KalNorth Gold Mines Limited and Controlled Entities
ACN 100 405 954
Annual Report
For the year ended 30 June 2015
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
CONTENTS
Corporate Particulars
Chairman Statement
Directors’ Report
Financial Report
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Auditors’ Independence Declaration
Independent Auditors’ Report
Corporate Governance Statements
Mineral Resources and Ore Reserves Statement
Mining Tenement Statements
Shareholders Information
1
2
3
16
17
18
19
20
43
44
45
47
54
58
61
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Chairman
Executive Director
Non-Executive Director
CORPORATE PARTICULARS
Directors
Mr Jiajun Hu
Mr Lijun Yang
Mr Yuanguang Yang
Company
Secretary
Mr Lijun Yang
Registered Office
and Principal
Place of Business
Share Registry
224 Dugan Street
Kalgoorlie, Western Australia 6430
Advanced Share Registry Limited
110 Stirling Highway
Perth WA 6009
Auditor
Solicitor
RSM Bird Cameron Partners
8 St Georges Terrace
Perth WA 6000
Steinepreis Paganin
16 Milligan St
Perth WA 6000
Stock Exchange
Listing
Australian Securities Exchange (ASX: KGM)
Company Website www.kalnorthgoldmines.com
1
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Dear Shareholders,
As Chairman of KalNorth Gold Mines Limited, it is my pleasure to present to you the 2015 Annual Report.
The Company’s financial position remained under challenge all through the year and indeed threatened the
Company’s survival.
In the very tough capital markets environment that persisted all through the year, the Board was keen to
avoid having to raise equity capital and dilute existing shareholders’ interest. Consequently, the Board and
management worked extremely hard to improve the Company’s working capital position through the
strategy of reducing administration and corporate overheads and realising value from existing resource
assets. The Mt Jewell assets were disposed during the year, enabling settlement of the remaining
purchase price from the original acquisition and leaving a surplus of $0.75 million to add to working capital.
KalNorth also successfully lodged a research and development tax offset claim during the year and
received a cash refund of over $0.5 million. As an interim measure however and in order to address a
short term gap, the Company raised $0.35 million by issue of convertible notes to Gold Fresh Limited.
More pressing was the need to deal with secured and unsecured loans over $4.2 million which matured at
the end of November 2014. After prolonged negotiations, agreement was reached in March 2015 to extend
the maturity date of all the loans to 30 April 2016, settle all accrued interest up to 31 December 2014 by
issue of shares and reduce the interest rate on all loans to 10% per annum (down from 15% and 18%) with
effect from 1 January 2015.
Despite these financial constraints, the Company managed to recommence and complete field exploration
works including diamond drilling, ground based gravity surveys and prospecting as well as in house
resource estimation, geophysical data compilation and geophysical interpretation. These programmes
resulted in the announcement of a new gold resource at Parrot Feather lode and highlighted the deep
resources potential under the Parrot Feather pit at the Lindsay’s Project. Several high quality gold targets
were generated which provide a foundation for ongoing exploration to extend current trends and identify the
new gold mineralization system at Kurnalpi. The Company will focus on the new gold mineralisation
discovery and assess any development options in this new financial year.
The extension of the maturity date of the loans to 30 April 2016 was only an interim solution. With legacy
debts of that magnitude on the Balance Sheet it is very hard to raise new equity capital and carry out value-
adding exploration work. At the time of writing this, agreements have been negotiated with the major
secured and unsecured lenders as well as our major shareholder, Cross-Strait Common Development
Fund Co., Limited. The secured lenders and the two largest unsecured lenders have agreed to the
settlement of their loans and interest by issue of shares and Cross-Strait has agreed to provide a $2 million
convertible note facility. These transactions are subject to shareholder approval, which will be sought at
the forthcoming AGM. Whilst these transactions will result in significant dilution of existing shareholders’
interest, the Directors believe that the agreement by these lenders to accept shares in settlement of their
loans and the concurrent approval of the Cross-Strait convertible note facility gives the Company the best
possible opportunity to remain a going concern in current market circumstances and remain viable for any
improvement in the mineral exploration sector (including any exploration success from the use of funds
under the convertible note facility) which may ultimately see some restoration in shareholder value.
On behalf of the Board, I thank you, our shareholders, for your continuing support and I also acknowledge
the efforts by executive director, Lijun Yang and his team in difficult conditions.
Jiajun Hu
Chairman
12 October 2015
2
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
The Directors of KalNorth Gold Mines Limited (“the Company”) present their financial report on the
consolidated entity, being the company and its controlled entities, for the financial year ended 30 June
2015.
Directors
The names of directors in office at any time during or since the end of the financial year are listed
hereunder. Directors have been in office since the start of the financial year to the date of this report unless
otherwise stated.
•
•
•
•
Jiajun Hu
Lijun Yang
Yuanguang Yang
Brendan Peter Connell
Non-executive Chairman
Executive Director
Non-executive Director (appointed 28 August 2014)
Former non-executive Chairman (resigned 28 August 2014)
Information on Directors
JIAJUN HU
Non-Executive Chairman (appointed Chairman 14 April 2015)
Mr. Jiajun Hu acts as Regional Business Executive of Cross-Strait Common Development Fund Co., Ltd
(hereinafter referred to as “Cross-Strait”). Currently, Cross-Strait, with its global headquarters in Hong
Kong, is the largest shareholder in the Company.
He is responsible for supervising and administrating the investment projects of Cross-Strait in Oceania and
he directly reports to the managing director of Cross-Strait and has gained significant experience in
international investment, financial accounting, commercial contract negotiation and contract dispute
negotiation through corporate transactions in North America, Africa, Asia and Oceania.
He has a Bachelor’s Degree in Business Studies in 2008 from the Australian National University majoring
in finance and accounting. Mr. Hu has specialized knowledge of financial transaction market and
investment capital market, and is familiar with Chinese business and capital market operation. Mr. Hu is
fluent in both English and Chinese
Mr Hu has held no other directorships of other public companies within the last three years.
Interest in shares and options: nil
LIJUN YANG
Executive Director
Mr Yang is a geologist with more than 10 years working experience at various Chinese and Australian gold
operations. He received his Master’s Degree in Exploration Mineralogy from the China University of
Geosciences in 2012 and developed new methodologies to explore for gold mineralisation using the
typomorphic properties of minerals. He commenced working for KalNorth as a Project Evaluation Geologist
in August 2013 and was appointed to the Board in November 2013 as an Executive Director. Mr Yang is
multi-lingual (Chinese & English).
He is a member of the Australian Institute of Geoscientists (“AIG”) and the Society of Economic Geologists
(“SEG”).
Mr Yang has held no other directorships of other public companies within the last three years.
Interest in shares and options: 31,400 ordinary fully paid shares
3
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Information on Directors (Cont’d)
YUANGUANG YANG
Non-Executive Director (Appointed 28 August 2014)
Mr. Yang is a Hong Kong CPA (practising) and currently operates a CPA firm in Hong Kong with business
focus in markets of Hong Kong, Mainland China, Australia and New Zealand. Mr. Yang is also a Chartered
Accountant in Australia and New Zealand.
He has over 15 years’ experience in audit and assurance, global tax planning, corporate advisory, family
business and M & A business and also worked with the Industrial and Commercial Bank of China for
several years before running his CPA business.
Mr Yang resides in Hong Kong and is an authorised officer of South Victory Global Limited, a major lender
to and shareholder in the Company.
Mr. Yang has held no other directorships of other public companies within the last three years.
Interest in shares and options: nil
BRENDAN PETER CONNELL
Resigned 28 August 2014
Company Secretary
Mr Lijun Yang
Appointed 29 August 2014
Mr James Church
Resigned 29 August 2014
Principal Activities
The consolidated entity’s principal activity during the year was gold exploration on the Lindsays, Kalpini and
Kurnalpi projects near Kalgoorlie, Western Australia.
Operating Results and Financial Performance
The operating loss after income tax of the consolidated entity for the year ended 30 June 2015 was
$774,451 (2014: loss $10,763,483).
The operating loss for the year was impacted by the following key items:
(i) Exploration expenditure of $0.79 million (2014: $0.80 million) across all project areas and immediately
written-off to the profit and loss.
(ii) No impairment charge for the further write-down of past exploration expenditures in the current year
(2014: $10.1 million).
(iii) Interest expense of $0.56 million (2014: $0.73 million) on the secured and unsecured loans.
(iv) Profit on the sale of the Mt. Jewell project of $0.9 million (2014: nil).
(v) A tax refund of $0.53 million with respect to the 2014 financial year and supported by a tax incentive
submission based upon the R&D activities and development of new mining knowledge relating to mine
design and mining methodologies at the Lindsays mine (2014: $2.40 million).
In addition to the sources of funding referred to above, the company also raised $350,000 via the
completion of a convertible note issue.
4
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Operating Results and Financial Performance (Cont’d)
As at 30 June 2015 the company had $238,640 (2014: $128,867) in cash reserves and an aggregate of
$4,764,557 (2014: $4,891,788) in secured/unsecured loans and convertible notes (and accrued interest
payable).
At 30 June 2015, the consolidated entity had net assets of $1,764,199 (2014: $1,513,157).
Review of Operations
The company has four core gold exploration projects each located within 90 kilometres of Kalgoorlie in the
Eastern Goldfields of Western Australia. Each project hosts a gold resource within a package of semi
contiguous tenements that are located close to existing infrastructure and operating gold plants that could
provide options for milling with any future development proposal. The past year, with improvement in the
financial capacity of the company resulted in the first exploration programs being initiated and completed in
over two years on three of the four project areas. The company’s strategy has and continues to focus on
seeking to realise value from existing resource assets by improving the value whilst at the same time
rationalising the large tenement portfolio to reduce the commitment costs to keep tenure in good standing.
During the year field based work programs included diamond drilling, ground based gravity surveys and
prospecting. Desktop work comprising resource estimation, geophysical data compilation and geophysical
interpretation resulted in the announcement of a new gold resource at Lindsays and the definition of
several high quality gold targets at Kurnalpi that require further evaluation. In particular the geological
interpretation and targeting exercise at Kurnalpi has supported the company’s view of the project being a
favourable area for significant gold mineralisation and provided a foundation for ongoing exploration.
Lindsays Project (100% KGM)
The Lindsays Project is located approximately 65km to the north east of Kalgoorlie and contains the
Lindsays mine site which continues to remain under suspension since August 2013. During the past year
three RC precollared diamond drill holes were completed at Lindsays successfully targeting the narrow flat
dipping Parrot Feathers lode below the Stage 2 pit which hosts the Parrot Feathers lode to improve
understanding of the lode geometry and grade in an area previously evaluated with reverse circulation
drilling. The Parrot Feathers lode is exposed along the entire length of the Stage 2 open pit and the recent
and historical drilling has shown the lode to have good continuity both along strike and down dip. All three
holes intersected the mineralised quartz vein in the expected position
The results of these drill holes were combined with the relogging and reinterpretation of existing drilling to
refine the geological model and support a resource estimate of the Parrot Feathers lode. The company
elected to focus on re-modelling and estimating the Parrot Feathers lode as it was exposed at the base of
the suspended stage 2 pit, contained higher grade intercepts from previous drilling than other zones at
Lindsays and had exhibited down dip continuity to some 250m from surface. Furthermore the Stage 2
open pit provided a sound option from which to develop an underground mining operation. The company
engaged Ravensgate Mining Industry Consultants (“Ravensgate) to complete the mineral resource
estimate to JORC 2012 standard.
The more robust geological model and improved grade distribution within the Parrot Feathers lode gives
further confidence to consider underground development from the base of the stage 2 open pit. The
company has commenced and is well advanced with an initial scoping study and preliminary economic
evaluation to develop the Parrot Feathers lode via underground mining. The company continues to
progress negotiations with parties interested in a tribute type of underground mining development of the
Parrot Feathers lode.
5
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Review of Operations (Cont’d)
Kurnalpi Project (100% KGM)
The company’s wholly owned Kurnalpi project is located some 90km to the east of Kalgoorlie and covers
approximately 100km2 centered on the historical Kurnalpi townsite. Kurnalpi was the site of a major alluvial
gold rush in the late 1890’s, was exploited in the mid 1980’s by modern alluvial mining and continues to
yield gold nuggets to this day over a wide area by prospectors who work the company’s ground under
agreement. Numerous small historical gold workings are located throughout the Kurnalpi area but a
primary source to the extensive alluvial gold areas is yet to be located. The company considers the
Kurnalpi Project to have the core geological, geophysical, geochemical and structural characteristics that
are required to host major Archaean orogenic lode gold deposits, and has initiated work to progress
exploration over this high priority area.
In March 2015 the company engaged Core Geophysics to commence a geophysical interpretation of the
Kurnalpi area using all available open file company and Government aeromagnetic data sets that were
merged to create a seamless mosaic over the wider area surrounding the interpretation block. The
purpose of the interpretation was to deliver both a significantly improved geological and structural
framework of Kurnalpi, but also a range of ranked target areas considered prospective for gold
mineralisation that would assist the prioritisation and focusing of future exploration. On 20 July 2015 the
company reported the completion of the interpretation and targeting compilation with the delivery of an
advanced geological and structural interpretation map of the Kurnalpi District at a 1:25000 scale. In addition
a range of targets were identified from the interpretation that are considered prospective for gold
mineralisation and five top tier targets were selected after field inspection. These high priority targets have
been selected for follow up evaluation by drilling, mapping and geophysical surveys in 2016.
Prospecting for surface gold by independent individuals under agreement with the company over most of
the Kurnalpi tenements continued throughout the year. This activity whilst being at no cost to the company
provides small revenue from a share of the gold nuggets won, but most importantly the expenditure for the
work undertaken on each tenement by the prospectors is additional to that by the company to support the
annual commitment required to maintain the tenements in good standing. The geological information
obtained from the location and texture of the nuggets in the surface weathering profile also provides data
that can contribute to targeting the source of this alluvial gold. The company plans to initiate detailed
research into the source of the gold nuggets at Kurnalpi in 2016 with the aim of providing vectors to the
primary source or sources.
Kalpini Project (100%KGM)
The company’s wholly owned Kalpini project is located some 60km to the north east of Kalgoorlie and
23km east of the Lindsays gold project. The project consists of three tenements one of which is a mining
lease centered on the historical Atlas gold workings which were operating in the early 1900’s, but also the
smaller nearby Camelia and Gambia prospects. Substantial reverse circulation (RC) and minor diamond
drilling by the company at Kalpini during the period 2009-2012 supported the delineation of a mineral
resource estimate (JORC 2004 Compliant) of 4.6Mt @1.7g/t Au for 255, 600oz (refer ASX announcement
dated 24 October 2012). The resource is covered by a single granted Mining Lease and is linked to
Saracen Mineral Holdings (ASX:SAR) Carosue Dam haul and access road 5.5km to the north by a granted
miscellaneous license, which can be used as a future haul road route if required.
The company resumed exploration at Kalpini in April 2015 and completed a five hole programme of infill
reverse circulation (RC) precollared diamond holes along the Gambia-Camelia Trend. An aggregate 508m
was drilled in five holes, four of which were new holes, the fifth being a re-entry of a hole drilled in 2012
(KPDD009-012, KPRCD371). The programme was specifically designed to provide further geological and
structural controls on the flat dipping mineralisation to support future upgrading of the resource estimate to
JORC 2012 compliance. Each of the holes intersected the narrow mineralised lodes, the best intercept
being 1.45m from 117.55m at 15.2g/t Au in hole KPRCD371. The assay results received coupled with the
structural data interpreted from the drill core confirm the flat dipping high grade nature of the lodes at
Gambia and Camelia with the information providing confidence in the current geological interpretation .
The April 2015 drilling campaign at Kalpini is part of the company’s strategy to realize value from its
existing resource base through development. The information from the drilling will be incorporated into the
Kalpini resource model to aid in refining the model and supporting reporting to JORC 2012 compliance.
Resource modelling and targeting for additional styles of gold mineralisation at Kalpini will be pursued in
2016.
6
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Review of Operations (Cont’d)
Spargoville Project (100% KGM)
The Spargoville Project is located approximately 50km to the south west of Kalgoorlie and 30km west of
Kambalda and consists of 16 semi-contiguous tenements over a 25km north and south strike. The Lady
Allison gold resource, located on a Mining Lease is the core asset in the tenement portfolio with an inferred
resource estimate of 2.13Mt at 1.3g/t Au. Work completed during the year consisted of rehabilitation of the
drill sites for drilling completed during 2014.
In December 2012 the company announced the execution of a farm-out agreement with Mithril Resources
Limited (“Mithril” & ASX: MTH) for exploration over the Spargoville Project. During 2014 Mithril earned a
20% interest in the tenements after having completed the stage 1 expenditure of $0.32 million and made an
election to proceed toward earning an additional 60% interest (stage 2 commitment). On 11 March 2015
Mithril notified the company of its withdrawal from the Spargoville Farm-In and Joint Venture with an
effective date of 11 May 2015. Mithril also elected to return its 20% interest to KalNorth for no
consideration, and from the effective date KalNorth resumed 100% ownership of the project.
The Spargoville Project is not considered a priority for exploration in 2016 and the company will likely seek
other interested parties for joint venture or outright sale.
Significant Changes in the State of Affairs
There was a reduction to the consolidated entity’s resource and reserve base after adjustments to the
Lindsays resource were made in the course of compiling the Parrot Feathers lode, and the removal of the
Mt. Jewell resource and reserve following the divestment of the project. No changes were made to the
other resources or reserves.
Except for the matters mentioned in the Review of Operations above, there have been no significant
changes in the state of affairs of the consolidated entity during the current year.
Dividends Paid or Recommended
The Directors do not recommend the payment of a dividend and no dividends have been paid or declared
since the end of the last financial year.
Significant Events after the Reporting Date
Since the end of the financial year and to the date of this report no matter or circumstance has arisen which
has significantly affected, or may significantly affect, the operations of the consolidated entity, the results of
those operations or the state of affairs of the consolidated entity in subsequent financial years other than
the matters referred to below.
(a) On 31 August 2015 and 11 September 2015, binding agreements were entered into with Renergy Pty
Ltd, South Victory Global Limited, Smarter Group (Australia) Pty Ltd and Mr John McKinstry, as a result
of which principal amounts and all outstanding interest (accruing up to the date immediately prior to the
date of issue of shares by the Company) owed to these parties will be settled by issue of shares at an
issue price of $0.01 each. At 30 June 2015, the principal and interest amounts due to these parties
amounted to $4.35 million.
(b) On 15 September 2015, a convertible note facility agreement was entered into with the Company’s
largest shareholder, Cross-Strait, under the terms of which the Company will be able to draw down up
to $2 million. As at the date of the financial report $0.3m was received from Cross-Strait. Cross-Strait
will have the right to convert all or part of the amounts drawn down under the facility into shares in the
Company at an issue price of $0.01 per share. The facility will have a maturity date of 30 April 2017.
7
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Significant Events after the Reporting Date (Cont’d)
(c) On 29 July 2015, the Company issued a prospectus for a non-renounceable entitlement offer of shares
at $0.01 each. The rights offer has closed, however the issue of shares has not been completed as the
Company is required to give applicants an opportunity to withdraw their applications on or before 16
October 2015. On 27 August 2015, the Company announced acceptances have been received for
44,730,803 shares. Assuming no material applications for the rights offer are withdrawn, an amount of
approximately $0.4 million is expected to be raised when the Company completes the rights issue on
19 October 2015.
The completion of the transactions referred to in (a) and (b) above is subject to shareholder and other
regulatory approvals which must be obtained by 30 November 2015 (unless the parties agree to an
extension).
Likely Developments and Expected Results
The company intends to remain focused on adding value through ongoing exploration activities at its main
projects and may seek alliance partners to fast track development of existing resource assets.
Environmental Issues
The consolidated entity is subject to significant environmental regulation in respect of its exploration
activities.
The consolidated entity aims to ensure the appropriate standard of environmental care is achieved and, in
doing so, comply with all environmental legislation. The directors of the consolidated entity are not aware
of any breach of environmental legislation for the year under review.
Meetings of Directors
During the financial year 13 meetings of Directors were held. Attendances by each Director during the year
were as follows:
Directors’ Meetings
Number of meetings
eligible to attend
Number
attended
Lijun Yang
Jiajun Hu
Yuanguang Yang
Brendon Connell (resigned 28/8/2014)
13
13
10
3
13
13
9
3
¹There were no Audit or Remuneration Committee meetings held, with all matters dealt with by the Board
as a whole.
Options
At the date of this report, there were no unissued ordinary shares of KalNorth Gold Mines Limited under
option (2014: 25,000,000).
During the year ended 30 June 2015 and to the date of this report, no shares were issued on the exercise
of options (2014: nil).
Risk Management
The Board is responsible for ensuring that risks and opportunities are identified in a timely manner and that
activities are aligned with the risks and opportunities identified by the Board.
8
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Risk Management (Cont’d)
The consolidated entity believes that it is crucial for all Board members to be a part of this process and, as
such, the Board has not established a separate risk management committee, but considers these matters
at Board meetings.
The Board has a number of mechanisms in place to ensure that management’s objectives and activities
are aligned with the risks identified by the Board. These include Board approval of a strategic plan which
encompasses strategy statements designed to meet stakeholders needs and manage business risk, and
implementation of Board approved operating plans and budgets and the monitoring thereof.
Remuneration Report (Audited)
This report outlines the remuneration arrangements in place for Directors and executives of the
consolidated entity.
Remuneration Policy
The remuneration policy of KalNorth Gold Mines Limited has been designed to align Director and executive
objectives with shareholder and business objectives by providing a fixed remuneration component and
offering specific long-term incentives based on key performance areas affecting the consolidated entity’s
ability to attract and retain the best Directors and executives to run and manage the consolidated entity.
The Board’s policy for determining the nature and amount of remuneration for Board members and senior
executives of the consolidated entity is as follows:
The remuneration policy setting out the terms and conditions for executive directors and other senior
executives was developed by the Board. All executives receive a base salary (which is based on factors
such as the length of service and experience) and superannuation. The Board reviews executive packages
annually by reference to the consolidated entity’s performance, executive performance, and comparable
information from industry sectors and other listed companies in similar industries.
The Board may exercise discretion in relation to approving incentives, bonuses, and options. The policy is
designed to attract the highest calibre of executives and reward them for performance that results in long-
term growth in shareholder wealth.
All remuneration paid to Directors and executives is valued at the cost to the consolidated entity and
expensed.
Executives are also entitled to participate in the employee share and option arrangements. Shares given to
Directors and executives are valued as the difference between the market price of those shares and the
amount paid by the Director or executive. Options are valued using the Black-Scholes methodology.
Performance-Based Remuneration
The consolidated entity currently has no compulsory performance-based remuneration component built into
Director and executive remuneration packages. However, performance-based bonuses may be awarded
from time to time at the discretion of the Board, and this will be dependent on individual performance linked
to the consolidated entity’s strategic objectives for that period.
In the current year, no bonuses were paid or declared.
Non-Executive Director Remuneration
The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to
attract and retain Directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.
The Board considers the fees paid to non-executive Directors of comparable companies when undertaking
the annual review process. Independent advice is obtained when considered necessary to confirm that
remuneration is in line with market practice. Each Director may receive a fee for being a Director of the
Company.
9
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Remuneration Report (Cont’d)
Non-executive Directors may also receive performance rights (subject to shareholder approval) as it is
considered an appropriate method of providing sufficient reward whilst maintaining cash reserves.
Relationship between Remuneration Policy and Consolidated Entity Performance
The remuneration policy has been tailored to increase goal congruence between shareholders and
Directors and executives. From time to time, this is facilitated through the issue of options to the majority of
directors and executives to encourage the alignment of personal and shareholder interests. The
consolidated entity believes this policy will be effective in increasing shareholder wealth.
Key management personnel service agreements
Details of the key conditions of service agreements for key management personnel are as follows:
Lijun Yang
Wade Johnson
Commencement
Date
01/08/2013
24/03/2014
Notice Period
Base Salary
1 month
1 month
Base Salary
$80,0001
$150,0001
Termination
Payments
Provided
-
-
¹Entitled to statutory superannuation contributions
There are no other agreements with key management personnel.
10
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
DIRECTORS’ REPORT
Remuneration Report (Cont’d)
Remuneration Details for the Year Ended 30 June 2015
(a)
Key management personnel compensation:
2015
Name
Short-term benefits
Post-employment benefits
Share-based
payment
Salary, fees
and leave
$
Non- Cash
bonus
$
Non-monetary
benefits
$
Super-
annuation
Retirement
benefits
Options
Others
Total
$
$
$
$
$
Directors
Lijun Yang
Jiajun Hu
Yuanguang Yang1
Brendan Peter Connell 2
Other key management personnel
Wade Johnson3
Total
80,000
54,166
23,753
-
183,491
341,410
-
-
-
-
-
-
-
-
-
-
-
-
7,600
7,521
-
-
19,967
35,088
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87,600
61,687
23,753
-
26,689
26,689
230,148
403,188
1 Mr. Yuanguang Yang was appointed 28 August 2014.
2 Mr. Connell resigned on 28 August 2014.
3 Mr Johnson received an additional $33,491 in salary in lieu of forgoing a portion of his accrued annual leave entitlements.
11
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
DIRECTORS’ REPORT
Remuneration Report (Cont’d)
2014
Name
Directors
Lijun Yang1
Jiajun Hu2
Yuanguang Yang3
Brendan Peter Connell 4
Laurence Freedman5
Robert Schuitema6
Jian Yu8
John McKinstry8
Other key management personnel
James Church9
Wade Johnson
Total
Short-term benefits
Post-employment benefits
Share-based
payment
Salary, fees
and leave
$
Non- Cash
bonus
$
Non-monetary
benefits
$
Super-
annuation
Retirement
benefits
Options
Others
Total
$
$
$
$
$
65,846
25,000
-
15,000
-
65,333
-
-
15,000
292,674
478,853
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,091
-
-
-
-
6,043
-
-
-
27,072
39,206
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93,6007
-
-
-
-
93,600
71,937
25,000
-
15,000
-
164,976
-
-
15,000
319,746
611,659
1 Mr. Lijun Yang was appointed to the board on 8 November 2013 and as Company Secretary on 29 August 2014 (post year-end).
2 Mr. Jiahun Hu was appointed to the board on 13 December 2013
3 Mr. Yuanguang Yang was appointed to the board on 28 August 2014
4 Mr. Connell was appointed to the board on 25 February 2014 and resigned on 28 August 2014 (post year-end).
5 Mr Laurence Freedman retired from the board on 8 November 2013.
6 Mr. Schuitema resigned from the board on 25 February 2014
7 Mr. Schuitema was paid $93,600 in consulting fees during the year.
8
Mr. Jian Yu resigned from the board on 13 December 2013
8 Mr. McKinstry resigned from the board on 2 August 2013.
9 Mr. Church was appointed on 25 February 2014 and resigned on 29 August 2014 (post year-end).
12
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
DIRECTORS’ REPORT
Remuneration Report (Cont’d)
Share-based payment compensation
To ensure that the consolidated entity has appropriate mechanisms to continue to attract and retain the
services of Directors and Executives of a high calibre, the consolidated entity has a policy of issuing
options that are exercisable in the future at a certain fixed price.
No options were granted to Directors or key management personnel during the year ended 30 June 2015
(2014: nil).
Key management personnel shareholdings
The number of ordinary shares in KalNorth Gold Mines Limited held by each key management personnel of
the consolidated entity during the financial year is as follows:
2015
Directors
Balance
1 July 2014
Granted as
Remuneration
Options
Exercised
Net Change
Other
Balance
30 June 2015
Lijun Yang
Jiajun Hu
Yuanguang Yang
Brendan Peter Connell1
31,400
-
-
-
Other
Wade Johnson
Total
2,000,000
2,031,400
1 Mr. Connell resigned on 28 August 2014.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31,400
-
-
-
(990,000)
(990,000)
1,010,000
1,041,400
Key management personnel option holdings
No options were granted or held by key management personnel in the current or prior year.
Loans to key management personnel and their related parties
There were no loans outstanding at the reporting date to key management personnel and their related parties.
Use of Remuneration Consultants
The Company did not use any remuneration consultants during the period.
END OF REMUNERATION REPORT
13
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
DIRECTORS’ REPORT
Indemnification and Insurance of Officers and Auditors
The Company’s Constitution requires it to indemnify Directors and officers of any entity within the
consolidated entity against liabilities incurred to third parties and against costs and expenses incurred in
defending civil or criminal proceedings, except in certain circumstances. An indemnity is also provided to
the Company’s auditors under the terms of their engagement. Directors and officers of the consolidated
entity have been insured against all liabilities and expenses arising as a result of work performed in their
respective capacities, to the extent permitted by law. The insurance premium relates to:
•
costs and expenses incurred by the relevant officers in defending proceedings, whether civil or
criminal and whatever the outcome;
• other liabilities that may arise from their position, with the exception of conduct involving a wilful
breach of duty or improper use of information or position to gain a personal advantage.
Proceedings on Behalf of Company
No person has applied for leave of the Court to bring proceedings on behalf of the company or intervene in
any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the
company for all or any part of those proceedings. The company was not a party to any such proceedings
during the year.
Non-Audit Services
The Board of Directors is satisfied that the provision of non-audit services during the year is compatible
with the general standard of independence for auditors imposed by the Corporations Act 2001. The
Directors are satisfied that the services disclosed below did not compromise the external auditor’s
independence for the following reasons:
• all non-audit services are reviewed and approved by the Board prior to commencement to ensure
they do not adversely affect the integrity and objectivity of the auditor; and
•
the nature of the services provided does not compromise the general principles relating to auditor
independence in accordance with APES 110: Code of Ethics for Professional Accountants set by
the Accounting Professional and Ethical Standards Board.
The following fees were paid or payable to RSM Bird Cameron for non-audit services:
Taxation services
Other taxation services – R&D return and lodgment assistance
2015
$
9,000
48,659
57,659
2014
$
17,350
72,783
90,133
Officers of the company who are former audit partners of RSM Bird Cameron Partners
There are no officers of the company who are former audit partners of RSM Bird Cameron Partners.
Auditor’s Independence Declaration
The auditor, RSM Bird Cameron Partners, has provided the Board of Directors with an independence
declaration in accordance with section 307C of the Corporations Act 2001.
The independence declaration is located on the next page.
14
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
DIRECTORS’ REPORT
The Report of Directors, incorporating the Remuneration Report, is signed pursuant to section 298(2) (a) of
the Corporations Act 2001 in accordance with a resolution of the Board of Directors.
Lijun Yang
Executive Director
Dated at Perth this 30th day of September 2015
15
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
For the year ended 30 June 2015
Revenue from gold sales
Cost of sales
Gross profit / (loss)
Other income
Director and corporate employee costs
Professional fees and consultants
Advertising and promotion cost
Depreciation expenses
Listing and registry fees
Exploration costs
Impairment expense
Interest expense
Other administration expenses
Loss before income tax
Income tax benefit
Loss after income tax for the year
Note
2015
$
2014
$
9,295
5,211,564
-
(5,520,582)
9,295
(309,018)
1,463,771
(178,812)
(303,285)
(5,945)
(114,913)
(29,047)
(794,899)
-
(563,765)
(256,851)
2,545,953
(430,498)
(184,228)
(25,636)
(217,914)
(38,030)
(805,489)
(10,124,900)
(726,013)
(447,710)
(774,451)
-
(774,451)
(10,763,483)
-
(10,763,483)
3
8
4
5
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Movement in fair value of available for sale investments
Other comprehensive income for the year, net of tax
-
-
8,076
8,076
Total comprehensive loss for the year
(774,451)
(10,755,407)
Loss per share
Basic and diluted loss per share (cents)
17
(0.28)
(5.28)
The accompanying notes form an integral part of these financial statements.
16
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2015
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total Current Assets
Non-Current Assets
Property, plant and equipment
Exploration and evaluation expenditure
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Interest bearing liabilities
Total Current Liabilities
Non-Current Liabilities
Restoration provision
Total Non-Current Liabilities
TOTAL LIABILITIES
Note
2015
$
2014
$
19 (b)
6
7
238,640
15,993
7,500
262,133
128,867
32,503
34,548
195,918
8
9
389,920
7,147,846
7,537,766
504,833
8,035,398
8,540,231
7,799,899
8,736,149
10
11
12
122,785
4,764,557
4,887,342
1,231,834
4,891,788
6,123,622
1,148,358
1,148,358
1,099,370
1,099,370
6,035,700
7,222,992
NET ASSETS
1,764,199
1,513,157
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
13
14
76,251,722
-
(74,487,523)
75,226,229
1,334,418
(75,047,490)
1,764,199
1,513,157
The accompanying notes form an integral part of these financial statements.
17
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2015
Issued
Capital
$
Accumulated
Losses
$
Financial
assets
reserve
$
Share
payment
reserve
$
Total
Equity
$
2014
As at 1 July 2013
74,603,464
(65,814,380)
(8,076)
2,864,791
11,645,799
(10,763,483)
-
-
8,076
(10,763,483)
8,076
-
-
-
(10,763,483)
8,076
(10,755,407)
Loss after income tax for the year
Movement in fair value of
available for sale investments
Total comprehensive income for
the year, net of tax
Transfer of expired share option
costs
Shares issued during the year,
net of costs
-
-
-
-
As at 30 June 2014
75,226,229
(75,047,490)
1,530,373
622,765
-
-
-
-
(1,530,373)
-
-
622,765
1,334,418
1,513,157
75,226,229
(75,047,490)
- 1,334,418
1,513,157
2015
As at 1 July 2014
Loss after income tax for the year
Total comprehensive income for the
year, net of tax
Transfer of expired share option
costs
Shares issued during the year, net of
costs
-
-
-
(774,451)
(774,451)
1,334,418
1,025,493
-
As at 30 June 2015
76,251,722
(74,487,523)
-
-
-
-
-
-
-
(774,451)
(774,451)
(1,334,418)
-
-
-
-
1,764,199
The accompanying notes form an integral part of these financial statements.
18
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2015
Note
2015
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Research and development tax refund
Interest received
Interest paid
Refund of office security bond
Net cash used in operating activities
19(a)
$
25,890
(788,237)
533,785
6,923
(13,325)
27,050
(207,914)
2014
$
6,074,603
(9,580,175)
2,377,491
21,392
(72,645)
-
(1,179,334)
Cash flows from investing activities
Proceeds from sale of investments
Proceeds from sale of tenements
Proceeds from sale of plant and equipment
Payment for mine tenements
Payments for plant and equipment
Payment for mineral exploration activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from borrowings – convertible loan
Net cash provided by financing activities
-
1,800,000
-
(1,050,000)
-
(782,313)
(32,313)
8,993
12,500
269,173
(1,200,000)
(27,033)
(805,489)
(1,741,856)
-
350,000
350,000
622,765
-
622,765
Net increase / (decrease) in cash held
Cash and cash equivalents at the beginning of the financial year
109,773
128,867
(2,298,425)
2,427,292
Cash and cash equivalents at the end of the financial year
19(b)
238,640
128,867
The accompanying notes form an integral part of these financial statements.
19
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies
The financial statements cover KalNorth Gold Mines Limited (“KalNorth” “Company”) as a consolidated
entity consisting of KalNorth Gold Mines Limited and the entities it controlled at the end of, or during, the
year. The financial statements are presented in Australian dollars, which is KalNorth's functional and
presentation currency.
The financial report was authorised for issue on 30 September 2015 by the Board of Directors.
Basis of preparation
The financial statements are general purpose financial statements that have been prepared in accordance
Interpretations, other authoritative
with Australian Accounting Standards, Australian Accounting
pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in
financial statements containing relevant and reliable information about transactions, events and conditions.
Compliance with Australian Accounting Standards ensures that the financial statements and notes also
comply with International Financial Reporting Standards as issued by the IASB. Material accounting
policies adopted in the preparation of these financial statements are presented below and have been
consistently applied unless otherwise stated.
The financial statements have been prepared on an accruals basis and are based on historical costs,
modified, where applicable, by the measurement at fair value of selected non-current assets, financial
assets and financial liabilities.
Going Concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of
normal business activities and the realisation of assets and discharge of liabilities in the normal course of
business.
As disclosed in the financial statements, the Company and consolidated entity had net current liabilities of
$4,625,209 at 30 June 2015, incurred a net loss of $774,551 and had net cash flows from operating
activities of $207,914 for the year then ended.
The Directors believe that it is reasonably foreseeable that the company and the consolidated entity will
continue as going concerns and that it is appropriate to adopt the going concern basis in the preparation of
the financial report after consideration of the following factors which are disclosed in events subsequent to
reporting date (Note 27):
(a) As disclosed in Note 11, secured and unsecured loans as at 30 June 2015 are $3.50 million and $0.70
million, respectively. Interest payable was $0.17 million and $0.03 million, respectively. Subsequent to
balance date, binding agreements were entered into with secured lenders Renergy Pty Ltd and South
Victory Global Limited as well as unsecured lenders Smarter Group (Australia) Pty Ltd and Mr John
McKinstry, as a result of which $3.50 million of secured debt plus interest payable and $0.65 million of
unsecured debt plus interest payable as at 30 June 2015 is proposed to be settled through the
issuance of company shares at an issue price at $0.01 share each;
(b) On 15 September 2015, a convertible note facility agreement was entered into with the Company’s
largest shareholder, Cross-Strait, under the terms of which the Company will be able to draw down up
to $2 million. As at the date of the financial report $0.3m was received from Cross-Strait. Cross-Strait
will have the right to convert all or part of the amounts drawn down under the facility into shares in the
Company at an issue price of $0.01 per share. The facility will have a maturity date of 30 April 2017;
and
20
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies (cont’d)
Going Concern (cont’d)
(c) On 29 July 2015, the Company issued a prospectus for a non-renounceable entitlement offer of shares
at $0.01 each. The rights offer has closed, however the issue of shares has not been completed as the
Company is required to give applicants an opportunity to withdraw their applications on or before 16
October 2015. On 27 August 2015, the Company announced acceptances have been received for
44,730,803 shares. Assuming no material applications for the rights offer are withdrawn, an amount of
approximately $0.4 million is expected to be raised when the Company completes the rights issue on
19 October 2015.
The completion of the transactions referred to in (a) and (b) above is subject to shareholder and other
regulatory approvals which must be obtained by 30 November 2015 (unless the parties agree to an
extension).
As disclosed in Note 11, as at 30 June 2015 the convertible note facility totals $350,000. The convertible
note facility is with Gold Fresh Limited and has a maturity date of 5 March 2016 and, subject to completion
of the transaction referred to in (a) above, the Company is seeking Gold Fresh’s agreement to convert the
convertible note to shares rather than require redemption.
The Company has the intent and ability to curtail corporate and administration cash outflows.
Adoption of new and revised standards
Changes in accounting policies on initial application of Accounting Standards
In the year ended 30 June 2015, the Group has reviewed and adopted all of the new and revised
Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the
current annual reporting period.
The Group has also reviewed all new Standards and Interpretations that have been issued but are not yet
effective for the year ended 30 June 2015. As a result of these reviews the Directors have determined that
there is no impact, material or otherwise, of the new and revised Standards and Interpretations on its
business and, therefore, no change is necessary to Group accounting policies.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the
consolidated entity only. Supplementary information about the parent entity is disclosed in Note 26.
Principles of consolidation
The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by
KalNorth Gold Mines Limited at the end of the reporting period. A controlled entity is any entity over which
KalNorth Gold Mines Limited has the ability and right to govern the financial and operating policies so as to
obtain benefits from the entity’s activities.
Where controlled entities have entered or left the Group during the year, the financial performance of those
entities is included only for the period of the year that they were controlled. A list of controlled entities is
contained in Note 21 to the financial statements.
In preparing the consolidated financial statements, all inter-group balances and transactions between
entities in the consolidated group have been eliminated in full on consolidation.
21
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies (cont’d)
Principles of consolidation (cont’d)
Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent,
are reported separately within the equity section of the consolidated statement of financial position and
statement of comprehensive income. The non-controlling interests in the net assets comprise their
interests at the date of the original business combination and their share of changes in equity since that
date.
Operating Segments
Operating segments are presented using the 'management approach', where the information presented is
on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The
CODM is responsible for the allocation of resources to operating segments and assessing their
performance.
Income tax
The income tax expense (income) for the year comprises current income tax expense (income) and deferred
tax expense (income).
Current income tax expense charged to the profit of loss is the tax payable on taxable income calculated
using applicable income tax rates enacted, or substantially enacted, as at reporting date. Current tax liabilities
(assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation
authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances
during the year as well as unused tax losses.
Current and deferred income tax expense (income) is charged or credited directly to equity instead of profit or
loss when the tax related to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also
result where amounts have been fully expensed but future tax deductions are available. No deferred
income tax will be recognised from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled, based on tax rates enacted or substantially enacted at
reporting date. Their measurement also reflects the manner in which management expects to recover or
settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the
extent that it is probable that future taxable profit will be available against which the benefits of the deferred
tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint
ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the
temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable
future.
Current tax assets and liabilities are offset where a largely enforceable right of set-off exists and it is
intended that net settlement or simultaneous realisation and settlement of the respective asset and liability
will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the
deferred tax assets and liabilities related to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous
realisation and settlement of the respective asset and liability will occur in future periods in which significant
amounts of deferred tax assets or liabilities are expected to be recovered or settled.
22
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies (cont’d)
Mining tenements and exploration and evaluation expenditure
Mining tenements are carried at cost, less accumulated impairment losses.
Exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable
area of interest. These costs are only carried forward to the extent that they are expected to be recouped
through the successful development of the area or where activities in the area have not yet reached a stage
that permits reasonable assessment of the existence of economically recoverable reserves. Accumulated
costs in relation to an abandoned area are written off in full against profit in the year in which the decision to
abandon the area is made.
When production commences, the accumulated costs for the relevant area of interest are amortised over the
life of the area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry
forward costs in relation to that area of interest.
Costs of site restoration are provided over the life of the facility from when exploration commences and are
included in the costs of that stage. Site restoration costs include the dismantling and removal of mining plant,
equipment and building structures, waste removal, and rehabilitation of the site in accordance with clauses of
the mining permits. Such costs have been determined using estimates of future costs, current legal
requirements and technology on an undiscounted basis.
Any changes in the estimates for the costs are accounted on a prospective basis. In determining the costs of
site restoration, there is uncertainty regarding the nature and extent of the restoration due to community
expectations and future legislation. Accordingly the costs have been determined on the basis that the
restoration will be completed within one year of abandoning the site.
Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the
asset, but not the legal ownership that are transferred to the economic entity, are classified as finance
leases.
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group
as lessee are classified as operating leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave
expected to be settled within 12 months of the reporting date are recognised in current liabilities in respect
of employees' services up to the reporting date and are measured at the amounts expected to be paid
when the liabilities are settled.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are
incurred.
23
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies (cont’d)
Property, plant and equipment
Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any
accumulated depreciation and impairment losses.
Property
Freehold land and buildings are measured on the cost basis less depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not
in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis
of the expected net cash flows that will be received from the assets employment and subsequent disposal.
The expected net cash flows have been discounted to their present values in determining recoverable
amounts.
Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to the
group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to
the statement of comprehensive income during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding
freehold land, is depreciated on a straight-line basis over the useful lives to the consolidated entity
commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of fixed asset
Plant and equipment
Buildings
Motor vehicles
IT assets
Depreciation rate
10-33%
10%
25%
33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting
date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These
gains and losses are included in the statement of comprehensive income or loss. When revalued assets
are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained
earnings.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current
classification.
An asset is current when: it is expected to be realised or intended to be sold or consumed in normal
operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve
months after the reporting period; or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least twelve months after the reporting period. All other assets
are classified as non-current.
24
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies (cont’d)
Current and non-current classification (cont’d)
A liability is current when: it is expected to be settled in normal operating cycle; it is held primarily for the
purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least twelve months after the reporting
period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Financial instruments
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity
becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for
financial assets that are delivered within timeframes established by marketplace convention.
Financial instruments are initially measured at fair value plus transactions costs where the instrument is not
classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair
value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified
and measured as set out below.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is
transferred to another party whereby the entity no longer has any significant continuing involvement in the
risks and benefits associated with the asset. Financial liabilities are derecognised where the related
obligations are either discharged, cancelled or expire. The difference between the carrying value of the
financial liability extinguished or transferred to another party and their fair value of consideration paid,
including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
Classification and subsequent measurement
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are subsequently measured at amortised cost using the effective interest rate
method.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated as such or
that are not classified in any of the other categories. They comprise investments in the equity of other entities
where there is neither a fixed maturity nor fixed or determinable payments.
Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised
cost using the effective interest rate method.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective
evidence that a financial asset or group of financial assets is impaired. Objective evidence includes
significant financial difficulty of the issuer or obligor; a breach of contract such as default or delinquency in
payments; the lender granting to a borrower concessions due to economic or legal reasons that the lender
would not otherwise do; it becomes probable that the borrower will enter bankruptcy or other financial
reorganisation; the disappearance of an active market for the financial asset; or observable data indicating
that there is a measurable decrease in estimated future cash flows.
25
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies (cont’d)
Impairment of financial assets (cont’d)
The amount of the impairment allowance for financial assets carried at cost is the difference between the
asset's carrying amount and the present value of estimated future cash flows, discounted at the current
market rate of return for similar financial assets.
Available-for-sale financial assets are considered impaired when there has been a significant or prolonged
decline in value below initial cost. Subsequent increments in value are recognised in other comprehensive
income through the available-for-sale reserve.
Fair value
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date; and assumes that
the transaction will take place either: in the principle market; or in the absence of a principal market, in the
most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming they act in their economic best interest. For non-financial assets, the fair value
measurement is based on its highest and best use. Valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to measure fair value, are used, maximising the
use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. Classifications are reviewed each
reporting date and transfers between levels are determined based on a reassessment of the lowest level
input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal
expertise is either not available or when the valuation is deemed to be significant. External valuers are
selected based on market knowledge and reputation. Where there is a significant change in fair value of an
asset or liability from one period to another, an analysis is undertaken, which includes a verification of the
major inputs applied in the latest valuation and a comparison, where applicable, with external sources of
data.
Impairment of non-financial assets
At each reporting date, the group reviews the carrying values of its tangible and intangible assets to
determine whether there is any indication that those assets have been impaired. If such an indication
exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and
value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its
recoverable amount is expensed to the comprehensive statement of income.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount
of the asset is reduced to its recoverable amount. An impairment loss is recognised in profit or loss
immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated
as a revaluation decrease. 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 prior years. A reversal of an impairment loss is
recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the
reversal of the impairment loss is treated as a revaluation increase.
26
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies (cont’d)
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term
highly liquid investments with original maturities of three months or less, and bank overdrafts.
Trade and Other Receivables
Trade and other receivables include amounts due from customers for goods sold and services performed in
the ordinary course of business. Receivables expected to be collected within 12 months of the end of the
reporting period are classified as current assets. All other receivables are classified as non-current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any provision for impairment.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises all direct materials,
direct labour and an appropriate portion of variable and fixed overheads. Fixed overheads are allocated on
the basis of normal operating capacity. Costs are assigned to inventories using the first-in-first-out basis.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated
cost of completion and selling expenses.
Trade and Other Payables
Trade and other payables represent the liabilities for goods and services received by the entity that remain
unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts
normally paid within 30 days of recognition of the liability.
Provision for restoration
Costs of site restoration are recognised in full at present value as a non-current liability and an equivalent
amount capitalised as part of the cost of the asset when an obligation arises to decommission or restore a
site to a certain condition after abandonment as a result of bringing the assets to their present location. The
capitalised cost is amortised over the life of the project and the provision is accredited periodically as the
discounting of the liability unwinds. The unwinding of the discount is recorded as interest expense.
Site restoration costs include the dismantling and removal of mining plant, equipment and building
structures, waste removal and rehabilitation of the site in accordance with clauses of the mining permits.
Such costs are determined using estimates of future costs, current legal requirements and technology on
an undiscounted basis.
Any changes in the estimates for the costs are accounted for on a prospective basis. In determining the
costs of site restoration there is uncertainty regarding the nature and extent of the restoration due to
community expectations and future legislation. Accordingly the costs are determined on the basis that
restoration will be completed within one year of abandoning a site.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction
costs. They are subsequently measured at amortised cost using the effective interest method. Where there is
an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of
GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables
and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented
in the cash flow statement on a gross basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.
27
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies (cont’d)
Revenue
Sale of gold
Revenue from sale of gold is recognised when the significant risks and rewards of ownership have passed
to the buyer and can be reliably measured. Risks are considered passed to buyer when the customer takes
possession of the ore, however, revenue is not reliably measurable until that ore has been processed.
Therefore revenue from the sale of ore is recognised upon processing.
Interest income
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to
the financial assets.
Share-based payment transactions
The consolidated entity provides benefits to employees (including senior executives) in the form of share-
based payments, whereby employees render services in exchange for shares or rights over shares (equity
settled transactions). The consolidated entity does not provide cash settled share based payments.
The cost of equity settled transactions with employees are measured by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by reference to the
market price of the consolidated entity’s shares on the Australian Stock Exchange. The cost of equity
settled transactions are recognised, together with a corresponding increase in equity, over the period in
which the service conditions are fulfilled, ending on the date on which the relevant employees become fully
entitled to the award (the vesting period).
The cumulative expense recognised for equity settled transactions at each reporting date until vesting date
reflects the extent to which the vesting period has expired, and the consolidated entity’s best estimate of
the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period
represents the movement in cumulative expense recognised for the period.
No cumulative expense is recognised for awards that ultimately do not vest (in respect of non-market
vesting conditions).
Contributed equity
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. Incremental costs directly
attributable to the issue of new shares or options for the acquisition of a business are not included in the
cost of the acquisition as part of the purchase consideration.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the consolidated
entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of
ordinary shares outstanding during the financial year.
Diluted earnings per share
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.
28
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 1: Statement of Significant Accounting Policies (cont’d)
Comparative figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
Finance costs
Finance costs are expensed in the period in which they are incurred.
Note 2: Critical accounting estimates and judgments
The Directors evaluate estimates and judgments incorporated into the financial report based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of future
events and are based on current trends and economic data, obtained both externally and within the group.
The critical accounting estimates and judgments are:
Restoration provision
The Company is required to ensure that appropriate rehabilitation is carried out on tenements that are
mined. The amount of rehabilitation cost is an estimate based upon the estimated life of each mined
tenement, as well as the future timing and cost of such rehabilitation. The provision is constantly revised as
information about the life of mine, type of mining and cost estimates are updated.
Deferred exploration and evaluation expenditure
Exploration and evaluation costs are carried forward where right of tenure of the area of interest is current.
These costs are carried forward in respect of an area that has not at statement of financial position date
reached a stage that permits reasonable assessment of the existence of economically recoverable reserves,
refer to the accounting policy stated in Note 1.
Note 3: Other income
Interest received on cash deposits
Refundable R&D tax offset
Gain on sale of tenements (i)
Profit on sale of property, plant and equipment
Other income
Total other income
2015
$
6,923
533,785
913,460
103
9,500
1,463,771
2014
$
6,194
2,377,491
12,500
148,154
1,614
2,545,953
(i) On 7 November 2014, the Company settled its sale of the Mount Jewell project in the Goldfields
region, Western Australia. The gain on sale consisting of the following components;
Proceeds from sale (exclusive of GST)
Deferred purchase consideration - early payment discount (Note 10(i))
Exploration & evaluation expenditure write-back on disposal (Note 9)
Rehabilitation provision write-back on disposal
Total gain on sale
1,800,000
50,000
(1,000,000)
63,460
913,460
Note 4: Impairment expenses
Impairment of exploration and evaluation assets
Total impairment expenses
2015
$
2014
$
10,124,900
10,124,900
-
-
29
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 5: Income tax
(a)
Income tax recognised
No income tax is payable by the consolidated entity for the year as a loss was recorded for income tax
purposes.
(b) Numerical reconciliation between income tax expense and the loss before income tax
Loss before income tax
Income tax benefit at 30% (2014: 30%)
Tax effect of permanent differences – Impairment
Tax effect of temporary differences
Tax effect of deferred tax asset not recognised
Income tax expense
(c)
Unrecognised deferred tax balances
2015
$
2014
$
(774,451)
232,335
(183,816)
77,472
(125,991)
-
(10,763,483)
3,229,045
(3,037,470)
(65,374)
(126,201)
-
Tax losses attributable to members of the tax consolidated group
– revenue
Potential tax benefit at 30%
78,063,584
23,419,075
75,596,401
22,678,920
A deferred tax asset attributable to income tax losses has not been recognised at reporting date as the
probability criteria disclosed in Note 1 (Income Tax) is not satisfied and such benefit will only be available if
the conditions of deductibility also disclosed in Note 1 (Income Tax) are satisfied.
For the purposes of taxation, KalNorth Gold Mines Limited and its 100% owned Australian subsidiary are a
tax consolidated group. The head entity of the tax consolidated group is KalNorth Gold Mines Limited. The
group has not entered into a tax sharing agreement.
Note 6: Trade and other receivables
Current
GST receivable
Other receivables
Note 7: Other assets
Current
Prepayments
Credit card facility deposit
Total other assets
2015
$
2014
$
15,993
-
15,993
16,534
15,969
32,503
2015
$
2014
$
-
7,500
7,500
27,048
7,500
34,548
30
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 8: Property, plant and equipment
Plant and equipment
At cost
Accumulated depreciation
Motor vehicles
At cost
Accumulated depreciation
IT Assets
At cost
Accumulated depreciation
Land and buildings
At cost
Accumulated depreciation
2015
$
2014
$
381,136
(330,897)
50,239
113,887
(102,283)
11,604
302,008
(283,990)
18,018
380,866
(70,807)
310,059
381,136
(305,086)
76,050
113,887
(83,261)
30,626
302,008
(222,910)
79,098
380,866
(61,807)
319,059
Total written down value
389,920
504,833
(a) Movements in carrying amounts
Balance at 1 July 2013
Additions
Disposals
Depreciation expense
Land &
Buildings
328,059
-
-
(9,000)
Plant &
Equipment
147,284
300
(9,091)
(62,443)
Motor
Vehicles
197,123
25,702
(142,652)
(49,547)
IT
Assets
177,858
1,231
(3,067)
(96,924)
Total
850,324
27,233
(154,810)
(217,914)
Balance at 30 June 2014
319,059
76,050
30,626
79,098
504,833
Balance at 1 July 2014
Depreciation expense
319,059
(9,000)
76,050
(25,811)
30,626
(19,022)
79,098
(61,080)
504,833
(114,913)
Balance at 30 June 2015
310,059
50,239
11,604
18,018
389,920
Note 9: Exploration and evaluation expenditure
Cost
Reconciliation
Balance at beginning of year
Exploration expenditure incurred
Exploration expenditure immediately expensed (i)
Disposal of tenements – Mt Jewell Project (ii)
Additional allowance for rehabilitation
Impairment (iii)
Balance at end of year
2015
$
2014
$
7,147,846
8,035,398
8,035,398
794,899
(794,899)
(1,000,000)
112,448
-
17,547,128
805,489
(805,489)
-
613,170
(10,124,900)
7,147,846
8,035,398
(i) During the year the company incurred exploration expenditure costs which were immediately expensed as
their recoverability was uncertain.
(ii) The Mt Jewell Project was disposed of during the year (Note 3 (i)).
(iii) During the prior year, the directors undertook an impairment assessment of the current carrying values of
the exploration and evaluation assets. As a result, the carrying value of the exploration and evaluation
asset was deemed to be impaired by $10,124,900.
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the
successful development and commercial exploitation or sale of the respective mining areas. Amortisation of
the costs carried forward for the development phase is not being charged pending the commencement of
production.
31
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 10: Trade and other payables
Current
Trade payables
Deferred consideration (i)
Sundry payables and accrued expenses
2015
$
2014
$
67,997
-
54,788
122,785
57,182
1,100,000
74,652
1,231,834
(i) A final cash payment of $1,050,000 was made as part of the settlement on disposal of the Mt. Jewell
project. The Company negotiated a $50,000 early payment discount on this final deferred consideration
(Note 3 (i)).
Note 11: Interest bearing liabilities
Current
Secured loans (ii)
Unsecured loans (ii)
Convertible notes (iii)
Interest payable on secured loans (i)
Interest payable on unsecured loans (i)
Interest payable on convertible notes (i)
Total interest bearing liabilities
(i) The interest payable movement for the year is as follows:
Balance at beginning of year
Interest expense incurred for the year
Interest – equity settled on 2 September 2014 (Note 13 (i))
Interest – equity settled on 11 March 2015 (Note 13 (ii))
Interest paid for the year
Interest 10% withholding on the convertible note
Balance at end of year
(ii) Secured and unsecured loans
2015
$
2014
$
3,500,000
700,000
350,000
173,562
34,712
6,283
3,500,000
700,000
-
606,666
85,122
-
4,764,557
4,891,788
691,788
563,765
(358,420)
(667,073)
(13,325)
(2,178)
214,557
39,139
725,294
-
-
(72,645)
-
691,788
On 2 September 2014, the company equity settled partial outstanding interest ($358,420) on the loan from
secured lender South Victory Global Limited (“SVG”) by the issue of 35,842,004 ordinary fully paid shares
(Note 13(i)).
On 10 and 11 March 2015, the Company announced it had reached agreement for the restructuring of all its
secured and unsecured loans which had become due and payable on 29 November 2014. As a consequence
of Deeds of Settlement and Release executed with all lenders, the revised loan arrangements are as follows
and were in effect as at balance date:
(i) Principal amounts of the loans ($3,500,000 secured and $700,000 unsecured for an aggregate of
$4,200,000) have a maturity date of 30 April 2016;
(ii) Interest due and payable as at 31 December 2014 of $667,073 on all loans was settled by the issue of
41,177,334 fully paid ordinary shares at an issue price of $0.0162 per share (Note 13 (ii)); and
(iii) With effect from 1 January 2015, the interest rate applicable to all loans was reduced to 10% per annum
from either 15% (secured) or 18% (unsecured). With effect from 1 January 2015, interest is payable at six-
monthly intervals across all loans.
On 27 July 2015, the Company was advised that Smarter Group (Australia) Pty Ltd had purchased two
unsecured loans totalling $600,000 (and the accrued interest as at 30 June 2015 of $29,753) from Link
Traders (Aust) Pty Limited.
See Events subsequent to reporting date (Note 27) for details of agreements with lenders to relieve liabilities.
32
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 11: Interest bearing liabilities (cont’d)
(iii) Convertible notes
On 5 September 2014, the Company entered into a Converting Loan agreement with Goldfresh Limited, a
Hong Kong based Investment Company, for an amount of $350,000 to the Company with short term funding
for its working capital. The loan was converted to convertible notes on 16 February 2015 and the key terms
are as follows:
(a) Principal - $350,000
(b) Interest – 8% p.a.
(c) Maturity – 5 March 2016
(d) Conversion price – lower of 1.5 cents or price of any shares issued after agreement execution date.
Assuming completion of the rights issue of shares referred to in Note 27, the conversion price will be
reduced to 1 cent per share.
Note 12: Restoration provision
Non-current
Restoration provision (i) (ii)
(i) The provision movement for the year is as follows:
Carrying amount at the start of the year
Sale of the Mt. Jewell Project
Additional provisions recognised
Carrying amount at the end of the year
2015
$
2014
$
1,148,358
1,099,370
2015
$
2014
$
1,099,370
(63,460)
112,448
486,200
-
613,170
1,148,358
1,099,370
(ii) Costs of site restoration are recognised in full at present value as a non-current liability and an equivalent
amount capitalised as part of the cost of the asset when an obligation arises to decommission or restore a
site to a certain condition after abandonment as a result of bringing the assets to their present location.
Note 13: Contributed equity
2015
$
2014
$
315,966,034 fully paid ordinary shares (2014: 238,946,696)
76,251,722
75,226,229
Movements in ordinary shares on issue for the year:
Balance 1 July 2014
Share issue at 1.00 cent each – (i)
Share issue at 1.62 cents each – (ii)
No. of
shares
238,946,696
35,842,004
41,177,334
Paid up
capital
$
75,226,229
358,420
667,073
Balance 30 June 2015
315,966,034
76,251,722
(i) On 2 September 2014, the company issued 35,842,004 ordinary fully paid shares (at an issue price of
1.00 cent each) in partial settlement of outstanding interest on loans of $358,420 (Note 11(i)).
(ii) On 11 March 2015, the company issued 41,177,334 ordinary fully paid shares (at an issue price of 1.62
cents each) in settlement of outstanding interest on loans of $667,073 (Note 11(ii)).
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up of the
consolidated entity, to participate in the proceeds from the sale of all surplus assets in proportion to the
number of and amounts paid up on shares held.
33
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 13: Contributed Equity (cont’d)
On a show of hands every member present at a meeting in person or by proxy shall have one vote and
upon a poll each share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a
going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to
maintain an optimum capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce
debt.
The consolidated entity would look to raise capital when an opportunity to invest in a business or
company was seen as value adding relative to the current company's share price at the time of the
investment. The consolidated entity is not actively pursuing additional investments in the short term as it
continues to integrate and grow its existing businesses in order to maximise synergies.
The consolidated entity is subject to certain financing arrangements covenants and meeting these is
given priority in all capital risk management decisions. There have been no events of default on the
financing arrangements during the financial year.
Note 14: Reserves
Share based payment reserve
(i) Movement in share based payments reserve
Balance at 1 July 2014
Share options expired – transfer to accumulated losses
Balance at 30 June 2015
(ii) Share based payments reserve
2015
$
2014
$
1,334,418
1,334,418
-
-
No of
Options
25,000,000
(25,000,000)
-
Paid up
Capital
$
1,334,418
(1,334,418)
-
The share based payments reserve records items recognised as expenses on valuation of share options.
Note 15: Key management personnel compensation
Refer to the Remuneration Report contained in the Directors’ Report for details of the remuneration paid to
each member of the consolidated entity’s key management personnel for the year ended 30 June 2015.
The totals of remuneration paid to key management personnel of the consolidated entity during the year are
as follows:
Short-term employee benefits
Post-employment benefits
34
2015
$
2014
$
368,100
35,088
403,188
572,454
39,206
611,660
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 16: Related party transactions
During the financial year, other than remuneration paid or payable to key management personnel, the
Company did not engage in any related party transactions. In the prior year, the Company engaged Mercury
Consulting Pty Ltd and IRM Pty Ltd, both former director-related entities, to perform investor relations
activities on behalf of the consolidated entity for a fee of $32,182. The services were provided on an arm’s
length basis.
Note 17: Loss per share
a) Basic loss per share
Loss after income tax
2015
$
2014
$
(774,451)
(10,763,483)
Weighted average number of ordinary shares on issue during the year
used as the denominator in calculating basic loss per share
281,026,497
203,923,588
Diluted loss per share is the same as basic loss per share as there are no securities to be classified as
dilutive potential ordinary shares on issue.
Note 18: Auditor’s remuneration
Remuneration of the auditor for:
- audit and review of financial reports
- taxation services
- other taxation services – R&D tax credit assistance
Note 19: Cash flow information
a) Reconciliation of the net loss after income tax to the net cash flows
from operating activities:
Net loss for the year
Non-cash items included in net loss:
Depreciation expense
Exploration expenses
Tenement impairment expense
Gain on sale of plant and equipment
Gain on sale of tenements
Share based settled interest expense
Changes in assets and liabilities:
Decrease in inventories
Decrease in trade and other receivables
Decrease in other assets
Decrease in trade and other creditors
2015
$
2014
$
33,800
9,000
48,659
91,459
38,800
17,350
72,783
128,933
2015
$
2014
$
(774,451)
(10,763,483)
114,913
794,899
-
-
(913,460)
548,261
-
16,509
27,050
(21,636)
217,914
805,489
10,124,900
(123,241)
-
-
-
1,038,501
452,405
93,766
(3,025,585)
Net cash outflow from operating activities
(207,914)
(1,179,334)
b) Reconciliation of cash
Cash balance comprises:
- Cash at bank and on hand
c) Non-Cash Financing and Investing Activities
238,640
128,867
As disclosed in Note 13, the Company issued 77,019,338 shares during the year to settle outstanding
interest expense of $1,025,493.
35
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 20: Commitments
(i) Mining tenements
The consolidated entity has certain commitments to meet minimum expenditure requirements on the
mineral exploration assets in which it has an interest. The current annual minimum lease expenditure
commitments on these tenements which covers the Lindsays, Kurnalpi, Kalpini and Mt. Jewell projects
is $791,520 (2014: $1,316,037).
If the consolidated entity decides to relinquish certain leases and/or does not meet these obligations,
assets recognised in the balance sheet may require review to determine the appropriateness of
carrying values. The sale, transfer, or farm-out of exploration rights to third parties will reduce or
extinguish these obligations.
(b) Non-cancellable operating lease commitments
- Not later than 12 months
- Between 12 months and 5 years
- Greater than 5 years
2015
$
2014
$
8,004
-
-
8,004
50,051
8,004
-
58,055
The consolidated entity has an operating lease for a hand held data analyser at a rental of $1,334 per month
and expiring 31 December 2015.
Note 21: Controlled entities
Country of
Incorporation
Percentage Owned (%)
Subsidiaries of KalNorth Gold Mines Limited:
Shannon Resources Pty Ltd (dormant)
Lusitan Prospecting Pty Ltd (dormant)
Australia
Australia
2015
100
100
2014
100
100
Shannon Resources Pty Ltd and Lusitan Prospecting Pty Limited are the registered owners of various
tenements. The parent entity owns 100% of both entities. There was no income earned and no expenses
incurred by these entities for the year end 30 June 2015 (2014: nil).
36
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 22: Segment information
Identification of reportable operating segments
The consolidated entity is organised into two operating segments: mine development and mineral
exploration, both within Australia. During the year ended 30 June 2015, the consolidated entity's external
revenue was derived solely from the sale of its share of prospector gold. In 2014, the consolidated entity's
external revenue was most significantly from sales of ore recovered from the Lindsays mining operation to
Saracen Mineral Holdings Limited (an Australian listed gold miner), however mining was suspended in
August 2013.
30 June 2015
Revenue
Sales to external customers
Other revenue
Total revenue
EBITDA
Depreciation and amortisation
Impairment expense
Interest revenue
Finance costs
Loss before income tax
Income tax benefit
Loss after income tax
30 June 2015
Assets
Segment assets
Exploration assets
Property, plant and equipment
Unallocated assets:
Cash and cash equivalents
Other current and non-current
assets
Total assets
Liabilities
Segment liabilities
Trade and other payables
Restoration provision
Unallocated liabilities:
Interest-bearing liabilities
Total liabilities
Mine
development
Mineral
exploration
$
$
Admin
$
Total
consolidated
group
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,265
1,456,848
1,466,113
9,265
1,456,848
1,466,113
(102,696)
(102,696)
(19,021)
-
-
-
(95,892)
-
6,923
(563,765)
(114,913)
-
6,923
(563,765)
(19,021)
(755,430)
(774,451)
-
-
-
(19,021)
(755,430)
(774,451)
7,147,846
11,603
-
378,317
7,147,846
389,920
-
-
238,640
238,640
23,493
23,493
7,159,449
640,450
7,799,899
-
(1,083,622)
-
(64,736)
(122,785)
-
(122,785)
(1,148,358)
-
(1,083,622)
-
(64,736)
(4,764,557)
(4,887,342)
(4,764,557)
(6,035,700)
37
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 22:Segment information (cont’d)
30 June 2014
Revenue
Sales to external customers
Other revenue
Total revenue
EBITDA
Depreciation and amortisation
Impairment expense
Interest revenue
Finance costs
Loss before income tax
Income tax benefit
Mine
development
Mineral
exploration
$
$
Admin
$
Total
consolidated
group
$
5,211,564
-
5,192,150
(328,432)
-
-
-
-
-
2,539,759
2,539,759
5,211,564
2,539,759
7,751,323
627,582
299,150
-
-
-
-
(49,547)
(10,124,900)
-
-
(168,367)
-
6,194
(726,013)
(217,914)
(10,124,900)
6,194
(726,013)
(328,432)
(10,174,447)
(260,604)
(10,763,483)
-
-
-
-
Loss after income tax
(328,432)
(10,174,447)
(260,604)
(10,763,483)
30 June 2014
Assets
Segment assets
Exploration assets
Property, plant and equipment
Unallocated assets:
Cash and cash equivalents
Other current and non-current
assets
Total assets
Liabilities
Segment liabilities
Trade and other payables
Restoration provision
Unallocated liabilities:
Interest-bearing liabilities
Total liabilities
-
-
-
-
-
8,035,399
-
8,035,399
30,626
474,207
504,833
-
-
128,867
128,867
67,051
67,051
8,066,025
670,125
8,736,150
-
(972,814)
(1,100,000)
(126,556)
(131,834)
-
(1,231,834)
(1,099,370)
-
(972,814)
-
(1,226,556)
(4,891,788)
(5,023,622)
(4,891,788)
(7,222,992)
38
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 23: Financial risk management objectives and policies
The Consolidated entity’s principal financial instruments comprise cash and short-term deposits.
The main purpose of these financial instruments is to finance the consolidated entity’s operations. The
Consolidated entity has various other financial assets and liabilities such as receivables and payables, which
arise directly from its operations.
The main risks arising from the consolidated entity’s financial instruments are interest rate risks, commodity
price risks, and, indirectly, foreign exchange risk. Other minor risks have been summarised below. The Board
reviews and agrees on policies for managing each of these risks.
(a)
Interest rate risk
The Consolidated entity’s exposure to market interest rate relates primarily to the consolidated entity’s cash
and short-term deposits. All other financial assets in the form of receivables and payables are non-interest
bearing. The Consolidated entity does not engage in any hedging or derivative transactions to manage
interest rate risk.
The following tables set out the carrying amount by maturity of the consolidated entity’s exposure to interest
rate risk and the effective weighted interest rate for each class of these financial instruments
Weighted
average
interest
Rate
%
Floating interest
rate
$
Fixed interest
maturing 1 year or
less
$
Fixed interest
maturing 1 to 5
years
$
30 June 2015
Cash at bank
Total assets
1.97%
238,640
-
Interest bearing liabilities
Interest bearing liabilities
Interest bearing liabilities
Total liabilities
10%
10%
8%
-
-
-
-
(734,712)
(3,673,563)
(356,282)
(4,764,557)
-
-
-
-
-
Weighted
average
interest
Rate
%
Floating interest
rate
$
Fixed interest
maturing 1 year or
less
$
Fixed interest
maturing 1 to 5
years
$
30 June 2014
Cash at bank
Total assets
0.37%
128,867
-
Interest bearing liabilities
Interest bearing liabilities
Total liabilities
18%
15%
-
-
-
(785,120)
(4,106,668)
(4,891,788)
Interest rate sensitivity analysis – cash at bank
-
-
-
-
At 30 June 2015, if interest rates had changed by 1% during the entire year with all other variables held
constant, profit for the year and equity would have been $3,507 higher/lower (2014: $2,985), mainly as a
result of higher/lower interest income from cash and cash equivalents.
(b) Credit risk
The maximum exposure to credit risk at reporting date on financial assets of the consolidated entity is the
carrying amount, net of any provisions for doubtful debts, as disclosed in the statement of financial position
and notes to the financial statements.
39
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 23: Financial risk management objectives and policies (cont’d)
(c)
Liquidity risk
The consolidated entity manages liquidity risk by monitoring forecast cash flows and ensuring that
adequate unutilised borrowing facilities are maintained.
The table below analyses the entity’s financial liabilities into relevant maturity groupings based on the
remaining period from the statement of financial position date to the contractual maturity date. As the
amounts disclosed in the table are the contractual undiscounted cash flows, these balances will not
necessarily agree with the amounts disclosed in the statement of financial position.
30 June 2015
Financial liabilities due
for payment
Trade and other payables
Interest bearing liabilities
Financial assets – cash
flows realisable
Cash assets
Trade and other receivables
Net (outflow)/inflow from
financial instruments
Less than 6
months
$
6 months
to 1 year
$
1 to 5 years
$
Total
$
(122,785)
-
(4,764,557)
(122,785)
(4,764,557)
238,640
15,993
254,633
-
7,500
7,500
131,848
(4,757,057)
-
-
-
-
-
-
-
(122,785)
(4,764,557)
(4,887,342)
238,640
23,493
262,133
(4,625,209)
Less than 6
months
$
6 months
to 1 year
$
1 to 5 years
$
Total
$
30 June 2014
Financial liabilities due
for payment
Trade and other payables
Interest bearing liabilities
Financial assets – cash
flows realisable
Cash assets
Trade and other receivables
Net outflow from
financial instruments
(1,231,834)
(4,891,788)
(6,123,622)
128,867
32,503
161,370
(5,962,252)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,231,834)
(4,891,788)
(6,123,622)
128,867
32,503
161,370
(5,962,252)
40
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 23: Financial risk management objectives and policies (cont’d)
(d)
Foreign exchange risk
The Consolidated entity sold its ore in Australian Dollars (AUD) and costs of production are denominated in
Australian Dollars (AUD). However the AUD gold price is set with reference to the USD price. A rapidly
weakening US dollar exposes the consolidated entity to the downside risks related to movement in the
AUD/USD exchange rate. The Consolidated entity’s current policy is for the all of gold production to be
exposed to foreign exchange risk. As production ceased during the prior year and all gold inventories were
sold, there is no current intention to enter into any currency hedging contracts and none are outstanding at
year end. There were no financial instruments with a foreign currency exposure at the reporting date or at
the end of the preceding financial year.
(e) Net fair value of financial assets and liabilities
The carrying amounts of financial instruments included in the statement of financial position approximate their
fair values due to their short terms of maturity.
Note 24: Share based payments
Options issued
The Consolidated entity may from time to time issue options to its directors and employees and third party
lenders as part of its policy to continue to attract and retain the directors and employees of high calibre and
maintain on-going commercial relationships with lenders.
During the year ended 30 June 2015 there were no options issued (2014: nil).
Set out below is a summary of those options on issue as at 30 June 2015 for the Consolidated entity:
Expiry
Issue date
date
28/05/2013 28/11/2014 25,000,000
25,000,000
Balance at
start of
year
Number
issued
during
year
Number
expired
during year
(25,000,000)
(25,000,000)
-
-
Balance at
end of year
-
-
Number
exercisable
at end of
year
-
-
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the year as part of share
based payment expense were nil (2014: nil).
Note 25: Contingent liabilities and contingent assets
There are no contingent liabilities or assets at reporting date.
Note 26: Parent Information
As referred to in Note 21, the consolidated entity comprises KalNorth Gold Mines Limited, the parent entity
and two wholly-owned subsidiaries. The Parent entity disclosures are not materially different to the
consolidated entity’s disclosures in the Statement of Financial Position and the Statement of Profit or Loss
and Other Comprehensive Income. In addition, there are:
a) no guarantees entered into by the parent entity in relation to the debts of its subsidiaries.
b) no contingent liabilities of the parent entity as at the reporting date.
c) no contractual commitments by the parent entity for the acquisition of property, plant and
equipment as at the reporting date.
41
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
Note 27: Events subsequent to reporting date
Since the reporting date and to the date of this report no matter or circumstance has arisen which has
significantly affected, or may significantly affect, the operations of the consolidated entity, the results of
those operations or the state of affairs of the consolidated entity in subsequent financial years other than
the matters referred to below.
(a) On 31 August 2015 and 11 September 2015, binding agreements were entered into with Renergy Pty
Ltd, South Victory Global Limited, Smarter Group (Australia) Pty Ltd and Mr John McKinstry, as a result
of which principal amounts and all outstanding interest (accruing up to the date immediately prior to the
date of issue of shares by the Company) owed to these parties will be settled by issue of shares at an
issue price of $0.01 each.
(b) On 15 September 2015, a convertible note facility agreement has been entered into with the
Company’s largest shareholder, Cross-Strait, under the terms of which the Company will be able to
draw down up to $2 million. As at the date of the financial report $0.3m was received from Cross-
Strait. Cross-Strait will have the right to convert all or part of the amounts drawn down under the facility
into shares in the Company at an issue price of $0.01 per share. The facility will have a maturity date
of 30 April 2017.
(c) On 29 July 2015, the Company issued a prospectus for a non-renounceable entitlement offer of shares
at $0.01 each. The rights offer has closed, however the issue of shares has not been completed as the
Company is required to give applicants an opportunity to withdraw their applications on or before 16
October 2015. On 27 August 2015, the Company announced acceptances have been received for
44,730,803 shares. Assuming no material applications for the rights offer are withdrawn, an amount of
approximately $0.4 million is expected to be raised when the Company completes the rights issue on
19 October 2015.
The completion of the transactions referred to in (a) and (b) above is subject to shareholder and other
regulatory approvals which must be obtained by 30 November 2015 (unless the parties agree to an
extension).
42
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Financial Report
DIRECTORS’ DECLARATION
The directors of the company declare that, in the opinion of the directors:
(a)
the attached financial statements and notes thereto are in accordance with the
Corporations Act 2001, including
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30
June 2015 and its performance for the year ended on that date; and
complying with Australian Accounting Standards, including the Interpretations, and
the Corporations Regulations 2001;
(ii)
(b)
(c)
(d)
the financial statements and notes thereto also comply with International Financial
Reporting Standards, as disclosed in Note 1; and
the directors have been given the declarations required by s295A of the Corporations Act
2001
there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable;
Signed in accordance with a resolution of the directors made pursuant to s295(5) of the
Corporations Act 2001.
On behalf of the Directors:
Lijun Yang
Executive Director
Dated at Perth this 30th September 2015
43
RSM Bird Cameron Partners
8 St George’s Terrace Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 8 9261 9100 F +61 8 9261 9101
www.rsmi.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of KalNorth Gold Mines Limited for the year ended 30 June 2015,
I declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
RSM BIRD CAMERON PARTNERS
Perth, WA
Dated: 30 September 2015
D J WALL
Partner
Liability limited by a
scheme approved
under Professional
Standards Legislation
Major Offices in:
Perth, Sydney, Melbourne,
Adelaide and Canberra
ABN 36 965 185 036
RSM Bird Cameron Partners is a member of the RSM network. Each member
of the RSM network is an independent accounting and advisory firm which
practises in its own right. The RSM network is not itself a separate legal entity
in any jurisdiction.
RSM Bird Cameron Partners
8 St George’s Terrace Perth WA 6000
GPO Box R1253 Perth WA 6844
T +61 8 9261 9100 F +61 8 9261 9101
www.rsmi.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
KALNORTH GOLD MINES LIMITED
Report on the Financial Report
We have audited the accompanying financial report of KalNorth Gold Mines Limited, which comprises the
consolidated statement of financial position as at 30 June 2015, and the consolidated statement of profit or loss and
other comprehensive income, consolidated statement of changes in equity, and consolidated statement of cash
flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory
information, and the directors' declaration of the consolidated entity comprising the company and the entities it
controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility 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 is free from
material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of
material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity's preparation and fair presentation of the financial report in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
Liability limited by a
scheme approved
under Professional
Standards Legislation
Major Offices in:
Perth, Sydney, Melbourne,
Adelaide and Canberra
ABN 36 965 185 036
RSM Bird Cameron Partners is a member of the RSM network. Each member
of the RSM network is an independent accounting and advisory firm which
practises in its own right. The RSM network is not itself a separate legal entity
in any jurisdiction.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We
confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of KalNorth Gold Mines Limited, would be in the same terms if given to the directors as at the time of this
auditor's report.
Opinion
In our opinion:
(a) the financial report of KalNorth Gold Mines Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report contained within the directors’ report for the year ended 30 June 2015.
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.
Opinion
In our opinion the Remuneration Report of KalNorth Gold Mines Limited for the year ended 30 June 2015 complies
with section 300A of the Corporations Act 2001.
RSM BIRD CAMERON PARTNERS
Perth, WA
Dated: 30 September 2015
D J WALL
Partner
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Corporate Governance
The Board of Directors of KalNorth Gold Mines Limited is responsible for the corporate governance of the
Company. The Board guides and monitors the business and affairs of KalNorth Gold Mines Limited on behalf
of the shareholders by whom they are elected and to whom they are accountable. The Company’s
governance approach aims to achieve exploration, development and financial success while meeting
stakeholders’ expectations of sound corporate governance practices by proactively determining and adopting
the most appropriate corporate governance arrangements.
ASX Listing Rule 4.10.3 requires listed companies to disclose in their Annual Report the extent to which they
have complied with the ASX Best Practice Recommendations of the ASX Corporate Governance Council
(“CGC”) in the reporting period. A description of the Company’s main corporate governance practices is set
out below. The Corporate Governance Statement is current as at 30 June 2015, and has been approved by
the Board of Directors. All these practices, unless otherwise stated, were in place for the entire year. They
comply with the ASX Corporate Governance Principles and Recommendations (3rd edition).
The Company's directors are fully cognisant of the Corporate Governance Principles and Recommendations
published by CGC and have adopted those recommendations where they are appropriate to the Company's
circumstances. However, a number of those principles and recommendations are directed towards listed
companies considerably larger than KalNorth Gold Mines Limited, whose circumstances and requirements
accordingly differ markedly from the Company's. For example, the nature of the Company's operations and
the size of its staff mean that a number of the board committees and other governance structures
recommended by the CGC are not only unnecessary in the Company's case, but the effort and expense
required to establish and maintain them would, in the directors' view, be an unjustified diversion of
shareholders' funds.
As the Company's activities develop in size, nature and scope, the size of the Board and the implementation
of additional corporate governance structures will be given further consideration.
The Company’s website at www.kalnorthgoldmines.com contains a corporate governance section that
includes copies of the Company’s corporate governance policies.
Principle 1: Lay solid foundations for management and oversight
Recommendation 1.1:
Companies should disclose the respective roles and responsibilities of its board and management and those matters
expressly reserved to the Board and those delegated to management and disclose those functions.
The Board’s role is to govern the Company rather than to manage it. In governing the Company, the Directors
must act in the best interests of the Company as a whole. It is the role of the senior management to manage
the Company in accordance with the direction and delegations of the Board and the responsibility of the
Board to oversee the activities of management in carrying out these delegated duties.
The Board is responsible for:
• overseeing the Company’s commitment to the health and safety of employees and contractors, the
environment and sustainable development;
• overseeing the activities of the Company, including its control and accountability systems;
• appointing and removing the Managing Director, Company Secretary, and other senior executives,
evaluating their performance, reviewing their remuneration and ensuring an appropriate succession
plan;
setting the strategic objectives of the Company and monitoring its progress against those objectives;
reviewing, ratifying and monitoring systems of risk management and internal control;
setting the operational and financial objectives and goals for the Company;
•
•
•
• ensuring that there are effective corporate governance policies and practices in place
• approving and monitoring budgets, capital management and acquisitions and divestments;
• approving and monitoring all financial reporting to the market;
• appointing external auditors and principal professional advisors; and
• making formal determinations required by the Company’s constitutional documents or by law or other
external regulation.
The Managing Director (MD) is normally responsible for running the affairs of the Company under delegated
authority from the Board and to implement the policies and strategy set by the Board. In carrying out those
47
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
responsibilities, the Managing Director must report to the Board in a timely manner and ensure all reports to
the Board present a true and fair view of the Company’s financial condition and operational results. Given the
present size and scale of operations, the Company does not have a Managing Director but rather an
Executive Director supported by a small management team. Consequently the Board as a whole takes a
closer interest in the day to day affairs of the Company.
Recommendation 1.2:
Companies should undertake appropriate checks before appointing a person, or putting forward to security holders a
candidate for election, as a director and provide security holders with all material information in its possession relevant to
a decision on whether or not to elect or re-elect a director.
The Company undertakes checks on any person who is being considered as a director. These checks may
include character, experience, education and financial history and background.
All security holder releases will contain material information about any candidate to enable an informed
decision to be made on whether or not to elect or re-elect a director.
Recommendation 1.3:
Companies should have a written agreement with each director and senior executive setting out the terms of their
appointment.
All directors have in place a formal letter of appointment including a director’s interest agreement with respect
to disclosure of security interests.
Recommendation 1.4:
The Company Secretary should be accountable directly to the Board, through the chair, on all matters to do with the
proper functioning of the Board.
The Company Secretary has a direct reporting line to the Board, through the Chair.
Recommendation 1.5:
The Company should establish a policy concerning diversity and disclose the policy or summary of the policy. The policy
should include requirements for the Board to establish measureable objectives for achieving gender diversity and for the
Board to assess annually both the objectives and progress in achieving them.
The Company recognises that a talented and diverse workforce is a key competitive advantage. The
Company is committed to developing a workplace that promotes diversity. The Company’s policy is to recruit
and manage on the basis of competence and performance regardless of age, nationality, race, gender,
religious beliefs, sexuality, physical ability or cultural background. The Company has not yet formalised this
policy into a written document. It is the Board’s intention to formalise the policy at a time when the size of the
Company and its activities warrants such a structure.
The Company has 6 staff (comprising the three directors and one exploration manager, one female casual
job bookkeeper and one casual job geologist), - There are no women in senior executive positions or on the
Board.
Recommendation 1.6:
The Company should have and disclose a process for periodically evaluating the performance of the Board, its
committees and individual directors and whether a performance evaluation was undertaken in the reporting period in
accordance with that process.
Due to the size of the Board and the nature of its business, it has not been deemed necessary to institute a
formal documented performance review program of individuals. The Chairman conducted an informal review
during the financial year whereby the performance of the Board as a whole and the individual contributions of
each director were discussed. The Board considers that at this stage of the Company’s development an
informal process is appropriate.
Recommendation 1.7:
The Company should have and disclose a process for periodically evaluating the performance of senior executives and
whether a performance evaluation was undertaken in the reporting period in accordance with that process.
The Board undertakes a review of the senior executives’ performance annually, including setting the goals for
the coming year and reviewing the achievement of these goals.
48
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Performance has been measured to date by the efficiency and effectiveness of the enhancement of the
Company’s mineral interest portfolio, the designing and implementation of the exploration and development
programme and the securing of ongoing funding so as to continue its exploration and development activities.
This performance evaluation is not based on specific financial indicators such as earnings or dividends as the
Company is at the exploration stage and during this period is expected to incur operating losses.
Due to the size of the Company and the nature of its business, it has not been deemed necessary to institute
a formal documented performance review program of senior executives. The Non-executive directors
conducted an informal review process whereby they discussed with the Executive Director the approach
toward meeting the short and long term objectives of the Company. The Board considers that at this stage of
the Company’s development an informal process is appropriate.
Principle 2: Structure the board to add value
Recommendation 2.1:
The Board should establish a Nomination Committee comprising a majority of independent directors (including the Chair).
The Company established a nomination committee comprising the two non-executive directors, including the
Chairman but no separate meetings of this committee were held in the reporting year. The Board considers
that the Company is not currently of a size, nor are its affairs of such complexity, to justify separate committee
meetings at this time. The Board as a whole is able to address the governance aspects of the full scope of
the Company’s activities and to ensure that it adheres to appropriate ethical standards. In particular, the full
Board considers those matters that would usually be the responsibility of a nomination committee. However
the Board considers that no efficiencies or other benefits would be gained by having separate nomination
committee meetings.
Directors are appointed under the terms of the Company’s constitution. Appointments to the Board are based
upon merit and against criteria that serves to maintain an appropriate balance of skills, expertise, and
experience of the board. The categories considered necessary for this purpose are a blend of accounting and
finance, business, technical and administration skills. Casual appointments must stand for election at the
next annual general meeting of the Company.
Retirement and rotation of Directors are governed by the Corporations Act 2001 and the Constitution of the
Company. All Directors, with the exception of the Managing Director (if appointed), serve for a period of three
years before they are requested to retire and if eligible offer themselves for re-election.
Recommendation 2.2:
The Company should have and disclose a Board skills matrix setting out the mix of skills and diversity that the Board
currently has or is looking to achieve in its membership.
The Company has a skills or diversity matrix in relation to its Board members which reflects the current size
and scope of the Company’s operations. The Board will adopt a more detailed and comprehensive matrix if
and when there is a significant change in the size and scale of its activities.
Skills/Qualifications
Experience Based on Skills/Knowledge
Director
Gender
Jiajun Hu
(Chairman)
Male
Lijun Yang
Male
Yuanguang
Yang
Male
Finance and
accounting
BSc in Business
Geologist
MSc in Geology
MAIG;MSEG
Accounting
CPA
Accounting/
Finance
Communications/
Investor Relations
Corporate
Management
Fund
Raising
Geology
√
√
√
√
√
√
√
√
√
√
√
Recommendation 2.3:
The Company should disclose the names of the directors considered to be independent directors and length of service of
each director.
The names, position, appointment date and independence classification are set out in the table below:
49
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Director
Position
Date Appointed
Independent
Jiajun Hu (Chairman)
Non-executive
Chairman
13 December 2013 (appointed as
Chairman on 14 April 2015)
Lijun Yang
Executive Director
8 November 2013
Yuanguang Yang
Non-executive
Director
28 August 2014
No
No
No
Recommendation 2.4:
A majority of the Board of the Company should be independent directors.
In assessing whether a director is classified as independent, the Board considers the independence criteria
set out in the ASX Corporate Governance Council Recommendation 2.1 and other facts, information and
circumstances deemed by the Board to be relevant. Using the ASX Best Practice Recommendations on the
assessment of the independence of Directors, the Board considers that at present none of the Directors can
be considered independent. Mr Jiajun Hu and Mr Yuanguang Yang have been nominated to the Board by
major shareholders of the Company, whilst Mr Lijun Yang is an executive director.
The Company considers that each of the directors possesses the skills and experience suitable for building
the Company. Although the Company does not currently have a majority of independent directors, the current
composition of the Board is considered appropriate in the circumstances.
It is the Board’s intention to review its composition on a continual basis and in line with any future changes to
Company’s size and level of activities.
Recommendation 2.5:
The Chair of the Board should be an independent director, and should not be the CEO of the Company.
The Chair of the Board, Mr Jiajun Hu is not the CEO of the Company and he has a non-executive role. For
the reasons explained in the preceding section, Mr Hu is a non-independent director.
Given the size of the Company and the complexity of its affairs as well as the Board’s desire to maximise
exploration expenditure within the constraints of the Company’s overall working capital, the Company is not
presently in a position to have a majority of independent directors.
Recommendation 2.6:
The Company should have a program for inducting new directors and provide appropriate professional development
opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors
effectively.
The Company does not currently have a formal induction program for new Directors nor does it have a formal
professional development program for existing Directors. The Board does not consider that a formal induction
program is necessary given the current size and scope of the Company’s operations.
The Board seeks to ensure that all of its members understand the Company’s operations. Directors also
attend, on behalf of the Company and otherwise, technical and commercial seminars and industry
conferences which enable them to maintain their understanding of industry matters and technical advances.
Noting the above, the Board considers that a formal induction program is not necessary given the current size
and scope of the Company’s operations, though the Board may adopt such a program in the future as the
Company’s operations grow and evolve.
Principle 3: Act ethically and responsibly
Recommendation 3.1:
Companies should have a Code of Conduct for its directors, senior executives and employees.
The Company has established a Code of Conduct which sets out the Company’s key values and how they
should be applied within the workplace and in dealings with those outside the Company. A copy of the Code
is available on the Company’s website.
50
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Principle 4: Safeguard Integrity in Financial Reporting
Recommendation 4.1
The Board should have an Audit Committee.
The Board established an audit committee comprising the two non-executive directors of the Company but no
separate committee meetings were held during the reporting year. The Board considers that the Company is
not currently of a size, nor are its affairs of such complexity, to justify separate committee meetings at this
time. The Board as a whole is able to address the governance aspects of the full scope of the Company’s
activities and to ensure that it adheres to appropriate ethical standards. In particular, the full Board considers
those matters that would usually be the responsibility of an audit committee. However the Board considers
that no efficiencies or other benefits would be gained by holding separate audit committee meetings.
The Company requires external auditors to demonstrate quality and independence. The performance of the
external auditor is reviewed and applications for tender of external audit services are requested as deemed
appropriate, taking into consideration assessment of performance, existing value and tender costs.
The external audit firm partner or an appropriate delegate responsible for the Company audit attends
meetings of the Board by invitation.
Recommendation 4.2
The Board of the Company should, before it approves the Company’s financial statements for a financial period, receive
from its CEO and CFO a declaration that, in their opinion, the financial records of the entity have been properly maintained
and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the
financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of
risk management and internal control which is operating effectively.
The Company has in place a procedure whereby prior to approval of financial statements by the Board (in
addition to any formal management representation letter to the Company’s auditor) a declaration is provided
in accordance with Sections 286 and 295(3)(b) of the Corporations Act 2001 (Cth) that financial records have
been properly maintained, the financial statements comply with the accounting standards, and give a true and
fair view of the financial position based on sound risk management and internal controls operating effectively.
This declaration was provided by the Executive Director, Mr Lijun Yang who has been nominated by the
Board to provide oversight and supervision of the Company’s financial affairs.
Recommendation 4.3
The Company should ensure that the external auditor is present at the AGM and be available to answer questions from
security holders relevant to the audit.
The Company invites the auditor or representative of the auditor to the AGM in accordance of the
requirements of Section 250RA of the Corporations Act 2001 (Cth) and is available to answer questions
relevant to the audit.
Principle 5 – Make timely and balanced disclosure
Recommendation 5.1:
Companies should have a written policy for complying with its continuous disclosure obligations under the Listing Rules.
The Company has developed an ASX Listing Rules Disclosure Strategy which has been endorsed by the
Board. The ASX Listing Rules Disclosure Strategy ensures compliance with ASX Listing Rules and
Corporations Act obligations to keep the market fully informed of information which may have a material effect
on the price or value of its securities and outlines accountability at both the Board and (where and when
applicable) senior executive level for that compliance. All ASX announcements are posted to the Company’s
website as soon as possible after confirmation of receipt is received from ASX.
A copy of the continuous disclosure policy is available on the Company’s website.
Principle 6 – Respect the rights of security holders
Recommendation 6.1 and 6.2:
Companies should provide information about itself and its governance to investors via its website.
51
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Companies should design and implement an investor relations program to facilitate two-way communication with
investors.
The Company is committed to maintaining a Company website with general information about the Company
and its operations, information about governance and information specifically targeted at keeping the
Company’s shareholders informed about all major developments affecting the Company’s state of affairs.
The Company has a Shareholder Communication Policy which is available on the Company’s website.
Through this the Board aims to ensure that the shareholders are informed of the Company’s governance and
all major developments affecting the Company’s state of affairs. Information is communicated to shareholders
through the:
• Company website;
• ASX Company Announcements platform;
• Quarterly Operational and Cash flow reports;
• Half-year Financial Report;
• Annual Report;
•
Investor Presentations
• Shareholder meetings
• Other correspondence from time to time regarding matters impacting on shareholders.
Recommendations 6.3 and 6.4:
Companies should disclose the policies and processes in place to facilitate and encourage participation at meetings of
security holders.
Companies should give security holders the option to receive communications from, and send communications to, the
entity and its security registry electronically.
In accordance with the Company’s Shareholder Communications Policy, the Company supports shareholder
participation in general meetings and seeks to provide appropriate mechanisms for such participation. The
Company will use general meetings as a tool to effectively communicate with shareholders and allow
shareholders a reasonable opportunity to ask questions of the Board of Directors and to otherwise participate
in the meeting.
Mechanisms for encouraging and facilitating shareholder participation will be reviewed regularly to encourage
the highest level of shareholder participation.
The Company considers that communicating with shareholders by electronic means is an efficient way to
distribute information in a timely and convenient manner. In accordance with the Shareholder Communication
Policy, the Company has, as a matter of
Practice, provided new shareholders with the option to receive communications from the Company
electronically and the Company encourages them to do so. Existing shareholders are also encouraged to
request communications electronically. All shareholders that have opted to receive communications
electronically are provided with notifications by the Company when an announcement or other communication
(including annual reports, notices of meeting etc) is uploaded to the ASX announcements platform.
Principle 7 – Recognise and manage risk
Recommendation 7.1:
The Board should have a committee or committees to oversee risk.
The Board established a risk management committee comprising and the two non-executive directors of the
Company but no separate committee meetings were held in the reporting year. The role of the risk
management committee is therefore undertaken by the full Board. The Board considers that, given the
current size and scope of the Company’s operations, efficiencies or other benefits would not be gained by
having separate risk management committee meetings at present.
As the Company’s operations grow and evolve, the Board will reconsider the appropriateness of having
separate risk management committee meetings. However, the Board has adopted a Risk Management Policy
that sets out a framework for a system of risk management and internal compliance and control, and this is
available on the Company’s website.
52
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Corporate Governance
Statement of Corporate Governance Practices (cont’d)
Recommendation 7.2:
The Board should review the entity’s risk management framework at least annually to satisfy itself that it continues to be
sound and disclose whether such a review has taken place.
As the Board has responsibility for the monitoring of risk management it has not required a formal report
regarding the material risks and whether those risks are managed effectively. The Board believes that the
Consolidated Group is currently effectively communicating its significant and material risks to the Board and
its affairs are not of sufficient complexity to justify the implementation of a more formal system for identifying,
assessing, monitoring and managing risk in the Company.
Recommendation 7.3:
The Company should disclose if it has an internal audit function.
The Company does not have an internal audit function. The Board considers that the Company is not
currently of a size, nor are its affairs of such complexity, to justify the formation of an internal audit function at
this time. The Board as a whole continually evaluates and improves the effectiveness of its risk management
and internal control processes.
Recommendation 7.4:
The Company should disclose whether it has any material exposure to economic, environmental and social sustainability
risks and, if it does, how it manages or intends to manage those risks.
The Company is of the view that it has adequately disclosed the nature of its operations and relevant
information on exposure to economic, environmental and social sustainability risks. Other than general risks
associated with the mineral exploration industry, the Company does not currently have material exposure to
environmental and social sustainability risks.
Principle 8 – Remunerate fairly and responsibly
Recommendation 8.1:
The Board should have a Remuneration Committee.
The Board has established a remuneration committee comprising the two non-executive directors of the
Company but no separately remuneration committee meetings were held in the reporting year. The Board
considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the
separate committee meetings at this time. The Board as a whole is able to address the governance aspects
of the full scope of the Company’s activities and to ensure that it adheres to appropriate ethical standards. In
particular, the full Board considers those matters that would usually be the responsibility of a remuneration
committee. However the Board considers that no efficiencies or other benefits would be gained by having
separate remuneration committee meetings at this stage.
Recommendation 8.2:
Companies should separately disclose its policies and practices regarding the remuneration of non-executive directors
and the remuneration of executive directors and other senior executives.
The Company’s policies and practices regarding the remuneration of Executive and Non-Executive Directors
is set out in its Remuneration Policy which is available on the website.
This information is also set out in the Remuneration Report contained in the Company’s Annual Report for
each financial year
Recommendation 8.3:
A Company which has an equity based remuneration scheme should have a policy on whether participants are permitted
to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of
participating in the scheme and disclose that policy or summary of it.
The Company does not have an equity based remuneration scheme which is affected by this
recommendation. Recipients of equity-based remuneration (e.g. incentives options) are not permitted to enter
into any transactions that would limit the economic risk of options or other unvested entitlements.
53
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Annual Mineral Resources and Ore Reserves Statement
The Company’s reported Mineral Resources are located within four projects that lie in an arc 50-80kms’ to the
north east and south west of Kalgoorlie, Western Australia. The main project area is to the north east of
Kalgoorlie and comprises the Lindsays, Kalpini and Kurnalpi project areas which are spread over a 60km arc
from west to east. The Spargoville project lies approximately 22kilometres to the east of Kambalda.
The most significant change in the 2015 Annual Mineral Resources and Ore Reserve Statement has been
the removal of the mineral resources and ore reserves contained within the Mt Jewell project as a result of
that project’s divestment in November 2014. In addition, the board has taken the decision to declassify the
ore reserves for Lindsays, Kurnalpi and Kalpini on the basis that the input mining costs and parameters that
were used at the time to constrain the ore reserves are no longer applicable. In addition and with respect to
Lindsays, part of the Eastern Structure mineral resource on which part of the Lindsays ore reserve was based
was modified as a result of the reporting of the new Parrot Feathers lode (noted below). Given this previously
reported resource has been the subject of more recent modification, the ore reserve previously estimated
based on that mineral resource cannot be justified.The board’s decision was also influenced, supported and
reinforced by a recently prepared (October 2015) independent 3rd party technical project review and valuation
report of the Company’s mineral assets in which it was stated that no consideration had been given by the 3rd
party to the ore reserves previously reported by the Company .
The Lindsays project consists of a contiguous package of tenements centred around the Lindsays Mine site
which remains under suspension. The Lindsay’s mineral resources are contained within two granted Mining
Leases. During the year three diamond drill holes were completed at the Lindsays mine site which formed
the basis for the reporting of the Parrot Feathers lode resource ( ASX:20 July 2015). The Parrot Feathers
lode was previously incorporated into the previously reported Eastern Structure, and this resource has
subsequently been adjusted downward to account for the removal of that part of the new Parrot Feathers lode
resource. The Parrots Feathers Lode mineral resource was first reported on 20 July 2015 and the Company
confirms that it is not aware of any new information or data that materially affects the information included in
that market announcement. All material assumptions underpinning the mineral resource estimate contained
in that announcement continue to apply and have not materially changed.
The Kalpini Project resource is contained within a granted Mining Lease. There has been no change to the
mineral resource estimate at Kalpini during the year ended 30 June 2015. The information was prepared and
first disclosed under JORC 2004. It has not been updated since to comply with the JORC Code 2012 on the
basis that the information has not materially changed since it was last reported.
The Kurnalpi project lies 85km to the east of Kalgoorlie straddling the Kurnalpi Pinjin road and consists of a
contiguous package of Exploration, Prospecting and Mining leases. The project contains six individual
resources all located on granted Mining leases and centred within 3 kilometres of the more significant Brilliant
deposit. There has been no change to the mineral resource estimate at Kurnalpi during the year ended 30
June 2015. The information was prepared and first disclosed under JORC 2004. It has not been updated
since to comply with the JORC Code 2012 on the basis that the information has not materially changed since
it was last reported.
The Spargoville Project contains the Lady Allison gold mineral resource located on a granted Mining Lease.
There has been no change to the mineral resource at Spargoville during the year ended 30 June 2015. The
information was prepared and first disclosed under JORC 2004. It has not been updated since to comply with
the JORC Code 2012 on the basis that the information has not materially changed since it was last reported.
54
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Annual Mineral Resources and Ore Reserves Statement
Table 1: Ore Resources
Summary of Mineral Resource Estimates (at 30 June 2015)
Reported according to JORC Category and Deposit (JORC 2004 &2012 Compliant)
Deposit
Tonnes (t) Grade (g/t) Ounces (oz.) Tonnes (t) Grade (g/t)
Ounces (oz.)
Tonnes (t) Grade (g/t) Ounces (oz.) Tonnes (t) Grade (g/t) Ounces (oz.)
Measured
Indicated
Inferred
Total
Discovery Hill
Halfway Hill
Scottish Lass
Brilliant
Sparkle
Dazzle
Total
Gambia/Camelia
Atlas
Total
Eastern Structure
1
Parrot Feathers
Central Structure
Neves Prospect
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,821,300
288,900
-
-
-
-
1.3
0.9
-
Kurnalpi
-
-
-
130,000
510,000
84,700
115,200
1,117,700
8,500
-
190,000
511,000
3,110,200
1.20
124,200
2,543,400
3,072,000
169,000
3,241,000
1,479,000
140,000
1,315,100
490,900
Kalpini
183,700
1,074,000
6,900
299,000
190,600
1,373,000
Lindsays
76,000
18,000
46,500
24,900
-
203,000
261,000
47,900
37,700
-
165,400
549,600
1.9
1.3
1.8
1.6
4.0
1.1
1.6
-
1.5
0.9
1.1
1.0
1.1
1.0
0.8
1.1
1.6
1.2
1.5
1.6
4.3
1.1
1.3
-
2.8
3,600
130,000
18,700
510,000
2,600
84,700
38,000
3,939,000
5,800
478,900
12,600
511,000
81,300
5,653,600
53,900
4,146,000
11,100
468,000
65,000
4,614,000
10,500
1,682,000
36,000
401,000
1,700
1,500
-
1,363,000
528,600
64,100
49,700
4,038,700
0.9
1.1
1.0
1.2
0.9
0.8
1.2
1.8
1.2
1.7
1.6
4.2
1.1
1.6
0.9
1.7
3,600
18,700
2,600
153,200
14,300
12,600
205,000
237,600
18,000
255,600
86,500
54,000
48,200
26,400
1,800
216,900
Stockpile
Total
64,100
64,100
0.87
0.87
1,800
-
1,800
3,425,000
Lady Allison
-
-
-
-
-
Spargoville
-
2,127,700
1.3
86,800
2,127,700
1.3
86,800
Total
64,100
0.87
1,800
9,776,200
1.5
480,200
6,593,700
1.3
282,800
16,434,000
1.4
764,300
1. Parrot Feathers reported under JORC 2012, all others under JORC 2004
KalNorth Gold Mines Total
55
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Annual Mineral Resources and Ore Reserves Statement
Table 2: Comparison of Lindsays Ore Resources
Reported according to JORC Category and Deposit (JORC 2004 &2012 Compliant)
Deposit
Eastern Structure June 2015
Eastern Structure June 2014
Parrot Feathers Lode June 2015
Parrot Feathers Lode June 2014
Central Structure June 2015
Central Structure June 2014
Neves Prospect June 2015
Neves Prospect June 2014
Stockpile June 2015
Stockpile June 2014
Total June 2015
Total June 2014
Measured
Tonnes (t) Grade (g/t) Ounces (oz)
-
-
-
-
-
-
-
-
-
-
64,100
64,100
64,100
64,100
-
-
-
-
-
-
-
0.9
0.87
0.9
0.87
-
-
-
-
-
-
-
1,800
1,800
1,800
1,800
Lindsays Resource -Comparison June 30 2015 Vs June 30 2014
-
Tonnes (t)
1,479,000
2,272,800
140,000
1,315,100
1,315,100
490,900
490,900
0
-
3,425,000
4,078,800
Indicated
Grade (g/t)
1.6
2.04
4.0
-
1.1
1.10
1.6
1.60
-
-
1.5
1.68
Ounces (oz)
76,000
149,000
18,000
Tonnes (t)
203,000
904,800
261,000
Inferred
Grade (g/t)
1.6
3.1
4.3
Ounces (oz)
10,500
92,200
36,000
Tonnes (t)
1,682,000
3,177,600
401,000
-
-
-
-
-
46,500
46,500
24,900
24,900
-
-
47,900
47,900
37,700
37,700
-
-
165,400
220,400
549,600
990,400
1.1
1.1
1.3
1.3
2.8
3.0
-
-
1,700
1,700
1,500
1,500
-
-
49,700
95,400
1,363,000
1,363,000
528,600
528,600
64,100
64,100
3,974,600
5,133,300
Total
Grade (g/t)
1.6
2.36
4.2
-
1.1
1.10
1.6
1.55
0.9
0.87
1.7
1.9
Ounces (oz)
86,500
241,200
54,000
-
48,200
48,200
26,400
26,400
1,800
1,800
216,900
317,600
56
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Annual Mineral Resources and Ore Reserves Statement
Governance and Internal Controls
The company ensures that all resource calculations are undertaken and or reviewed by independent industry
consultants.
All drill hole data was imported and stored into a master database managed by the company using Datashed
and SQL. Data validation and interrogation is performed by KalNorth and independent resource consultants
when required. Any errors in the data are communicated to the Exploration Manager and on approval
rectified. Amendments made to the format of a drill holes, survey data samples and assay information are
recorded in the database for future reference. As at June 30 2015 the database is managed by external
consultants but stored on the company’s server.
Quality control on resource drill programs have been undertaken to industry standards with implementation of
appropriate drilling technique, survey data collection, assay standards, sample duplicates and repeat
analysis. Samples were analysed by independent internationally accredited laboratories with a QAQC
program that reported monthly and showing acceptable levels of accuracy and precision. Regular inspections
of the assay laboratory were made during the course of drilling programs to ensure that the laboratory
maintained strong adherence to QAQC. The company interrogates and validates its internal assay standards
using Datashed QAQC software.
The mineral resource estimates for the Kurnalpi and Spargoville Deposits were undertaken independently by
Snowden Mining Industry Consultants.
The mineral resource estimate for the Parrot Feathers lode was undertaken independently by Ravensgate
Mining Industry Consultants.
Competent Person Statement
The Mineral Resources and Ore Reserves Statement is based on, and fairly represents information and
supporting documentation compiled by the person named below
The Mineral Resources and Ore Reserves statement as a whole has been approved by Mr Wade Johnson
who is the Exploration Manager and a full time employee of and a holder of shares in KalNorth Gold Mines
Limited and is a member of The Australian Institute of Geoscientists (AIG). The details within the Mineral
Resources and Ore Reserve Statement are consistent with information previously released and prepared by
previous employees and consultants of the company and compiled by Mr Johnson. Mr Johnson has
sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration
and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of
the “Australian Code for Reporting of exploration Results, Mineral Resources and Ore Reserves”. Mr
Johnson consents to the inclusion in the report of the matters based on his information in the form and
context in which it appears in this announcement.
The information within this Annual Report that relates to Exploration results is based on information compiled
by Mr Wade Johnson who is a full time employee of KalNorth Gold Mines Limited and is a member of The
Australian Institute of Geoscientists (AIG). Mr Johnson has sufficient experience which is relevant to the style
of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify
as a Competent Person as defined in the 2012 Edition of the “Australian Code for Reporting of exploration
Results, Mineral Resources and Ore Reserves”. Mr Johnson consents to the inclusion in the report of the
matters based on his information in the form and context in which it appears in this announcement.
57
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Mining Tenement
Mining Tenements held at 19 October 2015
All tenements are located in the Goldfields region of Western Australia.
TENEMENT
NUMBER
STATUS
LOCALITY
KALNORTH
PROJECT
HOLDER
INTEREST
%
M27/485
E27/412
E27/411
E28/2015
M28/0092
M28/0072
P28/1190
P28/1191
M28/0007
P28/1228
P28/1224
P28/1225
P28/1226
P28/1227
P28/1229
P28/1230
P28/1231
M28/0084
E28/2226
M28/374
M28/375
M28/0090
P28/1180
P28/1154
P28/1155
P28/1156
P28/1157
P28/1184
M28/0089
M28/0076
E28/2153
M28/0066
M28/0113
P28/1187
P28/1186
P28/1097
P28/1100
P28/1101
P28/1102
P28/1103
P28/1104
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
KALPINI
KALPINI HILL
MAGGIES DAM
COLOUR DAM
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
6 MILE SOUTH
KURNALPI 1
KURNALPI 2
KURNALPI
KURNALPI
RICHES FIND
KURNALPI
KURNALPI
KURNALPI
KALPINI
KALPINI
ALPINI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
SHANNON RESOURCES PTY LTD
LUSITAN PROSPECTING PTY LTD
LUSITAN PROSPECTING PTY LTD
LUSITAN PROSPECTING PTY LTD
LUSITAN PROSPECTING PTY LTD
LUSITAN PROSPECTING PTY LTD
LUSITAN PROSPECTING PTY LTD
LUSITAN PROSPECTING PTY LTD
LUSITAN PROSPECTING PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
KALNORTH GOLD MINES LIMITED
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
KALNORTH GOLD MINES LIMITED
KALNORTH GOLD MINES LIMITED
SUCCESS GOLD MINE
KURNALPI
KALNORTH GOLD MINES LIMITED
KURNALPI
KURNALPI
SHANNON RESOURCES PTY LTD
SCOTTISH LASS WELL
KURNALPI
SHANNON RESOURCES PTY LTD
5 MILE DAM
KURNALPI
KURNALPI
COLOUR DAM
KURNALPI - PURPLE
PATCH
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KALNORTH GOLD MINES LIMITED
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
KALNORTH GOLD MINES LIMITED
KURNALPI
KALNORTH GOLD MINES LIMITED
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
58
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
TENEMENT
NUMBER
P28/1105
P28/1106
P28/1107
P28/1108
P28/1111
P28/1112
P28/1113
P28/1114
P28/1115
P28/1116
P28/1118
P28/1119
P28/1125
P28/1126
E28/2256
P28/1254
P28/1255
E28/1477
P28/1117
M27/34
M27/169
P27/2111
P27/2094
M27/486
P15/5264
P15/5494
E15/1174
P15/5216
M15/1806
P15/5236
P15/5537
P15/5545
P15/5546
P15/5547
P15/5548
P15/5392
P15/5409
L27/82
L27/84
L27/88
P 15/5766
P 15/5772
E 27/517
E28/2303
E28/2304
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Mining Tenement
KALNORTH
PROJECT
LOCALITY
HOLDER
STATUS
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
LIVE
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNAPLI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI 2
KURNALPI 3
LAPAGE HILL
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
KURNALPI
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
SHANNON RESOURCES PTY LTD
AT LINDSAY
LINDSAYS FIND
KALNORTH GOLD MINES LIMITED
LINDSAY FIND
LINDSAYS FIND
KALNORTH GOLD MINES LIMITED
LINDSAYS NORTH
LINDSAYS FIND
KALNORTH GOLD MINES LIMITED
LINSDAY DAM
LINDSAYS FIND
KALNORTH GOLD MINES LIMITED
LINDSAYS
LINDSAYS FIND
KALNORTH GOLD MINES LIMITED
LOGANS FIND
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LOGANS
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
SPARGOVILLE
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LOGANS
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LADY ALLISON
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LOGANS
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LARKINVILLE
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LOGANS
LOGANS
LOGANS
LOGANS
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LARKINVILLE
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LARKINVILLE
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LINDSAYS
LINDSAYS FIND
KALNORTH GOLD MINES LIMITED
LINDSAYS DEVIATION
LINDSAYS FIND
KALNORTH GOLD MINES LIMITED
KALPINI
KALPINI
KALNORTH GOLD MINES LIMITED
NORTH DAM
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LADY ALLISON
SPARGOVILLE
KALNORTH GOLD MINES LIMITED
LINDSAYS EAST
LINDSAYS FIND
KALNORTH GOLD MINES LIMITED
CLAYPAN EAST
YINIDI WOOLSHED
KALNORTH GOLD MINES LIMITED
LAKE ROE
YINIDI WOOLSHED
KALNORTH GOLD MINES LIMITED
59
INTEREST
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
80
80
80
80
80
80
80
80
80
80
80
80
100
100
100
80
80
100
100
100
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Mining Tenement
KALNORTH
PROJECT¹
LOCALITY
HOLDER
STATUS
TENEMENT
NUMBER
E27/524
LIVE
WELLINGTON
KALPINI
HERON RESOURCES LIMITED
INTEREST
%
100%Au
¹The Spargoville tenements were subject to an earn in Joint Venture by Mithril Resources Limited which
terminated on 11 May 2015. Mithril have formally handed back the 20% interest to Kalnorth and the
registration of the transfer is still pending as at 19 October 2015.
60
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Shareholder Information
Shareholder Information
The shareholder information set out below was applicable as at 19 October 2015.
A.
Distribution of Equity Securities
Analysis of number of equity holders by size of holding:
Spread of
Holdings
Number of
Holders
Number of
Units
% of Total
Issued Capital
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
129
194
165
367
132
987
47,334
636,006
1,363,705
12,713,237
300,737,816
345,498,098
0.014%
0.184%
0.395%
3.680%
95.728%
100%
The number of shareholders holding less than a marketable parcel is 987.
B.
Voting Rights
At a general meeting of shareholders:
a. On a show of hands, each person who is a member or sole proxy has one vote.
b. On a poll, each shareholder is entitled to one vote for each fully paid share.
C.
Equity Security Holders
The names of the twenty largest quoted equity security holders are listed below:
Rank Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SOUTH VICTORY GLOBAL LIMITED
RENERGY PTY LTD
LINK 405 PTY LTD
IRON MOUNTAIN PTY LTD
TIMPETRA RESOURCES LTD
MRS SUSAN MARIE CARR
IRON MOUNTAIN PTY LIMITED
LINK TRADERS (AUST) PTY LTD
IRON MOUNTAIN PTY LIMITED
INTERNATIONAL TECHNOLOGY GROUP PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
MR JUSTIN JOHN WOOD + MRS CAROLYN WOOD
CITICORP NOMINEES PTY LIMITED
PERSHING AUSTRALIA NOMINEES PTY LTD
EDWIN PAUL CAYZER + LORAINE HELEN CAYZER
STEVEN WILLIS SHALLCRASS
MR GREGORY GERARD RYAN
BROADBENT NOMINEES PTY LTD
MR LIONEL CEDRIC JULIAN LEES
Total Units
111,045,588
45,110,916
24,868,646
22,761,692
15,737,841
14,761,340
14,710,000
8,828,687
7,272,998
4,800,000
3,398,012
2,978,179
2,316,839
2,057,196
1,881,796
1,860,000
1,710,000
1,350,000
1,294,190
1,288,000
Issued
Capital
%
32.14
13.06
7.2
6.59
4.56
4.27
4.26
2.56
2.11
1.39
0.98
0.86
0.67
0.6
0.54
0.54
0.49
0.39
0.37
0.37
Totals
290,031,920
83.95
61
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2015
Shareholder Information
D.
Substantial Shareholders
Substantial shareholders (>5% of shares held) in the Company are listed below:
Rank
Shareholder
1.
2.
3.
4.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
SOUTH VICTORY GLOBAL LIMITED
RENERGY PTY LTD
LINK 405 PTY LTD
Total
Total Units
111,045,588
45,110,916
24,868,646
22,761,692
203,786,842
62