A N N U A L A N N U A L R E P O R T R E P O R T 2 0 2 2 2 0 2 2 P R O G R E S S I O N Y A N C O A L A U S T R A L I A L T D Y A N C O A L A N N U A L R E P O R T 2 0 2 2 I T ’ S N O T J U S T W H E R E W E ’ R E G O I N G B U T H O W W E G E T T H E R E Yancoal is a leading low-cost Australian customers: in 2022 we sold our Australian in Asia. But while coal mining remains our coal producer and exporter to the global coal to 13 countries, including major core focus, we also have a strategy to seaborne market, producing a mix of markets across the Asian region and sustain the business through diversifying premium thermal, semi-soft coking and an uplift of sales in Europe. Every year, into renewable energy projects and into PCI coals. Since 2004, Yancoal has Yancoal’s thermal coal exports power other minerals and commodities. Yancoal generated over $10 billion in Foreign millions of households in Asia, and our is a public company, listed on both the Direct Investment (FDI) for Australia and metallurgical coal exports assist in the Australian Securities Exchange (ASX: now owns, operates or participates in production of millions of tonnes of steel. YAL) and the Stock Exchange of Hong nine producing coal mines across NSW, We believe our coal will continue to play Kong (HKEx: 3668), and is majority owned Queensland and Western Australia. a key role in delivering economic growth by Yankuang Energy Group Company Yancoal has a diverse range of and improved quality of life, especially Limited, which is itself listed on the HKEx. 11 “ Despite a particularly difficult period over the past few years, nevertheless Yancoal has delivered some monumental ‘first time’ achievements in 2022.” BAOCAI ZHANG CHAIRMAN OF THE BOARD C H A I R M A N ’ S L E T T E R Since 2020, Yancoal has faced mining plans at sites to increase resources industry, Yancoal enacted significant external challenges - severe investment in water management a talent attraction and retention floods, the continuation of COVID-19, facilities so that production would not strategy, and introduced a new internal industry-wide labour shortages and high suffer drastic impacts; communication and collaboration inflation. But the company has not been overwhelmed by these difficulties. The business developed a comprehensive strategy to: operate efficiently; ensure safety at all times; prepare for possible negative external shocks and events; maximise production and productivity; achieve production targets; and achieve management objectives. Tangible examples of how Yancoal implemented this strategy during 2022 included: • Over 90% of Yancoal employees platform (“OnePlace”). participated in “Safe Way” program This business strategy has achieved training. During 2022, Yancoal safety remarkable results in 2022 and Yancoal statistics continued to outperform the has experienced record revenue and coal industry average; profit, as well as maintaining its position • To improve maintenance performance and to reduce maintenance costs, Yancoal developed and implemented as one of Australia’s largest coal exporters and one of the Yankuang Energy Group’s most important foreign investment pillars. an equipment operation improvement In 2022, Shandong Energy Group and optimisation project that was based celebrated 20 years since its first on each site having its own specific international investment beyond Shandong strategy; and Province. Yancoal has played an important • Responding to unprecedented rain events, the business promptly adjusted • To address the labour shortages being experienced across the Australian role in the “Development Beyond Shandong” strategy and in 2022 was 2 Y A N C O A L A N N U A L R E P O R T 2 0 2 2 deservedly recognised as an “Outstanding its Australian coal assets and seeks Yancoal’s self-sufficiency for power and to Contribution Company” amongst the opportunities internationally. deliver diversification for the business. broader Shandong Energy Group. An important element of Yancoal’s Yancoal continues its diversification strategy through the potential development Despite a particularly difficult period over the past few years, nevertheless Yancoal success has been the integration of renewable energy projects and has delivered some monumental “first Australian and Chinese cultures. Such expansion into minerals and commodities time” achievements in 2022 that need to integration can only be facilitated by a beyond coal. As part of this strategy, in be recognised, such as the repayment mutual understanding and respect for the 2022, Yancoal started assessing two of external interest bearing loan debt, common goals we are seeking to achieve renewable energy projects. A feasibility the payment of fully franked dividends, for Yancoal, as well as our differences. study has commenced into the Stratford and diversification into renewable energy There has been a concerted effort to Renewable Energy Hub, which could projects. The foundation is set for Yancoal increase engagement with Yancoal’s include pumped hydro power and to generate further returns for shareholders external stakeholders and shareholders solar facilities, and a Memorandum of in 2023 and beyond. to demonstrate our operations and the Understanding was executed to study the unique position we hold for both Yankuang application of innovative kinetic energy Energy and Shandong Energy Group. storage technology at the former Austar These activities will continue as Yancoal coal mine. If developed, both these forges ahead to maximise the value of projects have the potential to increase I thank my fellow Directors for their efforts and support in 2022, and I thank management and the workforce for their ongoing pursuit of the “One Yancoal” vision. 3 “ Following an outstanding financial performance in 2021, Yancoal delivered even more record results in 2022.” DAVID MOULT CEO M E S S A G E F R O M O U R C E O This year again demonstrated the ability 2022 and the remainder of outstanding Due to these financial results, Yancoal of Yancoal’s world class assets to generate debt in 2023, for the first time since being enters 2023 in a transformed financial considerable returns during periods of established Yancoal has no external position. But these impressive financial robust coal prices. interest bearing loan debts and this will results and outcomes mask operational Following an outstanding financial performance in 2021, Yancoal delivered allow us to redirect the resulting cost challenges that the business overcame in savings towards to other initiatives. 2022. These challenges mirrored those even more record results in 2022, which Realised coal prices reached that we experienced in 2021. included: record revenue generation of unprecedented levels during 2022. Our mines in New South Wales started the $10.5 billion; record Operating EBITDA of Yancoal’s realised average price for year with water storage capacity in excess $7.0 billion and a record EBITDA margin thermal coal products was A$372/tonne of their environmental limits, following the of 65%; and record profit of $3.6 billion. and A$405/tonne for metallurgical coal repeated heavy rainfall events in 2021 Strong cash generation underpinned several significant milestones for the business this year. Yancoal is now paying corporate tax, having recouped previously incurred tax losses, and this has directly benefited our shareholders through the final dividend of $0.70/share being fully franked for the first time. Following the repayment of US$2.6 billion of debt during products, giving an overall average realised due to the La Niña weather pattern. Heavy sales price of A$378/tonne. To maximise rains repeatedly fell again throughout revenue during periods of strong market 2022, as the La Niña weather pattern conditions, Yancoal actively responds to persisted for a third consecutive year. customer requirements and leverages its While the mines invested in additional diversified international customer base. dewatering equipment and constructed In 2022, Yancoal sold coal into 13 market additional water storage dams, the volume destinations and experienced a notable of rainfall overwhelmed the increased uplift in sales to Europe. pumping and storage capacity and repeatedly caused production outages. 4 Y A N C O A L A N N U A L R E P O R T 2 0 2 2 $10.5B R E V E N U E $3.6B P R O F I T The COVID-19 pandemic continued to to address adverse operating conditions. from our operations in conditions that linger in 2022, and we were required to Lower production volume also directly were often unprecedented at our mines. implement ongoing response measures influenced the per-tonne operating Importantly, and despite the additional that proved effective in minimising risk to cost and this was compounded by challenges, our workforce remained the workforce and disruption to operations. uncontrollable external factors largely focused on safety. The Total Recordable These work practices and measures attributable to inflationary pressures. Injury Frequency Rate ended the year proved successful on-site, but community transmission ultimately resulted in instances of workers being unable to attend sites, in line with Government protocols. Our community contributions increased during 2022 to $1.8 million, which was split between site-based community at 8.1, which represented a continuation of the downward trend that has been experienced since 2018. support program initiatives and I thank all Yancoal employees for their Run of Mine production achieved was ongoing corporate level sponsorships hard work and support over the last year. 50.5 million tonnes (100% basis) and of organisations such as the Clontarf A true reflection of a company’s culture sales of attributable production was Foundation and the Westpac Helicopter is how the workforce comes together as 29.3 million – both around 20% lower Rescue Service. A detailed overview of a team during difficult periods to achieve than 2021. Operating cash cost per our Environmental, Social and Governance their goals. Our workforce’s response to product tonne for the year was $94. (ESG) performance will be available in the the challenges and headwinds we have Our disciplined approach to internal 2022 ESG Report. cost factors did not waiver, despite the need for additional equipment and contractors to implement recovery plans The patience, resilience and determination of Yancoal’s workforce allowed the business to extract the maximum value experienced over the past three years is an indication that Yancoal’s culture is strong. I am optimistic for our future. 5 F I N A N C I A L S U M M A R Y COAL PRODUCTION ATTRIBUTABLE SALEABLE COAL PRODUCTION, MILLION TONNES Three large-scale, low-cost mines are the foundation of Yancoal’s business. SALES REVENUE AND AVERAGE PRICE A$ MILLIONS / A$ PER TONNE Realised price and revenue exceed the prior highs of 2018. 60 50 40 30 20 10 0 2018 2019 2020 2021 2022 Moolarben Yarrabee Non-attributable MTW Ashton HVO Stratford Duralie 12000 10000 8000 6000 4000 2000 - 132 111 141 82 378 400 350 300 250 200 150 100 50 - 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 Revenue Average realised coal price OPERATING EBITDA A$ MILLIONS / MARGIN % NET PROFIT / (LOSS) AFTER TAX A$ MILLIONS Record Operating EBITDA and EBITDA Margin. Profit eclipses prior years. 65% 45% 46% 36% 21% 8000 7000 6000 5000 4000 3000 2000 1000 - 6000 5000 4000 3000 2000 1000 0 -1000 -2000 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Operating EBITDA EBITDA Margin Profit / (Loss) after tax Tax Expense 6 -2000400060008000100001200020222021202020192018-5010015020025030035040020222021202020192018RevenueAverage realised coal price13211182141378Profit / (Loss) after taxTax Expense-2000-1000010002000300040005000600020222021202020192018010203040506020222021202020192018MoolarbenMTWHVOYarrabeeAshtonStratford DuralieNon-attributable-1000200030004000500060007000800020222021202020192018Operating EBITDAEBITDA Margin45%36%21%46%65% F I N A N C I A L S U M M A R Y Y A N C O A L A N N U A L R E P O R T 2 0 2 2 PRODUCT MIX ATTRIBUTABLE SALES VOLUME, MILLION TONNES Product mix and qualities continually optimised. CASH OPERATING COSTS OPERATING COSTS, ROYALTIES, AND SELLING PRICE, A$/TONNE Realised price outpaced costs and royalties. 40 35 30 25 20 15 10 5 0 400 350 300 250 200 150 100 50 0 132 141 111 82 378 400 350 300 250 200 150 100 50 0 2018 2019 2020 2021 2022 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 Thermal Metallurgical Cash operating costs Royalty Average selling price, A$/t NET DEBT AND GEARING A$ MILLIONS / % Net cash position since July 2022. TOTAL DIVIDEND AND PAYOUT RATIO A$ MILLIONS / % A$1.23/share returned in 2022 dividends. 4000 3000 2000 1000 - -1000 -2000 -3000 41% 35% 29% 24% 2018 2019 2020 2021 60% 60% 58% 58% 1800 1800 1600 1600 1400 1400 1200 1200 1000 1000 800 800 600 600 400 400 200 200 2022 - - 1800 118% 118% 118% 1600 1400 1200 1000 800 600 400 200 - 60% 58% 45% 45% 45% 2018 2019 2019 2020 2021 2021 2022 2022 Net debt Gearing ratio 2018 2018 2019 2019 2019 2019 2020 2020 2021 2021 2021 2021 Interim Div. 2022 2022 2022 2022 Final Div. Special Div. Payout ratio Interim Div. Interim Div. Final Div. Final Div. Special Div. Special Div. Payout ratio Payout ratio 7 051015202530354020222021202020192018ThermalMetallurgical-3000-2000-1000-100020003000400020222021202020192018Net debtGearing ratio35%29%41%24%Cash operating costsRoyaltyAverage selling price, A$/t050100150200250300350400050100150200250300350400202220212020201920182022202120202019201813211182141378Interim Div.Final Div.Special Div.Payout ratio-200400600800100012001400160018002022202120202019201820222021201960%58%118%45% R E V I E W O F O P E R A T I O N S ** Implied mine life is the Marketable reserve at 31-Dec-2022 divided by the 2021 Output, rounded to the nearest whole number. The 2021 production figure was used for the calculation as 2022 incurred irregular production losses due to extraneous factors. 8 8 MOOLARBENNSWMOUNT THORLEY WARKWORTHNSWHUNTER VALLEY OPERATIONSNSWYARRABEEQLDMIDDLEMOUNTQLDASHTONNSWSTRATFORD- DURALIENSWECONOMIC INTEREST95%~83%51%100%~50%100%100%DESCRIPTIONTruck and shovel open-cut and longwall underground mining complex producing thermal coal; operated by Yancoal.Dragline, Truck and shovel open-cut mine producing semi-soft coking coal and thermal coal; operated by Yancoal.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.Truck and shovel open-cut mine producing ultra low volatile pulverised coal injection (PCI) coal and thermal coal; operated by Yancoal.Truck and shovel open-cut mine producing low volatility pulverised coal injection (PCI) coal and hard coking coal; operated by Middlemount Joint Venture.The Ashton longwall mine produces a semi-soft coking coal; operated by Yancoal. Truck and shovel open-cut mine producing thermal coal and semi-hard coking coal; operated by Yancoal.HEAD COUNT~860EMPLOYEES & CONTRACTORS ~1,360EMPLOYEES & CONTRACTORS~1,365EMPLOYEES & CONTRACTORS~430EMPLOYEES & CONTRACTORS~640EMPLOYEES & CONTRACTORS~315EMPLOYEES & CONTRACTORS~105EMPLOYEES & CONTRACTORS2022 SALEABLE COAL PRODUCTION (100%)14.9MILLION TONNES8.1MILLION TONNES9.6MILLION TONNES2.1MILLION TONNES2.6MILLION TONNES0.9MILLION TONNES0.7MILLION TONNESMARKETABLE RESERVES (AS AT 31 DEC 2022)169MILLION TONNES169MILLION TONNES610MILLION TONNES59MILLION TONNES67MILLION TONNES24MILLION TONNES0.8MILLION TONNESIMPLIED MINE LIFE**9YEARS15YEARS58YEARS23YEARS18YEARS20YEARS1YEAR Y A N C O A L A N N U A L R E P O R T 2 0 2 2 YARRABEE MIDDLEMOUNT CAMEBY DOWNS* MOUNT THORLEY WARKWORTH STRATFORD DURALIE ASHTON HUNTER VALLEY OPERATIONS MOOLARBEN PREMIER* 9 9 MOOLARBENNSWMOUNT THORLEY WARKWORTHNSWHUNTER VALLEY OPERATIONSNSWYARRABEEQLDMIDDLEMOUNTQLDASHTONNSWSTRATFORD- DURALIENSWECONOMIC INTEREST95%~83%51%100%~50%100%100%DESCRIPTIONTruck and shovel open-cut and longwall underground mining complex producing thermal coal; operated by Yancoal.Dragline, Truck and shovel open-cut mine producing semi-soft coking coal and thermal coal; operated by Yancoal.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.Truck and shovel open-cut mine producing ultra low volatile pulverised coal injection (PCI) coal and thermal coal; operated by Yancoal.Truck and shovel open-cut mine producing low volatility pulverised coal injection (PCI) coal and hard coking coal; operated by Middlemount Joint Venture.The Ashton longwall mine produces a semi-soft coking coal; operated by Yancoal. Truck and shovel open-cut mine producing thermal coal and semi-hard coking coal; operated by Yancoal.HEAD COUNT~860EMPLOYEES & CONTRACTORS ~1,360EMPLOYEES & CONTRACTORS~1,365EMPLOYEES & CONTRACTORS~430EMPLOYEES & CONTRACTORS~640EMPLOYEES & CONTRACTORS~315EMPLOYEES & CONTRACTORS~105EMPLOYEES & CONTRACTORS2022 SALEABLE COAL PRODUCTION (100%)14.9MILLION TONNES8.1MILLION TONNES9.6MILLION TONNES2.1MILLION TONNES2.6MILLION TONNES0.9MILLION TONNES0.7MILLION TONNESMARKETABLE RESERVES (AS AT 31 DEC 2022)169MILLION TONNES169MILLION TONNES610MILLION TONNES59MILLION TONNES67MILLION TONNES24MILLION TONNES0.8MILLION TONNESIMPLIED MINE LIFE**9YEARS15YEARS58YEARS23YEARS18YEARS20YEARS1YEAR E X E C U T I V E L E A D E R S H I P T E A M CHAIR OF THE EXECUTIVE COMMITTEE (CEC) CHIEF EXECUTIVE OFFICER (CEO) CHIEF FINANCIAL OFFICER (CFO) MR NING ZHANG MR DAVID MOULT MR NING (KEVIN) SU Mr Zhang was appointed Mr Moult was appointed CEO Mr Ning (Kevin) Su was Executive Director, Co-Vice in March 2020, having been appointed CFO in May 2020, Chairman and CEC of Yancoal an Independent Non-Executive having been Yancoal’s General in March 2020. Mr Zhang has Director of Yancoal since Manager Treasury since June served Yankuang Group for January 2018. He has over 2014. He has over 20 years nearly 30 years and has rich 40 years of global coal mining of accounting, financial and experience in accounting, experience. At Centennial Coal, treasury experience across financial management, project he was Managing Director manufacturing and mining management, auditing and and CEO from 2011 to 2017, industries in China and risk control. Before taking Non-Executive Director from Australia. Mr Su was previously positions at Yancoal, he served May 2017 until January 2018, the financial controller of Acer’s as Vice-Director of the Finance and COO from 1998 to 2011. Oceanic Region, acting in Department and Director of the He is a Director of the Minerals various accounting and finance Audit and Risk Department at Council of Australia (MCA), positions in the Company Yankuang Group. Mr Zhang a Director and former from 2003 to 2014. He holds holds a Master’s degree Chairman of the New South a Master of Commerce Degree from Tianjin University of Wales Minerals Council from the University of Sydney, Finance and Economics, (NSWMC), a Director of a Bachelor of Commerce and is a Professorate Senior Coal Services Pty Ltd, Degree from University of Accountant and International and a Director of Port Waratah International Business and Finance Manager. Coal Services (PWCS). Economics in China and is a Fellow of CPA Australia. 10 Y A N C O A L A N N U A L R E P O R T 2 0 2 2 EXECUTIVE GENERAL MANAGER – OPERATIONS CHIEF COMMERCIAL OFFICER (CCO) EXECUTIVE GENERAL MANAGER – MARKETING COMPANY SECRETARY, CHIEF LEGAL, COMPLIANCE, AND CORPORATE AFFAIRS OFFICER MR BILL MCKINSTREY MR MICHAEL NGO MR MARK SALEM MS LAURA LING ZHANG Mr McKinstrey was appointed Mr Ngo joined Yancoal in 2020 Mr Salem was appointed Ms Zhang is one of the founding EGM – Operations in March and has responsibility for the EGM – Marketing in March executives of the Company 2021. Mr McKinstrey has company’s various commercial 2018, following four years as and has been the Company over 45 years of experience functions, including strategy, General Manager of Marketing. Secretary since September in the mining industry, with mergers and acquisitions, Mark has over 30 years of 2005. She has over 20 years 27 years of these in senior infrastructure and procurement. experience in coal marketing, of experience in the mining management and executive He has over 25 years of logistic and commercial industry and has been roles. Since 2013 and before experience most of which functions. Mark worked instrumental in the Company’s his appointment as EGM – has been in the resources at Xstrata Coal for growth. Ms Zhang has Operations, he held several and energy sector. Previous 14 years, where he held BA, MA and EMBA roles in Yancoal including roles include Senior Vice marketing and commercial (Australia Graduate School Acting COO, General Manager President – Strategic Planning positions in Australia, the of Management) degrees, – QLD/WA and Project Director & Analysis for Banpu PCL, Asia/Pacific and Switzerland. is a Fellow of Institute for the Moolarben Open-Cut Executive General Manager Mark has also worked in of Chartered Secretaries 4 Expansion Project. Between – Strategy & Development for various roles at BP Coal and Administrators (ICSA) 2003-2013 Mr McKinstrey Centennial Coal and Principal Development Australia, Rio and the Hong Kong Institute of held senior roles at Xstrata / – Transaction Advisory Tinto and Savage Resources. Chartered Secretaries (HKICS), Glencore, and prior to this was Services for EY. responsible for the operational and financial performance of a portfolio of eight coal assets for Thiess Contractors. is a member and graduate of AICD, and a graduate of GIA. 11 F I N A N C I A L S T A T E M E N T S 14 DIRECTORS’ REPORT 30 REMUNERATION REPORT 45 AUDITOR’S INDEPENDENCE DECLARATION 46 MANAGEMENT DISCUSSION AND ANALYSIS 64 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 65 CONSOLIDATED BALANCE SHEET 66 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 67 CONSOLIDATED STATEMENT OF CASH FLOWS 68 NOTES TO THE FINANCIAL STATEMENTS 124 DIRECTORS’ DECLARATION 125 INDEPENDENT AUDITOR’S REPORT 130 CORPORATE GOVERNANCE STATEMENT 156 CONTINUING CONNECTED TRANSACTIONS 162 COAL RESERVES AND RESOURCES 167 SHAREHOLDING STATISTICS 169 GLOSSARY 172 CORPORATE DIRECTORY 12 12 YANCOAL 2021YANCOAL 2021ADDITIONAL HKEX COMPLIANCE REQUIREMENTSADDITIONAL HKEX COMPLIANCE REQUIREMENTS Y A N C O A L A N N U A L R E P O R T 2 0 2 2 1313 ANNUAL REPORTANNUAL REPORTADDITIONAL HKEX COMPLIANCE REQUIREMENTSADDITIONAL HKEX COMPLIANCE REQUIREMENTS D I R E C T O R S ’ R E P O R T DIRECTORS’ REPORT 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 2022 (the “period”). DIRECTORS The following persons were Directors of Yancoal Australia Ltd during the period and until the date of this report: Chairman • Baocai Zhang (became a director on 26 June 2012) Co-Vice Chairmen • Ning Zhang (became a director on 20 March 2020) • Gregory James Fletcher (became a director on 26 June 2012) Directors • Xing Feng (became a director on 15 December 2017) • Helen Jane Gillies (became a director on 30 January 2018) • Geoffrey William Raby (became a director on 26 June 2012) YANCOAL 12MTH ROLLING TRIFR 10 9 8 7 Jul-21 Jan-22 Dec-22 Yancoal TRIFR Industry weighted average Under the direction of the board of Directors (“Board”) and the Health, Safety, Environment and Community Committee, Yancoal utilises Core Hazard and Critical Controls across all operations, identifying critical hazards within the workplace and instituting adequate controls. These controls are regularly verified to ensure that they are operating as intended for our people’s safety. During 2022, Yancoal continued to implement COVID-19 response measures that proved effective in minimising risks to the workforce • Yaomeng Xiao (became a director on 30 May 2022) and disruption to the Company’s operations. The measures • Xiangqian Wu (became a director on 28 April 2017) • Qingchun Zhao (became a director on 28 April 2017) Directors retired during the year • Cunliang Lai (was a director from 18 November 2004 to 30 May 2022) COMPANY SECRETARY The Company Secretary in office during the period and up to the date of this report is Laura Ling Zhang. REVIEW OF ACTIVITIES SAFETY AND ENVIRONMENT Yancoal remains committed to operating safely and transparently to achieve its objective of zero harm to our employees and contractors. Yancoal operates its mines to meet legislative and safety standards and be an industry leader in this aspect of its business. included pre-screening, periodical testing, differentiated check- in codes for work areas and deliveries with minimal contact. The work practices and measures implemented proved successful on-site. However, community transmission ultimately resulted in instances of workers being unable to attend work as they followed Government protocols. Yancoal’s Total Recordable Injury Frequency Rate (“TRIFR”) at the end of the period was 8.11; the TRIFR recorded at the end of 2021 was 8.4. The decrease in the Group’s TRIFR was a favourable outcome that resulted from continued efforts across all sites. The uptick in the rate in mid-2022 served as a reminder that constant attention is required to sustain an acceptable rate, and the recovery in the profile by the end of the year demonstrates the effectiveness of the programs Yancoal has in place. The reported TRIFR at the end of the period is below the comparable industry- weighted average TRIFR of 8.42. In 2022 Yancoal commenced a trial vehicle collision awareness system at one of its operations. This trial commenced with equipment installation on light vehicles and is progressing to installation on haul trucks, which remains ongoing. Integration of the system with the site’s new WiFi network was undertaken, and a full trial of the system will commence in 2023. In 2022, Yancoal launched a five-year program designed to provide a consistent approach to Health, Safety and Training management across all Yancoal operations and support the integration of a safety culture across the business. Attributable TRIFR includes Moolarben, Mount Thorley Warkworth, Stratford Duralie, Yarrabee, Ashton and the Corporate offices; it excludes Middlemount and Hunter Valley Operations. The Industry weighted average combines proportional components from the relevant New South Wales and Queensland industry averages. The sources for the industry statistics are published periodically, as revised data is released the industry weighted average calculation is updated. 1 2 14 The “Safe Way Every Day” program offers a range of training and interpersonal initiatives designed to enhance personal safety • A water licence audit was undertaken across NSW operations to ensure that the company’s records match those held by the skill sets. The program is designed to enhance employee safety regulator. As a result, a coordinated updating of the licence knowledge and motivation to work safely each day, empowering and works approvals across NSW operations has now been everyone to understand their direct influence on safety outcomes. completed. The audit results are now being used to develop an In 2022 over 90% of Yancoal personnel commenced the “Safe Way Every Day” training. Yancoal implemented a Mental Health Program in 2022, a four- year, four-stage program. In 2022 Stage 1 was completed, which incorporated several elements, including the provision of Manager & Supervisor Training to select site managers and supervisors; and the provision of ‘First Aid’ or ‘Mental Health Response’ training to select site supervisors to help senior workers and leaders facilitate help-seeking behaviours. Stage 2 also commenced in 2022, with Yancoal employees being introduced to the program via a 2½ hour workshop on mental health awareness and education. The workshop focused interactive digital interface for site and corporate functions. • Yancoal’s Independent Environmental Assurance Audit (IEAA) program is designed to assess the risks associated with key environmental aspects at each operation. During 2022, audits were completed at Austar Mine, Ashton Mine, Moolarben Coal Mine and Mount Thorley Warkworth Operations. The level of environmental management demonstrated by these sites has been high, with proactive actions identified to improve environmental performance further. There were no environmental incidents with significant impact reported during the year. In 2022, Yancoal contributed $1.84 million via its Community on several areas, including assessing mental health support Support Program to local and regional health, environmental, networks & EAP promotion; addressing the signs, symptoms education, arts, culture and community initiatives capable of and contributing factors of poor mental health; and providing making a positive difference in the regions in which it operates. knowledge and skills to have the appropriate conversations and establish appropriate support networks. Yancoal works with its community stakeholders, utilising community consultative committees, local newsletters, local The Yancoal Mental Health program strategy is targeted to media, community days and site-specific websites to help ensure deliver a structured and sustainable mental health and well-being the communities are engaged and informed of relevant matters program that synergises strongly with the Yancoal Safe Way related to nearby operations. cultural framework and Leadership Development programs. The program intends to promote and support positive mental health management; encourage “help-seeking” behaviours amongst our workforce; change perceptions of mental health; and equip our people better to support their teams, co-workers, family and friends. Yancoal’s operations are subject to stringent environmental approvals and licences. To honour these regulatory obligations and to meet the requirements of Yancoal’s management directives, Yancoal has developed and implemented systems, processes and practices to manage compliance with the conditions of these approvals and licences. These systems, processes and practices are subject to continuous improvement initiatives and are audited by a third party to provide “third line” assurance. The following environmental initiatives were undertaken in 2022 to improve environmental performance or comply with environmental approvals and licences: • Yancoal undertook a review of its Corporate Environmental Management System (EMS) in 2022. The Corporate EMS has been developed and implemented to establish the company’s environmental compliance systems, processes and practices. A significant update made during the 2022 review was the creation of an Aboriginal Cultural Heritage (ACH) Management Standard. This Standard aims to set out minimum expectations for managing ACH to ensure that all sites are consistently implementing control measures to minimise the impacts of mining on ACH. ENERGY TRANSITION As a thermal coal producer, Yancoal acknowledges it plays a role in mitigating the emissions generated by its operations and supporting investments in low-emission technology to reduce downstream emissions from the consumption of coal products. Yancoal is progressing with a feasibility study into a significant renewable energy project at Stratford once mining is completed in 2024. The proposed project is an integrated pumped hydro energy storage development, with an associated solar farm to “recharge” the pumped hydro system during daylight hours. Yancoal, in combination with Green Gravity, is studying the potential application of Green Gravity’s innovative energy storage technology at the former Austar coal mine site in NSW, Australia. The concept involves utilising decommissioned ventilation shafts to house Green Gravity’s gravitational energy storage technology to provide long-duration energy storage to the NSW electricity grid. Yancoal also studied the potential for nature-based carbon credit generation projects across its property portfolio. Equipment suppliers to the mining sector are constantly innovating to improve the fuel efficiency of haul trucks and other machinery. Fuel efficiency is a crucial assessment metric Yancoal considers when acquiring equipment for its operations. 15 DIRECTORS’ REPORT Yancoal also understands the elevated interest from stakeholders While we do not track our scope 3 emissions associated with regarding the potential risks and opportunities posed to its our product’s consumption, we support the development business and the broader sector due to the ongoing global shift of technologies to reduce the emissions intensity of these towards a lower-carbon economy. Yancoal’s 2022 ESG Report downstream activities. These technologies include developing is due to be published in April 2023. The 2022 ESG Report will and installing high-efficiency, low-emissions technologies in provide a detailed review of the Company’s progress in these coal-fired power stations and investment in carbon capture and matters and broader ESG materiality issues. storage technology. GOVERNANCE Oversight of climate-related matters, including risks and opportunities, sits within Yancoal’s governance framework. The Health, Safety, Environment and Community Committee consider climate-related risks and relevant risk management strategies. The Board has ultimate responsibility for the oversight and We note that the government is working on changes to legislation and regulations to progressively step down “baselines” under the safeguard mechanism within the National Greenhouse and Energy Reporting Act 2007 (Cth). Such changes will likely require safeguard facilities to purchase and retire “Australian Carbon Credit Units” or new “Safeguard Mechanism Credits” for emissions above their revised baselines. We are tracking these developments closely and exploring means to reduce approval of risk management and financial investment decisions, emissions at sites. including those relating to climate change. The Board regularly considers how climate change may affect physical, regulatory, commercial, and operating environments. These considerations OPERATIONS Yancoal owns, operates or has a joint-venture stake in coal mines inform the development of medium-to-long-term goals in New South Wales (“NSW”), Queensland and Western Australia. and strategies. REPORTING ON OUR EMISSIONS Yancoal reports its operational direct (scope 1) and indirect (scope 2) emissions annually in line with the National Greenhouse and Energy Reporting Act 2007 (Cth). The Group has implemented systems and processes to collect and calculate the data required and submitted its 2021/2022 Section 19 Energy and Emissions Report to the Federal Clean Energy Regulator on 27 October 2022. Most scope 1 emissions relate to fugitive emissions associated with underground and open-cut mines and diesel consumption, and scope 2 emissions stem from electricity purchased from the grid. Overall, on an operational control basis, our total scope 1 and scope 2 emissions for the period ended 30 June 2022 were 2,237,073 tCO2- e, a 7% increase from the year prior3. Fugitive emissions associated with underground mining at Ashton were the main driver of the increased Scope 1. Scope 2 emissions decreased, driven mainly by reduced coal processing due to The thermal, semi-soft coking and pulverised coal injection (“PCI”) coal products are exported through ports in Newcastle, Gladstone and Dalrymple Bay to customers throughout the Asia-Pacific region. The mines in NSW started the year with water storage capacity in excess of our environmental limits following repeated heavy rainfall events in 2021 due to the La Niña weather pattern. Heavy rains repeatedly fell again throughout 2022 as the La Niña weather pattern persisted for a third consecutive year. The mines invested in additional dewatering equipment and constructed additional water storage dams; however, the volume of rainfall overwhelmed the increased pumping and storage capacity. The rainfall impacted the mining output in several ways; initially, production is lost when mining ceases during the rain event; additional time is lost pumping water out of the active mining pits and off benches where mining needs to resume. Furthermore, productivity is lost due to operating in wet and boggy conditions following the rain event. Where the water storage dams are at capacity, water must then be stored in operating locations (sacrificial pits), inhibiting reduced volumes due to excessive wet weather. mining operations. GREENHOUSE GAS EMISSIONS Compounding the production impacts resulting from the wet weather were the COVID-19 pandemic disruptions. Mandated isolation procedures often resulted in mines running with reduced 2021/2022 1,935,656 301,417 workforce availability, and supply chains and production or delivery of services and spare parts were often compromised. 2020/2021 1,747,756 334,617 The combination of these factors impacted equipment availability Scope 1 Scope 2 and further affected coal production. 3 Emissions data is reported on 100% basis, but Yancoal does not own 100% of all assets. The operating assets included are: Moolarben, Mount Thorley Warkworth, Yarrabee, Stratford Duralie, and Ashton, as well as several non-operational assets. Reporting on a 100% basis is consistent with the National Greenhouse and Energy Reporting (NGER) data submitted to the Clean Energy Regulator (CER). 16 DIRECTORS’ REPORT In the context of the unprecedented working conditions in 2022, Demand for thermal coal proved robust in 2022. According to the coal production was down 20% from the 2021 level. Limiting International Energy Agency, the global coal demand increased the production loss to 20% was a commendable outcome only by 1.2% in 2022 and exceeded 8 billion tonnes in a calendar made possible by the diligent efforts of the workforce across all year for the first time. Seasonal demand factors such as ‘wind operations. Yancoal’s seven mines produced 50.5Mt of ROM coal, droughts’, surplus hydropower, or cold winters influence the coal 38.9Mt of saleable coal and 29.4Mt of attributable saleable coal. markets periodically. On the supply side, structural shortfalls The full-year attributable saleable coal production was ~5% below resulting from years of underinvestment may underpin the market. the low end of the 31-33Mt target range due to multiple factors, including the reasons mentioned above. Yancoal actively responds to prevailing market conditions and customer requirements to the best of its ability. Over the past The Group’s overall average cash operating costs, excluding several years, Yancoal has expanded and diversified its customer government royalties, increased from A$67 per tonne in 2021 to base, including shipping additional coal into Europe in 2022 A$94 per tonne in 2022. The lower production volume directly following the dislocation in global energy markets that occurred impacts the per-tonne unit cost calculation. There were also following the invasion of Ukraine and the subsequent sanctions uncontrollable factors, including higher diesel prices, explosive placed on Russian imports. prices and demurrage costs, that contributed to the higher unit cost and the additional cost associated with sourcing additional equipment and contractors to aid recovery efforts. Reduced output from Yancoal in 2022 limited its attributable sales to 29.4 million tonnes, 20% less than the prior year. This trend of lower sales volumes was seen across the broader industry, with The ‘Management Discussion and Analysis’ provides a detailed the reduced supply contributing to a positive pricing impact. review of the period’s operational performance. Compared to 2021, a lower AUD:USD exchange rate also COAL MARKETS The majority of Yancoal’s thermal coal sales are at prices contributed to an increase in the Australian dollar-denominated realised price. The Group’s overall average ex-mine selling price was A$378/tonne, 168% higher than in 2021 due to the coal associated with the GlobalCOAL NEWC 6,000k Cal NAR index price strength. (GCNewc) and the All Published Index 5 (API5) 5,500kCal index. Each contract has price adjustments for energy content and other coal characteristics. Typically, thermal coal produced in the FINANCIAL PERFORMANCE Revenue increased by 95% from $5,404 million in 2021 to Hunter Valley tends to have GCNewc index characteristics. In $10,548 million in 2022, primarily due to the 168% increase in the contrast, coal produced west of the Hunter Valley usually tends to realised coal price. have API5 Index characteristics or sits between the indices. Operating EBITDA increased by $4,428 million to $6,959 million in In 2022, the API5 price averaged US$176/t and ended the period 2022. The Operating EBITDA margin was 65% in 2022, compared at US$133/t, while the GCNewc price averaged US$363/t and to 46% in 2021. ended at US$399/t. The +US$200/t price differential through the year was more pronounced than the prior decade, of which the average differential was approximately U$20/t. The two indices should not trade at disparate prices on a simple energy equivalent basis, but specific supply and demand factors sustained the high- energy, low-ash coal indices throughout 2022. Yancoal’s full-year 2022 average realised coal price of A$378/t was up 168% from 2021. The average realised price comprised a A$372/t average realised thermal coal price and a A$405/t average realised metallurgical coal price. The depreciation and amortisation expenses were stable at $834 million in 2022. After including the depreciation and amortisation, $459 million of finance costs and an income tax expense of $1,505 million, the profit after tax was $3,586 million — a notable improvement from the $791 million reported in 2021. The net operating cash flow was $6,528 million. Capital Expenditure was $548 million for equipment and activities required to sustain the operations and the ongoing mining fleet replacement program. Financing cash out flows were $5,133 million as Yancoal made mandatory debt repayments and early The GCNewc price ended the year at near record levels; however, debt repayments totalling US$2,260 million and distributed if the heavy rain associated with the La Niña weather pattern has dividends totalling A$1,626 million through the year. The gearing passed – as suggested by the Bureau of Meteorology – Australia’s ratio improved from 24% at 31 December 2021 to effectively 0% exports should gradually improve. Coal markets appear to have at 31 December 2022, as Yancoal had a net cash position at started factoring in a slow easing of supply-side constraints for the year’s end. high-energy low-ash coal from Australia. As at 31 December 2022, the Group had $2,699 million in cash Indonesia recorded several monthly production records in 2022 and cash equivalents. after being less impacted by seasonal weather events than in prior years. Lower energy coal from Indonesia is finding customers and appears to be competing with the coal sold against the API5 Index (on a value-adjusted basis). The ‘Management Discussion and Analysis’ provides a detailed review of the period’s financial performance. 17 DIRECTORS’ REPORT POTENTIAL GROWTH PROJECTS At Moolarben, Yancoal has the required approvals to increase On 16 February 2023, the Company announced that it was subject to revised directions received from the New South Wales annual open-cut mine ROM coal production from 14Mtpa to government compelling it to make available up to 310,000 16Mtpa. Yancoal’s ability to increase open-cut production tonnes of coal per quarter to domestic power generators from its depends on increasing the capacity at the Coal Handling attributable saleable production. The directions are effective for and Preparation Plant (CHPP). This CHPP upgrade project the fifteen months, from 1 April 2023 to 30 June 2024 with coal is underway, with the final stage of modifications to increase sold under the directions subject to a price cap of A$125 per capacity to 16Mtpa scheduled to be completed during 1Q 2023. tonne delivered for 5,500 kcal/kg products, energy adjusted. At Ashton, an agreement was reached with the adjoining On 17 February 2023, the Company entered into facility Ravensworth Operation for the Ashton mine to access some of documentation to refinance its existing A$975 million syndicated Ravensworth’s underground coal resources. State Government bank guarantee facility due to expire on 2 June 2023 with planning approval was received, and the relevant tenements three new contingent liability facilities, totalling A$1.2 billion for have now been transferred into Ashton’s ownership, enabling a period of 3 years. The refinance is due to be completed in access into this new mining area from 1 January 2023. Federal early March 2023. environmental approval is required before longwall extraction in November 2024 (based on the estimated timing). Securing a transfer of these tenements to Ashton’s ownership will increase the longevity and efficiency of the Ashton operation by utilising its existing equipment to access additional mining locations with coal of similar or better coal quality than it currently produces. During the year ended 31 December 2022, neither Yancoal nor any of its subsidiaries purchased, sold or redeemed Yancoal’s listed securities. However, as noted in the Remuneration Report, Yancoal instructed CPU Share Plans Pty Ltd as trustee of the Yancoal Australia Limited Employee Share Trust to acquire and hold fully paid ordinary shares in the Company in on-market share The Mount Thorley Warkworth (MTW) underground mine concept transactions in late 2022. remains subject to study and assessment, but we do not expect to reach a conclusion until after 2023. Beyond the Company’s organic growth opportunities, it is open to acquiring additional coal assets or diversifying into other minerals, energy, or renewable energy projects. Any new initiative would be subject to careful evaluation and require Yancoal Board consideration and approval before commencement. CORPORATE ACTIVITIES On 25 May 2022, Yancoal’s majority shareholder, Yankuang Energy Group Company Limited, announced it was considering a transaction to acquire further shares in Yancoal by means of an acquisition structure to be determined by Yankuang Matters subsequent to the end of the financial year are detailed in the ‘Management Discussion and Analysis’ section of this report. DIVIDENDS AND DIVIDEND POLICY According to Yancoal policy and 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 or final dividends, and per the Company’s Constitution must: • subject to the point 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 Energy. On 8 September 2022, Yankuang Energy terminated the • 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. On 27 February 2023, the Directors declared a fully franked final dividend of A$924 million, A$0.7000 per share, with a record date of 15 March 2023 and payment date of 28 April 2023. potential transaction. On 30 June 2022, Yancoal announced its intention to make early debt repayments of about US$801 million and these were completed in mid-July. On 30 September 2022, Yancoal announced its intention to make early debt repayments of about US$1.0 billion and these were completed on 4 October 2022. On 9 December 2022, Yancoal announced its intention to make early debt repayments of about US$459 million and these were completed in mid-December. In conjunction with the US$500 million early debt repayment completed in October 2021 Yancoal repaid US$2,760 million ahead of schedule. The early debt repayments saved ~A$119 million in finance costs during 2022, and will save ~A$294 million in finance costs during 2023. 18 DIRECTORS’ REPORT COMMUNICATION WITH SHAREHOLDERS The Company believes in high standards of transparent corporate FULFILMENT OF CONDITIONS AND UNDERTAKINGS The Company confirms that it has complied with the conditions disclosure and is committed to disclosing to its shareholders and undertakings imposed by The Stock Exchange of Hong information in a timely and fair manner via ASX and HKExnews. Kong Limited during the period from 1 January 2022 to Where there is inadvertent disclosure made to a selected group, 31 December 2022. the Company will make the same disclosure publicly to all others as soon as practicable. Communication is mainly made through: • Annual reports are prepared and made available 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; MANAGEMENT CONTRACTS No contracts concerning the management and administration of the whole or any substantial part of the Company’s business were entered into or existed during the year ended 31 December 2022. TAX RELIEF The Company is not aware of any taxation relief available to the shareholders because they hold fully paid shares. If shareholders are unsure about the taxation implications of purchasing, holding, • Interim reports containing a summary of the financial information disposing of, dealing in, or exercising any rights concerning the and affairs of the Group for that period; fully paid shares, they are advised to consult an expert. • Quarterly production reports containing a summary of the Group’s production output and coal sales for the reporting period; MAJOR CUSTOMERS AND SUPPLIERS Information regarding the Group’s sales to the major customers and purchases from the major suppliers can be found in Notes B2 • Notices of explanatory memoranda for AGMs and extraordinary and B5 to the consolidated financial statements. The details of the general meetings (if any) that are sent to all shareholders. customer and sales agreements are provided in the ‘Continuing The Company does not practice selective disclosure, and Price- Connected Transactions’ section of this report. sensitive information is first publicly released through ASX and None of the Directors, or their associates, had any beneficial HKExnews. All Company shareholders are eligible to receive the interest in the five largest customers or suppliers to the knowledge of the Directors. To the Directors’ knowledge, no substantial shareholders of Yancoal have a beneficial interest in the five largest customers or suppliers. 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. 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. PRE-EMPTIVE RIGHTS ON NEW ISSUES OF SHARES Under the Corporations Act 2001 (Cth) and the Company’s Constitution, shareholders do not have the right to be offered any shares that 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 2022, approximately 23.97% 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 publicly available information 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. 19 DIRECTORS’ REPORT INSURANCE OF OFFICERS Rule 10.2 of Yancoal’s Constitution requires Yancoal to indemnify, SW AUDIT to the full extent permitted by law, each Officer of the Company Audit and review of financial statements against liability incurred by the Officer as a Director or an Officer of the Company. The Directors named in this report, along with the Audit related services Non-audit services Company Secretary, Chief Executive Officer and Chief Financial Other assurance services Officer, have the benefit of this requirement, as do individuals who Taxation compliance 2022 $’000 1,178 31 – 59 – 2021 $’000 1,233 35 – 50 – formerly held one of those positions. During the financial year, the Company paid a premium for Directors’ and Officers’ Liability insurance and 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 (Cth) 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. Total services remuneration of ShineWing Australia 1,268 1,318 For fees paid to related practices and non-related audit firms, refer to Note F2. 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 45. 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 No proceedings have been brought or intervened in on behalf Directors’ Report and financial statements have been rounded of the Company with leave of the Court under section 237 of the Corporations Act 2001 (Cth). off to the nearest million dollars in accordance with that legislative instrument. 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 essential. Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year are set out below. 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 undermines 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: 20 DIRECTORS’ REPORT INFORMATION ON CURRENT DIRECTORS BAOCAI ZHANG EMBA Non-Executive Director (26 Jun 2012 – 19 Jan 2014, and 8 Jun 2018 – current) Co-Vice Chairman (20 Dec 2013 – 8 Jun 2018) Executive Director (20 Jan 2014 – 8 Jun 2018) Chairman of the Board (8 Jun 2018 – current) GREGORY JAMES FLETCHER BCOM CA Independent Non-Executive Director (26 Jun 2012 – Current) Co-Vice Chairman (1 Mar 2018 – Current) Mr Fletcher 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. Mr Zhang, joined Yankuang Energy (formerly known as Yanzhou Prior to 2009, Mr Fletcher was a senior partner of Deloitte for Coal Mining Co Ltd) in 1989 and was appointed as the Head of 16 years, during which he held many senior roles as well as the Planning and Finance department of Yankuang Energy in working with major Australian listed companies with operations 2002. He was appointed as a Director and Company Secretary of internationally, including the Asia Pacific region. He also worked Yankuang Energy in 2006 and Deputy General Manager in 2011. closely with organisations in China, Indonesia and Mongolia to Mr Zhang was appointed as Non-Executive Director of Yancoal on enhance governance practices. 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 of Shandong Energy Group Company Limited (Shandong Energy Group) (formerly known as Yankuang Group) and a standing member of the CPC Shandong Energy Group Committee. In February 2018, he was appointed as the General Counsel of Shandong Energy. Mr Zhang was appointed as the Chair of the Board of Yancoal on 8 June 2018. In July 2020, Mr Zhang was appointed as the Deputy General Manager of Shandong Energy Group and a standing member of the CPC Shandong Energy Group Committee. In June 2021, Mr. Zhang was appointed as the General Manager, Deputy Secretary of the CPC Shandong Energy Group Committee and a Director of Shandong Energy Group. 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 Yankuang Energy’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. NING ZHANG Executive Director (20 Mar 2020 – current) Chair of the Executive Committee (20 Mar 2020 – current) Co-Vice Chairman (20 Mar 2020 – current) Since 2009 Mr Fletcher has taken on Board and Audit Committee roles. He has been Chairman of SMEG Australia Pty Limited and a Board Director of Yancoal SCN Limited, Railcorp, TAFE NSW and WDS Limited and is currently a Board Director of Saunders International Limited. Mr Fletcher is the current Audit and Risk Committee Chair for the NSW Electoral Commission and NSW HealthShare/eHealth and, in the past, has been Chairman of the Roads and Maritime Services Audit and Risk Committee and City of Sydney Audit and Risk Committee. Mr Fletcher holds a Bachelor of Commerce, and he is a Chartered Accountant. XIANGQIAN WU DE Non-Executive Director (28 Apr 2017 – Current) Mr Wu joined Yankuang Energy (formerly known as Yanzhou Coal Mining Co Ltd) in 1988. In 2003, he was appointed as the Deputy Head and Deputy Chief Engineer of Jining No.3 Coal Mine. In 2004, he was appointed as the Deputy Head and Chief Engineer of Jining No.3 Coal Mine. In 2006, he was appointed as the Head of Jining No.3 Coal Mine. 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 Yankuang Energy. In January 2016, he was appointed as the General Manager and Deputy Chief Engineer of Yankuang Energy. In April 2020, he was appointed as the Production Director of Yankuang Group Co. Ltd. In August 2020, he was appointed as the Chief Safety Officer of Shandong Energy Group Co. Ltd. Mr Wu graduated Mr Zhang, holds a master’s degree from Tianjin University from Shandong University of Science and Technology and China of Finance and Economics. He is professionally accredited University of Mining and Technology. as Professorate Senior Accountant and International Finance Manager. During his near 30-year career with the Shandong Energy Group (formerly known as Yankuang Group), Mr Zhang has held several senior roles, including Vice Director of the Finance Department and the Director of the Audit and Risk Department. Mr Wu is a Research Fellow in Applied Engineering Technology and a Doctor of Engineering. 21 DIRECTORS’ REPORT QINGCHUN ZHAO EMBA Non-Executive Director (28 Apr 2017 – Current) YAOMENG XIAO M.ENG Non-Executive Director (30 May 2022 – Current) Mr Zhao, is a senior accountant with an EMBA degree and is Mr Xiao, joined Yankuang Energy’s predecessor in 1994. Mr Xiao a Director and the Chief Financial Officer of Yankuang Energy was appointed as the director of the Safety Inspection Department (formerly known as Yanzhou Coal Mining Co Ltd). of Dongtan Coal Mine of the Yankuang Energy in 2013, and the Mr Zhao joined Yankuang Energy’s predecessor in 1989 and was appointed as the Chief Accountant in charge of the Finance Department in 2002 and Director of the Planning and Finance Department of Yankuang Energy in 2006. In March 2011, he was appointed as the Vice Chief Financial Officer and the Director of the Finance Department of Yankuang Energy. In March 2014, Mr Zhao was appointed Assistant General Manager and the Director of the Finance Management Department of Yankuang Energy. In January 2016, he was appointed as the Chief Financial Officer of Yankuang Energy, and in June 2016, he was appointed as a director of Yankuang Energy. Mr Zhao graduated from Nankai University. chairman and the general manager of Guizhou Wulunshan Coal Mining Company Limited in 2014. In 2016, he was appointed as the deputy general manager of Yankuang Guizhou Neng Hua Company Limited. In July 2018, he was appointed as the manager of Jining No. 3 Coal Mine of Yankuang Energy. In April 2020, he was appointed as the vice general manager of Yankuang Energy. In July 2021, he took office as the Secretary of the CPC Yankuang Energy Committee and the general manager of Yankuang Energy, and was appointed as the director of the Yankuang Energy in August 2021. Mr. Xiao graduated from China University of Mining and Technology. He is a research fellow in applied engineering technology with a master’s degree of engineering. XING FENG EMBA Non-Executive Director (15 Dec 2017 – Current) Mr Feng, started his career with China Cinda Asset Management Co., Limited (Cinda) in 1999, and has served in various capacities DR GEOFFREY WILLIAM RABY BEC (HONS) MEC AND PHD (ECONOMICS) Independent Non-Executive Director (26 Jun 2012 - Current) Dr Geoffrey Raby was appointed a Director of Yancoal in 2012. in the Department of General Management, Department of Dr Raby was formerly Australia’s Ambassador to the People’s General Business and Department of Investment and Financing. Republic of China from 2007 to 2011. Prior to that, he was a He has abundant experience in corporate governance, investment Deputy Secretary in the Department of Foreign Affairs and Trade and financing. He was appointed Deputy General Manager of Cinda’s Strategic Fourth Client Department in 2020, where he is responsible for implementing the Department’s development strategy plan, involvement in the 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. He was appointed General Manager of Cinda Jilin Branch in 2022, where he is responsible for the overall work of the branch. Mr Feng holds a Bachelor of Engineering (Electrical Engineering and Automation) from Tsinghua University and an EMBA degree from Peking University. (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 Master of Economics and a Doctor of Philosophy in Economics. 22 DIRECTORS’ REPORT HELEN JANE GILLIES MBA, MCONSTRLAW, LLB(HONS), BCOM, FAICD Mr Moult holds a Master of Business Administration and a Higher National Diploma in Mining. Mr Moult is a Chartered Mining Independent Non-Executive Director (30 Jan 2018 – Current) Engineer in the United Kingdom, a Fellow of the Australasian Helen Gillies is an experienced Director and legal, risk and Institute of Mining and Metallurgy, a Fellow of the Institute of compliance professional. Ms Gillies was appointed as a Non-Executive Director of the ASX listed company Monadelphous Group Limited (“MND”) in 2016. She is the Chair of the Audit Committee of MND and a member of the Nomination Committee of MND and a member of the Remuneration Committee of MND. She was appointed as a Non-Executive Director of ASX listed Company Aurelia Metals Limited (“AMI”) in January 2021, and is a member of the Nomination and Remuneration Committee of AMI and a member of the Sustainability and Risk Committee of AMI. Materials, Minerals and Mining, a European Engineer of European Federation of National Engineering Associations and a member of the Australia Institute of Company Directors. NING (KEVIN) SU FCPA Chief Financial Officer (1 June 2020 – Current) Ning (Kevin) Su, a Fellow of CPA Australia (FCPA), joined Yancoal as General Manager Treasury in June 2014. He has over 20 years of accounting, financial, and treasury experience across manufacturing and mining industries in China and Australia. Mr Su was previously the financial controller of Acer’s Oceanic Region, She was appointed a Non-Executive Director of Bankstown and acting in various accounting and finance positions in the company Camden Airports in September 2017, an unlisted entity. She was appointed as a Non-Executive Director with Lexon Insurance from 2003 to 2014. Mr Su holds a Master of Commerce Degree from the University of Sydney and a Bachelor of Commerce Pte Ltd, an unlisted entity. Previously, she served as a director of Red Flag Group Limited from 2016 to 2020, 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 also 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. She also has completed the Advanced Management Program and the International Directors Programme at Insead, France. Ms Gillies is a Fellow of the Australian Institute of Company Directors. INFORMATION ON MANAGEMENT DAVID JAMES MOULT C. ENG (MINING), MBA, FAUSIMM, FIMMM, MAICD Chief Executive Officer (9 Mar 2020 – Current) Independent Non-Executive Director (30 Jan 2018 – 9 Mar 2020) David Moult was an Independent Director of Yancoal from January 2018 to March 2020 when he was then appointed to the role of Chief Executive Officer (“CEO”). He has over 40 years of 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 Director of the Minerals Council of Australia (“MCA”), a Director and former Chairman of the New South Wales Minerals Council (“NSWMC”), a Director of Coal Service Pty Ltd, and a Director of Port Waratah Coal Services (“PWCS”). Mr Moult is a member of the Coal Industry Advisory Board to the International Energy Agency. Degree from the University of International Business and Economics in China. LAURA LING ZHANG BA, MA, EMBA, AGIA, FCIS, GAICD Company Secretary, Chief Legal, Compliance, Corporate Affairs Officer (6 Sep 2005 – Current) Laura Ling Zhang 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 of experience in the mining industry and has been instrumental in the Company’s growth. She 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. Ms Zhang also holds a 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 2012. Ms Zhang completed her EMBA degree at the Australian Graduate School of Management at the University of New South Wales in 2019. Ms Zhang was previously a Fellow of the Hong Kong Institute of Chartered Secretaries between May 2016 and July 2021, and is currently a Fellow member of the Governance Institute of Australia. Ms Zhang has been a member of the Australian Institute of Company Directors since 2011. 23 DIRECTORS’ REPORT DIRECTOR/CEO Baocai Zhang (Director) Ning Zhang (Director) Gregory James Fletcher (Director) OTHER CURRENT KEY DIRECTORSHIPS Director of Shandong Energy Group Company Limited Director of various subsidiaries of Yancoal Australia Ltd 4Director of Saunders International Limited, Chairman Audit and Risk Committee and Member of the Remuneration and Nomination Committee (ASX:SND) (1 Jul 2015 – current) Member of the Audit and Risk Committee of TAFE NSW Chairman of NSW Electoral Commission Audit and Risk Committee Chairman of NSW HealthShare/eHealth Audit and Risk Committee Member of Audit and Risk Committee, NSW Health Infrastructure Member of Audit and Risk Committee NSW Police Force Qingchun Zhao (Director) 4Director of Yankuang Energy Group Company Limited (1171 HK) (Jun 2016 – current) Director of Yancoal International (Holding) Co. Ltd Director of Yankuang Group Finance Co., Ltd Director of Qilu Bank Co., Ltd Director of Shanghai CIFCO Futures Director of Inner Mongolia Mineral (Group) Limited Liability Company Director of Zhongyin Financial Leasing Co., Ltd Yaomeng Xiao (Director) 4Director of Yankuang Energy Group Company Limited (1171 HK) (August 2021 - Current) Xiangqian Wu (Director) Chairman of Yankuang Donghua Heavy Industry Co., Ltd Director of Yancoal International (Holding) Co. Ltd. Director of Yancoal International (Holding) Co. Ltd Director of Yancoal International Resources Development Co., Ltd Director of Yancoal International Technology Development Co., Ltd Xing Feng (Director) Director of China Broadcasting and Telecommunications Corporation Director of China Cinda (Hong Kong) Holdings Company Limited Dr Geoffrey William Raby (Director) 4Director of Netlinkz Limited (ASX:NET) (8 Sept 2020 – current) Helen Jane Gillies (Director) 4Director of Monadelphous Group Limited (ASX:MND) (5 Sept 2016 – current) Director of BAC Holdings Pty Ltd (since 2017) (Listed Company) Director of Aurelia Metals Limited (ASX:AMI) (21 Jan 2021 – current) Director with Lexon Insurance Pte Ltd (since 2022) David James Moult (CEO) Director of the Minerals Council of Australia Director of the New South Wales Minerals Council Director of Coal Services Pty Ltd Director of Coal Mines Insurance Pty Ltd Director of Mines Rescue Pty Ltd Director of Port Waratah Coal Services Ltd Director of Middlemount Coal Pty Ltd Director of Middlemount Mine Management Pty Ltd Director of Ribfield Pty Ltd 4 Listed company 24 DIRECTORS’ REPORT DIRECTOR/CEO Baocai Zhang (Director) FORMER DIRECTORSHIPS IN LAST THREE YEARS Chairman and Director of Yankuang Group Finance Co., Ltd Director of Yanzhou Coal Yulin Neng Hua Co., Ltd Director of Inner Mongolia Haosheng Coal Mining Limited Director of Yancoal International (Holding) Co., Ltd Chairman of Shandong Yunding Technology Co.Ltd Ning Zhang (Director) Director of Shanghai Yankuang Energy Sources Technology Research & Development Co., Ltd Gregory James Fletcher (Director) None Qingchun Zhao (Director) Director of Qingdao Zhongyin International Trade Co., Ltd Director of Yankuang Group (Hongkong) Co., Ltd Chairman of Shanghai Jujiang Asset Management Co., Ltd Director of Inner Mongolia Haosheng Coal Mining Limited Executive Director of Qingdao Duanxin Asset Management Co., Ltd Director of Duanxin Investment Holding (Shenzhen) Co., Ltd Chairman of Duanxin Investment Holding (Beijing) Co., Ltd Director of Yanzhou Coal Yulin Neng Hua Co., Ltd None 5Director of Yanzhou Coal Mining Company Limited (1171 HK) (14 May 2014 – 20 Aug 2021) Director of Yancoal International Trading Co. ltd Yaomeng Xiao (Director) Xiangqian Wu (Director) Xing Feng (Director) None Dr Geoffrey William Raby (Director) 5Chairman of Wiseway Group (ASX:WWG) (18 Jul 2018 – 30 Apr 2019) Helen Jane Gillies (Director) David James Moult (CEO) 5Director of OceanaGold Corporation Limited (ASX:OGC) (5 Aug 2011 – 29 Jun 2021) Director of Red Flag Group (Holdings) Limited Independent Non-Executive Director of Yancoal Australia Ltd (30 Jan 2018 – 9 Mar 2020) Director of the World Coal Association SPECIAL RESPONSIBILITIES AS AT 31-DECEMBER 2022: DIRECTOR Baocai Zhang Ning Zhang Xiangqian Wu Yaomeng Xiao Qingchun Zhao Xing Feng Gregory James Fletcher Dr Geoffrey William Raby Helen Jane Gillies AUDIT AND RISK MANAGEMENT COMMITTEE – – – – Member – Chair – Member NOMINATION AND REMUNERATION COMMITTEE Member – – Member – – Member Member Chair HEALTH, SAFETY, ENVIRONMENT AND COMMUNITY COMMITTEE STRATEGY AND DEVELOPMENT COMMITTEE – Member Member – – – – Chair – Chair – – – Member Member – Member – 5 Listed company 25 DIRECTORS’ REPORT CURRENT DIRECTORSHIPS AND COMPANY SECRETARY POSITIONS WITHIN THE GROUP HELD BY CEO AND CFO: COMPANY CEO CFO COMPANY 1 ABAKK Pty Limited 2 Ashton Coal Mines Pty Ltd 3 Ashton Coal Operations Pty Limited 4 Athena Coal Operations Pty Ltd 5 Athena Coal Sales Pty Ltd 6 Austar Coal Mine Pty Limited 7 Australian Coal Resources Pty Ltd 8 Black Hill Land Pty Ltd 9 Catherine Hill Bay Land Pty Ltd 10 CIM Duralie Pty Ltd 11 CIM Mining Pty Ltd 12 CIM Services Pty Ltd 13 CIM Stratford Pty Ltd 14 CNA Bengalla Investments Pty Limited 15 CNA Resources Pty Ltd 16 CNA Warkworth Australasia Pty Limited 17 CNA Warkworth Pty Ltd 18 Coal & Allied (NSW) Pty Limited 19 Coal & Allied Industries Pty Ltd 20 Coal & Allied Mining Services Pty Limited 21 Coal & Allied Operations Pty Ltd 22 Donaldson Coal Finance Pty Limited 23 Donaldson Coal Holdings Limited 24 Donaldson Coal Pty Ltd 25 Duralie Coal Marketing Pty Ltd 26 Duralie Coal Pty Ltd 27 Eucla Mining Pty Ltd 28 Felix NSW Pty Ltd 29 Gloucester (SPV) Pty Ltd 30 Gloucester (Sub-Holdings 1) Pty Ltd 31 Gloucester (Sub-Holdings 2) Pty Ltd 32 Gloucester Coal Pty Ltd 33 Gwandalan Land Pty Ltd 34 Kalamah Pty Ltd 35 Lower Hunter Land Holdings Pty Ltd CEO Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. CFO C.S. C.S. C.S. Dir. Dir. 36 Miller Pohang Coal Co Pty Ltd 37 Minmi Land Pty Ltd 38 Monash Coal Holdings Pty Ltd 39 Monash Coal Pty Ltd 40 Moolarben Coal Mines Pty Ltd C.S. 41 Moolarben Coal Operations Pty Ltd Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. C.S. C.S. C.S. Dir. Dir. Dir. Dir. Dir. 42 Moolarben Coal Sales Pty Ltd 43 Mount Thorley Coal Loading Ltd 44 Mount Thorley Operations Pty Limted 45 Namoi Valley Coal Pty Limited 46 Newcastle Coal Company Pty Ltd 47 Nords Wharf Land Pty Ltd 48 Northern (Rhondda) Collieries Pty Ltd 49 Novacoal Australia Pty Limited 50 Oaklands Coal Pty Limited 51 Primecoal International Pty Ltd 52 Proserpina Coal Pty Ltd 53 R.W.Miller (Holdings) Pty Ltd 54 Stratford Coal Marketing Pty Ltd 55 Stratford Coal Pty. Ltd. 56 Warkworth Coal Sales Limited 57 Warkworth Mining Limited 58 Warkworth Pastoral Coal Pty Ltd 59 Warkworth Tailings Treatment Pty Ltd 60 Watagan Mining Company Pty Ltd 61 Westralian Prospectors Pty Ltd 62 White Mining (NSW) Pty Limited 63 White Mining Pty Ltd 64 White Mining Services Pty Limited C.S. 65 Yancoal Australia Sales Pty Ltd Dir. Dir. Dir. Dir. Dir. 66 Yancoal CSR Pty Ltd 67 Yancoal Mining Services Pty Ltd 68 Yancoal Moolarben Pty Ltd 69 Yancoal Resources Pty Ltd 70 Yarrabee Coal Company Pty Ltd – Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. – – – – Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. C.S. Dir. Dir. Dir. Dir. C.S. Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. C.S. Dir. C.S. C.S. C.S. Dir. Dir. Dir. Dir. Dir. Dir. CURRENT DIRECTORSHIPS AND COMPANY SECRETARY POSITIONS OF SUBSIDIARIES OF SHANDONG ENERGY AND YANKUANG OUTSIDE THE GROUP HELD BY CEO AND CFO: COMPANY 1 AMH (Chinchilla Coal) Pty Ltd 2 Athena Coal Mines Pty Ltd 3 Mountfield Properties Pty Ltd 4 Ozstar Australia Pty Ltd 5 Premier Coal Limited 6 Syntech Holdings II Pty Ltd 7 Syntech Holdings Pty Ltd 8 Syntech Resources Pty Ltd CEO Dir. Dir. Dir. Dir. – Dir. Dir. Dir. CFO Dir. Dir. Dir. Dir. Dir. Dir. Dir. Dir. COMPANY 9 Tonford Pty. Ltd. 10 UCC Energy Pty Limited 11 Yancoal Technology Development Pty Ltd 12 Yankuang (Australia) Metal Mining Pty Ltd 13 Yankuang Bauxite Resources Pty Ltd 14 Yankuang OzStar Pty Ltd 15 Yankuang Resources Pty Ltd CEO Dir. – – – – Dir. – CFO Dir. Dir. Dir. Dir. Dir. Dir. Dir. 26 DIRECTORS’ REPORT 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 2022, and the numbers of meetings attended by each Director were: GENERAL MEETINGS MEETINGS OF THE BOARD MEETINGS OF COMMITTEES ANNUAL GENERAL MEETING FULL MEETINGS OF DIRECTORS AUDIT AND RISK MANAGEMENT HEALTH, SAFETY, ENVIRONMENT AND COMMUNITY NOMINATION AND REMUNERATION STRATEGY AND DEVELOPMENT TRAINING CONTINUOUS PROFESSIONAL DEVELOPMENT Baocai Zhang Ning Zhang Cunliang Lai8 Yaomeng Xiao9 Xiangqian Wu10 Qingchun Zhao Gregory James Fletcher Geoffrey William Raby Helen Jane Gillies Xing Feng A6 B7 1 1 – 1 1 1 n/a n/a – – 1 – – – 1 1 1 1 1 1 A 8 8 3 5 8 8 8 7 8 7 B 8 8 3 5 8 8 8 8 8 8 A – – – – – 3 4 – 4 – B – – – – – 4 4 – 4 – A – 4 – – 4 – – 4 – – B – 4 – – 4 – – 4 – – A 5 – – 1 4 – 5 5 5 – B 5 – – 1 4 – 5 5 5 – A 1 – – – – – – 1 – 1 B 1 – – – – 1 – 1 – 1 Note Note Note Note Note Note Note Note Note Note Note: Each Director received continuous professional development training during the year ended 31 December 2022, which included training on workplace culture, HKEX disclosure requirements, updates on employment and industrial reforms, cybersecurity, ESG, privacy, competition laws and other relevant topics. The Directors are also continually updated on developments in applicable statutory and regulatory regime and the business environment to facilitate the discharge of their responsibilities. 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: • No relevant changes occurred during 2022. DIRECTORS’ CONFIRMATIONS DIRECTOR’S INTEREST IN COMPETING BUSINESS Baocai Zhang, who is a non-executive Director, serves as a director of Shandong Energy Group. Qingchun Zhao, who is a non- executive Director, serves as a director of Yankuang Energy. Shandong Energy Group and Yankuang Energy Group are the controlling shareholders of the Company. As at 31 December 2022, Shandong Energy Group is, directly and indirectly, interested in approximately 54.81% of the shares in Yankuang Energy and Yankuang Energy is interested in approximately 62.26% of the shares in the Company. Shandong Energy Group is a capital investment company with exposure to coal, coal chemicals and aluminium, power generation, machinery manufacturing and financial investments. Yankuang Energy is principally engaged in the production of coal and coal chemicals, manufacturing of mechanical and electrical equipment and power and heat generation. The mining assets of Yankuang Energy Group located in Australia, other than through its interest in the Group, are managed and operated by the Company. Shandong Energy Group does not have any interests in mines in Australia other than through its interests in Yankuang Energy and the Group. 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 directly or indirectly, with the Group’s business during the year ended 31 December 2022. 6 7 A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the Committee during the year 8 Mr Cunliang Lai resigned as a director of Yancoal Australia Ltd (Company) effective 30 May 2022. 9 Mr Yaomeng Xiao was appointed as a director the Company effective 30 May 2022. He was appointed as a member of the Nomination and Remuneration Committee (NRC) of the Company effective from the end of the Company’s Board meeting on 28 October 2022. 10 Mr Xiangqian Wu resigned as a member of NRC of the Company effective from the end of the Company’s Board meeting on 28 October 2022. 27 DIRECTORS’ REPORT 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 $169,500 (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 $41,200 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 $20,600 for being a member 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 $370,800 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 INTERESTS OF THE DIRECTORS AND CHIEF EXECUTIVE OF THE COMPANY As at 31 December 2022 the interests 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 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 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 EXECUTIVE OR DIRECTOR Baocai Zhang Gregory James Fletcher Geoffrey William Raby Ning Zhang David James Moult NUMBER OF SHARES AND UNDERLYING SHARES NATURE OF INTEREST APPROXIMATE PERCENTAGE 274,404 2,100 22,858 178,813 Beneficial owner Beneficial owner Beneficial owner Beneficial owner 4,446,438 Beneficial owner 0.02078% 0.00016% 0.00173% 0.01354% 0.33674% 28 DIRECTORS’ REPORT ASSOCIATED CORPORATIONS OF THE COMPANY NAME OF DIRECTOR NAME OF THE ASSOCIATED CORPORATION Qingchun Zhao Yankuang Energy Group Company Limited Xiangqian Wu Yankuang Energy Group Company Limited Yaomeng Xiao Yankuang Energy Group Company Limited NUMBER OF SHARES AND UNDERLYING SHARES 420,000 122,000 350,000 NATURE OF INTEREST Beneficial owner Beneficial owner Beneficial owner APPROXIMATE PERCENTAGE 0.00849% 0.00329% 0.00707% Save as disclosed above, as at 31 December 2022, 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. INTERESTS OF PERSONS OTHER THAN DIRECTORS AND CHIEF EXECUTIVE OF THE COMPANY As at 31 December 2022 the following persons (other than a Director or Chief Executive of the Company) had an interest 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 Yankuang Energy Shandong Energy11 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., Ltd12 Cinda International Holdings Limited Cinda Securities Co., Ltd China Cinda (HK) Holdings Company Limited China Cinda Asset Management Co., Ltd 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 NUMBER OF SHARES HELD OR INTERESTED APPROXIMATE PERCENTAGE (%) 822,157,715 822,157,715 181,474,887 181,474,887 181,474,887 181,474,887 181,474,887 181,474,887 181,474,887 181,474,887 181,474,887 62.26 62.26 13.74 13.74 13.74 13.74 13.74 13.74 13.74 13.74 13.74 Save as disclosed above, as at 31 December 2022, 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 336 of the SFO. 11 Shandong Energy is deemed to be interested in the 822,157,715 Shares which Yankuang Energy 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 Yankuang Energy. 12 Cinda International HGB Investment (UK) limited, an indirect wholly owned subsidiary of China Cinda Asset Management Co., Ltd, is interested in 181,474,887 Shares which are held via various accounts and nominees. China Cinda Asset Management Co., Ltd., China Cinda (HK) Holdings Company Limited, Cinda International Holdings Limited, Cinda Securities Co., Ltd, 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 181,474,887 Shares which Cinda International HGB Investment (UK) Limited is interested in as beneficial owner. 29 DIRECTORS’ REPORT R E M U N E R A T I O N R E P O R T - A U D I T E D Dear Shareholder, I am pleased to introduce the Group’s 2022 Remuneration Report. 2022 REFLECTIONS AND PERFORMANCE 2022 saw 12 months of some of the most severe and erratic inclement weather ever experienced in NSW, combined with industry wide labour shortages that significantly disrupted operational activities. The impacts of the wet weather include not just ongoing rainfall disruptions but also several significant flooding events, with excess water being stored in active mining pits impacting mining schedules. These saturated mining conditions also impacted equipment productivities significantly, due to wet and boggy conditions, further hampering recovery efforts. Significant impacts were also felt along the logistics chain including Rail and Port activities from these wet weather events. Challenges of the current tight labour market have impacted maintenance activities due to shortage of skilled/semi- skilled labour, including availability of supplementary labour which in the past has been normally accessible. Further to this, underground operations have also faced challenges with manning shortages requiring prioritisation of operations from development onto Longwall operations, ultimately impacting continuity of operations. Yancoal has invested in additional mining equipment to assist with recovery in production should weather and labour market conditions improve. Key operational highlights include: Strong Safety Culture: 12-month rolling TRIFR of 8.1, below the comparable industry average and down from 8.4 in 2021 Saleable Production: Achieved attributable saleable coal production of 29.4 Mt after addressing the operational challenges Realised Coal Price: Average realised coal price of A$378/t up from A$141/t in 2021 Beyond the weather events and overall labour shortages, Yancoal in 2022 faced ongoing workforce disruption from COVID-19-related absenteeism. The executive leadership team continues to prioritise the health and wellbeing of all Yancoal employees, contractors and service providers. Our colleagues continued to perform and be resilient throughout the challenges faced this year and we wish to thank them for all their efforts during difficult circumstances. Continuing supply side constraints, combined with global energy uncertainty, has sustained elevated international thermal coal prices with Yancoal achieving an average realised coal price of A$378/t in 2022. Yancoal focused on minimising the cost of demurrage, optimising its products, and capitalising on alternative market values to maximise sales. As a result, Yancoal has delivered exceptional financial performance in 2022 which enabled the payment of over A$1.6 billion of dividends in 2022 and debt repayments of USD$2.3 billion over the last 12 months. 2022 EXECUTIVE REMUNERATION OUTCOMES The 2022 Executive STIP Outcomes section of this report summarises this year’s scorecard performance. Our balanced scorecard approach reinforces the need for our Executive team to deliver across a range of both financial and non-financial priorities. Performance against production and cash costs was constrained as a result of operational challenges and uncontrollable factors (diesel prices, labour shortages and wet weather recovery works) experienced during the year. However, higher than expected coal prices contributed to a stretch Profit Before Tax outcome. This report sets out remuneration information for the Group’s Key Management Personnel (“KMP”) for the 12 months ended 31 December 2022. Yours sincerely, Helen Jane Gillies Chair of the Nomination and Remuneration Committee 30 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 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 Yankuang Energy 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. During 2022 Cunliang Lai retired from the role of Director effective 30 May 2022 and Yaomeng Xiao was appointed to this role effective 30 May 2022. The KMP comprise the Directors of the Company and nominated members of the Executive Committee (“Executive KMPs”). Together, the Executive Director and Executive KMPs are referred to as “Executives” in this report. Details of the KMP are set out in the table below. NAME POSITION NON-EXECUTIVE DIRECTORS Baocai Zhang Director Chairman of the Board Chair of the Strategy and Development Committee Member of the Nomination and Remuneration Committee Cunliang Lai Qingchun Zhao Director Director Member of the Audit and Risk Management Committee Member of the Strategy and Development Committee Xiangqian Wu Director Member of the Health, Safety, Environment and Community Committee Member of the Nomination and Remuneration Committee Xing Feng Director Member of the Strategy and Development Committee Yaomeng Xiao Director Member of the Nomination and Remuneration Committee Gregory James Fletcher Independent Director Co-Vice Chairman of the Board Chair of the Audit and Risk Management Committee Member of the Nomination and Remuneration Committee Geoffrey William Raby Independent Director Chair of the Health, Safety, Environment and Community Committee Member of the Strategy and Development Committee Member of the Nomination and Remuneration Committee Helen Jane Gillies Independent Director Chair of the Nomination and Remuneration Committee Member of the Audit and Risk Management Committee EXECUTIVE DIRECTORS Ning Zhang Director, Co-Vice Chairman of the Board Chair of the Executive Committee Member of the Health, Safety, Environment and Community Committee EXECUTIVE KMP David James Moult Chief Executive Officer Ning (Kevin) Su Chief Financial Officer TIME IN ROLE Full year Until 30 May 2022 Full year Full year Until 28 October 2022 Full year From 30 May 2022 From 28 October 2022 Full year Full year Full year Full year Full Year Full Year 31 REMUNERATION REPORT - AUDITED REMUNERATION FRAMEWORK OBJECTIVES The executive remuneration framework is structured to be market competitive and to reflect the reward strategy of the Group. Through this framework the Group 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 Group performance; and - providing a clear structure for earning rewards Details of remuneration for all Executives are set out in the ‘Executive Statutory Remuneration’ section of this Remuneration Report. REMUNERATION STRUCTURE The executive remuneration framework is structured as a combination of fixed and variable remuneration, as follows: VARIABLE REMUNERATION (AT RISK) FIXED ANNUAL REMUNERATION (“FAR”) SHORT-TERM INCENTIVE PLAN (“STIP”) LONG-TERM INCENTIVE PLAN (“LTIP”) The FAR package provides market competitive remuneration to attract and retain high quality talent while reflecting role scope and accountabilities. The STIP rewards Executives for the achievement of Group and individual goals that are aligned to the Group’s financial, operational and strategic priorities. The LTIP rewards and supports retention of participants who are in positions to influence the Group’s long- term performance. The FAR package incorporates cash salary, superannuation benefits and may include a provision for a car benefit, together with various other benefits. Executive FAR is reviewed annually against equivalent roles among companies of similar size in the mining/ resources industry. No Executives are guaranteed an annual increase in FAR. • 50% is paid as cash • 25% is deferred into rights (Deferred Share Rights) for one year • 25% is deferred into rights for two years Performance is assessed annually against profitability, health & safety, strategic objectives and environment key performance indicators (“KPIs”). For further information see the ‘Short Term Incentive Plan’ section in this Remuneration report. Performance rights to shares with no dividend equivalent payments vest after a three-year period subject to performance assessed against a comparator group: • 60% Earnings Per Share Vesting Condition (“EPS Awards”) • 40% Costs Target Vesting Condition (“Costs Target Awards”). For further information see the ‘Long Term Incentive Plan’ section in this Remuneration report. The executive remuneration framework has been structured to align participants to the long-term interests of the Company and its shareholders through the use of equity components in the annual remuneration package: deferred share rights in the STIP and performance share rights in the LTIP. Restrictions are in place regarding to whom equity can be issued and/or transferred under the HKEx Listing Rules, as the Company is required to maintain a minimum free float of shares. As a result, the Company’s ability to issue and/or transfer shares to employees or personnel who are directors of the Company and/or its subsidiaries is restricted by the HKEx Listing Rules. For more information, please see the ‘Public Float’ section of the Directors’ Report. In accordance with the terms of the STIP and LTIP grant conditions, the Board has discretion to settle the STIP deferred share rights or qualifying LTIP performance share rights in cash. If settled in cash, the cash equivalent value is determined with reference to the market value of shares on vesting. Since the introduction of the current executive remuneration framework in 2018, deferred STIP has been settled in cash. Following an increase in the Company’s public float, Yancoal instructed CPU Share Plans Pty Ltd as trustee of the Yancoal Australia Limited Employee Share Trust to acquire and hold fully paid ordinary shares in the Company in on-market share transactions in late 2022. Accordingly, in 2023, subject to Board approval, vested deferred STIP and LTIP may be settled, in whole or part, by way of fully paid ordinary shares in the Company, rather than by way of a cash equivalent payment only. 32 REMUNERATION REPORT - AUDITED TARGET REMUNERATION MIX The chart below illustrates the relative proportion of 2022 remuneration for Executive KMPs which is fixed and that which is linked to individual and/or Group performance (STIP and LTIP) in the event that target performance for at- risk components is met. 15% 33% 33% CEO/CEC 21% CFO 43% 17% 17% 21% Fixed At risk STI (cash) At risk STI (deferred) At risk LTI As the graphics above illustrate, STIP and LTIP form a significant part of Executive remuneration, which have been structured to award the majority of at-risk remuneration as share rights. REMUNERATION TIMING The chart below provides an indicative timing illustration of how the 2022 financial year remuneration will be delivered to Executive KMPs. FAR At risk STI (cash) 50% At risk STI (deferral) 25% At risk STI (deferral) 25% At risk STI LTI 2022 2023 2024 2025 Date granted End of performance period Date paid/eligible for vesting 33 REMUNERATION REPORT - AUDITED SHORT TERM INCENTIVE PLAN The STIP aims to strengthen stakeholder alignment and encapsulates various Company and Group performance measures. The Board maintains discretion to alter the formula outcomes outlined below if the results generate any unintended outcomes from a reward perspective considering the perspectives of various stakeholders including but not limited to shareholders, employees and communities. The STIP structure for 2022 is outlined in the table below. No structural changes were proposed for 2022. FEATURE Eligibility Opportunity Scorecard Performance Conditions DESCRIPTION Executives as well as other management and employees of the Group are eligible to participate in the STIP. This is expressed as a percentage of each Executive’s FAR. The STIP opportunity is reviewed annually. The Chief Executive Officer, Chair of the Executive Committee and Chief Financial Officer 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. The STIP Scorecard consists of several KPIs. At the start of each year, the Board reviews and selects KPIs considered to be the most appropriate to the business to drive performance for the financial year in question. Assessment against these measures is determined following the end of each year. For Executives, all KPIs are measured at Group level. The STIP scorecard measures the Group’s performance in respect of the following categories: KPI Profitability MEASURE Profit Before Tax (“PBT”) Free On Board13 (“FOB”) Cash Costs (excluding royalties) Run Of Mine tonnes (“ROM”) Health & Safety Total Recordable Injuries and Disease Injuries (“TRI & DI”) Critical Controls Compliance Strategic Objectives Strategic measures may include special projects, capital management, growth and culture development. Environment Environmental incidents and complaints WEIGHTING 30% 20% 10% 10% 5% 15% 10% Individual Performance Condition Individual Performance will be assessed against objectives set at the beginning of the financial year as part of Yancoal’s Performance Review and Development (“PRD”) framework, with further consideration of behaviours against Yancoal’s values and Leadership competencies. The Board will oversee the objectives and assessment of the Chief Executive Officer and Chair of the Executive Committee, while objectives for other executives including the Chief Financial Officer will be set and assessed in collaboration with the Chief Executive Officer and Chair of the Executive Committee. Outcome Formula The STIP Scorecard outcome and individual PRD outcome are weighted (Chief Executive Officer and Chair of the Executive Committee 90% and 10%; Chief Financial Officer 80% and 20% respectively) to determine the overall STIP Performance Outcome. 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. Likewise, the PRD outcome is converted to a payout multiplier. These payout multipliers (0% to 200%) are weighted as described above and 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 Group KPIs. The Board can exercise discretion should the formula outcome generate an unintended reward. Timing Executive STIP awards are paid as follows: • 50% of the award is delivered as a cash payment around March each year. Settlement • 50% of the award will be deferred in share rights and vest in equal parts over a two- year period (25% deferred for one year, 25% deferred for two years) subject to continued employment at the respective vesting dates (1 March 2024 and 1 March 2025). The value of the deferred portion of STIP is converted to Deferred Share Rights (to Yancoal shares) at the time of award using a volume average weighted price (“VWAP”). Deferred share rights will be granted for nil consideration following audited 2022 financial statements being released. Following vesting, the Company will issue participants with a vesting notice confirming the number of deferred share rights that have vested and become exercisable. Vested rights will be equity settled unless the Board exercises discretion to settle in cash, with consideration to the Company being required to maintain a minimum free float. The cash equivalent value is determined with reference to the number of rights and the market value of shares on vesting, less applicable taxes and other amounts such as any applicable statutory superannuation contributions. 13 FOB cash costs are calculated on a management reporting basis 34 REMUNERATION REPORT - AUDITED LONG TERM INCENTIVE PLAN LTIP grants are delivered in performance share rights with vesting subject to performance conditions measured over a three-year period. The Board maintains discretion to reduce or waive the conditions outlined below if the results generate any unintended outcomes. No structural changes were proposed for 2022, however the EPS Awards comparator group was revised to include additional comparable coal mining-focused companies. The LTIP structure for 2022 is outlined in the table below. FEATURE Eligibility Frequency LTIP opportunity DESCRIPTION Executives and certain senior management are eligible to participate in the LTIP. Each year, eligible Executives and certain senior management are considered for an annual LTIP grant. The Chair of the Executive Committee and the Chief Executive Officer have an annual LTIP opportunity of up to 200% of FAR. The Chief Financial Officer has an annual LTIP opportunity of up to 50% of FAR. Allocation Methodology The number of performance rights granted is calculated by dividing the dollar value of the annual LTIP opportunity by the VWAP of the Company’s ordinary shares traded on the ASX across a 20-day trading period spread 10 days prior to, and 10 days after, 31 December 2021. LTIP instrument LTIP performance conditions LTIP performance conditions – why were they chosen? How will the performance condition be calculated for the EPS Awards? The LTIP is issued via a grant of performance share rights for nil consideration. The LTIP will vest subject to both service and performance measures: • EPS Awards: 60% of the award will vest subject to EPS growth performance of the Group relative to performance of a comparator group of international companies of a comparable size with a coal mining focus over the relevant performance period; and • Costs Target Awards: 40% of the award will vest subject to cost per tonne performance of the Group 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 it allows for an objective, well understood, external assessment of the shareholder value created by the Group relative to a group of peers over a sustained period in view of the low liquidity and limited float of Yancoal shares. The Costs Target condition was chosen because it provides a structural incentive to LTIP participants to ensure that the Group remains positioned in the best cost quartile of Australian coal producers. The best quartile costs protect and preserve shareholder value in difficult times and supports enhanced returns when the commodity cycle recovers. For the EPS Awards, the EPS growth of the Group (based on the Group’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. Vesting is based on the ranking in accordance with the following schedule: Below the 50th percentile: no EPS Awards vest At 50th percentile: 50% of the EPS Awards vest Between the 50th and 75th percentiles: vesting will occur on a pro rata straight line basis At the 75th percentile or above: 100% of the EPS Awards vest The 2022 comparator group consists of the following companies: Adaro Energy; Alliance Resources; Arch Resources; CONSOL Energy; Coronado Global Resources; Evolution Mining; New Hope Corp; Peabody; PT Bumi Resources TBK; Sandfire Resources; Sibanye Stillwater; South32; Teck Resources; and Whitehaven Coal. For the Costs Target Awards, the Group’s weighted average FOB cost per tonne is measured as a percentile ranking compared to the coal industry cost curve, as provided 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. Yancoal must rank ahead of 70% of the comparator companies before vesting commences. How will the performance condition be calculated for the Costs Target Awards? Above the 30th percentile: At the 30th percentile: no Costs Target Awards vest 50% of the Costs Target Awards vest Between the 30th and 20th percentiles: vesting will occur on a pro rata straight line basis At the 20th percentile or below: 100% of the 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 2022. The Costs Target Awards is based on the FOB cost per saleable tonne achieved by the Group and the assets managed on behalf of Yancoal International Holdings for the year ending 31 December 2024 with Costs Target Awards being tested at, or shortly after, the time of publication of Wood Mackenzie’s independent expert report. Performance testing will occur within four months of the end of the performance period. All awards that do not vest following testing will lapse immediately. There is no re-testing. All vested awards are automatically exercised. Settlement Exercisable rights will be equity settled unless the Board exercises discretion to settle in cash, with consideration to the Company being required to maintain a minimum free float. The cash equivalent value is determined with reference to the number of rights and the market value of shares on vesting, less applicable taxes and other amounts such as any applicable statutory superannuation contributions. 35 REMUNERATION REPORT - AUDITED Malus and Clawback of awards under equity plans Malus and Clawback of awards under equity plans The Board has discretion to clawback or adjust an award in certain circumstances to ensure no unfair benefit is derived by an equity plan participant. The circumstances in which the Board may exercise this discretion include, but are not limited to, where, in the opinion of the Board, an equity plan participant has acted fraudulently or dishonestly, engaged in negligence or gross misconduct, there is a material misstatement or omission in the Company’s financial statements, or the Company is required by, or entitled under, law or Company policy to reclaim remuneration from an equity plan participant or restrict the vesting or exercise of an equity plan participant’s awards. Duration of the Equity Incentive Plan Duration of the Equity Incentive Plan The Equity Incentive Plan sets no limit on its duration and will remain in force until it is terminated by the Board. LTIP awards granted to Executives in 2022 LTIP awards granted to Executives in 2022 A summary of the LTIP awards granted in 2022 is set out in the table below. NAME Ning Zhang David James Moult Ning (Kevin) Su Total FAIR VALUE AT DATE OF GRANT $ NUMBER OF PERFORMANCE RIGHTS GRANTED14 – 2,655,211 193,021 2,848,232 – 1,264,113 91,895 1,356,008 The maximum total value of the performance rights is the grant price multiplied by the maximum number of performance rights which can be granted. The grant price is determined at grant date and will not change during the vesting period. The maximum possible value, under the accounting standards, will not change from the determined value at the grant date. The minimum possible value of performance rights is zero, if they do not meet the relevant performance conditions. Chair of the Executive Committee Mr Ning Zhang is entitled to participate in the LTIP. On 21 February 2022, Mr Ning Zhang elected not to participate in the 2022 LTIP. 14 The performance share rights noted above have been allocated and were issued on 23 September 2022 for David James Moult and Ning (Kevin) Su. 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 10 days prior to, and 10 days after, 31 December 2021. 36 REMUNERATION REPORT - AUDITED REMUNERATION GOVERNANCE FRAMEWORK BOARD Consistent with its Board Charter, the Board oversees the appointment, remuneration and performance of senior management; including but not limited to: • Approving the remuneration arrangements for all members of the Executive Committee (except for any Director) and senior executive officers; and • Ensuring that the Group’s remuneration policies are aligned with its purpose, values, strategic objectives and risk appetite. On these and other issues as outlined in the Board Charter, the Board receives recommendations from the NRC. NOMINATION AND REMUNERATION COMMITTEE The Board has established an NRC to make recommendations to the Board on matters such as: • Board composition and succession planning for the Board and the Chief Executive Officer and oversight of succession planning for the Executive Committee; • Director remuneration (subject to shareholder approval that is required in accordance with the ASX and HKEx Listing Rules, and the Constitution) and remuneration arrangements for the Company’s Executive Committee and any other person nominated as such by the Committee from time to time; • the public reporting of remuneration for Directors and key management personnel and other members of the Executive Committee; • oversight of the performance assessment of the Executive Committee; • designing Company policy and regulations with regard to corporate governance; and • diversity and inclusion. EXTERNAL ADVICE From time to time, the NRC seeks and considers advice from external advisors who are engaged by and report directly to the NRC. Such advice will typically cover remuneration levels, independent benchmarking data and information regarding best practice, trends and regulatory developments. Following the last holistic review of the framework completed in 2018, the Nomination and Remuneration Committee reviewed the Group’s remuneration framework in 2022 to ensure remuneration arrangements continue to align management with shareholder interests. The NRC has reviewed the advice provided and determined that the existing remuneration arrangements continue to align management with shareholder interests, hence no material changes to the framework are required. No remuneration recommendations were obtained during 2022 as defined under the Corporations Act 2001 (Cth). EXECUTIVE REMUNERATION PRINCIPLES AND FRAMEWORK Equitable and aligned with the long- term interests of the Company and its shareholders Compliant with relevant Group policies, including the Diversity Policy Market competitive remuneration to attract and retain skilled and motivated employees Linked with achievement of Group strategy and challenging business objectives, and the delivery of sustainable returns over the long-term Rewards the contribution of outstanding performers and recognises conduct aligned to Yancoal’s values 37 REMUNERATION REPORT - AUDITED LINKING EXECUTIVE REMUNERATION TO GROUP PERFORMANCE The Group’s remuneration principles include rewarding based on performance and this is primarily achieved through the Group’s STIP and LTIP. Cash and equity awards under these plans are impacted by the overall performance of the Group in order to maintain a link between performance and shareholder value. The Group’s earnings and delivery of shareholder wealth for the past five years is outlined in charts below. These charts also highlight the fact Yancoal’s Executive remuneration reflects the outcomes across a number of financial and operational outcomes at Group and Company level. OVERVIEW OF YANCOAL’S HISTORICAL PERFORMANCE AND EXECUTIVE STIP OUTCOMES15 PBT ($’M) OPERATING EBITDA ($’M) CASH OPERATING COSTS ($/t) 5,091 6,959 94 65 64 67 59 1,172 767 1,103 (1,143) 2,180 1,654 2,531 748 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 BASIC EPS ($) CLOSING SHARE PRICE ($) DIVIDEND PER SHARE (PAID) ($) 2.71 6.06 1.23 0.68 0.54 0.60 (0.79) 3.92 2.90 2.42 2.60 0.39 0.21 0.10 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 ATTRIBUTABLE ROM TONNES (Mt) TRIFR (Number of recordable injuries per million hours worked) EXECUTIVE STIP SCORECARD OUTCOME (% of Target) 46.5 47.9 47.5 42.9 38.1 8.0 7.4 7.4 8.4 8.1 169% 169% 144% 151% 118% FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 15 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. 38 REMUNERATION REPORT - AUDITED 2022 EXECUTIVE STIP OUTCOMES The table below outlines STIP scorecard achievement for Yancoal Australia Limited and Yancoal International Holdings Limited in 2022. ACTUAL KPI RESULT THRESHOLD TARGET STRETCH COMMENTS STIP OUTCOME STIP OUTCOME KPI MEASURE Profitability16 PBT [$Am] Adjusted FOB Cash Costs17 (excluding royalties) [$ per tonne] Adjusted ROM [Mt] Health & Safety TRI & DI Critical Controls Compliance 5,405 70.49 57.75 69 99% Strategic Objectives Strategic measures such as 105% diversification and optimisation initiatives Environment OVERALL Environmental incidents and complaints (excluding serial complainants) Various 151.3% Stretch PBT reflects higher than expected coal prices Uncontrollable factors elevated cash costs including diesel prices, labour shortages and wet weather ROM tonnes were constrained as significant rainfall, COVID safe work protocols impacted production and truck availability Threshold TFR & DI performance reflects a result similar in achievement from the prior year Target Critical Controls Compliance performance reflects a similar outcome to the prior year Results reflect the progress made across key strategic objectives which position Yancoal to improve both financial outcomes including capital management and operational outcomes such as diversification in the future Stretch reflects incidents and complaints remaining low 16 The NRC Committee has approved the use of adjusted outcomes for FOB Cash Costs and ROM in the FY22 STIP scorecard to ensure STIP outcomes provide a fair reflection of performance. 17 FOB cash costs are calculated on a management accounts basis. 39 REMUNERATION REPORT - AUDITED The table below outlines 2022 Individual Objectives achievement: EXECUTIVE CEC CEO CFO OUTCOME COMMENTS The majority of goals have been achieved in full in 2022 The majority of goals have been achieved in full in 2022 • Improve the Company’s operational performance and optimise Yancoal’s Core Competitiveness • Prioritise and identify ways to increase share liquidity • Continue to develop and enhance the Group’s sustainability and ESG capabilities and credentials to deliver positive outcomes • Implementation of a business strategy to enhance the resilience of the Tier 1 Mines. - Optimising the operations through a focus on improved equipment utilisation - Maintain a continued focus on a robust and sustainable cost management approach - Build further resilience into the Tier 1 Mines water management infrastructure in anticipation of changing weather extremes The majority of goals have been achieved in full in 2022 • Assisted the CEC and CEO to implement strategic projects • Lead Company’s capital management strategy • Effective stakeholder management across Australia and China • Improved collaborations between functions to drive productivity The STIP outcomes are a reflection of the balanced scorecard approach that considers not only the business results but also progress across a series of strategic priorities that are crucial to Yancoal’s long term shareholder returns and individual objectives for each Executive KMP. The 2022 STIP Outcome for the Executive KMP is equivalent to 78% (for the CEC and CEO) and 81% (for the CFO) of the maximum STIP opportunity. Details of the resulting STIP outcomes for Executives are outlined in the table below. Executive STIP outcomes are subject to discussion and approval by the Board. NAME Ning Zhang David James Moult Ning (Kevin) Su Total STIP CASH $18 405,650 1,379,450 413,650 2,198,750 STIP DEFERRED $19 405,650 1,379,450 413,650 2,198,750 STIP TOTAL $ 811,300 2,758,900 827,300 4,397,500 % OF STIP OPPORTUNITY AWARDED % OF STIP OPPORTUNITY NOT AWARDED 78% 78% 81% 79% 22% 22% 19% 21% 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, 25% of total STIP award deferred for two years). Since the introduction of the current executive remuneration framework in 2018, deferred STIP has been settled in cash. Following an increase in the Company’s public float, Yancoal instructed CPU Share Plans Pty Ltd as trustee of the Yancoal Australia Limited Employee Share Trust to acquire and hold fully paid ordinary shares in the Company in on-market share transactions in late 2022. Accordingly, in 2023, subject to Board approval, vested deferred STIP may be settled, in whole or part, by way of fully paid ordinary shares in the Company, rather than by way of a cash equivalent payment only. See section ‘Short Term Incentive Plan’ for Settlement details. Details of the remuneration of Executives prepared in accordance with statutory obligations and accounting standards are contained in the Executive Statutory Remuneration Section 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. 2022 EXECUTIVE LTIP OUTCOMES 2020 LTIP 2020 LTIP The close of 2022 signals the testing of the 2020 LTIP performance conditions. Because the condition for the EPS Awards is relative for the performance period from 1 January 2020 to 31 December 2022, and the condition for the Costs Target Awards is tested at (or shortly after) the time of publication of the independent expert’s report; testing and any subsequent vesting of the 2020 LTIP will not take place until the relevant performance results have been released which is anticipated to be March 2023. 18 The 2022 STIP cash figures are to be paid around March 2023. 19 The “STIP Deferred” is the value of the deferred portion of the STIP awarded for the year. 40 REMUNERATION REPORT - AUDITED 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. The following table outlines key ESA terms for each of the Executives. EXECUTIVE Ning Zhang POSITION TERM OF ESA NOTICE PERIOD TERMINATION BENEFIT Executive Director, Unlimited 6 months20 / 12 months21 • Nil for cause or resignation. Co-Vice Chairman of the Board, Chair of the Executive Committee Chief Executive Officer Chief Financial Officer David James Moult Ning (Kevin) Su EXECUTIVE STATUTORY REMUNERATION Unlimited Unlimited 6 months / 12 months 3 months / 6 months • 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. EXECUTIVE REMUNERATION The following table sets out the details of remuneration earned by Executives in 2022 and 2021, calculated in accordance with Australian Accounting Standards. SHORT-TERM BENEFITS $ POST- EMPLOYMENT BENEFITS $ LONG-TERM BENEFITS $ SHARE- BASED PAYMENTS $ NAME Ning Zhang22 YEAR 2022 2021 CASH SALARY STI 491,384 405,650 476,676 373,850 David James Moult 2022 1,742,613 1,379,450 Ning (Kevin) Su 2021 1,677,355 1,269,700 2022 2021 489,397 413,650 472,340 383,600 Total 2022 2,723,394 2,198,750 2021 2,626,371 2,027,150 NON- MONETARY BENEFITS SUPERANNUATION BENEFITS 18,399 14,220 27,436 17,504 7,778 7,592 53,613 39,316 24,430 22,631 24,430 22,631 24,430 22,631 73,290 67,893 LONG SERVICE LEAVE 5,291 1,127 STI DEFERRED 405,650 TOTAL $ 1,350,804 LTI – 373,850 (111,081) 1,151,273 26,594 1,379,450 1,691,984 6,271,957 16,296 1,269,700 1,073,000 5,346,186 13,946 413,650 123,491 1,486,342 13,456 383,600 78,494 1,361,713 45,831 2,198,750 1,815,475 9,109,103 30,879 2,027,150 1,040,413 7,859,172 % PERFORMANCE RELATED 60% 55% 71% 68% 64% 62% 68% 65% 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 2022, 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 of any other office in connection with the management of the affairs of any member of the Group. 20 Notice period applicable if the Executive resigns. 21 Notice period applicable if the Company terminates the Executive. 22 As Chair of the Executive Committee Mr Ning Zhang is entitled to participate in the LTIP. On 21 February 2022, Mr Ning Zhang elected not to participate in the 2022 LTIP. 41 REMUNERATION REPORT - AUDITED 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 In line with sound corporate governance, the remuneration structure for the Non-Executive Directors is distinct from the remuneration structure for Executives. 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, Yankuang Energy. The total Board and Committee fees paid by the Company to Non-Executive Directors in 2022 was $969,700. During 2022, Non-Executive Directors were remunerated by way of fixed fees in the form of cash and superannuation (to the maximum superannuation guarantee cap). No element of the Non-Executive Director fees is linked to performance. No Board or Board Committee fees were paid to: • Executive Director Ning Zhang as the responsibilities of Board Committee membership are considered in determining the remuneration provided as part of their normal employment conditions. • Nominee Directors of Yankuang Energy and Cinda, as the responsibilities of Board or Board Committee membership were considered part of their role and remuneration arrangements with Yankuang Energy and Cinda. The nominee Directors of Yankuang Energy and Cinda were as follows: - Cunliang Lai - Xiangqian Wu - Yaomeng Xiao - Baocai Zhang - Qingchun Zhao - Xing Feng The table below outlines Board and Board Committee fees for 2022 and 2021. BOARD FEES PER ANNUM (INCLUDING ANY SUPERANNUATION) Chairman of the Board Independent Co-Vice Chairman of the Board (inclusive of Committee fees) Director 2022 AND 2021 $ Not applicable 370,800 169,950 COMMITTEE FEES PER ANNUM (INCLUDING ANY SUPERANNUATION) CHAIR MEMBER Audit and Risk Management Committee Health, Safety, Environment and Community Committee Nomination and Remuneration Committee Strategy and Development Committee Not applicable 41,200 41,200 Not applicable 20,600 20,600 20,600 20,600 42 REMUNERATION REPORT - AUDITED The following table sets out the details of remuneration (in the form of Board and Committee fees and other benefits) earned by eligible Non-Executive Directors in 2022 and 2021 calculated in accordance with Australian Accounting Standards. SHORT TERM BENEFITS $ POST-EMPLOYMENT BENEFITS $ FEES STI OR BONUS NON-MONETARY BENEFITS SUPERANNUATION LONG SERVICE LEAVE 414,970 348,169 232,487 211,163 251,662 230,033 899,119 789,365 – – – – – – – – – – – – – – – – 24,430 22,631 22,363 20,587 23,788 22,318 70,581 65,536 – – – – – – – – TOTAL $ 439,400 370,800 254,850 231,750 275,450 252,351 969,700 854,901 NAME Gregory James Fletcher23 Helen Jane Gillies Geoffrey William Raby Total YEAR 2022 2021 2022 2021 2022 2021 2022 2021 SHARE TRADING POLICY The Company’s Share Trading Policy prohibits dealing in Company securities or Yankuang Energy securities by Directors of the Group, all officers of the Company and other relevant employees and contractors of the Group, as well as their closely related persons, during specified blackout periods each year and when they are in possession of ‘inside information’. Directors of the Group, all officers of the Company, and their closely related persons are also prohibited from dealing in securities of the 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, employees are permitted to deal in Company securities or Yankuang Energy securities outside these blackout periods where they are not in possession of inside information, however additional approval requirements apply. 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 of the Company 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 for the duration of that financial year. 23 Includes the following transaction-specific remuneration paid: Gregory James Fletcher – 2022: $68,600, Helen Jane Gillies – 2022: $23,100, Geoffrey William Raby – 2022: $23,100 43 REMUNERATION REPORT - AUDITED 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 in the table below. No other KMP held any shares in respect of Yancoal or its related entities at or during the year ended 31 December 2022. NAME HELD AT 1 JANUARY 2022 GRANTED AS COMPENSATION PURCHASED / (DISPOSED) HELD AT 31 DECEMBER 2022 Gregory James Fletcher Geoffrey William Raby Baocai Zhang Ning (Kevin) Su24 2,100 22,858 274,404 45,573 – – – – – – – – 2,100 22,858 274,404 45,573 The number of performance rights held by Executives under LTIP in 2022 is outlined in the table below. NAME David James Moult Ning (Kevin) Su HELD AT 1 JANUARY 2022 GRANTED AS COMPENSATION25 VESTED DURING THE YEAR EXERCISED DURING YEAR LAPSED / CANCELLED DURING YEAR26 HELD AT 31 DECEMBER 2022 OF WHICH EXERCISABLE OF WHICH NOT VESTED & NOT EXERCISABLE 2,557,999 166,293 1,264,113 91,895 – – – – – – 3,822,112 258,188 – – 3,822,112 258,188 As at 31 December 2022 there are 7,403,281 LTIP performance rights and 3,373,680 unvested deferred STIP rights in aggregate over unissued Group shares representing approximately 0.82% of the issued share capital of the Company as at the date of this Report. Refer to Note D3 for further details. 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 (see Note E3). There were no loans provided to Directors and Executives during the year. This report is made in accordance with a resolution of the Directors. Gregory James Fletcher Director Sydney 27 February 2023 24 In 2022, tranche 1 of the 2020 STIP Deferred Rights vested and the Board exercised its discretion to settle these awards by way of a cash equivalent payment, rather than by way of fully paid ordinary shares in the Company. As a result, Ning Zhang, David Moult and Ning (Kevin) Su received cash payments in consideration for 45,090, 170,164 and 53,778 vested 2020 STIP Deferred Rights respectively. 25 2022 LTIP: The number of performance rights granted is calculated as the value of the maximum LTIP award divided by the VWAP across a 20-day trading period spread 10 days prior to, and 10 days after, 31 December 2021. 26 As CEC Mr Ning Zhang is entitled to participate in the LTIP. On 21 February 2022, Mr Ning Zhang elected to not to participate in the 2022 LTIP. 44 REMUNERATION REPORT - AUDITED A U D I T O R ’ S I N D E P E N D E N C E D E C L A R A T I O N Take the lead AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF YANCOAL AUSTRALIA LTD As lead auditor, I declare that, to the best of my knowledge and belief, during the year ended 31 December 2022 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit, and ii. no contraventions of any applicable code of professional conduct in relation to the audit. SW Audit (formerly ShineWing Australia) Chartered Accountants Yang (Bessie) Zhang Partner Sydney, 27 February 2023 Brisbane Level 15 240 Queen Street Brisbane QLD 4000 T + 61 7 3085 0888 Melbourne Level 10 530 Collins Street Melbourne VIC 3000 T + 61 3 8635 1800 Perth Level 18 197 St Georges Terrace Perth WA 6000 T + 61 8 6184 5980 Sydney Level 7, Aurora Place 88 Phillip Street Sydney NSW 2000 T + 61 2 8059 6800 SW Audit ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. SW Audit is an independent member of ShineWing International Limited. sw-au.com 41 45 M A N A G E M E N T D I S C U S S I O N A N D A N A L Y S I S BUSINESS OVERVIEW Yancoal operates a diversified portfolio of world class assets consisting of both large-scale open cut and underground mines comprising six coal mine complexes in Australia27. 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 influenced by the interaction between the demand and supply for thermal and metallurgical coal. This, in turn depends on macroeconomic trends, including regional and global economic activity, the price and availability of alternative forms of energy production as well as more localised supply impacts. 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 their transaction date and mostly at fixed prices. 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 relevant quarterly benchmark. Throughout the period, NSW and Queensland once again experienced persistent and heavy rainfall associated with the prolonged La Niña weather cycle that disrupted mining, rail and port activity and hampered the recovery from the floods and persistent wet weather experienced in 2021. With most of the NSW open cut mines already well above their water storage capacity, Our customers are located throughout the Asia-Pacific region with heavy rainfall and flooding in March resulted in decreased Japan, Taiwan and South Korea accounting for approximately 73% of our revenue from coal sales in the year ended 31 December 2022. Thermal coal is primarily used in electricity generation and its end 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 user customers. Commodity traders are 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 or a fixed price. Generally, lower ash products are production from Moolarben, MTW, HVO and Stratford Duralie and led to increased vessel queues off the port at Newcastle. In May, Queensland suffered heavy rainfall with the Group’s Yarrabee site having to be evacuated on several occasions. Heavy rainfall again in NSW at the start of July resulted in many of the open cut mines suspending operations for several days, with sites once again exceeding their water storage capacities with ongoing above average rainfall thereafter resulting in Moolarben, MTW and HVO having to sacrifice operating pits for water storage, significantly impacting production. Queensland again suffered heavy rainfall in October resulting in significant downtime at Yarrabee. The overall direct and indirect impact of the extreme wet weather was a loss of approximately 8.3Mt of ROM coal (equity) for the full year. priced relative to the GlobalCOAL Newcastle index and higher ash During the first half of the period, COVID-19 continued to products are priced relative to the Argus/McCloskey All Published Index 5 (API5) index. Annual fixed price contracts are mostly priced against the Japanese Power Utility Reference Price, which is the contract price agreed between major Australian suppliers and Japanese power utilities. The balance of our sales are spot sales priced relative to the market at their transaction date and mostly at fixed prices. At times during the period, delayed contract deliveries contributed to a ‘lag effect’ in the realised price achieved compared to benchmark spot prices. These delayed deliveries primarily resulted from the production and supply chain interruptions noted below and led to extended periods between when the contract was priced and when it was performed. escalate in regional areas resulting in an increased number of positive cases in our communities. Whilst sites continued to adopt Yancoal’s COVID-19 protocols, our employees, as part of the broader community, were not immune and adherence to Government COVID-19 regulations resulted in the Group reporting its highest number of positive cases and proactive isolations since the start of the pandemic. This led to an increase in the number of workers unable to attend site impacting labour availability, particularly where a shortage of skilled labour including statutory and trades positions, limited the number of operating crews. During the second half of the period the number of positive cases decreased significantly with minimal cases currently being reported. Overall, the impact of COVID-19 on production was a loss of approximately 0.9Mt of ROM coal (equity) for the full year, noting that this impact would have been higher if not for the wet weather production delays. 27 Includes Moolarben, MTW, HVO (jointly owned), Yarrabee, Ashton and Stratford Duralie with Donaldson currently on care and maintenance and Austar transitioning to mine closure. 46 Australia’s unemployment rate fell to just 3.4% during the period The Group’s overall average ex-mine selling price of coal and labour availability across all our sites continues to be increased by 168% from A$141 per tonne in 2021 to A$378 per challenging, particularly maintenance trade positions. Whilst the tonne in 2022 mainly as a result of (i) an increase in global USD impact on our operations in 2022 was somewhat reduced by the coal prices with the weekly average GlobalCOAL Newcastle wet weather interruptions, achieving the required headcount and thermal coal index price increasing by US$225 per tonne skillset will be essential to delivering the Group’s mine schedules. (163%) during the same period; the weekly Argus/McCloskey This remains a key focus for management with proactive initiatives API5 coal index price increasing by US$92 per tonne (110%) being developed and rolled out across the business to attract and during the same period; and the average semi-soft coking coal retain a highly skilled and motivated workforce. benchmark price increasing by US$139 per tonne (101%) during During the period, coal price indices appreciated to record levels on the back of the growing concerns for energy security which commenced towards the end of 2021, Indonesia restricting the same period; and (ii) the Australian dollar weakening against the US dollar by 7.5% from an average of 0.7514 in 2021 to 0.6947 in 2022. exports in January 2022, supply issues caused by wet weather in Internally, management actions were directed by the Group’s “Key Australia and Indonesia and the Russia/Ukraine crisis with energy Tasks” initiative that focused on 40 workstreams across the Group, associated restrictions and sanctions. Despite some appreciation in the high-ash thermal market early in the period this plateaued as China increased domestic production easing imports of non-Australian coals, with displaced/sanctioned Russian coal also entering China, keeping the high-ash thermal index relatively flat. In contrast, the low-ash, high calorific, GlobalCOAL Newcastle index price, has appreciated substantially overseen by the Board of Directors (“Board”). Operationally, the workstreams focused on productivity improvement and cost reduction initiatives. Productivity and yield improvements, resulting in additional product tonnes, is estimated to deliver approximately $75 million in profit before tax improvements during 2022, with these structural improvements to be embedded in the site processes. on the back of stable demand and weakening supply due to the Further profit enhancements were achieved through the Group’s “washing harder” strategy where at some mines, where coal seams have the appropriate qualities, higher wash costs and lower yields are intentionally incurred to increase the overall sales margin. This has been particularly effective during the period with large arbitrage opportunities existing between low and higher- ash thermal coal. The Group’s overall average cash operating costs per product tonne, excluding government royalties, increased from A$67 per tonne in 2021 to A$94 per tonne in 2022 with the increase primarily due to decreased production volumes resulting from the aforementioned wet weather, escalation in COVID-19 cases and a tight labour market and inflationary cost pressures, particularly the diesel price. wet weather impacts. Subsequent to the period end, the Group has received increased inquiries from mainland China, and we understand customs clearance is restricted to some utilities and steel mills only. Two cargoes of coal were recently sold into China for February/March delivery. In the metallurgical market, later in the period there was a weakening in the steel market due to China COVID-19 lockdowns with slower than expected spend on infrastructure. This resulted in a shift in the metallurgical market reversing its historic premium relative to thermal coal to trade at a discount. In early 2023 this trend reversed more in line with the historic position with metallurgical coal trading above thermal coal prices. 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 and actively seek to expand our customer base and sales to new markets. It is currently expected that Australia’s share of the world seaborne thermal coal supply market, of 19.8% in 2022, will increase to approximately 23.9% by 205028, and it will continue to play a critical role as a primary source of premium grade coals. The Group’s coal sales revenue is typically recognised on a Free on Board (“FOB”) basis when coal is loaded at the load port in Australia. 28 Wood Mackenzie Coal Market Service Data November 2022 47 MANAGEMENT DISCUSSION AND ANALYSIS The table below sets out the ROM and saleable production for MTW’s ROM production decreased by 4.1Mt (25%) and its each Yancoal owned mine on a 100% basis during the period. saleable production decreased by 3.1Mt (28%). The decrease YEAR ENDED 31 DECEMBER 2022 MT 2021 MT CHANGE (%) ROM PRODUCTION Moolarben MTW HVO Yarrabee Ashton Stratford Duralie Middlemount 16.9 12.4 11.9 2.6 2.1 1.0 3.6 20.4 16.5 14.4 3.0 2.6 1.5 4.8 Total – 100% basis 50.5 63.2 SALEABLE PRODUCTION Moolarben MTW HVO Yarrabee Ashton Stratford Duralie Middlemount 14.9 8.1 9.6 2.1 0.9 0.7 2.6 18.4 11.2 10.6 2.6 1.2 0.8 3.7 Total – 100% basis 38.9 48.5 (17%) (25%) (17%) (13%) (19%) (33%) (25%) (20%) (19%) (28%) (9%) (19%) (25%) (13%) (30%) (20%) On a 100% basis, ROM coal production was down 20% from 63.2Mt in 2021 to 50.5Mt in 2022. This included a 20% decrease in the three tier-one assets (being Moolarben, MTW and HVO) from 51.3Mt in 2021 to 41.2Mt in 2022. Saleable coal production was also down 20% from 48.5Mt in 2021 to 38.9Mt in 2022. This included a 19% decrease in the three tier- one assets from 40.2Mt in 2021 to 32.6Mt in 2022. Moolarben’s ROM production decreased by 3.5Mt (17%) and its saleable production decreased by 3.5Mt (19%). The decrease in ROM production was primarily due to wet weather and mine flooding, labour shortages resulting from both COVID-19 absenteeism and a general labour shortage and low opening inventories of blasted overburden, primarily due to wet weather interruptions in the prior period. The decrease in saleable in ROM production was also primarily due to wet weather and mine flooding, low opening inventories, COVID-19 and a delay in commissioning a new ultra class truck fleet. MTW has a congested mine footprint that affords limited water storage options resulting in increased interruptions from the persistent wet weather. The decrease in saleable production was primarily attributable to the decrease in ROM production. HVO’s ROM production decreased by 2.5Mt (17%) and saleable production decreased by 1.0Mt (9%). The decrease in ROM production was again primarily due to wet weather and mine flooding and COVID-19 however, with a larger footprint HVO had more water storage options. Production decreases were also partially offset by an increase in washing capacity including the restart of the second Howick wash plant in December 2021. The table below sets out the Group’s ongoing equity interest in the saleable production for each Yancoal owned mine that contributes to the financial results of the Group. YEAR ENDED 31 DECEMBER OWNERSHIP %29 2022 MT 2021 MT CHANGE (%) 95 82.9 51 100 100 100 ~50 14.1 17.4 6.7 4.9 2.1 0.9 0.7 29.4 1.3 30.7 24.7 6.0 30.7 9.3 5.4 2.6 1.2 0.8 36.7 1.9 38.6 31.1 7.5 38.6 (19%) (28%) (9%) (19%) (25%) (13%) (20%) (30%) (20%) (21%) (20%) (20%) SALEABLE PRODUCTION Moolarben MTW HVO Yarrabee Ashton Stratford Duralie Attributable Middlemount (equity-accounted) Total – equity basis Thermal Metallurgical The Group’s attributable saleable coal production, excluding production was primarily attributable to the decrease in ROM Middlemount, was down 20% from 36.7Mt in 2021 to 29.4Mt in with the underground being 100% bypass coal. 2022 and including Middlemount was down 20% from 38.6Mt in 2021 to 30.7Mt in 2022. The attributable saleable production contribution of the Group’s tier-one assets increased from 83% in 2021 to 84% in 2022. Thermal coal saleable production decreased by 21% from 31.1Mt in 2021 to 24.7Mt in 2022 and metallurgical coal saleable production decreased by 20% from 7.5Mt in 2021 to 6.0Mt in 2022. Thermal coal represented 80% of total saleable coal production in 2022 a decrease from 81% in 2021. 29 Ownership percentage stated as at 31 December 2022. 48 MANAGEMENT DISCUSSION AND ANALYSIS The chart below shows the longer-term trend in the Group’s attributable saleable production.30 ATTRIBUTABLE SALEABLE PRODUCTION (MT) 40 37.8 36.7 35.6 32.9 35 30 25 20 15 10 5 0 HEALTH AND SAFETY Yancoal remains committed to operating safely and transparently to achieve its objective of zero harm. Yancoal operates its mines to meet legislative and safety standards and be an industry leader in this aspect of its business. Under the direction of the Board and the Health, Safety, 29.4 Environment and Community (“HSEC”) Committee, Yancoal utilises Core Hazard and Critical Controls across all operations, identifying critical hazards within the workplace and instituting adequate controls. These controls are regularly verified to ensure that they are operating as intended for our people’s safety. Our 12-month rolling TRIFR 31 at 31 December 2022 was 8.1, representing a decrease from 8.4 at 31 December 2021 and 2018 2019 Moolarben 2020 MTW 2021 2022 below the comparable weighted average industry TRIFR of 8.4 HVO at 31 December 2022. Yarrabee Stratford Duralie Ashton During the period, Yancoal commenced rollout of “The Yancoal Safe Way Every Day” program which centres around the Yancoal “Safe Way” value and offers a range of training and interpersonal From 2018 to 2020 the Group’s attributable saleable production, initiatives that are designed to enhance personal safety skill excluding Middlemount, increased from 32.9Mt to 37.8Mt driven sets. The program implementation supports the integration of a by the continued expansion of Moolarben, including increasing new safety culture that demonstrates the “Safe Way Every Day” the Group’s interest from 81% to 85% on 30 November 2018 and principles and encourages safety best practice performance 95% on 31 March 2020. on the ground. In 2021, the Group’s attributable saleable production decreased Yancoal also commenced implementation of a four-year, four to 36.7Mt primarily due to the hard rock intrusion encountered stage Mental Health Program in 2022. During the period, Stage in the Moolarben underground, severe and persistent wet 1 was completed which incorporated the provision of training to weather and the impact of COVID-19 on site shutdowns and select site supervisors to help senior workers and leaders facilitate labour availability. In 2022, the Group’s attributable saleable production decreased to 29.4Mt primarily due to the continued severe and persistent wet weather encountered in NSW and Queensland and further impacts from labour availability including the escalation of COVID-19 throughout the first half of the year. help seeking behaviours. Stage 2 has also commenced with employees being introduced to the program via a two and a half hour workshop for mental health awareness and education. ENVIRONMENT, SOCIAL AND GOVERNANCE (“ESG”) The key risks affecting the Group’s operations, and where Yancoal’s HSEC Committee has oversight of Yancoal’s ESG applicable, the strategies and measures taken to manage these performance. The Group compiles an annual “Environment, risks, are detailed in the Corporate Governance Statement included in this report. Social & Governance” report, published on the ASX and HKEx platforms and available on the Company’s website. Yancoal’s ESG disclosures have been guided by the Taskforce for Climate- Related Financial Disclosures, the Global Reporting Initiative and the United Nations Sustainable Development Goals. Environment: Yancoal’s operations are subject to stringent environmental approvals and licences. To enhance compliance with these regulatory obligations, and to meet the requirements of Yancoal’s management directives, Yancoal has developed and implemented comprehensive and robust environmental compliance systems, processes and practices. These systems, processes and practices are subject to continuous 30 The Group’s quarterly report issued on 19 January 2021 included Attributable Saleable Coal Production for the year ended 31 December 2020 of 38.3Mt with this amount including an additional 0.5Mt attributable to the additional 10% interest acquired in Moolarben in the first quarter of 2020. The difference arises as the economic effective date of the acquisition was 1 January 2020 but for accounting purposes the transaction completion date was 31 March 2020. 31 TRIFR includes Moolarben, MTW, Stratford Duralie, Yarrabee, Ashton, Donaldson, Austar and the Corporate offices; it excludes HVO and Middlemount (not operated by Yancoal). The weighted average industry TRIFR combines proportional components from the relevant New South Wales and Queensland Industry references. 49 MANAGEMENT DISCUSSION AND ANALYSIS improvement initiatives and are periodically audited by third form of safeguard mechanism credit (SMC). This scheme is parties to provide “third line” assurance to the Board and the expected to commence on 1 July 2023 (subject to the passage HSEC Committee regarding both systems and performance. of legislation). Yancoal’s managed operations fall within this In addition, Yancoal frequently monitors legislative and policy legislation (Moolarben, MTW, Yarrabee and Ashton) with HVO and changes to allow sufficient time to implement environmental Middlemount also impacted by these changes. We are monitoring licensing and management changes in response to policy this closely and modelling various scenarios to assess the reform. During the period, independent environmental assurance potential impact and timing. audits were conducted at Austar, Ashton, Moolarben and MTW with opportunities for continuous improvement currently being implemented. Social: Yancoal is committed to making a genuine positive difference in the communities in which it operates. Yancoal 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 terms of its operations, there is a particular focus on targeting operates a Community Support Program which proactively the reduction of Scope 1 emissions (from diesel consumption) engages with stakeholders at each site to support local and and Scope 2 emissions (from electricity consumption). Work regional initiatives, both financially and physically. Yancoal’s Code has commenced to identify emissions reduction opportunities of Conduct sets out the Group’s requirements and expectations at key sites with an express aim at driving down Yancoal’s for all employees and suppliers, including the requirement to act carbon footprint. ethically at all times. Yancoal has also developed procedures to ensure its suppliers are not engaging in modern slavery. In April 2022, Yancoal donated $500,000 to assist victims of floods in NSW and Queensland. This donation has been disbursed to 1,522 recipients through GIVIT Australia, the NSW and Queensland Government’s nominated disaster relief charity. Governance: Yancoal has developed rigorous governance processes to drive its ESG performance across the business. The Enterprise Risk Management framework is a key platform, and includes the assessment and mitigation of business risks, including environmental risks and the risks associated with the progressive transition to a lower carbon economy. The HSEC Charter includes oversight of compliance with modern slavery Yancoal is progressing two significant renewable energy projects – a pumped hydro power and solar facility at its Stratford mine, and an innovative project at Austar (in collaboration with Green Gravity) to utilise kinetic energy in old mine shafts to generate electricity during periods of peak demand. Both projects are at an early stage of investigation, but if proved up and developed, have the potential to both increase Yancoal’s self-sufficiency for power and diversify the business. COVID-19 The health and wellbeing of all Yancoal employees remains a key focus in response to the ongoing COVID-19 pandemic. regulations as a responsibility of the HSEC Committee. This will Sites had in place COVID-19 protocols aimed at minimising increase the governance and supervision of Yancoal’s modern the transmission and disruption at site for much of the period, slavery aspirations. Climate Change Risk: The transition to a lower carbon economy gathered pace in 2022, with the 2022 United Nations Climate Change Conference of Parties (“COP27”) in Sharm El-Sheik, Egypt. In addition, the new Australian federal government passed legislation committing Australia to reduce its emissions by 47% by 2030 (compared to 2005 emissions levels). The government has released draft legislation and accompanying draft rules to reform the operation of the National Greenhouse and Energy Reporting (NGER) scheme’s safeguard mechanism. Those reforms would including the below, noting that some of these were eased in line with government announcements towards the end of the period: • Site Incident Management teams • Access restrictions for people with symptoms • Use of Pre-Screening apps / forms • Availability of RAT testing • Crew separation measures – at some sites • Social distancing seek to reset GHG emission baselines for designated large • Use of thermal cameras facilities and put those baselines on a declining trajectory to align with Australia’s mid-term emission reduction targets. Facilities that exceed their baseline will be required to purchase and surrender “Australian Carbon Credit Units” (ACCU’s) or a new • COVID-19 awareness signage 50 MANAGEMENT DISCUSSION AND ANALYSIS Whilst sites continued to adopt Yancoal’s COVID-19 protocols, our employees, as part of the broader community, were not • Wet weather preparedness such as emergency ROM stockpiles, contingent wet weather waste dumps and immune and adherence with Government COVID-19 regulations drainage works resulted in the Group recording positive cases across all sites and offices. The number of workers unable to attend site due to COVID-19 increased during the first half of the year to the highest levels since the start of the pandemic but declined significantly • Continuing to build blasted inventory volumes • Hiring additional pumps to maximise dewatering movements and provide sufficient contingency as the second half progressed with minimal cases currently being • Daily wet weather planning meetings reported. Adherence to the Group’s COVID-19 protocols helped ensure that whilst the number of cases escalated the Group did not incur any temporary shutdowns, as was the case in 2021. In 2022, the most significant COVID-19 impact has been COVID-19 related absenteeism resulting in a loss of approximately 0.9Mt of ROM coal (equity) for the full year. Overall, other than the aforementioned impact, there were no other material adverse impacts or changes to the Group’s funding or business plan as a result of COVID-19 during the period. • Using environmental approval windows to maximise the discharge of excess water • Mine schedules revised to optimise equipment use and coal recovery in consideration of dewatering and storage in active mining pits • Utilising wet weather down time to conduct training • Approvals for emergency release of excess water stored across sites WATER MANAGEMENT Diligent management of wet weather impacts and site-wide water management controls are an essential element in the performance of open cut coal mines. While large quantities of clean water are required for the processing of ROM coal in the wash plant, too much water, through sudden rainfall events, can result in flooding, suspension of operations or unlicensed discharges into local rivers, potentially causing environmental harm. Sites construct water management infrastructure including sedimentation and storage dams for holding and segregating clean and dirty water. As noted above, NSW has experienced heavy and persistent rainfall throughout the period that has disrupted mining, rail and port activity with most of the NSW open cut mines nearing or exceeding their water storage capacity limits. With recent shifts in weather patterns management had proactively prioritised site wet weather planning and as a result the impacts of the aforementioned wet weather, whilst still significant, were well managed. Planning activities continued to include: • Review of water management strategies including longer term water modelling • Prioritisation of investment in infrastructure including pumps and duplicating pipeline infrastructure • The construction of additional water storage dams • Increasing capacity of the Moolarben water treatment plant • Sharing of pumps across the operations based on priority • Crushing gravel and building stockpiles to improve road conditions during wet weather 51 MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL RESULTS REVIEW RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022 For the management discussion and analysis, the Group’s operating results for the year ended 31 December 2022 are compared with the operating results for the year ended 31 December 2021. All financial numbers included below, and in the commentary to follow, are stated in Australian dollars (A$ or $) unless otherwise stated. YEAR ENDED 31 DECEMBER 2022 2021 IFRS REPORTED $M NON-OPERATING $M OPERATING $M IFRS REPORTED $M NON-OPERATING $M OPERATING $M CHANGE % 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 Impairment charge Other operating expenses Share of profit of equity-accounted investees, net of tax EBITDA EBITDA % Depreciation and amortisation EBIT EBIT % Net finance costs32 Non-operating items Profit before income tax Profit before income tax % Income tax expense Profit after income tax Profit after income tax % Attributable to: - Owners of Yancoal - Non-controlling interests Profit per share attributable to the ordinary equity holders of the Company Basic profit per share (cents) Diluted profit per share (cents) 10,548 183 35 (969) (662) (678) (457) (967) (183) (315) (297) 146 6,384 61% (834) 5,550 53% (459) – 5,091 48% (1,505) 3,586 34% 3,586 – 271.6 270.2 136 (12) – – – – – – – 315 136 – 575 – 575 – 50 (625) – – – – – – – – – 10,684 171 35 (969) (662) (678) (457) (967) (183) – (161) 146 6,959 65% (834) 6,125 57% (409) (625) 5,091 48% (1,505) 3,586 34% 3,586 – 271.6 270.2 5,404 64 (60) (757) (578) (642) (410) (421) (162) (100) (202) 57 2,193 41% (831) 1,362 25% (259) – 1,103 20% (312) 791 15% 791 – 59.9 59.7 132 (4) – – – – – – – 100 110 – 338 – 338 – (28) (310) – – – – – – – – – 5,536 60 (60) (757) (578) (642) (410) (421) (162) – (92) 57 2,531 46% (831) 1,700 31% (287) (310) 1,103 20% (312) 791 14% 791 – 59.9 59.7 93% 187% 158% 28% 15% 6% 11% 130% 13% – 75% 156% 175% -% 260% 43% – 362% 382% 353% 353% – 353% 353% 32 Includes the reclassification of interest income of $103 million (2021: $21 million) from revenue to net finance costs and bank fees and other charges of $53 million (2021: $49 million) from other operating expenses to net finance costs as these amounts are excluded from operating EBITDA. 52 MANAGEMENT DISCUSSION AND ANALYSIS 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. REVENUE Ex-mine coal sales33 Sale of purchased coal Other Sale of coal Sea freight Royalty revenue Other Revenue YEAR ENDED 31 DECEMBER 2022 $M 11,047 (538) 8 2021 $M 5,290 98 21 10,517 5,409 87 53 27 79 28 20 10,684 5,536 CHANGE (%) 109% (649%) (13%) 94% 10% 89% 35% 93% As presented by the management, Operating EBITDA represents Total revenue increased by 93% from $5,536 million in 2021 to profit or loss before income tax for the year as adjusted for net $10,684 million in 2022, primarily due to a 94% increase in coal sales revenue from $5,409 million in 2021 to $10,517 million in 2022. With respect to coal sales revenue, the key factors were: 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. YEAR ENDED 31 DECEMBER 2022 2021 CHANGE (%) 372 134 178% 24.6 84 9,139 405 4.7 16 31.7 85 4,246 (22%) (1%) 115% 180 125% 5.8 15 (19%) 7% 83% 1,908 1,044 378 141 168% 29.3 11,047 37.5 5,290 (22%) 109% PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY Profit after income tax increased by 353% from $791 million in 2021 to $3,586 million in 2022 and was fully attributable to the owners of Yancoal with no non-controlling interests. Profit attributable to the owners of Yancoal of $3,586 million was impacted by a number of non-operating items in 2022. These THERMAL COAL Average selling price (A$ per tonne) Sales volume (Mt) % of total ex-mine sales volume Total ex-mine thermal coal revenue (A$ million) totaled a net loss before tax impact of $625 million comprising METALLURGICAL COAL Average selling price (A$ 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) a $239 million fair value loss recycled from the hedge reserve, a $315 million impairment charge, $23 million of contingent royalty payments together with a $60 million contingent royalty remeasurement loss and a $12 million royalty receivable remeasurement gain. These are discussed in more detail separately in the section “Overview of non-operating items” below and have been excluded from the operating commentary. OVERVIEW OF OPERATING RESULTS The analysis in this section includes ex-mine sales tonnes, saleable production and ex-mine revenue comprising (i) 95% of the Moolarben unincorporated joint venture; (ii) 82.9% of the combined unincorporated Mount Thorley and Warkworth joint ventures (MTW); (iii) 51% of the unincorporated HVO joint venture; and (iv) 100% of Yarrabee, Ashton and Stratford Duralie. The results of Middlemount are excluded from the line-by-line commentary below as its result, as an incorporated equity- accounted investment, is included in share of profits of equity- accounted investees, net of tax in the statement of profit and loss and is discussed separately below. 33 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. 53 MANAGEMENT DISCUSSION AND ANALYSIS • The Group’s overall average ex-mine selling price of coal increased by 168% from A$141 per tonne in 2021 to A$378 per tonne in 2022 mainly as a result of (i) an increase in global USD coal prices with the weekly average GlobalCOAL Newcastle thermal coal index price increasing by US$225 per tonne (163%) during the same period; the weekly Argus/McCloskey API5 coal index price increasing by US$92 per tonne (110%) during the same period; and the average semi-soft coking coal benchmark price increasing by US$139 per tonne (101%) during the same period; and (ii) the Australian dollar weakening against the US dollar by 7.5% from an average of 0.7514 in 2021 to 0.6947 in 2022. • The Group’s average selling price of thermal coal increased from A$134 per tonne to A$372 per tonne. The Group’s average selling price of metallurgical coal increased from A$180 per tonne to A$405 per tonne. • The Group’s ex-mine sales volume decreased by 22% from 37.5Mt in 2021 to 29.3Mt in 2022, primarily due to the 20% decrease in saleable production partially offset by movements in coal inventories. • A 649% decrease in the net revenue from the sale of purchased coal from $98 million in 2021 to ($538) million in 2022, primarily resulting from corporate sales made under a long-term fixed price contract acquired as part of the Coal & Allied acquisition that, with the current high market prices, effectively reduced Group revenue in 2022. An 89% increase in royalty revenue from $28 million in 2021 to $53 million in 2022 recognised on the Group’s Middlemount royalty where it receives a royalty of 4% of Free on Board Trimmed Sales on 100% of the Middlemount mine coal sales, with the increase in the period primarily attributable to the strengthening coal price. The charts below show the longer-term trend in the Group’s average realised A$ selling price and the split of coal sales revenue by end user destination.34 AVERAGE A$ SELLING PRICE 500 400 300 200 100 0 405 378 372 182 123 132 167 100 111 124 76 82 180 134 141 2018 2019 2020 2021 2022 Thermal Metallurgical Group India $340M, 3% Chile $156M, 1% Other $188M, 2% Thailand $382M, 4% Vietnam $575M, 5% Malaysia $583M, 6% Europe $598M, 6% Korea $1,501M, 14% Japan $3,731M, 35% 2022 Taiwan $2,463M, 23% Japan $1,758m, 33% Chile $62M, 1% India $455m, 8% Other $205M, 4% Thailand $420M, 8% Vietnam $286m, 5% Malaysia $153m, 3% Europe $92m, 2% 2021 Korea $829m, 15% Taiwan $1,149m, 21% Others includes Indonesia, Australia and Bangladesh (2021: Australia, Indonesia, UAE, Cambodia, Pakistan and Bangladesh) Sales revenue to the primary Asian seaborne markets of Japan, Taiwan and South Korea, as a percentage of total coal sales revenue, remained relatively stable at 73% (2021: 69%). Sales revenue to end users in Europe increased by 4% primarily through opportunities to further diversify sales due to the global energy crisis created from the current Russian/Ukraine conflict. Sales to end users in Malaysia increased by 3%, primarily due to market development opportunities being realised; whilst sales to India decreased by 5% due to alternative markets providing better commercial returns. Sales revenue to Thailand remained relatively stable at $382 million (2021: $420 million) but with these sales delivered under a long-term fixed price contract, the relative percentage of group sales decreased from 8% to 4%. OPERATING EBITDA AND OPERATING EBITDA MARGIN Operating EBITDA increased by 175% from $2,531 million in 2021 to $6,959 million in 2022. The $4,428 million increase was primarily due to the $5,148 million (93%) increase in revenue, noted above. Other factors included (i) a $111 million increase in other income; (ii) a $868 million increase in costs; (iii) a $21 million decrease in coal purchases; and (iv) an $89 million increase in the equity accounted profit. Operating EBITDA margin as a percentage of operating revenue increased from 46% in 2021 to 65% in 2022. 34 In prior periods customer domicile was used to determine the primary geographical markets, however end user destination is considered to be more useful information. The 2021 numbers have been restated. 54 MANAGEMENT DISCUSSION AND ANALYSIS OPERATING EBITDA PER EX-MINE SALES TONNE 8000 6000 4000 2000 0 45% 2,180 36% 1,654 2018 2019 21% 748 2020 65% 6,959 46% 2,531 2021 2022 Operating EBITDA ($'m) Margin % CASH OPERATING COSTS Raw materials and consumables used Employee benefits Transportation Contractual services and plant hire Other operating expenses Cash operating costs (excluding royalties) OTHER INCOME Net gain on foreign exchange Sundry income Other income YEAR ENDED 31 DECEMBER 2022 $M 164 7 171 2021 $M CHANGE (%) 52 8 60 215% (13%) 187% Royalties Cash operating costs NON-CASH OPERATING COSTS Depreciation and amortisation Total production costs Total production costs (excluding royalties) YEAR ENDED 31 DECEMBER 2022 $/T 2021 $/T 33 23 20 16 4 95 33 128 29 157 124 20 15 17 11 2 66 11 77 22 99 88 Other income increased from $60 million in 2021 to $171 million in 2022. This included a net gain on foreign exchange of $164 million (2021: $52 million) primarily recognised on holding USD cash balances as the Australian dollar weakened during 2022. CHANGES IN INVENTORIES OF FINISHED GOODS AND WORK IN PROGRESS Changes in inventories of finished goods and work in progress moved from a decrease of $60 million in 2021 to an increase of $35 million in 2022 as inventory levels were re-established during the period with production exceeding sales by 182kt. PRODUCTION COSTS All-in total production costs include cash and non-cash operating costs, representing costs directly attributable to the production, transportation and selling of coal but excludes care and maintenance costs and non-cash changes in rehabilitation provisions. It also includes indirect corporate costs, in particular, corporate employee costs, but excludes transaction costs. Cash operating costs comprise the cost of raw materials and consumables used, employee benefits, contractual services and plant hire, transportation and other operating expenses. Non-cash operating costs include depreciation and amortisation. The table above is prepared on a cost per sales tonne basis. Over a financial year ex-mine sales tonnes and saleable production are not necessarily aligned due to changes in coal inventories. The table below has been restated on a per saleable production tonne basis to remove the impact of inventory movements and more accurately represent the cost of production. Royalties have been removed as these are based on sales revenue and are driven by ex-mine sale tonnes. PER SALEABLE PRODUCTION TONNE CASH OPERATING COSTS Raw materials and consumables used Employee benefits Transportation Contractual services and plant hire Other operating expenses Cash operating costs (excluding royalties) NON-CASH OPERATING COSTS Depreciation and amortisation Total production costs (excluding royalties) YEAR ENDED 31 DECEMBER 2022 $/T 2021 $/T 33 22 20 15 4 94 29 123 21 16 17 11 2 67 23 90 The Group’s cash operating costs, after capitalised development, per saleable tonne increased by $27/t from $67/t in 2021 to $94/t in 2022 primarily due to (i) a 7.3Mt (20%) decrease in production volumes primarily impacted by the severe and ongoing wet weather and labour shortages including COVID-19, including the incurrence of unavoidable fixed costs in the short-term, that has the effect of increasing the cost per tonne produced; (ii) incurring additional preventative and remediation costs with respect to water management, including pumping and pit design; (iii) inflationary cost increases including labour, diesel, explosives, equipment parts and electricity; and (iv) increases in NCIG port 55 MANAGEMENT DISCUSSION AND ANALYSIS costs following the introduction of an additional coal price linked toll charge from 1 July 2022. These largely uncontrollable impacts EMPLOYEE BENEFITS Employee benefits expense increased by 15% from $578 have been compounded by the additional costs incurred by million in 2021 to $662 million in 2022, primarily due to an the Group’s “washing harder” strategy to improve coal quality increase in headcount and wage and salary inflation together to capture more of the current low-ash thermal coal price with a $36 million increase in bonus accruals and share based arbitrage opportunity for a net positive outcome on the Group’s payments including the impact of the Group’s increasing share operating margin. The increases in operating costs due to the aforementioned uncontrollable factors and the Group’s “washing harder” strategy have been partially offset by management’s non-negotiable focus on operational productivity and cost reductions. In 2022 this was led by the Group’s “Key Tasks” initiative that focused on 40 key workstreams across the Group, overseen directly by the Board, where the operational focus was on site optimisation projects delivering productivity improvement and cost reduction initiatives. The chart below shows the longer-term trend in the Group’s full year cash operating costs per product tonne. CASH OPERATING COSTS PER PRODUCT TONNE (A$) 65 64 59 67 94 100 80 60 40 20 0 price on deferred bonuses for senior management, and an $18 million increase in superannuation contribution and workers compensation premiums. This contributed to an increase in per saleable product tonne employee benefits from $16 to $22 over the same period. TRANSPORTATION Transportation costs increased by 6% from $642 million in 2021 to $678 million in 2022, primarily due to an increase in NCIG port costs following the introduction of an additional coal price linked toll charge from 1 July 2022 and an $8 million increase in sea freight incurred on a Cost and Freight contract due to increasing freight rates. Given the Group’s long-term take or pay arrangements for rail and port, transportation costs did not decrease in line with the 20% decrease in saleable production. This contributed to an increase in per saleable product tonne transportation costs from $17 to $20 over the same period. CONTRACTUAL SERVICES AND PLANT HIRE Contractual services and plant hire expenses increased by 11% from $410 million in 2021 to $457 million in 2022 primarily due 2018 2019 2020 2021 2022 to a $35 million increase in contractors utilised as part of the Raw materials and consumables used Employee benefits Transportation Contractual services and plant hire Other operating expenses The Group’s cash operating costs, after capitalised development, decreased to $59/t in 2020 primarily due to short-term cash saving measures introduced as a response to the decrease in the coal price following the initial wave of COVID-19. Cash operating costs then increased to $67/t in 2021 as these measures unwound compounded by a decrease in production volumes due to the severe wet weather and COVID-19 impacts. The Group’s cash operating costs increased to $94/t in 2022 for the reasons noted above. RAW MATERIALS AND CONSUMABLES USED Raw materials and consumables used increased by 28% from $757 million in 2021 to $969 million in 2022, primarily due to lower production volumes increasing the effective cost per tonne and inflationary cost pressures. Diesel costs increased by $153 million, and explosive costs increased by $24 million, due to price increases, despite the 20% decrease in saleable production. This contributed to an increase in per saleable product tonne raw materials and consumables used from $21 to $33 over the same period. wet weather recovery plans and to mitigate labour availability issues and an $11 million increase in revenue-based marketing commissions. This contributed to an increase in per saleable product tonne contractual service and plant hire costs from $11 to $16 over the same period. GOVERNMENT ROYALTIES Government royalty expenses increased by 130% from $421 million in 2021 to $967 million in 2022, primarily due to a 109% increase in ex-mine coal sales revenue and an increase in coal royalty rates introduced by the Queensland Government effective from 1 July 2022. 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 in and are payable to the appropriate State government. This contributed to an increase in per ex-mine sales tonne government royalties from $11 to $33 over the same period. COAL PURCHASES Coal purchases increased by 13% from $162 million in 2021 to $183 million in 2022, primarily due to the wet weather impacted reduction in supply across many other Australian producers creating limited opportunities to make coal purchases being offset by the increase in the purchase price driven by the general market increase. 56 MANAGEMENT DISCUSSION AND ANALYSIS OTHER OPERATING EXPENSES Other operating expenses increased by 75% from $92 million in mandatory loan repayments of US$25 million and voluntary debt prepayments of US$2,260 million, partially offset by (i) an increase 2021 to $161 million in 2022 and included a $30 million increase in the Group’s LIBOR based debt facilities all-in interest rate from in the Duralie rehabilitation provision, recognised in the profit an average of 4.51% in 2021 to an average of 5.65% in 2022; and and loss due to mining having now ceased at Duralie, and a (ii) a decrease in the AUD:USD exchange rate from an average $20 million increase in the Donaldson rehabilitation provision, of 0.7514 in 2021 to 0.6947 in 2022, where the Group’s loans are recognised in the profit and loss, with both amounts based on denominated in US dollars. the preliminary mine closure work completed to date. Excluding the provision increases, other operating expenses increased by $20 million, including a $5 million increase in IT costs that included an upgrade to the Group’s ERP system. This contributed to an increase in per saleable product tonne other operating expenses from $2 to $3 over the same period. SHARE OF PROFIT OF EQUITY-ACCOUNTED INVESTEES, NET OF TAX Share of profit of equity-accounted investees, net of tax increased from $57 million in 2021 to $146 million in 2022 primarily due to the increasing profit after tax performance of the incorporated Middlemount joint venture positively impacted by a 143% increase in realised A$ coal price partially offset by a 23% decrease in sales tonnes. DEPRECIATION AND AMORTISATION Depreciation and amortisation expenses increased marginally from $831 million in 2021 to $834 million in 2022 primarily due to lower production being offset by an increase in equipment employed as part of the mine recovery plans together with the impact of additional depreciation at Stratford resulting from the increase in its rehabilitation asset. Per saleable production tonne depreciation and amortisation costs increased from $23 to $29 over the same period. OPERATING EBIT AND OPERATING EBIT MARGIN Operating EBIT increased by 260% from $1,700 million in 2021 to $6,125 million in 2022 primarily due to a 175% increase in Operating EBITDA and a flat depreciation and amortisation charge as noted above. Operating EBIT margin as a percentage of operating revenue increased from 31% in 2021 to 57% in 2022. NET FINANCE COSTS Net finance costs increased by 43% from $287 million in 2021 to $409 million in 2022 due to a $204 million (66%) increase in interest expense and bank fees and charges and an $82 million (388%) increase in interest income. The $204 million increase in interest expense and bank fees and charges included $279 million (2021: $30 million) of non-cash interest expense relating the unwind of the discount recognised on the US$775 million related party loan provided by Shandong Energy in 2020 that was determined to be provided at a below arms-length interest rate. The loan was fully repaid during 2022 resulting in all the remaining discount being expensed during the period. Excluding these amounts, the interest expense decreased from $278 million in 2021 to $233 million in 2022 primarily due to a decrease in interest-bearing liabilities in the period through The $82 million increase in interest income was primarily due to (i) $63 million of non-cash interest income being recognised on the Middlemount shareholder loan due to voluntary prepayments; and (ii) a $19 million increase in bank interest income due to an increase in cash on hand during the period. The Middlemount shareholder loan was previously converted to an interest free loan resulting in an accounting fair value discount being applied to the face value of the loan. The discount was being recognised through the profit and loss, as non-cash interest income, over the life of the loan with loan repayments based on Middlemount’s forecast cash flows. With the significant increase in coal prices and cash flows, Middlemount has been able to fully repay the $212 million shareholder loan from Yancoal during the period, ahead of forecast, resulting in the acceleration of the profit and loss recognition. OPERATING PROFIT BEFORE INCOME TAX AND PROFIT BEFORE INCOME TAX MARGIN As a result of the aforementioned reasons, operating profit before income tax increased by 305% from $1,413 million in 2021 to $5,716 million in 2022. Operating profit before income tax margin as a percentage of operating revenue increased from 26% to 54% over the same period. PROFIT BEFORE INCOME TAX AND PROFIT BEFORE INCOME TAX MARGIN As a result of the aforementioned reasons, and the non- operating items discussed below, profit before income tax increased by 362% from $1,103 million in 2021 to a profit of $5,091 million in 2022. Profit before income tax margin as a percentage of operating revenue increased from 20% to 48% over the same period. INCOME TAX EXPENSE Income tax expense increased from $312 million in 2021 to $1,505 million in 2022. The effective tax rate was 28.3% and 29.6% in the same periods, respectively, compared to the Australian corporate income tax rate of 30%. The lower effective tax rate primarily resulted from the non-assessable equity- accounted profit of $146 million (2021: $57 million). During the period, the Group fully utilised its tax losses of $63 million brought forward from 31 December 2021 such that the Group will now pay Australian corporate income tax on future taxable profits. Income tax on the Group’s 2022 taxable profits will be payable in mid- 2023 however, $70 million of tax installments against this liability was paid in December 2022, with the outstanding $1,542 million payable recognised on the balance sheet at 31 December 2022. 57 MANAGEMENT DISCUSSION AND ANALYSIS PROFIT AFTER INCOME TAX AND PROFIT AFTER INCOME TAX MARGIN As a result of the aforementioned reasons profit after income tax increased by 353% from $791 million in 2021 to $3,586 million in 2022. Profit after income tax margin as a percentage of operating revenue increased from 14% to 34% over the same period. PROFIT PER SHARE ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE COMPANY Basic earnings per share increased by 353% from 59.9 cents per share in 2021 to 271.6 cents per share in 2022 and diluted earnings per share increased by 353% from 59.7 cents per share in 2021 to 270.2 cents per share in 2022 primarily due to the aforementioned profit after income tax with no change in the number of ordinary shares on issue. In 2022 the diluted earnings per share was impacted by 6.8 million rights on issue to senior with the exploration asset impaired to nil book value. The 2021 impairment charge related to the impairment, to nil book value, of the Donaldson exploration asset. Contingent royalty expense of $23 million (2021: $28 million) relates to the contingent coal price-linked royalty payable to Rio Tinto for the year ended 31 December 2022, as part of the contingent consideration on the Coal & Allied acquisition, due to the GlobalCOAL quarterly index price being above the 2022 threshold price for all four quarters. Similarly, the re-measurement of contingent royalty up by $60 million (2021: $33 million) represents an increase in the provision recognised on the Coal & Allied acquisition with respect to the contingent coal price-linked royalty potentially payable to Rio Tinto for the remaining period from 1 January 2023 to 31 August 2030 due to a strengthening of the thermal coal management (2021: 3.7 million). price forecasts. OVERVIEW OF NON-OPERATING ITEMS Non-operating items in the year ended 31 December 2022 and 2021 included the following: YEAR ENDED 31 DECEMBER NON-OPERATING ITEMS Fair value losses recycled from hedge reserve Impairment charge Contingent royalty expense Re-measurement of contingent royalty Re-measurement of royalty receivable Loss before tax impact 2022 $M (239) (315) (23) (60) 12 (625) 2021 $M (153) (100) (28) (33) 4 (310) Re-measurement of the royalty receivable up by $12 million (2021: $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. CASH FLOW ANALYSIS YEAR ENDED 31 DECEMBER 2022 $M 6,528 (298) (5,133) 1,097 2021 $M 1,900 (306) (761) 833 CHANGE $M 4,628 8 (4,372) 264 Net operating cash flows Net investing cash flows Net financing cash flows Net increase in cash Fair value losses recycled from the hedge reserve of $239 million (2021: $153 million) represent retranslation losses on the Group’s NET OPERATING CASH FLOWS Net operating cash inflows increased by $4,628 million (244%) US dollar-denominated loans which are attributable to changes to $6,528 million reflecting an increase in net receipts from in USD:AUD foreign exchange rates. Under the Group’s natural customers over payments to suppliers primarily due to a 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 USD:AUD exchange rates at the time the hedge was put in place and at the time the loan matured. Impairment charge of $315 million (2021: $100 million) relates to a $171 million impairment of the Donaldson thermal coal mining asset and a $144 million impairment of the Monash thermal coal exploration asset. Management has continued its strategic review of its underperforming assets and with the prospect of re-commencing operations at Donaldson (currently on care and maintenance) considered unlikely, mining assets have been impaired to nil book value. Similarly, it was considered unlikely that the Monash exploration asset will be developed in the future $5,144 million increase in revenue over the same period. NET INVESTING CASH FLOWS Net investing cash outflows decreased by $8 million (3%) to $298 million. In 2022 investing cash outflows included $548 million of capital expenditure partially offset by the $212 million repayment, in full, of the shareholder loan provided to Middlemount. In 2021 investing cash outflows included (i) $269 million of capital expenditure; and (ii) the final $100 million installment payment for a further 10% interest in the Moolarben joint venture partially offset by the $60 million repayment, in full, of the revolver loans provided to Middlemount. 58 MANAGEMENT DISCUSSION AND ANALYSIS NET FINANCING CASH FLOWS Net financing cash outflows increased by $4,372 million (575%) to Total assets increased by $1,001 million to $12,801 million at 31 December 2022 mainly reflecting the increase in current assets an outflow of $5,133 million, as set out in the table below. of $1,279 million noted above and a $254 million increase in YEAR ENDED 31 DECEMBER 2022 $M (1,626) (37) (3,405) (40) (25) – – Dividends paid Mandatory loan repayments Voluntary loan repayments Lease payments Purchase of treasury shares Loan repayment on maturity Proceeds from new loans Net financing cash flows (5,133) 2021 $M CHANGE $M – (1,626) (66) (705) (35) – (419) 464 (761) 29 (2,700) (5) (25) 419 (464) (4,372) In 2022 the net financing cash outflow included (i) $1,626 million of dividend payments being the settlement of the 2021 final declared dividend of $930 million and the 2022 interim dividend of $696 million; (ii) $37 million (US$25 million) of mandatory loan repayments under the syndicated facility; (iii) A$3,405 million (US$2,260 million) of voluntary debt prepayments on both the syndicated and related party facilities; (iv) $40 million of lease repayments; and (v) $25 million for the purchase of Company shares for settlement of Executive STIP and LTIP obligations. In 2021 the net financing cash outflow included (i) A$66 million (US$50 million) of mandatory loan repayments under the syndicated facility; (ii) A$705 million (US$531 million) of voluntary debt repayments on both the syndicated and related party facilities; and (iii) a A$419 million (US$300 million) debt repayment on maturity of the US$300 million syndicated term loan facility property, plant and equipment partially offset by (i) a $266 million decrease in exploration and evaluation assets primarily resulting from the $144 million Monash impairment and a $124 million transfer to mining tenements; (ii) a $241 million decrease in mining tenements including $36 million from the Donaldson impairment and $329 million of amortisation partially offset by the $124 million transfer in from exploration assets and (iii) a $212 million decrease in the Middlemount shareholder loan receivable. Total liabilities decreased by $883 million to $4,771 million at 31 December 2022 mainly reflecting (i) a $2,762 million decrease in interest-bearing liabilities including a $3,442 million decrease in loans due to the repayments made during the period partially offset by the $279 million unwind of the discount recognised on the US$775 million related party loan fully repaid during the period and a $325 million foreign exchange loss on the Group’s US dollar denominated loans due to an decrease in the AUD:USD exchange rate from an opening rate of 0.7256 at 31 December 2021 to a closing rate of 0.6775 at 31 December 2022; (ii) the recognition of a $1,542 million income tax payable noted above; and (iii) a $344 million increase in provisions including a $294 million increase in rehabilitation provision and the $60 million increase in the contingent royalty provision. Total equity increased by $1,884 million to $8,030 million at 31 December 2022 reflecting the $3,586 million profit after tax partially offset by (i) dividend payments of $1,626 million; and (ii) a $76 million reserve movement including a $61 million movement in the hedge reserve, net of tax. refinanced by A$464 million (US$333 million) drawn under the The Group’s primary source of liquidity was operating cash flows that contributed $6,528 million in the year ended 31 December 2022. Together with the opening cash position this enabled the payment for investing activities of $298 million and financing activities of $5,133 million. For the year ending 31 December 2023, the primary source of liquidity is expected to continue to be operating cash flows for ongoing business 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. replacement syndicated term loan facility. FINANCIAL RESOURCES AND LIQUIDITY YEAR ENDED 31 DECEMBER 2022 $M 3,810 (2,532) 1,278 12,801 (4,771) 8,030 2021 $M 2,531 (826) 1,705 11,800 (5,654) 6,146 CHANGE $M 1,279 (1,706) (427) 1,001 883 1,884 Current assets Current liabilities Net current assets Total assets Total liabilities Total equity Current assets increased by $1,279 million to $3,810 million at 31 December 2022 mainly reflecting an increase in cash on hand of $1,204 million. Current liabilities increased by $1,706 million to $2,532 million at 31 December 2022 mainly reflecting the recognition of a $1,542 million income tax payable as the Company fully utilised brought forward tax losses during the period. 59 MANAGEMENT DISCUSSION AND ANALYSIS YEAR ENDED 31 DECEMBER 2022 $M 673 (2,699) (2,026) 8,030 6,004 N/A 2021 $M 3,435 (1,495) 1,940 6,146 8,086 0.24 CHANGE (%) (2,762) (1,204) (3,966) 1,884 (2,082) Interest-bearing liabilities Less: cash and cash equivalents Net (cash) / debt Total equity Net debt + total equity Gearing ratio35 The Group’s objective when managing its capital structure is to provide capital towards sustaining capital expenditure, pay down interest-bearing liabilities to a supportable level whilst providing dividends to equity holders and pursuing organic and inorganic expansion opportunities when appropriate. NET DEBT AND GEARING 35% 3,093 29% 2,536 41% 3,568 24% 1,940 While the Group operates entirely in Australia and its costs are primarily denominated in its functional currency, the A$, foreign currency exposure arises particularly in relation to coal supply contracts, which generally are priced and payable in USD, procurement of diesel and imported plant and equipment, which can be priced in USD or other foreign currencies, and debt denominated in USD. 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. The Company hedges a portion of contracted USD sales and asset purchases settled in foreign currencies in each currency to (2,026) mitigate the adverse impact on cash flow due to the future rise or fall in the A$ against the relevant currencies. 2018 2019 2020 2021 2022 More details on interest-bearing liabilities, cash and cash Net debt ($'m) Net cash ($'m) Gearing % 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 D1, D2 4000 3000 2000 1000 0 -1000 -2000 -3000 The gearing ratio decreased from 24% to nil during the period as and D7 of the Group’s financial statements. the Group moved to a net cash position. This was primarily due to a decrease in net debt due to the high operating cash inflows that enabled the voluntary early repayment of debt and a significant increase in cash and cash equivalents on hand. The Group’s interest-bearing liabilities include (i) secured bank loans of A$489 million (31 December 2021: A$1,632 million); and (ii) unsecured loans from related parties of nil (31 December 2021: A$1,672 million); all denominated in US dollars and lease liabilities of A$184 million (31 December 2021: A$131 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 (including guarantee fees) for the year ended 31 December 2022 was 5.65% (2021: 4.51%). The Group’s cash and cash equivalents includes A$2,176 million (31 December 2021: A$970 million) and US$354 million (31 December 2021: US$381 million). AVAILABLE DEBT FACILITIES As at 31 December 2022, the Group had the following available debt facilities. $34 million of undrawn bank guarantees under its A$975 million Syndicated Bank Guarantee Facility that are provided for operational purposes in favour of port, rail, government departments and other operational functions in the normal course of business with a maturity date of 2 June 2023. On 17 February 2023, the Company entered into facility documentation to refinance this facility with three new contingent liability facilities, totalling A$1.2 billion for a period of 3 years. The refinance is due to be completed in early March 2023. No undrawn debt under its US$333 million Syndicated Term Loan with maturity dates of US$301 million on 23 August 2024 and US$32 million on 21 August 2026. The Directors of Yanzhou (now Yankuang Energy) 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 the Company, Yanzhou will ensure that the Group continues to operate so that it remains solvent. 35 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. 60 MANAGEMENT DISCUSSION AND ANALYSIS CAPITAL EXPENDITURE AND COMMITMENTS During the year ended 31 December 2022, capital expenditure cash flows of the Group amounted to $550 million (2021: $269 million) comprising $548 million (2021: $269 million) of property, plant and equipment and $2 million (2021: nil) of exploration. Included in the capital expenditure of $550 million is capitalised operating expenses, net of any applicable revenue, incurred on open-cut and underground development activities of $71 million (2021: $38 million). Amortisation of such capitalised costs commences on either (i) the start of commercial production from the new mine or pit for open-cuts; and (ii) over the life of mine if development roads service the entire mine or over the life of the longwall panels accessible from the development roads, if shorter, for undergrounds. At Stratford, Yancoal is progressing with plans for a renewable energy hub. Preliminary studies identified viable renewable energy options, and a feasibility study for the project has commenced. The centrepiece would be a Pumped-Hydro Energy Storage project that would provide dispatchable power into the grid at peak times or when the energy generated by other renewable sources (wind and solar) is unavailable. Given coal production at the Stratford mine is anticipated to end in 2024, this renewable energy hub provides an excellent opportunity for the beneficial re-use of land after the cessation of mining and does not impact water resources within the valley. The project could also allow Yancoal to maintain a commercially viable operation at the site and provide economic and social benefits to the Gloucester region. Project implementation remains subject to the feasibility study outcome, permitting requirements and relevant As at 31 December 2022, commitments of the Group comprised approval processes. capital commitments of $222 million (2021: $194 million). SIGNIFICANT INVESTMENTS The Company continues to look for high quality acquisition opportunities. The Company will inform the market as required, if and when any material transaction occurs. The Group also 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 potential expansion works across the tier- one assets of Moolarben, MTW and HVO, to be funded from operating cash flows. At Moolarben, Yancoal has the required approvals to increase annual open-cut mine ROM production from 14Mt to 16Mt. Yancoal’s ability to increase open-cut production depends on increasing the capacity at the Coal Handling and Preparation Plant (CHPP). This CHPP upgrade project is underway, with the final stage of modifications to increase capacity to 16Mtpa scheduled to be completed during the first quarter of 2023. Yancoal continually examines opportunities to grow the business. The Company is open to expanding or extending the operational profile of its existing assets with organic projects, like those identified at Moolarben or developing renewable projects like that at Stratford. It would also consider acquiring additional coal assets or diversifying into other minerals, energy or renewable energy projects should suitable opportunities arise. Any new initiative would be subject to careful evaluation and require Yancoal Board consideration and approval before commencement. 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 and potentially interest-bearing liabilities depending on the debt market availability at the time. On 16 December 2020, the Company received a letter from Shandong Energy (formerly Yankuang Group) confirming its commitment, having regard to the overall situation of the coal industry; the operations and financial circumstances of the Company and Shandong Energy; the Company’s existing financings; the global funding market; and the profitability of any proposed project, to explore with the Company whether, At MTW, the underground mine concept remains subject to study and the basis on which, financial support may be provided and assessment, but we do not expect to reach a conclusion to the Company by Shandong Energy in the next few years until after 2023. At Ashton, an agreement was reached with the adjoining Ravensworth Operation for the Ashton mine to access some of Ravensworth’s underground coal resources. State Government planning approval has been received, and the relevant tenements have now been transferred into Ashton’s ownership, enabling access into this new mining area from 1 January 2023. Federal environmental approval is required prior to longwall extraction in November 2024 (based on current estimated timing). Securing a transfer of these tenements to Ashton’s ownership will increase the longevity and efficiency of the Ashton operation by utilising its existing equipment to access additional mining locations with coal of similar or better coal quality than it currently produces. for the purpose of (i) potential acquisitions or finance lease arrangements; or (ii) additional financial support required by Watagan. In addition, Shandong Energy confirmed it is willing to assist and support the Company in discussions with Yankuang Energy (formerly Yanzhou) to explore the possibility of (i) obtaining a licence on paid terms for the use of technology recently acquired by Yankuang Energy; and (ii) commencing technology cooperation in accordance with standard and reasonable commercial practices. 61 MANAGEMENT DISCUSSION AND ANALYSIS MATERIAL ACQUISITIONS AND DISPOSALS No material acquisitions or disposals were undertaken during the period. EMPLOYEES 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 and Inclusion Policy was updated and approved by the Board in 2022 and seeks to actively facilitate a more diverse and representative management and leadership structure. During 2022 Yancoal made good As at 31 December 2022, the Group had approximately 3,359 progress against our measurable gender diversity targets and (2021: 3,196) employees (including contract labour who are full increased the proportion of the female workforce to 15%, noting time equivalents), all located in Australia, in addition to other that the mining sector is the most male dominated sector in the contractors and service providers who support the Group’s Australian economy. operations by delivering fixed scopes of work. For the period, the total employee costs (including director’s emoluments, HVO and Middlemount 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 $662 million (2021: $578 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, complies with the diversity policy, provides market competitive remuneration to attract and retain skilled and motivated employees and structures incentives to link rewards with performance. Details of the Group’s incentive plans are included in the Remuneration Report in the Groups’ Financial Report for the year ended 31 December 2022. 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, for example, in 2022 Yancoal commenced the rollout of a frontline leadership development program called “Leading the Way”. The program focuses on the development of the core leadership skills required of frontline leaders and is heavily built on Yancoal’s cultural framework of beliefs, values and inclusive In addition to this our Yancoal mine sites have been actively driving greater awareness of indigenous inclusion and offering opportunities for career pathways across the business. Yancoal also continues to be a long-term sponsor of the Clontarf Foundation which supports Indigenous youth education and career development, leading to positive outcomes in the communities where they operate. 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 16 February 2023, the Company announced that it was subject to revised directions received from the New South Wales government compelling it to make available up to 310,000 tonnes of coal per quarter to domestic power generators from its attributable saleable production. The directions are effective for the fifteen months, from 1 April 2023 to 30 June 2024 with coal sold under the directions subject to a price cap of A$125 per tonne delivered for 5,500 kcal/kg products, energy adjusted. On 17 February 2023, the Company entered into facility documentation to refinance its existing A$975 million syndicated bank guarantee facility due to expire on 2 June 2023 with three new contingent liability facilities, totalling A$1.2 billion for a period of three years. The refinance is due to be completed in early March 2023. On 27 February 2023, the Directors declared a fully franked final dividend of A$924 million, A$0.7000 per share, with a record date of 15 March 2023 and a payment date of 28 April 2023. FINANCIAL AND OTHER RISK MANAGEMENT leadership behaviours. As the program continues to roll out across The Group is exposed to financial risks arising from its operations all sites it will contribute to improved leadership competencies, and the use of financial instruments. The key financial risks include improved engagement of our frontline workers and assist in currency risk, price risk, interest rate risk, credit risk and liquidity continuing to sustain Yancoal’s workplace culture which in turn risk and are detailed in Note D7 to the financial statements in this feeds into our employee value proposition in a constrained labour report. The Board reviews and agrees policies and procedures for market. This investment contributes to a pipeline of employees management of these risks. who are ready to transition into new roles as well as creating a value proposition for new employees looking to join the Group. 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 62 MANAGEMENT DISCUSSION AND ANALYSIS date. Provisional pricing mechanisms embedded within these As mining inventory rebuilds and productivity rates improve over sales arrangements have the character of a commodity derivative the coming quarters, production rates should increase towards the and are carried at fair value through profit and loss as part of trade levels experienced in prior years. The full recovery of production receivables. The final sales price is determined normally 7 to 90 rates will depend on several factors, particularly rainfall levels. days after delivery to the customer. At 31 December 2022, there Yancoal’s 2023 attributable saleable production is expected to be were $151 million of provisionally priced sales still to be finalised. between 31 million tonnes and 36 million tonnes. If prices were to increase by 10%, provisionally priced sales would increase by $15 million. CONTINGENT LIABILITIES The contingent liabilities of the Group as at 31 December 2022 comprised (i) $941 million (31 December 2021: $875 million) of bank guarantees comprising $395 million (31 December 2021: $370 million) of performance guarantees provided to third parties Unit cost reduction is likely to take longer to deliver than the production uplift, as the recovery plans incur additional costs, energy input costs are still elevated, and cost inflation from recent years is now embedded. Over time, increasing production rates are expected to contribute to lower unit costs. Yancoal’s 2023 cash operating costs are expected to be between $92 / tonne and $102/tonne, with cash operating costs in the first half of the year expected to be higher than in the second half. and $546 million (31 December 2021: $505 million) of guarantees Capital expenditure in 2023 is expected to be between $750-$900 provided in respect of the cost of restoration of certain mining million as the fleet replacement cycle, that commenced in 2021, leases given to government departments as required by statute continues and additional equipment is secured to deliver the with respect to the Group’s owned and managed mines, (ii) a Group’s near-term production. 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. Through 2023 and potentially into 2024, the Company will need to continually balance output volumes, product quality, efficiency metrics, operating costs and capital expenditure as it executes its mine recovery plans. In 2023, Yancoal aims to deliver the best possible financial performance for its shareholders, which requires See Note D6 to the financial statements in this report for further flexibility on production volumes and operating cash costs. details on the Group’s contingent liabilities. CHARGES ON ASSETS The Group has a Syndicated Bank Guarantee Facility provided by a syndicate of nine Australian and international banks totalling A$975 million. As at 31 December 2022 the facility was drawn to A$941 million. The Group has a Syndicated Term Loan facility provided by a syndicate of six international banks totalling US$333 million. As at 31 December 2022 the facility was fully drawn. The Syndicated Bank Guarantee and Term Loan facilities were both secured by the assets of the consolidated group of Yancoal Resources Ltd and Coal & Allied Industries Ltd (both wholly owned subsidiaries of Yancoal) with a carrying value of $11,751 million as at 31 December 2022. FUTURE PROSPECTS The decrease in production in 2022 was largely the culmination of several years of operational challenges primarily driven by external factors, including wet weather, COVID-19 and labour shortages, impacting the Australian coal industry. To capture the benefit of the record coal prices experienced in 2022, sites maximised coal production, where possible, an approach that resulted in the depletion of mining inventory across most mines. Open-cut mines in NSW still have excess water on-site, with all mines at or above their water storage capacity. The Group has invested in additional mining equipment and dewatering capacity to bolster the recovery process and rebuild mining inventory. 63 MANAGEMENT DISCUSSION AND ANALYSIS C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S A N D O T H E R C O M P R E H E N S I V E I N C O M E F or t he yea r ended 3 1 Decem ber 2 022 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 Impairment charges 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 Ltd 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 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 EARNINGS PER SHARE ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE COMPANY: Basic earnings per share (cents per share) Diluted earnings per share (cents per share) NOTES B2 B3 B4 B1 B5 B5 E1 B6 D5 D5 D5 B7 B7 31 DECEMBER 2022 $M 10,548 183 35 (969) (662) (834) (678) (457) (967) (183) (315) (297) (459) 146 5,091 (1,505) 3,586 3,586 – 3,586 (326) 239 26 (61) 3,525 3,525 – 3,525 271.6 270.2 31 DECEMBER 2021 $M 5,404 64 (60) (757) (578) (831) (642) (410) (421) (162) (100) (202) (259) 57 1,103 (312) 791 791 – 791 (232) 153 24 (55) 736 736 – 736 59.9 59.7 These financial statements should be read in conjunction with the accompanying notes. 64 C O N S O L I D A T E D B A L A N C E S H E E T A s a t 31 December 2022 NOTES 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Royalty receivable 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 Royalty receivable Interests in other entities Other non-current assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Interest-bearing liabilities Current tax liabilities Provisions Total current liabilities NON-CURRENT LIABILITIES Trade and other payables Interest-bearing liabilities Deferred tax liabilities Provisions 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 C6 C7 C8 C9 C7 C1 C2 C4 C5 C9 E1 C10 D1 C11 D1 B6 C11 D2 D5 2,699 736 330 20 25 3,810 97 3,486 4,367 275 133 213 413 7 8,991 12,801 863 48 1,542 79 2,532 14 625 383 1,217 2,239 4,771 8,030 6,698 (264) 1,594 8,028 2 8,030 1,495 707 264 23 42 2,531 239 3,232 4,608 541 138 198 303 10 9,269 11,800 743 66 – 17 826 8 3,369 516 935 4,828 5,654 6,146 6,698 (188) (366) 6,144 2 6,146 These financial statements should be read in conjunction with the accompanying notes. 65 C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y F or th e ye ar en ded 31 D ecem be r 202 2 ATTRIBUTABLE TO OWNERS OF YANCOAL AUSTRALIA LTD NOTES CONTRIBUTED EQUITY $M 6,482 Balance at 1 January 2021 Profit after income tax Other comprehensive expense Total comprehensive income TRANSACTIONS WITH OWNERS IN THEIR CAPACITY AS OWNERS: Movements in other contributed equity D2 Movements in other reserves Balance at 31 December 2021 Balance at 1 January 2022 Profit after income tax Other comprehensive expense Total comprehensive income TRANSACTIONS WITH OWNERS IN THEIR AS OWNERS: Dividends paid Movements in other reserves D4 RETAINED EARNINGS/ (ACCUMULATED LOSSES) $M RESERVES $M (134) – (55) (55) – 1 1 (188) (188) – (61) (61) – (15) (15) (264) (1,157) 791 – 791 – – – (366) (366) 3,586 – 3,586 (1,626) – (1,626) 1,594 NON- CONTROLLING INTERESTS $M TOTAL EQUITY $M 2 – – – – – – 2 2 – – – – – – 2 5,193 791 (55) 736 216 1 217 6,146 6,146 3,586 (61) 3,525 (1,626) (15) (1,641) 8,030 TOTAL $M 5,191 791 (55) 736 216 1 217 6,144 6,144 3,586 (61) 3,525 (1,626) (15) (1,641) 8,028 – – – 216 – 216 6,698 6,698 – – – – – – Balance at 31 December 2022 6,698 These financial statements should be read in conjunction with the accompanying notes. 66 C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S F or th e ye ar end ed 31 Decem b er 20 22 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest paid Interest received Income tax paid Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment Payments for capitalised exploration and evaluation activities Repayment of borrowing from joint venture Dividend received 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 operation (net of cash acquired) Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of interest bearing liabilities - related entities Payment of dividends Repayment of interest-bearing liabilities Payment of lease liabilities Payment for treasury shares Proceeds from interest-bearing liabilities Net cash outflow from financing activities Net 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 NOTES 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 10,692 (3,857) (278) 41 (70) 6,528 (548) (2) 212 36 4 – – – (298) (2,122) (1,626) (1,320) (40) (25) – (5,133) 1,097 1,495 107 2,699 5,109 (3,036) (180) 7 – 1,900 (269) – 60 11 1 4 (13) (100) (306) (232) – (958) (35) – 464 (761) 833 637 25 1,495 F3 D1 D4 D1 C6 These financial statements should be read in conjunction with the accompanying notes. 67 N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S F or t he yea r ended 31 Decem b e r 20 2 2 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS INDEX 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 assets Exploration and evaluation assets Intangibles Cash and cash equivalents Trade and other receivables Inventories Royalty receivable Trade and other payables Provisions Capital Structure and Financing Interest-bearing liabilities Contributed equity Share-based payments Dividends Reserves Contingencies Financial risk management Fair value measurements Group Structure 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 A B B1 B2 B3 B4 B5 B6 B7 C C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 D D1 D2 D3 D4 D5 D6 D7 D8 E E1 E2 E3 E4 E5 F F1 F2 F3 F4 F5 F6 F7 F8 68 PAGE 69 70 70 73 75 75 76 77 80 80 81 82 83 86 86 87 88 89 89 90 91 92 92 94 95 96 97 98 99 103 105 105 108 111 112 114 116 116 116 117 118 118 118 122 122 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 27 February 2023. The accounting policies adopted are consistent with those of the most recent Annual Financial Report except for as disclosed below under New and amended accounting standards adopted by the Group. (i) Compliance with IFRS The consolidated financial statements of the Group also comply (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 certain financial assets and liabilities (including derivative instruments) at fair value through profit or loss. (v) Auditor sign-off - unqualified and unmodified The independent auditor’s report on these consolidated financial statements is unqualified and unmodified. (vi) Rounding of amounts The Company is of a kind referred to in ASIC Legislative Instrument 2016/191. 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. (vii) New and amended standards adopted by the Group New and amended accounting standards and interpretations effective for the current reporting period include: AASB 2020-3 Amendments to Australian Accounting Standards - Annual Improvements 2018 - 2020 and Other Amendments with International Financial Reporting Standards (“IFRS”) as issued Amendments to the property, plant and equipment accounting by the International Accounting Standards Board (“IASB”). standard has required the entity to recognise the sales proceeds from selling items produced while preparing the assets for its intended use, instead of deducting the amounts received from the cost of the asset. This will affect the production stage underground development costs and the coal produced during a longwall move. Management assessed the impact to the Group on 1 January 2022 to be $15 million which is not material. These amendments are adopted prospectively. Except for the above mentioned amendment there were no further changes to the Group’s accounting policies and no effect on the amounts reported for the current or prior periods. (viii) 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 2022 that have not been applied by the Group are disclosed in Note F8. (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 included in Note F6. These policies have been consistently applied to all the years presented, unless otherwise stated. 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (ix) Early adoption of standards Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2022 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. (x) 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. 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 Interests in other entities Note B6 Note C2 Note C3 Note C4 Note C9 Note C11 Note E1 B PERFORMANCE This section of the financial statements focuses on disclosure that enhances a user’s understanding of profit or loss 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. (a) Segment information (a) Segment information The segment information for the reportable segments for the year ended 31 December 2022 is as follows: 31 DECEMBER 2022 Total segment revenue (i) Add: Fair value losses recycled from hedge reserve Revenue from external customers Operating EBIT Operating EBITDA COAL MINING NSW $M 9,661 – 9,661 5,605 6,390 QLD $M 856 – 856 295 338 CORPORATE $M (239) 239 – 225 231 TOTAL $M 10,278 239 10,517 6,125 6,959 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2022 MATERIAL INCOME OR EXPENSE ITEMS Non-cash items Depreciation and amortisation Remeasurement of contingent royalty Remeasurement of royalty receivable Impairment charges Total capital expenditure Segment assets Investments in associates and joint ventures Total assets COAL MINING NSW $M (787) – – (315) (1,102) 831 9,226 175 9,401 QLD $M (42) – – – (42) 60 781 – 781 CORPORATE $M TOTAL $M (5) (60) 12 – (53) 6 2,381 238 2,619 (834) (60) 12 (315) (1,197) 897 12,388 413 12,801 (i) Total segment revenue consists of revenue from the sale of coal whereas revenue disclosed in the profit and loss also includes other revenue such as sea freight, rents and sub-lease rentals, interest income, dividend income and royalty income. Refer to Note B1(b) below. Interest revenue by segment for 31 December 2022 is as follows: NSW $nil (2021: $1 million), QLD $nil (2021: $nil) and Corporate $103 million (2021: $20 million). Finance costs by segment for 31 December 2022 is as follows: NSW $32 million (2021: $26 million), QLD $2 million (2021: $3 million) and Corporate $425 million (2021: $230 million). The segment information for the reportable segments for the year ended 31 December 2021 is as follows: 31 DECEMBER 2021 Total segment revenue (i) 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 Remeasurement of contingent royalty Remeasurement of royalty receivable Impairment charges Total capital expenditure Segment assets Investment in associate and joint ventures Total assets COAL MINING NSW $M 4,899 – 4,899 1,597 2,379 (782) – – (100) (882) 417 9,133 171 9,304 QLD $M 510 – 510 70 111 (41) – – – (41) 21 662 – 662 CORPORATE $M (153) 153 – 33 41 (8) (33) 4 – (37) 1 1,701 133 1,834 TOTAL $M 5,256 153 5,409 1,700 2,531 (831) (33) 4 (100) (960) 439 11,496 304 11,800 There were no other significant non-cash items recognised during the year ended 31 December 2022 and 31 December 2021 other than those disclosed above. (i) Total segment revenue consists of revenue from the sale of coal whereas revenue disclosed in the profit and loss also includes other revenue such as sea freight, rents and sub-lease rentals, interest income, dividend income and royalty income. Refer to Note B1(b) below. 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Other segment information (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 end-destination of coal sold. Refer to Note B2 for revenue from external customers split by geographical region. Revenues from the top five external customers were $3,489 million (2021: $1,691 million) which in aggregate represent approximately 33% (2021: 31%) 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 Sea freight Royalty revenue Other revenue Total revenue (refer to Note B2) (ii) Operating EBITDA 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 10,278 103 87 53 27 5,256 21 79 28 20 10,548 5,404 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 or income from the operating segments such as restructuring costs, business combination related expenses and 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 Fair value losses recycled from hedge reserve Impairment charges Remeasurement of contingent royalty Contingent royalty payments Remeasurement of royalty receivable Profit before income tax 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 6,959 (834) 6,125 103 (459) (53) (239) (315) (60) (23) 12 5,091 2,531 (831) 1,700 21 (259) (49) (153) (100) (33) (28) 4 1,103 Impairment charges of $315m comprise a $171m impairment of the Donaldson assets reducing the non-current operating assets to nil book value (refer Note C3) and a $144m impairment recognised against the Monash exploration and evaluation assets (refer Note C4). (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. 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (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 the products are 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 the time of the shipment. As a result, the Group has concluded that a contract with the customer does not exist for those contracts until the time of shipment. 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) 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. (iii) 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. FROM CONTINUING OPERATIONS Sales revenue Sale of coal Fair value losses recycled from hedge reserve Other revenue Interest income Sea freight Royalty revenue Other items 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 10,517 (239) 10,278 103 87 53 27 270 10,548 5,409 (153) 5,256 21 79 28 20 148 5,404 At 31 December 2022 there are $151 million (2021: $143 million) of provisionally priced sales, still to be finalised, of which $115 million is yet to be collected (2021: $94 million). These amounts are included in the revenue recognised above. 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Disaggregation of revenue Disaggregation of revenue In the following table, revenue from sale of coal is disaggregated by primary geographical market and major products/service lines, based on the end-destination of coal sold. Previously, customer domicile was used to determine the primary geographic market, however end-destination is considered more useful information. Accordingly, the 31 December 2021 table has been restated. The table also includes a reconciliation of the disaggregated revenue with the Group’s three reportable segments (see Note B1) however Corporate is not presented in this table as this segment has no coal sales: 31 DECEMBER 2022 PRIMARY GEOGRAPHICAL MARKETS Japan Taiwan South Korea Europe Malaysia Vietnam Thailand India Chile Indonesia Australia (Yancoal's country of domicile) Bangladesh Total PRODUCT MIX Thermal coal Metallurgical coal Total 31 DECEMBER 2021 PRIMARY GEOGRAPHICAL MARKETS Japan Taiwan South Korea India Thailand Vietnam Malaysia Europe Australia (Yancoal's country of domicile) Indonesia Chile United Arab Emirates Cambodia Pakistan Bangladesh Total PRODUCT MIX Thermal coal Metallurgical coal Total NSW $M 3,562 2,463 1,285 598 583 239 382 212 156 115 64 9 9,668 8,606 1,062 9,668 NSW $M 1,633 1,149 718 381 420 86 147 92 77 70 62 24 17 11 5 4,892 4,382 510 4,892 QLD $M 169 – 216 – – 336 – 128 – – – – TOTAL $M 3,731 2,463 1,501 598 583 575 382 340 156 115 64 9 849 10,517 – 849 849 QLD $M 125 – 111 74 – 200 6 – 1 – – – – – – 517 25 492 517 8,606 1,911 10,517 TOTAL $M 1,758 1,149 829 455 420 286 153 92 78 70 62 24 17 11 5 5,409 4,406 1,003 5,409 In 2022 10% of coal sales were attributable to the largest customer and 33% to the top five customers (2021: 8% and 31% respectively). 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Contract balances Contract balances The Group has recognised the following revenue-related receivables, contract assets and liabilities: Receivables from contracts with customers There are no other contract assets, liabilities or costs as at 31 December 2022 or 31 December 2021. 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 657 619 Transaction price allocated to the remaining performance obligation 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 Net gain on foreign exchange Gain on remeasurement of royalty receivable Sundry income B4 EMPLOYEE BENEFITS Accounting policies (i) Employee benefits 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 164 12 7 183 52 4 8 64 Employee benefits are expensed as the 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 from third parties. (ii) Superannuation Contributions made by the Group under Australian legislation to contribute 10.5% (previously 10%) from 1 July 2022 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. (a) Employee benefits (a) Employee benefits Employee benefits Superannuation contributions Total employee benefits During 2022, $23 million of employee benefits were capitalised (2021: $16 million). 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 609 53 662 532 46 578 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Key management personnel compensation (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 2022. The total remuneration paid to KMP of the Company and Group during the year is as follows: Short-term employee benefits Post-employment benefits Share-based payments Other long-term benefits (c) Top five employees (c) Top five employees 31 DECEMBER 2022 $ 31 DECEMBER 2021 $ 5,874,875 143,872 1,815,475 2,244,580 10,078,802 5,482,202 133,429 1,040,413 2,058,029 8,714,073 The five highest paid individuals in the Group include the Chief Executive for each of the years, details of whose remuneration are set out in the remuneration report. Details of remuneration of the remaining four (2021: four) highest paid individuals who are neither a Director or Chief Executive of the Company are as follows: 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 3 – 5 8 2 – 4 6 31 DECEMBER 2022 NUMBER 31 DECEMBER 2021 NUMBER 2 – 1 – 1 1 1 – 2 – 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 9 26 279 145 459 8 22 30 199 259 Salaries, allowance and other benefits in kind Retirement benefit scheme contributions Discretionary bonuses Their emoluments were within the following bands: HK$8,500,000 to HK$9,000,000 HK$9,000,000 to HK$9,500,000 HK$9,500,000 to HK$10,000,000 HK$10,500,000 to HK$11,000,000 HK$11,000,000 to HK$11,500,000 B5 EXPENSES (a) Finance costs (a) Finance costs Lease charges Unwinding of discount on provisions and deferred payables Unwinding of discount on related party loan Other interest expenses Total finance costs 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Other operating expenses (b) Other operating expenses Remeasurement of financial assets Bank fees and other charges Rehabilitation provision increase Rates and other levies Information technology Contingent royalty payments Insurance Other operating expenses Travel and accommodation Rental expense Total other operating expenses (c) Largest suppliers (c) Largest suppliers 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 60 53 50 30 25 23 22 19 12 3 33 48 – 28 20 28 19 15 7 4 297 202 In 2022 10% of total operating expenses related to one supplier and 29% to the top five suppliers (2021: 8% and 25% respectively). B6 TAXATION Accounting policy The current tax expense or benefit for the period is the tax payable or receivable 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 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 Yancoal Australia Ltd and its wholly-owned subsidiaries have formed a tax consolidated Group. The head entity, Yancoal Australia Ltd, and the members of 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 members of the tax consolidated group. The members of the tax consolidated group have entered into a tax funding agreement under which the members fully compensate Yancoal Australia Ltd for any current tax liabilities 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. 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Income tax expense (a) Income tax expense (i) Income tax expense Current tax expense Deferred tax benefit / (expense) Income tax expense Current tax expense included in income tax expense comprises: Current year income tax liability Deferred tax benefit / (expense) included in income tax expense comprises: Net (under) / over provision in respect of prior years Decrease in deferred tax assets (refer to Note B6(b)(ii)) Decrease in deferred tax liabilities (refer to Note B6(b)(iii)) (ii) Reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before tax Tax expense at the Australian tax rate of 30% (2021 - 30%) Tax effect of amounts which are not deductible / taxable in calculating taxable income: Share of profit of equity-accounted investees not assessable (Under) / over provision in prior years Other Income tax expense (iii) 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: Tax effect of the discount on interest bearing liability Cash flow hedges 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M (1,612) 107 (1,505) (1,612) (1,612) (3) (4) 114 107 – (312) (312) – – 5 (422) 105 (312) 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 5,091 (1,527) 44 (3) (19) (1,505) 1,103 (331) 17 5 (3) (312) 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M – (26) (26) 93 (24) 69 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Deferred tax assets and liabilities (b) Deferred tax assets and liabilities (i) Deferred tax balances 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M Deferred tax assets Deferred tax liabilities (ii) Deferred tax assets MOVEMENTS At 1 January 2021 Over provision in prior year (Charged)/credited - to profit or loss - directly to equity At 31 December 2021 At 1 January 2022 Over / (under) provision in prior year (Charged)/credited - to profit or loss - directly to equity At 31 December 2022 570 (953) (383) TAX LOSSES AND OFFSETS $M PROVISIONS $M TRADE AND OTHER PAYABLES $M LEASE LIABILITIES $M CASH FLOW HEDGES $M OTHER $M 480 45 (462) – 63 63 15 (78) – – 232 – 32 – 264 264 – 112 – 376 37 2 (1) – 38 38 4 – – 42 37 – 2 – 39 39 (10) 16 – 45 59 – – 24 83 83 – – 26 109 45 – 7 – 52 52 – (54) – (2) 539 (1,055) (516) TOTAL $M 890 47 (422) 24 539 539 9 (4) 26 570 The Group has unrecognised capital tax losses (tax effected) of $8.5 million (2021: capital tax losses $12 million). There is no expiry date on these tax losses. (iii) Deferred tax liabilities PROPERTY, PLANT AND EQUIPMENT $M INTANGIBLE ASSETS $M INVENTORIES $M MINING TENEMENTS AND EXPLORATION AND EVALUATION ASSETS $M UNREALISED FOREIGN EXCHANGE GAINS $M 39 28 14 – 81 81 14 4 99 17 – (1) – 16 16 – (2) 14 35 – – – 37 37 (1) 8 44 831 12 (80) – 763 763 – (100) 663 62 – (40) – 22 22 (1) 60 81 MOVEMENTS At 1 January 2021 Under provision in prior year Charged/(credited) - to profit or loss - directly to equity At 31 December 2021 At 1 January 2022 Under / (over) provision in prior year Charged/(credited) - to profit or loss At 31 December 2022 OTHER $M 41 2 – 93 136 136 – (84) 52 TOTAL $M 1,025 42 (105) 93 1,055 1,055 12 (114) 953 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 (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 earnings per share (b) Reconciliation of earnings used in calculating earnings 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 earnings per share (c) Weighted average number of shares used in calculating earnings per share Ordinary shares on issue at start on the period Weighted average number of ordinary shares used in basic earnings per share Adjusted for rights and options on issue Weighted average shares used in diluted earnings per share C OPERATING ASSETS AND LIABILITIES 31 DECEMBER 2022 31 DECEMBER 2021 271.6 270.2 59.9 59.7 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 3,586 791 31 DECEMBER 2022 NUMBER 31 DECEMBER 2021 NUMBER 1,320,439,437 1,320,439,437 1,320,439,437 1,320,439,437 6,786,623 3,677,102 1,327,226,060 1,324,116,539 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. 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 new open pit mining area before commercial production commences. Amortisation of capitalised costs over the life of the operation commences at the time that commercial production begins for an open pit mining area. The open pit mining area costs are capitalised net of the coal sales revenue earned from coal extracted as part of the mains development process. 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. Right of use 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 - 40 years • Mine development 10 - 40 years • Plant and equipment 2.5 - 30 years • Leased property, plant and equipment 2 - 10 years An asset’s carrying value is written down immediately to its recoverable amount if the asset’s carrying value is greater than its estimated recoverable value. 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 value 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. YEAR ENDED 31 DECEMBER 2021 Opening net book amount Transfers Additions Disposals Depreciation charge Closing net book amount AT 31 DECEMBER 2021 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 RIGHT OF USE ASSETS $M 202 (194) 249 – – 257 257 – 257 400 – – – (11) 389 484 (95) 389 1,389 86 104 – (177) 1,402 2,237 (835) 1,402 1,199 102 25 (1) (263) 1,062 3,463 (2,401) 1,062 101 – 59 – (38) 122 211 (89) 122 TOTAL $M 3,291 (6) 437 (1) (489) 3,232 6,652 (3,420) 3,232 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2022 Opening net book amount Transfers Additions Disposals Impairment Depreciation charge Closing net book amount AT 31 DECEMBER 2022 Cost Accumulated depreciation Net book amount ASSETS UNDER CONSTRUCTION $M FREEHOLD LAND AND BUILDINGS $M MINE DEVELOPMENT $M PLANT AND EQUIPMENT $M RIGHT OF USE ASSETS $M 257 (222) 481 – – – 516 516 – 516 389 2 – – – (11) 380 484 (104) 380 1,402 44 247 – (70) (210) 1,413 2,438 (1,025) 1,413 1,062 172 72 (1) (32) (243) 1,030 3,617 (2,587) 1,030 122 – 97 (2) (27) (43) 147 245 (98) 147 TOTAL $M 3,232 (4) 897 (3) (129) (507) 3,486 7,300 (3,814) 3,486 During the year ended 31 December 2022 an impairment of $129 million was recognised against the Donaldson property, plant and equipment assets. Depreciation and amortisation of $5 million was capitalised during the year (2021: $7 million). (a) Non-current assets pledged as security (a) Non-current assets pledged as security Refer to Note D1(a) for information on non-current assets pledged as security by the Group. 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. 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. Opening net book amount Transfers from exploration and evaluation Impairment Amortisation Closing net book amount 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 4,608 124 (36) (329) 4,367 4,883 69 – (344) 4,608 During the year ended 31 December 2022 an impairment of $36 million was recognised against the Donaldson mining tenement assets. 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C3 IMPAIRMENT OF ASSETS Accounting policies 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. 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 Note 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 with the impact recorded in 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 defined in accordance with the 2012 JORC code. (a) CGU assessment (a) CGU assessment The Group operates on a regional basis within NSW and as such the NSW mines of Moolarben, Mount Thorley Warkworth, Hunter Valley Operations, Ashton and Stratford Duralie are considered to be one Cash Generating Unit (“CGU”). Yarrabee and Middlemount are considered separate CGU’s due to their location and ownership structure. Donaldson is currently on care and maintenance and its operating assets have been fully impaired and Austar is progressing toward closure and therefore these sites are not included in the Group of NSW CGU’s. Life of Mine (“LOM”) models are reassessed on a regular basis and any change in the LOM model may result in a change in the recoverable amount and possibly result in an impairment charge. 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Assessment of fair value (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 (13 - 45 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 DESCRIPTION Coal prices 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$69 – US$239 per tonne (2021: US$57 – US$105 per tonne) for thermal and US$136 – US$249 per tonne (2021: US$103 – US$180 per tonne) for metallurgical coal. The Group receives long term forecast coal price data from multiple 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 countries various National Energy Policies including Nationally Determined Contributions submitted in accordance with the 2015 Paris Agreement, and other measures announced during the subsequent COP meetings, including phasing down of coal fired power generation. This contemplates the global seaborne demand for thermal coal will remain relatively consistent to 2024 and then range between remaining relatively consistent or declining to 33% below 2021 levels by 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 end markets, 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 incorporating updated pledges for COP27 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 4,6 and 8 years for the NSW, Yarrabee and Middlemount CGUs, respectively. The NSW CGU has a 91% exposure to thermal coal and 9% 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. For both thermal and metallurgical coal the Group’s forecast coal price is within the range of external price forecasts. These forecasts include the assumption that following the current market disruptions which include the Russian-Ukraine conflict and weather events impacting supply, the market will take longer to rebalance with continued supply disruptions. The forecast is based on global coal demand growing marginally until 2024 whilst limited supply will be brought online due to low investment in new coal production capacity over the last five to ten years. There is a risk that these assumptions are incorrect and that future coal prices are different from those forecast. Foreign exchange rates The long term AUD/USD forecast exchange rate of $0.75 (2021: $0.75) is based on external sources. The year-end AUD/USD exchange rate was $0.6775 per the Reserve Bank of Australia. Production and capital costs 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. The Group estimates its coal reserves and resources based on information compiled in accordance with the JORC 2012 Code and ASX Listing Rules 2014. 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 11% (2021: 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. External consultants were engaged to consider the Group’s discount rate, in particular the effect of ESG concerns on coal asset risk premiums, with 11% assessed as the middle of the range. 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. 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Based on the above assumptions at 31 December 2022 the recoverable amount is determined to be above book value for all CGU’s except Donaldson, resulting in no additional impairment. Having continued its review of underperforming assets management now considers the prospect of recommencing operations at the Donaldson mine to be unlikely. As such, an impairment provision of $171 million has been recognised, comprising $129 million of property, plant and equipment, $36 million of mining tenements and $6 million of intangible assets, reducing the non-current operating assets to nil book value. Impairment provisions recorded in previous years as at 31 December 2022 is $40 million at Stratford and Duralie. Stratford and Duralie is included in the NSW 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 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. The sensitivity for the NSW, Yarrabee and Middlemount CGUs are shown below: 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 5,606 12,393 6,787 2,349 (2,351) (1,466) 1,676 (360) 385 2022 YARRABEE $M MIDDLEMOUNT $M 359 840 481 276 (281) (174) 197 (34) 36 254 410 156 165 (171) (106) 119 (15) 16 (i) This represents the change in recoverable amount due to a +/- 10% change to our coal price assumption. (ii) This represents the change in recoverable amount due to a +/- 5 cents change to the long-term US$:A$ foreign exchange rate adopted. (iii) This represents the change in recoverable amount due to a +/- 50bps change in discount rate adopted. If coal prices were -10% Life of mine (“LOM”) the NSW and Yarrabee recoverable amounts would exceed book value however for Middlemount the book value would exceed the recoverable amounts by $15 million. If the AUD/USD over the life of mine long term forecast exchange rate was $0.80, the recoverable amount would exceed book value for all three CGU’s. If the WACC was 11.5%, or 0.5% higher, the recoverable amount would exceed book value for all three CGU’s. (c) Goodwill (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. (d) Exploration and evaluation (d) Exploration and evaluation Details of the impairment of exploration and evaluation assets is included in Note C4. 85 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 Other additions Transfers to mining tenements Impairment Closing net book amount 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 541 2 (124) (144) 275 709 1 (69) (100) 541 During the year ended 31 December 2022 an impairment of $144 million was recognised against the Monash exploration and evaluation assets. 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. 86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2021 Opening net book amount Transfers - assets under construction Amortisation charge Closing net book amount AT 31 DECEMBER 2021 Cost Accumulated amortisation Net book amount YEAR ENDED 31 DECEMBER 2022 Opening net book amount Transfers - assets under construction Amortisation charge Impairment Closing net book amount AT 31 DECEMBER 2022 Cost Accumulated amortisation Net book amount GOODWILL $M COMPUTER SOFTWARE $M WATER RIGHTS $M OTHER $M TOTAL $M 60 – – 60 60 – 60 7 1 (3) 5 36 (31) 5 57 5 – 62 62 – 62 11 – – 11 16 (5) 11 135 6 (3) 138 174 (36) 138 GOODWILL $M COMPUTER SOFTWARE $M WATER RIGHTS $M OTHER $M TOTAL $M 60 – – – 60 60 – 60 5 4 (2) – 7 39 (32) 7 62 – – (6) 56 56 – 56 11 – (1) – 10 16 (6) 10 138 4 (3) (6) 133 171 (38) 133 During the year ended 31 December 2022 an impairment of $6 million was recognised against the Donaldson water rights asset. The goodwill at 31 December 2022 relates to the acquisition of Yancoal Resources Limited (formally known as Felix Resources Limited) in a public offer to shareholders of the ASX listed company 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 2022. 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 CASH AND CASH EQUIVALENTS Accounting policy For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents includes: (i) cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts; and (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 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 650 1,739 310 2,699 621 769 105 1,495 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Risk exposure (a) Risk exposure The Group’s exposure to interest rate risk and credit risk is discussed in Note D7. 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. C7 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 F6(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 NON-CURRENT Receivables from joint venture (i) Receivables from other entities (ii) Long service leave receivables 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 657 79 736 – 21 76 97 619 88 707 149 14 76 239 (i) Receivables from joint venture included a loan provided to Middlemount with a face value of $212 million, which was revalued using the effective interest rate method (to $149 million at 31 December 2021). This loan has been fully repaid by Middlemount as at 31 December 2022. (ii) 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. It also included $7 million restricted cash paid to Department of Regional NSW. 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: 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 633 22 2 – 657 591 5 10 13 619 0-90 days 91-180 days 181-365 days Over 1 year Total 88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Past due but not impaired (a) Past due but not impaired The ageing analysis of the Group’s trade receivables based on the invoice dates, that were past due but not yet impaired as at 31 December 2022 and 2021, is as follows: 0-90 days 91-180 days 181-365 days Over 1 year Total 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 1 – 2 – 3 3 5 10 13 31 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 (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 D7. (c) Fair value and credit risk (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 D7 for more information on the risk management policy of the Group and the credit quality of the Group’s trade receivables. C8 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, discounts, less an allowance, if necessary, for obsolescence. Coal - at lower of cost or net realisable value Tyres and spares - at cost Fuel - at cost (a) Inventory expense (a) Inventory expense 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 183 141 6 330 142 118 4 264 Write downs of inventories to net realisable value recognised as a provision at 31 December 2022 amounted to $3 million (2021: $8 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. C9 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 and accrued receipts are recorded directly in other revenue in profit or loss. 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. 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Opening balance Remeasurement of royalty receivable Split between: Current Non-current Total 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 221 12 233 20 213 233 217 4 221 23 198 221 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 in 2012. 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. (a) Risk exposure and fair value measurements (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 D7. C10 TRADE AND OTHER PAYABLES Accounting policy Refer to Note F6(b) for detailed policies in relation to recognition, classification, measurement and derecognition of financial liabilities. 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 and based on the 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 Interest payable Other payables The following is an ageing analysis of trade payables based on the invoice dates at the reporting dates: 0-90 days 91-180 days 181-365 days Over 1 year Total 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 669 150 3 41 863 458 136 127 22 743 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 663 6 – – 669 453 5 – – 458 The average credit period for trade payable is 60 days. The Group has financial risk management policies in place to ensure that all payables are within the credit timeframe. 90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS C11 PROVISIONS Accounting policies 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. 2022 At 1 January Charged / (credited) to profit or loss - unwinding of discount - release of the provision - utilisation of provisions - rehabilitation provision increase Increase of provisions Re-measurement of provisions At 31 December Split between: Current Non-current Total PROVISION DESCRIPTION EMPLOYEE BENEFITS $M REHABILITATION $M TAKE OR PAY $M SALES CONTRACT PROVISIONS $M OTHER PROVISIONS $M 93 – – – – 2 – 95 6 89 95 727 22 – (25) 50 247 – 1,021 62 959 1,021 14 1 (5) – – – – 10 4 6 10 43 3 (11) – – – – 35 7 28 35 75 – – – – – 60 135 – 135 135 TOTAL $M 952 26 (16) (25) 50 249 60 1,296 79 1,217 1,296 Employee benefits The provision for employee benefits represents long service leave entitlements and other incentives accrued by employees. Rehabilitation costs Take or pay Sales contract 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. 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 past the life of a mine. 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 (including technology changes which are inherently uncertain), 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 is 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. 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. 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 in 2017 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. 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PROVISION DESCRIPTION Other provisions The provision includes marketing services fee payable to Noble Group Limited deemed above market norms in 2012 and contingent royalties payable to Rio Tinto assessed as part of the Coal & Allied Industries Ltd (“Coal & Allied”) acquisition in 2017 which will be amortised over the contract terms ending on 31 August 2030, 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. 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 LIABILITIES Accounting policies (i) Interest-bearing liabilities 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. CURRENT Lease liabilities Bank loans NON-CURRENT Lease liabilities Bank loans Unsecured loans from related parties (i) Total interest-bearing liabilities 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 48 – 48 136 489 – 625 673 32 34 66 99 1,598 1,672 3,369 3,435 (i) Included were unsecured interest bearing loans from majority shareholder Yankuang Energy and ultimate parent Shandong Energy. Both were fully repaid during the period (2021: $883 million and $789 million). Terms and conditions is detailed in Note D1(c) below. RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES Opening balance at 1 January 2022 Additions Repayments Disposals Unwind of interest expenses and costs Foreign exchange movements Closing balance at 31 December 2022 92 LEASE LIABILITIES $M LOANS FROM RELATED PARTIES $M BANK LOANS $M 131 97 (49) (2) 8 (1) 182 1,672 – (2,122) – 279 171 – 1,632 – (1,320) – 22 155 489 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Bank loans (a) Bank loans The bank loans are made up of the following facilities: SECURED BANK LOANS Syndicated Facility (i)* Syndicated Term Loan (ii)* UNSECURED BANK LOAN Working capital facility (iii) 31 DECEMBER 2022 31 DECEMBER 2021 FACILITY US $M FACILITY $M UTILISED $M FACILITY $M UTILISED $M – 333 – 333 – 492 – 492 – 492 – 492 1,198 459 69 1,726 1,198 459 – 1,657 * Facility balance excludes transaction costs of AU$3 million (31 December 2021: AU$24 million). (i) Syndicated Facility During 2022, US$869 million was repaid reducing the facility to nil (31 December 2021 facility amounted to US$869 million). The facility was fully repaid as at 31 December 2022 and cannot be redrawn. There was no breach of covenants at 31 December 2022. (ii) Syndicated Term Loan On 23 August 2021, the Syndicated Term Loan was refinanced with a new agreement, provided from a syndicate of six international banks, with US$333 million in total of which US$301 million will mature in August 2024 and US$32 million will mature in August 2026. The Syndicated Term Loan is secured by the assets of the aggregated group of Yancoal Resources Ltd and Coal & Allied Industries Ltd with a total assets carrying value of $11,751 million as at 31 December 2022. 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) The interest cover ratio is greater than 5.0 times; (b) The finance debt to EBITDA ratio is less than 3.0 times; and (c) The net tangible assets is greater than AU$1,500 million. (iii) Working capital facility The Group’s general purpose working capital facility with an international bank lapsed on 29 June 2022 and was not renewed. The drawn balance at 31 December 2021 was nil. There was no breach of covenants at 31 December 2022. (b) Bank guarantee facilities (b) Bank guarantee facilities Yancoal are party to a bank guarantee facility that has been issued for operational purposes in favour of port, rail, government departments and other operational functions: PROVIDER Syndicate of nine Australian and international banks FACILITY AU $M 975 Total 975 UTILISED AU $M 941 941 SECURITY Secured by the assets of the consolidated groups of Yancoal Resources Ltd and Coal & Allied Industries Ltd with carrying value of $11,751 million. Facility expires on 2 June 2023. The Syndicated Bank Guarantee Facility includes the same financial covenants as the Syndicated Term Loan. There was no breach of covenants at 31 December 2022. (c) Unsecured loans from related parties (c) Unsecured loans from related parties In December 2014, the Company successfully arranged two long term loan facilities from its majority shareholder, Yankuang Energy repayable on 31 December 2024. • Facility 1: AU$1,400 million - the purpose of the facility was fund working capital and capital expenditure. The facility could be drawn in both AUD and USD. During the year, US$398 million has been repaid (31 December 2021: US$175 million). At 31 December 2022, nil was drawn (31 December 2021: US$398 million (AU$548 million)). This facility cannot be redrawn. • 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 year US$243 million has been repaid reducing the facility balance to nil (31 December 2021: US$243 million (AU$335 million)). This facility cannot be redrawn. The terms of the US$775 million loan from Shandong Energy are as follows: On 31 March 2021 Shandong Energy provided the Group a US$775 million unsecured and subordinated loan. The loan matures on 16 December 2026. During the period, this loan has been early repaid in full. 93 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS A revaluation to fair value of the loan was performed at inception. This loan had an interest rate of 4.65% which is significantly below normal commercial terms. The implicit discount, between the agreed interest rate and determined arms length commercial interest rate of the loan, (if the loan was made by a financier that was not a related party) of 12%, was recognised as an increase to other contributed equity. The revaluation of the loan is released through interest expense in the profit and loss using the effective interest method over the life of the loan. During the period, $279 million was released through interest expense as a result of the early full repayment. D2 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)(ii) for detailed policies in relation to recognition, classification and measurement of contributed equity. (a) Contributed equity (a) Contributed equity (i) Share capital Ordinary shares (ii) Other contributed equity Contingent value right shares Related party loan contribution Total contributed equity 31 DECEMBER 2022 NUMBER 31 DECEMBER 2021 NUMBER 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 1,320,439,437 1,320,439,437 6,219 6,219 263 216 479 263 216 479 6,698 6,698 Related party loan contribution On 31 March 2021 Shandong Energy the Group’s ultimate parent, (formerly known as Yankuang) provided a US$775 million loan to the Group in order for the Group to redeem an equal amount of external bonds on issue. Using the effective interest method a revaluation to fair value the loan from Shandong Energy was performed at inception. The revaluation took into account the implicit discount between the determined arms length commercial interest rate of the loan if the loan was made by a financier that was not a related party, of 12%, and the actual interest rate. The difference was recognised as an increase to other contributed equity reflecting the contribution made to the Group through the implicit support provided by Shandong Energy. The revaluation of the loan is released through interest expense in the profit and loss using the effective interest method over the life of the loan. The loan was fully repaid by 31 December 2022. Key accounting estimate and judgement: In determining the expected commercial borrowing rate that is expected to be payable if the loan was made by a financier that was not a related party requires significant judgement in formulating the estimate as there are limited observable comparable transactions. (b) Ordinary shares (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. There were no changes in ordinary shares in the reporting periods. (c) Contingent value right shares (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. 94 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (d) Capital risk management (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 the reporting dates were as follows: Total interest-bearing liabilities Less: cash and cash equivalents (Net cash position) / Net debt Total equity Total capital Gearing ratio 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 673 (2,699) (2,026) 8,030 6,004 – 3,435 (1,495) 1,940 6,146 8,086 24.0% Refer to Note D1 for the Group’s compliance with the financial covenants of its borrowing facilities. D3 SHARE-BASED PAYMENTS Accounting policy Refer to Note B4 (iii) for the accounting policy on share-based payments. Participation in the share-based payment program (Long Term Incentive Program, “LTIP”) by the issuing of rights is limited to Senior Executives of the Group. All rights are redeemable on a one-for-one basis for the Group’s shares, subject to the achievement of certain performance hurdles. Dividends are not payable on rights. For more information on the operation of the LTIP refer to the remuneration report. Outlined below are the rights that are on issue as at 31 December 2021 and 31 December 2022. DATE OF MEASUREMENT / GRANT NUMBER OF RIGHTS DATE OF EXPIRY CONVERSION PRICE ($) 1 January 2019 1 January 2020 1 January 2021 1 January 2020 1 January 2021 1 January 2022 591,960 2,115,455 2,870,651 5,578,066 2,058,080 2,802,634 2,542,567 7,403,281 1 January 2022 1 January 2023 1 January 2024 1 January 2023 1 January 2024 1 January 2025 Nil Nil Nil Nil Nil Nil DETAILS MANAGEMENT PERFORMANCE RIGHTS 2019 LTIP 2020 LTIP (i) 2021 LTIP Balance at 31 December 2021 2020 LTIP (i) 2021 LTIP 2022 LTIP Balance at 31 December 2022 Balance at beginning of the year Granted during the year LTIP paid in cash LTIP rights lapsed Forfeited during the year Balance at the end of year (i) 2020 LTIP is still on issue and expected to vest in first half 2023. 2022 NO. OF RIGHTS 2021 NO. OF RIGHTS 5,578,066 2,542,567 (236,783) (355,177) (125,392) 7,403,281 3,434,940 2,870,651 (153,254) (229,881) (344,390) 5,578,066 95 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 issued Number of performance right on issue Grant date Average share price at grant date ($) Expected dividend yield Vesting conditions Value per performance right ($) 2022 LTIP 2,542,567 2,542,567 2021 LTIP 2,870,651 2,802,634 2020 LTIP 2,591,655 2,058,080 1 January 2022 1 January 2021 1 January 2020 2.80 10% (a) 2.10 2.45 10% (a) 1.94 2.86 8% (a) 2.23 There are a maximum of 7,403,281 shares available for issue, which, if issued as new shares, would represent 0.6% of share capital on issue at 31 December 2022 (31 December 2021: 5,578,066 shares representing 0.4% of share capital). The LTIP has been valued using the volume weighted average price of Yancoal’s ordinary shares across a 20 day trading period around the grant date. (a) The LTIP performance rights will vest dependent upon the outcome of cost and earnings per share targets. The rights are split 40% and 60% respectively to these conditions. UNVESTED AS AT 1 JANUARY 2022 GRANTED DURING THE YEAR DATE OF GRANT(I) VESTING PERIOD(II) David Moult 2,557,999 1,264,113 1 Jan 22 1 Jan 22 to 31 Dec 24 Four highest paid individuals(v) 1,077,349 471,471 1 Jan 22 1 Jan 22 to 31 Dec 24 CLOSING PRICE OF THE SHARES IMMEDIATELY BEFORE THE GRANT OF AWARDS ($) FAIR VALUE OF AWARDS AT THE DATE OF GRANT(III) ($) 2.80 2.80 2,655,211 990,303 Other Grantees 1,942,718 806,983 1 Jan 22 1 Jan 22 to 31 Dec 24 2.80 1,695,030 Total 5,578,066 2,542,567 5,340,544 VESTED/ EXPIRED/ LAPSED/ CANCELLED DURING THE YEAR(IV) – 223,786 493,566 717,352 OUTSTANDING AS AT 31 DECEMBER 2022 3,822,112 1,325,034 2,256,135 7,403,281 (i) 2022 LTIP were allocated to participants on 26 September 2022 however for accounting purposes, the grant date was taken to be 1 January 2022. (ii) 2022 LTIP vest subject to two performance conditions: 60% of the award will vest subject to EPS growth performance of the Group relative to performance of a comparator group of international companies of a comparable size with a coal mining focus over the relevant performance period (EPS Awards); and 40% of the award will vest subject to cost per tonne performance of the Group relative to performance of a comparator group of Australian export mines at the end of the performance period (Costs Target Awards). (iii) The fair value as determined under AASB2 is calculated as the number of performance rights granted multiplied by the Volume Weighted Average Price of the Company’s ordinary shares traded on the ASX across a 20-day trading period spread 10 days prior to, and 10 days after, 31 December 2021; less future estimated dividends during the vesting period. (iv) During 2022: From the 2019 LTIP grant 236,784 performance rights vested and 355,176 rights lapsed. Further, an aggregate 125,392 LTIP performance rights lapsed as a result of resignation. (v) Five highest paid individuals include the CEO, David Moult, outlined separately in the table above. LTIP performance share rights are granted for nil consideration. All vested LTIP awards are automatically exercised. As these LTIP awards have not vested yet, they do not have a weighted average closing price immediately before the date on which these awards were vested. D4 DIVIDENDS (a) Dividends (a) Dividends Final dividend for 2021 paid on 29 April 2022 Interim dividend for 2022 paid on 20 September 2022 CENTS PER SHARE 70.40 52.71 TOTAL $M 930 696 1,626 CENTS PER SHARE – – TOTAL $M – – – 2022 2021 On 28 February 2022, the Board elected to declare a 2021 dividend allocation of $930 million, comprising a A$0.5000 per share final dividend and a A$0.2040 per share special dividend, both unfranked with a record date of 16 March 2022 and payment date of 29 April 2022. On 17 August 2022, the Board elected to declare a 2022 interim dividend allocation of $696 million, A$0.5271 per share (unfranked), with a record date of 6 September 2022 and payment date of 20 September 2022. 96 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Franking credits (b) Franking credits 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M Franking credits available for subsequent reporting periods based on an income tax rate of 30% (2021 - 30%) 1,642 25 The above amounts are calculated from the balance of the franking account as at the end of the reporting year, adjusted for franking credits that will arise from the settlement of liabilities for income tax and dividends after the reporting year, including: (a) franking credits that will arise from the settlement of the provision for income tax that are reflected in the current tax payable balance at the reporting date; and (b) franking credits that will arise from the receipt of dividends recognised as receivable at the reporting date. Dividends may be franked from the above balance and from franking credits arising from income tax payments during 2023. D5 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 are 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 (a) Reserve balances Hedging reserve Treasury shares reserve Employee compensation reserve (b) Hedging reserve (b) Hedging reserve 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M (253) (25) 14 (264) (192) – 4 (188) 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. MOVEMENTS Hedging reserve - cash flow hedges Opening balance Fair value losses recognised on USD interest bearing liabilities Fair value losses recycled to profit or loss Deferred income tax benefit Closing balance 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M (192) (326) 239 26 (253) (137) (232) 153 24 (192) 97 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 2022: 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 (c) Employee compensation reserve (c) Employee compensation reserve 2023 $M 1 1 – 2024 $M 169 144 25 2025 $M 4 4 – 2026 $M 188 185 3 TOTAL $M 362 334 28 362 (109) 253 During the period the movements related to any 2022 additional performance rights issued or forfeited as disclosed in Note D3 and new awards of performance rights were made during the period. D6 CONTINGENCIES Contingent liabilities The Group had contingent liabilities at 31 December 2022 in respect of: (i) Bank guarantees PARENT ENTITY AND GROUP Performance guarantees provided to external parties Guarantees provided to government departments as required by statute JOINT VENTURES (EQUITY SHARE) Performance guarantees provided to external parties Guarantees provided to government departments as required by statute GUARANTEES HELD ON BEHALF OF RELATED PARTIES (REFER TO NOTE E2(F) FOR DETAILS OF BENEFICIARIES) Performance guarantees provided to external parties Guarantees provided to government departments as required by statute 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 83 110 193 231 432 663 81 4 85 941 133 108 241 151 393 544 86 4 90 875 Refer to Note E1(c)(iii) for commitments and contingent liabilities of the Group’s associates and joint ventures. (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. 98 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (iii) Other 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. D7 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; and (vii) Derivative financial instruments. FINANCIAL ASSETS Cash, loans and receivables - amortised cost Cash and cash equivalents Trade and other receivables Assets at fair value through profit and loss Royalty receivable FINANCIAL LIABILITIES Amortised cost Trade and other payables Interest-bearing liabilities 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 2,699 833 233 3,765 877 673 1,550 1,495 946 221 2,662 751 3,435 4,186 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. 99 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Market risk (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 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. 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 C9). The Group’s exposure to US dollar currency risk at the end of the reporting period, expressed in Australian dollars, was as follows: Cash and cash equivalents Trade and other receivables Royalty receivable Trade and other payables Interest-bearing liabilities Net Exposure 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 523 626 233 (199) (492) 691 525 565 221 (237) (3,608) (2,534) 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 increased/(decreased) equity and profit or loss after tax by the amounts shown below. This analysis assumes that all other variables remain constant. 100 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2022 Cash and cash equivalents Trade and other receivables Royalty receivable Total increase / (decrease) in financial assets Trade and other payables Interest-bearing liabilities Total (increase) / decrease in financial liabilities Total increase / (decrease) in profit after tax and equity 2021 Cash and cash equivalents Trade and other receivables Royalty receivable Total increase / (decrease) in financial assets Trade and other payables Interest-bearing liabilities Total (increase) / decrease in financial liabilities Total (decrease) / increase in profit after tax and equity 10% DEPRECIATION OF AUD/USD 10% APPRECIATION OF AUD/USD PROFIT AFTER INCOME TAX $M EQUITY $M PROFIT AFTER INCOME TAX $M EQUITY $M 41 49 18 108 (15) – (15) 93 41 44 19 104 (18) – (18) 86 – – – – – (38) (38) (38) – – – – – (281) (281) (281) (33) (40) (15) (88) 13 – 13 (75) (33) (36) (16) (85) 15 – 15 (70) – – – – – 31 31 31 – – – – – 230 230 230 Equity movements above reflect movements in the hedge reserve due to foreign exchange movements on designated 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 D8(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 2022 there are $151 million of provisionally priced sales (31 December 2021: $143 million). If coal prices were to increase by 10.0% provisionally priced sales would increase by $15 million (31 December 2021: $14 million). (iii) Interest rate risk The Group is subject to interest rate risk that arises from borrowings and cash and cash equivalents. Generally, no variable interest is receivable or payable on the Group’s trade and other receivables or payables where applicable as they are fixed in nature and therefore they are not exposed to the interest rate risk. The Group’s cash flow interest rate risk for assets primarily arises from cash at bank and deposits subject to market bank rates. As at 31 December 2022, the US$ bank facility (the Syndicated Term Loan) is subject to USD LIBOR-linked interest rates. In response to the interest rate benchmark reform, the Group has adopted screen rate replacement provisions with reference to the Asia Pacific Loan Market Association (APLMA) loan agreement template. Transition trigger event will happen in accordance with the loan agreements on or before 30 June 2023. The Group is also committed not to sign any new contracts with LIBOR component on and from 31 December 2022. Extensive discussions with internal and external stakeholders are ongoing to manage the risks with the market evolvement. The Group’s exposure to interest rate risk and the weighted average interest rate is set out as below: 101 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Cash and cash equivalents Bank loans and other borrowings Sensitivity 31 DECEMBER 2022 31 DECEMBER 2021 WEIGHTED AVERAGE INTEREST RATE % 3.7 4.8 WEIGHTED AVERAGE INTEREST RATE % 0.4 3.3 BALANCE $M 2,699 492 BALANCE $M 1,495 1,657 A 50 bps movement in interest rates would cause an immaterial impact on profit and loss of approximately $9 million. (b) Credit risk (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 2022 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 D6. 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, ageing of debtors and whether sufficient credit enhancement is provided by customers (letters of credit and bank guarantees). If the ageing of trade receivables significantly increased then the recognition of ECL would need to be reassessed. Receivables will only be written off if there is demonstrable evidence that there is no reasonable expectation of recovery. There was no provision recognised for trade receivables as at 31 December 2022 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. 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 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 2,699 833 3,532 1,495 946 2,441 Included in trade and other receivables are significant customers located in Japan, Australia and Taiwan that account for 46%, 17% and 15% of trade receivables respectively (2021: Japan 26%, Australia 19% and Taiwan 18%). The top five customers included in trade receivables with the largest gross receivable balance as at 31 December 2022 account for 56% of trade receivables (2021: 34%). 102 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (c) Liquidity risk (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: (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 standby facilities in place in accordance with the Board’s risk management policy. Details regarding finance facilities are set out in Note D1. 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 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 AT 31 DECEMBER 2022 Non-derivatives Trade and other payables Lease liabilities Other interest-bearing liabilities Total non-derivatives AT 31 DECEMBER 2021 Non-derivatives Trade and other payables Lease liabilities Other interest-bearing liabilities Total non-derivatives 863 57 38 958 743 39 213 995 – 43 473 516 – 33 212 245 – 96 54 150 – 60 3,833 3,893 – 13 – 13 – 21 194 215 863 209 565 1,637 743 153 4,452 5,348 863 184 489 1,536 743 131 3,304 4,178 D8 FAIR VALUE MEASUREMENTS (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 (c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The royalty receivable was classified as a level 3 financial instrument in 2022 and 2021. No other financial instruments were subject to recurring measurement. (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. 103 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (iii) value measurements using significant unobservable inputs (level 3) The following table presents the changes in level 3 instruments for the year ended 31 December 2022: Opening balance Remeasurement of the royalty receivable recognised in profit and loss 31 DECEMBER 2022 ROYALTY RECEIVABLE $M 31 DECEMBER 2021 ROYALTY RECEIVABLE $M 221 12 233 217 4 221 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 9.3%. 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 2022 FAIR VALUE INCREASE/ (DECREASE) $M 31 DECEMBER 2021 FAIR VALUE INCREASE/ (DECREASE) $M 20 (20) (13) 15 (8) 8 19 (18) (13) 15 (7) 8 WIPS On the 28 July 2020 the WIPS were restructured and are no longer entitled to any accrual or future dividend payments. Rights to claim repayment of the face value of $31 million only on wind-up, cessation or sale of the business or breach of senior debt covenants. The fair value is determined using the discount future cash flows that are dependent on the following unobservable inputs: internally maintained budgets and business plans of Wiggin 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 book value was 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 104 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS E GROUP STRUCTURE This section explains significant aspects of the Group’s structure including business combinations and disposals, interests in other entities, related party transactions, parent entity information, controlled entities, and the deed of cross guarantee. E1 INTERESTS IN OTHER ENTITIES Accounting policies (i) Control The Group defines “control of an investee” in accordance with AASB 10 Consolidated Financial Statements, paragraph 6 and 7 when the investor has: • power over the investee, and • exposure or rights to variable returns from its involvement with the investee and • the ability to affect those returns through its power over the investee. Consideration is given to the substance of the agreements and not only to how the arrangements are directed in practice when determining the level of control over the arrangement. In the case of an incorporated entity, this would result in Yancoal consolidating that entity as a subsidiary. In the case of another legal ownership structure, the Group has considered the most appropriate accounting policy based on the facts and circumstances for each legal ownership structure. This is discussed further in section (iii) below. If the conclusion is that the Group does not control the entity or other legal ownership structure, then an assessment is made whether the arrangement meets the definition of joint control. (ii) Joint control and 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 relevant activities of the joint arrangement require the unanimous consent of the parties sharing control. The classification of a joint arrangement as either a joint operation or joint venture is dependent on the rights and obligations of the parties to the arrangement. Where the Group concludes that joint control exists, the Group then considers whether the arrangement is a joint operation or joint venture in accordance with AASB 11 Joint Arrangements. 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 interest in 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 of the arrangement 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 accounting (as outlined in AASB 128 Investment in Associates and Joint Ventures). (iii) Controlling interest in unincorporated arrangements A controlling interest in an unincorporated arrangement occurs when the Group has the sole ability to direct the relevant activities in the arrangement, such as, approving budgets and investment plans and appointing representatives to the Board or relevant Committees. As the Group controls these contractual arrangements, they do not meet the definition of joint operations. The Group recognises its interest in these types of arrangements in accordance with the contractual arrangements by consolidating its share of any jointly held or incurred assets, liabilities, revenues, and expenses of joint operations and its share of, liabilities, revenues and expenses. These have been incorporated in the financial statements under the appropriate line items. If neither control nor joint control is identified, consideration is given whether the Group has significant influence over the entity or other legal ownership structure through AASB 128 Investments in Associates and Joint Ventures. (iv) 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. If the conclusion is that significant influence exists, then the investment is accounted for using the equity method as outlined in AASB 128 Investments in Associates and Joint Ventures. After initial recognition at cost, associates are accounted for using the equity method. (v) 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 The Group has interests in several unincorporated arrangements of which the determination of control or joint control requires significant judgement based on the assessment of the contractual rights and obligations. Differing conclusions around these judgements could materially impact how the Group recognises these investments on initial acquisition and how any subsequent changes in ownership interest are accounted for. See (a) and (b) below for a summary of the Group’s interest in unincorporated arrangements and joint arrangements and key judgements made in determining the applicable accounting treatment for each. 105 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Controlling interest in unincorporated arrangement (a) Controlling interest in unincorporated arrangement In some unincorporated arrangements the Group’s contractual rights and obligations give it control of the arrangements and the Group accounts for these arrangements by consolidating its share of the assets, liabilities, revenues, and expenses of the arrangement. In applying this accounting policy there can be significant judgement in determining whether the Group has control or joint control of an unincorporated arrangement. The Group has made the following judgements in the application of its accounting policy for a controlling interest in unincorporated arrangements. • Moolarben Coal Mines Pty Ltd and Yancoal Moolarben Pty Ltd, have a combined 95% (2021: 95%) interest in the Moolarben Joint Venture (an unincorporated arrangement) whose principal activity is the development and operation of open-cut and underground coal mines. The Group controls Moolarben as the decisions over relevant activities require approval from the JV Policy Committee, where the Group has the sole ability to appoint representatives. • Mount Thorley Operations Pty Ltd has an 80% (2021: 80%) interest in Mount Thorley Co-Venture (an unincorporated arrangement) whose principal activity is the development and operation of open-cut coal mines. The Group controls Mount Thorley as the decisions require a majority approval based on working interest and the Group’s working interest is 80%. • CNA Warkworth Australasia Pty Ltd and CNA Resources Ltd, have a combined 84.5% (2021: 84.5%) interest in Warkworth Associates (an unincorporated arrangement) whose principal activity is the development and operation of open-cut mines. The Group controls Warkworth as the decisions over relevant activities require a majority approval of the Operating Committee and 76% of the Participants shares. The Group can appoint 9 out of 11 Operating Committee members and holds 84.5% of the Participants shares. The principal place of business for the above joint operations is in Australia. (b) Joint operations with joint control (b) Joint operations with joint control The Group accounts for joint operations in accordance with AASB 11 Joint Arrangements, by recognising the Group’s share of joint assets, liabilities, revenue and expenses. The Group has made the following judgements in the application of its accounting policy for its interests in joint operations where the Group has joint control. • Coal & Allied Operations Pty Ltd has a 51% (2021: 51%) interest in the Hunter Valley Operations (“HVO”) Joint Venture (an unincorporated joint operation) whose principal activity is the development and operation of open-cut coal mines. The Group and the other joint venture partner have joint control over HVO as they must act together to direct the relevant activities which significantly affect the returns of the arrangement. • Yarrabee Coal Company Pty Ltd, has a 50% (2021: 50%) interest in the Boonal Joint Venture (an unincorporated joint operation), whose principal activity is the provision of a coal haul road and train load out facility. The Group and the other joint venture partner have joint control over Boonal as they must act together to direct the relevant activities which significantly affect the returns of the arrangement. The principal place of business for the above joint operations is in Australia. 106 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (c) Interests in associates and joint ventures (c) Interests in associates and joint ventures Set out below are the associates and joint ventures of the Group as at 31 December 2022 and 31 December 2021. 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. NAME OF ENTITY Port Waratah Coal Services Ltd WICET Holdings Pty Ltd Middlemount Coal Pty Ltd HVO Coal Sales Pty Ltd HV Operations Pty Ltd HVO Services Pty Ltd PLACE OF BUSINESS / COUNTRY OF INCORPORATION Australia Australia Australia Australia Australia Australia Newcastle Coal Infrastructure Group Pty Ltd Australia Total AMOUNT RECOGNISED IN PROFIT OR (LOSS): Middlemount Coal Pty Ltd Port Waratah Coal Services Ltd (i) Investment in associates % OF OWNERSHIP INTEREST CARRYING AMOUNT OF INVESTMENT 2022 % 30 25 2021 % 30 25 NATURE OF RELATIONSHIP MEASUREMENT METHOD Associate Equity method Associate Equity method 49.9997 49.9997 Joint Venture Equity method 51 51 51 27 51 51 51 27 Joint Venture Equity method Joint Venture Equity method Joint Venture Equity method Joint Venture Equity method 2022 $M 175 – 238 – – – – 2021 $M 171 – 132 – – – – 413 303 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 131 15 146 52 5 57 Port Waratah Coal Services Ltd The Group holds a direct shareholding in Port Waratah Coal Services Ltd (“PWCS”) of 30% (2021: 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 who is on the Board to partake in policy-making processes and is the appointed manager. The principal activities of PWCS were the provision of coal receivable, blending, stockpiling and ship loading services in the Port of Newcastle. WICET Holdings Pty Ltd (“WICET”) The Group holds 25% (2021: 25%) of the ordinary shares of WICET Holdings Pty Ltd (“WICET”). Under the shareholder agreement between the Group and other shareholders of WICET, the Group has 9.7% of the voting power equal to its capacity entitlement at WICET. 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 WICET were the provision of coal receiving, stockpiling and ship loading services in the Port of Gladstone. Movements in carrying amounts 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 2022 $M 31 DECEMBER 2021 $M 171 15 (11) 175 177 5 (11) 171 Middlemount Coal Pty Ltd Gloucester (SPV) Pty Ltd, has a 49.9997% (2021: 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. Structured through a separate vehicle and as a Pty Ltd entity, the legal form provides separation of the assets and liabilities of Middlemount and its owners. The Group and the other shareholder have joint control over Middlemount as they must act together to direct the relevant activities which significantly affect the returns of the arrangement. The key decisions require approval of 80% of the voting interest (which follows ownership interest). Given the legal structure of Middlemount, it has been concluded that it should be classified as a Joint Venture. In accordance with AASB 11 Joint Arrangements, the Group’s investment in Middlemount should be accounted for using the equity method. 107 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS HVO Entities The Group holds a 51% (2021: 51%) interest in HVO Coal Sales Pty Ltd, HV Operations Pty Ltd and HVO Services Pty Ltd (together the “HVO Entities”). These entities are the sales, marketing and employee vehicles of the HVO Joint Operation. The Group and the other joint venture partner have joint control over HVO Entities as they must act together to direct the relevant activities which significantly affect the returns of the arrangement. Newcastle Coal Infrastructure Group Pty Ltd The Group holds 27% (2021: 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. The principal activities of NCIG were the provision of coal receiving, stockpiling and ship loading services in the Port of Newcastle. All decisions over relevant activities are made by the Group and two other investors as the decisions over the relevant activities requires approval of 75% of voting interest. In accordance with AASB 11 Joint Arrangements, the Group’s investment in NCIG is deemed a joint venture and is accounted for using the equity method. Movements in carrying amounts The Group’s share of NCIG’s loss after tax has not been recognised for the reporting periods since the Group’s share of NCIG’s accumulated losses exceeds its interest in NCIG at the reporting dates. As the Group does not have contractual agreements or an obligation to contribute to this associate no additional liabilities have been recognised. Opening net book amount Share of profit / (loss) of equity-accounted investees, net of tax Dividends received Closing net book amount MIDDLEMOUNT 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 132 131 (25) 238 80 52 – 132 (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 joint ventures, other than Middlemount as at 31 December 2022 as set out in Note D6(ii). As a shipper in NCIG and WICET, the Group may be required to pay its share of any outstanding senior debt, amortised over the remaining years of that particular contract, if the Group’s source mines are unable to maintain a minimum level of Marketable Coal Reserves. Furthermore, the Group may be required to pay its share of any outstanding senior debt in full, if NCIG or WICET are unable to refinance a tranche of its maturing debt and defaults on its remaining debt. If an NCIG or WICET shipper was to default on its contractual obligations and was unable to pay its share of the NCIG or WICET debt, the outstanding senior debt would be socialised amongst the remaining shippers. In this scenario’s the Group’s share of the outstanding senior debt would increase. The Group currently expects to remain in compliance with the minimum level of Marketable Coal Reserves and is unaware of any issues with NCIG or WICET refinancing their future debt maturities. E2 RELATED PARTY TRANSACTIONS (a) Parent entities (a) Parent entities The parent entity within the Group is Yancoal Australia Ltd. The Group’s majority shareholder is Yankuang Energy Group Company Limited (“Yankuang Energy”), incorporated in the People’s Republic of China, formerly known as Yanzhou Coal Mining Company Limited. The ultimate parent entity and ultimate controlling party is Shandong Energy Group Company Limited (“Shandong Energy”), incorporated in the People’s Republic of China, formerly known as Yankuang Group Corporation Limited. (b) Yancoal International Holding Co. Ltd (b) Yancoal International Holding Co. Ltd Yancoal International (Holding) Co., Ltd is a wholly owned subsidiary of Yankuang Energy and controls 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 (“Yankuang Ozstar”), Yancoal Energy Pty Ltd and Syntech Resources Pty Ltd (“Yancoal International Group”). The Company manages these entities on behalf of Yankuang Energy. 108 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (c) Associates and joint ventures (c) Associates and joint ventures Refer to Note E1 for details on the associates and joint ventures. (d) Transactions with other related parties (d) Transactions with other related parties The following transactions occurred with related parties: SALES OF GOODS AND SERVICES Sales of coal to Yancoal International Trading Co. Ltd (i) Sales of coal to Yankuang Hainan (i) Sales of coal to Shandong Energy (Qingdao) Intelligent Industry Technology Co. Ltd (i) Provision of marketing and administrative services to Yancoal International Group (ii) Provision of marketing and administrative services to Shandong Energy Group PURCHASES OF GOODS AND SERVICES Purchases of coal from Syntech Resources Pty Ltd (i) ADVANCES AND LOANS Repayment of loans from Middlemount Equity subscription, debt repayment and debt provision Repayment of loans from Shandong Energy Repayments of loan from Yankuang Energy (ii) FINANCE COSTS Unwinding of discount on loan from Shandong Energy D1 Interest on loan from Shandong Energy Interest expenses on loans from Yankuang Energy (ii) Interest expenses on loans from Yancoal International Resources Development Co., Ltd (ii) Interest expenses on loans from Yancoal International (Holding) Co., Ltd (ii) Interest on bond from Yankuang Group (Hong Kong) Ltd OTHER COSTS Port charges to NCIG Port charges to WICET Port charges to PWCS Corporate guarantee fee to Yankuang Energy (ii) FINANCE INCOME Interest income received from loan receivable with Middlemount Interest income released from loan receivable with Middlemount OTHER INCOME Royalty income charged to Middlemount Dividend income received from Middlemount Dividend income received from PWCS Bank guarantee fee charged to Yancoal International Group (ii) NOTES 31 DECEMBER 2022 $’000 31 DECEMBER 2021 $’000 132,772 26,201 22,130 11,601 105 192,809 – – 211,802 211,802 (1,181,973) (940,113) (2,122,086) (279,136) (37,844) (19,226) (677) – – 21,446 27,019 18,647 8,556 – 75,668 (9,862) (9,862) 60,000 60,000 – (233,023) (233,023) (29,706) (34,936) (59,781) (9,220) (3,693) (2,718) (336,883) (140,054) (177,443) (53,653) (30,187) (14,375) (275,658) 62,910 – 62,910 28,433 25,000 12,709 2,431 68,573 (121,375) (47,845) (21,389) (23,962) (214,571) 14,114 5,096 19,210 28,270 – 13,058 2,216 43,544 109 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (e) Outstanding balances arising from transactions with related parties (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 Royalty receivable from Middlemount Receivable from Yancoal International Group in relation to cost reimbursement LOANS RECEIVABLE Other receivable from Shandong Energy Interest income receivable from Middlemount NON-CURRENT ASSETS Advances to joint venture and associate Receivable from Middlemount being an unsecured, non-interest bearing advance Total assets CURRENT LIABILITIES Other payables Payables to Yankuang Energy Payables to Shandong Energy Payables to Yancoal International Resources Development Co., Ltd NON-CURRENT LIABILITIES Other payables Payable to Yancoal International Resources Development Co., Ltd being an unsecured, interest-bearing loan (ii) Payable to Yankuang Energy being an unsecured, interest-bearing loan (ii) Payable to Shandong Energy, interest-bearing loan (ii) Total liabilities The terms and conditions of the related party non current liabilities is detailed in Note D1(c) above. (i) Continuing connected transaction under Chapter 14A of HK Listing Rules. (ii) Fully exempt continuing connected transaction under Chapter 14A of HK Listing Rules. 31 DECEMBER 2022 $’000 31 DECEMBER 2021 $’000 7,120 1,126 13 – 8,259 – – 8,259 – – – – – – – – – 46,390 4,001 1 155 50,547 148,892 148,892 199,439 110,714 12,518 647 123,879 22,046 860,913 788,946 1,671,905 1,795,784 110 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (f) Guarantees (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 OTHER YANKAUNG ENTITY Yankuang Resources Pty Ltd (g) Terms and conditions (g) Terms and conditions 31 DECEMBER 2022 $’000 31 DECEMBER 2021 $’000 55,727 29 29,062 10 3 – 60,899 29 29,062 10 3 45 84,831 90,048 Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. (h) Letter of support provided by parent (h) Letter of support provided by parent The Directors of Yankuang Energy have provided a letter of support whereby unless revoked by giving not less than 24 months notice, for so long as Yankuang Energy owns at least 51% of the shares of the Company, Yankuang Energy will ensure that the Group continues to operate so that it remains solvent. E3 PARENT ENTITY FINANCIAL INFORMATION (a) Summary 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 Accumulated losses Capital and reserves attributable to the owners of Yancoal Australia Ltd Profit / (loss) for the year Other comprehensive income Total comprehensive income / (expense) 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 6,306 8,679 14,985 8,627 1,845 10,472 4,513 3,661 8,659 12,320 3,786 4,240 8,026 4,294 6,698 6,698 (264) (1,921) 4,513 1,921 (61) 1,860 (188) (2,216) 4,294 (54) (55) (109) 111 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Dividends Subsequent to year end, controlled subsidiaries have declared dividends sufficient to enable the parent to declare a final dividend from accounting profits. (b) Guarantees entered into by the parent entity (b) Guarantees entered into by the parent entity As at 31 December 2022, the parent entity had contingent liabilities in the form of bank guarantees amounting to $941 million (2021: $875 million) in support of the operations of the parent entity, its subsidiaries and related parties (refer to Note D6). (c) Contingent liabilities of the parent entity (c) Contingent liabilities of the parent entity There are cross guarantees given by Yancoal Australia Ltd and certain subsidiaries as described in Note E4. The parent entity did not have any contingent liabilities as at 31 December 2022, except for those described in Note D6 and E5. E4 CONTROLLING INTERESTS (i) Significant investments in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries that are controlled: NAME OF ENTITY THE COMPANY Yancoal Australia Ltd (i) CONTROLLED ENTITIES PRINCIPAL ACTIVITIES Yancoal Australia Sales Pty Ltd (i) (ii) Coal sales Yancoal Resources Pty Ltd (formerly Yancoal Resources Limited) (ii) Coal investment holding company Yancoal Mining Services Pty Ltd (i) Provide management services to underground mines Yancoal Insurance Company Limited (iii) Provision of captive insurance to the Group Yancoal Moolarben Pty Ltd (i) (ii) Moolarben Coal Mines Pty Ltd (ii) Coal business development Coal business development Moolarben Coal Operations Pty Ltd Management of coal operations Moolarben Coal Sales Pty Ltd Coal sales Felix NSW Pty Ltd Yarrabee Coal Company Pty. Ltd. (ii) Proserpina Coal Pty Ltd Athena Coal Operations Pty Ltd Athena Coal Sales Pty Ltd Investment holding Coal mining and sales Holding company Dormant Dormant ISSUED AND FULLY PAID SHARE CAPITAL $ 100 446,409,065 100 19,000,000 100 1 2 2 2 92,080 1 1 1 Gloucester Coal Pty Ltd (formerly Gloucester Coal resource Coal Ltd) (i) (ii) Coal resource exploration development 719,720,808 Westralian Prospectors Pty Ltd (formerly Westralian Prospectors NL) (i) Holding company Eucla Mining Pty Ltd (formerly Eucla Mining NL) (i) Coal mining CIM Duralie Pty Ltd (i) Duralie Coal Marketing Pty Ltd (i) Duralie Coal Pty Ltd (i) (ii) Gloucester (SPV) Pty Ltd (ii) Gloucester (Sub Holdings 2) Pty Ltd (i) CIM Mining Pty Ltd (i) Monash Coal Holdings Pty Ltd (i) CIM Stratford Pty Ltd (i) CIM Services Pty Ltd (i) Holding company Holding company Coal mining Holding company Holding company Holding company Holding company Holding company Holding company 93,001 2 665 2 2 2 2 30,180,720 100 21,558,606 8,400,002 EQUITY HOLDING 2022 % 2021 % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 112 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ISSUED AND FULLY PAID SHARE CAPITAL $ 100 10 10 86,584,735 1 1 5 17,147,500 1 5,005 530,000 14,258,694 1 10,000 42,907,017 3,990,000 1 1 1 1 1 NAME OF ENTITY Monash Coal Pty Ltd (i) (ii) Stratford Coal Pty Ltd (i) (ii) Stratford Coal Marketing Pty Ltd (i) PRINCIPAL ACTIVITIES Coal exploration Coal mining Coal sales Coal & Allied Industries Pty Ltd (formerly Coal & Allied Industries Ltd) (ii) Coal investment holding company Kalamah Pty Ltd Coal & Allied (NSW) Pty Ltd Australian Coal Resources Pty Ltd (formerly Australian Coal Resources Ltd) Coal & Allied Operations Pty Ltd (ii) Holding company Employment company for Mount Thorley and Warkworth mines Coal investment holding company Coal mining and related coal preparation and marketing Lower Hunter Land Holdings Pty Ltd Management company of Lower Hunter Land entities Oaklands Coal Pty Ltd Novacoal Australia Pty Ltd CNA Resources Pty Ltd (formerly CNA Resources Ltd) (ii) Coal exploration Holding company Holding company CNA Warkworth Pty Ltd Coal mining Coal & Allied Mining Services Pty Ltd Employment company for Mount Thorley Co Venture RW Miller (Holdings) Pty Ltd (formerly RW Miller (Holdings) Ltd) Holding company Mount Thorley Coal Loading Ltd Operation of coal loading facility Gwandalan Land Pty Ltd Nords Wharf Land Pty Ltd Catherine Hill Bay Land Pty Ltd Black Hill Land Pty Ltd Minmi Land Pty Ltd Namoi Valley Coal Pty Ltd Dormant Dormant Dormant Dormant Dormant Holding company 51,210,000 CNA Warkworth Australasia Pty Ltd (ii) Coal mining CNA Bengalla Investments Pty Ltd Mount Thorley Operations Pty Ltd (ii) Northern (Rhondda) Collieries Pty Ltd Holding company Coal mining Holding company Miller Pohang Coal Company Pty Ltd Sales company for Mount Thorley JV 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 Sales company for Warkworth JV White Mining Pty Ltd (formerly White Mining Limited) (i) Holding company and mine management Watagan Mining Company Pty Ltd (i) Holding company Austar Coal Mine Pty Limited (i) Coal mining and sales White Mining Services Pty Limited (i) Holding company White Mining (NSW) Pty Limited (i) Coal mining and sales Ashton Coal Operations Pty Limited (i) Mine management Ashton Coal Mines Pty Ltd (formerly Ashton Coal Mines Ltd) (i) Coal sales Donaldson Coal Holdings Pty Ltd (formerly Donaldson Coal Holdings Ltd) (i) Holding company Gloucester (Sub Holdings 1) Pty Ltd (i) Holding company Donaldson Coal Pty Ltd (i) Donaldson Coal Finance Pty Ltd (i) Coal mining and sales Finance company 2 12 24,214 62,082 100 100 100 100 100 3,300,200 100 64,000,000 2 10 5 100 204,945,942 2 6,688,782 10 EQUITY HOLDING 2022 % 2021 % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 70 100 100 100 100 100 100 100 100 100 100 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 70 100 100 100 100 100 100 100 100 100 100 80 85 85 85 85 100 100 100 100 100 100 100 100 100 100 100 113 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NAME OF ENTITY Abakk Pty Ltd (i) Newcastle Coal Company Pty Ltd (i) Primecoal International Pty Ltd (i) PRINCIPAL ACTIVITIES Holding company Coal mining Holding company ISSUED AND FULLY PAID SHARE CAPITAL $ 6 2,300,999 1 EQUITY HOLDING 2022 % 100 100 100 2021 % 100 100 100 (i) 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 E5. (ii) 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. (iii) All subsidiaries included in the table above are incorporated and operate in Australia, except for Yancoal Insurance Company Limited which is incorporated in Guernsey. No subsidiaries have been deregistered / dissolved during 2022. The subsidiaries as listed have share capital consisting solely of ordinary shares and subordinated capital notes, which are held directly by the Group. The country of incorporation or registration is also their principal place of business. E5 DEED OF CROSS GUARANTEE Yancoal Australia Ltd and certain subsidiaries (refer to Note E4), 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 (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 2022 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 E4. 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 Impairment charges Transportation Contractual services and plant hire Government royalties Other operating expenses Finance costs Profit / (loss) before income tax Income tax benefit Profit / (loss) after income tax 114 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 3,172 79 24 (94) (188) (319) (182) (315) (154) (68) (75) (495) (399) 986 569 1,555 852 105 (3) (81) (147) (276) (162) (100) (140) (91) (41) (79) (228) (391) 201 (190) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 benefit Other comprehensive expense, net of tax Total comprehensive income / (expense) Summary of movements in consolidated accumulated losses Accumulated losses at the beginning of the financial year Dividends paid Profit / (Loss) after income tax Accumulated losses at the end of the financial year 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M (326) 239 26 (61) 1,494 (1,374) (1,626) 1,555 (1,445) (232) 153 24 (55) (245) (1,184) – (190) (1,374) (b) Consolidated balance sheet (b) Consolidated balance sheet Set out below is a Consolidated Balance Sheet as at 31 December 2022 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 2022 $M 31 DECEMBER 2021 $M CURRENT ASSETS Cash and cash equivalents Trade receivables Inventories Other current assets Total current assets NON-CURRENT ASSETS Trade and other receivables Other financial assets Property, plant and equipment Exploration and evaluation assets Mining tenements Intangible assets Deferred tax assets Other non-current assets Total non-current assets Total assets CURRENT LIABILITIES Trade and other payables Interest-bearing liabilities Current tax liabilities Provisions Total current liabilities 1,550 6,222 63 8 7,843 15 6,791 591 16 1,071 26 171 19 8,700 16,543 9,609 13 1,542 5 11,169 959 1,679 34 49 2,721 14 6,791 746 70 1,364 29 – 21 9,035 11,756 3,319 47 – 4 3,370 115 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NON-CURRENT LIABILITIES Interest-bearing liabilities Trade and other payable Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Accumulated losses Total equity 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 48 13 – 345 406 11,575 4,968 6,416 (3) (1,445) 4,968 2,891 7 87 266 3,251 6,621 5,135 6,698 (189) (1,374) 5,135 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 commitments, remuneration of auditors, 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 (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 Later than one year but not later than five years Exploration and evaluation Not later than one year Share of joint operations F2 REMUNERATION OF AUDITORS (a) SW Audit (formerly known as ShineWing Australia) (a) SW Audit (formerly known as ShineWing Australia) Audit and review of financial statements Audit-related services Other assurance services Total remuneration of SW Audit 116 31 DECEMBER 2022 $M 31 DECEMBER 2021 $M 213 9 – – 222 187 1 5 1 194 31 DECEMBER 2022 $’000 31 DECEMBER 2021 $’000 1,178 31 59 1,268 1,233 35 50 1,318 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) ShineWing China CPA / ShineWing (HK) CPA Ltd (b) ShineWing China CPA / ShineWing (HK) CPA Ltd Audit and review of financial statements (c) Other audit providers (c) Other audit providers 31 DECEMBER 2022 $’000 31 DECEMBER 2021 $’000 10 10 10 10 During the year ended 31 December 2022 the Company incurred services provided by other audit providers for the audit and review of financial statements and financial information for: PROVIDER Deloitte Ernst & Young PwC ENTITY Hunter Valley Operations Middlemount PWCS 31 DECEMBER 2022 $’000 31 DECEMBER 2021 $’000 68 24 – 65 36 8 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 Impairment of property, plant and equipment, intangible and exploration assets Unwind of non-substantial loan refinance Fair value losses recycled from hedge reserve Loss on remeasurement of contingent royalty Rehabilitation provision increase Unwinding of discount on provisions and deferred payables Net (gain) / loss on disposal of property, plant and equipment Gain on remeasurement of royalty receivables Release of provisions Interest income release from joint venture loan Foreign exchange gains Share of profit of equity-accounted investees, net of tax Changes in assets and liabilities: Increase in tax provision Increase in operating payables Decrease / (increase) in operating receivables Decrease / (increase) in prepayments (Increase) / decrease in inventories (Increase) / decrease in deferred tax Net cash inflow from operating activities 31 DECEMBER 2022 $M 3,586 834 315 279 239 60 50 26 (5) (12) (41) (63) (109) (146) 1,542 93 36 17 (66) (107) 6,528 31 DECEMBER 2021 $M 791 831 100 30 153 33 – 22 1 (4) (44) (14) (61) (57) – 194 (423) (12) 48 312 1,900 117 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F4 HISTORICAL INFORMATION The revenue, profit / (loss) after tax, assets and liabilities for the last five years at 31 December are: 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 2022 $M 10,548 5,091 (1,505) 3,586 3,586 – 3,810 8,991 2021 $M 5,404 1,103 (312) 791 791 – 2,531 9,269 2020 $M 3,473 (1,143) 103 (1,040) (1,040) – 1,343 9,712 2019 $M 4,459 767 (48) 719 719 – 1,773 9,320 12,801 11,800 11,055 11,093 2,470 2,301 4,771 8,030 826 4,828 5,654 6,146 1,199 4,663 5,862 5,193 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 F5 EVENTS OCCURRING AFTER THE REPORTING PERIOD No matter or circumstances have occurred subsequent to the end of the financial year that 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 or Company in subsequent financial periods except for the following: • On 16 February 2023, the Company announced that it was subject to revised directions received from the New South Wales government compelling it to make available up to 310,000 tonnes of coal per quarter to domestic power generators from its attributable saleable production. The directions are effective for the fifteen months, from 1 April 2023 to 30 June 2024 with coal sold under the directions subject to a price cap of A$125 per tonne delivered for 5,500 kcal/kg products, energy adjusted; • On 17 February 2023, the Company entered into facility documentation to refinance its existing A$975 million syndicated bank guarantee facility due to expire on 2 June 2023 with three new contingent liability facilities, totalling A$1.2 billion for a period of 3 years. The refinance is due to be completed in early March 2023; • On 27 February 2023, the Directors declared a fully franked final dividend of A$924 million, A$0.7000 per share, with a record date of 15 March 2023 and a payment date of 28 April 2023. F6 OTHER SIGNIFICANT ACCOUNTING POLICIES (a) Foreign currency transactions (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. (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. 118 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Financial instruments (b) Financial instruments Financial assets at Fair Value Through Profit or Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of Loss (“FVTPL”) Financial assets that do not meet the criteria for being measured the instrument. Financial assets and financial liabilities are initially measured at at amortised cost or fair value through other comprehensive income (”FVTOCI”) are measured at FVTPL. Specifically: fair value. Transaction costs that are directly attributable to the • Investments in equity instruments are classified as at FVTPL, acquisition or issue of financial assets and financial liabilities are unless the Group designates an equity investment that is neither added to or deducted from the fair value of the financial assets or held for trading nor contingent consideration arising from a financial liabilities, as appropriate, on initial recognition. business combination as at FVTOCI on initial recognition, and (i) Financial assets All regular way purchases or sales of financial assets are • Debt instruments that do not meet the amortised cost criteria or the FVTOCI criteria are classified as at FVTPL. In addition, recognised and derecognised on a trade date basis. Regular way debt instruments that meet either the amortised cost criteria purchases or sales are purchases or sales of financial assets that or the FVTOCI criteria may be designated as at FVTPL upon require delivery of assets within the time frame established by initial recognition if such designation eliminates or significantly regulation or convention in the marketplace. reduces a measurement or recognition inconsistency that would 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 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 amortised cost of a debt instrument and of allocating interest quantitative and qualitative information that is reasonable and 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. 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; 119 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS • 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 • 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 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; ability to meet its debt obligations. b) a breach of contract, such as a default or past due event; Irrespective of the outcome of the above assessment, the Group c) the lender(s) of the borrower, for economic or contractual presumes that the credit risk on a financial asset has increased reasons relating to the borrower’s financial difficulty, having significantly since initial recognition when contractual payments granted to the borrower a concession(s) that the lender(s) would are more than 30 days past due, unless the Group has reasonable not otherwise consider; or and supportable information that demonstrates otherwise. d) it is becoming probable that the borrower will enter into Despite the foregoing, the Group assumes that the credit risk bankruptcy or other financial reorganisation. 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 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 • information developed internally or obtained from external • External credit ratings where available. sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full. The grouping is regularly reviewed by management to ensure the constituents of each group continue to share similar credit risk Irrespective of the above analysis, the Group considers that characteristics. 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. 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. 120 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Impairment of trade receivables The Group has applied the simplified approach to measuring ECL remaining maturity of the hedged item is more than 12 months and as a current asset or liability when the remaining maturity of to trade and other receivables using a life-time expected loss the hedged item is less than 12 months. 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 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 as either financial liabilities or as equity in accordance with the fair values or cash flows of the hedged item. substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Cash flow hedges The effective portion of changes in the fair value of derivatives An equity instrument is any contract that evidences a residual or other financial instruments that are designated and qualify as interest in the assets of the Group after deducting all of cash flow hedges are recognised in other comprehensive income its liabilities. Financial liabilities The Group’s financial liabilities including trade and other payables, and accumulated in cash flow hedge reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. non-contingent royalty payable, interest-bearing liabilities which Amounts previously recognised in other comprehensive income are initially recognised at fair value and subsequently measured at and accumulated in the cash flow hedge reserve in equity are amortised cost, using the effective interest method. reclassified to profit or loss in the periods when the hedged item Effective interest method The effective interest method is a method of calculating the is recognised in profit or loss. Hedge accounting is discontinued when the Group revokes the amortised cost of a financial liability and of allocating interest hedging relationship, the hedging instrument expires or is sold, expense over the relevant period. The effective interest rate is terminated, or exercised, or when it no longer qualifies for hedge the rate that exactly discounts estimated future cash payments accounting. Any gain or loss recognised in other comprehensive (including all fees paid or points paid or received that form an income and accumulated in equity at that time remains in equity integral part of the effective interest rate, transaction costs and and is recognised when the forecast transaction is ultimately other premiums or discounts) through the expected life of the recognised in profit or loss. When a forecast transaction is no financial liability, or, where appropriate, a shorter period, to the longer expected to occur, the gain or loss accumulated in equity net carrying amount on initial recognition. Interest expense is is recognised immediately in the profit or loss. recognised on an effective interest basis. Derivatives that do not qualify for hedge accounting and those Equity instruments An equity instrument is any contract that evidences a residual not designated as hedging instruments Changes in the fair value of any derivative instruments that do not interest in the assets of an entity after deducting all of its liabilities. qualify for hedge accounting and those not designated as hedges Equity instruments issued by the Company are recognised at the are recognised immediately in the profit or loss. 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 (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 when a derivative contract is entered into and are subsequently ownership of the asset to another entity. 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 D7. The full fair value of a hedging derivative is classified as a non-current asset or liability when the 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. 121 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS F7 NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP Other amending accounting standards and interpretations the longwall move. Management assessed the impact to the Group on 1 January 2022 to be $15 million which is not material. These amendments are adopted prospectively. The relevant accounting amendments and interpretations effective Except for the above mentioned amendment there were no further for the current reporting period are: changes to the Group’s accounting policies and no effect on the • AASB 2020-3 Amendments to Australian Accounting Standards - Annual Improvements 2018 - 2020 and Other Amendments Amendments to property, plant and equipment accounting amounts reported for the current or prior periods. F8 NEW ACCOUNTING STANDARDS AND INTERPRETATIONS Certain new accounting standards and interpretations have standard has required the entity to recognise the sales proceeds been published that are not mandatory for 31 December 2022 from selling items produced while preparing the assets for its intended use, instead of deducting the amounts received reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards from the cost of the asset. This will affect the production stage and interpretations is set out below. underground development costs and the coal produced during REFERENCE AASB 2020-1, AASB 2020-6 DETAILS OF NEW STANDARD/AMENDMENT/INTERPRETATION APPLICATION DATE FOR THE GROUP Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current – deferral of effective date 1 January 2023 • This Standard amends AASB 101 to clarify requirements for the presentation of liabilities in the statement of financial position as current or non-current.For example, the amendments clarify that a liability is classified as non-current if an entity has the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. The meaning of settlement of a liability is also clarified. • The amendments specify that the conditions which exist at the end of the reporting period are those which will be used to determine if a right to defer settlement of a liability exists. • Management expectations about events after the balance sheet date, for example on whether a covenant will be breached, or whether early settlement will take place, are not relevant. • The amendments clarify the situations that are considered settlement of a liability. Impact: The adoption of the amendments and interpretations 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. AASB 2022-5 Amendments to Australian Accounting Standards – Lease Liability in a Sale and Leaseback 1 January 2024 • This Standard amends AASB 16 to add subsequent measurement requirements for sale and leaseback transactions that satisfy the requirements in AASB 15 Revenue from Contracts with Customers, to be accounted for as a sale. • AASB 16 already requires a seller-lessee to recognise only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. The amendments made by this Standard ensure that a similar approach is applied by also requiring a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a way that does not recognise any amount of the gain or loss related to the right of use it retains. Impact: These amendments are not expected to have a material impact on the Group unless a sale and lease back transaction would occur. AASB 2014-10, AASB 2021-7c AASB 2014-10: Sale or contribution of Assets between an Investor and its Associate or Joint Venture 1 January 2025 AASB 2021-7c: Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections • The amendments address an acknowledged inconsistency between the requirements in AASB 10 and those in AASB 128 (2011), in dealing with the sale or contribution of assets between an investor and its associate or joint venture. • The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. • AASB 2021-7c defers the effective date of AASB 2014-10 to 1 January 2025. Impact: This will only have impact where there has been a sale or contribution of assets between the entity and its investor. In the current period no such material transactions have occurred. 122 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS REFERENCE AASB 2021-2 DETAILS OF NEW STANDARD/AMENDMENT/INTERPRETATION APPLICATION DATE FOR THE GROUP Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates (amends AASB 7, AASB 101, AASB 108, AASB 134 and AASB Practice 1 January 2023 Statement 2) This Standard amends a number of standards as follows: • AASB 7: Financial Instruments: Disclosures to clarify that information about measurement bases for financial instruments is expected to be material to an entity’s financial statements; • AASB 101: Presentation of Financial Statements to require entities to disclose their material accounting policy information rather than their significant accounting policies; • AASB 108: Accounting Policies, Changes in Accounting Estimates and Errors to clarify how entities should distinguish changes in accounting policies and changes in accounting estimates; • AASB 134: Interim Financial Reporting to identify material accounting policy information as a component of a complete set of financial statements; and • AASB Practice Statement 2, to provide guidance on how to apply the concept of materiality to accounting policy disclosures. Impact: No impact on reported financial performance or position. Reductions in the quantum of accounting policies disclosures to focus on key decision areas and material policies only. AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction (AASB 1 and AASB 112) 1 January 2023 • This Standard amends AASB 112 to clarify the accounting for deferred tax on transactions that, at the time of the transaction, give rise to equal taxable and deductible temporary differences. In specified circumstances, entities are exempt from recognising deferred tax when they recognise assets or liabilities for the first time. The amendments clarify that the exemption does not apply to transactions for which entities recognise both an asset and a liability and that give rise to equal taxable and deductible temporary differences. This may be the case for transactions such as leases and decommissioning, restoration and similar obligations. Entities are required to recognise deferred tax on such transactions. • In addition, AASB 2021-5 amends AASB 1 to require deferred tax related to leases and decommissioning, restoration and similar obligations to be recognised by first-time adopters at the date of transition to Australian Accounting Standards, despite the exemption set out in AASB 112. Impact: The Group is currently adhering to this standard and there is no material impact on the Group’s financial report. 123 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS D I R E C T O R S ’ D E C L A R A T I O N F or th e ye ar end ed 31 Decem b er 20 22 In the Directors’ opinion: (a) the financial statements and notes set out on pages 64 to 123 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the Group’s financial position as at 31 December 2022 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 E5 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 E5. 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 the Directors. Gregory James Fletcher Director Sydney 27 February 2023 124 I N D E P E N D E N T A U D I T O R ’ S R E P O R T Take the lead INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF YANCOAL AUSTRALIA LTD Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Yancoal Australia Ltd (“the Company”) and its subsidiaries (“the Group”) which comprises the consolidated balance sheet as at 31 December 2022, 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, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying 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 2022 and of its financial performance for the year then ended, and b. complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (“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 are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. 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. Brisbane Level 15 240 Queen Street Brisbane QLD 4000 T + 61 7 3085 0888 Melbourne Level 10 530 Collins Street Melbourne VIC 3000 T + 61 3 8635 1800 Perth Level 18 197 St Georges Terrace Perth WA 6000 T + 61 8 6184 5980 Sydney Level 7, Aurora Place 88 Phillip Street Sydney NSW 2000 T + 61 2 8059 6800 SW Audit ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. SW Audit is an independent member of ShineWing International Limited. sw-au.com 151 125 1. Recoverability of long-life assets (Note C3) Area of focus How our audit addressed the area of focus Take the lead 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 in accordance with AASB 136 Impairment of Assets. These assets represent 89% of the Group’s non- current assets which includes property, plant and equipment (note C1), mining tenements (note C2) and intangible assets (note C5). Significant judgement is required to assess the recoverable amount of these assets. We have determined this to be a key audit matter . Our audit procedures included: considering the assessment of the existence of impairment indicators assessing the basis for determining the Cash- Generating Units (CGUs) obtaining an understanding and assessing key controls over the preparation of the fair value models obtaining an understanding of the methods, assumptions and data used in the fair value models testing the accuracy of the fair value models assessing whether the methods, assumptions and data were appropriate obtaining the assistance of valuation experts in assessing whether certain key assumptions are appropriate assessing the adequacy of the Group’s impairment disclosures relating to the recoverability of long-life assets. 2. Rehabilitation provision (Note C11) Area of focus How our audit addressed the area of focus The Group has closure and rehabilitation obligations to restore and rehabilitate environmental disturbances created by its operations sites. The rehabilitation provision has been created based on management’s internal estimates and assumptions relating to the current economic environment, which management believes is a reasonable basis upon which to estimate the future liability. Significant judgement is required to assess the completeness of the provisions. The rehabilitation provision is an accounting estimate which is subject to estimation uncertainty. We have determined this to be a key audit matter. Our audit procedures included: evaluating the Group’s legal and regulatory obligations for closure and rehabilitation obtaining an understanding and assessing key controls over the preparation of rehabilitation provision obtaining an understanding of the methods, assumptions and data used in the rehabilitation provision testing whether the future rehabilitation costs were consistent with the closure plans prepared by the Group’s internal experts for relevant sites testing the mathematical accuracy of the closure and rehabilitation provision calculations assessing the qualifications, competence and objectivity of the internal and external experts and that the information provided by the Group’s 152 126 INDEPENDENT AUDITOR’S REPORT Take the lead experts has been appropriately reflected in the calculation of the closure and rehabilitation provisions assessing the key assumptions used by management, including benchmarking to comparable market data assessing the adequacy of the Group’s disclosures relating to the rehabilitation and closure cost provision How our audit addressed the area of focus Our audit procedures included: checking the accuracy of the taxation work papers provided by the Group engaging the use of our tax experts to assist with: reviewing the tax calculations assessing transfer pricing documentation considering the prior period tax returns o o o assessing the adequacy of the Group’s taxation related disclosures. 3. Taxation (Note B6) Area of focus The Group is subject to income taxes in Australia. Significant judgement is required in determining the provision for income tax and associated deferred taxation balances. The Group estimates its tax liabilities based on the Group’s interpretation of tax 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 Group is involved in a significant number and value of related party transactions that are subject to analysis under the transfer pricing provisions of the international tax laws and regulations. Significant judgement is required to calculate taxation balances. Due to the size of the current and deferred tax balances, we consider this a key audit matter. Information Other than the Financial Statements and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s annual financial report for the year ended 31 December 2022 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 accordingly 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. 153 127 INDEPENDENT AUDITOR’S REPORT Take the lead Responsibilities of the Directors for the Financial Statements The directors of the Company are responsible for the preparation of the financial statements that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial statements that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the ability of the Group 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 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 the 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 the directors. Conclude on the appropriateness of the directors’ 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 represents 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. 154 128 INDEPENDENT AUDITOR’S REPORT Take the lead 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, actions taken to eliminate threats or safeguards applied. 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 key audit matters. 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 Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 23 to 40 of the directors’ report for the year ended 31 December 2022. 30 to 44 In our opinion, the Remuneration Report of Yancoal Australia Ltd for the year ended 31 December 2022 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. SW Audit (formerly ShineWing Australia) Chartered Accountants Yang (Bessie) Zhang Partner Sydney, 27 February 2023 Rami Eltchelebi Partner 155 129 INDEPENDENT AUDITOR’S REPORT 2 0 2 2 C O R P O R A T E G O V E R N A N C E S T A T E M E N T 2022 CORPORATE GOVERNANCE STATEMENT INTRODUCTION The Board and management of the Company are committed to good corporate governance. The Company adopts an approach to corporate governance based on international good practice as well as Australian and Hong Kong law requirements. ASX CORPORATE GOVERNANCE STATEMENT To the extent appropriate to the scale and nature of the 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. 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 CEO and other Company’s business, the Company has adopted the 4th senior Executives. The Executive Committee is a management edition of the ASX Corporate Governance Council’s Principles committee comprising the CEC, CEO, the CFO and any other and Recommendations (“ASX Recommendations”). This senior Executives that the Board resolves from time to time will statement sets out the Company’s compliance with the ASX be members of the Executive Committee. 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 Part 2 of Appendix 14 (the “HK Code”) to the Rules Governing the Listing of Securities on HKEx (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, unless otherwise disclosed) for the financial year ended 31 December 2022. The conduct of the Company’s compliance with the principles is discussed further in this statement. 1. OUR BOARD 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 is supplemented with the financial decision authorities matrix and appropriate approval thresholds at different management / executive 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. STRUCTURE OF THE BOARD During the financial year ended 31 December 2022, the Board composition was: EXECUTIVE DIRECTORS Ning Zhang NON-EXECUTIVE DIRECTORS Baocai Zhang (Chairman) ROLE OF THE BOARD The Board is responsible for the overall corporate governance, Cunliang Lai (from 1 January to 30 May 2022) Yaomeng Xiao (from 30 May 2022) 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, Qingchun Zhao Xiangqian Wu Xing Feng 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. INDEPENDENT NON-EXECUTIVE DIRECTORS Gregory James Fletcher Geoffrey William Raby 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 page 21. 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 2022 and each director’s attendance at these meetings is set out in the Directors’ Report on page 27. 130 CHAIRMAN OF THE BOARD The current Chairman, Baocai Zhang, was nominated by the Company’s majority shareholder, Yankuang Energy Group Company Limited (“Yankuang Energy”). The Chairman leads the Board and is responsible for the efficient organisation and conduct of the Board’s functions. The Chairman ensures that Directors have the opportunity to contribute to Board deliberations. The Chairman regularly communicates with the CEC and CEO to review key issues and performance trends. Corporate governance Accounting / audit / risk management The current CEO is David James Moult. The CEO is responsible Government / policy 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 Legal / regulatory • Experience in governance within large organisations and multi- jurisdictional compliance environments • Publicly listed company experience • Experience in financial accounting, reporting and corporate finance, including recognising and evaluating financial risks and maintaining effective risk management and internal controls • Experience in government affairs, and public and regulatory policy • Experience in compliance and knowledge of legal and regulatory requirements responsibility for the Company’s operations (other than as Health, safety and environment • Experience in health, safety and delegated to the CEC) and undertakes 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, CEC 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, CEC and the CEO. 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. Human resources environment, including controlling risks and implementing and monitoring health, safety and environment strategies and procedures • Experience in remuneration, workplace culture, people management and succession planning International business expertise • Experience in and exposure to political, cultural, regulatory and business environments in a range of global locations • Experience with doing business in China, including with government agencies, regulators and customers 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. BOARD COLLECTIVE KEY SKILLS AND EXPERIENCE The Board’s policy for the selection, appointment and re- Mining / exploration and production/ engineering • Executive experience in mining, engineering or resources companies • Experience in engineering, exploration and production projects both domestically and internationally • Experience in assessing commercial viability of major capital projects 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 • Experience in the delivery of large- appropriate decisions. scale capital projects • Relevant experience in marketing and trading of coal At the time of appointment of a new Non-Executive Director, the key terms and conditions relevant to that person’s appointment, Capital projects Trading / marketing Strategy • Experience in developing and the Board’s responsibilities and the Company’s expectations of a Leadership Board experience implementing successful business strategy, including appropriately overseeing management on the delivery of agreed strategic planning objectives • Experience at a senior executive level working in a large organisation • Experience in serving on Boards of varying size and composition, in varying industries and for a range of organisations Director are set out in a letter of appointment. 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: • Board composition and succession planning for the Board and the CEO; 131 2022 CORPORATE GOVERNANCE STATEMENT • Director remuneration (subject to any shareholder approval No Director may hold office without re-election beyond the that is required in accordance with the Company’s Constitution, third annual general meeting (“AGM”) following the meeting at ASX Listing Rules and HK Listing Rules) and remuneration which the Director was last elected or re-elected. The Company arrangements for the Company’s Executive Committee and provides all material information in its possession, including the any other person nominated as such by the Nomination and details of expertise and qualifications, details of any other material Remuneration Committee from time to time; directorships, and any other materials that the Board considers • the public reporting of remuneration for Directors and key management personnel 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 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 (whether independent or not) 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 • oversight of the progress of the diversity and inclusion by the shareholders at an AGM. strategy, as well as diversity metrics at the organisation and operation level. To the extent that the ASX Listing Rules require an election of Directors to be held and no Director would otherwise be required In carrying out its duties, the Nomination and Remuneration under the Company’s Constitution to submit for election or re- Committee has regard to the ASX Recommendations and the election at an AGM, the Director who has been the longest in principles in the HK Code in particular, principles B.1 and B.2. office since their last election or appointment must retire at the Further information regarding the Nomination and Remuneration AGM. As between Directors who were last elected or appointed Committee is outlined under the Board committees section below. on the same day, where it is not agreed between the relevant The Board recognises that people are its most important asset Directors, the Director to retire must be decided by lot. and is committed to the maintenance and promotion of diversity The process for appointment, retirement and re-election of and inclusion in the workplace at all levels of the organisation. The Directors is set out in the Company’s Constitution which can Company’s Diversity and Inclusion Policy, approved by the Board, be found within the Corporate Governance section of the seeks to actively facilitate a more diverse and representative Company’s website. management and leadership structure. The Company has a strong commitment to gender diversity including to ensure the adequate representation of women in senior executive positions and on the Board. In identifying candidates, the Nomination and Remuneration Committee considers and recommends to the Board nominees by reference to a number of selection criteria including the skills, expertise, background and gender that add to and complement the range of skills, expertise, background and gender 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. 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. Where appropriate, the appropriate checks are undertaken prior to a Director being appointed. 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 Company Constitution’s prescribed minimum number of Directors and in order to comply with any applicable laws, regulations, ASX Listing Rules or HK Listing Rules. If a Director is appointed to fill a casual vacancy in these circumstances, the approval of members must 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 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. The Board will consider the materiality of the Directors’ interests, position, association or relationship for the purposes of determining ‘independence’ on a case-by-case basis, having regard to both quantitative and qualitative principles. Specifically, the Board will consider whether there are any factors or considerations which may mean that the Director’s interest, business or relationship could, or could be reasonably perceived to, materially interfere with the Director’s ability to act in the best interests of the Company or are likely to affect, or could appear to affect, their independent judgement. A Director is generally considered to be 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, principal, director or senior employee of a provider of material professional services to the Company or its holding company or be sought at the next general meeting. any of their respective child entities; 132 2022 CORPORATE GOVERNANCE STATEMENT • is not, nor has within the last three years been, in a material the corporate values of the Company, Mr Fletcher and Dr Raby business relationship (e.g. as a supplier, professional adviser, have enhanced these values through their strong professional consultant or customer) with the Company or any of its child relationship with management. After a review of all the skill entities, or an officer of, or otherwise associated with, someone sets, experience and qualifications of Mr Fletcher and Dr Raby with such a relationship; • does not receive performance-based remuneration (including options or performance rights) from, or participate in an employee incentive scheme of, the Company; respectively, the Company is satisfied that Mr Fletcher and Dr Raby have the required character, integrity, experience and knowledge to continue fulfilling the role of independent non-executive Director effectively, and their continued tenure will continue to bring valuable insights, expertise and fresh • does not hold more than 1% of the number of issued shares perspectives to the Board. of the Company; • is not an officer of, or otherwise associated with, a substantial shareholder of the Company; A majority of the Board are not considered independent Directors due to their affiliations with the Company’s majority shareholder, Yankuang Energy, and accordingly the Company does not • is not, nor has been within the last three years an officer or employee of, or a partner, principal, director or employee comply with Recommendation 2.4 of the ASX Recommendations. However, the Board considers that its composition appropriately of a professional adviser to, a substantial shareholder represents the interests of its shareholders including its majority 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, nor within one year prior to the appointment, had any material interest in any principal activity of or is not or was not involved in any material business dealings with the Company, its holding company or their respective child entities; • does not have close personal ties with any person who falls within any of the categories described above; shareholder, Yankuang Energy, 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 Yankuang Energy, including establishing Independent Board Committees where appropriate. Each independent Non-Executive Director must regularly, and at least annually, 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 with assistance from the Nomination and Remuneration Committee on • has not been a Director of the Company, for such a period that his or her independence from management and substantial a regular basis and at least annually at or around the time that the Board or the Nomination and Remuneration Committee considers holders may have been compromised; and candidates for re-election to the Board. • is free from any other interest, position, association or The independent Non-Executive Directors have confirmed relationship that might interfere, or might reasonably be seen to their independence in accordance with Rule 3.13 of the HK interfere, with the Director’s capacity to bring an independent Listing Rules, the ASX Listing Rules and the Board Charter judgement to bear on issues before the Board and to act in the and the Company has received from each of the independent best interests of the Company and its shareholders generally. Non-Executive Directors an annual confirmation on his/her 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 Company has assessed the independence of each of the Non-Executive Directors (including the Chairman of the Board) in light of their interests and relationships, and has determined that of the 9 Directors currently on the Board, three hold their positions in an independent Non-Executive capacity (based on independence as required under Rule 3.13 of the HK Listing Rules, the ASX Listing Rules and the Board Charter. Accordingly, the Company considers that the independent Non-Executive Directors continue to be independent. The Company has established the following mechanisms to ensure independent views and input are available to the Board: • A sufficient number of three Independent Non-executive Directors representing one-third of the Board have been appointed and all of them continue to devote adequate time contribution to the Company; the independence standard disclosed above). The Company’s • All Independent Non-Executive Directors are required to current independent Directors are Gregory James Fletcher, Geoffrey William Raby and Helen Jane Gillies. Mr Fletcher and Dr Raby have been independent non-executive Directors since their appointment on 26 June 2012 and have always emphasised the importance of high standards of corporate governance and contributed in objectively advising as well as constructively monitoring and mentoring the management team in their capacity as independent non-executive Directors. Being familiar with confirm in writing annually their compliance of independence requirements as set out under Rule 3.13 of the Listing Rules; • Annual meeting between the Chairman and all Independent Non-executive Directors without presence of other Directors providing an effective platform for the Chairman to listen to independent views on various issues concerning the Company; 133 2022 CORPORATE GOVERNANCE STATEMENT • Independent professional advice would be provided to other materials containing information about the Company Independent Non-executive Directors upon reasonable request including the Company’s Constitution, charters and policies to assist them to perform their duties to the Company; to support the induction of Directors to the Board. • Non-executive Directors receive fixed fee(s) for their role as Yancoal has an ongoing Director training program, which members of the Board and Board Committee(s) as appropriate; Directors participate in to ensure that they maintain the skills and • Non-executive Directors’ independence is assessed upon appointment, annually, and at any other time where the circumstances warrant reconsideration; • All Directors are encouraged to express freely their independent views and constructive challenges during the Board / Board Committees meetings; and • An Independent Board Committee consisting of independent Non-Executive Directors is established by the Board as and knowledge required to effectively discharge their responsibilities. Examples of continuing education or development programs include briefings on workplace culture, HKEX disclosure requirements, updates on employment and industrial reforms, cybersecurity, ESG, privacy and competition laws. Periodic review is undertaken to consider whether professional development for Directors is required to enable the Board to deal with new and emerging business and governance issues, and Directors are expected to undertake any necessary continuing when required to manage any related party transactions. education and training. The Board will review the implementation and effectiveness of The Company Secretary supports Directors by providing access such mechanisms on an annual basis. to information in appropriate form where requested. NOMINATION AND NON-INDEPENDENCE OF CHAIR The Company’s Constitution provides that the Company’s KEEPING NON-ENGLISH SPEAKING DIRECTORS INFORMED There are currently a number of non-English speaking directors shareholders holding a majority of the issued shares of the on the Board. To ensure that these directors understand, and Company (which confer the right to vote) may nominate a Director are able to participate in, Board meeting discussions and can to the office of Chairman and may elect one or more Directors to properly discharge their directors’ duties and obligations, the the office of Vice Chair. Company will ensure that: As a nominee of Yankuang Energy, Baocai Zhang, the Chairman • all Board and Board Committee papers or any other key is not considered independent by the independence standard corporate documents are distributed to a Director in a language (as above) and accordingly the Company does not comply with the Director speaks and understands where that Director does Recommendation 2.5 of the ASX Recommendation. However, not speak and understand English; and the Board considers that this is an appropriate reflection of Yankuang Energy’s majority shareholding in the Company. While a majority of the Directors are associated with Yankuang Energy this is considered appropriate in light of Yankuang Energy’s majority shareholding in the Company. The Board has put in place appropriate policies and procedures such as the Conflicts and Related Party Transactions Policy and 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. CONFLICTS OF INTEREST To help ensure that any conflicts of interests are identified, the • an interpreter is available at all Board and Board Committee meetings (whether in person, by telephone, video conference or otherwise) to assist in translating the content of all discussions at those meetings to ensure all Directors can understand and contribute to the discussions at those meetings. In addition to the above, to ensure that all Directors are kept informed and can properly discharge their directors’ duties and obligations, where required Board in-camera sessions are held prior to Board meetings, with a translator present, to provide all Directors the opportunity to participate and discuss important Company matters, and all Board Committee meetings, where possible and appropriate, invite all Directors to attend regardless of whether such Directors are members of such Company has put in place a standing agenda item at all meetings Board Committees. 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. INDUCTION AND PROFESSIONAL DEVELOPMENT Upon appointment, Directors are provided with induction training. This includes briefing sessions with management regarding the Company’s structure, business operations, history, and culture, and provision of an information pack containing a letter of COMPANY SECRETARY The Company Secretary supports and is accountable to the Board, through the 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. Each Director is able to communicate directly with the Company Secretary and vice versa. The Board Charter sets out the other duties of the Company Secretary, which include appointment setting out the Company’s expectations, Directors’ being responsible for: duties and the terms and conditions of their appointment, and 134 2022 CORPORATE GOVERNANCE STATEMENT • 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 Securities and Future Ordinance and other applicable laws are established and properly maintained; 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. Periodically a performance review is conducted by the Chairman for each Non-Executive Director, specifically addressing the performance criteria within the Protocol. A review of the performance of the Chairman is facilitated by the Co-Vice Chairs who seek input from each Director individually on the performance of the Chairman against the competencies for the Chairman’s role approved by the Board. • 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. Performance reviews Since the adoption of the Protocol in 2012, the Company has carried out six 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 the last review of the Board and its The Company Secretary is Laura Ling Zhang. Ms Zhang has committees was conducted internally in 2021. completed no less than 15 hours of professional training to update her skills and knowledge as required by the HKEx. 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 and last revised by the Board in February 2022. 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 The Company has not undertaken a review of the performance of the Board and its committees for the financial year ending 31 December 2022 and accordingly the Company has not complied with Recommendation 1.6(b) of the ASX Recommendations. However, the Board considers that in light of the changes in the composition of the Board and in the Nomination and Remuneration Committee this year, the Australia- China geopolitical situation and the inability of Directors to travel to have face to face meetings given Covid restrictions, it was not appropriate to conduct board performance evaluations in respect of 2022. PERFORMANCE OF SENIOR EXECUTIVES The CEC and the CEO review the performance of senior and expertise and the Board’s practices and procedures are Executives annually against appropriate measures as part appropriate for the present and future needs of the Company is of the Company’s performance management system for all conducted. This evaluation of performance of the Board may be managers and staff. 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. 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 Board committees On a periodic basis, Directors will provide written feedback in also undertakes an annual formal review of the performance of other members of the Executive Committee, based on similar relation to the performance of the Board, its committees and criteria. The Board reviews and approves the annual review of individual Directors against a set of agreed criteria. At such time, all the members of the Executive Committee undertaken by the each committee of the Board will also be required to provide Nomination and Remuneration Committee. feedback in terms of a review of its own performance and the feedback is discussed by the Board, with consideration of whether any steps for improvement are required. Where appropriate to facilitate the review process, assistance may be obtained from third party advisers. The performance evaluations for the CEC, CEO and senior Executives will take place in 2023 (in respect of 2022), and will be carried out in accordance with the process disclosed above. 135 2022 CORPORATE GOVERNANCE STATEMENT REMUNERATION OF NON-EXECUTIVE DIRECTORS AND 2. BOARD COMMITTEES SENIOR EXECUTIVES The Nomination and Remuneration 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 2022, the Nomination and Remuneration Committee engaged consulting firm PwC to conduct an independent review of the remuneration framework. 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 majority shareholder, Yankuang Energy. Remuneration for Non-Executive Directors is capped at an aggregate amount for each financial year of $3.5 million. Non- 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 HEALTH, SAFETY, ENVIRONMENT AND COMMUNITY COMMITTEE NOMINATION AND REMUNERATION COMMITTEE 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. Executive Directors may also be paid such additional or special Other committees may be established by the Board as and when remuneration as the Directors decide is appropriate where required. Membership of the Board committees is based on the a Non-Executive Director performs extra services or makes needs of the Company, relevant regulatory requirements, and the special exertions for the benefit of the Company. Such additional skills and experience of individual Directors. The purpose and primary role of each of the Board committees and membership of the committees are outlined below. The Charters of each of these standing Board committees are available within the Corporate Governance section of the Company’s website. 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. Senior Executives The Company’s senior Executives are employed under written employment contracts that set out the terms of their employment. In 2022, no changes were made to the structure of senior Executive contracts. Where appropriate, the appropriate checks are undertaken prior to a new senior Executive being appointed. Further details of the remuneration of the Non-Executive Directors, Executive Directors and senior Executives can be found in the Remuneration Report on pages 30 to 44. 136 2022 CORPORATE GOVERNANCE STATEMENT AUDIT AND RISK MANAGEMENT COMMITTEE CURRENT MEMBERSHIP PURPOSE Independent Non-Executive Directors: The committee’s objectives are to: Gregory James Fletcher – Chair • help the Board in relation to the reporting of financial information; Helen Jane Gillies Non-Executive Directors: Qingchun Zhao The committee consists only of Non-Executive Directors with a majority being independent and the Chair of the committee is an independent Non-Executive Director and is not the Chairman of the Board. The Committee meets the minimum composition requirement of three Non- Executive Directors for the audit committee, at least one of whom is an independent Non-Executive Director with appropriate professional qualifications or accounting or related financial management expertise, as required by the HK Code. • advise on the appropriate application and amendment of accounting policies; • make evaluations and recommendations to the shareholders of the Company regarding the external auditor; • recommend to the Board the remuneration of the external auditor for shareholder approval as required in accordance with the Constitution; • 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 2022, work performed by the committee included, but was not limited to: • 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 Company’s related party and connected transactions; • annual review of Enterprise Risk Management Framework; • regular updates on cyber-security matters; • in-camera sessions with external auditors and internal auditors; • regular updates on potential speak-up facility matters maintained by an independent third party; • review of the effectiveness of risk management, internal control systems, internal audit function and whether the Company is operating with due regard to the risk appetite set by the Board; and • evaluation of the Company’s debt facilities. 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. HEALTH, SAFETY, ENVIRONMENT AND COMMUNITY COMMITTEE CURRENT MEMBERSHIP PURPOSE Independent Non-Executive Directors: The committee assists the Board to: Geoffrey William Raby – Chair Non-Executive Directors: Xiangqian Wu Executive Directors: Ning Zhang The committee consists of majority Non-Executive Directors and meets the minimum composition requirement of three Directors, as required by the Company’s Health, Safety, Environment and Community Committee Charter. • 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 • provide necessary focus and guidance on HSEC matters across the Company. During the financial year ended 31 December 2022, work performed by the committee included, but was not limited to: • monitoring the Company’s ongoing health and safety and environmental performance, including significant incidents and regulatory investigations; • overseeing major initiatives; • endorsing the Company’s Modern Slavery Action Plan; • considering independent environmental assurance audits for various Company mine sites; • reviewing and endorsing the Company’s 2021 Environmental, Social and Governance Report; and • overseeing community initiatives and health, safety and environmental legal and compliance matters. 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. 137 2022 CORPORATE GOVERNANCE STATEMENT NOMINATION AND REMUNERATION COMMITTEE CURRENT MEMBERSHIP PURPOSE Independent Non-Executive Directors: The committee assists the Board of the Company by making recommendations in relation to: Helen Jane Gillies – Chair Gregory James Fletcher Geoffrey William Raby Non-Executive Directors: Baocai Zhang • Board composition and succession planning for the Board and the CEO and oversight of succession planning for the Executive Committee; • Director remuneration (subject to any shareholder approval that is required in accordance with the Company’s Constitution, ASX Listing Rules and HK Listing Rules) and remuneration arrangements for the Company’s Executive Committee and any other person nominated as such by the Nomination and Remuneration Committee from time to time; Yaomeng Xiao (from 28 October 2022) • the public reporting of remuneration for Directors and key management personnel and other members of The committee consists only of Non-Executive Directors with a majority being independent, including the Chair of the committee, and meets the minimum composition requirement of three Non-Executive Directors, as required by the Company’s Nomination and Remuneration Committee Charter. the Executive Committee; • oversight of the performance assessment of the Executive Committee; • designing Company remuneration policy and regulations with regard to corporate governance; and • oversight of the progress of the diversity and inclusion strategy, as well as diversity metrics at the organisation and operation level. During the financial year ended 31 December 2022, work performed by the committee included, but was not limited to: • consideration of re-election of Directors; • undertaking a review of the Company’s organisational structure, succession planning and composition of the Executive Committee; • undertaking an external, independent review of the executive remuneration structure to ensure it still meets its objectives; • endorsed amendments to the Diversity and Inclusion Policy and the Nomination and Remuneration Committee Charter regarding diversity and inclusion matters; • review of the 2021 Corporate Governance Statement, including diversity and measurable objectives; • finalisation and endorsement of Company short-term and long-term incentive plans and Company salary indexation and performance assessment implementation; • monitoring workplace culture with a focus on Yancoal’s efforts to prevent, and respond to, inappropriate workplace conduct, including sexual harassment, bullying and racism; and • keeping abreast of the current labour market conditions, the risks the tight labour market creates for talent attraction and retention and Yancoal’s response to managing those risks. 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. 138 2022 CORPORATE GOVERNANCE STATEMENT STRATEGY AND DEVELOPMENT COMMITTEE CURRENT MEMBERSHIP PURPOSE Independent Non-Executive Directors: The committee assists the Board in its oversight and review of the Company’s strategic initiatives, including: Geoffrey William Raby Non-Executive Directors: Baocai Zhang – Chair Qingchun Zhao Xing Feng The committee consists only of Non-Executive Directors and meets the minimum composition requirement of three Directors, as required by the Company’s Strategy and Development Committee Charter. • merger and acquisition proposals; • major capital markets transactions; • significant investment opportunities; and • proposals to dispose of significant Company assets. During the financial year ended 31 December 2022, work performed by the committee included, but was not limited to: • consideration of capital management issues for projects; and • evaluation of various acquisition opportunities and organic growth opportunities. 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. INDEPENDENT BOARD COMMITTEE CURRENT MEMBERSHIP PURPOSE An Independent Board Committee is composed of independent Non-Executive Directors who do not have a material interest in the relevant transactions. 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 2022, the Independent Board Committee met for the purposes of considering transactions between or involving the Company and its majority shareholder, Yankuang Energy. Meetings and attendance The number of meetings held by the Board and each committee during 2022 and each member’s attendance at these meetings is set out in the Directors’ Report on page 27. 3. ACTING LAWFULLY, ETHICALLY AND RESPONSIBLY OUR VALUES AND BELIEFS The Company is focused on maintaining and upholding a company culture and a set of company values to underpin its ongoing success and sustainability as a business. Who we are and how we work as Yancoal employees is informed by the ‘Yancoal Way’, which encapsulates our beliefs, values and expected behaviours. Our three core beliefs drive our values to deliver. They are: TRANSPARENCY COMPLIANCE EFFICIENCY We are open and honest with one another and have a “no surprises” mentality for all the stakeholders we work with. We always follow our internal rules and the rules of law where we operate. We strive to be efficient, productive and effective at what we do all day, every day. 139 2022 CORPORATE GOVERNANCE STATEMENT Our beliefs are underpinned by our core values which drive our daily behaviour. Our five core values are: PATH WAY PEOPLE SAFE WAY SAFETY HIGH WAY EXCELLENCE BETTER WAY INNOVATION RIGHT WAY INTEGRITY We value involvement from everyone. Full engagement is encouraged. 99% of what we need to know is already within the Yancoal workforce. Safety is not optional. It is considered in everything we do to eliminate harm to our people. We identify and implement best practice and operate above the line in the ‘can do’ zone with courage, trust and pride. We seek to continuously improve all aspects of our business. We do what we say with honesty, integrity and reliability. If it feels like the wrong thing to do it quite possibly is. If you are uncomfortable with doing something, check the Code or seek advice. Our values and beliefs are supported by our Code of Conduct and other key governance polices, which are approved by the Board. The Code of Conduct and other key governance polices are internally promoted on a regular basis and training programs have been developed to instil and reinforce our values, beliefs and expected behaviours under the Code of Conduct and other key governance polices. CODE OF CONDUCT 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 key governance guidelines and policies which are approved by the Board that set out legal and ethical standards for the Company’s Directors and employees, including (but not limited to) an Anti-Corruption Policy, Conflicts and Related Party Transactions Policy, Competition / Anti-Trust Policy, Health and Safety Policy, Gifts and Benefits Policy, Modern Slavery Policy, Share Trading Policy, Whistleblower Policy and Workplace Behaviour Policy. The Code of Conduct and these other key governance 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, misconduct or an improper state of affairs or circumstances within the Group. The Code of Conduct and these other key governance guidelines and policies also guide compliance with legal and other obligations to stakeholders. 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; • 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; and • the Company does not tolerate inappropriate workplace conduct, including sexual harassment, bullying and racism of any form. The Code of Conduct is promoted across to all business activities in Australia and overseas and reinforced by training and appropriate disciplinary action if breached. Any material breaches of the Code of Conduct are reported to the Board or the Audit and Risk Management Committee. The Code of Conduct is available in the Corporate Governance section of the Company’s website and training for all levels of the business regarding the Code of Conduct is conducted periodically. 140 2022 CORPORATE GOVERNANCE STATEMENT REPORTING CONCERNS AND WHISTLEBLOWER PROTECTION The Company’s Whistleblower Policy encourages any current or Secretary in consultation with the supervisor or manager of the offending person. Any material breaches of the policy are reported to the Audit and Risk Management Committee. The Anti- former employees or officers, contractors or suppliers (and their Corruption Policy is available in the Corporate Governance section employees), associates or certain family members of an individual of the Company’s website and is supplemented by the Company’s mentioned above to raise serious concerns of misconduct or Code of Conduct and Gifts & Benefits Policy. Individuals can an improper state of affairs or circumstances in relation to the report concerns confidentially and anonymously via Yancoal’s Company and report any issues if they have reasonable grounds Speak Up facility, which is operated by an independent for suspecting so. The disclosure cannot solely be about a external party. 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 (“EGM”) of Risk and 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 Business Activity Statement agent, or an employee or officer at the Company who has functions or duties relating to its tax affairs. All disclosures made under the policy will be treated seriously and may be the subject of an 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 Company has in place processes for protecting, supporting and monitoring the welfare of anyone who makes a disclosure under the policy. The Audit and Risk Management Committee and the Board are informed at each meeting with a report on all active whistleblower matters and incidents, 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. ANTI-CORRUPTION POLICY The Company is committed to the highest level of integrity and ethical standards in all business practices and has formally DEALINGS IN COMPANY SECURITIES By law, and under the Company’s Share 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 Yankuang Energy securities by Directors of the Group, all officers of the Company and other relevant employees and contractors of the Group, as well as their closely related parties, during specified blackout periods each year. Subject to compliance with the Company’s Share Trading Policy, employees are permitted to deal in Company securities or Yankuang Energy securities outside these blackout periods where they are not in possession of inside information, however additional approval requirements apply. 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 last revised in February 2022, which includes 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. A copy of the Share Trading Policy is available on the Corporate Governance section of the Company’s website. adopted an Anti-Corruption Policy, which outlines how the Specific enquiry has been made of all the Directors and they have Company expects all of its Directors, officers and employees each confirmed that they have complied with the Company’s to behave when conducting business both in Australia and Share Trading Policy for the period 1 January 2022 to 31 internationally. Corruption and bribery in all forms are strictly December 2022. prohibited by the Company. Directors, officers and employees must conduct themselves, at all times, in a manner consistent with Company policy, community expectations and in compliance with state, federal and international legislation. Breaches of the Anti-Corruption Policy are regarded as serious and will be subject to appropriate sanctions. Preliminary investigations of reported breaches are administered by Human Resources. If a breach of the policy is found to have occurred, a formal investigation process is administered by the Company 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, Yankuang Energy, to ensure that Yankuang Energy can comply with its disclosure obligations in relation to Company information. 141 2022 CORPORATE GOVERNANCE STATEMENT Similarly, Yankuang Energy seeks to ensure that the Company can comply with its disclosure obligations in relation to Yankuang • risk management, control and reporting systems are in place to identify, assess, manage, monitor and report on these risks. Energy’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 Executives to consider whether any matters at the meeting should be disclosed to the market. 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 General Counsel. In accordance with the Disclosure Policy, Board approval and input will only be required in respect of matters that are clearly within the reserved powers of the Board (and responsibility for which has not been delegated to management) or matters that The role and membership of the Audit and Risk Management Committee are described under paragraph titled “Audit and Risk Management Committee” and under the Board committees section. 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. 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 2022, 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 are otherwise of fundamental significance to Yancoal. Copies Management Committee and Board; of all material market announcements are also circulated to the Board promptly after they have been made, to ensure the Board has timely oversight of the nature and quality of information being disclosed to the market and the frequency of such disclosures. In addition, the Disclosure Committee receives copies of all market announcements prior to release regardless of materiality and the Chair of Audit and Risk Management Committee receives copies of all immaterial market announcements once released, • 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; and • the EGM of Risk and Audit as a central resource available to assist with all risk management responsibilities, and to assist otherwise material announcements are provided prior to release. with any training/awareness or other related requirements. The Disclosure Policy can be found within the Corporate The Audit and Risk Management Committee receives periodic Governance section of the Company’s website. Any information reports on the performance of the Company’s enterprise risk disclosed to the market through an announcement to the ASX management framework, as well as on the Company’s key and HKEx is also published on the Investor section of the risk exposures to satisfy itself that it continues to be sound Company’s website. 4. RISK MANAGEMENT AND FINANCIAL REPORTING RISK IDENTIFICATION AND MANAGEMENT The Board, through the Audit and Risk Management Committee, and that the Company is operating with due regard to the risk appetite set by the Board. An annual review of the risk management framework was conducted in 2022 by the Audit and Risk Management Committee, on behalf of the Board. The Audit and Risk Management Committee confirmed that the risk management framework continued to be effective and adequate is responsible for satisfying itself that a sound system of risk and considered social, environmental and contemporary risks. oversight and management exists, that internal controls are The Audit and Risk Management Committee confirmed that effective and for setting the risk appetite within which the Board the Company is operating with due regard to the risk appetite expects management to operate. In particular, the Board ensures that: • the material strategic, operational, financial reporting and compliance risks are identified and evaluated; and set by the Board. 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 ISO 31000 - 142 2022 CORPORATE GOVERNANCE STATEMENT Risk Management and undertaken on a periodic basis; with risk are specific to the Company while others relate to economic identification and analysis activities performed at a functional conditions and the general industry and markets in which the level, as well as at each of the Company’s mine sites. Company operates. The responsibility for managing risks, risk controls or risk The Company’s risk management policies and procedures management action plans is embedded within the business have been designed and implemented to identify, assess and and undertaken as part of everyday activities. Together with the manage any material exposure to risks relating to the Company’s CEC, the Board and the Audit and Risk Management Committee, business, including environmental and social risks. The Company the EGM of Risk and Audit is responsible for developing a risk undertakes regular monitoring and assessment of existing and matrix and framework and for implementing related risk-based emerging risks. Group material risks are assigned specific risk assurance processes for the Company and its subsidiaries. owners which are recorded alongside applicable key controls The EGM of Risk and Audit annually reviews and confirms the and control effectiveness ratings to manage the Company’s continued effectiveness of the risk framework to the Audit and exposure to such risks. Further details of how the Company 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 manages certain environmental and social risks are set out in the Company’s 2021 Environmental, Social and Governance Report published on the ASX and HKEx platforms and available on the Company’s website. The 2022 Environmental, Social and Governance Report will be published later in 2023. against material misstatement or loss. However, there can be no assurance that such risk mitigation 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 and wider business to seek information and explanations. The Chair of the Audit and Risk Management Committee meets independently with the EGM of Risk and Audit. strategies will protect the Company from these risks. Other risks are beyond the Company’s control and cannot be mitigated or transferred. 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. ENVIRONMENTAL AND SOCIAL RISKS The table below identifies risks which are considered to be environmental and/or social risks. ENVIRONMENTAL RISKS SOCIAL RISKS The role of the EGM of Risk and Audit is responsible for the achievement of the risk management, internal audit, insurance Operations Health and safety objectives and includes the responsibilities of Yancoal’s Regulatory approvals Whistleblower Officer. Mine closure An annual program for internal audit and risk assurance is Overlapping tenement provided to the Audit and Risk Management Committee for Transition to a lower carbon economy approval. The annual Internal Audit program is focused on key operating risks and processes and evaluates the design and operating effectiveness of associated key controls. Technological change Fraud or misconduct The program includes a review of compliance with the obligations Changes in government policy, legislation or regulation imposed by the General Rules on Internal Control for Enterprises Geopolitical Environment and the Supporting Guidelines of Internal Control for Enterprises, jointly issued by five Chinese ministries. Environment Litigation Periodical status reports on the execution of the plan, including Native Title / Aboriginal Cultural Heritage 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. 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 Operational and coal production risks 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. 143 2022 CORPORATE GOVERNANCE STATEMENT The Company’s coal production can be impacted by a number at heights or in confined spaces as well as manual handling of factors, including (but not limited to) for example unforeseen and slip, trip and fall events. These could also have adverse geological or geotechnical issues, inappropriate mine design / financial implications including legal claims for personal injury, plans, underground mine roof falls changes or variations in coal wrongful death, amendments to approvals, potential production quality, high-wall or low-wall failures, cave-ins or other failures delays or stoppages, any of which may have a material adverse relating to mine infrastructure, including tailings dams, hydrologic effect on the financial performance and / or financial position or other conditions, critical equipment unavailability / failure (in of the Company. particular any protracted breakdown or issues with any of the Company’s Coal Handling and Preparation Plants (“CHPPs”) or a major Heavy Mining Equipment), unforeseen delays or complexities in installing and operating mining longwall systems, fires and explosions from methane gas or coal dust, adverse weather including abnormal weather conditions (including prolonged wet weather, flooding and draught), bushfire events, discontinuity caused by poor mining conditions in underground development, inability to dispose of tailings and rejects, insufficient water supply, industrial action, labour shortages, supply chain interruptions, power interruption, damage to third party infrastructure, accidental and mine water discharges, protracted breakdown of rail and port infrastructure. Regulatory factors and the occurrence of other operating risks can also limit production. 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 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 cause exposure to hazardous materials. There is also a risk that actions could be brought against the Company, alleging adverse effects of such substances on personal health. The Company maintains an Occupational Health and Safety Management System Framework that sets out the minimum requirements across the operations. It also regularly reviews the health and safety risks at each of its sites and has identified a number of core hazards that are consistent across each site. The Company has developed methods to control these core hazards. market and economic factors and these risks would not be fully The management of these health and safety controls is covered by insurances maintained by the Company. periodically reviewed at each site to mitigate the core hazard Mining operations can also be impacted by regular rain events. Throughout the year, regular wet weather events generated by the prevailing La Niña weather pattern often had a threefold impact: mining activities were halted; logistics services were potentially severed; and excess water in active open-cut operations restricted mining access, particularly when onsite water storage limits exceeded capacity. Sites are managing such risks at an operational level, including water conservation initiatives and flood mitigation measures. The Company reviews the risks and controls at each site on a regular basis. It validates that related information remains up to date, and applicable controls are in place to minimise or mitigate the occurrence and impact of the risk to the extent practicably possible. Health and safety 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) vehicle interaction / motor vehicle accidents, exposures to energised plant or equipment, exposures to airborne contaminants, handling of tyres, ground or strata instability, fires and explosions, explosives, inrush and inundation, stockpile and reclaim tunnels, integrity of structures and fixed plant, coal or gas bursts, lifting and working with suspended loads, working and associated health and safety risks. Management has also performed a risk assessment around psychosocial risks outlined within the Safe Work NSW Code of Practice – Managing Psychosocial Hazards in the Workplace, and the new ISO 45003 Occupational health and safety management — Psychological health and safety at work — Guidelines for managing psychosocial risks. This risk assessment covers common psychosocial risks across all operational sites and corporate offices and identified controls/mitigants to target the hazards identified and risks assessed. During the year, Yancoal commenced implementation of its four stage / year Mental Health Program. During 2022, Yancoal launched the “Safe Way Every Day” program, a five-year program that has been designed to provide a consistent approach to Health, Safety and Training management across all Yancoal operations, and support the integration of a safety culture across the business. The company remains exposed to pandemic related risks, including COVID-19. These range from health, supply chain, logistics & infrastructure, production and sales risk through to other risks to the continuity of business operations, including absenteeism. The company continues to strongly encourage vaccinations across its workforce and to maintain a scalable COVID-19 control program across mine sites and offices. 144 2022 CORPORATE GOVERNANCE STATEMENT Regulatory approvals The ability of the Company to meet its long term production target been assessed as higher risk will be required to provide a greater amount of security. Mines in both NSW and Queensland are profile depends on (amongst other things) the Company being being held to more rigorous progressive rehabilitation and mine able to obtain on a timely basis, and maintain, all necessary closure regimes. regulatory approvals (including any approvals arising under applicable mining laws, environmental legislation 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 mining sector. There is no assurance or guarantee that the Company will be successful in securing any or all of the required consents, approvals and rights necessary to maintain its forecast 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 planned production increases or changes to mine plans) are not obtained or are delayed, 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. With regard to environmental approvals, NSW and QLD have introduced state government policies and guidelines aimed at protecting agricultural and urban land from the effects of mining. These include the QLD Government’s Central Queensland Plan (2013) and Regional Planning Interests Act 2014 (QLD) and the NSW Government’s Strategic Regional Land Use Policy (2012), Aquifer Interference Policy (2012), NSW Extraction Plan Guideline (October 2022) and the State Environmental Planning Policy (Resources and Energy) 2021 (NSW). Each of these policies is relevant to the areas in which the Company has mining operations. Yancoal’s experts in these areas continuously monitor changing regulations and ensure the Company is in a position to respond promptly to the rapidly changing regulatory environment. The “life of mine” planning process is utilised to identify future approvals requirements. Early identification of an approval requirement provides sufficient time to finesse the scope of a project to limit or avoid environmental impacts, and to collect appropriate baseline data to support new approvals. Early consultation with stakeholders provides data to inform an application and to respond to stakeholder concerns. This approach results in constructive engagement and the mitigation of approvals risk. 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 closure and rehabilitation expenses 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. 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 lose revenues, which could have an adverse financial effect. In addition, there is a risk that closure and rehabilitation 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. The annual “life of mine” planning process assesses closure Regulations and policies are constantly evolving and adapting options and is instrumental in identifying closure costs, liabilities to market trends, community concerns and new technologies. and risks. Further, the Company is developing a mine closure Accordingly, there is no assurance that the future development standard to facilitate a consistent approach to closure planning and exploration activities of the Company will result in profitable or commercially viable mining operations in these areas. In 2013, amendments to the Mining Act 1992 (NSW) introduced a ‘fit and proper person’ test which allows a decision maker to at each of its operations. Native Title / Aboriginal Cultural Heritage 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 make decisions in relation to the grant, renewal, cancellation or which legitimate native title rights of Aboriginal Australians may transfer of an authority based on its view of whether the current exist. Where the grant or renewal of a tenement is in respect of or proposed authority holder is a ‘fit and proper person’. The decision maker may take into consideration whether the proposed authority holder has previous compliance issues, a company’s financial capacity to comply with mining obligations, whether the proposed authority holder has been the subject of insolvency action, and technical expertise. 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, In 2018, the QLD Government revised the process by which and substantial compensation may be payable as part of any mining companies are required to calculate and provide security agreement reached, including for the temporary suspension of for their rehabilitation liability. Companies are now assessed under the relevant native title rights and interests. a risk-based security mechanism. Mining operations that have 145 2022 CORPORATE GOVERNANCE STATEMENT The existence or determination of native title may, therefore, affect decision which adversely impacts upon or prevents the project the existing or future activities of the Company and impact on its proposed by the Company. 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 The Company has established a dedicated and skilled team to manage all tenement matters, including where overlapping tenements exist. This team is charged with oversight of overlapping tenement risks and opportunities, and for constructive met. If a claim is successful, freehold title over the relevant land is engagement with the holders of those overlapping tenements to transferred to the claimant Local Aboriginal Land Council. Further, harmonise operations. 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 Transition to a lower carbon economy 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. The transition to a lower carbon economy gathered pace in 2022, with the 2022 United Nations Climate Change Conference of Parties (COP27) in Sharm El-Sheik, Egypt. decisions of the relevant Aboriginal Land Councils, which may The federal government recently passed legislation to target adversely affect our ability to develop projects and, consequently, a 43% reduction in emissions by 2030. As such, there is an our operational and financial performance. increased focus on high emitting industries such as coal mining. There may be matters of Aboriginal cultural heritage significance in the vicinity of existing or future mining operations. Claims to protect areas of Aboriginal cultural heritage significance may be brought by Aboriginal parties. In addition, a planning approval to disturb areas of Aboriginal cultural heritage does not, as of right, permit the destruction of such areas. It is also possible that both state and federal legislation will be amended to afford greater The government is working on changes to legislation and regulations to progressively step down “baselines” under the safeguard mechanism within the National Greenhouse and Energy Reporting Act. Such changes are likely to require safeguard facilities to purchase and retire “Australian Carbon Credit Units” (ACCU’s) or new “Safeguard Mechanism Credits” (SMC’s) for emissions in excess of their baselines. protection for areas previously proposed to be disturbed. In any Details of these changes are being developed by government. of these circumstances, mine plans may need to be altered, or Currently it is not possible to estimate the quantity or price of projects may become unviable, with a direct impact on forecast ACCU’s or SMC’s the Company may be required to acquire. production profiles and forecast profitability and asset value. Nonetheless, we expect these changes to impact financial returns Yancoal has implemented an additional layer of governance in from July 2023. the oversight of Aboriginal Cultural Heritage matters with the The Company tracks and measures its carbon emissions at development of a corporate register of matters. This initiative is each site and reports emissions under the National Greenhouse designed to identify material matters which warrant corporate and Energy Reporting scheme (NGER). There is a particular oversight and approval. 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 focus on targeting the reduction of GHG emissions from diesel and electricity consumption. This includes optimising diesel consumption in the existing fleet, assessing the potential to progressively electrify the fleet, the use of rooftop solar to reduce grid energy consumption and the opportunity to enter into “power purchase agreements” with renewable energy generators. development of the Company’s projects because the Company The Company is also subject to a spectrum of climate-related and the relevant petroleum exploration or production licence risks, including both physical and transition risks with the potential or other exploration licence holders could potentially seek to to affect the Company’s future development, operations, markets undertake their respective activities on the overlapping area or and asset carrying values. Physical risk factors include (but are the same resource seams and in some cases the overlapping not limited to) extreme weather events, fires, access to water, petroleum tenure holder’s consent may be required. power supply, damage to assets and indirect impacts from supply 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 chain disruption. In terms of physical risks, sites are consistently managing these at an operational level, including water conservation initiatives and flood mitigation measures. the Company. There is also a risk that if agreement cannot be Transition risk factors include (but are not limited to) timing reached with overlapping tenement holders the matter may of technology development and deployment, customer or be referred to the relevant minister or a court who may make a community perception and the regulatory response to the risk 146 2022 CORPORATE GOVERNANCE STATEMENT of climate change. Unilateral and collective action by Australia platforms and available on the Company’s website. The 2022 and other countries, may affect the demand for coal, coal Environmental, Social and Governance Report will be published prices, the future supply of coal and the competitiveness of by the end of April 2023. the Company’s products in the world energy market. Extensive government regulations relating to the transition to a lower carbon world economy may give rise to risks of delay and uncertainty associated with approvals for future development and impose costs on the mining operations of the Company. ESG and supply chain The Company’s Environment & Community team is accountable for the organisation’s ESG report and is engaged with evolving trends and developments to meet stakeholder needs for more useful reporting. ESG considerations are also incorporated into Extensive environmental regulations in Australia, and in other our procurement processes, with supplier ESG performance countries that could affect the Company’s business, may progressively incorporated in our assessment of tenders. This impose costs on its mining operations, and future regulations includes an evaluation of modern slavery performance, health and could increase those costs, limit its ability to produce and sell safety systems and performance, and an explicit requirement for coal, or reduce demand for the Company’s coal products. In suppliers to conduct themselves ethically in compliance with the particular, the regulatory response to the risk of climate change, Yancoal Code of Conduct. 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. The Company’s marketing team is constantly developing a more diversified customer base to improve revenue resilience. 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 Future regulations could increase those costs, limit the Company’s thermal coal demand. 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. The Company is also exposed to risks related to external factors, including the capital and insurance markets. 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 Company recognises the growing interest by stakeholders the cancellation of planned additional coal-fired power capacity, in how Yancoal is positioning itself in this shift to a lower-carbon which may reduce demand for thermal coal in the market. economy, through managing potential risks and identifying and developing opportunities for our business and the broader sector as a result of an anticipated global shift towards a lower- carbon economy. Within this context, Yancoal has identified the development of renewable energy projects and the pursuit of diversification into minerals and commodities beyond coal as important elements of a strategy to underpin the ongoing sustainability of its business into the future. 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. The Company engages constructively with all stakeholders to ensure they have access to objective information to inform their views. Additional details relating to the transition to a lower carbon economy is provided in the Company’s 2021 Environmental, Social and Governance Report published on the ASX and HKEx There is also a risk of the Company not keeping up with technology advancements which could affect its future competitiveness. Our diversified and evolving customer base assist in improving business resilience to changing demands. Our focus on high quality, low cost Tier 1 assets is an important limb of our strategy to mitigate the impact of technological change. Fraud and misconduct Any fraud (including cyber fraud), misrepresentation, money laundering, corruption 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. 147 2022 CORPORATE GOVERNANCE STATEMENT Yancoal wants everyone to work in an environment that is While the Company maintains active engagement with all conducive to productivity, safety and teamwork. It has in place a stakeholders such as the government, industry forums and Code of Conduct, which sets out expected standards of behaviour peer-groups, the risk mitigation is limited as the risk impact is that are non-negotiable and key to the Company’s culture, influenced by external factors. including the clear prohibition of bullying, (sexual) harassment, retaliation and unlawful discrimination. The Code of Conduct is supplemented by a Speak Up facility that allows for any concerns to be raised confidentially and anonymously. Material disclosures received via this facility are subject to investigations overseen by Yancoal’s Whistleblower Officer, with outcomes reported to the Board. Changes in government policy, legislation or regulation The Company is subject to extensive legislation, regulations and supervision by a number of federal and state regulatory bodies. Any future legislation or 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, the domestic coal reservation policy as proposed by NSW government, or the use of coal in power generation. Yancoal is a member of the state industry body in each jurisdiction, as well as of the federal Minerals Council of Australia. Each of these industry associations is actively involved in advising respective governments in respect of changes in policy, legislation and regulation, and is primarily accountable for the industry’s lobbying efforts in that regard, and in keeping association members informed of developments. Geopolitical Environment The Company is subject to geopolitical exposures that have 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 any environmental requirements, it may incur fines or penalties, be required to 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. Changes to environmental regulations may increase the standard and cost of compliance, and may adversely affect the Company’s ability to generate the expected economic returns from its mining assets over their operational life. 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 the potential to impact the Company’s operations and growth. economic returns over their useful lives. Import protocols of China continue to influence regional coal markets and have resulted in an increased diversification of the Company’s customer base. Yancoal intends to continue this diversification of its customer base and sales mix in the most optimal market available. Taxation The Company is subject to a range of taxation obligations, which 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 is managed under its Tax Policy. Tax risks arise from business Company may become liable as a result of its activities may be systems, operations and development, as well as external factors impossible to assess under the current legal framework. including regulatory assurance activities, changes in tax and industry legislation and regulations. The Company uses hazardous materials and will generate hazardous waste, and may be subject to common law claims, The Company publishes a Tax Transparency Report annually, damages due to natural disasters, and other damages, as well as covering its approach to tax, and tax governance and tax risk the investigation and clean-up of soil, surface water, groundwater, management framework. Royalties Royalties are payable to the NSW and QLD state governments and other media. Such claims may arise, for example, out of current or former activities at sites that it owns or operates. The Company maintains regular corporate oversight and on coal produced in NSW and QLD. In both states, the royalties management reporting on compliance to company policies and are payable on an ad valorem basis as they are calculated as regulatory requirements. It employs skilled experts at each site a percentage of the value for which the coal is sold. There is a to manage its environmental compliance obligations. Further, risk when the NSW and QLD state governments increase these it has implemented an independent external environmental royalties or their method of calculation; as done recently by QLD assurance program which audits each site on a periodical basis, state government. Any future impost of any new royalty related with a primary focus on the identification and management of state tax or increase in royalty rates has an adverse effect on environmental risks. the Company’s financial position and/or financial performance. 148 2022 CORPORATE GOVERNANCE STATEMENT Litigation Like all companies in the resources sector, the Company is In addition, the coal price is highly dependent on the outlook for coal consumption in large Asian economies, such as China, Japan exposed to the risks of litigation (either as the complainant or and India, as well as any changes in government policy regarding as the defendant), which may have a material adverse effect on coal or energy policy in those countries. 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. 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 Breach of contractual obligations to key clients such as delayed or of new mines and projects due to such development not being non-delivery of coal can expose the Company to financial loss and economically viable. reputational impact. Yancoal undertakes legal review and ongoing conflict management of key material contracts to minimise risk of disputes and subsequent litigation. The Company also manages its obligations under relevant legislation to manage risk of prosecution, such as set out under the risks “Health and safety” and “Regulatory approvals” above. 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. ECONOMIC AND CONTEMPORARY RISKS In addition to the above environmental and social risks, the The liabilities, earnings and cash flows of the Company are influenced by movements in exchange rates, especially Company is subject to a range of economic and contemporary movements in the A$:US$ exchange rate. risks. These include (but are not limited to) the Company’s exposure to coal prices and demand, foreign exchange rates, insurance, transport and infrastructure, technology and cyber vulnerabilities, estimates of coal resources and reserves, business development risks, funding, impairments, NCIG and WICET debt, While the Company’s 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 people and talent management and Joint Ventures and reliance currencies, and debt denominated in US$. on third parties. These are further outlined below. Coal prices and coal demand The Company generates revenue from the sale of coal. In 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 developing its business plan and operating budget, the Company forward exchange contracts or other hedging instruments and the makes certain assumptions regarding coal prices and demand terms of these contracts. 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 Insurance The Company has external 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 externally insured (or has not sufficiently insured) or cannot insure, including liabilities in respect of past activities. The growing anti-coal sentiment in the insurance market may also further reduce insurance capacity available to the Company and/ or lead to insurance terms for certain insurance types or layers no in the supply of seaborne coal, technological changes, changes longer being economically viable. 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. As a result, the risk transfer to a third party as achieved through external 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. 149 2022 CORPORATE GOVERNANCE STATEMENT In addition, insurance may not be available or continue to be damage, equipment faults, power failure, computer viruses, available at economically acceptable premiums and therefore misuse by employees or contractors, telecommunications failures, require a form of self-insurance. Yancoal established a wholly external malicious intervention such as hacking, terrorism, fire, owned captive insurance company in FY22 that retained some natural disasters, or weather interventions. Such events are initial risk during the financial year and over time seeks to build up largely beyond the Company’s control, and may affect its ability to risk capital and help off-set future reductions in external insurance carry on our operations efficiently. The Company is enforcing the capacity. However, in the absence of external insurance coverage cyber defensive measures by deploying tools and technologies and therefore external risk transfer, major losses could adversely related (but not limited) to remote vendor access, multi-factor affect the future financial performance of the Company. authentication, intrusion protection and other monitoring systems. Transport and infrastructure Coal produced from the Company’s mining operations is Estimates of Coal Resources and Reserves and geology The volume and quality of the coal that the Company recovers transported to customers by a combination of road, rail and sea. may be less than the Coal Resource and Reserve estimates Fluctuations in transportation costs and disruptions to our railway reported to date. Coal Resource and Reserve estimates are and port linkages could disrupt the Company’s coal deliveries expressions of judgment based on knowledge, experience and and adversely affect its business, financial condition and results industry practice. There are risks associated with such estimates, 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 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. or delay in the construction of new rail or port capacity, failure Coal Resource and Coal Reserve estimates are regularly revised to meet contractual requirements, terrorist attacks, breach of based on actual production experience or new information and regulatory framework, mismatch of rail and port capacity or the could therefore be expected to change. Furthermore, should possible sale of infrastructure. Each of these factors could impair the Company encounter mineralisation or formations different the Company’s ability to supply coal to customers and/or increase from those predicted by past drilling, sampling and similar costs, and consequently may have a material adverse effect on examinations, Coal Resource and Coal Reserve estimates may the Company’s financial position. have to be adjusted and mining plans, coal processing and 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. Risk exposures are managed by a dedicated team of experts, of both Yancoal assets as well as the greater supply chains used. Mitigating activities undertaken includes actively monitoring previously experienced, current and emerging risks by analysis of 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. automated data capture from supply chain operations, as well as If the Company’s actual Coal Resource and Coal Reserve information shared with all other supply chain intermediaries. estimates are less than current estimates, the Company’s prospects, value, business, results of operations and financial condition may be materially adversely affected. 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. The Company also performs an active role in key industry forums, including government bodies, as well as incident management and critical response groups. Technology / cyber The Company’s business relies on the performance, reliability and availability of its 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 150 2022 CORPORATE GOVERNANCE STATEMENT Funding The amount of future funding required by the Company will crucial in the ability to attract and retain people. This combined with a review of allowances, retention payments and more flexible depend on a number of factors, including (but not limited to) the rostering arrangements has meant that the Company has done business activities, commitments and the overall performance of particularly well to retain employees, with 88% of workforce the Company’s business at that time. The Company’s business choosing to remain during the year. 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. The growing anti-coal sentiment in capital markets is reducing external funding capacity available to the Company and/or lead to terms that are no longer economically viable. The Company also recognises the need to grow future leaders from within the organisation, and during 2022 an additional 17 high potential participants were included in the Company’s high potential leadership development program, Ignite. The Company has also developed a Front Line Leadership program called “Lead the Way” and roll out of the program commenced in Q4 2022. It is expected that by the end of 2023 more than 30% In developing its business plan and operating budget, the of front line leaders will have attended this program. In 2023 the Company has made certain assumptions regarding coal prices, Company also plans to roll out a suite of soft skill training courses the A$:US$ exchange rate, future production levels, business which will contribute to employee development journey. development activities, dividends and other factors which determine the Company’s financial performance. Impairment The Company’s balance sheet includes a number of assets 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 that are subject to impairment risk. The value of these assets is parties. Decision making, management, marketing and other derived from the fundamental valuation of the underlying mining key aspects of each joint venture are regulated by agreements operations and as such is subject to many of the risks including, between the relevant joint venture participants. Under these but not limited to, coal price and demand, foreign exchange, coal agreements, certain decisions require the endorsement of third production, estimates of reserves and resources, uncertainty in party joint venture participants and the Company relies on the costs forecasts, operating risks, injury and mine closure. co-operation of these third parties for the success of its current 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. NCIG and WICET debt As a shipper in NCIG and WICET, the Company may be required to pay its share of any outstanding senior debt, amortised over the remaining years of that particular contract, if the Company’s source mines are unable to maintain a minimum level of Marketable Coal Reserves. Furthermore, the Company may be required to pay its share of any outstanding senior debt in 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. full, if NCIG and WICET are unable to refinance a tranche of its The Company also use contractors and other third parties for maturing debt and defaults on its remaining debt. If an other NCIG exploration, mining and other services generally, and is reliant on or WICET shipper was to default on its contractual obligations a number of third parties for the success of its current operations and was unable to pay its share of the NCIG or WICET debt and for the development of its growth projects. While this is normal respectively, the outstanding senior debt would be socialised for the mining and exploration industry, problems caused by third amongst the remaining shippers. In this scenario the Company’s parties may arise which may have an impact on the performance share of the outstanding senior debt would increase. 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. People and talent management The retention and attraction of talent will remain a key risk as the labour market constraints in the Australian coal industry are expected to remain for the foreseeable future. The key to ongoing success and sustainability as a business is maintaining and upholding company culture, which is underpinned by the Yancoal values and beliefs. During 2022, after engaging with the staff, the Company developed a purpose statement and set of inclusive leadership behaviours. These resources serve to reinforce and safeguard Company culture for the future. The Company workplace culture and employee value proposition are 151 2022 CORPORATE GOVERNANCE STATEMENT HEALTH, SAFETY, ENVIRONMENT AND COMMUNITY COMPLIANCE The Company has adopted policies to comply with occupational EXTERNAL AUDITOR The Company’s external auditor is SW Audit (formerly ShineWing Australia). Consistent with the requirements of the Corporations health, safety, environment and other laws. The Board has a Act 2001 (Cth) for listed entities, SW Audit has a policy of Health and Safety Policy and an Environment and Community partner rotation every five years. The appointment, removal Relations Policy which apply across all areas of the business. and remuneration (not including amounts paid for special or In addition, each mine site has its own health, safety and additional services provided by the auditor) of the auditor require environmental policies and procedures to deal with their shareholder approval. 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, environmental and community responsibilities. The committee meetings are generally held at one of the Company’s mine sites, to provide the Committee with the opportunity of viewing the implementation of the policies in practice, to receive feedback from site operational representatives and to address any mine specific health, safety and environment issues. Further information regarding the Health, Safety, Environment and Community Committee is outlined under the Board committees section above. AUDIT AND RISK MANAGEMENT COMMITTEE The Board is responsible for preparing the financial statements and accounts of the Company. The Audit and Risk Management Committee 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. Further information regarding the Audit and Risk Management Committee is outlined under the Board committees section above. CEO AND CFO CERTIFICATIONS ON FINANCIAL REPORTS The persons who performed a chief executive function and chief The external auditor receives all papers and minutes of the Audit and Risk Management Committee. The external auditor also attends the Company’s AGM to answer questions from shareholders relevant to the Company’s audit. The statement of the external auditor, SW Audit, 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 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 2022 are set out in the Directors’ Report. VERIFICATION OF PERIODIC CORPORATE REPORTS Where a periodic corporate report is not required to be audited or reviewed by an external auditor, the Company conducts an internal verification process to confirm the integrity of the report to ensure that the content of the report is materially accurate, balanced and provide investors with appropriate information to make informed investment decisions. The verification financial officer function for the Company have declared in writing process involves the reports being prepared and reviewed by to the Board that in respect of the half year ended 30 June 2022 and the full year ended 31 December 2022, in their opinion, the relevant executives. Further details regarding the Company’s disclosure and communications processes are set out below financial records of the Company have been properly maintained under paragraph titled “Make timely and balanced disclosure”, 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. and section titled “Communications with shareholders”. 152 2022 CORPORATE GOVERNANCE STATEMENT 5. DIVERSITY The Company recognises that people are its most important with a view to progressing towards a balanced representation asset and is committed to the maintenance and promotion of of women at a Board and senior management level. workplace diversity. The Company’s Diversity and Inclusion Policy, approved by the Board, seeks to actively facilitate a more diverse and representative management and leadership structure. The Diversity and Inclusion 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 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 and Inclusion Policy. The measurable objectives adopted for 2022 and the Company’s performance against the measurable objectives are outlined in the table below: OBJECTIVE PERFORMANCE 1. To promote the DE&I Strategy to all leadership teams, to articulate the business case for greater diversity and create buy-in and ownership for the year 1 objectives of the plan The Yancoal Diversity, Equity and Inclusion Strategy (“DE&I Strategy”) was initially presented in detail to the Yancoal human resources team (“HR team”) at a forum held in July 2022. An action item from the presentation was for site human resource leads to communicate the strategy with their Site Leadership Team (SLT). The DE&I Strategy is aligned to Yancoal’s Diversity and Inclusion Policy which underwent an external review in 2022. The document was updated to reflect industry best practice and encompass Yancoal’s evolving efforts in promoting a diverse and inclusive environment. To further incorporate ownership and improve the ongoing governance of the DE&I Strategy a DE&I committee will be established in 2023 consisting of nominees representing each of our sites. 2. To promote appropriate gender balance in interview selection panels Increasing gender balance in our interview and selection panels reduces the risk of unconscious bias playing a part in candidate selection. Our HR teams comprising a majority of female employees attend site-based interviews providing balanced and unbiased recommendations. In 2022 Yancoal recruited 101 new female employees to the business which represents 20% of all new hire engagement. This is 6% greater than our female to male ratio of 14%. 3. To actively promote the achievement of women at Yancoal through nominations in external awards, including NSW, QLD & WA Women in Mining, WIM100 and other industry awards NSW Mining hosts the annual NSW Women in Mining Awards to acknowledge and highlight the achievements of women in mining. Yancoal submitted five nominations for the 2022 awards across two award categories: Exceptional Woman, and Outstanding Woman Trade, Operator or Technician. Yancoal was successful with Rebecca Jackson (Exploration Manager) being recognised as a finalist in the Exceptional Woman category. 4. To provide development support and mentoring for women to progress into leadership positions, particularly in areas affected by gender imbalance 5. To promote days of significance such as International Women’s Day 6. To evaluate our gender balance and set a target to increase the proportion of women in the Yancoal workforce from 12% to 13% Mentoring NSW: Yancoal is a Silver Sponsor for the 2022 NSW Women in Mining Mentorship program. This year we have eight female employees from Moolarben, MTW, Stratford and Sydney, and from a range of roles including operators, mining engineers, specialists, support staff and a manager. Yancoal also has four mentors accepted in the program inclusive of one Executive. QLD: Yancoal has employees participating in the WIMARQ (Women in Mining and Resources Queensland) mentoring program. There are 2 mentees participating in the program, one from Yarrabee and the other from Cameby. Yancoal is also in the process of establishing an internal mentoring program open to all female employees. The initiative has been developed and led by the 2022 Ignite leadership group. The program will commence in February 2023 with 12 female mentor and mentee partnerships established. The program will run for 9 months with monthly mentoring sessions scheduled. Leadership Development The Ignite program is Yancoal’s flagship talent program which has continued to develop high potential and high performing females into leadership positions over the last three years. Since 2020, Ignite has had 57 participants in total with 14 (25%) of the participants being female leaders. 5 females have successfully been promoted to more senior roles in the business since completing the Ignite program. The Women in Energy & Resources Leadership Summit features Australia’s foremost senior female leaders in our industry sharing their leadership journey and shaping strategies to help participants increase self-confidence and establish a leadership presence. In 2022 Yancoal sponsored three talented females to attend. Feedback from the event was extremely positive. International Women’s day was celebrated at every site and office across Yancoal in March 2022. The event provided an opportunity to celebrate the achievement of our female nominees and female employees more broadly. The proportion of women in the workforce has increased by 1% from 14% in 2021 to 15% in 2022. Significant improvements across all sites have been made with the female representation in our wage’s workforce. Of note were the recent efforts achieved at Premier Coal increasing female representation to 18%. An additional 50 females were recruited to the site in the last 12 months via targeted campaigns and networking activity. 7. To encourage career planning conversations and achievable and structured development plans to be put in place as part of the annual Performance Review & Development cycle During the 2022 goal setting process, 39% of our salaried staff recorded formalised development plans in their annual Performance Review & Development Plan. Coincidentally, it is the same percentage rate for both men and women. The 39% also provides a baseline number on which to build to raise development planning as an important aspect of the annual process. 153 2022 CORPORATE GOVERNANCE STATEMENT The Board has set the following measurable objectives in relation to gender diversity for 2023: 1. We will establish a D&I committee representing each of our sites to improve our structure of governance and accountability for diversity and inclusion across the whole business. 2. We will provide development support and mentoring programs for women to progress their careers with Yancoal. Target greater than 30 female employees being mentored in 2023. 3. We will evaluate our gender balance and set a target to maintain and/or improve the proportion of women in the Yancoal workforce at 17% or higher. 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 2022, the proportion of women who were directly engaged as employees and contractors was 15%: 473 direct employees and 123 Managed Contractors. The proportion of women in Executive Committee roles within the Company during 2022 was 7%: Women held 1 of 14 Executive Committee 4. We will encourage career planning conversations and roles within the Company. development plans to be put in place as part of the annual Performance Review & Development cycle. Target > 80% salaried females have development plans in place. 5. We will aim to continually reduce the gender pay gap through conducting and actioning annual gender pay reviews. 6. We will provide all employees with a workplace environment and culture that supports inclusivity including creating awareness of the negative impacts associated with bullying, harassment and sexual harassment. On and from 30 January 2018, one female Non-Executive Director sits on the Board. 6. 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 In considering the Board’s succession, the Remuneration and corporate direction. The Company aims to keep shareholders, Nomination Committee would identify and select the potential potential investors and other stakeholders informed of all major candidates for Directors in accordance with the Committee’s developments affecting the state of affairs of the Company. Charter and may engage independent professional search firms The Company facilitates the investor relations program by to identify potential candidates for Independent Non-executive communicating information regularly to shareholders, potential Directors as and when appropriate. The Board will continue to investors and other stakeholders by: strive to increase the proportion of female members over time in line with any measurable objectives set by the Board for gender diversity. According to the Australian Workplace Gender & Equality Agency (WGEA) in 2021/22 the proportion of women to men in the Australian workforce was roughly 50:50. However, WGEA also reported that the mining sector is the top male dominated sector with approximately 80% male participation. The coal industry sub-division is even more challenging with a female participation rate of 17.6%. The lower number of female participants in the coal mining sector make it challenging to achieve increased levels of gender diversity. • 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 ‘Investors’, ‘Sustainability’, ‘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 company presentations made to analysts or investors on the ASX and HKEx platforms within the Investor section of the Company’s website. 154 2022 CORPORATE GOVERNANCE STATEMENT The Board considers one of its key responsibilities to be Under section 249N of the Corporations Act 2001 (Cth), communication with shareholders. The Company generally shareholders representing at least 5% of the total votes that encourages shareholders to attend and participate in all general may be cast on the resolution or at least 100 shareholders who meetings including AGMs and will use a variety of technological are entitled to vote at a general meeting may give the Company solutions where appropriate to facilitate such participation of notice requiring resolutions to be put before a general meeting. shareholders to allow shareholders to attend and vote in person, The notice must be in writing, must set out the wording of the by proxy or online, this may include, for example, making proposed resolution and must be signed by the shareholders meetings available to view by live telecommunications. To proposing to move the resolution. ensure that the views of as many shareholders as possible are represented, it is the Company’s standard practice at an AGM (and any other general meeting) for all resolutions to be decided by a poll rather than by a show of hands. 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. Apart from the general meetings, the Company’s website provides an effective means of communication with shareholders. The Company’s Shareholder Communications Policy sets out the Company’s commitment of maintaining an ongoing dialogue with shareholders and the investment community. This Policy is reviewed by the Board on a regular basis as required to ensure its effectiveness. 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 Company’s General Manager - Investor Relations, including at shareholder@yancoal. The Company’s 2022 AGM was held at 11.00am (AEST) (being com.au. Upon receipt of the enquiries, the General Manager 9.00am (HKT)) on Monday, 30 May 2022 at Darling Park, The - Investor Relations will forward the shareholders’ enquiries Pavilion, 201 Sussex Street, Sydney NSW 2000, Australia. and concerns to the Board, Board committees or management The major items discussed were the re-election of Directors, as appropriate. issue of rights under the equity incentive plan and re-insertion of proportional takeover provisions. All resolutions were duly passed by the shareholders by way of poll. The Company’s Shareholder Communication Policy can be found within the Corporate Governance section of the Company’s website. 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. 7. AMENDMENTS TO THE COMPANY’S CONSTITUTION At a general meeting of Shareholders held on 30 May 2022, Shareholder approval to amend the Constitution was sought and obtained. The Constitution was amended by: a) replacing the references to “Yanzhou” and “Yanzhou Coal Mining Company Limited” with “Yankuang” and “Yankuang Energy Group Company Limited”; and b) inserting “at the Company’s general meetings or creditors meetings” to Rule 7.9(u) to provide for the right of a recognised clearing house or its nominee(s) to appoint or authorise proxies, attorneys or representatives to attend the Company’s general meetings and creditors meetings to cast votes attaching to voting shares that it holds in the Company. This Corporate Governance Statement has been approved by the Board and is current as at 27 February 2023. 155 2022 CORPORATE GOVERNANCE STATEMENT C O N T I N U I N G C O N N E C T E D T R A N S A C T I O N S The Company has entered into certain transactions with the three years ending 31 December 2021, 2022 and 2023 (as connected persons of the Company, which constitute continuing amended on 5 October 2022) was not to exceed US$87.5 million, connected transactions of the Company under the HK Listing US$155 million and US$155 million, respectively. During the year Rules. These non-exempt continuing connected transactions are ended 31 December 2022, the transaction amount received by set out below. the Group was approximately US$123.0 million, which was below SALE OF COAL BY THE GROUP TO YANKUANG ENERGY From time to time, Yankuang Energy (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 annual cap. PURCHASE OF COAL BY THE GROUP FROM YANKUANG ENERGY The Group has purchased and may, from time to time, purchase coal from Yankuang Energy and/or its subsidiaries (excluding the Group), in particular Australian based subsidiaries of On 19 November 2020, the Company entered into a framework Yankuang Energy (excluding the Group) holding mines which agreement for coal sales with Yankuang Energy (the “Yankuang are managed by the Group, for back-to-back on sale to end Energy Framework Coal Sales Agreement”) in relation to the sale customers in order to fulfil customer requirements and maintain of coal by the Group to Yankuang Energy and/or its subsidiaries customer relationships. (excluding the Group) commencing from 1 January 2021 and expiring on 31 December 2023. The Company entered into a framework coal purchase agreement with Yankuang Energy (the “Yankuang Energy Framework Coal The Yankuang Energy Framework Coal Sales Agreement provides Purchase Agreement”) on 8 October 2018 to govern all existing that all transactions in relation to the sale of coal by the Group to and future purchases of coal by the Group from Yankuang Energy Yankuang Energy and/or its subsidiaries (excluding the Group) and/or its subsidiaries (excluding the Group). The Yankuang must be: (i) in the ordinary and usual course of business of the Energy Framework Coal Purchase Agreement provides that all Group; (ii) on an arm’s length basis; (iii) on normal commercial transactions in relation to the purchase of coal by the Group from terms or better; and (iv) in compliance with, among other things, Yankuang Energy and/or its subsidiaries (excluding the Group) the HK Listing Rules and applicable laws. must be: (i) in the ordinary and usual course of business of the The maximum annual transaction amount to be received by the Group from Yankuang Energy and/or its subsidiaries (excluding the Group) for the three years ending 31 December 2021, 2022 and 2023 was not to exceed US$20 million, US$20 million and US$20 million, respectively. During the year ended 31 December 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. 2022, no sales to Yankuang Energy and/or its subsidiaries On 16 December 2020, the Board resolved to renew the (excluding the Group) were made. SALE OF COAL BY THE GROUP TO YIT On 19 November 2020, the Company entered into a framework agreement for coal sales with Yancoal International Trading Co., Ltd. (“YIT”) (the “YIT Framework Coal Sales Agreement”) in relation to the sale of coal by the Group to YIT and/or its associates (excluding the Yankuang Energy Group), commencing from 1 January 2021 and expiring on 31 December 2023. YIT is a wholly-owned subsidiary of Shandong Energy, the controlling shareholder of Yankuang Energy. Accordingly, YIT is a connected person of the Company by virtue of being an associate of Yankuang Energy. The YIT Framework Coal Sales Agreement provides that all transactions in relation to the sale of coal by the Group to YIT and/ or its associates (excluding the Yankuang Energy 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 or better; and (iv) in compliance with, among other things, the HK Listing Rules and applicable laws. Yankuang Energy Framework Coal Purchase Agreement for a further three years commencing from 1 January 2021 and to set the annual caps for the three years ending 31 December 2021, 2022 and 2023 at US$40 million, US$40 million and US$40 million, respectively. During the year ended 31 December 2022, no purchases from Yankuang Energy and/or its subsidiaries (excluding the Group) were made. 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 Coal Limited 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) Yankuang Energy; (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, on 22 June 2012, pursuant to which the Company has agreed to provide to the Existing The maximum annual transaction amount to be received by the Recipients certain services in respect of certain assets owned by Group from YIT and/or its associates (excluding the Group) for the Existing Recipients. Each of the Existing Recipients is a wholly 156 owned subsidiary of Yankuang Energy (other than Yankuang Services Fees Services Fees Energy itself). Yankuang Energy is a Controlling Shareholder of The services fees for provision of the Services are charged on the Company and is interested in approximately 62.26% of the the basis of cost plus a 5% margin, except for any third-party Shares in the Company. On 7 December 2016, a deed of variation, accession and termination to 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 Shandong Energy. Shandong Energy is, directly and indirectly, charges attributable to the provision of the relevant services which are charged at cost. The cost base upon which the 5% margin is applied is determined on the basis of management’s reasonable estimate of such costs as may be defined in the budget of each calendar year having regard to certain principles, including: (i) in respect of coal-mining operations, the allocated portion of the Company’s corporate administration costs based on the Company’s corporate budget in respect of those corporate administration costs; and (ii) in respect of non- mining operations, the estimated management time likely to be incurred in providing the Services and the allocated portion of the Company’s corporate administration costs based on the Company’s corporate budget in respect of those corporate administration costs. The above costs are subject to re-calibration at the start of every year on the basis of the previous year’s actuals and any anticipated changes. interested in approximately 54.81% of the shares in Yankuang At the end of each financial year (or such other times as the Energy and is a controlling shareholder of the Company. parties may agree), the parties will undertake a reconciliation Details of the terms of the Management and Transitional Services Agreement, as amended pursuant to a deed of variation to the Management and Transitional Services Agreement on 12 November 2021, are set out below. 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 Services Services The services provided to each Recipient and each of their respective subsidiaries include: • 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; • 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 • IT services, which comprise the granting of the permission to use the Company’s hardware or software and the provision of IT support services. (collectively, the “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. fee adjustment required. Payment of the Services Fees Payment of the Services Fees The Company will invoice the Recipients each month for services provided. 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. On 16 December 2020, the Board resolved to set the annual caps for the three years ending 31 December 2021, 2022 and 2023 at $12 million, $12 million and $12 million, respectively. During the year ended 31 December 2022, the transaction amount charged by the Group was approximately $11.7 million, which was below the annual cap. LOAN FACILITY PROVIDED BY THE COMPANY TO PREMIER COAL Premier Coal Holdings Pty Ltd, an indirect wholly-owned subsidiary of Yankuang Energy (“Premier Coal”) (as the borrower), entered into a loan agreement with the Company (as lender) on 15 June 2016 in relation to a $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 157 CONTINUING CONNECTED TRANSACTIONS the Premier Coal Loan Agreement, subject to automatic extension Energy Entities and/or their subsidiaries for the three years on a rolling 12 months basis, or any earlier date on which the ending 31 December 2020, 2021 and 2022 was not to exceed facility is terminated or cancelled in full or on which all the money $170 million, $170 million and $170 million, respectively. During owing becomes due and payable. On 16 December 2020, the Board resolved to set the annual caps, representing 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 2021, 2022 and 2023 at $53.5 million, $53.5 million and $53.5 million, respectively. As at 31 December 2022, no amount remained drawn down under the Premier Coal Loan Agreement. BANK GUARANTEES PROVIDED IN FAVOUR OF CERTAIN YANKUANG ENERGY SUBSIDIARIES Framework Bank Guarantee Agreement 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 “Yankuang Energy Entities”) (the “Framework Bank Guarantee Agreement”) on 19 December 2019, pursuant to which the Yankuang Energy 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 was for a period of three years commencing 1 January 2020 and expiring on 31 December 2022. On 23 December 2022, the Framework Bank Guarantee Agreement was extended for one further year from 1 January 2023. The Company manages certain mines, which are located in Australia, on behalf of the Yankuang Energy Entities and/or their subsidiaries. In the ordinary and usual course of business, the Yankuang Energy Entities and/or their subsidiaries 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 the year ended 31 December 2022, the aggregate maximum daily outstanding principal and the bank guarantee fees was approximately $84.8 million, which was below the annual cap. SALE OF COAL BY THE GROUP TO GLENCORE From time to time, Glencore Coal Pty Ltd (“Glencore”) and/or its subsidiaries and/or related entities 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). On 16 December 2020, the Board resolved to renew the Glencore Framework Coal Sales Agreement for a further three years from 1 January 2021, and to set the annual caps for the three years ending 31 December 2021, 2022 and 2023 at US$350 million, US$350 million and US$350 million, respectively. During the year ended 31 December 2022, the transaction amount received by the Group was approximately US$188.5 million, which was below the annual cap. documents pursuant to existing facility agreements generally within five business days after receiving a request, which is a SALE OF COAL BY THE GROUP TO POSCO From time to time, POSCO Australia Pty Ltd (previously known as much shorter period of time and simpler process as compared Pohang Steel Australia Pty Ltd) (“POSCO”) and/ or its associates to those required by other commercial banks to issue credit may purchase coal from the Group for their own utilisation in the support documents without an existing facility agreement, and manufacturing of steel or generation of electricity. As POSCO is the relationship between the Company and the managed mines, interested in 20% of the Mount Thorley JV, a subsidiary of the as an integral part of the management services rendered by the Company under the HK Listing Rules, POSCO is a connected Company in support of the operation of the managed mines, person of the Company by virtue of being a substantial the Yankuang Energy Entities and/or their subsidiaries holding shareholder of the Company’s subsidiary. 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. On 22 December 2021, each of Ashton Coal Mines Limited, Miller Pohang Coal Company Pty Limited, Yarrabee Coal Company Pty Ltd and Stratford Coal Pty Ltd (each a subsidiary of the Company) The aggregate maximum daily outstanding principal and the formally agreed to enter into a coal sales agreement with POSCO bank guarantee fees to be received under the credit support (collectively, the “POSCO Coal Sales Agreements”) pursuant to documents issued by the financiers in favour of the Yankuang which POSCO and/or its associates have agreed to purchase 158 CONTINUING CONNECTED TRANSACTIONS coal from the Group during the three years ending 31 December and Anotero’s entitled portion of coal product (other than coal 2024. The maximum annual transaction amounts to be received product to be sold to Glencore and/or its subsidiaries); (ii) the by the Group from POSCO and/or its associates for the sale of amount payable to each of CNAO and Anotero by the SalesCo coal pursuant to the POSCO Sales Agreements for the three shall be the total amount received by the SalesCo for that portion years ending 31 December 2022, 2023 and 2024 (as amended of product under each sales contract entered into between the on 1 September 2022) will not exceed US$450 million, US$300 SalesCo and its customers; and (iii) payment by the SalesCo to million and US$300 million, respectively. During the year ended CNAO and Anotero shall be no later than 3 business days after 31 December 2022, the transaction amount received by the Group receipt by the SalesCo of payment from its customers. In respect was US$337.1 million, which was below the annual cap. of any sales to Glencore and/or its subsidiaries that fall within the PURCHASE OF COAL BY THE GROUP 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 associates. 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 Glencore Framework Coal Sales Agreement, each of CNAO and Anotero agrees that SalesCo will be treated as if it has entered into the sale as agent for and on behalf CNAO and Anotero in proportion to their respective participating interests in the HVO JV. 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. and usual course of business of the Group; (ii) on an arm’s length Notwithstanding that the term of the HVO Sales Agreement may 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 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 will take into account relevant industry benchmarks and indices expiry of the initial three years. 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. The original maximum annual transaction amounts to be paid by SalesCo for Anotero’s entitled portion of finished coal product in saleable form that is produced by the tenements held by the HVO JV (other than coal product to be sold to Glencore and/or its subsidiaries) pursuant to the HVO Sales Agreement for the three On 16 December 2020, the Board resolved to renew the Glencore years ending 31 December 2021, 2022 and 2023 was US$750 Framework Coal Purchase Agreement for a further three years commencing from 1 January 2021 and to set the annual caps million, US$750 million and US$750 million, respectively. On 9 November 2022, the maximum annual transaction amounts for for the three years ending 31 December 2021, 2022 and 2023 at the year ending 31 December 2022 and 2023 were amended to US$250 million, US$250 million and US$250 million, respectively. US$1.9 billion and US$1.9 billion, respectively. The transaction During the year ended 31 December 2022, the transaction amount distributed by the SalesCo to Anotero up to 9 November 2022 has paid by the Group was approximately US$78.7 million, which was exceeded the original maximum annual transaction amount while below the annual cap. PURCHASE OF COAL BY SALESCO 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 on 4 May 2018 (the “HVO Sales Agreement”). The relevant mining and exploration licences of HVO are held the transaction distributed by the SalesCo to Anotero for the year ended 31 December 2022 of approximately US$1.56 billion was below the revised annual cap. 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 directly by CNAO and Anotero as tenants in common in proportion Limited) (“MT Operations”), a wholly-owned subsidiary of the 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 Company holding the relevant mining and exploration licences of Mount Thorley on behalf of the MT JV, sell coal through Miller Pohang Coal Co. Pty Limited (the “MT SalesCo”). 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 159 CONTINUING CONNECTED TRANSACTIONS of the Company under the HK Listing Rules. As POSCO holds The 2019 Diesel Fuel Supply Agreement became effective on more than 10% of the interest in the MT SalesCo, and has 1 November 2019 and expired on 31 October 2022. Accordingly, more than 10% participating interest in the MT JV, POSCO is on 13 October 2022, HV Operations and GAO agreed to extend a connected person of the Company by being a substantial the term of the 2019 Diesel Fuel Supply Agreement by one shareholder of the subsidiaries of the Company. Accordingly, year, pursuant to which HV Operations has agreed to purchase the transaction between the MT SalesCo and POSCO constitutes diesel fuel from GAO during the period from 1 November 2022 a continuing connected transaction of the Company under the to 31 October 2023 (the “2022 Diesel Fuel Supply Agreement”). HK Listing Rules. POSCO and MT Operations sell all of their entitled portions of finished coal product in saleable form to which they are entitled through the MT JV to the MT SalesCo only. 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. Payment by the MT SalesCo to POSCO and MT Operations occurs 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 maximum annual transaction amounts for the purchase of POSCO’s portion of finished coal product by MT SalesCo for three years, and will re-comply with the applicable requirements of the HK Listing Rules after the expiry of the initial three years. Pursuant to the 2019 Diesel Fuel Supply Agreement and the 2022 Diesel Fuel Supply Agreement, HV Operations agrees to purchase, and GAO agrees to sell diesel fuel 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 or with reference to the price assessment published in the S&P Global Platts Oilgram Price Report for 10ppm Sulphur Gasoil FOB Singapore, and in accordance with the 2022 Diesel Fuel Supply Agreement. The maximum annual transaction amount to be paid by HV Operations to GAO for the purchase of diesel fuel for the period from 1 November 2019 to 31 December 2019, the two years ending 31 December 2020 and 2021, and the period from 1 January 2022 to 31 October 2022 will not exceed $30 million, $180 million, $180 million and $150 million, respectively; and The original maximum annual transaction amounts to be paid the maximum transaction amount to be paid by HV Operations by MT SalesCo for POSCO’s portion of finished coal product to GAO for the purchase of diesel fuel for the period from for the three years ending 31 December 2021, 2022 and 2023 1 November 2022 to 31 December 2022, and the period from will not exceed US$90 million, US$90 million and US$90 million, 1 January 2023 to 31 October 2023 will not exceed $43 million respectively. On 26 September 2022, the maximum annual and $186 million, respectively. During the year ended 31 transaction amounts for the year ending 31 December 2022 December 2022, the transaction amount paid by the Group was and 2023 were amended to US$200 million and US$350 million, approximately $177.0 million, which was below the aggregate respectively. The transaction distributed by the MT SalesCo to cap for the year. POSCO up to 26 September 2022 has exceeded the original maximum annual transaction amount while the transaction distributed by the MT SalesCo to POSCO for the year ended 31 December 2022 of approximately US$172.2 million was below the revised annual cap. PURCHASE OF DIESEL FUEL FROM GLENCORE On 25 October 2019, HV Operations Pty Ltd (“HV Operations”), MASTER LEASE AGREEMENTS WITH ZHONGYIN On 22 December 2021, each of Warkworth Mining Limited and Mount Thorley Operations Pty Limited (each a “Lessee”), both being subsidiaries of the Company, and Zhongyin (Hong Kong) Co., Limited (“Zhongyin”) entered into master lease agreements (the “Master Lease Agreements”, and each, a “Master Lease Agreement”) pursuant to which Zhongyin agreed to lease certain a subsidiary of the Company, entered into a diesel fuel supply items of up to a total of 15 ultra-class trucks across both Lessees agreement with Glencore Australia Oil Pty Ltd (“GAO”), pursuant (the “Equipment”) to each Lessee for a term of five years from the to which HV Operations has agreed to purchase diesel fuel from relevant commencement date in accordance with the terms of the GAO during the period from 1 November 2019 to 31 October 2022 relevant Master Lease Agreement. (the “2019 Diesel Fuel Supply Agreement”). Yankuang Energy is a controlling shareholder of the Company, As GAO is a subsidiary of Glencore plc, which is the holding holding approximately 62.26% of the total issued shares of the company of Anotero Pty Ltd, a substantial shareholder of HV Company, and Zhongyin is an indirect wholly-owned subsidiary of Operations, GAO is a connected person of the Company by Yankuang Energy. Accordingly, Zhongyin is a connected person virtue of being an associate of a substantial shareholder of the of the Company by virtue of being an associate of Yankuang Company’s subsidiary. Energy, a connected person of the Company. 160 CONTINUING CONNECTED TRANSACTIONS In accordance with the Australian Accounting Standards In accordance with the requirement of Rule 14A.56 and 14A.71(6) applicable to the Group, the Group will recognise each lease (b) of the HK Listing Rules, the Company has engaged the (the “Lease”) under the Master Lease Agreements as a right-of- independent auditor of the Company to report on the continuing use asset representing its right to use the relevant Equipment connected transactions of the Group. and a lease liability representing its obligation to make lease payments. A right-of-use asset will be recognised at the commencement date of the individual Lease. Leases will be recognised by the Company pursuant to the Master Lease Agreements in the year ending on 31 December 2022. The transactions under the Master Lease Agreements will be treated as continuing connected transactions under Chapter 14A of the 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; HK Listing Rules and the Company is required to set an annual ii. were not, in all material respects, in accordance with the pricing cap on the total value of right-of-use assets to be recognised by policies of the Group; the Company for the year ending on 31 December 2022 under the Master Lease Agreements. All leases have been recognised during the year of 2022. Each Lessee will execute a lease schedule in respect of each unit of Equipment leased by it, setting out the details of the lease, including the lease commencement date, rent payment date and rent in respect of the lease of such Equipment. During the term of the lease of each unit of Equipment, which will be five years from the date of commencement of such lease, the relevant Lessee will pay to Zhongyin the rent on each rent payment date as specified 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 (as amended) for the financial year ended 31 December 2022 set out in the announcements of the Company. The independent auditor noted the two instances where original caps were revised during the year in relation to the purchase of coal by SalesCo from Anotero, and the purchase of coal from POSCO, as further described above. in the relevant lease schedule. The amount of the rent in respect In accordance with paragraph 14A.57 of the Listing Rules, a of a lease will be determined by reference to the acquisition cost copy of the independent auditor’s letter will be provided to the of the relevant Equipment (being the applicable purchase price, HK Stock Exchange. interest payable on the amount of that price that has been paid by the Lessor, from the date it pays that component of the price and the term of the lease). The Company confirms that, taking into consideration all steps taken by the Company, including announcements made by the Company in relation to the increases of annual caps for certain The Company has not leased any Equipment from Zhongyin continuing connected transactions, it has complied with the previously. The maximum annual transaction amount for Leases requirements of Chapter 14A of the HK Listing Rules in relation to entered into by the Group under the Master Lease Agreements, all connected transactions and continuing connected transactions which are based on the total value of the right-of-use assets to which any Group member was a party during the year ended relating to such Leases, for the year ending 31 December 31 December 2022. Please refer to Note E2 to the financial 2022 will not exceed US$70 million. During the year ended 31 statements for a summary of the related party transactions December 2022, the recognised right-of-use asset at inception entered into by the members of the Group for the year ended 31 of the lease amounted to US$61.2 million, which was below the December 2022. 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. cap for the transaction and the period. Review on continuing connected transactions 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 2022. The independent 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. 161 CONTINUING CONNECTED TRANSACTIONS C O A L R E S O U R C E S A N D C O A L R E S E R V E S The Coal Resources and Coal Reserves presented in this report are extracted from an announcement made on 27 February 2023. The original report was produced in accordance with the Australasian Code for reporting of Mineral Resources and Ore Reserves 2012 Edition (the 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 material assumptions and 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). The attributable share total is the totals are coal resources or coal reserves when Yancoal’s ownership percentage (as at 31 December 2022) is applied. Coal resources and coal reserves have been rounded in line with the JORC Code and the Yancoal reporting standards to reflect the relative uncertainty of the estimates. On an attributable basis the Yancoal group total year-end 31 December 2022 position is as follows: CATEGORY1 Measured, Indicated and Inferred Coal Resources Recoverable Proved and Probable Coal Reserves2 Marketable Proved and Probable Coal Reserves3 31-DEC-2022 31-DEC-2021 % CHANGE 5,201Mt 989Mt 731Mt 6,013Mt 1,137Mt 819Mt -13.5% -13.0% -22.8% The following abbreviations are used throughout this section of the report. AusIMM Australasian Institute of Mining and Metallurgy JORC Joint Ore Reserves Committee Met Semi Metallurgical coal Semi-soft coking coal Thermal Thermal coal PCI Mt OC UG Pulverised coal injection Million tonnes Open Cut Underground 1 2022 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. 2 Where required the component Coal Reserve numbers for each site making up this total have been depleted by production from the annual report date to 31 December 2022. 3 Where required the component Coal Reserve numbers for each site making up this total have been depleted by production from the annual report date to 31 December 2022. 162 COAL RESOURCES FOR YEAR ENDING 31 DECEMBER 2022 PROJECT Moolarben (OC & UG) Mt Thorley (OC & UG) YANCOAL OWNERSHIP % COAL TYPE 95% Thermal 80% Semi/Thermal Warkworth (OC & UG) 84.47% Semi/Thermal HVO (OC) Yarrabee (OC) Gloucester (OC)4 Middlemount (OC) Ashton (OC & UG) Ashton RUMEx (UG)5 Donaldson (OC & UG)6 Monash (UG)7 Total Coal Resources (100% Basis) Yancoal Attributable Share 51% Semi/Thermal 100% PCI/Thermal 100% Met/Thermal 50% Met/Thermal 100% Semi/Thermal 100% Semi/Thermal 100% Semi /Thermal 100% Met/Thermal MOISTURE BASIS % MEASURED COAL RESOURCES (MT) INDICATED COAL RESOURCES (MT) INFERRED COAL RESOURCES (MT) TOTAL COAL RESOURCES (MT) 2022 6.0% 6 to 8% 6 to 8% 6 to 8% 5.5% 6.0% 5.0% 6.5% 6.5% 4.0% 6.0% 2022 2021 2022 2021 2022 2021 670 200 490 770 60 8 79 83 5 0 0 700 203 497 780 60 8 83 85 0 190 0 160 150 260 170 150 260 200 75 175 200 75 175 1300 1300 2400 2400 60 195 55 95 25 0 0 60 195 56 95 0 400 17 13 110 21 90 0 0 0 13 110 19 90 0 100 80 2,365 2,606 2,300 2,703 3,084 3,262 2022 1030 425 925 4470 133 313 155 268 30 0 0 7,749 5,201 COAL RESERVES FOR YEAR ENDING 31 DECEMBER 2022 RECOVERABLE COAL RESERVE PROVED COAL RESERVES (MT) PROBABLE COAL RESERVES (MT) TOTAL COAL RESERVES (MT) PROJECT Moolarben (OC) Moolarben (UG) Mount Thorley (OC) Warkworth (OC) HVO (OC) Yarrabee (OC) Gloucester (OC) Middlemount (OC) Ashton RUMEx (UG) Ashton (UG) Donaldson (UG) YANCOAL OWNERSHIP % COAL TYPE 95% Thermal 95% Thermal 80.0% Semi/Thermal 84.47% Semi/Thermal 51% Semi/Thermal 100% PCI/Thermal 100% Met/Thermal 50% Met/Thermal 100% Semi/Thermal 100% Semi/Thermal 100% Semi/Thermal 2022 150 26 1.8 139 390 36 0 69 0 14 0 2021 162 32 1.9 151 400 39 0 74 0 14 0 Total Coal Reserves (100% Basis) - Rounded 826 874 Yancoal Attributable Share 2022 2021 5 13 16 92 460 42 1.4 19 18 7 0 673 5 13 16 92 460 42 2.4 19 0 8 110 766 2022 155 39 18 231 850 78 1.4 88 18 21 0 1,499 989 4 Gloucester comprises the Stratford, Duralie and Grant & Chainey deposits. 5 6 7 Following the acquisition of the Rumex leases from Glencore Australia to Yancoal Australia Ashton Coal Operations, the Coal Resources are reported under the Ashton Rumex project. In recognition of the Company’s downward revisions in the carrying values of Donaldson and Monash, no Coal Resources and Coal Reserves have been reported given the lack of a foreseeable economic pathway to their developments. In recognition of the Company’s downward revisions in the carrying values of Donaldson and Monash, no Coal Resources and Coal Reserves have been reported given the lack of a foreseeable economic pathway to their developments. 163 COAL RESOURCES AND COAL RESERVES MARKETABLE COAL RESERVE PROVED COAL RESERVES (MT) PROVED COAL RESERVES (MT) TOTAL COAL RESERVES (MT) MOISTURE BASIS, % 2021 2022 2021 PROJECT Moolarben (OC) Moolarben (UG) Mount Thorley (OC) Warkworth (OC) HVO (OC) Yarrabee (OC) Gloucester (OC)8 Middlemount (OC)9 Ashton RUMEx (UG)10 Ashton (UG) Donaldson (UG)11 YANCOAL OWNERSHIP % COAL TYPE 95% Thermal 95% Thermal 80.0% Semi/Thermal 84.47% Semi/Thermal 51% Semi/Thermal 100% PCI/Thermal 100% Met/Thermal 50% Met/Thermal 100% Semi/Thermal 100% Semi/Thermal 100% Semi/Thermal 2022 125 27 1.2 96 280 27 0 49 0 8 0 Total Coal Reserves (100% Basis) - Rounded 613 651 Yancoal Attributable Share 133 32 1.3 104 290 29 0 53 0 8 0 4 13 11 61 330 32 0.8 18 12 4 0 486 4 13 11 61 330 32 1 16 0 5 62 535 ASH % 2022 21% 16% 13.9% 13.3% 12.9% 10% 19% 2022 129 40 12 157 610 59 0.8 2022 9% 9% 10% 10% 10% 10% 8% 67 10% Coking 10% Coking 10.5% PCI 10.5% PCI 8.5% 8.5% 9.5% 9.5% 12 12 0 1,099 731 YANCOAL 2022 EXPLORATION DRILLING Total payments for capitalised exploration and evaluation activities in 2022 was $1.8 million. There were no development activities related to mining structures or infrastructure undertaken in 2022. The reporting period is from 1 January to 31 December 2022. The drilling totals provided exclude pre-production drilling. MOOLARBEN MOUNT THORLEY WARKWORTH HUNTER VALLEY OPERATIONS NO. OF HOLES TOTAL DRILLED (M) NO. OF HOLES TOTAL DRILLED (M) NO. OF HOLES TOTAL DRILLED (M) Non-Core Holes Core Holes 7 10 817 707 0 0 0 0 2 0 612 0 8 Gloucester comprises the Stratford, Duralie and Grant & Chainey deposits. 9 The project has two product types for Marketable Coal Reserves each with a different Moisture basis, Coking at 10%, PCI at 10.5% and Ash% of 10% for Coking & 10.5% for PCI. 10 Following the acquisition of the Rumex leases from Glencore Australia to Yancoal Australia, the Coal Reserves are reported under the Ashton Rumex project. 11 In recognition of the Company’s downward revisions in the carrying values of Donaldson and Monash, no Coal Resources and Coal Reserves have been reported given the lack of a foreseeable economic pathway to their developments. 164 COAL RESOURCES AND COAL RESERVES PROJECT Moolarben Mount Thorley/ Warkworth (MTW) HVO Y A N C O A L A U S T R A L I A T E N E M E N T S A s at 31 D ecember 2 022 TITLE TENEMENT TENEMENT TYPE PROJECT 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 ML 1828 AL 32 AL 33 AL 34 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 Assessment Lease Assessment Lease Assessment Lease Auth 72 Authorisation Part CCL 708 (sublease) 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 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 ML 1465 ML 1474 ML 1482 ML 1500 ML 1526 ML 1560 ML 1589 ML 1622 ML 1634 ML 1682 ML 1704 ML 1705 ML 1706 ML 1707 ML 1710 ML 1732 ML 1734 ML 1748 ML 1753 ML 1810 ML 1811 ML 1840 ML 1841 MLA 495 MLA 496 MLA 520 MLA 535 MLA 562 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 Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Application Mining Lease Application Mining Lease Application Mining Lease Application Mining Lease Application Yarrabee/Wilpeena EPC 1684 Exploration Permit for Coal EPC 717 EPC 1177 EPC 1429 EPC 1668 EPC 621 MDL 160 ML 1770 ML 80049 ML 80050 ML 80096 ML 80104 ML 80172 ML 80195 ML 80196 ML 80197 ML 80198 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 Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease 165 Y A N C O A L A U S T R A L I A T E N E M E N T S A s at 31 D ecember 2 022 PROJECT TITLE TENEMENT TENEMENT TYPE Gloucester Basin (Stratford/Duralie) ALA 74 Auth 311 Auth 315 EL 6904 Assessment Lease Application Authorisation Authorisation Exploration Licence ELA 5910 Exploration Licence Application PROJECT Ashton TITLE TENEMENT TENEMENT TYPE EL 4918 EL 5860 ML 1529 ML 1533 ML 1623 ML 1696 ML 1834 ML 1835 ML 1836 ML 1837 MLA 351 MLA 394 MLA 500 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 ALA 73 EL 6123 EL 7579 Exploration Licence Exploration Licence Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Application Mining Lease Application Mining Lease Application 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 Assessment Lease Application Exploration Licence Exploration Licence Donaldson Monash Rhondda CCL 774 Consolidated Coal Lease ML 1427 ML 1646 ML 1360 ML 1409 ML 1447 ML 1521 ML 1528 ML 1538 ML 1577 ML 1733 ML 1787 Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Middlemount MDL 282 Mineral Development Licence Austar ML 700014 Mining Lease ML 700027 Mining Lease ML 70379 ML 70417 Mining Lease Mining Lease CCL 728 CCL 752 CML 2 DSL 89 EL 6598 ML 1157 ML 1283 ML 1345 ML 1388 ML 1550 ML 1661 ML 1666 ML 1677 Consolidated Coal Lease Consolidated Coal Lease Coal Mining Lease Dam Site Lease Exploration Licence Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease Mining Lease MLA 521 Mining Lease Application MPL 1364 Mining Purposes Lease MPL 204 MPL 217 MPL 23 MPL 233 MPL 269 Mining Purposes Lease Mining Purposes Lease Mining Purposes Lease Mining Purposes Lease Mining Purposes Lease 166 S H A R E H O L D E R S T A T I S T I C S Yancoal A u st ra lia Limit ed – Ord in ary F u lly Pa id as o f 6 Mar ch 2023 COMBINED ASX AND HKEX TOP 20 SHAREHOLDERS RANK NAME 1 YANKUANG ENERGY GROUP COMPANY LIMITED 2 HKG REGISTER CONTROL A/C\C 3 BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM 4 CITICORP NOMINEES PTY LIMITED 5 EVERCHARM INTERNATIONAL INVESTMENT LIMITED 6 HSBC CUSTODY NOMINEESLIMITED 7 BNP PARIBAS NOMINEES PTY LTD 8 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 9 BNP PARIBAS NOMS PTY LTD 10 WARBONT NOMINEES PTY LTD 11 CPU SHARE PLANS PTY LTD 12 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 13 ECAPITAL NOMINEES PTY LIMITED 14 BKI INVESTMENT COMPANY LIMITED 15 NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> 16 NATIONAL NOMINEES LIMITED 17 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 18 NETWEALTH INVESTMENTS LIMITED 19 MR QINGNAN WEN 20 BNP PARIBAS NOMS PTY LTD Totals: Top 20 holders of ORDINARY SHARES (Total) Total Remaining Holders Balance Total Shares on issue UNITS 822,157,715 216,154,420 112,859,940 23,840,512 14,285,715 13,936,418 11,336,543 9,548,345 5,293,411 4,410,222 4,193,496 3,168,873 3,061,546 3,000,000 2,170,725 2,102,653 1,933,099 1,894,658 1,470,000 1,316,535 1,258,134,826 62,304,611 1,320,439,437 % UNITS 62.26 16.37 8.55 1.81 1.08 1.06 0.86 0.72 0.40 0.33 0.32 0.24 0.23 0.23 0.16 0.16 0.15 0.14 0.11 0.10 95.28 4.72 167 RANGE OF UNITS ORDINARY SHARES AS OF 6 MARCH 2023 RANGE 1 - 1,000 1,001 - 10,000 10,001 - 100,000 100,001 - 1,000,000 1,000,001 Over Rounding Total TOTAL HOLDERS 4,963 3,871 880 85 21 9,820 UNMARKETABLE PARCELS ORDINARY SHARES AS OF 6 MARCH 2023 Minimum $ 500.00 parcel at $ 6.1400 per unit UNITS 1,850,464 14,794,542 25,061,094 19,392,321 1,259,341,016 1,320,439,437 % UNITS 0.14 1.12 1.90 1.47 95.37 0.00 100.00 MINIMUM PARCEL SIZE 82 HOLDERS 1,052 UNITS 19,259 TRANSFER OF SHARES BETWEEN THE AUSTRALIAN AND HONG KONG SHARE REGISTERS Shares in Yancoal can be moved between its Australian and Hong Kong share registers. Any shareholder interested in moving their shares between the two registers is encouraged to contact Computershare, using the contact details set out in the Corporate Directory. The process and fees for moving shares will differ depending on how a shareholder, or their broker/participant, holds their shares. Typically, the transfer of shares between the Australian and Hong Kong registers takes between three to six business days. Shareholders should not trade their shares until a transfer of shares is completed. 168 SHAREHOLDER STATISTICS G L O S S A R Y AAS ACCC ACCU AMI AGM Aon API5 ARMC ARTC ASX Australian Accounting Standards Australian Competition & Consumer Commission Australian Carbon Credit Units Aurelia Metals Ltd Annual General Meeting Aon Hewitt All Published Index 5 – 5,500 kCal coal index Audit and Risk Management Committee Australian Rail Track Corporation The Australian Securities Exchange ASX Recommendations ASX Corporate Governance Council’s Principles and Recommendations AusIMM Board CEC CEO CER CFR CFO CGU CHPP Cinda Australasian Institute of Mining and Metallurgy Yancoal’s board of directors Chair of the Executive Committee Chief Executive Officer Clean Energy Regulator Cost and Freight contract Chief Financial Officer Cash-Generating Unit Coal Handling and Preparation Plant Cinda (HK) Holdings Company Limited Group Coal & Allied Coal & Allied Industries Ltd CODM Chief Operating Decision Makers Coke (steel making) A grey, hard, and porous fuel with a high carbon content and few impurities, made by heating coal or oil in the absence of air. Continuing Connected Transactions The Stock Exchange of Hong Kong requires disclosure of ‘Continuing Connected Transactions’ which are connected transactions involving the provision of goods or services, which are carried out on a continuing or recurring basis and are expected to extend over a period of time. They are usually transactions in the ordinary and usual course of business of the issuer. Connected transactions are transactions with connected persons, and specified categories of transactions with third parties that may confer benefits on connected persons through their interests in the entities involved in the transactions. COP26 COP27 Costs Target COVID-19 CVR 2021 United Nations Climate Change Conference of Parties 2022 United Nations Climate Change Conference of Parties Costs Target vesting condition Novel Coronavirus Contingent Value Rights Deferred Share Rights Rights to Yancoal shares with no dividend equivalent payments that vest over time subject to remaining employed DE&I EBIT EBITDA ECL EGM EPS The Yancoal Diversity, Equity and Inclusion strategy Earnings Before Interest and Tax Earnings Before Interest, Tax, Depreciation and Amortisation Expected Credit Losses Executive General Manager Earnings per share EPS Awards Earnings per share vesting condition ESA ESG Executive Service Agreement Environment, Social and Governance Executive KMPs Nominated members of the Executive Committee. Executives Comprise the executive directors and Executive KMPs FAR FAS Fixed Annual Remuneration Free Alongside Ship FOB Cash Costs Free On Board Cash Costs (excluding royalties) FVTPL FVTOCI GCNewc GiLTS HK Code Fair Value Through Profit or Loss Fair Value Through Other Comprehensive Income GlobalCOAL Newcastle 6,000kCal NAR Index Gladstone Island Long Term Securities Corporate Governance Code in Appendix 14 HK Listing Rules Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited HKEx The Stock Exchange of Hong Kong 169 HKExnews Website for regulatory filings and disclosures of listed issuers on the Stock Exchange of Hong Kong HSEC Committee Health, Safety, Environment and Community Committee HVO The Hunter Valley Operations mine HVO Entities HVO Coal Sales Pty Ltd, HV Operations Pty Ltd and HVO Services Pty Ltd IASB IFRSs JORC KMP KPIs LOM LPR LTI/LTIP LTIFR MCA International Accounting Standards Board International Financial Reporting Standards Joint Ore Reserves Committee Key Management Personnel comprise the Directors of the Company and nominated members of the Executive Committees. Key Performance Indicators Life of Mine Loan Prime Rate Long-term incentive plan The Lost Time Injury Frequency Rate is the number of lost time injuries occurring in a workplace per 1 million hours worked. Minerals Council of Australia Metallurgical coal A collective term applied to coal used in the steel making process Middlemount Middlemount Coal Pty Ltd Mineral Reserve Mineral Resource Parts of a Mineral Resource that can, at present, be economically mined. The two categories define an increasing level of geological confidence with Probable at the low end and Proved at the high end. The concentration of material of economic interest in or on the earth’s crust. The three categories define an increasing level of geological confidence with Inferred at the low end, then Indicated, and Measured at the high end. Model Code Model Code for Securities Transactions by Directors of Listed Issuers MND Monadelphous Group Ltd Moolarben JV Moolarben Coal Joint Venture MTW NAR NCIG NGER NRC NSW NSWMC PBT PCI Coal The Mount Thorley Warkworth Mine Net As Received Newcastle Coal Infrastructure Group is a coal export terminal in Newcastle, New South Wales. National Greenhouse and Energy Reporting Nomination and Remuneration Committee New South Wales New South Wales Mineral Council Profit Before Tax Pulverised Coal Injection coal is used heat source and supplementary fuel in the steel making process to reduce coke consumption. Performance Rights Rights to Yancoal shares with no dividend equivalent payments that vest over time subject to meeting performance criteria and remaining employed Period PRD Protocol PWCS QLD ROM Coal ROM tonnes Saleable coal The 12 months ending 31 December 2022 Performance Review and Development Board Performance Evaluation Protocol Port Waratah Coal Services is a coal export terminal in Newcastle, New South Wales. Queensland Run Of Mine Coal, the coal volume initially extracted from the mine Run of Mine tonnes Coal volume remaining after processing to remove non-coal material Scope 1 emissions Scope 1 covers direct emissions from owned or controlled sources; for example emissions released from coal during the mining process. Scope 2 emissions Scope 3 emissions Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company's value chain; for example the emissions real during combustion of coal by the end users. Semi-soft coking coal Used to produce coke for the steel-making process, but it produces a low coke quality and more impurities compared to hard coking coal. Services SFO IT services, which comprise the granting of the permission to use the Company’s hardware or software and the provision of IT support services. Hong Kong Securities and Futures Ordinance Shandong Energy Shandong Energy Group Co. Ltd Sojitz Corporation Short-term incentive plan The Taskforce on Climate-related Financial Disclosures was established by the Financial Stability Board to develop a set of voluntary, consistent disclosure recommendations for use by companies in providing information to investors, lenders and insurance underwriters about their climate-related financial risks. Sojitz STI/STIP TCFD 170 GLOSSARY tCO2-e Emissions equivalent to a tonne of carbon dioxide emissions; it is the standard unit in carbon accounting to quantify greenhouse gas emissions. The Company or Yancoal Yancoal Australia Ltd The Group Thermal coal TRI & DI TRIFR UOP VWAP Watagan WICET WIPS Yankuang Yancoal Australia Ltd and its controlled entities A collective term applied to coal suited to combustion to generate electricity or other purposes. Total Recordable Injuries & Disease Injuries The Total Recordable Injury Frequency Rate is the number of fatalities, lost time injuries, substitute work, and other injuries requiring treatment by a medical professional per million hours worked. Units of Production Volume Weighted Average Price gives the average price a security has traded at throughout a period, based on both volume and price Watagan Mining Company Pty Ltd Wiggins Island Coal Export Terminal is a coal export terminal in at Gladstone, Queensland. Wiggins Island Preference Shares Yankuang Group Company Ltd Yankuang Energy Yankuang Energy Group Company Limited Yanzhou YIT Yanzhou Coal Mining Company Ltd Yancoal International Trading Company Limited 171 GLOSSARY C O R P O R A T E D I R E C T O R Y DIRECTORS Baocai Zhang Ning Zhang Gregory Fletcher Xing Feng Helen Gillies Dr Geoffrey Raby Yaomeng Xiao Xiangqian Wu Qingchun Zhao COMPANY SECRETARY: Laura Ling Zhang AUDITOR: SW Audit Level 7, Aurora Place 88 Phillip Street Sydney NSW 2000 Australia Public Interest Entity Auditor recognised in accordance with the Financial Reporting Council Ordinance REGISTERED AND PRINCIPAL PLACE OF BUSINESS: Level 18 Darling Park 2 201 Sussex Street Sydney NSW 2000 Australia T: +61 2 8583 5300 AUSTRALIAN COMPANY NUMBER: 111 859 119 AUSTRALIAN SECURITIES EXCHANGE LTD (ASX) Stock code: YAL STOCK EXCHANGE OF HONG KONG LIMITED (HKEX) Stock code: 3668 SHARE REGISTRY: Computershare Investor Services Pty Limited Level 3, 60 Carrington Street Sydney NSW 2000 Australia T: +61 2 8234 5000 Computershare Hong Kong Investor Services Limited 17M Floor, Hopewell Centre 183 Queens Road East Wan Chai Hong Kong T: +852 2862 8555 COUNTRY OF INCORPORATION: Incorporated in Victoria, Australia with limited liability WEB ADDRESS: www.yancoal.com.au SHAREHOLDER ENQUIRIES: shareholder@yancoal.com.au 172