Cygnus Gold Limited
Annual Report 2018

Plain-text annual report

Annual Report 2018 An Australian Gold and Base Metals Exploration Company Corporate directory — 01 1 – – Principal Place of Business & Registered Office Stock Exchange Listing Level 3, 20 Parkland Road Osborne Park WA 6017 – Contact information Phone: +61 8 9489 2680 Email: info@cygnusgold.com Website: www.cygnusgold.com – Australian Business Number 80 609 094 653 – Directors Primary listing: Australian Securities Exchange ASX Code: CY5 – Share Register Computershare Investor Services Pty Ltd GPO Box 2975, Melbourne VIC 3001 Phone: +61 3 9415 5000 Fax: +61 3 9473 2500 – Bankers National Australia Bank 100 St Georges Terrace Mr Michael Bohm Non-executive Chairman Perth WA 6000 Mr James Merrillees Managing Director – Mr Simon Jackson Non-executive Director Solicitors Dr Oliver Kreuzer Non-executive Director Gilbert and Tobin Dr Amanda Buckingham Non-executive Director Level 16, Brookfield Place Tower 2 123 St Georges Terrace PERTH WA 6000 – Company Secretary Mr Michael Naylor – Auditors Grant Thornton Audit Pty Ltd Central Park Level 43 152-158 St Georges Terrace Perth WA 6000 Annual Report 2018 - Cygnus Gold Limited // 1 Cygnus Gold - Contents 02 As we await results from our first quarter 2019 exploration activities and plan our work for the months ahead, the coming year looks to be an important one in shaping our Company and its success. 2 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Contents Contents 03 Statement of Profit and Loss and Other Comprehensive Income 01 Corporate Directory — 05 Chairman’s Statement — 08 Directors’ Report — 58 Auditor’s Independence Declaration — 61 — 62 Statement of Financial Position — 63 Statement of Changes in Equity — 64 Statement of Cash Flows — 65 Notes to the Financial Statements — 87 Directors’ Declaration — 88 Independent Auditor’s Report — 91 ASX Additional Information — Annual Report 2018 - Cygnus Gold Limited // 3 Cygnus Gold - Chairman’s statement 04 the team has built on our extensive project portfolio we have been successful in executing numerous land access agreements and subsequently undertaken several drill programs on our 100% owned projects 4 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Chairman’s statement Chairman’s statement — 05 Fellow shareholders, I am pleased to present the 2018 Annual Report for Cygnus Gold Limited (ASX: CY5), reflecting on the Company’s first year listed on the Australian Securities Exchange following the completion of our Initial Public Offering and the commencement of trading in January 2018. In the time since our listing, we have been successful in executing numerous land access agreements and subsequently undertaken several drill programs on our 100% owned projects. Further, the team has built on our extensive project portfolio in the Wheatbelt region of Western Australia where we are exploring for gold and base metals in the under-explored Southwest Terrane – home to gold discoveries including the significant Tampia gold resource. The focus to date has been the Stanley Project, where during 2018 we completed more than 12,000 metres of drilling. There are multiple prospects at Stanley, including Bottleneck, Stanley Hill, McDougall and Brays, and our work on the project to date has produced some promising results including these from Bottleneck including 9.5m at 29.2 g/t Au in hole BNDD001 and 10.9m at 15.1 g/t Au in BNDD003. We have subsequently completed follow-up drilling at Bottleneck, as well as the Stanley Hill and McDougall prospects in early 2019. A new target is emerging at McDougall South where we have identified a coherent (1km x 500m) gold anomaly associated with a north-west-trending structural zone, and two holes intersected anomalous gold. In addition to Stanley, we also undertook drilling at our Bencubbin Project as part of a program co-funded by the WA Government, with our initial focus on the Jefferies prospect, a 3.5km long gold auger anomaly. This previous work returned a wide, anomalous gold intercepts in limited (shallow) drilling including 12m @ 2.15g/t Au from surface, and we have followed this up with a 10-hole program in February 2019. • Consolidated a significant tenement holding for gold and base metal exploration in Western Australia — • Attracted cornerstone investment from Resource Capital Funds, Southern Cross Capital and Gold Road Resources Limited — • Recruited a management team to undertake both the corporate and technical management processes — • Arranged land access and permitting for exploration on the Company’s priority target areas — • Undertaken a number of exploration and drilling programs foreshadowed in our IPO — • Entered into multiple earn-in and JV agreements with Gold Road — • Successful official quotation on the ASX — • Successfully applied for WA Government co-funding for diamond drilling at Stanley, Burracoppin and Bencubbin. Annual Report 2018 - Cygnus Gold Limited // 5 Cygnus Gold - Chairman’s statement 6 Chairman’s statement — Whilst gold is our focus, the team also identified an extensive surface nickel anomaly over an 18km strike at Bencubbin North. The 70km-long Bencubbin Greenstone is considered a prime target for sulfide-hosted nickel-copper and base metals mineralisation, however the nickel targets have not been adequately tested nor drilled. We have recently undertaken a reconnaissance soil sampling program there in early 2019 and we expect to commence a wider program over the coming months. The Company has also progressed our Joint Venture (JV) projects with Gold Road Resources Ltd (ASX: GOR), a major shareholder in our company and a well-credentialled partner. Cygnus is managing these JVs at Wadderin, Lake Grace and Yandina, and we have been busy already in 2019 completing surveying, sampling and a 23-hole drill program. More drilling is planned for the coming months. Following on from the harvest season in the Wheatbelt, it has been a busy period of exploration at Cygnus and I would like to thank our Management and Staff for their significant efforts through 2018. I would also like to thank our Shareholders for their support and encouragement for our exploration efforts. As we await results from our first quarter 2019 exploration activities and plan our work for the months ahead, the coming year looks to be an important one in shaping our Company and its success. I hope you will share that journey with us. Michael Bohm Non-executive Chairman 6 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Chairman’s statement The Company has also progressed our Joint Venture 07 projects with Gold Road Resources Ltd, a major shareholder in our company and a well-credentialled partner. Annual Report 2018 - Cygnus Gold Limited // 7 Cygnus Gold - Directors’ Report 08 Directors’ Report — The directors present their report, together with the financial statements for the year ended 31 December 2018 for Cygnus Gold Limited (Cygnus or the Company). Directors — The names and details of the Company’s directors in office during the financial year and until the date of this report (unless otherwise stated) are as follows: Mr Michael Bohm - Non-executive Chairman Director Appointed 30 September 2016 — Mr Bohm is a qualified mining professional with Risk Committees and Chairs their Remuneration significant corporate and operations experience. He Committees. Prior to this, he has held a number has had extensive minerals industry experience in of directorships including those with Perseus Australia, South East Asia, Africa, Chile, Canada and Mining Limited, Tawana Resources Limited, Argyle Europe. A graduate of WA School of Mines, Mr Bohm Diamonds Mines, Sally Malay Mining Limited and has worked as a mining engineer, mine manager, Ashton Mining of Canada. study manager, project manager, project director and managing director and has been directly involved in a number of new mine developments. Mr Bohm currently serves as a Director of a number of ASX-listed companies and sits on their Audit & Over the past three years, Mr Bohm has also held directorships with the following ASX listed companies: Other current directorships Commenced Ceased Mincor Resources Limited Ramelius Resources Limited 1 January 2017 29 November 2012 - - Former directorships in the last 3 years Berkut Minerals Limited Perseus Mining Limited 1 July 2016 30 June 2017 15 October 2009 31 May 2018 Tawana Resources Limited 1 August 2015 21 October 2016 8 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Mr James Merrillees – Managing Director Appointed 17 November 2017 — 09 Mr Merrillees is a professional geologist with more than 20 years’ experience in minerals exploration and development. He has wide-ranging experience leading teams exploring for and evaluating precious and base metals globally. Mr Merrillees experience includes senior technical and corporate roles for ASX-listed major and junior gold and base metals explorers and producers. He is a member of the AusIMM and holds Bachelor of Science (Geology) and Bachelor of Commerce (Accounting and Finance) degrees and a Graduate Diploma in Applied Finance. Over the past three years, Mr Merrillees has not held any directorships with an ASX listed company. Mr Simon Jackson – Non-executive Director Appointed 17 November 2017 — Mr Jackson is a Chartered Accountant with 26 years’ experience in the gold industry. He has held positions as CEO and MD of ASX-listed Brazilian-focussed gold producer Beadell Resources Limited and President & CEO of the TSXV-listed Orca Gold Inc, a junior exploration company with multiple gold discoveries in Sudan. From 1999 to 2010, he was an integral part of the senior management team at Red Back Mining Inc, which grew from a small West Perth-based junior to a TSX-listed intermediate producer that was taken over by Kinross Gold Corp in 2010. Mr Jackson’s career includes corporate transactions and equity financings involving assets in Australia, Africa, Asia and South America. Over the past three years, Mr Jackson has also held directorships with the following ASX listed companies: Other current directorships Commenced Ceased Coziron Resources Limited Kopore Metals Limited 30 January 2019 7 March 2019 - - Former directorships in the last 3 years Cardinal Resources Limited 31 August 2015 12 October 2017 Beadell Resources Limited 10 November 2013 14 July 2018 Annual Report 2018 - Cygnus Gold Limited // 9 Cygnus Gold - Directors’ Report 10 Dr Oliver Kreuzer – Non-executive Director Director since April 2016 — Dr Kreuzer is a Registered Professional Geoscientist (MAIG, RPGeo) with a broad skill set in structural, generative and corporate geology honed during a 20-year career in applied research and mineral exploration across a wide range of gold, base metals and uranium projects in Australia, Africa, North America, Europe and Asia. His work directly contributed to new company floats (ASX:AUC, ASX:RGU, ASX:CY5), company transforming project acquisitions (ASX:AWV, ASX:GLA) and new discoveries. Dr Kreuzer’s passion lies in the application of superior geoscience to exploration targeting and shortening the time frame to discovery. Over the past three years, Dr Kreuzer has not held any directorships with an ASX listed company. Dr Amanda Buckingham – Non-executive Director Director since April 2016 — Dr Buckingham has been involved full-time in mineral exploration for more than 20 years. Dr Buckingham founded and remains a major shareholder and director of companies in the United States, Australia and Singapore and has been fundamental to their high profitability. Dr Buckingham founded Fathom Geophysics in 2007, an industry leading geophysical group that has developed worlds-best technology for targeting under cover and significantly increasing the chance of discovery. Dr Buckingham’s early career was at major mining companies such as Rio Tinto and several listed juniors. She has wide-ranging exploration experience in North and sub-Saharan Africa, North and South America, South East and Central Asia, Russia and Europe. Dr Buckingham is a research fellow at the University of Western Australia and a founder of Cygnus. Over the past three years, Dr Buckingham has not held any directorships with an ASX listed company. 10 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Interests in the shares and options of the Company — As at the date of this report, the interests of the directors in the shares (direct and indirect) of Cygnus Gold 11 Limited were: Name Number of ordinary shares Performance Rights Mr Michael Bohm Mr James Merrillees Mr Simon Jackson Dr Oliver Kreuzer Dr Amanda Buckingham 3,170,001 150,000 303,334 1,883,334 2,333,334 There are no options on issue at the date of this report. Company Secretary — Mr Michael Naylor — 100,000 350,000 100,000 100,000 100,000 Mr Naylor has 23 years’ experience in corporate advisory and public company management since commencing his career and qualifying as a Chartered Accountant with Ernst & Young. He has been involved in the financial management of mineral and resource focused public companies serving on the board and in the executive management team focusing on advancing and developing mineral resource assets and business development. Operating results — The loss of the Company for the year ended 31 Principal activities — Cygnus is an exploration company focused on the December 2018 after providing for income tax discovery of gold and base metals deposits in the amounted to $638,119 (2017: $784,721). south west Yilgarn of Western Australia. Review of financial position — The net assets are $5,626,625 as at 31 December 2018 (2017: $6,607,517). There have been no significant changes in the nature of these activities during the period. Annual Report 2018 - Cygnus Gold Limited // 11 Cygnus Gold - Directors’ Report 12 The focus to date has been the Stanley Project, where during 2018 we completed more than 12,000 metres of drilling. 12 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Review of Operations — 13 Overview — Cygnus is targeting the discovery of high-grade gold and base metals deposits within the Southwest Terrane of Western Australia. The Southwest Terrane is a unit of high metamorphic grade rocks forming part of the well-mineralised Yilgarn Craton. In Western Australia, particularly in the Southwest Terrane, high-grade metamorphosed greenstone sequences have been targeted sporadically for their gold potential with some success at Griffins Find, Katanning and Tampia. However, compared to other parts of the Yilgarn Craton, the intensity of exploration activity is relatively low. Cygnus believes this is partly a result of widespread, post-mineral cover which requires detailed geophysical data to effectively explore. It was only in February 2016 that higher resolution geophysical data over the Southwest Yilgarn became publicly available. Using this newly released data, Cygnus’ team generated maps identifying the greenstone belts across the Southwest Terrane including key structures controlling the location of mineralisation. The areas identified by this approach were subject to detailed screening and the Company subsequently applied for exploration licences over targets that passed this initial screening and were ranked highest for potential to host economic gold deposits. At 31 December 2018, the Company had assembled a ~9,000km² land package to explore for gold and base metals in this highly prospective region. Annual Report 2018 - Cygnus Gold Limited // 13 Cygnus Gold - Directors’ Report Cygnus Gold - Directors’ Report 14 Overview — Figure 1: Location of Cygnus’ Projects, Southwest Western Australia 14 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Cygnus Gold - Directors’ Report In Western Australia, particularly in the Southwest 15 Terrane, high-grade metamorphosed greenstone sequences have been targeted sporadically for their gold potential with some success at Griffins Find, Katanning and Tampia. Annual Report 2018 - Cygnus Gold Limited // 15 Cygnus Gold - Directors’ Report Cygnus Gold - Directors’ Report 16 Stanley Project (Cygnus 100%) — Cygnus’ most advanced exploration project is the Stanley Project, comprising an area of 160km2 approximately 60km northeast of the Wheatbelt town of Katanning. Stanley was targeted following Cygnus’ interpretation of available geophysical datasets which defined a more than 20km- long strike length of prospective greenstone sequences which included widespread, shallow and high-grade gold mineralisation identified by previous explorers (Figure 2). Following the successful IPO in January 2018 Cygnus has completed over 12,000m of drilling at Stanley as discussed below. 16 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Cygnus Gold - Directors’ Report 17 Figure 2: E70/4787 (Stanley Project), key drill results and prospects. Note: The geology interpretation is explained in the Independent Technical Assessment Report in Section 8 of the Cygnus Gold Prospectus dated 22 November 2017 Annual Report 2018 - Cygnus Gold Limited // 17 Cygnus Gold - Directors’ Report 18 January 2018 Diamond Drilling — The Company’s initial 629m diamond core drilling program targeted the Bottleneck prospect which is defined by widespread historical intersections of shallow, high-grade gold. This prospect had received limited deeper drilling and the Company had also interpreted a ‘down-plunge’ target, which had never been tested. The initial diamond exploration program returned a number of encouraging results including (refer ASX announcements on 22 February 2018 and 7 March 2018)1: • BNDD001: 9.50m @ 29.20 g/t Au from 36.70m incl. 2.4 m @ 114.63 g/t Au from 38.70m • BNDD003: 10.95m @ 15.10 g/t Au from 24.70m incl. 4.75 m @ 34.17 g/t Au from 24.70m • BNDD006: 6m @ 3.27 g/t Au from 157.5m incl. 2m @ 8.82 g/t Au from 161.5m. Drilling confirmed the width and grade of mineralisation intersected in the historical aircore holes, and notably holes BNDD001 and BNDD006 intersected mineralisation in fresh basement and these were targeted for follow up drilling described below (also Figures 3 & 4). This program was co-funded by a grant from the WA Government’s Exploration Initiative Scheme. Figure 3: Plan view of the Bottleneck Prospect with intersections >0.1 g/t Au in Cygnus Gold’s 2018 diamond drilling program. 18 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report 19 Figure 4: Section BNDD001 looking north with intervals >0.1 g/t Au and significant intervals >1 g/t Au highlighted (holes 08KUAC0075 and 09KUAC009 are historical holes not drilled by Cygnus2) February 2018 Reverse Circulation (RC) Drilling — Cygnus followed up this initial diamond drilling with a 32-hole (2,975m) RC drilling program, targeting the high- grade zone and basement extensions of the gold mineralisation at Bottleneck, as well as targets on the Brays and Stanley Hill prospects, which had never been tested with deeper drilling. Hole BNRC009, targeting extensions to the high-grade mineralisation at Bottleneck intersected (refer ASX announcement on 8 June 2018)1: • 7m @ 4.9g/t Au from 42m incl. 1m @ 33.0g/t Au from 42m BNRC009 confirmed the targeted high-grade horizon however did not materially extend mineralisation into the basement. Six holes of this program (BNRD005, BNRD007, BNRD010, BNRC022 BNRD023 BNRD024 and BNRD025) targeted extensions to mineralisation in Cygnus hole BNDD006 which considered a priority target by the Company as it was the first hole to intersect high-grade mineralisation in fresh basement rock at Stanley. Annual Report 2018 - Cygnus Gold Limited // 19 Cygnus Gold - Directors’ Report 20 Significant intersections included (refer ASX Resampling of the mineralised intervals in STRC0002 announcement on 8 June 2018)1: is underway to determine whether further follow-up • BNRD010: is warranted. o 3.0m @ 1.01g/t Au from 111.0m and Holes STRC0004, 0005 and 0006 were drilled to o 1.0m @ 0.32g/t Au from 116.2m and test a domal structure to the south of Bottleneck, o 2.0m @ 0.58g/t Au from 131.2m and with the best result coming in STRC0005 with 4m o 1.0m @ 0.66g/t Au from 152.3m. @ 1.08g/t Au from 32m. STRC0004 and STR0006 • BNRD024: did not intersect significant mineralisation and this o 2.7m @ 0.33g/t Au from 151.4m and dome is considered to have been tested with no o 1.0m @ 0.10g/t Au from 190.0m. follow up planned. • BNRD005 intersected several narrow zones of mineralisation coincident with BNDD006 including 1m @1.31g/t Au from 83m. The Company also drilled two RC holes (total 182m) at the McDougall South prospect targeting historical aircore gold anomalism associated with a complex structural zone with best intersections (Refer ASX • Holes BNRC022 and BNRD023 intersected a announcement 4 February 2019)1: narrow, mineralised zone that extends more than 80m between these two holes, with best intervals of 4m @ 0.27g/t Au from 148m in BNRC022. Several RC holes were also drilled to test aircore gold anomalies drilled by Cygnus up to 5km from Bottleneck, and significant intersections from these holes included (refer CY5 ASX announcement 6 June • • STRC0007: 4m @ 0.25g/t Au from 32m and STRC0008: 16m @ 0.19g/t Au from 32m. An aircore drilling program at McDougall South was planned to follow up this anomalous zone (discussed below). December 2018 Aircore Drilling 2018)1: — • • • BNRC012 with 2m @ 0.37g/t Au from 41m; BNRC013 with 1m @ 1.07g/t Au from 34m; and BNRC015 with 6m @ 0.62g/t Au from 46m. December 2018 RC Drilling — In addition to the RC drilling, the December 2018 program included 65 aircore (AC) holes for 2,661m designed to test targets identified from the Company’s ground geophysical and surface geochemistry surveys as well as follow up zones of anomalous gold intersected in the Company’s RC programs. In December 2018 the Company completed an eight-hole (866m) RC drilling program testing additional gold targets at Stanley. The best results from the AC program came in STAC028 at McDougall South with 12m @ 0.34g/t Au from 16m (Refer ASX announcement 4 February 2019)1. Three holes (STRC0001, STRC0002, STRC0003) targeted extensions to the Bottleneck prospect defined by the diamond and RC programs completed earlier in the year. The best result from this program came in hole STRC0002 which ended in mineralisation with 6m @ 0.74g/t Au from 136m as well as a narrow zone of mineralisation higher up the hole with 4m @ 1.17g/t Au from 124m (refer CY5 ASX announcement 6 June 2018)1. The intersection at STAC028 is part of a large (1km x 500m), and coherent gold anomaly at McDougall South associated with a NW trending structural zone (Figures 5 & 6). This gold anomalous zone is defined by a +50ppb Au mineralised halo hosted in basement rock interpreted as a felsic granulite after a granitic precursor. Two further lines of AC drilling and two RC holes were drilled in early 2019 to follow up this zone at McDougall South with assay results anticipated in March-April 2019. 20 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report 21 Figure 5: McDougall South Prospect, drilling over interpreted geology with contours of maximum downhole Au. Figure 6: McDougall South section with significant gold intersections at STRC007 and 008 within a broader >50ppb Au halo. Annual Report 2018 - Cygnus Gold Limited // 21 Cygnus Gold - Directors’ Report Cygnus Gold - Directors’ Report Cygnus Gold - Directors’ Report 22 BENCUBBIN PROJECT (Cygnus 100%) — Cygnus Gold’s 675km2 Bencubbin Project, located ~220km northeast of Perth, was originally pegged for its gold prospectively, centred on the historical Jefferies prospect on a 10km long section of the Bencubbin Greenstone Belt. During the year work by the Company’s technical team recognised the nickel and base metals potential of the ~80km long Bencubbin Greenstone and two additional tenements were applied for at Bencubbin North and Bencubbin South to cover the entire Belt. BENCUBBIN — The Company’s initial focus at Bencubbin was on the Jefferies gold prospect, where previous explorers defined a ~3.5km long auger gold anomaly with assay values up to 566ppb Au broadly coincident with a contact between the greenstone belt and a granite intrusion (Figure 7)2. 22 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Cygnus Gold - Directors’ Report Cygnus Gold - Directors’ Report 23 Figure 7: Bencubbin Project interpreted geology and historical auger samples². The geology is based on geophysical interpretation and modelling as explained in the Company’s Independent Technical Assessment Report within Cygnus’ Prospectus dated 22 November 2017. Historical exploration at Jefferies also reported rock In addition, the potential for the gold mineralisation chip assays up to 12.9g/t Au and wide, anomalous gold at Jefferies to extend further towards the south and intercepts in shallow drilling including: southwest along the interpreted granite-greenstone • 12m @ 2.15g/t Au from surface in hole NM2R-1132 contact was untested. • 13m @ 0.62g/t Au from 42m to EOH, including An RC rig mobilised to drill the Jefferies Project in 2m @ 3.36g/t Au from 52m in hole NM2R-0142. early 2019 with results expected early in the second Despite these encouraging results, the Company quarter of 2019. considers that the Jefferies prospect remains The drilling program at Bencubbin was co-funded by underexplored and, apart from generally shallow air a WA Government Exploration Incentive Scheme core and RAB drilling, has only been tested by two (EIS) grant. diamond and 14 RC holes. Annual Report 2018 - Cygnus Gold Limited // 23 Cygnus Gold - Directors’ Report 24 BENCUBBIN NORTH (NI-CU ± CO, BASE METALS) — Nickel Potential — Bencubbin North was pegged by the Company in mid-2018 after a review of historical exploration identified a regionally extensive nickel auger surface geochemical anomaly, developed over a strike length of ~18km, and associated with ultramafic rocks within a north-northwest trending Archaean greenstone belt (Figure 8). Several discrete Cu and Au anomalies are located within or adjacent to the Ni anomalism, with a maximum coincident auger Cu result of 162ppm recorded, and a (separate) maximum Au value of 71 ppb reported, both within the greenstone sequence (Figure 9). 24 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report 25 Figure 8: E70/5169 (Bencubbin North) surface geochemistry grid contours for nickel, historical drilling and Jefferies prospect to the SE. Annual Report 2018 - Cygnus Gold Limited // 25 Cygnus Gold - Directors’ Report 26 Figure 9: E70/5169 (Bencubbin North); gridded historical nickel, copper and gold surface geochemistry. Historic drilling at Bencubbin North included five lines of shallow (<40m) RAB holes principally targeting gold mineralisation. None of these historical holes tested the peak nickel anomalism, and none were assayed for Ni, leaving the entire 18km surface multi-element geochemical anomaly effectively untested for nickel deposits. Aircore drilling approximately 15km to the southeast of the main Bencubbin North Ni-Cu target intersected extensions of the Bencubbin ultramafic package including(Refer ASX announcement on 30 November 2018)1: • • 12m @ 0.13% Ni from 48m in hole MERA 3; and 16m @ 0.12% Ni from 47m in hole MERA 1 ~ 600m to the northeast of MERA 3. Importantly, none of the holes drilled at Bencubbin North were analysed for Platinum Group Elements (PGEs) which are considered an important indicator of nickel sulphide fertility. Given the lack of effective historic exploration, as well as the ability to apply improved (and more detailed) geochemical sampling, and electromagnetic (EM) geophysics, Cygnus considers the Bencubbin Project a high priority target for the discovery of a new nickel system. Base Metals Potential — Review of the nickel potential at Bencubbin North also identified a series of gossans known as the Mandiga prospect. These gossans are the surface expression of a laterally extensive sulphide-bearing ironstone unit within the Bencubbin greenstone, west of the main Bencubbin North nickel anomaly. The Mandiga gossans outcrop discontinuously over a strike length of more than 3km with a true thickness of up to 15m (Figure 10). 26 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report 27 Figure 9: E70/5169 (Bencubbin North); gridded historical nickel, copper and gold surface geochemistry. Figure 10: E70/5169 (Bencubbin North); Mandiga Gossan VMS Target Zone Lead points over nickel grid contours Mandiga was explored in the late 1970s including auger sampling which identified a Pb anomaly spatially coincident with the gossan. Historical drilling at Mandiga included percussion drilling and seven diamond core holes, with best results of(refer ASX announcement on 30 November 2018)1: • • • 18m @ 0.14% Ni from 32m in Hole DMA4; 2m @ 0.63% Pb from 52m in Hole DMA2; and 2m @ 1.7% Zn from 176m in Hole DMA5. The Pb-in-auger anomalism extends for a further 1.2km south of the known drilling and has not been drill tested in any subsequent work. Given the extent and known thickness of the system, encouraging early results, and the lack of modern exploration techniques applied, Cygnus considers this target highly prospective for base metal mineralisation and follow up is planned for the first half of 2019. Annual Report 2018 - Cygnus Gold Limited // 27 Cygnus Gold - Directors’ Report 28 BURRACOPPIN PROJECT (Cygnus 100%) — Cygnus’ wholly-owned Burracoppin tenements are located ~25 km east- northeast of Merredin with excellent access via the Great Eastern Highway that crosses the tenements, and a network of local roads and local farm tracks. The Edna May gold mine owned and operated by Ramelius Resources Ltd (ASX:RMS), is located approximately 4km from the corner of Cygnus’ Burracoppin Project (Figure 11). The Burracoppin Project is underlain by Archaean granite and greenstone that were metamorphosed to amphibolite and granulite facies grade. Outcropping bedrock is rare with the area being dominated by an intensely developed regolith rarely more than 50m thick. Exploration by previous explorers at Burracoppin identified a more than 2.5km long by 0.7km wide gold-in-soil anomaly at Anomaly 47, which is open to the east where it is cut by a paleochannel system. 28 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report 29 Figure 11: Cygnus’ Burracoppin Project and location of Cygnus’ ground gravity survey. Regional geology from 1:500,000 GSWA mapping. Annual Report 2018 - Cygnus Gold Limited // 29 Cygnus Gold - Directors’ Report 30 These explorers also recognised the base metals potential of the region with follow-up auger sampling at Anomaly 47 identifying coherent Au-Pb-Zn anomalies as well as an arsenic (As) “pipe” at Dicks Reward defined by a >100ppm As anomaly more than 2.6km long and up to 1.5km wide which is open to the east. The geochemical signature of mineralisation at Anomaly 47 is similar to known Volcanogenic Massive Sulphide (VMS) deposits globally, with the Au-Ag-Zn-Pb rich mineralisation located to date potentially being the distal signature of a more proximal Cu-Zn rich system, which is the target of the Company’s planned follow up. Cygnus 2018 Ground Gravity Survey — During 2018 Cygnus completed a detailed ground gravity survey targeting relatively dense massive sulfides potentially associated with VMS mineralisation. A total of 4,142 stations were acquired on three different station spacings (50m, 100m and 200m) over the broader Anomaly 47 target horizon. Thirty-one discrete positive gravity anomalies were identified from this survey with 14 considered high-priority targets for follow-up (Figure 12). Figure 12: Image of Cygnus Gold’s ground gravity survey (residual of the Bouguer gravity) with compilation of historical exploration at Burracoppin² and boundary of airborne electromagnetic (AEM) survey. 30 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Cygnus 2018 Airborne EM Survey — 31 Cygnus subsequently collected a 277 line-km Xcite™ Airborne Electromagnetic (AEM) survey to screen the prospective gravity anomalies as well as to try and identify additional conductive targets which may represent accumulations of massive sulfides (refer ASX Announcement 19 September 2018)1. The AEM survey identified several discrete bedrock conductors, in addition to numerous shallow conductors which likely correspond to conductive zones within transported cover (Figure 13). Figure 13: TOP LEFT: AEM survey location with respect to the Anomaly 47 and Dicks Reward prospects, previous drilling and discrete AEM conductors. BOTTOM LEFT: Gridded Tau [decay constant] derived from dB/dT, long wavelength removed. RIGHT: Inset over Anomaly 47 showing ground gravity anomalies coincident with AEM conductors and historical drill collars The nearest historical drilling (shallow RC drilling assayed only for gold) is 200m east of the main conductive target zone, with the only one deeper RC hole drilled a further 400m to the east. This deeper RC drilling intersected narrow higher-grade zones within broader mineralised intervals including2: • A47RC003 with 4m @ 0.69g/t Au, 14.7g/t Ag, 0.52% Pb, 0.75% Zn from 27m Drill testing of targets identified from the gravity and EM surveys is planned to commence in 2019 once approvals are received and is being co-funded by a grant from the WA Government. Annual Report 2018 - Cygnus Gold Limited // 31 Cygnus Gold - Directors’ Report 32 Bonnie Rock — In July 2018 the Company applied for a new tenement over the Bonnie Rock Prospect, approximately 50km northwest of Anomaly 47 (Figure 11). Bonnie Rock comprises a series of pods of massive magnetite, franklinite (Zn-Fe oxide) and garnet schists with Zn, Pb, Ag mineralisation hosted in felsic granulites considered the metamorphic equivalent of altered felsic rocks. The similarities of Bonnie Rock with the Au-Ag-Zn-Pb mineralisation at Anomaly 47 suggest this is a regionally extensive style of mineralisation, with the greenstone sequences at Burracoppin and Bonnie Rock being underexplored for both VMS and gold mineralisation. Exploration at Bonnie Rock will commence after tenement grant, in early 2019. Gold Potential — In addition to the potential for VMS style mineralisation identified at Anomaly 47 and Bonnie Rock, the Burracoppin Project tenements cover Archaean greenstones including interpreted extensions of the greenstone package hosting the nearby Edna May gold mine ~20km southeast of Anomaly 47. Given the limited historical exploration, and extensive post mineral cover across the Burracoppin Project the package is considered highly prospective for Archaean “orogenic” lode gold style gold mineralisation and Cygnus will continue to target and test for this deposit style during 2019. Cygnus Gold - Directors’ Report Exploration at Bonnie Rock will commence after 33 tenement grant, early 2019. Annual Report 2018 - Cygnus Gold Limited // 33 Cygnus Gold - Directors’ Report 34 GOLD ROAD EARN-IN AND JV PROJECTS (Cygnus diluting to 25%) — In October 2017, the Company entered into earn-in agreements with ASX-listed developer Gold Road Resources Ltd (ASX:GOR) over Cygnus’ Lake Grace and Wadderin Projects covering an area in excess of 3,400km2. These agreements provide Gold Road with the opportunity to earn up to a 75% interest in these projects by spending $3.7m over four years (for details of these agreements refer GOR ASX announcement 10 October 2017). In early 2018 the Company announced a new joint venture (JV) with Gold Road over the Yandina Project, and in late 2018 the Company applied for additional tenements which are intended to form the Hyden JV (Figure 14). In total, the four areas under agreement with Gold Road cover in excess of 6,000km2 with Cygnus initially managing the exploration programs. 34 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report 35 Figure 14: Cygnus Gold – Gold Road Projects earn-in and JV Projects over regional gravity image (residual Bouguer). Annual Report 2018 - Cygnus Gold Limited // 35 Cygnus Gold - Directors’ Report 36 Lake Grace Earn-in Project — On the Lake Grace Earn-in Project, the Company completed a detailed interpretation of the geology and regolith and regional surface sampling. Detailed follow up of these new areas including aircore drilling is planned for early 2019 and will include testing of the previously reported targets at Panhandle and HR3. The Panhandle prospect is a >500ppb gold-in-soil anomaly that the Company believes was only partly drill tested in the early 1990s as drilling appears to have missed the core of the gold system. At Panhandle, the Cygnus gravity data defines a dense and structurally complex unit sitting proximal to a jog in the regionally extensive Yandina shear zone (Figure 15). This unit is interpreted as a prospective mafic-ultramafic sequence within the Lake Grace greenstone. 36 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report 37 Figure 15: Panhandle Prospect. Left is historical residual bouguer gravity anomaly data [0-2k] from the GSWA. Right image is the Cygnus’ semi-detailed bouguer gravity data, imaged using a histogram equalized stretch (NE illumination). The dense target is circled by the red dashes. The HR3 target is the extension of a ~6km-long and up to 1.5km-wide gold-in-soil anomaly ranging from 5 to 128ppb Au. At HR3, the Company’s ground gravity data defines a distinct fold nose coincident with a narrow gold anomaly and a broader multi-element (As-Sb-Bi-Te-Mo-Pb) anomaly considered to be ‘pathfinder’ elements for gold mineralisation in the region (Figure 16). There has been no historical drilling at HR3. Figure 16: Surface sampling over HR3 target (Lake Grace Project) overlain on Cygnus bouguer gravity image. Left frame Au (ppb); Right frame As (ppm). Gold anomaly outlined in red and multi-element (As-Sb-Bi-Te-Mo-Pb) pathfinder anomaly in yellow. Annual Report 2018 - Cygnus Gold Limited // 37 Cygnus Gold - Directors’ Report 38 Wadderin Earn-in Project — At the Wadderin Earn-in Project, the Company has completed detailed interpretation of the geology and regolith which has defined several high-priority gold prospects slated for follow-up ground work. These targets include major bends on the regional Yandina shear and extensions to the Hardies prospect where previous explorers intersected shallow gold with several intervals of more than 2 g/t2. Follow-up aircore drill testing of targets at Wadderin is planned for early 2019, subject to receipt of statutory approvals. 38 // Cygnus Gold Limited - Annual Report 2018 Yandina Joint Venture (Cygnus 25%) — The Yandina JV with Gold Road comprises four tenements covering an area of approximately 1,727km2 over the prospective Yandina Shear which is known to host gold mineralisation elsewhere in the Southwest Terrane. The Yandina tenements are now granted and field work by Cygnus Gold comprised regional surface sampling and a detailed airborne magnetics survey over a section of the shear zone which only had regional data. The Company also completed a detailed geological interpretation of the Yandina project area which has identified targets for follow up field checking and surface sampling planned for early 2019. Cygnus Gold - Directors’ Report 39 Annual Report 2018 - Cygnus Gold Limited // 39 Cygnus Gold - Corporate 40 Corporate — Admission to the Australian Securities Exchange — Cygnus was successfully admitted to the Official List with official quotation commencing on 15 January 2018. Cygnus raised $6,000,000 (before costs). After listing the Company had 60,683,341 shares on issue. Dividends paid or recommended — The directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend to the date of this report. Subsequent Events — There are no matters or circumstances that have arisen since the end of the year that have significantly affected or may significantly affect either: • the Company’s operations in future financial years • the results of those operations in future financial years; or • the Company’s state of affairs in future financial years. 40 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Corporate Cygnus’ technical team has considerable knowledge 41 and experience in targeting and evaluating gold mineralised systems world-wide. Annual Report 2018 - Cygnus Gold Limited // 41 Cygnus Gold - Directors’ Report 42 Likely Developments and Expected Results — Significant changes in the state of affairs — The Company is committed to: There have been no changes in the state of affairs • systematically explore the Company’s key asset at Stanley; • advance exploration for gold on the other Cygnus Exploration Licences at Bencubbin and Burracoppin; • manage the Wadderin, Lake Grace and Yandina Projects with Gold Road Projects in accordance with the relevant earn-in and joint venture agreements; • continue to negotiate further access with private landholders in relation to areas of interest identified by the above activities; and • implement a growth strategy to seek out further exploration, acquisition and joint venture opportunities in Australia. Environmental issues — The Company is aware of its environmental obligations with regards to its exploration activities and ensures that it complies with all regulations when carrying out any exploration work. The directors have considered the National Greenhouse and Energy Reporting Act 2007 (‘the NGER Act’) and at the current stage of de- velopment and based on the locations of the Compa- ny’s operations, the directors have determined that the NGER Act will have no effect on the Company for the current or subsequent financial year. The directors will reassess this position as and when the need arises. No environmental breaches have occurred or have been notified by any Government agencies during the year ended 31 December 2018. of the Company other than those outlined in the Review of Operations. Corporate Governance — The directors of Cygnus Gold Limited believe that effective corporate governance improves company performance, enhances corporate social responsibility and benefits all stakeholders. Changes and improvements are made in a substance over form manner, which appropriately reflect the changing circumstances of the company as it grows and evolves. Accordingly, the Board has established a number of practices and policies to ensure that these intentions are met and that all shareholders are fully informed about the affairs of the Company. Cygnus reviews all of its corporate governance practices and policies on an annual basis to ensure they are appropriate for the Company’s current stage of development. This year, the review was made against the new ASX Corporate Governance Council’s Principles and Recommendations (third edition) which became effective for financial years beginning on or after 1 July 2014. The Board has reviewed and approved its Corporate Governance Statement on 28 March 2019, and this is available on the Company’s website at www.cygnusgold.com/corporate-governancedetail The Company has a corporate governance section on the website which includes details on the Company’s governance arrangements and copies of relevant policies and charters. 42 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report REMUNERATION REPORT (AUDITED) — 43 This remuneration report for the year ended Company, directly or indirectly including any 31 December 2018 outlines the remuneration director (whether executive or otherwise) of arrangements of the Company in accordance the parent. with the requirements of the Corporations Act 2001(Cth) as amended (the Act) and its The table below outlines the KMP of the Company regulations. This information has been audited as during the financial year ended 31 December 2018. required by section 308(3C) of the Act. Unless otherwise indicated, the individuals were KMP for the entire financial year. The remuneration report details the remuneration arrangements for Key Management Personnel For the purposes of this report, the term (KMP) who are defined as those persons having “executive” includes the executive directors and authority and responsibility for planning, directing senior executives of the Company. and controlling the major activities of the Executive director James Merrillees Managing Director (appointed 17 November 2017) NON EXECUTIVE DIRECTORS Michael Bohm Non-executive Chairman (appointed 30 September 2016) Simon Jackson Non-executive Director (appointed 17 November 2017) Oliver Kreuzer Non-executive Director (appointed 21 April 2016) Amanda Buckingham Non-executive Director (appointed 21 April 2016) Senior executive Michael Naylor Company Secretary (appointed 4 October 2016) There were no other changes to KMP after reporting date and before the date the financial report was authorised for issue. Annual Report 2018 - Cygnus Gold Limited // 43 Cygnus Gold - Directors’ Report 44 Remuneration governance — Due to the current size of the Company, it is more efficient and effective for the functions otherwise undertaken by a remuneration committee to be performed by the Board. All directors are therefore responsible for determining and reviewing compensation arrangements for key management personnel, including periodically assessing the appropriateness of the nature and amount of remuneration by reference to relevant market conditions and prevailing practices. The Board obtains professional advice where necessary to ensure that the Company attracts and retains talented and motivated directors, executives and employees who can enhance Company performance through their contributions and leadership. Remuneration framework — The Board recognises that the Company’s The remuneration for executives has three performance and ultimate success in project components: delivery depends very much on its ability to attract and retain highly skilled, qualified and motivated people in an increasingly competitive remuneration market. At the same time, remuneration practices must be transparent to shareholders and be fair and • Fixed remuneration, inclusive of superannuation and allowances; • Short Term Incentives (“STI”) under a performance-based cash bonus incentive competitive taking into account the nature and size plan; and of the organisation and its current stage of activities. The approach to remuneration has been structured with the following objectives: • Fairness: provide a fair level of reward to all employees; • Transparency: establish transparent links between reward and performance; • Alignment: promote mutually beneficial outcomes by aligning employee, and shareholder interests; and • Culture: drive leadership performance and behaviours that promote safety, diversity and employee engagement. • Long Term Incentives (“LTI”) through participation in the Company’s approved equity incentive plan. These three components comprise each executive’s total annual remuneration. To link executive remuneration with the Company’s performance, the Company’s policy is to endeavour to provide a portion of each executive’s total remuneration as “at risk”. These three components comprise each executive’s total annual remuneration. To link executive remuneration with the Company’s performance, the Company’s policy is to endeavour to provide an appropriate portion of each executive’s total remuneration as “at risk”. 44 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report 2018 mix of remuneration for Directors and KMP percentage of total remuneration — 45 OVERVIEW OF COMPANY PERFORMANCE — In considering the Company’s performance and benefits for shareholder wealth, the Board has regard to the following indices in respect of the current and the previous two financial years: Executive Revenue Net loss after tax Share price 31 December 2016 1,285 81,504 N/A 2017 3,262 784,721 N/A 2018 198,317 638,119 $0.065 Currently, there is a portion of remuneration of key management personnel that is linked to performance via share based awards and short term incentives which is linked to individual performance, which are tied to total shareholder return as measured against the performance of a group of peer exploration companies. The rationale for this approach is that the Company is in the exploration phase, and it is currently not appropriate to link remuneration to factors such as profitability. Annual Report 2018 - Cygnus Gold Limited // 45 Cygnus Gold - Directors’ Report 46 Executive director remuneration — Fixed Remuneration Executives receive a fixed base cash salary and other associated benefits. Executives also receive a superannuation guarantee contribution required by Australian legislation which was 9.5% at 31 December 2018. No executives receive any other retirement benefits. Fixed remuneration of executives will be set by the Board each year and is based on market relativity and individual performance. In setting fixed remuneration for executives, individual performance, skills, expertise and experience are also taken into account to determine where the executive’s remuneration should sit within the market range. Where appropriate, external remuneration consultants will be engaged to assist the Board to ensure that fixed remuneration is set to be consistent with market practices for similar roles. Short Term Incentives The Managing Director was eligible to earn a short-term cash bonused upon achievement of significant performance-based outcomes aligned with the Company’s strategic objectives at that time. These performance-based outcomes are considered to be an appropriate link between executive remuneration and the potential for creation of shareholder wealth. Short term incentives were accrued during the year. Performance was measured for the period 15 January 2018 to 15 January 2019. The table below sets out the STI amounts earned and the performance hurdles met during the year Executive STI amount Performance Hurdle Mr James Merrillees $30,797 Measured on three set key performance indicators at target plus stretch levels of significant performance. The following performance outcomes were achieved in FY18, resulting in Mr Merrillees being entitled to an STI payment: • Targets generated by defining new quality follow up targets on all tenement areas held and stretch to drill holes planned at all follow up areas. • Targets tested via Reverse Circulation drilling or Diamond drilling over two tenements - stretch to four tenements. • Sustainability target by implementing Health, Safety, Environment and Community Policy approved by Board. Long Term Incentives The objective of the LTI plan is to reward executives and directors in a manner which aligns this element of remuneration with the creation of shareholder wealth. As such LTIs are made to executives and directors who are able to influence the generation of shareholder wealth and thus have an impact on the Company’s performance. 700,000 performance rights were granted to the Managing Director during the year with a one-year and two-year measurement period. 46 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Non-executive director remuneration — 47 Non-executive directors’ fees are paid within an aggregate limit which is approved by the shareholders from time to time. Retirement payments, if any, are determined in accordance with the rules set out in the Company’s Constitution and the Corporations Act at the time of the director’s retirement or termination. Non-executive directors’ remuneration may include an incentive portion consisting of bonuses and/or performance rights/ options, as considered appropriate by the Board, which is subject to shareholder approval in accordance with the ASX Listing Rules. The aggregate remuneration, and the manner in which it is apportioned amongst non-executive directors, is reviewed annually. The Board considers the amount of director fees being paid by comparable companies with similar responsibilities and levels of experience of the non-executive directors when undertaking the annual review process. The current maximum amount of non-executive directors’ fees payable is fixed at $300,000 in total, for each 12-month period commencing 1 January each year, until varied by ordinary resolution of shareholders. Non-executive directors are not entitled to any termination payments. There were 800,000 performance rights granted to non-executive irectors during the year. Details to these rights are provided further along in the Directors’ Report. No share options were issued. The Company prohibits directors or executives from entering into arrangements to protect the value of any Cygnus Gold shares, options or performance rights that the director or executive has become entitled to as part of his/her remuneration package. This includes entering into contracts to hedge their exposure. The following table sets out the specifics to the number of performance rights granted to each non-executive director during the year: Non-executive Directors Performance Rights Mr Michael Bohm Mr Simon Jackson Dr Oliver Kreuzer Dr Amanda Buckingham Total 200,000 200,000 200,000 200,000 800.000 Use of remuneration consultants — During the year ended 31 December 2018 the Board did not engage the services of remuneration consultants. Annual Report 2018 - Cygnus Gold Limited // 47 Cygnus Gold - Directors’ Report 48 The remuneration of the Directors — The directors and KMP of Cygnus Gold Limited are set out in the following tables: Short term employee benefits s e e F t n a t l u s n o C s e e F / y r a l a S l a u n n A e v a e L s u n o B t n e m y o p m E l t s o P n o i t a u n n a r e p u S - y a p d e s a b e r a h S ) h s a C - n o n ( s t n e m e c n a m r o f r e P f o % d e s a b n o i t a r e n u m e r l a t o T Non-executive Directors Mr Michael Bohm Dr Amanda Buckingham Dr Oliver Kreuzer Mr Simon Jackson Alan Cleland (Resigned 17 November 2017) Executives James Merrillees Michael Naylor 2018 50,000 - 2017 4,167 69,750 2018 40,000 30,563 2017 3,333 59,116 2018 40,000 28,850 2017 3,333 102,000 2018 40,000 2017 3,333 2018 2017 - - - - - 5,250 - - - - - - - - - - - - - - - - - - - - 4,750 346 55,096 396 - 74,313 3,800 346 74,709 317 - 62,766 3,800 346 72,996 317 - 105,650 3,800 346 44,146 317 - - - - - 3,650 - 5,250 2018 228,529 - 17,308 28,1251 26,027 1,212 301,200 2017 129,714 - 9,786 18,265 14,998 2018 2017 - - 90,0002 60,0002 - - - - - - - - - 172,763 90,000 60,000 Total Remuneration 2018 398,529 149,413 17,308 28,125 42,177 2,596 638,147 2017 143,880 296,116 9,786 18,265 16,345 - 484,392 1 Bonus was accrued at 31 December 2018 and excludes superannuation which is included in post-employment amount. 2 Amount owing at 31 December 2018, $7,500 and at 31 December 2017, $5,000. 0.6 - 0.5 - 0.5 - 0.8 - - 9.7 11.6 - - 4.8 4.1 48 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Shares Issues on Exercise of Options — There were no shares issued on exercise of options or performance rights. 49 GRANT OF LTI AND VALUE OF PERFORMANCE RIGHTS AWARDED, EXERCISED AND LAPSED DURING THE YEAR — 1,500,000 performance rights to the value of $5,415 was granted as part of remuneration during the year ended 31 December 2018. There were no Performance Rights issued for the year ended 31 December 2017. Shares held by directors and key management personnel including their related parties, is set out below: Balance at start of the year Balance at date of appointment Received during the year on exercise of options Other acquisition/ disposal of shares during the year Balance at date of resignation Balance at end of the year Non-executive Directors Mr Michael Bohm Mr Simon Jackson Dr Oliver Kreuzer 3,000,001 133,334 1,833,334 Dr Amanda Buckingham 2,333,334 Executives Mr James Merrillees 100,000 Mr Michael Naylor Total 1,300,000 8,700,003 - - - - - - - - - - - - - - 170,000 170,000 50,000 - 50,000 185,000 625,000 - - - - - - - 3,170,001 303,334 1,833,334 2,333,334 150,000 1,485,000 8,700,003 Annual Report 2018 - Cygnus Gold Limited // 49 Cygnus Gold - Directors’ Report 50 PERFORMANCE RIGHTS HELD BY DIRECTORS AND KEY MANAGEMENT PERSONNEL — During the year shareholders approved the board to grant performance rights shares to each of the directors as incentive remuneration under the performance rights plan. f o t r a t s t a e c n a l a B r a e y e h t - u m e r s a d e t n a r G n o i t a r e n e h t g n i r u d d e v e c e R i s n o i t p o f o e s i c r e x e n o r a e y f o e t a d r o 8 1 0 2 r e b m e c e D 1 3 n o i t a n g i s e r t a d e H l / d e s p a L d e t i e f r o f 1 3 t a l e b a s i c r e x e 8 1 0 2 r e b m e c e D d n a d e t s e V Non-executive Directors Mr Michael Bohm Mr Simon Jackson Dr Oliver Kreuzer Dr Amanda Buckingham Executives Mr James Merrillees Mr Michael Naylor Total - - - - - - - 200,000 200,000 200,000 200,000 700,000 - 1,500,000 - - - - - - - - - - - - - - 200,000 200,000 200,000 200,000 700,000 - 1,500,000 - - - - - - - 50 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report PERFORMANCE RIGHTS HELD BY DIRECTORS AND KEY MANAGEMENT PERSONNEL — 51 Each performance rights entitles the holder to one ordinary share in Cygnus upon satisfaction of the performance conditions linked to the rights during the relevant measurement period. The rights do not carry any other privileges. The following performance conditions are applicable to the rights awarded in the year: Two measurement periods: (i) Tranche 1 is the period from 15/1/18 to 15/1/2019. (ii) Tranche 2 is the period 15/1/18 to 15/1/2020. The vesting conditions for the Performance Rights are as follows: (iii) Employment at the end of the relevant measurement period; (iv) No fatalities on the Company’s mining tenements; and (v) Performance of the Company against a peer group based on Total Shareholder Return (TSR) Cygnus’ TSR compared to the peer group will determine the proportion of Performance Rights that will vest (subject to the other vesting conditions being met), as set out below: Relative TSR over the Measurement Period Proportion of Performance Rights vested Below the 50th percentile At the 50th percentile 0% 50% Between the 50th and the 75th percentile Pro-rata between 50% and 100% Above the 75th percentile 100% Annual Report 2018 - Cygnus Gold Limited // 51 Cygnus Gold - ASX Listed companies 52 The Company’s relative performance was compared to the following peer group: — ASX – Listed companies — Alloy Resources Limited — Alto Metals Limited — Antipa Minerals Limited — Arrow Minerals Limited — Ausgold Limited — Barra Resources Limited — Black Cat Syndicate Limited — Duketon Mining Limited — Emerson Resources Limited — Explaurum Limited — Golden Mile Resources Limited — Great Boulder Resources Limited — Great Western Exploration Limited — Intermin Resources Limited — Musgrave Minerals Limited — Riversgold Limited — Syndicated Metals Limited — Thundelarra Limited 52 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Subject to the vesting criteria being met, directors will be entitled to exercise the number of performance Rights vesting and be issued with a corresponding number of ordinary shares in Cygnus Gold Limited. 53 g n i r u d d e d r a w A r a e y e h t e t a d d r a w A e t a d g n i t s e V e t a d y r i p x E d r a w a t a t h g i r e c n a m - r o f r e p f o e u a v l r i a F ) $ ( e t a d - r o f r e p f o e u a v l l a t o T d e t n a r g s t h g i r e c n a m 1 r a e y e h t g n i r u d ) $ ( d e s i n g o c e r t n u o m A n o d e s a b 8 1 0 2 n i d o i r e p g n i t s e v 1 ) $ ( e c i r p e s i c r e x E d e t s e v . o N r a e y g n i r u d d e t s e v . o N r a e y g n i r u d r a e y l i a c n a n F i Mr Bohm Mr Jackson Dr Kreuzer Dr Buckingham James Merrillees Total 2018 100,0002 25 May 18 NA 15 Jan 19 0.19 Nil 2018 100,000 25 May 18 NA 15 Jan 20 0.19 Nil 2018 100,0002 25 May 18 NA 15 Jan 19 0.19 Nil 2018 100,000 25 May 18 NA 15 Jan 20 0.19 Nil 2018 100,0002 25 May 18 NA 15 Jan 19 0.19 Nil 2018 100,000 25 May 18 NA 15 Jan 20 0.19 Nil 2018 100,0002 25 May 18 NA 15 Jan 19 0.19 Nil 2018 100,000 25 May 18 NA 15 Jan 20 0.19 Nil 2018 350,0002 25 May 18 NA 15 Jan 19 0.19 Nil 2018 350,000 25 May 18 NA 15 Jan 20 0.19 Nil - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 722 - 722 - 722 - 722 - - 346 - 346 - 346 - 346 - 2,527 5,415 1,212 2,596 1. The total value of the first tranche of performance rights has been determined to be nil given that all rights expired for that tranche post year-end, thus resulting in no benefit to the holder. For tranche 2, the total value has been determined using management’s estimates and judgments, applying weighted probabilities to determine the most likely outcome of the vesting criteria that will be met as at 15 January 2020 and multiplying the quantity of rights expected to vest by the fair value at award date. These estimates are made based on how the company has historically performed relative to the peer group and future considerations. The total value attributable to each key management personnel is first determined and then expensed evenly over the vesting period (herein the period between the Award date and Expiry date) and thus only a portion is recognised in the current period. 2. 750,000 performance rights from tranche 1 were not achieved and were cancelled subsequent to 31 December 2018. No dollar value is attributable to this tranche given that no rights vested. There were no performance rights on issue as at 31 December 2017. Annual Report 2018 - Cygnus Gold Limited // 53 Cygnus Gold - Directors’ Report 54 EMPLOYMENT CONTRACTS OF DIRECTORS AND SENIOR EXECUTIVES — On 15 March 2018, the Company entered into a revised agreement with Mr Merrillees to recognise his promotion to Managing Director under annual based remuneration of, $246,375 (inclusive of superannuation) applied from December 2017. As part of the new agreement a STI of 15% of total fixed remuneration (Base Salary plus Superannuation) was put in place should several key performance indicators be met, including exploration targets generated, exploration targets tested and Health, Safety and Environmental components. Total amount accrued at year end was 12.5% total $30,797. In addition, the agreement included long term incentives of 700,000 performance rights which was approved by shareholders’ during the year. Mr Merrillees is required to give the Company six weeks’ notice to terminate the agreement and the Company is required to give Mr Merrillees three months’ notice to terminate the contract or payment in lieu. The Company entered into an agreement with Blue Leaf Corporate Pty Ltd, a company associated with Mr Naylor, which commenced on 15 January 2018 for the provision of company secretarial and financial management services. Mr Naylor is required to give the Company 90 days’ notice to terminate the contract and the Company is required to give Mr Naylor 90 days’ notice to terminate the contract or payment in lieu. LOANS TO KEY MANAGEMENT PERSONNEL — There were no loans to key management personnel of the Company, including their personally related parties, as at 31 December 2018 or 31 December 2017. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL — There were no other transactions with key management personnel. VOTING AND COMMENTS MADE AT THE COMPANY’S LAST ANNUAL GENERAL MEETING — Cygnus Gold received a 100% “yes” votes on its Remuneration Report for the year ended 31 December 2017. The Company received no specific feedback on its Remuneration Report at the Annual General Meeting. END OF REMUNERATION REPORT 54 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Meetings of directors — 55 During the financial year, six meetings of directors were held. Attendances by each director during the year were as follows: Director’s names Number attended Number eligible to attend Michael Bohm James Merrillees Simon Jackson Dr Oliver Kreuzer Dr Amanda Buckingham 6 6 4 6 6 6 6 6 6 6 Given the size of the Board the Company has decided that there are no efficiencies to be gained from forming separate committees. SHARE OPTIONS AND PERFORMANCE RIGHTS — There are no share options on issue and there was 750,000 performance rights on issue at the date of this report. INDEMNIFYING OFFICERS — In accordance with the constitution, except as may be prohibited by the Corporations Act 2001, every officer of the Company shall be indemnified out of the property of the Company against any liability incurred by him in his capacity as officer or agent of the Company or any related corporation in respect of any act or omission whatsoever and howsoever occurring or in defending any proceedings, whether civil or criminal. The terms of the policy prevent disclosure of the amount of the premium payable and the level of indemnification under the insurance contract. INDEMNIFYING OF AUDITORS — In accordance with the constitution, except as may be prohibited by the Corporations Act 2001, every officer To the extent permitted by law, the Company has agreed to indemnify its auditors, Grant Thornton, as part of the terms of its audit engagement agreement, against claims by third parties arising from the audit (for an unspecified amount). No payments have been made to indemnify Grant Thornton to the date of this report. Annual Report 2018 - Cygnus Gold Limited // 55 Cygnus Gold - Directors’ Report 56 Proceedings on behalf of the Company — No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of these proceedings. The Company was not a party to any such proceedings during the year. Non-audit services — During the year, related practices to Grant Thornton Audit Pty Ltd, the Company’s auditors, performed certain other services in addition to their statutory audit duties. The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those non-audit services during the year is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services were subject to the corporate governance procedures adopted by the Company and have been reviewed by the Board of Directors to ensure they do not impact upon the impartiality and objectivity of the auditor • the non-audit services do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards The total remuneration for audit and non-audit services provided during the prior and current financial years is set out in note 9 of the financial statements. 56 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ Report Auditor’s independence declaration — 57 The lead auditor’s independence declaration for the year ended 31 December 2018 has been received and is attached to this Directors’ Report. This report is made in accordance with a resolution of the directors. James Merrillees Managing Director Dated in Perth this 28th day of March 2019. Notes 1. Refer ASX announcement on the said date for full details of these exploration results. Cygnus is not aware of any new information or data that materially affects the information included in the said announcement. 2. Information on historical results from the Stanley Project, including JORC Code Table 1 information, is contained in the Independent Technical Assessment Report within Cygnus’ Prospectus dated 22 November 2017. Cygnus is not aware of any new information or data that materially affects the information included in the Prospectus. Competent Persons Statement The information in this announcement that relates to Exploration Results is based on information and supporting documentation compiled by Mr James Merrillees, a Competent Person who is a member of The Australasian Institute of Mining and Metallurgy. Mr Merrillees is Managing Director and a full-time employee of Cygnus Gold and holds shares in the Company. Mr Merrillees has sufficient experience relevant to the style of mineralisation under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Merrillees consents to the inclusion in this announcement of the matters based on this information in the form and context in which it appears. Forward Looking Statement This report may contain certain forward-looking statements and projections regarding estimated, resources and reserves; planned production and operating costs profiles; planned capital requirements; and planned strategies and corporate objectives. Such forward looking statements/ projections are estimates for discussion purposes only and should not be relied upon. They are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors many of which are beyond the control of Cygnus Gold Limited. The forward-looking statements/projections are inherently uncertain and may therefore differ materially from results ultimately achieved. Cygnus Gold Limited does not make any representations and provides no warranties concerning the accuracy of the projections, and disclaims any obligation to update or revise any forward-looking statements/projects based on new information, future events or otherwise except to the extent required by applicable laws. While the information contained in this report has been prepared in good faith, neither Cygnus Gold or any of its directors, officers, agents, employees or advisors give any representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. Accordingly, to the maximum extent permitted by law, none of Cygnus Gold Limited, its directors, employees or agents, advisers, nor any other person accepts any liability whether direct or indirect, express or limited, contractual, tortuous, statutory or otherwise, in respect of, the accuracy or completeness of the information or for any of the opinions contained in this presentation or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this presentation. Annual Report 2018 - Cygnus Gold Limited // 57 Cygnus Gold - Auditor’s independence declaration 58 Grant Thornton Audit Pty Ltd Central Park Level 43 152 - 158 St Georges Terrace PO Box 7757 Perth WA 6000 T +61 8 9480 2000 Auditor’s Independence Declaration To the Directors of Cygnus Gold Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Cygnus Gold Limited for the year ended 31 December 2018, I declare that, to the best of my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd CHARTERED ACCOUNTANTS P W Warr Partner – Audit & Assurance Perth, 28 March 2019 ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. www.grantthornton.com.au 58 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Auditor’s independence declaration Consolidated a significant tenement holding for gold 59 and base metal exploration in Western Australia Annual Report 2018 - Cygnus Gold Limited // 59 Cygnus Gold 60 CYGNUS DIRECTORS BELIEVE THAT EFFECTIVE CORPORATE GOVERNANCE IMPROVES COMPANY PERFORMANCE, ENHANCES CORPORATE SOCIAL RESPONSIBILITY AND BENEFITS ALL STAKEHOLDERS. 60 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Statement of Profit or Loss and Other Comprehensive Income Statement of Profit or Loss and Other Comprehensive Income — For the year ended 31 December 2018 61 Revenues Depreciation Employee benefits expense Exploration expense Other expense Share based payments Results from operating activities Finance income Loss before income tax Income tax expense Loss after income tax for the year Other comprehensive loss Notes 2018 $ 131,745 2017 $ - 14 (26,009) (2,814) (309,017) (207,179) (103,484) (230,625) 16 (395,330) (347,365) (2,596) - (704,691) (787,983) 66,572 3,262 (638,119) (784,721) 15 - - (638,119) (784,721) - - Total other comprehensive loss for the year, net of tax (638,119) (784,721) Loss per share attributable to equity holders of the Company: Basic and diluted loss per share (cents per share) 7 (1.10) (2.69) This statement above should be read in conjunction with the Notes to the Financial Statements. Annual Report 2018 - Cygnus Gold Limited // 61 Cygnus Gold - Statement of Financial Position 62 Statement of Financial Position — As at 31 December 2018 Notes 3 4 13 14 5 6 6.1 Assets Current Cash and cash equivalents Subscriptions receivable Trade and other receivables Current assets Non-current Exploration & evaluation Property, plant and equipment Non-current assets Total assets Liabilities Current Trade and other payables Employee benefit provisions Current liabilities Non-current liabilities Employee benefit provisions Non Current Liabilities Total liabilities Net assets Equity Share capital Other contributed equity Reserves Accumulated losses Total equity 2018 $ 3,512,139 - 72,313 3,584,452 2,555,261 102,353 2,657,614 6,242,066 561,451 43,590 605,041 - 10,400 10,400 615,441 5,626,625 7,128,373 - 2,596 (1,504,344) 5,626,625 2017 $ 145,517 6,000,000 374,079 6,519,596 565,924 12,111 578,035 7,097,631 479,400 10,714 490,114 - - - 490,114 6,607,517 1,473,742 6,000,000 - (866,225) 6,607,517 This statement above should be read in conjunction with the Notes to the Financial Statements. 62 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Statement of Changes in Equity Statement of Changes in Equity — For the year ended 31 December 2018 63 s s o l d e t a l u m u c c $ A E V R E S E R T N E M Y A P i d e t u b r t n o C D E S A B E R A H $ S y t i u q E l a t o $ T y t i u q e $ s e t o N l a t i p a c e r a h S r e h t $ O Balance at 1 January 2017 951,242 Loss for the period Other comprehensive loss Total comprehensive loss Transactions with owners - - - Issue of share capital 6 522,500 - - - - - Subscriptions yet to be issued - 6,000,000 Balance at 31 December 2017 1,473,742 6,000,000 Balance at 1 January 2018 1,473,742 6,000,000 Loss for the year Other comprehensive loss Total comprehensive loss Transactions with owners - - - - - - Issue of share capital 6 6,000,000 (6,000,000) Share issue expense (345,369) Subscriptions issued Share based payment expensed - - Balance at 31 December 2018 7,128,373 - - - - - - - - - - - - - - - - - - 2,596 (81,504) 869,738 (784,721) (784,721) - - (784,721) (784,721) - - 522,500 6,000,000 (866,225) 6,607,517 (866,225) 6,607,517 (638,119) (638,119) - - (638,119) (638,119) - - - - - (345,369) - 2,596 2,596 (1,504,344) 5,626,625 This statement above should be read in conjunction with the Notes to the Financial Statements. Annual Report 2018 - Cygnus Gold Limited // 63 Cygnus Gold - Statement of Cash Flows 64 Statement of Cash Flows — For the year ended 31 December 2018 Operating activities Payments to suppliers and employees Payments for exploration expenditure Interest received Other income Notes 2018 $ (413,545) (103,484) 64,300 131,745 2017 $ (487,015) (217,982) 3,262 - Net cash used in operating activities 8 (320,984) (701,735) Investing activities Payments for acquisition of mining tenements Payments for capitalised exploration expenditure Purchase of property plant and equipment EIS Grant-Co-funded Exploration Drilling Program Funds from joint venture received in advance Other (investing) (49,626) (2,078,860) (116,251) 139,149 158,563 (20,000) - (427,777) (14,925) - - - Net cash used in investing activities (1,967,025) (442,702) Financing activities Proceeds from share issued 6 6,000,000 522,500 Costs of shares issued Repayment of loan Net cash provided by financing activities (345,369) - 5,654,631 - (11,149) 511,351 Net change in cash and cash equivalents 3,366,622 (633,087) Cash and cash equivalents, beginning of period 145,517 778,604 Cash and cash equivalents, end of year 3 3,512,139 145,517 This statement above should be read in conjunction with the Notes to the Financial Statements. 64 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements Notes to the Financial Statements — 65 1 Nature of operations – Cygnus Gold Limited’s (“Cygnus” or “the Company”) principal activities include the exploration for gold and base metals deposits in Western Australia. 2 General information and statement of compliance – The general purpose financial statements of the Company have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). Compliance with Australian Accounting Standards results in full compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Cygnus Gold Limited is a for-profit Company for the purpose of preparing the financial statements. Cygnus Gold Limited is a Company incorporated and domiciled in Australia. The address of its registered office and its principal place of business is Level 3, 20 Parkland Road, Osborne Park, Western Australia. The financial statements were approved and authorised for issue by the Board of Directors on 28 March 2019. 3 Cash and cash equivalents – Cash at bank and on hand Short-term deposits Cash and cash equivalents 2018 $ 2,012,139 1,500,000 3,512,139 2017 $ 145,517 - 145,517 Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates. Annual Report 2018 - Cygnus Gold Limited // 65 Cygnus Gold - Notes to the Financial Statements 66 4 Trade and other receivables – Trade and other receivables Prepayments 2018 $ 51,273 21,040 72,313 2017 $ 35,803 338,276 374,079 All amounts are short-term. The carrying values of trade and other receivables are considered to be a reasonable approximation of fair value. 5 Trade and other payables – Trade and other payables Gold Road funds received in advance 2018 $ 402,888 158,563 561,451 2017 $ 479,400 - 479,400 All amounts are short-term. The carrying values of trade and other payables are considered to be a reasonable approximation of fair value 66 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements 6 Equity Share capital – 67 The share capital of Cygnus consists only of fully paid ordinary shares; the shares do not have a par value. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders’ meeting of Cygnus. 2018 Shares 2017 Shares 2018 $ 2017 $ Shares issued and fully paid: Beginning of the year 30,683,341 25,416,675 1,473,742 951,242 Share issue 30,000,000 5,266,666 6,000,000 522,500 Share consolidation on a ratio of 1 share for 3 held - - (345,369) - Share issue costs 60,683,341 30,683,341 7,128,373 1,473,742 Total contributed equity at 31 December 30,683,341 25,416,675 1,473,742 951,242 Each share has the same right to receive dividend and the repayment of capital and represents one vote at the shareholders’ meeting of Cygnus. 6.1 PERFORMANCE RIGHTS – The table below discloses the number of performance rights granted, vested or lapsed during the year. Each performance rights converts to one ordinary share in the Company upon satisfaction of the performance conditions linked to the rights. The rights do not carry any other privileges. The fair value of the performance rights granted is determined based on the number of rights awarded multiplied by the share price of the Company on the date awarded. Management has assessed the most probable outcomes to be achieved by the expiry date and has used weighted probabilities to determine the value of the rights accordingly. The expense recorded as share based payments is recognized straight-line over the vesting period (in this case, from the award date to the expiry date). g n i r u d d e d r a w A r a e y e h t e t a d d r a w A e t a d t r a t s g n i t s e V t a t h g i r e c n a m r o f r e p ) $ ( e t a d d r a w a f o e u a v l r i a F e t a d y r i p x E e t a d d o i r e p e c v r e S i 750,000 25 May 18 15 Jan 19 15 Jan 19 0.19 15 Jan 19 750,000 25 May 18 15 Jan 19 15 Jan 20 0.19 15 Jan 20 e c n a m r o f r e p f o e u a V l g n i r u d d e t n a r g s t h g i r 1 r a e y e h t ) $ ( - e s n e p x e f o t n u o m A e h t n i d e s i n g o c e r ) $ ( d o i r e p - 5,415 2,596 d e t s e v . o N r a e y g n i r u d - - d e t s e v . o N r a e y d e s p a l - - Annual Report 2018 - Cygnus Gold Limited // 67 Cygnus Gold - Notes to the Financial Statements 68 The following performance conditions are applicable to the rights awarded in the year: Two measurement periods: (i) (ii) Tranche 1 is the period from 15/1/18 to 15/1/2019. Tranche 2 is the period 15/1/18 to 15/1/2020. The vesting conditions for the Performance Rights are as follows: (i) (ii) (iii) Employment at the end of the relevant measurement period; No fatalities on the Company’s mining tenements; and Performance of the Company against a peer group based on Total Shareholder Return (TSR). Cygnus’ TSR compared to the peer group will determine the proportion of Performance Rights that will vest (subject to the other vesting conditions being met), as set out below: RELATIVE TSR OVER THE MEASUREMENT PERIOD PROPORTION OF PERFORMANCE RIGHTS VESTED Below the 50th percentile At the 50th percentile 0% 50% Between the 50th and the 75th percentile Pro-rata between 50% and 100% Above the 75th percentile 100% Subject to the vesting criteria being met, directors will be entitled to exercise the number of Performance Rights vesting and be issued with a corresponding number of ordinary shares in Cygnus Gold Limited. Note that Tranche 1 milestone were not achieved and were cancelled subsequent to 31 December 2018. 7 Loss per share – Both the basic and diluted loss per share have been calculated using the loss attributable to shareholders of the Company as the numerator (ie no adjustments to profit were necessary in 2017). Net loss attributable to ordinary equity holders of the Company (638,119) (784,721) Weighted average number of ordinary shares outstanding during the year used in calculation of basic and diluted loss per share 57,996,711 29,150,557 Basic and diluted loss per share (cents per share) (1.10) (2.69) 2018 $ 2017 $ 68 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements 8 Reconciliation of cash flows from operating activities – 69 Cash flows from operating activities Loss for the period Adjustments for depreciation Share based payment expensed Net changes in working capital: Change in trade and other receivables Change in employee benefits provisions Change in trade and other payables 2018 $ 2017 $ (638,119) (784,721) 26,009 2,596 2,814 - 319,413 (28,044) 43,274 (74,157) 10,715 97,501 Net cash from operating activities (320,984) (701,735) 9 Auditor remuneration – 2018 $ 2017 $ Audit and review of financial statements Auditors of Cygnus Gold Limited - Grant Thornton Australia 27,309 27,875 Non-audit services Investigation accountant’s report and due diligence services - 12,000 Tax compliance Total auditor’s remuneration 8,050 5,500 35,359 45,375 Annual Report 2018 - Cygnus Gold Limited // 69 Cygnus Gold - Notes to the Financial Statements 70 10 Related party transactions – The Company’s related parties include its associates and joint venture, key management, post-employment benefit plans for the Company’s employees and others as described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash. 10.1 Related party transactions – Names and positions of key management personnel in office at the time during the financial year: Name Mr Michael Bohm Mr James Merrillees Mr Simon Jackson Dr Oliver Kreuzer Position Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director Dr Amanda Buckingham Non-Executive Director Mr Michael Naylor Company Secretary 10.2 Key management personnel remuneration – Aggregate compensation of key management personnel of the Company: Short term employee benefits Post employment benefits Share based payments (non-cash) 2018 $ 593,374 42,177 2,596 638,147 2017 $ 468,047 16,345 - 484,392 Detailed information about the remuneration received by each Key Management Personnel is provided in the remuneration report on page 48. 70 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements 10.3 Services by key management personnel – 71 Key management of the Company are the executive members of Cygnus’s Board of Directors and members of the Executive Council. All transactions with other related parties are made on normal commercial terms and conditions and at deemed market rates. Mr Michael Bohm – Non-executive Chairman Mr Michael Bohm provided corporate and project advisory services to the Company during the year. • • 2018 2017 - $69,750 Dr Amanda Buckingham – Non-executive Director Fathom Geophysics Australia Pty Ltd, a company of which Dr Amanda Buckingham is a Director, provided geophysical consulting services to the Company during the year. • • 2018 $30,563 2017 $59,116 Dr Oliver Kreuzer – Non-executive Director Corporate Geoscience Group, a company of which Dr Oliver Kreuzer is the Managing Partner and Principal Consultant, provided geological consulting services to the Company during the period. • • 2018 $28,850 2017 $102,000 Michael Naylor – Company Secretary Blue Leaf Corporate Pty Ltd, a company of which Mr Naylor is a Director, provided company secretarial and financial management services to the Company during the year. Amount owing at 31 December 2018, $7,500 and at 31 December 2017 $5,000. • • 2018 $90,000 2017 $60,000 Annual Report 2018 - Cygnus Gold Limited // 71 Cygnus Gold - Notes to the Financial Statements 72 11 Financial instrument risk – Loans and receivables Loans Trade payables and accruals 2018 $ - 479,400 2017 $ 11,149 54,786 Risks associated with market risk, credit risk and liquidity risk are not considered material with respect to the above items. Liquidity Risk Liquidity risk arises from the possibility that the Company might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Company manages liquidity risk by monitoring forecast cash flows, only investing surplus cash with major financial institutions; and comparing the maturity profile of financial liabilities with the realisation profile of financial assets. The Board meets on a regular basis to analyse financial risk exposure and evaluate treasury management strategies in the context of the most recent economic conditions and forecasts. The Board’s overall risk management strategy seeks to assist the Company in managing its cash flows. Financial liabilities are expected to be settled within 12 months. Notes 5 5 Carrying Amount $ Contractual Cash Flows $ 561,451 479,400 561,451 479,400 6 Months or less $ 561,451 479,400 2018 Trade and other payables 2017 Trade and other payables Market Risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Currency Risk The Company is not exposed to significant foreign currency risk on transactions that are denominated in a currency other than the respective functional currencies of the Company entities being the Australian Dollar (AUD). Interest Rate Risk The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s cash. Cash includes funds held in term deposits and cheque accounts during the year, which earned variable interest at rates ranging between 1.05% and 2.5% (2017: 1.05 % and 2.65%), depending on the bank account type and account balances. The Company has no loans or borrowings. 72 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements At the reporting date the interest rate sensitivity for the Company interest-bearing financial instrument was: 73 Carrying Amount 31 December 2018 $ Carrying Amount 31 December 2017 $ Variable rate financial assets 3,532,140 145,517 A change of 100 basis points in the interest rates at the end of the reporting period would have increased (decreased) profit and loss by the amounts shown below. The analysis assumes that all other variables remain constant. This analysis is performed on the same basis for 2018. 100bp increase 100bp increase 3,532 3,532 145 145 Capital management policies and procedures The Company’s capital management objectives are: • to ensure the Company’s ability to continue as a going concern; and • to provide an adequate return to shareholders. The Company monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of the Statement of Financial Position recognised in other comprehensive income. Management assesses the Company’s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. Annual Report 2018 - Cygnus Gold Limited // 73 Cygnus Gold - Notes to the Financial Statements 74 12 Commitments and contingent assets and liabilities – Due to the nature of the Company’s operations in exploring and evaluating areas of interest, it is difficult to accurately forecast the nature or amount of future expenditure, although it will be necessary to incur expenditure in order to retain present interests in mineral tenements. Annual rent on exploration licenses held by the Company are $139,536 (2017: $100,098) with a minimum exploration commitment of $1,026,000 (2017:$761,000) per annum. Annual rent on exploration licenses held under joint venture arrangements are $190,808 (2017: $35,224) with a minimum exploration commitment of $1,802,000 (2017: $273,000) per annum . The Company is not aware of any other contingent commitments. 13 Exploration and evaluation – Opening balance Expenditure incurred during the year Closing balance 14 Property, plant and equipment – Assets at cost Accumulated depreciation Carrying value 31 December 2018 $ 565,924 1,989,337 2,555,261 2018 $ 131,176 (28,823) 102,353 2017 $ 65,047 500,877 565,924 2017 $ 14,925 (2,814) 12,111 Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current year, is as follows: IT equipment $ Software & communications $ Motor vehicles $ Total $ Balance at 1 January 2018 Additions Depreciation expense Balance at 31 December 2018 12,111 28,721 (14,787) 26,045 - 26,236 (6,004) 20,232 - 12,111 61,294 116,251 (5,218) (26,009) 56,075 102,353 74 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements 15 Income tax expense – 75 The major components of tax expense and the reconciliation of the expected tax expense based on the domestic effective tax rate is at 27.5% (2017: 27.5%) and the reported tax expense in profit or loss are as follows: Accounting loss before tax 2018 $ 2017 $ 638,119 784,721 At Australia’s statutory income tax rate of 27.5% (2017: 27.5%) (175,483) 215,798 Deferred tax asset not recognised Income tax expense attributable to entity Deferred income tax at balance date relates to the following: Deferred tax assets Accrued expenditure Capital raising cost Tax losses Total deferred tax assets Deferred tax liabilities Exploration and evaluation assets Total deferred tax liability 175,483 (215,798) - - 9,659 10,313 32,800 32,800 1,032,948 342,360 1,075,408 385,743 702,697 155,629 702,697 155,629 Deferred tax asset recognised to offset deferred tax liability (702,697) (155,629) Net deferred tax asset not brought to account 372,711 230,114 Total tax losses not used against deferred tax liabilities for which no deferred tax asset has been recognised (not tax effected) 3,875,448 1,364,219 Annual Report 2018 - Cygnus Gold Limited // 75 Cygnus Gold - Notes to the Financial Statements 76 16 Other expenses – Corporate expenses Occupancy Travel and accommodation 17 Operating segments – 2018 $ 337,646 48,456 9,228 395,330 2017 $ 313,320 23,463 10,582 347,365 The Company has identified its operating segments based on the internal reports that are reviewed and used by the directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The company operates in one segment being Exploration and Evaluation of Minerals in Western Australia. 18 OPERATING LEASES AS LESSEE – The company leases office space under an operating lease. The future minimum lease payments are as follows: Within 1 year $ 1 to 5 years $ After 5 years $ 31 December 2018 31 December 2017 49,414 34,468 207,502 149,445 - - Total $ 255,916 183,913 Lease expense during the period amount to $47,858 (2017: $20,106) representing minimum lease payments. The lease agreement commenced on 1 July 2017 and has an initial term of 3 years expiring 29 June 2020 at which point an option for renewal for a further term of 2 years to 29 June 2022 exists. 19 POST-REPORTING DATE EVENTS – There are no matters or circumstances that have arisen since the end of the year that have significantly affected or may significantly affect either: • the Company’s operations in future financial years • the results of those operations in future financial years; or • the Company’s state of affairs in future financial years. 76 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements 20 Changes in accounting policies – 77 20.1 Accounting Standards issued but not yet effective and not being adopted early by the Company – Several amendments and interpretations apply for the first time in 2018, but do not have an impact on the consolidated financial statements of the Company. The Company has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. New standards adopted in the period During the year, there were two significant accounting standards adopted by the Company: AASB 15 Revenue from contracts with customers AASB 15 replaces AASB 118 Revenue, AASB 111 Construction Contracts and several revenue-related Interpretations. The new Standard has been applied as at 1 July 2018 with no adjustment to opening retained earnings required as the Company had yet to derive material revenue until the current period. AASB 9 Financial Instruments AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement. It makes major changes to the previous guidance on the classification and measurement of financial assets and introduces an ‘expected credit loss’ model for impairment of financial assets. AASB 9 also contains new requirements on the application of hedge accounting. The Company has adopted the standard in this period but does not have any financial instruments of which are impacted by the adoption. Thus, there has been no adjustment to opening retained earnings as at 1 July 2018. Given that the Company does not have any material financial instruments that are impacted by the adoption of the standard, the Company has not disclosed significant accounting policies with respect to balances impacted by this standard. Standard not yet effective this period The following standard not yet effective is considered to be applicable to the Company’s balances and transactions: AASB 16 Leases Nature of change AASB 16 requires lessees to account for all leases under a single on-balance sheet model. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to Annual Report 2018 - Cygnus Gold Limited // 77 Cygnus Gold - Notes to the Financial Statements 78 determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Application date Annual reporting periods beginning on or after 1 January 2019. Impact on initial application Based on an initial impact assessment, the new accounting standard is not expected to impact the Company as it currently does not have any significant operating or finance leases. Likely impact on initial application The Company is yet to undertake a detailed assessment of the impact of AASB 16. However, based on the entity’s preliminary assessment, the likely impact on the first time adoption of the Standard for the year ending 31 December 2019 includes: • • there will be a significant increase in lease assets and financial liabilities recognised on the balance sheet the reported equity will reduce as the carrying amount of lease assets will reduce more quickly than the carrying amount of lease liabilities • EBIT in the statement of profit or loss and other comprehensive income will be higher as the implicit interest in lease payments for former off balance sheet leases will be presented as part of finance costs rather than being included in operating expenses • operating cash outflows will be lower and financing cash flows will be higher in the statement of cash flows as principal repayments on all lease liabilities will now be included in financing activities rather than operating activities. Interest can also be included within financing activities 78 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements 20.2 FUNCTIONAL AND PRESENTATION CURRENCY – 79 The functional currency of Company is measured using the currency of the primary economic environment in which that entity operates. The financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. 20.3 OPERATING EXPENSES – Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin. Expenditure for warranties is recognised and charged against the associated provision when the related revenue is recognised. 20.4 Financial instruments – Recognition, Initial Measurement and Derecognition Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument. The company has only non-complex financial instruments that are summarised in notes (3), (5) and (6) of the financial report, the details of which are as follows: Cash and cash equivalents Cash at bank or on hand and short-term deposits (being those with an original maturity date of less than 3 months). Trade and other receivables • net GST amounts owing from the tax authorities; and • accrued interest from cash in bank and term deposits. Prepayments General prepayments such as prepaid insurance. Trade and other payables • PAYG amounts withheld from employee wages and owing to the tax authorities; • Superannuation amounts owed to the tax authorities; and • Trade creditors and accruals for services performed by suppliers and vendors of the Company. Gold Road funds received in advance As at balance date, the Company was provided funds to be spent under the terms and conditions of a JV agreement. These amounts give rise to a liability as the Company is obligated to spend the funds under their JV contract. The financial assets and financial liabilities above are measured at amortised cost. The financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. These events occur within 12-months of balance date. Annual Report 2018 - Cygnus Gold Limited // 79 Cygnus Gold - Notes to the Financial Statements 80 20.5 LOANS AND RECEIVABLES – Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition, these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Company’s trade and most other receivables fall into this category of financial instruments. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in companies, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified Company. Classification and subsequent measurement of financial liabilities The Company’s financial liabilities include trade and other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest method. 20.6 Income taxes – Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity. Current income tax assets and/or liabilities comprise those obligations to, or claims from, the Australian Taxation Office (‘ATO’) and other fiscal authorities relating to the current or prior reporting periods that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries and joint ventures is not provided if reversal of these temporary differences can be controlled by the Company and it is probable that reversal will not occur in the foreseeable future. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income, based on the Company’s forecast of future operating results which is adjusted for significant non- taxable income and expenses and specific limits to the use of any unused tax loss or credit. Deferred tax liabilities are always provided for in full. Deferred tax assets and liabilities are offset only when the Company has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income (such as the revaluation of land) or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively. 80 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements 20.7 Cash and cash equivalents – 81 Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short- term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short- term deposits, as defined above, are considered an integral part of the Company’s cash management. 20.8 Equity and reserves – Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share capital, net of any related income tax benefits. Retained earnings include all current and prior period retained profits. The company maintains a share base payments reserve which accumulates the value recognised as a result of share based awards issued to employees or contractors for services rendered. Where amounts have accumulated in the reserve and the underlying instruments expire, amounts are transferred from the reserve to retained earnings. Where amounts have accumulated in the reserve and the underlying instruments have vested or been exercised, amounts are transferred from the reserve to share capital. 20.9 Provisions, contingent liabilities and contingent assets – Provisions for product warranties, legal disputes, onerous contracts or other claims are recognised when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan’s main features to those affected by it. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Company can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outflow of economic resources as a result of present obligation is not probable. Such situations are disclosed as contingent liabilities, unless the outflow of resources is remote in which case no liability is recognised. Annual Report 2018 - Cygnus Gold Limited // 81 Cygnus Gold - Notes to the Financial Statements 82 20.10 Exploration and Development expenditure – Exploration, evaluation and development expenditures incurred are capitalised in respect of each identifiable area of interest. These costs are only capitalised to the extent that they are expected to be recovered through the successful development of the area or where activities in the area have not yet reached a stage that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made. When production commences, the accumulated costs for the relevant area of interest are amortised over the life of the area according to the rate of depletion of the economically recoverable reserves. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to capitalise costs in relation to that area of interest. Costs of site restoration are provided over the life of the project from when exploration commences and are included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant, equipment and building structures, waste removal, and rehabilitation of the site in accordance with local laws and regulations and clauses of permits. Such costs have been determined using estimates of future costs, current legal requirements and technology on an undiscounted basis. Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of site restoration, there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. Accordingly, the costs have been determined on the basis that the restoration will be completed within one year of abandoning the site. 20.11 Goods and Services Tax (GST) – Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST components of investing and financing activities, which are disclosed as operating cash flows. 20.12 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS – The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. In preparing this Annual Financial Report, the significant judgements and estimates made by management in applying the Entity’s accounting policies and the key sources of estimation uncertainty are detailed below. 82 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements Critical Estimates Exploration and Evaluation Expenditure - Impairment 83 Determining the recoverability of exploration and evaluation expenditure capitalised in accordance with the Company’s accounting policy requires estimates and assumptions as to future events and circumstances, in particular, whether successful development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. Critical to this assessment is estimates and assumptions as to the presence of mineral reserves, timing of expected cash flows, exchange rates, commodity prices and future capital requirements. Changes in these estimates and assumptions as new information about the presence or recoverability of a mineral reserve becomes available, may impact the assessment of the recoverable amount of exploration and evaluation assets. If, after having capitalised the expenditure a judgement is made that recovery of the expenditure is unlikely, an impairment loss is recorded in the consolidated statement profit or loss and other comprehensive income. Performance Rights The Company makes judgments around the value of awarded performance rights based on the historical performance of the company as the vesting conditions are linked to peer group comparison via Total Shareholder Returns (TSR). Management determines the total value of the award based on weighted probabilities of the vesting criteria being achieved. In addition to historical performance compared to its peers, management further considers how the Company is tracking towards the vesting criteria based on subsequent performance with reference to subsequent events up to balance date as well as any other expected improvements in the share price based on operational knowledge. Critical Judgments Exploration and Evaluation Expenditure The entity capitalises expenditure relating to exploration and evaluation where it is considered likely to be recoverable or where the activities have not reached a stage which permits a reasonable assessment of the existence of reserves. While there are certain areas of interest from which no reserves have been extracted, the directors are of the continued belief that such expenditure should not be written off since feasibility studies in such areas have not yet been conducted. 20.13 GOING CONCERN – The Company has incurred a net loss of $638,119 (2017: $784,721) during the year and the cash outflows from operating activities equates to $320,984 (2017: $701,735). The financial statements have been prepared on the basis of going concern which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The Directors consider this to be appropriate given the ability to manage the Company’s cost structure and in turn the levels of cash outflow dependent on timing of its exploration activities. Taking into account the current cash reserves and successful fund raising from the Initial Public Offering completed in January 2018 of $6,000,000 before cost, the Directors are confident the Company has adequate resources to continue as a going concern for the foreseeable future. Annual Report 2018 - Cygnus Gold Limited // 83 Cygnus Gold - Notes to the Financial Statements 84 20.14 EMPLOYEE BENEFITS – Wages and salaries and annual leave: Short-term employee benefits are benefits, other than termination benefits, that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. Examples of such benefits include wages and salaries, non-monetary benefits and accumulating sick leave. Short-term employee benefits are measured at the undiscounted amounts expected to be paid when the liabilities are settled. 20.15 PROPERTY, PLANT AND EQUIPMENT – Recognition and Measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Costs include expenditures that are directly attributable to the acquisition of the asset. Subsequent Costs Subsequent expenditure is only capitalised when it is probable that the future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred. Depreciation Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. The expected useful lives in the current and comparative period are as follows: IT equipment Plant and equipment Motor vehicle 2 – 3 years 2 – 3 years 5 years The estimated useful lives, depreciation methods and residual values are reviewed at the end of each reporting period. 84 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Notes to the Financial Statements 20.16 SHARE BASED PAYMENTS – 85 The Company operates equity-settled share-based remuneration plans for its employees. None of the Company’s plans feature any options for a cash settlement. All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions). All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to share option reserve. Where vesting periods exist, the total expense is recognised straight-line over the vesting period. Where vesting conditions are non-market based, the expense is based on the best available estimate of the number of instruments expected to vest. Where the vesting conditions are market based, the company uses a pricing model to determine fair value of each instrument. However, in the case of the performance rights issued in the current period as outlined in Note (6.1), the Company has not utilised a pricing model given the nature of the vesting conditions and how they are interdependent on the performance of a peer group which is represented by a significant number of ASX listed companies. In this case, the use of a pricing model is not considered practical or commercial. The total value of the rights is determined, rather, based on management’s estimates and judgments that uses a weighted probability to determine the most likely outcome of performance rights that will vest which is then multiplied by the fair value of each instrument (i.e. the share price of the Company) on the date of granting. 20.17 REVENUE – Revenue arises from a management fee derived from the Company’s facilitation of exploration and evaluation activities on behalf of its joint venture / earn-in Partner. The fee is derived as a percentage of amounts received from the JV partner and expended on the tenements of which the two partners are exploring. To determine whether to recognise revenue, the Company follows a 5-step process: 1. Identifying the contract with a customer 2. Identifying the performance obligations 3. Determining the transaction price 4. Allocating the transaction price to the performance obligations 5. Recognising revenue when/as performance obligation(s) are satisfied. For the management fee, revenue is recognised on an accruals basis at a point in time, which is defined as the moment in which the company spends the JV partner’s contributions to the earn-in arrangement and thus is entitled to the management fee that attaches to the expenditure. Interest revenue is reported on an accrual basis using the effective interest method. All revenue is stated net of any applicable goods and services tax (GST). Annual Report 2018 - Cygnus Gold Limited // 85 Cygnus Gold - Notes to the Financial Statements 86 20.18 JOINT OPERATIONS – A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. The Company has recognised its share of jointly held assets, liabilities, revenues and expenses of joint operations. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. The Company has recognised its share of jointly held assets, liabilities, revenues and expenses of joint operations. The Company currently has three joint operations with the listed ASX company Gold Road Resources Limited (“Gold Road”) as follows: 1. 2. The Lake Grace Project The Wadderin Project For both of these projects, Cygnus owns 100% of the tenement rights and Gold Road can earn-in to a maximum of 75% of interest in the tenements. In order to do so, Gold Road must spend as much as $3.7M over the four year period from the commencement of the operation in October 2017. In each of these cases, Cygnus receives cash calls from Gold Road and manages the exploration and evaluation activity at their discretion, deriving a management fee of 10% of the expenditure that has spent from Gold Road funds. Given the accounting policies noted above, none of the amounts spent by Cygnus on behalf of Gold Road are included in the exploration and evaluation asset on the Statement of Financial Position. The Company only capitalises qualifying expenditure on the projects as exploration and evaluation asset where it is the Company’s cash used. As at 31 December 2018, Gold Road had provided Cygnus with $158,563 (2017: nil) of cash that was spent post year- end on the projects. This balance appears as a liability in Trade and other payables. See Note (5). 3. The Yandina Joint Venture In this joint operation, Gold Road is to hold 75% of the tenement rights and the Company’s share is to be 25%. The rights of tenure over these tenements were granted during the year as such expenditure is incurred is capitalised as exploration and evaluation asset. Expenditure incurred prior to rights over tenure was expensed. 20.19 GOVERNMENT GRANTS – The company receives government grants for qualifying exploration and evaluation activity. The amounts are paid in arrears as a reimbursement. All expenditures incurred by the Company that are covered by the grant are capitalized exploration and evaluation expenditure. For this reason, the company applies the grant amounts received as an off- set against its evaluation and exploration asset balance on the Statement of Financial Position. In the current period, this treatment occurred for the EIS Grant - a co-funded exploration drilling program - totalling to $139,149 (2017: nil). 86 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Directors’ declaration 87 Directors’ Declaration — 1. In the opinion of the Directors of Cygnus Gold Limited: a The financial statements and notes of Cygnus Gold Limited are in accordance with the Corporations Act 2001, including: i ii Giving a true and fair view of its financial position as at 31 December 2018 and of its performance for the year ended on that date; and Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and b There are reasonable grounds to believe that Cygnus Gold Limited will be able to pay its debts as and when they become due and payable. 2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and Chief Financial Officer for the year ended 31 December 2018. 3. Note 2 confirms that the financial statements also comply with International Financial Reporting Standards. Signed in accordance with a resolution of the directors: James Merrillees Managing Director Perth, 28 March 2019 Annual Report 2018 - Cygnus Gold Limited // 87 Cygnus Gold - Independent Auditor’s Report 88 Grant Thornton Audit Pty Ltd Central Park Level 43 152 - 158 St Georges Terrace PO Box 7757 Perth WA 6000 T +61 8 9480 2000 Independent Auditor’s Report To the Members of Cygnus Gold Limited Report on the audit of the financial report Opinion We have audited the financial report of Cygnus Gold Limited (the Company), which comprises the statement of financial position as at 31 December 2018, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including: a giving a true and fair view of the Company’s financial position as at 31 December 2018 and of its financial performance for the year then ended; and b 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 Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. www.grantthornton.com.au 88 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Independent Auditor’s Report 89 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. We have determined the matters described below to be the key audit matters to be communicated in our report. Key audit matter How our audit addressed the key audit matter Exploration and Evaluation Assets Note 13, 20.10 & 20.11 At 31 December 2018 the carrying value of Exploration and Evaluation Assets was $2,555,261. In accordance with AASB 6 Exploration for and Evaluation of Mineral Resources, the Company is required to assess at each reporting date if there are any triggers for impairment which may suggest the carrying value is in excess of the recoverable value. The process undertaken by management to assess whether there are any impairment triggers in each area of interest involves an element of management judgement. This area is a key audit matter due to the significant judgement involved in determining the existence of impairment triggers. Our procedures included, amongst others:    obtaining the management reconciliation of capitalised exploration and evaluation expenditure and agreeing to the general ledger; reviewing management’s area of interest considerations against AASB 6; conducting a detailed review of management’s assessment of trigger events prepared in accordance with AASB 6 including;    tracing projects to statutory registers, exploration licenses and third party confirmations to determine whether a right of tenure existed; enquiry of management regarding their intentions to carry out exploration and evaluation activity in the relevant exploration area, including review of management’s budgeted expenditure; understanding whether any data exists to suggest that the carrying value of these exploration and evaluation assets are unlikely to be recovered through development or sale; and  assessing the appropriateness of the related financial statement disclosures. Information Other than the Financial Report and Auditor’s Report Thereon The Directors are responsible for the other information. The other information comprises the information included in the Company’s annual report for the year ended 31 December 2018, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information 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 Company’s ability 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 Company or to cease operations, or have no realistic alternative but to do so. © 2019 Grant Thornton Australia Limited. Annual Report 2018 - Cygnus Gold Limited // 89 Cygnus Gold - Independent Auditor’s Report 90 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 pages 43 to 54 of the directors’ report for the year ended 31 December 2018. In our opinion, the Remuneration Report of Cygnus Gold Limited, for the year ended 31 December 2018, complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd CHARTERED ACCOUNTANTS P W Warr Partner – Audit & Assurance Perth, 28 March 2019 90 // Cygnus Gold Limited - Annual Report 2018 © 2019 Grant Thornton Australia Limited. Cygnus Gold - Additional shareholder information as at 7 March 2019 Top 20 holders of ordinary shares – In accordance with ASX Listing Rule 4.10, the following information is provided as at 7 March 2019. 91 Rank Name Units % of issued capital 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Merrill Lynch (Australia) Nominees Pty Limited Southern Cross Capital Pty Ltd Resource Capital Fund VI L.P. Gold Road (Projects) Pty Ltd Ms Charmaine Linda Lobo Mr Alan Frank Cleland Southern Cross Capital Pty Ltd Mr Oliver Pierre Kreuzer Fathom Geophysics Australia Pty Ltd Insurgent Metals Pty Ltd Dale Park Pty Ltd Equity Trustees Limited Sargon CT Pty Ltd Eastern Goldfields Exploration Pty Ltd BNP Paribas Nominees Pty Ltd Mr Robert Angus Castle Stuart Jetosea Pty Ltd Ms Sarah June McAlpine Mr Michael Dylan Naylor & Ms Sarah McAlpine 20 Cumbak Pty Ltd 5,000,000 5,000,000 4,166,667 3,750,000 3,170,001 3,000,001 2,500,000 1,833,334 1,666,667 1,666,667 1,333,334 1,099,399 1,065,533 1,000,000 675,001 666,667 521,173 520,000 470,000 460,000 8.24 8.24 6.87 6.18 5.22 4.94 4.12 3.02 2.75 2.75 2.20 1.81 1.76 1.65 1.11 1.10 0.86 0.86 0.77 0.76 Total 39,364,444 64.88 Annual Report 2018 - Cygnus Gold Limited // 91 Cygnus Gold - Additional shareholder information as at 7 March 2019 92 Range of shares – Range Total holders Units % of issued capital 11 60 50 305 61 487 2,478 180,982 448,462 12,306,046 47,745,373 0.00 0.30 0.74 20.28 78.68 60,683,341 100.00 Units % of issued capital 9,166,664 7,500,000 3,750,000 3,170,001 3,170,001 15.11 12.36 6.18 5.22 5.22 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 Over Total Substantial Holders – Range Resource Capital Fund VI L.P. Southern Cross Capital Pty Ltd Gold Road (Projects) Pty Ltd Mr Alan Frank Cleland Ms Charmaine Linda Lobo 92 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Additional shareholder information as at 7 March 2019 Unmarketable Parcels – There were 85 shareholders with less than a marketable parcel of shares, based on the closing price $0.056 93 Restricted Securities – There are 15,577,088 ordinary shares escrowed until 15 January 2020. Voting Rights – In accordance with the Company’s constitution, on a show of hands every member present in person or by proxy or attorney or duly appointed representative has one vote. On a poll every member present or by proxy or attorney or duly authorised representative has one vote for every fully paid share held. ASX Listing Rule 4.10.19 – In accordance with Listing Rule 4.10.19, the company states that it has used the cash and assets in a form readily convertible to cash that it had at the time of admission in a way consistent with its business objectives. The business objective is primarily mineral exploration. Annual Report 2018 - Cygnus Gold Limited // 93 Cygnus Gold - Additional shareholder information as at 7 March 2019 94 Schedule of tenements – A listing of the Entity’s tenements: Tenement Location Registered Owner % OF OWNERSHIP E70/4787 Western Australia Cygnus Gold Limited E70/4854 Western Australia Cygnus Gold Limited E70/4910 Western Australia Cygnus Gold Limited E70/4912 Western Australia Cygnus Gold Limited E70/4952 Western Australia Cygnus Gold Limited E70/4988 Western Australia Cygnus Gold Limited E70/4992 Western Australia Cygnus Gold Limited E70/5050 Western Australia Cygnus Gold Limited E70/5131 Western Australia Cygnus Gold Limited E70/5137 Western Australia Cygnus Gold Limited E70/5168 Western Australia Cygnus Gold Limited E70/5169 Western Australia Cygnus Gold Limited 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% E70/5196 Western Australia Cygnus Gold Limited Pending, 100% E77/2405 Western Australia Cygnus Gold Limited E77/2463 Western Australia Cygnus Gold Limited 100% 100% E77/2464 Western Australia Cygnus Gold Limited Pending, 100% Wadderin Earn-In Project E70/4911 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/4939 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/4989 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/4990 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/5018 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/5019 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/5020 Western Australia Cygnus Gold Limited 100%, diluting to 25% 94 // Cygnus Gold Limited - Annual Report 2018 Cygnus Gold - Additional shareholder information as at 7 March 2019 95 Lake Grace Earn-In Project E70/4853 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/4855 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/4991 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/5017 Western Australia Cygnus Gold Limited 100%, diluting to 25% E70/5188 Western Australia Cygnus Gold Limited Pending 100%, diluting to 25% Yandina Joint Venture Project E70/5098 Western Australia Gold Road (Projects) Pty Ltd E70/5099 Western Australia Gold Road (Projects) Pty Ltd E70/5100 Western Australia Gold Road (Projects) Pty Ltd E70/5101 Western Australia Gold Road (Projects) Pty Ltd E70/5098 Western Australia Gold Road (Projects) Pty Ltd 25% 25% 25% 25% 25% HYDEN JOINT VENTURE PROJECT E70/5230 Western Australia Cygnus Gold Limited, Gold Road (Projects) Pty Ltd Pending 25% E70/5231 Western Australia Cygnus Gold Limited, Gold Road (Projects) Pty Ltd Pending 25% E70/5232 Western Australia Cygnus Gold Limited, Gold Road (Projects) Pty Ltd Pending 25% Annual Report 2018 - Cygnus Gold Limited // 95 Cygnus Gold Limited Level 3, 20 Parkland Road, Osborne Park, Perth, WA 6017, Australia +61 (0)8 9489 2680 info@cygnusgold.com www.cygnusgold.com ASX : CY5 

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