Cardinal Health Annual Report 2018

Plain-text annual report

CONTENTS Executive Chairman’s Report Sustainability Report 2 5 Mineral Resources and Ore Reserves 56 63 Chief Financial Officer’s Review Chief Operating Officer’s Review 35 Annual Financial Report Innovations and Asset Optimisation 42 46 Discovery Shareholder Information Corporate Information 65 157 159 Front Cover: Photo of employees working in the open pit at Mt Rawdon taken by Fraser Perry (graduate Mining Engineer). EVOLUTION MINING CREATING AUSTRALIA’S PREMIER GOLD MINING COMPANYABOUT EVOLUTIONWe are a leading, growth-focussed Australian gold miner. Evolution operates five wholly-owned mines – Cowal in New South Wales; Mt Carlton, Mt Rawdon, and Cracow, in Queensland; and Mungari in Western Australia. In addition, Evolution holds an economic interest in Ernest Henry, in Queensland, that will deliver 100% of future gold and 30% of future copper and silver produced from an agreed life of mine area. Outside of the life of mine area Evolution will have a 49% interest in future copper, gold and silver production from Ernest Henry.In FY18 we produced 801,187 ounces of gold at an AISC of A$797 per ounce to reach seven consecutive years of achieving production and cost guidance. Evolution has guided FY19 Group gold production of 720,000–770,000 ounces at an All-in sustaining cost of A$850–A$900 per ounce of gold.801koz A$ 797/oz A$ 812M A$ 1.26B GOLD PRODUCED AISC MINE CASH FLOW CONTRIBUTION TO AUSTRALIAN ECONOMY Includes C1 cash cost, plus royalty expense, sustaining capital, general corporate and administration expense 1. 2. Using the average AUD:USD exchange rate of 0.7752 for FY18 3. 4. Group total of A$539.9M includes Edna May net mine cash flow of A$0.7M Includes AISC plus growth (major project) capital and discovery expenditure. Calculated on per ounce sold basis We Say, We Do, We Deliver 1 Evolution Mining Limited Annual Report 2018FY18 HIGHLIGHTS Continued delivery from operations■■Seventh consecutive year of achieving production and cost guidance■■Gold production of 801,187 ounces ■■Record low AISC1 of A$797 per ounce (US$618/oz)2■■Record low All-in Cost (AIC)3 of A$1,033 per ounce (US$800/oz)2■■Continued improvements in safety with a 31% reduction in TRIF to 5.49 Sector leading cash generation■■Record operating mine cash flow of A$811.8 million and record net mine cash flow of A$539.94 million■■Record net mine cash flow at Ernest Henry (A$219.2M), Mt Carlton (A$108.7M) and Mt Rawdon (A$49.7M)■■Group cash balance increased by A$285.8 million to A$323.2 million ■■Net bank debt reduced by A$325.8 million to A$71.8 million■■Fully franked cash dividends of A$109.9 million paid during FY18Sustainable long-life asset portfolio■■Group average reserve life extended to beyond nine years■■Organic growth delivered through exploration success at Cowal, Mungari and Cracow■■Cowal’s growth projects Stage H cutback and Float Tails Leach project remain on schedule and on budgetInnovative culture ■■Fast firsts and early adopters of new technologies driving asset optimisation to improve safety and efficiency, and reducing costs for asset optimisationShared value■■A$1.26B contribution into the Australian economy ■■Five new shared value projects and four environmental enhancement projects Executive Chairman’s Report On behalf of the Board of Directors of Evolution Mining Limited, I am proud to present you with the Company’s 2018 Annual Report. This year’s report also includes our inaugural Sustainability Report which supports our objectives of achieving long-term shareholder value in a corporately responsible manner and highlights the role we play in developing strong and sustainable communities. world and had an unblemished record of delivery into production and cost guidance. On behalf of the Board and Leadership Team, I thank Mark for his significant contribution and wish him every success in the future. Bob Fulker was appointed as Evolution’s new Chief Operating Officer in February 2018 and has brought a strong focus on identifying innovative solutions in safety and operations to further improve the effectiveness and profitability of our assets. In 2018 Evolution reported a record statutory net profit of A$263.4 million. This was achieved on the back of a record operating cash flow of A$811.8 million and a record net mine cash flow, after all sustaining and major project capital expenditure, of A$539.9 million. This strong cash generation enabled Evolution to reduce net debt by A$325.8 million during the period to A$71.8 million. The Company’s gearing commenced the year at 15.9% and was reduced to 2.7% by 30 June 2018. Ernest Henry, in its first full year in Evolution’s portfolio, made another strong contribution, producing 95,209 ounces of gold at an AISC of A$(641) per ounce to generate net mine cash flow of A$219.2 million. Cowal continued to deliver reliable, low-cost production with 257,951 of gold produced at an AISC of A$877 per ounce. Mt Carlton also had another outstanding year with production of 112,479 ounces at an AISC of A$535 per ounce. The continued increase in cash generation of the business saw a total of A$109.9 million in fully franked cash dividends paid during the year based on Evolution’s dividend policy of a payout ratio of 50% of after tax earnings. Major projects at Evolution’s cornerstone Cowal operation progressed well during the year. The Float Tails Leach project, which will increase recoveries by 4 – 6%, and the Stage H cutback both tracked in line with plan. Cowal currently has a mine life through to 2032 and several significant opportunities are being assessed to increase production and further extend mine life. This includes increasing plant throughput from 7.5Mtpa to 9.8Mtpa, co-treating oxide ore and drilling activities to confirm and extend mineralisation at ore bodies outside of the main E42 pit, including E41, E46 and Galway/Regal. The 2018 Financial Year was yet another year in which our people delivered exceptional operating results from our quality asset portfolio which resulted in achieving record results on nearly every important metric we focus on. We are a relatively young company and we are building one that we believe is both unique and distinct. In the seven years since our inception the Company has grown a reputation as a transparent, consistent and reliable gold producer. Our core value of safety is critical to our success as a Company. Evolution remains focused on improving our high safety standards across our business. It is pleasing that in FY18 the Group achieved continued improvements in our Total Recordable Injury Frequency (TRIF) with a 31% reduction over the 12 months to 5.49. At the same time, the Company continued its track record of delivering to, or outperforming, production and cost guidance. This marks seven consecutive years of achieving guidance since Evolution’s formation in 2011. Evolution produced 801,187 ounces of gold in FY18 at an All-in Sustaining Cost (AISC) of A$797 per ounce and an All-in Cost of A$1,033 per ounce. Using the average AUD:USD exchange rate for FY18 of 0.7752, Evolution’s AISC equated to US$618 per ounce, ranking Evolution as one of the lowest cost gold producers globally. After six and a half years as Evolution’s Chief Operating Officer, Mark Le Messurier departed the Company in December 2017. Throughout his time at the Company Mark helped build Evolution into one of the most highly respected mid-tier gold mining companies in the 2 Evolution Mining Limited Annual Report 2018 A Modification 14 application to amend the current mining permit was submitted in March 2018. The application is to expand the plant to 9.8Mtpa and includes an Integrated Waste Landform and infrastructure upgrades. Glen Masterman, Evolution’s VP Discovery and Chief Geologist, continued to ramp up our activities in this area with a total discovery spend of A$31.6 million in FY18. The projects with the highest investment for the year were Cowal’s E41 and GR46, Mungari regional and Cracow extensional drilling. Our focus on delivering on our strategy of upgrading the quality of our asset portfolio continued with the sale of the Edna May operation in September 2017 for an upfront payment of A$40 million and a contingent payment of up to an additional A$50 million. Across our entire business our people have continued to work incredibly hard during the year and I would like to thank each and every Evolution employee and contractor for their contribution. Our people are our most important asset and we want to make every person’s time at Evolution a highlight of their career. I also appreciate the support that our Leadership Team has received from the Board of Directors this year and recognise this as a critical ingredient of our success. Evolution remains focused on prioritising margins over production growth and is forecasting Group gold production in FY19 of 720,000 – 770,000 ounces at an AISC in the range of A$850/oz – A$900/oz. Evolution has a strong platform of high-quality assets with an average reserve life in excess of nine years. All assets are located in the safe jurisdiction of Australia with a highly skilled workforce, and in an attractive operating environment. Our balance sheet is strong, our assets are generating substantial cash flow and our business is now well positioned to prosper through the cycle. Yours faithfully JAKE KLEIN EXECUTIVE CHAIRMAN Executing a clear and consistent strategy 3 Evolution Mining Limited Annual Report 20184 Evolution Mining Limited Annual Report 20181. Determined by a study using the Stakeholder 360® research and engagement framework. Evolution was rated in the ‘high approval’ category (4.06 out of 5.00) . The mean social licence score in over 2,000 cases of social licence studied globally is 3.391. Reporting what matters to our business and our stakeholders 5 Evolution Mining Limited Annual Report 2018SUSTAINABILITY REPORTFY18 Sustainability Highlights Safety■■Safety improvement: 31% reduction in Total Recordable Injury FrequencySocio-economic contributions■■Five new Shared Value Projects commenced■■A$1.26B contributed to the Australian economy■■A$80M in direct spend with local organisations■■52% local employment across our operationsEnvironmental■■Four Environmental Enhancement projects underway■■Zero material environmental incidents■■Zero fines for environmental incident/non-conformanceDiversity■■50% female graduate intake for FY19■■Flexible work arrangements and helping parents return to work■■4% of our employees identify as Aboriginal or Torres Strait IslanderSocial licence to operate■■High approval rating from our stakeholders1Our vision, strategy and values Our vision Inspired people creating Australia’s premier gold company – a sustainable business that prospers through the cycle. We have grown into a globally relevant mid-tier gold producer since inception in November 2011. Our strategy We have a clear and consistent strategy: ■ Build a reputation for reliability and transparency ■ Reduce All-in Sustaining Costs ■ ■ Increase free cash flow per share Increase returns via dividends ■ Extend mine life Our values guide our behaviours and decisions in the workplace every day: Safety: Think before we act, every job, every day. Excellence: We take pride in our work, deliver our best and always strive to improve. Accountability: If it is my responsibility, I own it – good or bad. Respect: We trust each other, act honestly and consider each other’s opinion. 6 Evolution Mining Limited Annual Report 2018Sustainability Report DIRECT SPEND CONTRIBUTION TO THE AUSTRALIAN ECONOMY 80M A$ TO LOCAL COMMUNITY ORGANISATIONS A$1.26B IN FY18 REDUCTION IN INJURIES NEW SHARED VALUE PROJECTS 31% TRIF: FY18 = 5.49 (FY17 = 7.96) 5 Evolution’s inaugural Sustainability Report - providing transparency on the role we play in developing strong and sustainable communities in the interests of all stakeholders. For us, being a sustainable business is about building a company that allows us to deliver long-term value to our investors while recognising our broader responsibilities to our other stakeholders. We believe that our direct and indirect economic contribution should generate shared value for all stakeholders, measured not only by the superior returns we deliver to our shareholders, but also by the positive legacies we leave in our communities. Our people are integral to our success and the delivery of our long-term strategy. In FY18 we contributed A$1.26 billion to the Australian economy (approximately A$6.0 billion since formation of Evolution) and spent around A$80 million directly with local community organisations. We attained a ‘social licence to operate’ score that placed us in the ‘high approval’ category which is a very strong result compared to other mining companies1. Our partnership approach reflects our values of Safety, Excellence, Accountability and Respect and is guided by our Community Principles. In addition to our sponsorships and donations, we partner with our community stakeholders on Shared Value Projects – legacy projects that will provide benefits to the community that last beyond the life of the mine. In FY18 we established five new Shared Value Projects, including a business opportunity for one of our Queensland traditional owner partners and a regional tourism initiative in central west NSW. Operating within an extractive industry, we know it is essential to provide a healthy and safe workplace for 1. Stakeholder Perception Survey – Deloitte 2018 our people and that we continue to deliver an outstanding level of environmental performance. We seek opportunities to effectively manage water and energy, minimise waste, and to reduce our environmental footprint. We currently have four environmental enhancement projects underway. We foster a culture where our people do the right thing because they want to, not because they have to, and this saw us reduce the number of injuries in FY18 by 31%. We work to attract, engage, develop and retain talented people not only with the right skills but with the right mindset. We want our people’s time at Evolution to be the highlight of their career. We invest in bespoke leadership programs as it is our leaders who are most influential in shaping the culture of our teams. We believe that corporate governance is essential to sustained value creation and we are committed to maintaining a high standard in all aspects of corporate governance. The voluntary reporting landscape is evolving rapidly, and we are committed to actively participating in enhanced disclosure of sustainability issues and opportunities. In FY18, we engaged an independent sustainability consultant to facilitate a workshop with various leaders across our business to identify and prioritise our sustainability topics. The material topics chosen were also informed by our engagement with stakeholders, including our 2018 Stakeholder Perception Survey (Deloitte). 7 Evolution Mining Limited Annual Report 20188 Evolution Mining Limited Annual Report 2018Our inaugural Sustainability Report addresses Evolution’s sustainability performance for the financial year ending 30 June 2018. This report provides information on economic, social and environmental topics that were identified as mattering most to our business and our stakeholders and builds upon the information we disclosed in our FY17 Annual Report. The key topics identified are:■■Heath, Safety and Wellbeing■■Local communities ■■Traditional Custodians■■Procurement practices■■Effluents and waste ■■Economic performance■■Water ■■Biodiversity■■Energy use and emissions ■■Mine closure and rehabilitation■■Employment Micro purge bore sampling trials at Mt Rawdon 9 Evolution Mining Limited Annual Report 2018Corporate Governance Evolution supports the intent of the ASX Corporate Governance Council’s Principles and Recommendations (3rd Edition) and meets specific requirements unless disclosed otherwise. Our full Corporate Governance Statement is available in the corporate governance section of our website at https://evolutionmining.com.au/corporate-governance/. Evolution’s Governance Framework Board of Directors Executive Chairman Board Sub Committees Nomination & Remuneration Audit Risk Management Group Leadership Team 10 Evolution Mining Limited Annual Report 2018Safety We want our people to go home safely to their families. We foster a safety culture where people do the right thing for themselves and those around them because they believe in it, rather than because there is a rule in place. The safety, health and wellbeing of our people is of paramount importance to us and we believe that every injury is preventable and that no task is so important that it cannot be done safely. We work collaboratively with our internal and external stakeholders to identify and manage risks in the workplace striving to apply innovative and sustainable solutions that continuously improve our practices. We have developed a comprehensive Health, Safety & Environmental (HSE) management system which our operations must comply with. Each calendar year, every site is subject to audit to ensure compliance with these HSE standards. In FY18 we improved our safety performance achieving further significant reductions in our total recordable injury frequency (TRIF) from 7.96 to 5.49 and significant safety occurrence frequency from 4.95 to 3.20 (15% target reduction). Our focus on preventing vehicle incidents moved to “business as usual” and there was a further reduction in incidents over the year. We developed and rolled out our Critical Control plans for additional safety risks at each operational site and completed assurance reviews at the end of the year. During the year, we focussed on improving the safety culture at each operational site. Audits were undertaken in December and June with each site demonstrating an improvement in safety culture. Note: TRIF is calculated based on the frequency of total recordable injuries per million hours worked. 11 Evolution Mining Limited Annual Report 2018In FY19 we will continue with existing programs and commence new initiatives that will help drive our strategy and the achievement of our key goals. These will include:■■Two Critical Control assurance audits per site presented to the leadership team■■All critical control audit actions closed out by agreed time framesSafety (continued) We are very proud of our FY18 safety achievements ■ 31% reduction in total recordable injury frequency ■ 35% reduction in significant safety occurrence frequency ■ An average of 110 safety interactions conducted daily ■ Approximately 460 Take 5 pre-start safety checks conducted daily ■ Conducted external safety audits of all our operations against the Evolution Safety and Health Management system ■ Hosted our fourth Evolution Mine Rescue Challenge and the NSW Mine Rescue challenge which were held at West Wyalong Awards in FY18 ■ Victorian Mine Rescue competition – combined Evolution team Search and Rescue winner and Breathing Apparatus practical winner We live by our Safety Principles ■ Management takes accountability for safety performance ■ Everyone is empowered to stop “at risk” behaviour and control unsafe conditions ■ Everyone takes accountability for his/her own safety and for the safety of those around them ■ All injuries and incidents are preventable ■ No task is so important that it cannot be done safely 12 Evolution Mining Limited Annual Report 2018Emergency Response Evolution continues to build mine rescue skills, capability and resources across the Group. We have five Emergency Response Teams (ERT) with a total of 147 members. Our teams have played an important role in supporting our operations and nearby communities. Over the last 12 months, our ERT personnel were first responders to 16 offsite emergency incidents that occurred within our local communities. These incidents included motor vehicle accidents, fires, farm incidents and medical emergencies. The Mungari ERT provided assistance in Kalgoorlie following a significant storm in November 2017. Evolution participated in a number of Mine Rescue events in FY18 as part of its commitment to safety and developing the skills of its people. A team attended the Victorian Mine Rescue Competition and performed outstandingly well, winning the Search and Rescue exercise and the Breathing Apparatus practical event. This event highlighted the great collaboration between our mine rescue crews across different sites. For example, crews from as far away as Mt Carlton and Cowal worked together on specialised training, including swift water rescue. We held our fourth Group Mine Rescue Challenge at West Wyalong showgrounds in New South Wales, and in the same week, hosted the New South Wales Mine Rescue Challenge. Five teams participated in the Evolution challenge and eight teams in the New South Wales challenge. Our goal was for each team and its members to develop their skills substantially as a direct result of the challenge. The exercises included theory, multi- casualty incident, search and rescue, road crash rescue and fire scenarios. It also involved a group scenario at the local flour mill involving community members and local emergency services where everyone worked together. The scenarios were designed to be realistic and replicate the intensity of emergency situations that could occur in a mine. Often this involved noise, wetness, darkness, inaccessible or hidden casualties, uncooperative patients and time constraints. There was great support from the local community and emergency services for both challenges which were hugely successful in building the resolve and abilities of the teams involved. In December 2017, a Memorandum of Understanding (MOU) was signed between Evolution and the New South Wales State Emergency Service (SES). The MOU outlines how Evolution’s staff will provide support to the New South Wales SES to build their operational response capability. Evolution also has agreements in place with various emergency service agencies in Queensland, Western Australia and New South Wales to work in partnership to support communities during any future natural disasters. Getting prepared for the Group Mine Rescue Challenge 13 Evolution Mining Limited Annual Report 2018Pre-start stretching exercises at our Cowal operations Health and Wellbeing Promoting and supporting the wellness of our people is a mandate of our Safety and Health policy. Evolution is committed to investment in many activities that benefit our people’s health and wellbeing including the provision of services by our health partners. Evolution offers confidential monthly one-on-one health consultations by physiologists to help individuals achieve positive health and wellbeing outcomes. This may include the tracking of health metrics such as blood pressure, cholesterol, glucose levels and weight, the provision of tailored exercise programs and proactive rehabilitation interventions. The R U OK? Organisation has a mission to inspire and empower everyone to meaningfully connect with people around them and to support anyone struggling with life to genuinely change behaviour Australia-wide. At Evolution we embrace R U OK? Day. Not just once a year, but with regular reminders throughout the year to check in on our colleagues’ mental health. FY18 Health and Wellbeing Achievements ■ More than 75% workforce participate in our Health and Wellbeing program ■ ■ ■ 1,060 proactive rehabilitation interventions taken 7,760 one-on-one health consultations 2,029 Epworth sleep assessments ■ Reductions in BMI, Blood Glucose and Cholesterol levels ■ Onsite gym facilities and access to health professionals at our remote camps ■ Group exercise activities at remote camps ■ Employee Assistance Program (EAP) available to all employees and immediate family members ■ Embracing R U OK? Day 75% PARTICIPATION IN VOLUNTARY HEALTH AND WELLBEING PROGRAMS 14 Evolution Mining Limited Annual Report 2018Our People and Culture Inspired people creating Australia’s premier gold company One of the biggest challenges we face as an industry is attracting and retaining talented people. We want working at Evolution to be the highlight of our people’s career and we believe we have the right group of people with a strong sense of purpose who are focussed on the continued delivery of our strategy. Building a strong culture We have continued to build a strong culture based on our values of Safety, Excellence, Accountability and Respect and have focussed on increasing our engagement levels and making Evolution an even greater place to work. This year we focussed on: ■ Developing our people via our leadership development programs, individual development plans and on the job training ■ Establishing employee consultation groups ■ Embracing knowledge sharing using technology eg Yammer, as well as face to face forums ■ Enhancing employee recognition programs Focussing on creating an inclusive and diverse workplace To us, diversity is about commitment to equality and the treatment of all individuals with respect. Diversity refers to all characteristics that make people different from each other including religion, race, ethnicity, language, gender, sexual orientation, disability, age or any other area of potential difference. Managing diversity makes us creative, productive, responsive, competitive and creates value for our shareholders. Mining is the most male dominated industry in Australia1. As of 30 June 2018, we had a total of 1,263 employees of which 1,097 are male (86.9%) and 166 (13.1%) are female. In FY18 we paid attention to providing pathways to increase the number of women in our business and to helping mums and dads back into the workplace after taking parental leave. Some of our initiatives included: ■ Increasing the number of flexible working arrangements eg adjusted start and finish times, compressed work weeks, and altered rosters ■ Reviewing our practices for pre, during and post parental leave for males and females 1. Source: Workplace Gender Equality Agency data comparison 2017 www.data.wgea.gov.au ■ 88% of employees who took parental leave returned to the workplace. ■ Leveraging industry body memberships to offer mentee and mentor opportunities ■ Attracting more female job applicants through targeted advertising ■ Increasing female participation in our pipeline programs ■ Current graduates: 40% female (exceeding the 30% target) ■ FY18 vacation students: 29% female ■ 2019 graduates: 50% female Our workforce is comprised of 4% Aboriginal or Torres Strait permanent employees and more than half of our workforce are from our local communities (52%). See our Workplace Gender Equality Public Report for further information on our workforce profile and our Diversity Policy is available on our website under the Corporate Governance section. 15 Evolution Mining Limited Annual Report 2018Our People and Culture (continued) “Flexible work arrangements allow me to start later so that I can drop my son off at before school care. Without this flexibility, I would not be able to perform this role. It’s very important to me that I can attend special school functions that occur during normal work hours such as certificate presentations and sporting events. I make up the time spent offsite at these events. I greatly appreciate this flexibility.” Marcelle - Geologist 16 Evolution Mining Limited Annual Report 2018Our People and Culture (continued) Inspiring future miners We are excited to be playing our part in building awareness amongst our younger people that mining offers a variety of vocational and professional career pathways. Our approach is to inspire, connect and engage with students via practical experiences and direct interactions with our mine sites and specialists to unearth these pathway possibilities. Jason – Mining Engineer and Finance vacation student Following my time as an engineering student, I aimed to improve my understanding of how the industry works as a whole. Being part of Evolution’s finance team, I gained depth and understanding of the importance of this role within the mining industry. I was challenged and given my own roles and responsibilities. I noticed that Evolution stands by their values. It has been very rewarding to be part of a company where the same principles and standards employed onsite are being displayed offsite. Evolution has given me the greatest possible start to my career in this exciting industry. Some of our initiatives to help inspire students in FY18 included: Our flagship Graduate program ■ Mine site tours with our local community schools ■ Hosted high school work experience students at our sites and offices providing ‘realistic job previews’ of mining life ■ High School scholarships offered to final year students to support tertiary education studies, particularly in STEM (Science, Technology, Engineering and mathematics) related fields ■ Partnered with university faculties to host student study tours involving ‘hands on’ experience and mentoring by our Geology teams ■ Hosted information and ‘meet and greet’ sessions with university mining faculties, highlighting the vacation and graduate student experience offerings ■ Supported engineering student Demonstration Days by making our managers available to provide technical guidance and coaching to the students ■ Provided winter and summer vacation student opportunities across each of our sites creating a pipeline of talent for our graduate program We believe Evolution can play a role in developing future leaders and have implemented a graduate program that is now getting nationwide recognition. The Australian Association of Graduate Employers ranked Evolution in the top 75 graduate employers. Evolution was the only gold mining company named in this group. We have run three graduate programs with a bi-annual intake of around 9-12 graduates. The program runs over two years, with a range of rotations which provides broad exposure across many aspects of our business. In FY18 we promoted graduate alumni into the roles of: Business Analyst (reporting directly to our Chief Operations Officer); Project Geoscientist within Group Discovery; and Project Manager at Cowal. In 2019, we will expand our Graduate intake by 20%. Further information on our vacation and graduate programs is available on our website https:// evolutionmining.com.au/graduate-vacation-programs 17 Evolution Mining Limited Annual Report 2018Our People and Culture (continued) Developing our people We recognise that development is not a ‘one size fits all’ and have therefore designed a suite of personal and professional development opportunities for our people including: ■ Performance and development planning – by setting annual performance goals aligned to our annual Balanced Business Plan, tracking progress, and receiving direct feedback at biannual reviews and informally throughout the year, our people are clear on performance and development expectations. ■ Bespoke leadership development programs – our three tailored programs GOLD (intensive leadership experience), Silver (frontline leader workshop) and Alloy (leadership application) equipped over 100 of our leaders to drive a high performing team culture. ■ Functional technical forums – to share expertise, practice and knowledge to drive operational efficiencies through emerging technologies and applied innovation. ■ Mentoring – we matched high performing senior leaders with a Leadership Team member as a mentor which resulted in 33% of participants being internally promoted. We have a dedicated mentoring resource portal where our people can initiate their own mentoring relationships with the support of their Manager. ■ Study support – acquiring new skills and knowledge helps our people to perform at their best and delivers better business outcomes. Our employee benefits include financial study assistance and time off to study. “I completed the Silver program. It reinforced a lot of what I am already doing as a leading hand and gave me confidence to tackle more difficult issues that arise. It also taught me that leading by example is the best way to go. I was given the opportunity to complete my Certificate III in Mobile Plant Maintenance. My Superintendent encouraged me to complete my apprenticeship onsite to give me more confidence mentoring staff and a better understanding of the safety aspects of the system components.” Doug - Step Up Leading Hand 18 Evolution Mining Limited Annual Report 2018Act Like an Owner Our Act like an Owner (ALO) program has continued to be a key program in recognising our people for showing pride and commitment, being open to new ideas, supporting each other, being courageous and doing the right thing for the long term. In late FY18 we streamlined this process allowing for easier submission of ALO nominations and more timely recognition of our people who are nominated. Our focus for FY19 ■ Monthly Culture Pulse Survey to drive improvements ■ Laser focus on roles and functions – to ensure people are working on the right things at the right level ■ Double the number of ALO nominations received in FY18 ■ Continue to develop our approach to inclusion and diversity and pilot a ‘Return to Work’ flexible working program at our Mungari operations for men and women who have been out of paid work for two plus years ■ Extend our engagement with our local schools and Universities to build STEM capability and support vocational and professional talent pipelines ■ Broaden our talent review and succession planning approach to emerging leaders and key specialists to strengthen leadership and talent bench strength Our employees were again offered the opportunity to increase their ownership in the business through an employee share offer. 19 Evolution Mining Limited Annual Report 201820 Evolution Mining Limited Annual Report 2018SOCIAL LICENCE TO OPERATE ‘HIGH APPROVAL’ RATING FROM STAKEHOLDERS Social Responsibility We believe we have an obligation to create shared value for all our stakeholders. This is measured as much by the positive legacies we leave in our communities and the people whose lives we enrich as by the superior returns we deliver to our shareholders. Listening to our stakeholders In FY18 we completed our biennial Stakeholder Perception Study, facilitated by Deloitte, to understand our stakeholders’ key areas of interest and concern and to measure the quality of our relationships. High quality relationships produce more social capital and are a foundation for social licence to operate. We canvassed the views of 100 key stakeholders and 300 randomly selected members of the public across our five operations. Our Social Licence score was determined by using the Stakeholder 360® research and engagement framework. Evolution was rated in the ‘high approval’ (4.06 out of 5.00) category of social licence, with Deloitte noting that this is a high level of social licence compared to other mining companies. The mean social licence score in over 2,000 cases of social licence studied globally is 3.391. The study showed that what matters most to our stakeholders is local employment, local procurement and community investment, whilst the key areas of concern are environmental impacts and planning for closure. Each operation identified key actions to address the feedback received. We will report our progress against these actions and ensure we continue our open dialogue with stakeholders and maintain our reputation for transparency. Evolution has procedures to ensure complaints are handled appropriately and are promptly addressed. We share learnings across the business to prevent future similar incidents and we actively work to minimise the number of complaints received. Community investment We are committed to investing in our communities and partnering to achieve meaningful outcomes and to generate shared value. We share the economic benefit by, wherever possible, prioritising local procurement and local employment and training opportunities, particularly for our local indigenous communities. We make a significant economic contribution to the Australian economy as well as directly within our local communities (see page 26). In addition to our sponsorships and donations, we collaborate to implement projects that will continue to benefit the community long beyond the life of the mine. These Shared Value Projects will be particularly important for planning for closure and supporting the viability of communities beyond the life of mine which our stakeholders indicated were a very high priority at every operation in our Stakeholder Perception Study. 5 NEW SHARED VALUE PROJECTS BUILDING COMMUNITY RESILIENCE 1. Boutilier, R. Technical notes on the SLO measure, 2015 We collaborate to implement projects that will continue to benefit the community beyond the life of the mine. 21 Evolution Mining Limited Annual Report 2018Somewhere Down the Lachlan (NSW) sculpture trail - a Shared Value Project to promote regional tourism In FY18 we commenced five new Shared Value Projects within our local communities: ■ Cowal, NSW - Somewhere Down the Lachlan Partnership with Forbes Art Society and local Councils to develop a significant regional tourist attraction linking the Forbes, Lachlan and Bland Shires. The initiative includes a sculpture trail along the Lachlan River, regular food and wine events that promote local produce to restaurants and consumers, and promotion of indigenous and other local art through sales and art classes. ■ Mt Carlton, Qld - ‘Birriah Freight’ Business Partnership with the Birriah People to establish a freight business, to be owned by Birriah, which will consolidate freight in Townsville, deliver to our Mt Carlton operation and grow to service other businesses in the region. Supported by QUBE Logistics and other external partners. ■ Mt Rawdon, Qld - Mt Perry Men’s Shed Partnership to enhance the local Men’s Shed facilities, including tools, equipment and infrastructure for their new shed. Men’s Sheds enhance mental health, build mateship and strengthen community spirit. They also provide valuable services to the community. ■ Cracow, Qld - Cracow Community Caravan Park Partnership with Banana Shire Council to expand the Heritage Centre Caravan Park from 3 serviced 22 Evolution Mining Limited Annual Report 2018sites to 11. Ownership will transition from Evolution to the Cracow Community Centre, a community co-operative. This will enable increased tourism in Cracow, provide potential for new local business opportunities and generate a sustainable income stream for the local community. ■ Mungari, WA - Hannans Primary School - Sensory Nature Play Area Partnership to create a natural outdoor play area providing opportunities for children from the school and local community organisations to develop a range of skills and senses that are vital for physical and brain development. Evolution received the Community Event of the Year Award in the Mt Perry Australia Day awards for delivering various health initiatives to the local community including skin checks, flu injections, first aid training and hosting the Mt Perry Charity Ball that raised over A$33,000 to assist the prevention of suicide. We were named Community Citizen of the Year at the Coolgardie Shire Australia Day Awards for our contribution to the community, including two Shared Value Projects, construction of a sensory nature play area and bush tucker garden in Coolgardie Primary School and a youth park in the community centre. 23 Evolution Mining Limited Annual Report 2018Traditional Custodians and Cultural Heritage We respect the role of the traditional custodians of the land on which we operate, and we value the partnerships we have built with them. We take our responsibility to protect and manage Cultural Heritage extremely seriously and we are working with our indigenous partners to develop and deliver Cultural Awareness training at each operation to ensure we remain informed and respectful. We are committed to partnering to advance the outcomes for indigenous people and we have implemented various initiatives to deliver this, including: our successful Shared Value Project with Gudjuda Reference Group Aboriginal Corporation; our Project Bridge collaboration with key supply partners; and our establishment of the Birriah Freight business. We also provide scholarships for secondary and tertiary students, traineeships, apprenticeships and direct and indirect employment. Whilst traineeships and entry level positions offer an important first step, we believe leadership development and promotion opportunities are critical for delivering sustainable outcomes. For example, we are pleased that two of our three Wulli Wulli trainees at Cracow were provided with full time positions in FY18. Braydon – Our Apprentice Fitter from the Birriah People Braydon commenced his career at our Mt Carlton operation in January 2014 as one of five trainees from the Birriah People. He completed a Certificate II in Resource Processing and was offered permanent employment, becoming a very competent processing operator. Braydon developed a keen interest in maintenance, assisting the team in his spare time, and was awarded the position of Apprentice Fitter. Braydon also stepped up to join the Emergency Response Team, became a mentor to his indigenous colleagues and acted as a role model to other employees. CULTURAL HERITAGE INCIDENTS: NIL CULTURAL HERITAGE-RELATED INFRINGEMENTS: NIL COST OF CULTURAL HERITAGE-RELATED INFRINGEMENTS: NIL 24 NAIDOC celebrations (Cowal Partnering Program funded event at Condobolin, NSW) Evolution Mining Limited Annual Report 2018Charmaine – winner of the 2018 Exceptional Indigenous Person in Queensland Resources We were proud to see Charmaine named the 2018 Exceptional Indigenous Person in Queensland Resources. Charmaine, a Wulli Wulli person, joined our Cracow operation in 2012 as Safety Administrator, quickly progressing to Administration Team Leader. Her leadership qualities, drive for delivering positive community outcomes and ability to act as a mentor and confidante to people at all levels saw Charmaine promoted into the Group Community Relations Advisor role in 2017. Further examples of our community initiatives and outcomes are provided on our website: www.evolutionmining.com.au/community/ 25 Evolution Mining Limited Annual Report 2018Our Socio-Economic Contributions We make significant contributions to local, regional and national economies directly through the payment of taxes and royalties to governments, as well as to our workforce and suppliers. In FY18 we contributed A$1.26B to the Australian economy and approximately A$6B since Evolution formed in 2011. A$80M >A$1.26B DIRECT SPEND WITH LOCAL ORGANISATIONS CONTRIBUTED INTO AUSTRALIAN ECONOMY ECONOMIC CONTRIBUTION FY18 (A$M) EVOLUTION ECONOMIC CONTRIBUTION SINCE INCEPTION (A$B) DIVIDENDS $110 ROYALTIES $66 TAXES $48 INTEREST $20 WAGES $256 SUPPLIER PAYMENTS $761 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 1.26 1.12 1.05 0.60 0.60 0.84 0.5 FY12 FY13 FY14 FY15 FY16 FY17 FY18 A$6.0B EVOLUTION ECONOMIC CONTRIBUTION SINCE INCEPTION (A$B) Tax Transparency Code The Australian Board of Taxation released a voluntary Tax Transparency Code in 2016 designed to encourage greater transparency within the corporate sector of its compliance with Australian tax laws. We have adopted this voluntary reporting and continue to provide this information on the Evolution Mining website under the Corporate Governance section. 26 Evolution Mining Limited Annual Report 2018Protecting the Environment We are committed to attaining an outstanding level of environmental performance in all our workplaces Management Approach Evolution incorporates environmental considerations into all areas of our business to effectively manage environmental impacts and risks. We have an Environment and Sustainability Policy that we expect our people and contractors to adhere to (available to view on our website under the Sustainability/ Environment section). We believe we have a social responsibility to not only achieve all legislative compliance expectation but to strive for leading practice and to meet the expectations of the communities we operate within and are part of. We developed and implemented 11 Environmental Protocols to lift us to a higher standard of environmental performance and have instituted governance reviews for our tailings storage facilities. We are focussed on enhancing environmental stewardship through the development and implementation of quarterly environmental assurance reviews and integrating environmental considerations into our Life of Mine Plans across all sites. We undertake periodic reviews to ensure that our environmental performance targets and objectives are being achieved. In FY18 we maintained our track record of no material environmental incidents and had four environmental enhancement projects underway. 27 Evolution Mining Limited Annual Report 2018Protecting the Environment (continued) Environmental Enhancement Projects Coastal rehabilitation We have partnered with North Queensland Dry Topics to sponsor the Burdekin waterways environmental enhancement project. The project involves the extraction of weeds in the Kalamia Creek to reinstate an open body of wetlands, restore fauna diversity and improve farm productivity. Wildlife rescue - online training courses We have partnered with WIRES (NSW Wildlife Information Rescue Education Services) to develop online training for volunteers in NSW, SA, QLD and WA. This initiative will improve access to training, reduce costs incurred by WIRES and the volunteers, and enhance the services provided. Mallee fowl recovery in the Bland Shire The Mallee fowl population in NSW is listed as endangered. Evolution has partnered with the Lake Cowal Foundation and the NSW Government to support the revitalisation of the Mallee fowl species in regional NSW as part of a greater National program which is being led by the Commonwealth Government. Rehabilitation and land care We have partnered with the Kalgoorlie-Boulder Urban Land Care Group to upgrade the nursery and expand communication programs for enhanced awareness of rehabilitation programs being undertaken. Voluntary nature refuge reserve at Mt Perry This project involves the voluntary preservation of approximately 10 square kilometres of land owned by Evolution near our Mt Rawdon operation at Mt Perry to create a nature refuge for local fauna (e.g. koalas and gliders). This project will help protect otherwise at-risk native fauna. Environmental Protocols Our Environmental Protocols consist of 11 benchmarks for best practice management in key business risk areas such as Waste Rock Management, Cyanide Management and Mine Closure and Rehabilitation. All our sites and workplaces are required to meet the protocols which are audited on a regular basis. Details of each protocol are provided on our website https://evolutionmining.com.au/ environment-2/ 1. Air Quality 2. Biodiversity Management 3. Chemical Management 4. Cyanide Management 5. Water Management 6. Hydrocarbon Management 7. Waste rock Management 8. Rehabilitation and closure Management 9. Tailing Management 10. Waste Management 11. Energy efficiency The environmental topics identified as being most important to our business and stakeholders are reported on below. Water Management Evolution takes a proactive approach to responsible water management and as a minimum complies with all relevant water licensing requirements set by Government and industry regulators. Our water management protocol ensures that our operations effectively manage water, including process water, stormwater, discharges and dewatering activities. We utilise probabilistic site water balance models to predict water flow and requirements during droughts and storm-water flows. Our operations prepare for seasonal variations in water flow and maintain routine dewatering activities to satisfy water licence conditions. Each operation has different hydrogeological settings ranging from fresh to hypersaline surface and underground water and specific site licence to operate conditions. In addition, there are water management requirements associated with tailings and waste rock management designed to manage risks associated with unwanted events. The various streams of water have specific water management requirements. The protocol guides operations to ensure that clean water is kept separate from contaminated water (a similar management strategy is used for other waste by-product streams). We monitor fresh water (surface, groundwater and rainwater intake) and recycled water volumes to ensure controls are implemented. FY18 water data from our sites is provided over page. Environmental data (water, air emissions and energy) reported from our operations is collated and verified by external environmental accountants Greenbase. 28 Evolution Mining Limited Annual Report 2018Protecting the Environment (continued) FY18 Total Water Withdrawal FY18 parameter Surface water (ML) Groundwater - mine dewatering (ML) Cowal gold operation 1,274 556 Groundwater - borefields (ML) 1,476 Rainwater (ML) Municipal water (ML) Other water (ML) Total Cracow operation 487 - - 38.4 - - Mt Carlton operation Mt Rawdon operation Mungari operation 283 81 0.11 - - - 33.6 - - 1,817 - - - 2,575 - - 59 - Total 2,077 3,212 1,476 1,856 59 - - - - 3,305 526 364 1,851 2,634 8,680 FY18 Water Recycled and Reused FY18 parameter Cowal gold operation Cracow operation Mt Carlton operation Mt Rawdon operation Mungari operation Total Total volume reused (ML) 2,711 305 171 2,801 1,030 7,018 Note: Water recycled and reused exceeded the withdrawal volume at Mt Rawdon mainly due to above average rainfall experienced in the Bundaberg region. Climate Change, Emissions and Energy Evolution acknowledges that Climate Change is occurring and its effects have the potential to impact our business. In FY19 we plan to identify and assess climate-related impacts to our business. As a mining company, we can contribute to global efforts to combat Climate Change by promoting energy efficiency and reducing emissions. Each year we create and submit annual reports for the National Pollutant Inventory (NPi) and the National Greenhouse and Energy Reporting Act (NGER) to estimate greenhouse gas (GHG) emissions and energy use and we provide this information on our company website www.evolutionmining.com.au/environment-2. In FY18 Scope 1 emissions decreased by 5%, Scope 2 emissions decreased by 9%, and energy consumption decreased by 7% compared to FY17. The decreases in emissions and energy are largely due to divestment of the Edna May asset in October 2017. A summary of FY18 results is provided in the tables below. GHG emissions (t CO2-e) Scope 1 Scope 2 Total Scope 1 & Scope 2 Energy (GJ) Energy consumed Net energy consumed Energy produced FY18 FY17 159,061 394,144 553,205 167,734 430,993 598,727 4,075,493 4,402,695 4,075,493 4,389,992 12,702      -5% -9% -8% -7% -7% N/A 29 Evolution Mining Limited Annual Report 2018Protecting the Environment (continued) Air quality Biodiversity management Our operations develop, implement, communicate and adhere to their air quality management plan. This includes developing and implementing strategies, operational controls, management practices and monitoring/ inspections programs to verify that air emission controls are operating properly and to provide relevant, traceable data for internal and external reporting. We manage point and non-point source air emissions to ensure we are protective of human health and the environment. We acknowledge that the nature of our operations can have significant environmental impacts. Additionally, our operations and growth strategy are dependent on obtaining and maintaining access to environmental resources. We believe that we all have a role in demonstrating our environmental responsibility by minimising impacts and contributing to enduring environmental benefits through every stage of our operations. Ambient dust, noise, odour, and spill light impacts on our surrounds and are closely monitored at our operations. Protection of our social licence to operate means that we operate above compliance in these areas within our community surroundings. We report our air emissions as per our legal and other requirements and communicate the outcomes in the various consultative forums for our operations. We have developed land and biodiversity management plans at our operations. These plans are risk-based. Adaptive strategies include the voluntary and prescribed biodiversity offset areas that are actively maintained for fire, pest and weed control at our operations. CASE STUDY: Burdekin waterways environmental enhancement project We have partnered with North Queensland Dry Tropics to improve the quality of runoff water into the Great Barrier Reef lagoon by slowing wet season floodwaters to allow entrained sediment time to settle. The project involves the extraction of weeds from the Kalamia Creek to reinstate an open body of wetlands, restore fauna diversity and improve farm productivity. Migratory birds from as far away as Siberia will have significant portions of their natural habitat reinstated and extracted weeds are being converted to compost. The first phase of Evolution Mining’s Environmental Enhancement Project (EEP) commenced in December 2017, removing 15 hectares of aquatic weeds from the Kalamia Creek wetland water body. The weed piles were transported to the composting site at a local landholder’s property who placed the material in windrows and turned the piles fortnightly using his compost turner. All local landholders supported the objectives of the project and are keen to see the open water body return. The landholders told stories about fish previously caught in the area before it became choked up with weeds and how they would like the local children to share the same experiences. Following a rainfall event in February, the creek system received a good flood pulse. A manager at the Pacific Reef Prawn farm located downstream said “I’m not sure of what you have actually done upstream in the creek but this is the cleanest we have ever seen the water during a flood pulse”. The project has received interest from local landholders eager to use some of the compost product. This indicates that if the final compost product is beneficial and cost mitigation is viable, it could be a popular renewable resource in the Lower Burdekin. The project is on-track to meet its milestones and long-term outcomes. 30 First weed being pushed to the bank Evolution Mining Limited Annual Report 2018Protecting the Environment (continued) Waste rock management This protocol addresses the characterisation of waste rock, design and construction of waste rock disposal facilities, potential acid generation, storm-water controls, monitoring, rehabilitation and closure. The protocol is applied as required given that our gold- silver-copper ore bodies and their surrounding waste rock are generally quite different for each operation in terms of their potential for AMD and salinity impact on the surrounding environment. Operations maintain material balances for their topsoil, waste rock types throughout the lifecycle of operations in order to provide certainty for meeting eventual rehabilitation closure criteria requirements. Where Potentially Acid Forming (PAF) waste rock is suspected or known to occur, the operation will place it inside and under Non-Acid Forming (NAF) covers. Progressive rehabilitation activities are conducted as areas of the waste disposal facility become available. Full rehabilitation of these areas is conducted as soon as practicable. FY18 waste rock produced: 39,905kt1. Tailings management Tailings are the fine waste slurry residue of the crushed solid mineral ore that is fed into the process plant grinding mills. Tailings storage facilities need to be operated and rehabilitated with due care for a range of potential issues. Our protocol and governance process incorporate the International Council on Mining and Metals (ICMM) six key components of the Tailings Governance Framework. Regular inspection and audit ensure that operations meet the requirements for the characterisation of tailings, protection of wildlife, protection of groundwater, prevention of uncontrolled releases to the environment, management of process fluids and the closure and rehabilitation of tailing storage facilities. Ongoing efficient recovery of tailings decant water back to the processing plant water supply is essential to manage the water balance and minimise new water intake to operations. Management of wildlife access and safe egress from tailings storage facilities is a key business imperative for our operations. Our fresh water-based operations have cyanide destruction and slurry dilution to reduce WAD cyanide levels to safe levels for avifauna and terrestrial animals. Fencing, bird deterrent systems and regular monitoring and perimeter patrols provide early warning of such issues. FY18 Tailings produced: 26,632kt1 (wet tonnes). Waste management We have established an ethos to reduce, recycle and reuse our resources occurring in our normal site waste management practices. The on-site management of putrescible and non- putrescible waste streams has progressed to a stage where bioremediation and general landfill facilities and management practices are now relieving pressure on local government authority facilities. Generally septic waste solids are transported to local government authority facilities. Our operations use specialist, government approved waste management service providers and tracking arrangements for the approved, safe disposal of transfers of obsolete or used hazardous material waste/ dangerous goods substances. Generally, chemicals are consumed in process. Hydrocarbons in the form of dirty rags, crushed oil filters, used engine coolants or used bulk lubes are typically sent off-site under commercial service arrangements for industrial re-refining (for re-use) or conversion into energy. Rehabilitation and closure management We acknowledge that mining is only a temporary use of land and the project planning cycle begins with ensuring our minimum disturbance of ground during the exploration drilling phase (10 to 30 years) and needs to look forward to what the operation’s future land use/s will be and what the site should look like when the operational areas are ready for relinquishment. Each of our sites have a closure plan in place which outlines the process to rehabilitate the site and performance criteria required before a tenement can be handed over to Government. These plans take into consideration both environmental and social impacts. We rehabilitated 113.66 hectares of land in FY18 around two operations. 1. Excluding Edna May, divested in October 2017. 31 Evolution Mining Limited Annual Report 2018Protecting the Environment (continued) Environmental assurance Environmental compliance As part of our environmental management, Evolution’s activities are governed by conditions detailed in mining approvals, lease conditions and licences set out by regulatory authorities. Periodic voluntary independent environmental performance audits are also conducted. The Evolution Environmental Assurance Audit Program is undertaken by our corporate office. The program reviews different risk areas and aspects from the site operating licence each quarter. This assurance program assists in the effective management and monitoring of environmental risk across the organisation. Quarterly assurance visits to our operations focused on hydrocarbon and chemical management. Small leaks and spill volumes have been focused on to ensure that incidents are being reported and the causes are promptly addressed. Rehabilitation success and failures are reviewed with the view that other Sites share the learnings during subsequent Site visits or during our monthly Environmental Professional Network teleconference and our annual face-to-face gathering. Assurance visit and audit recommendations are tracked and followed up via our company incident management system. Cyanide reduction We are currently evaluating GlyCat technology using glycine and cyanide during the cyanidation process of gold ore. The GlyCat process will enhance the dissolution of gold where glycine is used as a catalyst with cyanide. This is a research program with Australian Mineral Industries Research Association (AMIRA) and has potential for significant reagent cost reduction. 32 Evolution Mining Limited Annual Report 2018Sunrise at the Mungari processing plant (photo by Andrew Millar) 33 Evolution Mining Limited Annual Report 2018Evolution – A Diversified Mid-tier Gold Miner Gold Reserves (Moz)1 Copper Reserves (kt)1 Gold Resources (Moz)1 Copper Resources (kt)1 Reserve grade (g/t Au)1 Reserve grade (% Cu)1 FY18 Au production (koz)2,3 FY18 AISC (A$/oz)3,4 FY18 net mine cash flow3 1 2 3 4 5 Cowal (100%) Mungari (100%) Mt Carlton (100%) Mt Rawdon (100%) Cracow (100%) 6 Ernest Henry (economic interest) Group Total 0.83 3.05 371 0.71 28 0.67 0.25 0.90 7.22 165 6.08 2.58 1.06 1.07 0.51 1.92 14.27 52 4.92 0.62 112 535 108.7 560 0.81 0.57 258 877 101.2 1.82 118 1,181 23.7 2 0.79 5.14 334 0.55 1.07 105 90 95 0.80 0.66 801 797 (641) 219.2 539.9 884 49.7 1,181 36.7 6 3 45 1 Location bubble size denotes FY18 gold production (annualised for Ernest Henry) 1. This information is extracted from the report entitled “Annual Mineral Resources and Ore Reserve Statement” released by Evolution to ASX on 19 April 2018. Mineral Resources and Ore Reserves are depleted to 31 December 2017. Results also include the update on Castle Hill announcement entitled “Restructure of ownership of Castle Hill Gold Deposit” released by Evolution to ASX on 18 July 2018. Both announcements are available to view on www.evolutionmining.com.au. Further information is provided in the Mineral resources and Ore Reserves section of this report. 2. 3. Group production total includes 21,639oz gold from Edna May operation (FY18Q1) This information is extracted from the report entitled “June 2018 Quarterly Report” released by Evolution to ASX on 19 July 2018 and is available to view on www.evolutionmining.com.au. Group total of A$539.9M includes Edna May net mine cash flow of A$0.7M. Includes C1 cash cost, plus royalty expense, sustaining capital, general corporate and administration expense 4. 34 Evolution Mining Limited Annual Report 2018 Chief Operating Officer’s Review We Say, We Do, We Deliver I started with Evolution in February 2018 and I am very excited to have witnessed the achievements of my team – delivering another outstanding year under our mantra “We Say, We Do, We Deliver.” Bob Fulker, Chief Operating Officer We demonstrated our value of Safety in the best possible way by reducing the Total Recordable Injury Frequency (TRIF) by 31% to the lowest ever achieved for Evolution at 5.5. The number of positive safety interactions in our team was well over 39,000 for the year and over 1,700 people were involved in our health and wellbeing programs. Significantly, we halved the number of vehicle interactions when compared with FY17 which was a key area of focus of our safety programs. We recognise that there is no place for complacency in safety and we will continue the momentum to improve our safety culture in FY19. Our communities and social responsibility are vital to our ongoing sustainability and success. Everyone at Evolution has a role to play in building positive community relations. During the year, we collaborated with our community stakeholders on shared value projects and environmental enhancement projects to leave a positive legacy beyond the life of our mines. We see innovation as critical to advancing our business and we actively seek opportunities to improve. We were first to apply high intensity grinding (HIGmill) technology in a hard rock (gold) environment and the first to use CaBolter technology in an innovative way (open pit environment). We worked with Minnovare to develop Production Optimiser technology to reduce stope dilution. We had 58 Act Like an Owner nominations (ALO) during the period, an example of daring to think differently and we are aiming to double this FY19. Mt Rawdon won the “People’s Choice Award” for their very innovative initiative, Barrell Mate, at the Queensland Mining Industry Health and Safety Conference. The site slurry pumps have a bearing barrel drive that fails and requires rebuilding in the workshop. The team designed and manufactured a twin clamp 360-degree rotating holder to allow an assembly to be rebuilt without leaving the holder, eliminating additional lifts and halving the amount of manual handling. This innovation has application across the industry. FY18 was an excellent year from a production perspective with 801,187 ounces produced, towards the top end of our guidance (750,000 – 805,000oz), and four out of six operations were either at or above the top end of their guidance. This was achieved at a record low AISC of A$797 per ounce. Some highlights from our operations are provided below and further details are provided in the Directors’ Report section of this document. Cowal The Cowal gold operation is a world-class, open pit gold operation located 350km west of Sydney. It is situated within the Bland, Lachlan and Forbes Shires on the traditional lands of the Wiradjuri People. Mining approval has been granted until at least 2032 and this long mine life provides a runway to capture additional upside. Cowal had an outstanding year, delivering on projects while achieving above guidance ounces, below guidance costs, and significantly reducing TRIF from 7.4 to 3.3. The Stage H cutback is on track with early ore being mined. The Float Tails Leach project – which will increase recoveries between 4 and 6% – is due for commissioning in the first half of FY19. The Plant Expansion Feasibility Study to lift capacity from 7.5Mtpa up to 9.8Mtpa is also due for completion in late 2018. 35 Evolution Mining Limited Annual Report 2018Chief Operating Officer’s Review (continued) The site successfully hosted the Evolution and NSW Mine Rescue Challenges in West Wyalong which not only tested our emergency capabilities, but also saw participation from our local community. Total FY18 gold production of 257,951oz was above the top end of the guidance range of 235,000 – 245,000oz. FY18 AISC of A$877/oz was below the bottom end of the A$950 – A$1,000/oz guidance range. Full year net mine cash flow was A$101.2 million. A number of mill throughput records were set and a lot of hard work and innovation ensured that the highest throughput for a financial year of 7,795kt was achieved in FY18. The underexplored region offers immense untapped potential. Exploration delivered material resource growth of 1.35 million ounces of gold prior to mining depletion, setting us up for another strong year and helping to ensure our future at Cowal. In FY19, our challenge is to assess mining and processing options to take this operation to the next level of production excellence – aspiring to an annual production level of 300,000oz. Mungari The Mungari gold operation is located 600km east of Perth and 20km west of Kalgoorlie in Western Australia on the traditional land of the Maduwongga People. Our local communities are Kalgoorlie and Coolgardie. The operation is a key asset in Evolution’s portfolio and consists of underground mining at Frog’s Leg, open pit mining at White Foil and a strategically located 1.6Mtpa process plant. Safety improved at Mungari with a significant reduction in Significant Safety Occurrence Frequency (SSOF) over the year from 6.0 to 2.4 and TRIF from 13.3 to 9.7. The operational performance also improved, highlighted by milling costs reducing by A$2/t processed against budget. Total gold production for FY18 of 118,498oz was slightly below guidance of 120,000 – 130,000oz which resulted in FY18 AISC of A$1,181/oz being above the guidance range of A$990 – A$1,050/oz. Full year net mine cash flow was A$23.7 million. Mungari’s performance is expected to improve in FY19, built on the completion of the White Foil Stage 3 cutback and increased availability of high-grade ore feed from Frog’s Leg underground. The operation has a major footprint in the world-class Kalgoorlie gold district with opportunities for high- grade discoveries to expand production and lower costs. The operation currently has a 10 year mine plan and an aspiration to lift annual production up to a sustainable 150,000 ounce profile. Opportunities currently being investigated to support this production rate include: ■ Un-constraining the crushing and leach circuit through data analysis to increase plant throughput to 1.9 - 2.0Mtpa ■ Ore sorting technology to deliver the highest grade to the processing plant ■ High-grade discoveries from an extensive regional exploration program ■ Heap leach options ■ Data analysis of seismicity to identify potential mineralisation Mt Carlton Our Mt Carlton operation is located 150km south of Townsville, Queensland, on the traditional lands of the Birriah People. Our local communities are Gumlu, Home Hill, Bowen and Townsville. At Mt Carlton, Evolution developed the expertise to commercialise a refractory, non-oxidised, high-sulphidation epithermal deposit which is a great credit to our people. The operation was developed by Evolution and commissioned in 2013. It is now a highly successful core asset and is one of the highest-grade open pit gold mines in the world with an innovative team culture driving this impressive performance. The operation has a current mine life out to 2025 and further mine life extensions are likely. Ore is sourced from the V2 gold-copper-silver deposit which is processed on site to produce a concentrate and shipped to China for smelting. The process plant has a current capacity of 840ktpa. Approximately 10 – 15% of gold feed is recovered through a gravity circuit prior to the flotation circuit to produce doré gold bars which are sold to the ABC Refinery in Sydney. The gravity circuit was installed in 2017 and has lifted recoveries from 88% to 90 – 91%. Mt Carlton’s injury reduction in FY18 was impressive with TRIF reducing from 8.2 to 3.9. The operation installed the CAT fatigue management system in the truck fleet to assist in managing fitness for work. Mt Carlton produced more than 100koz of gold for the third year in a row with FY18 production of 112,479oz. This exceeded the top end of the 100,000 – 110,000oz guidance range. A record low AISC of A$535/oz was achieved which was substantially below guidance of A$680 – A$730/oz. Full year net mine cash flow was a record A$108.7 million. The team at Mt Carlton also advanced the Definitive Feasibility Study which is examining the relative merits of a Stage 4 cutback compared to a potential underground operation in FY20. Future opportunities include: ■ Real time data capture and analysis to improve Overall Equipment Effectiveness (OEE) ■ World first online gold analysis (OLGA) technology developed by CSIRO which enables 36 Evolution Mining Limited Annual Report 2018Chief Operating Officer’s Review (continued) the processing team to be able to adjust processing parameters effectively in real time, reducing losses to tailings The TRIF increased from 5.2 last year to 14.0. Safety continues to be a major focus for site with a focus on fatigue management. ■ Recovery improvements such as tails retreatment ■ Regional low sulphidation ore co-treatment opportunities Cracow The Cracow underground gold operation is located 500km north-west of Brisbane, Queensland, on the traditional lands of the Wulli Wulli People. Our local communities are Cracow and Theodore. The operation has been a consistent and reliable producer since mining began in 2004. The current mine life is out to 2023 however Cracow has a long track record for replacing mining depletion and maintaining a three to five year mine life. Operationally, Cracow performed well in FY18, exceeding planned ounces and again extending mine life. Total gold production of 90,357oz was above the top end of the 85,000 – 90,000oz guidance range. AISC of A$1,181/oz was in line with guidance of A$1,150 – A$1,200/oz. Full year net mine cash flow was A$36.7 million. Cracow’s ongoing commitment to innovation was demonstrated by the increase in gold recovery in the order of 2% from the installation of a high-intensity grinding mill (HIGmill) and the development of Production Optimiser technology for underground production drill rigs to reduce stope mining dilution. In FY19 we will continue to seek improvements and the most significant opportunities include: ore sorting; remote bogging from surface; and electric equipment. 37 Evolution Mining Limited Annual Report 2018“From a production perspective, FY18 was an excellent year with 801,187 ounces produced which was towards the top end of our guidance (750,000 – 805,000oz). Four out of six operations were either at or above the top end of their production guidance. This was achieved at a record low AISC of A$797 per ounce.” Bob Fulker, COOChief Operating Officer’s Review (continued) Mt Rawdon Ernest Henry The Ernest Henry copper-gold operation is a large-scale, long-life asset operated by Glencore. The operation employs a sub-level caving ore extraction method. It is located 38km north east of Cloncurry, Queensland. In November 2016 Evolution acquired an economic interest in Ernest Henry that will deliver 100% of future gold and 30% of future copper and silver produced within an agreed life of mine area. Outside the life of mine area, Evolution will have a 49% interest in future copper, gold and silver production from Ernest Henry. The Ernest Henry transaction has materially improved the quality and longevity of the Group’s portfolio and reduced the cost profile. Total FY18 gold production of 95,209oz was above the top end of the 85,000 – 90,000oz guidance range. AISC of A$(641)/oz was substantially below guidance of A$(200) – A$(150)/oz. Full year net mine cash flow was a record A$219.2 million. Yours faithfully BOB FULKER CHIEF OPERATING OFFICER The Mt Rawdon open pit gold operation is located 75km south-west of Bundaberg, Queensland and is surrounded by the traditional lands of the Port Curtis Coral Coast People. Our local communities are Mt Perry, Gin Gin, Biggenden and Gayndah. Evolution has owned and operated Mt Rawdon since November 2011. Total FY18 gold production was 105,053oz. A very strong June half year ensured production guidance of 105,000 – 115,000oz was achieved. AISC of A$884/oz was also within the guidance range of A$850 – A$900/oz. Full year net mine cash flow of A$49.7 million was a record under Evolution ownership. A significant production milestone was achieved in June 2018 with 50 tonnes of gold produced since the mine began operating Safety at Mt Rawdon continues to be a key focus for the team. In FY18 we saw a decrease in TRIF from 6.6 to 5.1. In FY18 Mt Rawdon won the People’s Choice Award at the Queensland Mine Safety Awards for their innovative “Barrel Mate” initiative. The team also designed and built a used tyre protection wall as a bund to protect against rock falls. Improvements were made in blast efficiencies with: improved fragmentation; reduced blast delays; and reduction in downtime for blast evacuations. The following innovations are currently being trialled: ■ Truck payload management – targeting consistent loading of trucks to increase productivity and reduce equipment damage by utilising CQMS Razer’s Titan 3330 product ■ Remote operation of production drills – targeting the operation of multiple machines by a single operator and isolating the operator from working near high-walls ■ Innovative use of the CaBolter to improve the productivity of ground support installation on the open pit walls We partnered on a shared value project to enhance the local Men’s Shed at Mt Perry. We produced the gold for the 2018 Lexus Melbourne Cup which brought the Melbourne Cup Tour to the community in September this year. We were also the major sponsor for Bundaberg’s NAIDOC celebrations. 38 Evolution Mining Limited Annual Report 2018FY19 Guidance and Three Year Outlook to FY21 Evolution is forecasting FY19 Group gold production of 720,000 – 770,000 ounces of gold. Group C1 cash costs are expected to be in the range of A$560 – A$610 per ounce and Group AISC are expected to be in the range of A$850 – A$900 per ounce. Using the average AUD:USD exchange rate of 0.7752 for the 12 months to 30 June 2018, Evolution’s forecast FY19 costs are among the lowest of global gold producers and equate to C1 cash costs of US$430 – US$470 per ounce and AISC of US$660 – US$700 per ounce. Investment in sustaining capital in FY19 is forecast to be in the range of A$105.0 – A$135.0 million. The majority of the investment will be at Cowal, comprising of tails facilities, mobile fleet major repairs and equipment replacement. Investment in tails facilities will also take place at Mungari, Mt Carlton, Mt Rawdon and Cracow. Investment in growth (major project) capital and exploration is additional to the costs included in AISC. Investment in major capital in FY19 is forecast to be in the range of A$150.0 – A$180.0 million. The bulk of the major project capital investment is associated with expansion projects at Cowal with mine development of A$70.0 – A$75.0 million and Float Tails Leach project investment of A$6.0 – 9.0 million. Major project capital investment at Mt Carlton, Mt Rawdon and Cracow relates predominantly to mine development. Exploration investment is expected to total approximately A$40.0 – A$55.0 million. This is a substantial increase on the FY18 exploration spend of A$31.6 million. Cowal (A$15.0 – A$20.0 million) and Mungari (A$15.0 – A$20.0 million) will receive the largest allocation of the investment in FY19. FY19 AISC guidance of A$850 – A$900 per ounce positions Evolution as one of the world’s lowest cost gold producers. A breakdown of production, costs and capital guidance is provided in the table below. FY19 guidance Gold production (oz) C1 cash costs1 (A$/oz) All-in sustaining cost1 (A$/oz) Sustaining capital (A$M) Major capital (A$M) Cowal Mungari 240,000 – 250,000 765 – 840 975 – 1,075 125,000 – 135,000 875 – 925 1,050 – 1,100 Mt Carlton 95,000 – 105,000 470 – 520 670 – 720 Mt Rawdon 95,000 – 105,000 815 – 865 1,000 – 1,050 55 – 60 10 – 15 7.5 – 12.5 5 – 10 Cracow 80,000 – 85,000 850 – 900 1,250 – 1,300 17.5 – 22.5 Ernest Henry 85,000 – 90,000 (875) – (825) (575) – (525) 10 – 15 90 – 100 0 – 5 25 – 30 25 – 30 10 – 15 0 Corporate Group Copper (t) 720,000 – 770,000 560 – 610 45 – 50 850 – 900 105 – 135 150 – 180 Ernest Henry 19,000 – 21,000 Mt Carlton 800 – 1,000 1. A copper price assumption of A$8,800/t has been used for by-product credits Three Year Outlook to FY21 Evolution remains focused on prioritising margins over production growth. The Company expects to produce in excess of 700,000 ounces of gold for at least the next three years1. All-in sustaining costs are expected to remain relatively flat throughout this period which will enable the business to prosper even in weaker gold price environments. Evolution continues to invest in future production growth. Capital expenditure will remain elevated in FY19 due to investment in major projects at Cowal. It is then expected to decline from FY20 onwards. Production Outlook FY19 – FY21 Period Gold Production (koz) AISC (A$/oz) Sustaining capital (A$/M) Major project capital (A$M) FY19 720 – 770 850 – 900 105 – 135 150 – 180 FY20 720 – 770 850 – 900 115 – 145 115 – 145 FY21 700 - 750 870 – 920 95 - 125 115 - 145 1. For information on the Exploration Targets, refer to ASX release entitled “Three Year Outlook and High-Grade Drill results from new Dalwhinnie Lode at Cowal” released to the ASX on 4 September 2018 and available to view at www.evolutionmining.com.au 39 Evolution Mining Limited Annual Report 2018 FY19 Guidance and Three Year Outlook to FY21 (continued) PRODUCTION OUTLOOK (KOZ)1 AISC OUTLOOK (A$/OZ) SUSTAINING CAPITAL OUTLOOK (A$M) 11 22 770 770 750 900 900 920 145 135 125 MAJOR PROJECT CAPITAL OUTLOOK (A$M) 180 145 145 833 780 720 720 700 907 797 850 850 870 116 101 105 115 95 128 171 150 115 115 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 Production Low Production High AISC Low AISC High Sustaining Capex Low Sustaining Capex High Major Capex Low Major Capex High Cautionary statement concerning the proportion of Exploration Targets1 Of Evolution’s Production Outlook, 2% is comprised of Exploration Targets. The potential quantity and grade of this exploration target is conceptual in nature and there has been insufficient exploration to determine a Mineral Resource and there is no certainty that further exploration work will result in the determination of Mineral Resources or that production target itself will be realised. Cautionary statement concerning the proportion of Inferred Mineral Resources There is a low level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result in the determination of Indicated Mineral Resources or that the production target itself will be realised. Material Assumptions ASX on 19 April 2018 and available to view at www.evolutionmining.com.au. The material assumptions upon which on which the forecast financial information is based are: Silver A$20/oz Copper A$8,800/t Diesel A$110/bbl Competent Persons Statement The estimated Mineral Resources and Ore Reserves underpinning the Production Target and Exploration Target have been prepared by Competent Persons in accordance with the requirements in Appendix 5A (JORC Code). The Company confirms that the form and context in which the Competent Persons findings are presented have not been materially modified from the original market announcement. Relevant proportions of Mineral Resources and Ore Reserves underpinning the Production Target The material assumptions on which the Production Target is based are presented in ASX release Annual Mineral Resources and Ore Reserves Statement” released to the The Production Target comprises 96.5% Probable Ore Reserves, 1.5% Inferred Mineral Resources and 2% Exploration Targets. 40 Evolution Mining Limited Annual Report 2018 Grade control drilling at Mt Carlton 41 Evolution Mining Limited Annual Report 2018Innovation and Asset Optimisation Innovation and Asset Optimisation Our aim is to differentiate ourselves through innovation, incremental improvements and excellent operational discipline to deliver better margins and value. We embrace disruption and constant change to innovate and evolve. We focus on the few things that make the biggest difference. To enable “Different Thinking” we needed to structure our business appropriately. We recently shifted the focus of our highly skilled technical professionals, the Technical Services Group, to drive the attributes of Transformation and Effectiveness. This team had previously focused on technical work streams “Within” the business. The change is to enable them to work “On” the business in a Transformational role while still being intimately involved in operational discipline improvements to drive operational effectiveness from good to great. Innovation – Fast Firsts Developing the Production Optimiser Cracow operation partnered with Minnovare to develop Production Optimiser technology for underground stope drilling. The technology allows for accurate drill hole placement, reducing drill hole deviation which then improves the blast-hole drilling accuracy. This then leads to a reduction in stope dilution. Use of this technology has delivered a consistent improvement in drilling accuracy with stope mining dilution being reduced by up to 50%. In addition, the success demonstrated with the Production Optimiser has allowed the modification of drill patterns to further reduce planned dilution. Minimum stoping widths at Cracow have typically been in the order of 1.9m. With improvements in accuracy, trials have commenced to reduce this minimum width down to 1.3m. We are now adapting this technology for the open pit drilling fleet at our operations. Focusing on innovation rather than invention allows us to be Fast Firsts rather than Fast Followers. We believe that this approach will extend our competitive advantage within the mining industry. At Evolution we encourage disruption and an agile approach to innovation. We look for ground breaking ideas to transform the company’s ounce and cost profile, while maintaining a myopic focus on value accretion. 42 Evolution Mining Limited Annual Report 2018High-intensity grinding mill (HIGmill) Evolution’s Cracow mine was the first gold processing plant to apply the high intensity grinding mill (HIGmill) technology to improve recovery. Cracow commissioned this technology in January 2017 and has shown a consistent increase in processing recovery of 2%. The HIGmill is a vertical grinding mill which comprises a drivetrain attached to a vertical shaft with rotating grinding rotors. Attached to the fixed shell are stationary counter rings. Feed is introduced at the bottom of the HIGmill and proceeds upwards through all grinding stages prior to exiting the HIGmill at the top. The mill is filled to approximately 70% capacity with grinding media and the entire charge is mixed and grinding is facilitated by the rotating discs. This technology has been used extensively in the industrial minerals space but had not been tried in a hard-rock gold environment. This technology was chosen for use at Cracow due to the grind-sensitive nature of the ore and the power-efficient grinding characteristics of the HIGmill. 43 Evolution Mining Limited Annual Report 2018CaBolter - Applying proven technology in a new way Our Mt Rawdon operation is the first to use the proven CaBolter technology, normally used for underground wall support by remote drilling, in an innovative way. They have applied this technology in the open pit to install ground support. This technology provides a safer working environment as our people are isolated from working near highwalls.Innovation and Asset Optimisation (continued) Online Gold Analysis Our Mt Carlton operation will be the first operation to trial the online gold analyser (OLGA) developed by CSIRO. This new system will provide average gold grades of plant feed every 10 minutes versus our current six-hourly lab assays. The benefit of this system will be that the processing team will be able to adjust plant parameters effectively in real time thereby reducing losses to tailings. Float Tails Leach Project At Cowal we are in the process of installation of our float tails leach project which is due for completion during FY19. The installation will include; ■ A new leach circuit to treat flotation tails and detoxification of the stream before pumping to the tails storage facility ■ A new carbon handling and electrowinning facility to treat the gold recovered from the flotation tails leach circuit ■ A new reagent mixing and distribution systems needed for the operation of the leach circuit, detoxification facilities and carbon handling facilities With the completion of this circuit and commissioning on track for the December quarter, we are looking for a 4 – 6% recovery improvement as well as approximately 10,000 ounces per year recovered from the tails. Innovations and improvements on the radar Data Analytics Data analytics is a resource that will facilitate many business improvement opportunities. We are currently partnering with a firm to predict tails grade by analysing thousands of live variables and comparing them to historic data. We aim to predict situations that will lead to increased tails gold grade and thus allow the operator to react with the best information, improving recovery and thus revenue. We are expanding our data lake to enable both internal and external collaboration. Power optimisation Electricity is a significant cost to our operations, and it is constraining us from expanding mill capacity at two of our operations. We believe there is an opportunity to analyse our power consumption and correlate it with our production patterns to develop techniques which optimise our electricity usage, reducing our costs and enabling improved throughput and recoveries of our mills. Fragmentation analysis Digital imagery is not new but enabling our processing plants to improve their grinding efficiency and power draw by tracking blast effectiveness on the feed belts will enable early plant optimisation, improved throughput and recovery with a feedback loop to the blast design and the engineers. Ultimately reducing total cost and increasing throughput. Overall Equipment Effectiveness Overall Equipment Effectiveness (OEE) is the gold standard for measuring manufacturing productivity. OEE identifies time that is truly productive and optimises it through data. It requires quality data, a strong operating discipline to investigate significant non-conformance, and an improvement plan with measurable outcomes. 44 Evolution Mining Limited Annual Report 2018Gold bar produced at Cracow 45 Evolution Mining Limited Annual Report 2018Discovery Developing a pipeline of high-quality exploration targets Evolution is committed to organic growth by discovery of new resources at our existing operations and across our portfolio of greenfield projects. Our discovery strategy is simple. We are focused on finding epithermal (low, intermediate and high sulphidation) deposits and orogenic lode gold deposits. In the epithermal category we are searching for high sulphidation deposits like Mt Carlton, intermediate sulfidation deposits like Cowal and low sulfidation deposits like Cracow. In the orogenic lode gold category, we are exploring for deposit styles typically mined in the Yilgarn Craton in Western Australia. We have continued building land positions around our operating assets at Mungari, Cowal and Cracow. We are also developing a pipeline of exploration projects in Queensland between Cracow and Mt Carlton. We recognise a key to our success will be our ability to leverage external partnerships. As a result, we are partnering with groups who have superior geological knowledge of and access to areas prospective for the types of mineral deposit we want to find. We plan to invest between A$40 and A$55 million on Discovery programs and a further A$10 to A$15 million on resource definition drilling. Our largest Discovery investments will be made at Cowal and Mungari with each of these projects running budgets of between A$15 and A$20 million. Exploration Footprint APPROACH: UPGRADE THE PIPELINE People Tactics Deposit Styles Geographic Focus New, invigorated world class team Fostering a Discovery Culture Build land positions in key camps 3D architecture and footprint vectoring Epithermal – low/ intermediate & high sulfidation Orogenic lode gold Emphasis in Australia Evaluating North America ENABLERS: LEVERAGING THE BEST TEAMS Organisation Near-mine exploration – tailored to meet the needs of our operations Group Discovery – seasoned leadership; centre of technical expertise; evaluations and execution teams Partnerships Become a partner of choice Deploy Evolution expertise MUNGARI A$15–20M 46 Evolution Mining Limited Annual Report 2018Discovery (continued) ■ Resource definition drilling programs resulted in an increase in Ore Reserves prior to mining deletion of: ■ ■ ■ 127,000 gold ounces at Mt Carlton 168,000 gold ounces at Mungari 150,000 gold ounces at Cracow ■ Maiden Ore Reserve of 817,000 gold ounces at Marsden ■ Discovery of new high-grade lode at GRE46 – Dalwhinnie lode ■ Exploration success at the Ora Banda camp, Mungari ■ Acquisition of Connors Arc Project – an early stage exploration project in north-east Queensland Resource definition drilling A$10–15M DRUMMOND PROJECT A$1–2M TENNANT CREEK A$1–2M MUNGARI A$15–20M COWAL A$15–20M MT CARLTON A$1–2M CONNORS ARC A$3–4M CRACOW A$2–3M 47 Evolution Mining Limited Annual Report 2018Discovery (continued) Growth opportunities include: ■ Further delineation and conversion of the significant mineral endowment at Cowal along the 3km long Gold Corridor between E46 and E41 ■ Testing for extensions to the newly discovered Dalwhinnie lode at GRE46 ■ Evaluation of regional porphyry copper-gold potential within the Cowal Province ■ Advancing the Mungari Provincial pipeline (>30 current targets) and continuation of the near-mine drilling programs with targets including deep extension drilling at Frog’s Leg, evaluation of the White Foil underground, and near- surface extensions of mineralisation north of the White Foil open pit ■ Further extensional and infill drilling at Cracow with targets on the known structural corridors including the Kilkenny to Empire trend ■ Further resource definition drilling at Mt Carlton and continuation of testing for underground resource extensions ■ Extensional drilling below the 1,200m level at Ernest Henry (subject to agreement with Glencore). “In FY18 we grew resources and reserves, continued to strengthen the quality of our portfolio and strengthened our team which came together in a new exploration hub created in Sydney.” Glen Masterman, VP Discovery and Chief Geologist Our Pipeline of Opportunities Our goal is to improve the overall quality of our portfolio by building a base of early-stage project opportunities and being prepared to continually upgrade and substitute projects. Our pipeline has been developed to include various stages of project maturity and degrees of risk. New projects are aligned with our desire to improve asset quality and to match our geographic and commodity preferences. Exploration Conceptual/ Scoping Project Studies Development Projects Operating Assets Connors Connors Arc Arc Mungari Mungari Regional Regional Drummond Drummond Basin Basin Cowal Regional Cowal Cowal 300koz 300koz Tennant Creek Cracow Cracow Regional Regional Ernest Henry >1200m 48 Mungari Mungari 150koz 150koz Mt Carlton UG Marsden Cowal Stage H FTL Cowal E42 OP Mungari OP + UG Cracow UG Mt Carlton OP Mt Rawdon OP Ernest Henry UG Evolution Mining Limited Annual Report 2018Discovery (continued) Cowal Near Mine Growth GRE46 Following on from the success of converting the Stage H resource to reserves exploration drilling turned its attention to the Galway-Regal-E46 (GRE46) corridor. We announced a maiden Inferred underground resource at GRE46 (603,000 gold ounces) and demonstrated the potential to expand the underground mineralised zone. A further 206,000 resource ounces were identified at E41 and GRE46 open pits. Step-out drilling confirmed high-grade mineralisation is open along strike and recently identified the high- grade Dalwhinnie lode located 30 to 50 metres into the footwall of the GRE46 underground resource. An underground exploration decline has been approved by the Board and awaits approval by the NSW Division of Resources and Geoscience. Development is planned to commence in FY19. We believe there is sufficient untested area to support resource growth of more than 500,000 ounces, bringing the endowment to greater than one million ounces at GRE46. E41 The E41 deposit represents a strong opportunity to continue baseload open pit feed to Cowal’s production profile as mineralisation is constrained by drilling, not by geology. Drilling at E41 West identified a new and significant zone of mineralisation over 250m in length outside of the resource, along strike and at depth. Regional Opportunities Marsden – reserve conversion Marsden is a copper-gold porphyry deposit located immediately to the southeast of the operation. In FY18, we announced a maiden Ore Reserve of 817,000 gold ounces and 371,000 copper tonnes. Marsden has long- term strategic value to our exploration activities in the area and highlights the copper-gold opportunity in the Cowal district. East Girral An unexplored structure northwest of the mine was identified as highly prospective. Subsequent aircore drilling in FY18 delineated a significant geochemical anomaly and follow up drilling is planned. 49 Evolution Mining Limited Annual Report 2018Discovery (continued) Mungari The Kalgoorlie region around the Mungari operation is the focus of Evolution’s search for orogenic gold deposits with a view to finding high-grade feed for the processing plant. As such, most exploration is within 50km of the plant on a large package of 100% owned tenements which host more than >30 quality targets. Frog’s Leg Underground Frog’s Leg Deep Our highest priority target at Mungari is delineating down-dip extensions of the Frog’s Leg vein. The geological architecture is permissive of a repeat of “flexures” and an underground drilling program has been designed to test the vein beneath the lowest workings at Frog’s Leg. Drilling will commence when the drill drive has reached a suitable position. Drilling is expected to be completed in the March quarter 2019. / 50 ! Evolution Mining Limited Annual Report 2018Discovery (continued) White Foil Infill drilling of the underground Mineral Resource at White Foil will continue in FY19. The objective of this next phase of drilling is to increase confidence in the estimate to enable the reporting of Indicated Mineral Resources and Ore Reserves in key areas. Current estimates show sufficient grade and continuity to establish an underground mining operation at White Foil. Previous drilling was undertaken to a nominal 40m x 40m spacing, with drilling in FY19 increasing drill density to a 20m x 20m pattern. White Foil will have significant potential to grow its resource base as an underground operation, as drilling from underground workings is a more cost-effective means of testing deeper zones of mineralisation than surface drilling. Regional Open Pits Castle Hill Evolution terminated Norton Gold Fields’ right to mine and process ore from the Castle Hill deposit in July 2018. The new Agreement allows Evolution to explore and develop an important package of tenements at Mungari that were effectively quarantined by the rights held by Norton Gold Fields. Castle Hill is located approximately 25km northwest of the Mungari processing plant and hosts a Mineral Resource of 695,000 ounces and Ore Reserve of 236,000 ounces with potential to expand. The reserves currently exclude Kiora and Wadi deposits. Castle Hill is now expected to provide base-load feed for the Mungari processing facility following forecast completion of the White Foil open-pit in FY20. Infill drilling and engineering studies relevant to Castle Hill and the surrounding deposits are underway and include drilling at Picante, Ridgeback, and Burgundy. Ora Banda Camp Exploration programs have prioritised targets with the potential to deliver high grades from the well-endowed Ora Banda camp with historic production of about three million ounces. Prioritised targets have similar geology to the main producers in the Ora Banda camp and we see the same stratigraphy as the rocks that are well mineralised at Frog’s Leg along the K2 and K2B structural positions. We have identified several areas that have been ineffectively explored for Ora Banda style mineral systems. At the Perimeter prospect, significant intersections were returned from an 800m long corridor hosting mineralisation in narrow sheeted and stockwork quartz veins. Mineralisation is open along strike and at depth with higher grades showing an apparent steep plunge towards the southwest. Step-out drilling is planned for FY19 to delineate the full scope of the mineralised system. Drilling at the Scottish Archer prospect defined high- grade gold mineralisation and further drilling to test the depth and strike extensions will be undertaken in FY19. Results from Perimeter and Scottish Archer confirm new target models and transfer geological knowledge from Frog’s Leg. At the Lady Agnes prospect, drilling identified mineralisation along a 200m strike length which remains open at depth. Cracow Cracow has a very strong history of reserve replacement. In FY18, resource definition drilling focussed on extension and further delineation of the Coronation, Baz, Imperial, Griffin and Killarney structures and resulted in the addition of 150,000 ounces to Ore Reserves. Diamond drilling in FY19 will target resource conversion and high priority extensional underground targets including Killarney and the area between Coronation and Sterling. Sterling is currently interpreted as the continuation of the Coronation deposit based on the geometry of Coronation and information from historic surface drilling. Location map of the western vein field at Cracow 51 Evolution Mining Limited Annual Report 2018Discovery (continued) Mt Rawdon Although not in our current mine plans, the orebody at Mt Rawdon clearly continues down plunge and at depth. Our focus is on testing zones outside of existing reserves to confirm continuity of high-grade zones. The aim is to identify high-grade mineralisation for conversion to reserves. Eight holes are planned to be drilled in FY19. Potential Reserve expansion at Mt Rawdon Ernest Henry The Ernest Henry copper-gold operation is a large-scale, long-life asset operated by Glencore. We acquired an economic interest in Ernest Henry that will deliver 100% of future gold and 30% of future copper and silver production above the 1,200mRL and a 49% interest in future copper, gold and silver production below the 1,200mRL. Significant opportunity exists for mine life extension below the 1,200mRL. Most of the drilling to date has been completed above this level where gold grade distributions closely correlate with copper grades. High-grade copper grades have been identified below the 1,200mRL and we can assume that high-grade gold mineralisation is also continuous as there are no geological constraints. Mineralisation remains open at depth. 52 Evolution Mining Limited Annual Report 2018Current resource modelOre Reserve Pit DesignCurrent Drilling informationArea of opportunity0m400mLooking northDiscovery (continued) Connors Arc, Queensland Evolution entered into an agreement with Orion Minerals Limited (ASX:ORN) (“Orion”) to acquire 100% of the Connors Arc exploration project, a large early-stage exploration project covering approximately 3,200km2, located 160km northwest of Rockhampton in Queensland (see ASX announcement 2 May 2018, Figure 1). It is a technically compelling project with multiple and very extensive alteration zones which could be indicative of multiple preserved epithermal gold systems. The project area has similar geological characteristics to two of Evolution’s current mines, Mt Carlton and Cracow, both of which are greater than one million ounces epithermal gold deposits. Work started on the project in July 2018 with the completion of an airborne hyperspectral survey. Connors Arc Project Tennant Creek, Northern Territory Emmerson Resources and Evolution agreed to restructure the Tennant Creek joint venture following completion of the Stage 1 earn-in in December 2017. Under the new arrangement, Evolution will acquire a 100% interest in the Gecko – Goanna Copper Gold corridor and the Orlando pit as illustrated in the right hand figure. In May 2018 Emmerson Resources shareholders approved the restructure. A strategic review of the project was progressed. Tennant Creek Joint Venture 53 Evolution Mining Limited Annual Report 2018Mungari Exploration team 54 Evolution Mining Limited Annual Report 201855 Evolution Mining Limited Annual Report 2018Mineral Resources and Ore Reserves Group Mineral Resources as at 31 December 2017 are estimated at 14.27 million ounces of gold and 946,000 tonnes of copper compared with the estimate at 31 December 2016 of 14.18 million ounces of gold and 1.03 million tonnes of copper after accounting for mining depletion of 842,000 ounces of gold. All Mineral Resources are constrained at an A$1,800/oz economic threshold at Evolution’s 100% owned assets. Mineral Resources are reported inclusive of Ore Reserves. Group Ore Reserves as at 31 December 2017 are estimated at 7.22 million ounces of gold and 564,000 tonnes of copper compared with the 31 December 2016 estimate of 6.99 million ounces of gold and 212,000 tonnes of copper after accounting for mining depletion of 842,000 ounces of gold. Evolution is committed to building a sustainable business that prospers through the cycle and has therefore used an unchanged and conservative gold price assumption of A$1,350/oz to estimate Ore Reserves. Commodity Price Assumptions Commodity price assumptions used to estimate the December 2017 Mineral Resources and Ore Reserves are unchanged for gold, copper and silver to those used previously (December 2016 Mineral Resources and Ore Reserves). ■ Gold: A$1,350/oz for Ore Reserves, A$1,800/oz for Mineral Resources ■ Silver: A$20.00/oz for Ore Reserves, A$26.00/oz for Mineral Resources ■ Copper: A$6,000/t for Ore Reserves, A$9,000/t for Mineral Resources Changes since 31 December 2017 Mineral Resources and Ore Reserves Statement Evolution’s Mineral Resource and Ore Reserve estimates as at 31 December 2017 were released to the ASX on 19 April 2018 in the report entitled “Annual Mineral Resources and Ore Reserves Statement” (also available to view at www.evolutionmining.com.au). In this report the Castle Hill Mineral Resource attributable to Evolution was estimated at 23.06Mt grading 0.91g/t Au for 671koz after accounting for Norton’s share of the Stage 1 open pit over which Norton had the right to mine and process ore. On 18 July 2018, Evolution announced the termination of Norton’s right to mine and process ore from the Castle Hill deposit giving full ownership of the Mineral Resource to Evolution. The Mineral Resource was re-estimated at 19.32Mt grading 1.12g/t Au for 695koz using Evolution’s assumptions and operating parameters. Also, in the 19 April 2018 Annual Mineral Resources and Ore Reserves Statement, the Castle Hill Ore Reserve attributable to Evolution was estimated at 1.93Mt grading 1.04g/t Au for 65koz (at a 0.6g/t Au cut-off) representing a 50% share of the Norton Stage 1 open pit over which Evolution would receive a profit share (i.e. 50% of total profits). Similarly, Evolution re-estimated the Ore Reserve at 5.35Mt grading 1.38g/t Au for 236koz using its assumptions and operating parameters. Full details of the Castle Hill Mineral Resource and Ore Reserve estimates are provided in the report entitled “Restructure of Ownership of Castle Hill Gold Deposit” released to the ASX on 18 July 2018 and available to view at www.evolutionmining.com.au. Evolution is not aware of any other new information or data that materially affects the information contained in the Annual Mineral Resources and Ore Reserves Statement 31 December 2017 other than changes due to normal mining depletion during the six months ended 30 June 2018. JORC 2012 and ASX Listing Rules Requirements The Mineral Resources and Ore Reserves statement included with this announcement has been prepared in accordance with the 2012 Edition of the “Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves” (the JORC Code 2012) for all projects. Group Mineral Resources and Ore Reserves summaries are tabulated on the following pages. Material Information summaries are also provided for GRE46 Underground Mineral Resource at Cowal and the Marsden Mineral resource and Ore Reserve pursuant to ASX Listing Rules 5.8 and 5.9 and the Assessment and Reporting Criteria in accordance with JORC Code 2012 requirements. 56 Evolution Mining Limited Annual Report 2018Mineral Resources and Ore Reserves (continued) Governance and Internal Controls Evolution Mining reports its Mineral Resources and Ore Reserves on an annual basis, with Mineral Resources inclusive of Ore Reserves. Reporting is in accordance with the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves and the ASX Listing Rules. All Mineral Resource and Ore Reserve estimates and procedures are subject to internal and external review by qualified professionals. All Competent Persons named by Evolution are suitably qualified and experienced as defined in the JORC Code 2012 Edition. Prior to the public release of the Mineral Resource and Ore Reserve estimates, they are reviewed by the Evolution Board. Competent Persons Statement The information in this report that relates to the Mineral Resources and Ore Reserves listed in the table below is based on, and fairly represents, information and supporting documentation prepared by the Competent Person whose name appears in the same row, who is employed on a full-time basis by Evolution Mining Limited. Each person named in the table below has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined in the JORC Code 2012. Each person named in the table below is a member or fellow of the Australasian Institute of Mining and Metallurgy and consents to the inclusion in this report of the matters based on their information in the form and context in which it appears. Evolution employees acting as a Competent Person may hold equity in Evolution Mining Limited and may be entitled to participate in Evolution’s executive equity long-term incentive plan, details of which are included in Evolution’s annual Remuneration Report. Annual replacement of depleted Ore Reserves is one of the performance measures of Evolution’s long-term incentive plans. Activity Cowal Mineral Resource Cowal Ore Reserve Competent Person James Biggam Ryan Kare Mungari Mineral Resource Andrew Engelbrecht Mungari Ore Reserve Matt Varvari Mt Carlton Mineral Resource Matthew Obiri-Yeboah Mt Carlton Open Pit Ore Reserve Anton Kruger Mt Carlton Underground Ore Reserve Tully Davies Cracow Mineral Resource Cracow Ore Reserve Mt Rawdon Mineral Resource Mt Rawdon Ore Reserve Marsden Mineral Resources Marsden Ore Reserve Chris Wilson Phillip Jones Timothy Murphy Dimitri Tahan Michael Andrew Anton Kruger Membership status Member Member Member Member Member Fellow Member Member Member Member Member Fellow Fellow Full details of the Ernest Henry Mineral Resources and Ore Reserves are provided in the report entitled “Glencore Resources and Reserves as at 31 December 2017” released February 2018 and available to view at www.glencore.com. The information in this statement that relates to the Ernest Henry Mineral Resource and Ore Reserve is based on, and fairly represents, information and supporting documentation prepared by Colin Stelzer and Mark Jamieson respectively. Colin and Mark are members of the Australasian Institute of Mining and Metallurgy and are full-time employees of Glencore. The Company confirms that all material assumptions and technical parameters underpinning the estimates in Glencore’s market release continue to apply and have not materially changed. Colin Stelzer and Mark Jamieson consent to the inclusion in this report of the matters based on their information in the form and context in which it appears. Ernest Henry Resource is reported on a 100% basis for gold and 30% for copper (Evolution Mining has rights to 100% of the revenue from future gold production and 30% of future copper and silver produced from an agreed life of mine area and 49% of future gold, copper and silver produced from the Ernest Henry Resource outside the agreed life of mine area). Apportioning of the resource into the specific rights does not constitute a material change to the reported figures. 57 Evolution Mining Limited Annual Report 2018Mineral Resources and Ore Reserves (continued) Forward looking statements This report prepared by Evolution Mining Limited (or “the Company”) includes forward looking statements. Often, but not always, forward looking statements can generally be identified by the use of forward looking words such as “may”, “will”, “expect”, “intend”, “plan”, “estimate”, “anticipate”, “continue”, and “guidance”, or other similar words and may include, without limitation, statements regarding plans, strategies and objectives of management, anticipated production or construction commencement dates and expected costs or production outputs. Forward looking statements inherently involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance and achievements to differ materially from any future results, performance or achievements. Relevant factors may include, but are not limited to, changes in commodity prices, foreign exchange fluctuations and general economic conditions, increased costs and demand for production inputs, the speculative nature of exploration and project development, including the risks of obtaining necessary licenses and permits and diminishing quantities or grades of reserves, political and social risks, changes to the regulatory framework within which the Company operates or may in the future operate, environmental conditions including extreme weather conditions, recruitment and retention of personnel, industrial relations issues and litigation. Forward looking statements are based on the Company and its management’s good faith assumptions relating to the financial, market, regulatory and other relevant environments that will exist and affect the Company’s business and operations in the future. The Company does not give any assurance that the assumptions on which forward looking statements are based will prove to be correct, or that the Company’s business or operations will not be affected in any material manner by these or other factors not foreseen or foreseeable by the Company or management or beyond the Company’s control. Although the Company attempts and has attempted to identify factors that would cause actual actions, events or results to differ materially from those disclosed in forward looking statements, there may be other factors that could cause actual results, performance, achievements or events not to be as anticipated, estimated or intended, and many events are beyond the reasonable control of the Company. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Forward looking statements in these materials speak only at the date of issue. Subject to any continuing obligations under applicable law or any relevant stock exchange listing rules, in providing this information the Company does not undertake any obligation to publicly update or revise any of the forward-looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based Group Gold Mineral Resources Statement Gold Measured Indicated Inferred Total Resource Group Gold Mineral Resources – December 2017 Cut- Off Tonnes (Mt) Gold Gold Metal Metal (koz) (koz) 0.4 46.64 0.70 1,049 141.99 0.91 4,173 Gold Grade (g/t) Gold Grade (g/t) Tonnes (Mt) Tonnes (Mt) 5.27 Gold Metal (koz) Gold Gold Grade Grade (g/t) (g/t) 1.50 255 193.90 0.88 Tonnes (Mt) CP3 Gold Metal (koz) 5,476 Underground 3 - - - - - - 5.90 3.17 603 5.90 3.17 603 0.4 46.64 0.70 1,049 141.99 0.91 4,173 11.17 2.39 199.80 0.95 6,079 7.13 1.40 2.87 321 10.36 2.38 793 0.69 4.58 1.56 0.21 11.56 78 0.05 10.38 10.57 2.60 870 0.73 39.79 0.71 5.77 33.06 1.30 1,379 11.69 905 4.90 0.58 1.51 858 144 101 15 117 3.13 5.08 11.64 2.57 0.25 11.35 11.89 2.76 108 48.44 0.69 566 44.93 1.35 511 963 93 1,056 1,067 1,950 Project Type Cowal1 Cowal Open pit Cowal1 Cracow1 Mt Carlton1 Total Total Open pit 2.8 8.52 0.17 0.35 0.59 3.65 Mt Carlton Underground 2.4 - - Mt Carlton1 Total Mt Rawdon1 Total Mungari1 0.59 3.65 Open pit 2.89 0.58 0.2 0.18 0.94 0.5 Underground 2.5/1.5 0.41 9.46 46 69 - 69 54 5 124 130 Mungari Mungari1 Ernest Henry2 Marsden Total Total Total Total 0.59 6.84 1.48 4.50 214 3.70 2.47 294 5.59 3.52 633 34.54 1.43 1,593 15.40 1.74 860 50.52 1.59 2,583 0.9 13.20 0.69 293 67.10 0.62 1,338 15.00 0.60 289 95.30 0.63 1,920 0.2 - - - 119.83 0.27 1,031 3.14 0.22 22 122.97 0.27 1,053 64.07 0.80 1,640 415.22 0.77 10,231 52.77 1.41 2,398 532.06 0.83 14,269 Data is reported to significant figures to reflect appropriate precision and may not sum precisely due to rounding Mineral Resources are reported inclusive of Ore Reserves 1 Includes stockpiles 2 Ernest Henry Operation cut-off 0.9% CuEq Group Mineral Resources Competent Person3 (CP) Notes refer to: 1. James Biggam; 2. Chris Wilson; 3. Andrew Engelbrecht; 4 Matthew Obiri-Yeboah; 5. Tim Murphy; 6. Colin Stelzer (Glencore); 7. Michael Andrew This information is extracted from the reports entitled “Annual Mineral Resources and Ore Reserves Statement” released on 19 April 2018 and “Restructure of Ownership of Castle Hill Gold Deposit” released to ASX on 18 July 2018 and both available and available to view at www.evolutionmining.com.au. Full details of the Ernest Henry Mineral Resources and Ore Reserves are provided in the report entitled “Glencore Resources and Reserves as at 31 December 2017” released February 2018 and available to view at www.glencore.com. The Company confirms that it is not aware of any new information or data that materially affects the information included in the Reports and that all material assumptions and parameters underpinning the estimates in the Reports continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Persons’ findings are presented have not been materially modified from the Reports. Ernest Henry Resource is reported on a 100% basis for gold and 30% for copper (Evolution Mining has rights to 100% of the revenue from future gold production and 30% of future copper and silver produced from an agreed life of mine area and 49% of future gold, copper and silver produced from the Ernest Henry Resource outside the agreed life of mine area). Apportioning of the resource into the specific rights does not constitute a material change to the reported figures 58 1 2 4 5 3 6 7 Evolution Mining Limited Annual Report 2018Mineral Resources and Ore Reserves (continued) Group Gold Ore Reserves Statement Group Gold Ore Reserves – December 2017 Gold Project Type Cut- Off Tonnes (Mt) Proved Gold Grade (g/t) Probable Total Reserve Gold Metal (koz) Tonnes (Mt) Gold Grade (g/t) Gold Metal (koz) Tonnes (Mt) Gold Grade (g/t) 46.64 0.70 1,049 69.64 Cowal1 Open pit Cracow1 Underground Mt Carlton1 Open pit Mt Carlton Underground Mt Carlton1 Total Mt Rawdon1 Open pit Mungari Underground 0.4 3.4 0.8 3.7 0.3 2.75 0.17 0.59 - 0.59 2.89 0.37 5.72 3.65 - 3.65 0.58 5.86 Mungari1 Open pit Mungari1 Total 0.7/0.85- 0.95 0.18 0.79 0.55 4.24 32 69 - 69 54 70 5 75 0.89 5.08 4.96 7.22 5.11 0.81 4.70 1,998 116.28 213 578 65 643 617 107 1.48 4.22 0.28 4.50 26.44 1.08 0.81 5.14 4.77 7.22 4.92 0.79 5.10 1.31 3.63 0.28 3.91 23.56 0.71 12.87 1.57 646 13.05 1.55 13.58 1.75 753 14.13 1.82 828 Ernest Henry2 Underground 0.9 10.20 0.77 253 41.20 0.49 649 51.40 0.55 902 Marsden Open pit 0.3 - - - 65.17 Total 61.03 0.78 1,530 218.37 0.39 0.81 817 65.17 5,690 279.41 0.39 0.80 817 7,220 Gold Metal (koz) 3,046 245 647 65 712 671 177 651 CP3 1 2 3 6 4 5 7 3 Data is reported to significant figures to reflect appropriate precision and may not sum precisely due to rounding 1 Includes stockpiles 2 Ernest Henry Operation cut-off 0.9% CuEq Group Ore Reserve Competent Person3 (CP) Notes refer to: 1. Ryan Kare; 2. Phillip Jones; 3. Anton Kruger; 4. Dimitri Tahan; 5. Matt Varvari; 6. Tully Davies; 7. Mark Jamieson (Glencore) This information is extracted from the reports entitled “Annual Mineral Resources and Ore Reserves Statement” released on 19 April 2018 and “Restructure of Ownership of Castle Hill Gold Deposit” released to ASX on 18 July 2018 and both available and available to view at www.evolutionmining.com.au. Full details of the Ernest Henry Mineral Resources and Ore Reserves are provided in the report entitled “Glencore Resources and Reserves as at 31 December 2017” released February 2018 and available to view at www.glencore.com. The Company confirms that it is not aware of any new information or data that materially affects the information included in the Reports and that all material assumptions and parameters underpinning the estimates in the Reports continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Persons’ findings are presented have not been materially modified from the Reports 59 Evolution Mining Limited Annual Report 2018 Mineral Resources and Ore Reserves (continued) Group Copper Mineral Resources Statement Copper Project Type Marsden Total Cut- Off 0.2 Measured Copper Grade (%) Copper Metal (kt) Tonnes (Mt) Indicated Copper Grade (%) Copper Metal (kt) Tonnes (Mt) Inferred Copper Grade (%) Copper Metal (kt) Tonnes (Mt) Total Resource Copper Grade (%) Copper Metal (kt) Tonnes (Mt) - - - 119.83 0.46 553 3.14 0.24 7 122.97 0.46 560 Total Ernest Henry2 Mt Carlton1 Open pit Mt Carlton Mt Carlton1 Total Underground 0.9 3.96 1.30 51 20.13 1.18 238 4.50 1.00 45 28.59 1.17 334 0.35 2.4 0.59 0.37 - 0.59 - 0.37 1.18 2 - 2 10.36 0.21 10.57 0.41 0.99 0.43 43 2 45 54 150.53 0.56 836 0.69 0.05 0.74 8.38 0.68 1.40 0.73 0.68 5 1 5 11.64 0.25 11.89 0.43 1.06 0.44 50 3 52 57 163.45 0.58 946 Total 4.55 Group Copper Ore Reserves Statement Copper Project Type Cut-Off Proved Copper Grade (%) Tonnes (Mt) Probable Total Reserve Copper Metal (kt) Tonnes (Mt) Copper Grade (%) Copper Metal (kt) Tonnes (Mt) Copper Grade (%) Copper Metal (kt) Marsden Ernest Henry2 Mt Carlton1 Open pit Total Mt Carlton Underground Mt Carlton1 Total 0.3 0.9 0.8 3.7 Total - - - 65.17 0.57 371 65.17 0.57 3.06 1.50 46 12.36 0.96 0.59 0.37 - 0.59 3.65 - 0.37 1.32 2 - 2 3.63 0.28 3.91 48 81.44 0.7 0.36 0.66 0.63 119 25 1 26 516 15.42 1.07 4.22 0.28 4.50 85.09 0.64 0.36 0.62 0.66 371 165 27 1 28 564 Group Mineral Resources Competent Person3 (CP) Notes refer to 1. James Biggam; 2. Chris Wilson; 3. Andrew Engelbrecht; 4 Matthew Obiri-Yeboah; 5. Tim Murphy; 6. Colin Stelzer (Glencore); 7. Michael Andrew Group Ore Reserve Competent Person3 (CP) Notes refer to 1. Ryan Kare; 2. Phillip Jones; 3. Anton Kruger; 4. Dimitri Tahan; 5. Matt Varvari; 6. Tully Davies; 7. Mark Jamieson (Glencore) The following notes relate to both tables above Data is reported to significant figures to reflect appropriate precision and may not sum precisely due to rounding Mineral Resources are reported inclusive of Ore Reserves 1 Includes stockpiles 2 Ernest Henry Operation cut-off 0.9% CuEq CP3 7 6 4 CP3 3 7 3 6 Full details of the Ernest Henry Mineral Resources and Ore Reserves are provided in the report entitled “Glencore Resources and Reserves as at 31 December 2017” released February 2018 and available to view at www.glencore.com. The Company confirms that it is not aware of any new information or data that materially affects the information included in the Report and that all material assumptions and parameters underpinning the estimates in the Report continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Persons’ findings are presented have not been materially modified from the Report. Ernest Henry Resource is reported on a 100% basis for gold and 30% for copper (Evolution Mining has rights to 100% of the revenue from future gold production and 30% of future copper and silver produced from an agreed life of mine area and 49% of future gold, copper and silver produced from the Ernest Henry Resource outside the agreed life of mine area). Apportioning of the resource into the specific rights does not constitute a material change to the reported figures. 60 Evolution Mining Limited Annual Report 2018 Board of Directors Jacob (Jake) Klein BCom (Hons), ACA, Executive Chairman Mr Klein was appointed as Executive Chairman in October 2011, following the merger of Conquest Mining Limited and Catalpa Resources Limited. Previously he served as James (Jim) Askew BEng (Mining), MEngSc, FAusIMM, MCIMM, MSME (AIME), MAICD, Non-Executive Director Mr Askew is a mining engineer with more than 40 years’ broad international experience as a Director and Chief the Executive Chairman of Conquest Mining. Prior to that, Mr Klein was President and CEO of Sino Gold Mining Limited, where he managed the development of that company into the largest foreign participant in the Chinese gold industry. Sino Gold was listed on the ASX in 2002 with a market capitalisation of A$100 million and was purchased by Eldorado Gold Corporation in late 2009 for over A$2 billion. It became an ASX/S&P 100 Company, operating two award-winning gold mines and engaging over 2,000 employees and contractors in China. Prior to joining Sino Gold (and its predecessor) in 1995, Mr Klein was employed at Macquarie Bank and PricewaterhouseCoopers. Mr Klein was a Non-Executive Director of the Lynas Corporation Limited from August 2004 to May 2017, a company with operations in Australia and Malaysia and of OceanaGold Corporation from December 2009 to July 2014 a company with operations in the Philippines, USA and New Zealand. Executive Officer for a wide range of Australian and international publicly listed mining, mining finance and other mining related companies. Mr Askew has served on the boards of numerous mining and mining services companies, which currently include OceanaGold Limited (Chairman since November 2006), a company with operations in the Philippines, USA and New Zealand; Syrah Resources Limited (Chairman since October 2014), a company with operations in Mozambique and in the USA; and Endeavour Mining Corporation (Non-Executive Director since July 2017), a company with operations in Cote d’Ivoire, Mali and Burkina Faso. Mr Askew is a member of the Risk Committee and Member of the Nomination and Remuneration Committee. Within the last 3 years Mr Askew has been a Non- Executive Director of Nevada Copper Limited and Asian Mineral Resources Ltd. Lawrie Conway B Bus, CPA, MAICD, Finance Director and Chief Financial Officer Graham Freestone BEc (Hons), Non-Executive Director Mr Conway was appointed Finance Director and Chief Financial Officer of Evolution Mining Limited with effect from 1 August 2014 (previously a Non- Executive Director). Mr Conway has more than 28 years’ experience in the resources sector across a diverse range of commercial, financial and operational activities. He has held a mix of corporate, operational and commercial roles within Australia, Papua New Guinea and Chile with Newcrest and prior to that with BHP Billiton. He most recently held the position of Executive General Manager – Commercial and West Africa with Newcrest Mining where he was responsible for Newcrest’s group Supply and Logistics, Marketing, Information Technology and Laboratory functions as well as Newcrest’s business in West Africa. Mr Conway is a Non-Executive Director of Aurelia Metals Ltd (appointed in June 2017). Mr Freestone has more than 45 years’ experience in the petroleum and natural resources industry. He has a broad finance, corporate and commercial background obtained in Australia and internationally through senior finance positions with the Shell Group, Acacia Resources Limited and AngloGold Ashanti Limited. Mr Freestone was the Chief Financial Officer and Company Secretary of Acacia Resources Limited from 1994 until 2001. From 2001 to 2009 he was a Non- Executive director of Lion Selection Limited, and from 2009 to 2011 he was a Non-Executive Director of Catalpa Resources Limited and Chaired their Audit Committees during that period. Mr Freestone is a Non-Executive Director of Kasbah Resources Limited (appointed February 2017) a company 61 Evolution Mining Limited Annual Report 2018Board of Directors (continued) Mr Johnstone was Chief Operating Officer at Equinox Minerals Limited, until the acquisition by Barrick Gold Corporation in 2011. Prior to that Mr Johnstone was Chief Operating Officer of Sino Gold Mining Limited, where he oversaw the development and operation of gold mines in China. Mr Johnstone is Chairman of Aurelia Metals Ltd (since November 2016). Mr Johnstone is the Lead Independent Director, Chair of the Risk Committee, and a member of the Audit Committee. Mr Johnstone was a former Non-Executive Director of Magnis Resources Ltd; Neometals Ltd (Reed Resources Ltd); and Metallum Ltd. Thomas (Tommy) McKeith BSc (Hons), GradDip Eng (Mining), MBA, Non-Executive Director Mr McKeith is a geologist with 30 years’ experience in various mine geology, exploration and business development roles. He was formerly Executive Vice President (Growth and International Projects) for Gold Fields Limited, where he was responsible for global greenfields exploration and project development. Mr McKeith was also Chief Executive Officer of Troy Resources Limited and has held Non-Executive Director roles at Sino Gold Limited, Avoca Resources Limited and is currently the Non-Executive Chairman of Prodigy Gold NL. Mr McKeith is the Chair of the Nomination and Remuneration Committee. Subsequent to year end, Mr McKeith stepped down from the Audit Committee and was appointed as a member of the Risk Committee. with a tin project in Morocco and Chairs its Remuneration and Audit Committees. Mr Freestone was Chair of the Audit Committee from 2011 until June 2018 and remains a member of the Audit Committee. Subsequent to year end, Mr Freestone stepped down from the Risk Committee and was appointed as a member of the Nomination and Remuneration Committee. Andrea Hall BCom, FCA, M. App Fin, GAICD, Non-Executive Director Ms Hall is a Chartered Accountant with more than 30 years’ experience in the financial services industry in roles involved in internal audit, risk management, corporate and operational governance, external audit, financial management and strategic planning. Prior to retiring from KPMG in 2012, Ms Hall was a Perth-based partner within KPMG’s Risk Consulting Services in industries including mining, mining services, transport, healthcare, insurance, property and government. Ms Hall is currently a Non-Executive Director and Chair of the Audit and Risk Committee at ASX-listed Pioneer Credit Limited and Automotive Holdings Group Limited. Ms Hall is also a Non-Executive Director of Insurance Commission of Western Australia and the Fremantle Football Club. Ms Hall became Chair of the Audit Committee in June 2018 and was a member until this date. Colin (Cobb) Johnstone BEng (Mining), Lead Independent Director Mr Johnstone is a mining engineer with over 30 years’ experience in the resources sector. He has served as General Manager at some of Australia’s largest mines including the Kalgoorlie Super Pit in Western Australia, the Olympic Dam Mine in South Australia and the Northparkes Mine in New South Wales. He has extensive international experience including Canada, China, Africa and South America. 62 Evolution Mining Limited Annual Report 2018Chief Financial Officer’s Review The true test of a good strategy is the financial outcomes generated. Right from when Evolution was formed we have directed our energy to establishing a globally relevant mid-tier gold company that generates superior returns for our shareholders. The financial performance achieved in the twelve months to 30 June 2018 truly do reflect that we have executed well against that strategy. Right across the business we have seen all areas combine to deliver excellent financial outcomes for our shareholders. The results clearly demonstrate that the decisions taken over the past few years have significantly improved the quality of our portfolio. “The business delivered on production and cost guidance for the seventh consecutive year. Evolution recorded a 21% increase in statutory net profit after tax to A$263.4 million and produced an underlying profit after tax to A$250.8 million (30 June 2017: A$217.6 million and A$206.6 million respectively). Both of these were record profits.” Lawrie Conway Finance Director and Chief Financial Officer The Group’s ongoing focus on productivity improvements and cost efficiencies delivered another year of outstanding results. Total gold production of 801,187oz was at the upper end of original guidance for the year of 750,000oz – 805,000oz. Record low AISC of A$797/oz, represented a decrease of 12% on the prior year and was well below original guidance of A$820/oz – A$870/oz. Operating mine cash flow of A$811.8 million represented an increase of 15% on the prior year. Net mine cash flow increased 17% on the previous year to A$539.9 million with all mines contributing positive cash flows after meeting their capital investment commitments. Net bank debt was reduced by A$325.8 million to A$71.8 million (30 June 2017: A$397.6 million). Revenue for the year ended 30 June 2018 increased by 4% to A$1,540.4 million (30 June 2017: A$1,479.9 million). This is largely due to a full 12-month sales contribution from Ernest Henry totalling A$347.4 million (30 June 2017: A$163.3 million1) partly offset by the impact of the disposal of the Edna May Operation which resulted in a decrease in revenue of A$79.7 million on the prior year. Total gold sold equalled 798,101oz which included deliveries into the hedge book of 205,915oz at an average price of A$1,564/oz (30 June 2017: 248,493oz, A$1,584/oz). The remaining 592,186oz were sold at achieved average price of A$1,673/oz (30 June 2017: 568,830oz, A$1,666/oz). The Group’s hedge book totalled 250,000oz at 30 June 2018 at an average price of A$1,711/oz with deliveries through to June 2020. Group operating costs (excluding depreciation, amortisation and fair value adjustments of A$435.6 million) decreased to A$705.5 million (30 June 2017: A$719.7 million) largely as a result of the sale of Edna May during the year which resulted in a decrease of A$61.5 million on the prior year. This was offset by the inclusion of a full 12 months of operating costs from Ernest Henry, which accounted for an increase of A$52.3 million to A$116.4 million (30 June 2017: $64.1 million). The operating costs for the five existing mine sites remained consistent, with an increase of only 2% on the prior year to A$554.6 million. In December 2017, the Group made its first income tax payment having utilised all unrestricted tax losses. A total of A$48.4 million of income tax was paid during 63 Evolution Mining Limited Annual Report 2018Chief Financial Officer’s Review (continued) the year including tax paid for the 30 June 2017 financial year (A$30.7 million) and tax instalments for 30 June 2018 financial year (A$17.7 million). This was another indication of the quality and profitability of the portfolio now in place. Total exploration expenditure for the year ended 30 June 2018 was A$31.6 million (30 June 2017: A$29.0 million) with an exploration expense of A$5.4 million (30 June 2017: A$12.6 million). Capital expenditure for the year totalled A$271.9 million (30 June 2017: A$245.0 million). This consisted of sustaining capital, including near mine exploration and resource definition of A$100.9 million (30 June 2017: A$116.6 million) and growth (major capital) projects of A$171.0 million (30 June 2017: A$128.4 million). The main growth capital projects included: Stage H and Float Tails (Dual) Leach projects (A$84.6 million) at Cowal, Cracow underground mine development (A$14.4 million), Mt Rawdon capital waste stripping (A$10.9 million) and Mungari underground development (A$8.9 million). On 3 October 2017, the sale of the Edna May Operation to Ramelius Operations Pty Ltd was completed for total proceeds of up to A$90.0 million. The consideration comprised of a A$40.0 million up front cash payment and contingent consideration in the form of either a cash royalty, Ramelius shares, or a combination of both up to A$50.0 million. In August 2017, the Directors approved a change to the dividend policy of whenever possible paying a dividend equivalent to 50% of the Company’s after-tax earnings. This policy was applied to both the interim and final dividend for 2018. Total dividends declared for the 2018 financial year were 7.5 cents per share totalling A$126.9 million. These dividends were fully franked. Evolution is forecasting FY19 Group gold production of 720,000 – 770,000 ounces of gold. Group C1 cash costs are expected to be in the range of A$560 – A$610 per ounce and Group AISC are expected to be in the range of A$850 – A$900 per ounce. In conclusion, the 2018 financial year was another great year for Evolution. We are committed to maintaining our focus on low costs and strong cash generation. We are also actively investing in the future to ensure the sustainability of our business and are confident in our ability to continue to deliver superior shareholder returns. Financials Units FY18 FY17 Change Statutory Profit before tax Statutory Profit after tax Underlying Profit after tax EBITDA Operating Mine Cash Flow Net Mine Cash Flow Group Cash Flow1 A$M 338.9 237.3 43% A$M 263.4 217.6 21% A$M A$M 250.8 206.6 21% 795.1 713.9 11% A$M 811.8 706.5 15% A$M 539.9 461.5 17% A$M 395.6 382.0 4% EBITDA Margin2 % AIC Margin A$/oz 53.0 612.0 49.0 568.0 8% 8% Earnings Per Share Gearing Final dividend (fully franked) cps 15.6 13.3 17% % cps 2.7 7.5 15.9 5.0 83% 33% 1. Excludes proceeds from Edna May (FY18) and Pajingo (FY17) 2. FY18 excludes Edna May; FY17 excludes Pajingo Yours faithfully LAWRIE CONWAY FINANCE DIRECTOR and CHIEF FINANCIAL OFFICER 64 Evolution Mining Limited Annual Report 2018Evolution Mining Limited Annual Financial Report Contents Directors' Report Auditor's Independence Declaration Financial Statements Page 66 104 Consolidated Statement of Profit or Loss and Other Comprehensive Income 105 Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors' Declaration Independent Auditor's Report to the Members Shareholder Information Corporate Information 106 107 108 109 150 151 157 159 65 Evolution Mining Limited Annual Report 2018 Directors’ Report Directors' Report Directors' Report The Directors present their report together with the consolidated financial report of the Evolution Mining Limited Group, consisting of Evolution Mining Limited ("the Company") and the entities it controlled at the end of, or during, the year ended 30 June 2018. Directors The Directors of Evolution Mining Limited during the year ended 30 June 2018 and up to the date of this report are set out below. All Directors held their position as a Director throughout the entire year and up to the date of this report unless otherwise stated. Jacob (Jake) Klein Lawrence (Lawrie) Conway Colin (Cobb) Johnstone James (Jim) Askew Graham Freestone Thomas (Tommy) McKeith Naguib Sawiris (i) Sebastien de Montessus (i) Andrea Hall (ii) Vincent Benoit (iii) Amr El Adawy (iii) Andrew Wray (iv) Executive Chairman Finance Director and Chief Financial Officer Lead Independent Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Alternate Non-Executive Director for Naguib Sawiris Alternate Non-Executive Director for Sebastien de Montessus Alternate Non-Executive Director for Naguib Sawiris and Sebastien de Montessus (i) Resigned as Non-Executive Director effective 1 August 2018. (ii) Appointed as Non-Executive Director effective 1 October 2017. (iii) Resigned as Alternate Non-Executive Director effective 19 April 2018. (iv) Appointed as Alternate Non-Executive Director effective 19 April 2018. Resigned as Alternate Non-Executive Director effective 1 August 2018. Company Secretary The name of the Company Secretary during the full year ended 30 June 2018 and up to the date of this report is as follows: Evan Elstein Principal activities The principal activities of the Group during the year were exploration, mine development, mine operations and the sale of gold and gold/copper concentrate in Australia. There were no significant changes to these activities during the year. Key highlights for the year Key highlights for the year ended 30 June 2018 include: • • • Safety of our people is of paramount importance and our focus has been demonstrated through an improved total recordable injury frequency (TRIF) of 5.50 (30 June 2017: 7.96). The Group recorded a statutory net profit after tax of $263.4 million for the year, an increase of 21% on the prior year. Underlying profit after tax increased by 21% to a record $250.8 million (30 June 2017: $206.6 million). The Group’s continuing focus on productivity improvements and cost efficiencies delivered a year with outstanding results including: • • • • • Total gold production of 801,187oz at the upper end of original guidance for the year of 750,000oz - 805,000oz. Record low AISC of A$797/oz, representing a decrease of 12% on the prior year and falling below original guidance of A$820/oz - A$870/oz. Operating mine cash flow of A$811.8 million, representing an increase of 15% on the prior year. Net mine cash flow of A$539.9 million, representing an increase of 17% on the prior year with all mines contributing positive cash flows after all capital investment. Net bank debt has been reduced by $325.8 million to $71.8 million (30 Jun 2017: $397.6 million). 66 66 Evolution Mining Limited Annual Report 2018 Directors' Report Key highlights for the year (continued) • • • • • • • • A total of $109.9 million (30 June 2017: $63.0 million) in fully franked dividends was paid during the year. A final dividend of 4 cents per share fully franked ($67.7 million) was declared and will be paid on 28 September 2018. In May 2018, Evolution entered into an agreement with Orion Minerals Limited to acquire 100% of the Connors Arc exploration project, a large, early-stage exploration project covering approximately 3,200km², located 160km northwest of Rockhampton in Queensland. It is a technically compelling project with multiple and very extensive alteration zones which could be indicative of multiple preserved epithermal gold systems. The project area has similar geological characteristics to two of Evolution’s current mines, Mt Carlton and Cracow, both of which are greater than one million ounce epithermal gold deposits. In March 2018, the Group successfully renewed the Senior Secured Revolving Loan (“Facility A”) and the Performance Bond Facility (“Facility C”) through to July 2021 for $350.0 million and $175.0 million respectively (previously $300.0 million and $155.0 million respectively). The expiry date of the Senior Secured Term Loan (“Facility D”) remains unchanged at October 2021. Facility A ($350.0 million) remained undrawn at 30 June 2018. The renewal of the debt facilities has secured a saving of approximately $6 million over the term of the loans compared to the previous pricing. In February 2018, an agreement was reached with Emmerson Resources Limited to restructure the Tennant Creek Mineral Field Joint Venture. Under the new arrangement, Evolution has forgone its right to a 65% interest in the entire JV area and instead acquired a 100% interest in the Gecko, Goanna and Orlando Copper-Gold project. In December 2017, the Group made its first income tax payment. A total of $48.4 million of income tax was paid during the year including tax paid for the 30 June 2017 financial year ($30.7 million) and tax instalments for the current year ($17.7 million). On 3 October 2017, the sale of the Edna May Operation to Ramelius Operations Pty Ltd was completed for total proceeds of up to $90.0 million. The consideration comprised of a $40.0 million up-front cash payment and contingent consideration in the form of either a cash royalty, Ramelius shares, or combination of both up to $50.0 million. In September 2017, the Group repaid the outstanding balance of $40.0 million on the Senior Secured Term Loan ("Facility B") in anticipation of the up-front cash payment to be received on the sale of the Edna May Operation. The Senior Secured Revolving Loan ("Facility A") remained undrawn during the year. On 4 August 2017, the Group agreed to subscribe for a $2.5 million investment in the initial public offering of Riversgold Ltd, a new, gold-focussed, exploration company whose strategy is to build a portfolio of high-quality mineral projects with a view to sell or enter into a joint venture at an appropriate time in the project life cycle. This provided the Company with a shareholding of 15.1% in Riversgold Ltd. 67 67 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review Evolution is a leading, growth-focussed Australian gold company. As at 30 June 2018, the Group consisted of five wholly-owned operating gold mines: Cowal in New South Wales; Cracow, Mt Carlton and Mt Rawdon in Queensland; and Mungari in Western Australia, and an economic interest in the Ernest Henry Copper-Gold Operation (100% of gold and 30% of copper and silver) in Queensland. The Group’s strategy is to deliver shareholder value through efficient gold production, growing gold reserves and developing acquiring or divesting assets to improve the quality of the portfolio. Since its formation in November 2011, the Group has built a strong reputation for operational predictability and stability through a record of consistently achieving production and cost guidance with guidance met for seven consecutive years. A portfolio approach to production provides Evolution with a Group-wide level of operational stability and predictability without reliance on one single asset. The Group’s high-performance team culture and clearly defined business plans and goals further contribute to delivering reliable and consistent results. To build a sustainable business, the Group maintains a strong commitment to growth through exploration and a disciplined methodical approach to business development through opportunistic, logical, value-accretive acquisitions and divestments. Profit Overview The Group achieved a record 12-month statutory net profit after tax of $263.4 million for the year ended 30 June 2018 (30 June 2017: $217.6 million), largely driven by a 12 month contribution from the Ernest Henry Copper-Gold Operation compared to 8 months in the previous year. In October 2017, the Group disposed of the Edna May asset to Ramelius Operations Pty Limited as part of its strategy to improve the quality of its asset portfolio. The following graph shows the movements in the Group's statutory profit after tax for the year ended 30 June 2017 to the year ended 30 June 2018. 68 68 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Profit Overview (continued) The Group achieved a record underlying net profit after tax of $250.8 million for the year ended 30 June 2018 (30 June 2017: $206.6 million). The table below shows a reconciliation of statutory profit/(loss) before tax to the underlying profit after tax. Statutory profit before income tax Fair value gain Loss on sale of subsidiary Transaction and integration costs Underlying profit before income tax Income tax expense Tax benefit on sale of subsidiary Tax effect of adjustments Recognition of previously unrecognised tax losses Recognition of previously unrecognised temporary differences Underlying profit after income tax Cash Flow 2018 $'000 338,934 (3,142) - (866) 334,926 (75,546) 4,165 1,201 (4,544) (9,440) 250,762 2017 $'000 237,284 - 3,576 6,987 247,847 (19,677) - (1,182) (20,400) - 206,588 Operating mine cash flow increased 15% with all operations producing positive operating mine cash flows totalling $811.8 million (30 June 2017: $706.5 million). Total capital expenditure increased 11% which was in line with plan at $271.9 million (including all sustaining and major capital expenditure, rehabilitation costs and capital stripping). The Group’s All in Sustaining Cost decreased by 12% to $797/oz (30 June 2017: $907/oz) driven by the inclusion of 12 months (30 June 2017: 8 months) of results from Ernest Henry which contributed an AISC of $(641)/oz for the year offset by the 11% increase in capital expenditure attributable in the most part to Cowal Stage H capital waste stripping costs and Cowal’s Float Tails Leach project. 69 69 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Key Results The consolidated operating and financial results for the current and prior year are summarised below. All $ figures refer to Australian thousand dollars (A$'000) unless otherwise stated. Key Business Metrics 30 June 2018 30 June 2017 % Change (ii) Total underground ore mined (kt) Total underground lateral development (m) Total open pit ore mined (kt) Total open pit waste mined (kt) Processed tonnes (kt) Gold grade processed (g/t) Gold production (oz) Silver production (oz) Copper production (t) Unit cash operating cost (A$/oz) (i) All in sustaining cost (A$/oz) (i) All in cost (A$/oz) (i) Gold price achieved (A$/oz) Silver price achieved (A$/oz) Copper price achieved (A$/t) Total Revenue Cost of sales (excluding D&A and fair value adjustments (i)) Corporate, admin, exploration and other costs (excluding D&A) EBIT (i) EBITDA (i) Statutory profit/(loss) after income tax Underlying profit after income tax Operating mine cash flow Capital expenditure Net mine cash flow 7,817 13,640 14,453 40,984 21,425 1.37 801,187 989,253 23,268 512 797 1,033 1,645 22 8,923 1,540,433 (705,553) (39,797) 360,380 795,083 263,388 250,762 811,766 (271,870) 539,896 5,662 11,290 19,672 33,128 20,607 1.49 844,124 1,067,681 14,898 625 907 1,073 1,641 24 7,600 1,479,876 (719,738) (46,283) 270,959 713,855 217,607 206,588 706,484 (244,998) 461,486 38% 21% (27)% 24% 4% (8)% (5)% (7)% 56% 18% 12% 4% 0.2% (8)% 17% 4% 2% 14% 33% 11% 21% 21% 15% (11)% 17% (i) (ii) (iii) EBITDA, EBIT, Unit cash operating cost, All-in Sustaining Cost (AISC), and All-in Cost (AIC) are non-IFRS financial information and are not subject to audit. Percentage change represents positive/(negative) impact on the business Ernest Henry mining and processing statistics are in 100% terms while costs represent Evolution's cost and not solely the cost of Ernest Henry's operation. 70 70 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Mining Operations Cowal Cowal was the Group's highest producer, achieving above guidance gold production of 257,951oz (guidance of 235,000 - 245,000oz) at an average unit cash operating cost of $675/oz and AISC of $877/oz. Cash costs and AISC were in line with, and below the lower end of guidance of $660 -$720/oz and $950 - $1,000/oz respectively. Capital expenditure for the year was $124.6 million, of which $84.9 million relate to the Stage H and Float Tails (Dual) Leach projects. Commissioning of the Float Tails (Dual) Leach project is forecast to commence in September 2018. Once commissioned, the project is expected to increase recoveries between 4 and 6%. Cowal ore mining activities in the year focussed on the E42 Stage G cutback to a current operating level of 858mRL. At 30 June 2018, Stage H material movement remained on track, and mining activities have transitioned from free digging in the oxides to drill and blast in the primary rock. During March 2018, Cowal submitted the Modification 14 development application, which includes seeking approval to increase plant throughput from 7.5Mtpa to 9.8Mtpa to the NSW Department of Planning and Environment. Public support has been strong. Evolution has submitted responses to public submissions and is now awaiting a decision from the regulator. This is expected to be received in the second half of FY19. Exploration work delivered material resource growth, reflected in the Mineral Resources and Ore Reserves update which incorporated full year drilling results and contributed an 816,000oz addition at Galway Regal E46 Underground and at the E41 and E46 open pits. Work programs in FY19 will aim to further delineate extensions of these resources along strike and at depth. Definition drilling is also planned to confirm grade continuity and understand geologic controls on grade distribution to support further classification upgrades. A maiden Ore Reserve for Marsden, located 17km from the Cowal plant, has been also included in the Mineral Resources and Ore Reserves update, contributing 835,000oz of gold and 380,000t of copper. Key Business Metrics 30 June 2018 30 June 2017 Change % Change Operating cash flow ($'000) Sustaining capital ($'000) Major capital ($'000) Total capital ($'000) Net mine cash flow ($'000) Gold production (oz) All-in Sustaining Cost ($/oz) All-in Cost ($/oz) 225,812 (39,697) (84,923) (124,620) 101,192 257,951 877 1,223 237,007 (43,849) (27,080) (70,929) 166,078 263,015 833 941 (11,195) 4,152 (57,843) (53,691) (64,886) (5,064) (44) (282) (5)% (9)% 214% 76% (39)% (2)% 5% 30% 71 71 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Mining Operations (continued) Mungari Mungari produced a total of 118,498oz at an average unit cash operating cost of $991/oz and an AISC of $1,181/oz. Gold production was below guidance of 120,000 - 130,000oz due to significant seismic activity at the Frog's Leg underground mine in the first half of FY18. As a consequence cash costs and AISC were above guidance of $860 - $910/oz and $990 - $1,050/oz respectively. Capital expenditure in the year was $46.6 mllion of which $8.9 million related to mine development at the Frog’s Leg underground mine and $27.7 million related to capital waste stripping on the White Foil open pit. The Frog’s Leg underground mine produced 462kt of ore at an average grade of 5.32g/t. Total development for the year was 1,749m but was impacted by heading availability and rehabilitation operations in the first half. Total material moved at the White Foil open pit was 501kt at an average grade of 1.61 g/t. The Stage 3 cutback progressed on plan and moved into an operating phase during the later half of the year with subsequent reduced volumes of capital waste being recognised. The process plant performed well over the course of the year, with 1,654kt of ore processed at an average grade of 2.36g/t. Increased gold recoveries of 94.2% were achieved (30 June 2017 : 92.4%) following the successful commissioning of an additional Knelson concentrator allowing for increased recoveries in the gravity circuit. Mungari’s performance is expected to improve in FY19 driven by the completion of the White Foil Stage 3 cutback and increased availability of high-grade ore feed from the Frog’s Leg underground mine. Investment in discovery and resource definition drilling programs across the Mungari tenements continued during the year with full results received for definition drilling at the White Foil underground target incorporated in the December 2017 Mineral Resources and Ore Reserves update. Development commenced to extend the Frog’s Leg decline with the aim of establishing an underground drilling position to test extensions of the Frog’s Leg vein structure well below the base of the deepest workings. Drilling at Perimeter and Scottish Archer targets, north of the Mungari processing plant, has returned significant mineralisation. During FY19, drilling is planned to delineate the full scope of the mineralised system at Perimeter and to test the depth and strike extents of the high-grade zone at Scottish Archer. Key Business Metrics 30 June 2018 30 June 2017 Change % Change Operating cash flow ($'000) Sustaining capital ($'000) Major capital ($'000) Total capital ($'000) Net mine cash flow ($'000) Gold production (oz) All-in Sustaining Cost ($/oz) All-in Cost ($/oz) 70,240 (9,935) (36,611) (46,546) 23,694 118,498 1,181 1,604 95,958 (14,566) (22,161) (36,727) 59,231 143,820 1,143 1,371 (25,718) 4,631 (14,450) (9,819) (35,537) (25,322) 38 233 (27)% (32)% 65% 27% (60)% (18)% (3)% (17)% 72 72 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Mining Operations (continued) Mt Carlton Mt Carlton produced 112,479oz, exceeding guidance of 100,000 - 110,000 ozs. Unit cash operating costs of $299/oz and AISC of $535/oz were both substantially below the bottom end of guidance of A$420 - $470/oz and A$680 - $730/oz respectively. The production and cash cost performance over and above plan was predominantly due to higher grades in bonanza zones of the pit outperforming the resource model. Mining during the year was focussed on the western end of Stage 3a of the V2 pit with a shift in focus to the Stage 3b cutback in the later stages. This placed emphasis on Stage 3b ore, and the new Southern ramp construction with anticipation that ore from Stage 3b North (75RL) will be delivered in early FY19. Capital expenditure for the year of $30.9 million is largely attributed to Stage 3b capital waste of $21.0 million combined with the purchase of a new excavator and the start of Stage 5 Tailings Storage Facility lift. The Mine Extension Feasibility Study is ongoing and due for completion and decision in the first half of FY19. Key Business Metrics 30 June 2018 30 June 2017 Change % Change Operating cash flow ($'000) Sustaining capital ($'000) Major capital ($'000) Total capital ($'000) Net mine cash flow ($'000) Gold production (oz) All-in Sustaining Cost ($/oz) All-in Cost ($/oz) 139,598 (9,866) (21,009) (30,875) 108,723 112,479 535 735 120,339 (15,304) (13,887) (29,191) 91,148 105,024 622 762 19,259 5,438 (7,122) (1,684) 17,575 7,455 (87) (27) 16% (36)% 51% 6% 19% 7% (14)% (4)% 73 73 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Mining Operations (continued) Mt Rawdon Mt Rawdon achieved total gold production of 105,053oz at a unit cash operating cost of A$693/oz and an AISC of A$884/oz. Production was at the lower end of guidance of 105,000 - 115,000oz, while cash costs and AISC were within guidance of $670 - $720/oz and $850 - $900/oz respectively. Capital expenditure for the year was $19.5 million with a large amount of this attributable to capital waste mined in the Stage 4 cutback. Mining activities during the year were focussed on the progression of the Stage 4 cutback and sourcing ore from the lower benches of the open pit. In the early FY19 the plant will predominantly process stockpiles as mining activities focus on waste material in Stage 4 and installing additional ground support in the western area of the pit. Key Business Metrics 30 June 2018 30 June 2017 Change % Change Operating cash flow ($'000) Sustaining capital ($'000) Major capital ($'000) Total capital ($'000) Net mine cash flow ($'000) Gold production (oz) All-in Sustaining Cost ($/oz) All-in Cost ($/oz) 69,198 (8,574) (10,924) (19,498) 49,700 105,053 884 987 69,035 (14,242) (19,071) (33,313) 35,722 101,331 873 1,065 163 5,668 8,147 13,815 13,978 3,722 11 (78) % (40)% (43)% (41)% 39% 4% (1)% 7% 74 74 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Mining Operations (continued) Cracow Cracow exceeded guidance of 85,000 - 90,000oz, producing 90,357oz at a unit cash operating cost of $762/oz and AISC of $1,181/oz. Cash costs were below the lower end of the guidance of $810 - $860/oz while AISC was within the guidance range of $1,150 - $1,200/oz. A total of 537kt of ore was mined at an average grade of 5.51g/t during the year with primary ore sources being the Kilkenny, Coronation and Griffin ore bodies. Capital expenditure for the year was A$34.0 million comprising mainly of capital works to upgrade the airstrip servicing the site, mobile fleet replacement and refurbishment, and mine development. Capital investment at the mine increased in FY18 and will be similar in FY19 due to the age of the mine and the successful increase in mine life over the last 18-24 months. Resource definition and exploration drill programs at Cracow during the year returned strong results from the Killarney structure where mineralisation is continuing to be defined to the south of the current resource. Key Business Metrics 30 June 2018 30 June 2017 Change % Change Operating cash flow ($'000) Sustaining capital ($'000) Major capital ($'000) Total capital ($'000) Net mine cash flow ($'000) Gold production (oz) All-in Sustaining Cost ($/oz) All-in Cost ($/oz) 70,771 (19,601) (14,451) (34,052) 36,719 90,357 1,181 1,269 72,690 (17,462) (14,168) (31,630) 41,060 89,496 1,123 1,208 (1,919) (2,139) (283) (2,422) (4,341) 861 58 61 (3)% 12% 2% 8% (11)% 1% (5)% (5)% 75 75 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Mining Operations (continued) Ernest Henry Attributable production from Ernest Henry was 95,209oz of gold exceeding guidance of 85,000 - 90,000oz, 66,750oz of silver and 21,011t of copper at a negative unit cash operating cost of $(921)/oz and a negative AISC of $(641)/oz after copper and silver by-product credit of (1,984)/oz. Cash costs and AISC were substantially below FY18 guidance of $(500) - $(300)/oz and $(200) - $(150)/oz respectively. Ore mined was 6,819kt at an average grade of 0.56g/t gold and 1.12% copper. Underground development was 6,781m. Ore processed was 6,759kt at an average grade of 0.56g/t gold and 1.12% copper. Gold recovery and copper recovery of 80.3% and 96.3% respectively were achieved. Key Business Metrics 30 June 2018 30 June 2017 (i) Change % Change Operating cash flow ($'000) Sustaining capital ($'000) Major capital ($'000) Total capital ($'000) Net mine cash flow ($'000) Gold production (oz) Copper production (t) All-in Sustaining Cost ($/oz) All-in Cost ($/oz) 230,860 (11,618) - (11,618) 219,242 95,209 21,011 (641) (641) 87,851 (6,066) - (6,066) 81,785 60,259 13,306 (361) (361) 143,009 (5,552) - (5,552) 137,457 34,950 7,705 (280) (280) 163% 92% -% 92% 168% 58% 58% 78% 78% (i) (ii) Results for 2017 were for 8 months from 1 November 2016. Ernest Henry mining and processing statistics are in 100% terms while costs represent Evolution's cost and not solely the cost of Ernest Henry's operation. 76 76 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Mining Operations (continued) Edna May The Edna May Operation was sold on 3 October 2017 to Ramelius Operations Pty Ltd for total proceeds of up to $90.0 million. The consideration comprised of a A$40.0 million up-front cash payment and contingent consideration in the form of either a cash royalty, Ramelius shares, or combination of both up to $50.0 million. No profit or loss has been recognised on disposal with the value of the consideration, including the net present value of the contingent consideration, closely matching the carrying value of the Edna May Operation at date of disposal. No contingent consideration has been received to date. The value of the contingent consideration will be assessed at each reporting period. During the period that Edna May was still under Evolution ownership, Edna May produced 21,639oz of gold at an AISC of $1,588/oz. Financial Performance Profit or Loss Revenue for the year ended 30 June 2018 increased by 4% to $1,540.4 million (30 June 2017: $1,479.9 million). This is largely due to a full 12 months’ sales contribution from Ernest Henry totalling $347.4 million (30 June 2017: $163.3 million). This is comprised of $188.8 million for copper and silver revenue and $158.6 million for gold revenue (30 June 2017: $102.9 million for 8 months of copper and silver revenue and $60.4 million for 5 months of gold revenue). The achieved copper price increased 17% to $8,923/t which favourably impacted revenue in the year. This was partly offset by the impact of the disposal of the Edna May Operation which resulted in a decrease of $79.7 million on the prior year. Total gold sold equalled 798,101oz which included deliveries into the hedge book of 205,915oz at an average price of $1,564/oz (30 June 2017: 248,493oz, $1,584/oz). The remaining 592,186oz were sold at spot price achieving an average price of $1,673/oz (30 June 2017: 568,830oz, $1,666/oz). The Group's hedge book totals 250,000oz as at 30 June 2018 at an average price of $1,711/oz with deliveries through to June 2020. Operating costs (excluding depreciation, amortisation and fair value adjustments of $435.6 million) decreased to $705.5 million (30 June 2017: $719.7 million) largely as a result of the sale of Edna May during the year which resulted in a decrease of $61.5 million on the prior year. This was offset by the inclusion of 12 months’ worth of Ernest Henry’s results, which accounted for an increase of $52.3 million in operating costs (30 June 2018: $116.4 million; 30 June 2017: $64.1 million). The operating costs for the five existing mine sites remained consistent, with an increase of only 2% on the prior year to $554.6 million. An independent valuation of the Cowal open pit and Mungari open pit and underground has been completed during the financial year. A balance sheet reclassification of $90.5 million has been recorded (from Property, Plant and Equipment to Mine Development) with a resulting $2.9 million of additional mine development amortised during this financial year. As a consequence of this valuation, a reduction in income tax expense for the year of $22.7 million has been recorded of which $9.4 million has been excluded from underlying profit as it relates to tax depreciation that will be deducted in future years. The Group posted a 21% increase in statutory profit after tax to $263.4 million (30 June 2017: $217.6 million) driven by increased sales, decreased costs per ounce and decreased transaction costs and exploration expense. Underlying profit after tax was $250.8 million (30 June 2017: $206.6 million). Balance Sheet Total assets increased 4% during the year to $3,056.3 million (30 June 2017: $2,945.5 million). An increase in cash of $285.8 million since 30 June 2017 to $323.2 million combined with the recognition of deferred consideration on the Edna May disposal of $34.4m has been offset by the disposal of total assets attributable to Edna May of $114.0 million as well as a reduction in the net carrying amount of property, plant and equipment and producing mines due to a depreciation charge of $405.2 million outstripping capital additions of $323.8 million. Non-current inventories increased by $37.6 million to $38.5 million and include ore stockpiles at Mt Rawdon ($16.9 million) and Cowal ($21.6 million) not expected to be processed within 12 months. The Cowal ore stockpile of $13.3 million at the beginning of the year has been reclassified from Mine Development. 77 77 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Financial Performance (continued) Balance Sheet (continued) Total liabilities for the Group decreased to $767.9 million at 30 June 2018, a decrease of $49.3 million, or 6% on the prior year. The decrease is in part attributable to the $40.0 million final repayment of the Senior Secured Term Loan (“Facility B”) established for the Cowal acquisition. The remaining decrease is due to the disposal of liabilities of $37.6 million related to the sale of Edna May offset by a $11.1 million increase in the current tax liability to $47.3 million at 30 June 2018. The Group ended the year with a cash balance of $323.2 million and available credit of $350.0 million in Facility A as part of its Senior Secured Syndicated Revolving and Term Facility. Cash Flow Total cash inflows for the year amounted to $285.8 million (30 June 2017: inflow $20.2 million). Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net movement in cash Cash at the beginning of the year Effects of exchange rate changes on cash Cash at the end of the year 30 June 2018 $'000 30 June 2017 $'000 Change $'000 % Change 714,166 (270,284) (158,087) 285,795 37,385 46 323,226 650,795 (1,120,794) 490,156 20,157 17,295 (67) 37,385 63,371 850,510 (648,243) 265,638 20,090 113 285,841 10% (76)% (132)% 1,318% 116% (169)% 765% Net cash outflows from investment activities were $270.3 million, an $850.5 million decrease (30 June 2017: $1,120.8 million) in the most part attributable to the prior year payments for the acquisition of the economic interest in Ernest Henry Copper-Gold Operation of $884.0 million (including transaction fees) and receipt of $41.9 million on the sale of Pajingo. Capital investments for the year include property, plant and equipment of $116.1 million and mine development and exploration of $191.9 million. Net cash outflows from financing activities were $158.1 million, an increase of $648.2 million (30 June 2017: inflow $490.2 million). Financing cash flows for the year included the repayment of $40.0 million on the Senior Secured Term Loan and dividend payments of $109.9 million offsetting the $408.8 million in equity raised in 2017. Taxation During the year, the Group made its first income tax payment of $36.2 million related to the 30 June 2017 financial year and recognised an income tax expense of $75.5 million (30 June 2017: $19.7 million). On the balance sheet, the Company recognised a current tax liability of $47.3 million (30 June 2017: $36.2 million) and a deferred tax asset of $0.4 million (30 June 2017: $16.4 million). Income tax expense for the year has been reduced by $26.7 million due to the recognition of tax losses and temporary differences as an asset. This includes $22.7 million as a consequence of an independent valuation of the Cowal open pit and Mungari open pit and underground that was completed during the financial year. The tax payments made in respect of the 30 June 2017 financial year combined with tax instalments paid over the course of the 30 June 2018 financial year have enabled the declaration of fully franked interim and final dividends. Capital Expenditure Capital expenditure for the year totalled $271.9 million (30 June 2017: $245.0 million). This consisted of sustaining capital, including near mine exploration and resource definition of $100.9 million (30 June 2017: $116.6 million) and mine development of $171.0 million (30 June 2017: $128.4 million). The main capital projects included the Stage H and Float Tails (Dual) Leach projects ($84.6 million) at Cowal, Cracow underground mine development ($14.4 million), Mt Rawdon capital waste stripping ($10.9 million) and Mungari underground development ($8.9 million). 78 78 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Financial Performance (continued) Financing Total finance costs for the year were $24.8 million (30 June 2017: $35.2 million), a decrease of 30%. Included in total finance costs are interest expense of $20.5 million (30 June 2017: $24.2 million), amortisation of debt establishment costs of $0.7 million (30 June 2017: $7.4 million) and discount unwinding on mine rehabilitation liabilities of $3.6 million (30 June 2017: $3.3 million). In September 2017, the Group repaid the outstanding balance of $40.0 million on the Senior Secured Term Loan ("Facility B") in anticipation of the up-front cash payment to be received on the sale of the Edna May Operation. The Senior Secured Revolving Loan ("Facility A") remained undrawn during the year. In March 2018, the Group successfully renewed the Senior Secured Revolving Loan (“Facility A”) and the Performance Bond Facility (“Facility C”) through until July 2021 for $350.0 million and $175.0 million respectively (previously $300.0 million and $155.0 million respectively). The expiry on the Senior Secured Term Loan (“Facility D”) remains unchanged at October 2021. The renewal of the debt facilities has secured a saving of approximately $6 million over the term of the loans compared to the previous pricing. The repayment periods and the outstanding balances as at 30 June 2018 on each facility are set out below: Facility Senior Secured Revolving Loan - Facility A ($350.0 million) Performance Bond Facility - Facility C Senior Secured Term Loan - Facility D Material business risks Term date Outstanding balance $ nil $132 million $395 million 31 July 2021 31 July 2021 15 October 2021 The Group prepares its business plans using estimates of production and financial performance based on a range of assumptions and forecasts. There is uncertainty in these assumptions and forecasts, and risk that variation from them could result in actual performance being different to expected outcomes. The uncertainties arise from a range of factors, including the nature of the mining industry and general economic factors. The material business risks faced by the Group that may have an impact on the operating and financial prospects of the Group as at 30 June 2018 are: Fluctuations in the gold price and Australian dollar The Group’s revenues are exposed to fluctuations in the gold, silver and copper prices and the Australian dollar. Volatility in the gold, silver and copper prices and Australian dollar creates revenue uncertainty and requires careful management of business performance to ensure that operating cash margins are maintained should the Australian dollar price fall. Declining gold, silver and copper prices can also impact operations by requiring a reassessment of the feasibility of a particular exploration or development project. Even if a project is ultimately determined to be economically viable, the need to conduct such a reassessment could cause substantial delays and/or may interrupt operations, which may have a material adverse effect on our results of operations and financial condition. Mineral Resources and Ore Reserves The Group’s Mineral Resources and Ore Reserves are estimates, and no assurance can be given that the estimated reserves and resources are accurate or that the indicated level of gold, silver, copper or any other mineral will be produced. Such estimates are, in large part, based on interpretations of geological data obtained from drill holes and other sampling techniques. Actual mineralisation or geological conditions may be different from those predicted. No assurance can be given that any part or all of the Group’s Mineral Resources constitute or will be converted into Ore Reserves. Market price fluctuations of gold, silver and copper as well as increased production and capital costs may render the Group’s Ore Reserves unprofitable to develop at a particular site or sites for periods of time or may render Ore Reserves containing relatively lower grade mineralisation uneconomic. Estimated reserves may have to be re-estimated based on actual production experience. Any of these factors may require the Group to reduce its Mineral Resources and Ore Reserves, which could have a negative impact on the Group’s financial results. 79 79 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Material business risks (continued) Replacement of depleted reserves The Group must continually replace reserves depleted by production to maintain production levels over the long term. Reserves can be replaced by expanding known ore bodies, locating new deposits or making acquisitions. Exploration is highly speculative in nature. The Group’s exploration projects involve many risks and are frequently unsuccessful. Once a site with mineralisation is discovered, it may take several years from the initial phases of drilling until production is possible. As a result, there is no assurance that current or future exploration programs will be successful. There is a risk that depletion of reserves will not be offset by discoveries or acquisitions or that divestitures of assets will lead to a lower reserve base. The mineral base of the Group may decline if reserves are mined without adequate replacement and the Group may not be able to sustain production beyond the current mine lives, based on current production rates. Mining risks and insurance risks The mining industry is subject to significant risks and hazards, including environmental hazards, industrial accidents, unusual or unexpected geological conditions, unavailability of materials and equipment, pit wall failures, rock bursts, seismic events, cave-ins, and weather conditions (including flooding and bush fires), most of which are beyond the Group’s control. These risks and hazards could result in significant costs or delays that could have a material adverse effect on the Group’s financial performance, liquidity and results of operation. The Group maintains insurance to cover the most common of these risks and hazards. The insurance is maintained in amounts that are considered reasonable depending on the circumstances surrounding each identified risk. However, property, liability and other insurance may not provide sufficient coverage for losses related to these or other risks or hazards. Production and cost estimates The Group prepares estimates of future production, cash costs and capital costs of production for its operations. No assurance can be given that such estimates will be achieved. Failure to achieve production or cost estimates or material increases in costs could have an adverse impact on the Group’s future cash flows, profitability, results of operations and financial condition. The Group’s actual production and costs may vary from estimates for a variety of reasons, including: actual ore mined varying from estimates of grade, tonnage, dilution and metallurgical and other characteristics; short-term operating factors relating to the ore reserves, such as the need for sequential development of ore bodies and the processing of new or different ore grades; revisions to mine plans; risks and hazards associated with mining; natural phenomena such as inclement weather conditions, water availability and floods; and unexpected labour shortages or strikes. Costs of production may also be affected by a variety of factors including: changing waste-to-ore ratios, ore grade metallurgy, labour costs, cost of commodities, general inflationary pressures and currency exchange rates. Environmental, health and safety, and permits The Group’s mining and processing operations and exploration activities are subject to extensive laws and regulations governing the protection of the environment, waste disposal, worker safety, mine development and protection of endangered and other special status species. The Group’s ability to obtain permits and approvals and to successfully operate may be adversely impacted by real or perceived detrimental events associated with the Group’s activities or those of other mining companies affecting the environment, human health and safety or the surrounding communities. Delays in obtaining or failure to obtain government permits and approvals may adversely affect the Group’s operations, including its ability to continue operations. While the Group has implemented extensive health, safety and community initiatives at its sites to ensure the health and safety of its employees, contractors and members of the community affected by its operations, there is no guarantee that such measures will eliminate the occurrence of accidents or other incidents which may result in personal injuries or damage to property, and in certain instances such occurrences could give rise to regulatory fines and/or civil liability. 80 80 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Operating and Financial Review (continued) Material business risks (continued) Community relations The Group has an established community relations function, both at a Group level and at each of its operations. The Group function has developed a community engagement framework, including a set of principles, policies and procedures designed to provide a structured and consistent approach to community activities across our sites whilst recognising that, fundamentally, Community Relations is about people connecting with people. The Group recognises that a failure to appropriately manage local community stakeholder expectations may lead to dissatisfactions which have the potential to disrupt production and exploration activities. Risk management The Group manages the risks listed above, and other day-to-day risks through an established management framework which conforms to Australian and international standards and guidance. The Group’s risk reporting and control mechanisms are designed to ensure strategic, operational, legal, financial, reputational and other risks are identified, assessed and appropriately managed. These are reviewed by the Risk Committee throughout the year. The financial reporting and control mechanisms are reviewed during the year by management, the internal audit process, the Audit Committee and the external auditors. The Group has policies in place to manage risk in the areas of Health and Safety, Environment and Equal Employment Opportunity. The Leadership Team, the Risk Committee and the Board regularly review the risk portfolio of the business and the effectiveness of the Group’s management of those risks. Dividends In August 2017, the Directors approved a change to the dividend policy of whenever possible paying a dividend equivalent to 50% of the Group's after tax earnings. The change was effective immediately and was applied to the final dividend for 2017 and interim dividend for 2018. This policy remains consistent at 30 June 2018. Dividends will be rounded to the nearest half-cent. The Board has confirmed that Evolution is in a sound position to meet its commitment under the new policy to pay a final fully franked dividend for the current period of 4 cents per share, totalling $67.7 million. Evolution shares will trade excluding entitlement to the dividend on 28 August 2018, with the record date being 29 August 2018 and payment date of 28 September 2018. The Dividend Reinvestment Plan ("DRP") remains suspended. Significant changes in the state of affairs There were no significant changes in the nature of the activities of the Group during the period, other than those included in the Key Highlights. Further information on likely developments in the operations of the Group and the expected results of operations have not been included in this Annual Financial Report because the Directors believe it would be likely to result in unreasonable prejudice to the Group. Events occurring after the reporting period No matter or circumstance has occurred subsequent to the year end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or state of affairs of the Group or economic entity in subsequent financial years except for the following matters: • On 18 July, the Company reached an agreement to terminate Norton Gold Field’s right to mine and process ore from the Castle Hill deposit. This provides Evolution with full ownership and unfettered access to the deposit located 25km from the Mungari processing facility. Castle Hill is estimated to contain Ore Reserves of 236,000oz which will provide a material extension to the operating life at Mungari. Evolution will pay an initial up-front cash payment of $12 million (paid 31 July 2018), a further $3 million six months after completion of the transaction and a 2% net smelter royalty over the first 38,000oz of gold production from certain tenements within the Castle Hill deposit area. 81 81 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Events occurring after the reporting period (continued) • On 26 July, it was announced that La Mancha had undertaken a block trade monetisation of shares reducing its direct interest in Evolution to 9.6%. In accordance with the terms of the Share Sale Agreement signed between Evolution and La Mancha in April 2015, La Mancha had the right to nominate Directors to the Board of Evolution provided that it held more than 10.0% of the shares on issue in Evolution. La Mancha's nominee Directors, Mr Naguib Sawiris, Mr Sebastian de Montessus and their Alternate Director, Mr Andrew Wray resigned from the Board of Directors of Evolution effective 1 August 2018. Environmental regulation and performance The Executive Chairman reports to the Board on all significant safety and environmental incidents. The Board also has a Risk Committee which has oversight of the safety, health and environmental performance of the Group and meets at least two times per year. The Directors are not aware of any environmental incidents occurring during the year ended 30 June 2018 which would have a materially adverse impact on the overall business of the Group. The operations of the Group are subject to environmental regulation under the jurisdiction of the countries in which those operations are conducted namely in Australia. Each mining operation is subject to particular environmental regulation specific to their activities as part of their operating licence or environmental approvals. Each of our sites are required to also manage their environmental obligations in accordance with our corporate environmental policies and standards. The environmental laws and regulations that cover each of our sites, combined with our policies and standards, address the potential impact of the Group's activities in relation to water and air quality, noise, land disturbance, waste and tailings management, and the potential impact upon flora and fauna. The Group has a uniform internal reporting system across all sites. All environmental incidents, including breaches of any regulation or law are assessed according to their actual or potential environmental consequence. Given levels of environmental incidents are tracked based on factors such as spill volume, incident location (onsite or offsite) and potential or actual environmental impacts. These levels include: I (insignificant), II (minor), III (moderate), IV (major), V (catastrophic). Across the five Evolution Mining Sites, excluding government reporting for vehicular and non-vehicular native fauna deaths, the Level III reports for the past two years have been: Number of Level III incidents 2018 8 2017 9 Incidents were notified to the relevant government authority and the relevant agreed action was taken. There have been no Level IV or V incidents. 82 82 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Information on Directors The following information is current as at the date of this report. Please refer to the Remuneration Report section (e) for details of shareholdings, options and rights. Jacob (Jake) Klein, BCom Hons, ACA, Executive Chairman Mr Klein was appointed as Executive Chairman in October 2011, following the merger of Conquest Mining Limited and Catalpa Resources Limited. Previously he served as the Executive Chairman of Conquest Mining. Prior to that, Mr Klein was President and CEO of Sino Gold Mining Limited, where he managed the development of that company into the largest foreign participant in the Chinese gold industry. Sino Gold was listed on the ASX in 2002 with a market capitalisation of A$100 million and was purchased by Eldorado Gold Corporation in late 2009 for over A$2 billion. It became an ASX/S&P 100 Company, operating two award-winning gold mines and engaging over 2,000 employees and contractors in China. Prior to joining Sino Gold (and its predecessor) in 1995, Mr Klein was employed at Macquarie Bank and PricewaterhouseCoopers. Mr Klein was a Non-Executive Director of the Lynas Corporation Limited from August 2004 to May 2017, a company with operations in Australia and Malaysia and of OceanaGold Corporation from December 2009 to July 2014 a company with operations in the Philippines, USA and New Zealand. Lawrence (Lawrie) Conway B Bus, CPA, GAICD, Finance Director and Chief Financial Officer Mr Conway was appointed Finance Director and Chief Financial Officer of Evolution Mining Limited with effect from 1 August 2014 (previously a Non-Executive Director). Mr Conway has more than 28 years’ experience in the resources sector across a diverse range of commercial, financial and operational activities. He has held a mix of corporate, operational and commercial roles within Australia, Papua New Guinea and Chile with Newcrest and prior to that with BHP Billiton. He most recently held the position of Executive General Manager – Commercial and West Africa with Newcrest Mining where he was responsible for Newcrest's group Supply and Logistics, Marketing, Information Technology and Laboratory functions as well as Newcrest's business in West Africa. Mr Conway is a Non-Executive Director of Aurelia Metals Ltd (appointed in June 2017). James (Jim) Askew, BEng (Mining), MEngSc, FAusIMM, MCIMM, MSME (AIME), MAICD, Non-Executive Director Mr Askew is a mining engineer with more than 40 years’ broad international experience as a Director and Chief Executive Officer for a wide range of Australian and international publicly listed mining, mining finance and other mining related companies. Mr Askew has served on the boards of numerous mining and mining services companies, which currently include OceanaGold Limited (Chairman since November 2006), a company with operations in the Philippines, USA and New Zealand; Syrah Resources Limited (Chairman since October 2014), a company with operations in Mozambique and in the USA; and Endeavour Mining Corporation (Non-Executive Director since July 2017), a company with operations in Cote d’Ivoire, Mali and Burkina Faso. Mr Askew is a member of the Risk Committee and Member of the Nomination and Remuneration Committee. Within the last 3 years Mr Askew has been a Non-Executive Director of Nevada Copper Limited and Asian Mineral Resources Ltd. 83 83 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Information on Directors (continued) Graham Freestone, BEc (Hons), Non-Executive Director Mr Freestone has more than 45 years’ experience in the petroleum and natural resources industry. He has a broad finance, corporate and commercial background obtained in Australia and internationally through senior finance positions with the Shell Group, Acacia Resources Limited and AngloGold Ashanti Limited. Mr Freestone was the Chief Financial Officer and Company Secretary of Acacia Resources Limited from 1994 until 2001. From 2001 to 2009 he was a Non-Executive director of Lion Selection Limited, and from 2009 to 2011 he was a Non-Executive director of Catalpa Resources Limited, and Chaired their Audit Committees during that period. Mr Freestone is a Non-Executive Director of Kasbah Resources Limited (appointed February 2017) a company with a tin project in Morocco, and Chairs its Remuneration and Audit Committees. Mr Freestone was Chair of the Audit Committee from 2011 until June 2018 and remains a member of the Audit Committee. Subsequent to year end, Mr. Freestone stepped down from the Risk Committee and was appointed as a member of the Nomitation and Remuneration Committee. Colin (Cobb) Johnstone, BEng (Mining), Lead Independent Director Mr Johnstone is a mining engineer with over 30 years' experience in the resources sector. He has served as General Manager at some of Australia's largest mines including the Kalgoorlie Super Pit in Western Australia, the Olympic Dam Mine in South Australia and the Northparkes Mine in New South Wales. He has extensive international experience including Canada, China, Africa and South America. Mr Johnstone was Chief Operating Officer at Equinox Minerals Limited, until the acquisition by Barrick Gold Corporation in 2011. Prior to that Mr Johnstone was Chief Operating Officer of Sino Gold Mining Limited, where he oversaw the development and operation of gold mines in China. Mr Johnstone is Chairman of Aurelia Metals Ltd (since November 2016). Mr Johnstone is the Lead Independent Director, Chair of the Risk Committee, and a member of the Audit Committee. Mr Johnstone was a former Non-Executive Director of Magnis Resources Ltd; Neometals Ltd (Reed Resources Ltd); and Metallum Ltd. Thomas (Tommy) McKeith, BSc (Hons), GradDip Eng (Mining), MBA, Non-Executive Director Mr McKeith is a geologist with 30 years' experience in various mine geology, exploration and business development roles. He was formerly Executive Vice President (Growth and International Projects) for Gold Fields Limited, where he was responsible for global greenfields exploration and project development. Mr McKeith was also Chief Executive Officer of Troy Resources Limited and has held Non-Executive Director roles at Sino Gold Limited, Avoca Resources Limited and is currently the Non-Executive Chairman of Prodigy Gold NL. Mr McKeith is the Chair of the Nomination and Remuneration Committee. Subsequent to year end, Mr. McKeith stepped down from the Audit Committee and was appointed as a member of the Risk Committee. Andrea Hall, BCom, FCA, M. App Fin, GAICD, Non-Executive Director Ms Hall is a Chartered Accountant with more than 30 years’ experience in the financial services industry in roles involved in internal audit, risk management, corporate and operational governance, external audit, financial management and strategic planning. Prior to retiring from KPMG in 2012, Ms Hall was a Perth-based partner within KPMG’s Risk Consulting Services in industries including mining, mining services,transport, healthcare, insurance, property and government. Ms Hall is currently a Non-Executive Director and Chair of the Audit and Risk Committee at ASX-listed Pioneer Credit Limited and Automotive Holdings Group Limited. Ms Hall is also a Non-Executive Director of Insurance Commission of Western Australia and the Fremantle Football Club. Ms Hall became Chair of the Audit Committee in June 2018 and was a member until this date. 84 84 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Company Secretary Evan Elstein, BCom (Accounting and Finance), ACA, FGIA, FCIS Mr Elstein was appointed as the Company Secretary and Vice President for Information Technology in October 2011 following the merger of Conquest Mining Limited and Catalpa Resources Limited. Previously he served as Company Secretary of Conquest Mining. He is a Chartered Accountant, Chartered Secretary, and a member of Chartered Accountants Australia and New Zealand, the Institute of Chartered Secretaries and Administrators and the Governance Institute of Australia. Mr Elstein has over 25 years' experience in senior financial, commercial and technology roles, where his responsibilities have included the roll out of IT projects and services, business improvement initiatives and merger and acquisition activities. He has held senior positions with IT consulting companies in Australia, and previously served as the Chief Financial Officer and Company Secretary of Hartec Limited. Prior to that, Mr Elstein held senior finance and operations positions at Dimension Data in South Africa. Meetings of directors The numbers of meetings of the Company's Board of Directors and of each Board Committee held during the year ended 30 June 2018, and the numbers of meetings attended by each Director were: Jacob (Jake) Klein Lawrence (Lawrie) Conway James (Jim) Askew Graham Freestone Colin (Cobb) Johnstone Thomas (Tommy) McKeith Andrea Hall (i) Naguib Sawiris (ii) Sebastien de Montessus (ii) Vincent Benoit (iii) Amr El Adawy (iii) Andrew Wray (iv) Board Audit Risk Management Nomination and Meetings of committees A 6 6 6 6 6 6 5 - 3 - - 2 B 6 6 6 6 6 6 5 6 6 - - 2 A - - - 4 4 4 3 - - - - - B - - - 4 4 4 3 - - - - - A - - 2 2 2 - - - - - - - Remuneration B - - 3 - - 3 - - 3 - - 1 A - - 3 - - 3 - - 1 - - 1 B - - 2 2 2 - - - - - - - A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee during the year (i) (ii) (iii) (iv) Andrea Hall was appointed into her role on 1 October 2017. Naguib Sawiris and Sebastien de Montessus resigned from their roles effective 1 August 2018. Vincent Benoit and Amr El Adawy resigned from their roles effective 19 April 2018. Andrew Wray was appointed to his role on 19 April 2018 and resigned on 1 August 2018. 85 85 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) This Remuneration Report forms part of the Directors' Report for the year ended 30 June 2018. This report contains details of the remuneration paid to the Directors and Key Management Personnel ("KMP") and is aligned to the Company's overall remuneration strategy and framework. The Company's remuneration philosophy and strategy is designed to ensure that the level and composition of remuneration is competitive, reasonable and appropriate for the results delivered and to attract and retain appropriately experienced Directors and employees. This remuneration report is presented under the following sections: (a) (b) (c) (d) (e) (f) (g) Remuneration Overview Remuneration Governance Remuneration Strategy and Framework Executive Remuneration Outcomes Non-Executive Director Remuneration Other Remuneration Information Summary of Key Terms (a) Remuneration Overview (i) Key Management Personnel The executive remuneration framework covered in this report includes the Executive Directors (Executive Chairman and Chief Financial Officer) and those executives considered to be Key Management Personnel (“KMP”) named below: Position Executive Chairman Name Jacob (Jake) Klein Lawrence (Lawrie) Conway Finance Director and Chief Financial Officer Aaron Colleran Paul Eagle Evan Elstein Bob Fulker (i) Glen Masterman Mark Le Messurier (ii) Vice President Business Development & Investor Relations Vice President People & Culture Company Secretary & Vice President Information Technology Chief Operating Officer Vice President Discovery & Chief Geologist Chief Operating Officer (i) (ii) Bob Fulker was appointed into his role on 12 February 2018. Mark Le Messurier resigned from his role effective 1 January 2018. (ii) Key Remuneration Outcomes Key remuneration outcomes for the 2018 financial year are summarised in the table below: Remuneration STIP Outcomes LTIP Outcomes KMP Remuneration NED Remuneration Description The average STIP outcome for the KMP was 90.3% of the maximum opportunity based on the assessment of business and personal measures. This reflects the Company's outstanding operating and financial performance, and improvement in the upgrading of the asset portfolio during the year. 69.3 % of the Performance Rights awarded during the 2016 financial year and tested as at 30 June 2018 vested on 16 August 2018. This reflects the Company's continued strong performance during the three years to 30 June 2018. The Performance Rights awarded during the 2015 financial year were tested as at 30 June 2017, with 100% of the Performance Rights meeting their performance measures and were approved by the Board on 16 August 2017 to vest. Five of the KMP received increases to their fixed remuneration during the 2018 financial year. Non-Executive Directors did not receive any increase to their fees during the year. (iii) What has changed in relation to remuneration during the 2018 financial year No key changes to the executive remuneration framework have been implemented during the 2018 financial year. 86 86 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (a) Remuneration Overview (continued) (iv) What changes are planned for remuneration in the 2019 financial year Commencing in the 2019 financial year, the Long Term Incentive Plan is to be extended down one level in the organisation. (b) Remuneration Governance The Board of Directors (“the Board”) has an established Nomination and Remuneration Committee, consisting solely of Non-Executive Directors, with the delegated responsibility to report on and make recommendations to the Board on the: • • • Appropriateness of the remuneration policies and systems, having regard to whether they are: • • • Relevant to the Company’s wider objectives and strategies; Legal and defensible; In accordance with the human resource objectives of the Company; Performance of the Executive Directors (on an annual basis) and ensure there is a process for determining key performance indicators for the ensuing period; and Remuneration of the Executive Directors, Non-Executive Directors and Key Management Personnel, in accordance with approved Board policies and processes. (c) Remuneration Strategy and Framework The executive remuneration framework has been designed to align Executive Directors and KMP objectives with shareholder and business objectives by offering a remuneration package based on key performance areas affecting the Company's overall performance. The Board believes the remuneration framework to be strategic, appropriate and effective in its ability to attract and retain KMP and to operate and manage the Company effectively. The Group's target remuneration philosophies are: • • • Total Fixed Remuneration - TFR (being salary, superannuation, plus regular allowances) positioned at the median (50th percentile) based on the industry benchmark McDonald report (an industry recognised gold and general mining remuneration benchmarking survey covering over 97 organisations within the industry); Total Annual Remuneration - TAR (TFR plus STI) at target at the 75th percentile for high performers; and Total Remuneration - TR (TAR plus LTI) at the 75th percentile, with flexibility to provide up to the 90th percentile levels for high performers and critical roles. The overarching objectives and principles of the Group’s remuneration strategy are that: • • • • • • Total remuneration for each level of the workforce is appropriate and competitive; Total remuneration comprises a competitive fixed component and a sizeable “at risk” component based on performance hurdles; Short term incentives are appropriate with hurdles that are measurable, transparent and achievable; Incentive plans are designed to motivate and incentivise for high performance and delivery on organisational objectives; The corporate long term incentives are focussed on shareholder value; and The principles and integrity of the remuneration review process deliver fair and equitable outcomes. 87 87 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (c) Remuneration Strategy and Framework (continued) The following table outlines the remuneration components for all KMP for the 2018 financial year: Component Total Fixed Remuneration (TFR) Performance measure Key results areas for the role are determined based on the individual's position and key business imperatives. Short Term Incentive (STI) Long Term Incentive (LTI) Key Performance indicators are set with a mix of individual and corporate elements. The relative weighting of which is dependent on the individual employee job banding and position. For the Executive Chairman, the weighting is 70% corporate and 30% individual and for the remainder of the KMP, 60% corporate and 40% individual. For the corporate component for FY18, the measures focussed on safety, cash contribution, costs and strategic imperatives focused on delivering the Cowal projects to plan, improving the portfolio quality (including M&A and divestments; Discovery and LOM Plans), delivery of key business improvement projects, while making tangible progress with the Discovery strategy through the identification and acquisition of new projects. Performance measures agreed with the Board have a 3 year time horizon and are focussed on enhancing shareholder value. Strategic objective Remuneration is designed to attract, motivate and retain key personnel. Considerations include: • Overall Company business plan • External market conditions • Key employee value drivers • Individual employee performance • Industry benchmark data The objective is to motivate employees to achieve key annual targets focussed on safety, operations, cash contribution, and effective cost management, improving the overall quality of the asset portfolio and driving a high achievement team culture. The primary objective to deliver industry leading shareholder returns. 88 88 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (c) Remuneration Strategy and Framework (continued) The target achievement remuneration ratio mix for Executive Directors and KMP for the 2018 financial year and prior financial year is as follows: (d) Executive Remuneration Outcomes (i) Financial Performance The Group has demonstrated strong performance over the past five years. The following table breaks down the key performance indicators for the Group over this time frame: Statutory profit/(loss) for the year ($'000) Underlying profit for the year after income tax ($'000) (i) EBITDA ($'000) Basic earnings per share (cents) Dividends declared (cents per share) Share price ($) at 30 June closing 2018 263,388 250,762 795,083 15.57 7.5 3.51 2017 217,607 206,588 713,855 13.28 5.0 2.41 2016 (24,349) 134,496 607,551 (1.75) 3.0 2.33 2015 100,115 106,050 272,656 13.71 2.0 1.15 2014 50,017 50,017 207,556 7.06 2.0 0.70 (i) Refer to the Profit Overview section in the Operating and Financial Review for a reconciliation of the underlying profit for the year. 89 89 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (d) Executive Remuneration Outcomes (continued) (ii) STIP Component Participation Composition Performance conditions Performance measure The Overall Group STIP applies to site based employees at the level of Manager and all Group office employees. The Group STIP is a cash bonus, up to a maximum percentage of TFR, based on the employee job band. It is assessed and paid annually conditional upon the achievement of key company objectives and individual KPIs. For the 2018 financial year, the company objectives were focussed in the areas of safety, group cash contribution, production, costs and a strategic imperative element. Award parameters The Group STIP is currently set at between 10% and 60% of TFR for Target achievement, with a maximum of 20%-90% of TFR for Stretch achievement, depending on the employee job band. Details of the Group STIP paid to the Directors and KMP are shown in the Remuneration Table in section d(iv). The Group's performance against the STI Scorecard for FY18 is as follows: STIP Scorecard HSE SSO Frequency Rate (SSOFR) Environmental Critical Controls Compliance - top 3 Hazards (%) Profitability Group Cash Contribution ($ Target (100%) STIP Weighting Result Award 4.2 90% 270 20% 10% 20% 3.2 80% 386 30% 5% 30% FY18 STIP considerations Award outcome for the year million) Group All In Costs ($/oz sold) Discretionary 30% 40.5% 135.5% 1,140 100% 20% 30% 1,045 135% 100% Strategic Imperatives Total At the time of setting the FY18 STIP measures, the Board determined it would consider the following factors when awarding the score for the strategic imperatives measure: • Delivery to plan of the Cowal projects • Improvement in the portfolio quality (covering M&A, divestments, Discovery and LOM Plans) • Delivery of the key business improvement projects; and • Advancement in the discovery area: - Identification and acquisition of at least one new advanced project - Generate or acquire at least 3 new exploration projects at drill test or target definition stage The Board approved a discretionary score of 135.0% for the following reasons: • The Float Tails Leach project progressed to plan with commissioning ready for H1 FY19. The establishment activities for Stage H were completed ahead of schedule and under budget. The mining of Stage H finished ahead of the accelerated development plan and costs remain on budget. The steering committee reviews were undertaken every month with dashboard tracking of all projects at Cowal in place. The project team established at Cowal is highly skilled and establishing good standards for project execution. • The sale of Edna May was successfully completed. Evolution demonstrated it is a good seller, not only in terms of portfolio management, but in how we dealt with the Edna May workforce and transitioned service and processes to the new owner. • Discovery program gained good momentum throughout FY18, with 3 new early stage exploration projects added to the portfolio, including the acquisition of the Connors Arc project and 10 prospects across the Company’s operations were advanced to the next stage of exploration. • Life of Mines have improved with focus being applied towards further improvements in FY19. • During FY18, $28.3 million of value beyond budget was achieved with all operations contributing to the result through improvements in productivity and commercial contract terms and efficiency gains. 90 90 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (d) Executive Remuneration Outcomes (continued) (ii) STIP (continued) Component Performance measure 2018 Total STIP Granted ($) % of Maximum Entitlement Granted % of Maximum Entitlement Forfeited Directors Jacob Klein Lawrie Conway Key Management Personnel Aaron Colleran Paul Eagle Evan Elstein Bob Fulker (i) Glen Masterman Mark Le Messurier (ii) 657,000 480,000 375,000 300,000 310,000 170,000 350,000 150,000 90.8% 88.9% 89.7% 87.8% 85.1% 86.3% 91.5% 74.2% 9.2% 11.1% 10.3% 12.2% 14.9% 13.7% 8.5% 25.8% (i) (ii) Bob Fulker was appointed into his role on 12 February 2018. His STIP is pro-rated for his period of employment. Mark Le Messurier resigned from his role effective 1 January 2018. His STIP is pro-rated for his period of employment. (iii) LTIP Component Participation Performance period Composition Performance conditions Performance measure The Group LTIP applies to employees at the level of Manager and above across the Group. Up to 3 years. The Company has one long term incentive plan currently in operation, the Employee Share Option and Performance Rights Plan (“ESOP”). The Employees and Contractors Plan (ECOP) and the Option component of the ESOP are now effectively dormant with no new options to be issued under these plans. All remaining Options either expired or were exercised during the previous financial year. The ESOP (approved by shareholders on 23 November 2010, 26 November 2014 and 23 November 2017) provides for the issuance of Performance Rights to Executive Directors and eligible employees. This LTIP was introduced for employees at the level of Manager and above, effective from 1 July 2011 and provides equity based “at risk” remuneration, up to maximum percentages, based on, and in addition to, each eligible employee’s TFR. These incentives are aimed at retaining and incentivising KMP and senior managers on a basis that is aligned with shareholder interests, and are provided via Performance Rights. The Performance Rights are issued for a specified period and each Performance Right is convertible into one ordinary share. All Performance Rights expire on the earlier of their expiry date or termination of the employee’s employment subject to Director discretion. Performance Rights do not vest until a specified period after granting and their exercise is conditional on the achievement of certain performance hurdles that are aligned with shareholder interests. There are no voting or dividend rights attached to the Performance Rights. Voting rights will attach to the ordinary shares when the Performance Rights vest. Unvested Performance Rights cannot be transferred and will not be quoted on the ASX. Award parameters Further details on each of the performance conditions laid out below are detailed in Section f(i) - 'Other Remuneration Information'. 91 91 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (d) Executive Remuneration Outcomes (continued) (iii) LTIP (continued) Component Performance Measure Performance Target Description (i) TSR Performance The Group’s relative total shareholder return (TSR) measured against the TSR for a peer Company of 20 comparator gold mining companies (Peer Group) (ii) Absolute TSR performance The Group’s absolute TSR return (iii) Growth in Growth in the Group’s Earnings per share Earnings per share (iv) Increase in ore reserves per share Increasing the ore reserves per share over a 3year period Weighting for each year from FY15 grants 25% 25% 25% 25% FY18 LTIP considerations ECOP Options Each year an assessment is made by the Directors against performance hurdles and guidelines established by the Board. In exercising their discretion under the rules, the Directors will take into account matters such as the position of the eligible person, the role they play in the Group, the nature or terms of their employment or contract and the contribution they make to the Group as a whole. At 30 June 2018 there were no Options outstanding (FY17: nil) Outstanding balance at the beginning of the year Issued during the period Exercised during the period Expired during the period Outstanding balance at the end of the year At 30 June 2018 there were no Options outstanding (FY17: nil) ESOP Options 2018 Number - - - - - Outstanding balance at the beginning of the year Issued during the period Exercised during the period Expired during the period Outstanding balance at the end of the year Outcomes for the FY15 award which vested during the year are set out as follows: 2018 Number - - - - - Award outcome for the year - ESOP Performance Rights 2017 Number 52,954 - - (52,954) - 2017 Number 5,150,390 - (4,178,661) (971,729) - Performance Target TSR Performance (i) (ii) Measure Percentile Absolute TSR performance Compound annual return (iii) Growth in Earnings per share Compound annual return FY15 Outcome % Vested 5th 53% 20% 25% 25% 25% 25% (iv) Increase in ore reserves per share Percentage increase 128% 92 92 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (d) Executive Remuneration Outcomes (continued) (iii) LTIP (continued) Component Performance Measure Outcomes for the FY16 award which will vest in August 2018 are set out as follows: Performance Target TSR Performance (i) (ii) Measure Percentile Absolute TSR performance Compound annual return (iii) Growth in Earnings per share Compound annual return (iv) Increase in ore reserves per share Percentage increase 136% The movement in Performance Rights under this plan is in the table below: FY16 Outcome % Vested 20th 42% 2% 19% 25% 0% 25% Outstanding balance at the beginning of the year Performance Rights granted (withdrawn) during the period pursuant to Retention Agreement* Performance Rights granted during the period pursuant to Transition Incentive Plan* Performance rights granted during the period Vested during the period Lapsed during the period Forfeited during the period Outstanding balance at the end of the year 2018 Number 26,278,566 2017 Number 29,429,811 - (3,750,000) - 6,586,571 (9,214,401) - (2,708,126) 20,942,610 3,375,000 6,797,540 (7,961,146) - (1,612,639) 26,278,566 *The 3,750,000 Performance Rights granted in December 2015 to Mr. Jake Klein were withdrawn pursuant to a Transition Incentive Plan (TIP) under the Retention Agreement which the Company has entered into with Mr. Klein. Under the Plan the Company granted 3,375,000 Performance Rights to Mr. Klein subject to the satisfaction of Vesting Conditions to be tested as at 16 December 2019 and were approved by shareholders at the shareholder meeting held on 21 June 2017. The table below reflects the Performance Rights granted, vested, or lapsed in each financial year: FY14 FY15 FY16 FY17 Granted Granted - TIP Vested Lapsed Forfeited Subject to vesting Testing date Testing date - TIP Vesting (%) 10,498,408 - (7,961,147) - (2,537,261) - 30/06/16 - 100% 10,804,370 - (9,214,401) - (1,589,969) - 30/06/17 - 100% 8,141,368 - - - (2,279,972) 5,861,396 30/06/18 - 69.3% 6,797,540 3,375,000 - - (1,022,779) 9,149,761 30/06/19 30/06/2020 - 16/12/19 - - FY18 Running Balance 6,586,571 42,828,257 - 3,375,000 - (17,175,548) - - (655,118) (8,085,099) 5,931,453 20,942,610 - - - 93 93 Directors' Report (continued)Evolution Mining Limited Annual Report 2018l a t o T ) i i ( s t i f e n e B r e h t O ) i ( e u l a V d e s i t r o m A 7 1 0 2 8 1 0 2 7 1 0 2 8 1 0 2 7 1 0 2 8 1 0 2 7 1 0 2 s u n o B 8 1 0 2 s t i f e n e B n o i t a u n n a r e p u S 7 1 0 2 8 1 0 2 I T L I T S t n e m y o p m E l - t s o P n o i t a r e n u m e R d e x F i l a t o T 7 1 0 2 8 1 0 2 s e e F d n a l y r a a S e s a B l e b a t y r a m m u s n o i t a r e n u m e R ) v i ( ) d e u n i t n o c ( s e m o c t u O n o i t a r e n u m e R e v i t u c e x E ) d ( ) d e u n i t n o c ( ) d e t i d u A ( t r o p e R n o i t a r e n u m e R t r o p e R ' s r o t c e r i D 94 2 7 2 , 2 3 8 , 2 8 2 8 , 1 6 4 , 1 0 4 4 , 2 3 1 4 6 5 , 5 4 1 - 5 1 8 , 1 5 1 7 8 7 , 7 3 1 0 9 6 , 3 1 1 5 6 0 , 3 2 1 0 9 8 , 3 4 6 , 4 1 6 0 , 4 7 4 , 1 3 3 6 , 2 5 1 3 3 6 , 7 6 1 1 8 7 , 3 0 1 3 3 6 , 2 7 1 3 3 6 , 7 5 1 3 3 6 , 2 3 1 3 3 6 , 2 4 1 4 1 6 , 7 5 1 , 1 8 8 6 , 3 8 0 , 1 8 2 6 , 2 3 8 7 2 6 , 8 7 9 - 4 2 2 , 8 8 7 0 3 5 , 9 4 1 , 1 8 2 6 , 1 8 8 2 4 6 , 2 3 9 1 4 6 , 6 0 6 1 0 3 , 2 8 0 , 1 4 5 4 , 9 6 9 2 1 1 , 4 0 0 , 0 1 4 8 8 , 3 0 7 , 2 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 2 5 3 , 8 6 3 7 4 7 , 1 4 5 5 9 3 , 3 7 1 - 0 3 8 , 9 3 9 , 2 5 9 8 , 6 4 6 , 4 0 0 5 , 6 7 6 , 2 0 0 0 , 2 9 7 , 2 1 3 9 , 6 5 1 8 5 8 , 8 6 1 , 1 5 8 0 3 2 4 , , 4 8 3 4 5 5 4 , 8 2 8 , 1 0 3 2 7 4 , 8 1 2 , 1 1 6 0 , 9 5 2 0 9 0 , 3 8 8 , 2 0 0 0 , 0 1 6 0 0 0 , 5 7 4 0 0 0 , 7 5 6 0 0 0 , 0 8 4 - 0 9 6 , 8 1 0 9 6 , 8 1 0 9 6 , 8 1 0 9 6 , 8 1 0 9 6 , 8 1 0 9 6 , 8 1 0 3 1 , 7 3 3 8 2 6 , 2 1 2 3 9 2 , 5 8 2 9 0 8 , 7 0 1 0 3 5 , 4 6 3 3 3 6 , 7 3 3 3 6 , 7 3 1 3 0 , 5 2 3 3 6 , 7 3 3 3 6 , 7 3 3 3 6 , 7 3 3 3 6 , 7 3 8 8 6 , 3 4 2 8 2 6 , 1 0 2 2 4 6 , 7 1 2 4 5 5 , 7 5 1 0 3 , 7 0 3 2 0 1 , 6 2 2 - - - - - - - - - - - - - - 0 0 5 , 1 9 3 0 0 0 , 5 6 2 0 0 0 , 0 0 3 - 0 0 0 , 0 0 3 0 0 0 , 5 3 3 0 0 0 , 5 7 3 0 0 0 , 0 0 3 0 0 0 , 0 1 3 0 0 0 , 0 7 1 0 0 0 , 0 5 3 0 0 0 , 0 5 1 6 1 6 , 9 1 6 1 6 , 9 1 - 7 0 0 , 1 1 - - - - 8 4 2 , 0 1 6 1 6 , 9 1 6 1 6 , 9 1 6 1 6 , 9 1 - 0 8 9 , 7 1 6 1 6 , 9 1 - - 8 4 0 , 0 2 8 4 0 , 0 2 - 2 3 8 , 6 9 7 2 , 1 1 - 1 1 4 , 0 1 8 4 0 , 0 2 8 4 0 , 0 2 8 4 0 , 0 2 4 2 0 , 0 1 8 4 0 , 0 2 4 2 0 , 0 1 4 8 1 4 8 9 , 4 8 3 5 6 6 , 0 5 7 3 1 1 , 7 6 8 5 1 1 , - , 5 2 1 3 3 1 7 7 8 7 0 1 , 0 0 0 5 9 , 5 7 3 4 0 1 , , 8 6 3 9 0 4 4 8 3 5 3 3 , 8 1 7 3 7 3 , - 5 3 4 2 6 3 , 4 8 3 0 3 4 , 2 5 9 4 1 7 , 0 0 0 5 1 1 , 1 2 7 8 1 1 , 8 1 9 1 7 , 0 0 0 5 3 1 , 9 8 5 9 0 1 , 0 0 0 5 9 , 0 0 0 5 0 1 , 2 5 9 4 4 4 , 2 5 9 9 5 3 , 2 5 9 4 8 3 , 8 6 6 5 9 1 , 2 5 9 4 0 4 , 6 7 9 4 1 2 , , 2 5 7 3 8 0 1 , l e n n o s r e P t n e m e g a n a M y e K ) v i ( s u s s e t n o M e d n e i t s a b e S e n o t s e e r F m a h a r G ) i i i ( l l a H a e r d n A e n o t s n h o J n i l o C h t i e K c M s a m o h T y a w n o C e i r w a L w e k s A s e m a J ) v i ( s i r i w a S b u g a N i i l n e K b o c a J s r o t c e r i D ) i i v ( r e i r u s s e M e L k r a M ) i v ( n a m r e t s a M n e G l ) v ( l r e k u F b o B i l n e t s E n a v E l e g a E l u a P n a r e l l o C n o r a A . D E N r o f s t h g i r n o i t n e t e r d n a , P M K r o f r a e y e h t g n i r u d d e s n e p x e s t h g i r e c n a m r o f r e p d n a s n o i t p o f o e u a v l r i a f e h t s e s i r p m o c s t h g i r d e s a b e r a h s f o l e u a v d e s i t r o m A . r e i r u s s e M e L k r a M r o f s t i f e n e b n o i t a n m r e t i d n a r e k u F b o B l r o f s u n o b n o n g s i a d n a s t s o c n o i t a c o e r e d u c n l l i s t i f e n e b r e h O t . 8 1 0 2 t s u g u A 1 e v i t c e f f e s e o r l r i e h t m o r f d e n g s e r i s u s s e t n o M e d n e i t s a b e S d n a s i r i w a S b u g a N i . 7 1 0 2 r e b o t c O 1 n o e o r l r e h o t n i i d e t n o p p a s a w l l a H a e r d n A . 6 1 0 2 t s u g u A 1 n o l e o r i s h o t n i i d e t n o p p a s a w n a m r e t s a M n e G l . 8 1 0 2 y r a u r b e F 2 1 n o e o r l i s h o t n i i d e t n o p p a s a w l r e k u F b o B 4 9 . 8 1 0 2 y r a u n a J 1 e v i t c e f f e l e o r i s h m o r f d e n g s e r i r e i r u s s e M e L k r a M ) i ( ) i i ( ) i i i ( ) v i ( ) v ( ) i v ( ) i i v ( Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (d) Executive Remuneration Outcomes (continued) (v) Executive service agreements Remuneration and other key terms of employment for the Executive Directors and KMP are formalised in the Executive Services Agreements table below: Name Term of agreement and notice period Total Fixed Remuneration Notice Period by Executive Notice period by Evolution Termination payments (i) Existing Executive Directors and Key Management Personnel Jacob Klein Executive Chairman Open 803,800 300,000 fixed Director's Fees 6 months 6 months Aaron Colleran Vice President Business Development and Investor Relations Lawrie Conway Finance Director and Chief Financial Officer Paul Eagle Vice President People and Culture Evan Elstein Company Secretary and Vice President Information Technology Bob Fulker (ii) Chief Operating Officer Glen Masterman Vice President Discovery and Chief Geologist Open 475,000 3 months 6 months Open Open 610,000 135,000 fixed Director's Fees 3 months 6 months 395,000 3 months 6 months Open 412,500 3 months 6 months Open 525,000 3 months 6 months Open 440,000 3 months 6 months 12 month Total Fixed Remuneration 6 months Total Fixed Remuneration 6 months Total Fixed Remuneration 6 months Total Fixed Remuneration 6 months Total Fixed Remuneration 6 months Total Fixed Remuneration 6 months Total Fixed Remuneration (i) (ii) For a change of control event, the termination payment is 12 months TFR for Executive Directors and KMP. Bob Fulker was appointed into his role on 12 February 2018. Fixed salary, inclusive of the required superannuation contribution amount, is reviewed annually by the Board following the end of the financial year. The amounts set out above are the Executive Directors and KMP total fixed remuneration as at the date of this report. (e) Non-Executive Director Remuneration Outcomes The Board policy is to remunerate Non-Executive Directors (NEDs) at market rates for comparable companies for time, commitment and responsibilities. The Nomination and Remuneration Committee determines Non-Executive Directors fees and reviews this annually, based on market practice, their duties and areas of responsibility. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders (currently $950,000 per annum). Fees for Non-Executive Directors are not linked to the performance of the Group and they currently do not participate in the Group’s STIP or LTIP. Under the NED Equity Plan, NEDs will be granted Share Rights as part of their remuneration. The number of Share Rights granted will be calculated in accordance with the following formula: “Equity Amount” ($) for the financial year/Value per Share Right 95 95 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (e) Non-Executive Director Remuneration Outcomes (continued) Where: • • “Equity Amount” is an amount determined by the Board, having regard to level of board and committee fees paid in cash and independent advice received. For 2018, the Equity Amount is $40,000 for each NED. The Value per Share Right = the volume weighted average price (VWAP) of Evolution’s ordinary shares traded on the ASX over the 5 trading day period up to and including 30 June each year. For FY2018, the VWAP used to determine the number of share rights granted to each NED was $2.3957. Providing the NED remains a director of Evolution, Share Rights will vest and automatically exercise 12 months after the grant date. The Share Rights granted to NEDs under the NED Equity Plan are not subject to performance conditions or service requirements which could result in potential forfeiture. Vested Share Rights will convert into ordinary shares on a one-for-one basis. Vested Share Rights will be satisfied by either issuing shares or arranging for shares to be acquired on-market, subject to the Evolution Securities Trading Policy and the inside information provisions of the Corporations Act. Upon the transfer to the relevant NED, the shares will be subject to disposal restrictions (Disposal Conditions) under the earlier of: • • the NED ceasing to be a director of Evolution; or 3 years from the date of grant of the share rights or such longer period nominated by the NED at the time of the offer (up to a maximum 15 years from the date of grant). Generally, Share Rights will lapse if a Participant ceases to be a Director of the Company. Broken out in the table below is a summary of the fee structure by individual as at 30 June 2018. For remuneration outcomes please refer to table in section d (iv). Note that a change in Board Sub-Committee fees was implemented during the year. Directors James Askew Graham Freestone Andrea Hall (i) Colin Johnstone Thomas McKeith Naguib Sawiris (ii) Sebastien de Montessus (ii) Base Fees Lead Independent Cash Component ($) Sub-Committee Member Sub-Committee Chairman Total Cash Fees Equity ($) NED Equity Plan Shares 95,000 95,000 71,250 95,000 95,000 95,000 95,000 - - - 15,000 - - - - 25,000 - 15,000 15,000 - - 20,000 10,000 7,500 10,000 10,000 - 10,000 115,000 130,000 78,750 135,000 120,000 95,000 105,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 Total per annum ($) 155,000 170,000 118,750 175,000 160,000 135,000 145,000 641,250 15,000 55,000 67,500 778,750 280,000 1,058,750 (i) (ii) Andrea Hall was appointed into her role on 1 October 2017. Naguib Sawiris and Sebastien de Montessus resigned from their roles effective 1 August 2018. 96 96 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (f) Other Remuneration Information (i) LTIP performance parameters Component TSR Performance The Group's TSR will be based on the percentage by which its 30-day volume weighted average share Assessment price quoted on ASX (“VWAP”) at the close of trade on the Relevant Date (plus the value of any dividends paid during the performance period) has increased over the Group’s applicable 30-day VWAP at the close of trade, relating to the grant of Performance Rights for that period. Level of performance achieved Evolution TSR performance as compared to the Peer Group TSR % of TSR Performance Rights vesting Threshold Top 50th percentile 33% Target Above the top 50th percentile and below the top 25th percentile Top 25th percentile Straight-line pro-rata between 33% and 66% 66% Absolute TSR performance Growth in earnings per share Above the top 25th percentile and below the top 10th percentile Top 10th percentile or above Straight-line pro-rata between 66% and 100% 100% Exceptional Performance rights will be will be tested against the Group’s Absolute TSR performance relative to the 30 days VWAP (Absolute TSR Performance Rights) as at 30 June 2018, 30 June 2019 and 30 June 2020 respectively, measured as the cumulative annual TSR over the three year performance period. Level of performance achieved % of Absolute TSR Performance Rights vesting Evolution Absolute TSR performance Threshold 10% Per Annum Return 33% Target Above 10% Per Annum Return and below 15% Per Annum Return 15% Return Per Annum Straight-line pro-rata between 33% and 66% 66% Above 15% Per Annum Return and below 20% Per Annum Return Above 20% Per Annum Return Straight-line pro-rata between 66% and 100% 100% Exceptional A proportion of Performance Rights granted during the years ended 30 June 2016, 30 June 2017 and 30 June 2018 and those to be granted during the year ended 30 June 2019, will be tested against the Group’s growth in Earnings Per Share, calculated by excluding any Non-Recurring Items, and measured as the cumulative annual growth rate over the three year performance period. Level of performance achieved Evolution Earnings per share performance % of Earnings Per Share Performance Rights vesting Threshold 7% Per Annum Growth in EPS 33% Target Exceptional Above 7% Per Annum Growth in EPS and below 11% Per Annum Growth in EPS 11% Per Annum Growth in EPS Above 11% Per Annum Growth in EPS and below 15% Per Annum Growth in EPS Above 15% Per Annum Growth in EPS Straight-line pro-rata between 33% and 66% 66% Straight-line pro-rata between 66% and 100% 100% 97 97 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (f) Other Remuneration Information (continued) (ii) Director and key management personnel equity holdings Balance at the Received during Received during Other changes Balance at the start of the year the year on end of the year conversion of performance rights the year on exercise of options Directors Jacob Klein Lawrie Conway James Askew Graham Freestone Andrea Hall (i) Colin Johnstone Thomas McKeith Naguib Sawiris (ii) (iii) Sebastien de Montessus (iii) Amr El Adawy (iv) Key Management Personnel Aaron Colleran Paul Eagle Evan Elstein Bob Fulker (v) Mark Le Messurier (vi) Glen Masterman 10,470,058 156,923 757,289 114,207 108,969 156,923 11,333 667,836 280,842 449,095 937,933 - - - - - 2,229,965 536,347 16,298 16,298 16,298 16,298 16,298 16,298 411,200 536,347 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (11,333) (637,836) (113,842) (290,295) 12,700,023 693,270 773,587 130,505 125,267 173,220 16,298 16,298 30,000 167,000 570,000 - - - - (121,538) 1,352,742 14,111,408 3,811,647 (1,174,844) 16,748,210 Andrea Hall was appointed into her role on 1 October 2017. At 30 June 2018, La Mancha had a relevant interest in 253,891,807 Evolution shares, representing approximately 15% of Evolution’s issued capital. Subsequent to the year end, it was announced that La Mancha had undertaken a block trade monetisation of shares, reducing its direct interest in Evolution to 9.6%. Naguib Sawiris and Sebastien de Montessus resigned from their roles effective 1 August 2018. Amr El Adawy resigned as Alternate Non-Executive Director on 19 April 2018. Bob Fulker was appointed into his role on 12 February 2018. Mark Le Messurier resigned from his role effective 1 January 2018. (i) (ii) (iii) (iv) (v) (vi) Directors' Report Remuneration Report (Audited) (continued) (f) Other Remuneration Information (continued) (i) LTIP performance parameters (continued) Component Increase in ore reserves per share Assessment A proportion of Performance Rights will be tested against the Group’s ability to grow its Ore Reserves, calculated by measuring the growth over the three year performance period by comparing the baseline measure of the Ore Reserves as at 31 December (“Baseline Ore Reserves”) to the Ore Reserves as at 31 December three years later on a per share basis, with testing to be performed at 30 June 2018, 30 June 2019 and 30 June 2020. Level of performance achieved Evolution Growth in Ore Reserves per share performance % of Growth in Ore Reserves Performance Rights vesting Threshold 90% of Baseline Ore Reserves 33% Target Exceptional Above 90% of Baseline Ore Reserves but below 100% Baseline Ore Reserves 100% Baseline Ore Reserves Above 100% of Baseline Ore Reserves and below 120% of Baseline Ore Reserves 120% and above of Baseline Ore Reserves Straight-line pro-rata between 33% and 66% 66% Straight-line pro-rata between 66% and 100% 100% 98 98 99 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (f) Other Remuneration Information (continued) (ii) Director and key management personnel equity holdings Balance at the start of the year Received during the year on conversion of performance rights Received during the year on exercise of options Other changes Balance at the end of the year Directors Jacob Klein Lawrie Conway James Askew Graham Freestone Andrea Hall (i) Colin Johnstone Thomas McKeith Naguib Sawiris (ii) (iii) Sebastien de Montessus (iii) Amr El Adawy (iv) Key Management Personnel Aaron Colleran Paul Eagle Evan Elstein Bob Fulker (v) Mark Le Messurier (vi) Glen Masterman 10,470,058 156,923 757,289 114,207 - 108,969 156,923 - - 11,333 667,836 280,842 449,095 - 937,933 - 14,111,408 2,229,965 536,347 16,298 16,298 - 16,298 16,298 16,298 16,298 - - - 411,200 - 536,347 - 3,811,647 - - - - - - - - - - - - - - - - - - - - - - - - - - (11,333) (637,836) (113,842) (290,295) - (121,538) - (1,174,844) 12,700,023 693,270 773,587 130,505 - 125,267 173,220 16,298 16,298 - 30,000 167,000 570,000 - 1,352,742 - 16,748,210 (i) (ii) (iii) (iv) (v) (vi) Andrea Hall was appointed into her role on 1 October 2017. At 30 June 2018, La Mancha had a relevant interest in 253,891,807 Evolution shares, representing approximately 15% of Evolution’s issued capital. Subsequent to the year end, it was announced that La Mancha had undertaken a block trade monetisation of shares, reducing its direct interest in Evolution to 9.6%. Naguib Sawiris and Sebastien de Montessus resigned from their roles effective 1 August 2018. Amr El Adawy resigned as Alternate Non-Executive Director on 19 April 2018. Bob Fulker was appointed into his role on 12 February 2018. Mark Le Messurier resigned from his role effective 1 January 2018. 99 99 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (f) Other Remuneration Information (continued) (ii) Director and key management personnel equity holdings (continued) Performance and Share Rights Directors Jacob Klein Lawrie Conway James Askew Graham Freestone Andrea Hall (i) Colin Johnstone Thomas McKeith Naguib Sawiris (ii) Sebastien de Montessus (ii) Key Management Personnel Aaron Colleran Paul Eagle Evan Elstein Bob Fulker (iii) Mark Le Messurier (iv) Glen Masterman Balance at the start of the year 7,778,641 1,177,637 16,298 16,298 - 16,298 16,298 16,298 16,298 1,089,289 665,043 938,252 - 1,177,637 276,080 13,200,367 Granted as compen- sation Converted Lapsed Other changes At end of the year Vested and exercisable Balance at the end of the year Unvested 692,165 (2,229,965) 369,050 (536,347) (16,298) (16,298) - (16,298) (16,298) (16,298) (16,298) 16,697 16,697 16,697 16,697 16,697 16,697 16,697 - 286,014 233,732 - 249,109 (411,200) - 322,919 276,787 (536,347) - 261,410 2,808,065 (3,811,647) (428,590) (102,832) - - - - - - - (95,280) (52,559) (84,551) - (102,832) - (866,644) - - - - - - - - - 5,812,251 907,508 16,697 16,697 16,697 16,697 16,697 16,697 16,697 968,607 232,400 - - - - - - - 1,280,023 - 846,216 - 691,610 - 322,919 - 815,245 - - 537,490 - 11,330,141 538,807 373,050 191,084 - 232,400 - 2,536,348 4,843,644 675,108 16,697 16,697 16,697 16,697 16,697 16,697 16,697 741,216 473,166 500,526 322,919 582,845 537,490 8,793,793 (i) (ii) (iii) (iv) Andrea Hall was appointed into her role on 1 October 2017. Naguib Sawiris and Sebastien de Montessus resigned from their roles effective 1 August 2018. Bob Fulker was appointed into his role on 12 February 2018. Mark Le Messurier resigned from his role effective 1 January 2018. (g) Summary of Key Terms Below is a list of key terms with definitions used within the Director’s Report: Key Term Definition The Board of Directors (“the Board” or “the Directors”) Key Management Personnel ("KMP") The Board of Directors, the list of persons under the relevant section above. Senior executives have the authority and responsibility for planning, directing and controlling the activities of the Company and are members of the senior leadership team. KMP for the financial year ended 30 June 2018 are listed above. Total Fixed Remuneration ("TFR") Total Fixed Remuneration comprises a base salary plus superannuation. This is currently positioned at the median (50th percentile) of the industry benchmarking report. Short Term Incentive ("STI") and Short Term Incentive Plan (“STIP”) STI is the short-term incentive component of Total Remuneration. The STI usually comprises a cash payment that is only received by the employee if specified annual goals are achieved. STIP refers to the plan under which the incentives are granted and paid. 100 100 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Remuneration Report (Audited) (continued) (g) Summary of Key Terms (continued) Key Term Definition Long Term Incentive ("LTI") and Long term Incentive Plan (“LTIP”) LTI is the long-term incentive component of Total Remuneration. The LTI comprises of Performance Rights, usually with a three year vesting period that are subject to specified vesting conditions established by the Board. Further details of the vesting conditions associated with the performance rights are detailed in the Vesting Conditions of Performance Rights section. Performance Rights cannot be exercised unless the vesting conditions have been satisfied. LTIP refers to the plan under which LTIs are granted and is aimed at retaining and incentivising KMP and senior managers to achieve business objectives that are aligned with shareholder interests, and are currently provided via Performance Rights. Total Annual Remuneration Total Fixed Remuneration plus STI. Total Remuneration Total Fixed Remuneration plus STI and LTI. Superannuation Guarantee Charge ("SGC") This is the employer contribution to an employee nominated superannuation fund required by law. The percentage contribution was set at 9.5% in the reporting period and is capped in line with the SGC maximum quarterly payment. Employees and Contractors Option Plan ("ECOP") The plan permits the Company, at the discretion of the Directors, to grant Options over unissued ordinary shares of the Company to eligible Directors, members of staff and contractors as specified in the plan rules. The plan is currently dormant and no further Options will be issued under this plan. Employee Share Option and Performance Rights Plan ("ESOP") The plan permits the Company, at the discretion of the Directors, to grant both Options and Performance Rights over unissued ordinary shares of the Company to eligible Directors and members of staff as specified in the plan rules. NED Equity Plan The plan permits the Company, at the discretion of the Board and Remuneration Committee to issue remuneration to Non-Executive Directors through Share Rights. Total Shareholder Return ("TSR") TSR is the total return on an ordinary share to an investor arising from growth in the share price plus any dividends received. Key Performance Indicators ("KPIs") A form of performance measurement for individual performance against a pre-defined set of goals. Volume Weighted Average Share Price (“VWAP”) A 30 day volume weighted average share price quote on the Australian Stock Exchange (ASX). The VWAP is to be used when assessing Company performance for TSR. Fees Fees paid to Executive and Non-Executive Directors for services as a Director, including sub-committee fees as applicable. 101 101 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Indemnification of officers and auditors During the financial year the Company paid a premium in respect of a contract insuring the Directors of the Company, the company secretaries and all executive officers of the Company and of any related body corporate against a liability incurred as such a Director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has entered into a Deed of Indemnity, Insurance and Access with each Director. In Summary the Deed provides for: • • • Access to corporate records for each Director for a period after ceasing to hold office in the Company; The provision of Directors and Officers Liability Insurance; and Indemnity for legal costs incurred by Directors in carrying out the business affairs of the Company. Except for the above the Company has not otherwise, during or since the financial year, except to the amount permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. Proceedings on behalf of the company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001. Non-audit services The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the Group are important. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for non-audit services provided during the year are set out below. Details of the amounts paid or payable to the auditor for audit services provided during the year are set out in note 25(a). The board of Directors has considered the position and, in accordance with advice received from the audit committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • • all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. 102 102 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Directors' Report Non-audit services (continued) During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms: Other assurance services PricewaterhouseCoopers firm: Assurance related services Non PricewaterhouseCoopers audit firms Internal audit services Other assurance services Total remuneration for other assurance services SPACE Taxation services PricewaterhouseCoopers firm: Tax compliance services Tax advisory services Non PricewaterhouseCoopers audit firms Tax compliance services Tax advisory services Total remuneration for taxation services SPACE SPACE Total remuneration for non-audit services Auditor's independence declaration 2018 $ 2017 $ - 168,971 259,965 428,936 - 8,670 397,215 254,242 660,127 140,413 114,348 20,000 274,761 89,391 402,939 111,861 291,424 895,615 1,089,063 1,170,376 A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 104. Rounding of amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in the Directors' Report. Amounts in the Directors' Report have been rounded off in accordance with that ASIC Corporations Instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar. This report is made in accordance with a resolution of Directors. Jacob (Jake) Klein Executive Chairman Sydney Andrea Hall Chair of the Audit Committee 103 103 Directors' Report (continued)Evolution Mining Limited Annual Report 2018Auditor’s Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Evolution Mining Limited for the year ended 30 June 2018, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Evolution Mining Limited and the entities it controlled during the period. Marc Upcroft Partner PricewaterhouseCoopers Sydney 17 August 2018 PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. 104 Evolution Mining Limited Annual Report 2018Consolidated Statement of Profit or Loss and Consolidated Statement of Profit or Loss Other Comprehensive Income and Other Comprehensive Income Sales revenue Cost of sales Gross Profit Interest income Other income Share based payments expense Corporate and other administration costs Transaction and integration costs Loss on sale of subsidiary Exploration and evaluation costs expensed Finance costs Profit before income tax expense Income tax expense Profit after income tax expense attributable to Owners of Evolution Mining Limited Other comprehensive income Items that may be reclassified subsequently to profit or loss Changes in the fair value of available-for-sale financial assets Changes in the fair value of cash flow hedges Exchange differences on translation of foreign operations Blank Other comprehensive income, net of tax Total comprehensive income Total comprehensive income for the period is attributable to: Owners of Evolution Mining Limited 30 June 2018 $'000 30 June 2017 $'000 Notes 2 2 24 2 2 2 3 11(b) 11(b) 11(b) 1,540,433 (1,140,472) 399,961 1,479,876 (1,151,344) 328,532 3,332 651 (8,491) (27,193) 866 - (5,414) (24,778) 338,934 (75,546) 263,388 (1,925) - 46 (1,879) 1,519 776 (6,413) (28,728) (6,987) (3,576) (12,645) (35,194) 237,284 (19,677) 217,607 1,699 127 (47) 1,779 261,509 219,386 261,509 261,509 219,386 219,386 Cents Cents Earnings per share for profit attributable to Owners of Evolution Mining Limited: Basic earnings per share Diluted earnings per share 4 4 15.57 15.51 13.28 13.23 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 105 105 Evolution Mining Limited Annual Report 2018Consolidated Balance Sheet Consolidated Balance Sheet ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-current assets Inventories Available-for-sale financial assets Property, plant and equipment Mine development and exploration Deferred tax assets Other non-current assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Interest bearing liabilities Current tax liabilities Provisions Other current liabilities Total current liabilities Non-current liabilities Interest bearing liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Issued capital Reserves Retained earnings/(Accumulated losses) Capital and reserves attributable to owners of Evolution Mining Limited Total equity 30 June 2018 $'000 30 June 2017 $'000 Notes 9 12 14 14 7 8 17 15 13 10 16 10 16 11(a) 11(b) 11(c) 323,226 71,296 264,221 658,743 38,459 5,536 571,775 1,743,752 419 37,632 2,397,573 3,056,316 152,367 93,496 47,312 32,085 63 325,323 292,470 150,129 442,599 767,922 2,288,394 2,183,727 45,407 59,260 2,288,394 2,288,394 37,385 63,119 276,869 377,373 827 4,962 741,189 1,801,479 16,448 3,191 2,568,096 2,945,469 156,627 53,401 36,214 30,173 3,206 279,621 382,723 154,873 537,596 817,217 2,128,252 2,183,727 38,795 (94,270) 2,128,252 2,128,252 The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes. 106 106 Evolution Mining Limited Annual Report 2018Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity Issued capital $'000 Share- based payments $'000 Fair value revaluation reserve $'000 Cash flow hedges $'000 Foreign currency translation $'000 Retained earnings $'000 Total equity $'000 Notes Balance at 1 July 2016 1,770,987 29,496 (110) (127) 104 (248,917) 1,551,433 Profit after income tax expense Changes in fair value of available-for-sale financial assets Changes in fair value of cash flow hedge Exchange differences on translation of foreign operations Total comprehensive income Transactions with owners in their capacity as owners: Contributions of equity Dividends provided for or paid Recognition of share-based payments 11(a) 5 24 - - - - - 412,740 - - 412,740 - - - - - - - 7,653 7,653 - 1,699 - - 1,699 - - - - Balance at 30 June 2017 2,183,727 37,149 1,589 Balance at 1 July 2017 2,183,727 37,149 1,589 Profit after income tax expense Fair value loss on avaible-for-sale financial assets, net of tax Exchange differences on translation of foreign operations Total comprehensive expense Transactions with owners in their capacity as owners: Dividends provided for or paid Recognition of share-based payments - - - - - - - - - - - - (1,925) - (1,925) - 8,491 8,491 - - - Balance at 30 June 2018 2,183,727 45,640 (336) - - 127 - 127 - - - 217,607 217,607 - - 1,699 127 (47) (47) - 217,607 (47) 219,386 - - - - - - - - - - - - - - - - - - - (62,960) 412,740 (62,960) - (62,960) 7,653 357,433 57 (94,270) 2,128,252 57 (94,270) 2,128,252 - - 263,388 263,388 - (1,925) 46 46 - 263,388 46 261,509 - - - (109,858) - (109,858) (109,858) 8,491 (101,367) 103 59,260 2,288,394 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 107 107 Evolution Mining Limited Annual Report 2018Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows 30 June 2018 $'000 30 June 2017 $'000 Notes Cash flows from operating activities Receipts from sales Payments to suppliers and employees Other income Interest received Interest paid Income taxes paid Net cash inflow from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for mine development and exploration Proceeds from sale of property, plant and equipment Proceeds from sale of subsidiary Cash disposed on sale of subsidiary Payments for transaction and integration costs Transfer from term deposits Transaction costs related to business disposal Payments for Available-for-sale financial assets Payment for economic interest in Ernest Henry Net cash outflow from investing activities 6(a) Cash flows from financing activities Proceeds from interest bearing liabilities - Senior Secured Syndicated Revolving and Term Facility Repayment of interest bearing liabilities - Senior Secured Syndicated Revolving and Term Facility Repayment of short term borrowings Proceeds from short term borrowings Payment of finance lease liabilities Dividends paid Proceeds from issues of shares Payment of transaction costs for issuing shares Net cash inflow from financing activities Net increase/ in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of period 9 1,554,951 (775,032) 651 2,510 (20,495) (48,419) 714,166 (116,053) (191,875) 595 40,000 (13) (438) - - (2,500) - (270,284) 1,441,275 (768,279) 776 1,519 (24,496) - 650,795 (91,041) (181,267) 1,820 40,688 - (3,045) (3) (3,942) - (884,004) (1,120,794) - 475,000 (40,000) (84,330) 77,460 (1,344) (109,873) - - (158,087) 285,795 37,385 46 323,226 (325,000) (163,232) 161,630 (8,316) (52,419) 408,808 (6,315) 490,156 20,157 17,295 (67) 37,385 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 108 108 Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements Contents of the Notes to the Consolidated Financial Statements Business Performance Performance by Mine Revenue and Expenses Income tax expense Earnings per share Dividends Other cash flow information Resource Assets and Liabilities Property, plant and equipment Mine development and exploration Capital Structure, Financing and Working Capital Cash and cash equivalents Interest bearing liabilities Equity and reserves Trade and other receivables Trade and other payables Inventories Other non-current assets Provisions Deferred tax balances Risk and unrecognised items Financial risk management Contingent liabilities and contingent assets Commitments Events occurring after the reporting period Other information Ernest Henry Operation Related party transactions Share-based payments Remuneration of auditors Deed of cross guarantee Interests in other entities Parent entity financial information Summary of significant accounting policies New accounting standards 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Page 110 110 111 113 113 114 115 117 117 119 123 123 123 124 126 127 127 128 128 130 132 132 135 135 137 138 138 139 140 142 143 144 145 146 147 109 109 Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements Business Performance This section highlights the key indicators on how the Group performed during the year. 1 Performance by Mine (a) Description of segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the Executive Chairman and the Senior Leadership Team (the chief business decision makers) in assessing performance and in determining the allocation of resources. The Group’s operational mine sites, Exploration and Corporate are each treated as individual operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Corporate includes share-based payment expenses and other corporate expenditures supporting the business during the period. Segment performance is evaluated based on earnings before interest, tax, depreciation and amortisation (EBITDA). The Group’s operations are all conducted in the mining industry in Australia. (b) Segment information The segment information for the reportable segments for the year ended 30 June 2018 is as follows: Cowal $'000 Mungari $'000 Mt Carlton $'000 Mt Rawdon $'000 Edna May $'000 Cracow $'000 Ernest Henry $'000 Pajingo $'000 Explo- ration $'000 Corp- orate $'000 Total $'000 30 June 2018 SPACE Revenue EBITDA Sustaining Capital Major Capital Total Capital 422,858 191,062 214,844 179,387 93,006 67,331 136,503 234,225 37,171 147,708 347,403 70,210 230,976 2,629 39,697 84,923 124,620 9,935 36,611 46,546 9,866 21,009 30,875 8,574 10,924 19,498 1,599 3,072 4,671 19,601 14,451 34,052 11,618 - 11,618 - - - - - - (5,414) - 1,540,433 795,083 (34,383) - - - 1,619 - 1,619 102,509 170,990 273,499 The segment information for the reportable segments for the year ended 30 June 2017 is as follows: Cowal $'000 Mungari $'000 Mt Carlton $'000 Mt Rawdon $'000 Edna May $'000 Cracow $'000 Ernest Henry $'000 Pajingo $'000 Explo- ration $'000 Corp- orate $'000 Total $'000 440,691 231,767 197,093 166,471 116,845 146,149 163,342 99,234 91,578 258,434 90,029 126,051 20,588 71,610 17,518 2,614 - (12,645) - 1,479,876 713,855 (33,638) 43,849 27,080 70,929 14,566 22,161 36,727 15,304 13,887 29,191 14,242 19,071 33,313 2,241 28,519 30,760 17,462 14,168 31,630 6,066 - 6,066 2,820 3,560 6,380 - - - 1,035 - 1,035 117,585 128,446 246,031 110 30 June 2017 Space Revenue EBITDA Sustaining Capital Major Capital Total Capital 110 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 1 Performance by Mine (continued) (c) Segment reconciliation Reconciliation of profit before income tax expense SPACE EBITDA Depreciation and amortisation Interest income Acquisition and integration costs Fair value amortisation expense Fair value unwinding expense Finance costs Loss on sale of subsidiary Profit before income tax expense Recognition and measurement 30 June 2018 $'000 30 June 2017 $'000 795,083 (405,230) 3,332 866 (33,481) 3,142 (24,778) - 338,934 713,855 (388,824) 1,519 (6,987) (45,035) 1,526 (35,194) (3,576) 237,284 Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The Board of Evolution Mining Limited has appointed a strategic steering committee which assesses the financial performance and position of the Group, and makes strategic decisions. The steering committee, which has been identified as being the chief business decision maker, consists of the Executive Chairman and the Senior Leadership Team (KMP). 2 Revenue and Expenses Sales revenue Gold sales Silver sales Copper sales Cost of sales Mine operating costs Royalty and other selling costs Depreciation and amortisation expense Fair value amortisation Fair value gain 30 June 2018 $'000 30 June 2017 $'000 1,312,640 21,049 206,744 1,540,433 1,341,311 25,164 113,401 1,479,876 30 June 2018 $'000 30 June 2017 $'000 639,609 65,944 404,580 33,481 (3,142) 1,140,472 657,258 62,480 388,097 45,035 (1,526) 1,151,344 111 111 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 2 Revenue and Expenses (continued) Corporate and other administration costs Depreciation and amortisation expense Corporate overheads Transaction and integration costs Contractor, consultants and advisory expense Corporate and administration expense Stamp duty on business combinations Finance costs Finance lease interest expense Amortisation of debt establishment costs Unwinding of discount on provisions Interest expense Depreciation and amortisation Cost of sales (excluding Ernest Henry) Cost of sales (Ernest Henry) Corporate and other administration costs Recognition and measurement 30 June 2018 $'000 30 June 2017 $'000 650 26,543 27,193 724 978 (2,568) (866) 19 740 3,544 20,475 24,778 727 28,001 28,728 2,998 944 3,045 6,987 338 7,444 3,254 24,158 35,194 278,911 125,669 650 405,230 323,195 64,902 727 388,824 Revenue from the sale of goods is recognised when there has been a transfer of risks and rewards to the customer and no further processing is required by the Group, the quality and quantity of the goods has been determined with reasonable accuracy, the price is fixed or determinable, and collectability is probable. The point at which risk and title passes for concentrate sales is generally upon receipt of the bill of lading when the commodity is delivered for shipment. Revenue is measured at the fair value of the consideration received or receivable. The terms of metal in concentrate sales contracts with third parties contain provisional pricing arrangements whereby the selling price for metal in concentrate is based on prevailing spot prices on a specified future date after shipment to the customer (quotation period). Adjustments to the sales price occur based on movements in quoted marked prices up to the date of final settlement. The period between provisional invoicing and final settlement is typically between one and three months. Revenue on provisionally priced sales is recognised based on the estimated fair value of the total consideration receivable. 112 112 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 3 Income tax expense Judgement is required to determine whether deferred tax assets are recognised in the Balance Sheet. Management must assess the likelihood that the Group will generate sufficient taxable earnings in future periods in order to recognise and utilise those deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and existing tax laws. These assessments require the use of estimates such as commodity prices and operating performance over the life of the assets. To the extent that cash flows and taxable income differ significantly from estimates, the Group’s ability to realise the deferred tax assets reporting could be impacted. (a) Income tax expense Current tax on profits for the period Deferred tax Previously unrecognised tax loss now recognised Adjustments for current tax of prior periods (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit before income tax Tax at the Australian tax rate of 30% space Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Costs of business acquisitions Deferred tax expense on sale of subsidiary Adjustments for current tax of prior periods Share-based payments Loss on sale of subsidiary Other Temporary differences now recognised to reduce deferred tax expense Tax loss recognised to reduce deferred tax expense Tax losses used to reduce current tax expense Income tax expense 4 Earnings per share (a) Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) 113 30 June 2018 $'000 85,490 (4,433) - (5,511) 75,546 30 June 2018 $'000 338,933 101,680 - 4,165 (5,511) 2,547 - (689) (12,993) (4,544) (9,109) 75,546 30 June 2017 $'000 36,214 3,863 (20,400) - 19,677 30 June 2017 $'000 237,284 71,185 982 - - 1,924 1,073 2,257 - (20,400) (37,344) 19,677 (414,479) (256,961) 30 June 2018 Cents 15.57 15.51 30 June 2017 Cents 13.28 13.23 113 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 4 Earnings per share (continued) (b) Earnings used in calculating earnings per share Earnings per share used in the calculation of basic and diluted earnings per share: Profit after income tax attributable to the owners of the parent (c) Weighted average number of shares used as the denominator 30 June 2018 $'000 30 June 2017 $'000 263,388 217,607 2018 Number 2017 Number Weighted average number of ordinary shares used in calculating the basic earnings per share Effect of dilutive securities (i) 1,691,215,407 6,419,798 1,638,875,242 5,584,134 Adjusted weighted average number of ordinary shares used in calculating the diluted earnings per share 1,697,635,205 1,644,459,376 (i) Performance rights and share rights have been included in the determination of diluted earnings per share 5 Dividends (a) Ordinary shares 30 June 2018 $'000 30 June 2017 $'000 Interim dividend - 2018 Interim dividend for the year ended 30 June 2018 of 3.5 cents per share fully franked (30 June 2017: 2 cent per share unfranked) per fully paid share paid on 30 March 2018 59,180 33,595 Space Final dividend - 2017 Final dividend for the year ended 30 June 2017 of 3 cents per share fully franked (30 June 2016: 2 cent per share unfranked) per fully paid share paid on 26 September 2017 50,678 109,858 29,365 62,960 (b) Dividends not recognised at the end of the reporting period In June 2017, the Directors approved a change to the dividend policy of whenever possible paying a dividend equivalent to 50% of the Group's earnings. The final dividend for 2018 has been calculated accordingly. 114 114 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 5 Dividends (continued) (b) Dividends not recognised at the end of the reporting period (continued) In addition to the above dividends, since period end the Directors have recommended the payment of a fully franked final dividend of 4.0 cents per fully paid ordinary share (30 June 2017: 3 cents fully franked). The aggregate amount of the proposed dividend expected to be paid on 28 September 2018 out of retained earnings at 30 June 2018, but not recognised as a liability at period end, is 30 June 2018 $'000 30 June 2017 $'000 67,704 50,484 (c) Franked dividends The final dividend recommended after 30 June 2018 will be fully franked out of franking credits expected to arise from the payment of income tax during the year ending 30 June 2019. The franking account balance at the end of the financial year is $1.3 million (30 June 2017: nil) 6 Other cash flow information (a) Reconciliation of profit after income tax to net cash inflow from operating activities Profit after income tax Transaction and integration costs Fair value amortisation and expense Depreciation and amortisation Unwind of discount on provisions Amortisation of debt establishment costs Share-based payments expense Exploration and evaluation costs expensed Income tax expense Loss on sale of subsidiary Timing difference on settlement of Ernest Henry sales/ costs Change in operating assets and liabilities: Increase in operating receivables Increase in inventories Increase in operating payables Increase in current and deferred tax balances Increase in borrowing costs Increase in other provisions Net cash inflow from operating activities 30 June 2018 $'000 263,388 (866) 30,339 404,650 3,544 740 8,491 5,414 75,546 - (76) (9,509) (26,728) 8,179 (48,419) (2,684) 2,157 714,166 30 June 2017 $'000 217,607 6,987 43,509 388,824 3,254 7,444 6,413 12,645 - 3,576 16,887 (36,237) (41,586) 4,957 19,677 (7,857) 4,695 650,795 115 115 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 6 Other cash flow information (continued) (b) Net debt reconciliation This section sets out an analysis of net debt and the movements in net debt for each of the periods presented. Net debt Cash and cash equivalents Bank loans Net bank debt Available-for-sale financial assets Finance lease liabilities Net debt Year ended 30 June 2017 space Net debt at the beginning of the year Cash flows Foreign exchange adjustments Other non-cash movements Net debt as at end of the year Year ended 30 June 2018 space Net debt at the beginning of the year Cash flows Foreign exchange adjustments Other non-cash movements Net debt at the end of the year 30 June 2018 $'000 30 June 2017 $'000 323,226 (395,000) (71,774) 5,536 - (66,238) 37,385 (435,000) (397,615) 4,961 (1,344) (393,998) Cash and cash equivalent $'000 Available- for-sale (i) $'000 Finance leases due within 1 year $'000 Bank loans due within 1 year $'000 Bank loans due after 1 year $'000 Total $'000 17,295 20,157 (67) - 37,385 37,385 285,794 47 - 323,226 3,263 - - 1,698 4,961 4,961 - - 575 5,536 (8,316) 6,972 - - (1,344) (1,344) 1,344 - - - - (50,000) - - (50,000) (285,000) (100,000) - - (385,000) (272,758) (122,871) (67) 1,698 (393,998) (50,000) (45,000) - - (95,000) (385,000) 85,000 - - (300,000) (393,998) 327,138 47 575 (66,238) (i) Available-for-sale comprise current investments that are traded in an active market, being the Group’s financial assets held at fair value through profit or loss. 116 116 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements Resource Assets and Liabilities This section provides information that is relevant to understanding the composition and management of the Group's assets and liabilities. 7 Property, plant and equipment At 1 July 2017 Cost Accumulated depreciation Net carrying amount Year ended 30 June 2018 Carrying amount at beginning of year Additions Reclassification Disposals Depreciation Depreciation relating to fair value uplift on business combinations Disposal of subsidiary Carrying amount at the end of the year At 30 June 2018 Cost Accumulated depreciation Net carrying amount Included in above Assets in the course of construction Freehold land $'000 Plant and equipment $'000 Total $'000 16,841 - 16,841 1,640,294 (915,946) 724,348 1,657,135 (915,946) 741,189 16,841 - - - - - (2,580) 14,261 724,348 116,053 (90,578) (595) (117,563) (4,608) (69,543) 557,514 741,189 116,053 (90,578) (595) (117,563) (4,608) (72,123) 571,775 14,261 - 14,261 1,590,847 (1,033,333) 557,514 1,605,108 (1,033,333) 571,775 - 103,445 103,445 117 117 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 7 Property, plant and equipment (continued) At 1 July 2016 Cost Accumulated depreciation Net carrying amount Year ended 30 June 2017 Carrying amount at beginning of year Additions Reclassification Disposals Depreciation Depreciation relating to fair value uplift on business combinations Carrying amount at the end of the year At 30 June 2017 Cost Accumulated depreciation Net carrying amount Included in above Carrying amount of lease assets Assets in the course of construction Recognition and measurement Cost Freehold land $'000 Plant and equipment $'000 Total $'000 10,526 - 10,526 10,526 4,258 2,057 - - - 16,841 16,841 - 16,841 1,565,270 (786,026) 779,244 1,575,796 (786,026) 789,770 779,244 86,783 (2,322) (1,820) (132,076) (5,461) 724,348 789,770 91,041 (265) (1,820) (132,076) (5,461) 741,189 1,640,294 (915,946) 724,348 1,657,135 (915,946) 741,189 - - - 2,952 67,352 70,304 2,952 67,352 70,304 Plant and equipment is carried at cost less accumulated depreciation and impairment. Costs equals the fair value of the item at acquisition date and includes expenditure that is directly attributable to the acquisition of the items. Freehold land is carried at cost. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the Statement of Profit or Loss during the reporting period in which they are incurred. An item of property, plant and equipment is derecognised when it is sold or otherwise disposed of, or when its use is expected to bring no future economic benefits. Any gain or loss from derecognising the asset is included in the statement of profit or loss in the period the item is derecognised. Depreciation Depreciation of plant and equipment is calculated using either the straight line or units of production method to allocate their cost, net of their residual values, over their estimated useful lives. The rates vary between 10% and 33% per annum. Freehold land is not depreciated. Accounting estimates and judgements Estimation of remaining useful lives, residual values and depreciation methods involve significant judgement and are reviewed annually for all major items of plant and equipment. Any changes are accounted for prospectively from the date of reassessment to the end of the revised useful life. 118 118 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 8 Mine development and exploration At 1 July 2017 Cost Accumulated amortisation Net carrying amount Year ended 30 June 2018 Carrying amount at beginning of year Additions Amortisation Amortisation recognised in inventory Amortisation relating to fair value uplift on business combinations Asset write-off Reclassifications Disposal of subsidiary Reclassification to long term inventory Carrying amount at the end of the year At 30 June 2018 Cost Accumulated amortisation Net carrying amount Producing mines $'000 Exploration and evaluation $'000 Total $'000 2,959,137 (1,285,786) 1,673,351 128,128 - 128,128 3,087,265 (1,285,786) 1,801,479 1,673,351 176,772 (287,668) (580) (28,873) - 91,837 (20,108) (13,280) 1,591,451 128,128 31,014 - - - (5,410) (1,259) (172) - 152,301 1,801,479 207,786 (287,668) (580) (28,873) (5,410) 90,578 (20,280) (13,280) 1,743,752 3,085,507 (1,494,056) 1,591,451 152,301 - 152,301 3,237,808 (1,494,056) 1,743,752 119 119 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 8 Mine development and exploration (continued) At 1 July 2016 Cost Accumulated amortisation Net carrying amount Year ended 30 June 2017 Carrying amount at beginning of year Additions Amortisation Acquisition of economic interest in Ernest Henry Operation (i) Amortisation recognised in inventory Amortisation relating to fair value uplift on business combinations Exchange differences Asset write-off Reclassifications Carrying amount at the end of the year At 30 June 2017 Cost Accumulated amortisation Net carrying amount Producing mines $'000 Exploration and evaluation $'000 Total $'000 1,962,882 (1,015,047) 947,835 110,338 - 110,338 2,073,220 (1,015,047) 1,058,173 947,835 151,500 (256,748) 884,004 (13,990) (39,574) - - 324 1,673,351 110,338 30,473 - - - - 21 (12,645) (59) 128,128 1,058,173 181,973 (256,748) 884,004 (13,990) (39,574) 21 (12,645) 265 1,801,479 2,959,137 (1,285,786) 1,673,351 128,128 - 128,128 3,087,265 (1,285,786) 1,801,479 (i) Refer to note 22 for information on the Ernest Henry transaction and financial results for the year ended 30 June 2018. Recognition and measurement Mines under construction This expenditure includes net direct costs of construction, borrowing costs capitalised during construction and an appropriate allocation of attributable overheads. Expenditure is net of proceeds from the sale of ore extracted during the construction phase to the extent that this ore extracted is considered material to the development of the mine. After production commences, all aggregated costs of construction are transferred to producing mines or plant and equipment as appropriate. Producing mines - deferred stripping Stripping (waste removal) costs are incurred both during the development phase and production phase of operations. Stripping costs incurred during the development phase are capitalised as mines under construction. Stripping costs incurred during the production phase are generally considered to create two benefits: • • the production of ore inventory in the period - accounted for as a part of the cost of producing those ore inventories; or improved access to the ore to be mined in the future - recognised under producing mines if the following criteria are met: • • • Future economic benefits (being improved access to the ore body) associated with the stripping activity are probable; The component of the ore body for which access has been improved can be accurately identified; and The costs associated with the stripping activity associated with that component can be reliably measured. The amount of stripping costs deferred is based on the life of component ratio which is obtained by dividing the amount of waste tonnes mined by the quantity of gold ounces contained in the ore for each component of the mine. Stripping costs incurred in the period are deferred to the extent that the actual current period waste to contained gold ounce ratio exceeds the life of component expected 'life of component' ratio. 120 120 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 8 Mine development and exploration (continued) Recognition and measurement Producing mines - deferred stripping A component is defined as a specific volume of the ore body that is made more accessible by the stripping activity and is determined based on mine plans. An identified component of the ore body is typically a subset of the total ore body of the mine. Each mine may have several components, which are identified based on the mine plan. The deferred stripping asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the ore within an identified component, plus an allocation of directly attributable overhead costs. The deferred stripping asset is depreciated over the expected useful life of the identified component of the ore body that is made more accessible by the activity, on a units of production basis. Economically recoverable reserves are used to determine the expected useful life of the identified component of the ore body. Exploration and evaluation Exploration and evaluation expenditure related to areas of interest is capitalised and carried forward to the extent that rights to tenure of the area of interest are current and either: • • Costs are expected to be recouped through the successful development and exploitation of the area of interest or alternatively by sale; or Where activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing. Such expenditure consists of an accumulation of acquisition costs and direct exploration and evaluation costs incurred, together with an appropriate portion of directly related overhead expenditure. The carrying value of capitalised exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying value may exceed its recoverable amount. Any amounts in excess of the recoverable amount are derecognised in the financial year it is determined. Depreciation and amortisation The Group uses the units of production basis when amortising mine development assets which results in an amortisation charge proportional to the depletion of the anticipated remaining life of mine production. Each item's economic life has due regard to both its physical life limitations and to present assessments of economically recoverable reserves of the mine property at which it is located. Impairment of non-financial assets (i) Testing for impairment At each reporting date, the Group tests its tangible and other intangible assets for impairment where there in an indication that: • • the asset may be impaired; or previously recognised impairment (on assets other than goodwill) may have changed. Where the asset does not generate cash inflows independent from other assets and its value in use cannot be estimated to be close to its fair value, the asset is tested for impairment as part of the cash generating unit (CGU) to which it belongs. The Group considers each of its mine sites to be a separate CGU. If the carrying amount of an asset or CGU exceeds its recoverable amount, the carrying amount is reduced to the recoverable amount and an impairment loss recognised in the Statement of Profit or Loss. The recoverable amount of an asset or CGU is determined as the higher of its fair value less costs of disposal or value in use. (ii) Impairment calculations In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs of disposal, a discounted cash flow model is used based on a methodology consistent with that applied by the Group in determining the value of potential acquisition targets, maximising the use of market observed inputs. These calculations, classified as Level 3 on the fair value hierarchy, are compared to valuation multiples, or other fair value indicators where available, to ensure reasonableness. 121 121 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 8 Mine development and exploration (continued) Accounting estimates and judgements Deferred stripping The life of component ratio is a function of the mine design and therefore changes to that design will generally result in changes to the ratio. Changes in other technical or economic parameters that impact reserves will also have an impact on the life of component ratio even if they do not affect the mine design. Changes to production stripping resulting from a change in life of component ratios are accounted for prospectively. Exploration and evaluation Judgement is required to determine whether future economic benefits are likely, from either exploitation or sale, or whether activities have not reached a stage that permits a reasonable assessment of the existence of reserves. In addition to these judgements, the Group has to make certain estimates and assumptions such as the determination of a JORC resource which is itself an estimation process that involves varying degrees of uncertainty depending on how the resources are classified (i.e. measured, indicated or inferred). These estimates directly impact when the Group capitalises exploration and evaluation expenditure. The capitalisation policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves will be found. Any such estimates and assumptions may change as new information becomes available. The recoverable amount of capitalised expenditure relating to undeveloped mining projects (projects for which the decision to mine has not yet been approved at the required authorisation level within the Group) can be particularly sensitive to variations in key estimates and assumptions. If a variation in key estimates or assumptions has a negative impact on recoverable amount it could result in a requirement for impairment. Units of production method of amortisation The Group uses the units of production basis when amortising mine development assets which results in an amortisation charge proportional to the depletion of the anticipated remaining life of mine production. Each item's economic life, which is assessed annually, has due regard to both its physical life limitations and to present assessments of economically recoverable reserves of the mine property at which it is located. These calculations require the use of estimates and assumptions. Ore reserves and resources The Group estimates its ore reserves and mineral resources annually at 31 December each year and reports in the following April, 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 exploration and evaluation assets), the provision for rehabilitation obligations, 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 copper 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. The Group has considered whether past impairment losses should be reversed given the expectation of continued improved earnings in relation to those CGUs. While there are some indicators supporting a reversal of impairment, other indicators (such as metals prices, continued price volatility and variability in values of asset transactions) do not clearly support a reversal. Accordingly a reversal of past impairment losses has not been recognised. 122 122 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements Capital Structure and Financing This section provides information on the Group's capital and financial management activities. 9 Cash and cash equivalents Current assets Bank balances Cash at bank Recognition and measurement 30 June 2018 $'000 - 323,226 323,226 30 June 2017 $'000 - 37,385 37,385 Cash and short-term deposits in the balance sheet comprise cash and bank and on hand and short term deposits with an original maturity of three months or less and are classified as financial assets held at amortised cost. Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rates. 10 Interest bearing liabilities Current liabilities Bank loans Less: Borrowing costs Finance lease liabilities Other borrowings Non-current liabilities Bank loans Less: Borrowing costs 30 June 2018 $'000 95,000 (1,504) - - 93,496 30 June 2017 $'000 50,000 (4,813) 1,344 6,870 53,401 300,000 (7,530) 292,470 385,000 (2,277) 382,723 In September 2017, the Group repaid the outstanding balance of $40.0 million on the Senior Secured Term Loan ("Facility B") in anticipation of the up-front cash payment to be received on the sale of the Edna May Operation. The Senior Secured Revolving Loan ("Facility A") remained undrawn during the year. In March 2018, the Group successfully renewed the Senior Secured Revolving Loan (“Facility A”) and the Performance Bond Facility (“Facility C”) through until July 2021 for $350.0 million and $175.0 million respectively (previously $300.0 million and $155.0 million respectively). The expiry on the Senior Secured Term Loan (“Facility D”) remains unchanged at October 2021. The renewal of the debt facilities has secured a saving of approximately $6 million over the term of the loans compared to the previous pricing. 123 123 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 10 Interest bearing liabilities (continued) The repayment periods and the outstanding balances as at 30 June 2018 on each Facility are set out below: Senior Secured Revolving Loan - Facility A ($350.0 million) Performance Bond Facility - Facility C Senior Secured Term Loan - Facility D (a) Secured liabilities and assets pledged as security Term date Outstanding balance $ nil $132 million $395 million 31 July 2021 31 July 2021 15 October 2021 The New Facility is secured in the form of a General Security Agreement and Share Security Agreement over the Groups operating assets. The carrying amounts of assets pledged as general security for total borrowings is $1.952 billion. The share capital pledged as share security for total borrowings is $1.872 billion. Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. Recognition and measurement Interest bearing liabilities are initially recognised at fair value less directly attributable transaction costs incurred and subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised. 11 Equity and reserves (a) Contributed equity Movements in ordinary share capital Ordinary shares are fully-paid and have no par value. They carry one vote per share and the rights to dividends. They bear no special terms or conditions affecting income or capital entitlements of the shareholders and are classified as equity. Balance at 1 July 2016 Shares issued on vesting of performance rights Shares issued under DRP for final dividend Shares issued under DRP for interim dividend Shares issued under Institutional Component of Entitlement Offer Shares issued under Retail Component of Entitlement Offer Shares issued under Employee Share Scheme (i) Shares issued on exercise of unlisted share options Less: share issue costs Balance at 30 June 2017 Shares issued on vesting of performance rights Shares issued under Employee Share Scheme (i) Shares issued under NED Equity Plan Balance at 30 June 2018 Number of shares 1,468,262,821 7,961,146 1,927,526 3,066,229 151,914,603 44,976,448 511,192 4,178,661 - 1,682,798,626 9,214,401 501,234 97,788 1,692,612,049 $'000 1,770,987 - 4,055 6,192 311,425 90,134 - 7,249 (6,315) 2,183,727 - - - 2,183,727 (i) Information relating to the employee share scheme, including details of shares issued under the scheme, is set out in note 24. 124 124 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 11 Equity and reserves (continued) (a) Contributed equity (continued) Recognition and measurement Ordinary share capital is classified as equity and is recognised at the fair value of the consideration received by the Group. Incremental costs directly attributable to the issue of new shares, options or performance rights are shown in equity as a deduction, net of tax, from the proceeds. (b) Other reserves Fair value revaluation reserve Share-based payments Other reserves Movements: Fair value revaluation reserve Balance at the beginning of the year Change in fair value of available-for-sale financial assets Balance at the end of the year Cash flow hedges Balance at the beginning of the year Change in the fair value of cash flow hedges Balance at the end of the year Share-based payments Balance at the beginning of the year Share based payments expense Balance at the end of the year Foreign currency translation Balance at the beginning of the year Currency translation differences arising during the year Balance at the end of the year (i) Nature and purpose of other reserves Fair value revaluation reserve Notes 24 30 June 2018 $'000 (336) 45,640 103 45,407 1,589 (1,925) (336) - - - 37,149 8,491 45,640 57 46 103 30 June 2017 $'000 1,589 37,149 57 38,795 (110) 1,699 1,589 (127) 127 - 29,496 7,653 37,149 104 (47) 57 The fair value revaluation reserve records fair value changes on financial assets designated at fair value through other comprehensive income. Cash flow hedges The cash flow hedging reserve records the portion of gains or losses on derivatives that are designated and qualify as cash flow hedges and are recognised in other comprehensive income. 125 125 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 11 Equity and reserves (continued) (b) Other reserves (continued) (i) Nature and purpose of other reserves (continued) Share-based payments The share-based payments reserve is used to recognise the value of equity-settled share-based payments provided to employees, including Non-Executive Directors, Executive Directors and key management personnel as part of their remuneration. Refer to note 24 for further information. Foreign currency translation The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. (c) Retained earnings Movements in retained earnings were as follows: Balance at the beginning of the year Net profit for the period Dividends paid Balance at the end of the year 12 Trade and other receivables Current assets Trade receivables (i) GST refundable Prepayments Other receivables Notes 5 30 June 2018 $'000 (94,270) 263,388 (109,858) 59,260 30 June 2017 $'000 (248,917) 217,607 (62,960) (94,270) 30 June 2018 $'000 30 June 2017 $'000 60,394 3,501 5,386 2,015 71,296 53,534 4,349 3,296 1,940 63,119 (i) Trade receivables includes accrued income of $46.897 million (30 June 2017: $40.263 million) relating to silver and copper sales from April to June 2018 production for Ernest Henry. These amounts are to be settled in July to September 2018. Refer to note 22 for further information on the transaction and the financial results for the year ended 30 June 2018. Recognition and measurement Trade receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days and therefore are all classified as current. Other receivables These amounts generally arise from transactions outside the usual operating activities of the Group. They do not contain impaired assets and are not past due. 126 126 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 13 Trade and other payables Current liabilities Trade creditors and accruals (i) Other payables 30 June 2018 $'000 123,889 28,478 152,367 30 June 2017 $'000 132,073 24,554 156,627 (i) Trade creditors and accruals include accrued costs of $29.157 million (30 June 2017: $29.522 million) relating to the Group's share of production costs for April to June 2018 for Ernest Henry. These amounts are to be settled in July to September 2018. Refer to note 22 for further information on the transaction and the financial results for the year ended 30 June 2018. Recognition and measurement Trade creditors and accruals Trade creditors and accruals represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are paid on normal commercial terms. The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. 14 Inventories Current Stores Ore Doré and concentrate Metal in circuit Metal in transit Total current inventories Non-current Stores Ore Total non-current inventories Recognition and measurement 30 June 2018 $'000 30 June 2017 $'000 43,334 166,820 6,055 21,867 26,145 264,221 - 38,459 38,459 46,946 175,302 8,088 21,323 25,210 276,869 827 - 827 Ore stockpiles, metal in circuit, gold doré, metal in transit, refined gold bullion and concentrate are physically measured or estimated and valued at the lower of cost and net realisable value. Cost represents the weighted average cost and includes direct costs and an appropriate portion of fixed and variable production overhead expenditure, including depreciation and amortisation, incurred in converting materials into finished goods. Materials and supplies are valued at the lower of cost and net realisable value. Any provision for obsolescence is determined by reference to specific stock items identified. A regular and ongoing review is undertaken to establish the extent of surplus items and a provision is made for any potential loss on their disposal. If the stockpile is not expected to be processed within 12 months after reporting date, it is included in non-current assets. 127 127 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 14 Inventories (continued) Accounting estimates and judgements Net realisable value Net realisable value involves significant judgements and estimates in relation to the selling price in the ordinary course of business less estimates costs of completion and estimated costs necessary to make the sale. The total expense relating to inventory write downs to net realisable value for the year ended 30 June 2018 was $6.128 million (30 June 2017: $9.117 million). 15 Other non-current assets Non-current assets -Other Contingent consideration attributable to the Pajingo Operation Contingent consideration attributable to the Edna May Operation Other Total other non-assets 30 June 2018 $'000 30 June 2017 $'000 3,100 34,441 91 37,632 3,100 - 91 3,191 Contingent consideration amounts classified as a financial asset are remeasured to fair value with changes in fair value recognised in profit or loss. No fair value gains or losses have been recognised in profit or loss during the year. 16 Provisions Current Employee entitlements Non-current Employee entitlements Rehabilitation provision Other long term provision Total provisions 30 June 2018 $'000 30 June 2017 $'000 32,085 32,085 30,173 30,173 2,935 146,988 206 150,129 5,298 149,372 203 154,873 182,214 185,046 128 128 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 16 Provisions (continued) (i) Movements in provisions Movements in each class of provision during the financial year are set out below: 30 June 2018 Space Carrying amount at the beginning of the year Charged to profit or loss - unwinding of discount - provision recognised Re-measurement of provision Disposal of subsidiary Carrying amount at the end of the year 30 June 2017 Space Carrying amount at the beginning of the year Charged to profit or loss - unwinding of discount - provision recognised Re-measurement of provision Carrying amount at the end of the year Employee benefits Employee benefits $'000 Rehabilitation $'000 Other $'000 Total $'000 35,471 149,372 - 3,099 - (3,550) 35,020 3,544 (944) 16,000 (20,984) 146,988 30,982 - 4,489 - 35,471 145,916 3,204 (814) 1,066 149,372 203 - - 3 - 206 200 - - 3 203 185,046 3,544 2,155 16,003 (24,534) 182,214 177,098 3,204 3,675 1,069 185,046 The provision for employee benefits represent wages and salaries, annual leave and long service leave entitlements. Rehabilitation The nature of site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal and restoration, reclamation and revegetation of affected areas of the site in accordance with the requirements of the mining permits. Recognition and measurement Employee benefits Annual leave liabilities are measured at the amounts expected to be paid when the liabilities are settled. Long service leave liabilities are measured at the present value of the estimated future cash outflows for the services provided by employees up to the reporting date. Liabilities not expected to be settled within twelve months are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity that match, as closely as possible to the related liability. Rehabilitation Site restoration costs are recorded at the present value of the estimated future costs of the legal and constructive obligation to rehabilitate locations. 129 129 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 16 Provisions (continued) Recognition and measurement (continued) Rehabilitation When the liability is initially recorded, the present value of the estimated cost is capitalised as part of the carrying value of the related mining assets. Over time, the discounted liability is increased for the change in the present value based on a discount rate that reflects current market assessments. Additional disturbances or changes in rehabilitation costs will be recognised as additions or changes to the corresponding asset and rehabilitation liability when incurred. The unwinding of the effect of discounting the provision is recorded as a finance cost in the statement of profit or loss. The carrying amount is capitalised as part of mine development and amortised on a units of production basis. Accounting estimates and judgements Employee benefits Management judgement is required in determining the future probability of employee departures and period of service used in the calculation of long service leave. Rehabilitation Significant estimates and assumptions are required in determining the provision for mine rehabilitation as there are many transactions and other factors that will affect the ultimate liability payable to rehabilitate the mine sites. Factors that will affect this liability include changes in technology, changes in regulations, price increases, changes in timing of cash flows which are based on life of mine plan and changes in discount rates. When these factors change or become known in the future, such differences will impact the mine rehabilitation provision in the period in which they change or become known. 17 Deferred tax balances (a) Recognised deferred tax balances Inventories Exploration and evaluation expenditure Property, plant and equipment Mine development Employee benefits Provisions Share issue costs Other Deferred tax balances from temporary differences Tax losses carried forward Deferred tax assets/(liabilities) 30 June 2018 $'000 31,836 (32,710) (13,849) (52,539) 10,506 44,158 1,088 (1,661) (13,171) 13,590 419 30 June 2017 $'000 31,897 (24,664) (6,080) (61,244) 10,644 44,812 2,168 (1,485) (3,952) 20,400 16,448 130 130 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 17 Deferred tax balances (continued) (b) Movement in deferred tax balances during the year Balance at 1 July 2017 $'000 Recognised in profit or loss $'000 Utilised to reduce tax liability $'000 Balance at 30 June 2018 $'000 31,897 (24,663) (6,079) (61,244) 10,644 44,811 2,168 20,400 (1,486) 16,448 (61) (8,047) (7,770) 8,705 (138) (653) (1,080) 13,654 (176) 4,434 - - - - - - - (20,463) - (20,463) 31,836 (32,710) (13,849) (52,539) 10,506 44,158 1,088 13,591 (1,662) 419 Inventories Exploration and evaluation expenditure Property, plant and equipment Mine development Employee benefits Provisions Share issue costs Tax losses carried forward Other Deferred tax assets (c) Tax losses The Group has unrecognised available tax losses of $33.382 million as at 30 June 2018. These tax losses have not been recognised due to the uncertainty of their recoverability in future periods. Accounting estimates and judgements Judgement is required to determine whether deferred tax assets are recognised in the Balance Sheet. Management must assess the likelihood that the Group will generate sufficient taxable earnings in future periods in order to recognise and utilise those deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and existing tax laws. These assessments require the use of estimates such as commodity prices and operating performance over the life of the assets. To the extent that cash flows and taxable income differ significantly from estimates, the Group's ability to realise the deferred tax assets reporting could be impacted. 131 131 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements Risk and Unrecognised Items This section of the notes discusses the Group’s exposure to various risks and shows how these could affect the Group’s financial position and performance as well as providing information on items that are not recognised in the financial statements as they do not (yet) satisfy the recognition criteria. 18 Financial risk management The Group’s activities expose it to a variety of financial risks such as market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. Risk management is carried out at a corporate level under policies approved by the Board of Directors. Management identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board of Directors approves written principles for overall risk management, as well as policies covering specific areas, such as interest rate risk, credit risk, gold price risk and use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. The Group holds the following financial instruments: Financial Assets Cash and cash equivalents Trade and other receivables (excluding GST refundable) Available-for-sale financial assets Financial Liabilities Trade and other payables Interest bearing liabilities (a) Derivatives 30 June 2018 $'000 30 June 2017 $'000 323,226 67,795 5,536 396,557 152,367 385,966 538,333 37,385 58,770 4,962 101,117 156,627 436,124 592,751 Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group currently only designates derivatives as cash flow hedges (hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions). There are no fair value hedges or net investment hedges, nor are there any derivatives that do not classify for hedge accounting. The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income through the cash flow hedge reserve. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Profit or Loss within other income or other expense. Amounts accumulated in the cash flow hedge reserve are reclassified to the Statement of Profit or Loss in the periods when the hedged item affects profit or loss for instance when the forecast sale that is hedged takes place. 132 132 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 18 Financial risk management (continued) (a) Derivatives (continued) When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, fixed assets) the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in profit or loss as depreciation in the case of fixed assets. Derivatives are only used for economic hedging purposes and not as speculative investments. The Group has no derivative financial instruments at 30 June 2018 (nil for 2017). (b) Market risk (i) Foreign exchange risk Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Group's functional currency. Management has set up a policy to manage their foreign exchange risk against their functional currency and is measured using sensitivity analysis and cash flow forecasting. As at 30 June 2018, the Group held US$0.766 million (30 June 2017: US$4.634 million) in US dollar currency bank accounts, outstanding receivables of US$6.875 million (30 June 2017: US$8.252 million) relating to the Mt Carlton operation and US$34.661 million (30 June 2017: US$30.970 million) relating to Ernest Henry. An increase/decrease in AUD:USD foreign exchange rates of 5% will result in a $38,280 (30 June 2017: $231,700) increase/decrease in US dollar currency bank account balances and a $2,076,815 (30 June 2017: $1,961,100) increase/decrease in US dollar receivables. The Group also held NZ$ nil (30 June 2017: NZ$0.041 million) in a NZ dollar currency bank account. (ii) Price risk The Group is currently exposed to the risk of fluctuations in prevailing market commodity prices on the gold, silver and copper currently produced from its gold mines and market share prices on the available-for-sale assets. The Group has in place physical gold delivery contracts as at 30 June 2018 covering sales of 250,000 oz (30 June 2017: 458,495 oz) of gold at an average flat forward price of $1,711 (30 June 2017: $1,645). An increase/decrease in market share prices on available-for-sale assets of 10% will result in a $553,643 (30 June 2017: $496,107) increase/decrease in available-for-sale assets. (iii) Cash flow and fair value interest rate risk The Group’s interest rate risk arises from variable interest rates on interest bearing liabilities. As at 30 June 2018, the Group held interest bearing liabilities of $395 million (30 June 2017: $435 million) which incurs interest at a variable rate. An increase/decrease of variable interest rates of 0.25% will result in a $1.849 million (30 June 2017: 0.25%, $1.658million) increase/decrease in interest expense relating to interest bearing liabilities. (c) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers, and cash and investment securities held with banks. At the balance sheet date there were no significant concentrations of credit risk given customers and banks have investment grade credit ratings. The total trade and other receivables outstanding at 30 June 2018 was $71.296 million (30 June 2017: $63.119 million). Cash and cash equivalents at 30 June 2018 were $323.2 million (30 June 2017: $37.4 million). (d) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. Prudent liquidity risk management implies maintaining sufficient cash and term deposits, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. 133 133 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 18 Financial risk management (continued) (d) Liquidity risk (continued) (i) Financing arrangements The Group had access to the following undrawn borrowing facilities at the end of the reporting period: Bank loans - revolving credit facility Expiring beyond one year (ii) Maturities of financial liabilities 30 June 2018 $'000 30 June 2017 $'000 350,000 350,000 300,000 300,000 The tables below analyses the Group's financial liabilities into relevant maturity groupings based on their contractual maturities for: • • all non-derivative financial liabilities, and net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. At 30 June 2018 Space Non-derivatives Trade and other payables Finance lease liabilities Other borrowings Bank loans At 30 June 2017 Space Non-derivatives Trade and other payables Finance lease liabilities Other borrowings Bank loans Less than 1 year $'000 Between 1 and 2 years $'000 Between 2 and 5 years $'000 Total contractual cash flows $'000 Over 5 years $'000 Carrying amount (assets)/ liabilities $'000 152,367 - - 109,826 262,193 - - - 119,873 119,873 - - - 195,858 195,858 156,627 1,344 6,870 64,356 229,197 - - - 163,660 163,660 - - - 233,036 233,036 - - - - - - - - - - 152,367 - - 425,557 577,924 152,367 - - 395,000 547,367 156,627 1,344 6,870 461,052 625,893 156,627 1,344 6,870 435,000 599,841 134 134 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 18 Financial risk management (continued) (e) Risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so as to maintain a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt. The Group’s focus has been to raise sufficient funds through equity and debt capital markets to fund capital investment in working capital and exploration and evaluation activities. The Group monitors its liquidity through analysis of regular cash flow forecasts. (i) Loan covenants The lenders have placed covenants over the Group's Senior Secured Revolving and Term Facility based on the current ratio, leverage ratio, debt service ratio and the tangible net worth ratio. The Group has complied with these covenants during the year. 19 Contingent liabilities and contingent assets (a) Contingent liabilities The Group had contingent liabilities at 30 June 2018 in respect of: (i) Claims At the date of this report the Group was unaware of any material claims, actual or contemplated. (ii) Guarantees The Group has provided bank guarantees in favour of various government authorities and service providers with respect to site restoration, contractual obligations and premises at 30 June 2018. The total of these guarantees at 30 June 2018 was $132.356 million with various financial institutions (30 June 2017: $125.183 million). 20 Commitments (a) Capital and lease commitments (i) Exploration expenditure commitments In order to maintain current rights of tenure to exploration tenements the Group is required to perform minimum exploration work to meet minimum expenditure requirements specified by various government authorities. These obligations are subject to renegotiation when application for a mining lease is made and at various other times. These obligations are not provided for in the financial report and are payable: Within one year Later than one year but not later than five years Later than five years 30 June 2018 $'000 10,479 30,756 40,236 81,471 30 June 2017 $'000 7,529 15,873 31,707 55,109 135 135 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 20 Commitments (continued) (a) Capital and lease commitments (ii) Capital commitments The Group has the following capital commitments in relation to capital projects and joint venture requirements at each of the sites. Within one year 30 June 2018 $'000 17,619 17,619 30 June 2017 $'000 26,227 26,227 (iii) Non-cancellable operating leases The Group leases mining equipment, office space and small items of office equipment under operating leases. The leases typically run for one month to five years with an option to renew at the expiry of the lease period. None of these leases include contingent rentals. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years 30 June 2018 $'000 30 June 2017 $'000 14,576 9,355 1,145 25,076 23,209 5,231 - 28,440 (b) Gold delivery commitments As at 30 June 2018 Within one year Later than one year but not greater than five years As at 30 June 2017 Within one year Later than one year but not greater than five years Gold for physical delivery oz 150,000 100,000 250,000 208,495 250,000 458,495 Contracted sales price A$/oz Value of committed sales $'000 1,694 1,737 3,431 1,567 1,711 3,278 254,037 173,667 427,704 319,156 427,705 746,861 136 136 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 20 Commitments (continued) (b) Gold delivery commitments The counterparties to the physical gold delivery contracts are Australia and New Zealand Banking Group Limited ("ANZ"), National Australia Bank Limited ("NAB"), Commonwealth Bank of Australia ("CBA"), Citibank N.A ("Citibank") and Societe Generale ("SG"). Contracts are settled on a quarterly basis by the physical delivery of gold per the banks instructions. The contracts are accounted for as sale contracts with revenue recognised once the gold has been delivered to Macquarie, ANZ, NAB, WBC, CBA, Citibank, SG or one of their agents. The physical gold delivery contracts are considered a contract to sell a non-financial item and is therefore out of the scope of AASB 139 Financial Instruments: Recognition and Measurement. As a result no derivatives are required to be recognised. The Company has no other gold sale commitments with respect to its current operations. 21 Events occurring after the reporting period No matter or circumstance has occurred subsequent to the year end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or state of affairs of the Group or economic entity in subsequent financial years except for the following matters: (a) Restructure of Ownership of Castle Hill Gold Deposit On 18 July, the Company reached an agreement to terminate Norton Gold Field’s right to mine and process ore from the Castle Hill deposit. This provides Evolution with full ownership and unfettered access to the deposit located 25km from the Mungari processing facility. Castle Hill is estimated to contain Ore Reserves of 236,000oz which will provide a material extension to the operating life at Mungari. Evolution will pay an initial up-front cash payment of $12 million (paid 31 July 2018), a further $3 million six months after completion of the transaction and a 2% net smelter royalty over the first 38,000oz of gold production from certain tenements within the Castle Hill deposit area. (b) Resignation of La Mancha Directors On 26 July, it was announced that La Mancha had undertaken a block trade monetisation of shares reducing its direct interest in Evolution to 9.6%. In accordance with the terms of the Share Sale Agreement signed between Evolution and La Mancha in April 2015, La Mancha had the right to nominate Directors to the Board of Evolution provided that it held more than 10.0% of the shares on issue in Evolution. La Mancha's nominee Directors, Mr Naguib Sawiris, Mr Sebastian de Montessus and their Alternate Director, Mr Andrew Wray resigned from the Board of Directors of Evolution effective 1 August 2018. 137 137 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements Other Information This section covers additional financial information and mandatory disclosures. 22 Ernest Henry Operation (a) Description On 24 August 2016, the Group announced that through a wholly owned subsidiary, it had entered into a transaction with Glencore plc to acquire an economic interest in the Ernest Henry Copper-Gold Operation for an up-front payment of $880 million. This $880 million up-front payment is recognised as a mine development asset. The Group also announced the entry into a strategic alliance with Glencore plc in respect of potential future regional acquisitions and the commitment the parties made to cooperate on exploration activities in the region surrounding Ernest Henry. The transaction was completed on 1 November 2016. Under the agreement, the Group has a right to the production output when produced in relation to 100% of future gold and 30% of future copper and silver from the agreed life of mine area. Copper and silver sales revenue are recognised in the same month as their production is reported as the production is in control of the purchaser (Glencore). Gold sales and gold revenues are recognised when the metal is received and sold by Evolution. In addition to the up-front payment, the Group must also contribute 30% of future production costs in respect of the life of mine area. The Group has agreed to an ongoing obligation to pay an amount equal to 49% of development and production costs in return for 49% of future copper, gold and silver production from new reserves extending beyond the mine life at acquisition date. (b) Financial performance and position The below information presents the financial performance and balance sheet information of the Ernest Henry operation included in the Consolidated Financial Statements for the eight months ended 30 June 2017. Revenue (note 2) Cost of sales (excluding amortisation) Amortisation Profit before income tax 30 June 2018 $'000 347,403 (116,427) (125,669) 105,307 30 June 2017 $'000 163,342 (64,108) (64,902) 34,332 138 138 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 22 Ernest Henry Operation (continued) (b) Financial performance and position (continued) The carrying amounts of assets and liabilities as at the period end were: Assets Trade and other receivables Inventories Mine Development Total assets Liabilities Trade and other payables Total liabilities Net assets 23 Related party transactions (a) Parent entities The ultimate parent entity within the Group is Evolution Mining Limited. (b) Subsidiaries Interests in subsidiaries are set out in note 27. (c) Key management personnel compensation Short-term employee benefits Post-employment benefits Share-based payments Detailed remuneration disclosures are provided in the remuneration report on pages 86 to 101. 30 June 2018 $'000 46,897 26,145 696,548 769,590 30 June 2017 $'000 40,263 25,210 811,178 876,651 29,157 29,157 29,522 29,522 740,433 847,129 30 June 2018 $ 30 June 2017 $ 7,888,131 168,858 4,646,895 12,703,884 6,907,351 156,931 2,939,830 10,004,112 139 139 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 23 Related party transactions (continued) (d) Transactions with other related parties Directors fees in the amount of $115,000 were paid to International Mining and Finance Corp, a company of which Mr James Askew is a Director for services provided during the period (30 June 2017:$113,750). Directors fees in the amount of $300,000 were paid to DAK Corporation Pty Ltd, a company of which Mr Jacob Klein is a Director for services provided during the period (30 June 2017: $200,000). Directors fees in the amount of $135,000 were paid to Lazy 7 Pty Ltd, a company of which Mr Colin Johnstone is a Director for services provided during the period (30 June 2017: $137,748). Directors fees in the amount of $95,000 were paid to Mr Naguib Sawiris as a Director for services provided during the period (30 June 2017: $95,000). Directors fees in the amount of $105,000 were paid to Mr Sebastien de Montessus as a Director for services provided during the period (30 June 2017: $104,375). 24 Share-based payments (a) Types of share based payment plans The Group has two Option and Performance Rights plans in existence: (1) Employee Share Option and Performance Rights Plan (ESOP) The ESOP was established and approved at the Annual General Meeting on 23 November 2010, and amended on 19 October 2011. The latest plan was approved at the Annual General Meeting on 26 November 2014 and permits the Company, at the discretion of the Directors, to grant both Options and Performance Rights over unissued ordinary shares of the Company to eligible Directors and members of staff as specified in the plan rules. (2) Non-Executive Director Equity Plan (NEDEP) The NEDEP was established and approved at the Annual General Meeting on 24 November 2016. The plan permits the Company, at the discretion of the Directors, to grant NED Share Rights as part of their remuneration. (b) Recognised share based payment expenses 30 June 2018 $'000 30 June 2017 $'000 Expense arising from equity settled share based payment transactions recognised in profit and loss 8,491 6,413 (c) Summary and movement of NED Share Rights on issue The following table illustrates the number and movements in, Share Rights issued during the year. Outstanding balance at the beginning of the year Share Rights granted Vested Lapsed Forfeited Outstanding balance at the end of the year 2018 Number 97,788 116,879 (97,788) - - 116,879 2017 Number - 97,788 - - - 97,788 140 140 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 24 Share-based payments (continued) (c) Summary and movement of NED Share Rights on issue (continued) There were 116,879 Share Rights granted during the 2018 financial year. Provided the NEDs remain directors of Evolution, Share Rights will vest and automatically exercise 12 months after the grant date of 23 November 2017. (d) Fair value determination During the year, the Company issued two allotments of performance rights that will vest on 30 June 2020. They have four performance components being a Total Shareholder Return (“TSR”) condition, an absolute TSR condition, a Growth in Earnings per share (“EPS”) condition and a Growth in Ore Reserves condition. (i) TSR Performance Right Valuation The fair value of the TSR Performance Rights (market-based condition) was estimated at the date of grant using Monte Carlo simulation, taking into account the terms and conditions upon which the awards were granted. (ii) Absolute TSR Performance Right Valuation The Absolute TSR Performance Right Valuation will be measured as the cumulative annual TSR over the three year period ending 30 June 2020. (iii) Growth in Earnings per Share The growth in Earnings per Share is measured as the cumulative annual growth rate in EPS, excluding non recurring items over the three year period ending 30 June 2020. (iv) Growth in Ore Reserves per Share The growth in Ore Reserves per share is measured by comparing the Baseline measure of the Ore Reserves as at 31 December 2015, to the Ore Reserves as at 31 December 2018 on a per share basis, with testing to be performed at 30 June 2019. The following tables list the inputs to the models used for the Performance Rights granted for the period: TSR Absolute TSR Growth in EPS Growth in Ore Reserves September 2017 Performance Rights issue Number of rights issued Spot price ($) Risk-free rate (%) Term (years) Volatility (%) Fair value at grant date ($) 1,516,766 2.410 2.05 2.8 58 1.51 February 2018 Performance Rights issue Number of rights issued Spot price ($) Risk-free rate (%) Term (years) Volatility (%) Fair value at grant date ($) 130,627 2.810 2.05 2.4 53 1.85 1,516,766 2.410 2.05 2.8 58 1.28 130,627 2.810 2.05 2.4 53 1.55 1,516,766 2.410 2.05 2.8 58 2.26 130,627 2.810 2.05 2.4 53 2.66 1,516,766 2.410 2.05 2.8 58 2.26 130,627 2.810 2.05 2.4 53 2.66 The volatility above was determined with reference to historical volatility but also incorporates factors that management believes will impact the actual volatility of the Company’s shares in future periods. Recognition and measurement The Group provides benefits to its employees (including Key Management Personnel) in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). 141 141 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 24 Share-based payments (continued) Recognition and measurement (continued) Vesting conditions that are linked to the price of shares of the Company (market conditions) are taken into account when determining the fair value of equity settled transactions. Other vesting conditions such as service conditions are excluded from the measurement of fair value but are considered in estimating the number of investments that may ultimately vest. The cost of these equity-settled transactions is measured by reference to the fair value of the equity instruments at the date at which they are granted. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (“the vesting period”). The charge to the Statement of Profit or Loss for the period is the cumulative amount as calculated above less the amounts already recognised in previous periods. There is a corresponding entry to equity. Accounting estimates and judgements The Group measures the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at the date at which they are granted. The fair value is determined by an external specialist using an option pricing model, based off the assumptions detailed above. 25 Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: (a) PricewaterhouseCoopers Audit and other assurance services Audit and review of financial statements Other assurance services Assurance related services Total remuneration for audit and other assurance services Taxation services Tax compliance services Tax advisory services Total remuneration for taxation services 2018 $ 2017 $ 510,920 - 510,920 - 8,670 8,670 511,940 140,413 652,353 89,391 402,939 492,330 Total remuneration of PricewaterhouseCoopers 519,590 1,144,683 142 142 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 25 Remuneration of auditors (continued) (b) Non-PricewaterhouseCoopers related audit firms Audit and other assurance services Other assurance services Internal audit services Other assurance services Total remuneration for audit and other assurance services Taxation services Tax compliance services Tax advisory services Total remuneration for taxation services 2018 $ 2017 $ 168,971 259,965 428,936 397,215 254,242 651,457 114,348 20,000 134,348 111,861 291,424 403,285 Total remuneration of non-PricewaterhouseCoopers audit firms 1,080,393 537,633 Total auditors' remuneration 1,599,983 1,682,316 It is the Group's policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where PricewaterhouseCoopers's expertise and experience with the Group are important. These assignments are principally tax advice and due diligence on acquisitions, or where PricewaterhouseCoopers is awarded assignments on a competitive basis. It is the Group's policy to seek competitive tenders for all major consulting projects. 26 Deed of cross guarantee Evolution Mining Limited and those entities identified in note 27 are parties to a deed of cross guarantee under which each Company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and Directors' Report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission. The companies identified above represent a 'closed group' for the purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled by Evolution Mining Limited, they also represent the 'extended closed group'. The Consolidated Balance Sheet, Consolidated Statement of Profit or Loss and Other Comprehensive Income, and summary of movements in consolidated retained earnings for the year ended 30 June 2018 of the closed group is equal to the Consolidated Balance Sheet, Consolidated Statement of Profit or Loss and Other Comprehensive Income, and Consolidated Statement of Changes in Equity of the Group. 143 143 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 27 Interests in other entities (a) Significant investments in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following principal subsidiaries in accordance with the accounting policy described below: Name of entity Evolution Mining Management Services Pty Ltd Conquest Mining Pty Ltd (i) (ii) Edna May Ops Pty Ltd (i) (ii) Mt Rawdon Operations Pty Ltd (i) (ii) Westonia Mines Minerals Pty Ltd (i) Lion Selection Pty Ltd (i) Auselect Pty Ltd (i) Lion Mining Pty Ltd (i) (ii) Sedgold Pty Ltd (i) Fernyside Pty Ltd (i) Evolution Tennant Creek Pty Ltd (ii) Evolution Mining NZ Pty Ltd (ii) Evolution Mining (Cowal) Pty Ltd (i) (ii) Evolution Mining Mungari Pty Ltd (i) (ii) Toledo Holding (Ausco) Pty Ltd (i) Evolution Mining (Mungari East) Pty Ltd (i) (ii) Evolution Mining (Phoenix) Pty Limited (i) (ii) Hayes Mining Pty Ltd (i) Evolution Mining (Aurum 2) Pty Ltd (i) (ii) Evolution Mining (Connors Arc) Pty Ltd (i) (ii) Evolution Mining (Canada Holdings) Ltd (ii) Evolution Mining Management Services (Canada) Ltd (ii) Country of incorporation Class of shares Equity holding 2018 % 2017 % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Canada Canada Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - - - (i) (ii) These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 issued by the Australian Securities and Investments Commission. For further information refer to note 26. These entities are considered to be the material controlled entities of the Group. Their principal activities are identifying, developing and operating gold related projects. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business. 144 144 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 28 Parent entity financial information The financial information for the parent entity, Evolution Mining Limited has been prepared on the same basis as the consolidated financial statements. (b) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Balance sheet Space Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Shareholders' equity Space Issued capital Reserves Fair Value revaluation reserve Share based payment reserve Accumulated losses Total equity Statement of Profit or Loss and Other Comprehensive Income Space Profit for the year Other comprehensive expense Total comprehensive expense (c) Guarantees entered into by the parent entity The parent entity has provided bank guarantees, as detailed in note 19. (d) Contingent liabilities of the parent entity 30 June 2018 $'000 30 June 2017 $'000 316,591 2,065,188 2,381,779 27,659 2,385,766 2,413,425 158,438 294,284 452,722 101,283 406,690 507,973 1,929,057 1,905,452 2,183,727 2,183,727 1,131 45,566 (301,367) 1,929,057 3,042 37,075 (318,392) 1,905,452 126,882 - 126,882 82,842 - 82,842 The parent entity did not have any contingent liabilities as at 30 June 2018 or 30 June 2017. For information about guarantees given by the parent entity, please see above. 145 145 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 29 Summary of significant accounting policies (a) Basis of preparation This financial report is a general purpose financial report, prepared by a for-profit entity, in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). The financial report also complies with the International Financial Reporting Standards (IFRS) including interpretations as issued by the International Accounting Standards Board (IASB). The financial report has been prepared on a historical cost basis, except for derivative financial instruments and available-for-sale assets which have been measured at fair value. The financial report has been presented in Australian (AU) dollars and all values are rounded to the nearest AU$1,000 (AU$'000) unless otherwise stated. The accounting policies have been consistently applied by all entities included in the Group and are consistent with those applied in the prior year. (b) Principles of consolidation The consolidated financial statements include the financial statements of the parent entity, Evolution Mining Limited, and its controlled entities (referred to as 'the Consolidated Entity' or 'the Group' in these financial statements). A list of significant controlled entities (subsidiaries) is presented in note 27. Control is achieved when the Group is exposed, or has the rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one of more of the three elements of control. Specifically the Group controls an investee if, and only if, the Group has all of the following: • • • Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its involvement with the investee; and The ability to use its control over the investee to affect its returns. Non- controlling interests in the results and equity of the entities that are controlled by the Group is shown separately in the Statement of Profit or Loss or Other Comprehensive Income, Balance Sheet and Statement of Changes in Equity respectively. (c) Foreign currency translation (i) Functional and presentation currency The presentation currency of the Group is Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. (ii) Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. The subsequent payment or receipt of funds related to a transaction is translated at the rate applicable on the date of payment or receipt. Monetary assets and liabilities are denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. All exchange differences in the consolidated financial statements are taken to the Statement of Other Comprehensive Income and accumulated in a reserve. 146 146 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 29 Summary of significant accounting policies (continued) (c) Foreign currency translation (continued) (iii) Translation The assets and liabilities of subsidiaries with functional currency other than Australian dollars (being the presentation currency of the Group) are translated into Australian dollars at the exchange rate at the reporting date and the Statement of Profit or Loss is translated at the average exchange rate for the period. On consolidation, exchange differences arising from the translation of these subsidiaries are recognised in Other Comprehensive Income and accumulated in the foreign currency translation reserve. (d) Intangible assets (i) Mining tenements, mining rights and mining information Mining tenements have a finite useful life and are carried at cost less, where applicable, any accumulated amortisation and accumulated impairment losses. The carrying values of mining tenements and mining rights are reviewed to ensure they are not in excess of their recoverable amounts. Amortisation of mining tenements and mining rights commences from the date when commercial production commences or in the case of the acquisitions, from the date of acquisition and is charged to the profit or loss. Mining tenements are amortised over the life of the mine using units of production basis in ounces. Mining information has a finite useful life and is carried at cost less accumulated amortisation. Mining information amortisation is recognised over the period that the information is expected to remain relevant. The amortisation of the above intangibles is classified as a cost of sale. 30 New accounting standards Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below. Title of standard Nature of change Impact AASB 15 Revenue from Contracts with Customers The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for goods and services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption. Management has assessed the effects of applying the new standard on the group’s financial statements and on the recognition of revenue derived through the sale of gold and concentrate. Management have concluded that there is no material impact in the treatment of revenue recognition following transition to AASB 15. The new standard introduces new disclosure requirements. These are expected to change the nature and extent of the group’s disclosures with regards to revenue particularly in the year of the adoption of the new standard. Mandatory application date/ Date of adoption by group Mandatory for financial years commencing on or after 1 January 2018. 147 147 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements Mandatory application date/ Date of adoption by group Must be applied for financial years commencing on or after 1 January 2018. The group will apply the new rules retrospectively from 1 July 2018, with the practical expedients permitted under the standard. Comparatives for FY18 will not be restated. 30 New accounting standards (continued) Title of standard Nature of change Impact AASB 9 Financial Instruments AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The group has reviewed its financial assets and liabilities and is expecting the following impact from the adoption of the new standard on 1 July 2018: Financial assets held by the group are broken down as follows: • Equity instruments currently classified as Available For Sale (AFS) for which a Fair Value through Other Comprehensive Income (FVOCI) election is available; • Cash and cash equivalents including current accounts and short-term term deposits, and; • Trade receivables currently held at cost, to be measured at amortised cost under the classification conditions for AASB 9. The group does not expect the new guidance to affect the classification and measurement of these financial assets. However, gains or losses realised on the sale of financial assets designated as FVOCI will no longer be transferred to profit or loss on sale, but instead reclassified below the line from the FVOCI reserve to retained earnings. During the 2018 financial year, no gains or losses were recognised in profit or loss in relation to the disposal of available-for-sale financial assets. There will be no impact on the group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The new hedge accounting rules under AASB 9 have no impact as the group is not currently hedge accounting. The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under AASB 139. It applies to financial assets classified at amortised cost, debt instruments measured at FVOCI, contract assets under AASB 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts. Based on the assessments undertaken to date, the group expects no impact on the allowances for trade receivables or cash and cash equivalents as the only applicable financial assets. The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard. 148 148 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Notes to the Consolidated Financial Statements 30 New accounting standards (continued) Title of standard AASB 16 Leases Nature of change Impact AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group has non-cancellable operating lease commitments of $25.076 million, see note 20. To date, the group has focussed on the provisions of the standard that will most impact the financial results. Below is a summary of the work performed and the assessed impact of the new standard: • Data gathering: Site and group data has been collated related to contracts that may contain a lease. • Data integrity and analysis: a number of the identified contracts are covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under AASB 16. • Modelling of transition options: Review of the transition options indicates that there is not a material difference to the group between the three transition methodologies. Accordingly, the group intends to apply the modified retrospective transition approach. • Financial reporting: Preliminary review results indicate that under the requirements of AASB 16, a lease asset and liability would be recorded on balance sheet of approximately $20m-$25m if the standard applied at 30 June 2018. Work will continue during FY19 on the implementation of processes and systems prior to the effective date of 1 July 2019. Mandatory application date/ Date of adoption by group Mandatory for financial years commencing on or after 1 January 2019. At this stage, the Group does not intend to adopt the standard before its effective date. The group intends to apply the modified retrospective transition approach and will not restate comparative amounts for the year prior to first adoption. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 149 149 Notes to the Consolidated Financial Statements (continued)Evolution Mining Limited Annual Report 2018Director’s Declaration Directors' Declaration In the Directors' opinion: (a) (b) (c) the financial statements and notes set out on pages 105 to 149 are in accordance with the Corporations Act 2001, including: complying with Accounting Standard, the Corporations Regulations 2001 and other mandatory professional (i) reporting requirements, and giving a true and fair view of the consolidated entity's financial position as at 30 June 2018 and of its performance for the year ended on that date, and (ii) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 26 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 26. Note 29(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of Directors. Jacob (Jake) Klein Executive Chairman Andrea Hall Chair of the Audit Committee Sydney 150 150 Evolution Mining Limited Annual Report 2018Independent Auditor’s Report to the Members Independent auditor’s report To the members of Evolution Mining Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Evolution Mining Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Group's financial position as at 30 June 2018 and of its financial performance for the year then ended b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: • • • • • • the consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2018 the consolidated balance sheet as at 30 June 2018 the consolidated statement of changes in equity for the year then ended the consolidated statement of cash flows for the year then ended the notes to the consolidated financial statements, which include a summary of significant accounting policies the directors’ declaration. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au 151 Liability limited by a scheme approved under Professional Standards Legislation. Evolution Mining Limited Annual Report 2018PricewaterhouseCoopers, ABN 52 780 433757One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.auLevel 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.auLiability limited by a scheme approved under Professional Standards Legislation.Independent auditor’s reportTo the members of Evolution Mining LimitedReport on the audit of the financial reportOur opinionIn our opinion:The accompanying financial report of Evolution Mining Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including:a)giving a true and fair view of the Group's financial position as at 30 June 2018 and of its financialperformance for the year then endedb)complying with Australian Accounting Standards and the Corporations Regulations 2001.What we have auditedThe Group financial report comprises:•the consolidated statement of profit or loss and other comprehensive income for the year ended 30June 2018•the consolidated balance sheet as at 30 June 2018•the consolidated statement of changes in equity for the year then ended•the consolidated statement of cash flows for the year then ended•the notes to the consolidated financial statements, which include a summary of significant accountingpolicies•the directors’ declaration.Basis for opinionWe conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial reportsection of our report.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants(the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.152 Independent Auditor’s Report (continued)Evolution Mining Limited Annual Report 2018152Our audit approachAn audit is designed to provide reasonable assurance aboutwhether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group,its accounting processes and controls and the industry in which it operates.Materiality Audit scopeKey audit matters•For the purpose of our auditwe used overall Groupmateriality of $19.9 million,which representsapproximately 2.5% of theGroup’s earnings beforeinterest, tax, depreciation andamortisation (EBITDA).•We applied this threshold,together with qualitativeconsiderations, to determinethe scope of our audit and thenature, timing and extent ofour audit procedures and toevaluate the effect ofmisstatements on thefinancial report as a whole.•We chose EBITDA because, inour view, it is the benchmarkagainstwhich theperformance ofthe Group ismost commonly measured.•We utliseda 2.5% thresholdbased on our professionaljudgement, noting it is withinthe range of commonlyacceptable thresholds.•Our audit focused on wherethe Group made subjectivejudgements; for example,significant accountingestimates involvingassumptions and inherentlyuncertain future events.•OurauditprocedureswerepredominantlyperformedattheGroup’scorporateoffice inSydney.Wealsoconductedsite visits totheMt Carltonmine site.•Amongstotherrelevanttopics,wecommunicatedthefollowingkeyauditmatterstotheAuditCommittee:−Valuation of assets atMungari and Cowal−Assessment of the carryingvalue of assets•Thesearefurtherdescribed intheKeyaudit matters sectionofourreport.Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. Key audit matter How our audit addressed the key audit matter Valuation of assets held at Mungari and Cowal (Refer to note 3, 7 and 8) The Group obtained external valuations of the open cut pit mine development and property, plant and equipment at Cowal and the open cut pit and underground mine development at Mungari. The valuations were conducted principally to obtain accurate values for the assets to support the Group’s income tax positions. The resulting consequence of the valuations are as follows: • • A current year balance sheet reclassification of $90.5 million from Property, Plant and Equipment to Mine Development, with a resulting $2.9 million of additional mine development amortisation recognised in the current year, A reduction in income tax expense for the current year of $22.7m due to net additional tax values of the assets. This was a key audit matter because of the: • • • Inherent subjective nature and judgment involved in the assumptions applied with valuations Relative size of Mine Development and Property, Plant and Equipment balance in the consolidated balance sheet Significant judgement involved in assessing the tax position taken and the quantum of the additional tax benefit obtained as a result of the valuations performed. We have performed the following procedures, amongst others, to assess the valuations and associated accounting and tax impact: For the external valuations we: • read the valuation reports and considered the approach applied by the external valuer, assessed the competency and capabilities of the external valuer, read the valuer’s terms of engagement and did not identify any terms that might affect their objectivity or impose limitations on their work relevant to the valuation, Agreed the impact of the valuations to the Group’s accounting records. • • • For the associated accounting impact, we recalculated the accuracy of the balance sheet reclassification and the resulting additional depreciation recognised as a result of the reclassification. For the associated tax consequences we, in conjunction with our tax experts: • • examined position papers prepared by management held various discussions with management to discuss tax positions and approach in relation to the valuations performed and proposed amendments to prior tax returns. 153 153 Independent Auditor’s Report (continued)Evolution Mining Limited Annual Report 2018How our audit addressed the key audit matter We evaluated the Group’s assessment of indicators of impairment or reversal of impairment and its conclusion not to recognise an impairment or impairment reversal. In particular, we assessed the appropriateness of the impairment assessment that no internal or external indicators of impairment exist by evaluating the current year financial performance of each CGU and the budget and forecast as well as evaluating external market data. In regards to the impairment reversal for Mt Carlton, we performed the following: • • • • compared the current year US$ gold prices to the US$ gold prices when the impairment occurred compared current gold price forecasts to gold price forecasts when the impairment occurred considered the Group’s calculations of recoverable amount, including sensitivities of key assumptions, and compared them to the carrying value of the Mt Carlton assets analysed market data for recent gold mine transactions and compared to the carrying value of the Mt Carlton assets. We also evaluated the adequacy of the disclosures made in the note 8 in light of the requirements of Australian Accounting Standards. Key audit matter Assessment of the carrying value of assets (Refer to note 7 and 8) At 30 June 2018, the Group held mine development and exploration assets of $1,744 million and property, plant and equipment of $572 million. In line with the requirements of AASB 136, the Group has assessed whether there is an indication that an asset may be impaired. This assessment considered performance against budget, adverse changes in the business or regulatory environment and changes to other key assumptions that affect cash flows and discount rates. The Group identified no indicators of impairment for any Cash Generating Unit (“CGU”). AASB 136 also requires an assessment at each reporting date whether there is an indication that an impairment loss recognised in prior periods may no longer exist or may have decreased. If any such indication exists, the Group shall determine whether all or part of the prior impairment loss need to be reversed. The Group previously recognised impairment losses of $148.6 million relating to the carrying value of Mt Carlton’s non-current assets in 2013 as a result of the fall in the gold price combined with a compression of valuations in the gold industry. The Group performed an assessment of whether to reverse a portion of the previously recognised impairment losses related to Mt Carlton up to the carrying amount that would have been determined (net of amortisation) had no impairment loss been recognised. The assessment focused on changes in macro-economic factors, operating and financial performance for the period, and updates to mine plans. The Group anticipates continued strong performance at Mt Carlton which, together with the wider recovery of some gold prices, provides evidence that conditions leading to its past impairment may no longer be present. This is an indicator that the mine assets should be considered for reversal of impairment. The assessment of the carrying values of assets was a key audit matter due to the significant judgement involved in the determination as to whether or not an impairment charge or reversal relating to an asset or CGU is required. 154 154 Independent Auditor’s Report (continued)Evolution Mining Limited Annual Report 2018Other information The directors are responsible for the other information. The other information included in the Group’s annual report for the year ended 30 June 2018 comprises the Director’s Report (but does not include the financial report and our auditor’s report thereon), which we obtained prior to the date of this auditor’s report. We also expect other information to be made available to us after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor's report. 155 155 Independent Auditor’s Report (continued)Evolution Mining Limited Annual Report 2018Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 86 to 101 of the directors’ report for the year ended 30 June 2018. In our opinion, the remuneration report of Evolution Mining Limited for the year ended 30 June 2018 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Marc Upcroft Partner Sydney 17 August 2018 156 156 Independent Auditor’s Report (continued)Evolution Mining Limited Annual Report 2018Shareholder Information Capital (as at 27 September 2018) Share Capital Ordinary shareholders Shareholdings with less than a marketable parcel of $500 worth of ordinary shares Market price 1,696,675,463 20,548 966 A$2.64 Distribution of Fully Paid Shares (as at 27 September 2018) Range 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Unmarketable Parcels Securities 1,548,337,088 99,082,246 24,876,915 21,771,833 2,607,381 1,696,675,463 47,402 % 91.26 5.84 1.47 1.28 0.15 100.00 0.00 No. of Holders 274 3,855 3,311 7,963 5,145 20,548 966 Substantial Shareholders (as at 27 September 2018) La Mancha Group International BV Van Eck Global Fully Paid Ordinary Shares Number 161,891,807 237,760,469 % 1.33 18.76 16.11 38.75 25.04 100.00 4.70 % 9.54 14.01 Total 399,652,276 23.55% 157 Evolution Mining Limited Annual Report 2018Shareholder Information (continued) Twenty Largest Shareholders (as at 27 September 2018) Fully Paid Ordinary Shares Current balance Issued capital % 634,465,783 341,212,175 276,587,196 75,623,736 33,312,932 18,573,836 14,345,892 12,550,549 9,264,513 8,851,406 7,337,371 6,639,806 5,428,171 4,777,489 4,428,723 4,189,751 4,052,188 3,880,000 3,546,354 3,343,936 37.39 20.11 16.30 4.46 1.96 1.09 0.85 0.74 0.55 0.52 0.43 0.39 0.32 0.28 0.26 0.25 0.24 0.23 0.21 0.20 1,472,411,807 86.78 1,472,411,807 224,263,656 1,696,675,463 86.78 13.22 100.00 Name HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA BRISPOT NOMINEES PTY LTD CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED ROXI PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED SMARTEQUITY EIS PTY LTD AMP LIFE LIMITED LUJETA PTY LTD UBS NOMINEES PTY LTD PACIFIC CUSTODIANS PTY LIMITED ZERO NOMINEES PTY LTD BNP PARIBAS NOMINEES PTY LTD CS THIRD NOMINEES PTY LIMITED Total TOTAL Balance of Register Grand TOTAL 1.5 Share Buy-Backs There is no current on-market buy-back scheme. 2. Other Information 158 Evolution Mining Limited Annual Report 2018Corporate Information ABN 74 084 669 036 Board of Directors Jacob (Jake) Klein Executive Chairman Lawrence (Lawrie) Conway Finance Director and Chief Financial Officer Colin (Cobb) Johnstone Lead Independent Director James (Jim) Askew Non-Executive Director Graham Freestone Non-Executive Director Thomas (Tommy) McKeith Non-Executive Director Andrea Hall Non-Executive Director Company Secretary Evan Elstein Registered Office Level 24, 175 Liverpool Street SYDNEY NSW 2000 Postal Address Level 24, 175 Liverpool Street SYDNEY NSW 2000 T: F: +61 2 9696 2900 +61 2 9696 2901 Share Register Link Market Services Level 12, 680 George Street SYDNEY NSW 2000 T: F: +61 1300 554 474 +61 2 9287 0303 Email: registrars@linkmarketservices.com.au Auditor PricewaterhouseCoopers One International Towers Sydney Watermans Quay BARANGAROO NSW 2000 T: F: +61 2 8266 0000 +61 2 8266 9999 Website www.evolutionmining.com.au Stock Exchange Listing Evolution Mining Limited (EVN) shares are listed on the Australian Securities Exchange 159 Evolution Mining Limited Annual Report 2018This page has been left blank intentionally 160 Evolution Mining Limited Annual Report 2018 Level 24, 175 Liverpool Street SYDNEY NSW 2000  +61 2 9696 2900  +61 2 9696 2901 ASX: EVN W W W . 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