 CNA Warkworth Pty Ltd
11 Coal & Allied Industries Limited
12 Coal & Allied Mining Services Pty Limited
13 Coal & Allied (NSW) Pty Limited
14 Coal & Allied Operations Pty Ltd
15 CIM Duralie Pty Ltd
16 CIM Mining Pty Ltd
17 CIM Services Pty Ltd
18 CIM Stratford Pty Ltd
19 Duralie Coal Marketing Pty Ltd
20 Duralie Coal Pty Ltd
21 Eucla Mining N.L.
22 Felix NSW Pty Ltd
23 Gloucester (SPV) Pty Ltd
24 Gloucester (Sub Holdings 2) Pty Limited
25 Gloucester Coal Ltd
26 Gwandalan Land Pty Ltd
27 Kalamah Pty Ltd
28 Lower Hunter Land Holdings Pty Ltd
29 Minmi Land Pty Ltd
30 Miller Pohang Coal Co Pty Ltd
31 Monash Coal Holdings Pty Limited
32 Monash Coal Pty Ltd
33 Moolarben Coal Mines Pty Limited
34 Moolarben Coal Operations Pty Ltd
35 Moolarben Coal Sales Pty Ltd
36 Mount Thorley Coal Loading Ltd
37 Mount Thorley Operations Pty Limited
38 Namoi Valley Coal Pty Limited
39 Nords Wharf Land Pty Ltd
40 Northern (Rhondda) Collieries Pty Ltd
41 Novacoal Australia Pty Limited
42 Oaklands Coal Pty Limited
43 Parallax Holdings Pty Limited
44 Proserpina Coal Pty Ltd
45 R.W. Miller (Holdings) Limited
46 SASE Pty Ltd
47 Stratford Coal Marketing Pty Ltd
48 Stratford Coal Pty. Ltd.
49 Warkworth Coal Sales Ltd
50 Warkworth Mining Limited
51 Warkworth Pastoral Co Pty Ltd
52 Warkworth Tailings Treatment Pty Ltd
53 Westralian Prospectors N.L.
54 Yancoal Australia Sales Pty Ltd
55 Yancoal Moolarben Pty Ltd
56 Yancoal Resources Limited
57 Yancoal SCN Limited
58 Yarrabee Coal Company Pty. Ltd.
Current key positions (Company Secretary) within Group
1 Abakk Pty Ltd
2 Ashton Coal Mines Limited
3 Ashton Coal Operations Pty Limited
4 Austar Coal Mine Pty Limited
5 Donaldson Coal Finance Pty Limited
6 Donaldson Coal Holdings Limited
7 Donaldson Coal Pty Ltd
8 Gloucester (Sub Holdings 1) Pty Limited
9 Newcastle Coal Company Pty Ltd
10 Primecoal International Pty Ltd
11 White Mining (NSW) Pty Limited
12 White Mining Limited
13 White Mining Services Pty Limited
14 Watagan Mining Company Pty Ltd
57
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
Interests in shares and options
97,127 fully paid Yancoal ordinary shares (including 28,233
held by Ying Zhang, a related party of Mr Lei Zhang)
The Nomination and Remuneration Committee’s objective is to
assist the Board by making recommendations in relation to:
• Board composition and succession planning for the Board;
Paul Stringer. Chief Operating Officer (29 May 2018 – Current).
Experience and expertise
Mr Stringer, aged 65, was appointed as Chief Operating Officer
(COO) on 29 May 2018.
Mr Stringer has over 45 years’ experience in mining and mining
related industries. Prior to being appointed as COO, he served
as General Manager of Syntech Resources Cameby Downs
Mine (since 2012), General Manager of Yancoal Yarrabee Mine
(since 2013), GM of Yancoal’s Queensland/Western Australia
Mines (since 2014), and General Manager of Yancoal’s East
Coast Mines (since 2016).
Current directorships and key positions within Group
1 Warkworth Coal Sales Ltd
2 Warkworth Mining Limited
3 Warkworth Pastoral Co Pty Ltd
4 Warkworth Tailings Treatment Pty Ltd
Interests in shares and options
56,131 fully paid Yancoal ordinary shares
•
•
remuneration levels and structure for KMP and other
members of the Executive Committee as appointed from
time to time;
the public reporting of remuneration for KMP and other
members of the Executive Committee;
•
the performance assessment of the Executive Committee;
• designing Company remuneration policy and regulations
with regard to corporate governance; and
• diversity.
2.2 Use of external remuneration advisors
From time to time, the Nomination and Remuneration
Committee seeks and considers advice from external advisors
who are engaged by and report directly to the Nomination
and Remuneration Committee. Such advice will typically
cover remuneration levels, independent benchmarking
data and information regarding best practice, trends and
regulatory developments. Following a substantial revamp
of the remuneration framework in 2018, no remuneration
recommendations were obtained during 2019 as defined
under the Corporations Act 2001 (Cth).
2. REMUNERATION PRINCIPLES AND FRAMEWORK
The Company’s governing principles for remuneration are:
3. EXECUTIVE REMUNERATION
•
•
•
•
to ensure remuneration is equitable, aligned with the
long-term interests of the Company and its shareholders,
and complies with relevant Company policies, including the
Diversity Policy;
to provide market competitive remuneration and
conditions to attract and retain skilled and motivated
employees;
to structure incentives linking reward with the
achievement of Company strategy and challenging
business objectives, and the delivery of sustainable returns
over the long-term; and
to reward based on performance, by acknowledging the
contribution of outstanding performers and for conduct
aligned to Yancoal’s values.
2.1 Remuneration governance framework
Consistent with its Board Charter, the Board oversees
the appointment, remuneration and performance of
all KMP (other than Directors) and other members of
the Executive Committee. On these issues, the Board
receives recommendations from the Nomination and
Remuneration Committee.
3.1 Objective
The executive remuneration framework is structured to be
market competitive and to reflect the reward strategy of the
Company. Through this framework the Company seeks to align
executive remuneration with:
• Shareholder interests by:
͵
͵
making economic performance a core component of
the overall remuneration plan design;
focusing on the key value drivers of the business
including employee safety, operational performance
and cost control; and
͵
attracting and retaining high calibre executives.
• Executive interests by:
͵
͵
͵
͵
rewarding capability and experience;
reflecting competitive reward for contribution to
growth in company performance;
providing a clear structure for earning rewards; and
providing recognition for contribution.
Details of remuneration for all Executives are set out in
Table 10 of this Remuneration Report.
58
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
3.2 Structure
The executive remuneration framework is structured as a
combination of fixed and variable remuneration, as follows:
TABLE 2: Executive remuneration structure
Fixed remuneration
Variable remuneration
(‘at risk’)
CURRENT
•
Fixed Annual Remuneration (“FAR”), including
cash salary, superannuation, and car benefit
in some circumstances; and
• Other benefits (see Section 3.4)
•
•
Short-term Incentive Plan (“STI”/“STIP”)
(see Section 3.5.1); and
Long-term Incentive Plan (“LTI”/“LTIP”)
(see Section 3.5.2).
3.3 Remuneration mix at target remuneration
The chart below illustrates the relative proportion of
remuneration for Executive KMP that is fixed and that which
is linked to individual and/or Company performance (STIP
and LTIP) in the event that target performance for at-risk
components is met.
TABLE 3: Components of Target Remuneration for Executive
KMP for 2019
CEO/CEC
33%
17%
17%
33%
CFO/COO
43%
21%
21%
14%
Fixed
At risk STI (cash)
At risk STI (deferred)
At risk LTI
A description of each of the remuneration components – fixed
remuneration, STIP and LTIP – is provided in sections 3.4 and
3.5 of this Remuneration Report.
3.4 Fixed Remuneration
Executives receive a fixed remuneration package, which
incorporates cash salary, superannuation benefits and may
include a provision for a car benefit, together with various
other benefits. Executives have some scope to determine the
combination of cash and various non-monetary benefits by
which their FAR is delivered. Relocation and expatriate benefits
are not included in fixed remuneration and are reported
as non-monetary benefits in the Statutory Remuneration
declaration in Table 10 of this Remuneration Report.
Executive fixed remuneration is reviewed annually to provide
a base level of remuneration which is appropriate to the
scope and accountabilities of each executive’s position and
competitive with equivalent roles among companies of similar
size in the mining/resources industry. No Executives are
guaranteed an annual increase in FAR. In 2019 the Nomination
and Remuneration Committee elected to increase fixed
remuneration for Executive KMPs by up to 3%.
3.5 Variable remuneration
Variable remuneration is delivered through participation in the
STIP (as outlined in section 3.5.1 of this Remuneration Report)
whilst certain executives are also eligible to participate in an
LTIP (as outlined in section 3.5.2 of this Remuneration Report).
3.5.1 Short Term Incentive Plan
The STIP aims to strengthen shareholder alignment and
encapsulates various company performance measures.
The Board maintains discretion to alter the scorecard
outcomes outlined below if the scorecard results generate any
unintended outcomes from a reward perspective considering
the perspectives of various stakeholders including but not
limited to shareholders, employees and communities.
Eligibility
Executives as well as other management and employees of the
Company are eligible to participate in the STIP.
Objective
The objective of the STIP is to reward Executives and
employees for the achievement of Company, Business Unit,
and individual goals that are aligned to the Company’s
financial, operational and strategic priorities.
Structure
For 2019 the Executives’ STIP comprised two key components:
1. STIP Opportunity – this is expressed as a percentage of
each Executive’s FAR. The STIP opportunity is reviewed
annually. The CEO, CEC, CFO and COO have a Target
STIP opportunity of 100% of FAR, with a maximum
opportunity of 200% of FAR. The Board believes this
level of STIP opportunity is reasonable and competitive
for the current environment.
2. STIP Scorecard – this consists of several Key Performance
Indicators (“KPIs”).
At the start of each year, the Board reviews and selects
KPIs which it considers to be the most appropriate to
the business. Assessment against these measures is
determined following the end of each year.
For Executives, all KPIs are measured at Company level.
The STIP scorecard measures the Company’s performance
in respect of the following categories:
TABLE 4: Components of Target Remuneration for
Executives for 2019
MEASURE
Profit Before Tax (“PBT”)
KPI
Profitability
Free On Board (“FOB”) Cash Costs
(excluding royalties)
Run Of Mine tonnes (“ROM”)
Health & Safety
Total Recordable Injury Frequency Rate
(“TRIFR”)
Strategic
Objectives
Critical Controls Compliance
Strategic measures may include special
projects, capital management, growth
and culture development.
WEIGHTING
30%
20%
10%
10%
5%
15%
Environment
Environmental incidents and complaints
10%
For 2019, profit before income tax (“PBT”) was deemed
a more appropriate measure than net profit after tax
(“NPAT”), which was included in the prior year.
STIP scorecard performance is assessed by the Chairman
of the Executive Committee and the CEO, reviewed by the
Nomination and Remuneration Committee, and approved
by the Board.
59
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
Performance against the STIP scorecard is converted to
a payout multiplier (calculated referencing the relevant
maximum level of opportunity and minimum acceptable or
threshold level of performance). The payout multiplier (0% to
200%) is applied to the Target STIP opportunity to determine
the actual STIP award. Accordingly, each Executive’s STIP award
is heavily influenced by the achievement of Company KPIs.
LTIP
performance
conditions
LTIP
performance
conditions
– why were
they chosen?
How will the
performance
condition be
calculated
for the EPS
Awards?
Timing
Executive STIP awards are paid as follows:
• 50% of the award is delivered as a cash payment around
March each year.
• 50% of the award will vest in equal parts over a two-year
period (25% deferred for one year, remaining 25% deferred
for two years) subject to continued employment at the
respective vesting dates. The value of the deferred portion
of STIP is converted to Deferred Rights (to Yancoal shares)
at the time of award using a VWAP determined by the
Board. At vesting, the Deferred Rights will be settled in
equity or the cash equivalent value.
3.5.2 Long Term Incentive Plan
LTIP grants are delivered in performance share rights with
vesting subject to performance metrics measured over a
3-year period. No structural changes were proposed for 2019.
Key characteristics of the LTIP are outlined in Table 5.
TABLE 5: LTIP 2019 Structure
Eligibility
Objective
Frequency
LTIP
opportunity
Allocation
Methodology
LTIP
instrument
Executives and certain senior management are
eligible to participate in the LTIP.
The objective of the LTIP is to reward and retain
participants who are in positions to influence
the Company’s long-term performance.
Each year, eligible Executives and certain senior
management are considered for an annual
LTIP grant.
The Chairman of the Executive Committee and
the Chief Executive Officer have an annual LTIP
opportunity of up to 200% of FAR.
The Chief Financial Officer and Chief Operating
Officer have an LTIP opportunity of up to 50%
of FAR.
The number of performance rights granted is
calculated by dividing the dollar value of the
annual LTIP opportunity by the volume weighted
average price of the Company’s ordinary shares
traded on the ASX across a 90-day trading
period spread 60 days prior to, and 30 days
after, 31 December 2018. The VWAP period was
extended from the usual 20 day VWAP used for
LTIP allocation, to acknowledge the impact on
the YAL share of capital transactions in the last
quarter of FY2018.
The LTIP is issued via a grant of performance
share rights for nil consideration. The Company
may at its discretion settle an Executive’s
and certain senior management’s LTIP in cash
or shares.
The LTIP will vest subject to both service and
performance measures:
• Earnings Per Share (“EPS”) Vesting Condition
(“EPS Awards”): 60% of the award will vest
subject to EPS growth performance of the
Company relative to performance of a
comparator group of companies operating
in the Australian resources sector over the
relevant performance period; and
• Costs Target Vesting Condition (“Costs
Target Awards”): 40% of the award will vest
subject to cost per tonne performance of
the Company relative to performance of
a comparator group of Australian export
mines at the end of the performance period.
An EPS vesting condition was chosen because:
a.
b.
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 in view of the low
liquidity and limited float of Yancoal shares;
and
It is a widely adopted metric that is well
understood by markets.
The Costs Target Vesting Condition was chosen
because it provides a structural incentive to
LTI participants to ensure that the Company
remains positioned in the best cost quartile of
Australian coal producers. The best quartile
costs protects and preserves shareholder value
in difficult times and supports enhanced returns
when the commodity cycle recovers.
For the EPS Awards, the EPS growth of the
Company (based on the Company’s annual
report, adjusted for any share consolidations
or splits) is measured as a percentile ranking
compared to the EPS growth for the same
period of the comparator group of companies
operating in the Australian resources sectors.
Vesting is based on the ranking in accordance
with the following schedule:
•
At the 75th percentile or above – 100% of
the EPS Awards vest;
• Between the 50th and 75th percentiles
– vesting will occur on a pro rata straight
line basis;
•
At 50th percentile – 50% of the EPS Awards
vest; and
•
Below the 50th percentile – no EPS Awards vest.
The 2019 comparator group consists of the
following companies: Whitehaven Coal; BHP
Billiton; Rio Tinto; Newcrest Mining; South32;
Fortescue Metals Group; Iluka Resources;
New Hope Corp; Northern Star Resources;
OZ Minerals; Evolution Mining; Mineral
Resources; St Barbara and Regis Resources.
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YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
How will the
performance
condition be
calculated
for the
Costs Target
Awards?
For the Costs Target Awards, the Company’s
weighted average FOB cost per tonne is
measured as a percentile ranking compared
to the estimated coal industry cost curve
(as advised by an independent expert) for
Australian export mines at the end of the
performance period.
Vesting is based on the ranking in accordance
with the following schedule:
• At the 20th percentile or below – 100% of
the Costs Target Awards vest;
• Between the 30th and 20th percentiles –
vesting will occur on a pro rata straight line
basis;
• At the 30th percentile – 50% of the Costs
Target Awards vest; and
• Above the 30th percentile – no Costs Target
Awards vest.
Performance
Period
• Subject to achieving vesting conditions,
EPS awards can become exercisable after
a three-year performance period with
the performance period commencing on
1 January 2019.
•
The Costs Target Awards is based on the
FOB cost per saleable tonne achieved by
Yancoal Australia Limited and the assets
managed on behalf of Yancoal International
Holdings for the year ending 31 December
2021 with Costs Target Awards being tested
at, or shortly after, the time of publication of
the independent expert’s report.
•
All awards that do not vest following testing
will lapse immediately. There is no re-
testing. All vested awards are automatically
exercised.
3.6 Linking Executive remuneration to Company performance
The Company’s remuneration principles include rewarding based on performance and this is primarily achieved through the
Company’s STIP and LTIP. Cash and equity awards under these plans are significantly impacted by the overall performance
of the Company in order to maintain a link between performance and shareholder value. See Section 3.5 for further detail.
The Company’s earnings and delivery of shareholder wealth for the past four years is outlined in the table below.
3.6.1 Overview of Yancoal’s performance
TABLE 6: Yancoal’s 5 year financial performance
PBT ($’M)
Basic EPS ($)A
Closing share price ($)A
Ordinary dividend per share ($)A
31 DEC 2019
767
31 DEC 2018
1,172
31 DEC 2017
311
31 DEC 2016
(312)
31 DEC 2015
(354)
0.54
2.90
0.39
0.95
3.92
0.10
0.52
4.38
–
(0.23)
10.56
–
(0.29)
2.15
–
A
Yancoal’s share capital was consolidated on a 35-1 basis on 28 September 2018. Restated figures are shown for Closing share price and Ordinary dividend
per share.
3.6.2 2019 Executive STIP outcomes
The table below outlines STIP scorecard achievement and the resulting STI outcomes across KPIs for 2019.
TABLE 7: Company Performance against 2019 Executive STIP Scorecard
KPI
Profitability
MEASURE
PBT
FOB Cash Costs (excluding royalties) ($ per tonne)
Health & Safety
TRIFR
ROM (Mt)
Critical Controls Compliance
Strategic Objectives
Strategic measures may include special projects,
capital management, growth and culture development
ACTUAL KPI RESULT STI OUTCOME
761 Between Target and Stretch
60.8 Stretch
53.0 Stretch
7.6 Between Target and Stretch
94% Between Target and Stretch
9.6 Varies Across Objectives
Environment
Environmental incidents and complaints
15.3 Stretch
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YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
The assessed outcomes and average achievement for Yancoal and Yancoal International Holdings Limited of 169% reflects the
following achievements in 2019:
1.
The delivery of profit before tax of $761 million for the Group and the assets managed on behalf of Yancoal International
Holdings Limited;
2. Attributable saleable coal production increased by 8% on the prior year, a record total of 53 million tonnes; and
3. Continued focus on a robust and sustainable cost management approach.
Details of amounts paid to executives are outlined in Table 8 of this Remuneration Report.
TABLE 8: 2019 Executive STIP Outcomes
NAME
Reinhold Schmidt
Lei Zhang
Fucun Wang
Paul Stringer
Total
STIP CASH
$A
–
STIP DEFERRED
$B
–
STIP TOTAL
$
–
–
–
440,885
440,885
–
–
440,885
440,885
–
–
881,770
881,770
% OF STIP
OPPORTUNITY
AWARDED
0%
% OF STIP
OPPORTUNITY
NOT AWARDED
100%
0%
0%
59%
13%
100%
100%
41%
87%
A
B
The 2019 STIP cash figures are to be paid around March 2020.
The “STIP Deferred” is the value of the deferred portion of the STIP awarded for the year.
The STIP Deferred value shown in the table above is converted to Deferred Rights at the time of award, using the VWAP
established by the Board. The STIP Deferred Rights will vest in equal parts over a two-year period (25% of total STIP award
deferred for one year, remaining 25% of total STIP award deferred for two years). Given the low float of the Company’s shares,
it is anticipated that, at the time of vesting, the Board may exercise discretion to settle the 2019 STIP Deferred Rights with a
cash equivalent payment.
Details of the remuneration of Executives prepared in accordance with statutory obligations and accounting standards are
contained in Table 10 of this Remuneration Report. The deferred STIP expense has been accounted for as being expected to be
settled in cash in accordance with Australian Accounting Standards.
3.6.3 LTIP awards granted to Executives in 2019
A summary of the LTIP awards granted in 2019 is set out in the table below.
TABLE 9: Details of the LTIP applicable to Executives
NAME
Reinhold Schmidt
Lei Zhang
Fucun Wang
Paul Stringer
Total
FAIR VALUE AT
DATE OF GRANT
$A
2,619,644
NUMBER OF
PERFORMANCE
RIGHTS GRANTED
985,754
186,740
792,866
286,128
70,269
298,350
107,668
3,885,378
1,462,041
A
The performance share rights noted above have been allocated and were issued on 28 June 2019. The number of performance rights granted is calculated
as the maximum LTIP award opportunity divided by the VWAP across a 90-day trading period spread 60 days prior to, and 30 days after, 31 December 2018;
adjusted for estimated dividends forgone during the performance period.
3.7 Looking forward to 2020
Following a substantial review in 2018 to align remuneration with ASX and HKEx practices, the remuneration structure and
incentive opportunity will remain unchanged in 2020 apart from increases to fixed remuneration in accordance with standard
market practice. The performance criteria for the 2020 LTIP awards and the VWAP for allocations will be reviewed for continued
appropriateness prior to the 2020 awards being granted.
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YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
4. REMUNERATION TABLE
4.1 Executives Remuneration
Table 10 sets out the details of remuneration earned by Executives, calculated in accordance with Australian Accounting Standards
TABLE 10: Statutory Remuneration of Executives in 2018 and 2019
POST-EMPLOYMENT
BENEFITS
$
SHORT-TERM BENEFITS
$
YEAR
CASH
SALARY
2019
1,629,226
STIA
–
NON-
MONETARY
BENEFITS
SUPERANNUATION
BENEFITS
LONG-TERM BENEFITS
$
LONG
SERVICE
LEAVE
STI
DEFERREDA
SHARE-BASED
PAYMENTS
$
TOTAL
$
%
PERFORMANCE
RELATED
LTI
70,864
20,767
172,602
–
1,451,019
3,344,478
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
1,602,234
695,388
109,585
457,015
–
449,951
118,970
–
–
150,573
356,707
478,860
–
162,720
211,334
700,350
440,885
370,544
590,433
3,265,451
440,885
2,736,022 1,972,832
15,176
5,644
–
2,613
6,042
–
167,873
77,278
259,955
195,120
22,766
20,767
20,290
–
10,024
20,767
10,266
20,767
11,949
83,068
75,295
140,696
695,388
43,554
34,729
–
118,970
–
–
1,260
137
27,000
8,764
244,416
184,326
–
–
–
211,334
440,885
590,433
440,885
1,616,125
631,915
103,435
45,045
–
–
432,064
185,915
155,888
67,067
2,142,406
929,942
3,897,972
639,947
793,599
–
519,917
938,993
781,706
1,953,648
1,716,468
6,877,066
7,709,662
43%
52%
16%
36%
–
69%
46%
78%
53%
73%
44%
59%
NAME
Reinhold
Schmidt
Lei Zhang
Baocai ZhangB
Fucun WangC
Paul StringerD
Total
A
B
C
D
Following preparation of the 2018 remuneration report, the 2018 STIP outcomes for Executive KMP were reduced by less than 1%. The 2018 figures for STI have
been restated in the table above and in Table 15.
Baocai Zhang was an Executive director until 8 June 2018.
Fucun Wang was an Executive director from 26 June 2018.
Paul Stringer was considered a KMP from 29 May 2018.
Particulars regarding the Directors’, senior management’s and Executive KMPs’ remuneration and the five highest paid employees
as required to be disclosed pursuant to Appendix 16 of the HK Listing Rules are set out in note B4 to the financial statements.
During the financial year ended 31 December 2019, no emoluments were paid by the Group to any of the Directors or the five
highest paid employees as an inducement to join or upon joining the Group or as compensation for loss of office as a director
of any member of the Group or in connection with the management of the affairs of any members of the Group.
5. SERVICE AGREEMENTS
For Non-Executive Directors, the terms and conditions of their appointment are outlined in a letter of appointment.
For Executives, the terms and conditions of their employment are outlined in their Executive Service Agreement (“ESA”)
with the Company.
Updates to the ESAs have been put in place for those executives who received an employment cost adjustment in 2019 to recognise
achievement of performance and development goals. All other terms and conditions outlined in the ESA remain effective.
TABLE 11: Certain ESA terms for each of the Executives
EXECUTIVE
Reinhold
Schmidt
POSITION
Chief Executive Officer
TERM OF ESA
Unlimited
Lei Zhang
Chief Financial Officer
Unlimited
NOTICE PERIOD TERMINATION BENEFIT
6 monthsA
Nil for cause or resignation.
•
Fucun Wang
Executive Director, Co-Vice
Chairman, Chairman of the
Executive Committee
Unlimited
6 monthsA
Paul Stringer
Chief Operating Officer
Unlimited
A Notice period applicable if the Executive resigns.
B Notice period applicable if the Company terminates the Executive.
12 monthsB
3 monthsA
6 monthsB
12 monthsB
3 monthsA
6 monthsB
•
•
•
•
•
•
•
If ceasing employment for any other reason i.e. as a ‘Good Leaver’, a pro-rata
payment in accordance with STIP or LTIP plan rules is at the Board discretion.
Nil for cause or resignation.
If ceasing employment for any other reason i.e. as a ‘Good Leaver’, a pro-rata
payment in accordance with STIP or LTIP plan rules is at the Board discretion.
Nil for cause or resignation.
If ceasing employment for any other reason i.e. as a ‘Good Leaver’, a pro-rata
payment in accordance with STIP or LTIP plan rules is at the Board discretion.
Nil for cause or resignation.
If ceasing employment for any other reason i.e. as a ‘Good Leaver’, a pro-rata
payment in accordance with STIP or LTIP plan rules is at the Board discretion.
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YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
6. NON-EXECUTIVE DIRECTOR FEES
Objective
The Board seeks to set remuneration for Non-Executive Directors at a level which:
• provides the Company with the ability to attract and retain directors of the highest calibre;
•
•
reflects the responsibilities and demands made on Non-Executive Directors; and
is reasonable and acceptable to the Company’s shareholders.
Structure
The remuneration structure for the Non-Executive Directors is distinct from the remuneration structure for Executives in line with
sound corporate governance.
The Company set an aggregate remuneration cap of $3,500,000 per annum for all Non-Executive Directors. Consistent with the
Constitution, remuneration payable to each Non-Executive Director has been approved by the Company’s majority shareholder,
Yanzhou.
The total Board and Committee fees paid by the Company to Non-Executive Directors in 2019 was $956,160.
During 2019, Non-Executive Directors were remunerated by way of fixed fees in the form of cash and superannuation (to the
maximum superannuation guarantee cap). A change was made to the Board and Board Committee fees from 2018 to 2019 with
fees being adjusted to be sufficient to attract and retain high quality directors. Fees for directors were last reviewed in 2012. No
equity instruments were issued to Non-Executive Directors over 2019 as part of their remuneration package. No element of the
Non-Executive Director fees is linked to performance.
Neither Board nor Board Committee fees were paid to:
• Executive Director Fucun Wang as the responsibilities of Board Committee membership are considered in determining the
remuneration provided as part of their normal employment conditions.
• Nominee Directors of Yanzhou as the responsibilities of Board or Board Committee membership were considered part of their
role and remuneration arrangements with Yanzhou. The Directors of Yanzhou and China Cinda (HK) Holdings Company Limited
Group (“Cinda”) were as follows:
͵
͵
͵
͵
Cunliang Lai
Fuqi Wang
Fucun Wang
Xing Feng
– Xiang Qian Wu
– Baocai Zhang
– Qingchun Zhao
TABLE 12: Board and Board Committee fees
Board Fees per annum (including any superannuation)
Chairman of the Board
Independent Co-Vice Chairman of the Board
(inclusive of Committee fees)
Director
Committee Fees per annum (including any superannuation)
Audit and Risk Management Committee – Chair
Audit and Risk Management Committee – Member
Health, Safety, Environment and Community Committee – Chair
Health, Safety, Environment and Community – Member
Nomination and Remuneration Committee – Chair
Nomination and Remuneration Committee – Member
Strategy and Development Committee – Chair
Strategy and Development Committee – Member
2019
$
Not applicable
360,000
165,000A
Not applicable
20,000
40,000
20,000
40,000
20,000
Not applicable
20,000
A Other than as noted in Table 13: Details of Non-Executive Directors Remuneration.
Table 13 sets out the details of remuneration (in the form of Board and Committee fees and other benefits) earned by Non-
Executive Directors, that were eligible for compensation, calculated in accordance with Australian Accounting Standards.
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YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
TABLE 13: Details of Non-Executive Directors’ Remuneration, earned in 2018 and 2019
NAME
Gregory James Fletcher
Geoffrey William Raby
David James Moult
Helen Jane Gillies
Huaqiao ZhangB
Vincent O’RourkeC
Total
SHORT TERM BENEFITS
$
POST-EMPLOYMENT BENEFITS
$
STI OR BONUS
–
NON- MONETARY
BENEFITS
–
SUPERANNUATION
20,767
LONG SERVICE
LEAVE
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19,200
17,785
15,913
20,767
18,237
19,521
18,857
–
725
–
1,307
78,840
74,239
–
–
–
–
–
–
–
–
–
–
YEAR
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
FEESA
339,233
398,074
187,215
176,500
224,233
191,972
205,479
198,494
–
7,296
–
13,163
956,160
985,499
TOTAL
$
360,000
417,274
205,000
192,413
245,000
210,209
225,000
217,351
–
8,021
–
14,470
1,035,000
1,059,738
A
Includes following transaction specific remuneration paid:
•
•
•
•
Gregory James Fletcher – 2018: $112,500.
Geoffrey William Raby – 2018: $11,740.
David James Moult – 2018: $24,658.
Helen Jane Gillies – 2018: $43,836.
B
C
Huaqiao Zhang – resigned on 30 January 2018
Vincent O’Rourke – resigned on 30 January 2018
7. SHARE TRADING POLICY AND INSIDER TRADING POLICY
The Company’s Share Trading Policy prohibits dealing in Company securities or Yanzhou securities by KMP and other relevant
employees, as well as their closely related persons, during specified blackout periods each year and when they are in possession
of ‘inside information’. Directors, KMP and their closely related persons are also prohibited from dealing in securities of a listed
company where he or she is in possession of inside information in relation to those securities. Subject to compliance with the
Company’s Share Trading Policy and Insider Trading Policy, employees are permitted to deal in Company securities or Yanzhou
securities outside these blackout periods where they are not in possession of inside information, however additional approval
requirements apply to Directors.
The Share Trading Policy precludes relevant employees from entering into any hedge or derivative transactions relating to
unvested options or share rights granted to them under incentive plans and securities that are subject to holding locks or
restrictions from dealing under such plans. There are also restrictions regarding margin lending arrangements, hedging and short-
term trading of the Company’s securities. Each Director and KMP is required to provide a declaration at the end of each financial
year certifying that they (and their closely related persons) have complied with the Share Trading Policy and the Insider Trading
Policy for the duration of that financial year.
8. EQUITY INSTRUMENT DISCLOSURES
The numbers of shares in the Company held during the financial year by each director of the Company and other Executive KMPs
of the Group, including their personally related parties, are set out below.
TABLE 14: Movement in Shares held by KMP in 2019
NAME
Gregory Fletcher
Reinhold Schmidt
Baocai Zhang
Geoffrey Raby
Lei Zhang
Ying ZhangA
Paul Stringer
HELD AT
1 JANUARY
2019
2,100
GRANTED AS
COMPENSATION
–
HELD AT
31 DECEMBER
2019
2,100
PURCHASED
–
312,278
274,404
22,858
68,894
28,233
56,131
–
–
–
–
–
–
–
–
–
–
–
–
312,278
274,404
22,858
68,894
28,233
56,131
A Mrs Ying Zhang is a related party of Mr Lei Zhang.
No other KMP held any shares in respect of Yancoal or its related entities at or during the year ended 31 December 2019.
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YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
TABLE 15: Movement in Other Equity Instruments held by Executives in 2019
The number of performance rights held by Executives in 2019 is outlined in the table below.
NAME
Reinhold
Schmidt
Lei Zhang
Fucun Wang
Paul Stringer
INSTRUMENT
LTIPA
STIP DeferralB
LTIPA
STIP DeferralB
LTIPA
STIP DeferralB
LTIPA
STIP DeferralB
HELD AT
1 JANUARY
2019
668,693
GRANTED AS
COMPENSATION
985,754
VESTED
DURING
THE YEAR
–
EXERCISED
DURING
YEAR
–
207,720
47,667
35,538
196,735
63,128
70,970
176,370
–
70,269
–
298,350
–
107,668
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
LAPSED/
CANCELLED
DURING YEARC
–
(207,720)
HELD AT
31 DECEMBER
2019
1,654,447
–
–
117,936
(35,538)
–
–
495,085
(63,128)
–
–
178,638
(176,370)
–
OF WHICH
EXERCISABLE
–
OF WHICH NOT
VESTED & NOT
EXERCISABLE
1,654,447
–
–
–
–
–
–
–
–
117,936
–
495,085
–
178,638
–
A
Relating to the 2018 and 2019 LTIP awards:
•
•
2019 LTIP: The number of performance rights granted is calculated as the maximum LTIP award opportunity divided by the VWAP across a 90-day trading
period spread 60 days prior to, and 30 days after, 31 December 2018.
2018 LTIP: The number of performance rights granted is calculated as the maximum LTIP award opportunity divided by the VWAP across a 20- day
trading period spread evenly either side of 31 December 2017. The number of performance share rights was adjusted due to the 35:1 share consolidation
undertaken by the Company in September 2018.
B
Relating to the deferred portions of the 2018 and 2019 STIP.
•
2018 STIP Deferral: The first portion of the 2018 deferred STIP is due to vest in March 2020. Given the low float of YAL shares, discretion has been exercised
to settle this portion of the award in cash.
•
2019 STIP Deferral: The 2019 deferred STIP has been accounted for as being expected to be settled in cash in accordance with Australian Accounting Standards.
C Under Australian Accounting Standards, these performance rights have been accounted for as being cancelled due to the expectation that these are now to be
settled in cash rather than in equity.
9. OTHER TRANSACTIONS WITH AND LOANS TO DIRECTORS AND EXECUTIVES
A number of Directors and executives hold positions in other entities that result in them having control or significant influence
over the financial or operating policies of those entities. Some of these entities transacted with the Company or its subsidiaries in
the reporting period. The terms and conditions of any transactions with management, Directors or parties related to Executives
or Directors were no more favourable than those available, or which might reasonably be expected to be available, on similar
transactions to non-management or Director related persons or entities on an arm’s length basis (refer to Note E3). There were
no loans provided to Directors and Executives during the year.
DIRECTORS’ CONFIRMATIONS
Director’s Interest in Competing Business
Baocai Zhang, who is a non-executive Director, serves as a director of Yankuang. Xiangqian Wu and Qingchun Zhao, who are non-
executive Directors, serve as the directors of Yanzhou. Yankuang and Yanzhou are the controlling shareholders of the Company.
As at 31 December 2019, Yankuang is, directly and indirectly, interested in approximately 53.79% of the shares in Yanzhou and
Yanzhou is interested in approximately 62.26% of the shares in the Company. Yankuang is principally engaged in the production
and sale of coal, coal chemicals and aluminium, power generation, machinery manufacturing and financial investments. Yanzhou
is principally engaged in the production of coal and coal chemicals, manufacturing of mechanical and electrical equipment and
power and heat generation. Yankuang does not have any interests in mines in Australia other than through its interests in Yanzhou
and the Group. The mining assets of Yanzhou located in Australia, other than through its interest in the Group, are managed and
operated by the Company.
Except as disclosed above, none of the Directors are interested in any business apart from the Group’s business which competes
with or is likely to compete, either directly or indirectly, with the Group’s business during the year ended 31 December 2019.
Letters of appointment and service contracts
Each Director has entered into a letter of appointment in relation to his/her role as a director of the Company, which is subject to
termination by the Director or the Company in accordance with the terms of the letter of appointment, the requirements of the
Listing Rules and the provisions relating to the retirement and rotation of the Directors under the Constitution.
Pursuant to the terms of the letter of appointment entered into between each Director (on the one part) and the Company (on
the other part), (a) the Executive Director and the non-executive Directors are not entitled to receive any director’s fees; (b) the
annual director’s fees payable by the Company to each Independent Non-executive Director are $165,000 (save for Gregory
Fletcher who receives fees as set out in (e) below); (c) an Independent Non-executive Director (save for Gregory Fletcher) will
receive from the Company an additional fee of $40,000 for being the chairman of the audit and risk management committee, the
nomination and remuneration committee or the health, safety, environment and community committee, (d) an Independent Non-
Executive Director (save for Gregory Fletcher) will receive from the Company an additional fee of $20,000 for being a member
66
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
of the audit and risk management committee, the health, safety environment and community committee, the nomination and
remuneration committee or the strategy and development committee, and certain additional fees on a per day basis as approved
by the Board for the role on an independent board committee for any major related party transactions, and (e) Gregory Fletcher
will receive $360,000 including superannuation in aggregate for his role as a Co-Vice Chair of the Board, chairman of the audit
and risk management committee, member of the nomination and remuneration committee and chair of the independent board
committee.
Each Director is entitled to be indemnified by the Company (to the extent permitted under the Constitution and applicable laws)
and to be reimbursed by the Company for all necessary and reasonable out-of-pocket expenses properly incurred in connection
with the performance and discharge of his/her duties under his/her letter of appointment.
Save as disclosed above, none of the Directors has entered into any service contracts as a director with any member of the Group
(excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than
statutory compensation)).
INTERESTS AND POSITIONS IN SHARES
1. Interests of the Directors and Chief Executive of the Company
As at 31 December 2019 the interests and/or short positions (as applicable) of the Directors and the chief executive of the
Company in the Shares and debentures of the Company and any interests and/or short positions (as applicable) in shares or
debentures of any of the Company’s associated corporations (within the meaning of Part XV of the Securities and Futures
Ordinance (SFO)) which (1) have to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of
Part XV of the SFO (including interests and/or short positions (as applicable) which they are taken or deemed to have under such
provisions of the SFO), (2) are required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or (3)
are required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to
the HK Listing Rules, to be notified to the Company and the Hong Kong Stock Exchange, are as follows:
The Company
NAME OF DIRECTOR OR CHIEF EXECUTIVE
Baocai Zhang
Gregory James Fletcher
Geoffrey William Raby
Fucun Wang
Reinhold Schmidt
NUMBER OF
SHARES
274,404
2,100
22,858
–
312,278
INTEREST IN
UNDERLYING
SHARES1
–
TOTAL INTEREST
IN SHARES AND
UNDERLYING SHARES
274,404
NATURE OF INTEREST
Beneficial owner
–
–
495,0852
1,654,4472
2,100
Beneficial owner
22,858
558,2132
2,174,4452
Beneficial owner
Beneficial owner
Beneficial owner
APPROXIMATE
PERCENTAGE
0.02078%
0.00016%
0.00173%
0.04227%
0.16468%
Associated corporations of the Company
NAME OF DIRECTOR
Fuqi Wang
Xiangqian Wu
NAME OF THE ASSOCIATED CORPORATION
Yanzhou Coal Mining Company Limited
Yanzhou Coal Mining Company Limited
NUMBER OF
SHARES
10,000
NATURE OF INTEREST
Beneficial owner
APPROXIMATE
PERCENTAGE
0.00034%
10,000
Beneficial owner
0.00034%
Save as disclosed above, as at 31 December 2019, none of the Directors or the chief executive of the Company have an interest
and/or short position (as applicable) in the Shares or debentures of the Company or any interests and/or short positions (as
applicable) in the shares or debentures of the Company’s associated corporations (within the meaning of Part XV of the SFO)
which (i) have to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the
SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), (ii) are
required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein or (iii) are required, pursuant to
the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the HK Listing Rules, to be
notified to the Company and the Hong Kong Stock Exchange.
1
2
These represent the number of shares underlying the performance share rights which were granted pursuant to the Company’s Equity Incentive Plan approved
by the Board on 18 April 2018. The terms of the Equity Incentive Plan governing the grant of performance share rights are not subject to the provisions of
Chapter 17 of the HK Listing Rules as it does not involve the grant of options by the Company to subscribe for new shares of the Company.
Under Australian Accounting Standards, the 63,128 STIP Deferral held by Fucun Wang and 207,720 STIP Deferral held by Reinhold Schmidt have been accounted
for as being cancelled due to the expectation that these are now to be settled in cash rather than equity.
67
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
2. Interests of persons other than Directors and Chief Executive of the Company
As at 31 December 2019 the following persons (other than a Director or chief executive of the Company) had an interest and/or
short position (as applicable) in the Shares or underlying Shares which were recorded in the register required to be kept under
section 336 of the SFO:
NAME OF SHAREHOLDER
Yanzhou
Yankuang3
CAPACITY
Beneficial interest
Interest in controlled entity
Cinda International HGB Investment (UK) Limited
Beneficial interest
China Agriculture Investment Limited
International High Grade Fund B, L.P.
Cinda International GP Management Limited
China Cinda (HK) Asset Management Co., Ltd4
Cinda Strategic (BVI) Limited
Cinda International Holdings Limited
Cinda Securities Co., Ltd
China Cinda (HK) Holdings Company Limited
China Cinda Asset Management Co., Ltd
Glencore Coal Pty Ltd
Glencore Holdings Pty Limited
Glencore plc5
CSIL6
Interest in controlled entity
Interest in controlled entity
Interest in controlled entity
Interest in controlled entity
Interest in controlled entity
Interest in controlled entity
Interest in controlled entity
Interest in controlled entity
Interest in controlled entity
Beneficial interest
Interest in controlled entity
Interest in controlled entity
Beneficial interest
Shandong Lucion Investment Holdings Group Co., Ltd
Interest in controlled entity
NUMBER OF
SHARES HELD
OR INTERESTED
822,157,715
APPROXIMATE
PERCENTAGE
(%)
62.26
822,157,715
209,800,010
209,800,010
209,800,010
209,800,010
209,800,010
209,800,010
209,800,010
209,800,010
209,800,010
209,800,010
84,497,858
84,497,858
84,497,858
71,428,571
71,428,571
62.26
15.89
15.89
15.89
15.89
15.89
15.89
15.89
15.89
15.89
15.89
6.40
6.40
6.40
5.41
5.41
Save as disclosed above, as at 31 December 2019, none of the substantial shareholders or other persons, (other than the Directors
and Chief Executive of the Company) had any interest or short position in the shares and/or underlying shares of the Company as
recorded in the register required to be kept by the Company under section 33b of the SFO.
COMMUNICATION WITH SHAREHOLDERS
The Company believes in high standards of transparent corporate disclosure and is committed to disclosing to its shareholders
information in a timely and fair manner via ASX and HKExnews. Where there is inadvertent disclosure made to a selected group,
the Company will make the same disclosure publicly to all others as soon as practicable. Communication is mainly made through:
• annual reports that are prepared and sent to all shareholders. The Board ensures that the annual report includes all relevant
material information about the Company and the Group, including future developments and other disclosures required by
the Corporations Act 2001 (Cth), the ASX listing rules, the Companies Ordinance of the Laws of Hong Kong and the Hong Kong
listing rules;
•
interim reports containing a summary of the financial information and affairs of the Group for that period;
• quarterly production reports containing a summary of the Group’s production output and coal sales for the reporting period;
• notices of explanatory memoranda for AGMs and extraordinary general meetings (if any) that are prepared and sent to all
shareholders.
The Company does not practice selective disclosure. Price sensitive information is first publicly released through ASX and
HKExnews. All shareholders of the Company will receive the Annual Report and the notice of AGM by post.
Shareholders can access all of the Company’s announcements published on the ASX and HKExnews on the Company’s website at
www.yancoal.com.au.
3
4
5
6
Yankuang is deemed to be interested in the 822,157,715 Shares which Yanzhou is interested in as beneficial owner as it is entitled to exercise or control the
exercise of more than one-third of the voting power at general meetings of Yanzhou.
Cinda International HGB Investment (UK) limited, an indirect wholly owned subsidiary of China Cinda Asset Management Co., Ltd, is interested in 209,800,010
Shares which are held by J P Morgan Nominees Australia Limited as nominee. China Cinda Asset Management Co., Ltd., China Cinda (HK) Holdings Company
Limited, Cinda International Holdings Limited, Cinda Securities Co., Ltd, Cinda Strategic (BVI) Limited, China Cinda (HK) Asset Management Co., Ltd, Cinda
International GP Management Limited, International High Grade Fund B, L.P. and China Agriculture Investment Limited are each deemed to be interested in the
209,800,010 Shares which Cinda International HGB Investment (UK) Limited is interested in as beneficial owner.
Glencore plc and Glencore Holdings Pty Limited are deemed to be interested in the 84,497,858 Shares which Glencore Coal Pty Ltd is interested in as beneficial
owner. Glencore plc wholly owns Glencore Holdings Pty Ltd which in turn wholly owns Glencore Coal Pty Ltd.
CSIL, a wholly owned subsidiary of Shandong Lucion Investment Holdings Group Co., Ltd, is interested in 71,428,572 Shares which are held by HSBC Custody
Nominees (Australia) Limited – A/C 2 as nominee.
68
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
The following table sets out the breakdown of the use
of proceeds from the HK Listing as at the date of this
annual report:
S/N PURPOSE OF NET PROCEEDS
Debt Repayment (48%)
1
2
Future M&A (30%)
3 Moolarben JV Acquisition
(12%)
AMOUNT
ALLOCATED
HK$’000
626,507
391,567
156,627
4
General Working Capital (10%)
130,522
Total (Net Proceeds)
1,305,223
AMOUNT
UTILISED
HK$’000
626,507
BALANCE
HK$’000
–
–
391,567
156,627
130,522
913,223
–
–
391,567
The above utilisations are in accordance with the intended
use of the net proceeds and percentage allocated, as stated
in the Company’s prospectus for the Global Offering dated
26 November 2018. The Company expects to utilise the
balance of Net Proceeds of approximately HK$391 million
in the next 12 months.
The Board will continue to update in periodic announcements
on the utilisation of the balance of the proceeds from the HK
Listing as and when the proceeds are materially disbursed and
provide a status report on such use in its annual report and its
quarterly and full year results announcements.
MANAGEMENT CONTRACTS
No contracts concerning the management and administration
of the whole or any substantial part of the business of the
Company were entered into or existed during the year ended
31 December 2019.
TAX RELIEF
The Company is not aware of any relief on taxation available
to the shareholders by reason of their holdings of the fully
paid shares. If the shareholders are unsure about the taxation
implications of purchasing, holding, disposing of, dealing in, or
exercising of any rights in relation to the fully paid shares, they
are advised to consult an expert.
MAJOR CUSTOMERS AND SUPPLIERS
The information in respect of the Groups sales to the
major customers, and purchases from the major suppliers
can be found in Notes B2 and B5 to the consolidated financial
statements.
To the knowledge of the Directors, none of the Directors,
or their associates, had any beneficial interest in the five
largest customers or suppliers. To the knowledge of the
Directors, two substantial shareholders, Yanzhou Coal Mining
Company and Glencore Coal (each owning more than 5% of
the Company’s issued capital) have a beneficial interest in two
of the five largest customers. The details of the customer/
sales agreements are provided in this ‘Continuing Connected
Transactions’ section of this report.
DIVIDENDS AND DIVIDEND POLICY
Subject in each case to applicable laws, the ongoing cash
needs of the business, the statutory and common law duties
of the Directors and shareholders’ approval, the Directors may
pay interim and/or final dividends, and in accordance with the
Company’s Constitution must:
i.
ii.
subject to (ii) below, pay as interim and/or final dividends
not less than (A) 50% of net profit after tax (pre-abnormal
items); or (B) 50% of the free cash flow (pre-abnormal
items), in each financial year; and
if the Directors determine that it is necessary in order
to prudently manage the Company’s financial position,
pay as interim and/or final dividends not less than 25%
of net profit after tax (pre-abnormal items) in any given
financial year.
The Company paid an interim dividend totaling $136.7 million
on 20 September 2019. The Company intends to pay a final
dividend of $280 million for the year ended 31 December 2019
to be paid on 29 April 2020.
PRE-EMPTIVE RIGHTS ON NEW ISSUES OF SHARES
Under the Corporations Act 2001 (Cth) and the constitution of
the Company, shareholders do not have the right to be offered
any Shares which are newly issued for cash before those
Shares can be offered to non-Shareholders.
PUBLIC FLOAT
Based on the information available to the Company as at
31 December 2019, approximately 15.37% of the issued
ordinary shares of the Company are held by the public.
Accordingly the Company has complied with the waiver
granted by The Stock Exchange of Hong Kong Limited under
Rule 8.08(1) of The Rules Governing the Listing of Securities
as part of the Company’s listing in Hong Kong. Rule 8.08(1)
(a) of the HK Listing Rules requires that at least 25% of an
issuer’s total issued share capital must at all times be held
by the public.
Based on the information that is publicly available to the
Company and within the knowledge of the Directors as at
the date of this report, the Company has maintained the
minimum public float of approximately 15.37% under the
HK Listing Rules.
FULFILMENT OF CONDITIONS AND UNDERTAKINGS
The Company confirms that it has complied with the
conditions and undertakings imposed by The Stock Exchange
of Hong Kong Limited during the period from 1 January 2019
to 31 December 2019.
USE OF IPO PROCEEDS
In connection with the global offering in Hong Kong, which
was completed on 3 January 2019 (the “Global Offering”),
the Company allotted and issued 59,441,900 new shares on
6 December 2018, 563,881 new shares on 28 December 2018
and 4,361,900 new shares on 3 January 2019 at a price of
HK$23.48 per share and raised HK$1,511 million ($268 million)
in total gross proceeds. The net proceeds from the Global
Offering amounted to approximately HK$1,305 million after
deduction of related expenses of approximately HK$206
million (the “Net Proceeds”).
69
YANCOAL ANNUAL REPORT 2019 DIRECTOR’S REPORT
DIRECTOR’S REPORT
DIRECTORS’ INTERESTS IN TRANSACTIONS, ARRANGEMENTS
OR CONTRACTS
No transactions, arrangements or contracts of significance in
relation to the Group’s business to which any of the Company’s
subsidiaries and fellow subsidiaries was a party, and in which a
Director or an entity connected with a Director had a material
interest, whether directly or indirectly, subsisted at any time
during the year or at the end of the year.
INSURANCE OF OFFICERS OR AUDITORS
Rule 10.2 of Yancoal’s Constitution requires Yancoal to
indemnify, to the full extent permitted by law, each Officer
of the Company against liability incurred by the Officer as a
Director or an Officer of the Company. The Directors named in
this report, along with the Company Secretary, Chief Executive
Officer and Chief Financial Officer, have the benefit of this
requirement, as do individuals who formerly held one of
those positions.
During the financial year, the Company paid a premium for
Directors’ and Officers’ Liability insurance as well as Defence
Costs cover. The policies cover the Directors and other officers
of the Group. The Directors have not included details of the
nature of the liabilities covered and the amount of premium
paid in respect of the Directors’ and Officers’ Liability
insurance policy as such disclosure is prohibited under the
terms of insurance contracts.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the
Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which
the Company is a party, for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf
of the Company with leave of the Court under section 237 of
the Corporations Act 2001 (Cth).
NON-AUDIT SERVICES
The Company may decide to employ the auditor on
assignments additional to its statutory audit duties where
the auditor’s expertise and experience with the Group are
important.
The Board of Directors have considered the position and,
in accordance with advice received from the Audit and Risk
Management Committee, is satisfied that the provision of the
non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act
2001 (Cth). The Directors are satisfied that the provision of
non- audit services by the auditor, as set out below, did not
compromise the auditor independence requirements of the
Corporations Act 2001 (Cth) for the following reasons:
• all non-audit services have been reviewed by the Audit and
Risk Management Committee to ensure they do not impact
the impartiality and objectivity of the auditor; and
• none of the services undermine the general principles
relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.
During the year the following fees were paid or payable for
services provided by the auditor of the Group, its related
practices and non-related audit firms:
TABLE 16: Auditor’s Fees in 2019
SHINEWING AUSTRALIA
Audit and review of financial statements
Non-audit services:
Other assurance services
Taxation compliance
Total services remuneration of
ShineWing Australia
2019
$
1,378,700
12,800
2018
$
1,808,000
982,000
50,000
84,000
1,441,500
2,874,000
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001 (Cth) is set
out on page 71.
ROUNDING OF AMOUNTS
The Group is of a kind referred to in Legislative Instrument
2016/191, issued by the Australian Securities and Investments
Commission, relating to the “rounding off’ of amounts in this
Directors’ Report and financial statements. Amounts in the
Directors’ Report and financial statements have been rounded
off to the nearest million dollars in accordance with that
legislative instrument.
Details of the amounts paid or payable to the auditor for non-
audit services provided during the year are set out below.
This report is made in accordance with a resolution of the
Directors.
During the year, the auditor’s non-audit service to the
Company was the preparation of the accountant’s report in
connection with Hong Kong listing.
Gregory James Fletcher
Director
Sydney
28 February 2020
70
YANCOAL ANNUAL REPORT 2019
Take the lead
Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 to the
directors of Yancoal Australia Ltd
I declare that to the best of my knowledge and belief, during the year ended 31 December 2019 there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
ShineWing Australia
Chartered Accountants
R Blayney Morgan
Partner
Sydney, 28 February 2020
Brisbane
Level 14
12 Creek Street
Brisbane QLD 4000
T + 61 7 3085 0888
Melbourne
Level 10
530 Collins Street
Melbourne VIC 3000
T + 61 3 8635 1800
F + 61 3 8102 3400
Sydney
Level 8
167 Macquarie Street
Sydney NSW 2000
T + 61 2 8059 6800
F + 61 2 8059 6899
ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional
Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited.
shinewing.com.au
71
YANCOAL ANNUAL REPORT 2019AUDITOR’S INDEPENDENCE DECLARATIONAUDITOR’S INDEPENDENCE DECLARATION
CONTINUING CONNECTED TRANSACTIONS
CONTINUING CONNECTED TRANSACTIONS
The Company has entered into certain transactions with
connected persons of the Company which constitute
continuing connected transactions of the Company under the
HK Listing Rules. These non-exempt continuing connected
transactions, in respect of which the Company has complied
with the relevant requirements under Chapter 14A of the HK
Listing Rules, are set out below.
1. Sale of Coal by the Group
From time to time, Yanzhou (the controlling shareholder of the
Company who is interested in approximately 62.26% of the
Shares in the Company) and/or its subsidiaries (excluding the
Group) may purchase coal from the Group primarily for their
own trading purposes. The Company entered into a framework
coal sales agreement with Yanzhou (the “Yanzhou Framework
Coal Sales Agreement”) on 8 October 2018 to govern all existing
and future sale of coal by the Group to Yanzhou and/or its
subsidiaries (excluding the Group). The Yanzhou Framework Coal
Sales Agreement provides that all transactions in relation to
the sale of coal by the Group to Yanzhou and/or its subsidiaries
(excluding the Group) must be (i) in the ordinary and usual
course of business of the Group, (ii) on an arm’s length basis,
(iii) on normal commercial terms with the sale price being
determined with reference to market indices, adjusted for coal
characteristics and an optional analysis to ensure the price is
negotiated on an arm’s length basis and (iv) in compliance with,
amongst other things, the HK Listing Rules and applicable laws.
The Yanzhou Framework Coal Sales Agreement expires
on 31 December 2020 and is automatically renewable for
successive periods of three years thereafter, subject to
compliance with the then applicable provisions of the HK
Listing Rules, unless terminated earlier by not less than three
months’ prior notice or otherwise in accordance with the
terms of the Yanzhou Framework Coal Sales Agreement.
The maximum annual transaction amount to be received by
the Group from Yanzhou and/or its subsidiaries (excluding the
Group) for the three years ending 31 December 2018, 2019
and 2020 will not exceed US$250.0 million, US$250.0 million
and US$250.0 million, respectively. During the year ended
31 December 2019, the transaction amount received by the
Group was approximately US$95.5 million, which was below
the annual cap.
2. Purchase of Coal by the Group
The Group has purchased and may, from time to time,
purchase coal from Yanzhou and/or its subsidiaries, in
particular Australian based subsidiaries of Yanzhou holding
mines which are managed by the Group, for back-to-back on
sale to end customers in order to fulfil customer requirements
and maintain customer relationships.
The Company entered into a framework coal purchase
agreement with Yanzhou (the “Framework Coal Purchase
Agreement”) on 8 October 2018 to govern all existing and
future purchases of coal by the Group from Yanzhou and/or
its subsidiaries (excluding the Group). The Framework Coal
Purchase Agreement provides that all transactions in relation
to the purchase of coal by the Group from Yanzhou and/or its
subsidiaries (excluding the Group) must be (i) in the ordinary
and usual course of business of the Group, (ii) on an arm’s
length basis, (iii) on normal commercial terms with the sale
price being determined with reference to industry index prices
and coal quality characteristics under the respective contracts
and (iv) in compliance with, amongst other things, the HK
Listing Rules and applicable laws.
The Framework Coal Purchase Agreement expires on
31 December 2020 and is automatically renewable for
successive periods of three years thereafter, subject to
compliance with the then applicable provisions of the HK
Listing Rules, unless terminated earlier by not less than three
months’ prior notice or otherwise in accordance with the
terms of the Framework Coal Purchase Agreement.
The maximum annual transaction amount to be paid by
the Group to Yanzhou and/or its subsidiaries (excluding the
Group) for the three years ending 31 December 2018, 2019
and 2020 will not exceed US$65.0 million, US$65.0 million
and US$65.0 million, respectively. During the year ended
31 December 2019, the transaction amount paid by the
Group was approximately US$5.3 million, which was below
the annual cap.
3. Provision of Management Services by the Company
As one of the conditions imposed by the Foreign Investment
Review Board of the Australian Government in relation
to the merger of the Company with Gloucester in 2012,
a management and transitional services agreement
(the “Management and Transitional Services Agreement”) was
entered into between the Company and the following entities
(the “Existing Recipients”), comprising (i) Yanzhou, (ii) Yancoal
Technology Development Holdings Pty Ltd, (iii) Premier Coal
Holdings Pty Ltd, (iv) Athena Holdings Pty Ltd, (v) Tonford
Holdings Pty Ltd, (vi) Wilpeena Holdings Pty Ltd and (vii)
Yancoal Energy Pty Limited, in 2012, pursuant to which the
Company has agreed to provide to the Existing Recipients
each Services (as described below) in respect of certain
assets owned by the Existing Recipients. Each of the Existing
Recipients is a wholly owned subsidiary of Yanzhou (other
than Yanzhou itself). Yanzhou is a Controlling Shareholder of
the Company and is interested in approximately 62.26% of the
Shares in the Company.
On 7 December 2016, a deed of variation, accession and
termination agreement of the Management and Transitional
Services Agreement was entered into among the Existing
Recipients, Yankuang Resources Pty Ltd (“Yankuang
Resources”), Yankuang (Australia) Metal Mining Pty Ltd.
(“Yankuang (Australia) Metal Mining)”, together with Yankuang
Resources and the Existing Recipients, the “Recipients”) and the
Company, pursuant to which Yankuang Resources and Yankuang
(Australia) Metal Mining became parties to the Management
and Transitional Services Agreement and are entitled to
all rights and benefits of an Existing Recipient under the
Management and Transitional Services Agreement. Yankuang
Resources and Yankuang (Australia) Metal Mining are both
wholly-owned subsidiaries of Yankuang. Yankuang is, directly
and indirectly, interested in approximately 53.79% of the shares
in Yanzhou and is a controlling shareholder of the Company.
Details of the terms of the Management and Transitional
Services Agreement are set out below.
72
YANCOAL ANNUAL REPORT 2019
CONTINUING CONNECTED TRANSACTIONS
CONTINUING CONNECTED TRANSACTIONS
Services
i.
The Services provided to each Recipient and each of
their respective subsidiaries (excluding the Group and
Yanzhou) include:
a. General Corporate services, which comprise human
resource services, treasury services, financial accounting/
reporting services, compliance services, marketing and
logistic services, corporate communications services,
government and industry relations services, business
development services and other general corporate
services,
b. Operations Services, which comprise carrying out
exploration programs, preparing business plans,
monitoring and reporting on environmental issues, using
all reasonable endeavours to meet business KPIs, preparing
plans of operations as may be required by laws and other
operational services and
c.
IT Services, which comprise the granting of the permission
to use the Company’s hardware or software and the
provision of IT support services.
During the term, each party may request that the Company
provide an additional service or the Company may change
or modify the provision of an existing service by notifying
the parties in writing. Following receipt of the notice,
representatives of each party must promptly meet to discuss
in good faith the proposed new services or modified services.
ii. Services Fees
The services fees for provision of the Services are charged on
the basis of cost plus a 5% margin, except for any third party
charges attributable to the provision of the relevant services
which are charged at cost. The cost base upon which 5%
margin is applied is determined on the basis of management’s
reasonable estimate of such costs at the commencement
of each calendar year having regard to certain principles,
including (i) in respect of coal-mining operations, the total
budgeted corporate administration costs of the Company
and the budgeted proportion of overall product tonnes of the
relevant mining operation, (ii) in respect of non-coal mining
businesses, the estimated management hours and the hourly
rate for such work and (iii) in respect of disbursement, full
recovery of any hard disbursements incurred by the Company.
At the end of each financial year (or such other times as the
parties may agree), the parties will undertake a reconciliation
of the fees charged during that financial year against the actual
cost and services provided. The Company will refund the
excess charges or the Recipients will pay the shortfall charges
to the Company, in each case, within 14 days of determination
of the fee adjustment required.
iii. Payment of the Services Fees
The Company will invoice the Recipients quarterly in arrears
for services provided and the Recipients must pay to the
Company within 30 days after the receipt of the invoice.
Notwithstanding that the term of the Management and
Transitional Services Agreement may exceed three years, the
Company has set the annual caps for the transactions under
the Management and Transitional Services Agreement for a
term of three years and will re-comply with the applicable
requirements of the HK Listing Rules after the expiry of the
initial three years. The maximum annual transaction amount
to be charged by the Group from the Recipients for the three
years ending 31 December 2018, 2019 and 2020 will not
exceed $15 million, $15 million and $15 million, respectively.
During the year ended 31 December 2019, the transaction
amount charged by the Group was approximately $8.9 million,
which was below the annual cap.
4. Loan Facility Provided by the Company
Premier Coal Holdings Pty Ltd, an indirect wholly-owned
subsidiary of Yanzhou (“Premier Coal”) (as the borrower),
entered into a loan agreement with the Company (as lender)
on 15 June 2016 in relation to an $50 million uncommitted
revolving loan with a fixed interest rate of 7% per annum
(the “Premier Coal Loan Agreement”). Pursuant to the Premier
Coal Loan Agreement, the Company may terminate or cancel
the facility at any time and amounts already advanced to
Premier Coal prior to the termination or cancellation are
required to be repaid immediately. The termination date will
be the date 12 months after the date of the Premier Coal
Loan Agreement, subject to automatic extension on a rolling
12 months basis, or any earlier date on which the facility is
terminated or cancelled in full or on which all the money owing
becomes due and payable.
The maximum daily drawn-down principal of the loan under
the Premier Coal Loan Agreement (including the interest
accrued thereon) for the three years ending 31 December 2018,
2019 and 2020 will not exceed $53.5 million, $53.5 million
and $53.5 million, respectively. The annual caps represent
the facility limit under the Premier Coal Loan Agreement and
the maximum interest to be received. As at 31 December 2019,
no amount remained drawn down under the Premier Coal
Loan Agreement.
5. Bank Guarantees Provided in favour of Yanzhou’s
Subsidiaries
5.1 Syndicated Facility Agreement
Yancoal Resources Limited (“Yancoal Resources”), a wholly-
owned subsidiary of the Company, entered into a syndicated
facility agreement (as amended from time to time) (the “Local
Banks Secured Syndicated Facility Agreement”) with financiers
who are independent third party commercial banks, on
11 October 2005, pursuant to which the financiers have agreed
to grant to the borrowers, being Yancoal Resources and any
new borrowers as agreed by the financiers, a dollar contingent
liability facility (which may also be drawn in US$), under
which, the financiers will issue credit support documents,
including bank guarantee and letter of credit, in the name of
the borrowers. Subject to amendment and restatement from
time to time, the Local Banks Secured Syndicated Facility
Agreement is for a term of three years.
The Company manages certain mines on behalf of Yanzhou.
In the ordinary and usual course of business, the subsidiaries
of Yanzhou holding the managed mines may require credit
support documents issued by commercial banks for their
respective business operations. Given the relevant commercial
banks can issue credit support documents pursuant to existing
facility agreements generally within 5 business days after
receiving a request, which is a much shorter period of time
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CONTINUING CONNECTED TRANSACTIONS
and simpler process as compared to those required by other
commercial banks to issue credit support documents without
an existing facility agreement and the relationship between
the Company and the managed mines, as an integral part of
the management services rendered by the Company in support
of the operation of the managed mines, the subsidiaries
of Yanzhou holding the managed mines will use the overall
bank guarantee facilities, including the Syndicated Facility
and the facility under the Local Banks Secured Syndicated
Facility Agreement, and pay the Company bank guarantee
fees, which are equal to the fees to be paid by the Company
to the commercial banks.
The aggregate maximum daily outstanding principal and the
bank guarantee fees to be received under the credit support
documents issued by commercial banks in favour of the
subsidiaries of Yanzhou (excluding the Group) for the three
years ending 31 December 2018, 2019 and 2020 will not exceed
$123.4 million, $128.6 million and $133.7 million, respectively.
During the year ended 31 December 2019, the aggregate
maximum daily outstanding principal and the bank guarantee
fees was approximately $113.3 million, which was below the
annual cap.
On 19 December 2019, the Company entered into a framework
bank guarantee agreement with the subsidiaries of Yanzhou
to govern the future issuance of bank guarantees for the three
financial years ending 31 December 2020, 2021 and 2022.
Further details are provided in section headed “5.2 Framework
Bank Guarantee Agreement” below.
5.2 Framework Bank Guarantee Agreement
The Company entered into a framework bank guarantee
agreement with Athena Holdings Pty Ltd, Tonford Holdings
Pty Ltd, Wilpeena Holdings Pty Ltd, Premier Coal Holdings
Pty Ltd and Yancoal Energy Pty Ltd (together, the “Yanzhou
Entities”) (the “Framework Bank Guarantee Agreement”)
on 19 December 2019, pursuant to which the Yanzhou Entities
and/or their subsidiaries may use overall bank guarantee
facilities under the financing facilities entered or to be entered
into by the Group, and pay the Company bank guarantee
fees, which are equal to the bank guarantee fees to be paid
by the Group to the relevant financiers plus a 5% margin
within 20 business days after the payment by the Company.
The initial term of the Framework Bank Guarantee Agreement
is for a period of three years commencing 1 January 2020 and
expiring on 31 December 2022 and is automatically renewed
for a successive period of three years thereafter, subject to the
compliance with the HK Listing Rules.
The Company manages certain mines, which are located
in Australia on behalf of Yanzhou Entities and/or their
subsidiaries. In the ordinary and usual course of business,
the Yanzhou Entities and/or their subsidiaries of holding the
managed mines may require credit support documents issued
by commercial banks for their respective business operations.
Given the relevant commercial banks can issue credit support
documents pursuant to existing facility agreements generally
within five business days after receiving a request, which is a
much shorter period of time and simpler process as compared
to those required by other commercial banks to issue credit
support documents without an existing facility agreement
and the relationship between the Company and the managed
mines, as an integral part of the management services
rendered by the Company in support of the operation of the
managed mines, the Yanzhou Entities and/or their subsidiaries
holding the managed mines will use the overall bank guarantee
facilities entered or to be entered into by the Group and pay
the Company bank guarantee fees.
The aggregate maximum daily outstanding principal and the
bank guarantee fees to be received under the credit support
documents issued by the financiers in favour of the Yanzhou
Entities and/or their subsidiaries (excluding the Group) for
the three years ending 31 December 2020, 2021 and 2022
will not exceed $170 million, $170 million and $170 million,
respectively.
6. Purchase of Coal by Glencore
From time to time, Glencore Coal Pty Ltd (“Glencore”) and/or
its associates may purchase coal from the Group for on sale
to end customers, in order to maintain customer relationships
or to meet specific customer requirements. The Company
entered into a framework coal sales agreement with Glencore
(the “Glencore Framework Coal Sales Agreement”) on
29 June 2018 to govern all existing and future sales of coal by
the Group to Glencore and/or its subsidiaries and/or related
entities. The Glencore Framework Coal Sales Agreement
provides that all transactions in relation to the sale of coal by
the Group to Glencore and/or its subsidiaries and/or related
entities must be (i) in the ordinary and usual course of business
of the Group, (ii) on an arm’s length basis, (iii) on normal
commercial terms with the sale price being determined with
reference to the prevailing market price for the relevant type
of coal and (iv) in compliance with, amongst other things, the
HK Listing Rules and applicable laws. The Company will take
into account relevant industry benchmarks and indices when
determining the market price. Glencore wholly owns Anotero
Pty Ltd (“Anotero”). Anotero is a substantial shareholder
of subsidiaries of the Company under the HK Listing Rules.
Glencore is a connected person of the Company by virtue of
being a substantial shareholder of the Company’s subsidiary
(through Anotero).
The Glencore Framework Coal Sales Agreement expires
on 31 December 2020 and is automatically renewable for
successive periods of three years thereafter, subject to
compliance with the then applicable provisions of the HK
Listing Rules, unless terminated earlier by not less than three
months’ prior notice or otherwise in accordance with the terms
of the Glencore Framework Coal Sales Agreement.
The maximum annual transaction amount to be received by
the Group from Glencore and/or its subsidiaries and/or its
related entities for the three years ending 31 December 2018,
2019 and 2020 will not exceed US$350 million, US$350 million
and US$350 million, respectively. During the year ended
31 December 2019, the transaction amount received by the
Group was approximately US$68.3 million, which was below
the annual cap.
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CONTINUING CONNECTED TRANSACTIONS
7. Purchase of Coal by Sojitz
From time to time, Sojitz Moolarben Resources Pty Ltd
(“Sojitz”) and/or its subsidiaries may purchase coal from the
Group primarily for their own trading purposes and for sale to
end customers, typically into Japan. Specifically, Moolarben
Coal Sales Pty Ltd has entered into a coal supply contract for
a term of three years with Sojitz Corporation in March 2016
for onward supply of coal to a major industrial user in Japan.
This contract is likely to be renewed and it is expected that this
business will be ongoing. Sojitz is a substantial shareholder
of the Moolarben joint venture, a subsidiary of the Company
under the HK Listing Rules. Sojitz is a connected person of the
Company by virtue of being a substantial shareholder of the
Company’s subsidiary.
The coal sales agreement between the Company and Sojitz
(the “Sojitz Coal Sales Agreement”) dated 6 August 2018
governs all existing and future sales of coal by the Group to
Sojitz and/or its subsidiaries. The Sojitz Coal Sales Agreement
provides that all transactions in relation to the sale of coal by
the Group to Sojitz and/or its subsidiaries must be (i) in the
ordinary and usual course of business of the Group, (ii) on an
arm’s length basis, (iii) on normal commercial terms with the
sale price being determined with reference to market indices,
coal quality and an optional analysis to ensure the price is
negotiated on an arm’s length basis and (iv) in compliance
with, amongst other things, the HK Listing Rules and
applicable laws.
The Sojitz Coal Sales Agreement expires on 31 December 2020
and is automatically renewable for successive periods of one
year thereafter, subject to compliance with the then applicable
provisions of the HK Listing Rules, unless terminated earlier
by not less than three months’ prior notice or otherwise in
accordance with the terms of the Sojitz Coal Sales Agreement.
The maximum annual transaction amount to be received by
the Group from Sojitz and/or its subsidiaries for the three years
ending 31 December 2018, 2019 and 2020 will not exceed
US$100 million and US$100 million, respectively. During the
year ended 31 December 2019, the transaction amount
received by the Group was approximately US$49.7 million,
which was below the annual cap.
8. Sales of Coal by the Group to POSCO and/or its Associates
From time to time, POSCO Australia Pty Ltd (previously
known as Pohang Steel Australia Pty Ltd) (“POSCO”) and/
or its associates may purchase coal from the Group for their
own utilisation in the manufacturing of steel or generation of
electricity. As POSCO is interested in 20% of the Mount Thorley
JV, a subsidiary of the Company under the HK Listing Rules,
POSCO is a connected person of the Company by virtue of
being a substantial shareholder of the Company’s subsidiary.
The Group entered into four coal sales agreements with
POSCO group companies that govern the sale of coal by
the Group to POSCO and/or its associates for coal sales
during the year ended 31 December 2019 (the “POSCO Coal
Sales Agreements”).
The POSCO Coal Sales Agreements provide that all transactions
in relation to the sale of coal by the Group to POSCO and/
or its associates must be (i) in the ordinary and usual course
of business of the Group, (ii) on an arm’s length basis, (iii) on
normal commercial terms with the sale price being negotiated
between the parties on an arm’s length market related basis
relative to industry benchmarks prices and reflecting coal
quality, and (iv) in compliance with, amongst other things,
the HK Listing Rules and applicable laws. The Group has been
supplying POSCO and/or its associates for several years under
annual contracts which are renewed annually, but where
volume and price are renegotiated annually.
The maximum annual cap in respect of the POSCO Coal Sales
Agreements for the year ended 31 December 2019 was
US$780 million. During the year ended 31 December 2019, the
transaction amount received by the Group was approximately
US$163.6 million, which was below the annual cap.
As the POSCO Coal Sales Agreements are renewed annually,
the Company will set an annual cap for the transactions under
the POSCO Coal Sales Agreements for a further term of one
year and will re-comply with the applicable requirements
of the HK Listing Rules when the relevant agreements are
renewed. As disclosed in the announcement of the Company
dated 19 December 2019, and supplemental announcement
dated 10 February 2020, the parties entered into four coal
sales agreements with POSCO and/or its associates (the “2020
POSCO Coal Agreements”) on 19 December 2019. Of the 2020
POSCO Coal Sales Agreements, two will become effective on
1 January 2020 and will expire on 31 December 2020, and
the other two will become effective on 1 April 2020 and will
expire on 31 March 2021. Upon the 2020 POSCO Coal Sales
Agreements becoming effective, the 2019 POSCO Coal Sales
Agreements will cease to have any effect in accordance with
their terms. The maximum annual transaction amount to be
received by the Group and/or its subsidiaries for the year
ending 31 December 2020 and the period from 1 January 2021
to 31 March 2021 will not exceed US$600 million and
US$150 million respectively.
9. Purchase of Coal from Glencore
From time to time, the Group may purchase coal from
Glencore and/or its associates for on sale to end customers,
in order to maintain customer relationships or to meet
specific customer requirements. The Company entered
into a framework coal purchase agreement with Glencore
(the “Glencore Framework Coal Purchase Agreement”) on
6 August 2018 to govern all existing and future purchase
of coal by the Group from Glencore and/or its subsidiaries.
The Glencore Framework Coal Purchase Agreement provides
that all transactions in relation to the purchase of coal by
the Group from Glencore and/or its associates must be
(i) in the ordinary and usual course of business of the Group,
(ii) on an arm’s length basis, (iii) on normal commercial terms
with the sale price being determined with reference to the
prevailing market price for the relevant type of coal and (iv)
in compliance with, amongst other things, the HK Listing Rules
and applicable laws. The Company will take into account
relevant industry benchmarks and indices when determining
the market price. Glencore wholly owns Anotero which is a
substantial shareholder of subsidiaries of the Company under
the HK Listing Rules. Glencore is a connected person of the
Company by virtue of being a substantial shareholder of the
Company’s subsidiary.
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YANCOAL ANNUAL REPORT 2019 CONTINUING CONNECTED TRANSACTIONS
CONTINUING CONNECTED TRANSACTIONS
The Glencore Framework Coal Purchase Agreement expires
on 31 December 2020 and is automatically renewable for
successive periods of three years thereafter, subject to
compliance with the then applicable provisions of the HK
Listing Rules, unless terminated earlier by not less than three
months’ prior notice or otherwise in accordance with the
terms of the Glencore Framework Coal Purchase Agreement.
The maximum annual transaction amount to be paid by
the Group to Glencore and/or its subsidiaries for the three
years ending 31 December 2018, 2019 and 2020 will not
exceed US$350 million, US$350 million and US$350 million,
respectively. During the year ended 31 December 2019, the
transaction amount paid by the Group was approximately
US$71.8 million, which was below the annual cap.
10. Purchase of Coal from Anotero
As part of the Glencore Transaction, Coal & Allied Operations
Pty Ltd (“CNAO”), a wholly-owned subsidiary of the Company,
HVO Coal Sales Pty Ltd (the “SalesCo”) and Anotero entered
into a sales contract – Hunter Valley Operations Joint Venture
on 4 May 2018 (the “HVO Sales Agreement”). The relevant
mining and exploration licences of HVO are held directly by
CNAO and Anotero as tenants in common in proportion to
their respective participating interest in the Hunter Valley
Operations Joint Venture (”HVO JV”). Pursuant to the HVO
Sales Agreement, (i) each of CNAO and Anotero agrees to sell
all of its entitled portion of finished coal product in saleable
form that is produced by the tenements held by the HVO JV
to the SalesCo only and the SalesCo agrees to purchase each
of CNAO’s and Anotero’s entitled portion of coal product;
(ii) the amount payable to each of CNAO and Anotero by the
SalesCo shall be the total amount received by the SalesCo for
that portion of product under each sales contract entered
into between the SalesCo and its customers; and (iii) payment
by the SalesCo to CNAO and Anotero shall be no later than
3 business days after receipt by the SalesCo of payment
from its customers. Anotero is a substantial shareholder
of subsidiaries of the Company under the HK Listing Rules.
Anotero is a connected person of the Company by virtue of
being a substantial shareholder of the Company’s subsidiary.
The HVO Sales Agreement shall commence on the date of the
HVO Sales Agreement and terminate upon the termination
of the joint venture agreement in relation to the HVO JV in
accordance with its terms.
Notwithstanding that the term of the HVO Sales Agreement
may exceed three years, the Company has set the estimated
maximum annual transaction amounts for the transactions
under the HVO Sales Agreement for a term of three years
and will re-comply with the applicable requirements of the
HK Listing Rules after the expiry of the initial three years.
The maximum annual transaction amount to be distributed by
the SalesCo to Anotero for the three years ending 31 December
2018, 2019 and 2020 will not exceed US$750 million,
US$750 million and US$750 million, respectively. During the
year ended 31 December 2019, the transaction distributed by
the SalesCo to Anotero was approximately US$620.5 million,
which was below the annual cap.
11. Purchase of Coal from POSCO
The participants of the unincorporated joint venture in relation
to Mt Thorley (the “MT JV”) namely POSCO and Mount Thorley
Operations Pty Ltd (previously known as R. W. Miller & Co. Pty
Limited) (“MT Operations”), a wholly-owned subsidiary of the
Company holding the relevant mining and exploration licences
of Mount Thorley on behalf of the MT JV, entered into a sales
contract with Miller Pohang Coal Co. Pty Limited (the “MT
SalesCo”) on 10 November 1981 (the “MT Sales Agreement”),
respectively. MT SalesCo is a company jointly controlled by
MT Operations and POSCO with MT Operations and POSCO
holding 80% and 20% of its interest, respectively. Both the MT
SalesCo and the MT JV are subsidiaries of the Company under
the HK Listing Rules. As POSCO holds more than 10% of the
interest in the MT SalesCo and has more than 10% participating
interest in the MT JV, POSCO is a connected person of the
Company by being a substantial shareholder of the subsidiaries
of the Company. Accordingly, the transaction between the
MT SalesCo and POSCO constitutes a continuing connected
transaction of the Company under the HK Listing Rules.
Pursuant to the MT Sales Agreement: (i) each of POSCO and
MT Operations agrees to sell all of its entitled portion of
finished coal product in saleable form that is produced by
the tenements held by the MT JV to the MT SalesCo only and
the MT SalesCo agrees to purchase each of POSCO’s and MT
Operations’ entitled portion of coal product; (ii) the amount
payable to each of POSCO and MT Operations shall be the
total amount received by the MT SalesCo for that portion of
product under each sales contract entered into between the
MT SalesCo and its customers; and (iii) payment by the MT
SalesCo to POSCO and MT Operations shall be no later than
seven days after receipt by the MT SalesCo of payment from
its customers.
The MT Sales Agreement was entered into on 10 November
1981 and will last during the economic life of the Mount
Thorley coal mine.
Notwithstanding that the term of the MT Sales Agreement
may exceed three years, the Company has set the estimated
maximum annual transaction amounts for the transactions
under the MT Sales Agreement for a term of three years
and will re-comply with the applicable requirements of
the HK Listing Rules after the expiry of the initial three
years. The maximum annual transaction amount to be
distributed by the MT SalesCo to POSCO for the three
years ending 31 December 2018, 2019 and 2020 will not
exceed US$90 million, US$90 million and US$90 million,
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YANCOAL ANNUAL REPORT 2019 CONTINUING CONNECTED TRANSACTIONS
CONTINUING CONNECTED TRANSACTIONS
non-executive Directors hereby confirmed that the above
continuing transactions have been entered into:
1.
in the ordinary and usual course of business of the Group;
2.
on normal commercial terms or better; and
3.
in accordance with the relevant agreements governing
them on terms that are fair and reasonable and in the
interest of Shareholders as a whole.
In accordance with the requirement of Rule 14A.56 and
14A.71(6)(b) of the HK Listing Rules, the Company has engaged
the independent auditor of the Company to report on the
continuing connected transactions of the Group.
Based on the results of procedures performed and in
accordance with the aforesaid HK Listing Rules, the
independent auditor has provided a letter to the Board
confirming that nothing has come to their attention that cause
them to believe that the continuing connected transactions:
i. have not been approved by the Board;
ii. were not, in all material respects, in accordance with the
pricing policies of the Group;
iii. were not entered into, in all material respects, in
accordance with the relevant agreements governing such
transactions; and
iv. have exceeded their respective annual caps for the
financial year ended 31 December 2019 set out in the
prospectus and announcement of the Company.
In accordance with paragraph 14A.57 of the Listing Rules, a
copy of the independent auditor’s letter will be provided by
the Company to the HK Stock Exchange.
The Company confirms that it has complied with the
requirements of Chapter 14A of the HK Listing Rules in relation
to all connected transactions and continuing connected
transactions to which any Group member was a party during
the year ended 31 December 2019. Please refer to Note E3 to
the financial statements for a summary of the related party
transactions entered into by the members of the Group for the
year ended 31 December 2019. Other than those transactions
disclosed in the section headed “Continuing Connected
Transactions” above, none of these transactions constitutes
a disclosable connected transaction as defined under the
HK Listing Rules.
respectively. During the year ended 31 December 2019, the
transaction amount distributed by the MT SalesCo to POSCO
was approximately US$71.9 million, which was below the
annual cap.
12. Purchase of Diesel Fuel from Glencore
On 25 October 2019, HV Operations Pty Ltd (“HV Operations”),
a subsidiary of the Company, entered into a diesel fuel supply
agreement with Glencore Australia Oil Pty Ltd (“GAO”),
pursuant to which HV Operations has agreed to purchase
diesel fuel from GAO during the period from 1 November 2019
to 31 October 2022 (the “2019 Diesel Fuel Supply Agreement”).
As GAO is a subsidiary of Glencore plc, which is the holding
company of Anotero Pty Ltd, a substantial shareholder of
HV Operations, GAO is a connected person of the Company by
virtue of being an associate of a substantial shareholder of the
Company’s subsidiary.
The 2019 Diesel Fuel Supply Agreement became effective
on 1 November 2019 and will expire on 31 October 2022.
Pursuant to the 2019 Diesel Fuel Supply Agreement, HV
Operations agrees to purchase, and GAO agrees to sell at a
price agreed and applicable to the monthly quantity delivered
as measured in accordance with the agreement. HV Operations
will generate a purchase order prior to the month of delivery.
GAO will deliver the volume of fuel in the purchase order by
the date specified in that purchase order and HV Operations
will make the payments after the delivery of the fuel. The basis
for calculating the payments to be made is based on the
volume delivered and the price determined following the
tender process.
To ensure a fair and open tender process, an Independent
Third Party has been engaged with extensive involvement in
the commercial business-to-business diesel supply market
to assist in the tender document preparation, submission
evaluations and subsequent engagement with suppliers in
negotiating the optimal outcome. A tender has been issued to
several prospective suppliers. The negotiation process cycled
three or four times with each supplier, including reviewing
and verifying the accuracy and consistency of each submission
made by the suppliers and ensuring that pricing is evaluated
on consistent basis. Potential suppliers were determined and
approved based on a variety of criteria, including reputation,
reliability and the pricing submitted.
The maximum annual transaction amount to be paid by HV
Operations to GAO for the purchase of diesel fuel for the
period 1 November 2019 to 31 December 2019, the two
years ending 31 December 2020 and 2021, and the period
1 January 2022 to 31 October 2022 will not exceed $30 million,
$180 million, $180 million and $150 million, respectively.
During the year ended 31 December 2019, the transaction
amount paid by the Group was approximately $22.3million,
which was below the annual cap.
Review on continuing connected transactions
Pursuant to Rule 14A.55 of the HK Listing Rules, the Directors
(including independent non-executive Directors) have
reviewed the above continuing connected transactions
in the year ended 31 December 2019. The independent
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YANCOAL ANNUAL REPORT 2019
INTRODUCTION
The Company adopts an approach to corporate governance
based on international best practice as well as Australian and
Hong Kong law requirements. The Board and management are
committed to corporate governance.
ASX CORPORATE GOVERNANCE STATEMENT
To the extent appropriate to the scale and nature of
the Company’s business, the Company has adopted the
3rd edition of the ASX Corporate Governance Council’s
Principles and Recommendations (“ASX Recommendations”).
This statement sets out the Company’s compliance with the
ASX Recommendations and the main corporate governance
policies and practices adopted by the Company.
HK LISTING AND COMPLIANCE WITH THE HONG KONG
CORPORATE GOVERNANCE CODE
The Company has also adopted the provisions of the Corporate
Governance Code in Appendix 14 (the “HK Code”) to the Rules
Governing the Listing of Securities on The Stock Exchange
of Hong Kong Limited (the “HK Listing Rules”) as part of its
corporate governance policy.
The Company has implemented and applied the principles
contained within the HK Code in conducting the Company’s
business, including reflecting those principles in the Company’s
Board Charter and relevant policies. In the opinion of the
Board, the Company has complied with the code provisions of
the HK Code (in addition to the relevant principles of the ASX
Recommendations) for the financial year ended 31 December
2019. The conduct of the Company’s compliance with the
principles is discussed further in this statement.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT
AND OVERSIGHT
Role of the Board
The Board is responsible for the overall corporate governance,
leadership and control of the Company including directing the
affairs of the Company, setting and monitoring the Company’s
risk management strategy and overseeing the appointment,
remuneration and performance of senior Executives. The
Board is committed to maximising performance, generating
appropriate levels of shareholder value and financial return,
and sustaining the growth and success of the Company over
the longer-term. Directors are expected to exercise their
decision making in the best interests of the Company.
The Board’s role and responsibilities and its delegation of
authority to standing committees and senior Executives have
been formalised in a Board Charter. The Board Charter can
be found within the Corporate Governance section of the
Company’s website.
The Board Charter sets out the procedure by which the
Board collectively, and each individual Director, can seek
independent professional advice at the Company’s expense.
Delegation to management
The Board delegates responsibility for the day to day
management of the Company’s affairs and implementation
of the strategy and policy initiatives set by the Board to the
Chair of the Executive Committee (“CEC”), the Chief Executive
Officer (“CEO”) and other senior Executives. The Executive
Committee is a management committee comprising the CEC,
CEO, the Chief Financial Officer (“CFO”) and any other senior
Executives that the Board resolves from time to time will be
members of the Executive Committee.
The Executive Committee Charter sets out the functions of
the Executive Committee and the duties of the CEC, CEO and
CFO and provides for a clear division of responsibility between
management and the Board. The Executive Committee Charter
also provides the financial decision authorities and appropriate
approval thresholds at different levels which have been
approved by the Board.
Given the delegation of the day to day management of the
Company, it is the responsibility of management, with the
assistance of the Company Secretary, to provide the Directors
with timely, adequate and appropriate information to assist
the Directors in making informed decisions and to be able to
effectively perform their duties and responsibilities.
Senior Executive contracts
The Company’s senior Executives are employed under
employment contracts that set out the terms of their
employment. In 2018, the Nomination and Remuneration
Committee engaged external remuneration consultants to
provide independent market benchmarking with respect to
the remuneration of Yancoal Executives and Non-Executive
Directors. In 2019, no structural changes were made to senior
Executive contracts.
COMPANY SECRETARY
The Company Secretary supports and is accountable to the
Board, through the Chairman of the Board (“Chairman”),
on all matters to do with the proper functioning of the
Board. The Company Secretary facilitates the timely flow of
information within the Board and between the Board and
management. All Directors have direct access to the Company
Secretary. The Board Charter sets out the other duties of the
Company Secretary, which include being responsible for:
• ensuring compliance by the Company with the Company’s
constitution, the provisions of the Corporations Act 2001
(Cth) and other applicable laws and Listing Rules as they
relate to the Company;
• providing corporate governance advice to the Board
and facilitating induction processes and the ongoing
professional development of Directors;
• ensuring that the Board Charter and relevant policies and
procedures are followed;
• ensuring that the Company’s books and registers
required by the Corporations Act 2001 (Cth), the Hong
Kong Securities and Futures Ordinance (“SFO”) and other
applicable laws are established and properly maintained;
• ensuring that all notices and responses are lodged with
ASIC, ASX and HKEx on time; and
• organising and attending shareholders’ meetings
and Directors’ meetings, including sending out
notices, preparing agendas, marshalling proxies and
compiling minutes.
78
YANCOAL ANNUAL REPORT 2019CORPORATE GOVERNANCE STATEMENTCORPORATE GOVERNANCE STATEMENT The Company Secretary is Laura Ling Zhang. Ms Zhang has
completed no less than 15 hours of professional training to
update her skills and knowledge as required by the HKEx.
Nomination and appointment of Directors
The Board considers that Board succession planning, and
the progressive and orderly renewal of the Company’s Board
membership, are an important part of the governance
process. The Board’s policy for the selection, appointment
and re-appointment of Directors is to ensure that the Board
possesses an appropriate range of skills, experience and
expertise to enable the Board to carry out its responsibilities
most effectively. As part of this appointment and re-
appointment process, the Directors consider Board renewal
and succession plans and whether the Board‘s size and
composition is conducive to making appropriate decisions.
At the time of appointment of a new Non-Executive
Director, the key terms and conditions relevant to that
person’s appointment, the Board’s responsibilities and
the Company’s expectations of a Director are set out in
a letter of appointment. Each Director has entered into a
letter of appointment with the Company. The Company
has implemented an induction program, facilitated by the
Company Secretary, through which new Non-Executive
Directors are introduced to the Company’s operations and
are familiarised with the Company’s strategy, culture and
core values.
The Board has established a Nomination and Remuneration
Committee to make recommendations to the Board on
matters such as succession plans for the Board, the size
and composition of the Board, potential candidates for
appointment to the Board, re-election of Directors, Board
induction and Board evaluation procedures. The structure and
membership of the Nomination and Remuneration Committee
is described further under Principles 2 and 8.
The Board recognises that people are its most important
asset and is committed to the maintenance and promotion of
workplace diversity. Whilst traditionally experience as a senior
Executive or Director of a large organisation with international
operations is a prerequisite for candidature, in accordance
with the Diversity Policy, the Board also seeks skills and
experience in the following areas:
• marketing and sales;
• policy and regulatory development and reform;
• health, safety and environment and social responsibility;
and
• human resources.
In identifying candidates, the Nomination and Remuneration
Committee considers and selects nominees by reference to
a number of selection criteria including the skills, expertise
and background that add to and complement the range of
skills, expertise and background of the existing Directors, the
capability of the candidate to devote the necessary time and
commitment to the role, potential conflicts of interest and
independence, and the extent to which the candidate would
fill a present need on the Board. Where appropriate, the
appropriate checks are undertaken prior to a Director being
appointed. The mix of skills currently held by the Board is set
out under Principle 2.
The role, rights and responsibilities and membership
requirements of the Nomination and Remuneration
Committee, together with the selection criteria for candidates
for the Board are set out in the Nomination and Remuneration
Committee Charter which can be found within the Corporate
Governance section of the Company’s website. In carrying
out its duties, the Committee has regard to the ASX Principles
and the principles in the HK Code, in particular, principles
A.3 and A.4.
Shareholder approval is required for the appointment of
Directors. However, Directors may appoint other Directors
to fill a casual vacancy where the number of Directors falls
below the constitutional minimum number of Directors and in
order to comply with any applicable laws, regulations, the ASX
Listing Rules or the HK Listing Rules. If a Director is appointed
to fill a casual vacancy in these circumstances, the approval of
members must be sought at the next general meeting.
No Director may hold office without re-election beyond the
third annual general meeting (“AGM”) following the meeting
at which the Director was last elected or re-elected. The
Company provides all material information in its possession,
including the details of expertise and qualifications, details
of any other material directorships, and any other material
that the Board considers to be material to such a decision, in
relation to Directors standing for election or re-election in the
Notice of Meeting provided to shareholders prior to the AGM.
Each Non-Executive Director has been appointed for an
initial term of not more than 3 years (and will be subject to
retirement by rotation at least once every 3 years under
rule 8.1 of the Company’s Constitution, pending re-election
by the shareholders at an annual general meeting). Each
Independent Non-Executive Director has been appointed for
an initial term of not more than 3 years and will be subject to
retirement by rotation at least once every 3 years under rule
8.1 of the Company’s Constitution, pending re-election by the
shareholders at an annual general meeting.
To the extent that the ASX Listing Rules require an election
of Directors to be held and no Director would otherwise be
required under the Company’s Constitution to submit for
election or re-election at an AGM, the Director who has been
the longest in office since their last election or appointment
must retire at the AGM. As between Directors who were last
elected or appointed on the same day, where it is not agreed
between the relevant Directors, the Director to retire must be
decided by lot.
The process for appointment, retirement and re-election of
Directors is set out in the Company’s Constitution which can
be found within the Corporate Governance section of the
Company’s website.
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YANCOAL ANNUAL REPORT 2019CORPORATE GOVERNANCE STATEMENTCORPORATE GOVERNANCE STATEMENT DIVERSITY
The Company recognises that people are its most important asset and is committed to the maintenance and promotion of
workplace diversity. The Company’s Diversity Policy, approved by the Board, seeks to actively facilitate a more diverse and
representative management and leadership structure. The Diversity Policy is available in the Corporate Governance section of the
Company’s website.
Annually, the Board establishes measurable objectives with the assistance of the Nomination and Remuneration Committee with
a view to progressing towards a balanced representation of women at a Board and senior management level.
The measurable objectives and performance against them are reviewed annually by the Nomination and Remuneration
Committee as part of its annual review of the effectiveness of the Diversity Policy.
The measurable objectives adopted for 2019 and the Company’s performance against the measurable objectives are outlined in
the table below:
OBJECTIVE
1. Review the Company’s Diversity,
Workplace Behaviour, Anti-
Discrimination Policies and
implements training on the
latter two.
2. Roll out the updated Parental
Leave Policy.
3. Update recruitment and onboarding
processes to capture additional
diversity measures, for example
ethnicity, religion and cultural
background.
4. Continue to target a diverse group
of candidates with recruitment and
selection procedures that are merit
based and non- discriminatory.
5. Continue to ensure our managers
are adept recruiters, retainers and
motivators of our diverse workplace.
PERFORMANCE
The Diversity Policy was updated and published on 18 December 2019. The Workplace
Behaviour and Anti- Discrimination policy was also reviewed for the purposes of
developing Corporate training materials to support the training sessions which
were conducted in 2019. Regular training focussed on workplace behaviour is also
conducted across sites.
The updated Parental Leave Policy, including enhanced provisions was effective from
1 January 2019. The revised policy provides 15 weeks of primary carers leave, an
increase from the previous offering of 12 weeks. In addition, employees on unpaid
parental leave will receive superannuation as if at work and should they return to
work on a part time basis they shall receive superannuation at their pre- parental
leave rate until their child reaches school age.
On 1 November 2019, the Company’s Success Factors Recruitment & Onboarding
process commenced, whereby all applicants now complete a candidate profile which
enables details such as place of birth, gender and ethic group identification to be
captured. For privacy reasons these details are optional. This will allow the Company
to report on the diversity of both its candidate pipeline (where disclosed) as well as
successful candidates.
Across the Yancoal group, merit-based, non-discriminatory practices continue to be
followed.
A human resources representative endeavours to sit with managers during interviews
to coach and mentor them on targeted selection techniques and merit-based
selection, as well as general diversity awareness with regards to candidates.
As part of the Company’s focus on retaining and motivating its current workforce, all
sites implemented cultural improvement plans in 2019. These plans were designed
to improve employee engagement based on the feedback received from the 2018
employee engagement survey. The result from the 2019 survey demonstrated an
overall improvement in engagement as shown by the improvement in the overall net
promoter score from -28.3 to 2.5, which represents an increase of approximately 30%.
The Board has set the following measurable objectives in relation to gender diversity for 2020:
1. Provide training to the Human Resources team on behavioural based interviewing and unconscious bias, scheduled for
February 2020.
2. Develop an e-learning module for Workplace Behaviour and implement in 2020.
3. Conduct a pay gap analysis to identify and address any pay equity concerns. Where equity issues are identified these should
be addressed in the 2020 salary review process.
4. Measure the retention of female employees and should any issues be identified, seek to implement ways to address the issues.
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YANCOAL ANNUAL REPORT 2019CORPORATE GOVERNANCE STATEMENTCORPORATE GOVERNANCE STATEMENT Proportion of Women in the Company
Gender has been identified as a key area of focus for
the Company. On an annual basis, the Nomination and
Remuneration Committee reviews the proportion of women
employed by the Company and submits a report to the Board
outlining its findings. Details regarding the proportion of men
and women throughout the organisation are set out below.
As at 31 December 2019, the proportion of women who were
directly engaged by the Company as a whole was 12%: 329
Full-time, 21 Part-time, 7 Casual and 81 Managed Contractors.
The proportion of women in Executive Committee roles
within the Company during 2019 was 8%: Women held 1 of 13
Executive Committee roles within the Company.
On and from 30 January 2018, one female Non-Executive
Director sits on the Board.
PERFORMANCE OF THE BOARD, ITS COMMITTEES AND
INDIVIDUAL DIRECTORS
The Nomination and Remuneration Committee oversees an
annual evaluation process for the Board, its committees and
each Director based on the Board Performance Evaluation
Protocol (“Protocol”) adopted and approved by the Board
in 2012.
The Board
Periodically, a review of the structure and operation of the
Board, the skills and characteristics required by the Board
to maximise its effectiveness and whether the mix of skills,
experience and expertise and the Board’s practices and
procedures are appropriate for the present and future needs
of the Company is conducted. This evaluation of performance
of the Board may be conducted with the assistance of an
external facilitator. As set out in the Board Charter, the
review of the Board involves Directors providing written
feedback on the Board’s performance to the Chairman or to
an external facilitator, which in turn is discussed by the Board,
with consideration of whether any steps for improvement
are required.
It is expected that externally facilitated reviews will occur
approximately every three years. The independent external
facilitator will seek input from each of the Directors and
certain members of senior management in relation to the
performance of the Board against a set of agreed criteria.
Once an externally facilitated review occurs, the progress
against any recommendations from the most recent externally
facilitated review, together with any new issues, will be
considered internally. Feedback from each Director against a
set of agreed criteria will be collected by the Chairman or the
external facilitator. The CEC and CEO will also provide feedback
from senior Executives in connection with any issues that may
be relevant in the context of the Board performance review.
Feedback will be collected by the Chairman, or an external
facilitator, and discussed by the Board, with consideration
being given as to whether any steps should be taken to
improve performance of the Board or its committees.
Since the adoption of the Protocol in 2012, the Company
carried out four annual board performance reviews
internally, and has conducted one externally facilitated
board performance review. An externally facilitated review
of the Board was carried out in 2016 (in respect of 2015)
and a review of the Board was conducted internally in 2018
(in respect of 2017), in accordance with process disclosed
above. For the financial years ended 31 December 2018 and
31 December 2019, a board performance review has not yet
been undertaken in accordance with the process disclosed
above. It is expected that the Company will conduct a board
performance review for the past financial year in 2020.
The Nomination and Remuneration Committee considers
assessments by independent bodies regarding Boards of
Australian companies and their performance. The Chair of
the Nomination and Remuneration Committee reports any
material issues or findings from these evaluations to the Board.
Board committees
Each of the four standing committees of the Board conducts
an annual committee performance self-assessment to review
performance using guidelines approved by the Nomination and
Remuneration Committee. The guidelines include reviewing
the committee’s performance having regard to its role and
responsibilities as set out in its Charter; consideration as
to whether the committee’s Charter is fit for purpose; and
identification of future topics for training/education of the
committee or its individual members.
The outcomes of the performance self-assessments are
reported to the Nomination and Remuneration Committee
(or to the Board, if there are any material issues relating to
the Nomination and Remuneration Committee) for discussion
and noting.
Each committee provides feedback to the Board on its own
performance, which is collected by the Chairman or an
external facilitator, and the feedback is discussed by the Board,
with consideration of whether any steps for improvement
are required.
The most recent review of the Board’s committees was
conducted in 2018 (in respect of 2017) in accordance
with the process disclosed above. For the financial years
ended 31 December 2018 and 31 December 2019, a Board
committees’ performance review has not yet been undertaken
in accordance with the process disclosed above. It is expected
that the Company will conduct such a performance review for
the past financial year in 2020.
Individual Directors
Directors are evaluated on, amongst other things, their
alignment with the values of the Company, their commitment
to their duties and their level of financial, technical and
specialist knowledge. Directors are also expected to be fully
aware of their duties of care and skill, as well as fiduciary
duties, as a Director.
An annual performance review of Non-Executive Directors
is conducted by the Chairman for each Non-Executive
Director, specifically addressing the performance criteria
within the Protocol.
An annual review of the performance of the Chairman is
facilitated by the Co-Vice Chairmen who seeks input from
each Director individually on the performance of the Chairman
against the competencies for the Chairman’s role approved
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YANCOAL ANNUAL REPORT 2019CORPORATE GOVERNANCE STATEMENTCORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
by the Board. The Co-Vice Chairmen collate the input in
order to provide an overview report to the Nomination
and Remuneration Committee and to the Board, as well as
feedback to the Chairman.
An externally facilitated review of individual Directors was
conducted in 2016 (in respect of 2015) and an internal review
was conducted in 2018 (in respect of 2017) in accordance
with the process disclosed above. For the financial years
ended 31 December 2018 and 31 December 2019, an annual
performance review of Non-Executive Directors has not yet
been undertaken in accordance with the process disclosed
above. It is expected that the Company will conduct such
a performance review for the past financial year in 2020.
The requirements of the principles set out in the HK Code in
respect of performance of the Directors will be taken into
account in undertaking future Director reviews.
Performance of Senior Executives
The CEC and the CEO review the performance of senior
Executives annually against appropriate measures as part
of the Company’s performance management system for all
managers and staff.
On an annual basis, the Nomination and Remuneration
Committee and subsequently the Board formally reviews the
performance of the CEO and the CEC. The CEO’s performance
is assessed against qualitative and quantitative criteria,
including profit performance, other financial measures,
safety performance and strategic actions. The Nomination
and Remuneration Committee also undertakes an annual
formal review of the performance of other members of the
Executive Committee, based on similar criteria. The Board
reviews and approves the annual review of all the members of
the Executive Committee undertaken by the Nomination and
Remuneration Committee.
The performance evaluation for the CEC, CEO and senior
Executives to take place in 2020 (in respect of 2019) will be in
accordance with the process disclosed above.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
Structure of the Board
Currently, the Board comprises:
• Executive Director: Fucun Wang;
• Non-Executive Directors: Baocai Zhang, Cunliang Lai,
Qingchun Zhao, Xiangqian Wu, Fuqi Wang and Xing Feng;
and
•
Independent Non-Executive Directors: Geoffrey William
Raby, Gregory James Fletcher, David James Moult and
Helen Jane Gillies.
The skills, experience and expertise of each Director and the
period that each Director has held office is disclosed in the
Information on Directors in the Directors’ Report, on pages
49 to 52.
The Constitution provides that there will be a minimum of 4
and a maximum of 11 Directors of the Company, unless the
Company resolves otherwise at a general meeting.
The number of meetings held by the Board during 2019 and
each director’s attendance at these meetings is set out in the
Directors’ Report on page 53 .
Chairman of the Board
The current Chairman, Baocai Zhang, was nominated by
the Company’s major shareholder, Yanzhou Coal Mining
Co. Ltd (“Yanzhou”). The Chairman leads the Board and is
responsible for the efficient organisation and conduct of the
Board’s functioning. The Chairman ensures that Directors
have the opportunity to contribute to Board deliberations.
The Chairman regularly communicates with the CEC and
CEO and to review key issues and performance trends.
The Chairman, together with the Co-Vice Chairmen, Fucun
Wang and Gregory Fletcher, also represent the Company in the
wider community.
The Chief Executive Officer is Reinhold Schmidt. The CEO is
responsible for conduct and supervision of the management
function of the Company, including implementing strategic
objectives, plans and budgets approved by the Board. The
CEO has overall responsibility for the Company’s operations
(other than as delegated to the CEC and undertaking such
responsibilities as may be delegated to him by the Board from
time to time. The CEO is accountable to the Board and reports
to the Chairman of the Board and the CEC.
The roles of the Chairman and the CEO are separate and
assumed by different individuals to ensure a balance of
power and authority, so that power is not concentrated in
any one individual of the Board. There is a clear division of
responsibilities between the Chairman and the CEO.
Board Committees
The Board may from time to time establish appropriate
committees to assist in the discharge of its responsibilities.
The Board has established the following standing Board
committees:
• Audit and Risk Management Committee;
• on and from 18 December 2019, Health, Safety,
Environment and Community Committee (previously
known as Health, Safety and Environment Committee)
• Nomination and Remuneration Committee; and
• Strategy and Development Committee.
These Board committees review matters on behalf of the
Board and, as set out in the relevant Charter:
•
refer matters to the Board for a decision, with a
recommendation from the committee; or
• determine matters (where the committee acts with
delegated authority), which the committee then reports
to the Board.
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YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
The purpose of each of the Board committees is outlined below.
COMMITTEE
Audit and Risk
Management
Committee
PURPOSE
The committee’s objectives are to:
• help the Board in relation to the reporting of financial information.
• advise on the appropriate application and amendment of accounting
policies;
• make evaluations and recommendations to the shareholders of the
Company regarding the external auditor;
MEMBERSHIP
Independent Non- Executive
Directors:
Gregory Fletcher – Chair
David Moult Helen Gillies
Non-Executive Directors:
Qingchun Zhao
•
recommend to the Board the remuneration of the external auditor
for shareholder approval as required in accordance with the
Constitution;
(minimum of three Non-
Executive Directors, a majority of
whom are independent)
• provide a link between the Board and the external auditor and
management;
• ensure that the Board, Directors and management are aware of
material risks facing the business;
• ensure the systems in place to identify, monitor and assess risk are
appropriate and operating effectively; and
• assess the independence of the external auditor.
During the financial year ended 31 December 2019, work performed by
the committee included:
•
•
review and endorsement of the Company’s Interim and Annual
Financial Results;
consideration of external audit reports and approval of external
auditor’s audit plan;
• engagement of non-audit services;
•
•
•
•
consideration of the Company’s asset impairment assessments;
review of the revised Audit and Risk Management Committee
Charter;
review of the Company’s related party and connected transactions
review of the effectiveness of risk management and internal control
systems and internal audit functions; and
• evaluation of the Company’s debt facilities and 2019 debt
prepayments along with consideration of the Company’s dividend
payments.
The committee assists the Board to:
•
•
fulfil its responsibilities in relation to the health, safety, environment,
and community (collectively HSEC) matters arising out of the
activities of the Company;
consider, assess and monitor whether or not the Company has in
place the appropriate policies, standards, systems and resources
required to meet the Company’s HSEC commitments; and
Health, Safety,
Environment
and Community
Committee
Independent Non-Executive
Directors:
David Moult – Chair Geoffrey
Raby
Non-Executive Directors:
Fuqi Wang Executive Directors:
Fucun Wang
• provide necessary focus and guidance on HSEC matters across the
(minimum of three Directors)
Company.
83
YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
COMMITTEE
Health, Safety,
Environment
and Community
Committee
continued
PURPOSE
During the financial year ended 31 December 2019, work performed by
the committee included:
• monitoring the Company’s ongoing health and safety and
environmental performance, including significant incidents and
regulatory investigations;
• monitored the ongoing integration of the Company’s health and
safety systems for the acquired Coal & Allied mine sites.
MEMBERSHIP
Independent Non-Executive
Directors:
David Moult – Chair Geoffrey
Raby
Non-Executive Directors:
Fuqi Wang Executive Directors:
Fucun Wang
• overseeing major initiatives, including the Principal Hazard
(minimum of three Directors)
Management Project, Contractor Management project, MTW
Fatigue Management Project and the Yancoal Community Support
Program;
•
•
considering independent environmental assurance audits for various
Company mine sites, including Moolarben, MTW and Ashton; and
considering the Company’s updated Enterprise Risk Management
approach.
Nomination and
Remuneration
Committee
The committee assists the Board of the Company by making
recommendations in relation to:
• Board composition and succession planning for the Board;
• Director remuneration (subject to any shareholder approval
that is required in accordance with the Constitution and the ASX
Listing Rules) and remuneration arrangements for the Executive
Committee and any other person nominated as such by the
committee from time to time;
•
the public reporting of remuneration for Directors and the
Company’s Executive Committee;
•
the performance assessment of the Executive Committee;
• designing company policy and regulations with regard to corporate
governance; and
• diversity.
During the financial year ended 31 December 2019, work performed by
the committee included:
•
consideration of re-election of Directors;
• undertaking a review of the Company’s organisational structure and
composition of the Executive Committee;
•
•
•
review of the 2018 Corporate Governance Statement, including
diversity and measurable objectives;
review of the amended Nomination and Remuneration Committee
Charter; and
finalisation and endorsement of Company short-term and long-term
incentive plans and Company salary indexation and performance
assessment implementation.
The committee assists the Board in its oversight and review of the
Company’s strategic initiatives, including:
• merger and acquisition proposals;
• major capital markets transactions;
•
significant investment opportunities; and
• proposals to dispose of significant Company assets.
Strategy and
Development
Committee
84
Independent Non- Executive
Directors:
Helen Gillies – Chair
Gregory Fletcher David Moult
Non-Executive Directors:
Xiangqian Wu Baocai Zhang
(minimum of three Non-
Executive Directors, a majority of
whom are independent)
Independent Non- Executive
Directors:
Geoffrey Raby
Non-Executive Directors:
Baocai Zhang – Chair
Qingchun Zhao Fuqi Wang Xing
Feng
(minimum of three Directors)
YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
COMMITTEE
Strategy and
Development
Committee
continued
Independent
Board
Committees
PURPOSE
During the financial year ended 31 December 2019, work performed
by the committee included:
•
consideration of capital management issues, including share
consolidation, early debt repayment and dividend decisions;
• evaluation of various acquisition opportunities and organic
growth opportunities; and
•
review of Stakeholder Engagement Strategy and investor
relations issue.
An Independent Board Committee is established by the Board as and
when required to manage any related party transactions.
During the financial year ended 31 December 2019, a previously
constituted Independent Board Committee passed certain written
resolutions for the purposes of considering transactions between or
involving the Company and its major shareholder, Yanzhou.
MEMBERSHIP
Independent Non- Executive
Directors:
Geoffrey Raby
Non-Executive Directors:
Baocai Zhang – Chair
Qingchun Zhao Fuqi Wang Xing
Feng
(minimum of three Directors)
An Independent Board
Committee is composed of
independent Non- Executive
Directors who do not have a
material interest in the relevant
transactions.
The primary role of the Strategy and Development Committee is to assist the Board in its oversight and review of the Company’s
strategic initiatives. The other standing Board committees referred to above are discussed further below under Principle 4
(Audit and Risk Management Committee), Principle 7 (Health, Safety, Environment and Community Committee) and Principle 8
(Nomination and Remuneration Committee). The Charters of each of these standing Board committees are available within the
Corporate Governance section of the Company’s website.
The number of meetings held by the Board and each committee during 2019 and each member’s attendance at these meetings is
set out in the Directors’ Report on page 53.
Other committees may be established by the Board as and when required.
Membership of the Board committees is based on the needs of the Company, relevant regulatory requirements, and the skills and
experience of individual Directors.
Director independence
In determining the composition of the Board, the Company has regard to the balance of Executive and Non-Executive Directors to
ensure that there is a strong independent presence on the Board to exercise independent judgement.
The Board comprises 11 Directors, of whom four hold their positions in an independent Non-Executive capacity (based on the
independence standard disclosed below). The Company’s current independent Directors are Geoffrey Raby, Gregory Fletcher,
David Moult and Helen Gillies.
The Board has assessed the independence of each of the Non-Executive Directors (including the Chairman) in light of their
interests and relationships. A majority of the Board are not considered independent Directors having regard to their affiliation
with the Company’s major shareholder, Yanzhou, and accordingly the Company does not comply with Recommendation 2.4
of the ASX Recommendation. However, the Board considers that its composition appropriately represents the interests of its
shareholders including its major shareholder, Yanzhou, and that the Board has put in place appropriate policies and procedures
to guide the Board and senior Executives in circumstances where conflicts of interest may arise and in its dealings with Yanzhou,
including establishing the Independent Board Committee referred to above.
To help ensure that any conflicts of interests are identified, the Company has put in place a standing agenda item at all meetings
of the Board and its committees to provide the Directors with the opportunity of declaring any conflicts of interests in the subject
matter of the proposed resolutions made within the meeting.
To assist the Board in making independent judgements, the Board Charter sets out the procedure by which the Board collectively,
and each individual Director, can seek independent professional advice, at the Company’s expense.
Each independent Director must regularly provide the Board with all information relevant to their continued compliance with the
independence standard. The independence of Directors will be reviewed by the Board on a regular basis with assistance from the
Nomination and Remuneration Committee. The Nomination and Remuneration Committee will also assist the Board with regular
evaluation of the performance of the Board, Board committees and individual Directors.
The independent Non-Executive Directors have confirmed their independence in accordance with Rule 3.13 of the HK Listing
Rules, and the Company has received from each of the independent Non-Executive Directors an annual confirmation on his/her
independence as required under Rule 3.13 of the HK Listing Rules. Accordingly, the Company considers that the independent Non-
Executive Directors continue to be independent.
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YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
Independence Standard
In assessing the independence of its Directors, the Board has
regard to the factors relevant to assessing the independence
of a Director that are set out in Box 2.3 of the ASX
Recommendations (3rd edition) and Rule 3.13 of the HK Listing
Rules. The criteria considered in assessing the independence of
Non-Executive Directors are also set out in the Board Charter.
A Director is considered independent if the Director:
•
•
•
•
is not, and has not within the last three years been,
employed in an Executive capacity by the Company or any
of its child entities;
is not, nor has within the last three years been, a partner,
Director or senior employee of a provider of material
professional services to the Company or any of its child
entities;
is not, nor has within the last three years been, in a
material business relationship with the Company or any of
its child entities, or an officer of, or otherwise associated
with, someone with such a relationship;
is not a substantial Shareholder of the Company or an
officer of, or otherwise associated with, a substantial
Shareholder of the Company;
• does not have a material contractual relationship with
the Company or any of its child entities other than as a
Director;
• does not have close family ties with any person who falls
within any of the categories described above;
• has not been a Director of the Company for such a
period that his or her independence may have been
compromised; and
•
is free from any other interest, position, association or
relationship that might interfere, or might reasonably be
seen to interfere, with the Director’s capacity to bring an
independent judgement to bear on issues before the Board
and to act in the best interests of the Company and its
shareholders generally.
The Company’s Constitution provides that the Company’s
shareholders holding a majority of the issued shares of the
Company (which confer the right to vote) may nominate a
Director to the office of Chairman and may elect one or more
Directors to the office of Vice Chair.
As a nominee of Yanzhou, Baocai Zhang, the Chairman is not
considered independent by the independence standard (as
above) and accordingly the Company does not comply with
Recommendation 2.5 of the ASX Recommendation. However,
the Board considers that this is an appropriate reflection
of Yanzhou’s majority shareholding in the Company. While
a majority of the Directors are associated with Yanzhou
this is considered appropriate in light of Yanzhou’s major
shareholding in the Company. The Board has put in place
appropriate policies and procedures such as the Conflicts and
Related Transactions Policy, the Majority Shareholder Protocol
to manage any potential conflicts, while the Company’s
Constitution allows for the establishment of an Independent
Board Committee consisting of Independent Non-Executive
Directors if required.
Board skills matrix
The Board represents a balance of skills, experience and
diversity of perspectives appropriate to the requirements of
the Company’s business.
The table below sets out the skills and experience that are
currently represented on the Board.
SKILLS AND EXPERIENCES
Mining/exploration and production
Engineering
Capital projects
Trading/marketing
Strategy
Leadership
Board/Committee experience
Corporate governance
Accounting/audit/risk management
Government/policy
Legal/regulatory
Health, safety and environment
Human resources
International business expertise
TOTAL
4
4
10
4
11
11
8
7
7
9
5
6
5
9
Induction and professional development
Upon appointment, Directors are provided with an information
pack containing a letter of appointment setting out the
Company’s expectations, Directors’ duties and the terms
and conditions of their appointment, and other materials
containing information about the Company including the
Company’s Constitution, charters and policies to support the
induction of Directors to the Board.
Directors also participate in continuing education or
development programs arranged for them, including for
example training on Directors duties (including with respect
to climate change risk), developments in HKEx corporate
governance framework and developments in whistleblower
regimes. The training was conducted by the Company’s Hong
Kong and Australian based legal advisors.
The Company Secretary supports Directors by providing access
to information in appropriate form where requested.
PRINCIPLE 3: ACT ETHICALLY AND RESPONSIBLY
Conduct and ethics
The Board policy is that Directors, employees and contractors
must observe both the letter and spirit of the law, and adhere
to the highest standards of business conduct. The Company
has adopted a formal Code of Conduct and other guidelines
and policies which are approved by the Board that set out
legal and ethical standards for the Company’s Directors and
employees, including a Conflicts of Interests and Related Party
Transactions Policy.
The Code of Conduct and these other guidelines and policies
guide the Directors, the CEO, senior Executives, and employees
generally as to the practices necessary to maintain confidence
in the Company’s integrity and as to the responsibility and
accountability of individuals for reporting, and investigating
reports of, unethical practices. The Code of Conduct and these
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YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
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other guidelines and policies also guide compliance with legal
and other obligations to stakeholders.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN CORPORATE
REPORTING
Specifically, the objective of the Code of Conduct is to:
• provide a benchmark for professional behaviour;
•
support the Company’s business reputation and corporate
image within the community; and
• make Directors and employees aware of the consequences
if they breach the policy.
The key values underpinning the Code of Conduct are:
• our actions must be governed by the highest standards of
integrity and fairness;
• our decisions must be made in accordance with the letter
and spirit of applicable law; and
• our business must be conducted honestly and ethically,
with our best skills and judgement, and for the benefit of
customers, employees, shareholder and the Company alike.
The Code of Conduct is available in the Corporate Governance
section of the Company’s website.
Reporting concerns and whistleblower protection
The Company’s Whistleblower policy encourages any current
or former employees or officers, contractors or suppliers
(and their employees), associates or certain family members
of an individual mentioned above to raise serious concerns of
misconduct or an improper state of affairs or circumstances
in relation to the Company and report any issues if they have
reasonable grounds for suspecting so. The disclosure cannot
solely be about a personal work-related grievance.
Individuals can report their concerns confidentially in writing
or by phone to a confidential Speak Up facility, which is
operated by an independent external party. Alternatively,
disclosure may be made with our Whistleblower Officer, the
Executive General Manager Risk & Audit, an officer or senior
manager within the Company, the Company’s auditor or if the
disclosure concerns the Company’s tax affairs or its associates,
its registered tax agent or BAS agent, or an employee or
officer at the Company who has functions or duties relating
to its tax affairs.
All disclosures made under this policy will be treated seriously
and may be the subject of a investigation with the objective
of locating evidence that either substantiates or refutes
the misconduct disclosed by a person. Such investigations
will be facilitated in accordance with the steps and process
detailed in the policy, subject to certain exceptions within
the policy. The Audit and Risk Management Committee and
the Board are informed at each meeting with a report on all
active whistleblower matters, including information on the
number and nature of disclosures made in the last quarter, the
status of any investigations underway and the outcomes of
any investigations completed and actions taken as a result of
those investigations.
The Yancoal Whistleblower Policy is available in the Corporate
Governance section of the Company’s website.
Audit and Risk Management Committee
The ARMC has the responsibility to review, oversee and report
to the Board in relation to the preparation of the financial
statements and accounts of the Company. The Board has
established an Audit and Risk Management Committee, which
plays a key role in helping the Board to oversee financial
reporting, internal control structure, risk management systems
and internal and external audit functions. The committee also
enables the Board to maintain a transparent relationship with
the Company’s internal and external auditors.
The committee has the necessary power and resources to
meet its responsibilities under its charter, including rights of
access to management and auditors (internal and external)
and to seek explanations and additional information.
The committee meets at least four times per year, or as
frequently as required. The Charter of the Audit and Risk
Management Committee provides clear terms of reference
and can be found in the Corporate Governance section
of the Company’s website. The purpose of the Audit and
Risk Management Committee is outlined under the Board
committees section above.
In accordance with its Charter, the Audit and Risk Management
Committee has at least three members. The current
members of this committee are Gregory Fletcher (chair of the
committee), Qingchun Zhao, David Moult and Helen Gillies.
The committee consists only of Non-Executive Directors
with a majority being independent. Consistent with the
ASX Recommendations, the Chair of the committee is an
independent Non-Executive Director and is not the Chairman
of the Board. The qualifications, skills and experience of
each member and the number of times the committee met
throughout the period and the individual attendances of the
committee members at those meetings is disclosed in the
Information on Directors in the Directors’ Report, on page 53.
The Company has also employed a full time Executive General
Manager of Risk and Audit (“EGM of Risk and Audit”). His role
is described further under Principle 7.
CEO and CFO certifications on financial reports
The persons who performed a chief executive function and
chief financial officer function for the Company have declared
in writing to the Board that in respect of the half year ended
30 June 2019 and the full year ended 31 December 2019, in
their opinion, the financial records of the Company have been
properly maintained and the financial statements comply
with the appropriate accounting standards and give a true
and fair view of the financial position and performance of the
Company, and that their opinion has been formed on the basis
of a sound system of risk management and internal control
which is operating effectively.
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YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
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External Auditor
The Company’s external auditor is ShineWing Australia.
Consistent with the requirements of the Corporations Act 2001
(Cth), ShineWing Australia has a policy of partner rotation
every five years. The appointment, removal and remuneration
(not including amounts paid for special or additional
services provided by the auditor) of the auditor require
shareholder approval.
The external auditor receives all papers and minutes of the
Audit and Risk Management Committee. The external auditor
also attends the Company’s Annual General Meeting to answer
questions from shareholders relevant to the Company’s audit.
The statement of the external auditor, ShineWing Australia,
about reporting responsibilities on the financial statements of
the Group is set out under the heading “Independent Auditor’s
Report To the Members of Yancoal Australia Ltd” in this
annual report.
The Directors confirm that, to the best of their knowledge,
information and belief, having made all reasonable enquiries,
they are not aware of any material uncertainties relating to
events or conditions that may cast uncertainties relating to
events or conditions that may cast significant doubt upon the
Company’s ability to continue as a going concern.
An analysis of remuneration (including details of the amounts
paid or payable) to the auditor for audit and non-audit services
provided during the financial year ended 31 December 2019
are set out in the Directors’ Report on page 70.
PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE
The Company recognises the importance of timely and
adequate disclosure to the market, and is committed to
making timely and balanced disclosure of all material matters
and to effective communication with its shareholders and
investors so as to give them ready access to balanced and
understandable information. The Company also works
together with its major shareholder, Yanzhou, to ensure that
Yanzhou can comply with its disclosure obligations in relation
to Company information, and vice versa, Yanzhou seeks to
ensure that the Company can comply with its disclosure
obligations in relation to Yanzhou’s information.
The Board has put in place a Disclosure Policy to encapsulate
the disclosure obligations under the Corporations Act
2001 (Cth) and the ASX Listing Rules and to set out
procedures for managing compliance with those obligations.
These procedures provide a framework for managing the
disclosure of material matters to the market to ensure
accountability at Board and senior Executive level. As part of
this framework, a standing agenda item at all the Company’s
Board and Executive Committee meetings requires the
Directors and senior Executive to consider whether any
matters at the meeting should be disclosed to the market.
The Disclosure Policy can be found within the Corporate
Governance section of the Company’s website.
A Disclosure Committee has been established to assist the
Company to meet its disclosure obligations. The Committee
plays a key role in reviewing and determining whether
information is likely to have a material effect on the price
or value of the Company’s securities such that it requires
disclosure to the market. The Disclosure Committee members
comprise the CEC, CEO, CFO, Company Secretary, Investor
Relations General Manager and Group Counsel.
Any information disclosed to the market through an
announcement to the ASX is also published on the Investor
section of the Company’s website.
PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS
Communications with shareholders
The Company has an investor relations program that is aimed
at facilitating two-way communications with investors.
The Company’s policy is to promote effective two-way
communication with shareholders and other investors so that
they understand how to assess relevant information about the
Company and its corporate direction. The Company aims to
keep shareholders, potential investors and other stakeholders
informed of all major developments affecting the state of
affairs of the Company. The Company facilitates the investor
relations program by communicating information regularly to
shareholders, potential investors and other stakeholders by:
• posting announcements on the ASX and HKEx platforms
in accordance with its continuous disclosure obligations
and also making these announcements available on the
Company’s website under the sections marked ‘Corporate
Governance’, ‘Media’ and ‘Boards and Committees’;
• keeping its website up to date on important information
about the Company, including its Constitution, Board and
Board Committee Charters, core corporate governance
policies and financial information about the Company; and
• publishing investor presentations made to analysts and
making media briefings available within the Investor
section of the Company’s website.
The Board considers one of its key responsibilities to be
communication with shareholders and, accordingly, the
Company encourages shareholders to attend and participate in
all general meetings including annual general meetings and will
use a variety of technological solutions where appropriate to
facilitate such participation of shareholders. This may include,
for example, holding meetings across multiple venues linked
by live telecommunications and hybrid meetings that allow
shareholders to attend and vote in person, by proxy or online.
Shareholders are entitled to ask questions about the
management of the Company and of the auditor as to its
conduct of the audit and the preparation of its reports.
Any shareholders who cannot attend any general meetings
can also participate via lodgement of their proxies. In
addition, shareholders have the option of receiving
communications from and sending communications to the
Company and the Company’s principal and branch share
registries, Computershare Investor Services Pty Limited
and Computershare Hong Kong Investor Services Limited,
electronically.
The Company’s Shareholder Communication Policy can
be found within the Corporate Governance section of the
Company’s website.
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YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
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Paragraph 44 of the Hong Kong Joint Policy Statement
Regarding the Listing of Overseas Companies, jointly issued
by the Securities and Futures Commission of Hong Kong and
HKEx in March 2007 and updated in April 2018, requires that
members holding a minority stake in an overseas company
must be allowed to convene an extraordinary general meeting
and add resolutions to a meeting agenda. The minimum level
of members’ support required to convene a meeting must be
no higher than 10%.
Under section 249D of the Corporations Act 2001 (Cth),
Shareholders with at least 5% of the votes that may be cast at
a general meeting may request the Directors to call a general
meeting or may convene a general meeting themselves at
their own expense under section 249F of the Corporations Act
2001 (Cth). Any such request must be in writing, must state
any resolution to be proposed at the meeting, must be signed
by the shareholder making the request and must be given to
the Company.
Under section 249N of the Corporations Act 2001 (Cth),
Shareholders representing at least 5% of the total votes that
may be cast on the resolution or at least 100 Shareholders
who are entitled to vote at a general meeting may give the
Company notice requiring resolutions to be put before a
general meeting. The notice must be in writing, must set out
the wording of the proposed resolution and must be signed
by the shareholders proposing to move the resolution.
Apart from the general meetings, the Company’s website
is an effective means of communication with Shareholders.
The Company is committed to facilitating the two-way
communication with Shareholders, in particular, dealing with
Shareholder enquiries (whether an institutional investor or a
retail investor) and any Shareholders who have questions or
comments on what the Company is doing are most welcome
to contact the Company at any time through the website.
Shareholders may raise enquiries to the Board by contacting
the Group’s General Manager Corporate Affairs, including at
shareholder@yancoal.com.au. Upon receipt of the enquiries,
the General Manager Corporate Affairs will forward the
Shareholders’ enquiries and concerns to the Board, Board
committees or the management as appropriate.
Amendments to the Company’s Constitution
At a general meeting of Shareholders held on 31 May 2019,
Shareholder approval to amend the Constitution was sought
and obtained. The Constitution was amended by:
a
b
c
replacing the reference to “40%” with “50%”;
including the phrase “or 50% of the free cash flow (pre-
Abnormal Items), whichever is higher” after the bracketed
phrase “(pre-Abnormal Items)”; and
inserting a sentence which defines “free cash flow” at the
end of the paragraph,
in rule 4.1(a)(1), so that the rule reads:
(a) “Subject in each case to applicable laws, the ongoing
cash needs of the business, the statutory and common
law duties of the directors and the shareholders’ rights
under rule 7.10, the directors may pay interim and/or final
dividends, and must:
(1) subject to rule 4.1(a)(2), pay as interim and/or final
dividends not less than (A) 50% of net profit after tax
(pre- Abnormal Items); or (B) 50% of the free cash flow
(pre-Abnormal Items), whichever is higher in each financial
year; and
(2) if the directors determine that it is necessary in order
to prudently manage the company’s financial position,
pay as interim and/or final dividends not less than 25%
of net profit after tax (pre-Abnormal Items) in any given
financial year.
“Free cash flow” for the purpose of rule 4.1(a)(1) is the net
cash inflow from operating activities less payments made for
capital expenditure and exploration activities.”
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
Risk identification and management
The Board, through the Audit and Risk Management
Committee, is responsible for satisfying itself that a sound
system of risk oversight and management exists and that
internal controls are effective to enable it to assess the type
and extent of relevant risks in its decision making.
In particular, the Board ensures that:
•
•
the material strategic, operational, financial reporting and
compliance risks are identified and evaluated; and
risk management, control and reporting systems are in
place to identify, assess, manage, monitor and report on
these risks.
The role and membership of the Audit and Risk Management
Committee are described under Principles 2 and 4.
The Company’s Audit and Risk Management Committee
Charter can be found within the Corporate Governance section
of the Company’s website. The number of times the committee
met throughout the period and the individual attendances of
the committee members at those meetings is disclosed in the
Directors’ Report, on page 53.
The Board has requested the Company’s senior Executives
and management to report to the Audit and Risk Management
Committee and, where appropriate the Board, regarding the
effective management of its material business risks.
In 2019, the Audit and Risk Management Committee had in
place a framework to identify, assess, manage risks that are
material to the business. This framework includes:
•
•
•
implementation of a corporate risk management standard
approved by the Audit and Risk Management Committee
and Board;
identification of material business risk by reference to a
corporate risk register, approved by the Audit and Risk
Management Committee and Board;
formal risk identification activities being undertaken at
both a functional level and at each of the Company’s
mine sites;
• designated individuals across the business that have
accountability for the implementation of risk management
within their areas of responsibility;
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YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
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•
the EGM of Risk and Audit as a central resource available
to assist with all risk management responsibilities, and
to assist with any training/awareness or other related
requirements; and
•
internal procedures and plans for crisis management.
The Audit and Risk Management Committee receives periodic
reports on the performance of the Company’s enterprise risk
management framework, as well as on the Company’s key risk
exposures to satisfy itself that it continues to be sound. An
annual review of the risk management and internal control
framework was conducted by the Audit and Risk Management
Committee, on behalf of the Board, in 2019 that addressed
areas for continuous improvement in line with the Australian
/ New Zealand standard for risk management. The framework
was considered effective and adequate.
The EGM of Risk and Audit is responsible for establishing and
managing the enterprise risk management framework, risk
management system and practices. The company’s formal
risk identification activities are guided by the Australian /
New Zealand standard for risk management and undertaken
on a periodic basis; with Risk Identification and Analysis
activities undertaken at a functional level, as well as at each of
the Company’s mine sites.
The responsibility for managing risks, risk controls or risk
management action plans is embedded within the business
and undertaken as part of everyday activities. Together with
the CEC, the Board and the Audit and Risk Management
Committee, the EGM of Risk and Audit is responsible for
developing a risk matrix and framework and for implementing
related risk-based assurance processes for the Company
and its subsidiaries. The EGM of Risk and Audit annually
reviews and confirms the continued effectiveness of the risk
framework to the Audit and Risk Management Committee.
The Board recognises and acknowledges that, while risk
management controls and systems can be effective in
managing risks, they cannot eliminate all risks relevant to the
Company achieving its objectives and cannot provide absolute
assurance against material misstatement or loss.
Risks associated with the Company
The future operating performance of the Group may be
affected by risks relating to the Company’s business. Some of
these risks are specific to the Company while others relate to
economic conditions and the general industry and markets in
which the Company operates.
The Company’s risk management policies and procedures
have been designed and implemented to identify, assess
and manage any material exposure to risks relating to the
Company’s business, including economic, environmental and
social sustainability risks. The Company undertakes regular
monitoring and assessment of existing and emerging risks.
Group material risks are assigned specific risk owners and risk
treatment strategies which are recorded alongside applicable
key controls and control effectiveness ratings to pro-actively
manage the Company’s exposure to such risks. Further details
of how the Company manages certain economic, environmental
and social sustainability risks are set out in the Management
Discussion and Analysis Report on pages 34 to 44.
However, there can be no assurance that such risk mitigation
strategies will protect the Company from these risks.
Other risks are beyond the Company’s control and cannot be
mitigated. The occurrence of any such risks could adversely
affect the Company’s financial condition and performance.
The risks listed below are not purported to be exhaustive and
there is no assurance that the importance of different risks
will not change or other risks will not emerge.
The table below identifies risks which are considered to be
economic, environmental and/or social sustainability risks.
ECONOMIC
SUSTAINABILITY
RISKS
ENVIRONMENTAL
SUSTAINABILITY
RISKS
SOCIAL
SUSTAINABILITY
RISKS
Operations
Health, safety
and hazardous
materials
Business
development
Funding
Adverse foreign
exchange rate
movements
Hedging through
bank issued
instruments
Coal prices and
coal demand
Coal production
Debt costs
Taxation
Accounting
Standards
Regulatory
approvals
Estimates of
Resources and
Reserves and
geology
Take or pay
liabilities
Uncertainty in
costs forecast
NCIG and WICET
debt
Mine closure
Coal supply
agreements
Joint ventures and
reliance on third
parties
Competition
Title
Native Title
Overlapping
tenement
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YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
ECONOMIC
SUSTAINABILITY
RISKS
ENVIRONMENTAL
SUSTAINABILITY
RISKS
SOCIAL
SUSTAINABILITY
RISKS
Enforcement and
counterparty
insolvency
Coal royalties
Climate change/
carbon regulation
Environmental
activism
Technological
change
Technology / cyber
Key personnel
Fraud or
misconduct
Changes in
government policy,
regulation or
legislation
Environment and
planning
Litigation
Insurance
Exploration and
development
Transport and
infrastructure
Environment
Impairment
Operations
The Company’s operations are subject to operating risks.
These risks include (but are not limited to) industrial action,
inappropriate mine design /plans, mine collapses, cave-ins or
other failures relating to mine infrastructure, including tailings
dams, interruptions due to hazardous weather conditions,
power interruption, insufficient water supply, critical
equipment unavailability / failure (in particular any protracted
breakdown or issues with any of the Company’s CHPPs or a
major excavator), damage to third party infrastructure, fires,
and explosions from methane gas or coal dust, accidental
mine water discharges, flooding and variations in or unusual
or unexpected geological or geotechnical mining conditions
(particularly in the Company’s underground operations).
Such risks could result in damage to applicable mines, personal
injury, environmental damage, delays in coal production,
delays in deliveries, decreased coal production, increased
cost / monetary losses, reduced revenue, and possible legal
liability. Although the Company’s insurance policies provide
coverage for some of these risks, the amount and scope of
insurance cover is limited by market and economic factors
and these risks would not be fully covered by insurances
maintained by the Company.
Health, safety and hazardous materials
Accidents could occur at a mine site or corporate office that
result in personal injuries. These could relate to factors such
as (but not limited to) coal or gas bursts, vehicle interaction/
motor vehicle accidents, exposures to energised plant or
equipment and working at heights or in confined spaces.
These could also have adverse financial implications including
legal claims for personal injury, wrongful death, amendments
to approvals, potential production delays or stoppages, any
of which may have a material adverse effect on the financial
performance and/or financial position of the Company.
There is a risk that past, present or future operations have not
met, or will not meet, health and safety requirements and/or
that the approvals or modifications the Company is currently
seeking, or may need to seek in the future, will not be granted
at all or on terms that are unduly onerous. If the Company
is unsuccessful in these efforts or otherwise breaches these
health and safety requirements, it may incur fines or penalties,
be required to curtail or cease operations and/or be subject
to increased compliance costs or costs for rehabilitation or
rectification works, which have not been previously planned at
one or more of its sites.
The Company‘s operations may substantially impact the
environment or cause exposure to hazardous materials.
It will use hazardous materials and will generate hazardous
waste, and may be subject to common law claims, damages
due to natural disasters, and other damages, as well as the
investigation and clean-up of soil, surface water, groundwater,
and other media. Such claims may arise, for example, out of
current or former activities at sites that it owns or operates.
There is also a risk that actions could be brought against the
Company, alleging adverse effects of such substances on
personal health.
There is also a risk of business interruptions or increased
absenteeism as a result of pandemics.
Business development
An ineffective evaluation of investment opportunities and/or
allocation of capital could result in a loss of company value,
reduce shareholder returns, impairments and/or regulatory
exposures. There is a risk that capital is not available to
support the company’s growth or strategy.
Funding
The amount of future funding required by the Company will
depend on a number of factors, including (but not limited
to) the business activities, commitments and the overall
performance of the Company’s business at that time.
The Company’s business operations and cash flow are
highly sensitive to any fluctuation in the US$ coal price, coal
production from its operations, demand for its coal product
and US$ movement in foreign exchange rates, particularly
movements in the A$:US$ exchange rate. In developing
its business plan and operating budget, the Company has
made certain assumptions regarding coal prices, the A$:US$
exchange rate, future production levels, business development
activities, the potential of Watagan being reconsolidated,
dividends and other factors which determine the Company’s
financial performance.
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YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
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If a funding shortfall materialises, the Company may need to
raise substantial additional debt or equity. The Company’s
capacity to secure the requisite level of funding will depend
on the amount of funding required, the performance and
future prospects of its business and a number of other factors,
including US$ coal prices, interest rates, economic conditions,
debt market conditions (including continued support of
thermal coal industry), equity market conditions, and future
levels of Yanzhou support.
To the extent that the Company is not able to secure additional
financing (whether debt or equity) on acceptable terms from
third parties, the Company will continue to rely on financial
support from Yanzhou.
As at 31 December 2019, the Company had a loan
receivable from Watagan of A$901 million (re-drawable up
to A$1.36 billion) which is subject to impairment testing.
Yankuang Group Co. Ltd (“Yankuang”), the Group’s ultimate
parent company, guarantees payment of any amount owed
to the Company under the loan if Watagan does not pay the
Company such amount when due.
Yanzhou’s and Yankuang’s capacity to meet their respective
funding commitments will depend on their financial position
at the time and their capacity to raise the necessary funds to
meet the commitments. Yancoal’s capacity to source further
funding from Yanzhou will depend on Yanzhou’s willingness
and financial capacity to provide that funding. There can be
no assurance that Yanzhou will be in a position to provide
financial support to Yancoal or that Yankuang will be in a
position to meet its obligations under the guarantee in respect
of the Watagan Agreements.
Adverse foreign exchange rate movements
Foreign exchange risk is the risk of the Company sustaining loss
through adverse movements in exchange rates. Such losses
can impact the Company’s financial position and performance
and the level of additional funding required to support the
Company’s businesses.
The liabilities, earnings and cash flows of the Company are
influenced by movements in exchange rates, especially
movements in the A$:US$ exchange rate.
While the Company operates entirely in Australia and its costs
are primarily denominated in its functional currency, the A$,
foreign currency exposure arises particularly in relation to coal
supply contracts, which generally are priced and payable in
US$, procurement of imported plant and equipment, which
can be priced in US$ or other foreign currencies, and debt
denominated in US$.
The impact of exchange rate movements will vary depending
on factors such as the nature, magnitude and duration of the
movements, the extent to which currency risk is hedged under
forward exchange contracts or other hedging instruments and
the terms of these contracts.
Hedging through bank issued instruments
Operating foreign exchange risk that arises from firm
commitments or highly probable transactions is managed
through the use of bank issued forward foreign currency
contracts and collar option contracts. The Company hedges
a portion of contracted US dollar sales and asset purchases
settled in foreign currencies in each currency to mitigate the
adverse impact on cash flow due to the future rise or fall in
Australian dollars against the relevant currencies.
Coal prices and coal demand
The Company generates revenue from the sale of coal. In
developing its business plan and operating budget, the
Company makes certain assumptions regarding coal prices
and demand for coal. The prices which the Company will
receive for its coal depend on numerous market factors
beyond its control and, accordingly, some underlying coal price
assumptions relied on by the Company may materially change
and actual coal prices and demand may differ materially from
those expected.
The prices for coal are determined predominantly by world
markets, which are affected by numerous factors, including
the outcome of future sale contract negotiations, general
economic activity, industrial production levels, changes in
foreign exchange rates, changes in energy demand and demand
for steel, changes in the supply of seaborne coal, technological
changes, changes in production levels and events interfering
with supply, changes in international freight rates or other
transportation infrastructure and costs, the costs of other
commodities and substitutes for coal, market changes in coal
quality requirements, government regulations which restrict
use of coal, and tax impositions on the resources industry,
all of which are outside the control of the Company and may
have a material adverse impact on coal prices and demand.
In addition, the coal price is highly dependent on the outlook
for coal consumption in large Asian economies, such as China,
Japan and India, as well as any changes in government policy
regarding coal or energy policy in those countries.
Absent offsetting factors, significant and sustained adverse
movements in demand for coal and, consequently, coal
prices (both generally and in relation to particular types and
classes of coal) may have a material adverse impact on the
ongoing financial performance and financial position of the
Company or may result in the Company not proceeding with
the development of new mines and projects due to such
development not being economically viable.
Any weakening in coal prices or any deterioration prompted by
further reduction in demand or addition of new tonnes to the
seaborne market (for example from thermal coal exports from
the US) would have a material adverse impact on the financial
performance of the Company and its capacity to undertake
development projects.
Coal production
Improvement in the Company’s financial performance is
dependent on the Company being able to sustain or increase
coal production and decrease operating costs on a per
tonne basis. The Company’s success or failure in improving
productivity will become particularly important to the
Company’s financial performance at times of low coal prices.
The Company’s coal production can be impacted by a number
of factors, including for example unforeseen geological
or geotechnical issues (particularly in the Company’s
underground operations), changes or variations in coal quality
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or geological, hydrologic or other conditions, adverse weather
including abnormal wet weather conditions, bushfire events,
unforeseen delays or complexities in installing and operating
mining longwall systems, protracted breakdown of coal
handling infrastructure and other mining equipment and rail
and port breakdowns and outages. Regulatory factors and the
occurrence of other operating risks can also limit production.
Debt costs
The majority of the Company’s loan are US$ LIBOR based
floating rate loans and currently there are no interest rate
hedging arrangements in place. As a result, any increase in
the US$ LIBOR from current levels will expose the Company
to higher debt costs.
Taxation
In addition to the corporate income tax imposed on the
Company, the Company is required to pay government
royalties, direct and indirect taxes and other imposts in the
jurisdictions in which the Company will operate. The Company
may be affected by changes in government taxation and
royalty policies or in the interpretation or application of such
policies under Australian laws.
The potential of the Company to obtain the benefit of existing
tax losses and claim other tax attributes will depend on future
circumstances and may be affected by changes in ownership
of both Yanzhou and Yancoal, business activities, thin
capitalisation thresholds, tax bases and any other conditions
relating to the use of tax losses or other attributes of the
group. The ability to use the Company’s carried forward losses
will depend on the Company’s continued satisfaction of the
loss recoupment tests under Australian tax laws and be subject
to the availability of sufficient future taxable profits.
Accounting Standards
Australian Accounting Standards (“AAS”) and International
Financial Reporting Standards (“IFRS”) are issued by the
Australian Accounting Standards Board and International
Accounting Standards Board respectively and are beyond the
control of the Company and the Directors. Any changes to
AAS, IFRS or to the interpretation of those standards may have
an adverse effect on the reported financial performance or
financial position of the Company.
In particular, the accounting treatment for transactions such
as the transfer of the NSW mining assets of Ashton, Austar and
Donaldson to Watagan in 2016 could be reviewed by standard
setters and may be subject to change. In the event that the
Company reconsolidates Watagan’s results and financial
position into its consolidated financial statements ahead of
the scheduled date bond maturity in 2025, due to a change to
AAS, IFRS or their interpretation, the reconsolidation may have
an adverse effect on the reported financial performance and
financial position of the Company.
Regulatory approvals
The ability of the Company to meet its long term production
target profile depends on (amongst other things) the
Company being able to obtain on a timely basis, and maintain,
all necessary regulatory approvals (including any approvals
arising under applicable mining laws, environmental
regulations and other laws) for its current operations and
expansion and growth projects, including obtaining planning
approvals, land access, land owner consents and addressing
any native title issues, impacts on the environment and
objections from local communities.
The requirement to obtain approvals and to address potential
and actual issues for existing and future mining projects
is common to all companies in the coal sector. However,
there is no assurance or guarantee that the Company will be
in a position to secure any or all of the required consents,
approvals and rights necessary to maintain its current
production profile from its existing operations or to develop
its growth projects in a manner which will result in profitable
mining operations and the achievement of its long term
production targets. If these approvals (or other approvals
required for the planned production increases) are not
obtained, or if conditional or limited approvals are obtained,
the economic viability of the relevant projects may be
adversely affected, which may in turn result in the value of the
relevant assets being impaired.
Estimates of Resources and Reserves and geology
The volume and quality of the coal that the Company recovers
may be less than the Resource and Reserve estimates reported
to date. Resource and Reserve estimates are expressions
of judgment based on knowledge, experience and industry
practice. There are risks associated with such estimates,
including that coal mined may be of a different quality or
grade, tonnage or strip ratio from those in the estimates and
the ability to economically extract and process the coal may
not eventuate. Resource and Reserve estimates are necessarily
imprecise and depend to some extent on interpretations and
geological assumptions, coal prices, cost assumptions, and
statistical inferences which may ultimately prove to have
been unreliable.
Coal Resource and Coal Reserve estimates are regularly revised
based on actual production experience or new information
and could therefore be expected to change. Furthermore,
should the Company encounter mineralisation or formations
different from those predicted by past drilling, sampling
and similar examinations, Coal Resource and Coal Reserve
estimates may have to be adjusted and mining plans, coal
processing and infrastructure may have to be altered in a way
that might adversely affect their operations. If it is determined
that mining of certain Coal Reserves are uneconomic, this
may lead to a reduction in the Company’s aggregate Coal
Reserve estimates.
Material changes in Coal Reserve estimates, grades, strip
ratios, washing yields or recovery rates may affect the
economic viability of projects. Coal Reserve estimates
should not be interpreted as assurances of mine life or of the
profitability of current or future operations.
If the Company’s actual Coal Resource and Coal Reserve
estimates are less than current estimates, the Company’s
prospects, value, business, results of operations and financial
condition may be materially adversely affected.
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Take or pay liabilities
Port and rail (above rail and below rail) capacity is generally
contracted via long-term take-or-pay contracts. The Company
will generally be required to pay for its contracted rail or port
tonnage irrespective of whether it is utilised. Unused port or
rail capacity can arise as a result of circumstances including
insufficient production from a given mine, a mismatch
between port and rail capacity for a mine, or an inability to
transfer the used capacity due to contractual limitations such
as required consent of the provider of the port or rail services,
or because the coal must emanate from specified source
mines or be loaded onto trains at specified load points.
Uncertainty in costs forecast
The business operations and financial condition of the
Company may vary with fluctuations in production and
capital costs. Changes in the costs of mining and processing
operations as well as capital costs could occur, including as
a result of inflation, business cycles or through unforeseen
events, such as international and local economic and political
events (including movement in exchange rates) or unexpected
geological or mining conditions, and could have material
adverse financial consequences for the Company.
NCIG and WICET debt
As a shipper in NCIG and WICET, the Company’s source mines
are required to maintain a minimum level of Marketable
Coal Reserves (11 years’ worth of contracted capacity).
Non-compliance with this requirement would result in the
termination of the individual contracts and require the Company
to pay its share of any outstanding senior debt, amortised
over the remaining 10 years of that particular contract.
The Company’s current share of the outstanding senior debt is
approximately A$900 million and A$350 million, respectively.
Mine closure
Closure of any of the mines or other operations of the
Company before the end of their mine life (e.g. due to
environmental, geological, geotechnical, commercial and/or
health and safety issues), could trigger significant employee
redundancy costs, closure and rehabilitation expense and
other costs or loss of revenues. Many of these costs will
also be incurred where mines are closed at the end of their
planned mine life or placed on care and maintenance.
A move to care and maintenance has the potential to trigger
significant employee redundancy costs and a subsequent loss
of revenues, as a minimal employee presence is required for
ongoing management and rehabilitation of the mine.
If one or more of the relevant sites are closed earlier than
anticipated, the Company will be required to fund the closure
costs on an expedited basis and potentially lose revenues,
which could have an adverse financial effect. In addition, there
is a risk that closure planning is inadequate, costs have been
underestimated and/or that claims may be made arising from
environmental remediation upon closure of one or more of
the sites.
Coal supply agreements
The Company derives a significant portion of its revenue from
a limited number of customers. The loss of, or a reduction
in, sales to any of these customers as a result of for example
geopolitical changes for or other market forces could
materially and adversely affect its business, financial condition
and results of operations.
The Company’s coal supply agreements typically require the
delivery of a fixed or minimum quantity of coal at a location,
at a time and over a period stipulated in the agreement.
Most of the Company’s coal supply agreements also require
the delivery of coal meeting specified quality thresholds for
characteristics such as moisture content, sulphur content and
ash content. To the extent that any contracted volumes cannot
be delivered as agreed, the Company may be liable to pay
substantial compensation for the resulting losses, costs and
charges (including demurrage) incurred by the buyer.
Ineffective contract management could result in breach of
contracts, financial losses, damage to reputation and litigation.
Joint ventures and reliance on third parties
The Company holds a number of joint venture interests,
including interests in the Middlemount, Moolarben, HVO,
Mount Thorley and Warkworth joint ventures, PWCS, NCIG
and WICET, with other parties. Decision making, management,
marketing and other key aspects of each joint venture are
regulated by agreements between the relevant joint venture
participants. Under these agreements, certain decisions
require the endorsement of third party joint venture
participants and the Company relies on the co-operation of
these third parties for the success of its current operations
and/or the development of its growth projects and the
transportation of increased production.
The Company cannot control the actions of third party joint
venture participants, and therefore cannot guarantee that
joint ventures will be operated or managed in accordance with
the preferred direction or strategy of the Company. There is
a risk that the veto rights of, or consents required from, the
joint venture partners will prevent the business and assets of
a joint venture from being developed, operated and managed
in accordance with that preferred direction or strategy.
The Company also use contractors and other third parties
for exploration, mining and other services generally, and
is reliant on a number of third parties for the success of its
current operations and for the development of its growth
projects. While this is normal for the mining and exploration
industry, problems caused by third parties may arise which
may have an impact on the performance and operations
of the Company. Any failure by counterparties to perform
their obligations may have a material adverse effect on the
Company and there can be no assurance that the Company will
be successful in attempting to enforce its contractual rights
through legal action.
Competition
The Company faces competition in all aspects of its business,
including sales and marketing, pricing of coal, production
capacity, coal quality and specifications, transportation
capacity, cost structure and brand recognition. The Company’s
coal business competes in the domestic and international
markets with other large domestic and international coal
producers. An increase in production or reduction in prices
of competing coal from both Australia and overseas may
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adversely impact the Company’s ability to sell its coal
products and the price to be attained for sales. Increased
competition in the future, including from new competitors,
may emerge. This competition may relate not only to coal
produced and sold, but also to competition for the acquisition
of new projects, which may adversely affect the ability of the
Company to acquire new interests on acceptable terms should
it wish to make such acquisitions.
Further industry consolidation could result in competitors
improving their scale or productivity or competitors may
develop lower-cost geological coal resources or develop
resources in lower cost base geographies, increasing pressure
on the Company’s ability to maintain its margins.
There is significant competition within the resources industry
in Australia, the United States and Asia. Furthermore, new
entrants to the industry may emerge in one or more of those
markets, increasing the competitive pressure on the Company.
This pressure could adversely affect the Company’s market
share and financial performance and position.
The Company supplies coal as fuel to, among others, the
thermal power generation industry and, as a result, is affected
by the demand and growth of the thermal power industry.
Thermal coal as a fuel source competes, among others, with
natural gas, and the price of natural gas can therefore affect
coal sales. The natural gas market has been volatile historically
and prices in this market are subject to wide fluctuations in
response to relatively minor changes in supply and demand.
The thermal power generation industry is also affected by the
development of alternative energy sources, climate change
and global environmental factors.
Title
Exploring or mining for coal is generally illegal without a
tenement granted by the State Governments. The grant
and renewal of tenements is subject to a regulatory regime
and each tenement is subject to certain conditions. There is
no certainty that an application for grant or renewal of a
tenement will be granted at all or on satisfactory terms
or within expected timeframes. Further, the conditions
attached to tenements may change. The permitting rules
are complex and may change over time, making the title
holder’s responsibility to comply with the applicable
requirements more onerous, more costly or even impossible,
thereby precluding or impairing continuing or future mining
operations. There is a risk that the Company may lose title
to any of its granted titles if it is unable to comply with
conditions or if the land subject to the title is required for
public purposes. There is also a risk that a tenement may not
be granted from any applications for renewals of tenements or
for new tenements.
Obtaining mining tenements often involves first obtaining
consents from landholders and other third parties, some of
which may in certain circumstances have a right of veto, as
well as approvals (such as environmental approvals). There is a
risk that the requisite consents and approvals may not be able
to be obtained on time or on acceptable commercial terms, or
may not be able to be obtained at all, and consequently have
an adverse financial effect on the Company.
Native Title
It is possible that, in relation to tenements which we have an
interest in or will in the future acquire, there may be areas over
which legitimate native title rights of Aboriginal Australians
may exist. Where the grant or renewal of a tenement is in
respect of land in relation to which native title may exist, the
Company will need to comply with the Native Title Act 1993
(Cth) in order for the tenement to be validly granted.
Compliance with the Native Title Act 1993 (Cth) (and the
relevant native title process to be followed for the grant of
the tenement e.g. the right to negotiate process) may be
prolonged or delayed, and substantial compensation may be
payable as part of any agreement reached, including for the
extinguishment or impairment of the relevant native title
rights and interests.
The existence or determination of native title may, therefore,
affect the existing or future activities of the Company and
impact on its ability to develop projects which may in turn
impact its operational and financial performance.
Under the Aboriginal Land Rights Act 1983 (NSW), Aboriginal
Land Councils can claim crown land if certain requirements are
met. If a claim is successful, freehold title over the relevant land
is transferred to the claimant council. Further, Aboriginal Land
Councils are afforded certain statutory rights which can include
a requirement to enter into a compensation agreement prior to
the grant of a Mining Lease. This may delay the grant of future
mining tenements over any area of such land. Some of our
tenements are located in areas that are subject to outstanding
Aboriginal land claims, and additional Aboriginal land claims
may be made in the future over other areas in which our
tenements are located. Any such claims may result in our
ability to explore or mine for coal in these areas being subject
to the decisions of the relevant Aboriginal Land Councils,
which may adversely affect our ability to develop projects and,
consequently, our operational and financial performance.
Overlapping tenement
Some of the Company’s mines and associated tenements
adjoin or are overlapped by petroleum tenements and adjoin
other exploration interests held by third parties. Overlapping
tenements could potentially prevent, delay or increase the cost
of the future development of the Company’s projects because
the Company and the relevant petroleum exploration licence
or other exploration licence holders could potentially seek to
undertake their respective activities on the overlapping area
or the same resource seams and in some cases the overlapping
petroleum tenure holder’s consent may be required.
There is no guarantee that agreement will be reached with the
overlapping petroleum tenement holder or that agreement
will not be delayed or will be reached on terms satisfactory to
the Company. There is also a risk that if agreement cannot be
reached with overlapping tenement holders the matter may be
referred to the relevant minister or a court who may make a
decision which adversely impacts upon or prevents the project
proposed by the Company.
Enforcement and counterparty insolvency
The Company has entered into contracts which are important
to the future of its businesses including (but not limited to)
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for the provision of coal handling services, long term sales
contracts, debt facilities, long term leases, contract mining and
the provision of certain guarantees, indemnities and sureties.
Additional details relating to climate change risks will be
provided in the Company’s ESG report as published later in
the year.
Any failure by counterparties to perform those contracts may
have a material adverse effect on the Company and there can
be no assurance that it would be successful in enforcing any of
its contractual rights through legal action.
In addition, any insolvency of a counterparty to any of these
contracts may have a material adverse effect on the Company
and there can be no assurance that it would be successful in
enforcing any of its contractual rights through legal action or
recovering all monies owed by that counterparty (including
under any claim for damages).
Coal royalties
Royalties are payable to the NSW and QLD state governments
on coal produced in NSW and QLD. In both states, the royalties
are payable on an ad valorem basis as they are calculated as a
percentage of the value for which the coal is sold. The relevant
State Governments may increase these royalties or change
their method of calculation. Any impost of new royalty related
state tax or increase in royalty rates may have an adverse
effect on the Company’s financial position and/or financial
performance.
Climate change/carbon regulation
Yancoal acknowledges that it has a role to play in mitigating the
emissions generated by its operations and supporting research
into low-emission technology to assist the reduction of
downstream emissions from the consumption of coal products.
In November 2014, an agreement was announced between
the United States and China to cut greenhouse gas emissions
by more than 25% below 2005 levels by 2025. This agreement
was followed by the 2015 United Nations Climate Change
Conference, and the signing of the Paris Agreement within the
United Nationals Framework Convention on Climate Change.
The Paris Agreement was signed by representatives from
195 countries, and aims to hold back the increase in global
temperatures, increase the ability of countries to adapt to the
adverse impacts of climate change and provide channels to
finance projects that lead to greenhouse gas reductions.
The Company is also subject to a spectrum of climate-related
risks. These include physical and non-physical impacts with
the potential to affect the Company’s future development,
operations, markets and asset carrying values. Factors include
(but are not limited to) extreme weather events, fires, access
to water, power supply and the regulatory response to the risk
of climate change. Unilateral and collective action by Australia
and other countries, may affect demand for coal, coal prices,
the future supply of coal and the competitiveness of the
Company’s products in the world energy market. Extensive
government regulations relating to climate change impose
costs on the mining operations of the Company, and future
regulations could increase those costs, limit the Company’s
ability to produce and sell coal, or reduce demand for the
Company’s coal products. In recent years, China has also taken
steps to address severe air pollution in many Chinese cities
by adopting a range of policies to lower carbon emissions and
reduce coal usage.
Environmental activism
The Company recognises the growing interest by stakeholders
regarding the potential risks and opportunities posed to our
business and the broader sector as a result of an anticipated
global shift towards a lower-carbon economy. Increased
community concern and adverse actions taken by community
and environmental groups may delay or prevent the Company
from progressing new mine developments or development or
expansion of existing mines, or may mean that those mines are
subject to conditions that adversely affect their profitability
and consequently the financial performance of the Company.
Environmental lobby groups in both QLD and NSW have
previously made submissions opposing both operation and
expansion of coal mines in an attempt to prevent new mine
developments or expansion of existing mines on the basis of
environmental concerns.
Technological change
Thermal coal as a source of energy competes with other
forms of electricity generation (such as hydro, solar and wind).
In recent years, the global shift from conventional fuels to
renewable sources of energy has created greater competition
for thermal coal in the market which could lead to a structural
decline in thermal coal demand.
As renewable technologies become more efficient and cost
effective, they may gain an economic advantage over coal-
fired and other fossil fuel-based electricity generation. These
economic factors, combined with increasing costs to comply
with emission limits for other air pollutants, may result in the
continued retirement of existing coal-powered generation
capacity, and the cancellation of planned additional coal-fired
power capacity, which may reduce demand for thermal coal in
the market.
There is also a risk of the Company not keeping up with
technology advancements which could affect its future
competitiveness.
Technology/cyber
The Company’s business relies on the performance, reliability
and availability of its information technology systems
including (custom) software. Information and operating
technology may be subject to international cyber security
threats. Breaches could result in (but are not limited to) safety
exposures, the loss of sensitive data / information, unplanned
outage of business-critical system, environmental damage
and misappropriation of company funds. The Company’s
information technology infrastructure in general may also
be adversely affected by factors such as server damage,
equipment faults, power failure, computer viruses, misuse
by employees or contractors, telecommunications failures,
external malicious intervention such as hacking, terrorism,
fire, natural disasters, or weather interventions. Such events
are largely beyond the Company’s control, and may affect its
ability to carry on our operations efficiently.
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Key personnel
A number of key personnel are important to attaining the
business goals of the Company. One or more of these key
employees could leave their employment or cease to actively
participate in the management of the Company and this may
adversely affect the ability of the Company to conduct its
business and, accordingly, affect its financial performance and
its share price. There may be a limited number of persons with
the requisite experience and skills to serve in the Company’s
senior management positions if existing management leave
the Company. If the Company cannot attract, train and retain
qualified managers, and other personnel, the Company may
be unable to successfully manage its growth or otherwise
compete effectively in the Australian coal industry.
The Company is also dependent on attracting qualified
technical employees to provide services in relation to
certain of its coal and other mining operations. Coal mining is
a labour-intensive industry. The Company’s future success will
depend greatly on its and its mining contractors’ continued
ability to attract and retain skilled and qualified personnel on
economic terms.
Fraud and misconduct
Any fraud, misrepresentation, money laundering or other
misconduct by the Company’s employees, customers, service
providers, business partners or other third parties could result
in violations of relevant laws and regulations by the Company
and subject the Company to corresponding regulatory
sanctions. These unlawful activities and other misconduct may
have occurred in the past and may occur in the future, and may
result in civil and criminal liability under increasingly stringent
laws or cause serious reputational or financial harm to the
Company. The Company may not be able to timely detect or
prevent such activities, which could subject the Company to
regulatory investigations and criminal and civil liability, harm
our reputation and have a material adverse effect on the
Company’s business, financial condition, results of operations
and prospects.
Changes in government policy, regulation or legislation
The Company is subject to extensive legislation, regulations
and supervision by a number of federal and state regulatory
organisations.
Any future legislation and regulatory change may affect the
resources industry and may adversely affect the Company’s
financial performance and position, such as future laws that
may limit the emission of greenhouse gases or the use of coal
in power generation.
Environment and planning
In recent years, state government policies of NSW and QLD
have been introduced in the interests of protecting agricultural
and urban land from the effects of mining. These include the
QLD Government’s Central Queensland Plan and Regional
Planning Interests Act and the NSW Government’s Strategic
Regional Land Use Policy, Aquifer Interference Policy, and
2013 amendments to the State Environmental Planning Policy
(Mining, Petroleum Production and Extractive Industries)
2007. Each of these policies is relevant to the areas in which
the Company has mining operations. Accordingly, there is
no assurance that the future development and exploration
activities of the Company will result in profitable or
commercially viable mining operations in these areas.
In 2013, the NSW State Government introduced the fit and
proper person consideration in making decisions about mining
rights including the grant, transfer, renewal, cancellation and
suspension of such rights. This allows the Government to
consider a miner’s conduct (in particular its compliance with
environmental and mining legislation), as well as a miner’s
financial capabilities and technical expertise. In recent years,
the NSW State Government has also significantly increased the
maximum penalties for breaches of mining and environmental
legislation, and the resources of regulators to investigate
possible breaches and prosecute mining companies.
These changes have resulted in the updating of compliance
programs, and increased the risk of prosecution for breaches
of relevant legislation.
In 2018, the QLD State Government revised the process by
which mining companies are required to calculate and provide
security for their rehabilitation liability. Over the next 3 years,
companies are being required to transition to a risk- based
security mechanism whereby operations assessed as being
higher risk will be required to provide a greater amount of
security. Further, mines in both NSW and Queensland are
being held to a more rigorous progressive rehabilitation and
mine closure regime.
Litigation
Like all companies in the resources sector, the Company is
exposed to the risks of litigation (either as the complainant or
as the defendant), which may have a material adverse effect
on the financial position of the relevant entity. The Company
could become exposed to claims or litigation by persons
alleging they are owed fees or other contractual entitlements,
employees, regulators, competitors or other third parties.
Such claims or proceedings could divert our management’s
time and attention and consume financial resources in their
defence or prosecution.
Insurance
The Company has insurance coverage for certain operating
risks. However, it may become subject to liability (including in
relation to pollution, occupational illnesses or other hazards),
or suffer loss resulting from business interruption, for which it
is not insured (or has not sufficiently insured) or cannot insure,
including liabilities in respect of past activities.
Should a major uninsured loss be suffered, future financial
performance could be materially adversely affected.
In addition, insurance may not be available or continue
to be available at economically acceptable premiums. As
a result, the insurance coverage may not cover the scope
and extent of claims against the Company or losses it may
incur, including, but not limited to, claims for environmental
or industrial accidents, occupational illnesses, pollution
and product liability, war, terrorism, major equipment and
business interruption.
To the extent a successful claim against the Company
proceeds, it may have a material adverse effect on its financial
position.
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Exploration and development
The Company’s existing coal reserves will decline as mining
continues. Therefore, the Company’s growth and long-term
success will depend on its ability to acquire additional coal
resources within its exploration areas and to convert such coal
resources into economically recoverable coal reserves.
There are several risks relating to coal mining exploration and
development which are common to the industry and which,
if realised, have the capacity to affect operations, production,
cash flow and financial performance of the Company.
Development and exploration activities may be affected
by factors beyond the control of the Company, including
geological conditions, seismic activity, mineralisation,
consistency and predictability of coal grades, changes to law,
changes to the regulatory framework applying to mining,
overlapping resources tenure, and the rights of indigenous
people on whose land exploration activities are undertaken.
Any discovery of a coal deposit does not guarantee that the
mining of that deposit would be commercially viable, with the
size of the deposit, development and operating costs, land
ownership, coal prices and recovery rates all being key factors
in determining commercial viability.
Issues that arise during development, construction and mine
start-up may result in increased costs, delayed commencement
of coal production, delayed receipt of coal revenue or coal
production not commencing at all. These problems may
include delays in obtaining approvals (including land use
approvals) or in the construction of mine infrastructure.
There are many milestones which need to be met in a timely
fashion for production to commence on any projects currently
in the pre-development or development stages.
The Company may also be exposed to risks including risks of
default associated with managing contractual relationships
with participants in any of the development or exploration
joint ventures or other contractual relationships to which it is,
or may become, a party.
Transport and infrastructure
Coal produced from the Company’s mining operations is
transported to customers by a combination of road, rail and
sea. Fluctuations in transportation costs and disruptions to
our railway and port linkages could disrupt the Company’s coal
deliveries and adversely affect its business, financial condition
and results of operations.
A number of factors could disrupt or restrict access to
essential coal transportation and handling services, including
(but not limited to) weather related problems, key equipment
and infrastructure failures, rail or port capacity constraints,
congestions and inter-system losses, industrial action, failure
to obtain consents from third parties for access to rail or land,
failure or delay in the construction of new rail or part capacity,
failure to meet contractual requirements, terrorist attacks,
breach of regulatory framework, mismatch of rail and port
capacity or the possible sale of infrastructure. Each of these
factors could impair the Company’s ability to supply coal to
customers and/or increase costs, and consequently may have
a material adverse effect on the Company’s financial position.
Significant increases in transport costs (such as emissions
control requirements and fluctuations in the price of diesel
fuel and demurrage) could make the Company’s coal less
competitive when compared to other fuels or coal produced
from other regions.
Environment
Due to the nature of coal mining processes, and the associated
by-products, residues and tailings generated from these
processes, all operations of the Company are subject to
stringent environmental laws and regulations.
There is a risk that past, present or future operations have
not met or will not meet environmental or related regulatory
requirements and/or that the approvals or modifications the
Company is currently seeking, or may need to seek in the
future, will not be granted. If the Company is unsuccessful
in these efforts or otherwise breaches these environmental
requirements, it may incur fines or penalties, be required to
curtail or cease operations and/or be subject to increased
compliance costs or costs for rehabilitation or rectification
works, which have not been previously planned at one or more
of its sites.
Extensive environmental regulations in Australia, and in other
countries that could affect the Company’s business, may
impose costs on its mining operations, and future regulations
could increase those costs, limit its ability to produce and sell
coal, or reduce demand for the Company’s our coal products.
In particular, the regulatory response to the risk of climate
change, including unilateral and collective action by Australia
and other countries, may affect demand for coal, coal prices
and the competitiveness of the Company’s products in the
world energy market in the medium to long term.
Changes in and future environmental regulations could
increase the standards and costs of compliance, and adversely
affect the Company’s ability to generate the expected
economic returns from its mining assets over their useful lives.
The Company may not always be able to comply with future
laws and regulations in relation to environmental protection
economically or at all. There can be no assurance that the
Company will be able to fully and economically utilise the
entire coal resources of the mines it operates currently or in
the future or that some of its mining assets will not become
“stranded assets” that are not able to generate the expected
economic returns over their useful lives.
Environmental legislation may change in a manner that
may require compliance with additional standards, and a
heightened degree of responsibility for companies and their
Directors and employees. There may also be unforeseen
environmental liabilities resulting from coal related activities,
which may be costly to remedy. In particular, the acceptable
level of pollution and the potential abandonment costs and
obligations for which the Company may become liable as a
result of its activities may be impossible to assess under the
current legal framework.
Impairment
The Company’s balance sheet includes a number of assets that
are subject to impairment risk, including mining tenements,
exploration and evaluation assets, goodwill, the Middlemount
98
YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
loan and royalty receivable, the Watagan loan receivable and
investments accounted for using the equity method.
The value of these assets is derived from the fundamental
valuation of the underlying mining operations and as such
is subject to many of the risks including, but not limited to,
coal price and demand, foreign exchange, coal production,
estimates of reserves and resources, uncertainty in costs
forecasts, operating risks, injury and mine closure.
Adverse changes in these risk factors could lead to a reduction
in the valuation of the Company’s assets and result in an
impairment charge being recognised.
Internal audit function
The internal audit function is managed by the EGM of Risk
and Audit. That person has direct access to the Chair of the
Audit and Risk Management Committee, as well as to the
CEC, to whom he directly reports. The CEC and the Audit and
Risk Management Committee recommends to the Board the
appointment of the EGM of Risk and Audit.
The EGM of Risk and Audit has unfettered access to the
Audit and Risk Management Committee and its Chair to seek
information and explanations. The Chair of the Audit and Risk
Management Committee meets independently with the EGM
of Risk and Audit.
The role of the EGM of Risk and Audit includes achievement
of the internal audit objectives, risk management policies and
insurance strategy.
An annual program for internal audit and risk assurance is
provided to the Audit and Risk Management Committee
for approval. The annual Internal Audit program is focused
on key operating risks and processes control design and
operating effectiveness.
The program includes a review of compliance with the
obligations imposed by the General Rules on Internal
Control for Enterprises and the Supporting Guidelines of
Internal Control for Enterprises, jointly issued by five Chinese
ministries.
Periodical status reports on the execution of the plan,
including current findings and actions are provided to the
Audit and Risk Management Committee. This includes key
issues and subsequently corrective actions are monitored,
reviewed and reported. Any material findings are reported
to the Board.
Health, Safety and Environment Compliance
The Company has adopted policies to comply with
occupational health, safety, environment and other laws.
The Board has a Health, Safety and Environment Policy in place
since May 2016 which applies across the Company. In addition,
each mine site has its own health, safety and environmental
policies and procedures to deal with their particular health,
safety and environmental issues. The Board has established
a Health, Safety, Environment and Community Committee
to assist it in overseeing the Company’s health, safety and
environmental responsibilities. In accordance with its charter,
this committee has a minimum of at least three members.
The current members of this committee are David Moult (Chair
of the committee), Geoffrey Raby, Fuqi Wang and Fucun Wang.
It is intended the committee meets at least four times per
year, or as frequently as required. The committee meetings are
held at one of the Company’s mine sites, whenever possible,
to receive feedback from the health, safety and environment
forum held at the mine site and to address any mine specific
health, safety and environment issues.
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY
Nomination and Remuneration Committee
The Board has established a Nomination and Remuneration
Committee. In accordance with its charter, this committee
currently has 5 members, Helen Gillies (Chair of the
committee), Xiangqian Wu, Gregory Fletcher, Baocai
Zhang and David Moult. Three of the members of the
committee, including the Chair of the committee, are
independent Directors of the Company, in line with the
ASX Recommendations. The Nomination and Remuneration
Committee Charter can be found within the Corporate
Governance section of the Company’s website.
The committee makes recommendations to the Board to
achieve Company remuneration structures that are equitable
and aligned with the long-term interests of the Company and
its shareholders, to attract and retain skilled employees, to
structure short and long term incentives that are challenging
and linked to creation of sustainable returns and to ensure any
termination benefits are justifiable and appropriate.
In 2018, the committee engaged consulting firm Aon Hewitt
(“Aon”) to provide independent market benchmarking and
recommendations with respect to the remuneration of Yancoal
Executives and Non-Executive Directors. The Board adopted
the recommendations in May 2018. Given this review in
2018 and the subsequent implementation of remuneration
recommendations, no further changes to the remuneration
framework for Executives or Non- executive Directors was
made in 2019.
The committee has the necessary power and resources to
meet its responsibilities under its charter, including rights of
access to management, auditors and external advisers. It is
intended that the committee will meet at least once per year,
or as frequently as required.
The number of times the committee met throughout the
period and the individual attendances of the committee
members at those meetings is disclosed in the Directors’
Report, on page 53.
Remuneration of Non-Executive Directors
The Constitution provides that the Non-Executive Directors are
entitled to such remuneration as approved by the Company’s
shareholders in accordance with the Constitution, which must
not exceed the aggregate annual amount as determined by
the Company in general meeting or by its major shareholder,
Yanzhou.
Remuneration for Non-Executive Directors is capped at an
aggregate amount for each financial year of $3.5 million.
Non- Executive Directors may also be paid such additional or
special remuneration as the Directors decide is appropriate
where a Non-Executive Director performs extra services or
makes special exertions for the benefit of the Company. Such
99
YANCOAL ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
additional remuneration will not form part of the calculation
of the aggregate cap on Non-Executive Directors’
remuneration for a financial year and do not require
shareholder approval. No Director is involved in determining
his or her own remuneration.
Further details of the remuneration of the Non-Executive
Directors, Executive Directors and senior Executives can be
found in the Remuneration Report on pages 54 to 66.
Dealings in Company securities
By law, and under the Company’s Insider Trading Policy, dealing
in Company securities is subject to the overriding prohibition
on trading while in possession of inside information.
In addition, the Company’s Share Trading Policy prohibits
dealing in Company securities or Yanzhou securities by
Directors, senior Executives and other relevant employees, as
well as their closely related parties, during specified blackout
periods each year. General employees are permitted to
deal in Company securities outside these blackout periods,
however additional approval requirements apply to Directors,
the CEO and the CFO. The Share Trading Policy precludes
relevant employees from entering into any hedge or derivative
transactions relating to unvested options or share rights
granted to them under incentive plans and securities that
are subject to holding locks or restrictions on dealing under
such plans. There are also restrictions that apply to relevant
employees from entering into margin lending arrangements
and short-term trading of the Company’s securities. Breaches
of the policy are treated seriously and may lead to disciplinary
action, including dismissal.
The Company’s share trading policy was revised in October
2018 with the requirements set out in the Model Code for
Securities Transactions by Directors of Listed Issuers (the
“Model Code”) as set out in Appendix 10 of the HK Listing
Rules to regulate the Directors’ securities transactions,
which is also applicable to its employees who are likely to be
in possession of unpublished inside information. Such policy
was subsequently amended in December 2019.
Specific enquiry has been made of all the Directors and
they have each confirmed that they have complied with the
Company’s share trading policy and insider trading policy
(which is more stringent than the Model Code) for the period
1 January 2019 to 31 December 2019.
Copies of the Company’s Share Trading Policy and Insider
Trading Policy are available on the Corporate Governance
section of the Company’s website.
This Corporate Governance Statement has been approved by
the Board and is current as at 28 February 2020.
100
YANCOAL ANNUAL REPORT 2019
Revenue
Other income
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefits
Depreciation and amortisation
Transportation
Contractual services and plant hire
Government royalties
Coal purchases
Other operating expenses
Finance costs
Share of profit of equity-accounted investees, net of tax
Profit before income tax
Income tax expense
Profit after income tax
Profit is attributable to:
Owners of Yancoal Australia
Non-controlling interests
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Cash flow hedges:
Fair value losses
Fair value losses transferred to profit and loss
Deferred income tax (expense) / benefit
Other comprehensive income, net of tax
Total comprehensive income
Total comprehensive income for the year is attributable to:
Owners of Yancoal Australia Ltd
Non-controlling interests
Profit per share attributable to the ordinary equity holders of the Company:
Basic profit per share (cents per share)
Diluted profit per share (cents per share)
31 DECEMBER
2019
$M
4,460
31 DECEMBER
2018
$M
4,850
101
39
(707)
(525)
(607)
(562)
(388)
(310)
(332)
(145)
(233)
(24)
767
(48)
719
719
–
719
(15)
190
(53)
122
841
841
–
841
54.5
54.4
150
31
(669)
(518)
(523)
(537)
(418)
(347)
(332)
(278)
(293)
56
1,172
(320)
852
852
–
852
(443)
160
85
(198)
654
654
–
654
67.6
67.6
NOTES
B2
B3
B4
B5
B5
E2
B6
D7
D7
D7
B7
B7
These financial statements should be read in conjunction with the accompanying notes.
101
YANCOAL ANNUAL REPORT 2019CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMECONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2019
31 DECEMBER
2019
$M
NOTES
31 DECEMBER
2018
$M
(RESTATED)
C7
C8
C9
C10
D3
D3
C13
C8
C1
C2
C4
C5
B6
D1
C10
D3
E2
C11
D2
C12
D3
C11
D2
B6
C12
D3
D4
D7
962
453
261
21
1
4
45
26
1,773
282
2,940
4,047
555
97
–
901
205
4
273
16
9,320
11,093
802
1,267
–
30
13
2,112
4
2,231
11
558
14
–
2,818
4,930
6,163
6,482
(484)
163
6,161
2
6,163
1,031
552
226
28
–
7
57
21
1,922
292
2,939
4,218
563
97
33
835
165
8
307
–
9,457
11,379
840
13
1
34
25
913
–
4,111
–
488
27
2
4,628
5,541
5,838
6,482
(604)
(42)
5,836
2
5,838
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Royalty receivable
Derivative financial instruments
Non-contingent royalty receivable
Asset classified as held for sale
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Mining tenements
Exploration and evaluation assets
Intangible assets
Deferred tax assets
Interest-bearing loan to associate
Royalty receivable
Non-contingent royalty receivable
Investments accounted for using the equity method
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Interest-bearing liabilities
Current tax liabilities
Provisions
Non-contingent royalty payable
Total current liabilities
Non-current liabilities
Trade and other payables
Interest-bearing liabilities
Deferred tax liabilities
Provisions
Non-contingent royalty payable
Deferred income
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings / (accumulated losses)
Capital and reserves attributable to owners of Yancoal Australia Ltd
Non-controlling interests
Total equity
These financial statements should be read in conjunction with the accompanying notes.
102
YANCOAL ANNUAL REPORT 2019CONSOLIDATED BALANCE SHEETCONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2019 ATTRIBUTABLE TO OWNERS OF YANCOAL AUSTRALIA LTD
CONTRIBUTED
EQUITY
$M
6,217
NOTES
D7
RESERVES
$M
(413)
RETAINED
EARNINGS/
(ACCUMULATED
LOSSES)
$M
(781)
Balance at 1 January 2018
Opening balance adjustment on adoption
of AASB 9
Balance at 1 January 2018
Profit after income tax
Other comprehensive expense
Total comprehensive income
Transactions with owners in their
capacity as owners:
Issuance of new ordinary shares
Dividends paid
Subordinated capital notes redeemed on
conversion
Movements in other reserves
Acquisition of minority interest
Balance at 31 December 2018
Balance at 1 January 2019
Profit after income tax
Other comprehensive income
Total comprehensive income
Transactions with owners in their
capacity as owners:
Dividends paid
Movements in other reserves
–
6,217
–
–
–
266
–
(1)
–
–
265
6,482
6,482
–
–
–
–
–
–
–
(413)
–
(198)
(198)
–
–
–
7
–
7
(604)
(604)
–
122
122
–
(2)
(2)
D4
D4
D6
Balance at 31 December 2019
6,482
(484)
NON-
CONTROLLING
INTERESTS
$M
3
TOTAL EQUITY
$M
5,026
–
3
–
–
–
–
–
–
–
(1)
(1)
2
2
–
–
–
–
–
–
2
17
5,043
852
(198)
654
266
(130)
(1)
7
(1)
141
5,838
5,838
719
122
841
(514)
(2)
(516)
6,163
TOTAL
$M
5,023
17
5,040
852
(198)
654
266
(130)
(1)
7
–
142
5,836
5,836
719
122
841
(514)
(2)
(516)
6,161
17
(764)
852
–
852
–
(130)
–
–
–
(130)
(42)
(42)
719
–
719
(514)
–
(514)
163
These financial statements should be read in conjunction with the accompanying notes.
103
YANCOAL ANNUAL REPORT 2019CONSOLIDATED STATEMENT OF CHANGES IN EQUITYCONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest paid
Interest received
Transaction costs paid
Stamp duty paid
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
NOTES
4,651
(2,950)
(231)
91
(9)
(4)
4,847
(2,896)
(236)
96
(34)
(30)
Net cash inflow from operating activities
F3
1,548
1,747
Cash flows from investing activities
Payments for property, plant and equipment
Payments for capitalised exploration and evaluation activities
Proceeds from sale of property, plant and equipment
Receipts of non-contingent royalties
Payment of non-contingent royalties
Payments for acquisition of interest in joint ventures and subsidiaries (net of cash acquired)
E1
Proceeds from disposal of interest in joint venture and subsidiaries (net of cash disposed)
Repayment of loan from joint venture
Advances of borrowing from joint venture
Repayment of borrowings from associates
Advance of borrowings to associates
Dividends received
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of interest bearing liabilities
Proceeds from interest-bearing liabilities
Repayment of interest bearing liabilities - related entities
Receipts from promissory note
Payment of lease liabilities
Proceeds from issues of shares and other equity securities
Transaction costs paid
Dividends paid
Payment for treasury shares
Net cash outflow from financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
D4
C7
(282)
(3)
15
8
(28)
(42)
–
21
(25)
227
(293)
10
(392)
(349)
–
(349)
40
(37)
–
–
(514)
–
(1,209)
(53)
1,031
(16)
962
(194)
(4)
5
75
(119)
(353)
524
117
–
254
(377)
17
(55)
(1,250)
411
(175)
–
(20)
268
(2)
(130)
(6)
(904)
788
207
36
1,031
These financial statements should be read in conjunction with the accompanying notes.
104
YANCOAL ANNUAL REPORT 2019CONSOLIDATED STATEMENT OF CASH FLOWS CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019
A
B
B1
B2
B3
B4
B5
B6
B7
C
C1
C2
C3
C4
C5
C6
C7
C8
C9
C10
C11
C12
C13
D
D1
D2
D3
D4
D5
D6
D7
D8
D9
E
E1
E2
E3
E4
E5
E6
F
F1
F2
F3
F4
F5
F6
F7
F8
Basis of Preparation
Performance
Segment information
Revenue
Other income
Employee benefits
Expenses
Taxation
Earnings per share
Operating Assets and Liabilities
Property, plant and equipment
Mining tenements
Impairment of long life assets
Exploration and evaluation assets
Intangibles
Leases
Cash and cash equivalents
Trade and other receivables
Inventories
Royalty receivable
Trade and other payables
Provisions
Asset classified as held for sale
Capital Structure and Financing
Interest-bearing loan to associate
Interest-bearing liabilities
Non-contingent royalty
Contributed equity
Share-based payments
Dividends
Reserves
Contingencies
Financial risk management
Group Structure
Business combinations and disposals
Interests in other entities
Related party transactions
Parent entity financial information
Controlling interests
Deed of cross guarantee
Other Information
Commitments
Remuneration of auditors
Reconciliation of profit after income tax to net cash inflow from operating activities
Historical information
Events occurring after the reporting period
Other significant accounting policies
New and amended standards adopted by the Group
New accounting standards and interpretations
PAGE
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114
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118
118
120
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130
132
132
132
134
136
136
138
139
140
141
142
149
149
150
156
160
160
163
165
165
165
166
166
167
167
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173
105
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 A BASIS OF PREPARATION
These consolidated financial statements and notes are
for the consolidated entity consisting of Yancoal Australia
Ltd (“Company” or “parent entity”) and its subsidiaries
(“the Group”).
These general purpose financial statements have been
prepared in accordance with the Australian Accounting
Standards and interpretations issued by the Australian
Accounting Standards Board and the Corporations Act 2001.
Yancoal Australia Ltd is a for-profit entity for the purpose of
preparing the financial statements.
The financial statements were authorised for issue
in accordance with a resolution of the Directors on
28 February 2020.
(i) Compliance with IFRS
The consolidated financial statements of the Group also
comply with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards
Board (“IASB”).
(ii) Subsidiaries
The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its
power over the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The acquisition method of accounting is used to account
for business combinations by the Group. Intercompany
transactions, balances and unrealised gains on transactions
between the Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries are aligned to ensure
consistency with the policies adopted by the Group.
(iii) Significant accounting policies
Significant accounting policies have been included in the
relevant notes to which the policies relate, and other
significant accounting policies are discussed in Note F6.
These policies have been consistently applied to all the years
presented, unless otherwise stated.
(iv) Historical cost convention
These financial statements have been prepared on an accrual
basis and under the historical cost convention, as modified
by the revaluation of financial assets and liabilities (including
derivative instruments) at fair value through profit or loss.
(v) Restated deferred tax comparative figures
As required by the accounting standards deferred tax assets
and liabilities shall be offset when an entity has a legally
enforceable right to offset tax liabilities and assets. The Group
has offset deferred tax asset and liabilities as at 1 January 2019
and restated the comparative balances as at 31 December
2018. The restatement at 31 December 2018 has resulted in
deferred tax liabilities of $1,029 million being offset against
deferred tax assets of $1,062 million resulting in a net deferred
tax asset balance of $33 million. This has reduced both the
non-current asset and non-current liability balances by
$1,029 million. There has been no adjustment to the Group’s
net asset position as at 31 December 2018 or to the profit or
loss for the period ending 31 December 2018.
(vi) Auditor sign-off – unqualified and unmodified
The independent auditor’s report of these consolidated
financial statements is unqualified and unmodified.
(vii) Rounding of amounts
The Company is of a kind referred to in ASIC Legislative
Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to the ‘rounding off’ of
amounts in the financial statements. Amounts in the financial
statements have been rounded off in accordance with that
legislative instrument to the nearest million dollars, or in
certain cases, the nearest dollar.
(viii) New and amended standards adopted by the Group
Effective from 1 January 2019 the Group adopted new
standards including AASB 16 Leases. Refer to Note F7
for details.
(ix) Impact of standards issued but not yet applied by
the Group
Australian Accounting Standards and Interpretations issued
but not yet applicable for the year ended 31 December 2019
that have not been applied by the Group are disclosed in
Note F8.
(x) Early adoption of standards
Certain new accounting standards and interpretations have
been published that are not mandatory for 31 December 2019
reporting periods and have not been early adopted by the
Group. The Group’s assessment of the impact of these new
standards and interpretations is set out in Note F8.
(xi) Critical accounting estimates and judgements
The preparation of financial statements requires the use of
certain critical accounting estimates and judgements that
involve a higher degree of judgement or complexity. It also
requires management to exercise its judgement in the process
of applying the Group’s accounting policies.
106
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 B PERFORMANCE
This section of the financial statements focuses on disclosure
that enhances a user’s understanding of profit after tax.
Segment reporting provides a breakdown of profit, revenue
and assets by geographic segment. The key line items of the
profit or loss along with their components provide details
behind the reported balances.
B1 Segment information
Accounting Policy
Management has determined the operating segments
based on the strategic direction and organisational
structure of the Group together with reports reviewed by
the Chief Operating Decision Makers (“CODM”), defined as
the Executive Committee, that are used to make strategic
decisions including resource allocation and assessment of
segment performance.
The reportable segments are considered at a regional level
being New South Wales (“NSW”) and Queensland (“QLD”).
Non-operating items of the Group are presented under
the segment “Corporate” which includes administrative
expenses, foreign exchange gains and losses recycled
from hedge reserve, and the elimination of intersegment
transactions and other consolidation adjustments.
The Directors evaluate estimates and judgements incorporated
into these financial statements based on historical knowledge
and best available current information. Estimates assume a
reasonable expectation of future events and are based on
current trends and economic data, obtained both externally
and within the Company.
The resulting accounting estimates will, by definition, seldom
equal the related actual results.
Details of critical accounting estimates and judgements can be
found in the notes to which they relate and include:
Taxation
Mining tenements
Impairment of assets
Exploration and evaluation assets
Royalty receivable
Provisions
Note B6
Note C2
Note C3
Note C4
Note C9
Note C11
Interest bearing loan to associate (impairment)
Note D1
Business combinations and disposals
Interest in other entities
(Control of Watagan, impairment)
Note E1
Note E2
(xii) Current net asset deficiency
The current net asset deficiency position of the Group as
at 31 December 2019 is $339 million (31 December 2018:
$1,009 million current net asset position). The factors
that contributed to the current net asset deficiency
position include:
a. an interest-bearing liability of $1,267 million has been
b.
c.
re-classified to current during the year due to a repayment
expected in the year ending 31 December 2020;
excluding the impact of the above reclassification, the
Group has current net assets of $928 million; and
the Group has continued to generate cash inflows from
operating activities in the current year of $1,548 million
(31 December 2018: $1,747 million).
The Directors continually monitor the Group’s working capital
position including forecast working capital requirements in
light of the Group’s existing debt facilities and available cash
reserves and are satisfied that the Group will be able to pay its
debts as and when they fall due for a period of 12 months from
the date of the financial report.
107
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (a) Segment information
The segment information for the reportable segments for the year ended 31 December 2019 is as follows:
COAL MINING
31 DECEMBER 2019
Total segment revenue*
Add: Fair value losses recycled from hedge reserve
Revenue from external customers
Operating EBIT
Operating EBITDA
Material income or expense items
Non-cash items
Depreciation and amortisation
Arbitration award including interest
Remeasurement of contingent royalty
Remeasurement of royalty receivable
Total capital expenditure
Segment assets
Investment in associate and joint ventures
Derivative financial instruments
Total assets
NSW
$M
3,917
–
3,917
1,063
1,623
(560)
–
–
–
(560)
360
8,770
184
–
8,954
QLD
$M
448
–
448
26
66
(40)
–
–
–
(40)
16
670
–
–
670
CORPORATE
$M
(190)
190
–
(61)
(54)
(7)
56
12
32
93
4
1,379
89
1
TOTAL
$M
4,175
190
4,365
1,028
1,635
(607)
56
12
32
(507)
380
10,819
273
1
1,469
11,093
The segment information for the reportable segments for the year ended 31 December 2018 is as follows:
COAL MINING
31 DECEMBER 2018
Total segment revenue*
Add: Fair value losses recycled from hedge reserve
Revenue from external customers
Operating EBIT
Operating EBITDA
Material income or expense items
Non-cash items
Depreciation and amortisation expense
Remeasurement of royalty receivable
Gain on disposal of joint operation and subsidiaries
Transaction costs
Stamp duty accrued
Impairment of financial assets
Remeasurement of financial assets
Cash items
Transaction costs
Stamp duty paid
Total capital expenditure
Segment assets (restated)
Investment in associate and joint ventures
Total assets
NSW
$M
4,294
–
4,294
1,698
2,183
QLD
$M
446
–
446
95
127
(483)
(33)
–
–
–
–
–
–
–
–
–
–
–
–
(483)
(33)
–
–
–
200
8,921
191
9,112
–
–
–
10
727
–
727
CORPORATE
$M
(160)
160
–
(136)
(130)
(7)
4
78
(11)
4
(21)
(29)
18
(18)
(30)
(48)
–
TOTAL
$M
4,580
160
4,740
1,657
2,180
(523)
4
78
(11)
4
(21)
(29)
(498)
(18)
(30)
(48)
210
1,424
116
1,540
11,072
307
11,379
*
Total segment revenue consists of revenue from the sale of coal whereas revenue disclosed in the profit or loss also includes other revenue such as
management fees, sea freight, rents and sub-lease rentals, interest income, dividend income and royalty income. Refer to Note B1(b) below.
There was no impairment charge or other significant non-cash items recognised during the year ended 31 December 2019 and
31 December 2018 other than those disclosed above.
108
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (b) Other segment information
(i) Segment revenue
Sales between segments are carried out at arm’s length and are eliminated on consolidation. The revenue from external parties
for the reportable segments are measured in a manner consistent with that in the profit and loss.
Revenue from external customers are derived from the sale of coal from operating mines and coal purchases. Segment revenues
are allocated based on the country in which the customer is located. Refer to Note B2 for revenue from external customers split
by geographical region.
Revenues from the top five external customers were $1,876 million (2018: $1,644 million) which in aggregate represent
approximately 37% (2018: 35%) of the Group’s revenues from the sale of coal. These revenues were attributable to the NSW
and Queensland coal mining segments.
Segment revenue reconciles to total revenue as follows:
Total segment revenue
Interest income
Mining services fees
Sea freight
Other revenue
Total revenue (refer to Note B2)
31 DECEMBER
2019
$M
4,175
31 DECEMBER
2018
$M
4,580
125
43
83
34
119
46
66
39
4,460
4,850
(ii) Operating EBITDA
The Executive Committee assesses the performance of the operating segments based on a measure of Operating EBITDA.
This measure excludes the effects of non-recurring expenditure from the operating segments such as restructuring costs,
business combination related expenses and significant impairments of cash-generating units. Furthermore, the measure excludes
the effects of fair value re-measurements and foreign exchange gains/(losses) on interest-bearing liabilities. Interest income
and expense are not allocated to the NSW and QLD segments, as this type of activity is driven by the corporate function, which
manages the cash position of the Group.
A reconciliation of Operating EBITDA to profit before income tax from continuing operations is provided as follows:
Operating EBITDA
Depreciation and amortisation
Operating EBIT
Interest Income
Finance costs
Bank fees and other charges
Arbitration award
Gain on disposal of interest in joint operation and subsidiaries
Stamp duty
Fair value losses recycled from hedge reserve – USD loans
Transaction costs
Remeasurement of financial assets
Remeasurement of contingent royalty
Impairment of financial assets
Remeasurement of royalty receivable
Profit before income tax from continuing operations
31 DECEMBER
2019
$M
1,635
31 DECEMBER
2018
$M
2,180
(607)
1,028
125
(233)
(56)
49
–
–
(190)
–
–
12
–
32
767
(523)
1,657
119
(293)
(96)
–
78
(25)
(160)
(29)
(29)
(33)
(21)
4
1,172
109
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (iii) Segment capitalised expenditure
Amounts with respect to capital expenditure are measured in a manner consistent with that of the financial statements.
Reportable segment’s capital expenditure is set out in Note B1(a).
All segment assets are located in Australia.
(iv) Segment liabilities
A measure of total liabilities for reportable segments are not provided to the Executive Committee. The Executive Committee
reviews the liabilities of the Group at a consolidated level.
B2 Revenue
Accounting Policies
(a) Sales revenue
i. Sale of coal
The Group produces and sells a range of thermal and metallurgical coal products. Revenue from the sale of coal is recognised
when control of the product has transferred to the customer usually when loaded onto the vessel, or Free On Board (“FOB”).
Some contracts include sea freight services which is accounted for as a separate performance obligation. On occasion revenue
is recognised as the vessel pulls into harbour on a Free Alongside Ship (“FAS”) basis. A receivable is recognised when control
of the products is delivered as this is the point in time that the consideration is unconditional and only the passage of time
is required before the payment is due. Payment is usually due within 21 days of the date when control of the product is
transferred to the customer.
Some of the Group’s coal sales contracts are long-term supply agreements which stipulate the annual quantity and contain
a price negotiation mechanism. The initial transaction price is the market price prevailing at the time of the future shipment.
As the future market price for coal is highly susceptible to factors outside the Group’s influence, the transaction price for a
shipment is not readily determinable until or nearing the time of the shipment.
As a result, the Group has concluded that a contract with the customer does not exist for those shipments.
The transaction price for a shipment is often linked to a market index for the respective delivery period, for example, by
reference to the average GlobalCOAL Newcastle Index for the delivery period. At the end of each reporting period, the final
average index price may not be available for certain shipments. In those situations, the Group uses “the expected value”
method to estimate the amount of variable consideration with reference to index prices at the end of the reporting period
for those shipments.
(b) Other revenue
i.
Interest
Interest income from a financial asset is accrued over time, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life
of the financial asset to that asset’s net carrying amount. Interest income from leases is recognised over the term of the lease
based on a pattern reflecting a constant periodic rate of return on the net investment in the lease.
ii. Mining services fees
The Group provides mining, corporate support and IT services which relate to the management of Watagan mines.
The management and mining service agreements stipulate a fixed monthly service fee and payment of the service fees is
usually due within 21 days after the end of each calendar month in which the service is rendered. Revenue from providing
management and mining services is recognised when the services are rendered.
iii. Sea freight services
When contracts for sale of coal include sea freight services the performance obligation associated with providing the shipping
is separately measured and recognised as the service is provided.
iv. Other
Other primarily consists of dividends, rent, and other management fees. Dividends are recognised as revenue when the right
to receive payment is established, it is probable that the economic benefits associated with the dividend will flow to the Group
and can be measured reliably. Rental income arising on land surrounding a mine site is accounted for on a straight-line basis
over the lease term.
110
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 From continuing operations
Sales revenue
Sale of coal
Fair value losses recycled from hedge reserve
Other revenue
Interest income
Mining services fees
Sea freight
Other
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
4,365
(190)
4,175
125
43
83
34
285
4,460
4,740
(160)
4,580
119
46
66
39
270
4,850
At 31 December 2019 there are $114 million of provisionally priced sales (31 December 2018 $310 million), still to be finalised, of
which $99 million is yet to be collected (31 December 2018 $131 million).
Disaggregation of revenue
In the following table, revenue is disaggregated by primary geographical market and major products/service lines. The table also
includes a reconciliation of the disaggregated revenue with the Group’s three reportable segments (see Note B1):
31 DECEMBER 2019
Primary geographical markets
Japan
China
South Korea
Taiwan
Singapore
Australia (Yancoal’s country of domicile)
Thailand
All other foreign countries
Total
Product mix
Thermal coal
Metallurgical coal
Total
31 DECEMBER 2018
Primary geographical markets
Japan
Singapore
China
South Korea
Taiwan
Thailand
Australia (Yancoal’s country of domicile)
All other foreign countries
Total
Product mix
Thermal coal
Metallurgical coal
Total
NSW
$M
1,012
664
428
510
394
404
338
167
3,917
3,382
535
3,917
946
760
671
546
501
343
283
244
4,294
3,467
827
4,294
QLD
$M
CORPORATE
$M
127
19
118
23
71
49
–
41
448
54
394
448
109
101
68
118
17
–
12
21
446
7
439
446
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
TOTAL
$M
1,139
683
546
533
465
453
338
208
4,365
3,436
929
4,365
1,055
861
739
664
518
343
295
265
4,740
3,474
1,266
4,740
In 2019 11.0% of coal sales were attributable to the largest customer and 36.9% to the top five customers (2018: 9.7% and
34.7% respectively).
111
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
Contract balances
The group has recognised the following revenue-related receivables, contract assets and liabilities:
Receivables from contracts with customers
There are no contract assets, liabilities or costs as at 31 December 2019 or 31 December 2018.
31 DECEMBER
2019
$M
276
31 DECEMBER
2018
$M
442
Transaction price allocated to the remaining performance obligation
For long term contracts the Group has concluded that contracts with customers do not exist for those shipments for which the
actual delivery quantity and transaction price have not yet been negotiated or determined. For the remaining shipments where
the delivery quantity and transaction price have been negotiated or determined but are subject to market price movements, the
contract durations are within one year or less. As a result, the Group elects to apply the practical expedient in paragraph 121(a)
of AASB 15 and does not disclose information about the remaining performance obligations in relation to the coal sales contracts.
The Group also elects to apply the practical expedient in paragraph 121(b) of AASB 15 and does not disclose information about
the remaining performance obligations in relation to the management and mining service contracts.
B3 Other income
Gain on disposal of joint operation and subsidiaries (Note E1)
Gain on remeasurement of royalty receivable
Gain on remeasurement of contingent royalty
Net gain on foreign exchange*
Sundry income**
31 DECEMBER
2019
$M
–
31 DECEMBER
2018
$M
78
32
12
–
57
101
4
–
61
7
150
*
There is no impact on the conversion of US dollar denominated interest-bearing liabilities (2018: nil).
** Sundry income includes $49 million relating to an arbitration award as disclosed in Note C8(ii).
B4 Employee benefits
Accounting Policies
i. Employee benefits
Employee benefits are expensed as the related service by the employee is provided and includes both equity and cash based
payment transactions. Employee benefits recognised in the profit or loss are net of recoveries.
ii. Superannuation
Contributions made by the Group under Australian legislation to contribute 9.5% of employees salaries and wages to the
employee’s defined contribution superannuation funds are recognised as an expense in the period in which they are incurred.
iii. Equity-settled share-based payments
The grant date fair value of equity-settled share-based payment awards granted to employees is recognised as an expense,
with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is
adjusted to reflect the number of awards for which related service and non-market performance conditions are expected to
be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-
market based performance conditions at the vesting date. For share-based payment awards with market based performance
conditions, the grant date fair value of the share-based payment is measured using Black-Scholes option pricing model to
reflect such conditions and there is no true-up for differences between expected and actual outcomes.
(a) Employee benefits
Employee benefits
Share-based payments
Superannuation contributions
Total employee benefits
During 2019 $7 million of employee benefits were capitalised (2018: $1 million)
112
31 DECEMBER
2019
$M
484
31 DECEMBER
2018
$M
464
–
41
525
16
38
518
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (b) Key management personnel compensation
Refer to the remuneration report contained in the directors’ report for details of the remuneration paid or payable to each
member of the Group’s key management personnel (“KMP”) for the year ended 31 December 2019. The total of remuneration
paid to KMP of the Company and the Group during the year are as follows:
Short-term employee benefits
Post-employment benefits
Other long-term benefits
31 DECEMBER
2019
$M
4,922,451
31 DECEMBER
2018
$M
5,901,640
161,908
2,827,707
7,912,066
149,534
2,742,559
8,793,733
(c) Top five employees
The five highest paid individuals in the Group include the Chief Executive for each of the years and the Chief Operating Officer,
and details of whose remuneration are set out in the remuneration report. Details of emoluments of the remaining three
(2018: four) highest paid individuals who are neither a Director, Chief Executive, or Chief Operating Officer (2019 only) of the
Company are as follows:
Salaries, allowance and other benefits in kind
Retirement benefit scheme contributions
Discretionary bonuses
Their emoluments were within the following bands:
HK$8,000,000 to HK$8,500,000
HK$8,500,000 to HK$9,000,000
HK$9,000,000 to HK$9,500,000
HK$10,000,000 to HK$10,500,000
HK$11,000,000 to HK$11,500,000
B5 Expenses
(a) Finance costs
Lease charges
Unwinding of discount on provisions and deferred payables
Other interest expenses
Total finance costs
(b) Other operating expenses
Bank fees and other charges
Duties and other levies
Insurance
Travel and accommodation
Information technology
Net loss on disposal of property, plant and equipment
Stamp duty
Remeasurement of contingent royalty
Remeasurement of financial assets
Impairment of financial assets
Net loss on foreign exchange
Rental expense
Other operating expenses
Total other operating expenses
31 DECEMBER
2019
$M
2
31 DECEMBER
2018
$M
2
–
3
5
–
5
7
31 DECEMBER
2019
NUMBER
1
31 DECEMBER
2018
NUMBER
–
–
2
–
–
1
–
1
2
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
7
11
215
233
56
21
12
12
11
9
–
–
–
–
5
3
16
145
3
17
273
293
96
18
13
9
14
9
25
33
29
21
–
4
7
278
113
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (c) Largest suppliers
In 2019 5.0% of total operating expenses related to one supplier and 21.3% to the top five suppliers (2018 7.6% and 23.5%
respectively).
B6 Taxation
Accounting Policy
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate and laws enacted or substantially enacted at the end of the reporting period for each jurisdiction,
adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax expense or benefit associated with these items is recognised
in other comprehensive income or directly in equity, respectively.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses. The carrying value of deferred tax assets
are reviewed at each reporting period and reduced to the extent that it is no longer probable that future taxable profit will be
available to allow all or part of the asset to be recovered.
Current tax assets and tax liabilities are offset where the Group has a legally enforceable right to offset and intends either to
settle on a net basis, or to realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset
when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to
the same taxation authority.
Tax consolidation legislation
Yancoal Australia Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Yancoal Australia Ltd, and the entities in the tax consolidated group account for their own current and
deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand
alone taxpayer in its own right. In addition to its own current and deferred tax amounts, Yancoal Australia Ltd also recognises
the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed
from the entities in the tax consolidated group.
The entities in the tax consolidated group have entered into a tax funding agreement under which the wholly-owned entities
fully compensate Yancoal Australia Ltd for any current tax payable assumed and are compensated by Yancoal Australia Ltd for
any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to
Yancoal Australia Ltd under the tax consolidation legislation as loans between entities. The amounts receivable/payable under
the tax funding agreement are due upon receipt of funding advice from the head entity. The head entity may also require
payment of interim funding amounts to assist with its obligations to pay tax instalments.
Critical accounting estimates and judgements
Deferred tax
Judgement is required to determine the amount of deferred tax assets that are recognised based on the likely timing and the
level of future taxable profits. The Group assesses the recoverability of recognised and unrecognised deferred taxes, including
historical losses incurred in Australia, using estimates and assumptions relating to projected taxable income as applied in the
impairment process, refer to note C3.
Uncertain tax matters
Judgements are applied in how income tax legislation interacts with income tax accounting principles. These judgements are
subject to risk and uncertainty, and there is the possibility that changes in circumstances will alter expectations, which may
impact deferred tax assets and liabilities recognised. Where the final tax outcome is different from the amounts that are
initially recognised these differences will impact the current and deferred tax in the period in which the determination is made.
114
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (a) Income tax expense
(i) Net tax expenses
Income tax expense
Income tax (under)/over provision in respect of prior years
(ii) Income tax expense
Deferred tax expense
Deferred tax expense included in income tax benefit comprises:
Net (under)/over provision in respect of prior years
Decrease in deferred tax assets (refer to Note B6(b)(ii))
Increase in deferred tax liabilities (refer to Note B6(b)(i))
(iii) Reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before tax
Tax at the Australian tax rate of 30% (2018 – 30%)
Tax effect of amounts which are not deductible/taxable in calculating taxable income:
(Under)/over provision in prior years
Movements in tax base of assets
Movements in financial assets
Stamp duty expensed
Share of (loss) / profit of equity-accounted investees not deductible
Gain on disposal of interest in joint operation
Other
Income tax expense
31 DECEMBER
2019
$M
(31)
31 DECEMBER
2018
$M
(340)
(17)
(48)
(48)
(17)
(230)
199
(48)
767
(230)
(17)
219
–
–
(7)
–
(13)
(48)
20
(320)
(320)
20
(301)
(39)
(320)
1,172
(352)
20
–
(15)
(7)
16
14
4
(320)
In finalising the opening tax base of the acquired Coal and Allied Industries Ltd an adjustment to deferred tax assets has been
recognised of $219 million.
(iv) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other
comprehensive income but directly debited or credited to equity:
Cash flow hedges
Adjustment on adoption of AASB 9
(b) Deferred tax assets and liabilities
(i) Deferred tax balances
Deferred tax assets
Deferred tax liabilities
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
53
–
53
(85)
7
(78)
31 DECEMBER
2019
$M
792
31 DECEMBER
2018
$M
1,062
(803)
(11)
(1,029)
33
115
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
(ii) Deferred tax assets
MOVEMENTS
At 1 January 2018
Under/over provision in prior year
(Charged)/credited
– to profit or loss
– directly to equity
– tax loss recorded on behalf
of Watagan Group
Acquisition of subsidiaries
At 31 December 2018
At 1 January 2019
Under/over provision in prior year
(Charged)/credited
– to profit or loss
– directly to equity
– tax loss recorded on behalf
of Watagan Group
Acquisition of subsidiaries
At 31 December 2019
TAX LOSSES
AND OFFSETS
$M
839
PROVISIONS
$M
177
TRADE AND
OTHER
PAYABLES
$M
28
FINANCE LEASE
LIABILITIES
$M
16
CASH FLOW
HEDGES
$M
135
41
(321)
–
66
–
625
625
(56)
(296)
–
57
–
330
(25)
(23)
(7)
–
7
129
129
1
24
–
–
–
154
–
6
–
–
–
34
34
1
(6)
–
–
–
29
–
(3)
–
–
–
13
13
–
16
–
–
–
29
11
–
85
–
–
231
231
–
32
(53)
–
–
210
OTHER
$M
24
(30)
40
–
–
(4)
30
30
10
–
–
–
–
40
TOTAL
$M
1,219
(3)
(301)
78
66
3
1,062
1,062
(44)
(230)
(53)
57
–
792
The Group’s tax consolidated group includes Watagan Mining Company Pty Ltd and its controlled subsidiaries, refer to E2b(i) for
further details. Deferred tax assets are recognised for the carry forward of unused tax losses and unused tax credits to the extent
that it is probable that taxable profits will be available against which the unused tax losses / credits can be utilised. The Group has
unrecognised capital tax losses (tax effected) of $11 million (2018: capital tax losses $9 million). There is no expiry date on these
tax losses.
(iii) Deferred tax liabilities
MOVEMENTS
At 1 January 2018
Under/over provision in prior year
Charged/(credited)
– to profit or loss
– to other
Acquisition of subsidiaries
At 31 December 2018
At 1 January 2019
Under/over provision in prior year
Charged/(credited)
– to profit or loss
– to other
Acquisition of subsidiaries
At 31 December 2019
PROPERTY,
PLANT AND
EQUIPMENT
$M
143
INTANGIBLE
ASSETS
$M
3
INVENTORIES
$M
13
MINING
TENEMENTS AND
EXPLORATION
AND EVALUATION
ASSETS
$M
850
UNREALISED
FOREIGN
EXCHANGE
GAINS
$M
(3)
–
57
–
(15)
185
185
12
(37)
–
–
160
–
6
–
1
10
10
–
(4)
–
–
6
–
14
–
–
27
27
(1)
2
–
–
28
(23)
(71)
–
1
757
757
(34)
(175)
–
–
548
–
3
–
–
–
–
–
9
–
–
9
OTHER
$M
24
–
30
(4)
–
50
50
(4)
6
–
–
52
TOTAL
$M
1,030
(23)
39
(4)
(13)
1,029
1,029
(27)
(199)
–
–
803
116
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 B7 Earnings per share
Accounting Policies
(a) Basic earnings per share
Calculated as net earnings attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than
dividends) and preference shares dividends, divided by the weighted average number of ordinary shares, adjusted for any
bonus element, excluding any treasury shares held.
(b) Diluted earnings per share
Calculated as net earnings attributable to members of the parent, adjusted for costs of servicing equity (other than dividends);
the after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as
expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution
of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares,
adjusted for any bonus element.
(a) Basic and diluted earnings per share
Total basic earnings per share (cents)
Total diluted earnings per share (cents)
(b) Reconciliation of earnings used in calculating profit per share
Basic and diluted earnings per share
Earnings used in calculating the basic and diluted earnings per share:
From continuing operations
(c) Weighted average number of shares used in calculating profit per share
Ordinary shares on issue at start on the period
Less: weighted average of treasury shares held
Plus: weighted average of new ordinary shares issued during the period
Weighted average number of ordinary shares used in basic earnings per share
Adjusted for rights and options on issue
Weighted average shared used in diluted earnings per share
31 DECEMBER
2019
54.5
31 DECEMBER
2018
67.6
54.4
67.6
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
719
719
852
852
31 DECEMBER
2019
NUMBER
1,320,439,437
31 DECEMBER
2018
NUMBER
1,255,984,189
(31,225)
–
(323,623)
4,155,183
1,320,408,212
1,259,815,749
1,254,597
1,365,383
1,321,662,809
1,261,181,132
117
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 C OPERATING ASSETS AND LIABILITIES
Investment in assets drives the current and future performance of the Group. This section includes disclosures for property
plant and equipment, mining tenements, exploration and evaluation assets, intangible assets, royalty receivable, cash and cash
equivalents, trade and other receivables, trade and other payables, inventories and provisions contained within the Balance Sheet.
C1 Property, plant and equipment
Accounting Policies
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost
includes expenditure directly attributable to the acquisition of the items and the estimated restoration costs associated
with the asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the
item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised
when replaced.
Mine development assets include all mining related development expenditure that is not included under land, buildings, and
plant and equipment. The open pit operations capitalise mine development costs including both direct and indirect costs
incurred to remove overburden and other waste materials to enable access to the coal seams during the development of
a mine before commercial production commences. Amortisation of those capitalised costs over the life of the operation
commences at the time that commercial production begins for the mine or for a new open pit mining area. Underground mine
development costs include both direct and indirect mining costs relating to underground longwall panel development and
mains development (primary access/egress roads for the mine). Mains development costs are capitalised net of the coal sales
revenue earned from coal extracted as part of the mains development process. These capitalised costs are amortised over the
life of the mine if the roads service the entire mine or over the life of the panels accessible from those mains if shorter than the
mine life.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward mine
development costs in relation to that area of interest. Accumulated costs in relation to an abandoned area are written off in
full in the period in which the decision to abandon the area is made.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial
period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
Depreciation and amortisation
Fixed assets, excluding freehold land, is depreciated on a straight-line or Units of Production (“UOP”) basis over the asset’s
useful life to the Group. UOP is based on either machine hours utilised, or production tonnes from life of mine plans and
estimated reserves, commencing from the time the asset is ready for use. Leased assets are depreciated over the asset’s useful
life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Group will obtain
ownership at the end of the lease term. Leasehold improvements are depreciated over the period of the lease or estimated
useful life, whichever is the shorter, using the straight-line method.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period.
The estimated useful lives are as follows:
• Buildings 10 - 25 years
• Mine development 10 - 40 years
• Plant and equipment 2.5 - 40 years
•
Leased property, plant and equipment 2 - 20 years
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount. Any gain or loss arising on the disposal of an item of property, plant and equipment
is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit
or loss.
See Note C3 for further details on impairment of assets and Note C2 for further details on the estimation of coal reserves used
for UOP.
118
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Year ended 31 December 2018
Opening net book amount
Transfer from assets under construction
Additions
Transfer from exploration and evaluation
Acquisition through business
combinations
Other disposals
Depreciation
Closing net book amount
At 31 December 2018
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 31 December 2019
Opening net book amount
Initial recognition of lease assets under AASB 16
Transfer from assets under construction
Additions
Transfer to finance lease receivables
Transfer to mining tenements
Transfer from exploration and evaluation
Other disposals
Depreciation
Closing net book amount
At 31 December 2019
Cost or fair value
Accumulated depreciation
Net book amount
ASSETS UNDER
CONSTRUCTION
$M
FREEHOLD
LAND AND
BUILDINGS
$M
MINE
DEVELOPMENT
$M
PLANT AND
EQUIPMENT
$M
LEASED PLANT
AND
EQUIPMENT
$M
81
(177)
190
–
8
–
–
102
102
–
102
102
–
(149)
271
–
–
–
–
–
224
224
–
224
274
21
1
–
22
–
(8)
310
376
(66)
310
967
222
10
10
61
–
(85)
1,185
1,613
(428)
1,185
310
1,185
–
9
–
–
–
–
–
(9)
310
383
(73)
310
–
36
93
–
(41)
11
–
(96)
1,188
1,712
(524)
1,188
1,434
(66)
4
–
136
(9)
(229)
1,270
2,975
(1,705)
1,270
1,270
–
126
13
–
–
–
(13)
(256)
1,140
3,095
(1,955)
1,140
76
–
5
–
–
–
(9)
72
110
(38)
72
72
69
(25)
18
(19)
–
–
(4)
(33)
78
113
(35)
78
TOTAL
$M
2,832
–
210
10
227
(9)
(331)
2,939
5,176
(2,237)
2,939
2,939
69
(3)
395
(19)
(41)
11
(17)
(394)
2,940
5,527
(2,587)
2,940
During the year ended 31 December 2019 $3 million of depreciation and amortisation was capitalised (2018: $1 million).
(a) Non-current assets pledged as security
Refer to Note D2(a)(ii) for information on non-current assets pledged as security by the Group.
119
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 C2 Mining tenements
Accounting Policy
Mining tenements have a finite useful life and are carried at cost less any accumulated amortisation and impairment losses.
Mining tenements are amortised from the date when commercial production commences, or the date of acquisition.
Amortisation is calculated over the life of the mine on a ‘units of production’ method based on the Joint Ore Reserves
Committee (“JORC”) estimated reserves.
Changes in the annual amortisation rate resulting from changes in the remaining estimated reserves, are applied on a
prospective basis from the commencement of the next financial year. Every year the mining tenement’s carrying amount is
compared to its recoverable amount and assessed for impairment, or for possible reversals of prior year impairment.
See Note C3 for further details on the impairment of assets.
Opening net book amount
Acquisition through business combination
Transfers from exploration and evaluation
Transfers from mine development
Amortisation
Transfer to assets classified as held for sale
Closing net book amount
31 DECEMBER
2019
$M
4,218
31 DECEMBER
2018
$M
4,296
–
–
41
(212)
–
4,047
128
6
–
(188)
(24)
4,218
Critical accounting estimates and judgements
Coal Reserves are based on geological information and technical data relating to the size, depth, quality of coal, suitable
production techniques and recovery rates. Such an analysis requires complex geological judgements to interpret the data.
The estimation of Recoverable Reserves is based on factors such as estimates of foreign exchange rates, coal price, future
capital requirements, rehabilitation obligations and production costs, along with geological assumptions and judgements
made in estimating the size and quality of the reserves. Management forms a view of forecast sales prices based on long term
forecast coal price data from multiple external sources.
C3 Impairment of long life assets
Accounting Policy
Mining tenements and goodwill are tested annually for impairment, or more frequently if events or changes in circumstances
indicate that they might be impaired.
An impairment loss is recognised immediately in profit or loss for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use.
Mining tenements and other non-financial assets (excluding goodwill) that have previously suffered an impairment are
reviewed for possible reversal of the impairment at the end of each reporting period.
For the purposes of assessing impairment, assets are grouped into Cash-Generating Units (“CGU”), being the lowest levels for
which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or
groups of assets. For the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated
so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting
purposes. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to CGUs that
are expected to benefit from the synergies of the combination.
The Group assesses impairment by evaluation of conditions and events specific to the CGU that may be indicative of
impairment triggers.
120
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Critical accounting estimates and judgements
The determination of fair value and value in use requires management to make estimates and assumptions about expected
production and sales volumes, coal prices (considering current and historical prices, price trends and related factors), foreign
exchange rates, coal resources and reserves (refer to C2), operating costs, closure and rehabilitation costs and future capital
expenditure. These estimates and assumptions are subject to risk and uncertainty; hence there is a possibility that changes
in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances,
some or all of the carrying amount of the assets may be further impaired or the impairment charge reduced with the impact
recorded in the statement of profit or loss. Management must use judgement in determining the CGUs that should be used for
impairment testing and allocating goodwill that arises from business combinations to these CGUs.
The Group estimates its coal resources and reserves based on information compiled by Competent Persons as defined by the
Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves (December 2012), which is prepared
by the Joint Ore Reserves Committee (“JORC”) of the Australasian Institute of Mining and Metallurgy, Australian Institute of
Geoscientists and Minerals Council of Australia, known as the JORC 2012 Code, and Australian Securities Exchange (“ASX”)
Listing Rules 2014.
(a) CGU assessment
The Group operates on a regional basis within NSW and as such the NSW mines are considered to be one CGU. From 2017,
Hunter Valley Operations and Mount Thorley Warkworth have been included in the NSW regional CGU alongside Moolarben
and Stratford/Duralie. Yarrabee and Middlemount are considered separate CGU’s due to their location and ownership structure.
(b) Assessment of fair value
Each CGU’s fair value less costs of disposal has been determined using a discounted cash flow model over the expected life of
mine (18 – 42 years). The fair value model adopted has been categorised as level 3 in the fair value hierarchy.
The key assumptions in the model include:
KEY ASSUMPTIONS
Coal prices
DESCRIPTION
The Group’s cash flow forecasts are based on estimates of future coal prices, which assume benchmark
prices will revert to the group’s assessment of the long term real coal prices of US$51 – US$100 per
tonne (2018: US$67 – US$104 per tonne) for thermal and US$102 – US$176 per tonne (2018: US$112 –
US$217 per tonne) for metallurgical coal.
The Group receives long term forecast coal price data from two external sources when determining its
benchmark coal price forecasts and then makes adjustments for specific coal qualities.
The external sources have determined their benchmark coal price forecasts having regard to the latest
International Energy Agency (IEA) New Policy Scenario, the Nationally Determined Contributions submitted
in the lead-up to the Paris Agreement in 2015 and National Energy Policies as they are updated. This
contemplates the global seaborne demand for thermal coal will remain relatively consistent to showing a
decline of 7.4% through to 2040 whilst the global seaborne demand for metallurgical coal will increase up
to 2040. Key risks to the outlooks are increasing decarbonisation trends, trade disputes, protectionism,
import control policies in China, shareholder activism to divest from coal, the pace of renewable
technology advancement and investor behaviour to coal project financing.
The Group has considered the impacts of a more rigorous international response to climate change under
the Paris Agreement and notes that the average mine life required for the recoverable amount to continue
to exceed the book value, holding all inputs constant, including coal prices, is 8, 36 and 5 years for the NSW,
Yarrabee and Middlemount CGUs, respectively. The NSW CGU has a 89% exposure to thermal coal and 11%
exposure to metallurgical coal whilst Yarrabee and Middlemount are both metallurgical coal mines.
The Group concludes that whilst a more rigorous international response to climate change could reduce
the future demand for coal the likely impact of any such actions are not expected to materially impact
during the time periods noted above and hence would not result in the recoverable amount falling below
book value.
Foreign
exchange rates
For both thermal and metallurgical coal the Group’s forecast coal price is within the range of external price
forecasts.
The long term AUD/USD forecast exchange rate of $0.75 (2018: $0.75) is based on external sources.
The year-end AUD/USD exchange rate was $0.70 per the Reserve Bank of Australia.
121
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 KEY ASSUMPTIONS
Production and
capital costs
DESCRIPTION
Production and capital costs are based on the Group’s estimate of forecast geological conditions, stage of
existing plant and equipment and future production levels.
Coal reserves and
resources
Discount rate
This information is obtained from internally maintained budgets, the five year business plan, life of mine
models, life of mine plans, JORC reports, and project evaluations performed by the Group in its ordinary
course of business.
See discussion at Note C2 Mining tenements for how the coal reserves and resources are determined.
The Group has applied a post-tax discount rate of 10.5% (2018: 10.5%) to discount the forecast future
attributable post-tax cash flows.
The post-tax discount rate applied to the future cash flow forecasts represents an estimate of the rate the
market would apply having regard to the time value of money and the risks specific to the asset for which
the future cash flow estimates have not been adjusted.
This rate is also consistent with the Group’s five year business plan, life of mine models and project
evaluations performed in ordinary course of business.
Based on the above assumptions at 31 December 2019 the recoverable amount is determined to be above book value for all
CGU’s resulting in no impairment.
Impairment provisions recorded as at 31 December 2019 is $67 million for Stratford and Duralie. Stratford and Duralie is included
in the NSW region CGU. Management may consider reversals of the impairment provision previously recognised if there is either
an increase in the average long term real revenue over the life of the mine due to either an increase in USD coal prices, or a
weakening of the AUD/USD foreign exchange rate or a combination of both, or reductions in the current and life of mine operating
costs, capital expenditure requirements, or an increase in the reserves.
In determining the value assigned to each key assumption, management has used: external sources of information; the expertise
of external consultants; as well as the experience of experts within the Group to validate entity specific assumptions such as coal
reserves and resources. Additionally various sensitivities have been determined and considered with respect to each of the key
assumptions, further supporting the above fair value conclusions.
Key sensitivity
The most sensitive input in the fair value model is forecast revenue, which is primarily dependent on estimated future coal prices
and the AUD/USD forecast exchange rate.
Book Value
Recoverable Amount
Head Room
USD Coal Price (i)
+10%
-10%
Exchange Rate (ii)
+5 cents
-5 cents
Discount Rate (iii)
+50 bps
-50 bps
NSW
$M
5,645
11,315
5,670
2,555
(2,557)
(1,493)
1,697
(487)
526
2019
YARRABEE
$M
367
MIDDLEMOUNT
$M
274
372
5
284
(307)
(177)
188
(9)
9
662
388
200
(206)
(107)
120
(20)
21
(i) This represents the change in recoverable amount due to a +/- 10% change to our coal price assumption.
(ii) This represents the change in recoverable amount due to a +/- 5 cents change to the long-term US$:A$ foreign exchange rate adopted.
(iii) This represents the change in recoverable amount due to a +/- 50bps change in discount rate adopted.
122
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 If coal prices were -10% LOM the recoverable amount would exceed book value for all CGUs with the exception of Yarrabee
who exceeded the recoverable amount by $302 million. If the AUD/USD long term forecast exchange rate was $0.80 the
recoverable amount would exceed book value for all CGUs with the exception of Yarrabee who exceed the recoverable amount by
$172 million. If the WACC was 11.0% the recoverable amount would exceed the book value for all CGU’s apart from Yarrabee who
exceeds the recoverable amount by $4 million.
(c) Goodwill
The Yarrabee goodwill was not subject to an impairment charge as the recoverable amount is greater than the carrying value for
this CGU.
C4 Exploration and evaluation assets
Accounting Policy
Exploration and evaluation expenditure incurred is accumulated in respect of each separately identifiable area of interest
which is at the individual exploration permit or licence level. These costs are only carried forward where the right of tenure
for the area of interest is current and to the extent that they are expected to be recouped through successful development
and commercial exploitation, or alternatively, sale of the area, or where activities in the area have not yet reached a stage
which permits reasonable assessment of the existence of economically recoverable reserves and active and significant
operations in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets acquired in a business combination are recognised at their fair value at the acquisition
date. The carrying amount of exploration and evaluation assets are assessed for impairment when facts or circumstances
suggest the carrying amount of the assets may exceed their recoverable amount. A regular review is undertaken for each
area of interest to determine the appropriateness of continuing to carry forward costs in relation to each area of interest.
Accumulated costs in relation to an abandoned area are written off in full in the period in which the decision to abandon
the area is made.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are
demonstrable, the exploration and evaluation assets attributable to that area of interest are first tested for impairment and
then reclassified to mining tenements or mine development assets.
Critical accounting estimates and judgements
The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement in
determining whether it is likely that future economic benefits are likely, which may be based on assumptions about future
events or circumstances. Estimates and assumptions may change if new information becomes available. If after expenditure
is capitalised information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalised is
recognised in the profit and loss in the period when the new information becomes available.
Opening net book amount
Acquisition through business combinations
Other additions
Transfers to mining tenements
Transfers to mine development
Closing net book amount
31 DECEMBER
2019
$M
563
31 DECEMBER
2018
$M
565
-
3
-
(11)
555
12
2
(6)
(10)
563
123
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 C5 Intangibles
Accounting Policies
(i) Goodwill
Goodwill acquired in a business combination is recognised at cost and subsequently measured at cost less any impairment
losses. The cost represents the excess of the cost of a business combination over the fair value of the identifiable assets,
liabilities and contingent liabilities acquired.
Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be
impaired.
See Note C3 for further details on impairment of assets.
(ii) Computer software
Computer software is carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is
calculated on a straight-line basis over the period of expected benefit, which ranges from 2.5 to 10 years.
(iii) Water rights
Water rights have been recognised at cost and are assessed annually for impairment or more frequently if events or changes
in circumstances indicate that it might be impaired. The water rights have been determined to have an indefinite useful life as
there is no expiry date on the licences.
(iv) Other
Other intangibles include access rights, other mining licenses and management rights associated with the Group’s right to
manage Port Waratah Coal Services. These intangibles have a finite useful life and are carried at cost less any accumulated
amortisation and impairment losses. Amortisation of these other intangibles is calculated as the shorter of the life of the mine
or agreement and using a units of production basis in tonnes, or on a straight-line basis. The estimated useful lives vary from
10 to 25 years.
GOODWILL
$M
COMPUTER
SOFTWARE
$M
WATER RIGHTS
$M
OTHER
$M
TOTAL
$M
60
–
60
60
–
–
–
60
60
–
60
60
–
–
–
–
60
60
–
60
25
(17)
8
8
2
–
(3)
7
27
(20)
7
7
1
1
–
(3)
6
29
(23)
6
18
–
18
18
–
(1)
–
17
17
–
17
17
1
–
–
–
18
18
–
18
14
(1)
13
13
1
–
(1)
13
14
(1)
13
13
–
2
(1)
(1)
13
15
(2)
13
117
(18)
99
99
3
(1)
(4)
97
118
(21)
97
97
2
3
(1)
(4)
97
122
(25)
97
At 1 January 2018
Cost
Accumulated amortisation
Net book amount
Opening net book amount
Acquisition through business
combination
Other disposals
Amortisation charge
Closing net book amount
At 31 December 2018
Cost
Accumulated amortisation
Net book amount
Opening net book amount
Other additions
Transfers – assets under
construction
Other disposals
Amortisation charge
Closing net book amount
At 31 December 2019
Cost
Accumulated amortisation
Net book amount
124
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 The goodwill at 31 December 2019 relates to the acquisition of Yancoal Resources Limited (formally known as Felix Resources
Limited) from an independent third party in an arms length transaction and was allocated to the Yarrabee mine. Refer to Note C3
for the details regarding the fair value less cost to sell calculation performed at 31 December 2019. The CGU for which goodwill
was allocated was not subject to an impairment charge as the recoverable amount is greater than the carrying value for this CGU.
C6 Leases
(a) Amount recognised in profit or loss
Other income from equipment leasing
Depreciation on right of use assets (refer Note C1)
Expenses relating to short-term and variable leases
Interest on lease liabilities
(b) As a lessee
Right-of-use assets
Opening balance at 31 December 2018
Initial recognition of leases under AASB 16
Transfer to plant and equipment
Transfer to finance lease receivables
Additions
Other disposals
Depreciation
Closing balance at 31 December 2019
31 DECEMBER
2019
$M
5
(33)
(32)
(7)
BUILDINGS
$M
–
PLANT AND
EQUIPMENT
$M
72
14
–
–
2
–
(2)
14
55
(25)
(19)
16
(4)
(31)
64
TOTAL
$M
72
69
(25)
(19)
18
(4)
(33)
78
An undiscounted maturity analysis of lease liabilities is disclosed in Note D2(d).
The cash outflow for capitalised leases was $37 million for the year ended 31 December 2019.
(c) As a lessor
Operating lease
The Group leases certain mining equipment to its joint operations. The Group has classified these leases as operating leases,
because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets.
The following table sets out a maturity analysis of lease receipts not eliminated on consolidation, showing the undiscounted lease
payments to be received after the reporting date.
Within one year
One to two years
Two to five years
More than five years
Total undiscounted lease payments
31 DECEMBER
2019
$M
3
3
6
1
13
125
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Finance lease
The Group sub-leases certain mining equipment to its joint operations. The Group has classified the sub-leases as finance leases,
because the sub-leases are for the remaining term of the head leases.
The following table sets out a maturity analysis of lease receipts not eliminated, showing the undiscounted lease payments and
interest income to be received after the reporting date.
Within one year
One to two years
Two to five years
More than five years
Total undiscounted lease payments receivable
Unearned finance income
Residual value
Finance lease receivable
Rental income is included in ‘other income’.
C7 Cash and cash equivalents
31 DECEMBER
2019
$M
1
1
–
–
2
–
14
16
Accounting Policy
For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents includes:
cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts; and
i.
ii. other short term, highly liquid investments, that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
Cash at bank and in hand
Deposits at call
Share of cash held in Joint Operations
Cash and cash equivalents
31 DECEMBER
2019
$M
736
31 DECEMBER
2018
$M
587
73
153
962
341
103
1,031
As disclosed in Note D2(a)(i) the minimum average balance of AU$25 million per day and at month end AU$50 million is required
to be held in the Lender Accounts of the Syndicated Facility which is not available for use on those days.
(a) Risk exposure
The Group’s exposure to interest rate risk and credit risk is discussed in Note D9. The maximum exposure to credit risk on the cash
and cash equivalents balance at the end of the reporting period is the carrying amount of each class of cash and cash equivalents
mentioned above.
126
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 C8 Trade and other receivables
Accounting Policy
Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting
period which are classified as non-current assets. After initial recognition,trade and other receivables are carried at amortised
cost using the effective interest method apart from Wiggins Island Preference Shares (“WIPS”) which are classified as fair
value through profit and loss. Refer to Note F5(b) for detailed policies in relation to recognition, measurement, impairment and
derecognition of trade and other receivables.
Current
Trade receivables from contracts with customers
Other trade receivables
Promissory note receivable (i)
Other receivable (ii)
Non-current
Receivables from joint venture (refer to Note E2(b)(iii))
Receivables from other entities (iv)
Long service leave receivables
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
276
121
–
56
453
203
14
65
282
431
81
40
–
552
218
15
59
292
i.
As part of the equity raising completed in 1 September 2017 US$28 million was deposited in Yankuang Ozstar (Ningbo) Trading Co Limited, a related party, and
a promissory note was issued to the Company. This has been settled during the year.
ii. On 6 August 2019 a subsidiary of the Group received a favourable decision in international arbitration proceedings commenced by a subsidiary in relation to
a commercial dispute. A supplementary decision by the arbitration tribunal addressing costs and interest in the arbitration was received by the subsidiary on
18 December 2019. The counterparty to the arbitration attempted to appeal the tribunal’s decision but its available avenues of appeal were exhausted by
20 December 2019. The tribunal awarded the subsidiary approximately $49 million in damages plus costs, plus approximately $7 million in interest. In 2020 the
damages plus costs and interest has been received in cash.
iii. Receivables from joint venture includes a loan provided to Middlemount Coal Pty Ltd (“Middlemount”) with a face value of $212 million. From 1 January 2019
the shareholders of Middlemount agreed to make the loan interest free for 24 months. At 31 December 2019 this loan has been amortised using the effective
interest rate method to $203 million with the difference being recognised through profit and loss.
iv. Receivables from other entities includes the Group’s investment in securities issued by Wiggins Island Coal Export Terminal Pty Ltd (‘WICET”). These include
E Class WIPS and Gladstone Island Long Term Securities (“GiLTS”). During 2018 the WIPS were revalued to nil from $29 million, the GiLTS were impaired by
$17 million to a carrying value of $14 million, and an unpaid deferred distribution from WICET of $4 million was fully impaired.
The Group does not have a standardised and universal credit period granted to its customers, and the credit period of individual
customer is considered on a case-by-case basis, as appropriate. The following is an aged analysis of trade receivables based on the
invoice dates at the reporting dates:
The following is an aged analysis of trade receivables based on the invoice dates at the reporting dates:
0-90 days
91-180 days
181-365 days
Over 1 year
Total
31 DECEMBER
2019
$M
265
31 DECEMBER
2018
$M
439
10
–
1
276
–
2
1
442
127
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
(a) Past due but not impaired
The ageing analysis of the Group’s and the Company’s trade receivables, that were past due but not yet impaired as at
31 December 2019 and 2018, is as follows:
0-90 days
91-180 days
181-365 days
Over 1 year
Total
31 DECEMBER
2019
$M
21
31 DECEMBER
2018
$M
3
10
–
1
32
–
2
1
6
The Group does not hold any collateral over these balances. Management closely monitors the credit quality of trade receivables
and considers the balance that are neither past due or impaired to be of good quality.
(b) Foreign exchange and interest rate risk
Information about the Group’s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is
provided in Note D9.
(c) Fair value and credit risk
Due to the nature of these receivables, their carrying amount is assumed to approximate their fair value.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables
mentioned above. Refer to Note D9 for more information on the risk management policy of the Group and the credit quality of
the Group’s trade receivables.
C9 Inventories
Accounting Policy
Coal stocks are stated at the lower of cost and net realisable value. Costs are assigned on a weighted average basis and include
direct materials, direct labour and an appropriate proportion of variable and fixed overheads on the basis of normal mining
capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make the sale.
Inventories of auxiliary materials, spare parts, small tools, and fuel expected to be used in production are stated at weighted
average cost after deducting rebates and discounts less allowance, if necessary, for obsolescence.
Coal – at lower of cost or net realisable value
Tyres and spares – at cost
Fuel - at cost
31 DECEMBER
2019
$M
171
31 DECEMBER
2018
$M
136
86
4
261
86
4
226
(a) Inventory expense
Write downs of inventories to net realisable value recognised as a provision at 31 December 2019 amounted to $3 million
(2018: $1 million). The movement in the provision has been included in “Changes in inventories of finished goods and work in
progress” in the profit or loss.
128
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
C10 Royalty receivable
Accounting Policy
The royalty receivable is revalued at each reporting period based on expected future cash flows that are dependent on sales
volumes, price changes and fluctuations in foreign exchange rates. Gains or losses arising from changes in the re-measurement
of the fair value of the royalty receivable are recognised in profit or loss. The cash receipts are recorded against the royalty
receivable which will be decreased over time. Since the term of the contract is greater than 12 months, unwinding of the
discount, to reflect the time value of money, for the asset is recognised as interest revenue.
Critical accounting estimates and judgements
The fair value of the royalty receivable is estimated based on expected future cash flows that are dependent on sales volumes,
price changes and fluctuations in foreign exchange rates.
Opening balance
Cash received / receivable
Unwinding of the discount
Re-measurement of royalty receivable
Split between:
Current
Non-current
31 DECEMBER
2019
$M
193
31 DECEMBER
2018
$M
199
(19)
20
32
226
21
205
226
(31)
21
4
193
28
165
193
A right to receive a royalty of 4% of Free on Board Trimmed sales from the Middlemount mine was acquired as part of the
merger with Gloucester Coal Ltd. This asset has been determined to have a finite life being the life of the Middlemount Mine
and is measured on a fair value basis. During 2019 the increase in the royalty receivable was primarily due to an extension to the
Middlemount life of mine by 7 years to 2038 as a result of the increased life of mine ROM tonnes including an additional mine area.
(a) Risk exposure and fair value measurements
Information about the Group’s exposure to price risk, foreign exchange risk and methods and assumptions used in determining
fair value of the royalty receivable is provided in Note D9.
C11 Trade and other payables
Accounting Policy
Refer to Note F6(b) for detailed policies in relation to recognition, classification, measurement and derecognition of trade and
other payables.
Liabilities for payroll costs payable include employee benefits for wages, salaries, annual leave and accumulating sick leave
that are expected to be wholly settled within 12 months of the reporting date represent undiscounted present obligations
resulting from employees’ services provided to the reporting date including related on costs, such as superannuation, workers
compensation, insurance and payroll tax. Employee benefits payable later than 12 months have been measured at the
present value of the estimated future cash outflows to be made for those benefits using corporate bond rates with terms that
match the expected timing of cash out flows. In determining the liability, consideration is given to employee salary and wage
increases and the probability that the employee may satisfy any vesting requirements.
Trade payables
Payroll costs payable
Other payables
Tax sharing and funding payables to Watagan
31 DECEMBER
2019
$M
387
31 DECEMBER
2018
$M
423
103
148
164
802
100
209
108
840
129
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
The following is an aging analysis of trade payables based on the invoice dates at the reporting date:
0-90 days
91-180 days
181-365 days
Over 1 year
Total
31 DECEMBER
2019
$M
383
31 DECEMBER
2018
$M
421
–
–
4
387
1
1
–
423
The average credit period for trade payable is 90 days. The Group has financial risk management policies in place to ensure that
all payables are within the credit timeframe.
C12 Provisions
Accounting Policy
Provisions are:
•
recognised when the Group has a legal or constructive obligation as a result of a past event; it is probable that cash will be
required to settle the obligation, and the amount can be reliably estimated.
• measured at the present value of management’s best estimate at reporting date of the cash outflow required to settle
the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the liability where the time value is material. Any increase in
the provision due to the passage of the time is recognised as an interest expense.
2019
Opening net book amount
Charged/(credited) to profit or loss
– unwinding of discount
– release of the provision
Re-measurement of provisions
Closing net book amount
Split between:
Current
Non-current
Total
EMPLOYEE
BENEFITS
$M
74
SALES
CONTRACT
PROVISION
$M
71
REHABILITATION
$M
254
TAKE
OR PAY
$M
45
OTHER
PROVISIONS
$M
78
–
–
8
82
7
75
82
3
(17)
–
57
10
47
57
4
–
92
350
–
350
350
2
(14)
–
33
12
21
33
–
(12)
–
66
1
65
66
TOTAL
$M
522
9
(43)
100
588
30
558
588
130
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 PROVISION
Employee benefits
DESCRIPTION
The provision for employee benefits represents long service leave and annual leave entitlements and other
incentives accrued by employees.
Long service leave payments are made monthly to the Coal Mining Industry (Long Service Leave Funding)
Corporation based on the eligible monthly payroll of employees involved in the mining of black coal.
Reimbursement is sought from the fund when long service leave is paid to employees involved in the mining
of black coal. An asset for the amount recoverable from the Coal Mining Industry (Long Service Leave
Funding) Corporation is recognised in trade and other receivables.
Rehabilitation costs Mining lease agreements and exploration permits impose obligations on the Group to rehabilitate areas
where mining activity has taken place. Rehabilitation of these areas is ongoing and in some cases will
continue until 2064. The provision for rehabilitation costs has been calculated based on the present value of
the future costs expected to be incurred in restoring affected mining areas, assuming current technologies.
Key estimate and judgement:
The rehabilitation provision has been created based on managements’ internal estimates and assumptions
relating to the current economic environment, which management believes is a reasonable basis upon which
to estimate the future liability.
These estimates are reviewed regularly to take into account any material changes to the assumptions,
however actual rehabilitation costs will ultimately depend upon the future market prices for the necessary
decommissioning works and the timing of when the rehabilitation costs are incurred. Timing is dependent
upon when the mines cease to produce at economically viable rates, which in turn, will depend upon future
coal prices, which are inherently uncertain.
In acquiring part of a business or operation, an assessment is made on the fair value of the assets and
liabilities under AASB 3 Business Combinations. Take or pay is the assessment of forecast excess capacity
for port and rail contracts. A provision was recognised for the discounted estimated excess capacity.
The provision has a finite life and will be released to profit or loss over the period in which excess capacity
is realised.
Key estimate and judgement:
The provision is recognised and estimated based on management’s assessment of contracted port capacity
versus forecast usage. This involves making assumptions about the probability, amount and timing of an
outflow of resources embodying economic benefits.
The assets and liabilities under AASB 3 Business Combinations. The sales contract provision is the assessment
of a coal supply and transportation agreement to supply coal to BLCP Power Limited in Thailand at below
market prices. A provision was recognised for the discounted estimated variance between contract and
market prices. The provision has a finite life and will be released to profit or loss over the contract term.
Key estimate and judgement:
The provision is recognised and estimated based on management’s assessment of future market prices.
The provision includes marketing services fee payable to Noble Group Limited deemed above market norms,
contingent royalties payable to Rio Tinto Plc assessed as part of the Coal & Allied Industries Ltd (“Coal &
Allied”) acquisition in 2017 which will be amortised over the contract term, and make good provisions to
cover the cost to ‘make good’ any hired equipment, in case any major overhaul costs are incurred at the end
of the lease period.
Key estimate and judgement:
The provision is recognised and estimated based on management’s assessment of future market prices of coal.
Take or pay
Sales contract
Other provisions
131
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 C13 Asset classified as held for sale
Accounting Policy
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally
through a sale or loss of control transaction rather than through continuing use. This condition is regarded as met only
when the asset (or disposal group) is available for immediate sale or disposal in its present condition subject only to terms
that are usual and customary for sales or disposals of such assets (or disposal group) and the transaction is highly probable.
Management must be committed to the transaction, which should be expected to qualify for recognition as a completed
transaction within one year from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying
amount and fair value less costs to sell.
Current assets
Land held for sale (i)
i.
Land held for sale
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
45
57
The land held for sale are to parcels of non-mining land located in the Lower Hunter Valley that is held for future sale. These were
acquired as part of the acquisition of Coal & Allied at fair value.
On 24 May 2019 a subsidiary of the Company and member of the Group sold a property at Black Hill NSW for $12 million.
There was no gain or loss recognised on this sale as this amount was previously recognised as an asset held for sale associated
with the acquisition of Coal & Allied Industries Ltd in 2017.
D CAPITAL STRUCTURE AND FINANCING
The ability of the Group to fund the investment in its ongoing activities, invest in new opportunities and meet current
commitments is dependent on available cash and access to third party capital. This section contains disclosure on interest-bearing
liabilities, contingencies, financial risk management, reserves, share based payments and contributed equity that are required to
finance the Group’s activities.
D1 Interest-bearing loan to associate
Accounting Policy
Financial assets classified as loans are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are included in current assets, except for those with maturities 12 months after the reporting period
which are classified as non-current assets. Refer to Note F6(b) for detailed policies in relation to recognition, measurement,
impairment and derecognition of interest-bearing loan to associate.
Critical accounting judgements and estimates
Determining when a significant increase in credit risk has
occurred
AASB 9 requires all long term financial asset loans to have
the general ECL method applied when assessing the loan
receivable for impairment. The general method requires
Yancoal to assess whether or not a significant increase in
credit risk (since the origination of the loan) has occurred.
Judgment is required when performing this assessment given
the tenor of the loan, the counterparty and the business that
it operates in. Where a significant increase in credit risk is
identified the ECL calculation will be performed on a life to
date basis rather than for the next 12 months only.
Yancoal application
In determining if there is a significant increase in credit risk
associated with the Watagan loan Yancoal consider:
•
the Watagan life of mine plans;
• 5 year plans and annual budgets; and
•
life of mine financial models including 13 month cash flow
forecasts.
Yancoal compares the current forecasts against the same
information at loan origination to determine whether or not
there has been a significant increase in credit risk.
132
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Critical accounting judgements and estimates continued
Measuring the 12 month and lifetime ECL exposure
Yancoal application
For financial assets judgement is involved in determining the
ECL provision. The Group calculates ECL as the difference
between all contractual cash flows that are due to the Group
in accordance with the contract and all the cash flows that
the Group expects to receive, discounted at the original
effective interest rate over either a time period of 12 months
from the reporting date or the maximum contracted life of
the loan exposure.
Forward looking information and probability of default
Judgement is required to determine what appropriate
forward looking information should be factored into the
provision e.g. economic factors associated with the Watagan’s
business. Associated with this forward-looking information
the Group would need to assign a probability that the
counterparty would default under each scenario used.
Forward looking information and probability of default are
judgments that are determined on the date of the reporting
period, without the benefit of hindsight.
For further details on Watagan refer also to Note E2
The contracted loan maturity date is 1 April 2025 and
management exercises judgement in forecasting the
anticipated future loan drawdowns by Watagan on the
committed but undrawn component of the loan.
Similarly, management exercises judgement in determining
the anticipated future cash flows to be received during
the term of the loan, and assesses the enforceability and
recoverability under the Yankuang Guarantee.
Yancoal application
In assessing future scenarios Yancoal adopts the same third
party data as set out in Note C3 regarding the impairment of
assets including coal prices and foreign exchange rates.
If required Yancoal seek external third party credit rating
agency probability of default data and extrapolates from
that the specific circumstances regarding the Watagan loan
to determine an appropriate probability of default for each
scenario being considered.
Opening balance
Repayments
Drawdowns
Closing balance
31 DECEMBER
2019
$M
835
31 DECEMBER
2018
$M
712
(227)
293
901
(254)
377
835
On 31 March 2016, the Group transferred its interest in three of its 100% owned NSW coal mining operations, being the Austar,
Ashton and Donaldson coal mines, to Watagan for a purchase price of $1,363 million. The purchase price was funded by way of
a $1,363 million loan from Yancoal Australia Ltd to Watagan bearing interest of BBSY plus 7.06% with a maturity date of 1 April
2025. Yankuang Group Co., Ltd (“Yankuang”), the Group’s ultimate parent entity, guarantees payment of any amount owed to
Yancoal Australia Ltd under the loan if Watagan does not pay Yancoal Australia Ltd such amount when due.Watagan can make
prepayments of the outstanding loan balance with any such prepayment capable of redraw in the future.
At 31 December 2019, it was determined that due to the deterioration in the current and forecast operating results of Watagan
there had been a significant increase in credit risk of the loan at the reporting date compared to the credit risk at inception of the
loan. On this basis, the Group has changed the ECL calculation for the Watagan loan from an allowance for 12 month ECLs to an
allowance for lifetime ECLs.
Having regard to the calculation of lifetime ECL the directors have considered the enforceability of the Yankuang guarantee noted
above and have received written confirmation from Yankuang re-confirming that they remain bound by the Guarantee and will
honour their obligations under it. The directors have also considered Yankuang’s financial position and are satisfied that Yankuang
has the necessary financial resources to fulfil the guarantee.
Based on the above, the lifetime ECL on the Watagan loan at 31 December 2019 is determined to be nil.
If no such reliance was able to be placed on the Yankuang guarantee it is considered highly likely that a material lifetime ECL
would be recognised.
133
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 D2 Interest-bearing liabilities
Interest-bearing liabilities
Accounting Policy
i.
Interest-bearing liabilities (excluding financial guarantees) are initially recognised at fair value, net of transaction costs.
They are subsequently measured at amortised cost using the effective interest rate method. US dollar interest-bearing loans
are designated as a hedge instrument in a cash flow hedge (refer to note D7). Refer to Note F6(b) for detailed policies in
relation to recognition, classification, measurement and derecognition of interest-bearing liabilities.
ii. Leases
For capitalised leases the corresponding minimum lease payments are included in lease liabilities. Each lease payment is
allocated between finance cost and a reduction in the outstanding lease liability. The finance cost is charged to profit or loss
over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period, refer Note F7 for further details.
Current
Secured bank loans
Lease liabilities
Non-current
Secured bank loans
Lease liabilities
Unsecured loans from related parties
Total interest-bearing liabilities
Reconciliation of liabilities arising from financing activities
Opening balance at 31 December 2018
Additions
Repayments
Termination
Unwind of interest expenses
Unwind of non-substantial loan modification
Foreign exchange movements
Closing balance at 31 December 2019
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
1,236
31
1,267
1,004
63
1,164
2,231
3,498
–
13
13
2,572
29
1,510
4,111
4,124
LEASE
LIABILITIES
$M
42
LOANS FROM
RELATED
PARTIES
$M
1,510
SECURED
BANK LOAN
$M
2,572
87
(38)
(4)
7
–
–
94
–
(349)
–
–
–
3
–
(349)
–
–
–
17
1,164
2,240
As a result of a refinancing during 2017 a non-substantial loan modification adjustment was recognised in line with AASB 9:
Financial Instruments. At 31 December 2019 the remaining balance to be amortised in finance costs is $8 million (31 December
2018: $13 million). This amount will continue to amortise up to the date of maturity, at which time the full face value of the
secured bank loans will be recognised.
134
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
(a) Secured bank loans
The secured bank loans are made up of the following facilities:
Secured bank loans
Syndicated Facility (i)*
Syndicated Term Loan (ii)
31 DECEMBER 2019
31 DECEMBER 2018
FACILITY US
$M
FACILITY
$M
UTILISED
$M
FACILITY
$M
UTILISED
$M
1,275
300
1,575
1,820
428
2,248
1,820
428
2,248
2,161
425
2,586
2,161
425
2,586
*
i.
Facility balance excludes the remaining fair value adjustment balance of AU$8 million recorded at 31 December 2019 (31 December 2018: AU$13 million).
Syndicated Facility
In 2009 a Syndicated loan facility of US$2,600 million was taken out and fully drawn down to fund the acquisition of the Felix
Resources Group. During 2014, the Syndicated Facility was extended with repayments due in 2020, 2021 and 2022. During 2019
US$250 million (31 December 2018: US$925 million) was repaid reducing the facility to US$1,275 million (31 December 2018:
US$1,525 million).
Security is held over these loans in the form of a corporate guarantee issued by the Company’s majority shareholder, Yanzhou
Coal Mining Company Limited (“Yanzhou”), for the full amount of the facility.
The Syndicated Facility includes the following financial covenants to be tested half-yearly:
(a)
(b)
(c)
The interest cover ratio is greater than 1.40;
The gearing ratio of the Group will not exceed 0.75; and
The consolidated net worth of the Group are greater than AU$3,000 million.
The calculation of the above covenants include certain exclusions with regard to unrealised gains and losses including foreign
exchange gains and losses.
The Syndicated Facility include the following minimum balance requirements to be satisfied daily and at each end of month:
a.
this is tested at the end of each month, and;
The Company is to maintain in the Lender Accounts an aggregate daily average balance of not less than AU$25 million,
b.
The Company is to maintain in the Lender Accounts an aggregate end of month balance of not less than AU$50 million.
There was no breach of covenants at 31 December 2019.
ii.
Syndicated Term Loan
In 2018 a Syndicated Term Loan of US$300 million was taken out and all proceeds were used to partially repay the Syndicated
Facility.
The Syndicated Term Loan is secured by the assets of the aggregated group of Yancoal Resources Ltd and Coal & Allied Industries
Ltd with carrying value of $6,435 million.
The Syndicated Term Loan includes the following financial covenants based on the aggregated results of Yancoal Resources Ltd
Group and Coal & Allied Group to be tested half-yearly:
a.
b.
c.
The interest cover ratio is greater than 5.0 times;
The finance debt to EBITDA ratio is less than 3.0 times; and
The net tangible assets is greater than AU$1,500 million.
There was no breach of covenants at 31 December 2019.
(b) Bank guarantee facilities
Yancoal are party to the following bank guarantee facilities which have been issued for operational purposes in favour of port,
rail, government departments and other operational functions:
PROVIDER
Syndicate of seven Australian and
international banks*
Bank of China*
Total
*
This facility can be drawn in both A$ and US$.
US
$M
–
25
25
AU
$M
1,000
36
1,036
UTILISED AU
$M SECURITY
885
Secured by the assets of the consolidated groups of Yancoal
Resources Ltd and Coal & Allied Industries Ltd with carrying
value of $6,435 million. Facility expires on 23 August 2021.
Unsecured facility expires on 27 December 2020.
36
921
135
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 The Syndicated Bank Guarantee Facility includes the same financial covenants as the Syndicated Term Loan. The Bank of China
bank guarantee facility includes the same financial covenants as the Syndicated Facility.
(c) Unsecured loans from related parties
In December 2014, the Company successfully arranged two long term loan facilities from its majority shareholder, Yanzhou
repayable on 31 December 2024.
• Facility 1: AU$1,400 million – the purpose of the facility is to fund working capital and capital expenditure. The facility can be
drawn in both AUD and USD. During the period no additional amounts have been drawn down and US$250 million was repaid
(31 December 2018: repaid US$9 million)). US$573 million (AU$817 million) was drawn as at 31 December 2019 (31 December
2018: US$823 million (AU$1,166 million)).
• Facility 2: US$243 million – initially the facility totalled US$807 million with the purpose of the facility being to fund the
coupon payable on subordinated capital notes. On 31 January 2018 all remaining SCN’s were redeemed limiting the facility
to the current drawn amount US$243 million. During the period no amount has been drawn down or repaid. In total
US$243 million (AU$347 million) was drawn as at 31 December 2019 (31 December 2018: US$243 million (AU$344 million)).
Both the facilities have a term of ten years (with the principal repayable at maturity) and are provided on an unsecured and
subordinated basis with no covenants.
D3 Non-contingent royalty
Accounting Policy
In acquiring part of a business or operation, an assessment was made of the fair value of the assets and liabilities under
AASB 3 Business Combinations. The non contingent royalty was fair valued on initial recognition and payable in US dollars
so subject to foreign exchange movements. The amount has a finite life with any discounting and foreign exchange released
to profit or loss over the contract term. Refer to Note F6 for detailed policies in relation to recognition, classification,
measurement and derecognition of non-contingent royalty.
Opening balance
Initial recognition
Receipts/payments
Unwind of discount
Foreign exchange
Closing balance
Current
Non-current
Total
ASSET
LIABILITY
31 DECEMBER
2019
$M
15
31 DECEMBER
2018
$M
–
31 DECEMBER
2019
$M
52
31 DECEMBER
2018
$M
160
–
(8)
1
–
8
4
4
8
87
(75)
1
2
15
7
8
15
–
(28)
3
–
27
13
14
27
–
(119)
5
6
52
25
27
52
As part of the acquisition of Coal & Allied on 1 September 2017 US$240 million of the purchase price is to be paid over five years
from completion. During 2019 US$20 million (2018: US$90 million) of the non-contingent royalties were paid.
As part of the Glencore acquisition of the 16.6% interest in HVO, Glencore will pay to Yancoal 27.9% of the paid and future payable
non-contingent royalty payments.
D4 Contributed equity
Accounting Policy
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its
liabilities. Costs directly attributable to the issue of new shares, options or other equity instrument are shown as a deduction
from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options
associated with the acquisition of a business are included as part of the purchase consideration. Refer to Note F6(b) for
detailed policies in relation to recognition, classification and measurement of contributed equity.
136
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (a) Contributed equity
(i) Share capital
Ordinary shares (note D4(b))
(ii) Other equity securities
Contingent value right shares
Total contributed equity
(iii) Movements in contributed equity
Opening balance
Subordinated capital notes converted to ordinary shares
Ordinary shares issued under entitlement offer
Ordinary shares issued under institutional placement
Transaction costs, net of tax
Closing balance
There was no movement during 2019.
(iv) Movements of Ordinary Share Capital
Opening balance
Ordinary shares issued under institutional offer
Ordinary shares issued under retail entitlement offer
Ordinary shares to be issued under over allotment option
Subordinated capital notes converted to ordinary shares
Share consolidation
Ending balance
31 DECEMBER
2019
NUMBER
31 DECEMBER
2018
NUMBER
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
1,320,439,437
1,320,439,437
6,219
6,219
263
263
6,482
263
263
6,482
31 DECEMBER
2018
$M ORDINARY
SHARES
31 DECEMBER
2018
$M OTHER
SHARE CAPITAL
5,953
–
–
268
(2)
6,219
1
–
(1)
–
–
–
31 DECEMBER
2019
NUMBER
31 DECEMBER
2018
NUMBER
1,320,439,437
43,959,446,612
–
–
–
–
–
59,441,900
563,881
4,361,900
3,015,976
(42,706,390,832)
1,320,439,437
1,320,439,437
(b) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to
the number of and amounts paid on the shares held.
On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon
a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
A share consolidation of 35 ordinary shares to 1 ordinary share of the Company was completed on 28 September 2018.
As announced on 29 November 2018 the Company launched a Global Offering in connection with its dual listing on the Hong
Kong Stock Exchange which commenced on 6 December 2018. On 6 December 2018 the Company issued 59,441,900 new shares
under the Global Offering, on 28 December 2018 563,881 new shares were issued under the Retail Entitlement offer and on
3 January 2019 4,361,900 new shares under partial exercise of the Over Allotment Option, all in connection with the dual listing
for HK$23.48 per New Share. The total amount raised was AU$268 million and AU$37 million of issue costs were incurred of
which AU$8 million was capitalised.
(c) Contingent value right shares
The contingent value right (“CVR”) shares were repurchased on 4 March 2014 for cash of $263 million representing the market
value of $3.00 cash per CVR share.
137
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
(d) Capital risk management
Total capital comprises total equity as shown on the balance sheet plus total interest bearing liabilities less cash and cash
equivalents. The Group’s primary objectives when managing capital are to ensure the continued ability to provide a consistent
return for equity stakeholders through a combination of capital growth and distributions and to maintain an optimal capital
structure to reduce the cost of capital. In order to achieve these objectives, the Group seeks to maintain a debt to debt plus
equity ratio (gearing ratio) that balances risks and returns at an acceptable level and also to maintain a sufficient funding base to
enable the Group to meet its working capital and strategic investment needs. In order to maintain or adjust the capital structure,
the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or other
equity instruments, repay debt or draw down additional debt.
The gearing ratios at 31 December 2019 and 31 December 2018 were as follows:
Total interest-bearing liabilities
Less: cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
NOTES
D2
C7
31 DECEMBER
2019
$M
3,498
31 DECEMBER
2018
$M
4,124
(962)
2,536
6,163
8,699
(1,031)
3,093
5,838
8,931
29.2%
34.6%
Refer to Note D2 for the Group’s compliance with the financial covenants of its borrowing facilities.
D5 Share-based payments
Accounting Policy
Refer to Note B4(iv) for the accounting policy on share-based payments.
Generally, participation in the Share Based Payment program (Long Term Incentive Program, “LTIP”) by the issuing of Rights is
limited to Senior Executives of the Group. All Rights are redeemable on a one-for-one basis for the Group’s shares, subject to the
achievement of performance hurdles. Dividends are not payable on Rights. For more information on the operation of the LTIP
refer to the Remuneration report.
DETAILS
Management performance rights 2018 Short Term Incentive Plan (“2018 STIP”)
2018 STIP
DATE OF
MEASUREMENT/GRANT
31 December 2018
NUMBER OF
RIGHTS*
804,599
DATE OF
EXPIRY
1 January 2020
31 December 2018
804,599
1 January 2021
2018 Long Term Incentive Plan (“2018 LTIP”)
2019 Long Term Incentive Plan (“2019 LTIP”)
30 May 2018
1 January 2019
1,609,198
1,438,170
1 January 2021
2,161,669
1 January 2022
3,599,839
*
The number of rights issued has been adjusted by the 35:1 share consolidation which was completed on 28 September 2018.
CONVERSION
PRICE
($)
Nil
Nil
Nil
Nil
138
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Balance at beginning of the year
Granted
Exercised during the year (i)
Cancellation of 2018 STIP (ii)
Expired during the year
Forfeited during the year
Balance at the end of year
2019
NO. OF RIGHTS
3,093,010
2018
NO. OF RIGHTS
–
2,161,669
4,309,438
–
(1,185,203)
(1,609,198)
–
–
–
(45,642)
(31,225)
3,599,839
3,093,010
(i)
In 2018 these rights relate to the SIS bonus, exercised on 1 September 2018. The weighted average closing price on the date immediately preceding exercise,
31 August 2018, adjusted for the share consolidation, was $4.375.
(ii) The 2018 STIP has been transferred to other payables with the expectation of being cash settled in future periods.
Fair value of performance rights granted
The fair value of the LTIP performance rights has been determined using the following assumptions:
Number of performance rights
Grant date
Post-consolidation share price at grant date ($)
Expected dividend yield
Vesting conditions
Value per performance right ($)
2019
LTIP
2,161,669
2018
LTIP
1,438,170
1 January 2019
30 May 2018
3.35
8%
(a)
2.66
4.94
0%
(a)
4.94
There are a maximum of 3,599,839 shares available for issue, which, if issued as new shares, would represent 0.2% of share capital
in issue at 31 December 2019 (31 December 2018: 3,093,010 shares representing 0.2% of share capital).
The LTIP has been valued using the volume weighted average price of Yancoal’s ordinary shares across a 10 day trading period
before grant date.
a. The LTIP performance rights will vest dependent upon the outcome of a cost and Earnings Per Share target. The rights are split
40% and 60% respectively to these conditions.
D6 Dividends
(a) Dividends
Final dividend for 2018 paid on 30 April 2019
Interim dividend for 2019 paid on 20 September 2019
(2018 interim paid on 21 September 2018)
2019
2018
CENTS PER
SHARE
28.55
10.35
CENTS PER
SHARE
–
10.35
TOTAL
AU$’M
377
137
514
TOTAL
AU$’M
–
130
130
On 28 February 2020 the Directors declared an unfranked dividend of $280 million (21.21 cents per ordinary share), with a record
date of 16 March 2020 and payment date of 29 April 2020, which is between 50% of profit after tax, before abnormal items, and
50% of free cash flow consistent with the Company’s constitution.
(b) Franking credits
Franking credits available for subsequent reporting periods based on an income tax rate of 30% (2018 - 30%)
31 DECEMBER
2019
$M
14
31 DECEMBER
2018
$M
8
The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for:
a.
b.
c.
franking credits that will arise from the payment of the amount of the provision for income tax and franking debits that will
arise as a result of refunds of tax that are reflected in the current tax receivable balance at the reporting date;
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
139
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
D7 Reserves
Accounting Policies
i. Hedging reserve
When a financial instrument is designated as a cash flow hedging instrument, the effective portion of changes in the fair value
of the hedging instrument is recognised in other comprehensive income and accumulated in the hedging reserve until the
anticipated underlying transaction occurs. Any ineffective portion of changes in the fair value of the hedging instrument is
recognised immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, or is sold, terminated or expires, any accumulated
gain or loss remains in equity until the forecast transaction is ultimately recognised in profit or loss. If the forecast transaction
is no longer expected to occur, then the amount accumulated in equity is immediately recognised in profit or loss.
ii. Employee compensation reserve
Shares held by the Group sponsored Employee Share Plan Trust are recognised as treasury shares and deducted from equity.
The fair value of equity plans granted is recognised in the employee compensation reserve over the vesting period.
This reserve will be reversed against treasury shares when the underlying shares vest and transfer to the employee at the fair
value. The difference between the fair value at grant date and the amount received against treasury shares is recognised in
retained earnings (net of tax).
(a) Reserve balances
Hedging reserve
Employee compensation reserve
31 DECEMBER
2019
$M
(489)
31 DECEMBER
2018
$M
(611)
5
(484)
7
(604)
(b) Hedging reserve
The hedging reserve is used to record gains or losses on cash flow hedges that are recognised directly in equity through other
comprehensive income.
The closing balance relates to the effective portion of the cumulative net change in the fair value of the natural cash flow hedge
using the US dollar denominated interest-bearing liabilities to hedge against future coal sales.
Hedging reserve – cash flow hedges
Opening balance
Fair value losses recognised on USD interest bearing liabilities
Recycled to profit or loss
Deferred income tax (expense) / benefit
Closing balance
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
(611)
(15)
190
(53)
(489)
(413)
(443)
160
85
(611)
If interest-bearing liabilities that are a natural hedge to future coal sales are repaid prior to the original designated date the
hedge gain/loss incurred prior to repayment will be released to the profit or loss in line with the original sales to which they were
designated. This has resulted in the following pre-tax release profile as at 31 December 2019:
Hedge loss to be recycled in future periods
Of which:
Hedges related to loans repaid prior to designated
repayment date
Hedges related to loans yet to be repaid
Deferred income tax benefit
Closing balance
2020
$M
181
–
181
2021
$M
163
61
102
2022
$M
238
238
–
2023
$M
–
–
–
2024
$M
116
36
80
TOTAL
$M
698
335
363
698
(209)
489
140
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
(c) Employee compensation reserve
The fair value of equity plans granted is recognised in the employee compensation reserve over the vesting period. This reserve
will be reversed against treasury shares when the underlying shares vest and transfer to the employee at the fair value.
The difference between the fair value at grant date and the amount received against treasury shares is recognised in retained
earnings (net of tax).
During the period the movements related to any 2019 additional performance rights issued or forfeited as disclosed in Note D4
and new awards of performance rights were made during the period.
D8 Contingencies
Contingent liabilities
The Group had contingent liabilities at 31 December 2019 in respect of:
(i) Bank guarantees
Parent entity and Group
Performance guarantees provided to external parties
Guarantees provided in respect of the cost of restoration of certain mining leases given to government departments
as required by statute
Joint ventures (equity share)
Performance guarantees provided to external parties
Guarantees provided in respect of the cost of restoration of certain mining leases
Guarantees held on behalf of related parties (refer to Note E3(f) for details of beneficiaries)
Performance guarantees provided to external parties
Guarantees provided in respect of the cost of restoration of certain mining leases given to government departments
as required by statute
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
151
135
286
160
285
445
106
84
190
921
208
113
321
144
236
380
119
55
174
875
(ii) Letter of Support provided to Middlemount Coal Pty Ltd
The Company has issued a letter of support dated 4 March 2015 to Middlemount Coal Pty Ltd (“Middlemount”), a joint venture of
the Group confirming:
•
•
it will not demand the repayment of any loan due from Middlemount, except to the extent that Middlemount agrees
otherwise or as otherwise provided in the loan agreement; and
it will provide financial support to Middlemount to enable it to meet its debts as and when they become due and payable,
by way of new shareholder loans in proportion to its share of the net assets of Middlemount.
This letter of support will remain in force whilst the Group is a shareholder of Middlemount or until notice of not less than
12 months is provided or such shorter period as agreed by Middlemount.
(iii) Contingencies
A number of claims have been made against the Group, including in respect of personal injuries, and in relation to contracts which
Group members are party to as part of the Group’s day to day operations. The personal injury claims which have been made
against the Group have largely been assumed by the insurers of the Group under the Group’s insurance policies. The Directors do
not believe that the outcome of these claims will have a material impact on the Group’s financial position.
141
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
D9 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest
rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial
markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative
financial instruments such as foreign exchange contracts to hedge certain risk exposures. Derivatives are exclusively used for
hedging purposes and not as speculative instruments. The Group uses different methods to measure different types of risk to
which it is exposed. These methods include sensitivity analysis in the case of foreign exchange, interest rate risk and other price
risks, and aging analysis for credit risk.
The Group holds the following financial instruments:
i. Cash and cash equivalents;
ii. Trade and other receivables (including WIPS);
iii. Trade and other payables;
iv. Interest-bearing liabilities, including bank loans and leases;
v. Available-for-sale investments;
vi. Royalty receivable;
vii. Non-contingent royalty receivable;
viii. Non-contingent royalty payable;
ix. Derivative financial instruments; and
Interest-bearing loan from associate.
x.
Financial assets
Cash and cash equivalent
Loans and receivables – amortised cost
Trade and other receivables
Non-contingent royalty receivable
Interest bearing loan to associates
Assets at fair value through profit and loss
Royalty receivable
WIPS
Financial liabilities
Amortised cost
Trade and other payables
Interest-bearing liabilities
Non-contingent royalty payable
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
962
735
8
901
226
–
2,832
806
3,498
27
4,331
1,031
844
15
835
193
–
2,918
840
4,124
52
5,016
The Board of Directors has overall responsibility for determining risk management objectives and policies and risk management is
carried out by the Group Audit and Risk Management department along with the Group Treasury department. The Board provides
written principles for overall risk management, as well as policies covering specific areas such as the use of derivative financial
instruments to mitigate foreign exchange risk. These derivative instruments create an obligation or right that effectively transfers
one or more of the risks associated with an underlying financial instrument, asset or obligation.
The overall objective of the Board is to set policies that seek to reduce risk and volatility in financial performance without unduly
affecting competitiveness and flexibility. Further details regarding these policies are set out below.
(a) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, securities prices, and coal
prices, will affect the Group’s income or the value of its holdings of financial instruments.
(i) Foreign exchange risk
The Group operates entirely in Australia and its costs are primarily denominated in its functional currency, the Australian dollar.
Export coal sales are denominated in US dollars and a strengthening of the Australian dollar against the US dollar has an adverse
impact on earnings and cash flow settlement. Liabilities for some plant and equipment purchases and loans are denominated
142
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
in currencies other than the Australian dollar and a weakening of the Australian dollar against other currencies has an adverse
impact on earnings and cash flow settlement.
The hedging policy of the Group aims to protect against the volatility of cash expenditures or reduced collection in the above
mentioned transactions as well as to reduce the volatility of profit or loss for retranslation of US dollar denominated loans at each
period end.
Hedging through bank issued instruments
Operating foreign exchange risk that arises from firm commitments or highly probable transactions are managed through the use
of bank issued forward foreign currency contracts. The Group hedges a portion of contracted US dollar sales receivables and asset
purchases settled in foreign currencies in each currency to mitigate the adverse impact on cash flow due to the future rise or fall
in Australian dollars against the relevant currencies.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised
in Other Comprehensive Income in the hedging reserve until the anticipated underlying transaction occurs. Once the anticipated
underlying transaction occurs, amounts accumulated in equity are recycled through the profit or loss or recognised as part of
the cost of the asset to which it relates. The ineffective portion of changes in the fair value of derivatives that are designated and
qualify as cash flow hedges is recognised immediately in the profit or loss. In the current period, the loss relating to the ineffective
portion was $nil (2018: $nil).
Natural cash flow hedge
The Group currently does not use bank issued instruments to hedge foreign exchange risks in respect of US dollar denominated
loans, however, the scheduled repayment of the principal on US dollar loans is designated to hedge the cash flow risks on the
portion of forecast US dollar sales that are not hedged through bank issued instruments (“natural cash flow hedge”). US dollar
loan repayments up to a six-month period are designated to hedge the forecast US dollar sales during the same period after the
designation of the hedge relationship based on a dollar for dollar basis until the hedge ratio reaches one.
Hedging effectiveness is determined by comparing the changes in the hedging instruments and hedged sales. Hedge ineffectiveness
will occur when cash flows generated by sales transactions are lower than the forecast sales transaction. In cases of hedge
ineffectiveness, gains or losses in relation to the excess portion in the foreign exchange movement of the designated US dollar
loan repayment will be recycled to profit or loss. The effective portion of changes in the hedging instruments will be recognised in
the cash flow hedge reserve in Other Comprehensive Income. When the sales transactions occur, amounts accumulated in equity
are recycled through the profit or loss as an increase or decrease to sales revenue.
Royalty receivable
The royalty receivable from the Middlemount Joint Venture is estimated based on expected future cash flows that are dependent
on sales volumes, US dollar denominated coal prices and the US dollar foreign exchange rate (refer to Note C10).
Other assets
Other assets include the promissory note receivable as discussed in Note C8(i).
Non contingent royalty payable and receivable
As part of the acquisition of Coal & Allied in 2017 the Company has agreed to make deferred non-contingent royalty payments to
Rio Tinto Plc (“Rio Tinto”) in US dollars. As described in Note D3 27.9% of non-contingent royalty payable is received from Glencore.
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows:
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Other assets
Royalty receivable
Non-contingent royalty receivable
Trade and other payables
Interest bearing liabilities
Non-contingent royalty payable
Net Exposure
31 DECEMBER 2019
31 DECEMBER 2018
USD
$M
641
241
1
–
226
8
(163)
(3,412)
(27)
(2,485)
HKD
$M
73
–
–
–
–
–
–
–
–
73
USD
$M
560
375
–
48
193
15
(295)
(4,096)
(52)
(3,252)
HKD
$M
189
–
–
–
–
–
–
–
–
189
143
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Sensitivity
The following table summarises the sensitivity of the Group’s financial assets and liabilities to a reasonable possible change in
the US dollar exchange rate. The Group’s exposure to other foreign exchange movements is not material. The Group has used
the observed range of actual historical rates for the preceding five year period, with a heavier weighting placed on recently
observed market data, in determining reasonably possible exchange movements to be used for the current year’s sensitivity
analysis. Past movements are not necessarily indicative of future movements. A 10% depreciation/appreciation of the Australian
dollar against the US dollar would have (decreased)/increased equity and profit or loss after tax by the amounts shown below.
This analysis assumes that all other variables remain constant.
2019
Cash and cash equivalents
Trade and other receivables
Royalty receivable
Non-contingent royalty receivable
Other assets
Total increase / (decrease) in financial assets
Trade and other payables
Interest-bearing liabilities
Non-contingent royalty payable
Total (increase) / decrease in financial liabilities
Total increase / (decrease) in profit before tax and equity
2018
Cash and cash equivalents
Trade and other receivables
Non-contingent royalty receivable
Other assets
Total increase / (decrease) in financial assets
Trade and other payables
Interest-bearing liabilities
Non-contingent royalty payable
Total (increase) / decrease in financial liabilities
Total increase / (decrease) in profit before tax and equity
10% DEPRECIATION OF AUD/USD
10% APPRECIATION OF AUD/USD
PROFIT BEFORE
INCOME TAX
$M
EQUITY
$M
PROFIT BEFORE
INCOME TAX
$M
EQUITY
$M
79
27
22
1
1
130
(13)
–
(3)
(16)
114
58
29
19
4
110
(23)
–
(4)
(27)
83
–
–
–
–
–
–
–
(379)
–
(379)
(379)
–
–
–
–
–
–
(319)
–
(319)
(319)
(65)
(22)
(18)
(1)
(1)
(107)
10
–
3
13
(94)
(48)
(24)
(16)
(3)
(91)
19
–
4
23
(68)
–
–
–
–
–
–
–
310
–
310
310
–
–
–
–
–
261
–
261
261
Equity movements above reflect movements in the hedge reserve due to foreign exchange movements on USD interest
bearing loans.
(ii) Price risk
The price risk of the Group include coal price risk.
The Group does not enter into commodity contracts other than to meet the Group’s expected usage and sales requirements,
such contracts are not settled net. The royalty receivables from Middlemount is exposed to fluctuations in coal price. The Group
currently does not have any derivative hedges in place against the movement in the spot coal price. Refer to Note D9(d)(iii) for the
royalty receivable coal price sensitivity analysis.
Coal sales are predominately provisionally priced initially. Provisionally priced sales are those for which price finalisation,
referenced to the relevant index, is outstanding at the reporting date. Provisional pricing mechanisms embedded within these
sales arrangements have the character of a commodity derivative and are carried at fair value through profit and loss as part of
trade receivables. The final sales price is determined normally 7 to 90 days after delivery to the customer. At 31 December 2019
there are $114 million of provisionally priced sales. If coal prices were to increase by 10% provisionally priced sales would increase
by $11 million.
144
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (iii) Interest rate risk
The Group is subject to interest rate risk that arises from borrowings, cash and cash equivalents and interest-bearing loan to
associate. Generally, no variable interest is receivable or payable on the Group’s trade and other receivables or payables where
applicable as they are fixed in nature and therefore they are not exposed to the interest rate risk.
The Group’s cash flow interest rate risk for assets primarily arises from cash at bank and deposits subject to market bank rates.
Floating rate borrowings bearing LIBOR rates are re-set on a quarterly basis.
The Group’s exposure to interest rate risk and the weighted average interest rate is set out as below:
Cash and cash equivalents
Bank loans and other borrowings
Interest-bearing loan to associate
31 DECEMBER 2019
31 DECEMBER 2018
WEIGHTED
AVERAGE
INTEREST RATE
%
1.5
5.9
8.6
WEIGHTED
AVERAGE
INTEREST RATE
%
1.4
5.9
9.1
BALANCE
$M
962
2,240
901
BALANCE
$M
1,030
2,572
835
Sensitivity
The following table summarises the sensitivity of the Group’s significant financial assets and liabilities to changes in variable
interest rates. This sensitivity is based on reasonably possible changes, determined using observed historical interest rate
movements for the preceding five year period, with a heavier weighting given to more recent market data. Past movements are
not necessarily indicative of future movements. For financial assets, a 25 basis point (decrease) / increase in interest rates would
have (decreased) / increased equity and profit or loss after tax by the amounts shown below. For financial liabilities, a 25 basis
point (decrease) / increase in interest rates would have increased / (decreased) equity and profit or loss after tax by the amounts
shown below. This analysis assumes that all other variables remain constant.
2019
Cash and cash equivalents
Interest-bearing loan to associate
Interest-bearing liabilities
2018
Cash and cash equivalents
Interest-bearing loan to associate
Interest-bearing liabilities
-25 BPS
+25 BPS
PROFIT AFTER
INCOME TAX
$M
EQUITY
$M
PROFIT AFTER
INCOME TAX
$M
EQUITY
$M
(2)
(2)
4
–
(1)
(1)
5
3
–
–
–
–
–
–
–
–
2
2
(4)
–
1
1
(5)
(3)
–
–
–
–
–
–
–
–
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
As at 31 December 2019 the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure
to discharge an obligation by the counterparties and financial guarantees provided by the Group is arising from the carrying
amount of the respective recognised financial assets as stated in the Consolidated Balance Sheet and the amount of contingent
liabilities in relation to financial guarantees issued by the Group as disclosed in Note D8.
In order to minimise credit risk, the management of the Group has delegated a team responsible for determination of credit
limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts.
In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure
that adequate impairment losses are made for irrecoverable amounts. In this regard, the Directors consider that the Group’s
credit risk is significantly reduced. The Group maintains its cash and cash equivalents with reputable banks. Therefore, the
Directors consider that the credit risk for such amounts are minimal.
In assessing the Expected Credit Losses (“ECL”) of trade receivables management assesses historical write offs of trade
receivables, aging of debtors and whether sufficient credit enhancement is provided by customers (letters of credit and bank
guarantees). If the aging of trade receivables significantly increased then the recognition of ECL would need to be reassessed.
145
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
Receivables will only be written off if there is demonstrable evidence that there is no reasonable expectation of recovery.
There was no provision apart from Note D1 for lifetime or 12 month ECL recognised for trade receivables as at 31 December 2019
as there are minimal aged debts.
The credit risk on cash and cash equivalents is limited as the counterparties are banks with credit-ratings assigned by international
credit-rating agencies that are at least investment grade.
Credit risk in trade receivables is managed in the following ways:
i. payment terms and credit limits are set for individual customers;
ii. a risk assessment process is used for all customers; and
iii. letters of credit are required for those customers assessed as posing a higher risk.
As disclosed in Note D2(a)(i) the minimum average balance of AU$25 million per day and at month end AU$50 million is required
to be held in the Lender Accounts of the Syndicated Facility which is not available for use on those days.
Refer to Note D1 for details on the credit risk assessment on the interest-bearing loan to associate.
The maximum exposure to credit risk on financial assets which have been recognised in the balance sheet is their carrying amount
less impairment provision, if any as set out below.
Cash and cash equivalents
Trade and other receivables
Interest-bearing loan to associate
31 DECEMBER
2019
$M
962
31 DECEMBER
2018
$M
1,031
735
901
2,598
844
835
2,710
Included in trade and other receivables are significant customers located in Australia and Hong Kong that account for 12% and 5%
of trade receivables respectively (2018: Singapore 18%, Australia 17%, Japan 16%, and Taiwan 14%).
The top five customers included in trade receivables with the largest gross receivable balance as at 31 December 2019 account for
27% of trade receivables (2018: 33%).
(c) Liquidity risk
Liquidity risk includes the risk that the Group will not be able to meet its financial obligations as they fall due. The Group will be
impacted in the following ways:
will not have sufficient funds to settle transactions on the due date;
i.
ii. will be forced to sell financial assets at a value which is less than what they are worth; or
iii. may be unable to settle or recover a financial asset at all.
Liquidity risk is managed by maintaining sufficient cash and liquid deposit balances and having readily accessible standby facilities
in place in accordance with the Board’s risk management policy. Details regarding finance facilities are set out in Note D2.
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities
and interest payments for all liabilities.
The amounts disclosed in the table are the contractual undiscounted cash flows including interest payments. Balances due within
12 months equal their carrying balances as the impact of discounting is not significant.
Contractual maturities of financial liabilities
AT 31 DECEMBER 2019
Non-derivatives
Trade and other payables
Non-contingent royalty
Lease liabilities
Other interest-bearing liabilities
Total non-derivatives
LESS THAN
1 YEAR
$M
BETWEEN 1
AND 2 YEARS
$M
BETWEEN 2
AND 5 YEARS
$M
GREATER THAN
5 YEARS
$M
TOTAL CASH
FLOWS
$M
CARRYING
AMOUNT
$M
802
14
36
1,437
2,289
4
14
35
1,134
1,187
–
–
26
1,409
1,435
–
–
10
–
10
806
28
107
3,980
4,921
806
27
94
3,404
4,331
146
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 AT 31 DECEMBER 2018
Non-derivatives
Trade and other payables
Non-contingent royalty
Lease liabilities
Other interest-bearing liabilities
Total non-derivatives
(d) Fair value measurements
LESS THAN
1 YEAR
$M
BETWEEN 1
AND 2 YEARS
$M
BETWEEN 2
AND 5 YEARS
$M
GREATER THAN
5 YEARS
$M
TOTAL CASH
FLOWS
$M
CARRYING
AMOUNT
$M
840
26
13
306
1,185
–
13
9
1,524
1,546
–
13
21
1,778
1,812
–
–
–
1,660
1,660
840
52
43
5,268
6,203
840
52
42
4,082
5,016
(i) Fair value hierarchy
The Group uses various methods in estimating the fair value of financial instruments. AASB 13 Fair Value Measurement requires
disclosure of fair value measurements by level in accordance with the following fair value measurement hierarchy:
a. quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
b.
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices)
or indirectly (derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
c.
The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value at
31 December 2019 and 31 December 2018:
31 DECEMBER 2019
Assets
Royalty receivable
WIPS
Total assets
31 DECEMBER 2018
Assets
Royalty receivable
WIPS
Total assets
LEVEL 1
$M
LEVEL 2
$M
LEVEL 3
$M
TOTAL
$M
–
–
–
–
–
–
–
–
–
–
–
–
226
–
226
193
–
193
226
–
226
193
–
193
(ii) Valuation techniques
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.
These valuation techniques maximise the use of observable market data where it is available. If all significant inputs required
to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the
case for the royalty receivable and WIPS.
(iii) Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 instruments for the year ended 31 December 2019:
Opening balance
Cash received / receivable
Unwinding of the discount
Remeasurement of the royalty receivable recognised in profit and loss
Closing balance
31 DECEMBER
2019
ROYALTY
RECEIVABLE
$M
193
31 DECEMBER
2018
ROYALTY
RECEIVABLE
$M
199
(19)
20
32
226
(31)
21
4
193
147
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Royalty receivable
The fair value of the royalty receivable is the fair value of the right to receive a royalty of 4% of Free on Board Trimmed Sales from
the Middlemount Mine. The financial asset has a finite life being the life of the Middlemount Mine and will be measured on a fair
value basis.
The fair value is determined using the discounted future cash flows that are dependent on the following unobservable inputs:
forecast sales volumes, coal prices and fluctuations in foreign exchange rates. The forecast sales volumes are based on the
internally maintained budgets, five year business plan and life of mine models. The forecast coal prices and long term exchange
rates are based on external data consistent with the data used for impairment assessments (refer to Note C3). The risk-adjusted
post-tax discount rate used to determine the future cash flows is 10.0%.
The estimated fair value could increase significantly if the following unobservable inputs of sales volumes and coal prices were
higher and if the Australian dollar weakens against the US dollar. The estimated fair value would also increase if the risk-adjusted
discount rate was lower.
Sensitivity
The following tables summarise the sensitivity analysis of royalty receivable. This analysis assumes that all other variables
remain constant.
Coal price
+10%
-10%
Exchange rates
+5 cents
-5 cents
Discount rates
+50 bps
-50 bps
31 DECEMBER
2019
FAIR VALUE
INCREASE/
(DECREASE)
$M
31 DECEMBER
2018
FAIR VALUE
INCREASE/
(DECREASE)
$M
21
(20)
(11)
13
(7)
8
15
(15)
(16)
16
(4)
4
WIPS
The WIPS are entitled to an annual dividend of 15%, which can be deferred for up to seven years. Deferred dividends attract an
annual finance charge of 15.75%. There is no scheduled maturity date but there are certain “remarketing dates” whereby the
WIPS can be refinanced, the earliest of which is 2023. The fair value is determined using the discounted future cash flows that are
dependent on the following unobservable inputs: internally maintained budgets and business plans of Wiggins Island Coal Export
Terminal (“WICET”). The risk adjusted post tax discount rate used to determine the future cashflows is 11.0%. In 2018 the WIPS
were reduced to nil.
(iv) Fair values of other financial instruments
The carrying amount is approximate to the fair value for the following:
i. Trade and other receivables
ii. Other financial assets
iii. Trade and other payables
iv. Interest-bearing liabilities
148
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 E GROUP STRUCTURE
This section explains significant aspects of the Group’s structure including interests in other entities, related party transactions,
parent entity information, controlled entities and the deed of cross guarantee.
E1 Business combinations and disposals
Accounting Policies
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired.
The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the
liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of
any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition
related costs are expensed as incurred including stamp duty. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the
acquisition date.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree and the acquisition
date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable
assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the
subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit
or loss as a gain on acquisition of subsidiaries.
Critical accounting estimates and judgements
Accounting for acquisitions of businesses requires judgment and estimates in determining the fair value of acquired assets
and liabilities. Techniques used to determine the fair value of acquired assets and liabilities include an income and cost
approach for mining tenements and depreciated replacement cost for the valuation of property, plant and equipment.
The relevant accounting standard allows the fair value of assets acquired to be refined for a window of one year after the
acquisition date, and judgement is required to ensure the adjustments made reflect new information obtained about facts and
circumstances that existed as of the acquisition date. The adjustments made on fair value of assets are retrospective in nature
and have an impact on goodwill or gain recognised on acquisition.
(a) Update on acquisition of 4% of Moolarben
On 30 November 2018, Moolarben Coal Mine Pty Ltd a 100% owned subsidiary of Yancoal Australia Ltd acquired a 4% interest
in Moolarben Coal Joint Venture (“Moolarben JV”) from Kores Australia Moolarben Coal Pty Ltd (“Kores”). The Moolarben JV
is accounted for as a joint operation. With the 4% acquisition the Group holds an 85% interest in the Moolarben JV. The cash
consideration paid was $84 million, split over four six-monthly instalments of $21 million each, and reduced by a $21 million
effective date adjustment whereby the cash consideration was reduced by 4% of the Moolarben JV’s net cash inflows from the
date of the sales agreement (15 April 2018) to completion.
During the period no new information has occurred in relation to this acquisition and as a result the accounting for this acquisition
was finalised on 30 November 2019.
(b) Update on acquisition of 28.898% interest in Warkworth Joint Venture
As announced on 7 March 2018 and effective from 1 March 2018 CNA Warkworth Australasia Pty Ltd, a subsidiary of the
Company, acquired a 28.898% interest in the Warkworth Joint Venture from Mitsubishi Development Pty Ltd (“MDP”) for
US$230 million, plus a net debt and working capital adjustment. The acquisition also included MDP’s shareholding in the
following companies, Warkworth Coal Sales Pty Ltd, Warkworth Mining Ltd, Warkworth Pastoral Co Pty Ltd and Warkworth
Tailings Treatment Pty Ltd.
During the period no new information has occurred in relation to this acquisition and as a result the accounting for this acquisition
was finalised on 7 March 2019.
149
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 E2 Interests in other entities
Accounting Policies
i. Associates
Associates are entities over which the Group has significant influence but not control or joint control. Significant influence is
presumed to exist where the Group:
• has over 20% but less than 50% of the voting rights of an entity, unless it can be clearly demonstrated that this is not the
case; or
• holds less than 20% of the voting rights of an entity; however, has the power to participate in the financial and operating
policy decisions of the entity.
After initial recognition at cost, associates are accounted for using the equity method.
ii. Joint arrangements
A joint arrangement is a contractual arrangement whereby two or more parties undertake economic activities under joint
control. Joint control exists only when the strategic, financial and operational policy decisions relating to the activities of the
joint arrangement require the unanimous consent of the parties sharing control. The classification of a joint arrangement is
dependent on the rights and obligations of the parties to the arrangement and will be either a joint operation or joint venture.
Joint operations: A joint operation is an arrangement where the Group shares joint control, primarily through contractual
arrangements with other parties. In these arrangements, the Group has rights to the assets and obligations for the liabilities
relating to the arrangement. This includes situations where the parties benefit from the joint activity through a share of the
output, rather than by receiving a share of the results of trading. The Group recognises its proportional right to the assets,
liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues
and expenses. These have been incorporated in the financial statements under the appropriate line items.
Joint ventures: A joint venture is a joint arrangement in which the parties that share joint control have rights to the net
assets of the arrangement. A separate vehicle, not the parties, has rights to the assets and liabilities of the arrangement.
Joint ventures are accounted for using the equity method.
iii. Equity method
The Group’s share of its associates’ and joint ventures’ post-acquisition profits or losses is aggregated as one line item and
recognised in profit or loss. Its share of post-acquisition other comprehensive income is recognised in other comprehensive
income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends
receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.
When the Group’s share of losses in a joint venture or associate equals or exceeds its interest, which includes any long-term
interests that, in substance, form part of the Group’s net investment in the joint venture, the Group does not recognise any
further losses, unless it has incurred a contractual or constructive obligation to contribute further funds. Unrealised gains
on transactions between the Group and its joint ventures or associates are eliminated to the extent of the Group’s interest
in these entities. Accounting policies of the joint ventures and associates have been changed where necessary, to ensure
consistency with the policies adopted by the Group.
Critical accounting judgements and estimates
There is significant judgement in assessing whether the Group controls Watagan. Even though it holds 100% of the nominal
share capital. An assessment has been made that in accordance with the accounting standards the Group does not control
Watagan as it is not able to direct the relevant activities of Watagan and accounts for its interest in Watagan as an associate.
There are significant estimates in assessing the underlying asset impairment test for Watagan, further details are in the
note below.
(a) Joint operations
A controlled entity, Moolarben Coal Mines Pty Limited, has an 85% (2018: 81% up to 30 November 2018) interest in the
Moolarben Joint Venture whose principal activity is the development and operation of open-cut and underground coal mines.
A controlled entity, Coal & Allied Operations Pty Ltd has a 51% (2018: 67.6% up to 4 May 2018) interest in the Hunter Valley
Operations Joint Venture whose principal activity is the development and operation of open-cut coal mines.
A controlled entity, Mount Thorley Operations Pty Ltd has a 80% (2018: 80%) interest in the Mount Thorley Joint Venture whose
principal activity is the development and operation of open-cut coal mines.
Controlled entities, CNA Warkworth Australasia Pty Ltd and CNA Resources Ltd, have a combined 84.5% (2018: 55.6% up
to 1 March 2018) interest in the Warkworth Joint Venture whose principal activity is the development and operation of
open-cut mines.
150
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 A controlled entity, Yarrabee Coal Company Pty Ltd, has a 50% (2018: 50%) interest in the Boonal Joint Venture, whose principal
activity is the provision of a coal haul road and train load out facility.
The principal place of business for the above joint operations is in Australia.
(b) Interests in associates and joint ventures
Set out below are the associates and joint ventures of the Group as at 31 December 2019. The entities listed below have share
capital consisting solely of ordinary shares, which are held directly by the Group. The country of incorporation or registration is
also their principal place of business.
PLACE OF
BUSINESS /
COUNTRY OF
INCORPORATION
NAME OF ENTITY
Watagan Mining Company Pty Ltd Australia
Port Waratah Coal Services Ltd
Australia
Newcastle Coal Infrastructure
Group Pty Ltd
Middlemount Coal Pty Ltd
HVO Coal Sales Pty Ltd
HVO Operations Pty Ltd
HVO Services Pty Ltd
Total
Australia
Australia
Australia
Australia
Australia
(i) Investment in associates
% OF OWNERSHIP INTEREST
CARRYING AMOUNT OF INVESTMENT
2019
%
100
30
27
2018
%
100
30
27
NATURE OF
RELATIONSHIP
Associate
Associate
Associate
MEASUREMENT
METHOD
Equity method
Equity method
Equity method
49.9997
49.9997
Joint Venture
Equity method
51
51
51
51
51
51
Joint Venture
Equity method
Joint Venture
Equity method
Joint Venture
Equity method
2019
$M
–
184
–
87
2
–
–
273
2018
$M
–
190
–
116
1
–
–
307
Watagan Mining Company Pty Ltd
During 2015 the Group established a 100% owned subsidiary, Watagan Mining Company Pty Ltd (“Watagan”). On 18 February 2016,
the Group executed a Bond Subscription Agreement, together with other agreements (the “Watagan Agreements”) that, on
completion, transferred the Group’s interest in three of its 100% owned NSW coal mining operations, being the Austar, Ashton and
Donaldson coal mines (the “three mines”), to Watagan for a purchase price of $1,363 million (an amount equal to the book value
of the three mines at completion). The purchase price was funded by way of a $1,363 million loan from Yancoal Australia Ltd to
Watagan bearing interest at BBSY plus 7.06% with a maturity date of 1 April 2025 Yankuang Group Co., Ltd (“Yankuang”), the
Group’s ultimate parent entity, guarantees payment of any amount owed to Yancoal Australia Ltd under the loan if Watagan does
not pay Yancoal Australia Ltd such amount when due. The completion date of the transaction was 31 March 2016.
On completion Watagan issued US$775 million of secured debt bonds with a term of approximately nine years to three external
financiers (“Bondholders”). The Bondholders receive interest on the face value outstanding on the bonds comprising a fixed
interest component, as well as a variable interest component that is tied to the EBITDA performance of Watagan. As a result
of the terms of the Watagan Agreements, it was determined that the Bondholders obtained accounting control of Watagan;
accordingly, the Group de-consolidated Watagan.
This change in accounting control was determined to occur on the issuance date of the bonds on the basis that the Bondholders
obtained power over the key operating and strategic decisions of Watagan and no longer resided with the Group. Specifically,
those powers were transferred to the Bondholders under the terms of the Watagan Agreements as the Bondholders were given
control of Watagan’s board of directors via appointment of the majority of directors. This change in accounting control resulted in
the Group de-consolidating the results of Watagan from the transaction completion date and the Group began to equity account
for its 100% equity interest in Watagan as an associate, given the Group retains significant influence in Watagan.
On 4 January 2019 BOCI (one of the Bondholders) notified Watagan and Yankuang that it was exercising its put option over
US$200 million of bonds. As a consequence, Yankuang became the bondholder of the put bonds following completion of the
purchase of those bonds by Yankuang on 1 April 2019. No security was given by Watagan in favour of Yankuang. As the put bonds
represent less than 50.1% of the face value of the bonds, and the put option was not exercised by the instructing bondholder, the
put option is not deemed to have been exercised as to all the bonds, nor has the group regained accounting control of Watagan.
Accordingly, the Group continues to equity account its interest in Watagan.
Whilst Watagan is equity accounted rather than consolidated for accounting purposes, as a result of the Group’s ongoing 100%
equity ownership it remains within the Group’s tax consolidated group.
The Watagan group financial statements for the year ended 31 December 2019 have not yet been finalised by Watagan, where,
in accordance with their reporting obligations, they have until 30 April 2020 to finalise their reporting. However, Yancoal has
undertaken an assessment of the carrying value of the Watagan assets for the purpose of disclosures in its Group financial
statements. This resulted in the recognition of a $873 million impairment provision, before tax, against the non-current assets
recognised on Watagan’s balance sheet based on the Group’s assessment of the carrying value of the Watagan assets, following
151
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 finalisation of a number of detailed technical studies. This is in addition to the recognition of a $100 million impairment provision,
before tax, by Yancoal at 30 June 2019. For the year ended 31 December 2019 the total impairment provision recognised of
$973 million includes $328 million at Austar, $528 million at Ashton and $117 million at Donaldson.
The book value of Watagan’s non-current assets, after the recognition of the above impairment, is $832 million and includes,
$114 million, $258 million and $271 million for the Austar, Ashton and Donaldson mines, respectively.
The book value of Watagan’s net liabilities has declined since inception and at 31 December 2019 Yancoal has assessed the book
value of liabilities exceeded the book value of assets by $1,294 million. Watagan’s loss after tax for the year ended 31 December
2019 was $856 million (2018: loss $217 million) inclusive of the impairment provision described above. These losses have not been
recognised by Yancoal as the accumulated losses exceeds the value of the investment by the Group.
Under the Watagan Agreements, Yancoal will regain accounting control of Watagan and need to re-consolidate the Watagan
Group if:
• either Industrial Bank (as more than 50.1% of the total bonds will have been put to Yankuang) or UNE (as the instructing
bondholder) exercise their put options to Yankuang during an exercise window (the next window being January 2021);
• Watagan redeems all the bonds; or
•
some other change of circumstance occurs that re-establishes Yancoal’s control of Watagan, including amendments or
replacement of existing accounting standards.
If reconsolidation occurs Yancoal will i) cease recognising interest income on the Watagan loan amounting to $75 million in
the year ended 31 December 2019, forego the fees and margin received under the various service agreements amounting to
$10 million in the year ended 31 December 2019 and de-recognise the Watagan loan receivable balance of $901 million at
31 December 2019 as these amounts will become intercompany balances and will be eliminated on consolidation; ii) recognise
an interest expense on the Watagan bonds amounting to $69 million in the year ended 31 December 2019 (or the Yankuang loan if
the put option has been fully exercised or any external funding used to refinance either the Watagan bonds or Yankuang loan) and
recognise the fair value of the Watagan Bonds, with a face value of US$775 million (A$1,106 million) at 31 December 2019; and iii)
recognise the ongoing operating results of Watagan, including the three Watagan mines, in the profit and loss and recognise the
fair value of the assets and liabilities of Watagan (including the Watagan Bonds) on the balance sheet at that time.
The book value of Watagan’s net liabilities at 31 December 2019 was $1,294 million. Upon the potential reconsolidation of
Watagan, Yancoal will be required to recognise the fair value of the assets and liabilities of Watagan on its balance sheet at
the date of reconsolidation, and whilst book value is not necessarily equal to fair value the Yancoal directors believe the net
asset deficiency of $1,294 million is a reasonable approximation of fair value at 31 December 2019. As such, had the potential
reconsolidation of Watagan by Yancoal occurred at 31 December 2019 Yancoal may be required to recognise a loss on
reconsolidation of approximately $1,294 million. The net asset deficiency of Watagan could increase in the future if Watagan
incurs additional after tax losses, additional asset impairments or there is a weakening of the AUD:USD exchange rate resulting
in an increase in the AUD equivalent of the US$775 million bonds.
On 24 January 2020, it was announced to Austar employees that the mine will suspend production and transition to care and
maintenance operations after 31 March 2020, following the completion of works within the current Bellbird South mining area.
Work continues to be undertaken by Watagan in respect of the very challenging geological, geotechnical, ventilation and gas
conditions at the mine’s Stage 3 area to assess if a re-entry to this mining area is feasible and economic. Based on the latest
available technical information, received in the second half of 2019, it was determined to impair the carrying value of the
Austar mine to $nil reflecting the increased significant uncertainty regarding any future operations at the Austar mine.
The Ashton mine continues to face geotechnical challenges with regard to mining the Lower Barrett seam on completion of the
current Upper Lower Liddell seam together with ongoing land acquisition challenges with regard to the proposed South East
Open Cut mine (“SEOC”). Based on the latest available technical information and regulatory approval status of SEOC, updated in
the second half of 2019, it was determined to impair the carrying value of the Ashton mine to $112 million, including exploration,
reflecting the increased geotechnical risk and related negative economic impact on the Lower Barrett seam and the increased
uncertainty regarding development of SEOC.
Donaldson remains on care and maintenance and work remains ongoing to explore potential future mining operations. Based on
the latest available technical information, it was determined to impair the carrying value of Donaldson to $228 million, including
exploration, primarily reflecting an increase in forecast operating cash costs.
The value of the non-current assets in Watagan continue to carry operational risks, including that:
• Ashton mines the Lower Barrett seam on completion of mining the Upper Lower Liddell seam; and
• Donaldson will recommence operations at some time in the future which is management’s current intention.
152
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 The key assumptions in the fair value model of Watagan are broadly consistent with those disclosed in Note C3 noting that;
(i) the Group’s assessment of the long term coal prices of US$51 - US$100 per tonne for thermal coal and US$102 - US$176 per
tonne from metallurgical coal for Watagan mines is toward the bottom of the range of external forecasts, and (ii) to reflect the
increased operational risks when determining the recoverable amount of the Watagan mines a 1.5% risk premium has been
applied to the discount rate for Ashton’s current operations, increasing to 3.5% for Lower Barrett, and a 3.5% risk premium has
been applied to Austar and Donaldson.
If it is determined that either or both, Ashton or Donaldson, are unable to operate at future forecast production levels or there
are further materially negative changes to other operating assumptions, impacting both mines, including coal prices, exchange
rates, operating costs, capital expenditure, life of mine production, geological conditions, approvals or changes to existing lease
conditions or regulatory outcomes it is likely that the fair value of these mines would be reduced further. Any further impairment
of the assets of Watagan would increase Watagan’s net asset deficit. In that event, a further impairment may be recognised by the
Group on its loan receivable from Watagan, refer to Note D1 for details on the loan, or on the future reconsolidation of Watagan.
Sensitivities
Apart from the geotechnical issues noted at Ashton and the ongoing work on recommencing mining at Donaldson that directly
impact the physical and cost inputs, the most sensitive inputs to the fair value model of Watagan is forecast revenue, which is
primarily dependent on estimated future coal prices, the AUD:USD forecast exchange rate, and the discount rate:
Book Value
Recoverable Amount
Head Room
US$ Coal Price (i)
+10%
-10%
Exchange Rate (ii)
+5 cents
-5 cents
Discount Rate (iii)
+50 bps
-50 bps
2019
WATAGAN
$M
190
190
–
164
(155)
(75)
89
(13)
13
(i) This represents changes in recoverable amount due to +/- 10% change to our coal price assumption.
(ii) This represents the changes in recoverable amount due to a +/- 5 cents change to the long-term AUD:USD foreign exchange rate adopted.
(iii) This represents the changes in recoverable amount due to a +/- 50bps change in discount rate adopted.
For Yancoal, an increase in the recoverable amount, all else being equal, may decrease any loss on reconsolidation, conversely,
a decrease in the recoverable amount may increase any loss on reconsolidation.
Port Waratah Coal Services Ltd
The Group holds a direct shareholding in Port Waratah Coal Services Ltd (“PWCS”) of 30% (2018: 30%). Under the shareholder
agreement between the Group and the other shareholders of PWCS, the Group has 30% of the voting power of PWCS. The Group
has the right to appoint a director and is currently represented on the Board to partake in policy-making processes. The principal
activities of PWCS were the provision of coal receivable, blending, stockpiling and ship loading services in the Port of Newcastle.
Newcastle Coal Infrastructure Group Pty Ltd
The Group holds 27% (2018: 27%) of the ordinary shares of Newcastle Coal Infrastructure Group Pty Ltd (“NCIG”). Under the
shareholder agreement between the Group and other shareholders, the Group has 27% of the voting power of NCIG. The Group
has the right to appoint a director and is currently represented on the Board to partake in policy-making processes.
153
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Summarised financial information of associates
The information below reflects the Group’s share of the results of its principal associates and the aggregated assets and liabilities.
They have been amended to reflect adjustments made by the Group when using the equity method, including fair value
adjustments and modifications for differences in accounting policy.
Cash and cash equivalent
Other current assets
Current assets
Property, plant and equipment
Mining tenements
Exploration and evaluation assets
Deferred tax asset
Other non current assets
Non-current assets
Total assets
Current liabilities
Deferred tax liability
Other non-current liabilities
Non-current liabilities
Total liabilities
Net assets
Group's ownership interest in the Net assets
Revenue
Management fees (Yancoal
Australia Ltd)
Interest paid / payable
(Bondholders)
Interest paid / payable (Yancoal
Australia Ltd)
Other interest expenses
Depreciation & amortisation
expenses
Impairment of assets
(Loss) / gain on foreign exchange
Other expenses
Income tax benefit / (expense)
(Loss) / profit from continuing operations after tax
Other comprehensive income / (expense)
Total comprehensive (expense) / income
Group's ownership interest in (loss) / profit after tax
WATAGAN
PWCS
NCIG
31 DECEMBER
2019
$M
14
31 DECEMBER
2018
$M
109
31 DECEMBER
2019
$M
72
31 DECEMBER
2018
$M
51
31 DECEMBER
2019
$M
59
31 DECEMBER
2018
$M
51
66
80
347
–
154
153
178
832
912
57
–
2,149
2,149
2,206
(1,294)
(1,294)
316
(49)
(72)
(75)
(5)
(141)
(973)
(7)
(216)
366
(856)
–
(856)
(856)
55
164
865
319
298
–
172
1,654
1,818
54
206
1,996
2,202
2,256
(438)
(438)
311
(51)
(74)
(67)
(5)
(69)
–
(89)
(263)
90
(217)
–
(217)
(217)
47
119
1,365
–
–
–
43
1,408
1,527
289
71
555
626
915
612
184
341
–
–
–
(29)
(117)
–
–
(173)
(9)
13
–
13
4
56
107
1,462
–
–
–
25
1,487
1,594
235
78
649
727
962
632
190
362
–
–
–
(33)
(112)
–
–
(174)
(14)
29
–
29
9
37
96
2,079
–
–
–
495
2,574
2,670
53
96
3,843
3,939
3,992
(1,322)
(357)
439
–
–
–
(241)
(106)
–
(49)
(92)
–
(49)
–
(49)
(13)
41
92
2,158
–
–
–
500
2,658
2,750
53
99
3,871
3,970
4,023
(1,273)
(338)
388
–
–
–
(228)
(106)
–
(329)
(83)
111
(247)
–
(247)
(67)
154
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Movements in carrying amounts
The Group’s share of Watagan and NCIG’s profit / (loss) after tax has not been recognised for the years ended 31 December 2019
and 31 December 2018 since the Group’s share of Watagan and NCIG’s accumulated losses exceeds its interest in Watagan and
NCIG at 31 December 2019 and at 31 December 2018.
As the Group does not have contractual agreements or a contractual obligation to contribute to these associates no additional
liabilities have been recognised.
MOVEMENTS IN PWCS CARRYING AMOUNTS
Opening balance
Share of profit of equity-accounted investees, net of tax
Dividends received
Closing net book amount
(ii) Interest in joint ventures
31 DECEMBER
2019
$M
190
31 DECEMBER
2018
$M
191
4
(10)
184
9
(10)
190
Middlemount Coal Pty Ltd
A controlled entity, Gloucester (SPV) Pty Ltd, has a 49.9997% interest in the net assets of Middlemount Coal Pty Ltd
(“Middlemount”), an incorporated joint venture, whose principal activity is the development and operation of open-cut coal
mines in the Bowen Basin.
HVO entities
On completion of the establishment of the 51%:49% unincorporated joint venture with Glencore on 4 May 2018, the Group holds
51% of the shares in HVO Coal Sales Pty Ltd, HVO Operations Pty Ltd and HVO Services Pty Ltd (“HVO Entities”). From this date
the Group has determined that it no longer controls these companies. From 4 May 2018 the Group equity accounts the financial
results of these companies.
Summarised financial information of joint ventures
The following table provides summarised financial information for the HVO Entities and Middlemount. They have been amended
to reflect adjustments made by the Group when using the equity method, including fair value adjustments and modifications for
differences in accounting policy.
Cash and cash equivalents
Other current assets
Total current assets
Total non-current assets
Total current liabilities
Non-current financial liabilities
Other non-current liabilities
Total non-current liabilities
Net assets
Group's ownership interest in net assets
HVO ENTITIES
MIDDLEMOUNT
31 DECEMBER
2019
$M
5
113
118
32
108
38
38
4
2
31 DECEMBER
2018
$M
6
113
119
36
115
38
38
2
1
31 DECEMBER
2019
$M
8
31 DECEMBER
2018
$M
14
80
88
942
231
173
452
625
174
87
81
95
868
97
162
472
634
232
116
155
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Revenue
Depreciation and amortisation
Other expenses
Interest expenses
Income tax benefit /(expense)
Profit / (loss) from continuing operations after tax
Movements in reserves, net of tax
Total changes in equity
Group's ownership interest in profit / (loss) after tax
Group’s ownership interest in reserve movements
HVO ENTITIES
MIDDLEMOUNT
31 DECEMBER
2019
$M
2
–
–
–
–
2
–
2
1
–
31 DECEMBER
2018
$M
–
–
–
–
2
2
–
2
1
–
31 DECEMBER
2019
$M
464
31 DECEMBER
2018
$M
755
(44)
(479)
(17)
18
(58)
–
(58)
(29)
–
(38)
(541)
(37)
(48)
91
21
112
46
10
The liabilities of Middlemount include non-interest-bearing liability of $203 million (face value of $212 million) due to the Group
at 31 December 2019 (31 December 2018: $218 million) with maturity of 31 December 2020 and an interest-bearing revolver
of $25 million which was fully drawn at 31 December 2019. The liabilities of Middlemount also includes a royalty payable of
$15 million due to the Group at 31 December 2019 (31 December 2018: $9 million).
Movements in carrying amounts
Opening net book amount
Share of (loss) / profit of equity-accounted investees, net of tax
Movements in reserves, net of tax
Closing net book amount
MIDDLEMOUNT
31 DECEMBER
2019
$M
116
31 DECEMBER
2018
$M
60
(29)
-
87
46
10
116
(iii) Commitments and contingent liabilities in respect of associates and joint ventures
There were no commitments and no contingent liabilities in respect of the Group’s associates and HVO Entities as at
31 December 2019.
There were no commitments in respect of the Group’s interest in Middlemount at 31 December 2019.
Other contingent liabilities in respect of the Group’s interest in Middlemount are set out in Note D8(ii).
E3 Related party transactions
(a) Parent entities
The parent entity within the Group is Yancoal Australia Ltd. The Group’s majority shareholder is Yanzhou Coal Mining Company
Limited (“Yanzhou”) (incorporated in the People’s Republic of China). The ultimate parent entity and ultimate controlling party is
Yankuang Group Corporation Limited (incorporated in the People’s Republic of China).
Yancoal International Resources Development Co., Ltd, Yancoal International Trading Co., Ltd are owned by Yanzhou and
incorporated in Hong Kong. Yankuang Resources Pty Ltd is owned by Yankuang, incorporated in Australia and the Company
manages this entity on behalf of Yankuang.
(b) Yancoal International Holding Co. Ltd
Yancoal International (Holding) Co., Ltd is a wholly owned subsidiary of Yanzhou and has the following subsidiaries: Yancoal
Technology Development Holdings Pty Ltd, Athena Holdings Pty Ltd, Tonford Holdings Pty Ltd, Wilpeena Holdings Pty Ltd, Premier
Coal Holdings Pty Ltd, Premier Coal Ltd, Yankuang Ozstar Ningbo Trading Co Ltd (“Yankaung Ozstar”), Yancoal Energy Pty Ltd and
Syntech Resources Pty Ltd (“Yancoal International Group”). The Company manages these entities on behalf of Yanzhou.
(c) Associates and joint ventures
Refer to Note E2 for details on the associates and joint ventures.
156
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (d) Transactions with other related parties
The following transactions occurred with related parties:
Sales of goods and services
Sale of coal to Watagan Mining Company Pty Ltd
Sales to coal to Yancoal International Trading Co. Ltd (i)
Provision of marketing and administrative services to Watagan Group
Provision of marketing and administrative services to Yancoal
International Group (ii)
Purchases of goods and services
Purchase of coal from Watagan Group
Purchases of coal from Syntech Resources Pty Ltd (i)
Advances and loans
Repayments of loan from Yanzhou Coal Mining Company Ltd (ii)
Advances of loan to Watagan Mining Company Pty Ltd
Repayments of loan from Watagan Mining Company Pty Ltd (ii)
Repayments of loans from Middlemount Coal Pty Ltd
Advances of loan receivable to Middlemount
Repayment of promissory note from Yankaung Ozstar
Interest income capitalised into loan receivable from Middlemount
Finance costs
Interest expenses on loans from Yancoal International Resources Development Co., Ltd (ii)
Interest expenses on loans from Yanzhou (ii)
Interest expenses on loans from Yancoal International (Holding) Co., Ltd (ii)
Interest expenses on loans from Yancoal International Trading Co., Ltd (ii)
Other costs
Corporate guarantee fee to Yanzhou Coal Mining Company Ltd (ii)
Port charges to NCIG Holdings Pty Limited
Port charges to PWCS
Arrangement fee on loans from Yancoal International Resources Development Co., Ltd (ii)
Finance income
Interest income received from Premier Coal Holdings Pty Ltd
Interest income from loan to Watagan Mining Company Pty Ltd
Interest income released from loan receivable with Middlemount
Interest income received from loan receivable with Middlemount
Other income
Mining services fees charged to Watagan Group
Royalty income charged to Middlemount
Bank guarantee fee charged to Yancoal International Group (ii)
Bank guarantee fee charged to Watagan Group
Longwall hire fee charged to Austar Coal Mine Pty Ltd
Dividend income received from PWCS
31 DECEMBER
2019
$’000
31 DECEMBER
2018
$’000
22,217
126,840
5,881
8,880
163,819
(112,280)
(7,341)
(119,621)
(349,211)
(292,845)
227,150
21,000
(25,000)
40,037
–
(378,869)
(12,290)
(57,675)
(5,823)
(3,241)
(79,029)
(27,991)
(128,968)
(32,402)
–
(189,361)
-
75,368
5,820
729
81,917
43,308
19,299
2,904
1,702
3,000
13,279
83,492
36,854
225,952
5,705
7,900
276,411
(47,302)
(27,159)
(74,461)
(174,787)
(377,091)
254,356
117,071
–
–
(14,952)
(195,402)
(20,305)
(65,352)
(9,282)
(20,354)
(115,293)
(65,090)
(137,628)
(38,449)
(1,503)
(242,670)
264
67,179
18,187
–
85,630
46,003
31,398
2,860
1,574
3,000
13,126
97,961
157
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
(e) Outstanding balances arising from transactions with related parties
Balances outstanding at the reporting date to / from related parties are unsecured, non-interest bearing (except for loans
receivable and loans payable) and are repayable on demand.
The following balances are outstanding at the end of the reporting period in relation to transactions with related parties:
Current assets
Trade and other receivables
Receivable from Yancoal International Group in relation to cost reimbursement
Receivable from Watagan Group entities in relation to cost reimbursement
Royalty receivable from Middlemount
Other receivable from Yankuang Resources Pty Ltd
Promissory Notes receivable from Oz Star Ningbo Trading Co., Ltd
Loans receivable
Interest income receivable from Watagan Mining Company Pty Ltd
Interest income receivable from Middlemount
Loan receivable advanced to Middlemount
Non-current assets
Advances to joint venture and associate
Receivable from Middlemount Coal Pty Ltd being an unsecured, non-interest bearing advance
Receivable from Watagan Mining Company Pty Ltd being an unsecured, interest-bearing loan
Current liabilities
Other payables
Payables to Yanzhou
Payables to Yancoal International Resources Development Co., Ltd
Payables to Yancoal International (Holding) Co., Ltd
Tax sharing and funding arrangement with Watagan Group
Payables to Yancoal International Trading Co., Ltd
Other payable to Watagan Group
Non-current liabilities
Other payables
Payable to Yancoal International Resources Development Co., Ltd being an unsecured, interest-bearing loan (ii)
Payable to Yancoal International (Holding) Co., Ltd being an unsecured, interest-bearing loan (ii)
Payable to Yancoal International Trading Co., Ltd being an unsecured, interest-bearing loan (ii)
Payable to Yanzhou being an unsecured, interest-bearing loan (ii)
The terms and conditions of the related party non current liabilities is detailed in Note D2(c) above.
Continuing connected transaction under Chapter 14A of H K Listing Rules.
i.
ii. Fully exempt continuing connected transaction under Chapter 14A of H K Listing Rules.
31 DECEMBER
2019
$’000
31 DECEMBER
2018
$’000
2,734
–
15,428
52
–
–
318
25,000
43,532
3,791
9,417
9,403
35
39,671
–
–
–
62,317
202,670
900,591
217,850
834,896
1,103,261
1,052,746
102,211
159,154
5,654
2,345
164,026
–
3,451
277,687
5,612
3,974
107,618
8,938
–
285,296
192,692
79,927
–
891,634
1,164,253
191,272
128,927
304,619
885,065
1,509,883
158
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
(f) Guarantees
The financiers of the Group have issued undertakings and guarantees to government departments, and various external parties
on behalf of the following related entities:
Yancoal International Group
Syntech Resources Pty Ltd
AMH (Chinchilla Coal) Pty Ltd
Premier Coal Ltd
Tonford Holdings Pty Ltd
Athena Joint Venture
Watagan Group
Ashton Coal Mines Ltd
Austar Coal Mine Pty Ltd
Donaldson Coal Pty Ltd
Other Yankaung entity
Yankuang Resources Pty Ltd
31 DECEMBER
2019
$’000
31 DECEMBER
2018
$’000
84,172
49
29,000
10
3
28,843
37,993
9,764
84,694
49
29,000
10
3
15,467
36,640
7,953
45
45
189,879
173,860
Refer to Note D8(i) for details of the natures of the guarantees provided.
(g) Terms and conditions
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to
other parties unless otherwise stated.
The terms of the loan facilities from Yanzhou are as follows:
The US$116 million loan from Yancoal International Resources Development Co., Ltd repaid in October 2018 was charged at a
fixed interest rate of 7.00% p.a (inclusive of arrangement fees).
On 31 December 2014 an AU$1,400 million facility was provided by Yanzhou at a fixed interest rate of 7% on any amounts drawn.
During 2019 US$250 million was repaid and no additional amounts were drawn. As at 31 December 2019 a total of US$573 million
has been drawn.
On 31 December 2014 an AU$807 million facility was provided by Yanzhou at a fixed interest rate of 7% on any amounts drawn.
During 2019 no amounts were repaid or drawn (2018: no amount was repaid or drawn) (Note D2(c)). As at 31 December 2019 a
total of US$243 million has been drawn.
Yanzhou has provided corporate guarantees as security for the following facilities:
• Syndicated facility and syndicated bank guarantee facility at a fixed rate of 1.5% from 1 April 2018 (2.5% before 1 April 2018) is
charged on the outstanding loan principal and bank guarantee facility limit.
The Directors of Yanzhou have provided a letter of support whereby unless revoked by giving not less than 24 months notice, for
so long as Yanzhou owns at least 51% of the shares of Yancoal, Yanzhou will ensure that Yancoal continues to operate so that it
remains solvent.
159
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
E4 Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity, Yancoal Australia Ltd show the following aggregate amounts:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Contributed equity
Reserves
Other reserves
Distributable profits
Accumulated losses
Capital and reserves attributable to the owners of Yancoal Australia Ltd
Profit for the year
Other comprehensive income / (expense)
Total comprehensive income
31 DECEMBER
2019
$M
1,556
31 DECEMBER
2018
$M
1,120
9,721
11,277
2,560
3,035
5,595
5,682
9,947
11,067
1,198
4,066
6,064
5,003
6,482
6,482
(484)
1,045
(1,361)
5,682
1,073
122
1,195
(604)
486
(1,361)
5,003
616
(198)
418
(b) Guarantees entered into by the parent entity
As at 31 December 2019, the parent entity had contingent liabilities in the form of a bank guarantee amounting to $921 million
(2018: $875 million) in support of the operations of the parent entity, its subsidiaries and related parties (refer to Note E3).
(c) Contingent liabilities of the parent entity
There are cross guarantees given by Yancoal Australia Ltd and certain subsidiaries as described in Note E5.
The parent entity did not have any contingent liabilities as at 31 December 2019, except for those described in Note D8.
E5 Controlling interests
(a) Significant investments in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries that are
controlled:
PRINCIPAL ACTIVITIES
EQUITY HOLDING
ISSUED AND FULLY
PAID SHARE CAPITAL
2019
%
2018
%
NAME OF ENTITY
The Company
Yancoal Australia Ltd (i)
Controlled entities
Yancoal SCN Ltd
Holding company of subordinated capital notes
Yancoal Australia Sales Pty Ltd (i) (iii)
Coal sales
Yancoal Resources Limited (iii)
Coal investment holding company
Yancoal Mining Services Pty Ltd (i)
Provide management services to underground mines
Moolarben Coal Mines Pty Ltd (iii)
Coal business development
Moolarben Coal Operations Pty Ltd
Management of coal operations
Moolarben Coal Sales Pty Ltd
Coal sales
Felix NSW Pty Ltd
SASE Pty Ltd
Investment holding
Dormant
Yarrabee Coal Company Pty. Ltd. (iii)
Coal mining and sales
Proserpina Coal Pty Ltd
Holding company
160
1
100
446,409,065
100
1
2
2
2
9,650,564
92,080
1
100
100
100
100
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
100
100
90
100
100
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 NAME OF ENTITY
PRINCIPAL ACTIVITIES
EQUITY HOLDING
ISSUED AND FULLY
PAID SHARE CAPITAL
2019
%
2018
%
Athena Coal Operations Pty Ltd
Athena Coal Sales Pty Ltd
Gloucester Coal Ltd (i) (iii)
Dormant
Dormant
1
1
Coal resource exploration development
719,720,808
Westralian Prospectors NL (i)
Holding company
Eucla Mining NL (i)
CIM Duralie Pty Ltd (ii)
Duralie Coal Marketing Pty Ltd (ii)
Duralie Coal Pty Ltd (i) (iii)
Gloucester (SPV) Pty Ltd (iii)
Coal mining
Holding company
Holding company
Coal mining
Holding company
Gloucester (Sub Holdings 2) Pty Ltd (ii)
Holding company
CIM Mining Pty Ltd (i)
Monash Coal Holdings Pty Ltd (ii)
CIM Stratford Pty Ltd (i)
CIM Services Pty Ltd (ii)
Monash Coal Pty Ltd (ii) (iii)
Stratford Coal Pty Ltd (ii) (iii)
Stratford Coal Marketing Pty Ltd (ii)
Paway Ltd
Holding company
Holding company
Holding company
Holding company
Coal exploration
Coal mining
Coal sales
Dormant
Coal & Allied Industries Ltd (iii)
Coal investment Holding company
Kalamah Pty Ltd
Holding company
Coal & Allied (NSW) Pty Ltd
Employment company for Mount Thorley mine and
Warkworth mine
Australian Coal Resources Ltd
Warkworth mine Coal investment holding company
93,001
2
665
2
2
2
2
30,180,720
100
21,558,606
8,400,000
100
10
10
1
86,584,735
1
10,000
5
Coal & Allied Operations Pty Ltd (iii)
Coal mining and related coal preparation and marketing
17,147,500
Lower Hunter Land Holdings Pty Ltd
Management company of lower Hunter land entities
Oaklands Coal Pty Ltd
Novacoal Australia Pty Ltd
CNA Resources Ltd (iii)
CNA Warkworth Pty Ltd
Coal exploration
Holding company
Holding company
Coal mining
Coal & Allied Mining Services Pty Ltd
Employment company for Mount Thorley Co Venture
RW Miller (Holdings) Ltd
Holding company
Mount Thorley Coal Loading Ltd
Operation of Mount Thorley coal loading facility
Gwandalan Land Pty Ltd
Nords Wharf Land Pty Ltd
Holding company
Hold land for future development
Catherine Hill Bay Land Pty Ltd
Hold land for future development
Black Hill Land Pty Ltd
Minmi Land Pty Ltd
Hold land for future development
Hold land for future development
Namoi Valley Coal Pty Ltd
Holding company
CNA Warkworth Australasia Pty Ltd (iii)
Coal mining
CNA Bengalla Investments Pty Ltd
Holding company
Mount Thorley Operations Pty Ltd (iii)
Coal mining
Northern (Rhondda) Collieries Pty Ltd
Holding company
Miller Pohang Coal Company Pty Ltd
Coal sales
Warkworth Mining Ltd
Mine management
Warkworth Pastoral Company Pty Ltd
Pastoral company for the Warkworth JV
Warkworth Tailings Treatment Pty Ltd
Tailings company for the Warkworth JV
Warkworth Coal Sales Ltd
Parallax Holdings Pty Ltd
Sales company for Warkworth JV
Holding company
1
5,005
530,000
14,258,694
1
10,000
42,907,017
3,990,000
1
1
1
1
1
8,400,000
2
12
24,214
62,082
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66
100
100
100
100
100
100
100
100
100
100
80
85
85
85
85
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66
100
100
100
100
100
100
100
100
100
100
80
85
85
85
85
100
161
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 NAME OF ENTITY
Non controlled entities (iv)
PRINCIPAL ACTIVITIES
Watagan Mining Company Pty Ltd
Holding company
Austar Coal Mine Pty Limited
Coal mining and sales
White Mining Limited
Holding company and mine management
White Mining Services Pty Limited
Holding company
White Mining (NSW) Pty Limited
Coal mining and sales
Ashton Coal Operations Pty Limited
Mine management
Ashton Coal Mines Ltd
Coal sales
Gloucester (Sub Holdings 1) Pty Ltd
Holding company
Donaldson Coal Holdings Ltd
Holding company
Donaldson Coal Pty Ltd
Coal mining and sales
Donaldson Coal Finance Pty Ltd
Abakk Pty Ltd
Finance company
Holding company
Newcastle Coal Company Pty Ltd
Coal mining
Primecoal International Pty Ltd
Holding company
HV Operations Pty Ltd
HVO Coal Sales Pty Ltd
HVO Services Pty Ltd
Managing entity of Hunter Valley Operations
Coal sales company for Hunter Valley
Holding company
EQUITY HOLDING
ISSUED AND FULLY
PAID SHARE CAPITAL
2019
%
2018
%
100
64,000,000
3,300,200
2
10
5
5
2
204,945,942
6,688,782
10
6
2,300,999
1
1
1,000
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
51
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
51
51
i.
ii.
iii.
These subsidiaries have been granted relief from the requirement to prepare financial reports in accordance with ASIC Legislative Instrument 2016/785.
These subsidiaries represent the closed group for the purposes of the class order. For further information refer to Note E6.
These subsidiaries are members of the extended closed group for the purposes of ASIC Legislative Instrument 2016/785. For further information refer to
Note E6.
These entities are considered to be the material controlled entities of the Group. Their principal activities are the exploration, development, production and
marketing of metallurgical and thermal coal.
iv. On 31 March 2016 the Group lost control of Watagan Mining Company Pty Ltd and its subsidiaries. On 4 May 2018 the Group lost control of the HVO Entities.
For further information refer to Note E2.
v. All subsidiaries included in the table above are incorporated and operate in Australia, except for Paway Ltd which is incorporated in the British Virgin Islands.
The subsidiaries as listed have share capital consisting solely of ordinary shares and subordinated capital notes, which are held
directly by the Group, and the proportion of ownership interests held equals to the voting rights held by the Group apart from
Watagan which is 33% being the current proportion of board members. The country of incorporation or registration is also their
principal place of business.
162
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 E6 Deed of cross guarantee
Yancoal Australia Ltd and certain subsidiaries (refer to Note E5), are parties to a deed of cross guarantee under which each
company guarantees the debts of the others. By entering into the deed, the wholly owned entities have been relieved from the
requirement to prepare a financial report and Directors’ Report under Legislative Instrument 2016/785 issued by the Australian
Securities and Investments Commission.
(a) Consolidated statement of profit or loss and other comprehensive income
Set out below is a Consolidated Statement of Profit or Loss and Other Comprehensive Income and a summary of movements in
consolidated accumulated losses for the year ended 31 December 2019 of the entities included in the deed of cross guarantee
consisting of Yancoal Australia Ltd and certain subsidiaries. For details regarding the closed group and the extended closed group
refer to Note E5.
Revenue
Other income
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee benefits
Depreciation and amortisation
Coal purchase
Transportation
Contractual services and plant hire
Government royalties
Other operating expenses
Finance costs
Profit before income tax
Income tax benefit
Profit after income tax
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Cash flow hedges:
Fair value losses taken to equity
Fair value losses transferred to profit or loss
Deferred income tax (expense) / benefit
Other comprehensive income / (expense), net of tax
Total comprehensive income
Summary of movements in consolidated accumulated losses
Accumulated losses at the beginning of the financial year
Dividends provided for or paid
Opening retained earnings attributable to new members
Profit after income tax
Opening balance adjustment on adoption of AASB 9
Accumulated losses at the end of the financial year
31 DECEMBER
2019
$M
1,804
31 DECEMBER
2018
$M
1,465
126
2
(20)
(118)
(47)
(322)
(108)
(57)
(5)
(51)
(195)
1,009
93
1,102
100
(5)
(14)
(122)
(29)
(408)
(126)
(76)
(4)
(350)
(272)
159
312
471
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
(15)
190
(53)
122
1,224
(947)
(514)
(13)
1,102
–
(372)
(443)
160
85
(198)
273
(1,318)
(130)
13
471
17
(947)
163
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (b) Consolidated balance sheet
Set out below is a Consolidated Balance Sheet as at 31 December 2019 of the entities included in the deed of cross guarantee
consisting of Yancoal Australia Ltd and certain subsidiaries. For details regarding the closed group and the extended closed group
refer to Note E5.
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
769
552
14
18
4
881
302
11
9
7
1,357
1,210
21
6,816
329
250
901
466
243
13
4
9,043
10,400
1,636
1,251
11
13
2,911
21
6,791
330
271
835
821
254
23
8
9,354
10,564
1,805
12
10
25
1,852
1,790
3,687
4
55
14
–
67
27
1,863
3,781
4,774
5,626
6,482
(484)
(372)
5,626
5,633
4,931
6,482
(604)
(947)
4,931
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Non contingent royalty receivable
Total current assets
Non-current assets
Trade and other receivables
Other financial assets
Property, plant and equipment
Mining tenements
Interest-bearing loan to associates
Deferred tax assets
Exploration and evaluation assets
Other non-current assets
Non contingent royalty receivable
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing liabilities
Provisions
Non-contingent royalty payable
Total current liabilities
Non-current liabilities
Interest-bearing liabilities
Trade and other payable
Provisions
Non-contingent royalty payable
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
164
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 F OTHER INFORMATION
This section provides details on other required disclosures relating to the Group to comply with the accounting standards and
other pronouncements. Information is provided on remuneration of auditors, commitments, events occurring after balance date,
reconciliation of profit after income tax to net cash inflow, other accounting policies and new and amended accounting policies.
F1 Commitments
(a) Capital commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Property, plant and equipment
Not later than one year
Share of joint operations
Other
Exploration and evaluation
Not later than one year
Share of joint operations
F2 Remuneration of auditors
(a) ShineWing Australia
Audit and review of financial statements
Other assurance services
Tax compliance services
Total remuneration of ShineWing Australia
(b) ShineWing (HK) CPA Ltd
Other assurance services
31 DECEMBER
2019
$M
31 DECEMBER
2018
$M
46
2
5
53
49
-
–
49
31 DECEMBER
2019
$000
1,379
31 DECEMBER
2018
$000
1,808
13
50
1,442
982
84
2,874
15
820
(c) Other audit providers
During the year ended 31 December 2019 the Company incurred services provided by Ernst & Young relating to the audit and
review of Middlemount’s financial statements of $35,000 (2018: $35,000), and Deloitte of $75,000 (2018: $49,000) for services
relating to the audit and review of Hunter Valley Operations joint venture financial information.
165
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
F3 Reconciliation of profit after income tax to net cash inflow from operating activities
Profit after income tax
Non-cash flows in profit or loss:
Depreciation and amortisation of non-current assets
Release of provisions
Capitalised interest income from joint venture
Unwinding of discount on royalty receivable
Unwinding of discount on provisions
Remeasurement of financial assets
Net loss on disposal of property, plant and equipment
Impairment of financial assets
Fair value losses recycled from hedge reserve
Foreign exchange losses / (gains)
Unwind of non-substantial loan refinance
Gain on disposal of joint operation and subsidiaries
Lease interest expenses
(Gain) / loss on remeasurement of contingent royalty
Gain on remeasurement of royalty receivables
Unwind of discount on non-contingent royalty
Share of loss/(profit) of equity-accounted investees, net of tax
Changes in assets and liabilities:
Decrease in deferred tax
Increase in inventories
Decrease in operating receivables
(Decrease) / increase in operating payables
(Increase) / decrease in prepayments
Net cash inflow from operating activities
F4 Historical information
The assets and liabilities for the last five years at 31 December are:
31 DECEMBER
2019
$M
719
31 DECEMBER
2018
$M
852
607
(31)
(6)
(20)
9
–
9
–
190
5
5
–
7
(12)
(32)
2
24
44
(35)
90
(24)
(3)
523
(59)
(18)
(21)
13
29
9
21
160
(9)
10
(78)
3
33
(4)
4
(56)
262
(61)
85
44
5
1,548
1,747
2019
$M
4,460
767
(48)
719
719
–
1,773
9,320
11,093
2,112
2,818
4,930
6,163
2018
$M
4,850
1,172
(320)
852
852
–
1,922
10,486
12,408
913
5,657
6,570
5,838
2017
$M
2,601
311
(82)
229
229
–
1,689
10,624
12,313
1,013
6,274
7,287
5,026
2016
$M
1,238
(312)
85
(227)
(227)
–
738
6,922
7,660
499
5,809
6,308
1,352
2015
$M
1,319
(354)
63
(291)
(291)
–
2,125
5,745
7,870
638
5,543
6,181
1,689
Revenue
Profit / (loss) before income tax
Income tax (expense)/benefit
Profit / (loss) after tax
Profit / (loss) is attributable to:
Owners of Yancoal Australia Ltd
Non-controlling interests
Assets and Liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
166
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 F5 Events occurring after the reporting period
No matter or circumstances have occurred subsequent to the
end of the financial year which has significantly affected, or
may significantly affect, the operations of the Group, the result
of those operations or the state of affairs of the Group in
subsequent financial periods except for the following matters:
• On 28 February 2020, Yancoal declared a final dividend
totalling $280 million (21.2 cents per share), with a record
date of 16 March 2020. The final dividend will be paid on
29 April 2020.
F6 Other significant accounting policies
(a) Foreign currency transactions
(i) Functional and presentation currency
Items included in the financial statements of each of the
Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the
functional currency’). The consolidated financial statements
are presented in Australian dollars, which is the Group’s
functional and presentation currency, except for Yancoal SCN
Limited which has the US dollar as its functional currency.
For the purpose of presenting these consolidated financial
statements, the assets and liabilities of the Group’s foreign
operations are translated into Australian dollars using
exchange rates prevailing at the end of the reporting period.
Income and expense items are translated at the average
exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used.
Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in equity.
(ii) Transactions and balances
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and
from the translation at year end exchange rates of monetary
assets and liabilities denominated in foreign currencies are
recognised in profit or loss, except when they are deferred in
equity as qualifying cash flow hedges.
Non-monetary items that are measured at fair value in a
foreign currency are translated using the exchange rates at
the date when the fair value was determined. Translation
differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss. Non-monetary
items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at the date of
the transaction.
(b) Financial instruments
Financial assets and financial liabilities are recognised when a
Group entity becomes a party to the contractual provisions of
the instrument.
Financial assets and financial liabilities are initially measured
at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial
liabilities are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on initial
recognition.
(i) Financial assets
All regular way purchases or sales of financial assets are
recognised and derecognised on a trade date basis. Regular
way purchases or sales are purchases or sales of financial
assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace.
All recognised financial assets are subsequently measured in
their entirety at either amortised cost or fair value, depending
on the classification of the financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are
subsequently measured at amortised cost:
•
•
the financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and
the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
Amortised cost and effective interest method
The effective interest method is a method of calculating the
amortised cost of a debt instrument and of allocating interest
income over the relevant period.
For financial instruments the effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs
and other premiums or discounts) excluding ECL, through the
expected life of the debt instrument, or, where appropriate,
a shorter period, to the gross carrying amount of the debt
instrument on initial recognition.
The amortised cost of a financial asset is the amount at which
the financial asset is measured at initial recognition minus the
principal repayments, plus the cumulative amortisation using
the effective interest method of any difference between that
initial amount and the maturity amount, adjusted for any loss
allowance. On the other hand, the gross carrying amount of a
financial asset is the amortised cost of a financial asset before
adjusting for any loss allowance.
Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured
at amortised cost or fair value through other comprehensive
income (”FVTOCI”) are measured at FVTPL. Specifically:
•
Investments in equity instruments are classified as
at FVTPL, unless the Group designates an equity
investment that is neither held for trading nor contingent
consideration arising from a business combination as at
FVTOCI on initial recognition, and
167
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 • Debt instruments that do not meet the amortised
•
cost criteria or the FVTOCI criteria are classified as at
FVTPL. In addition, debt instruments that meet either
the amortised cost criteria or the FVTOCI criteria may
be designated as at FVTPL upon initial recognition if
such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would
arise from measuring assets or liabilities or recognizing
the gains and losses on them on different bases. The Group
has not designated any debt instruments as at FVTPL.
Financial assets at FVTPL are measured at fair value, with
changes in fair value arising from remeasurement recognised
in profit or loss. The net gain or loss recognised in profit or
loss excludes any dividend or interest earned on the financial
assets and is included in the ‘other revenue’ line item.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument
has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial
instrument as at the reporting date with the risk of a default
occurring on the financial instrument as at the date of
initial recognition. In making this assessment, the Group
considers both quantitative and qualitative information
that is reasonable and supportable, including historical
experience and forward-looking information that is available
without undue cost or effort. Forward-looking information
considered includes the future prospects of the industries in
which the Group’s debtors operate, obtained from economic
expert reports, financial analysts, governmental bodies,
relevant think-tanks and other similar organisations, as well
as consideration of various external sources of actual and
forecast economic information that relate to the Group’s
core operations.
In particular, the following information is taken into account
when assessing whether credit risk has increased significantly
since initial recognition:
•
•
an actual or expected significant deterioration in the
financial instrument’s external (if available) or internal
credit rating;
significant deterioration in external market indicators
of credit risk for a particular financial instrument, e.g. a
significant increase in the credit spread, the credit default
swap prices for the debtor, or the length of time or the
extent to which the fair value of a financial asset has been
less than its amortised cost;
• existing or forecast adverse changes in business, financial
or economic conditions that are expected to cause a
significant decrease in the debtor’s ability to meet its
debt obligations;
• an actual or expected significant deterioration in the
operating results of the debtor;
•
significant increases in credit risk on other financial
instruments of the same debtor; and
168
an actual or expected significant adverse change in the
regulatory, economic, or technological environment of the
debtor that results in a significant decrease in the debtor’s
ability to meet its debt obligations.
Irrespective of the outcome of the above assessment, the
Group presumes that the credit risk on a financial asset
has increased significantly since initial recognition when
contractual payments are more than 30 days past due, unless
the Group has reasonable and supportable information that
demonstrates otherwise.
Despite the foregoing, the Group assumes that the credit
risk on a financial instrument has not increased significantly
since initial recognition if the financial instrument is
determined to have low credit risk at the reporting date.
A financial instrument is determined to have low credit risk
if i) the financial instrument has a low risk of default, ii) the
borrower has a strong capacity to meet its contractual cash
flow obligations in the near term and iii) adverse changes in
economic and business conditions in the longer term may, but
will not necessarily, reduce the ability of the borrower to fulfill
its contractual cash flow obligations. The Group considers a
financial asset to have low credit risk when it has an internal
or external credit rating of ‘investment grade’ as per globally
understood definition.
The Group regularly monitors the effectiveness of the criteria
used to identify whether there has been a significant increase
in credit risk and revises them as appropriate to ensure that
the criteria are capable of identifying significant increase in
credit risk before the amount becomes past due.
Definition of default
The Group considers the following as constituting an event
of default for internal credit risk management purposes as
historical experience indicates that receivables that meet
either of the following criteria are generally not recoverable.
• when there is a breach of financial covenants by the
counterparty; or
•
information developed internally or obtained from
external sources indicates that the debtor is unlikely
to pay its creditors, including the Group, in full.
Irrespective of the above analysis, the Group considers
that default has occurred when a financial asset is more
than 90 days past due unless the Group has reasonable and
supportable information to demonstrate that a more lagging
default criterion is more appropriate.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events
that have a detrimental impact on the estimated future cash
flows of that financial asset have occurred. Evidence that a
financial asset is credit-impaired includes observable data
about the following events:
a. significant financial difficulty of the issuer or the borrower;
b. a breach of contract, such as a default or past due event;
c. the lender(s) of the borrower, for economic or contractual
reasons relating to the borrower’s financial difficulty,
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider; or
it is becoming probable that the borrower will enter into
bankruptcy or other financial reorganisation.
d.
Measurement and recognition of ECL
The measurement of ECL is a function of the probability of
default, loss given default (i.e. the magnitude of the loss if
there is a default) and the exposure at default (including
consideration of enforceability and recoverability under any
guarantees). The assessment of the probability of default
and loss given default is based on historical data adjusted by
forward-looking information as described above. As for the
exposure at default, for financial assets, this is represented
by the assets’ gross carrying amount at the reporting date
and any undrawn, but committed loans associated with the
financial asset.
For financial assets, the ECL is estimated as the difference
between all contractual cash flows that are due to the Group
in accordance with the contract and all the cash flows that the
Group expects to receive, discounted at the original effective
interest rate.
Where lifetime ECL is measured on a collective basis to cater
for cases where evidence of significant increases in credit risk
at the individual instrument level may not yet be available, the
financial instruments are grouped on the following basis:
• Nature of financial instruments;
• Past-due status;
• Nature, size and industry of debtors; and
• External credit ratings where available.
The grouping is regularly reviewed by management to ensure
the constituents of each group continue to share similar credit
risk characteristics.
If the Group has measured the loss allowance for a financial
instrument at an amount equal to lifetime ECL in the previous
reporting period, but determines at the current reporting
date that the conditions for lifetime ECL are no longer met,
the Group measures the loss allowance at an amount equal
to 12 month ECL at the current reporting date.
The Group recognises an impairment gain or loss in profit
or loss for all financial instruments with a corresponding
adjustment to their carrying amount through a loss
allowance account.
Impairment of trade receivables
The Group has applied the simplified approach to measuring
ECL to trade and other receivables using a life-time
expected loss allowance. The Group has also used the
practical expedient of a provisions matrix using fixed rates
to approximate the ECL. These provisions are considered
representative across all business and geographic segments
of the Group based on historical credit loss experience and
considered future information.
(ii) Financial liabilities and equity instruments
Debt and equity instruments issued by the Group are classified
as either financial liabilities or as equity in accordance with the
substance of the contractual arrangements and the definitions
of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of its
liabilities.
Financial liabilities
The Group’s financial liabilities including trade and other
payables, non-contingent royalty payable, interest-bearing
liabilities which are initially recognised at fair value and
subsequently measured at amortised cost, using the effective
interest method.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees paid or points paid or received that form an
integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected life of
the financial liability, or, where appropriate, a shorter period,
to the net carrying amount on initial recognition. Interest
expense is recognised on an effective interest basis.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Company are
recognised at the proceeds received, net of direct issue costs.
(iii) Accounting for derivative financial instruments and
hedging activities
Derivatives are initially recognised at fair value at the
date when a derivative contract is entered into and are
subsequently remeasured at their fair value at the end of the
reporting period. The resulting gain or loss is recognised in
profit or loss immediately unless the derivative is designated
and effective as a hedging instrument, in which event the
timing of the recognition in profit or loss depends on the
nature of the hedge relationship. The Group designates certain
derivatives as either: (i) hedges of the fair value of recognised
assets or liabilities (fair value hedge); and (ii) hedges of highly
probable forecast transactions (cash flow hedge).
The fair values of various derivative instruments used for
hedging purposes are disclosed in Note D9. The full fair value
of a hedging derivative is classified as a non-current asset
or liability when the remaining maturity of the hedged item
is more than 12 months and as a current asset or liability
when the remaining maturity of the hedged item is less than
12 months.
169
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 At the inception of the hedging relationship the Group
documents the relationship between the hedging instrument
and the hedged item, along with its risk management
objectives and its strategy for undertaking various hedge
transactions. Furthermore, at the inception of the hedge
and on an ongoing basis, the Group documents whether the
hedging instrument that is used in a hedging relationship is
highly effective in offsetting changes in fair values or cash
flows of the hedged item.
Cash flow hedge
The effective portion of changes in the fair value of derivatives
or other financial instruments that are designated and qualify
as cash flow hedges are recognised in other comprehensive
income and accumulated in cash flow hedge reserve.
The gain or loss relating to the ineffective portion is recognised
immediately in profit or loss.
Amounts previously recognised in other comprehensive
income and accumulated in cash flow hedge reserve in equity
are reclassified to profit or loss in the periods when the
hedged item is recognised in profit or loss.
Hedge accounting is discontinued when the Group revokes
the hedging relationship, the hedging instrument expires or is
sold, terminated, or exercised, or when it no longer qualifies
for hedge accounting. Any gain or loss recognised in other
comprehensive income and accumulated in equity at that
time remains in equity and is recognised when the forecast
transaction is ultimately recognised in profit or loss. When a
forecast transaction is no longer expected to occur, the gain
or loss accumulated in equity is recognised immediately in
profit or loss.
Derivatives that do not qualify for hedge accounting and those
not designated as hedging instruments
Changes in the fair value of any derivative instruments that do
not qualify for hedge accounting and those not designated as
hedges are recognised immediately in the profit or loss.
(iv) Derecognition
A financial asset is derecognised only when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity.
On derecognition of a financial asset in its entirety, the
difference between the asset’s carrying amount and the
sum of the consideration received and receivable and the
cumulative gain or loss that had been recognised in other
comprehensive income and accumulated in investment
revaluation reserve is recognised in profit or loss.
A financial liability is derecognised when, and only when,
the Group’s obligations are discharged, cancelled or expire.
The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable
is recognised in profit or loss.
F7 New and amended standards adopted by the Group
The Group has applied AASB 16 Leases with a date of
initial application of 1 January 2019. As a result, the Group
has changed its accounting policy for lease contracts as
detailed below.
The Group has applied AASB 16 using the modified
retrospective approach and therefore the comparative
information has not been restated and continues to be
reported under AASB 117 Leases. The details of accounting
policies under AASB 117 are disclosed separately if they are
different from those under AASB 16 and the impact of changes
is also disclosed.
On transition to AASB 16, the Group elected to apply the
practical expedient to grandfather the assessment of which
transactions are leases. It applied AASB 16 only to contracts
that were previously identified as leases. Contracts that were
not identified as leases under AASB 117 were not reassessed
for whether there is a lease. Therefore, the definition of a
lease under AASB 16 was applied only to contracts entered
into or changed on or after 1 January 2019.
Policy applicable before 1 January 2019
For contracts entered into before 1 January 2019, the Group
determined whether the arrangement was or contained a
lease based on the assessment of whether:
•
•
fulfilment of the arrangement was dependent on the use
of a specific asset or assets; and
the arrangement had conveyed a right to use the asset.
An arrangement conveyed the right to use the asset if
one of the following was met:
i.
the purchaser had the ability or right to operate the
asset while obtaining or controlling more than an
insignificant amount of the output;
ii. the purchaser had the ability or right to control
physical access to the asset while obtaining or
controlling more than an insignificant amount of
the output; or
iii. facts and circumstances indicated that it was
remote that other parties would take more than an
insignificant amount of the output, and the price per
unit was neither fixed per unit of output nor equal to
the current market price per unit of output.
Policy applicable from 1 January 2019
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the
right to control the use of an identified asset, the Group
assesses whether:
•
the contract involves the use of an identified asset – this
may be specified explicitly or implicitly, and should be
physically distinct or represent substantially all of the
capacity of a physically distinct asset. If the supplier
has a substantive substitution right, then the asset is
not identified;
170
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 the Group has the right to obtain substantially all of the
economic benefits from use of the asset throughout the
period of use; and
to exercise an extension option, and penalties for early
termination of a lease unless the Group is reasonably
certain not to terminate early.
•
•
the Group has the right to direct the use of the asset.
The Group has this right when it has the decision-making
rights that are most relevant to changing how and for
what purpose the asset is used. In rare cases where the
decision about how and for what purpose the asset is used
is predetermined, the Group has the right to direct the use
of the asset if either:
the Group has the right to operate the asset; or
i.
ii. the Group designed the asset in a way that
predetermines how and for what purpose it will be used.
This policy is applied to contracts entered into, or changed, on
or after 1 January 2019.
At inception or on reassessment of a contract that contains a
lease component, where applicable, the Group allocates the
consideration in the contract to each lease component on the
basis of their relative stand-alone prices.
As a lessee
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount
of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs
incurred and an estimate of costs to dismantle and remove the
underlying asset or to restore the underlying asset or the site
on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using
the straight-line or other appropriate method from the
commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease
term. The estimated useful lives of right-of-use assets are
determined on the same basis as those of property and
equipment. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses its
incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease
liability comprise the following:
•
fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a
rate, initially measured using the index or rate as at the
commencement date;
• amounts expected to be payable under a residual value
guarantee; and
•
the exercise price under a purchase option that the Group
is reasonably certain to exercise, lease payments in an
optional renewal period if the Group is reasonably certain
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is
a change in future lease payments arising from a change in
an index or rate, if there is a change in the Group’s estimate
of the amount expected to be payable under a residual
value guarantee, or if the Group changes its assessment of
whether it will exercise a purchase, extension or termination
option. When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if the
carrying amount of the right-of-use asset has been reduced
to zero.
The Group presents right-of-use assets in ‘property, plant and
equipment’ and lease liabilities in ‘loans and borrowings’ in
the balance sheet.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets
and lease liabilities for short-term leases of machinery that
have a lease term of 12 months or less and leases of low-value
assets, including IT equipment. The Group recognises the lease
payments associated with these leases as an expense on a
straight-line basis over the lease term.
Under AASB 117
In the comparative period, as a lessee the Group classified
leases that transfer substantially all of the risks and rewards
of ownership as finance leases. When this was the case, the
leased assets were measured initially at an amount equal
to the lower of their fair value and the present value of the
minimum lease payments. Minimum lease payments were the
payments over the lease term that the lessee was required to
make, excluding any contingent rent.
Subsequently, the assets were accounted for in accordance
with the accounting policy applicable to that asset.
Assets held under other leases were classified as operating
leases and were not recognised in the Group’s balance sheet.
Payments made under operating leases were recognised in
profit or loss on a straight-line basis over the term of the lease.
Lease incentives received were recognised as an integral part
of the total lease expense, over the term of the lease.
As a lessor
When the Group acts as a lessor, it determines at lease
inception whether each lease is a finance lease or an
operating lease.
To classify each lease, the Group makes an overall assessment
of whether the lease transfers substantially all of the risks and
rewards incidental to ownership of the underlying asset. If this
is the case, the lease is a finance lease, if not, it is an operating
lease. As part of this assessment, the Group considers certain
indicators such as whether the lease is for the major part of
the economic life of the asset.
171
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 Lessor impact:
Sub-leases to joint ventures have been reassessed under AASB
16 and have been converted to finance leases. As the lease
term and payments under the sub-lease reflect the lease term
and payments under the head lease, this is a ‘back to back’
arrangement and is accounted for as a finance lease. The lease
is calculated as the present value of the lease payments for
the right to use the underlying asset during the lease term that
are not yet received plus any residual value accruing to the
lessor. The discount rate used is the present value of the lease
payments is the rate implicit in the lease.
This has resulted in derecognition of $19 million in leased plant
and equipment and recognition of $19 million of finance lease
receivables as at 1 January 2019.
Other amending accounting standards and interpretations
Other relevant accounting amendments and interpretations
effective for the current reporting period include:
• AASB 2017-7 Amendments to Australian Accounting
Standards - Long-term Interests in Associates and Joint
Ventures;
•
Interpretation 23 Uncertainty over Income Tax Treatments;
and
• AASB 2018-1 Amendments to Australian Accounting
Standards - Annual Improvements 2015-2017 Cycle.
The adoption of the amendments and interpretation have not
resulted in any changes to the Group’s accounting policies and
has no effect on the amounts reported for the current or prior
periods.
When the Group is an intermediate lessor, it accounts for its
interests in the head lease and the sub-lease separately. It
assesses the lease classification of a sub-lease with reference
to the right-of-use asset arising from the head lease, not
with reference to the underlying asset. If a head lease is a
short-term lease to which the Group applies the exemption
described above, it classifies the sub-lease as an operating
lease.
The Group recognises lease payments received under
operating leases as revenue on a straight-line basis over the
lease term as part of ‘other revenue’.
The accounting policies applicable to the Group as a lessor in
the comparative period are the same as AASB 16. However,
when the Group was an intermediate lessor the sub-leases
were classified with reference to the underlying asset. For the
leases that are now recognised as a finance lease due to this
change the amounts due from lessees under the finance leases
are recognised as receivables at the amount of the Group’s net
investment in the leases. Finance lease income is allocated to
accounting periods so as to reflect a constant periodic rate of
return on the Group’s net investment outstanding in respect of
the leases.
Impact on financial statements
On transition to AASB 16, the Group recognised an additional
$50 million of right-of-use assets and $69 million of lease
liabilities and $19 million of finance lease receivables.
When measuring lease liabilities, the Group discounted
lease payments using the contract rates and its incremental
borrowing rate at 1 January 2019. The weighted-average rate
applied is 7%.
Lesee impact:
New lease liabilities recognised
Uplift for discount rates applied
Recognition exemption for:
– short-term leases
– non-capital leases
Reassessment of lease term
Operating lease commitment at 31 December 2018
as disclosed in the
Group's consolidated financial statements
1 JANUARY
2019
$M
69
11
80
9
12
(13)
88
172
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 F8 New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019
reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards
and interpretations is set out below.
REFERENCE
AND TITLE
AASB 2018-6
DETAILS OF NEW STANDARD/AMENDMENT/INTERPRETATION
Amendments to Australian Accounting Standards –Definition of a Business
APPLICATION DATE
FOR THE GROUP
1 January 2020
The Standard amends the definition of a business in AASB 3 Business Combinations. The
amendments clarify the minimum requirements for a business, remove the assessment of
whether market participants are capable of replacing missing elements, add guidance to help
entities assess whether an acquired process is substantive, narrow the definitions of a business
and of outputs, and introduce an optional fair value concentration test.
Impact:
The Group is currently adhering to this standard and there is no material impact expected on
the Group's financial report.
Amendments to Australian Accounting Standards –Definition of Material
AASB 2018-7
1 January 2020
This Standard amends AASB 101 Presentation of Financial Statements and AASB 108 Accounting
Policies, Changes in Accounting Estimates and Errors to align the definition of ‘material’ across
the standards and to clarify certain aspects of the definition. The amendments clarify that
materiality will depend on the nature or magnitude of information. An entity will need to
assess whether the information, either individually or in combination with other information, is
material in the context of the financial statements. A misstatement of information is material if
it could reasonably be expected to influence decisions made by the primary users.
Impact:
The Group is currently adhering to this standard and there is no material impact expected on
the Group’s financial report.
Conceptual Framework for Financial Reporting, and relevant amending standards
AASB 2019-1
1 January 2020
The revised Conceptual Framework includes some new concepts, provides updated definitions
and recognition criteria for assets and liabilities and clarifies some important concepts. It is
arranged in eight chapters, as follows:
• Chapter 1 –The objective of financial reporting
• Chapter 2 –Qualitative characteristics of useful financial information
• Chapter 3 – Financial statements and the reporting entity
• Chapter 4 –The elements of financial statements
• Chapter 5 –Recognition and derecognition
• Chapter 6 –Measurement
• Chapter 7 –Presentation and disclosure
• Chapter 8 –Concepts of capital and capital maintenance
Amendments to References to the Conceptual Framework in AASB Standards has also been
issued, which sets out the amendments to affected standards in order to update references
to the revised Conceptual Framework. The changes to the Conceptual Framework may affect
the application of AASB in situations where no standard applies to a particular transaction
or event. In addition, relief has been provided in applying AASB 3 and developing accounting
policies for regulatory account balances using AASB 10, such that entities must continue to
apply the definitions of an asset and a liability (and supporting concepts) in the 2010 Conceptual
Framework, and not the definitions in the revised Conceptual Framework.
Impact:
The Directors anticipate that the adoption of these updates will have no impact on the
recognition of amounts in the Group’s financial statements, but there will be additional
disclosures required.
173
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 REFERENCE
AND TITLE
AASB 2014-10 Amendments to Australian Accounting Standards –Sale or Contribution of Assets between an
DETAILS OF NEW STANDARD/AMENDMENT/INTERPRETATION
APPLICATION DATE
FOR THE GROUP
1 January 2022
Investor and its Associate or Joint Venture
The amendments clarify that a full gain or loss is recognised when a transfer to an associate or
joint venture involves a business as defined in AASB 3 Business Combinations. Any gain or loss
resulting from the sale or contribution of assets that does not constitute a business, however, is
recognised only to the extent of unrelated investors’ interests in the associate or joint venture.
AASB 2015-10 deferred the mandatory effective date (application date) of AASB 2014-10 so that
the amendments were required to be applied for annual reporting periods beginning on or after
1 January 2018 instead of 1 January 2016. AASB 2017-5 further defers the effective date of the
amendments made in AASB 2014-10 to periods beginning on or after 1 January 2022.
Impact:
The Directors anticipate that the adoption of this amendment will have no impact on the
recognition of amounts in the Group’s financial statements, but there will be additional
disclosures required.
174
YANCOAL ANNUAL REPORT 2019NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 In the Directors’ opinion:
a. the financial statements and notes set out on pages 94 to 194 are in accordance with the Corporations Act 2001, including:
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements, and
i.
ii. giving a true and fair view of the Group’s financial position as at 31 December 2019 and of its performance for the year
ended on that date, and
b. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable, and
c. at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group
identified in Note E6 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of
the deed of cross guarantee described in Note E6.
Note A(i) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given the declarations by individuals performing the function of the Chief Executive Officer and Chief
Financial Officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of Directors.
Gregory James Fletcher
Director
28 February 2020
175
YANCOAL ANNUAL REPORT 2019DIRECTORS’ DECLARATION DIRECTORS’ DECLARATION FOR THE YEAR ENDED 31 DECEMBER 2019
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF YANCOAL AUSTRALIA LTD
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of Yancoal Australia Ltd (“the Company”) and its
subsidiaries (“the Group”), which comprises the consolidated balance sheet as at 31 December 2019, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information, and the directors’ declaration.
In our opinion:
1.
the financial statements of the Group are in accordance with the Corporations Act 2001, including:
a.
giving a true and fair view of the Group’s financial position as at 31 December 2019 and of its performance
for the year ended on that date; and
b.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
2.
the financial statements also comply with International Financial Reporting Standards (“IFRS”) as disclosed in
Note A(i).
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement. Our
responsibilities under those standards are further described in the Auditor’s Responsibility section of our report. We
are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(the “Code”) that are relevant to our audit of the financial statements in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key Audit Matters (“KAMs”) are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements for the year ended 31 December 2019. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
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176
YANCOAL ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORTINDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF YANCOAL AUSTRALIA LTD
Key Audit Matter
Impairment of interest-bearing loan to Watagan Mining
Company Pty Ltd (“Watagan”)
(Note D1)
As at 31 December 2019 Yancoal was owed $901 million by
Watagan. This loan receivable must be assessed for impairment
as required by AASB 9 Financial Instruments. As the Watagan
underlying assets cash flows do not support the full recovery of
this loan receivable, management and those charged with
governance have assessed whether sufficient credit enhancement
is in place to ensure the receivable is recoverable.
Management and those charged with governance have
determined that whilst without significant credit enhancement,
there would be a significant impairment, the loan receivable does
not require impairment as Yankuang Group Co., Ltd (“Yankuang”),
the ultimate parent of the Company, has provided a guarantee for
the loan receivable. Additional confirmation and assurance was
required from Yankuang confirming that it remains bound by the
guarantee and it will honour its obligations under the guarantee.
Due to the size of the loan receivable and the nature of the
guarantee provided the loan receivable is considered to be a key
audit matter.
Accounting for an associate - Watagan
(Note E2(b)(i))
As the Group does not control Watagan but has significant
influence, Watagan is accounted for as an associate in
accordance with AASB 128 Investments in Associates and Joint
Ventures. The ongoing losses of Watagan are not recognised by
the Group as it does not have contractual agreements or a
constructive obligation to contribute to Watagan and the loan to
the associate is planned to be settled. Disclosure of the
summarised financial position and results of Watagan are
included in the financial statements in note E2(b)(i).
As disclosed in note E2(b)(i), for the year ended 31 December
2019, Yancoal has determined the Watagan asset values requires
a pre-tax impairment provision of $973 million. This is due to
updated information identified in the period by management and
those charged with governance including as a result of certain
technical reviews. Such updated information included:
1. On 24 January 2020, it was announced to Austar
employees that the mine will suspend production and
transition to care and maintenance operations after 31
March 2020;
2. Ashton facing geotechnical challenges in future mining
activities and challenges noted with the land acquisition
required for the South East Open Cut mine; and
How the matter was addressed during the
audit
Our audit procedures included:
Reviewing the loan receivable impairment
assessment with consideration to AASB 9
Financial Instruments.
Assessing the documentary evidence to
support the guarantee and the intentions of the
Company in executing the guarantee if
necessary.
Assessing Yankuang’s ability to fulfil the
obligation and fulfil the assurance given to the
Group.
Obtaining expert assistance on the
methodology and inputs of the loan impairment
assessment.
Assessing the adequacy of the Group’s
disclosures in respect of the loan receivable.
Our audit procedures included:
Reviewing and assessing the position papers
prepared by management and valuation
experts for the assessment of the carrying
value of the underlying Watagan assets.
Evaluating managements’ key valuation
assumptions and estimates used in the
impairment testing. This includes documenting
the skills and experience of the experts
preparing the valuation workings to consider
whether reliance can be placed on their work.
Performing sensitivity analysis on key inputs.
Reviewing the Group’s disclosures included in
the financial statements for Watagan’s
impairment testing.
Engaging our corporate finance specialists to
review the impairment model and various
inputs.
Reviewing cash flow forecasts for the twelve
months from the date of signing of the financial
statements of Watagan, assessing the cash
flows of the Group inclusive of those of
177
YANCOAL ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORTINDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF YANCOAL AUSTRALIA LTD Key Audit Matter
3. Donaldson remaining in care and maintenance.
The impairment assessment is complex and involves significant
judgment. Watagan's financial position and performance are not
currently consolidated by the Group. There remains the potential
for Watagan to be reconsolidated by the Group in the future.
Given the complexity of the current results of Watagan,
assessment of its potential impact to the Group is considered to
be a key audit matter.
Watagan consolidation assessment
(Note E2(b)(i))
The Group holds 100% of the nominal share capital of Watagan,
however management and those charged with governance have
assessed that the Group does not control Watagan as it is not
able to direct the relevant activities of Watagan.
The assessment under the accounting standards is continuous
and requires a high degree of judgement. If Watagan is controlled
by the Group there would need to be a significant change to the
financial statements to reflect the consolidation of the assets and
liabilities of Watagan.
The issue is addressed annually and requires significant audit
focus and is considered a key audit matter.
Impairment of non-current assets
(Note C3)
A substantial portion of the value of the Group’s non-current
assets are tangible and intangible assets which are subject to an
impairment assessment and revaluations in accordance with
AASB 136 Impairment of Assets or AASB 9 Financial Instruments.
These assets include property plant and equipment (note C1),
mining tenements (note C2), intangible assets (note C5), royalty
receivable (note C10) and long-term receivables from joint
ventures (note C8(iii)).
The assessments for each level of the classes of non-current
assets requires different levels of audit effort.
Asset valuation was a key audit matter due to the size of the
balances, being 80% of the Group’s non-current assets, and the
level of judgement required to be applied to prepare the
impairment assessment
How the matter was addressed during the
audit
Watagan and ensuring appropriate disclosures
on going concern is made, if needed.
Our audit procedures included:
Considering the requirements of the
accounting standard AASB 10 Consolidated
Financial Statements to assess whether the
Company controlled Watagan during the year
ended 31 December 2019. In performing these
procedures we have reviewed and challenged
management's control assessment which
includes but is not limited to an analysis of the
relationship between the Group, Watagan and
its bondholders.
Obtaining external accounting advice.
Our audit procedures included:
Assessing the determination of the Group’s
Cash-Generating Units.
Considering the assessment of impairment
indicators which require an impairment test.
Evaluating the forecast commodity prices
including comparison to available market
information.
Comparing estimated operating costs and
capital expenditure used in the impairment
assessment with the latest approved mine
plans and budgets.
Comparing the life of mine plan used in
impairment with reserves and resources
reported by internal geological experts.
Evaluating the competency and objectivity of
the experts by considering their professional
qualifications and experience.
Working with our valuation specialists to
compare key assumptions such as discount
178
YANCOAL ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORTINDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF YANCOAL AUSTRALIA LTD How the matter was addressed during the
audit
rates and foreign exchange rates to market
information.
Performing sensitivity analysis on the key
assumptions.
Assessing the Group’s impairment disclosures.
Our audit procedures included:
Engaging the use of our tax experts to assist
with:
Assessing the tax calculations;
Considering any uncertain taxation positions;
Assessing transfer pricing arrangements; and
Evaluating the COT assessment.
Assessing the Group’s taxation disclosures.
Key Audit Matter
Taxation
(Note B6)
The Group is subject to income taxes in Australia. Significant
judgement is required in determining the provision for income
taxes and associated deferred taxation balances. The Group
estimates its tax liabilities based on the Group’s interpretation of
taxation laws and regulations. Where the final outcome of these
matters is different from the amounts that were initially recorded,
such differences will impact the current and deferred tax assets
and liabilities in the period in which such a determination is made.
The Company must comply with the provisions of the Continuity of
Ownership Test (“COT”) to continue to carry forward deferred tax
assets of A$330 million that are associated with prior period
losses.
Furthermore, the Group is involved in a significant value and
quantity of related party transactions are subject to analysis under
with the transfer pricing provisions of international taxation laws
and regulations.
Significant judgement is required to calculate taxation balances,
including assessing the recognition and measurement of taxation
balances where there is a range of possible outcomes due to
different interpretations of taxation law and regulations. Due to the
size of the deferred tax balances on a gross basis we consider
this to be a key audit matter.
Other information
The directors are responsible for the other information. The other information comprises the information in the
Group’s financial report for the year ended 31 December 2019, but does not include the financial statements and
our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information; we are required to report that fact. We have nothing to report in this regard.
179
YANCOAL ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORTINDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF YANCOAL AUSTRALIA LTD Responsibilities of the Directors for the Financial Statements
The directors of the Company are responsible for the preparation of financial statements that give a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that give a true
and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
The directors are responsible for overseeing the Group’s financial reporting process. In Note A(i), the directors also
state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
statements comply with IFRS.
Auditor’s responsibilities for the Audit of the Financial Statements
Our responsibility is to express an opinion on the financial statements based on our audit. Our objectives are to
obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial statements. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
180
YANCOAL ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORTINDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF YANCOAL AUSTRALIA LTD We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in
the audit of the financial statements of the current period and are therefore the KAMs. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 54 to 66 of the directors’ report for the year ended 31
December 2019. The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Opinion on the Remuneration Report
In our opinion, the Remuneration Report of Yancoal Australia Ltd, for the year ended 31 December 2019, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
ShineWing Australia
Chartered Accountants
R Blayney Morgan
Partner
Sydney, 28 February 2020
181
YANCOAL ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORTINDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF YANCOAL AUSTRALIA LTD SHAREHOLDER STATISTICS
SHAREHOLDER STATISTICS
YANCOAL AUSTRALIA LIMITED - ORDINARY FULLY PAID AS OF 27/03/2020
Combined ASX and HKEx TOP 20 SHAREHOLDERS
RANK
NAME
UNITS*
% UNITS
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
20
YANZHOU COAL MINING COMPANY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
GLENCORE COAL PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
HKG REGISTER CONTROL A/C\C
CITICORP NOMINEES PTY LIMITED
EVERCHARM INTERNATIONAL INVESTMENT LIMITED
CORANAR OVERSEAS LTD
NATIONAL NOMINEES LIMITED
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