Friday, 25 February 2022
ASX Market Announcement
Australian Securities Exchange
Level 4 Exchange Centre
20 Bridge Street
SYDNEY NSW 2000
Dear Sir or Madam
LODGEMENT OF APPENDIX 4E – YEAR ENDED 31 DECEMBER 2021
_________________________________________________________________________________________________________
Please find attached the Preliminary Final Report – 31 December 2021 (Appendix 4E) under Listing
Rule 4.3A relating to Hillgrove Resources Limited’s results for the 12-month period from 1 January 2021
to 31 December 2021 (“CY21”).
The full annual report together with the financial report of Hillgrove Resources Limited (“the Company”)
and the consolidated entity, being the Company and its controlled entities, for the year ended 31
December 2021 and the auditors’ report are also attached as per ASX Guidelines.
Yours Faithfully
Joe Sutanto
Company Secretary
IIII
HILLGROVE RESOURCES LIMITED ACN 004 297 116
Ground Floor, 5-7 King William Road, PO Box 372, Unley SA 5061, Australia
www.hillgroveresources.com.au
T +61 8 7070 1698
HILLGROVE RESOURCES LIMITED
ABN 73 004 297 116
Appendix 4E: Preliminary final report for period ending 31 December 2021
Name of entity
ABN
Hillgrove Resources Limited
73 004 297 116
Financial year ended
12 Months to 31 December 2021 (CY21)
Previous corresponding reporting period
12 Months to 31 December 2020 (CY20)
Results for announcement to the market
31 Dec 2021
31 Dec 2020
Change
$
%
Revenue from ordinary activities
Nil
$20.2m
($20.2m)
N/A
Profit / (Loss) from ordinary activities after tax
attributable to the owners of Hillgrove Resources Limited
($5.9m)
($5.9m)
$0.0m
0%
Profit / (Loss) for the period attributable to the owners of
Hillgrove Resources Limited
($5.9m)
($5.9m)
$0.0m
0%
Dividends
No dividend was paid in the current or prior period.
NTA backing
31 Dec 2021
31 Dec 2020
Net tangible asset backing per ordinary security
(undiluted)
3.2 cents
3.5 cents
Earnings per share
Basic EPS
Diluted EPS
Subsidiaries
31 Dec 2021
(0.6) cents
(0.6) cents
31 Dec 2020
(1.0) cents
(1.0) cents
The consolidated results incorporate the assets, liabilities and results of the Company’s subsidiaries. The proportion of ownership
interest is equal to the proportion of voting power held. International Accounting standards have been used in consolidating foreign
entities. There are no associates or joint venture entities. During the period ended 31 December 2021 Hillgrove subsidiaries Hillgrove
Singapore Holdings Pte Ltd, Hillgrove Singapore No. 2 Pte Ltd, Hillgrove Singapore No. 3 Pte Ltd, and Hillgrove Singapore No. 4 Pte Ltd
were struck off.
Additional Appendix 4E disclosure requirements
Refer to the attached Directors Report and Financial Statements at the following page references;
Review of results (Directors Report) - page 11, Consolidated Statement of Profit or Loss and Other Comprehensive Income – page 24,
Consolidated Statement of Financial Position – page 25, Consolidated Statement of Changes in Equity – page 26, Consolidated
Statement of Cash Flows – page 27, Independent Auditors Report – page 50.
This report is based on the consolidated financial statements for the year ended 31 December 2021, which have been audited by
PricewaterhouseCoopers.
Appendix 4E
Page 1
ANNUAL REPORT
for the year ended 31 December
2021
www.hillgroveresources.com.au
Hillgrove Resources Limited ACN 004 297 116
CORPORATE DIRECTORY
CORPORATE AND
REGISTERED OFFICE
5-7 King William Road,
Unley S.A. 5061, Australia
Tel: + 61 8 7070 1698
KANMANTOO COPPER MINE
440 Mine Road
Kanmantoo S.A. 5252, Australia
Tel: + 61 8 8538 6800
SHARE REGISTRY
Boardroom Pty Limited
Level 7, 207 Kent 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
AUDITORS
PricewaterhouseCoopers
70 Franklin Street
Adelaide S.A. 5000, Australia
WEB SITE
www.hillgroveresources.com.au
GENERAL ENQUIRIES
Info@hillgroveresources.com.au
CONTENTS
Chairman and Managing
Director’s Statement
Hillgrove Projects
Mineral Resource
Financial Report
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
1
2
7
8
49
50
56
Cover photos by Duy Dash, courtesy of the Department for Energy and Mining, South Australia.
Page 2
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Chairman and Managing Director’s Statement
Dear Shareholders,
It has been an exciting year for the Company,
which has seen us achieve some significant
milestones to progress the development
of the Kanmantoo Underground Project.
Following on from the capital raising which
was completed in February 2021, Hillgrove
embarked on a 17 kilometre drilling program –
with the results of this drilling very encouraging
in demonstrating that there is mineralisation
containing grades, widths, and continuity that
will support underground mining.
The success of this drilling enabled the
Company to release an updated Mineral
Resource Estimate which saw the Resource
increase by 82% from 34.4kt to 62.5kt
of copper metal, as well as increase the
geological confidence of this Resource, with
72% of the Kavanagh Resource now classified
as Indicated. This updated Kavanagh
Resource now covers an area 500m long
by 200m wide by 500m deep and is only
constrained by the extent of the drilling, in
both the along strike and dip directions.
With the success of this drilling and the
updated Mineral Resource Estimate,
the Company released a study which
highlighted the excellent economics of the
project. This included almost $200m of free
cash flows within the initial three years, as
well as confirmation that the Kanmantoo
Underground Project is one of the lowest
capital intensive copper development projects
in the world.
The study reinforced the decision earlier in the
year to commence the decline development
ahead of the final investment decision, utilising
the Komatsu MC51 mechanical cutting
machinery. Supported by the award of a $2m
grant from the South Australian Government,
the decline commenced in October and the
MC51 has already created a portal at the base
of the open pit, which will initially be used to
create access to underground drill platforms.
The decline will also serve as the future
underground mine access, further reducing
what is already a very low cost and short time
frame to copper production.
Mr Derek Carter
Independent Non-Executive
Chairman
Mr Lachlan Wallace
Chief Executive Officer and
Managing Director
At the site itself, all infrastructure is in place. This includes an operational
processing plant that is being maintained for a fast restart and a permitted
and operational tailings storage facility with ample storage capacity. This not
only reduces the timeframes and capital costs to first copper production, but
importantly, at over 3Mtpa, the processing capacity is far greater than the
expected annual production from the Kanmantoo Underground. The spare
processing capacity enables Hillgrove to respond to changing commodity
prices by flexing the cut-off grade to maximise value from the Kanmantoo
Underground, without the need for additional capital expenditure. Whilst most
other producers would need to consider permitting, capital costs and lengthy
construction times to expand production to take advantage of changing
prices, the Kanmantoo project can react quickly, which may prove valuable as
the world continues to decarbonise through electrification, fuelling the demand
for copper.
In addition, as we head towards restarting operations, the site is also on very
firm footing from a regulatory and community standpoint. Kanmantoo is fully
permitted and enjoys strong support from the local Kanmantoo and Callington
communities where the company has a long-standing positive presence.
We are also proud of our record on environmental stewardship. Through our
native revegetation program, we have rehabilitated over 120 hectares of land
on and around the mine site, re-introducing native plants and grasses, and
connecting with regional regeneration projects to create a green corridor that
will be protected in perpetuity and provide a safe-haven for wildlife. As we
prepare for the restart of the Kanmantoo Underground, we are also proud
to present the Company’s inaugural Sustainability Report which outlines our
activities to date and commitments towards a sustainable future in line with the
UN’s Sustainabile Development Goals and the GRI framework1.
Finally, we would like to thank all our stakeholders that are involved with
Hillgrove during this exciting period, as we look to transition from a developer
to become Australia’s next copper mine.
1
The Sustainability Report is available at the
Hillgrove Resources website.
Mr Derek Carter
Chairman
Mr Lachlan Wallace
Managing Director
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 1
Hillgrove Projects
KANMANTOO UNDERGROUND DEVELOPMENT
Hillgrove Resources Limited’s (Hillgrove) flagship project is the Kanmantoo Copper
Mine in South Australia, located 55 kilometres from Adelaide. The site is in an enviable
position, being close to road, rail, power, water, port facilities, and enjoying access to a
large pool of specialised contractors and potential employees.
The exploration and mining lease is scattered with historical copper and base metal
operations and includes the former Kanmantoo Copper Mine, a medium sized copper
mine that operated from 1971 to 1976 as an open pit and underground operation.
Hillgrove re-opened the mining operations in 2011 and operated an open pit until 2019.
With the completion of the open pit, care and maintenance of the existing processing
plant has continued, to enable a rapid low-cost restart should the Kanmantoo
Underground (Underground) operation proceed.
Following on from the drilling and the release of the Mineral Resource Estimate (“MRE”)
in 2020, Hillgrove continued the drilling campaigns throughout 2021. A total of 52
diamond drill holes have been drilled to the end of the year, with drilling continuing.
Highlights of this drilling2 include:
CENTRAL AND EAST KAVANAGH
½ KTDD205
170.65m @ 1.01% Cu and 0.11 g/t Au from 339m downhole.
½ KTDD208
½ KTDD202_W3
½ KTDD198_W5
½ KTDD203_W4
166.3m @ 0.90% Cu and 0.13 g/t Au from 332m downhole.
20.0m @ 1.53% Cu and 0.36 g/t Au from 624m downhole.
11.0m @ 1.59% Cu and 0.05 g/t Au from 393m downhole.
4.55m @ 1.50% Cu and 0.24 g/t Au from 843.45m downhole
(equal deepest hole).
SPITFIRE AND SOUTH WEST KAVANAGH
½ KTDD206
16.0m @ 1.19% Cu and 0.08 g/t Au from 427m downhole.
½ KTDD206_W2
7.5m @ 1.87% Cu and 0.08 g/t Au from 328.5m downhole.
½ KTDD206_W4
4.6m @ 3.71 g/t Au from 410m downhole.
These drill holes demonstrated that the mineralisation extends for at least 500m below
the extent of the Kavanagh open pit completed in 2019 and led to the release of an
updated MRE in December 20213:
½ A total Kanmantoo Resource tonnage of over 5.6Mt at 1.1% Cu, 0.33 g/t Au
for 62.5kt of copper metal, an 82% increase in copper metal over the previous
Kanmantoo MRE due to the additional successful drill intercepts and a change in
copper cut-off grade resulting from the engineering economic assessment studies.
½ 72% of the Kavanagh MRE is now classified as Indicated.
½ The updated Kavanagh MRE now covers an area 500m long by 200m wide by
500m deep.
½ The MRE is constrained by the extent of the drilling and not by the geology, in both
the along strike and dip directions.
With the completion of the updated
MRE, an economic assessment was
undertaken, which confirmed the
Underground’s outstanding potential from
Stage 1 operations4. The highlights of this
economic assessment included:
½ Post-tax free cash flow of
$196 million.
½ NPV8 of $166 million.
½ Internal rate of return of 389%.
½ Payback period of 7 months post the
completion of pre-production works.
½ Low capital costs of only $26M,
resulting in one of the lowest capital
intensity projects in the world, at
just US$1,550/t (US$0.70/lb) of
annual copper produced, an order of
magnitude below other development
projects which AME estimate to
average US$7.26/lb of annual copper
production5.
½ All in sustaining cost of $6,991/t
copper (US$2.22/lb), providing good
margins at current and projected
copper prices.
½ An initial three year mine plan of
3.3Mt, targeting production of 36k
tonnes of copper and 10k ounces of
gold.
The strong potential project economics
reinforced the decision to commence the
development of the Underground decline
ahead of the final investment decision.
The initial decline is partially funded by
a $2m grant from the South Australian
Government that was awarded in late
August 2021.
2
3
4
5
Refer ASX announcement of 6 May 2021,
24 June 2021, and 1 September 2021.
Refer ASX announcement of
14 December 2021.
Refer ASX announcement of
14 December 2021.
AME, 2017, Copper - Capital Intensity of
New Copper Mines.
Page 2
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Hillgrove Projects (cont.)
KANMANTOO UNDERGROUND DEVELOPMENT (cont.)
6114800 Nm
6115000 Nm
6115200 Nm
Giant Open Pit Completed 2019
KTDD205
170.65m @ 1.01% Cu,
0.1g/t Au
KTDD208
166.3m @ 0.9% Cu,
0.13g/t Au
2
1 00mRL
1000mRL
KTDD206W2
7.5m @ 1.9% Cu,
0.08g/t Au
KTDD206
16m @ 1.2% Cu,
0.08g/t Au
800mRL
KTDD189
16.7m @ 1.3% Cu,
0.26g/t Au
KTDD189W3
11.4m @ 1.04% Cu,
0.08g/t Au
KTDD189W8
10.45m @ 1.1% Cu,
0.07g/t Au
KTDD198W5
11m @ 1.6% Cu,
0.05g/t Au
600mRL
2021 Block Model Indicated
2021 Block Model Inferred
Drill intersection >0.6% Cu
> .
Blast Hole 2 0% Cu
Kavanagh Underground Resource 2021
at 0.6% Cu showing all HGO Drilling
Labels for Key Intercepts
KTDD204W1
14.2m @ 2.16% Cu,
0.5g/t Au
KTDD187W2
16.37m @ 3.0% Cu,
0.21g/t Au
KTDD187W6
22.5m @ 2.46% Cu,
0.11g/t Au
KTDD198W4
19.53m @ 1.93% Cu,
0.36g/t Au
KTDD202
19.5m @ 1.64% Cu,
0.07g/t Au
KTDD198W3
17.9m @ 1.2% Cu,
0.56g/t Au
KTDD202W3
20m @ 1.5% Cu,
0.36g/t Au
KTDD203W5
3m @ 1.1% Cu,
5.0g/t Au
KTDD203W4
4.5m @ 1.5% Cu,
0.2g/t Au
0
100
metres
Longitudinal section through the Kavanagh lodes with best intersections from the 2021 drilling.
Following the completion of the successful capital raising in September 2021, the next major drilling program of 16,000 metres has
commenced, which will potentially increase the geological confidence and annual production ahead of a planned commencement
of Underground operations in 2022. Initial work will be conducted in the Nugent area, with the aim of bringing this area into the initial
Underground mine plan, which will create an additional work area to increase the annual production potential. The program will then
expand to include drilling at Spitfire and South West Kavanagh.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 3
Hillgrove Projects (cont.)
NEAR MINE EXPLORATION
The Company continues to advance the
exploration of its Cu-Au targets within 10
kms of the Kanmantoo processing plant.
These include the previously announced6
Stella and North West Kanmantoo
geochemical and geophysical targets.
Stella
The 2019 3D MT (magneto-telluric)
geophysical survey has identified the
Stella zone as a coincident magnetic
high, conductivity high and gravity low
target commencing at around 200m
below surface. Nearby drilling has
intersected a 60m wide zone of chlorite-
pyrrhotite-garnet alteration with attendant
Cu-Au mineralisation (ASX release of
29 April 2019).
In May 2021, Hillgrove was awarded
a grant up to $229,500 by the South
Australian Government, under the ADI
Scheme to drill test this anomaly. The first
diamond drill hole (SLDD001) confirmed
a new gold discovery, with an 82.35m
wide alteration zone intersected, which
included copper and gold veining from
315m downhole. In total, three alteration
zones with copper gold veining over a
combined 158m was intersected7.
North West
Mapping and sampling has identified a
2.4km long zone of Cu-Au anomalism
coincident with a strong magnetic
high and broad widths of iron-oxide
alteration and iron-oxide brecciation at
surface, within 4.5kms of the Kanmantoo
processing plant. Recent re-logging of
historic government drill core in the area
has identified locally intense albitisation
and veining.
6
7
Refer ASX announcement of
29 April 2019.
Refer ASX announcement of
26 August 2021.
316000mE
6120000mN
NORTH WEST
320000mE
ain
m
o
ral D
ctu
u
Str
MineAlteration
Corridor
6116000mN
ain
m
o
ral D
ctu
u
Str
6112000mN
KANMANTOO
STELLA
Old Cu-Au shafts
0
NORTH
2
kilometres
Kanmantoo Airmagnetics
& Structural Trends
Plan view of the location of projects within 10km of Kanmantoo Copper Mine.
The rock chip sampling, where possible, across the North-West Kanmantoo area has
identified mineralisation with a strong magmatic association including:
½ Rock chip samples to 2.2 g/t Au, 0.1% Cu (not the same sample).
½ Elevated Mo, Bi, Co, Sn, U, La.
The area has not been subjected to electrical geophysical methods for drill targeting
and has not been drilled by Hillgrove.
Page 4
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Hillgrove Projects (cont.)
NEAR MINE EXPLORATION (cont.)
318000 Em
318200 Em
Hillgrove RC holes pre2010
4
5
2
C
R
T
K
3
5
2
C
R
T
K
0
7
1
C
R
T
K
7
5
2
C
R
T
K
8
5
2
C
R
T
K
5
5
2
C
R
T
K
6
5
2
C
R
T
K
100mRL
Aberfoyle 1994 DDH
1
0
N
A
K
Base of weathering
EAST
1
0
0
D
D
L
S
KAN01 0.9m @ 9.8g/t Au, 0.18% Cu
within >36m @ 0.48g/t Au, 0.3% Cu
1m @ 0.2% Pb, 0.1% Zn, 14g/t Ag
within 10m Pb-Zn epigenetic vein system
0mRL
-100mRL
MT
Conductivity
Shell
Cu %
>0.8
0.4 - 0.8
0.1 - 0.4
Magnetic Target
0.6m @ 16.8g/t Au, 10.1% Cu
within >82.35m zone of Fe-Cu-Au veins
1.1m @ 0.87g/t Au, 0.72% Cu
within 43m albite zone
-200mRL
1m @ 0.54% Cu, 0.13g/t Au
within >33m zone of Fe-Cu veins
3
- 00mRL
Magnetic
Target
Au g/t
>0.3
0.1 - 0.3
0.05 - 0.1
u r
u l p
h
S
C
u
A
u
0
100
metres
Stella Drilling
Cross Section
Looking North
Above: Cross section of the Stella
drilling and 2021 drill intercepts.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 5
Hillgrove Projects (cont.)
REGIONAL EXPLORATION
South East Cambro-Ordovician Project
The Regional area comprises 5,652 sq kms of exploration licences in the south-east
of South Australia over a mineralised sequence of Cambro-Ordovician sediments,
volcanics and felsic intrusives. In a recent publication by the Geological Survey of
South Australia8, the Survey notes the similarities between the tectonic setting and its
high-level granitic to dioritic intrusives in south-east South Australia, with the geology of
the large Porphyry Cu-Mo-Au deposits in south-east China (e.g. Dexing, 9.7Mt of Cu
metal, 265 t Au).
These observations support Hillgrove’s exploration activities and the award of a
grant totalling up to $74,300 under the ADI Scheme. These funds will be used to
undertake geochemical analysis of the regolith to identify prospective targets for Cu-Au
mineralisation under cover of the Murray Basin.
Kanappa Copper-Gold Exploration
Kanappa is approximately 65 kms by road from the Kanmantoo operation.
Hillgrove has previously reported the results of the diamond drilling at Kanappa that
intersected copper-gold mineralisation within a skarn mineralising system. KPDDH0039
interesected 45 metres at 0.2% copper, from 47 metres, including two higher grade
zones:
½ 5.5m @ 0.47% Cu from 69.5m downhole; and
½ 4.5m @ 0.65% Cu from 85.0m downhole.
The geology of these drill holes confirm the Company’s view that the Kanappa area is
prospective for large scale magmatic related copper-gold mineral deposits.
The petrology work on a suite of samples from all drill holes by internationally respected
alteration petrologist, Dr Roger Taylor, has clearly identified the mineralisation as an
overprinting Cu rich skarn with attendant alteration stages including garnet-pyroxene,
amphibole-magnetite, and copper and iron sulphides.
A review of the whole rock geochemistry of the monzonites intersected by the drill holes
shows that the magmatic system is classified as a Volcanic Arc Granite and classified
within the Loucks (2014) porphyry fertility field.
These drill results confirm the Company’s view that the Kanappa area is prospective
for large scale magmatic related copper-gold mineral deposits and further work is
continuing in the area in conjunction with the entire South-East South Australian
magmatic related copper-gold exploration program.
Mt Rhine Copper-Gold
Exploration
The Mt Rhine Project is 80kms via
existing roads from the Kanmantoo
processing plant and 12kms from the
Kanappa copper-gold project.
The Company had previously identified
two significant zones of copper-gold at
Mt Rhine through a systematic soil and
rock chip sampling program. In 2018, the
stronger copper-gold zone was covered
with a program of ground magnetics and
pole-dipole IP which indicated a 1.7km
long anomaly for drill targeting.
Field inspection of the copper-gold and
conductivity anomaly has located a series
of carbonate Cu-Fe skarns over a strike
length of 1km. These have never been
drilled and present as a large scale Cu-Au
magmatic target similar to the Kanappa
style mineralisation. Further work is
continuing in the area in conjunction with
the entire South-East South Australian
and Kanappa magmatic related copper-
gold exploration program.
8 Mesa Journal 93, 2020, p47-53.
9
Refer ASX announcement of 30 January 2019.
Page 6
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Mineral Resource
MINERAL RESOURCES FOR KANMANTOO
As at 31 December 2021
On 14 December 2021, the Company released an updated Underground MRE for the first of its underground opportunities
on a portion of the deeper Kavanagh mineralisation beneath the Giant Open Pit. The Table below summarises the Kanmantoo
MRE which includes this updated 2021 Kavanagh MRE and includes the 2020 Nugent MRE10 below the Giant and Nugent
open pits respectively.
MINERAL RESOURCE ESTIMATE FOR THE UNDERGROUND
Deposits
Kavanagh 2021
(0.6% Cu COG)
Nugent 2020
(0.8% Cu COG)
Totals
JORC 2012
Classification
Indicated
Inferred
Sub-Total
Indicated
Inferred
Sub-Total
Indicated
Inferred
Total
Tonnage
(kt)
3,530
1,480
5,010
202
457
659
3,732
1,937
5,669
Cu
(%)
1.1
1.01
1.08
1.4
1.3
1.32
1.12
1.08
1.10
Au
(g/t)
0.11
0.1
0.11
0.47
0.7
0.61
0.13
0.73
0.33
Cu Metal
(kt)
38.9
15
53.9
2.8
6
8.7
42
21
62.5
Note: Due to appropriate rounding, numbers may not sum.
The information in this report that relates to the MRE on the Kavanagh underground project was reported by the Company to the
ASX on 14 December 2021. The Company confirms that it is not aware of any new information or data that materially affects the
information included in the original market announcement and that all material assumptions and technical parameters underpinning
the estimate in the relevant market announcement continue to apply and have not materially changed. The Company confirms that
the form and context in which the Competent Person’s findings are presented have not been materially modified from the original
market announcement.
The MRE for the Kavanagh and Nugent underground area is based upon information compiled by Mr Peter Rolley, who is a Member
of The Australian Institute of Geoscientists. Mr Rolley is a full-time employee of Hillgrove Resources Limited and has sufficient
experience relevant to the styles of mineralisation and type of deposit under consideration to qualify as a Competent Person as
defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(JORC Code)’. Mr Rolley has consented to the inclusion in the release of the matters based on their information in the form and
context in which it appears.
10 The Nugent deposit was not drilled in 2021 and the 2020 Nugent MRE has not been updated.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 7
FINANCIAL REPORT
for the year ended 31 December
2021
Contents
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 Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
9
15
23
24
25
26
27
28
49
50
Shareholder Information for Listed Public Companies 56
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 Australian dollars.
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 25 February 2022. 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 the Investors page on our website
www.hillgroveresources.com.au
Page 8
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Directors’ Report
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 2021.
PRINCIPAL ACTIVITIES
Hillgrove is an Australian mining company listed on the Australian Securities Exchange (ASX: HGO) and focused on the development
of the Kanmantoo Underground Copper Mine in South Australia and mineral exploration in the south-east of South Australia. The
Kanmantoo Copper Mine is located less than 55 kilometres from Adelaide in South Australia.
DIRECTORS AND OFFICERS
The Directors and Officers of the Company during the whole of the financial year and up to the date of this report are:
Name/Qualifications
Experience and Special Responsibilities
Mr Derek Carter
Qualifications
Experience
Independent Non-Executive Chairman / Chairman Nomination and Remuneration
Committees
BSc, MSc, FAusIMM
Derek has over 40 years’ experience in exploration and mining geology and management. He held
senior positions in Burmine Ltd and the Shell Group of Companies where he was responsible for
discovering the Los Santos tungsten deposit in Spain, before founding Minotaur Gold NL in 1993. He
resigned as Chairman of Minotaur Exploration Ltd in November 2016. Derek was awarded AMEC’s
Prospector of the Year Award (jointly) in 2003 for the discovery of the Prominent Hill copper-gold
deposit, the AusIMM President’s Award and is a Centenary Medallist. Derek is currently the Chairman
of Petratherm Limited (ASX: PTR).
Derek is a member of the Audit and Risk Committee.
Appointed 24 April 2020.
Mr Murray Boyte
Independent Non-Executive Director / Chairman Audit and Risk and Treasury Committees
Qualifications
Experience
BCA, CA, MAICD
Murray has over 35 years’ experience in merchant banking and finance, undertaking company
reconstructions, mergers and acquisitions in Australia, New Zealand, North America and Hong Kong.
Murray holds a Bachelor of Commerce and Administration from the Victoria University in Wellington
and is a member of the Australian Institute of Company Directors, the Institute of Directors of New
Zealand and Chartered Accountants Australia & New Zealand. In addition, Murray has held executive
positions and directorships in the transport, horticulture, finance service, investment, health services
and property industries. Murray is currently the Chairman of Eureka Group Holdings (ASX: EGH),
Chairman of National Tyre & Wheel Limited (ASX: NTD), and a Non Executive Director of Eumundi
Group (ASX: EBG).
Murray is a member of the Nomination and Remuneration Committees.
Appointed 10 May 2019.
Mr Lachlan Wallace
Chief Executive Officer and Managing Director
Qualifications
Experience
BEng (Mining Hons), MSc (Mineral & Energy Economics), MBA, MAusIMM, GAICD
Since joining Hillgrove in 2012, Lachlan held various operational roles at the Kanmantoo Copper Mine
including General Manager before becoming the Chief Executive Officer and Managing Director in
2019. Previously, Lachlan was responsible for Stemcor’s global mining assets, developing their iron
ore and manganese portfolio in India and nickel project in Indonesia at a time when Stemcor’s annual
turnover exceeded £6Bn. In addition, Lachlan chaired a JV between Stemcor and an Indonesian
partner to facilitate thermal coal trade flows ex-Indonesia. Lachlan has held technical, managerial and
consulting roles in Africa and Australia, including Anglo Gold Ashanti’s Siguiri gold project in Guinea,
the Lumwana copper mine in Zambia, and the Savage River iron ore mine in Tasmania.
Lachlan is a member of the Treasury Committee.
Appointed 24 May 2019.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 9
Directors’ Report (cont.)
DIRECTORS AND OFFICERS (CONT.)
Name/Qualifications
Experience and Special Responsibilities
Mr Joe Sutanto
Company Secretary and Chief Commercial Officer
Qualifications
Experience
BCom, MBA, CPA
Joe joined Hillgrove in 2011 and has held a number of roles within the finance team, which spanned
commercial and planning to financial control before becoming the Company Secretary and Chief
Commercial Officer in 2020. Prior to Hillgrove, Joe held a number of roles which included as a
corporate finance executive at PwC Corporate Finance, commodities trader at Glencore, and as
an auditor at KPMG. A CPA qualified accountant, Joe completed his MBA at HKUST and London
Business School.
Appointed 10 July 2020.
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 D Carter
Mr M Boyte
Mr L Wallace
Board
Remuneration
Committee
Audit & Risk
Committee
Nomination
Committee
Treasury
Committee
A
15
15
15
B
15
15
15
A
3
3
-
B
3
3
-
A
3
3
-
B
3
3
-
A
2
2
-
B
2
2
-
A
-
1
1
B
-
1
1
A – Number of meetings held during the Directors time in office
B – Number of meetings attended
Page 10
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Directors’ Report (cont.)
RESULTS
Revenue from ordinary activities
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
CY21
-
($5.9m)
($5.9m)
CY20
$20.2m
($5.9m)
($5.9m)
For the year ended 31 December 2021, the net loss after tax was $5.9 million compared to a net loss after tax of $5.9 million for the
year ended 31 December 2020.
The underlying EBITDA for the year was a loss of $5.4 million compared to a loss of $3.7 million for 2020. This reflects the costs
associated with processing plant care and maintenance, and other site costs, together with costs of running the corporate
head office.
Income Statement Overview
Copper revenue
Gold revenue
Silver revenue
Less: Treatment and refining costs
NET REVENUE FROM SALE OF CONCENTRATE
Mining costs
Pre-strip and deferral
Processing costs
Transport and shipping costs
Other direct costs
Care and maintenance costs
Inventory movements
Royalties
Corporate costs
TOTAL COSTS
Net realised gains/(losses)
Other income
EBITDA
Depreciation and amortisation
Exploration and project costs written off
EBIT
Net interest and financing charges
Income tax benefit/(expense)
NET PROFIT AFTER TAX
12 mths to Dec 2021
12 mths to Dec 2020
$ million
$ million
-
-
-
-
-
-
-
-
-
(1.3)
(1.2)
-
-
(3.0)
(5.5)
-
0.1
(5.4)
(0.1)
-
(5.5)
-
(0.4)
(5.9)
19.6
1.7
0.4
(1.5)
20.2
-
-
(6.5)
(1.5)
(2.3)
(1.3)
(9.2)
(0.9)
(4.2)
(25.9)
1.9
0.1
(3.7)
(1.9)
(0.1)
(5.7)
(0.2)
-
(5.9)
Change
$ million
(19.6)
(1.7)
(0.4)
1.5
(20.2)
-
-
6.5
1.5
1.0
0.1
9.2
0.9
1.2
20.4
(1.9)
-
(1.7)
1.8
0.1
0.2
0.2
(0.4)
-
There was no revenue generated during the year, with the Company’s focus being on exploration and development activities.
Total costs were $5.5 million compared to $25.9 million for the previous year. The significant reduction in costs was the result of the
completion of stockpiles processing in early 2020.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 11
Directors’ Report (cont.)
RESULTS (Cont.)
Cash Flow Overview
Net cash inflows from operating activities
Net cash used in investing activities
Net cash inflows/ (outflows) from financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at the end of the year
Operating Activities Cash Flow
12 mths to Dec 2021
12 mths to Dec 2020
$ million
$ million
(4.9)
(9.4)
19.4
5.1
10.7
(3.0)
(2.7)
2.0
(3.7)
5.6
Change
$ million
(1.9)
(6.7)
17.4
8.8
5.1
Cash received in the course of operations amounted to $0.1 million and relates to the sale of excess seed produced for the
rehabilitation activities.
Cash payments in the course of operations totalled $5.0 million and include payments for corporate and administration costs and the
costs relating to care and maintenance activities.
Trade creditors and other payables are on normal commercial terms.
Investing Activities Cash Flow
Net cash outflow from investing activities was $9.4 million compared to an outflow of $2.7 million in the previous corresponding
period. Of the $9.4 million, $8.4 million related to underground exploration and expansion works, which are classified as mine
development (2020: $2.7 million). Expenditure on regional exploration licences amounted to $1.0 million (2020: $0.7 million).
Financing Activities Cash Flow
In 2021, there was a net cash inflow of $19.4 million from financing activities. This relates to capital raisings completed in February
2021 (from a Placement and non renounceable entitlement offer) and September / October 2021 (from a Placement and share
purchase plan).
Consolidated Statement of Financial Position Overview
31 December 2021
31 December 2020
$ million
$ million
Change
$ million
Cash
Receivables
Inventories
Property, Plant & Equipment
Exploration
Total Assets
Trade Payables
Provisions
Employee Benefits
Total Liabilities
Net Assets / Equity
10.7
0.9
1.9
33.4
4.4
51.3
1.8
10.1
1.5
13.4
37.9
5.6
0.8
1.8
24.4
3.2
35.8
1.1
10.5
1.0
12.6
23.2
5.1
0.1
0.1
9.0
1.2
15.5
0.7
(0.4)
0.5
0.8
14.7
Total assets increased by $15.5 million to $51.3 million, largely as a result of an increase in property plant and equipment. This was
mainly due to the capitalisation of mine development.
Total liabilities increased by $0.8 million to $13.4 million and are the result of normal fluctuations in the timing of payables.
Page 12
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Directors’ Report (cont.)
OPERATING REVIEW
During the year, the Company continued to advance the
Underground project, with drilling conducted and the
commencement of the development decline. The successful
drilling led to an updated MRE, with a resource tonnage of over
5.6Mt at 1.1% Cu, 0.33g/t Au for a total of 62.5kt of copper
metal. Moreover, it also led to the completion of an economic
assessment, which confirmed the outstanding potential of the
project.
In addition to the development activities for the Underground,
Hillgrove advanced the exploration of the near mine and regional
prospects – with drilling undertaken at Stella and geochemical
analysis undertaken in the South East Delamerian.
OUTLOOK AND FUTURE DEVELOPMENTS
The focus of the Company will predominantly be directed
towards further advancing the Underground project, with the key
steps to be undertaken as follows:
½ Expansion of the Underground Resource;
½ Infill drill to improve the geological confidence such that
an initial Ore Reserve Estimate may be prepared for the
Underground;
½ Drill test depth extensions;
½ Reach a final investment decision; and
½ Subject to a positive final investment decision, complete the
financing for the development of the Underground.
In addition to the activities related to the Underground, the
Company will also continue to explore and evaluate its near mine
as well as regional prospects.
CAPITAL RAISINGS
In February 2021, the Company completed:
½ A pro rata non renounceable entitlement offer, raising $2.8
million through the issue of 90.1 million new fully paid
ordinary shares at $0.031 per share; and
½ Following the approval at the Extraordinary General Meeting,
raised $5.7 million through the issue of 185.1 million new
fully paid ordinary shares at $0.031 per share.
In addition, on 22 September 2021, the Company announced
an equity raising of $12.0 million at $0.052 per share. The raising
was undertaken through the following:
½ Placement – the issue of 192.3 million new fully paid ordinary
shares pursuant to the Company’s available placement
capacity under ASX Listing Rules 7.1 and 7.1A raising gross
proceeds of $10.0 million; and
½ Share purchase plan – the issue of 38.9 million new fully paid
ordinary shares raising gross proceeds of $2.0 million.
Proceeds from all tranches were received in the current period.
IMPACT OF COVID-19 ON OPERATIONS
With the continued outbreak of COVID-19, the Company was
fortunate that the outbreak did not have a material impact to
its exploration and development activities. However, as the
impact of COVID-19 continues to evolve, the Directors cannot
reasonably estimate the effects that the COVID-19 pandemic
could have on future periods.
During the year ended 31 December 2021, the Group received
government assistance through JobKeeper of $108,000 (2020:
$583,800) which was treated as a reduction in expenses.
DIVIDENDS
There were no dividends paid during the current period.
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.
EVENTS SUBSEQUENT TO
BALANCE DATE
There were no events subsequent to balance date.
LIKELY DEVELOPMENTS AND EXPECTED
RESULTS OF OPERATIONS
Likely developments in the operations of the group in the short
to medium term will largely be focussed on the exploration and
development of the Kanmantoo Underground. For further
details on each of these, refer to the Hillgrove Projects section
of this report.
ENVIRONMENTAL REGULATION
Closure of an operation brings with it potential significant
financial, environment, and social impacts. Recognising this, a
closure management plan for Kanmantoo has been prepared,
which includes long term monitoring to verify that controls are
effective and standards are maintained.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 13
Directors’ Report (cont.)
ENVIRONMENTAL REGULATION (Cont.)
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 at the date
of this report, however elevated iron in groundwater detected
in a borehole on the mining lease has been reported to
the Regulator. Whilst this is currently immaterial, Hillgrove
continues to monitor the borehole to ensure that it does not
lead to a material breach of any environmental regulations.
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:
½ 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
½ in connection with an application, in relation to such
proceedings, in which the Court grants relief to the
person under the Corporations Law.
INDEMNITY OF AUDITORS
Hillgrove Resources Limited has agreed to indemnify their
auditors, PricewaterhouseCoopers, to the extent permitted
by law, against any claim by a third party arising from
Hillgrove Resources Limited’s breach of their agreement.
The indemnity stipulates that Hillgrove Resources Limited
will meet the full amount of any such liabilities including a
reasonable amount of legal costs.
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
(PricewaterhouseCoopers) for audit and non-audit services provided
during the period are set out in Note 7 (e).
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 did
not compromise the auditor independence requirements of the
Corporations Act 2001.
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 23.
CORPORATE GOVERNANCE
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.
Page 14
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
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 2021,
which forms part of the director’s report and has been audited in accordance with
section 308 (3C) of the Corporations Act 2001.
1.0 Key Management Personnel
Key management personnel comprise the Non-Executive Directors and the
Executive Director (KMP). Details of the KMP are set out in the table below.
Non-Executive
Directors
Title (At Year End)
Change in 2021
Financial Year
Mr D Carter
Chairman
Chairman Nomination Committee
Chairman Remuneration Committee
Member Audit and Risk Committee
Full Year
Mr M Boyte
Director
Chairman Audit and Risk Committee
Chairman Treasury Committee
Member Nomination Committee
Member Remuneration Committee
Full Year
Executive Director
Mr L Wallace
CEO and Managing Director
Member Treasury Committee
Full Year
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 is chaired by an Independent Non-Executive Director.
The role of the Remuneration Committee is set out in its Charter and in summary
is to:
½ Review and approve the Company’s remuneration strategy and policy;
½ Consider and propose to the Board the remuneration of the CEO and
consider and approve the remuneration of all designated senior executives;
½ Review and approve Hillgrove Resources’ short term incentive (STI) and long
term incentive (LTI) schemes, including amounts, terms and offer processes
and procedures;
½ Determine and approve equity awards in accordance with policy and shareholder
approvals, including testing of vesting and termination provisions; and
½ 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 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.
The Remuneration and Benefits policy
aims to:
½ Align employee remuneration to the
principles and measurement of Total
Shareholder Return (TSR);
½ Present progressive incentive structures
to encourage outstanding performance,
and hence improved TSR; and
½ Mitigate the business risks associated
with poor performance, market
movements and employee turnover.
The Remuneration Committee Charter and
Remuneration and Benefits Policy can be
viewed on the Company’s website
www.hillgroveresources.com.au.
2.2 USE OF REMUNERATION
CONSULTANTS
The Remuneration Committee is briefed by
management however, makes all decisions
free of influence of management.
Further to the management briefings,
to assist in its decision making, the
Committee may, from time to time, seek
independent advice from remuneration
consultants, and in so doing will directly
engage with the consultant without
management involvement.
In the year ending 31 December 2021,
the Committee engaged remuneration
advisors Egan Associates. Their analysis
relating to the remuneration for the Chief
Executive Officer and Managing Director
(CEO & MD) was considered by the
Remuneration Committee and the Board
in forming their views on remuneration
matters. The work completed did not
constitute a remuneration recommendation
in accordance with the Corporations
Act 2001.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 15
Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (cont.)
3.0 Non-Executive Director
Remuneration
Elements
Details
Aggregate Board
and Committee
Fees
The total amount of fees paid to non-
executive directors in the year ended
31 December 2021 is within the
aggregate amount approved by
shareholders of $450,000 a year.
Board/Committee
Fees Per Annum
Board Chairman Fee
Board NED Base Fee
$120,000
$75,000
$5,000
$5,000
Remuneration Committee
Chairman Fee
Audit and Risk
Committee Chairman Fee
Details
Superannuation contributions were made
at a rate of 9.5% until 30 June 2021 and
have been made at a rate of 10.0% of
base fee from 1 July 2021 (but only up to
the Government’s prescribed maximum
contributions limit) which satisfies the
Company’s statutory superannuation
contributions. Contributions are included
in the total fee.
Post-Employment
Benefits
Superannuation
Other Benefits
Details
Equity Instruments Non-Executive Directors may receive
performance related remuneration or
performance rights.
Other Fees/
Benefits
No payments were made to Non-
Executive Directors during the 2021
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.
4.0 Executive Remuneration
4.1 EXECUTIVE KMP REMUNERATION
FRAMEWORK
Hillgrove Resources’ executive remuneration strategy is
designed to attract, retain and motivate a highly qualified and
experienced group of Executives.
4.2 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.
4.3 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 2021
Position
TFR (Cash)
STI (Cash)
LTI (Equity)
CEO & MD
100%
Up to 50% of TFR Up to 50% of TFR
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.
1 YEAR
Jan.
2021
Dec.
2021
4 YEARS
May
2021
Mar.
2022
Mar.
2023
Mar.
2024
Mar.
2025
TFR
STI
(1 year)
LTI – (measured 4 years)
STI performance period ends
LTI performance period starts
STI performance period
starts and new TFR effective
LTI performance
period ends
Page 16
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (cont.)
4.4 VARIABLE ‘AT RISK’ REMUNERATION
As set out in Section 4.3, variable remuneration forms a portion of the CEO & MD’s remuneration. Apart from being market
competitive, the purpose of variable remuneration is to direct Executive’s behaviours towards maximising Hillgrove Resources’
value and return value to shareholders, by targeting short, medium and long term performance measures. The key aspects are
summarised below.
4.4.1 Short Term Incentives (STI)
STI Programme
Purpose
Performance Target Areas
Rewarding Performance
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.
The key performance objectives of the Company vary by level but are currently directed to
achieving ambitious targets.
The Board adopted a Balanced Scorecard approach to determine 2021 STI performance. The
Balanced Scorecard measures performance against the Company’s internal goals, which includes
ESG metrics, resource and reserves, mine plan, and securing funding.
A threshold and target are set for each STI outcome. Specific targets are not provided in detail
due to commercial sensitivity.
Validation of performance against the Balanced Scorecard measures set for the CEO & MD
and KMPs involves a review calculation and recommendation by the CEO & MD, reviewed and
approved by the Remuneration Committee with final Board sign-off.
4.4.2 Performance Based Remuneration Granted and Forfeited During the Year
The following table shows how much of the STI cash bonus was awarded and how much was forfeited for each KMP.
KMP
Mr L Wallace
Opportunity ($)
Awarded (%)
Forfeited (%)
210,000
0%
0%
2021 Performance
At the time of signing the Remuneration Committee and the Board had not approved the award of the STI cash bonus related
to 2021 performance.
4.4.3 Long Term Incentives (LTI) Plans
The LTI provides an annual opportunity for executives and key staff to receive an equity award 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 share price hurdles over the vesting period,
along with other performance criteria.
As at the end of the 2021 financial year, there were two LTI Plans granted and outstanding to Executive KMP:
½ 2020 Option and Performance Rights Plan (2020 OPRP) = 5,000,000 performance rights; and
½ 2021 Option and Performance Rights Plan (2021 OPRP) = 5,000,000 performance rights.
In addition to the above, 70% of the 2019 Option and Performance Rights Plan vested in 2021, with a total of 2,185,135 shares
issued to KMP.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 17
Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (cont.)
REMUNERATION REPORT (AUDITED) (cont.)
2020 and 2021 OPRP Description
Detail
2020 OPRP
2021 OPRP
Purpose
Award
Exercise Price
Voting Rights
LTI Allocation
Service Period
To retain key executives and align their remuneration with shareholder value.
Under the LTI, executives and key staff are offered performance rights (to acquire ordinary
shares of Hillgrove Resources Limited).
Exercise price of nil in the event performance hurdles are met.
There are no voting rights attached to performance rights.
The size of individual LTI grants for the CEO/MD is determined in accordance with the Board
approved remuneration strategy mix. See Section 4.3.
To the later of 1 March 2023 or when the
Performance Hurdles are met
To the later of 1 March 2024 or when the
Performance Hurdles are met
Performance Hurdles
- Measurement Price
- Price Calculation Methodology
- Start of Testing Date
- First Exercise Date
- Last Exercise Date
6.0 cents
10 day VWAP
1 March 2022
1 March 2023
30 March 2024
8.0 cents
10 day VWAP
1 March 2023
1 March 2024
30 March 2025
4.4.4 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.au.
4.5 RELATIONSHIP BETWEEN PERFORMANCE AND EXECUTIVE KMP REMUNERATION
4.5.1 Hillgrove Resources Financial Performance (31 December 2017 to 31 December 2021)
Sales Revenue ($M)
Underlying EBITDA ($M)
Reported net profit / (loss) ($M)
12 Months to 31 Dec
2017 restated
113.3 (1)
16.2
(14.1)
2018
180.1
44.3
29.5
2019
113.5
12.1
(10.0)
2020
20.4
(3.7)
(5.9)
2021
-
(5.4)
(5.9)
Return on equity (ROE) % (2)
(88.3%)
101.7%
(28.4%)
(24.0%)
(19.1%)
Basic earnings per share (EPS) (cents)
Diluted EPS (cents)
Dividends paid (cents per share)
Share price as at 31 December (cents)
(4.8)
(4.8)
-
9.0
5.1
4.9
-
9.0
(1.7)
(1.7)
1.5
6.0
(1.0)
(1.0)
-
3.2
(0.6)
(0.6)
-
5.4
Total shareholder return (TSR) % (Annual)
125.0%
0% (3)
(16.7%) (4)
(46.7%)
68.8%
(1) Restatement for changes in accounting policies.
(2) Based on average total equity.
(3) Share price as at 31 December was 9c in 2017 and 2018, which results in a 0% TSR.
(4) Hillgrove’s TSR performance includes the $0.015 dividend.
Page 18
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (cont.)
4.6 KMP REMUNERATION TABLES – AUDITED
Short-term
Long-term
Fixed Remuneration
Salary and
Fees
Non-
monetary
Benefits
Super-
annuation
Benefits
Termination
Benefits
Long
Service
Leave
113,896
74,745
72,893
68,493
-
43,555
-
30,254
-
21,777
186,789
238,824
404,166
395,000
404,166
395,000
-
203,603
-
114,583
-
318,186
590,955
952,010
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,104
7,101
7,107
6,507
-
4,138
-
2,874
-
2,069
18,211
22,689
15,834
24,997
15,834
24,997
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,269
111,186
-
10,416
-
23,685
34,045
71,371
-
-
-
111,186
-
111,186
-
-
-
-
-
-
-
-
-
-
-
-
9,875
9,875
9,875
9,875
-
-
-
-
-
-
9,875
9,875
Total
Total
125,000
81,846
80,000
75,000
-
47,693
-
33,128
-
23,846
205,000
261,513
429,875
429,872
429,875
429,872
-
328,058
-
124,999
-
453,057
634,875
1,144,442
Non-Executive Directors
Mr D Carter (1)
Mr M Boyte
Mr J Gooding (2)
Mr P Baker (3)
Mr A Breuer (4)
Total
Executive Directors
Mr L Wallace
Total
Year
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
Other Key Management Personnel
Mr P Kiley (5)
Mr G Norris (6)
Total
Total
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
(1) Mr D Carter was appointed on 24 April 2020.
(2) Mr J Gooding resigned on 24 April 2020.
(3) Mr P Baker resigned on 20 May 2020.
(4) Mr A Breuer resigned on 24 April 2020.
(5) Mr P Kiley resigned on 10 July 2020.
(6) The table shows the period Mr G Norris was a part of the KMP (to 31 May 2020, post the completion of processing stockpiled ore).
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 19
Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (cont.)
4.6 KMP REMUNERATION TABLES – AUDITED (CONT.)
Variable Remuneration
Year
Short-Term
Long-Term
Total
Total
Fixed and
Variable
Proportion of Total
Remuneration
Fixed (%)
Variable (%)
Non-Executive Directors
Mr D Carter
Mr M Boyte
Mr J Gooding
Mr P Baker
Mr A Breuer
Total
Executive Directors
Mr L Wallace
Total
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
Other Key Management Personnel
-
-
-
-
-
-
-
-
-
-
-
-
259,793
259,793
-
-
259,793
259,793
-
-
-
-
-
-
-
-
-
-
-
-
-
-
519,586
519,586
-
-
178,500 (7)
180,180
178,500
180,180
228,241
133,334
228,241
133,334
406,741
313,514
406,741
313,514
384,793
81,846
339,793
75,000
-
47,693
-
33,128
-
23,846
724,586
261,513
836,616
743,386
836,616
743,386
Mr P Kiley
Mr G Norris
Total
Total
CY21
CY20
CY21
CY20
CY21
CY20
CY21
CY20
-
-
-
-
51,075
97,213
148,288
476,346
-
-
-
-
67,218
53,080
120,298
245,297
-
118,293
178,500
298,473
-
150,293
747,827
283,627
-
-
268,586
721,643
926,327
1,561,202
582,100
1,726,542
32%
100%
24%
100%
-
100%
-
100%
-
100%
28%
100%
51%
58%
51%
58%
-
69%
-
51%
-
63%
41%
66%
68%
0%
76%
0%
-
0%
-
0%
-
0%
72%
0%
49%
42%
49%
42%
-
31%
-
49%
-
37%
59%
34%
(7) At the time of signing, the Remuneration Committee and the Board had not approved the award of the STI cash bonus related to
2021 performance however, an expense has been accrued.
Page 20
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Directors’ Report (cont.)
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 4.4.3
To incentivise and align part of employee
remuneration to shareholder value
To provide equity and cash 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:
KMP
Mr L Wallace
Grant
Date
May 21
Balance
Held at
31/12/20
Granted
Number
Vested
% Vested
Number
Forfeited
%
Forfeited
-
10,000,000
-
0%
70%
-
936,487
936,487
0%
30%
Balance
held at
31/12/21 (1)
10,000,000
-
10,000,000
TOTAL
3,121,622
10,000,000
2,185,135
Aug 20
3,121,622
-
2,185,135(2)
(1) None of these rights are exercisable and have not vested.
(2) Vested in December 2021, with Ordinary Shares issued in January 2022.
5.3 EXERCISE OF PERFORMANCE RIGHTS GRANTED AS REMUNERATION
During the financial year, no shares which were previously granted as part of remuneration exercised (the exercise of 2,185,135
performance rights occurred in January 2022).
5.4 VALUE OF PERFORMANCE RIGHTS GRANTED AND ON FOOT TO EXECUTIVE KMP
AS AT 31 DECEMBER 2021
Mr L Wallace
2020 OPRP
2021 OPRP
TOTAL
Number Granted
Face Value per
right (1)
Fair Value per
right (2)
5,000,000
5,000,000
10,000,000
$0.054
$0.054
$0.0787
$0.0737
Intrinsic Value (3)
Fair Value
$270,000
$270,000
$540,000
$393,500
$368,500
$762,000
(1) The Face Value is the closing share price on 31 December 2021.
(2) The Fair Value 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.
(3)
Intrinsic value is the difference between the Face Value ($0.054) and the exercise price ($0.00).
5.5 MOVEMENT IN EQUITY HELD
The movement during the reporting period in the number of ordinary shares of Hillgrove Resources Limited held, directly,
indirectly or beneficially, by each specified Director and executive KMP, including their personally-related entities:
Directors
Mr D Carter
Mr M Boyte
Mr L Wallace
Held as at 31/12/20
Exercise of Rights
Net Other Changes
Held as at 31/12/21
Shares
Shares
Shares
-
-
12,205,197
-
-
-
1,805,210
3,482,216
2,005,977 (1)
1,805,210
3,482,216
14,211,124
(1) Acquired as part of the entitlement offer and share purchase plan. The exercise of 2,185,135 performance rights which vested in 2021
occurred in January 2022.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 21
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
contract for the Executive KMP as at 31 December 2021.
Employee
Position
Commencement
Fixed Remuneration
Short-term Incentive
Long-term Incentive
Contract Length
Mr L A Wallace
Chief Executive Officer and Managing Director
24 May 2019
$420,000 p.a. reviewed periodically
Up to 50% of fixed remuneration
Up to 50% of fixed remuneration
Indefinite
Notice Periods for Resignation or Termination 6 months
Redundancy Benefit
National Employment Standards and Group Redundancy Policy
Death or Total and Permanent Disability
Benefit
No specific benefit
Change of Control
No effect
Termination for Serious Misconduct
No notice required, remuneration to the day less advance payments and return of
Company property.
No payment of STI/LTI
Statutory Entitlements
All leave and benefits due per National Employment Standards
Post-Employment Restraints
For 6 months: must not recruit employees or make adverse comments or actions
by either party
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 2021 may be accessed from the Company’s
website at www.hillgroveresources.com.au/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 23.
Signed in accordance with a resolution of the Directors:
Dated at Adelaide this 25th day of February 2022.
Mr Derek Carter
Chairman
Mr Lachlan Wallace
Managing Director
Page 22
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Auditor’s Independence Declaration
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 23
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. Auditor’s Independence Declaration As lead auditor for the audit of Hillgrove Resources Limited for the year ended 31 December 2021, 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 inrelation 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. Julian McCarthy Adelaide Partner PricewaterhouseCoopers 25 February 2022 Consolidated Statement of
Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2021
31 Dec 2021
31 Dec 2020
Note
$’000
$’000
Continuing operations
Concentrate revenue
Other income
Expenses
Interest and finance charges
Impairment charges
(Loss) before income tax
Income tax (expense) / benefit
Loss from continuing operations
Profit / (loss) from discontinued operations
Loss for the period
Comprehensive income
Items that may be reclassified to profit or loss:
Exchange difference on translation of discontinued operations
Total comprehensive income for the period attributable to
equity holders of Hillgrove Resources Limited
Earnings per share for profit from continuing operations
attributable to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the ordinary equity
holders of the Company:
Basic earnings per share
Diluted earnings per share
5
6
7(a)
7(b)
7(c)
9
8
11
11
11
11
-
59
(5,446)
(42)
(4)
(5,433)
(422)
(5,855)
-
(5,855)
-
(5,855)
Cents
(0.6)
(0.6)
(0.6)
(0.6)
20,248
124
(27,624)
(167)
(51)
(7,470)
-
(7,470)
1,525
(5,945)
177
(5,768)
Cents
(1.3)
(1.3)
(1.0)
(1.0)
The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with
the notes to the consolidated financial statements set out on pages 28 to 48.
Page 24
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Consolidated Statement of Financial Position
As at 31 December 2021
31 Dec 2021
31 Dec 2020
Note
$’000
$’000
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Non-current assets
Inventories
Property, plant and equipment
Exploration and evaluation expenditure
Total assets
Current liabilities
Trade and other payables
Provisions
Employee benefits payable
Non-current liabilities
Provisions
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
12
13
14
14
15
16
17
18
20
21
22
23
24
10,737
923
100
11,760
1,816
33,284
4,434
39,534
51,294
1,800
736
1,501
4,037
9,314
9,314
13,351
37,943
5,601
832
50
6,483
1,782
24,390
3,236
29,408
35,891
1,122
775
1,035
2,932
9,736
9,736
12,668
23,223
256,118
28,762
(246,937)
37,943
236,550
27,755
(241,082)
23,223
The Consolidated Statement of Financial Position is to be read in conjunction with
the notes to the consolidated financial statements set out on pages 28 to 48.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 25
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Contributed
equity
Note
$’000
Reserves
$’000
Accumulated
losses
Total equity
$’000
$’000
Balance 1 January 2020
234,322
27,113
(235,137)
26,298
Profit/(Loss) for the period
Other comprehensive income
Transactions with owners:
Contributions of equity, net of transaction
costs
Share-based payments
Balance 31 December 2020
Profit/(Loss) for the period
Transactions with owners:
Contributions of equity, net of transaction
costs and tax
Share-based payments
Balance 31 December 2021
-
-
2,228
-
-
177
-
465
(5,945)
-
-
-
236,550
27,755
(241,082)
(5,945)
177
2,228
465
23,223
-
19,568
-
256,118
-
-
1,007
28,762
(5,855)
(5,855)
-
-
(246,937)
19,568
1,007
37,943
22
33
22
33
The Consolidated Statement of Changes in Equity is to be read in conjunction with
the notes to the consolidated financial statements set out on pages 28 to 48.
Page 26
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
31 Dec 2021
31 Dec 2020
Note
$’000
$’000
Cash flows from operating activities
Cash receipts in the course of operations (inclusive of GST)
Cash payments in the course of operations (inclusive of GST)
Net cash (used) / 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
Payment on disposal of Indonesian subsidiaries
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares (net of transaction costs)
Repayment of finance leases
Interest received
Net cash from/(used) in financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of financial period
Cash and cash equivalents at the end of the financial period
12
53
(4,955)
(4,902)
(987)
(8,407)
-
-
(9,394)
19,421
-
11
19,432
5,136
5,601
10,737
20,211
(23,211)
(3,000)
(687)
(2,346)
348
(91)
(2,776)
2,251
(206)
3
2,048
(3,728)
9,329
5,601
The Consolidated Statement of Cash Flows is to be read in conjunction with
the notes to the consolidated financial statements set out on pages 28 to 48.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 27
Notes to the consolidated Financial Statements for the year ended 31 December 2021
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) Going concern
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.
Whilst the Group has $10.7 million in cash and cash equivalents
at 31 December 2021, it recorded an operating loss of $5.9
million, had net cash outflows from operating activities of $4.9
million and there are no forecasted cash inflows from operating
activities in the next 12 months. The Group continues to have
ongoing expenditure including care and maintenance costs,
rehabilitation activities, corporate costs, exploration, and
development of the Underground project. Whilst the Group
has the option to reduce discretionary expenditure to manage
cash flow, the Board does not expect to pursue this option and
expects further funding will need to be obtained to progress
development of the underground project.
In light of these circumstances, particularly the fact that as at
the date of this report the sources and the required amount of
additional funding had not been secured to fund operations of
the group for the next twelve months and onwards, there is 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 is assessing funding alternatives to
optimise shareholders’ returns. The Directors are confident that
the required amount of financing will be secured to support the
cash flow needs of the group as required for twelve months
from the date of this report. Therefore, the financial report has
been prepared on a going concern basis.
As such, the financial report does not include any adjustments
relating to the recoverability and classification of recorded asset
amounts nor to the amounts and classification of liabilities that
may be necessary should the Group be unable to continue as a
going concern.
(b) 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.
(i) 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).
(ii) 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.
(iii) 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.
(c) Foreign currency translation
(i)
Functional and presentation currency
Items included in the financial statements of each of the
Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the
functional currency’). The consolidated financial statements are
presented in Australian dollars, which is Hillgrove Resources
Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation
at year end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the profit
or loss, except when deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges.
Page 28
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
1. STATEMENT OF SIGNIFICANT
ACCOUNTING POLICIES (cont.)
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 rate differences arising,
if any, are recognised in other comprehensive income and
accumulated in equity (attributed to non-controlling interests as
appropriate).
(d) Impairment of assets
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.
The recoverable amount is the higher of an assets fair value
less costs to sell and its value-in-use (VIU). In its impairment
assessment, the Group determined the recoverable amount
based on VIU. The 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. The valuation is considered to be level 3 in the
fair value hierarchy due to unobservable inputs used in the
valuation. Assets that have undergone 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) 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 consolidated 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 flows.
(f) Government grants
The Group was eligible for the Australian Government’s
JobKeeper wage subsidy scheme. Receipts from the
JobKeeper Program are accounted for as government grants
under AASB 120 Accounting for Government Grants and
Disclosures of Government Assistance.
Government grants are recognised where there is reasonable
assurance that the grant will be received, and all attached
conditions will be complied with. Where the grant relates to an
expense item, it is recognised as a reduction of the expense to
which it relates. Where the grant relates to capitalised expenses,
it is recognised as a reduction to the carrying amount of the
related asset.
(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).
(h) Standards and interpretations in issue
(i) 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.
(ii) Early adoption of standards
There are no standards on issue that are expected to have a
material impact on the group in the current or future reporting
periods.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 29
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
(b) Restoration, rehabilitation and
environmental obligations
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
Notes 18 and 21.
The provision represents management’s best estimate of
the costs that will be incurred, but significant judgement is
required on cost estimates including inflation and discount
rates and changes to the lives of operations, as many of these
costs will not crystallise until the end of the life of the mine.
3. DIVIDENDS
Franked dividends paid
Amount of franking credits
available to shareholders for
subsequent financial years
31 Dec 2021
31 Dec 2020
$’000
-
$’000
-
17,556
17,556
4. FINANCIAL REPORTING BY
SEGMENT
Through its ownership of the Kanmantoo copper mine, the
Group has one operating segment in the resources industry,
in Australia. The Group also had exploration tenement interests
overseas which were sold during the prior year as part of
the sale of the Indonesian subsidiaries. These tenements
were previously fully written down, incurring minimal care
and maintenance costs and were therefore considered to be
immaterial, not requiring separate segment disclosure. The
Indonesian business has been disclosed as discontinued in
Note 8.
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 recoverable amount is
based on value in use calculations which require the use of
assumptions. The estimates of discounted future cash flows
for the Kanmantoo CGU are based on significant assumptions
including:
½ Estimates of the quantities of resources, and the timing of
access to those resources;
½ Future production levels based on plant throughput and
recoveries;
½ Future copper, gold and silver prices based on spot
pricing;
½ Future exchange rates for the Australian dollar to US dollar
based on spot prices;
½ Future operating costs of production, capital expenditure
and rehabilitation expenditure;
½ The discount rate most appropriate to the CGU; and
½ The timing and amounts to be received from the sale of
processing equipment and land following completion of
mining and processing activities.
Annual assessments of the discounted future cash flows for
the Kanmantoo CGU have resulted in no adjustments to the
carrying values.
Separate to the CGU, there have been impairments of carrying
values of some exploration assets. 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.
Page 30
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
5. CONCENTRATE REVENUE
31 Dec 2021
31 Dec 2020
Copper in concentrate
Gold in concentrate
Silver in concentrate
Treatment and refining
deductions
Concentrate revenue
$’000
-
-
-
-
-
$’000
19,643
1,796
393
(1,584)
20,248
Revenue is measured at the fair value of the consideration
received or receivable.
The group sells copper concentrate under an offtake contract
and the Group trades using CIF terms (i.e. Seller’s cost,
insurance and freight) for vessel chartering. Under AASB 15,
the Company has three performance obligations relating to the
sale of concentrate which include delivery and transfer of title
of concentrate at the port of loading, loading of concentrate
onto the ship and transporting the shipment to the port of
destination. The transaction price applied to the delivery
of concentrate to the port is the value of the concentrate
delivered adjusted for treatment and refining charges, the
transaction price allocated to the final two performance
obligations are cost of loading and chartering a vessel for
shipment to destination at cost recovery.
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.
With the completion of open-cut mine related processing
operations in March 2020, there has been no revenue in FY21.
6. OTHER INCOME
Interest
Other – excess rehabilitation
seed sale income
Other – services provided to
third parties
Other – government cashflow
boost
Total other income
31 Dec 2021
31 Dec 2020
$’000
$’000
11
48
-
-
59
13
-
11
100
124
7. EXPENSES
Profit or loss before income tax includes the following
expenses:
(a) Expenses per profit or loss
31 Dec 2021
31 Dec 2020
Note
$’000
Costs of production
Depreciation and
amortisation
Inventory movement
Cost of goods sold
Government royalties
Corporate and other
costs
Care and maintenance
costs and other direct
site costs
Rehabilitation adjustment
Depreciation and
amortisation
(Gain) / Loss on sale of
fixed assets
Foreign exchange
loss / (gain)
Total expenses
(i)
(ii)
(iii)
$’000
10,564
1,891
9,211
21,666
907
-
-
-
-
-
2,895
3,777
2,583
(106)
74
-
-
1,335
(166)
-
(92)
197
5,446
27,624
(i) Corporate and other costs reflect the costs incurred in running
the corporate head office.
(ii) During the period of care and maintenance, depreciation of the
processing plant has ceased based on the assumption that the
activities performed during the period of care and maintenance
will preserve the current value of these assets. Costs incurred in
relation to care and maintenance have been expensed.
(iii) The decrease in the required rehabilitation provision has been
fully expensed as the associated rehabilitation asset in Mine
Development has been written down to nil in prior reporting
periods.
(b)
Interest and finance charges
31 Dec 2021
31 Dec 2020
Note
$’000
$’000
Discount on unwind of
rehabilitation provision
Borrowing costs, bank
fees and charges
Other interest payable
(i)
Total Interest and
finance charges
34
8
-
42
109
6
52
167
(i)
Includes interest charged on sales proceeds received in advance
of ship loading. The cost is netted-off against revenue as it is
received and therefore is not disclosed as a financing activity
cashflow in the consolidated statement of cashflows.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 31
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
7. EXPENSES (cont.)
Impairment charges
(c)
31 Dec 2021
31 Dec 2020
Note
$’000
$’000
Exploration assets
(i)
4
4
51
51
(i) Expenditure on exploration areas of interest where the
prospect of recoupment of costs capitalised through
successful development and commercial exploitation is no
longer considered likely, is charged to the profit or loss as an
impairment charge.
8. DISCONTINUED OPERATIONS
(a) Description
In October 2020, Hillgrove successfully withdrew from
Indonesia, through the sale of its Indonesian subsidiaries,
PT Akram Resources and PT Fathi Resources. With the
carrying value of these assets being fully impaired in 2015, the
transaction resulted in an improvement of the consolidated
statement of financial position (through a reduction in liabilities)
of $2.2 million.
(b) Financial performance
31 Dec 2021
31 Dec 2020
(d) Other required disclosures
$’000
31 Dec 2021
31 Dec 2020
Expenses
Employee benefits (excluding
share-based payments)
Employee share based
payments (see note 33)
(e) Assurance services
$’000
$’000
3,167
4,256
821
587
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:
Loss before income tax
Income tax expense
Loss after income tax of
discontinued operation
Gain on sale of subsidiaries
after income tax (see (d)
below)
Profit from discontinued
operation
Exchange differences on
translation of discontinued
operations
31 Dec 2021
31 Dec 2020
$
$
Other comprehensive income
from discontinued operations
-
-
-
-
-
-
-
-
$’000
(373)
(373)
-
(373)
1,898
1,525
177
1,702
(i) Audit Services
PricewaterhouseCoopers:
Audit and review of financial
reports and other audit work
under the Corporations Act
2001
(ii) Taxation Services
Services by
PricewaterhouseCoopers:
Tax advice including research
and development
Services by other firms:
Crowe Horwath Singapore
113,189
113,189
149,928
149,928
15,576
6,171
-
15,576
3,812
9,983
(c) Cashflow information
There was no consideration received on the sale of the
subsidiaries. A negotiated payment of US$60,000 was made
in full settlement of the outstanding liabilities of the companies
which subsequently allowed the accrued balances of $2.2
million to be reversed.
(d) Details of the sale of the subsidiaries
Consideration received / (paid)
Carrying amount of net liability sold
Reclassification of foreign currency translation
reserve
Gain on sale
31 Dec 2020
$’000
(91)
2,166
2,075
(177)
1,898
Page 32
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
9.
INCOME TAX
(a) Income tax expense
Income tax expense comprises:
- Current tax expense
- Deferred tax expense
/ (benefit)
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-deductible expenses
- Non-assessable income
- Losses from non-resident
foreign operations
31 Dec 2021
31 Dec 2020
$’000
$’000
-
422
422
-
-
-
(5,433)
(5,945)
(1,630)
(1,783)
246
2
-
-
176
3
-
(458)
(186)
2,248
-
-
- Exploration deductable
(2,500)
- Tax temporary differences
(recognised) / not recognised
Income tax expense/(benefit)
(c) Amounts recognised
directly in equity
Deferred tax – (credited) /
debited directly in equity
4,304
422
(422)
(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.
10. DEFERRED TAX
(i)
No deferred tax assets or liabilities have been
recognised.
(ii)
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.
(iii) 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.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 33
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
10. DEFERRED TAX (cont.)
The balance of deferred tax assets comprises temporary
differences attributable to:
Classification of securities as ordinary shares
Ordinary shares have been classified as ordinary shares and
included in basic earnings per share.
31 Dec 2021
31 Dec 2020
Classification of securities as potential shares
Tax losses and credits
Business related costs
Exploration expenditure / PPE
Provisions and accruals
Total deferred tax assets
$’000
66,682
562
-
3,458
70,702
$’000
58,434
421
1,080
3,460
63,395
The balance of deferred tax liabilities comprises temporary
differences attributable:
Exploration expenditure / PPE
Total deferred tax liabilities
Net deferred tax assets
Deferred tax assets not
recognised
Recognised net deferred tax
assets
31 Dec 2021
31 Dec 2020
$’000
5,430
5,430
$’000
-
-
65,272
63,395
(65,272)
(63,395)
(i) Basic earnings
-
-
The company has unrecognised capital losses of $11.3 million
(2020: $11.3 million).
11. 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. Potential ordinary shares shall be treated as
dilutive when, and only when, their conversion to ordinary
shares would decrease earnings per share or increase loss per
share from continuing operations.
Outstanding performance rights have been classified as
potential ordinary shares and included in diluted earnings per
share.
(a) Weighted average number of shares used
as the denominator
Weighted average number
of ordinary shares used in
calculating basic and dilutive
EPS
31 Dec 2021
31 Dec 2020
Number
Number
960,997,490
586,213,187
(b) Reconciliation of earnings used in calculating
earnings per share
31 Dec 2021
31 Dec 2020
$’000
$’000
(Loss) attributable to the
ordinary equity holders of the
Company:
From continuing operations
From discontinued operations
(ii) Diluted earnings
(Loss) attributable to the
ordinary equity holders of the
Company
From continuing operations
From discontinued operations
(5,855)
-
(5,855)
(5,855)
-
(5,855)
(7,470)
1,525
(5,945)
(7,470)
1,525
(5,945)
(c) Basic earnings per share
From continuing operations
attributable to the ordinary
equity holders of the Company
From discontinued operations
Total basic earnings per share
attributable to the ordinary
equity holders of the company
31 Dec 2021
31 Dec 2020
Cents
Cents
(0.6)
-
(1.3)
0.3
(0.6)
(1.0)
Page 34
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
11. EARNINGS PER SHARE (cont.)
(d) Diluted earnings per share
14. INVENTORIES
31 Dec 2021
31 Dec 2020
Cents
Cents
Current assets
From continuing operations
attributable to the ordinary
equity holders of the Company
From discontinued operations
Total diluted earnings per
share attributable to the
ordinary equity holders of the
company
(0.6)
-
(1.3)
0.3
(0.6)
(1.0)
12. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Restricted cash
31 Dec 2021
31 Dec 2020
$’000
10,178
559
10,737
$’000
5,042
559
5,601
Cash and cash equivalents include 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 foreign exchange pre
settlement risk.
13. TRADE AND OTHER RECEIVABLES
Prepayments
Other receivables
GST receivable
31 Dec 2021
31 Dec 2020
$’000
$’000
400
368
155
923
385
404
43
832
31 Dec 2021
31 Dec 2020
$’000
$’000
100
100
1,816
1,816
50
50
1,782
1,782
Stores and consumables
Total current inventory
Non-current assets
Stores inventory
Total non-current inventory
Inventory is recognised at the lower of cost and net realisable
value.
Due to the processing plant entering a phase of care and
maintenance, an assessment has been made of the estimated
cost or net realisable value of stores inventory which is unlikely
to be consumed in the next financial year but still has future
economic value in conjunction with the plant itself. This has
been reclassified to non-current stores inventory.
15. PROPERTY, PLANT AND
EQUIPMENT
Land and buildings
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
Total property, plant and
equipment
31 Dec 2021
31 Dec 2020
$’000
$’000
5,277
(379)
4,898
5,277
(379)
4,898
73,559
73,490
(59,887)
13,672
(59,817)
13,673
436
(369)
67
477
(399)
78
174,357
165,451
(159,710)
(159,710)
14,647
5,741
33,284
24,390
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 35
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
Reconciliations of the carrying amounts for each class of asset
are set out below:
31 Dec 2021
31 Dec 2020
$’000
$’000
Land and buildings
Carrying amount at beginning
of period
Disposals
Carrying amount at end
of period
Plant and equipment
Carrying amount at beginning
of period
Additions
Depreciation
Carrying amount at end of
period
Motor vehicles
Carrying amount at beginning
of period
Disposals
Depreciation
Carrying amount at end of
period
Mine development
Carrying amount at beginning
of period
Additions
Depreciation
Carrying amount at end of
period
Total property, plant and
equipment
4,898
-
4,898
5,145
(247)
4,898
13,673
13,749
66
(67)
179
(255)
13,672
13,673
78
-
(11)
67
5,741
8,906
-
123
(18)
(27)
78
5,146
2,138
(1,543)
14,647
5,741
33,284
24,390
15. PROPERTY, PLANT AND
EQUIPMENT (cont.)
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 from inception, 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.
During the period of care and maintenance, depreciation of
the processing plant ceased. Refer to note 7 (a) (ii) for further
information.
Mine development includes development costs related to the
Kanmantoo mine.
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
recoverable amount is the higher of an asset’s fair value less
costs to sell (FVLCOD) and its value-in-use (VIU). The VIU
methodology is used to estimate the recoverable amount,
rather than the FVLCOD method, as VIU is considered more
appropriate given the cessation of open pit operations and the
intent to develop the underground project.
The impairment calculations were performed using a discount
rate of 11.38% (2020: 12.53%)
No impairment charges were taken against the Group’s
Kanmantoo assets in the current year.
Page 36
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
16. EXPLORATION AND EVALUATION
18. PROVISIONS – CURRENT
EXPENDITURE
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.
Expenditure on exploration areas of interest where the
prospect of recoupment of costs capitalised through
successful development and commercial exploitation is no
longer considered likely, is charged to the profit or loss as an
impairment charge.
Exploration and evaluation
expenditure
Carrying amount at beginning
of period
Additions
Impairment loss
Carrying amount at end of
period
31 Dec 2021
31 Dec 2020
$’000
$’000
4,434
3,236
1,202
(4)
4,434
3,236
2,616
671
(51)
3,236
17. TRADE AND OTHER PAYABLES
Trade payables
Other payables and accruals
31 Dec 2021
31 Dec 2020
$’000
567
1,233
1,800
$’000
218
904
1,122
Information about the Group’s exposure to liquidity risk is
provided in Note 25(d).
31 Dec 2021
31 Dec 2020
$’000
736
736
$’000
775
775
775
4,132
Rehabilitation provision
Movement in provisions
Carrying value at the beginning
of the period
Payments charged against
provisions:
Rehabilitation provision
(389)
Make good provision
Unsettled ship provision
Increase / (reduce) provision
recognised:
Make good provision
Transfer from / (to)
non-current provisions:
Rehabilitation provision
Balance at end of period
-
-
-
350
736
(1,159)
(244)
(124)
(176)
(1,654)
775
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.
19. LEASE LIABILITIES
Lease liabilities
Total lease liabilities
31 Dec 2021
31 Dec 2020
$’000
$’000
-
-
-
-
Assets and liabilities arising from a lease are initially measured
on a present value basis. Lease liabilities include the net
present value of; fixed payments (including in-substance fixed
payments), less any lease incentives receivable, variable lease
payments, amounts expected to be payable under residual
value guarantees, the exercise price of a purchase option, and
payments of penalties for terminating the lease, if the lease term
reflects the group exercising that option. Lease payments to
be made under reasonably certain extension options are also
included in the measurement of the liability.
The lease payments are discounted using the interest rate
implicit in the lease. If that rate cannot be readily determined,
the Group’s incremental borrowing rate is used, being the
rate that the Group would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security and conditions.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 37
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
19. LEASE LIABILITIES (cont.)
Lease payments are allocated between principal and finance
cost. The finance cost is charged to 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.
Right-of-use assets are measured at cost comprising; the
amount of the initial measurement of lease liability, any
lease payments made at or before the commencement date
less any lease incentives received, any initial direct costs,
and restoration costs. Right-of-use assets are depreciated
over the shorter of the asset’s useful life and the lease term
on a straight-line basis. If the Group is reasonably certain
to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset’s useful life.
Payments associated with new short-term leases of
equipment and vehicles and all leases of low-value assets
are to be recognised on a straight-line basis as an expense in
profit or loss.
The Group has no material lease obligations that require the
disclosure of “lease liabilities” and “right-to-use” assets under
AASB 16.
20. EMPLOYEE BENEFITS PAYABLE
– CURRENT
Employee benefits payable
31 Dec 2021
31 Dec 2020
$’000
1,501
$’000
1,035
The current provision for employee benefits includes accrued
annual leave, long service leave, bonuses and other accrued
remuneration.
The entire amount of employee benefits payable of $1.5 million
(2020: $1.0 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 2021
31 Dec 2020
$’000
$’000
Leave obligations expected to
settle after 12 months
176
123
21. PROVISIONS – NON-CURRENT
Rehabilitation provision
Movement in provisions
Carrying value at the beginning
of the period
Discount on unwind of
rehabilitation provision
Transfer (to)/from current
provisions
(Reduce)/increase provision
recognised
Balance at end of period
31 Dec 2021
31 Dec 2020
$’000
9,314
$’000
9,736
9,736
8,140
34
(350)
(106)
9,314
109
1,654
(167)
9,736
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 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 and shown as a financial cost.
Included in the rehabilitation provision is a payment of
approximately $1.7 million to the Native Vegetation Fund.
With permission from the State Government, the Group has
delayed the timing of this payment and, whilst the intention is
for the payment to be made at a later date, it should be noted
that non-payment would increase the Group’s rehabilitation
provision by approximately $1.5 million. This circumstance is
not expected to eventuate.
Page 38
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
22. CONTRIBUTED EQUITY
Share capital
Issued and paid up capital for 1,168,169,769 fully paid shares
(31 December 2020: 661,798,194)
Ordinary shares issued – movements during the period
31 Dec 2021
31 Dec 2020
$’000
$’000
256,118
236,550
31 Dec 2021
31 Dec 2020
31 Dec 2021
31 Dec 2020
Opening balance
No. of shares
No. of shares
661,798,194
585,588,518
Employee option schemes / issues
-
-
Capital raises
506,371,575
76,209,676
Less – transaction costs (net of tax)
-
-
Balance at end of period
1,168,169,769
661,798,194
$’000
236,550
-
20,553
(985)
256,118
$’000
234,322
-
2,362
(134)
236,550
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.
Capital raise
In February 2021, the Company completed:
½ A pro rata non renounceable entitlement offer, raising gross proceeds of $2.8 million through the issue of 90,090,541 new
fully paid ordinary shares at $0.031 per share; and
½ Following the approval at the Extraordinary General meeting, raised gross proceeds of $5.7 million through the issue of
185,080,646 new fully paid ordinary shares at $0.031 per share.
In addition, on 22 September 2021, the Company announced an equity raising of $12.0 million at $0.052 per share. The raising
was undertaken through the following:
½ Placement – the issue of 192,307,693 new fully paid ordinary shares pursuant to the Company’s available placement
capacity under ASX Listing Rules 7.1 and 7.1A raising gross proceeds of $10.0 million; and
½ Share purchase plan – the issue of 38,892,695 new fully paid ordinary shares raising gross proceeds of $2.0 million.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 39
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
23. RESERVES
(iii) Profit reserve
The profit reserve is used to accumulate distributable profits,
preserving the characteristics of profit by not appropriating
against prior year accumulated losses. The reserve can be
used to pay taxable dividends.
24. ACCUMULATED LOSSES
31 Dec 2021
31 Dec 2020
$’000
$’000
At beginning of the period
(241,082)
(235,137)
Net loss (not carried forward
to profit reserve)
Accumulated losses at end
of the period
(5,855)
(5,945)
(246,937)
(241,082)
Share based payments
reserve
Profit reserve
Foreign currency translation
Movements:
Share based payments
reserve
Opening balance
Share based compensation
expense
Closing balance
Profit reserve
Opening balance
Transfer of current year profit
Dividend paid
Closing balance
Foreign currency
translation
Opening balance
Reclassified to profit and loss
on disposal of discontinued
operations
Closing balance
31 Dec 2021
31 Dec 2020
$’000
$’000
6,680
22,082
-
5,673
22,082
-
28,762
27,755
5,673
1,007
6,680
5,208
465
5,673
22,082
22,082
-
-
-
-
22,082
22,082
-
-
-
(177)
177
-
Nature and purpose of reserves
(i)
Share based payments reserve
The share based payments reserve is used to recognise the
fair value of:
½ Share performance rights issued to employees
½ Options granted to the non-executive directors
½ Unlisted options issued to the joint lead managers of the
2021 placement and share purchase plan.
(ii) 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) and accumulated in
the foreign currency translation reserve within equity. The
cumulative amount has been reclassified to profit or loss as
the investment has been disposed of.
Page 40
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
25. FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of financial risks: market risk, foreign exchange 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.
(a) Market risk
At the end of the reporting period, the Group was not exposed to any market risk.
(b) Foreign exchange risk
At the end of the reporting period, the Group was not exposed to any foreign exchange risk.
(c) 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
Commonwealth Bank of Australia which are considered to be appropriate financial institutions.
The Group has trade receivables of $Nil (31 December 2020: $Nil). The maximum exposure to credit risk at the reporting date is
the carrying amount of the financial assets. The group applies the AASB 9 simplified approach to measuring expected credit losses
which uses a lifetime expected loss allowance for all trade receivables and contract assets. Applying the principles of the expected
credit loss model and historical recovery rates, the Consolidated entity has not recognised a provision against trade receivables and
contract assets.
Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group,
and a failure to make contractual payments.
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.
(d) 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 regular basis to ensure adequate funds are in place to maintain uninterrupted production
and to meet its payment obligations when they fall due. The Group and the parent entity had no undrawn borrowing facilities at the
reporting date.
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.
Less than 1
year
1 to 2 year(s)
2 to 3 years
3 to 4 years
4 to 5 years
More than 5
years
31 December 2021 $’000
Trade and other payables
Total
31 December 2020 $’000
Trade and other payables
Total
1,800
1,800
1,122
1,122
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 41
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
26. SUBSIDIARIES
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Hillgrove Resources Limited (the
“parent entity”) as at 31 December 2021 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. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
The proportion of ownership interest is equal to the proportion of voting power held. The consolidated financial statements
incorporate the assets, liabilities and results of the following subsidiaries;
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 Hillgrove Indonesia
Country of
incorporation
Class of share
Equity holding
31 Dec 2021 (%)
Equity holding
31 Dec 2020 (%)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Singapore
Singapore
Singapore
Indonesia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
-
-
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
There were no transactions with non-controlling interests during the period.
On 8 November 2021, ACRA (the Accounting and Corporate Regulatory Authority in Singapore) advised that the four
Singaporean companies had, at Hillgrove’s request, been struck off from the register. All inter-company loan balances were
written off in 2020.
Page 42
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
27. COMMITMENTS
(a) Non-cancellable commitments
Future commitments not provided for in the financial statements and payable:
Within one year
One to five years
31 Dec 2021
31 Dec 2020
$’000
13
-
13
$’000
30
13
43
The Group has no material lease obligations that require the disclosure of “lease liabilities” and “right-to-use” assets under
AASB 16.
(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 to five years
31 Dec 2021
31 Dec 2020
$’000
704
445
1,149
$’000
1,010
1,106
2,116
(c) Capital commitments
At 31 December 2021 there were no contracted capital commitments (31 December 2020: Nil).
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 43
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
28. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
(a) Reconciliation of cash
For the purposes of the consolidated 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 consolidated statement of cash flows is reconciled to the related
items in the consolidated statement of financial position as set out in Note 12.
(b) Reconciliation of operating profit after income tax to net cash provided by operating activities
31 Dec 2021
31 Dec 2020
Operating profit/(loss) after income tax
Add/(less) items classified as investing/financing activities
Net (gain)/loss on sale of fixed assets
Net interest expense
Finance lease payments
Payment on disposal of Indonesian subsidiaries
Tax expense on capital raise costs
Add/(less) non-cash items
Depreciation and amortisation
Impairment asset write downs
Employee share options
Discount on unwind of rehabilitation provision
Rehabilitation adjustment
Changes in operating assets and liabilities
Increase / (decrease) in deferred revenue
(Increase) / decrease in receivables, prepayments and inventories
Increase / (decrease) in trade creditors and accruals
Increase / (decrease) in provisions and employee benefits
$’000
(5,855)
-
8
-
-
422
74
4
820
34
(106)
-
(176)
(205)
78
Net cash used by operating activities
(4,902)
(c) Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
$’000
(5,945)
(92)
58
206
91
-
1,891
51
587
109
(166)
(479)
12,492
(7,812)
(3,991)
(3,000)
Cash and cash equivalents
Borrowings – repayable within one year
Borrowings – repayable after one year
Net funds / (debt)
31 Dec 2021
31 Dec 2020
$’000
10,737
-
-
10,737
$’000
5,601
-
-
5,601
Page 44
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
28. NOTES TO THE STATEMENT OF CASH FLOWS (cont.)
Reconciliation of movement of liabilities to cash flows arising from financing activities
Other Assets
Liabilities from Financing activities
Cash &
Bank
Liquid
Investments
Finance leases
due within
1 year
Finance
leases due
after 1 year
Borrowings
due within
1 year
Borrowings
due after
1 year
Net debt as at 1 January 2020
Cash flows
Other non-cash movements
Net funds/(debt) as at
31 December 2020
Cash flows
Other non-cash movements
Net funds/(debt) as at
31 December 2021
9,329
(3,728)
-
5,601
5,136
-
10,737
-
-
-
-
-
-
-
(253)
206
47
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Non-cash movements represent accrued interest, repayment timing movements between current and non-current and
revaluations.
Total
9,076
(3,522)
47
5,601
5,136
-
10,737
29. KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Cash bonus
Termination payments
Share based payments
31 Dec 2021
31 Dec 2020
$
590,955
43,920
178,500
-
747,827
1,561,202
$
952,010
81,246
298,473
111,186
283,627
1,726,542
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.
Hillgrove Copper Pty Ltd is the banker for the Group and re-allocates via loan account all costs that relate to the Group.
Some assets and liabilities previously recognised in the parent Company, mainly consisting of property, plant, equipment and
exploration related assets, have been transferred to the controlled entities via loan account. All these transactions were recorded
at carrying value.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 45
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
31. EVENTS AFTER THE REPORTING PERIOD
There were no subsequent events since the balance date.
32. CONTINGENT LIABILITIES
Guarantees
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
31 Dec 2021
31 Dec 2020
$’000
338
16
354
$’000
338
16
354
The consolidated entity has obligations to restore land disturbed under exploration and mining licences. The maximum
obligation to the South Australian Government in respect of the Kanmantoo copper mine has been assessed at a value of $9.2
million and is secured by the SA Government on a first ranking basis against the assets of the consolidated entity.
Included in the rehabilitation provision is a payment of approximately $1.7 million to the Native Vegetation Fund. With permission
from the State Government, the Group has delayed the timing of this payment and, whilst the intention is for the payment to be
made at a later date, it should be noted that non-payment would increase the Group’s rehabilitation provision by approximately
$1.5 million. This circumstance is not expected to eventuate.
The Directors are of the opinion that further provisions are not required in respect of these matters, as it is not probable that a
future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
The consolidated entity had no other contingent liabilities at 31 December 2021.
33. SHARE-BASED PAYMENTS
(i) Movements in performance rights during the year – employees and non-executive directors
31 December 2021
31 December 2020
Number of
performance rights
Weighted average
exercise price ($)
Number of
performance rights
Weighted average
exercise price ($)
Balance at beginning of year
Granted – employees
Granted – non-executive directors
Forfeited during the year
Exercised during the year
Expired during the year
Balance at end of year
Exercisable at end of year
11,741,840
28,500,000
14,000,000
-
-
(3,000,000)
51,241,840
6,119,288
-
-
0.121
-
-
-
-
-
18,875,000
10,473,282
-
(3,622,687)
-
(13,983,755)
11,741,840
-
-
-
-
-
-
-
-
-
Page 46
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
33. SHARE-BASED PAYMENTS (cont.)
At the end of the year there were 51,241,840 performance rights outstanding and the weighted average remaining contractual
life at the end of the period was 2.56 years (31 December 2020: 0.89 years).
(ii) Movements in rights during the year – capital raise lead managers
Balance at beginning of year
Granted
Forfeited during the year
Exercised during the year
Expired during the year
Balance at end of year
31 December 2021
31 December 2020
Number of
performance rights
Weighted average
exercise price ($)
Number of
performance rights
Weighted average
exercise price ($)
-
20,000,000
-
-
-
-
0.078
-
-
-
20,000,000
0.078
-
-
-
-
-
-
-
-
-
-
-
-
At the end of the year there were 20,000,000 rights outstanding and the weighted average remaining contractual life at the end
of the period was 2.75 years (31 December 2020: Nil).
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:
Performance rights issued under the OPRP:
Equity based
Cash based
31 Dec 2021
31 Dec 2020
$’000
$’000
647
174
821
465
122
587
The consolidated statement of changes in equity excludes cash based payments of $174k but includes $360k for non-employee
share based payments.
During the period, the share based payment amounts that were expensed was calculated based on an adjusted form of the
Black Scholes Model, third party valuation using a Monte Carlo simulation approach, or share price on the date of issue against
the probability that they will vest.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 47
Notes to the consolidated Financial Statements for the year ended 31 December 2021 (cont.)
34. PARENT ENTITY INFORMATION
The financial information for the parent entity, Hillgrove Resources Limited, has been prepared on the same basis as the
consolidated financial statements, except as set out below.
Investments in subsidiaries 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.
Set out below is the supplementary information about the parent entity.
Profit / (loss) after income tax
Total comprehensive income
Statement of Financial Position
Total current assets
Total assets
Total current liabilities
Total liabilities
Net assets
Shareholder’s Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Significant accounting policies
Parent
31 Dec 2021
31 Dec 2020
$’000
(3,309)
(3,309)
10,864
33,797
1,525
1,525
32,272
256,118
13,547
(237,393)
32,272
$’000
(4,525)
(4,525)
5,755
16,222
1,216
1,216
15,006
236,550
12,539
(234,083)
15,006
The accounting policies of the parent entity are consistent with those of the consolidated entity, disclosed throughout the report
and notes. Investments in subsidiaries are accounted for at cost, less any impairment.
Contingent liabilities
Security bond on rental properties
31 Dec 2021
31 Dec 2020
$’000
16
$’000
16
Page 48
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Directors’ Declaration
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 24 to 48 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 2021 and of its
performance for the financial year ended on that date; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
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 25th day of February 2022.
Mr Derek Carter
Chairman
Mr Lachlan Wallace
Managing Director
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 49
Independent Auditor’s Report to the Members of Hillgrove Resources Limited
Page 50
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
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 Liability limited by a scheme approved under Professional Standards Legislation. 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 2021 and of itsfinancial 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 2021•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 thenended•the notes to the consolidated financial statements, which include significant accounting policiesand other explanatory information•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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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. Independent Auditor’s Report to the Members of Hillgrove Resources Limited (cont.)
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Page 51
Independent auditor’s report – Hillgrove Resources Limited (continued) 2 Material uncertainty related to going concern We draw attention to Note 1(a) in the financial report, which indicates that the Group incurred an operating loss of $5.9 million and net cash outflows from operating activities of $4.9 million during the year ended 31 December 2021, and that there are no expected cash inflows from operating activities for twelve months from the date of this report. As a result, the Group will require additional funding over the next twelve months. These conditions, along with other matters set forth in Note 1(a), 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 Audit scope •For the purpose of our audit we used overallGroup materiality of $513,000, which representsapproximately 1% of the Group’s total assets.•We applied this threshold, together withqualitative considerations, to determine the scopeof our audit and the nature, timing and extent ofour audit procedures and to evaluate the effect ofmisstatements on the financial report as a whole.•We chose Group total assets because, in ourview, it is a benchmark against which theperformance of the Group is most commonlymeasured.•We utilised a 1% threshold based on ourprofessional judgement, noting it is within therange of commonly acceptable thresholds.•Our audit focused on where the Group madesubjective judgements; for example, significantaccounting estimates involving assumptions andinherently uncertain future events.•The Group’s accounting records are held andmanaged at the Kanmantoo site and thecorporate head office, located in Adelaide.•Through its ownership of the Kanmantoo coppermine, the Group has one operating segmentbeing in the resources industry, in Australia. Weperformed an audit of this operating segmentgiven its financial significance to the Group duringthe year. Independent Auditor’s Report to the Members of Hillgrove Resources Limited (cont.)
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Independent auditor’s report – Hillgrove Resources Limited (continued) 3 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 matter(s) 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 assets of Kanmantoo cash generating unit (Refer to note 15) The Group’s assessment of the carrying value of the Kanmantoo cash generating unit (‘CGU’) was considered a key audit matter due to the financial significance of property, plant and equipment ($33.3 million) and the judgemental assumptions included in the Group’s discounted cash flow models for the Kanmantoo mine, as disclosed in Note 2(a). We performed the following procedures, amongst others: •Assessed the appropriateness of the CGU identificationin accordance with the requirements of AustralianAccounting Standards.•Evaluated the Group’s ability to forecast future resultsby comparing budgets with reported actual results forthe previous financial year.•Evaluated the Group’s plans for the Kanmantoo mineand considered whether these are feasible. Thisincluded a comparison of a sample of resourceestimates and exploration target tonnages to theassessment prepared by the Group’s expert. We alsoassessed the competence of the Group’s expert.•Evaluated whether judgements made in selecting themethod, significant assumptions and data fordeveloping the discounted cash flow model give rise toindicators of possible bias by the Group.•Assessed the appropriateness of significantassumptions and data in the context of AustralianAccounting Standards. This included:-compared the data utilised to determine the totalforecast ore to be processed to historical volumesprocessed and processing plant capacity.-compared the data utilised in forecasting the oreproduction to historical recovery levels. Independent Auditor’s Report to the Members of Hillgrove Resources Limited (cont.)
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Independent auditor’s report – Hillgrove Resources Limited (continued) 4 -compared copper pricing data used to independentindustry forecasts.-compared the foreign exchange rate data utilised bymanagement to current market information.-compared the forecast operating cost assumptions tohistorical costs incurred.-compared the forecast capital costs to external costestimates.-evaluated the appropriateness of the discount rateapplied by the Group by comparing to current marketinformation.-assessed the timing and amounts to be received fromthe sale of processing plant and land followingexpected completion of mining and processingactivities to external valuation reports. This included anassessment of the competence of the external firmswho prepared the valuations.•Evaluated the reasonableness of disclosures made inthe financial report, including those regardingsignificant assumptions, considering the requirementsof Australian Accounting Standards.Rehabilitation provision (Refer to note 18 and 21) 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 2021, the consolidated statement of financial position included provisions for such obligations of $10.0 million. This was a key audit matter due to the judgement applied by the Group in assessing the nature and extent of the We performed the following procedures, amongst others. •Compared the actual rehabilitation costs incurred in thecurrent year against management’s prior year forecastassumptions to assess management’s ability toforecast future costs.•Assessed the nature, timing and extent of rehabilitationwork to be performed by comparing the area inmanagement’s rehabilitation models to the arearequiring rehabilitation under the state and federalgovernment mining leases.•Assessed the completeness of cash flow data basedon our understanding of the Group’s rehabilitationobligations. Independent Auditor’s Report to the Members of Hillgrove Resources Limited (cont.)
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Independent auditor’s report – Hillgrove Resources Limited (continued) 5 rehabilitation work to be performed, estimating the future cost and timing of performing this work and applying assumptions, as disclosed in Note 2(b). •Assessed the appropriateness of significantassumptions and data in the context of AustralianAccounting Standards. This included:-evaluated the integrity of the rehabilitationprovision, including assessing the mathematicalaccuracy of the underlying models used indetermining the Group’s rehabilitation estimate.-evaluated the appropriateness of discount ratesand inflation rates utilised in calculating the closingprovision by comparing them to current marketinformation.•Evaluated the reasonableness of disclosures made inthe financial statements, considering the requirementsof Australian Accounting Standards.Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 31 December 2021 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Independent Auditor’s Report to the Members of Hillgrove Resources Limited (cont.)
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Independent auditor’s report – Hillgrove Resources Limited (continued) 6 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.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 15 to 22 of the directors’ report for the year ended 31 December 2021. In our opinion, the remuneration report of Hillgrove Resources Limited for the year ended 31 December 2021 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 Julian McCarthy Adelaide Partner 25 February 2022 Shareholder Information for Listed Public Companies
The following additional information is required by the Australian Securities
Exchange Limited in respect of listed public companies only.
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 7 February 2022, the Company has 1,174,289,057 listed fully paid ordinary
shares. Each fully paid share carries on a poll one vote.
The company also has 28,500,000 unquoted performance rights and 34,000,000
options on issue which do not carry voting rights.
(b) Unmarketable parcels
The number of shareholders holding less than a marketable parcel of ordinary shares
was 1,854 as at 7 February 2022.
(c) Distribution schedule of Fully Paid Ordinary Shares
as at 7 February 2022
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
445
1,097
415
1,164
696
3,817
(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 Joe Sutanto is the Company Secretary.
(f) On-market buy-back
There is no current on-market buy-back.
(g) Substantial shareholders as at 7 February 2022
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
Cosoff Group
Issued capital
15.2%
5.3%
5.0%
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HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
Shareholder Information (cont.)
Twenty largest listed shareholders
The twenty largest shareholders hold 51.3% of the total ordinary shares issued.
The 20 largest shareholdings as at 7 February 2022 are listed below:
Shareholder
1
Portfolio Services Pty Ltd
2 Mr Raymond Edward Munro
3
4
5
6
7
8
9
Bell Potter Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
Portfolio Services Pty Ltd
J P Morgan Nominees Australia
UBS Nominees Pty Ltd
Portfolio Services Pty Ltd
Citicorp Nominees Pty Ltd
10 BNP Paribas Nominees Pty Ltd Six Sis Ltd
11 Proco Pty Ltd
12 Proco Pty Ltd
13 Portfolio Services Pty Ltd
14 Mr Antony Gordon Breuer
15 Portfolio Services Pty Ltd
16 HSBC Custody Nominees
17 National Nominees Pty Ltd
18 Cosell Pty Limited
19 Papaiola Holdings Pty Ltd
20 Jarhamche Pty Ltd
(h)
Interests in mining tenements
No. of ordinary
shares held
% of issued
shares
69,812,355
57,215,000
57,022,134
55,087,354
42,337,067
38,448,524
35,501,868
30,961,163
29,941,303
25,368,008
23,200,000
23,000,000
17,546,894
17,346,365
15,322,581
14,536,165
14,322,295
14,000,000
13,500,000
8,235,762
5.9%
4.9%
4.9%
4.7%
3.6%
3.3%
3.0%
2.6%
2.5%
2.2%
2.0%
2.0%
1.5%
1.5%
1.3%
1.2%
1.2%
1.2%
1.1%
0.7%
602,704,838
51.3%
Tenement
ML 6345
ML 6436
EML 6340
EL 5628
EL 6174
EL 6175
EL 6176
EL 6207
EL 6208
EL 6294
EL 6397
ML 755
Location
Percentage
Kanmantoo, South Australia
Kanmantoo, South Australia
Kanmantoo, South Australia
Kanmantoo, South Australia
Coomandook, South Australia
Coonalpyn, South Australia
Wheal Ellen, South Australia
Tintinara, South Australia
Carcuma, South Australia
Wynarka, South Australia
Laffer, South Australia
Armidale, New South Wales
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
(i) Other information
Hillgrove Resources Limited, incorporated and domiciled in Australia,
is a publicly listed Company limited by shares.
HILLGROVE RESOURCES LIMITED
ANNUAL REPORT 2021
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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
E: info@hillgroveresources.com.au
W: www.hillgroveresources.com.au