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Annual Report 2019

Plain-text annual report

A YEAR OF ACHIEVEMENT annual report 2019 ASX300 ENTRY CONTINUED GROWTH NEW ACQUISITIONS 1 MILLION OUNCE LIFE OF MI NE PL AN DIVIDE ND PAYMENT CORPORATE DIRECTORY Directors Kevin Lines - BSc (Geology), MAusIMM, MAICD Independent Non – Executive Chairman Mark Zeptner - BEng (Hons) Mining, MAusIMM, MAICD Managing Director and Chief Executive Officer Michael Bohm - BAppSc (Mining Engineering), MAusIMM, MAICD Independent Non-Executive Director David Southam - B. Com, CPA, MAICD Independent Non-Executive Director Natalia Streltsova - MSc, PhD (Chem Eng), GAICD, MSME, MCIM (appointed 1 October 2019 and after preparation of segments of this report) Company Secretary Richard Jones - BA (Hons), LLB Chief Financial Officer Tim Manners - BBus (Accounting), FCA, AGIA, MAICD Chief Operating Officer Duncan Coutts - BEng (Hons) Mining, MAusIMM General Manager – Exploration Kevin Seymour - BSc (Geology), MAusIMM Principal registered office Level 1, 130 Royal Street East Perth WA 6004 + 61 8 9202 1127 Share registry Auditor Computershare Investor Services Pty Limited Level 5, 115 Grenfell Street Adelaide SA 5000 1300 556 161 (within Australia) + 61 3 9415 4000 (outside Australia) Deloitte Touche Tohmatsu Tower 2, Brookfield Place 125 St Georges Terrace Perth WA 6000 Stock exchange listing Ramelius Resources Limited (“RMS”) shares are listed on the Australian Securities Exchange (ASX) Website www.rameliusresources.com.au table of contents Chairman’s Report Managing Director’s Report 2019 Highlights Operations Review Overview Operational Summary Mt Magnet Edna May Development & Exploration Projects Resources and Reserves Company Summary Mineral Resources Ore Reserves Competent Persons Native Title Statement Sustainability Statement Workplace Health and Safety Social Responsibility Environmental Protection Water Resource Management Diversity Statement Corporate Governance Statement Annual Financial Report Directors’ Report Auditor’s Independence Declaration Income Statement Statement of Comprehensive Income Balance Sheet Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information 02 04 06 08 08 09 10 13 14 24 24 25 27 28 29 30 30 31 32 33 34 35 37 38 59 62 63 64 65 66 69 110 111 116 1 RAMELIUS RESOURCES ANNUAL REPORT 2019CHAIRMAN'S REPORT DEAR FELLOW SHAREHOLDERS, I am pleased to report that Ramelius continued its recent record of strong financial and operational performances in the financial year ended 30 June 2019. The Company reported: is very encouraging and supports the Company’s belief in the prospectivity of this under-explored terrain. At Mt Magnet our exploration team has had a very successful year highlighted by the discovery of the Eridanus deposit, adjacent to the previously mined • Net profit before tax of $30.4 million; Lone Pine pit. This exciting discovery has been the • Net Profit after tax of $21.8 million; • Gold sales of 203,318 ounces generating revenue of $352.8 million; • Cash flows from operating activities for the year of $137.0 million; and • Cash and gold at 30 June 2019 of $106.8 million. This operational and financial performance has underpinned the Company’s core strategies of securing both the immediate short-term future of Ramelius and focus of an accelerated drilling programme with an initial reserve of 3.1 million tonnes at 1.1g/t Au containing 110,000 ounces of gold. The Eridanus discovery continues to build on earlier successes at Shannon and Stellar and reinforces the value of the Company’s commitment to ongoing exploration at Mt Magnet. Similarly, exploration has been ongoing at our Vivien underground mining operations near Leinster, with the Board recently taking a decision to extend mine life by almost a year with further exploration ongoing. building the Company’s capacity in the medium to The combination of these Exploration, Corporate and longer term. Complementing the strong operational Mine optimisation efforts has culminated during the performance has been a very active programme of year with the release, in June, of the Company’s first corporate and asset level acquisitions, designed to One Million Ounce mine plan. This plan underpins strengthen and extend the mine lives of our two key production, for the next five years, at both of the processing facilities at Mt Magnet and Edna May. Company’s processing centres resulting in gold At Edna May, 315km east of Perth, the decision was made early in 2019 financial year to commit to the development of a new underground mine in preference to the Stage 3 expansion of the open pit. output averaging approximately 200,000 ounces per annum. It is a very significant achievement for Ramelius and a credit to a great many employees and contractors across our operations. As a result of this decision the milling facility at Edna The efforts of your company have been appreciated May has excess processing capacity. The acquisitions by the market with a growing recognition, not just of of Marda, located 191km north-northeast of Edna the capability of our team to continuously deliver on May, and the Tampia Hill project, near Narembeen, forecasts, but the expanding capacity of Ramelius to 240km east of Perth, have allowed Ramelius to secure action growth initiatives in a timely and cost-effective new gold resources to address the latent processing manner. As a result, in the period 30 June 2018 to 22 capacity of the Edna May Mill. Both these transactions August 2019; were successfully completed in February 2019 and an aggressive programme of planning/approvals has commenced. In parallel with these corporate initiatives • Ramelius share price has appreciated 103%; • Market Capitalisation has appreciated 153%; the Company has consolidated a strategic landholding • Market Capitalisation (at A$1.15/share) has to support exploration for new gold deposits in the risen to A$757 million; and region. Early success at Symes’ Find, south of Edna May, • Ramelius re-entered the ASX300. 2 RAMELIUS RESOURCES ANNUAL REPORT 2019It is particularly pleasing, following the to balance the levels for suitable downside insurance, release of the Ramelius Dividend Policy through hedging, whilst maintaining exposure to any at the AGM last year, that your Board future upside in the gold price and will continue to actively has been able to approve the payment manage our gold hedging to achieve best outcomes. of a fully franked dividend of 1.0 cent per share. Whilst the dividend is the minimum allowed under our new policy it is an important first step and represents a payout ratio of 27% when compared to Basic Earnings per share of 3.7 cents. Since the end of the year under review, the gold price, both in US$ and A$ terms, has appreciated substantially. This situation is beneficial for all Ramelius stakeholders and hopefully represents a new longer-term support level for gold globally. However, in this very dynamic price environment it can be challenging to confidently set the appropriate level of revenue protection via the Company’s gold hedging portfolio. Your Board is very conscious of the need for the Company NET PROFIT BEFORE TAX $30.4 million $106.8 million CASH AND GOLD AT 30 JUNE 2019 The year ahead will be both exciting and challenging for the Ramelius team with continued developments at the Marda and Tampia projects at Edna May and new mines, Eridanus and Shannon, at Mt Magnet. Your Board remains focused on continuing to grow your investment in the Company by prudent use of capital on exploration, asset acquisition and corporate activities. In parallel with these initiatives Ramelius will continue to monitor an often rapidly changing external business environment to ensure the Company retains the necessary skills to manage change at all levels within the organisation. As part of these initiatives the Board is very pleased to welcome Dr Natalia Streltsova to the Board as an Independent Non-Executive Director. Dr Streltsova’s very strong technical background and valuable Board experience will be of significant future value to our company. I thank our employees and contractors for their continuing efforts during past year. I also would like to particularly thank our Managing Director, Mark Zeptner and the management team, as well as my fellow non-executive directors, Mike Bohm and David Southam. On behalf of the Board, I also thank all of you, our shareholders, for your ongoing support and look forward to an interesting year ahead. Kevin Lines Chairman Ramelius Resources Ltd 3 RAMELIUS RESOURCES ANNUAL REPORT 2019MANAGING DIRECTOR’S REPORT DEAR SHAREHOLDERS, During the 2019 financial year your company made significant progress towards becoming a mid-tier gold producer in the Australian sector in June 2019. Development may occur following the completion of a 21-day public advertising period and approval of an offset arrangement. Spectacular gold intersections within numerous high grade hits occurring immediately below the Stellar open pit (Mt with production hitting 196,679 ounces, backing Magnet) were also announced during the Quarter. up from the plus 200,000 ounces of production At the Annual General Meeting in November, the in the year prior. The acquisitions of the Marda & Tampia Gold Projects, both of which are located within 200km of the Edna May production centre, demonstrate the Company’s proactive commitment to growth. The addition of Company announced a new dividend policy that targets a minimum $0.01/share payment per annum, subject to meeting mining reserve and cash reserve hurdles. The Company exceeded the guidance range, producing 52,623 ounces for the Quarter. these new projects led to our One Million Ounce mine The third Quarter was productive seeing multiple plan, which was announced in June 2019, and which is mining proposals approved and previously a landmark point in the history of Ramelius. Although commenced acquisitions finalised. The mining we have been a successful gold miner for more than 10 proposal for Eridanus (Mt Magnet) open pit was years, we have never been in a position to demonstrate approved and Edna May underground commenced. such a significant mine life at meaningful production The Marda acquisition was approved by the courts levels. On top of this, the Company delivered a positive and completed, whilst the Company also proceeded Net Profit after Tax for the fifth year running, as well as to compulsorily acquire all the shares it did not hold boasting a cash and gold balance of over A$100M to close out the financial year. Ramelius started the year well, achieving guidance for the September 2018 Quarter with production of 51,428 ounces from our Mt Magnet, Edna May and Vivien operations. The Annual Resources and Reserves Statement, released in September, featured a 54% increase in Ore Reserves from a year earlier. This Quarter saw the commencement of two new acquisitions, that of Explaurum Limited (Tampia) & Black Oak Minerals Ltd (Marda) via a takeover and deed of Company arrangement respectively. The Greenfinch open pit, adjacent to Edna May, appeal process for the 48.8Ha Clearing Permit commenced in the December 2018 Quarter. On 7 October 2019 the Company announced that it had received approval of a revised Clearing Permit application for a reduced footprint of 16.6Ha submitted 4 10+ years AS A SUCCESSFUL GOLD MINER 196,679 ounces OVER THE YEAR RAMELIUS RESOURCES ANNUAL REPORT 2019in Explaurum Limited, at which point Ramelius held Essentially the share price has doubled over the 12 a relevant intertest of 95.58%. Production remained month period, delivering strong capital gains for steady throughout the Quarter with 45,286 ounces of shareholders. gold poured, again achieving guidance. There is no doubt that is has once again been a The exploration team continued to provide excellent busy year for the Company I would like to thank results from diamond drilling at Vivien and Edna the Board and staff for their support and ongoing May undergrounds mines, as well as from RC drilling efforts throughout the year, with the established at Symes’ Find (Edna May) and below the Eridanus mining teams at Mt Magnet, Vivien and Edna May open pit (Mt Magnet). Pleasingly, our strategic performing exceptionally well. Additionally, I would tenement position continued to yield positive results like to extend a warm welcome to our new teams at over the last 12 months, justifying our continued Tampia & Marda. investment into exploration in the region. The 2019 financial year saw approximately $19.8M spent on exploration at Ramelius, and with our strong balance sheet, this still gives us the flexibility to pursue growth opportunities as and when they arise. Looking forward to another exciting year of growth at Ramelius. Ramelius re-entered the ASX300 Index in late March Mark Zeptner 2019 which complemented a welcome re-rating of the stock that had commenced in the new year. Managing Director Ramelius Resources Ltd 196,679 ounces $19.8 million SPENT ON EXPLORATION 54% increase IN ORE RESERVES FROM LAST YEAR 5 RAMELIUS RESOURCES ANNUAL REPORT 20192019 HIGHLIGHTS Over the past year, Ramelius has achieved a number of major milestones, helping to entrench its reputation as an emerging Australian mid-tier gold miner with an excellent track record of meeting guidance and delivering growth for shareholders. CONTINUED GROWTH Ramelius saw its share price increase 25% over the 12 months to June 30, 2019. The positive momentum was partly driven by the Australian gold price, but also reflected our strong operational performance, the bedding down of the Marda and Tampia Hill acquisitions and continued success with our exploration programs at Mt Magnet, Vivien and Edna May. The share price continued to appreciate strongly in the early months of the new financial year. ROBUST FINANCIALS The Company delivered its fifth consecutive year of profit, posting a net profit after tax of $21.8 million. The full-year result was accompanied by the declaration of a 1.0c fully franked dividend in keeping with its dividend policy announced earlier in the year. At the end of June, the Company held $106.8 million in cash and bullion and was debt-free. 6 ASX300 ENTRY At the bi-annual rebalance of the S&P/ ASX 300 in March this year, Ramelius re-entered the ASX 300. Inclusion, which is determined on measures of market capitalisation and liquidity, typically results in greater interest from institutional investors whose mandates deem that they can only invest in larger ASX-listed companies. FY2019 KEY FINANCIAL HIGHLIGHTS Earnings: EBITDA: A$112.2M (2018: A$127.0M) NPAT: A$21.8M (2018: A$30.8M) Cashflow: Cash from Operating Activities: A$137.0M (2018: A$118.9M) Net Mine Cash Flow: A$70.7M (2018: 48.5M) Balance Sheet Cash & Bullion: A$106.8M (2018: A$95.5M) Debt free. Capacity to secure debt if required Dividend Payment: Directors declare 1.0c fully franked dividend (27% payout ratio) Record date of 4 Sept 2019 and a payment date of 4 Oct 2019 RAMELIUS RESOURCES ANNUAL REPORT 2019FIVE-YEAR MINE PLAN In June this year, Ramelius announced a landmark five-year life of mine plan, based around the twin production centres of Mt Magnet and Edna May. The Company envisages producing in excess of 1,000,000 ounces of gold over the next five years. • Key production centres continue to deliver mine • Provides long-term clarity over production and life extensions costs • Anticipate maintaining mine life at five years or • Plan underpinned largely by existing Ore more through exploration and acquisition Reserves/Indicated Resources EDNA MAY MT MAGNET Edna May production centre set to deliver higher margins Effective exploration strategies keep delivering Resource/Reserve replacement Edna May Operations Cosmos Mine Area • Underground development well • Drilling beneath new Eridanus open pit progressed, stoping to commence soon produces excellent intercepts • Greenfinch approval targeted for December 2019 Marda Project • Mining works have commenced • Haulage to Edna May in the December Quarter Tampia Hill Project • Strategic review completed June 2019 • Confirmed haulage to Edna May as preferred development option • Decision to mine targeted for end of CY19 Vivien Satellite Mine • Resource update delivers an additional 12 months of mine life • Incorporates new high grade results from diamond drilling at depth CORPORATE SUMMARY Shares on Issue: 658m Debt: Nil Market Cap: @ $1.01/sh: 664M Enterprise Value: $558M Cash & Gold*: $106.8M *As at June 30, 2019 7 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW OVERVIEW Ramelius is a well-established mid-tier ASX 300 gold production and exploration Company. Ramelius has averaged production of in excess of 200,000 ounces per annum over the last two years and has set guidance for the 2020 financial year of 205,000 – 225,000 ounces. Furthermore, a life of mine plan was released on 17 June 2019 which detailed annual gold production of over 200,000 ounces out to the 2023 financial year. During the 2019 year the Company produced 196,679 ounces from its Mt Magnet, Vivien, and Edna May gold mines at an All-In Sustaining Cost (“AISC”) of A$1,192 per ounce. Sales for the year totaled 203,318 ounces at an average realised gold price of A$1,726 generating strong a return of $A534 per ounce above AISC per ounce. WESTERN AUSTRALIA 196,679 ounces from its Mt Magnet, Vivien, and Edna May gold mines. Ramelius’ operations locations 8 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) OPERATIONAL SUMMARY Unit Mt Magnet1 Edna May Group OPEN PIT High grade ore mined Grade Contained gold UNDERGROUND High grade ore mined Grade Contained gold Total ore mined MILL PRODUCTION Tonnes milled Grade Contained gold Recovery Recovered gold Gold poured Gold sold kt g/t oz kt g/t oz kt kt g/t oz % oz oz oz 2,034 1.23 80,118 305 5.14 50,346 2,338 1,962 1.91 120,271 95.5 114,800 114,840 542 1.40 24,412 32 4.14 4,245 574 2,842 0.94 85,650 93.9 80,464 81,839 2,576 1.26 104,530 337 5.04 54,591 2,912 4,804 1.33 205,921 94.8 195,264 196,679 119,997 83,321 203,318 1 In the above table and throughout this report Mt Magnet incorporates the high grade Vivien underground ore which is processed through the Mt Magnet processing plant. Mine operations performance for the 2019 financial year Average realised gold price v All-in sustaining cost (by Quarter) %/Oz $1,669 $1,696 $1,758 $1,791 $1,726 $1,800 $1,600 $1,400 $1,253 $1,190 $1,210 $1,106 $1,192 $1,200 $1,000 $800 $600 z O / C S I A $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 ) z O / $ ( e c i r p d o g d e s i l l a e r e g a r e v A SEP 18 DEC 18 MAR 19 JUN 19 YEAR Mt Magnet (LHS) Edna May (LHS) Group (LHS) Average realised gold price (RHS) AISC and realised gold price for 2019 9 RAMELIUS RESOURCES ANNUAL REPORT 2019 OPERATIONS REVIEW (CONTINUED) MT MAGNET Mining Operations at Mt Magnet continued on a multi pit / underground basis throughout the 2019 financial year with ore being milled from five open pit and two underground projects. A summary of the main projects for the year is provided as follows: Mt Magnet key mining & exploration areas Area Type Operational commentary Milky Way Open pit Milky Way was the main ore source at Mt Magnet during the year making up 51% of the ore feed. Total high grade ore mined for the year was 1.4 million tonnes at a grade of 1.06 g/t with 1.0 million tonnes being milled at a grade of 1.10 g/t and recovery of 93.4% for recovered gold of 33,021 ounces. At the end of the year there were 0.4 million tonnes of high grade Milky Way ore stockpiled which will provide base load mill feed in the 2020 financial year as the Eridanus pit is developed. Work at Eridanus commenced in May 2019 following the announcement of a maiden Ore Reserve and subsequent mining approvals. Eridanus Open pit Eridanus is a low strip ratio open pit mine which will provide the base load feed for the Mt Magnet processing facility from the second Quarter of the 2020 financial year. Stellar & Stellar West Open Pit A total of 1.1 million bcms were moved during 2019 with negligible ore being mined as operations focused on the site establishment and pre strip activities. Mining at Stellar West concluded in the second Quarter of the 2019 financial year with 84k tonnes being milled at a grade of 1.61 g/t and a recovery of 93.7% for recovered gold of 4,091 ounces. At Stellar, spectacular drill results in December 2018 led to mining being suspended in that month as the drill results were analysed, and mine plan options were assessed. Mining of the Stellar pit is expected to re-commence during the 2020 financial year, with the high grade areas being exposed in the second half of the year. Mining at Stellar is expected to be completed by the June 2020 Quarter. A total of 257k tonnes were milled at a grade of 1.50 g/t and recovery of 93.9% for recovered gold of 11,598 ounces. The Shannon open pit was completed during the year which provided modest volumes of ore and provided access for the underground, with the portal being established in the June 2019 Quarter. Shannon Open Pit During the year 168k tonnes were milled at a grade of 2.41 g/t at a recovery of 97.0% for recovered gold of 12,663 ounces. Development of the Shannon underground has now commenced with commercial volumes of ore expected from the December 2019 Quarter. 10 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) Area Type Operational commentary Vegas Open Pit Water Tank Hill Underground Vegas is a new small pit whose development was bought forward into the year to assist with mine sequencing and provide oxide BIF ore for blending purposes. The Vegas pit is planned to continue at modest volumes throughout the 2020 financial year to provide ongoing material for ore feed blending. The Water Tank Hill underground mine was completed in the March 2019 Quarter. By the end of that Quarter, the link decline and vent drives had reached the Hill 60 deposit and the first level cross-cut was completed. In the June Quarter, several additional small stope areas at Water Tank Hill were identified with mining commencing in June. A total of 67k tonnes were milled at a grade of 3.64 g/t and recovery of 97.1% for recovered gold of 7,641 ounces. Work commenced at the Hill 60 underground mine during the year with 1,910 metres of development being achieved. Hill 60 Underground During the year operations focused on development with negligible ore being mined and milled from the Hill 60 underground mine. Shannon Underground Vivien Underground Steady state volumes of ore are expected to be available from the September 2019 Quarter. With the completion of the Shannon open pit, work on the portal and decline commenced in June 2019. Only minimal development was made during year with commercial volumes of ore expected from the December 2019 Quarter. Despite lower output than last year the Vivien mine performed well producing 37% (2018: 39%) of the gold production from the Mt Magnet operation. Total high grade mill production from Vivien was 256k tonnes at a grade of 5.34 g/t and recovery of 97.1% for recovered gold of 42,761 ounces. During the year good contributions were made from both stoping and development ore. A recent mine extension diamond drilling program returned significant high grade gold mineralisation below the current mine plan at Vivien (Vivien Deeps). The results are considered very significant as they now extend the known mineralisation a further 200m below the current mine plan, deepening the known mineralisation to 600m below surface. An extension of mine and new resource and reserve information were announced by the Company on 12 September 2019. Shannon Underground Portal Commencement June 2019 11 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) MT MAGNET (continued) Milling MILL PRODUCTION Tonnes milled Grade Contained gold Recovery Recovered gold Gold poured Gold sold 2019 2018 Change (%) Kt g/t Oz % Oz Oz Oz 1,962 1.91 120,271 95.5 114,800 114,840 1,995 2.23 143,141 94.3 135,021 135,597 119,997 135,565 - 2 % - 14 % - 16 % + 1 % - 15 % - 15 % - 11 % Mt Magnet mill production for the 2019 financial year A total of 1,962k tonnes were processed at the Mt Magnet mill during the year compared to 1,995k tonnes in the prior year representing a 2% decrease in throughput. In addition to the lower throughput the grade was down 14% on the prior year which resulted in a decrease in gold poured of 20,757 ounces or 15%. Grades at Mt Magnet were down on the prior year as a result of 23% less underground ore being available at a grade 16% less than the prior year. Underground operations at Mt Magnet focused on the development of Hill 60, and to a lesser extent the Shannon underground. Both of these sources of high grade underground ore will reach commercial extraction rates in the 2020 financial year. Gold production from Mt Magnet is forecast to be 140,000oz – 150,000oz in the 2020 financial year. A total of 1,962,000 tonnes were processed at the processing facility at Mt Magnet 12 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) EDNA MAY Mining During the year mining of the Stage 2 open pit at Edna May was completed with operations at Edna May focussing on the development of the underground mine and the milling of existing Stage 2 high grade and low grade stockpiles. The Stage 2 open pit performed better than expected with 542k tonnes being mined at a grade of 1.40 g/t for the year. Mining at Stage 2 concluded in the December 2018 Quarter with the milling of the ore continuing into the March 2019 Quarter as the Stage 2 high grade stockpiles were exhausted. In the September 2018 Quarter an assessment of the Edna May development options post the Stage 2 open pit was completed with the decision to develop an underground mine chosen in preference to a larger Stage 3 open pit cutback. In the March 2019 Quarter, the preferred underground mining contractor was mobilised, and development commenced. During this period of development 32k tonnes of ore were mined at a grade of 4.14 g/t. With Stage 2 ore being exhausted in the March 2019 Quarter, and commercial quantities of underground ore not being available until the 2020 financial year, milling focused on the low grade stockpiles with this ore making up 92% of ore being milled in the second half of the 2019 financial year. This low grade ore performed better than expected and achieved a grade of 0.67 g/t for the 2019 year. The stockpile carried no cost and hence made a positive contribution to both earnings and cashflows. Gold production from Edna May is forecast to be 65,000oz – 75,000oz in the 2020 financial year. Milling Throughput for the year, when compared to the 2018 financial year (including the period under Evolution Mining Limited’s control) was up 7% due to improved plant optimisation. MILL PRODUCTION Tonnes milled Grade Contained gold Recovery Recovered gold Gold poured Gold sold 2019 20181 Change (%) 2,842 0.94 85,650 93.9 80,464 81,839 2,010 1.20 77,352 93.9 72,611 72,521 + 41 % - 22 % + 11 % 0 % + 11 % + 13 % 83,321 67,520 + 23 % Kt g/t Oz % Oz Oz Oz 1 The figures reported for 2018 are for the nine months ended 30 June 2018, the period of Ramelius ownership Edna May mill production for the 2019 financial year 13 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) DEVELOPMENT & EXPLORATION PROJECTS Development projects In the 2018 Annual Report Ramelius outlined the plans for the following development projects: • Edna May project (Stage 3 open pit or underground) • Shannon (Mt Magnet) • Hill 60 (Mt Magnet) • Morning Star (Mt Magnet) • Eridanus (Mt Magnet) • Greenfinch (Edna May) Of these six development projects, mining or development has commenced on four projects (Edna May underground, Shannon, Hill 60, and Eridanus). On the remaining two, Morning Star has been deferred in favour of the Eridanus open pit at Mt Magnet, and a revised Clearing Permit has been submitted for Greenfinch which is currently under assessment by the regulators. 14 OPERATIONS REVIEW (CONTINUED) Development & exploration projects (continued) Greenfinch project (Edna May, WA) Marda Gold Project (Yilgarn, WA) The Clearing Permit for Edna May was rejected by In June 2019 initial Mineral Resources the Department of Mines, Industry Regulations of 4.8Mt at 2.0 g/t for 300,000oz of and Safety (DMIRS) in November 2018. This decision contained gold and Ore Reserves of 1.1Mt was appealed by Ramelius and on 13 May 2019 the at 2.4 g/t for 89,000oz of contained gold Environment Minister upheld the decision of the were announced. DMIRS, however at the same time, the Environment Minister invited Ramelius re-submit a revised Clearing Permit application. The revised submission, which had a significantly reduced project disturbance footprint, was made in June 2019 and focused on completely avoiding the Declared Rare Flora species, Eremophila resinosa, without loss of the original 57,000 ounces of recoverable gold. On 7 October 2019 the Company announced that it had received approval of the revised Clearing Permit application. Development may occur following the completion of a 21-day public advertising period and approval of an offset arrangement. The Marda Gold Project is an open pit deposit with the ore to be hauled to, and milled at, the Edna May mill for processing. Resource drilling and project development activities (studies and costings) were largely completed by 30 June 2019, with statutory approvals well-advanced and expected in the September 2019 Quarter. The capital works programme is scheduled to commence in October 2019. Haulage is planned to the Edna May mill with The development of the Greenfinch project is commercial quantities coming into dependent upon the approval of the revised Clearing production in the December 2019 Quarter. Permit as well as the Commonwealth EPBC Act approvals which are currently being assessed in parallel by the Federal Department of the Environment and Energy (DotEE). 15 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) Development & exploration projects (continued) Tampia Hill Gold Project (Narembeen, WA) Since completing the acquisition of the Tampia Hill Gold Project in April 2019 Ramelius moved to complete a Strategic Review of the project which aimed to determine the best economic outcomes for the future development of the project. Broadly, the premise of the Strategic Review was to compare the merits of an on-site processing facility at Tampia (‘milling option’) versus mining only at Tampia with the ore hauled to the Edna May mill located some 140km to the north (‘haulage option’). The haulage option was identified to deliver superior economic returns for shareholders and as a result the Board resolved to evaluate the project based on milling at the Edna May production centre. The results of the Strategic Review were discussed in detail in the ASX announcement on 17 June 2019. Ramelius continues to advance the project with work still required on hydrology, environmental, permitting and stakeholder engagement. With further work still to be undertaken to evaluate the project the Tampia Hill Gold Project has been classified as an Exploration & Evaluation Asset within the financial report. The final investment decision is anticipated to occur late in the 2019 calendar year. In June 2019 initial Mineral Resources of 8.2Mt at 1.7 g/t for 460,000oz of contained gold and Ore Reserves of 2.2Mt at 2.8g/t for 200,000oz of contained gold was announced. Water Bore Drilling Tampia Hill Gold Project 16 OPERATIONS REVIEW (CONTINUED) Development & exploration projects (continued) Exploration Ramelius’ exploration activities focused around the Mt Magnet and Edna May Gold Projects during the year. Mt Magnet ERIDANUS DEEPS PROSPECT Diamond and RC drilling programmes were completed on the Eridanus Deeps Prospect during the year. Drilling was oriented parallel to the strike of the Eridanus Granodiorite to scope for orthogonal vein arrays identified in earlier resource definition drilling. The new drilling confirmed the presence of broad intervals of significant (>1.0 g/t Au) mineralisation within the Eridanus Granodiorite below the proposed open pit. Drill testing has now been partially completed to 400m below surface. Selected (>0.5 g/t Au) assay results as reported during the year include: • 8m at 5.06 g/t Au from 37m • 12.6m at 5.39 g/t Au from in GXRC1904, 230.4m in GXDD0085 including 3m at 11.42 g/t Au • 32m at 2.26 g/t Au from 23m • 23m at 1.93 g/t Au from 126m in GXDD0086 in GXRC1904 • 15m at 4.10 g/t Au from 385m • 12m at 6.41 g/t Au from 183m in GXDD0086 in GXRC1904, including 2m • 7m at 6.32 g/t Au from 450m at 25.85 g/t Au in GXDD0086 • 15m at 3.32 g/t Au from 27m • 12m at 6.90 g/t Au from 211m in GXDD0075 • 23m at 3.98 g/t Au from 240m in GXDD0075 • 36m at 3.29 g/t Au from 375m in GXDD0075 in GXRC2027 • 30m at 1.85 g/t Au from 206m in GXRC2028 • 37m at 2.60 g/t Au from 30m in GXRC2029 • 43m at 4.17 g/t Au from 27m • 16m at 2.66 g/t Au from 84m in GXDD0084, including 12m at 11.6 g/t Au • 14m at 2.45 g/t Au from 324m in GXDD0084 in GXRC2030 • 8m at 7.66 g/t Au from 218m in GXRC2030 17 OPERATIONS REVIEW (CONTINUED) Development & exploration projects (continued) ERIDANUS OPEN PIT Detailed structural and vein density logging of the diamond core revealed a dominant subvertically dipping, north- westerly striking vein set within a broader stockwork vein array. The gold mineralisation is best developed within the competent east-west trending Eridanus Granodiorite but numerous lodes are seen to extend well beyond the granodiorite and are hosted by the surrounding Boogardie Basin felsic porphyry rocks. Eridanus Deeps RC and Diamond drill hole location plan Eridanus exploration drilling cross section (north-south) below the current pit design 18 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) Development & exploration projects (continued) TITAN DEEPS PROSPECT Two Titan Deeps diamond holes were drilled below the Titan pit during the year. Only narrow, low order anomalous intersections were generated but further step out drilling along the controlling Boogardie Break structure is warranted. • 9.2m at 2.10 g/t Au from 131.9m in GXDD0088 • 3.5m at 6.77 g/t Au from 461.5m in GXDD0088, including 1.5m at 15.35 g/t Au LONE PINE SOUTH PROSPECT RC drilling was completed over the Lone Pine South Prospect (located below the backfilled Lone Pine Palaeochannel). Gold mineralisation appears associated with a north-northwest trending sericite-carbonate altered shear zone in felsic porphyry rocks. • 6m at 2.05 g/t Au from 19m in GXRC1872 • 5m at 3.29 g/t Au from 109m in GXRC1873 • 1m at 21.2 g/t Au from 127m in GXRC1897 • 3m at 4.23 g/t Au from 90m in GXRC2003 • 6m at 13.67 g/t Au from 200m in GXRC2010 • 11m at 2.19 g/t Au from 175m in GXRC2011 A steep west dip is preferred at present with mineralisation remaining open down dip and along strike to the south. With this predicted dip projection, true widths are estimated to be 30% of the reported down hole intersections. RAMELIUS RESOURCES ANNUAL REPORT 2019 19 OPERATIONS REVIEW (CONTINUED) Development & exploration projects (continued) Edna May Over the year Ramelius has consolidated its land holding around the Edna May Gold Mine through numerous tenement acquisitions along with the acquisitions of the Tampia Hill Gold Project and Marda Gold Project. Exploration & development projects around the Edna May Gold Mine 20 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) Drill hole location and conceptual pit design over Symes’ Find SYMES’ FIND Symes’ Find encompasses Mining Lease (ML) 77/1111, situated over the historical Symes Find gold workings, located 80km south of the Moorine Rock township. During the year Ramelius exercised its right to acquire the project outright having completed RC drilling with highly encouraging results, including: • 12m at 2.23 g/t Au from 70m in SYFC002, including 1m at 11.4 g/t Au • 6m at 3.11 g/t Au from 46m in SYFC003 True widths are interpreted to be around 80% of the reported downhole intersections for the shallow plunging gneissic fabric mineralisation and 50% for the sub-vertical quartz healed shears. Infill RC drilling culminated in the successful delineation of a maiden Indicated and Inferred Mineral Resource of 540Kt at 1.90 g/t for 34,000oz. The drilling has further delineated a broad southeast trending surficial laterite gold anomaly (at plus 1.0 g/t • 9m at 2.19 g/t Au from 44m in SYFC004 Au) which remains open to the southeast. • 16m at 3.59 g/t Au from 18m in SYFC010, including 2m at 8.98 g/t Au • 8m at 43.23 g/t Au from 5m in SYFC073, including 3m at 112.4 g/t Au • 14m at 5.31 g/t Au from 51m in SYFC087, including 4m at 12.64 g/t Au • 8m at 17.05 g/t Au from 33m in SYFC093, including 3m at 42.01 g/t Au • 11m at 6.65 g/t Au from 8m in SYFC094, including 2m at 30.90 g/t Au • 7m at 11.62 g/t Au from 10m in SYFC097, including 3m at 23.56 g/t Au • 12m at 6.79 g/t Au from 1m in SYFC100, including 2m at 33.85 g/t Au • 12m at 4.49 g/t Au from surface in SYFC101, including 2m at 23.35 g/t Au • 6m at 10.62 g/t Au from surface in SYFC140, including 2m at 30.20 g/t Au The defined resource is currently constrained by the boundaries of the granted Mining Lease (ML) 77/1111. Step out RC drilling, targeting the southern strike and plunge projection of the higher grade shoots at Symes’ Find has commenced within the surrounding Exploration Licence (EL) 77/2474 (where drilling access can now be achieved as paddocks are in fallow). 21 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) Development & exploration projects (continued) EDNA MAY GOLD MINE Subsequent to the completion of the Stage 2 open pit at Edna May, access has now been gained off the switchback within the open pit to target deeper exploration drill holes into the predicted extensions of the Greenfinch and Golden Point Gneisses (located within the footwall of the Edna May Gneiss). Better drill results returned include 5m at 5.02 g/t Au from 16m in EMRC015. A deep surface diamond drill program targeted the extension of the high grade underground Jonathan and Fuji lodes. A number of good results were returned for the Jonathan lode position, including: • 7m at 4.93 g/t Au from 521m EMRCD022 • 7m at 8.95 g/t Au from 508m in EMRCD025 • 5.4m at 5.67 g/t Au from 480m in EMRCD027 WESTONIA / HOLLETON / MT HAMPTON PROJECTS Wholly owned Ramelius subsidiary, Edna May Operations Pty Ltd (EMO) acquired 100% of the Westonia Exploration Licence (EL) 77/2443 that surrounds its gold mining operations at Edna May along with acquiring 100% of three Exploration Licences (EL) 77/2334, 77/2458 and 70/5033 around the historical Holleton Mining Centre located south of the mine. During the year the focus was on negotiating land access for future exploration activities. Land access and compensation agreements continue to be negotiated with various private land owners in the district to allow Ramelius more flexibility to schedule its planned exploration activities without disrupting any farmers’ wheat/canola crops throughout the year. NULLA SOUTH FARM-IN & JOINT VENTURE PROJECT – RAMELIUS EARNING 75% Early in the year Ramelius entered into a Farm-in and Joint Venture Agreement with CGM (WA) Pty Ltd, a subsidiary of Chalice Gold Mines Limited (ASX: CHN) over CGM’s Nulla South Exploration Licences (EL) 77/2353 and 2354. Under the terms of the farm-in and joint venture agreement, Ramelius may earn a 75% interest in the project by spending $2 million on exploration within 3 years. Exploration drilling initially focused around the historical Felstead’s Find workings before moving to drill test a series of blind litho- structural targets located elsewhere within the project area (while access was available ahead of winter cropping). Encouraging drill results from Felstead’s Find include: • • 13m at 2.34 g/t Au from 34m in NUSC004 10m at 1.08 g/t Au from 53m in NUSC004 • 9m at 2.07 g/t Au from 69m in NUSC005 22 RAMELIUS RESOURCES ANNUAL REPORT 2019OPERATIONS REVIEW (CONTINUED) Felstead’s Find, Nulla South Farm-in Project drilling cross section Jupiter RC drilling cross section GIBB ROCK FARM-IN & JOINT VENTURE PROJECT – RAMELIUS EARNING 75% During the year, Ramelius executed a Farm-in and Joint Venture Agreement with CGM (WA) Pty Ltd, a subsidiary of Chalice Gold Mines Limited (ASX: CHN), for Ramelius to fund all exploration over CGM’s Gibb Rock Exploration Licence (EL) 70/4869 and EL 70/5194. Under the terms of the Agreement, Ramelius may earn a 75% interest in the project by spending $2 million within three years. Ramelius continues to advance land access and is designing work programmes over selected target areas within the project. Other YANDAN PROJECT (QLD) Ramelius relinquished the Yandan project during the year. TANAMI JOINT VENTURE (NT) – RAMELIUS 85% No field work was completed during the year. JUPITER FARM-IN & JOINT VENTURE (NEVADA, USA) – RAMELIUS EARNING 75% RC drilling was completed during the year with the drilling confirming the continuity of low- level gold anomalism associated with flat lying brecciated jasperoids, sitting along the Tertiary volcanics. Drilling failed to enhance the results from the prior year. More drilling is planned for the 2020 year. 23 RAMELIUS RESOURCES ANNUAL REPORT 2019RESOURCES AND RESERVES COMPANY SUMMARY AS AT 30 JUNE 2019 Total Mineral Resources are estimated to be 81 Mt at 1.6 g/t Au for 4.1 Moz of gold as shown in table A Total Ore Reserves are estimated to be 15 Mt at 1.8 g/t Au for 840 koz of gold as shown in table B The previous publicly reported estimate of total Mineral Resources was 70.5Mt at1.5 g/t Au for 3,476 koz of gold announced 18 September 2018. The previous publicly reported estimate of total Ore Reserves was 13.3 Mt at 1.6 g/t Au for 698 koz of gold announced 18 September 2018. Increases were largely achieved via the acquisition of the Marda and Tampia projects. 24 RAMELIUS RESOURCES ANNUAL REPORT 2019RESOURCES AND RESERVES (CONTINUED) MINERAL RESOURCES Table A: Mineral Resources MINERAL RESOURCES AS AT 30 JUNE 2019 - INCLUSIVE OF RESERVES Project Deposit Measured Indicated Inferred Total Resource t g/t oz t g/t oz t g/t oz t g/t oz Galaxy Group 92,000 Morning Star - Bartus Group 49,000 1.8 - 2.2 - - - 5,400 4,100,000 - 4,900,000 4,000 110,000 - - - 1,200,000 180,000 200,000 1.6 1.9 2.1 1.8 2.0 3.3 - - - 220,000 2,300,000 300,000 4,300,000 8,000 240,000 68,000 790,000 1.3 1.5 1.6 1.0 - 96,000 6,600,000 210,000 9,200,000 12,000 400,000 26,000 2,000,000 - 180,000 - 40,000 2.5 3,000 240,000 12,000 21,000 1.5 1.7 1.9 1.5 2.1 3.1 320,000 510,000 24,000 94,000 12,000 24,000 Boomer Britannia Well Bullocks Eastern Jaspilite Eclipse Eridanus Golden Stream Lone Pine Milky Way O'Meara Group Spearmont- Galtee Stellar Welcome - Baxter Open Pit deposits Mt Magnet 150,000 2.2 10,000 120,000 2.8 11,000 130,000 2.5 11,000 400,000 2.5 32,000 - - - - - - - - - - - - - - - - - - - - - - - 170,000 - 2,800,000 150,000 490,000 1,400,000 180,000 2.2 1.3 2.9 1.3 1.3 2.5 12,000 41,000 120,000 690,000 14,000 67,000 21,000 390,000 58,000 880,000 14,000 230,000 2.1 1.1 1.2 1.7 1.1 1.7 3,000 210,000 23,000 3,500,000 2,700 220,000 21,000 870,000 30,000 2,300,000 2.2 1.3 2.4 1.5 1.2 12,000 410,000 2.0 15,000 150,000 17,000 42,000 88,000 27,000 25,000 2.9 2,000 210,000 4.3 28,000 230,000 4.0 30,000 220,000 1.6 11,000 280,000 380,000 2.1 1.6 26,000 - - - 380,000 15,000 200,000 1.8 11,000 700,000 2.1 1.7 26,000 37,000 510,000 1.9 30,000 17,000,000 1.7 920,000 11,000,000 1.4 480,000 28,000,000 1.6 1,400,000 Hill 50 Deeps 280,000 5.5 49,000 930,000 200,000 7.0 4.4 210,000 400,000 28,000 160,000 6.4 4.3 81,000 1,600,000 22,000 360,000 6.6 4.3 340,000 50,000 Hill 60 Morning Star Deeps Saturn UG Shannon - - - - - - - - - - - - UG deposits 280,000 5.5 49,000 1,700,000 190,000 4.2 26,000 330,000 5.0 53,000 530,000 4.7 79,000 - 330,000 - 5.9 6.1 - 1,600,000 63,000 290,000 330,000 2,800,000 2.5 4.2 3.6 130,000 1,600,000 39,000 620,000 320,000 4,700,000 2.5 5.1 4.6 130,000 100,000 700,000 ROM & LG stocks Total Mt Magnet Edna May Edna May UG Greenfinch ROM & LG stocks Edna May 1,500,000 0.7 33,000 - - - - - - 1,500,000 0.7 33,000 2,300,000 1.5 110,000 18,000,000 2.1 1,200,000 13,000,000 1.9 810,000 34,000,000 2.0 2,200,000 - - - - - - - 21,000,000 - - 310,000 2,700,000 0.9 6.9 1.1 580,000 5,100,000 70,000 12,000 94,000 1,700,000 0.8 6.7 1.1 130,000 26,000,000 2,700 330,000 60,000 4,400,000 0.9 6.9 1.1 720,000 73,000 150,000 1,700,000 0.5 25,000 - - - - - - 1,700,000 0.5 25,000 25,000 24,000,000 41,000 110,000 91,000 1.0 3.9 2.6 3.8 750,000 6,800,000 5,100 8,900 11,000 34,000 120,000 300,000 0.9 2.9 3.4 2.0 200,000 32,000,000 3,100 440,000 13,000 18,000 230,000 390,000 0.9 5.4 3.0 2.4 970,000 77,000 22,000 30,000 Total Edna May 1,700,000 Vivien Vivien UG 370,000 Kathleen Valley Mossbecker Yellow Aster Nil Desperandum Total KV Coogee Coogee Western Queen WQ South Symes Symes Find Dolly Pot Dugite Python Goldstream Marda Golden Orb King Brown Die Hardy Red Legs Total Marda - - - - - - - - - - - - - - - - 0.5 5.8 - - - - - - - - - - - - - - - - 68,000 - - - - - - - - - - - - - - - - Tampia Tampia 390,000 2.4 31,000 7,700,000 Total Resource 4,700,000 1.6 240,000 54,000,000 23,000 5.8 4,400 100,000 2.9 9,500 120,000 3.5 14,000 220,000 31,000 3.4 3.6 24,000 520,000 3,600 65,000 2.5 3.3 41,000 750,000 7,000 96,000 2.7 3.4 66,000 11,000 100,000 3.6 12,000 81,000 3.4 8,800 180,000 3.5 21,000 400,000 560,000 250,000 760,000 100,000 370,000 130,000 1,100,000 - 3,200,000 1.9 1.7 1.9 1.9 2.5 3.0 4.3 1.6 - 2.0 1.7 1.6 24,000 31,000 15,000 47,000 8,300 35,000 18,000 150,000 44,000 170,000 130,000 190,000 41,000 54,000 450,000 - 370,000 210,000 1,400,000 420,000 130,000 2.1 1.7 1.8 1.4 1.8 1.9 1.5 2.9 2.0 1.8 10,000 540,000 2,300 610,000 250,000 10,000 940,000 5,900 11,000 2,600 230,000 560,000 170,000 21,000 1,500,000 34,000 370,000 87,000 4,600,000 7,400 8,200,000 2,700,000 22,000,000 1.6 1,200,000 81,000,000 1.9 1.7 1.9 1.9 1.9 2.6 3.7 1.6 2.9 2.0 1.7 1.6 34,000 34,000 15,000 57,000 14,000 46,000 21,000 75,000 34,000 300,000 460,000 4,100,000 Figures rounded to 2 significant figures. Rounding errors may occur. 25 RAMELIUS RESOURCES ANNUAL REPORT 2019 RESOURCES AND RESERVES (CONTINUED) Mineral Resource Commentary Mt Magnet is comprised of numerous gold deposits contained within a contiguous tenement holding, located within an 8km radius of the processing facility. The Galaxy group includes the Saturn, Mars, Titan, Brown Hill and mineralisation hosted in mafic gneiss units similar to Tampia. All resources are based on combinations of RC and diamond drill holes. Sampling has been via riffle or cone splitters (RC) or by sawn half core. Assay is carried out by commercial laboratories and accompanied by QAQC samples. A substantial Vegas deposits. Current mining operations proportion of drill data is historic in nature or include the Milky Way, Eridanus, Stellar West & gathered by previous owners, however Ramelius Vegas open pits, and the Hill 60 and Shannon underground mines. Vivien is a high grade quartz lode deposit, located near Leinster. has added significant further drilling for all deposits, especially those forming Ore Reserves. Mineralisation has been modelled via cross- sectional interpretations using deposit appropriate The Edna May mine was acquired in October 2017. lower cut-off grade shapes and geological It was re-modelled and reported in early 2018, interpretations. Geological understanding following a significant underground and surface has formed the basis of all ore interpretations. drilling campaign. It comprises of the large-scale Interpretations have then been wireframed Edna May stockwork deposit and the related, adjacent Greenfinch deposit. Two high grade quartz lodes are modelled within the broader Edna May deposit. Underground mining is in progress on high grade lodes and large low grade stockpiles are providing significant mill feed. All deposits have been depleted for mining during the 2019 financial year. using geological software, including Micromine, Leapfrog & Surpac. Mineralisation has been grouped by domain where required and statistical analysis, top-cutting and estimation carried out using anisotropic search ellipses. Estimation uses Ordinary Kriging and/or Inverse Distance methods. Modelling has been undertaken with recognition of the probable mining method and minimum mining widths and resource classifications reflect Acquisition of the Marda and Tampia projects has drill spacing, data quality, geological and grade provided the main increase to Mineral Resources. continuity. Density information for fresh rock is Both are unmined ore deposits. Marda comprises generally well established and new measurements a number of BIF hosted gold deposits, located 120km north of Southern Cross. Tampia is hosted within amphibolite facies mafic rocks 12km SE of Narembeen in the WA wheatbelt. Symes Find is located 120km SSE of Edna May, also in the WA wheatbelt and consists of lateritic and primary have frequently been obtained. Nearly all deposits listed, with the exceptions of Marda and Tampia, have had some degree of recent production or historic mining. Resources are reported using cut- offs approximating an A$1,850/oz gold price. 26 RAMELIUS RESOURCES ANNUAL REPORT 2019RESOURCES AND RESERVES (CONTINUED) ORE RESERVES Table B: Ore Reserves Project Deposit Proven g/t t Probable Total Reserve oz t g/t oz t g/t oz ORE RESERVE STATEMENT AS AT 30 JUNE 2019 Boomer Brown Hill Eridanus Golden Stream Milky Way Morning Star Mt Magnet Stellar Vegas Total Open Pit Hill 60 Shannon Total Underground - - - - - - - - - - - - ROM & LG stocks 1,500,000 Mt Magnet Total 1,500,000 Edna May UG Greenfinch - - ROM & LG stocks 1,700,000 Edna May Total 1,700,000 Edna May Vivien Vivien UG 220,000 Marda Dolly Pot Dugite Python Goldstream Golden Orb East Golden Orb West King Brown Marda Total - - - - - - - - - - - - - - - - - - - - 0.7 0.7 - - 0.5 0.5 6.2 - - - - - - - - - - - - - - - - - - - - 130,000 620,000 3,100,000 95,000 200,000 1,100,000 170,000 180,000 5,600,000 240,000 290,000 530,000 33,000 - 2.9 1.6 1.1 3.0 1.2 1.9 2.7 1.3 1.4 3.2 5.1 4.3 - 12,000 130,000 31,000 620,000 110,000 3,100,000 9,200 95,000 7,800 200,000 68,000 1,100,000 15,000 170,000 7,500 180,000 260,000 5,600,000 25,000 240,000 48,000 290,000 73,000 530,000 - 1,500,000 33,000 6,100,000 1.7 330,000 7,600,000 - - 420,000 1,700,000 25,000 - 4.7 1.2 - 63,000 420,000 62,000 1,700,000 - 1,700,000 25,000 2,100,000 1.9 130,000 3,700,000 44,000 - - - - - - - - - 300,000 170,000 320,000 71,000 64,000 140,000 75,000 1,100,000 - 1.7 2.0 2.2 2.6 4.2 2.7 5.3 2.5 2.7 - 220,000 16,000 300,000 11,000 170,000 22,000 320,000 6,000 71,000 8,600 64,000 12,000 140,000 13,000 75,000 89,000 1,100,000 180,000 2,200,000 2.9 1.6 1.1 3.0 1.2 1.9 2.7 1.3 1.4 3.2 5.1 4.3 0.7 1.5 4.7 1.2 0.5 1.3 6.2 1.7 2.0 2.1 2.6 4.2 2.7 5.4 2.5 2.8 12,000 31,000 110,000 9,200 7,800 68,000 15,000 7,500 260,000 25,000 48,000 73,000 33,000 360,000 63,000 62,000 25,000 150,000 44,000 16,000 11,000 22,000 6,000 8,600 12,000 13,000 89,000 200,000 Tampia Tampia 170,000 3.7 20,000 2,000,000 Total Reserve 3,600,000 1.1 120,000 11,000,000 2.0 720,000 15,000,000 1.8 840,000 Figures rounded to 2 significant figures. Rounding errors may occur. Ore Reserve Commentary All Ore Reserves have been reported from Measured and Indicated Resources only. Current operational open pits are Milky Way, Vegas and Eridanus and these were depleted via mining to the end of June 2019. Current underground operations are the Vivien, Edna May, Shannon and Hill 60 mines which were also depleted. All Ore Reserves have been generated from a number of internal and external mining optimisations and open pit or underground design studies using appropriate cost, geotechnical, slope angle, stope span, dilution, cut-off grade and recovery parameters. Ore Reserves are utilised in the current Life of Mine plan. Mining approvals processes are in progress for the Greenfinch, Tampia and Marda open pits. 27 RAMELIUS RESOURCES ANNUAL REPORT 2019RESOURCES AND RESERVES (CONTINUED) Ore Reserve Commentary (continued) The Eridanus Ore Reserve is based on an open pit mine design and has been reported from Indicated Resource only. It has been calculated from several internal and external optimisation and design studies using appropriate cost, geotechnical, slope design criteria, dilution, cut-off grade and recovery parameters. Ore Reserves are reported above 0.6g/t Au. The design pit totals 5.5Mbcm, is 450m long and reaches a maximum depth of 110m. Ore Reserve gold prices as below (per oz), were used to generate appropriate cut-offs; • Mt Magnet open pits reserves utilise a gold price of A$1,650 and underground utilise a gold price of A$1,800 • Edna May open pits reserves utilise a gold price of A$1,650 and underground utilise a gold price of A$1,800 • Vivien reserves utilise a gold price of A$1,800 • Marda open pits reserves utilise a gold price of A$1,700 • Tampia open pits reserves utilise a gold price of A$1,800 Mining, milling and additional overhead costs are based on currently contracted and budgeted operating costs. Costs for Vivien underground mining and ore haulage are based on current contracted and budgeted rates. Mill recoveries for all ore types are well established. Mt Magnet and Edna May stockpiles consist of ROM stocks & low grade stocks mined post 2012. COMPETENT PERSONS The information in this report that relates to Mineral Resources and Ore Reserves is based on information compiled by Rob Hutchison (Mineral Resources) and Duncan Coutts (Ore Reserves), who are Competent Persons and Members of The Australasian Institute of Mining and Metallurgy. Rob Hutchison and Duncan Coutts are full-time employees of the Company. Rob Hutchison and Duncan Coutts have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Rob Hutchison and Duncan Coutts consent to the inclusion in this report of the matters based on their information in the form and context in which it appears. 28 RAMELIUS RESOURCES ANNUAL REPORT 2019NATIVE TITLE STATEMENT Exploration and mining areas held by the Company may be subject to issues associated with Native Title. While it is not appropriate to comment in any detail upon specific negotiations with Native title parties, the directors of Ramelius believe it is important to state the Company’s policy and approach to Native Title and dealings with indigenous communities. The directors believe that the following native title policy statement summarises the Company’s desire to develop a spirit of cooperation in its dealings with indigenous people, create goodwill, mutual awareness and understanding and most importantly, respect and commitment. Recognition and Respect Ramelius recognises Aboriginal regard for land and respects their culture, traditions and cultural sites. Understanding and Trust Ramelius listens to Aboriginal community representatives to understand their views and beliefs. Recognising that communities may not be fully appreciative of how the Company’s business and industry operates, Ramelius works towards increasing their understanding, respect and trust and to promote the Company’s obligations and economic constraints among indigenous communities. Ramelius ensures that its employees and contractors approach the Company’s activities at local sites with respect and a clear understanding of important issues and priorities. Communication and Commitment Ramelius adopts practical measures to develop trust. Acknowledging that community leaders and representatives have an obligation to consult their people to determine their opinions and wishes, and that this may often not be achieved as quickly as is desired, Ramelius uses its best endeavours to expedite the process and ensure that its commercial interests are not adversely impacted. The Company also uses its best endeavours to ensure reasonable rights of consultation and continued access to land are facilitated and the integrity of land is preserved. The Company is committed to taking appropriate steps to identify and reduce the effects of any unforeseen impacts from its activities. 29 RAMELIUS RESOURCES ANNUAL REPORT 2019SUSTAINABILITY STATEMENT The Ramelius Board of Directors maintains oversight of sustainability issues. Sustainability embraces how Ramelius conducts business and includes workforce occupational health and safety, social responsibility to the general community, minimising business operational impact on the environment and protecting the Company’s reputation as a gold producer in Australia. The following is a summary of how Ramelius deals with sustainability. WORKFORCE HEALTH AND SAFETY Ramelius is committed to providing a healthy and safe environment for all employees and contractors. This is achieved as follows: • Creating a culture that promotes health and safety in the best interests of all workforce participants; • Regular site safety meetings which encourage identification of issues and continual improvement; • Strict mine site entry procedures and requirements including enforcement of a drug and alcohol policy and testing of site personnel; • Incident investigations and reporting to the Board; • Documented and regular review of emergency procedures and processes; • Ongoing staff training; and • by a process of risk management. 30 RAMELIUS RESOURCES ANNUAL REPORT 2019SUSTAINABILITY STATEMENT (CONTINUED) SOCIAL RESPONSIBILITY Ramelius endeavours to build and maintain a sustainable and diverse workforce focused on high performance. The Company publically reports to shareholders and investors to ensure they are informed on corporate governance issues and the entity’s approach to sustainability matters. The Company’s efforts in regard to social responsibility include the following: • Maintaining and reviewing the Company’s diversity policy which encourages a workforce comprised of individuals with diverse backgrounds, experiences, values and skills; • Encouraging staff training and ongoing professional development; • Acknowledgement of native title which promotes indigenous regard for land and respect of their culture, traditions and cultural sites; • Engagement of shareholders and investors through presentations, roadshows and information booths at various industry conferences; • Encouraging full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company’s strategy and goals • Providing security holders with an on-line voting facility to enable voting through a secure website or mobile device and providing the option to receive and send communications electronically; • Identification and ongoing management of economic and other business-related risks including the maintenance of a risk register; and • Community support through sponsorships and donations. Sunrise at Edna May Gold mine 31 RAMELIUS RESOURCES ANNUAL REPORT 2019SUSTAINABILITY STATEMENT (CONTINUED) ENVIRONMENTAL PROTECTION The Company has policies and procedures in place • Undertaking appropriate waste product which aim to protect the environment. Ramelius management activities including mine site seeks to comply with legislative requirements and sewage, tailings and other hazardous materials, to promote a high regard for the environment dust and general waste; in conducting its business. Key areas on which Ramelius focuses to address this important sustainability issue are summarised below: • Landfill rehabilitation and conducting ongoing restoration wherever possible; • Maintaining a focus on the efficient use of • Environmental incidence documentation and resources including water and power; reporting; • Implementing water and other resource • Addressing biodiversity issues as part of recycling measures; and the Company’s planning for and conduct of • Facilitating environmental pollution audits and exploration and mining activities including flora reporting. and fauna studies, native vegetation recording and disturbed land restoration; • Conducting environmental impact studies and preparing reports thereon including rehabilitation measures for government assessment as part of the process in seeking approval for proposed mining activities; Edna May Gold Mine Southern Waste Dump 32 RAMELIUS RESOURCES ANNUAL REPORT 2019SUSTAINABILITY STATEMENT (CONTINUED) WATER RESOURCE MANAGEMENT Ramelius conducts open pit gold mining and processing at its Mt Magnet and Edna May operations and underground gold mining at its Mt Magnet, Edna May and Vivien sites located in Western Australia where water management is an important and integral part of site activities. We seek to engage with our local communities and government regulators to promote efficient water use and effective catchment management to help improve water security. The Company’s objectives with respect to effective water management at its operating sites includes: • maximising water use efficiency at all mine sites to reduce the need for water to be abstracted from the environment; • ensuring water management planning includes consideration of mine voids at closure; • ensuring that environmental, social and cultural values are not adversely affected from the abstraction and release of water; • effective planning and design of mining activity to ensure quality and quantity of public and private drinking water supplies are not adversely affected; and • optimising the use of excess water from mine dewatering, either on site or off site, to reduce adverse effects of releases to the environment. 33 RAMELIUS RESOURCES ANNUAL REPORT 2019DIVERSITY STATEMENT Ramelius acknowledges that benefits flow from a workforce comprised of individuals with diverse backgrounds, experiences, values and skills. The Company is committed to recruitment based on qualifications, skills, abilities and merit to ensure workforce vacancies are filled with the most suitable employees available regardless of gender, religion, cultural background or marital status. Ramelius values the contribution of all its employees and encourages personal development and training of employees to achieve their full potential for the mutual benefit of Ramelius and employees. WORKPLACE GENDER PROFILE During the year, the Company updated its workplace gender profile as follows. WORKPLACE PROFILE Women Men Casual Full Time Part Time Full Time Part Time Women Men Total Staff % Women Men Board* Senior Executives/KMP’s Managers Professional Staff Technical Staff Community & Personal Service Staff Clerical & Administrative Staff Machinery Operators and Drivers Other Total - - 2 3 10 3 10 1 - 29 - - - 1 - - 1 - - 2 4 4 15 28 86 5 4 48 1 195 *Excludes appointment of Natalia Streltsova on 1 October 2019 - - - - - - - - - - - - - - - 2 2 1 - 5 - - 1 3 10 3 1 3 - 4 4 18 35 106 13 18 53 1 21 252 - - 11.1 11.4 9.4 38.4 100.00 100.0 88.9 88.6 90.6 61.6 83.3 16.7 3.7 - 14.2 96.3 100.0 85.8 34 RAMELIUS RESOURCES ANNUAL REPORT 2019CORPORATE GOVERNANCE STATEMENT The Board of Directors is responsible for the overall Corporate Governance of the Company including strategic direction, management goal setting and monitoring, internal control, risk management and financial reporting. In discharging this responsibility, the Board seeks to take into account the interests of all key stakeholders of the Company, including shareholders, employees, customers and the broader community. Ramelius is committed to conducting its business with high standards of ethics and corporate governance in the best interests of all stakeholders. The 2019 Corporate Governance Statement of Ramelius has been lodged with the Australian Securities Exchange Limited and is publically available from the “Investors” section of the Company’s website at www.rameliusresources. com.au 35 RAMELIUS RESOURCES ANNUAL REPORT 201936 RAMELIUS RESOURCES ANNUAL REPORT 2019financial report 2019 Directors’ report Directors and Company Secretary Principal activities Dividends Significant changes in the state of affairs Events since the end of the financial year Financial review Material business risks Environmental regulation Information on Directors Meetings of Directors Remuneration report Shares under option Insurance of officers and indemnities Proceedings on behalf of the Company Non-audit services Rounding of amounts Auditor’s independence declaration Financial statements Financial statements Notes to the financial statements Signed reports Directors’ declaration Independent auditor’s report to the members 38 38 38 38 38 39 39 42 43 44 46 46 57 57 57 57 58 59 61 62 69 110 110 111 37 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT Your Directors present their report on the consolidated entity consisting of Ramelius Resources Limited and the entities it controlled at the end of, or during, the year ended 30 June 2019. Throughout the report, the consolidated entity is referred to as the group. Unless specifically noted, all dollar amounts disclosed in this report are Australian Dollars (A$ or AUD). Directors and Company secretary The following persons were Directors of Ramelius Resources Limited during the whole of the financial year and up to the date of this report: Kevin Lines Mark Zeptner Michael Bohm David Southam was appointed as a Director on 2 July 2018 and continued in office at the date of this report. The Company Secretary is Richard Jones. Mr Jones was appointed to the position of Company Secretary on 30 November 2018 after serving as Joint Company Secretary from 1 October 2018. Mr Jones has nearly 20 years’ experience as a corporate commercial lawyer in both private and in-house capacities and across various industries. He has also served as Company Secretary for ASX listed and unlisted companies in the mining sector. Principal activities The principal activities of the group during the year included exploration, mine development, mine operations and the production and sale of gold. There were no significant changes to those activities during the year. Operations review A review of the group’s operations during the year ended 30 June 2019 is provided in the section of the report headed ‘Review of Operations’, which commences on page 8. Development & exploration projects A review of the group’s development and exploration projects during the year ended 30 June 2019 is provided in the section of the report headed ‘Development & Exploration Projects, which commences on page 14. Dividends Dividends recommended but not yet paid Since the end of the 2019 financial year the Directors have recommended the payment of a fully franked final dividend of 1 cent per fully paid share. The fully franked final dividend will have a record date of 4 September 2019 and a payment date of 4 October 2019. The financial effect of the final dividend has not been brought to account in the financial statements for the year ended 30 June 2019 and will be recognised in subsequent financial reports. Dividends paid There were no dividends paid in the year ended 30 June 2019. Significant changes in the state of affairs Acquisition of the Tampia Hill Gold Project (Explaurum Limited) The Tampia Hill Gold Project is located near Narembeen, 204km east of Perth in Western Australia and 140km by road from the existing Edna May gold mine and processing facility. The Tampia Hill Gold Project has a Mineral Resource of 460,000 ounces and an Ore Reserve of 200,000 ounces (refer to ASX Announcement dated 17 June 2019 “Life of Mine and Tampia Update”). On 10 September 2018 Ramelius announced an initial off-market takeover bid to acquire all of the ordinary shares of Explaurum Limited (“Explaurum”). Under the offer, Explaurum shareholders would have received one (1) Ramelius share for every four (4) Explaurum shares held. On 13 December 2018 Ramelius announced an improved, best and final takeover offer for Explaurum. Under the improved offer Explaurum shareholders received $0.02 cash for every Explaurum share held in addition to the existing consideration of one (1) Ramelius share for every four (4) Explaurum shares held. On 18 December 2018 the Explaurum Board unanimously recommended that Explaurum shareholders accept the Ramelius offer in the absence of a superior proposal. Control of Explaurum was attained on 27 December 2018. The offer formally closed on 25 February 2019 with Ramelius holding a relevant interest in 95.58% of Explaurum shares. On this date Ramelius exercised its compulsory acquisition powers under the Corporations Act to acquire the remaining Explaurum shares. The compulsory acquisition was completed on 4 April 2019 with Ramelius having a 100% relevant interest in Explaurum Limited and its subsidiaries. 38 RAMELIUS RESOURCES ANNUAL REPORT 2019 DIRECTORS’ REPORT (CONTINUED) Significant changes in the state of affairs (continued) Acquisition of the Tampia Hill Gold Project (Explaurum Limited) (continued) A total of $8.5 million cash consideration (net of receipts) was paid along with 127,778,619 Ramelius shares issued to Explaurum Shareholders as part of the offer. Acquisition costs totaled $4.9 million which includes stamp duty on the transaction. Acquisition of the Marda Gold Project The Marda Gold Project is located 191km north-northeast of the Edna May operations and is amenable to processing at the existing Edna May facilities. The Marda Gold Project has a Mineral Resource of 300,000 ounces and an initial Ore Reserve of 89,000 ounces. On 13 September 2018 Ramelius entered into a binding agreement for the acquisition of Black Oak Minerals Limited (in Liquidation) (“BOK”), the owner of the Marda Gold Project, for $13.0 million. A BOK creditors meeting held on 1 November 2018 approved the acquisition of BOK by Ramelius paving the way for Ramelius to apply to the Federal Court of Australia for the transfer of the shares in BOK to the group. On 31 January 2019 the Federal Court of Australia approved the transfer of shares with completion occurring on 13 February 2019. Transaction costs were $0.9 million. Further details of the acquisitions can be found in note 17 to the financial statements. Greenfinch approvals delayed The Clearing Permit for Edna May was rejected by the Department of Mines, Industry Regulations and Safety (DMIRS) in November 2018. This decision was appealed by Ramelius and, on 13 May 2019, the Environment Minister upheld the decision of the DMIRS. However, at the same time, the Environment Minister invited Ramelius to re-submit a revised Clearing Permit application. This revised submission, with a materially reduced project footprint, was made in June 2019 and focused on avoiding all of the Declared Rare Flora species, Eremophila resinosa, without loss of the original 57,000 ounces of recoverable gold. There were no other significant changes in the state of affairs of the group that occurred during the financial year not otherwise disclosed in this report or the financial statements. Events since the end of the financial year No matter or circumstance has arisen since 30 June 2019 that has significantly affected the group’s operations, results, or state of affairs, or may do so in the future. Financial review Financial performance Revenue Cash costs of production Gross margin excluding “non-cash” items Mt Magnet $M Edna May $M Corp & other $M 207.2 (130.1) 145.6 (80.1) 77.1 65.5 Amortisation and depreciation (67.9) Inventory movements Gross profit Earnings before interest & tax (EBIT) Profit / (loss) before income tax Income tax expense Profit / (loss) for the year from continuing operations 2019 Financial performance 5.3 14.5 14.5 14.5 - 14.5 (13.4) (23.0) 29.1 29.1 29.1 - 29.1 - - - - - - (12.9) (13.2) (8.6) (21.8) Group 2019 $M 352.8 (210.2) 142.6 (81.3) (17.7) 43.6 30.7 30.4 (8.6) 21.8 2018 $M Change $M Change % 341.8 (209.4) 11.0 (0.8) + 3 % + 0 % 132.4 10.2 + 8 % (80.7) (0.6) + 1 % 8.2 59.9 46.2 45.5 (14.7) (25.9) - 316 % (16.3) (15.5) (15.1) 6.1 - 27 % - 34 % - 33 % - 41 % 30.8 (9.0) - 29 % 39 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Financial review (continued) Revenue Reconciliation Revenue reconciliation between 2019 and 2018 Revenue Revenue for the year ended 30 June 2019 increased by 3% to $352.8 million compared to $341.8 million for the year ended 30 June 2018. The main driver behind this has been an improved gold price environment with lower production from Mt Magnet being offset by increased production at Edna May: • Mt Magnet gold sales decreased by 11% or 15,568 ounces due to the lower grades as discussed within this report; • Edna May gold sales increased by 23% or 15,861 ounces due to the operation being owned for the full financial year (owned for only nine months of the 2018 financial year) as well as higher throughput rates; • The realised gold price was $1,726 per ounce, a 3% increase on the 2018 realised gold price of $1,679, and slightly below the average spot price for the year of A$1,768 per ounce; • Silver & other sales increased to $1.8 million in 2019 from $0.8 million in 2018, this was mainly due to the sale of equipment at Edna May as the mine moved to a contractor model when operations focused on the underground development. Earnings before interest & tax (EBIT) The EBIT for the year ended 30 June 2019 was $30.7 million compared to $46.2 million for the year ended 30 June 2018, representing a 34% decrease. Mt Magnet delivered an EBIT of $14.5 million for the year ended 30 June 2019 which was down from the $44.2 million gross profit for the year ended 30 June 2018. Profitability at Mt Magnet was down on 2018 due to slightly higher operating costs and lower grades in 2019 financial year at that operation. The cost per tonne at Mt Magnet was up 7% on the prior year due to higher operating costs due to higher stripping costs at Milky Way in the year and the operations moving to smaller open pits which have lower productivity rates. Whilst operating costs were higher the main driver of the reduced profitability has been due to the lower grades at Mt Magnet & Vivien with the total cost of sales per ounce increasing 19%. Grades were down at the Mt Magnet project as a result of 58% less high grade underground ore being available as mining at Water Tank Hill concluded and underground operations focused on the development of the new Hill 60 and Shannon underground mines. The development of these underground mines in 2019 will deliver higher grades in the 2020 financial year. This drop in underground ore was offset in part by a 6% increase in the grade of open pit ore fed into the processing plant at Mt Magnet. Whilst the volumes from the Vivien mine were comparable to the 2018 financial year grades at Vivien decreased 20% on the 2018 grades. Edna May delivered an EBIT of $29.1 million for the year ended 30 June 2019 compared to $15.7 million for the year ended 30 June 2018. Whilst this is in part due to the operation being controlled by Ramelius for the whole financial year in 2019 it is also, and more importantly, attributable the improved financial performance of the operation. Profitability at Edna May increased in the 2019 financial year with the completion of the Stage 2 open pit delivering higher than expected grades. This was despite the business incurring costs involved in the restructure of the operations as a seamless transition to the Greenfinch project was not possible. As the Stage 2 stockpiles were exhausted the mill feed came to rely on the low grade stockpiles which again delivered excellent, and higher than expected, grades. 40 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Financial review (continued) Earnings before interest & tax (EBIT) (continued) Low grade ore stockpiles will continue to be the primary source of ore feed at Edna May until the Marda and Greenfinch ore becomes available and will continue to be used for blending purposes. Low grade ore has delivered positive earnings as well as positive cash flow over the year. Reconciliation of earnings before interest & tax (EBIT) Reconciliation of movement in EBIT from 2018 to 2019 Overall the cost of sales for the group (on a per tonne basis) decreased 9%, however, the cost of sales increased in absolute terms as a result of higher tonnes being milled. This has not been reflected in higher gold sales revenue due to the decreased grades across the group’s operations. Net profit after tax (NPAT) A net profit after income tax of $21.8 million was recorded for the year ended 30 June 2019, representing a decrease of 29% from the year ended 30 June 2018. Net finance costs, which include interest income and non-cash financing costs relating to the unwinding of provisions and contingent consideration, were comparable to the 2018 financial year. The effective tax rate of the group for the year ended 30 June 2019 was 28% compared to 32% for the year ended 30 June 2018. The 30 June 2018 effective tax rate was higher due to non-deductible costs associated with the acquisition of Edna May. Cashflow The net cash from operations for the year was $137.0 million compared to $118.9 million in the 2018 financial year. This has been due to the monetisation of ore stockpiles and gold on hand that was accumulated in the prior year. Ore & gold stockpiles decreased $17.7 million in the financial year ended 30 June 2019 compared to a build-up of gold and ore stockpiles in the 2018 financial year of $8.2 million. A total of $109.0 million was re-invested during the year which included: • Payments for the Tampia Gold Project (Explaurum Limited) (net of cash acquired) of $8.4 million; • Payments for the Marda Gold Project (Black Oak Minerals Limited) of $13.2 million; • Payments for the development of open pit and underground mines of $58.2 million; and • Payments for mining tenements and exploration of $19.0 million. Free cash flow# for the year was $51.8 million (2018: $34.9 million). Cash on hand at the end of the financial year was $95.8 million compared to $68.2 million at 30 June 2018. As at 30 June 2019 a total of 5,465 ounces of gold were on hand with the reported cash and gold bullion on hand at 30 June 2019 being $106.8 million (2018: $88.7 million). Corporate Ramelius held forward gold sales contracts at 30 June 2019 totaling 240,900 ounces of gold at an average price of A$1,834 per ounce over a period to August 2021. This compared to forward gold sales contracts at 30 June 2018 totaling 140,250 ounces of gold at an average price of A$1,719 per ounce over a period to November 2019. The level of price protection has increased as the group’s production profile has increased along with the record AUD gold prices enabling attractive cash margins to be secured. # - Free cash flow is defined as operating cash flows less payments for development, exploration and property, plant, and equipment. 41 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Material business risks The material business risks for the group include: • Fluctuations in the United States Dollar (“USD”) spot gold price and AUD/USD exchange rate: The financial results and position of the group are reported in Australian dollars. Gold is sold throughout the world based principally on the U.S. dollar price. Accordingly, the groups revenues are linked to both the USD spot gold price and AUD/USD exchange rate. Volatility in the gold price creates revenue uncertainty and requires careful management to ensure that operating cash margins are maintained should there be a sustained fall in the AUD spot gold price. The group uses AUD gold forward contracts, within certain Board approved limits, to manage exposure to fluctuations in the AUD gold price. • Government regulation: The group’s mining, processing, development and exploration activities are subject to various laws and statutory regulations governing prospecting, development, production, taxes, royalty payments, labour standards and occupational health, mine safety, toxic substances, land use, water use, communications, land claims of local people and other matters. No assurance can be given that new laws, rules and regulations will not be enacted or that existing laws, rules and regulations will not be applied in a manner which could have an adverse effect on the group’s financial position and results of operations. Any such amendments to current laws, regulations and permits governing operations and activities of mining and exploration, or more stringent implementation thereof, could have a material adverse impact on the group. • Operating risks and hazards: The group’s mining operations, consisting of open pit and underground mines, involve a degree of risk. The group’s operations are subject to all the hazards and risks normally encountered in the exploration, development and production of gold. Processing operations are subject to hazards such as equipment failure, toxic chemical leakage, loss of power, fast-moving heavy equipment, failure of tailings disposal pipelines and retaining dams around tailings containment areas, rain and seismic events which may result in environmental pollution and consequent liability. The impact of these events could lead to disruptions in production and scheduling, increased costs and loss of facilities, which may have a material adverse impact on the group’s results of operations, financial condition, license to operate and prospects. These risks are managed by a structured operations risk management framework, experienced employees and contractors and formalised procedures. Ramelius also has in place a comprehensive insurance program with a panel of experienced industry supportive underwriters. • Production, cost and capital estimates: The group prepares estimates of future production, operating costs and capital expenditure relating to production at its operations. The ability of the group to achieve production targets or meet operating and capital expenditure estimates on a timely basis cannot be assured. The assets of the group are subject to uncertainty with regards to ore tonnes, grade, metallurgical recovery, ground conditions, and operational environment. Failure to achieve production, cost or capital estimates, or material increases to costs, could have an adverse impact on the group’s future cash flows, profitability and financial condition. The development of estimates is managed by the group using a rigorous budgeting and forecasting process. Actual results are compared with forecasts and budgets to identify drivers behind discrepancies which may result in updates to future estimates. • Exploration and development risk: An ability to sustain or increase the current level of production in the longer term is in part dependent on the success of the group’s exploration activities and development projects, and the expansion of existing mining operations. The exploration for, and development of, mineral deposits involves significant risks that even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, few properties that are explored subsequently have economic deposits of gold identified, and even fewer are ultimately developed into producing mines. Major expenses may be required to locate and establish mineral reserves, to establish rights to mine the ground, to receive all necessary operating permits, to develop metallurgical processes and to construct mining and processing facilities at a particular site. • Ore Reserves and Mineral Resources: The group’s estimates of Mineral Resources and Ore are based on different levels of geological confidence and different degrees of technical and economic evaluation, and no assurance can be given that anticipated tonnages and grades will be achieved, that the indicated level of recovery will be realised or that Ore Reserves could be mined or processed profitably. The quality of any Mineral Resources and Ore Reserves estimate is a function of the quantity of available technical data and of the assumptions used in engineering and geological interpretation, and modifying factors affecting economic extraction. Such estimates are compiled by experienced and appropriately qualified personnel and subsequently reported by Competent Persons under the JORC Code. Fluctuation in gold prices, key input costs to production, as well as the results of additional drilling, and the evaluation of reconciled production and processing data subsequent to any estimate may require revision of such estimates. 42 RAMELIUS RESOURCES ANNUAL REPORT 2019 DIRECTORS’ REPORT (CONTINUED) Material business risks (continued) Actual mineralisation of ore bodies may be different from those predicted, and any material variation in the estimated Ore Reserves, including metallurgy, grade, dilution, ore loss, or stripping ratio at the group’s properties may affect the economic viability of its properties, and this may have a material adverse impact on the group’s results of operations, financial condition and prospects. There is also a risk that depletion of reserves will not be offset by discoveries or acquisitions, or that divestitures of assets will lead to a lower reserve base. The reserve base of the group may decline if reserves are mined without adequate replacement and the group may not be able to sustain production beyond current mine lives, based on current production rates. • Climate Change: Ramelius acknowledges that climate change effects have the potential to impact our business. The highest priority climate related risks include reduced water availability, extreme weather events, changes to legislation and regulation, reputational risk, and technological and market changes. The group is committed to understanding and proactively managing the impact of climate related risks to our business. This includes integrating climate related risks, as well as energy considerations, into our strategic planning and decision making. Environmental regulation Regulations The operations of the group in Australia are subject to environmental regulations under both Commonwealth and State legislation. In the mining industry, many activities are regulated by environmental laws as they may have the potential to cause harm and/or otherwise impact upon the environment. Therefore, the group conducts its operations under the necessary State Licences and Works Approvals to carry out associated mining activities and operate a processing plant to process mined resources. The group’s licences and works approvals are such that they are subject to audits both internally and externally by the various regulatory authorities. These industry audits provide the group with valuable information in regard to environmental performance and opportunities to further improve systems and processes, which ultimately assist the business in minimising environmental risk. Reporting Due to the various licences and works approvals the group holds, annual environmental reporting (for a 12-month period) is a licence and works approval condition. The group did not experience any reportable environmental incidents for the reporting year 2018-2019. Regulatory agencies requiring annual environmental reports are outlined below but are not limited to the following: • Department of Water and Environmental Regulation (DWER); • Department of Mines, Industry Regulation and Safety (DMIRS); • Tenement Condition Report; • Native Vegetation Clearing Report; • Mining Rehabilitation Fund (MRF) Levy; • National Pollutant Inventory (NPI); • National Greenhouse and Energy Reporting Scheme (NGERS); and • Bureau of Land Management. Sustainability The group is committed to environmental performance and sustainability and works closely with the regulatory authorities to minimise the environmental impact and achieve sustainable operations. Where the business can, continuous improvement processes are implemented to improve the operation and environmental performance. The group seeks to build relationships with all stakeholders to ensure that their views and concerns are taken into account in regard to decisions made about the operations, to achieve mutually beneficial outcomes. This includes current operations, future planning and post closure activities. 43 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Information on Directors Kevin Lines BSc (Geology), MAusIMM, MAICD Mark Zeptner BEng (Hons) Mining, MAusIMM, MAICD Independent Non-Executive Chairman Managing Director & Chief Executive Officer Experience Mr Lines is a geologist and has more than 35 years’ experience in mineral exploration and mining for gold, copper, lead, zinc and tin. He has held senior geological management positions with Newmont Australia Limited, Normandy Mining Limited and the CRA group of companies. He was the foundation Chief Geologist at Kalgoorlie Consolidated Gold Mines where he led the team that developed the ore-body models and geological systems for the Super-Pit Operations in Kalgoorlie. Interest in Shares and Options 1,000,000 Ordinary Shares Special responsibilities Chairman of the Board Member of Audit & Risk Committee Member of Nomination & Remuneration Committee Directorships held in other listed entities in the last three years None. Experience Mr Zeptner has more than 25 years’ industry experience including senior operational and management positions with WMC and Gold Fields Limited at their major gold and nickel assets in Australia and offshore. He joined Ramelius on 1 March 2012 as the Chief Operating Officer, was appointed Chief Executive Officer on 11 June 2014 and Managing Director effective 1 July 2015. Interest in Shares and Options 3,012,500 Ordinary Shares 1,500,000 Options over Ordinary Shares exercisable at $0.20 expiring on 11 June 2020 500,000 Performance Rights over Ordinary Shares expiring on 11 June 2026 568,956 Performance Rights over Ordinary Shares vesting on 1 July 2021 and expiring on 1 July 2028 Special responsibilities Chief Executive Officer Directorships held in other listed entities in the last three years None. 44 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Information on Directors (continued) Michael Bohm B.AppSc (Mining Eng.), MAusIMM, MAICD David Southam B.Comm, CPA, MAICD Independent Non-Executive Director Independent Non-Executive Director Experience Mr Bohm is a mining engineer with extensive corporate and operational management experience in the minerals industry in Australia, South East Asia, Africa, Chile, Canada and Europe. He is a graduate of the WA School of Mines and has worked as a mining engineer, mine manager, study manager, project manager, project director and Managing Director. He has been directly involved in many project developments in the gold, base metals and diamond sectors in both open pit and underground mining environments. Interest in Shares and Options 1,237,500 Ordinary Shares (as at 30 June 2019) Special responsibilities Chairman of Nomination & Remuneration Committee Member of Audit & Risk Committee Directorships held in other listed entities in the last three years Chairman of Cygnus Gold Limited and Non-Executive Director Mincor Resources NL Previously a Non-Executive Director of Perseus Mining Limited, Tawana Resources NL and Berkut Minerals Limited Experience Mr Southam is a Certified Practicing Accountant with more than 25 years’ experience in accounting, capital markets and finance across the resources and industrial sectors. Mr Southam has been intimately involved in several large project financings in multiple jurisdictions and has completed significant capital market and M & A transactions. Interest in Shares and Options Nil Special responsibilities Chairman of Audit & Risk Committee Member of Nomination & Remuneration Committee Directorships held in other listed entities in the last three years Managing Director of Mincor Resources NL Previously Executive Director of Western Areas Limited Previously Non-Executive Director of Kidman Resources Limited 45 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Meetings of Directors The number of meetings of the Company’s Board of Directors and each Board Committee held during the year ended 30 June 2019, and number of meetings attended by each Director were: Full meetings of Directors Audit & Risk Committee Nomination & remuneration Committee Meetings of Committees Director Kevin Lines Mark Zeptner Michael Bohm David Southam A 17 17 17 15 B 17 17 17 17 A 6 - 6 6 B 6 - 6 6 A 5 - 5 5 B 5 - 5 5 A = Number of meetings attended; B = Number of meetings held during the time the Director held office or was a member of the Committee during the year Remuneration report (audited) The Directors present the Ramelius Resources Limited 2019 remuneration report, outlining key aspects of our remuneration policy and framework, and remuneration awarded this year. This remuneration report is prepared in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308(3C) of the Act. The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the group, directly or indirectly, including any directors (executive and non-executive) of Ramelius Resources Limited. For this report a KMP is a direct report to the Managing Director / Chief Executive Officer which includes the Chief Financial Officer, Chief Operating Officer, General Manager – Exploration, and the Manager Legal / Company Secretary. The report is structured as follows: (a) Key management personnel covered in this report (b) Remuneration governance (c) Remuneration policy and framework (d) Elements of remuneration (e) Link between remuneration and performance (f) Contractual arrangements for executive KMP (g) Non-executive director arrangements (h) Details of KMP remuneration (i) Other statutory information (a) Key management personnel covered in this report Name Position Directors of the group during the financial year were: Kevin Lines Mark Zeptner Michael Bohm David Southam Non-Executive Chairman Managing Director / Chief Executive Officer Non-Executive Director Non-Executive Director (appointed 2 July 2018) The KMP during the financial year were: Tim Manners Duncan Coutts Kevin Seymour Richard Jones 1 Chief Financial Officer Chief Operating Officer General Manager – Exploration Manager Legal / Company Secretary (appointed 1 October 2018) Domenico Francese 1 Company Secretary (resigned 30 November 2018) 1. Richard Jones & Domenico Francese served as Joint Company Secretary for the period 1 October 2018 to 30 November 2018. Details on the Executive and Non-Executive Directors can be found on pages 45 to 46 of the Directors report. 46 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (b) Remuneration governance The Nomination & Remuneration Committee (NRC) is a Committee of the Board. It is primarily responsible for making recommendations to the Board on: • Non-executive director fees; • Executive remuneration (directors and executives); and • The executive remuneration framework and incentive plan policies. The objective of the NRC is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-term interests of the Company. In performing its functions, the NRC may seek advice from independent remuneration consultants. No such consultants were engaged during the year. (c) Remuneration policy and framework Ramelius has adopted a policy that aims to attract, motivate and retain a skilled executive team focused on contributing to its objective of creating wealth and adding value for its shareholders. The remuneration framework has been formed on this basis. The remuneration framework is based on several factors including the experience and performance of the individual in meeting key objectives of Ramelius. The objective of the executive remuneration framework includes incentives that seek to encourage alignment of management performance and shareholder interests. The framework aligns executive rewards with strategic objectives and the creation of value for shareholders and conforms to market practices for delivery of rewards. In determining executive remuneration, the NRC aims to ensure that remuneration practices are: • Competitive and reasonable, enabling the Company to attract and retain and incentivise key talent; • Aligned to the Company’s strategic and business objectives and the creation of shareholder value; • Distinctly demonstrate a link between performance and pay; • Structured to have a suitable mix of fixed and performance related variable components; • Acceptable to shareholders, and • Transparent. The executive remuneration framework is designed to ensure market competitiveness and achievement of the remuneration objective. The remuneration of executives is: • Benchmarked from time to time against similar organisations both within the industry and of comparable market size to ensure uniformity with market practices; • A reflection of individual roles, levels of seniority and responsibility that key personnel hold; • Structured to take account of prevailing economic conditions; and • A mix of fixed remuneration and at-risk performance-based elements using short and long-term incentives. The executive remuneration framework has three components: • Base pay and benefits, including superannuation; • Short-term performance incentives; and • Long-term incentives through participation in the Performance Rights Plan as approved by the Board. The combination of these comprises an executive’s total remuneration package. Incentive plans are regularly reviewed to ensure continued alignment with financial and strategic objectives. (d) Elements of remuneration Ramelius remunerates its executives with a total remuneration package (“TRP”) that consists of two components: • Total fixed remuneration; and • Total variable remuneration. The total variable remuneration ensures an executive’s remuneration is aligned to the group’s performance, this portion of an executive’s remuneration is considered “at risk”. Variable remuneration can be in the form of either a short-term incentive (STI) or a long-term incentive (LTI). 47 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (d) Elements of remuneration (continued) Total fixed remuneration Total fixed remuneration (“TFR”) comprises of base salary, superannuation, and any fringe benefits tax charges related to employee benefits. The group allows a KMP to salary sacrifice certain items such as superannuation and motor vehicles (on a total cost basis). Remuneration levels are reviewed annually in June by the NRC through a process that considers individual and overall performance of the group. Industry remuneration surveys and data are utilised to assist in this process. There are no guaranteed base pay increases included in any executive contracts. Short-term incentives Short-term incentives (STI) allow executives to earn an annual incentive which is linked the group’s annual performance. How is it paid? Any STI awards are paid in cash after the assessment of the annual performance is made. How much can an executive earn? In the 2019 financial year the Managing Director / Chief Executive Officer was able to earn a maximum STI of 60% of the TFR. Other executives were able to earn a maximum STI of 45% of their TFR. In conjunction with the group’s key performance measures detailed below, a comprehensive review of each executive’s individual performance is made to determine the achievable percentage (between 0% - 100%) of the maximum potential STI available to be awarded. This may result in the proportion of remuneration related to performance varying between individual executives. A structured set of key performance measures have been selected which are core drivers of short-term performance as well as considered important for the group’s growth and profitability. For any STI to be paid two “gates” must be passed, these are: • No loss of life at any project site; and • No serious environmental breach. The KPI’s used to measure performance for the Managing Director / Chief Executive Officer are: • Net profit after tax relative to budget • Gold production relative to budget 30% 20% • All in sustaining cost (AISC) relative to budget 30% • Reserve addition to Life of Mine Plan 20% How is performance measured? The KPI’s used to measure performance for the other KMP’s are as follows. Ranges are shown as the particular weighting varies depending on the role of the KMP: • Net profit after tax relative to budget • Gold production relative to budget 20 - 30% 20 - 30% • All in sustaining cost (AISC) relative to budget 20 - 30% • Reserve addition to Life of Mine Plan 20 - 40% The performance is measured relative to the budget with threshold, target, and stretch cases considered. The STI’s are payable at the absolute discretion of the Board, there are several modifiers considered by the Board which may result in a downward reduction in the STI’s paid. The STI award is determined following a review of the financial results, operations, life-of- mine plan and the annual Resources & Reserves Statement by the NRC. This typically occurs in the second Quarter of the financial year. No amount is provided for or included in the financial report and remuneration report until such review has taken place. When is it paid? 48 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (d) Elements of remuneration (continued) Short-term incentives (continued) Based on this assessment, the STI cash payments for the 2018 financial year which were paid in the 2019 financial year are detailed in the following table: Name Position Mark Zeptner Tim Manners Managing Director / Chief Executive Officer Chief Financial Officer Duncan Coutts Chief Operating Officer Kevin Seymour General Manger – Exploration Richard Jones 2 Manager Legal / Company Secretary Domenico Francese Company Secretary Maximum STI1 Achieved STI1 % 60% 45% 45% 45% n/a 45% $ 326,700 176,963 190,575 141,750 n/a 163,123 % 46% 33% 34% 33% n/a 29% $ 250,470 129,773 142,932 103,818 n/a 103,455 1 Amounts disclosed above include superannuation attributable to the STI. 2 Richard Jones was not employed by the group in the 2018 financial year and as such no bonus payment was made. Long-term incentives Under the Ramelius Performance Rights Plan, annual grants of performance rights are made to executives to align remuneration with the creation of shareholder value over the long-term. The LTI’s are designed to focus executives on delivering long-term shareholder returns. How is it paid? How much can an executive earn? How is performance measured? LTI’s are provided to selected executives under the Ramelius Performance Rights Plan. Selected executives are eligible to receive performance rights (being entitlements to shares in Ramelius subject to satisfaction of vesting conditions) as long-term incentives as determined by the Board in accordance with the terms and conditions of the plan. The plan provides selected executives the opportunity to participate in the equity of Ramelius through the issue of rights as a long-term incentive that is aligned to the long- term interests of shareholders. Under the Performance Rights Plan, the number of rights granted to executives ranges up to 40% (60% for the Managing Director / Chief Executive Officer) of the executive’s TFR and is dependent upon the individual’s skills, responsibilities and ability to influence financial or other key objectives of Ramelius. The number of rights granted is calculated by dividing the LTI remuneration dollar amount by the volume weighted average price of Ramelius shares traded on the Australian Securities Exchange during the 5-trading day period prior to the date of the grant. The vesting of performance rights is subject to vesting conditions related to achievement of total shareholder returns (TSR) and period of service. TSR performance is measured against the TSR of a benchmark peer group. The following companies have been identified by Ramelius to comprise the peer group. Company Saracen Mineral Holdings Limited Regis Resources Limited Silver Lake Resources Limited Westgold Resources Limited Gascoyne Resources Limited Northern Star Resources Limited # Resolute Mining Limited # Gold Road Resources Limited Millennium Minerals Limited Dacian Gold Limited St Barbara Limited Pantoro Limited Blackham Resources Limited Evolution Mining Limited # # Companies added to the peer group on 25 July 2019 but not applied retrospectively ASX Code SAR RRL SLR WGX GCY NST RSG GOR MOY DCN SBM PNR BLK EVN 49 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (d) Elements of remuneration (continued) Long-term incentives (continued) How is performance measured? (continued) The NRC may recommend to the Board to either include or exclude gold mining organisations available on this list to reflect changes in the industry. The proportion of executive rights that vest is dependent on how the Ramelius TSR compares to the peer group as follows: Relative TSR Over the Vesting and Measurement Period Below the 50th percentile At the 50th percentile Between the 50th and 75th percentile At and above the 75th percentile Proportion of Performance Rights Vested 0% 50% Pro-rata between 50% and 100% 100% Once vested, rights may be exercised within seven years of the vesting date. The vesting and measurement period for performance rights granted in the 2017 financial year have been set over three years with vesting and measurement for each third of the granted rights occurring at the end of each year during the three-year period. When is performance measured? For performance rights granted after 30 June 2017 the performance rights vest three years after the grant date. Any performance rights that do not vest will lapse after testing. There is no re-testing of performance rights. What happens if an executive leaves? Where an executive ceases to be an employee of the group any unvested performance rights will lapse on the date of cessation of employment, except in limited circumstances that are approved by the Board on a case by case basis. Based on the above assessment the performance rights issued, vested, and lapsed in the 2019 financial year (for the 2018 financial year performance) are detailed in the following table: Name Position Issued 1 Performance rights measured for vesting Percentage vested % Number vested Mark Zeptner Managing Director / Chief Executive Officer 568,956 500,000 100% 500,000 Tim Manners Chief Financial Officer Duncan Coutts Chief Operating Officer 260,966 284,483 Kevin Seymour General Manger – Exploration 201,186 Richard Jones 1 Manager Legal / Company Secretary 189,655 - 117,994 87,653 - Domenico Francese Company Secretary - 101,138 - 83% 83% - 83% - 98,336 73,050 - 84,288 All performance rights 3,825,125 1,358,451 89% 1,215,432 1 Performance rights issued during the financial year will be measured for vesting on 1 July 2021. Employee Share Acquisition Plan The Employee Share Acquisition Plan enables the Board to offer eligible employees ordinary fully paid shares in Ramelius as a long-term incentive, in accordance with the terms of the plan. Shares may be offered at no consideration unless the Board determines that market value or some other value is appropriate. No such shares were offered during the 2019 financial year. Other long-term incentives The Board may at its discretion provide share rights/options as a long-term retention incentive to employees. 50 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (e) Link between remuneration and performance The following table shows key performance indicators for the group over the last five years: Name Net profit (loss) after tax ($000) Dividend / capital return ($000) Share price 30 June ($) Basic earnings per share (cents) Diluted earnings per share (cents) 2019 21,832 - 0.73 3.74 3.67 2018 30,760 - 0.58 5.84 5.75 2017 17,765 - 0.45 3.39 3.36 2016 27,540 - 0.44 5.82 5.81 2015 16,068 - 0.12 3.48 3.48 The total remuneration mix for the Managing Director / Chief Executive Officer and Other Executives is illustrated in the following graph. The link between performance and remuneration is discussed within this remuneration report. 2019 Total remuneration mix Other Executives Managing Director/CEO 63% 21% 7% 9% 56% 25% 11% 8% 0% 20% 40% 60% 80% 100% TFR STI LTI STI forgone (f) Contractual arrangements for executive KMP Remuneration and other terms of employment for executives are formalised in service agreements. The service agreements specify the components of remuneration, benefits and notice periods. Participation in short-term and long-term incentives are at the discretion of the Board. Other major provisions of the agreements relating to remuneration are set out below. Contracts with executives may be terminated early by either party as detailed below: Name and Position Term of Agreement Mark Zeptner Managing Director / Chief Executive Officer Tim Manners Chief Financial Officer Duncan Coutts Chief Operating Officer Kevin Seymour GM – Exploration Richard Jones Manager Legal / Company Secretary On-going commencing 1 July 2015 On-going commencing 31 July 2017 On-going commencing 12 February 2016 On-going commencing 1 July 2009 On-going commencing 26 October 2018 Base Salary incl. Super 1 Company / Employee Notice Period $550,000 6 / 3 months $378,400 6 / 3 months $412,500 3 / 3 months $291,720 3 / 3 months $275,000 6 / 3 months Termination Benefit 2 6 months base salary 6 months base salary 3 months base salary 3 months base salary 6 months base salary 1. Base salaries quoted are as at 30 June 2019, they are reviewed annually by the Nomination & Remuneration Committee 2. Termination benefits are payable on early termination by the Company, other than for gross misconduct, unless otherwise indicated. In certain circumstances the termination benefit may be 12 months base salary. 51 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (g) Non-executive director arrangements Non-executive director fees are determined using the following guidelines. Fees are: • Determined by the nature of the role, responsibility and time commitment necessary to perform required duties; • Not performance or incentive based but are fixed amounts; and • Determined by the desire to attract a group of individuals with pertinent knowledge and experience. In accordance with the Company’s Constitution, the total amount of remuneration of Non-Executive Directors is within the aggregate limit of $550,000 per annum as approved by shareholders at the 2010 Annual General Meeting. Non-executive directors may apportion any amount up to this maximum level amongst the non-executive directors as determined by the Board. Remuneration consists of non-executive director fees, committee fees and superannuation contributions. Non-executive directors are also entitled to be paid reasonable travelling, accommodation and other expenses incurred in performing their duties as directors. Non-executive directors do not participate in any performance-based pay including schemes designed for the remuneration of an executives, share rights or bonus payments and are not provided with retirement benefits other than salary sacrifice and superannuation. All non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms, including remuneration, relevant to the office of director. Details of remuneration fees paid to non-executive directors are set out below: Non-executive directors Robert Kennedy Kevin Lines Michael Bohm David Southam Total Year 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 Director fees - 141,503 173,269 116,864 95,304 95,304 97,231 - 365,804 353,671 Superannuation Total remuneration - 1,444 17,327 11,686 9,530 9,530 9,723 - 36,580 22,660 - 142,947 190,596 128,550 104,834 104,834 106,954 - 402,384 376,331 52 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (h) Details of KMP remuneration The following table shows details of the remuneration expense recognised for the group’s executive key management personnel for the current and previous financial year measured in accordance with the requirements of the accounting standards. FIXED REMUNERATION VARIABLE REMUNERATION Cash Salary1 Term. Payments Non- Monetary Benefits1 Annual and Long Service Leave2 Superan- nuation STI 1 LTI Options3 LTI Rights3 Total Perform. Related Executive Director Mark Zeptner – Managing Director / Chief Executive Officer 2019 2018 521,666 470,000 Executives - - 5,343 85,087 25,000 250,470 - 111,466 999,032 3,071 23,440 25,000 44,000 53,130 55,862 674,503 Tim Manners – Chief Financial Officer 2019 2018 357,868 308,620 - - 5,343 2,815 (218) 12,992 20,531 129,773 19,714 5,500 Duncan Coutts – Chief Operating Officer 2019 2018 387,499 363,796 - - 5,343 3,071 15,076 (1,601) 25,000 142,932 27,129 19,438 Kevin Seymour – General Manager – Exploration 2019 2018 266,720 260,000 - - 5,343 12,143 25,000 103,818 3,071 (4,466) 27,500 15,000 Richard Jones – Company Secretary (appointed 8 October 2018) 2019 2018 187,500 - - - 3,740 17,456 18,750 - - - - - Domenico Francese – Company Secretary (up to 30 November 2018)4 2019 2018 124,826 299,583 - (44,146) 21,888 94,050 313,021 - 477 34,665 17,511 9,900 Simon Iacopetta – Chief Financial Officer - - - - - 50,741 40,000 95 (69,564) 1,988 - - 1,846,079 299,583 25,112 85,398 136,169 721,043 2019 2018 Total 2019 2018 36.2% 22.7% 31.5% 7.3% 31.8% 17.8% - - - - - - - - - - - - - 46,378 559,675 21,722 371,363 58,667 634,517 65,713 477,546 42,699 455,723 48,816 349,921 32.2% 18.2% 8,736 236,182 3.7% - - - 202 496,403 56,326 431,900 19.0% 15.3% - - - 23,260 268,148 3,381,532 - 0% 29.3% 17.0% 1,766,178 40,000 12,600 (4,534) 118,842 93,838 53,130 248,439 2,328,493 1. Short-term benefits as per Corporations Regulation 2M.3.03(1) Item 6. 2. Other long-term benefits as per Corporations Regulation 2M.3.03 (1) Item 8. The amounts disclosed in this column represent the movements in the associated provisions. They may be negative where a KMP has taken more leave than accrued during the year. 3. Rights and options relate to rights and options over ordinary shares issued to key management personnel. The fair value of rights and options granted shown above is non-cash and was determined in accordance with applicable accounting standards and represents the fair value calculated at the time rights and options were granted and not when shares were issued. 4. In addition to the amounts above Domenico Francese was paid $329,661 in annual and long service leave entitlements which had been accrued but not paid during his employment. 53 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (i) Other statutory information (i) Terms and conditions of the share-based payment arrangements Performance rights The terms and conditions of each grant of performance rights affecting remuneration in the current or future reporting period are as follows: Grant Date Vesting and Exercise Date Expiry Date Exercise Price Value Per Performance Right at Grant Date 23 November 2016 1 July 2019 1 July 2026 22 December 2016 11 June 2019 11 June 2026 1 July 2017 31 July 2017 3 October 2017 5 September 2018 29 November 2018 1 July 2020 1 July 2020 1 July 2020 1 July 2021 1 July 2021 1 July 2027 1 July 2027 1 July 2027 1 July 2028 1 July 2028 $nil $nil $nil $nil $nil $nil $nil $0.37 $0.36 $0,33 $0.29 $0.27 $0.39 $0.27 Vested 0% 100% 0% 0% 0% 0% 0% Rights to deferred shares under the Performance Rights Plan are assessed against vesting criteria (and vested accordingly) in July each year. For the performance rights granted on 23 November 2016, one third of the performance rights granted vested on 1 July 2017, another third vested on 1 July 2018, and the final third vests on 1 July 2019. Performance rights granted after 30 June 2017 vest three years from the grant date. On vesting, each right must be exercised within seven years of the vesting date. The performance rights carry no dividend or voting rights. If an employee ceases employment before the performance rights vest, the rights will be forfeited, except in limited circumstances that are approved by the Board on a case-by-case basis. (ii) Reconciliation of options, performance rights, and ordinary shares held by KMP Options The table below shows a reconciliation of options held by each KMP from the beginning to the end of the 2019 financial year. All vested options were exercisable. Vested Balance at the end of the year Name & grant dates Balance at start of year Number Number % Exercised Vested Unvested Mark Zeptner 26 November 2015 26 November 2015 1,500,000 1,500,000 1,500,000 1,500,000 100 100 (1,500,000) - - 1,500,000 - - The amounts paid per ordinary share on the exercise of options at the date of exercise were as follows: Exercise date 3 June 2019 Amounts paid per share $0.20 No amounts are unpaid on any shares issued on the exercise of options. 54 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (i) Other statutory information (continued) (ii) Reconciliation of options, performance rights, and ordinary shares held by KMP (continued) Performance rights The table below shows a reconciliation of performance rights held by each KMP from the beginning to the end of the 2019 financial year. All vested performance rights were exercisable. Name Grant Year Mark Zeptner 2019 2017 Tim Manners 2019 2018 Duncan Coutts 2019 2018 2017 Kevin Seymour 2019 2018 2017 Domenico Francese 2018 2017 Richard Jones 2019 Balance at start of year Granted during the year Vested Forfeited / Cessation as KMP Balance at the end of the year Value to vest1 Number Number % Number % Vested Unvested $ - 568,956 - 500,000 - 500,000 - 100 - 260,966 317,778 - - 284,483 342,222 353,982 - - - 201,186 254,222 262,958 293,333 303,413 - - - - - - - - 216,330 - - 160,703 - 185,426 - 189,655 - - - - - 61 - - 61 - 61 - - - - - - - - - - - (293,333) (286,563) - - - 568,956 128,547 - 500,000 - - - - - - - - - - - - - - - - - 260,966 80,140 317,778 46,736 284,483 87,361 342,222 56,467 216,330 117,994 - - - 201,186 254,222 61,782 41,947 160,703 87,652 - - - - - 189,655 42,850 - - - 1. The maximum value of the performance rights yet to vest has been determined as the amount of the grant date fair value of the rights that is yet to be expensed. Shareholdings The table below shows a reconciliation of shareholdings held by each KMP from the beginning to the end of the 2019 financial year. Name Mark Zeptner Kevin Lines Michael Bohm Kevin Seymour Balance at start of year 3,012,500 1,000,000 1,237,500 224,860 Domenico Francese 1,314,922 Received during the year on the exercise of options Received during the year on exercising of performance rights Sold during the year Cessation as KMP 1,500,000 - - - - - - - - - (1,500,000) - - (30,000) - - - - Balance at the end of the year 3,012,500 1,000,000 1,237,500 194,860 All shareholdings noted above are held either directly by the KMP or their associate. - (1,314,922) - 55 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Remuneration report (audited) (continued) (i) Other statutory information (continued) Loans to key management personnel There were no loans made to key management personnel or their personally related parties during the current or prior financial year. Other transactions with key management personnel There were no other transactions with key management personnel. Aggregate amounts of each of the above types of transactions with key management personnel of Ramelius Resources Limited: Amounts recognised as an expense Rent of office building 2019 $ - 2019 $ 45,286 Voting and comments made at the Company’s 2018 Annual General Meeting Of the total valid available votes lodged, Ramelius received 97% of “FOR” votes on its remuneration report for the 2018 financial year. The Company did not receive any specific feedback at the AGM on its remuneration practices. Share trading policy The trading of shares is subject to, and conditional upon, compliance with the Company’s employee share trading policy. The policy is enforced through a system that includes a requirement that executives confirm compliance with the policy and provide confirmation of dealings in Ramelius securities. The ability for an executive to deal with an option or a right is restricted by the terms of issue and the plan rules which do not allow dealings in any unvested security. The Share Trading Policy specifically prohibits an executive from entering into transactions that limit the economic risk of participating in unvested entitlements such as equity-based remuneration schemes. The Share Trading Policy can be viewed on the Company’s website. Remuneration report ends. 56 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Shares under option (a) Unissued ordinary shares Unissued ordinary shares of Ramelius Resources Limited under option at the date of this report are as follows: Date options granted 26 November 2015 Expiry date 11 June 2020 Exercise price Number under option $0.20 1,500,000 1,500,000 No option holder has any right under the options to participate in any other share issue of the Company or any other entity. (b) Shares issued on the exercise of options The following ordinary shares of Ramelius were issued during the year ended 30 June 2019 as a result of the exercise of options. No amounts are unpaid on any of the shares. Date options granted 26 November 2015 Exercise price of options Number of shares issued $0.20 1,500,000 1,500,000 Insurance of officers and indemnities Indemnification Ramelius is required to indemnify its Directors and Officers against any liabilities incurred by the Directors and Officers that may arise from their position as Directors and Officers of Ramelius and its controlled entities. No costs were incurred during the year pursuant to this indemnity. Ramelius has entered into deeds of indemnity with each Director whereby, to the extent permitted by the Corporations Act 2001, Ramelius agreed to indemnify each Director against all loss and liability incurred as an officer of the Company, including all liability in defending any relevant proceedings. Insurance premiums Since the end of the previous year Ramelius has paid insurance premiums in respect of Directors’ and Officers’ liability and legal expenses insurance contracts. The terms of the policies prohibit disclosure of details of the amount of the insurance cover, the nature thereof and the premium paid. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of Ramelius or to intervene in any proceedings to which Ramelius is a party, for the purpose of taking responsibility on behalf of Ramelius for all or part of those proceedings. There were no such proceedings brought or interventions on behalf of Ramelius with leave from the Court under section 237 of the Corporations Act 2001. Non-audit services The Company may decide to engage the auditor (Deloitte Touche Tohmatsu) (for 2018 the figures disclosed below relate to Grant Thornton) on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the group are important. Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year are set out below. The Board of Directors has considered the position and, in accordance with advice received from the Audit & Risk Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: - all non-audit services have been reviewed by the Audit & Risk Committee to ensure they do not impact the impartiality and objectivity of the auditor; - none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. 57 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ REPORT (CONTINUED) Non-audit services (continued) During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms: Other assurance services Audit of regulatory returns Accounting assistance Non-assurance services Tax advice and compliance services Total 2019 $ 6,250 13,200 - 19,450 2019 $ - - 62,400 62,400 Auditor independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 59. Rounding of amounts The Company is of the kind referred to in ASIC Legislative Instrument 2016/191 relating to the ‘rounding off’ of amounts in the Directors’ report. Amounts in the Directors’ report have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar. This report is made in accordance with a resolution of Directors. Kevin James Lines Chairman Perth 23 August 2019 58 RAMELIUS RESOURCES ANNUAL REPORT 2019 AUDITOR’S INDEPENDENCE DECLARATION 59 Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. Deloitte Touche Tohmatsu ABN 74 490 121 060 Tower 2, Brookfield Place 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au The Directors Ramelius Resources Limited Level 1, 130 Royal Street East Perth WA 6892 23 August 2019 Dear Directors Auditor’s Independence Declaration to Ramelius Resources Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Ramelius Resources Limited and its controlled entities. As lead audit partner for the audit of the financial report of Ramelius Resources Limited and its controlled entities for the financial year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU David Newman Partner Chartered Accountants RAMELIUS RESOURCES ANNUAL REPORT 201960 RAMELIUS RESOURCES ANNUAL REPORT 2019financial statements Income statement Statement of comprehensive income Balance sheet Statement of changes in equity Cash flow statement Notes to the financial statements Directors’ declaration Independent auditor’s report to the members 62 63 64 65 66 69 110 111 61 RAMELIUS RESOURCES ANNUAL REPORT 2019INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2019 Revenue Cost of production Gross profit Other expenses Other income Interest income Finance costs Profit before income tax Income tax expense Profit for the year from continuing operations Earnings per share Basic earnings per share Diluted earnings per share Note 1(a) 2(a) 2(b) 1(b) 2(c) 3 26 26 2019 $’000 352,770 (309,161) 43,609 (15,016) 2,125 1,886 (2,193) 30,411 (8,579) 21,832 Cents 3.74 3.67 2018 $’000 341,784 (281,864) 59,920 (16,994) 3,322 1,021 (1,770) 45,499 (14,739) 30,760 Cents 5.84 5.75 62 RAMELIUS RESOURCES ANNUAL REPORT 2019STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019 Profit for the year Other comprehensive income, net of tax Items that may be reclassified to profit or loss: Exchange differences on translation of foreign operations Items that may not be reclassified to profit or loss: Change in fair value of financial assets Other comprehensive (loss) / income for the year, net of tax Note 2019 $’000 21,832 2018 $’000 30,760 15 15 (69) 38 (50) (119) 242 280 Total comprehensive income for the year 21,713 31,040 63 RAMELIUS RESOURCES ANNUAL REPORT 2019BALANCE SHEET AS AT 30 JUNE 2019 Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Total current assets Non-current assets Other receivables Other assets Financial assets Property, plant, and equipment Development assets Exploration and evaluation expenditure Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Provisions Current liabilities Non-current liabilities Provisions Contingent consideration Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Retained earnings Total equity 64 Note 4(a) 5 6 7 5 7 8 9 10 3 11 13 13 12 3 14 15 2019 $’000 95,815 6,774 41,067 8,629 152,285 - 1,488 101 43,823 99,430 99,442 - 244,284 2018 $’000 68,209 3,358 58,086 1,439 131,092 1,306 7,296 126 51,122 84,728 19,317 917 164,812 396,569 295,904 44,926 6,852 51,778 45,987 12,121 7,741 65,849 31,796 6,075 37,871 43,169 12,892 - 56,061 117,627 93,932 278,942 201,972 214,218 (7,674) 72,398 278,942 149,568 1,884 50,520 201,972 RAMELIUS RESOURCES ANNUAL REPORT 2019STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2019 Share capital $000’s Share-based payment reserve $000’s Other reserves $000’s Retained profits $000’s Total equity $000’s Balance at 30 June 2017 149,122 861 59 19,760 169,802 Profit for the year Other comprehensive income Total comprehensive income Transactions with owners in their capacity as owners: Share capital Transaction costs net of tax Share-based payments Balance at 30 June 2018 Profit for the year Other comprehensive loss Total comprehensive (loss) / income Transactions with owners in their capacity as owners: Shares issued for acquisition of Explaurum Limited (see notes 15 & 17) Shares issued on exercise of options Share-based payments Balance at 30 June 2019 - - - 448 (2) - 149,568 - - - 64,232 300 118 214,218 - - - - - 684 1,545 - - - - - 487 2,032 - 280 280 - - - 30,760 - 30,760 30,760 280 31,040 - - - 448 (2) 684 339 50,520 201,972 - (119) (119) 21,832 - 21,832 21,832 (119) 21,713 (9,926) - - - - 46 54,306 300 651 (9,706) 72,398 278,942 65 RAMELIUS RESOURCES ANNUAL REPORT 2019STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2019 Cash flows from operating activities Receipts from operations Payments to suppliers and employees Interest received Finance costs Income tax refund received Note 2019 $’000 2018 $’000 348,382 (213,321) 1,843 (14) 79 337,160 (219,185) 946 (10) - Net cash provided by operating activities 4(b) 136,969 118,911 Cash flows from investing activities Payments for derivatives Payments for property, plant, and equipment Payments for development assets Proceeds from sale of property, plant, and equipment Proceeds from the sale of subsidiary Payments for the acquisition of Explaurum, net of cash acquired Payments for the acquisition of Marda Payment for acquisition of subsidiary, net of cash acquired 5(a) 17(a) 17(b) Loan to Explaurum Limited Payments for financial assets Proceeds from the sale of financial assets Payments for mining tenements and exploration Payments for site rehabilitation Net cash used in investing activities Cash flows from financing activities Proceeds from the issue of shares Transaction costs from issue of shares (Payments for) / return of secured deposits Net cash provided by financing activities - (7,995) (58,233) 763 1,000 (8,383) (13,238) - (3,700) (25) - (18,962) (209) (108,982) 300 - (681) (381) (30) (4,757) (65,628) - 60 - - (38,350) - (17) 200 (13,620) (754) (122,896) 448 (2) (4) 442 Net increase / (decrease) in cash and cash equivalents 27,606 (3,543) Cash at the beginning of the financial year 68,209 71,752 Cash and cash equivalents at the end of the financial year 4(a) 95,815 68,209 66 RAMELIUS RESOURCES ANNUAL REPORT 2019Edna May Open Pit 67 RAMELIUS RESOURCES ANNUAL REPORT 201968 RAMELIUS RESOURCES ANNUAL REPORT 2019notes to the financial statements About this report Key numbers Segment information Note 1: Revenue Note 2: Expenses Note 3: Income tax expense Note 4: Cash and cash equivalents Note 5: Trade and other receivables Note 6: Inventories Note 7: Other assets Note 8: Property, plant, & equipment Note 9: Development assets Note 10: Exploration and evaluation assets Note 11: Trade and other payables Note 12: Contingent consideration Note 13: Provisions Note 14: Share capital Note 15: Reserves Risk Note 16: Financial instruments and financial risk management Group structure Note 17: Asset acquisitions Note 18: Business combination Note 19: Interests in other entities Unrecognised items Note 20: Contingent liabilities Note 21: Commitments 70 72 72 75 75 76 80 81 81 82 82 85 87 88 88 89 91 92 93 93 95 95 97 98 99 99 99 Other information 100 Note 22: Events occurring after the reporting period 100 Note 23: Related party transactions Note 24: Share based payments Note 25: Remuneration of auditors Note 26: Earnings per share Note 27: Deed of cross guarantee Note 28: Parent entity information Note 29: Accounting policies 100 101 104 104 105 107 109 69 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: ABOUT THIS REPORT About this report Ramelius Resources Limited (referred to as ‘Ramelius’) is a for-profit Company limited by shares incorporated and domiciled in Australia whose shares are publicly listed on the Australian Securities Exchange Limited (ASX). The nature of the operations and principal activities of Ramelius and its controlled entities (referred to as ‘the group’) are described in the segment information. The consolidated general purpose financial report of the group for the year ended 30 June 2019 was authorised for issue in accordance with a resolution of the Directors on 23 August 2019. The Directors have the power to amend and reissue the financial report. The financial report is a general purpose financial report which: - has been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standard Board (AASB) and the Corporations Act 2001. The consolidated financial statements of the group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB); - has been prepared under the historical cost convention except for FVOCI financial assets, which have been measured at fair value; - has been presented in Australian dollars and rounded to the nearest $1,000 unless otherwise stated, in accordance with ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191; - adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the group and effective for reporting periods beginning on or before 1 July 2018. Refer to Note 29 for further details; - does not early adopt Accounting Standards and Interpretations that have been issued or amended but are not yet effective. Refer to Note 29 for further details. Certain comparatives on the balance sheet and income statement have been reclassified to bring these into line with classifications in the current period. 70 Key Judgements, Estimates and Assumptions In the process of applying the groups accounting policies, management has made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are found in the following notes: Page 76 Note 3 Recovery of deferred tax assets 82&85 Note 8 & 9 Impairment of assets 82&85 Note 8 & 9 Depreciation and amortisation 85 85 87 88 89 Note 9 Deferred mining expenditure Note 9 Ore Reserves estimates Note 10 Exploration and evaluation expenditure Note 12 Contingent consideration Note 13 Provision for restoration and rehabilitation Principles of consolidation The consolidated financial statements comprise the financial statements of the parent entity, Ramelius Resources Limited, and its controlled entities. A list of controlled entities is contained in Note 19 to the consolidated financial statements. All controlled entities have a 30 June financial year end. In preparing the consolidated financial statements, all inter-Company balances and transactions, income and expenses and profits and losses resulting from intra- group transactions have been eliminated. Subsidiaries are consolidated from the date on which control is obtained to the date on which control is disposed. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Foreign currency The functional currencies of overseas subsidiaries are listed in note 19. As at the reporting date, the assets and liabilities of overseas subsidiaries are translated into Australian dollars at the rate of exchange ruling at the balance sheet date and the income statements are translated at the average exchange rates for the year. The exchange differences arising on the retranslation are taken directly to a separate component of equity. Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the balance sheet date. Exchange differences arising from the application of these procedures are taken to the income statement, with the exception of differences on foreign RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: ABOUT THIS REPORT (CONTINUED) currency borrowings that provide a hedge against a net investment in a foreign entity, which are taken directly to equity until the disposal of the net investment and are then recognised in the income statement. Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity. Other accounting policies Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. The notes to the financial statements The notes include information which is required to understand the financial statements and is material and relevant to the operations, financial position and performance of the group. Information is considered material and relevant if, for example: - the amount in question is significant because of its size or nature; - - - it is important for understanding the results of the group; it helps to explain the impact of significant changes in the group’s business – for example acquisition and impairment write downs; or it relates to an aspect of the group’s operations that is important to its future performance. The notes are organised into the following sections: - Key numbers: provides a breakdown of individual line items in the financial statements that the Directors consider most relevant and summarises the accounting policies, judgements and estimates relevant to understanding these line items; - Risk: provides information about the capital management practices of the group and discusses the group’s exposure to various financial risks and what the group does to manage these risks; - Group structure: explains aspects of the group structure and how changes have affected the financial position and performance of the group; - Unrecognised items: provides information about items that are not recognised in the financial statements but could potentially have a significant impact on the group’s financial position and performance; - Other information: provides information on items which require disclosure to comply with Australian Accounting Standards and other regulatory pronouncements. However, these are not considered critical in understanding the financial performance of position of the group. Significant items in the current reporting period The financial position and performance of the group was particularly affected by the following events and transactions during the reporting period: • The acquisition of Explaurum Limited (Tampia Gold Hill Project) which completed in April 2019 (see note 17) which resulted in an increase in exploration & evaluation assets (note 10). • The acquisition of Marda Operations Pty Limited (formerly Black Oak Minerals Limited) (Marda Gold Project) in February 2019 (see note 17) which resulted in an increase in mine development assets (note 9). • The change in managements judgements regarding the fair value of the Edna May contingent consideration which impacted the other income (see note 1(b)) in the year and the contingent consideration liability (see note 12) For a detailed discussion about the group’s performance and financial position please refer to our operating and financial review on pages 8-13 and 39-41. 71 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS Segment information (a) Description of segments and principal activities Management has determined the operating segments based on internal reports about components of the group that are regularly reviewed by the Chief Operating Decision Maker (CODM), being the Managing Director / Chief Executive Officer, to make strategic decisions. Reportable operating segments are Mt Magnet, Edna May and Exploration. The group operates primarily in one business segment, namely the exploration, development and production of minerals with a focus on gold. The CODM monitors performance in these areas separately. Unless stated otherwise, all amounts reported to the CODM are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the group. Operating segment performance details for financial years 2019 and 2018 are set out below: (b) Segment gross margin 2019 Segment results Segment revenue Cost of production Amortisation and depreciation Movement in inventory Deferred mining costs Segment margin Mt Magnet $’000 Edna May $’000 Exploration $’000 207,123 (176,895) (67,920) 5,360 46,879 14,547 145,647 (85,537) (13,383) (23,034) 5,369 29,062 - - - - - - Total $’000 352,770 (262,432) (81,303) (17,674) 52,248 43,609 Total segment assets 115,975 74,594 100,021 290,590 Total segment liabilities 55,676 48,163 1,626 105,465 2018 Segment results Segment revenue Cost of production Amortisation and depreciation Movement in inventory Deferred mining costs Segment margin Mt Magnet $’000 Edna May $’000 Exploration $’000 226,720 (176,752) (61,233) (4,823) 60,313 44,225 115,064 (93,003) (19,422) 13,056 - 15,695 - - - - - - Total $’000 341,784 (269,755) (80,655) 8,233 60,313 59,920 Total segment assets 109,453 86,038 19,747 215,238 Total segment liabilities 43,798 48,510 789 93,097 72 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Segment information (continued) (c) Segment gross margin Segment margin reconciles to profit before income tax from continuing operations for the year ended 30 June 2019 and 30 June 2018 as follows: Segment margin Other income Interest income Depreciation and amortisation Employee benefit expense Equity settled share-based payments Costs associated with the acquisition of Edna May Exploration and evaluation costs Impairment of exploration and evaluation assets Change in fair value of Edna May contingent consideration Impairment of development assets Impairment of debtors Loss / (gain) on sale of investments Finance costs Other expenses Profit before income tax from continuing operations (d) Other profit and loss disclosure 2019 $’000 43,609 116 1,886 (193) (6,674) (651) - (711) (2,800) 2,009 - (717) - (2,193) (3,270) 30,411 2019 Exploration and evaluation costs Impairment of exploration and evaluation assets Change in fair value of contingent consideration Total other profit and loss disclosure 2018 Exploration and evaluation costs Impairment of exploration and evaluation assets Change in fair value of contingent consideration Impairment of development assets Total other profit and loss disclosure Mt Magnet $’000 Edna May $’000 Exploration $’000 - - - - - - 2,009 2,009 (711) (2,800) - (3,511) Mt Magnet $’000 Edna May $’000 Exploration $’000 - - - - - - - 3,282 (2,999) (610) (2,428) - - 283 (3,038) 2018 $’000 59,920 40 1,021 (125) (3,120) (684) (3,471) (610) (2,428) 3,282 (2,999) - (225) (1,770) (3,332) 45,499 Total $’000 (711) (2,800) 2,009 (1,502) Total $’000 (610) (2,428) 3,282 (2,999) (2,755) 73 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Segment information (continued) (e) Segment assets Operating segment assets are reconciled to total assets as follows: Segment assets Unallocated assets: Cash and cash equivalents Trade and other receivables Other current assets Other non-current assets Available-for-sale financial assets Property, plant and equipment Deferred tax assets Total assets as per the balance sheet (f) Segment liabilities Operating segment liabilities are reconciled to total liabilities as follows: Segment liabilities Unallocated liabilities: Trade and other payables Current provisions Non-current provisions Deferred tax liabilities 2019 $’000 290,590 95,815 - 8,629 1,016 101 418 - 2018 $’000 215,238 68,209 2,877 1,439 6,819 126 279 917 396,569 295,904 2019 $’000 105,465 3,980 423 18 7,741 2018 $’000 93,097 195 563 77 - Total liabilities as per the balance sheet 117,627 93,932 (g) Major customers Ramelius sells its gold production to either The Perth Mint or delivers it into forward gold contracts. (h) Segments assets by geographical location The total non-current assets other than financial instruments and deferred tax assets, broken down by the location of the assets, is shown in the following table: Australia US Total non-current assets other than financial instruments and deferred tax assets 2019 $’000 241,741 954 242,695 2018 $’000 155,073 506 155,579 74 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 1: Revenue The group derives the following types of revenue: (a) Revenue Gold sales Silver sales Other revenue Total revenue from continuing operations (b) Other income Change in fair value of Edna May contingent consideration Foreign exchange gains Total other income from continuing operations (c) Recognising revenue from major business activities 2019 $’000 2018 $’000 350,981 340,957 808 981 665 162 352,770 341,784 Note 12 2019 $’000 2,009 116 2,125 2018 $’000 3,282 40 3,322 Revenue (general) Revenue is measured at the fair value of the consideration received or receivable. Revenue from sale of goods or rendering of a service is recognised upon delivery of the goods or service to customers as this corresponds to the transfer of control of the goods and the cessation of all involvement with those goods. All revenue is stated net of goods and services tax (GST). Gold bullion and silver sales Revenue from gold bullion and silver sales is brought to account when control over the inventory has transferred to the buyer and selling prices are known or can be reasonably estimated. Note 2: Expenses Profit before tax includes the following expenses whose disclosure is relevant in explaining the performance of the group: (a) Cost of production Mining and milling production costs Employee benefits expense Royalties Amortisation and depreciation Inventory movements Total cost of production from continuing operations 2019 $’000 157,575 36,247 16,362 81,303 17,674 309,161 2018 $’000 160,259 32,271 16,912 80,655 (8,233) 281,864 75 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 2: Expenses (continued) (b) Other expenses Employee benefit expense Equity settled share-based payments Other expenses Costs associated with the acquisition of Edna May Amortisation and depreciation Exploration and evaluation costs Impairment of development assets Impairment of exploration and evaluation assets Impairment of receivable Loss on sale of available-for-sale financial assets Total other expenses from continuing operations (c) Finance costs Provisions: unwinding of discount Contingent consideration: unwinding of discount Interest and finance charges Total finance costs from continuing operations Note 9 10 5(a) 13 12 2019 $’000 6,674 651 3,270 - 193 711 - 2,800 717 - 15,016 941 1,238 14 2,193 2018 $’000 3,120 684 3,332 3,471 125 610 2,999 2,428 - 225 16,994 631 1,128 11 1,770 (d) Recognising expenses from major business activities Amortisation and depreciation Refer to notes 8 and 9 for details on depreciation and amortisation Impairment Impairment expenses are recognised to the extent that the carrying amounts of assets exceed their recoverable amounts. Refer to notes 8, 9 and 10 for further details on impairment. Employee benefits expense The group’s accounting policy for liabilities associated with employee benefits is set out in Note 13. The policy relating to share-based payments is set out in Note 24. Note 3: Income tax expense (a) The components of tax expense comprise Current tax Deferred tax Income tax expense from continuing operations 2019 $’000 (79) 8,658 8,579 2018 $’000 - 14,739 14,739 76 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 3: Income tax expense (continued) (b) Recognition of income tax expense to prima facia tax payable: Accounting profit before tax Income tax expense calculated at 30% Tax effects of amounts which are not deductible / (taxable) in calculating taxable income: - Share-based payments - Other non-allowable items - Adjustments for prior periods - Research & development tax credit Income tax expense Applicable effective tax rate (c) Deferred tax movement: 2019 $’000 30,411 9,123 195 11 (671) (79) 2018 $’000 45,499 13,650 205 884 - - 8,579 14,739 28% 32% 30 June 2019 Deferred tax liability (“DTL”) Exploration and evaluation Development Property, plant & equipment Inventory – consumables Total DTL Deferred tax asset (“DTA”) Inventory – deferred mining costs Property, plant, and equipment Provisions Tax losses Other Group DTA Net deferred tax asset / (liability)# Balance at 1 July 2018 $’000 Charged / (credited) to income $’000 Balance at 30 June 2019 $’000 5,644 19,545 499 342 26,030 2,236 933 14,886 8,296 596 26,947 917 3,082 2,689 (499) (23) 5,249 - 1,011 668 (6,181) 1,093 (3,409) 8,726 22,234 - 319 31,279 2,236 1,944 15,554 2,115 1,689 23,538 (7,741) # Deferred tax assets and liabilities have been offset for presentation on the balance sheet pursuant to set off provisions 77 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 3: Income tax expense (continued) (c) Deferred tax movement: (continued) 30 June 2018 Deferred tax liability (“DTL”) Exploration and evaluation Development Property, plant & equipment Inventory – consumables Total DTL DTL from discontinued operation DTL from continuing operations Deferred tax asset (“DTA”) Equity transaction costs Inventory – deferred mining costs Property, plant, and equipment Receivables Provisions Tax losses Other Total DTA DTA from discontinued operation DTA from continuing operations Balance at 1 July 2017 $’000 Acquisition of subsidiary $’000 Charged / (credited) to income $’000 Charged / (credited) to equity $’000 Balance at 30 June 2018 $’000 5,730 13,127 - 134 18,991 (2) 18,989 503 1,749 1,279 3 7,863 20,394 141 31,932 (988) 30,944 - 3,799 - - 3,799 - 3,799 - - - - 7,500 - - 7,500 - 7,500 (86) 2,619 499 208 3,240 2 3,242 - 487 (346) (3) (477) (12,098) 95 (12,342) 988 (11,354) - - - - - - - (143) - - - - - - (143) - (143) 5,644 19,545 499 342 26,030 - 26,030 360 2,236 933 - 14,886 8,296 236 26,947 - 26,947 917 Net deferred tax asset / (liability) # 11,955 # Deferred tax assets and liabilities have been offset for presentation on the balance sheet pursuant to set off provisions (d) Franking credits Franking credits available for subsequent years (at 30%) 2019 $’000 21,826 2018 $’000 21,826 The above represents the balance of the franking account as at the end of the reporting period, adjusted for: - Franking credits / debits that will arise from payment of any current tax liability / current tax asset, and - Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date. No such adjustments are required in the current financial year. (e) Tax losses 2019 2018 Gross Net (30%) Gross Net (30%) 7,050 37,923 44,973 2,115 11,377 13,492 27,653 4,305 31,958 8,296 1,292 9,588 Unused tax losses: - for which a deferred asset has been recognised - for which a no deferred asset has been recognised Total potential unused tax losses 78 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 3: Income tax expense (continued) (e) Tax losses (continued) Explaurum Limited, Explaurum Operations Pty Ltd, and Ninghan Exploration Pty Ltd (“Explaurum Group”) entered the Ramelius tax consolidated group on 4 April 2019. When a Company enters an existing tax consolidated group the tax losses of that Company at the date it enters the tax consolidated group may be transferred to the existing tax group and utilised against future taxable income, subject to various provisions in the relevant tax legislation. The balance of the unused tax losses for which no deferred tax has been recognised relates to capital losses. All other unused tax losses have been recognised as a deferred tax asset. The Directors have assessed that it is probable the group will generate sufficient taxable profits to utilise the losses recognised as a deferred tax asset. Key judgement, estimates and assumptions: Recovery of deferred tax assets Judgement is required to determine whether deferred tax assets are recognised in the balance sheet. Deferred tax assets, including those arising from un-utilised tax losses, require management to assess the likelihood that the group will generate sufficient taxable earnings in the future periods in order to recognise and utilise those deferred tax assets. Judgement is also required in respect of the expected manner of recovery of the value of an asset or liability (which will then impact the quantum of the deferred tax assets or deferred tax liabilities recognised) and the application of existing laws in each jurisdiction. Estimates of future taxable income are based on forecast cash flows from operations and existing tax laws in each jurisdiction. These assessments require the use of estimates and assumptions such as exchange rates, commodity prices and operating performance over the life of the assets. To the extent that cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets reported at the reporting date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the group operates could limit the ability of the group to obtain tax deductions and recover/utilise deferred tax assets in future periods. As at 30 June 2019 the ability of the Ramelius tax group to access and utilise the carried forward tax losses from the Explaurum Group is being assessed and as such no deferred tax asset has been recognised in relation to these carried forward tax losses. At the date the Explaurum Group entered the Ramelius tax group it had carried forward tax losses of $33,618,000 with a potential benefit of $10,085,400. (f) Recognition and measurement of income tax Current income tax Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates that have been enacted, or substantially enacted by the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretations. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred taxes Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed for accounting purposes, but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised, or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects the way management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profits will be available against which the benefits of the deferred tax asset can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income tax legislation and the anticipation that the group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. 79 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 3: Income tax expense (continued) (f) Recognition and measurement of income tax (continued) Tax consolidated group Ramelius Resources Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. Each entity in the group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The tax consolidated group has entered into a tax funding arrangement whereby each Company in the group contributes to the income tax payable by the group in proportion to their contribution to the group’s taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to the head entity. Note 4: Cash and cash equivalents (a) Cash and cash equivalents Cash at bank and in hand Deposits at call Total cash and cash equivalents (b) Reconciliation of net profit after tax to net cash flows from operations Net profit Non-cash items Share based payments Depreciation and amortisation Write off and impairment of exploration assets Discount unwind on provisions Discount unwind on deferred consideration Change in fair value of Edna May contingent consideration Impairment of development assets Impairment of receivable Items presented as investing or financing activities Gain on disposal of non-current assets Payments for derivatives Financial assets at FVOCI (Increase) / decrease in assets Prepayments Trade and other receivables Inventories Deferred tax assets Increase / (decrease) in liabilities Trade and other payables Provisions Deferred tax liabilities Net cash provided by operating activities (c) Recognition and measurement 2019 $’000 40,815 55,000 95,815 2018 $’000 38,181 30,028 68,209 21,832 30,760 651 81,496 3,511 941 1,238 (2,009) - 717 (765) - - (690) (3,337) 17,019 3,409 8,111 (404) 5,249 136,969 684 80,780 3,038 631 1,128 (3,282) 2,999 - - 30 225 (316) (587) (8,233) 11,497 (3,645) (40) 3,242 118,911 Cash and cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank, demand deposits held with banks, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in values. For the purposes of the Statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above. Risk exposure The group’s exposure to interest rate risk is discussed in Note 16. Maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents disclosed above. 80 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 5: Trade and other receivables Current Trade receivables Provision for impairment Trade receivables Other receivables Total current trade and other receivables Non-current Other receivables Total non-current trade and other receivables (a) Other receivables 2019 $’000 2018 $’000 5,422 (8) 5,414 1,360 6,774 - - 128 (8) 120 3,238 3,358 1,306 1,306 Other receivables in the prior year included a $411,000 (current) and $1,306,000 (non-current) receivable from Maximus Resources Limited in relation to the Share Sale Agreement for Ramelius Milling Services Pty Limited. This receivable was settled during the year for $1,000,000 resulting in an impairment of the receivable of $717,000. Note 6: Inventories Ore stockpiles Gold in circuit Gold bullion & dore Gold nuggets Consumables and supplies Total inventories (a) Inventory expense 2019 $’000 22,313 2,107 5,475 80 11,092 41,067 2018 $’000 26,012 4,444 17,115 80 10,435 58,086 The reversal of prior year write down of inventories due to an increase in net realisable value recognised during the year ended 30 June 2019 amounted to a net $548,000 credit to the income statement (2018: $1,446,000 charge to income statement). (b) Recognition and measurement Inventories Gold ore, gold in circuit and poured gold bars are physically measured, or estimated, and valued at the lower of cost and net realisable value. Cost represents the weighted average cost and includes direct costs and an appropriate allocation of fixed and variable production overhead costs, including depreciation and amortisation. Consumables and stores are valued at the lower of cost and net realisable value. Costs of purchased inventory are determined after deducting any applicable rebates and discounts. A periodic review is undertaken to establish the extent of any surplus or obsolete items and where necessary a provision is made. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion of sale. Gold ore represents stockpiled ore that has been mined or otherwise acquired and is available for further processing. If there is significant uncertainty as to whether the stockpiled ore will be processed, it is expensed. Where future processing of ore can be predicted with confidence (e.g. it exceeds the mine cut-off grade), it is valued at the lower of cost and net realisable value. If ore is not expected to be processed within 12 months after reporting date, it is classified as non-current assets. Ramelius believes processing ore stockpiles may have a future economic benefit to the group and accordingly ore is valued at lower of cost and net realisable value. 81 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 7: Other assets Current Prepayments Secured term deposits with financial institutions Total other current assets Non-current Secured term deposits with financial institutions Other security bonds & deposits Total other non-current assets (a) Other non-current assets 2019 $’000 2,129 6,500 8,629 1,000 488 1,488 2018 $’000 1,439 - 1,439 6,819 477 7,296 Other non-current assets comprise secured deposits with financial institutions for finance facilities as well as bonds and deposits with government bodies with regards to the mining and exploration activities of the group. Note 8: Property, plant, and equipment 2019 As at 1 July 2018 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2019 Opening net book amount Additions on the acquisition of subsidiary Transfers from mine development Additions Disposals Transfers Depreciation charge Closing net book amount As at 30 June 2019 Cost or fair value Accumulated depreciation Net book amount Land and buildings $’000 Plant and equipment $’000 Assets under construction $’000 7,096 (802) 6,294 6,294 135 - - - 1,420 (775) 7,074 8,651 (1,577) 7,074 102,212 (59,297) 42,915 1,913 - 1,913 42,915 1,913 134 249 - (6) 5,223 (14,494) 34,021 107,852 (73,831) 34,021 - - 7,458 - (6,643) - 2,728 2,728 - 2,728 Total $’000 111,221 (60,099) 51,122 51,122 269 249 7,458 (6) - (15,269) 43,823 119,231 (75,408) 43,823 82 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 8: Property, plant, and equipment (continued) 2018 As at 1 July 2017 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2018 Opening net book amount Additions on the acquisition of subsidiary Transfers from mine development Additions Transfers Depreciation charge Closing net book amount As at 30 June 2018 Cost or fair value Accumulated depreciation Net book amount (a) Valuation of property Land and buildings $’000 Plant and equipment $’000 Assets under construction $’000 1,618 (210) 1,408 1,408 5,478 - - - (592) 6,294 7,096 (802) 6,294 59,376 (43,289) 16,087 16,087 35,752 703 4,637 1,744 (16,008) 42,915 102,212 (59,297) 42,915 1,744 - 1,744 1,744 1,793 - 120 (1,744) - 1,913 1,913 - 1,913 Total $’000 62,738 (43,499) 19,239 19,239 43,023 703 4,757 - (16,600) 51,122 111,221 (60,099) 51,122 Properties are recognised as a Level 2 in the fair value hierarchy as defined under AASB 13 Fair Value Measurements. The valuation basis of property is fair value being the amounts for which the assets could be exchanged between willing parties in an arm’s length transaction, based on current prices in an active market for similar properties in the same location and condition. (b) Depreciation Items of plant and equipment are depreciated on a straight-line basis over their estimated useful lives, the duration of which reflects the useful lives depending on the nature of the asset. The group uses the straight-line method when depreciating property, plant and equipment, resulting in estimated useful lives for each class of depreciable assets as follows: Class of fixed asset Properties Plant and equipment – mine camp Plant & equipment – mill refurbishments Plant & equipment – tailings dam Plant & equipment – computers Plant & equipment – office equipment Plant & equipment – office furniture Plant & equipment – other Mine and exploration equipment Motor vehicles Useful life 40 years 2 – 15 years 5 years 5 years 4 years 3 – 10 years 10 – 25 years 2.5 – 25 years 2 – 33.3 years 8 – 12 years Key judgement, estimates and assumptions: Depreciation The estimations of useful lives, residual value and depreciation methods require management judgement and are reviewed bi-annually for all major items of plant and equipment. If they need to be modified, the change is accounted for prospectively from the date of reassessment until the end of the revised useful life (for both the current and future years). 83 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 8: Property, plant, and equipment (continued) (c) Derecognition An item of property, plant and equipment is derecognised when it is sold or otherwise disposed of, or when its use is expected to bring no future economic benefits. Gains and losses on derecognising assets are determined by comparing proceeds with the carrying amount. These gains and losses are included in the Income Statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. (d) Impairment Key judgement, estimates and assumptions: Impairment of assets The group assesses each Cash-Generating Unit (CGU) at least annually, to determine whether there is any indication of impairment or reversal of a prior impairment. Where an indicator of impairment or reversal exists, a formal estimate of the recoverable amount is made, which is deemed as being the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as ore reserves, future production, commodity prices, discount rates, exchange rates, operating costs, sustaining capital costs, any future development cost necessary to produce the reserves (including the magnitude and timing of cash flows) and operating performance. Some of the factors considered in management’s assessment as to whether there existed any indicators of impairment at the CGU’s included: • Strong operational; and financial performance of the CGU’s compared to that assumed in the prior year impairment model, particularly for the Edna May CGU; • The extension of mine life across all CGU’s; • Positive gold price environment; • The decision of the business to develop an underground operation at Edna May; and • Acquisitions complementing the existing CGU’s of the group. (e) Recognition and measurement of property, plant, and equipment Cost Each class of plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Properties are shown at fair value based on valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Major spares purchased specifically for particular plant are capitalised and depreciated on the same basis as the plant to which they relate when in use. Assets are depreciated or amortised from the date they are installed and are ready for use, or in respect of internally constructed assets, from the time the asset is completed and deemed ready for use. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. 84 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 9: Development assets Development assets Less: accumulated amortisation Net book amount Development asset reconciliation Opening net book amount Additions on the acquisition of subsidiary Additions Restoration and rehabilitation adjustment Impairment Transfer to property, plant, and equipment Transfer from exploration and evaluation asset Amortisation Closing net book amount (a) Impairment Note 17(b) 2(b) 8 10 2019 $’000 330,866 (231,436) 99,430 84,728 13,759 57,159 3,164 - (249) 7,096 (66,227) 99,430 2018 $’000 249,937 (165,209) 84,728 53,455 23,240 65,568 817 (2,999) (703) 9,515 (64,165) 84,728 No impairment of development assets arose during the 2019 financial year. Refer to note 8(d) for further discussion on the impairment of assets and the process undertaken by managements in forming this conclusion. In the prior year the evaluation of the mine plan and future cash flows of the Edna May gold mine resulted in an impairment charge of $2,999,000 being incurred on the Edna May cash generating unit (CGU). However, in conjunction with the assessment of the recoverable amount for the Edna May CGU management revised the fair value of the contingent consideration which resulted in a reduction in the fair value of the contingent consideration of $3,282,000 in the prior year. (b) Recognition and measurement Mine development Development assets represent expenditure in respect of exploration, evaluation, feasibility and development incurred by or on behalf of the group, including overburden removal and construction costs, previously accumulated and carried forward in relation to areas of interest in which mining has now commenced. Such expenditure comprises net direct costs and an appropriate allocation of directly related overhead expenditure. All expenditure incurred prior to commencement of production from each development property is carried forward to the extent to which recoupment out of future revenue from the sale of production, or from the sale of the property, is reasonably assured. When further development expenditure is incurred in respect of a mine property after commencement of production, such expenditure is carried forward as part of the cost of the mine property only when future economic benefits are reasonably assured, otherwise the expenditure is classified as part of the cost of production and expensed as incurred. Such capitalised development expenditure is added to the total carrying value of development assets being amortised. Deferred mining expenditure - Pre-production mine development Pre-production mining costs incurred by the group in relation to accessing recoverable reserves are carried forward as part of ‘development assets’ when future economic benefits are established, otherwise such expenditure is expensed as part of the cost of production. 85 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 9: Development assets (continued) (b) Recognition and measurement (continued) Deferred mining expenditure - Surface mining costs Mining costs incurred during the production stage of operations are deferred, this is generally the case where there are fluctuations in deferred mining costs over the life of the mine, and the effect is material. The amount of mining costs deferred is based on the ratio obtained by dividing the amount of waste mined by the quantity of gold ounces contained in the ore. Mining costs incurred in the period are deferred to the extent that the current period waste to contained gold ounce ratio exceeds the life-of-mine waste-to-ounce (life-of-mine) ratio. The life-of-mine ratio is based on economically recoverable reserves of the operation. In the production stage of some operations, further developments of the mine require a phase of unusually high overburden removal activity that is similar in nature to pre-production mine development. The costs of such unusually high overburden removal activity are deferred and charged against reported profits in subsequent periods on a unit- of-production basis. The accounting treatment is consistent with that of overburden removal costs incurred during the development phase of a mine, before production commences. Deferred mining costs that relate to the production phase of the operation are carried forward as part of ‘development assets’. The amortisation of deferred mining costs is included in site operating costs. Key judgement, estimates and assumptions: Production stripping The life-of-mine ratio is a function of an individual mine’s design and therefore changes to that design will generally result in changes to the ratio. Changes in other technical or economic parameters that impact reserves will also have an impact on the life-of-mine ratio even if they do not affect the mine’s design. Changes to the life-of-mine ratio are accounted for prospectively. Key judgement, estimates and assumptions: Deferred mining expenditure The group defers mining costs incurred during the production stage of its operations. Changes in an individual mine’s design will generally result in changes to the life-of-mine waste to contained gold ounces (life-of-mine) ratio. Changes in other technical and economic parameters that impact reserves will also have an impact on the life-of-mine ratio even if they do not affect the mine’s design. Changes to the life-of-mine are accounted for prospectively. Key judgement, estimates and assumptions: Amortisation and impairment The group uses the unit-of-production basis when depreciating / amortising mine specific assets which results in a depreciation / amortisation charge proportional to the depletion of the anticipated remaining life-of-mine production. Economic life, which is assessed annually, has due regard to both its physical life limitations and to present assessments of economically recoverable reserves of the mine property. These calculations require the use of estimates and assumptions. Development assets are amortised based on the unit-of-production method which results in an amortisation charge proportional to the depletion of the estimated recoverable reserves. Where there is a change in the reserves the amortisation rate is adjusted prospectively in the reporting period in which the change occurs. The net carrying values of development expenditure carried forward are reviewed half-yearly by Directors to determine whether there is any indication of impairment, refer to Note 8 (d) for further information. Key judgement, estimates and assumptions: Ore reserves The group estimates ore reserves and mineral resources each year based on information compiled by Competent Persons as defined in accordance with the Australian code for reporting Exploration Results, Mineral Resources and Ore Reserves 2012 (‘JORC code’). Estimated quantities of economically recoverable reserves are based upon interpretations of geological models and require assumptions to be made including estimates of short and long-term commodity prices, exchange rates, future operating performance and capital requirements. Changes in reported reserve estimates can impact the carrying value of plant and equipment and development, provision for restoration and rehabilitation obligations as well as the amount of depreciation and amortisation. 86 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 10: Exploration and evaluation assets Exploration and evaluation Exploration and evaluation asset reconciliation Opening net book amount Additions on the acquisition of subsidiary Additions Impairment Exchange differences Transfer to development asset Closing net book amount (a) Recognition and measurement Note 17(a) 2(b) 2019 $’000 99,442 19,317 72,262 17,732 (2,800) 27 (7,096) 99,442 2018 $’000 19,317 19,101 - 12,165 (2,428) (6) (9,515) 19,317 Exploration and evaluation Exploration and evaluation costs related to areas of interest are capitalised and carried forward to the extent that: (a) Rights to tenure of the area of interest are current; and (b) (i) Costs are expected to be recouped through successful development and exploitation of the area of interest or alternatively by sale; or (ii) Where activities in the area of interest have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, active and significant operations in, or in relation to, the areas are continuing. Such expenditure consists of an accumulation of acquisition costs and direct net exploration and evaluation costs incurred by or on behalf of the group, together with an appropriate portion of directly related overhead expenditure. Deferred feasibility Feasibility expenditure represents costs related to the preparation and completion of feasibility studies to enable a development decision to be made in relation to an area of interest and is capitalised as incurred. When production commences, relevant past exploration, evaluation and feasibility expenditure in respect of an area of interest that has been capitalised is transferred to mine development where it is amortised over the life of the area of interest to which it relates on a unit-of-production basis. When an area of interest is abandoned or the Directors decide it is not commercial, any accumulated costs in respect of that area are written off in the year the decision is made. Each area of interest is reviewed at the end of each reporting period and accumulated costs written off to the extent they are not expected to be recoverable in the future. Mineral rights Mineral rights comprise identifiable exploration and evaluation assets, mineral resources and ore reserves, which are acquired as part of a business combination or a joint venture and are recognised at fair value at date of acquisition. Mineral rights are attributable to specific areas of interest and are classified within exploration and evaluation assets. Mineral rights attributable to each area of interest are amortised when commercial production commences on a unit- of-production basis over the estimated economic reserve of the mine to which the rights related. Impairment Impairment of specific exploration and evaluation assets during the year have occurred where Directors have concluded that capitalised expenditure is unlikely to be recovered by sale or future exploitation. At each reporting date the group undertakes an assessment of the carrying amount of its exploration and evaluation assets. During the year indicators of impairment were identified on certain exploration and evaluation assets in accordance with AASB 6 Exploration for and Evaluation of Mineral Resources. As a result of this review, an impairment loss of $2.8 million (2018: $2.4 million) has been recognised in relation to areas of interest where the directors have concluded that capitalised expenditure is unlikely to be recovered by sale or future exploitation. 87 RAMELIUS RESOURCES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 10: Exploration and evaluation assets (continued) Key judgement, estimates and assumptions: Exploration, Evaluation and Deferred feasibility expenditure Judgement is required to determine whether future economic benefits are likely, from either exploitation or sale, or whether activities have not reached a stage that permits a reasonable assessment of existence of reserves. In addition to these judgements, the group has to make certain estimates and assumptions. The determination of JORC resources is itself an estimation process that involves varying degrees of uncertainty depending on how the resources are classified (i.e. measured, indicated or inferred). The estimates directly impact when the group capitalises exploration and evaluation expenditure. The capitalisation policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves will be found. Any such estimates and assumptions may change as new information becomes available. Note 11: Trade and other payables Trade payables Other payables and accruals Total trade and other payables (a) Recognition and measurement 2019 $’000 9,436 35,490 44,926 2018 $’000 7,080 24,716 31,796 Trade and other payables Liabilities for trade and other payables are initially recorded at the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the group, and then subsequently at amortised cost. Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature. Risk exposure The group’s exposure to cash flow risk is discussed in Note 16. Note 12: Contingent consideration Non-current Acquisition of Edna May contingent consideration Total contingent consideration Movements Balance as at 1 July 2018 Unwinding of discount rate Change in fair value of contingent consideration Total contingent consideration 88 2019 $’000 12,121 12,121 Note 2(c) 1(b) 2018 $’000 12,892 12,892 Contingent consideration $’000 12,892 1,238 (2,009) 12,121 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 12: Contingent consideration (continued) Significant estimate: contingent consideration The purchase consideration for Edna May included contingent consideration of: • $20,000,000 in cash or Ramelius shares, or a combination of both, at Ramelius’ sole election, upon a Board approved decision-to-mine the Edna May Stage 3 open pit; and • Royalty payments of up to a maximum of $30,000,000 payable at $60/oz from gold production over 200,000 ounces (or up to $50,000,000 payable at $100/oz if the Edna May Stage 3 open pit decision-to-mine is not Board approved). The potential undiscounted amount payable under the agreement is between $0 and $50,000,000. The fair value of the contingent consideration has been revalued at 30 June 2019 which resulted in a reduction of the contingent consideration of $2,009,000 which has been recorded in the income statement. The main driver behind the reduction in the fair value of the contingent consideration has been the decision to commence underground mining at Edna May as opposed to carrying out the larger ‘Stage 3’ open pit, which attracted the $20,000,000 bullet payment noted above. Note 13: Provisions Current Employee benefits Rehabilitation and restoration costs Total current provisions Non-current Employee benefits Rehabilitation and restoration costs Total non-current provisions Rehabilitation and restoration costs Opening book amount New provision from the acquisition of subsidiary Revision of provision during the year Expenditure on rehabilitation and restoration Discount unwind 2019 $’000 6,089 763 6,852 379 45,608 45,987 42,489 - 3,150 (209) 941 2018 $’000 5,411 664 6,075 1,344 41,825 43,169 20,914 20,984 714 (754) 631 Total provision for rehabilitation and restoration 46,371 42,489 Rehabilitation and restoration costs Current Non-current Total provision for rehabilitation and restoration 763 45,608 46,371 664 41,825 42,489 (a) Revision of rehabilitation and restoration provision Represents amendments to future restoration and rehabilitation liabilities resulting from changes to the approved mine plan in the financial year, initial recognition of new rehabilitation provisions as well as a change in provision assumptions. Key provision assumption changes include reassessment of costs and timing of expenditure. 89 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 13: Provisions (continued) (b) Recognition and measurement Provisions Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Employee Benefits - Wages, salaries, salary at risk, annual leave and sick leave Liabilities arising in respect of wages and salaries, bonuses, annual leave and any other employee benefits expected to be wholly settled within 12 months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liabilities are settled. These amounts are recognised in ‘trade and other payables’ (for amounts other than annual leave and bonuses) and ‘current provisions’ (for annual leave and bonuses) in respect of employee services up to the reporting date. Costs incurred in relation to non-accumulating sick leave are recognised when the leave is taken and are measured at the rate paid or payable. Long service leave The liability for long service leave is measured at the present value of the estimated future cash outflows to be made by the group resulting from employees’ services provided up to the reporting date. Liability for long service leave benefits not expected to be settled within 12 months are discounted using the rates attaching to high quality corporate bonds at the reporting date, which most closely match the terms of maturity of the related liability. In determining the liability for these long-term employee benefits, consideration has been given to expected future increases in wage and salary rates, the groups experience with staff departures and periods of service. Related on-costs have also been included in the liability. The obligations are presented as current liabilities in the Balance Sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. Defined contribution superannuation plans Contributions to defined contribution superannuation plans are expensed when incurred. Provision for restoration and rehabilitation Estimated costs of decommissioning and removing an asset and restoring the site are included in the cost of the asset as at the date the obligation first arises and to the extent that it is first recognised as a provision. The group records the present value of the estimated cost of constructive and legal obligations to restore operating locations in the period in which the obligation is incurred. The nature of decommissioning activities includes dismantling and removing structures, rehabilitating mine sites, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation and revegetation of affected areas. Typically, the obligation arises when the asset is installed, or the environment is disturbed at the development location. When the liability is initially recorded, the present value of the estimated cost is capitalised by increasing the carrying amount of the related mining assets. Over time, the discounted liability is increased for the change in the present value based on the discount rates that reflect the current market assessments and the risks specific to the liability. Additional disturbances or changes in decommissioning costs will be recognised as additions or changes to the corresponding asset and rehabilitation liability when incurred. The unwind effect of discounting the provision is recorded as a finance cost in the Income Statement and the carrying amount capitalised as a part of mining assets is amortised on a unit-of-production basis. Costs incurred that relate to an existing condition caused by past operations, but do not have future economic benefits, are expensed as incurred. Key judgement, estimates and assumptions: Provision for restoration and rehabilitation The group assesses its mine restoration and rehabilitation provision bi-annually in accordance with the accounting policy. Significant judgement is required in determining the provision for restoration and rehabilitation as there are many transactions and other factors that will affect the ultimate liability payable to rehabilitate and restore the mine sites. The estimate of future costs therefore requires management to make assessment of the future restoration and rehabilitation date, future environmental legislation, changes in regulations, price increases, changes in discount rates, the extent of restoration activities and future removal and rehabilitation technologies. When these factors change or become known in the future, such differences will impact the restoration and rehabilitation provision in the period in which they change or become known. At each reporting date the rehabilitation and restoration provision is remeasured to reflect any of these changes. 90 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: KEY NUMBERS (CONTINUED) Note 13: Provisions (continued) (b) Recognition and measurement (continued) Key judgement, estimates and assumptions: Long service leave Management judgement is required in determining the following key assumptions used in the calculation of long service leave at balance sheet date: - Future increase in salaries and wages; - Future on cost rates; and - Future probability of employee departures and period of service Note 14: Share capital Ordinary shares Share capital at 1 July 2017 Shares issued from exercise of options Shares issued from exercise of performance rights Less cost of share issues (net of tax) At 30 June 2018 Note Number of shares $’000 526,734,248 149,122 1,500,000 274,760 - 448 - (2) 528,509,008 149,568 Shares issued as part of the acquisition of Explaurum1 17(a) 127,778,619 64,232 Shares issued from exercise of performance rights Shares issued from exercise of options Transfer from share based payments reserve At 30 June 2019 85,342 1,500,000 - 28 300 90 657,872,969 214,218 1 Represents the value of shares at the date of issue. Refer to Note 15 for details on the NCI reserve. (a) Recognition and measurement Share capital Ordinary share capital is classified as equity and is recognised at fair value of the consideration received by the group. Any transaction costs arising on the issue of ordinary shares and the associated tax are recognised directly in equity as a reduction of the share proceeds received. Ordinary shares Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings other than voting exclusions as required by the Corporations Act 2001. In the event of winding up of the Company, ordinary shareholders rank after all creditors and are fully entitled to any proceeds of liquidation. Options over shares Refer Note 24 for further information on options, including details of any options issued, exercised and lapsed during the financial year and options over shares outstanding at financial year end. Rights over shares Refer Note 24 for further information on rights, including details of any rights issued, exercised and lapsed during the financial year and rights over shares outstanding at financial year end. 91 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: RISK Note 15: Reserves Share-based payments reserve Financial assets at FVOCI Other NCI acquisition reserve Foreign currency translation reserve Total reserves 2019 $’000 2,032 (383) 634 (9,926) (31) (7,764) 2018 $’000 1,545 (333) 634 - 38 1,884 Share-based payment reserve Share-based payments reserve records items recognised as expenses on valuation of employees share options and rights. Financial assets at FVOCI The group has elected to recognise changes in the fair value of certain investments in equity securities in OCI. These changes are accumulated within the FVOCI reserve within equity. The group transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised. Non-Controlling Interest (NCI) acquisition reserve The NCI acquisition reserve represents the incremental increase in the RMS share price on the buy-out of the EXU non- controlling interest post the date control was obtained. Foreign currency translation reserve Foreign currency translation reserve comprises all foreign exchange difference arising from the translation of the financial statements of foreign operations where their function currency is different to the presentation currency of the reporting entity. Note 16: Financial instruments and financial risk management The Directors are responsible for monitoring and managing financial risk exposures of the group. The group holds the following financial assets and liabilities: Financial assets Cash at bank Term deposits Trade and other receivables Secured term deposits with financial institutions Other security bonds and deposits Available-for-sale financial assets Total financial assets Financial liabilities Trade and other payables Total financial liabilities (a) Recognition and measurement 2019 $’000 40,815 55,000 6,774 7,500 488 101 2018 $’000 38,181 30,028 4,664 6,819 477 126 110,678 80,295 44,926 44,926 31,796 31,796 Initial recognition and measurement Financial instruments are initially measured at fair value plus transaction costs except where the instrument is classified ‘at fair value through profit or loss’ in which case transaction costs are expensed immediately. 92 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: RISK (CONTINUED) Note 16: Financial instruments and financial risk management (continued) (b) Classification and subsequent measurement Financial instruments are subsequently measured at fair value, amortised cost using the effective interest rate method or at cost. Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Quoted prices in an active market are used to determine fair value where possible. The group does not designate any interest in subsidiaries, associates or joint venture entities as being subject to the requirements of accounting standards specifically applicable to financial instruments. Amortised Cost Amortised cost amounts are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method. Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Fair value through other comprehensive income (FVOCI) FVOCI financial assets include any financial assets not included in the above categories. (c) Fair value Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. (d) Expected loss At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. If there is objective evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously not recognised in the profit or loss - is removed from equity and recognised in profit or loss. Management of financial risk The group’s management of financial risk is aimed at ensuring cash flows are sufficient to: • Withstand significant changes in cash flow at risk scenarios and meet all financial commitments as and when they fall due; and • Maintain the capacity to fund future project development, exploration and acquisition strategies. The group continually monitors and tests its forecast financial position against these criteria. The group is exposed to the following financial risks: liquidity risk, credit risk and market risk (including foreign exchange risk, commodity price risk and interest rate risk). (a) Liquidity risk Liquidity risk arises from the possibility that the group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. Prudent liquidity risk management implies maintaining sufficient cash to meet obligations when due. The group manages liquidity risk by regularly monitoring forecast cash flows. i. Maturities of financial liabilities (a) Payables Trade and other payables are expected to be settled within 6 months. (b) Borrowings The group has no outstanding borrowings as at 30 June 2019. (b) Credit risk exposures Credit risk represents the loss that would be recognised if counterparties failed to perform as contracted. The credit risk on financial assets of the entity which have been recognised in the Balance Sheet is the carrying amount, net of any provision for doubtful debts. Credit risk is managed through the consideration of credit worthiness of customers and counterparties. This ensures to the extent possible, that customers and counterparties to transactions are able to pay their obligations when due and payable. Such monitoring is used in assessing impairment. i. Past due but not impaired As at 30 June 2019 there were no receivables past due but not impaired. 93 RAMELIUS RESOURCES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS: RISK (CONTINUED) Note 16: Financial instruments and financial risk management (continued) (b) Credit risk exposures (continued) ii. Impaired trade receivables Individual receivables which are known to be uncollectable are written off by reducing the carrying amount directly. The other receivables are assessed to determine whether there is objective evidence that an impairment has been incurred but not yet identified. For these receivables, the estimated impairment losses are recognised in a separate provision for impairment. The group considers that there is evidence of impairment if any of the following indicators are present: • significant financial difficulties of the debtor, • probability that the debtor will enter bankruptcy or financial reorganisation, and • default or delinquency in payments (past due). Receivables for which an impairment provision was recognised are written off against the provision when there is no expectation of recovering additional cash. Impairment losses are recognised in profit or loss within other expenses. Subsequent recoveries of amounts previously written off are credited against other expenses. (c) Market risk i. Foreign currency risk The group undertakes transactions impacted by foreign currencies; hence exposures to exchange rate fluctuations arise. The majority of the group’s revenue is affected by movements in USD:AUD exchange rate that impacts on the Australian gold price whereas the majority of costs (including capital expenditure) are in Australian dollars. The group considers the effects of foreign currency risk on its financial position and financial performance and assesses its option to hedge based on current economic conditions and available market data. ii. Commodity price risk The group’s revenue is exposed to commodity price fluctuations, in particular to gold prices. Price risk relates to the risk that the fair value of future cash flows of gold sales will fluctuate because of changes in market prices largely due to demand and supply factors for commodities and gold price commodity speculation. The group is exposed to commodity price risk due to the sale of gold on physical delivery at prices determined by markets at the time of sale. The group manages commodity price risk as follows: Forward sales contracts Gold price risk is managed through the use of forward sales contracts which effectively fix the Australian Dollar gold price and thus provide cash flow certainty. These contracts are accounted for as sale contracts with revenue recognised once gold has been physically delivered into the contract. The physical gold delivery contracts are considered a contract to sell a non-financial item and therefore do not fall within the scope of AASB 9 Financial Instruments. At 30 June 2019, the group had 240,900 ounces in forward sales contracts at an average price of A$1,834. Refer to Note 21(a) for further details. Put options Gold price risk may be managed with the use of hedging strategies through the purchase of gold put options to establish gold “floor prices” in Australian dollars over the group’s gold production; however, this is generally at levels lower than current market prices. These put options enable Ramelius to retain full exposure to current, and any future rises in the gold price while providing protection to a fall in the gold price below the strike price. Gold put options are marked to market at fair value through profit and loss. Gold prices, cash flows and economic conditions are constantly monitored to determine whether to implement a hedging program. (d) Gold price sensitivity analysis The group has performed a sensitivity analysis relating to its exposure to gold price risk at reporting date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result in a change in these risks. Any impacts from such hedging would be in relation to revenue from gold sales. Based on gold sales of 39,102oz (200,352 oz less forward sales of 161,250oz) in 2019 and 51,523oz (200,273oz less forward sales of 148,750oz) in 2018, if gold price in Australian dollars had changed by + / - A$100, with all other variables remaining constant, the estimated realised impact on pre-tax profit (loss) and equity would have been as follows: 94 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE Note 16: Financial instruments and financial risk management (continued) (d) Gold price sensitivity analysis (continued) Impact on pre-tax profit Increase in gold price by A$100 Decrease in gold price by A$100 Impact on equity Increase in gold price by A$100 Decrease in gold price by A$100 (e) Capital risk management 2019 $’000 3,910 (3,910) 3,910 (3,910) 2018 $’000 5,152 (5,152) 5,152 (5,152) The objective when managing capital is to maintain a strong capital base capable of withstanding cash flow variability, whilst providing flexibility to pursue growth aspirations. Ramelius aims to maintain an optimal capital structure to reduce the cost of capital and maximise shareholder returns. The capital structure is equity as shown in the Balance Sheet. The group is not subject to any externally imposed capital requirements. (f) Fair value measurement The financial assets and liabilities of the group are recognised on the Consolidated Balance Sheet at their fair value in accordance with the group’s accounting policies. Measurement of fair value is grouped into levels based on the degree to which fair value is observable in accordance with AASB 7 Financial Instruments: Disclosure. - Level 1 - fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. - Level 2 - fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). - Level 3 - fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). (g) Fair value measurement of financial instruments Derivative financial assets are measured at fair value using valuation techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates. The valuations would be recognised as a Level 2 in the fair value hierarchy as they have been derived using inputs from a variety of market data. Available-for-sale financial assets are measured at fair value using the closing price on the reporting date as listed on the Australian Securities Exchange Limited (ASX). Available-for-sale financial assets are recognised as a Level 1 in the fair value hierarchy as defined under AASB 7 Financial Instruments: Disclosures. The carrying amounts of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. Note 17: Asset acquisitions (a) Tampia Hill Gold Project (Explaurum Limited) On 10 September 2018 Ramelius released a Bidders Statement in relation to its off-market takeover bid under Chapter 8 of the Corporations Act for all of the fully paid ordinary shares in Explaurum Limited (Explaurum) (then ASX: EXU). Under the offer, Explaurum shareholders would have received one (1) Ramelius share for every four (4) Explaurum shares held. On 13 December 2018 Ramelius announced an improved, best and final takeover offer (“the Offer”) for Explaurum. Under the improved offer Explaurum shareholders received $0.02 cash for every Explaurum share held in addition to the existing consideration of one (1) Ramelius share for every four (4) Explaurum shares held. On 18 December 2018 the Explaurum Board unanimously recommended that Explaurum shareholders accept the Ramelius offer in the absence of a superior proposal. Control of Explaurum was obtained on 27 December 2018. The offer closed on 25 February 2019 with Ramelius holding a relevant interest in 95.58% of Explaurum shares. On this date Ramelius exercised its compulsory acquisition powers under the Corporations Act to acquire the remaining Explaurum shares. The compulsory acquisition was completed on 4 April 2019 with Ramelius having a 100% relevant interest in Explaurum Limited and its subsidiaries. 95 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE (CONTINUED) Note 17: Asset acquisitions (continued) (a) Tampia Hill Gold Project (Explaurum Limited) (continued) The Tampia Hill Gold Project is located in the wheatbelt of Western Australia is located near Narembeen, 204km east of Perth in Western Australia and 140km by road from the existing Edna May Gold Mine. The Tampia Hill Gold Project has a Mineral Resource of 460,000 ounces and an Ore Reserve of 200,000 ounces. The group has determined that the transaction does not constitute a business combination in accordance with AASB 3 Business Combinations. The acquisition of the net assets meets the definition of, and has been accounted for, as an asset acquisition. When an asset acquisition does not constitute a business combination, the assets and liabilities are assigned a carrying amount based on their relative fair values in an asset purchase transaction and no deferred tax will arise in relation to the acquired assets and assumed liabilities as the initial recognition exemption for deferred tax under AASB 112 Income Taxes is applied. No goodwill arises on the acquisition and transactions costs of the acquisition are included in the capitalised cost of the asset. Details of the purchase consideration and the net assets acquired are as follows: Purchase consideration: Cash paid Ordinary shares issued (127,778,619) NCI reserve Acquisition costs Total purchase consideration Note At acquisition $’000 At 30 June 2019 $’000 14 15 5,219 27,727 - 1,127 34,073 8,472 64,232 (9,926) 4,893 67,671 The fair value of the shares issued to gain control of Explaurum Limited was based on the Ramelius share price on 27 December 2018 (the date on which control was obtained) of $0.425 per share. The fair value of the shares issued post control being obtained was the share price at the date the shares were issued. The difference between this share price and that at the date of control has been recorded in the NCI acquisition reserve (see note 15). At acquisition $’000 At 30 June 2019 $’000 1,665 495 129 66,492 (3,063) (3,700) (117) 61,901 (27,828) 34,073 1,665 495 129 72,262 (3,063) (3,700) (117) 67,671 - 67,671 8,472 4,893 (3,317) (1,665) 8,383 Net assets acquired: Cash and cash equivalents Trade and other receivables Plant and equipment Exploration & evaluation assets Trade and other payables Loans payable Provisions Net identifiable assets acquired Less: Non-controlling interest Net assets acquired Outflow of cash to acquire subsidiary, net of cash acquired: Cash consideration, net of receipts Acquisition costs Less: acquisition costs provided for but not paid Less: cash balance acquired Net outflow of cash – investing activities 96 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE (CONTINUED) Note 17: Asset acquisitions (continued) (b) Marda Gold Project (Black Oak Minerals Limited) The Marda Gold Project is located 191km north-northeast of the Edna May operations and is amenable to processing at the existing Edna May facilities. The Marda Gold Project has a Mineral Resource of 300,000 ounces and an Ore Reserve of 89,000 ounces. On 13 September 2018 Ramelius entered into a binding agreement for the acquisition of Black Oak Minerals Limited (in Liquidation) (“BOK”), the owner of the Marda Gold Project, for $13.0 million. A BOK creditors meeting held on 1 November 2018 approved the acquisition of BOK by Ramelius paving the way for Ramelius to apply to the Federal Court of Australia for the transfer of the shares in BOK to the group. On 31 January 2019 the Federal Court of Australia approved the transfer of shares with completion occurring on 13 February 2019. The group has determined that the transaction does not constitute a business combination in accordance with AASB 3 Business Combinations. The acquisition of the net assets meets the definition of, and has been accounted for, as an asset acquisition. When an asset acquisition does not constitute a business combination, the assets and liabilities are assigned a carrying amount based on their relative fair values in an asset purchase transaction and no deferred tax will arise in relation to the acquired assets and assumed liabilities as the initial recognition exemption for deferred tax under AASB 112 Income Taxes is applied. No goodwill arises on the acquisition and transactions costs of the acquisition are included in the capitalised cost of the asset. Details of the purchase consideration and the net assets acquired are as follows: Purchase consideration: Cash paid Acquisition costs Total purchase consideration Net assets acquired: Consumables Land & buildings Plant and equipment Mine development Net assets acquired Outflow of cash to acquire subsidiary, net of cash acquired: Cash consideration Acquisition costs Less: acquisition costs provided for but not paid Net outflow of cash – investing activities Note 18: Business combination $’000 13,000 901 13,901 2 135 5 13,759 13,901 13,000 901 (663) 13,238 In the prior reporting period Ramelius acquired Edna May Operations Pty Limited from Evolution Mining Limited. Part of the purchase consideration was consideration contingent upon future production and mine development. The contingent consideration arrangement requires the group to pay the former owner Evolution Mining Limited a royalty of either $60 or $100 per ounce and/or a payment of $20,000,000 in cash or Ramelius shares as described in note 12. The maximum amount payable under this arrangement is $50,000,000. There is no minimum amount payable. The fair value of the contingent consideration as at 30 June 2018 of $12,892,000 was estimated calculating the present value of the future expected cash flows. The estimates were based on a discount rate of 10% and probability adjusted production profiles. For the year ended 30 June 2019, there was an increase of $1,238,000 recognised in the income statement for the contingent consideration arrangement which represents the unwinding of the discount rate. In addition to this there was a decrease of $2,009,000 recognised in the income statement relating to changes in the fair value of the contingent consideration. The liability is presented as non-current contingent consideration in the balance sheet. 97 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: GROUP STRUCTURE (CONTINUED) Note 19: Interests in other entities Controlled entities The group’s principal subsidiaries at 30 June 2019 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group. The country of incorporation or registration is also their principal place of business. Name of Entity Parent entity Country of incorporation Functional currency Percentage owned 2019 % Percentage owned 2018 % Ramelius Resources Limited Australia Australian dollars n/a n/a Subsidiaries of Ramelius Resources Limited Mt Magnet Gold Pty Limited RMSXG Pty Limited Ramelius USA Corporation Australia Australian dollars Australia Australian dollars USA US dollars Ramelius Operations Pty Limited Australia Australian dollars Explaurum Limited Australia Australian dollars Subsidiaries of Ramelius Operations Pty Limited Edna May Operations Pty Limited Australia Australian dollars Marda Operations Pty Limited (formerly Black Oak Minerals Limited) Australia Australian dollars Subsidiaries of Explaurum Limited Explaurum Operations Pty Limited Australia Australian dollars Ninghan Exploration Pty Limited Australia Australian dollars 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 - - - The parent entity and all subsidiaries of Ramelius, except for Ramelius USA Corporation, form part of the closed group detailed at Note 27. Joint operations The group has the following direct interests in unincorporated joint operations at 30 June 2019 and 30 June 2018: Joint operation project Joint operation partner Principal activity 2019 Interest (%) 85% Withdrawn 0%* 0%* 0%* Diluting 100% 2018 85% 0%* 0%* - - - 0%* 0%* Tanami Mooletar Jumbulyer Nulla South Gibb Rock Dreadnought Resources Limited Unlisted entity Unlisted entity Chalice Gold Mines Limited Chalice Gold Mines Limited Coogee Farm-out Jupiter Unlisted entity Kinetic Gold# Gold Gold Gold Gold Gold Gold Gold * Ramelius is earning into the joint ventures by undertaking exploration and evaluation activities. # - Kinetic Gold is a subsidiary of Renaissance Gold Inc. 98 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: UNRECOGNISED ITEMS Note 19: Interests in other entities (continued) Joint operations (continued) The share of assets in unincorporated joint operations is as follows: 2019 $’000 2018 $’000 Non-current assets Exploration and evaluation assets (note 10) 2,490 3,549 (a) Recognition and measurement Under AASB 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. Ramelius has exploration related joint arrangements which are considered joint operations. Ramelius recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements under the appropriate headings. Note 20: Contingent liabilities The Directors are of the opinion that the recognition of a provision is not required in respect of the following matters, as it is not probable that a future sacrifice of economic benefits will be required, or the amount is not capable of reliable measurement. (a) Bank guarantees The group has negotiated a number of bank guarantees in favour of various government authorities and service providers. The total nominal amount of these guarantees at the reporting date is $370,145 (2018: $2,122,000). These bank guarantees are fully secured by cash on term deposit. Note 21: Commitments (a) Gold delivery commitments Forward sale contracts are accounted for as sale contracts with revenue recognised once gold has been physically delivered. The physical gold delivery contracts are considered own use contracts and therefore do not fall within the scope of AASB 139 Financial Instruments: Recognition and Measurement. As a result, no derivatives are required to be recognised. Forward gold sale contract delivery commitments are shown below: Gold delivery commitments As at 30 June 2019 Within one year Between one and five years Total As at 30 June 2018 Within one year Between one and five years Total Gold for physical delivery Oz 138,800 102,100 240,900 110,250 30,000 140,250 Contracted sales price A$/oz Committed gold sales value $’000 $1,806 $1,873 $1,834 $1,708 $1,758 $1,719 250,605 191,193 441,798 188,347 52,744 241,091 99 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION Note 21: Commitments (continued) (b) Capital expenditure commitments Capital expenditure contracted but not provided for in the financial statements. Within one year Total capital expenditure commitments (c) Operating lease commitments Future minimum rentals payable on non-cancellable operating leases due: Within one year Between one and five years Total operating lease commitments 2019 $’000 1,509 1,509 819 524 1,343 2018 $’000 - - 363 639 1,002 (d) Minimum exploration and evaluation commitments In order to maintain current rights of tenure to exploration tenements, the group is required to perform minimum exploration work to meet minimum expenditure requirements. These obligations are subject to renegotiation and may be farmed out or relinquished. These obligations are not provided for in the financial statements. Within one year Between one and five years Due later than five years Total minimum exploration and evaluation commitments Note 22: Events occurring after the reporting period 2019 $’000 5,171 17,254 22,881 45,306 2018 $’000 3,346 12,099 21,826 37,271 No matters or circumstances have arisen since 30 June 2019 that have significantly affected, or may significantly affect: (a) The group’s operations in future financial years, (b) The results of operations in future financial years, or (c) The group’s state of affairs in future financial years. Note 23: Related party transactions Transactions with related parties are on normal commercial terms and at conditions no more favourable than those available to other parties unless otherwise stated. Key management personnel compensation Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments 2019 $ 2018 $ 3,108,089 2,226,288 172,749 (64,650) 299,583 268,148 141,503 (4,535) 40,000 301,569 Total key management personnel compensation 3,783,919 2,704,825 Detailed remuneration disclosures are provided in the Remuneration Report. 100 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION (CONTINUED) Note 23: Related party transactions (continued) (a) Subsidiaries Interests in subsidiaries are set out in Note 19. (b) Transactions with other related parties There were no other transactions with related parties during the year. In the prior year lease payments were made to an entity related to the late Chairman, Mr R M Kennedy. The lease agreement was for the office property in Adelaide, SA and had been based on normal commercial terms on conditions on an arm’s length basis. Aggregate amounts of each of the above types of transactions with key management personnel of Ramelius Resources Limited: Amounts recognised as an expense Rent of office building 2019 $ 2018 $ - 45,286 There was no other amount receivable from or payable to Directors and their related entities at reporting date. Note 24: Share based payments (a) Options In November 2015 3,000,000 options over the ordinary fully paid shares in Ramelius Resources Limited were issued as approved by the shareholders at the 2015 Annual General Meeting. The table set out below summarises the options granted: As at 1 July Options exercised As at 30 June Vested and exercisable at 30 June 2019 2018 Avg ex price per option Number of options Avg ex price per option Number of options $0.20 $0.20 $0.20 $0.20 3,000,000 (1,500,000) 1,500,000 1,500,000 $0.23 $0.30 $0.20 $0.20 4,500,000 (1,500,000) 3,000,000 3,000,000 Share options outstanding at the end of the year have the following expiry dates and exercise prices: Grant date 26 November 2015 20 November 2015 Total Expiry date Exercise price Share options 30 June 2019 Share options 30 June 2018 11 June 2019 11 June 2020 $0.20 $0.20 - 1,500,000 1,500,000 1,500,000 1,500,000 3,000,000 Weighted average remaining contractual life of options outstanding at the end of the year 0.95 years 1.45 years There were no options granted during the years ended 30 June 2019 and 30 June 2018. 101 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION (CONTINUED) Note 24: Share based payments (continued) (b) Performance rights Under the Performance Rights Plan, which was approved by shareholders at the 2016 Annual General Meeting, eligible employees are granted performance rights (each being an entitlement to an ordinary fully paid share) subject to the satisfaction of vesting conditions and on the terms and conditions as determined by the Board. Performance rights are issued for no consideration and have a nil exercise price. The amount of performance rights that vest depends on Ramelius Resources Limited’s total return to shareholders (TSR), including share price growth, dividends and capital returns, and ranking within a peer group. Once vested performance rights remain exercisable for a period of seven years. Performance rights issued under the plan carry no voting or dividend rights. The table set out below summarises the performance rights granted: As at 1 July Performance rights forfeited Performance rights lapsed Performance rights granted Performance rights exercised As at 30 June Vested and exercisable at 30 June Performance rights outstanding at the end of the year have the following expiry date: Grant date 23 November 2016 23 November 2016 23 November 2016 22 December 2016 1 July 2017 31 July 2017 3 October 2017 5 September 2018 29 November 2018 Total Expiry date 1 July 2024 1 July 2025 1 July 2026 11 June 2026 1 July 2027 1 July 2027 1 July 2027 1 July 2028 1July 2028 2019 Performance rights 2018 Performance rights 6,900,914 (422,645) (143,019) 3,825,125 (85,342) 10,075,033 1,831,778 3,429,330 (235,988) - 3,982,332 (274,760) 6,900,914 701,688 Performance rights 30 June 2019 Performance rights 30 June 2018 701,688 630,090 804,081 500,000 2,635,721 464,445 580,500 2,437,039 1,321,469 701,688 858,451 858,442 500,000 2,793,388 464,445 724,500 - - 10,075,033 6,900,914 Weighted average remaining contractual life of performance rights outstanding at the end of the year 7.92 years 8.25 years 102 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION (CONTINUED) Note 24: Share based payments (continued) (b) Performance rights (continued) The fair value at grant date is independently determined using a Monte Carlo Simulations pricing model that takes into account the exercise price, the term of the performance right, the share price at grant date, expected price volatility of the underlying share and the risk-free rate for the term of the performance right. The expected price volatility is based on historic volatility (based on the remaining life of the performance right). Model inputs for performance rights granted during the year are as follows: Metric Exercise price Grant date Life Share price at grant date Expected price volatility Risk free rate Performance rights granted: 5 Sept 2018 29 Nov 2018 $nil $nil 5 Sept 2018 29 Nov 2018 2.8 years 2.6 years $0.49 63% 2.08% $0.385 55% 2.09% (c) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transaction recognised during the period as part of employee benefits expense were as follows: Performance rights Options Total share-based payment expense (d) Recognition and measurement 2019 $‘000 651 - 651 2018 $‘000 631 53 684 The group provides benefits to employees (including the Managing Director / Chief Executive Officer) in the form of share-based compensation, whereby employees render services in exchange for shares or options and/or rights over shares (equity-settled transactions). The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The group issues share-based remuneration in accordance with the employee share acquisition plan, the performance rights plan or as approved by the Board as follows: (i) Employee share acquisition plan The group operates an Employee Share Acquisition Plan where employees may be issued shares and/or options. Fair value of the equity to which employees become entitled is measured at grant date and recognised as an employee benefits expense over the vesting period with a corresponding increase in equity. Fair value of shares issued is determined with reference to the latest ASX share price. Options are valued using an appropriate valuation technique which takes vesting conditions into account. (ii) Performance rights plan The group has a Performance Rights Plan where key management personnel may be provided with rights to shares in Ramelius. Fair values of rights issued are recognised as an employee benefits expense over the relevant service period, with a corresponding increase in equity. Fair value of rights are measured at effective grant date and recognised over the vesting period during which key management personnel become entitled to the rights. There are a number of different methodologies that are appropriate to use in valuing rights. Fair value of rights granted is measured using the most appropriate method in the circumstances, taking into consideration the terms and conditions upon which the rights were issued. (iii) Other long-term incentives The Board may at its discretion provide share rights either to recruit or as a long-term retention incentive to key executives and employees. The fair value of options and/or rights granted is recognised as an employee benefits expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options and/or rights granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. 103 RAMELIUS RESOURCES ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION (CONTINUED) Note 24: Share based payments (continued) (d) Recognition and measurement (continued) Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options and/or rights that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity. Upon exercise of the rights, the balance of the Share-Based Payments Reserve relating to those rights remains in the share-based payments reserve until it is transferred to retained earnings. Note 25: Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: Deloitte Touche Tohmatsu Audit and review of financial statements Other assurance services - Audit of regulatory returns - Accounting assistance Total remuneration of Deloitte Touche Tohmatsu Grant Thornton Audit and review of financial statements Other assurance services - Audit of regulatory returns Tax advice and compliance services Total remuneration of Grant Thornton Note 26: Earnings per share 2019 $ 105,000 6,250 13,200 124,450 - - - - 2018 $ - - - - 182,333 - 62,400 244,733 2019 Cents 2018 Cents (a) Basic earnings per share Basic earnings per share attributable to the ordinary equity holders of the Company 3.74 5.84 (b) Diluted earnings per share Diluted earnings per share attributable to the ordinary equity holders of the Company 3.67 5.75 (c) Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 584,112,265 527,021,292 Adjustments for calculation of diluted earnings per share: Share rights and options 11,448,559 7,780,731 Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share 595,560,824 534,802,023 2019 Number 2018 Number 104 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION (CONTINUED) Note 26: Earnings per share (continued) (d) Calculation of earnings per share Basic earnings per share is calculated by dividing: - the profit attributable to owners of the Company, adjusted to exclude costs of servicing equity other than ordinary shares, - by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share adjusts the figures used in determining basic earnings per share to take into account the: - after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, - weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (e) Earnings used in the calculation of earnings per share Both the basic and diluted earnings per share have been calculated using the profit after tax as the numerator. (f) Classification of securities All ordinary shares have been included in basic earnings per share. (g) Classification of securities as potential ordinary shares Rights to shares granted to executives and senior managers are included in the calculation of diluted earnings per share and assume all outstanding rights will vest. Rights are included in the calculation of diluted earnings per share to the extent they are dilutive. Options have been included in determining diluted earnings per share to the extent that they are in the money (i.e. not antidilutive). Rights and options are not included in basic earnings per share. Note 27: Deed of cross guarantee Pursuant to ASIC Instrument 2016/785, wholly-owned controlled entities Mt Magnet Gold Pty Ltd (formerly Mt Magnet Gold NL), RMSXG Pty Ltd, Ramelius Operations Pty Ltd, Edna May Operations Pty Ltd, Marda Operations Pty Ltd (formerly Black Oak Minerals Limited), Explaurum Operations Pty Ltd, and Ninghan Exploration Pty Ltd are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of its financial reports and director’s report. It is a condition of the Class Order that the Company and each of its eligible controlled entities enter into a Deed of Cross Guarantee. In December 2011, Ramelius Resources Limited, RMSXG Pty Ltd and Mt Magnet Gold Pty Ltd (the Closed group) entered into a Deed of Cross Guarantee. In March 2018 Edna May Operations and Ramelius Operations Pty Ltd joined the Closed Group by entering the Deed of Cross Guarantee by way of an Assumption Deed. In April 2019 Explaurum Limited, Explaurum Operations Pty Ltd, and Ninghan Exploration Pty Ltd joined the Closed Group by entering the Deed of Cross Guarantee by way of an Assumption Deed. The effect of the Deed is that Ramelius Resources Limited has guaranteed to pay any deficiency in the event of winding up of the abovementioned controlled entities under certain provisions of the Corporations Act 2001. Mt Magnet Gold Pty Ltd, RMSXG Pty Ltd, Ramelius Operations Pty Ltd, Edna May Operations Pty Ltd, Marda Operations Pty Ltd, Explaurum Limited, Explaurum Operations Pty Ltd, and Ninghan Exploration Pty Ltd have also given a similar guarantee in the event that Ramelius Resources Limited is wound up. Explaurum Limited is required to prepare an audited financial report for the year ended 30 June 2019 as it was a disclosing entity during the year ended 30 June 2019. A Consolidated Statement of Comprehensive Income and Consolidated Balance sheet comprising the Closed group which are parties to the Deed of Cross Guarantee, after eliminating all transactions between parties to the Deed is set out below. 105 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION (CONTINUED) Note 27: Deed of cross guarantee (continued) Statement of comprehensive income Sales revenue Cost of production Gross profit Other expenses Other income Interest income Finance costs Profit before income tax Income tax expense Profit for the year from continuing operations Other comprehensive income Net change in fair value of available-for-sale assets Other comprehensive income for the year, net of tax 2019 $’000 352,770 (309,161) 43,609 (14,961) 2,125 1,886 (2,193) 30,466 (8,579) 21,887 2018 $’000 341,784 (281,864) 59,920 (16,548) 3,322 1,021 (1,770) 45,945 (14,739) 31,206 (50) (50) (42) (42) Total comprehensive income for the year 21,837 31,164 Balance sheet Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Total current assets Non-current assets Other receivables Other assets Available-for-sale financial assets Property, plant, and equipment Development assets Exploration and evaluation expenditure Deferred tax assets Total non-current assets Total assets Current liabilities Trade and other payables Provisions Current liabilities 106 2019 $’000 95,815 6,774 41,067 8,629 152,285 1,488 1,488 101 43,823 99,430 98,488 - 244,818 2018 $’000 68,209 3,358 58,086 1,439 131,092 2,264 7,296 126 51,122 84,728 18,812 917 165,265 397,103 296,357 44,926 6,852 51,778 31,796 6,075 37,871 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION (CONTINUED) Note 27: Deed of cross guarantee (continued) Balance sheet (continued) Non-current liabilities Provisions Deferred consideration Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Retained earnings Total equity 2019 $’000 45,987 12,121 7,741 65,849 117,627 2018 $’000 43,169 12,892 - 56,061 93,932 279,476 202,425 214,218 (7,642) 72,900 279,476 149,568 1,890 50,967 202,425 Note 28: Parent entity information The financial information of the parent entity, Ramelius Resources Limited, has been prepared on the same basis as the consolidated financial statements, other than investments in controlled entities which were carried at cost less impairment. (a) Summary financial information Financial statement for the parent entity show the following aggregate amounts: Current assets Total assets Current liabilities Total liabilities Net assets Equity Share capital Reserves Share-based payment reserve Other reserves Retained losses Total equity (b) Income statement Profit / (loss) after income tax Total comprehensive income / (loss) (c) Commitments (i) Operating lease commitments Future minimum rentals payables on non-cancellable leases due: Within one year Later than one year but not later than five years Total operating lease commitments 2019 $’000 2018 $’000 84,055 214,596 (12,735) (16,701) 197,895 71,317 169,516 (6,783) (11,650) 157,866 214,218 149,568 2,032 (383) (17,972) 197,895 (25,104) (25,154) 351 280 631 1,545 (332) 7,086 157,866 7,242 7,200 191 561 752 107 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION (CONTINUED) Note 28: Parent entity information (continued) (c) Commitments (continued) (ii) Minimum exploration and evaluation commitments In order to maintain current rights of tenure to exploration tenements, Ramelius is required to perform minimum exploration work to meet minimum expenditure requirements. These obligations are subject to renegotiation and may be farmed out or relinquished. These obligations are not provided for in the parent entity financial statements. Within one year Later than one year but not later than five years Later than five years Total minimum exploration and evaluation commitments (d) Contingent liabilities 2019 $’000 698 1,748 1,742 4,188 2018 $’000 1,261 3,737 1,808 6,806 The Directors are of the opinion that the recognition of a provision is not required in respect of the following matters, as it is not probable that a future sacrifice of economic benefits will be required, or the amount is not capable of reliable measurement. (i) Bank guarantees Ramelius has negotiated a number of bank guarantees in favour of various government authorities and service providers. The total nominal amount of these guarantees at the reporting date is $370,145 (2018: $2,122,000). These bank guarantees are fully secured by cash on term deposit. (e) Guarantees in relation to debts of subsidiaries In December 2011, Ramelius Resources Limited, RMSXG Pty Ltd and Mt Magnet Gold Pty Ltd (the Closed group) entered into a Deed of Cross Guarantee. In March 2018 Edna May Operations and Ramelius Operations Pty Ltd joined the Closed Group by entering the Deed of Cross Guarantee by way of an Assumption Deed. In April 2019 Explaurum Limited, Explaurum Operations Pty Ltd, and Ninghan Exploration Pty Ltd joined the Closed Group by entering the Deed of Cross Guarantee by way of an Assumption Deed. The effect of the Deed is that Ramelius has guaranteed to pay any deficiency in the event of winding up of the abovementioned subsidiaries under certain provisions of the Corporations Act 2001. The subsidiaries have also given a similar guarantee in the event that Ramelius is wound up. 108 RAMELIUS RESOURCES ANNUAL REPORT 2019NOTES TO THE FINANCIAL STATEMENTS: OTHER INFORMATION (CONTINUED) Note 29: Accounting policies (a) New standards and interpretations not yet adopted The group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for an accounting period that begins on or after 1 July 2018. Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2019 reporting periods and have not been early adopted by the group. The group’s assessment of the impact of these new standards and interpretations is set out below. Title of standard AASB 16 Leases Nature of change Impact AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term (<12 months) and low-value assets. The depreciation of the right of use asset and interest on the lease liability will be recognised in the income statement The group plans to adopt the modified retrospective approach on transition whereby comparative information is not restated. Consequently, the date of initial application is the first day of the annual reporting period in which the new standard applies, being 1 July 2019. The lease asset is measured at an amount equal to the lease liability. The group is in the process of completing changes to the contracting process and the system processes to ensure ongoing compliance with AASB 16. The group has substantially completed the assessment of key contracts and arrangements that may qualify as leases under AASB 16 and require recognition on the balance sheet. The group has reviewed key service contracts including mining services, drilling, haulage, and power generation contracts. The work performed to date includes: Data gathering: site and group data has been collated relating to contracts that may contain leases. Data integrity and analysis: several identified contracts are covered by the exemption for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under AASB 16. Modelling of transition options: review of the transition options is ongoing. Further work on the process improvements and reaching conclusions on the groups accounting interpretations is continuing. In addition, the group is aware that implementation activities of other peers continues and the practical application of the new standard will continue to develop and emerge. The leases recognised by the group under AASB 16 predominately relate to the lease of mining equipment embedded in mining services contracts, power generation contracts, the leasing of light vehicles, and office premises. On adoption of AASB 16, operating lease expense, and a portion of mining contractor charges, will no longer be recognised in gross profit. Instead the depreciation of right- of-use assets will be recognised in the gross profit and lease financing costs will be recognised in the finance costs. Date of adoption AASB 16 is mandatory for financial years commencing on or after 1 January 2019. For the group this is the reporting period commencing on 1 July 2019. 109 RAMELIUS RESOURCES ANNUAL REPORT 2019DIRECTORS’ DECLARATION In the Directors’ opinion: (a) the financial statements and notes set out on pages 38 to 110 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its performance for the financial year ended on that date, and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and (c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 27 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 27. The ‘About this report’ section of the notes to the financial statements confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors. Kevin James Lines Chairman Perth 23 August 2019 110 RAMELIUS RESOURCES ANNUAL REPORT 2019 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RAMELIUS RESOURCES LIMITED 111 Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. Deloitte Touche Tohmatsu ABN 74 490 121 060 Tower 2, Brookfield Place 123 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia Tel: +61 8 9365 7000 Fax: +61 8 9365 7001 www.deloitte.com.au Independent Auditor’s Report to the members of Ramelius Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Ramelius Resources Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated balance sheet as at 30 June 2019, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity, and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. 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. RAMELIUS RESOURCES ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RAMELIUS RESOURCES LIMITED (CONTINUED) 112 Key Audit Matter How the scope of our audit responded to the Key Audit Matter Acquisition and classification of the Tampia Hill Gold Project During the year, the Group acquired the Tampia Hill Gold Project, for a total consideration of $67.7 million. The determination as to whether the acquisition represents a business combination or an asset acquisition requires judgement, specifically as to whether or not the assets acquired and liabilities assumed constitute a business in accordance with AASB 3 ‘Business Combinations’. Details of the key assumptions applied by management as part of the acquisition accounting is disclosed in Note 17. Our procedures included, but were not limited to: • evaluating the nature of the assets acquired and liabilities assumed; • assessing whether the existence of a JORC compliant reserve, without a definitive feasibility study constitutes an ‘input’ in the context of accounting standards; • assessing whether the existing employees who accompanied the Tampia Hill Gold Project constituted an organised workforce; and • assessing the amount of additional work that would be required to be undertaken to allow a potential development decision to be made. We also assessed the appropriateness of the disclosures included in Note 17 to the financial statements. Accounting for mine development assets As at 30 June 2019 the carrying value of development assets amounts to $ 99.4 million as disclosed in Note 9. During the year the Group incurred $57.2 million of capital expenditure related to mine development assets and recognised related amortisation expenses of $66.2 million. The accounting for both underground and open pit operations includes a number of estimates and judgements, including: • the allocation of mining costs between operating and capital expenditure; and • the determination of the units of production used to amortise mine properties. For underground operations, a key driver of the allocation of costs between operating and capital expenditure is the physical mining data associated with the different underground mining activities including the development of declines, lateral and vertical development, as well as capital non-sustaining costs. The allocation of costs for open pit operations is based on the ratio between actual ore and waste mined, referred to as the ‘waste to ounce ratio’, compared with the ratio of expected ore and waste mined over the life of the respective open pit. In respect of the allocation of mining costs our procedures included, but were not limited to: • obtaining an understanding of the key controls management has in place in relation to the capitalisation of both underground and open pit mining costs and the production of physical mining data; and • on a sample basis, testing the mining costs through agreeing to source data. In respect of the allocation of mining costs for underground operations, our procedures included, but were not limited to: • assessing the appropriateness of the allocation of costs between operating and capital expenditure based on the nature of the underlying activity, and recalculating the allocation based on the underlying physical data. In respect to the deferred stripping costs our procedures included, but were not limited to: • assessing the accounting policy against the appropriate accounting standards, including AASB 102 Inventories and AASB Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine; • assessing the accuracy of the expected stripping ratios by agreeing key inputs to Reserves and Resources reports; • assessing the accuracy of the actual stripping ratios by agreeing key inputs to production reports and stockpile surveys; and • assessing the completeness and accuracy of costs associated with stripping activities. RAMELIUS RESOURCES ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RAMELIUS RESOURCES LIMITED (CONTINUED) 113 In respect of the Group’s unit of production amortisation calculations our procedures included, but were not limited to: • obtaining an understanding of the key controls management has in place in relation to the calculation of the unit of production amortisation rate; • testing the mathematical accuracy of the rates applied; and • agreeing the inputs to source documentation, including: - the allocation of contained ounces to the specific mine development assets; - the contained ounces to the applicable reserves statement; and - the reasonableness of the life of mine plan for the development asset. We also assessed the appropriateness of the disclosures included in Note 9 to the financial statements. Rehabilitation provision As at 30 June 2019 a rehabilitation provision of $46.4 million has been recognised as disclosed in Note 13. Judgement is required in the determination of the rehabilitation provision, including: • assumptions relating to the manner in which rehabilitation will be undertaken, • scope and quantum of costs, and • timing of the rehabilitation activities. Our procedures included, but were not limited to: • obtaining an understanding of the key controls management has in place to estimate the rehabilitation provision; • agreeing rehabilitation cost estimates to underlying support, including where applicable reports from management’s experts; • assessing the independence, competence and objectivity of specialists used by management; • confirming the closure and related rehabilitation dates are consistent with the latest estimates of life of mines; • comparing the inflation and discount rates to available market information; and • testing the mathematical accuracy of the rehabilitation provision. We also assessed the appropriateness of the disclosures included in Note 13 to the financial statements. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2019, 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 we do not express any form of assurance conclusion thereon. RAMELIUS RESOURCES ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RAMELIUS RESOURCES LIMITED (CONTINUED) 114 In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the director’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. RAMELIUS RESOURCES ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RAMELIUS RESOURCES LIMITED (CONTINUED) 115 • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 17 to 27 of the Director’s Report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Ramelius Resources Limited, for the year ended 30 June 2019, 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. DELOITTE TOUCHE TOHMATSU David Newman Partner Chartered Accountants Perth, 23 August 2019 RAMELIUS RESOURCES ANNUAL REPORT 2019SHAREHOLDER INFORMATION Additional Information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below. Shareholdings as at 7 October 2019 Substantial shareholders The number of shares held by substantial shareholders and their associates as disclosed in substantial holding notices given to the Company are set out below: Substantial shareholder Number of fully paid ordinary shares held Ruffer LLP Mitsubishi UFJ Financial Group, Inc. Van Eck Associates Corporation Vinva Investment Management Voting Rights Fully paid ordinary shares 50,392,723 44,016,990 36,388,598 32,586,179 Other than voting exclusions as required by the Corporations Act 2001 and subject to any rights or restrictions attached to any class of shares, at a meeting of members, on a show of hands, each member present (in person, by proxy, attorney or representative) has one vote and on a poll, each member present (in person, by proxy, attorney or representative) has one vote for each fully paid share they hold. Options and Performance Rights Details of options and performance rights on issue by the Company as at 7 October 2019 are as follows: Expiry date 11/06/2020* 01/07/2024* 01/07/2025* 11/06/2026* 01/07/2026* 01/07/2027# 01/07/2028# Exercise price $0.20 Number of options 1,500,00 Number of Performance Rights Nil Nil Nil Nil Nil Nil 593,217 539,690 500,000 620,181 3,680,666 3,758,508 Option and performance rights holders will be entitled on payment of the exercise price shown above to be allotted one ordinary fully paid share in the Company for each option/performance right exercised. * These options/performance rights are exercisable in whole or in part at any time until the expiry date. Any options/performace rights not exercised before expiry will lapse. # These performance rights are subject to vesting conditions and once vested are exercisable in whole or in part at any time until the expiry date. Any vested performance rights not exercised before expiry will lapse. 116 RAMELIUS RESOURCES ANNUAL REPORT 2019SHAREHOLDER INFORMATION (CONTINUED) Distribution of equity security holders Ordinary shares Range 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 Over Rounding Total Unmarketable Parcels Total holders 1,504 2,212 1,253 2,465 445 - 7,879 Units 579,601 6,270,057 10,098,849 83,362,595 557,910,926 - 658,222,028 Units 0.09 0.95 1.53 12.66 84.76 0.01 100.00 Range Minimum $ 500.00 parcel at $ 1.1950 per unit Minimum Parcel Size 419 Holders Units 859 86,557 All unquoted options (1,500,000) are held by the Company’s Managing Director, Mr Mark Zeptner. Performance Rights Holders of Unquoted 1 July 2024 Performance Rights Holders of Unquoted 1 July 2025 Performance Rights Holders of Unquoted 11 June 2026 Performance Rights Holders of Unquoted 1 July 2026 Performance Rights Holders of Unquoted 1 July 2027 Performance Rights Holders of Unquoted 1 July 2028 Performance Rights - - - 4 3 7 - - - 8 - 8 - - - - 1 1 - - - 6 2 8 - - - - 18 18 - - - 12 13 25 Category 1 - 1000 1001 - 5,000 5001 – 10,000 10,001 – 100,000 100,001 and over Total Security Holders On market buy-back There is no current on-market buy-back. 117 RAMELIUS RESOURCES ANNUAL REPORT 2019SHAREHOLDER INFORMATION (CONTINUED) Twenty largest shareholders The name of the 20 largest holders of fully paid ordinary shares constituting a class of quoted equity securities on the Australian Securities Exchange Limited including the number and percentage held by those holders at 3 October 2019 are as follows: Rank Name Units % Units 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 19 19 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED STRAMIG HOLDINGS PTY LTD WEST TRADE ENTERPRISES PTY LTD CS THIRD NOMINEES PTY LIMITED MR RICHARD ARTHUR LOCKWOOD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD MISTY GRANGE PTY LTD BNP PARIBAS NOMINEES PTY LTD CHRYSOS FUND LIMITED WEST TRADE ENTERPRISES PTY LTD MR GABOR MATORICZ HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA SOUTHERN CROSS CAPITAL PTY LTD MR IAN GEORGE KNIGHT MR MARK WILLIAM ZEPTNER MR MARK WILLIAM ZEPTNER + MRS VALMA ZEPTNER 162,423,767 128,722,615 72,172,415 16,377,670 9,500,000 5,515,333 4,660,400 4,500,000 4,460,779 3,806,582 3,761,676 3,721,383 3,431,041 2,950,000 2,306,254 2,200,000 2,014,779 1,905,000 1,500,000 1,500,000 1,500,000 24.68 19.56 10.96 2.49 1.44 0.84 0.71 0.68 0.68 0.58 0.57 0.57 0.52 0.45 0.35 0.33 0.31 0.29 0.23 0.23 0.23 Totals: Top 21 holders of ORDINARY FULLY PAID SHARES (Total) Total Remaining Holders Balance 438,929,694 219,292,334 66.68 33.32 Unquoted and restricted equity securities Fully paid ordinary Shares There are no unquoted restricted fully paid ordinary shares on issue. Performance Rights Details of options and performance rights on issue as at 7 October 2019 which are unquoted restricted securities held by employees as long-term incentives are as follows. Date until securities are restricted 11/06/2020# 01/07/2024* 01/07/2025* 11/06/2026* 01/07/2026* 01/07/2027** 01/07/2028** Number of unquoted securities on issue 1,500,000 593,217 539,690 500,000 620,181 3,680,666 3,758,508 Number of holders Vesting Date Exercise price Exercisable until 1 7 8 1 8 18 25 - - - - - 01/07/2020 01/07/2021 $0.20 Nil Nil Nil Nil Nil Nil 11/06/2020 01/07/2024 01/07/2025 11/06/2026 01/07/2026 01/07/2027 01/07/2028 # These securities are vested options which may not be transferred or used as collateral. * These securities are vested performance rights which may not be transferred or used as collateral. ** These securities are unvested performance rights exercisable when vested which may not be transferred or used as collateral 118 RAMELIUS RESOURCES ANNUAL REPORT 2019A YEAR OF ACHIEVEMENT RAMELIUS RESOURCES LIMITED ACN 001 717 540 ABN 51 001 717 540 Level 1, 130 Royal Street EAST PERTH WA 6004 PO Box 6070 EAST PERTH WA 6892 Telephone: (08) 9202 1127 Email: ramelius@rameliusresources.com.au Website: www.rameliusresources.com.au 

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