KalNorth Gold Mines Limited and Controlled Entities
ACN 100 405 954
Annual Report
For the year ended 30 June 2017
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
CONTENTS
Corporate Directory
Directors’ Report
Auditors’ Independence Declaration
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
Independent Auditors’ Report
Corporate Governance Statement
Minerals Resources and Ore Reserves Statement
Mineral Interest Summary
Additional Shareholders Information
1
2
11
12
13
14
15
16
37
38
42
50
53
54
KalNorth Gold Mines Limited and Controlled Entities
ed and Controlled Entities For the year ended 30 June 2014
CORPORATE DIRECTORY
For the year ended 30 June 2017
Directors
Mr Jiajun Hu
Mr Yuanguang Yang
Mrs Xiaojing Wang
Executive Chairman
Non-Executive Director
Non-Executive Director
Company
Secretary
Mr Jiajun Hu
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
BDO (Audit) WA Pty Ltd
38 Station Street
Subiaco WA 6008
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 2017
DIRECTORS’ REPORT
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 2017.
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 from the start of the financial year to the date of this report unless otherwise
stated.
Jiajun Hu
Yuanguang Yang
Xiaojing Wang (Appointed 11/01/2017)
Lijun Yang (Resigned 10/01/2017)
Executive Chairman
Non-executive Director
Non-executive Director
Executive Director
Information on Directors
JIAJUN HU
Executive Chairman with effect from 11 January 2017, Non-Executive prior to that.
Mr. Jiajun Hu acts as Regional Business Executive of Cross-Strait Common Development Fund Co., Ltd
(hereinafter referred to as “Cross-Strait”). Cross-Strait, with its global headquarters in Hong Kong, is one of
the largest shareholders in the Company.
He is responsible for supervision and administration of Cross-Strait’s investment projects in Oceania and
reports directly 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
transactions market and
investment capital market, and is familiar with Chinese business and capital market operation. Mr. Hu is
fluent in both English and Chinese
the financial
Mr Hu has held no other directorships of other public companies within the last three years.
Interest in shares and options: Nil
YUANGUANG YANG
Non-Executive Director
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
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: 2,375,300 shares
2
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
DIRECTORS’ REPORT
Information on Directors (cont’d)
XIAOJING WANG (REBECCA) (Appointed 11/01/2017)
Non-Executive Director
Mrs Wang holds a Bachelor of Applied Finance, from Macquarie University, NSW and is currently the Finance
Manager for a Sydney based private company.
Interest in shares and options: Nil
LIJUN YANG (Resigned 10/01/2017)
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.
Company Secretary
Mr Jiajun Hu (Appointed 11/01/2017)
Mr Lijun Yang (Resigned 10/01/2017)
Principal Activities
The consolidated entity’s principal activity during the year was gold exploration on its projects in the Eastern
Kalgoorlie region in Western Australia.
Review of Operations
Kurnalpi Project (100 % KGM)
The Kurnalpi project is located approximately 85km north-east of Kalgoorlie with easy road access. It has
been subject to extensive historic small scale gold mining and a number of companies have completed
extensive work on this project previously. A series of small to moderate size mineral resources have been
defined in the project area and KalNorth is focusing on exploration to define additional resources to increase
the potential for development.
During the FY 2017, a three stage project review and targeting exercise including existing data review, field
reconnaissance, mapping and sample collection and mineralisation related structure/geochemical alteration
interpretation and target analysis in Kurnalpi project was successfully conducted by CSA Global Pty Ltd. The
gold mineralisation related host lithology and tectonic setting in Kurnalpi project had been reclassified and
defined on the basis of geochemical signatures of collected samples. Au-Ag-Bi-Mo-Te elements group was
believed related to mineralisation after comparing samples’ multi-geochemical signature to defined gold
mineralisation. The “oxidised fluid” and “reduced fluid” had been discriminated on the basis of dominant types
of alteration assemblage which was considered related to the defined gold mineralisation. The regional
structures and evolution model were interpreted to indicate the potential mineralisation related trap sites. A
gold exploration model for Kurnalpi project was then summarised and 28 targets had been identified including
3 high and 3 moderately high priority targets to be tested as first pass.
In the June Quarter, 46 early stage Air Core holes for a total of 2,088 metres first pass drilling program was
completed on E28/1477 of Kurnalpi project on high priority targets generated from previous geophysical
3
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
DIRECTORS’ REPORT
Review of Operations (cont’d)
and mapping work. No significant intercepts were recorded and the Company plans to continue testing other
targets within Kurnalpi project.
Lindsay’s Project (100 % KGM)
The Lindsay’s project is located approximately 65km to the north east of Kalgoorlie and contains the Lindsay’s
mine site which continues to remain under care and maintenance since August 2013. The Board was seeking
to review its strategy with respect to the Lindsay’s Project which has demonstrated both open-cut and
underground mining potential.
The Company entered into a Heads of Agreement (HOA) with Keras (Gold) Australia Pty Ltd (Keras) on 11
March 2016 to redevelop Lindsay’s Project. Keys terms of the HOA included activities to investigate the
economic mining of the Lindsay’s Project deposits, the lodgment of certain mining approvals and further
negotiations regarding a formal arrangement between the parties. On 21 December 2016, the HOA was
terminated by mutual agreement.
The Company continued its strategic review of the project and conducted discussions with several interested
parties to redevelop or divest the project in the future.
Kalpini Project (divested)
The Kalpini Project is located 70km northeast of Kalgoorlie town via Yarri and Kurnalpi-Pingjin Road,
consisting of only one Mining Lease currently which contains the Kalpini gold resource at 4.61Mt @1.7 g/t
for 255,600 ounces. The gold resource is hosted at three prospects, Atlas, Gambia and Camelia which are
all hosted within dolerite but having contrasting controls on the mineralisation.
The Company successfully completed a sale of the Kalpini Project, following an open bidding process in
which several groups participated. Following execution of a binding sale and purchase agreement, the sale
was completed during the June Quarter for gross proceeds of $3.2M.
Operating Results and Financial Performance
The operating loss after income tax of the consolidated entity for the year ended 30 June 2017 was $95,951
(2016: loss $12,330,518).
The operating loss for the year was impacted by the following key items:
(i) Sale of the Kalpini Project for gross proceeds of $3.2 million, resulting in a gain of $1.28 million (2016:
$nil).
(ii) Exploration expenditure of $0.55 million (2016: $1.09 million) across all project areas and immediately
written-off to the profit and loss.
(iii) Interest expense of $0.13 million (2016: $0.31 million) on the Company’s convertible note facilities.
As at 30 June 2017 the Company had $3,260,565 (2016: $34,105) in cash reserves and an aggregate liability
of $1,372,791 (2016: $320,054) in debt instruments.
At 30 June 2017, the consolidated entity had net assets of $5,524,815 (2016: $5,569,976).
During the Financial Year the Company negotiated an extension of the maturity date for the convertible
note facility from 30 April 2017 to 30 April 2018.
4
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
DIRECTORS’ REPORT
Significant Changes in the State of Affairs
There have not been significant changes in the state of affairs of the consolidated entity during the financial
year, other than as noted in this financial report.
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.
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 12 meetings of Directors were held. Attendances by each Director during the year
were as follows:
Jiajun Hu
Yuanguang Yang
Xiaojing Wang (Appointed 11/01/2017)
Lijun Yang (Resigned 10/01/2017)
Directors’ Meetings
Number of meetings
eligible to attend
Number
attended
12
12
5
7
12
12
5
7
No Audit or Remuneration Committee meetings were held in the year, 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 (2016: Nil).
During the year ended 30 June 2017 and to the date of this report, no shares were issued on the exercise of
options (2016: 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.
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.
5
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
DIRECTORS’ REPORT
Risk Management (cont’d)
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.
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.
6
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
DIRECTORS’ REPORT
Remuneration Report (Audited) (cont’d)
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 in place at the date of
this report are as follows:
Commencement
Date
11/01/2017
Notice Period
Base Salary
One month
Base Salary
$60,0001
Termination
Payments
Provided
-
Jiajun Hu – Executive
Chairman
¹Entitled to statutory superannuation contributions
There are no other agreements with key management personnel.
Voting and comments made at the Company's 2016 Annual General Meeting ('AGM')
At the 2016 AGM, 95% of the votes received supported the adoption of the remuneration report for the year
ended 30 June 2016. The Company did not receive any specific feedback at the AGM regarding its
remuneration practices.
Remuneration Details
(a)
Key management personnel compensation:
2017
Short-term benefits
Post-employment benefits
Name
Salary and
fees
$
Annual Leave
Entitlements
$
Super-
annuation
Termination
Total
$
$
$
Directors
Jiajun Hu
Yuanguang Yang
Xiaojing Wang (Appointed 11/01/2017)
Lijun Yang (Resigned 10/01/2017)
Total
59,167
30,000
14,137
67,987
171,291
2,368
-
-
-
2,368
4,196
-
-
5,975
-
-
-
11,191
65,731
30,000
14,137
85,153
10,171
11,191
195,021
7
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
DIRECTORS’ REPORT
Remuneration Report (Audited) (cont’d)
2016
Short-term benefits
Post-employment benefits
Name
Directors
Lijun Yang
Jiajun Hu
Yuanguang Yang
Other key management
personnel
Wade Johnson1
Total
Salary and
fees
$
Annual Leave
Entitlements
$
Super-
annuation
Termination
Total
85,385
50,000
30,000
148,095
313,480
$
$
$
8,111
4,354
-
-
-
-
93,496
54,354
30,000
14,305
26,770
23,076
23,076
185,476
363,326
-
-
-
-
-
1 Mr Johnson’s employment agreement was terminated on 14 April 2016.
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 2017
(2016: 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:
2017
Directors
Balance
1 July 2016
Granted as
Remuneration
Net Change
Other
Balance
30 June 2017
Jiajun Hu
Yuanguang Yang
Xiaojing Wang (Appointed
11/01/2017)
Lijun Yang
10/01/2017)
(Resigned
Total
2016
-
2,375,300
-
47,100
2,422,400
-
-
-
-
-
-
-
-
-
2,375,300
-
(47,100)
-
(47,100)
2,375,300
Balance
1 July 2015
Granted as
Remuneration
Net Change
Other
Balance
30 June 2016
Directors
Lijun Yang
Jiajun Hu
Yuanguang Yang
Other
Wade Johnson (resigned
14 April 2016)
Total
31,400
-
-
1,010,000
1,041,400
15,700
-
2,375,300
47,100
-
2,375,300
(1,010,000)
-
1,381,000
2,422,400
-
-
-
-
-
8
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
DIRECTORS’ REPORT
Remuneration Report (Audited) (cont’d)
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 (30 June 2016: Nil) to key management personnel and their
related parties.
Use of Remuneration Consultants
The Company did not use any remuneration consultants during the period.
Additional information
The earnings of the consolidated entity for the five years to 30 June 2017 are summarised below:
2017
$
2016
$
2015
$
2014
$
2013
$
Sales revenue
EBITDA
EBIT
Loss after income tax
13,422
1,565,081
66,419 (11,958,266)
34,858 (12,018,044)
(12,330,518)
(95,951)
9,295
(95,773)
(210,686)
(774,451)
5,211,564
(9,818,556)
(10,037,470)
(10,763,483)
3,629,630
(55,814,673)
(56,364,791)
(56,492,958)
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
2017
2016
2015
2014
2013
Share price at financial year end ($)
Total dividends declared (cents per
share)
Basic loss per share (cents per
share)
[END OF REMUNERATION REPORT]
0.009
0.023
0.008
0.009
0.065
-
-
-
-
-
(0.01)
(2.23)
(0.28)
(5.28)
(35.09)
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.
9
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
DIRECTORS’ REPORT
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 Australia Partners, the Company’s former auditor, for non-
audit services:
Taxation services
- other taxation services – R&D tax credit - Indirect Tax Consulting
No fees have been paid or are payable to BDO (Audit) WA Pty Ltd for non-audit services
2017
$
7,500
15,791
23,291
2016
$
5,000
-
5,000
Auditor
BDO Audit (WA) Pty Ltd was appointed as auditor of the Company following the AGM on 29 November 2016.
RSM Australia Partners resigned as auditors of the Company on that date in accordance with section 327 of
the Corporations Act 2001.
Auditor’s Independence Declaration
The auditor, BDO Audit (WA) Pty Ltd, has provided the Board of Directors with an independence declaration
in accordance with section 307C of the Corporations Act 2001 and this is set out on the following page.
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.
Jiajun Hu
Executive Chairman
Dated at Perth 29 September 2017
Review of Operations – Competent Persons Statement
The information within this Annual Report that relates to Exploration results is based on information compiled by Mr Lijun
Yang who is an employee of Gold Geological Consulting Pty Ltd which provides technical consultancy services to KalNorth
Gold Mines Limited. Mr Yang is a member of The Australian Institute of Geoscientists (AIG). Mr Yang 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 Yang consents to the inclusion in this report of the matters
based on his information in the form and context in which it appears in this report.
10
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY GLYN O'BRIEN TO THE DIRECTORS OF KALNORTH GOLD MINES
LIMITED
As lead auditor of KalNorth Gold Mines Limited for the period ended 30 June 2017, I declare that, to
the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Kalnorth Gold Mines Limited and the entities it controlled during the
period.
Glyn O’Brien
Director
BDO Audit (WA) Pty Ltd
Perth, 29 September 2017
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
11
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2017
Revenue from gold sales
Revenue from non-mineral sales
Cost of sales – gold sales
Cost of sales – non-mineral sales
Gross profit
Other income
Gain/(loss) on sale of tenements
Director and corporate employee costs
Professional fees and consultants
Advertising and promotion cost
Depreciation expenses
Listing and registry fees
Exploration costs
Interest expense
Debt to equity – fair value loss
Other expenses
Loss before income tax
Income tax benefit
Loss after income tax for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Other comprehensive income for the year, net of tax
Note
2017
$
2016
$
13,422
-
1,444,329
120,752
-
-
(1,028,673)
(119,200)
13,422
417,208
18,473
1,277,850
(359,752)
(156,685)
-
(31,561)
(45,668)
(552,403)
(130,809)
-
(128,818)
161,697
(463,207)
(188,750)
(199,321)
(2,160)
(59,778)
(39,377)
(1,098,112)
(312,474)
(10,355,775)
(190,469)
(95,951)
-
(95,951)
(12,330,518)
-
(12,330,518)
-
-
-
-
3
3
8
4
5
Total comprehensive loss for the year
(95,951)
(12,330,518)
Loss per share
Basic and diluted loss per share (cents)
16
(0.01)
(2.23)
The accompanying notes form an integral part of these financial statements.
12
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
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
NET ASSETS
EQUITY
Issued capital
Accumulated losses
TOTAL EQUITY
Note
2017
$
2016
$
18 (b)
6
7
3,260,565
2,834
7,500
3,270,899
34,105
302,293
7,500
343,898
8
9
10
11
12
309,400
5,259,651
5,569,051
338,190
6,999,901
7,338,091
8,839,950
7,681,989
446,824
1,372,791
1,819,615
288,339
320,054
608,393
1,495,520
1,495,520
1,503,620
1,503,620
3,315,135
2,112,013
5,524,815
5,569,976
13
92,438,807
(86,913,992)
92,388,017
(86,818,041)
5,524,815
5,569,976
The accompanying notes form an integral part of these financial statements.
13
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2017
2016
As at 1 July 2015
Loss after income tax for the year
Total comprehensive income for the year, net of tax
Shares issued during the year, net of costs
Equity portion on convertible note issued during year
As at 30 June 2016
Issued
Capital
$
Accumulated
Losses
$
Total
Equity
$
76,251,722
(74,487,523)
1,764,199
-
-
(12,330,518)
(12,330,518)
(12,330,518)
(12,330,518)
16,109,255
27,040
-
-
92,388,017
(86,818,041)
16,109,255
27,040
5,569,976
Issued
Capital
$
Accumulated
Losses
$
Total
Equity
$
2017
As at 1 July 2016
Loss after income tax for the year
Total comprehensive income for the year, net of tax
Shares issued during the year, net of costs
92,388,017
(86,818,041)
(95,951)
(95,951)
-
-
-
Equity portion on convertible note issued during year
As at 30 June 2017
50,790
-
92,438,807
(86,913,992)
5,569,976
(95,951)
(95,951)
-
50,790
5,524,815
The accompanying notes form an integral part of these financial statements.
14
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2017
Note
2017
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
Other income
Other payments
Net cash used in operating activities
18(a)
Cash flows from investing activities
Proceeds from sale of tenements
GST collected on sale of tenements
Facilitation fee – sale of tenements
Payments for plant and equipment
Proceeds from sale of plant and equipment
Payment for mineral exploration activities
Net cash provided by/(used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares (net)
Proceeds from short-term borrowings
Proceeds from borrowings – convertible loan
Repayment of borrowings - unsecured
Net cash provided by financing activities
$
151,154
(788,495)
157,912
3,648
(71)
-
-
(475,852)
3,200,000
320,000
(190,000)
(2,771)
12,500
(620,417)
2,719,312
2016
$
1,319,118
(1,632,110)
-
3,785
(56,316)
120,752
(119,200)
(363,971)
40,000
-
-
(8,048)
-
(1,000,576)
(968,624)
-
-
1,000,000
(17,000)
983,000
861,060
17,000
300,000
(50,000)
1,128,060
Net increase / (decrease) in cash held
3,226,460
(204,535)
Cash and cash equivalents at the beginning of the financial year
34,105
238,640
Cash and cash equivalents at the end of the financial year
18(b)
3,260,565
34,105
The accompanying notes form an integral part of these financial statements.
15
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
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 29 September 2017 by the Board of Directors.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the
Corporations Act 2001, as appropriate for-profit oriented entities. These financial statements also comply
with International Financial Reporting Standards as issued by the International Accounting Standards Board
('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where
applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value
through profit or loss, investment properties, certain classes of property, plant and equipment and derivative
financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also
requires management
in the process of applying the consolidated entity's
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial statements, are disclosed in note 2.
to exercise its judgement
New, revised or amending Accounting Standards and Interpretations adopted
In the year ended 30 June 2017, the group has reviewed all of the new and revised Standards and
interpretations issued by the AASB that are relevant to its operations and effective for annual reporting
periods beginning 1 July 2016.
It has been determined by the Directors that there is no impact material or
otherwise, of any of the new and revised Standard and Interpretations on its business and, therefore, no
change is necessary to Group accounting policies.
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 2017. As a result of this review 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 necessary to Group accounting policies.
Parent entity information
In accordance with the Corporations Act 2001,
consolidated entity only. Supplementary information about the parent entity is disclosed in Note 24.
these financial statements present the results of
the
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of KalNorth
Gold Mines Limited ('company' or 'parent entity') as at 30 June 2017 and the results of all subsidiaries for the
year then ended. KalNorth Gold Mines Limited and its subsidiaries together are referred to in these financial
statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity
controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power to direct the activities
is transferred to the
of the entity. Subsidiaries are fully consolidated from the date on which control
consolidated entity. They are de-consolidated from the date that control ceases.
16
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 1: Statement of Significant Accounting Policies (cont’d)
Principles of consolidation (cont’d)
Intercompany transactions, balances and unrealised gains on transactions between entities in the
consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in
ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference
between the consideration transferred and the book value of the share of the non-controlling interest acquired
is recognised directly in equity attributable to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill,
liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences
recognised in equity. The consolidated entity recognises the fair value of the consideration received and the
fair value of any investment retained together with any gain or loss in profit or loss.
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
17
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 1: Statement of Significant Accounting Policies (cont’d)
Income tax (cont’d)
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.
Mining tenements and exploration and evaluation expenditure
Mining tenements and exploration and evaluation expenditure are carried at cost,
impairment losses.
less accumulated
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
legal
the mining permits. Such costs have been determined using estimates of
requirements and technology on an undiscounted basis.
future costs, current
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.
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.
18
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
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
lives to the consolidated entity
freehold land,
commencing from the time the asset is held ready for use.
is depreciated on a straight-line basis over the useful
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.
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.
19
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 1: Statement of Significant Accounting Policies (cont’d)
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.
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;
the
the borrower will enter bankruptcy or other
it becomes probable that
disappearance of an active market for the financial asset; or observable data indicating that there is a
measurable decrease in estimated future cash flows.
financial reorganisation;
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.
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
the fair value
liability, assuming they act
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.
interest. For non-financial assets,
in their economic best
20
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 1: Statement of Significant Accounting Policies (cont’d)
Fair value (cont’d)
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.
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.
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.
21
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 1: Statement of Significant Accounting Policies (cont’d)
Compound interest instruments
Compound financial instruments issued by the Company comprise convertible notes that can be converted
to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and does not
vary with changes in fair value.
The liability component of the compound financial instruments is initially recognised at the fair value of a
similar liability that does not have an equity conversion option. The equity component is initially recognised
at the difference between the fair value of the compound financial instrument as a whole and the fair value
of the liability component. Any directly attributable transaction costs are allocated to the liability and equity
components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability
component of a compound financial instrument is measured at amortised cost using the effective interest
method. The equity component of a compound financial instrument is not remeasured.
Interest related to the financial liability is recognised in profit or loss. On conversion, the financial liability is
reclassified to equity and no gain or loss is recognised.
Provision for restoration
Long term environmental obligations are based on the Group’s environmental management plans in
compliance with current environmental and regulatory requirements. Full provision is made based on the
value of the estimated cost restoring the environmental disturbance that has occurred up to the reporting
date. The restoration provision relates to exploration and evaluation expenditure and rehabilitation relating to
the exploration and mining lease.
The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in
legislation, technology or other circumstances.
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.
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.
22
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 1: Statement of Significant Accounting Policies (cont’d)
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.
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.
23
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
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
A provision has been made for the present value of anticipated costs for future rehabilitation of land explored
or mined. The consolidated entity's mining and exploration activities are subject to various laws and
regulations governing the protection of the environment. The consolidated entity recognises management's
best estimate for assets retirement obligations and site rehabilitations in the period in which they are incurred.
Actual costs incurred in the future periods could differ materially from the estimates. Additionally, future
changes to environmental laws and regulations, life of mine estimates could affect the carrying amount of
this provision.
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
Refundable R&D tax offset
Other income
Total other income
2017
$
2016
$
3,648
-
14,825
18,473
3,785
157,912
-
161,697
Gain/(loss) on sale of tenements (i)
1,277,850
(463,207)
(i)
The Company completed the sale of its 100% interest in the Kalpini project as part of its divesture of
non-core assets (2016: sale of the Roe and Spargoville projects). All tenements were located within
the Goldfields region of Western Australia. The gain/(loss) on sale consists of
the following
components;
Proceeds from sale (exclusive of GST)
Facilitation fee
Exploration & evaluation expenditure carrying value (Note 9)
Rehabilitation provision write-back on disposal
Total gain/(loss) on sale of tenements
2017
$
3,200,000
(190,000)
(1,759,450)
27,300
1,277,850
2016
$
40,000
-
(522,323)
19,116
(463,207)
24
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 4: Expenses
Loss before income tax consists of the following specific expenses:
2017
$
2016
$
Fair value loss – extinguishment of debt¹
-
(10,355,775)
¹On 24 February 2016, after receiving shareholder approval (25 November 2015 - 2015 Annual General Meeting)
and regulatory approval (23 February 2016), the Company issued 450,251,100 ordinary fully paid shares in
settlement of $4.15M in loans principal and $352,511 in accrued interest.
The cost of equity was recorded at fair value, and using the closing share price of 3.3 cents as at 23 February
2016. Accordingly, the Company recognised $14,858,287 as the fair value of equity to settle the principal and
accrued interest of $4,502,510 with the difference between the carrying amount of the financial
liability
extinguished, and the consideration paid being $10,355,775 recognised as a loss.
It should be noted that at the time of obtaining shareholder approval the closing share price was 1.2 cents, and
in the intervening period from obtaining shareholder to regulatory approval, 1.585 million shares traded in a range
of 0.9 cents and 3.3 cents.
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 27.5% (2016: 28.5%)
Tax effect of permanent differences – Impairment
Tax effect of permanent differences – debt to equity fair value
expense
Tax effect of temporary differences
Tax effect of deferred tax asset not recognised
Tax effect of deduction for tax losses not previously recognised
Income tax expense
(c)
Unrecognised deferred tax balances
2017
$
2016
$
(95,951)
(26,386)
-
(12,330,518)
(3,514,198)
45,005
-
460,849
-
(434,463)
-
3,106,733
474,972
(112,512)
-
-
Tax losses attributable to members of the tax consolidated group
– revenue
Potential tax benefit at 27.5% (2016: 28.5%)
77,804,937
21,396,358
80,156,769
22,844,679
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 subsidiaries 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.
25
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 6: Trade and other receivables
Current
Trade receivables – gold stockpile sales (i)
GST receivable
R&D receivable
2017
$
2016
$
2,834
-
-
2,834
137,732
6,649
157,912
302,293
(i)
Trade receivables are non-interest bearing and have payment terms between 30 – 90 days.
Note 7: Other assets
Current
Credit card facility - security deposit
Total other assets
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
2017
$
2016
$
7,500
7,500
2017
$
386,121
(372,340)
13,781
113,887
(113,887)
-
307,843
(304,308)
3,535
380,866
(88,782)
292,084
7,500
7,500
2016
$
386,121
(351,975)
34,146
113,887
(113,887)
-
305,072
(302,087)
2,985
380,866
(79,807)
301,059
Total written down value
309,400
338,190
(a) Movements in carrying amounts
Balance at 1 July 2015
Additions
Depreciation expense
Land &
Buildings
Plant &
Equipment
Motor
Vehicles
310,059
-
(9,000)
50,239
4,985
(21,078)
11,604
-
(11,604)
Balance at 30 June 2016
301,059
34,146
Balance at 1 July 2017
Additions
Depreciation expense
301,059
-
(8,975)
34,146
-
(20,365)
Balance at 30 June 2017
292,084
13,781
-
-
-
-
-
IT
Assets
18,018
3,063
(18,096)
Total
389,920
8,048
(59,778)
2,985
338,190
2,985
2,771
(2,221)
338,190
2,771
(31,561)
3,535
309,400
26
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 9: Exploration and evaluation expenditure
Cost
Reconciliation
Balance at beginning of year
Exploration expenditure incurred
Exploration expenditure immediately expensed (i)
Disposal of tenements (ii)
Additional allowance for rehabilitation
Balance at end of year
2017
$
2016
$
5,259,651
6,999,901
6,999,901
552,403
(552,403)
(1,759,450)
19,200
7,147,846
1,098,112
(1,098,112)
(522,323)
374,378
5,259,651
6,999,901
(i) During the year the company incurred exploration expenditure costs which were immediately expensed
as their recoverability was uncertain.
(ii) The Kalpini project was divested during the year (2016: Roe and Spargoville Projects).
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.
Note 10: Trade and other payables
Current
Trade payables (i)
GST Payable (i)
Sundry payables and accrued expenses (i)
2017
$
2016
$
73,809
279,640
93,375
446,824
188,069
-
100,270
288,339
(i) There are no amounts included within these balances that are not expected to be settled within the
next 12 months. The average credit terms for services received by the Group are 30 days from invoice
date and are non-interest bearing.
Note 11: Interest bearing liabilities
Current
Unsecured loans (ii)
Convertible notes – Cross Straits (iii)
Interest payable on Cross Straits convertible notes (i)(iii)
Total interest bearing liabilities
(i) The interest payable movement for the year is as follows:
Balance at beginning of year
Interest expense
Interest expense – Present value convertible note
Interest – equity settled on 24 February 2016
Interest – equity settled on 26 November 2015
Interest paid for the year
Interest 10% withholding on the convertible note
Balance at end of year
(ii) Secured and unsecured loans
2017
$
2016
$
-
1,280,887
91,904
1,372,791
17,000
284,577
18,477
320,054
18,477
83,639
-
-
-
-
(10,212)
91,904
214,557
312,474
(11,617)
(352,511)
(16,156)
(56,316)
(71,954)
18,477
There were no secured or unsecured loans for the year ended 30 June 2017 (2016: $17,000 non-secured
loan).
27
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 11: Interest bearing liabilities (cont’d)
(iii) Convertible notes – Cross-Strait Common Development Fund Co., Ltd (“Cross-Strait”)
In September 2015, the Company entered into a convertible note facility agreement with Cross-Straits for
an amount of up to $2 million. The facility became effective following shareholder and other regulatory
approvals in February 2016. The noteholder can, at its discretion, convert all or part of the amounts drawn
down into shares in the Company at an issue price of $0.01 per share. The Company’s right to drawdown
under the facility to the full amount of $2 million was extended during the year from an end date of 31
December 2016 to 28 February 2018. At the same time, the repayment date for amounts drawn down was
extended from 30 April 2017 to 30 April 2018.
At the end of the prior financial year, the Company had issued 30 convertible notes having drawn down a
principal amount of $300,000. During the current financial year, the Company has issued a further 100
convertible notes having drawn a further principal amount of $1 million.
Interest accrues daily on the principal amounts drawn down under the facility at an annual rate of 8% and
Cross-Straits has rights of security over all of the Company’s assets. Cross-Straits can elect to have the
interest paid by issue of shares in the Company at an issue price of $0.01 per share.
Summary of Cross Straits convertible note is as follows:
2017
2016
Carrying amount at the beginning of the year
Convertible notes drawn down in year – face value
Amount classified as equity from drawdowns in year (Note 13)
Unwinding of interest
$
284,577
1,000,000
(50,790)
47,100
$
-
300,000
(27,040)
11,617
Carrying amount at the end of the year
1,280,887
284,577
Note 12: Restoration provision
Non-current
Restoration provision (i)
(i) The provision movement for the year is as follows:
Carrying amount at the start of the year
Reduction arising from sale of tenements
Additional provisions recognised
Carrying amount at the end of the year
Note 13: Contributed equity
2017
$
2016
$
1,495,520
1,503,620
2017
$
2016
$
1,503,620
(27,300)
19,200
1,148,358
(19,116)
374,378
1,495,520
1,503,620
2017
$
2016
$
894,240,060 fully paid ordinary shares (2016: 894,240,060)
92,438,807
92,388,017
Movements in ordinary shares on issue for the year:
Balance 1 July 2015
Issue of shares under an entitlement offer
Placement of shortfall shares from an entitlement offer
Shares issued in settlement of director fees
Shares issued on conversion of convertible note and accrued interest
Cancellation of shares – previously issued under the employee share
scheme
Shares issued in settlement of secured and unsecured loans and
accrued interest
No. of
shares
315,966,034
29,532,064
60,000,000
2,375,300
36,615,562
Paid up
capital
$
76,251,722
295,320
600,000
23,753
366,156
(500,000)
-
450,251,100
14,858,287
28
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 13: Contributed Equity (cont’d)
Equity portion on convertible note issued during year
Share issue costs for the period
Balance 30 June 2016
Balance 1 July 2016
-
-
27,040
(34,261)
894,240,060
92,388,017
894,240,060
92,388,017
Equity portion on convertible note issued during year (i)
-
50,790
Balance 30 June 2017
894,240,060
92,438,807
(i) This balance represents the equity component of convertible notes (Note 11 (iii)) issued by the Company
during the current financial year.
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.
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.
29
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 14: 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 2017.
The totals of remuneration paid to key management personnel of the consolidated entity during the year are as
follows:
Short-term employee benefits
Termination benefits
Post-employment benefits
Note 15: Related party transactions
2017
$
2016
$
173,659
11,191
10,171
195,021
313,480
23,076
26,770
363,326
All transactions were made on normal commercial terms and conditions and at market rates.
Transactions:
During the financial year, other than remuneration paid or payable to key management personnel, the Company
had no other related party transactions (2016: no related party transactions).
The following balances are outstanding at the reporting date in relation to transactions with related parties:
2016
$
34,167
2017
$
29,137
Accrued Directors’ fees
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Note 16: Loss per share
a) Basic loss per share
Loss after income tax
2017
$
2016
$
(95,951)
(12,330,518)
Weighted average number of ordinary shares on issue during the year used
as the denominator in calculating basic loss per share
894,240,060
551,825,166
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 17: Auditor’s remuneration
Remuneration of the auditor for:
- audit and review of financial reports- BDO Audit (WA) Pty Ltd
- audit and review of financial reports- RSM Australia Partners
- taxation services – RSM Australia Pty Ltd
- other taxation services RSM Australia Pty Ltd – R&D tax credit
2017
$
2016
$
28,200
-
2,500
15,791
46,491
-
35,000
5,000
-
40,000
30
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 18: 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
(Gain)/loss on sale of tenements
(Gain)/loss on sale of plant & equipment
Debt to equity – fair value loss
Share based settled expenses
Share based settled interest expense
Changes in assets and liabilities:
Decrease in trade and other receivables
Decrease in trade and other creditors
Net cash outflow from operating activities
b) Reconciliation of cash
Cash balance comprises:
- Cash at bank and on hand
c) Non-Cash Financing and Investing Activities
2017
2016
$
$
(95,951)
(12,330,518)
31,561
552,403
(1,277,850)
(12,500)
-
-
130,737
59,778
1,098,112
463,207
-
10,355,775
23,753
256,158
299,459
(103,711)
(286,300)
(3,936)
(475,852)
(363,971)
3,260,565
34,105
There were no non-cash financing and investing activities for the year (2016: 486,866,662 ordinary
fully paid shares were issued during the year to settle aggregate outstanding loan principal and
accrued interest liabilities of $4,868,667).
Note 19: 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 and Kurnalpi projects is $654,620 (2016:
$771,720).
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.
(ii) Non-cancellable operating lease commitments
During the year ended 30 June 2017 the Company had not entered into any non-cancellable operating
lease commitments (30 June 2016: $nil).
Note 20: Controlled entities
Country of
Incorporation
Percentage Owned (%)
Subsidiaries of KalNorth Gold Mines Limited:
Shannon Resources Pty Ltd
Lusitan Prospecting Pty Ltd
Australia
Australia
2017
100
100
2016
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 2017 (2016: nil).
31
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 21: 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 2017, the consolidated entity's external
revenue was derived solely from the sale of certain gold stockpiles and/or its share of prospector gold.
30 June 2017
Revenue
Sales to external customers
Interest revenue
Gain on sale of tenements
Other income
Total income
EBITDA
Depreciation and amortisation
Finance costs
Profit/(Loss) before income tax
Income tax benefit
Mine
development
Mineral
Exploration
$
$
Admin
$
Total
consolidated
group
$
13,422
-
-
-
13,422
13,422
-
-
13,422
-
-
-
13,422
-
1,277,850
-
-
725,447
-
-
725,447
-
3,648
-
14,825
18,473
(672,450)
(31,561)
(130,809)
3,648
1,277,850
14,825
1,309,745
66,419
(31,561)
(130,809)
(834,820)
(95,951)
-
-
Profit/(Loss) after income tax
13,422
725,447
(834,820)
(95,951)
30 June 2017
Assets
Segment assets
Exploration assets
Property, plant and equipment
Unallocated assets:
Cash and cash equivalents
Other current assets
Total assets
Liabilities
Segment liabilities
Trade and other payables
Restoration provision
Unallocated liabilities:
Interest-bearing liabilities
Total liabilities
-
-
-
-
-
5,259,651
-
-
309,400
5,259,651
309,400
-
-
3,260,565
3,260,565
10,334
10,334
5,259,651
3,580,299
8,839,950
-
(1,495,520)
(58,782)
-
(388,042)
-
(446,824)
(1,495,520)
-
(1,495,520)
-
(58,782)
(1,372,791)
(1,760,833)
(1,372,791)
(3,315,135)
32
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 21: Segment information (cont’d)
30 June 2016
Revenue
Mine
development
Mineral
Exploration
$
$
Admin
$
Total
consolidated
group
$
Sales to external customers
Other income
Total income
1,444,329
-
1,444,329
-
-
-
-
120,752
120,752
1,444,329
120,752
1,565,081
EBITDA
415,656
(1,098,112)
(618,524)
(1,300,980)
Interest revenue
Refundable R&D tax offset
Depreciation and amortisation
Loss on sale of tenements
Debt to equity – fair value loss
Finance costs
-
-
-
-
-
-
-
157,912
(11,604)
(463,207)
-
-
3,785
-
(48,174)
-
(10,355,775)
(312,475)
3,785
157,912
(59,778)
(463,207)
(10,355,775)
(312,475)
Profit/(Loss) before income tax
415,656
(1,415,011)
(11,331,163)
(12,330,518)
Income tax benefit
-
-
-
-
Profit/(Loss) after income tax
415,656
(1,415,011)
(11,331,163)
(12,330,518)
30 June 2016
Assets
Segment assets
Exploration assets
Property, plant and equipment
Unallocated assets:
Cash and cash equivalents
Other current assets
Total assets
Liabilities
Segment liabilities
Trade and other payables
Restoration provision
Unallocated liabilities:
Interest-bearing liabilities
Total liabilities
-
-
-
-
-
6,999,901
-
-
338,190
6,999,901
338,190
-
-
34,104
34,104
309,794
309,794
6,999,901
682,088
7,681,989
-
(1,143,530)
-
(360,090)
(288,339)
-
(288,339)
(1,503,620)
-
(1,143,530)
-
(360,090)
(320,054)
(608,393)
(320,054)
(2,112,013)
33
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Note 22: 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
$
0.44%
2,260,565
1,000,000
30 June 2017
Cash at bank
Total assets
Interest bearing liabilities
Total liabilities
8%
-
-
(1,300,000)
(1,300,000)
Weighted
average
interest
Rate
%
Floating interest
rate
$
Fixed interest
maturing 1 year or
less
$
1.14%
34,105
-
30 June 2016
Cash at bank
Total assets
Interest bearing liabilities
Total liabilities
8%
-
-
(300,000)
(300,000)
Interest rate sensitivity analysis – cash at bank
At 30 June 2017, 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 $8,355 higher/lower (2016: $3,332), 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.
34
KalNorth Gold Mines Limited and Controlled Entities
Note 22: Financial risk management objectives and policies (cont’d)
For the year ended 30 June 2017
(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 2017
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
30 June 2016
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
(d)
Foreign exchange risk
Less than 6
months
$
6 months
to 1 year
$
Total
$
(446,824)
-
-
(1,372,791)
(446,824)
(1,372,791)
(446,824)
(1,372,791)
(1,819,615)
3,260,565
2,834
3,263,399
-
7,500
7,500
3,260,565
10,334
3,270,899
2,816,575
(1,365,291)
1,451,284
Less than 6
months
$
6 months
to 1 year
$
Total
$
(288,339)
-
-
(320,054)
(288,339)
(320,054)
(288,339)
(320,054)
(608,393)
34,105
302,293
336,398
48,059
-
7,500
7,500
34,105
309,793
343,898
(312,554)
(264,495)
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 all of the gold production to be
exposed to foreign exchange risk. As production ceased during the prior years 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.
35
KalNorth Gold Mines Limited and Controlled Entities
Note 22: Financial risk management objectives and policies (cont’d)
For the year ended 30 June 2017
(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 23: Contingent liabilities and contingent assets
There are no contingent liabilities or assets at reporting date.
Note 24: Parent Information
As referred to in Note 20, 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.
Note 25: 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.
36
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
DIRECTORS’ DECLARATION
In the opinion of the Directors of KalNorth Gold Mines Limited (the ‘Company’):
a.
the accompanying financial statements and notes are in accordance with the Corporations Act
2001 including:
i.
ii.
giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2017
and of its performance for the year then ended; and
complying with Australian Accounting Standards, the Corporations Regulations 2001,
professional reporting requirements and other mandatory requirements;
b.
c.
there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable; and
the financial statements and notes thereto are in accordance with International Financial
Reporting Standards issued by the International Accounting Standards Board.
This declaration has been made after receiving the declarations required to be made to the Directors
in accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June
2017.
This declaration is signed in accordance with a resolution of the Board of Directors.
On behalf of the Directors:
Jianjun Hu
Executive Chairman
Dated at Perth 29 September 2017
37
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of KalNorth Gold Mines Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of KalNorth Gold Mines Limited (the Company) and its subsidiaries
(the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
38
Carrying value of exploration and evaluation asset
Key audit matter
How the matter was addressed in our audit
The Group carries exploration and evaluation
expenditure totalling $5,259,651 in terms of the
application of the Group's accounting policy as
set out in Note 9.
The carrying value of the exploration and
evaluation asset is a key audit matter due to:
(cid:127) The significance of the total balance (59% of
total assets); and
(cid:127) The level of procedures undertaken to evaluate
managements application of the requirements of
AASB 6 Exploration for and Evaluation of Mineral
Resources in particular whether any indicators of
impairment may be present.
Our procedures included, but were not limited
to:
· Obtaining a schedule of the areas of
interest held by the Group and assessing
whether the rights to tenure of those areas
of interest remained current at balance
date;
· Considering the status of the ongoing
exploration programmes in the respective
areas of interest by holding discussions with
management, reviewing the Group’s
exploration budgets, ASX announcements
and director’s minutes;
· Considering whether any such areas of
interest had reached a stage where a
reasonable assessment of economically
recoverable reserves existed;
· Reviewing the assessment of the carrying
value of the exploration and evaluation
costs, ensuring that management have
considered the effect of potential
impairment indicators, commodity prices
and the stage of the Group's project also
against the standard of AASB 6; and
· We also assessed the adequacy of the
related disclosures in Note 9 to the
Financial Statements.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2017, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
39
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 6 to 10 of the directors’ report for the
year ended 30 June 2017.
In our opinion, the Remuneration Report of KalNorth Gold Mines Limited, for the year ended 30 June
2017, complies with section 300A of the Corporations Act 2001.
40
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Glyn O’Brien
Director
Perth, 29 September 2017
41
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Statement of Corporate Governance
Statement of Corporate Governance Practices
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 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 2017, 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.
42
KalNorth Gold Mines Limited and Controlled Entities
Statement of Corporate Governance Practices (cont’d)
For the year ended 30 June 2017
Statement of Corporate Governance
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
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
Chairman (part of the year, 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.
Given the present size and scale of operations, the Executive Chairman (and prior to that, for part of the year,
the Executive Director) also serves as the Company Secretary. In any case the Company Secretary has a
direct reporting line to the Board.
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 measurable 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 project geologist, one female part-time
bookkeeper and one female exploration technical assistant). For part of the year (since January 2017), the
Board comprising three directors includes one female director.
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.
43
KalNorth Gold Mines Limited and Controlled Entities
Statement of Corporate Governance Practices (cont’d)
For the year ended 30 June 2017
Statement of Corporate Governance
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.
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)
Yuanguang
Yang
Xiaojing
Wang
(appointed
Male
Male
Finance and
accounting
BSc in Business
Accounting
CPA
Female
Bachelor of Applied
Finance
Accounting
/
Finance
√
√
√
44
Communications/
Investor Relations
Corporate
Management
Fund
Raising
Geology
√
√
√
√
√
√
√
√
√
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Statement of Corporate Governance
January
2017)
Lijun Yang
(Executive
Director up
to January
2017)
Male
Geologist
MSc in Geology
MAIG;MSEG
√
√
√
√
The Board recognises that since January 2017, there are no directors with technical skills in geology and
mining. Given the present size and scale of activities, the Board believes that the risks of not having those
skills at a Board level is manageable. The Company sources such skills on a consulting basis and Mr Lijun
Yang has continued to provide geological services to the Company since his resignation as an Executive
Director in January 2017.
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:
Director
Position
Date Appointed
Independent
Jiajun Hu
Executive Chairman
Xiaojing Wang
Yuanguang Yang
Non-executive
Director
Non-executive
Director
Appointed as a non-executive
director on 13 December 2013,
then appointed as Non-Executive
Chairman on 14 April 2015, and
subsequently appointed Executive
Chairman on 11 January 2017
11 January 2017
28 August 2014
No
Yes
No
Recommendation 2.4:
A majority of the Board of the Company should be independent directors.
in the ASX Corporate Governance Council Recommendation 2.1 and other facts,
In assessing whether a director is classified as independent, the Board considers the independence criteria set
out
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 only Mrs Wang can be
considered independent. Mr Jiajun Hu and Mr Yuanguang Yang have been nominated to the Board by major
shareholders of the Company.
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 had a non-executive role until January 2017, however since then he acts
in an executive capacity. In the absence of a separate CEO, Mr Hu also effectively fulfils that role since January
2017. For the further reasons explained in the preceding section, Mr Hu is not an 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 an independent Chairman.
45
KalNorth Gold Mines Limited and Controlled Entities
Statement of Corporate Governance Practices (cont’d)
For the year ended 30 June 2017
Statement of Corporate Governance
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.
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.
46
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Statement of Corporate Governance
Statement of Corporate Governance Practices (cont’d)
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.
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;
Other correspondence from time to time regarding matters impacting on shareholders.
Annual Report;
Investor Presentations
Shareholder meetings
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.
47
KalNorth Gold Mines Limited and Controlled Entities
Statement of Corporate Governance Practices (cont’d)
For the year ended 30 June 2017
Statement of Corporate Governance
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 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.
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.
48
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Statement of Corporate Governance
Statement of Corporate Governance Practices (cont’d)
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 separate 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.
49
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Annual Mineral Resources and Ore Reserves Statement
The Company’s reported Mineral Resources are located within two projects that lie in an arc 50-80kms’ to the
north east of Kalgoorlie, Western Australia. The project area is to the north east of Kalgoorlie and comprises the
Kurnalpi and Lindsays project areas which are spread over a 60km arc from west to east.
The only change in the Annual Mineral Resources and Ore Reserve Statement from 30 June 2016 to 30 June
2017 relates to the reduction of Mineral Resources as a result of the divestment of the Kalpini project towards
the year-end.
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. The
resource of Brilliant was upgraded from JORC 2004 to JORC 2012 during 2016 financial year, there has been
no change to the mineral resource of other deposits at Kurnalpi during the year ended 30 June 2017.
The Lindsays project consists of a contiguous package of tenements centred around the Lindsays Mine site
which remains under care and maintenance. The Lindsay’s mineral resources are contained within two granted
Mining Leases. As the gold price improved significantly since December 2015, the Company processed the
stockpile ore in early 2016. There has been no change to the mineral resource estimate of other deposits at
Lindsays during the year ended 30 June 2017.
50
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Annual Mineral Resources and Ore Reserves Statement
Table 1: Ore Resources
Summary of Mineral Resource Estimates (at 30 June 2017)
Reported according to JORC Category and Deposit (JORC 2004 &2012 Compliant)
Indicated
Deposit
Tonnes
(t)
Grade
(g/t)
Ounces
(oz.)
Tonnes
(t)
Inferred
Grade
(g/t)
Ounces
(oz.)
Tonnes
(t)
Total
Grade
(g/t)
Kurnalpi Project
-
-
-
130,000
510,000
84,700
109,300
920,000
8,500
190,000
-
511,000
117,800
2,345,700
0.9
1.1
1.0
1
1.0
0.8
0.9
Lindsays Project
76,000
203,000
18,000
261,000
46,500
24,900
47,900
37,700
165,400
549,600
1.6
4.3
1.1
1.3
2.8
3,600
130,000
18,700
510,000
2,600
84,700
28,300
3,530,000
5,800
478,900
12,600
511,000
71,600
5,244,600
10,500
1,682,000
36,000
401,000
1,700
1,500
1,363,000
528,600
49,700
3,974,600
0.9
1.1
1.0
1.2
0.9
0.8
1.1
1.6
4.2
1.1
1.6
1.7
Ounces
(oz.)
3,600
18,700
2,600
137,600
14,300
12,600
189,400
86,500
54,000
48,200
26,400
215,100
-
-
-
1.3
0.9
-
1.3
1.6
4.0
1.1
1.6
1.5
Discovery Hill
Halfway Hill
Scottish Lass
Brilliant1
-
-
-
2,620,000
Sparkle
288,900
Dazzle
Total 2
-
2,908,900
Eastern Structure
Parrot Feathers1
1,479,000
140,000
Central Structure
1,315,100
Neves Prospect
490,900
Total
3,425,000
KalNorth Gold
Mines Total
Tonnes (t)
Total
6,333,900
Indicated
Grade
(g/t)
1.4
Ounces
(oz.)
283,200
Tonnes (t)
2,895,300
Inferred
Grade
(g/t)
1.3
Ounces
(oz.)
121,300
Tonnes (t)
9,219,200
Total
Grade
(g/t)
1.4
Ounces
(oz.)
404,500
1. Brilliant and Parrot Feathers reported under JORC 2012, all others under JORC 2004.
2. Due to simple arithmetical and typographical errors, the Mineral Resources numbers in the “Total” row for
Kurnalpi Project were incorrectly stated as follows:
Inferred Resources – 1,621,000 tonnes at 0.9g/t for 46,700 ounces; and
Total Resources – 4,519,900 tonnes at 1.1 g/t for 164,500 ounces.
The correct numbers are shown in the table above and have not changed from 30 June 2016 to 30 June 2017.
51
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
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 engaged professional
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.
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 estimate for the Parrot Feathers of Lindsays project as well as Brilliant of Kurnalpi project
were undertaken independently by Ravensgate Mining Industry Consultants.
Except the Brilliant deposit, other mineral resource estimates for the Kurnalpi Project were undertaken
independently by Snowden Mining Industry Consultants.
Competent Person Statement
The Annual Mineral Resources and Ore Reserves Statement is based on, and fairly represents information and
supporting documentation compiled by the person named below:
The Annual Mineral Resources and Ore Reserves statement as a whole has been approved by Mr Lijun Yang
who is an employee of Gold Geological Consulting Pty Ltd which providing technical consultancy services to
KalNorth Gold Mines Limited. Mr Yang 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 Yang. Mr
Yang 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
Yang consents to the inclusion in this report of the matters based on his information in the form and context in
which it appears in the report.
52
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Mining Interests
Mining Tenements held at 8 September 2017
All tenements are located in the Goldfields region of Western Australia.
Holder
Tenement
Shannon Resources Pty Ltd
E28/1477
Shannon Resources Pty Ltd
E28/2226
Shannon Resources Pty Ltd
E28/2256
Shannon Resources Pty Ltd
E28/2541
M28/0007 Shannon Resources Pty Ltd
M28/0066 Shannon Resources Pty Ltd
M28/0072 Shannon Resources Pty Ltd
M28/0076 Shannon Resources Pty Ltd
M28/0084 Shannon Resources Pty Ltd
M28/0089 Shannon Resources Pty Ltd
M28/0090 Shannon Resources Pty Ltd
M28/0092 Shannon Resources Pty Ltd
M28/0113 Shannon Resources Pty Ltd
M28/0374 Shannon Resources Pty Ltd
M28/0375 Shannon Resources Pty Ltd
P28/1154 KalNorth Gold Mines Ltd
P28/1180 KalNorth Gold Mines Ltd
P28/1184 KalNorth Gold Mines Ltd
P28/1186 KalNorth Gold Mines Ltd
P28/1187 KalNorth Gold Mines Ltd
P28/1190 KalNorth Gold Mines Ltd
P28/1191 KalNorth Gold Mines Ltd
P28/1226
Lusitan Prospecting Pty Ltd
P28/1227
Lusitan Prospecting Pty Ltd
P28/1228
Lusitan Prospecting Pty Ltd
P28/1229
Lusitan Prospecting Pty Ltd
P28/1230
Lusitan Prospecting Pty Ltd
P28/1231
Lusitan Prospecting Pty Ltd
P28/1254
Shannon Resources Pty Ltd
P28/1255
Shannon Resources Pty Ltd
Shannon Resources Pty Ltd
P28/1282
M28/0377 Shannon Resources Pty Ltd
M28/0378 Shannon Resources Pty Ltd
M28/0379 Shannon Resources Pty Ltd
M28/0380 Shannon Resources Pty Ltd
M28/0381 Shannon Resources Pty Ltd
M28/0382 Shannon Resources Pty Ltd
M28/0383 Shannon Resources Pty Ltd
M28/0384 Shannon Resources Pty Ltd
M28/0386 Shannon Resources Pty Ltd
E27/0517 KalNorth Gold Mines Ltd
L27/0082 KalNorth Gold Mines Ltd
L27/0084 KalNorth Gold Mines Ltd
M27/0034 KalNorth Gold Mines Ltd
M27/0169 KalNorth Gold Mines Ltd
M27/0486 KalNorth Gold Mines Ltd
Project
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Kurnalpi
Lindsays Find
Lindsays Find
Lindsays Find
Lindsays Find
Lindsays Find
Lindsays Find
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
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Status
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live (Conversion)
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Live
Pending
Live
Live
Live
Live
Live
Live
53
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Shareholder Information
Shareholder Information
The shareholder information set out below was applicable as at 8 September 2017.
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
127
181
143
326
127
904
46,997
580,231
1,174,282
11,553,277
880,885,273
894,240,060
0.005%
0.065%
0.131%
1.292%
98.507%
100%
The number of shareholders holding less than a marketable parcel is 636.
B.
Voting Rights
At a general meeting of shareholders:
a.
b.
On a show of hands, each person who is a member or sole proxy has one vote.
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
Total Units
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
SOUTH VICTORY GLOBAL LIMITED
RENERGY PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
GOLD FRESH LIMITED
SMARTER GROUP (AUSTRALIA) PTY LTD
FINANCIAL MARKET INFRASTRUCTURE FUND PTY LTD
LINK GROUP
REGALWEST PTY LTD
MR JOHN MCKINSTRY
DAHT INTERNATIONAL TRADING PTY LTD
ZAC-ZOOM PTY LTD
PERSHING AUSTRALIA NOMINEES PTY LTD
INTERNATIONAL TECHNOLOGY GROUP PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
MR JUSTIN JOHN WOOD + MRS CAROLYN WOOD
EDWIN PAUL CAYZER + LORAINE HELEN CAYZER
MR GREGORY GERARD RYAN
MRS BEVAN ALFRED JAGGARD GROUP
STEVEN WILLIS SHALLCRASS
260,688,116
188,594,646
109,185,563
86,615,562
65,490,400
50,315,000
33,470,170
14,603,632
5,793,155
5,000,000
5,000,000
4,257,096
3,398,012
2,958,299
2,571,126
2,316,839
1,860,000
1,800,000
1,734,100
1,710,000
Issued
Capital
%
29.15
21.09
12.21
9.69
7.32
5.63
3.74
1.63
0.65
0.56
0.56
0.48
0.38
0.33
0.29
0.26
0.21
0.20
0.19
0.19
Totals
847,361,716
94.76
54
KalNorth Gold Mines Limited and Controlled Entities
For the year ended 30 June 2017
Shareholder Information
D.
Substantial Shareholders
Holdings of substantial shareholders as advised to the Company are set out below:
Rank
Shareholder
1.
2.
3.
4.
SOUTH VICTORY GLOBAL LIMITED
RENERGY PTY LTD
CROSS-STRAIT COMMON DEVELOPMENT FUND CO., LIMITED
GOLD FRESH LIMITED
Total Units
260,688,116
188,594,646
88,703,335
86,615,562
55