2013 Financial Report

FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

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DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

CONTENTS NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Directors’ report................................................................................................................................ 4 Auditor’s independence declaration................................................................................ 6 Statement of profit or loss and other comprehensive income.................... 7 Statement of financial position............................................................................................. 8 Statement of changes in equity............................................................................................ 9 Statement of cashflows............................................................................................................ 10 Notes to the financial statements 1 // General information............................................................................................................................................. 11 2 // Significant accounting policies............................................................................................................... 11 3 // Critical judgements in applying the entity’s accounting policies.................. 21 4 // Profit for the year.....................................................................................................................................................22 5 // Income tax benefit / (expense)..............................................................................................................24 6 // Auditor’s remuneration....................................................................................................................................24 7 // Dividends.........................................................................................................................................................................25 8 // Cash and cash equivalents...........................................................................................................................25 9 // Inventories.......................................................................................................................................................................26 10 // Trade and other receivables ......................................................................................................................26 11 // Other financial assets......................................................................................................................................... 27 12 // Assets classified as held for sale............................................................................................................. 27 13 // Other assets...................................................................................................................................................................28 14 // Investments accounted for using the equity method................................................28 15 // Property, plant and equipment..............................................................................................................29 16 // Intangible assets......................................................................................................................................................30 17 // Trade and other payables.............................................................................................................................. 31 18 // Borrowings......................................................................................................................................................................32 19 // Other financial liabilities..................................................................................................................................33 20 // Provisions..........................................................................................................................................................................33 21 // Tax liabilities...................................................................................................................................................................34 22 // Issued capital................................................................................................................................................................34 23 // Reserves ............................................................................................................................................................................35 24 // Retained earnings...................................................................................................................................................35 25 // Notes to the cash flow statement........................................................................................................36 26 // Commitments............................................................................................................................................................. 37 27 // Contingent liabilities and contingent assets...........................................................................38 28 // Subsequent events...............................................................................................................................................38 29 // Deed of cross guarantee................................................................................................................................38 30 // Controlled entities................................................................................................................................................39 31 // Parent Entity Disclosures ..............................................................................................................................40 Directors’ declaration................................................................................................................ 42 Independent Auditor’s report.............................................................................................43

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

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DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2013

DIRECTORS’

REPORT The Directors of Downer EDI Mining Pty Ltd submit herewith the annual financial report of the consolidated entity for the financial year ended 30 June 2013. In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows:

The names of the Directors of Downer EDI Mining Pty Ltd during or since the end of the financial year are:

REVIEW OF OPERATIONS The profit from ordinary activities for the consolidated entity after income tax for the year ended 30 June 2013 was $91,497 thousand (2012: $165,382 thousand).

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant change in the state of affairs of the Company during the financial year other than that referred to in the financial statements or notes thereto.

NAME Mr D J Overall MATTERS SUBSEQUENT TO THE END OF THE Mr P A Newman FINANCIAL YEAR Mr K J Fletcher There has not been any matter or circumstance occurring Mr P T Kerr subsequent to the end of the financial year that has Mr P J Tompkins significantly affected, or may significantly affect, the

operations of the consolidated entity, the results of those PRINCIPAL ACTIVITIES operations, or the state of affairs of the consolidated entity The entity’s principal activities in the course of the financial in future financial years. year consisted of contract mining, civil engineering,

blasting services, resources estimation, mine management FUTURE DEVELOPMENTS AND EXPECTED consulting and tyre and rim management solution services.

RESULTS OF OPERATIONS

Information on likely developments in the operations of DIVIDENDS the entity and the expected results of operations have not In respect of the financial year ended 30 June 2013, the been included in this annual report because the Directors Directors declared and paid a dividend of $110,125 thousand believe it would be likely to result in unreasonable prejudice (2012:$53,474). Subsequent to balance date the Directors to the entity. Accordingly, this information has not been have declared a dividend of $16,700 thousand. disclosed in this financial report.

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DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2013

ENVIRONMENTAL REGULATION

ROUNDING OF AMOUNTS

The entity’s main exposure to environmental regulation is through its contractual obligations. The Directors are not aware of any non-compliance with these obligations.

The entity is of the kind referred to in ASIC Class Order 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.

Signed in accordance with a resolution of Directors made pursuant to s.298(2) of the Corporations Act 2001.

On behalf of the Directors

INDEMNIFICATION OF OFFICERS AND AUDITORS During the financial year, the entity paid a premium in respect of a contract insuring the Directors of the entity (as named above), all executive officers of the entity and of any related body corporate against a liability incurred as such a Director or executive officer to the extent permitted by the Corporations Act 2001.

The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The entity has not otherwise, during or since the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or Auditor of the entity or of any related body corporate against a liability incurred as such an officer or Auditor.

AUDITOR’S INDEPENDENCE DECLARATION The Auditor’s independence declaration is included on page 6 of the financial report.

David Overall Director Brisbane, 30 October 2013

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

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INDEPENDENCE DECLARATION

Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Riverside Centre Level 25, 123 Eagle Street, Brisbane QLD 4000 GPO Box 1463, Brisbane QLD 4001 Australia Tel: +61 (0) 7 3308 7000 Fax: +61 (0) 7 3308 7004 www.deloitte.com.au

The Board of Directors Downer EDI Mining Pty Ltd 7th Floor 104 Melbourne Street South Brisbane QLD 4101 30 October 2013 Dear Board Members

Independence Declaration In accordance with section 307C of the Corporations Act 200I, I am pleased to provide the following declaration of independence to the directors of Downer EDI Mining Pty Ltd. As lead audit partner for the audit of the financial statements of Downer EDl Mining Pty Ltd for the financial year ended 30Â June 2013, 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

R G Saayman Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited

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DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2013

Consolidated Note

2013

2012

$'000

$'000

Revenue

4(a)

2,867,889

2,745,724

Other income / (expense)

4(a)

3,516

(659)

13,225

16,389

Share of net profit from joint ventures and associates accounted for using the equity method Finance costs

4(b)

(68,868)

(64,075)

Employee benefits expense

4(b)

(1,034,909)

(898,896)

Raw materials and consumables used

(272,514)

(303,460)

Subcontractor costs

(474,365)

(518,612)

Plant and equipment costs

(787,701)

(772,125)

Changes in inventories of finished goods and work in progress

(2,681)

2,308

Communication expenses

(8,159)

(8,610)

Occupancy costs

(21,447)

(19,262)

Professional fees

(7,355)

(11,489)

Travel and accommodation expenses

(56,840)

(58,471)

Management fees

(13,315)

(8,558)

Other expenses from ordinary activities

(30,939)

(23,392)

4(c)

-

113,257

105,537

190,069

5

(14,040)

(24,687)

91,497

165,382

641

(180)

10,783

779

-

-

11,424

599

102,921

165,981

Debt forgiveness from ultimate parent entity Profit before tax Income tax expense Profit for the year from continuing operations Other comprehensive income Exchange differences on translating foreign operations Net value gain on cashflow hedges Revaluation adjustments during the year

Other comprehensive income for the year, net of tax Total comprehensive income for the year

The statement of comprehensive income should be read in conjunction with the accompanying notes included on pages 11 to 41.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

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STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013

Consolidated Note

2013

2012

$'000

$'000

ASSETS Current assets Cash and cash equivalents

8

7,615

8,472

Inventories

9

185,945

166,223

Trade and other receivables

10

299,322

450,610

Other financial assets

11

4,204

1,592

Other assets

13

20,830

29,706

Assets classified as held for sale

12

14,289

-

532,205

656,603

14

17,297

10,254

Property, plant and equipment

15

648,401

671,034

Intangible assets

16

66,708

68,153

Other financial assets

11

7,753

47,941

Total current assets Non-current assets Equity-accounted investments

Total non-current assets Total assets

740,159

797,382

1,272,364

1,453,985

LIABILITIES Current liabilities Trade and other payables

17

266,250

363,348

Borrowings

18

53,226

28,051

Other financial liabilities

19

23,728

27,307

Provisions

20

99,662

95,863

442,866

514,569

Total current liabilities Non-current liabilities Trade and other payables

17

-

105

Borrowings

18

526,469

618,963

Other financial liabilities

19

731

3,433

Provisions

20

19,667

22,612

Deferred tax liabilities

21

32,145

36,613

579,012

681,726

1,021,878

1,196,295

250,486

257,690

101,480

101,480

Total non-current liabilities Total liabilities Net assets EQUITY Issued capital

22

Reserves

23

(1,545)

(12,969)

Retained earnings

24

150,551

169,179

250,486

257,690

Total equity

The statement of financial position should be read in conjunction with the accompanying notes included on pages 11 to 41.

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DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES STATEMENT TO THE OF FINANCIAL CHANGES STATEMENTS IN EQUITY FOR THE YEAR ENDED 30 JUNE 2013

Consolidated Issued capital

Reserves

Retained Earnings

Total

$'000

$'000

$'000

$'000

101,480

(13,568)

57,271

145,183

Payment of dividend

-

-

(53,474)

(53,474)

Profit for the year

-

-

165,382

165,382

Other comprehensive income for the year

-

599

-

599

Total comprehensive income for the year

-

599

165,382

165,981

101,480

(12,969)

169,179

257,690

Payment of dividend

-

-

(110,125)

(110,125)

Profit for the year

-

-

91,497

91,497

Other comprehensive income for the year

-

11,424

-

11,424

Total comprehensive income for the year

-

11,424

91,497

102,921

101,480

(1,545)

150,551

250,486

Balance at 1 July 2011

Balance at 30 June 2012

Balance at 30 June 2013

The statement of financial position should be read in conjunction with the accompanying notes included on pages 11 to 41.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

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STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 30 JUNE 2013

Consolidated 2013

2012

$’000

$’000

3,320,020

2,904,441

-

2,200

3,185

4,889

(2,906,269)

(2,551,113)

Payments for management fee to consolidated head entity

(13,315)

(8,558)

Interest and other costs of finance paid

(68,868)

(64,074)

Income tax (paid) / refunded from consolidated head entity

(18,508)

(6,087)

316,245

281,698

50,489

12,899

(164,783)

(286,289)

1,210

(4,088)

10,340

11,489

1,517

18,161

-

(2)

(101,227)

(247,830)

Proceeds from borrowings (within Downer EDI Group)

64,006

24,083

Repayment of borrowings (within Downer EDI Group)

(145,582)

-

(72,976)

(24,198)

48,802

20,880

Dividends paid

(110,125)

(53,474)

Net cash outflow from financing activities

(215,875)

(32,709)

Net increase in cash and cash equivalents

(857)

1,159

Cash and cash equivalents at the beginning of the year

8,472

7,313

7,615

8,472

Cash flows from operating activities Receipts from customers Distributions from equity accounted investments Interest received Payments to suppliers and employees

Net cash inflow from operating activities

25(c)

Cash flows from investing activities Proceeds from sale of property, plant and equipment Payments for property, plant and equipment Proceeds from sale of intangibles Receipts from joint ventures Proceeds from related parties Acquisition of new business Net cash used in investing activities Cash flows from financing activities

Repayment of borrowings (external) Proceeds of borrowings (external)

Cash and cash equivalents at the end of the year

25(a)

The statement of cashflows should be read in conjunction with the accompanying notes included on pages 11 to 41.

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DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 1 // GENERAL INFORMATION Downer EDI Mining Pty Ltd (the entity) is a proprietary company, incorporated in Australia. The entity and its controlled subsidiaries operate in Australia, Canada, Chile, Botswana, Brazil, Namibia, Papua New Guinea and South Africa. The parent entity is Downer EDI Mining Pty Ltd. Its ultimate parent entity is Downer EDI Limited. Downer EDI Mining Pty Ltd’s registered office and its principle place of business are as follows:

NOTES

7th Floor 104 Melbourne Street SOUTH BRISBANE QLD 4101 Tel: (07) 3026 6666 The entity’s principal activities are contract mining, civil engineering, blasting services, resources estimation, mine management consulting and tyre and rim management solution services.

Note 2 // SIGNIFICANT ACCOUNTING POLICIES FINANCIAL REPORTING FRAMEWORK The entity is not a reporting entity because in the opinion of the Directors there are unlikely to exist users of the financial report who are unable to command the preparation of reports tailored so as to satisfy specifically all of their information needs. Accordingly, this ‘special purpose financial report’ has been prepared to satisfy the Directors’ reporting requirements under the Corporations Act 2001. For the purposes of preparing the financial statements, the entity is a for-profit entity.

STATEMENT OF COMPLIANCE The financial statements have been prepared in accordance with the Corporations Act 2001, the recognition and measurement requirements specified by all Accounting Standards and Interpretations, and the disclosure requirements of Accounting Standards AASB 101 ‘Presentation of Financial Statements’, AASB 107 ‘Statement of Cash Flow’ and AASB 108 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ and AASB 1054 ‘Australian Additional Disclosures’.

BASIS OF PREPARATION The financial report has been prepared on the basis of historical cost, except for the revaluation of certain noncurrent assets and financial instruments. Cost is based on the fair values of the consideration given in exchange of assets. All amounts are presented in Australian dollars, unless otherwise stated.

The entity is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the entity’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 other factors that are considered to be relevant. 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. Refer to Note 3 for a discussion of critical judgements in applying the entity’s accounting policies, and key sources of estimation uncertainty.

APPLICATION OF NEW AND REVISED ACCOUNTING STANDARDS The following new and revised Standards and Interpretations have been adopted in the current year and have affected the amounts reported in these financial statements.

Standards affecting presentation and disclosure Amendments to AASB 101 ‘Presentation of Financial Statements’ The amendment (part of AASB 2011-9 ‘Amendments to Australian Accounting Standards Presentation of Items of Other Comprehensive Income’ introduce new terminology for the statement of comprehensive income and income statement. Under the amendments to AASB 101, the statement of comprehensive income is renamed as a statement of profit or loss and other comprehensive income and the income statement is renamed as a statement of profit or loss. The amendments to AASB 101 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to AASB 101 require items of other comprehensive income to be grouped into two categories in the other comprehensive income section: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to AASB 101 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income.

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Amendments to AASB 101 ‘Presentation of Financial Statement’ The amendments (part of AASB 2012-5 ‘Further Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle) requires an entity that changes accounting policies retrospectively, or makes a retrospective restatement or reclassification to present a statement of financial position as at the beginning of the preceding period (third statement of financial position). When the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position.The related notes to the third statement of financial position are not required to be disclosed. (a) Basis of consolidation The consolidated financial statements incorporate the financial statements of the entity and entities (including special purpose entities) controlled by the Company (its subsidiaries) (referred to as ‘the consolidated entity’ in these financial statements). Control is achieved where the entity has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the entity.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. In the separate financial statements of the entity, intra-group transactions (‘common control transactions’) are generally accounted for by reference to the existing (consolidated) book value of the items. Where the transaction value of common control transactions differ from their consolidated book value, the difference is recognised as a contribution by or distribution to equity participants by the transacting entities. (b) Business combinations Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquiree. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under AASB 3 ‘Business Combinations’ are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 ‘Non-current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair values less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED of the business combination over the entity’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the entity’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. (c)

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 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 except for:

Joint venture arrangements

Jointly controlled assets Interests in jointly controlled assets in which the entity is a venturer and has joint control are included in the financial statements by recognising the entity’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 entity’s share of expenses incurred by or in respect of each joint venture. The entity also recognises income from the sale or use of output from the joint venture in accordance with the revenue policy in Note 2(f).

The entity’s interests in assets where the entity does not have joint control are accounted for in accordance with the substance of the entity’s interest. Where such arrangements give rise to an undivided interest in the individual assets and liabilities of the joint venture, the entity recognises its undivided interest in each asset and liability and classifies and presents those items according to their nature.

Jointly controlled operations Where the entity is a venturer and so has joint control in a jointly controlled operation, the entity recognises the assets that it controls and the liabilities that it incurs, along with the expenses that it incurs and the entity’s share of the income that it earns from the sale of goods and services by the joint venture.

Jointly controlled entities Interests in jointly controlled entities in which the entity is a venturer (and so has joint control) are accounted for by using the equity method in the entity’s financial statements.

Investments in jointly controlled entities where the Company 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 company has significant influence, by using the equity method (refer Note 2(j)). (d) Foreign currency The financial statements of the entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the financial statements, the results and financial position of the entity are expressed in Australian dollars, which is the functional currency of Downer EDI Mining Pty Ltd, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the entity, transactions in currencies other than the entity’s

exchange differences which relate to assets under construction for future productive use, which are included in the cost of those assets where they are regarded as an adjustment to interest costs on foreign currency borrowings (refer Note 2(n));

exchange differences on transactions entered into in order to hedge certain foreign currency risks (refer Note 2(u));

exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned or likely to occur, which form part of the net investment in a foreign operation, are recognised in the foreign currency translation reserve and recognised in profit and loss on disposal of the net investment.

The assets and liabilities of the entity’s foreign operations (including comparatives) are translated into Australian dollars at exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in the translation reserve. Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity on or after the date of transition to A-IFRS are treated as assets and liabilities of the foreign entity and translated at exchange rates prevailing at the reporting date.

Goodwill arising on acquisitions before the date of transition to A-IFRS is treated as an Australian dollar denominated asset. (e) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) except:

where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to the taxation authority is included as part of receivables or payables.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Cash flows are included in the cash 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 taxation authorities is classified as operating cash flows. (f) Revenue Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Revenue is recognised for the major business activities as follows: Sale of goods Revenue from the sale of goods is recognised when all of the following conditions are satisfied:

the entity has transferred to the buyer the significant risks and rewards of ownership of the goods;

the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

the amount of revenue can be measured reliably;

it is probable that the economic benefits associated with the transaction will flow to the entity; and

the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Rendering of services Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. The stage of completion of the contract is determined by reference to the services performed up to and including the balance sheet date as a proportion of the total service to be performed.

Dividend and interest revenue Dividend revenue from investments is recognised when the shareholder’s right to receive payment has been established.

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. (g) Construction contracts Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date, as measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs, except where this would not be representative of the stage of completion.

Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable.

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Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. (h) Income tax The entity is part of a tax-consolidated group under Australian taxation law, of which Downer EDI Limited is the head entity. As a result, Downer EDI Mining Pty Ltd is subject to income tax through its membership of the tax-consolidated group. The consolidated current and deferred tax amounts for the tax-consolidated group are allocated to the members of the tax-consolidated group (including Downer EDI Mining Pty Ltd) using the ‘stand alone taxpayer’ approach by reference to the carrying amounts in the financial statements of the 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 arising from this allocation process are then accounted for as immediately assumed by the head entity, as under Australian taxation law the head entity has the legal obligation (or right) to these amounts.

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, Downer EDI Mining Pty Ltd and Downer EDI Limited have agreed to pay a tax equivalent payment to or from the head entity equal to the tax liability or asset assumed by the head entity for that period as noted above. Such amounts are reflected in amounts receivable from or payable to the head entity.

Accordingly, the amount arising under the tax funding arrangement for each period is equal to the tax liability or asset assumed by the head entity for that period and no contribution from (or distribution to) equity participants arises in relation to income taxes.

The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should leave the tax-consolidated group. The effect of the tax sharing agreement is that the Company’s liability for tax payable by the tax-consolidated group is limited to the amount payable to the head entity under the tax funding arrangement.

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. Adjustments are made for transactions and events occurring within the tax-consolidated group that do not give rise to a tax consequence for the Group or that have a different tax consequence at the level of the Group.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 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. Adjustments are made for transactions and events occurring within the tax-consolidated group that do not give rise to a tax consequence for the Group or that have a different tax consequence at the level of the Group.

combination, in which case it is taken into account in the determination of goodwill or excess.

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.

(j) Financial assets Investments are recognised and derecognised on trade date where purchase 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.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in branches and associates, and interests in joint ventures except when the entity 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 the reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the entity expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the entity 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

(i) Cash and cash equivalents Cash comprises cash on hand and demand 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.

Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

Subsequent to initial recognition, investments in subsidiaries are measured at cost in the entity’s financial statements, and investments in associates are accounted for under the equity method. Further information regarding equity accounted investments is detailed in Note 2(c).

Other financial assets are classified into 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 the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit or loss’.

Determination of fair value The fair values of financial assets and liabilities are determined as follows:

the fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices;

the fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions;

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

15

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

the fair value of derivative instruments, is calculated using quoted prices. Where such prices are not available use is made of discounted cash flow analysis using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives; or

the fair value of financial guarantee contracts is determined using option pricing models where the main assumptions are the probability of default by the specified counterparty extrapolated from market-based credit information and the amount of loss, given the default.

Financial assets at fair value through profit or loss Financial assets are classified as financial assets at fair value through profit or loss where the financial asset:

has been acquired principally for the purpose of selling in the near future;

is a part of an identified portfolio of financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

is a derivative that is not designated and effective as a hedging instrument.

Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described above.

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 method less impairment.

Interest income is recognised by applying the effective interest rate.

Derecognition of financial assets The entity derecognises a financial asset only when the contractual right to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the entity neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the entity recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the entity retains substantially all the risks and rewards of ownership of a transferred financial asset, the entity continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. (k) Inventories Inventories are valued at the lower of cost and net realisable value. Costs, including an appropriate portion of fixed and variable overhead expenses, are assigned to inventory on hand by the method most appropriate to each particular class of inventory, with the majority being valued on a first in first out basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. (l) Construction work in progress Construction work in progress is stated at the aggregate of contract costs incurred to date plus recognised losses and progress billings. If there are contracts where progress billings exceed the aggregate costs incurred plus profits less losses, the net amounts are presented under other liabilities.

Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted.

Construction costs include all costs directly related to specific contracts, costs that are specifically chargeable to the customer under the terms of the contract and an allocation of overhead expenses incurred in connection with the entity’s construction activities in general.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

Buildings, plant and equipment, leasehold improvements and equipment under finance lease 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.

The carrying amount of financial assets including uncollectible trade receivables is reduced by the impairment loss through the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

16

With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

(m) Property, plant and equipment Land is carried in the balance sheet at cost.

Any revaluation increase arising on the revaluation of land and buildings is recognised in other comprehensive

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED income, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation of land and buildings is recognised in the profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset.

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. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

fair value or, if lower, at amounts equal to the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the entity’s general policy on borrowing costs. Refer to Note 2(n).

Finance leased assets are amortised on a straight-line basis over the estimated useful life of each asset, or where shorter, the term of the relevant lease.

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 assets are consumed.

Lease incentives 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 straightline basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(n) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

(p) Goodwill Goodwill acquired in a business combination is initially measured at its cost, being the excess of the cost of the business combination over the entity’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised at the date of the acquisition.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Goodwill is subsequently measured at its cost less any accumulated impairment losses.

(o) Leased assets Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental to ownership to the lessee. All other leases are classified as operating leases.

Company as lessor Amounts due from lessees under finance leases are recorded as receivables. Finance lease receivables are initially recognised at amounts equal to the present value of the minimum lease payments receivable plus the present value of any unguaranteed residual value expected to accrue at the end of the lease term. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Company’s net investment outstanding in respect of the leases.

Company as lessee Assets held under finance leases are initially recognised at their

For the purpose of impairment testing, goodwill is allocated to each of the entity’s cash-generating units, or groups of cash-generating units, expected to benefit from the synergies of the business combination. Cashgenerating units or groups of cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.

If the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount of the cash-generating unit (or groups of cashgenerating units), the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or groups of cash-generating units) and then to the other assets of the cash-generating units pro-rata on the basis of the carrying amount of each asset in the cash-generating unit (or groups of cash-generating units). An impairment loss recognised for

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

17

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period. On disposal of an operation within a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal of the operation. (q)

Intangible assets

Intangible assets acquired separately Patents, trademarks and licenses are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period, with any changes in these accounting estimates being accounted for on a prospective basis.

Internally generated intangible assets Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;

the intention to complete the intangible asset and use or sell it;

the ability to use or sell the intangible asset;

how the intangible asset will generate probable future economic benefits;

the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. (r) Impairment of long-lived assets excluding goodwill At each reporting date, the Company reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the company 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

18

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 annually for impairment 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 future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at revalued amount, in which case the impairment loss is treated as a revaluation decrease (refer Note 2(m)).

Where an impairment loss subsequently reverses, the carrying amount of the asset (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 (cash-generating unit) in prior years. A reversal of impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase (refer Note 2(m)). (s) Employee benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, redundancy and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of employee benefits expected to be settled within 12 months, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the entity in respect of services provided by employees up to reporting date.

Defined contribution plans Contributions to defined contribution superannuation plans are expensed when employees have rendered service entitling them to the contributions. (t) Provisions Provisions are recognised when the entity has a present obligation (legal or constructive) as a result of a past event, it is probable that the entity will be required to settle the

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 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 cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Warranties Provisions for warranty costs are recognised at the date of sale of the relevant products, at the Directors’ best estimate of the expenditure required to settle the entity’s obligation.

Onerous Contracts Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

Royalties Provisions for royalty costs are recognised at the date of sale of the relevant products, at the Directors’ best estimate of the expenditure required to settle the entity’s obligation.

Decommissioning and restoration A provision is made for close down, restoration and environmental rehabilitation is recognised when there is a present obligation as a result of production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include such costs as the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas. (u) Derivative financial instruments The entity enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including forward foreign exchange contracts and interest rate swaps.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date.

The resulting gain or loss is recognised in the profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

The entity designates certain derivatives as either hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges).

The fair value of a hedging derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Embedded derivatives Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss.

Hedge accounting The entity designates certain hedging instruments, which include derivatives, embedded derivatives and nonderivatives in respect of foreign currency risk, as either fair value hedges or cash flow hedges.

Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the entity documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.

Fair value hedge Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the profit or loss immediately, together with any changes in the fair value of the hedged item that is attributable to the hedged risk.

Hedge accounting is discontinued when the entity revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. The adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date.

Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss as part of other expenses or other income.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

19

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss in the same line of the income statement as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the entity revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.

profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Fair value is determined in the manner described in Note 2(j).

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. (w)

(v) Financial liabilities Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.

Financial liabilities at fair value through profit or loss Financial liabilities are classified as at fair value through profit or loss where the financial liability is either held for trading or it is designated as at fair value through profit or loss.

A financial liability is held for trading if:

it has been incurred principally for the purpose of repurchasing in the near future; or

it is a part of an identified portfolio of financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or

it is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading is designated as at fair value through profit or loss upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise or;

the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance evaluated on a fair value basis, in accordance with the entity’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

it forms part of a contract containing one or more embedded derivatives, and AASB 139 ‘Financial Instruments: Recognition and Measurement’ permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in

20

Standards and Interpretations issued not yet effective At the date of authorisation of the financial report, the standards and interpretations listed below were in issue but not yet effective. They will be applied in the entity’s financial report related to the first annual reporting period commencing after the effective date.

The following standards and amendments to standards have been identified as those which may impact the entity in the period of initial application. They have not been applied in preparing this financial report. The entity has not yet determined the potential effect of these standards on the entity’s future financial reports.

AASB 9 Financial Instruments, AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) effective on a modified retrospective basis to annual periods beginning on or after 1 January 2015;

AASB 10 Consolidated Financial Statements effective 1 January 2013;

AASB 11 Joint Arrangements effective 1 January 2013;

AASB 12 Disclosure of Interest in Other Entities effective 1 January 2013;

AASB 127 Consolidated and Separate Financial Statements effective for annual reporting periods beginning on or after 1 January 2013;

AASB 128 Investments in Associates and Joint Ventures effective 1 January 2013;

AASB 13 Fair Value Measurement and related AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 effective for annual reporting periods beginning on or after 1 January 2013;

AASB 119 Employee Benefits effective 1 January 2013;

AASB 2011-4 Amendments to Australian Accounting Standards to remove individual key management personnel disclosure requirements effective 1 July 2013;

AASB 2012-2 Amendments to Australian Accounting

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 2 // SIGNIFICANT ACCOUNTING POLICIES – CONTINUED Standards - Disclosures - Offsetting Financial Assets and Financial Liabilities effective 1 January 2013

AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities effective 1 January 2014

relations, risk management, training and the prior management of projects.

AASB 2012-10 Amendments to Australian Accounting Standards - Transition Guidance and Other Amendments effective 1 January 2013

In determining revenues and expense for contracts management make key assumptions regarding estimated revenues and expense over the life of the contracts. Where variations are recognised in revenue, assumptions are made regarding the probability that customers will approve variations and the amount of revenue arising from variation.

In respect of costs, key assumptions regarding costs to complete contracts may include estimation of labour, technical costs, impact of delays and productivity.

Interpretation 20 - Stripping Costs in the Production Phase of a Surface Mine and AASB 2011-12 Amendments to Australian Accounting Standards arising from Interpretation 20 effective 1 January 2013.

Employee entitlements Management judgement is applied in determining the following key assumptions used in the calculation of long service leave at balance date:

The following pronouncement approved by the IASB/IFRIC, where an equivalent pronouncement has not yet been issued by the AASB, has been identified as one which may impact the entity in the period of initial application. It has not been applied in preparing this financial report. The entity has not yet determined the potential effect of this standard on the Company’s future financial reports.

future increases in wages and salaries;

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) effective 1 January 2014;

Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below or elsewhere in the financial statements:

AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle effective 1 January 2013

Disclosures – Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) effective 1 January 2013; and

Mandatory Effective Date of IFRS 9 and Transition Disclosures (Amendments to IFRS 9 and IFRS 7) effective 1 January 2015.

Note 3 // CRITICAL JUDGEMENTS IN APPLYING THE ENTITY’S ACCOUNTING POLICIES The following are the critical judgements (apart from those involving estimations, which are dealt with below), that management has made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements: Revenue recognition Revenue and expense are recognised in net profit by reference to the stage of completion of each identifiable component for engineering services, mining services and construction contracts.

A fundamental condition for being able to estimate percentage of completion profit recognition is that project revenues and project costs can be established reliably.

This reliability is based on such factors as compliance with the entity’s system for project control and that project management has the necessary skills. Project control also includes a number of estimates and assessments that depend on the experience and knowledge of project management in respect of project control, industrial

future on cost rates;

experience of employee departures and period of service; and

fair value of derivatives and other financial instruments.

Intangible assets Useful lives of intangible assets with finite lives are reviewed annually. Any reassessment of useful lives in a particular year will affect the amortisation expense (either increasing or decreasing) through to the end of the reassessed useful life for both the current and future years. Details of these assumptions used are provided in Note 16.

Impairment of goodwill and net investments Determining whether goodwill and net investments (as the case may be) is impaired requires an estimation of the value in use of the cash-generating units to which goodwill or net investments has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

Useful life of property, plant and equipment Useful lives of property, plant and equipment are reviewed annually. Any reassessment of useful lives in a particular year will affect the amortisation expense (either increasing or decreasing) through to the end of the reassessed useful life for both the current and future years. Details of these assumptions used are provided in Note 15.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

21

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 4 // PROFIT FOR THE YEAR Profit / (Loss) for the year has been arrived at after crediting / (charging) the following items of income and expense:

Consolidated 2013

2012

$'000

$'000

2,477,090

2,384,604

345,119

320,414

39,285

34,217

3,158

4,629

27

260

Other revenue

3,009

1,460

Rental income

201

140

-

-

2,867,889

2,745,724

5,240

-

-

4

Net foreign exchange loss / (gains)

(1,724)

(663)

Total other income / (expense)

3,516

(659)

a) Revenues Sales revenue Rendering of services Construction contracts Sale of goods Revenue Interest from common controlled entities Interest from external parties

Dividends Total Revenue Other income / (expense) Government grants 1 Net gain / (loss) on disposal of property, plant and equipment

1

In the current financial year, the Group applied AASB 120 Accounting for Government grants and disclosure of Government assistance in relation

to the research and development tax incentive received by the Group. Prior year disclosures have not been re-stated as the impact to the Financial Report is not material.

22

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 4 // PROFIT FOR THE YEAR – CONTINUED Profit / (Loss) for the year has been arrived at after crediting / (charging) the following items of income and expense: Consolidated 2013

2012

$'000

$'000

56,969

56,788

b) Operating expenses Finance costs on liabilities carried at amortised cost: Interest expense Other finance costs Finance lease expense Total interest and finance lease expense

639

2

11,260

7,285

68,868

64,075

179,107

147,666

682

325

27,685

15,371

Depreciation and amortisation of non-current assets: Plant and equipment Buildings Amortisation of leased assets Amortisation of intellectual property Total depreciation and amortisation Doubtful debts / (Recovery of doubtful debts) Operating lease and rental expenses

235

632

207,709

163,994

(85)

(748)

208,847

228,251

Employee benefits expense: 78,035

63,747

Share based transactions

1,911

807

Other employee benefits

954,963

834,342

1,034,909

898,896

Debt forgiveness from ultimate parent entity 2

-

(113,257)

Total significant items before income tax

-

(113,257)

Total significant items after income tax

-

(113,257)

Defined contribution plans

Total employee benefits expense c) Debt forgiveness from ultimate parent entity The following material items are relevant to an understanding of the Group’s financial performance:

2

The ultimate parent entity has forgiven an amount from the total loan balance as part of the group legal entity rationalisation program.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

23

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 5 // INCOME TAX BENEFIT / (EXPENSE) Income tax benefit / (expense) recognised in the income statement Consolidated 2013

2012

$'000

$'000

Current tax

(47,305)

(5,575)

Deferred tax

22,432

(17,927)

(Under) / over provided in prior years

10,833

(1,185)

(14,040)

(24,687)

* Downer EDI Mining Pty Ltd, a wholly-owned Australian controlled entity of Downer EDI Limited is a part of a tax consolidated group of Downer EDI Limited under Australian taxation law. Accordingly, the company has entered into a tax sharing agreement with Downer EDI Limited as the head entity of the Australian group (refer note 2).

The tax rate used above 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 period.

Note 6 // AUDITORS’ REMUNERATION

Consolidated 2013

2012

$

$

605,649

652,840

Deloitte Touche Tohmatsu earned the following remuneration from Downer EDI Mining Pty Ltd during the year: Audit and review of financial reports Other assurance services

Taxation services Other services Total Auditors’ remuneration

24

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

52,500

24,500

658,149

677,340

15,950

66,765

94,062

-

768,161

744,105

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 7 // DIVIDENDS Consolidated 2013

2012

Cents per share

Total $’000

Cents per share

Total $’000

21.00

18,944

19.00

16,896

100.00

91,181

40.00

36,578

18.00

16,700

21.00

18,944

Recognised amounts Interim Dividend: Unfranked Final Dividend: Unfranked Unrecognised amounts Final Dividend: Unfranked

In respect of the financial year ended 30 June 2013, the Directors declared a dividend of $16,700 thousand subsequent to balance date.

The company is part of a tax-consolidated group and accordingly, does not pay tax or have franking credits in its own right.

Note 8 // CASH AND CASH EQUIVALENTS Consolidated

Cash at bank and on hand Short-term deposits

2013

2012

$'000

$'000

7,615

8,472

- 7,615

- 8,472

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

25

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 9 // INVENTORIES

Consolidated 2013

2012

$'000

$'000

-

7,700

406

359

Materials and consumables

147,140

136,079

Components and spare parts

26,783

14,717

Less provision for obsolescence of components and spare parts

(1,160)

(1,917)

173,169

156,938

839,994

846,096

(827,218)

(836,811)

12,776

9,285

185,945

166,223

Raw materials - in transit Work in progress

Construction work in progress (amount due from customers for contract work) Gross construction work in progress – at cost Less: construction work in progress billed

Note 10 // TRADE AND OTHER RECEIVABLES

Consolidated 2013

2012

$'000

$'000

294,835

448,391

(1,554)

(1,639)

293,281

446,752

91

1,608

5,950

2,250

6,041

3,858

299,322

450,610

Current Trade receivables Allowance for doubtful debts

Other receivables – commonly controlled entities Other receivables

Total current trade and other receivables

26

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 11 // OTHER FINANCIAL ASSETS

Consolidated 2013

2012

$'000

$'000

4,204

1,833

Derivatives designated and effective as hedging instruments carried at fair value Foreign currency forward contracts

-

Interest rate swaps

-

4,204

1,833

Investments, loans and receivables carried at amortised cost -

-

6,781

-

-

-

972

47,700

7,753

47,700

Current

4,204

1,592

Non-current

7,753

47,941

11,957

49,533

Shares in controlled entities Loans to commonly controlled entities (interest bearing) Loans to subsidiaries Loans to related parties

Note 12 // ASSETS CLASSIFIED AS HELD FOR SALE

Consolidated

Assets classified as held for sale ¹

1

2013

2012

$'000

$'000

14,289

-

Equipment at Cracow was sold to the client in July 2013, as per the terms of the Contract.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

27

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 13 // OTHER ASSETS

Consolidated 2013

2012

$'000

$'000

20,221

28,962

Other deposits

415

271

Deferred expenditures

194

473

20,830

29,706

Prepayments

Total other assets

Note 14 // INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Consolidated

Investments in jointly controlled entities

28

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

2013

2012

$'000

$'000

17,297

10,254

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 15 // PROPERTY, PLANT AND EQUIPMENT

Consolidated Freehold Land Plant and Leasehold Equipment In course of and Buildings Equipment Improvements under construction Finance Lease 2013 Gross Carrying Amount Accumulated depreciation Closing net book value

Total

$'000

$'000

$'000

$'000

$'000

$'000

571

985,218

4,091

173,893

24,715

1,188,488

(180)

(497,178)

(2,634)

(40,095)

–

(540,087)

391

488,040

1,457

133,798

24,715

648,401

Consolidated Freehold Land Plant and Leasehold Equipment In course of and Buildings Equipment Improvements under construction Finance Lease 2012 Gross Carrying Amount Accumulated depreciation Closing net book value

$'000

$'000

$'000

Total

$'000

$'000

$'000

566

911,427

5,116

140,475

40,694

1,098,278

(167)

(393,155)

(3,054)

(30,868)

–

(427,244)

399

518,271

2,062

109,607

40,694

671,034

The following useful lives are used in the calculation of depreciation: Buildings

40 years

Leasehold improvements

3-10 years

Plant and equipment

3-10 years

Plant and equipment under finance lease

3-10 years

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

29

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 16 // INTANGIBLE ASSETS

Consolidated Goodwill 2013

Intellectual Property / Software

$'000

$'000

Total $'000

Gross Carrying Amount

64,793

17,286

82,079

Accumulated Amortisation / Impairment

(1,869)

(13,502)

(15,371)

Closing net book value

62,924

3,784

66,708

Consolidated Goodwill 2012

Intellectual Property / Software

$’000

$’000

$’000

Gross Carrying Amount

64,793

19,135

83,928

Accumulated Amortisation / Impairment

(1,869)

(13,906)

(15,775)

Closing net book value

62,924

5,229

68,153

Amortisation allocated during the year is recognised as an expense and disclosed in Note 3.

The following useful lives are used in the calculation of amortisation:

30

Total

Patents

20 years

Trademarks

10 years

Licences

5 years

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 17 // TRADE AND OTHER PAYABLES

Consolidated 2013

2012

$'000

$'000

118,896

209,524

2,156

2,291

16,527

9,306

Current Trade payables Amounts due to customers under contracts Goods and services tax payable Other

128,671

142,227

266,250

363,348

Non-current Non-trade payables to controlled entities

-

Other

-

105

-

105

266,250

363,453

Total trade and other payables

-

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

31

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 18 // BORROWINGS

Consolidated Current

2013

2012

$'000

$'000

37,316

20,677

Secured – at amortised cost Finance lease liabilities ¹ Hire purchase liabilities Bank loans

2

- 16,562

- 8,996

(652)

(1,622)

53,226

28,051

Finance lease liabilities ¹

80,787

77,774

Bank loans 2

61,387

32,930

Deferred Finance Charges

(2,441)

-

139,733

110,704

297,507

443,089

89,229

65,170

386,736

508,259

Total non-current borrowings

526,469

618,963

Total borrowings

579,695

647,014

Deferred Finance Charges Total current borrowings Non-current Secured – at amortised cost

Unsecured – at amortised cost Loans from ultimate parent entity 3 Loans from subsidiaries / commonly controlled entities

32

1

T he finance lease liability has been guaranteed by the ultimate parent entity, Downer EDI Limited, who will meet the lease obligations in the event that the entity is unable to repay the debt.

2

T he bank loan has been guaranteed by a number of entities residing within the Downer EDI group. In the event that the entity is unable to repay the loan, the guarantors will be called on to meet the repayment of the loan agreement.

3

I ncludes amounts payable to the parent entity, Downer EDI Limited, under the tax funding arrangement (refer to note 2(h) for details). The loan payable to the ultimate parent entity is unsecured. The interest rate applicable to this loan is 11.66% (2012: 11.64%).

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 19 // OTHER FINANCIAL LIABILITIES

Consolidated 2013

2012

$'000

$'000

1,236

8,843

Current Foreign currency forward contracts

-

Interest rate swaps Advances from joint venture entities

-

22,492

18,464

23,728

27,307

-

2,600

Non-current Foreign currency forward contracts

731

833

731

3,433

24,459

30,740

Interest rate swaps

Total Other Financial Liabilities

Note 20 // PROVISIONS

Consolidated Employee benefits

Decommissioning and Make Good

Warranty

Other

Total

At 1 July 2012

$'000

$'000

$'000

$'000

$'000

Current

65,132

2,088

-

28,643

95,863

Non-current

5,648

-

-

16,964

22,612

70,780

2,088

-

45,607

118,475

Current

75,398

1,901

-

22,363

99,662

Non-current

10,720

-

1,000

7,947

19,667

Total

86,118

1,901

1,000

30,310

119,329

Total At 30 June 2013

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

33

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 21 // TAX LIABILITIES

Consolidated 2013

2012

$'000

$'000

-

-

-

-

Current Current Tax ¹

Non-current Temporary differences

Total Tax Liabilities 1

32,145

36,613

32,145

36,613

32,145

36,613

The company has entered into a tax sharing agreement with the ultimate parent entity Downer EDI Ltd (refer note 2 (h)).

Note 22 // ISSUED CAPITAL

Consolidated 2013

2012

$'000

$'000

97,680

97,680

3,800

3,800

101,480

101,480

Ordinary Shares 91,176,328 ordinary shares (2012: 91,176,328) Preference Shares 3,800,000 preference shares (2011: 3,800,000)

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.

Fully paid ordinary share capital Fully paid ordinary shares carry one vote per share and carry the right to dividends.

The parent entity is 100% owned subsidiary of Downer EDI Limited and accordingly that company controls all voting rights.

There was no movement in ordinary share capital during the financial year.

Fully paid preference share capital Preference shares entitle the holder, in priority to all other issued shares, to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held.

The parent entity is a 100% owned subsidiary of Downer EDI Limited and accordingly that company controls all voting rights.

There was no movement in preference share capital during the financial year.

34

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 23 // RESERVES

Consolidated

Foreign currency translation Hedging

2013

2012

$’000

$’000

(3,035)

(3,676)

1,490

(9,293)

-

Asset revaluation Total reserves

-

(1,545)

(12,969)

(3,676)

(3,496)

641

(180)

(3,035)

(3,676)

Movement in reserves Foreign currency translation reserve: Balance at beginning of financial year Translation of foreign operations Balance at end of financial year

The Group has overseas operations in Canada, Chile, Botswana, Brazil, Indonesia, Namibia, PNG, South Africa, UK and USA. Downer EDI Mining Pty Ltd has determined that the functional currency is each countries’ local currency. Exchange differences relating to the translation from the functional currency of the foreign operation into Australian dollars (being the company’s functional and presentation currency) are brought to account by entries made directly to the foreign currency translation reserve.

Hedging reserve: Balance at beginning of financial year

(9,293)

(10,072)

Revaluation during the year

10,783

779

1,490

(9,293)

Balance at end of financial year

The hedging reserve represents hedging gains and losses recognised on the effective portion of cashflow hedges. The cumulative deferred gain or loss on the hedge is recognised in profit or loss when the hedged transaction impacts the profit or loss, or is included as a basis adjustment to the non-financial hedged item, consistent with the applicable accounting policy.

Note 24 // RETAINED EARNINGS

Consolidated

Balance at beginning of financial year Profit for the year Dividends paid Balance at end of financial year

2013

2012

$’000

$’000

169,179

57,271

91,497

165,382

(110,125)

(53,474)

150,551

169,179

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

35

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 25 // NOTES TO THE CASH FLOW STATEMENT a) Reconciliation of cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents includes cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows: Consolidated

Cash Short term deposits

2013

2012

$’000

$’000

7,615

8,472

-

-

7,615

8,472

b) Non-cash financing and investing activities During the financial year the group acquired $78,377,931 of equipment under finance leases. This acquisition will be reflected in the cash flow statements over the term of the finance lease via lease repayments (2012: $21,547,000). c) Reconciliation of profit after tax to net cash flows from operating activities Consolidated 2013

2012

$’000

$’000

91,497

165,382

Share of joint ventures profits net of distributions

(13,225)

(16,389)

Depreciation and amortisation of non-current assets

207,709

163,994

7,913

3,085

-

(2,088)

Increase / (Decrease) in deferred tax balances

(4,468)

18,600

Unrealised foreign exchange gains/losses

11,424

-

-

599

Current trade and other receivables

149,771

(149,215)

Current inventories

(19,722)

(19,463)

Profit for the year Adjustments for:

Loss on sale of other non-current assets Deferred acquisition of JV

Other Changes in net assets and liabilities: (Increase) / decrease in assets:

6,505

(7,957)

Non-current trade and other receivables

-

-

Other non-current assets

-

2,200

(111,599)

78,691

3,799

27,612

(7,607)

-

(105)

(112)

Other current assets

Increase / (decrease) in liabilities: Current trade and other payables Current Provisions Other current liabilities Non-current trade and other payables Non-current financial liabilities

(2,702)

-

Non-current provisions

(2,945)

16,759

316,245

281,698

Net cash provided by operating activities

36

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 26 // COMMITMENTS Consolidated a) Capital expenditure commitments Plant and equipment

2013

2012

$'000

$'000

30,701

160,575

Between one and five years

-

30,593

Greater than five years

-

-

30,701

191,168

Within one year

Consolidated b) Other expenditure commitments

2013

2012

$'000

$'000

Within one year

81,843

98,045

Between one and five years

64,278

118,301

-

-

146,121

216,346

Operating lease commitments

Greater than five years

Consolidated Finance lease commitments Within one year

2013

2012

$'000

$'000

43,864

27,479

90,682

86,658

Minimum finance lease payments

134,546

114,137

Future finance charges

(16,443)

(15,686)

Finance lease liabilities

118,103

98,451

Between one and five years

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

37

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 27 // CONTINGENT LIABILITIES AND CONTINGENT ASSETS Indemnities granted to bankers and others in support of performance guarantees issued on behalf of the group in the normal course of business were $66,123 thousand (2012: $42,799 thousand).

The group has provided a guarantee in relation to its portfolio of operating leases in regards to the residual values. This guarantee is valued at $6,185 thousand (2012: $6,755 thousand).

The Parent entity and nominated controlled entities in the group are guarantors under a syndicated borrowing facility established and utilised by the Parent’s controlling entity.

During the 2000/01 financial year, the Parent entity’s superannuation plan changed from being a defined benefits scheme to a defined contributions scheme. The Parent entity guaranteed the superannuation benefits of certain members in the event that their entitlements at retirement are less than they would have otherwise received under the defined benefits arrangement.

The company is called upon to give guarantees and indemnities in respect of the performance of its contractual and financial obligations. These guarantees and indemnities are indeterminable in amount.

The company and its consolidated entities have lodged claims and are subject to counter claims with respect to contracting works completed.

Note 28 // SUBSEQUENT EVENTS There has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years.

Note 29 // DEED OF CROSS GUARANTEE During the year, Advanced Separation Engineering Australia Pty Ltd, Downer EDI Mining Pty Ltd, Roche Highwall Mining Pty Ltd, Roche Contractors Pty Ltd, QCC Resources Pty Ltd, Roche Castings Pty Ltd, Century Administration Pty Ltd, Gaden Drilling Pty Ltd, Downer EDI Mining - Minerals Exploration Pty Ltd, Downer EDI Mining - Blasting Services Pty Ltd, Quality Coal Consulting Pty Ltd, Otraco International Pty Ltd, Rimtec Pty Ltd, Choad Pty Ltd, Otracom Pty Ltd, REJV Services Pty Ltd and Roche Services Pty Ltd were parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved of their requirement to prepare a financial report and Directors’ report under Class Order 98/1418 (as amended by Class Orders 98/2017 and 00/0321) issued by the Australian Securities and Investments Commission.

The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other material parties to the Deed of Cross Guarantee that are controlled by the Parent entity, they also represent the ‘Extended Closed Group’. The consolidated entity information shown in the income statement and balance sheet materially represents the consolidated income statement and balance sheet of the Closed Group.

38

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 30 // CONTROLLED ENTITIES Country of incorporation

Name of controlled entity

Class of Shares

Ownership interest 2013

2012

%

%

Advanced Separation Engineering Australia Pty Ltd*

Australia

Ordinary

100

100

Century Administration Pty Ltd*

Australia

Ordinary

-

100

Choad Pty Ltd*

Australia

Ordinary

-

100

QCC Resources Pty Ltd*

Australia

Ordinary

100

100

Quality Coal Consulting Pty Ltd*

Australia

Ordinary

100

100

Downer EDI Mining Pty Ltd*

Australia

Ordinary

100

100

Downer EDI Mining-Blasting Services Pty Ltd*

Australia

Ordinary

100

100

Downer EDI Mining-Minerals Exploration Pty Ltd*

Australia

Ordinary

100

100

Gaden Drilling Pty Limited*

Australia

Ordinary

-

100

Otraco Botswana (Proprietary) Limited

Botswana

Ordinary

100

-

Brazil

Ordinary

100

100

Canada

Ordinary

100

100

Chile

Ordinary

100

100

Australia

Ordinary

100

100

Otraco Brasil Gerenciamento de Pneus Ltda Otraco Canada Inc .

Otraco Chile SA Otraco International Pty Ltd*

South Africa

Ordinary

100

-

Otraco Tyre Management Namibia (Proprietary) Ltd

Namibia

Ordinary

100

-

Otracom Pty Ltd*

Australia

Ordinary

100

100

PT Otraco Indonesia

Indonesia

Ordinary

100

100

REJV Services Pty Ltd*

Australia

Ordinary

100

100

PNG

Ordinary

100

100

Otraco Southern Africa (Pty) Ltd

Richter Drilling (PNG) Limited Rimtec Pty Ltd*

Australia

Ordinary

100

100

Rimtec USA Inc.

USA

Ordinary

100

100

Hong Kong

Ordinary

100

100

Roche Bros. Superannuation Pty. Ltd.

Australia

Ordinary

100

100

Roche Castings Pty Ltd*

Australia

Ordinary

-

100

Roche Contractors Pty Ltd*

Australia

Ordinary

100

100

Roche Highwall Mining Pty Ltd*

Australia

Ordinary

100

100

PNG

Ordinary and Preference

100

100

Australia

Ordinary

100

100

Brazil

Ordinary

100

100

Snowden Holdings Pty Ltd

Australia

Ordinary

100

100

Snowden Mining Industry Consultants Inc.

Canada

Ordinary

100

100

Roche Bros (Hong Kong) Limited

Roche Mining (PNG) Limited Roche Services Pty Ltd* Snowden Consultoria Do Brasil Limitada

Snowden Mining Industry Consultants Limited

United Kingdom

Ordinary

100

100

Snowden Mining Industry Consultants Pty Ltd

Australia

Ordinary

100

100

Snowden Mining Industry Consultants (Pty) Ltd

South Africa

Ordinary

100

100

British Virgin Isl.

Ordinary

-

100

Australia

Ordinary

100

100

South Africa

Ordinary

100

100

Snowden Mining Technologies Limited Snowden Technologies Pty Ltd Snowden Training (Pty) Ltd

* These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 issued by the Australian Securities and Investments Commission. For further information refer to note 29.

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

39

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

Note 31 // PARENT ENTITY DISCLOSURES Company 2013

2012

$'000

$'000

Current assets

410,609

496,350

Non-current assets

730,109

769,911

1,140,718

1,266,261

Current liabilities

389,761

424,900

Non-current liabilities

617,617

711,472

1,007,378

1,136,372

133,340

129,889

101,480

101,480

30,402

37,447

1,458

(9,038)

133,340

129,889

103,080

17,449

a) Financial position Assets

Total assets

Liabilities

Total liabilities Net assets

Equity Issued capital Retained earnings

Reserves Hedging Reserve Total equity

b) Financial performance Profit for the year

40

Other comprehensive income

10,496

624

Total comprehensive income

113,576

18,073

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013

c) Guarantees entered into by the parent entity in relation to debts of its subsidiaries The parent entity has, in the normal course of business, entered into guarantees in relation to the debts of its subsidiaries during the financial year. d) Contingent liabilities of the parent entity Indemnities granted to bankers and others in support of performance guarantees issued on behalf of the parent entity in the normal course of business were $48,444 thousand. (2012: $22,557 thousand).

The company has provided a guarantee in relation to its portfolio of operating leases in regards to the residual values.

This guarantee is valued at $6,185 thousand (2012: $6,755 thousand).

The parent entity and nominated controlled entities in the group are guarantors under a syndicated borrowing facility established and utilised by the Parent’s controlling entity.

The company is called upon to give guarantees and indemnities in respect of the performance of its contractual and financial obligations. These guarantees and indemnities are indeterminable in amount.

The company and its consolidated entities have lodged claims and are subject to counter claims with respect to contracting works completed. e) Commitments for the acquisition of property, plant and equipment by the parent entity Company 2013

2012

$'000

$'000

Plant and equipment 27,934

149,197

Between one and five years

-

30,593

Greater than five years

-

-

27,934

179,790

Within one year

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

41

DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2013

As detailed in Note 2 to the financial statements, the company is not a reporting entity because in the opinion of the directors there are unlikely to exist users of the financial report who are unable to command the preparation of reports tailored so as to satisfy specifically all of their information needs.

Accordingly, this ‘special purpose financial report’ has been prepared to satisfy the Directors’ reporting requirements under the Corporations Act 2001.

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; and (b) 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 giving a true and fair view of the financial position and performance of the entity.

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

David Overall Director Brisbane, 30 October 2013

42

DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

INDEPENDENT AUDITOR’S REPORT Deloitte Touche Tohmatsu A.B.N. 74 490 121 060 Riverside Centre Level 25, 123 Eagle Street, Brisbane QLD 4000 GPO Box 1463, Brisbane QLD 4001 Australia

Independent Auditor’s Report to the members of Downer EDI Mining Pty Ltd

DX: 115 Tel: +61 (0) 7 3308 7000 Fax: +61 (0) 7 3308 7004 www.deloitte.com.au

We have audited the accompanying financial report, being a special purpose financial report, of Downer EDI Mining Pty Ltd, which comprises the statement of financial position as at 30 June 2013, the statement of profit and loss and other comprehensive income, the statement of cash flows 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 7 to 42.

Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view and have determined that the basis of preparation described in Note 2 to the financial report is appropriate to meet the requirements of the Corporations Act 2001 and is appropriate to meet the needs of the members. The directors’ responsibility also includes such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We have conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance 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 of the financial report that gives a true and fair view, 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.

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, which has been given to the directors of Downer EDI Mining Pty Ltd would be in the same terms if given to the directors as at the time of this auditor’s report.

Opinion In our opinion, the financial report of Downer EDI Mining Pty Ltd is in accordance with the Corporations Act 2001, including: (a) g iving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2013 and of their performance for the year ended on that date; and (b) c omplying with Australian Accounting Standards to the extent described in Note 2, and the Corporations Regulations 2001.

Basis of Accounting Without modifying our opinion, we draw attention to Note 2 to the financial report, which describes the basis of accounting.

The financial report has been prepared for the purpose of fulfilling the directors’ financial reporting responsibilities under the Corporations Act 2001. As a result, the financial report may not be suitable for another purpose.

DELOITTE TOUCHE TOHMATSU

R G Saayman Partner, Chartered Accountants Brisbane, 30 October 2013

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited DOWNER EDI MINING PTY LTD | FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013

43

downeredimining.com

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