Notes to the Consolidated Financial Statements for the year ended 30 June 2024 Year of maturity Currency 2024 2023 Face value $’000 (Audited) Carrying value $’000 (Audited) Face value $’000 (Audited) Carrying value $’000 (Audited) Facility 1 Government debt facility A1 2033 AUD 120,000 117,025 96,725 93,350 Government debt facility B1,2 2027 AUD 40,000 40,000 – – AUD 160,000 157,025 96,725 93,350 Facility 2 Production linked loan facility3 2028 AUD 166,063 91,503 132,364 136,468 AUD 166,063 91,503 132,364 136,468 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). KMS’ 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 amount, after taking into account all payments (including royalty) made under the agreement which provides the lenders with an agreed & commercially confidential after-tax internal rate of return; or b. an amount equal to the NPV of the lender’s rights to all payments (including the royalty) made under this agreement calculated on the basis of the most recent forecast commodity price for the mineral sands products. 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. Joint venture (100%) 2024 $’000 (Audited) Joint venture (100%) 2023 $’000 (Audited) Non-current assets Prepayments Prepaid expense on financing costs on royalty obligations1 – 119,597 Revaluation – (2,309) – 117,288 Non-current liabilities Other Financial Liabilities Royalty make whole 112,696 119,597 Revaluation on royalty make whole 5,156 (4,592) Foreign currency revaluation (1,325) (2,309) 116,527 112,696 Note 1: The production linked loan facility was fully drawn during the year. The financing costs relating to the royalty obligations were transferred from prepayments to the production linked loan facility as cost of the loan. 8. Investment in joint venture (continued) The terms and conditions of outstanding loans are as follows: 58 Annual Report 2024 Sheffield Resources Limited
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