Austral Gold Limited
Annual Report 2020

Plain-text annual report

MEDIA RELEASE Austral Gold Limited 17 March 2021 Austral Gold Files 2020 Annual Report Austral Gold Limited (the “Company” or “Austral”) (ASX: AGD; TSX-V: AGLD) is pleased to announce that it has filed its Annual Report for the Financial Year Ended 31 December 2020. The Annual Report is available under the Company’s profile at www.asx.com.au and www.sedar.com and on the Company’s website at www.australgold.com About Austral Gold Austral Gold Limited is a growing gold and silver mining, development and exploration company building a portfolio of quality assets in Chile, the USA and Argentina. Austral owns 100% interest in the Guanaco/Amancaya mine in Chile and the Casposo Mine (care and maintenance) in Argentina, and a 26.46% interest in the Rawhide Mine in Nevada. In addition, Austral owns an attractive portfolio of exploration projects in the Paleocene Belt in Chile (including those acquired in the recent acquisition of Revelo Resources Corp) and a 100% interest in the Pingüino project in Santa Cruz, Argentina. Austral Gold Limited is listed on the TSX Venture Exchange (TSX-V: AGLD), and the Australian Securities Exchange. (ASX: AGD). For more information, please consult Austral's website at (www.australgold.com). Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. Release approved by the Chief Executive Officer of Austral Gold, Stabro Kasaneva. For additional information please contact: Jose Bordogna Chief Financial Officer Austral Gold Limited jose.bordogna@australgold.com +54 (11) 4323 7558 David Hwang Company Secretary Austral Gold Limited info@australgold.com +61 (2) 9698 5414448 Austral Gold Limited ABN 30 075 860 472 ASX: AGD TSXV: AGLD Level 5 126 Phillip St, Sydney NSW 2000 | T +61 2 9380 7233 | F +61 2 9251 7455 | info@australgold.com | www.australgold.com ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2020 www.australgold.com TABLE OF CONTENTS CORPORATE DIRECTORY CHAIRMAN’S LETTER KEY PRINCIPLES REVIEW OF ACTIVITIES DIRECTORS’ REPORT FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDITOR’S REPORT ADDITIONAL INFORMATION 4 6 8 10 34 54 88 90 98 Austral Gold Limited 3 Annual Report 2020 CORPORATE DIRECTORY KEY MANAGEMENT Stabro Kasaneva Chief Executive Officer and Executive Director Rodrigo Ramirez Vice President of Operations Raul Guerra Vice-President of Exploration Jose Bordogna Chief Financial Officer DIRECTORS Wayne Hubert Chairman & Executive Director Eduardo Elsztain Vice Chairman & Non-Executive Director Saul Zang Non-Executive Director Pablo Vergara del Carril Non-Executive Director Stabro Kasaneva Chief Executive Officer and Executive Director Robert Trzebski Independent Non-Executive Director Ben Jarvis Independent Non-Executive Director COMPANY SECRETARY David Hwang Automic Group REGISTERED OFFICE Level 5 126 Phillip Street Sydney NSW 2000 Tel: +61 2 9380 7233 Email: info@australgold.com Web: www.australgold.com OTHER OFFICES Santiago, Chile Lo Fontecilla 201 of. 334 Santiago, Chile Tel: +56 (2) 2374 8560 Buenos Aires, Argentina Bolivar 108 Buenos Aires (1066) Argentina Tel: +54 (11) 4323 7500 Fax: +54 (11) 4323 7591 Vancouver, Canada 170-422 Richards Street Vancouver, BC V6B 2Z4 Tel: +1 604 868 9639 Austral Gold Limited 4 Annual Report 2020 LISTED Australian Securities Exchange ASX: AGD TSX Venture Exchange TSXV: AGLD PLACE OF INCORPORATION: Western Australia SHARE REGISTRIES Computershare Investor Services Australia GPO Box 2975 Melbourne VIC 3001 Tel: 1300 850 505 (within Australia) Tel: +61 3 9415 5000 (outside Australia) Computershare Investor Services Canada 510 Burrard Street, 2nd Floor Vancouver, BC V6C 3B9 Tel: +1 604 661 9400 Fax: +1 604 661 9549 AUDITORS KPMG www.kpmg.com.au Austral Gold Limited 5 Annual Report 2020 DEAR SHAREHOLDERS Austral Gold Limited 6 Annual Report 2020 state of Utah with the goal of consolidating the Mercur camp for the first time. The investment was completed in early 2021. In 2021 we plan to build upon the accomplishments made this year. We forecast production to be at 50,000-55,000 gold equiva- lent ounces and expect to continue to deliver solid margins and strong cash flows from operations. Our strategic acquisitions and organic growth opportunities, backed by an experienced manage- ment team with a proven operational and exploration track record, an exceptional understanding of the Chilean and Argentinean resources sector and the strategic equity investments in North America provide us with the foundation for continued growth. This has been a very good year for our shareholders. The market finally started to recognise the value we created as indicated by the 200% increase in our share price in 2020. In addition, we paid our shareholders a dividend of A$0.009 per share and in early 2021 declared another dividend of A$0.008 per share. Our Board is proud of key milestones that Austral Gold achieved this year, including: • Solid production at Guanaco/Amancaya • Record adjusted EBITDA with solid C1 and AISC metrics at our mining operations in Chile • Exploration success that included significant drilling results at Amancaya, Guanaco and Casposo • A stronger balance sheet with an increase in our current ratio to 1.33 (2019:1.14) and a reduction of our combined net debt by US$10.3m (net of cash and cash equivalents) to negative US$4.0m (2019: positive US$6.3m). The amount is net of approximately 6,200 refined gold ounces in inventory with a fair value of US$11.7 million at year-end. • Increase in our share price by 200% • Payment of a dividend of US$3.5 million in 2020 and declaration of a dividend of approximately US$3.8 million in 2021 Safety is also a significant priority for Austral Gold. We are commit- ted to the well-being of our employees and the communities in which we operate, and continue to promote the highest health, safety and environmental standards. We are very supportive of the local communities in which we operate through local hiring of personnel and community and education initiatives. During 2019 and 2020, we saw a positive trend for gold and silver prices and we expect the price of precious metals to remain strong in 2021 and increase over the long term. Although we have improved our financial results in 2020, we continually strive to improve profit margins, while increasing the life and value of our mineral resources to ultimately increase shareholder value. I would like to thank our shareholders for their continued support, all of our employees and contractors, and our Board members for their hard work and dedication during this year. WAYNE HUBERT Chairman I AM PLEASED TO REPORT THAT 2020 WAS A VERY GOOD YEAR FOR AUSTRAL GOLD LIMITED AND I AM HONORED TO BE NAMED EXECUTIVE CHAIRMAN IN AUGUST 2020. Our operations generated both record cash flows and gross margins through the realisation of higher gold and silver prices despite COVID-19, lower sales revenue, an interruption to opera- tions due to our miners’ strike and the strategic decision to outsource operations. The key to any business is its people and having strong leader- ship. In order to complement the executive team, we were fortu- nate to add Raul Guerra as Corporate VP of Exploration. Raul brings strong leadership to the Group, with more than 30 years of precious metal exploration experience and has been involved in the discovery of more than 50 million ounces of gold including two large greenfield discoveries at Barrick. We are excited by his contributions to date which included leading a strategic review of exploration activities and setting priorities including major goals for the Group including the discovery of new Tier I or II deposit(s) through exploration and new business. Another key factor in running a successful business is having suffi- cient cash to execute its business plan. The Guanaco/Amancaya mine complex has been our primary cash generating asset and we expect this to continue. The Board is very proud of the financial performance at the Guanaco/Amancaya mine complex in 2020 as it was the main contributor to the Group’s adjusted EBITDA of US$46.0 million (2019: US$37.6 million), a profit after income tax of US$7.667 million (2019: US$1.639 million) and the generation of net cash flows from operating activities of US$30.482 million (2019: US$29.635 million). With our objective to extend the mine life at Guanaco/Amancaya mine in Chile, not only did we obtain many positive drill results at Amancaya, we also took great strides to increase our footprint in the Paleocene-Eocene Belt in Chile. This was accomplished through the acquisition of Revelo Resources (closed in February 2021) and other surrounding mining properties to our flagship mine complex. Regarding Casposo, although we have a clear objective to recom- mence mining operations, our efforts in 2020 were affected by COVID-19. Notwithstanding, we completed phase 1 of the new drilling campaign while continuing the design of the next phase and have budgeted for a significant increase in exploration which also includes activities in the new area of Manantiales. In addi- tion, we continually assess opportunities to consolidate projects that surround Casposo and to source ore from third parties in the region. This is a work in progress and several compelling oppor- tunities are being pursued by us. Further, with the agreement that provides us with the option to acquire all or part of the Sierra Blanca gold-silver project in Santa Cruz, near the Group’s Pingüino project, we expanded the area of our Pingüino project by securing an additional 7,000 hectares, resulting in a new exploration cluster in the Province of Santa Cruz. In the US, during 2020, we increased our investment in the Rawhide mine in Nevada, USA to 26.46% from 22.48% and also entered into an agreement to acquire a 19.9% equity position in Ensign Gold which is currently assembling a 5,000-hectare land package on favourable Carlin-type gold deposit geology in the Austral Gold Limited 7 Annual Report 2020 I S E L P C N R P I Y E K Austral Gold Limited 8 Annual Report 2020 Be socially and environmentally responsible and strive to reduce safety risks and operating costs Be the preferred partner for companies, communities and governments to operate precious metal projects in the Americas: currently focused on Chile, Argentina and the USA MAXIMIZE VALUE CREATION FOR STAKEHOLDERS Austral Gold Limited 9 Annual Report 2020 REVIEW OF ACTIVITIES Austral Gold Limited 10 Annual Report 2020 Rawhide Mine Fallon Nevada, USA PROPERTIES Operations Exploration projects 100% Interest 100% Interest GUANACO/AMANCAYA CASPOSO 100% Interest 26.46% Interest PINGÜINO RAWHIDE MINE Guanaco/Amancaya Antofagasta, Chile Casposo San Juan Province, Argentina Pingüino Santa Cruz Province, Argentina Austral Gold Limited is a growing gold and silver mining, development and exploration company building a portfolio of quality assets in Chile, the USA and Argentina. Austral owns 100% interest in the Guanaco/Amancaya mine in Chile. Casposo Mine (care and maintenance) in Argentina, and a 26.46% interest in the Rawhide Mine in Nevada and a 19.96% on the Mercur Project in Utah (Ensign Gold). In addition, Austral owns an attractive portfolio of exploration projects in the Paleocene Belt in Chile (including the recent investments in Revelo Resources Corp and other surrounding mining concessions near Guanaco/Amancaya) and a 100% interest in the Pingüino project in Santa Cruz, Argentina. Austral Gold Limited 11 Annual Report 2020 AUSTRAL GOLD HAS PRODUCED OVER 500,000 GOLD EQUIVALENT OUNCES OVER THE LAST TEN YEARS. SOUND CASH FLOWS HAVE FUNDED AUSTRAL’S GROWTH INITIATIVES 5 6 3 , 1 5 8 8 0 , 1 5 8 8 8 , 6 4 Acquired Amancaya Project Acquired 51% of U/G mining contractor Kinross royalty agreement exited 2014 Purchased 15% stake in Goldrock Mines Purchased 20% stake in Argentex Mining 2013 Achieved low cash costs of US$548/ AuEq oz 2015 8 5 0 , 0 0 3 5 9 , 2 1 First gold doré bar poured at Guanaco 2011 Guanaco cash flow positive Guanaco mineral resources increased by 10% 2012 * Includes production from Casposo (51%) ** Includes production from Casposo (70%) Austral Gold Limited 12 Annual Report 2020 * * 6 5 0 , 0 8 6 3 1 , 0 7 * * 8 8 4 , 4 6 * 4 1 0 , 5 5 Acquired San Guillermo & Reprado Projects Acquired additional 19% of Casposo Mine Updated FS for mining projects Finalized construction of new agitation leaching plant in Chile First full year operating the new agitation leaching in plant Record combined production surpassing 80K Geo Starts UG opera- tions at Amancaya Record individual production at Guanaco/ Amancaya Placed Casposo on Care & Maintenance Effectively acquired remaining 30% of Casposo mine Entered into North America through investment in the Rawhide mine 2017 2018 2019 Acquired 51% of Casposo Mine Acquired Argentex Mining Dual listed on TSX-V 2016 0 9 1 , 5 5 Record Adjusted EBITDA of US$46 million Agreement to acquire 100% of Revelo Resources (closed in 2021) Agreements to acquire additional mining concessions near Guanaco/ Amancaya Agreement to acquire up to 100% of Sierra Blanca in Argentina 2020 Austral Gold Limited 13 Annual Report 2020 REVIEW OF RESULTS OF OPERATIONS Key Operating Results Fiscal Year ended 31 December 2020 2019 Guanaco/ Amancaya Mines Rawhide Mine (100% basis)1 Casposo Mine (100% basis)2 Net to Austral Gold*2,3 Guanaco/ Amancaya Mines Casposo Mine (100% basis)2 Net to Austral Gold1,2 Processed (t) 195,296 1,855,337 Gold produced (Oz) Silver produced (Oz) Gold Equivalent Ounces (Oz)3 52,306 24,213 253,066 160,113 55,190 26,265 - - - - 665,995 253,024 39,545 280,706 58,449 60,666 2,770 62,605 293,687 543,906 143,542 644,385 61,853 67,005 4,473 70,136 1 Attributable production from the Rawhide Mine and as of December 2020 twelve month Austral recorded a weighted average of 25.37% (2019-nil) as 17 December 2019 – acquired 22.48% ownership in the Rawhide Mine and exercised options to increase its ownership interest on 31, January 2020 Austral to 23.62% ownership interest. On 8, May 2020 the Group exercised its remaining options and increased its ownership interest to 26.46%. 2 Effective December 2019, Austral Gold owned 100% of Casposo. From March 2017 to 22 December 2019, Austral Gold owned 70% of Casposo; 3 AuEq ratio is calculated at 86:3 Ag:Au for the FY20 and 85:1 Ag:Au for FY19. Austral Gold Limited 14 Annual Report 2020 BACKGROUND The Guanaco and Amancaya mines remain the Company’s flagship asset. Guanaco is located approximately 220km south-east of Antofagasta in Northern Chile at an elevation of 2,700m and 45km from the Pan American Highway. Guanaco is embedded in the Paleocene/Eocene belt, a geological feature which runs north/south through the centre of the Antofagasta region, Chile. Gold mineralisation at Guanaco is controlled by pervasively silicified, sub-vertical east/northeast-west/southwest trend- ing zones with related hydro-thermal breccias. Silicification grades outward into advanced argillic alteration and further into zones with argillic and propylitic alteration. In the Cachinalito vein system, most of the gold mineralisation is concentrated between depths of 75m and 200m and is contained in horizontally elongated mineralised shoots. The alteration pattern and the mineralogical composition of the Guanaco mineralisation have led to the classification as a high-sulfidation epithermal deposit. In July 2014, the Company acquired the Amancaya Project (‘Amancaya’) from Yamana Gold Inc (TSX:YRI | NYSE:AUY) which is located approximately 60km south-west of the Guanaco mine. Amancaya is a low sulfidation epithermal gold-silver deposit consisting of eight mining exploration concessions covering 1,755 hectares (and a further 1,390 hectares of second layer mining claims). At Amancaya, open-pit mining operations began during the first half of 2017 while underground operations started in 2018. The Amancaya ore is delivered to the Guanaco plant for processing. On 14 November 2017, Austral Gold purchased a 100% inter- est in the San Guillermo and Reprado gold-silver projects, located in the emerging Amancaya precious metals district of northern Chile, from Revelo Resources Corp. (TSX- V:RVL) for consideration of ten million Austral Gold ordinary shares. The San Guillermo property consists of concessions totalling 12,175 hectares that surround the company’s high-grade gold and silver Amancaya operation. The Reprado Project consists of concessions totalling 3,960 hectares situated approximately 20km north of Amancaya. Historical drilling undertaken by Teck Resources Ltd intersected gold in low sulfidation quartz veins trending essentially east-west. A technical report on combined resources and construction of a new agitation leaching plant at the Guanaco mine site was completed in June 2017 and the commissioning phase was completed in November 2017. During February 2021, the Group acquired Revelo Resources, that owns three projects located close to the Group’s pre- existing Guanaco/Amancaya mining complex to provides the Group with a leading role in the Paleocene-Eocene Belt in Chile. Austral Gold Limited 15 Annual Report 2020 PRODUCTION Guanaco/Amancaya Operations Mined Ore (t) Processed (t) Average Plant Grade (g/t Au) Average Plant Grade (g/t Ag) Gold produced (Oz) Silver produced (Oz) Gold-Equivalent (Oz) *** C1 Cash Cost of Production (US$/AuEq Oz)* All-in Sustaining Cost (US$/Au Oz) * Realised gold price (US$/Au Oz) Realised silver price (US$/Ag Oz) Sales volume Fiscal Year ended 31 December months ended 2020 196,194 195,296 8.5 43.9 52,306 253,066 55,190 723 1,021 1,765 21 49,995 2019 250,986 253,024 7.6 81.2 60,666 543,906 67,005 661 899 1,404 16 66,657 * The cash cost (C1) includes: Mine, Plant, On-Site G&A, Smelting, Refining, and Royalties (excludes Corporate G&A). It is the cost of production per gold equivalent ounce. ** The All-in Sustaining Cost (AISC) includes: C1, Sustaining Capex, Brownfield Exploration, and Mine Closure Amortisation. *** AuEq ratio is calculated at 88:1 Ag:Au for the FY20 and 85:1 Ag:Au for the FY19 Production during FY20 at Guanaco/Amancaya decreased by 18% to 55,190 gold equivalent ounces (52,306 gold ounces and 253,066 silver ounces) from 67,005 gold equivalent ounces (60,666 gold ounces and 543,906 silver ounces) during FY19. The decrease was mainly a result of the lower throughput of the mine and lower silver grades which was anticipated in accordance with the Group’s production guidance. During FY20, mining continued at the Guanaco underground operations with a total of 2,928 tonnes mined while 193,266 tonnes were mined from the Amancaya underground operations. Management continues to evaluate opportunities to extend the life of mine of the Guanaco and Amancaya mines. Austral Gold Limited 16 Annual Report 2020 EXPLORATION With the appointment of Raul Guerra as Corporate VP of Exploration during the third quarter, the Company performed a strategic review of the exploration activities and defined new objectives. Based on the strategic review, the exploration priorities were set as follows: • Discover new Tier I or II deposit(s) through exploration and acquisition of new business • Discover brownfields ounces at Amancaya, Casposo and Manantiales: • Guanaco District: complete delineation at Sierra Inesper- ada to drill the best ranked targets starting in October 2020 • New Opportunities: Identify and consolidate third-party projects with potential near existing Austral Gold infra- structure • Explore other oxide and deeper gold-rich sulfide mineral- ization opportunities at the Guanaco District During the year an evaluation of both Guanaco and Aman- caya was completed with a new approach including the utilisation of specialist geology consultants to define the structural architecture, identify the phreatomagmatic activ- ity centers, recognize new major mineralization controls and reprocess previous remote sensing and geophysical studies. With this new information platform, targeting and ranking was completed that reoriented the exploration and identified new opportunities. MINING During the year ended 31 December 2020, mining contin- ued at the Guanaco underground operations with a total of 2,928 tonnes mined while 193,266 tonnes were mined at the Amancaya underground operations. The geological team continues to investigate opportunities to extend both the life of mine of the Guanaco deposit (reserves depleted during 2018) and the Amancaya deposit. SAFETY AND ENVIRONMENTAL PROTECTION During the year ended 31 December 2020, there was one lost-time accident (LTA) and four nil-lost-time accidents (NLTA) involving employees of Guanaco and third party contractors. Safety and environmental protection are core values of the Company. The implementation of best practice safety stan- dards along with a sound risk management program are key priorities for Austral Gold. COVID-19 IMPACT During FY20, the Company´s flagship mine complex in Chile (Guanaco/Amancaya) was not significantly impacted by COVID-19 except for several precautionary measures to address the risk of the COVID-19 virus as recommended by the Health Authorities and Governments around the world. In Argentina, exploration activities were reduced at the Casposo and Pingüino projects following mandatory isola- tion measures in effect in Argentina during Q2 and Q3 2020. COMMUNITY ACTIVITIES Austral Gold has an extensive history of being a committed neighbor to the communities in which it operates. Our support to the communities surrounding our projects in Chile focuses mainly on education programs as we believe that through education it is possible to improve citizens socio-economic conditions and contribute to the youth population and the overall community. Austral Gold Limited 17 Annual Report 2020 EXPLORATION IN CHILE Austral Gold Limited 18 Annual Report 2020 Exploration in 2020 was focused on brownfield areas in the Amancaya / Sierra Inesperada (Guanaco) District. EXTENDING THE KNOWN VEINS TO DEPTH The drilling program started in the fourth quarter of 2020 in order to extend resources and reserves at the Amancaya mine at depth. Previous exploration was not successful in intercepting the veins at depth when drilling was performed from east to west. Austral mapped out the contact between two breccia zones at the loca- tion of the veins and observed a steepening of this contact zone. Consequently, drilling was undertaken from west to east, and intersected the vein with similar widths and tenor that is currently being mined 50m to 100m under previous intersections. Drill hole DAM-008 also included a high-grade intersection on the hanging wall of 4.1m of 23.5 g/t Au and 29 g/t Ag. For 2021 we have also budgeted for a near mine exploration program to target the discovery of the vein systems based on the new structural - geological district model and ore controls related to phreatomagmatic breccias complex learned from the current program. AMANCAYA MINE EXPLORATION The exploration activities at the Amancaya Project focused on a drilling campaign to validate the continuity of mineralization along strike and to depth with the goal of expanding the resources. During September 2020, the Company started a drilling campaign based on a new internal conceptual geological model for the Amancaya Mine updated with relogging, remapping of current accessible ramps and drifts, and modelling of conceptual geologi- cal sections. The main objectives were to perform in-depth testing on the continuity of mineralization at level 1650 and to identity shallow extension to the south of Sur Central Vein. HIGHLIGHTS Significant results were obtained from the deep drilling campaign of the Amancaya Vein System including highlights from assays reported on 27 January 2021: • DAM-002 1.35 meters @14.65 g/t gold and 50.60 g/t silver including 42.43 g/t gold and 124 g/t silver over 0.44 meters • DAM-003 2.07 meters @12.13 g/t gold and 57.50 g/t silver including 21.01 g/t gold and 142.8 g/t silver over 0.88 meters • DAM-008 2.53 meters @12.18 g/t gold and 8.50 g/t silver in the Central Vein and 30m at 4.04 g/t gold and 7.50 g/t silver includ- ing 4.14 meters @23.50 g/t gold and 29.30 g/t silver in a newly discovered mineralized breccia zone at depth • DAM-012 0.40 meters @41.89 g/t gold and 7.50 g/t silver A total of 4,806 meters were drilled to validate the extension of the mineralization down to the 1600 level at the Amancaya mine. A detailed relogging and underground mine mapping program identified new controls for the veins related to the phreatomagam- tic breccia complex geometry. Encouraging results were obtained in the central vein, mainly at the southern end of the Sur vein opening exploration to the south of this sector. Additionally, one drill hole was successfully extended to explore the eastern edge of the Amancaya diatreme as a major mineral- ization control, intercepting 30m @ 4.04 gpt Au (DAM-008), which includes high-grade veins and hydrothermal injection breccias. This zone also included a high-grade intersection on the hanging wall of 4.1m of 23.5 g/t Au and 29 g/t Ag. During Q1 2021, we plan on focusing the drilling activities on defin- ing the continuity of the mineralization intercepted by hole DAM-008, recognizing the southern and northern extension of this new Vein/ Breccia System. In addition, an infill drilling program is planned to categorize resources at the north, central and south veins. Austral Gold Limited 19 Annual Report 2020 GUANACO DISTRICT EXPLORATION During the year, the focus continued on the Sierra Inesperada area with delineation and drilling activities. A total of 2,239 meters were drilled, starting with Mina Inesperada and continuing with a first phase drill campaign at the Carla and Purisima veins. Seven maar-diatreme complexes in the area were recognized suggesting that they are near entirely preserved and affected by favorable hydrothermal alteration, being relatively restricted to phreatomag- matic products. Geological mapping focused on the identification of intra- maar structures and phreatomagmatic facies as indicators of proximity to the positions of the conduits. At Mina Inesperada, two drillholes with different azimuth were completed. The ore control has been identified with drill hole DIN-003, opening the upside to the north. It also confirms that the favorable alteration and the gold mineraliza- tion is related and hosted in the phreatomagmatic breccia body. The most interesting results from our Q4 2020 drilling program relates to drill holes DIN-006A and DIN-008 at Purisima, where low grade gold mineraliza- tion was intercepted and which suggests a fertile Diatreme-Dome system. Highlights from the drilling results of the Q4 2020 drilling campaign include: • DAM-002 1.4 meters @14.7 g/t gold and 50.6 g/t silver including 42.4 g/t gold and 124 g/t silver over 0.4 meters • DAM-003 2.1 meters @12.1 g/t gold and 57.5 g/t silver including 21.0 g/t gold and 143g/t silver over 0.9 meters • DAM-008 2.5m of 12.2 g/t gold and 8.5 g/t silver in the Central Vein and 30m at 4 g/t gold including 4.1 meters @23.5 g/t gold and 29.3 g/t silver in a newly discovered mineralized breccia zone at depth • DAM-012 0.4 meters @41.9 g/t gold and 7.5 g/t silver The 2021 exploration program is expected to continue with drilling activities in (i) the Mina Inesperada area with the goal of validating an extension of the mineralization to the North, and (ii) the Purisima and Ines areas. This has been adjusted based on the results of DIN-007 to address a preferred drilling direc- tion from West to East (Purisima, Ines) and North South (Ines). ACQUISITION OF REVELO RESOURCES SUBSEQUENT TO YEAR-END As described in note 37 (i) to the FY20 Financial statements, on 5 Febru- ary 2021, the Group completed the acquisition of Revelo Resources Corp. (“Revelo”) under a plan of arrangement (“the Arrangement”) in Canada. Under terms of the Arrangement, Austral acquired all Revelo shares and Revelo shareholders received total consideration of US$6,977,713 comprised of cash of US$917,059 (C$1,176,471) and 35,475,095 ordinary shares of Austral valued at approximately US$6,060,654. Consequently, Revelo became a wholly-owned subsidiary of Austral. Revelo’s main assets are three explo- ration projects located close to the Group’s Guanaco/Amancaya mining complex in Chile. As part of the acquisition, the Group acquired a 19.9% interest in Pampa Metals Corporation (CSX:PM). Revelo´s Las Pampas project is a large property located in the heart of the highly productive Paleocene Mineral Belt in northern Chile that contains several important gold, silver and copper mines and projects. Numerous indi- cations of low-sulphidation, epithermal gold and silver mineralization occur on the property, which is situated along geologic trend and a few kilometers to the southwest of the prolific El Peñon mining district. Austral Gold Limited 20 Annual Report 2020 CERRO BUENOS AIRES PROJECT During December 2020, Austral entered into a purchase option agreement of 36 mining concessions from Mr. Simunovic Petricio. The Property is a potential High Sulfidation (HS) project with a significant hydrothermal alteration footprint. However, to date no anomalous gold values have been reported in the sector which has been under evaluation by various companies in the past as a possible copper porphyry system. There are geophysical studies in the sector that generated favorable indicators for the occurrence of a HS type deposit. Another strong indicator is the age of the hydrothermal alteration totally synchronous with other similar deposits in the belt. As disclosed in the FY20 financial statements, the cost of the option is US$5.05 million and is to be paid in Chilean pesos. US$100,000 was paid on signing the agreement and the balance payable over five years and there is a Net Smelter Return (“NSR”) royalty over the mining properties of 2% for precious metals and 1.5% for the sale or disposal of any other mineral, metal and/or other refined or unrefined mining products ripped up and extracted from the mining properties. The Company has the option of exiting the agreement without paying the option installments. However, none of the option payments made would be refundable. Austral Gold Limited 21 Annual Report 2020 CASPOSO MINE The Casposo mine is located in the department of Calingasta, San Juan Province, Argentina, approximately 150km from the city of San Juan, and covers an area of 100.21km2. Casposo is a low sulfidation epithermal deposit of gold and silver located in the eastern border of the Cordillera Frontal geological province. The Cordillera Frontal represents the eastern portion of the Cordillera Principal that runs along the Chile-Argentine border for approxi- mately 1,500km. The Casposo gold– silver mineralisation is Permian in age, and occurs in the extensive Permo-Triassic volcanic rocks of the Choiyoi Group, at both rhyolite, and underlying andesitic rocks, where it is associated with NW-SE, E-W and N-S striking banded quartz, chalcedony and calcite veins, typical of low sulfidation epithermal environments. Post-mineralisation dykes of rhyolitic, mafic, and trachytic composition often cut the vein systems. These dykes, sometimes reaching up to 30m thickness, are usually steeply dipping and north–south oriented. Mineralisation at Casposo occurs along a 10km long north- west to southeast trending regional structural corridor, with the main Kamila Vein system forming a 500m long sigmoidal set near the centre. The Mercado Vein system is the northwest continuation of Kamila and is separated by an east–west fault from the Kamila deposit. In March 2016, Austral Gold acquired a controlling stake and management of the Casposo gold and silver project. Since then, Austral Gold undertook a complete revision of historical work (geology, geochemistry, geophysics and drillings), and completed a regional mapping at a 1:10,000 scale to identify potential opportunities for discovering additional mineralisation and ranking a series of mine and brownfield exploration targets. In March 2017, Austral Gold acquired an additional 19% of the Casposo silver and gold project and in December 2019, it effectively acquired the remaining 30%. CARE AND MAINTENANCE During the June 2019 quarter, Austral completed a comprehensive review of operations, and as the mine operator, decided to tempo- rarily place the mine on care and maintenance. During the year, Austral paid approximately US$2 million in severance to 199 Casposo employees. The Casposo Mine continues to be on care and maintenance. The Group’s goal is to recommence processing operations. ARGENTINA Austral Gold Limited 22 Annual Report 2020 Operations Casposo Mine Year ended 31 December 2020 31 December 2019 31 December 2018 Processed (t) - 39,545 166,194 Average Plant Grade (g/t Au) Average Plant Grade (g/t Ag) Gold produced (Oz) Share of Gold produced* Silver produced (Oz) Share of Silver produced* C1 Cash Cost (US$/ AuEq Oz) * All-in Sustaining Cost (US$/Au Oz) * Realised gold price (US$/Au Oz) Realised silver price (US$/Ag Oz) - - - - - - - - - - 2.7 2.0 97.8 277.3 2,770 11,564 1,939 8,095 143,542 1,213,316 100,479 861,921 2,133 1,362 2,289 1,710 1,303 1,227 15 15 * As of 23 December 2019, Austral Gold owned 100% of Casposo. From March 2017 to 22 December 2019, Austral Gold owned 70% of Casposo CASPOSO MINE The Casposo mine is located in the department of Calingasta, San Juan Province, Argentina, approximately 150km from the city of San Juan, and covers an area of 100.21km2. Casposo is a low sulfidation epithermal deposit of gold and silver located in the eastern border of the Cordillera Frontal geological province. The Cordillera Frontal represents the eastern portion of the Cordillera Principal that runs along the Chile-Argentine border for approximately 1,500km. The Casposo gold– silver mineralisation is Permian in age, and occurs in the extensive Permo-Triassic volca- nic rocks of the Choiyoi Group, at both rhyolite, and underlying andesitic rocks, where it is associated with NW-SE, E-W and N-S striking banded quartz, chalcedony and calcite veins, typical of low sulfidation epithermal environments. Post-mineralisation dykes of rhyolitic, mafic, and trachytic composition often cut the vein systems. These dykes, sometimes reaching up to 30m thickness, are usually steeply dipping and north–south oriented. Mineralisa- tion at Casposo occurs along a 10km long north- west to southeast trending regional structural corridor, with the main Kamila Vein system forming a 500m long sigmoidal set near the centre. The Mercado Vein system is the northwest continuation of Kamila and is separated by an east–west fault from the Kamila deposit. In March 2016, Austral Gold acquired a controlling stake and management of the Casposo gold and silver project. Since then, Austral Gold undertook a complete revision of historical work (geology, geochemistry, geophysics and drillings), and completed a regional mapping at a 1:10,000 scale to identify potential oppor- tunities for discovering additional mineralisation and ranking a series of mine and brownfield exploration targets. In March 2017, Austral Gold acquired an additional 19% of the Casposo silver and gold project and in December 2019, it effec- tively acquired the remaining 30%. CARE AND MAINTENANCE During the June 2019 quarter, Austral completed a comprehen- sive review of operations, and as the mine operator, decided to temporarily place the mine on care and maintenance. During the year, Austral paid approximately US$2 million in severance to 199 Casposo employees. The Casposo Mine continues to be on care and maintenance. The Group’s goal is to recommence processing operations. Austral Gold Limited 23 Annual Report 2020 ARGENTINA EXPLORATION COVID-19 Impact In Argentina, exploration activities were reduced at the Casposo and Pingüino projects following mandatory isolation measures in effect in Argentina during Q2 and Q3 2020. Casposo Exploration During Q4 2020, the exploration activities were focused on the Manantiales — Casposo district in the San Juan Province, Argentina. Drilling targets were defined based on new concepts resulting in our confirmation of the presence of high-grade gold rock chip samples related to new veins at the Cerro Amarillo area in the Manantiales — Casposo District. At Manantiales, a potential south extension and two new secondary veins were identified through geologi- cal mapping and surface activities whereas at Valen- tina, historic results were reviewed and validated with gold values up to 7.66 g/t Au. A drilling campaign started during February 2021. The Cerro Amarillo area was also identified with exploration potential for a high-grade gold veins system based on multiple rock chip samples +10 gpt Au. The drilling program commenced in Q1 2021 at the Valentina Vein target and is expected to be followed by the Manantiales veins and Cerro Amarillo area. Austral Gold Limited 24 Annual Report 2020 SANTA CRUZ PROVINCE PINGÜINO AND SIERRA BLANCA PROJECTS Pingüino Project The Group owns 100% of the mineral rights of 20 properties with over 51,000 hectares of land. These properties are located within two prominent geographical features, the Deseado and Somun- cura Massifs both of which have proven to host significant epith- ermal precious metal deposits. The large epithermal vein swarm at Pingüino contains indium-enriched vein-hosted base metal mineralisation, as well as low sulphidation precious metal vein mineralisation. The combination of these two types of mineralisa- tion within the same property is unique for the province of Santa Cruz and a significant asset for the Company. The Silver-Gold-Zinc-Lead-Indium Pingüino Project is an advanced stage development project located in south-central Argentina, 300km southwest of the city of Comodoro Rivadavia and 220km northwest of Puerto San Julián. In the last 20 years, seven mines have been constructed in Santa Cruz, making it one of the most prolific precious metal provinces in the world, including world class deposits such as Cerro Vanguardia and Cerro Negro. The Pingüino Project lies in a vein field similar but smaller to Cerro Vanguardia some 35kms north-west along same controlling struc- ture as Pingüino deposit (225km strike length of veins vs 115 km strike length of veins). The project has year round access, is close to major infrastructure, has no nearby communities and more than 70% of surface land is owned by the Group. During 2020, the geology team completed a trenching program at the Pingüino project which totaled 113 trenches with 5,360 meters excavated within 12 veins (e.g. Tranquilo, Marta Norte, Ana, Marta Northeast, Fantasma, Sol, Ivana, Silvia and Trinda Veins). Sierra Blanca Project As disclosed in note 20 to the December 2020 financial state- ments, during 2020, the Group and New Dimension Resources Ltd. (TSX-V:NDR) (“New Dimension”) signed an agreement to acquire New Dimension’s Sierra Blanca gold-silver project (the “Project”) in Santa Cruz, near the Group’s Pingüino project. With this transaction, Austral expanded the area of its Pingüino project by securing an additional 7,000 hectares, resulting in a new exploration cluster in the Province of Santa Cruz. In addition, the exploration team carried out the inventory of the veins of both projects to design the next exploration campaign. The geological team also began planning the exploration activities for 2021 including a US$100,000 work commitment program for Sierra Blanca over the next 12 months. Austral Gold Limited 25 Annual Report 2020 USA Austral Gold Limited 26 Annual Report 2020 RAWHIDE MINE / ENSIGN GOLD BACKGROUND On 17 December, 2019, Austral acquired an equity interest in Rawhide Acquisition Holding LLC (“RWH”), a privately-held Dela- ware limited liability company that owns Rawhide Mining LLC which in turn owns the Rawhide Mine located ~50 miles outside of Fallon, Nevada, United States. The Rawhide mine is located in Nevada’s prolific Walker Lane gold-silver belt, among multiple historic mines that produced more than 1 million ounces of gold (e.g., Comstock, Round Mountain, Borealis, and Tonopah). Rawhide is a historical mining operation that started in the early 1900s. Rawhide was formerly operated as a subsidiary of Kennecott Corporation prior to Coral Reef Capital, a private equity firm, partnering with the Rawhide mine management team to acquire the property from Rio Tinto Plc in 2010. Currently, Coral Reef Capital is the controlling shareholder of Rawhide Acqui- sition Holding LLC. The Rawhide mine is a fully permitted operation that produces gold and silver through an open pit heap leaching operation. In 2019, Rawhide received a mine expansion permit associated with the Regent open pit. It is surrounded by multiple 1.0 million+ gold oz deposits. Austral Gold made the strategic investment in the Rawhide opera- tion as part of its acquisition plan to focus on near-term cash producing mining assets. OVERVIEW OF RAWHIDE OPERATION Gold was discovered at Rawhide in 1906, with intermittent small scale production until Kennecott undertook open pit mining from 1990-2003, producing 1.4 million ounces of gold and 10.9 million ounces of silver from 88 million tons. Residual heap leaching until 2010 recovered an additional 200 thousand ounces of gold and 1.9 million ounces of silver. Austral Gold has been advised by Rawhide that from 2011-2018 its mining at the Rawhide property totaled 4.9 million tons, with 160,000 ounces of gold and 1.8 million ounces of silver produced. Gold-silver mineralization at Rawhide has been historically mined from a series of low sulfidation epithermal veins, vein swarms and replacement zones hosted by various basaltic to rhyolitic volcanic units. The lower grade bulk tonnage mineralization that is the focus of current operations occurs between structures within permeable volcanic units and at intrusive contacts. Rawhide Mining received a mine expansion permit covering the Regent satellite deposit, and open pit mining has recently commenced. Regent highlights the upside exploration and production optionality of Austral’s strategic investment in the Rawhide mining operation. EQUITY OWNERSHIP As disclosed in note 21 to the December 2020 financial state- ments, the Group increased its equity interest in Rawhide Acqui- sition Holding LLC (“RAH”) from 22.48% to 26.46% through the exercise of options during the year. Although RAH did not have taxable income in 2020, its objective is to distribute 50% of its taxable income to the LLC members on a quarterly basis as a Tax Distribution. Historically made significant additional Ordinary Distributions to its members provided its ongoing mining at the Rawhide and Regent open pits generate taxable income. OPERATING ACTIVITIES The following table summarizes the production figures of the Rawhide mine (US) in which Austral has a 26.46% interest. Actual production was slightly below Rawhide’s FY20 guidance of 27,000- 30,000 gold equivalent ounces mainly as a result of interruptions at the crushing plant due to repairs and the ramp up of the crushing conveying system. Rawhide Operations (100% basis) Processed (t) Gold produced (Oz) Silver produced (Oz) Gold-Equivalent (Oz) Fiscal Year ended December 2020 1,855,337 24,213 160,113 26,265 * The Company acquired an initial 22.48% interest in interest in Rawhide on 17 December 2019. * * FY20 weighted average of 25.23% (ownership in the Rawhide Mine as effective 31, January 2020 Austral held a 23.62% ownership interest in Rawhide. On 8, May 2020 the ownership interest was increased to 26.46%). *** AuEq ratio is calculated at 78:1 Ag:Au for FY20 ENSIGN GOLD As disclosed in note 37(ii) to the financial statements, the Group acquired a 19.96% equity interest in Ensign Gold. It also acquired warrants that if exercised would increase the Group’s interest to approximately 27.22% on a partially diluted basis (approximately 22.90% on a fully diluted basis). Ensign is a privately held federally incorporated Canadian company. Austral Chairman Wayne Hubert and CEO Stabro Kasaneva are directors of Ensign Gold. Ensign is not a reporting issuer in any Province of Canada, nor is it listed on any stock exchange. Ensign is currently assembling a 5,000-hectare land package on favourable Carlin-type gold deposit geology in the state of Utah with the goal of consolidating the Mercur camp for the first time. Ensign owns 54 patented claims, 370 unpatented claims, and 5 SITLA claims on South Mercur, West Mercur and North Mercur. Historically, this region produced over 3 million ounces of gold and was shut down over two decades ago when gold was selling for less than $300 per ounce. Austral Gold Limited 27 Annual Report 2020 Austral Gold Limited 28 Annual Report 2020 TABLE 1: ORE RESERVES ESTIMATE 31 December 2020 Ore Reserves (JORC 2012 and NI 43-101 Compliant) Proven Reserves Probable Reserves Total Ore Reserves Gold (Au) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Guanaco Underground Total Guanaco 3 3 2.1 0.2 2.1 0.2 3 3 1.0 0.1 1.0 0.1 6 6 1.6 0.3 1.6 0.3 Underground 162 7.2 Total Amancaya 162 7.2 Total Combined 165 7.1 37 37 38 Amancaya 133 5.1 133 5.1 136 5.0 22 22 22 295 6.2 295 6.2 301 6.1 59 59 59 Silver (Ag) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Underground 65 Total Guanaco 65 6 6 12 12 Guanaco 168 168 3 3 Amancaya 19 19 233 233 4 4 31 31 Underground 170 33 180 171 21 115 341 27 295 Total Amancaya 170 33 180 171 21 115 341 27 295 Total Combined 235 25 192 339 12 134 574 18 326 Austral Gold Limited 29 Annual Report 2020 TABLE 2: MINERAL RESOURCES ESTIMATE 31 December 2020 Mineral Resources (JORC 2012 and NI 43-101 Compliant) Measured (Me) Indicated (Ind) Total (Me + Ind) Inferred (Inf) Gold (Au) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Guanaco Underground 283 2.4 Total Guanaco 283 2.4 Open Pit – – Underground 169 10.1 Total Amancaya 169 10.1 Total Combined 452 5.3 22 22 – 55 55 77 502 2.6 502 2.6 42 42 785 2.6 785 2.6 65 65 717 2.4 717 2.4 54 54 Amancaya 2 8.9 0.4 2 8.9 0.4 23 4.49 3 223 5.7 225 5.7 41 41 392 7.6 394 7.6 96 96 693 6.23 139 716 6.2 142 727 3.6 83 1,179 4.2 161 1,433 4.3 196 Silver (Ag) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Underground 283 23 210 502 Total Guanaco 283 23 210 502 Guanaco 17 17 278 785 278 785 Amancaya Open Pit – – – 2 Underground 169 52 283 223 Total Amancaya 169 52 283 225 Total Combined 452 34 493 727 81 14 14 16 4 98 2 392 102 394 19 16 81 30 30 489 717 489 717 4 23 380 693 384 716 15 15 37 17 18 16 342 342 28 387 415 757 380 1,179 23 873 1,433 Austral Gold Limited 30 Annual Report 2020 TABLE 3: ORE RESERVES ESTIMATE 31 December 2019 Ore Reserves (JORC 2012 and NI 43-101 Compliant)Ore (JORC 2012 and NI 43-101 Compliant) Proven Reserves Probable Reserves Total Ore Reserves Gold (Au) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Underground Total Guanaco 65 65 Underground 264 Total Amancaya 264 Total Combined 329 Underground Total Casposo – – 4.7 4.7 6.9 6.9 6.5 – – Guanaco 168 168 Amancaya 243 243 410 Casposo 608 608 3.1 3.1 5.5 5.5 4.5 2.4 2.4 10 10 59 59 69 – – 17 17 43 43 60 46 46 233 233 506 506 739 608 608 3.6 3.6 6.3 6.3 5.4 2.4 2.4 27 27 102 102 129 46 46 Total 329 6.5 69 1,018 3.2 106 1,347 4.0 175 Silver (Ag) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Underground Total Guanaco 65 65 Underground 264 Total Amancaya 264 Total Combined 329 Underground Total Casposo – – 6 6 32 32 27 – – 12 12 274 274 285 – – Guanaco 168 168 Amancaya 243 243 410 Casposo 3.5 3.5 25 25 16 19 19 196 196 215 233 233 506 506 739 4.1 4.1 29 29 21 31 31 470 470 500 608 179 3,495 608 179 3,495 608 179 3,495 608 179 3,495 Total 329 27 285 1,019 113 3,709 1,347 92 3,995 Austral Gold Limited 31 Annual Report 2020 TABLE 4: MINERAL RESOURCES ESTIMATE 31 December 2019 Mineral Resources (JORC 2012 and NI 43-101 Compliant) Measured (Me) Indicated (Ind) Total (Me + Ind) Inferred (Inf) Gold (Au) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Guanaco Underground 422 3.2 Total Guanaco 422 3.2 43 43 1,213 2.8 108 1,636 2.9 151 1,134 2.6 1,213 2.8 108 1,636 2.9 151 1,134 2.6 96 96 Amancaya Open Pit – – – 2 8.9 0.4 2 8.9 0.4 23 4.49 3 Underground 307 10.2 101 298 7.3 Total Amancaya 307 10.2 101 300 7.3 70 70 605 8.8 171 716 5.96 137 607 8.8 171 739 5.9 140 Total Combined 730 6.1 144 1,513 3.7 178 2,243 4.5 322 1,874 3.9 236 Casposo Underground Total Casposo 37 37 2.4 2.4 3 3 1,009 2.8 1,009 2.8 92 92 1,046 2.8 1,046 2.8 95 95 913 5.4 158 913 5.4 158 Total 767 5.9 147 2,522 3.3 270 3,289 3.9 417 2,787 4.4 394 Silver (Ag) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Tonnes (Kt) Grade (g/t) Contained Metal (koz) Guanaco Underground 422 17 235 1,213 15 592 1,636 16 827 1,134 13 477 Total Guanaco 422 17 235 1,213 15 592 1,636 16 827 1,134 13 477 Amancaya Open Pit – – – 2 Underground 307 49 480 298 Total Amancaya 307 49 480 300 81 28 28 4 2 265 605 269 607 81 38 38 4 744 748 23 716 739 37 17 18 28 399 426 Total Combined 730 30 715 1,513 18 861 2,243 22 1,576 1,874 15 903 Casposo Underground 37 221 264 1,090 167 5,409 1,046 169 5,673 913 143 4,204 Total Casposo 37 221 264 1,009 167 5,409 1,046 169 5,673 913 143 4,204 Total 767 40 978 2,522 77 6,270 3,289 69 7,248 2,787 57 5,108 Note: Numbers may not add in the above tables due to rounding Austral Gold Limited 32 Annual Report 2020 Competent Persons Statements The information in the report to which this statement is attached that relates to Mineral Resources is based upon information compiled by Sebastian Ramirez, a Competent Person (CP 165) who is a registered member of the Comision Calificadora de Competencias en Recursos y Reservas Mineras. Sebastian Ramirez is a full time employee of the company and has suffi- cient experience that is relevant to the style of mineralisation and the type of deposit under consideration and to the activity 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’. Sebastian Ramirez consents to the inclusion in the report of matters based on his information in the form and context in which it appears. The information in the report to which this statement is attached that relates to Ore Reserves is based upon information compiled by Dr Robert Trzebski, a Competent Person who is a fellow of the Australian Institute of Mining and Metallurgy (AUSIMM). Dr Robert Trzebski is a Non-Executive Director of the Company and has sufficient experience that is relevant to the style of mineralisation and the type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Explo- ration Results, Mineral Resources and Ore Reserves’. Dr Robert Trzebski consents to the inclusion in the report of matters based on his information in the form and context in which it appears. NOTES TO THE MINERAL RESOURCES & ORE RESERVES STATEMENT Guanaco and Amancaya Mines The RPA Qualified Persons (QPs) for the Amancaya and Guanaco Reserve and Resource Estimate include: Kathleen Ann Altman, P.E., Ph.D. (Metallurgy); Jason J. Cox, P.Eng. (Mineral Reserves); Ian Weir, P.Eng. (Mineral Reserves); Chester M. Moore, P.Eng., (Mineral Resources). The Mineral Resources and Reserves are classified and reported in accordance with CIM definitions as incorporated in NI 43-101, as well as JORC 2012, within the Guanaco and Amancaya Gold Project, Region II, Chile, dated 16 June, 2017, with an effective date of 31 December 2016. Mineral resources have been updated to account for depletion from mining activities by Sebastian Ramirez, P.Eng, an Austral Gold employee and a QP as per NI 43-101 and a CP as per JORC 2012. The Company confirms that it is not aware of any new informa- tion or data that materially affects the information included in the original market announcement on 13 June 2017 and, 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. The Company confirms that the form and context in which the CP’s findings are presented have not been materially modified from the original market announce- ment. The Company ensures that the Ore Reserves and Mineral Resource Estimates are subject to appropriate levels of gover- nance and internal controls. Governance of the Company’s Ore Reserves Mineral Resources development and the estimation process is a key responsibility of the Executive Management of the Company. The Chief Executive Officer of the Company oversees the review and technical evaluations of the Ore Reserves and Mineral Resource estimates. Casposo Mine The RPA Qualified Persons (‘QP’) for the Casposo Reserve and Resource Estimate include: Jason J. Cox, P.Eng. (Mineral Reserves) and Chester M. Moore, P.Eng., (Mineral Resources). The Mineral Resources and Reserves are classified and reported in accordance with Canadian Institute of Mining, Metallurgy and Petroleum Definition Standards for Mineral Resources and Ore Reserves dated May 10, 2014 (‘CIM’) definitions as incorporated in NI 43-101, as well as JORC 2012, within the Technical Report on the Casposo Gold-Silver Mine, Department of Calingasta, San Juan Province, Argentina dated 7 September 2016. Mineral Resources and Ore Reserves have been updated to account for depletion from mining activities by Nicolas Pizarro, P.Eng, an Austral Gold employee and a QP as per NI-43-101 and a Competent Person (‘CP’) as per JORC 2012. Ore reserves have been updated to account for depletion from mining activities by Dr Robert Trzebski, who is an Independent Director of Austral Gold, and a QP as per NI 43-101 and a CP as per JORC 2012. Austral Gold Limited 33 Annual Report 2020 DIRECTORS’ REPORT Austral Gold Limited 34 Annual Report 2020 REVIEW OF RESULTS For the Year Ended 31 December 2020 The following report on the review of results for the year ended 31 December 2020 (“FY20”) and 2019 (“FY19”) together with the consolidated financial report of Austral Gold Limited (the Company) and its subsidiaries, (referred to hereafter as the Group). PRINCIPAL ACTIVITIES The principal activities of the Group during FY20 were: • Several precautionary measures taken to protect the health of our people to address the risk of the COVID-19 virus. • Gold and silver production at the Group’s Guanaco/ Amancaya mines achieved its full-year production guidance despite the interrup- tion to operations from a miners´ strike during Q2 2020 and the transition to outsource the Amancaya underground mining operations. • Continued to seek quality assets through M&A activities in stable jurisdictions by: – executing a definitive arrangement agreement to acquire 100% of the shares of Revelo Resources Corp. The acquisition was finalised on 5 February 2021; – entering into a Subscription and Investment Agreement with Ensign Gold to acquire a 19.9% interest; – increasing the Group’s interest in Rawhide. The Group owns a 26.46% interest after exercising its options during 2020; – executing an agreement with New Dimension Resources Ltd. (TSX-V:NDR) (“New Dimension”) to acquire up to 100% of New Dimension’s Sierra Blanca gold-silver project (the “Project”) in Santa Cruz Province near the Group’s Pinguino project; – executing acquisition agreements to acquire additional mining concessions near the Group’s Guanaco/Amancaya complex. • Exploration activities seeking organic growth in the Company´s existing mining projects in Argentina and Chile. • Strengthening the corporate team through the appointment of Wayne Hubert as Executive Chairman and Raúl Guerra as VP of Exploration while Director Eduardo Elsztain, the Company´s largest shareholder, remains on the Board as Non-Executive Director and Vice-Chairman. • There were no other significant changes in our principal activities during the period. A summary of key operating results for FY20 and FY19 is set out in the following table for comparative purposes. REVIEW OF RESULTS OF OPERATIONS Fiscal Year ended 31 December 2020 2019 Key Operating Results Guanaco/ Amancaya Rawhide Mine (100% basis)1 Casposo (100% basis)2 Net to Austral Gold1,2 Guanaco/ Amancaya Casposo (100% basis)2 Net to Austral Gold1,2 Processed (t) 195,296 1,855,337 Gold produced (Oz) 52,306 24,213 Silver produced (Oz) 253,066 160,113 Gold Equivalent Ounces (Oz)3 55,190 26,265 - - - - 665,995 253,024 39,545 280,706 58,449 60,666 2,770 62,605 293,687 543,906 143,542 644,385 61,853 67,005 4,473 70,136 1 Attributable production from the Rawhide Mine and as of December 2020 twelve month Austral recorded a weighted average of 25.37% (2019-nil) as 17 December 2019 – acquired 22.48% ownership in the Rawhide Mine and exercised options to increase its ownership interest on 31, January 2020 Austral to 23.62% ownership interest. On 8, May 2020 the Group exercised its remaining options and increased its ownership interest to 26.46%. 2 Effective December 2019, Austral Gold owned 100% of Casposo. From March 2017 to 22 December 2019, Austral Gold owned 70% of Casposo; 3 AuEq ratio is calculated at 86:3 Ag:Au for the FY20 and 85:1 Ag:Au for FY19. Austral Gold Limited 35 Annual Report 2020 Guanaco Operations Mined Ore (t) Processed (t) Average Plant Grade (g/t Au) Average Plant Grade (g/t Ag) Gold produced (Oz) Silver produced (Oz) Gold-Equivalent (Oz) *** C1 Cash Cost of Production (US$/AuEq Oz)* All-in Sustaining Cost (US$/Au Oz) * Realised gold price (US$/Au Oz) Realised silver price (US$/Ag Oz) Sales volume Fiscal Year ended 31 December months ended 2020 196,194 195,296 8.5 43.9 52,306 253,066 55,190 723 1,021 1,765 21 49,995 2019 250,986 253,024 7.6 81.2 60,666 543,906 67,005 661 899 1,404 16 66,657 * The cash cost (C1) includes: Mine, Plant, On-Site G&A, Smelting, Refining, and Royalties (excludes Corporate G&A). It is the cost of production per gold equivalent ounce. ** The All-in Sustaining Cost (AISC) includes: C1, Sustaining Capex, Brownfield Exploration, and Mine Closure Amortisation. *** AuEq ratio is calculated at 88:1 Ag:Au for the FY20 and 85:1 Ag:Au for the FY19 Production during FY20 at Guanaco/Amancaya decreased by 18% to 55,190 gold equivalent ounces (52,306 gold ounces and 253,066 silver ounces) from 67,005 gold equivalent ounces (60,666 gold ounces and 543,906 silver ounces) during FY19. The decrease was mainly a result of the lower throughput of the mine and lower silver grades which was anticipated in accordance with the Group’s production guidance. During FY20, mining continued at the Guanaco underground operations with a total of 2,928 tonnes mined while 193,266 tonnes were mined from the Amancaya underground operations. Management continues to evaluate opportunities to extend the life of mine of the Guanaco and Amancaya mines. In addition, the following table summarizes the production figures of the Rawhide mine (US) in which Austral has a 26.46% interest. Actual production was slightly below Rawhide’s FY20 guidance of 27,000-30,000 gold equivalent ounces mainly as a result of inter- ruptions at the crushing plant due to repairs and the ramp up of the crushing conveying system. Rawhide Operations (100% basis) Fiscal Year ended December 2020 Processed (t) Gold produced (Oz) Silver produced (Oz) Gold-Equivalent (Oz) * 1,855,337 24,213 160,113 26,265 * The Company acquired an initial 22.48% interest in interest in Rawhide on 17 December 2019. ** FY20 weighted average of 25.23% (ownership in the Rawhide Mine as effective 31, January 2020 Austral held a 23.62% ownership interest in Rawhide. On 8, May 2020 the ownership interest was increased to 26.46%). *** AuEq ratio is calculated at 78:1 Ag:Au for FY20 COVID-19 IMPACT During FY20, the Company´s flagship mine complex in Chile (Guanaco/Amancaya) was not significantly impacted by COVID-19 except for several precautionary measures to address the risk of the COVID-19 virus as recommended by the Health Authorities and Governments around the world. In Argentina, exploration activities were reduced at the Casposo and Pingüino projects following mandatory isolation measures in effect in Argentina during Q2 and Q3 2020. Austral Gold Limited 36 Annual Report 2020 KEY FINANCIAL RESULTS Key financial metrics Thousands of US$ Revenue Gross profit Gross profit % Adjusted gross profit (excluding depreciation and amortisation) Adjusted gross profit % (excluding depreciation and amortisation) EBITDA EBITDA per share (basic) EBITDA per share (fully diluted) Adjusted EBITDA Adjusted EBITDA per share (basic) Adjusted EBITDA per share (fully diluted) Profit attributed to shareholders (Loss) attributed to non-controlling interests Earnings per share (Basic) Earnings/(Loss) earnings per share (diluted) Comprehensive income Fiscal Year ended December 31 2020 88,223 37,884 42.9% 54,151 61.4% 30,963 0.055 0.054 45,962 0.082 0.080 7,667 - 1.36c 1.34c 7,612 2019 102,209 26,661 26.1% 46,916 45.9% 33,550 0.062 0.059 37,612 0.070 0.066 5,225 (3,586) 0.97c 0.93c 1,658 Note: Readers are cautioned that Adjusted EBITDA does not have standardised meanings as prescribed by IFRS and may not be comparable to similar measures presented by other companies. Further, readers are cautioned that Adjusted EBITDA should not replace profit or loss or cash flows from operating, investing and financing activities (as determined in accordance with IFRS), as an indicator of the Company’s performance. EBITDA AND ADJUSTED EBITDA Thousands of US$ Profit before tax Depreciation and amortisation Net finance (income) / costs EBITDA Other expenses Settlement of union agreement at Guanaco/Amancaya Severance of mining employees due to outsource of operations Impairment of goodwill Impairment of exploration and evaluation expenditure Care and maintenance Restructuring cost (Casposo) Other Loss/(gain) on financial assets Share of loss of associate Adjusted EBITDA Fiscal Year ended December 31 2020 14,335 16,267 361 30,963 4,963 4,278 926 748 1,983 - (180) 1,774 507 2019 9,508 20,255 3,787 33,550 - - - 862 1,185 2,087 (62) (10) - 45,962 37,612 Austral Gold Limited 37 Annual Report 2020 Thousands of US$ Cash & cash equivalents Current assets Non-current assets Current liabilities Non-current liabilities Net assets Net current assets Current loans and borrowings Current financial leases Non-current loans and borrowings Non-current financial leases Combined debt (borrowings and financial leases) Combined net debt (net of cash & cash equivalents) Combined debt to EBITDA Combined net debt to EBITDA Current ratio* Total liabilities to net assets *Current Assets divided by Current Liabilities Fiscal Year ended December 31 2020 12,401 31,942 73,523 24,035 20,162 61,268 7,907 831 2,905 1,246 3,416 8,398 (4,003) 27% (13%) 1.33 0.72 2019 9,196 26,849 79,318 23,529 25,907 56,731 3,320 4,045 3,047 2,077 6,302 15,471 6,275 46% 19% 1.14 0.87 OPERATING AND FINANCIAL RESULTS OF THE GROUP Adjusted EBITDA increased to US$46.0m (52%) from US$37.6m during FY19 (37%) while EBITDA decreased to US$31.0m (35%) during FY20 from US$ 33.6m (33%) during FY19. Net profit before and after tax increased to US$14.3m and US$7.7m during FY20 from US$9.5 and US$1.6m during FY19 and was mainly due to higher operating margins, which resulted from both higher gold and silver prices per ounce realised and higher gold grades. The cost of sales in the prior period was also impacted by unprofitable operations at Casposo due to low production and the 2019 restructuring when Casposo was placed on care and maintenance. Net profit during FY20 was mainly due to the following: • Gross profit of US$37.9m or 43% (including US$16.3m of depreciation and amortisation) was realised (FY19: gross profit of US$26.7m or 26% including US$20.3m of depreciation and amortisation). Excluding depreciation and amortisation, a gross profit of US$54.2m was earned during FY20 or 61% (FY19: US$46.9m or 46%). • Other expenses include the following: – payment of bonuses and other benefits to mining employees at Guanaco/Amancaya due to a new collective union agreement during Q2 2020; – the cost to terminate mining employees in December 2020 at Guanaco/Amancaya as a result of the Group’s decision to outsource the underground mine operation at its 100% owned Amancaya mine and certain maintenance activities at Guanaco´s processing plant; – Impairment expenses which are mainly due to the expense of goodwill and the expense of certain exploration and evaluation expenditures previously capitalised; – care and maintenance expenses for the entire year as compared to FY19 when Casposo was placed on care and maintenance during the second quarter of 2019 • lower administration costs, which were mainly due to the depreciation of the South American currencies against the USD dollar, lower general and administrative expenses at Casposo and a decrease in the provision for employee entitlements. • lower net finance costs which was primarily due to a decrease in interest expense as a result of debt repayments during the year and a present value adjustment to the mine closure provision at Guanaco • a loss on financial assets. Net gold equivalent ounces (GEOs) produced (including production attributable from Rawhide) during FY20 decreased to 61,853 GEOs from 70,136 GEOs produced during FY19. Production from the Guanaco/ Amancaya mine complex decreased to 55,190 GEOs from 67,005 GEOs, a decrease of 17.6%. The decrease in production was mainly a result of the lower throughput of the mine and lower silver grades which was anticipated in accordance with the Group’s production guidance. Overall cash cost of production (“C1”)* and All-in sustaining costs (“AISC”) at Guanaco/Amancaya increased slightly during FY20 due to lower throughput compared to the prior year to US$723/AuEq oz and US$1,021/ AuEq oz (FY19:US$661/AuEq oz and US$899/ AuEq oz). Austral Gold Limited 38 Annual Report 2020 FINANCIAL POSITION Net assets increased by US$4.6m from 31 December 2019 to US$61.3m at 31 December 2020 (31 December 2019: US$56.7m). The increase was mainly due to the profit earned during FY20 which was partially offset by the payment of a US$3.5m dividend. Working capital increased by US$4.6m to US$7.9m at 31 December 2020 (31 December 2019: working capital of US$3.3m). The increase in working capital arose mainly due to the increase in inventory as a result of the Company’s cash management strategy to maximise gold and silver inventory. The increase was partially offset by an increase in income tax payable and the dividend paid to shareholders. At 31 December 2020, the Group had a current ratio equal to 1.33 (FY19 1.14). Cash plus refined gold totaled US$24.1m, US$12.4m cash and cash equivalents (31 December 2019: US$9.2m) and ~6,200 refined gold ounces in inventory with a fair value of ~US$11.7m. Combined net debt (borrowings and financial leases net of cash & cash equivalents) decreased by US$10.3m to negative US$4.0m at 31 December 2020 compared to US$6.3m at 31 December 2019. Trade and other receivables (current and non-current) decreased by US$1.4m to US$6.4m at 31 December 2020 mainly due to a decrease in trade receivables, prepaid tax and GST/VAT receivable. Inventories increased by US$4.1m to US$14.7m at 31 December 2020 (31 December 2019: $US$10.6m) and was mainly due to an increase in gold and silver in process and gold and silver bullion due to the Company’s cash management strategy. The allowance for inventory obsolescence increased by US$0.3m to US$1.6m at 31 December 2020. Trade and other payables (current and non-current) increased by US$1.5m to US$10.4m at 31 December 2020 (31 December 2019: US$8.9m) mainly due to a portion of severance which remained payable at year end. CASH FLOW Net cash provided from operating activities before and after changes in assets and liabilities increased to US$36.9m and US$30.5m during the 12-months ended 31 December 2020 from US$33.3m and US$29.6m during the 12-months ended 31 December 2019 respectively. The increase was primarily due to the strong operational results during FY20. Cash used in investing activities totaled US$16.2m during FY20 compared to US$14.7m during FY19. Cash was used primarily for additions to plant, property and equipment, exploration and evaluation activities, payment of a promissory note and the exercise of options to increase the Group’s equity interest to 26.46% in the Rawhide Mine in Nevada, USA. Cash used in financing activities totaled US$11.0m during FY20 compared to US$7.5m during FY19 due to the net repayment of borrowings and financial leases, the payment of a dividend to shareholders and the exercise of options by shareholders. LIQUIDITY Guidance The Group forecasts 2021 production to be at the lower end of the 50,000-55,000 gold equivalent ounces range with C1 and AISC at US$700-800 and US$800-1,000 respectively per gold equivalent ounce. Access to capital The Group has in the money options outstanding from the October 2019 rights issue equivalent to approximately US$0.7m and has strong banking relationships from which it expects it can obtain financing if required. Austral Gold Limited 39 Annual Report 2020 THE DIRECTORS WAYNE HUBERT Executive Chairman EDUARDO ELSZTAIN Vice-Chairman Mr. Hubert is a mining executive with over 15 years’ expe- rience working in the South American resources sector. From 2006 until 2010 he was the Chief Executive Officer of ASX-listed Andean Resources Limited and led the team that increased Andean’s value from $70 million to $3.5 billion in four years. Andean was developing a world-class silver and gold mine in Argentina with a resource of over 5 million ounces of gold when it was acquired by Goldcorp Inc. of Canada. Mr. Hubert holds a degree in Engineering and a Master of Business Administration and has held executive roles for Merid- ian Gold with experience in operations, finance and investor relations. In addition to his role at Austral Gold Limited, Mr. Hubert is currently serving as Chairman of Revival Gold Inc. (TSX.V:RVG) (OTCQB:RVLGF) and Ensign Gold Inc . (private company), and is also a director of InZinc Mining. Appointed 18 Oct 2011 Re-elected by shareholders on 27 May 2020 Mr. Eduardo Elsztain is chairman of IRSA Inversiones y Repre- sentaciones S.A. (NYSE:IRS), one of Argentina’s largest and most diversified real estate companies; and IRSA Commercial Properties (NASDAQ:IRCP), with shopping centers, premium office buildings, five-star hotels and residential developments. He also serves as Chairman of Cresud (NASDAQ:CRESY) and BrasilAgro (NYSE:LND), leading Latin American agricultural companies that own directly and indirectly almost 1M HA of farmland. Mr. Elsztain is Chairman of Banco Hipotecario S.A. (BASE:BHIP); and of BACS, Argentinean leading bank specialized in providing innovative financial solutions to local companies. He is also member of the World Economic Forum, the Council of the Americas, the Group of 50 and Argentina’s Business Association (AEA). He is President of Fundacion IRSA, which promotes education among children and young people; President of TAGLIT — Birthright Argentina; Co-Founder of Endeavor Argentina; and Vice- President of the World Jewish Congress. Mr. Elsztain has not held any other Directorships with Austra- lian or Canadian listed companies in the last three years. Appointed Director 29 Jun 2007 Appointed Chairman on 2 Jun 2011 Re-elected by shareholders on 27 May 2020 Austral Gold Limited 40 Annual Report 2020 STABRO KASANEVA Executive Director, Chief Executive Officer SAUL ZANG Non-Executive Director Mr. Kasaneva is a Geologist with a degree from the Universi- dad Católica del Norte, Chile and has over 30 years of experi- ence in production geology, exploration and management of precious metal mining operations. Since Mr. Kasaneva joined Austral Gold in 2009, he has been instrumental in transforming the Company by consolidating the operations of the Guanaco Mine in Chile, restarting opera- tions at the Casposo Mine in Argentina as well as identifying a number of opportunities that represent the growth potential for Austral Gold. Throughout his career as a geologist, he worked on exploration and production gaining vast experience in grade control, QA/ QC, modeling and geological resources estimation. Mr. Kasaneva led Business Development Departments for several years evaluating a number of mining business oppor- tunities in South America, Central America and North America. He has held the roles of General Manager of Mining Operations, Vice-President of Operations and COO. Mr. Kasaneva is a Director of Ensign Gold. Mr. Kasaneva does not hold any other Directorships. Appointed 7 Oct 2009 Re-elected by shareholders on 27 May 2020 Mr. Zang obtained a law degree from Universidad de Buenos Aires. He is a founding member of the law firm Zang, Bergel & Viñes. Mr. Zang is an adviser and Member of the Board of Direc- tors of the Buenos Aires Stock Exchange and provides legal advice to national and international companies. Mr. Zang currently holds: i. Vice-Chairmanships on the Boards of IRSA (NYSE: IRS, BASE: IRSA), IRSA Commercial Properties (NASDAQ: IRCP, BASE: IRCP), Cresud (NASDAQ: CRESY, BASE: CRES) and ii. Directorships with Banco Hipotecario (BASE: BHIP), Brasil Agro (NYSE: LND, BVMF:AGRO3), among others. Mr. Zang has not held any other Directorships with Australian or Canadian listed companies in the last three years. Appointed 29 Jun 2007 Re-elected by shareholders on 27 May 2020 Austral Gold Limited 41 Annual Report 2020 THE DIRECTORS BEN JARVIS Non-Executive Director, Member of the Audit Committee PABLO VERGARA DEL CARRIL Non-Executive Director, Member of the Audit Committee Mr. Jarvis is the Managing Director of Six Degrees Investor Relations, an Australian advisory firm that provides investor relations services to a broad range of companies listed on the Australian Securities Exchange. Mr. Jarvis was educated at the University of Adelaide where he majored in Politics. Other Directorships with listed companies in the last three years: Hip Resources Limited (ASX: HIP) Appointed 24 Octo- ber 2019. Appointed 2 Jun 2011 Re-elected by shareholders on 27 May 2020 Mr. Vergara del Carril is a lawyer and is professor of Post- graduate Degrees for Capital Markets, Corporate Law and Business Law at the Argentine Catholic University. He is a member of the International Bar Association, the American Bar Association and the AMCHAM, among other legal and business organisations. He is a founding Board member of the recently incorporated Australian- Argentin- ean Chamber of Commerce. He is a Board member of the Argentine Chamber of Corporations and also an officer of its Legal Committee. He is recognised as a leading lawyer in Corporate, Real Estate, M&A, Banking & Finance and Real Estate Law by international publications such as Chamber & Partners, Legal 500, International Financial Law Review, Latin Lawyer and Best Lawyer. He is a Director of Banco Hipotecario SA. (BASE: BHIP), Nuevas Fronteras (owner of the Intercontinental Hotel in Buenos Aires), IRSA Commercial Properties (NASDAQ: IRCP, BASE: APSA) and Emprendimiento Recoleta SA (owner of the Buenos Aires Design Shopping Centre), among other companies. Mr. Vergara del Carril is also a Director of Guanaco Mining Company Limited and Guanaco Capital Holding Corp. Mr. Vergara del Carril has not held any other Directorships with Australian or Canadian listed companies in the last three years. Appointed 18 May 2006 Re-elected by shareholders on 27 May 2020 Austral Gold Limited 42 Annual Report 2020 The Company’s Board believes that a highly credentialed Board, with diverse backgrounds, skills and perspectives, will be effective in supporting and enabling deliv- ery of strong governance for the Company and create value for the Company’s shareholders. The Board brings a broad mix of experience and skills to the Company including in the areas of corporate governance, legal, geological expertise and financial management. ROBERT TRZEBSKI Non-Executive Director, Chairman of the Audit Committee Dr. Trzebski holds a degree in Geology, PhD in Geophys- ics, Masters in Project Management and has over 30 years of professional experience in mineral exploration, project management and mining services. He is currently Chief Operating Officer of Austmine Ltd. As a fellow of the Australian Institute of Mining and Metallurgy, Dr. Trzebski has acted as the Competent Person (CP) for the Company’s ASX releases. Dr. Trzebski is a non-executive director of Lake Resources NL (ASX: LKE; OTC:LLKKF). Dr. Trzebski has not held any other Directorships with Austra- lian or Canadian listed companies in the last three years. Appointed 10 Apr 2007 Re-elected by shareholders on 27 May 2020 Austral Gold Limited 43 Annual Report 2020 SENIOR MANAGEMENT AND COMPANY SECRETARY Mr. Ramirez holds a Mining Engineering degree from the University of Chile. He assumed the role of VP of Operations as the Company looks to maximize efficiencies across three operations and seek out growth opportunities. He has been involved with the Company since it was founded, to recommis- sion the Guanaco mine in 2010. Mr. Ramirez has led mining and engineering activities since then, as well as all reviews and analysis of the Company’s growth activities. Mr. Ramirez recently led the design and construction of the Company’s new agitation leach plant at Guanaco. Prior to joining Austral, Mr. Ramirez held senior operational, planning and execution roles at Antofagasta PLC and at Meridian Gold’s world class El Peñon mine acquired by Yamana Gold. Appointed 7 August 2017 Raul Guerra assumed the role of Corporate VP Exploration in August 2020. He brings more than 30 years of precious metal exploration experience to the Austral Gold team. Most recently, he was Vice-President of Latin America for Barrick Gold Corporation (Barrick). He has been involved in the discovery of more than 50 million ounces of gold including two large greenfield discoveries at Barrick. Mr. Guerra is a Geologist from the Universidad de Chile. Appointed as VP of Exploration in August 2020. Mr. Bordogna joined Austral Gold in 2013 as Controller and was promoted to CFO in 2016. Since then, he has overseen all the corporate finance and accounting activities, including equity and direct investments in mining related assets, listing the company on the TSX-V, amongst others. Mr. Bordogna is a Certified Public Accountant and holds a Master of Finance (Universidad del CEMA) and a Master of International Business (The University of Sydney). He is also CFA Candidate Level 3. Prior to joining Austral Gold, he worked for the International Finance Corporation (IFC) and Deloitte in Latin America. He has over 15 years’ experience in corporate finance, M&A, investment banking and accounting roles. Appointed 22 August 2016 Mr. Hwang assumed the role of Company Secretary in July 2019. Mr. Hwang is an experienced corporate lawyer specialising in listings on the ASX, equity capital markets and providing advice on corporate governance and compli- ance issues. Appointed 31 July 2019 RODRIGO RAMIREZ Vice President of Operations RAUL GUERRA Vice President of Exploration JOSÉ BORDOGNA Chief Financial Officer DAVID HWANG Automic Group, Company Secretary Austral Gold Limited 44 Annual Report 2020 DIRECTORS’ MEETINGS The number of Directors’ meetings (including meetings of Commit- tees of Directors) and number of meetings attended by each of the Directors of the Company during the financial year were Directors’ meetings Audit Committee meetings Director Pablo Vergara del Carril Robert Trzebski Wayne Hubert Eduardo Elsztain Saul Zang Stabro Kasaneva Ben Jarvis A 6 5 6 6 6 6 6 B 6 6 6 6 6 6 6 A 2 2 N/A N/A N/A N/A 2 B 2 2 N/A N/A N/A N/A 2 A: Number of meetings attended B: Number of meetings held during the time the Director held office during the financial year SHARES AND OPTIONS At the date of this report there are no options over the Company’s ordinary shares. During or since the end of the financial year, the Company has not granted options over its ordinary shares. INDEMNITY AND INSURANCE OF OFFICERS Under a deed of access, indemnity and insurance, the Company indemnifies each person who is a Director or secretary of Austral Gold Limited against: • any liability (other than for legal costs) incurred by a Director or secretary in his or her capacity as an officer of the Company or of a subsidiary of the Company; and • reasonable legal costs incurred in defending an action for a liability incurred or allegedly incurred by a secretary in his or her capacity as an officer of the Company or of a subsidiary of the Company. The above indemnities: • apply only to the extent the Company is permitted by law to indemnify a Director or secretary; • are subject to the Company’s constitution and the prohibitions in section 199A of the Corporations Act; and • apply only to the extent and for the amount that a Director or secretary is not otherwise entitled to be indemnified and is not actually indemnified by another person (including a related body corporate or an insurer). INDEMNITY AND INSURANCE OF AUDITOR • The Company has not, during or since the end of the finan- cial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. • During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. INTERESTS KEY MANAGEMENT PERSONNEL • The relevant interest of each Director and Executive Officer (directly or indirectly) in the share capital of the Company, as notified by the Directors to the Australian Securities Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows: Director Ordinary Shares Options P Vergara del Carril 68,119 - - - R Trzebski E Elsztain S Zang S Kasaneva B Jarvis W Hubert Raul Guerra R Ramirez J Bordogna It is also noted: 451,679,060 9,615,500 1,640,763 6,881,230 - 2,545,500 801,000 279,514 22,000 136,730 - - - - - - 1. E Elsztain, S Zang, P Vergara del Carril and are Directors of Guanaco Capital Holding Corp which holds 35,870,730 shares and 2,989,226 options according to the last substantial holder notice lodged in December 2020. 2. E Elsztain and S Zang are Directors of IFISA which holds 380,234,614 shares according to the last substantial holder notice lodged in December 2020. E Elsztain is the ultimate beneficial owner of IFISA. REMUNERATION REPORT (AUDITED) Remuneration Policy The full Board of Austral Gold is responsible for determining remu- neration policies in respect of executives and Key Management Personnel (KMP). The Company has a Remuneration Policy that aims to ensure the remuneration packages of Directors and senior executives properly reflect the person’s duties, responsibilities and level of performance, as well as ensuring that remuneration is competitive in attracting, retaining and motivating people of the highest quality. The level of remuneration for non-executive Directors is consid- ered with regard to the practices of other public companies and the aggregate amount of fees paid to non-executive Directors approved by shareholders. At this stage, the level of remuneration is based on market rates and is not directly linked to shareholders’ wealth. Austral Gold Limited 45 Annual Report 2020 The Key Management Personnel (KMP) during or since the end of the financial year were: The Directors of the Group during or since the end of the financial year: • Wayne Hubert Executive Director • Eduardo Elsztain Non-Executive Vice Chairman • Saul Zang Non-Executive Director • Pablo Vergara de Carril Non-Executive Director • Robert Trzebski Non-Executive Director • Ben Jarvis Non-Executive Director • Stabro Kasaneva Chief Executive Officer and Director The Senior Executive KMP during or since the end of the financial year: • Rodrigo Ramirez Vice President of Operations • Raul Guerra Vice-President of Exploration • José Bordogna Chief Financial Officer Remuneration of KMP The Group has employment agreements with all executive KMP in accordance with the laws in the jurisdiction in which the KMP is employed. Remuneration of executive KMP is made up of a fixed component and a variable component. Performance against predetermined targets (KPIs) are used to determine the portion of the variable component paid annually. The KPIs are based on financial and non-financial indicators and include production, safety, cost of production, sustaining capital investments, new business and value accretive investments amongst others. Link Between Remuneration and Performance The Group aims to align its executive remuneration to its strategic and business objectives and the creation of shareholder value. The table below shows the measures of the Group’s financial performance over the last 5 financial years as required by the Corporations Act 2001. However, these are not necessarily consistent with the measures used in determining the variable amounts of remuneration to be awarded to each KMP. Consequently, there may not always be a direct correlation between the statutory key performance measures and the variable remuneration awarded. 12 months ended 30 June 2016 12 months ended 30 June 2017 6 months ended 31 December 2018 12 months ended 31 December 2019 12 months ended 31 December 2020 Sales Revenue (US$’000) Profit/(loss) before tax (US$’000) Basic EPS (US cents per share) Diluted EPS (US cents per share) Share price (cents AUD/CDN) 101,025 48,867 122,767 102,209 88,223 (6,232) (14,905) (37,054) 9,508 14,335 (0.85) (2.56) (4.88) 0.97 1.36 (0.85) (2.56) (4.88) 0.93 1.34 15.0/15.0 15.0/13.0 6.0/6.0 9.0/8.5 21.0/22.0 Austral Gold Limited 46 Annual Report 2020 Details of Remuneration Details of the nature and amount of each major element of the remuneration of each Director of the Group and each of the KMP of the Group during the financial year were: 12 month period ended 31 December 2020 Primary Post-employment Share-based Total Cash and accrued Salary and Fees US$ Accrued Cash Bonus US$1 Non- monetary benefits US$ Superannuation US$ Retirement/ Termination benefits US$ Shares US$ Options US$ US$ Directors Non-executive directors – – – 368 – – – – – 4,305 4,305 – 368 8,610 Executive Director – – – – E Elsztain 100,000 S Zang W Hubert R Trzebski B Jarvis 50,000 33,833 45,695 45,695 P Vergara del Carril 50,000 Total non- executive director remuneration 325,223 W Hubert 60,000 – – – – – – – - S Kasaneva 326,358 364,973 Total Director remuneration 711,581 364,973 368 8,610 Other Key Executives – – – – – – – – R. Ramirez 263,828 295,053 R. Guerra3 123,192 61,596 J. Bordogna 108,010 86,377 495,030 443,026 Total other executive remuneration Total director and executive officer remuneration 1,206,611 807,999 368 8,610 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 100,000 50,000 33,833 50,368 50,000 50,000 334,201 60,000 691,331 1,085,532 558,881 184,788 194,387 938,056 2,023,588 1 Accrued cash bonus defined as bonus earned during the year that has been paid or accrued 2 All salaries are paid in local currency and converted to USD by average FX — only for the purpose of preparing this table. 3 Commenced employment during the third quarter of 2020. Austral Gold Limited 47 Annual Report 2020 Twelve-month period ended 31 December 2019 Cash and accrued Salary and Fees US$ Primary Accrued Cash Bonus US$ Non- monetary benefits US$1 Post-employment Share-based Total Superannuation US$ Retirement benefits US$ Shares US$ Options US$ US$ Directors Non-executive directors – – – – – – – – – – – – – – – – 4,024 4,024 – 8,648 Executive director – 8,048 Other Key Executives – – – 8,048 – – – – – – – – – – – – – E Elsztain 100,000 S Zang 50,000 W Hubert 58,000 R Trzebski 45,676 B Jarvis 45,676 P Vergara del Carril 50,000 Total non- executive director remuneration 349,352 – – – – – – – S Kasaneva 355,127 311,255 Total Director remuneration 705,079 311,255 R. Ramirez 287,069 251,606 J Bordogna 119,390 69,857 Total Other Executive remuneration Total director and executive officer remuneration 406,459 321,463 1,111,538 632,718 1 Accrued cash bonus defined as bonus earned during the year that has been paid or accrued 2 All salaries are paid in local currency and converted to USD by average FX — only for the purpose of preparing this table – – – – – – – – – – – – – – – – – – – – – – – – – – 100,000 50,000 58,000 50,000 50,000 50,000 358,000 666,382 1,024,382 538,675 189,247 727,922 1,782,304 Austral Gold Limited 48 Annual Report 2020 Contractual Arrangement with Executive KMP at 31 December 2020 Name Term of Agreement and notice period Base salary Termination payments Stabro Kasaneva Chief Executive Officer No fixed term 30 days notice Rodrigo Ramirez VP of Operations No fixed term 30 days notice Raul Guerra VP of Exploration No fixed term 30 days notice Base salary is paid in Chilean pesos annually with no FX adjustment clause Base salary is paid in Chilean pesos annually with no FX adjustment clause Base salary is paid in Chilean pesos annually with no FX adjustment clause Pro rata bonus accrued Pro rata bonus accrued Pro rata bonus accrued Jose Bordogna Chief Financial Officer No fixed term 30 days notice Base salary is paid in Argentine pesos annually with no FX adjustment clause Pro rata bonus accrued Relative Proportion of Fixed vs Variable Remuneration Expense The following table shows the relative proportions of executive remuneration that are linked to performance and those that are fixed, based on the amounts disclosed as statutory remuneration expense in the tables above Fixed remuneration At risk — short-term incentive At risk — long-term incentive Name December 2020 December 2019 December 2020 December 2019 December 2020 December 2019 Stabro Kasaneva 47% 53% 53% 47% 0% 0% Executive Directors Executive Officers Rodrigo Ramirez Raul Guerra Jose Bordogna 47% 67% 56% 53% N/A 63% 53% 33% 44% 47% N/A 37% 0% 0% 0% 0% N/A 0% Austral Gold Limited 49 Annual Report 2020 Other transactions with KMP Zang, Bergel & Viñes Abogados is a related party since two non-executive Directors, Saul Zang and Pablo Vergara del Carril have significant influence over this law firm based in Buenos Aires, Argentina. Fees charged to the Company for the year ended 31 December 2020 amounted to US$148,696 (2019: US$141,022). Cresud S.A.C.I.F.Y.A, IRSA Inversiones y Representaciones S.A., IRSA Proiedades Comerciales S.A. and Consultores Asset Manage- ment S.A. are related parties as they are controlled by Non-executive Director and Chairman, Eduardo Elsztain. During the twelve month period ended 31 December 2020 a total of US$62,047 was charged to the Company (2019: US$326,437) in regard to IT services support, HR services, software licenses building/ office expenses and other fees. During April 2019, Consultores Assets Management SA, a company controlled by E Elsztain provided a loan of US$1.6 million at an annual interest rate of at 10% per annum. The loan plus interest of $30,609, was repaid in July 2019. This concludes the remuneration report, which has been audited. Auditors KPMG continues in office as auditors in accordance with the requirements of the Corporations Act 2001. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the period by the auditor are outlined in note 10 to the financial statements. There were no non-audit services provided by KPMG in 2020 (2019: Nil). The Directors are satisfied that the provision of non-audit services during the period 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 10 during the period 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 audi- tor; 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 issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. Proceedings on Behalf of the Company No person has applied for leave of Court to bring proceedings on behalf of the Company or 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. Auditor’s Independence Declaration The lead auditor’s independence declaration for the period ended 31 December 2020 has been received and is included in this report. Signed in accordance with a resolution of Directors at Sydney. Rounding of Amounts The Company is a company of the kind referred to in ASIC Instrument 2016/191, dated 1 April 2016, and in accordance with that Instru- ment amounts in the Directors’ Report and the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. Signed in accordance with a resolution of Directors made pursuant to s.298(2) of the Corporations Act 2001. For and on behalf of the board Robert Trzebski Director 17 March 2021 Austral Gold Limited 50 Annual Report 2020 Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Austral Gold Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Austral Gold Limited for the financial year ended 31 December 2020 there have been: no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. i. ii. KPM_INI_01  PAR_SIG_01  PAR_NAM_01  PAR_POS_01  PAR_DAT_01  PAR_CIT_01  KPMG Daniel Camilleri Partner Sydney 17 March 2021 51 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Austral Gold Limited 51 Annual Report 2020                               Austral Gold Limited 52 Annual Report 2020 Austral Gold Limited 53 Annual Report 2020 FINANCIAL STATEMENTS Austral Gold Limited 54 Annual Report 2020 AUSTRAL GOLD LIMITED FINANCIAL REPORT 2020 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME All figures are reported in thousands of US$ Continuing operations Sales revenue Cost of sales Gross profit before depreciation and amortisation expense Depreciation and amortisation expense Gross profit Other expense Administration expenses Net finance costs Share of loss of associate (Loss)/gain on financial assets Profit before income tax Income tax expense Profit after income tax expense Profit attributable to: Owners of the Company Non-controlling interests Items that may not be classified subsequently to profit or loss Foreign currency translation Total comprehensive income for the year Comprehensive income/(loss) attributable to: Owners of the Company Non-controlling interests Earnings per share (cents per share): Basic earnings per share Diluted earnings per share The notes on pages (59) to (87) are an integral part of these consolidated financial statements. For the year ended 31 December Note 2020 2019 13 6 6 7 8 9 21 11 12 12 88,223 (34,072) 54,151 (16,267) 37,884 (13,000) (7,907) (361) (507) (1,774) 14,335 (6,668) 7,667 7,667 - 7,667 (55) 7,612 7,612 - 7,612 1.36 1.34 102,209 (55,293) 46,916 (20,255) 26,661 (4,072) (9,304) (3,787) - 10 9,508 (7,869) 1,639 5,225 (3,586) 1,639 19 1,658 5,244 (3,586) 1,658 0.97 0.93 Austral Gold Limited 55 Annual Report 2020 AUSTRAL GOLD LIMITED FINANCIAL REPORT 2020 CONSOLIDATED STATEMENT OF FINANCIAL POSITION All figures are reported in thousands of US$ As at 31 December Note 2020 2019 Assets Current assets Cash and cash equivalents Trade and other receivables Other financial assets Inventories Total current assets Non-current assets Other receivables Mine properties Property, plant and equipment Exploration and evaluation expenditure Investment accounted for using the Equity method Goodwill Deferred tax assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Income tax payable Employee entitlements Loans and borrowings Promissory note Lease liabilities Total current liabilities Non-current liabilities Trade and other payables Provisions for reclamation and rehabilitation Loans and borrowings Lease liabilities Employee entitlements Deferred tax liability Total non-current liabilities Total liabilities Net assets Equity Issued capital Accumulated losses Reserves Total equity 14 16 17 15 16 18 19 20 21 7 11 22 23 25 21 19 22 24 25 19 23 11 26 27 28 12,401 4,469 404 14,668 31,942 1,907 3,876 44,146 18,941 4,221 - 432 9,196 6,825 277 10,551 26,849 990 6,484 50,432 15,281 3,976 926 1,229 73,523 105,465 79,318 106,167 10,371 6,034 3,894 831 - 2,905 24,035 8,910 2,022 3,548 4,045 1,957 3,047 23,529 - 1 11,050 10,814 1,246 3,416 24 4,426 20,162 44,197 61,268 102,177 (43,871) 2,962 61,268 2,077 6,302 1,048 5,665 25,907 49,436 56,731 101,682 (44,238) (713) 56,731 The notes on pages (59) to (87) are an integral part of these consolidated financial statements. Austral Gold Limited 56 Annual Report 2020 AUSTRAL GOLD LIMITED FINANCIAL REPORT 2020 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2020 and 2019 All figures are reported in thousands of US$ Balance at 31 December 2018 Adjustment on initial application of AASB16 Note Issued capital Accumulated losses Reserves 100,569 (49,473) - 10 Adjusted balance at 1 January 2019 100,569 Profit (loss) for the year Foreign exchange movements from translation of financial statements to US$ Total comprehensive income/ (loss) - - - Issued Capital 26 1,113 Acquisition of 49% of Cachinalito Acquisition of 30% of Casposo Balance at 31 December 2019 Profit for the year Profit transferred to profit reserve Foreign exchange movements from translation of financial statements to US$ Total comprehensive income/ (loss) Issued Capital Dividend paid - - 101,682 - - - - 495 - 26 (49,463) 5,225 - 5,225 - - - (44,238) 7,667 (7,300) - 367 - - Balance at 31 December 2020 102,177 (43,871) The notes on pages (59) to (87) are an integral part of these consolidated financial statements. Non- controlling interest Total 3,741 54,872 - 10 3,741 (3,586) - (3,586) - (1,361) 1,206 - - - - - - - - 54,882 1,639 19 1,658 1,299 (908) (200) 56,731 7,667 - (55) 7,612 421 (3,496) 61,268 35 - 35 - 19 19 186 453 (1,406) (713) - 7,300 (55) 7,245 (74) (3,496) 2,962 Austral Gold Limited 57 Annual Report 2020 AUSTRAL GOLD LIMITED FINANCIAL REPORT 2020 CONSOLIDATED STATEMENT OF CASH FLOWS All figures are reported in thousands of US$ Changes in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents, at the end of the period Net increase in cash and cash equivalents Causes of change in cash and cash equivalents Operating activities Profit after income tax Non-cash items Income tax expense recognized in profit or loss Impairment of goodwill Impairment of exploration and evaluation expenditure Depreciation and amortisation Interest received (Gain)/loss on sale of equipment Non-cash net finance charges Provision for reclamation and rehabilitation Inventory write-down Allowance for doubtful accounts Non-cash employee entitlements Share of loss of associate Loss/(gain) in fair value of other financial assets Net cash from operating activities before change in assets and liabilities Changes in working capital: (Increase) Decrease in inventory Decrease in trade and other receivables (Decrease) in trade and other payables (Decrease) in deferred revenue (Decrease) in employee entitlements Net cash provided through operating activities Cash flows from investing activities Additions to plant, property and equipment Proceeds from maturity of bonds and sale of securities Proceeds from sale of inventory and equipment Payment for investment in exploration and evaluation Payment for investment in mine properties Payment for equity investment, net of costs Payment for purchase of a property option Payment for purchase of non-controlling interests Interest received Net cash used in investing activities Cash flows from financing activities Proceeds from loans and borrowings Repayment of loans and borrowings Repayment of lease liabilities Interest paid on leases Proceeds from rights offering net of offering costs Proceeds from exercise of options net of costs Dividends paid Net cash used in financing activities Net increase in cash and cash equivalents For the year ended 31 December Note 2020 2019 9,196 12,401 3,205 1,716 9,196 7,480 7,667 1,639 6,668 926 748 16,267 (4) (114) 742 767 286 123 591 507 1,774 36,948 (4,653) 1,316 (1,860) - (1,269) 30,482 7,869 - 862 20,255 (27) 215 1,860 175 179 75 255 - (10) 33,347 2,481 1,417 (4,183) (2,140) (1,287) 29,635 19 20 18 21 17 29 (7,624) (10,035) 99 366 (3,329) (1,036) (2,708) (2,000) - 4 294 650 (779) (1,993) (2,019) - (817) 27 (16,228) (14,672) 1,072 (5,117) (3,495) (434) - 421 (3,496) (11,049) 3,205 5,991 (11,455) (2,794) (524) 1,299 - - (7,483) 7,480 The notes on pages (59) to (87) are an integral part of these consolidated financial statements. Austral Gold Limited 58 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 1. REPORTING ENTITY Austral Gold Limited (“the Company”) is a company limited by shares that is incorporated and domiciled in Australia. The Company’s shares are publicly traded on the Australian Securities Exchange under the symbol AGD and on the TSX Venture Exchange under the symbol AGLD. These consolidated financial statements (“financial statements”) as at and for the year ended 31 December 2020 comprise the Company and its subsidiaries (together referred to as the “Group”). The nature of the operations and principal activi- ties of the Group are described in the Directors’ Report. These financial statements are available upon request from the Company’s registered office at Level 5, 126 Phillip Street, Sydney NSW 2000 or at www.australgold.com. 2. BASIS OF PREPARATION The consolidated financial statements are general purpose financial statements which 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 profit oriented entities. The consolidated financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The consolidated financial statements have been prepared under the historical cost convention, except for certain financial assets and liabilities which are stated at fair value. These financial statements were authorised for issue by the Company’s Board of Directors on 17 March 2021. Details of the Group’s accounting policies are included in Note 38. 2.1 Functional and Presentation currency These consolidated financial statements are presented in United States dollars (US$), which is the Group’s functional currency. The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with the legislative instrument, amounts in the audited financial statements have been rounded off to the nearest thousand dollars, unless otherwise stated. 2.2 Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supple- mentary information about the parent entity is disclosed in note 34. 2.3 Reclassification of Prior Year Presentation Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifica- tions had no effect on the reported results of operations. Inventory movements previously included in Production in Cost of Sales have been disclosed separately. 3. GOING CONCERN The outbreak of the COVID-19 pandemic and the measures adopted by governments in countries worldwide to mitigate the pandemic’s spread have impacted the Group. These measures required the Group to stop its exploration activities at the Casposo Mine in Argentina during its second quarter and take several precautionary measures to protect the health of the Group’s employees. However, the Group’s production, financial performance for the year and its liquidity have not been negatively impacted by COVID-19. For the year ended 31 December 2020, the Group made a profit after income tax of US$7,667 million (2019: profit after income tax of US$1,639 million) from continuing operations and generated net cash flows from operating activities of US$30,482 million (2019: net cash flow from operating activities of US$29,635 million). At 31 December 2020, the Group has net current assets of US$7,907 million (2019: net current assets of US$3,320 million). There is still significant uncertainty over how the outbreak of COVID-19 will impact the Group’s business in future periods. However, the Directors note the following with regards to the ability of the Group to continue as a going concern: i. At 31 December 2020, the Group had a cash balance of US$12,401 million and approximately 6,200 refined gold ounces in inventory with a fair value of US$11.7 million. ii. The Group’s cash flow forecasts following the most likely mine plan and 2021 production guidance that forecast sales of; • 50,000-55,000 gold equivalent ounces; and • average 2021 selling price of gold equivalent ounces US$1,790, indicate that the Group forecasts that it will have free cash flow from operations to meet its borrowing obligations, to meet the required capital expenditures and fund the acquisition and investment disclosed in note 37. The financial statements have been prepared on a going concern basis, which contemplates the continuation of normal business operations and the realization of assets and settlement of liabilities in the normal course of business. Based on the factors set out above, the Directors believe that the going concern basis of preparation is appropriate and the Group will be able to repay its debts as and when they fall due. Austral Gold Limited 59 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 4. USE OF ESTIMATES AND JUDGEMENTS In preparing these financial statements, Management has made judgements, estimates and assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended 31 December 2020 is detailed below: Carrying value of Mine Properties The Group estimates its ore reserves and mineral resources annually at each year end, based on information compiled by Competent Persons as defined in accordance with the Australasian code for reporting Exploration Results, Mineral Resources and Ore Resources (JORC code 2012). The estimated quantities of economically recoverable reserves are based upon interpretations of geological models and require assumptions to be made regarding factors such as estimates of short and long-term exchange rates, estimates of short and long-term commodity prices, future capital requirements and future operating performance. Changes in reported reserves estimates can impact the carrying amount of mine development (including mine properties, property, plant and equipment and exploration and evaluation assets), the provision for mine closure provisions, the recognition of deferred tax assets, as well as the amount of amortisation charged to the statement of profit or loss. Impairment Significant judgements, estimates and assumptions are required in determining value in use or fair value less costs of disposal. This is particularly so in the assessment of long life assets. It should be noted that the CGU recoverable amounts are subject to variability in key assumptions including, but not limited to, gold and silver prices, currency exchange rates, discount rates, production profiles and operating and capital costs. A change in one or more of the assumptions used to determine value in use or fair value less costs of disposal could result in a change in a CGU’s recoverable amount. Carrying value of exploration and evaluation assets The Group tests at each reporting date whether there are any indicators of impairment as identified by AASB 6 “Exploration for and Evaluation of Mineral Resources”. Where indicators of impairment are identified, the recoverable amounts of the assets are determined and an impairment is recorded when the carrying value exceeds recoverable value. Mine closure provisions Obligations associated with exploration and mine properties are recognised when the Group has a present obligation, the future sacrifice of the economic benefits is probable, and the provision can be measured reliably. The provision is measured at the present value of the future expenditure and a corresponding rehabilitation asset is also recognised. On an ongoing basis, the rehabilitation will be remeasured in line with the changes in the time value of money (recognised as an expense and an increase in the provision), and additional disturbances (recognised as additions to a correspond- ing asset and rehabilitation liability). The calculation of this provision requires assumptions such as application of envi- ronmental legislation, mine closure dates, available technologies and engineering cost estimates. The related carrying amounts are disclosed in note 24. Measurement of fair values The Group has established a control framework with respect to the measurement of fair values. Estimates and underly- ing assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ended 31 December 2020 is detailed below: A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: i. Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities ii. Level 2 — inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly (i.e. as prices), or indirectly (i.e. derived from prices) iii. Level 3 — inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Austral Gold Limited 60 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS The Group holds listed equity securities on the Australian and Canadian stock exchanges and listed Argentine sovereign bonds at fair value, which are measured at the closing bid price at the end of the reporting period. These financial assets held at fair value fall within Level 1 of the fair value hierarchy. The Group also holds options which rely on estimates and judgements to calculate a fair value for these financial instruments using the Black Scholes model. These financial assets held at fair value fall within Level 2 of the fair value hierarchy. Further information about the assumptions made in measuring fair values is included in Note 17 – Other financial assets and Note 30 – Financial instruments. 5. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES AND ADOPTION OF NEW/AMENDED AASB AND AASB INTERPRETATIONS Adoption of other narrow scope amendments to IFRSs and IFRS Interpretations A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2021 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements. 6. COST OF SALES All figures are reported in thousands of US$ Profit before income tax includes the following specific expenses: For the year ended 31 December 2020 2019 Production Staff costs Royalties Mining Fees Inventory movements Total cost of sales before depreciation and amortisation expense Depreciation of plant and equipment Amortisation of mine properties Total depreciation and amortisation expense Severance included in staff costs 7. OTHER EXPENSES All figures are reported in thousands of US$ Settlement of union agreement at Guanaco/Amancaya Severance of mining employees due to outsource of operations Impairment of goodwill (i) Impairment of exploration and evaluation expenditure Care and maintenance Restructuring expenses Exploration expenses (Gain)/loss on sale of fixed assets and inventory Other Total other expenses 18,020 17,843 1,962 474 (4,227) 34,072 14,229 2,038 16,267 1,608 For the year ended 31 December 2020 4,963 4,278 926 748 1,983 - 282 (114) (66) 13,000 31,377 21,616 2,560 502 (762) 55,293 17,117 3,138 20,255 988 2019 - - - 862 1,185 2,087 - 215 (277) 4,072 (i) Goodwill of US$926,000, which arose on the acquisition of a subsidiary, Ingenieria y Mineria Cachinalito Limitada was written off as Ingenieria y Mineria Cachinalito Limitada is in the process of being wound up. Austral Gold Limited 61 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 8. ADMINISTRATION EXPENSES All figures are reported in thousands of US$ Consulting and professional services Administration Staff costs Non-executive director fees Other Total administration expenses Severance included in staff costs 9. NET FINANCE COSTS All figures are reported in thousands of US$ Interest income Interest expense Interest expense on leases (Gain)/loss from foreign exchange Present value adjustment to mine closure provision Other Net finance costs 10. AUDITOR’S REMUNERATION All figures are reported in US$ Audit and review services: Auditors of the Group-KPMG Audit and review of financial statements-Group Audit and review of financial statements-controlled entities 11. INCOME TAX EXPENSE All figures are reported in thousands of US$ (A) Income tax expense comprises: Current tax payable Deferred tax (benefit)/expense Income tax (B) Reconciliation of effective income tax rate Profit before tax Prima facie income tax expense calculated at 30% Difference due to blended overseas tax rate* Non-deductible expenses Temporary differences not brought into account Recognition of carry-forward tax losses Income tax * Chile tax rate: 27.0% (31 December 2019: 27.0%). Argentina tax rate: 30% (31 December 2019: 30%) For the year ended 31 December 2020 1,427 1,095 3,754 334 1,297 7,907 42 For the year ended 31 December 2020 (4) 214 434 (535) 252 - 361 2019 1,987 1,044 4,909 358 1,006 9,304 84 2019 (27) 901 524 1,845 517 27 3,787 For the year ended 31 December 2020 2019 92,885 144,700 237,585 74,000 159,500 233,500 For the year ended 31 December 2020 7,450 (782) 6,668 14,335 4,300 (720) 2,907 149 32 6,668 2019 2,312 5,557 7,869 9,508 2,852 (721) 6,510 (460) (312) 7,869 Austral Gold Limited 62 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS All figures are reported in thousands of US$ 31 December 2020 31 December 2019 Chile Argentina Other Total Chile Argentina Other Total (C) Deferred tax assets and liabilities Deferred tax assets Other receivable Inventory Mining concessions brought to account Accrual for mine closure Deferred income Tax losses carried forward Property, plant and equipment Payroll accrual Other Leasing Tax losses not brought to account 147 69 - 2,037 2,266 - - 326 - 884 - - 84 198 302 - 245 632 - 102 - - - - - - 147 153 199 2,339 2,266 9,965 10,210 - - - - 632 326 102 884 57 69 – 1,198 18 – – 780 36 1,147 (9,965) (9,965) – – 61 320 198 – 98 1,072 – 989 – – Deferred tax assets 5,729 1,563 Deferred tax liabilities Mining concessions (10,672) - - - 7,292 3,305 2,738 (10,672) (8,950) – – – – – – 57 130 320 1,396 18 9,182 9,280 – – – – 1,072 780 1,025 1,147 (9,182) (9,182) - – 6,043 (8,950) Property plant and equipment inflation adjustment - (1,040) (23) (1,063) Financial assets 540 (91) - 449 – – (1,474) (20) (1,494) (35) – (35) Deferred tax liabilities (10,132) (1,131) (23) (11,286) (8,950) (1,509) (20) (10,479) Net deferred tax (liabilities)/assets (4,403) 432 (23) (3,994) (5,645) 1,229 (20) (4,436) Movement in deferred tax balances Opening balance (5,645) 1,229 (20) (4,436) (888) 3,892 – 3,004 Exchange rate difference - Charged to profit or loss Closing balance 1,242 (4,403) (349) (448) 432 9 (340) 2 (1,897) 12 (1,883) (12) 782 (4,759) (766) (32) (5,557) (23) (3,994) (5,645) 1,229 (20) (4,436) Deferred tax assets have not been recognised in respect to tax losses for certain entities of the Group. See Note 36 for details. 12. EARNINGS PER SHARE All figures are reported in thousands of US$ Net profit/(loss) attributable to owners Weighted average number of shares used as the denominator Number for basic earnings per share Number for diluted earnings per share Basic earnings per ordinary share (cents) Diluted earnings per ordinary share (cents) For the year ended 31 December 2020 7,667 562,581,929 572,718,453 1.36 1.34 2019 5,225 539,424,350 556,237,880 0.97 0.93 Austral Gold Limited 63 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 13. OPERATING SEGMENTS Management have determined the operating segments based on reports reviewed by the Chief Operating Decision Maker (“CODM”). The CODM considers the business from both operations and geographic perspective and has identified two reportable segments, Guanaco/Amancaya which is based in Chile and Casposo which is based in Argentina. The CODM monitors the performance in these two regions separately. During the year ended 31 December 2020, the Group earned approximately 57% (2019-78%) of its consolidated revenue from sales made to one customer. All figures are reported in thousands of US$ Revenue: Gold Silver Cost of sales Depreciation and amortization expense Other (expense) Income Administration expenses Finance costs Share of loss of associate (Loss)/gain on financial assets For the year ended 31 December 2020 For the year ended 31 December 2019 Guanaco Amancaya Casposo Group and unallocated items Consolidated Guanaco/ Amancaya Casposo Group and unallocated items Consolidated 82,810 5,413 (34,072) - - - - - - 82,810 5,413 84,823 8,650 5,045 3,691 (34,072) (44,985) (10,308) - - - (16,106) (119) (42) (16,267) (16,269) (3,927) (59) 89,868 12,341 (55,293) (20,255) (10,103) (2,149) (748) (13,000) (668) (3,479) 75 (4,072) (4,193) (552) (3,162) (7,907) (5,455) (887) (2,962) (9,304) (462) 1,450 (1,349) - (2,000) - - (361) (507) (507) 226 (1,774) (1,239) (2,545) - - - - (3) - 10 118 (3,787) - 10 (7,869) Income tax expense (6,224) (397) (47) (6,668) (7,155) (832) Segment profit/ (loss) Segment assets Segment liabilities Capital expenditure 15,063 (1,767) (5,629) 7,667 17,702 (13,242) (2,821) 1,639 77,124 38,681 10,599 12,701 15,640 105,465 4,091 638 1,425 225 44,197 11,462 76,525 41,832 12,138 13,568 16,074 106,167 4,565 486 3,039 183 49,436 12,807 Austral Gold Limited 64 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS Geographic information: All figures are reported in thousands of US$ Revenue by geographic location Chile Argentina Australia Canada United States Total revenue Non-current assets by geographic location Chile Argentina United States British Virgin Islands Canada Australia Total non-current assets 14. CASH AND CASH EQUIVALENTS All figures are reported in thousands of US$ Cash at call and in hand Short-term investments Total cash and cash equivalents For the year ended 31 December 2020 88,223 - - - - 88,223 51,468 17,722 4,221 110 2 - 73,523 For the year ended 31 December 2020 12,285 116 12,401 2019 93,473 8,736 - - - 102,209 57,615 17,619 3,976 102 6 - 79,318 2019 7,756 1,440 9,196 Reconciliation of Cash Cash at the end of the financial year as shown in the Statement of Cash Flows, is reconciled to items in the Statement of Financial Position as follows: Cash and cash equivalents 12,401 9,196 Risk Exposure The Group’s exposure to interest rate risk is discussed in note 30. The maximum exposure to credit risk at the reporting date is the carrying amount of each class of cash and cash equivalents mentioned above. 15. INVENTORIES All figures are reported in thousands of US$ Materials and supplies Ore stocks Gold bullion and gold in process Total inventories As at 31 December 2020 8,538 776 5,354 14,668 2019 8,648 71 1,832 10,551 *Ore stock inventories require estimates and assumptions most notably in regard to grades, volumes, densities, future completion costs and ultimate sale price. Such estimates and assumptions may change as new information becomes available which may impact upon the carrying value of inventory. The allowance for inventory obsolescence forming part of the above balance is US$1,548k (31 December 2019:US$1,262k). Austral Gold Limited 65 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 16. TRADE AND OTHER RECEIVABLES All figures are reported in thousands of US$ Current Trade receivables Other current receivables Loan receivable (i) Prepaid income tax GST/VAT receivable Total current receivables Non-current GST/VAT receivable Prepaid income tax Loan receivable (i) Other Total non-current receivables Allowance for doubtful accounts included in trade receivables Trade debtors The ageing of trade receivables is 0–30 days As at 31 December 2020 2,285 1,072 132 112 868 4,469 905 799 12 191 1,907 513 2,285 2019 3,787 548 – 1,252 1,238 6,825 578 – – 412 990 390 3,787 (i) As part of the new three year collective labour agreements with Unions at the Group’s Guanaco/Amancaya mines, the Company provided non-interest-bearing loans to employees 16.1 Past due but not impaired There were no receivables past due at 31 December 2020 (31 December 2019: nil). 16.2 Fair value and credit risk Due to the short-term nature of trade receivables, their carrying amount is assumed to approximate their fair value. Refer to note 30 for more information on the risk management policy of the Group and the credit quality of the receivables. 16.3 Key customers The Group is mainly reliant on three customers to which gold and silver produced from the Guanaco/Amancaya mines are sold. 17. OTHER FINANCIAL ASSETS All figures are reported in thousands of US$ Current Call option to buy a further 3.795% of Rawhide — level 3 Listed bonds — level 1 Listed equity securities — level 1 Total current other financial assets at fair value As at 31 December 2020 - 34 370 404 2019 4 29 244 277 The table above sets out the Group’s assets and liabilities that are measured and recognised at fair value at 31 December 2020 and 2019. Listed securities are shares of a Canadian listed mining company and sovereign bonds nominated in USD as at 31 December 2020 and 2019. Call options as at 31 December 2019 are options to acquire an interest in a certain mining asset in North America which were exercised during year ended 31 December 2020. During the year ended 31 December 2020, another option to acquire certain mining properties in South America which was purchased at a cost of US$2 million. This option was initially valued using the Black-Scholes option valuation model at the time of acquisition and revalued to nil during the year ended 31 December 2020. Fair value hierarchy Refer to note 4 of these financial statements for details of the fair value hierarchy. Transfers During the year ended 31 December 2020 there were no transfers between the financial instrument levels of hierarchy. Austral Gold Limited 66 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 18. MINE PROPERTIES All figures are reported in thousands of US$ Guanaco/Amancaya Casposo Total Mine Properties – 31 December 2019 Cost Accumulated amortisation Carrying value — Mine Properties Movements in carrying value Carrying amount at 1 January 2019 Additions Transfers from Exploration and Evaluation expenditure Amortisation Carrying amount at 31 December 2019 Mine Properties — 31 December 2020 Cost Accumulated amortisation Carrying value — Mine Properties Movements in carrying value Carrying amount at 1 January 2020 Additions Transfers to Exploration and Evaluation expenditure Decrease in provision for reclamation and rehabilitation Amortisation Carrying amount at 31 December 2020 63,122 (56,638) 6,484 6,723 1,993 - (2,232) 6,484 62,552 (58,676) 3,876 6,484 1,036 (1,079) (527) (2,038) 3,876 9,795 (9,795) - - - 906 (906) - 9,795 (9,795) - - - - - - - 72,917 (66,433) 6,484 6,723 1,993 906 (3,138) 6,484 72,347 (68,471) 3,876 6,484 1,036 (1,079) (527) (2,038) 3,876 Carrying value — Guanaco/Amancaya The Guanaco and Amancaya mines have been determined by Management to be a single cash generating unit (“CGU”). The mine properties noted above and the property, plant and equipment that is an intrinsic part of the mine and its structure (included in note 19) with a total book value of US$42.5 million are included in determining the carrying value of the CGU for the purposes of assessing for impairment. Management have assessed the fair value to be above book value of the Guanaco/Amancaya project and therefore no impairment charge has been applied to the assets for the current year. An impairment test was also performed by an independent party using the discounted cash flow model (DCF) as the primary valuation methodology along with a crosscheck method using comparable listed market values. Main assumptions of the DCF model for impairment test purposes are as follows: • Real Forecast Gold price (2021-2024): US$1,554/oz – US$1,871/oz (31 December 2019 US$1,493/oz – US$1,498/oz) • Real Forecast Silver price: (2021-2024) US$18.70/oz – US$23.1/oz (31 December 2019 US$17.10/oz – US$17.90/oz) • One year of underground mining plus three years of processing existing heap leach pads • Real Discount Rate (post-tax): 4.8% (31 December 2019: 4.9%) The sensitivity to +/- 10% variation in the gold price (US$1,398-2,058/oz) on the fair value of the Guanaco/Amancaya project results in an impact of +/- US$9.4 million. The sensitivity to +/- 10% variation in the discount rate (4.3%-5.3%) fair value of the Guanaco/Amancaya project results in an impact of +/- US$0.4 million. The sensitivities do not lead to a fair value below the book value of the project. Austral Gold Limited 67 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 19. PROPERTY, PLANT AND EQUIPMENT All figures are reported in thousands of US$ Property, plant and equipment owned Right-of-use Property, plant and equipment owned Cost Accumulated depreciation Carrying amount at 31 December 2020 and 31 December 2019 Movements in carrying value Carrying amount at beginning of the year Additions Transfer of leases to right-of-use Depreciation Disposals Carrying amount at 31 December 2020 and 31 December 2019 31 December 2020 31 December 2019 34,725 9,421 44,146 154,297 (119,572) 34,725 37,515 7,624 - (10,411) (3) 34,725 37,515 12,917 50,432 146,883 (109,368) 37,515 54,020 10,035 (12,930) (13,352) (258) 37,515 The majority of the property, plant and equipment is included in the Guanaco/Amancaya Cash Generating Unit (“CGU”). Property, plant and equipment that does not form part of the Guanaco CGUs are being carried at the lower of their book value and recoverable amount. The Casposo property, plant and equipment is recorded at salvage value as it is currently not being used. The Group leases production equipment under a number of finance leases. At 31 December 2020, the net carrying amount of finance lease assets under AASB 16 was US$9.4m. All figures are reported in thousands of US$ Underground Mine Development Plant Mining Equipment 31 December 2020 Buildings Land Other Total Movements in carrying value Balance at 1 January, 2019 14,669 28,090 815 790 Additions Transfer of leases to right-of-use assets Disposals Depreciation Carrying amount at 31 December 2019 Additions Disposals Depreciation Carrying amount at 31 December 2020 7,687 655 - - (10,652) - (5,670) (5,392) 5,600 1,013 (888) (258) (917) 16,686 12,701 4,550 5,718 - 401 - (5,637) (3,031) 362 - (841) 4,056 680 (1,390) - (1,173) 2,173 2,173 1,037 (3) (630) - - - 815 815 - - - 54,020 10,035 (12,930) (258) - - - (200) (13,352) 590 590 106 - 37,515 37,515 7,624 (3) (272) (10,411) 16,767 10,071 4,071 2,577 815 424 34,725 Balance at 1 January, 2020 16,686 12,701 4,550 Austral Gold Limited 68 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS Reconciliation of carrying amount All figures are reported in thousands of US$ Underground Mine Development Plant Mining Equipment Buildings Land Other Total Cost Balance at 1 January, 2019 Recognition of right- of-use assets on initial recognition of AASB 16 Adjusted balance at 1 January 2019 Additions Disposals Balance at 31 December 2019 Additions Disposals Balance at 31 December 2020 62,770 48,608 21,402 14,732 815 7,109 155,436 - (14,352) (1,240) (2,499) - - (18,091) 62,770 34,256 20,162 12,233 815 7,109 137,345 7,687 - 655 - 1,013 (497) 680 - - - - - 10,035 (497) 70,457 34,911 20,678 12,913 815 7,109 146,883 5,718 - 401 - 362 (68) 1,037 (133) - - 106 (9) 7,624 (210) 76,175 35,312 20,972 13,817 815 7,206 154,297 All figures are reported in thousands of US$ Underground Mine Development Plant Mining Equipment Accumulated depreciation and impairment losses Buildings Land Other Total Balance at 31 December, 2018 Recognition of right-of-use on initial recognition of AASB 16 Adjusted balance at 1 January 2019 Depreciation Disposals Balance at 31 December 2019 Depreciation Disposals Balance at 31 December 2020 Carrying amounts At 31 December 2019 At 31 December 2020 48,101 20,518 15,801 10,677 - (3,700) (352) (1,110) 48,101 16,818 15,449 5,670 - 5,392 - 917 (238) 9,567 1,173 - 53,771 22,210 16,128 10,740 5,637 - 3,031 - 841 (68) 630 (130) 59,408 25,241 16,901 11,240 - - - - - - - - - 6,319 101,416 - (5,162) 6,319 96,254 200 - 13,352 (238) 6,519 109,368 272 (9) 10,411 (207) 6,782 119,572 16,686 12,701 4,550 2,173 16,767 10,071 4,071 2,577 815 815 590 424 37,515 34,725 Austral Gold Limited 69 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 19 (ii). Right of use All figures are reported in thousands of US$ Office Vehicles Machinery and equipment Recognised on adoption of AASB 16 Additions Less depreciation Balance at 31 December 2019 Balance at 1 January 2020 Additions Less depreciation Balance at 31 December 2020 339 47 (94) 292 292 - (99) 193 3,206 3,366 (1,383) 5,189 5,189 322 (1,834) 3,677 9,724 - (2,288) 7,436 7,436 - (1,885) 5,551 All figures are reported in thousands of US$ As at 31 December Lease liabilities Lease liabilities Less: current portion Non-current long-term liability 19 (iii). Undiscounted lease payments All figures are reported in thousands of US$ Less than a year Greater than a year 20. EXPLORATION AND EVALUATION EXPENDITURE All figures are reported in thousands of US$ Costs carried forward in respect of areas of interest Carrying amount at the beginning of the period Additions Impairment for the period Transfers from/(to) Mining Properties Carrying amount at end of the period 2020 6,321 (2,905) 3,416 As at 31 December 2020 3,193 7,712 10,905 As at 31 December 2020 15,281 3,329 (748) 1,079 18,941 Total 13,269 3,413 (3,765) 12,917 12,917 322 (3,818) 9,421 2019 9,349 (3,047) 6,302 2019 3,233 7,811 11,044 2019 16,270 779 (862) (906) 15,281 The recovery of the carrying amount of the exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the areas of interest. This balance mainly relates to expenditures at the Guanaco, Casposo and Pingüino exploration projects. Additions for the year ended 31 December 2020 and 2019 relate mainly to exploration on the Guanaco and Casposo projects and the initial payment for the Sierra Blanca project in Santa Cruz, Argentina. The significant terms of the transaction to acquire the Sierra Blanca in October 2020 include the payment of US$100,000 cash (paid) on signing and work commitments of US$700,000. The transaction is being accounted for as an acquisition of an asset and the work commitments are to be paid as follows: Year 1: $100,000 Year 2: $200,000 Year 3: $300,000 After work commitments in Year 1 are incurred, the Group will acquire a 51% interest. After the work commitments in Year 2 and Year 3 are incurred, the Group will acquire an additional 29% interest. Expenditures may be incurred earlier than the work commitment dates. Austral Gold Limited 70 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS After 80% of the project is earned, the Group also has an option to purchase the final 20% of the project for a total of US$2.3 million cash and US$1.6 million in work commitments as follows: Year 4: Cash of US$0.5 million and work commitments of US$0.4 million Year 5: Cash of US$1.0 million and work commitments of US$0.4 million At the time of acquisition, the Sierra Blanca project had no probable and proven resources. The project was not in produc- tion and there was no mine plan to place them into production. For these reasons, the acquisition was accounted for as an acquisition of assets and liabilities and not a business combination as defined under AASB3. Impairment for the year ended 31 December 2020 and 2019 relate exploration projects with no expected value in Argentina. During December 2020, the Group entered into an option agreement to acquire certain mining concessions in Chile named Buenos Aires from 1 to 199. The total cost of the option is US$5.05 million (“Fixed Price”) and is to be paid in Chilean pesos as follows: Upon execution of the agreement (paid) 6 months from the date of the agreement 12 months from the date of the agreement 18 months from the date of the agreement 24 months from the date of the agreement 30 months from the date of the agreement 36 months from the date of the agreement 48 months from the date of the agreement US$ 100,000 100,000 350,000 500,000 1,000,000 500,000 1,000,000 1,500,000 5,050,000 In addition, there is a 2% NSR on gold and silver and a 1.5% NSR on other minerals sold from these concessions. During December 2020, the Group also entered into an agreement to acquire the Sierra Amarilla properties (334 hectares) from SQM (SQM:NYSE). The total consideration was US$40,000 (paid) plus a 1% NSR royalty over precious metals sold from those properties. 21. INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD The Group’s interests in equity-accounted investees comprise an interest in Rawhide Acquisition Holding LLC. (“Rawhide”). On 17 December 2019, the Group made an initial purchase of approximately 22.48% (21.28% on a fully diluted basis) directly from Rawhide for a purchase price of US$3,957,406, of which US$2,000,000 was paid in cash at closing. The balance of US$1,957,406 was paid on 31 January 2020. Transaction costs of US$19,016 were incurred. In addition, on 17 December 2019, the Group entered into option agreements with three existing unit owners to acquire an additional 3.795% of the issued and outstanding Rawhide Units for a total of US$750,813. The Group exercised these options during 2020. During the year ended 31 December 2020, the Group recorded a loss of US$507,093 representing the share of the loss incurred by Rawhide adjusted for the impact of AASB 16, Rawhide hedges and call options based on their ownership interest throughout the period. All figures are reported in thousands of US$ Percentage ownership interest Non-current assets Current assets Non-current liabilities Current liabilities Net liabilities (100%) Group’s share of net liabilities Carrying amount of interest in associate As at December 2020 26.46% 23,873 18,145 (33,504) (11,047) (2,533) (670) 4,221 2019 22.48% 25,330 15,323 (34,557) (7,347) (1,251) (281) 3,976 Austral Gold Limited 71 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS All figures are reported in thousands of US$ Revenue (Loss) from continuing operations (100%) Other comprehensive income (100%) Total comprehensive income (100%) Group’s share of total (loss) and comprehensive income (25.37%)* *Weighted average of 25.37% ownership in the Rawhide Mine during the year ended 31 December 2020. 22. TRADE AND OTHER PAYABLES All figures are reported in thousands of US$ For the year ended 31 December 2020 42,623 (1,999) - (1,999) (507) As at 31 December Current Trade payables Accrued expenses Royalty payable Director fees Other Total trade and other payables Non-Current Other payables 23. EMPLOYEE ENTITLEMENTS All figures are reported in thousands of US$ Current Salaries and bonuses Employee entitlements Total employee entitlements As at 31 December 2020 4,775 3,956 659 429 552 10,371 - 2020 2,579 1,315 3,894 2019 - - - - - 2019 4,081 3,075 746 432 576 8,910 1 2019 1,894 1,654 3,548 The current provision for employee entitlements includes all unconditional entitlements in accordance with the applicable legislation. The entire amount is presented as current, since the Group does not have an unconditional right to defer payment. The entire balance of employee benefits is expected to be settled within the next 12 months. Non-current Employee entitlements 24 1,048 Retirement benefits Retirement benefits are to be paid upon the death of workers and for disability and retirement. The methodology followed to determine the provision for all employees adhering to the agreements has considered turn- over rates and the RV-2014 mortality table established by the Superintendency of Securities and Insurance to calculate the reserves of life insurance in Chile according to the valuation method called Accumulated Benefit Valuation Method or Accrued Benefit Cost. This methodology is established in AASB 119 Employee benefits on Retirement Benefits Costs. The parameters of turnover rates, rates of increase of remunerations and discount rate have been determined by the Group. Austral Gold Limited 72 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 24. PROVISIONS All figures are reported in thousands of US$ Non current Mine closure Others Closing balance Movement in non current provisions Opening balance (Reductions)/additions Exchange difference Present Value Adjustment Closing balance As at 31 December 2020 11,045 5 11,050 10,814 (531) 515 252 11,050 2019 10,804 10 10,814 10,664 (25) (342) 517 10,814 Rehabilitation provision Provision for rehabilitation work has been recognised in relation to estimated future expenditures including rehabilitating mine sites, dismantling operating facilities and restoring affected areas. These future cost estimates are discounted to their present value. The calculation of this provision requires assumptions such as application of environmental legis- lation, mine closure dates, available technologies and engineering cost estimates. The related carrying amounts are disclosed in note 18. As at 31 December 2020, the total restoration provision amounts to US$7.5m for Guanaco/Amancaya mine. The present value of the restoration provision was determined based on the following assumptions: Undiscounted rehabilitation costs: US$7.6m; and Discount period: 2 years (Discount period based on expected timing of restoration activities). Discount rate: 0.50% (2019-1.75%) As at 31 December 2020, the total restoration provision amounts US$3.5m for the Casposo mine. The present value of the restoration provision was determined based on the following assumptions: Undiscounted rehabilitation costs: US$4.2m; and Discount rate: 11.49% (2019–12.3%) There are no current plans for rehabilitation and restoration as the Group has initiated an exploration program and there is potential to restart operations in the future. 25. LOANS AND BORROWINGS All figures are reported in thousands of US$ Current Loan facilities Vendor take-back loan Total current loans and borrowings Non-current Loan facilities Total non-current loans and borrowings As at 31 December 2020 831 - 831 1,246 1,246 2019 3,754 291 4,045 2,077 2,077 Loan Facilities At 31 December 2020, the Loan Facilities are payable to Banco Santander and are to be repaid over 30 months at an annual average interest rate of 5.5% (2019–5.85%). Austral Gold Limited 73 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 26. ISSUED CAPITAL All figures are reported in thousands of US$ Fully paid ordinary shares Number of ordinary shares Weighted average number of ordinary shares (basic) Movements in ordinary share capital Balance at 1 January 2019 Shares issued pursuant to pro-rata rights offering Share issue costs pursuant to exercise of options Balance at 31 December 2019 Exercise of options Share issue costs pursuant to exercise of options Balance at 31 December 2020 As at 31 December 2020 102,177 566,070,265 562,581,929 Number of ordinary shares 534,173,010 25,220,249 - 559,393,259 6,677,006 - 566,070,265 2019 101,682 559,393,259 539,424,350 US$’000 100,569 1,194 (81) 101,682 504 (9) 102,177 On 15 October 2019, the Group closed its non-renounceable pro-rata rights offer of ordinary shares and attaching options at a price of A$0.08 per share. One option was granted for each 1.5 shares ordinary issued. The fair value of the options granted was US$186,000 (note 28). The Group received gross proceeds of US$0.43m. Ordinary shares participate in dividends and the proceeds on winding up of the Parent Entity in proportion to the number of shares held. At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The ordinary shares do not have any par value. Movements in share options Unlisted Options to acquire ordinary fully paid shares at A$0.092 on or before 18 October 2021 27. ACCUMULATED LOSSES All figures are reported in thousands of US$ Accumulated losses at beginning of year Adjustment on initial application of AASB16 (net of tax) Adjusted balance at 1 January 2020/1 January 2019 Net profit for the year Profits transferred to profit reserve Accumulated losses at end of year Date 18 Oct 2019 As at 31 December 2020 2019 10,136,524 16,813,530 31 December 2020 31 December 2019 (44,238) - (44,238) 7,667 (7,300) (43,871) (49,473) 10 (49,463) 5,225 - (44,238) Austral Gold Limited 74 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 28. RESERVES All figures are reported in thousands of US$ 31 December 2020 31 December 2019 Foreign currency translation reserve Balance at beginning of year Foreign exchange movements from translation of financial statements to US dollars Balance at end of year Share option reserve Balance at beginning of year Unlisted options (1) Balance at end of year Business combination reserve Balance at beginning of year Acquisition of 49% of Cachinalito Acquisition of 30% of Casposo Balance at end of year Profit appropriation reserve Transfer from accumulated losses Dividend paid Balance at end of year Total reserves 375 (55) 320 (135) (74) (209) (953) - - (953) 7,300 (3,496) 3,804 2,962 356 19 375 (321) 186 (135) - 453 (1,406) (953) - - - (713) (i) The fair value of the unlisted options issued in its non-renounceable pro-rata rights offer is determined at the date of issuance using the Black-Scholes options valuation model that takes into account the assumptions per the following table. Upon the exercise of options, the balance of the reserve relating to those options is transferred to share capital. Exercise price Term of option Share price at date of issuance Expected price volatility Risk-free interest rate Nature and purpose of reserves AUS$ 0.092 2 years AUS$ 0.073 53% per annum 0.72% Foreign Currency Translation Reserve Exchange differences arising on translation of the non-US$ denominated non-monetary balances of Group Companies are recognised in the foreign currency translation reserve. The reserve is recognised in profit or loss when the net invest- ment is disposed of. Share Option Reserve Options granted/issued as share-based payments and a capital raise are recognised in the share option reserve. Profit appropriation Reserve Transfers up to the net income earned during the year may be transferred from accumulated losses and paid as a dividend. Austral Gold Limited 75 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 29. NON-CONTROLLING INTEREST All figures are reported in thousands of US$ Non-controlling interest in subsidiaries comprise Acquired as part of subsidiary As at 31 December 2020 - 2019 - On 20 March 2019, the Group entered into an agreement to acquire the 49% non-controlling interest in Cachinalito for US$949,729 to be paid in eighteen monthly installments of approximately US$52,651. During the year ended 31 December 2020, the Company made twelve payments totaling US$332,729 (2019; US$617,000). On 23 December 2019, the Group entered into an agreement to effectively acquire the 30% non-controlling interest in Casposo for US$200,000. 30. FINANCIAL INSTRUMENTS Financial risk management objectives The Group’s principal financial instruments comprise borrowings, receivables, listed equity securities, cash and short- term deposits. These activities expose the Group to a variety of financial risks: market risk (interest rate risk and foreign currency risk), credit risk, price risk and liquidity risk. The Group recognises the importance of risk management and has adopted a Risk Management and Internal Compliance and Control policy which describes the role and accountabilities of management and of the Board. The Directors manage the different types of risks to which the Group is exposed by considering risk and monitoring levels of exposure to the main financial risks by being aware of market forecasts for interest rates, foreign exchange rates, commodity and market prices. The Group’s exposure to credit risk and liquidity risk is monitored through general business budgets and forecasts. The Group holds the following financial instruments: All figures are reported in thousands of US$ Financial Assets Cash and cash equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Employee entitlements Borrowings Promissory note Financial leases a. Market Risk As at 31 December 2020 12,401 4,603 404 10,371 3,918 2,077 - 6,321 2019 9,196 6,000 277 8,910 4,596 6,122 1,957 9,349 Foreign Currency Risk The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign currency exchange rate fluctuations. Foreign exchange rate risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the functional currency of the Group. The risk is measured using cash flow forecasting. Foreign currency risk is minimal as most of the transactions are settled in US$. As at 31 December 2020, the Group was exposed to foreign exchange risk though the following financial assets and liabilities denominated in currencies other than the Group’s functional currency (thousands of US$). Austral Gold Limited 76 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Financial liabilities Trade and other payables Employee entitlements Financial leases Argentinian Peso (ARS) Chilean Peso (CLP) Australian (AUS) Canadian Dollar 81 1,981 34 289 420 1 120 54 - 2,591 2,159 86 4 334 - 369 - - 15 14 - 39 - - ii. Price Risk The Group’s revenues are exposed to fluctuations in the price of gold, silver and other prices. Gold and silver produced is sold at prevailing market prices in US$. The Group has resolved that for the present time the production should remain unhedged. The Group considers exposure to commodity price fluctuations within reasonable boundaries to be an integral part of the business. Historical Evolution in the gold and silver commodity prices (US$) 2500 2000 1400 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Gold Price (US$/oz) Silver Price (US$/oz) 60 50 40 30 20 10 0 Sensitivity to Changes in Commodity Prices (Gold and Silver) The below sensitivity analysis demonstrates the after tax effect on the profit/(loss) and equity which could result if there were changes in the gold and silver commodity prices by +/- 10% of the actual commodity prices realised by the Group. All figures are reported in thousands of US$ Effect on profit/(loss) For the year ended Effect on equity 31 December 2020 31 December 2019 31 December 2020 31 December 2019 10 % increase in gold and silver prices 10 % decrease in gold and silver prices 8,822 (8,822) 10,221 (10,221) 8,822 (8,822) 10,221 (10,221) iii. Interest Rate Risk The Group’s main interest rate risk arises from finance leases. The Group’s borrowings are at fixed rates and therefore do not carry any variable interest rate risk. Austral Gold Limited 77 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS a. Financial Market Risk The financial market risk is the risk that the fair value or future cash flows of the financial instruments will fluctuate because of changes in market prices, which occurs due to the Group’s investment in listed securities where share prices can fluctuate over time. This risk however is not deemed to be significant as these investments are held for long term strategic purposes and therefore movement in the market prices do not impact the short-term profit or loss or cash flows of the Group. The group holds listed government bonds, and listed equity securities (note 17). These are classified as level 1 within the fair value hierarchy as per AASB 7 “Financial Instruments”. b. Credit Risk The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any allowance for doubtful debts, as disclosed in the statement of financial position and notes to the financial statements. The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s policy to securitise its other receivables. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant. There are no significant concentrations of credit risk. c. Liquidity Risk The liquidity of the Group is managed to ensure sufficient funds are available to meet financial commitments in a timely and cost effective manner. Management continuously reviews the Group’s liquidity position through cash flow projections based upon the current mine plan to determine the forecast liquidity position and maintain appropriate liquidity levels. d. Maturities of financial liabilities The tables below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. All figures reported in thousands of US$ 31 December 2020 Financial liabilities Trade and other payables Employee entitlements Borrowings Leasing Total 31 December 2020 liabilities 31 December 2019 Financial liabilities Trade and other payables Employee entitlements Promissory note Borrowings Leasing Total 31 December 2019 liabilities Consolidated 6 months 6-12 months 1-5 years > 5 years Total 10,371 3,894 416 1,468 16,149 8,910 3,548 1,957 3,484 1,532 19,431 - - 415 1,437 1,852 - - - 561 1,515 2,076 - 24 1,246 3,416 4,686 1 1,048 - 2,077 6,302 9,428 - - - - - - - - - - - 10,371 3,918 2,077 6,321 22,687 8,911 4,596 1,957 6,122 9,349 30,935 Austral Gold Limited 78 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 31. DIVIDENDS All figures are reported in thousands of US$ Dividends paid For the year ended 31 December 2020 3,496 2019 - An unfranked cash dividend of A$0.09 per share was paid on 24 July 2020. 32. COMMITMENTS All figures are reported in thousands of US$ Lease commitments Finance lease commitments at the reporting date and recognised as liabilities, payable: Within one year Two to five years Total commitment Less: Future finance charges Net commitment recognised as liabilities Representing: Lease liability—current Lease liability—non-current Operating leases not recognised as liabilities As at 31 December 2020 2019 3,179 3,553 6,732 (411) 6,321 2,905 3,416 - 3,496 6,711 10,207 (858) 9,349 3,047 6,302 - To maintain legal rights to its properties, the Group pays fees for mining concessions and exploration. It anticipates that it will need to pay approximately US$0.5m during the next year to maintain legal rights to all of its properties. Exploration commitments not recognized as liabilities Exploration commitments at the reporting date and not recognised as liabilities Within one year Two to five years Total exploration commitments not recognised as liabilities 550 5,100 5,650 - - - 33. SUBSIDIARIES Subsidiaries Country of Incorporation % owned 31 December 2020 31 December 2019 Guanaco Mining Company Limited British Virgin Islands Guanaco Compañía Minera SpA Ingenieria y Mineria Cachinalito Limitada Casposo Energías Renovables S.A.U. Austral Gold Argentina S.A. Chile Chile Argentina Argentina Austral Gold North America Corp. United States Argentex Mining Corporation SCRN Properties Ltd. Casposo Argentina Limited Canada Canada Canada 100.000 99.998 100.000 100.000 99.970 100.000 100.000 100.000 100.000 100.000 99.998 100.000 100.000 99.970 100.000 100.000 100.000 100.000 Austral Gold Limited 79 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 34. PARENT ENTITY INFORMATION All figures are reported in thousands of US$ 31 December 2020 31 December 2019 Current assets Total assets Current liabilities Total liabilities Net assets Issued capital Accumulated losses Reserves Total shareholders’ equity Profit for the year Total comprehensive income/(loss) for the year Details of any guarantees entered into by the parent entity in relation to the debts of its subsidiaries Details of any contingent liabilities of the parent entity Details of any contractual commitments by the parent entity for the acquisition of property, plant or equipment. A* Austral Gold Limited is guarantor for the credit facility of US$0.3m between BAF and Guanaco Compañía Minera SpA. 35. RELATED PARTY TRANSACTIONS 35.1 KMP holdings of shares and share options at 31 December 2020 1,011 67,795 13,176 13,176 54,619 102,177 (47,326) (231) 54,620 2,727 2,672 A* None None 1,136 67,920 12,896 12,896 55,024 101,682 (46,553) (106) 55,023 (676) (657) A* None None • Mr Eduardo Elsztain holds 451,679,060 shares and 9,615,500 options directly and indirectly in Austral Gold Limited. (31 December 2019— 479,805,958 shares and 16,241,776 options) • Mr Saul Zang holds 1,640,763 shares and 136,730 options directly in Austral Gold Limited. (31 December 2019— 1,640,763 shares and 136,730 options) • Mr Pablo Vergara del Carril holds 68,119 shares directly in Austral Gold Limited. (31 December 2019—68,119) • E Elsztain and S Zang are Directors of IFISA which holds 380,234,614 shares and nil options according to the last substantial holder notice lodged in December 2020. (31 December 2019—433,448,890 and 12,378,689 options) • P Vergara del Carril, E Elsztain and S Zang are Directors of Guanaco Capital Holding Corp which holds 35,870,730 shares and 2,989,226 options according to the last substantial holder notice lodged in December 2020. (31 December 2019—35,870,730 and 2,989,227 options) • Mr Stabro Kasaneva holds 6,881,230 shares indirectly in Austral Gold Limited. (31 December 2019—6,881,230) • Mr Wayne Hubert holds 2,545,500 shares indirectly in Austral Gold Limited. (31 December 2019—1,750,000) • Mr. Raul Guerra holds 801,000 shares directly in Austral Gold Limited. (31 December 2019—nil) • Mr. Rodrigo Ramirez holds 279,514 shares directly in Austral Gold Limited. (31 December 2019—279,514) • Mr. Jose Bordogna holds 22,000 shares directly in Austral Gold Limited. (31 December 2019—nil) 35.2 Directors and Key Management Personnel Remuneration The aggregate compensation made to Directors and other members of Key Management Personnel of the Group is set out below: All figures are reported in thousands of US$ Short-term employment benefits Consulting fees Non-executive director fees Total For the year ended 31 December 2020 1,691 60 334 2,085 2019 1,394 - 358 1,752 Austral Gold Limited 80 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS Other transactions with related parties Zang, Bergel & Viñes Abogados is a related party since two non-executive Directors, Saul Zang and Pablo Vergara del Carril have significant influence over this law firm based in Buenos Aires, Argentina. Fees charged and expenses to reimbursement to the Group for the 12 months ended 31 December 2020 amounted to US$148,696 (2019: US$141,022). Cresud S.A.C.I.F.Y.A, IRSA Inversiones y Representaciones S.A., IRSA Propiedades Comerciales S.A. and Consultores Asset Management S.A. are related parties as they are controlled by Non-executive Director and Chairman, Eduardo Elsz- tain. During the twelve month period ended 31 December 2020 a total of US$62,047 was charged to the Company (2019: US$326,437) in regard to IT services support, HR services, software licenses building/office expenses and other fees. During April 2019, Consultores Assets Management SA, a company controlled by E Elsztain provided a loan of US$1.6 million at an annual interest rate of at 10% per annum. The loan plus interest of US$30,609 was repaid in July 2019. 35.3 Ultimate parent entity The Parent Entity is controlled by IFISA with a 67.17% non-diluted and diluted interest in Austral Gold Limited and is incorporated in Uruguay. The ultimate beneficial owner of IFISA is Eduardo Elsztain. 36. UNRECOGNISED DEFERRED TAX ASSETS In certain entities of the Group, tax losses have not been recognised as deferred tax assets in respect of the following items, because it is not probable that future taxable profit will be available against which the Group can use the benefits therefrom. Australia Tax losses Capital losses Canada Tax losses As at 31 December 2020 US$ ‘000 15,332 2,486 Expiry No Expiry No Expiry 18,683 2021-2041 The ability of the Group to utilise Australian or Canadian tax losses will depend on the applicability and compliance with the respective Australian or Canadian tax laws regarding continuity of ownership or same or similar business tests. United States Tax losses 37. SUBSEQUENT EVENTS 287 No Expiry (i) (ii) During February 2021, the Group completed the acquisition of Revelo Resources Corp. (‘Revelo) under a plan of arrangement (‘the Arrangement’) in Canada. Under terms of the Arrangement, Austral acquired all Revelo shares and Revelo shareholders received total consideration of US$6,977,713 comprised of cash of US$917,059 (C$1,176,471) and 35,475,095 ordinary shares of Austral valued at approximately US$6,060,654. Consequently, Revelo became a wholly-owned subsidiary of Austral. The fair value of the ordinary shares issued was based on the listed share price of the Company at the date of issue on 05 February 2021, AUD$0.225 (US$0.1708) per share. During February 2021, the Group acquired 5,950,000 units (19.96%) of Ensign Gold Inc, a Canadian entity that is currently assembling a 5,000-hectare land package on Carlin-type gold deposit geology in the state of Utah. The Group paid C$0.25 per Unit, for an aggregate purchase price of C$1,487,500 (US$1,162,109 at an assumed exchange rate of 1.28). Each Unit consists of one Class A share (each, a “Share”) in the capital of Ensign and one-half of one transferable share purchase warrant (each whole warrant, a “Warrant”). Each Warrant entitles the holder to purchase one additional Share at an exercise price will C$1.50 for a period of 36 months, subject to an acceleration provision that will accelerate expiration of the Warrants if the closing sale price for a Share on a public market exceeds C$2.00 for 30 consecutive trading days. (iii) During January 2021, the Group received shareholder and regulatory approval of the Companies Stock incentive plan. (iv) On 14 February 2021, 2,666 ordinary shares were issued pursuant to the exercise of options. (v) On 23 February 2021, the Group declared an unfranked dividend of A$0.008 per share to shareholders totaling approximately US$3.8 million. Austral Gold Limited 81 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 38. SIGNIFICANT ACCOUNTING POLICIES The group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements, except if mentioned otherwise (see also Note 5). 38. 1 38.2 38.3 38.4 38.5 38.6 38.7 38.8 38.9 38.10 38.11 38.12 38.13 38.14 38.15 38.16 38.17 38.18 38.19 38.20 38.21 38.22 38.23 Set out below is an index of the significant accounting policies. Basis of consolidation Revenue recognition Goods and services tax (GST)/ Value added tax (VAT) Foreign currency translation Mine properties Exploration and evaluation expenditure Property, plant and equipment Cash and cash equivalents Income tax Inventories Trade and other receivables Trade and other payables Interest bearing liabilities Provisions Leases Impairment of non-financial assets De-recognition of financial assets and financial liabilities Contributed equity Earnings per share Borrowing costs Employee leave benefits Segment reporting New, revised or amending Accounting Standards and Interpretations adopted 38.1 Basis of consolidation A subsidiary is any entity over which the Group has control. The Group controls an entity when the Group 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 over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. A list of subsidiaries is contained in note 33 to the financial statements. The financial statements of the subsidiaries are prepared for the same reporting periods as the parent company using consistent accounting policies. All intercompany balances and transactions between entities in the Group, including any unrealised profits or losses, have been eliminated on consolidation. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Non-controlling interests in the equity and results of the subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the Group. Business combinations The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. Goodwill Goodwill has arisen on the acquisition of a subsidiary, Ingenieria y Mineria Cachinalito Limitada. The recoverable amount of the goodwill arising from the Cachinalito business has been determined by including it as part of the combined Guanaco/ Amancaya CGU described above. As of 31 December 2020 the goodwill was written off as Ingenieria y Mineria Cachinalito Limitada is in the process of being wound up. Austral Gold Limited 82 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 38.2 Revenue Recognition Under AASB 15, the sale of minerals is recognised at the transfer of control or point of sale, which is when the customer has taken delivery of the goods, the risks and rewards have been transferred to the customer and there is a valid contract. Determining the timing of the transfer of control at a point in time or over time requires judgement. When the customer is the refinery, the control of the metals is transferred at the metal availability date. The metal availability date is when the metals are available for pricing by the refinery. If the customer is not the refinery, revenue is recognized when the metals are transferred to the customer upon receipt and the customer obtains control of the metals. Invoices are payable two business days after the metal availability date. Goods and services tax (GST)/ Value added tax (VAT) Revenues, expenses and assets are recognised net of the amount of GST/VAT, except where the amount of GST/ VAT incurred is not recoverable from the tax authorities. In these circumstances the GST/VAT is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST/VAT. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST/VAT component of investing and financing activities, which are disclosed as operating cash flows. 38.3 Foreign currency translation The financial statements are presented in United States Dollars (US$), which is the Group’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into US$ 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. 38.4 Mine Properties Mines in production represent the aggregated exploration and evaluation expenditure and capitalised development costs in respect of areas of interest in which mining is ready to or has commenced. Mine development costs are deferred until commercial production commences, at which time they are depreciated on a units-of-production basis over the mineable reserves. Once production commences, further development expenditure is classified as part of the cost of production, unless substantial future economic benefits can be established. Amortisation Aggregated costs on productive areas are amortised over the life of the area of interest to which such costs relate on the units-of-production basis. Deferred stripping costs Deferred stripping costs represent certain mining costs, principally those that relate to the stripping of waste, which provides access so that future economically recoverable ore can be mined. Stripping (i.e. overburden and other waste removal) costs incurred in the production phase of a surface mine are capitalised to the extent that they improve access to an identified component of the ore body and are subsequently amortised on a systematic basis over the expected useful life of the identified component of the ore body. Capitalised stripping costs are disclosed as a component of Mine Properties. Components of an ore body are determined with reference to mine plans and take account of factors such as the geographical separation of mining locations and/ or the economic status of mine development decisions. Capitalised stripping costs are initially measured at cost and represent an accumulation of costs directly incurred in performing the stripping activity that improves access to the identified component of the ore body, plus an allocation of directly attributable overhead costs. The amount of strip- ping costs deferred is based on a relevant production measure which uses a ratio obtained by dividing the tonnage of waste mined by the quantity of ore mined for an identified component of the ore body. Stripping costs incurred in the period for an identified component of the ore body are deferred to the extent that the current period ratio exceeds the expected waste to ratio for the life of the identified component of the ore body. Such deferred costs are then charged against the statement of profit or loss when the stripping ratio falls below the mine ratio. These are a function of the mine design and therefore any changes to the design will generally result in changes to the ratio. Changes in other technical or economic parameters that impact on reserves may also have an impact on the component ratio even though they may not impact the mine design. Changes to the mine plan, identified components of an ore body, stripping ratios, units of production and expected useful life are accounted for prospectively. Deferred stripping costs form part of the total investment in a cash generating unit, which is reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable. Austral Gold Limited 83 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 38.6 Exploration and evaluation expenditure Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest and carried forward in the statement of financial position where rights to tenure of the area of interest are current; and one of the following conditions is met: i. such costs are expected to be recouped through successful development and exploitation of the area of interest or alternatively, by its sales; or ii. exploration and/or evaluation activities in the area of interest have not, at reporting date, yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in the area are continuing. Expenditure relating to pre-exploration activities is written off to the profit or loss during the period in which the expenditure is incurred. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. Accumulated expenditure on areas that have been abandoned, or are considered to be of no value, are written off in the year in which such a decision is made. When the technical and commercial feasibility of an undeveloped mining project has been demonstrated, the project enters the construction phase. The cost of the project assets are transferred from exploration and evaluation expenditure and reclassified into construction phase and include past exploration and evaluation costs, development drilling and other subsurface expenditure. When full commercial operation commences, the accumulated costs are transferred into Mine Properties or an appropriate class of property, plant and equipment. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the production output basis. 38.7 Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation The depreciated amount of property, plant and equipment is recorded either on a straight-line basis or on the production output basis to the residual value of the asset over the lesser of mine life or estimated useful life of the asset. Depreciation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only. Depreciation is expensed, except those that are included in the amount of exploration assets as an allocation of production overheads. The depreciation rate used for fixed assets except for underground mine development is between 10%-20%. The depreciation rate used in underground mine development is provided for over the life of the area of interest on a production output basis. Assets that are idle or no longer ready for use are not depreciated but are separately tested for impairment and where the recoverable value is less than the book value of the asset, an impairment is recorded. De-recognition and disposal An item of property, plant and equipment is de-recognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss in the year the asset is de-recognised. 38.6 Cash and cash equivalents Cash includes: i. cash on hand and at call deposits with banks or financial institutions; and ii. other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. 38.9 Income tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by reporting date. Deferred income tax is provided on all temporary differences at reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: Austral Gold Limited 84 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS i. when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a trans- action that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or ii. when the taxable temporary difference is associated with investments in subsidiaries, associates, or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: i. when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or ii. when the deductible temporary difference is associated with investments in subsidiaries, associates, or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the tempo- rary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised. The carrying amount of any deferred income tax assets recognised is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply for the year when the asset is realised or the liability is settled, based on tax laws that have been enacted or substantively enacted at report- ing date. Income taxes relating to items recognised directly to equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. 38.10 Inventories Materials and supplies are stated at the lower of cost and net realisable value on a ‘first in first out’ basis. Cost comprises direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity. If the ore stockpile is not expected to be processed in 12 months after reporting date, it is included in non-current assets and the net realisable value is calculated on a discounted cash flow basis. Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained ounces based on assay data, and the estimated recovery percentage. Stockpile tonnages are verified to periodic surveys. Gold bullion and gold-in-process are valued at the lower of cost and net realisable value. Net realisable value is determined using the prevailing metal prices. 38.11 Trade and other receivables Trade accounts receivable, amounts due from related parties and other receivables represent the principal amounts due at balance date plus accrued interest and less, where applicable, any unearned income and provisions for doubtful accounts. 38.12 Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. They are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. 38.13 Interest bearing liabilities Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Where there is an uncondi- tional right to defer settlement of the liability for at least 12 months after the reporting date, the loans or borrowings are classified as non-current. Austral Gold Limited 85 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 38.14 Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. 38.15 Leases At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period for time in exchange for consideration. At commencement or on modification of a contract that contains a lease component, the Group allocates the consid- eration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component. 38.16 Impairment of non-financial assets At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell or value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the profit or loss. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax rate. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives or more frequently if events or circumstances indicate that the carrying value may be impaired. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. 38.17 De-recognition of financial assets and financial liabilities Financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when: i. the rights to receive cash flows from the asset have expired; or ii. the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass- through’ arrangement; or iii. the Group has transferred its rights to receive cash flows from the asset and either; a. has transferred substantially all the risks and rewards of the asset; or b. has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Group could be required to repay. Fair value through other comprehensive income The Group’s investments in equity securities are classified as ‘fair value through Other Comprehensive Income. Subsequent to initial recognition fair value through other comprehensive income investments are measured at fair value with gains or losses being recognised directly through Other Comprehensive Income in the Statement of Profit or Loss and Other Comprehensive Income. Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. Austral Gold Limited 86 Annual Report 2020 NOTES TO THE FINANCIAL STATEMENTS 38.18 Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 38.19 Earnings per share Basic earnings per share Basic earnings per share is determined by dividing net profit after income tax attributable to members of the parent, 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. Diluted earnings per share Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 38.20 Borrowing costs Borrowing costs are recognised as an expense when incurred unless they are attributable to qualifying assets, in which case they are then capitalised as part of the assets. 38.21 Employee leave benefits Short-term employee benefits Liabilities for employees’ entitlements to wages and salaries, annual leave and other employee entitlements expected to be settled within 12 months of the reporting date are recognised in the current provisions in respect of employees’ services up to reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non- accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable. Long service leave The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. 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 reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated cash outflows. Superannuation The Company contributes to employee superannuation funds. Contributions made by the Company are legally enforce- able. Contributions are made in accordance with the requirements of the Superannuation Guarantee Legislation. 38.22 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (“CODM”). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. 38.23 New, revised or amending Accounting Standards and Interpretations adopted The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the AASB that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. Austral Gold Limited 87 Annual Report 2020 DIRECTORS’ DECLARATION Austral Gold Limited 88 Annual Report 2020 IN THE DIRECTORS’ OPINION: 1. the attached consolidated financial statements and notes thereto comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regu- lations 2001 and other mandatory professional reporting requirements; 2. the attached consolidated financial statements and notes thereto comply with International Financial Reporting Standards as issued by the International Ac- counting Standards Board as described in note 1 to the consolidated financial statements; 3. the attached consolidated financial statements and notes thereto give a true and fair view of the Group’s financial position as at 31 December 2020 and of its performance for the 12 months ended on that date; and 4. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The Directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001. Signed on behalf of the Directors by: Robert Trzebski Director Sydney 17 March 2021 Austral Gold Limited 89 Annual Report 2020 INDEPENDENT AUDITOR’S REPORT Austral Gold Limited 90 Annual Report 2020 Independent Auditor’s Report To the shareholders of Austral Gold Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Austral Gold Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • • giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 31 December 2020; • Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; • Notes including a summary of significant accounting policies; and • Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 are independent of the Group in accordance with 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 fulfilled our other ethical responsibilities in accordance with the Code. 91 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Austral Gold Limited 91 Annual Report 2020 Key Audit Matters The Key Audit Matters we identified are: • Going concern basis of preparation; Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. • Carrying value of mine assets and plant & equipment; and • Carrying value of exploration and evaluation assets. These 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. Going concern basis of preparation Refer to Note 3 “Going Concern” to the Financial Report The key audit matter How the matter was addressed in our audit The Group’s use of the going concern basis of preparation and the associated extent of uncertainty is a key audit matter due to the high level of judgment required by us in evaluating the Group’s assessment of going concern. We evaluated the extent of uncertainty regarding events or conditions casting significant doubt in the Group’s assessment of going concern. This included: • Analysing cash flow projections by: The Directors have determined that the use of the going concern basis of accounting is appropriate in preparing the financial report. Their assessment of going concern was based on cash flow projections. The preparation of these projections incorporated a number of assumptions and judgments, and the Directors have concluded that the range of possible outcomes considered in arriving at this judgment does not give rise to a material uncertainty casting significant doubt on the Group’s ability to continue as a going concern. We critically assessed the level of uncertainty, as it related to the Group’s ability to continue as a going concern, within these assumptions and judgments, focusing on the following: • • • Impact of future commodity prices to cash inflows projected; The Group’s planned levels of operational and capital expenditures, and the ability of the Group to manage cash outflows within available funding; and The nature and feasibility of planned methods the Group has to meet its financing commitments. In assessing this key audit matter, we involved - evaluating the underlying data used to generate the projections for consistency with other information tested by us, our understanding of the Group’s intentions, and past results and practices. We specifically looked for consistency between commodity prices used by management and those tested by us and consistency with the Group’s intentions, as outlined in Directors minutes and strategy document; and - Assessing the planned levels of operating and capital expenditures for consistency of relationships and trends with the Group’s historical results, results since year end, and our understanding of the business, industry and economic conditions of the Group; • Analysing the impact of reasonably possible changes in projected cash flows and their timing, to the projected monthly cash positions. We assessed the resulting impact on the ability of the Group to pay debts as and when they fall due and continue as a going concern. The specific areas we focused on were informed from the results of our tests of the accuracy of previous 92 92 Annual Report 2020 Austral Gold Limited senior audit team members who understand the Group’s business, industry and the economic environment it operates in. Group cash flow projections and sensitivity analysis on key cash flow projection assumptions; • Assessing significant non-routine forecast cash inflows and outflows for feasibility, quantum and timing. We used our knowledge of the Group, its industry and status to assess the level of associated uncertainty; and • Evaluating the Group’s going concern disclosures in the financial report by comparing them to our understanding of the matter, the events or conditions incorporated into the cash flow projection assessment, the Group’s plans, and accounting standard requirements. Carrying value of mine assets and plant & equipment ($48.022 million) Refer to Notes 18 “Mine properties” and 19 “Property, plant and equipment” to the Financial Report The key audit matter How the matter was addressed in our audit The Group’s mine properties and plant & equipment are a significant portion (46%) of the Group’s total assets. The recoverable value is based on a net present value model for each cash generating unit (‘CGU’), and is a key audit matter due to: Our procedures included: • Obtaining an understanding of the key controls associated with the preparation of the net present value models used to assess the recoverable amount of each CGU; • The high level of judgement used in evaluating key assumptions applied by the Group in each net present value model, which are affected by expected future operating performance and market conditions, including: • • - - - - level of resources and reserves capable of being produced economically, as reported in the Group’s third-party Reserve Report; forecast cost of developing areas of interest and producing silver and gold; future production volumes and timing; and specific discount rate applied in each model. Austral Gold Limited Evaluating the net present value methodology used by the Group for consistency with the requirements of the Accounting Standards; Evaluating the Group’s determination of CGUs based on our understanding of the operations of the Group’s business and each area of interest, and how independent cash inflows were generated, against the requirements of the accounting standards; • Critically evaluating the Group’s key assumptions used to determine the recoverable amount of key CGUs relating to commodity prices, and discount rate based on our knowledge of the industry, publicly available data of comparable entities, and published forecast price expectations of industry commentators; 93 93 Annual Report 2020 These forward looking assumptions necessitate additional scrutiny by us due to: • • • the inherent uncertainties in estimating these assumptions; the consistency of application and the changes in silver and gold pricing increasing the risk of inaccurate forecasting; and the sensitivity of the net present value model to changes in assumptions such as commodity prices and discount rate, reducing available headroom. Management engaged a third-party expert to assist in their assessment of mine property and plant & equipment carrying value. • Considering the sensitivity of the models by varying key assumptions such as commodity price and discount rate within a reasonably possible range to identify those CGUs at higher risk of impairment and to focus our further procedures; • Checking the forecast cost of developing areas of interest and producing silver and gold, future production volumes and timing to those within the Group’s Reserves Report, Board approved plans and budgets. We assessed these against our understanding of the business and industry trends; • Corroborating mine closure plans with the key operational and finance personnel; • Assessing the historical accuracy of budgeting and forecasting by the Group to inform our evaluation of forecasts incorporated in the models; • Evaluating the scope, competence, and objectivity of the Group’s external experts engaged to 1) assist the Group prepare the Group’s Reserves Report as utilised within the net present value model and 2) assess the salvage value of plant and equipment; and • Assessing the financial report disclosures based on our understanding and the requirements of the accounting standards. Carrying value of exploration and evaluation assets ($18.941 million) Refer to Note 20 “Exploration and evaluation expenditure” to the Financial Report The key audit matter How the matter was addressed in our audit The Group’s exploration and evaluation assets (‘E&E assets’) are a significant portion (18%) of the Group’s total assets. The carrying value of E&E assets is a key audit matter due to the high level of judgement used in application of the requirements of the industry specific accounting standard AASB 6 Exploration for and Evaluation of Mineral Resources, in particular the conditions allowing capitalisation of relevant expenditure and presence of impairment indicators. Austral Gold Limited Our procedures included: • Obtaining an understanding of the key controls associated with evaluating the E&E assets; • • 94 94 Evaluating the Group’s accounting policy to recognise E&E assets using the criteria in the accounting standard; Evaluating the Group’s determination of areas of interest based on our understanding of the operations of the Group and each area of interest, and how independent cash Annual Report 2020 The conditions allowing capitalisation of relevant expenditure focus on: inflows were generated, against the requirements of the accounting standards; • • • • • • • the determination of the areas of interest (areas) in particular, evaluating the results of the external expert engaged by the Group; documentation available regarding rights to tenure, via licensing, and compliance with relevant conditions, to maintain current rights to an area of interest; the Group’s determination of whether the E&E assets are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; and The presence of impairment indicators would necessitate a detailed analysis by the Group of the value of E&E assets. Assessing the presence of impairment indicators includes factors that may draw into question the commercial continuation of E&E activities for the areas of interest where significant capitalised E&E assets exist. For each area of interest, we assessed the Group’s current rights to tenure by corroborating the ownership of the relevant license to government registries and evaluating agreements in place with other parties. We also tested for compliance with conditions, such as minimum expenditure requirements, on a sample of licenses; Testing the Group’s additions to E&E assets for the period by evaluating a sample of recorded expenditure for consistency to underlying records, the capitalisation requirements of the Group’s accounting policy and the requirements of the accounting standard; Evaluating documents, such as minutes of directors’ meetings and ASX market announcements, for consistency with the Group’s stated intentions for continuing E&E activities in certain areas. We corroborated this through interviews with key operational and finance personnel; In addition to the assessments above we paid particular attention to: • • The impact of changes in gold and silver prices to the Group’s strategy and intentions; The intention of the Group to fund the continuation of activities; and • Results from latest activities regarding the existence or otherwise of economically recoverable reserves or commercially viable quantity of the reserves. The Group engaged an external third party expert to assist with these assessments for certain exploration interests. • Analysing the Group’s determination of recoupment through successful development and exploitation of the area (or by its sale) by evaluating the Group’s documentation of planned future and continuing activities including work programs and project and corporate budgets for a sample of areas; • Assessing the impact of changes in the gold and silver prices to the Group’s modelling underlying their decision for commercial continuation of activities; • Obtaining project and corporate budgets identifying areas with existing funding and those requiring alternate funding sources. We compared this for consistency with areas with E&E activities, for evidence of the ability to fund continued activities. We identified those areas relying on alternate funding sources and evaluated the capacity of the Group to secure such funding; and • Assessing the results of the external expert. Austral Gold Limited 95 95 Annual Report 2020 Other Information Other Information is financial and non-financial information in Austral Gold Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we 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. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • • • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • • 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 Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They 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: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report. Austral Gold Limited 96 96 Annual Report 2020 Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Austral Gold Limited for the year ended 31 December 2020 complies with Section 300A of the Corporations Act 2001. 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 responsibilities We have audited the Remuneration Report included in pages 45 to 50 of the Directors’ report for the year ended 31 December 2020. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Daniel Camilleri Partner Sydney 17 March 2021 Austral Gold Limited 97 97 Annual Report 2020 ADDITIONAL INFORMATION Austral Gold Limited 98 Annual Report 2020 Forward Looking Statements In this annual report that are not historical facts are forward-looking statements. Forward-looking statements are statements that are not historical, and consist primarily of projections — statements regarding future plans, expectations and developments. Words such as “expects”, “intends”, “plans”, “may”, “could”, “potential”, “should”, “antici- pates”, “likely”, “believes” and words of similar import tend to identify forward-looking statements. All forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied, including, without limitation, business integration risks; uncertainty of production, development plans and cost estimates, commodity price fluctuations; political or economic instability and regulatory changes; currency fluctuations, the state of the capital markets, uncertainty in the measurement of mineral reserves and resource estimates, Austral’s ability to attract and retain qualified personnel and manage- ment, potential labour unrest, reclamation and closure requirements for mineral properties; unpredictable risks and hazards related to the development and operation of a mine or mineral property that are beyond the Company’s control, the availability of capital to fund all of the Company’s projects and other risks and uncertainties identified under the heading “Risk Factors” in the Company’s continuous disclosure documents filed on the ASX and SEDAR. You are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. Austral cannot assure you that actual events, performance or results will be consistent with these forward-looking statements, and management’s assumptions may prove to be incorrect. Austral’s forward-looking statements reflect current expectations regarding future events and operating performance and speak only as of the date hereof and Austral does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expecta- tions or opinions should change other than as required by applicable law. For the reasons set forth above, you should not place undue reliance on forward-looking statements. CORPORATE GOVERNANCE STATEMENT Austral Gold Limited and its subsidiaries have adopted the corporate governance framework and practices set out in its Corporate Governance Statement. The Corporate Governance Statement is available on the Company’s website at www.australgold.com. STATEMENT OF ISSUED CAPITAL As at 28 February 2021 the total issued capital of Austral Gold Limited was 601,548,026 ordinary shares. 534,091,001 shares were quoted on the Australian Securities Exchange under the code AGD. The only shares of the Company on issue are fully paid ordinary shares. None of these shares are restricted securities or securities subject to voluntary escrow within the meaning of the Listing Rules of the Australian Securities Exchange. 67,457,025 shares were quoted on the Toronto Venture Exchange under the code AGLD. There are no restrictions on the voting rights attached to the fully paid ordinary shares. On a show of hands, every member present in person, by proxy, by attorney or by representative shall have one vote. On a poll, every member present in person, by proxy, by attorney or by representative shall have one vote for every share held. DISTRIBUTION OF FULLY PAID ORDINARY SHARES As at 28 February 2021 Size of Holding 1-1,000 1,001-5,000 5,001-10,000 50,001-100,000 >100,000 Holders Shares held % of issued capital 680 548 224 307 77 1,836 260,231 1,564,445 1,779,025 10,434,012 587,510,313 601,548,026 0.04 0.26 0.30 1.73 97.67 100.00 SUBSTANTIAL SHAREHOLDERS The Company has been notified of the following substantial shareholdings as at 28 February 2021: Registered Holder Beneficial Holder Shares Held Options Held HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited HSBC Custody Nominees (Australia) Limited Inversiones Financieras Del Sur SA (IFISA) Inversiones Financieras Del Sur SA (IFISA) Guanaco Capital Holding Corp 380,234,614 47,658,462 – – 35,870,730 2,989,226 Eduardo Elsztain 35,573,716 6,626,274 Austral Gold Limited 99 Annual Report 2020 Rank Name No. of shares % of issued capital 1 2 3 4 5 6 7 8 9 EDUARDO SERGIO ELSZTAIN * 451,679,060 75.09% CS THIRD NOMINEES PTY LIMITED 16,458,232 2.74% MICHAEL D WINN 15,978,225 2.66% EMX ROYALTY CORPORATION 9,855,784 1.64% HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 9,244,035 1.54% HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 8,825,769 1.47% STABRO KASANEVA 6,881,230 1.14% CITICORP NOMINEES PTY LIMITED 6,763,994 1.12% J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 4,910,954 0.82% 10 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 3,399,222 0.57% 11 TIMOTHY J BEALE 2,333,622 0.39% 12 SAUL ZANG 1,640,763 0.27% 13 BNP PARIBAS NOMS PTY LTD 1,541,378 0.26% 14 CS FOURTH NOMINEES PTY LIMITED 1,500,000 0.25% 15 ASOCIACION ISRAELITA ARGENTINA TZEIRE AGUDATH JABAD 1,158,265 0.19% 16 BNP PARIBAS NOMINEES PTY LTD 1,121,910 0.19% 17 SHANN SUPERANNUATION NOMINEES PTY LTD 1,100,000 0.18% 18 FUSION ELECTRICS (AUST) PTY LTD 1,000,000 0.17% 19 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 931,341 0.15% 20 TAYLOR FAMILY INVESTMENTS PTY LTD 750,000 0.12% Total Other 547,073,784 90.94% 54,474,242 9.06% Total Shares on issue 601,548,026 100.00% *Beneficial holdings Austral Gold Limited 100 Annual Report 2020 Austral Gold Limited 101 Annual Report 2020 Austral Gold Limited 102 Annual Report 2020 Austral Gold Limited 103 Annual Report 2020 www.australgold.com 

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