GRANGE RESOURCES LIMITED. - Annual Report 2013

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Australia’s most experienced magnetite producer 20 13 Annual REPORT

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Grange Resources	Grange Resources	Grange Resources
Limited
Board of directors
Michelle LiNon-executive Chairman
Neil ChatfeldNon-executive Deputy	Chairman
Wayne BouldManaging Director
Clement KoNon-executive Director
John HoonNon-executive Director
Honglin ZhaoExecutive Director
coMPaNY secretarY
Pauline Carr
reGistered office
Grange Resources Limited_ABN 80 009 132 405_
34a Alexander Street, BURNIE, TAS 7320
Telephone: + 61 (3) 6430 0222; Facsimile: +		61 (3) 6432 3390
sHare reGistrY
Computershare Investor Services Pty Ltd
Yarra Falls
452 Johnston Street, ABBOTSFORD, VIC 3067
aUditors
PricewaterhouseCoopers
Freshwater Place
2 Southbank Boulevard, SOUTHBANK, VIC		3006
stocK eXcHaNGe
Grange Resources Limited is listed on the ASX Limited
(ASX Code: GRR) and the “OTC” Markets in Berlin, Munich,
Stuttgart and Frankfurt in Germany (Code: WKN. 917447)
WeBsite
www.grangeresources.com.au
coNteNts
About Grange	1	Corporate Governance Statement	20
2013 Overview	2	Directors’ Report	30
2014 Priorities	3	Financial Statements	44
About the Magnetite Business	4	Tenement Schedule	90
Chairman’s and Managing Director’s Review	6	ASX Additional Information List of Signifcant	91
Operating and Financial Review	9	ASX Announcements	92
GRANGE RESOURCESLIMITED

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About Grange
Our Business
Grange Resources Limited (Grange or the Company), ASX Code: GRR,
is Australia’s most experienced magnetite producer with over 45 years
of mining and production from its Savage River mine, and has a market
capitalisation of approximately A$340 million as of 3 March 2014.
WESTERN Grange’s operations consist principally of owning and operating the Savage
AUSTRALIA River integrated iron ore mining and pellet production business located in
Southdown the north-west region of Tasmania. The Savage River magnetite iron ore
Perth mine is a long life mining asset set to continue operation to 2030, with
potential to further extend the mine life. At Port Latta, on the north-west
coast of Tasmania, Grange owns a downstream pellet plant and port
Savage River
facility producing over two million tonnes of premium quality iron ore pellets
TASMANIA
Hobart annually, with plans to increase annual production to 2.7 million tonnes.
Grange has a combination of spot and contracted sales arrangements in
place to deliver its pellets to customers throughout South East Asia.
In addition, Grange is a majority joint venture partner in a major magnetite
development project at Southdown, near Albany in Western Australia.
The Southdown magnetite project, once developed, is expected to have
the capacity to supply over four times the amount of iron ore produced
at Savage River, at an annual production rate of 10 million tonnes of
premium magnetite concentrate. In late 2012 in light of the high cost
development environment within Australia, the Company announced that
it was significantly reducing its expenditure on the project during 2013.
While continuing its search for an equity partner for a strategic share of
the Company’s interest in the project, the Company is also undertaking an
internal review of the definitive feasibility study to identify the potential for
alternative development models.
Our VisiOn
We will produce high quality steel making raw materials
economically and effectively. Our operations will be efficient,
flexible, and stakeholder focused.
Our Values
At Grange we ALL will...
u Work safely
u Lead and act with fairness, integrity, trust and respect
u Be responsible and accountable for our actions
u Utilise our resources efficiently and effectively
u Engage with stakeholders and proactively manage our
impact on their environment
u Work together openly and transparently
u Promote an environment in which our people can develop
and prosper
2013 ANNUAL REPORT
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2013 Overview

In 2013 we delivered on our promises by successfully navigating the business through a challenging transitional year which finished strongly. Our focus on safety continued to be unrelenting.

OperatiOnal OVerView

u Exceptional safety record continued. No Lost Time Injuries recorded since July 2010
u Regained access to higher grade ore ahead of schedule
u Improved production and returned unit operating costs to long term target levels
u Maintained focus on the protection and progressive refurbishment of critical core process infrastructure
u Successfully delivered mine re-development strategies
u Progressed the strategies to further extend the life and value of Savage River’s operations
u Significant increase and upgrade of Long Plains resource
u Balance sheet strength preserved with disciplined operational planning and execution enabling internal funding of critical mine redevelopment
u Attractive dividend yield to shareholders (at current share prices) continued
u Reassessment of the Southdown project development model initiated

Financial OVerView

u Sales volumes of 1.9 million tonnes of iron ore products (down from 2.4 million tonnes)
u Revenues from mining operations of $281.1 million (down from $331.3 million)
u Average realised product price of US$141.43 per tonne (FOB Port Latta) (down from US$144.84 per tonne)
u Net profit after tax of $25.6 million (down from $59.1m)
u Net cash inflows from operating activities of $115.8 million (down from $179.3 million)
u Cash and term deposits of $159.9 million as at 31 December 2013
u Low gearing levels with borrowings of $3.5 million
u Final dividend of 1.0 cent per share (unfranked) plus a 1.0 cent per share special dividend declared. Total dividends of 3.0 cents for the 2013 year

Ash Ralston (Mechanical Supervisor) and Cai Zhang (Graduate Engineer), Port Latta Operations.

GRANGE RESOURCES LIMITED

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2014 Priorities

Grange is Australia’s proven, safe, reliable, long life producer of premium quality magnetite pellets and remains a major long-term contributor to both the north west regional and Tasmanian state economies.

2014 priOrities

u Take advantage of iron ore prices and current market opportunities through spot cargoes and longer term contracts which deliver upside and diversify customer and geographic risk
u Retain the strong emphasis on reducing operating costs and maintaining competitive unit operating costs
u Reassess the Southdown Project development model
u Continue investment in mine development - progress next phase of North Pit development and unlock South Deposit to provide an alternative source of ore
u Continue to develop and implement “real time” operational scheduling and management processes to improve daily productivity
u Continue to invest in process infrastructure
u Complete preparatory works for installation of new autogeneous mills at Savage River
u Progress approval for South Deposit tailings storage facility which is sufficient for the balance of the mine life at Savage River
u Continue development and implementation of end to end quality management processes
u Focus on the strategic management of capital expenditure to ensure that it adds the maximum value at the right time
u Investigate value adding opportunities to the downstream business
u Continue to drive value for all shareholders
u Maintain regular dividends
u Target growth opportunities to complement existing business

inVestMent Merits

u Sound fundamentals underpin the business
u Savage River is a long established operation with almost 50 years of experience
u Savage River is a long life producer of premium quality magnetite pellets
u Savage River generates significant cash flow and has a strong balance sheet
u Stable work force with minimal turnover who know the intricacies of the business and deliver added value
u We have the in house skills, systems, capability and discipline to deliver the right development model for Southdown
u High yield dividend stream commenced in 2011 and continued throughout 2012 and 2013. Since 2011, we have returned in excess of $115 million to shareholders through dividends

2013 ANNUAL REPORT

About the Magnetite Business

Magnetite and the irOn Ore industry

Magnetite is a naturally occurring mineral commonly refined into an iron ore concentrate and used for steel production. Iron ore makes up about five per cent of the Earth’s crust and most commonly occurs in the form of haematite or magnetite. Most of the magnetite mined now is used as an ore of iron. Iron liberated from magnetite ore is usually used to make concentrate for pellet feed or pellets which are used to make steel.

The Australian iron ore industry has traditionally been based on the mining, production and export of haematite ores, also referred to as ‘Direct Shipping Ore’ (DSO). Approximately 96 per cent of Australian iron ore production comes from DSO. While magnetite is an emerging industry in Australia, globally it accounts for approximately 50 per cent of iron ore production.

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Blast furnace
iron Making Process
50% – 80% 20% – 50%
Sinter Lump & Pellets
Exhaust Exhaust
gases gases
Molten
Molten
Slag out Iron out
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Magnetite tO irOn
Smelting magnetite to iron involves agglomeration
or ‘clumping together’ of the magnetite concentrate,
and thermal treatment to produce iron ore pellets.
The pellets can be used directly in a blast furnace or
at direct reduction iron-making plants.
Magnetite concentrate has internal thermal energy
meaning less energy is required, compared to
haematite, in the pelletising process which in turn
results in less carbon dioxide emissions. The blast
furnace chemically reduces iron oxide into liquid
iron called ‘hot metal’. The iron ore and reducing
agents (coke, coal and limestone) are combined.
Pre-heated air is blown at the bottom of the
combination for up to eight hours. The final product
is a liquid which is drained, and eventually refined to
produce steel.
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GRANGE RESOURCES LIMITED

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Magnetite Business

Mining magnetite ore is a high volume business. It is capital intensive and requires significant downstream processing infrastructure including a beneficiation plant, a pellet plant and port facilities. As can be seen from the following graphic, magnetite products command a value premium above haematite ore products such as fines and lump. This premium is derived on two fronts, through additional iron content, and a quality premium.

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MaGNetite – tHe PreMiUM iroN ore
Iron Ore Pellet
~65-69% iron
Magnetite
Concentrate
~67% iron
Direct Shipping
Lump ~63% iron
Direct Shipping
Fines ~58% iron
Price Higher
Higher
QUaLitY
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The growth in Chinese demand, and its understanding of the use of magnetite-based iron ore products has seen a significant change in the value accrued to both magnetite concentrate and pellets, and the methodology used for determining that value.

As magnetite concentrate is a refined product, it usually has higher iron content and lower impurities. This can have beneficial quality and environmental outcomes for the steel maker.

Until April 2010, iron ore prices were traditionally decided in closed-door negotiations between the small handful of “key” miners and steel makers which dominated both spot and contract markets. Traditionally, the first agreement on price reached between these two groups set a benchmark price that was followed by the rest of the industry for a 12 month period.

This benchmark system broke down in 2010 with pricing moving to short term index-based mechanisms. Given that most other commodities already have a mature market-based pricing system, it was natural for iron ore to follow suit. This has seen magnetite product pricing change so that it is now based on the transparent market based index prices, with premiums being paid for increased iron ore content and pellet manufacture.

2013 ANNUAL REPORT

Chairman’s & Managing Director’s Review

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Michelle Li Chairman

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Wayne Bould Managing Director

Financial results

Grange recorded a consolidated profit after tax of $25.6 million for the year ended 31 December 2013. This result was achieved on sales of 1.9 million tonnes of iron ore products and revenues from mining operations of $281.1 million. The Board was pleased to announce an interim dividend of 1.0 cent per share in August 2013, and a 1.0 cent per share final dividend and a further 1.0 cent special dividend both payable in April 2014 following the announcement of our 2013 full year results.

All in all, 2013 was a difficult transitional year for Grange, and we are very pleased to report that Grange has successfully regained its focus on the optimisation of its day to day business activities and met the challenges which confronted it in 2013. Grange has delivered the promises to regain access to higher grade ore by year end, improve production and return unit operating costs to long term target levels. This result was achieved without any loss of focus on the safe management of the workplace and the overall safety of our people.

Additionally, in concert with the operational restructuring and cost containment initiatives implemented by the Company during the first half of 2013, the Board determined to reduce corporate overheads by closing the Perth Office and transferring all corporate activities to Grange’s existing office in Burnie, Tasmania.

The iron ore price began reflecting a renewed and heightened interest in high grade, low impurity iron ore products in the latter months of 2013. This renewed interest from the Chinese, Indian and to a lesser extent, Japanese markets together with realignment of the Australian dollar provided Grange an opportunity to maximise sales from its higher grade stocks and to move into 2014 seeking to shore up its sales offerings and begin negotiating term off-take agreements with quality customers.

The “back to the knitting” and “deliver in full on time” focus has established a solid basis for the success of the business in 2014 and beyond.

saFety

Grange’s operations team continued to maintain their unrelenting and disciplined management of personal safety in operations as they implemented the second of its four year

OHS & ESR Strategic Business Plans from 2012 through 2015. They have been united in their efforts to lead and manage systems which balance with requisite behavioural disciplines to eliminate injuries and incidents from our operations. Our efforts are having a real impact as evidenced by the continuous reduction in our safety performance statistics with No Lost Time Injuries since July 2010 - an impressive total 1316 days LTI free as at 28 February 2014.

Unfortunately, the Total Recordable Injury Frequency Rate (TRIFR) increased from 1.99 per million hours worked at 31 December 2012 to 3.87 per million hours worked at 31 December 2013 due to a number of medical treatment injuries. The increase in reported medical treatment injuries highlights the ongoing development of an open and collaborative approach to safety management in the workplace.

The Board is confident that the teams’ planned and unrelenting discipline in managing workplace safety will ensure personal safety remains an intrinsic component of the Company’s operational planning and process management - on every shift, each and every day.

GRANGE RESOURCES LIMITED

OperatiOnal perFOrMance

The Grange team entered 2013 facing a need to deal with some reasonably significant issues in its mining operations at Savage River – remediation of the July 2012 slip in the main ore zone of North Pit in order to regain access as soon as possible to the high grade ore; the need to mine remnant deposits which contained much lower grade ore in order to sustain cash flow and maintain cash reserves; the need to get product directly to market to take some of the upside evident in iron ore prices; and the need to significantly review life of mine plans to reposition the business so that it can remain competitive in a frequently changing “roller coaster” market. This meant developing well planned strategies and managing to them with very tight and disciplined scheduling and process control methodologies.

A key element of the strategy was to mine the remnant deposits on a “just in time” basis, pushing ROM stocks to almost zero and pushing the lower grade ore through the downstream processing infrastructure on an immediate basis to get it to market as quickly as possible.

The corollary of this was a need to move very significant volumes of ore and waste, and to process record volumes of ore to produce a lower volume of finished product. This impacted unit costs of production significantly during the first half of the year.

Grange entered the second half of the year with a clear focus to get back to the basics – drive productivity with disciplined end to end “mine to metal” planning, drive the attainment of the schedules, and unrelentingly manage all costs, particularly operating costs.

The team entered Q3 in full knowledge that it was always going to be our toughest challenge in 2013. The Tasmanian winter is very demanding operationally at the best of times. With snow, record rainfalls and very strong winds the 2013 winter was particularly challenging. Despite the climatic adversity the team were effective in exceeding the plan and were able to regain access to the North Pit high grade ore ahead of schedule during September and begin to rebalance ROM stockpile feeds and significantly increase grade/weight recovery into Q4.

With access to the higher grade ore in North Pit, and with the constant focus on disciplined planning, targeted quality and cost control

management, the business hit its rhythm in Q4 and safely delivered record run rates during the quarter. This coupled with the continued focus on disciplined planning and scheduling saw Grange end the year on target with its cash reserves intact.

The operations team added further long term value to the business by successfully completing an extensive drilling program at Long Plains which upgraded the high grade magnetite resource to 107 million tonnes, potentially increasing the mine life at Savage River. They also finalised plans for the construction the South Deposit Tails Storage Facility and expansion of mining operations and these have progressed through the Tasmanian Environmental Protection Agency (EPA) and the Department of Sustainability, Environment, Water, Population and Communities (SEWPaC) to final approval.

The Board believes that Grange’s experienced team has worked through the issues which confronted them at the start of 2013 and have established an excellent basis for the success of the business in 2014 and beyond.

sOuthdOwn prOject

During the year the Company implemented its reduced spend approach to the project. Grange continued to seek a buyer for its equity interest and to keep the Project’s approvals, project assets and tenements in good order.

Market conditions for securing project investment funding did not improve in 2013 and they continue to remain challenging. In late 2013 the Board commissioned the Grange team to conduct an internal review of the Project’s operating model generated as part of the definitive feasibility study. This internal review will determine if changes in market outlook, project construction conditions (including regional infrastructure development) and operating methodologies learned “hands on” from our operations at Savage River will allow the overall Southdown development concept and model to be pragmatically reworked so as to reduce initial capital requirements and overall life of mine operating costs. The review is anticipated to be completed in mid 2014.

2013 ANNUAL REPORT

Chairman’s & Managing Director’s Review (cont.)

BOard

We would like to thank our Board colleagues for their hard work throughout the year. In June 2013 the Board made the decision to close the Company’s Perth office and to relocate Grange’s headquarters to its Tasmanian office in Burnie. As the consequence of the restructure, the now former Managing Director, Mr Richard Mehan, left the Company.

On 4 June 2013, Mr Wayne Bould, the Company’s Chief Operating Officer, was appointed to the Board as Managing Director and CEO. Mr Bould joined Grange in 2008 and has 40 years’ practical and managerial experience in the petroleum, forestry and mining sectors. With his extensive knowledge of the Company’s Tasmanian operations and the iron ore industry as well as an in-depth appreciation and understanding of the broader challenges facing the mining sector he is well credentialed to lead Grange through operational challenges.

Mr Xi Zhiqiang, the Company’s nonexecutive Chairman since 2009 retired from the Board on 29 October 2013. Ms Michelle Li, a mineral processing engineer and metallurgist with over 20 years’ experience in the Australian mining sector, joined the Board as a non-executive Director and Chairman.

The Board believes that a third independent non-executive Director will provide more effective board performance, and expects an appointment in 2014. The Board is also undertaking work on developing a Board succession plan.

OutlOOk and grange’s 2014 priOrities

Grange is very conscious that its prime focus is to remain competitive in a frequently changing iron ore market where market prices rise and fall seemingly at the drop of a hat. The management team is very disciplined in managing its day to day activities while at the same time challenging itself to find better ways to do business as the mine gets older and deeper.

In 2014 the team will be disciplined in ensuring it continues to:

u pursue its safety management strategies and further develop its risk management and reporting systems;
u maintain a disciplined approach to planning operations and managing schedules;
u drive productivity improvements and unit cost reductions;
u seek medium term sales contracts at fair market rates with quality customers;
u revise and optimise life of mine plans to incorporate new opportunities with Long Plains and other potential internal and external sources of ore;
u revise and optimise life of mine plans to incorporate opportunities to utilise more effective mining methodologies which are more productive and energy efficient;
u model downstream product mix and output to ensure that the business is capable of maximising the value of its offering to the market;
u identify the potential for alternate development models which may see the Southdown Project move into construction and operation.

The Board has reviewed and agreed the strategies with the management team, and is confident that by maintaining constant and disciplined focus on the day to day operational basics at the same time as continually exploring opportunities for innovation, improvement and growth, the business will ensure it will remain competitive and deliver value to its loyal employees and shareholders.

thank yOu

On behalf of Grange’s Board, we would like to thank all of our employees for their dedication and hard work over the past year. We have an excellent culture within the Company and you are all to be commended for your achievement and special contribution. This has established a good basis for the success of the business in 2014 and beyond.

We would also like to thank Grange’s long standing shareholders for their trust in the team and their patience during a period of transition and development. The Board and the leadership team are greatly appreciative of your ongoing support.

Michelle Li Chairman

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Wayne Bould Managing Director

GRANGE RESOURCES LIMITED

Operating and Financial Review

key 2013 highlights

Victoria Braniff (Structural Geologist) and Christopher Esterhuizen (Mining Geologist), Savage River Operations.

u Exceptional safety record at Savage River continues with no Lost Time Injuries recorded since July 2010
u Delivered on our 2013 promises by successfully navigating the business through a challenging transitional year which finished strongly
u Revenues from mining operations of $281.1 million
u Net profit after tax of $25.6 million
u Disciplined operational planning and execution has allowed the business to fund critical mine re-development and preserve balance sheet strength
u Cash and term deposits of $159.9 million
u Net cash inflows from operating activities of $115.8 million
u Low gearing levels with borrowings of $3.5 million
u Continued cost control disciplines have seen unit operating costs return to long term target levels
u Maintained focus on the protection and progressive refurbishment of critical core process infrastructure
u Paid $23.1 million of dividends to shareholders during 2013 with a further $23.1 million to be paid in April 2014
u Pellet prices remained strong with improving premiums for Grange’s higher quality, lower impurity products
u Realised product prices averaged US$141.43 (A$147.99) per tonne (FOB Port Latta)
u Lower realised AUD:USD exchange rates ($0.9557) have delivered stronger AUD revenues
u Strong market sentiment that current prices are likely to continue to prevail in 2014
u Successfully delivered mine re-development strategies
u Re-established access to higher grade ore ahead of schedule in September 2013 which significantly improved production and delivered competitive unit operating costs during Q4 2013
u The strong emphasis on reducing operating costs and maintaining competitive unit operating costs will continue during 2014
u Successfully completed an extensive drilling program at Long Plains and announced an upgraded high grade magnetite resource of 107 million tonnes, potentially increasing the life of mine at Savage River (refer ASX announcement dated 19 December 2013)
u Maintained our focus on the Southdown Project
u Continued our search for an equity partner in the Southdown Project
u Ensured that all Southdown tenements, permits and project assets remained in good standing
u Maintained the currency of all the elements of the Southdown definitive feasibility study
u Commenced an internal review of the Southdown definitive feasibility study to identify the potential for alternative development models

2013 ANNUAL REPORT

Operating and Financial Review (cont.)

reView OF results

safety Performance

The exceptional safety performance at Savage River and Port Latta operations continued with no Lost Time Injuries (LTI) recorded since July 2010. This result reflects the robust and effective safety culture and the strong focus by all staff in maintaining a safe and productive workplace. Unfortunately, the Total Recordable Injury Frequency Rate (TRIFR) increased from 1.99 per million hours worked at 31 December 2012 to 3.87 per million hours worked at 31 December 2013 due to a number of medical treatment injuries. The increase in reported medical treatment injuries highlights the ongoing development of an open and collaborative approach to safety management in the workplace.

full Year result

Grange recorded a consolidated profit after tax of $25.6 million for the year ended 31 December 2013 (2012 restated: $59.1 million). This result was achieved on sales of 1.9 million tonnes (2012: 2.4 million tonnes) of iron ore products and revenues from mining operations of $281.1 million (2012: 331.3 million).

The reduction in revenues from mining operations for the year ended 31 December 2013 arose from the following:

u 20% reduction in sales of iron ore products to 1.9 million tonnes (from 2.4 million tonnes in 2012). This was due to restricted access to the usual runs of higher grade ore between January 2013 and September 2013. Consequently much larger volumes of lower grade ore were required to be processed during this period to offset the downstream production impacts.
u 2% reduction in the average product prices to US$141.43 per tonne (from US$144.84 per tonne in 2012) off-set by an 8% reduction in the average realised AUD:USD exchange rate. This delivered stronger AUD unit prices of A$147.99 per tonne (from A$139.86 per tonne in 2012). Premiums for higher iron content and products with lower impurities (including those produced by Grange) significantly improved during Q4 2013.

The iron ore market is dynamic and continues to evolve with heightened interest in high grade, low impurity iron ore products from the Chinese, Indian and to a lesser extent, Japanese markets. This evolution is driven by a combination of India’s internal tax regime, toughening environmental requirements in China and additional growth in Japan. These market changes provide very good opportunities for Grange to shore up its sales offerings and to seriously consider negotiating term off-take agreements with quality customers. However the iron ore market will continue to be subject to on-going pressure from buyers in all markets to supply them with premium products at a lower cost.

The increased unit costs at Savage River were the result of remediation efforts relating to the July 2012 rock slide and the need to process large volumes of lower grade ore from January 2013 to September 2013. Greater day to day focus on the operational basics such as quality planning and scheduling coupled with very tight management of unit costs bought about the reduction of the higher unit operating costs in Q3 2013, and settle into a far more stable and controlled operating environment in Q4 2013.

Mike Berechree (Shift Fitter) and Nic Bellinger (Mechanical Leading Hand), Port Latta Operations.

GRANGE RESOURCES LIMITED

The strategy of producing product from the lower grade remnant deposits on a “just in time” basis proved very effective in not only funding the remediation efforts but also the re-development of the North Pit.

Re-establishing access to higher grade ore in the North Pit from September 2013 has facilitated improved production, sales and replenished cash reserves. It has also enabled the rebuild of run of mine stockpiles to commence and places the operations team in a position to achieve planned production of approximately 2.3 million tonnes of iron ore products in 2014 at competitive unit operating costs.

financial Position

As at 31 December 2013, Grange has $159.9 million (2012: $174.9 million) in cash and term deposits and $3.5 million (2012 restated $13.9 million) in borrowings. The Company believes that it has preserved the strength of the Group’s balance sheet whilst:

u Investing in significant mine redevelopment at Savage River to regain access to the main ore zone of the North Pit and progressing pre-production stripping at South Deposit to provide an alternative source of ore in the second half of 2014;
u Repaying a mobile equipment facility of $5.8 million (net of debt service reserve amounts) in April 2013; and
u Returning $23.1 million to shareholders through the payment of dividends in April 2013 and October 2013.

With no net debt, improved access to high grade ore and increasing confidence of production and ongoing unit costs, Grange is well positioned to take advantage of a stronger iron ore market.

Production and sales statistics

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12 Months 12 Months
December 2013 December 2012
Production Statistics
Mine (‘000)
Waste Mined (BCM) 15,689 12,864
Ore Mined (BCM) 1,979 1,774
Total Mined (BCM) 17,668 14,638
Strip Ratio (Ore To Waste) 8:1 7:1
Concentrator (‘000)
Ore Crushed (t) 6,410 6,530
Ore Milled (t) (wet) 6,168 6,221
Weight Recovery (%) 33.4% 35.9%
Concentrate Produced (t) 1,955 2,123
Pellet Plant (‘000)
Pellets Produced (t) 1,916 2,005
Concentrate Stockpile (t) 3 9
Pellet Stockpile (t) 232 131
Sales (‘000)
Pellets (t) 1,815 2,221
Concentrate (t) 0 64
Chips (t) 84 84
Total Sales (t) 1,899 2,369
Sales Revenue, Cash Operating Costs (C1)
and Operating Margin
Sales Revenue
Sales of Iron Ore (A$’000) $281,072 $331,308
Average Product Price Received (A$/t) $147.99 $139.86
Cash Operating Costs (C1)
Cash Operating Costs (C1) (A$/t) $119.94 $106.08
Operating Margin (A$/t) $28.05 $33.78
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Cash Operating Costs (C1) are the cash costs associated with producing iron ore products without allowance for mining development, deferred stripping and stockpile movements, and also exclude royalties, depreciation and amortisation costs

2013 ANNUAL REPORT

Operating and Financial Review (cont.)

explOratiOn and eValuatiOn

The continued exploration drilling program at Long Plains, a magnetite deposit located approximately 6 km south of Savage River, delivered a substantial increase in the Mineral Resource to 107 million tonnes of magnetite iron ore at 35% DTR. Design and modelling work on this deposit will continue in 2014, as we seek to build this into the Life of Mine Plan as an addition to the existing Savage River deposits. For details on the Mineral Resource please refer to the ASX release made on 19 December 2013.

strategic priOrities and Business risks

Grange’s strategic focus is to generate shareholder value by safely producing high quality iron ore products from uts Savage River and Port Latta operations in Tasmania and continuing to assess the feasibility of its major iron ore development project at Southdown, near Albany in Western Australia. The group’s current strategic priorities and various business risks that could impact its ability to deliver these strategic business priorities are set out on page 32 of this annual report.

Mineral resOurces and Ore reserVes - saVage riVer OperatiOns

The following tables show the Mineral Resources and Ore Reserves for the Savage River operations as at 31 December 2013. The mining of ore throughout the 2013 year focussed on high grade supply from the Stage 2 area of North Pit. The increase in resources from 2012 is attributable to the updated resource estimation for the Long Plains deposit (as announced to the ASX on 19 December 2013).

Mineral Resources and Ore Reserves are categorised in accordance with the Australasian Code for Exploration Results, Mineral Resources and Ore Reserves of 2012 (JORC Code, 2012). Estimated Measured and Indicated Mineral Resources include those Mineral Resources modified to produce the estimated Ore Reserves. Mineral Resources which are not included in the Ore Reserves did not meet the required economic viability hurdle at the time of last review.

Mineral resources

A summary of the total Mineral Resources for Savage River as at 31 December 2013 (including the mineral resource estimate for the Long Plains deposit which was announced to the ASX on 19 December 2013) is as follows:

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As at December 2013 As at June 2012
Tonnes Grade Tonnes Grade
(Mt) % DTR (Mt) % DTR
Measured 71.3 53.5 78.2 54.2
Indicated 148.7 49.9 135.7 53.5
Inferred 166.2 41.7 129.8 47.2
Total 386.2 47.1 343.7 51.3
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* Davis Tube Recovery – a measure of recoverable magnetite

ore reserve

A summary of the ore reserve for Savage River as at 31 December 2013 is as follows:

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As at December 2013 As at June 2012
Tonnes Grade Tonnes Grade
(Mt) % DTR (Mt) % DTR
Proved 41.4 52.6 44.6 52.2
Probable 61.7 52.7 64.8 52.1
Total 103.1 52.6 109.4 51.8
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* Davis Tube Recovery – a measure of recoverable magnetite

A detailed statement of the Mineral Resources and Ore Reserves can be found in the ASX announcement dated 28 February 2014. Grange confirms in reproducing the Mineral Resources and Ore Reserves in this subsequent report, that it is not aware of any new information or data that materially affects the information included and all the material assumptions and technical parameters underpinning the estimates in this report continue to apply and have not materially changed.

GRANGE RESOURCES LIMITED

health and saFety

overview

Grange believes that responsible occupational Health and Safety (OHS) and sound environmental and social responsibility (ESR) practices are integral to an efficient and successful company. Grange’s OHS & ESR Management Systems have been integrated to form the “Safety and Environment Management System” (SEMS) which supports OHS & ESR policies and defines the required standard to which any Grange facility must operate.

The SEMS is an integral part of the business. The implementation and effective management of the SEMS enables compliance with legislation, reduction of risk, increased efficiencies and provides the framework for continuous improvement. The SEMS is aligned to ISO 14001 Environmental & OHSAS 18001 Management Systems Standards and is applicable to any existing and future national or international operation.

Mission statement

Our mission is to drive a continuous improvement culture involving all managers, supervisors, employees and contractors. We strive to eliminate injury and loss, create positive environmental outcomes and add value to the communities in which we operate. This will be achieved through effective management systems, integrated risk management practices, risk aware culture, demonstrable leadership, maintaining standards, monitoring performance and looking after our people.

safety Performance

The Company is committed to protecting workers from injury or illness while working at any of its operations or sites. We take this commitment seriously and expect those working for us to share the same level of commitment.

In addition Grange is committed to ensuring compliance with legislative requirements for each area of its operations including meeting or exceeding requirements within:

u Work Health & Safety Legislation;
u Adopting accepted industry standards in areas where legislation is deficient;
u Mining, OH&S and construction legislation as required; and
u Environmental licence conditions for existing and new operations.

Established systems are in place to ensure legislative requirements are tracked, monitored and corrective actions implemented for any instances of non-compliance.

During 2013, the Savage River mine experienced a number of small rock falls in North Pit. The application of stringent risk management processes ensures all rock falls or failures are safely managed. Potential failures or rock falls are identified well in advance due to a robust Ground Control Principal Hazard Management Plan that includes radar monitoring, exclusion zones to ensure plant and people are removed from the hazard areas and a comprehensive consultation and communication process with the workforce which contains safe operating procedures, reports and trigger action responses.

During 2013, we continued to refine and enhance our Safety and Environmental Management System (SEMS) so as to ensure continuous improvement and the delivery of superior safety performance. A multi-faceted health and safety strategy was adopted during the year and included:

u Forging ahead with our comprehensive governance framework which utilises leading positive performance indicators to assess performance, monitor compliance and identify opportunities for improvement.
u Continuing the refinement of our robust Safety, Environment and Social Responsibility system which communicates the individual behaviours required at all levels to drive, support and continually improve our overall performance.
u Delivering highly visible safety focused programs in order to reinforce our commitment to safe work practices.
u Providing training and development which focuses on the cultivation of safety leadership skills in addition to ensuring compliance with all statutory requirements.
u Incorporating risk management processes and systems into our SEMS as part of Grange’s ongoing safety maturity journey.

Grange recognises the importance of our contractors’ safety management systems being aligned with workplace and mine safety regulations as well as being on par with our own safety standards. To this end we have developed and incorporated new OHS & ESR requirements for contractors into our SEMS.

2013 ANNUAL REPORT

Operating and Financial Review (cont.)

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10 25
8 LTIFR Rolling 20
TRIFR Rolling
LTI
6 MTI 15
4 10
2 5
0 0
Jul. Dec. June Dec. June Dec. June Dec.
2010 2010 2011 2011 2012 2012 2013 2013
Incidents
12 Month Rolling TRIFR and LTIFR
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safety incidents - rolling average trends.

During the year Grange worked closely and openly with the Office of the Chief inspector of Mines (OCIM), inviting them to participate in regular inspections, audits and organising forums sponsored by Grange for improving OHS in operating mines. These forums also have a positive impact on other Tasmanian operations including connected industries.

A new manual has been developed to assist contractors understand and easily reference our expectations and requirements.

The focus on positive performance indicators continued in 2013. These were further enhanced through the safety reviews of the various business streams which reinforce accountability for the delivery of safety critical functions and business improvement strategies.

In addition to training delivered at the operational level, the company rolled out a number of site-wide programs and workshops to ensure the seamless changeover to the new Work Health and Safety Act 2012. The new Act commenced in Tasmania as part of the National Model Workplace Health & Safety regime on 1 January 2013.

sharing and Learning

Grange adopts a philosophy of continuous learning and sharing of safety experiences. In addition to its highly successful on-line induction programs, Grange conducts an extensive range of on-site safety training activities including site driving and pit driving permits, simulation training for new operators, fire warden and extinguisher training as well as refreshers on occupational first aid and road accident rescue entrapment release.

Principle Hazard Management Plans and subordinate standards and procedures were also revised or compiled to ensure full compliance with the new legislative requirements. These Plans were presented to the Office of the Chief inspector of Mines (OCIM) and assessed as being the benchmark for the mining industry.

The Company has a fully functional and qualified emergency response team (“ERT”) providing expert and first response care to our sites and others in need including road accidents in the Savage River area. During the year a combined Savage River and Port Latta team competed in the Tasmanian Mines Emergency Rescue Committee Mines Rescue Competition 2013 and were successful in winning the Surface Search and Rescue, Safety, Best Captain and Skills events.

Grange also participated in the WorkSafe Tasmania month events and entered the Workplace Safety Awards 2013. The Company received a Finalist Award for Best Workplace Health and Safety Management System - Private Sector.

commitment to social responsibility

Grange continued with its commitment to social responsibility engaging with our stakeholders and communities to help us understand and respond to their interests and concerns. In addition to regular dialogue with neighbours and communities close to our operations, the Company hosts and supports the education sector through tours, school curriculum information, industry links, a graduate program as well as work opportunities at its operations.

Grange is actively involved in the community in which we operate and regularly supports local events and the region. For example over the past two years management and workers have rolled up their sleeves and participated in Clean Up Australia Day, covering the long and winding 45 km road between Waratah and the Savage River Township, collecting roadside litter and rubbish to enhance our environment.

GRANGE RESOURCES LIMITED

enVirOnMental

Legislative approval

Grange obtained environmental and planning approval in 1996 and 1997 allowing it to operate under the Tasmanian Land Use Planning and Approvals Act 1993 (LUPA), the Tasmanian Environmental Management and Pollution Control Act 1994 (EMPCA), the Tasmanian Goldamere Pty Ltd (Agreement) Act 1996 (Goldamere Act) and the Tasmanian Mineral Resources Development Act 1995. This approval covers an expected mine and processing life using open-cut mining at Savage River, gangue removal and concentrating at Savage River and pelletising at Port Latta. During 2013 Grange has applied for relevant approvals for the South Deposit Tailings Storage Facility.

Goldamere act

The Goldamere Act overrides all other Tasmanian legislation with respect to Grange’s operations. The Goldamere Act limits Grange’s liability for remediation of contamination, under Tasmanian law, to damage caused by Grange’s operations, and indemnifies Grange for certain environmental liabilities arising from past operations. Where pollution is caused or might be caused by previous operations and that pollution may be impacting on Grange’s operations or discharges, Grange is indemnified against that pollution. Grange is required to operate to Best Practice Environmental Management (BPEM).

Planning approvals

Grange obtained planning approval subject to a series of environmental permit conditions on 29 January 1997. Planning approval was issued by the Waratah Wynyard Council for Savage River and by the Circular Head Council for Port Latta. The approvals were conditional on the provision of an Environmental Management Plan (EMP) incorporating a Rehabilitation Plan (ERP) prior to the commencement of operations. Various other studies were also required. Grange is awaiting planning approvals from the Waratah Wynyard Council for the South Deposit Tailings Storage Facility. These are expected in 2014.

environmental Management Plans

The EMP incorporating the ERP and study results were approved by the (then) Department of Environment Parks, Heritage and the Arts and operations commenced in October 1997. The latest revision of the approval documents occurred on 6 October 2000 when Environmental Protection Notices (EPN) 248/2 and 302/2 were issued to replace the environmental permit conditions for Savage River and Port Latta respectively.

Kai Zou (Graduate Engineer), Port Latta Operations.

Approvals are required from the Department of Primary Industries, Parks, Water and the Environment (DPIPWE) and relevant Councils for major infrastructure developments and operational expansions and changes. These approvals are in the form of approved EMP amendments and reflect changing operational circumstances, an increasing knowledge base and include approvals designed to extend operations, amend management plans and provide for changes to waste rock dumping plans and any proposed treatment facilities.

2013 ANNUAL REPORT

Operating and Financial Review (cont.)

An amendment to the EMP was approved for an extension of mine and pelletising operations in early 2007 to approve the Mine Life Extension Plan.

Principal environmental issues

Waste rock, tailings and Water Management

– savage river

EMP and ERP reviews were submitted in December 2010 and the next revision commenced at the end of 2013. The revised EMPs reflect BPEM and current mine planning and focus on closure requirements and rehabilitation. The development of significant new projects such as a new pit will require additional planning approval and at a minimum an EMP amendment approval followed by issuance of an EPN from the EPA.

Goldamere agreement

The Goldamere Agreement (which forms part of the Goldamere Act) provides a framework for Grange to repay the Tasmanian Government for the purchase of the mine through remediation works. Significant variations to the Goldamere Agreement were signed on 4 October 2000 and 10 September 2002 following extensive negotiations. The amended Goldamere Agreement provides a framework for Grange to co-manage the Savage River Rehabilitation Project (SRRP) and carry out contracted works in lieu of paying the purchase price of the operation to the Government. The agreement also allows Grange to integrate its rehabilitation obligations with those of the State under the SRRP.

savage river rehabilitation Project (“srrP”)

Grange representatives meet with representatives from DPIPWE on a regular basis to develop and implement remediation works at Savage River. Grange has contracted with the SRRP for works including construction, management and development of waste rock dump covers, acid pipelines and other remediation projects. The SRRP objective is to capture and treat 65% of the site’s copper load to remove the possibility of an acutely toxic aquatic environment. The scope of works to meet this objective has been completed and costed to feasibility level.

A strategic plan outlining the works required to achieve the objective and repay Grange’s purchase price debt has been approved by the Tasmanian Environmental Protection Authority and is being implemented by the SRRP Committee. This plan was updated in 2012 to reflect the long term risks and Grange’s latest mining plan.

u Water, tailings and waste rock management at Savage River, including: development of waste rock dumps which exclude oxygen to minimise the formation of acid mine drainage and utilisation of these dumps to form seals on old waste rock dumps; subaqueous tailings deposition and maintenance of saturated tailings; providing a centralised water treatment system using a disused pit to eliminate turbidity from mine runoff. Appropriate management and monitoring systems are in place to ensure regulatory compliance in these areas. RGS Environmental continues to regularly audit waste rock management for Grange.
u In 2013 Grange developed a Development and Environmental Management Plan (DPEMP) for the South Deposit Tails Storage Facility (SDTSF). Due to the size and nature of the tails storage facility, the proposal requires assessment under LUPA (1993), the State EMPC Act (1994) and the Commonwealth EPBC Act (1999), as the proposal has the potential to impact on matters of national environmental significance (Tasmanian Devil and Spotted Quoll).
u The DPEMP was submitted to the Waratah-Wynyard Council in May 2013 for assessment, the DPEMP was publically advertised through May and June with 1 submission received in relation to the development. A workshop in July with the Environmental Protection Authority (EPA) highlighted areas that needed further clarification. Toward the end of July the EPA formally requested a Supplementary submission, this submission provided an opportunity to address the issues raised in the public submission. Grange spent a number of months liaising with both the EPA and the Department of Environment in Canberra (DoE) addressing the Supplementary criteria. In early December the EPA and the DoE were satisfied that all the required information had been provided which allowed the approvals process to recommence. The EPA Board were to meet on January 7 to determine whether the SDTSF should be approved or not.
u Due to the loss of habitat for the Tasmanian Devil and the Spotted Quoll, Grange will be required to provide an offset for unavoidable impacts. Toward the end of 2013, Grange and the DoE had reached agreement on the nature and size of the impacts, subsequent to an approval from the EPA board in early 2014, Grange will be in a position to negotiate a suitable offset with the DoE and obtain approval from the Federal Environment Minister under the EPBC Act.

GRANGE RESOURCES LIMITED

u The SDTSF incorporates the ability to mix and co-treat legacy acid rock drainage (ARD) from the Old Tailings Dam and B-Dump using the excess alkalinity in tailings should Grange and the Crown agree to do so. The potential transfer of the ARD seeps from the Old Tailings Dam will also improve the long term integrity of the Main Creek Tails Dam. The co-treatment of the ARD seeps within the SDTSF would improve water quality in Main Creek and the Savage River. Regardless of whether the ARD seeps are treated in the SDTSF, remediation of Main Creek will be further enhanced by the innovative design of the dam that will allow water to flow through alkaline rock prior to discharge downstream.
u Grange is anticipating receiving planning permits for the SDTSF from the WaratahWynyard Council in the first quarter of 2014, with construction commencing shortly thereafter.
u Grange continues to improve the performance and utilisation of online data presentation systems for water quality data collection.

air emissions reduction Program – Port Latta

u Work continued in 2013 to maximise the efficiency of the current scrubbers. The following graphs depict continuing improvements in stack concentrations of Sulphur Dioxide and Total Particulate Matter.
u The furnace blow reduction program continued in 2013, with a full time person dedicated to improving furnace operations and performance. There are a number of projects being conducted that will not only aid pellet quality, but also decrease the likelihood of furnace blows. The following graph shows continuing reduction per tonne of production in furnace blows during 2012-13.

rehabilitation Plans

Grange continues to plan for closure and departure on completion of the mining plan. Principal issues in respect of closure include maintenance, tailings management, future use of infrastructure and a five year monitoring and maintenance plan.

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stack – sulphur dioxide concentrations stack – total Particulate Matter
1800 1800
1350 1350
900 900
450 450
0 0
Apr 01 Jan 04 Oct 06 Jul 09 Apr12 Dec 14 Apr 01 Jan 04 Oct 06 Jul 09 Apr12 Dec 14
Sulphur Dioxide Emissions Total Particulate emissions
Linear (Sulphur Dioxide Emissions) Linear (Total Particulate emissions)
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2012-2013 furnace Blows
0.0016
0.0012
0.0008
0.004
0
Dec 11 Apr 12 Jul 12 Oct 12 Jan 13 May 13 Aug 13 Nov 13 Mar 14
Furnace blows per tonne of production
Linear (Furnace blows per tonne of production)
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Victoria Braniff (Structural Geologist) and Christopher Esterhuizen (Mining Geologist), Savage River Operations.

2013 ANNUAL REPORT

Operating and Financial Review (cont.)

sOuthdOwn Magnetite prOject

The Southdown Project ultimately aims to export 10 million tonnes per year of premium magnetite concentrate to Asian steel markets. The Southdown Joint Venture (SDJV) is a joint venture between Grange Resources Limited (70%) and SRT Australia Pty Ltd (SRTA) (30%). SRTA is jointly owned by Sojitz Corporation, a Japanese global trading company, and Kobe Steel, Japan’s third largest steel producer.

2013 Project overview

u The Project continued on reduced expenditure while Grange seeks an equity partner for a strategic share in the Project
u Existing tenure and approvals have been maintained
u Project security has been enhanced by continuing to build land tenure and access
u Progressed studies relating to project engineering and further environmental permitting

Grange announced to the market on 29 November 2012 that it would significantly reduce expenditure on its 70% share of the Southdown Magnetite Project. Following this announcement the Project’s team size and scope of work was reduced.

Challenging global economic conditions have resulted in the search for an equity partner continuing throughout the year. The reduced Project Team has continued to build land tenure and access through negotiations with land holders and government agencies to enhance the ability of the Project to rapidly mobilise in the future.

During 2013, market conditions for securing project investment funding did not improve. The joint venture partners continue to monitor all ongoing project requirements to ensure that the current status of the feasibility studies is such that the project can be fully recommenced as soon as an appropriate opportunity arises. The on-going strategy is to maintain the currency and good standing of all tenements, permits and project assets. This approach will be continued into 2014, and at least until Grange is able to secure an equity partner for a strategic share of the Company’s interest in the project or until a valid alternate development model can be successfully formulated.

In December 2013, Grange advised that its Board had commissioned management to conduct an internal review of the operating model generated for the project as part of the Definitive Feasibility Study. The internal review is tasked to determine if the Southdown concept can be reworked to reduce initial capital requirements and the overall life of mine operating costs.

The review will consider changes in market outlook and mix, project construction conditions (including regional infrastructure development) and the application of the “hands on” operating methodologies learned from the Company’s operations at Savage River. The review is in progress and is expected to be completed during mid-2014.

2014 Project Priorities

u Complete the internal review to determine if there are viable alternative development models for the project
u Continue search for new equity partner to take a strategic share of the Company’s interest in the Project
u Maintain reduced expenditure for 2014 to approximately $2.5 million (Grange share)
u Maintain all tenements, permits and project assets in good order
u Progress environmental approvals and permits
u Grange has the in house skills, systems, capability and discipline to deliver Southdown’s potential when the time is right

Project overview

Geology

The Southdown magnetite deposit is a long, thin, near-surface, continuous ore body. It extends over 12 kilometres, with depths varying from 50 metres in the west to 480 metres in the east. The deposit has been drilled and evaluated since its initial discovery in 1983, including an extensive program of resource drilling during 2011 for the feasibility study.

conventional Mining

Targeted concentrate production rates require a material movement in the mine of up to 132 Mt per annum by conventional drill, blast, load and haul mining methods. The final proposed pit is six kilometres long, one kilometre wide and about 370 metres deep. The mining operation will draw heavily on Grange’s existing capability as Australia’s most experienced commercial producer of magnetite concentrate, to assist with start-up and ongoing operations.

ore crushing and concentration

The project plan envisages Southdown ore being processed to increase the iron content from around 25% to 69%. Extensive metallurgical test work including pilot plant trials have been conducted since 2004.

GRANGE RESOURCES LIMITED

The process includes crushing, grinding, classification and magnetic separation. The concentrate is further upgraded using hydro separation to remove fine silica, and flotation to remove sulphur impurities.

Pumping the concentrate slurry 100 km to the Port

Final magnetite concentrate will be thickened and transported through a 110 km pipeline to the Port of Albany, where it will be filtered and stored for loading onto cape size ships. A second pipeline will return the filtered water back to the mine site so it can be used again in the process. Both pipelines are buried.

increasing albany’s Port capacity

Subject to a decision to proceed, a concentrate export facility would be built on 7 hectares of reclaimed land at Albany Port, immediately east of the existing wood chip terminal site. The plan incorporates a filtration plant, storage shed, new berth and ship loading facility. Deepening and widening a 9.5 kilometre approach channel will enable 200,000 tonne cape size ships to use the port. Whilst minimal dust generation is expected because of the high moisture content of the concentrate, the shed will be fully enclosed, under negative pressure and fitted with dust extraction equipment.

The development would more than treble Albany’s current port capacity from approximately 4 Mt per annum to 14 Mt per annum. The design has been developed in close consultation with the Albany Port Authority and in line with the Public Environmental Review approved in November 2010.

a new source of water and power supply

The plan also envisages that a seawater desalination plant would be constructed 25 km from the mine to supply the plant with 11 GL per annum of water. Power for the mine site would be provided by a new 278 kilometre 330kv transmission line from Muja to Southdown, to be built by Western Power.

operations Planning

The Southdown operation will be modelled on Grange’s existing Savage River operation in Tasmania operating on a 24/7 basis for 365 days per year.

construction Planning & schedule

MiNeraL resoUrces aNd ore reserVes - soUtHdoWN ProJect

Mineral resources

The Mineral Resource estimate for the Southdown Project as at 31 December 2013 is as follows:

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As at December 2013
Tonnes (Mt) Grade %DTR
Measured 423.0 37.8
Indicated 86.8 38.7
Inferred 747.1 30.9
Total 1,256.9 33.7
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* Davis Tube Recovery – a measure of recoverable magnetite

Mineral Resources are reported above a cut-off of 10% DTR

ore reserves

The current Ore Reserve for the Southdown Project as at 31 December 2013 is based on the pit design and mining schedule developed during the Feasibility Study and includes modifying metallurgical factors and plant recovery.

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Concentrate
ROM (Mt) DTR (%) Fe (%)
Proven 384.6 35.6 69.6
Probable 3.1 41.7 69.9
Total 387.7 35.6 69.6
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An additional 24.4 Mt of Inferred Resources is included within the designed pit.

A detailed statement of the Mineral Resources and Ore Reserves can be found in the ASX announcement dated 28 February 2014. Grange confirms in reproducing the Mineral Resources and Ore Reserves in this subsequent report, that it is not aware of any new information or data that materially affects the information included, and all the material assumptions and technical parameters underpinning the estimates in this report continue to apply and have not materially changed.

Subject to a decision to proceed, the project will engage an experienced construction management company to coordinate a series of fixed price contracts to minimise risk and the number of interfaces. The Southdown Joint Venture continues to work alongside the community, including traditional owners of the land, to ensure a safe and environmentally responsible project.

2013 ANNUAL REPORT

Corporate Governance Statement

Grange is committed to creating and building sustainable value for shareholders and protecting stakeholder interests. The Company recognises that high standards of corporate governance are essential to achieving that objective.

The Board has the responsibility for ensuring Grange is properly managed so as to protect and enhance shareholders’ interests in a manner that is consistent with the Company’s responsibility to meet its obligations to all stakeholders. For this reason, the Board is committed to applying appropriate standards of corporate governance across the organisation.

As part of its commitment to enhancing its corporate governance, and as a listed company, the Board has adopted relevant practices which are consistent with the Australian Securities Exchange (“ASX”) Corporate Governance Principles.

Details of the Company’s corporate governance practices are included below and also on the Company’s website www.grangeresources.com. au. This facilitates transparency about Grange’s corporate governance practices and assists shareholders and other stakeholders make informed judgments.

Grange considers that its governance practices comply with the majority of the ASX Best Practice Recommendations.

rOle OF the BOard

The Company’s Constitution vests management and control of the business and the Company’s affairs in the Board.

The Board’s primary role is to enhance shareholder value. It is responsible for providing a leadership role and for providing overall stewardship of the organisation. The Board oversees Grange’s strategic direction and the conduct of business activities by the management team for the benefit of Grange shareholders.

Board functions

Specific accountabilities and responsibilities of the Board include:

u Developing long-term objectives and strategy in conjunction with management;
u Reviewing and approving plans, new investments, major capital and operating expenditures and major funding activities proposed by management;
u Reviewing and approving policies, goals, targets and budgets;
u Defining and setting performance expectations for the Company and monitoring actual performance;
u Appointing and reviewing the performance of the Managing Director and senior management;
u Assuring itself that there are effective health, safety, environmental and operational procedures in place;
u Ensuring that there is effective budgeting and financial supervision and that appropriate audit arrangements are in place;

Alison Casboult (Accounts Payable Officer) Burnie Office.

u Satisfying itself there are effective reporting systems that will assure the Board that proper financial, operational, compliance, risk management and internal control processes are in place and functioning appropriately;
u Satisfying itself that the annual financial statements of the Company fairly and accurately set out the financial position at year end, and the financial performance during the year;
u Assuring itself that the Company has adopted a Code of Corporate Ethics and that Company practice is consistent with that Code;
u Reporting to and advising shareholders;
u Practicing and exhibiting the Company’s values; and
u Having an awareness of the statutory obligations imposed on Board members and ensuring there are appropriate standards of corporate governance.

The Board has a charter, a copy of which is located on the Company’s website.

GRANGE RESOURCES LIMITED

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cOMpOsitiOn OF BOard company values and culture, meetings
with senior management and site visits
The Board aims to have a mix of
to familiarise them with the operations of
relevant skills, industry and geographic
the Company.
knowledge together with expertise
to carry out its duties and meet its The Board has a non-executive
objectives including high levels of: Chairman and the roles of the Chairman
and Managing Director are undertaken
u Finance / accounting expertise;
by different individuals. The Board
u Operational and technical expertise; is comprised of six Directors - two
executive Directors and four non-
u Large project management and
executive Directors.
implementation expertise;
u Australian resources industry Two of the four non-executive Directors
expertise; and are not considered to be independent.
The non-independent Directors,
u Iron ore marketing and trading
include Michelle Li (nominated by major
expertise.
shareholder Shagang International
The Remuneration and Nomination Holdings Limited) and Clement
Committee periodically considers Ko (representative of substantial
Aleisha Connelly (Accounts Payable the skill and experience mix of the shareholder Pacific International
Officer) Burnie Office.
Board and undertakes a gap analysis. Holdings Co. Pty Ltd). Michelle Li also
----- End of picture text -----

Two of the four non-executive Directors are not considered to be independent. The non-independent Directors, include Michelle Li (nominated by major shareholder Shagang International Holdings Limited) and Clement Ko (representative of substantial shareholder Pacific International Holdings Co. Pty Ltd). Michelle Li also acts as Chairman.

The Remuneration and Nomination Committee periodically considers the skill and experience mix of the Board and undertakes a gap analysis. Directors are elected for a three year period and retire by rotation in accordance with the Company’s Constitution. Professional intermediaries are used to identify and assess suitable candidates for independent vacancies. New directors are provided with an extensive induction program which includes a range of relevant Company and Board information including

The Board is mindful of the Principles and the preference for Boards to have a majority of independent Directors. The Board continues to monitor and review its composition and plans to appoint an additional independent Director in the first half of 2014. The independent status of each director is monitored throughout the year.

Management functions

The Company has established the functions that are reserved for management. Management is responsible, on a shared basis with and subject to the approval of the Board, for developing strategy, and is directly responsible for implementing the strategies into the Company’s business activities. Management is also responsible for safeguarding the Company’s assets, maximizing the utilization of available resources and for creating wealth for Grange’s shareholders.

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Director Independent Non-Executive Term in Office
Michelle Li No - Nominated by major Yes 2 months
shareholder
Neil Chatfield Yes Yes 5 years
Wayne Bould No – Managing Director No 6 months
John Hoon Yes Yes 3 years & 8 months
Honglin Zhao No – Executive Director No 3 years & 6 months
Clement Ko No – Substantial shareholder Yes 5 years
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2013 ANNUAL REPORT

Corporate Governance Statement (cont.)

eValuatiOn OF the BOard, cOMMittees and seniOr ManageMent

The performance of the Board and its Committees is assessed on a periodic basis. Senior management are reviewed and evaluated annually. In particular, the assessment of senior management is conducted by reference to short term and long term key performance indicators which are agreed at the start of each financial year. The evaluation of the Board is overseen by the Remuneration and Nomination Committee and Board members are required to complete questionnaires providing feedback on the Board’s performance. The review process for the Committees is undertaken by way of regular feedback from the Board during the year. A formal assessment of the Board was last conducted in mid 2013.

The Managing Director’s performance is evaluated annually by the Remuneration and Nomination Committee against a range of key performance indicators and targets. The Committee makes a recommendation to the Board on the Managing Director’s remuneration which is based on both performance and external market data. The Managing Director has a current position description and a letter of appointment which describes his term of office, duties, rights and responsibilities and entitlements on termination.

BOard cOMMittees

audit committee

The Company has a formally established Audit Committee with a written charter, a copy of which is available on the Company’s website.

The Audit Committee consists of Mr John Hoon (Committee Chairman), Mr Neil Chatfield and Ms Michelle Li, all of whom are non-executive Directors. A majority of the Committee (including the Committee Chairman) is independent. Each member of the Audit Committee must be appropriately financially literate and at least one member of the Audit Committee will have extensive financial or accounting expertise.

The Audit Committee assists the Board to meet its oversight responsibilities in relation to Grange’s financial reporting, legal and regulatory requirements, internal control and risk management systems and internal and external audit functions.

It is responsible for ensuring that the integrity of the Company’s financial records is maintained and that the Company is exposed to minimum financial risk. It reviews:

u Grange’s financial reporting principles and policies, controls and procedures;
u the effectiveness of Grange’s internal control systems;
u the integrity of Grange’s financial statements and the independent audit thereof, and Grange’s compliance with legal and regulatory requirements in relation thereto.

It undertakes a broad review, monitors compliance, and makes recommendations to the Board in respect of the Company’s accounting, compliance and risk affairs. It also reviews the appointment and performance of the external auditors.

remuneration and Nomination committee

The Remuneration and Nomination Committee’s overall role is to ensure that Grange’s remuneration policies and practices are consistent with the Company’s goals and objectives.

The Committee is responsible for the oversight of Grange’s remuneration strategy and overall policy. It makes recommendations to the Board on all aspects of appointment, remuneration and termination pertaining to the Managing Director and reviews the appointment, remuneration or termination of senior executives.

In addition to considering the performance of the Managing Director and the performance and succession planning of his direct reports, the Committee monitors external remuneration trends and market conditions and selects and appoints external advisers as required.

The Committee oversees the Company’s diversity policy and corporate governance practices in relation to remuneration. It is also responsible for making recommendations on nonexecutive director remuneration and addressing relevant remuneration issues generally.

In addition to its remuneration responsibilities the Committee undertakes Board nomination and appointment functions. It assesses the skills required by the Board, prepares and reviews the Board’s succession plan and implements processes to identify and recruit suitable candidates for appointment as non-executive directors.

The Remuneration and Nomination Committee has three members and presently comprises Mr Neil Chatfield

GRANGE RESOURCES LIMITED

(Committee Chairman), Mr John Hoon and Ms Michelle Li, all of whom are non-executive Directors. A majority of the Committee (including the Committee Chairman) is independent.

There are no executive Directors on the Committee. The Committee seeks input from the Managing Director and senior executives on selected Company remuneration matters. No senior executive is involved in deciding their own remuneration. Executive remuneration is a mix of fixed and performance based remuneration and external remuneration advisers are consulted by the Committee as required.

The Committee has adopted the following guidelines for engaging and dealing with remuneration consultants:

u the consultant/consultancy should have a database from which to draw data on market practice in relation to remuneration of key management personnel (“KMP”) in relevant comparator companies;
u the consultant/consultancy should have significant relevant experience in advising on KMP remuneration;
u the individual consultants who are advising the Company should have significant relevant experience in advising on KMP remuneration;
u the consultant/consultancy should be engaged by and report directly to the Board or the Remuneration and Nomination committee;
u any interaction between management and the consultant/consultancy should be authorised by the Board or Remuneration and Nomination Committee and should be limited to receiving input to allow the consultant to undertake the work commissioned by the Board or Remuneration and Nomination committee; and
u Consideration of audit reports into health, safety and the environment systems, processes and resources and recommending appropriate measures to the Board; and
u If interviews or working sessions involve management then a representative of the Board or Remuneration and Nomination Committee may attend.
u Reviewing compliance with legislation and internal policy as well as the Company’s readiness for impending legislation.

Further details are contained in the Remuneration Report section of the Annual Report. The Committee has a written charter, a copy of which is available on the Company’s website.

The Committee is comprised of a majority of non-executive directors. The members of the Health, Safety and Environment Committee are: Mr Neil Chatfield (Committee Chairman), Mr John Hoon, Ms Michelle Li, all of whom are non-executive Directors, and Managing Director, Mr Wayne Bould.

Health, safety and environment committee

The Board has a dedicated Health, Safety and Environment Committee. The Committee’s role is to assist the Board discharge its environmental and workplace health and safety role and obligations. The Committee provides the Board with additional resources to monitor and review key issues in this area. The Committee has a written charter a copy of which is available on the Company’s website. Specific duties of the Health, Safety and Environment Committee include:

The Committee meets at least three times a year and at least one of these meetings will be at site and incorporate an inspection of the operations. The heads of Company operations are invited to attend all Committee meetings.

committee of independent
u Reviewing the strategic plans and directors targets covering health, safety and The Committee of Independent
the environment;

The Committee of Independent Directors’ of the Board serves as an independent body with respect to transactions which may give rise to a potential conflict of interest for a particular Director, with a view to protect the interests of both the Company and its shareholders.

u Monitoring safety and environmental performance together with action plans to improve performance and / or remedy specific issues;
u Ensuring the consistency of standards, policies and practices across the Company’s operations;

The Committee’s duties include general oversight of the Company’s consideration of any proposed transaction between the Company and any person in relation to whom a conflict of interest exists or may exist for a particular Director.

u Monitoring the implementation of new, and the effectiveness of established, health, safety and the environment risk management systems at Company locations;
u Reviewing the findings of investigations into major incidents;

2013 ANNUAL REPORT

Corporate Governance Statement (cont.)

The Committee is also responsible for the interpretation of conflict of interest protocols as well as reviewing and making recommendations to the Board or shareholders (as applicable) on the pricing and contract negotiations for the supply of product to substantial shareholders or related parties and the review of the process and arrangements for the supply of product on a spot sale basis to substantial shareholder and related parties.

The members of the Committee of Independent Directors are: Mr Neil Chatfield (Committee Chairman), Mr John Hoon, and Managing Director, Mr Wayne Bould. A copy of the Committee’s charter is on the Company’s website.

independent prOFessiOnal adVice and access tO cOMpany inFOrMatiOn

All Directors have the right of access to all relevant Company information, to the Company’s executives and, subject to prior consultation with the Chairman, may seek independent professional advice concerning any aspect of the Company’s operations or undertakings at the Company’s expense.

cOdes OF cOnduct

The Board acknowledges its responsibility to set the ethical tone and standards of the Company. Accordingly it has clarified the standards of ethical and professional behaviour required of Directors, employees and contractors through the establishment of a Code of Ethics and Conduct Policy.

The Code requires all Directors, employees and contractors to conduct business with the highest ethical standards, including compliance with the law, and to report or avoid conflict of interest situations. Compliance with the Code is mandatory with breaches taken seriously.

In addition the Board has a dedicated Code of Conduct which provides Directors with clear and unambiguous guidance as to the minimum standards of behaviour which is required of Grange’s Directors undertaking Grange activities or whenever they are representing Grange.

Copies of the Code of Ethics and Conduct and the Board Code of Conduct are located on the Company’s website.

diVersity

Philosophy and Policy

Grange recognises that our employees are our most valuable resource and the means by which we will achieve safe, sustainable, cost effective production. Diversity is one of many elements which helps create sustainable value for our shareholders. Grange takes a broad and all encompassing view of diversity. Diversity is about accepting, respecting and understanding that each person is unique.

In late 2011 the Board approved a Diversity Policy. The policy highlights that an individual’s differences can be along the lines of race, cultural background, gender, sexual orientation, socio-economic status, age, physical abilities, religious beliefs, political beliefs or other ideologies.

Diversity can also include an extensive range of individual characteristics and experiences such as communication styles, career path, educational background, family responsibilities and marital status which may influence personal perspectives.

The policy details how Grange supports diversity in its work place. This includes:

u Undertaking recruitment of employees at all levels from as diverse a pool of qualified candidates as reasonably possible;
u Recruiting and selecting on the basis of merit (skills, qualifications, abilities and achievements);
u Providing fair and equal access to employees so that no one person or group of people is treated any less favourably or more favourably than others;
u Providing a positive and safe work environment that promotes job satisfaction and one in which all employees feel they are valued, treated fairly and recognised for their contribution;
u Treating all employees fairy and with respect and dignity as detailed in the Company’s values and the Code of Business Ethics and Conduct and Fair Treatment Policy;
u Maintaining a comprehensive range of contemporary policies as part of the “Grange Cares” program covering recruitment, behaviour at work, fair treatment, performance as well as training and personal development;
u Reinforcing a performance oriented and merit based organisational culture in which remuneration practices reward and retain employees equally based on performance and potential regardless of gender;

GRANGE RESOURCES LIMITED

u Providing training and personal development plans to maximise safety awareness, job performance and productivity, and the opportunity for promotion;
u Complying with anti-discrimination and equal employment legislation;
u Initiating and supporting actions in our communities which foster diversity and equal opportunities; and
u Integrating Board approved diversity targets into business and workforce planning.

In addition, the policy also explains how the Board demonstrates its commitment to diversity. This includes:

u Using professional intermediaries to source suitably qualified candidates for Board positions;
u Providing translation services and other administrative arrangements to accommodate non-English speaking Board members;
u Assuming responsibility for establishing and reviewing measurable diversity targets (with the assistance of the Remuneration and Nominations Committee);
u Reporting on gender participation in the Annual Report each year; and
u Annually reviewing the diversity policy.

A copy of the policy is on the Company’s website.

Gender Participation

The Company has one female Board member who is also Chairman. In addition the Grange Board has cultural diversity with four of the six directors being of overseas origin.

The Company defines executives as those professional or managerial team members who report directly to the Managing Director or the Board. Of the four executives reporting directly to the Managing Director or Board, one (25%) is a woman. The Company conducts performance based reviews at least annually of all employees and monitors the number of women progressing through its professional and technical ranks.

The table below indicates the participation of women in the general workforce for the Company as at 31 December 2013:

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As at As at
% of Total 31 Dec 2013 % 31 Dec 2012 %
Workforce Workforce of Women in of Women in Measurable
Segment in Segment Segment Segment Diversity Targets
Supervisory / 22% 20% 21% No specific target
Administrative for these individual
categories. Overall target
Operations / 74% 4% 4% of 12% for all three
Maintenance categories by 2017
Professional / 4% 11% 15% 25% by 2017
Managerial
Total workforce 100% 8% 9% 12% by 2017
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As at 31 December 2013 the number of women in the Company’s workforce was 46. This represents an overall participation rate of 8%. Women comprise 4% of operations and maintenance roles, 20% of administration and supervisory roles and 11% of senior professional roles and managerial roles.

In early 2012 the Company established measurable diversity objectives. In developing its objectives the Board considered the location and nature of the Company’s operations as well as the potential impact of its major development project. In late 2012 the Company announced a significant reduction in expenditure and staff numbers in its Southdown Project.

As a result, for the foreseeable future the Company’s will be based at Grange’s Tasmanian operations. Both Savage River and Port Latta are mature and established operations and by mining industry standards have a stable workforce with very low levels of staff turnover. Consequently there are limited opportunities for the Company to improve diversity through recruitment.

In early 2013 the Company reviewed its diversity objectives in the light of the changed operational landscape and market conditions. As a result amendments have been made to the timeframe for the attainment of its diversity objectives with 2017 being considered a more realistic target. The Company continues to aim to have women comprising 25% of senior professional / managerial roles and to increase the overall proportion of women in the workforce to 12%. The Board will continue to review progress against these targets at regular intervals.

2013 ANNUAL REPORT

Corporate Governance Statement (cont.)

trading in cOMpany securities By directOrs and seniOr executiVes

To safeguard against insider trading, the Company’s Securities Dealing Policy prohibits employees and Directors from trading in any securities of the Company at any time when they are in possession of unpublished, pricesensitive information in relation to those securities.

The policy describes what constitutes insider trading, the penalties for undertaking such activities and makes recommendations on when employees should not trade in the Company’s securities.

The policy also notes designated “blackout” periods during which Directors and employees are not allowed to trade. The Company Secretary advises employees and Directors of the commencement and conclusion of all blackout periods.

Before commencing any trade, a Director must first obtain the written approval of the Chairman and senior management must advise the Company Secretary.

As required by the ASX Listing Rules, the Company notifies the ASX of any transaction conducted by Directors in the securities of the Company.

During the year the Company also introduced additional internal procedures to provide clarity to employees in relation to information requests from external sources.

cOntinuOus disclOsure

The Company is committed to providing relevant up-to-date information to its shareholders and the broader investment community in accordance with its continuous disclosure obligations under the ASX Listing Rules and the Corporations Act 2001.

The Board has a Continuous Disclosure and Market Communication Policy to ensure that information considered material by the Company is immediately reported to the ASX. Other information such as Company presentations are also disclosed to the ASX and are on the Company’s website.

Grange applies the following guiding principles for market communications:

u Grange will not disclose price sensitive information to an external party except where that information has previously been disclosed to the market generally.
u Timely and accurate information must be provided equally to all shareholders and market participants.
u Information must be disseminated by channels prescribed by laws and other channels which Grange considers to be fair, timely and costefficient.

The Company’s website provides access to all current and historical information, including ASX announcements, financial reports and other releases.

sharehOlder cOMMunicatiOn

In adopting a Continuous Disclosure and Market Communication Policy, the Board ensures that shareholders are provided with up-to-date information.

Communication to shareholders is facilitated by the production of the annual report, quarterly and half yearly reports, public announcements and the posting of all ASX announcements and other information (including copies of all investor presentations) on the Company’s website. The website contains nine years of historical ASX announcements to facilitate research by investors and shareholders.

Shareholders are encouraged to attend and participate in the Annual General Meeting (AGM) of the Company. Shareholders may raise questions at the AGM and the external auditor is in attendance at such meetings to address any questions in relation to the conduct of the audit.

GRANGE RESOURCES LIMITED

risk ManageMent

The Board acknowledges that risk management is a core component of Director and executive duties and an essential element of good governance. The Board determines the Company’s risk profile and is responsible for overseeing and approving risk management strategies and policies, internal compliance and internal control. A summary of the Company’s Risk Management Policy is available on the Company’s website.

The Board oversees an annual assessment of the

effectiveness of risk management and internal compliance and control. The responsibility for undertaking and assessing risk management and internal control effectiveness is delegated to management. Management is required by the Board to assess risk management and associated internal compliance and control procedures and report back on the efficiency and effectiveness of risk management by benchmarking the Company’s performance to the Australia/New Zealand Standard on Risk Management.

The Chief Executive Officer and Chief Financial Officer have provided a written statement to the Board that:

u their view provided on the Company’s financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the Board; and
u that the Company’s risk management and internal compliance and control system is operating effectively in all material respects.

reMunerate Fairly and respOnsiBly

Senior executives’ remuneration packages are in accordance with the ASX’s Corporate Governance Principles and Recommendations containing a balance of fixed and incentive pay reflecting both short term and long term incentives which reflect the Company’s core performance requirements. Further details are contained within the Remuneration Report.

Non-executive Directors are remunerated solely by way of fixed cash fees which are inclusive of the superannuation guarantee. They do not receive bonus payments nor are they provided with retirement benefits other than superannuation. Further details are contained within the Remuneration Report.

asx Best practice recOMMendatiOns

The following table lists each of the ASX Best Practice Recommendations applicable to the Company as at the date of its financial year end, being 31 December 2013, and whether the Company was in compliance with the recommendations at that date. Where the Company considers that it is divergent from these recommendations, or that it is not practical to comply, there is an explanation of the Company’s reasons set out following the table.

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Principle / Recommendation Complied Note
1 Lay Solid Foundations for Management
and Oversight
1.1 Establish and disclose the functions
reserved to the Board and those delegated 4
to management.
1.2 Disclose the process for evaluating the
4
performance of senior executives.
2 Structure the Board to Add Value
2.1 A majority of the Board should be
8 1
independent directors.
2.2 The chair should be an independent
8 1
director.
2.3 The roles of chair and chief executive
officer should not be exercised by the same 4
individual.
2.4 The Board should establish a nomination
4
committee.
2.5 Disclose the process for evaluating the
performance of the Board, its committees 4
and individual directors.
3 Promote Ethical and Responsible Decision Making
3.1 Establish a code of conduct to guide the
directors, the chief executive officer (or
equivalent), the chief financial officer (or
equivalent) and any other key executives
as to:
• the practices necessary to maintain
confidence in the Company’s integrity;
4
• the practices necessary to take into
account their legal obligations and
the reasonable expectations of their
stakeholders; and
• the responsibility and accountability of
individuals for reporting and investigating
reports of unethical practices.
3.2 Establish and disclose a policy concerning
4
diversity.
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2013 ANNUAL REPORT

Corporate Governance Statement (cont.)

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Principle / Recommendation Complied Note
3 Promote Ethical and Responsible
Decision Making (cont.)
3.3 Disclose the measurable objectives for
achieving gender diversity set by the Board
4
in accordance with the diversity policy and
progress towards achieving them.
3.4 Disclose the proportion of women
employees in the whole organisation,
4
women in senior executive positions and
women on the board.
4 Safeguard Integrity in Financial Reporting
4.1 The Board should establish an Audit
4
Committee.
4.2 The Audit Committee should be structured
so that it:
• consists of only non-executive directors;
• consists of a majority of independent
4
directors;
• is chaired by an independent chair, who
is not chair of the Board; and
• has at least three members.
4.3 The Audit Committee should have a formal
4
charter.
5 Make Timely and Balanced Disclosure
5.1 Establish and disclose written policies
designed to ensure compliance with ASX
Listing Rule disclosure requirements 4
and to ensure accountability at a senior
management level for that compliance.
6 Respect the Rights of Shareholders
6.1 Design and disclose a communications
strategy to promote effective
communication with shareholders and 4
encourage effective participation at general
meetings.
7 Recognise and Manage Risk
7.1 Establish policies for the oversight and
management of material business risks and 4
disclose a summary of those policies.
7.2 The Board should require management to
design and implement the risk management
and internal control system to manage the
Company’s material business risks and
report to it on whether those risks are being 4
managed effectively. The Board should
disclose that management has reported to
it as to the effectiveness of the Company’s
management of its material business risks.
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Principle / Recommendation Complied Note
7 Recognise and Manage Risk (cont.)
7.3 The Board should disclose whether it has
received assurance from the chief executive
officer (or equivalent) and the chief financial
officer (or equivalent) that the declaration
provided in accordance with section 295A
4
of the Corporations Act 2001 is founded
on a sound system of risk management
and internal control and that the system is
operating effectively in all material respects
in relation to financial reporting risks.
8 Remunerate Fairly and Responsibly
8.1 The Board should establish a remuneration
4
committee.
8.2 The remuneration committee should be
structured so that it:
• consists of a majority of independent
directors; 4
• is chaired by an independent chair; and
• has at least three members.
8.3 Clearly distinguish the structure of non-
executive directors’ remuneration from that 4
of executive directors and senior executives.
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Note 1: Principle 2 - structure the Board to add Value

The Company is not in compliance with recommendations 2.1 and 2.2 of the ASX Best Practice Recommendations. A majority of the Board is not considered to be independent when considered in accordance with the criteria set out in recommendation 2.1 (it presently has equal numbers of independent and non-independent non-executive directors, nor is the Chair an independent Director in accordance with these criteria).

Following the merger with privately held Australian Bulk Minerals (ABM) on 2 January 2009, the shareholders of ABM had the right to appoint four Directors to the Board of which one would be appointed Chair. Prior to the merger, the Company was not in compliance with recommendations 2.1 and 2.2 as the majority of the Board were not considered to be independent, nor was the Chair considered an independent Director.

Despite the Company not being in compliance with these Best Practice Recommendations, the Board believe that the individuals on the Board can and do make quality and independent judgements in the best interests of the Company and all stakeholders.

GRANGE RESOURCES LIMITED

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FINANCIAL REPORT For the Year Ended 31 December 2013

These financial statements are the consolidated financial statements of the consolidated entity consisting of Grange Resources Limited and its subsidiaries. The financial statements are presented in Australian currency.

Grange Resources Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

34A Alexander Street Burnie Tasmania 7320

A description of the nature of the consolidated entity’s operations and its principal activities can be found on pages 1 to 19 of this report.

All press releases, financial reports and other information are available on our website: www.grangeresources.com.au

	Contents
	Directors’ Report	30
	Auditor’s Independence Declaration	43
	Financial Statements
	– Statement of Comprehensive Income	44
	– Statement of Financial Position	45
	– Statement of Changes in Equity	46
	– Statement of Cash Flows	47
	– Notes to the Financial Statements	48
	Directors’ Declaration	87
	Independent Auditor’s Report	88

2013 ANNUAL REPORT

Directors’ report

The Directors present their report on the consolidated entity (the “Group”) consisting of Grange Resources Limited (“Grange” or “the Company”) and the entities it controlled at the end of, or during, the year ended 31 December 2013.

DireCtors

The following persons were Directors of the Company during the whole of the 12 month financial year ended 31 December 2013 and up to the date of this report:

Neil Chatfield Clement Ko John Hoon Honglin Zhao

Michelle Li was appointed non-executive Director and Chairman of the Company from 29 October 2013.

Wayne Bould was appointed Managing Director of the Company from 4 June 2013.

Zhiqiang Xi was non-executive Director and Chairman of the Company until his resignation on 29 October 2013.

Richard Mehan was Managing Director of the Company until his resignation on 4 June 2013.

information on Directors

Michelle Li , PhD, GAICD, Age 49

Non-executive Chairman, Member of the Audit Committee, Member of the Remuneration and Nomination Committee, and Member of the Health Safety and Environment Committee

Ms Li was appointed as non-executive Chairman on 29 October 2013. She is a mineral processing engineer and metallurgist with over 20 years’ experience in the Australian mining sector. Her experience includes senior roles at Citic Pacific, Rio Tinto and Iluka Resources, as well as a senior project role at the Grange Resources Southdown project.

Ms Li has a PhD from the University of Queensland and was previously a non-executive Director of Sherwin Iron Limited from 2012 until 2013.

Neil Chatfield , FCPA, FAICD, Age 59

Deputy Non-executive Chairman, Chairman of Remuneration and Nomination Committee, Chairman of the Health, Safety and Environment Committee, Chairman of Committee of Independent Directors and Member of the Audit Committee.

Mr Chatfield is an experienced executive and Non-executive Director and has over 35 years’ experience in the resources and transport sectors. He has extensive experience in financial management, capital markets, mergers and acquisitions and risk management.

Mr Chatfield is currently Non-executive Chairman of Seek Limited (since 2012) and Non-executive Director (since 2005), Nonexecutive Director of Transurban Group (since 2009) and Nonexecutive Chairman of Virgin Australia Holdings Limited (since June 2007) and Non-executive Director of Recall Holdings Limited (since 2013). Mr Chatfield was previously an executive Director of Toll Holdings Limited from 1998 to September 2008 and a Nonexecutive Director of Whitehaven Coal from 2007 to 2012.

Wayne Bould , Age 61

Managing Director; Member of the Health, Safety and Environment Committee and Member of the Committee of Independent Directors

Mr Bould, formerly the Company’s Chief Operating Officer, was appointed Managing Director on 4 June 2013 and has over 40 years’ practical and managerial experience in the petroleum, forestry and mining sectors. He joined Grange in May 2008 and was integrally involved in the completion of the merger with Australian Bulk Minerals and the successful integration of the two businesses.

Prior to joining Grange, Mr Bould was the Director, Business Excellence for Newmont Mining Corporation’s global business operations. Mr Bould also has considerable experience as a senior manager in management consulting, in the downstream oil industry with Shell Australia, and in the manufacture and distribution of timber products with Auspine.

Mr Bould is an active contributor to the Tasmanian mining sector and is the current President and a Director of Tasmanian Minerals Council. In addition he is an industry representative member on the Joint Commonwealth and Tasmanian Economic Council.

Honglin Zhao , Age 60

Executive Director

Mr Zhao is a Director on the Board of the Jiangsu Shagang Group, ultimate shareholder of Shagang International Holdings Limited and China’s largest private steel company. He is also a Director of Shagang International (Australia) Pty Ltd.

Mr Zhao has over 38 years’ experience in the industry and was previously the Commander of Project Development Headquarters with Shagang. Mr Zhao has extensive project management and implementation experience and expertise.

GRANGE RESOURCES LIMITED

John Hoon , CA, FGIA, GAICD, Age 54

Non-executive Director, Chairman of Audit Committee, Member of the Remuneration and Nomination Committee, Member of the Health, Safety and Environment Committee and Member of the Committee of Independent Directors

Mr Hoon has a strong background in financial and audit matters and has an extensive Australian and South East Asian business network across a wide range of sectors. He was previously a Director of Bao Australia Pty Ltd, a subsidiary of China Shanghai Baosteel Corporation which is one of the largest listed companies in China and which has numerous joint ventures with Australian mining companies. In addition, Mr Hoon together with his associates, successfully founded and established Navitas Limited, an Australian listed company providing private business and English language education. Mr Hoon was previously a nonexecutive Director of Drake Resources Limited from 2011 until 2013.

Clement Ko LLB, MBA, Age 50

Non-executive Director

Mr Ko is the Chairman and sole shareholder of Pacific Minerals Limited, the sole member of Pacific International Co Pty Ltd (one of the current shareholders of Grange). Prior to founding Pacific Minerals Limited, Mr Ko worked for BHP Billiton (China) Ltd as a senior regional marketing manager. Mr Ko has more than 20 years of experience in the mining sector with extensive experience in marketing and sales.

Company secretary

Ms Pauline Carr BEc, MBA, FCIS, FAICD

Ms Carr is a qualified chartered secretary and experienced executive with over 28 years management and commercial experience in the resources industry with both Australian and international companies. In addition, she has 20 years of comprehensive hands on company secretarial, compliance and governance experience with listed company boards. She also provides governance, management support, compliance, risk management and business improvement consultancy services to organisations in a range of sectors.

Pauline is a fellow with both the Australian Institute of Company Directors and the Governance Institute of Australia (formerly Chartered Secretaries Australia). She was a member of the Governance Institute’s South Australian Branch Council and the National Legislative Review Committee for many years and is a regular presenter of seminars for governance professionals.

Grange resources Board of Directors

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Michelle Li Neil Chatfield
Non-Executive Chairman Non-Executive Deputy Chairman
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