ANNUAL REPORT
for the year ended
31 DECEMBER
2022
www.hillgroveresources.com.au
Hillgrove Resources Limited ACN 004 297 116
CONTENTS
CORPORATE DIRECTORY
Chairman and Managing
Director’s Statement
Hillgrove Projects
Mineral Resource
Financial Report
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
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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 8, 210 George Street
Sydney N.S.W. 2000, Australia
Tel: + 61 2 9290 9600
Fax: + 61 2 9279 0664
Bankers
Westpac Banking Corporation
31 Willoughby Road
Crows Nest N.S.W. 2065, Australia
Auditors
PricewaterhouseCoopers
70 Franklin Street
Adelaide S.A. 5000, Australia
Web Site
www.hillgroveresources.com.au
General Enquiries
Info@hillgroveresources.com.au
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Chairman and Managing Director’s Statement
Dear Shareholders,
Following on from the successful
drilling campaigns of 2020 and 2021,
which culminated in the release of the
Economic Assessment in December
20211, the Company achieved a number
of significant milestones to progress
the development of the Kanmantoo
Underground Project in 2022.
During the year, continued drilling
returned further multiple high grade
zones being delineated within wider
zones of copper mineralisation. These
included 36.5 metres at 1.76% Cu,
0.29 g/t Au from 367.7 metres downhole
(KTDD208_W2) and 17.85 metres at
1.46% Cu, 0.08 g/t Au from 395.5
metres downhole (KTDD208_W4)2.
As a result, the potential opportunity at
Kanmantoo continued to grow in 2022,
with the compilation of the Kavanagh
and Nugent drilling programs adding
a further 1.3M tonnes to the Mineral
Resource Estimate base3. Furthermore,
over 5.2M tonnes of Resources are
now classified as either Indicated or
Measured (up from 3.7M tonnes),
which materially improved the
geological confidence of the Mineral
Resource Estimate.
The Mineral Resource Estimates for both
the Kavanagh and Nugent areas remain
limited by the extent of the drilling and
remain open along strike and down dip.
In addition to this, these are only two
of nine deposits that have either been
drilled or mined on the permitted mining
lease. Pending exploration success, the
Company will seek to bring these lodes
into the mine plan as additional work
areas to increase annual throughput.
The latent capacity in the process
plant and tailings dam enables this to
occur, without further processing capital
expenditure or permitting.
Mr Derek Carter
Independent Non-Executive
Chairman
Mr Lachlan Wallace
Chief Executive Officer and
Managing Director
With the success of the drilling, funding discussions for the restart of
operations at Kanmantoo moved to the definitive agreements stage in early
2022. This however stalled in mid 2022 as a result of the significant drop
in the copper price, which impacted the project financing process and the
ability for the Company to hedge forward production. However, with the
recent resurgence in the copper price, particularly late in 2022 and the
outlook for surging demand and supply concerns, securing sufficient funding
to restart operations is back on track.
The Company secured $6m of funding through a royalty agreement with
Freepoint4 which enabled drilling to commence in South Hub and North Hub.
These areas represent an opportunity to increase both mine life and annual
throughput by bringing additional work areas into the mine plan.
Looking forward, the Company is focussed on finalising funding for
the restart at Kanmantoo as soon as possible and subsequently, the
commencement of the underground mine.
As we head towards this restart, the site continues to be 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 and
an excellent record on environmental stewardship.
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.
Mr Derek Carter
Chairman
Mr Lachlan Wallace
Managing Director
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Refer ASX announcement of 14 December 2021.
Refer ASX announcement of 21 March 2022.
Refer ASX announcements of 11 May 2022 and 26 July 2022.
Refer ASX announcement of 24 August 2022.
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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 Economic Assessment released in December 2021 (Economic
Assessment), Hillgrove continued its drilling campaign throughout 2022. Highlights of
the drilling5 include:
Kavanagh
½ KTDD208_W2
½ KTDD208_W4
½ KTDD208_W1
Nugent
½ KTDD230
½ KTDD224
Spitfire
½ 22KVUG005
½ 22KVUG006
½ 22KVUG008
36.5m @ 1.76% Cu, 0.29 g/t Au from 367.7m downhole.
17.85m @ 1.46% Cu, 0.08 g/t Au from 395.5m downhole.
15.3m @ 2.15% Cu, 0.21 g/t Au from 471.0m downhole.
14.5m @ 1.60% Cu, 0.34 g/t Au from 175m downhole.
16.55m @ 1.22% Cu, 0.43 g/t Au from 229.05m downhole.
12.55m @ 1.72% Cu, 0.22 g/t Au from 56.45m downhole.
13.13m @ 2.1% Cu, 0.18 g/t Au from 72.0m downhole.
10.35m @ 2.38% Cu, 0.28 g/t Au from 66.65m downhole.
This drilling led to an increase in the
Mineral Resource Estimate in the
Kavanagh and Nugent areas from 62.5k
tonnes of copper to 75.9k tonnes of
copper6 (21% increase), and increased
the proportion of Resources classified
as Indicated and Measured from 67% to
76%. These resource estimates are still
constrained by the extent of the drilling
and not by the geology, in both the along
strike and down dip directions.
Subsequent to this, a further modest
drilling campaign is currently being
conducted to demonstrate the potential
of the other lodes within the lease
(North Hub and South Hub). These
areas are not currently in the mine plan
and, pending successful drilling, have
the potential to increase the mine life
and annual throughput, which would
better utilise the latent capacity in the
processing plant, which is only 40%
utilised (refer Economic Assessment).
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6
Refer ASX announcement of 21 March
2022, 6 May 2022, and 8 August 2022.
Refer ASX announcement of 14
December 2021 and 26 July 2022.
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 announced7 South
Kanmantoo, Stella, Mullewa and North
West Kanmantoo geochemical and
geophysical targets and now also
includes the Disher Hill prospect.
North West Kanmantoo
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,
sampling and detailed petrology of
historic government drill core in the area
has identified a wide area of mineralised
magnetite-andalusite-garnet schists
which are interpreted to be the upper
alteration halo of a new epigenetic
Kanmantoo style mineral zone.
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).
6160000mN
S O U T H
A U S T R AL I
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EL6526
6140000mN
Millbrae
NW Kanmantoo
6120000mN
Disher Hill
Kanmantoo ML
Mullewa
South Kanmantoo
Stella
Wheal Ellen
North Wheal Ellen
Woodchester
320000mE
EL6526
Mt Rhine
Kanappa
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M Lap ocation
Kanmantoo
EL6526 Prospects
(on TMI Airmagnetics VRTP)
NORTH
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10km
MGAz53
½ Elevated Mo, Bi, Co, Sn, U, La.
300000mE
The area has not been subjected to
electrical geophysical methods for drill
targeting and has not been drilled
by Hillgrove.
Figure 1: Plan view of the location of projects within 10km of Kanmantoo Copper Mine.
7
Refer ASX announcement of 29 April 2019.
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Hillgrove Projects (cont.)
NEAR MINE EXPLORATION (cont.)
318000 Em
318200 Em
EAST
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Hillgrove RC holes pre2010
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Base of weathering
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
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- 00mRL
Magnetic
Target
Au g/t
>0.3
0.1 - 0.3
0.05 - 0.1
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u l p
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metres
Stella Drilling
Cross Section
Looking North
Figure 2: Cross section of the Stella drilling and 2021 drill intercepts.
Stella
Various geophysical surveys have identified the 700m long Stella zone as a
coincident magnetic high, conductivity high and gravity low target commencing
at around 200m below surface. Diamond drilling has intersected a 60-82m wide
zone of chlorite-pyrrhotite-garnet alteration with attendant Cu-Au mineralisation
(ASX releases of 29 April 2019, 26 August 2021).
REGIONAL EXPLORATION
Dukes Project and Milendella
Project (South East Kanmantoo
Province)
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 known as
the Kanmantoo Province. The Company’s
tenements have been divided into two
Project areas reflecting both geography and
geology differences as shown on Figure 3.
The Milendella Project as centre along the
Coorong Shear Zone and is prospective for
porphyry Cu-Au mineral systems. The Dukes
Project is focused along the Dundas-Flinders
Shear Zone and is prospective
for “Winu” style sediment hosted Cu-Au
Mineral Systems.
DUKES PROJECT
The Dukes Project is centred approximately
150kms via existing roads from the
Kanmantoo processing plant.
Over the past year Hillgrove has continued
to collect petrological and whole rock assay
data from legacy drill core throughout the
Project area and integrating this data with the
Company’s data and mapping at Kanmantoo.
As a result, a new preliminary Mineral System
Model is being proposed that is similar to
the “Winu” 8 mineral system model in the
Paterson province of northern WA.
The key elements of the model are:
1. Copper fertile basement of Truro
volcanics (identified by WMC in their
early search for Cu in Sth Aust).
2. Sedimentary basin of turbidite to
carbonate sequences.
3. Proximal to major lineament/crustal
structure.
4. At least two periods of dynamic
deformation.
5. Significant multiphase intrusive
activity, with one phase being oxidised
(magnetite not ilmenite).
Hillgrove Projects (cont.)
REGIONAL EXPLORATION (cont.)
138°E
S O U T H
A U S T R A L I A
140°E
Curnamona
Craton
Broken Hill
142°E
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32°S
Port Augusta
Anabama Cu-Mo
Bendigo Cu-Mo
Adelaide
Rift
Complex
L och Lily K ars B elt
Mt WrightArc Volcanics
MAP
LOCATION
N E W S O U T H
W A L E S
34°S
HGO Milendella Fault Project
Kanmantoo Province
ADELAIDE
V I C T O R I A
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Kanmantoo Cu-Au
S o u t h e r n
O c e a n
HGO Cu, Au sites
Other Cu, Au sites
HGO Dukes Project
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Horsham
Z
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Stavely Cu-Mo
Dundas-Flinders
Shear Zone
(on TMI Airmagnetics)
NORTH
0
10 km0
Figure 3: Dukes and Milendella Projects.
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38°S
DUKES PROJECT (cont.)
6. A contact metamorphic system that overprints the first dynamic deformation
(characterised by biotite & andalusites).
7. A retrograde magmatic thermal alteration system along the same
structural zones.
8. Mineralisation with a retrograde thermal paragenesis within dilational structures
within the thermal plume.
All of these elements occur in the Dukes Project area, and previous geochemical
and structural targets are being re-evaluated in view of this new Mineral System
Model. The resulting set of Cu-Au prospects with “Winu” style alteration systems is
shown in Figure 4.
MILENDELLA PROJECT
Kanappa and Mt Rhine
Copper-Gold Prospects
In recent presentations and publications
by the Geological Survey of South
Australia (GSSA)9, the Survey notes the
similarities between the tectonic setting
and its high-level granitic to dioritic
intrusives in the Kanmantoo Province
of 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, 265t Au). The
Milendella Project along the Coorong
Shear Zone is an area of Cu fertile
magmatic systems within two prospects,
Kanappa and Mt Rhine. Activities in this
Milendella Project are being undertaken
in conjunction with the GSSA and Minex-
CRC’s South-East South Australian
magmatic related copper-gold initiative.
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36°S
The Kanappa prospect 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. KPDDH00310 intersected 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.
8
ASX release by RTZ 23 February 2022
and YouTube presentation to AIG on
geology on 18 May 2022.
9 Mesa Journal 93, 2020, p47-53 and
GSSA Discovery Day 2022 Tom Wise
Presentation.
10 Refer ASX announcement of
30 January 2019.
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Hillgrove Projects (cont.)
REGIONAL EXPLORATION (cont.)
MILENDELLA PROJECT (cont.)
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
is consistent with GSSA’s stated views
of the prospectivity of this portion of the
Kanmantoo Province for Cu porphyry
systems. Further work is continuing in
the area.
The Mt Rhine prospect is 15 kms north
of Kanappa where surface rock chips
have shown Cu-Au mineralisation over
a 1.7km long zone of skarn alteration
and sulphides. Peak rock chips include
49.8 g/t Au and 13.1% Cu
(different samples).
139°E
EL6526
139°30'E
140°E
Kanappa Cu-Au
EL6526
35 S°
EL6208
35
S°30'
EL6207
EL6397
3 S6°
Keith
Kanmantoo Cu-Au
EL6294
Murray Bridge
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EL6174
EL6175
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Geophysical Targets
Cu & Metal Occurrences
Cu Fertile Igneous Rocks
All Exploration Targets
South East SA
HGO Tenements
(on TMI Airmagnetics)
0
NORTH
2 km0
Figure 4: All Exploration Targets.
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Mineral Resource
MINERAL RESOURCES FOR KANMANTOO
As at 31 December 2022
The Table below summarises the Kanmantoo Mineral Resource Estimates (MRE) which includes the updated 2022 Kavanagh
and 2022 Nugent MRE11 below the Giant and Nugent open pits respectively.
MINERAL RESOURCE ESTIMATE FOR THE UNDERGROUND
Deposits
Kavanagh 2022
(0.6% Cu COG)
Nugent 2022
(0.7% Cu COG)
Totals
JORC 2012
Classification
Measured
Indicated
Inferred
Sub-Total
Indicated
Inferred
Sub-Total
Measured
Indicated
Inferred
Total
Tonnage
(kt)
780
3,640
1,300
5,750
865
400
1,270
780
4,505
1,700
6,985
Cu
(%)
1.28
1.03
1
1.1
1.19
1.1
1.18
1.28
1.06
1
1.08
Au
(g/t)
0.1
0.06
0.1
0.1
0.64
0.3
0.54
0.1
0.2
0.1
0.16
Cu Metal
(kt)
9.9
38
10
61
10.3
5
15
9.9
48
15
75.9
Note: Due to appropriate rounding, numbers may not sum.
The information in this release that relates to the Exploration Results and Mineral Resource Estimates 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 they appear.
11 Refer ASX announcement of 11 May 2022 and 26 July 2022 respectively.
8
FINANCIAL REPORT
for the year ended
31 DECEMBER 2022
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 28 February 2023. 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.
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
Shareholder Information for
Listed Public Companies
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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 2022.
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
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Mr Derek Carter
Qualifications
Experience
Mr Murray Boyte
Qualifications
Experience
Independent Non-Executive Chairman / Chairman Nomination and
Remuneration Committees
BSc, MSc, FAusIMM
Derek has over 50 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.
Independent Non-Executive Director / Chairman Audit and Risk and Treasury
Committees
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.
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.
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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
13
13
13
B
13
13
13
A
2
2
-
B
2
2
-
A
5
5
-
B
5
5
-
A
1
1
-
B
1
1
-
A
-
-
-
B
-
-
-
A – Number of meetings held during the Directors time in office
B – Number of meetings attended
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
FY22
-
($6.0m)
($6.0m)
FY21
-
($5.9m)
($5.9m)
For the year ended 31 December 2022, the net loss after tax was $6.0 million compared to a net loss after tax of $5.9 million for
the year ended 31 December 2021.
The underlying EBITDA for the year was a loss of $4.4 million compared to a loss of $5.4 million for 2021. This reflected the costs
associated with processing plant care and maintenance and other site costs, together with the costs of running the head office.
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Directors’ Report (cont.)
RESULTS (cont.)
Income Statement Overview
$ million
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
Care and maintenance costs
Other direct 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 / (LOSS) AFTER TAX
12 mths
Dec 2022
12 mths
Dec 2021
Change
-
-
-
-
-
-
-
-
-
(1.3)
(1.3)
-
-
(1.9)
(4.5)
-
0.1
(4.4)
(0.1)
-
(4.5)
(1.5)
-
(6.0)
-
-
-
-
-
-
-
-
-
(1.2)
(1.3)
-
-
(3.0)
(5.5)
-
0.1
(5.4)
(0.1)
-
(5.5)
-
(0.4)
(5.9)
-
-
-
-
-
-
-
-
-
(0.1)
-
-
-
1.1
1.0
-
-
1.0
-
-
1.0
(1.5)
0.4
(0.1)
There was no revenue generated during the year, with the Company’s focus being on exploration and development activities.
Total costs were $4.5 million compared to $5.5 million for the previous year. The reduction largely related to final settlement on
contractual obligations and reductions in bonus and share option costs.
Cash Flow Overview
$ million
Net cash flows from operating activities
Net cash used in investing activities
Net cash flows from financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at the end of the year
Operating Activities Cash Flow
12 months Dec 2022
12 months Dec 2021
Change
(5.8)
(5.5)
5.9
5.4
5.3
(4.9)
(9.4)
19.4
5.1
10.7
(0.9)
3.9
(13.5)
10.5
(5.4)
Cash payments in the course of operations totalled $5.8 million and included payments for corporate and administration
overheads and costs relating to care and maintenance activities. The $0.9 million increase largely related to bonus and long-term
incentives being accrued in the December 2021 accounts with payment being made in early 2022.
Trade creditors and other payables were on normal commercial terms.
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Directors’ Report (cont.)
RESULTS (Cont.)
Cash Flow Overview (cont.)
Investing Activities Cash Flow
Net cash outflow from investing activities was $5.5 million compared to an outflow
of $9.4 million in the previous corresponding period. $7.9 million was spent on
investing activities which was partially offset by a $2.0 million government grant
for the trial of new underground mining technology and the receipt of two other
government grants, under the Accelerated Discovery Initiative, totalling $0.3 million.
Of the $7.9 million, $7.3 million related to underground exploration and expansion
works, which are classified as mine development (2021: $8.4 million). Expenditure
on regional exploration licences amounted to $0.6 million (2021: $1.0 million).
Financing Activities Cash Flow
In 2022, there was a net cash inflow of $5.9 million from financing activities. This
related to funds received from the net smelter royalty agreement that the Company
entered into with Freepoint Metals and Concentrates LLC as announced to the
market on 24 August 2022.
Consolidated Statement of Financial Position Overview
$ million
Cash
Receivables
Inventories
Property, plant & equipment
Exploration
Total assets
Trade payables
Provisions
Employee benefits
Deferred income (government grant)
Financial liabilities (Freepoint royalty)
Total Liabilities
NET ASSETS / EQUITY
31 Dec 2022
31 Dec 2021
Change
5.3
0.9
1.9
40.0
4.8
52.9
0.7
9.8
0.6
2.0
7.2
20.3
32.6
10.7
0.9
1.9
33.4
4.4
51.3
1.8
10.1
1.5
-
-
13.4
37.9
(5.4)
-
-
6.6
0.4
1.6
(1.1)
(0.3)
(0.9)
2.0
7.2
6.9
(5.3)
Total assets increased by $1.6 million to $52.9 million, largely as a result of an
increase in property plant and equipment and the associated reduction in cash
used to fund this.
Total liabilities increased by $6.9 million to $20.3 million. The introduction of
the estimated value of the royalty payable to Freepoint Metal and Concentrates
accounted for the majority of the movement in the year. In addition, the $2.0
million government grant was classified as deferred income which will be released
to the profit and loss over the life of the underground project. The reduction in
trade payables is the result of normal fluctuations and the lower employee benefits
payable largely reflected there being no accrued bonus at 31 December 2022.
OPERATING REVIEW
During the year, the Company continued
to advance the Underground project, with
drilling conducted and the continuation of
the development decline. The successful
drilling led to an updated MRE, with a
resource tonnage of 7.0M tonnes at
1.08% Cu and 0.16g/t Au for a total of
75.9k tonnes of copper metal. In addition,
this drilling increased the proportion of
Resources classified as Indicated and
Measured from 67% to 76%.
OUTLOOK AND FUTURE
DEVELOPMENTS
The focus of the Company will
predominantly be directed towards
further advancing the Underground
project, which will largely be to reach
a final investment decision and,
subject to this 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 its regional prospects.
MATERIAL BUSINESS RISKS
The material business risks faced by
the Company that are likely to have
an effect on the financial prospects of
the Company, and how the Company
manages these risks include:
½ Insufficient cash reserves to complete
development of the Kanmantoo
Underground – this risk has
been mitigated by the completion
of a robust Updated Economic
Assessment in February 2023, which
was compiled on a first principles
basis and based on current costs,
which reflects the cost inflationary
environment the mining sector has
recently experienced.
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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.
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
metals in groundwater detected in a borehole on the mining
lease was reported to the Regulator in October 2021. Whilst
this is currently immaterial, and there were no notable changes
to the levels during 2022, Hillgrove continues to monitor the
borehole to ensure that it does not lead to a material breach of
any environmental regulations.
Directors’ Report (cont.)
MATERIAL BUSINESS RISKS (CONT.)
½ Price and currency volatility leading to reduced life of
mine economics – there is an ability for the Company to
adjust the cut-off grade to assist in preserving value. In
addition, in the event the restart at Kanmantoo occurs,
the Company will be looking to hedge a portion of forward
production.
½ Pit wall failure leading to loss of access to the Kanmantoo
Underground – this has been mitigated through
conservative stope designs and the ongoing void
monitoring to provide real time response and prediction
to void risks. In addition, peer review for the geotechnical
work has been conducted.
CAPITAL RAISINGS
There were no equity raisings conducted in the year however,
Hillgrove did complete a $6.0 million funding agreement for
the sale of Kanmantoo royalty with Freepoint Metals and
Concentrates LLC. In return for the funding, Freepoint Metals
and Concentrates LLC will receive 2.5% of net smelter returns
for the first 85,000 tonnes of payable copper, reducing to
0.5% thereafter. Royalty payments will only occur from future
production.
These proceeds were received in the current period.
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
Subsequent to balance date and at the time of this release,
the Company entered into a trading halt to conduct a
capital raising.
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Directors’ Report (cont.)
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 6(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 24.
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.
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Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED)
The Directors of Hillgrove Resources and its Consolidated Entities present the Remuneration Report for the Company for the year
ended 31 December 2022, 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 2022 Financial Year
Mr D Carter
Chairman
Chairman Nomination Committee
Chairman Remuneration Committee
Member Audit and Risk Committee
Mr M Boyte
Director
Executive Director
Mr L Wallace
Chairman Audit and Risk Committee
Chairman Treasury Committee
Member Nomination Committee
Member Remuneration Committee
CEO and Managing Director
Member Treasury Committee
Full Year
Full Year
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 on the Company’s
website www.hillgroveresources.com.au.
2.1 REMUNERATION AND BENEFITS POLICY
The Company’s approach to remuneration is outlined in the Remuneration and Benefits Policy and is based on providing
competitive rewards that motivate talented employees to deliver superior results.
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 in the Company’s website
www.hillgroveresources.com.au.
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Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (Cont.)
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.
During the year no remuneration consultancy contracts were entered into by the Company and no disclosure is required under
Section 300A(1)(h) of the Corporations Act 2001.
3.0 Non-Executive Director Remuneration
Elements
Details
Aggregate Board and
Committee Fees
The total amount of fees paid to non-executive directors in the year ended 31 December 2022 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
Remuneration Committee Chairman Fee
Audit and Risk Committee Chairman Fee
Post-Employment Benefits
Details
$120,000
$75,000
$5,000
$5,000
Superannuation
Superannuation contributions were made at a rate of 10.0% until 30 June 2022 and have been made
at a rate of 10.5% of base fee from 1 July 2022 (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.
Other Benefits
Details
Equity Instruments
Non-Executive Directors may receive performance related remuneration or performance rights. In May
2021, there were two LTI Plans granted and outstanding to Non-Executive Directors:
½ Tranche 1 = 8,000,000 options
½ Tranche 2 = 6,000,000 options
Further information on Tranche 1 and Tranche 2 is as follows:
Tranche 1 Options
Tranche 2 Options
Exercise Price
Grant Date
First Exercise Date
Last Exercise Date
$0.10/share
14 May 2021
14 May 2023
14 May 2025
$0.15/share
14 May 2021
14 May 2024
14 May 2026
Other Fees/Benefits
No payments were made to Non-Executive Directors during the 2022 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.
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Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (Cont.)
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 2022
Position
CEO & MD
TFR (Cash)
100%
STI (Cash)
LTI (Equity)
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.
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TFR
STI
LTI 2022 OPRP
1 YEAR
4 YEARS
Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (Cont.)
4.4 VARIABLE ‘AT RISK’ REMUNERATION
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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
18
Performance Target Areas
Rewarding Performance
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I
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 2022 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 ($)
210,000
4.4.3 Long Term Incentives (LTI) Plans
2022 Performance
Awarded (%)
0%
Forfeited (%)
100%
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 2022 financial year, there were three LTI Plans outstanding to Executive KMP:
½ 2020 Option and Performance Rights Plan (2020 OPRP) = 5,000,000 performance rights;
½ 2021 Option and Performance Rights Plan (2021 OPRP) = 5,000,000 performance rights; and
½ 2022 Option and Performance Rights Plan (2022 OPRP) = 5,000,000 performance rights.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
19
I
H
L
L
G
R
O
V
E
R
E
S
O
U
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C
E
S
L
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Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (Cont.)
4.4 VARIABLE ‘AT RISK’ REMUNERATION (cont.)
2020, 2021, and 2022 OPRP Description
Detail
Purpose
Award
Exercise Price
Voting Rights
LTI Allocation
Service Period
2020 OPRP
2021 OPRP
2022 OPRP
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
To the later of 1 March 2025
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
8.0 cents
10 day VWAP
1 March 2023
1 March 2024
10.0 cents
10 day VWAP
1 March 2024
1 March 2025
30 March 2024
30 March 2025
30 March 2026
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 2018 to 31 December 2022)
Sales Revenue ($M)
Underlying EBITDA ($M)
Reported net profit / (loss) ($M)
12 Months to 31 December
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)
2022
-
(4.4)
(6.0)
Return on equity (ROE) %(1)
101.7%
(28.4%)
(24.0%)
(19.1%)
(17.0%)
Basic earnings per share (EPS) (cents)
Diluted EPS (cents)
Dividends paid (cents per share)
Share price as at 31 December (cents)
Total shareholder return (TSR) % (Annual)
5.1
4.9
-
9.0
0%
(1.7)
(1.7)
1.5
6.0
(1.0)
(1.0)
-
3.2
(0.6)
(0.6)
-
5.4
(16.7%)(2)
(46.7%)
68.8%
(0.5)
(0.5)
-
5.4
0%(3)
(1) Based on average total equity.
(2) Hillgrove’s TSR performance includes the $0.015 dividend.
(3) Share price as at 31 December was 5.4c in 2021 and 2022, which results in a 0% TSR.
Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (Cont.)
4.6 KMP Remuneration Tables – Audited
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Non-Executive Directors
20
Mr D Carter
Mr M Boyte
I
I
D
E
T
M
L
S
E
C
R
U
O
S
E
R
E
V
O
R
G
L
L
H
I
Total (Non Executive Directors)
Executive Directors
Mr L Wallace
Total (Executive Directors)
Total
Non-Executive Directors
Mr D Carter
Mr M Boyte
Total (Non Executive Directors)
Executive Directors
Mr L Wallace
Total (Executive Directors)
Total
Fixed Remuneration
Long-term
Long-term
Salary and
Fees
Non-
monetary
Benefits
Super-
annuation
Benefits
Termination
Benefits
Long
Service
Leave
113,379
113,896
72,563
72,893
185,942
186,789
397,270
404,166
397,270
404,166
583,212
590,955
-
-
-
-
-
-
-
-
-
-
-
-
11,621
11,104
7,437
7,107
19,058
18,211
22,498
15,834
22,498
15,834
41,556
34,045
-
-
-
-
-
-
-
-
-
-
-
-
Total
125,000
125,000
80,000
80,000
205,000
205,000
-
-
-
-
-
-
16,843
436,611
9,875
429,875
16,843
436,611
9,875
429,875
16,843
641,611
9,875
634,875
Year
CY22
CY21
CY22
CY21
CY22
CY21
CY22
CY21
CY22
CY21
CY22
CY21
Variable Remuneration
Year
Short-Term Long-Term
Total
Total
Fixed and
Variable
Proportion of Total
Remuneration
Fixed %
Variable %
CY22
CY21
CY22
CY21
CY22
CY21
CY22
CY21
CY22
CY21
CY22
CY21
-
-
-
-
-
-
-
-
-
-
259,793(1)
259,793
384,793
-
-
-
259,793(1)
259,793
339,793
-
-
205,000
519,586
519,586
724,586
243,099
243,099
679,710
178,500
228,241
406,741
836,616
-
243,099
243,099
679,710
178,500
228,241
406,741
836,616
-
243,099
243,099
884,710
178,500
747,827
926,327
1,561,202
100%
32%
100%
24%
100%
28%
64%
51%
64%
51%
73%
41%
0%
68%
0%
76%
0%
72%
36%
49%
36%
49%
27%
59%
(1) As approved at the Annual General Meeting of 7 May 2021. As a result of the nature of the options having no vesting conditions, the full
value of the options were expensed in the 2021 financial year.
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)
To incentivise and align part of employee
remuneration to shareholder value. No
employees, including KMP, were a participant in
the GESP.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
Hillgrove Resources Option
and Performance Rights Plan
Option and Performance
Rights Plan (OPRP)
Refer 4.4.3
To provide equity and cash incentive subject to
meeting predetermined service and performance
conditions.
21
I
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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:
e
t
a
D
t
n
a
r
G
KMP
Non-Executive Directors
Mr D Carter
May-21
Mr M Boyte
May-21
TOTAL
NON-EXECUTIVE
DIRECTORS
Executive Directors
Balance Held
at 31/12/21
d
e
t
s
e
V
-
-
d
e
t
s
e
v
n
U
7,000,000
7,000,000
-
14,000,000
d
e
t
n
a
r
G
-
-
-
Mr L Wallace
Jul-22
-
-
5,000,000
May-21
-
10,000,000
Aug-20 2,185,135
-
-
-
TOTAL
EXECUTIVE
DIRECTORS
2,185,135 10,000,000 5,000,000
d
e
t
s
e
V
r
e
b
m
u
N
-
-
-
-
-
-
-
d
e
t
s
e
V
%
0%
0%
0%
0%
0%
0%
0%
d
e
t
i
e
f
r
o
F
r
e
b
m
u
N
-
-
-
-
-
-
-
d
e
t
i
e
f
r
o
F
%
0%
0%
0%
0%
0%
i
d
e
s
c
r
e
x
E
-
-
-
-
-
Balance held
at 31/12/22
d
e
t
s
e
V
d
e
t
s
e
v
n
U
-
7,000,000
-
7,000,000
-
14,000,000
-
5,000,000
-
10,000,000
0%
2,185,135
-
-
0% 2,185,135
-
15,000,000
5.3 EXERCISE OF PERFORMANCE RIGHTS GRANTED AS REMUNERATION TO KMP
2,185,135 performance rights which vested and were available to be exercised in 2021 were exercised in 2022.
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
22
I
I
D
E
T
M
L
S
E
C
R
U
O
S
E
R
E
V
O
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Directors’ Report (cont.)
REMUNERATION REPORT (AUDITED) (Cont.)
5.4 VALUE OF PERFORMANCE RIGHTS GRANTED AND ON FOOT TO EXECUTIVE KMP
AS AT 31 DECEMBER 2022
KMP
Non-Executive Directors
Mr D Carter
2021 Options Tranche 1
2021 Options Tranche 2
Mr M Boyte
2021 Options Tranche 1
2021 Options Tranche 2
TOTAL NON-EXECUTIVE DIRECTORS
Executive Directors
Mr L Wallace
2020 OPRP
2021 OPRP
2022 OPRP
TOTAL EXECUTIVE DIRECTORS
Outstanding
Face Value
per right(1)
Fair Value
per right(2)
Intrinsic
Value(3)
Fair Value
4,000,000
3,000,000
4,000,000
3,000,000
14,000,000
5,000,000
5,000,000
5,000,000
15,000,000
0.054
0.054
0.054
0.054
0.0384
0.0355
0.0384
0.0355
$216,000
$162,000
$153,440
$106,353
$216,000
$162,000
$756,000
$153,440
$106,353
$519,585
$0.054
$0.054
$0.054
$0.0787
$0.0737
$0.0694
$270,000
$270,000
$270,000
$393,500
$368,500
$347,000
$810,000
$1,109,000
(1) The Face Value is the closing share price on 31 December 2022.
(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
Shares
Shares
Shares
Held as at 31/12/21
Exercise of Rights
Net Other Changes
Held as at 31/12/22
1,805,210
3,482,216
-
-
14,211,124
2,185,135(1)
-
-
-
1,805,210
3,482,216
16,396,259
(1) 2,185,135 performance rights which vested and were available to be exercised in 2021 were exercised in 2022.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
23
I
H
L
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E
R
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S
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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 2022.
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.
Statutory Entitlements
Post-Employment Restraints
No payment of STI/LTI
All leave and benefits due per National Employment Standards
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 2022 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 24.
Signed in accordance with a resolution of the Directors:
Dated at Adelaide this 28th day of February 2023.
Derek Carter
Chairman
Lachlan Wallace
Managing Director
Auditor’s Independence Declaration
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
24
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E
T
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L
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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 2022, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Hillgrove Resources Limited and the entities it controlled during the period. Julian McCarthy Adelaide Partner PricewaterhouseCoopers 28 February 2023
Consolidated Statement of
Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2022
Other income
Expenses
Interest and finance charges
Impairment charges
(Loss) before income tax
Income tax (expense) / benefit
(Loss) for the year attributable to owners
Comprehensive income
Items that may be reclassified to profit or loss:
Total comprehensive income for the period attributable to
equity holders of Hillgrove Resources Limited
Earnings per share for profit attributable to the ordinary
equity holders of the Company:
Basic earnings per share
Diluted earnings per share
Note
5
6(a)
6(b)
6(c)
7
9
9
31 Dec 2022
31 Dec 2021
$’000
$’000
67
(4,538)
(1,465)
(24)
(5,960)
(13)
(5,973)
-
(5,973)
(0.5)
(0.5)
59
(5,446)
(42)
(4)
(5,433)
(422)
(5,855)
-
(5,855)
(0.6)
(0.6)
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 29 to 49.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
25
I
H
L
L
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R
O
V
E
R
E
S
O
U
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E
S
L
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Consolidated Statement of Financial Position
As at 31 December 2022
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
26
Non-current assets
Property, plant and equipment
Exploration and evaluation expenditure
I
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O
S
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V
O
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L
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Inventories
Total assets
Current liabilities
Trade and other payables
Provisions
Employee benefits payable
Non-current liabilities
Provisions
Deferred income
Financial liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
31 Dec 2022
31 Dec 2021
Note
$’000
$’000
10
11
12
13
14
12
15
16
18
19
20
21
22
23
24
5,305
905
410
6,620
40,031
4,784
1,464
46,279
52,899
703
766
663
2,132
9,006
2,000
7,195
18,201
20,333
32,566
10,737
923
100
11,760
33,284
4,434
1,816
39,534
51,294
1,800
736
1,501
4,037
9,314
-
-
9,314
13,351
37,943
256,088
29,388
(252,910)
32,566
256,118
28,762
(246,937)
37,943
The Consolidated Statement of Financial Position is to be read in conjunction with
the Notes to the consolidated financial statements set out on pages 29 to 49.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Contributed
equity
Note
$’000
Reserves
$’000
Accumulated
losses
$’000
Total
equity
$’000
Balance 1 January 2021
236,550
27,755
(241,082)
23,223
Profit/(Loss) for the period
Transactions with owners:
Contributions of equity, net of transaction
costs and tax
Share-based payments
Balance 31 December 2021
Profit/(Loss) for the period
Transactions with owners:
Contributions of equity, net of transaction
costs and tax
Share-based payments
Balance 31 December 2022
-
19,568
-
256,118
-
(30)
-
256,088
22
33
22
33
-
-
1,007
28,762
-
-
626
29,388
(5,855)
(5,855)
-
-
(246,937)
19,568
1,007
37,943
(5,973)
(5,973)
-
-
(30)
626
(252,910)
32,566
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 29 to 49.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
27
I
H
L
L
G
R
O
V
E
R
E
S
O
U
R
C
E
S
L
M
T
E
D
I
I
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
28
I
I
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E
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L
S
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Consolidated Statement of Cash Flows
For the year ended 31 December 2021
31 Dec 2022
31 Dec 2021
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
Grant income relating to exploration and evaluation
Payments for property, plant and equipment
Grant income relating to property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares (net of transaction costs)
Proceeds from borrowings
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
10
25
(5,777)
(5,752)
(605)
304
(7,269)
2,000
(5,570)
(23)
5,868
45
5,890
(5,432)
10,737
5,305
53
(4,955)
(4,902)
(987)
(8,407)
-
(9,394)
19,421
-
11
19,432
5,136
5,601
10,737
The Consolidated Statement of Cash Flows is to be read in conjunction with
the Notes to the consolidated financial statements set out on pages 29 to 49.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
29
I
H
L
L
G
R
O
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Notes to the consolidated Financial Statements for the year ended 31 December 2022
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 $5.3 million in cash and cash
equivalents at 31 December 2022, it recorded an operating
loss of $6.0 million, had net cash outflows from operating
activities of $5.8 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
currently in the process of conducting a capital raising and
for the related bookbuild to be completed. Regardless of the
outcome of the capital raising, the Directors are confident
that the required amount of financing will be secured from
other sources 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.
2
2
0
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Notes to the consolidated Financial Statements for the year ended 31 December 2022 (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
Government grants are recognised where there is
reasonable assurance that the grant will be received, and all
attached conditions will be complied with. The recognition
treatment of the grant depends on the purpose of the grant
as follows:
i. Relating to an expense item - recognised as a
reduction of the expense to which it relates.
ii. Relating to property, plant and equipment – recognised
as deferred income within the Consolidated Statement
of Financial Position and released to the Consolidated
Statement of Profit and Loss and Other Comprehensive
Income over the life of the associated asset.
iii. Relating to exploration activities – recognised as
a reduction in the carrying value of the associated
exploration asset.
(g) Financial liabilities
Financial liabilities are initially measured at fair value, net
of transaction costs, and are subsequently measured at
amortised cost using the effective interest method.
The effective interest method is the method of calculating
the amortised cost of a financial liability and for the
allocation and recognition of the associated interest
expense in the relevant period. The effective interest rate
is the rate that exactly discounts the estimated future
cashflows of the financial liability to its initial fair value.
(h) 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).
(i) 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.
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Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
1. STATEMENT OF SIGNIFICANT
ACCOUNTING POLICIES (cont.)
(i) Standards and interpretations in issue
(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.
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:
(b) Exploration and evaluation expenditure
The application of the Group’s accounting policy for
exploration and evaluation expenditure requires judgement
in determining whether future economic benefits are likely,
either from development and commercial exploitation, or sale
of the respective areas. Estimates and assumptions made
may change if new information becomes available.
(c) 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
16 and 19.
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.
(d) Fair value of financial liabilities
During August 2022, the Group entered into a royalty funding
agreement with Freepoint Metals and Concentrates LLC
(Freepoint). $5.87 million was received from Freepoint ($6.0
million less transaction costs), and in return, the group will
pay Freepoint 2.5% of net smelter returns for the first 85,000
tonnes of payable copper from the Kanmantoo underground
project, reducing to 0.5% thereafter.
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;
Management assessed the likelihood of the underground
project proceeding to be high and as such the potential
payments to Freepoint have been classified as a financial
liability, measured at amortised cost.
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.
Due to the uncertainty surrounding funding for the
underground project, an assessment of the discounted
future cash flows for the Kanmantoo CGU was performed
which resulted in no adjustments to the carrying values.
Refer to Note 13 for additional details.
Financial liabilities at amortised cost are initially recognised
at fair value less transaction costs and are thereafter carried
at amortised cost using the effective interest method. The
fair value was assessed at 31 August 2022 to be the amount
received of $5.87 million. The effective interest rate is the
rate that discounts estimated future cashflows to the initial
fair value and this was calculated to be 24.06%.
At each reporting period an interest expense will be
recognised in the profit and loss representing the unwinding
of the discount reflected in the amortised cost carrying value.
In addition, recalculations may be required at reporting
periods for any known changes i.e., updated copper
pricing, ore reserves etc. When changes are not the result
of movements in the market rates of interest, the cashflows
are updated but continue to be discounted using the original
effective interest rate. Any gain or loss on this recalculation
is recognised in the Consolidated Statement of Profit and
Loss and Other Comprehensive Income.
2
2
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2
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Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
2. CRITICAL ACCOUNTING ESTIMATES
AND JUDGEMENTS (cont.)
(d) Fair value of financial liabilities (cont.)
At 31 December 2022, an interest expense of $0.4 million
was recognised for the unwinding of the discount. In
addition, a recalculation was performed to account for
increased copper prices (US$7,528 @ 0.69 A$/US$
exchange rate to US$8,390 @ 0.68 A$/US$ exchange rate)
which resulted in an expense of $0.9 million.
Refer to Note 25(a) for analysis of the estimated impact
of movements in the copper price on the financial liability
valuation.
3. DIVIDENDS
Franked dividends paid
Amount of franking credits
available to shareholders for
subsequent financial years
31 Dec 2022
31 Dec 2021
$’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.
5. OTHER INCOME
6. EXPENSES
Profit or loss before income tax includes the following
expenses:
(a) Expenses per profit or loss
31 Dec 2022
31 Dec 2021
Note
$’000
$’000
Corporate and other
costs
Care and maintenance
costs and other direct
site costs
Rehabilitation
adjustment
Depreciation and
amortisation
Total expenses
(i)
(ii)
(iii)
1,863
2,895
2,640
2,583
(32)
(106)
67
4,538
74
5,446
(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
credited to the profit or loss 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 2022
31 Dec 2021
$’000
$’000
31 Dec 2022
31 Dec 2021
$’000
$’000
Discount on unwind of
rehabilitation provision
Interest
Other – excess rehabilitation
seed sale income
Total other income
44
23
67
11
48
59
Borrowing costs, bank fees
and charges
Discount on unwind of royalty
financial liability
Revaluation of royalty financial
liability
Total interest and finance
charges
(c)
Impairment charges
130
8
438
889
1,465
34
8
-
-
42
Exploration assets
Note
(i)
31 Dec 2022
31 Dec 2021
$’000
$’000
24
24
4
4
(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.
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
6. EXPENSES (cont.)
(d) Other required disclosures
7.
INCOME TAX
31 Dec 2022
31 Dec 2021
$’000
$’000
(a) Income tax expense
31 Dec 2022
31 Dec 2021
$’000
$’000
Employee benefits (excluding
share-based payments)
Employee share based
payments (see Note 33)
(e) Assurance services
3,121
3,167
626
821
The following fees were paid or payable for services provided
by the auditor of the parent entity, its related practices and
non-related audit firms:
31 Dec 2022
31 Dec 2021
$
$
(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 and tax
compliance
112,691
112,691
113,189
113,189
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2
2
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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
-
13
13
-
422
422
(5,960)
(5,433)
(1,788)
(1,630)
188
1
-
246
2
-
27,360
27,360
15,576
15,576
- Exploration deductible
(1,238)
(2,500)
- Tax temporary differences
(recognised) / not recognised
2,850
4,304
Income tax expense/
(benefit)
(c) Amounts recognised
directly in equity
Deferred tax – (credited) /
debited directly in equity
13
422
13
(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.
2
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2
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Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
INCOME TAX (cont.)
7.
Hillgrove Resources Limited and its wholly-owned Australian
controlled entities have implemented the tax consolidation
legislation. The head entity, Hillgrove Resources Limited,
and the controlled entities in the tax consolidated group
account for their own current and deferred tax amounts.
These tax amounts are measured as if each entity in the tax
consolidated group continues to be a stand-alone taxpayer
in its own right. The entities in the tax-consolidated group
entered into a tax sharing agreement and a tax funding
agreement. On adoption of the legislation, the entities in the
tax consolidated group entered into a tax sharing agreement
which, in the opinion of the Directors, limits the joint and
several liability of the wholly owned entities in the case of
a default by the head entity. The entities have also entered
a tax funding agreement under which the wholly-owned
entities fully compensate the head entity for any current
tax payable assumed and are compensated by the head
entity for any current tax receivable and deferred tax assets
relating to unused tax losses or unused tax credits that are
transferred to it under the tax consolidation legislation.
8. 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.
The balance of deferred tax assets comprises temporary
differences attributable to:
Tax losses and credits
Business related costs
Provisions and accruals
Financial liability
Total deferred tax assets
31 Dec 2022
31 Dec 2021
$’000
70,515
376
3,183
2,158
76,232
$’000
66,682
562
3,458
-
70,702
The balance of deferred tax liabilities comprises temporary
differences attributable:
Exploration expenditure / PPE
Total deferred tax liabilities
31 Dec 2022
31 Dec 2021
$’000
9,346
9,346
$’000
5,430
5,430
Net deferred tax assets
66,886
65,272
Deferred tax assets not
recognised
Recognised net deferred tax
assets
(66,886)
(65,272)
-
-
The company has unrecognised capital losses of $11.3
million (2021: $11.3 million).
9. 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.
Classification of securities as ordinary shares
Ordinary shares have been classified as ordinary shares and
included in basic earnings per share.
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Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
9. EARNINGS PER SHARE (cont.)
Classification of securities as potential shares
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
31 Dec 2022
31 Dec 2021
Number
Number
Weighted average number
of ordinary shares used
in calculating basic and
dilutive EPS
1,174,289,057
960,997,490
10. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Restricted cash
31 Dec 2022
31 Dec 2021
$’000
4,758
547
5,305
$’000
10,178
559
10,737
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, and
an exploration tenement bond.
(b) Reconciliation of earnings used in calculating
earnings per share
11. TRADE AND OTHER RECEIVABLES
(i) Basic earnings
(Loss) from continuing
operations attributable to the
ordinary equity holders of the
Company:
(ii) Diluted earnings
(Loss) from continuing
operations attributable to the
ordinary equity holders of the
Company:
(iii) Basic earnings
per share
(Loss) from continuing
operations attributable to the
ordinary equity holders of the
Company:
(iv) Diluted earnings
per share
(Loss) from continuing
operations attributable to the
ordinary equity holders of the
Company:
31 Dec 2022
31 Dec 2021
$’000
$’000
Prepayments
Other receivables
GST receivable
31 Dec 2022
31 Dec 2021
$’000
$’000
481
362
62
905
400
368
155
923
(5,973)
(5,855)
(5,973)
(5,855)
Financing arrangements
On 16 June 2022, the Group entered into a $4 million line
of credit finance facility with Volvo Finance Australia Pty Ltd
which expires on 30 June 2023. The facility may be used to
finance the purchase of underground mining equipment but at
the date of this report, the facility had not been drawn upon.
31 Dec 2022
31 Dec 2021
Cents
Cents
12. INVENTORIES
(0.5)
(0.6)
(0.5)
(0.6)
Current assets
Stores and consumables
Total current inventory
Non-current assets
Stores inventory
Total non-current inventory
31 Dec 2022
31 Dec 2021
$’000
$’000
410
410
1,464
1,464
100
100
1,816
1,816
Inventory is recognised at the lower of cost and net
realisable value.
Due to the processing being in 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.
2
2
0
2
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A
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Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
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 6 (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.
Due to the uncertainty surrounding funding for the
underground project, an assessment of the discounted
future cash flows for the Kanmantoo CGU was performed
which resulted in no adjustments to the carrying values.
The impairment calculations were performed using a nominal
discount rate of 16.63% (2021: 13.88%)
No impairment charges were taken against the Group’s
Kanmantoo assets in the current year.
13. PROPERTY, PLANT AND EQUIPMENT
31 Dec 2022
31 Dec 2021
$’000
$’000
Land and buildings
At cost
Accumulated depreciation
and impairment
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
5,277
5,277
(379)
4,898
(379)
4,898
73,574
73,559
(59,964)
13,610
(59,887)
13,672
451
(369)
82
436
(369)
67
181,151
174,357
(159,710)
(159,710)
21,441
14,647
40,031
33,284
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.
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
General and administrative costs are only included where they
are directly related to a particular area of interest.
Exploration and evaluation assets are assessed for impairment
when facts and circumstances suggest that the carrying
amount of an exploration and evaluation asset may exceed
its recoverable amount. The recoverable amount of the
exploration and evaluation asset is estimated to determine the
extent of the impairment loss (if any).
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been
recognised for the asset in previous periods.
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.
Where a decision has been made to proceed with
development in respect of a particular area of interest,
the relevant exploration and evaluation asset is tested
for impairment and the balance is then reclassified to
development.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
37
I
H
L
L
G
R
O
V
E
R
E
S
O
U
R
C
E
S
L
M
T
E
D
I
I
13. PROPERTY, PLANT AND
EQUIPMENT (cont.)
Reconciliations of the carrying amounts for each class of
asset are set out below:
31 Dec 2022
31 Dec 2021
$’000
$’000
Land and buildings
Carrying amount at beginning
of period
Depreciation
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
Additions
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
-
4,898
4,898
13,672
13,673
22
(84)
66
(67)
13,610
13,672
67
15
-
82
14,647
6,794
-
78
-
(11)
67
5,741
8,906
-
Exploration and evaluation
expenditure
Carrying amount at beginning
of period
Additions
Government grant income (i)
31 Dec 2022
31 Dec 2021
$’000
$’000
4,784
4,434
4,434
678
(304)
(24)
3,236
1,202
-
(4)
4,784
4,434
21,441
14,647
40,031
33,284
Impairment loss
Carrying amount at
end of period
14. EXPLORATION AND EVALUATION
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.
Exploration and evaluation assets are initially measured at
cost and include acquisition and renewal of rights to explore,
drilling, sampling, assaying and depreciation of assets used in
exploration and evaluation activities.
(i) During the year, two grants were received under the South
Australian Government’s Accelerated Discovery Initiative.
As detailed in Note 1(f), the income has been recognised as
a reduction in the carrying value of the associated exploration
assets.
15. TRADE AND OTHER PAYABLES
Trade payables
Other payables and accruals
31 Dec 2022
31 Dec 2021
$’000
130
573
703
$’000
567
1,233
1,800
Information about the Group’s exposure to liquidity risk is
provided in Note 25(d).
I
I
D
E
T
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S
E
C
R
U
O
S
E
R
E
V
O
R
G
L
L
H
I
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
16. PROVISIONS – CURRENT
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
38
31 Dec 2022
31 Dec 2021
$’000
766
766
$’000
736
736
736
775
Rehabilitation provision
Movement in provisions
Carrying value at the
beginning of the period
Payments charged against
provisions:
Rehabilitation provision
(376)
(389)
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.
Transfer from / (to) non-
current provisions:
Rehabilitation provision
Balance at end of period
406
766
350
736
The Group has no material lease obligations that require the
disclosure of “lease liabilities” and “right-to-use” assets under
AASB 16.
18. EMPLOYEE BENEFITS PAYABLE
– CURRENT
Employee benefits payable
31 Dec 2022
31 Dec 2021
$’000
663
$’000
1,501
The current provision for employee benefits includes
accrued annual leave, long service leave, and other accrued
remuneration.
The entire amount of employee benefits payable of
$0.7 million (2020: $1.5 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 2022
31 Dec 2021
$’000
$’000
Leave obligations expected
to settle after 12 months
425
176
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.
17. LEASE LIABILITIES
Lease liabilities
Total lease liabilities
31 Dec 2022
31 Dec 2021
$’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. 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.
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
39
I
H
L
L
G
R
O
V
E
R
E
S
O
U
R
C
E
S
L
M
T
E
D
I
I
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
19. PROVISIONS – NON-CURRENT
20. DEFERRED INCOME
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 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
$’000
9,006
$’000
9,314
Government grant
$’000
2,000
2,000
$’000
-
-
9,314
9,736
130
(406)
(32)
9,006
34
(350)
(106)
9,314
A $2 million grant was received during the period from
the South Australian Government to assist with the trial
of new underground mining technology. In accordance
with AASB120, the grant has been disclosed as deferred
income and, on the commencement of underground mining
operations, will be released to the Consolidated statement of
profit or loss and other comprehensive income over the life of
the associated mine development asset.
Upon successful development, and commercial production
from the underground project, $1 million of the grant will
be repayable to the South Australian Government via a
0.25% royalty, 12 months after the first concentrate sale
from the underground operation. Should this be required,
the $1 million will be reclassified from deferred income to
financial liabilities.
21. FINANCIAL LIABILITIES
Discounted net smelter
return royalty
31 Dec 2022
31 Dec 2021
$’000
$’000
7,195
7,195
-
-
Refer to Notes 1(g) and 2(d) for further information on the net
smelter return royalty and Note 25(a) for the potential impact
on the amount payable due to copper price fluctuations.
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.
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
40
I
I
D
E
T
M
L
S
E
C
R
U
O
S
E
R
E
V
O
R
G
L
L
H
I
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
22. CONTRIBUTED EQUITY
Share capital
Issued and paid up capital for 1,174,289,057 fully paid shares
(31 December 2021: 1,168,169,769)
Ordinary shares issued – movements during the period
31 Dec 2022
31 Dec 2021
$’000
$’000
256,088
256,118
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Opening balance
No. of shares
No. of shares
1,168,169,769
661,798,194
Employee option schemes / issues
6,119,288
Capital raise
Less – transaction costs (net of tax)
-
-
-
506,371,575
-
Balance at end of period
1,174,289,057
1,168,169,769
$’000
256,118
-
-
(30)
256,088
$’000
236,550
-
20,553
(985)
256,118
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.
23. RESERVES
Share based payments reserve
Profit reserve
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
31 Dec 2022
31 Dec 2021
$’000
7,306
22,082
29,388
6,680
626
7,306
$’000
6,680
22,082
28,762
5,673
1,007
6,680
22,082
22,082
-
-
-
-
22,082
22,082
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
41
I
H
L
L
G
R
O
V
E
R
E
S
O
U
R
C
E
S
L
M
T
E
D
I
I
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
23. RESERVES (cont.)
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
Impact of 10% increase/
decrease in realised AUD
copper price
31 December 2022
Impact on current value
of royalty payable
Increase
$’000
Decrease
$’000
744
(744)
½ Unlisted options issued to the joint lead managers of the
(b) Foreign exchange risk
2021 placement and share purchase plan.
(ii) Profit reserve
The profit reserve is used to accumulate distributable profits,
preserving the characteristics of profit by not appropriating
against prior year accumulated losses. The reserve can be
used to pay taxable dividends.
At 31 December 2022, the Group has no US$ denominated
receivables. However, the valuation of the royalty payable to
Freepoint Metals and Concentrates will increase/decrease
in line with movements in the A$/US$ exchange rate. The
sensitivity to this has been reflected in the above market
price table.
24. ACCUMULATED LOSSES
31 Dec 2022
31 Dec 2021
$’000
$’000
At beginning of the period
(246,937)
(241,082)
Net loss (not carried forward
to profit reserve)
Accumulated losses at
end of the period
(5,973)
(5,855)
(252,910)
(246,937)
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
The Group has exposure to copper commodity prices arising
from the royalty agreement entered into with Freepoint
Metals and Concentrates LLC during August 2022 (refer
Note 2d). Movements in the realised price of copper will
increase / decrease the associated royalty liability. The
below table details the Group’s sensitivity to movements in
the realised copper price:
(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 2021
$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.
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
42
I
I
D
E
T
M
L
S
E
C
R
U
O
S
E
R
E
V
O
R
G
L
L
H
I
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
25. FINANCIAL RISK MANAGEMENT (cont.)
(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 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
Total
cash flows
Carrying
amount
31 December 2022 $’000
Trade and other payables
Financial liabilities
Total
31 December 2021 $’000
Trade and other payables
Total
703
237
940
-
3,346
3,346
-
4,105
4,105
-
4,552
4,552
-
265
265
-
-
-
703
12,505
13,208
703
7,195
7,898
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
Total
cash flows
Carrying
amount
1,800
1,800
-
-
-
-
-
-
-
-
-
-
1,800
1,800
1,800
1,800
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 2022 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;
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
2
43
I
H
L
L
G
R
O
V
E
R
E
S
O
U
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C
E
S
L
M
T
E
D
I
I
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
26. SUBSIDIARIES (cont.)
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
PT Hillgrove Indonesia
Country of
incorporation
Class of share
Equity holding
31 Dec 2022 (%)
Equity holding
31 Dec 2021 (%)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Indonesia
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
There were no transactions with non-controlling interests during the period.
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 2022
31 Dec 2021
$’000
25
16
41
$’000
13
-
13
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
(c) Capital commitments
31 Dec 2022
31 Dec 2021
$’000
1,462
731
2,193
$’000
704
445
1,149
At 31 December 2022, there were no contracted capital commitments (31 December 2021: Nil).
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
44
I
I
D
E
T
M
L
S
E
C
R
U
O
S
E
R
E
V
O
R
G
L
L
H
I
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (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 10.
(b) Reconciliation of operating profit after income tax to net cash provided by operating activities
Operating profit/(loss) after income tax
Add/(less) items classified as investing/financing activities
Net interest expense
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
Discount on unwind of royalty financial liability
Revaluation of royalty financial liability
Rehabilitation adjustment
Changes in operating assets and liabilities
(Increase) / decrease in receivables, prepayments and inventories
Increase / (decrease) in trade creditors and accruals
Increase / (decrease) in provisions and employee benefits
Net cash used by operating activities
(c) Net debt reconciliation
31 Dec 2022
31 Dec 2021
$’000
(5,973)
$’000
(5,855)
-
13
67
25
626
130
438
889
(32)
61
(782)
(1,214)
(5,752)
8
422
74
4
820
34
-
-
(106)
(176)
(205)
78
(4,902)
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Cash and cash equivalents
Financial liabilities – repayable after one year
Net funds / (debt)
31 Dec 2022
31 Dec 2021
$’000
5,305
(7,195)
(1,890)
$’000
10,737
-
10,737
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P
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2
0
2
2
45
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Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
28. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (cont.)
Reconciliation of movement of liabilities to cash flows arising from financing activities
Other assets
Cash & Bank
Liquid
Investments
Liabilities from
financing activities
Financial
liabilities due
within 1 year
Financial
liabilities due
after 1 year
Net debt as at 1 January 2021
Cash flows
Other non-cash movements
5,601
5,136
-
Net funds/(debt) as at 31 December 2021
10,737
Cash flows
Other non-cash movements
Net funds/(debt) as at 31 December 2022
(5,432)
-
5,305
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,868)
(1,327)
(7,195)
Total
5,601
5,136
-
10,737
(11,300)
(1,327)
(1,890)
Non-cash movements represent accrued interest, repayment timing movements between current and non-current and
revaluations.
29. KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Cash bonus
Share based payments
31 Dec 2022
31 Dec 2021
$
583,212
58,399
-
243,099
884,710
$
590,955
43,920
178,500
747,827
1,561,202
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.
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
31. EVENTS AFTER THE REPORTING PERIOD
Subsequent to balance date and at the time of this release, the Company entered into a trading halt to conduct a
capital raising.
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 2022
31 Dec 2021
$’000
359
15
374
$’000
338
16
354
2
2
0
2
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A
46
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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 $1.5 million. This circumstance is not expected to eventuate.
The Directors are of the opinion that further provisions are not required in respect of these matters, as it is not probable that a
future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
The consolidated entity had no other contingent liabilities at 31 December 2022.
33. SHARE-BASED PAYMENTS
(a) Movements in performance rights during the year
31 December 2022
31 December 2021
Number of
performance rights
Weighted average
exercise price ($)
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
51,241,840
16,000,000
-
-
(6,119,288)
(2,622,552)
58,500,000
-
-
-
-
-
-
-
-
-
11,741,840
28,500,000
14,000,000
-
-
(3,000,000)
51,241,840
6,119,288
-
-
0.121
-
-
-
-
-
At the end of the year there were 58,500,000 performance rights outstanding and the weighted average remaining
contractual life at the end of the period was 2.38 years (31 December 2021: 2.56 years).
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Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
33. SHARE-BASED PAYMENTS (cont.)
(b) Summary of performance rights outstanding
2019 OPRP
2020 OPRP
2021 OPRP
2022 OPRP
Growth OPRP
Director Options Tranche 1
Director Options Tranche 2
TOTAL
31 December 2022
31 December 2021
Number of
performance rights
Last exercise date
Number of
performance rights
Last exercise date
-
-
8,741,840
20 January 2022
12,500,000
30 March 2024
14,500,000
30 March 2025
14,500,000
30 March 2026
3,000,000
8,000,000
6,000,000
58,500,000
31 July 2024
14 May 2025
14 May 2026
12,500,000
13,000,000
-
3,000,000
8,000,000
6,000,000
51,241,840
30 March 2024
30 March 2025
-
31 July 2024
14 May 2025
14 May 2026
Further information for each of the outstanding OPRP performance rights are as follows:
Consideration
Exercise price
Method of settlement
Performance hurdles
2019 OPRP
2020 OPRP
2021 OPRP
2022 OPRP
Growth OPRP
-
-
-
-
-
-
-
-
-
-
Equity
Equity
Equity
Equity
Equity
- Share price target - cents
-
6.0
8.0
10.0
- Price calculation methodology
15 day VWAP
10 day VWAP
10 day VWAP
10 day VWAP
-
-
- Start of testing date
10 August 2020
1 March 2022
1 March 2023
1 March 2024
1 August 2021
- First exercise date
- Last exercise date
- Other hurdles
1 January 2022
1 March 2023
1 March 2024
1 March 2025
1 August 2021
30 January 2022
30 March 2024
30 March 2025
30 March 2026
31 July 2024
(1)
-
-
-
(2)
(1)
the Company’s Total Shareholder Return performance relative to the component companies in the S&P/ASX Small Resources
Accumulation Index measured over the period from 10 August 2020 to 31 December 2021 using a 15-day VWAP.
(2) To substantially advance one or more of the company exploration projects to the point where a JORC Mineral Resource is approved by
the Board to advance to a funded Definitive Feasibility Study
In addition, further information for each of the outstanding director options are as follows:
Consideration
Exercise price
Method of settlement
Grant date
First exercise date
Last exercise date
Tranche 1
-
$0.10/share
Equity
14 May 2021
14 May 2023
14 May 2025
Tranche 2
-
$0.15/share
Equity
14 May 2021
14 May 2024
14 May 2026
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
33. SHARE-BASED PAYMENTS (cont.)
(c) Additional information on rights issued during the year
2
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Grant date
Valuation date
Consideration
Exercise price
Number of rights granted
Performance hurdles
- Share price target - cents
48
- Price calculation methodology
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- Start of testing date
- First exercise date
- Last exercise date
Valuation
- Performed by
- Methodology
- Share price volatility
- Expected dividend yield
- Risk free interest rate
- Valuation per right - cents
2021 OPRP (1)
4 March 2022
4 March 2022
-
-
2022 OPRP (1)
1 July 2022
2022 OPRP
1 July 2022
4 March 2022
10 May 2021 (2)
-
-
-
-
1,500,000
1,500,000
13,000,000 (3)
8.0
10 day VWAP
1 March 2023
1 March 2024
10.0
10 day VWAP
1 March 2024
1 March 2025
10.0
10 day VWAP
1 March 2024
1 March 2025
30 March 2025
30 March 2026
30 March 2026
External advisers
External advisers
External advisers
Monte Carlo
Binomial
Monte Carlo
66%
0%
1.3%
3.13
66%
0%
1.7%
2.44
70%
0%
0.0%
6.94
1. Additional employees were invited to join the 2021 OPRP and 2022 OPRP. These rights were subject to a separate valuation based on
the date the employees were notified of their eligibility.
2. The employees in this plan were notified of their eligibility to participate on 10 May 2021. The valuation was performed at this date.
3.
Includes 5,000,000 for Lachlan Wallace as detailed in 4.4.3 of the Remuneration Report.
(d) Movements in rights during the year – capital raise lead managers
31 December 2022
31 December 2021
Number of
performance rights
Weighted average
exercise price ($)
Number of
performance rights
Weighted average
exercise price ($)
Balance at beginning of year
20,000,000
0.078
Granted
Forfeited during the year
Exercised during the year
Expired during the year
Balance at end of year
-
-
-
-
-
-
-
-
-
20,000,000
-
-
-
-
0.078
-
-
-
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 1.75 years (31 December 2021: 2.75 years).
Notes to the consolidated Financial Statements for the year ended 31 December 2022 (cont.)
33. SHARE-BASED PAYMENTS (cont.)
(e) 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 2022
31 Dec 2021
$’000
$’000
626
-
626
647
174
821
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.
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.
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Parent
31 Dec 2022
31 Dec 2021
$’000
(1,838)
(1,838)
5,371
31,475
445
445
31,030
$’000
(3,309)
(3,309)
10,864
33,797
1,525
1,525
32,272
256,088
14,172
256,118
13,547
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
(239,230)
(237,393)
Total equity
31,030
32,272
Significant accounting policies
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 2022
31 Dec 2021
$’000
$’000
-
16
2
2
0
2
T
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A
U
N
N
A
50
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Directors’ Declaration
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 25 to 49 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 2022 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 28th day of February 2023.
Mr Derek Carter
Chairman
Mr Lachlan Wallace
Managing Director
Independent Auditor’s Report to the Members of Hillgrove Resources Limited
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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 2022 and of its financial performance for the year then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: • the consolidated statement of financial position as at 31 December 2022 • the consolidated statement of changes in equity for the year then ended • the consolidated statement of cash flows for the year then ended • the consolidated statement of profit or loss and other comprehensive income for the year then ended • the notes to the consolidated financial statements, which include significant accounting policies and 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.)
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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 $6.0 million and net cash outflows from operating activities of $5.8 million during the year ended 31 December 2022, 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 overall Group materiality of $530,000, which represents approximately 1% of the Group’s total assets. • We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. • We chose Group total assets because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. • We utilised a 1% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. • Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. • The Group’s accounting records are held and managed at the Kanmantoo site and the corporate head office, located in Adelaide. • Through its ownership of the Kanmantoo copper mine, the Group has one operating segment being in the resources industry, in Australia. We performed an audit of this operating segment given its financial significance to the Group during the 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 13) 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 ($40.0 million) and the judgemental assumptions included in the Group’s discounted cash flow models for the Kanmantoo mine, as disclosed in Note2(a). We performed the following procedures, amongst others: • Assessed the appropriateness of the CGU identification in accordance with the requirements of Australian Accounting Standards. • Evaluated the Group’s ability to forecast future results by comparing budgets with reported actual results for the previous financial year. • Evaluated the Group’s plans for the Kanmantoo mine and considered whether these are feasible. This included a comparison of a sample of resource estimates and exploration target tonnages to the assessment prepared by the Group’s expert. We also assessed the competence of the Group’s expert. • Evaluated whether judgements made in selecting the method, significant assumptions, and data for developing the discounted cash flow model give rise to indicators of possible bias by the Group. • Assessed the appropriateness of significant assumptions and data in the context of Australian Accounting Standards. This included:
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 Key audit matter How our audit addressed the key audit matter - compared the data utilised to determine the total forecast ore to be processed to historical volumes processed and processing plant capacity. - compared the data utilised in forecasting the ore production to historical recovery levels. - compared copper pricing data used to independent industry forecasts. - compared the foreign exchange rate data utilised by management to current market information. - compared the forecast operating cost assumptions to historical costs incurred. - compared the forecast capital costs to external cost estimates. - evaluated the appropriateness of the discount rate applied by the Group by comparing to current market information. - assessed the timing and amounts to be received from the sale of processing plant and land following expected completion of mining and processing activities to external valuation reports. This included an assessment of the competence of the external firms who prepared the valuations. • Evaluated the reasonableness of disclosures made in the financial report, including those regarding significant assumptions, considering the requirements of Australian Accounting Standards.
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 Key audit matter How our audit addressed the key audit matter Fair value of financial liabilities (Refer to Note 2(d) and Note 21) During the year the Group entered into a royalty funding agreement for $6.0 million (less transaction costs). The Group’s fair value assessment and associated accounting was considered a key audit matter due to the financial significance of royalty agreement and the judgemental assumptions included in the fair value calculation as disclosed in Note 2(d). We performed the following procedures, amongst others: • Assessed the appropriateness of the accounting policy treatment at amortised cost using the effective interest method to be in line with the requirements of Australian Accounting Standards. • Assessed the appropriateness of significant assumptions and data in the context of Australian Accounting Standards. This included: - agreed a sample of data used to support the calculation to the current approved life of mine plan. - compared the data utilised in forecasting the ore production to historical recovery levels. - compared the data utilised to determine the total forecast ore to be processed to historical volumes processed and processing plant capacity. - compared copper pricing data used to independent industry forecasts. - compared the foreign exchange rate data utilised by management to current market information. • Assessed the mathematical accuracy of the model. • Evaluated the reasonableness of disclosures made in the financial report, including those regarding significant assumptions, considering the requirements of Australian Accounting Standards.
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 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 2022, 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. 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.
Independent Auditor’s Report to the Members of Hillgrove Resources Limited (cont.)
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Independent auditor’s report - Hillgrove Resources Limited (continued) 7 Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 15 to 23 of the directors’ report for the year ended 31 December 2022. In our opinion, the remuneration report of Hillgrove Resources Limited for the year ended 31 December 2022 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 28 February 2023
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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 24 January 2023, 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 44,500,000 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 1,698 as at 24 January 2023.
(c) Distribution schedule of Fully Paid Ordinary Shares
as at 24 January 2023
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
444
1,051
404
1,208
672
3,779
(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 24 January 2023
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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Shareholder Information for Listed Public Companies (cont.)
Twenty largest listed shareholders
The twenty largest shareholders hold 47.9% of the total ordinary shares issued.
The 20 largest shareholdings as at 24 January 2023 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
Portfolio Services Pty Ltd
Citicorp Nominees Pty Ltd
J P Morgan Nominees Australia
Portfolio Services Pty Ltd
UBS Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
10 Proco Pty Ltd
11 Proco Pty Ltd
12 Portfolio Services Pty Ltd
13 Mr Antony Gordon Breuer
14 National Nominees Pty Ltd
15 Portfolio Services Pty Ltd
16 Cosell Pty Limited
17 Papailoa Holdings Pty Ltd
18 Fundazma Pty Ltd
19 HSBC Custody Nominees
20 H&G High Conviction Ltd
No. of ordinary
shares held
% of issued
shares
69,812,355
68,952,500
57,022,134
42,337,067
33,910,293
32,637,550
30,961,163
29,000,000
26,842,050
23,250,000
23,050,000
17,546,894
17,000,000
15,352,561
15,322,581
14,000,000
13,500,000
11,451,613
11,449,602
9,009,995
5.9%
5.9%
4.9%
3.6%
2.9%
2.8%
2.6%
2.5%
2.3%
2.0%
2.0%
1.5%
1.4%
1.3%
1.3%
1.2%
1.1%
1.0%
1.0%
0.8%
(h)
Interests in mining tenements
562,408,358
47.9%
Tenement
ML 6345
ML 6436
EML 6340
EL 6526
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%
*
The Group has made an application to cancel ML755 with approval expected in
early FY23.
(i) Other information
Hillgrove Resources Limited, incorporated and domiciled in Australia,
is a publicly listed Company limited by shares.
HILLGROVE RESOURCES LIMITED
ACN 004 297 116
Adelaide Office
Ground Floor
5-7 King William Road
Unley, SA 5061
Australia
T: +61 8 7070 1698
E: info@hillgroveresources.com.au
W: www.hillgroveresources.com.au