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 2018 4
Evolution Mining Limited Annual Report 2018 1.
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$80M in direct spend with local organisations■■52% local employment across our operationsEnvironmental■■Four Environmental Enhancement projects underway■■Zero material environmental incidents■■Zero fines for environmental incident/non-conformanceDiversity■■50% female graduate intake for FY19■■Flexible work arrangements and helping parents return to work■■4% of our employees identify as Aboriginal or Torres Strait IslanderSocial licence to operate■■High approval rating from our stakeholders1 Our vision, strategy and values
Our vision
Inspired people creating Australia’s premier gold company
– a sustainable business that prospers through the cycle.
We have grown into a globally relevant mid-tier gold producer
since inception in November 2011.
Our strategy
We have a clear and consistent strategy:
■ Build a reputation for reliability and transparency
■ Reduce All-in Sustaining Costs
■
■
Increase free cash flow per share
Increase returns via dividends
■ Extend mine life
Our values
guide our behaviours and decisions in the workplace every day:
Safety:
Think before we act,
every job, every day.
Excellence:
We take pride in our
work, deliver our best
and always strive to
improve.
Accountability:
If it is my responsibility,
I own it – good or bad.
Respect:
We trust each other, act
honestly and consider
each other’s opinion.
6
Evolution Mining Limited Annual Report 2018 Sustainability Report
DIRECT SPEND
CONTRIBUTION TO THE AUSTRALIAN ECONOMY
80M
A$
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 2018 8
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 2018 Corporate 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 2018 Safety
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 frames Safety (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 2018 Emergency 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 2018 Pre-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 2018 Our 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 2018 Our 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 2018 Our 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 2018 Our 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 2018 Act 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 2018 20
Evolution Mining Limited Annual Report 2018 SOCIAL 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 2018 Somewhere 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 2018 sites 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 2018 Traditional 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 2018 Charmaine – 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 2018 Our 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 2018 Protecting 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 2018 Protecting 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 2018 Protecting 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 2018 Protecting 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 2018 Protecting 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 2018 Protecting 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 2018 Sunrise at the Mungari processing plant (photo by Andrew Millar)
33
Evolution Mining Limited Annual Report 2018 Evolution – 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 2018 Chief 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 2018 Chief 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$797 per ounce.” Bob Fulker, COO Chief Operating Officer’s Review (continued)
Mt Rawdon
Ernest Henry
The Ernest Henry copper-gold operation is a large-scale,
long-life asset operated by Glencore. The operation
employs a sub-level caving ore extraction method. It is
located 38km north east of Cloncurry, Queensland. In
November 2016 Evolution acquired an economic interest
in Ernest Henry that will deliver 100% of future gold
and 30% of future copper and silver produced within an
agreed life of mine area. Outside the life of mine area,
Evolution will have a 49% interest in future copper, gold
and silver production from Ernest Henry. The Ernest
Henry transaction has materially improved the quality
and longevity of the Group’s portfolio and reduced the
cost profile.
Total FY18 gold production of 95,209oz was above the
top end of the 85,000 – 90,000oz guidance range.
AISC of A$(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 2018 FY19 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 2018 Innovation 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 2018 High-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 2018 Gold bar produced at Cracow
45
Evolution Mining Limited Annual Report 2018 Discovery
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 2018 Discovery (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 2018 Discovery (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 2018 Discovery (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 2018 Discovery (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 2018 Discovery (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 2018 Discovery (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 north Discovery (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 2018 Mungari Exploration team
54
Evolution Mining Limited Annual Report 2018 55
Evolution Mining Limited Annual Report 2018 Mineral 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 2018 Mineral 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 2018 Mineral 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 2018 Mineral 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 2018 Board 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 2018 Chief 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 2018 Chief 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 2018 Evolution 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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 ($) at 30 June closing
2018
263,388
250,762
795,083
15.57
7.5
3.51
2017
217,607
206,588
713,855
13.28
5.0
2.41
2016
(24,349)
134,496
607,551
(1.75)
3.0
2.33
2015
100,115
106,050
272,656
13.71
2.0
1.15
2014
50,017
50,017
207,556
7.06
2.0
0.70
(i)
Refer to the Profit Overview section in the Operating and Financial Review for a reconciliation of the underlying profit for
the year.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' Report
Remuneration Report (Audited) (continued)
(d) Executive Remuneration Outcomes (continued)
(ii) STIP
Component
Participation
Composition
Performance
conditions
Performance measure
The Overall Group STIP applies to site based employees at the level of Manager and all Group office
employees.
The Group STIP is a cash bonus, up to a maximum percentage of TFR, based on the employee job
band.
It is assessed and paid annually conditional upon the achievement of key company objectives and
individual KPIs. For the 2018 financial year, the company objectives were focussed in the areas of
safety, group cash contribution, production, costs and a strategic imperative element.
Award parameters The Group STIP is currently set at between 10% and 60% of TFR for Target achievement, with a
maximum of 20%-90% of TFR for Stretch achievement, depending on the employee job band. Details
of the Group STIP paid to the Directors and KMP are shown in the Remuneration Table in section
d(iv). The Group's performance against the STI Scorecard for FY18 is as follows:
STIP
Scorecard
HSE
SSO Frequency Rate (SSOFR)
Environmental Critical Controls
Compliance - top 3 Hazards (%)
Profitability Group Cash Contribution ($
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, $28.3 million of value beyond budget was achieved with all operations contributing to
the result through improvements in productivity and commercial contract terms and efficiency gains.
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Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' Report
Remuneration Report (Audited) (continued)
(d) Executive Remuneration Outcomes (continued)
(ii) STIP (continued)
Component
Performance measure
2018
Total STIP Granted
($)
% 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 2018 Directors' 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 2018 Directors' 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 2018 l
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(
)
i
i
i
(
)
v
i
(
)
v
(
)
i
v
(
)
i
i
v
(
Directors' Report (continued)Evolution Mining Limited Annual Report 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Directors' 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 2018 Auditor’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 2018 Consolidated 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 2018 Consolidated 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 2018 Consolidated 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 2018 Consolidated 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Notes 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 2018 Director’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 2018 Independent 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 2018 How 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 2018 Other 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 2018 Report 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 2018 Shareholder 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 2018 Shareholder 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 2018 Corporate 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 2018 This 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 . E V O L U T I O N M I N I N G. C O M . A U