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U.S. Gold Corp.ANNUAL
REPORT
2020
Competent Persons
This Mineral Resources and Ore Reserves Statement as a whole has been approved by Mr D Ian Chalmers, FAusIMM, FAIG, (Executive Director of the
Company,) who has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which
he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’. Mr Chalmers has provided his prior written consent to the inclusion in this report of the Mineral Resources and Ore Reserves
Statement in the form and context in which it appears.
The information in this report that relates to the TGO Mineral Resource estimates is based on, and fairly represents, information which has been compiled by
Mr Craig Pridmore, Geology Manager Tomingley Gold Operations, who is a Member of the Australasian Institute of Mining and Metallurgy and an employee
of Alkane Resources Ltd. Mr Pridmore has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to
the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves’.
The information in this report that relates to the TGO Open Pit Ore Reserve estimate is based on, and fairly represents, information which has been compiled
by Mr John Millbank (Proactive Mining Solutions), an independent consultant, who is a Member of the Australasian Institute of Mining and Metallurgy. Mr
Millbank has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that is being
undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources
and Ore Reserves’.
The information in this report that relates to the TGO Underground Ore Reserve estimate is based on, and fairly represents, information which has been
compiled by Mr Christopher Hiller (Hiller Enterprises Pty Ltd), an independent consultant, who is a Member of the Australasian Institute of Mining and
Metallurgy. Mr Hiller has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that
is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’.
The information in this report that relates to Roswell and San Antonio Mineral Resource estimate is based on, and fairly represents, information compiled by
Mr David Meates MAIG, (Alkane Exploration Manager NSW), who has sufficient experience which is relevant to the style of mineralisation and type of deposit
under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves.
The information in this report that relates to the PHGP Mineral Resource estimate is based on, and fairly represents, information which has been
compiled by Mr Craig Pridmore, Geology Manager Tomingley Gold Operations, who is a Member of the Australasian Institute of Mining and Metallurgy
and an employee of Alkane Resources Ltd. Mr Pridmore has sufficient experience that is relevant to the style of mineralisation and type of deposit under
consideration and to the activity that is being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves’.
Previously reported information
The information in this report that relates to:
•
•
•
TGO Mineral Resource estimates is extracted from the Company’s ASX announcement dated 18 August 2020;
TGO Open Pit Ore Reserve estimate is extracted from the Company’s ASX announcements dated 18 August 2020 and 23 September 2019;
TGO Underground Ore Reserve estimate is extracted from the Company’s ASX announcements dated 18 August 2020, 4 June 2018 and 11 June 2018;
• Roswell and San Antonio Mineral Resource estimate is extracted from the Company’s ASX announcement dated 20 April 2020;
• PHGP Mineral Resource estimate is extracted from the Company’s ASX announcement dated 18 October 2018;
•
exploration results (Northern Molong Porphyry Project) are extracted from the Company’s ASX announcements noted in the text of the report;
and are available to view on the Company’s website. The Company confirms that, other than mining depletion, it is not aware of any new information or data
that materially affects the information included in the relevant market announcement(s); in the case of estimates of Mineral Resources or Ore Reserves,
that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not
materially changed; and that the form and context in which the Competent Person’s findings are presented have not been materially altered.
Disclaimer
This report contains certain forward-looking statements and forecasts, including possible or assumed reserves and resources, production levels and rates,
costs, prices, future performance or potential growth of Alkane Resources Ltd, industry growth or other trend projections. Such statements are not a
guarantee of future performance and involve unknown risks and uncertainties, as well as other factors which are beyond the control of Alkane Resources
Ltd. Actual results and developments may differ materially from those expressed or implied by these forward-looking statements depending on a variety of
factors. Nothing in this report should be construed as either an offer to sell or a solicitation of an offer to buy or sell securities.
This document has been prepared in accordance with the requirements of Australian securities laws, which may differ from the requirements of United
States and other country securities laws. Unless otherwise indicated, all Ore Reserve and Mineral Resource estimates included or incorporated by reference
in this document have been, and will be, prepared in accordance with the JORC classification system of the Australasian Institute of Mining, and Metallurgy
and Australian Institute of Geosciences.
Contents
Business Review
Chairman’s Message
Group Overview
Operations and Development
Exploration
Integrity
Financial Report
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Consolidated Financial Statements
Notes to the
Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate
Governance Statement
4
5
6
8
14
21
23
24
45
46
48
52
92
93
98
99
Schedule of Mining Tenements
100
Company
Information
ACN 000 689 216
ABN 35 000 689 216
Directors
I J Gandel
N Earner
D I Chalmers
A D Lethlean
G M Smith
(Non-Executive Chairman)
(Managing Director)
(Technical Director)
(Non-Executive Director)
(Non-Executive Director)
Joint Company Secretaries
D Wilkins
J Carter
Registered office
and principal place of business
Ground Floor,
89 Burswood Road,
Burswood WA 6100
Telephone: 61 8 9227 5677 | Facsimile: 61 8 9227 8178
Share registry
Advanced Share Registry Limited
110 Stirling Highway,
Nedlands WA 6009
Telephone: 61 8 9389 8033 | Facsimile: 61 8 9262 3723
Auditor
PricewaterhouseCoopers
Brookfield Place,
125 St Georges Terrace,
Perth WA 6000
Securities exchange listings
Australian Securities Exchange (Perth)
Ordinary fully paid shares
Code: ALK
OTCMarkets – OTCQX International
Code: ALKEF
Internet
http://www.alkane.com.au
mail@alkane.com.au
BUSINESS
REVIEW
4
| Alkane Resources Annual Report 2020 BUSINESS REVIEW | CHAIRMAN'S MESSAGE
Chairman's Message
It is with great pleasure that, on behalf of
your Board of Directors, I present the Alkane
Resources 2020 Annual Report. It has been
a year in which our enhanced gold strategy
has yielded an extremely promising discovery
and laid foundations for extending our gold
operations at Tomingley.
The past year has been an exciting one for Alkane. In a strong market for Australian gold, we continued to drive the gold strategy
that underpins our vision of becoming a multi-mine gold producer. While our gold operations at Tomingley continued to perform
reliably and productively, our exploration teams ramped up their activities on our two major projects in New South Wales.
After a scheduled summer maintenance closure, the gold processing facility at Tomingley Gold Operations (TGO) began
processing underground stope ore in February. My thanks go to the whole team at TGO for the smooth recommencement of
gold mining activities and for their commitment to the new levels of safe working practices due to the pandemic. To date there
has been no disruption to mining or production outputs.
Over the past year, we have continued to search for avenues to prolong the operating life of the TGO processing facility, which
is one of Alkane’s key assets. A major step forward came from our exploration efforts in the gold corridor to the south of the
mine at Roswell, San Antonio and El Paso. After confirming the economic potential of the San Antonio and Roswell deposits,
we have now commenced the approval application process to develop these as an extension of the existing operation. This will
be a consolidated State Significant Development that has the potential to extend the operation for another seven or more years.
The most significant exploration outcome in the past year has been the landmark discovery of extensive gold-porphyry
mineralisation at our Boda prospect in the northern Molong Volcanic Belt. An initial drilling program has indicated the
presence of large-scale gold-copper mineralisation with a higher-grade core. These early results indicate Boda is a genuine
prospect for a large-tonnage gold-copper development, similar to Newcrest’s Cadia Valley Mine. We look forward to sharing
the results of a large drilling program that is now underway to test the controls and dimensions of the Boda discovery.
The final significant focus of the past year was preparation for the demerger and separate ASX listing of Australian Strategic
Materials Ltd (ASM), formerly Alkane’s holding company for the multi-commodity Dubbo Project and clean metal joint venture in
South Korea. Shareholders voted for this action at an Extraordinary General Meeting on 16 July 2020, and the demerger of
ASM was finalised on 29 July. The Dubbo Project has been an exciting project for Alkane for around two decades, but the time
is now right for ASM to move forward independently under the expert leadership of a new executive team. I am truly pleased
that Alkane shareholders have benefited financially from this demerger.
Once again, I extend my thanks to our Managing Director, Nic Earner, and the entire Alkane team, including our strategic
partners and consultants, along with our many shareholders and stakeholders for their ongoing support of Alkane. I look
forward to building value in our company over the coming year.
Ian Gandel
Chairman
Alkane Resources Ltd
5
Alkane Resources Annual Report 2020 |
Group Overview
Alkane has maintained a strong focus on gold exploration, production and
investment in the past year, making significant advances towards its vision of
becoming a multi-mine gold producer.
About Alkane
Alkane Resources Ltd is a gold production company with a
multi-commodity exploration and development portfolio.
It is the parent entity of the Alkane Group, which includes
Tomingley Gold Operations. The Group’s projects and
operations are primarily located in Central Western New
South Wales in eastern Australia.
Alkane has a major focus on gold exploration and
production through its subsidiary Tomingley Gold
Operations (TGO), which is an operating underground mine
that transitioned from open cut in 2019. The Company
has commenced the approval process to develop two gold
deposits in the near vicinity of TGO, which will feed the
processing plant and extend the life of the operation.
Exploration drilling at the San Antonio and Roswell deposits
The Company is also undertaking major gold exploration
activities in the northern Molong Volcanic Belt, east
of Dubbo, where extensive gold-copper porphyry
mineralisation has been discovered.
Former subsidiary Australian Strategic Materials Ltd (ASM)
demerged from Alkane in July 2020. ASM will continue to
develop the Dubbo Project, a large in-ground polymetallic
resource of the metals zirconium, hafnium, niobium and
rare earth elements.
Alkane also owns stakes in gold exploration and
development companies Calidus Resources Ltd (ASX: CAI)
and Genesis Minerals Ltd (ASX: GMD). Alkane is listed
on both the ASX (code ALK) and US OTCQX (code ALKEF)
securities exchanges.
6
| Alkane Resources Annual Report 2020
BUSINESS REVIEW | GROUP OVERVIEW
BUSINESS REVIEW | GROUP OVERVIEW
Strategic priorities and investments
In a strong market for Australian gold, Alkane focused
on gold production, exploration and partnerships during
the 2019-2020 financial year. In parallel, the Company
prepared for the demerger and separate listing of
Australian Strategic Materials Ltd (ASM), which proceeded
in July 2020.
Additional facets of the Company’s gold strategy include:
• Strong regional NSW exploration portfolio – in
particular the extensive gold-copper porphyry
mineralisation identified at Alkane’s Boda prospect in
the northern Molong Volcanic Belt
Alkane’s vision is to become a multi-mine Australian gold
producer, founded on existing gold assets, established
projects, promising prospects and demonstrated
experience in gold exploration and production. The gold
operation at Tomingley is well positioned to anchor this
strategy, based on the current underground development
and prospective accelerated development of the extended
Tomingley gold corridor.
• Potential growth via strategic investment and future
acquisitions.
The Company continues to seek strategic investments in
junior gold mining companies and high-potential projects,
where Alkane can contribute additional capital, expertise
and operating capability for mutual benefit.
“
Alkane’s vision is to become
a multi-mine Australian
gold producer, founded on
existing gold assets,
established projects
and promising prospects.
7
Alkane Resources Annual Report 2020 |
BUSINESS REVIEW | OPERATIONS AND DEVELOPMENT
Operations and Development
As underground production at Tomingley Gold Operations commenced,
the Company continued to explore opportunities for extending the life of
the operation. This included starting the approval application process for
developing the nearby Roswell and San Antonio deposits.
Tomingley Gold Operations
Production
Tomingley Gold Operations (TGO) is a wholly owned
subsidiary of Alkane, located near the village of Tomingley,
approximately 50 kilometres southwest of Dubbo in Central
Western New South Wales. The gold processing plant was
commissioned in January 2014 and has been operating at
the design capacity of 1Mtpa since late May 2014. Mining
is based on four gold deposits: Wyoming One, Wyoming
Three, Caloma One and Caloma Two.
Open cut mining from the four deposits occurred from
late 2013 until early 2019. During that time 6,271,000
tonnes of ore averaging 1.95g/t gold were mined, resulting
in 369,000 ounces of poured gold after processing (to 31
December 2019).
Development of the underground mine at the Wyoming
One deposit commenced in late 2018, with the first stope
ore production in late 2019. The plan is to extract the
identified Ore Reserves over a 40-month period, while
potentially growing the reserve base over the life of the
development.
8
| Alkane Resources Annual Report 2020
The operation processed predominantly low-grade
stockpiles for the second half of 2019, before a planned
shutdown in December for extended maintenance of the
plant. Prior to this pause, the first underground stope
material was processed to confirm grade and recovery
performance. The processing plant was successfully
restarted in mid-February 2020, primarily processing
underground stope material. The operation continues to
perform very well, with recovery performing as expected.
Mine life extension
With the underground development on schedule and on
budget, TGO continued to explore opportunities to extend
the life of the mine and processing plant. This included
commencement of an extensional drilling program inside
the resource base to identify additional economic ore
loads. The Wyoming One, Caloma One and Caloma Two
deposits are open at depth, making mine life extensions
highly likely.
A cut-off grade review in the context of the current gold
price led to the inclusion of additional underground stope
ore in the mine schedule (approximately 33,000 ounces of
gold). The current gold price also makes development of a
previously approved cut-back of the Caloma One open cut
an economic prospect. TGO has released a tender for open
cut mining contracts, intending to mine approximately
570,000 tonnes of ore at 1.61g/t gold, containing 29,500
ounces. The establishment work is scheduled to commence
in September 2020.
BUSINESS REVIEW | OPERATIONS AND DEVELOPMENT
Total gold poured in FY2020:
33,507 ounces at an
All in Sustaining Cost (AISC)* of
A$1,357 per ounce
Total gold sold in FY2020:
32,995 ounces
at an average of
A$2,199 per ounce
*All in Sustaining Cost (AISC) comprises all site operating costs, royalties, mine exploration, sustaining capex and mine development and
an allocation of corporate costs, presented on the basis of ounces produced.
San Antonio and Roswell development
Alkane also continued major exploration activities in the
gold corridor between Tomingley and Peak Hill, with the
view to identifying additional resources for processing
at TGO. This focused on the Roswell and San Antonio
deposits, which are within eight kilometres of TGO to
the south and have similar geology to the Caloma and
Wyoming deposits. Inferred Resources were announced
for the Roswell deposit on 28 January 2020 and for the San
Antonio deposit on 20 April 2020. (Refer to the Exploration
section of this report for more detail.)
With the intention of developing the Roswell and San
Antonio deposits via open cut and underground mining,
Alkane commenced the approval application process
during the reporting period. Consultation with regulators,
landholders and other stakeholders, as well as on-ground
assessments needed for the Environmental Impact
Statement, are underway.
The Company expects to release preliminary mine plans for
Roswell and San Antonio in the December quarter of 2020.
In support of this development, Alkane received approval
from the NSW Resources Regulator in May 2020 for
development of an underground exploration drive from
the existing Wyoming One underground operations to the
Roswell and San Antonio deposits. The NSW Department
of Planning, Industry and Environment also consented
to approval modifications allowing the capacity of TGO’s
residue storage facility to be increased and the mine site
and associated infrastructure to be used in support of
underground exploration operations.
With the addition of the Roswell and San Antonio Inferred
Resources, the total resources at TGO and the exploration
tenements to the immediate south are now in excess of
one million ounces of contained gold.
Alkane Resources Annual Report 2020 |
9
BUSINESS REVIEW | OPERATIONS AND DEVELOPMENT
Mineral Resources and Ore Reserves
Alkane reports Ore Reserves and Mineral Resources for TGO (excluding the Roswell and San Antonio deposits) as at 30 June
2020 in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(JORC 2012). These estimates take into account ore depleted by mining during the 2020 financial year and were reported
to the ASX on 18 August 2020. Any differences to those tables are corrections to typographical errors; the assumptions and
parameters detailed in that report are unchanged. Mineral Resources are wholly inclusive of Ore Reserves.
TGO Mineral Resources (as at 30 June 2020)
MEASURED
INDICATED
INFERRED
TOTAL
DEPOSIT
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
TOTAL GOLD
(koz)
Open Pittable Resources (cut-off 0.50g/t Au)
Wyoming One
Wyoming Three
Caloma
Caloma Two
Sub Total
624
86
879
64
1,653
1.8
2.0
1.6
2.3
1.6
Underground Resources (cut-off 1.3g/t Au)
Wyoming One
Wyoming Three
Caloma
Caloma Two
Sub Total
TOTAL
664
46
158
-
868
2,521
2.8
2.2
2.6
0.0
2.8
1.8
428
16
1,016
812
2,272
1,390
24
129
785
2,328
4,600
Apparent arithmetic inconsistencies are due to rounding.
TGO Ore Reserves (as at 30 June 2020)
1.3
1.3
1.2
2.0
1.6
2.9
2.0
2.0
2.4
2.7
2.2
107
33
824
26
990
427
20
465
426
1,338
2,328
0.7
1.4
1.2
1.4
1.2
2.8
1.9
1.9
2.0
2.2
1,159
135
2,719
902
4,915
2,481
90
752
1,211
4,534
1.5
1.7
1.3
2.0
1.5
2.9
2.1
2.0
2.3
2.6
1.5
9,449
1.9
57
8
115
58
238
228
6
50
88
372
610
DEPOSIT
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
PROVED
PROBABLE
TOTAL
TOTAL GOLD
(koz)
Open Pittable Reserves (cut-off 0.50g/t Au)
Wyoming One
Wyoming Three
Caloma
Caloma Two
Stockpiles
Sub Total
0
0
450
0
207
657
Underground Reserves (cut-off 1.3g/t Au)
TGO underground
Sub Total
TOTAL
573
573
1,230
0.0
0.0
1.7
0.0
0.8
1.1
1.9
1.9
1.8
0
0
119
0
0
119
1,618
1,618
1,737
0.0
0.0
1.2
0.0
0.0
1.2
2.0
2.0
1.9
0
0
569
0
207
776
2,191
2,191
2,967
0.0
0.0
1.6
0.0
0.8
1.4
2.0
2.0
1.8
0
0
30
0
6
36
140
140
176
Apparent arithmetic inconsistencies are due to rounding. This table corrects some typographical errors in the original statement.
10
| Alkane Resources Annual Report 2020
BUSINESS REVIEW | OPERATIONS AND DEVELOPMENT
The tables below compare the total TGO Mineral Resources and Ore Reserves as at 30 June 2020 year on year with
30 June 2019.
TGO Comparative Mineral Resources (30 June 2019 to 30 June 2020)
Tonnage
(kt)
2019
Grade
(g/t Au)
Gold
(koz)
Tonnage
(kt)
2020
Grade
(g/t Au)
Gold
(koz)
DEPOSIT
Open Pittable
Wyoming One
Wyoming Three
Caloma
Caloma Two
Sub Total
Underground
Wyoming One
Wyoming Three
Caloma
Caloma Two
Sub Total
TOTAL
1,303
135
2,735
902
5,075
896
20
154
294
1,364
6,439
1.6
1.7
1.3
2.0
1.5
3.9
3.4
3.5
3.5
3.8
2
60
8
116
58
242
113
2
17
33
165
407
1,159
135
2,719
902
4,915
2,481
90
752
1,211
4,534
9,449
Apparent arithmetic inconsistencies are due to rounding.
TGO Comparative Ore Reserves (30 June 2019 to 30 June 2020)
DEPOSIT
Open Pittable
Wyoming One
Wyoming Three
Caloma
Caloma Two
Stockpiles
TOTAL
Underground
Proven
Probable
TOTAL
Tonnage
(kt)
2019
Grade
(g/t Au)
Gold
(koz)
Tonnage
(kt)
2020
Grade
(g/t Au)
0
0
0
0
677
677
45
688
732
0.0
0.0
0.0
0.0
0.7
0.7
2.7
3.2
3.1
0
0
0
0
15
15
4
70
74
0
0
569
0
207
776
573
1,618
2,191
Apparent arithmetic inconsistencies are due to rounding.
The primary differences from 2019 to 2020 are:
• Caloma One cut-back placed into the Reserves
• Underground cut-off grade reduced from +2.5g/t to +1.3g/t, and
• Underground mining commenced 2019, with ore extraction occurring mid-2019.
1.5
1.7
1.3
2.0
1.5
2.9
2.1
2.0
2.3
2.6
1.9
0.0
0.0
1.6
0.0
0.8
1.4
1.9
2.0
2.0
Gold
(koz)
57
8
115
58
238
228
6
50
88
372
610
0
0
30
0
6
36
34
106
140
11
Alkane Resources Annual Report 2020 | BUSINESS REVIEW | OPERATIONS AND DEVELOPMENT
Peak Hill Gold Project
Located 15 kilometres south of Tomingley Gold Operations,
Alkane’s Peak Hill Gold Mine (PHGM) operated from
1996 to 2005 as an open cut heap leach. While the site
is substantially rehabilitated, it remains an active Mining
Lease.
Technological advances and gold price increases in the
last two decades have made the economics of further
development of PHGM worth re-evaluating. A revised
Mineral Resource (JORC 2012), completed in October
2018, identified an initial Inferred Resource of 108,000
ounces of gold.
Drilling at the Peak Hill Proprietary deposit (photo: Mitchell Services)
Peak Hill Mineral Resource (as at 30 June 2020)
Deposit
Proprietary
Underground
TOTAL
Resource
Category
Cut-off
Tonnes
(Mt)
Gold grade
(g/t)
Gold metal
(koz)
Copper Metal
(%)
Inferred
2g/t Au
Inferred
2g/t Au
1.02
1.02
3.29
3.29
108
108
0.15
0.15
This Mineral Resource estimate is unchanged since 30 June 2019.
Unlike the prospects between TGO and PHGM, the Proprietary deposit is moderately refractory in nature at depth, requiring
different recovery methods. The Company completed a ten-hole core diamond drilling program to provide mineralised
samples to test modern gold recovery techniques. The metallurgical test program has so far explored flotation and leaching
options.
Alkane retains its Mining Lease and Environment Protection Licence for Peak Hill Gold Mine, but any further mine
development would require further environmental assessment and government approval.
Mineral Resource and Ore Reserve Governance and Internal Controls
The Alkane Group has governance arrangements and internal controls with respect to its estimates of Mineral Resources and Ore Reserves and the
estimation process within the Tomingley Gold Operations, Dubbo Project, and exploration and evaluation projects such as the Peak Hill Gold Project,
including:
•
•
•
•
oversight and approval of each annual statement by the Technical Director;
establishment of internal procedures and controls to meet JORC Code 2012 compliance in all external reporting;
independent review of new and materially changed estimates;
annual reconciliation with internal planning to validate reserve estimates for operating mines; and
• Board approval of new and materially changed estimates.
12
| Alkane Resources Annual Report 2020
BUSINESS REVIEW | OPERATIONS AND DEVELOPMENT
Dubbo Project
Mineral Resources and Ore Reserves
As at 30 June 2020, the Mineral Resources and Ore
Reserves for the Toongi deposit, which is the basis of the
Dubbo Project, are the same as those stated at 30 June
2019. These estimates were provided by independent
industry consultants Mining One Pty Ltd and are reported
by Alkane in accordance with the Australasian Code for
Reporting of Exploration Results, Mineral Resources and
Ore Reserves (JORC 2012). Mineral Resources are wholly
inclusive of Ore Reserves, which are based on economic
parameters applied to the Mineral Resources, reflecting an
initial project horizon of 20 years.
Located 25 kilometres south of Dubbo in Central Western
New South Wales, the Dubbo Project is a large in-ground
polymetallic resource of the metals zirconium, hafnium,
niobium, tantalum, yttrium and rare earth elements. The
project is owned by Australian Strategic Materials Ltd (ASM),
a wholly owned subsidiary of Alkane until July 2020. ASM
demerged from Alkane early in the 2021 financial year.
A major focus over the past year was preparation for the
demerger and separate listing of ASM. After extensive
regulator consultation and implementation planning,
the Board committed to this action on 20 May 2020 and
shareholders voted to demerge at an Extraordinary General
Meeting on 16 July 2020. ASM also appointed experienced
mining executive David Woodall as Managing Director on
10 February 2020.
For more detail about ASM and the Dubbo Project, refer to
the 2020 ASM Annual Report.
Dubbo Project Mineral Resources (as at 30 June 2020)
Resource Category
Tonnes
(Mt)
ZrO2
(%)
HfO2
(%)
Nb2O5
(%)
Ta2O5
(%)
Y2O3
(%)
TREO*
(%)
Measured
Inferred
TOTAL
42.81
32.37
75.18
1.89
1.90
1.89
0.04
0.04
0.04
0.45
0.44
0.44
0.03
0.03
0.03
0.14
0.14
0.14
0.74
0.74
0.74
*TREO% is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O3, Ta2O5, Y2O3
Dubbo Project Ore Reserves (as at 30 June 2020)
Reserve Category
Tonnes
(Mt)
ZrO2
(%)
HfO2
(%)
Nb2O5
(%)
Ta2O5
(%)
Y2O3
(%)
TREO*
(%)
Proved
TOTAL
18.90
18.90
1.85
1.85
0.04
0.04
0.440
0.029
0.136
0.735
0.440
0.029
0.136
0.735
*TREO% is the sum of all rare earth oxides excluding ZrO2, HfO2, Nb2O3, Ta2O5, Y2O3
13
Alkane Resources Annual Report 2020 |
BUSINESS REVIEW | EXPLORATION
Exploration
Alkane’s gold exploration activities in Central Western New South Wales
escalated in the past year, primarily focused on two major projects. Resource
definition drilling commenced at the Roswell and San Antonio prospects
within the Tomingley Gold Project, leading to the release of Inferred
Resources for both deposits. Elsewhere, a diamond core drilling program at
the Boda prospect within the Northern Molong Porphyry Project revealed
extensive gold-copper porphyry mineralisation.
Tomingley Gold Project (gold)
Alkane Resources Ltd 100%
Alkane’s Tomingley Gold Project covers an area of approximately 440 square kilometres, stretching 60 kilometres north-
south along the Newell Highway in Central Western New South Wales. The prospective belt extends from near the village of
Tomingley in the north (about 50 kilometres southwest of Dubbo), through Peak Hill and almost to Parkes in the south. The
project incorporates the Company’s currently active Tomingley Gold Operations (TGO) and the inactive Peak Hill Gold Mine.
Resource drilling at Roswell and San Antonio deposits
Over the past year, Alkane continued its extensive exploration program focused on the immediate area to the south of the
TGO mine, with the objective of sourcing additional ore feed for the processing plant, either at surface or underground.
In July 2019 the Company defined an Exploration Target across the three primary prospects – Roswell, El Paso and San
Antonio. An intensive resource drilling program followed for the balance of the financial year, focused on increasing the
drilling density within the Roswell and San Antonio prospects, as well as testing strike extensions. The initial Inferred
Resource for the Roswell deposit was announced on 28 January 2020 and for the San Antonio deposit 20 April 2020, both in
accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2012).
Roswell and San Antonio Mineral Resources (as at 30 June 2020)
Deposit
Resource Category
Cut-off
Tonnes
(Mt)
Gold grade
(g/t)
Gold metal (koz)
Inferred
Inferred
0.5g/t Au
0.5g/t Au
Inferred
0.5g/t Au
7.02
7.92
14.94
1.97
1.78
1.87
445
453
898
Roswell
San Antonio
TOTAL
14
| Alkane Resources Annual Report 2020
BUSINESS REVIEW | EXPLORATION
The Mineral Resource estimates were initially completed in January and April 2020, so the Mineral Resources as at June 2019
were nil.
Further infill and extension drilling continued on both deposits to define the continuity of the mineralisation to the north and
higher-grade zones at depth, as well as facilitate definition of Indicated and Measured Resources. To 30 June 2020, 288 holes
had been drilled for a total of 69,424 metres. This largely completed the Roswell infill drilling, and modelling commenced to
define Indicated Resources within the initial Inferred Resource envelope. Updated resource calculations for Roswell and San
Antonio are anticipated to be released in the December quarter of 2020. Drilling also continued further south around the El
Paso deposit during the reporting period.
Three-dimensional models of the Roswell and Antonio Resources.
15
Alkane Resources Annual Report 2020 | BUSINESS REVIEW | EXPLORATION
6 3 95 0 0 0m N
t
s
u
r
h
T
s
e
k
r
a
P
B
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Tomingley
P a to n s
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T O M IN G LE Y G O LD O P E R A T IO N S
- O p e n C u t P ro d uc tio n 3 9 4, 0 00 o z
- O p e n C u t R e so ur ce is 2 3 8, 0 00 o z
- U /G R e so u rce 3 7 2, 0 00 o z
M Y A LLS U NI T E D
- H isto ric P ro d uc tio n ~ 6 2, 0 0 0o z
M c L e a n s
R O S W E LL
- R e so u rce 4 45 ,0 0 0 oz
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Road
S A N A N T O N IO
- R e so u rce 4 5 3 ,0 0 0 oz
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M o n zo d io rite sill
V o lca n icla stic se di m e nt s
F e ld sp a r p hy ric A n de site (e le va te d P )
F e ld sp a r p hy ric A n de site
A n de site
M in er a lis a tio n
0
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T
o
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s
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h
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S m ith s
E L 5 6 75
6 3 85 0 0 0m N
Barrabadeen
Jo u n a m a
l
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e
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e
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B arra b a d e e n
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?
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re
e
k
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P E A K H ILL G O LD M IN E
- H isto ric P ro d uc tio n ~ 7 0, 0 00 o z
- O p e n C u t P ro d uc tio n 1 5 3 ,0 0 0 oz
- U /G R e so u rce 1 0 8 ,0 0 0o z
Peak Hill
Em000016
Em000516
Map of the gold corridor between Tomingley and Peak Hill.
16
| Alkane Resources Annual Report 2020
Northern Molong Porphyry Project
(gold-copper)
Alkane Resources Ltd 100%
Encompassing four exploration licences (Bodangora, Boda
South, Kaiser and Finns Crossing), the Northern Molong
Porphyry Project covers an area of 115 square kilometres,
centred about 20 kilometres north of Wellington and about
35 kilometres east of Dubbo. (Alkane acquired the fourth
‘one block’ Boda South exploration licence from Impact
Resources in 2019, extending the Boda target corridor
about 1.8 kilometres to the south.)
The project covers a section of the northern Molong
Volcanic Belt, which is highly prospective for large-scale
porphyry gold-copper deposits similar to the Cadia Valley
deposits near Orange. Alkane’s exploration activity over the
Boda prospect
The Boda prospect is positioned at the western margin of
the Boda Intrusive Complex. A drilling program undertaken
during May-August 2019 included one diamond core
hole (KSDD003) at Boda, drilled to test the depth of gold
mineralisation identified in 2016 RC drilling. The assay
results of KSDD003 indicated an increase in thickness and
grade of porphyry gold-copper mineralisation at depth.
This led to a drilling program comprising five additional
diamond core holes to test the north-south strike and
depth extensions of the mineralisation, and the discovery
of significant high-grade gold and copper mineralisation
in KSDD007 (which included 96.8m @ 3.97g/t gold, 1.52%
copper from 768m – see table on the next page).
The results of the six diamond core holes have been
modelled* to indicate a subvertical elliptical zone of
significant gold-copper mineralisation of about 500 metres
strike length, 400 metres wide and more than 1100 metres
vertically (ASX announcement 19 May 2020). The model
further suggests a high-grade pod with approximate
dimensions of 150 metres long, 100 metres wide and more
than 500 metres vertically. The mineralisation is open to
the north, south and at depth, making Boda a genuine
prospect for a large tonnage gold-copper alkalic porphyry
development. (The model’s AuEq cut-off was used to assist
in the visualisation of a mineralised envelope and is not an
estimation of a Mineral Resource envelope.)
BUSINESS REVIEW | EXPLORATION
past several years has established a geological framework
for the project area and demonstrated the existence of
stratigraphic and intrusive rock sequences very similar
to that at Cadia. The work also shows that gold-copper
mineralisation is hosted by very similar rock types at similar
stratigraphic positions – notably the margins of major
magnetic/intrusive complexes.
Alkane has a number of exploration prospects located at
the intersections of five identified magnetic complexes
(Kaiser, Boda, Comobella, Driell Creek and Finns Crossing)
within a 15-kilometre northwest trending corridor.
Preliminary 3D model of the Boda mineralised envelope with
high-grade core.
* The drilling results were modelled using a +0.2g/t AuEq cut-off (for the mineralisation envelope) and +3.0g/t AuEq cut-off (high-grade
pod). The calculation formula is AuEq(g/t) = Au(g/t) + Cu%/100 X 31.1035 X CuPrice($/t)/AuPrice($/oz).
The prices used were US$1,550/oz gold and US$5,000/t copper.
17
Alkane Resources Annual Report 2020 |
BUSINESS REVIEW | EXPLORATION
In the coming year, Alkane is undertaking a drilling program to test the controls and dimensions to the high-grade pod
and extensions to the large low-grade mineralised envelope. This major RC and diamond core drilling program, totalling
approximately 30,000 metres, commenced in July 2020.
To aid further discoveries in the Boda region, Alkane completed a 70-line kilometre 3D induced polarisation (IP) geophysical
survey over the six-kilometre strike extensions of the Boda Intrusive Complex. This identified five anomalies that may
represent alteration associated with new porphyry intrusion centres. The 3D-IP survey results will be confirmed with
geological field mapping, and tested for additional porphyry systems when drilling at Boda recommences.
Boda diamond hole intercepts
KSDD003 (770.8m)
KSDD005 (1539.6m)
KSDD006 (1092.8m)
KSDD007 (1392.9m)
KSDD008 (1035.8m)
KSDD009 (885.9m)
507m @ 0.48g/t gold, 0.20% copper from 211m;
including 313m @ 0.62g/t gold, 0.17% copper from 228m;
which includes 108m @ 1.06g/t gold, 0.41% copper from 408m
ASX Announcement 9 September 2019
689m @ 0.46g/t gold, 0.19% copper from 402m;
including 312m @ 0.70g/t gold, 0.19% copper from 402m;
which includes 119m @ 1.47g/t gold, 0.29% copper from 463m
ASX Announcement 13 February 2020
267m @ 0.29g/t gold from 268m;
AND 341m @ 0.20g/t gold, 0.21% copper from 607m;
which includes 12m @ 0.39g/t gold, 0.32% copper from 607m;
and 14m @ 0.56g/t gold, 0.54% copper from 934m
ASX Announcement 23 March 2020
1,167m @ 0.55g/t gold, 0.25% copper from 75m;
including 512m @ 1.00g/t gold, 0.44% copper from 688m;
which includes 376m @ 1.30g/t gold, 0.56% copper from 768m;
which includes 96.8m @ 3.97g/t gold, 1.52% copper from 768m
ASX Announcement 23 March 2020
965.7m @ 0.21g/t gold, 0.11% copper from 7.3m;
including 153m @ 0.40g/t gold, 0.13% copper from 480m;
which includes 29m @ 0.99g/t gold, 0.22% copper from 548m
ASX Announcement 22 April 2020
152.1m grading 0.18g/t gold, 0.12% copper from 692m;
including 19.0m grading 0.82g/t gold, 0.25% copper from 692m;
and 28.0m grading 0.30g/t gold, 0.13% copper from 418m
ASX Announcement 19 May 2020
Exploration drilling at the Boda prospect
18
| Alkane Resources Annual Report 2020
BUSINESS REVIEW | EXPLORATION
Geological drilling map, showing diamond holes KSDD003 to 009 at the Boda prospect.
19
Alkane Resources Annual Report 2020 | BUSINESS REVIEW | EXPLORATION
Other projects
Due to the extensive effort on the Tomingley Gold and Northern Molong Porphyry Projects, exploration activity on other
projects was largely limited to data review for target definition. An aeromagnetic survey was completed over the Glen Isla and
Gundong tenements and an induced polarisation (IP) survey was undertaken at Glen Isla.
N
148°00' E
150°00' E
W
E
S
Tritton
Nyngan
Central West of
NSW
inset
Sydney
0
100
kilometres
Trangie
Tottenham
Dubbo
32°00' S
Mineral Hill
TGO
Peak Hill
Northparkes
Sunrise
Tomingley
Parkes
Armstrongs
Forbes
Cowal
West
Wyalong
34°00' S
North Molong
Porphyry Project
Wellington
Burrendong
Dam
Mt
Conqueror
Orange
Cudal
Bathurst
Cadia Valley
McPhillamys
Rockley
To Sydney
Elsienora
C e n t r a l W e s t R e g i o n
N e w S o u t h W a l e s
P r o s p e c t L o c a t i o n s
The Alkane Group’s projects and operations are primarily located in the vicinity of Dubbo in
Central Western New South Wales.
20
| Alkane Resources Annual Report 2020
BUSINESS REVIEW | INTEGRITY
Integrity
Alkane strives to deliver strong environmental and social performance, with
the aim of leaving a lasting positive legacy for both local communities and the
environment. The Company is committed to providing a safe and rewarding
working environment for employees.
Environmental Management
Rehabilitated waste rock emplacement at TGO
Alkane’s exploration, mining, processing and rehabilitation
activities are carefully designed with the smallest practical
environmental footprint in mind. The Company also
focuses on protecting, nurturing and enhancing local
biodiversity, as well as progressive land rehabilitation
to ensure sites are returned to stable and productive
ecosystems once mining is finished.
Project biodiversity offset areas are protected by binding
Conservation Property Vegetation Plans, signed in
agreement with regional Local Land Services organisations.
Activities include re-vegetation and protection of native
species from introduced predators. At Peak Hill Gold Mine,
the Company’s rehabilitation efforts have resulted in an
increasingly species-rich site, with several native bird and
mammal species, not present pre-mining, now thriving.
Community
Alkane actively supports the communities in which it
operates through regular communications about activities,
support of local businesses, provision of training and career
opportunities, and sponsorship of local infrastructure
projects and events. The Company is most active in the
Narromine Shire, Parkes Shire and Dubbo Regional Council
local government areas in Central Western New South
Wales.
Alkane Resources Annual Report 2020 |
21
BUSINESS REVIEW | INTEGRITY
Employees
Risk Management
Alkane is committed to employing members of the local
community where possible, with most employees living
locally. Personnel are distributed across several office
locations and operations across Central Western New
South Wales (Orange, Dubbo, Peak Hill and Tomingley),
Sydney and Perth. The largest concentration of employees
is at Tomingley Gold Operations.
Alkane’s risk management policy (including framework and
registers) is managed by the Risk Management Coordinator
and subject to formal approval of policy amendments by
the Risk Management Committee and the Board. Details of
the Company’s Risk Management process and plans can be
found on the Company’s website.
Environment and WHS
Alkane complies with all laws and regulations in relation
to the environment and work health and safety (WHS).
The Company strives for continuous improvement of
its standards for Tomingley Gold Operations, the Peak
Hill Gold Mine decommissioning and closure, and for
ongoing exploration and mine development. Details of the
Company’s Environment and WHS performance can be
found on the Company’s website.
22
| Alkane Resources Annual Report 2020
FINANCIAL
REPORT
Photo credit: Mitchell Services
23
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | DIRECTOR'S REPORT - DIRECTORS
Directors' Report
The Directors present their report, together with the financial statements, on
the consolidated entity (referred to hereafter as the 'consolidated entity' or
the 'Group') consisting of Alkane Resources Ltd (referred to hereafter as the
'Company' or 'parent entity') and the entities it controlled at the end of, or
during, the year ended 30 June 2020.
Directors and Company Secretary
The following persons were directors of Alkane Resources Ltd (Alkane) during the whole of the financial year and up to the
date of this report, unless otherwise stated:
I J Gandel
N P Earner
D I Chalmers
A D Lethlean
G M Smith
The Board continues its efforts to seek to appoint additional independent members who will bring complementary skill sets
and diversity to the Group's leadership.
Information on Directors
Ian Jeffrey Gandel – Non-Executive Chairman
LLB, BEc, FCPA, FAICD
Appointed Director 24 July 2006 and Chairman 1 September 2017.
Mr Gandel is a successful Melbourne-based businessman with extensive experience in retail management and retail property.
He has been a director of the Gandel Retail Trust and has had an involvement in the construction and leasing of Gandel
shopping centres. He has previously been involved in the Priceline retail chain and the CEO chain of serviced offices.
Mr Gandel has been an investor in the mining industry since 1994. Mr Gandel is currently a substantial holder in a number
of publicly listed Australian companies and, through his private investment vehicles, now holds and explores tenements in
his own right in Western Australia. Mr Gandel is currently non-executive chairman of Alliance Resources Ltd (appointed as a
director on 15 October 2003 and in June 2016 was appointed non-executive chairman). Mr Gandel is currently non-executive
chairman of Australian Strategic Materials Limited (appointed 18 March 2014). (This company was demerged from the
Group effective 16 July 2020 and was admitted to the ASX on 29 July 2020.) He is also non-executive chairman of Octagonal
Resources Ltd (appointed 10 November 2010). (This company sought delisting from the ASX in February 2016 and converted
to Pty Ltd status in April 2016.)
Mr Gandel is a member of the Audit Committee and Chairman of the Remuneration and Nomination Committees.
24
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | DIRECTOR'S REPORT - DIRECTORS
Nicolas Paul Earner – Managing Director
BEng (hons)
Appointed Managing Director 1 September 2017.
Mr Earner is a chemical engineer and a graduate of the University of Queensland with over 25 years' experience in technical
and operational optimisation and management, and has held a number of executive roles in mining and processing.
Mr Earner joined Alkane Resources Ltd as Chief Operations Officer in August 2013 with responsibility for the safe and efficient
management of the Company's operations at Tomingley Gold Operations (TGO) and Dubbo (Dubbo Project). Under his
supervision, the successful development of TGO transitioned to profitable and efficient operations. His guidance also drives
the engineering and metallurgical aspects of the Dubbo Project, overseeing optimisation of plant design and product and
marketing development.
Prior to his appointment as the Group's Chief Operations Officer in August 2013, he spent four years at Straits Resources
Ltd, including two years as executive general manager – operations, supervising up to 1,000 employees in open cut and
underground gold mines and an underground copper mine. During the 11 years before that, he had various roles at Rio Tinto
Coal Australia's Mount Thorley Warkworth coal mine and BHP/WMC Olympic Dam copper-uranium-gold operations. His
eight years at Olympic Dam included roles managing the Concentrator and Hydromet functions, which included substantial
milling, leaching and solvent extraction circuits. His other positions included production superintendent – Smelting and senior
engineer – process control, instrumentation and communications.
Mr Earner is currently a non-executive director of Genesis Minerals Limited (appointed 24 October 2019) and Australian
Strategic Materials Limited (appointed 1 September 2017). (The latter company was demerged from the Group effective 16
July 2020 and listed on the ASX on 29 July 2020.)
David Ian Chalmers – Technical Director
MSc, FAusIMM, FAIG, FIMM, FSEG, MSGA, MGSA, FAICD
Appointed Technical Director 1 September 2017. Resigned as Managing Director 31 August 2017.
Mr Chalmers, Alkane Resources Ltd's Technical Director, is a geologist and graduate of the Western Australia Institute of
Technology (Curtin University) and has a Master of Science degree from the University of Leicester in the United Kingdom.
He has worked in the mining and exploration industry for over 50 years, during which time he has had experience in all
facets of exploration and mining through feasibility and development to the production phase. Mr Chalmers was Technical
Director of Alkane until his appointment as Managing Director in 2006, overseeing the Group's minerals exploration efforts
across Australia and the development and operations of the Peak Hill Gold Mine (NSW). During his time as chief executive
he steered Alkane through the discovery, feasibility, construction and development of the now fully operational Tomingley
Gold Operations; the discovery and ultimate sale of the McPhillamys gold deposit; the recent discovery of the gold deposits
immediately south of Tomingley and the porphyry gold-copper discovery at Boda. Mr Chalmers also managed the process
development and global marketing effort for the Dubbo Project, advancing it to the threshold of development.
Mr Chalmers is currently a non-executive director of Australian Strategic Materials Limited (appointed 18 March 2014). (This
company was demerged from the Group effective 16 July 2020 and was admitted to the ASX on 29 July 2020.)
Mr Chalmers is a member of the Nomination Committee.
25
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | DIRECTOR'S REPORT - DIRECTORS
Anthony Dean Lethlean – Non-Executive Director
BAppSc (Geology)
Appointed Director 30 May 2002.
Mr Lethlean is a geologist with over 10 years’ mining experience, including four years underground on the Golden Mile in
Kalgoorlie. In later years, he has worked as a resource analyst with various stockbrokers and investment banks, including CIBC
World Markets. He was a founding director of Helmsec Global Capital Limited which seeded, listed and funded a number of
companies in a range of commodities. He retired from the Helmsec group in 2014. He is also a director of corporate advisory
Rawson Lewis and a non-executive director of Alliance Resources Ltd (appointed 15 October 2003).
Mr Lethlean is the senior independent Director, Chairman of the Audit Committee and a member of the Remuneration and
Nomination Committees.
Gavin Murray Smith – Non-Executive Director
B.Com, MBA, MAICD
Appointed Director 29 November 2017.
Mr Smith is an accomplished senior executive and non-executive director within multinational business environments. He
has more than 35 years' experience in Information Technology, Business Development, and General Management in a wide
range of industries and sectors. Mr Smith has worked for the Bosch group for the past 29 years in Australia and Germany and
is current chair and president of Robert Bosch Australia. In this role Mr Smith has led the restructuring and transformation
of the local Bosch subsidiary. Concurrent with this role, he is a non-executive director of the various Bosch subsidiaries, joint
ventures, and direct investment companies in Australia and New Zealand. In addition, Mr Smith is the chair of the Internet of
Things Alliance Australia (IoTAA), the peak body for organisations with an interest in the IoT.
Mr Smith is currently a non-executive director of Australian Strategic Materials Limited (appointed 12 December 2017). (This
company was demerged from the Group effective 16 July 2020 and was admitted to the ASX on 29 July 2020.)
Mr Smith is a member of the Audit Committee, Remuneration and Nomination Committees.
Dennis Wilkins – Joint Company Secretary
B.Bus, ACIS, AICD
Appointed Company Secretary 29 March 2018.
Mr Wilkins is the founder and principal of DWCorporate Pty Ltd, a corporate advisory firm servicing the natural resources
industry.
Since 1994 he has been a director of, and involved in the executive management of, several publicly listed resource companies
with operations in Australia, PNG, Scandinavia and Africa. Since July 2001, Mr Wilkins has been running DWCorporate Pty Ltd,
where he advises on the formation of, and capital raising for, emerging companies in the Australian resources sector.
Mr Wilkins is currently a director of Key Petroleum Limited.
James Carter – Joint Company Secretary
Appointed Company Secretary 20 May 2020.
Mr Carter is a CPA and Chartered Company Secretary with over 20 years’ international experience in the resources industry.
He has held senior finance positions across listed resources companies since 2001.
26
| Alkane Resources Annual Report 2020
FFINANCIAL REPORT | DIRECTOR'S REPORT - PRINCIPAL ACTIVITIES
Principal activities
During the financial year the principal activities of the consolidated entity consisted of:
● mining operations at the Tomingley Gold Operations;
● evaluation activities in relation to the Dubbo Project and demerger of the ASM business;
● exploration and evaluation activities on tenements held by the Group; and
● pursuing strategic investments in gold exploration companies.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Result for the year
The profit for the consolidated entity after providing for income tax amounted to $12,762,000 (30 June 2019: $23,293,000).
This result included a profit before tax of $30,362,000 (30 June 2019: $31,930,000) in relation to Tomingley Gold Operations.
Review of operations
Tomingley Gold Operations (TGO)
The gold operations at Tomingley are located approximately 50 kilometres southwest of Dubbo in the central west of NSW.
The gold processing plant was commissioned in January 2014 and has been operating at the design capacity of 1Mtpa since
late May 2014. Mining is based on four gold deposits (Wyoming One, Wyoming Three, Caloma One and Caloma Two).
TGO continues to perform well and is processing underground stope material with recovery as expected. The ore feed
is supplemented by low grade stockpiles whenever capacity permits. TGO continues to maintain high vigilance around
COVID-19.
Gold recovery of 88.1% for the period was in line with the expectations of processing lower grade stockpiles (2019: 91.7%).
Average grade milled declined to 1.45g/t in the current year as a result of processing both medium and low grade stockpiles
as the operation transitions from open cut to underground.
Production for the period was 33,507 ounces of gold (2019: 48,969 ounces of gold) with all in sustaining costs of $1,357 per
ounce (2019: $947 per ounce). The average sales price achieved for the period increased to $2,199 per ounce (2019: $1,777
per ounce). Gold sales of 32,995 ounces (2019: 52,068 ounces) resulted in sales revenue of $72,549,000 (2019: $92,513,000).
Bullion on hand increased by 504 ounces from 30 June 2019 to 2,231 ounces (fair value of $5,776,000 at period end).
Alkane has commenced the approval process for the Roswell and San Antonio development deposits located to the
immediate south of TGO. Consultations with regulators, landholders and other stakeholders, as well as on-ground
assessments needed for the Environmental Impact Statement, are underway.
Purchasing of an additional underground fleet has occurred, as well as a farm property to the immediate south of Tomingley.
27
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | DIRECTOR'S REPORT - REVIEW OF OPERATIONS
The table below summarises the key operational information:
TGO Production
Unit
September
Quarter
2019
December
Quarter
2019
March
Quarter
2020
June
Quarter
2020
FY
2020
FY
2019
Waste mined
Ore mined
Ore mined
Stripping Ratio
Grade mined (2)
Ore milled
Head grade
Gold recovery
Gold poured (3)
Revenue summary
Gold sold
Average price realised
Gold revenue
Cost Summary
Surface works
Underground
Processing
Site support
C1 Cash Cost (1)
Royalties
Sustaining capital
Rehabilitation
Corporate
All-in Sustaining Cost (1)
Bullion on hand
Stockpiles
BCM's
BCM's
Tonnes
Ratio
g/t
-
-
-
-
-
-
50,473
5,331
50,473
5,331
26,392
50,612
107,060
151,815
335,879
-
1.73
-
2.36
-
1.94
9.50
2.79
9.50
2.37
657,647
146,368
400,186
4.50
1.68
Tonnes
289,282
231,493
113,699
204,269
838,743
998,703
g/t
%
Ounces
Ounces
A$/oz
A$000's
A$/oz
A$/oz
A$/oz
A$/oz
A$/oz
A$/oz
A$/oz
A$/oz
A$/oz
A$/oz
Ounces
0.96
87.40
7,497
6,997
2,151
1.21
88.60
6,929
9,143
2,084
15,048
19,050
31
-
768
201
44
-
749
231
1,000
1,024
47
70
30
122
1,268
2,226
38
228
26
125
1,441
10
1.83
85.90
5,723
3,864
2,126
8,215
20
499
365
110
995
48
262
14
28
2.20
89.20
1.45
88.10
1.66
91.70
13,358
33,507
48,969
12,992
2,327
30,236
32,995
2,199
72,549
52,068
1,777
92,513
77
468
320
116
981
74
245
29
39
50
272
517
158
997
56
205
26
73
254
-
401
93
749
49
42
52
55
1,346
1,868
1,368
2,231
1,357
2,231
947
1,727
Ore for immediate milling
Tonnes
430,227
275,733
261,445
207,414
207,414
677,029
Stockpile grade (2)
Contained gold
g/t
Ounces
0.77
10,583
0.75
6,655
0.76
6,370
0.83
5,566
0.83
5,566
0.71
15,368
(1) All in Sustaining Cost (AISC) comprises all site operating costs, royalties, mine exploration, sustaining capex, mine development and an
allocation of corporate costs on the basis of ounces produced. AISC does not include share based payments or net realisable value
provision for product inventory.
(2) Based on the resource models.
(3) Represents gold poured at site, not adjusted for refining adjustments which results in minor differences between the movements in
bullion on hand and the difference between production and sales.
28
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | DIRECTOR'S REPORT - REVIEW OF OPERATIONS
Dubbo Project
The Dubbo Project remains construction ready, with the mineral deposit and surrounding land wholly owned, all material
state and federal approvals in place, an established flowsheet and a solid business case.
Alkane's shareholders approved the demerger of Australian Strategic Materials Limited (ASM), with relevant resolutions
tabled at the Extraordinary General Meeting (EGM) passed on 16th July 2020.
ASM continues the execution of its integrated business plan for the Dubbo Project, which aims to deliver value-adding clean
metals, and the optimisation of the June 2018 FEED Study, with flotation testwork currently being advanced with a view to
inserting a flotation circuit to the Dubbo Project design, targeting lower overall capital and operating costs.
During the year RMR Tech Corporation (RMR), which is a joint venture investment by ASM, completed the construction and
commissioning of the commercial pilot plant in Daejeon, South Korea. The plant, designed to produce low emission, high-
purity metals, was completed on time and budget. Initially the joint venture with RMR is focused on metal production of
zirconium, titanium and rare earths for permanent magnet alloys.
Exploration
The extensive exploration program focused on the immediate area to the south of the TGO mine has continued as part of the
plan to source additional ore feed, either at surface or underground. During the year the program continued to focus on both
increasing the drilling density within the Roswell and San Antonio prospects as well as testing strike and depth extensions.
Roswell infill drilling is largely complete and modelling will commence to enable definition of Indicated Resource. Deeper core
drilling is proceeding to determine continuity of the mineralisation at depth to confirm the longer term underground mining
potential.
At San Antonio, infill drilling within the initial Inferred Resource is proceeding. Approximately 7,500 metres of the infill
program remain to be completed to expedite compilation of an Indicated Resource for this deposit.
Regional drilling of the San Antonio to Peak Hill corridor focused on stratigraphy south of the El Paso target where earlier
exploration had returned encouraging results.
The metallurgical program continued and was focused on various leaching tests to recover gold from recently generated
flotation concentrate from the sulphide mineralisation. Final results are anticipated in the first quarter of FY21.
The Company has also maintained a focused multi-commodity exploration program in the central west of NSW.
Northern Molong Porphyry Project (gold-copper)
Initial drill testing of the Boda prospect was completed during the year and results demonstrated continuity to the south of
the broad gold-copper mineralised alteration envelope.
A major RC and diamond core drilling program totalling approximately 30,000 metres has commenced. This program will test
the controls and dimensions to the high-grade pod and extensions to the large low grade mineralised envelope.
Corporate
The Alkane Board resolved to progress with the demerger transaction to separately list Australian Strategic Materials Limited
(ASM) on the Australian Securities Exchange (ASX). The shareholder approval and ASX approval for listing was obtained in July
2020. The demerger was implemented and ASM was admitted to the ASX on 29 July 2020.
29
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | DIRECTOR'S REPORT - SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant changes in the state of affairs
During November 2019, the Group announced a capital placement and a one for eight share entitlement issue raising
$40,665,000 (before costs) to fund an accelerated exploration and development program in the Tomingley corridor (NSW) in
2020.
During the year Alkane executed a subscription and an underwriting agreement with Genesis Minerals Ltd (Genesis) to invest
up to a further $6,000,000 in Genesis. Alkane's holding in Genesis at 30 June 2020 is 15.5% of their share capital. Alkane was
a sub-underwriter in the rights issue component of that fundraising and as result has potential to own 19.9% of Genesis on
completion of the rights issue. The investment is consistent with Alkane's strategic objective to grow its gold business, both
organically through its Tomingley gold operations in NSW, and through investment in junior Australian gold companies with
projects that meet Alkane's investment criteria.
In June 2019, Australian Strategic Materials Ltd executed a binding agreement with Zirconium Technology Corporation (Ziron
Tech) (a South Korean Company) to fund the final stage of research and feasibility into a clean process for converting metal
oxide, including Dubbo Project metals, to metals of a highly marketable purity. Several conditions precedent that remained
outstanding at 30 June 2019 were satisfied in July 2019, and an investment of US$1.2m has been made for the final stage of
research which will include construction of a commercial scale equipment unit for testing.
In early 2020 with the outbreak of Coronavirus Disease 2019 ('COVID-19' or 'the coronavirus'), unprecedented measures
put in place by the Australian Government, as well as governments across the globe, to contain the coronavirus have had a
significant impact on the economy. Management continues to consider the potential implications of coronavirus, which may
include delaying the construction and commissioning of the pilot modification plant for the Dubbo Project, and other Dubbo
Project optimisation work in progress focused on further improving the project economics. As at the date these financial
statements were authorised, Management was not aware of any material adverse effects on the financial statements as a
result of the coronavirus.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
Matters subsequent to the end of the financial year
In July 2020, ASM was demerged with its cash reserves and no bank debt. Net assets equating to $112,973,000 at 30 June
2020 have been demerged at 29 July 2020. All interests in the Dubbo Project and associated assets (including land and water
rights), together with ASM’s investment in South Korean metals technology company RMR Tech Corporation (subsidiary of
Ziron Tech), will be 100% owned by ASM following the demerger. ASM will have a focused Board and management team, a
strategy to pursue the advancement of the 'Clean Metal' metallisation technology, potential value-enhancing opportunities
in relation to the Dubbo Project, and will continue to be involved in offtake and financing discussions, including those already
underway in relation to the Dubbo Project.
Following the demerger, Alkane will be an Australian focused gold company, with existing production from its Tomingley
operations and the opportunity to grow its production base through organic exploration and discovery (including the Boda
discovery) and through further strategic acquisitions.
As at the date of the shareholder meeting to vote on the demerger on 16 July 2020, Alkane had 580,033,307 ordinary shares
on issue. Following the approval of the early vesting of the Alkane Performance Rights, the number of ordinary shares on
issue in Alkane will be 595,248,891, immediately following the demerger, and Alkane will have a capital structure as follows:
30
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | DIRECTOR'S REPORT - LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Capital structure
Alkane shares on issue
Alkane Performance Rights
Pre-demerger
Number
Post-demerger
Number
530,033,307
595,248,891
22,329,762
3,173,638
On 17 July 2020, Alkane Resources Ltd, and Australian Strategic Materials Ltd entered into a restructure deed as part of the
demerger to capitalise $113,000,000 and forgive $4,730,991 of the related party loans to Australian Strategic Materials Ltd.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect, the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
Likely developments and expected results of operations
The Group's shareholders approved the demerger of Australian Strategic Materials Limited (ASM). ASM continues the
execution of its integrated business plan for the Dubbo Project, which aims to deliver value-adding clean metals, and the
optimisation of the June 2018 FEED Study, with flotation testwork currently being advanced with a view to inserting a
flotation circuit to the Dubbo Project design, targeting lower overall capital and operating costs.
The Group intends to continue efforts at TGO to be focused on development of the underground mine, and exploration and
evaluation of several of its other tenements to secure additional ore feed. Exploration and evaluation activities will continue
on existing tenements and opportunities to expand the Group's tenement portfolio will be pursued with a view to ensuring
there is a pipeline of development opportunities for consideration.
Refer to the Review of Operations for further detail on planned developments.
Environmental regulation
The Group is subject to significant environmental regulation in respect of its exploration and evaluation, development and
mining activities.
The Group aspires to the highest standards of environmental management and insists its staff and contractors maintain
that standard. A significant environmental incident is considered to be one that causes a major impact or impacts to land
biodiversity, ecosystem services, water resources or air, with effects lasting greater than one year. There were no significant
environmental incidents reported at any of the Group's operations.
Meetings of Directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the year
ended 30 June 2020, and the number of meetings attended by each Director were:
31
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | DIRECTOR'S REPORT - MEETINGS OF DIRECTORS
Full meetings of
directors
Meetings of committees
Audit
Nomination
Remuneration
Risk
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
I J Gandel
A D Lethlean
D I Chalmers
G M Smith
N P Earner
16
16
16
16
16
16
16
16
16
16
4
4
4
4
1
1
4*
4*
1
4
4
1
1
1
1
1
1
1
1
1
2*
2*
2
2
1*
1*
1
1
2*
2*
2*
2*
4*
4*
1*
1*
1*
1*
2
2
Held: represents the number of meetings held during the time the Director held office or was a member of the committee during the year.
*Not a member of this committee. Non-members may attend the relevant committee meetings by invitation.
Remuneration report
The Directors are pleased to present Alkane Resources Ltd's remuneration report, which sets out remuneration information
for the company's Non-Executive Directors, Executive Directors and other Key Management Personnel ('KMP').
The report contains the following sections:
(a) Key Management Personnel disclosed in this report
(b) Remuneration governance
(c) Use of remuneration consultants
(d) Executive remuneration policy and framework
(e)
Statutory performance indicators
(f) Non-Executive Director remuneration policy
(g) Voting and comments made at the company's 2019 Annual General Meeting
(h) Details of remuneration
(i)
Service agreements
(j) Details of share-based payments and performance against key metrics
(k)
Shareholdings and share rights held by Key Management Personnel
(l) Other transactions with Key Management Personnel
(a) Key Management Personnel disclosed in this report
Non-Executive and Executive Directors
I J Gandel
N P Earner
D I Chalmers
A D Lethlean
G M Smith
32
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
Other Key Management Personnel
J Carter
D Woodall (appointed 12 February 2020) Managing Director – Australian Strategic Materials
A MacDonald
D Wilkins
General Manager – Marketing
Joint Company Secretary
Chief Financial Officer / Joint Company Secretary
(b) Remuneration governance
The Company has established a Remuneration Committee to assist the Board in fulfilling its corporate governance
responsibilities with respect to remuneration by reviewing and making appropriate recommendations to the Board on:
● the overall remuneration strategy and framework for the Company;
● the operation of the incentive plans which apply to the executive team, including the appropriateness of key performance
indicators and performance hurdles; and
● the assessment of performance and remuneration of the Executive Directors, Non-Executive Directors and other Key
Management Personnel.
The Remuneration Committee is a committee of the Board and at the date of this report the members were independent
Non-Executive Directors and included I J Gandel, A D Lethlean and G M Smith.
Their objective is to ensure that remuneration policies and structures are fair, competitive and aligned with the long-term
interests of the Company and its shareholders.
The Company's annual Corporate Governance Statement provides further information on the role of this Committee, and the
full statement is available at URL: http://www.alkane.com.au/company/governance.
(c) Use of remuneration consultants
No remuneration consultants were engaged in the financial year to provide remuneration advice.
(d) Executive remuneration policy and framework
In determining executive remuneration, the Board (or the Remuneration Committee as its delegate) aims to ensure that
remuneration practices:
● are competitive and reasonable, enabling the Company to attract and retain key talent while building a diverse,
sustainable and high achieving workforce;
● are aligned to the Company’s strategic and business objectives and the creation of shareholder value;
● promote a high performance culture recognising that leadership at all levels is a critical element in this regard;
● are transparent; and
● are acceptable to shareholders.
33
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
The executive remuneration framework has three components:
● Total Fixed Remuneration (TFR);
● Short-Term Incentives (STI); and
● Long-Term Incentives (LTI).
(i) Executive remuneration mix
The Company has in place executive incentive programs which provide the mechanism to place a material portion of
executive pay 'at risk'.
(ii) Total fixed remuneration
A review is conducted of remuneration for all employees and executives on an annual basis, or as required. The Remuneration
Committee is responsible for determining executive TFR.
(iii) Incentive arrangements
The Company may utilise both short-term and long-term incentive programs to balance the short and long-term aspects of
business performance, to reflect market practice, to attract and retain key talent and to ensure a strong alignment between
the incentive arrangements of executives and the creation and delivery of shareholder return.
Performance rights have been used in the current period to incentivise the Company’s executives and KMP. The performance
rights plan was approved by shareholders at the 2016 Annual General Meeting.
Long-term incentives
The LTI is designed to focus executives on delivering long-term shareholder returns. Eligibility for the plan is restricted to
executives and nominated senior managers, being the employees who are most able to influence shareholder value. Under
the plan, participants have an opportunity to earn up to 100% of their total fixed remuneration (calculated at the time of
approval by the Remuneration Committee) comprised of performance rights. Performance rights are granted in two tranches
each year. Each tranche of performance rights has separate vesting conditions being share price growth and company
milestone events, with the executives' LTI weighted more heavily to the share price growth tranche. The LTI vesting period is
three years.
The performance rights will be provided in the form of rights to ordinary shares in Alkane Resources Ltd that will vest at the
end of the three year vesting period provided the predefined targets are met. On vesting, the rights automatically convert
into one ordinary share each. Participants do not receive any dividends and are not entitled to vote in relation to the rights
to shares prior to the vesting period. If a participant ceases to be employed by the Group within this period, the rights will be
forfeited, except in limited circumstances that are approved by the Board on a case-by-case basis.
Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan.
Targets are generally reviewed annually and set for a forward three year period. Targets reflect factors such as the
expectations of the Group’s business plans, the stage of development of the Group’s projects and the industry business cycle.
The most appropriate target benchmark will be reviewed each year prior to the granting of rights.
The Remuneration Committee is responsible for determining the LTI to vest based on an assessment of whether the
predefined targets are met. To assist in this assessment, the committee receives detailed reports on performance
from management. The committee has the discretion to adjust LTI's downwards in light of unexpected or unintended
circumstances.
34
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
(iv) Clawback policy for incentives
Under the terms and conditions of the Company’s incentive plan offer and the plan rules, the Board (or the Remuneration
Committee as its delegate) has discretion to determine forfeiture of unvested equity awards in certain circumstances (e.g.
unlawful, fraudulent or dishonest behaviour or serious breach of obligations to the Company). All incentive offers and final
outcomes are subject to the full discretion of the Board (or the Remuneration Committee as its delegate).
(v) Share trading policy
The trading of shares issued to participants under any of the Company’s employee share plans is subject to, and conditional
upon, compliance with the Company’s employee share trading policy. Executives are prohibited from entering into any
hedging arrangements over unvested rights under the Company’s employee incentive plans. The Company would consider a
breach of this policy as gross misconduct which may lead to disciplinary action and potentially dismissal.
(e) Statutory performance indicators
The Company aims to align executive remuneration to the Company’s strategic and business objectives and the creation of
shareholder wealth. The table below shows measures of the Group’s financial performance over the last five years as required
by the Corporations Act 2001. However, these are not necessarily consistent with the specific measures in determining the
variable amounts of remuneration to be awarded to KMP. As a consequence, there may not always be a direct correlation
between the statutory key performance measures and the variable remuneration rewarded.
Revenue ($'000)
Profit/(loss) for the year attributable to owners ($'000)
Basic earnings /(loss) per share (cents)
Dividend payments ($'000)
Share price at period end (cents)
Total KMP incentives as a percentage of profit/(loss) for the year (%)
(f) Non-Executive Director remuneration policy
30 June
2020
30 June
2019
30 June
2018
30 June
2017
30 June
2016
74,397
12,762
95,852
23,293
2.40
-
1.21
8.3%
4.60
-
0.46
3.3%
129,974
117,792
109,624
24,471
(28,937)
4.80
-
0.23
3.0%
(5.80)
-
0.24
0.3%
4,695
1.10
-
0.20
3.0%
On appointment to the Board, all Non-Executive Directors enter into a service agreement with the Company in the form of a
letter of appointment. The letter summarises the Board policies and terms, including remuneration, relevant to the office of
Director.
Non-Executive Directors receive a Board fee and fees for chairing or participating on Board Committees. Non-Executive
Directors appointed do not receive retirement allowances. Fees provided are inclusive of superannuation and the Non-
Executive Directors do not receive performance-based pay.
Fees are reviewed annually by the Remuneration Committee taking into account comparable roles and market data obtained
from independent data providers. The base fees of Non-Executive Directors for the period ending 30 June 2020 were
increased on 1 July 2019 and prior to that had not changed since 1 January 2013.
The maximum annual aggregate Directors’ fee pool limit (inclusive of applicable superannuation) is $700,000 and was
approved by shareholders at the Annual General Meeting on 16 May 2013.
35
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
Details of Non-Executive Director fees in the year ended 30 June 2020 are as follows:
Base fees
Chair
Other Non-Executive Directors
Additional fees
Audit Committee – chair
Audit Committee – member
Remuneration Committee – chair
Remuneration Committee – member
$ per annum
129,400
77,600
7,800
5,200
7,800
5,200
For services in addition to ordinary services, Non-Executive Directors may charge per diem consulting fees at the rate
specified by the Board from time to time for a maximum of four days per month over a 12 month rolling basis. Any fees in
excess of this limit are to be approved by the Board.
(g) Voting and comments made at the Company's 2019 Annual General Meeting
The Company received more than 87% of 'yes' votes on its remuneration report for the last financial period ended 30 June
2019. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.
36
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
(h) Details of remuneration
The following table shows details of the remuneration expense recognised for the Directors and the KMP of the Group for the
current and previous financial year measured in accordance with the requirements of the accounting standards.
30 June 2020
Cash salary (a)
Fixed remuneration
Annual and long
service leave (b)
Post-
employment
benefits (c)
Variable
remuneration
Rights to
deferred shares
(d)
Total
Performance
related pay
$
$
$
$
$
%
Executive Directors
N P Earner
D I Chalmers
Other KMP
D Woodall (e)
A MacDonald
D Wilkins (f)
J Carter (e)
Total Executive
Directors and other
KMP
Total NED
remuneration (g)
Total KMP
remuneration
expense
484,142
244,645
121,180
359,136
309,049
345,000
28,214
29,443
10,720
15,566
-
17,792
23,058
19,255
11,512
23,023
-
25,000
748,241
1,283,655
90,312
383,655
-
104,770
-
119,548
143,412
502,495
309,049
507,340
1,863,152
101,735
101,848
1,062,871
3,129,606
300,419
-
20,589
-
321,008
2,163,571
101,735
122,437
1,062,871
3,450,614
58%
24%
0%
21%
0%
24%
34%
0%
31%
30 June 2019
Cash salary (a)
Fixed remuneration
Annual and long
service leave (b)
Post-
employment
benefits (c)
Variable
remuneration
Rights to
deferred shares
(d)
Total
Performance
related pay
$
$
$
$
$
%
Executive Directors
N P Earner
D I Chalmers
Other KMP
A MacDonald
D Wilkins (f)
J Carter (e)
Total Executive
Directors and other
KMP
Total NED
remuneration (g)
Total KMP
remuneration
expense
466,943
178,082
360,000
169,438
228,750
16,178
(10,775)
18,445
-
10,792
23,058
16,918
33,250
-
18,750
542,845
1,049,024
64,897
249,122
114,132
-
50,688
525,827
169,438
308,980
1,403,213
34,640
91,976
772,562
2,302,391
299,993
-
20,424
-
1,703,206
34,640
112,400
772,562
2,622,808
52%
26%
22%
0%
16%
34%
0%
29%
37
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
(a) Short-term benefits as per Corporations Regulation 2M.3.03(1) Item 6.
(b) Other long-term benefits as per Corporations Regulation 2M.3.03(1) Item 8. The amounts disclosed in this column represent the
movements in the associated provisions. They may be negative where a KMP has taken more leave than accrued during the year.
(c) Post-employment benefits are provided through superannuation contributions.
(d) Rights to deferred shares granted under the executive STI and LTI schemes are expensed over the performance period, which includes
the year to which the incentive relates and the subsequent vesting period of the rights.
Rights to deferred shares are equity-settled share-based payments as per the Corporations Regulations 2M.3.03(1) Item11. These
include negative amounts for the rights forfeited during the year.
Details of each grant of share right are provided in the table in section (j). Shareholder approval was received in advance to the grant
of share rights where required.
(e) J Carter was appointed Chief Financial Officer on 1 October 2018.
D Woodall was appointed Managing Director - Australian Strategic Materials Ltd on 12 February 2020.
(f) Company secretarial services were paid to DWCorporate Pty Ltd, a company associated with Mr Wilkins.
(g) Refer below for details of Non-Executive Directors' (NED) remuneration.
30 June 2020
Non-Executive Directors
I J Gandel
A D Lethlean
G M Smith
Total Non-Executive Directors
30 June 2019
Non-Executive Directors
I J Gandel (1)
A D Lethlean
G M Smith
Total Non-Executive Directors
Cash salary and
fees
$
Superannuation
$
Total
$
130,045
82,366
88,008
300,419
12,355
8,234
-
20,589
142,400
90,600
88,008
321,008
Cash salary and
fees
$
Superannuation
$
Total
$
135,084
79,909
85,000
299,993
12,833
7,591
-
20,424
147,917
87,500
85,000
320,417
(1) Remuneration details for I J Gandel include unpaid committee fees relating to the prior financial period. The amount of unpaid fees for
the period ending 30 June 2020 is nil (2019: $12,500)
38
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
The relative proportions of remuneration expense recognised during the year that are linked to performance and those that
are fixed are as follows:
Executive Directors of Alkane Resources Ltd
D I Chalmers
N P Earner
Other Key Management Personnel
D Woodall (1)
J Carter
A MacDonald
D Wilkins (2)
Fixed remuneration
At risk - LTI
2020
%
2019
%
2020
%
2019
%
76
42
100
76
79
100
74
48
-
84
78
100
24
58
-
24
21
-
26
52
-
16
22
-
(1) D Woodall was appointed Managing Director – Australian Strategic Materials Ltd on 12 February 2020.
(2) D Wilkins is not an employee of the Company and therefore not eligible to participate in incentive programs. Instead a fee for services
is paid as set out previously.
(i) Service agreements
Remuneration and other terms of employment for KMP are formalised in service agreements. Details of these agreements are
as follows:
Name and position
D I Chalmers
– Technical Director
N P Earner
– Managing Director
D Woodall
– Managing Director ASM
J Carter
– Chief Financial Officer
A MacDonald
– General Manager - Marketing
D Wilkins
– Company Secretary (3)
Term of agreement
TFR (1)
Termination payment (2)
On-going commencing
1 September 2017
On-going commencing
1 September 2017
On-going commencing
10 February 2020
On-going commencing
1 October 2018
On-going commencing
1 February 2017
On-going commencing
29 March 2018
$248,400
6 months
$507,200
see note 2 below
$375,000
$370,000
$384,900
3 months
3 months
6 months
see note 3 below
see note 3 below
(1) Total Fixed Remuneration (TFR) is for the year ended 30 June 2020 and is inclusive of superannuation but does not include long service
leave accruals. TFR is reviewed annually by the Remuneration Committee. Mr Chalmer's TFR represents his role as Technical Director
and does not include other Director fees.
(2) Specified termination payments are within the limits set by the Corporations Act 2001. The termination benefit provision for the
Managing Director was approved at the Annual General Meeting on 29 November 2017.
Mr Earner may resign with 3 months' notice; or
Alkane may terminate the Executive Employment agreement with 3 months' notice; or
Where Mr Earner resigns as a result of a material diminution in the position, Mr Earner will be entitled to payment in lieu of 12
months' notice and short-term incentives and long-term incentives granted or issued but not yet vested.
(3) Mr Wilkins' firm, DW Corporate Pty Ltd, is engaged to provide company secretarial and corporate advisory services. Fees are charged
on an hourly basis, and all amounts are disclosed in the remuneration table in section (h).
Mr Wilkins' agreement commenced 29 March 2018 until terminated in writing by either party, a four month notice period of
termination is required and no monies are payable consequent to termination.
39
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
(j) Details of share-based payments and performance against key metrics
Details of each grant of share rights affecting remuneration in the current or future reporting period are set out below.
Name
Date of grant
Number
of rights
granted
Fair value of
share rights
at date of
grant
$
Share rights
at fair value
$
Performance
period end
Share based
payment
expense
current year
$
Executive Directors
D I Chalmers
FY2018 LTI - Performance Rights
- Tranche 1
FY2018 LTI - Performance Rights
- Tranche 2
FY2019 LTI - Performance Rights
- Tranche 1
FY2019 LTI - Performance Rights
- Tranche 2
FY2020 LTI - Performance Rights
- Tranche 1
FY2020 LTI - Performance Rights
- Tranche 2
N P Earner
FY2018 LTI - Performance Rights
- Tranche 1
FY2018 LTI - Performance Rights
- Tranche 2
FY2019 LTI - Performance Rights
- Tranche 1
FY2019 LTI - Performance Rights
- Tranche 2
FY2020 LTI - Performance Rights
- Tranche 1
FY2020 LTI - Performance Rights
- Tranche 2
Other Key Management Personnel
J Carter
FY2019 LTI - Performance Rights
- Tranche 1
FY2019 LTI - Performance Rights
- Tranche 2
FY2020 LTI - Performance Rights
- Tranche 1
FY2020 LTI - Performance Rights
- Tranche 2
A MacDonald
FY2018 LTI - Performance Rights
- Tranche 1
FY2018 LTI - Performance Rights
- Tranche 2
FY2019 LTI - Performance Rights
- Tranche 1
FY2019 LTI - Performance Rights
- Tranche 2
4/12/2017
710,960
4/12/2017
152,348
21/11/2018
305,785
21/11/2018
65,525
22/11/2019
198,624
22/11/2019
42,562
0.240
0.340
0.050
0.215
0.419
0.623
170,630
30/06/2020
56,877
51,798
30/06/2020
(9,209)
15,289
30/06/2021
14,088
30/06/2021
5,096
3,913
83,223
30/06/2022
27,741
26,519
30/06/2022
5,893
4/12/2017
5,965,251
0.240
1,431,660
30/06/2020
477,220
4/12/2017
1,278,268
21/11/2018
2,497,245
21/11/2018
535,124
22/11/2019
1,622,252
22/11/2019
347,625
18/10/2018
1,841,591
18/10/2018
394,626
2/09/2019
604,146
2/09/2019
129,460
11/10/2017
1,036,817
11/10/2017
222,175
18/10/2018
976,601
18/10/2018
209,271
0.340
0.050
0.215
0.419
0.623
0.059
0.220
0.236
0.406
0.250
0.345
0.059
0.220
434,611
30/06/2020
(77,264)
124,862
30/06/2021
115,052
30/06/2021
41,621
31,959
679,724
30/06/2022
226,575
216,590
30/06/2022
48,131
108,654
30/06/2021
86,818
30/06/2021
142,578
30/06/2022
52,596
30/06/2022
36,218
24,116
47,526
11,688
259,204
30/06/2020
86,401
76,650
30/06/2020
(13,627)
57,619
30/06/2021
46,040
30/06/2021
19,206
12,789
40
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
(a) The value at grant date for share rights granted during the year as part of remuneration is calculated in accordance with AASB 2
Share Based Payments. Differences will arise between the number of share rights at fair value in the table above and the STI and LTI
percentages mentioned in section (d) due to different timing of valuation of rights as approved by the Remuneration Committee and
at grant. Refer to note 30 for details of the valuation techniques used for the rights plan.
(b) Share rights only vest if performance and service targets are achieved. The determination is usually made at the conclusion of the
statutory audit.
The determination of the number of rights that are to vest or be forfeited during a financial year is made by the Remuneration
Committee after the statutory audit has been substantially completed. As such, the actual determination is made after the
balance date. Where there are rights that have vested or been forfeited, details will be included in the Remuneration Report
as the relevant performance period will conclude at the end of the relevant financial year.
Performance against key metrics
No short-term incentives were issued to executives during the year.
The LTI consisted of Tranche 1 ('T1') and Tranche 2 ('T2') performance rights, being the reward vehicle for targets that are
milestone based. The tables below provide details of the performance milestone targets, weighting and vesting for 2018,
2019 and 2020 performance rights granted to Directors and other KMP's.
LTI reward vehicle
Performance metrics
Weighting
Vested
Outcome
Performance Rights
(T1)
Share price performance growth*
82%
Performance Rights
(T2)
Financing obtained and development
commenced at Dubbo Project by the
end of the LTI period
Commissioning of the Dubbo Project
commenced by the end of the LTI
period
Production of the Dubbo Project at
modelled rates of 65% capacity (which
is end of production year one target)
6%
6%
6%
100%
0%
0%
0%
0%
0%
Vesting periods ends:
30 June 2020,
2021 and
2022
Vesting periods ends 30 June 2020,
2021 and 2022
Vesting periods ends 30 June 2020,
2021 and 2022
Vesting periods ends 30 June 2020,
2021 and 2022
*Share price performance growth targets for performance rights (T1) above are as follows:
TSR compound annual growth rate (CAGR)
% Performance rights vesting (T1)
Less than 10% CAGR
Nil
Above 10% CAGR up to 15% CAGR
Pro rata vesting from 0% - 50%
At 15% CAGR
50%
Above 15% CAGR up to 30% CAGR
Pro rata vesting from 50% - 100%
At 30% CAGR
100%
41
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | DIRECTOR'S REPORT - REMUNERATION REPORT
(k) Shareholdings and share rights held by Key Management Personnel
Shareholding
The number of shares in the Company held during the financial year by each Director and other members of Key
Management Personnel of the consolidated entity, including their personally related parties, is set out below:
Ordinary shares
I J Gandel
A D Lethlean
D I Chalmers
N P Earner
G Smith
D Woodall *
A MacDonald
Balance at the
start of the year
Received
as part of
remuneration
Additions
Disposals/ other
Balance at the
end of the year
111,261,217
640,076
4,152,124
146,666
142,000
-
1,810,000
118,152,083
-
-
-
-
-
-
-
-
24,759,926
80,010
519,016
18,334
189,875
35,000
191,250
-
-
-
-
-
-
136,021,143
720,086
4,671,140
165,000
331,875
35,000
(541,250)
1,460,000
25,793,411
(541,250)
143,404,244
*Balance held at the date of appointment (12 February 2020) was nil.
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each Director and
other members of Key Management Personnel of the consolidated entity, including their personally related parties, is set out
below:
Performance rights over ordinary shares
D I Chalmers – Performance rights
N P Earner – Performance rights
J Carter – Performance rights
A MacDonald – Performance rights
Balance at the
start of the year
Granted
Vested
Expired/
forfeited/ other
Balance at the
end of the year
1,234,618
10,275,888
2,236,217
2,444,864
241,186
(710,960)
(152,348)
1,969,877
(5,965,251)
(1,278,268)
733,606
-
-
-
(1,036,817)
(222,175)
16,191,587
2,944,669
(7,713,028)
(1,652,791)
612,496
5,002,246
2,969,823
1,185,872
9,770,437
The determination of the number of rights that are to vest or be forfeited in relation to the FY2018 performance rights
is made by the Remuneration Committee after the statutory audit has been substantially completed. As such, the actual
determination was made after the balance date however details have been included in the current Remuneration Report as
the relevant performance period is the current financial year.
On 16th July 2020 at the Extraordinary General Meeting in relation to the demerger to the ASM business, the shareholders
also voted for early vesting of the FY2019 Tranche 1, the cancellation of the FY2019 Tranche 2 performance rights, and the
cancellation of the FY2020 Tranche 2 performance rights.
42
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | DIRECTOR'S REPORT - INDEMNITY AND INSURANCE OF OFFICERS
(l) Other transactions with Key Management Personnel
There were no other transactions with KMP during the financial year ended 30 June 2020.
There were no unissued ordinary shares of Alkane Resources Ltd under performance rights outstanding at the date of this
report.
This concludes the remuneration report, which has been audited.
Indemnity and insurance of officers
Alkane Resources Ltd has entered into deeds of indemnity, access and insurance with each of the Directors. These deeds
remain in effect as at the date of this report. Under the deeds, the Company indemnifies each Director to the maximum
extent permitted by law against legal proceedings or claims made against or incurred by the Directors in connection with
being a Director of the Company, or breach by the Group of its obligations under the deed.
The liability insured is the indemnification of the Group against any legal liability to third parties arising out of any Directors’
or officers’ duties in their capacity as a Director or officer other than indemnification not permitted by law.
No liability has arisen under this indemnity as at the date of this report.
The Group has not otherwise, during or since the financial year, indemnified nor agreed to indemnify an officer of the Group
or of any related body corporate, against a liability incurred as such by an officer.
During the year the Company has paid premiums in respect of Directors' and executive officers' Insurance. The contracts
contain prohibitions on disclosure of the amount of the premiums and the nature of the liabilities under the policies.
Proceedings on behalf of the Company
No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
43
Alkane Resources Annual Report 2020 |
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's
expertise and experience with the Group is important.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in note 25 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
● all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of
the auditor; and
● none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this Directors' Report.
Rounding of amounts
The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to the 'rounding-off' of amounts in the Directors' Report and Financial Report. Amounts in
this report have been rounded off in accordance with that ASIC Legislative Instrument to the nearest thousand dollars, or in
certain cases, to the nearest dollar.
This report is made in accordance with a resolution of Directors.
On behalf of the Directors
N P Earner
Managing Director
24 August 2020
Perth
44
FINANCIAL REPORT | DIRECTOR'S REPORT - NON-AUDIT SERVICES| Alkane Resources Annual Report 2020
FINANCIAL REPORT | AUDITOR'S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audit of Alkane Resources Limited for the year ended 30 June 2020, I declare
that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit, and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Alkane Resources Limited and the entities it controlled during the
period.
Helen Bathurst
Partner
PricewaterhouseCoopers
Perth
24 August 2020
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
45
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | FINANCIAL STATEMENTS
Financial Statements
Consolidated Financial Statements
Consolidated statement of profit or loss and other comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the Consolidated Financial Statements
Note 1. Segment information
Note 2. Revenue
Note 3. Expenses
Note 4. Other net income
Note 5. Income tax
Note 6. Discontinued operations
Note 7. Cash and cash equivalents
Note 8. Trade and other receivables
Note 9. Inventories
Note 10. Derivative financial instruments
Note 11. Biological assets
Note 12. Other financial assets
Note 13. Property, plant and equipment
Note 14. Exploration and evaluation
Note 15. Investments accounted for using the equity method
Note 16. Trade and other payables
Note 17. Provisions
Note 18. Issued capital
Note 19. Reserves
Note 20. Retained profits/(accumulated losses)
Note 21. Critical accounting judgements, estimates and assumptions
Note 22. Financial risk management
Note 23. Capital risk management
Note 24. Key Management Personnel disclosures
Note 25. Remuneration of auditors
Note 26. Contingent liabilities
Note 27. Commitments
Note 28. Events after the reporting period
Note 29. Related party transactions
Note 30. Share-based payments
Note 31. Earnings per share
Note 32. External borrowings and assets pledged as security
Note 33. Parent entity information
Note 34. Deed of cross guarantee
Note 35. Reconciliation of profit after income tax to net cash from operating activities
Note 36. Significant accounting policies
48
49
50
51
52
53
54
55
55
59
61
61
62
63
64
64
65
67
67
68
69
71
72
73
73
75
77
77
78
78
78
79
80
81
83
84
85
86
87
88
46
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | FINANCIAL STATEMENTS
These financial statements are consolidated financial statements for the Group consisting of Alkane Resources
Ltd and its subsidiaries.
The financial statements are presented in the Australian currency.
Alkane Resources Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Alkane Resources Ltd
89 Burswood Road
Burswood WA 6100
The financial statements were authorised for issue by Directors on 24 August 2020. The Directors have the
power to amend and reissue the financial statements.
All press releases, financial reports and other information are available at the Shareholders’ Centre on our
website: www.alkane.com.au
47
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
Continuing operations
Revenue
Cost of sales
Gross profit
Other net income
Interest income
Total revenue
Expenses
Other expenses
Finance costs
Net loss on disposal of derivatives
Share of loss of associates accounted for using the equity method
Total expenses
Profit before income tax expense from continuing operations
Income tax expense
Profit after income tax expense from continuing operations
(Loss)/Profit after income tax benefit/(expense) from discontinued operations
Profit after income tax expense for the year attributable to the owners of Alkane
Resources Ltd
Other comprehensive loss
Items that will not be reclassified subsequently to profit or loss
Changes in the fair value of equity investments at fair value through other
comprehensive income
Items that may be reclassified subsequently to profit or loss
Losses on cash flow hedges
Other comprehensive loss for the year, net of tax
Total comprehensive income for the year attributable to the owners of Alkane
Resources Ltd
Total comprehensive income for the year is attributable to:
Continuing operations
Discontinued operations
Note
2020
$'000
2019
$'000
2
3
4
3
15
5
6
20
72,549
(41,940)
30,609
150
625
73,324
(10,677)
(236)
(317)
(240)
(11,470)
19,914
(6,569)
13,345
(583)
12,762
92,513
(60,912)
31,601
736
837
94,086
(7,386)
(399)
-
-
(7,785)
25,389
(2,266)
23,123
170
23,293
(251)
151
(209)
(460)
12,302
12,886
(584)
12,302
(780)
(629)
22,664
22,489
175
22,664
Cents
Cents
Earnings per share for profit from continuing operations attributable to the owners of Alkane Resources Ltd
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the owners of Alkane Resources Ltd
Basic earnings per share
Diluted earnings per share
31
31
31
31
2.44
2.37
2.33
2.26
4.57
4.45
4.60
4.48
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
48
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet
As at 30 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Biological assets
Assets of disposal group classified as held for distribution to owners
Total current assets
Non-current assets
Property, plant and equipment
Exploration and evaluation
Investments accounted for using the equity method
Biological assets
Deferred tax
Derivative financial instruments
Other financial assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
External borrowings
Provisions
Other liabilities
Liabilities directly associated with assets classified as held for distribution to owners
Total current liabilities
Non-current liabilities
External borrowings
Provisions
Deferred tax
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits/(accumulated losses)
Total equity
Note
2020
$'000
2019
$'000
7
8
9
10
11
6
13
14
15
11
5
10
12
16
32
17
6
32
17
5
18
19
20
48,337
2,940
7,647
172
-
59,096
139,538
198,634
62,322
32,745
14,385
-
10,947
64
8,614
129,077
327,711
9,425
2,090
2,659
64
14,238
26,565
40,803
4,515
14,873
-
134
19,522
60,325
69,582
1,998
4,816
25
80
76,501
-
76,501
51,038
103,894
7,767
402
-
678
8,417
172,196
248,697
8,007
-
4,438
-
12,445
-
12,445
-
13,059
9,317
-
22,376
34,821
267,386
213,876
258,876
3,413
5,097
267,386
220,111
2,352
(8,587)
213,876
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
49
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement of changes in equity
For the year ended 30 June 2020
Share capital
$'000
Share-based
payments
reserve
$'000
Other
reserves
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 July 2018
220,160
2,116
Profit after income tax expense for the year
Other comprehensive loss for the year, net of tax
Total comprehensive income/(loss) for the year
Share based payments (note 30)
Deferred tax recognised in equity
Balance at 30 June 2019
Balance at 1 July 2019
Adjustment for reclassification
Balance at 1 July 2019 - restated
Profit after income tax expense for the year
Profit after income tax expense for the year
Total comprehensive income/(loss) for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs
(note 18)
Share-based payments (note 30)
Deferred tax recognised in equity
Balance at 30 June 2020
-
-
-
-
(49)
220,111
-
-
-
865
-
2,981
Share capital
$'000
220,111
(922)
219,189
-
-
-
39,442
-
245
258,876
Share-based
payments
reserve
$'000
2,981
-
2,981
-
-
-
-
1,225
-
4,206
-
-
(629)
(629)
-
-
(31,880)
23,293
-
23,293
-
-
190,396
23,293
(629)
22,664
865
(49)
(629)
(8,587)
213,876
Other
reserves
$'000
Accumulated
losses
$'000
Total equity
$'000
(629)
-
(629)
-
(460)
(460)
-
-
296
(793)
(8,587)
922
(7,665)
12,762
-
12,762
-
-
-
213,876
-
213,876
12,762
(460)
12,302
39,442
1,225
541
5,097
267,386
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
50
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement of cash flows
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers
Payments to suppliers (inclusive of GST)
Interest received
Finance costs paid
Royalties and selling costs
Other receipts
Net cash from operating activities
35
Cash flows from investing activities
Payments for investments
Payments for property, plant and equipment and development expenditure
Proceeds from disposal of property, plant and equipment
Payments for exploration expenditure
Payments for security deposits
Purchase of biological assets
Proceeds from the sale of biological assets
Transaction costs relating to ASM demerger
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of share issue
Proceeds from borrowings
Repayment of borrowings
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
18
18
7
Note
2020
$'000
2019
$'000
72,347
(44,059)
28,288
986
(127)
(1,490)
879
28,536
(8,966)
(46,122)
1
92,513
(55,944)
36,569
1,477
(138)
(2,864)
1,172
36,216
(7,616)
(19,621)
4
(20,132)
(11,578)
(217)
(457)
118
(1,525)
(77,300)
(70)
(195)
439
-
(38,637)
40,665
(1,223)
7,885
(1,264)
46,063
(2,701)
69,582
66,881
-
-
988
(988)
-
(2,421)
72,003
69,582
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
51
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 1
Note 1. Segment information
The consolidated entity is organised into two operating segments: gold operations and the exploration, evaluation and
development of critical metals. These operating segments are based on the internal reports that are reviewed and used
by the Board of Directors (who are identified as the Chief Operating Decision Makers) in assessing performance and in
determining the allocation of resources.
The ASM business has been accounted for as Discontinued Operations that was previously reported in the Critical Metals
segment. Information about this discontinued segment is provided in note 6.
Costs that do not relate to either of the operating segments have been identified as unallocated costs. Corporate assets and
liabilities that do not relate to either of the operating segments have been identified as unallocated. The Group has formed a
tax consolidation group and therefore tax balances are disclosed under the unallocated grouping. The Group utilises a central
treasury function resulting in cash balances being included in the unallocated segment.
30 JUNE 2020
Gold sales to external customers
Interest income
Segment net profit /(loss) before income tax
Segment net profit includes the following non-cash adjustments:
Depreciation and amortisation
Exploration expenditure written off or provided for
Inventory product movement and provision
Restructuring provision
Income tax expense
Total adjustments
Total segment assets
Total segment liabilities
Net segment assets
Gold
Operations
$'000
Critical
Metals
$'000
Unallocated
$'000
Total
$'000
72,549
-
72,549
30,362
(9,072)
-
2,203
(147)
-
(7,016)
77,834
(30,890)
46,944
-
-
-
-
-
-
-
-
-
-
-
-
-
-
625
625
(10,448)
(79)
(329)
-
-
(6,569)
(6,977)
110,339
(2,870)
107,469
72,549
625
73,174
19,914
(9,151)
(329)
2,203
(147)
(6,569)
(13,993)
188,173
(33,760)
154,413
52
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 2
30 JUNE 2019
Gold sales to external customers
Interest income
Segment net profit /(loss) before income tax
Segment net loss includes the following non-cash adjustments:
Depreciation and amortisation
Exploration expenditure written off or provided for
Inventory product movement and provision
Restructuring provision
Income tax expense
Total adjustments
Total segment assets
Total segment liabilities
Net segment assets
Note 2. Revenue
Revenue from continuing operations
Gold sales
(a) Revenue
Gold
Operations
$'000
Critical
Metals
$'000
Unallocated
$'000
Total
$'000
92,513
-
92,513
31,930
(7,165)
-
(14,669)
104
-
(21,730)
38,035
(22,982)
15,053
-
-
-
-
837
837
812
(7,110)
(150)
(138)
-
-
(2,339)
(2,627)
95,184
(11,577)
83,607
(12)
(444)
-
-
-
(456)
115,478
(262)
115,216
2020
$'000
72,549
92,513
837
93,350
25,632
(7,327)
(582)
(14,669)
104
(2,339)
(24,813)
248,697
(34,821)
213,876
2019
$'000
92,513
Revenue is recognised when control of a good or service transfers to a customer. Control is generally determined to be when
the customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or
service.
(b) Gold sales
Revenue from the sale of goods is recognised when the Group satisfies its performance obligations under its contract with the
customer by transferring such goods to the customer's control. Control is generally determined to be when the customer has
the ability to direct the use and obtain substantially all of the remaining benefits from that good.
53
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 3
Note 3. Expenses
Cost of sales
Cash costs of production
Inventory product movement
Depreciation and amortisation
Royalties and selling costs
(a) Cash costs of production
2020
$'000
33,137
(2,203)
9,072
1,934
41,940
2019
$'000
36,662
14,669
7,165
2,416
60,912
Cash costs of production include ore and waste mining costs, processing costs and site administration and support costs. Cash
costs of production include $13,085,000 of employee remuneration benefits (2019: $10,281,000).
(b) Inventory product movement
Inventory product movement represents the movement in the balance sheet inventory ore stockpile, gold in circuit and
bullion on hand.
Refer to note 9 for further details on the Group's accounting policy for inventory.
(c) Inventory product provision for net realisable value
Inventory must be carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price
in the ordinary course of business less estimated costs to complete processing and to make a sale. The net realisable value
provision equals the decrement between the net realisable value and the carrying value before provision.
Refer to note 9 for further details on the Group's accounting policy for inventory.
Other expenses
Corporate administration
Employee remuneration and benefits expensed
Share based payments
Professional fees and consulting services
Restructuring provision
Exploration expenditure provided for or written off
Directors' fees and salaries expensed
Depreciation
Non-core project expenses
54
2020
$'000
3,387
2,361
1,225
2,321
147
329
660
79
168
10,677
2019
$'000
2,580
1,570
865
1,633
(104)
138
614
90
-
7,386
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 4
Note 4. Other net income
Net foreign exchange gain
Net gain/(loss) on disposal of property, plant and equipment
Other income
Other net income
Note 5. Income tax
(a) Income tax expense
Current tax
Adjustments for current tax of prior periods
Total current tax expense
Deferred income tax
(Increase)/Decrease in deferred tax asset
Increase in deferred tax liabilities
Total deferred tax expense/(benefit)
Income tax expense
Income tax expense is attributable to:
Profit from continuing operations
(Loss)/Profit from discontinued operations
2020
$'000
(4)
9
145
150
2020
$'000
-
-
(4,210)
10,531
6,321
6,321
6,569
(248)
6,321
2019
$'000
(4)
(7)
747
736
2019
$'000
(6,929)
(6,929)
5,914
3,354
9,268
2,339
2,266
73
2,339
55
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 5
(b) Reconciliation of income tax expense/(benefit) to prima facie tax payable
Profit from continued operations before income tax expense
(Loss)/Profit from discontinued operations before income tax
expense
Profit before income tax expense
Tax at the Australian tax rate of 30% (2019 - 30%)
Tax benefits of deductible equity raising costs
Non-deductible share based payments
Other items
Movement in temporary differences
Under provision for prior year
Utilisation of previously unrecognised tax losses
(c) Deferred tax assets
2020
$'000
19,914
(831)
19,083
5,725
(123)
367
112
-
240
-
6,321
2019
$'000
24,761
243
25,004
7,501
(49)
259
8
(6,533)
1,226
(73)
2,339
Movements
At 1 July 2018
- to profit or loss
- direct to equity
At 30 June 2019
Movements
At 1 July 2019
- profit or loss
- directly to equity
As at 30 June 2020
Tax losses
$'000
Rehabilitation
Provision and
assets
$'000
Property,
plant and
equipment
$'000
R&D Tax
incentive
credits
$'000
Other
$'000
Total
$'000
-
-
-
-
-
Tax losses
$'000
7,065
-
7,065
4,619
(1,002)
-
3,617
20,843
(4,491)
-
16,352
-
1,072
-
1,072
2,900
(1,493)
(49)
1,358
28,362
(5,914)
(49)
22,399
Rehabilitation
Provision and
assets
$'000
Property,
plant and
equipment
$'000
R&D Tax
incentive
credits
$'000
Other
$'000
Total
$'000
3,617
(296)
-
3,321
16,352
(2,888)
-
13,464
1,072
179
-
1,251
1,358
150
541
2,049
22,399
4,210
541
27,150
Recognised deferred tax assets are attributable to:
Losses and temporary
differences carried
forward for continued
operations
Losses and temporary
differences carried
forward for
discontinued operations
56
7,065
3,321
12,420
1,251
1,934
25,991
-
-
1,044
-
115
1,159
7,065
3,321
13,464
1,251
2,049
27,150
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 5
(d) Deferred tax liabilities
The balance comprises temporary differences attributable to:
Exploration expenditure
Property, plant & equipment
Other
Gross recognised deferred tax liabilities
Set-off of deferred tax assets
Net recognised deferred tax assets/(liabilities) are attributable to:
Losses and temporary differences carried forward for continued
operations
Losses and temporary differences carried forward for discontinued
operations
Movements
At 1 July 2018
Charged/(credit)
- to profit or loss
At 30 June 2019
At 1 July 2019
Charged/(credited)
- to profit or loss
At 30 June 2020
Recognised deferred tax liabilities are attributable to:
Temporary differences in respect of continued operations
Temporary differences in respect of discontinued operations
2020
$'000
(36,995)
(4,744)
(507)
(42,246)
27,150
(15,096)
10,947
(26,043)
(15,096)
2019
$'000
(31,168)
-
(548)
(31,716)
22,399
(9,317)
-
-
-
Exploration
Expenditure
$'000
Property,
plant and
equipment
$'000
Other
$'000
Total
$'000
27,941
-
3,227
31,168
31,168
-
5,827
36,995
9,795
27,200
36,995
-
-
-
-
-
-
4,744
4,744
4,744
-
4,744
421
-
127
548
548
-
(41)
507
505
2
507
28,362
-
3,354
31,716
31,716
-
10,530
42,246
15,044
27,202
42,246
57
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 5
(e) Deferred tax recognised directly in equity
Relating to equity raising costs
Relating to revaluations of investments/financial instruments
(f) Unrecognised temporary differences and tax losses
Unrecognised tax losses
Deductible temporary differences
Potential tax benefit at 30% (2019: 30%)
2020
$'000
(245)
(296)
(541)
2020
$'000
18,378
513
18,891
5,667
2019
$'000
(49)
-
(49)
2019
$'000
18,315
-
18,315
5,495
The potential benefit of carried forward tax losses will only be obtained if taxable income is derived of a nature and amount
sufficient to enable the benefit from the deductions to be realised. In accordance with the Group’s policies for deferred taxes,
a deferred tax asset is recognised only if it is probable that sufficient future taxable income will be generated to offset against
the asset.
Determination of future taxable profits requires estimates and assumptions as to future events and circumstances including
commodity prices, ore resources, exchange rates, future capital requirements, future operational performance, the timing of
estimated cash flows, and the ability to successfully develop and commercially exploit resources.
Tax legislation prescribes the rate at which tax losses transferred from entities joining a tax consolidation group can be applied
to taxable incomes and this rate is diluted by changes in ownership, including capital raisings. As a result, the reduction in the
rate at which the losses can be applied to future taxable incomes, the period of time over which it is forecast that these losses
may be utilised has extended beyond that which management considers prudent to support their continued recognition for
accounting purposes. Accordingly, no deferred tax asset has been recognised for certain tax losses. Recognition for accounting
purposes does not impact the ability of the Group to utilise the losses to reduce future taxable profits.
Alkane Resources Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation legislation.
As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set
off in the consolidated financial statements.
Deferred tax assets relating to deductible temporary differences can only be recognised to the extent that it is probable that
future taxable profits will be available against which the deductible temporary difference can be utilised. Recognition for
accounting purposes does not impact the ability of the Group to utilise the deductible temporary differences to reduce future
taxable profits.
58
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 6
Note 6. Discontinued operations
ASM Group
On 17 June 2020, the Group publicly announced the demerger of Alkane's critical metals and materials business and assets
(the ASM Business) from the remainder of Alkane's business.
Australian Strategic Materials Ltd (ASM) was admitted to the ASX on 29 July 2020 and will operate the ASM Business; and
Alkane will continue to own and operate the remainder of Alkane's business being, principally, its Australian gold business.
Following the demerger, Alkane will be an Australian focused gold company, with existing production from its Tomingley
Operations and the opportunity to grow its production base through organic exploration and discovery (including the Boda
discovery) and through further strategic acquisitions. Corporately, Alkane will continue to have an experienced Board and
management team, the remainder of its cash position.
ASM was demerged with its cash reserves and no bank debt. All interests in the Dubbo Project and associated assets
(including land and water rights), together with ASM’s investment in South Korean metals technology company RMR Tech
Corporation, will be 100% owned by ASM following the demerger. ASM will have a focused Board and management team, a
strategy to pursue the advancement of the 'Clean Metal' metallisation technology, potential value-enhancing opportunities
in relation to the Dubbo Project and will continue to be involved in offtake and financing discussions, including those already
underway in relation to the Dubbo Project.
The net assets of ASM were measured at the lower of carrying amount and fair value. The ASM businesses were included in
the Critical Metals segment until 30 June 2019.
Financial performance information
Discontinued other income
Share of loss of Joint Venture
Professional fees and consulting services
General and administration expenses
Pastoral company expenses
Audit fees
Finance costs
Total expenses
(Loss)/profit before income tax expense
Income tax benefit/(expense)
(Loss)/profit after income tax (expense)/benefit from
discontinued operations
2020
$'000
1,073
(10)
(624)
(381)
(848)
(41)
-
(1,904)
(831)
248
(583)
2019
$'000
1,766
-
216
57
(1,782)
(11)
(3)
(1,523)
243
(73)
170
59
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 6
Carrying amounts of assets and liabilities held for distribution to the owners
Cash and cash equivalents
Trade and other receivables
Consumables
Biological assets
Investments accounted for using the equity method
Property, plant and equipment
Exploration and evaluation assets
Other non-current assets
Total assets
Trade and other payables
Provisions
Deferred tax
Total liabilities
Net assets
Cash flows of ASM businesses
Operating
Investing
Financing
Cash at the beginning of the period
Net cash at the end of the period
2020
$'000
18,544
233
5
783
1,721
27,567
90,665
20
139,538
344
178
26,043
26,565
112,973
2020
$'000
(222)
(4,894)
(3,308)
26,968
18,544
2019
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2019
$'000
(165)
(6,211)
7,027
26,317
26,968
Accounting policy for discontinued operations
A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as held for
distribution to owners and that represents a separate major line of business or geographical area of operations, is part of a
single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with
a view to resale. The results of discontinued operations are presented separately on the face of the statement of profit or
loss.
60
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 7
Note 7. Cash and cash equivalents
Current assets
Cash at bank
Reconciliation to cash and cash equivalents at the end of the financial year
The above figures are reconciled to cash and cash equivalents at
the end of the financial year as shown in the statement of cash
flows as follows:
Balances as above
Cash and cash equivalents - classified as held for distribution by
owners - classified as held for sale
Balance as per statement of cash flows
2020
$'000
48,337
48,337
18,544
66,881
2019
$'000
69,582
69,582
-
69,582
Cash at bank at balance date weighted average interest rate was 0.67% (2019: 2.1%).
Cash and cash equivalents include cash on hand and deposits held at call with financial institutions and other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of
cash and which are subject to an insignificant risk of changes in value.
Note 8. Trade and other receivables
Current assets
Trade receivables
Prepayments
GST and fuel tax credit receivable
(a) Classification as receivables
2020
$'000
1,057
922
961
2,940
2019
$'000
348
890
760
1,998
Receivables are recognised initially at fair value and then subsequently measured at amortised cost, less provision for credit
losses. As at 30 June 2020 the Group has determined that the expected provision for credit losses is not material.
In determining the recoverability of a trade or other receivables using the expected credit loss model, the Group performs
a risk analysis considering the type and age of outstanding receivables, the creditworthiness of the counterparty, contract
provisions, letter of credit and timing of payment.
61
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 9
(b) Fair value of receivables
Due to the short-term nature of the current receivables, their carrying amount is assumed to be the same as their fair value.
(c) Impairment and risk exposure
Information about the impairment of receivables, their credit quality and the Group’s exposure to credit risk, foreign currency
risk and interest rate risk can be found in note 22.
Note 9. Inventories
Current assets
Ore stockpiles
Gold in circuit
Bullion on hand
Consumable stores
2020
$'000
934
1,940
2,407
2,366
7,647
2019
$'000
704
834
1,539
1,739
4,816
(a) Assigning costs to inventories
Costs are assigned to ore stockpiles, gold in circuit and bullion on hand on the basis of weighted average costs. Inventories
must be carried at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an
appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal
operating capacity. At balance date ore stockpiles, gold in circuit, bullion on hand and consumable stores were carried at cost.
No provision was recorded at 30 June 2020 to write down inventories to their recoverable value (2019: $nil).
Consumable stores include diesel, explosives and other consumables items. These items are carried at cost.
(b) Amounts recognised in profit or loss
Consumable inventories recognised as an expense during the year ended 30 June 2020 amounted to $6,920,000 (2019:
$12,499,000). These were included in costs of production.
Product inventory movement during the year ended 30 June 2020 amounted to an expense of $2,203,000 (2019: expense of
$14,669,000) and is disclosed as part of cost of sales in note 3.
62
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 10
Note 10. Derivative financial instruments
Current assets
Derivative financial instruments
Commodity options - cash flow hedges
Non-current assets
Derivative financial instruments
Commodity put options - cash flow hedges
Total non-current Derivative financial instruments
2020
$'000
172
64
64
236
2019
$'000
25
678
678
703
During the 2019 financial year subsidiary company Tomingley Gold Operations Pty Ltd ('TGO') entered into several commodity
put option contracts to hedge a portion of its future gold sales.
On 12 May 2020 Alkane entered into a fixed price Singapore Gasoil 10ppm cash-settled swap transaction contract with
Macquarie for a total of 1,665,151 litres of diesel, effective 01 July 2020 until 30 June 2021 at a fixed forward price of AUD
0.4105 per litre.
Movements in the options' fair value are reflected through other comprehensive income.
Accounting policy for derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the consolidated entity's exposure to variability in cash flows that is attributable to
particular risks associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The
effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income through the
cash flow hedges reserve in equity, whilst the ineffective portion is recognised in profit or loss. Amounts taken to equity are
transferred out of equity and included in the measurement of the hedged transaction when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to ensure that each
hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no longer expected
to occur, the amounts recognised in equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes
ineffective and is no longer a designated hedge, the amounts previously recognised in equity remain in equity until the
forecast transaction occurs.
63
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 11
Note 11. Biological assets
Biological assets comprise livestock which were acquired by Toongi Pastoral Company Pty Ltd as part of farming operations on
the surrounding land to the Dubbo Project mining lease. They are assets of disposal groups classified as held for distribution
to owners in the current financial year.
Current assets
Biological assets
Non-current assets
Biological assets
Note 12. Other financial assets
Non-current assets
Security deposits
2020
$'000
-
-
2020
$'000
8,614
2019
$'000
80
402
2019
$'000
8,417
The above deposits are held by financial institutions or regulatory bodies as security for rehabilitation obligations as required
under the respective exploration and mining leases or as required under agreement totalling $8,614,000 for the current
period (2019: $8,417,000 backed by security deposits).
All interest bearing deposits are held in Australian dollars and therefore there is no exposure to foreign currency risk. Please
refer to note 22 for the Group’s exposure to interest rate risk. The fair value of other financial assets is equal to its carrying
value.
64
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 13
Note 13. Property, plant and equipment
Year ended 30 June 2020
Opening cost
Additions
Transfers between classes
Assets classified as held for distribution to owners
and other disposals
Net movement
Closing cost
Opening accumulated depreciation and
impairment
- to profit or loss
Assets classified as held for distribution to owners
and other disposals
Net movement
Closing accumulated depreciation and
impairment
Land and
buildings
$'000
Plant and
equipment
$'000
Capital
WIP
$'000
Mine
properties
$'000
Total
$'000
40,379
-
8,403
(26,456)
(18,053)
22,326
80,448
-
3,728
18,873
11,445
(20,794)
(1,833)
9,612
90,060
(120)
(2,041)
1,687
174,479
30,257
946
-
31,203
205,682
299,034
49,130
-
(28,409)
20,721
319,755
(12,674)
(73,322)
(121)
(3,306)
8
720
(113)
(12,787)
(2,586)
(75,908)
-
-
-
-
-
(162,000)
(247,996)
(6,738)
(10,165)
-
728
(6,738)
(9,437)
(168,738)
(257,433)
Closing net carrying value
9,539
14,152
1,687
36,944
62,322
Land and
buildings
$'000
Plant and
equipment
$'000
Capital
WIP
$'000
Mine
properties
$'000
Total
$'000
Year ended 30 June 2019
Opening cost
Additions
Transfers between classes
Disposals
Net movement
Closing cost
Opening accumulated depreciation and
impairment
- to profit or loss
- capitalised to Mine properties
- disposals
Net movement
Closing accumulated depreciation and
impairment
39,743
73,590
630
162,518
-
636
-
636
-
7,437
(579)
6,858
40,379
80,448
(12,483)
(71,651)
(191)
-
-
(191)
(12,674)
(1,217)
(1,021)
567
(1,671)
(73,322)
13,247
(10,149)
-
3,098
3,728
9,885
2,076
-
11,961
174,479
276,481
23,132
-
(579)
22,553
299,034
-
-
-
-
-
-
(156,081)
(240,215)
(5,919)
-
-
(5,919)
(7,327)
(1,021)
567
(7,781)
(162,000)
(247,996)
Closing net carrying value
27,705
7,126
3,728
12,479
51,038
65
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 13
All property, plant and equipment are stated at historical cost less accumulated depreciation and impairment charges.
Historical cost includes:
● expenditure that is directly attributable to the acquisition of the items;
● direct costs associated with the commissioning of plant and equipment including pre-commissioning costs in testing the
processing plant;
● where the asset has been constructed by the Group, the cost of all materials used in construction, direct labour on the
project and project management costs associated with the asset; and
● the present value of the estimated costs of dismantling and removing the asset and restoring the site on which it is
located.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced.
All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate their cost over their estimated useful lives as follows:
Buildings
Plant and equipment
Mining properties
Office equipment
Furniture and fittings
Motor vehicles
Software
units of production
units of production
units of production
3-5 years
4 years
4-5 years
2-3 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the
statement of comprehensive income.
(a) Mine properties
Mine properties represent the accumulation of all exploration, evaluation and development expenditure incurred by the
Group in relation to areas of interest for which the technical feasibility and commercial viability of the extraction of mineral
resources are demonstrable.
When further development expenditure is incurred in respect of a mine property after the commencement of production,
such expenditure is carried forward as part of the mine property only when it is probable that the additional future economic
benefits associated with the expenditure will flow to the Group. Otherwise such expenditure is classified as part of the cost of
production. Mine properties are amortised on a units of production basis over the economically recoverable resources of the
mine concerned.
Underground development commenced in January 2019 and continued up to 30 June 2020. Commercial production was
declared in February 2020. Amortisation of mine properties commenced with commercial production and is being charged
using units of production method.
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| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 14
Note 14. Exploration and evaluation
Opening balance
Expenditure during the year
Amounts provided for or written off
Exploration and evaluation classified as available for distribution to
owners
2020
$'000
103,894
17,964
(329)
(88,784)
32,745
2019
$'000
93,136
11,166
(408)
-
103,894
(a) Amounts recognised in profit or loss
Exploration and evaluation costs are carried forward on an area of interest basis. Costs are recognised and carried forward
where rights to tenure of the area of interest are current and either:
● the expenditures are expected to be recouped through successful development and exploitation of the area of interest; or
● activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment
of the existence or otherwise of economically recoverable reserves, and active and significant exploration and evaluation
activities in, or in relation to, the area of interest are continuing.
Exploration and evaluation assets are tested for impairment when reclassified to development tangible or intangible assets,
or whenever facts or circumstances indicate impairment. An impairment loss is recognised for the amount by which the
exploration and evaluation assets carrying amount exceeds their recoverable amount. The recoverable amount is the higher
of the exploration and evaluation assets fair value less costs of disposal and their value in use.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are
demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then
reclassified to mine properties under development. No amortisation is charged during the exploration and evaluation phase
Recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful development and
commercial exploitation, or alternatively, sale of the respective areas of interest.
There may exist, on the Group's exploration properties, areas subject to claim under native title or containing sacred sites
or sites of significance to Aboriginal people. As a result, exploration properties or areas within tenements may be subject to
exploration or mining restrictions.
Note 15. Investments accounted for using the equity method
Non-current assets
Investment in associates
2020
$'000
14,385
2019
$'000
7,767
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Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 16
Share of profit / loss of equity accounted for investments
Share of losses - associates
Interests in associates
2020
$'000
(240)
2019
$'000
-
Interests in associates and joint venture are accounted for using the equity method of accounting. Information relating to the
investments that are material to the consolidated entity are set out below:
Name
Calidus Resources Ltd (CAI)
Genesis Minerals Ltd (GMD)
Principal place of business /
Country of incorporation
2020
%
2019
%
Ownership interest
Australia
Australia
12.99%
15.51%
15.78%
2.38%
Alkane’s percentage of holding in Calidus exceeds 10%, which gives Alkane the right to appoint one Nominated Director (out
of five) to the Board. Alkane’s right to a 20% presentation on the Board of Directors entitles the Company significant influence
in policy-making processes including participation in decisions about dividends and other distributions.
On 24 October 2019, Nic Earner (Alkane’s Managing Director) was appointed as a Non-Executive Director to the Genesis
Board. The appointment of Nic Earner entitles Alkane a 20% voting right at the Directors’ meeting. Alkane’s 20% representing
on the Board out of five directors entitles the Company significant influence in policy-making processes including participation
in decisions about dividends and other distributions.
Note 16. Trade and other payables
Current liabilities
Trade payables
Other payables
2020
$'000
4,588
4,837
9,425
2019
$'000
3,710
4,297
8,007
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial
period which are unpaid. Current trade and other payables are unsecured and are usually paid within 30 days of recognition.
Trade and other payables are presented in current liabilities unless payment is not due within 12 months from the reporting
date.
The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term
nature.
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| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 17
Note 17. Provisions
Current liabilities
Employee benefits
Rehabilitation
Restructuring
Non-current liabilities
Employee benefits
Rehabilitation
(a) Provisions
2020
$'000
2,659
-
-
2,659
122
14,751
14,873
2019
$'000
2,202
1,591
645
4,438
194
12,865
13,059
Provisions are recognised when the Group has a present legal or constructive obligation, it is probable that an outflow of
resources will be required to settle the obligation, and the amount can be reliably estimated.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the
provision due to the passage of time is recognised in finance charges.
(b) Information about individual provisions and significant estimates
Employee benefits
The provision for employee benefits relates to the Group's liability for long service leave and annual leave.
The current portion of this liability includes all of the accrued annual leave. The entire amount of the provision of $1,833,000
(2019: $1,301,000) is presented as current, since the Group does not have an unconditional right to defer settlement for any
of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of
accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be
taken or paid within the next 12 months.
Current leave obligations expected to be settled after 12 months
2020
$'000
595
2019
$'000
646
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Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 17
The liability for long service leave not expected to vest within 12 months after the end of the period in which the employees
render the related service is recognised in the non-current provision for employee benefits and measured at the present
value of expected future payments to be made in respect of services provided up to the end of the reporting period.
Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.
Expected future payments are discounted using market yields at the end of the reporting period on corporate bonds with
terms and currencies that match as closely as possible, the estimated future cash outflows. Where the Group does not have
an unconditional right to defer settlement for any annual or long service leave owed, it is classified as a current provision
regardless of when the Group expects to realise the provision.
Restructuring provision
The provision in the prior year related to the Group's liability for severance payments for the open cut gold mining operations,
which has been settled during the current financial year.
Rehabilitation and mine closure
The Group has obligations to dismantle and remove certain items of property, plant and equipment and to restore and
rehabilitate the land on which they sit.
A provision is raised for the estimated cost of settling the rehabilitation and restoration obligations existing at balance date,
discounted to present value using an appropriate pre-tax discount rate.
Where the obligation is related to an item of property, plant and equipment, its cost includes the present value of the
estimated costs of dismantling and removing the asset and restoring the site on which it is located. Costs that relate to
obligations arising from waste created by the production process are recognised as production costs in the period in which
they arise.
The discounted value reflects a combination of management's assessment of the nature and extent of the work required, the
future cost of performing the work required, the timing of cash flows and the discount rate. The increase in the provision due
to the passage of time of $127,000 (2019: $330,000) was recognised in finance charges in the statement of comprehensive
income.
The provisions are reassessed at least annually. A change in any of the assumptions used to determine the provisions could
have a material impact on the carrying value of the provision.
(c) Movements in provisions
Movements in rehabilitation and mine closure provision during the financial year are set out below:
2020
$'000
14,456
1,276
(1,881)
127
773
14,751
2019
$'000
18,535
1,338
(5,909)
330
162
14,456
Rehabilitation and mine closure
Opening balance
Additional provision incurred
Expenditure during the year
Unwinding of discount
Change in estimate
70
| Alkane Resources Annual Report 2020 FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 18
Movements in restructuring provision during the financial year are set out below:
Restructuring provision
Opening balance
Additional provision incurred
Redundancies paid
Change in estimates
Movements in employee benefits provision during the financial year are set out below:
Employee benefits provision
Opening balance
Additional provision incurred
Employee benefits paid
Employee benefits provision classified as held for distribution to
owners
Note 18. Issued capital
2020
$'000
645
-
(792)
147
-
2020
$'000
2,396
1,921
(1,518)
(18)
2,781
2019
$'000
2,694
321
(2,370)
-
645
2019
$'000
3,620
1,698
(2,922)
-
2,396
Ordinary shares - fully paid
580,033,307
506,096,222
258,876
220,111
2020
Shares
2019
Shares
2020
$'000
2019
$'000
Movements in ordinary share capital
Details
Balance
Less: Deferred tax credit recognised directly into equity
Balance
Adjustment for reclassification
Share issue*
Share issue costs
Less: Deferred tax credit recognised directly into equity
Date
Shares
$'000
1 July 2018
506,096,222
-
220,160
(49)
30 June 2019
506,096,222
220,111
-
73,937,085
-
-
(922)
40,665
(1,223)
245
Balance
30 June 2020
580,033,307
258,876
*During the year 73,937,085 shares were issued for capital raising (2019: nil).
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Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 19
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
Note 19. Reserves
The following table shows a breakdown of the balance sheet line item ‘Reserves’ and the movements in these reserves during
the year. A description of the nature and purpose of each reserve is provided below the table.
Financial assets at fair value through other comprehensive income
reserve
Hedging reserve - cash flow hedges
Share-based payments reserve
Other reserves
2020
$'000
(101)
(989)
4,206
297
3,413
2019
$'000
151
-
2,981
(780)
2,352
Financial assets at fair value through other comprehensive income reserve
The cash flow hedge reserve is used to recognise the effective portion of gains or losses on derivatives that are designated
and qualify as cash flow hedges, as described in note 10. Amounts are subsequently either transferred to the initial cost of
inventory or reclassified to profit or loss as appropriate.
Hedging reserve – cash flow hedges
The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined to
be an effective hedge.
Share-based payments reserve
The reserve is used to recognise the grant date fair value of shares issued to directors and KMP, as well as the grant date fair
value of deferred rights granted but not yet vested.
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| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 20
Note 20. Retained profits/(accumulated losses)
Accumulated losses at the beginning of the financial year
Adjustment for reclassification
Accumulated losses at the beginning of the financial year - restated
Profit after income tax benefit for the year
Retained profits/(accumulated losses) at the end of the financial
year
2020
$'000
(8,587)
922
(7,665)
12,762
5,097
2019
$'000
(31,880)
-
(31,880)
23,293
(8,587)
Note 21. Critical accounting judgements, estimates and assumptions
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the
actual results. Management also needs to exercise judgement in applying the Group’s accounting policies.
Carrying value of non-current assets
Non-current assets include capitalised exploration and evaluation expenditures and mine properties. The Group has
capitalised significant exploration and evaluation expenditure on the basis either that such expenditure is expected to be
recouped through future successful development (or alternatively sale) of the areas of interest concerned or on the basis that
it is not yet possible to assess whether it will be recouped and activities are planned to enable that determination.
The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors,
including whether the Group decides to exploit the related lease itself, or, if not, whether it successfully recovers the related
exploration asset through sale. The future recoverability of mine properties is dependent on the generation of sufficient
future cash flows from operations (or alternately sale). Factors that could impact the future recoverability of exploration and
evaluation and mine properties include the level of reserves and resources, future technological changes, costs of drilling and
production, production rates, future legal changes (including changes to environmental restoration obligations) and changes
to commodity prices and exchange rates.
Estimates of recoverable quantities of resources and reserves also include assumptions requiring significant judgment as
detailed in the resource and reserve statements.
An impairment review is undertaken to determine whether any indicators of impairment are present. The Group has not
recorded an impairment charge or reversal against either the gold operations or critical metals cash generating units in the
current financial year. Refer to note 14 for details.
Depreciation of property, plant and equipment
Non-current assets include property, plant and equipment. The Group reviews the useful lives of depreciable asset at each
reporting date or when there is a change in the pattern in which the asset's future economic benefits are expected to be
consumed, based on the expected utilisation of the assets. Depreciation and amortisation are calculated using the units of
production method based on ounces of gold produced.
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Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 21
Rehabilitation and mine closure provisions
These provisions represent the discounted value of the present obligation to restore, dismantle and rehabilitate certain
items of property, plant and equipment and to rehabilitate exploration and mining leases. The discounted value reflects a
combination of management's assessment of the nature and extent of the work required, the future cost of performing the
work required, the timing of cash flows and the discount rate. Changes to one or more of these assumptions is likely to result
in a change to the carrying value of the provision and the related asset or a change to profit and loss in accordance with the
Group's accounting policy stated in note 17.
Net realisable value and classification of inventory
The Group's assessment of the net realisable value and classification of its inventory requires the use of estimates, including
the estimation of the relevant future commodity or product price, future processing costs and the likely timing of sale.
Share-based payments
The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value for share appreciation rights and performance rights
component tranche 1 is determined with the assistance of an external valuer. The number of performance rights issued under
the long-term incentive plan tranche 2 component are adjusted to reflect management’s assessment of the probability of
meeting the targets and service condition. The related assumptions are set out in note 30. The accounting estimates and
assumptions relating to equity settled share based payments would have no impact on the carrying amounts of assets and
liabilities within the next annual reporting period but may impact expenses and equity.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required
in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for
anticipated tax audit issues based on the consolidated entity's current understanding of the tax law. Where the final tax
outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax
provisions in the period in which such determination is made.
In addition, the Group has recognised deferred tax assets relating to carried forward tax losses to the extent there are
sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority against which the
unused tax losses can be utilised. Utilisation of the tax losses also depends on the ability of the entity to satisfy certain tests at
the time the losses are recouped. Refer to note 5 for the current recognition of tax losses.
74
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FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 22
Exploration and evaluation costs
Exploration and evaluation costs have been capitalised on the basis that the consolidated entity will commence commercial
production in the future, from which time the costs will be amortised in proportion to the depletion of the mineral resources.
Key judgements are applied in considering costs to be capitalised which includes determining expenditures directly related
to these activities and allocating overheads between those that are expensed and capitalised. In addition, costs are only
capitalised that are expected to be recovered either through successful development or sale of the relevant mining interest.
Factors that could impact the future commercial production at the mine include the level of reserves and resources, future
technology changes, which could impact the cost of mining, future legal changes and changes in commodity prices.
Where economic recoverable reserves for an area of interest have been identified, and a decision to develop has occurred,
capitalised expenditure is classified as mine development.
To the extent that capitalised costs are determined not to be recoverable in the future, they will be written off in the period in
which the determination is made.
Note 22. Financial risk management
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and
interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the
consolidated entity. The Group uses derivative financial instruments including gold forward and gold put option contracts to
mitigate certain risk exposures.
This note presents information about the Group's exposure to each of the above risks, their objectives, policies and processes
for measuring and managing risk, and the management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.
Management monitors and manages the financial risks relating to the operations of the group through regular reviews of the
risks and mitigating strategies.
(a) Market risk
(i) Foreign currency risk
The Group's sales revenue for gold are largely denominated in US dollars and the majority of operating costs are denominated
in Australian dollars, hence the Group's cash flow is significantly exposed to movement in the A$:US$ exchange rate. The
Group mitigates this risk through the use of derivative instruments, including but not limited to a combination of Australian
dollar denominated gold forward contracts and put options to hedge a portion of future gold sales.
The Australian dollar denominated gold forward contracts are entered into and continue to be held for the purpose of
physical delivery of gold bullion. As a result, the contracts are not recorded in the financial statements. Refer to note 27 for
further information.
(ii) Commodity price risk
The Group's sales revenues are generated from the sale of gold. Accordingly, the Group's revenues are exposed to commodity
price fluctuations, primarily gold. The Group mitigates this risk through the use of derivative instruments, including but not
limited to Australian dollar denominated gold forward contracts.
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Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 22
(iii) Interest rate risk
The Group's main interest rate risk arises through its cash and cash equivalents and other financial assets held within financial
institutions. The Group minimises this risk by utilising fixed rate instruments where appropriate.
Summarised market risk sensitivity analysis:
Interest rate risk
Impact on profit/(loss) after tax
30 June 2020
30 June 2020
Carrying
amount
$'000
+100BP
$'000
-100BP
$'000
Carrying
amount
$'000
+100BP
$'000
-100BP
$'000
48,337
2,028
8,614
(9,425)
-
338
-
60
-
399
(338)
-
(60)
-
(399)
69,582
348
8,417
(8,745)
-
487
-
59
-
546
(487)
-
(59)
-
(546)
Financial assets
Cash and cash equivalents
Receivables*
Other financial assets
Financial liabilities
Trade and other payables
Total increase / (decrease) in profit
*The receivables balance excludes prepayments and tax balances which do not meet the definition of financial assets and liabilities.
There is no exposure to foreign exchange risk or commodity price risk for the above financial assets and liabilities.
(b) Credit risk
The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered
representative across all customers of the consolidated entity based on recent sales experience, historical collection rates and
forward-looking information that is available.
In determining the recoverability of a trade or other receivable using the expected credit loss model, the Group performs a
risk analysis considering the type and age of the outstanding receivables, the creditworthiness of the counterparty, contract
provisions, letter of credit and timing of payment.
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposure to
customers, including outstanding receivables and committed transactions.
(i) Risk management
The Group limits its exposure to credit risk in relation to cash and cash equivalents and other financial assets by only utilising
banks and financial institutions with acceptable credit ratings.
(ii) Credit quality
Tax receivables and prepayments do not meet the definition of financial assets. The Group assesses the credit quality of the
customer, taking into account its financial position, past experience and other factors.
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FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 23
(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial liabilities as they fall due. The Group's approach
to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's
reputation. The Board of Directors monitors liquidity levels on an ongoing basis.
The Group's financial liabilities generally mature within 3 months, therefore the carrying amount equals the cash flow
required to settle the liability.
Note 23. Capital risk management
The Group's objectives when managing capital are to safeguard the ability to continue as a going concern, so that it
can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may return capital to
shareholders, pay dividends to shareholders, issue new shares or sell assets.
Note 24. Key Management Personnel disclosures
The aggregate compensation made to directors and other members of KMP of the consolidated entity is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
2020
$'000
2,163,571
122,437
101,735
1,062,871
3,450,614
2019
$'000
1,703,206
112,400
34,640
772,562
2,622,808
Mr Wilkins is associated with DWCorporate Pty Ltd, a company which provided company secretarial services to the Group
throughout the financial year ended 30 June 2020. This fee is disclosed as short-term employee benefits in the remuneration
report.
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Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 25
Note 25. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the
auditor of the Company:
Audit services - PricewaterhouseCoopers
Audit or review of the financial statements
Other services - PricewaterhouseCoopers
Other advisory services
Note 26. Contingent liabilities
2020
$'000
115
175
290
2019
$'000
174
61
235
The Group has entered into forward gold sales contracts which are not accounted for on the balance sheet. A contingent
liability of $14,178,000 (2019: contingent liability of $4,939,000) existed at the balance date in the event the contracts are
not settled by the physical delivery of gold.
The Group has contingent liabilities estimated up to the value of $8,330,000 (30 June 2019: $5,650,000) for the potential
acquisition of several parcels, including amount of $3,670,000 related to land acquisition surrounding the Dubbo Project. The
landholders have the right to require subsidiary Australian Strategic Materials Ltd to acquire their property as provided for in
the development consent conditions for the Dubbo Project or under agreement with Australian Strategic Materials Ltd.
Note 27. Commitments
(a) Exploration and mining lease commitments
In order to maintain current rights of tenure to exploration and mining tenements, the Group will be required to outlay the
amounts disclosed in the below table. These amounts are discretionary, however if the expenditure commitments are not
met then the associated exploration and mining leases may be relinquished.
Within one year
(b) Physical gold delivery commitments
2020
$'000
1,505
2019
$'000
2,377
As part of its risk management policy, the Group enters into derivatives including gold forward contracts and gold put options
to manage the gold price of a proportion of anticipated gold sales.
Alkane purchased gold forward sales and put options as part of a risk mitigation strategy on any potential downward price
pressure while Tomingley was processing the low grade stockpiles during the year.
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FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 28
The gold forward sales contracts disclosed below did not meet the criteria of financial instruments for accounting purposes
on the basis that they met the normal purchase/sale exemption because physical gold would be delivered into the contract.
Accordingly, the contracts were accounted for as sale contracts with revenue recognised in the period in which the gold
commitment was met. The balances in the table below relate to the value of the contracts to be delivered into by transfer of
physical gold.
30 June 2020
30 June 2020
Fixed forward contracts
Within one year
30 June 2019
Fixed forward contracts
Within one year
One to five years
(c) Capital commitments
Gold for
physical
delivery
Ounces
Contracted
gold sale price
per ounce ($)
Value of
committed
sales
$'000
17,770
1,836
32,619
12,980
14,770
1,854
1,853
24,065
27,374
Capital commitments committed for the year at the end of the reporting period but not recognised as liabilities amounted to
$8,787,000 (2019: $833,000). The amount related to the discontinued operation was $3,200,000.
Note 28. Events after the reporting period
On 16 July 2020, the Group publicly announced the shareholders’ approval of the demerger of Alkane's critical metals and
materials business and assets (the ASM Business) from the remainder of Alkane's business.
Australian Strategic Materials Ltd (ASM) listed on the ASX in July 2020 and will operate the ASM Business; and Alkane will
continue to own and operate the remainder of Alkane's business being, principally, its Australian gold business.
In July 2020 ASM was demerged with its cash reserves and no bank debt. Net assets equating to $112,973,000 at 30 June
2020 have demerged at 29 July 2020. All interests in the Dubbo Project and associated assets (including land and water
rights), together with ASM’s investment in South Korean metals technology company RMR Tech Corporation (subsidiary of
Ziron Tech), will be 100% owned by ASM following the demerger. ASM will have a focused Board and management team, a
strategy to pursue the advancement of the 'Clean Metal' metallisation technology, potential value-enhancing opportunities
in relation to the Dubbo Project and will continue to be involved in offtake and financing discussions, including those already
underway in relation to the Dubbo Project.
Following the demerger, Alkane will be an Australian focused gold company, with existing production from its Tomingley
Operations and the opportunity to grow its production base through organic exploration and discovery (including the Boda
discovery) and through further strategic acquisitions.
As at the date of the shareholder meeting to vote on the demerger on 16 July 2020, Alkane had 580,033,307 ordinary shares
on issue. Following the approval of the early vesting of the Alkane Performance Rights, the number of ordinary shares on
issue in Alkane will be 595,248,891, immediately following the demerger, and Alkane will have a capital structure as follows:
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Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 29
Capital Structure
Alkane Shares on issue:
Alkane Performance Rights:
Pre-Demerger Number
Post-Demerger Number
580,033,307
22,329,762
595,248,891
3,173,638
On 17 July 2020, Alkane Resources Ltd and Australian Strategic Materials Ltd entered into a restructure deed as part of the
demerger to capitalise $113,000,000 and forgive $4,730,991 of the related party loans to Australian Strategic Materials Ltd.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the
consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial
years.
Note 29. Related party transactions
Parent entity
Alkane Resources Ltd is the parent entity of the Group.
Associates
Interests in associates are set out in note 15.
Key Management Personnel
Disclosures relating to Key Management Personnel are set out in note 24 and the remuneration report included in the
Directors' Report.
Transactions with other related parties
Nuclear IT, a director-related entity, provides information technology consulting services to the Group which includes the
coordination of the purchase of information technology hardware and software totalling $397,677 for the current period
(2019: $65,400). These terms are documented in a service level agreement and represent normal commercial terms.
During the period fees amounting to $309,000 (2019: $169,400) were paid to DWCorporate Pty Ltd in which the current
Company Secretary of the Group, Mr D Wilkins, has a substantial financial interest. DWCorporate Pty Ltd provides secretarial
services to the Group. Mr D Wilkins was appointed Company Secretary of the Group on 29 March 2018.
Related party payables
As at 30 June 2020, there were no committee fees payable to the Group's Chairman, Mr I J Gandel (2019: $22,917, including
unpaid fees in 2018).
Invoices totalling $6,297 were outstanding at the end of the reporting period in relation to transactions with related party
DWCorporate Pty Ltd (2019: $16,500).
80
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 30
Note 30. Share-based payments
Share-based compensation benefits are provided to employees via the Group's incentive plans. The incentive plans consist of
short-term and long-term incentive plans for Executive Directors and other executives and the employee share scheme for all
other employees. Information relating to these plans is set out in the remuneration report and below.
The fair value of rights granted under the short-term and long-term incentive plans is recognised as an employee benefits
expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair
value of the rights granted, which includes any market performance conditions and the impact of any non-vesting conditions
but excludes the impact of any service and non-market performance vesting conditions.
Non-market vesting conditions and the impact of service conditions are included in assumptions about the number of rights
that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the
specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of
rights that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the
revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity.
The initial estimate of fair value for market-based and non-vesting conditions is not subsequently adjusted for differences
between the number of rights granted and number of rights that vest.
When the rights are exercised, the appropriate number of shares are transferred to the employee. The proceeds received net
of any directly attributable transaction costs are credited directly to equity.
Under the employee share scheme, shares issued by the Group to employees for no cash consideration vest immediately
on grant date. On this date, the market value of the shares issued is recognised as an employee benefits expense with a
corresponding increase in equity.
The fair value of deferred shares granted to employees for nil consideration under the employee share scheme is recognised
as an expense over the relevant service period, being the year to which the incentive relates and the vesting period of the
shares. The fair value is measured at the grant date of the shares and is recognised in equity in the share-based payment
reserve. The number of shares expected to vest is estimated based on the non-market vesting conditions. The estimates are
revised at the end of each reporting period and adjustments are recognised in profit or loss and the share-based payment
reserve.
Executive Directors and other executives
The Company’s remuneration framework is set out in the remuneration report, including all details of the performance rights
and share appreciation rights plans, the associated performance hurdles and vesting criteria.
Participation in the plans is at the discretion of the Board of Directors and no individual has a contractual right to participate
in the plans or to receive any guaranteed benefits. Participation is currently restricted to senior executives within the Group.
The determination of the number of rights that are to vest or be forfeited is made by the Remuneration Committee after
the statutory audit has been substantially completed. As such, the actual determination was made after the balance date
however details have been included in the tables below as the relevant performance period is the current financial year.
81
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 30
The following tables illustrate the number and weighted average fair value of, and movements in, share rights during the year.
Performance Rights
Outstanding at the beginning of the year
Issued during the year
Vested during the year
Lapsed during the year
Outstanding at the end of the year
2020
2019
Number of
performance
rights
18,476,061
3,853,701
(8,430,376)
(1,806,507)
12,092,879
Weighted
average
fair value
$
$0.18
$0.37
$0.24
$0.34
$0.18
Number of
performance
rights
10,236,883
8,239,178
-
-
18,476,061
Weighted
average
fair value
$
$0.26
$0.08
$0.00
$0.00
$0.18
The number of performance rights to be granted is determined by the Remuneration Committee with reference to the fair
value of each performance right which is generally the volume weighted average price for the month preceding the start of
the performance period. This will differ from the fair value reported in the table above which is determined at the time of
grant.
The following table lists the inputs to the models used.
Dividend yield
%
Expected
stock
volatility
%
Risk free rate
%
Expected
life
years
Weighted
average
share price at
grant date
$
-
-
-
-
-
-
70.00%
2.08%
70.00%
1.84%
66.00%
2.14%
65.00%
2.14%
67.00%
0.69%
65.00%
0.73%
2.9
2.8
3.0
2.9
2.8
2.6
2020
$'000
1,225
$0.25
$0.24
$0.22
$0.22
$0.40
$0.63
2019
$'000
865
Grant date
Performance hurdle
11/10/2017
04/12/2017
18/10/2018
21/11/2018
02/09/2019
22/11/2019
Service condition and market
condition
Service condition and market
condition
Services condition and market
condition
Service condition and market
condition
Service condition and market
condition
Service condition and market
condition
Expenses arising from share-based payment transactions:
Performance rights
82
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 31
Note 31. Earnings per share
Earnings per share for profit from continuing operations
Profit after income tax attributable to the owners of Alkane
Resources Ltd
Basic earnings per share
Diluted earnings per share
Earnings per share for profit/(loss) from discontinued operations
(Loss)/profit after income tax attributable to the owners of Alkane
Resources Ltd
Basic earnings per share
Diluted earnings per share
Earnings per share for profit
Profit after income tax attributable to the owners of Alkane
Resources Ltd
Basic earnings per share
Diluted earnings per share
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating
basic earnings per share
Adjustments for calculation of diluted earnings per share:
Performance rights
Weighted average number of ordinary shares used in calculating
diluted earnings per share
2020
$'000
13,345
Cents
2.44
2.37
2020
$'000
(583)
Cents
(0.11)
(0.10)
2020
$'000
12,762
Cents
2.33
2.26
2019
$'000
23,123
Cents
4.57
4.45
2019
$'000
170
Cents
0.03
0.03
2019
$'000
23,293
Cents
4.60
4.48
Number
Number
547,023,712
506,096,222
17,141,368
564,165,080
13,287,556
519,383,778
83
Alkane Resources Annual Report 2020 | FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 32
Note 32. External borrowings and assets pledged as security
Security deposits
As at the date of this report $8,614,000 (2019: $8,417,000) in deposits have been provided as security. Refer note 12 for
details.
On 21 December 2018, the working capital facility with Macquarie Bank Ltd was executed including the following securities:
● a security agreement requiring Alkane Resources Ltd and Tomingley Gold Operations Pty Ltd to maintain minimum cash
deposit balances of $3,000,000 and $5,000,000 respectively; and
● a parental guarantee provided by Alkane Resources Ltd and Tomingley Holdings Pty Ltd.
External borrowings
The external borrowings are secured by National Australia Bank (NAB) over the company's plant and equipment. The details
of the facilities are as following:
● On 17 January 2020, a NAB equipment finance loan of $702,500 was secured to finance a used Cat loader over a 60
month term. The interest rate of the facility is 4.0733% per annum. The security to be put in place is limited to the
equipment being financed.
● On 05 May 2020, another NAB equipment finance loan of $6,100,000 has been secured to finance the existing
underground earthmoving equipment. The term of the loan is for 36 months with an interest rate of 4.2968% per annum.
The security to be put in place is limited to the equipment being financed.
The external borrowings are secured over the assets to which they relate, the carrying value of which exceeds the value of
the liability. The Group holds title to the equipment under the facilities pledged as security.
The table below represents the carrying value of assets pledged as security:
Non-current
Plant and equipment
2020
$'000
6,803
2019
$'000
-
No other assets were pledged as security in the year ended 30 June 2020 (2019: $nil).
84
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 33
Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit after income tax
Total comprehensive income
Balance sheet
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Financial assets at fair value through other comprehensive income
reserve
Share-based payments reserve
Accumulated losses
Total equity
Determining the parent entity financial information
Parent
2020
$'000
14,091
14,091
Parent
2020
$'000
203,910
254,611
2,801
3,040
258,876
(101)
4,206
(11,410)
251,571
2019
$'000
22,513
22,664
2019
$'000
11,655
202,024
2,108
5,203
220,111
151
2,981
(26,422)
196,821
The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements,
except as set out below.
(i) Tax consolidation legislation
Alkane Resources Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation legislation.
Refer to note 5 for further details.
85
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 34
(ii) Share-based payments rights
The grant by the Company of rights to equity instruments to the employees of subsidiary undertakings in the Group is treated
as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference
to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with
a corresponding credit to equity.
(iii) Investment in subsidiaries
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 (2019: $nil).
Note 34. Deed of cross-guarantee
The following Group entities have entered into a deed of cross-guarantee. Under the deed of cross-guarantee, each body has
guaranteed that the debts to each creditor of each other body which is a party to the deed will be paid in full in accordance
with the deed:
● Alkane Resources Limited (the Holding Entity)
● Tomingley Holdings Pty Ltd and Tomingley Gold Operations Pty Ltd (the wholly owned subsidiaries, which are eligible for
the benefit of the ASIC Instrument)
By entering into the deed, the wholly owned entities have been relieved from the requirement to prepare financial
statements and Directors' Report under Corporations Instrument 2016/785 issued by the Australian Securities and
Investments Commission.
The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there are no other
parties to the deed of cross-guarantee that are controlled by Alkane Resources Ltd, they also represent the 'Extended Closed
Group'.
The statement of profit or loss and other comprehensive income and balance sheet (excluding ASM business, which is
separately disclosed in note 6) are substantially the same as the consolidated entity as stated in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income and therefore have not been separately disclosed.
86
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 35
Note 35. Reconciliation of profit after income tax to net cash from operating
activities
Profit after income tax (expense)/benefit for the year
Adjustments for:
Depreciation and amortisation
Net (gain)/loss on disposal of property, plant and equipment
Share of loss - associates
Share-based payments
Non-cash finance charges
Exploration costs provided for or written off
Fair value adjustments to derivatives
Finance charges
Realised loss on expiry put option derivatives
Demerger costs reclassified
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
(Increase)/decrease in inventories
Decrease in provision for income tax
Increase/(Decrease) in trade and other payables
Increase in deferred tax liabilities
Decrease in other provisions
Increase/(Decrease) in fair value of biological assets
Net cash from operating activities
Net debt reconciliation
2020
$'000
12,762
9,231
(9)
250
1,225
-
329
-
126
258
1,525
(749)
(3,134)
-
143
6,320
(81)
340
28,536
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Cash and cash equivalents
Borrowings - repayable within one year
Borrowings - repayable after one year
Net cash
2020
$'000
48,337
(2,659)
(4,515)
41,163
2019
$'000
23,293
7,327
7
-
865
330
582
(1,481)
-
-
-
287
14,392
(6,929)
(2,452)
9,314
(9,075)
(244)
36,216
2019
$'000
69,582
-
-
69,582
87
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 36
Opening net cash
Cash flows
Closing net cash
Cash
$
69,582
(21,245)
48,337
Borrowings
repayable
within one
year
$
Borrowings
repayable
after one
year
$
-
(2,659)
(2,659)
-
(4,515)
(4,515)
69,582
(14,071)
41,163
Note 36. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective
notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations did not have any impact on the amounts recognised in prior
periods and will also not affect the current or future periods.
Adoption of the new standard has had neither an impact on the timing of recognition, nor on the measurement of revenue in
respect of the sale of goods.
AASB 16 Leases
The Group adopted AASB 16 Leases from 1 July 2019. The standard replaces AASB 117 Leases and for lessees eliminates the
classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-
use assets and corresponding lease liabilities are recognised in the statement of financial position. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis, while the lease liability is
reduced by an allocation of each lease payment. In the earlier periods of the lease, the expense associated with the lease
under AASB 16 will be higher when compared to lease expenses under AASB 117. For lessor accounting, the standard does
not substantially change how a lessor accounts for leases.
The Group has elected to use the simplified transition approach as allowed under AASB 16 as well as apply the following
practical expedients permitted by the standard:
● reliance on previous assessments on whether leases are onerous;
● the accounting for operating leases with a remaining lease term less than 12 months as at 1 July 2020 as short-term
leases;
● the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group has reviewed its contracts that were in place at 1 July 2019 or have been entered into since and determined
that there are no long term operating leases. As a result, there was no impact on the current or prior financial period upon
adoption of AASB 16.
There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in
its current or future reporting periods and on foreseeable future transactions.
88
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 36
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate
for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for certain financial assets and
liabilities which are measured at fair value.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements, are disclosed in note 21.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in note 33.
Tax consolidated legislation
Alkane Resources Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Alkane Resources Ltd, and the controlled entities in the Tax Consolidated Group account for their own
current and deferred tax amounts. These tax amounts are measured as if each entity in the Tax Consolidated Group continues
to be a stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Alkane Resources Ltd also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in
the Tax Consolidated Group.
The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate
Alkane Resources Ltd for any current tax payable assumed and are compensated by Alkane Resources Ltd for any current tax
receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Alkane Resources
Ltd under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in
the wholly owned entities financial statements.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts
receivable from or payable to other entities in the Group.
89
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 36
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Alkane Resources Ltd
('Company' or 'parent entity') as at 30 June 2020 and the results of all subsidiaries for the year then ended. Alkane Resources
Ltd and its subsidiaries together are referred to in these financial statements as the 'consolidated entity' or the 'Group'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity
when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control
ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the consolidated entity.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the consolidated statement of
comprehensive income, statement of changes in equity and balance sheet respectively.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Alkane Resources Ltd's functional and presentation
currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit
or loss.
Non-current assets or disposal groups classified as held for distribution to owners
Non-current assets and assets of disposal groups are classified as held for distribution to owners when the entity is
committed to distribute the asset (or disposal group) to the owners. They are measured at the lower of their carrying amount
and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for distribution
to owners, they must be available for immediate distribution in their present condition and their distribution must be highly
probable.
An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of disposal
groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal
of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously
recognised.
Non-current assets are not depreciated or amortised while they are classified as held for distribution to owners. Interest and
other expenses attributable to the liabilities of assets held for distribution continue to be recognised.
Non-current assets classified as held for distribution to owners and the assets of disposal groups classified as held for
distribution to owners are presented separately on the face of the balance sheet, in current assets. The liabilities of disposal
groups classified as held for distribution to owners are presented separately on the face of the balance sheet, in current
liabilities.
90
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - NOTE 36
Impairment of non-financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group
of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition
of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial
asset or group of financial assets that can be reliably estimated.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the
period in which they are incurred.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the tax authority is included in other receivables or other payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
● the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares; by
● the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in
ordinary shares issued during the year and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
● the profit attributable to owners of the Company, excluding any costs of servicing equity, and
● the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of
all dilutive potential ordinary shares.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
91
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | DIRECTORS' DECLARATION
In the Directors' opinion:
● the financial statements and notes set out on pages 48 to 91 are in accordance with the Corporations Act 2001 including:
(a) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(b) giving a true and fair view of the consolidated entity's financial position as at 30 June 2020 and of its performance for the
financial year ended on that date; and
● the financial statements and notes also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 36 to the financial statements;
● there are reasonable grounds to believe that Alkane Resources Limited will be able to pay its debts as and when they
become due and payable.
● at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group
will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross
guarantee described in note 34 to the financial statements.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors.
On behalf of the Directors
N P Earner
Managing Director
24 August 2020
Perth
92
| Alkane Resources Annual Report 2020
FINANCIAL REPORT | INDEPENDENT AUDITOR'S REPORT
Independent auditor’s report
To the members of Alkane Resources Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Alkane Resources Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2020 and of its
financial performance for the year then ended, and
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated balance sheet as at 30 June 2020
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies, and
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
PricewaterhouseCoopers, ABN 52 780 433 757
Brookfield Place, 125 St Georges Terrace, PERTH WA 6000, GPO Box D198, PERTH WA 6840
T: +61 8 9238 3000, F: +61 8 9238 3999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
93
Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | INDEPENDENT AUDITOR'S REPORT
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
The Group produces gold from its Tomingley Gold operations, located in New South Wales. The Group
is also currently undertaking exploration and evaluation activities at its Dubbo Project in New South
Wales, and other exploration projects outside of Tomingley Gold and Dubbo operations. The
accounting processes are structured around a Group finance function at its head office in Perth.
Materiality
Audit scope
Key audit matters
• Our audit focused on where
the Group made subjective
judgements; for example,
significant accounting
estimates involving
assumptions and inherently
uncertain future events.
•
The accounting processes are
structured around a Group
finance function at its head
office in Perth.
• Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
and Risk Committee:
− Estimate of rehabilitation
and mine closure provision,
and
− Carrying value of
exploration and evaluation
assets.
•
These are further described in
the Key audit matters section of
our report.
•
For the purpose of our audit
we used overall Group
materiality of $3,277,000,
which represents
approximately 1% of the
Group’s total assets.
• We applied this threshold,
together with qualitative
considerations, to determine
the scope of our audit and the
nature, timing and extent of
our audit procedures and to
evaluate the effect of
misstatements on the financial
report as a whole.
• We chose Group total assets
because, in our view, it is the
benchmark against which the
performance of the Group is
most commonly measured.
• We selected 1% based on our
professional judgement noting
that it is also within the range
of commonly acceptable asset
related thresholds.
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| Alkane Resources Annual Report 2020
FINANCIAL REPORT | INDEPENDENT AUDITOR'S REPORT
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit matter
Estimate of rehabilitation and mine closure
provision
We performed the following procedures, amongst
others:
(Refer to Rehabilitation and mine closure provision in
note 17 and Critical accounting estimates and
judgements in note 21 to the financial statements)
As a result of its mining and processing activities at
Tomingley Gold, the Group incurs obligations to
restore and rehabilitate the environment disturbed by
its operations. Rehabilitation activities are governed by
a combination of legislative requirements and the
Group’s policies.
This was a key audit matter as determining the
provision for rehabilitation and mine closure requires
the use of significant estimates and judgements by the
Group in assessing the magnitude, nature and extent of
rehabilitation work to be performed, and in
determining:
•
•
the expected future cost of performing the work
the timing of when the rehabilitation activities are
expected to take place, and
• economic assumptions such as the discount rate
used to discount this estimate to net present value.
• Evaluated the Group’s rehabilitation and
restoration cost forecasts including the process by
which they were developed and tested the
mathematical accuracy of the calculation of the
discounted cash flows prepared by the Group,
• Evaluated the competence of experts used by the
Group in calculating the nature and extent of
rehabilitation work required,
• Compared prior year planned rehabilitation
activities and estimated cost to the actual activity
and cost incurred for rehabilitation work performed
during the year and investigated significant
differences,
• Benchmarked key market related assumptions
including inflation rates and discount rates against
external market data, and
• Evaluated the basis for cost estimations made by
the Group, in light of the budgets and forecasts
approved by the Board and tested on a sample basis
the provision amount to comparable data sourced
from external parties and management’s experts.
Carrying value of exploration and evaluation
assets
We performed the following procedures:
• Assessed whether the Group retained right of
(Refer to Exploration and evaluation in note 14 and
Critical accounting estimates and judgements in note
21 to the financial statements)
tenure for all of its exploration licence areas by
obtaining licence status records from relevant
government on-line databases.
The Group’s exploration assets are subject to the
impairment indicators assessment required by AASB 6
Exploration for and Evaluation of Mineral Resources
(AASB 6).
• For a sample of additions to exploration and
evaluation assets during the year inspected relevant
supporting documentation, such as invoices, and
compared the amounts to accounting records.
Due to the relative size of this balance in the
consolidated balance sheet as well as the judgemental
application of AASB 6 this was a key audit matter.
Judgement was required by the Group to assess
whether there were indicators of impairment of the
• For a sample of additions to exploration and
evaluation assets during the year tested the nature
of the expense being capitalised and whether this is
in accordance with AASB 6.
•
Inquired of management and directors as to the
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Alkane Resources Annual Report 2020 |
FINANCIAL REPORT | INDEPENDENT AUDITOR'S REPORT
Key audit matter
How our audit addressed the key audit matter
capitalised exploration and evaluation assets due to the
need to make estimates and assumptions about future
events and circumstances, such as whether the mineral
resources may be economically viable to mine in the
future.
future plans for the capitalised exploration and
evaluation assets and assessed plans for future
expenditure to meet minimum licence
requirements.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2020, but does not include the
financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other
information we obtained included the Corporate directory and the Directors' report. We expect the
remaining other information to be made available to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
When we read the other information not yet received, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our
professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
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FINANCIAL REPORT | INDEPENDENT AUDITOR'S REPORT
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 32 to 43 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the remuneration report of Alkane Resources Limited for the year ended 30 June 2020
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Helen Bathurst
Partner
Perth
24 August 2020
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Alkane Resources Annual Report 2020 | FINANCIAL REPORT | SHAREHOLDER INFORMATION
Shareholder Information
Additional information required by Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows.
The information is current as at 1 September 2020.
Distribution of Equity Securities
Analysis of numbers of equity security holders by size of holding:
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
The number of equity security holders holding less than a marketable parcel of securities are:
Twenty Largest Shareholders
The names of the 20 largest holders of quoted ordinary shares are:
ABBOTSLEIGH PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ABBOTSLEIGH PTY LTD
CITICORP NOMINEES PTY LIMITED
CHAPELGREEN PTY LTD
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