for personal use only - asxpeter desmond reeve 4 4 - - - - 1 1 sam riggall 3 3 - - - - - - douglas...
Post on 19-Aug-2020
3 Views
Preview:
TRANSCRIPT
1
IVANHOE AUSTRALIA LIMITED
ACN 107 689 878
Annual financial report for the year ended 31 December 2010
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
2
Directors’ report
The directors of Ivanhoe Australia Limited present their annual financial report of the Company for the year ended 31
December 2010. The directors report as follows:
The names and particulars of the directors of the Company during or since the end of the financial year are:
Name, qualifications Particulars
Robert Martin Friedland
(BA Political Science)
Chairman and a Non-Executive Director, aged 60. Mr Friedland is the founder, Chief
Executive Officer and Executive Chairman of Ivanhoe Mines, Chairman of Ivanhoe Nickel
and Platinum, Chairman and President of Ivanhoe Capital Corporation and co-founder and
Executive Co-Chairman of Ivanhoe Energy Inc. Appointed 7 November 2007.
Peter Desmond Reeve
(BSc (Metallurgy))
Chief Executive Officer and Managing Director, aged 49. Mr Reeve was previously
employed by Newcrest Mining Ltd as part of the Executive Committee responsible for
corporate development and market related aspects of the group. Mr Reeve is a director of
Exco Resources Limited and Emmerson Resources Limited. Mr Reeve is a member of the
Safety, Health and Environment Committee. Appointed 21 February 2007.
Douglas John Kirwin
(BSc, MSc)
Non-Executive Director, a professional geologist, aged 60. Mr Kirwin joined the Board in
2006. Mr Kirwin has spent more than 35 year in the mining exploration industry. He is
currently Executive Vice President, Exploration of Ivanhoe Mines and is also a director of
various Ivanhoe Mines subsidiaries. Appointed 8 November 2006.
John Anthony Macken
(BA, BAI, Hons)
Non-Executive Director, Chartered Engineer with the Institute of Engineers in Ireland, aged
59. Mr Macken is President of Ivanhoe Mines. Mr Macken is a Director of SouthGobi
Resources Ltd and is a director of various subsidiaries of Ivanhoe Mines. Mr Macken is the
Chairman of the Safety, Health and Environment Committee. Appointed 7 November 2007.
Peter Graham Meredith
(CA., CMA)
Non-Executive Director, Chartered Accountant, aged 67. Mr Meredith joined the Board in
2006. Mr Meredith previously spent 31 years with Deloitte and Touche LLP, Chartered
Accountants. Mr Meredith is a Director, and the Deputy Chairman of Ivanhoe Mines and is
a director and the Chairman of SouthGobi Resources Ltd. Mr Meredith is a member of the
Nomination, Governance and Remuneration Committee and a member of the Audit and
Finance Committee. Appointed 8 November 2006.
Ian Rutherford Plimer
(BSc, Hons, PhD)
Lead Independent Non-Executive Director, aged 64. Professor Plimer is a Professor of
Mining Geology at the University of Adelaide, South Australia and Emeritus Professor of
Earth Science at the University of Melbourne. Professor Plimer is currently a Non-
Executive director of Kefi Minerals Plc and Ormil Energy Ltd. He is the Chairman of the
Nomination, Governance and Remuneration Committee and a member of the Safety,
Health and Environment Committee and the Audit and Finance Committee. Appointed 7
November 2007.
Kyle Wightman
(B Comm, MBA, FAICD)
Independent Non-Executive Director aged 66. Mr Wightman is an economist, financier and
business consultant with over 40 years experience, particularly relating to the feasibility,
development and financing of major projects and investments. He has held a number of
senior roles in the resources, financial and advisory sectors. Mr Wightman is currently a
Non-Executive Director and Chairman of the Board Audit Committee of Indophil Resources
NL, He is a member of the Safety, Health and Environmental Committee and Nomination,
Governance and Remuneration Committee, and is Chairman of the Audit and Finance
Committee. Appointed 4 July 2008.
William Beckwith Hayden
(BSc (Geology, Hons)
Non-Executive Director, aged 59. Mr Hayden joined the Board in 2006. Mr Hayden is a
geologist with over 36 years experience in the mineral exploration industry. Mr Hayden was
the founder and President of Ivanhoe Nickel and Platinum Ltd. Mr Hayden is President of
GoviEx Uranium Inc., a director of Globe Metals & Mining Ltd, Sky Alliance Resources Inc.,
Ivanhoe Nickel and Platinum Ltd, Sunward Resources Ltd.and holds various directorships
of Ivanhoe Mines subsidiaries. Appointed 8 November 2006, retired 27 May 2010.
David Woodall
(MSc, BSc)
Non-Executive Director. Mr Woodall, aged 50, is currently Chief Executive Officer of the
Alynalmas Gold Ltd. Appointed 7 November 2007, retired 27 May 2010.
David Morris Korbin
(CA)
Non-Executive Director, Chartered Accountant, aged 68. Mr Korbin is a management and
financial consultant. Mr Korbin is currently an independent director and chair of the Audit
Committee of Ivanhoe Mines. Appointed 7 November 2007, retired 27 May 2010.
Sam Riggall
(B Law (Hons), B Comm,
MBA)
Executive General Manager – Commercial and Executive Director, (until 12 Febuary
2011), Non-Executive Director (since 13 Febuary 2011), aged 39. Mr Riggall was
previously employed by Rio Tinto as Chief Negotiator for the Investment Agreement for the
Oyu Tolgoi project in Mongolia. Mr Riggall has extensive commercial experience in the
mining industry having worked in a variety of commodity and functional roles including
based metals, exploration, business development and capital market transactions.
Appointed 27 May 2010. He was Executive General Manager – Commercial and an
Executive Director until 12 Febuary 2011 when he resigned his position. Since that date,
he has continued as a Non-Executive Director.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
3
Directors’ report (con’t)
The above named directors held office during and since the end of the financial year, with the exception of Mr W Hayden, Mr
D M Korbin and Mr D Woodall.
Directorships of other listed companies
Directorships of other listed companies held by directors in the 3 years immediately before the end of the financial year are
as follows:
Name Company Period of directorship
Mr R M Friedland Ivanhoe Energy Inc. (TSX; NASDAQ) Since 1995
Ivanhoe Mines Ltd (TSX; NYSE; NASDAQ) Since 1994
Potash One Inc. (TSX) Since 2009, resigned January 2011
Mr P D Reeve Exco Resources Ltd (ASX) Since 2008
Emmerson Resources Ltd (ASX) Since 2009
Mr J A Macken SouthGobi Resources Ltd (TSX,HK) Since 2007
Western Lithium Corporate (TSX-V) Since 2008
Ivanhoe Mines Ltd (TSX; NYSE; NASDAQ) Since 2003, resigned February 2011
Mr P G Meredith Ivanhoe Mines Ltd (TSX; NYSE; NASDAQ)
Ivanhoe Energy Inc. (TSX; NASDAQ)
Since 2005
Since 2007
SouthGobi Resources Ltd (TSX, HK) Since 2003
Entrée Gold Inc (TSX; AMEX) Since 2002
Great Canadian Gaming Corporation (TSX) Since 2000
Mr W B Hayden Pan Palladium Ltd (ASX, HK) Since 2002, resigned November 2009
Global Metals & Mining Limited (ASX) Since November 2009
Mr D M Korbin Seaspan Corporation (NYSE) Since 2005, resigned September 2009
Ivanhoe Mines Ltd (TSX; NYSE; NASDAQ) Since 2006
Professor I R Plimer CBH Resources Ltd (ASX) Since 1998, resigned October 2010
Kefi Minerals Plc (AIM) Since 2006
Ormil Energy Ltd (ASX) Since February 2010
Mr K Wightman Indophil Resources NL (ASX) Since 2006
Shareholdings
The following table sets out key management personnel‟s relevant interests in shares and performance rights of the
Company as at the date of this report.
During and since the end of the financial year an aggregate 500,000 performance rights (2009: 75,000) were granted by the
Company to key management personnel (being 500,000 performance rights granted to Mr S Riggall as part of his
remuneration, of which he exercised 125,000 during the financial year). Each performance right when exercised entitles the
holder to one fully paid ordinary share in the Company (without any amount being payable for the exercise of the
performance right and receipt of the share).
During and since the end of the financial year the Company has issued a total of 5,550,000 fully paid ordinary shares to key
management personnel as a result of the exercise of performance rights.
Directors and senior management
Fully paid ordinary shares
Number
Performance Rights
Number
Directors
Mr R M Friedland 3,000,000 (i) 1,000,000
M P D Reeve 3,189,500 1,062,500
Mr S Riggall 125,000 375,000
M D J Kirwin 1,225,000 750,000
Mr J A Macken 375,000 125,000
Mr P G Meredith 375,000 125,000
Mr W B Hayden 225,000 75,000
Mr D Woodall 112,500 37,500
Mr D M Korbin - 25,000
Professor I R Plimer 87,500 25,000
Mr K Wightman 250,000 50,000
(i) Mr R M Friedland owns 101,360,740 shares in the ultimate parent company, Ivanhoe Mines Ltd. which holds
259,536,627 (at 24 March 2011) ordinary shares in Ivanhoe Australia Limited.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
4
Directors’ report (con’t)
Shareholdings (con’t)
Directors and senior management
Fully paid ordinary shares
Number
Performance Rights
Number
Senior Management
Mr J E Eltham - -
Mr N Valk - -
Mr B J Goss 562,500 187,500
Mr P Carter 592,500 187,500
Mr D J Millman 195,000 75,000
Directors’ meetings
The number of Directors‟ meetings (including meetings of Committees of Directors) and the number of meetings attended by
each of the Directors of the Company held during the financial year set out below. During the financial year, 4 Board
meetings, 1 Nomination, Governance and Remuneration Committee, 5 Audit and Finance Committee meetings and 1 Safety,
Health and Environment Committee meeting was held during the period.
Name
Board of Directors Audit and Finance
Committee
Nomination, Governance
and Remuneration
Committee
Safety, Health and
Environmental
Committee
Held Attended Held Attended Attended Attended Held Attended
Robert Martin Friedland 4 3 - - - - - -
Peter Desmond Reeve 4 4 - - - - 1 1
Sam Riggall 3 3 - - - - - -
Douglas John Kirwin 4 3 - - - - - -
John Anthony Macken 4 3 - - - - - -
Peter Graham Meredith 4 4 2 2 1 1 1 1
William Beckwith Hayden 1 1 - - - - - -
David Woodall 1 1 - - - - - -
David Morris Korbin 1 1 3 2 - - - -
Ian Rutherford Plimer 4 4 5 5 1 1 1 1
Kyle Wightman 4 4 5 5 1 1 1 1
Company secretary
The name(s) and particulars of the Company Secretary during or since the end of the financial year are:
Name
Darren Millman
(CA, BBus(Acc),
GradDipACG)
Chartered Accountant, aged 33. Mr Millman was appointed as Company Secretary on 20
September 2007. Mr Millman previously had management roles with KPMG in Canada in
its Mining Advisory Group.
Principal activities
The principal activity of the consolidated entity during the year was mineral exploration. No significant change in the nature of
this activity occurred during the year.
Review of operations
The consolidated loss for the year amounted to $78,786,654 (2009: $52,226,281 loss).
During 2010, Ivanhoe Australia made substantial progress on its vision to become a significant Australian base-metal producer, whilst continuing to be recognised as the pre-eminent exploration company in Australia, with an unrivalled track record for discovery. Key milestones achieved were the strategic acquisition of the Osborne copper and gold mining complex, Mineral Resource updates at the Merlin and Mount Elliott deposits and significant progress in bringing the Merlin Project closer to production. Ivanhoe Australia also achieved exploration success with high-grade copper-gold intercepts at the Starra 222 Project, Barnes Shaft and Houdini prospects. The strategic acquisition of the Osborne Copper and Gold complex in September 2010 significantly enhanced the value and reduced the development risk of the Merlin Project. In addition, the combined copper and gold ore sources at Osborne and Cloncurry have created a new copper and gold business for Ivanhoe Australia.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
5
Directors’ report (con’t)
Review of operations (con’t)
The successful integration of the Osborne mining complex with Ivanhoe Australia‟s exploration expertise and world-class deposits provides the building blocks for Ivanhoe to become the next large Australian base-metals company. Osborne will be established as the main operating centre for the Company‟s Cloncurry district activities. Ivanhoe Australia has assembled a significant package of Mineral Resources in the Cloncurry district, near Mount Isa, with direct and indirect interests covering 3,034 square kilometres and applications in place for 23 additional tenements covering 3,396 square kilometres. The nature of the geological systems indicate potential metal production could be both multifaceted and long term. The exploration success so far has revealed copper, molybdenum, rhenium and gold; however, other polymetallic deposits are slowly revealing themselves, which are likely to broaden this commodity base.
Exploration is the key to Ivanhoe Australia‟s growth strategy, with a focus on continuing the strong history of exploration success at Ivanhoe Australia‟s Cloncurry tenements in the discovery of new deposits and extending existing deposits. Opportunities for future exploration successes have been enhanced in 2010 with the establishment of a new geophysics group and the expanded tenement holding in the Cloncurry region resulting from the Osborne acquisition. Ivanhoe Australia has a strong development pipeline, with four main projects and other potential opportunities. The key development project is Merlin, which is the highest-grade molybdenum and rhenium project known in the world. During the year, significant progress was made in bringing Merlin closer to production with the completion of the scoping study and an updated Mineral Resource incorporating the high-grade Little Wizard domain. In addition, substantial progress was made on the pre-feasibility study that is expected to be completed in April 2011. The full feasibility study is expected to be completed in Q3 2011, with mining of ore in the third quarter of 2012. The Merlin scoping study released in March 2010 demonstrated that the project will have a high return, with strong, long-term cashflows. The acquisition of the Osborne complex has provided the project with a number of additional options relating to the design of a molybdenum roaster and the physical location of plant infrastructure. The Merlin pre-feasibility study is expected to benefit from the inclusion of the Little Wizard Deposit in the Merlin Mineral Resource and the utilisation of the Osborne mining complex. Significant progress also was made on the company‟s three other development projects: Mount Elliott, Mount Dore and the Copper Gold Study. During the year, the Mount Elliott Mineral Resource has increased significantly, making it one of the largest copper-gold mineralised systems discovered in Australia. A scoping study on Mount Elliott subsequently has begun to evaluate various mining options.
On September 10, 2010, the Company completed a successful entitlement offer, raising gross proceeds of $269 million to fund the development of projects and ongoing exploration. The new shares offered under the Entitlement Offer also will receive one half option for every new share, with each option entitling the holder to acquire one Ivanhoe Australia ordinary share until September 20, 2011, at a price of A$3.38. A total of 46.7 million options were issued under the Entitlement Offer, which could raise up to a further A$158 million, increasing the total amount raised to A$427 million.
Ivanhoe Australia completed its secondary listing on the Toronto Stock Exchange (TSX); the Company‟s ordinary shares and options (referred to as warrants for Canadian purposes) began trading in November 2010.
As at 31 December 2010, Ivanhoe Mines Ltd. owned 62% of Ivanhoe Australia, a reduction from the previous year‟s holding of 81%. Ivanhoe Mines continues to provide high-level corporate and technical guidance in assisting Ivanhoe Australia to progress projects and secure financial support.
Changes in state of affairs
There was no significant change in the state of affairs of the consolidated entity during or since the year end.
Subsequent events
There has not been any other matter or circumstance that has arisen since the end of the financial period, that has
significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state
of affairs of the Company in future financial periods.
Future developments
Disclosure of information regarding likely developments in the operations of the consolidated entity in future years and the
expected results of those operations may result in unreasonable prejudice to the consolidated entity and therefore have not
been disclosed in this report.
Environmental regulations
The consolidated entity‟s operations are subject to environmental regulation under both Commonwealth and State legislation.
There have been no significant known breaches of these regulations by the consolidated entity.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
6
Directors’ report (con’t)
Dividends
No dividends have been paid, recommended or declared since the start of the year.
Indemnification of officers and auditors
The Company has entered into agreements to indemnify all the Directors and Officers named in this report against all
liabilities to persons (other than the Company), which arise out of the Directors and Officers conduct unless the liability
relates to conduct involving a lack of good faith or the indemnity is otherwise prohibited by law. The Company has agreed to
indemnify (to the extent permitted by law) the Directors and Officers against all costs and expenses incurred in defending an
action that falls within the scope of the indemnity and any resulting payments. The contract of directors and officers insurance
prohibits disclosure of the nature of the liability and the amount of the premium.
The Company has not during or since the end of the year indemnified or agreed to indemnify an auditor of the Company
against a liability incurred as auditor.
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in
note 30 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person or
firm on the auditor‟s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the non-audit services as disclosed in note 30 to the financial statements do not
compromise the external auditor‟s independence, based on advice received from the Audit and Finance Committee, for the
following reasons:
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of
the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct
APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards
Board, including reviewing or auditing the auditor‟s own work, acting in a management or decision-making capacity for
the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
Auditor’s independence declaration
The auditors independence declaration is included on page 61 of the annual report.
Rounding off of amounts
The company is a company of the kind referred to in ASIC Class Oder 98/0100, dated 10 July 1998, and in accordance with
that Class Order amounts in the directors‟ report and the financial report are rounded off to the nearest thousand dollars,
unless otherwise indicated.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
7
Directors’ report (con’t)
Remuneration report – audited
This remuneration report, which forms part of the directors‟ report, sets out information about the remuneration of Ivanhoe
Australia Limited‟s directors and its senior management for the financial year ended 31 December 2010. The prescribed
details for each person covered by this report are detailed below under the following headings:
key management personnel details
principles of remuneration
relationship between the remuneration policy and Company performance
remuneration of directors and senior management
key terms of employment contracts.
Key management personnel
The following persons acted as directors of the Company during or since the end of the financial year:
Executive directors
Mr P D Reeve (Managing Director & CEO)
Mr S Riggall (Director & Executive General Manager, Commercial), Appointed 27 May 2010. Resigned as
Executive General Manager – Commercial on 12 February 2011 but remains a Non-Executive Director.
Non-executive directors
Mr R M Friedland (Chairman)
M D J Kirwin
Mr J A Macken
Mr P G Meredith
Mr W B Hayden, retired 27 May 2010
Mr D Woodall, retired 27 May 2010
Mr D M Korbin, retired 27 May 2010
Professor I R Plimer (independent)
Mr K Wightman (independent)
The term „senior management‟ is used in this remuneration report to refer to the following key management personnel.
Except as noted, the named key management personnel held their current position for the whole of the financial year and
since the end of the financial year:
Mr J E Eltham (Executive General Manager, Projects)
Mr N R Valk (General Manager, Operations), appointed 7 December 2010
Mr B J Goss (General Manager, Exploration Strategy & Systems)
Mr P Carter (General Manager, Exploration)
Mr D J Millman (Finance Manager and Company Secretary)
Principles of remuneration
The Board policy for determining the nature and amount of key management personnel remuneration and other remuneration
is agreed by the Board of Directors as a whole after review, approval and recommendation by the Nomination, Governance
and Remuneration Committee.
The terms „remuneration‟ and „compensation‟ are used interchangeably throughout this report.
Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company. Key management personnel comprise the directors of the Company and senior management of the Company.
Compensation levels for key management personnel and other employees of the Company are competitively set to attract and retain appropriately qualified and experienced directors and senior management. The Nomination, Governance and Remuneration Committee obtains independent advice on the appropriateness of compensation packages in the Company given trends in comparative companies, and the objectives of the Company‟s compensation strategy.
The compensation structures explained below are designed to attract and retain suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account:
the capability and experience of key management personnel and other employees; and
the ability of key management personnel and other employees to control areas of their respective responsibilities
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
8
Directors’ report (con’t)
Remuneration report – audited (con’t)
Senior Executive Remuneration
Compensation packages for the Executive Director‟s and senior management include a mix of fixed and incentive based compensation and a consulting agreement with Mr J E Eltham.
The Board regularly reviews the policy regarding the appropriate mix of fixed and incentive based compensation for senior executives, having regard to industry practice and assistance from external remuneration advisers to ensure the Company attracts and retains the best people.
Fixed compensation
Fixed compensation consists of base compensation (which is calculated on a total cost basis and includes any fringe benefit tax charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds.
Fixed compensation levels are reviewed annually by the Nomination, Governance and Remuneration Committee and the Board through a process that considers individual contributions and overall performance of the Group, as well as market relativity. A senior executive‟s compensation is also reviewed on promotion.
Incentive based compensation
The Company does not currently operate a short-term incentive scheme and, in 2010, no cash awards were made to the
executives. The Board is currently considering a short-term incentive scheme for the 2011 financial year, however will review
this in the context of the formal review of the Company‟s broader executive remuneration policy to be undertaken during the
2011 financial year.
From 2008, the Company issued performance rights to Directors and senior executives under the Ivanhoe Australia Limited
Employee Share Plan (Plan) that are subject to time based vesting conditions. The current approach of time based vesting is
considered appropriate in the circumstances of the Company. The Board will continue to review the appropriateness of the
time based vesting conditions for future grants of performance rights.
All performance rights expire on the earlier of their expiry date or termination of the individual‟s employment. The
performance rights granted to the Directors and executives vest in 4 equal tranches (subject to being in employment). The
vested performance rights can be exercised immediately (subject to the Company's Share Trading Policy). Upon exercise of
the performance rights, the relevant number of shares are allocated to the executives.
The number of performance rights in each tranche must be exercised within two years following vesting. Any vested
performance rights not exercised before that time will expire.
All unvested performance rights will immediately vest in the event of a change in control of the Company or its ultimate
holding company and may, at the Board‟s discretion, vest in special circumstances such as death, permanent disability or
redundancy.
Non-Executive Director Remuneration
Non-Executive Director fees are paid within an aggregate limit which must not exceed $500,000 (excluding mandatory
superannuation) per annum or such other maximum as determined by the Company in a general meeting.
The cash fees paid to Independent Non-executive Directors for the 2010 financial year were $60,000 (2009:$60,000) per annum, plus statutory superannuation. Mr Wightman, as Audit Committee Chairman received an additional amount of $12,000 (2009:$12,000) for the financial year.
Non-independent Non-Executive Directors do not receive a cash fee with the exception of Mr Korbin. The cash fees paid to Mr Korbin for the 2010 financial year was $21,800 (2009:$52,320).
All Non-Executive Directors are eligible to participate in the Plan.
All Non-Executive Directors are also entitled to be reimbursed for all reasonable travel, accommodation and other expenses incurred in attending meetings of the Board, committees or shareholders or while engaged on other Ivanhoe Australia Limited business.
Consulting Agreement Mr J Eltham is on an agreed daily charge rate of $1,125, there is no minimum termination notice required from either party. Mr J Eltham is not entitled to participate in the Plan.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
9
Directors’ report (con’t)
Remuneration report – audited (con’t)
Relationship between the remuneration policy and Company performance
The achievement of Company strategic objectives is the key focus of the efforts of the Company, and it is the leadership of
the directors and senior management which makes the achievement of this aim possible. As indicated above, over the
course of the 2011 financial year, the Board, through the Nomination, Governance and Remuneration Committee will review
the Company‟s executive remuneration policy to ensure the remuneration framework remains focused on driving and
rewarding executive performance, while being closely aligned to the achievement of Company strategic objectives and the
creation of shareholder value.
The consolidated entity sets performance based remuneration with the objective of improving shareholder returns. Shareholder returns are primarily measured by the movement in share price from the start to the end of each financial year. During the year total remuneration to directors and senior management was $7,502,094 (2009: $11,367,230), an overall reduction of $3,865,136. No dividends have been declared in the past four financial years or the current financial year. As the Company remains in the growth phase of its life cycle, shareholder returns do not correlate with revenues and losses reported in any of the recent financial years. Shareholder returns are more dependent on the future expectation of Company performance rather than Company earnings.
The share price on 31 December 2010 was $3.57 (2009: $3.69), and has traded between a low of $2.45 (2008: $0.30) and a
high of $3.82 (2009: $4.24) during the financial year.
Under the Company's share trading policy, key management personnel may not deal in Company securities on
considerations of a short term nature. Further, under the Plan, holders of performance rights must not engage in any hedging
of risk in respect of their performance rights before the performance rights vest. In particular, each participant in the Share
Plan is taken to have agreed not to hedge their exposure to the economic interest they have in any performance rights,
unless and until the performance hurdles in relation to the performance rights have been satisfied. For these purposes,
hedging means the participant or its associate entering into any arrangement which has the effect or intended operation of
protecting the participant if the value of the performance right diminishes or which takes from the participant any benefit i f the
value of the performance right increases.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
10
Directors’ report (con’t)
Remuneration report – audited (con’t)
Remuneration of directors and senior management (Company and Consolidated) – audited
Short-term
employment benefits
Post-
employment
Equity (Long-term)
Salary &
Fees
Non-
monetary
Superannuation
Contribution
Performance
Rights
Expensed in
Year (1)
S300A(1)(e)(vi)
Value of
performance
rights as
proportion of
total
remuneration
Total
Executive directors $ $ $ $ % $
Mr P D Reeve 2010 389,908 9,866 33,043 1,418,607 77% 1,851,424
2009 389,909 7,051 35,092 3,191,381 88% 3,623,433
Mr S Riggall 2010 114,389 8,589 28,628 1,001,098 73% 1,152,704
Non-executive
directors
Mr R M Friedland 2010 - - - 1,335,160 100% 1,335,160
2009 - - - 3,003,653 100% 3,003,653
Mr D J Kirwin 2010 - - - 500,685 100% 500,685
2009 - - - 1,126,370 100% 1,126,370
Mr J A Macken 2010 - - - 166,895 100% 166,895
2009 - - - 375,457 100% 375,457
Mr P G Meredith 2010 - - - 166,895 100% 166,895
2009 - - - 375,457 100% 375,457
Mr W B Hayden 2010 - - - 100,137 100% 100,137
2009 - - - 225,274 100% 225,274
Mr D Woodall 2010 - - - 50,068 100% 50,068
2009 - - - 112,637 100% 112,637
Mr D M Korbin 2010 21,800 - - 33,379 60% 55,179
2009 52,320 - - 75,091 59% 127,411
Professor I R Plimer 2010 60,000 - 5,400 33,379 34% 98,779
2009 60,000 - 5,400 75,091 53% 140,491
Mr K Wightman 2010 72,000 - 6,480 33,379 30% 111,859
2009 72,000 - 6,480 75,091 49% 153,571
Senior Management
Mr J E Eltham 2010 472,845 - - - - 472,845
Mr N Valk 2010 21,492 - 2,100 - - 23,592
Mr B J Goss 2010 183,486 - 16,514 250,342 56% 450,342
2009 191,132 - 13,706 563,185 73% 768,023
Mr P Carter 2010 279,321 8,710 21,950 250,342 45% 560,323
2009 210,909 9,686 18,991 563,185 70% 802,771
Mr D J Millman 2010 181,194 16,198 16,307 184,457 46% 398,156
2009 181,180 4,912 16,306 330,284 62% 532,682
TOTALS 2010 1,796,435 43,363 130,422 5,524,823 7,495,043
TOTALS 2009 1,157,450 21,649 95,975 10,092,156 11,367,230
1. Expensing of fair value performance rights on a straight-line basis over vesting period. Determined using Black
& Scholes valuation method.
Notes
No cash awards or bonuses (or any other forms of short-term employee benefits other than those described in
the above table) were paid during the 2010 financial year (2009: Nil). All awards were long-term employee
benefits made in the form of performance rights.
25% of performance rights vested during the year.
No performance rights were forfeited during the year.
Other than the superannuation contributions described in the above table, no other post employment benefits
were provided during the year.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
11
Directors’ report (con’t)
Remuneration report – audited (con’t)
Equity instruments
Share Plan – Performance Rights (note 32 (ii))
In 2008, the Board of Directors approved the Employee Share Plan (“Share Plan”) and the issue of 16,675,000 performance
rights.
During the financial year the Board of Directors approved and the Company issued 2,630,000 (2009: 1,125,000) performance
rights to employees.
The Share Plan provides for the offer to, and acquisition by, selected Eligible Employees and Directors of:
rights to acquire Shares where generally no cash consideration is required to be paid for the acquisition of the
underlying Shares (Performance Rights); and
“unallocated” Shares, typically being Shares that are to be held in the Share Plan subject to a holding lock and
restrictions on voting and which are liable to be forfeited prior to allocation if any performance conditions attaching to
them are not satisfied and in certain other circumstances.
The holders of these performance rights and unallocated shares entitle the holder to acquire one share by way of issue.
Modification of terms of equity-settled share-based payment transactions No terms of equity-settled share-based payment transactions (including performance rights granted as compensation to key
management personnel) have been altered or modified by the issuing entity during the reporting period or prior period.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
12
Directors’ report (con’t)
Remuneration report – audited (con’t)
Analysis of performance rights over equity instruments granted as compensation
Details of vesting profiles of the performance rights granted as remuneration by Ivanhoe Australia Limited to each key
management person of the Group and Group executives is summarised in the table below.
During the financial year
Name
Series No. granted
(i)
No.
vested (ii)
% of grant
vested
$ expensed in
year (iii)
Directors
Mr R M Friedland Issued 6 August 2008 - 1,000,000 25% 1,335,160
Mr P Reeve Issued 6 August 2008 - 1,062,500 25% 1,418,607
Mr S Riggall Issued 21 February 2010 500,000 125,000 25% 1,001,098
Mr D Kirwin Issued 6 August 2008 - 375,000 25% 500,685
Mr J A Macken Issued 6 August 2008 - 125,000 25% 166,895
Mr P G Meredith Issued 6 August 2008 - 125,000 25% 166,895
Mr W B Hayden Issued 6 August 2008 - 75,000 25% 100,137
Mr D Woodall Issued 6 August 2008 - 37,500 25% 50,068
Mr D M Korbin Issued 6 August 2008 - 25,000 25% 33,379
Professor I R Plimer Issued 6 August 2008 - 25,000 25% 33,379
Mr K Wightman Issued 6 August 2008 - 25,000 25% 33,379
Senior management
Mr J E Eltham Issued 6 August 2008 - - -
Mr N R Valk Issued 6 August 2008 - - -
Mr B J Goss Issued 6 August 2008 - 187,500 25% 250,342
Mr P Carter Issued 6 August 2008 - 187,500 25% 250,342
Mr D J Millman Issued 6 August 2008 (iv) - 75,000 25% (v) 184,457
Notes
(i) The performance rights granted to Mr S Riggall on 23 February 2010. The terms and conditions are consistent with the 2008 and
2009 performance rights issued. The performance rights were granted in 4 equal tranches, which respectively vest and can be
exercised (subject to being in employment) on 1 March of each year from 2010 to 2013.
(ii) The value of performance rights granted is recognised in compensation on a straight line basis over the vesting period of the grant,
in accordance with Australian accounting standards.
(iii) No performance rights have lapsed during the financial year. Tranche 3 vested and could be exercised from 1 September 2010 for
all directors and senior management with the exception of Mr S Riggall whose Tranche 1 (or 25% of his grant of performance rights
for the financial year) vested and could be exercised on 1 March 2010.
(iv) An additional 75,000 performance rights were issued to Mr D J Millman on the 1 December 2009.
(v) For Mr D J Millman 56,250 performance rights issued on 6 August 2008 (expense of $75,102) vested during the financial year and
18,750 performance rights issued on 1 December 2009 (expense of $109,355) vested during the financial year.
The performance rights were provided at no cost to the recipients. In general, upon vesting, the holder will be entitled to
exercise their performance rights and acquire one fully paid ordinary share in the Company for each performance right. No
amount is payable upon vesting or exercise.
The Directors and employees are entitled to exercise their performance rights and be issued with the shares in 4 equal
tranches after vesting (subject to being in employment) on 1 September of each year from 2008 to 2011 (with the exception
of Mr S Riggall as noted above). All performance rights in a tranche expire two years after the vesting date for that tranche.
The first tranche of the performance rights vested in September 2008, however the first tranche could not be exercised until 1
September 2009 with the exception of Mr S Riggall as noted above. All unvested performance rights will immediately vest in
the event of a change in control of the Company or its ultimate holding company and may, at the Board‟s discretion, vest in
special circumstances such as death, permanent disability or redundancy. A holder of a performance right does not have a
right to participate in any new issue of securities to existing shareholders by virtute of holding the performance right (such a
holder may only participate in a new issue of securities if they exercise their performace right and acquire the underlying
share before the record date for determining entitlements to the new issue and participate in the new issue as a result of
being a holder of shares).
No performance rights were forfeited during the year.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
13
Directors’ report (con’t)
Remuneration report – audited (con’t)
Directors and senior management exercised performance rights
During the year, the following directors and senior management exercised performance rights that were granted to them by
Ivanhoe Australia Limited as part of their compensation. Each performance right converts into one fully paid ordinary share of
Ivanhoe Australia Limited.
Name
No. of perfomance
rights exercised (i)
No. of fully paid ordinary
shares of Ivanhoe Australia
Limited issued
Directors
Mr R M Friedland 1,000,000 1,000,000
Mr P Reeve 3,187,500 3,187,500
Mr S Riggall 125,000 125,000
Mr D Kirwin 375,000 375,000
Mr J A Macken 125,000 125,000
Mr P G Meredith 125,000 125,000
Mr W B Hayden 75,000 75,000
Mr D Woodall 37,500 37,500
Mr D M Korbin 25,000 25,000
Professor I R Plimer 25,000 25,000
Mr K Wightman - -
Senior management
Mr J E Eltham - -
Mr N R Valk - -
Mr B J Goss 187,500 187,500
Mr P Carter 187,500 187,500
Mr D J Millman 75,000 75,000
Notes
(i) The performance rights were provided at no cost to the recipients. No amount is payable for the underlying share upon exercise of a performance right.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
14
Directors’ report (con’t)
Remuneration report – audited (con’t)
The following table summarises the value of performance rights granted, exercised or lapsed during the year to directors and
senior management:
Name
Value of performance
rights granted at the
grant date $ (i) (iii)
Value of performance
rights exercised at the
exercise date $ (ii)
Directors
Mr R M Friedland - 2,850,000
Mr P Reeve - 10,996,875
Mr S Riggall 1,575,000 381,250
Mr D Kirwin - 1,068,750
Mr J A Macken - 356,250
Mr P G Meredith - 418,750
Mr W B Hayden - 213,750
Mr D Woodall - 125,625
Mr D M Korbin - 71,250
Professor I R Plimer - 71,250
Mr K Wightman - -
Senior management
Mr J E Eltham - -
Mr N R Valk - -
Mr B J Goss - 534,375
Mr P Carter - 534,375
Mr D J Millman - 213,750
Notes
(i) The value of performance rights granted is recognised in compensation on a straight line basis over the vesting period of the grant,
in accordance with Australian accounting standards.
(ii) No performance rights have lapsed during the financial year. Tranche 3 vested and could be exercised from 1 September 2010 for
all directors and senior management with the exception of Mr S Riggall whose Tranche 1 vested and could be exercised on 1
March 2010.
(iii) The fair value of the performance right at grant date of $3.15 per share was based on fair value at grant date.
Service agreements The remuneration and other terms of employment for the CEO and senior management are formalised in service agreements
with the exception of Mr J E Eltham (refer to page 8 for details). Each of these agreements makes provision for a fixed
remuneration component and performance rights as a long-term incentive. The material terms of the service agreements are
set out below.
Term Conditions Position
Duration of contract Ongoing until notice is given by either
party
CEO and senior management
Voluntary termination (i.e termination
by executive by giving notice)
3 months‟ fixed compensation CEO and senior management
Termination by Company without cause 3 months‟ fixed compensation or
payment in lieu
CEO and senior management
Termination by Company for cause Employment may be terminated
immediately without notice if the
executive commits any act or omission
justifying summary dismissal at
common law.
CEO and senior management
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
15
Directors’ report (con’t)
Signed in accordance with a resolution of the directors made pursuant to section 298(2) of the Corporations Act 2001.
On behalf of the Directors
Robert Friedland Peter Reeve
Chairman Managing Director
Melbourne, 29 March 2011
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
16
IVANHOE AUSTRALIA LIMITED
CORPORATE GOVERNANCE STATEMENT
The Board of directors of Ivanhoe is committed to conducting the Company‟s business in an ethical manner and in accordance with corporate governance „best practices‟.
This statement outlines the Company‟s corporate governance practices for the financial year, which comply with the ASX Corporate Governance Council recommendations (as applicable to the Company for the financial year), unless otherwise stated. The statement also includes additional commentary into consideration of the Toronto Stock Exchange (TSX) Guideline 1D Corporate Governance: A Guide to Good Disclosure.
Principle 1 – Lay solid foundations for management and oversight
Role of the Board
The Board is responsible for the overall corporate governance of the Company.
The Company has adopted a Board Charter which sets out the principles for the operation of the Board and describes the powers, functions and responsibilities of the Board. The key responsibilities of the Board include:
overseeing the composition of the Board including consideration of the skills and competency of the directors;
overseeing and appraising the strategies, policies and performance of Ivanhoe;
approving annual budgets and major expenditure items;
overseeing the Company‟s risk management compliance and corporate governance policies;
approving and monitoring internal and external reporting;
approving dividends and distributions;
appointing (and if appropriate removing) and monitoring the performance of the Executive Officers; and
reviewing senior executive succession planning.
The Charter also sets out the powers, functions and responsibilities of the Chief Executive Officer and executive team. This Board Charter is available on the Company's website.
The roles and responsibilities of each sub-committee chair are not in documented form. The committee acts collectively to achieve their roles and responsibilities documented within each sub-committee charter.
Performance evaluation
The Board has established a Nomination, Governance and Remuneration Committee, which is responsible for evaluating the performance of senior executives.
The Committee has established a Work Performance System (WPS). The WPS sets performance goals for senior executives and employees of the Company. The
goals are aligned to Company strategic goals and are measured bi-annually against performance.
Performance evaluation of senior executives and employees took place during the 2010 financial year in accordance with the WPS.
Principle 2 – Structure the Board to add value
The directors of the Company and details of their skills, qualifications, attendances at meetings and the period of office held are included on pages 2 to 4.
Composition
The Board includes two independent Non-Executive Directors, Kyle Wightman and Ian Plimer. The Board considers that the composition of the Board is appropriate having regard to the experience and skills of the directors, to Ivanhoe Mines Ltd.'s majority shareholding interest in Ivanhoe Australia and to Ivanhoe Mines Ltd.'s continuing debt financing of the Company.
Independence
The Board considers that the Non-Executive Directors, Robert Friedland, John Macken, Peter Meredith and Douglas Kirwin are not independent because they are directors and/or officers of Ivanhoe Mines Ltd., which is a substantial majority shareholder in Ivanhoe Australia.
Accordingly, a majority of the Board are not independent directors. However, having regard to the above, the Board considers the present composition to be appropriate in the circumstances of the Company.
The Chairman, Robert Friedland, is not an independent director because he is the executive chairman of Ivanhoe Mines Ltd. The Board considers that it is appropriate for Robert Friedland to be Chairman of the Company because of his experience and skills and because of Ivanhoe Mines Ltd.‟s majority shareholding interest in the Company and Ivanhoe Mines Ltd‟s continuing debt financing of the Company. Mr Plimer has been appointed as lead independent director to act as Chairman, as necessary, in the event of a conflict of interest or in the absence of the Chairman.
The Board establishes information walls between the Company‟s associates and its directors and employees for any transactions when considered appropriate as a result of interests in each such associated company. In other instances, where matters arise in which directors have an interest such directors are either requested to excuse themselves from the board meeting or are not permitted to vote on the matter, in this manner the Board promotes the independent judgment of its constituent members.
In order to facilitate the exercise of independent judgment by its members, the board: (i) has a written position description for the lead independent director; and (ii) establishes sub-committees, in which independent directors are members.
The non-executive directors have convened a separate meeting of the non-executive directors when considered appropriate to do so during the year, with standing non-
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
17
executive directors now occurring at each board meeting effective from December 2010.
Education and Qualifications
The Company takes steps to ensure that prospective directors fully understand the role of the Board and its committees and the contribution individual directors are expected to make, including in particular the commitment of time and energy that the Company expects of its directors. In addition, new directors are provided with a comprehensive information package, including pertinent corporate documents and a director‟s manual containing information on the duties, responsibilities and liabilities of directors. New directors are also briefed by management as to the status of the Company's business
Management and outside advisors provide information and education sessions to the Board and its committees on a continuing basis as necessary to keep the directors up-to-date with the Company, its business and the environment in which it operates as well as with developments in the responsibilities of directors, corporate governance, ethics and compliance.
Presentations are made to the Board from time to time to educate and keep them informed of changes within the Company and of regulatory and industry requirements and standards.
Nomination, Governance and Remuneration Committee
The Board has established a Nomination, Governance and Remuneration Committee, which has a written charter that is available on the Company's website.
The Nomination, Governance and Remuneration Committee is responsible for establishing processes for evaluating the performance of the Board, and other Board Committees both collectively and individually.
The Nomination, Governance and Remuneration consists of the Non-Executive Director Peter Meredith, CA and two Independent Non-Executive Directors (Kyle Wightman, B.Com, MBA, F.A.I.C.D. and Ian Plimer, B.Sc (Hons), PhD) and is chaired by Ian Plimer.
The Nomination, Governance and Remuneration Committee, together with the Board, reviews what competencies, skills and personal qualities it should seek in new Board members in order to add value to the Company, in light of the Company‟s current needs. The Nomination, Governance and Remuneration Committee annually assesses the current competencies and characteristics represented on the Board to determine the Board‟s strengths and identify any gaps that need to be filled. This analysis assists the Nomination, Governance and Remuneration Committee in discharging its responsibility for selecting new nominees to the Board.
While the Board functions effectively given the Company's stage of development and the size and complexity of its business, the Board, through its Nomination, Governance and Remuneration Committee, will continue to seek qualified candidates to augment its experience and expertise and to enhance the Company's ability to effectively develop its business interests.
Performance review
The Board periodically conducts a formal review of its performance, as well as each of its Committees and Directors. This review will generally be facilitated by the Lead Independent Director, Professor Ian Plimer.
A full performance review of the Board and Board Committees is currently underway to assess the 2010 performance, the review is being conducted by the lead independent director.
Independent professional advice
Directors may seek independent professional advice and, if the Chairman of the Board consents, the Company will pay a director's costs of seeking independent professional advice. That consent may not be unreasonably withheld or delayed.
Principle 3 – Promote ethical and responsible decision making
Code of Conduct
The Company has a statement of values and responsibilities, a corporate code of conduct (which applies to all directors and employees) and a code of conduct for directors and senior executives which embrace high standards of personal and corporate conduct. The statement of values and responsibilities and the codes of conduct are available on the Company's website.
The code of conduct covers the following:
compliance with laws, rules and regulations;
managing actual and potential conflicts of interest;
corporate opportunities such as preventing directors and key executives from taking improper advantage of property, information or position for personal gain;
employment practices such as occupational health and safety and equal opportunity;
responsibilities of the individual, such as use of privileged and confidential information;
usefulness of financial information by maintaining appropriate accounting policies, practices and disclosure; and
reporting of unlawful or unethical behaviour.
In 2010, the Board monitored compliance through an annual affirmation by all employees that they have complied with Ivanhoe Mines Ltd.‟s code of conduct. On a monthly basis the corporate secretary reports to the Board any human resources incidents which include those related to breaches of the Code of Conduct. IAL currently utilises Ivanhoe Mines Ltd.‟s whistle blowing system to allow an avenue for employees to report non-compliance with the Code of Conduct.
Trading in securities
The Company has established a Share Trading Policy, which is available on the Company‟s website.
In accordance with the prohibition in the Corporations Act, the Share Trading Policy states that directors, senior management and employees may not trade in Ivanhoe Securities at any time if they are in possession of inside information.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
18
In addition to the restrictions imposed on trading with inside information, directors, senior management and employees are not permitted to trade in the Company‟s securities during the two weeks prior to the announcement or filing of the Company‟s financial statements (quarterly, half-yearly, annually). If the Company elects to file its financial statements earlier than the deadlines set out the TSX or ASX, the Company Secretary will advise its directors, senior management and employees of the revised trading restrictions
At all times, clearance must be obtained from an „Approving Officer‟.
The Policy also sets out:
when directors, senior management and other employees may deal in listed securities of another entity (because they may obtain inside information about another entity while performing their duties for the Group); and
procedures to reduce the risk of insider trading.
Principle 4 – Safeguard integrity in financial reporting
Audit and Finance Committee
The Board has established an Audit and Finance Committee. The Committee has a formal written charter, which is available on the Company's website.
All members of the Committee have a good knowledge of finance and accounting practices (see details of their respective skills and experience in the Directors‟ Report).
The Audit and Finance Committee met 5 times during the financial year and Committee members‟ attendance record is disclosed in the table of directors‟ meetings on page 4.
The Audit and Finance Committee consists of the Non-Executive Director Peter Meredith, CA and two Independent Non-Executive Directors (Kyle Wightman, B.Com, MBA, F.A.I.C.D. and Professor Ian Plimer, B.Sc (Hons), PhD) and is chaired by Kyle Wightman.
The Company‟s external auditors are invited to attend meetings of the Audit and Finance Committee.
The Company monitors the performance of the external auditor on an annual basis and ensure the rotation of the external engagement partner occurs withing the prescribed guidance timelines.
Auditor independence
The Committee is cognisant of the Company‟s need to maintain an independent auditor.
Principle 5 – Make timely and balanced disclosure
Ivanhoe is committed to providing timely, open and accurate information to all of its stakeholders, including shareholders, regulators and the investment community.
The Company has adopted a Market Disclosure Protocol designed to ensure compliance with the disclosure requirement set out in the Corporations Act 2001 (Cth), the ASX Listing Rules and the Ontario Securities Act and to ensure accountability at a senior executive level for that compliance. The Market Disclosure Protocol is available on the Company's website.
In summary, the object of the the Market Disclosure Protocol is to:
ensures the Company immediately discloses all requisite information to the ASX and the TSX in accordance with the applicable rules and regulations;
ensures officers and employees are aware of the Company's continuous disclosure obligations; and
establishes procedures for :
the collection of all potentially price-sensitive information;
assessing if information must be disclosed to applicable security exchanges;
releasing to the ASX and the TSX, information which the Company is required to disclose; and
responding to any queries from the relevant exchanges.
The Board has established the Market Disclosure Committee to ensure compliance with its disclosure requirements. This Committee comprises the following:
Chief Executive Officer;
Chief Financial Officer;
Manager – Legal;
Investor Relations Officer;
Executive General Manager – Commercial; and
Company Secretary.
Decisions of the Market Disclosure Committee are by simple majority vote of those members of the committee available when a decision is required. If the Market Disclosure Committee cannot reach consensus on a matter, the matter must be referred to the full Board.
Principle 6 – Respect the rights of shareholders
The Board aims to ensure that shareholders and the broader investment community are fully informed of all relevant information necessary to assess the performance of the directors, management and the Company.
The Company's Market Disclosure Policy which is clearly marked under the Corporate Governance section on the Company‟s website deals with communication to shareholders through announcements on the ASX and the TSX as applicable.
The Board ensures that shareholders are informed of all major developments affecting the Company's state of affairs through the Company‟s annual and interim results announcements, annual report, quarterly mining exploration entity reports, annual general meeting, public announcements and through the Company's website. The Company publicly releases all information disclosed to the ASX or the TSX under this policy by placing it on its website.
Principle 7 – Recognise and manage risk
Oversight of the risk management system
The Board, through the Audit and Finance Committee, recognises its responsibility for ensuring that there are adequate policies, procedures and systems in place in the Company in relation to risk management, compliance and internal control systems.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
19
The Company has completed a formal review of its internal control procedures, and has developed a risk register and risk management policy for the oversight and management of material business risks.
The Company has established a Safety, Health and Environment Committee to ensure appropriate practices in the areas of safety, health and environmental management in all of its activities and appropriate compliance and reporting systems in these areas.
Risk reporting
The Chief Executive Officer and Finance Manager, having made the appropriate enquiries, have each given the Board:
a declaration that the financial records of the Company have been properly maintained and that the Company‟s financial statements, and notes, for the financial year present a true and fair view of the financial position and performance of the Company and comply with relevant accounting standards; and
an assurance that the declaration given by them is based on a sound system of risk management and internal compliance and control and the system is operating effectively in all material respects in relation to financial reporting risks.
Management is also required to report to the Audit and Finance Committee and the Board on whether material business risks are being managed effectively.
In accordance with this system, management has reported to the Board as to the effectiveness of the Company's management of its material business risks. The material business risks are disclosed within the Annual Information Form which is publicly reported annually to both the ASX and the TSX.
Principle 8 – Remunerate fairly and responsibly
The Board has established the Nomination, Governance and Remuneration Committee, which has a written charter that is available on the Company‟s website.
The structure of Executive and Non-Executive Director remuneration is described in detail in the Remuneration Report which forms part of the Director‟s Report.
The Independent Non-Executive Directors receive a cash fee for service, as well as statutory superannuation. One Non-Executive Director who is not independent received a cash fee from the Company.
Both Executive and Non-Executive Directors are eligible to participate in the Company‟s Employee Share Plan.
The Company considers that this remuneration structure is appropriate taking into account the fact that Ivanhoe is, at present, an exploration company and there is a need to conserve cash resources. Performance Rights are therefore considered an appropriate form of remuneration.
Further, the Company‟s remuneration structure is consistent with the remuneration policies of the Company's majority shareholder, Ivanhoe Mines Ltd.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Statement of comprehensive income
20
Statement of comprehensive income for the financial year ended 31 December 2010
Consolidated
Note
2010
$’000
2009
$’000
Revenue 4 3,774 1,550
Other income 30 41
Exploration and evaluation expenses (39,492) (29,122)
Employee benefits expenses 6 (24,052) (21,417)
Administration expenses (3,453) (1,840)
Depreciation expenses 14 (934) (730)
Finance costs 5 (3,789) (5,073)
Travel expenses (4,535) (1,811)
Rehabilitation expense 19 - (548)
Share of losses of associates 11 (959) (1,371)
Impairment of associates 11 - 2,572
Initial fair value of share options received 12 (ii) - 1,437
Change in fair value of financial assets
classified through profit or loss 12(ii) (4,320) 3,086
Other expenses 6 (72) (17)
Loss before tax (77,802) (53,243)
Income tax benefit / (expense) 7 (984) 1,017
Loss for the year (78,786) (52,226)
Other comprehensive income
Gain / (loss) on available-for-sale investments
taken to equity (3,278) 3,391
Income tax relating to components of other
comprehensive income 984 (1,017)
Other comprehensive (loss) / income for the
period net of tax (2,294) 2,374
Total comprehensive income for the period (81,080) (49,852)
Loss per share
From continuing and discontinued operations:
Basic (cents per share) 31 (22.0) (16.7)
Diluted (cents per share) 31 (22.0) (16.7)
Notes to the financial statements are included on pages 25 to 59.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Statement of financial position
21
Statement of financial position as at 31 December 2010
Consolidated
Note
2010
$’000
2009
$’000
Current assets
Cash and cash equivalents 158,983 11,823
Trade and other receivables 8 4,418 503
Inventories 9 6,248 137
Other financial assets 12 203 4,523
Other 10 3,919 526
Total current assets 173,771 17,512
Non-current assets
Investments accounted for using the equity
method 11 19,175 14,267
Other receivables 13 145 3,817
Other financial assets 12 3,052 6,331
Property, plant and equipment 14 58,290 4,642
Intangible assets 15 8,494 8,494
Total non-current assets 89,156 37,551
Total assets 262,927 55,063
Current liabilities
Trade and other payables 16 7,947 5,405
Provisions 19 4,439 622
Total current liabilities 12,386 6,027
Non-current liabilities
Provisions 19 40,327 3,720
Borrowings 17 28,788 52,570
Total non-current liabilities 69,115 56,290
Total liabilities 81,501 62,317
Net (liabilities) / assets 181,426 (7,254)
Equity
Issued capital and contributed equity 20 390,746 135,496
Reserves 21 29,077 16,861
Accumulated losses 22 (238,397) (159,611)
Total (deficiency) / equity 181,426 (7,254)
Notes to the financial statements are included on pages 25 to 59.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA PTY LIMITED
Statement of changes in equity
22
Statement of changes in equity for the financial year ended 31 December 2010
Consolidated
Issued capital
and
contributed
equity
Share option
reserve
Investment
revaluation
reserve
Share based
payments
reserve
Accumulated
losses Total
$’000 $’000 $’000 $’000 $’000 $’000
Balance at 1 January 2009 123,902 - - 13,405 (107,385) 29,922
Loss for the year - - - (52,226) (52,226)
Revaluation of other financial assets (note 21) - - 2,374 - - 2,374
Total comprehensive income for the period - - 2,374 - (52,226) (49,852)
Recognition of share-based payments (note 21) - - - 12,676 - 12,676
Performance rights exercised (note 20) 11,594 - - (11,594) - -
Balance at 31 December 2009 135,496 - 2,374 14,487 (159,611) (7,254)
Balance at 1 January 2010 135,496 - 2,374 14,487 (159,611) (7,254)
Loss for the year - - - - (78,786) (78,786)
Revaluation of other financial assets (note 21) - - (2,294) - - (2,294)
Total comprehensive income for the period - - (2,294) - (78,786) (81,080)
Recognition of share-based payments (note 21) - - - 9,340 - 9,340
Performance rights exercised (note 20) 13,748 - - (13,748) - -
Entitlement Offer (note 20 & 21) 250,243 - - - - 250,243
Options attaching to entitlement offer (note 21) - 18,918 - - - 18,918
Share issue costs (note 20) (8,741) - - - - (8,741)
Balance at 31 December 2010 390,746 18,918 80 10,079 (238,397) 181,426
Notes to the financial statements are included on pages 25 to 59.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA PTY LIMITED
Cash flow statement
23
Cash flow statement for the financial year ended 31 December 2010
Consolidated
Note
2010
$’000
2009
$’000
Cash flows from operating activities
Receipts from customers 30 41
Payments to suppliers and employees (64,226) (38,728)
Interest received 1,731 1,530
Interest and finance costs paid (48) (169)
Net cash (used in) / provided by operating activities 26 (62,513) (37,326)
Cash flows from investing activities
Payments for property, plant and equipment (3,379) (1,589)
Payments for asset acquisition – Barrick (Osborne) Pty Ltd (17,753) -
Payment for other financial assets - (2,939)
Payment for investment in associate (5,867) (3,409)
Refund / (payment) of security deposit 3,735 (584)
Proceeds from sale of property, plant and equipment 40 -
Net cash used in investing activities (23,224) (8,521)
-
Cash flows from financing activities
Proceeds from issues of equity securities 269,161 -
Payment for share issue costs (8,740) -
Proceeds from borrowings 29,000 -
Repayment of borrowings (56,524) -
Net cash (used in) / provided by financing activities 232,897 -
Net (decrease) / increase in cash and cash equivalents 147,160 (45,847)
Cash and cash equivalents
at the beginning of the financial year
11,823 57,670
Cash and cash equivalents
at the end of the financial year 158,983 11,823
Notes to the financial statements are included on pages 25 to 59.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
24
Notes to the financial statements for the financial year ended 31 December 2010
Note Contents
1 General information
2 Summary of accounting policies
3 Segment information
4 Revenue
5 Finance costs
6 Loss for the year
7 Income taxes
8 Trade and other receivables
9 Inventories
10 Other current assets
11 Investments accounted for using the equity method
12 Other financial assets
13 Non – current other receivables
14 Property, plant and equipment
15 Intangibles
16 Trade and other payables
17
18
Borrowings
Parent entity disclosures
19 Provisions
20 Issued capital and contributed equity
21 Reserves
22 Accumulated losses
23 Commitments
24 Contingent liabilities
25 Subsidiaries
26 Notes to the cash flow statement
27 Financial instruments
28 Key management personnel compensation
29 Related party transactions
30 Remuneration of auditors
31 Earnings per share
32 Share-based payments
33 Subsequent events
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
25
1. General information
Ivanhoe Australia is a company limited by shares, incorporated and domiciled in Australia. Ivanhoe Australia‟s registered
office and its principal place of business are as follows:
Registered office Principal place of business
Ivanhoe Australia Limited Ivanhoe Australia Limited
Level 9 Level 9
479 St Kilda Road 479 St Kilda Road
Melbourne VIC 3004 Melbourne VIC 3004
2. Summary of accounting policies
Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act
2001, Accounting Standards and Interpretations, and complies with other requirements of the law.
The financial report includes the separate financial statements of the Company and the consolidated financial statements of the Group.
The financial report has been prepared in accordance with Accounting Standards and Interpretations. Accounting Standards include Australian equivalents to International Financial Reporting Standards ('A-IFRS'). Compliance with A-IFRS ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards ('IFRS').
Basis of preparation
The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.
The financial statements were authorised for issue by the directors on 29 March 2011.
Critical Accounting Estimates and Judgements
In the application of the Group‟s accounting policies, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Rehabilitation and dismantling provisions
The Group‟s accounting policy for rehabilitation and dismantling provisions requires significant estimates and assumptions
including estimates of the cost, timing and extent of rehabilitation activities as well as changes in discount rates. These
uncertainties may result in future actual expenditure differing from the amounts currently provided.
The provision recognised for each site is periodically reviewed and updated based on the facts and circumstances available
at the time. The provision at balance date represents management‟s best estimate of the present value of future rehabilitation
costs required.
Impairment of other tangible and intangible assets At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication of impairment exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. The determination of fair value and value in use requires management to make estimates and assumptions about items such as expected production and sales volumes, commodity prices, reserves, operating costs and discount rates. These estimates and assumptions are subject to uncertainty and changes to these factors would impact the recoverable amount of the assets.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
26
2. Summary of accounting policies (con’t)
Critical Accounting Estimates and Judgements (con’t) Income Taxes The Group‟s accounting policy for taxation requires management‟s judgement in determining the recognition of deferred tax assets on the statement of financial position. Deferred tax assets, including those arising from historical tax losses, capital losses and temporary differences are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised.
Assumptions about the generation of future taxable profits depend on management‟s estimates of future cash flows.
Share Based Payments Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a Black – Scholes pricing model. The expected life used in the model has been adjusted, based on management‟s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. Further details on how the fair value of equity-settled share-based transactions has been determined can be found in note 32.
Adoption of new and revised Accounting Standards
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting
period beginning 1 January 2010. Details of the impact of the adoption of these new accounting standards are set out in the
individual accounting policy notes set out below.
Standards and Interpretations issued not yet effective
At the date of authorisation of the financial report, the Standards and Interpretation listed below were in issue but not yet effective:
Standard/Interpretation
Effective for annual reporting periods
beginning on or after
AASB 124 „Related Party Disclosures (revised December 2009),
AASB 2009-12 Amedments to Australian Accounting Standards‟
1 January 2011
AASB 9 „Financial Instruments, AASB 2009-11 Amendments to
Australian Accounting Standards arising from ASSB 9‟
AASB 2009-14 „Amendments to Australian Interpretation –
Prepayments of a Minimum Funding Requirement‟
Interpretation 19 „Extinguishing Financial Liabilities with Equity
Instruments‟
1 January 2013
1 January 2011
1 July 2010
2. Summary of accounting policies (con’t)
Adoption of new and revised Accounting Standards (con’t)
These Standards and Interpretations will be first applied in the financial report of the Group that relates to the annual
reporting period beginning after the effective date of each pronouncement.
The following significant accounting policies have been adopted in the preparation and presentation of the financial report:
(a) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) (referred to as 'the Group' in these financial statements). A controlled entity is any entity Ivanhoe Australia Limited has the power to control the financial and operating policies of the entity so as to obtain benefits from its activities.
All inter-company balances and transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the Company.
(b) Borrowing costs
All borrowing costs, except to the extent that they are directly attributable to the acquisition, construction or production of qualifying assets, are recognised in profit or loss in the period in which they are incurred.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
27
2. Summary of accounting policies (con’t)
(c) Cash and cash equivalents
Cash comprises cash on hand, cash at call and short-term deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(d) Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of short term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.
(e) Exploration and evaluation expenditure
Exploration costs are expensed in the year in which it is incurred until such time as it has been determined that the area of interest has economically recoverable reserves, in which case subsequent exploration costs and the costs incurred to develop the area of interest are capitalised.
Presently, all exploration and evaluation expenditure is expensed in the year in which it is incurred.
(f) Financial assets
Investments are recognised and derecognised on trade date where the purchase order or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value.
Subsequent to initial recognition, investments in subsidiaries are measured at cost in the financial statements. Subsequent to initial recognition, investments in associates are accounted for under the equity method in the consolidated financial statements and the cost method in the financial statements.
Other financial assets are classified in the following categories: financial assets 'at fair value through profit or loss', 'held-to-maturity investments', 'available-for-sale' financial assets, and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, „at fair value through profit or loss‟.
At fair value through profit or loss
An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial Instruments are designated at fair value through profit or loss if Ivanhoe Australia manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company‟s investment strategy. Upon initial recognition, the attributable transaction costs are recognised in profit or loss when incurred. Financial instruments that are at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.
Available-for-sale financial assets
Ivanhoe Australia‟s investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign exchange gains and losses on available for sale monetary items, are recognised as a separate component of equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss.
Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest rate method less impairment.
Interest is recognised by applying the effective interest rate.
(g) Financial instruments issued by the Company
Interest and dividends
Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the related debt or equity instruments.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
28
2. Summary of accounting policies (con’t)
(h) Foreign currency
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each entity are expressed in Australian dollars, which is the functional currency of Ivanhoe Australia Limited, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise.
(i) Impairment of other tangible and intangible assets
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication of impairment exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of the asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in the profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.
(j) Income taxes
Current tax
Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date. Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).
Deferred tax
Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.
In principle, deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised. However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences arising from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, branches and associates, and interests in joint ventures except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with these investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset
and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted by reporting date. The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the
carrying amount of its assets and liabilities.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
29
2. Summary of accounting policies (con’t)
(j) Income taxes (cont’)
Deferred tax (con‟t)
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Company/Group intends to settle its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.
Tax consolidation
The Company and its wholly-owned Australian resident subsidiary are part of a tax consolidated group under Australian tax law, effective from 1 January 2007. Ivanhoe Australia Limited is the head entity in the tax-consolidated group. Tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax consolidated group are determined using the „separate taxpayer within group‟ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax consolidated group are recognised by the Company (as head entity in the tax-consolidated group).
Due to the existence of a tax funding arrangement between the entities in the tax-consolidated group, amounts are recognised as payable to or receivable by the Company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and other members of the tax-consolidated group in accordance with the arrangements.
Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised as a contribution from (or distribution to) equity partic ipants.
(k) Intangible assets
Mine tenements
Mine tenements recognised by the consolidated entity are recorded at cost less accumulated amortisation and any impairment losses. Amortisation of costs is provided on a unit-of-production method. The unit-of-production basis results in an amortisation charge proportional to the depletion of the economically recoverable mineral reserves. The net carrying value of each mine tenement is reviewed regularly and, to the extent to which this value exceeds its recoverable amount, the excess amount is either fully provided against or written off in the financial year in which this is determined.
(l) Inventories
Inventories of consumable supplies and spare parts are valued at lower of cost and net realisable value.
(m) Pastoral property leases
Pastoral property leases have been included in Property, Plant and Equipment. Refer to note 2(n).
(n) Property, plant and equipment
Leasehold land
Pastoral property leases have been included in Property, Plant and Equipment and are stated at cost less accumulated amortisation and impairment.
Plant and equipment
Buildings and plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.
Depreciation
Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated residual value. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.
The depreciation rates used for each class of depreciable assets are:
Buildings 10%
Plant and equipment 10-20%
Leasehold land 3.5%
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
30
2. Summary of accounting policies (con’t)
(o) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
Rehabilitation and dismantling provisions
An obligation to incur restoration, rehabilitation and environmental costs arises when an environmental disturbance is caused by the development or ongoing production of an area of interest. Costs arising from the installation of plant and other site preparation work, discounted to their net present values, are provided for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. These costs are charged against profits over the life of the mine, through the depreciation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent environmental disturbance which is created on an ongoing basis during production are provided for at their net present values and charged against profits as extraction progresses. Such costs arising from exploration activities not associated with development projects are expensed in the period incurred.
Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work that result from changes in the estimated timing or amount of the cash flow, or a change in the discount rate, are added to, or deducted from, the cost of the related asset in the current period. If a decrease in the liability exceeds the carrying amount of the asset, the excess shall be recognised immediately in the statement of comprehensive income. If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy above.
(p) Revenue
Revenue is measured at the fair value of the consideration received or receivable, and is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured.
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset to that asset‟s net carrying amount.
(q) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax ('GST'), except:
i. where the amount of GST incurred is not recoverable from the Australian Taxation Office, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or
ii. for receivables and payables with are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included as part of receivables or payables.
Cash flows are included in the cast flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the Australian Taxation Authority is classified as operating cash flows.
(r) Joint venture arrangements
Jointly controlled assets
Interests in jointly controlled assets in which the Group is a venturer and has joint control are included in the financial statements by recognising the Group‟s share of jointly controlled assets (classified according to their nature), the share of liabilities incurred (including those incurred jointly with other venturers) and the Group‟s share of expenses incurred by or in respect of each joint venture. The Group also recognises income from the sale or use of output from the joint venture in accordance with the revenue policy in note 2(p).
The Group‟s interest in assets where the Group does not have joint control are accounted for in accordance with the substance of the Group‟s interest. Where such arrangements give rise to an undivided interest in the individual assets and liabilities of the joint venture, the Group recognises its undivided interest in each asset and liability and classifies and presents those items according to their nature.
Jointly controlled entities
Interests in jointly controlled entities in which the Group is a venturer (and so has joint control) are accounted for under the equity method in the consolidated financial statements. Investments in jointly controlled entities where the Group is an investor but does not have joint control over that entity are accounted for as an available-for-sale financial asset or, if the Group has significant influence, by using the equity method (refer note 2 (s)).
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
31
2. Summary of accounting policies (con’t)
(s) Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a
joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but
is not control or joint control over those policies.
The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of
accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with
AASB 5 „Non-current Assets Held for Sale and Discontinued Operations‟. Under the equity method, investments in
associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group‟s
share of the net assets of the associate, less any impairment in the value of individual investments.
Losses of an associate in excess of the Group‟s interest in that associate (which includes any long-term interests that, in
substance, form part of the Group‟s net investment in the associate) are recognised only to the extent that the Group has
incurred legal or constructive obligations or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group‟s share of the net fair value of the identifiable assets, liabilities and
contingent liabilities of the associate recognised at the date of the acquisition is recognised as goodwill. The goodwill is
included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess
of the Group‟s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of the
acquisition, after reassessment, is recognised immediately in profit or loss.
Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group‟s
interest in the relevant associate.
(t) Share-based payments
Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of
the equity instrument at the grant date. Fair value is measured by use of a Black – Scholes pricing model. The expected life
used in the model has been adjusted, based on management‟s best estimate, for the effects of non-transferability, exercise
restrictions, and behavioural considerations. Further details on how the fair value of equity-settled share-based transactions
has been determined can be found in note 32.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the Group‟s estimate of equity instruments that will eventually vest.
At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of
the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with
corresponding adjustment to the equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with other parties are measured at the fair value of the goods and services
received, except where the fair value cannot be estimated reliably, in which case they are measured at the fair value of the
equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the
current fair value determined at each reporting date.
(u) 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 period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary
shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary
shares.
(v) Lease payments
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability.
The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are
consumed.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED Notes to the financial statements
32
2. Summary of accounting policies (con’t) (w) Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or where appropriate a shorter period, to the net carrying amount on initial recognition. 3. Segment information Information reported to the Group’s Chief Executive Officer for the purposes of resource allocation and assessment of performance is focused on 3 key business segments. The Group’s reportable segments under AASB 8 are as follows:
• Melbourne • Cloncurry, Queensland • Tennant Creek, Northern Territory
The Melbourne office segment provides administration support and is responsible for the treasury function and the managing of investments in Exco Resources Limited and Emmerson Resources Limited. The Cloncurry segment located in Queensland, Australia undertakes exploration on the Group’s mining leases and exploration tenements. The Tennant Creek segment activities relate to the exploration of the mining leases and exploration tenements in connection with the Emmerson Resources Limited joint venture agreement. Information regarding these segments is presented below. The following is an analysis of the Group’s revenue and results by reportable operating segments for the periods under review:
Revenue Segment loss 2010
$’000 2009 $’000
2010 $’000
2009 $’000
Continuing operations Cloncurry - - (56,417) (31,525) Melbourne 3,774 1,550 (7,912) (13,864) Tennant Creek - - (8,179) (7,483) Total of all Segments 3,774 1,550 (72,508) (52,872) Unallocated items Interest revenue 3,774 1,550 Finance costs (3,789) (5,073) Iinitial fair value of share options received - 1,437 Change in fair value of financial assets classified as fair value through profit or loss (4,320) 3,086 Share of loss of associate (959) (1,371) Income tax benefit/(expense) (984) 1,017 Total loss before tax (78,786) (52,226) Gain / (loss) on available-for-sale investments taken to equity (3,278) 3,391 Income tax relating to components of other comprehensive income 984 (1,017) Total comprehensive income for the period (81,080) (49,852) The revenue reported above represents the revenue generated from external customers. Segment loss represents the loss incurred by each segment without the allocation of share of losses of associate, interest revenue, change in fair value of financial assets classified as fair value through profit or loss, finance costs and income tax expense. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED Notes to the financial statements
33
4. Revenue
Consolidated
2010 $’000
2009 $’000
Interest revenue:
Bank deposits 3,774 1,550 All revenue relates to continuing operations. 5. Finance costs
Consolidated
2010 $’000
2009 $’000
Interest and finance costs on bank arrangements 47 170
Interest on parent entity loan 3,742 140 Non-cash interest on parent entity loan - 4,763 3,789 5,073
6. Loss for the year (a) Gains and losses Loss for the year has been arrived at after crediting/(charging) the following gains and losses:
Consolidated
2010 $’000
2009 $’000
Loss on disposal of property, plant and equipment (32) -
Net foreign exchange gains/(losses) (40) (17) (72) (17)
(b) Other expenses Loss for the year includes the following expenses:
Consolidated
2010 $’000
2009 $’000
Rental expenses (1,556) (1,077) Employee benefit expense: Defined contribution plans (936) (578) Share based payments (note 32 (i)) (51) (28) Share based payments (note 32 (ii)) (9,341) (12,676) Salaries and wages (13,724) (8,135)
(24,052) (21,417)
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
34
7. Income taxes
Income tax recognised in profit or loss
Consolidated
2010
$’000
2009
$’000
Deferred tax benefit / (expense) relating to
the origination and reversal of temporary
timing differences and tax losses
(984) 1,017
Total tax benefit / (expense) (984) 1,017
The prima facie income tax expense on pre-tax accounting profit / (loss) from operations reconciles to the income tax expense in the financial statements as follows:
Loss before tax from continuing operations (77,802) (53,243)
Income tax benefit calculated at 30% 23,341 15,973
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income
(2,803)
(3,841)
Deferred tax losses not brought to account (18,320) (11,642)
Deferred tax assets (temporary) not brought to account
(1,699) -
Over provision not brought to account from prior year
(1,503)
508
Deductible expenses for tax not booked (investment allowance)
- 19
Total tax benefit / (expense) (984) 1,017
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.
Income tax recognised directly in equity
2010
Before tax
$’000
Tax (expense)
benefit
$’000
Net of tax
$’000
Investment – Emmerson Resources Shares (3,278) 984 (2,294)
(3,278) 984 (2,294)
Unrecognised deferred tax balances Consolidated
2010
$’000
2009
$’000
The following deferred tax assets have not been brought to account:
- tax losses – revenue 59,887 40,236
- other temporary differences 4,370 355
64,257 40,591
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
35
7. Income taxes (con’t)
Recognised deferred assets and tax liabilities
Consolidated
2010
$’000
2009
$’000
The following deferred tax balances have been brought to account:
Deferred tax assets
- Equity account investments - 1,699
- Provisions 616 1,003
- Share issue costs 3,038 1,571
- Tax losses 2,475 -
Deferred tax liabilities
- Accrued income (613) (6)
- Unrealised gain (65) (1,357)
- Prepayments (84) (55)
- Property, plant & equipment (3,127) (957)
- Intangible assets (1,748) (1,898)
- Other assets (492) -
- -
Deferred tax balances
Deferred tax assets/(liabilities) arise from the following:
Consolidated
2010
Opening balance
Charged to
income
Charged to
equity
Recycled from
equity to
income Closing balance
$’000 $’000 $’000 $’000 $’000
Temporary differences
Equity accounted investments 1,699 (1,699) - - -
Provisions 1,003 (387) - - 616
Share issue costs 1,571 1,467 - - 3,038
Accrued income (6) (607) - - (613)
Fair value through profit or loss financial assets (1,357) 1,292 - - (65)
Prepayments (55) (29) - - (84)
Property, plant & equipment (957) (2,170) - - (3,127)
Intangible assets (1,898) 150 - - (1,748)
Other assets - (492) - - (492)
Tax losses - 2,475 - - 2,475
Available for sale financial assets - (984) 984 - -
- (984) 984 - -
Deferred tax (liability) (6,129)
Deferred tax asset 6,129
Presented in the statement of financial position as follows: -
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
36
7. Income taxes (cont’d)
Consolidated
2009
Opening balance
Charged to
income
Charged to
equity
Recycled from
equity to
income Closing balance
$’000 $’000 $’000 $’000 $’000
Temporary differences
Equity accounted investments 2,059 (360) - - 1,699
Provisions (1,429) 2,432 - - 1,003
Share issue costs 2,091 (520) - - 1,571
Accrued income - (6) - - (6)
Fair value through profit or loss financial assets - (1,357) - - (1,357)
Prepayments - (55) - - (55)
Property, plant & equipment (698) (259) - - (957)
Intangible assets (1,898) - - - (1,898)
Available-for-sale financial assets - 1,017 - (1,017) -
Other financial liabilities 1,084 (1,084) - - -
Deferred tax assets not brought to account (1,209) 1,209 - - -
- 1,017 - (1,017) -
Deferred tax (liability) (4,273)
Deferred tax asset 4,273
Presented in the statement of financial position as follows: -
8. Trade and other receivables
Consolidated
2010
$’000
2009
$’000
Goods and services tax recoverable 1,620 406
Diesel fuel rebate 32 13
Accrued Interest 2,044 21
Related party receivables (note 29) 57 58
Other 665 5
4,418 503
9. Inventories
Consolidated
2010
$’000
2009
$’000
Finished goods (purchased) 16 16
Consumable supplies and spare parts (i) 6,232 121
6,248 137
(i) Forming part of the Osborne Copper Gold transaction (refer Note 14) was the aquisition of inventory of $5,730,861
recorded at fair value. The balance increasing with the purchase of inventory from the acquisition date to the
reporting date.
10. Other current assets
Consolidated
2010
$’000
2009
$’000
Prepayments (i) 3,919 526
3,919 526
(i) Forming part of the Osborne Copper Gold transaction (refer Note 14) was the prepayment of gas under contract
with the ability to utilise the gas in the future.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
37
11. Investments accounted for using the equity method
a) Consolidated
b)
2010
$’000
2009
$’000
Investments in associates 19,175 14,267
19,175 14,267
Reconciliation of movement in investments
accounted for using the equity method:
Balance at 1 January 14,267 9,657
Additional investment in associate 5,867 3,409
Share of losses (post significant influence) (959) (1,371)
Impairment reversal / (charge) (ii) - 2,572
Balance at 31 December 19,175 14,267
The fair value of Exco Resources Limited (“Exco”) is $45,194,520 (2009: $14,805,510), this is based on the priced quoted on
the Australia Securities Exchange as at 31 December 2010.
Name of entity
Country of incorporation Principal activity
Ownership interest
2010
%
2009
%
Associates
Exco Resources Limited Australia Mineral exploration 22.9 20.2
(i) The reporting date of Exco is 30 June. For the purposes of applying the equity method of accounting, the financial
statements of the associate for the year ended 30 June 2010 (2009: 30 June 2009) and financial statements for the six
months ended 31 December 2010 (2009: 31 December 2009) have been used.
(ii) During the 2009 financial year the impairment charge of $2,572,182 recorded on the Exco investment was reversed.
Summarised financial information in respect of the Group‟s associates is set out below:
Consolidated
2010
$’000
2009
$’000
Financial position:
Total assets 82,926 77,454
Total liabilities 6,766 (15,645)
Net assets 76,160 61,809
Group‟s share of associates‟ net assets 17,441 12,485
Financial performance:
Total revenue 38,345 683
Total profit / (loss) for the year before tax 9,597 (3,928)
Income tax expense (806) -
Net profit / (loss) for the year 8,791 (3,928)
Group‟s share of associate‟s profit / (loss) (959) (1,371)
Dividends received from associates
No dividends were received during the year (2009: Nil) from its associate.
Commitments
The Group‟s share of the exploration commitments and operating leases of associates is disclosed in note 23.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
38
12. Other financial assets Consolidated
2010
$’000
2009
$’000
Current
At fair value
Options – at fair value (ii) 203 4,523
203 4,523
Non-current
At fair value
Available for sale – shares at fair value (i) 3,052 6,331
3,052 6,331
(i) On 16 April 2009, Ivanhoe Australia announced that it had entered into a private placement investment in, and a
joint-venture agreement with, Emmerson Resources Limited („Emmerson‟). Emmerson is an Australian mineral
exploration company listed on the ASX. The private placement consisted of 22.61 million units at a price of $0.13
per share and for a cost of $2.939m which represents the fair value of the private placement. This has resulted in
Ivanhoe Australia holding approximately 10% of Emmerson common shares. The recorded fair value at 31
December 2010 of $3,052,350 (2009: $6,330,800) has been determined by reference to the price of $0.135 per
share quoted on the Australia Securities Exchange as at 31 December 2010 (2009: $0.28). The gain on available
for sale assets has been recognised in equity.
(ii) At the time of entering the joint venture agreement and private placement, Ivanhoe Australia received 27.9 million
share options in Emmerson. One full share option allows Ivanhoe Australia to purchase one Emmerson common
share at a price of $0.20 on, or before, April 16, 2011. These options were fair valued upon acquisition and at
period end with any gain or loss taken to the income statement. The options were acquired for nil consideration.
The recorded fair value at 31 December 2010 of $203,288 (2009: $4,523,273) has been determined using the
Black-Scholes option pricing model at $0.007 (2009: $0.162) per share. At April 16, 2009 the options were valued at
$1,437,350 at $0.052 per share.
Fair value of financial instruments
The fair values of the financial assets were determined as follows:
The fair value of the share on recognition and subsequently has been determined with reference to quoted market
prices; and
The fair value on recognition of the share options has been determined using the Black-Scholes option pricing
method; and
The subsequent fair value of the share options has been determined with reference to quoted market prices.
13. Non-current other receivables
Consolidated
2010
$’000
2009
$’000
Security deposits (i) 145 3,817
145 3,817
(i) The current year security deposits relate to Exploration Permits held by the Queensland Government Department
of Mines and Energy. The prior year deposits held by the Queensland Government Department of Mines and Energy
is a combination of a performance guarantee in relation to the rehabilitation of the mine site area and deposits for
Exploration Permits.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
39
14. Property, plant and equipment
Consolidated
Leasehold
land
Buildings
Plant and equipment at
cost Total
$’000 $’000 $’000 $’000
Gross carrying amount
Balance at 1 January 2009 1,351 664 2,773 4,788
Additions - 731 858 1,589
Disposals - - - -
Balance at 1 January 2010 1,351 1,395 3,631 6,377
Additions - 300 3,079 3,379
Asset Acquisition (i) - 13,584 37,691 51,275
Disposals - - (80) (80)
Balance at 31 December 2010 1,351 15,279 44,321 60,951
Accumulated depreciation
Balance at 1 January 2009 (237) (154) (614) (1,005)
Disposals - - - -
Depreciation expense (47) (111) (572) (730)
Balance at 1 January 2010 (284) (265) (1,186) (1,735)
Disposals - - 8 8
Depreciation expense (47) (149) (738) (934)
Balance at 31 December 2010 (331) (414) (1,916) (2,661)
Net book value
As at 31 December 2009 1,067 1,130 2,445 4,642
As at 31 December 2010 1,020 14,865 42,405 58,290
(i) On 30 September 2010, the Company completed its acquisition of the Osborne Copper and Gold assets.
The assets acquired consisted of property plant equipment, buildings, inventories (note 9) and prepayments (note 10).
The liabilities assumed under the terms of the transaction were the rehabilition provision and an onerous contract (note 19).
Aggregate depreciation allocated, which is recognised as an expense during the year:
Consolidated
2010
$’000
2009
$’000
Leasehold land 47 47
Buildings 149 111
Plant and equipment 738 572
934 730
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
40
15. Intangibles
Consolidated
Mine Tenements Total $’000 $’000
Gross carrying amount
Balance at beginning of year 8,494 8,494
Balance at 31 December 2010 8,494 8,494
Accumulated amortisation and impairment
Balance at beginning of year - -
Balance at 31 December 2010 - -
Net book value
As at 31 December 2009 8,494 8,494
As at 31 December 2010 8,494 8,494
The Company did not hold any intangible assets during the current or comparative reporting period.
16. Trade and other payables
Consolidated
2010
$’000
2009
$’000
Trade payables (i) 7,212 4,723
Accrued expenses and sundry payables 735 682
7,947 5,405
(i) Payment terms for the Consolidated entity during the current year and comparative period average 30 days.
17. Borrowings
Consolidated
2010
$’000
2009
$’000
Unsecured – at amortised cost
Loans from:
Ultimate parent entity (i) 28,788 52,570
28,788 52,570
Disclosed in the financial statements as:
Non-current borrowings 28,788 52,570
28,788 52,570
(i) The amount payable to the ultimate parent entity, Ivanhoe Mines Ltd, is by way of a 5 year maturity loan from 17
June 2008 and is interest free for a period of 18 months from 17 June 2008 and thereafter accrues interest at the
rate of BBR plus 2.5% per annum. The loan is repayable in full on 17 June 2013. Interest expense accrued for the
financial year is $3,741,529 (2009: $140,268).
During the year an amount of $56,524,000 (2009: nil) was repaid to Ivanhoe Mines Ltd. The repayment amount
consisted of the repayment of the line of credit totalling $29,614,550 (including interest amount of $614,550) and
part repayment of the loan totalling $26,909,450 (including interest of $1,790,551).
On the 30 December 2009, the consolidated entity entered into a loan agreement for a $30 million Line of Credit
with Ivanhoe Mines Ltd. Each advance under this Line of Credit incurs interest at a rate of BBR plus 4% per
annum. During the year, $29,000,000 was drawn down from the line of credit (2009: nil). Borrowing costs of
$614,550 (2009: nil) were incurred on the drawn down funds (2009: nil).
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
41
18. Parent entity disclosures
Financial position
2010
$’000
2009
$’000
Assets
Current assets 160,512 14,288
Non – current assts 49,703 31,029
Total Assets 210,215 45,317
Liabilities
Non – current liabilities 28,788 52,570
Total Liabilities 28,788 52,570
Equity
Issued capital 390,746 135,496
Retained earnings (238,396) (159,610)
Reserves
Investment revaluation 80 2,374
Share based payment 10,079 14,487
Share option 18,918 -
Total Equity 181,427 (7,253)
Financial performance
Loss for the year (i) (78,786) (51,506)
Other comprehensive income net of tax (2,294) 2,374
Total comprehensive income (81,080) (49,132)
(i) Loss for the year included an impairment charge recognised during the year based on the liquidity and recoverable
value of assets of the subsidiary entity.
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity, Ivanhoe Australia Limited, has given a letter of financial support to guarantee that the wholly-owned
subsidiary entities will meet their debts as and when they fall due. The total liabilities of the subsidiaries, excluding amounts
owed to the parent entity, are:
2010
$’000
2009
$’000
Total liabilities of subsidiary 52,713 9,686
Contingent liabilities of the parent entity
2010
$’000
2009
$’000
Financial assurance guarantees (i) 22,014 -
(i) During the financial year, the parent entity entered into an agreement as guarantor to it‟s subsidiary entities for
Guarantees provided to the Queensland Department of Mines and Energy in satisfaction of financial assurances
required to be held to ensure compliance with relevant provisions of the Mineral Resources Act 1989, the
Environmental Protection Act 1994 and Environmental Protection and Other Legislation Amendment Act 2000.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
42
19. Provisions
Consolidated
2010
$’000
2009
$’000
Current
Employee benefits 841 622
Onerous contract (note 14) 3,598 -
4,439 622
Non-current
Rehabilitation provision 31,842 3,720
Onerous contract 8,485 -
40,327 3,720
44,766 4,342
Rehabilitation provision
Consolidated
2010
$’000
2009
$’000
Balance at beginning of year 3,720 3,172
Increase in provision (i) - 548
Additional provision acquired (ii) 28,122 -
Balance at end of year 31,842 3,720
(i) In 2009, an independent environmental consultant prepared a revised plan of operations resulting in an increase in
the provision for rehabilitation costs based on current market rates.
(ii) An additional rehabilitation provision is required for the “Osborne Project Plan of Operations” which relates to the
Osborne mine site acquired during the year (note 14).
Onerous contract provision
Consolidated
2010
$’000
2009
$’000
Balance at beginning of year - -
Provision acquired (iii) 13,666 -
Provision recognised during the year (1,583) -
Balance at end of year 12,083 -
(iii) A provision is required for minimum supply requirements in gas supply agreements. The agreements were acquired
during the year as part of the Osborne mine site acquisition (note 14).
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
43
20. Issued capital and contributed equity
Consolidated
2010
$’000
2009
$’000
Ordinary shares 385,744 130,494
Contributed equity 5,002 5,002
390,746 135,496
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from
1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a
par value.
2010 2009
No. $’000 No. $’000
Ordinary shares
Balance at beginning of year 318,300,203 130,494 312,500,000 118,900
Issue of shares from entitlement offer (i) 93,458,650 250,243 - -
Share issue costs - (8,741) - -
Performance rights exercised 6,651,250 13,748 5,800,203 11,594
Balance at end of financial year 418,410,103 385,744 318,300,203 130,494
Ordinary shares carry one vote per share and carry the right to dividends.
(i) Entitlement Offering: On 13 August 2010, Ivanhoe Australia offered shareholders the right to acquire 1 new share for
every 4 existing shares held and 1 free attaching option for every 2 new shares acquired under the entitlement offer
(refer note 21).
2010
$’000
2009
$’000
Contributed equity
Discount on intercompany loan 7,145 7,145
Deferred tax attributable (2.143) (2.143)
Balance at end of financial year 5.002 5,002
21. Reserves
Consolidated
2010
$’000
2009
$’000
Investment revaluation reserve 80 2,374
Share based payment reserve 10,079 14,487
Share option reserve 18,918 -
29,077 16,861
Investment revaluation reserve
Consolidated
2010
$’000
2009
$’000
Balance at beginning of year 2,374 -
Valuation gain / (loss) recognised (3,278) 3,391
Deferred tax attributable to loss/gain 984 (1,017)
Balance at end of year 80 2,374
The investments revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued
financial asset is sold that portion of the reserve which relates to that financial asset, and is effectively realised, is in the
profit or loss. Where a revalued financial asset is impaired the portion of the reserve which relates to that financial asset
is recognised in the profit or loss.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
44
21. Reserves (con’t)
Share based payments reserve
Consolidated
2010
$’000
2009
$’000
Balance at beginning of year 14,487 13,405
Performance rights exercised during the
year (13,748) (11,594)
Recognised during the year 9,348 12,676
Performance rights cancelled during the
year (8) -
Balance at end of year 10,079 14,487
The share based payments reserve arises on the grant of performance rights to directors and employees under the share
plan. Amounts are recognised in accordance with note 2(t). Amounts are transferred out of the reserve and into issued
capital when the performance rights are exercised. Further information about share based payment to employees is made in
note 32 to the financial statements.
Share option reserve
Consolidated
2010
$’000
2009
$’000
Balance at beginning of year - -
Recognised during the year (note 20 (i)) 18,918 -
Balance at end of year 18,918 -
As at 31 December 2010 the consolidated group has 46,729,404 share options on issue (2009: nil), exercisable on a 1:1 basis for 46,729,404 ordinary shares of the consolidated group (2009: nil) at an exercisable price of $3.38. The options expire on 20 September 2011. As at the date of this report, a total of 46,729,204 such options were on issue. During and since the end of the financial year the Company has issued a total of 200 fully paid ordinary shares as a result of the exercise of such options.
A holder of an option does not have a right to participate in any new issue of securities to existing shareholders by virtue of holding the option, unless they exercise their option, and acquire the underlying share, prior to the record date for determining entitlements to the new issue of securities and participate in the new issue as a result of being a holder of shares.
22. Accumulated losses Consolidated
2010
$’000
2009
$’000
Balance at beginning of year (159,611) (107,385)
Net (loss) attributable to members of the
parent entity (78,786) (52,226)
Balance at end of year (238,397) (159,611)
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
45
23. Commitments Consolidated
2010
$’000
2009
$’000
(a) Exploration commitments
In order to maintain current rights of tenure to
exploration and mining tenements there is an
annual exploration expenditure requirement up
until the expiry.
These obligations, which are subject to
renegotiation upon expiry, are not
provided for in the financial statements and are
payable:
- Not longer than 1 year 5,287 7,603
- Longer than 1 year and not longer than 5 years 18,208 20,851
- Longer than 5 years - -
23,495 28,454
Group‟s share of associates exploration
commitments
- Not longer than 1 year 39 1,032
- Longer than 1 year and not longer than 5 years - -
- Longer than 5 years - -
39 1,032
(b) Operating leases
These obligations are not provided for in the financial report and are payable.
Non- cancellable operating rentals are as follows:
- Not longer than 1 year 119 163
- Longer than 1 year and not longer than 5 years - 119
- Longer than 5 years - -
119 282
Group‟s share of associates operating leases
Non- cancellable operating rentals are as follows:
- Not longer than 1 year 15 17
- Longer than 1 year and not longer than 5 years - 12
- Longer than 5 years - -
15 29
24. Contingent liabilities Consolidated
2010
$’000
2009
$’000
Guarantees
Details and estimates of maximum amounts of
contingent liabilities are as follows:
Financial assurance guarantees 22,014 3,817
In the current year the consolidated entity provided security guarantees to the Queensland Department of Mines and
Energy in satisfaction of financial assurances required to be held to ensure compliance with relevant provisions of the
Mineral Resources Act 1989, the Environmental Protection Act 1994 and Environmental Protection and Other Legislation
Amendment Act 2000. In the prior year security deposits were held in satisfaction of the financial assurances.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
46
25. Subsidiaries
Name of entity Country of incorporation
Ownership interest
2010 %
2009 %
Parent entity
Ivanhoe Australia Limited (i) Australia n/a n/a
Subsidiaries
Ivanhoe Cloncurry Mines Pty Limited (i)
Ivanhoe Australia Operations Pty Limited (i)
Ivanhoe (Osborne) Pty Limited (i)
Ivanhoe Australia Tennant Creek Pty Limited (i)
Australia
Australia
Australia
Australia
100
100
100
100
100
100
-
100
(i) These entities are part of the tax consolidated group.
26. Notes to the cash flow statement
Reconciliation of profit / (loss) for the period to net cash flows from operating activities
Consolidated
2010
$’000
2009
$’000
(Loss) for the year (78,786) (52,226)
Loss on disposal of property, plant and
equipment
32 -
Fair value of share options granted as income - (1,437)
Change in fair value of financial assets 4,320 (3,086)
Share of associates‟ loss 959 1,371
Depreciation of property, plant and equipment 934 730
Equity-settled share-based payment 9,341 12,676
Non-cash interest expense 3,742 141
Discount on intercompany loan - 4,763
Impairment of associate - (2,572)
Changes in net assets and liabilities:
(Increase) / decrease in assets:
Trade and other receivables (3,914) 808
Inventories (380) (110)
Other assets 2,819 (94)
Movement in deferred tax 984 (1,017)
Increase / (decrease) in liabilities:
Trade and other payables 2,543 2,000
Provisions (1,365) 727
Borrowings (3,742) -
Net cash from operating activities (62,513) (37,326)
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
47
27. Financial instruments
(a) Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 2 to the financial statements.
(b) Financial Risk Management
The Company has exposure to various risks from the use of financial instruments. The Company‟s principal financial instruments comprise cash, receivables, payables and other financial assets and liabilities. This note presents information about the Company‟s exposure to risk from the use of financial instruments. Further quantitative disclosures are included throughout this financial report. Financial risks including credit risk, liquidity risk, and market risk (interest rate risk, commodity risk and foreign currency risk) are managed such to maintain an optimal capital structure. The Company does not enter into derivative transactions to manage financial risks.
(c) Credit risk management
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group‟s exposure to credit risk at balance date in relation to each class of financial assets is the carrying amount of the
assets as indicated in the balance sheet. Cash and term deposits are only made with selected counterparties with a strong
Standard & Poors long term rating. Adherence to the treasury policy is monitored on a monthly basis.
(d) Liquidity risk management
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company‟s approach to managing liquidity involves monthly cash flow forecasting such to ensure that sufficient funds are always available to undertake planned activities.
The Company‟s and the Group‟s exposure to interest rate risk is set out below.
Interest rate sensitivity analysis
(i) Financial assets
As at 31 December 2010, the Group held $158,982,571 (2009:$11,822,725) in cash and cash equivalents with interest revenue of $3,774,375 (2009: $1,549,528) for the year then ended. A sensitivity of 1.5% (2009: 1.5%) has been selected as this is considered reasonable given the current interest rate and prior year movements of interest rate in the market. A 1.5% (2009: 1.5%) increase in the cash rate would have resulted in a $2,384,739 (2009:$177,341) increase in interest revenue and equity. A 1.5% (2009: 1.5%) decrease in the cash rate would have resulted in a $2,384,739 (2009:$177,341) decrease in interest revenue and equity.
(ii) Financial liabilities
As at 31 December 2009, the Group owed $28,787,605 (2009: $52,570,075) to the ultimate parent entity, Ivanhoe Mines Ltd.
The loan accrues interest at the rate of BBR plus 2.5% per annum. The loan was interest free until 17 December 2009.
Interest expense for the financial year was $3,126,978 (2009: $140,268). A sensitivity of 1.5% has been selected as this is
considered reasonable given the current interest rate and prior year movements of interest rate in the market. A 1.5%
increase in the cash rate would have resulted in an $561,300 (2009: $21,000) increase in interest expense and decrease in
equity. A 1.5% decrease in the cash rate would have resulted in an $46,905 (2009: $21,000) decrease in interest expense
and increase in equity.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
48
27. Financial instruments (con’t)
(d) Liquidity risk management (con’t)
Maturity profile of financial instruments
The following tables details the Company and Group‟s contractual maturity for its non-derivative financial assets and
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial assets and liabilities based on
the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.
Group
Weighted Average Effective Interest Rate
1 -5
years
Less than 1 month
1 – 3 months
3 months to 1 year
5+ years
$’000 $’000 $’000 $’000 $’000
2010
Financial assets
Trade and other receivables 4,418 - - - -
Other financial assets (note 12) 3,255
Financial liabilities
Variable Interest rate
instruments
(i) 7.38% - - - 28,788
-
Trade and other payables 7,947 - - - -
2009
Financial assets
Trade and other receivables 503 - - - -
Other financial assets (note 12) 10,854
Financial liabilities
Variable Interest rate
instruments
(i) 7.38% - - - 52,570
-
Trade and other payables 5,405 - - - -
(i) The interest rate is the current BBR plus 2.5% per annum.
The consolidated entity has a loan agreement with an outstanding balance of $28.8 million. The loan must be repaid in full on 17 June 2013.
The company continues to manage operating, exploration and development costs to ensure that the company and the economic entity can continue to pay their debts as and when they fall due over the twelve months from the date of this report.
(e) Fair value of financial assets and liabilities
On-balance sheet
The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of
the Group approximates their carrying amounts.
The net fair value of other monetary financial assets and liabilities is based upon discounting the expected future cash flows
by the current interest rates for assets and liabilities with similar risk profiles.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
49
27. Financial instruments (con’t)
(f) Categories of financial assets and liabilities
Consolidated
2010
$’000
2009
$’000
Financial assets
Current
Other financial assets (note
12)
203 4,523
Trade and other receivables
(note 8)
4,418 503
Non – current
Other financial assets (note
12)
3,052 6,331
7,673 11,357
Financial liabilities
Borrowings (note 17) 28,788 52,570
Trade and other payables
(note 16)
7,947 5,405
36,735 57,975
(g) Other price risks
The Group is exposed to equity price risks arising from equity instruments. Equity instruments are held for strategic rather
than trading purposes. The Group does not actively trade these investments.
Equity price sensitivity analysis
At 31 December 2010, if the equity prices had been 5% higher or lower:
Other financial assets subject to equity price risk
Consolidated 2010 2009 $’000 $’000
Options – at fair value (note 12) 203 4,523
Available for sale – shares at fair value (note 12) 3,052 6,331
-5%
2010
$’000
-5%
2009
$’000
+5%
2010
$’000
+5%
2009
$’000
Change in loss 10 226 (10) (226)
Change in reserves 153 317 (153) (317)
Change in equity (163) (543) 163 543
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
50
27. Financial instruments (con’t)
(h) Foreign currency risk management
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities and denominated in a currency that is not the entity‟s functional currency. The consolidated entity manages foreign currency risk by min imizing the amounts of foreign currency required and buying foreign currency only at the time it is required. Trade payables and trade receivables below are held in the subsidiaries in United States Dollars (USD).
Amounts of foreign currency in trade creditors
Consolidated
2010 2009 $’000 $’000
Trade Payables (USD) (196) (29)
Trade Receivables (USD) 56 53
140 24
Movement in USD against AUD
-20%
2010
$’000
-20%
2009
$’000
+20%
2010
$’000
+20%
2009
$’000
Change in loss 28 5 (28) (5)
Change in equity 28 5 (28) (5)
The sensitivity of 20% has been selected as this considered reasonable given the current level of both short term and long term exchange movement for these currencies and the above analysis assumes all other variables remain constant.
(i) Capital risk management
The Group‟s capital structure consists of deposits with banks and a loan from its ultimate parent entity (refer note 17).
The Group‟s objectives when managing capital are to safeguard the Group‟s ability to continue as a going concern, by
maintaining a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain
or adjust the capital structure, the Group may return capital to shareholders, issue new shares, re-negotiate intercompany
loan arrangements with its parent or sell assets to provide cashflow.
The Group monitors capital on the basis of the gearing ratio, however there are no external borrowings as at balance date.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
Risk management policies and procedures are established with regular monitoring and reporting.
Gearing ratio
The Group‟s Board reviews the capital structure on an annual basis. The gearing ratio at year end was as follows:
Consolidated
2010
$’000
2009
$’000
Financial assets
Debt (i) 28,788 52,570
Cash and cash equivalents (158,983) (11,823)
Net debt/(cash surplus) (130,195) 40,747
Equity (ii) 181,426 (7,254)
Net debt/(cash surplus) to
equity ratio N/A (562%)
(i) Debt is defined as long- and short-term borrowings, as detailed in note 17.
(ii) Equity includes all capital and reserves.
(j) Three tier hierarchy of fair value
The following table provides an analysis of financial instruments that are measured subsequent to
initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value
is observable.
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
51
27. Financial instruments (con’t)
Level 2 fair value measurements are those derived from 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 fair value measurements are those derived from valuation techniques that include inputs
for the asset or liability that are not based on observable market data (unobservable inputs).
Instrument
Level 1
$’000
Level 2
$’000
Level 3
$’000
Available for sales shares in Emmerson at fair value 3,052 - -
Options in Emmerson held as fair value through profit and loss - 203 -
28. Key management personnel compensation
Details of Key management personnel
Key management is defined as directors and senior management as referred to in the remuneration report.
i. Key management personnel compensation
The aggregate compensation made to directors and other members of key management personnel of the company and the
Group is set out below:
Consolidated
2010
$’000
2009
$’000
Short-term employee benefits 1,840 1,179
Post-employment benefits 130 96
Share-based payments 5,525 10,092
7,495 11,367
ii. Key management personnel equity holdings
Fully paid ordinary shares of Ivanhoe Australia Limited
Balance at 1
January
Granted as compensati
on
Received on
exercise of rights
Net other change
Bal at 31 December
Balance held
nominally No. No. No. No. No. No.
2010
Directors
Mr P Reeve - - 3,187,500 (i) 2,000 3,189,500
Mr R M Friedland (ii) 2,000,000 - 1,000,000 - 3,000,000
Mr S Riggall - - 125,000 - 125,000
Mr D Kirwin 850,000 - 375,000 - 1,225,000
Mr J A Macken 250,000 - 125,000 - 375,000
Mr P G Meredith 250,000 - 125,000 - 375,000
Mr W B Hayden 150,000 - 75,000 - 225,000
Mr D Woodall 75,000 - 37,500 - 112,500
Mr D M Korbin 60,000 - 25,000 (85,000) -
Professor I R Plimer 50,000 - 25,000 (iii)12,500 87,500
Mr K Wightman 250,000 - - - 250,000
Senior Management
Mr J E Eltham - - - - -
Mr N Valk - - - - -
Mr B J Goss 375,000 - 187,500 - 562,500
Mr P Carter 405,000 - 187,500 - 592,500
Mr D J Millman 120,000 - 75,000 - 195,000
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
52
28. Key management personnel compensation (con’t)
Balance at 1
January
Granted as compensati
on
Received on
exercise of rights
Net other change
Bal at 31 December
Balance held
nominally No. No. No. No. (i) No. No.
2009
Directors
Mr P Reeve - - - - -
Mr R M Friedland (ii) - - 2,000,000 - 2,000,000
Mr D Kirwin 100,000 - 750,000 - 850,000 -
Mr J A Macken - - 250,000 - 250,000
Mr P G Meredith - - 250,000 - 250,000
Mr W B Hayden - - 150,000 - 150,000
Mr D Woodall - - 75,000 - 75,000
Mr D M Korbin - - 50,000 10,000 60,000
Professor I R Plimer - - 50,000 - 50,000
Mr K Wightman 100,000 - 50,000 100,000 250,000
Senior Management
Mr B J Goss - - 375,000 - 375,000
Mr P Carter - - 375,000 30,000 405,000
Mr D J Millman - - 150,000 (30,000) 120,000
(i) Shares traded on the open market
(ii) Mr R M Friedland owns 101,360,740 shares in the ultimate parent company, Ivanhoe Mines Ltd. which holds
259,536,627 (at 24 March 2011) ordinary shares in Ivanhoe Australia Limited.
(iii) Shares rights exercised under the offering (refer note 20 (i)).
No other key personnel hold or traded ordinary shares during the year.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
53
28. Key management personnel compensation (con’t)
Performance Rights of Ivanhoe Australia Limited
Balance at 1
January Granted as
compensation Exercised Net other change
Bal at 31 December
Bal vested at 31
December
Vested but not
exercisable
Vested and
exercisable
Rights vested during year
No. No. No. No. No. No. No. No. No.
2010
Directors
Mr R M Friedland 2.000,000 - 1,000,000 - 1,000,000 3,000,000 - - 1,000,000
Mr P Reeve 4,250,000 - 3,187,500 - 1,062,500 3,187,500 - 1,062,500
Mr S Riggall - 500,000 125,000 - 375,000 375,000 125,000
Mr D Kirwin 750,000 - 375,000 - 375,000 1,125,000 - - 375,000
Mr J A Macken 250,000 - 125,000 - 125,000 375,000 - - 125,000
Mr P G Meredith 250.000 - 125,000 - 125,000 375,000 - - 125.000
Mr W B Hayden 150,000 - 75,000 - 75.000 225.000 - - 75,000
Mr D Woodall 75,000 - 37,500 - 37,500 112,500 - - 37,500
Mr D M Korbin 50,000 - 25,000 - 25,000 75,000 - - 25,000
Prof. I R Plimer 50,000 - 25,000 - 25,000 75,000 - - 25,000
Mr K Wightman 50,000 - - - 50,000 75,000 - 25,000 25,000
Senior
Management
Mr J E Eltham - - - - - - - - -
Mr N Valk - - - - - - - - -
Mr B J Goss 375,000 - 187,500 - 187,500 375,000 - - 187,500
Mr P Carter 375,000 - 187,500 - 187,500 375,000 - - 187,500
Mr D J Millman 150,000 - 75,000 - 75,000 150,000 - - 75,000
Balance at 1
January Granted as
compensation Exercised Net other change
Bal at 31 December
Bal vested at 31
December
Vested but not
exercisable
Vested and
exerci-sable
Rights vested during year
No. No. No. No. No. No. No. No. No.
2009
Directors
Mr R M Friedland 4.000,000 - 2,000,000 - 2.000,000 2,000,000 - - 1,000,000
Mr P Reeve 4,250,000 - - - 4,250,000 2,125,000 - 2,125,000 1,062,500
Mr D Kirwin 1,500,000 - 750,000 - 750,000 750,000 - - 375,000
Mr J A Macken 500,000 - 250,000 - 250,000 250,000 - - 125,000
Mr P G Meredith 500,000 - 250,000 - 250,000 250,000 - - 125,000
Mr W B Hayden 300,000 - 150,000 - 150.000 150.000 - - 75,000
Mr D Woodall 150,000 - 75,000 - 75,000 75,000 - - 37,500
Mr D M Korbin 100,000 - 50,000 - 50,000 50,000 - - 25,000
Prof. I R Plimer 100,000 - 50,000 - 50,000 50,000 - - 25,000
Mr K Wightman 100,000 - 50,000 - 50,000 50,000 - - 25,000
Senior
Management
Mr B J Goss 750,000 - 375,000 - 375,000 375,000 - - 187,500
Mr P Carter 750,000 - 375,000 - 375,000 375,000 - - 187,500
Mr D J Millman 225,000 75,000 150,000 - 150,000 150,000 - - 93,750
All performance rights issued to key management personnel were made in accordance with the provisions of the employee
share plan.
During the financial year 5,550,000 performance rights (2009: 4,525,000) were exercised by key management personnel.
Further details of the employee share plan and of performance rights granted during the 2010 and 2009 financial years are
contained in notes 32 to the financial statements.
29. Related party transactions
(a) Equity interests in related parties
Equity interests in subsidiaries
Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 25 to the financial statements.
(b) Equity interests in associates
Details of interests in associates are disclosed in note 11 to the financial statements.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
54
29. Related party transactions (con’t)
Transactions with other related parties (con’t)
(c) Transactions with key management personnel
i. Key management personnel compensation
Details of key management personnel compensation are disclosed in note 28 to the financial statements.
ii. Loans to key management personnel
There were no loans to key management personnel during the financial year.
iii. Other transactions with key management personnel of the Group
There were no other transactions with key management personnel of the Group during the financial year or in prior year.
iv. Transactions with key management personnel of Ivanhoe Australia Limited and Ivanhoe Mines Ltd
Robert M Friedland, John A Macken, Peter G Meredith, Douglas J Kirwin, David G Woodall are key management personnel
of Ivanhoe Mines Ltd. Information regarding the individual key management personnel compensation is provided in the
remuneration report section of the directors‟ report.
(d) Transactions with other related parties
Transactions between Ivanhoe Australia Limited and its related parties
During the financial year, the following transactions occurred between the Company and its other related parties:
Ultimate parent entity
Ivanhoe Australia Limited borrowed $29,000,000 (2009:nil) from Ivanhoe Mines Ltd (incorporated in Yukon, Canada).
Ivanhoe Australia Limited made repayments of $56,524,000 (2009: nil) to Ivanhoe Mines Ltd.
Ivanhoe Australia Limited entered into a $30,000,000 loan facility with Ivanhoe Mines Ltd on 31 December 2009 (note
17 (i))
The following balances arising from transactions between the Company and its related parties are outstanding at reporting
date:
Loans totalling $28,787,605 are repayable to Ivanhoe Mines Limited (2009:$52,570,075).
All amounts advanced to or payable to related parties are unsecured and are subordinate to other liabilities.
The amounts outstanding will be settled in cash.
A guarantee has been provided by the Company (refer note 18). An expense of $62,765,730 (2009:$42,010,845) has been
recognised in the period for impairment in the current year in respect of the amounts owed by related parties (refer note 18).
Transactions between the Company and its subsidiary were eliminated in the preparation of consolidated statements of the
Group.
Transactions between the Group and its related parties
During the financial year, the following transactions occurred between the Group and its other related parties:
Ultimate parent entity
Ivanhoe Mines Ltd charged Ivanhoe Cloncurry Mines Pty Limited $404,718 (2009:$ 208,273) for reimbursement of
costs incurred.
Ivanhoe Cloncurry Mines Pty Ltd charged Ivanhoe Mines Ltd $1,024,373 (2009: $448,548) for consultancy fees and
reimbursement of costs incurred.
Subsidiaries
Ivanhoe Australia mades advances of $79,811,226 (2008:$41,939,198) to Ivanhoe Cloncurry Mines Pty Ltd.
Loans totalling $219,094,878 are receivable from Ivanhoe Cloncurry Mines Pty Ltd (2009: $139,281,652 repayable).
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
55
29. Related party transactions (con’t)
(d) Transactions with other related parties (con’t)
Other related parties
Ivanhoe Australia Limited charged Ivanhoe Nickel and Platinum $8,012 (2009:$143,343) for reimbursement of costs
incurred and services provided by Ivanhoe Australia Limited employees which includes a margin of $728
(2009:$13,031).
I2MS Pte Ltd provided IT services (including the cost and installation of a new accounting system) which were charged
to Ivanhoe Australia Limited at a cost of $1,045,214 (2009:$187,689) which includes a margin of $94,069
(2009:$15,352).
Ivanhoe Capital Services Limited charged Ivanhoe Cloncurry Mines Pty Limited consultancy fees of $46,285 (2009:
$27,677).
Ivanhoe Capital Corp. charged Ivanhoe Australia Limited $42,953 (2009: $9,892) for reimbursement of costs incurred.
Ivanhoe Philippines, Inc. charged Ivanhoe Cloncurry Mines Pty Limited for consultancy fees and reimbursement of costs
incurred of $56,883 (2009: $61,419).
GoviEx Gold Inc. charged Ivanhoe Australia Limited for reimbursement of costs incurred of $2,592 (2009: $2,239).
Global Mining Management Corp. charged Ivanhoe Australia Limited for reimbursement of costs incurred of $33,219
(2009: $22,116).
Ivanhoe Capital Aviation Ltd charged Ivanhoe Australia Ltd for management and investor related services and the
reimbursement of travel costs incurred of $986,217 (2009: nil).
The following balances arising from transactions between the Group and its related parties are outstanding at reporting date:
Loans totalling $28,787,605 are repayable to Ivanhoe Mines Ltd (2008: $52,570,075).
Net receivables totalling $57,056 are payable from Ivanhoe Mines Ltd (2009: Receivable of $46,164).
Net payables totalling $136,334 are payable to I2MS Pte Ltd (2009:$27,884).
No payables are payable to GoviEx Gold Inc. (2009: $1,909).
No payables are payable to Global Mining Management Corp. (2009: $1,410).
No receivables are payable from Ivanhoe Nickel and Platinum (2009: $12,070).
Net payables totalling $6,880 are payable to Ivanhoe Capital Services Limited (2009: $2,001).
Net payables totalling $2,609 are payable to Ivanhoe Capital Corp. (2009: nil).
All amounts advanced to or payable to related parties are unsecured and are subordinate to other liabilities.
The amounts outstanding will be settled in cash.
Other than as detailed in this note, no guarantees have been given to, or received from, other related parties. No expense
has been recognised in the period for bad or doubtful debts in respect of the amounts owed by other related parties.
Transactions between the Group and associate (if any) that were eliminated in the preparation of consolidated statements of
the Group.
(e) Parent entities
The parent entity in the Group is Ivanhoe Australia Limited. Ivanhoe Australia Limited‟s parent entity is IAL Holdings
Singapore Pte. Ltd. The ultimate parent entity is Ivanhoe Mines Ltd. Ivanhoe Mines Ltd is incorporated in Canada.
30. Remuneration of auditors
Consolidated
2010
$’000
2009
$’000
Auditor of the parent entity
Audit and review of the financial report 90 82
Taxation services - -
Other non-audit services
- Related to the capital raising 90 -
- Other - -
180 82
The auditor of Ivanhoe Australia Limited is Deloitte Touche Tohmatsu. Audit fees of the Company (and fees for non-audit
services provided by the auditor) are borne by the subsidiary company, Ivanhoe Cloncurry Mines Pty Limited.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
56
31. Earnings per share
Consolidated
2010
Cents
per share
2009
Cents
per share
Basic earnings (loss) per share (22.0) (16.7)
Diluted earnings (loss) per share (22.0) (16.7)
Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as
follows:
2010
$’000
2009
$’000
Net Loss (i) (78,786) (52,226) (i) Net Loss is the same amount as loss after tax in the income statement
2010
No.
2009
No.
Weighted average number of ordinary shares for the purposes of
basic earnings per share 358,224,944 313,252,839
Diluted Earnings (Loss) Per Share
The performance rights held by rights holders have not been included in the weighted average number of ordinary shares for
the purposes of calculating diluted EPS as they do not meet the requirements for inclusion in AASB 133 “Earnings per
Share”. The rights are non-dilutive as they do not increase loss per share for continuing operations.
32. Share-based payments
Share-based payments have been made through performance rights under the “Share Acquisition Plan” and “Share Plan”.
(i) Share Acquisition Plan
On 8 September 2008, the Board of Directors approved the Employee Share Acquisition Plan (“Share Acquisition Plan”).
The Share Acquisition Plan provides for the offer to, and acquisition by the Company on behalf of selected Eligible
Employees (under the Ivanhoe Collective Agreement) of Shares:
where generally no cash consideration is required to be paid by the Eligible Employee for the acquisition of the
underlying Shares up to the value of $1,000 each year: and
where such shares continue to be held in the Share Acquisition Plan subject to a trading lock for a period of three years
after the acquisition date of the shares or as determined by the Plan Committee.
The shares are settled on the open market.
(ii) Share Plan
On 4 July 2008, (“inception”) the Board of Directors approved the Employee Share Plan (“Share Plan”) and offers of
Performance Rights to Directors and employees of the Company.
The Share Plan provides for the offer to, and acquisition by, selected Eligible Employees of:
rights to acquire Shares where generally no cash consideration is required to be paid for the acquisition of the
underlying Shares (“Performance Rights”); and
“unallocated” Shares, typically being Shares that are to be held in the Share Plan subject to a holding lock and
restrictions on voting and which are liable to be forfeited prior to allocation if any performance conditions attaching to
them are not satisfied and in certain other circumstances.
During the financial year the company issued 2,630,000 (2009:1,125,000) performance rights to employees. As at the date of
this report, a total of 9,917,000 performance rights (each convertible into one fully paid ordinary share) were on issue.
During and since the end of the financial year the Company has issued a total of 6,708,000 fully paid ordinary shares as a
result of the exercise of performance rights.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
57
32. Share-based payments (con’t)
The following share-based payment arrangements were in existence during the current and comparative reporting periods:
Number of Performance
Rights Expiry date
Exercise price
$
Fair value at grant date
$
Tranche 1 (Grant Date 6 August 2008) 4,168,750 1 September 2010 - $2.00
Tranche 2 (Grant Date 6 August 2008) 4,168,750 1 September 2011 - $2.00
Tranche 3 (Grant Date 6 August 2008) 4,168,750 1 September 2012 - $2.00
Tranche 4 (Grant Date 6 August 2008) 4,168,750 1 September 2013 - $2.00
Tranche 1 (Grant Date 22 January 2009) 25,000 1 September 2010 - $0.38
Tranche 2 (Grant Date 22 January 2009) 25,000 1 September 2011 - $0.38
Tranche 3 (Grant Date 22 January 2009) 25,000 1 September 2012 - $0.38
Tranche 4 (Grant Date 22 January 2009) 25,000 1 September 2013 - $0.38
Tranche 1 (Grant Date 26 October 2009) 131,250 1 September 2012 - $3.90
Tranche 2 (Grant Date 26 October 2009) 131,250 1 September 2013 - $3.90
Tranche 3 (Grant Date 26 October 2009) 131,250 1 September 2014 - $3.90
Tranche 4 (Grant Date 26 October 2009) 131,250 1 September 2015 - $3.90
Tranche 1 (Grant Date 26 October 2009) 87,500 1 March 2012 - $3.90
Tranche 2 (Grant Date 26 October 2009) 87,500 1 March 2013 - $3.90
Tranche 3 (Grant Date 26 October 2009) 87,500 1 March 2014 - $3.90
Tranche 4 (Grant Date 26 October 2009) 87,500 1 March 2015 - $3.90
Tranche 1 (Grant Date 1 December 2009) 37,500 1 September 2011 - $3.99
Tranche 2 (Grant Date 1 December 2009) 18,750 1 September 2012 - $3.99
Tranche 3 (Grant Date 1 December 2009) 18,750 1 September 2013 - $3.99
Tranche 1 (Grant Date 1 December 2009) 18,750 1 September 2011 - $3.99
Tranche 2 (Grant Date 1 December 2009) 18,750 1 September 2012 - $3.99
Tranche 3 (Grant Date 1 December 2009) 18,750 1 September 2013 - $3.99
Tranche 4 (Grant Date 1 December 2009) 18,750 1 September 2014 - $3.99
Tranche 1 (Grant Date 23 February 2010) 125,000 1 March 2012 - $3.15
Tranche 2 (Grant Date 23 February 2010) 125,000 1 March 2013 - $3.15
Tranche 3 (Grant Date 23 February 2010) 125,000 1 March 2014 - $3.15
Tranche 4 (Grant Date 23 February 2010) 125,000 1 March 2015 - $3.15
Tranche 1 (Grant Date 27 May 2010) 43,750 1 March 2012 - $3.35
Tranche 2 (Grant Date 27 May 2010) 43,750 1 March 2013 - $3.35
Tranche 3 (Grant Date 27 May 2010) 43,750 1 March 2014 - $3.35
Tranche 4 (Grant Date 27 May 2010) 43,750 1 March 2015 - $3.35
Tranche 1 (Grant Date 8 July 2010) 6,250 1 September 2010 - $2.57
Tranche 2 (Grant Date 8 July 2010) 6,250 1 September 2011 - $2.57
Tranche 3 (Grant Date 8 July 2010)) 6,250 1 September 2012 - $2.57
Tranche 4 (Grant Date 8 July 2010)) 6,250 1 September 2013 - $2.57
Tranche 1 (Grant Date 15 November 2010) 25,000 1 September 2012 - $3.35
Tranche 2 (Grant Date 15 November 2010) 25,000 1 September 2013 - $3.35
Tranche 3 (Grant Date 15 November 2010) 25,000 1 September 2014 - $3.35
Tranche 4 (Grant Date 15 November 2010) 25,000 1 September 2015 - $3.35
Tranche 1 (Grant Date 15 November 2010) 182,500 1 March 2013 - $3.35
Tranche 2 (Grant Date 15 November 2010) 182,500 1 March 2014 - $3.35
Tranche 3 (Grant Date 15 November 2010) 182,500 1 March 2015 - $3.35
Tranche 4 (Grant Date 15 November 2010) 182,500 1 March 2016 - $3.35
Tranche 1 (Grant Date 15 November 2010) 275,000 1 September 2013 - $3.35
Tranche 2 (Grant Date 15 November 2010) 275,000 1 September 2014 - $3.35
Tranche 3 (Grant Date 15 November 2010) 275,000 1 September 2015 - $3.35
Tranche 4 (Grant Date 15 November 2010) 275,000 1 September 2016 - $3.35
20,430,000
The weighted average fair value of the performance rights granted during the financial year is $3.31 (2009: $2.10). They
were priced using a Black-Scholes valuation model. Where relevant, the expected life used in the model has been adjusted
based on management‟s best estimates.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
58
32. Share-based payments (con’t)
2010
Inputs into the model
Option series Grant Date
23 February 2010 27 May 2010
8 July 2010
15 November 2010
Grant date share price $3.15 $3.35 $2.57 $3.35
Exercise price - - - -
Expected volatility 100% 100% 100% 100%
Performance right term (i) (i) (i) (i)
Dividend yield - - - -
Risk-free interest rate - - - -
2009
Inputs into the model
Option series Grant Date
6 August 2008 22 January 2009
26 October 2009
1 December 2009
Grant date share price $2.00 $0.38 $3.90 $3.99
Exercise price - - - -
Expected volatility 100% 100% 100% 100%
Performance right term (i) (i) (i) (i)
Dividend yield - - - -
Risk-free interest rate - - - -
(i) All performance rights expire on the earlier of their expiry date or termination of the individual‟s employment. The
Directors and employees are entitled to exercise their performance rights and be issued with the shares in 4 equal
tranches after vesting (subject to being in employment). However, unvested performance rights will immediately vest
in the event of a change in control of the Company or its ultimate holding company and may, at the Board‟s
discretion, vest in special circumstances such as death, permanent disability or redundancy.
The following reconciles the outstanding performance rights granted under the employee share plan at the beginning and
end of the financial year:
2010 2009
Number of
rights
Weighted
average
exercise price
$
Number of
rights
Weighted
average
exercise price
$
Balance at beginning of the financial year 11,527,500 $nil 16,675,000 $nil
Granted during the financial year 2,630,000 $nil 1,125,000 $nil
Forfeited during the financial year (12,500) $nil (472,297) $nil
Exercised during the financial year (6,651,250) $nil (5,800,203) $nil
Expired during the financial year - - - -
Balance at end of the financial year (iii) 7,493,750 $nil 11,527,500 $nil
Exercisable at end of the financial year 370,000 $nil 2,125,000 $nil
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
59
32. Share-based payments (con’t)
(ii) Exercised during the financial year
The following performance rights granted under the employee share option plan were exercised during the financial year:
2010
Performance Rights series
Number exercised
Exercise date
Share price at exercise
date
(1) Issued 6 August 2008 1,100,000 12/01/10 $3.75
(2) Issued 6 August 2008 1,100,000 12/01/10 $3.75
(1) Issued 6 August 2008 18,750 23/02/10 $3.15
(2) Issued 6 August 2008 18,750 23/02/10 $3.15
(1) Issued 6 August 2008 75,000 31/03/2010 $3.45
(2) Issued 6 August 2008 75,000 31/03/2010 $3.45
(1) Issued 1 December 2009 18,750 31/03/2010 $3.45
(1) Issued 26 October 2009 87,500 31/03/2010 $3.45
(1) Issued 6 August 2008 12,500 27/05/2010 $3.35
(2) Issued 6 August 2008 12,500 27/05/2010 $3.35
(3) Issued 6 August 2008 12,500 27/05/2010 $3.35
(1) Issued 23 February 2010 125,000 27/05/2010 $3.35
(1) Issued 6 August 2008 12,500 08/07/2010 $2.57
(2) Issued 6 August 2008 12,500 08/07/2010 $2.57
(1) Issued 6 August 2008 37,500 29/07/2010 $2.82
(2) Issued 6 August 2008 37,500 29/07/2010 $2.82
(3) Issued 6 August 2008 3,337,500 17/09/2010 $2.85
(3) Issued 6 August 2008 188,000 07/10/2010 $3.11
(1) Issued 21 May 2010 43,750 07/10/2010 $3.11
(2) Issued 5 February 2009 25,000 15/11/2010 $3.35
(3) Issued 5 February 2009 25,000 15/11/2010 $3.35
(3) Issued 6 August 2008 213,750 15/11/2010 $3.35
(2) Issued 1 December 2009 18,750 15/11/2010 $3.35
(1) Issued 26 October 2009 43,750 15/11/2010 $3.35
6,651,250
2009
Performance Rights series
Number exercised
Exercise date
Share price at exercise
date
(1) Issued 6 August 2008 137,500 05/02/09 $0.36
(2) Issued 6 August 2008 33,628 05/02/09 $0.36
(1) Issued 6 August 2008 175,000 15/09/09 $3.38
(2) Issued 6 August 2008 175,000 15/09/09 $3.38
(1) Issued 6 August 2008 250,000 26/10/09 $3.90
(2) Issued 6 August 2008 250,000 26/10/09 $3.90
(1) Issued 6 August 2008 2,342,500 1/12/09 $3.99
(2) Issued 6 August 2008 2,342,500 1/12/09 $3.99
(3) Issued 6 August 2008 6,575 1/12/09 $3.99
(1) Issued 6 August 2008 43,750 14/12/09 $3.94
(2) Issued 6 August 2008 43,750 14/12/09 $3.94
5,800,203
(iii) Balance at end of the financial year
The share performance rights outstanding at the end of the financial year had an exercise price of $nil (2009: $nil), and a
weighted average remaining contractual life of 962 days (2009: 513 days).
33. Subsequent events
There has not been any other matter or circumstance that has arisen since the end of the financial period, that has
significantly affected, or may significantly affect, the operations of the Company, the results of those operations, or the state
of affairs of the Company in future financial periods.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
Notes to the financial statements
60
Directors’ declaration
The directors declare that:
(a) in the directors‟ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable;
(b) the attached financial statementsare in compliance with International Financial Reporting Standards, as stated in
note 2 to the financial statements;
(c) in the directors‟ opinion, the attached financial statements and notes thereto are in accordance with the
Corporations Act 2001, including compliance with accounting standards and give a true and fair view of the
financial position and performance of the consolidated entity; and
(d) the directors have been given the declarations required by s.295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
Peter Reeve
Director and CEO
Melbourne, 29 March 2010
For
per
sona
l use
onl
y
Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited
61
Deloitte Touche Tohmatsu
ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia DX 111 Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au
29 March 2011
Dear Board Members,
Ivanhoe Australia Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of Ivanhoe Australia Limited.
As lead audit partner for the audit of the financial statements of Ivanhoe Australia Limited for the financial
year ended 31 December 2010, I declare that to the best of my knowledge and belief, there have been no
contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely,
DELOITTE TOUCHE TOHMATSU
Ian Sanders
Partner
Chartered Accountants
The Board of Directors
Ivanhoe Australia Limited
Level 9, 479 St Kilda Road
MELBOURNE VIC 3000
For
per
sona
l use
onl
y
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
62
Deloitte Touche Tohmatsu
ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia DX: 111 Tel: +61 (03) 9671 7000 Fax: +61 (03) 9671 7001 www.deloitte.com.au
Independent Auditor’s Report
to the members of Ivanhoe Australia Limited
Report on the Financial Report
We have audited the accompanying financial report of Ivanhoe Australia Limited, which comprises
the statement of financial position as at 31 December 2010, and the statement of comprehensive
income, the cash flow statement and the statement of changes in equity for the year ended on that date,
notes comprising a summary of significant accounting policies and other explanatory information, and
the directors’ declaration of the consolidated entity comprising the company and the entities it
controlled at the year’s end or from time to time during the financial year as set out on pages 20 to 60.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial
report in accordance with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Act 2001. This responsibility includes establishing and
maintaining internal control relevant to the preparation and fair presentation of the financial report that
is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In
Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of
Financial Statements, that compliance with the Australian equivalents to International Financial
Reporting Standards ensures that the financial report, comprising the financial statements and notes,
complies with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we
comply with relevant ethical requirements relating to audit engagements and plan and perform the
audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
For
per
sona
l use
onl
y
63
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
provided to the directors of Ivanhoe Australia Limited on 29 March 2011 would be in the same terms
if provided to the directors as at the date of this auditor’s report.
Auditor’s Opinion
In our opinion:
(a) the financial report of Ivanhoe Australia Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December
2010 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in
Note 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 7 to 14 of the directors’ report for the
year ended 31 December 2010. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Ivanhoe Australia Limited for the year ended 31 December
2010, complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Ian Sanders
Partner
Chartered Accountants
Melbourne, 29 March 2011
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
64
ADDITIONAL SHAREHOLDER INFORMATION
Additional information required by the ASX Listing Rules are not disclosed elsewhere in the full year report is set out below.
The shareholder information set out below was applicable as at 24 March 2011.
1. Distribution of Shareholders
Distribution of ordinary shareholders and shareholdings is set out in the table below:
Category of holding Holders Number of shares % of Issued Capital
1 – 1,000 571 328,590 0.08%
1,001 – 5,000 847 2,353,794 0.56%
5,001 – 10,000 284 2,218,764 0.53%
10,000 – 100,000 268 7,306,002 1.75%
100,001 and over 52 406,259,903 97.08%
Total 2,022 418,467,053 100%
Voting rights as governed by the Constitution of the Company provide that each ordinary shareholder present in person or by
poxy at a meeting shall have:
a. on a show of hands, one vote only; and
b. on a poll, one vote for every fully paid ordinary share held.
2. Largest shareholders
The names of the twenty largest holders by account holding of ordinary shares are listed below:
Shareholder Holding %
IAL Holding Singapore Pte Ltd 259,536,627 62.02
National Nominees Limited 45,475,751 10.87
HSBC Custody Nominees (Australia) Limited 37,993,772 9.08
J P Morgan Nominees Australia Limited 20,071,081 4.80
Citicorp Nominees Pty Limited 9,657,019 2.31
Austock Nominees Pty Ltd 6,400,000 1.53
RBC Dexia Investor Services Australia Nominees Pty Limited 4,613,693 1.10
Credit Suisse Securities (Europe) Ltd 4,610,000 1.10
UBS Wealth Management Australia Nominees Pty Ltd 2,060,503 0.49
Bond Street Custodians Ltd 1,986,527 0.47
AMP Life Limited 1,437,332 0.34
CS Fourth Nominees Pty Ltd 1,346,222 0.32
UBS Nominees Pty Limited 1,264,422 0.30
Cogent Nominees Pty Limited 1,222,302 0.29
Mr Douglas Kirwin 1,225,000 0.27
Brisport Nominees Pty Ltd 962,345 0.23
Morgan Stanley Australian Securities (Nominee) Pty Limited 564,216 0.13
Mr Paul Carter 562,500 0.13
Mr Barry Goss 512,500 0.12
Mr John Macken 375,000 0.09
3. Option holders
As at 24 March 2011, the Company had 46,729,204 listed options.
No voting rights attach to the options.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
65
ADDITIONAL SHAREHOLDER INFORMATION (continued)
4. Register of substantial shareholders
The names of substantial shareholders in the Company and the number of fully paid ordinary shares in which each has an
interest, as disclosed in substantial shareholder notices to the Company on the respective dates shown, are as follows:
Holder Date Number of shares % of Issued Capital
Ivanhoe Mines Ltd 10 September 2010 259,536,627 62%
5. Mining tenements The Group held the following mining tenements at Cloncurry, Queensland as at 24 March 2011.
Number Ivanhoe interest Status
ML 2454 100% Granted
ML 2566 100% Granted
ML 2688 100% Granted
ML 2689 100% Granted
ML 2690 100% Granted
ML 2691 100% Granted
ML 2692 100% Granted
ML 2693 100% Granted
ML 2694 100% Granted
ML 2732 100% Granted
ML 2733 100% Granted
ML 2734 100% Granted
ML 2735 100% Granted
ML 2736 100% Granted
ML 2737 100% Granted
ML 2738 100% Granted
ML 2745 100% Granted
ML 2746 100% Granted
ML 90008 1 Granted
ML 90040 100%2 Granted
ML 90043 100% Granted
ML 90057 100%2 Granted
ML 90061 100% Granted
ML 90068 100%2 Granted
ML 90125 100%2 Granted
ML 90128 100%2 Granted
ML 90158 100%2 Granted
ML 90183 100%2 Granted
ML 90187 100%2 Granted on 1 September 2010
EPM 7221 100% Granted
EPM 9083 3 Granted
EPM 9116 100% Granted
EPM 10577 100% Granted
EPM 10783 100% Granted
EPM 10908 100% Granted
EPM 11169 1 Granted
EPM 11220 100% Granted
EPM 11676 1 Granted
EPM 12023 1 Granted
EPM 12060 1 Granted
EPM 12285 1 Granted
EPM 12290 1 Granted
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
66
ADDITIONAL SHAREHOLDER INFORMATION (continued)
5. Mining tenements (continued)
Number Ivanhoe interest Status
EPM 13505 100% Granted
EPM 13709 1 Granted
EPM 13741 1 Granted
EPM 14033 1 Granted
EPM 14223 1 Granted
EPM 14434 1 Not renewed after expiry on 1 March 2010
EPM 14449 4 Not renewed after expiry on 26 June 2010
EPM 14520 1 Granted
EPM 14687 100% Granted
EPM 14688 100% Granted
EPM 14689 100% Granted
EPM 14733 100% Granted
EPM 15218 100% Granted
EPM 15281 100%2 Granted
EPM 15282 100% Granted
EPM 16177 1 Granted
EPM 16201 100% Granted on 27 January 2010
EPM 17417 100% Granted on 21 October 2010
EPM 17540 100% Granted on 20 October 2010
EPM 18205 100% Granted on 10 December 2010
EPM 17424 100% Application
EPM 17658 100% Application
EPM 17991 100% Application
EPM 18204 100% Application
EPM 18240 100% Application
EPM 18241 100% Application
EPM 18298 100% Application
EPM 18314 100% Application
EPM 18401 100% Application
EPM 18632 100% Application lodged on 9 April 2010
EPM 18633 100% Application lodged on 9 April 2010
EPM 18634 100% Application lodged on 9 April 2010
EPM 18635 100% Application lodged on 9 April 2010
EPM 18684 100% Application lodged on 13 May 2010
EPM 18716 100% Application lodged on 1 June 2010
EPM 18727 100% Application lodged on 2 June 2010
EPM 18728 100% Application lodged on 2 June 2010
EPM 18729 100% Application lodged on 2 June 2010
EPM 18748 100% Application lodged on 1 July 2010
EPM 18912 100% Application lodged on 5 October 2010
EPM 18996 100% Application lodged on 19 November 2010
EPM 19021 100% Application lodged on 8 December 2010
EPM 19022 100% Application lodged on 8 December 2010 1 Under the terms of a Joint Venture Exploration Agreement and a Variation to this Agreement with Exco Resources, the Company
has the right to earn an 80% interest in the Exco Resources‟ EPMs and ML listed by expending A$5.5 million before 1 November 2011. 2 100% of the tenement acquired under the terms of an Agreement between Barrick (PD) Australia Ltd, Barrick (Osborne) Pty Ltd
and the Company. The name Barrick (Osborne) was changed to Ivanhoe (Osborne). 3 Under the terms of an Agreement between Goldminco Resources Pty Ltd and Barrick (Osborne) Pty Ltd, Barrick (Osborne) earned
a 70% interest in 5 out of a total of 25 sub-blocks of EPM 9083 Duchess. The name Barrick (Osborne) was changed to Ivanhoe (Osborne). 4 Under the terms of a Farm in Agreement signed with Glengarry Resources Ltd, the Company had the right to earn an interest in
EPM 14449 Snake Creek.
For
per
sona
l use
onl
y
IVANHOE AUSTRALIA LIMITED
67
ADDITIONAL SHAREHOLDER INFORMATION (continued) 6. Exchange listings The Company's primary listing is on the Australian Securities Exchange (ASX).
The Company has a secondary listing on the Toronto Stock Exchange (TSX), with the company‟s ordinary shares and
options (referred to as warrants for Canadian purposes) commencing trading on the TSX in November 2010. 7. General Company Secretary
Mr Darren Millman
Principal Registered Office: Share Registry:
Level 9, 479 St Kilda Road Australian Registry:
Melbourne VIC 3004 Computershare Investor Services Pty Limited
Telephone: (03) 9090 8800 452 Johnston Street
Facsimile: (03) 9090 8899 Yarra Falls
Abbotsford VIC 3067
Telephone: 1300 787 272
Canadian Registry:
Computershare Investor Services Inc.
Level 9, 100 University Avenue
Toronto, Ontario M5J 2Y1
Telephone: 1-800-564-6253
ASX Code: IVA
TSX Code: IVA
For
per
sona
l use
onl
y
top related