ANNUAL REPORT
for the year ended 31 December 2017
HILLGROVE RESOURCES LIMITED
ACN 004 297 116
CONTENTS
CORPORATE DIRECTORY
Chairman and Managing
Director’s Statement
Kanmantoo Copper Mine
Exploration
Mineral Resource
and Ore Reserves
Sustainability: Environment,
Safety and Community
Financial Statements
Directors’ Declaration
1
3
6
12
14
15
68
Independent Auditor’s Report 69
Shareholder Information
75
CORPORATE AND
REGISTERED OFFICE
5-7 King William Road,
Unley S.A. 5061, Australia
Tel: +61 8 7070 1698
KANMANTOO COPPER MINE
Eclair Mine Road
Kanmantoo S.A. 5252, Australia
Tel: + 61 8 8538 6800
Fax: + 61 8 8538 5255
SHARE REGISTRY
Boardroom Pty Limited
Level 12, 225 George Street
Sydney N.S.W. 2000, Australia
Tel: + 61 2 9290 9600
Fax: + 61 2 9279 0664
BANKERS
Westpac Banking Corporation
31 Willoughby Road
Crows Nest N.S.W. 2065, Australia
Macquarie Bank Limited
1 Martin Place
Sydney N.S.W. 2000, Australia
AUDITORS
PricewaterhouseCoopers
Level 11, 70 Franklin Street
Adelaide S.A. 5000, Australia
WEB SITE
www.hillgroveresources.com.au
GENERAL ENQUIRIES
Info@hillgroveresources.com.au
CHAIRMAN AND MANAGING DIRECTOR’S STATEMENT
In the 2017 calendar year, Hillgrove completed the investment
phase of the Giant Pit cutback and has now entered a cash
generative phase. By late 2018 this should enable our creditors
who have supported us through this period to be returned to
normal trading terms, employees to be repaid their salary
deferments and debt to be repaid. In the second half of 2018,
this should have a material impact on the balance sheet and will
position the company to pursue growth options and consider
returning some of the value to shareholders in the form of fully
franked dividends.
We have come a long way since the
first quarter of 2016, when Hillgrove
critically assessed the past performance
of Kanmantoo. The depressed copper
prices at the time and the deferred
copper production associated with
the new Mineral Resource Estimate
(announced in May 2016), when
factored into mine plans and financial
projections, were combining to cause
a looming cash shortfall throughout
2016 and 2017. Facing this challenge
as a real and imminent threat led to
an extraordinary effort to successfully
implement a wide range of initiatives.
To put our operations on a sounder
footing, a number of measures were
undertaken. These included negotiation
of lower charges (and deferred payment
terms) with our main contractors,
introduction of a 10% wages deferment
(now being repaid) for our workforce,
deferring price participation with our
offtake buyer, completing an infill
drilling programme and targeting gold
production during a high price period.
An important financing initiative was the
unwinding of the forward sold copper
hedges to realise substantial cash
surpluses. This enabled the Company to
fully repay the USD debt early without
breaching covenants or defaulting on
that debt. It should be noted that, had
these positions not been closed, the
subsequent copper price increase would
have led to a negative monetary hedge
book value of a similar amount.
Other financing initiatives included
obtaining a $4m loan with the South
Australian Government and securing
the South Australian Government
environmental performance bond with
owned assets. Swiss Re provided a
bond to Electranet thus removing the
cash backing requirement. We also
negotiated a debt for equity swap and
copper price linked deferment with
our drilling contractor, and sourced
a PetroBond to provide credit for the
supply of fuel to the mine, improving
the company’s cash position. These
initiatives were supplemented in late
2016 by the funds raised via a fully
underwritten Convertible Note issue and
associated issue of short-dated options.
All of this notwithstanding, 2017 threw
up challenges for the Company that
delayed the timing of positive cashflows
until December 2017. These included
remedial geotechnical measures
predominantly associated with the east
wall slippage, availability challenges with
contracted mining equipment, adverse
weather and high workforce turnover.
On the other hand the exercise of the
options issued with the Convertible
Notes contributed funds to the Company
and the early redemption of those
Convertible Notes, virtually all of which
were converted to equity, reduced debt
improving the balance sheet.
Mr John Gooding
Independent Non-Executive Chairman
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Mr Steven McClare - Chief Executive
Officer and Managing Director
In early 2018 we have repaid the South
Australian Government Loan and also
successfully negotiated a copper pre-
pay facility that has provided a further
$4 million dollars for working capital
and allowed us to fix the pricing of an
additional 5,000 tonnes of copper at
an Australian Dollar price of $8,885
per tonne. As a result at 28 February
2018 we have fixed pricing for 13,400
tonnes of 2018 copper production at an
average price of $8,896 per tonne after
margins.
When looking at the 2017 financial
report, many of the initiatives that have
assisted the company through 2016
and 2017 calendar years have led
to liabilities that will become payable
in 2018. They have therefore been
recognised as current liabilities, causing
current liabilities to significantly outweigh
current assets at the end of 2017.
CHAIRMAN AND MANAGING DIRECTOR’S STATEMENT (CONT.)
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We remain confident, however, that
the company can generate sufficient
cashflow from operations to meet the
Company’s obligations throughout 2018
and beyond.
The underlying EBITDA for 2017 was
$16.2 million. When coupled with
the funding initiatives outlined above,
this allowed the Company to complete
the Giant Pit cutback by the end of
2017, an investment of $70 million
over the last three years. With the
sustainable step-up in monthly copper
production occurring before the end of
2017, EBITDA is projected to improve
significantly in 2018 with production of
22,000-24,000 tonnes of copper and
approximately 3,000 ounces of gold
anticipated.
After stripping out the fair value
adjustment (loss) on redemption of the
convertible notes (due to the share price
rising after the notes were issued), the
net financial result before tax for 2017
was around break-even. The Company
books a tax expense at present mainly
because it does not record the tax
benefit of carried forward tax losses.
There has also been a significant focus
on evaluating growth opportunities in
2017.
These efforts have validated several
projects which are able to utilise the
existing processing facility and/or site
infrastructure. These include Kanmantoo
Underground, exploration targets at
Kanappa and Mt Rhine, as well as
Kanmantoo Pumped Hydro.
Successful development of an
underground mining proof of concept at
Kanmantoo, and significant exploration
soil sampling and technical studies
at Kanappa/Mt Rhine have been
announced progressively throughout
2017. With Hillgrove now in the cash
generation phase, this work can progress
and accelerate albeit with modest
investment requirements during 2018.
The Board is determined to ensure that
any future growth or life extensions must
have a reasonable potential of delivering
a return for shareholders over and above
the base case of returning otherwise
invested cash to shareholders. To this
end, the Company intends to undertake
a measured exploration programme and
project feasibility assessment, which will
aim to extend mine life through near
mine extensions, regional exploration
targets or revenue generating projects.
On behalf of the Board we sincerely
thank all shareholders for your patience
and continued support.
With the cutback complete and
Kanmantoo in a cash generative phase,
the Company is now in a much stronger
financial position. The aim is to now
return creditors to normal terms, clear
debt and, with a much-improved cash
position and balance sheet, reward
shareholders.
We would like to also express our
gratitude to our fellow directors who
have worked closely with our hard-
working management team, to ensure
that the interests of our shareholders
and stakeholders have been always
in the forefront of any initiatives that
we have undertaken. We would also
like to thank our past Chairman, Hon
Dean Brown, AO for his dedicated and
energetic contribution in the past and
until his retirement in the first half of
2017.
Finally, we would like to acknowledge
the South Australian Government, our
wonderful staff, our offtake partner,
contractors and suppliers who have
worked so closely with the management
team to overcome the challenges of
the past few years and to ready the
company for much stronger profitability
and cash generation during 2018.
KANMANTOO COPPER MINE, SOUTH AUSTRALIA
Completed Giant Cutback which concludes capital investment phase of the
current open pit
The future Strip Ratio1 of 1.1 waste tonnes for every tonne of ore, positions
the business to increase copper production from below 15,000t in CY17 to
22,000t to 24,000t copper in CY18
KANMANTOO HIGHLIGHTS
■ OPERATIONAL CHALLENGES ADVERSELY IMPACTED
PRODUCTION, INCLUDING POOR EQUIPMENT AVAILABILITY,
WET WEATHER AND GEOTECHNICAL ISSUES
■ FLATTENED THE PIT WHICH ENABLED RETURN TO EFFICIENT
MINING PRACTICES
■ 67,265T OF COPPER CONCENTRATE PRODUCED, RESULTING
IN 14,802T OF CONTAINED COPPER IN CONCENTRATE
■ SUCCESSFULLY COMPLETED OBLIGATION TO BACKFILL ALL
SATELLITE PITS
■ ESTABLISHED GROWTH PIPELINE INCLUDING STAGED
UNDERGROUND DEVELOPMENT AT KANMANTOO, REGIONAL
EXPLORATION OPPORTUNITIES AND PUMPED HYDRO
ENERGY STORAGE
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1 Strip Ratio = Tonnes Waste / Tonnes Resource (including inferred)
KANMANTOO COPPER MINE, SOUTH AUSTRALIA (CONT.)
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Hillgrove’s flagship development is the
open pit Kanmantoo Copper Mine in
South Australia, located 55 kilometres
from Adelaide and close to road,
rail, power and Port Adelaide. The
exploration and mining lease is dotted
with historical copper and base metal
operations and includes the former
Kanmantoo Mine, a medium sized
copper operation that operated from
1971 to 1976. The location of the
Kanmantoo Copper Mine offers many
operational and logistical advantages,
with a main highway passing close to
the project and being approximately
90km by road to Port Adelaide,
permitting the trucking of copper
concentrate. The mine site is connected
to the electricity grid and has mains
water available, although most of the
process water is supplied by the District
Council of Mount Barker’s treated waste
water programme with a supplementary
(untreated) supply from SA Water. In
partnership with the South Australian
Government, additional water capacity
was installed in CY2016 from the
Murray River which provides 100%
redundancy to the Mount Barker supply
if required and enhances Hillgrove’s
active dust suppression programme.
Approximately 220 Hillgrove personnel
currently staff the mine. Due to
Kanmantoo’s location close to the
outer-Adelaide regional centres of Mt
Barker and Murray Bridge there is no
requirement to provide fly in/fly out
facilities. The resulting mix of staff
comprises about 12% from the local
area, 72% from the nearby regional
area and the remainder from greater
Adelaide.
KANMANTOO COPPER MINE, SOUTH AUSTRALIA (CONT.)
Along with Hillgrove’s direct
employment, specialist contract services
are being undertaken by its three
main mining contractors which have a
combined permanent workforce of some
55 employees on site. The combination
of specialised contract skills and
experienced Hillgrove employees has
allowed a high level of quality control
in the critical areas of drilling, blasting,
production and dilution control during
mining and milling operations.
The safety performance in CY17
improved slightly with Total Reportable
Injury Frequency Rate (TRIFR) down
to 20.3 injuries per million work hours
(CY16 21.3), however, this remains well
short of Hillgrove’s expectations. The
majority of injuries sustained were hand
injuries and sprains from walking on
uneven ground. Hand injuries were
arrested following the introduction
of mandatory wearing of gloves in
operational areas.Injury prevention in
CY18 will continue to focus on manual
handling and reducing soft muscle
injuries in static roles which reduced
markedly in CY17 following targeted
training and changed work practices.
Mining production in CY17 was 17%
higher than the previous year, due to an
investment (funded by the capital raised
in December 2016), which enabled
the pit to flatten out, creating larger
working areas, which improved mining
efficiency. Backfilling of the Emily
Pit was completed in CY17, finishing
the environmental commitments
made to backfill all satellite pits after
mining. Rehabilitation of a further 18ha
commenced in early CY17 and shaping
of the final waste rock landforms
continued ahead of further planned
seasonal planting in CY18.
Gawler
Nuriootpa
Angaston
Tanunda
Lyndoch
EL 5628
Mount
Pleasant
Sedan
Swan Reach
Mt Rhine
Kanappa
M urray
Gulf
St. Vincent
ADELAIDE
EL 5628
Mannum
R iver
Nairne
Mount Barker
Echunga
Kanmantoo
Callington
Murray Bridge
Meadows
Strathalbyn
Kanmantoo
Copper Mine
(ML 6345)
Tailem Bend
Milang
L a k e
A l e x a n d r i n a
Fleurieu
Peninsula
Goolwa
Victor Harbor
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20
kilometres
Meningie
Mineral Lease
Exploration Licence
Exploration Project
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Along with direct employment
opportunities and the significant use of
local suppliers and businesses, Hillgrove
continues to support local township
community events and sporting groups,
and engages with local Councils on
support and provision of services. The
Company also supports the awareness
of and education in the mining industry
through its support of mining training,
induction programmes and scholarships
for study in the resources industry.
Kanmantoo Tenement Map
The processing plant crushed and
milled 3.4M tonnes, 7% above the
previous year. Mining costs were
$13.15/BCM, and processing costs
$7.41/tonne milled. The unit mining
costs decreased (CY16 $14.01/BCM)
due to the increased production
efficiency afforded by the wider working
areas.
The CY17 C1 cost of US$2.33/lb of
copper produced was within guidance of
US$2.25/lb to US$2.35/lb.
Hillgrove continued its engagement
during the year with the local
Kanmantoo Callington Community
Consultative Committee (KCCCC). There
was particular focus on how the mine
can have a lasting positive effect on the
local area, through shared infrastructure
and enhancing the local environment by
linking onsite rehabilitation works with
offsite vegetation.
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EXPLORATION
NEAR MINE AND REGIONAL EXPLORATION
In 2016 the Company identified a number of opportunities for organic growth around the Kanmantoo infrastructure, namely
the Kanmantoo Underground Exploration Targets, the Kanappa copper-gold exploration project and the Mt Rhine copper-gold
exploration project.
The development of these opportunities continued in 2017 resulting in several announcements on their progress.
Kanmantoo Underground Exploration Targets 1
The Company demonstrated the extension of several high grade copper-gold zones beyond the final open pit design. This
resulted in the announcement (25 May 2017) of an Exploration Target 2 of: 5-10Mt @ 1.7-2.2% Cu, 0.4-1.0g/t Au
614500mN
615000mN
615500mN
Kanmantoo
Copper Mine
NORTH
1200m RL
1000m RL
800m RL
600m RL
Final Pit Design
Nugent
South West
South West
Kavanagh
Kavanagh
East
Kavanagh
North East
Kavanagh
North
Kavanagh
Coopers
Spitfire
West Kavanagh
Central Kavanagh
0
300
metres
Kanmantoo Copper Mine Longitudinal Section - Exploration Target Zones
In summary, the Exploration Targets;
■ suggest the potential for a very significant underground resource opportunity at
Kanmantoo, beneath and in the wall of the existing final pit
■ suggest that a significant increase in mine life may be possible at Kanmantoo
■ are based on utilising the existing processing plant and utilising the final in-pit haul
road that will extend from surface down to 350m depth
■ are based on several higher grade copper-gold ore zones that have already been
mined in the open pit, and projecting these to depth
■ commence within 250m of the existing in-pit haul road and therefore if these zones
are confirmed by drilling, will require minimal capital to develop, and
■ will benefit from the existing copper-gold processing plant at Kanmantoo that
operates at a very efficient $7.41/tonne milled
1
2
ASX Release of 25 May 2017.
The Exploration Target is conceptual
in nature as there has been
insufficient exploration to define a
Mineral Resource. It is uncertain
if further exploration will result in
the determination of a Mineral
Resource.
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EXPLORATION (CONT.)
NEAR MINE AND REGIONAL EXPLORATION (CONT.)
Underground mining at Kanmantoo is
not a new venture for the orebody. The
previous mining operators at Kanmantoo
in 1970-1976 also commenced
underground mining on the copper-
gold orebodies before the copper price
collapse of 1976 closed the operation.
Completed Nugent Pit
Current Pit Surface
Planned Nugent UG Development
Final
Giant Pit
Design
Nugent
Orezones with
planned drilling
NORTH
0
200
metres
Isometric view of the Giant Open Pit to the north-west and the proposed Nugent
underground development to the south-east
The first stage of the underground
feasibility study focuses on the
exploration of the high grade copper-
gold area in Nugent (12m @ 2.2% Cu,
7.9g/t Au) at the south-east end of the
Giant open pit. The plan is to establish
a short development drive of 180m from
the existing open pit ramp to establish
underground exploration drilling
platforms and stoping configurations to
test the Nugent Exploration Target
of 0.8-2.0Mt @ 1.5-2.0% Cu,
1.5-2.5 g/t Au.
Planning is in progress and tenders are
being evaluated for various stages of the
Nugent underground activities.
In addition, a series of deep diamond
drill holes into the East, Central and
West Kavanagh Exploration Targets are
planned to be undertaken in 2018.
These holes intend to follow up the
previously reported KTDD027 of 21m @
2.2% CuEq and 7m @ 3.1% CuEq, and
KTDD149 24m @ 2.4% CuEq 3, which
are open downdip and along strike.
These previous drill holes are not only
high grade copper intercepts but also
contain significant gold mineralisation.
These deep drill holes will enable
the depth continuation of the main
Kavanagh orebodies to be affirmed and
resource estimates to be released.
3
ASX Release 25 May 2017
Underground growth opportunity.
Underground mining at Kanmantoo in 1976
EXPLORATION (CONT.)
NEAR MINE AND REGIONAL EXPLORATION (CONT.)
0.9% Cu, 0.1 g/t Au
6.6% Cu, 0.2 g/t Au
0.4% Cu, 0.3 W
2.4% Cu, 0.8 g/t Au
0.2% Cu, 0.1 g/t Au
0.6% Cu
6.2% Cu
KPDDH01
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<35ppm Cu
<50ppm Cu
<80ppm Cu
>80ppm Cu
Diamond Drillhole
CuOx Sites
3.4% Cu
Rock Chip results
6158000mN
NORTH
0
400
metres
6157000mN
4.4% Cu
11.9% Cu
34% Cu
3.5% Cu
1.8% Cu
6156000mN
0.8 g/t Au
4.0 g/t Au
2.1 g/t Au
1.5 g/t Au
2.3 g/t Au
4.0 g/t Au
0.4% Cu
6155000mN
336000mE
337000mE
Kanappa Copper-Gold Exploration 4
Hillgrove has identified a copper-gold
mineralised zone at Kanappa over 4.8km
long, confirmed with soil and rock chip
sampling. Highlights include:
■ Sampling of mineralised outcrops along
the Kanappa zone, has shown up to
34.8% Cu and 4.0g/t Au (different
samples)
■ The soil geochemical sampling has
identified an area with very high grade
copper results up to 2,300ppm Cu
in soils
■ Mapping has identified in excess of 120
sites of outcropping copper and copper-
gold mineralisation
■ The Kanappa Project is 60kms via
existing roads from the Kanmantoo
processing plant
Various geophysical programs will be
undertaken in early 2018 to enable drill
targets to be prioritised.
Mt Rhine Copper-Gold Exploration
Project 5
The Company has identified two significant
zones of copper-gold at Mt Rhine through
a systematic soil and rock chip sampling
program. Selective rock chip sampling and
channel samples along Zone A have resulted
in intervals of 6m @ 15.9g/t Au.
Along Zone B, selective rock chip sampling
by Hillgrove has resulted in the discovery
of surface outcrops of high grade copper
and gold zones to 13.1% Cu and 49.8g/t Au
(different samples).
Both zones are over 1.0km in length. The
Mt Rhine Project is 80kms via existing roads
from the Kanmantoo processing plant and
12kms from the Kanappa copper-gold project.
4
ASX Releases 25 May 2017 and
20 October 2017.
5
ASX Release 25 October 2017.
Contoured 2017 soil geochemistry with
selected rock chip results at Kanappa
EXPLORATION (CONT.)
NEAR MINE AND REGIONAL EXPLORATION (CONT.)
Mt Rhine Copper-Gold Exploration Project (cont.)
Due to this projects’ proximity to Kanappa, geophysical programs planned to be undertaken in 2018 to identify drill targets will be
able to be undertaken in a cost and time effective manner.
NORTH
0
500
metres
3.7% Cu, 1.4 g/t Au
13.1% Cu, 6.8 g/t Au, 163 g/t Ag
0.1% Cu, 3.4 g/t Au
3.7% Cu, 1.4 g/t Au
7.1% Cu, 49.8 g/t Au
Channel 6m @ 15.9 g/t Au
5.1% Zn
6165000mN
4.4 g/t Au
1.1 g/t Au
Channel 8m @ 5.4 g/t Au
Channel 6m @ 15.4 g/t Au
Channel 6m @ 13.1 g/t Au
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>50ppm Cu
20-50ppm Cu
10-20ppm Cu
<10ppm Cu
Channel samples
Historic RC holes
Rock Chips
3.4% Cu
Rock Chip results
337000mE
338000mE
339000mE
Contoured 2017 soil geochemistry with selected rock chip results at Mt Rhine
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EXPLORATION (CONT.)
Waste
Dump
NEAR MINE AND REGIONAL EXPLORATION (CONT.)
Pumped Hydro Energy Storage
Hillgrove is compiling a prefeasibility
study of a Pumped Hydro Energy
Storage facility at the Kanmantoo site.
The Company has entered commercial
discussions with parties regarding
the potential to take advantage of
the infrastructure being developed
at Kanmantoo as part of the open pit
mining operation to establish a Pumped
Hydro Energy Storage facility. Pumped
Hydro enables South Australian
renewable energy growth by adding
system stability and storage to the
electrical network.
Storage
Dam
Waste Dump
Intake
NORTH
0
250
metres
Surge Tank
Shaft
Underground Power House
A c c e s s T u n n e l
Tailrace Tunnel
S u r f a c e P e n s t o c k
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Road
Haul
Pit
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The mine site is well suited for this
project due to:
■ Upper and lower ponds
approximately 1km apart providing
an effective head of up to 250m,
sufficient to generate 220MW for
up to 6 hours which is considered
the upper limit for commercial
maximization in the South Australian
context.
■ Advanced understanding of the
site’s geological, geotechnical,
hydrological and environmental
conditions from the existing mining
operation that is directly applicable
to Pumped Hydro, including a
complete array of ground water
monitoring stations, structural
mapping of pit faces (lower pond)
and over 145 km of exploration
drilling.
■ Estimated capital of less than $1M
per installed MW, roughly half the
industry average and competitive
with any other project in SA owing
largely to the ability of the mining
operation to construct the upper
(tailings storage facility) and lower
(final open pit) ponds for very
little additional cost as part of the
mining operation, which effectively
subsidises the Pumped Hydro
capital expenditure.
Kanmantoo Pumped Storage Project generalised plan
Intake
Dam
Surge Tank
Surface Penstock
1200mRL
1100mRL
1000mRL
900mRL
800mRL
Vertical
Shaft
Kanmantoo
Open Pit
A c c e s s T u n n e l
l r a c e T u n n e l
T a i
Underground
Power House
0
250
metres
Kanmantoo Pumped Storage Project gerneralised longitudinal projection
■ Close proximity to the main 275kV electricity network.
■ Access to water via existing pipelines (>2.5GLpa).
■ Excellent community and government relationships, as well as a site which is
already used for heavy industry.
Benchmarking against other announced pumped hydro projects indicates that the
Kanmantoo Pumped Hydro would be one of the earliest to market with a low capital
spend.
Initial studies indicate the Pumped Hydro facility can be developed and operate
concurrently with underground mining. However, the value of the underground
mining would reduce due to ore left in the larger crown pillar required and increased
mine development costs. Further studies will be carried out to optimise the
combination of projects that returns the best value to shareholders.
EXPLORATION (CONT.)
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INDONESIAN PROJECTS
On 28 February 2018 Hillgrove received notices from the Indonesian Department
of Mines, which state the tenements for its two Indonesian assets at Bird’s Head in
West Papua and Sumba Island have been terminated due to the non-performance of
obligations, including the non-payment of dead rents.
Hillgrove is taking advice to review its position and decide whether it will appeal the
decision.
The projects were on a care and maintenance and the carrying value of both projects
was fully impaired in 2015.
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MINERAL RESOURCE AND ORE RESERVE ESTIMATES
On 18 October 2016 a Mineral Resource Estimate and Ore Reserve Estimate was announced for the Kanmantoo Copper Mine.
The 2016 Mineral Resource Estimate for the Giant Pit only was updated in 2017 with 1,617m of in-pit RC drilling (<0.01%
increase in drill metres) to provide more certainty for the production schedules. The in-pit drilling has not resulted in a material
change to the total Mineral Resource Estimate.
The 2017 Mineral Resource Estimate for the Kanmantoo District has been reported at the 31 December 2017 mined surface
and is therefore depleted for production from 1 October 2016 to 31 December 2017. As production has only been from the
Giant Pit, only the Giant Pit has been depleted. The Mineral Resource estimate is tabulated below at 0.2% Cu cut-off grade. All
search parameters, variography, estimation algorithm, model extents, panel dimensions, are identical to the previously reported
2016 Mineral Resource Estimate (18 October 2016). The Mineral Resource Estimate is inclusive of the Ore Reserve Estimate also
tabulated below for the same surface and cut-off grade for the Giant Pit.
KANMANTOO GLOBAL MINERAL RESOURCE ESTIMATE AT 31 DECEMBER 2017
Ag
Tonnage
JORC 2012
Au
Cu
Mine
Kanmantoo Copper Mine,
All Deposits
Classification
Measured
Indicated
Inferred
Total
Note: Economic cut-off grade is 0.20% Cu.
(Mt)
9.5
10.1
12.3
31.8
(%)
0.6
0.6
0.6
0.6
(g/t)
0.1
0.1
0.1
0.1
GIANT OPEN PIT MINERAL RESOURCE ESTIMATE AT 31 DECEMBER 2017
JORC 2012
Tonnage
Mine
Classification
Kanmantoo Copper Mine,
Measured
Giant Pit Only
Total
Indicated
Inferred
Note: Economic cut-off grade is 0.20% Cu.
(Mt)
7.5
4.5
9.6
21.6
Cu
(%)
0.6
0.5
0.6
0.6
Au
(g/t)
0.1
0.1
0.1
0.1
KANMANTOO OPEN PIT ORE RESERVE ESTIMATE AT 31 DECEMBER 2017
JORC 2012
Tonnage
Mine
Classification
Kanmantoo Copper Mine
Proved
Probable
Total
Note: Economic cut-off grade is 0.20% Cu.
(Mt)
4.9
1.1
6.1
Cu
(%)
0.6
0.5
0.6
Au
(g/t)
0.1
0.1
0.1
(g/t)
1.2
1.5
1.0
1.2
Ag
(g/t)
1.2
1.0
0.9
1.0
Ag
(g/t)
1.2
0.9
1.1
Cu Metal
(kt)
59
62
67
188
Cu Metal
(kt)
44
23
53
120
Cu Metal
(kt)
31
6
37
The resource estimate is validated as an ongoing practice by the mine staff by reconciling production against the estimates. This
reconciliation process has highlighted the importance of drill hole data density as the pit progresses to depth.
Reconciliation for the last 3 months and for the last 6 months of 2017 shows the Mineral Resource Estimate to reconcile
conservatively by 2% in copper metal against mill reconciled open pit production.
MINERAL RESOURCE AND ORE RESERVE ESTIMATES (CONT.)
KANMANTOO UNDERGROUND COPPER-GOLD EXPLORATION TARGET
The Kanmantoo Exploration Target in this report is based on currently available data and was reported on 25 May 2017. The
Exploration Target is conceptual in nature as there has been insufficient exploration to define a Mineral Resource. It is uncertain
if further exploration will result in the determination of a Mineral Resource under the “Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves, the JORC Code” (JORC 2012). The Exploration Target is in addition to
the Mineral Resource Estimates tabulated above.
Exploration Target
Coopers
North Kavanagh
North East Zone
East Kavanagh
Central Kavanagh
West Kavanagh
South West Kavanagh
Spitfire
Nugent
Total
DH Width Range
(m)
Tonnage Range
(Mt)
Grade Range
(Cu%)
Grade Range
(Au g/t)
Grade Range
(CuEq%)
6-10
6-10
12-33
10-24
13-30
11-28
7-22
16-37
8-15
6-37
0.1-0.3
0.1-0.7
0.4-0.7
0.4-0.8
1.2-2.2
0.8-1.6
0.8-1.0
0.4-0.7
0.8-2.0
1.5-2.0
1.5-2.0
2.0-2.5
2.0-2.5
1.5-2.0
2.0-2.5
1.8-2.2
1.5-2.0
1.5-2.0
5.0-10.0
1.7-2.2
0.4-0.8
0.4-0.8
0.4-0.8
0.05-0.2
0.1-0.4
0.01-0.05
0.1-0.4
1.5-3.0
1.5-2.5
0.4-1.0
1.8-2.5
1.8-2.5
2.2-3.0
2.0-2.6
1.6-2.2
2.0-2.5
1.8-2.4
2.5-4.0
2.5-3.5
2.0-2.8
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Competent Person’s Statement
The information in this release that relates to Ore Reserve and Mineral Resource estimates were prepared by Competent Persons in accordance with the JORC
Code 2012. Further information on the Kanmantoo Mineral Resources and Ore Reserves is available in the Hillgrove Updated Mineral Resource and Ore Reserve
Estimate released to the ASX on 18 October 2016, which is also available on the Hillgrove Resources website at www.hillgroveresources.com.au. Hillgrove
Resources confirms that it is not aware of any new information or data that materially affects the information included in that market announcement and, in the
case of estimates of Mineral Resources and Ore Reserves that all material assumptions and technical parameters underpinning the estimates in the relevant
market announcement continue to apply and have not materially changed. Hillgrove Resources confirms that the form and context in which the findings of
the Competent Persons (Peter Rolley and Michaela Wright in relation to the Mineral Resource Estimates and Lachlan Wallace in relation to the Ore Reserve
estimates) are presented, have not been materially modified from the original market announcement apart from mining depletion. Peter Rolley, Michaela Wright
and Lachlan Wallace consent to the inclusion in this report of the matters based on their information in the form and context in which they appear.
SUSTAINABILITY: ENVIRONMENT, SAFETY AND COMMUNITY
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Hillgrove’s Sustainability and Work
Health & Safety Policies provide a
strong, ethical foundation for our
approach to health, safety, environment
and community (HSEC) responsibilities.
Supporting these policies, Hillgrove
has implemented an Integrated
Risk Management System (Kan-do)
across our operations. The system
incorporates a prioritised risk based
approach and continual improvement
framework, ensuring our HSEC policy
objectives and legislative compliance are
achieved.
To reduce the risks as low as reasonably
practicable, the Kan-do system provides
the appropriate safe systems of work,
clearly outlined responsibilities and
accountabilities, and a strong audit
framework. Hillgrove has identified its
Principal HSEC risks and implemented
the appropriate control measures.
The Kan-do system is driven by effective
leadership, the acceptance of individual
responsibility and the promotion of a
risk aware culture across its operations
through the implementation of a Due
Diligence Model. The Kan-do system
is audited regularly, and improvements
are monitored through Hillgrove’s Senior
Leadership Team and the Audit and
Risk Committee.
Prudent and environmentally
responsible operational management
at Kanmantoo has helped reduce
our overall rehabilitation expenditure,
while building our reputation with the
community as a good neighbour and an
ethical mining operator.
Progressive rehabilitation of the site
has commenced and the Integrated
Waste Landform (IWL) comprised
of our waste rock and the tailings
storage facility has seen considerable
progress. The continued revegetation
of the Mining Lease has seen further
linkages of remnant woodland areas and
enhancement of conserved remnant
vegetation.
The establishment of high quality native
vegetation on adjacent land is assisting
Hillgrove to return up to 10 hectares
of high quality rehabilitated land to the
community for every hectare of native
vegetation we have disturbed. The
establishment of this vegetation as a
community asset is being integrated
into a “Community Master Plan”
to ensure real benefit back to the
impacted community and the natural
environment. We continue to produce
and harvest native seed as well as
conduct wild seed collection to ensure
there are sufficient propagules to enable
this important work.
Strategic community engagement
continues utilising the long established
Community Engagement Plan (2009).
Regular reviews and modifications to the
plan continue to ensure engagement of
the community remains effective and
productive.
We remain pro-active in meeting the
ongoing challenges and impacts of
our site through the use of real-time
monitoring and alert systems focused
on dust prevention and action and the
blasting notification SMS system. There
is however always room for improvement
and as such we utilise working groups
made up of community and committee
members and regulators to drive actions
and ideas to improve performance.
FINANCIAL STATEMENTS
for the year ended 31 December 2017
15
CONTENTS
Financial Statements
Directors’ Report
Remuneration Report (audited)
Auditor’s Independence Declaration
Consolidated statement of profit or loss and
other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
15
16
28
39
40
41
42
43
44
68
69
75
These financial statements are the consolidated financial
statements for the consolidated entity consisting of Hillgrove
Resources Limited and its subsidiaries. The financial
statements are presented in the Australian currency.
Hillgrove Resources Limited is a company limited by shares,
incorporated and domiciled in Australia. Its registered office
and principal place of business is:
Hillgrove Resources Limited
Ground Floor, 5-7 King William Road,
Unley, South Australia 5061
The financial statements were authorised for issue by the
Directors on 14 March 2018. The Directors have the power to
amend and reissue the financial statements.
Through the use of the internet, we have ensured that our
corporate reporting is timely and complete. All press releases,
financial reports and other information are available at our
Investors’ Centre on our website www.hillgroveresources.com.au
DIRECTORS’ REPORT
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The Directors present their report on the consolidated entity (referred to hereafter as “the Group”) consisting of Hillgrove
Resources Limited (Hillgrove or the Company) and the entities it controlled during the 12 months ended 31 December 2017.
PRINCIPAL ACTIVITIES
Hillgrove Resources Limited is an Australian mining company listed on the Australian Securities Exchange (ASX: HGO) focused
on operating its flagship Kanmantoo Copper Mine and associated regional exploration targets, located less than 55km from
Adelaide in South Australia.
The Kanmantoo Mine has been mined at the rate of up to 20 million tonnes per annum and has produced up to 20,000 tonnes
of copper per annum. Annual export earnings are in a range of $110 million to $170 million per annum. Copper concentrate
production from the Kanmantoo Copper Mine is sold to Freepoint Metals & Concentrates LLC under a 100% off take agreement.
DIRECTORS AND OFFICERS
The Directors and Officers of the Company at any time during the 12 month period or since the end of 31 December 2017 are:
Name/Qualifications
Experience and special responsibilities
Mr John Gooding
Independent Non-Executive Chairman / Chairman Nomination and Remuneration Committees
Qualifications
Experience
Assoc Dip. Mining Eng., FIE Aust., F. Aus. IMM, MAICD
John is a Mining Engineer with over 40 years’ experience in the resources industry. He has held
executive management positions with CRA, Normandy Mining, MIM, Xstrata (CEO Xstrata Copper
Australia), Ok Tedi Mining and Roche Mining. John has extensive experience in gold and base metal
mining (both open-cut and underground) through the management and operation of mines in Australia
and internationally. He was the Managing Director and CEO of Highlands Pacific for nine and a half
years until November 2016, and was a Board member of the PNG Chamber of Mines and Petroleum
from 2009. He is also the Non-Executive Chairman of the Board for Kasbah Resources Ltd.
John is a member of the Audit and Risk Committee.
Appointed 31 May 2007.
Mr Maurice Loomes
Non-Executive Director
Qualifications
Experience
B.Comm (Econ Hons), F.Fin.
Maurice has a Bachelor of Commerce (Econ Hons) and over 40 years’ experience in investment
analysis and strategy gained across many industries, including roles at Bain and Company, Industrial
Equity Limited, Westmex Limited, Guinness Peat Group PLC and many others. He has also held
numerous directorships of public companies including CIC Australia Limited (1994-2013), Guinness
Peat Group PLC (1996-2000) and Tower Limited (2003-2005). Maurice is currently a Non-Executive
Director of Ariadne Australia Limited (2004- ) (a significant shareholder of Hillgrove Resources) and
was formerly a Non-Executive Director of Calliden Group Ltd from 2000- 2014.
Maurice is a member of the Remuneration, Audit and Risk and Nomination Committees.
Appointed 25 November 2013.
Mr Philip Baker
Independent Non-Executive Director
Qualifications
Experience
CPA, MAICD, BBus, PGDipBA
Phil is a Certified Practising Accountant with over 37 years in the mining industry. He started with MIM
Holdings in 1980 undertaking various roles before leading the development and construction of the
Ernest Henry copper/gold mine from 1995-97, and then was responsible for the copper refinery and
other operations in north Queensland. He became Group Treasurer and later EGM - Strategy, Planning
and Development, before leaving MIM in 2003. Phil was then CFO and Company Secretary at Peplin
Limited and later QMAG Limited before joining Lihir Gold Limited in 2007 as CFO, serving as CEO for
three months in 2010 before the takeover by Newcrest Ltd. After a period consulting to the resources
industry, Phil joined Rio Tinto in 2012 as CFO of Pacific Aluminium to help prepare it for divestment,
leaving in late 2013 when it was reintegrated into Rio Tinto Alcan.
Phil is a member of the Remuneration and Nomination Committees and Chairs the Audit and Risk
Committee.
Appointed 29 October 2014.
DIRECTORS’ REPORT (CONT.)
DIRECTORS AND OFFICERS (CONT.)
Name/Qualifications
Experience and special responsibilities
Mr Anthony (Tony) Breuer
Independent Non-Executive Director
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Qualifications
Experience
BCom/LLB
Tony has over thirty years of experience at investment bank, Gresham Partners Limited and is currently
Managing Director of Gresham Funds Management Group and Deputy Chairman of Gresham Partners
Capital Limited, and is a Board member of various Gresham group companies and committees. He
was formerly, Director of National Gallery Australia Foundation. He was admitted as a Barrister to the
Supreme Court of NSW.
Tony is a member of the Remuneration, Audit and Risk and Nomination Committees.
Appointed 1 June 2017.
Mr Steven McClare
Chief Executive Officer and Managing Director
Qualifications
Experience
Mr Paul Kiley
Qualifications
Experience
BEng (Mining Hons), M.Aus.IMM
Steve joined Hillgrove in September 2012 as the General Manager Operations at the Kanmantoo
Copper Mine and in May 2015 he was promoted to Chief Executive Officer and Managing Director.
Previously the Deputy General Manager, then Head of Mining Operations for Newcrest Mining’s
Cadia Valley Operations, Steve has spent a significant portion of his career constructing, ramping up
and optimising mining operations, including Telfer, Cadia Hill, Ridgeway Deeps and Cadia East for
Newcrest, and Callie for Newmont. With a background that includes management of Normandy’s
White Devil Mine, and also various roles within Mount Isa Mines and a work/study Mining Engineering
Cadetship with Western Collieries when he joined the industry in 1989. Steve boasts significant
experience within industry ranging from underground operations to 150ktpa to 26mtpa, to open pit
operations of 2mtpa to 24mtpa.
Steve is a member of the Treasury Committee.
Appointed 27 May 2015.
Chief Financial Officer & Company Secretary
B.Ec, CPA
Paul has over thirty years of experience in the mining, oil and gas industries. He spent 13 years with
Newmont (and previously Normandy) in a number of executive roles including Director for Corporate
Development for Newmont’s Asia Pacific region and the Group Risk Manager. He also spent six years
in senior roles with Occidental Oil & Gas, working in both Australia and the United States of America.
Paul is a member of the Treasury Committee.
Appointed 12 June 2015.
DIRECTORS’ REPORT (CONT.)
DIRECTORS AND OFFICERS (CONT.)
RETIRED DIRECTORS AND OFFICERS
Name/Qualifications
Experience and special responsibilities
The Hon.
Dean Brown, AO
Qualifications
Experience
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Independent Non-Executive Chairman / Chairman Nomination Committee
B.Rur.Sc.,Grad.Dip. Bus.Admin.,M.Rur.Sc., D.Sc.(Hon), FAICD
Former Premier and Minister of the South Australian Government and Member of South Australian
Parliament from 1973-1985 and 1992-2006. Dean was also Deputy Premier and Leader of the Opposition
during that time. He was a Director of AACM International Pty Ltd (1986-92), a Senior Agricultural Scientist,
the Premier’s Special Advisor on Drought (2007-11), a Director of the National Youth Mental Health Advisory
Board (Headspace) (between 2006-09) and Chairman of InterMet Resources Limited between (2008-13).
Dean undertakes corporate advisory consulting to a variety of companies and is also a Director of Scantech
Limited (2007- ), Chairman of the Playford Memorial Trust (member since 2008 and Chairman since 2011),
a Director of Foodbank SA (2006- ), a Director of Mission Australia (2012- ), Chairman of Skills IQ and a
member of several advisory Boards.
Dean Chaired the Nomination and the Remuneration Committees and was a member of the Audit and Risk
Committee.
Resigned 31 May 2017.
DIRECTORS’ MEETINGS
The number of Directors’ meetings and number of meetings attended by each of the Directors of the Company during the twelve
month period are:
Meetings Held
Director
Mr J E Gooding
Mr M W Loomes
Mr P Baker
Mr A Breuer
Mr S P McClare
Hon. D C Brown, AO
Board
Remuneration
Committee
Audit
Committee
Nomination
Committee
Treasury
Committee
A
18
18
18
8
18
10
B
18
18
18
8
18
10
A
6
6
6
2
6
4
B
6
6
6
2
4
4
A
7
7
7
2
7
5
B
7
7
7
2
7
5
A
2
2
2
-
2
1
B
2
2
2
-
2
1
A
-
-
2
-
2
-
B
-
-
2
-
2
-
A – Number of meetings held during the Directors time in office
B – Number of meetings attended
The number of Audit Committee meetings increased from three in 2016 to seven in 2017 as a result of a decision to tender the
Company’s audit services, and the subsequent appointment of PwC as the Company’s new auditor.
The Treasury Committee members are Mr P Baker, Mr S McClare, Mr P Kiley and Mr J Sutanto (Group Finance & Planning
Manager).
DIRECTORS’ REPORT (CONT.)
RESULTS
Revenue from ordinary activities
$127.1m CY16: $113.1m
Profit / (Loss) from ordinary
activities after tax attributable
to the owners of
Hillgrove Resources Limited
Profit / (Loss) for the period
attributable to the owners of
Hillgrove Resources Limited
($14.1m)
CY16: ($109.2m)
restated (1)
($14.1m)
CY16: ($109.2m)
restated (1)
1 Restatement: the financial statements for CY16 have been restated
to include adjustments relating to rehabilitation provision and
depreciation. Further details are in note 2 (f) to the consolidated
financial statements.
OVERVIEW OF CONSOLIDATED
FINANCIAL RESULTS
Hillgrove Resources Limited is an Australian mining company listed
on the Australian Securities Exchange (ASX: HGO) focused on its
flagship Kanmantoo Copper Mine, located less than 55km from
Adelaide in South Australia and associated regional exploration
targets.
For the year ended 31 December 2017, the net loss after tax was
$14.1 million compared to a net loss after tax of $109.2 million for
the year ended 31 December 2016 which included non-cash asset
impairment charges from the first half of 2016. At 30 June 2016
there was an impairment charge of $68.5 million after tax reducing
the carrying value of the Kanmantoo mine assets and which is
shown as a non-underlying item. The underlying net loss after tax
during the year was $8.4 million compared with $40.7 million loss in
2016. (Refer page 22 for further details including a reconciliation of
statutory results to underlying results).
During 2017, a non-underlying expense of $5.5 million was
recorded to reflect the increase in fair value of the convertible notes
by the time they were converted to shares. All convertible notes
were converted into equity or redeemed by year end. Further, the
Company books a tax expense at present because it does not record
the full tax benefit of carried forward tax losses.
Before the non-underlying items, the operating result for 2017 was
a profit before interest and tax (EBIT) of $4.4 million compared to a
loss before interest and tax of $22.5 million in 2016. Depreciation
expense in CY17 was $32.9 million, lower than the previous
year due mainly to lower charges following the impairment write
downs of depreciating assets in the previous year. With non-cash
depreciation and amortisation added back, underlying EBITDA in
2017 decreased by $6.0 million from $22.2 million to $16.2 million
with lower mining costs being capitalised during 2017 for the
pre-strip.
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REVIEW OF OPERATIONS FOR THE
CY17 YEAR AND OUTLOOK
In CY17, Hillgrove completed the investment phase
of the Giant Pit cutback and has now entered a cash
generative phase as higher grade ore can now be
selectively processed. By late 2018, this should enable
creditors who have supported the Company through the
2016 to 2017 period to be returned to normal trading
terms, employees to be repaid their salary deferments
and debt to be repaid.
A number of measures were undertaken in CY16 to deal
with the projected cashflow challenge from depressed
copper prices and deferred copper production. These
included negotiation of lower charges (and deferred
payment terms) with the main contractors, introduction
of a 10% wages deferment (now being repaid) for the
workforce, deferring price participation with the offtake
buyer, completing an infill drilling programme and
targeting gold production during a high price period. An
important financing initiative was the unwinding of the
forward sold copper hedges to realise substantial cash
surpluses. This enabled the Company to fully repay
the USD debt early without breaching covenants or
defaulting on that debt.
Other financing initiatives included obtaining a $4m loan
from the South Australian Government and securing
the South Australian Government environmental
performance bond with owned assets. Swiss Re provided
a bond to Electranet thus removing the cash backing
requirement. A debt for equity swap and copper price
linked deferment was also negotiated with the drilling
contractor, and a PetroBond was secured to provide
credit for the supply of fuel to the mine, improving
the company’s cash position. These initiatives were
supplemented in late 2016 by the funds raised via a fully
underwritten convertible note issue and associated issue
of short-dated options.
During 2017 the Company faced operational challenges
that delayed the timing of positive cashflows until
December 2017. These included remedial geotechnical
measures predominantly associated with the east
wall slippage, availability challenges with contracted
mining equipment, adverse weather and high workforce
turnover.
The exercise of the options issued with the Convertible
Notes contributed funds to the Company and the early
redemption of those Convertible Notes, virtually all
of which were converted to equity, reduced debt and
improved the balance sheet by the end of 2017.
DIRECTORS’ REPORT (CONT.)
REVIEW OF OPERATIONS FOR THE CY17 YEAR AND OUTLOOK (CONT.)
In early 2018 the Company has repaid the $4 million South Australian Government Loan along with accumulated interest of
$0.3 million and also successfully negotiated a copper pre-pay facility that has provided a further $4 million for working capital
and allowed Hillgrove to fix the pricing of an additional 5,000 tonnes of copper to be sold in 2018 at an Australian Dollar price
of $8,885 per tonne. As at 28 February 2018, there is fixed pricing for 13,400 tonnes of copper production over the next
12 months at an average price of $8,896/tonne after margins.
Many of the initiatives that have assisted the Company through 2016 and 2017 calendar years have led to liabilities on the
balance sheet that will become payable in 2018. They have therefore been recognised as current liabilities, causing current
liabilities to significantly outweigh current assets at the end of 2017. Management remains confident, however, that, with the
step-up in copper production from December 2017, the Company can generate sufficient cashflow from operations to meet its
obligations throughout 2018 and beyond.
The underlying EBITDA (refer page 22) for 2017 was $16.2 million. When coupled with the funding initiatives outlined above,
this allowed the Company to complete the Giant Pit cutback by the end of 2017, an investment of $70 million over the last
three years. With the sustainable step-up in monthly copper production occurring before the end of 2017, EBITDA is projected
to improve significantly in 2018 with production of 22,000-24,000 tonnes of copper and approximately 3,000 ounces of gold
anticipated.
After stripping out the fair value adjustment (loss) on redemption of the convertible notes (due to the share price rising after the
notes were issued) the underlying net profit before tax for 2017 was near break-even. The Company books a tax expense at
present mainly because it does not record the tax benefit of carried forward tax losses.
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Kanmantoo Copper Mine Production Statistics
Ore to ROM from Pit
Mined Waste
Total Tonnes Mined
Closing Ore Stocks
Mining Grade
Ore Milled
Milled Grade
Recovery
- Cu
- Au
- Cu
- Au
CY16
Mar-17 Qtr
Jun-17 Qtr
Sep-17 Qtr
Dec-17 Qtr
CY17
12 Mths
3 Mths
3 Mths
3 Mths
3 Mths
12 Mths
2,838
12,332
15,171
40
0.50
3,197
0.52
0.21
82.7
52.7
1,040
4,413
5,453
205
0.45
875
0.47
0.08
90.5
48.7
849
3,821
4,669
242
0.44
831
0.45
0.08
90.8
51.7
811
2,679
3,490
183
0.54
838
0.47
0.13
90.8
54.6
1,216
3,475
4,691
524
0.48
882
0.52
0.19
90.5
51.2
3,915
14,388
18,303
524
0.48
3,427
0.48
0.12
90.6
51.8
kt
kt
kt
kt
%
kt
%
g/t
%
%
Cu Concentrate Produced
Dry mt
59,842
16,223
15,203
16,170
19,669
67,265
Concentrate Grade
- Cu
- Au
Contained Metal in Concentrate
- Cu
- Au
- Ag
%
g/t
t
oz
oz
Total Concentrate Sold
Dry mt
22.8
6.0
23.0
2.0
22.3
2.3
21.9
3.7
21.0
4.3
22.0
3.1
13,624
11,518
104,042
60,213
3,727
1,060
27,254
15,939
3,392
1,100
25,986
15,865
3,548
1,900
26,448
15,786
4,135
2,725
14,802
6,785
30,862
110,551
17,571
65,161
During 2017, Hillgrove achieved production of 67,265 tonnes of dry concentrate containing 14,802 tonnes of copper and
6,785oz of gold from the Kanmantoo Copper Mine.
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DIRECTORS’ REPORT (CONT.)
REVIEW OF OPERATIONS FOR THE CY17 YEAR AND OUTLOOK (CONT.)
The funds from the convertible note issue in December 2016 enabled the pit to
flatten out, creating larger working areas which improved mining efficiency and
contributed to a 20% increase in mining production in CY17. Backfilling of the
Emily Pit was completed in CY17, finishing the environmental commitments made to
backfill all satellite pits after mining. Rehabilitation of a further 18ha commenced in
early CY17 and shaping of the final waste rock landforms continued ahead of further
planned seasonal planting in CY18. The processing plant crushed and milled 3.4M
tonnes, 7% above the previous year.
EXPLORATION PROGRAMME
Exploration activities during the year
were focused on delineating drill targets
to convert the significant underground
Exploration Target at the Kanmantoo
Copper Mine, and to test the regional
copper-gold projects at Kanappa and
Mt Rhine.
Mining costs were $13.15/BCM, and processing costs $7.41/tonne milled. The
unit mining costs decreased from the previous year (CY16 $14.01/BCM) due to the
increased production efficiency afforded by the wider working areas.
The CY17 C1 cost of US$2.33/lb of copper produced was within guidance of
US$2.25/lb to US$2.35/lb.
Kanmantoo Monthly Mining Performance
672
406
596
435
497
198
538
525
447
305
329
215
321
370
264
337
423
226
553
413
469
573
476
250
)
s
d
n
a
s
u
o
h
t
(
t
n
e
m
e
v
o
M
M
C
B
l
a
t
o
T
800
700
600
500
400
300
200
100
0
Jan
2017
Feb
2017
Mar
2017
Apr
2017
May
2017
Jun
2017
Jul
2017
Aug
2017
Sep
2017
Oct
2017
Nov
2017
Dec
2017
Total BCM movements (LHS)
Total Ore tonnes (RHS)
Kanmantoo Monthly Milled Tonnes, Copper Recovery (%)
and Mill Run Time (%) Performance
)
s
d
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a
s
u
o
h
t
-
t
m
d
(
s
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n
n
o
T
d
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l
l
i
M
325
300
275
250
225
94.2
94.8
94.4
93.1
90.5
90.5
90.1
89.9
90.5
89.5
94.8
92.4
91.7
88.8
90.1
84.7
100.0
97.4
93.2
90.4
89.8
89.6
96.2
91.6
290
282
304
291
285
255
271
266
301
299
276
306
Jan
2017
Feb
2017
Mar
2017
Apr
2017
May
2017
Jun
2017
Jul
2017
Aug
2017
Sep
2017
Oct
2017
Nov
2017
Dec
2017
Milled Tonnes (LHS)
Primary Copper Recovery (RHS)
Mill Run Time (RHS)
)
s
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a
s
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n
o
T
e
r
O
l
a
t
o
T
e
g
a
t
n
e
c
r
e
P
600
500
400
300
200
100
0
100
95
90
85
80
75
70
65
60
1
The Exploration Target is conceptual in nature as there has been insufficient exploration
to define a Mineral Resource. It is uncertain if further exploration will result in the
determination of a Mineral Resource.
2
ASX Releases 25 May 2017 and 20 October 2017.
The Company has demonstrated
the extension of several high grade
copper-gold zones beyond the final
open pit design. This has resulted in
the announcement (25 May 2017) of
an underground Exploration Target 1 of
5-10Mt @ 1.7-2.2% Cu, 0.4-1.0g/t Au.
The most advanced of these underground
targets is the Nugent underground zone
where the Company has identified a high
copper-gold area (12m @ 2.2% Cu, 7.9g/t
Au) at the south-east end of the Giant
open pit. The plan is to complete a short
development drive of 180m from the
existing Giant open pit ramp to establish
underground exploration drilling platforms
and stoping configurations to test the
Nugent Exploration Target of 0.8-2.0Mt @
1.5-2.0% Cu, 1.5-2.5 g/t Au.
Planning is in progress and tenders are
being evaluated for various stages of the
Nugent underground activities.
In general, the successful delineation
of the underground targets beneath
and within the wall of the existing
final Kanmantoo pit wall may result in
a significant increase in mine life at
Kanmantoo, made possible only by the
utilisation of the substantial assets of the
Company, the open pit Haul Road and the
efficient processing plant.
At Kanappa a soil sampling program has
identified a copper-gold mineralised zone
over 4.8km long with rock chips to 34.8%
Cu and 4g/t Au (different samples) 2. The
soil sample results are up to 2,300ppm
and mapping has identified over 120 sites
of outcropping mineralisation along the
trend. This is an exciting discovery and
one that the Company intend to vigorously
explore in 2018.
DIRECTORS’ REPORT (CONT.)
REVIEW OF OPERATIONS FOR THE CY17 YEAR AND OUTLOOK (CONT.)
EXPLORATION PROGRAMME (CONT.)
At Mt Rhine, two significant zones of copper-gold mineralisation have been identified
by soil and rock chip sampling. Zone A has been channel sampled with results of
6m @ 15.9g/t Au. Zone B is over 1km long and has rock samples of 13.1% Cu and
49.8g/t Au 3. Both zones are open along strike.
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Kanappa and Mt Rhine are approximately 60kms and 80kms respectively by road
from the Kanmantoo infrastructure and offer significant opportunities to discover
new copper-gold resources on wholly owned Company assets. Various geophysical
programs are underway with a view to developing drill targets in 2018.
STATEMENT OF PROFIT OR LOSS
$million
TOTAL REVENUE
Cash costs of production
Mining
Pre-strip and deferral
Processing
Transport and shipping
Treatment and refining
Other direct costs
Inventory movements
Royalties
Corporate costs
Gain/(loss) on disposal of assets
Other income
Net foreign exchange gain/(loss) realised
12 months to
31 Dec 2017
12 months to
31 Dec 2016
(restated)
Change
127.1
113.1
14.0
(73.8)
15.9
(27.7)
(6.0)
(12.9)
(5.1)
7.8
(4.6)
(4.4)
(0.1)
0.2
(0.2)
(71.1)
(2.7)
32.8
(16.9)
(24.8)
(5.0)
(12.4)
(5.8)
(1.0)
(1.3)
(4.1)
0.1
0.5
1.2
(2.9)
(1.0)
(0.5)
0.7
8.8
(3.3)
(0.3)
(0.2)
0.3
(1.4)
TOTAL CASH COSTS OF PRODUCTION
(110.9)
(90.9)
(20.0)
UNDERLYING EBITDA
Depreciation and amortisation
UNDERLYING EBIT
Net interest and financing charges
Income tax (expense)/benefit
UNDERLYING NPAT
Non-underlying items, net of tax
16.2
(11.8)
4.4
(4.6)
(8.2)
(8.4)
(5.7)
22.2
(44.7)
(22.5)
(4.3)
(13.9)
(40.7)
(68.5)
Reported net profit/(loss) after tax
(14.1)
(109.2)
Non-underlying Items
Fair value movement – Convertible Notes
Impairment - Australian exploration write down
Impairment - Kanmantoo assets write down
Total Non-underlying Items
(5.5)
(0.2)
-
(5.7)
-
-
(68.5)
(68.5)
(6.0)
32.9
26.9
(0.3)
5.7
32.3
62.8
95.1
(5.5)
(0.2)
68.5
62.8
Revenue from the sale of concentrate
(including the recognition of deferred
hedging gains from the previous year)
increased from $113.1 million in
2016 to $127.1 million in 2017. Total
concentrate sold in 2017 was 65,161
dry tonnes (CY16: 60,213 tonnes) at
an average realised price of $7,700 per
tonne of payable copper (CY16: $7,327
per tonne). The value of gold sold in
concentrate was $10.0 million (CY16:
$15.7 million).The volume of concentrate
produced increased in 2017 due to the
completion of the Giant Pit cut-back at
the end of the year, but still a few months
later than originally expected due to
delays with bad weather and equipment
availability particularly during the third
quarter.
Cash costs of production were also
higher in 2017 rising from $90.9 million
to $110.9 million in 2017. Even though
gross mining costs stayed level, the
proportion of mining costs capitalised
to the balance sheet for pre-strip and
deferred mining costs decreased by
$16.9 million as waste removal ratios
declined as expected toward the end of
the cut-back. In addition, processing
costs increased by $2.9 million due to
higher volume and electricity prices.
Royalties increased by $3.3 million
to $4.6 million in 2017 reflecting the
change in royalty rate to 5% early in
the year following the 5th anniversary of
production.
3
ASX Release 25 October 2017.
DIRECTORS’ REPORT (CONT.)
REVIEW OF OPERATIONS FOR THE CY17 YEAR AND OUTLOOK (CONT.)
CASH FLOW OVERVIEW
Operating activities cash flow
$ million
Receipts from customers
12 months to
31 Dec 2017
12 months to
31 Dec 2016
101.5
97.3
Payment to suppliers, employees and
contractors
Net cash inflows from operating activities
(100.9)
0.6
(76.3)
21.0
Change
4.2
(24.6)
(20.4)
Net cash inflows from operating activities for the 12 months ended 31 December
2017 were $0.6m reflecting that monthly copper metal production for most of
the year was at or around the cash breakeven level until the step-up in copper
production which occurred in December 2017. This includes the expenditure on
deferred mining costs of $14.5 million (2016: $9.1 million).
The $24.6 million increase in payments to suppliers, employees and contractors is
exacerbated by the classification of capitalised pre-strip costs as investing in PPE.
In 2016 the investment in pre-strip was $23.7 million, whereas in 2017 it reduced
to $4.5 million. On a combined basis, total cash payments for all mining activity in
2017 increased by only $2.7 million or about 2.6%.
Investing activities cash flow
$ million
12 months to
31 Dec 2017
12 months to
31 Dec 2016
Payments for exploration activities
Payments for property, plant and equipment
Proceeds on sale of plant and equipment
(0.1)
(6.8)
-
(0.4)
(28.3)
0.6
Change
0.3
21.5
(0.6)
Net cash (outflows) from investing activities
(6.9)
(28.1)
(21.2)
Investing activities were limited to sustaining capex at Kanmantoo, pre-strip
expenditure and modest exploration work in order to preserve cash during 2017.
With the completion of the Giant Pit cut back, the amount of capitalised pre-strip
expenditure decreased in 2017 following completion of the last bench with a strip
ratio greater than ten to one.
Financing activities cash flow
$ million
Proceeds from early termination of derivatives
Proceeds from issue of shares
Repayment of borrowings
Net proceeds from new borrowings
Net interest paid (incl. transaction costs)
Net cash inflows from financing activities
12 months to
31 Dec 2017
12 months to
31 Dec 2016
-
5.6
(0.3)
0.3
(0.9)
4.7
14.4
-
(18.4)
8.5
(1.6)
2.9
Change
(14.4)
5.6
18.1
(8.2)
0.7
1.8
In 2017, the only significant financing activity in the cashflow was $5.6 million in
proceeds from the exercise of options attached to the convertible note issue. The
conversion of convertible notes into shares was a non-cash transfer from debt to
equity.
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In 2016, the early close out of the hedge
book generated $14.4 million which,
along with the cash on hand, was
used to fully repay the USD debt from
Freepoint subsidiary Ventures Australia
LLC. The $4.0 million loan from the
South Australian Government was drawn
down in June 2016 and in December
2016 $5.0 million of convertible notes
were issued to shareholders.
STATEMENT OF FINANCIAL
POSITION
Cash and cash equivalents at
31 December 2017 were $0.5 million.
The long-awaited step change in copper
production occurred in December 2017
following completion of the cut-back of
the Giant Pit. This has been sustained
to the date of this report and is expected
to be maintained during 2018.
See below for details of production
guidance for 2018. This means that
the Kanmantoo Copper Mine is now
generating significantly higher net cash
inflows from operations each month
than has been the case for the past few
years.
Inventories were historically high at
31 December 2017 at $12.7 million.
Most of the $7.7 million increase during
2017 was due to the build-up in run-of-
mine (ROM) ore stocks which occurred
because the mine was producing ore at
rates faster than the mill could process
at full capacity. Stocks of finished
concentrates were also higher than
normal due to strong production in late
December and sales delayed by public
holidays.
Property, plant and equipment
increased by $9.0 million to $77.7
million. Taking into account
depreciation of $11.8 million, this
means additions to PP&E of about $21
million during 2017.
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DIRECTORS’ REPORT (CONT.)
Total borrowings of $9.5 million at 31 December 2017 comprise the loan from the
South Australian Government ($4.0 million plus accumulated interest of $0.3 million,
which was repaid in February 2018), promissory note from contractor ($2.7 million –
repayments commencing April 2018), deferred payment to contractor creditor ($1.9
million – repaid in February 2018) and $0.7 million in finance lease liabilities.
REVIEW OF OPERATIONS FOR THE CY17 YEAR AND OUTLOOK (CONT.)
STATEMENT OF FINANCIAL
POSITION (CONT.)
Of this, $14.5 million was mining
expenditure added to deferred mining
costs under the accounting policy
which normalises costs in the Giant Pit
for the impacts of variable waste ratios
and copper grades. As noted above,
December 2017 marked the turning
point for mine production which means
deferred costs will reduce in future
and be charged to costs of production.
Sustaining capital expenditure in
2017 was $1.9 million comprising
mainly geotechnical controls in the
pit and ongoing tailing storage facility
(TSF) construction. Along with the
increase in rehabilitation provision, the
corresponding rehabilitation asset in
mine development was increased by
$2.4 million.
Employee benefits increased by $3.6 million which included salaries deferred by
employees to assist with cash management plus unpaid liabilities for payroll related
on costs. The salary deferrals peaked in November 2017 and are now being repaid
as planned.
For the year ended 31 December 2017 total equity decreased by $4.4 million
reflecting the loss for the year of $14.1 million and a $7.1 million decrease in
reserves mainly relating to the recycling through profit and loss of deferred hedging
gains offset by a $16.8 million increase in share capital from conversion of the
convertible notes and exercise of related options.
As was the case at 31 December 2016, by applying impairment testing methodology
consistent with that used in previous years, the calculated recoverable amount
as at 31 December 2017 exceeds the carrying value. However, past impairment
charges have not been written back until such time as the Group has demonstrated
a sustained period of positive cashflows following the completion of the Giant Pit
cutback in late 2017.
Summary Balance Sheet
$ million
Cash
Receivables
Inventories
Property, Plant & Equipment
Exploration
Deferred Tax Assets
Total Assets
Payables
Provisions
Borrowings
Employee Benefits
Deferred Income
Total Liabilities
Net Assets / Equity
31 Dec 2017
31 Dec 2016
(restated)
0.5
4.3
12.7
77.7
0.9
-
96.2
48.3
16.8
9.5
7.3
0.5
82.4
13.8
1.9
4.0
5.0
68.7
0.8
4.9
85.3
36.4
13.3
13.0
3.7
0.7
67.1
18.2
Change
(1.4)
0.4
7.7
9.0
0.1
(4.9)
10.9
(11.9)
(3.5)
3.5
(3.6)
0.2
(15.3)
(4.4)
Deferred tax assets have moved to a
net nil position on the balance sheet
as the Group has recognised deferred
tax assets only to the extent that they
offset deferred tax expense and liabilities
arising from temporary differences. The
tax benefit of carried forward tax losses
of approximately $154.4 million is yet to
be brought to account.
Payables increased by $11.9 million to
$48.3 million at 31 December 2017,
mainly reflecting the planned payment
deferral agreements reached with the
three largest mining contractors. With
the forecast free cash flow generation
in 2018, this balance is expected to be
more than halved in the upcoming year.
Provisions increased by $3.5 million
mainly as a result of a revision of
the final cost estimate to close the
Kanmantoo mine upon depletion and
fully rehabilitate all affected areas,
including use of a lower discount rate
which increases the present value of
projected closure costs.
DIRECTORS’ REPORT (CONT.)
REVIEW OF OPERATIONS FOR THE CY17 YEAR AND OUTLOOK (CONT.)
GUIDANCE
Hillgrove provided guidance in March 2017 with the release of its Annual
Report. Due to the delay in the completion of the Giant Pit cutback, the
guidance for copper production was revised in August 2017 (2017 Half
Year Financial Report) and the guidance for copper production and C1
cost was revised in October 2017 (30 September 2017 Quarterly Report).
The Company’s actual performance against its revised 2017 guidance is
summarised in the table below.
CY17
Guidance
Actuals achieved
Copper contained in concentrates
14,800t - 15,800t
Gold contained in concentrates
5,500oz - 7,500oz
14,802t
6,785oz
C1 Costs
US$2.25 - $2.35 per lb 1 US$2.33 per lb
Capital Projects (excludes pre-strip) 2
$1.8M - $2.5M
$1.9M
1
2
At 0.75 exchange rate
In addition to the capital projects, $15.9 million of pre-strip was completed.
Copper produced, gold produced, C1 cost and capital expenditure were all
within the revised guidance.
Life of mine plan and outlook for 2018
The 2018 financial year will be one of step change, with the Giant Pit cutback
complete and copper production is forecast to be significantly higher than
the previous year as higher grade ore is made available for processing which
through stockpiles can be selectively treated, leading to significantly higher
cash generation. In addition to this, with improvements in both mining and
processing performance, a robust geological model, and a favourable outlook for
commodity prices, there is potential to create significant value for shareholders
from the remaining life of mine.
The Company provides the following guidance for the current Financial Year
ending 31 December 2018 (CY18) for the Kanmantoo Copper Mine:
■ Copper produced 22,000t to 24,000t copper contained in concentrates
■ Gold produced
2,500oz to 3,500oz gold contained in concentrates
■ C1 Costs
US$2.00 to US$2.25 per lb (at a 0.78 exchange rate)
■ Exploration capex
$1.8 million to $2.5 million
■ Capital projects
$2.6 million to $3.0 million
Despite the higher production, C1 costs remain relatively high, driven by the
deferred mining costs which will now be reallocated from the balance sheet to
operating costs. Excluding the reallocation of the deferred mining costs, the C1
cost would be in the order of US$1.65 to US$1.80 (at a 0.78 exchange rate)
and this would be more reflective of cash costs.
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RISKS
The Company currently has a single operation
asset, the Kanmantoo Copper Mine in
South Australia. The operation provides
the Company with all of its income. The
operation consists of an open pit mine and
processing plant located close to regional
communities. Concentrate is transported by
road in containers to the Port of Adelaide and
then loaded onto ship via the port rotainer
operation. The concentrate is then shipped to
the receiver, typically located in China. Should
any of these elements be subject to failure,
the Company’s expected financial result could
be impacted.
The Company’s annual budget and
related mine plans and production and
operation outcomes are subject to a range
of assumptions and expectations, all of
which contain a level of uncertainty and
therefore risk. The Company adopts a risk
management framework in order to identify,
analyse, treat and monitor the risks applicable
to the Group. The risks are formally reported
and discussed by the Executive on a regular
basis and with the Board and Audit and Risk
Committee twice a year.
The prices received for the Company’s
commodities (copper, gold and silver) are
dictated by global markets over which
Hillgrove and its offtake partner, Freepoint
Commodities LLC, have no influence. The
Company has taken active steps to mitigate
copper price and exchange rate risk on
revenues by fixing the AUD copper price for
future shipments. As at 28 February 2018 the
Company now had fixed pricing for 13,400
tonnes of copper at an average copper price
of $8,896 per tonne after margins.
CAPITAL RAISINGS
Prior to the expiry of its listed Options
on 22 September 2017, the Company
raised approximately $5.6 million (with no
transaction costs), through the exercise of the
187.8m Options at an exercise price of $0.03.
DIRECTORS’ REPORT (CONT.)
REVIEW OF OPERATIONS FOR THE CY17 YEAR AND OUTLOOK (CONT.)
EARLY REDEMPTION OF
EVENTS SUBSEQUENT TO REPORTING DATE
CONVERTIBLE NOTES
Since the Balance Date the Company has successfully completed the following
initiatives.
On 11 October 2017, the Company
announced its intention to redeem
its listed convertible notes (Notes) on
the redemption date of 22 December
2017. This followed a decision from the
Board that it was in the best interests
of Hillgrove to use the proceeds raised
from the September 2017 exercise of
its listed options to redeem the Notes as
this would simplify its capital structure,
reduce a layer of administration, and,
to the extent Noteholders elected to
convert their Notes to shares, strengthen
its balance sheet.
$4m Copper Pre-pay Facility
On 16 February 2018, the Company agreed a fully secured $4m copper pre-pay
Facility with Freepoint Metals & Concentrates LLC. The Facility provided the
Company with general working capital enabling it to:
■ Reduce its copper price risk exposure during 2018 by fixing the price of an
■ Freepoint advanced Hillgrove $4.0 million through to 30 June 2018, which
■ Take advantage of transactions such as buying back future liabilities at a
additional 5,000 tonnes of copper at $8,885/tonne, and
discount and to continue to advance growth projects.
The key terms of the Facility were:
will then convert to a prepayment of $800 per tonne on 5,000 tonnes of future
copper sales;
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At the request of Ariadne Capital Pty
Ltd (Ariadne), which underwrote the
issue of the Notes, the Company called
a shareholder meeting at which Ariadne
sought shareholder approval to convert
all of its Notes. Approval was granted at
the shareholder meeting held on
8 December 2017, and as a result,
Ariadne converted all of its Notes
into ordinary shares, increasing its
ownership in the Company to 26.1%.
As a result of this Note conversion and
earlier conversions during 2017, 4.95
million of the 5.0 million Notes were
converted into fully paid shares, and
the remaining 0.05 million Notes were
redeemed.
During 2017, the Company issued
164,963,630 shares as a result of Note
conversions.
DIVIDENDS
There were no dividends declared or
paid during the current period or in the
prior year.
SIGNIFICANT CHANGES IN
THE STATE OF AFFAIRS
Other than those matters listed in this
report there have been no significant
changes in the affairs of the Group
during the period.
■ Hillgrove will repay the Facility from the sale of these 5,000 tonnes during the
period from July 2018 to December 2018;
■ The Facility is secured by a security package which includes the mortgages over
the real property which was previously used to secure the SA Government Loan;
and
■ The Facility will incur interest at 7% pa.
Repayment of SAG $4m Loan
On 16 February 2018, the Company repaid to the South Australian Government
an amount of $4.3m for a loan and accumulated interest. The $4m loan was one
of a number of initiatives from key stakeholders to assist Hillgrove overcome a
cash shortfall during a major pit cutback at the Kanmantoo Copper Mine during a
significant downturn in the copper market (refer market release 28 June 2016).
Buy out of a mining contractor deferred liability
On 16 November 2016, the Company announced it had reached agreement with
a mining contractor to defer payment of $1.35 million of its outstanding creditor
balance until after 1 July 2017, when the Company would pay an amount based on
a sliding scale copper price. Based on current copper prices, this liability had the
potential to increase significantly, so on 27 February 2018, the Company paid $1.93
million in full settlement of this future liability.
Indonesian Projects
On 28 February 2018, Hillgrove received notices from the Indonesian Department
of Mines, which state the tenements for its two Indonesian assets at Bird’s Head in
West Papua and Sumba Island have been terminated due to the non-performance
of obligations including the non-payment of dead rents.
Hillgrove is taking advice to review its position and decide whether it will appeal the
decision.
The projects were on care and maintenance and the carrying value of both projects
was fully impaired in 2015.
DIRECTORS’ REPORT (CONT.)
ENVIRONMENTAL REGULATION
The consolidated entity’s operations are subject to significant environmental and
other regulations. The consolidated entity has a policy of engaging appropriately
experienced contractors and consultants to advise on and ensure compliance with
environmental regulations in respect of its exploration and development activities.
There have been no reports of material breaches of environmental regulations in the
financial period and at the date of this report.
INDEMNIFICATION AND INSURANCE OF OFFICERS
Officers’ Indemnity
Article 7.3(a) of the Company’s Constitution provides that “To the extent permitted
by law, the Company must indemnify each Relevant Officer against: (i) a Liability of
that person; and (ii) Legal Costs of that person”. The Company indemnifies every
officer against any liability or costs and expenses incurred by the person in his or her
capacity as officer of the Company:
■ in defending any proceedings, whether civil or criminal, in which judgement is
given in favour of the person or in which the person is acquitted, or
■ in connection with an application, in relation to such proceedings, in which the
Court grants relief to the person under the Corporations Law.
Directors’ and Officers’ Insurance
During the financial year, the Company paid a premium in respect of a contract for
directors’ and officers’ liability insurance. It is a condition of this Policy that each
Insured and/or any persons at their direction or on their behalf shall not disclose
the existence of any Coverage Section, its Limits of Liability, the nature of the liability
indemnified, or the premium payable.
Proceedings on Behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001
for leave to bring proceedings on behalf of the Company, or to intervene in any
proceedings to which the Company is a party, for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings. No proceedings have
been brought or intervened in on behalf of the Company with leave of the Court
under section 237 of the Corporations Act 2001.
Non-audit Services
The Company may decide to employ the auditor on assignments additional to their
statutory audit duties where the auditor’s expertise and experience with the Company
and/or the consolidated entity are important. Details of the amounts paid or payable
to the auditor (Price Waterhouse Coopers and Deloitte Touche Tohmatsu) for audit
and non-audit services provided during the period are set out in Note 6.
The Audit and Risk Committee has considered the position and 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.
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None of the services provided
undermine the general principles
relating to auditor independence as
set out in Professional Statement
F1, including reviewing or auditing
the auditor’s own work, acting in a
management or decision-making
capacity for the Company, acting as
advocate for the Company or jointly
sharing economic risk and rewards.
A copy of the Auditors’ Independence
Declaration as required under section
307C of the Corporations Act 2001 is
set out on page 39.
The Board is committed to following
ASX Corporate Governance Council
Corporate Governance Principles
and Recommendations. The
Company adopts these best practice
recommendations in its policies and
procedures where it is appropriate to do
so, given the size and type of Company
and its operations.
The Board has a process of reviewing
all policies and corporate governance
processes. Charters are reviewed
and updated periodically. These
charters provide the framework and
roles of respective committees for the
appointment of Non-Executive Directors
to undertake specific responsibilities on
behalf of the Board.
Details of the corporate governance
policies adopted by the Company
and referred to in this statement are
available on the Company’s website at
www.hillgroveresources.com.au.
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DIRECTORS’ REPORT (CONT.)
REMUNERATION REPORT (AUDITED)
The Directors of Hillgrove Resources
and its Consolidated Entities present the
Remuneration Report for the Company
for the year ended 31 December 2017,
which forms part of the director’s
report and has been audited in
accordance with section 308 (3C) of the
Corporations Act 2001.
Non-executive Directors
Mr J E Gooding
During the year a number of
remuneration related, cost reduction
decisions were implemented to assist
the Company to address the cash
constraints it faced, including:
■ Continuing the pay freeze which
Mr M W Loomes
(Non-independent)
was instituted in 2014, with salaries
remaining at 2013 levels.
Mr P Baker
■ The 10% salary deferral for all staff
(which commenced in May 2016)
continued until November 2017,
■ Not granting any Short Term
Incentives (STI’s) during 2017, and:
■ Reducing staff through natural
attrition and absorbing their roles
into remaining roles where possible.
Repayment of the 10% salary deferrals
commenced in December 2017.
Mr T Breuer
Executive Directors
Mr S P McClare
KMP Executives
Mr P Kiley
1.0 KEY MANAGEMENT PERSONNEL
Key management personnel comprise the Non-Executive Directors, the Executive
Director and Executives (KMP). Details of the KMP are set out in the table below.
Title (at year end)
Chairman
Chairman Remuneration Committee
Member Audit and Risk Committee
Chairman Nomination Committee
Director
Member Remuneration Committee
Member Audit and Risk Committee
Member Nomination Committee
Director
Chairman Audit and Risk Committee
Member Remuneration Committee
Member Nomination Committee
Director
Member Remuneration Committee
Member Audit and Risk Committee
Member Nomination Committee
Change in 2017
Financial Year
Appointed Chairman
of the Board, the
Remuneration
Committee and the
Nomination Committee
on 31 May 2017
Full Year
Full Year
Part Year
Appointed 1 June 2017
CEO and Managing Director
Member Treasury Committee
Chief Financial Officer and
Company Secretary
Member Treasury Committee
Full Year
Full Year
Mr L Wallace
General Manager, Kanmantoo
Full Year
Key Management departures during the 2017 Financial Year
Non-executive Directors
Title (at year end)
The Hon. Dean Brown, AO Chairman
Chairman Remuneration Committee
Member Audit and Risk Committee
Chairman Nomination Committee
Change in 2017
Financial Year
Resigned
31 May 2017
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DIRECTORS’ REPORT (CONT.)
REMUNERATION REPORT (AUDITED) (CONT.)
2.0 ROLE OF THE BOARD AND
THE REMUNERATION
COMMITTEE
The Board is responsible for the
Company’s remuneration strategy
and policy. Consistent with this
responsibility, the Board has established
a Remuneration Committee which
comprises a majority of independent
non-executive directors.
and employee turnover.
Shareholder Return (TSR);
and hence improved TSR; and
The Remuneration and Benefits policy aims to:
■ Align employee remuneration to the principles and measurement of Total
■ Present progressive incentive structures to encourage outstanding performance,
■ Mitigate the business risks associated with poor performance, market movements
The Remuneration Committee Charter and Remuneration and Benefits Policy
can be viewed in the Corporate Governance section of the Company’s website
www.hillgroveresources.com.au.
The role of the Remuneration Committee
is set out in its Charter and in summary
is to:
■ Review and approve the Company’s
remuneration strategy and policy;
■ Consider and propose to the Board
the remuneration of the CEO and
consider and approve the remuneration
of all designated senior executives;
■ Review and approve Hillgrove
Resources’ short term incentive
(STI) and long term incentive (LTI)
schemes, including amounts, terms
and offer processes and procedures;
■ Determine and approve equity
awards in accordance with policy
and shareholder approvals, including
testing of vesting and termination
provisions; and
■ Review and make recommendations
to the Board regarding remuneration
of non-executive directors.
Further information on the Remuneration
Committee’s role, responsibilities
and membership is contained in the
Corporate Governance Statement which
is available on the Company’s website
www.hillgroveresources.com.au.
2.1 Remuneration and Benefits
Policy
The Company’s approach to remuneration
is outlined in the Remuneration and
Benefits Policy and is based on providing
competitive rewards that motivate
talented employees to deliver superior
results.
2.2 Use of remuneration consultants
During the year no remuneration consultancy contracts were entered into by
the Company and no disclosure is required under section 300A (1) (h) of the
Corporations Act 2001.
3.0 NON-EXECUTIVE DIRECTOR REMUNERATION
Details
Elements
Aggregate Board and
Committee Fees
The total amount of fees paid to non-executive directors
in the year ended 31 December 2017 is within the
aggregate amount approved by shareholders at the AGM
in 2009 of $450,000 a year. The individual amounts paid
to directors have not increased since January 2011 (1).
Board/Committee fees
per annum*
Board Chairman Fee
$120,000 (1)
Audit Committee Chairman
$10,000 (2)
Board NED Base Fee
$60,000 (1)
Post-employment Benefits
Details
Superannuation
Superannuation contributions are made at a rate of
9.5% of base fee (but only up to the Government’s
prescribed maximum contributions limit) which satisfies
the Company’s statutory superannuation contributions.
Contributions are included in the base fee.
Other Benefits
Details
Equity Instruments
Other fees/benefits
Non-Executive directors do not receive any performance
related remuneration or performance rights.
No payments were made to non-executive directors
during the 2017 financial year for extra services or
special exertions. Directors are entitled to be reimbursed
for approved Company related expenditure e.g. flights
and expenses to attend Board meetings.
(1) Effective 1 December 2015, the Board agreed to a temporary 20% fee reduction in
the light of the economic conditions and low commodity price environment, which
reduced the Chairman’s fee from $150,000 to $120,000 and the NED fee from $75,000
to $60,000. The fee reduction was a voluntary initiative put in place by the directors.
Director’s fees will revert to the pre-reduction fees once the Giant Pit cutback is completed
and production returns to pre-cut back levels (expected to be in early 2018).
(2) Effective 1 January 2017, the Board agreed to pay the chairman of the Audit & Risk
Committee an annual fee of $10,000 in recognition of the increased time commitment
which comes with this role.
*
Fees include all committee memberships with no extra payments for committee
memberships, except as noted at (2) above.
DIRECTORS’ REPORT (CONT.)
REMUNERATION REPORT (AUDITED) (CONT.)
4.0 EXECUTIVE REMUNERATION
4.1 KMP Executive Remuneration Tables – Audited
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Non-Executive Directors
Mr J E Gooding
Mr M W Loomes
Mr P Baker
Mr A Breuer
The Hon. D C Brown
Total
Executive Directors
Mr S McClare
Total
Other key management personnel
Mr P G Kiley
Mr L A Wallace
Total
KMP Total
Year
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
Fixed Remuneration
Short-term
Long-term
Salary
and Fees
Non-monetary
benefits
Superannuation
Benefits
Termination
Benefits
Long
Service
Leave
88,059
60,000
54,795
55,191
63,927
54,795
31,963
-
50,000
100,000
288,744
269,986
472,634
430,436
472,634
430,436
337,000
342,770
277,697
288,696
614,697
631,466
1,376,075
1,331,888
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6941
-
5205
5,243
6,073
5,205
3,037
-
-
20,000
21,256
30,448
25,830
12,306
25,830
12,306
31,599
32,010
26,034
26,931
57,633
58,941
104,719
101,695
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
95,000
60,000
60,000
60,434
70,000
60,000
35,000
0
50,000
120,000
310,000
300,434
498,464
442,742
498,464
442,742
368,599
374,780
303,731
315,627
672,330
690,407
1,480,794
1,433,583
DIRECTORS’ REPORT (CONT.)
REMUNERATION REPORT (AUDITED) (CONT.)
4.0 EXECUTIVE REMUNERATION (CONT.)
4.1 KMP Executive Remuneration Tables – Audited (cont.)
Variable Remuneration
Total
Proportion of
Total Remuneration
Short-term
Year
Bonus
Equity
Compensation
Value of
Performance
Rights
Total
Performance
Related
Equity Related
31
Non-Executive Directors
Mr J E Gooding
Mr M W Loomes
Mr P Baker
Mr A Breuer
The Hon. D C Brown
Total
Executive Directors
Mr S P McClare
Total
Other key management personnel
Mr P G Kiley
Mr L A Wallace
Total
KMP Total
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
CY17
CY16
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
95,000
60,000
60,000
60,434
70,000
60,000
35,000
-
50,000
120,000
310,000
300,434
126,566
126,566
625,030
83,799
83,799
526,541
126,566
126,566
625,030
83,799
83,799
526,541
100,667
100,667
469,266
29,813
86,413
46,454
29,813
404,593
86,413
390,144
46,454
362,081
187,080
187,080
859,410
76,267
76,267
766,674
313,646
313,646
1,794,440
160,066
160,066
1,593,649
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0%
0%
0%
0%
0%
0%
-
-
0%
0%
-
-
0%
0%
0%
0%
-
-
-
-
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0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
-
-
20%
16%
-
-
21%
7%
22%
13%
-
-
-
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DIRECTORS’ REPORT (CONT.)
REMUNERATION REPORT (AUDITED) (CONT.)
4.0 EXECUTIVE REMUNERATION (CONT.)
4.2 Executive KMP
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remuneration framework
Hillgrove Resources’ executive
remuneration strategy is designed to
attract, retain and motivate a highly
qualified and experienced group of
executives.
4.3 Total fixed remuneration
Total Fixed Remuneration (TFR)
includes all remuneration and benefits
paid to an Executive KMP calculated
on a Total Employment Cost (TEC)
basis and includes base salary and
superannuation benefits paid in line with
the prevailing statutory Superannuation
Guarantee legislation.
There has been no increases in TFR
during the last three years and salaries
have remained at 2013 levels. In May
2016, given the Company’s cashflow
position was forecast to be very tight
throughout the remainder of 2016
and continue into 2017, all Hillgrove
employees agreed to defer 10% of
salaries from 19 May 2016 until
30 November 2017. In December 2017,
the Company began repaying these
deferred amounts over a fourteen month
period up until January 2019.
January
2017
TFR
STI
LTI
4.4 Remuneration composition mix and timing of receipt
The Company endeavours to provide an appropriate and competitive mix of
remuneration components balanced between fixed and ‘at risk’. The broad
remuneration composition mix of the Company’s Executive KMP can be illustrated
as follows:
Remuneration mix (actual) CY 2017
Position
CEO/MD
Senior Executives (KMP)
TFR (Cash)
STI (Cash) (1)
LTI (Equity)
100%
100%
Up to 60% of TFR
Up to 60% of TFR
Up to 50% of TFR
Up to 50% of TFR
(1) Note no STI’s were offered or paid in 2016 or 2017.
Note KMPs are classified as Executives for the purposes of remuneration disclosures
under the Corporations Act.
The three complementary components of Executive KMP remuneration are ‘earned’
over multiple time ranges. This is illustrated in the following chart.
YEARS 2 and 3
January
2018
June
2019
YEAR 1
June
2017
TFR
Performance measured
(one year)
Performance measured
(two years)
LTI
performance
period starts
STI
performance
period ends
STI
performance
period starts
and new TFR
effective
LTI
performance
period ends
4.5 Variable ‘at risk’ remuneration
As set out in the Section 4.4, variable remuneration forms a portion of the CEO/
MD and other Executive KMP remuneration. Apart from being market competitive
the purpose of variable remuneration is to direct executive’s behaviours towards
maximising Hillgrove Resources’ value and return to shareholders, by targeting short,
medium and long term performance measures. The key aspects are summarised
below.
DIRECTORS’ REPORT (CONT.)
REMUNERATION REPORT (AUDITED) (CONT.)
4.0 EXECUTIVE REMUNERATION (CONT.)
4.5 Variable ‘at risk’ remuneration (cont.)
4.5.1 Hedging and Margin Lending Prohibition
Under the Company’s Share Trading Policy and in accordance with the Corporations Act 2001, equity granted under the
Company’s equity incentive schemes must remain at risk until vested, or exercised. It is a specific condition of the policy that no
schemes are entered into, by an individual or their associates, that specifically protects the unvested value of shares, options or
performance rights allocated.
The Company, as required under the ASX Listing Rules, has a formal policy outlining how and when employees may deal in
Hillgrove Resources securities.
Hillgrove Resources Limited’s Share Trading Policy is available on the Company’s website www.HillgroveResources.com under
Investor Centre, Corporate Governance.
4.5.2 Long Term Incentives (LTI)
The LTI provides an annual opportunity for executives and key staff to receive an equity award with a two year vesting period and
that is intended to align a significant portion of an executive’s overall remuneration to shareholder value over the longer term.
All LTI awards remain at risk and subject to clawback (forfeiture or lapse) until vesting and must meet or exceed relative TSR
performance hurdles over the vesting period, along with other performance criteria.
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Long Term Incentives (LTI)
Purpose
Types of equity
awarded
To retain key executives and align their remuneration with shareholder value.
LTI has been provided under the Company’s Executive Long Term Incentive Plan. See Section 5.1 for further
details.
Under the LTI, executives and key staff are offered performance rights (to acquire ordinary shares of Hillgrove
Resources Limited).
Time of grant
In 2018 equity grants will be made after the 2018 AGM.
Time restrictions
Equity grants awarded to the CEO/MD and other KMPs are tested against the performance hurdle at the
vesting date which is two years (1) after the grant date. If the performance hurdle is not met at the vesting
date, performance rights lapse, subject to Board evaluation.
A service and performance requirement is imposed on all equity grants.
Performance hurdles
and vesting schedule
Equity grants were made in 2017 and were subject to the Company’s Total Shareholder Return (TSR) ranked
against the S&P/ASX Small Resources Index as follows:
Ranking of TSR Against S&P/ASX Small Resources Index (2 Years) (1)
Performance
% of equity to vest
Below the 50th percentile
At the 50th percentile
0%
50% vest
Between the 50th to 75th percentile
2% vesting on a straight line interpolation for each percentile
ranking above the 50th percentile
At or above 75th percentile
100%
Performance rights vest as shares if the time restrictions and relevant performance hurdle is met. Special
provisions, in accordance with company policies, may apply in the event of termination of employment or a
change of control.
There are no voting rights attached to performance rights.
The size of individual LTI grants for the CEO/MD and other KMPs is determined in accordance with the Board
approved remuneration strategy mix. See Section 4.4.
The target LTI $ value for each executive is then converted into a number of performance rights based on a
valuation methodology determined at the grant date, as follows:
Performance right allocation = LTI $ value determined / Hillgrove Resources share price at grant date.
Voting rights
LTI Allocation
(1) The vesting period for the 2016 and 2017 LTI’s was reduced to two years to reflect the current approved PEPR mine life.
DIRECTORS’ REPORT (CONT.)
REMUNERATION REPORT (AUDITED) (CONT.)
4.0 EXECUTIVE REMUNERATION (CONT.)
4.5 Variable ‘at risk’ remuneration (cont.)
4.5.3 Short Term Incentives (STI)
STI Programme
Purpose
Performance
Target Areas
Rewarding
Performance
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The STI arrangements are designed to reward executives for the achievement against annual performance targets
set by the Board at the beginning of the performance period. The STI programme is reviewed annually by the
Remuneration Committee and approved by the Board.
All STI awards to the CEO/MD and other KMP are approved by the Remuneration Committee and the Board.
The key performance objectives of the Company vary by level but are currently directed to achieving ambitious
targets, complemented by the achievement of individual performance goals and Company performance.
Based on the performance target areas set out above, a number of targets are set for each area which generally
includes a Threshold, Target and Stretch target. An STI measure can only start to be accumulated provided the
Threshold level is achieved.
A “gate opener” principle applies whereby an STI will only start to be awarded to the CEO and KMPs if a threshold
level of EBITDA is achieved.
All targets are set having regard to prior year performance, market conditions and Board approved budgets.
Specific targets are not provided in detail due to commercial sensitivity.
Validation of performance against the measures set for the CEO/MD and KMPs involves a review calculation and
recommendation by the CEO, reviewed and approved by the Remuneration Committee with final Board sign-off.
The Remuneration Committee determined that given the Company’s tight cashflow position no STI awards would be granted for
the 2017 year.
4.6 Relationship between Performance and Executive KMP Remuneration
4.6.1 Hillgrove Resources Financial Performance (31 January 2014 to 31 December 2017)
Sales Revenue ($M)
Underlying EBITDA ($M)
Reported net profit / (loss) ($M)
Return on equity (ROE) % (2)
Basic earnings per share (EPS) (cents)
Diluted EPS (cents)
Share price as at 31 December (cents) (3)
12 Months to
31 January
11 Months to
31 December
12 Months to 31 December
2014
139.2
37.8
1.5
0.7%
1.1
1.1
70
2014
166.8
52.3
3.8
1.6%
2.6
2.5
45
2015 (restated)
2016 (restated)
139.5
16.1
113.1
22.2
2017
127.1
16.2
(130.1) (1)
(109.2) (4)
(14.1) (4)
(69.1%) (1)
(144.3%) (4)
(88.3%) (4)
(77.0) (1)
(77.0) (1)
16
(57.8) (4)
(57.8) (4)
4
(4.8) (4)
(4.8) (4)
9
Total shareholder return (TSR) % (Annual)
(30.4%)
(35.3%)
(64.4%)
(75.0%)
125.0%
(1)
Includes impairment charge of $112.9m.
(2) Based on average total equity
(3) After 8 for 1 share consolidation effective on 17 September 2014.
(4)
Includes impairment charge of $68.5m.
4.5.2 Dividend History
No dividends have been declared or paid (interim or final) over the five years from 2014 to 2017.
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REMUNERATION REPORT (AUDITED) (CONT.)
5.0 EQUITY PLAN DISCLOSURES
5.1 Employee Share Schemes (ESS) operated by the Group
Plan Details
Type of Instruments
Details
Purpose
Employee share plan and share
issues
General Employee Share Plan
(GESP)
Hillgrove Resources Option and
Performance Rights Plan
Option and Performance
Rights Plan (OPRP)
Refer 4.5.2
To incentivise and align part of employee
remuneration to shareholder value
To provide equity incentive subject to
meeting predetermined service and
performance conditions.
5.2 Analysis of share-based payments granted as remuneration to KMP
Details of the vesting profile of the performance rights granted as remuneration to each Key Management Personnel, and the
movements during the period are set out below:
Key Executives
Mr S P McClare
TOTAL
Mr P Kiley
TOTAL
Mr L A Wallace
TOTAL
Balance held
at 31/12/16
Granted
Number
vested
%
vested
Number
forfeited
%
lapsed
Balance held at
31/12/17
Grant Date
Jun 17
Jul 16
Jul 14
-
3,800,000
2,500,000
300,000
-
-
2,800,000
3,800,000
Jun 17
-
2,600,000
Jul 16
1,500,000
-
Jun 17
Jul 16
Jul 14
1,500,000
2,600,000
-
2,100,000
1,200,000
112,500
-
-
1,312,500
2,100,000
-
-
-
-
-
-
-
-
-
-
-
0%
0%
-
-
0%
0%
-
0%
0%
-
-
-
-
-
-
(300,000)
100%
(300,000)
-
-
-
-
-
-
-
-
-
-
-
(112,500)
100%
3,800,000
2,500,000
-
6,300,000
2,600,000
1,500,000
4,100,000
2,100,000
1,200,000
-
(112,500)
-
3,300,000
5.3 Exercise of Performance Rights granted as remuneration
No performance rights held by executive KMP were exercised during the financial year.
5.4 Value of performance rights granted to Executive KMP, and on foot as at 31 December 2017
Key Executives
Mr S P McClare
TOTAL
Mr P Kiley
TOTAL
Mr L A Wallace
TOTAL
Grant Date
Number Granted
Vesting Date
Jun 17
Jul 16
Jun 17
Jul 16
Jun 17
Jul 16
3,800,000
2,500,000
6,300,000
2,600,000
1,500,000
4,100,000
2,100,000
1,200,000
3,300,000
Jun 19
Jun 18
Jun 19
Jun 18
Jun 19
Jun 18
Face Value
per right
$0.086
$0.086
Fair Value (1)
(3) $0.0644
(4) $0.0321
Intrinsic
Value (2)
$326,800
$215,000
Total Fair
Value
$244,870
$80,250
$541,800
$325,120
$0.086
$0.086
$0.086
$0.086
(5) $0.0654
(6) $0.0678
$223,600
$129,000
$169,940
$101,700
$352,600
$271,640
(5) $0.0654
(6) $0.0678
$180,600
$103,200
$137,260
$81,360
$283,200
$218,620
(1) The fair value at grant date has been based on a valuation in accordance with accounting standard AASB 2 “Share Based Payments”.
The fair values are used for accounting purposes only.
Intrinsic value at year end is the difference between the exercise price and the share price ($0.086) on 31 December 2017.
(2)
(3) Valued at 25 May 2017 when approved by shareholders at the AGM.
(4) Valued at 26 May 2016 when approved by shareholders at the AGM
(5) Valued at Grant Date on 1 June 2017.
(6) Valued at Grant Date on 11 July 2016.
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DIRECTORS’ REPORT (CONT.)
REMUNERATION REPORT (AUDITED) (CONT.)
5.5 Movement in equity held
The movement during the reporting period in the number of ordinary shares, convertible notes and options over ordinary shares
of Hillgrove Resources Limited held, directly, indirectly or beneficially, by each specified Director and executive KMP, including
their personally-related entities:
Held as at
31/12/16
Net Other
Changes
Convertible
Notes (1)
Exercise
Options (2)
Exercise of
Rights
Held as at
31/12/17
Directors
Mr J E Gooding
Mr M W Loomes
Mr P Baker
Mr A Breuer
Mr S P McClare
Other KMP
Mr P Kiley
Mr L A Wallace
Shares
Notes
Options
Shares
Notes
Options
Shares
Notes
Options
Shares
Notes
Options
Shares
Notes
Options
Shares
Notes
Options
Shares
Notes
Options
-
-
-
-
-
-
-
-
-
33,333
(1,000)
37,621
-
-
(37,621)
4,264,200
4,812,577
(127,926)
-
-
(4,812,577)
266,666
(8,000)
300,960
-
-
(300,960)
94,444
-
-
10,127,346
-
-
667,626
-
-
(3) 1,546,000
5,224,466
13,396,334
20,166,800
23,490
1,000
37,621
1,050,569
127,926
4,812,577
100,000
8,000
300,960
-
-
-
(3) 156,734
(156,734)
-
(4) 13,396,334
-
(13,396,334)
477,273
55,000
-
-
1,833,333
4,569,100
(55,000)
-
2,069,100
(5) 2,500,000
-
(4,569,100)
10,000
50,000
1,881,000
23,864
100,000
-
-
-
-
-
1,666,666
1,881,000
(50,000)
-
-
1,881,000
3,333,333
6,262,000
(100,000)
-
3,762,000
(6) 2,500.000
-
(6,262,000)
-
-
6,879,706
-
-
3,557,666
-
-
9,619,197
-
-
(1) Convertible Notes were converted into ordinary shares on or before the Redemption date of 22 December 2017.
(2) Options were exercised on or before their Expiry date of 22 September 2017.
(3) Shares and Notes held by Mr Breuer at the time of his appointment.
(4)
(5) Options acquired by Mr McClare acquired off market.
(6) Options acquired by Mr Wallace acquired off market.
Includes 5,896,334 Options held by Mr Breuer and 7,500,000 Options acquired off market.
DIRECTORS’ REPORT (CONT.)
REMUNERATION REPORT (AUDITED) (CONT.)
6.0 SERVICE CONTRACTS AND EMPLOYMENT AGREEMENTS
The Company does not enter into service contracts for KMP Executives. The following sets out details of the employment
contracts for Executive KMPs as at 31 December 2017.
Employee
Position
Mr S P McClare
Mr P G Kiley
Mr L A Wallace
Chief Executive Officer and
Managing Director
Chief Financial Officer and
Company Secretary
General Manager, Kanmantoo
Copper Mine
12 June 2015
$400,000 p.a. (3)
reviewed periodically
Up to 50% of fixed
remuneration
Up to 50% of fixed
remuneration
Indefinite
3 months
1 August 2015
$330,000 p.a. (4)
reviewed periodically
Up to 50% of fixed
remuneration
Up to 50% of fixed
remuneration
Indefinite
3 months
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Commencement
25 May 2015
$500,000 p.a. (2)
reviewed periodically
Up to 60% of fixed
remuneration
Up to 60% of fixed
remuneration
Indefinite
6 months
Fixed Remuneration (1)
Short-term Incentive
Long-term Incentive
Contract Length
Notice periods for resignation
or termination
Redundancy Benefit
Death or Total and Permanent
Disability Benefit
National Employment Standards
and Group Redundancy Policy
National Employment Standards
and Group Redundancy Policy
National Employment Standards
and Group Redundancy Policy
No specific benefit
No specific benefit
No specific benefit
Change of Control
No effect
No effect
No effect
Termination for serious
misconduct
No notice required,
remuneration to the day less
advance payments and return
of Company property.
No notice required,
remuneration to the day less
advance payments and return
of Company property.
No notice required,
remuneration to the day less
advance payments and return
of Company property.
No payment STI/LTI
No payment STI/LTI
No payment STI/LTI
Statutory entitlements
All leave and benefits due per
National Employment Standards
All leave and benefits due per
National Employment Standards
All leave and benefits due per
National Employment Standards
Post-Employment restraints
For 6 months:
Must not interfere in Company
business, recruit employees,
or make adverse comments or
actions by either party.
No adverse comments or
actions by either party
No adverse comments or
actions by either party
(1) On 19 May 2016 all Hillgrove employees, as part of a cost reduction initiative, agreed to defer 10% of their salary from 19 May 2016 until
1 December 2017. From 1 December 2017, the total salary deferral for each employee will be repaid over a 14 month period up until
January 2019.
(2) Mr McClare’s annual fixed remuneration excludes $64,632 attributable to the 2016 and 2017 salary deferral amounts, which will be paid
during CY18.
(3) Mr Kiley’s annual fixed remuneration excludes $52,571 attributable to the 2016 and 2017 salary deferral amounts, which will be paid
during CY18.
(4) Mr Wallace’s annual fixed remuneration excludes $43,806 attributable to the 2016 and 2017 salary deferral amounts, which will be paid
during CY18.
DIRECTORS’ REPORT (CONT.)
CORPORATE GOVERNANCE STATEMENT
The Company’s Board is committed to achieving the highest standards of corporate governance.
The Company’s Corporate Governance Statement for the year ended 31 December 2017 may be accessed from the Company’s
website at www.hillgroveresources.com.au/article/Corporate_Governance/Corporate_Governance.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191,
dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors‘ report and the financial
statements are rounded off to the nearest hundred thousand dollars, unless otherwise indicated.
AUDITORS 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 39.
Signed in accordance with a resolution of the Directors:
Dated at Adelaide this 14th day of March 2018
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Mr John Gooding
Chairman
Mr Steve McClare
Managing Director
AUDITOR’S INDEPENDENCE DECLARATION
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Auditor’s Independence Declaration
As lead auditor for the audit of Hillgrove Resources Limited for the year ended 31 December 2017, I
declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Hillgrove Resources Limited and the entities it controlled during the
period.
Andrew Forman
Partner
PricewaterhouseCoopers
Adelaide
14 March 2018
PricewaterhouseCoopers, ABN 52 780 433 757
Level 11, 70 Franklin Street, ADELAIDE SA 5000, GPO Box 418, ADELAIDE SA 5001
T: +61 8 8218 7000, F: +61 8 8218 7999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2017
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Revenue
Other income
Expenses
Impairment charges
Interest and finance charges
Fair value movement in convertible notes
Profit/(Loss) before income tax
Income tax (expense) / benefit
Profit/(Loss) for the year attributable to owners
Items that may be reclassified to profit or loss
Recycle of cash flow hedge reserve
Income tax relating to components of other
comprehensive income
Other comprehensive income for the period (net of income tax)
Note
4
5
6(a)
6(c)
6(b)
20(a)
7
23
23
31 Dec 2017
31 Dec 2016
$’000
127,078
212
(122,914)
(153)
(4,561)
(5,569)
(5,907)
(8,167)
(14,074)
$’000
restated
113,127
565
(136,201)
(68,475)
(4,354)
-
(95,338)
(13,859)
(109,197)
(10,946)
(10,550)
3,284
(7,662)
3,165
(7,385)
Total comprehensive income for the period
(21,736)
(116,582)
Total comprehensive income for the period is attributed to:
Equity holders of Hillgrove Resources Limited
Non-controlling interests
Total comprehensive income
Earnings per share for profit attributable to the ordinary equity
holders of the Company:
Basic and diluted earnings per share
8
(21,736)
-
(21,736)
Cents
(4.8)
(116,582)
-
(116,582)
Cents
(57.8)
The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with
the notes to the financial statements set out on pages 44 to 67.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2017
31 Dec 2017
31 Dec 2016
Note
$’000
$’000
restated
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Exploration and evaluation expenditure
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Borrowings
Employee benefits payable
Deferred income
Total current liabilities
Non-current liabilities
Provisions
Borrowings
Employee benefits payable
Deferred income
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings / (accumulated losses)
Total equity
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
471
4,367
12,734
17,572
77,691
889
-
78,580
96,152
48,317
2,896
8,151
6,716
306
66,386
13,826
1,388
609
190
16,013
82,399
13,753
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1,942
3,994
4,991
10,927
68,660
803
4,883
74,346
85,273
36,425
3,027
2,834
2,768
229
45,283
10,219
10,193
927
468
21,807
67,090
18,183
234,334
3,128
(223,709)
13,753
217,538
10,280
(209,635)
18,183
The Consolidated Statement of Financial Position is to be read in conjunction with
the notes to the financial statements set out on pages 44 to 67.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2017
Contributed
equity
Reserves
Note
$’000
$’000
Retained
earnings
$’000
restated
Total equity
$’000
restated
Balance 31 December 2015
216,272
16,122
(99,200)
133,194
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Loss for the period
Other comprehensive income
Transactions with owners:
Shares issued to creditors
Share based compensation
Transfer
Balance 31 December 2016
Loss for the period
Other comprehensive income
Transactions with owners:
Contributions of equity
Share based compensation
Balance 31 December 2017
-
-
1,266
-
-
217,538
-
-
16,796
-
22
33
23
22
33
-
(109,197)
(109,197)
(7,385)
-
305
1,238
10,280
-
-
-
(1,238)
(209,635)
-
(14,074)
(7,662)
-
510
-
-
-
(7,385)
1,266
305
-
18,183
(14,074)
(7,662)
16,796
510
13,753
234,334
3,128
(223,709)
The Consolidated Statement of Changes in Equity is to be read in conjunction with
the notes to the financial statements set out on pages 44 to 67.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2017
31 Dec 2017
31 Dec 2016
Note
$’000
$’000
Cash flows from operating activities
Cash receipts in the course of operations
Cash payments in the course of operations
Net cash generated by operating activities
28
Cash flows from investing activities
Payments for exploration and evaluation expenditure
Payments for property, plant and equipment
Proceeds on disposal of plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from early termination of derivatives
Proceeds from issue of shares
Transaction costs on issue of shares
Proceeds from borrowings
Transaction costs of borrowings / convertible notes
Repayment of borrowings
Interest received
Interest paid
Net cash from/(used) in financing activities
Net decrease in cash and cash equivalents
22
Cash and cash equivalents at the beginning of financial period
Cash and cash equivalents at the end of the financial period
9
101,547
(100,905)
642
(107)
(6,788)
1
(6,894)
-
5,635
-
300
(276)
(300)
5
(583)
4,781
(1,471)
1,942
471
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97,302
(76,270)
21,032
(383)
(28,319)
611
(28,091)
14,434
-
(30)
8,930
(526)
(18,354)
80
(1,663)
2,901
(4,158)
6,100
1,942
The Consolidated Statement of Cash Flows is to be read in conjunction with
the notes to the financial statements set out on pages 44 to 67.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
1. STATEMENT OF SIGNIFICANT
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation
of these consolidated financial statements are set out below.
Where an accounting policy is specific to one note, the policy
is described in the note to which it relates. The financial
statements are for the consolidated entity consisting of
Hillgrove Resources Limited and its subsidiaries.
(a) Basis of preparation
This general purpose financial report has been prepared
in accordance with Australian Accounting Standards,
Interpretations and other authoritative pronouncements of the
Australian Accounting Standards Board and the Corporations
Act 2001. The financial statements comprise the consolidated
financial statements of the Group. For the purposes of
preparing the consolidated financial statements, Hillgrove
Resources Limited is a for-profit entity.
Going concern
(i)
The consolidated financial statements have been prepared on
a going concern basis, which assumes the Group will be able
to realise its assets and discharge its liabilities in the normal
course of business. At 31 December 2017, the Group’s
current liabilities exceeded its current assets by $48.9 million.
It should be noted that many of the initiatives that assisted the
Company through the 2016 and 2017 calendar years have
led to liabilities that have become payable in 2018. These
liabilities have therefore been recognised as current liabilities,
causing current liabilities to significantly outweigh current
assets at the end of 2017.
The Group continues to manage its cash balance and
liquidity position through the continuation of existing creditor
deferred payment agreements with its main supplier and
service providers. The repayment of these deferred amounts
commenced in November 2017 and all of the scheduled
deferment payments to the main supplier have been made,
along with the repayment of the South Australian Government
loan of $4.3 million (including accumulated interest). In
February 2018, the Company’s improved credit standing saw
the establishment of a new debt facility to provide working
capital throughout 2018.
In addition to continuing creditor support, in 2017 the Group
executed a number of initiatives to manage its cash flows,
including raising $5.6 million through the exercise of options
attached to the convertible notes, negotiating a $2.7 million
PetroBond allowing it to return to normal creditor terms with its
fuel supplier instead of paying cash up front and replacing the
$1.6 million Electranet security bond with a bond which did
not require cash backing.
To minimise short term downside copper price risk on the
expected copper output, as at 28 February 2018, the Group
has fixed pricing of 13,400 tonnes of copper production over
the next 12 months at an average price of $8,896 per tonne
after margins.
Following the completion of the Giant Pit cutback, the
operating performance of the Kanmantoo mine improved
significantly in December 2017, with increases in mining
movements, copper output, and reduced unit costs. These
improvements were sustained in January and February 2018
and are expected to continue through the remainder of 2018.
The Board remains confident that the Company can generate
sufficient cashflow from operations to meet its obligations
throughout 2018 and beyond. The most recent cash flow
forecast to February 2019 shows positive cash flows from
operations will enable the Group to meet its obligations, build
cash reserves and improve upon the current working capital
balance. This cash flow forecast is dependent on achieving
planned yet attainable levels of mine production and mill
throughput.
However, based on the net current liability position and
continued reliance on creditors, there remains a material
uncertainty that may cast significant doubt about the Group’s
ability to continue as a going concern and therefore the Group
may be unable to realise its assets and discharge its liabilities
in the normal course of business. To address this uncertainty
the Group has a number of measures in place with major
creditors and is confident that the forecast production and
cash flows will enable the Group to realise its assets and
discharge its liabilities in the normal course of business and
therefore the financial report has been prepared on a going
concern basis.
The financial report does not include any adjustments relating
to the recoverability and classification of recorded asset
amounts or to the amounts and classification of liabilities that
may be necessary should the Group be unable to continue as
a going concern.
(ii) Compliance with International Financial
Reporting Standards
Compliance with Australian Accounting Standards ensures
that the consolidated financial statements and notes of
Hillgrove Resources Limited comply with International
Financial Reporting Standards (IFRSs).
(iii) Historical cost convention
These financial statements have been prepared under the
historical cost convention, as modified when necessary by the
revaluation of certain financial assets and liabilities to fair value
through other comprehensive income or through profit or loss.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
1. STATEMENT OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
(a) Basis of preparation (cont.)
(iv) Critical accounting estimates
The preparation of financial statements requires the use
of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements are disclosed in Note 2.
(v) Restatement of prior period
Certain amounts reported in the previous period have been
restated to correct errors impacting depreciation and provision
for rehabilitation which are not considered material to the prior
year financial statements. Details on the adjustments can be
found in Note 2.
Subsidiaries
(b) Basis of consolidation
(i)
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Hillgrove Resources
Limited (the ‘’parent entity’’) as at 31 December 2017 and the
results of all subsidiaries for the period then ended. Hillgrove
Resources Limited and its subsidiaries together are referred
to in this financial report as the Group. Subsidiaries are all
entities controlled by the Group. Control is achieved when the
Group has power over the investee, is exposed, or has rights,
to variable returns from its involvement with the investee and
has the ability to use its power to affect its returns.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group. Cost is measured as
the fair value of the assets given, shares issued or liabilities
incurred or assumed at the date of exchange. Transaction
costs are expensed as incurred, except if related to the issue
of debt or equity securities.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses
control of the subsidiary. Profit or loss and each component
of other comprehensive income are attributed to owners
of Hillgrove Resources Limited and to the non-controlling
interests where applicable.
Intercompany transactions, balances and unrealised gains
on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred.
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Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by
the Group.
(ii) Parent Entity
The financial information for the parent entity, Hillgrove
Resources Limited, disclosed in Note 34 has been prepared
on the same basis as the consolidated financial statements,
except as set out below.
Investments in subsidiaries and associates are accounted
for at cost in the financial statements of Hillgrove Resources
Limited. Dividends received from associates are recognised in
the parent entity’s profit or loss, rather than being deducted
from the carrying amount of these investments.
(c) Foreign currency translation
Functional and presentation currency
(i)
Items included in the financial statements of each of the
Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the
functional currency’). The consolidated financial statements are
presented in Australian dollars, which is Hillgrove Resources
Limited’s functional and presentation currency.
Transactions and balances
(ii)
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in
the profit or loss, except when deferred in equity as qualifying
cash flow hedges and qualifying net investment hedges.
For the purpose of presenting consolidated financial
statements, the assets and liabilities of Hillgrove Resources
Limited’s foreign operations are translated into Australian
dollars using exchange rates prevailing at the end of the
reporting period. Income and expense items are translated at
the average exchange rates for the period, unless exchange
rates fluctuated significantly during that period, in which case
the exchange rates at the dates of the transactions are used.
Exchange differences arising, if any, are recognised in other
comprehensive income and accumulated in equity (attributed
to non-controlling interests as appropriate).
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
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1. STATEMENT OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
Impairment of assets
(d)
The carrying value of property, plant and equipment is
assessed for impairment whenever there is an indicator that
the asset may be impaired. Determining whether property,
plant and equipment is impaired requires an estimation of
the recoverable value of the Cash Generating Unit (“CGU”)
to which property, plant and equipment has been allocated.
Impairment is recognised when the carrying amount exceeds
the recoverable amount.
In its impairment assessment, the Company determined
the recoverable amount based on a Value in Use (“VIU”)
calculation. The VIU assessment was undertaken using a
discounted cash flow approach. Cash flow projections are
based on the CGU’s life of mine plan. In assessing the VIU,
the estimated future post-tax cash flows are discounted to
their present value using a post-tax discount rate that reflects
the current market assessment of the time value of money
and business risk. Assets that have suffered an impairment
charge are reviewed for possible reversal of the impairment at
each reporting date.
The specific methods and assumptions used to estimate the
discounted future cash flows of the Group’s CGU are outlined
in more detail in Note 2 “Critical accounting estimates and
judgements”.
(e) Financial Instruments
The Group measures financial instruments, such as over-the-
counter derivatives, at fair value at each balance sheet date.
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
re-measured at their fair value. The method of recognising
the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so, the nature
of the item being hedged. The group designates certain
derivatives as either:
■ hedges of the fair value of recognised assets or liabilities or
a firm commitment (fair value hedge); or
■ hedges of a particular cash flow risk associated with a
recognised asset or liability or a highly probable forecast
transaction (cash flow hedge).
(f) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the
amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is
recognised as part of the cost of acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of
GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with
other receivables or payables in the statement of financial
position.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation
authority, are presented as operating cash flow.
(g) Rounding of amounts
The Company is a company of the kind referred to in ASIC
Corporations (Rounding in Financials/Directors’ Reports
Instrument 2016/191, dated 24 March 2016, and in
accordance with that Corporations Instrument, amounts in the
directors’ report and the financial statements are rounded off
to the nearest thousand dollars, unless otherwise indicated.
2. CRITICAL ACCOUNTING
ESTIMATES AND JUDGEMENTS
The Group makes estimates and assumptions concerning
the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. Estimates
and judgements are continually evaluated and are based on
historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities are discussed below:
(a) Recoverability of non-current assets
The Group has a single Cash Generating Unit (CGU) being the
Kanmantoo copper mine. The estimates of discounted future
cash flows for the Kanmantoo CGU are based on significant
assumptions including;
■ Estimates of the quantities of ore reserves and the timing
of access to those reserves;
■ Future production levels based on plant throughput and
recoveries;
■ Future copper, gold and silver prices based on broker
consensus pricing;
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
2. CRITICAL ACCOUNTING ESTIMATES
AND JUDGEMENTS (CONT.)
(a) Recoverability of non-current assets (cont.)
■ Future exchange rates for the Australian dollar to US dollar
based on forward curve data;
■ Future operating costs of production including capital
expenditure and rehabilitation;
■ The discount rate most appropriate to the CG.
An impairment charge of $67.1 million against the Kanmantoo
CGU was recorded at half year 30 June 2016 in light of
weaker consensus commodity prices which prevailed at the
time. At each subsequent year end, further assessments of
the discounted future cash flows for the Kanmantoo CGU have
resulted in no further adjustments to the carrying values.
The ultimate recoupment of costs capitalised and carried
forward for exploration and evaluation activities is dependent
on successful development and commercial exploitation, or
sale of the respective areas.
(b) Pre-strip mine development and
deferred mining costs
The Group capitalises pre-strip mining costs associated with
the development of pit structures prior to normal production.
The amount deferred is calculated according to the waste
removal ratio when that ratio is significantly higher than the
normal waste removal ratio expected to be experienced during
ore production, as indicated by the mine plan. Capitalised
pre-strip mining costs are classified under Mine Development
within Property Plant and Equipment in the balance sheet
and are being amortised to the Income Statement over the
remaining life of the Kanmantoo mine.
Deferred mining costs represent the mining costs which are
normalised for the impact of waste removal ratios and copper
grades over the productive life of specific pits. Costs are
usually deferred in the upper benches of the pit when the
waste removal ratio is generally higher and the copper grade
is generally lower than the average of all the ore-producing
benches in the pit. The deferred costs are returned to the cost
of production as the relevant pit reaches its floor depth.
(c) Ore reserve estimates
The Group’s disclosed reserves are its best estimate of
product that can be economically and legally extracted from
the relevant mining properties. Estimates are developed after
taking into account a range of factors including quantities, ore
grades, production techniques and recovery rates, exchange
rates, forecast commodity prices and production costs.
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The Group’s estimates are supported by geological studies and
drilling samples to determine the quantity and grade of each
ore body. Significant judgement is required to generate an
estimate based on the geological data available.
Changes in reported reserves can impact the carrying value
of property, plant and equipment including deferred mining
expenditure, provision for mine rehabilitation, recognition
of deferred tax assets and the amount of depreciation and
amortisation charged to the profit or loss.
In October 2016 a revised Mineral Resource Estimate and Ore
Reserve Estimate was announced for the Kanmantoo Copper
Mine. The 2016 Ore Reserve Estimate increased by 5.4kt of
copper metal (about 10%), net of depletion from mining since
30 June 2016.
(d) Restoration, rehabilitation and
environmental obligations
Expenditures related to ongoing restoration, rehabilitation and
environmental obligation activities are accrued and expensed
as incurred and included in the relevant cost of mining
activities. These expenditures are estimated either on the basis
of detailed cost estimates or are in accordance with statutory
provision requirements.
Provision is made for the costs of decommissioning and site
rehabilitation costs when the related environmental disturbance
takes place. Provisions are recognised at the net present value
of future expected costs as outlined in Note 16 and 19.
The provision represents management’s best estimate of
the costs that will be incurred, but significant judgement is
required as many of these costs will not crystallise until the
end of the life of the mine.
(e) Accounting for Convertible Notes
In December 2016 the Company issued $5.0 million of
convertible notes with a maturity date of December 2019.
In September 2017 the Company announced its intention
to redeem all unexercised convertible notes in December
2017. The Group was required to measure the fair value
of the embedded derivative relating to the noteholders
conversion option being the noteholder’s option to convert
notes into shares at a discount to the listed share price of the
Company at the time of conversion. The overall fair value
expense estimate for the upward movement in the value of
the embedded derivative was recognised as an expense of
$5,569k in the statement of profit or loss.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT.)
(f) Restatement of prior period
In 2017, an error was identified within the depreciation calculation caused by the incorrect application of residual values for
various items of plant and equipment. An error was also identified within the financial model used to estimate the rehabilitation
provision. Both errors, whilst not considered material, impacted the prior year financial statements. The errors have been
corrected by restating each of the affected financial statement line items for the 2016 financial year as presented (note; there is
no impact on prior year cashflows and basic/diluted earnings per share):
Balance Sheet (extract)
31 December 2016
Increase/(decrease)
31 December 2016 restated
Property, Plant & equipment
Deferred tax assets
Provision for rehabilitation
Net assets
Retained earnings
Total equity
Statement of profit or loss (extract)
Expenses
Impairment charges
Interest & finance charges
Income tax expense
Net profit/loss for year
$’000s
67,105
4,856
8,574
18,246
(209,572)
18,246
2016
$’000s
(137,614)
(67,117)
(4,209)
(13,886)
(109,134)
$’000s
1,555
27
1,645
(63)
(63)
(63)
$’000s
68,660
4,883
10,219
18,183
(209,635)
18,183
Profit Increase/(decrease)
2016 restated
$’000s
1,413
(1,358)
(145)
27
(63)
$’000s
(136,201)
(68,475)
(4,354)
(13,859)
(109,197)
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3. FINANCIAL REPORTING BY SEGMENT
Through its ownership of the Kanmantoo Copper Mine, the
Group has one operating segment being in the resources
industry, in Australia. The Group also has exploration
tenement interests overseas, but these tenements are fully
written down, under minimal care and maintenance and
therefore are considered to be immaterial, not requiring
separate segment disclosure.
4. REVENUE FROM SALE
OF CONCENTRATES
Revenue from sale of
concentrates
Total revenue
31 Dec 2017
31 Dec 2016
$’000
$’000
127,078
127,078
113,127
113,127
Revenue is measured at the fair value of the consideration
received or receivable.
The Group sells copper concentrate and sales of the metals
contained in the product are recognised when a group entity
has delivered the concentrate to the customer. Delivery does
not occur until the product has either been sold at the port to
the customer or has been loaded onto a ship on the basis of a
CIF sale.
The market price of the copper metal in the concentrate is
declared by the customer one calendar month prior to the
month of shipment. The price can be declared as either one
of: one month before the month of shipment or synthetically
spread adjusted to five months after the month of arrival at the
discharge port.
Concentrate sales revenue represents gross proceeds
receivable from the customer. Buyer deductions such as
treatment charges, refining charges, price participation and
bismuth penalty charges are classified as costs of production.
Revenue for 2017 also includes the net value realised from the
early close out in 2016 of commodity forward sale contracts
designated as cash flow hedges. All of the value realised from
this close out has now been brought to account.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
5. OTHER INCOME
31 Dec 2017
31 Dec 2016
6. EXPENSES
Profit or loss before income tax includes the following expenses:
$’000
(a) Expenses per Profit or Loss
Interest
Other income
Gain on embedded
derivative (a)
Grant income (b)
Total other income
$’000
11
-
-
201
212
76
13
324
152
565
(a) The Group has an embedded derivative associated
with a liability to a contractor for face value of $1,350k
where the future amount repayable is dependent on
the average AUD copper price after July 2017. Using
forecast consensus pricing at 31 December 2016
to value the embedded derivative component, an
unrealised gain was recognised as other income and the
value of the liability was reduced. At December 2017,
the derivative component of the liability was estimated
using actual average copper prices which added $580k
to the face value of the liability. The change in value
from the turnaround since December 2016 has been
shown as a finance expense in Note 6 (b).
(b) Grant income received to assist with construction of a
water pipeline was deferred to the balance sheet and
is recognised in the profit or loss on the same basis as
amortisation of the underlying asset.
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Costs of production
Depreciation and
amortisation
Inventory movement
Cost of goods sold
Government royalties
Corporate and other
costs
Loss / (gain) on sale of
fixed assets
Foreign exchange
loss / (gain)
Total Expenses per
Profit or Loss
31 Dec 2017
31 Dec 2016
Note
(i)
$’000
109,691
11,814
(7,794)
$’000
86,590
44,694
968
113,711
132,252
4,596
1,250
(ii)
4,352
3,976
18
(32)
237
(1,245)
122,914
136,201
(i)
Costs of production represent costs for mining,
processing, transport of concentrate to port, site
overheads and treatment/refining charges.
(ii) Corporate and other costs reflect the costs incurred
in running the corporate head office, together with
Indonesian care and maintenance costs.
(b)
Interest and finance charges
31 Dec 2017
31 Dec 2016
$’000
$’000
Discount on unwind of
rehabilitation provision
Bank fees and charges
Interest on borrowings
Interest payable on
financial liabilities
Convertible Note interest
Convertible Note costs
Shares in lieu of interest to
mining contractor
Loss on embedded
derivative (see note 5(a))
Total Interest and finance
charges
1,189
16
292
561
295
645
658
905
1,181
1,538
1,181
454
-
-
-
-
4,561
4,354
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
(e) Assurance services
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:
31 Dec 2017
31 Dec 2016
(i) Audit Services
Fees paid to
PricewaterhouseCoopers:
Audit and review of
financial reports and other
audit work under the
Corporations Act 2001
Fees paid to Deloitte Touche
Tohmatsu:
Audit and review of financial
reports and other audit work
under the Corporations Act
2001
Review of prospectus for
convertible note issue
Fees paid to other firms:
Audit and review of
Singapore financial reports
(Crowe Horwath)
(ii) Taxation Services
Services by Deloitte Touche
Tohmatsu:
Tax compliance services,
including review of income
tax returns
Tax advice for inclusion in
convertible note prospectus
Services by other firms:
Singapore tax compliance
services, including income
tax returns (Crowe Horwath)
Research and development
concession claims
(Shinewing)
$
203,060
$
-
63,490
260,000
-
20,000
14,624
281,174
15,902
295,902
12,477
20,107
-
12,777
8,348
8,563
10,335
31,160
-
41,447
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6. EXPENSES (CONT.)
Impairment charges
(c)
Property, plant and equip-
ment (Kanmantoo CGU)
Exploration assets
31 Dec 2017
31 Dec 2016
$’000
$’000
-
153
153
68,441
34
68,475
In accordance with the Group’s accounting policies, regular
impairment testing is carried out to ensure assets are not
carried at more than their recoverable amount. The value in
use methodology is used to estimate the recoverable amount,
rather than the fair value less cost of disposal method. This is
because the value in use methodology more closely portrays
Kanmantoo’s current life of mine plan which envisages
completion of mining and closure in the near-term and does
not assume any future expansion of the mineral resource.
As the recoverable amount can vary with market conditions
particularly the future estimated price of copper, impairment
testing is done at a point in time to reflect those market
conditions. At 30 June 2016 the consensus range of future
copper prices had decreased significantly from the last time
the recoverable amount was estimated at 31 December 2015.
After applying these lower copper prices to the recoverable
amount, an impairment charge of $68.4 million was taken
against the Group’s Kanmantoo assets.
An impairment is not a write off but a provision which can be
reversed in the event of improvements in market outlook or
operational performance including mine life extensions. As
was the case at 31 December 2016, by applying methodology
consistent with that used in previous years, the calculated
recoverable amount as at 31 December 2017 exceeds the
carrying value. However, past impairment charges have
not been written back until such time as the Group has
demonstrated a sustained period of positive cashflows
following the completion of the Giant Pit cutback in late 2017.
Expenditure in exploration areas of interest where the prospect
of recoupment of costs capitalised through successful
development and commercial exploitation is no longer
considered likely, is written off to the profit or loss.
(d) Other required disclosures
Employee benefits (excluding
share-based payments)
Share based payments
(see note 33)
31 Dec 2017
31 Dec 2016
$’000
$’000
25,113
22,897
510
305
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
7.
INCOME TAX EXPENSE
(a) Income tax expense
Income tax expense
comprises:
- Current tax expense
- Deferred tax expense
Income tax expense / (benefit)
(b) Numerical reconciliation
of income tax expense to
prima facie tax payable
Profit / (loss) from continuing
operations before income tax
expense / (benefit)
Tax at the Australian tax rate
of 30%
Tax effect of amounts
which are not deductible in
calculating taxable income:
- Share based payments
- Non-assessable income
- Non-deductible expenses
- Losses from non-resident
foreign operations
- Tax temporary differences
not recognised
- Fair value movement in
convertible notes
Income tax expense / (benefit)
(c) Amounts recognised
directly in equity
Deferred tax – (credited) /
debited directly in equity
31 Dec 2017
31 Dec 2016
$’000
$’000
3,284
4,883
8,167
3,165
10,694
13,859
(5,907)
(95,338)
(1,772)
(28,601)
153
-
45
261
91
(242)
3
246
7,809
42,362
1,671
8,167
-
13,859
(3,284)
(3,165)
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(d)
Tax consolidation legislation
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on
the national income tax rate for each jurisdiction adjusted
by changes in deferred tax assets and liabilities attributable
to temporary differences between the tax bases of assets
and liabilities and their carrying amounts in the financial
statements, and to unused tax losses. The Group’s liability
for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting
period. Current and deferred tax balances attributable to
amounts recognised directly in equity are also recognised
directly in equity.
Hillgrove Resources Limited and its wholly-owned Australian
controlled entities have implemented the tax consolidation
legislation. The head entity, Hillgrove Resources Limited, and
the controlled entities in the tax consolidated group account
for their own current and deferred tax amounts. These tax
amounts are measured as if each entity in the tax consolidated
group continues to be a stand-alone taxpayer in its own right.
The entities in the tax-consolidated group entered into a tax
sharing agreement and a tax funding agreement. On adoption
of the legislation, the entities in the tax consolidated group
entered into a tax sharing agreement which, in the opinion
of the Directors, limits the joint and several liability of the
wholly owned entities in the case of a default by the head
entity. The entities have also entered a tax funding agreement
under which the wholly-owned entities fully compensate the
head entity for any current tax payable assumed and are
compensated by the head entity for any current tax receivable
and deferred tax assets relating to unused tax losses or
unused tax credits that are transferred to it under the tax
consolidation legislation.
8. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company, excluding any
costs of servicing equity other than ordinary shares, by the
weighted average number of ordinary shares outstanding
during the year, adjusted for bonus elements in ordinary
shares issued during the year.
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been
issued for no consideration in relation to dilutive potential
ordinary shares.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
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8. EARNINGS PER SHARE (CONT.)
Classification of securities as ordinary shares
Ordinary shares have been classified as ordinary shares and
included in basic earnings per share.
Classification of securities as potential shares
Outstanding performance rights have been classified as
potential ordinary shares and included in diluted earnings per
share.
31 Dec 2017
31 Dec 2016
$’000
$’000
(a) Basic earnings
Profit from continuing
operations attributable to the
ordinary equity holders of the
Company
(b) Diluted earnings
Profit from continuing
operations attributable to the
ordinary equity holders of the
Company.
(14,074)
(109,197)
(14,074)
(109,197)
Number
Number
Weighted average number of
shares used as the denominator
Number for basic earnings per share
9. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Restricted cash
31 Dec 2017
31 Dec 2016
$’000
188
283
471
$’000
88
1,854
1,942
Cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term and
highly liquid investments that are readily convertible to known
amounts of cash and which are subject to an insignificant risk
of changes in value.
Restricted cash cannot be accessed without consent and
comprises deposits to cash back environmental bonds, office
rental security deposits and unclaimed dividends. At 31
December 2016 restricted cash included $1.6 million cash
backing of a bond required as part of the completion of the
electricity sub-station at Kanmantoo built by Electranet. In
2017 the Electranet Bond was replaced by an insurance bond
which did not require cash backing.
10. TRADE AND OTHER RECEIVABLES
31 Dec 2017
31 Dec 2016
Ordinary shares
294,649,666
188,874,010
Prepayments
Number for diluted earnings per share
Ordinary shares
294,649,666
188,874,010
Other receivables
GST receivable
Trade receivables
$’000
1,384
1,181
776
1,026
4,367
$’000
585
1,593
813
1,003
3,994
(a) Basic earnings per share
(Loss)/profit from continuing
operations attributable to the
ordinary equity holders of the
Company
(b) Diluted earnings per share
(Loss)/profit from continuing
operations attributable to the
ordinary equity holders of the
Company
Cents
Cents
(4.8)
(57.8)
(4.8)
(57.8)
Trade receivables are for concentrate sales and the Group has
a single customer under the terms of an offtake agreement.
Sales are generally denominated in US dollars. Revenue is
recognised in accordance with the policy described in Note 4
using spot exchange rates on the date of the sale, with trade
receivables subsequently being translated at the exchange
rate applicable on the date when settled. Unsettled balances
at period end are revalued using the appropriate end of period
exchange rate.
First progress payment is received three days after concentrate
is delivered to port in minimum tonnage lots. First provisional
payment covering 95% of the value is received three days after
ship loading. Second provisional payment for the remaining
5% is received 45 days after ship loading.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
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All property, plant and equipment is stated at historical cost
less accumulated depreciation and accumulated impairment
losses. Historical cost includes expenditure that is directly
attributable to the acquisition of the items and costs incurred
in bringing assets into 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. The carrying
amount of any component accounted for as a separate
asset is derecognised when replaced. All other repairs and
maintenance are charged to profit or loss during the reporting
period in which they are incurred.
The units of production basis is used when depreciating
mine specific assets which results in a depreciation charge
proportional to the depletion of the forecast remaining life of
mine production. Changes in factors such as estimates of
proven and probable reserves that affect the unit of production
calculations are applied on a prospective basis. The straight
line method of depreciation to allocate cost, net of residual
values, is used for all remaining assets over estimated useful
lives between 3-10 years, the duration reflects the specific
nature of the assets. Freehold land is not depreciated. The
assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting date.
Mine development includes the Kanmantoo mine rehabilitation
asset (see Note 2(d)).
Deferred mining costs represent the mining costs which are
normalised for the impact of strip ratios and copper grades
over the life of specific pits.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (Note 1(d)).
11. INVENTORIES
Concentrates
ROM stockpile
Stores and consumables
31 Dec 2017
31 Dec 2016
$’000
2,662
7,020
3,052
12,734
$’000
807
808
3,376
4,991
Inventory is recognised at the lower of cost and net realisable
value.
The cost of inventory is determined using the allocation of
costs between production and development activities. Costs
and activities are monitored at each stage of the production
process and allocated to physical units.
Net realisable value is based on the estimated amount expected
to be received when the inventory is completely processed and
sold. The estimation of net realisable value of inventories involves
judgements about the quantity of metal that can be recovered,
future commodity prices, production costs and selling costs.
12. PROPERTY, PLANT AND EQUIPMENT
31 Dec 2017
31 Dec 2016
Land and building
At cost
Accumulated depreciation
Plant and equipment
At cost
Accumulated depreciation and
impairment
Motor vehicles
At cost
Accumulated depreciation
Mine development
At cost
Accumulated depreciation and
impairment
Deferred mining costs
At cost
Total property, plant and
equipment
$’000
5,524
(379)
5,145
$’000
restated
5,524
(379)
5,145
73,068
72,896
(56,314)
(55,280)
16,754
17,616
1,253
(711)
542
1,261
(633)
628
158,770
152,456
(130,778)
(119,856)
27,992
32,600
27,258
27,258
12,671
12,671
77,691
68,660
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
12. PROPERTY, PLANT AND
EQUIPMENT (CONT.)
13. EXPLORATION AND EVALUATION
EXPENDITURE
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Reconciliations of the carrying amounts for each class of asset
are set out below:
31 Dec 2017
31 Dec 2016
$’000
$’000
restated
Land and Buildings
Carrying amount at beginning
of period
Disposals
Depreciation
Impairment losses
5,145
-
-
-
Carrying amount at end of period
5,145
Plant and equipment
Carrying amount at beginning
of period
Additions
Disposals
Depreciation
17,616
172
-
(1,034)
9,096
-
(105)
(3,846)
5,145
35,487
351
(2,310)
(5,247)
Impairment losses
-
(10,665)
Carrying amount at end of period
16,754
17,616
Exploration, evaluation and
expenditure
Balance at beginning
of the period
Additions
Transfers to mine development
Impairment losses
Carrying amount at end
of period
31 Dec 2017
31 Dec 2016
$’000
$’000
889
803
239
-
(153)
889
803
792
142
(97)
(34)
803
The Group accumulates certain costs associated with
exploration activities on specific areas of interest where
the Group has rights of tenure and where exploration and
evaluation activities in the area of interest have not reached a
stage that permits a reasonable assessment of the existence of
economically recoverable reserves.
Motor vehicles
Carrying amount at beginning
of period
Additions
Disposals
Depreciation
Carrying amount at end of period
Mine development
Carrying amount at beginning of
period
Additions
Transfers from exploration
Depreciation
Impairment losses
Increase provision for
rehabilitation
Carrying amount at end of period
Deferred Mining Costs
Carrying amount at beginning
of period
Additions
Impairment losses
628
77
(31)
(132)
542
32,600
3,918
-
(10,921)
-
2,395
27,992
562
401
(161)
(174)
628
83,474
26,755
97
(38,730)
(40,496)
1,500
32,600
12,671
14,587
17,014
9,091
-
(13,434)
Carrying amount at end of period
27,258
12,671
Total property, plant and
equipment
77,691
68,660
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
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Deferred tax assets of $2,036,000 (2016: $2,933,000) and
deferred tax liabilities of $8,289,000 (2016: $7,013,000)
are expected to be recovered in less than 12 months of the
balance sheet date.
Deferred tax liability (DTL)
DTL amounts recognised in
profit or loss
Deferred mining costs
Other
31 Dec 2017
31 Dec 2016
$’000
$’000
8,177
379
8,556
3,801
275
4,076
Amount offset to deferred tax
assets pursuant to set-off
(8,556)
(4,076)
Net deferred tax liabilities
-
-
Movements in net deferred tax
balance
Opening balance
4,883
15,577
Credited/(charged) to profit or
loss
Credited/(charged) directly in
equity for cash flow hedges
Over/(under) provision in prior
years
Closing balance
(8,525)
(13,895)
3,284
3,165
358
-
36
4,883
15. TRADE AND OTHER PAYABLES
Trade payables
Other payables and accruals
31 Dec 2017
31 Dec 2016
$’000
30,092
18,225
48,317
$’000
26,904
9,521
36,425
Information about the Group’s exposure to liquidity risk is
provided in Note 25.
14. DEFERRED TAX
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the
assets are recovered or liabilities are settled, based on those
tax rates which are enacted or substantively enacted for
each jurisdiction. The relevant tax rates are applied to the
cumulative amounts of deductible and taxable temporary
differences to measure the deferred tax asset or liability.
An exception is made for certain temporary differences arising
from the initial recognition of an asset or a liability. No deferred
tax asset or liability is recognised in relation to these temporary
differences if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect
either accounting profit or taxable profit or loss.
Deferred tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the
same taxation authority.
Deferred tax asset (DTA)
DTA amounts recognised in
profit or loss
Employee benefits
Rehabilitation provisions
Tax revenue losses
Property, plant & equipment
Other
DTA/(DTL) amounts recognised
directly in equity
Derivatives
Share issue expenses
Set-off deferred tax liabilities
pursuant to set-off provision
Net deferred tax assets
31 Dec 2017
31 Dec 2016
$’000
$’000
restated
1,496
4,688
-
1,667
495
8,346
-
210
(8,556)
-
915
1,462
2,758
5,539
1,141
11,815
(3,212)
356
(4,076)
4,883
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable future
taxable amounts will be available to utilise those temporary
differences and losses. Unused tax losses and offsets
for which no deferred tax asset has been recognised are
approximately $154.4 million (tax benefit at the Australian
tax rate of 30%: $46.3 million). In addition there is an
unrecognised temporary difference on plant and equipment
amounting to approximately $107.1 million (tax benefit at the
Australian tax rate of 30%: $32.1 million).
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
Each lease payment is allocated between the liability and
finance charges so as to achieve a constant rate of interest
on the liability balance outstanding. The interest element of
the finance cost is charged to the profit or loss over the lease
period so as to produce a constant periodic rate of interest on
the remaining balance of the liability for each period.
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as
operating leases. Payments made under operating leases are
charged to the profit or loss on a straight line basis over the
lease period.
Secured
Loan - South Australian
Government (a)
Unsecured
Lease liabilities
Promissory note (b)
Deferred payment (c)
Total current borrowings
31 Dec 2017
31 Dec 2016
$’000
$’000
4,259
-
544
1,417
1,931
3,892
8,151
443
1,365
1,026
2,834
2,834
(a)
In June 2016 the Company obtained a medium term
secured loan facility of $4.0 million provided by the
South Australian Government Financing Authority. The
loan has an interest rate of 4.2% and the accumulating
balance is repayable at maturity in February 2018 (see
Note 31 “Subsequent Events”).
(b) A contractor creditor of the Company has agreed to
convert a portion of the amount owed for past services
into an unsecured interest-bearing liability.
(c) A contractor creditor of the Company has agreed to
receive a deferred payment in lieu of a portion of an
amount owed for past services. Under the terms of the
deferral, the face value of the obligation is scaled up or
down according to the future copper price giving rise to
an embedded derivative which is measured at fair value
based on consensus forecast copper pricing.
16. PROVISIONS – CURRENT
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Rehabilitation provision
Make good provision
Unsettled ship provision
Movement in provisions
Carrying value at the beginning
of the period
(Reduce) / increase provision
recognised;
Rehabilitation provision
Make good provision
Unsettled ship provision
Transfer from/(to) non-current
provisions;
Rehabilitation provision
Balance at end of period
31 Dec 2017
31 Dec 2016
$’000
1,801
499
596
2,896
$’000
1,302
708
1,017
3,027
3,027
2,504
-
(209)
(421)
499
2,896
-
148
1,017
(642)
3,027
The rehabilitation provision is based on estimates for
tenements held and refers to the measures and actions
required to repair land disturbed by exploration and mining
activities. The current balance is in respect of the Kanmantoo
mine and Comet Vale tenement, which are expected to occur
over the next 12 months.
The make good provision is in respect of the contractual
requirement to make repairs necessary for mobile equipment
including vehicles to be returned to their original state.
The unsettled ship provision represents estimated outflows
for shipments of concentrate that have been invoiced using
provisional pricing. Settlement is expected to occur in the first
quarter of 2018.
17. BORROWINGS – CURRENT
Borrowings are classified as current liabilities. Where the
Group has an unconditional right to defer settlement of the
liability at least 12 months after the reporting period, that
part of the deferred settlement is classified as a non-current
liability.
Leases of property, plant and equipment where the Group
substantially holds all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised
at the lease’s inception at the lower of the fair value of the
leased property and the present value of the minimum lease
payments. The corresponding rental obligations, net of finance
charges, are included in current and non-current liabilities.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
18. EMPLOYEE BENEFITS
PAYABLE – CURRENT
Employee benefits payable
31 Dec 2017
31 Dec 2016
$’000
6,716
$’000
2,768
The current provision for employee benefits includes:
(a) Accrued annual leave and long service leave.
development or during the production phase, based on the net
present value of estimated future costs.
The costs are estimated on the basis of a closure plan. The
cost estimates are calculated annually during the life of the
operation to reflect known developments and are subject
to formal review at regular intervals. The amortisation or
‘unwinding’ of the discount applied in establishing the net
present value of provisions is charged to the statement of profit
or loss in and shown as a financial cost.
(b) Deferred salaries (now all current) plus unpaid liabilities
for payroll related on-costs.
20. BORROWINGS – NON-CURRENT
The entire amount of employee benefits payable of $6.7 million
(2016: $2.8 million) is presented as current since the Group
does not have an unconditional right to defer settlement for any
of these obligations. However, based on past experience the
Group does not expect all employees to take the full amount of
accrued leave or require payment within the next 12 months.
31 Dec 2017
31 Dec 2016
$’000
$’000
Current leave obligations
expected to settle after 12 months
1,820
1,449
19. PROVISIONS – NON CURRENT
Secured
South Australian Government
loan (see Note 17)
Convertible notes (a)
Less: transaction costs on
convertible notes
Unsecured
Lease liabilities
Promissory note (see Note 17)
31 Dec 2017
31 Dec 2016
Total non-current borrowings
31 Dec 2017
31 Dec 2016
$’000
$’000
-
-
-
-
128
1,260
1,388
1,388
4,086
5,000
(621)
8,465
515
1,213
1,728
10,193
Rehabilitation provision
Movement in provisions
Carrying value at the beginning
of the period
Discount on unwind of
rehabilitation provision
Transfer (to)/from current
provisions
Expenditure charged to provision
(Reduce)/increase provision
recognised
Balance at end of period
$’000
13,826
$’000
restated
10,219
10,219
6,660
1,189
1,180
(499)
(543)
3,460
13,826
642
(226)
1,963
10,219
The rehabilitation provision is based on estimates for
tenements held and refers to the measures and actions
required to remediate land disturbed by exploration and
mining activities. Close down and restoration costs include the
dismantling and demolition of infrastructure and the removal
of residual materials and remediation of disturbed areas.
Close down and restoration costs are provided for in the
accounting period when the obligation arising from the
related disturbance occurs, whether this occurs during mine
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds, net of transaction costs, and the redemption
amount is recognised in the statement of profit or loss over
the period of the borrowings using the effective interest
method. Fees paid on the establishment of loan facilities,
which are not an incremental cost in relation to the actual
draw-down of the facility, are recognised as prepayments and
amortised on a straight-line basis over the term of the facility.
(a)
In December 2016 $5.0 million of convertible notes
were issued with a maturity date of December 2019.
Accounting standards require the conversion feature of
the instrument to be periodically measured at fair market
value as affected by future changes in the Hillgrove share
price. Since issuing the notes, the Hillgrove share price
rose from 4.2 cents to 8.2 cents at 30 June 2017 and
remained around this level when all of the notes were
converted or redeemed in their entirety in December
2017. The fair value revaluation of the convertible notes,
which were trading above the redemption price, resulted
in a net $5,569k increase in the liability before its final
transfer into equity, which was recognised as an expense
in the profit or loss during 2017.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
20. BORROWINGS – NON-CURRENT (CONT.)
Convertible Notes - movement schedule
Opening balance – 1 January 2017
Fair value revaluation (see Statement of Profit & Loss)
Conversion to equity (see note 22)
Payment for redemptions
Closing balance – 31 December 2017
2017
$’000
5,000
5,569
(10,508)
(61)
-
21. EMPLOYEE BENEFITS PAYABLE – NON CURRENT
Long service leave
Deferred Salaries
22. SHARE CAPITAL
Issued and paid up capital for 568,929,118 fully paid shares
(31 December 2016: 206,767,2471)
Ordinary Shares Issued – movements during the period
31 Dec 2017
31 Dec 2016
$’000
609
-
609
$’000
331
596
927
31 Dec 2017
31 Dec 2016
$’000
$’000
234,334
217,538
Opening balance
Shares issued to creditor
Exercise of options
Conversion of notes
Less – transaction costs
Balance at end of period
31 Dec 2017
No. of shares
31 Dec 2016
No. of shares
206,767,247
188,109,342
9,405,467
18,657,905
187,792,770
164,963,634
-
-
-
-
31 Dec 2017
31 Dec 2016
$’000
217,538
658
5,634
10,508
(4)
$’000
216,272
1,271
-
-
(5)
568,929,118
206,767,247
234,334
217,538
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
Terms and conditions
Holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at shareholders
meetings. In the event of winding up the Company, ordinary shareholders rank after all other shareholders and creditors and are
fully entitled to any net proceeds of liquidation.
Capital risk management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so it can provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
23. RESERVES
31 Dec 2017
31 Dec 2016
Nature and purpose of reserves
Employee share option reserve
(i)
Employee share options reserve
Other financial assets
revaluation reserve
Cash flow hedges
Foreign currency translation
Movements:
Employee share options reserve
$’000
3,305
-
-
(177)
3,128
$’000
2,795
The employee share option reserve is used to recognise the
fair value of share performance rights issued to employees but
not exercised.
-
(ii) Cash flow hedge reserve
7,662
(177)
10,280
The cash flow hedge reserve represents the effective portion of
changes in the fair value of the derivatives that are designated
and qualify as cash flow hedges, net of taxes. The amounts are
recognised in the profit or loss in the same periods the hedged
item is recognised in the profit or loss.
Balance 31 December 2016
2,795
2,490
Share based compensation
expense
Balance 31 December 2017
Other financial assets
revaluation reserve
Balance 31 December 2016
Transfer to retained earnings
Balance 31 December 2017
Cash flow hedge reserve
510
3,305
305
2,795
-
-
-
(1,238)
1,238
-
Balance 31 December 2016
7,662
15,047
(iii)
Foreign currency translation reserve
Exchange differences arising on translation of the foreign
controlled entity are recognised in Other Comprehensive
Income as described in Note 1(c)(ii) and accumulated in
the foreign currency translation reserve within equity. The
cumulative amount is reclassified to profit or loss when the net
investment is disposed of.
24. RETAINED EARNINGS
31 Dec 2017
31 Dec 2016
$’000
$’000
At beginning of the period
(209,635)
(99,200)
Profit attributable to
members of the parent entity
(14,074)
(109,197)
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Gain arising on changes in fair
value of hedging instruments
entered into for cash flow
hedges
Cumulative (gain)/loss arising on
changes in fair value of hedging
instruments reclassified to profit
or loss
Deferred tax (Note 14)
Balance 31 December 2017
-
(1,994)
Transfer from reserves
-
(1,238)
Retained profits at end of
the period
(223,709)
(209,635)
(10,946)
(8,556)
3,284
-
3,165
7,662
No dividend was paid during the current period (31 December
2016: Nil). The Company has $21.3 million of franking credits
available for future periods (31 December 2016: $21.3 million).
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
25. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group’s overall risk
management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on
the financial performance of the Group. Risk management is carried out by senior management under direction of the Board of
Directors. The Board provides principles for overall risk management, as well as policies covering specific areas.
Copper and Gold – Commodity price and foreign exchange risk management
(a) Market risk
(i)
The Group has exposure to copper and gold commodity prices arising from sales contracts that commit the Group to supply
copper concentrate in future years. The prices for copper concentrate supplied under these contracts will be determined at the
time of delivery with respect to the price of copper, gold and silver which is quoted in US dollars. The copper price component
represents greater than 90% of the copper concentrate sales value and gold represents about 9%.
In the past, the Group has entered into copper commodity swaps contracted in Australian dollars to hedge both the US dollar
copper price risk and AUD/USD exchange rate risk. The Group has used these derivative financial instruments to provide more
predictable cash flows from sales revenues during times when the Group had significant third party secured debt.
In August 2016, the Board made a decision to close out all of its remaining derivative positions yielding cash proceeds which, in
combination with restricted cash balances, allowed the Group to retire its secured debt at the time. Since this early close out,
the Group has managed commodity price and foreign exchange risk on a ship-by-ship basis. The gains realised from the close
out of the cash flow hedges were allocated to a reserve account and were being allocated to profit and loss over the originally
designated hedge time periods as specified by the contract maturity dates. By 31 December 2017 all of the deferred gains have
been allocated to profit and loss.
During 2017, the Group’s metal offtaker Freepoint Metals LLC agreed to vary the normal offtake terms and provide short term
fixed copper pricing to the Group on market competitive cost margin terms. These arrangements protected the Group from
downside price risk, however they are not tradeable instruments nor able to be cancelled or settled/converted into cash. As a
consequence hedge accounting is not applicable to the fixed price arrangements.
As at 31 December 2017, the Group had a total of 12,000 tonnes of copper metal at agreed fixed prices ranging from AUD 8,204
per tonne up to AUD 9,094 per tonne (average price of AUD 8,740).
As shown in Note 17 “Current Borrowings”, at reporting date the Group has an interest-free liability to a mine contractor. The
underlying face value of the liability is $1,350,000 and during 2016 the final amount payable was subject to a discount/premium
referable to spot AUD copper prices. As at 31 December 2017 the final value of the liability has been determined and is no
longer subject to variation from movement in the copper price.
Interest rate risk management
(b)
The Group’s main interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow
interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk.
As at the reporting date, the Group had the following borrowings:
31 Dec 2017
31 Dec 2016
31 Dec 2017
31 Dec 2016
Weighted average interest rate
Book value $’000
Borrowings
4.3%
4.9%
7,608
13,531
The percentage of total borrowings which are at variable rates is 35% (31 December 2016: 22%).
An analysis by maturities is provided in (c) below.
Details of borrowings have been provided in Note 17 and 20. At 31 December 2017, if interest rates had increased/decreased
by 100 basis points from the year end rates with all other variables held constant, pre tax profit for the year would have been
decreased/increased by $27,000 (31 December 2016: $25,000).
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
25. FINANCIAL RISK MANAGEMENT (CONT.)
(c) Foreign exchange risk
The Group sells copper concentrate and sales invoices are denominated in USD.
The Group previously entered into AUD-denominated copper commodity derivatives to hedge both the USD copper price risk
and the AUD/USD exchange rate risk, with the foreign exchange exposure being the USD of the unhedged portion of future
sales. From August 2016 when the derivatives were closed out, copper concentrate sales were unhedged, but the potential
impact of foreign exchange risk on the unhedged revenue stream was not material. During 2017, the fixed pricing arrangements
implemented with Freepoint on a ship by ship basis include conversion from USD into AUD to the extent of the aggregate of the
early drawdown values for each ship. Provisional and final invoicing is settled at spot foreign exchange rates.
At 31 December 2017 the Group has USD-denominated trade receivables of US$1,079,157 (31 December 2016: US$423,649).
Offsetting this, the Group has unsettled ship provisions for final invoices which are also recorded in USD. At 31 December 2017
the Group has USD-denominated ship provisions of US$465,000 (31 December 2016: US$735,889). The table below details
the Group’s foreign exchange sensitivity on its net USD-denominated trade receivables and final invoice ship provisions.
31 December 2017
Impact on profit or loss
31 December 2016
Impact on profit or loss
Increase ($‘000)
Decrease ($‘000)
Increase ($‘000)
Decrease ($‘000)
Impact of 10% increase/decrease in A$/US$
exchange rate on US$ denominated trade
receivables
(72)
79
39
(43)
The Group and parent entity also hold bank accounts denominated in US$ and IDR (Indonesian Rupiah) which had carrying
values of $NIL and $8,102 respectively at 31 December 2017 (31 December 2016: $200 and $522 respectively). The foreign
exchange risk on these cash balances is not material.
(d) Credit risk
Credit risk is managed on a group basis. Credit risk can arise from cash and cash equivalents, deposits with banks and financial
institutions, derivative financial instruments and receivables. The Group holds its cash with Westpac Banking Corporation and
Macquarie Bank which are considered to be appropriate financial institutions.
The Group has trade receivables of A$1,383,535 (31 December 2016: A$585,336). The maximum exposure to credit risk at the
reporting date is the carrying amount of the financial assets.
GST refunds are receivable from a government agency and are deemed to have no significant credit risk.
For banks, financial institutions and third party debtors, management assesses the credit quality of the counterparty, taking into
account its financial position, past experience and other relevant factors.
(e) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market positions. Liquidity risk is managed
on a Group basis. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the
maturity profiles of financial assets and liabilities.
The Group monitors its cash flow on a weekly basis to ensure adequate funds are in place to maintain uninterrupted production .
The Group and the parent entity had no undrawn borrowing facilities at the reporting date.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
25. FINANCIAL RISK MANAGEMENT (CONT.)
(e) Liquidity risk (cont.)
Maturities of financial liabilities
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the
reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows
and includes future interest on borrowings.
31 December 2017 ($’000)
Trade and other payables
Borrowings
Total
31 December 2016 ($’000)
Trade and other payables
Borrowings
Total
Less than
1 year
48,317
8,151
56,468
36,425
3,304
39,729
1 to 2 year(s)
2 to 3 years
3 to 4 years
4 to 5 years
More than
5 years
-
1,388
1,388
-
6,339
6,339
-
-
-
-
5,328
5,328
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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26. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in Note 1(b)(i).
Name of controlled entity
Hillgrove Copper Pty Ltd
Hillgrove Copper Holdings Pty Ltd
Hillgrove Exploration Pty Ltd
Hillgrove Mining Pty Ltd
Hillgrove Operations Pty Ltd
Hillgrove Wheal Ellen Pty Ltd
Kanmantoo Properties Pty Ltd
Mt Torrens Properties Pty Ltd
SA Mining Resources Pty Ltd
Hillgrove Indonesia Pty Ltd
Hillgrove Singapore Holdings Pte Ltd
Hillgrove Singapore No 2 Pte Ltd
Hillgrove Singapore No 3 Pte Ltd
Hillgrove Singapore No 4 Pte Ltd
PT Akram Resources
PT Fathi Resources
PT Hillgrove Indonesia
Country of
incorporation
Class of share
Equity holding
31 Dec 2017 (%)
Equity holding
31 Dec 2016 (%)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Singapore
Singapore
Singapore
Indonesia
Indonesia
Indonesia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
80
80
100
100
80
80
100
100
100
100
100
100
100
100
100
100
100
80
80
100
100
80
80
100
The proportion of ownership interest is equal to the proportion of voting power held.
Transactions with non-controlling interests
There were no transactions with non-controlling interests during the period.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
27. COMMITMENTS
(a) Non-cancellable operating lease expense
commitments
Future operating lease commitments not provided for in the
financial statements and payable:
(b) Reconciliation of operating profit after income
tax to net cash provided by operating activities
31 Dec 2017
31 Dec 2016
$’000
$’000
Operating profit after income tax
(14,074)
(109,197)
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Add / (less) items classified as
investing / financing activities
Net loss on sale of fixed assets
Net interest expense
Add / (less) non-cash items
Depreciation and amortisation
Impairment asset write downs
Fair value adjustment –
convertible notes
Employee share options
Unrealised FX (gains) / losses
Unrealised (gain) / losses on
financial derivatives
Discount on unwind of
rehabilitation provision
Movement in deferred liability to
contractor
Shares in lieu of interest
Deferred income amortisation
Net cash generated by
operating activities before
change in assets and liabilities
Changes in operating assets
and liabilities
(Increase) / decrease in
receivables, prepayments and
inventories
Increase / (decrease) in trade
creditors and accruals
(Increase) / decrease in net
deferred tax assets
Increase / (decrease) in
provisions and employee benefits
(Increase) / decrease in
deferred mining costs
Net cash generated by
operating activities
18
1,817
11,814
153
5,569
511
-
(32)
3,174
44,694
68,475
-
305
(808)
(7,662)
(3,648)
1,189
1,180
905
654
(201)
(324)
-
(152)
693
3,667
(8,116)
1,045
14,484
11,736
4,883
10,748
3,285
2,927
(14,587)
(9,091)
642
21,032
Within one year
One year or later and no later
than five years
31 Dec 2017
31 Dec 2016
$’000
$’000
34
56
90
33
-
33
The group leases its Unley offices under non-cancellable
operating leases expiring within five years of the reporting date.
The lease has been extended to 2020. The lease has varying
CPI escalation clauses and renewal rights. On renewal, the
terms of the lease are renegotiated.
(b) Exploration expenditure commitments
In order to maintain current rights of tenure to exploration
tenements, the Group is required to perform exploration work
to meet the minimum expenditure requirements under the
various exploration licences which are held. These obligations
are expected to be fulfilled in the normal course of operations.
Mining interests may be relinquished or joint ventured to
reduce this amount. The SA State Government has the
authority to defer, waive or amend the minimum expenditure
requirements. Eligible exploration expenditure includes an
appropriate allocation of overhead costs.
Within one year
One year or later and no later
than five years
31 Dec 2017
31 Dec 2016
$’000
300
300
600
$’000
641
-
641
(c) Capital commitments
At 31 December 2017 there were no contracted capital
commitments (31 December 2016: Nil).
28. NOTES TO THE STATEMENT
OF CASH FLOWS
(a) Reconciliation of cash
For the purposes of the statement of cash flows, cash includes
cash on hand and at bank and short term deposits at call.
Cash as at the end of the financial year as shown in the
statement of cash flows is reconciled to the related items in
the Statement of Financial Position as set out in Note 9.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
29. KEY MANAGEMENT PERSONNEL
DISCLOSURES
(a) Key management personnel compensation
31. EVENTS AFTER THE
REPORTING PERIOD
Since the balance date the Company has successfully
completed the following initiatives:
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31 Dec 2017
31 Dec 2016
$’000
$’000
Short-term employee benefits
1,376,075
1,331,888
Post-employment benefits
Share based payments
104,719
313,646
101,695
160,066
1,794,440
1,593,649
Further detail regarding key management personnel
compensation can be found in the Remuneration Report.
30. RELATED PARTY TRANSACTIONS
(a) Parent entities
The parent entity within the Group is Hillgrove Resources
Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in Note 26.
(c) Key management personnel
Disclosures relating to key management personnel are set out
in Note 29.
(d) Related parties
Loans to controlled entities are eliminated on consolidation.
The parent Company is the banker for the Group and
re-allocated via loan account all costs that related to the
controlled entities. Some assets and liabilities previously
recognised in the parent Company, mainly consisting of
property, plant, equipment and exploration related assets,
have also been transferred to the controlled entities via loan
account. All these transactions were recorded at carrying
value.
(a) $4m copper pre-pay facility
On 16 February 2018, the Company agreed a fully secured
$4m copper pre-pay facility with Freepoint Metals &
Concentrates LLC. The facility provided the Company with
general working capital enabling it to:
■ Reduce its copper price risk exposure, during 2018 by
fixing the price of an additional 5,000 tonnes of copper at
$8,885/tonne, and
■ Take advantage of transactions such as buying back future
liabilities at a discount and to continue to advance growth
projects.
The key terms of the facility were:
■ Freepoint advanced Hillgrove $4.0 million, which will
convert to a prepayment of $800 per tonne on 5,000
tonnes of future copper sales;
■ Hillgrove will repay the facility from the sale of these 5,000
tonnes during the period from July 2018 to December
2018;
■ The facility is secured by a security package which
includes the mortgages over the real property which was
previously used to secure the SA Government Loan; and
■ The facility will incur interest at 7% pa.
(b) Repayment of SA Government $4m Loan
On 16 February 2018, the Company repaid the SA
Government $4.3m loan. The loan was one of a number of
initiatives from key stakeholders to assist Hillgrove overcome
a cash shortfall during a major cutback at the Kanmantoo
Copper Mine during a significant downturn in the copper
market (refer market release 28 June 2016).
(c) Buy out of a mining contractor deferred liability
On 16 November 2016, the Company announced it had
reached agreement with a mining contractor to defer payment
of $1.35 million of its outstanding creditor balance until after
1 July 2017, when the Company would pay an amount based
on a sliding scale copper price. Based on current copper
prices, this liability had the potential to increase significantly;
so on 27 February 2018, the Company paid $1.93 million in
full settlement of this future liability.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
31. EVENTS AFTER THE
REPORTING PERIOD (CONT.)
Indonesian Projects
(d)
On 28 February 2018, Hillgrove received notices from the
Indonesian Department of Mines, which state the tenements
for its two Indonesian assets at Bird’s Head in West Papua
and Sumba Island have been terminated due to the non-
performance
of obligations including the non-payment of dead rents.
Hillgrove is taking advice to review its position and decide
whether it will appeal the decision.
The projects were on care and maintenance and the carrying
value of both projects was fully impaired in 2015.
32. CONTINGENT LIABILITIES
Guarantees
31 Dec 2017
31 Dec 2016
$’000
$’000
Electranet performance bond to
support the build, own, operate
and maintain agreement for
installation of transmission
infrastructure at the Kanmantoo
site
Security bonds on rental properties
1,162
16
1,178
1,641
16
1,657
The consolidated entity has obligations to restore land
disturbed under exploration and mining licences. The
maximum obligation to the SA State Government in respect of
the Kanmantoo copper mine has been assessed at a value of
$9.2 milion and is secured by the SA Government on a first
ranking basis against the assets of the consolidated entity.
The Directors are of the opinion that further provisions are not
required in respect of these 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.
The consolidated entity had no other contingent liabilities at
31 December 2017.
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33. SHARE-BASED PAYMENTS
Options and Performance Rights Plan (OPRP)
Share based compensation benefits are provided by the
Options and Performance Rights Plan (OPRP). The securities
issued under this plan are referred to as performance rights
throughout the financial statements.
The Options and Performance Rights Plan (OPRP) is designed
to provide long-term incentives for senior managers and
above (including Executive Directors) to deliver ongoing
improvements in shareholder returns.
Under the plan, participants are granted rights which vest
and can be exercised three years after offer (for the 2014
offer) and two years after offer (for the 2016 and 2017 offers),
subject to the achievement of certain pre-set performance
measures and service conditions. Participation in the plan is at
the Board’s discretion and no individual has a contractual right
to participate in the plan or to receive any guaranteed benefits.
Rights granted under the plan carry no dividend or voting
rights. When exercisable, each performance right is
convertible into one fully paid ordinary share in Hillgrove
Resources Limited. The granting and exercise price of the
rights is nil. The ability for rights to vest and be automatically
exercised under the OPRP is dependent on the following:
a) The satisfaction of all the Performance Conditions (KPI’s);
b) The invitee achieving an Annual Performance Appraisal
Rating of 50% of more;
c) The invitee complying with all Company policy and
procedures (e.g. no disciplinary action against the invitee
between offer and vesting); and
d) The invitee meeting the Service Condition (continued
employment) for the rights.
Collectively the above conditions are referred to as the Vesting
Conditions.
Fair value of performance rights granted in the year
The assessed fair value at grant date of performance rights
granted to individuals is allocated equally over the period
from grant date to vesting date. Fair values at grant date are
independently determined using a Binominal Approximation or
Black-Scholes (as appropriate). Both models take into account
the exercise price, the term, the impact of dilution, the share
price at grant date, the expected price volatility of the underlying
share, the expected dividend yield and the risk-free interest rate
for the term of the performance rights. Expected volatility is based
on the Group’s three year rolling daily standard deviation using
Hillgrove’s closing share price for the six years prior to the grant.
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
33. SHARE-BASED PAYMENTS (CONT.)
Movements in performance rights during the year
31 December 2017
31 December 2016
Number of
performance rights
Weighted average
exercise price ($)
Number of
performance rights
Weighted average
exercise price ($)
Balance at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Balance at end of year
Exercisable at end of year
9,410,500
12,640,000
(30,000)
-
(832,500)
21,188,000
-
-
-
-
-
-
-
-
1,813,750
8,548,000
(220,000)
-
(731,250)
9,410,500
-
-
-
-
-
-
-
-
Performance rights outstanding at the end of the year
At the end of the year there are 21,188,000 performance
rights outstanding that have been offered under the OPRP.
The exercise price of these performance rights are Nil (31
December 2016: Nil), and the weighted average remaining
contractual life at the end of the period was 1.5 years (31
December 2016: 1.4 years).
Expenses arising from share-based payment
transactions
Total expenses arising from share-based payment transactions
recognised during the period as part of employee benefit
expense were as follows:
34. PARENT ENTITY INFORMATION
Set out below is the supplementary information about the
parent entity.
Parent
31 Dec 2017
31 Dec 2016
$’000
$’000
Loss after income tax
(21,735)
(116,582)
Total comprehensive income
(21,735)
(119,746)
Balance Sheet
Total current assets
Total assets
31 Dec 2017
31 Dec 2016
Total current liabilities
$’000
$’000
Total liabilities
335
19,031
5,020
5,278
854
28,769
924
10,586
Performance rights issued under
the OPRP
510
305
Net assets
13,753
18,183
Shareholders Equity
Contributed equity
234,333
217,538
Employee share options reserve
3,305
2,795
Retained profits
Total equity
(223,885)
(202,150)
13,753
18,183
Significant accounting policies
The accounting policies of the parent entity are consistent
with those of the consolidated entity, as disclosed in Note 1.
Investments in subsidiaries are accounted for at cost, less any
impairment.
Contingent liabilities
Security bond on rental
properties
31 Dec 2017
31 Dec 2016
$’000
$’000
16
16
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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017
35. STANDARDS AND INTERPRETATIONS IN ISSUE
Mandatory standards adopted in the current reporting period
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards
Board that are relevant to its operations and effective for the current annual reporting period. The adoption of these mandatory
standards has not had a significant impact on the Group’s accounting policies or the amounts reported during the year.
Early adoption of standards
There were no standards adopted early.
Standards and interpretations in issue but not yet adopted
At the date of authorisation of the financial statements, the standards and interpretations listed below were in issue but
not yet effective.
Standard/Interpretation
AASB 9 (2014) ‘Financial Instruments’, and the relevant
amending standards.
AASB 15 ‘Revenue from Contracts with Customers’ and AASB
2014-5 ‘Amendments to Australian Accounting Standards
arising from AASB 15’
AASB 16 ‘Leases’
AASB 15 Revenue from Contracts with Customers
The Australian Accounting Standards Board has issued AASB 15,
Revenue from Contracts with Customers, which has a mandatory
application date of 1 January 2018. The new standard is based on
the principle that revenue is recognised when control of a good or
service transfers to the customer. Control is deemed to have been
transferred when contractual performance obligations have been
fulfilled. This potentially changes the timing and quantum
of revenue recognition.
The offtake agreement requires the Group to deliver copper concen-
trate to port of shipping and to organise and pay for shipping to the
final destination port. Under AASB 15, the Group has assessed
these to be the performance obligations in the offtake agreement.
Revenue is currently recognised when concentrates have been
delivered to port and sold to the offtake customer at which
point control and ownership are transferred. Under AASB 15,
the Group will continue to recognise revenue at this point as
the first performance obligation will have been satisfied. The
second performance obligation will be met when concentrates
are delivered to the destination port and at this point associated
revenue will be recognised. The revenue associated with the
second performance obligation would be recognised at a later
point than is currently recognised. However, this is not expected
to have a material impact on the results of the Group.
Revenue is currently recorded on a gross basis, with treatment
charges recorded as an expense (as disclosed in note 6). The
Group is currently assessing whether this remains the most
appropriate treatment, or whether revenue should be recorded on
a net basis (i.e. excluding treatment charges). This assessment
would effect the amount of revenue but not effect recorded profit.
The Group has provisional pricing arrangements which are
finalised on final assay and weights. The treatment under AASB
118 is expected to be materially consistent under AASB 15.
Effective for annual reporting
periods beginning on or after
Expected to be initially applied
in the financial year ending
1 January 2018
31 December 2018
1 January 2018
1 January 2019
31 December 2018
31 December 2019
On the basis of the above, the new standard is not expected to
materially impact the Group’s net profit after tax. The Group will
adopt the standard effective 1 January 2018.
AASB 9 Financial Instruments
AASB 9 addresses the classification, measurement and
derecognition of financial assets and financial liabilities,
introduces new rules for hedge accounting and a new impairment
model for financial assets. The majority of the Group financial
assets are in the form of cash and cash equivalents, trade and
other receivables. Accordingly, the Group does not expect the
new guidance to have a significant impact on the classification
and measurement of its financial assets and liabilities, its offtake
pricing arrangements or its results on adoption of the new
impairment model.
AASB 16 Leases
AASB 16 will result in almost all leases being recognised
on the statement of financial position, as the distinction
between operating and finance leases is removed. Under
the new standard, an asset (the right to use the leased item)
and a financial liability to pay rentals are recognised. The
only exceptions are short-term and low-value leases. The
accounting for lessors will not significantly change. Information
on the undiscounted amount of the Group’s operating lease
commitments at 31 December 2017 under AASB 117 is disclosed
in note 27. The Group has not yet determined to what extent
its operating lease commitments will result in the recognition
of an asset and a liability for future payments although the
commitments, which are not substantial, may be covered by
the exception for short-term and low-value leases and some
commitments may relate to arrangements that will not qualify as
leases under AASB16.
DIRECTORS’ DECLARATION
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 40 to 67 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
giving a true and fair view of the consolidated entity’s financial position as at 31 December 2017 and of its
performance for the financial period 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.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Dated at Adelaide this 14th day of March 2018
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Mr John Gooding
Chairman
Mr Steve McClare
Managing Director
INDEPENDENT AUDITOR’S REPORT
to the Members of Hillgrove Resources Limited
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Independent auditor’s report
To the members of Hillgrove Resources Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Hillgrove Resources Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 31 December 2017 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated statement of financial position as at 31 December 2017
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
Level 11, 70 Franklin Street, ADELAIDE SA 5000, GPO Box 418, ADELAIDE SA 5001
T: +61 8 8218 7000, F: +61 8 8218 7999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
INDEPENDENT AUDITOR’S REPORT
to the Members of Hillgrove Resources Limited (cont.)
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Material uncertainty related to going concern
We draw attention to Note 1 in the financial report, which indicates that as at 31 December 2017 the
Group’s current liabilities exceeded its current assets by $48.9 million and it is reliant on the ongoing
support of its major creditors. These conditions, along with other matters set forth in Note 1, indicate
that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a
going concern. Our opinion is not modified in respect of this matter.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
For the purpose of our audit we used overall Group materiality of $890,000, which represents approximately
0.7% of the Group’s revenue.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
We chose Group revenue as the materiality benchmark rather than profit before tax due to the recent
volatility in profit before tax. Revenues are reflective of the Group’s operating activities in continued
challenging market conditions, are relatively stable and provide a level of materiality which, in our view, is
appropriate for the audit having regard to the expected requirements of users of the Group’s financial report.
We utilised a 0.7% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
INDEPENDENT AUDITOR’S REPORT
to the Members of Hillgrove Resources Limited (cont.)
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Audit Scope
Our audit focused on subjective judgements made by the Group; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
The Group’s accounting records are held and managed at their operating mine in Kanmantoo and the
corporate head office, located in Adelaide. We performed audit procedures at both locations.
The Kanmantoo mining operation was the focus of the audit as it is the Group’s only operating mine site. The
Group has overseas subsidiaries in Indonesia which hold its two Indonesian assets at Bird’s Head in West
Papua and Sumba Island which are both on care and maintenance. As the Indonesian entities have no
operational assets and are not material to the Group, we have performed limited audit procedures over these
subsidiaries from the corporate head office.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
In addition to the matter described in the Material uncertainty related to going concern section, we
have determined the matters described below to be the key audit matters to be communicated in our
report.
Key audit matter
How our audit addressed the key audit matter
Carrying value of Kanmantoo Cash
Generating Unit
(Refer to note 12)
Large impairment charges were recorded in the
consolidated statement of profit and loss and other
comprehensive income for the financial years ended 31
December 2016 ($68.5 million) and 31 December 2015
($112.9 million), the majority of which related to the
Kanmantoo Cash Generating Unit (“CGU”).
In the current year, given the existence of impairment
indicators the Group assessed the recoverability of the
carrying value of its Kanmantoo CGU. The Group also
considered whether there was objective evidence that
the conditions leading to the asset impairment were no
longer present and whether the Group should consider
We performed the following procedures, amongst
others:
Assessed the appropriateness of the CGU
identification in accordance with the requirements
of Australian Accounting Standards.
Compared the cash flow forecasts used in the
discounted cash flow model to those in the latest
Board approved budgets and evaluated the Group’s
ability to forecast future results by comparing
budgets with reported actual results for the
previous financial year.
Tested the mathematical accuracy of the
discounted cash flow model, and assessed the
completeness of cash flows included within the
model based on our understanding of operations
INDEPENDENT AUDITOR’S REPORT
to the Members of Hillgrove Resources Limited (cont.)
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Key audit matter
How our audit addressed the key audit matter
a reversal of prior impairment charges.
from the audit.
The assessment of the carrying value of the Kanmantoo
CGU was considered a key audit matter due to the
financial significance of the balance ($77.7 million) and
the judgemental assumptions included in the Group’s
discounted cash flow model, particularly:
long term copper and gold prices
reserve estimates and production and
processing volumes
operating costs, foreign exchange rates and
inflation rates; and
discount rate.
Compared long term copper and gold pricing data
used in the discounted cash flow model to
independent industry forecasts.
Compared foreign exchange and inflation rate
assumptions in the discounted cash flow model to
independent economic forecasts.
Evaluated the sensitivity of the CGU carrying value
to changes in the discount rate by varying the rate
used in the discounted cash flow model.
Assessed the reasonableness of the production and
processing volumes generating the cash inflows by
comparing these volumes to the overall mine
reserve estimates.
In relation to reserve estimates we assessed the
competence of the Group’s expert and considered
the movements in reserves over the year.
Assessed the Group’s judgement that there was not
sufficient objective evidence to consider reversing
previous impairment charges in line with the
requirements of Australian Accounting Standards.
Evaluated the accuracy and adequacy of the
disclosures made in the financial report, including
those regarding the key assumptions in light of the
requirements of Australian Accounting Standards.
Rehabilitation provision
(Refer to note 16 and 19)
We performed the following procedures, amongst
others:
As a result of its mining and processing operations, the
Group is obligated to restore and rehabilitate the
environment disturbed by these operations.
Rehabilitation activities are governed by a combination
of legislative requirements and Group policies. At 31
December 2017 the balance sheet included provisions
for such obligations of $15.6m.
Compared the actual rehabilitation costs incurred
against the Group’s forecasts to check that
rehabilitation estimates take into account current
experience;
Assessed the nature, timing and extent of
rehabilitation work to be performed by inspecting
mine and rehabilitation plans.
INDEPENDENT AUDITOR’S REPORT
to the Members of Hillgrove Resources Limited (cont.)
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Key audit matter
How our audit addressed the key audit matter
This was a key audit matter due to the judgement
applied by the Group in assessing the nature and extent
of the rehabilitation work to be performed, estimating
the future cost and timing of performing this work and
applying assumptions such as the discount rate and
inflation for future cash outflows associated with
rehabilitation activities. We also focused on this matter
because a prior period error was identified and
adjusted in the comparative financial information.
Tested the mathematical accuracy of the Group’s
rehabilitation estimate, and assessed the
completeness of cash flows based on our
understanding of rehabilitation obligations.
Considered the appropriateness of the discount
rates and inflation rates utilised in calculating the
closing provision by comparing them to market
information.
Assessed the Group’s determination of the prior
period error, including appropriateness of
recorded adjustments.
Considered the adequacy of disclosures made in
the financial statements and their appropriateness
under Australian Accounting Standards, including
disclosure of the prior period error.
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 31 December 2017, including the
Chairman and Managing Director's Statement, Kanmantoo Copper Mine, Exploration, Mineral
Resource and Ore Reserves, Sustainability: Environment, Safety and Community, and Director’s
Report but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
INDEPENDENT AUDITOR’S REPORT
to the Members of Hillgrove Resources Limited (cont.)
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In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 28 to 37 of the directors’ report for the
year ended 31 December 2017.
In our opinion, the remuneration report of Hillgrove Resources Limited for the year ended 31
December 2017 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Andrew Forman
Partner
Adelaide
14 March 2018
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SHAREHOLDER INFORMATION
SHAREHOLDER INFORMATION FOR LISTED
PUBLIC COMPANIES
As at the reporting date the most recent Shareholder information available for
disclosure is as follows:
(a) Voting rights and classes of equity securities
As at 26 February 2018, the Company has 568,929,118 listed fully paid ordinary
shares. Each fully paid share carries on a poll, one vote.
The company also has 22,188,000 unquoted performance rights on issue which are
held by 14 holders which do not carry voting rights.
(b) The number of shareholders holding less than a
marketable parcel of ordinary shares was 1,972
as at 26 February 2018.
(c) Distribution schedule of Fully Paid Ordinary Shares
as at 26 February 2018
Size of holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Number of shareholders
488
1,471
436
880
238
3,513
(d) Securities exchange listing
Quotation has been granted for all the ordinary shares of the Company on all
Member Exchanges of the Australian Securities Exchange Limited.
The ASX code is HGO.
(e) Company Secretary
Mr Paul Kiley is the Company Secretary.
(f) On-market buy-back
There is no current on-market buy-back.
(g) Substantial shareholders as at 26 February 2018
An extract of the Company’s register of Substantial Shareholders (who hold 5.0% or
more of the issued capital) in accordance with Form 604 Notices is set out below:
Name
Ariadne Australia Limited
Munro Family Super Fund
Supervised Investments Australia
Issued capital
26.1%
6.1%
5.1%
SHAREHOLDER INFORMATION (CONT.)
(g) Substantial shareholders as at 26 February 2018 (cont.)
Twenty largest listed shareholders
The twenty largest shareholders hold 66.7% of the total ordinary shares issued and
Key Management Personnel hold 9.0% of the total ordinary shares. The names of
the 20 largest shareholders as at 26 February 2018 are listed below:
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Shareholder
1
2
Ariadne Capital Pty Ltd
J P Morgan Nominees Australia
3 Mr Raymond Edward Munro
4
5
6
7
8
9
Portfolio Services Pty Ltd 1
BNP Paribas Nominees Pty Ltd
Bell Potter Nominees Pty Ltd
Portfolio Services Pty Ltd 2
Portfolio Services Pty Ltd 3
Portfolio Services Pty Ltd 4
10 Cosell Pty Ltd
11 Mr Malcolm Neil Nichols
12 WeyitinTrading Pty Ltd
13 Mr Anthony Gordon Breuer
14 Emeco Pty Ltd
15 Rossdale Superannuation Pty Ltd
16 HSBC Custody Nominees
17 Mr Lachlan Wallace
18 W Donnelly Services Pty Ltd
18 Sighet Pty Ltd
20 Helen Ma Pty Ltd
No. of ordinary
shares held
% of issued
shares
64,837,374
60,098,850
31,250,000
27,482,196
25,759,373
23,071,761
17,546,894
16,369,055
16,169,704
14,000,000
11,719,616
10,127,346
10,005,559
9,405,467
8,364,400
7,218,156
7,119,197
7,076,667
6,975,241
5,079,775
11.4%
10.6%
5.5%
4.8%
4.5%
4.1%
3.1%
2.9%
2.8%
2.5%
2.1%
1.8%
1.8%
1.7%
1.5%
1.3%
1.3%
1.2%
1.2%
0.9%
379,676,631
66.7%
(h)
Interests in mining tenements
Tenement
ML 6345
EML 6340
EL 5628
ELA 86/11
ML 755
IUP 322/2009 (1)
IUP 40/2010 (1)
Location
Percentage
Kanmantoo, South Australia
Kanmantoo, South Australia
Kanmantoo, South Australia
Aclare South Australia
Armidale, New South Wales
Sumba, Indonesia
Bird’s Head, Indonesia
100%
100%
100%
100%
100%
80%
80%
(1) Refer Events Subsequent to Reporting Date - the Company has received notices advising
its Indonesian tenements have been terminated, and is considering appealing these
notices.
(n) Other information
Hillgrove Resources Limited, incorporated and domiciled in Australia,
is a publicly listed Company limited by shares.
HILLGROVE RESOURCES LIMITED ACN 004 297 116
Adelaide Office
Ground Floor, 5-7 King William Road,
Unley SA 5061, Australia
P.O. Box 372, Unley SA 5061, Australia
T: +61 8 7070 1698
W: www.hillgroveresources.com.au