Cognetivity Neurosciences
Annual Report 2017

Plain-text annual report

ANNUAL REPORT For the year ended 30 June 2017 Crater Gold Mining Limited (ASX: CGN) ABN 75 067 519 779 Contents Chairman’s Statement Review of Operations Directors' Report Auditor's Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors' Declaration Independent Auditor's Report ASX Additional Information Corporate Directory Page 2 3 11 21 22 23 24 25 26 50 51 55 57 Chairman’s Statement Dear Shareholders, Development of the Crater Mountain tenements has been our main focus since 2012. Our driving force was the late Peter Macnab, a geologist with an iconic reputation in Papua New Guinea, credited with more than 180m oz of discoveries, including Lihir. Mr Macnab demonstrated success with the discovery of an epithermal gold zone (known as the Mixing Zone) at Nevera, and a number of drill-holes indicative of porphyry mineralisation. In a declining gold price environment from 2013, which made raising capital difficult, the Company began to focus on quick start mining through early development of a gold mine at the High Grade Zone ("HGZ") to generate cash internally, with exploration activities temporarily suspended. Mr Macnab sadly passed away in 2015. In his absence, performance in the HGZ only brought partial success as Level 1960 was found to have been significantly mined out by previous artisanal miners. Steps to open the Level 1930 adit started in late 2016, but the Company had by then encountered problems exacerbated by the accrual of substantial debt. Throughout these difficult years, I have continuously supported the Company financially through loans from my company Freefire Technology Limited ("Freefire"). By early 2017, these loans, aggregated with the outstanding convertible notes and net trade payables, made it clear that the Company required a thorough transformation. With this in mind, we embarked on a partially underwritten rights issue earlier this year, and it is with regret that this issue eventually failed because of inadequate subscription of the rights. We are now preparing for the launch of a new rights issue that will be fully underwritten by my company Freefire, the proposed details of which were announced on September 1, 2017. Practical actions, which have been taken in tandem with the new rights issue, will result in the refinancing of the Company to substantially free it from debt and provide adequate working capital going forward. A new strategy has been adopted which will not only include an increased focus on management of production at the HGZ, but the resumption of orderly and affordable exploration on a progressive basis. To ensure that the new strategy is met, we have already put in place a team of new management professionals including Mining Consultant, Rob Usher with over 25 years’ experience in gold production including years in PNG at the Porgera mine, Chief Financial Officer, Matthew O'Kane with over 20 years’ experience including MNCs as well as in public mining companies and Chief Operating Officer, Curtis Church with over 25 years of mining and exploration operating experience in various mines around the world. These gentlemen have been on the job since July and quality preparatory work has already been completed. We will also shortly be adding an experienced Geologist to the technical advisory committee to the Board to complement the engineering skills of Rob Usher. The Board and I will continue to seek ways to improve the professional leadership of the Company. We are currently experiencing a paradigm change in the outlook in the Company and I certainly feel excited by the prospects of the revived energy that now exists in the Company. Samuel Chan Wing-Sun Chairman 29 September 2017 Crater Gold Mining Limited 2 Review of Operations Company Focus – High Grade Zone project at Crater Mountain, Papua New Guinea The year ending 30 June 2017 was a challenging one for Crater Gold Mining Limited (“CGN” or the “Company”) and its subsidiary companies (“the Group”). The Company started the year focusing on mining the High Grade Zone (“HGZ”) at its flagship Crater Mountain project at the 1960 Level and stoping up towards surface at 1990 Level. However during this process considerable artisanal workings were discovered and the resulting gold production did not meet target. As a consequence, the Company announced the development of a second Adit at the 1930 level, 30m below the existing 1960 level. It is the Company’s belief that the area between 1930 level and 1960 level has not been mined by artisanal miners due to increased depth from surface, unlike the area between 1960 level and surface which was accessible by artisanal mining from surface. The Company is therefore confident that the addition of the Second adit will result in higher gold production. As at the end of the year the second adit at the 1930 level had been developed for approximately 27 metres and is estimated to require an additional 100 metres of development to reach the zone of mineralisation with the appropriate target grades for production ore. The highlight of the year saw the Company announce the completion of a maiden resource estimate in accordance with JORC guidelines for its HGZ project, part of the Crater Mountain Gold Project in Papua New Guinea (PNG). The near term objective is to establish the Company as a profitable gold producer. We anticipate that the HGZ mine will generate sufficient cash flow to fund further expansion of the HGZ mine and importantly, to fund the resumption of exploration activities at Crater Mountain. If sufficient cash flow from the HGZ mine is generated it can potentially eliminate the need for further external capital to fund exploration activities in the future. While the immediate focus remains on generating positive cash flows from the HGZ mine, our goal is also to increase the current JORC compliant resource of 24Mt at 1.0 g/t Au for 790,000 ounces at the nearby Mixing Zone project at Crater Mountain through further exploration work (refer ASX Release of 24 November 2011: “Crater Mt – Initial Resource Estimate”). This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. The Company is not aware of any new information or data that materially affects the information contained in that ASX release. All material assumptions and technical parameters underpinning the resource estimate continue to apply and have not materially changed). Crater Mountain is located 50 km southwest of Goroka in the Eastern Highlands Province of PNG. Formerly a tier-1 BHP asset, there has been in excess of 14,500 metres of diamond drilling to date, the majority focussed on the Nevera prospect, which hosts the HGZ mine and the Mixing Zone project. High Grade Zone gold mine, (HGZ) Crater Mountain, Papua New Guinea (100%)   Due diligence review of HGZ Mine led by Mr Robert Usher, mining engineer and former Executive General Manager of PanAust Asia Project review included high-level review of geological data by experienced career geologist, Mr Dorian L. (Dusty) Nicol  Maiden HGZ JORC gold resource Project Review The Company undertook a project review during the year. Although the Board remains confident that the Crater Mountain project has good potential to deliver acceptable financial returns to the Company, delays in the HGZ mine meeting production and profit targets, and the resulting lack of progress on exploration work, prompted a project review. As part of the Review, a team visited the HGZ mine in May 2017 to conduct a due diligence review. The team was led by Mr Robert Usher. Mr Usher is a mining engineer with more than 25 years’ experience. He was Executive General Manager of PanAust Asia from 2006 to 2014 and has significant gold production experience including in PNG with Placer Dome at its Porgera operation from 1993 to 1999. The work being supervised by Mr Usher at this time includes the completion of metallurgical test-work and detailed mine planning. If results are successful, it is anticipated the Company would be able to provide more definition around the deliverables and targets for the development of sustainable, cash flow positive commercial gold production. This cash would then be utilised to further advance exploration work at the Crater Mountain Project. Crater Gold Mining Limited 3 Review of Operations In August 2017 Mr Dorian L. (Dusty) Nicol undertook a high-level review of Nevera Prospect exploration data, including a visit to site to spend time with our local PNG geologist, and to view the project first hand. Mr Nicol is a career geologist with over 40-years’ experience in discovery and resource development. He has worked extensively in Papua New Guinea for Esso Minerals and Rennison Gold Fields, including on Crater Mountain and Kainantu gold projects. HGZ Gold Mine Development activities at the HGZ mine were put on hold initially pending an internal review due to the inability of the mine to generate the cash flows expected by the Board. The result of that review was the decision to initiate an external third party review, and also to increase the human resources available to manage in country activities in PNG. As at the end of the year the second adit at the 1930 level had been developed for approximately 27 metres and is estimated to require an additional 100 metres of development to reach the zone of mineralisation with the appropriate target grades for production ore. The Company started the year focusing on mining the HGZ at the 1960 Level and stoping up towards surface at 1990 Level. However during this process considerable artisanal workings were discovered and the resulting gold production did not meet target As a consequence, the Company announced the initiation of development of a second adit at the 1930 level, 30m below the existing 1960 level. The area between 1930 level and 1960 level has likely not been mined by artisanal miners due to the increased depth from surface, unlike the area between 1960 level and surface, which was accessible from surface by artisanal mining methods. The Company is confident that the addition of the second adit will result in higher gold production. The adit will access the depth continuity of the central block of the high-grade zone as demonstrated by the previous drilling program undertaken by the Company. The HGZ is high-grade high-sulphidation epithermal quartz-pyrite-gold mineralisation, extending from surface to possibly several hundred metres depth (possibly in excess of 500m); local artisanal miners produced an estimated 15,000 ounces from a small area of shallow workings (maximum 50m depth as encountered by the Company) in the base of a mineralised spur from 2005 to 2011. HGZ JORC resource  Maiden high grade JORC gold resource   Potential to increase gold resource substantially 3 major gold veins identified contain most the gold During the year the Company announced a maiden inferred resource estimate reported in accordance with JORC guidelines for its HGZ gold mining project of 44,500 tonnes at 11.9 g/t for 17,100 ounces of gold (cut- off grade of 5 g/t Au). The initial Inferred Resource at HGZ comprises: Resource Category Tonnes Grade (Au g/t) Inferred - cut-off of 5g/t au 44,500 Within this resource at a higher cut–off of > 7.5g/t Au 23,500 11.9 17.2 Gold Oz 17,100 13,000 As part of the resource definition, mapping of the HGZ showed three distinct major high-grade gold veins (Figure 1). The three veins are closely linked and are estimated to carry 11,800 ounces of gold. This will allow more efficient, targeted gold production. Crater Gold Mining Limited 4 Figure 1 - - N-S Composite Sections: The 3 identified high-grade veins N1, JL1 and L1 Review of Operations This maiden resource at the HGZ marked a significant milestone for the Company, confirming the potential for profitable gold mining from the HGZ mine. The report also provided us with more detail of the high-grade veins enabling us to target more selective mining of the 3 main high-grade veins going forward. Whilst the initial JORC resource may seem modest, the gold is accessible and all infrastructure is in place, allowing the Company to readily mine the 3 veins as well as other cross cutting structures. The maiden resource estimate only considered the HGZ as identified to date. Development of the 1930 Level will pass through approximately 100m of previously unexplored ground adjacent to the high-grade zone. This area is considered prospective for finding additional gold bearing structures and it is the Company’s plan to conduct further underground drilling from the 1930 level adit as a result. The potential to increase the resource is considered substantial given that drilling to date has mostly been confined to a maximum depth of 75m from surface (Figure 2). However there is also evidence from drilling that gold is encountered at least to a depth of 128m from surface (NEV022) Crater Gold Mining Limited 5 Review of Operations Figure 2 - Mineralised Zones at Crater Mountain Deposit. (9281000 mN) Future strategy The Company’s strategy is to become a profitable gold producer at the HGZ mine, whilst at the same time restarting further exploration drilling work in both the HGZ and the Mixing Zone. Gold production at the HGZ mine is anticipated to generate a positive cash flow for the Company, enabling it to potentially reduce or eliminate the need for further external funding in the future, and to enable it to further develop the flagship Crater Mountain project and its other prospects in PNG and Queensland, Australia. Corporate The Company undertook a Corporate Review with the objective to restructure the Company’s debt profile and best position the Company to advance its existing projects. Activities included engaging with third parties for a detailed review of the Company’s projects, strategy and options to attract new funding to eliminate material debt. Importantly, as announced to ASX on 16 February 2017 and 24 March 2017, Mr Sam Chan has committed to support the Company. The Company has received consistent support from Mr Sam Chan via Freefire Technology Ltd ("Freefire") and this support is ongoing as evidenced by Freefire's letter of support to the Company to September 2018. Crater Gold Mining Limited 6 Review of Operations Rights Issue On 27 July 2016 the Company announced an underwritten 1:8 rights issue at $0.07 per share to raise $2.12 million. The rights issue was underwritten by Freefire Technology Ltd, a company associated with Chairman Mr Sam Chan. The rights issue was undersubscribed in the amount of $822,971. The shortfall was taken up by the underwriter, Freefire Technology Limited. Appointment of Mr Richard Johnson as Director The Company announced the appointment of Mr Richard Johnson as a Director of the Company. Mr Johnson acted as the Company’s PNG General Manager and also continued in that role until end of October 2016. Loan Facility The Company advised that it secured a loan facility of up to $800,000 from the Industrial and Commercial Bank of China (Asia) Limited (ICBC, or the Bank). The ICBC loan facility is repayable on call and is guaranteed by interests associated with the Chairman, Mr Sam Chan. Valuation of PNG assets In order to address the underlying reason for the Disclaimer of Conclusion on the Company’s 31 December 2016 Financial Statements, an independent valuation of the Company’s projects in PNG was commissioned. The valuation process was completed and announced on 15 June 2017. The conclusion was that the preferred market value of the PNG assets was estimated at $8,000,000, which resulted in an impairment of non-current assets by $15,049,107. Valuation of Australian assets The Company’s Croydon project was independently valued in March 2017. The conclusion of this valuation for the Croydon projects was $1,075,000. Given the Company’s written down value as at year end was $987,819 it was determined that no valuation adjustment was required. Annual General Meeting All resolutions at the Company’s 2016 Annual General Meeting on 30 November 2016 were passed. Subsequent to end of year Rights Issue On the 24 July 2017, the Company announced; (i) an eleven (11) for two (2) Entitlement Offer of up to 1,496,652,416 fully paid ordinary shares (“New Shares”) at an issue price of $0.01 per New Share to raise up to $14,966,524 before costs; (ii) the proposed sale of 100% of its Croydon Project for $1.2 million in cash; and (iii) a series of associated initiatives to refocus the Company and accelerate the development of its flagship Crater Mountain Project in Papua New Guinea. The Entitlement Offer had a minimum raise of $13.0 million so together with the proceeds from the Croydon sale the minimum proceeds would have been $14.2 million. Subject to certain terms and conditions including Shareholders other than Freefire taking up entitlements to $2.1 million, Patersons Securities Limited intended to partially underwrite the Entitlement Offer, which when combined with Freefire’s underwriting commitment would have resulted in a minimum amount of $13.0M raised by the Entitlement Offer. On the 30 August 2017 the Company announced that there had been insufficient take-up of rights by existing shareholders to trigger the underwriting obligations and, as a result, the Rights Issue had been terminated. All application funds received were refunded to applying shareholders. Short Term Bridging Facility On 9 August 2017 the Company executed a Short Term Bridging Facility with Freefire for $3,504,915. The purpose of the bridging facility was to provide the Company funds to repay the Convertible Notes with interest upon maturity. Convertible Notes The Company’s Convertible Notes (CGNG) due on the 22nd of August 2017 were fully repaid upon expiry. The convertible notes were removed from official ASX quotation at the close of trading on the 19 September 2017. Crater Gold Mining Limited 7 Review of Operations Fully underwritten Rights Issue On 1 September 2017 Crater Gold Mining Ltd announced details of the Company’s proposed fresh rights issue. The Company is in the process of preparing the fresh rights issue offer document. It is currently proposed that the Fresh Rights Issue will be made on a 9:2 basis, at a price of $0.01 per share to raise approximately $12,245,000. The Fresh Rights Issue will be fully and directly underwritten by Freefire Technologies Ltd (Freefire), a company associated with Chairman, Mr Sam Chan. It was also announced that an interim loan of $2 million would be advanced to the Company by Freefire in order to enable the repayment of outstanding creditors prior to the closing of the fresh rights issue. To date the Company has received $0.8 million under this facility. The Company and Freefire have agreed to abandon the sale of the Croydon Project to Freefire. Accordingly, that project will remain within the Company and the prospectus for the Fresh Rights Issue will address the allocation of funds to advance that project. Alex Molyneux On 5 September 2017 the Company announced that Mr Alex Molyneux, previously the proposed Chairman of the Company under the previous rights issue terms, would have no ongoing role with the Company. The Company confirmed that it anticipated the other operational management previously announced would have ongoing involvement with the Company. Technical work resumes on HGZ mine development On the 14 August 2017 the Company announced it had resumed technical work on the development of HGZ Gold Mine at Crater Mountain. Technical consultants have been retained to work to confirm final mine plans. Mining Associates Limited (“MA”) has been retained to assist CGN confirm various mine planning parameters and develop a revised mine plan. In particular, the Company will work with MA to identify stoping blocks with gold grades in excess of 10g/t, both above the 1960 level and between the 1930 and 1960 levels. MA will also assist with confirmation of the Company’s recommended mining method and design of horizontal and vertical development between 1930 and 1960 levels, to most efficiently extract the targeted gold-bearing ore. Minmet Services Pty Ltd (“Minmet”) has also been retained to assist with metallurgy for restart of HGZ gold Mine processing operations. Minmet’s scope of work includes metallurgical test work and analysis to confirm operating plans but also direct participation in the re-start of operations and identification of opportunities for optimisation of the plant. An early batch plant run with representative ore will be undertaken shortly to collect plant data to ensure laboratory test work is aligned with actual plant operating conditions. The detailed mine planning and plant optimisation work will be undertaken in parallel with the resumption of development of the 1930 level adit at the HGZ Gold Mine. Schedule of Tenements Set out below is the schedule of tenements that the Company and its subsidiaries hold as at 30 June 2017. Schedule of Crater Gold Mining Limited tenements: Registered Holder % Owned Particulars Project Name EPM 8795 Croydon EPM 13775 Wallabadah EPM 16002 Foote Creek CGN CGN CGN EPM 18616 Black Mountain CGN EL 1115 EL 2203 EL 2249 EL 2318 EL 2334 EL 2335 Crater Mountain Anomaly Ltd 1 Ubaigubi Anomaly Ltd 1 Crater Mountain Anomaly Ltd 1 South Crater Anomaly Ltd 1 Crater Mountain Anomaly Ltd 1 Crater Mountain Anomaly Ltd 1 100 100 100 100 100 100 100 100 100 100 Status Granted Expiry Area (Km2) 6/09/2018 19.2 Renewal lodged 5/3/2017 32 Granted 30/01/2018 28.8 Granted 18/06/2018 Renewal lodged 25/09/2016 Renewal lodged 10/09/2017 Renewal lodged 10/11/2017 Renewal lodged 10/09/2017 Renewal lodged 21/05/2017 Renewal lodged 21/05/2017 96 41 88 10 20 68 78 ML 510 HGZ Anomaly Ltd 1 100 Granted 4/11/2019 1 Anomaly Limited is CGN’s 100% owned PNG subsidiary Crater Gold Mining Limited 8 Review of Operations On 3 July 2017 the Company received notification that the renewal application for license EL1972 had be denied by the Minister of Mining of Papua New Guinea effective 29 June 2017. After receiving this decision the Company decided to surrender licence EL2180. The surrender of EL2180 was effected by the Government of Papua New Guinea on 15 August 2017. These licenses were both located on Fergusson Island. On 25 September 2017 the Company was notified by the Queensland Government Department of Natural Resources and Mines that EPM13775 had been renewed until 6 March 2020. The information contained in this report relating to exploration results and mineral resource estimate at Crater Mountain PNG is based on and fairly represents information and supporting documentation prepared by Mr Richard Johnson, PNG General Manager of Crater Gold Mining Limited. Mr Johnson is a Fellow of The Australasian Institute of Mining and Metallurgy and has the relevant experience in relation to the mineralisation being reported upon to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Johnson consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. COMPETENT PERSONS STATEMENT Presentation of technical data and Competent Persons review Resource estimates contained in this report were previously announced in the Company’s ASX news releases of: • • 21 December 2011 Initial Resource Estimate (This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012). The Company confirms that it is not aware of any new information or data that materially affects the information included in that announcement, and that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. 14 November 2016 titled ‘Maiden JORC Gold Resource at HGZ Project, Crater Mountain, PNG’. Such resource estimates are subject to the relevant assumptions, qualifications and procedures described in the relevant ASX news releases. To date, the Company has only announced estimates of Inferred Mineral Resources. Nothing in this report or prior announcements by the Company constitutes presentation of Mineral Reserves. As such, economic analysis cannot be applied based on the date contained. The information contained in this report relating to exploration results and mineral resource estimates is based on and fairly represents information and supporting documentation prepared by Mr Dorian L. (Dusty) Nicol or prepared by appropriately qualified external technical experts and reviewed by him. Mr Nicol has been assisting the Company as a technical consultant relating to his areas of expertise. Mr Nicol is a Fellow of The Australasian Institute of Mining and Metallurgy and has the relevant experience in relation to the mineralisation being reported upon to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Nicol consents to the inclusion in this report of the matters based on his information in the form and context in which it appears. The Company has an ’exploration target’ of ‘multi-million ounces’ for the epithermal gold resources at the Nevera Prospect at Crater Mountain Project. A targeting exercise was carried out by Mining Associates (“MA”) for the Nevera prospect using a simple 10x10x10m block model informed by 5 m bench channel samples (not including rock chips) and a Nearest Neighbour (“NN”) estimation technique with a limited search range. The NN method was chosen so that no averaging of the grades occurred although there is a risk that estimates can be over selective. As the initial target is highly selective narrow underground mining, this is an acceptable approach. An initial examination of the composited data shows two natural breaks in Au grade distribution. One at about 0.4 g/t Au and a second at about 10 g/t Au. MA suggests that these represent low grade and high mineralisation events respectively. The block model was informed using a 100m spherical search so that no assumption was made of the direction and trend of mineralisation. Informing samples consisted of 2,766 5 m downhole composites and 1,479 5 m bench samples. No domain selection was used, but no blocks above the topography were estimated. Volume covered is about 700 m long, 700 m wide and 100 m to 350 m deep (variable with topography). This is certainly suitable for both selective mining and a bulk open pit. A bulk density of 2.5 t/m3 was used for reporting, the grade tonnage plot using cut-off grades from 1 to 20 g/t Au was reported. The target for Nevera prospect bulk open pit mining using a cut-off grade 1 g/t Au is 24 Mt @ 2.7 g/t Au for 2Moz of contained Au. The target for the HGZ only for selective underground mining using a cut-off grade 10g/t is 60-100koz @ 13-30 g/t. The exploration targets are conceptual in nature as there has been insufficient exploration to define them as Mineral Resources. It is uncertain if further exploration will result in the determination of a Mineral Resource under the JORC Code 2012. The exploration targets are not being reported as part of any Mineral Resource. No new information or data This report contains references to exploration results and Mineral Resource estimates, all of which have been cross-referenced to previous announcements made by the Company. The Company confirms that it is not aware of any new information or data that Crater Gold Mining Limited 9 materially affects the information included in the relevant announcements and in the case of estimates of Mineral Resources, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. Review of Operations Crater Gold Mining Limited 10 Directors’ Report The Directors present their report on the consolidated entity (referred to hereafter as "the Group") consisting of Crater Gold Mining Limited (referred to hereafter as "the Company") and its controlled entities for the year ended 30 June 2017. Directors The following persons were Directors of Crater Gold Mining Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: S W S Chan (Non-executive Chairman) R D Parker (Managing Director) T M Fermanis (Non-executive Deputy Chairman) R Johnson (Technical Director, appointed 19 July 2016) L K K Lee (Finance Director) D T Y Sun (Non-executive Director) Activities The principal activities of the Group consist of the exploration, evaluation and exploitation of potential world class gold and other base metal projects. Further details of the Group’s activities are included in the Review of Operations on pages 3-10 of this report. Review of Operations and Results The Group incurred a loss of $25,284,741 for the year ended 30 June 2017 (2016: loss of $10,886,589). Further details of the Group’s operations are included on pages 3-10 of this report. Dividends No dividends of the Company or any entity of the Group have been paid, declared or recommended since the end of the preceding year. The Directors do not recommend the payment of any dividend for the year ended 30 June 2017. Significant Changes in the State of Affairs The Company continued to develop its gold mining production at the HGZ mine. In addition further work was conducted on exploration activities across the Company’s tenements. During the year the Company made two significant adjustments to the carrying values of assets. The first adjustment, as previously disclosed in the half-year accounts, was the decision to fully impair the Mining Assets for the amount of $6,953,390. This decision was taken as 1960 level has not produced the quantities of gold originally expected and the Board felt it prudent to fully impair expenditure incurred to date in the development of the 1960 level adit. Secondly, in order to address the underlying reason for the Disclaimer of Conclusion on the Company’s 31 December 2016 Financial Statements, an independent valuation of the Company’s projects in PNG was commissioned. The valuation process was completed and announced on 15 June 2017. The conclusion was that the preferred market value of the PNG assets was estimated at $8,000,000, which resulted in an impairment of non-current assets by $15,049,107. The Company’s Corydon project was independently valued in March 2017. The conclusion of this valuation for the Croydon projects was $1.075 million. Given the Company’s written down value as at year end was $987,819 it was determined that no valuation adjustment was required The Directors are not aware of any other significant change in the state of affairs of the Company that occurred during the financial year other than as reported elsewhere in the Annual Report. Events Subsequent to Reporting Date On 3 July 2017 the Company received notification that the renewal application for license EL1972 had been denied by the Minister of Mining of Papua New Guinea. After receiving this decision the Company decided to surrender licence EL2180. The surrender of EL2180 was effected by the Government of Papua New Guinea on 15 August 2017. These licenses were both located on Fergusson Island. On 24 July 2017 the Company announced a capital raising and plans for restructuring of the Company. The capital raising was an 11 for 2 renounceable pro-rata entitlement offer at an issue price of $0.01 to raise at least $13.0 million. It was also proposed to sell the Croydon project for $1.2 million. The recapitalisation would also involve the appointment of new members of the board and new management. A prospectus was released on 26 July 2017 and followed up with a supplementary prospectus on 9 August 2017. On 9 August 2017 the Company executed a Short Term Bridging Facility with Freefire for $3,504,915. The purpose of the bridging facility was to provide the Company funds to repay the Convertible Notes with interest upon maturity. On 22 August 2017 the Convertible Notes expired. All Convertible Notes and accrued interest were paid out by early September 2017. On 1 September 2017 the Company advised that the capital raising had been terminated. It was also announced that a fresh rights issue on a 9 for 2 basis was to be launched forthwith. The Company expects to make a further announcement on the fresh rights issue in October. At the same time as cancelling the original rights issue it was confirmed that the sale of the Croydon project would also be abandoned. It was also announced that an interim loan of $2 million would be advanced to the Company by Freefire in order Crater Gold Mining Limited 11 Directors’ Report to enable the repayment of outstanding creditors prior to the closing of the fresh rights issue. To date the Company has received $0.8 million under this facility. On 5 September 2017 the Company announced that Mr Alex Molyneux, previously the proposed Chairman of the Company, would have no ongoing role with the business. The Company confirmed it anticipated the other operational management previously announced the 24 July 2017 ASX announcement would have ongoing involvement with the Company. On 25 September 2017 the Company was notified by the Queensland Government Department of Natural Resources and Mines that EPM13775 had been renewed until 6 March 2020. Likely Developments Likely developments in the Group’s operations in future financial years and the expected results of those operations are referred to on pages 3-10. Future financial performance and outcomes depend on a number of variables such as the Group’s ability to continue to attract funding and/or one or more joint venture partners, or alternatively to be bought out by a suitor. Material business risks that could adversely affect the Company’s financial performance include availability of funding and/or inability to attract one or more joint venture partners; political risk in the Company’s overseas country of operation. Information on Directors and Secretary The Directors and Secretary of the Company in office at the date of this report, unless otherwise stated, and their qualifications, experience and special responsibilities are as follows: S W S Chan BA (Non-Executive Chairman), age 68 Mr Chan has been a Director of the Company since 29 January 2013 and was appointed as Non-Executive Chairman on 11 March 2013. Mr Chan is a director and the controller of Freefire Technology Limited (“Freefire”), the major shareholder in the Company. Mr Chan received a Bachelor’s degree from the University of Manchester, UK in 1970 and qualified as a chartered accountant in 1973. He was the company secretary of Yangtzekiang Garment Limited from 1974 to 1988 and has been a director of Yangtzekiang Garment Limited since 1977. Mr Chan was appointed the Managing Director of YGM Trading Limited from 1987 to 2006 and the Chief Executive Officer of YGM Trading Limited from 2006 to 2010. He has been the Vice Chairman of the board of YGM Trading Limited since 2010. Mr Chan is also on the board of Yangtzekiang Garment Limited. Mr Chan was formerly a Director of Hang Ten Group Holdings Limited (listed in Hong Kong) from January 2003 to March 2012. As at the date of this report, Mr Chan has an interest of 160,085,929 ordinary shares and 100,241 Convertible Notes in the Company through his control of Freefire Technology Limited and 2,800,000 options over ordinary shares in the Company. R D Parker B Eng (Managing Director), age 46 Mr Parker has been a Director of the Company since 12 March 2013 and was appointed Managing Director on 1 April 2015. Mr Parker lives in Hong Kong. He is a qualified Marine Engineer and Marine Industries Manager having graduated from Southampton Institute of Higher Education, Marine Division, in Warsash, United Kingdom. Mr Parker is a professional Company Director. As at the date of this report, Mr Parker has an interest in 96,036 ordinary shares and 2,800,000 options over ordinary shares in the Company. T M Fermanis F Fin, MSAA (Executive Deputy Chairman), age 53 Mr Fermanis has been a Director of the Company since 2 November 2009 and was appointed Deputy Chairman on 1 April 2015. Mr Fermanis has extensive experience in stockbroking and has been an advisor since 1985 with extensive experience in the resource sector. He has been involved in gold exploration in PNG for a number of years. Mr Fermanis is a member of the Remuneration and Nomination Committee. Crater Gold Mining Limited 12 Directors’ Report As at the date of this report, Mr Fermanis has an interest in 602,311 ordinary shares, 40 Convertible Notes and 2,800,000 options over ordinary shares in the Company. R L Johnson BSc Eng Mining, FAusIMM (Technical Director), age 65 Mr Johnson was appointed as Technical Director on 19 July 2016. Mr Johnson, who acts as the Company’s PNG General Manager, is a mining engineer with extensive experience managing projects in many regions, including PNG. Between 2002 and 2005, Richard was responsible for turning around DRD Gold’s high grade underground Tolukuma Gold Mine in PNG’s Central Province into a highly profitable operation. He has also held senior executive and Director positions in several other resources companies in the region, including Allied Gold and DRDGold. As at the date of this report, Mr Johnson has an interest in 781,250 ordinary shares and 2,800,000 options over ordinary shares in the Company L K K Lee MCom, MAppFin, CPA (Finance Director), age 56 Mr Lee has been a Director of the Company since 6 June 2014 and was appointed Finance Director on 1 April 2015. Mr Lee received a Bachelor of Commerce degree and a Master of Commerce degree from the University of New South Wales, Australia. He also holds a Master of Applied Finance degree from the Macquarie University, Australia. He has over 25 years of experience in finance, corporate finance, management, auditing and accounting. He worked in an international accounting firm for several years and has worked as group financial controller, chief financial officer and director of listed companies on the Hong Kong Stock Exchange for over 10 years. Mr Lee is a member of the Hong Kong Institute of Certified Public Accountants and a member of CPA Australia. Mr Lee is a member of the Audit Committee. As at the date of this report, Mr Lee has an interest in 2,800,000 options over ordinary shares in the Company. D T Y Sun (Non-executive Director), age 69 Mr Sun has been a Director of the Company since 29 January 2013. Mr Sun obtained a Bachelor of Economics from the University of Tasmania and held management positions with the Ford Motor Company in Melbourne and in Brisbane, as well as with Citibank NA and Lloyds Bank Plc in Hong Kong. He has been an executive director of several listed companies in Hong Kong and has been engaged in advisory services on strategic planning and corporate development, mainly in corporate finance, since 1991. Mr Sun is Chairman of the Audit Committee and of the Remuneration and Nomination Committee. As at the date of this report, Mr Sun has an interest in 2,800,000 options over ordinary shares in the Company. Heath Roberts Dip Law (SAB), Grad. Dip Legal Practice (UTS) (Company Secretary) Mr Heath Roberts was appointed Company Secretary on 14 August 2015. Mr Roberts is a commercial solicitor with eighteen years ASX listed company experience, to Executive Director level. He has acted as Company Secretary and/or Director for numerous ASX listed and private companies. Crater Gold Mining Limited 13 Directors’ Report Directors’ Meetings The Company held 1 Board meeting during the year. In addition to formal Board meetings during the year a number of issues were dealt with by means of circular resolutions of the Board. The number of formal meetings attended by each Director was: Name S W S Chan T M Fermanis L K K Lee R D Parker R L Johnson D T Y Sun Board Audit Committee Remuneration and Nomination Committee Eligible to Attend 1 1 1 1 1 1 Attended - 1 1 1 1 1 Eligible to Attend - - - - - - Attended - - - - - - Eligible to Attend - - - - - - Attended - - - - - - The Eligible to Attend column represents the number of meetings held during the time the Director held office or was a member of the Committee during the year. Environmental Regulation and Performance The Group is subject to environmental regulation in relation to its former mining activities in North Queensland by the Environmental Protection Agency of Queensland. The Company complies with the Mineral Resources Act (1989) and Environmental Protection Act (1994). It is also subject to the Environmental Act (2000) (Papua New Guinea) on its activities in PNG. Shares under Option Unissued ordinary shares of the Company under option at the date of this report are as follows: Grant date Expiry date 23 December 2014 23 December 2014 23 December 2014 28 July 2015 9 September 2015 12 July 2016 30 September 2017 30 September 2017 30 September 2017 27 July 2019 27 July 2019 12 July 2020 Issue price of shares ($) $0.25 $0.25 $0.25 $0.25 $0.25 $0.125 Number of shares under option 4,600,000 2,100,000 800,000 7,800,000 5,800,000 9,000,000 Type Fair value ($) Unlisted Unlisted Unlisted Unlisted Unlisted Unlisted $0.01 $0.01 $0.01 $0.02 $0.02 $0.01 Option holders do not have any rights under the options to participate in any share issue of the Company. Shares Issued on the Exercise of Options No shares have been issued on the exercise of options during the course of the year (2016: Nil) or subsequent to year end. Indemnification and Insurance of Directors During the year, the Company paid premiums of $20,127 (2016: $19,220) to insure the Directors and Officers of the Company in relation to all liabilities and expenses arising as a result of the performance of their duties in their respective capacities to the extent permitted by the Corporations Act 2001. Indemnity and insurance of auditor The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. 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. Crater Gold Mining Limited 14 Directors’ Report Non-Audit Services The Company may decide to engage the auditor of the Company, BDO East Coast Partnership, on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company are important. No amounts were paid or are payable to BDO East Coast Partnership for non-audit services provided during the year. Remuneration Report (Audited) The information provided under headings (a) - (d) is provided in accordance with section 300A of the Corporations Act 2001. These disclosures have been audited. a) Principles used to determine the nature and amount of remuneration The Company has a Remuneration and Nomination Committee. The Board has adopted a Remuneration and Nomination Policy which provides advice on remuneration and incentive policies and practices and specific recommendations on remuneration packages and other terms of employment for executive Directors, other senior executives and Non-executive Directors. The performance of the Company is taken into consideration when the remuneration policies of the Company are assessed by the Committee. The Corporate Governance Statement provides further information on the role of this Committee. Executive Remuneration The remuneration policy ensures that contracts for services are reviewed on a regular basis and properly reflect the duties and responsibilities of the individuals concerned. The executive remuneration structure is based on a number of factors including relevant market conditions, knowledge and experience with the industry, organisational experience, performance of the Company and that the remuneration is competitive in retaining and attracting motivated people. There are no guaranteed pay increases included in the senior executives' contracts. Non-executive Directors Fees and payments to Non-executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors’ fees and payments are reviewed annually by the Board. Additional information The earnings of the consolidated entity for the five years to 30 June 2017 are summarised below: Sales revenue EBITDA EBIT Loss after income tax 2017 $‘000 225 (17,417) (24,561) (25,285) 2016 $‘000 385 (10,061) (10,259) (10,887) 2015 $‘000 2014 $‘000 2013 $‘000 53 (1,865) (1,871) (2,517) Nil (2,249) (2,236) (2,236) Nil (3,053) (3,061) (3,061) The factors that are considered to affect total shareholders return ('TSR') are summarised below: Share price at financial year end ($) Total dividends per share (cents per share) 2017 $0.01 Nil 2016 $0.07 Nil 2015 $0.09 Nil 2014 $0.08 Nil 2013 $0.001 Nil Basic earnings per share (cents per share) (9.503) (5.143) (1.792) (1.806) (7.099) Directors' Fees The current base remuneration was last reviewed with effect from 26 March 2009. Non-executive Director’s fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $200,000 per annum and was approved by shareholders at the Annual General Meeting on 23 November 2010. The following fees have applied for the year ended 30 June 2017:  Non-executive Director’s base fee - $35,000 per annum.  Work undertaken by the Non-executive Directors, in addition to that provided in their role as Non-executive Directors is charged at $1,200 per day or pro-rata for part thereof.  Audit Committee and the Remuneration and Nomination Committee – no additional fees payable. Except for retirement benefits provided by the superannuation guarantee legislation, there are no retirement benefits for the Non- executive Directors. Crater Gold Mining Limited 15 Directors’ Report b) Details of remuneration Directors and the key management personnel (as defined in section 300A Corporations Act 2001) of the Company and the Group are set out in the following tables. The key management personnel of the Company and the Group includes the Directors as per page 16 and the following executive officers who have authority and responsibility for the planning, directing and controlling the activities of the Group. Director / key management person Short-term Short-term Post- employment Share-based payments Total Base Fees/salary Other 5 Superannuation Options % of total 2017 Non-executive Directors S W S Chan D T Y Sun Subtotal Executive Directors R D Parker, Managing Director R L Johnson, Technical Director L K K Lee, Finance Director T M Fermanis, Executive Chair/Investor Deputy Relations Other key management personnel G R Boyce 1 H L Roberts 2 Total 2016 Non-executive Directors S W S Chan R P Macnab 3 D T Y Sun Subtotal Executive Directors R D Parker, Managing Director L K K Lee, Finance Director T M Fermanis, Executive Deputy Chair/Investor Relations6 Other key management personnel G R Boyce R L Johnson J A Lemon 4 H L Roberts 2 Total 35,000 35,000 70,000 - - - - - 200,000 163,332 35,000 120,000 35,000 144,000 117,054 89,100 346,154 35,000 17,500 35,000 87,500 200,000 120,000 35,000 162,377 250,000 9,240 62,755 926,872 - - - 627,332 - - - - - - 144,000 - - - - 144,000 - - - - - - - - - - - - - - - - - - - - - - - 12,832 12,832 25,664 26.8% 26.8% 47,832 47,832 95,664 12,832 6.0% 212,832 12,832 12,832 7.3% 9.7% 176,164 132,832 12,832 6.7% 191,832 9,624 6,416 93,032 7.6% 6.7% 126,678 95,516 1,031,518 9,883 9,883 9,883 29,649 9,883 9,883 9,883 6,574 10,683 - - 76,555 22.0% 36.1% 22.0% 4.7% 7.6% 5.2% 3.9% 4.1% - - 44,883 27,383 44,883 117,149 209,883 129,883 188,883 168,951 260,683 9,240 62,755 1,147,427 1. Mr Boyce resigned on 31 July 2017. 2. Mr Roberts acts in a part time capacity. Mr Roberts was appointed Company Secretary on 14 August 2015. 3. Mr Macnab passed away in December 2015. 4. Mr Lemon acts in a part-time capacity. Mr Lemon resigned as Company Secretary on 14 August 2015. 5. Other relates to services provided by Directors. Refer to Note 24 for details. 6. Mr Fermanis was classed as a non-executive director in 2016, this is a change to the prior year table, as in substance Mr Fermanis was an executive director. No other Directors, officers or executives of the Company received any share-based payments, other than those shown in the remuneration table above. Crater Gold Mining Limited 16 All remuneration is on fixed rates. Refer section (c) of this remuneration report. There were no performance based payments made during the year. A summary of Director and key management personnel remuneration follows. Directors’ Report Remuneration component Short term Post-employment benefits Share-based payments Total 2017 $ 938,486 - 2016 $ 1,070,872 - 93,032 76,555 1,031,518 1,147,427 c) Service agreements On appointment to the Board, all Non-executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms, including compensation, relevant to the office of Director. Remuneration and other terms of employment for the Executive Directors and other key management personnel are also formalised in service agreements. Major provisions of the agreements relating to remuneration are set out below. There are no current service agreements that contain incentive clauses and as such future remuneration is not necessarily dependent on the performance results of the Company: Key management personnel Commencement date 29 January 2013 Term of agreement No fixed term Base salary and fees $35,000 pa S W S Chan Chairman T M Fermanis Deputy Chairman D T Y Sun Non-Executive Director R D Parker Managing Director L.K K Lee Finance Director G Boyce 2 Chief Financial Officer R Johnson General Manager – PNG H L Roberts 1 Company Secretary 2 November 2009 No fixed term $179,000 pa 29 January 2013 No fixed term $35,000 pa 1 April 2015 No fixed term $200,000 pa 1 April 2015 No fixed term $120,000 pa 1 November 2011 No fixed term $975 pd 1 January 2013 No fixed term $120,000 pa 14 August 2015 No fixed term $1,200 pd Superannuation - - - - - - - - Period of notice 4 weeks 4 weeks 4 weeks 4 weeks 4 weeks 4 weeks 4 weeks 4 weeks 1. Mr H L Roberts was appointed as Company Secretary on the 14 August 2015. 2. Mr G Boyce resigned on 31 July 2017. d) Equity based compensation Options granted as part of remuneration for the year ended 30 June 2017 The Employee Share Option Plan (“Plan”) is designed to provide long term incentives for executives to deliver long term shareholder returns. Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the Plan or to receive any guaranteed benefits. Share-based compensation for the year ended 30 June 2017 No shares were issued to Directors and other key management personnel as part of compensation during the year ended 30 June 2017 (2016: nil). Crater Gold Mining Limited 17 Directors’ Report Options and rights over equity instruments The number of options over ordinary shares in the Company held during the financial year by each Director and key management personnel of the Group, including their personally related parties are set out below: Name 2017 Directors S W S Chan T M Fermanis R Johnson L K K Lee R D Parker D T Y Sun Key management personnel G R Boyce H L Roberts Balance at the start of the year Granted during the year as compensation Exercised during the year Other changes during the year Balance at the end of the year 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,800,000 1,100,000 - 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 750,000 500,000 - - - - - - - - - - - - - - - - 2,800,000 2,800,000 2,800,000 2,800,000 2,800,000 2,800,000 1,850,000 500,000 Options granted carry no dividend or voting rights. Share holdings The number of shares in the Company held during the financial year by each Director and key management personnel of the Group, including their personally related parties are set out below: Name 2017 Directors S W S Chan T M Fermanis R Johnson L K K Lee R D Parker D T Y Sun Key management personnel G R Boyce 3 H L Roberts 2016 Directors S W S Chan T M Fermanis L K K Lee R P Macnab R D Parker D T Y Sun Key management personnel G R Boyce 3 R Johnson J A Lemon 1 H L Roberts J V McCarthy Balance at the start of the year Granted during the year as compensation Additions Disposals / Other changes 2 Balance at the end of the year 131,848,176 602,471 781,250 - 239,604 - 108,823 - 106,737,341 602,471 - - 221,754 - 108,823 781,250 45,700 - - - - - - - - - - - - - - - - - - - - - 28,237,753 - - - 17,799 - - - - - - - 160,085,929 602,471 781,250 - 257,403 - - - (108,823) - - - 25,110,835 - - - 17,850 - - - - - - - - - - - - 131,848,176 602,471 - - 239,604 - - - (45,700) - - 108,823 781,250 - - - 1. Mr Lemon resigned during the course of the 2016 financial year and therefore ceased to be a KMP. 2. When a shareholder ceases to be a Director or Key Management, their existing shareholding is adjusted in the column “Other changes during the year”. 3. Mr Boyce resigned on 31 July 2017. Crater Gold Mining Limited 18 Directors’ Report Other transactions with key management personnel and their related parties Mr S W S Chan is a director and the controller of Freefire Technology Limited (“Freefire”), the major shareholder in the Company. During the year the Company paid Freefire $119,852 in loan interest and fees (2016: $80,106) and $250,603 in interest on convertible notes (2016: $251,289). During the course of the year Freefire made a number of short term loans to the Company at an annual interest rate of 8% (see Note 3d for further information on the loan). As of 30 June 2017: Mr R D Parker’s close family members hold a total of 77 Convertible Notes of the Company on which they earned $193 in interest (2016: $193). Mr T Fermanis owns 40 Convertible Notes of the Company on which he earned $100 in interest (2016: $100). Mr G R Boyce owns 200 Convertible Notes of the Company on which he earned $500 in interest (2016: $501). This concludes the Remuneration Report, which has been audited. Crater Gold Mining Limited 19 Directors’ Report Auditor’s Independence Declaration A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 21. Corporate Governance The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, Crater Gold Mining Limited and its Controlled Entities (‘the Group’) have adopted a corporate governance framework and practices to ensure they meet the interests of shareholders. The Australian Securities Exchange Corporate Governance Council’s Corporate Governance Principles and Recommendations – 3rd edition (‘the ASX Principles’) are applicable for financial years commencing on or after 1 July 2015, consequently for the Group’s 30 June 2017 year end. As a result, the Group has chosen to publish its Corporate Governance Statement on its website rather than in this Annual Report. Crater Gold Mining Limited is listed on the Australia Securities Exchange (ASX). Accordingly, unless otherwise stated in this document, the Board’s governance arrangements comply with the recommendations of the ASX Corporate Governance Council (including the 2014 amendments) as well as current standards of best practice for the entire financial year ended June 30 2017. The corporate governance statement is current as at June 30 2017 and has been approved by the Board. The Corporate Governance Statement and governance policies and practices can be found in the corporate governance section of the Company’s website at http://www.cratergold.com.au. The Group’s Corporate Governance Statement incorporates the disclosures required by the ASX Principles under the headings of the eight core principles. All of these practices, unless otherwise stated, were in place for the full reporting period. Signed for and on behalf of the Board in accordance with a resolution of the Directors. On behalf of the Directors R D Parker Managing Director Sydney 29 September 2017 T M Fermanis Deputy Chairman Crater Gold Mining Limited 20 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia DECLARATION OF INDEPENDENCE BY GARETH FEW TO THE DIRECTORS OF CRATER GOLD MINING LIMITED As lead auditor of Crater Gold Mining Limited for the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect Crater Gold Mining Limited and the entities it controlled during the period. Gareth Few Partner BDO East Coast Partnership Sydney, 29 September 2017 BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees. Consolidated Statement of Profit or Loss and Other Comprehensive Income For the Financial Year ended 30 June 2017 Notes June 2017 $ June 2016 $ Continuing Operations Revenue Cost of sales Gross profit / (loss) from gold production Profit / (loss) on disposal of fixed assets Interest income Gross profit / (loss) from continuing activities Expenses Administration expense Corporate compliance expense Depreciation expense Exploration and evaluation costs written off Exploration and evaluation costs impaired Financing expense Impairment of Mining Asset Loss before income tax expenses from continuing operations Income tax expense 5 5 5 6 13 13 14 7 225,288 384,800 (823,178) - (597,890) 384,800 7,273 826 (7,988) 4,175 (589,791) 380,987 (1,674,795) (1,985,640) (104,018) (133,355) (191,139) - - (2,333,494) (15,049,107) (6,195,942) (722,501) (627,133) (6,953,390) - (25,284,741) (10,886,589) - - Loss for the year after income tax expense (25,284,741) (10,886,589) Other comprehensive income Items that will be reclassified subsequently to profit or loss when specific conditions are met: Exchange differences on translating foreign operations (net of tax) 21 (616,932) (3,240,970) Total comprehensive income for the year (25,901,673) (14,127,559) Loss per share from continuing operations attributable to the ordinary equity holders of the Company: Basic loss - cents per share Diluted loss - cents per share 8 8 (9.503) (9.503) (5.143) (5.143) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. Crater Gold Mining Limited 22 Consolidated Statement of Financial Position As at 30 June 2017 Notes June 2017 $ June 2016 $ 10 11 12 13 14 15 16 17 18 19 20 21 21 296,185 137,307 433,492 95,239 203,666 298,905 66,967 68,581 8,953,712 22,664,481 - 7,105,002 641,347 916,534 9,662,026 30,754,598 10,095,518 31,053,503 2,327,509 2,217,595 1,145,021 897,070 7,109,173 1,306,415 10,581,703 4,421,080 - - 3,177,632 3,177,632 10,581,703 7,598,712 (486,185) 23,454,791 60,934,332 59,089,123 340,507 (226,644) 340,507 274,800 (61,534,380) (36,249,639) (486,185) 23,454,791 ASSETS Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Other financial assets Exploration and evaluation Mining assets Plant and equipment Total non-current assets Total Assets LIABILITIES Current liabilities Trade and other payables Related party payables Interest-bearing liabilities Total current liabilities Non-current liabilities Interest-bearing liabilities Total non-current liabilities Total liabilities Net Assets / (Liabilities) EQUITY Contributed equity Convertible note reserve Reserves Accumulated losses Total Equity The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. Crater Gold Mining Limited 23 Consolidated Statement of Changes in Equity For the Financial Year ended 30 June 2017 Note s 21 20 20 Balance at 1 July 2016 Movement in share based payment reserve Issue of share capital Transaction costs Transactions with owners Comprehensive income for the year Other comprehensive income Exchange differences on translating foreign operations 21 Total comprehensive income for the year Contributed equity Convertible note reserve Reserves Accumulated losses $ $ $ $ Total $ 59,089,123 340,507 274,800 (36,249,639) 23,454,791 - 2,106,423 (261,214) 1,845,209 - - - - - - - - 115,488 - - - - - 115,488 2,106,423 (261,214) 115,488 - 1,960,697 (25,284,741) (25,284,741) (616,932) - (616,932) (616,932) (25,284,741) (25,901,673) Balance at 30 June 2017 60,934,332 340,507 (226,644) (61,534,380) (486,185) Balance at 1 July 2015 53,724,173 340,507 3,407,059 (25,363,050) 32,108,689 Movement in share based payment reserve Issue of share capital Transaction costs Transactions with owners Loss for the year Other comprehensive income Exchange differences on translating foreign operations 21 Total comprehensive income for the year 21 20 20 - 5,616,117 (251,167) 5,364,950 - - - - - - - - - - 108,711 - - 108,711 - - - - 108,711 5,616,117 (251,167) 5,473,661 - (10,886,589) (10,886,589) (3,240,970) - (3,240,970) (3,240,970) (10,886,589) (14,127,559) Balance at 30 June 2016 59,089,123 340,507 274,800 (36,249,639) 23,454,791 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. Crater Gold Mining Limited 24 Consolidated Statement of Cash Flows For the Financial Year ended 30 June 2017 June 2017 $ June 2016 $ Notes 225,288 384,800 (2,174,822) (1,090,172) 826 4,175 (108,681) (426,527) Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Net cash used in operating activities 30 (2,057,389) (1,127,724) Cash flows from investing activities Purchases of property, plant and equipment Payments for exploration and evaluation Payments for mining assets Proceeds from/(Payments for) security deposits Net cash used in investing activities Cash flows from financing activities Proceeds from issue of ordinary shares and options Share issue costs Proceeds from borrowings Repayment of borrowings Net cash provided by financing activities Net increase / (decrease) in cash held Cash at the beginning of the period Effects of foreign exchange movements on cash transactions and balances Cash and cash equivalents at the end of the period (28,333) (265,641) (1,743,041) (2,738,784) - (1,611,302) 1,614 (2,136) (1,769,760) (4,617,863) 2,076,423 5,589,867 (261,214) (251,167) 3,780,000 2,055,542 (1,618,878) (2,008,867) 3,976,331 5,385,375 149,182 (360,212) 95,239 51,764 296,185 501,025 (45,574) 95,239 10 10 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. Crater Gold Mining Limited 25 Notes to the Consolidated Financial Statements 1 Summary of Significant Accounting Policies Crater Gold Mining Limited (the “Company”) and its legal subsidiaries together are referred to in this financial report as the Group or the Consolidated Entity. Details of the principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. Crater Gold Mining Limited is a for profit public company, limited by shares and domiciled in Australia. The financial statements were authorised for issue, in accordance with a resolution of the Directors, on 29 September 2017. The Directors have the power to amend and reissue the financial statements. a. Basis of preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards (AASB), Australian Accounting Interpretations, and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. These Financial Statements also comply with International Reporting Standards as issued by the International Accounting Standards Board (IASB). New, revised or amending Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Historical cost convention The financial report has been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through the Statement of Profit or Loss and Other Comprehensive Income and certain classes of plant and equipment. Critical accounting estimates The preparation of the financial report in conformity with Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2. b. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in Note 29. c. Principles of consolidation Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of the Company or parent entity as at 30 June 2017 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. A list of consolidated entities is contained in Note 28 to the financial statements. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non- controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Crater Gold Mining Limited 26 Notes to the Financial Statements d. Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. Segment information is provided on the same basis as information used for internal reporting purposes by the chief executive and the Board. In identifying its operating segments, management generally follows the Group's project activities. Each of these activities is managed separately. e. Foreign currency translation Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is The Company’s functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Consolidated Income, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity. Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:    assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the date of that Statement of Financial Position; income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and all resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold or borrowings repaid a proportionate share of such exchange differences are recognised in the Statement of Profit or Loss and Other Consolidated Income as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of foreign entities are treated as assets and liabilities of the foreign entities and translated at the closing rate. f. Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Sale of gold Sale of gold is recognised at the point of sale, which is where the customer has taken delivery of the goods, the risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue are net of sales returns, trade discounts and net of royalties. Interest revenue Interest revenue is recognised using the effective interest rate method, which, for floating rate financial assets, is the rate inherent in the instrument. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. g. Income Tax The income tax expense or revenue for the year comprises current income tax expense or income and deferred tax expense or income. Current income tax expense or revenue is the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the income statements when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Crater Gold Mining Limited 27 Notes to the Financial Statements Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Tax Consolidation Crater Gold Mining Limited and its wholly-owned Australian subsidiary have formed an income tax consolidated group under tax consolidation legislation. Each entity in the group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The tax consolidated group has entered a tax funding arrangement whereby each company in the group contributes to the income tax payable by the group in proportion to their contribution to the group’s taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity. h. Leases Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight line basis over the term of the lease. i. Acquisition of assets The purchase method of accounting is used for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition. Incidental costs directly attributable to the acquisition are taken to Profit or Loss under AASB 3. Where equity instruments are issued in an acquisition, the value of the instruments is their market price as at acquisition date, unless the notional price at which they could be placed in the market is a better indicator of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. j. Impairment of assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). k. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Statement of Financial Position. l. Investments and other financial assets Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date. Loans and receivables Crater Gold Mining Limited 28 Notes to the Financial Statements Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the Statement of Financial Position date, which are classified as non-current assets. Loans and receivables are included in receivables in the Consolidated Statement of Financial Position. They are subsequently measured at amortised cost using the effective interest rate method. De-recognition Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in income statements. Subsequent measurement Available for sale financial assets and financial assets at fair value through income statements are subsequently carried at fair value. Gains and losses arising from changes in the fair value of the financial assets at fair value through income statements category are included in the income statement in the period in which they arise. Dividend income from financial assets at fair value through income statements is recognised in the income statement as part of revenue from continuing operations when the Group’s right to receive payments is established. Impairment The Group assesses at each Reporting Date whether there is objective evidence that a financial asset or group of financial assets is impaired. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. m. Comparatives When required by Accounting Standards, comparative figures have been adjusted to conform to changes in the presentation for the current financial year. n. Exploration and evaluation expenditure Exploration and evaluation expenditure incurred is capitalised in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area of interest or when activities in the areas of interest have not yet reached a stage which permit reasonable assessment of the existence of economically recoverable reserves. The ultimate recoupment of capitalised costs is dependent on the successful development and commercial exploitation, or sale, of the respective areas of interest. Accumulated costs in relation to an abandoned area are written off in full against profit/loss in the year in which the decision to abandon the area is made. Where costs are capitalised on exploration, evaluation and development, they are amortised over the life of the area of interest to which they relate once production has commenced. Amortisation charges are determined on a production output basis, unless a time basis is more appropriate under specific circumstances. Exploration, evaluation and development assets are assessed for impairment if:   sufficient data exists to determine technical feasibility and commercial viability, and facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units to which the exploration activity relates. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. o. Mining assets Capitalised mining development costs include expenditures incurred to develop new ore bodies to define further mineralisation in existing ore bodies, to expand the capacity of a mine and to maintain production. Mining development also includes costs transferred from exploration and evaluation phase once production commences in the area of interest. Amortisation of mining development is computed by the units of production basis over the estimated proved and probable reserves. Proved and probable mineral reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits. These reserves are amortised from the date on which production commences. The amortisation is calculated from recoverable proven and probable reserves and a predetermined percentage of the recoverable measured, indicated and inferred resource. This percentage is reviewed annually. Restoration costs expected to be incurred are provided for as part of development phase that give rise to the need for restoration. p. Plant and equipment Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the cost basis. The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the Crater Gold Mining Limited 29 Notes to the Financial Statements asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the Group commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Asset Depreciation rates Plant and Equipment 4% – 50% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each Statement of Financial Position date. An asset’s carrying amount is written down immediately to its recoverable amount where there are indicators of impairment. The Company uses the unit-of-production basis when depreciating mine specific assets which results in a depreciation/amortisation charge proportional to the depletion of the anticipated remaining life of mine production. Amortisation of mine development costs is provided using the unit-of-production method. q. Trade and other payables These amounts 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 usually paid within 30 days of recognition. Receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment. Due to their short term nature they are not discounted. r. Borrowings Borrowings are initially recognised at fair value net of transaction costs and subsequently at amortised cost, using the effective interest method. Convertible notes The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs. On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in shareholders’ equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option is not remeasured in the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss. s. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of GST, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. t. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Potential ordinary shares are anti-dilutive when their conversion to ordinary shares would increase earnings per share or decrease loss per share from continuing operations. The calculation of diluted earnings per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an anti-dilutive effect on earnings per share. Crater Gold Mining Limited 30 Notes to the Financial Statements u. Rounding of amounts The Company is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the financial report. Amounts in the financial report have not been rounded off in accordance with that Class Order to the nearest thousand dollars, but to the nearest dollar. v. Goods and services tax (GST) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Statement of Financial Position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from or payable to the taxation authority are presented as an operating cash flow. Commitments and contingencies are disclosed gross of the amount of GST recoverable from, or payable to, the tax authorities. w. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the income statement in the period in which they are incurred. x. Rehabilitation costs The Company records the present value of the estimated cost of legal and constructive obligations to restore operating locations in the period in which the obligation is incurred. The nature of restoration activities includes dismantling and removing structures, rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation and revegetation of afflicted areas. When the liability is initially recorded, the present value of the estimated cost is capitalised by increasing the carrying amount of the related mining assets. y. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2017. The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below.  AASB 9 Financial Instruments and its consequential amendments This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1 January 2018 and completes phases I and III of the IASB's project to replace IAS 39 (AASB 139) 'Financial Instruments: Recognition and Measurement'. This standard introduces new classification and measurement models for financial assets, using a single approach to determine whether a financial asset is measured at amortised cost or fair value. The accounting for financial liabilities continues to be classified and measured in accordance with AASB 139, with one exception, being that the portion of a change of fair value relating to the entity's own credit risk is to be presented in other comprehensive income unless it would create an accounting mismatch. Chapter 6 'Hedge Accounting' supersedes the general hedge accounting requirements in AASB 139 and provides a new simpler approach to hedge accounting that is intended to more closely align with risk management activities undertaken by entities when hedging financial and non-financial risks. The consolidated entity will adopt this standard and the amendments from 1 July 2018 but the impact of its adoption is yet to be assessed by the consolidated entity. Although the directors anticipate that the adoption of AASB 9 will impact the consolidated entity's financial statements the impact of its adoption has been assessed to be immaterial.  AASB 15 Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate performance obligations within the contract; determine the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable users to Crater Gold Mining Limited 31 Notes to the Financial Statements understand the contracts with customers; the significant judgments made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The consolidated entity will adopt this standard from 1 July 2018 but the impact of its adoption is yet to be assessed by the consolidated entity. The directors anticipate that the adoption of AASB 9 will have no impact the consolidated entity's financial statements.  AASB 16: Leases When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. The main changes introduced by the new Standard are as follows:  recognition of a right-of-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating to low-value assets);  depreciation of right-of-use assets in line with AASB 116 : Property, Plant and Equipment in profit or loss and unwinding of the liability in principal and interest components;  inclusion of variable lease payments that depend on an index or a rate in the initial measurement of the lease liability using the index or rate at the commencement date;  application of a practical expedient to permit a lessee to elect not to separate non-lease components and instead account for all components as a lease; and  inclusion of additional disclosure requirements. The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application. Although the directors anticipate that the adoption of AASB 16 will impact the consolidated entity's financial statements the impact of its adoption has been assessed to be immaterial. 2 Critical Accounting Estimates and Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are set out below. Exploration and evaluation expenditure Exploration and evaluation expenditure is reviewed regularly to ensure that the capitalised expenditure is only carried forward to the extent that it is expected to be recouped through the successful development of the area of interest or when activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence of economically recoverable reserves. This policy is outlined in Note 1. Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. It is reasonably possible that the underlying gold price assumption may change which may then impact the estimated life of mine determinant and may then require a material adjustment to the carrying value of mining plant and equipment, mining infrastructure and mining development assets. Furthermore, the expected future cash flows used to determine the value-in-use of these assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including reserves and production estimates, together with economic factors such as metal spot prices, discount rates, estimates of costs to produce reserves and future capital expenditure. Crater Gold Mining Limited 32 Notes to the Financial Statements 3 Financial Risk Management The Group’s major area of risk is managing liquidity and cash balances and embarking on fundraising activities in anticipation of further projects. The activities expose the Group to a variety of financial risks: 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. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, and other risks, ageing analysis for credit risk. Risk management is carried out under policies set by the Managing Director and approved by the Board of Directors. The Board provides principles for overall risk management, as well as policies covering specific areas, such as, interest rate risk, credit risk and investment of excess liquidity. a. Market risk Foreign exchange risk Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Group’s functional currency. The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures to the Papua New Guinea Kina. As the Group is still in the development, exploration and evaluation stages, it has not needed to use forward contracts to manage foreign exchange risk. The Board will continue to monitor the Group’s foreign currency exposures. The Group’s exposure to interest-rate risk is summarised in the following table. Fixed interest rate items mature within 12 months. Price risk The Group is exposed to both commodity price risk and revenue risk. The commodity prices impact the Group’s capacity to raise additional funds and impact its sales of gold now that the Company is in production. Management actively monitors commodity prices and does not believe that the current level in AUD terms warrants specific action. b. Credit risk The credit risk on financial assets of the Group which have been recognised in the consolidated Statement of Financial Position is generally the carrying value amount, net of any provisions for doubtful debts. Management scrutinizes outstanding debtors on a regular basis and no items are considered past due or impaired. c. Liquidity risk Prudent liquidity management implies maintaining sufficient cash and marketable securities and the ability of the Group to raise funds on capital markets. The Managing Director and the Board continue to monitor the Group’s financial position to ensure that it has available funds to meet its ongoing commitments (refer to Note 4). 3 Financial Risk Management (cont.) d. Cash flow interest rate risk Consolidated Notes Floating interest rate Fixed interest rate Non-interest bearing 2017 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Weighted average interest rate Financial liabilities Trade and other payables Related party payables Interest bearing liabilities - loans 1 Interest bearing convertible notes 2 liabilities – Weighted average interest rate Net financial assets/(liabilities) 10 11 12 16 17 18 19 182,184 - - 182,184 0.59% - - - - - 0.00% - - - - - - 7,109,173 - 7,109,173 9.99% 114,001 137,307 66,967 381,275 2,327,509 1,145,021 - - 3,472,530 - Total 296,185 137,307 66,967 500,459 2,327,509 1,145,021 7,109,173 - 10,581,703 - 182,184 (7,109,173) (3,091,255) (10,081,244) Crater Gold Mining Limited 33 Notes to the Financial Statements 2016 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Weighted average interest rate Financial liabilities Trade and other payables Related party payables Interest bearing liabilities - current 1 Interest bearing liabilities – non- current 2 Weighted average interest rate Net financial assets/(liabilities) 10 11 12 16 17 18 19 80,279 - - 80,279 2.09% - - - - - - - - - - - 1,306,415 3,177,632 4,484,047 10.32% 14,960 203,666 68,581 287,207 2,217,595 897,070 - - 3,114,665 95,239 203,666 68,581 367,486 2,217,595 897,070 1,306,415 3,177,632 7,598,712 80,279 (4,484,047) (2,827,458) (7,231,226) The Convertible Notes were repayable on 22 August 2017. All other financial liabilities are due and payable within 12 months. The Company has assessed the potential interest rate risk on floating interest rate assets and does not consider the risk to be material to the Company. 1 Freefire Technology Limited The Company has secured short-term, interest bearing loans totalling $2,893,698 (2016: $1,306,415) from its major shareholder, Freefire Technology Limited (“Freefire”). • The loan funds are to be used by the Company principally for the purpose of developing the High Grade Zone at the Company’s Crater Mountain, PNG project and for general working capital. • Interest on the Principal Sums is payable by the Company to Freefire at the rate of 8% (2016: 8%) per annum. • The loans are repayable by the Company to Freefire upon written demand by Freefire. 1 ICBC Loan Facility On 25 August 2016 the Company announced that it had secured a loan facility of up to A$800,000 from the Industrial and Commercial Bank of China (Asia) Limited (“ICBC”). The ICBC loan facility is repayable on call and is guaranteed by interests associated with the Chairman, Mr Sam Chan. The interest rate is 2.75% per annum. 2 Convertible notes On 22 August 2014 the consolidated entity issued 138,190 10% convertible notes, with a face value of $25 each, for total proceeds of $3,454,750. Interest is paid on a semi-annual basis from 31 December 2014 onwards in arrears at a rate of 10% per annum based on the face value. Total transactions costs were $283,989 at the date of issue and unamortised transaction costs of $17,529 (2016: $120,389) have been offset against the convertible notes payable liability. The convertible notes are unsecured. On 22 August 2017 the convertible notes expired. All convertible notes and accrued interest were paid out by early September 2017 Crater Gold Mining Limited 34 Notes to the Financial Statements 3 e. Financial Risk Management (continued) Fair value estimation The fair value of assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The Group measures fair values using the following fair value hierarchy that considers and reflects the significance of the inputs used in making the measurements: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 prices) or indirectly (derived from prices). Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as Level 3 Inputs for the asset or liability that are not based on observable market data (significant unobservable inputs). The determination of what constitutes ‘observable’ requires significant judgment by the Group. The Group considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair values due to their short-term nature. f. Sensitivity analysis Foreign currency risk sensitivity analysis The Group is exposed to fluctuations in the value of the Australian Dollar to the PNG Kina (PKG). At 30 June 2017, the effect on profit and equity of the Consolidated Group as a result of changes in the value of the Australian Dollar to the PKG, with all other variables remaining constant, is as follows: Movement to AUD PKG by + 5% Change in profit $ 542,778 Change in equity $ 727,541 PKG by - 5% (491,085) (658,252) 4 Going Concern These financial statements are prepared on a going concern basis. The Group has incurred a net loss after tax of $25,284,741 (2016: $10,886,589) for the year ended 30 June 2017 with operating cash outflows of $2,283,550 (2016: outflows of $1,127,725). As at 30 June 2017, the Group had net current liabilities of $10,148,211 (2016: $4,122,175) including cash on hand of $296,185 (2016: $95,239). The Group’s key area of expenditure is the Crater Mountain Project in Papua New Guinea. The Group was granted Mining Lease ML 510 in November 2014 for the High Grade Zone project (“HGZ” project) at Crater Mountain. Whilst production to date has not reached target levels, the Group has taken corrective actions, including the engagement of new in country operational leadership in PNG, new technical advisors to the Board, and a new CFO. We are confident that these changes, plus the provision of adequate financial support, will result in more significant production output in the near future generating positive cash flows from mining operations. Whilst the above conditions indicate a material uncertainty which may cast significant doubt over the Group’s ability to continue as a going concern, in determining the appropriateness of the accounts being presented on a going concern basis the Directors note the following: a) On 9 August 2017 the Company executed a Short Term Bridging Facility with Freefire for $3,504,915. The purpose of the bridging facility was to provide the Company funds to repay the Convertible Notes with interest upon maturity. On 22 August 2017 the Convertible Notes expired. All Convertible Notes and accrued interest were paid out by early September 2017. b) On 1 September 2017 the Company announced a fresh rights issue, which will be fully underwritten by Freefire. It also announced on that day that an interim loan of $2 million would be advanced to the Company by Freefire in order to enable the repayment of outstanding creditors prior to the closing of the fresh rights issue. To date the Company has received $0.8 million under this facility, with the next drawdown of $0.8 million due in early October. c) In addition, the Group has successfully raised funds through share issues and debt funding on a number of occasions and the Directors are confident that this could be achieved should the need arise. Management have received a letter of support from Freefire stating that they intend to support the Group by way of further loans to cover any cash shortfall in the next 12 months should the need for such funding arise to enable the Group to meet its liabilities as and when they fall due. Should the Group be unable to continue as a going concern it may be required to realise its assets and discharge its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount of liabilities that might result should the Company be unable to continue as a going concern and meet its debts as and when they fall due. On this basis, the Directors are of the opinion that the financial statements should be prepared on a going concern basis and the Group will be able to pay its debts as and when they fall due and payable. Crater Gold Mining Limited 35 Note 5 Income from continuing operations Revenue from gold sales Interest received Profit / (loss) from sale of property, plant and equipment 6 Expenses Expenses, excluding finance costs, included in the Statement of Profit or Loss and Other Comprehensive Income classified by nature Audit fees Accounting fees Consulting fees Director related expenses - Directors’ fees - reimbursable expenses Total director related expenses Depreciation and amortisation expense Employee benefits expense Employee share option plan costs Exploration costs written off or impaired Mining asset impairment General administration expenses Insurance - Directors & officers indemnity insurance - other Total insurance Marketing and promotion expenses Minimum lease payments Share registry / meeting costs Telephone Travel Notes to the Financial Statements June 2017 $ June 2016 $ Note 225,288 384,800 826 4,175 7,273 (7,988) 129,277 11,558 717,943 133,664 - 133,664 191,139 34,831 115,488 15,049,107 6,953,390 434,935 21,060 1,101 22,161 17,905 21,732 104,018 605 34,695 102,846 19,867 832,283 148,750 - 148,750 198,452 70,733 108,711 8,529,436 - 332,054 20,127 - 20,127 12,739 73,081 133,355 11,020 46,989 13 14 Crater Gold Mining Limited 36 Notes to the Financial Statements June 2017 $ June 2016 $ Note 7 Income Tax a. Numerical reconciliation of income tax revenue to prima facie tax receivable Loss before income tax (25,284,741) (10,886,589) Tax at the Australian tax rate of 27.5% (2016 – 30%) (6,953,304) (3,265,977) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non-deductible share based payments Deferred tax asset not brought to account Other Net adjustment to deferred tax assets and liabilities for tax losses and temporary differences not recognised Income tax expense b. Tax losses 31,759 527,636 8,394 32,613 - 12,765 (6,385,515) (3,220,599) 6,385,515 3,220,599 - - Unused tax losses for which no deferred tax asset has been recognised Opening balance 44,356,102 41,851,272 Reduction in opening deferred taxes resulting from reduction in tax rate (1,108,902) - Taxable (income)/loss for the year Closing balance Potential Tax Benefits @ 27.5% (2016: 30%) 2,317,850 2,504,830 45,565,050 44,356,102 12,530,389 13,306,830 Crater Gold Mining Limited 37 Notes to the Financial Statements June 2017 June 2016 Note 8 Earnings per Share a. Basic loss per share Loss from continuing operations attributable to the ordinary equity holders of the Company (cents per share) (9.503) (5.143) b. Diluted loss per share Loss from continuing operations attributable to the ordinary equity holders of the Company (cents per share) (9.503) (5.143) The calculation of basic earnings per share at 30 June 2017 was based on the loss from continuing operations attributable to ordinary shareholders of $25,284,741 (2016 loss: $10,886,589) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2017 of 266,080,056 (2016: 211,660,011), calculated as follows: c. Weighted average number of shares used as a denominator Basic loss per share Diluted loss per share 2017 Shares 2016 Shares 266,080,056 211,660,011 266,080,056 211,660,011 At the year end, the consolidated entity had 30,100,000 options on issue (2016: 21,100,000), representing:  30,100,000 unlisted options with weighted average exercise price of $0.21 (2016: 21,100,000 at average $0.25) 9 Segment information Croydon $ Fergusson Island $ Crater Mountain $ Intersegment eliminations / unallocated $ Consolidated $ Full-year to 30 June 2017 Gold sales revenue Cost of sales Other revenue Profit on disposal of assets Assets written down/impaired Other expenses Segment profit (loss) Segment assets Segment liabilities Full-year to 30 June 2016 Gold sales revenue (net) Other revenue Loss on disposal of assets - - - - - - - 987,819 - - - - - - - - - - - - - - - - 225,288 (823,178) - - - - 826 7,273 225,288 (823,178) 826 7,273 (22,002,497) - (22,002,497) (549,934) (2,142,519) (2,692,453) (23,150,321) (2,134,420) (25,284,741) 8,880,556 42,774,282 227,143 (32,192,579) 10,095,518 10,581,703 384,800 - (3,771) - 384,800 4,175 (4,217) 4,175 (7,988) - - (8,529,436) (6,195,942) Assets written down/impaired (4,889,891) (342,787) (3,296,758) (2,556,397) (342,787) (3,296,758) Assets impaired Other expenses - - (586,932) (2,151,208) (2,738,140) Crater Gold Mining Limited 38 Notes to the Financial Statements Segment profit (loss) (4,889,891) (342,787) (3,502,661) (2,151,250) (10,886,589) Segment assets Segment liabilities 972,459 - - - 29,868,269 39,925,724 212,775 (32,327,012) 31,053,503 7,598,712 Reconciliation of Segment Profit to loss for the period from continuing operations: Segment profit (loss) Loss for the period from continuing operations (25,284,741) (25,284,741) Segment information is presented using a “management approach”, i.e. segment information is provided on the same basis as information used for internal reporting purposes by the chief executive and the Board. In identifying its operating segments, management generally follows the Group's project activities. Each of these activities is managed separately. The Chief Operating Decision Makers (“CODM”) review EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on at least a monthly basis. Description of segments Accounting policies adopted Unless stated otherwise, all amounts reported to the Board of Directors, being the chief operating decision makers with respect to operating segments, are determined in accordance with accounting policies that are consistent with those adopted in the annual financial statements of the consolidated entity. Segment Assets Where an asset is used across multiple segments, the asset is allocated to the segment that received the majority of the economic value form the asset. In most instances, segment assets are clearly identifiable on the basis of their nature and physical condition. Segment Liabilities Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the operations of the segment. Borrowings are generally considered to relate to the consolidated entity as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. Croydon This project consists of two sub-projects in far North West Queensland, the Croydon Polymetallic Project and the Croydon Gold Project. Fergusson Island This project consists of an exploration project at Wapolu on Fergusson Island, in Milne Bay province, PNG. Crater Mountain This is an advanced exploration and production project located in the PNG Highlands approximately 50kms southwest of Goroka. Geographical information Sales to external customers 2017 $ 2016 $ Geographical non-current assets 2017 $ 2016 $ Australia Papua New Guinea - 225,288 - 384,800 1,015,319 8,646,707 999,959 29,754,639 225,288 384,800 9,662,026 30,754,598 The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets, post- employment benefits assets and rights under insurance contracts. Types of products and services The principal products and services of this operating segment are the mining and exploration operations in Australia and Papua New Guinea. Crater Gold Mining Limited 39 Notes to the Financial Statements Major customers During 2017 one customer accounted for 100 percent of total revenue (2016: 100%). Note 10 Current Assets - Cash and Equivalents Cash at bank and on hand The effective (weighted average) interest rate on short term bank deposit was 0.41% (2016: 2.1%). 11 Current Assets - Trade and Other Receivables GST receivable Other 12 Non-Current Assets - Other Financial Assets Security deposits 13 Non-Current Assets - Exploration and Evaluation Opening net book value Expenditure capitalised Exploration costs written off/impairment Effect of movement in exchange rates Closing net book value June 2017 $ June 2016 $ 296,185 95,239 17,458 119,849 137,307 104,596 99,070 203,666 66,967 66,967 68,581 68,581 22,664,481 1,843,909 (15,049,107) (505,571) 8,953,712 30,781,160 2,882,549 (8,529,436) (2,469,792) 22,664,481 The above impairments/write downs have been recognised as a result of not meeting the requirements of AASB 6, whereby substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned. The following individual assets have been fully impaired in PNG: Crater Mountain EL2334/2335 ($1,566,562), EL2249 ($430,106) and EL2203 ($19,951); Fergusson Island EL1972 ($182,963) and EL2180 ($142,344). In Croydon, asset EPM9438 has been fully impaired ($2,556,397). The Company commissioned an independent valuation of its PNG projects which was completed on 10 April 2017. The valuation arrived at a preferred valuation of AUD$8 million and the PNG projects were impaired to this value. The Company’s Croydon project was independently valued in March 2017. The conclusion of this valuation for the Croydon projects was $1.075 million. Given the Company’s written down value as at year end was $987,819 it was determined that no valuation adjustment was required. The ultimate recoupment of costs carried forward for exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective areas. 14 Non-Current Assets – Mining assets Opening net book value Additions Reclassification of Mining assets Depreciation Amortisation expense/impairment expense Effect of movement in exchange rates Closing net book value 7,105,002 - - (19,356) (6,953,390) (132,256) 6,159,354 1,611,302 - - (44,411) (621,243) - 7,105,002 Crater Gold Mining Limited 40 Notes to the Financial Statements Note June 2017 $ June 2016 $ As a result of the granting of the mining lease, ML510 for Anomaly’s HGZ project at Crater Mountain in the Eastern Highlands Province, the decision was taking to reclassify the relevant exploration and evaluation expenditure as a mining asset in line with accounting standards. During the year, as previously disclosed in the half-year accounts, the decision to fully impair the Mining Assets for the amount of $6,953,390 was made. This decision was taken as 1960 level has not produced the quantities of gold originally expected and the Board felt it prudent to fully impair expenditure incurred to date in the development of the 1960 level adit. 15 Non-Current Assets – Plant and Equipment Plant and equipment Cost Accumulated depreciation Net book value 1,680,938 (1,039,591) 641,347 1,772,619 (856,085) 916,534 A reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current and prior financial years are set out below. Carrying amount as at 1 July 2015 Additions Disposals Depreciation expense Depreciation capitalised Effect of movements in exchange rates Carrying amount as at 30 June 2016 Additions Disposals Depreciation expense Depreciation capitalised Effect of movements in exchange rates Carrying amount as at 30 June 2017 Note 16 Current Liabilities – Trade and Other Payables Trade payables Accruals Other payables 17 Related Party Payables G R Boyce S W S Chan T M Fermanis Freefire Technology Ltd Plant and equipment 1,061,048 265,641 (7,988) (154,041) (143,764) (104,362) 916,534 28,333 - (171,783) (100,867) (30,870) 641,347 June 2017 $ 194,589 829,371 1,303,549 2,327,509 June 2016 $ 569,354 746,535 901,706 2,217,595 13,613 40,235 215,000 225,524 114,661 35,000 143,000 105,758 Crater Gold Mining Limited 41 Notes to the Financial Statements Note R Johnson L K K Lee R P Macnab R D Parker H Roberts D T Y Sun 18 Current Liabilities Interest-bearing liabilities Convertible notes ICBC loan Freefire Technology Limited loan Refer to Note 3(d) for detailed information on financial instruments. 19 Non-current Liabilities Interest-bearing liabilities Convertible notes Refer to Note 3(d) for detailed information on financial instruments. 20 Contributed Equity a. Share capital Equity Securities Issued For the financial year ended 30 June 2017 As at 1 July 2016 Shares issued As at 30 June 2017 For the financial year ended 30 June 2016 As at 1 July 2015 Shares issued As at 30 June 2016 b. Ordinary Shares June 2017 $ 179,998 157,706 - 271,180 6,765 35,000 1,145,021 June 2016 $ 187,497 98,750 8,750 156,114 12,540 35,000 897,070 3,415,475 800,000 2,893,698 7,109,173 - - 1,306,415 1,306,415 - - 3,177,632 3,177,632 No. of ordinary shares Total $ 242,026,860 30,091,761 272,118,621 59,089,123 1,845,209 60,934,332 171,825,400 70,201,460 242,026,860 53,724,173 5,364,950 59,089,123 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares and the amounts paid on those shares. On a show of hands, every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote and upon a poll, each share is entitled to one vote. The Company does not have a limited amount of authorised capital and the fully paid ordinary shares have no par value. Capital risk management The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Crater Gold Mining Limited 42 Notes to the Financial Statements The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current company's share price at the time of the investment. The consolidated entity is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The capital risk management policy remains unchanged from the 30 June 2016 Annual Report. c. Employee Share Option Plan Information relating to the Employee Share Option Plan, including details of options issued, exercised, lapsed and outstanding during the financial year is set out in Note 25b. d. Movements in share capital Date Details For the financial year ended 30 June 2017 01-Jul-16 22-Jul-16 13-Sep-16 Balance 1 July - Ordinary Shares Chancery Asset Management (non cash) Rights Issue Less: Transaction costs arising on share issues No. of shares 242,026,860 428,571 29,663,190 272,118,621 Value $ 59,089,123 30,000 2,076,423 (261,214) 60,934,332 During the course of the year to June 2017 the Company raised a total of $2,076,423 through the issue of 29,663,190 shares at $0.07 to various sophisticated investors. For the financial year ended 30 June 2016 01-Jul-15 28-Sep-15 18-Nov-15 03-Dec-15 04-Dec-15 09-Mar-16 16-Mar-16 Balance 1 July - Ordinary Shares Placement to sophisticated investors Placement to Freefire (as underwriter of above issue) Placement to sophisticated investors Sinton Spence Placement to sophisticated investors Placement to sophisticated investors Less: Transaction costs arising on share issues e. Movement in options Date Details For the financial year ended 30 June 2017 01-Jul-16 Opening Balance 12-Jul-16 ESOP For the financial year ended 30 June 2016 01-Jul-15 Opening Balance 28-Jul-15 Director options 09-Sep-15 ESOP 28-Jul-15 Ordinary 171,825,400 15,312,500 25,110,835 13,200,000 328,125 10,000,000 6,250,000 242,026,860 53,724,173 1,225,000 2,008,867 1,056,000 26,250 800,000 500,000 (251,167) 59,089,123 Class of options Listed Unlisted Total - - - - 21,100,000 21,100,000 9,000,000 9,000,000 30,100,000 30,100,000 6,700,000 6,700,000 7,800,000 7,800,000 5,800,000 5,800,000 800,000 800,000 - 21,100,000 21,100,000 Each option entitles the holder to purchase one share. The names of all persons who currently hold share options, granted at any time, are entered in the register kept by the Company, pursuant to Section 168 of the Corporations Act 2001, which may be inspected free of charge. Persons entitled to exercise these options have no right, by virtue of the options, to participate in any share issue by the parent entity or any other body corporate. The model inputs for options granted during the year ended 30 June 2017 included: Crater Gold Mining Limited 43 Notes to the Financial Statements  Options were granted for no consideration;  Exercise prices of $0.125;  Grant dates 12 July 2016;   Expiry dates of 12 July, 2020 Immediately vesting     Share price at grant date of $0.071; Expected volatility of the company’s shares 43.95%; Expected dividend yield of 0%; and Risk free rates of 1.92%. Note 21 Reserves and Accumulated Losses Reserves Share based payment reserve Share cancellation reserve Foreign currency translation reserve Movements Share-based Payments Reserve Balance 1 July 2016 Fair value of Employee Share Option Plan share options Balance 30 June 2017 Share Cancellation Reserve Balance 1 July 2016 Balance 30 June 2017 Foreign currency translation reserve Balance 1 July 2016 Currency translation differences Balance 30 June 2017 Accumulated Losses Movements in accumulated losses were as follows: Balance 1 July 2016 Loss for the year Balance 30 June 2017 Nature and purpose of reserves Share-based payments reserve June 2017 $ June 2016 $ 2,008,406 30,000 (2,265,050) 1,892,918 30,000 (1,648,118) (226,644) 274,800 1,892,918 115,488 1,784,207 108,711 2,008,406 1,892,918 30,000 30,000 30,000 30,000 (1,648,118) (616,932) 1,592,852 (3,240,970) (2,265,050) (1,648,118) (36,249,639) (25,284,741) (25,363,050) (10,886,589) (61,534,380) (36,249,639) The share-based payments reserve is used to recognise:   The fair value of options issued to employees and Directors; and The fair value of options issued as consideration for goods or services rendered. Share cancellation reserve The cancellation of shares in 2010 was realised within the share cancellation reserve. Foreign currency translation reserve Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve. The reserve is recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income when the net investment is disposed. June June Crater Gold Mining Limited 44 Notes to the Financial Statements Note 22 Commitments Operating leases Committed at the reporting date but not recognised as liabilities, payable: Within one year Later than one year but not later than five years 23 Guarantees and Deposits Non-Current Deposits lodged with the Queensland Department of Mines Accommodation and rental bonds Deposits lodged with PNG Department of Mining and Petroleum 24 Related Party transaction a. Parent entity Crater Gold Mining Limited is the parent entity. b. Key management personnel 2017 $ 2016 $ 16,890 - 16,890 27,500 7,575 31,891 66,966 17,748 16,890 34,638 27,500 7,885 33,196 68,581 Disclosures relating to key management personnel are set out below and the remuneration report in the Directors' Report. The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Remuneration component Short term Post-employment benefits Share-based payments Total 2017 $ 938,486 - 93,032 2016 $ 1,070,872 - 76,555 1,031,518 1,147,427 c. Transactions with Related Parties Mr S W S Chan is a director and the controller of Freefire Technology Limited (“Freefire”), the major shareholder in the Company. During the year the Company paid Freefire $119,852 in loan interest and fees (2016: $80,106) and $250,603 in interest on convertible notes (2016: $251,289). During the course of the year Freefire made a number of short term loans to the Company at an annual interest rate of 8% (see Note 3d for further information on the loan. Mr S W S Chan also provided a 125% security deposit for the ICBC loan of $800,000. Mr R D Parker’s close family members hold a total of 77 Convertible Notes of the Company on which they earned $193 in interest (2016: $193). Mr R D Parker is paid fees for his role as Managing Director totalling $200,000 (2016: $200,000). Mr R L Johnson is paid fees for his role as Technical Director totalling $163,332 (2016: $250,000). Mr T Fermanis owns 40 Convertible Notes of the Company on which he earned $100 in interest (2016: $100). Mr T Fermanis is paid fees for his role as Executive Deputy Chairman/Investor Relations totalling $144,000 (2016: $144,000). Mr L K K Lee is paid fees for his role as Finance Director totalling $120,000 (2016: $120,000). Mr G R Boyce owns 200 Convertible Notes of the Company on which he earned $500 in interest (2016: $501). All transactions with related parties are made at arms-length. d. Receivable from and payable to Related Parties Details can be found at Note 17. e. Subsidiaries For details relating to subsidiaries, refer to Note 28. Transactions and balances between subsidiaries and the parent have been eliminated on consolidation of the Group. Crater Gold Mining Limited 45 Notes to the Financial Statements 25 Share Option Based Payments a. Recognised share option based payment expenses The expense recognised for share options granted for employee services received during the year is shown in the table below: Expense arising from equity settled share-based payment transactions June 2017 $ June 2016 $ 115,488 115,488 108,711 108,711 b. Employee Share Option Plan The establishment of the Crater Gold Mining Employee Share Option Plan (“the Plan”) was approved by shareholders on 22 June 2007. The Plan is designed to provide long term incentives for executives, staff and contractors to deliver long term shareholder returns. Participation in the Plan is at the Board’s discretion and no individual has a contractual right to participate in the Plan or to receive any guaranteed benefits. Options granted under the Plan carry no dividend or voting rights. Summary of options granted under the Employee Share Option Plan The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and movements in, share options issued during the year: Expiry Date 30/09/2017 30/09/2017 27/07/2019 27/07/2019 30/09/2017 12/07/2020 Exercise price $0.25 $0.25 $0.25 $0.25 $0.25 $0.125 Balance at start of the year 4,600,000 2,100,000 7,800,000 5,800,000 800,000 Granted Exercised Forfeited/expired - - - - - - - - - - - - - - - - - - - - 9,000,000 21,100,000 9,000,000 Balance at end of the year 4,600,000 2,100,000 7,800,000 5,800,000 800,000 9,000,000 30,100,000 The weighted average exercise price during the financial year was $0.21 (2016: $0.25). The weighted average remaining contractual life of the options outstanding at the end of the financial year was 1.96 years (2016: 2.50 years). Option pricing model – Employee Share Option Plan The fair value of the equity-settled share options granted under the Employee Share Option Plan is estimated as at the date of grant using a Black-Scholes option pricing Model taking into account the terms and conditions upon which the options were granted. The model takes into account the historic dividends and share price volatilities and each comparator company to produce a predicted distribution of relative share performance. Historical volatility of 43.95% was the basis for determining expected share price volatility and it is not expected that this volatility will change significantly over the life of the options. The expected life of the options is taken to be the full period of time from grant date to expiry date as there is no expectation of early exercise of the options. The options are options to subscribe for ordinary shares in the capital of the Company. The options are issued for no consideration. A risk free rate of 1.92% was used in the model. Shares issued on exercise of the option will rank pari passu with all existing shares of the Company from the date of issue. Crater Gold Mining Limited 46 Notes to the Financial Statements 25 Share Option Based Payments (cont.) c. Share option based payments made to unrelated party The Company did not issue any options over ordinary shares to extinguish its liabilities (2016: Nil). 26 Equity settled liabilities a. Share based payments 2017 22-Jul-16 2016 04-Dec-15 Chancery Asset Management 428,571 428,571 $0.07 $0.07 30,000 Value of principal 30,000 Sinton Spence 328,125 328,125 $0.08 $0.08 26,250 Value of principal 26,250 b. Option based payments The Company did not issue any options over ordinary shares to extinguish its liabilities (2016: Nil). Note 27 Remuneration of Auditors During the year, the following fees were paid or payable for services provided by BDO East Coast Partnership, the auditor of the parent entity, its related practices and unrelated firms. BDO East Coast Partnership Audit and review of financial reports Non-audit services BDO Papua New Guinea (Auditors of Anomaly Limited) Audit and review of financial reports Non-audit services June 2017 $ June 2016 $ 114,250 - 114,250 15,027 - 15,027 84,500 - 84,500 18,346 - 18,346 28 Subsidiaries a. Ultimate controlling entity Crater Gold Mining Limited is the ultimate controlling entity for the Group. b. Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in accordance with the accounting policy described in Note 1. Name of entity Principal place of business / Country of Incorporation Class of shares Percentage ownership Anomaly Resources Limited Australia Ordinary Anomaly Limited Papua New Guinea Ordinary 2017 % 100 100 2016 % 100 100 The proportion of ownership interest is equal to the proportion of voting power held. There are no significant restrictions over the consolidated entity’s ability to access or use assets, and settle liabilities. Crater Gold Mining Limited 47 Notes to the Financial Statements June 2017 $ June 2016 $ (48,581,386) (48,581,386) (8,565,029) (8,565,029) 182,184 80,679 1,197,503 45,317,879 5,241,753 8,657,228 2,979,282 6,156,914 83,222,415 81,377,207 340,507 3,215,611 340,507 3,100,123 (94,238,258) (45,656,872) (7,459,725) 39,160,965 Note 29 Parent Entity information Statement of Profit or Loss Loss after income tax Total Comprehensive Loss Statement of Financial Position Total current assets Total assets Total current liabilities Total liabilities Equity Contributed equity Convertible note equity Reserves Accumulated losses Total Equity Guarantee The parent company had no bank guarantees in respect of its subsidiaries as at 30 June 2017 (2016: nil) Contingent liabilities The parent company had no contingent liabilities as at 30 June 2017 (2016: nil). Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017 (2016: nil). Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in Note 1, except for the following:  Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Crater Gold Mining Limited 48 Notes to the Financial Statements Note 30 Reconciliation of loss for the period from continuing operations to net cash inflow/(outflow) from operating activities Loss for the period from continuing operations Adjustments for non-cash income and expense items: Depreciation and amortisation/impairment Written down value of fixed asset disposals Non-cash interest transactions Exploration costs written off or impaired Payables settled by equity payments Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables (Decrease)/increase in trade creditors and accruals Net cash outflow from operating activities June 2017 $ June 2016 $ (25,284,741) (10,886,589) 7,144,529 198,452 - 7,988 464,003 200,606 15,049,107 8,529,436 145,488 134,961 66,359 357,865 12,641 674,781 (2,057,389) (1,127,724) 31 Post Reporting Date Events On 3 July 2017 the Company received notification that the renewal application for license EL1972 had be denied by the Minister of Mining of Papua New Guinea effective 29 June 2017. After receiving this decision the Company decided to surrender licence EL2180. The surrender of EL2180 was effected by the Government of Papua New Guinea on 15 August 2017. These licenses were both located on Fergusson Island. On 24 July 2017 the Company announced a capital raising and plans for restructuring of the Company. The capital raising proposed was an 11 for 2 renounceable pro-rata entitlement offer at an issue price of $0.01 to raise at least $13.0 million. It was also proposed to sell the Croydon project for $1.2 million. The recapitalisation would also involve the appointment of new members of the board and new management. A prospectus was released on 26 July 2017 and followed up with a supplementary prospectus on 9 August 2017. On 9 August 2017 the Company executed a Short Term Bridging Facility with Freefire for $3,504,915. The purpose of the bridging facility was to provide the Company funds to repay the Convertible Notes with interest upon maturity. On 22 August 2017 the Convertible Notes expired. All Convertible Notes and accrued interest were paid out by early September 2017. On 1 September 2017 the Company advised that the capital raising had been terminated. It was also announced that a fresh rights issue on a 9 for 2 basis was be launched forthwith, which will be fully underwritten by Freefire. The Company expects to make a further announcement on the fresh rights issue in October. At the same time as cancelling the original rights issue it was confirmed that the sale of the Croydon project would also be abandoned. It was also announced that an interim loan of $2 million would be advanced to the Company by Freefire in order to enable the repayment of outstanding creditors prior to the closing of the fresh rights issue. To date the Company has received $0.8 million under this facility. On 5 September 2017 the Company announced that Mr Alex Molyneux, previously the proposed Chairman of the Company, would have no ongoing role with the business. The Company confirmed it anticipated the other operational management previously announced would have ongoing involvement with the Company. 32 Contingent Liabilities The Group does not have any contingent liabilities (2016: nil). While the Company has provided for potential interest penalties that may be levied on amounts overdue to the Papua New Guinea Internal Revenue Commission, as these penalties are prescribed, it has not done so on amounts overdue for Papua New Guinea NASFUND contributions nor overdue Papua New Guinea Training Levy amounts, as potential penalties are not prescribed and therefore cannot be determined. There is a chance that penalities will also be levied on overdue NASFUND contributions and Training levies. Crater Gold Mining Limited 49 Directors’ Declaration In the directors' opinion:     the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in Note 1 to the financial statements; the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors This declaration is made in accordance with a resolution of the Directors. R D Parker Managing Director 29 September 2017 Crater Gold Mining Limited 50 Tel: +61 2 9251 4100 Fax: +61 2 9240 9821 www.bdo.com.au Level 11, 1 Margaret St Sydney NSW 2000 Australia INDEPENDENT AUDITOR'S REPORT To the members of Crater Gold Mining Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Crater Gold Mining Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. 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 are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (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. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 4 in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the group’s ability to continue as a going concern and therefore the group may be unable to realise its assets and discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this matter. BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees. 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 of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Carrying Value of Exploration and Evaluation Assets Key audit matter How the matter was addressed in our audit Exploration and evaluation assets of $8,953,712 form a significant proportion of the Group’s assets as shown in note 13. The recovery of the carrying value of the exploration and evaluation assets are subject to successful exploration, exploitation or sale in the future and as such is subject to management judgement in accordance with AASB 6 - Exploration for and Evaluation of Mineral Resources. Management have relied on the valuations prepared by third party expert valuers to support the carrying value of exploration assets at 30 June 2017. The Group’s exploration and evaluation assets are also exposed to market, economic, political and seasonal influences which may affect the value. Exploration and evaluation expenditure is recorded in accordance with the accounting policy detailed in note 1 of the notes to the financial statements. Our procedures in relation to the carrying value of exploration and evaluation included, amongst others: • • • • • Assessing the competence, capabilities, objectivity and independence of the management experts engaged to value the assets, and the methodology they adopted; Analysing the financial and operating commitments of the licenses to see whether sufficient expenditure has been included in the cash flow forecast to ensure expenditure conditions are met; Assessing the Group’s rights to tenure over the relevant exploration areas by obtaining the license agreements and also considering whether the Group maintains the tenements in good standing; Assessing the ability of the Group to finance any planned future exploration and evaluation activity; and Ascertaining whether management has any plans to abandon the held tenements. Mining Assets Key audit matter How the matter was addressed in our audit The mining assets as disclosed in note 14 were dependent on successful mining operations, successive years of underperformance to budget identified that there was a risk of impairment. The impairment of $6,953,390 required judgement and estimates from management making this a key audit matter. Our procedures in relation to the carrying value of mining assets included, amongst others: • • Assessing the competence, capabilities, objectivity and independence of the management experts engaged to value the assets, and the methodology they adopted Determining whether managements forecast supported the carrying value • Assessing the quantum of impairment booked. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2017, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and 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 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 the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has 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 this 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. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in paragraph b of the directors’ report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Crater Gold Mining Limited, for the year ended 30 June 2017, 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. BDO East Coast Partnership Gareth Few Partner Sydney, 29 September 2017 ASX Additional Information The following information is required to be disclosed under ASX Listing Rule 4:10 and is not disclosed elsewhere in this Report. This information is correct as at 20 September 2017. Substantial Shareholders The following substantial shareholders are recorded in the Company’s register of substantial shareholders. Name Freefire Technology Ltd Voting Rights Number of shares 160,085,929 % holding 58.83% Ordinary shares – on a show of hands, are one vote for every registered holder and on a poll, are one vote for each share held by registered holders. Options holders have no voting rights. Holders of Each Class of Equity Security Name Fully paid ordinary Shares Unlisted Options (exercisable at $0.25 per option on or before 30 September 2017) Unlisted Options (exercisable at $0.25 per option on or before 30 September 2017) (ESOP) Unlisted Options (exercisable at $0.25 per option on or before 27 July 2019) Unlisted Options (exercisable at $0.25 per option on or before 30 September 2017) (ESOP) Unlisted Options (exercisable at $0.25 per option on or before 27 July 2019) Unlisted Options (exercisable at $0.125 per option on or before 12 July 2020) Code CGN CGNO37 CGNO38 CGNO39 CGNO40 CGNO41 CGNO42 Number of holders 3,278 8 5 6 1 6 10 Top 20 Holders of Ordinary Shares Name Freefire Technology Ltd HSBC Custody Nominees (Australia) Limited BNP Paribas Nominees Pty Ltd Mr Graham John Bailey & Mrs Annette Maree Bailey Mr Paul Thomas McGreal Mr Norman Colburn Mayne Graham Bailey Earthmoving Pty Ltd Mr Joe Holloway One Managed Investment Funds Limited Bloom Star Investment Limited J P Morgan Nominees Australia Limited Mr Vineet Jindal Mr Barry Rowland Butler & Mrs Julie Butler IAE Study In Australia Pty Ltd Colvic Pty Ltd Mr Colin Frank West Mr Trilochana Reddy Mr Anthony Franco Santalucia Mr Carlo Battisti Richard Lewis Johnson Paynes Hardware Services Pty Ltd Number of shares 160,085,929 % holding 58.83% 7,447,416 4,816,713 4,375,000 3,700,000 3,329,333 3,125,000 2,643,524 2,410,637 1,775,649 1,661,272 1,253,916 1,126,883 1,040,000 1,000,000 1,000,000 980,940 885,143 800,000 781,250 769,865 2.74% 1.77% 1.61% 1.36% 1.22% 1.15% 0.97% 0.89% 0.65% 0.61% 0.46% 0.41% 0.38% 0.37% 0.37% 0.36% 0.33% 0.29% 0.29% 0.28% Grand Total 205,008,470 75.34% Distribution of Equity Securities Crater Gold Mining Limited 55 ASX Additional Information Class of Security Security Code 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and Over Total Fully paid ordinary Shares CGN 1,384 812 322 588 172 3,278 Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options CGNO37 CGNO38 CGNO39 CGNO40 CGNO41 CGNO42 - - - - - - - - - - - - - - - - - - - - - - - - 8 5 6 1 6 10 8 5 6 1 6 10 Number of holders holding less than a marketable parcel of shares A marketable parcel is defined by the Market Rule Procedures of the ASX as a parcel of securities with a value of not less than $500. The number of ordinary shareholders holding less than a marketable parcel of shares is 3,010. On market buy-back There is no current on market buy-back. Stock Exchange Listing Quotation has been granted for all the ordinary shares of the company on all Member Exchanges of the Australian Securities Exchange Limited. Unquoted Securities Options over unissued shares: A total number of 30,100,000 options are on issue. 13,300,000 are on issue to 30 holders of ordinary securities. 16,800,000 options are on issue to six directors. Crater Gold Mining Limited 56 Corporate Directory Directors: S W S Chan (Non-executive Chairman) R D Parker (Managing Director) T M Fermanis (Non-executive Deputy Chairman) R L Johnson (Technical Director) L K K Lee (Finance Director) D T Y Sun (Non-executive Director) Company Secretary: H L Roberts ABN: 75 067 519 779 Registered Office: Postal Address: Share Registry: Auditors: C/- BDO Level 11, 1 Margaret Street, Sydney NSW 2000 Australia Telephone: +61 8 9226 4500 Email: info@cratergold.com.au PO Box 7775 Cloisters Square PERTH WA 6850 Australia Link Market Services Limited Level 15, 324 Queen Street Brisbane QLD 4000 Australia Telephone: 1300 554 474 Facsimile: +61 7 3228 4999 BDO East Coast Partnership Level 11 1 Margaret Street Sydney NSW 2000 Australia Telephone: +61 2 9251 4100 ASX Listing: Crater Gold Mining Limited shares are quoted on the Australian Securities Exchange under the code “CGN”. Website address: www.cratergold.com.au Crater Gold Mining Limited 57 

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