UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 23, 2011
PEABODY ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 1-16463 | 13-4004153 | ||
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
701 Market Street, St. Louis, Missouri | 63101-1826 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (314) 342-3400
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01 Completion of Acquisition or Disposition of Assets
On October 27, 2011, Peabody Energy Corporation (Peabody or the Company) filed a Current Report on Form 8-K reporting that, among other things, it had acquired a relevant interest (as defined in the Australian Corporations Act 2001 (Cth)) on October 23, 2011 in more than 50.01% of Macarthur Coal Limiteds (Macarthur) shares as a result of Peabodys and ArcelorMittal SAs (ArcelorMittal) previously announced takeover offer by PEAMCoal Pty Ltd, a company which was then indirectly owned 60% by Peabody and 40% by ArcelorMittal (PEAMCoal). On October 23, 2011, Peabody also announced that the takeover offer had become unconditional and that PEAMCoal then had a relevant interest in approximately 59.85% of Macarthurs shares, excluding shares subject to an institutional acceptance facility. On October 25, 2011, ArcelorMittal announced that it had elected to sell its interest in PEAMCoal to Peabody in lieu of proceeding with the PEAMCoal joint venture.
On November 16, 2011, Peabody announced that PEAMCoal had begun the process of a compulsory acquisition of all outstanding shares of Macarthur after obtaining a relevant interest in more than 90% of the shares. On December 20, 2011, Peabody announced PEAMCoal had completed the acquisition of all outstanding shares in Macarthur, resulting in Peabodys 100% ownership of Macarthur.
This Form 8-K/A amends the Current Report on Form 8-K filed on October 27, 2011 to provide the audited financial statements of Macarthur and the unaudited pro forma financial information required by Items 9.01(a) and 9.01(b) of Form 8-K, respectively.
Item 9.01. Financial Statements and Exhibits.
(a) | Financial Statements of Businesses Acquired |
Macarthurs audited consolidated financial statements as of and for the years ended June 30, 2011 and 2010 are attached as Exhibit 99.2 and incorporated herein by reference.
(b) | Pro Forma Financial Information |
The required unaudited pro forma condensed combined financial information with respect to the acquisition of Macarthur is filed as Exhibit 99.1 and is incorporated herein by reference.
(d) | Exhibits. |
Exhibit |
Description of Exhibit | |
23.1 | Consent of KPMG (Brisbane, Australia), Independent Auditors. | |
99.1 | Unaudited pro forma condensed combined financial information. | |
99.2 | Audited consolidated financial statements of Macarthur Coal Limited and subsidiaries as of and for the years ended June 30, 2011 and 2010. |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PEABODY ENERGY CORPORATION | ||||||
January 5, 2012 | By: | /s/ Michael C. Crews | ||||
Name: Michael C. Crews | ||||||
Title: Executive Vice President and Chief Financial Officer |
3
EXHIBIT INDEX
Exhibit |
Description of Exhibit | |
23.1 | Consent of KPMG (Brisbane, Australia), Independent Auditors. | |
99.1 | Unaudited pro forma condensed combined financial information. | |
99.2 | Audited consolidated financial statements of Macarthur Coal Limited and subsidiaries as of and for the years ended June 30, 2011 and 2010. |
4
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Macarthur Coal Limited:
We consent to the incorporation by reference in the registration statements on Form S-8 (No. 333-61406, No. 333-70910, No. 333-75058, No. 333-109305, No. 333-105455, No. 333-105456, No. 333-117767, No. 333-136443, No. 333-140218, No. 333-147507) and on Form S-3 (No. 333-161179) of Peabody Energy Corporation of our report dated December 22, 2011, with respect to the consolidated statements of financial position of Macarthur Coal Limited as of June 30, 2011 and 2010, and the related consolidated statements of comprehensive income, changes in equity and cash flows for each of the years ended June 30, 2011 and 2010, which report appears in the Form 8-K/A of Peabody Energy Corporation dated January 5, 2012.
/s/KPMG
Brisbane, Australia
January 5, 2012
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information is based on the historical financial information of Peabody Energy Corporation (Peabody or the Company) and Macarthur Coal Limited (Macarthur) and has been prepared to reflect the acquisition of Macarthur (the Acquisition) by Peabody and the related financing transactions. The Acquisition together with the related financing are referred to as the Transactions. The unaudited pro forma condensed combined financial information reflects the acquisition of the shares of Macarthur obtained under the tender process or through compulsory acquisition as a single transaction.
The data in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2010 and the nine months ended September 30, 2011 assumes that the Acquisition was completed on January 1, 2010. The unaudited pro forma condensed combined balance sheet as of September 30, 2011 gives effect to the Acquisition as if it had occurred on September 30, 2011.
The unaudited pro forma condensed combined financial information has been compiled from the following sources:
| Peabodys historical information has been extracted without material adjustment from the Companys audited consolidated financial statements for the year ended December 31, 2010 contained in the Companys Annual Report on Form 10-K and the Companys unaudited condensed consolidated financial statements for the nine months ended September 30, 2011 contained in the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2011. |
| Financial information of Macarthur prepared on the basis of international financial reporting standards (IFRS) for the year ended December 31, 2010 was computed as (1) the audited historical financial information for the year ended June 30, 2010 plus (2) the unaudited historical financial information for the six months ended December 31, 2010 minus (3) the unaudited historical financial information for the six months ended December 31, 2009. Certain amounts were reclassified to conform to Peabodys presentation. |
| Financial information of Macarthur prepared on the basis of IFRS for the nine months ended September 30, 2011 was computed as (1) the audited historical financial information for the year ended June 30, 2011 minus (2) the unaudited historical financial information for the six months ended December 31, 2010 plus (3) the unaudited historical financial information for the three months ended September 30, 2011. Certain amounts were reclassified to conform to Peabodys presentation. |
The Macarthur financial information has been translated from Australian dollars to U.S. dollars using the historical exchange rates below. The average exchange rates applicable during the periods presented that were used for the unaudited pro forma condensed combined statements of operations and the period end exchange rate that was used for the unaudited pro forma condensed combined balance sheet are:
Average exchange rate for year ended December 31, 2010 |
$ | 0.9197 | ||
Average exchange rate for nine months ended September 30, 2011 |
$ | 1.0387 | ||
Period end rate for September 30, 2011 |
$ | 0.9781 |
The unaudited pro forma condensed combined financial information includes adjustments for certain significant differences between Macarthurs financial information prepared in accordance with IFRS and Peabodys financial information prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) which are described in the notes to the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information should be read in conjunction with:
| the accompanying notes to the unaudited pro forma condensed combined financial information; |
| the Companys consolidated financial statements for the year ended December 31, 2010 and for the nine months ended September 30, 2011 and the notes relating thereto; and |
| the consolidated financial statements of Macarthur for the fiscal years ended June 30, 2011 and 2010 included in Exhibit 99.2 to the Companys Current Report on Form 8-K/A, dated January 5, 2012. |
1
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION - (Continued)
The unaudited pro forma condensed combined financial information has been prepared for illustrative purposes only and:
| does not purport to represent what the consolidated results of operations actually would have been if the acquisition of Macarthur had occurred at the beginning of the periods presented or what those results will be for any future periods or what the consolidated balance sheet would have been if the acquisition of Macarthur had occurred on September 30, 2011; and |
| has not been adjusted to reflect any matters not directly attributable to implementing the acquisition of Macarthur and does not reflect any cost savings, operating synergies or revenue enhancements that the Company may achieve as a result of the Acquisition, the costs to integrate Macarthurs operations or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements. No adjustment, therefore, has been made for actions which may be taken once the Acquisition is complete, such as any transition plans related to Macarthur. As a result, actual results will differ from the amounts reflected in the unaudited pro forma condensed combined financial information, and the differences may be material. |
The Acquisition will be accounted for under the acquisition method of accounting under U.S. GAAP whereby the total purchase price is allocated to the assets acquired and liabilities assumed based on their respective fair values at the acquisition date. The cash purchase price reflects the acquisition of the common shares of Macarthur tendered or acquired through compulsory acquisition as a single transaction. Peabody has determined the fair values of the assets acquired and liabilities that were assumed based only on Peabodys internal valuation and analysis, and accordingly, the pro forma financial statements do not include a final allocation of the purchase price to reflect the fair value of those assets and liabilities based on an independent valuation. Once this independent valuation is completed, the final fair value allocation may differ significantly from this pro forma information.
2
PEABODY ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2010
Peabody | Macarthur IFRS (In A$) |
Macarthur IFRS (In US$) |
Pro Forma Adjustments |
Pro Forma As Adjusted |
||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues |
||||||||||||||||||||
Sales |
$ | 6,331.3 | $ | 772.4 | $ | 710.4 | $ | | $ | 7,041.7 | ||||||||||
Other revenues |
528.7 | 9.9 | 9.1 | | 537.8 | |||||||||||||||
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Total revenues |
6,860.0 | 782.3 | 719.5 | | 7,579.5 | |||||||||||||||
Costs and expenses |
||||||||||||||||||||
Operating costs and expenses |
4,841.0 | 477.8 | 439.4 | 31.5 | (1), (2), (A) | 5,311.9 | ||||||||||||||
Depreciation, depletion and amortization |
440.9 | 31.8 | 29.2 | 79.1 | (A) | 549.2 | ||||||||||||||
Asset retirement obligation expense |
48.5 | 1.9 | 1.7 | | 50.2 | |||||||||||||||
Selling and administrative expenses |
232.2 | 22.7 | 20.9 | | 253.1 | |||||||||||||||
Other operating (income) loss: |
| |||||||||||||||||||
Net gain on disposal or exchange of assets |
(30.0 | ) | | | | (30.0 | ) | |||||||||||||
Loss (income) from equity affiliates |
1.7 | (35.0 | ) | (32.2 | ) | 4.4 | (A) | (26.1 | ) | |||||||||||
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Operating profit |
1,325.7 | 283.1 | 260.5 | (115.0 | ) | 1,471.2 | ||||||||||||||
Interest expense |
222.1 | 10.5 | 9.7 | 240.6 | (B) | 472.4 | ||||||||||||||
Interest income |
(9.6 | ) | (19.9 | ) | (18.3 | ) | 2.0 | (B) | (25.9 | ) | ||||||||||
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Income from continuing operations before income taxes |
1,113.2 | 292.5 | 269.1 | (357.6 | ) | 1,024.7 | ||||||||||||||
Income tax provision (benefit) |
308.1 | 65.8 | 60.5 | (125.4 | ) (3), (C) | 243.2 | ||||||||||||||
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Income from continuing operations, net of income taxes |
805.1 | 226.7 | 208.6 | (232.2 | ) | 781.5 | ||||||||||||||
Loss from discontinued operations, net of income taxes |
(2.9 | ) | | | | (2.9 | ) | |||||||||||||
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Net income |
802.2 | 226.7 | 208.6 | (232.2 | ) | 778.6 | ||||||||||||||
Less: net income attributable to noncontrolling interests |
28.2 | | | | 28.2 | |||||||||||||||
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Net income attributable to common stockholders |
$ | 774.0 | $ | 226.7 | $ | 208.6 | $ | (232.2 | ) | $ | 750.4 | |||||||||
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Income from continuing operations |
||||||||||||||||||||
Basic earnings per share |
$ | 2.89 | $ | 2.80 | ||||||||||||||||
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|
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Diluted earnings per share |
$ | 2.86 | $ | 2.77 | ||||||||||||||||
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Net income attributable to common stockholders |
||||||||||||||||||||
Basic earnings per share |
$ | 2.88 | $ | 2.79 | ||||||||||||||||
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|
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Diluted earnings per share |
$ | 2.85 | $ | 2.76 | ||||||||||||||||
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|
See accompanying notes to unaudited pro forma condensed combined financial information.
3
PEABODY ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2011
Peabody | Macarthur IFRS (In A$) |
Macarthur IFRS (In US$) |
Pro Forma Adjustments |
Pro Forma As Adjusted |
||||||||||||||||
(in millions) | ||||||||||||||||||||
Revenues |
||||||||||||||||||||
Sales |
$ | 5,151.8 | $ | 470.2 | $ | 488.4 | $ | | $ | 5,640.2 | ||||||||||
Other revenues |
637.0 | 2.0 | 2.1 | | 639.1 | |||||||||||||||
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Total revenues |
5,788.8 | 472.2 | 490.5 | | 6,279.3 | |||||||||||||||
Costs and expenses |
||||||||||||||||||||
Operating costs and expenses |
4,119.7 | 323.9 | 336.4 | 53.5 | (1), (2), (A) | 4,509.6 | ||||||||||||||
Depreciation, depletion and amortization |
327.8 | 23.2 | 24.1 | 43.7 | (A) | 395.6 | ||||||||||||||
Asset retirement obligation expense |
43.9 | 1.3 | 1.4 | | 45.3 | |||||||||||||||
Selling and administrative expenses |
191.4 | 23.7 | 24.6 | | 216.0 | |||||||||||||||
Other operating (income) loss: |
| |||||||||||||||||||
Net gain on disposal or exchange of assets |
(31.4 | ) | (84.2 | ) | (87.5 | ) | | (118.9 | ) | |||||||||||
Loss (income) from equity affiliates |
9.0 | (0.3 | ) | (0.3 | ) | 3.3 | (A) | 12.0 | ||||||||||||
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Operating profit |
1,128.4 | 184.6 | 191.8 | (100.5 | ) | 1,219.7 | ||||||||||||||
Interest expense |
159.3 | 10.1 | 10.5 | 167.7 | (B) | 337.5 | ||||||||||||||
Interest income |
(11.7 | ) | (26.2 | ) | (27.2 | ) | 1.5 | (B) | (37.4 | ) | ||||||||||
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Income from continuing operations before income taxes |
980.8 | 200.7 | 208.5 | (269.7 | ) | 919.6 | ||||||||||||||
Income tax provision (benefit) |
224.7 | 60.1 | 62.4 | (93.6 | ) (3), (C) | 193.5 | ||||||||||||||
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Income from continuing operations, net of income taxes |
756.1 | 140.6 | 146.1 | (176.1 | ) | 726.1 | ||||||||||||||
Loss from discontinued operations, net of income taxes |
(3.7 | ) | | | | (3.7 | ) | |||||||||||||
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Net income |
752.4 | 140.6 | 146.1 | (176.1 | ) | 722.4 | ||||||||||||||
Less: net income attributable to noncontrolling interests |
17.0 | | | | 17.0 | |||||||||||||||
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Net income attributable to common stockholders |
$ | 735.4 | $ | 140.6 | $ | 146.1 | $ | (176.1 | ) | $ | 705.4 | |||||||||
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Income from continuing operations |
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Basic earnings per share |
$ | 2.73 | $ | 2.62 | ||||||||||||||||
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Diluted earnings per share |
$ | 2.72 | $ | 2.61 | ||||||||||||||||
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Net income attributable to common stockholders |
||||||||||||||||||||
Basic earnings per share |
$ | 2.72 | $ | 2.61 | ||||||||||||||||
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Diluted earnings per share |
$ | 2.71 | $ | 2.60 | ||||||||||||||||
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See accompanying notes to unaudited pro forma condensed combined financial information.
4
PEABODY ENERGY CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS AT SEPTEMBER 30, 2011
Peabody | Macarthur IFRS (In A$) |
Macarthur IFRS (In US$) |
Pro Forma Adjustments |
Pro Forma As Adjusted |
||||||||||||||||
(in millions) | ||||||||||||||||||||
Current assets | ||||||||||||||||||||
Cash and cash equivalents |
$ | 1,401.6 | $ | 298.8 | $ | 292.3 | $ | (823.0 | ) (A), (B) | $ | 870.9 | |||||||||
Accounts receivable, net |
591.4 | 136.1 | 133.1 | | 724.5 | |||||||||||||||
Inventories |
351.9 | 31.2 | 30.5 | 21.0 | (A) | 403.4 | ||||||||||||||
Assets from coal trading activities, net |
66.0 | | | | 66.0 | |||||||||||||||
Deferred income taxes |
90.9 | | | | 90.9 | |||||||||||||||
Other current assets |
503.2 | 936.7 | 916.2 | (443.8 | ) (1), (A) | 975.6 | ||||||||||||||
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Total current assets |
3,005.0 | 1,402.8 | 1,372.1 | (1,245.8 | ) | 3,131.3 | ||||||||||||||
Property, plant, equipment and mine development, net |
7,808.1 | 383.5 | 375.1 | 3,228.9 | (2), (A) | 11,412.1 | ||||||||||||||
Investments and other assets |
878.5 | 342.1 | 334.6 | 423.5 | (1), (A), (B) | 1,636.6 | ||||||||||||||
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Total assets |
$ | 11,691.6 | $ | 2,128.4 | $ | 2,081.8 | $ | 2,406.6 | $ | 16,180.0 | ||||||||||
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Current liabilities |
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Current maturities of long-term debt |
$ | 43.8 | $ | 17.9 | $ | 17.5 | $ | 25.0 | (B) | $ | 86.3 | |||||||||
Liabilities from coal trading activities, net |
62.6 | | | | 62.6 | |||||||||||||||
Accounts payable and accrued expenses |
1,334.9 | 143.8 | 140.7 | 197.6 | (A) | 1,673.2 | ||||||||||||||
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Total current liabilities |
1,441.3 | 161.7 | 158.2 | 222.6 | 1,822.1 | |||||||||||||||
Long-term debt, less current maturities |
2,458.6 | 58.6 | 57.3 | 4,075.0 | (B) | 6,590.9 | ||||||||||||||
Deferred income taxes |
499.6 | 88.7 | 86.8 | (86.8 | ) (A) | 499.6 | ||||||||||||||
Asset retirement obligations |
537.3 | 34.5 | 33.7 | | 571.0 | |||||||||||||||
Accrued postretirement benefit costs |
965.6 | | | | 965.6 | |||||||||||||||
Other noncurrent liabilities |
466.7 | 3.9 | 3.8 | | 470.5 | |||||||||||||||
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Total liabilities |
6,369.1 | 347.4 | 339.8 | 4,210.8 | 10,919.7 | |||||||||||||||
Stockholders equity |
||||||||||||||||||||
Preferred stock |
| | | | | |||||||||||||||
Series A junior participating preferred stock |
| | | | | |||||||||||||||
Perpetual preferred stock |
| | | | | |||||||||||||||
Series common stock |
| | | | | |||||||||||||||
Common stock |
2.8 | 1,253.9 | 1,226.4 | (1,226.4 | ) | 2.8 | ||||||||||||||
Additional paid-in capital |
2,231.3 | | | | 2,231.3 | |||||||||||||||
Retained earnings |
3,544.7 | 529.9 | 518.3 | (580.5 | ) | 3,482.5 | ||||||||||||||
Accumulated other comprehensive loss |
(139.1 | ) | (2.8 | ) | (2.7 | ) | 2.7 | (139.1 | ) | |||||||||||
Treasury shares, at cost |
(350.7 | ) | | | | (350.7 | ) | |||||||||||||
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Stockholders equity |
5,289.0 | 1,781.0 | 1,742.0 | (1,804.2 | ) (1), (2), (A), (B) | 5,226.8 | ||||||||||||||
Noncontrolling interests |
33.5 | | | | 33.5 | |||||||||||||||
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Total stockholders equity |
5,322.5 | 1,781.0 | 1,742.0 | (1,804.2 | ) | 5,260.3 | ||||||||||||||
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Total liabilities and stockholders equity |
$ | 11,691.6 | $ | 2,128.4 | $ | 2,081.8 | $ | 2,406.6 | $ | 16,180.0 | ||||||||||
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See accompanying notes to unaudited pro forma condensed combined financial information.
5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
IFRS and U.S. GAAP Differences
The following adjustments have been made to highlight the significant differences between Peabodys accounting policies and Macarthurs accounting policies. Macarthurs financial statements have been prepared in accordance with IFRS, which differs from the accounting policies used by Peabody. There has been no attempt to identify future differences between IFRS and U.S. GAAP as the result of proposed changes in accounting standards, transactions or events that may occur in the future. The organizations that promulgate IFRS and U.S. GAAP have significant projects ongoing that could have a significant impact on future comparisons between IFRS and U.S. GAAP, which could have a significant impact on Peabody or the combined company.
(1) Overburden in advance
Macarthur capitalizes costs incurred in the removal of overburden from coal deposits (overburden in advance) and defers the recognition of the expense until the coal is extracted while Peabody, in accordance with U.S. GAAP, expenses these items as incurred while a mine is in production.
Macarthurs total overburden in advance balance subject to adjustment was A$219.6 million, of which A$197.8 million was reflected in current assets, as of September 30, 2011.
The adjustments made to the pro forma condensed combined statements of operations were determined by calculating the net change in the total overburden in advance amounts from the beginning of period to the end of period amounts. The A$ net changes in total overburden in advance reflected in the pro forma condensed combined statement of operations, all of which increased costs and expenses, are as follows:
(Amounts in A$ millions) | ||||
Year ended December 31, 2010 |
$ | 4.3 | ||
Nine months ended September 30, 2011 |
$ | 38.6 |
The pro forma condensed combined balance sheet adjustment totaled $214.8 million, and was based on period end A$ balances multiplied by the period end exchange rate. The pro forma condensed combined statement of operations adjustments were based on the A$ net change during the period multiplied by the average exchange rate for the period, and totaled $4.0 million and $40.1 million, respectively, for the year ended December 31, 2010 and the nine months ended September 30, 2011.
(2) Exploration and evaluation activities
Macarthur capitalizes exploration and evaluation costs and depreciates them when production commences using a units of production basis while Peabody, in accordance with U.S. GAAP, expenses such costs as incurred to the extent such costs represent exploration or evaluation activities. Macarthurs exploration and evaluation asset balances subject to adjustment included property, plant, equipment and mine development, net of A$81.6 million as of September 30, 2011.
6
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION - (Continued)
The adjustments made to the pro forma condensed combined statements of operations were determined by calculating the net change in capitalized exploration costs from the beginning of period to the end of period, adjusting for any items transferred to property, plant and equipment under IFRS. The net changes in total capitalized exploration and evaluation costs were as follows:
(Amounts in A$ millions) | ||||
Year ended December 31, 2010 |
$ | 12.3 | ||
Nine months ended September 30, 2011 |
$ | 12.9 |
The pro forma condensed combined balance sheet adjustment totaled $79.8 million and was based on A$ period end balances multiplied by the period end exchange rate. The pro forma condensed combined statement of operations adjustments were based on the net change during the period multiplied by the average exchange rate for the period and totaled $11.3 million and $13.4 million, respectively, for the year ended December 31, 2010 and the nine months ended September 30, 2011.
(3) Tax effects of overburden and exploration and evaluation adjustments
In order to illustrate the after tax effects of the overburden and exploration and evaluation adjustments in the pro forma condensed combined statements of operations, an adjustment to the income tax provision was calculated by multiplying the before tax adjustments by 30%, the Australian statutory rate.
Transaction Pro Forma Adjustments
The following adjustments have been made to give effect to the Transactions:
(A) Purchase price allocation
The preliminary allocation of purchase price was based on Peabodys internal analysis using certain estimates and assumptions in estimating fair value. However, an independent valuation of the fair values for the estimated purchase price allocation and tax basis has not been performed on the individual assets and liabilities of Macarthur. Therefore, once a detailed analysis of the fair values for book and tax purposes has been performed and an independent valuation is completed, the actual fair values assigned may differ and the impact on operating costs and depreciation, depletion and amortization may also differ from the estimates provided herein.
The estimated purchase consideration amounts shown in U.S. dollars (in millions) using the September 30, 2011 exchange rate of $0.9781 per A$ was allocated to Macarthur assets and liabilities as follows:
Cash and cash equivalents |
$ | 292.3 | ||
Accounts receivable, net |
133.1 | |||
Inventories |
51.5 | |||
Other current assets |
468.4 | |||
Property, plant, equipment and mine development, net |
3,603.9 | |||
Investments and other assets |
702.5 | |||
Current maturities of long-term debt |
(17.5 | ) | ||
Accounts payable and accrued expenses |
(338.2 | ) | ||
Long-term debt, less current maturities |
(57.3 | ) | ||
Asset retirement obligations |
(33.7 | ) | ||
Other noncurrent liabilities |
(3.8 | ) | ||
|
|
|||
$ | 4,801.2 | |||
|
|
7
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION - (Continued)
The adjustments made to the pro forma condensed combined statements of operations reflect the additional expense for the estimated impact of the fair value adjustment for coal inventory and estimated impact on depreciation, depletion and amortization for the fair value adjustment for property, plant and equipment (including owned and leased mineral rights). The adjustments made to the pro forma condensed combined statements of operations also include additional expense for the estimated impact of reflecting the equity affiliate interest at its estimated fair value.
(B) Financing activities
The adjustments to the pro forma condensed combined balance sheet reflect cash and cash equivalents assumed to be used for the acquisition of Macarthur of $823.0 million, which included $62.2 million of acquisition related costs, the cash proceeds upon entering into a new term loan facility of $1,000.0 million ($25.0 million reflected in current maturities of long-term debt), proceeds from the issuance of $1,600.0 million aggregate principal amount of 6.00% Senior Notes due 2018 (the 2018 Notes) and $1,500.0 million aggregate principal amount of 6.25% Senior Notes due 2021 (the 2021 Notes and, together with the 2018 Notes, the Notes) and the deferred financing fees associated with the term loan facility, the Notes and the bridge facility of $59.6 million ($4.0 million reflected in current assets and $55.6 million reflected in noncurrent assets).
The adjustments to the pro forma condensed combined statements of operations reflect the pro forma adjustment to interest expense related to the amortization of deferred financing fees associated with the term loan facility, the Notes and the bridge facility and the pro forma adjustment to interest expense associated with the 2011 Term Loan Facility, the Notes and the bridge facility. The interest expense associated with the 2018 Notes reflects an interest rate of 6.00%, and the interest expense associated with the 2021 Notes reflects an interest rate of 6.25%. The interest expense associated with the Bridge Facility reflects fees of $16.2 million. Also reflected in the pro forma condensed combined statements of operations are adjustments for foregone interest income associated with the cash and cash equivalents assumed to be used for the acquisition of Macarthur at an estimated rate of 0.25%.
(C) Tax effects of Transaction adjustments
In order to illustrate the after tax effects of the Transaction adjustments in the pro forma condensed combined statements of operations, an adjustment to the income tax provision was calculated by multiplying the before tax adjustments by 30% for purchase accounting adjustments (the Australian statutory rate) and 37.5% (the Companys blended U.S. statutory rate) for financing and transaction adjustments.
8
Exhibit 99.2
INDEX TO MACARTHUR COAL LIMITED REPORTS
Financial Report |
||||
F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-93 | ||||
F-94 |
F-1
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2011
Note | 2011 $000 |
2010 $000 |
||||||||
Revenue from coal sales |
687,325 | 670,502 | ||||||||
Cost of coal sold |
(418,868 | ) | (397,800 | ) | ||||||
|
|
|
|
|||||||
Gross profit |
268,457 | 272,702 | ||||||||
Other income |
7 | 131,821 | 10,862 | |||||||
Distribution expenses |
(45,256 | ) | (56,550 | ) | ||||||
Administration expenses |
(24,743 | ) | (19,345 | ) | ||||||
Other expenses |
8 | (15,586 | ) | (25,894 | ) | |||||
|
|
|
|
|||||||
Results from operating activities |
314,693 | 181,775 | ||||||||
Finance income |
11 | 28,433 | 14,174 | |||||||
Finance expenses |
11 | (11,653 | ) | (12,169 | ) | |||||
|
|
|
|
|||||||
Net financial income |
16,780 | 2,005 | ||||||||
|
|
|
|
|||||||
Share of loss of equity accounted investees, net of income tax |
30 | (5,671 | ) | (10,934 | ) | |||||
|
|
|
|
|||||||
Profit before income tax |
325,802 | 172,846 | ||||||||
Income tax expense |
12(a) | (84,412 | ) | (47,782 | ) | |||||
|
|
|
|
|||||||
Profit for the year |
241,390 | 125,064 | ||||||||
|
|
|
|
|||||||
Other comprehensive income* |
||||||||||
Effective portion of changes in fair value of cash flow hedges |
15,045 | 12,469 | ||||||||
Net change in fair value of cash flow hedges reclassified to profit and loss |
(9,912 | ) | (26,807 | ) | ||||||
|
|
|
|
|||||||
Other comprehensive income for the year, net of income tax |
5,133 | (14,338 | ) | |||||||
|
|
|
|
|||||||
Total comprehensive income for the year |
246,523 | 110,726 | ||||||||
|
|
|
|
|||||||
Earnings per share: |
||||||||||
Basic earnings per share |
14 | $ | 0.83 | $ | 0.49 | |||||
Diluted earnings per share |
14 | $ | 0.83 | $ | 0.49 | |||||
|
|
|
|
* | Amounts recognised in comprehensive income are disclosed net of income tax. |
The consolidated statement of comprehensive income should be read in conjunction with the notes to the financial statements set out on pages F-6 to F-92.
F-2
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2011
Note | 2011 $000 |
2010 $000 |
||||||||
Current assets |
||||||||||
Cash and cash equivalents |
15 | 415,161 | 348,216 | |||||||
Trade and other receivables |
16 | 736,576 | 209,105 | |||||||
Inventories |
17 | 38,926 | 49,762 | |||||||
Other financial assets |
18 | 41,058 | 26,211 | |||||||
Overburden in advance |
19 | 182,256 | 146,548 | |||||||
|
|
|
|
|||||||
Total current assets |
1,413,977 | 779,842 | ||||||||
|
|
|
|
|||||||
Non-current assets |
||||||||||
Trade and other receivables |
16 | 106,168 | 75,309 | |||||||
Investments in equity accounted investees |
30 | 241,161 | 338,554 | |||||||
Inventories |
17 | 4,368 | | |||||||
Other financial assets |
18 | 7,035 | 4,263 | |||||||
Property, plant and equipment |
20 | 240,604 | 250,715 | |||||||
Exploration and evaluation assets |
21 | 100,309 | 98,483 | |||||||
Overburden in advance |
19 | 21,824 | 19,905 | |||||||
|
|
|
|
|||||||
Total non-current assets |
721,469 | 787,229 | ||||||||
|
|
|
|
|||||||
Total assets |
2,135,446 | 1,567,071 | ||||||||
|
|
|
|
|||||||
Current liabilities |
||||||||||
Trade and other payables |
22 | 101,758 | 125,677 | |||||||
Loans and borrowings |
23 | 20,769 | 15,822 | |||||||
Current tax payable |
12 | 20,929 | 55,025 | |||||||
Employee benefits |
24 | 6,878 | 5,179 | |||||||
Provisions |
25 | 2,930 | 3,459 | |||||||
Other financial liabilities |
26 | 2,265 | 6,639 | |||||||
|
|
|
|
|||||||
Total current liabilities |
155,529 | 211,801 | ||||||||
|
|
|
|
|||||||
Non-current liabilities |
||||||||||
Loans and borrowings |
23 | 64,543 | 83,600 | |||||||
Deferred tax liabilities |
13 | 90,600 | 76,604 | |||||||
Employee benefits |
24 | 119 | 87 | |||||||
Provisions |
25 | 30,584 | 30,602 | |||||||
Other financial liabilities |
26 | 587 | 35,782 | |||||||
|
|
|
|
|||||||
Total non-current liabilities |
186,433 | 226,675 | ||||||||
|
|
|
|
|||||||
Total liabilities |
341,962 | 438,476 | ||||||||
|
|
|
|
|||||||
Net assets |
1,793,484 | 1,128,595 | ||||||||
|
|
|
|
|||||||
Equity |
||||||||||
Share capital |
1,253,923 | 713,420 | ||||||||
Reserves |
1,841 | (2,752 | ) | |||||||
Retained earnings |
537,720 | 417,927 | ||||||||
|
|
|
|
|||||||
Total equity |
1,793,484 | 1,128,595 | ||||||||
|
|
|
|
The consolidated statement of financial position should be read in conjunction with the notes to the
financial statements set out on pages F-6 to F-92.
F-3
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 30 June 2011
Attributable to owners of the Company | ||||||||||||||||||||||||||
Note | Share capital $000 |
Hedging reserve $000 |
Share- based payments reserve $000 |
Reserve for own shares $000 |
Retained earnings $000 |
Total equity $000 |
||||||||||||||||||||
Balance at 1 July 2009 |
651,423 | 11,187 | 182 | | 346,273 | 1,009,065 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income for the year |
||||||||||||||||||||||||||
Profit or loss |
| | | | 125,064 | 125,064 | ||||||||||||||||||||
Other comprehensive income |
||||||||||||||||||||||||||
Effective portion of changes in fair value of cash flow hedges* |
| 12,469 | | | | 12,469 | ||||||||||||||||||||
Net change in fair value of cash flow hedges reclassified to profit or loss* |
| (26,807 | ) | | | | (26,807 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total other comprehensive income |
| (14,338 | ) | | | | (14,338 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income for the year |
| (14,338 | ) | | | 125,064 | 110,726 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Transactions with owners, recorded directly in equity* |
||||||||||||||||||||||||||
Contributions by and distributions to owners |
||||||||||||||||||||||||||
Dividends to equity holders |
27 | | | | | (53,410 | ) | (53,410 | ) | |||||||||||||||||
Issue of ordinary shares |
27 | 61,997 | | | | | 61,997 | |||||||||||||||||||
Share-based payment transactions |
24 | | | 217 | | | 217 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total contributions by and distributions to owners |
61,997 | | 217 | | (53,410 | ) | 8,804 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at 30 June 2010 |
713,420 | (3,151 | ) | 399 | | 417,927 | 1,128,595 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at 1 July 2010 |
713,420 | (3,151 | ) | 399 | | 417,927 | 1,128,595 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income for the year |
||||||||||||||||||||||||||
Profit or loss |
| | | | 241,390 | 241,390 | ||||||||||||||||||||
Other comprehensive income |
||||||||||||||||||||||||||
Effective portion of changes in fair value of cash flow hedges* |
| 15,045 | | | | 15,045 | ||||||||||||||||||||
Net change in fair value of cash flow hedges reclassified to profit or loss* |
| (9,912 | ) | | | | (9,912 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total other comprehensive income |
| 5,133 | | | | 5,133 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total comprehensive income for the year |
| 5,133 | | | 241,390 | 246,523 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Transactions with owners, recorded directly in equity* |
||||||||||||||||||||||||||
Contributions by and distributions to owners |
||||||||||||||||||||||||||
Dividends to equity holders |
27 | | | | | (121,597 | ) | (121,597 | ) | |||||||||||||||||
Issue of ordinary shares |
27 | 540,503 | | | | | 540,503 | |||||||||||||||||||
Own shares acquired |
| | | (580 | ) | | (580 | ) | ||||||||||||||||||
Share-based payment transactions |
24 | | | 40 | | | 40 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total contributions by and distributions to owners |
540,503 | | 40 | (580 | ) | (121,597 | ) | 418,366 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at 30 June 2011 |
1,253,923 | 1,982 | 439 | (580 | ) | 537,720 | 1,793,484 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
* | Amounts recognised are disclosed net of income tax. |
The consolidated statement of changes in equity should be read in conjunction with the notes to the financial statements set out on pages F-6 to F-92.
F-4
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2011
Note | 2011 $000 |
2010 $000 |
||||||||
Cash flows from operating activities |
||||||||||
Cash receipts from customers |
727,351 | 650,541 | ||||||||
Cash paid to suppliers and employees |
(531,219 | ) | (429,227 | ) | ||||||
|
|
|
|
|||||||
Cash generated from operating activities |
196,132 | 221,314 | ||||||||
Interest received |
25,556 | 13,805 | ||||||||
Income tax paid |
(109,290 | ) | (65,000 | ) | ||||||
Income tax refund |
5,371 | 7,009 | ||||||||
|
|
|
|
|||||||
Net cash from operating activities |
36 | 117,769 | 177,128 | |||||||
|
|
|
|
|||||||
Cash flows from investing activities |
||||||||||
Proceeds from sale of property, plant and equipment |
142 | 32 | ||||||||
Acquisition of property, plant and equipment |
(11,652 | ) | (9,824 | ) | ||||||
Deposit on land purchase |
(7,500 | ) | | |||||||
Proceeds from partial disposal of equity accounted investee |
7 | 97,600 | 7,000 | |||||||
Proceeds from partial disposal of mining project |
14,976 | | ||||||||
Exploration and evaluation expenditure |
(12,517 | ) | (10,310 | ) | ||||||
Contributions from joint ventures |
507,649 | 446,399 | ||||||||
Contributions to joint ventures |
(519,635 | ) | (448,614 | ) | ||||||
Loans to other entities |
(370,000 | ) | | |||||||
Repayment of loans to related parties |
1,219,616 | 771,700 | ||||||||
Advances to related parties |
(1,359,761 | ) | (835,411 | ) | ||||||
Deposits made with financial institutions in relation to guarantees provided |
(2,772 | ) | (1,509 | ) | ||||||
|
|
|
|
|||||||
Net cash used in investing activities |
(443,854 | ) | (80,537 | ) | ||||||
|
|
|
|
|||||||
Cash flows from financing activities |
||||||||||
Proceeds from share issues |
487,402 | 61,997 | ||||||||
Payment of interest and financial expenses |
(2,101 | ) | (743 | ) | ||||||
Repayment of other financial liabilities |
(3,700 | ) | (3,621 | ) | ||||||
Payments for finance lease liabilities |
(20,075 | ) | (20,174 | ) | ||||||
Dividends paid |
27 | (68,496 | ) | (53,410 | ) | |||||
|
|
|
|
|||||||
Net cash from /(used in) financing activities |
393,030 | (15,951 | ) | |||||||
|
|
|
|
|||||||
Net increase in cash and cash equivalents |
66,945 | 80,640 | ||||||||
Cash and cash equivalents at 1 July |
348,216 | 267,576 | ||||||||
|
|
|
|
|||||||
Cash and cash equivalents at 30 June |
15 | 415,161 | 348,216 | |||||||
|
|
|
|
The consolidated statement of cash flows should be read in conjunction with the notes to the
financial statements set out on pages F-6 to F-92.
F-5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2011
1. Reporting entity
Macarthur Coal Limited (the Company) is a company domiciled in Australia. The address of the Companys registered office is 100 Melbourne Street, South Brisbane, QLD, 4101. The consolidated financial statements of the Company as at and for the year ended 30 June 2011 comprise the Company and its subsidiaries (together referred to as the Group and individually as Group entities) and the Groups interest in associates and jointly controlled entities. The Group primarily is involved in exploration, project evaluation, project development and coal mining activities in Queenslands Bowen Basin.
2. Financial statements
(a) Description and purpose
The Financial Statements of the Group consist of:
| the consolidated statements of financial position as at 30 June 2011 and 30 June 2010; |
| the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years ended 30 June 2011 and 30 June 2010; |
| a basis of preparation note; |
| a description of the significant accounting policies; and |
| other explanatory notes. |
The Financial Statements have been prepared for inclusion by Peabody Energy Corporation, the Companys ultimate parent entity, in one or more documents in connection with its Form 8-K/A filing with the U.S. Securities Exchange Commission as a result of its acquisition of the Group.
(b) Basis of preparation
The Financial Statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB). The Financial Statements comply with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB).
The consolidated financial statements were authorised for issue by the Board of Directors on 22 December 2011.
(c) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except that derivative financial instruments are measured at their fair value.
The methods used to measure fair values are discussed further in Note 4.
(d) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Companys functional currency and the functional currency of all of its subsidiaries.
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, all financial information presented in Australian dollars has been rounded to the nearest thousand dollars, unless otherwise stated.
F-6
(e) Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with accounting standards requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Management discuss with the Audit and Risk Management Committee the development, selection and disclosure of the Groups critical accounting policies and estimates and the application of these policies and estimates. The significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are discussed below.
Estimates and assumptions
Coal Reserves
Economically recoverable coal reserves at the Coppabella mine of 43,247,000 (2010: 46,179,000) tonnes and Moorvale mine of 21,257,000 (2010: 24,189,000) tonnes, relate to the estimated quantity of coal in an area of interest that can be expected to be profitably extracted, processed and sold. The Group determines and reports coal reserves under the Australasian Code of Reporting of Mineral Resources and Ore Reserves (the JORC Code). This includes estimates and assumptions in relation to geological, technical and economic factors, including: quantities, grades, production techniques, recovery rates, production costs, transport costs, exchange rates and expected coal demand and prices. Changes in coal reserves impact on the assessment of recoverability of property, plant and equipment and investments in equity accounted investees, including the carrying value of assets depreciated on a units of production basis, and rehabilitation and dismantling provisions.
Exploration and evaluation assets
Determining the recoverability of exploration and evaluation expenditure capitalised in accordance with the Groups accounting policy (refer Note 3(f)), requires estimates and assumptions as to future events and circumstances, in particular, whether successful development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. The Group applies the principles of accounting standards and recognises exploration and evaluation assets when the rights of tenure of the area of interest are current, and the exploration and evaluation expenditures incurred are expected to be recouped through successful development and exploitation of the area. If, after having capitalised the expenditure under the Groups accounting policy in Note 3(f), a judgement is made that recovery of the carrying amount is unlikely, an impairment loss is recorded in profit or loss in accordance with the Groups accounting policy in Note 3(k). The carrying amounts of exploration and evaluation assets are set out in Note 21.
Rehabilitation and dismantling provisions
Certain estimates and assumptions are required to be made in determining the cost of rehabilitation and restoration of the areas disturbed during mining activities and the cost of dismantling of mining infrastructure in accordance with the Groups accounting policy (refer Note 3(m)). The amount the Group is expected to incur to settle its future obligations includes estimates regarding: the appropriate rate at which to discount the liability, the expected timing of the cash flows and the expected life of mine (which is based on coal reserves, refer above), the application of relevant environmental legislation, and the future expected costs of rehabilitation, restoration and dismantling. At 30 June 2011, the Group has used a discount rate of 6.15% (2010: 5.56%).
Changes in the estimates and assumptions used could have a material impact on the carrying value of the rehabilitation and dismantling provision and related asset. The provision is reviewed at each reporting date and updated based on the best available estimates and assumptions at that time. The carrying amount of the rehabilitation and dismantling provision and related assets is set out in Note 25.
F-7
Recoverability of non-current assets
As set out in Note 3(k), certain assumptions are required to be made in order to assess the recoverability of non-current assets where there is an impairment indicator. Key assumptions include future coal prices, future cash flows, discount rate and estimates of coal reserves. Estimates of coal reserves in themselves are dependent on various assumptions (refer above). Changes in these assumptions could therefore affect estimates of future cash flows used in the assessment of recoverable amount, estimates of the life of mine and depreciation. Further details of impairment testing assumptions relating to investments in equity accounted investees are included in Note 30. The carrying amounts of applicable non-current assets are set out in Notes 20 and 30.
Contingent liabilitieslitigation
Certain claims have been made on the Group. Judgements about the validity of the claims have been made by the Directors. Further details are included in Note 32.
Financial Instruments including hedge accounting
As set out in Note 3(c), managements judgement is necessary when determining whether a derivative financial instrument qualifies for hedge accounting. Factors such as forecast demand, production and port allocation are considered when assessing whether forecast transactions are highly probable as required by accounting standards. The carrying amounts of financial instruments are set out in Notes 18 and 26.
The recognition and measurement of derivative liabilities disclosed in Note 26, requires that certain estimations and assumptions be made in determining the fair value of the underlying transaction which results in the recognition of the derivative liabilities. Factors affecting future project fair value such as coal reserves, coal pricing and production costs are considered. Estimates of coal reserves in themselves are dependent on various assumptions (refer F-7). Changes in these estimates could materially impact on coal reserves, and could therefore affect estimates of future cash flows used in the assessment of future project fair value.
Minerals Resource Rent Tax
The Minerals Resource Rent Tax (MRRT) Bill was introduced to parliament on 2 November 2011 and after amendments, was passed by the House of Representatives on 23 November 2011. The Bill will be presented to the Senate for voting in early calendar year 2012.
The Bill was referred to the Senate Economics Legislation Committee and the legislations passage is not assured as it remains subject to debate and approval by the Senate.
If the MRRT is introduced in its proposed form from 1 July 2012, it has the potential to impact the assumptions used to determine the future cash flows generated from the continuing use of the Groups assets for the purpose of the calculations used in impairment testing. The assets most likely to be impacted include exploration and evaluation assets, property, plant and equipment and investments in equity accounted investees, the carrying amounts of which are set out in Notes 20, 21 and 30. The Group had not incorporated the impact of the MRRT into its assumptions at 30 June 2011 as the legislation had not been fully developed nor substantively enacted.
Australian Governments carbon pricing mechanism
The Clean Energy Legislative Package (Clean Energy Act 2011 and associated legislation) was passed by the Senate on 8 November 2011 and sets out the way that Australia will introduce a carbon price to reduce Australias greenhouse gas emissions.
From 1 July 2012, around 500 of Australias entities will have to pay a tax on their carbon emissions of $23 for each tonne of carbon dioxide emitted. The price will rise by 2.5% per year until 2015 when a flexible market-based trading scheme commences.
The introduction of a carbon pricing mechanism has the potential to impact the assumptions used for the purpose of the calculation used in asset impairment testing. The Group had not incorporated the potential impact of any carbon pricing mechanism in its impairment testing at 30 June 2011.
F-8
3. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.
(a) Basis of consolidation
Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.
Acquisitions on or after 1 July 2009
The Group has adopted the revised IFRS 3 Business Combinations (revised 2008) and the amended IAS 127 Consolidated and Separate Financial Statements (amended 2008) for acquisitions of non-controlling interests occurring in the financial year commencing 1 July 2009. The change in accounting policy was applied prospectively.
For acquisitions on or after 1 July 2009, the Group measures goodwill at the acquisition date as:
| the fair value of the consideration transferred; plus |
| the recognised amount of any non-controlling interests in the acquiree; plus |
| if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less |
| the net recognisable amount (generally fair value) of the identifiable assets acquired and liabilities assumed. |
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit and loss.
When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquirees employees (acquirees awards) and relate to past services, then all or a portion of the amount of the acquirers replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquirees awards and the extent to which the replacement awards relate to past and/or future service.
Accounting for acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Previously, goodwill was recognised arising on the acquisition of a non-controlling interest in a subsidiary; and that represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of exchange.
F-9
Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
Investments in associates and jointly controlled entities (equity accounted investees)
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Jointly controlled entities are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.
Investments in associates and jointly controlled entities are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The cost of the investment includes transaction costs. The consolidated financial statements include the Groups share of the profit or loss and other comprehensive income, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.
When the Groups share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.
Jointly controlled operations
A jointly controlled operation is a joint venture carried on by each venturer using its own assets in pursuit of the joint operations. The consolidated financial statements include the assets that the Group controls and the liabilities that it incurs in the course of pursuing the joint operation and the expenses that the Group incurs and its share of income that it earns from the joint operation.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Groups interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
(b) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currency of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to Australian dollars at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.
F-10
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the dates that fair values were determined. Foreign currency differences arising on retranslation are recognised in profit or loss.
(c) Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial assets: Loans and receivables, cash and cash equivalents, and cash and depositsnot at call.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents and trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less.
Cash and depositsnot at call comprise balances pledged as collateral for arrangements relating to Wiggins Island feasibility study costs and balances relating to the Groups share of cash in its joint ventures bank accounts.
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the date the Group becomes a party to the contractual provisions of the instrument.
F-11
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group classified non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest rate method.
Other financial liabilities comprise loans and borrowings, trade and other payables, and amounts payable for future user charges.
Derivative financial instruments, including hedge accounting
The Group holds derivative financial instruments to hedge its foreign currency risk exposures. On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be highly effective in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for which the hedge is designated, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.
Derivative financial instruments existed in relation to contractual obligations and the option for a sale of shares in a jointly controlled entity to a third party in line with pre-determined triggering events in the future. For further details refer to Note 26.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are accounted for as described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income and presented in the hedging reserve in equity remains there until the forecast transaction affects profit or loss. When the hedged item is a non-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when the asset is recognised. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognised immediately in profit or loss. In other cases the amount recognised in other comprehensive income is transferred to profit or loss in the same period that the hedged item affects profit or loss.
F-12
Other non-trading derivatives
When a derivative financial instrument is not held for trading, and is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in profit or loss.
(d) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.
Dividends
Dividends are recognised as a liability in the period in which they are declared.
Purchase of share capital
When share capital recognised as equity is purchased by the employee share plan trust, the amount of the consideration paid which includes directly attributable costs, is net of any tax effects, and is recognised as a deduction from equity. When shares are sold subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to / from retained earnings.
(e) Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation (refer below) and accumulated impairment losses (refer Note 3(k)).
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets and acquired assets includes the cost of materials, direct labour, any other cost directly attributable to bringing the asset to a working condition for its intended use, capitalising borrowing costs (refer Note 3(p)) and:
(i) | the initial estimate at the time of installation and during the period of use, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located; and |
(ii) | changes in the measurement of existing liabilities recognised for these costs resulting from changes in the timing or outflow of resources required to settle the obligation or from changes in the discount rate. |
Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
F-13
Mining property and development assets include costs transferred from exploration and evaluation assets once technical feasibility and commercial viability of an area of interest are demonstrable and subsequent costs to develop the mine to the production phase.
When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within other income/other expenses in profit or loss.
Subsequent costs
The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.
Depreciation is recognised in profit or loss on a straight line basis over the estimated useful lives of each component of an item of property, plant and equipment taking into account estimated residual values, with the exception of mining property and development assets which are depreciated on a units of production basis over the life of the economically recoverable reserves (refer Note 2(e)).
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Freehold land is not depreciated.
Assets are depreciated from the date they are available for use.
The depreciation rates or useful lives used for each class of asset are as follows:
2011 | 2010 | |||
Property, plant and equipment |
||||
Mining property and development |
UOP(1) | UOP(1) | ||
Buildings and infrastructure |
6.6% - 44% | 6.6% - 44% | ||
Plant and equipment |
5% - 67% | 5% - 40% | ||
Leased assets |
10% - 20% | 10% - 20% |
(1) | Depreciated on a units of production (UOP) basis over reserves. |
Depreciation rates and methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. When changes are made, adjustments are reflected prospectively in current and future periods only. Depreciation is expensed, except to the extent that it is included in the carrying amount of another asset (e.g. inventory stocks) as an allocation of production overheads.
Development costs
Development costs related to an area of interest are capitalised if the expenditures are expected to be recouped through sale or successful exploitation of the area of interest. Capitalisation of development expenditure ceases once the area of interest as a whole is capable of being operated at commercial levels of production in the manner intended by management, at which point the asset is depreciated in accordance with the rates above. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses (refer Note 3(k)), and is included in mining property and development assets within property, plant and equipment (see above).
F-14
(f) Exploration and evaluation expenditure
Exploration and evaluation costs, including the costs of acquiring licences, are capitalised as exploration and evaluation assets separately for each area of interest. Costs incurred before the Group has obtained the legal rights to explore an area are recognised in the profit or loss.
Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either:
(i) | the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or |
(ii) | activities in the area of interest have not at the reporting date, reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. |
Exploration and evaluation assets are tested for impairment when any of the following facts and circumstances exist:
(i) | the term of exploration license in the specific area of interest has expired during the reporting period or will expire in the near future, and it is not expected to be renewed; |
(ii) | substantive expenditure on further exploration for an evaluation of mineral resources in the specific area are not budgeted nor planned; |
(iii) | exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the decision was made to discontinue such activities in the specified area; or |
(iv) | sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale. |
Where a potential impairment is indicated, an assessment is performed for each cash generating unit (CGU) which is no larger than the area of interest. The Group performs impairment testing in accordance with accounting policy 3(k).
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within property, plant and equipment.
(g) Overburden in advance
Expenditure incurred in the removal of overburden from coal deposits is deferred and capitalised to inventory as the coal is extracted. Overburden in advance is measured at the lower of cost and net realisable value. The balance of the amount deferred is reviewed at each reporting date to determine the amount (if any) which is no longer recoverable out of future revenue. Any amounts so determined are expensed.
F-15
(h) Inventories
Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of inventories is allocated on a monthly weighted average basis and includes direct material, consumption of overburden in advance, coal mining, coal processing, labour, related transportation costs to the point of sale and other fixed and variable overhead costs directly related to mining activities. The site overheads and rehabilitation cost component of inventory is allocated using normal operating capacity. Depreciation is allocated to inventories on a units of production basis.
(i) Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and are not recognised on the Groups statement of financial position.
(j) Goodwill
Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see Note 3(a).
Acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore no goodwill is recognised as a result of such transactions.
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity accounted investee.
(k) Impairment
Financial assets (including receivables)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.
Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
F-16
The Group considers evidence of impairment for receivables at a specific asset level. All individually significant receivables are assessed for specific impairment. Any such impairment is recorded in profit and loss.
Non-financial assets
The carrying amounts of the Groups non-financial assets, other than inventories (refer Note 3(h)), overburden in advance (refer Note 3(g)) and deferred tax assets (refer Note 3(q)), are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the assets recoverable amount is estimated. For goodwill and intangible assets, that have indefinite useful lives, the recoverable amount is estimated at each reporting date. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating unit. Subject to an operating segment ceiling test, 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. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
Goodwill that forms part of the carrying amount of an investment in an associate or jointly controlled entity is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate or jointly controlled entity is tested for impairment as a single asset when there is objective evidence that the investment in an associate or jointly controlled entity may be impaired.
The Groups corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(l) Employee benefits
Defined contribution superannuation plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan that are due more than 12 months after the end of the period in which the employees render the service are discounted to their present value.
F-17
Other long-term service benefits
The Groups net obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using the rates attached to the Commonwealth Government bonds at the reporting date which have maturity dates approximating the terms of the Groups obligations.
Termination benefits
Termination benefits are recognised as an expense when the Group is committed demonstrably, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage redundancy. Termination benefits for redundancies are recognised as an expense if the Group has made an offer encouraging redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable more than 12 months after the reporting date, then they are discounted to their present value.
Short-term benefits
Liabilities for employee benefits for wages, salaries, annual leave and vesting sick leave represent present obligations resulting from employees services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as medical care, cars and free or subsidised goods and services, are expensed based on the net marginal cost to the Group as the benefits are taken by the employees.
A liability is recognised for the amount expected to be paid under short-term cash bonus plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
Share-based payment transactions
The grant-date fair value of share-based payment awards granted under the Employee Share Loan Plan and the Long Term Incentive Plan is recognised as an employee expense with a corresponding increase in equity over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value (refer Note 4) of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
Vested shares are purchased on market after vesting date, and held in trust. Equity instruments held in connection with the equity compensation plan are presented as treasury shares and shown in equity in the balance sheet as treasury reserve. The treasury reserve will hold the value of the shares on-trust until such time as the shares are withdrawn by the employee. On withdrawal, the treasury reserve is reversed against the share-based payment reserve.
Non-Executive Directors, excluding the Chairman, are entitled to 10,000 Company securities each year as part of their Directors fees, pro-rated based on length of service. The Chairman is entitled to 15,000 Company securities each year. The shares are purchased on the Australian Stock Exchange at the market value prevailing on the date of purchase. The provision of shares is not subject to performance conditions. The fair value of shares granted to Non-Executive Directors is recognised as an expense.
F-18
Long Term Incentive Plan
Under the Groups Long Term Incentive Plan (LTIP), eligible employees are invited to apply for performance rights, which will be converted to fully paid ordinary shares if the Company performance criteria specified by the Nomination and Remuneration Committee are satisfied within a specified performance period.
The Group has established an employee share plan trust (the Trust) to facilitate the operation of the LTIP, including acquisition of the shares on-market for the purpose of the LTIP.
The performance criteria for the purposes of the LTIP consist of Earnings per Share (EPS), Total Shareholder Return (TSR), and Return on Invested Capital (ROIC). If the performance criteria are satisfied over the performance period, the performance rights will automatically vest and the Company will allocate shares to participants. At the election of the participants, the shares are held in trust, sold or transferred to the participant.
CPU Share Plans Pty Limited, the trustee of the Trust, holds the shares in trust on the participants behalf until an employee notifies the Trustee that they wish to withdraw their shares.
Allocated shares can be held in Trust on the participants behalf until the earlier of the cessation of employment, 10 years from the date the performance rights were granted, or the participant withdraws the shares from the Trust by completing a Notice of Withdrawal.
While the shares are held in Trust, they will be subject to risk of forfeiture if a participants employment is terminated because of fraud, theft or other gross misconduct.
(m) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.
Rehabilitation and dismantling
Provisions are made, when the areas are disturbed, for the estimated cost of rehabilitation relating to areas disturbed during the mines operation up to reporting date but not yet rehabilitated. Provision has been made in full for all disturbed areas at the reporting date based on current estimates of costs per hectare to rehabilitate such areas, discounted to their present value based on expected future cashflows. The estimated cost of rehabilitation includes the current cost of re-contouring, topsoiling and revegetation complying with legislative requirements. Changes in estimates are dealt with on a prospective basis as they arise.
Uncertainty exists as to the amount of rehabilitation obligations which will be incurred due to the impact of changes in environmental legislation.
Assumptions have been made as to the remaining life of existing sites based on studies conducted by independent technical advisors and on the basis of current environmental legislation.
F-19
Infrastructure assets and dismantling
The present value of rehabilitation and dismantling obligations is recognised on construction of the assets where a legal or constructive obligation exists at that time. The provision is recognised as a non-current liability with a corresponding asset. At each reporting date the rehabilitation liability is re-measured in line with changes in discount rates, and timing or amount of the costs to be incurred. Any changes in the liability are added or deducted from the related asset, other than the unwinding of the discount which is recognised as a finance cost in profit or loss as it occurs.
If the change in the liability results in a decrease in the liability that exceeds the carrying amount of the asset, the asset is written-down to nil and the excess is recognised immediately in profit or loss. If the change in the liability results in an addition to the cost of the asset, the recoverability of the new carrying amount is considered. Where there is an indication that the new carrying amount is not fully recoverable, an impairment test is performed with the write-down recognised in profit or loss in the period in which it occurs.
Non-infrastructure areas
Rehabilitation obligations relating to non-infrastructure areas are discounted to their present value based on expected future cash flows. At each reporting date the rehabilitation liability is re-measured in line with changes in discount rates, timing or amount of the costs to be incurred and areas to be rehabilitated. Any changes in the liability are recognised in profit or loss as rehabilitation expense, other than the unwinding of the discount which is recognised as a finance cost.
Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.
(n) Revenue
Goods sold
Revenue from the sale of coal is measured at the fair value of the consideration received or receivable, net of penalties, returns, allowances and hedging gains/losses. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.
(o) Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense and spread over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
F-20
Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset.
At inception or upon reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently the liability is reduced as payments are made and an imputed finance charge on the liability is recognised using the Groups incremental borrowing rate.
(p) Finance income and finance costs
Finance income and costs comprise interest expense on borrowings using the effective interest rate method, interest income on funds invested, amortisation of ancillary costs incurred in connection with arrangement of borrowings and unwinding of the discount on provisions.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in the profit or loss on the date that the Groups right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.
(q) Income tax
Income tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
| temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; |
| temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and |
| taxable temporary differences arising on the initial recognition of goodwill. |
F-21
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income tax levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income tax expenses that arise from the distribution of cash dividends are recognised at the same time that the liability to pay the related dividend is recognised. The Group does not distribute non-cash assets as dividends to its shareholders.
The Company and its wholly-owned Australian resident entities are part of a tax-consolidated group. As a consequence, all members of the tax consolidated group are taxed as a single entity. The head entity within the tax-consolidated group is Macarthur Coal Limited.
(r) Segment reporting
Determination and presentation of operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Groups other components. All operating segments operating results are regularly reviewed by the Groups CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly financial income and expenses, changes in fair value of other derivative liabilities, net gain/loss on sale of controlling interest in subsidiary and disposal of interest in equity accounted investee, depreciation and amortisation relating to corporate assets and other corporate expenses.
Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.
(s) Goods and services tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the Australian Tax Office (ATO) is included as a current asset or liability in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financial activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.
F-22
(t) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share-based payment awards granted to employees.
(u) New standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2011, but have not been applied in preparing this financial report:
| IFRS 10 Consolidated Financial Statements introduces a new approach to determining which investees should be consolidated based on whether the investee is exposed to, or has rights, to variable returns from their involvement with the investee and has the ability to affect those returns through its power over the investee. The new requirements will be effective for the 30 June 2014 financial year. The Group has not yet determined the potential impact of the standard. |
| IFRS 11 Joint Arrangements overhauls the accounting for joint ventures (now called joint arrangements). Joint arrangements are classified as either joint operations; where the parties have rights to and obligations for underlying assets and liabilities, and joint ventures; where the joint venturers have rights to the net assets of the arrangements. Joint Operations are required to perform line by line accounting of the underlying assets and liabilities. Joint Ventures will need to be equity accounted with the option of proportionate consolidation being removed. The new requirements will be effective for the 30 June 2014 financial year. The Group has not yet determined the potential impact of the standard. |
| IFRS 12 Disclosure of Interests in Other Entities contains the disclosure requirements for entities that have interest in subsidiaries, joint arrangements, associates and/or unconsolidated structure entities. The new requirements will be effective for the 30 June 2014 financial year. The Group has not yet determined the potential impact of the standard. |
| IFRS 13 Fair Value Measurement defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. The new requirements will be effective for the 30 June 2014 financial year. The Group has not yet determined the potential impact of the standard. |
| IFRS 9 Financial Instruments includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the project to replace IAS 39 Financial Instruments: Recognition and Measurement. Exposure Draft ED/2011/3 Mandatory Effective Date of IFRS 9 (Amendments to IFRS 9 Financial Instruments (November 2009) and IFRS 9 Financial Instruments (October 2010)) proposes to change the mandatory effective date of IFRS 9 to annual periods beginning on or after 1 January 2015 rather than being applied for annual reporting periods beginning on or after 1 January 2013 as currently required. Early application of IFRS 9 would continue to be permitted. The Group has not yet determined the potential impact of the standard. |
| Disclosures on Transfers of Financial Assets (Amendments to IFRS 7) introduces new disclosure requirements about transfers of financial assets including disclosures for financial assets that are not derecognised in their entirety; and financial assets that are derecognised in their entirety but for which the entity retains continuing involvement. |
F-23
The amendments, which will become mandatory for the Groups 30 June 2012 financial year, require retrospective application, however comparatives are not required in the first year of adoption. There is not expected to be a significant impact on the financial statements. |
| IAS 124 Related Party Disclosures (revised 2009) simplifies and clarifies the intended meaning of the definition of related party and provides partial exemption for the disclosure requirements for government-related entities. The amendments, which will become mandatory for the Groups 30 June 2012 financial statements, are not expected to have any impact of the financial statements. |
| Improvements to IFRSs (2010 Improvements) incorporate a collection of improvements to the following accounting standards: IFRS 1, IFRS 7, IAS 1, IAS 34 and IFRIC 13. The amendments, which become mandatory for the 30 June 2012 financial statements, are not expected to have a significant impact on the financial statements. |
4. Determination of fair values
A number of the Groups accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.
Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably. The fair value of items of plant, equipment, fixtures and fittings is based on the market approach and cost approaches using quoted market prices for similar items when available and replacement cost when appropriate. Depreciable replacement cost estimates reflect adjustments for physical deterioration as well as functional and economic obsolescence.
Trade and other receivables/payables
The fair value of trade and other receivables/payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.
Finance lease liabilities
Fair value, which is determined for disclosure purposes, is calculated based on discounted expected future principal and interest cash flows for finance leases. The market rate of interest is determined by reference to similar lease agreements.
F-24
Derivatives
Foreign currency derivative contracts are recognised at fair value based on their listed market price, if available. If a listed market price is unavailable, then the fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).
Financial derivatives relating to contractual obligations and an option for the sale of shares in a jointly controlled entity to a third party are measured based on the fair value of the underlying entity to which the shares relate. The underlying entity is valued based on a discounted life of mine cash-flow approach.
Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate.
Share-based payment transactions
Long term incentive plan
The fair value of shares granted under the Long Term Incentive Plan is measured using Binomial Tree (EPS and ROIC hurdles) and Monte-Carlo simulation (TSR hurdle) valuation methodologies, taking into account the terms and conditions upon which the performance rights were granted. Measurement inputs include share price at grant date, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). The likelihoods of meeting service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.
5. Financial risk management
Overview
The Group has exposure to the following risks from their use of financial instruments:
| credit risk |
| liquidity risk |
| market risk |
| operational risk |
This note presents information about the Groups exposure to each of the above risks, the Groups objectives, policies and processes for measuring and managing risk, and the Groups management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.
Risk management framework
The Board of Directors (Board) has overall responsibility for the establishment and oversight of the Groups risk management framework. The Board has established the Audit and Risk Management Committee (ARMC), which is responsible for developing and monitoring the Groups risk management policies. The Committee reports regularly to the Board of Directors on its activities.
F-25
The Groups risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Groups activities. The Group, through its training and management standards and procedures, aim to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The Group ARMC also oversees how management monitors compliance with the Groups risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
The ARMC is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the ARMC.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Groups receivables from customers.
The credit risk on financial assets of the Group, which have been recognised in the statement of financial position, is the carrying amount, net of impairment.
The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the statement of financial position.
Credit risk on cash, deposits and derivative contracts is managed by ensuring that counterparties are recognised financial intermediaries with acceptable long term credit ratings of A- or above from Standard & Poors, and using several counterparties for transactions.
Trade and other receivables
The ARMC has established a credit policy under which each new customer is subject to the Groups standard letter of credit terms and conditions unless otherwise authorised by the Board. Open terms are only extended to customers after a proper credit assessment has been performed and only then are specific payment and delivery terms and conditions offered. The Groups credit assessment review includes external ratings, when available. Purchase limits are established for each customer on a case by case basis.
The Group minimises concentrations of credit risk by undertaking transactions with a number of customers in various countries. The majority of the Groups customers are the worlds largest steel producers with well established reputations for the purchase of bulk commodities including coal. Credit risk on customers is also reduced by entering into letters of credit with customers or utilising trade finance, if available, as considered necessary.
The Groups exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Groups customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk. Approximately 18% (2010: 17%) of the Groups revenue is attributable to sales transactions with a single customer.
The Group has made no allowance for impairment of receivables. Given the size and good credit standing of the customers with which the Group deals, management have assessed the probability of loss as being remote.
F-26
In addition, the Group has recognised a receivable due from MCG Coal Holdings Pty Ltd in relation to a loan facility agreement. The loan facility agreement provides for the loan to be converted to 90% of the share capital of MCG Coal Holdings Pty Ltd with the intention to develop mining operations in relation to MDL 162. The Group is in the process of pursuing legal action against the MCG Group of companies in order to effect the conversion to shares as per the original terms of the loan facility agreement. The original loan balance is recognised as a current receivable. The Board, in consultation with legal advisors, regard the loan balance as fully recoverable through conversion to shares and therefore no impairment has been recognised. See Note 16 for further details.
Investments
The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have a short term credit rating of at least A2 from Standard & Poors. Management actively monitors credit ratings and given that the Group has only invested in securities with high credit ratings, management does not expect any counterparty to fail to meet its obligations.
Guarantees
The Group has provided financial guarantees, details of which are provided in Note 32.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Groups approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Groups reputation.
The Group utilises a rolling cash flow forecast compared to its unused facilities to ensure that it has sufficient cash on demand as and when required over that forecasting period, including the servicing of financial obligations.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and coal prices will affect the Groups profit or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The Treasury Committee manages and monitors market risk and oversees the compliance with the Group Treasury policy and provides key inputs into financing strategies.
The Group enters into derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by the ARMC.
Currency risk
The Group is exposed to currency risk predominantly on sales, and to some extent on purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily the Australian dollar (AUD). The currency in which these transactions primarily are denominated is USD.
The Groups policy is to hedge up to 85% of the expected foreign currency revenues from fixed price USD contracts (generally for no longer than a 12 month period). The Group principally uses forward exchange contracts to hedge its currency risk, with a maturity of less than 12 months.
F-27
Interest rate risk
The Groups main interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Groups key interest rate risk management objective is to hedge where the movement in interest rates would have a significant profit and loss or cash flow effect on the Group. This would be achieved by entering into interest rate swaps. As at 30 June 2011 there were no interest rate swaps in place (2010: Nil).
Commodity price risk
The Group is exposed to the risk of fluctuations in prevailing market commodity prices on the mix of coal products it produces. The Groups policy is to manage these risks through the use of quarterly fixed price contracts for Pulverised Coal Injection (PCI) coal and coking coal which represent approximately 91% (2010: 93%) of total sales.
Operational risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Groups processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Groups operations.
The Groups objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Groups reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.
The primary responsibility for the development and implementation of controls to address operational risk is assigned to the ARMC. The ARMCs objective is to assist the Board to fulfil its responsibilities in relation to accounting, risk management and financial reporting practices.
The ARMC oversees and makes recommendations to the Board on:
| the adequacy and effectiveness of the accounting system and internal control environment |
| the adequacy of the system for compliance with relevant laws, regulations, standards and codes |
| the effectiveness of the risk management system (particularly with respect to the management and monitoring of material business risks) |
| the independence, objectivity, scope and quality of any internal and external audit |
| the frequency and significance of all transactions with related parties in addition to assessing their propriety |
| the integrity and quality of the Groups internal and external financial reporting. |
Compliance with Group standards is supported by a programme of periodic reviews undertaken by Internal Audit. The results of Internal Audit reviews are discussed with management, with summaries submitted to the ARMC.
F-28
Capital management
The Boards policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of share capital, retained earnings and non-controlling interests of the Group. The Board of Directors monitors the return of capital as well as the level of dividends to ordinary shareholders.
2011 $000 |
2010 $000 |
|||||||
Total liabilities |
341,962 | 438,476 | ||||||
Less: Cash and cash equivalents |
(415,161 | ) | (348,216 | ) | ||||
|
|
|
|
|||||
Net debt |
(73,199 | ) | 90,260 | |||||
|
|
|
|
|||||
Total equity |
1,793,484 | 1,128,595 | ||||||
Less: amounts accumulated in equity relating to cash flow hedges |
(1,982 | ) | 3,151 | |||||
|
|
|
|
|||||
Adjusted equity |
1,791,502 | 1,131,746 | ||||||
|
|
|
|
|||||
Net debt to adjusted equity ratio at 30 June |
(0.04 | ) | 0.08 | |||||
|
|
|
|
There were no changes in the Groups general approach to capital management during the year.
6. Operating segments
The Group has three reportable segments, as described below, which are the Groups strategic business units. The reportable segments are managed separately due to their phase of mining activity and reflect the Groups internal reporting structure. The Groups CEO (chief operating decision maker) reviews internal management reports on a monthly basis.
The Group has the following reportable segments:
| Production: Includes operating mines at Coppabella and Moorvale for the commercial production of LV PCI, coking and thermal coal. |
| Development: Relates to Middlemount Mine development project which will produce PCI and semi-hard coking coal and the Codrilla Mine Project which will produce PCI coal. |
| Exploration and evaluation: Includes a number of projects at varying stages of the exploration and evaluation phase. |
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax as included in the internal management reports that are reviewed by the Groups CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing, when applicable, is determined on an arms length basis.
F-29
Information about reportable segments
Production $000 |
Development $000 |
Exploration and Evaluation $000 |
Total $000 |
|||||||||||||
30 June 2011 |
||||||||||||||||
External sales revenue |
687,325 | | | 687,325 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial income |
| | 355 | 355 | ||||||||||||
Financial expenses |
(8,652 | ) | | (252 | ) | (8,904 | ) | |||||||||
Depreciation and amortisation |
(29,842 | ) | | | (29,842 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reportable segment profit/(loss) before income tax |
224,536 | 39,456 | 63,387 | 327,379 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reportable segment assets |
717,997 | 200,148 | 215,346 | 1,133,491 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
30 June 2010 |
||||||||||||||||
External sales revenue |
670,502 | | | 670,502 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Financial income |
40 | | 160 | 200 | ||||||||||||
Financial expenses |
(10,175 | ) | | | (10,175 | ) | ||||||||||
Depreciation and amortisation |
(30,961 | ) | | | (30,961 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reportable segment profit/(loss) before income tax |
213,906 | (10,810 | ) | (3,513 | ) | 199,583 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reportable segment assets |
737,239 | 286,370 | 138,388 | 1,161,997 | ||||||||||||
|
|
|
|
|
|
|
|
Reconciliations of reportable segment revenues, profit or loss and assets
2011 $000 |
2010 $000 |
|||||||
Revenues |
||||||||
Total revenue for reportable segments |
687,325 | 670,502 | ||||||
|
|
|
|
|||||
Profit or loss |
||||||||
Total profit before income tax for reportable segments |
327,379 | 199,583 | ||||||
Unallocated amounts: |
||||||||
Depreciation and amortisation |
(724 | ) | (318 | ) | ||||
Change in fair value of other derivative liabilities |
(2,121 | ) | (14,010 | ) | ||||
Financial income |
28,078 | 13,974 | ||||||
Financial expenses |
(2,749 | ) | (1,994 | ) | ||||
Facilitation fee |
15,390 | | ||||||
Net loss on partial disposal of equity accounted investee |
| (1,641 | ) | |||||
Other corporate expenses |
(39,451 | ) | (22,748 | ) | ||||
|
|
|
|
|||||
Consolidated profit before income tax |
325,802 | 172,846 | ||||||
|
|
|
|
2011 $000 |
2010 $000 |
|||||||
Assets |
||||||||
Total assets for reportable segments |
1,133,491 | 1,161,997 | ||||||
Unallocated amounts: |
||||||||
Cash and cash equivalents |
415,161 | 348,216 | ||||||
Property, plant and equipment |
2,083 | 1,397 | ||||||
Other corporate assets |
584,711 | 55,461 | ||||||
|
|
|
|
|||||
Consolidated total assets |
2,135,446 | 1,567,071 | ||||||
|
|
|
|
F-30
Geographical segments
The Group operates predominately in Australia. All non-current assets of the Group are based in Australia. There were $1,932,484 domestic coal sales attributable to Australian customers in the year (2010: $Nil).
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers.
Geographical information | 2011 $000 |
2010 $000 |
||||||
Japan |
144,553 | 168,946 | ||||||
Korea |
227,777 | 129,896 | ||||||
China |
81,542 | 105,989 | ||||||
Brazil |
90,197 | 78,371 | ||||||
UK |
52,674 | 54,535 | ||||||
France |
5,246 | 43,754 | ||||||
Italy |
30,660 | 29,939 | ||||||
Spain |
30,621 | 15,159 | ||||||
Other countries |
24,055 | 43,913 | ||||||
|
|
|
|
|||||
Total |
687,325 | 670,502 | ||||||
|
|
|
|
Major customers
Revenues from four customers (2010: three customers) of the Groups production segment each represent greater than 10% of total revenue.
7. Other income
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Management feerelated parties |
467 | 253 | ||||||
Net gain on partial disposal of equity accounted investee (i) |
44,148 | | ||||||
Net gain on partial disposal of mining project (ii) |
68,811 | | ||||||
Facilitation fee (ii) |
15,390 | | ||||||
Net gain on sale of infrastructure capacity (iii) |
2,986 | 10,600 | ||||||
Sundryother parties |
19 | 9 | ||||||
|
|
|
|
|||||
131,821 | 10,862 | |||||||
|
|
|
|
(i) | On 24 December 2010, Macarthur Coal Limited and Gloucester Coal Ltd completed a transaction involving the early settlement of a share purchase agreement and exercise of a call option providing Gloucester Coal Ltd with an additional 22.48% interest in Middlemount Coal Pty Ltd, an equity accounted investee. The settlement for the transfer of shares was previously subject to the achievement of certain project milestones. Consideration payable by Gloucester Coal Ltd was $97.6 million, a discount to the nominal $108.0 million exercise price, recognising the transfers had occurred significantly prior to the end of the option period and the specified project milestones. |
Consideration of $52.6 million was received by Macarthur Coal Limited on completion of the transaction with the remaining $45.0 million received on 30 June 2011. |
The net gain recognised in relation to the partial disposal of the interest in Middlemount Coal Pty Ltd after applicable income tax expense is $44.0 million which is inclusive of the reversal of the derivative liability referred to in Note 8. |
F-31
Following the share transfer, Macarthur Coal Limited holds a 50.0003% interest in Middlemount Coal Pty Ltd at 30 June 2011. |
(ii) | On 30 June 2011, BB Interests Pty Ltd being a 100% subsidiary of Macarthur Coal Limited completed the sale of its 85% interest in the Codrilla project to participants of the Coppabella and Moorvale Joint Venture (CMJV). The participants of the Bowen Basin Coal Joint Venture (MCC 85% and CITIC 15%) agreed to sell-down their respective interest in the Codrilla project to the CMJV so that following completion of the sale, ownership of the Codrilla project reflects the existing ownership of the Coppabella and Moorvale mines, with Macarthur Coal retaining a 73.3% ownership of the Codrilla project through its participation in the CMJV. The effective disposal of 13.76% of its interest in the Codrilla project resulted in a gain on sale being recognised to the Group of $68.8 million and facilitation fee income of $15.4 million. |
Consideration of $15.0 million was received by Macarthur Coal Limited on completion of the transaction representing 20% of the agreed price. Two remaining instalments are due on the completion of certain milestones with 40% due on granting of the mining lease ($30.0 million) and the final 40% due on first railing ($30.0 million). Deferred considerations have been discounted to fair value using an appropriate discount rate which most closely matches the expected timing of milestone satisfaction. |
(iii) | During the year ended 30 June 2011, the Group earned a net gain of $2,986,000 (2010:$10,600,000) on the sale of excess rail capacity. |
8. Other expenses
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Exploration and evaluation expensed as incurred |
| 17 | ||||||
Depreciation |
402 | 285 | ||||||
Net loss on disposal of non-current assets |
152 | 42 | ||||||
Net foreign exchange losses |
13,301 | 2,975 | ||||||
Change in fair value of other derivative liabilities (i) |
2,121 | 14,010 | ||||||
Transaction costs (ii) |
(390 | ) | 6,924 | |||||
Net loss on partial disposal of equity accounted investee (iii) |
| 1,641 | ||||||
|
|
|
|
|||||
15,586 | 25,894 | |||||||
|
|
|
|
(i) | During the year ended 30 June 2011, the Group revalued derivative contracts arising from the acquisition of Custom Mining Limited Group, resulting in a change in the fair value (loss) of $2,121,000 (2010: loss of $14,010,000) of the derivative contracts bringing the derivative liability position to $35,050,000 (2010: $32,929,000). Upon early exercise of the share sale agreement and call option (refer Note 7), the derivative liability was extinguished resulting in the recognition of $35,050,000 to the statement of comprehensive income which is included in the net gain on partial disposal of an equity accounted investment. |
(ii) | During the year ended 30 June 2011, the Group incurred transaction costs for potential mergers and acquisitions of $2,110,000 (2010: $6,924,000) offset by a $2,500,000 forgiveness of prior year liability in the current financial year. |
(iii) | In December 2010, the Group disposed of 22.48% (2010: 2.18%) of its equity accounted investment in Middlemount Coal Pty Ltd. This resulted in a net gain on disposal of $44,148,000 (2010: loss $1,641,000). Refer Notes 7 and 30 for further detail. |
F-32
9. Personnel expenses
Consolidated | ||||||||||||
Note | 2011 $000 |
2010 $000 |
||||||||||
Wages and salaries |
9,700 | 7,985 | ||||||||||
Other associated personnel expenses |
3,770 | 1,693 | ||||||||||
Contributions to defined contribution superannuation funds |
494 | 427 | ||||||||||
Increase in liability for annual leave |
1,282 | 955 | ||||||||||
Increase in liability for long-service leave |
93 | 157 | ||||||||||
Increase / (decrease) in liability for sick leave |
356 | (68 | ) | |||||||||
Equity-settled share-based payments transactions |
24 | 56 | 368 | |||||||||
Termination benefits |
859 | 267 | ||||||||||
|
|
|
|
|||||||||
16,610 | 11,784 | |||||||||||
|
|
|
|
10. Auditors remuneration
Consolidated | ||||||||
2011 $ |
2010 $ |
|||||||
Audit services |
||||||||
Auditors of the GroupKPMG |
||||||||
Audit and review of financial reports |
||||||||
- Current year |
378,000 | 397,000 | ||||||
- Prior year |
| 42,955 | ||||||
Audit of joint venture operations (A) |
||||||||
- Current year |
219,515 | 214,036 | ||||||
- Prior year |
16,078 | 38,246 | ||||||
Other regulatory audit services |
3,500 | 3,000 | ||||||
|
|
|
|
|||||
617,093 | 695,237 | |||||||
|
|
|
|
|||||
Other services |
||||||||
Auditors of the GroupKPMG |
||||||||
Forensic and other advisory services related to litigation |
541,132 | 64,854 | ||||||
Taxation services |
24,627 | 122,890 | ||||||
Other advisory services |
| 5,835 | ||||||
Joint venture operationsOther services (A)(B) |
1,711 | 3,660 | ||||||
|
|
|
|
|||||
567,470 | 197,239 | |||||||
|
|
|
|
(A) | Represents the Groups share of remuneration paid for audit and other services incurred by joint ventures. |
(B) | Represents tax advice and other assurance services. |
It is the Groups policy to engage KPMG to provide services additional to their statutory audit duties where KPMGs expertise and experience with the Group are important and it is logical and efficient for them to provide those services. The provision of non-audit services during the year by KPMG is compatible with, and did not compromise the auditor independence requirements of the Corporations Act 2001 and of the professional independence standards set out below.
All non-audit services were subject to Corporate Governance procedures adopted by the Group, that is, non-audit services provided by KPMG were limited, in accordance with the ARMC Charter, to those which could not be perceived to be materially in conflict with the role of the auditor.
F-33
Non-audit services provided by KPMG were undertaken in a manner not to undermine the general principles relating to auditor independence as set out in The Accounting Ethical Standards Board Code of Ethics for Professional Accountants (APES 110) and Section 100Independence, Integrity and Objectivity of the AICPA Code of Professional Conduct, as services did not involve:
| Reviewing or auditing the auditors own work |
| Acting in a management or decision making capacity for the Group or having a financial interest in the Group |
| Acting as an advocate for the Group |
| Jointly sharing in risks or rewards. |
The non-audit services work performed by KPMG has been primarily limited to forensic and other advisory services. The services of other reputable accounting firms were retained to reduce the requirement for KPMG to provide non-audit related services.
11. Financial income and expenses
Consolidated | ||||||||
Recognised in profit and loss | 2011 $000 |
2010 $000 |
||||||
Interest income on cash and short-term deposits |
24,241 | 14,174 | ||||||
Interest on loans to related parties |
2,956 | | ||||||
Unwind of discount on deferred income |
1,236 | | ||||||
|
|
|
|
|||||
Financial income |
28,433 | 14,174 | ||||||
|
|
|
|
|||||
Financing costs |
(2,539 | ) | (377 | ) | ||||
Interest expense on financial liabilities measured at amortised cost |
(6,685 | ) | (7,695 | ) | ||||
Unwind of discount on liabilities and provisions |
(2,429 | ) | (4,097 | ) | ||||
|
|
|
|
|||||
Financial expense |
(11,653 | ) | (12,169 | ) | ||||
|
|
|
|
|||||
Net financial income |
16,780 | 2,005 | ||||||
|
|
|
|
12. Income tax expense
(a) Income tax recognised in profit or loss
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current tax expense |
||||||||
Current year |
71,292 | 59,283 | ||||||
Adjustments for prior years |
(1,485 | ) | (5,411 | ) | ||||
|
|
|
|
|||||
69,807 | 53,872 | |||||||
|
|
|
|
|||||
Deferred tax expense |
||||||||
Origination and reversal of temporary differences |
14,605 | (6,090 | ) | |||||
|
|
|
|
|||||
14,605 | (6,090 | ) | ||||||
|
|
|
|
|||||
Total income tax expense from continuing operations |
84,412 | 47,782 | ||||||
|
|
|
|
F-34
(b) Reconciliation of effective tax rate
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Profit for the year |
241,390 | 125,064 | ||||||
Total income tax expense |
84,412 | 47,782 | ||||||
|
|
|
|
|||||
Profit excluding income tax |
325,802 | 172,846 | ||||||
|
|
|
|
|||||
Income tax using the domestic corporation tax rate of 30% |
97,741 | 51,854 | ||||||
Increase in income tax expense due to: |
||||||||
Non-deductible expenses |
2,775 | 3,248 | ||||||
Fair value movement in derivative |
| 4,203 | ||||||
Decrease in income tax expense due to: |
||||||||
Utilisation of capital losses |
(2,367 | ) | | |||||
Fair value movement in derivative |
(9,879 | ) | | |||||
Tax exempt income and other items |
(1,798 | ) | (4,123 | ) | ||||
|
|
|
|
|||||
86,472 | 55,182 | |||||||
Over provided in prior years |
(2,060 | ) | (7,400 | ) | ||||
|
|
|
|
|||||
84,412 | 47,782 | |||||||
|
|
|
|
(c) Income tax recognised directly in equity
2011 $000 |
2010 $000 |
|||||||||||||||||||||||
Before Tax | Tax (expense) benefit |
Net of Tax | Before Tax | Tax (expense) benefit |
Net of Tax | |||||||||||||||||||
Equity raising costs |
9,365 | (2,809 | ) | 6,556 | (393 | ) | 118 | (275 | ) | |||||||||||||||
(d) Income tax recognised directly in other comprehensive income | ||||||||||||||||||||||||
Cash flow hedges |
(7,333 | ) | 2,200 | (5,133 | ) | (20,483 | ) | 6,145 | (14,338 | ) |
Current tax assets and liabilities
The current tax liability for the Group of $20,929,000 (2010: $55,025,000) represents the amount of income taxes payable in respect of current and prior financial years.
F-35
13. Tax assets and liabilities
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets | Liabilities | Net | ||||||||||||||||||||||
2011 $000 |
2010 $000 |
2011 $000 |
2010 $000 |
2011 $000 |
2010 $000 |
|||||||||||||||||||
Property, plant and equipment |
| | 2,491 | 2,821 | 2,491 | 2,821 | ||||||||||||||||||
Employee benefits |
(2,098 | ) | (1,579 | ) | | | (2,098 | ) | (1,579 | ) | ||||||||||||||
Inventories |
| | 138 | 208 | 138 | 208 | ||||||||||||||||||
Loans and borrowings |
(1,659 | ) | (1,801 | ) | | | (1,659 | ) | (1,801 | ) | ||||||||||||||
Provisions |
(10,234 | ) | (10,218 | ) | | | (10,234 | ) | (10,218 | ) | ||||||||||||||
Amounts payable for future user charges |
(856 | ) | (1,497 | ) | | | (856 | ) | (1,497 | ) | ||||||||||||||
Overburden in advance |
| | 61,224 | 49,936 | 61,224 | 49,936 | ||||||||||||||||||
Mining property and development |
| | 11,099 | 15,420 | 11,099 | 15,420 | ||||||||||||||||||
Exploration and evaluation |
| | 27,114 | 21,229 | 27,114 | 21,229 | ||||||||||||||||||
Foreign currency derivative contracts |
| (1,350 | ) | 832 | | 832 | (1,350 | ) | ||||||||||||||||
Other items |
(611 | ) | (1,552 | ) | | | (611 | ) | (1,552 | ) | ||||||||||||||
Investments in equity accounted investees |
| | 6,273 | 6,273 | 6,273 | 6,273 | ||||||||||||||||||
Equity raising costs |
(3,113 | ) | (1,286 | ) | | | (3,113 | ) | (1,286 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Tax (assets)/liabilities |
(18,571 | ) | (19,283 | ) | 109,171 | 95,887 | 90,600 | 76,604 | ||||||||||||||||
Set off of tax |
18,571 | 19,283 | (18,571 | ) | (19,283 | ) | | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net tax (assets)/liabilities |
| | 90,600 | 76,604 | 90,600 | 76,604 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Investments in equity accounted investees |
6,350 | 18,144 | ||||||
Other financial assets |
559 | | ||||||
|
|
|
|
|||||
6,909 | 18,144 | |||||||
|
|
|
|
The deferred tax assets have not been recognised in respect of these items because it is not probable that future capital gains will be available against which the Group can utilise these benefits.
F-36
Movement in temporary differences during the year
Balance 1 July 2010 $000 |
Recognised in profit or loss $000 |
Recognised directly in equity $000 |
Recognised
in other comprehensive income $000 |
Balance 30 June 2011 $000 |
||||||||||||||||
Property, plant and equipment |
2,821 | (330 | ) | | | 2,491 | ||||||||||||||
Inventories |
208 | (70 | ) | | | 138 | ||||||||||||||
Loans and borrowings |
(1,801 | ) | 142 | | | (1,659 | ) | |||||||||||||
Employee benefits |
(1,579 | ) | (519 | ) | | | (2,098 | ) | ||||||||||||
Provisions |
(10,218 | ) | (16 | ) | | | (10,234 | ) | ||||||||||||
Amounts payable for future user charges |
(1,497 | ) | 641 | | | (856 | ) | |||||||||||||
Overburden in advance |
49,936 | 11,288 | | | 61,224 | |||||||||||||||
Mining property and development |
15,420 | (4,321 | ) | | | 11,099 | ||||||||||||||
Exploration and evaluation |
21,229 | 5,885 | | | 27,114 | |||||||||||||||
Other items |
(1,552 | ) | 941 | | | (611 | ) | |||||||||||||
Foreign currency derivative contracts |
(1,350 | ) | (18 | ) | | 2,200 | 832 | |||||||||||||
Investments in equity accounted investees |
6,273 | | | | 6,273 | |||||||||||||||
Equity raising costs |
(1,286 | ) | 982 | (2,809 | ) | | (3,113 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
76,604 | 14,605 | (2,809 | ) | 2,200 | 90,600 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
Balance 1 July 2009 $000 |
Recognised in profit or loss $000 |
Recognised directly in equity $000 |
Recognised
in other comprehensive income $000 |
Balance 30 June 2010 $000 |
||||||||||||||||
Property, plant and equipment |
2,376 | 445 | | | 2,821 | |||||||||||||||
Inventories |
258 | (50 | ) | | | 208 | ||||||||||||||
Loans and borrowings |
(1,979 | ) | 178 | | | (1,801 | ) | |||||||||||||
Employee benefits |
(1,266 | ) | (313 | ) | | | (1,579 | ) | ||||||||||||
Provisions |
(10,744 | ) | 526 | | | (10,218 | ) | |||||||||||||
Amounts payable for future user charges |
(2,102 | ) | 605 | | | (1,497 | ) | |||||||||||||
Overburden in advance |
50,985 | (1,049 | ) | | | 49,936 | ||||||||||||||
Mining property and development |
15,031 | 389 | | | 15,420 | |||||||||||||||
Exploration and evaluation |
20,156 | 1,073 | | | 21,229 | |||||||||||||||
Other items |
7,144 | (8,696 | ) | | | (1,552 | ) | |||||||||||||
Foreign currency derivative contracts |
4,706 | 89 | | (6,145 | ) | (1,350 | ) | |||||||||||||
Investments in equity accounted investees |
5,980 | 293 | | | 6,273 | |||||||||||||||
Equity raising costs |
(1,588 | ) | 420 | (118 | ) | | (1,286 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
88,957 | (6,090 | ) | (118 | ) | (6,145 | ) | 76,604 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
F-37
14. Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 30 June 2011 was based on the profit attributable to ordinary shareholders of $241,390,000 (2010: $125,064,000) and a weighted average number of ordinary shares outstanding during the year ended 30 June 2011 of 291,686,234 (2010: 253,680,737), calculated as follows:
Profit attributable to ordinary shareholders
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Profit attributable to ordinary shareholders |
241,390 | 125,064 |
Weighted average number of ordinary shares
Consolidated | ||||||||
2011 | 2010 | |||||||
Issued ordinary shares at 1 July |
254,333,109 | 243,980,249 | ||||||
Effect of shares issued in July 2009 |
| 9,700,488 | ||||||
Effect of institutional placement August 2010 |
31,774,218 | | ||||||
Effect of share purchase plan October 2010 |
3,552,735 | | ||||||
Effect of dividend re-investment plan October 2010 |
1,486,087 | | ||||||
Effect of treasury share purchases September 2010 |
(40,328 | ) | | |||||
Effect of dividend re-investment plan April 2011 |
580,413 | | ||||||
|
|
|
|
|||||
Weighted average number of ordinary shares at 30 June |
291,686,234 | 253,680,737 | ||||||
|
|
|
|
Diluted earnings per share
The calculation of diluted earnings per share at 30 June 2011 was based on profit attributable to ordinary shareholders of $241,390,000 (2010: $125,064,000) and a weighted average number of ordinary shares outstanding during the year ended 30 June 2011 of 291,794,306 (2010: 253,814,065), calculated as follows:
Profit attributable to ordinary shareholders (diluted)
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Net profit attributable to ordinary shareholders (diluted) |
241,390 | 125,064 |
Weighted average number of ordinary shares (diluted)
Consolidated | ||||||||
2011 | 2010 | |||||||
Issued ordinary shares at 1 July |
254,333,109 | 243,980,249 | ||||||
Effect of shares issued |
37,393,453 | 9,700,488 | ||||||
Effect of treasury shares purchased |
(40,328 | ) | | |||||
Effect of unvested rights and vested rights not issued |
108,072 | 133,328 | ||||||
|
|
|
|
|||||
Weighted average number of ordinary shares (diluted) at 30 June |
291,794,306 | 253,814,065 | ||||||
|
|
|
|
F-38
15. Cash and cash equivalents
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Cash at bank and on hand |
173,157 | 115,697 | ||||||
Bank deposits |
242,004 | 232,519 | ||||||
|
|
|
|
|||||
Cash and cash equivalents in the statement of cash flows |
415,161 | 348,216 | ||||||
|
|
|
|
The weighted average effective interest rate on the outstanding bank term deposits is 5.9% (2010: 5.7%). The deposits have a weighted average maturity of 80 days (2010: 62 days).
The Groups exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 28.
16. Trade and other receivables
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current |
||||||||
Trade receivables |
47,991 | 70,898 | ||||||
Other receivables and prepayments (i) |
422,901 | 20,805 | ||||||
Amounts receivable from related entitiesunsecured |
265,684 | 117,402 | ||||||
|
|
|
|
|||||
736,576 | 209,105 | |||||||
|
|
|
|
|||||
Non-current |
||||||||
Security deposits |
35 | 35 | ||||||
Other receivables and prepayments (i) |
27,454 | | ||||||
Amounts receivable from related entitiesunsecured |
78,679 | 75,274 | ||||||
|
|
|
|
|||||
106,168 | 75,309 | |||||||
|
|
|
|
No impairment losses (2010: $Nil) have been recognised in the current year.
The Groups exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in Note 28.
(i) | Included in other receivables and prepayments is an amount of $54.9 million due from some of the participants of the CMJV in relation to the Codrilla sell down transaction (see Note 7). This amount represents the fair value of the deferred consideration on the transaction applying a discount rate relevant to the timing of the expected cash flows. |
Other receivables and prepayments also include an amount of $360 million due from MCG Holdings Pty Ltd (MCGH). On 24 August 2010, Macarthur Coal Limited advised of its intention to acquire a 90% interest in MDL 162 for $334.35 million to be funded via a fully underwritten Institutional Placement and Share Purchase Plan. |
Following successful completion of the Institutional Placement on 25 August 2010, Macarthur Coal Limited entered into a loan facility agreement with MCG Coal Holdings Pty Ltd, MCG Coal Pty Ltd, MCG Resources Pty Ltd and Fortrus Resources Pty Ltd (the MCG Companies) on 1 September 2010 to provide MCG Coal Holdings Pty Ltd with $360 million to finalise the purchase of MDL 162 from Stanwell Corporation Limited. Macarthur Coal Limited agreed to subscribe for 90% of the shares in MCG Coal Holdings Pty Ltd for $334.35 million. The transaction was expected to be completed on 10 May 2011. |
F-39
Non-performance by the other party to the transaction, has resulted in Macarthur Coal Limited commencing litigation for specific performance under the loan facility agreement. The original loan amount is classified as a loan receivable pending the outcome of ongoing legal proceedings. |
17. Inventories
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current |
||||||||
Raw materials and consumables, at cost |
10,863 | 11,282 | ||||||
Coal stocks, at cost |
28,063 | 38,480 | ||||||
|
|
|
|
|||||
38,926 | 49,762 | |||||||
|
|
|
|
|||||
Non-current |
||||||||
Raw materials and consumables, at cost |
4,368 | | ||||||
|
|
|
|
|||||
4,368 | | |||||||
|
|
|
|
Refer Note 23 for details of security over inventories.
Raw materials, consumables and changes in coal stocks recognised as cost of sales amounted to $351,800,000 (2010: $331,380,000).
18. Other financial assets
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current |
||||||||
Cash and depositsnot at call |
38,286 | 26,211 | ||||||
Foreign currency derivative contracts |
2,772 | | ||||||
|
|
|
|
|||||
41,058 | 26,211 | |||||||
|
|
|
|
|||||
Non-current |
||||||||
Depositsnot at call |
7,035 | 4,263 | ||||||
|
|
|
|
|||||
7,035 | 4,263 | |||||||
|
|
|
|
Non-current depositsnot at call have been pledged as collateral for arrangements relating to Wiggins Island feasibility study costs, refer Notes 23 and 32.
The Groups exposure to credit, currency and interest rate risks related to other financial assets is disclosed in Note 28.
F-40
19. Overburden in advance
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current |
||||||||
Overburden in advance |
182,256 | 146,548 | ||||||
|
|
|
|
|||||
Non-current |
||||||||
Overburden in advance |
21,824 | 19,905 | ||||||
|
|
|
|
20. Property, plant and equipment
Consolidated | ||||||||
2011 $000 |
2010* $000 |
|||||||
Mining property and development (including mining rights and coal resources) |
||||||||
At cost |
162,107 | 153,053 | ||||||
Less accumulated depreciation |
(66,542 | ) | (61,423 | ) | ||||
|
|
|
|
|||||
95,565 | 91,630 | |||||||
|
|
|
|
|||||
Freehold land |
||||||||
At cost |
3,730 | 3,730 | ||||||
|
|
|
|
|||||
Buildings and infrastructure |
||||||||
At cost |
96,945 | 95,277 | ||||||
Less accumulated depreciation |
(58,703 | ) | (51,952 | ) | ||||
|
|
|
|
|||||
38,242 | 43,325 | |||||||
|
|
|
|
|||||
Plant and equipment |
||||||||
At cost |
31,164 | 23,359 | ||||||
Less accumulated depreciation |
(9,294 | ) | (6,640 | ) | ||||
|
|
|
|
|||||
21,870 | 16,719 | |||||||
|
|
|
|
|||||
Leased assets |
||||||||
At cost |
116,644 | 116,644 | ||||||
Less accumulated depreciation |
(40,429 | ) | (25,388 | ) | ||||
|
|
|
|
|||||
76,215 | 91,256 | |||||||
|
|
|
|
|||||
Capital works in progress |
||||||||
At cost |
4,982 | 4,055 | ||||||
|
|
|
|
|||||
240,604 | 250,715 | |||||||
|
|
|
|
Refer to Note 23 for details of security over property, plant and equipment.
* | Following a detailed review of joint venture development expenditure, $16,913,000 was reclassified as Exploration and Evaluation relating to 2010. This had the impact of decreasing Mining Property and Development cost as at 1 July 2010 by $16,913,000 with a corresponding increase in Exploration and Evaluation Assets. |
F-41
Consolidated | ||||||||
2011 $000 |
2010* $000 |
|||||||
Reconciliations |
||||||||
Reconciliation of the carrying amounts for each class of property, plant and equipment are set out below: |
||||||||
Mining property and development |
||||||||
Carrying amount at 1 July |
91,630 | 96,653 | ||||||
Additions |
12 | 326 | ||||||
Reclassification from exploration and evaluation assets |
9,561 | | ||||||
Effect of movement in rehabilitation asset |
(519 | ) | 1,836 | |||||
Depreciation |
(5,119 | ) | (7,185 | ) | ||||
|
|
|
|
|||||
Carrying amount at 30 June |
95,565 | 91,630 | ||||||
|
|
|
|
|||||
Freehold land |
||||||||
Carrying amount at 1 July |
3,730 | 3,730 | ||||||
Additions |
| | ||||||
|
|
|
|
|||||
Carrying amount at 30 June |
3,730 | 3,730 | ||||||
|
|
|
|
|||||
Buildings and infrastructure |
||||||||
Carrying amount at 1 July |
43,325 | 40,301 | ||||||
Additions |
412 | 28 | ||||||
Transfers from capital works in progress |
1,817 | 11,534 | ||||||
Effect of movement in dismantling asset |
(561 | ) | (1,617 | ) | ||||
Depreciation |
(6,751 | ) | (6,921 | ) | ||||
|
|
|
|
|||||
Carrying amount at 30 June |
38,242 | 43,325 | ||||||
|
|
|
|
|||||
Plant and equipment |
||||||||
Carrying amount at 1 July |
16,719 | 13,402 | ||||||
Additions |
1,395 | 89 | ||||||
Transfers from capital works in progress |
7,090 | 5,535 | ||||||
Disposals |
(294 | ) | (41 | ) | ||||
Depreciation |
(3,040 | ) | (2,266 | ) | ||||
|
|
|
|
|||||
Carrying amount at 30 June |
21,870 | 16,719 | ||||||
|
|
|
|
|||||
Leased assets |
||||||||
Carrying amount at 1 July |
91,256 | 102,236 | ||||||
Additions |
| 5,024 | ||||||
Depreciation |
(15,041 | ) | (16,004 | ) | ||||
|
|
|
|
|||||
Carrying amount at 30 June |
76,215 | 91,256 | ||||||
|
|
|
|
Refer to Note 23 for details of security over property, plant and equipment.
* | Following a detailed review of joint venture development expenditure, $16,913,000 was reclassified as Exploration and Evaluation relating to 2010. This had the impact of decreasing Mining Property and Development cost as at 1 July 2010 by $16,913,000 with a corresponding increase in Exploration and Evaluation Assets. |
F-42
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Capital works in progress |
||||||||
Carrying amount at 1 July |
4,055 | 13,562 | ||||||
Additions |
9,834 | 7,562 | ||||||
Transfers to other classes of property, plant and equipment |
(8,907 | ) | (17,069 | ) | ||||
|
|
|
|
|||||
Carrying amount at 30 June |
4,982 | 4,055 | ||||||
|
|
|
|
The following depreciation was recognised as an expense in the profit and loss:
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Mining property and development |
5,225 | 6,863 | ||||||
Buildings and infrastructure |
6,892 | 6,825 | ||||||
Plant and equipment |
3,095 | 2,192 | ||||||
Leased assets |
15,354 | 15,399 | ||||||
|
|
|
|
|||||
30,566 | 31,279 | |||||||
|
|
|
|
Leased assets
The Group leases production equipment under a number of finance lease agreements. Some leases provide the Group with the option to purchase the equipment. The leased equipment is secured by lease obligations (refer Note 23). At 30 June 2011, the net carrying amount of leased assets was $76,215,000 (2010: $91,256,000).
21. Exploration and evaluation assets
Consolidated | ||||||||
2011 $000 |
2010* $000 |
|||||||
Costs carried forward in respect of areas of interest in exploration and/or evaluationintangible: |
100,309 | 98,483 | ||||||
|
|
|
|
|||||
Cost |
||||||||
Balance at 1 July |
98,483 | 87,829 | ||||||
Exploration and evaluation costs disposed of |
(1,130 | ) | | |||||
Exploration costs transferred to PPE |
(9,561 | ) | | |||||
Exploration and evaluation costs capitalised |
12,517 | 10,654 | ||||||
|
|
|
|
|||||
Balance at 30 June |
100,309 | 98,483 | ||||||
|
|
|
|
The ultimate recoupment of costs carried forward as exploration and evaluation assets is dependent on the successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.
* | Restated. See Note 20. |
F-43
22. Trade and other payables
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current |
||||||||
Trade payables |
28,265 | 28,787 | ||||||
Other payables and accrued expenses |
49,351 | 67,372 | ||||||
Amounts payable to related entitiesunsecured |
24,142 | 29,518 | ||||||
|
|
|
|
|||||
101,758 | 125,677 | |||||||
|
|
|
|
The Groups exposure to currency and liquidity risk to trade and other payables is disclosed in Note 28.
23. Loans and borrowings
This note provides information about the contractual terms of the Groups interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Groups exposure to interest rate, foreign currency and liquidity risk, see Note 28.
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current liabilities |
||||||||
Finance lease liabilities |
18,739 | 13,890 | ||||||
Deferred liability for acquisition of mining interestunsecured |
2,030 | 1,932 | ||||||
|
|
|
|
|||||
20,769 | 15,822 | |||||||
|
|
|
|
|||||
Non-current liabilities |
||||||||
Finance lease liabilities |
61,040 | 79,526 | ||||||
Deferred liability for acquisition of mining interestunsecured |
3,503 | 4,074 | ||||||
|
|
|
|
|||||
64,543 | 83,600 | |||||||
|
|
|
|
Deferred liability for acquisition of mining interestunsecured
In December 2003, the Group purchased an additional 23.3% interest in the Coppabella Project. As part of the acquisition, the Group entered into an arrangement to progressively purchase the 23.3% interest in the exploration tenements each six months, over a 10 year period. In accordance with accounting standards the deferred liability has been reflected at its present value in the financial statements, discounted at 10.2% (2010: 10.1%) based on 5.2% (2010: 5.1%) interest plus a risk adjusted margin.
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Facilities utilised at reporting date |
||||||||
Bank loansCorporate Facility |
||||||||
Bank Guarantee Facility |
64,500 | 64,676 | ||||||
Cash backed bank guarantees |
6,500 | 4,263 | ||||||
|
|
|
|
|||||
71,000 | 68,939 | |||||||
|
|
|
|
F-44
Corporate Funding Facility
Bank Loans
The Group executed a new 3 year A$330,000,000 Corporate Funding Facility on 30 November 2010. The purpose of the Corporate Funding Facility is to provide bank guarantee facilities, additional funds for general corporate purposes within the Group and working capital for operations. The facility is held by a controlled entity, Macarthur Coal Financing Pty Ltd.
Security
The Corporate Funding Facility is secured by the following:
| a guarantee provided by Macarthur Coal Limited; |
| charges over the Groups interest in the Coppabella and Moorvale Joint Venture including all of the assets and undertakings of the controlled entity, Coppabella Coal Pty Ltd; |
| charges over the assets and undertakings of the controlled entity, Macarthur Coal Financing Pty Ltd; and |
| charges over the Companys shares in Coppabella Coal Pty Ltd and Macarthur Coal Financing Pty Ltd and intercompany loans to the controlled entities. |
Assets pledged under security arrangements
The carrying amounts of the pledged non-current assets are as follows:
2011 $000 |
2010 $000 |
|||||||
Mining property and development |
114,678 | 108,887 | ||||||
Land |
3,730 | 3,730 | ||||||
Buildings and infrastructure |
38,242 | 43,325 | ||||||
Plant and equipment |
19,787 | 15,322 | ||||||
Leased assets (refer below) |
76,215 | 91,256 | ||||||
Capital works in progress |
4,982 | 4,055 | ||||||
Receivables |
78,714 | 75,309 | ||||||
Overburden in advance |
21,824 | 19,905 | ||||||
|
|
|
|
|||||
358,172 | 361,789 | |||||||
|
|
|
|
Cash backed bank guarantees
The Group utilises cash backed guarantees in addition to the Corporate Funding Facility. No facility limit exists on these instruments.
F-45
Finance lease liabilities
Finance lease liabilities of the Group are payable as follows:
Minimum lease payments |
Interest | Principal | Minimum lease payments |
Interest | Principal | |||||||||||||||||||
2011 $000 |
2011 $000 |
2011 $000 |
2010 $000 |
2010 $000 |
2010 $000 |
|||||||||||||||||||
Less than one year |
23,605 | 5,119 | 18,486 | 20,329 | 6,439 | 13,890 | ||||||||||||||||||
Between one and five years |
48,747 | 11,713 | 37,034 | 62,115 | 14,837 | 47,278 | ||||||||||||||||||
More than five years |
26,466 | 2,460 | 24,006 | 36,703 | 4,455 | 32,248 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
98,818 | 19,292 | 79,526 | 119,147 | 25,731 | 93,416 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Security
The lease liabilities are secured by a fixed and floating charge provided by Macarthur Coal (C&M Equipment) Pty Ltd (MCCME), an associated entity. In addition, the Company provides guarantees to the extent of 73.3% of MCCMEs obligations under finance and operating leasing arrangements.
24. Employee benefits
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current liabilities |
||||||||
Liability for annual leave |
5,168 | 3,886 | ||||||
Liability for sick leave |
1,297 | 941 | ||||||
Liability for long-service leave |
413 | 352 | ||||||
|
|
|
|
|||||
6,878 | 5,179 | |||||||
|
|
|
|
|||||
Non-current liabilities |
||||||||
Liability for long-service leave |
119 | 87 | ||||||
|
|
|
|
Defined contribution superannuation funds
The Group makes contributions to several defined contribution superannuation funds. The amount recognised as an expense was $494,000 for the financial year ended 30 June 2011 (2010: $427,000).
Long service leave industry fund
The Group makes contributions to the Coal Mining Industry Leave Fund. A total of $1,221,000 was paid to the fund for the financial year ended 30 June 2011 (2010: $897,000).
Share-based payments
Long Term Incentive Plan (LTIP)
Each financial year the Group grants performance rights to Executives and other nominated senior managers to provide the plan participants with the incentive to deliver long-term growth in shareholder value.
The number of performance rights granted under the LTIP is set as a percentage of total fixed remuneration determined by the Nomination and Remuneration Committee (NRC). Performance rights are granted at no cost to participants. Each performance right granted entitles the participant to one ordinary share in the Company, subject to satisfaction of performance conditions set by the Board and NRC over a three year performance period. The rights expire on termination of an executives employment prior to the vesting date or upon failure to achieve the performance hurdles.
F-46
Shares to be awarded under the LTIP are acquired on market, avoiding dilution of shareholder equity, and placed in trust for employees until such time as the employee elects to have the shares transferred from the trust. Shares carry full dividend and voting rights upon allocation.
The performance rights and their allocation to shares are subject to the following performance conditions:
30% ð | linked to growth in the Groups Earnings Per Share (EPS) | |
50% ð | linked to Total Shareholder Return (TSR) targets | |
20% ð | linked to Return on Invested Capital (ROIC). |
A summary of performance rights granted to Executives and other participants are as follows:
Grant Date |
Performance |
Vesting Date |
Fair Value of Grant |
Balance at start of the year |
Granted during the year |
Vested during the year |
Forfeited during the year (1) |
Balance at the end of the year |
||||||||||||||||||||
2011 |
| |||||||||||||||||||||||||||
14 Oct 2008 |
1 July 2008 to 30 June 2011 | 30 June 2011 |
$3.55 | 49,237 | | (18,853 | ) | (30,384 | ) | | ||||||||||||||||||
29 June 2009 |
1 July 2009 to 30 June 2012 | 30 June 2012 |
$5.44 | 132,563 | | | (36,098 | ) | 96,465 | |||||||||||||||||||
30 June 2011 |
1 July 2010 to 30 June 2013 | 30 June 2013 |
$7.31 | | 94,827 | | | 94,827 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total |
181,800 | 94,827 | (18,853 | ) | (66,482 | ) | 191,292 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
2010 |
||||||||||||||||||||||||||||
14 Oct 2008 |
1 July 2007 to 30 June 2010 | 30 June 2010 |
$5.31 | 66,101 | | (49,395 | ) | (16,706 | ) | | ||||||||||||||||||
14 Oct 2008 |
1 July 2008 to 30 June 2011 | 30 June 2011 |
$3.55 | 59,511 | | | (10,274 | ) | 49,237 | |||||||||||||||||||
29 June 2009 |
1 July 2009 to 30 June 2012 | 30 June 2012 |
$5.44 | 158,237 | | | (25,674 | ) | 132,563 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total |
283,849 | | (49,395 | ) | (52,654 | ) | 181,800 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | Forfeited performance rights relate to those rights with a vesting date of 30 June 2011 where performance conditions have not been met and those rights originally granted to employees who have since left the Group and have therefore forfeited their rights. |
Fair value of rights granted
The fair value at each grant date is independently determined using the following valuation models:
| EPS and ROICBinomial Tree Methodology |
| TSRMonte-Carlo Simulation |
F-47
This value will not be equal to the market value of a share at the commencement of the performance period as the performance rights are contingent rights to shares in the future. The fair value of the performance rights at the grant date is influenced by the Companys share price at the date of grant, volatility of the underlying shares, the risk free rate of return, expected dividend yield, time to maturity and the likelihood that vesting conditions relating to market-based hurdles will be met. Expected volatility of the Company is estimated based on the historic volatility of the market price of the Companys shares.
The table below summarises the key assumptions adopted for valuation of the awards:
Performance Rights 2009 |
Performance Rights 2010 |
Performance Rights 2011 | ||||
Grant Date |
14 October 2008 | 29 June 2009 | 30 June 2011 | |||
Weighted average fair value at date of grant |
$3.55 | $5.44 | $7.31 | |||
Share price at date of grant |
$6.53 | $6.63 | $10.95 | |||
Expected volatility |
60% | 75% | 46% | |||
Dividend yield |
8.3% | 3.0% | 5.5% | |||
Expected life |
2.8 years | 3.0 years | 2.0 years | |||
Risk free interest rate |
4.64% | 4.62% | 4.68% |
The minimum total value of the grant, if the applicable performance conditions are not met, is nil.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the year as part of employee benefit expense were as follows:
Note | Consolidated | |||||||||
2011 $000 |
2010 $000 |
|||||||||
Expense arising from 2008 performance rights |
| 114 | ||||||||
Expense arising from 2009 performance rights |
23 | 55 | ||||||||
Expense arising from 2010 performance rights |
32 | 199 | ||||||||
Expense arising from 2011 performance rights |
1 | | ||||||||
|
|
|
|
|||||||
Total expense recognised as employee costs |
9 | 56 | 368 | |||||||
|
|
|
|
Employee Share Loan Plan
During the year the Group operated an Employee Share Loan Plan (ESLP) which was previously used to provide an opportunity for eligible persons of the Group and approved contractors to acquire shares of the Company. On 15 December 2005, 122,935 shares were acquired for 86 eligible employees at a purchase price of $5.43 per share with a value limit of between $6,000 and $20,000 per employee.
No invitations to participate in the ESLP were made in the 2011 financial year. All loans were fully repaid on the 31 December 2010 and the loan plan was closed.
All shares that were held under the ESLP ranked equally with all other shares on issue.
The Group provided interest free loans to all eligible persons to enable them to acquire shares under ESLP to 100% of the total acquisition price for the shares. Any dividends declared on the shares issued under ESLP were used to offset any loans outstanding on the shares. Employees and contractors also provided irrevocable authority to the Company to deduct 1% of their gross salary each month in repayment of the loan.
F-48
The loan was repayable if:
a) | default is made by the employee on the repayment of the loan; or |
b) | the employees employment with the Company, its subsidiary or associate or the relevant contractor is terminated for any reason; or |
c) | the employee becomes insolvent or commits an act of bankruptcy. |
The Company held the shares as security over the loan until the loan was repaid.
The market price of shares held under the ESLP as at 30 June 2011 was $Nil as the loan plan has been closed (2010: $12.12).
There were no other shares eligible for acquisition under the ESLP at 30 June 2011 (2010: Nil).
The number and weighted average acquisition price of shares is as follows:
Weighted Average exercise price |
Number of shares |
Weighted Average exercise price |
Number of shares |
|||||||||||||
2011 | 2011 | 2010 | 2010 | |||||||||||||
Outstanding at the beginning of the year |
22,083 | 33,126 | ||||||||||||||
Granted during the year |
| | ||||||||||||||
Sold and transferred during the year |
$11.80 | (22,083 | ) | $11.33 | (11,043 | ) | ||||||||||
|
|
|
|
|||||||||||||
Outstanding at the end of the year |
| 22,083 | ||||||||||||||
|
|
|
|
25. Provisions
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current |
||||||||
Rehabilitation and dismantling |
2,930 | 2,642 | ||||||
Other |
| 817 | ||||||
|
|
|
|
|||||
2,930 | 3,459 | |||||||
|
|
|
|
|||||
Non-current |
||||||||
Rehabilitation and dismantling |
30,263 | 30,398 | ||||||
Other |
321 | 204 | ||||||
|
|
|
|
|||||
30,584 | 30,602 | |||||||
|
|
|
|
F-49
During the financial year ended 30 June 2011, $1,074,000 was reversed through profit or loss in respect of rehabilitation expense (2010: $3,966,000).
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Rehabilitation and dismantling |
||||||||
Balance at 1 July |
33,040 | 35,617 | ||||||
Provisions reversed during the year |
(1,074 | ) | (3,966 | ) | ||||
Provisions used during the year |
(740 | ) | (1,091 | ) | ||||
Unwind of discount |
1,967 | 2,480 | ||||||
|
|
|
|
|||||
Balance at 30 June |
33,193 | 33,040 | ||||||
|
|
|
|
|||||
Other |
||||||||
Balance at 1 July |
1,021 | 197 | ||||||
Provisions made during year |
108 | 870 | ||||||
Provisions used during year |
(817 | ) | (69 | ) | ||||
Unwind of discount |
9 | 23 | ||||||
|
|
|
|
|||||
Balance at 30 June |
321 | 1,021 | ||||||
|
|
|
|
Rehabilitation and dismantling
In accordance with Queensland Government legislative requirements, a provision has been recognised for mine rehabilitation works throughout the life of the mines in relation to the Groups coal mining operations. A provision for dismantling of infrastructure assets on cessation of operations at the mines has also been recognised in relation to the Groups coal mining operations. The basis for accounting is set out in Note 3(m).
26. Other financial liabilities
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Current |
||||||||
Amounts payable for future user charges (refer Note 31(e)) |
2,265 | 2,137 | ||||||
Foreign currency derivative contracts |
| 4,502 | ||||||
|
|
|
|
|||||
2,265 | 6,639 | |||||||
|
|
|
|
|||||
Non-current |
||||||||
Amounts payable for future user charges (refer Note 31(e)) |
587 | 2,853 | ||||||
Other derivative liabilities |
| 32,929 | ||||||
|
|
|
|
|||||
587 | 35,782 | |||||||
|
|
|
|
Other derivative liabilities
In the 2008 financial year, resulting from the acquisition of Custom Mining Limited Group, the Group acquired a pre-existing obligation to transfer shares in a jointly controlled entity, Middlemount Coal Pty Ltd (Middlemount), to a non-related third party on the completion of certain triggering events. As per the share sale agreement, these triggering events related to milestones in the development of the Middlemount Mine project. In addition, a contractual obligation existed via a call option agreement to sell a further 20% in Middlemount to the same third party. Obligations under both agreements were accounted for as derivative contracts.
F-50
In April 2010, 2.18% of shares in Middlemount were transferred by the Group under the terms of the share sale agreement. The remaining derivative liability related to the obligation for the final sell trigger under the share sale agreement and the obligation under the call option agreement for a further 22.48%. The call option was exercised in December 2010, resulting in the derecognition of the derivative to the profit recognised on disposal (refer Note 7).
27. Capital and reserves
Company Ordinary shares |
||||||||
2011 | 2010 | |||||||
Share capital |
||||||||
On issue at 1 July |
254,333,109 | 243,980,249 | ||||||
Shares issued on equity settled transactions |
47,759,234 | 10,352,860 | ||||||
|
|
|
|
|||||
On issue at 30 Junefully paid |
302,092,343 | 254,333,109 | ||||||
|
|
|
|
Issuance of ordinary shares
Through an institutional placement on 31 August 2010; 38,149,966 ordinary shares were issued for an amount of $11.50 per share to raise $438,724,609. A further 4,874,993 ordinary shares were issued under a share purchase plan at $11.33 per share on 8 October 2010 raising $55,233,671.
Under the Macarthur Coal dividend reinvestment plan an additional 2,118,835 ordinary shares were issued on 18 October 2010 at $11.15 per share and 2,615,440 ordinary shares were issued on 11 April 2011 at $11.27 per share.
Ordinary shares
The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
In the event of winding up of the Company, ordinary shareholders rank after creditors and are fully entitled to any net proceeds.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred. Amounts are reclassified to profit or loss when the associated hedged transaction is settled.
Share-based payment reserve
The share-based payment reserve is used to recognise:
| The cumulative value recognised over the vesting period of the 2009, 2010 and 2011 share-based performance rights which have not reached the vesting date but are expected to vest; and |
| The value of the 2008 and 2009 share-based performance rights that have vested based on performance conditions being met, which have not yet been settled. |
F-51
Reserve for own shares
The reserve for the Companys own shares is used to recognise the cost of the Companys shares held by the Group.
The shares relate to vested performance rights for certain executives who participate in the long term incentive plan. The shares are acquired on market and placed in trust until such time as the employees elect to have the shares transferred out of the trust.
Dividends
Dividends recognised in the current year by the Company are:
Cents per share |
Total amount $ |
Franked/ unfranked |
Date of payment | |||||||||||
2011 |
||||||||||||||
Interim 2011 ordinary |
24.0 | 71,874,457 | Franked | 11 April 2011 | ||||||||||
Final 2010 ordinary |
17.0 | 49,722,123 | Franked | 18 October 2010 | ||||||||||
|
|
|
|
|||||||||||
Total amount |
41.0 | 121,596,580 | ||||||||||||
|
|
|
|
|||||||||||
2010 |
||||||||||||||
Interim 2010 ordinary |
8.0 | 20,346,649 | Franked | 21 April 2010 | ||||||||||
Final 2009 ordinary |
13.0 | 33,063,304 | Franked | 30 September 2009 | ||||||||||
|
|
|
|
|||||||||||
Total amount |
21.0 | 53,409,953 | ||||||||||||
|
|
|
|
Franked dividends declared or paid during the year were fully franked at the tax rate of 30%.
Dividends not recognised at the end of the reporting period
Subsequent to 30 June 2011, the following dividends were proposed by the Directors. The financial effect of these dividends has not been recognised in the financial statements for the year ended 30 June 2011 and will be recognised in subsequent financial reports.
The declaration and subsequent payment of dividends has no income tax consequences.
Cents per share |
Total amount $ |
Franked/ unfranked |
Date of payment | |||||||||||
Final ordinary |
16.0 | 48,334,775 | Franked | 9 September 2011 |
Dividend franking account
Company | ||||||||
2011 $000 |
2010 $000 |
|||||||
30% franking credits available to shareholders of the Company for subsequent |
148,841 | 131,129 |
The above available amounts are based on the balance of the dividend franking account at year-end adjusted for:
(a) | franking credits/debits that will arise from the payment/receipt of the current tax liabilities/assets; |
(b) | franking debits that will arise from the payment of dividends recognised as a liability at year end; |
F-52
(c) | franking credits that will arise from the receipt of dividends recognised as receivables by the tax-consolidated group at year end; and |
(d) | franking credits that the entity may be prevented from distributing in subsequent years. |
The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.
The impact on the dividend franking account of dividends proposed after the reporting date but not recognised as a liability is to reduce it by $20,715,000 (2010: $18,530,000).
In accordance with the tax consolidation legislation, Macarthur Coal Limited as the head entity of the tax-consolidated Group has also assumed the benefit of $148,841,000 (2010: $131,129,000) franking credits.
28. Financial instruments
Exposure to credit, interest rate and currency risks arises in the normal course of the Groups business. Derivative financial instruments are used to hedge exposure to fluctuations in foreign exchange rates.
Credit risk
Exposure to credit risk
The carrying amount of the Groups financial assets represents the maximum credit exposure. The Groups maximum exposure to credit risk at the reporting date was:
Note | 2011 $000 |
2010 $000 |
||||||||||
Cash and cash equivalents |
15 | 415,161 | 348,216 | |||||||||
Cash and depositsnot at call |
18 | 45,321 | 30,474 | |||||||||
Trade and other receivables |
16 | 842,744 | 284,414 | |||||||||
Forward exchange contracts used for hedgingassets |
18 | 2,772 | | |||||||||
|
|
|
|
|||||||||
1,305,998 | 663,104 | |||||||||||
|
|
|
|
The Groups maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
2011 $000 |
2010 $000 |
|||||||
Asia |
34,451 | 20,881 | ||||||
Europe |
6,258 | 32,694 | ||||||
Americas |
7,107 | 17,323 | ||||||
Australia |
175 | | ||||||
|
|
|
|
|||||
47,991 | 70,898 | |||||||
|
|
|
|
Concentration of credit risk at the reporting date on trade receivables was: Asia 72%, Europe 13%, Americas 15% and Australia less than 1% (2010: Asia 30%, Europe 46%, Americas 24% and Australia nil%). The geographical mix at the reporting date for trade receivables is influenced by the timing of shipments to customers during the month of June. This arises due to sales being settled within the appropriate contractual terms and conditions following sales recognition. To give a better understanding of the average exposure over the course of a year, the 2011 sales distribution by geographic regions is Asia 67%, Europe 20%, Americas 13% and Australia less than 1% (2010: Asia 63%, Europe 25%, Americas 12% and Australia nil%).
F-53
Refer Note 16 for credit risk exposure on other receivables and prepayments.
Impairment losses
None of the Groups trade receivables are past due (2010: $Nil).
Based on the global standing, size and credit ratings of our customers, the Group believes that no impairment allowance is necessary in respect of trade receivables.
Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:
2011 | ||||||||||||||||||||||||||||
Carrying amount $000 |
Contractual cash flows $000 |
6 months or less $000 |
6-12 months $000 |
1-2 years $000 |
2-5 years $000 |
More than 5 years $000 |
||||||||||||||||||||||
Non-derivative financial liabilities |
||||||||||||||||||||||||||||
Finance lease liabilities |
79,780 | 98,819 | 11,803 | 11,803 | 11,560 | 37,186 | 26,467 | |||||||||||||||||||||
Deferred liability for acquisition of mining interest |
5,533 | 5,199 | 1,040 | 1,040 | 2,079 | 1,040 | | |||||||||||||||||||||
Amounts payable for future user charges |
2,852 | 2,978 | 1,191 | 1,191 | 596 | | | |||||||||||||||||||||
Trade and other payables |
101,758 | 101,758 | 101,758 | | | | | |||||||||||||||||||||
Derivative financial liabilities |
||||||||||||||||||||||||||||
Forward exchange contracts used for hedging: |
||||||||||||||||||||||||||||
Outflow |
111,589 | 111,589 | 111,589 | | | | | |||||||||||||||||||||
Inflow |
(114,361 | ) | (114,361 | ) | (114,361 | ) | | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
187,151 | 205,982 | 113,020 | 14,034 | 14,235 | 38,226 | 26,467 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 | ||||||||||||||||||||||||||||
Carrying amount $000 |
Contractual cash flows $000 |
6 months or less $000 |
6-12 months $000 |
1-2 years $000 |
2-5 years $000 |
More than 5 years $000 |
||||||||||||||||||||||
Non-derivative financial liabilities |
||||||||||||||||||||||||||||
Finance lease liabilities |
93,416 | (119,147 | ) | (10,164 | ) | (10,165 | ) | (23,605 | ) | (38,510 | ) | (36,703 | ) | |||||||||||||||
Deferred liability for acquisition of mining interest |
6,006 | (7,279 | ) | (1,040 | ) | (1,040 | ) | (2,079 | ) | (3,120 | ) | | ||||||||||||||||
Amounts payable for future user charges |
4,990 | (5,361 | ) | (1,191 | ) | (1,191 | ) | (2,383 | ) | (596 | ) | | ||||||||||||||||
Trade and other payables |
125,677 | (125,677 | ) | (125,677 | ) | | | | | |||||||||||||||||||
Derivative financial liabilities |
||||||||||||||||||||||||||||
Forward exchange contracts used for hedging: |
||||||||||||||||||||||||||||
Outflow |
234,771 | (234,771 | ) | (234,771 | ) | | | | | |||||||||||||||||||
Inflow |
(230,269 | ) | 230,269 | 230,269 | | | | | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
234,591 | (261,966 | ) | (142,574 | ) | (12,396 | ) | (28,067 | ) | (42,226 | ) | (36,703 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts used for hedging have a maturity analysis which is expected to match the contracted cash inflows from the receipt of sale proceeds. It is not expected that the cash inflows included in the maturity analysis could occur significantly earlier or at significantly different amounts.
F-54
Currency risk
Exposure to currency risk
The Groups exposure to foreign currency risk at the reporting date was as follows, based on notional amounts:
2011 | 2010 | |||||||
USD $000 |
USD $000 |
|||||||
Trade receivables |
51,537 | 60,426 | ||||||
Trade and other payables |
(7,980 | ) | (20,312 | ) | ||||
|
|
|
|
|||||
Gross financial position exposure |
43,557 | 40,114 | ||||||
|
|
|
|
|||||
Contracted forecast sales |
119,728 | 244,013 | ||||||
Estimated forecast purchases |
(2,654 | ) | (9,640 | ) | ||||
|
|
|
|
|||||
Gross exposure |
117,074 | 234,373 | ||||||
|
|
|
|
|||||
Forward exchange contracts |
(118,371 | ) | (197,519 | ) | ||||
|
|
|
|
|||||
Net exposure |
42,260 | 76,968 | ||||||
|
|
|
|
In line with the Groups Treasury Policy, additional forward exchange contracts have been placed post 30 June 2011 for the 2012 financial year as fixed price sales contracts have been agreed.
The following significant exchange rates applied during the year:
Average rate | Reporting date spot rate | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
USD |
0.9881 | 0.8759 | 1.0739 | 0.8523 |
Sensitivity analysis
A 10% strengthening of the Australian dollar against the United States dollar at 30 June would have decreased equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2010.
Equity $000 |
Profit or
loss $000 |
|||||||
30 June 2011 |
||||||||
USD |
(10,144 | ) | (3,687 | ) | ||||
30 June 2010 |
||||||||
USD |
(21,288 | ) | (4,279 | ) |
A 10% weakening of the Australian dollar against the United States dollar at 30 June would have had the equal but opposite effect on the amounts shown above, on the basis that all other variables remain constant.
F-55
Interest rate risk
Profile
At the reporting date the interest rate profile of the Groups interest-bearing financial instruments was:
Carrying amount | ||||||||
2011 $000 |
2010 $000 |
|||||||
Fixed rate instruments |
||||||||
Financial liabilities |
(82,632 | ) | (98,406 | ) | ||||
|
|
|
|
|||||
(82,632 | ) | (98,406 | ) | |||||
|
|
|
|
|||||
Variable rate instruments |
||||||||
Financial assets |
460,482 | 378,690 | ||||||
Financial liabilities |
(5,533 | ) | (6,006 | ) | ||||
|
|
|
|
|||||
454,949 | 372,684 | |||||||
|
|
|
|
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a change in interest rates at the reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2010.
Profit or loss | Equity | |||||||||||||||
100bp increase $000 |
100bp decrease $000 |
100bp increase $000 |
100bp decrease $000 |
|||||||||||||
30 June 2011 |
||||||||||||||||
Variable rate instruments |
(61 | ) | 61 | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash flow sensitivity (net) |
(61 | ) | 61 | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
30 June 2010 |
||||||||||||||||
Variable rate instruments |
(107 | ) | 107 | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Cash flow sensitivity (net) |
(107 | ) | 107 | | | |||||||||||
|
|
|
|
|
|
|
|
F-56
Fair values
The fair values of financial assets and liabilities together with the carrying amounts shown in the statement of financial position are as follows:
Carrying amount |
Fair value | Carrying amount |
Fair value | |||||||||||||
2011 $000 |
2011 $000 |
2010 $000 |
2010 $000 |
|||||||||||||
Cash and cash equivalents |
415,161 | 415,161 | 348,216 | 348,216 | ||||||||||||
Trade and other receivables |
842,744 | 842,744 | 284,414 | 284,414 | ||||||||||||
Cash and depositsnot at call |
45,321 | 45,321 | 30,474 | 30,474 | ||||||||||||
Foreign currency derivative contracts: |
||||||||||||||||
Assets |
2,772 | 2,772 | | | ||||||||||||
Liabilities |
| | (4,502 | ) | (4,502 | ) | ||||||||||
Trade and other payables |
(101,759 | ) | (101,759 | ) | (125,677 | ) | (125,677 | ) | ||||||||
Deferred liability for acquisition of mining interest |
(5,533 | ) | (5,533 | ) | (6,006 | ) | (6,006 | ) | ||||||||
Finance lease liabilities |
(79,780 | ) | (77,284 | ) | (93,416 | ) | (89,141 | ) | ||||||||
Other derivative liabilities* |
| | (32,929 | ) | (32,929 | ) | ||||||||||
Employee benefits |
(6,997 | ) | (6,997 | ) | (5,266 | ) | (5,266 | ) | ||||||||
Other financial liabilities |
(2,852 | ) | (2,852 | ) | (4,990 | ) | (4,990 | ) | ||||||||
|
|
|
|
|||||||||||||
Unrecognised gains |
2,496 | 4,275 | ||||||||||||||
|
|
|
|
* | Refer Note 26 for details. |
Estimation of fair values
The methods used in determining the fair values of financial instruments are discussed in Note 4.
Fair value hierarchy
The following table presents the Groups financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
| Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities |
| Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) |
| Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
Level
1 $000 |
Level
2 $000 |
Level
3 $000 |
Total $000 |
|||||||||||||
30 June 2011 |
||||||||||||||||
Foreign currency derivative contracts asset |
| 2,772 | | 2,772 | ||||||||||||
Other derivative liabilities |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
| 2,772 | | 2,772 | |||||||||||||
|
|
|
|
|
|
|
|
Level 1 $000 |
Level 2 $000 |
Level 3 $000 |
Total $000 |
|||||||||||||
30 June 2010 |
||||||||||||||||
Foreign currency derivative contracts liability |
| 4,502 | | 4,502 | ||||||||||||
Other derivative liabilities |
| | 32,929 | 32,929 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
| 4,502 | 32,929 | 37,431 | |||||||||||||
|
|
|
|
|
|
|
|
F-57
The following table reconciles Level 3 of the fair value hierarchy from the opening balance at 1 July to the closing balance at 30 June:
2011 Other derivative liabilities $000 |
2010 Other derivative liabilities $000 |
|||||||
Opening balance |
(32,929 | ) | (18,919 | ) | ||||
Loss recognised in profit and loss (within other expenses) |
(2,121 | ) | (14,010 | ) | ||||
Settlement gain recognised in profit and loss (within other income) |
35,050 | | ||||||
|
|
|
|
|||||
Closing balance |
| (32,929 | ) | |||||
|
|
|
|
Although the Group believes that its estimate of fair value of the derivative financial instruments is appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value.
Interest rates used for determining fair value
The Group uses the government yield curve as of reporting date plus an adequate constant credit spread to discount financial instruments. The interest rates used are as follows:
2011 % |
2010 % | |||
Derivatives |
| 3.1 4.3 | ||
Deferred liability for acquisition of mining interestNote 23 |
10.15 | 10.10 | ||
Other receivables and prepayments (deferred)Note 16 |
5.50 | |
29. Interests in joint venture operations
The Group holds the following interests in various joint ventures whose principal activities are coal production, exploration and evaluation, and development.
Joint Venture % Interest held |
Principal activity | |||||||||
2011 | 2010 | |||||||||
Coppabella and Moorvale Joint Venture |
73.3 | % | 73.3 | % | Coal production | |||||
Monto Coal Joint Venture |
41 | %(1) | 41 | %(1) | Exploration and evaluation | |||||
Olive Downs (South) Joint Venture |
90 | % | 90 | % | Exploration and evaluation | |||||
Moorvale West Joint Venture |
90 | % | 90 | % | Exploration and evaluation | |||||
West/North Burton Joint Venture |
65 | % | 65 | % | Exploration and evaluation | |||||
West Rolleston Joint Venture |
90 | % | 90 | % | Exploration and evaluation | |||||
West Walker Joint Venture |
85 | % | 85 | % | Exploration and evaluation | |||||
Bowen Basin Coal Joint Venture |
85 | % | 85 | % | Exploration and evaluation | |||||
Capricorn Joint Venture |
85 | % | 85 | % | Exploration and evaluation |
(1) | The Group holds its 41% interest in the Monto Coal Joint Venture indirectly via its interest in Monto Coal 2 Pty Ltd, a jointly controlled entity. Refer Note 30 for details relating to the Groups investment in the jointly controlled entity. The information presented in the remainder of this note excludes financial information relating to the Monto Coal Joint Venture interests. |
For the year ended 30 June 2011, the contribution of the Coppabella and Moorvale Joint Venture to the operating profit before tax of the Group was $230,281,000 (2010: $213,906,000). The value of the Groups 73.3% share of the Coppabella and Moorvale Joint Venture coal sold (pre hedging) during the year was $666,376,000 (2010: $630,264,000).
F-58
There was no coal mined by the other joint ventures during the year.
Included in the assets and liabilities of the Group are the following items which represent the Groups interest in the assets and liabilities employed in the joint ventures, recorded in accordance with the accounting policies described in Note 3(a).
2011 $000 |
2010* $000 |
|||||||
Current assets |
||||||||
Trade and other receivables |
11,763 | 23,067 | ||||||
Inventories |
38,926 | 49,762 | ||||||
Other financial assets |
38,286 | 26,211 | ||||||
Overburden in advance |
182,256 | 146,548 | ||||||
|
|
|
|
|||||
Total current assets |
271,231 | 245,588 | ||||||
|
|
|
|
|||||
Non-current assets |
||||||||
Trade and other receivables |
2,103 | 73,718 | ||||||
Inventories |
4,368 | | ||||||
Other financial assets |
7,035 | 4,263 | ||||||
Property, plant and equipment |
238,690 | 249,318 | ||||||
Exploration and evaluation assets |
100,309 | 98,483 | ||||||
Overburden in advance |
21,824 | 19,905 | ||||||
|
|
|
|
|||||
Total non-current assets |
374,329 | 445,687 | ||||||
|
|
|
|
|||||
Total assets |
645,560 | 691,275 | ||||||
|
|
|
|
|||||
Current liabilities |
||||||||
Trade and other payables |
59,569 | 84,000 | ||||||
Loans and borrowings |
18,740 | 13,890 | ||||||
Provisions |
2,930 | 2,642 | ||||||
Other financial liabilities |
2,265 | 2,137 | ||||||
|
|
|
|
|||||
Total current liabilities |
83,504 | 102,669 | ||||||
|
|
|
|
|||||
Non-current liabilities |
||||||||
Loans and borrowings |
61,040 | 79,526 | ||||||
Provisions |
30,263 | 30,398 | ||||||
Other financial liabilities |
587 | 2,853 | ||||||
|
|
|
|
|||||
Total non-current liabilities |
91,890 | 112,777 | ||||||
|
|
|
|
|||||
Total liabilities |
175,394 | 215,446 | ||||||
|
|
|
|
Refer to Notes 31 and 32 for details of commitments and contingent liabilities.
Included in the Groups profit or loss are the following items which represent the Groups interest in the revenue and expenses relating to the joint ventures, recorded in accordance with the accounting policies described in Note 3(a).
2011 $000 |
2010 $000 |
|||||||
Revenue |
687,325 | 670,502 | ||||||
Expenses |
(465,997 | ) | (523,022 | ) | ||||
|
|
|
|
|||||
Net Profit |
221,328 | 147,480 | ||||||
|
|
|
|
* | Restated. See note 20. |
F-59
30. Equity accounted investees
2011 $000 |
2010 $000 |
|||||||
Investments in jointly controlled entities |
241,161 | 338,554 |
The Groups share of losses from its equity accounted investees for the year was $5,671,000 (2010: $10,934,000). During the years ended 30 June 2011 and 30 June 2010 the Group has not received any dividends in respect of its interests in equity accounted investees.
Summary financial information for equity accounted investees, not adjusted for the percentage ownership held by the Group:
Middlemount Coal Pty Ltd $000 |
Monto Coal 2 Pty Ltd $000 |
Custom Mining Dingo Pty Ltd (in liquidation) $000 |
||||||||||
30 June 2011 |
||||||||||||
Percentage held at the reporting date |
50.0003 | % | 80.39 | % | N/A | |||||||
Current assets |
36,373 | 10,201 | | |||||||||
Non-current assets |
362,315 | 61,752 | | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
398,688 | 71,953 | | |||||||||
|
|
|
|
|
|
|||||||
Current liabilities |
(115,216 | ) | (504 | ) | | |||||||
Non-current liabilities |
(263,634 | ) | (7,568 | ) | | |||||||
|
|
|
|
|
|
|||||||
Total liabilities |
(378,850 | ) | (8,072 | ) | | |||||||
|
|
|
|
|
|
|||||||
Income |
20 | 516 | 20 | |||||||||
Expenses |
(15,341 | ) | (1,734 | ) | | |||||||
|
|
|
|
|
|
|||||||
Loss |
(15,321 | ) | (1,218 | ) | 20 | |||||||
|
|
|
|
|
|
|||||||
30 June 2010 |
||||||||||||
Percentage held at the reporting date |
72.48 | % | 80.39 | % | 85.715 | % | ||||||
Current assets |
14,668 | 8,177 | | |||||||||
Non-current assets |
200,736 | 67,069 | | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
215,404 | 75,246 | | |||||||||
|
|
|
|
|
|
|||||||
Current liabilities |
(182,007 | ) | (2,579 | ) | | |||||||
Non-current liabilities |
| (7,568 | ) | (20 | ) | |||||||
|
|
|
|
|
|
|||||||
Total liabilities |
(182,007 | ) | (10,147 | ) | (20 | ) | ||||||
|
|
|
|
|
|
|||||||
Income |
14,960 | 259 | | |||||||||
Expenses |
(29,380 | ) | (414 | ) | | |||||||
|
|
|
|
|
|
|||||||
Loss |
(14,420 | ) | (155 | ) | | |||||||
|
|
|
|
|
|
F-60
The principal activities of the Groups equity accounted investees along with the Groups share of losses for the year were as follows:
Groups share
of losses |
||||||||||||||
Principal activities |
Reporting date |
2011 $000 |
2010 $000 |
|||||||||||
Custom Mining Dingo Pty Ltd (in liquidation) |
Dormant | 30 June | | | ||||||||||
Middlemount Coal Pty Ltd and its controlled entities |
Operator of Middlemount Mine project | 30 June | 4,692 | 10,810 | ||||||||||
Monto Coal 2 Pty Ltd |
Participant in the Monto Coal Joint Venture | 30 June | 979 | 124 |
Middlemount Coal Pty Ltd and its controlled entities
During the year the Group disposed of 22.48% of Middlemount Coal Pty Ltd in accordance with the terms of the share sale agreement for the fixed consideration of $97,600,000. $52,600,000 was receivable immediately, with $45,000,000 received on 30 June 2011.
No impairment of the investment in Middlemount Coal Pty Ltd and its controlled entities at 30 June 2011 was necessary based on the recoverable amount of the Middlemount Mine project exceeding the carrying value. The recoverable amount was based on a fair value less costs to sell model as determined internally by management. The fair value was based on the discounted cash flows to be generated from the project.
The following key assumptions were used:
| Cash flows based on the long-term project plan for the Middlemount Mine project taking into consideration long-term global coal pricing, anticipated operating and distribution infrastructure costs over the life of the project which was based on available coal reserves. Management believe that a discounted cash flow calculation longer than five years is appropriate given the long-term nature of the asset and the measured recoverable coal reserves. |
| Revenues for the 2012 financial year through to the 2014 financial year are based on internally approved cash flows, and the coal price assumptions used are consistent with the average of analyst forecasts for these periods. For the periods thereafter, revenues are determined using the average of analyst forecasts for long-term coal prices. A discount to the average analyst prices has been provided for of 5% on coking coal. No discount has been applied to PCI. |
| Operating and capital costs are based on current contracts and expected future costs as determined by the Group. |
The values assigned to the key assumptions represented managements assessment of future industry variables and were based on both internal and external sources of information. The impact of the Australian Governments proposed carbon pricing mechanism has not been incorporated into the fair value model, however current modelling on the proposed impact indicates that the recoverable amount would continue to exceed the project carrying amount.
The above assumptions are sensitive in the following areas:
| An increase of one percentage point in the discount rate, holding all other variables constant, would have decreased fair value less costs to sell by $32,000,000. This would not result in a material impairment. |
F-61
| A five percent increase in forecast operating costs, holding all other variables constant, would have decreased fair value less costs to sell by $66,000,000. This would not result in a material impairment. |
| A five percent decrease in forecast future long-term coal prices, holding all other variables constant, would have decreased fair value less costs to sell by $94,000,000. This would not result in a material impairment. |
Monto Coal 2 Pty Ltd
No impairment of the investment in Monto Coal 2 Pty Ltd was necessary at 30 June 2011 based on the recoverable amount of the investment exceeding its carrying value. The recoverable amount was based on its fair value less costs to sell, which was determined using recent market information for similar undeveloped coal interests and other current market information.
Custom Mining Dingo Pty Ltd
During 2011, a decision was made to liquidate Custom Mining Dingo Pty Ltd (in liquidation). Application for voluntary liquidation was made prior to 30 June 2011.
Commitments
2011 $000 |
2010 $000 |
|||||||
Share of capital expenditure commitments of jointly controlled entities payable: |
||||||||
Not later than one year |
13,860 | 8,461 | ||||||
|
|
|
|
|||||
13,860 | 8,461 | |||||||
|
|
|
|
|||||
Share of mining lease commitments of jointly controlled entities payable: |
||||||||
Not later than one year |
51 | 83 | ||||||
Later than one year but not later than five years |
192 | 250 | ||||||
Later than five years |
392 | 515 | ||||||
|
|
|
|
|||||
635 | 848 | |||||||
|
|
|
|
|||||
Share of operating commitments of jointly controlled entities payable: |
||||||||
Not later than one year |
57,228 | 15,276 | ||||||
Later than one year but not later than five years |
264,970 | 186,893 | ||||||
Later than five years |
351,831 | 166,831 | ||||||
|
|
|
|
|||||
674,029 | 369,000 | |||||||
|
|
|
|
Guarantees
Middlemount Coal Pty Ltd has provided guarantees in relation to rehabilitation works for a mineral development license and Wiggins Island feasibility study costs. In addition, guarantees are provided in relation to Parrot Creek quarry and diversion of the Middlemount-Dysart road.
Guarantees provided in relation to Wiggins Island feasibility study costs are secured by bank deposits of the same amounts.
Monto Coal 2 Pty Ltd has provided bank guarantees relating to Wiggins Island feasibility study costs, which are secured by bank deposits of the same amounts.
F-62
31. Capital and other commitments
2011 $000 |
2010 $000 |
|||||||
(a) Capital expenditure commitmentsjoint ventures |
||||||||
Capital expenditure contracted but not provided for in the financial statements and payable: |
||||||||
Not later than one year |
10,737 | 1,135 | ||||||
|
|
|
|
|||||
10,737 | 1,135 | |||||||
|
|
|
|
|||||
(b) Operating lease commitments |
||||||||
Future operating lease rentals not provided for in the financial statements and payable: |
||||||||
Not later than one year |
3,173 | 2,867 | ||||||
Later than one year but not later than five years |
8,680 | 6,601 | ||||||
Later than five years |
| 1,088 | ||||||
|
|
|
|
|||||
11,853 | 10,556 | |||||||
|
|
|
|
The Group leases office equipment, cars and office space under operating leases. Lease payments for the office lease are increased every year to reflect market rentals.
During the year ended 30 June 2011, $1,318,000 was recognised as an expense in profit or loss in respect of operating leases (2010: $1,397,000).
2011 $000 |
2010 $000 |
|||||||
(c) Mining leasesjoint ventures |
||||||||
Future mining lease rentals not provided for in the financial statements and payable: |
||||||||
Not later than one year |
453 | 416 | ||||||
Later than one year but not later than five years |
1,604 | 1,381 | ||||||
Later than five years |
2,602 | 2,875 | ||||||
|
|
|
|
|||||
4,659 | 4,672 | |||||||
|
|
|
|
|||||
(d) Exploration and evaluation expenditure |
||||||||
Exploration obligations |
||||||||
In order to maintain current rights of tenure to exploration tenements, the Group is required to perform minimum exploration work to meet the minimum expenditure requirements specified by various State governments. The expenditure obligations are subject to renegotiation when application for a mining lease and/or renewal of exploration permits is made and at other times. These obligations are not provided for in the financial statements and are payable: |
||||||||
Not later than one year |
1,364 | 797 | ||||||
Later than one year but not later than five years |
2,419 | 132 | ||||||
|
|
|
|
|||||
3,783 | 929 | |||||||
|
|
|
|
|||||
(e) Operating commitmentsjoint ventures |
||||||||
Commitments under the electricity, water, rail, port, coal washing plant, train loading facility and accommodation agreements for joint ventures not provided for in the financial statements and payable: |
||||||||
Not later than one year |
142,232 | 143,195 | ||||||
Later than one year but not later than five years |
375,190 | 428,004 | ||||||
Later than five years |
282,802 | 439,713 | ||||||
|
|
|
|
|||||
800,224 | 1,010,912 | |||||||
|
|
|
|
F-63
In addition to the operating commitments in (e) above, other contracts on commercial terms and conditions have been entered into with contractors for overburden and mining operations at the Coppabella and Moorvale mines and with original owners regarding royalty arrangements at both the Coppabella and Moorvale mines. As the amounts payable under the contracts vary with the coal quantities mined and sold, future commitments are not able to be reliably assessed and quantified.
Refer Note 23 for commitments relating to finance leases of the Group.
On 23 October 2002, the Coppabella and Moorvale Joint Venture participants agreed to pay a user charge to the Queensland Government for the facilitation of the transport infrastructure corridor (TIC) relocation. The user charge comprises 40 quarterly payments (2011: Group share of $596,000 per quarter; 2010: $596,000 per quarter), commencing 1 October 2002, which have been included in the above operating commitments less the amounts payable for future user charges recognised at 30 June 2011 (refer Note 26).
(f) Other commitments
Land Purchase
In May 2011, Macarthur Coal Limited entered a put and call option deed with the intention of purchasing property for future mining operations. The deed allows Macarthur Coal Limited the right to purchase the land for a total of $75 million with $60 million upfront and the remaining $15 million subject to the timing of certain milestones. A security deposit of $7.5 million paid by Macarthur Coal Limited is included in current other receivables and prepayments at balance date (refer Note 16). The transaction remained subject to ministerial approval under Land Act 1992 (Qld) at 30 June 2011 and has therefore not been recognised in the financial results at balance date.
Macarthur Coal Limited intend to exercise their right to purchase the land under the option deed and sale agreement. The $60 million upfront payment less the $7.5 million security deposit will be due and payable within seven days after the satisfaction of the approval conditions which is expected to occur within the first half of the 2012 financial year.
Joint Ventures
Deeds of cross charge
(i) | The payment of future cash calls by Coppabella Coal Pty Ltd, a controlled entity, for its share of operating and capital costs in the Coppabella and Moorvale Joint Venture is secured by a guarantee from the Company and a charge over Coppabella Coal Pty Ltds interest in the Coppabella and Moorvale Joint Venture in favour of the other joint venturers and Macarthur Coal (C&M Management) Pty Ltd as the manager of the Coppabella and Moorvale Joint Venture. |
(ii) | The payment of future cash calls by Monto Coal 2 Pty Ltd, an equity accounted investee, for its share of operating and capital costs in the Monto Coal Joint Venture is secured by a charge over Monto Coal 2 Pty Ltds interest in the Monto Coal Joint Venture in favour of the other joint venturers. |
(iii) | The payment of future cash calls by Olive Downs Coal Pty Ltd, a controlled entity, for its share of operating and capital costs in the Olive Downs (South) Joint Venture is secured by a charge over Olive Downs Coal Pty Ltds interest in the Olive Downs (South) Joint Venture in favour of the other joint venturers. |
(iv) | The payment of future cash calls by Capricorn Coal Pty Ltd, a controlled entity, for its share of operating and capital costs in the Capricorn Joint Venture is secured by a charge over Capricorn Coal Pty Ltds interest in the Capricorn Joint Venture in favour of the other joint venturers. |
F-64
(v) | The payment of future cash calls by West Burton Coal Pty Ltd, a controlled entity, for its share of operating and capital costs in the West/North Burton Joint Venture is secured by a charge over West Burton Coal Pty Ltds interest in the West/North Burton Joint Venture in favour of the other joint venturers. |
(vi) | The payment of future cash calls by West Rolleston Coal Pty Ltd, a controlled entity, for its share of operating and capital costs in the West Rolleston Joint Venture is secured by a charge over West Rolleston Coal Pty Ltds interest in the West Rolleston Joint Venture in favour of the other joint venturers. |
(vii) | The payment of future cash calls by West Walker Coal Pty Ltd, a controlled entity, for its share of operating and capital costs in the West Walker Joint Venture is secured by a charge over West Walker Coal Pty Ltds interest in the West Walker Joint Venture in favour of the other joint venturers. |
(viii) | The payment of future cash calls by Moorvale West Coal Pty Ltd, a controlled entity, for its share of operating and capital costs in the Moorvale West Joint Venture is secured by a charge over Moorvale West Coal Pty Ltds interest in the Moorvale West Joint Venture in favour of the other joint venturers. |
(ix) | The payment of future cash calls by BB Interests Pty Ltd, a controlled entity, for its share of operating and capital costs in the Bowen Basin Coal Joint Venture is secured by a charge over BB Interests Pty Ltds interest in the Bowen Basin Coal Joint Venture in favour of the other joint venturers. |
Jointly controlled entities and Associates
Refer Notes 30 and 34.
32. Contingencies
The Directors are of the opinion that provisions are not required in respect of these matters, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
Indemnities
Indemnities have been provided to Directors and certain Executive Officers of the Company in respect of liabilities to third parties arising from their positions, except where the liability arises out of conduct involving a lack of good faith. No monetary limit applies to these agreements and there are no known obligations outstanding at 30 June 2011. (1)
(1) | These contingent liabilities are considered remote. |
Guarantees
The Company provides guarantees in relation to the operations of the Group for payments in relation to leased equipment (refer Note 23), royalties, accommodation facilities and certain joint venture undertakings.
The Company provides letters of support to the associated entities listed in Note 34, to provide that each of those entities are in a position to meet debts as and when they become due and payable.
The Company has guaranteed the future commitments of Monto Coal 2 Pty Ltd, a jointly controlled entity, in relation to royalty arrangements.
The Company on behalf of its controlled entity, Coppabella Coal Pty Ltd, has provided guarantees totalling $Nil (2010: $14,660,000) in favour of a supplier.
F-65
The Company, on behalf of its controlled entity, Coppabella Coal Pty Ltd, has provided a guarantee in favour of a bank in respect of payment of foreign currency derivative obligations.
The Group has provided bank guarantees totalling $13,358,000 (2010: $4,501,000) in respect of the Wiggins Island feasibility study and the Companys Brisbane head office. These amounts are secured by bank deposits of $7,035,000 (2010: $4,263,000). (1)
Coppabella Coal Pty Ltd, a controlled entity, as a participant of the Coppabella and Moorvale Joint Venture, has provided bank guarantees totalling $59,148,000 (2010: $64,676,000) in respect of rehabilitation works, electricity, water and transport infrastructure corridor facilities. (1)
(1) | These contingent liabilities are considered remote. |
Environmental
Current Queensland Government environment policy requires the preparation of an Environmental Management Plan (EM Plan) and a Plan of Operations detailing the quality, timing and standards of planned mine rehabilitation work. The Coppabella and Moorvale Joint Venture has prepared its EM Plan and its Plan of Operations has been accepted by the Department of Environment and Resource Management. In addition to the EM Plan and the Plan of Operations, the Group is required to lodge securities with the Department of Employment, Economic Development and Innovation to ensure compliance with relevant legislation. The total amount of the guarantees lodged with the Department of Employment, Economic Development and Innovation as at 30 June 2011 is $35,327,000 (2010: $35,251,000) (included in the amount of guarantees referred to above). (1)
(1) | These contingent liabilities are considered remote. |
Litigation
Monto
A statement of claim was delivered to Monto Coal Pty Ltd, a wholly owned member of the Group, and Monto Coal 2 Pty Ltd, an equity accounted investee, on 1 October 2007 from the minority interest holders in the Monto Coal Joint venture, being Sanrus Pty Ltd, Edge Developments Pty Ltd and H & J Enterprises (Qld) Pty Ltd alleging that Monto Coal 2 Pty Ltd breached the Monto Coal Joint Venture Agreement and Monto Coal Pty Ltd breached the Monto Coal Management Agreement.
An additional statement of claim was delivered to Macarthur Coal Limited on 23 November 2010 from the same minority interest holders in the Monto Coal Joint Venture, alleging that Macarthur Coal Limited induced Monto Coal 2 Pty Ltd and Monto Coal Pty Ltd to breach the Monto Coal Joint Venture Agreement and the Monto Coal Management Agreement respectively.
The statement of claim seeks damages from the three defendants collectively of no less than $1,193,200,000 plus interest and costs.
Monto Coal Pty Ltd is the manager of the Monto Coal Joint venture pursuant to the Management Agreement. Monto Coal 2 Pty Ltd holds a 51% interest in the Monto Coal Joint Venture.
The Directors of the Group (and the Manager) dispute the claims and will vigorously defend their position.
The Directors remain of the opinion disclosure of any further information about the above matter would be prejudicial to the interests of the Group.
MDL 162
Following successful completion of the Institutional Placement on 26 August 2010, Macarthur Coal Limited entered into a loan facility agreement with MCG Coal Holdings Pty Ltd, MCG Coal Pty Ltd, MCG Resources Pty Ltd and Fortrus Resources Pty Ltd (the MCG Companies) on 1 September 2010 to provide MCG Coal Holdings Pty Ltd with $360 million to finalise the purchase of MDL 162 from Stanwell Corporation. Macarthur Coal Limited agreed to subscribe for 90% of the shares in MCGH for $334.35 million. The transaction was expected to be completed on 10 May 2011.
F-66
Non-performance by the other party to the transaction, has resulted in Macarthur Coal Limited commencing litigation for specific performance under the loan facility agreement. The original loan amount is classified as a loan receivable pending the outcome of ongoing legal proceedings.
The matter has been set down for trial for 10 days, commencing 30 January 2012.
33. Group entities
Ownership interest | ||||||||
2011 % |
2010 % |
|||||||
Parent entity |
||||||||
Macarthur Coal Limited |
||||||||
Subsidiaries |
||||||||
Coppabella Coal Pty Ltd |
100 | 100 | ||||||
Macarthur Coal Management Pty Ltd |
100 | 100 | ||||||
Macarthur Coal Mine Management Pty Ltd |
100 | 100 | ||||||
Macarthur Rush Pty Ltd |
100 | 100 | ||||||
Moorvale Coal Pty Ltd (in liquidation) |
100 | * | 100 | |||||
Macarthur Coal (Equipment) Pty Ltd |
100 | 100 | ||||||
Monto Coal Pty Ltd |
100 | 100 | ||||||
Macarthur Exploration Pty Ltd |
100 | 100 | ||||||
Olive Downs Coal Pty Ltd |
100 | 100 | ||||||
Queensland Coke & Energy Pty Ltd |
100 | 100 | ||||||
Capricorn Coal Pty Ltd |
100 | 100 | ||||||
West Burton Coal Pty Ltd |
100 | 100 | ||||||
West Rolleston Coal Pty Ltd |
100 | 100 | ||||||
West Walker Coal Pty Ltd |
100 | 100 | ||||||
Moorvale West Coal Pty Ltd |
100 | 100 | ||||||
BB Interests Pty Ltd |
100 | 100 | ||||||
Custom Mining Pty Ltd |
100 | 100 | ||||||
Custom Mining Management Pty Ltd |
100 | 100 | ||||||
Custom Management Services Pty Ltd |
100 | 100 | ||||||
Custom Mining (Monto) Pty Ltd |
100 | 100 | ||||||
Macarthur Coal Performance Share Plan Trust |
100 | 100 | ||||||
Macarthur Coal Financing Pty Ltd |
100 | | ||||||
Macarthur Berrigurra Pty Ltd |
100 | |
All subsidiaries were incorporated and carry on business in Australia.
* | Moorvale Coal Pty Ltd (in liquidation) was placed into voluntary liquidation on 9 August 2011. |
F-67
34. Investments in associated entities
Interest held | ||||||||||||||
Principal activities |
Reporting date |
2011 % |
2010 % |
|||||||||||
Macarthur Coal (C&M Management) Pty Ltd (1) |
Manager of the Coppabella and Moorvale Joint Venture | 30 June | 73.3 | 73.3 | ||||||||||
Bistrotel Pty Ltd (1) |
Property Owner | 30 June | 73.3 | 73.3 | ||||||||||
Macarthur Coal (C&M Equipment) Pty Ltd (1) |
Equipment Finance | 30 June | 73.3 | 73.3 |
(1) | Investments in these entities are held in connection with joint venture arrangements. Under these arrangements, the Group does not have control over these associated entities, and accordingly have not been consolidated. The impact of the results and operations of these associated entities are not material to the Group and accordingly have not been equity accounted. |
35. Acquisitions and disposals of subsidiaries and joint venture interests
Acquisitions
There were no acquisitions in the current or prior year.
Disposals
On 30 June 2011, the Group completed the partial disposal of the Codrilla project. The Group held an 85% interest in the project through its participation in the Bowen Basin Coal Joint Venture. Following the sell-down into the CMJV the Groups interest in the project was effectively reduced to 73.3%. The total consideration receivable from external parties, at present value, is $69.8 million, and is due in three instalments 20% receivable on contract completion, 40% receivable on granting of the mining lease and 40% due on first railing. The sale is unconditional and backstop dates are applicable to the timing of payments. The Group recognised a profit (before tax) on disposal of $68,812,000 for the year ended 30 June 2011.
Effect of Disposal
The disposal had the following effect on the Groups assets and liabilities for the year ended 30 June 2011:
Pre-disposal Carrying Amount $000 |
Fair Value Adjustment $000 |
Recognised values on disposal $000 |
||||||||||
Codrilla exploration and evaluation asset |
7,474 | | 7,474 | |||||||||
|
|
|
|
|
|
|||||||
Net identifiable assets and liabilities |
7,474 | | 7,474 | |||||||||
|
|
|
|
|
|
|||||||
Carrying value of interest disposed |
1,029 | |||||||||||
Consideration received, satisfied in cash |
14,976 | |||||||||||
Consideration receivable (i) |
59,904 | |||||||||||
|
|
|||||||||||
Total cash consideration received/receivable |
74,880 | |||||||||||
|
|
(i) | The consideration has been discounted to fair value at the completion date of $54.9 million based on a discount rate of 5.5%. |
F-68
36. Reconciliation of cash flows from operating activities
Consolidated | ||||||||
2011 $000 |
2010 $000 |
|||||||
Cash flows from operating activities |
||||||||
Profit for the year |
241,390 | 125,064 | ||||||
Adjustments for: |
||||||||
Depreciation and amortisation |
30,566 | 31,279 | ||||||
Share-based payments |
(40 | ) | 425 | |||||
Amounts reversed from provisions |
(1,434 | ) | (4,475 | ) | ||||
Unrealised foreign exchange losses |
429 | 1,142 | ||||||
Interest on loans and borrowings |
8,786 | 8,072 | ||||||
Interest on unwinding of discount |
2,429 | 4,097 | ||||||
Interest on deferred income |
(1,236 | ) | | |||||
Loss on disposal of property, plant and equipment |
152 | 42 | ||||||
(Gain)/loss on partial disposal of interest in equity accounted investee |
(44,148 | ) | 1,641 | |||||
Gain on sale of partial disposal of mining project |
(84,201 | ) | | |||||
Change in fair value of other derivative liabilities |
2,121 | 14,010 | ||||||
Share of loss of equity accounted investees |
5,671 | 10,934 | ||||||
|
|
|
|
|||||
Operating profit before changes in working capital |
160,485 | 192,231 | ||||||
|
|
|
|
|||||
Decrease in income tax payable |
(34,096 | ) | (3,557 | ) | ||||
Decrease/(increase) in net deferred tax liabilities/assets |
14,605 | (12,353 | ) | |||||
Decrease/(increase) in trade and other receivables |
24,747 | (35,975 | ) | |||||
Decrease/(increase) in inventories |
6,468 | (5,963 | ) | |||||
(Increase)/decrease in overburden in advance |
(37,627 | ) | 3,501 | |||||
(Decrease)/increase in trade and other payables |
(18,544 | ) | 38,197 | |||||
Increase in employee benefits |
1,731 | 1,047 | ||||||
|
|
|
|
|||||
Net cash from operating activities |
117,769 | 177,128 | ||||||
|
|
|
|
37. Related parties
Key Management Personnel Disclosures
The Key Management Personnel of the Group are those people responsible for planning, directing and controlling the activities of the Group throughout the year. The KMP include:
| Non-Executive Directors there were six (2010: six) Non-Executive Directors during the year |
| Senior Executives as at 30 June 2011, there were seven (2010: five) Senior Executives including the Chief Executive Officer (CEO) and Managing Director (MD), Nicole Hollows |
| Former Executives there are two (2010: two) Former Executives who were senior executives for part of the year. |
F-69
The following were key management personnel of the Group at any time during the year and unless otherwise indicated were Key Management Personnel for the entire year.
KEY MANAGEMENT PERSONNEL | ||||||||
DEFINED TERM |
NAME | POSITION | DATE APPOINTED | |||||
30 June 2011 and 30 June 2010 | ||||||||
Keith DeLacy | Chairman, Independent, Non-Executive Director | 5 July 2001 Resigned: effective 26 October 2011 | ||||||
Roger Marshall | Deputy Chairman, Independent, Non-Executive Director (2010: Deputy Chairman, Non-Executive Director) | 5 July 2001 Resigned: effective 26 October 2011 | ||||||
NON-EXECUTIVE DIRECTORS | Peter Forbes | Independent, Non-Executive Director | 14 November 2003 Resigned: effective 26 October 2011 | |||||
Chen Zeng | Non-Executive Director | 23 July 2007 Resigned: effective 26 October 2011 | ||||||
Martin Kriewaldt | Independent, Non-Executive Director | 13 October 2008 Resigned: effective 26 October 2011 | ||||||
Terry OReilly | Independent, Non-Executive Director | 13 October 2008 Resigned: effective 26 October 2011 | ||||||
EXECUTIVES |
SENIOR EXECUTIVES | 30 June 2011 | ||||||
Nicole Hollows | Chief Executive Officer Managing Director |
CEO: 7 January 2007 MD: 28 June 2007 Resigned: effective 26 October 2011 | ||||||
Gary Lee | Vice President, Marketing Chief Development Officer |
19 January 2004 Effective from 1 September 2010 | ||||||
Lisa Dalton | EGM Corporate Services & Company Secretary | 24 May 2007 | ||||||
Graham Yerbury | Chief Financial Officer | 6 September 2010 | ||||||
Rodney Dyer | EGM Projects | 16 November 2010 | ||||||
Scott Croger | Vice President, Marketing | 1 September 2010 | ||||||
Allan Fidock | EGM Operations | 1 February 2011 | ||||||
30 June 2010 | ||||||||
Nicole Hollows | Chief Executive Officer Executive Director |
CEO: 7 January 2007 MD: 28 June 2007 | ||||||
Peter Kane | Chief Operating Officer | 18 February 2008 | ||||||
Gary Lee | Vice President, Marketing | 19 January 2004 | ||||||
Lisa Dalton | EGM Corporate Services & Company Secretary | 24 May 2007 | ||||||
Michael Gray | EGM Projects & Infrastructure | 20 July 2009 | ||||||
FORMER EXECUTIVES | 30 June 2011 | |||||||
Michael Gray | EGM Projects & Infrastructure | 20 July 2009 Appointed: CEO of Middlemount effective 15 September 2010 | ||||||
Peter Kane | Chief Operating Officer | 18 February 2008 Resigned: effective 18 February 2011 | ||||||
30 June 2010 | ||||||||
Stuart Hatton | Chief Financial Officer | Appointed: 18 August 2008 Resigned: 30 October 2009 | ||||||
Shane Stephan | Chief Development Officer | Appointed: 12 February 2001 Resigned: 21 August 2009 |
F-70
Changes in Key Management Personnel subsequent to 30 June 2011
The following changes occurred subsequent to 30 June 2011, but prior to the issue of these Financial Statements.
On 26 October 2011 the following Directors and the Chief Executive Officer resigned:
Keith DeLacy (Director, Chairman) |
||
Roger Marshall (Director) |
||
Peter Forbes (Director) |
||
Chen Zeng (Director) |
||
Martin Kriewaldt (Director) |
||
Terry OReilly (Director) |
||
Nicole Hollows (Chief Executive Officer and Managing Director) |
On 26 October 2011 the following Directors and Chief Executive Officer were appointed:
Eric Ford (Director, Chairman) |
||
Julian Thornton (Director and Chief Executive Officer) |
||
Michael C. Crews (Director) |
||
Paul Dowd (Director) subsequently resigned on 21 December 2011 |
||
John M. Spark (Director) subsequently resigned on 21 December 2011 |
Key management personnel compensation
The Key Management Personnel compensation included in personnel expenses (see Note 9) are as follows:
2011 $ |
2010 $ |
|||||||
Short-term employee benefits |
5,580,036 | 4,045,484 | ||||||
Other long-term benefits |
53,820 | 143,745 | ||||||
Post-employment benefits |
282,757 | 240,407 | ||||||
Share-based payments (1) |
782,485 | 1,190,124 | ||||||
|
|
|
|
|||||
6,699,098 | 5,619,760 | |||||||
|
|
|
|
(1) | Includes shares provided to Directors as part of compensation and expense during the year relating to performance rights to Executives. |
F-71
Directors and Executive Officers Remuneration
Details of the nature and amount of each major element of remuneration of each Director of the Group and each relevant Group Executive are:
Short term | Post employment benefits - superannuation |
Long term employee benefits |
Termination benefits |
Share-based payment | Total | Proportion of remuneration performance related |
Value of options and rights as a proportion of remuneration |
|||||||||||||||||||||||||||||||||||||||||||||
Salary & fees |
STI cash bonus |
Non- monetary benefits |
Total | Shares | Options and rights1 |
|||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
Directors |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Executive |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Keith DeLacy |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 82,951 | | 13,736 | 96,687 | 15,382 | | | 145,039 | | 257,108 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 82,569 | | 10,100 | 92,669 | 7,431 | | | 146,353 | | 246,453 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Roger Marshall |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 59,633 | | 13,736 | 73,369 | 5,367 | | | 114,189 | | 192,925 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 59,633 | | 8,650 | 68,283 | 5,367 | | | 146,353 | | 220,003 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Peter Forbes |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 87,156 | | 13,736 | 100,892 | 7,844 | | | 114,850 | | 223,586 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 73,394 | | 9,744 | 83,138 | 6,605 | | | 146,138 | | 235,881 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Chen Zeng |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 50,459 | | 13,736 | 64,195 | 4,541 | | | 114,189 | | 182,925 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 50,459 | | 8,650 | 59,109 | 4,541 | | | 146,353 | | 210,003 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Martin Kriewaldt |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 59,633 | | 13,736 | 73,369 | 5,367 | | | 113,195 | | 191,931 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 50,459 | | 9,744 | 60,203 | 4,541 | | | 121,674 | | 186,418 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Terry OReilly |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 60,084 | | 13,736 | 73,820 | 30,750 | | | 114,189 | | 218,759 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 15,992 | | 8,650 | 24,642 | 49,008 | | | 121,674 | | 195,324 | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Executive |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Nicole Hollows - Chief Executive Officer |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 1,049,315 | 775,390 | 49,755 | 1,874,460 | 25,000 | 20,572 | | | 68,217 | 1,988,249 | 25 | % | 3 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 749,246 | 774,450 | 43,699 | 1,567,395 | 25,000 | 123,535 | | | 158,897 | 1,874,827 | 39 | % | 8 | % | ||||||||||||||||||||||||||||||||||||||
Total Remuneration - All Directors |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 1,449,231 | 775,390 | 132,171 | 2,356,792 | 94,251 | 20,572 | | 715,651 | 68,217 | 3,255,483 | ||||||||||||||||||||||||||||||||||||||||||
2010 | 1,081,752 | 774,450 | 99,237 | 1,955,439 | 102,493 | 123,535 | | 828,545 | 158,897 | 3,168,909 |
1 | Remuneration in the form of share-based payments includes negative amounts for performance rights forfeited during the year. |
F-72
Directors and Executive Officers Remuneration (continued)
Short term | Post employment benefits - superannuation |
Long term employee benefits |
Termination benefits |
Share-based payment |
Total | Proportion of remuneration performance related |
Value of options and rights as a proportion of remuneration |
|||||||||||||||||||||||||||||||||||||||||||||
Salary & fees |
STI cash bonus |
Non- monetary benefits |
Total | Shares | Options and rights1 |
|||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
Executives |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Gary Lee - Chief Development Officer, Macarthur Coal Limited |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 377,425 | 197,018 | 16,300 | 590,743 | 50,000 | 13,593 | | | 26,558 | 680,894 | 15 | % | 4 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 346,189 | 164,385 | 10,152 | 520,726 | 49,999 | 8,077 | | | 61,347 | 640,149 | 24 | % | 10 | % | ||||||||||||||||||||||||||||||||||||||
Lisa Dalton - Executive General Manager Corporate Services and Company Secretary, Macarthur Coal Limited |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 295,035 | 204,505 | 60,591 | 560,131 | 25,000 | 6,686 | | | 17,056 | 608,873 | 15 | % | 3 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 313,319 | 170,080 | 23,170 | 506,569 | 25,000 | 3,393 | | | 32,489 | 567,451 | 25 | % | 6 | % | ||||||||||||||||||||||||||||||||||||||
Graham Yerbury - Chief Financial Officer, Macarthur Coal Limited |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
(Appointed 06/09/2010) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 296,775 | 51,681 | 16,250 | 364,706 | 33,646 | | | | 53 | 398,405 | 13 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | | | | | | | | | | | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Rodney Dyer - Executive General Manager Projects, Macarthur Coal Limited |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
(Appointed 16/11/2010) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 245,677 | 79,225 | 12,163 | 337,065 | 10,821 | | | | 59 | 347,945 | 23 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | | | | | | | | | | | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Scott Croger - Vice President Marketing, Macarthur Coal Limited |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
(Appointed 01/09/2010) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 276,048 | 99,940 | 15,138 | 391,126 | 20,833 | 8,768 | | | 4,404 | 425,131 | 11 | % | 1 | % | ||||||||||||||||||||||||||||||||||||||
2010 | | | | | | | | | | | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Allan Fidock - Executive General Manager Operations, Macarthur Coal Limited 2 |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
(Appointed 01/02/2011) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 294,411 | 132,150 | 66,859 | 493,420 | 25,000 | 4,201 | | | 5,903 | 528,524 | 8 | % | 1 | % | ||||||||||||||||||||||||||||||||||||||
2010 | | | | | | | | | | | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
Former Executives |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
Michael Gray - Executive General Manager, Projects and Infrastructure, Macarthur Coal Limited |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
(Appointed 20/07/09) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
(Appointed CEO Middlemount 15/09/2011) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 57,977 | 64,683 | 11,888 | 134,548 | 5,246 | | | | 13,592 | 153,386 | 18 | % | 9 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 246,334 | 104,111 | 44,945 | 395,390 | 23,672 | 5,774 | | | 36,138 | 460,974 | 17 | % | 8 | % | ||||||||||||||||||||||||||||||||||||||
Peter Kane - Chief Operating Officer, Macarthur Coal Limited |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
(Resigned 18/02/2011) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 280,358 | 56,250 | 14,897 | 351,505 | 17,960 | | | | (69,008 | ) | 300,457 | (23 | %) | (23 | %) | |||||||||||||||||||||||||||||||||||||
2010 | 422,442 | 213,075 | 22,351 | 657,868 | 25,000 | 2,966 | | | 78,997 | 764,831 | 27 | % | 10 | % | ||||||||||||||||||||||||||||||||||||||
Stuart Hatton - Chief Financial Officer, Macarthur Coal Limited |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
(Resigned 30/10/2009) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | | | | | | | | | | | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 127,810 | | 7,367 | 135,177 | 10,356 | | | | (6,289 | ) | 139,244 | (5 | %) | (5 | %) | |||||||||||||||||||||||||||||||||||||
Shane Stephan - Chief Development Officer, Macarthur Coal Limited |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
(Resigned 21/8/2009) |
| |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | | | | | | | | | | | 0 | % | 0 | % | ||||||||||||||||||||||||||||||||||||||
2010 | 114,331 | | 1,434 | 115,765 | 3,887 | | | | | 119,652 | 0 | % | 0 | % |
F-73
Directors and Executive Officers Remuneration (continued)
Short term | Post employment benefits - superannuation |
Long term employee benefits |
Termination benefits |
Share-based payment |
Total | Proportion of remuneration performance related |
Value of options and rights as a proportion of remuneration | |||||||||||||||||||||||||||||||||||||||||
Salary & fees |
STI cash bonus |
Non- monetary benefits |
Total | Shares | Options and rights1 |
|||||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Total Remuneration - Executives | ||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 2,123,706 | 885,452 | 214,086 | 3,223,244 | 188,506 | 33,248 | | | (1,383 | ) | 3,443,615 | |||||||||||||||||||||||||||||||||||||
2010 | 1,570,425 | 651,651 | 109,419 | 2,331,495 | 137,914 | 20,210 | | | 202,682 | 2,692,301 |
1 | Remuneration in the form of share-based payments includes negative amounts for performance rights forfeited during the year. |
2 | While KMP from 1 February 2011, bonuses have been disclosed for the full 12 month period given Mr Fidock is one of the five highest paid earners of the Group, as required to be disclosed under the Corporations Act 2001. |
Principles of Non-Executive Director Remuneration
Remuneration levels for Non-Executive Directors are set to reflect the demands on the Directors and the responsibility they carry and to align with time commitments expected of them in carrying out their role.
Components of Non-Executive Director Remuneration
The various components of remuneration for Non-Executive Directors are outlined below:
Aggregate Remuneration Amount
The aggregate remuneration permitted to be paid to Non-Executive Directors that has been approved by shareholders at the AGM in November 2008 is $1.6 million per annum.
Components of Non-Executive Director Remuneration
Remuneration for Non-Executive Directors consists of:
| Board Fees as remuneration for Board membership with Chairman responsibilities earning an additional amount. |
| Committee Fees as remuneration for Committee membership with Committee Chairman responsibilities earning an additional amount. |
| Macarthur Coal Shares accrued on a daily basis, purchased on market after the announcement of the half year and full year financial results of the Company. |
Base Fees
Non-Executive Directors fees are determined by the Nomination and Remuneration Committee (NRC) and set by the Board and fall within the aggregate amount approved by the shareholders. Current fees for Directors, which have remained unchanged since 2007 are:
| Chairman $70,000 per annum |
| Non-Executive Director $45,000 per annum |
Committee Fees
Committee fees are determined by the NRC and set by the Board and also fall within the aggregate amount approved by shareholders. Increases in Committee Fees for the Chairmen of the Audit and Risk Management Committee, the Nomination and Remuneration Committee and the Special Projects Committee were approved in 2010.
F-74
Board committee
Chairman $ per annum |
Member $ per annum |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Audit and Risk Management Committee |
30,000 | 15,000 | 15,000 | 10,000 | ||||||||||||
Nomination and Remuneration Committee |
20,000 | 10,000 | 10,000 | 10,000 | ||||||||||||
Special Projects |
20,000 | 10,000 | 10,000 | 10,000 | ||||||||||||
Due Diligence Committee |
| 10,000 | | N/A |
Macarthur Coal Shares
Non-Executive Directors are also entitled to receive 10,000 (2010: 10,000) shares per annum and the Chairman 15,000 (2010: nil) shares per annum to strengthen alignment with shareholder interests pursuant to the Directors Share Plan. A Directors entitlement to shares accrues on a daily basis and will generally be allocated to a Director after the announcement of the half year results and the full year results. The shares are purchased on market in appropriate trading windows. Shares purchased are not subject to disposal restrictions. If a Director ceases to be a Director of the Company and has an outstanding entitlement to be allocated shares, either the shares will be acquired in the Directors name or the Director will receive a cash equivalent for the value of the shares, at the Boards discretion. Directors receive their entitlement to shares irrespective of Company performance.
Superannuation
Statutory superannuation contributions are made on behalf of Non-Executive Directors in accordance with the law. Fees set out above include any superannuation payable.
Other Fees/Benefits
The Companys Constitution permits:
| Additional fees to be paid to Non-Executive Directors for additional services. Since 1 December 2010 Terry OReilly has been paid additional fees of $30,000 per annum as a nominee of the Company on the Board of Middlemount Coal Pty Ltd. (2010: $nil). |
| Non-Executive Directors to be reimbursed for all business related expenses including travel in the discharge of their duties. Permitted reimbursements were made during the year. |
| In addition: |
| non-cash benefits including superannuation contributions above the statutory amount are able to be salary sacrificed. There are no retirement benefits in place and the Company does not make sign-on payments to new Directors |
| the Company contributed to professional development activities for some Non-Executive Directors during the year |
| there were no performance-based remuneration amounts paid or options granted to Non-Executive Directors during the year. |
Principles of Executive Remuneration (Including Managing Director Remuneration)
Macarthur Coals Board approved Remuneration Policy is designed to facilitate the alignment of individual performance with the Companys goals and the creation of shareholder value. The key elements of the Remuneration Policy include:
| remuneration practices that are fairly and responsibly structured to attract and retain talented team members and to motivate them to achieve both near term and longer term success |
| reward arrangements that comprise appropriate performance linked incentives based on financial and non-financial performance measures that are relevant to the business and connected to the individuals actual accountabilities |
| remuneration outcomes that are competitively positioned against the appropriate market, taking into consideration the individuals role, Corporate, group and individual performance and relevant market conditions. |
F-75
Components of Executive Remuneration
Executive remuneration for the 2011 and 2010 financial years had two key components:
Remuneration component |
Elements |
Details | ||
Fixed Annual Remuneration (Base Salary Plus Statutory Superannuation) |
Annual base salary is generally reviewed at the end of each financial year and applicable from 1 July each year | Annual base salary can be structured as a cash benefit and/or non-cash benefit including salary sacrifice packaging and the fringe benefits tax applicable to the packaging. | ||
Statutory superannuation contributions |
Statutory % of base salary. | |||
| ||||
Performance Linked Remuneration |
Short Term Incentive (STI) | Assessment based on annual performance at a corporate and individual level. | ||
Long Term Incentive (LTI) |
Assessment based on creation of shareholder value over a three year performance period. The performance period for performance rights forming part of executives remuneration in 2009 concluded on 30 June 2011 and shares under the LTI Plan for the 2009 performance rights will be purchased on market in the trading window after the release of the 2011 results (2010: The performance period for the first tranche of performance rights awarded to Executives ended 30 June 2010 and shares under LTI Plan for the 2008 performance rights will be purchased on market in the trading window after the release of the 2010 results). Refer below for further information on the performance hurdles and the awards to be made under the LTI Plan in the 2011 financial year. |
The fixed and performance linked components of remuneration varies for each Executive. The proportions of remuneration for each of the Executives that are linked to performance and those that are fixed are summarised in the table below.
Macarthur Coal Limited
Fixed remuneration | Performance linked remuneration | |||||||||||||||||||||||||||||||||||
Base salary + superannuation | Short term incentive | Long term incentive | ||||||||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||||||||
2011 % |
2010 % |
2011 % |
2011 % |
2010 % |
2011 % |
2011 % |
2010 % |
2011 % |
||||||||||||||||||||||||||||
Senior Executives |
||||||||||||||||||||||||||||||||||||
Nicole Hollows |
47.6 | % | 47.6 | % | 47.6 | % | 28.6 | % | 28.6 | % | 28.6 | % | 23.8 | % | 23.8 | % | 23.8 | % | ||||||||||||||||||
Gary Lee |
62.4 | % | 62.4 | % | 62.4 | % | 18.8 | % | 18.8 | % | 18.8 | % | 18.8 | % | 18.8 | % | 18.8 | % | ||||||||||||||||||
Lisa Dalton |
62.4 | % | 62.4 | % | 62.4 | % | 18.8 | % | 18.8 | % | 18.8 | % | 18.8 | % | 18.8 | % | 18.8 | % | ||||||||||||||||||
Graham Yerbury |
62.4 | % | | | 18.8 | % | | | 18.8 | % | | | ||||||||||||||||||||||||
Rodney Dyer |
52.6 | % | | | 26.3 | % | | | 21.1 | % | | | ||||||||||||||||||||||||
Scott Croger |
71.4 | % | | | 14.3 | % | | | 14.3 | % | | | ||||||||||||||||||||||||
Allan Fidock |
71.4 | % | | | 14.3 | % | | | 14.3 | % | | | ||||||||||||||||||||||||
Peter Kane |
| 55.6 | % | 55.6 | % | | 22.2 | % | 22.2 | % | | 22.2 | % | 22.2 | % | |||||||||||||||||||||
Michael Gray |
| 71.4 | % | 66.7 | % | | 14.3 | % | 33.3 | % | | 14.3 | % | 0 | % |
F-76
The information provided for 2010 allows comparisons between the 2010 financial year and what was put in place for the 2011 financial year. When STI Targets (that are performance linked over a one-year period) and LTI (performance targets over a three-year period) are met, then the amount of performance linked remuneration increases reflecting the Boards objective to reward arrangements that comprise appropriate performance linked incentives based on financial and non-financial performance measures that are relevant to the business and connected to the individuals actual accountabilities.
Total Fixed Remuneration (TFR)
The Total Fixed Remuneration for each Executive and employee is reviewed annually based on the individuals performance and effectiveness, the Groups circumstances and the indicative market levels of fixed and total reward for comparable roles from salary survey information provided by remuneration consultants. Salary increases for Executives are approved by the Nomination and Remuneration Committee. Any salary increase for the CEO requires approval of the Non-Executive Directors.
In 2011, all staff including Executives underwent a review of their performance and where appropriate, and in accordance with the principles in the Remuneration Policy, increases in total fixed remuneration were made to be effective from 1 July 2011.
At the commencement of the 2010 financial year, as a result of the economic conditions, the Board determined that salaries for Senior Executives would remain unchanged unless there was a role change, an anomalous situation or a contractual obligation.
In March 2010:
| Nicole Hollows received a remuneration review after the Board commissioned an external benchmark and review by Mercer of the CEOs remuneration. |
| Lisa Dalton received a remuneration review as a result of taking on an expanded role within the organisation and following receipt of the Mercer remuneration benchmark report. |
Most employees received a remuneration review in December 2009 driven by a tightening of the job market because of the economic recovery.
At the end of the 2010 financial year, all staff, including Executives underwent a review of their remuneration for the 2011 financial year in accordance with the principles in the Remuneration Policy.
Short Term Incentive Plan (STIP)
The goal of the Short Term Incentive Plan is to focus attention on short term strategic and financial objectives. The quantum of the award varies based on the years accomplishments, corporate, group and individual performance as well as a persons position and level of responsibility.
The STIP provides employees with an opportunity to earn an amount that is additional to their TFR. The additional amount is performance linked and underpinned by the employees role and responsibility.
For the 2010 financial year, the Group enhanced its STIP to better align the incentive to overall Group performance so that if the Group performed well, all employees could receive part of the reward. A key component of the STIP was the establishment of Corporate Short Term Incentive (STI) Targets aligning the STIP payments to the achievement of Corporate, Group and individual performance measures, a move away from the previous policy where STI Targets were centred primarily around individual performance.
Corporate, Group and individual performance targets were set for each executive and linked to corporate strategy and each Executives area of responsibility. The targets and potential reward outcomes are designed to encourage Executives to strive for exceptional performance while demonstrating leadership in the Groups values and culture. The Board retains an overall discretion on whether to pay all, a portion of, or no STI.
A summary of the STIP in operation for the 2011 and 2010 financial years was as follows:
Corporate Short Term Incentive Targets
Corporate STI Targets were developed and applied across the business. The corporate STIs for all employees were linked to the critical areas of safety, profit and cost. Executives and Senior Leaders in the business had additional Corporate STIs applicable to people and culture.
F-77
Group/Individual Short Term Incentive Targets
Specific group/individual STI Targets were also put in place to ensure the Group continued to drive superior individual performance relative to a persons position and level of responsibility. Each individual had between two to four STI Targets in addition to the Corporate STI Targets.
Mine Site Short Term Incentive Targets
To ensure the workforce and site staff were working towards the achievement of the budgeted production targets safely, a group STI Target structure for the individual portion of the STIs for the minesite was implemented. The group STI structure included safety, environmental, profit and production targets. This approach aligned achievement of minesite targets and was supported by the inter-dependence of departments on the site i.e. Production/Maintenance/Technical Services.
Maximum STI Entitlement
Short Term Incentive entitlements as a maximum percentage of total fixed remuneration for 2011 and 2010 were:
POSITION |
2011 | 2010 | ||||||
CEO and Managing Director |
60 | % | 60 | % | ||||
Senior Executives |
20-50 | % | 20-40 | % | ||||
Other executives and senior leaders |
10-20 | % | 10-20 | % | ||||
Employees |
10 | % | 10 | % |
Retention Bonuses
Discretionary Bonuses awarded by the Board in 2010
During 2010 the Company negotiated and entered into agreements with Noble Group Limited, Gloucester Coal Limited and the CITIC Group to acquire:
| 100% of Gloucester Coal Ltd (Gloucester) through an off-market takeover offer |
| Noble Group Limiteds (Noble) interest in the Middlemount JV, taking Macarthurs ownership to 100% including all marketing rights for Middlemount product |
| CITIC Resources Holdings Limiteds (CITIC Resources) direct interests in the Coppabella and Moorvale Joint Venture and intention to terminate marketing rights to China and India |
A small project team was established within Macarthur Coal to oversee these transactions, including the negotiation and finalisation of agreements for these transactions. In recognition of the efforts of this project team, including additional hours worked, the Board awarded a discretionary bonus of up to 10% of Total Fixed Remuneration to members of the project team including the CEO and Company Secretary. The transactions subsequently were not consummated and were impacted by change of control proposals received by the Company prior to completion.
Retention Plan established by the Board
In 2010, a retention plan was established by the Board following a period of intense corporate activity. The retention plan was put in place to mitigate the real risk of a talent exodus from the business caused by the period of corporate activity which included four change of control proposals from Peabody Energy Corporation and two change of control proposals from New Hope Corporation. The retention plan provided a financial incentive for staff to stay and work towards continuation of business at Macarthur Coal. For KMP, the retention plan consisted of a cash incentive linked to TFR for remaining in the employment of the Group for a 12 month period ending 31 March 2011. The retention plan met its objectives with a voluntary retention rate for the 2011 financial year of 90%.
F-78
Analysis of Bonuses Included in Remuneration
30 June 2011
Details of the retention bonuses and the vesting profile of the STI cash bonuses awarded as remuneration to each of the relevant group executives are detailed below.
Executives |
Retention bonus | Short term incentive bonus | ||||||||||||||
Included
in remuneration1 $ |
Included
in remuneration2 $ |
STI vested
in year % |
STI forfeited
in year3 % |
|||||||||||||
Nicole Hollows |
343,750 | 431,640 | 65 | % | 35 | % | ||||||||||
Gary Lee |
121,875 | 75,143 | 58 | % | 42 | % | ||||||||||
Lisa Dalton |
128,125 | 76,380 | 67 | % | 33 | % | ||||||||||
Graham Yerbury |
| 51,681 | 53 | % | 47 | % | ||||||||||
Rodney Dyer |
| 79,225 | 59 | % | 41 | % | ||||||||||
Scott Croger |
56,250 | 43,690 | 64 | % | 36 | % | ||||||||||
Allan Fidock4 |
93,750 | 38,400 | 48 | % | 52 | % | ||||||||||
Michael Gray5 |
50,285 | 14,398 | 65 | % | 35 | % |
1 | Amounts relate to balance of Retention Plan expense to be recognised in the 2011 financial year being approved in the prior financial year. For recognition purposes the expense relating to the Retention Plan has been recognised over the retention period of 1 April 2010 to 31 March 2011 however full retention payments were made during the 2011 financial year. |
2 | Amounts included in remuneration for the financial year represent that amount that vested in the financial year based on achievement of STI Targets. No amounts vest in future years in respect of the bonus scheme for the 2011 financial year. |
3 | The amounts forfeited are due to some STI targets not being met in relation to the current financial year. |
4 | While KMP from 1 February 2011, bonuses have been disclosed for the full 12 month period given Mr Fidock is one of the five highest paid earners of the Group, as required to be disclosed under the Corporations Act 2001. |
5 | Bonus awarded on pro-rata basis for the period Mr Gray was KMP subject to performance measures being met. |
30 June 2010
Details of the vesting profile of the STI cash bonuses awarded as remuneration and the Discretionary Bonuses awarded by the Board to each of the relevant Group Executives as detailed below.
Short Term Incentive and Discretionary Bonuses 2010 |
||||||||||||
Executives |
Included
in remuneration1,5 $ |
STI vested
in year % |
STI forfeited
in year2 % |
|||||||||
Nicole Hollows |
774,450 | 3 | 77 | 23 | ||||||||
Peter Kane |
213,075 | 72 | 28 | |||||||||
Gary Lee |
164,385 | 78 | 22 | |||||||||
Lisa Dalton |
170,080 | 4 | 80 | 20 | ||||||||
Michael Gray |
104,111 | 68 | 32 |
1 | Amounts included in remuneration in the financial year represent that amount that vested in the financial year based on achievement of STI Targets. No amounts vested in future years in respect of the bonus scheme for the 2010 financial year. |
2 | The amounts forfeited are due to some STI Targets not being met in relation to the current financial year. |
3 | Includes discretionary bonus awarded by the Board of $60,000 (10% of TFR) in January 2010. |
4 | Includes discretionary bonus awarded by the Board of $29,500 (10% of TFR) in January 2010. |
5 | Amounts include pro-rata allocation of Retention Plan amounts to 30 June 2010. |
F-79
Summary of Long Term Incentive Plan (LTIP)
LTIP Objective
The LTIP was established in the 2009 financial year. The LTIP is an equity-based incentive designed to provide Executives and other nominated senior leaders (participants) with the incentive to deliver long-term growth in shareholder value. The LTIP grant to each participant is determined based on the strategic importance of the participant in creating shareholder value.
Participants
The CEO, Senior Executives and other Senior Leaders nominated by the Board, are eligible to participate in the LTIP. There were nine (2010: nine) employees remaining as active participants in the plan at year end.
Performance Rights
Since the establishment of the plan, eligible participants receive performance rights on an annual basis, subject to the approval of the NRC. However, there were no rights issued under the plan during the 30 June 2010 financial year pending a restructure of the plan. The percentages of TFR entitlement for participants under the LTIP is set out in the following table:
Long Term Incentive Plan Grant (Maximum % Of TFR) |
||||||||
Position |
2011 | 2010 | ||||||
CEO |
50 | % | 50 | % | ||||
Senior Executives |
20-40 | % | 20-40 | % | ||||
Senior Leaders |
10-20 | % | 10-20 | % |
The number of performance rights granted to participants is equivalent to the relevant percentage of TFR determined by the NRC divided by the Volume Weighted Average Share Price of Macarthur Coal shares in a period determined by the NRC (2010: generally the first five trading days of July in the year that performance rights were granted).
Performance rights are granted at no cost to the participants. Each performance right granted entitles a participant to one ordinary share in the Company, subject to satisfaction of performance conditions set by the Board and NRC in respect of the grant, over a performance period of three financial years.
Performance Conditions
The extent to which performance rights will vest, and shares are allocated to participants, is subject to performance conditions based on the following three measures of Company performance (over the relevant three year performance period):
Proportion of performance rights to which performance measure applies |
Performance measure | |
30% |
Growth in the Companys Earnings Per Share (EPS) | |
50% | Total Shareholder Return (TSR) relative to companies in the ASX S&P 300 Accumulation Index | |
20% | Return on Invested Capital (ROIC) |
F-80
Why These Targets Were Selected
The Board selected the performance measures on the basis that they provide:
| alignment between comparative shareholder return and reward for participants and a relative, external, market based performance measure against similar comparator companies (TSR) |
| a relevant indicator of measuring increases in shareholder value (EPS) |
| suitable line of sight to encourage performance by the participants. |
Earnings Per Share
Thirty percent of performance rights granted to a participant will vest based on growth in the Companys EPS over the three-year performance period. For any performance rights subject to the EPS hurdle to vest, the Companys EPS growth must be at least equal to the base target set by the NRC. For all the performance rights subject to the EPS hurdle to vest, the Companys EPS growth must be at least equal to the stretch target set by the NRC. For the performance rights granted in respect of the current plan, the base and stretch targets for EPS growth and the related vesting schedule, are as follows:
Average annual growth in EPS over three year performance period |
Percentage of performance rights subject to EPS hurdle that vest | |
EPS growth below base target of 10% per annum |
Nil | |
EPS growth at least equal to base target of 10% per annum but below stretch target of 15% per annum |
50% | |
EPS growth at least equal to stretch target of 15% per annum |
100% |
Total Shareholder Return
Fifty percent of performance rights granted to a participant will vest based on the Companys TSR, that is, share price growth and reinvested dividends relative to the TSRs of companies in the ASX S&P 300 Accumulation Index (as at the start of the performance period) over the three year performance period. For the performance rights granted in respect of the current plan, the TSR performance condition applies as follows:
Macarthur Coal TSR Performance Over Three Year Performance Period Relative To Constituents Of ASX S&P 300 Accumulation Index |
Percentage Of Performance Rights | |
Less than the 50th percentile |
Nil | |
At the 50th percentile |
50% | |
Greater than the 50th percentile up to the 75th percentile |
50% plus 2% for every one percentile increase in Macarthur Coals relative position | |
At or greater than the 75th percentile |
100% |
Return on Invested Capital (ROIC)
Twenty percent of the performance rights granted to a participant will vest based on the Companys Return on Invested Capital (ROIC) performance over the three year performance period.
For any performance rights subject to the ROIC hurdle to vest, the Companys average ROIC must be at least equal to the base target set by the NRC. For all the performance rights subject to the ROIC hurdle to vest, the Companys average ROIC must be at least equal to the stretch target set by the NRC.
F-81
The performance rights granted in respect of the current plan, the base and stretch targets for ROIC, and the related vesting schedule, are as follows:
Average annual ROIC achieved over three year performance period |
Percentage of performance rights subject to ROIC hurdle that vest | |
ROIC below base target of 12% |
Nil | |
ROIC at least equal to base target of 12% but below stretch target of 15% |
50% | |
ROIC at least equal to stretch target of 15% |
100% |
Assessment Of Performance
For 2011, assessment of performance is made by the Board at the end of each performance period. For the performance rights granted in respect of the 2009 financial year, the Board assessed performance against the TSR, EPS growth and ROIC performance hurdles.
For 2010, assessment of performance is made by the Board following finalisation of financial statements for the last financial year of the relevant three year performance period. For the performance rights granted in respect of the 2008 financial year, the Board assessed performance against the TSR, EPS growth and ROIC performance hurdles following finalisation of the financial statements for the year ending 30 June 2010.
Shares Acquired Under LTIP
Shares to be allocated to participants under the LTIP (to the extent that performance rights vest) are acquired on market, avoiding dilution of shareholder equity. The shares are placed in trust for participants until such time as the participants request to have the shares transferred from the trust. No consideration is payable by the participants to be allocated the shares on vesting of rights or on transfer of shares from the trust. Shares carry full dividend and voting rights upon allocation to participants.
Change of Control
The Board has discretion to determine that some or all of the performance rights granted to participants that have not vested will vest in the event of a change of control of the Company.
Cessation of Employment
If a nominated participants employment ceases, before performance rights have vested, the participant will normally forfeit the performance rights, unless the participant dies or ceases employment in special circumstances e.g. as a result of redundancy or because the participant has become totally and permanently disabled. In addition to these guidelines, the Board has discretion to determine if other circumstances exist that result in the performance rights not being forfeited. In such cases, the extent to which any unvested performance rights will vest will be determined at the discretion of the Board.
Summary of Performance Rights Granted
The terms and conditions of each performance right affecting remuneration in the current or a future reporting period are as follows:
30 June 2011
Grant date |
Tranche | Vesting date |
Fair value of grant |
Performance achieved | ||||
14 October 2008 |
FY09 | 30 June 2011 | $3.55 | 50%1 | ||||
29 June 2009 |
FY10 | 30 June 2012 | $5.44 | To be determined | ||||
30 June 2011 |
FY11 | 30 June 2013 | $7.31 | To be determined |
1 | Relates to the average percentage of performance rights vested across the three performance hurdles. Refer below for detailed assessment of the outcome of each LTIP performance hurdle. |
30 June 2010
Grant date |
Tranche | Vesting date |
Fair value of grant |
Performance achieved | ||||
14 October 2008 |
FY08 | 30 June 2010 | $5.31 | 85%1 | ||||
14 October 2008 |
FY09 | 30 June 2011 | $3.55 | To be determined | ||||
29 June 2009 |
FY10 | 30 June 2012 | $5.44 | To be determined |
1 | Relates to the average percentage of performance rights vested across the three performance hurdles. Refer below for detailed assessment of the outcome of each LTIP performance hurdle. |
F-82
Outcome of Assessment of LTIP Performance Hurdles for Performance Rights
Performance rights granted under the LTIP relating to the 2009 financial year (2010: 2008 financial year) had a vesting date of 30 June 2011 (2010: 30 June 2010). Following is an assessment of the performance hurdles of EPS, ROIC and TSR for the performance period 1 July 2008 to 30 June 2011 (2010: 1 July 2007 to 30 June 2010):
Earnings Per Share
The percentage of the 2009 Performance Rights (2010: 2008 Performance Rights) linked to the EPS hurdle subject to vest is determined by the growth in EPS from the financial year immediately prior to the start of the Performance Period (base year) to the final financial year of the Performance Period, measured against specified EPS targets.
As the EPS for the 2008 financial year (2010: 2007 financial year) (the base year) was 36.6 (2010: 35.5) cents per share, the minimum EPS required for the 2011 financial year (2010: 2010 financial year) to each respective base and stretch target is as follows:
Target |
Annual EPS growth |
Percentage of performance rights subject to vest |
Minimum EPS at | |||||
2011 |
2010 | |||||||
Base target |
Equal to or greater than 10% but below stretch target of 15% | 50% | 48.7 cents | 47.3 cents | ||||
Stretch target |
Equal to or greater than 15% | 100% | 55.7 cents | 54.0 cents |
The average annual growth rate along with the percentage of rights vested, based on 2011 and 2010 financial years results is shown in the tables below:
30 June 2011
Vesting date |
Base year |
2011 NPAT |
2011 weighted Average no. of shares on issue1 |
EPS at 30 June 2011 |
Average |
% of Rights | ||||||
30 June 2011 |
36.6 cents | $241,390,000 | 291,686,234 | 82.8 cents | 31.25% | 100% |
1 | EPS is calculated on weighted average number of shares on issue during the year |
30 June 2010
Vesting date |
Base year |
2010 NPAT |
2010 weighted Average no. of shares on issue |
EPS at 30 June 20101 |
Average |
% of Rights | ||||||
30 June 2010 |
35.5 cents | $125,064,000 | 253,680,737 | 49.3 cents | 11.6% | 50% |
1 | EPS is calculated on weighted average number of shares on issue during the year |
Return on Invested Capital (ROIC)
For the 2009 Performance Rights (2010: 2008 Performance Rights), the ROIC over the three-year vesting period along with the calculated annual average over the period is assessed. The base target is an average annual ROIC of 12% and the stretch target is an average annual ROIC of 15%.
For this purpose, ROIC is calculated using the following formula:
ROIC | = | Earnings before interest and tax | ||||
Interest bearing debt + Shareholders equity |
F-83
Assessment of ROIC is summarised in the tables below.
30 June 2011
The outcome of 17.2% is above the stretch target of 15% and therefore 100% of the rights attached to the ROIC hurdle vested for the 2009 Performance Rights.
Performance Period |
EBIT $000 |
Debt + equity $000 |
Actual ROIC at 30 June |
% of rights subject to vest |
||||||||||||
2009 |
247,836 | 1,116,898 | 22.2 | % | ||||||||||||
2010 |
170,841 | 1,228,017 | 13.9 | % | ||||||||||||
2011 |
309,022 | 1,878,746 | 16.4 | % | ||||||||||||
Annualised average |
242,566 | 1,407,904 | 17.2 | % | 100 | % |
30 June 2010
The estimated outcome of 17.3% is above the stretch target of 15% and therefore 100% of the rights attached to the ROIC hurdle vested for the 2008 Performance Rights.
Vesting Period |
EBIT $000 |
Debt + Equity $000 |
Actual ROIC at 30 June |
% of Rights subject to vest |
||||||||||||
2008 |
114,006 | 738,991 | 15.4 | % | ||||||||||||
2009 |
247,836 | 1,116,898 | 22.2 | % | ||||||||||||
2010 |
170,841 | 1,228,017 | 13.9 | % | ||||||||||||
Annualised Average |
177,561 | 1,027,969 | 17.3 | % | 100 | % |
Total Shareholder Return (TSR)
For the 2009 Performance Rights (2010: 2008 Performance Rights), TSR was calculated by an independent third party comparing Macarthur Coals TSR performance against a comparator group listed in the S&P ASX 300 Index as at the start of the Performance Period (1 July 2008) (2010: 1 July 2007). The comparator group comprised 295 (2010: 295) companies.
The companies in the comparator group were ranked by their TSR performance:
| 50% of the relative TSR portion of the 2008 Performance Rights were to vest if Macarthur Coal ranked at the median of the peer group |
| 100% were to vest if Macarthur Coal ranked at the upper quartile or above of the peer group |
| In the event that the TSR was between the median and the upper quartile of the comparator companies, the level of vesting was to be 50% plus 2% for every one percentile increase in Macarthur Coals relative position. |
In the period 1 July 2008 to 30 June 2011, Macarthur Coal achieved a TSR of -40.707% and ranked at the 40th percentile. The negative TSR during the three-year period was, in part, the result of sustained impacts of the global financial crisis on global equity markets. In the case of Macarthur Coal, the reduction in TSR was accentuated as the Company was subject to takeover speculation during the first half of 2008. Based on the percentile ranking, none of the TSR portion of the 2009 Performance Rights vested on 30 June 2011.
In the period 1 July 2007 to 30 June 2010, Macarthur Coal achieved a TSR of 93.7% and ranked at the 98.4th percentile. Based on the percentile ranking, 100% of the TSR portion of the 2008 Performance Rights vested on 30 June 2010.
F-84
Vesting Profiles of Performance Rights
A summary of vesting profiles of the performance rights granted as remuneration to each of the key management personnel of the Group are detailed below:
30 June 2011 | Rights granted | Vested | Forfeited1 | Value of
rights forfeited2 |
||||||||||||||||||||||||
No. | Tranche | No. | % | No. | % | $ | ||||||||||||||||||||||
Key Management Personnel |
||||||||||||||||||||||||||||
Nicole Hollows |
|
FY09 FY10 FY11 |
|
|
19,218 47,543 45,342 |
|
|
9,609 |
|
|
50 |
|
|
9,609 |
|
|
50 |
|
|
105,219 |
| |||||||
Gary Lee |
|
FY09 FY10 FY11 |
|
|
7,495 18,542 10,635 |
|
|
3,748 |
|
|
50 |
|
|
3,748 |
|
|
50 |
|
|
41,041 |
| |||||||
Lisa Dalton |
|
FY09 FY10 FY11 |
|
|
3,997 13,074 9,398 |
|
|
1,999 |
|
|
50 |
|
|
1,999 |
|
|
50 |
|
|
21,889 |
| |||||||
Graham Yerbury |
FY11 | 7,997 | | | | | | |||||||||||||||||||||
Rod Dyer |
FY11 | 8,862 | | | | | | |||||||||||||||||||||
Scott Croger |
FY11 | 4,946 | | | | | | |||||||||||||||||||||
Allan Fidock3 |
FY11 | 2,473 | | | | | | |||||||||||||||||||||
Former Executives |
||||||||||||||||||||||||||||
Peter Kane4 |
|
FY09 FY10 |
|
|
11,531 28,526 |
|
|
|
|
|
|
|
|
11,531 28,526 |
|
|
100 100 |
|
|
142,523 352,581 |
| |||||||
Michael Gray5 |
|
FY09 FY10 FY11 |
|
|
3,844 9,509 1,217 |
|
|
1,922 |
|
|
50 |
|
|
1,922 |
|
|
50 |
|
|
21,046 |
| |||||||
Stuart Hatton6 |
|
FY09 FY10 |
|
|
6,558 18,542 |
|
|
|
|
|
|
|
|
6,558 18,542 |
|
|
100 100 |
|
|
56,333 159,276 |
|
1 | The number and % forfeited in the year represents the reduction from the maximum number of rights available to vest due to performance criteria not being achieved or where an Executive has resigned and therefore forfeited the rights. |
2 | Value of rights forfeited are based on the number of rights forfeited at the closing share price on 30 June 2011. |
3 | Allan Fidock was appointed to Executive General Manager Operations on 1 February 2011 and was therefore considered to be one of the key management personnel from that date. Given that Mr Fidock was one of the top five earners in the Group (section 300A(1)(c) of the Corporations Act 2001) for the 2011 financial year, remuneration has been disclosed for the full 12 months. |
4 | Peter Kane resigned effective 18 February 2011. The value of rights forfeited is based on the closing share price on 18 February 2011. |
5 | Michael Gray was appointed to the position of CEO of Middlemount Coal Pty Ltd on 15 September 2010 and was no longer a key management personnel of the Macarthur Coal Group from that date. Mr Gray was awarded performance rights for the 2011 financial year based on the period he was a key management personnel of the Group. |
6 | Stuart Hatton resigned effective 30 October 2009. The value of rights forfeited is based on the closing share price on 30 October 2009. |
F-85
30 June 2010 | Rights granted | Vested | Forfeited1 | Value of
rights forfeited2 |
||||||||||||||||||||||||
No. | Tranche | No. | % | No. | % | $ | ||||||||||||||||||||||
Key Management Personnel |
||||||||||||||||||||||||||||
Nicole Hollows |
|
27,548 |
|
|
FY08 |
|
23,416 | |
85 |
|
4,132 | |
15 |
|
50,080 | |||||||||||||
|
19,218 |
|
|
FY09 |
|
| | | | | ||||||||||||||||||
|
47,543 |
|
|
FY10 |
|
| | | | | ||||||||||||||||||
Peter Kane |
|
9,297 |
|
FY08 | 7,902 | 85 | 1,395 | 15 | 16,907 | |||||||||||||||||||
|
11,531 |
|
|
FY09 |
|
| | | | | ||||||||||||||||||
|
28,526 |
|
|
FY10 |
|
| | | | | ||||||||||||||||||
Gary Lee |
|
10,468 |
|
|
FY08 |
|
8,898 | 85 | 1,570 | 15 | 19,028 | |||||||||||||||||
|
7,495 |
|
|
FY09 |
|
| | | | | ||||||||||||||||||
|
18,542 |
|
|
FY10 |
|
| | | | | ||||||||||||||||||
Lisa Dalton |
3,361 | FY08 | 2,857 | 85 | 504 | 15 | 6,108 | |||||||||||||||||||||
|
3,997 |
|
|
FY09 |
|
| | | | | ||||||||||||||||||
|
13,074 |
|
|
FY10 |
|
| | | | | ||||||||||||||||||
Michael Gray |
7,438 | FY08 | 6,322 | 85 | 1,116 | 15 | 13,526 | |||||||||||||||||||||
|
3,844 |
|
|
FY09 |
|
| | | | | ||||||||||||||||||
|
9,509 |
|
|
FY10 |
|
| | | | | ||||||||||||||||||
Former Executives |
||||||||||||||||||||||||||||
Stuart Hatton3 |
6,558 | |
FY09 |
|
| | 6,558 | 100 | 56,333 | |||||||||||||||||||
|
18,542 |
|
|
FY10 |
|
| | 18,542 | 100 | 159,276 | ||||||||||||||||||
Shane Stephan4 |
10,468 | |
FY08 |
|
| | |
10,468 |
|
|
100 |
|
|
93,165 |
| |||||||||||||
|
7,495 |
|
|
FY09 |
|
| | 7,495 | 100 | 66,706 |
1 | The number and % forfeited in the year represents the reduction from the maximum number of rights available to vest due to performance criteria not being achieved or where an Executive has resigned and therefore forfeited the rights. |
2 | Value of rights forfeited are based on the number of rights forfeited at the closing share price on 30 June 2010. |
3 | Stuart Hatton resigned effective 30 October 2009. The value of rights forfeited is based on the closing share price on 30 October 2009. |
4 | Shane Stephan resigned effective 21 August 2009. The value of rights forfeited are based on the closing share price on 21 August 2009. |
Individual Directors and Executives compensation disclosures
No Director has entered into a material contract with the Group since the end of the previous financial year and there were no material contracts involving Directors interests existing at the reporting date.
CEO and executive employment contracts
The Group has entered into employment contracts with each executive. Each contract provides for participation in the STIP and LTIP, subject to the Boards discretion and has an open term, subject to rights of termination given to the employee and the Group. A summary of the key provisions of the employment contracts for the former CEO and senior executives is set out in the following tables:
F-86
30 June 2011
NOTICE TO BE GIVEN BY EXECUTIVE |
NOTICE TO BE GIVEN BY GROUP1 |
MAXIMUM TERMINATION PAYMENT2 |
OTHER PAYMENTS3 |
|||||||||||||
Nicole Hollows |
3 months | 12 months |
|
12 months (termination) 24 months (redundancy) |
|
No | ||||||||||
Gary Lee |
3 months | 3 months | 12 months (redundancy) | No | ||||||||||||
Lisa Dalton |
3 months | 3 months | 12 months (redundancy) | No | ||||||||||||
Graham Yerbury |
3 months | 3 months | 12 months (redundancy) | No | ||||||||||||
Rodney Dyer |
3 months | 3 months | 12 months (redundancy) | No | ||||||||||||
Scott Croger |
3 months | 3 months | 12 months (redundancy) | No | ||||||||||||
Allan Fidock |
2 months | 3 months | 12 months (redundancy) | No |
1 | Payments may be made in lieu of notice period; Executives can also be terminated without notice for gross misconduct; The Executives are also entitled to receive, on termination of employment, their statutory entitlements of accrued annual and long-service leave, together with any superannuation benefits. |
2 | The CEOs contract of employment specifies a 12-month termination payment and in the event that the CEO is made redundant, an entitlement to a 12-month redundancy payment in addition to the 12-month termination payment (total 24-month redundancy payment) as approved by Shareholders in 2010. Executives (other than the CEO) do not have a contractual right to a termination payment above their notice period except in the case of redundancy. Should an executive (other than the CEO) become redundant, they are entitled to a severance payment equivalent to three weeks pay pro-rata for each year of continuous service provided that the severance payment will be a minimum of 26-weeks pay and a maximum of 52-weeks pay. Note that in all contracts, the Group retains the right to terminate the employment contract without notice for gross misconduct. |
3 | Other payments include housing allowances, motor vehicle allowances and relocation allowances. |
30 June 2010
NOTICE TO BE GIVEN BY EXECUTIVE |
NOTICE TO BE GIVEN BY GROUP1 |
MAXIMUM TERMINATION PAYMENT2 |
OTHER PAYMENTS3 |
|||||||||||||
Nicole Hollows |
3 months | 12 months |
|
12 months (termination) 24 months (redundancy) |
|
No | ||||||||||
Peter Kane |
3 months | 3 months | 12 months (redundancy) | No | ||||||||||||
Gary Lee |
3 months | 3 months | 12 months (redundancy) | No | ||||||||||||
Lisa Dalton |
3 months | 3 months | 12 months (redundancy) | No | ||||||||||||
Michael Gray |
3 months | 3 months | 12 months (redundancy) | No |
1 | Payments may be made in lieu of notice period; Executives can also be terminated without notice for gross misconduct; The Executives are also entitled to receive, on termination of employment, their statutory entitlements of accrued annual and long-service leave, together with any superannuation benefits. |
2 | The CEOs contract of employment specifies a 12-month termination payment and in the event that the CEO is made redundant, an entitlement to a 12-month redundancy payment in addition to the 12-month termination payment (total 24-month redundancy payment) as approved by Shareholders in 2010. Executives (other than the CEO) do not have a contractual right to a termination payment above their notice period except in the case of redundancy. Should an executive (other than the CEO) become redundant, they are entitled to a severance payment equivalent to three weeks pay pro-rata for each year of continuous service provided that the severance payment will be a minimum of 26-weeks pay and a maximum of 52-weeks pay. Note that in all contracts, the Group retains the right to terminate the employment contract without notice for gross misconduct. |
3 | Other payments include housing allowances, motor vehicle allowances and relocation allowances. |
F-87
Equity instruments
Performance rights may be issued pursuant to the Long Term Incentive Plan. Refer Note 24 for further details.
Options and rights over equity instruments
There were no options held by Key Management Personnel at any time during the year (2010: nil). There was no movement during the reporting period in the number of options over ordinary shares in Macarthur Coal Limited held, directly, indirectly or beneficially, by each key management person, including their related parties (2010: nil). No options held by Key Management Personnel are vested but not exercisable at 30 June 2010 or 2011. As at 30 June 2011, a number of performance rights held by Key Management Personnel of the Group vested, but had not been settled. Shares purchased in September 2010 and remain held in trust at 30 June 2011 relating to vested performance rights at 30 June 2010 were 49,395 (2010: nil). Refer to Note 24 Share-based payments Long Term Incentive Plan for further details. In addition, detailed remuneration disclosures are provided above.
Movements in shares
The movement during the year in the number of ordinary shares in Macarthur Coal Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held
at 1 July 2010 |
Acquisitions | Received on exercise of options or rights(4) |
Disposals | Held
at 30 June 2011 |
||||||||||||||||
Directors |
||||||||||||||||||||
Keith De Lacy |
221,740 | 12,500 | (2) | | | 234,240 | ||||||||||||||
Roger Marshall |
171,740 | 10,000 | (3) | | | 181,740 | ||||||||||||||
Peter Forbes |
69,740 | 10,000 | (3) | | | 79,740 | ||||||||||||||
Chen Zeng |
27,500 | 10,000 | (3) | | (7,000 | ) | 30,500 | |||||||||||||
Martin Kriewaldt |
15,680 | 11,323 | (3) | | | 27,003 | ||||||||||||||
Terry OReilly |
247,984 | 17,500 | (3) | | | 265,484 | ||||||||||||||
Nicole Hollows |
14,500 | 440 | 23,416 | | 38,356 | |||||||||||||||
Executives |
||||||||||||||||||||
Gary Lee |
3,682 | | 8,898 | | 12,580 | |||||||||||||||
Lisa Dalton |
| | 2,857 | | 2,857 | |||||||||||||||
Graham Yerbury(1) |
1,000 | 2,872 | | | 3,872 | |||||||||||||||
Rod Dyer(1) |
| | | | | |||||||||||||||
Scott Croger(1) |
| | | | | |||||||||||||||
Allan Fidock(1) |
| 45 | | | 45 | |||||||||||||||
Michael Gray(1) |
4,341 | 902 | 6,322 | | 11,565 | |||||||||||||||
Peter Kane(1) |
14,052 | | 7,902 | | 21,954 |
(1) | Shareholding information for Key Management Personnel who were not Key Management Personnel for the whole year is only for that portion of the year during which they held a key management position. For the purposes of this table, shares held at appointment are assumed to have been held at 1 July and shares held at termination are assumed to be held at 30 June, with any acquisitions or disposals prior to appointment or after termination not shown. |
(2) | Includes 12,500 shares granted as compensation being 5,000 shares relating to the second tranche of shares for the 2010 year and 7,500 shares for the first tranche of shares relating to the 2011 financial year. |
(3) | Includes 10,000 shares granted as compensation being 5,000 shares relating to the second tranche of shares for the 2010 year and 5,000 shares for the first tranche of shares relating to the 2011 financial year. |
(4) | Shares were granted to Key Management Personnel during the course of the year in accordance with the long term incentive plan. The shares relate to vested performance rights and are placed in trust until such time as the employees elect to have the shares transferred out of the trust. There were 49,395 shares purchased by the trust in 2011 (2010: nil). |
Shares are granted to Directors in the current and prior year as application of Directors fees as detailed in Note 3(l).
F-88
The movement during the previous year in the number of ordinary shares in Macarthur Coal Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held
at 1 July 2009 |
Acquisitions | Received on exercise of options or rights |
Disposals | Held
at 30 June 2010 |
||||||||||||||||
Directors |
||||||||||||||||||||
Keith De Lacy |
304,240 | 17,500 | (2) | | 100,000 | 221,740 | ||||||||||||||
Roger Marshall |
154,240 | 17,500 | (2) | | | 171,740 | ||||||||||||||
Peter Forbes |
52,240 | 17,500 | (2) | | | 69,740 | ||||||||||||||
Chen Zeng |
10,000 | 17,500 | (2) | | | 27,500 | ||||||||||||||
Martin Kriewaldt |
1,000 | 14,680 | (3) | | | 15,680 | ||||||||||||||
Terry OReilly |
233,304 | 14,680 | (3) | | | 247,984 | ||||||||||||||
Nicole Hollows |
14,500 | | | | 14,500 | |||||||||||||||
Executives |
||||||||||||||||||||
Peter Kane |
11,552 | 2,500 | | | 14,052 | |||||||||||||||
Gary Lee |
3,682 | | | | 3,682 | |||||||||||||||
Lisa Dalton |
| | | | | |||||||||||||||
Michael Gray(1) |
| 4,341 | | | 4,341 | |||||||||||||||
Shane Stephan(1) |
5,682 | | | | 5,682 | |||||||||||||||
Stuart Hatton(1) |
| | | | |
(1) | Shareholding information for Key Management Personnel who were not Key Management Personnel for the whole year is only for that portion of the year during which they held a key management position. For the purposes of this table, shares held at appointment are assumed to have been held at 1 July and shares held at termination are assumed to be held at 30 June, with any acquisitions or disposals prior to appointment or after termination not shown. |
(2) | Includes 15,000 shares granted as compensation being 10,000 shares relating to the 2009 financial year and 5,000 shares for the first tranche of shares relating to the 2010 financial year. |
(3) | Includes 12,180 shares granted as compensation being 7,180 shares relating to the 2009 financial year and 5,000 shares for the first tranche of shares relating to the 2010 financial year. |
Consequences of performance on shareholders wealth
The various components of the way the Group remunerates Executives and the achievements against specific financial and non-financial performance measures over both the short and long-term are designed to create long-term, sustained shareholder value. When setting targets and determining the quantum of remuneration increases, and the fixed and performance linked remuneration components, the Board has regard to a number of factors, including the indices in the table below, in respect of the current and previous financial years.
For 2011, over the previous four years the annualised return to a shareholder who purchased shares on 1 July 2007 ($6.77/share), was paid the dividends by the Company and sold the shares on 30 June 2011 at $10.95/share (the closing price on 30 June 2011) was 15.4%. During the same period, average key management personnel (KMP) compensation has grown by 4.5% per annum.
For 2010, over the previous 4 years:
| The annualised return to a shareholder who purchased shares on 1 July 2006 ($4.48/share), was paid the dividends by the Company and sold the shares on 30 June 2010 at $12.12/share (the closing price on 30 June 2010) was 31.9% |
| The compound annual growth rate (CAGR) over the period for Directors fees was 28.3% |
| The CAGR for Executive remuneration over the period was a decrease of 7.2% |
| The CAGR for earnings per share over the period was a decrease of 12.3% |
F-89
Returns to shareholders over the entire period had exceeded the CAGR for Directors fees and Executive remuneration.
2007 | 2008 | 2009 | 2010 | 2011 | ||||||||||||||||
Net profit |
$66,544,000 | $72,684,000 | $168,558,000 | $125,064,000 | $241,390,000 | |||||||||||||||
Dividends paid |
$54,340,000 | $19,481,000 | $29,702,000 | $53,410,000 | $121,596,579 | |||||||||||||||
Change in share price |
$2.29 | $10.10 | -$10.27 | $5.52 | -$1.17 | |||||||||||||||
Return on invested capital |
13.3 | % | 10.0 | % | 16.2 | % | 10.7 | % | 12.4 | % | ||||||||||
Earnings per share (diluted) |
35.5 cents | 36.6 cents | 79.3 cents | 49.3 cents | 82.7 cents | |||||||||||||||
KMP remuneration |
$5,625,926 | $4,518,846 | $4,175,631 | $5,861,210 | $6,699,098 |
Non-Key Management Personnel disclosures
Identity of related parties
The Group has related party relationships with its subsidiaries (Note 33), joint ventures (Note 29), jointly controlled entities (Note 30), associated entities (Note 34) and its Key Management Personnel (refer disclosures of Key Management Personnel on preceding pages). The Group also has a related party relationship with CITIC Australia Coal Pty Ltd and other members of the CITIC group of companies (CITIC). The related party relationship arises through CITICs shareholding in Macarthur Coal Limited during the 2011 and 2010 financial years and its representation on the Board of Macarthur Coal Limited during the same periods. After financial year end, CITIC ceased being a shareholder of Macarthur Coal Limited, however is still a party to several joint ventures to which members of the Macarthur Coal Group and other third parties are also members. These joint ventures undertake either exploration activities or operate working coal mines funded by cash calls in the normal course of business. Coal sales (pre-hedging) of $107,854,000 were made to CITIC during the year (2010: $72,073,000). These transactions were on an arms length basis. At year end, there were no outstanding receivables from CITIC (2010: $Nil).
Associates
Macarthur Coal Management Pty Ltd, a controlled entity, charges management fees to Macarthur Coal (C&M Management) Pty Ltd, an associated entity, pursuant to the Management Fee Deed dated 31 August 1998. The management fee paid is equal to 0.5% of the aggregate FOB revenue paid to the Coppabella and Moorvale Joint Venture participants from the sale in aggregate of the first 2 million tonnes of coal from the Coppabella Mine in each financial year for the life of the Deed.
Macarthur Coal Mine Management Pty Ltd, a controlled entity, recharges employee expenses at cost to Macarthur Coal (C&M Management) Pty Ltd, an associated entity, and the Coppabella and Moorvale Joint Venture. The expenses are for work performed by Macarthur Coal Mine Management Pty Ltd staff in relation to the Coppabella and Moorvale mine activities. Expenses totalling $56,163,000 (2010: $44,484,000) were charged to Macarthur Coal (C&M Management) Pty Ltd and Coppabella and Moorvale Joint Venture during the year.
The Company recharges employee and administration expenses at cost to Macarthur Coal (C&M Management) Pty Ltd, an associated entity, and the Coppabella and Moorvale Joint Venture. The expenses are for administration costs and work performed by Company staff in relation to Coppabella and Moorvale mine activities. Expenses totalling $32,728,000 (2010: $24,944,000) were charged to Macarthur Coal (C&M Management) Pty Ltd and the Coppabella and Moorvale Joint Venture during the year.
F-90
Macarthur Coal (C&M Equipment) Pty Ltd, an associated entity, recharges lease expenses, interest and depreciation expenses at cost to Macarthur Coal (C&M Management) Pty Ltd, an associated entity, and the Coppabella and Moorvale Joint Venture. The expenses are associated with mining equipment used in relation to Coppabella and Moorvale mine activities. Expenses totalling $19,133,000 (2010: $19,133,000) were charged to Macarthur Coal (C&M Management) Pty Ltd and the Coppabella and Moorvale Joint Venture during the year. The Group has a 73.3% interest in this joint venture.
The aggregate amounts receivable and payable by the Group from non-Director related parties are shown in Notes 16 and 22.
Jointly controlled entities
Custom Mining Pty Ltd, a controlled entity, makes contributions to Middlemount Coal Pty Ltd for the purposes of funding the activities of the Middlemount Coal project, in line with the shareholders agreement. Contributions totalling $109,682,000 were made during the year (2010: $52,696,000). An additional amount of $180,000 (2010: $906,000) was advanced to Middlemount Coal Pty Ltd by the Company to fund other corporate costs.
The Company has a related entity payable to Monto Coal 2 Pty Ltd of $23,944,000 (2010: $29,518,000), which is payable to cover costs related to the development of stage 1 of the Monto Coal Joint Venture.
38. Parent entity disclosures
As at, and throughout, the financial years ending 30 June 2011 and 2010 the parent company of the Group was Macarthur Coal Limited.
Company | ||||||||
2011 $000 |
2010 $000 |
|||||||
Result of the parent entity |
||||||||
Profit for the period |
137,433 | 125,182 | ||||||
Other comprehensive income |
| | ||||||
|
|
|
|
|||||
Total comprehensive income for the period |
137,433 | 125,182 | ||||||
|
|
|
|
|||||
Financial position of parent entity at year end |
||||||||
Current assets |
461,398 | 424,040 | ||||||
Total assets |
2,036,403 | 1,065,997 | ||||||
Current liabilities |
275,822 | 44,318 | ||||||
Total liabilities |
692,008 | 277,710 | ||||||
|
|
|
|
|||||
Total equity of the parent entity comprising of: |
||||||||
Share capital |
1,253,923 | 713,420 | ||||||
Reserves |
167 | 399 | ||||||
Retained earnings |
90,305 | 74,468 | ||||||
|
|
|
|
|||||
Total Equity |
1,344,395 | 788,287 | ||||||
|
|
|
|
Litigation
Refer to Note 32 for details of litigation faced by the Company.
F-91
Company | ||||||||
2011 $000 |
2010 $000 |
|||||||
Parent Entity Commitments for Operating Leases |
||||||||
Future operating lease rentals not provided for in the financial statements and payable: |
||||||||
Not later than one year |
3,173 | 2,867 | ||||||
Later than one year but not later than five years |
8,680 | 6,601 | ||||||
Later than five years |
| 1,088 | ||||||
|
|
|
|
|||||
11,853 | 10,556 | |||||||
|
|
|
|
Company | ||||||||
2011 $000 |
2010 $000 |
|||||||
Parent Entity Commitments on behalf of joint ventures |
||||||||
Commitments under the electricity, water, rail, and port agreements for joint ventures not provided for in the financial statements and payable: |
||||||||
Not later than one year |
42,468 | 32,437 | ||||||
Later than one year but not later than five years |
154,099 | 175,270 | ||||||
Later than five years |
141,043 | 276,478 | ||||||
|
|
|
|
|||||
337,610 | 484,185 | |||||||
|
|
|
|
Guarantees
The Company has provided bank guarantees totalling $333,000 (2010: $422,000) in respect of the Companys Brisbane head office. These amounts are secured by bank deposits to the value of $333,000 (2010: $333,000) (1)
(1) | These contingent liabilities are considered remote. |
Refer to Note 32 for details of other guarantees provided by the Company.
39. Subsequent events
On 11 July 2011, Macarthur Coal Limited announced that it had received a non-binding indicative and conditional proposal from PEAMCoal Pty Ltd (PEAMCoal) a Company jointly controlled by Peabody Energy Corporation and ArcelorMittal S.A. under which, subject to due diligence and other matters, PEAMCoal would make a takeover bid for all of the issued shares in Macarthur Coal Limited.
On 4 August 2011 Macarthur Coal Limited received a bidders statement from PEAMCoal, containing the terms of a conditional proposal to bid for all of the issued ordinary shares in Macarthur Coal Limited at a price of A$15.50 per share. PEAMCoal subsequently increased the offer to $16.00 per share with a further $0.25 per share if Peabody Energy Corporation reached the compulsory acquisition threshold of 90% of acceptances.
The initial PEAMCoal offer opened on 18 August 2011 and following a number of extensions closed on 25 November 2011. The offer became unconditional on 25 October 2011 with PEAMCoal Limited acquiring 59.86% controlling interest in Macarthur Coal Limited shares. Subsequently ArcelorMittal S.A. elected to sell its interest in PEAMCoal to Peabody Energy Corporation, which will result in Peabody Energy Corporation owning 100% of the shares in PEAMCoal. Nominees of PEAMCoal were appointed to Macarthur Coals Board on 26 October 2011. PEAMCoal announced on 16 November 2011 that it had obtained 90% of acceptances to begin the compulsory acquisition process to acquire the remaining outstanding shares of Macarthur Coal Limited. This process is expected to be completed by 31 December 2011.
In light of the above developments, the Directors of Macarthur Coal Limited resolved that the Dividend Reinvestment Plan would not operate for the 2011 final dividend.
F-92
1. | In the opinion of the Directors of Macarthur Coal Limited (the Company): |
a) | the Financial Statements set out on pages F-2 to F-92 present fairly in accordance with Australian Accounting Standards: |
(i) | the financial position of the Group as at 30 June 2011 and 30 June 2010; and |
(ii) | the financial performance and cash flows of the Group for the years ended 30 June 2011 and 30 June 2010; |
b) | the Financial Statements also comply with International Financial Reporting Standards as disclosed in Note 2(b); and |
c) | there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. |
Dated at Brisbane this 22nd day of December 2011.
Signed in accordance with a resolution of the Directors:
/s/ Julian Thornton |
Julian Thornton Director and Chief Executive Officer |
F-93
The Board of Directors
Macarthur Coal Limited
We have audited the accompanying consolidated statements of financial position of Macarthur Coal Limited and subsidiaries as of 30 June 2011 and 30 June 2010 and the related consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years ended 30 June 2011 and 30 June 2010. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Macarthur Coal Limited and subsidiaries as of 30 June 2011 and 30 June 2010, and the results of their operations and their cash flows for the years then ended in conformity with Australian Accounting Standards. The consolidated financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ KPMG |
KPMG |
Brisbane
22 December 2011
F-94
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