Notes to the Consolidated Financial Statements for the year ended 30 June 2025 8. Investment in joint venture (continued) As at 30 June 2025, the first principal repayment of US$11m was made, the facility is fully drawn. Total interest paid for the year was US$11.0m / A$17.0m (2024: US$11.2m / A$16.9m). Debt Covenant The following financial covenants apply to all KMS secured debt facilities which are tested on a semi-annual basis. Compliance ratios: – Loan Life Cover Ratio is greater than 1.20:1 – Project Life Cover Ratio greater than 1.50:1 – Reserve Tail Ratio is greater than 20% – Debt Service Cover Ratio is greater than 1.10:1 Assessment: As at 30 June 2025, the KMS loan life cover ratio was in breach of the covenant, with OMRF & NAIF providing written waivers deferring the requirement to test the covenants. As a result of the waiver being obtained before reporting date, the loan continues to be classified as a non-current liability in these financial statements. The terms and conditions of outstanding loans are as follows: Year of maturity Currency 2025 2024 Face value $’000 (Audited) Carrying value $’000 (Audited) Face value $’000 (Audited) Carrying value $’000 (Audited) Facility 1 Government debt facility A1 2033 AUD 120,000 117,446 120,000 117,025 Government debt facility B1,2 2027 AUD 40,000 40,000 40,000 40,000 AUD 160,000 157,446 160,000 157,025 Facility 2 Production linked loan facility3 2028 AUD 151,145 98,186 166,063 91,503 AUD 151,145 98,186 166,063 91,503 Note 1: Interest charged at a base rate based upon the Commonwealth Government Security cost plus a margin of 3.5% which increases to 8% from year 6 onwards. Interest is payable quarterly in arrears. Note 2: Government debt facility B is required to be paid in advance of Government debt facility A, prior to 31 December 2027. Note 3: Facility 2 is denominated in USD, however, the KMS functional currency is AUD and reported accordingly. Interest is charged at a margin of 5% plus the higher of a) adjusted term SOFR, and b) 2% per annum. Minimum interest rate is 7%. (g) Joint venture – prepayments and other financial liabilities This Note 8 (g) (Joint venture – prepayments and other financial liabilities) should be read in conjunction with Note 8 (f) (Joint venture – borrowings). The Facility 2 Production Linked Loan Facility royalty arrangement contains a “make whole” condition. The key terms for the make whole amount are as below: – Triggered upon an acceleration (make whole) event occurring, being customary Events of Default for a facility of this type. – The amount due is the greater of: a. An aggregate amount at that time of all payments made under the agreement including the royalty payments; and b. An amount equal to the NPV of the lenders right to receive all of the payments made under this agreement including the royalty calculated on the basis of the expected price per tonne of each product. An initial valuation of the make whole condition in conjunction with recognition of a financial liability and a corresponding recognition of a prepaid expense is required as at the issuance date of the loan. When the loan was fully drawn, the said prepaid expense will be recorded against the loan liability as a cost of the loan. The royalty prepayment is required to be recorded as an additional expense to the loan for the purposes of the Effective Interest Rate calculation. The make whole amount is effectively the present value of the expected royalty payment which will be expensed through the life of the loan. On each financial reporting date, the make whole amount is recalculated with any difference recognised through profit or loss. 60 Sheffield Resources Limited Annual Report 2025
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