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KGL Resources Limited Annual Report 31 December 2019
Chairman’s Address
To our Shareholders,
Four years ago directors embarked on a strategy of intensive exploration designed to identify a mineral resource
of such quality at Jervois as to enable us to proceed with a robust, copper-based mining project.
We have now achieved that goal. Directors are confident that we have at Jervois a resource that can be taken
to development.
Our task now is to build a mine at Jervois. As you will be aware from our periodic reports to shareholders, we
have been working to a timetable that provides for the commencement of project construction in mid-2020.
However, uncertainty relating to the current global pandemic is limiting our ability to achieve this, with delays
expected to project financing due to the impact of COVID-19 on global markets.
A key objective in 2019 was to upgrade the quality of the resource. Through modern, state-of-the-art exploration
technology enabling efficient, targeted drilling, we increased confidence levels significantly. In only six months,
between the January and July 2019 updates, copper in the Indicated Resource category was increased from 50%
to 65% of the total Jervois resource of 390,000 tonnes of contained copper.
Since that upgrade, exploration has indicated the potential for further expansion of the resource and further
upgrading of the confidence levels. Drilling has been particularly successful at the Reward deposit, where half of
the currently known resource at Jervois is located. Additional high grade mineralisation has been intersected just
below the proposed pit level, an additional mineralised zone has been discovered just to the south of the proposed
pit, and at Reward Deeps continuity of more than 200 metres of high grade mineralisation has been confirmed.
Pre-development planning advanced on all fronts. McMahon Contractors were engaged to optimise the
conceptual mine planning we had undertaken within Jervois. Proceeding in parallel were metallurgical processing
and plant design as well as site infrastructure planning. A sustainable water source was located during the year,
and a pipeline to deliver it to site was planned.
The Environmental Impact Statement process was completed and the Northern Territory’s Environmental
Protection Authority subsequently recommended approval of the project to the NT Government. The Company
will lodge a Mine Management Plan with the government for final approval.
To fund the final pre-development activities, $12.4 million was raised by way of a placement in March and a
shareholder entitlement offer in December. Directors thank shareholders for their displaying their confidence in
the Company and the Jervois project through their strong participation in the capital raisings. The placement was
made to three of the company’s largest shareholders, and all of the top 10 shareholders participated in the
entitlement offer.
I would like to thank my four fellow directors and KGL’s staff for contributing so much effort and expertise.
During the year, Russell Dwyer, a civil engineer experienced in mining and construction projects, was appointed
to the new position of Project Manager working with Project Director Paul Richardson. We also welcomed a new
Chief Financial Officer, Amy Treble, who has extensive financial experience in the mining industry.
We are a small team with a strong collective focus on building a sustainable operation at Jervois and an
understanding of the potential to build further value for KGL by expanding and extending Jervois sustainably into
the future, beyond the proposed initial 10-year mine life.
Directors continue to be optimistic about the world copper market. The fundamentals remain favourable for the
Jervois project. The world will struggle to produce enough copper, with production shortfalls forecast over the
next 10 to 15 years. Mines will be confronted by declining ore grades. Average production grades have been
falling and costs rising with major producers having to increase mine volumes to maintain copper production.
2
KGL Resources Limited Annual Report 31 December 2019
Chairman’s Address
Several short-term factors have distorted these fundamentals. Social tensions in South America impacted on
production last year, contributing to declines in copper stocks. However, the effect on copper prices was held in
check by the US-China trade war. While this threat receded late in the year, the world has since been facing an
economic downturn caused by the coronavirus (COVID-19) outbreak, and this has had a depressing effect on the
copper market.
These influences have not changed the overarching growth in demand for copper in the present and future global
markets. The world will need more copper to produce more consumer goods, to generate and transmit electricity,
for construction, and to build electric vehicles.
Notwithstanding the short-term complexities of the copper market within the global economy, directors are
confident in the medium and long-term outlook for copper. Jervois will be entering the world copper market at
the right time.
“We are a small team with a strong collective focus on building a
sustainable operation at Jervois”
Denis Wood
Chairman
3
KGL Resources Limited Annual Report 31 December 2019
Reserves and Resources
Deposit
Reward OP
Category
Indicated
Reward UG
Indicated
Bellbird OP
Indicated
Bellbird UG
Rock Face
UG
Reward OP
Reward UG
Indicated
Indicated
Inferred
Inferred
Reward E OP
Inferred
Reward E UG
Inferred
Bellbird OP
Bellbird UG
Rock Face
UG
Inferred
Inferred
Inferred
Mt
5.1
3.1
3.8
0.2
3.1
0.2
2.1
0.7
0.8
1.1
1.7
Cu
%
1.22
1.94
1.23
1.85
2.44
0.67
1.70
0.76
1.29
0.91
2.02
Ag
g/t
27.9
31.9
7.6
11.9
13.5
14.6
32.3
7.1
12.0
6.1
12.7
1.4
1.59
11.3
Total
23.3
1.57
19.0
Pb % Zn %
Cu
Kt
61.7
59.8
46.7
3.9
74.9
1.2
35.6
5.4
10.8
10.3
33.6
Ag
Mozs
Pb
Kt
Zn
Kt
4.5
3.2
0.9
0.1
1.3
0.1
2.2
0.2
0.3
0.2
0.7
22.5
0.5
366.3
14.2
% Cu
cut off
0.5
1
0.5
1
1
0.5
1
0.5
1
0.5
1
1
Pb Resource
Reward
Reward S
Reward
Reward S
Bellbird N
TOTAL
Indicated
Indicated
Inferred
Inferred
Inferred
Total
Indicated
Inferred
0.5
0.5
0.3
1.4
0.7
3.3
0.56
0.99
0.51
0.81
0.57
91.9
64.0
56.8
78.0
17.9
3.60
0.92
3.58
1.78
1.71
1.49
0.63
1.73
0.93
2.52
3.0
5.1
1.4
11.1
3.8
0.73
64.4
2.07
1.35
24.3
1.6
1.1
0.5
3.4
0.4
6.9
18.9
4.7
9.8
24.4
11.3
7.8
3.2
4.7
12.8
16.7
2% Pb
0.3
2% Pb
0.3
0.2
69.2
45.2
16.3
10.3
26.6
1.57
1.31
1.47
24.2
25.5
24.7
255.0
12.7
135.6
8.5
390.6
21.1
Refer to Competent persons statement on page 25 of the Financial Statements.
4
KGL Resources Limited Annual Report 31 December 2019
Tenement Holdings
Tenement Number
Location
Beneficial Holding
ML 30180
Jervois Project, Northern Territory
ML 30182
Jervois Project, Northern Territory
ML30829
Jervois Project, Northern Territory
EL 25429
Jervois Project, Northern Territory
EL 30242
Jervois Project, Northern Territory
E28340
E28271
Yambah, Northern Territory
Yambah, Northern Territory
EL28082
Unka Creek, Northern Territory
100%
100%
100%
100%
100%
100%
100%
100%
5
KGL Resources Limited Annual Report 31 December 2019
Tenement Holdings
Map 1: KGL Jervois tenement map, Central NT
6
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 1: Lay Solid foundations for management and oversight
A listed entity should establish and disclose the respective roles and responsibilities of it board and
management. And how their performance is monitored and evaluated.
Recommendation
KGL’s Compliance Statement
1.1 A listed entity should disclose:
(a) The respective roles and responsibilities
of its board and management; and
(b) Those matters expressly reserved to the
board and those delegated to
management
1.2 A listed entity should:
(a) Undertake appropriate checks before
appointing a person, or putting forward to
security holders a candidate for election,
as a director, and
(b) 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.
Role of the Board
As detailed in the Board Charter, the Board is responsible for the management of the
Company’s affairs, including:
overseeing the Company, including its control and accountability systems;
appointing and removing the CEO and senior executives, and monitoring
performance of the CEO and senior executives;
determining and approving the levels of authority to be given to the CEO and
senior executives in relation to operational expenditures, capital
expenditures, contracts and authorising any further delegations of those
authorities by the CEO to the other employees of the Company;
approval of corporate strategy, financial plans and performance objectives;
reviewing, ratifying and monitoring systems of risk management and internal
control, codes of conduct and legal compliance;
monitoring occupational health, safety and environmental performance and
compliance and ensuring commitment of appropriate resources;
evaluating, approving and monitoring major capital expenditure, capital
management and all major corporate transactions, including the issue of
securities of the Company; and
approving all financial reports and material reporting and external
communications by the Company.
The CEO is responsible for running the affairs of the Company under delegated
authority from the Board and to implement the policies and strategies set by the Board.
In carrying out his or her responsibilities, the CEO 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 position and operating results. The CEO is accountable to the
Board for the authority delegated to the CEO.
The Board has established the following committees to assist it in discharging its
functions:
Audit and Risk Committee
Remuneration and Nomination Committee
The Board has approved an authorisation matrix which delegates financial and
commitment authorities to roles within the organisation, clearly identifying limits, above
which, the board has sole authority,
The company’s Board Charter, providing details of the specific roles and
accountabilities of the Board is provided on the website www.kglresources.com.au
Before a Director is appointed, the Board undertakes appropriate evaluations including
in-depth interviews and reference checks. Where a director is standing for election or
re-election, the Notice of Meeting will set out information on the director including
qualifications and experience, independence status and the recommendation of the
rest of the Board on the resolution.
The Explanatory Memorandum of the Notice of Meeting contains detailed information
on each director standing for election/re-election. Additionally, a detailed profile for
each director is included in the Company’s Annual Report.
7
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 1: Lay Solid foundations for management and oversight (continued)
Recommendation
KGL’s Compliance Statement
1.3 A listed entity should have a written
agreement with each director and senior
executive setting out the terms of their
appointment
Each Director executes a Letter of Appointment with the Company prior to appointment
as a director. The Letter of Appointment covers the following key terms:
Performance requirements in terms of board meetings and matters under
consideration
Key responsibilities and powers as detailed in the board Charter
Conditions of continuing in the role of director
Membership of committees
Remuneration
Consideration of independence and
Ability to seek independent advice.
Details of the Directors and Key Management Personnel’s employment are also
provided annually in the Remuneration Report as part of the directors’ report.
Each executive is employed under an employment agreement which sets out the
employment terms, duties, and responsibilities, remuneration details and the
circumstances under which employment can be terminated.
1.4 The Company Secretary of a listed entity
should be accountable directly to the
board, through the chair, on all matters to
do with the proper functioning of the
board.
The Company Secretary reports solely to the board and communication between the
directors and the Company Secretary is open and unfettered. The Company Secretary
advises the Board and its committees on governance matters, attends and takes
minutes at all Board and board committee meetings, communications with the ASX
and ASIC on all regulatory matters, monitors adherence to Board policies and
procedures and retains all professional advisors at the Board’s request.
KGL Resources Limited recognises that a diverse and inclusive workforce helps attract
and retain talented people, create more innovative solutions and ultimately create
value for KGL stakeholders. The Company has a Diversity and Inclusiveness Policy
and the Company amongst others, is accountable for promoting diversity in the
workplace, including recognising, valuing and utilising the diverse skills and knowledge
of staff and contractors. A copy of the policy can be found on the company website
www.kglresources.com.au
The Company is proud of the progress in increasing the diversity of the KGL board and
workforce. With only 5 directors and 7 full time employees, KGL does not have a large
workforce but has women in the roles of non-executive director, Chief Financial Officer
Company Secretary and onsite geologist. Additionally, women occupy 2 of the casual
field assistant roles.
The company is not a “relevant employer” as defined under the Workplace Gender
Equality Act.
1.5 A listed entity should
(a) Have a diversity policy which includes
requirement for the board or a relevant
committee of the board to set measurable
objectives for achieving gender diversity
and to assess annually both the
objectives and the entity’s progress in
achieving them
(b) Disclose that policy or a summary of it;
and
(c) Disclose at the end of each reporting
period the measurable objectives for
achieving gender diversity set by the
board in accordance with the entity’s
diversity policy and its progress toward
achieving them and either
i.
ii.
The respective proportions of men and
women on the board, in senior
executive positions and across the
whole organization
If the entity is a “relevant employer”
under the Workplace Gender Equality
Act, the entity’s most recent “Gender
Equality Indicators” as defined in and
published under the Act.
8
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 1: Lay Solid foundations for management and oversight (continued)
Recommendation
KGL’s Compliance Statement
1.6 A listed entity should:
(a) Have and disclose a process for
periodically evaluating the performance of
the board, its committees and individual
directors; and
(b) Disclose, in relation to each reporting
period, whether a performance evaluation
was undertaken in the reporting period in
accordance with that process.
1.7 A listed entity should:
(a) Have and disclose a process for
periodically evaluating the performance of
its senior executives; and
(b) Disclose, in relation to each reporting
period, whether a performance evaluation
was undertaken in the reporting period in
accordance with that process.
In June 2018, the composition of the board changed to ensure that the directors,
collectively, held an appropriate suite of skills required to advance the Jervois project.
Two new independent directors joined the board with extensive experience in,
amongst others, mining and project development. The composition of the
subcommittees has also changed during 2018.
It is the intention of the board to undertake a performance assessment once the board
and subcommittees have had a reasonable period performing in their current
configuration.
As the Company advances the Jervois project, consideration will be given to the
appropriate structure of the executive roles within the company. As positions are filled,
the Board in conjunction with the Remuneration and Nomination Committee consider
the processes for evaluation of the performance of senior executives.
Principle 2: Structure the Board to add value
A listed entity should have a board of appropriate size, composition, skills and commitment to enable it
to discharge its duties effectively.
Recommendation
KGL’s Compliance Statement
2.1 A board of a listed entity should
(a) Have a nomination committee which:
i. Has at least three members, a majority
of whom are independent directors
Is chaired by an independent director
and disclose:
ii.
(b)
iii. The charter of the committee
iv. The members of the committee and
v. As at the end of each reporting period,
the number of times the committee met
throughout the period and the individual
attendance of the member at those
meetings; or
If it does not have a nomination
committee, disclose that fact and the
processes it employs to address board
succession issues and to ensure that the
board has the appropriate balance of
skills, knowledge, experience,
independence and diversity to enable it to
discharge its duties and responsibilities
effectively.
The Board has established a Remuneration and Nomination committee. The
Committee is comprised of three independent directors.
The committee members are:
Mr Peter Hay (Chairman and independent, non-executive director)
Ms Fiona Murdoch (Independent and non-executive director)
Mr John Gooding (Independent and non-executive director)
The role of the committee is as follows:
Review and recommend policies on payments for directors
Identify and recommend to the Board candidates for the Board after
considering appropriate mix of skills and experience and after assessment of
how the candidates can contribute to the strategic direction of the company.
Approve and review induction procedures for new appointees of the Board to
ensure that they can effectively discharge their responsibilities.
Assess and consider the amount of time required by non-executive directors
to properly fulfil their duty to the company
Consider and recommend to the Board, candidates for election of re-election
to the Board at each annual shareholders’ meeting
Review succession plans for the Board with a view to maintaining an
appropriate balance of skills and experience on the Board
The details of meetings held and attendances can be found in the Directors’ Report.
A copy of the Remuneration and Nomination Committee Charter can be found on the
company’s website. www.kglresources.com.au
9
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 2: Structure the Board to add value (continued)
Recommendation
KGL’s Compliance Statement
2.2 A listed entity 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.
Directors recognise the following skills as being either essential or desirable to the
effective operation of the board. An assessment is made as to whether any of these
skills are required from the members of the board or whether they are better sourced
through a consultant. At present the board believes that these skills are adequately
cover by the current directors, especially following the introduction of the new directors
in 2018. External consultants have been used on a limited basis.
Skills required.
Ability to think strategically and identify and critically assess strategic
opportunities and threats and develop effective strategies in the context of the
strategic objectives of the company
Financial Performance.
o Qualifications and experience in accounting and/or finance:
o Oversee budgets and efficient use of resources
o Analyse financial statements
o Critically assess financial viability and performance
o Contribute to strategic financial planning
o Oversee funding arrangements and accountability
Legal
o Formal legal qualifications
o Understanding of the legal framework in which companies operate.
Risk and compliance oversight
o Ability to identify key risks to the organisation in a wide range of areas
including legal and regulatory compliance and monitor risk and compliance
management frameworks and systems.
Corporate Governance
o Knowledge and experience in best practice corporate governance,
particularly in the context of listed company requirements, including
Corporate Governance Guidelines.
Major Transactions
o Experience at a board level of overseeing and managing large acquisitions,
divestments, joint ventures etc
Financial/Equity Market Experience
o Experience in and understanding of the fundamentals and operation of
financial/ equity markets.
Experience at an executive level
o Appointment and evaluation of the performance of the CEO and senior
executive managers
o Oversight of strategic human resource management including workforce
planning and employee and industrial relations
o Oversight of large scale organisation change.
Commercial and Technical Experience
o A broad range of commercial/business and technical experience.
Metals industry experience
o A thorough understanding of the metal/copper industry, including metals
production, key stakeholders, geology and exploration, marketing and
logistics.
Mine development and operation experience. A thorough understanding of the
issues involved in developing and operating a mine in Australia.
o Knowledge of relevant mining legislation
o Mine planning, design and feasibility
o Safety and environmental issues
o Native title requirements
o Product processing
o
Infrastructure requirements
10
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 2: Structure the Board to add value (continued)
Recommendation
KGL’s Compliance Statement
2.3 The chair of the board of a listed entity
should be an independent director and, in
particular, should not be the same person
as the CEO of the entity.
2.4 A listed entity should have a program for
inducting new directors and provide
appropriate professional development
opportunities for directors to develop and
maintain the skills and knowledge need to
perform their roles as directors effectively.
Mr Denis Wood is the Chairman of the Board and is not considered independent. Mr
Wood has been undertaking the role of the Executive Chairman following the
restructuring of the executive team in 2015.
The Board considers the current arrangement is appropriate given the significant
experience that Mr Wood has in the development of resource projects, the size of the
company and the fact that the company now has a majority of independent non-
executive directors.
New directors undergo an induction process which includes receiving briefing from the
Chairman/CEO of the company, being provided with copies of all reports and
announcements relevant to the company’s recent activities and developments and a
site familiarisation visit.
Principle 3: Act ethically and responsibly
A listed entity should act ethically and responsibly.
Recommendation
KGL’s Compliance Statement
3.1 A listed entity should
(a) Have a code of conduct for its directors ,
senior executives and employees and
(b) Disclose that code or a summary of it.
The Company has a Code of Conduct which is given to all directors and employees
when joining the Company.
This Code of Conduct applies standards for appropriate ethical and professional
behaviour for all employees and Directors working for KGL Resources Limited and/or
its subsidiary companies. It sets out the fundamental values, which form the basis of,
and underpin all of the Company’s business relationships.
The code specifically addresses the following areas and can be found on the
company’s website. www.kglresources.com.au
Compliance with the law
Occupational Health and Safety
Environment
Drug and Alcohol Use
Equal Employment Opportunity
Harassment
Confidentiality
Insider Trading
Personal Information and Privacy
Continuous Disclosure
Use of Company Resources and Fraud Prevention
Information Systems
Financial Inducements
Travel, Entertainment and Gifts
Expediting or Service Arrangements
Travel
Entertainment
o
o
o
o Gifts
Conflicts of Interest
Outside Activities
Political Support
Violations of the Company’s Policies and Procedures and Disciplinary
Process
Responsibilities of Management of the Company
Professional Behaviour
Whistle blower Policy
The Company is in the process of updating its Code of Conduct as part of an overall
update of all policies.
11
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 4: safeguard integrity in corporate reporting
A listed entity should have formal and rigorous processes that independently verify and safeguard the
integrity of its corporate reporting.
Recommendation
KGL’s Compliance Statement
4.1 The board of a listed entity should:
(a) Have an audit committee which
i. Has at least 3 members, all of whom
are non-executive directors and a
majority of whom are independent
directors and
Is chaired by an independent director
who is not the chair of the board
And disclose
ii.
iii. The charter of the committee
iv. The relevant qualifications and
v.
(b)
(c)
experience of the members of the
committee; and
In relation to each reporting period, the
number of times the committee met
throughout the period and the
individual attendances of the members
at those meetings or
If it does not have an audit committee,
disclose that fact and the processes it
employs that independently verify and
safeguard the integrity of its corporate
reporting,
including the processes for the
appointment and removal of the
external auditor and the rotation of the
audit engagement partner.
The Company has established an Audit and Risk Committee to assist the Board in its
oversight of:
the integrity of the Company’s accounting and financial reporting practices;
the company’s risk profile and risk policies;
the effectiveness of the Company’s system of internal control and framework for
risk management; and
the Company’s compliance with applicable legal and regulatory obligations.
The general responsibilities and functions of the Committee, as set out in the Charter, are:
assessing whether the Company’s external reporting is consistent with the
information and knowledge of members of the Audit and Risk Committee and
whether it is adequate for the needs of the Company’s shareholders;
assessing the management processes supporting external reporting;
overseeing the development, implementation and review of the procedures for
selection and appointment of the Company’s external auditor and for the rotation
of external audit engagement partners;
making recommendations to the Board about the appointment and removal of
the Company’s external auditor;
assessing the performance and independence of the Company’s external
auditors, including confirming that provision of non-audit services by the
Company’s external auditors has not compromised the auditor’s independence
(if the Company’s external auditor provides non-audit services);
reporting to the Board the results of the Audit and Risk Committee’s review of
the Company’s risk management, internal controls and compliance systems and
processes;
monitoring, reviewing and assessing the propriety of related party transactions;
ensuring that Management has implemented a structured and comprehensive
risk management system across the Company;
reviewing, and approving for recommendation to the Board, guidelines and
policies governing the oversight and management of the Company’s material
business risks, including the processes by which Management assess, manage
and control the Company’s exposure to risk; and
monitoring material changes to the Company’s risk profile.
The Committee is comprised of three directors, all of whom are independent.
The committee members are:
Ms Fiona Murdoch (Chairman, Independent non-executive director).
Mr Peter Hay (Independent non-executive)
Mr John Gooding (Independent nonexecutive)
The committee meets with the external auditor without management present on general
matters concerning the audit and the financial management of the company. The Chair of
the audit committee reports to the Board on the Committee’s discussions, conclusions and
recommendations.
The Committee reviews the performance of the external auditor, most regularly after the
release of the Annual Financial Statements, to ensure that the auditor has provided an
efficient and effective audit. The Committee is responsible for recommending to the Board
the removal of the auditor if, in its opinion, the auditor is not meeting the standards
required by the Committee. The appointment of New Auditors would also be
recommended by the Committee. Partner rotation complies with the requirements of the
Corporations Act.
12
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 4: safeguard integrity in corporate reporting (continued)
Recommendation
KGL’s Compliance Statement
4.1 (continued)
4.2 The board of a listed entity should,
before it approves the entity’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
4.3 A listed entity that has an AGM should
ensure that is external auditor attends
its AGM and is available to answer
questions from security holders relevant
to the audit.
The details of the qualifications and experience of the committee members and the number
of meetings attended each year is detailed in the Company’s Directors’ Report and/or on
the company’s website.
The Company requires the Executive Chairman and Chief Financial Officer to provide the
board their written opinion Stating:
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 of the entity in accordance with
Section 295A of the Corporations Act and
That an opinion has been formed on the basis of a sound system of risk
management and internal control which is operating effectively.
The external auditors of the company are BDO (Queensland) Pty Ltd. The external auditor
attends each Annual General meeting and is available to answer any questions from
shareholders relevant to the conduct of the audit and the preparation and content of the
audit report.
Principle 5: Make timely and balanced disclosure
A listed entity should have formal and rigorous processes that independently verify and safeguard the
integrity of its corporate reporting.
Recommendation
KGL’s Compliance Statement
5.1 A listed entity should
(a) Have a written policy for complying with
its continuous disclosure obligations
under the Listing Rules and
The Board has a policy to ensure that all employees understand the requirements of
continuous disclosure. In accordance with this policy, employees, who become aware of
potentially price sensitive information, must immediately report this to the Executive
Chairman or Company Secretary.
(b) Disclose that policy or a summary of it
The Policy is listed on the Company’s website www.kglresources.com.au .
13
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 6: Respect the rights of security holders
A listed entity should make timely and balanced disclosure of all matters concerning it that a reasonable
person would expect to have a material effect on the price or values of its securities.
Recommendation
KGL’s Compliance Statement
6.1 A listed entity should provide
information about itself and its
governance to investors via its website.
The Company’s website contains detailed information about its business and projects.
Details of the Board Members and Executive team are also listed.
The Investor page provides helpful information to the shareholder. It allows
shareholders to view all ASX and Media releases, copies of the annual reports and
quarterly activities and cashflow statements.
The website also contains the following corporate governance documents.
Board Charter
ASX Continuous Disclosure Policy
Securities Trading Policy
Audit & Risk Committee Charter
Remuneration and Nomination Committee Charter
Workplace Health and Safety Policy
Bullying and Harassment Policy
Mental health and Wellbeing Policy
Diversity and Inclusiveness Policy
Whistleblowers Policy
Environmental Policy
6.2 A listed entity should design and
implement an investor relation program
to facilitate effective two-way
communication with investors
6.3 A listed entity should disclose the
policies and processes it has in place to
facilitate and encourage participation at
meetings of security holders
Although the Company has not established a formal shareholder communication policy,
it does take the appropriate measures to keep shareholders informed about its activities
and to listen to issues or concerns raised by shareholders.
Information is communicated to the members through compliance with ASX Listing Rules
and the Corporations Act 2001, by way of the Annual Report, Half-Yearly Report,
Quarterly Activities Reports, Appendix 5B cashflow reports, the Annual General Meeting
and other meetings that may be called to obtain approval for Board recommendations.
In addition to this the Company releases regular progress reports and presentation
released to ASX to keep members abreast of the company’s development. The
Company also maintains a website -www.kglresources.com.au - where all of the
Company's ASX announcements and media releases can be viewed at any time.
Notices of meeting sent to shareholders comply with the “Guideline for notices of
meeting” issued by the ASX. In relation to the AGMs, shareholders are encouraged to
submit questions before the meeting.
The Chairman encourages shareholders at the AGM to ask questions or make
comments about the Company’s projects and the performance of the Board and senior
management. The Chairman may respond directly to the questions or, at his discretion,
refer the question to another director or executive.
6.4 A listed entity should give the security
holders the option to receive
communications from, and send
communications to, the entity and its
security registry electronically.
Shareholders have the option of electing to receive all shareholder communications by
email. The Company provides a printed copy of the Annual Report to only those
shareholders who have specifically elected to receive a printed copy. Other
shareholders are advised when the Annual Report is available on the Company’s
website.
All announcements made to the ASX are available to shareholders by email through a
subscription to the Company’s website.
The KGL Share Register is managed and maintained by Link Market Services limited.
Shareholders can access their shareholding details or make enquiries about their current
shareholding by quoting their Shareholder Reference Number or Holder Identification
number via the Link Market Services Investor Centre. Shareholders are also able to
receive notices from the company (e.g. Notices of Meeting, Entitlement offers etc.) and
undertake voting at company meetings electronically.
14
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 7: Recognise and manage risk
A listed entity should establish a sound risk management framework and periodically review the
effectiveness of that framework.
Recommendation
KGL’s Compliance Statement
7.1 The board of a listed entity should:
(a) Have a committee or committees to
oversee risk each of which
i. Has at least three members , a
majority of whom are independent
directors and
Is chaired by an independent director
ii.
And disclose
iii. The charter of the committee
iv. The members of the committee and
v. As at the end of each reporting period
, the number of times the committee
met throughout the period and the
individual attendances of the members
at those meetings or
(b)
If it does not have a risk committee or
committees that satisfy (a) above,
disclose that fact and the processes it
employees for overseeing the entity’s
risk management framework.
7.2 The board or a committee of the board
should;
(a) Review the entity’s risk management
framework at least annually to satisfy
itself that it continues to be sound; and
disclose, in relation to each reporting
period whether which a review has taken
place.
(b)
7.3 A listed entity should disclose
(a)
If it has an internal audit function, how
the function is structured and what role it
performs
If it does not have an internal audit
function, that fact and the processes it
employs for evaluating and continually
improving the effectiveness of its risk
management and internal control
processes.
(b)
The Directors continually monitor areas of significant business risk, recognising that
there are inherent risks associated with the exploration for, development and mining of
mineral deposits.
Specifically, in relation to risk oversight the Board is conscious of its responsibilities to:
ensure compliance in legal, statutory and ethical matters; monitor the business
environment; identify business opportunities; and monitor the systems established to
ensure proper and appropriate responses to member complaints and enquiries. In the
context of the Company’s exploration and development project, the Board considers
these risks at each board meeting.
Additionally, the Board has established an Audit & Risk Committee. The details of
meetings and attendance of the Audit and Risk can be found in the Company’s
Directors’ report.
The Board considers risks specific to each stage of development and a comprehensive
risk assessment is undertaken at each stage. As the company development is rapidly
changing, it is considered appropriate to assess risk at each stage of development and
following each program. To track the risks identified, the Company has established a
risk register and a compliance register which is reported at each board meeting for
review.
The Company does not have an internal audit function and considers this appropriate
for the size of the Company and the stage of its development.
The Audit & Risk Committee meets at least three times a year to receive and consider
reports on, and monitor and discuss, known and emerging risk and compliance issues,
including non-financial operational and other business risks.
In support of the functions of the Audit & Risk Committee, the Company’s managers
are directly responsible for risk management in their respective areas of accountability.
Operational, financial, legal, compliance, strategic and reputational risks continue to be
managed primarily by the Directors and where appropriate, these risks are managed
with the support of relevant external professional advisers. The board receive monthly
reports to ensure that management are appropriately addressing the risks to company.
Specifically, a compliance register is presented in each Monthly Report detailing the
major items that the company must adhere to. The register provides specifics of
actions taken to ensure compliance.
15
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 7: Recognise and manage risk (continued)
Recommendation
KGL’s Compliance Statement
7.4 A listed entity should disclose whether
it has any material exposure to
economic, environmental and social
risks and, if it does, how it manages or
intends to manage those risks
The following risks are related to the Company specifically
Future Capital Raisings
KGLs’ ongoing activities may require substantial further financing in the future, in
addition to amounts raised pursuant to the Entitlement Offer. KGL will require
additional funding to bring the Jervois Copper Project into commercial production. Any
additional equity financing may be dilutive to Shareholders, may be undertaken at
lower prices than the current market price and debt financing, if available, may involve
restrictive covenants which limit KGL’s operations and business strategy. Although the
Directors believe that additional capital can be obtained, no assurances can be made
that appropriate capital or funding, if and when needed, will be available on terms
favourable to KGL or at all. If KGL is unable to obtain additional financing as needed, it
may be required to reduce, delay or suspend its operations and this could have a
material adverse effect on KGL’s activities and could affect KGL’s ability to continue as
a going concern.
Exploration Risk
The success of KGL depends on the delineation of economically mineable reserves
and resources, access to required development capital, movement in the price of
commodities, securing and maintaining title to KGL’ exploration and mining tenements
and obtaining all consents and approvals necessary for the conduct of its exploration
activities. Exploration on KGL’ existing tenements may be unsuccessful, resulting in a
reduction of the value of those tenements, diminution in the cash reserves of KGL and
possible relinquishment of the tenements. The exploration costs of KGL are based on
certain assumptions with respect to the method and timing of exploration. By their
nature, these estimates and assumptions are subject to significant uncertainties and,
accordingly, the actual costs may materially differ from these estimates and
assumptions. Accordingly, no assurance can be given that the cost estimates and the
underlying assumptions will be realised in practice, which may materially and adversely
affect KGL’ viability. If the level of operating expenditure required is higher than
expected, the financial position of KGL may be adversely affected. KGL may also
experience unexpected shortages or increases in the costs of consumables, spare
parts, plant and equipment.
Feasibility and Development Risks
It may not always be possible for KGL to exploit successful discoveries which may be
made in areas in which KGL has an interest. Such exploitation would involve obtaining
the necessary licences or clearances from relevant authorities that may require
conditions to be satisfied and/or the exercise of discretions by such authorities. It may
or may not be possible for such conditions to be satisfied. Further, the decision to
proceed to further exploitation may require participation of other companies whose
interests and objectives may not be the same as KGL’s. Given the early stage of
KGL’s projects, there will be a complex, multidisciplinary process to be undertaken to
complete a feasibility study to support any development proposal. There is a risk that
the feasibility study and associated technical works will not achieve the results
expected. There is also a risk that even if a positive feasibility study is produced, the
project may not be successfully developed for commercial or financial reasons.
16
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 7: Recognise and manage risk (continued)
Recommendation
KGL’s Compliance Statement
7.4 (continued)
Regulatory Risk
KGL’s operations are subject to various Federal, State and local laws and plans,
including those relating to mining, prospecting, development permit and licence
requirements, industrial relations, environment, land use, royalties, water, native title
and cultural heritage, mine safety and occupational health. Approvals, licences and
permits required to comply with such rules are subject to the discretion of the
applicable government officials. No assurance can be given that KGL will be
successful in obtaining any or all of the various approvals, licences and permits or
maintaining such authorisations in full force and effect without modification or
revocation. To the extent such approvals are required and not retained or obtained in a
timely manner or at all, KGL may be curtailed or prohibited from continuing or
proceeding with production and exploration. KGL’s business and results of operations
could be adversely affected if applications lodged for exploration licences are not
granted. Mining and exploration tenements are subject to periodic renewal. The
renewal of the term of a granted tenement is also subject to the discretion of the
relevant Minister. Renewal conditions may include increased expenditure and work
commitments or compulsory relinquishment of areas of the tenements comprising
KGL’s projects. The imposition of new conditions or the inability to meet those
conditions may adversely affect the operations, financial position and/or performance
of KGL. It is also possible that, in relation to tenements which KGL has an interest in or
will in the future acquire such an interest, there may be areas over which legitimate
common law native title rights of Aboriginal Australians exist. If native title rights do
exist, the ability of KGL to gain access to tenements (through obtaining consent of any
relevant landowner), or to progress from the exploration phase to the development and
mining phases of operations may be affected. KGL has a registered Indigenous Land
Use Agreement with the traditional owners for its Jervois Copper Project.
Occupational Health and Safety
Given KGL’ exploration activities (and especially if it achieves exploration success
leading to mining activities), it will face the risk of workplace injuries which may result
in workers’ compensation claims, related common law claims and potential
occupational health and safety prosecutions.
Further, the production processes used in conducting any future mining activities of
KGL can be dangerous. KGL has, and intends to maintain, a range of workplace
practices, procedures and policies which will seek to provide a safe and healthy
working environment for its employees, visitors and the community
Limited operating history of KGL
KGL has limited operating history on which it can base an evaluation of its future
prospects. If KGL’ business model does not prove to be profitable, investors may lose
their investment. KGL’s historical financial information is of limited value because of
KGL’ lack of operating history and the emerging nature of its business. The prospects
of KGL must be considered in the light of the risks, expenses and difficulties frequently
encountered by companies in their early stage of development, particularly in the
mineral exploration sector, which has a high level of inherent uncertainty.
Key Personnel
In formulating its exploration programs, KGL relies to a significant extent upon the
experience and expertise of the Directors and management. A number of key
personnel are important to attaining the business goals of KGL. One or more of these
key employees could leave their employment, and this may adversely affect the ability
of KGL to conduct its business and, accordingly, affect the financial performance of
KGL and its Share price. Recruiting and retaining qualified personnel are important to
KGL’ success. The number of persons skilled in the exploration and development of
mining properties is limited and competition for such persons is strong.
Resource Estimate Risk
Resource estimates are expressions of judgement based on knowledge, experience
and industry practice. These estimates are expressions of judgment based on
knowledge, experience and industry practice. These estimates were appropriate when
made but may change significantly when new information becomes available. There
are risks associated with such estimates. Resource estimates are necessarily
imprecise and depend to some extent on interpretations, which may ultimately prove to
be inaccurate and require adjustment. Adjustments to resource estimates could affect
KGL’ future plans and ultimately its financial performance and value. Copper and gold
price fluctuations, as well as increased production costs or reduced throughput and/or
recovery rates may render resources containing relatively lower grades uneconomic
and may materially affect resource estimations.
17
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 7: Recognise and manage risk (continued)
Recommendation
KGL’s Compliance Statement
7.4 (continued)
Environmental Risk
The operations and activities of KGL are subject to the environmental laws and
regulations of Australia. As with most exploration projects and mining operations,
KGL’s operations and activities are expected to have an impact on the environment,
particularly if advanced exploration or mine development proceeds. KGL attempts to
conduct its operations and activities to the highest standard of environmental
obligation, including compliance with all environmental laws and regulations. KGL is
unable to predict the effect of additional environmental laws and regulations which may
be adopted in the future, including whether any such laws or regulations would
materially increase KGL’s cost of doing business or affect its operations in any area.
However, there can be no assurances that new environmental laws, regulations or
stricter enforcement policies, once implemented, will not oblige KGL to incur significant
expenses and undertake significant investments which could have a material adverse
effect on KGL’s business, financial condition and performance.
Availability of equipment and contractors
Given the current level of activity across the Australian mining industry, the availability
of appropriate equipment, including drill rigs, is in short supply. There is also high
demand for contractors providing other services to the mining industry. Consequently,
there is a risk that KGL may not be able to source all the equipment and contractors
required to fulfil its proposed exploration activities. There is also a risk that hired
contractors may underperform or that equipment may malfunction, either of which may
affect the progress of KGL’s exploration activities.
Fluctuations in Copper Price and Australian Dollar Exchange Rate
The copper mining industry is competitive. There can be no assurance that copper and
gold prices will be such that KGL can mine its deposits at a profit. Copper and gold
prices fluctuate due to a variety of factors including supply and demand fundamentals,
international economic and political trends, expectations of inflation, currency
exchange fluctuations, interest rates, global or regional consumption patterns and
speculative activities. Similarly, demand and supply of capital and currencies, forward
trading activities, relative interest rates and exchange rates and relative economic
conditions can impact exchange rates.
Climate Change Risk
The operations and activities of KGL are subject to changes to local or international
compliance regulations related to climate change mitigation efforts, specific taxation or
penalties for carbon emissions or environmental damage, and other possible restraints
on industry that may further impact KGL and its profitability. While KGL will endeavour
to manage these risks and limit any consequential impacts, there can be no guarantee
that KGL will not be impacted by these occurrences. Climate change may also cause
certain physical and environmental risks that cannot be predicted by KGL, including
events such as increased severity of weather patterns, incidence of extreme weather
events and longer-term physical risks such as shifting climate patterns. All these risks
associated with climate change may significantly change the industry in which KGL
operates.
Macro-Economic Risks
On 11 March 2020, the World Health Organisation Director-General declared the
outbreak of the novel coronavirus (2019-nCoV) a pandemic. This emerging macro-
economic risk may adversely affect the ability of KGL to obtain and / or complete the
financing of the Jervois project within forecast timeframes.
18
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 8: Remunerate fairly and responsibly
A listed entity should pay director remuneration sufficient to attract and retain high quality directors and
design its executive remuneration to attract, retain and motivate high quality senior executives and to
align their interests with the creation of value for security holders.
Recommendation
KGL’s Compliance Statement
8.1 The board of a listed entity should:
(a) Have remuneration committee which
The Company has established a Remuneration and Nomination Committee to assist
the Board on all matters relating to remuneration.
i.
ii.
Has at least 3 members, a majority of
whom are independent directors; and
Is chaired by an independent director
And disclose
iii. The charter of the committee
iv. The members of the committee; and
v. As at the end of each reporting period,
the number of times the committee met
throughout the period and the individual
attendances of the members at those
meetings; or
(b)
If it does not have a remuneration
committee, disclose that fact, and the
processes it employs for setting the level
and composition of remuneration for
directors and senior executives and
ensuring that such remuneration is
appropriate and not excessive.
The Committee Charter sets out the role of the committee as follows:
make recommendations to the Board regarding their remuneration
framework for directors, including in relation to;
o
o
o
o
the level of fees payable to each non-executive director within
the maximum aggregate level of remuneration approved by the
Company’s shareholders;
any changes to the maximum aggregate level of remuneration
approved by the Company’s shareholders;
the manner in which fees may be taken; and
any other applicable arrangements, including for example,
payments of fees for special exertions, director expense claims
and ad hoc Committee fees.
review the competitiveness of the Company’s executive compensation
programs to ensure:
o
o
o
o
o
the attraction and retention of corporate officers;
the motivation of corporate officers to achieve the Company’s
business objectives; and
the alignment of the interests of key leadership with the long-
term interests of the Company’s shareholders;
review trends in management compensation, oversee the
development of new compensation plans and, when necessary,
approve the revision of existing plans;
review the performance of executive management;
review and approve Executive Directors goals and objectives, evaluate
Executive Directors performance in light of these corporate objectives, and
set Executive Directors compensation levels consistent with Company
philosophy;
recommend appropriate salary, bonus and other compensation to the
Board for approval;
review and approve compensation packages for new corporate officers
and termination packages for corporate officers as requested by
management;
review and approve the awards made under any executive officer bonus
plan, and provide an appropriate report to the Board;
review and make recommendations concerning long-term incentive
compensation plans, including the use of share options and other equity-
based plans. Except as otherwise delegated by the Board, the committee
will act on behalf of the Board as the “Committee” established to
administer equity-based and employee benefit plans, and as such will
discharge any responsibilities imposed on the committee under those
plans, including making and authorising grants, in accordance with the
terms of those plans;
The Committee is comprised of three independent directors.
The committee members are:
Mr Peter Hay (Chairman and Non-executive director).
Ms Fiona Murdoch (independent non-executive)
Mr John Gooding (independent non-executive)
The details of the qualifications and experience of the committee members and the
number of meetings attended each year will be detailed in the Company’s Annual
Report and/or the company website.
19
KGL Resources Limited Annual Report 31 December 2019
Corporate Governance Statement
Principle 8: Remunerate fairly and responsibly (continued)
Recommendation
KGL’s Compliance Statement
8.2 A listed entity should separately disclose its
policies and practices regarding the
remuneration of non-executive directors
and the remuneration of executive directors
and other senior executives.
With a small number of executive roles, the Company takes an individual approach
to setting the remuneration for these roles. As the Company progresses the
development of the Jervois project and the number of roles increase, policies and
practices will be established.
The directors are paid a fixed remuneration per month.
The Executive Chairman has to dated received no additional remuneration for
undertaking the role of the CEO. In 2019 the board, with shareholder approval
granted the Executive Chairman 4 million shares for the 3 years in the CEO role.
Full details of payments to executives can be found in the Remuneration Report as
part of the Director Report section of the Annual Report.
The Company has a Securities Trading Policy. This policy strictly prohibits Directors
and Employees from entering into any transaction that is designed to limit the
economic risk of a holding in unvested KGL Resources Limited securities.
A full copy of the policy can be found on the Company’s website
www.kglresources.com.au
8.3 A listed entity which has an equity-based
remuneration scheme should:
(a) 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
(b) Disclose that policy or a summary of it.
20
KGL RESOURCES LIMITED
AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
Contents
Directors’ Report
Competent Person’s statement
Auditor’s Independence Declaration
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Page
1
25
26
27
28
29
30
31
56
57
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT
The directors present their report on the consolidated entity (or the Group) consisting of KGL
Resources Limited and the entities it controlled at the end of, or during, the year ended 31 December
2019.
DIRECTORS
The names and details of the Company’s directors in office during the financial year and until the
date of this report are as follows. Directors were in office for this entire period unless otherwise
stated.
Names, qualifications, experience and special responsibilities
Denis Wood
Executive Chairman
BSc (Geology)
Appointed 28 July 2015
Denis Wood is an Australian and international mining industry
director, investor, executive and professional metallurgist and
geologist with more than 45 years’ experience.
Denis’s early career comprised 13 years with BHP as a
metallurgist followed by eight years with the mining industry
technical services provider CCI Holdings where he reached the
position of Managing Director.
Denis then moved to Chicago to join a multinational company
which supplied a complete range of services to the mining
industry. Responsible for commercial testing and engineering,
he managed more than 50 branches in the United States as well
as operations in South Africa and South America.
Upon returning to Australia, Denis took up multiple directorships
and shareholdings of Australian based resource companies
including QCC, Cumnock Coal, Sedgman, Jupiter Mines and
Marathon Resources. Denis then accepted the position of
Managing Director/CEO of Australian Premium Coals, a
subsidiary of Macarthur Coal Limited, and was responsible for
the successful development of greenfield sites including the
Coppabella and Moorvale coal mines in Central Queensland.
Subsequently he spent eight years as the Executive Director of
the Talbot Group in the position of Director of Resources.
Following a brief retirement, Denis returned to the industry to
restructure and focus the direction of KGL to become a robust,
world class copper producer in the Northern Territory.
Other Current Directorships of ASX Listed Companies
None
Former Directorships of ASX Listed Companies in last three
years
None
1
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
DIRECTORS (CONTINUED)
Ferdian Purnamasidi
BACHELOR OF COMMERCE
DIPLOMA OF BUSINESS
MANAGEMENT
Non-executive Director
Appointed 26 April 2016
Peter Hay
BENG (MINING)
BACHELOR OF COMMERCE
MEMBER OF INSTITUTE OF
CHARTERED ACCOUNTANTS IN
AUSTRALIA
Non-Executive Director
Appointed 02 November 2017
.
Ferdian is an Executive at the Salim Group and in charge of
Business Development and Strategic Acquisitions within the
resources sector. Ferdian brings over 18 years of professional
experience working both in Australia and overseas. The Salim
Group is a major shareholder of KGL through its Singapore
based company KMP Pte Ltd. The Salim Group is a diversified
business conglomerate which owns interests in companies
involved in the mining business, dairy products, flour milling,
instant noodles, cooking oil, automobile assembly, property,
insurance and retail.
Ferdian is also the Managing Director of Mach Energy Australia
Pty Ltd which owns the world-class Mt Pleasant coal operation
in the Hunter Valley region in New South Wales.
Ferdian graduated with Bachelor of Commerce from the Curtin
University of Western Australia.
Other Current Directorships of ASX Listed Companies
None.
Former Directorships of ASX Listed Companies in last three
years
None.
Mr Hay has a Bachelor of Engineering (Mining) and Bachelor
of Commerce and is an associate member of the Institute of
Chartered Accountants based in Brisbane. With over 30 years’
experience in the mining industry, he has held senior positions
largest resource companies,
in some of Queensland’s
including General Manager of Pan Australian Mining Limited,
Managing Director of Sedgman Limited and Joint Managing
Director of Macarthur Coal Ltd. Mr Hay has extensive
experience as a non-executive director of companies including
Sedgman Limited and Aston Resources Limited.
Mr Hay is member of the Audit and Risk Committee and Chair
of the Remuneration Committee.
Other Current Directorships of ASX Listed Companies
None.
Former Directorships of ASX Listed Companies in last three
years
None.
2
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
DIRECTORS (CONTINUED)
Fiona Murdoch
LLB (HONS)
MBA
GRADUATE OF THE AUSTRALIAN
INSTITUTE OF COMPANY DIRECTORS
(GAICD)
Non-Executive Director
Appointed 12 June 2018
John Gooding
ASSOC DIP (MINING ENGINEERING)
Non-Executive Director
Appointed 12 June 2018
Fiona brings more than 30 years of senior operational
experience to the Board of KGL, including leadership roles in
the mining and resources industry with AMCI Investment, MIM
Holdings and Xstrata Queensland.
She has extensive domestic and international experience with
major projects in Western Australia, Northern Territory and
Queensland, and in South America, Dominican Republic,
Papua New Guinea and the Philippines. Fiona has experience
working with Chinese, Japanese, South Korean, German and
South American investment partners across multi-national,
listed, private and statutory authority environments. She was
a Partner of corporate advisory firm Neuchâtel Partners for 10
years and previously a Non-Executive Director of metallurgical
services and technology company Core Resources Pty Ltd.
Currently, Fiona serves as a Non-Executive Director for NRW
Holdings Limited (ARX:NRH) and Metro Mining Limited
(ASX:MMI). In addition, Fiona serves on the Board of Building
Queensland and on the Joint Venture Committee for the West
Pilbara Iron Ore Project. Fiona is also Chair of The Pyjama
Foundation Limited, a not-for-profit organisation providing
learning-based activities for children in foster care.
Fiona is a Graduate of the AICD Company Director program
and holds an MBA as well as an Honours degree in Law.
Ms Murdoch is Chair of KGL’s Audit and Risk Committee and
a member of the Remuneration Committee.
Other Current Directorships of ASX Listed Companies
NRW Holdings Limited. Appointed 24 February 2020
Metro Mining Limited. Appointed 11 March 2019
Former Directorships of ASX Listed Companies in last three
years
None.
Mr Gooding is a mining engineer with over 40 years of
experience in the resources industry.
He most recently served as the Managing Director and Chief
Executive Officer of Highlands Pacific and prior to this held
executive management positions with Normandy Mining, MIM,
Xstrata, Ok Tedi Mining and Roche Mining.
He holds a NT, NSW and Qld Mine Managers Certificate, is a
Fellow of both the Institute of Engineers Australia and the
Australasian Institute of Mining and Metallurgy and is a
member of the Australian Institute of Company Directors.
Mr Gooding is member of the Audit and Risk Committee and
the Remuneration Committee.
Other Current Directorships of ASX Listed Companies
Hillgrove Resources Ltd - Chairman
Former Directorships of ASX Listed Companies in last three
years
Highlands Pacific Ltd and Kasbah Resources Ltd
3
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
COMPANY SECRETARY
Kylie Anderson
BSC. MBA (INT. BUS.) MPA,
MAICD
Appointed 2 January 2008
financial and company
Ms Anderson has held senior
secretarial roles with a number of companies in the resources
sector including Felix Resources and Rio Tinto.
INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES
CORPORATE
At the date of this report, the interest of the directors in the shares and options of KGL Resources
Limited are:
Director
D Wood
F Purnamasidi
P Hay
J Gooding
F Murdoch
Ordinary shares
Options over
ordinary shares
30,264,422
600,000
2,382,964
10,000
71,750
-
-
-
-
-
MEETINGS OF DIRECTORS
The number of directors’ meetings held during the year and the number of meetings attended by
each director while they were a director were as follows:
Directors
D Wood
F Purnamasidi
P Hay
J Gooding
F Murdoch
Held*
Attended
8
8
8
8
8
7
8
8
7
8
*Number of meetings held during the time the director held office during the year.
4
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
MEETINGS OF DIRECTORS (CONTINUED)
Committee membership and meetings
Ms Fiona Murdoch is Chair of the Audit and Risk Committee along with Peter Hay and John
Gooding as members.
Peter Hay is Chair of the Remuneration Committee along with Fiona Murdoch and John Gooding
as members.
Audit and Risk
Committee
Remuneration
Committee
Held*
Attended
Held*
Attended
Directors
D Wood
F Purnamasidi
Peter Hay
J Gooding
F Murdoch
-
-
3
3
3
-
-
3
3
3
-
-
1
1
1
-
-
1
1
1
*Number of meetings held during the time the director was a member of the Committee during the
year.
CORPORATE INFORMATION
Principal activity
The principal activity of the Group during the year was exploration and development of the Jervois
multi-metal project in the Northern Territory.
Employees
The Group employed 7 employees as at 31 December 2019 (2018: 7 employees).
DIVIDENDS
No dividends in respect of the current year have been paid, declared or recommended for
payment.
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KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS REPORT (CONTINUED)
REVIEW OF OPERATIONS
During 2019, KGL entered the final stages of planning for the development of the Jervois Copper
Project in the Northern Territory. The Group worked to a timetable that provides for project
construction to commence in mid-2020, although the timetable is now subject to the effects of
the COVID-19 virus.
The year represented the mature phase of a consistent strategy to identify a mineral resource on
which KGL could confidently build a robust and sustainable mining operation.
Intensive drilling achieved the objective of increasing the confidence levels in the resource. In
August 2019, KGL announced a significant upgrade with the Indicated Copper Category
increasing from 50% to 65% of total copper resources at Jervois. Total resources at Jervois were
estimated at:
-
-
26.6 million tonnes at 1.47% copper and 24.7 g/t silver
containing 390,600 tonnes copper and 21.1 million ounces silver.
Further drilling at Reward, Rockface and Bellbird indicated the potential for expansion and
additional upgrading of resources.
Late in the year, KGL proceeded with detailed mine planning. At the same time, continued drilling
highlighted the quality of the Reward deposit where additional high grade, wide interval copper
was located just below and south of the proposed pit, and also at depth to the north.
In parallel with mine planning, KGL undertook other project development work to establish
metallurgical process design, water supply and on-site infrastructure.
The Environmental Impact Statement process concluded during the year, resulting in the
Environmental Protection Authority advising the Northern Territory Government that the project
can proceed by implementing several recommendations.
At year’s end, KGL was working towards lodging a Mine Management Plan with the NT
Government for final project approval.
Pre-development planning
All foundation planning progressed into the final stages.
In mine planning, Macmahon Contractors, the preferred mining contractor, was engaged to
prepare the mine plan, optimising KGL’s conceptual planning. Several areas of improvement
were identified and are being incorporated into the plan, with the focus on optimising the
scheduling for the two open pit and three underground mines.
In processing, Core Metallurgy undertook test work to advance the metallurgical processing
design to the final stages.
To supply water for the project, a sustainable water source was identified, and preliminary design
work proceeded on the bore field and pipeline to access the water. Applications are in progress
to obtain the required Mineral Lease and Water Extraction Licence.
Planning was undertaken for the run-of-mine stockpile, tailings storage and a creek diversion.
These and other infrastructure requirements including the accommodation camp and power
station are being integrated with the final mine plan.
Resources upgrade
Confidence levels in the Mineral Resource at Jervois were strengthened significantly during the
year. The upgrade resulted from highly successful infill drilling programs at the Reward and
Rockface deposits through which resources were converted from the Inferred to Indicated
category. The update announced in August 2019 showed a 32% increase (over the January
2019 estimates) in contained copper in the Indicated Resource category, with increases of 240%
and 30% for the Reward and Rockface deposits respectively. Copper in the Indicated Resource
category rose from 50% to 65% of the total contained copper resource at Jervois.
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KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REVIEW OF OPERATIONS (CONTINUED)
Resources upgrade (continued)
Contained silver for the Indicated Resources category was increased by 31% with increases of
236% and 37% for Reward and Rockface respectively.
Total copper resources now stand at 26.6 million tonnes at 1.47% copper and 24.7 g/t silver,
containing 390,600 tonnes copper and 21.1 million ounces silver, including Indicated Resources
of 255,000 tonnes contained copper and 12.7 million ounces contained silver.
Table 1 Mineral Resource for the Jervois Copper Project
(Minor rounding errors. The Marshall lode is now included in the Reward Deposit following drilling and improved modelling
for mine planning purposes. The Green Parrot deposit has been renamed Reward South now that it is considered as a
southern extension of Reward with potential for expansion.)
The Competent Persons Statement in relation to the JORC resource statement can be found on page 25.
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KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REVIEW OF OPERATIONS (CONTINUED)
Resources upgrade (continued)
Figures 1 and 2 illustrate the progress of the copper and silver resource definition under KGL’s
ownership of the Jervois Project.
Figure 1 Copper Mineral Resource History at Jervois
Figure 2 Silver Mineral Resource History at Jervois
8
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REVIEW OF OPERATIONS (CONTINUED)
Drilling
Having successfully upgraded resources through drilling programs, KGL continued drilling later
in the year to further upgrade resources and enhance geological understanding ahead of mining,
with positive results. Drilling concentrated on increasing and upgrading the resources at the
known deposits that are part of the mining plans. State of the art down hole electromagnetic
(DHEM) surveying technology continued to deliver benefits in locating mineralised conductors
and identifying drill targets efficiently.
Reward
Following the resource upgrade at Jervois, further drilling indicated the resource growth potential
around the entire Reward resource where half of the current estimated resources at Jervois are
located. The drill results are expected to lead to upgrading of resources.
The three trends defined at Reward comprise the Reward Central Trend (where the proposed
open pit is located) and the Reward Sub-trend which together are part of the Reward Main Lode,
and the Reward Deeps Lode trend.
Wide intersections of high-grade continuous copper mineralisation were encountered just below
and south of the current proposed open pit. The intersection of additional high-grade copper
beneath the planned open pit limit presents more options for the final mine design. These include
potential opportunities to increase the scale of production and reduce mine operating costs.
Among the results for holes drilled later in the year were (drill hole intervals):
KJCD376:
27.3m @ 1.78% Cu, 73.6 g/t Ag, 0.56 g/t Au from 181.6 m, including
− 10.0 m @ 2.96% Cu, 165.4 g/t Ag, 0.57 g/t Au from 198.8 m
KJD382:
17.9 m @ 3.90% Cu, 97.1 g/t Ag, 0.38 g/t Au from 117.5 m, including
− 10.0 m @ 6.10% Cu, 164.3 g/t Ag, 0.62 g/t Au from 117.5 m
29.4 m @ 2.56% Cu from 182.7 m, including
− 16.8 m @ 3.77% Cu, 68.4 g/t Ag, 0.3 g/t Au from 196.3 m
KJD388:
7.1 m @ 1.68% Cu, 20 g/t Ag from 138.9 m
9.4 m @ 4.32% Cu, 83.2 g/t Ag, 0.57 g/t Au from 176.2 m
4.2 m @ 2.56% Cu, 130.9 g/t Ag from 197.3 m
KJD395:
65 m @ 3.6% Cu, 98.6 g/t Ag, 0.45 g/t Au from 210.3 m, including
− 18.6 m @ 6.56% Cu, 246 g/t Ag, 0.89 g/t Au from 225.4 m
3.3 m @ 2.05% Cu, 19.2 g/t Ag, 0.65 g/t Au from 289.8 m
The remaining assay results of the 2019 drilling program were announced in March 2020. A
further five holes at Reward beneath the proposed pit limit (KJD398, KJD399, KJD400, KJD401,
and KJD402) intercepted significant mineralised intervals. The intercepts substantiate the
existence of high-grade copper and gold shoots, and also improve confidence in the surrounding
resources.
9
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REVIEW OF OPERATIONS (CONTINUED)
Drilling (continued)
Reward South
In December 2019, a new copper-silver-gold mineralised zone open in all directions was
discovered at Reward South.
The Company first reported the discovery of a strong conductor zone as a result of down hole
electromagnetic (DHEM) surveying in Hole KJD360 which had been drilled to target a gravity
anomaly. Hole KJD415 was drilled to test this conductor. Results, announced in March 2020,
included:
26.5 m (Estimated True Width) @ 0.98% Cu, 285.5 g/t Ag, 0.36 g/t Au from 242.2 m,
including:-
o 7 m (ETW) @ 2.04% Cu, 616.5 g/t Ag, 0.91 g/t Au from 272.4 m
The newly discovered conductor and the intercept in KJD415 are located in one of the strongest
gravity anomalies identified at Jervois to date.
Hole KJD415 was subsequently surveyed by DHEM. The results of the new survey shows a
higher conductance of the zone and also adjusted the location of the conductor. The centre of
the new conductor was drilled recently; results are pending.
Reward Deeps
At Reward Deeps, upper interval intersections up-dip of the Reward Deeps Lode are expected
to improve both confidence and grade in the surrounding resource blocks which are currently
classed as Inferred and of lower grade. The hole intercepts were (drill hole intervals):
KJCD344
9.7 m @ 3.0% Cu, 59.90 g/t Ag from 202.9 m
KJCD364
11.4 m @ 2.12% Cu, 45.8 g/t Ag, 0.97 g/t Au from 256.9 m
KJD365
6.3 m @ 2.54% Cu, 68.1 g/t Ag, 0.93 g/t Au from 175.3 m.
Drill results at Reward Deeps late in the year confirm the continuity of high-grade mineralisation
from 175 metres to over 400 metres in depth.
Hole KJCD373 tested the northern perimeter of the Reward Deeps Lode at a depth of
approximately 400 metres below surface and confirmed the continuity of Reward Deeps at this
location.
KJCD373 intercepted (drill hole intervals):
12.8m @ 3.02% Cu, 36.8 g/t Ag, 0.56 g/t Au from 413.9 m, including
− 3.9m @ 6.54% Cu, 80.4 g/t Ag, 1.38 g/t Au from 422.8 m
4.1m @ 7.23% Cu, 22.1 g/t Ag, 2.59 g/t Au from 445 m, including
− 1.4m @ 15.78% Cu, 49 g/t Ag, 5.68 g/t Au from 447.6 m
Results of a further three holes (KJD411, KJD413 and KJD414) drilled in late 2019 and
announced in March 2020 included further significant upper interval intersections of high-grade
mineralisation.
Elevated gold grades were recorded at both the Reward Main Lode and Reward Deeps, the
higher gold grades being consistent with high grade copper intersections.
10
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REVIEW OF OPERATIONS (CONTINUED)
Drilling (continued)
Reward Deeps (continued)
A long section of Reward in Figure 3 shows the location of the interpreted new conductor and the gravity model at Reward and Reward South. The section shows
the relationship to the proposed pits at Reward and Reward South and Reward Deeps and includes some recent drill results.
Figure 3: Longitudinal section of recent assay results and recent interpreted conductor plates from Reward (decimals rounded for ease of presentation). Also shown is an image of
the gravity model of Reward.
11
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REVIEW OF OPERATIONS (CONTINUED)
Drilling (continued)
Reward Deeps (continued)
While priority was given to infill drilling to increase confidence levels in the Jervois resources, KGL
continued to seek expansion opportunities in the highly prospective Jervois mineral field.
Exploration holes drilled at Reward East and Reward North encountered significant mineralisation
and point to continuity to the north and east.
Bellbird
Both infill and exploration drilling at Bellbird extended high grade copper mineralisation trends.
The intercepts confirmed the continuity of the trends and are expected to contribute to a future
resource update. Among the best drill results (drill hole intervals) were:
KJD350
22.4 m @ 2.15% Cu and 13.90 g/t Ag from 162.4 m including
5.2 m @ 6.98% Cu and 44.10 g/t Ag from 172.2 m
KJD346W1
4.4 m @ 6.07% Cu and 50.50 g/t Ag from 236.1 m
Indicating the potential for high grade mineralisation to extend along the Main Lode’s
southerly projection was this result:
KJCD354X
8 m @ 5.01% Cu and 13.6 g/t Ag from 437 m
Drilling also strongly indicated the presence of the East Lode in close parallel proximity to
the Main Lode. High grade results in the East Lode include:
KJCD358
1 m @ 34.27% Cu and 436 g/t Ag from 358 m, the highest grade ever achieved at
Jervois.
The two high quality lodes are expected to intersect in the northern part of Bellbird (see Figure 4
on page 17).
In November 2019, three holes were drilled directly underneath the proposed Bellbird pit, to test
potential extensions of the main lode at Bellbird. These holes showed that significant
mineralisation occurs immediately below the limit of the proposed pit.
Bellbird North
Three holes were also drilled directly underneath the proposed Bellbird North pit, to test potential
extensions of the northern extension of the Bellbird lode. All three extension holes at Bellbird
North intercepted mineralisation at the expected location of the extension of the lode. However,
the lode appeared to be thinner than the surrounding intercepts.
Another two holes (KJD410 and KJD412) were drilled below the proposed Bellbird North pit. These
holes were drilled to test possible extensions of the previously reported bornite vein in Hole
KJCD358 (1m @ 34% Cu). Both holes intercepted high grade copper in a narrow zone of
chalcopyrite veinlets with minor bornite.
12
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REVIEW OF OPERATIONS (CONTINUED)
Drilling (continued)
Bellbird (continued)
Figure 4: Projected surface trace of the Main and East Lodes at Bellbird with recent drill hole results
projected on to topography and geology map (decimals rounded for ease of presentation).
13
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REVIEW OF OPERATIONS (CONTINUED)
Drilling (continued)
Rockface
Results of drilling at Rockface, included in the previous half yearly report, strengthened confidence
in the resource at Rockface and added to the deposit’s resource potential.
Infill drilling at the Rockface Main and North Lodes is expected to contribute to upgrading
resources from the Inferred to Indicated category.
FINANCIAL REVIEW
For the year ended 31 December 2019, the KGL Group recorded loss after income tax of
$2,328,377 (2018: loss of $1,229,078).
Employee expenses increased in the year to 31 December 2019 to $1,807,453 (2018 $817,249)
resulting from the issue of shares to key management personnel in lieu of remuneration
($1,000,000).
The KGL cash reserve as at 31 December 2019 was $7,202,899, including $6,726,255 in cash
and cash equivalents and $476,644 in term deposits held as security.
MATERIAL BUSINESS RISKS
KGL’s exploration and mining operations will be subject to the normal risks of mining and any
revenues will be subject to numerous factors beyond KGL’s control. The material business risks
that may affect KGL are summarised below.
Future Capital Raisings
KGLs’ ongoing activities may require substantial further financing in the future, in addition to
amounts raised pursuant to the Entitlement Offer. KGL will require additional funding to bring the
Jervois Copper Project into commercial production. Any additional equity financing may be dilutive
to Shareholders, may be undertaken at lower prices than the current market price and debt
financing, if available, may involve restrictive covenants which limit KGL’s operations and business
strategy. Although the Directors believe that additional capital can be obtained, no assurances can
be made that appropriate capital or funding, if and when needed, will be available on terms
favourable to KGL or at all. If KGL is unable to obtain additional financing as needed, it may be
required to reduce, delay or suspend its operations and this could have a material adverse effect
on KGL’s activities and could affect KGL’s ability to continue as a going concern.
Exploration Risk
The success of KGL depends on the delineation of economically mineable reserves and resources,
access to required development capital, movement in the price of commodities, securing and
maintaining title to KGL’ exploration and mining tenements and obtaining all consents and
approvals necessary for the conduct of its exploration activities. Exploration on KGL’ existing
tenements may be unsuccessful, resulting in a reduction of the value of those tenements,
diminution in the cash reserves of KGL and possible relinquishment of the tenements. The
exploration costs of KGL are based on certain assumptions with respect to the method and timing
of exploration. By their nature, these estimates and assumptions are subject to significant
uncertainties and, accordingly, the actual costs may materially differ from these estimates and
assumptions. Accordingly, no assurance can be given that the cost estimates and the underlying
assumptions will be realised in practice, which may materially and adversely affect KGL’ viability.
If the level of operating expenditure required is higher than expected, the financial position of KGL
may be adversely affected. KGL may also experience unexpected shortages or increases in the
costs of consumables, spare parts, plant and equipment.
14
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
MATERIAL BUSINESS RISKS (CONTINUED)
Feasibility and Development Risks
It may not always be possible for KGL to exploit successful discoveries which may be made in
areas in which KGL has an interest. Such exploitation would involve obtaining the necessary
licences or clearances from relevant authorities that may require conditions to be satisfied and/or
the exercise of discretions by such authorities. It may or may not be possible for such conditions
to be satisfied. Further, the decision to proceed to further exploitation may require participation of
other companies whose interests and objectives may not be the same as KGL’s. Given the early
stage of KGL’s projects, there will be a complex, multidisciplinary process to be undertaken to
complete a feasibility study to support any development proposal. There is a risk that the feasibility
study and associated technical works will not achieve the results expected. There is also a risk
that even if a positive feasibility study is produced, the project may not be successfully developed
for commercial or financial reasons.
Regulatory Risk
KGL’s operations are subject to various Federal, State and local laws and plans, including those
relating to mining, prospecting, development permit and licence requirements, industrial relations,
environment, land use, royalties, water, native title and cultural heritage, mine safety and
occupational health. Approvals, licences and permits required to comply with such rules are subject
to the discretion of the applicable government officials. No assurance can be given that KGL will
be successful in obtaining any or all of the various approvals, licences and permits or maintaining
such authorisations in full force and effect without modification or revocation. To the extent such
approvals are required and not retained or obtained in a timely manner or at all, KGL may be
curtailed or prohibited from continuing or proceeding with production and exploration. KGL’s
business and results of operations could be adversely affected if applications lodged for
exploration licences are not granted. Mining and exploration tenements are subject to periodic
renewal. The renewal of the term of a granted tenement is also subject to the discretion of the
relevant Minister. Renewal conditions may include increased expenditure and work commitments
or compulsory relinquishment of areas of the tenements comprising KGL’s projects. The imposition
of new conditions or the inability to meet those conditions may adversely affect the operations,
financial position and/or performance of KGL. It is also possible that, in relation to tenements which
KGL has an interest in or will in the future acquire such an interest, there may be areas over which
legitimate common law native title rights of Aboriginal Australians exist. If native title rights do exist,
the ability of KGL to gain access to tenements (through obtaining consent of any relevant
landowner), or to progress from the exploration phase to the development and mining phases of
operations may be affected. KGL has a registered Indigenous Land Use Agreement with the
traditional owners for its Jervois Copper Project.
Occupational Health and Safety
Given KGL’ exploration activities (and especially if it achieves exploration success leading to
mining activities), it will face the risk of workplace injuries which may result in workers’
compensation claims, related common law claims and potential occupational health and safety
prosecutions.
Further, the production processes used in conducting any future mining activities of KGL can be
dangerous. KGL has, and intends to maintain, a range of workplace practices, procedures and
policies which will seek to provide a safe and healthy working environment for its employees,
visitors and the community
15
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
MATERIAL BUSINESS RISKS (CONTINUED)
Limited operating history of KGL
KGL has limited operating history on which it can base an evaluation of its future prospects. If
KGL’ business model does not prove to be profitable, investors may lose their investment.
KGL’s historical financial information is of limited value because of KGL’ lack of operating
history and the emerging nature of its business. The prospects of KGL must be considered in
the light of the risks, expenses and difficulties frequently encountered by companies in their
early stage of development, particularly in the mineral exploration sector, which has a high
level of inherent uncertainty.
Key Personnel
In formulating its exploration programs, KGL relies to a significant extent upon the experience and
expertise of the Directors and management. A number of key personnel are important to attaining
the business goals of KGL. One or more of these key employees could leave their employment,
and this may adversely affect the ability of KGL to conduct its business and, accordingly, affect the
financial performance of KGL and its Share price. Recruiting and retaining qualified personnel are
important to KGL’ success. The number of persons skilled in the exploration and development of
mining properties is limited and competition for such persons is strong.
Resource Estimate Risk
Resource estimates are expressions of judgement based on knowledge, experience and industry
practice. These estimates are expressions of judgment based on knowledge, experience and
industry practice. These estimates were appropriate when made but may change significantly
when new information becomes available. There are risks associated with such estimates.
Resource estimates are necessarily imprecise and depend to some extent on interpretations,
which may ultimately prove to be inaccurate and require adjustment. Adjustments to resource
estimates could affect KGL’ future plans and ultimately its financial performance and value. Copper
and gold price fluctuations, as well as increased production costs or reduced throughput and/or
recovery rates may render resources containing relatively lower grades uneconomic and may
materially affect resource estimations.
Environmental Risk
The operations and activities of KGL are subject to the environmental laws and regulations of
Australia. As with most exploration projects and mining operations, KGL’s operations and activities
are expected to have an impact on the environment, particularly if advanced exploration or mine
development proceeds. KGL attempts to conduct its operations and activities to the highest
standard of environmental obligation, including compliance with all environmental laws and
regulations. KGL is unable to predict the effect of additional environmental laws and regulations
which may be adopted in the future, including whether any such laws or regulations would
materially increase KGL’s cost of doing business or affect its operations in any area.
However, there can be no assurances that new environmental laws, regulations or stricter
enforcement policies, once implemented, will not oblige KGL to incur significant expenses and
undertake significant investments which could have a material adverse effect on KGL’s business,
financial condition and performance.
16
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
MATERIAL BUSINESS RISKS (CONTINUED)
Availability of equipment and contractors
Given the current level of activity across the Australian mining industry, the availability of
appropriate equipment, including drill rigs, is in short supply. There is also high demand for
contractors providing other services to the mining industry. Consequently, there is a risk that KGL
may not be able to source all the equipment and contractors required to fulfil its proposed
exploration activities. There is also a risk that hired contractors may underperform or that
equipment may malfunction, either of which may affect the progress of KGL’s exploration activities.
Fluctuations in Copper Price and Australian Dollar Exchange Rate
The copper mining industry is competitive. There can be no assurance that copper and gold prices
will be such that KGL can mine its deposits at a profit. Copper and gold prices fluctuate due to a
variety of factors including supply and demand fundamentals, international economic and political
trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional
consumption patterns and speculative activities. Similarly, demand and supply of capital and
currencies, forward trading activities, relative interest rates and exchange rates and relative
economic conditions can impact exchange rates.
Climate Change Risk
The operations and activities of KGL are subject to changes to local or international compliance
regulations related to climate change mitigation efforts, specific taxation or penalties for carbon
emissions or environmental damage, and other possible restraints on industry that may further
impact KGL and its profitability. While KGL will endeavour to manage these risks and limit any
consequential impacts, there can be no guarantee that KGL will not be impacted by these
occurrences. Climate change may also cause certain physical and environmental risks that cannot
be predicted by KGL, including events such as increased severity of weather patterns, incidence
of extreme weather events and longer-term physical risks such as shifting climate patterns. All
these risks associated with climate change may significantly change the industry in which KGL
operates.
Macro-Economic Risks
On 11 March 2020, the World Health Organisation Director-General declared the outbreak of the
novel coronavirus (2019-nCoV) a pandemic. This emerging macro-economic risk may adversely
affect the ability of KGL to obtain and / or complete the financing of the Jervois project within
forecast timeframes.
17
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
CAPITAL RAISINGS / CAPITAL STRUCTURE
KGL raised $6.5 million before costs in March 2019 in a placement to three large shareholders to
fund drilling to further upgrade mineral resources, and $5.94 million in an entitlement offer in
December 2019 to fund drilling, planning and design work required to undertake the project
financing stage.
In the placement, KGL issued 21,666,666 new shares at 30 cents per share to three large
shareholders in KGL. Two of the investors made their first investments in KGL last year. Marshall
Plenty, a company associated with international mineral resources identity Mr Ernie Thrasher,
acquired 12,683,333 shares in the latest placement. ASM Connaught House Fund LP, ASM
Connaught House Fund (Master) ll LP and ASM Connaught House Fund (Master) lll LP, which are
managed by Argyle Street Management Limited, acquired 3,333,333 shares. KMP Investments
Pty Ltd, KGL’s largest shareholder, acquired 5,650,000 shares.
In the entitlement offer, KGL made a 1 for 8 non-renounceable entitlement offer of fully paid shares
issued at 23 cents per share representing a 6.12% discount to the traded price on the last day
prior to the offer being announced.
All of the top 10 shareholders in KGL participated in the capital raising, including KGL’s largest
shareholder KMP Investments Pte Ltd by way of a placement when the required funds arrived after
the closing date.
In addition, at the 2019 Annual General Meeting, shareholders approved the issue of 4,000,000
shares to Mr Denis Wood. For more information, refer to the Remuneration Report on page 20.
SUMMARY OF SHARES AND OPTIONS ON ISSUE
As at the date of this report there were 311,818,103 ordinary shares on issue, no share options
and no performance rights.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
No significant changes in the occurred in the state of affairs during the year.
ENVIRONMENTAL REGULATION
The Group’s operations in the Northern Territory are subject to significant environmental
regulations under both Commonwealth and State legislation. There have been no breaches by
KGL and its subsidiaries.
REMUNERATION REPORT (AUDITED)
The remuneration report, which has been audited, outlines the director and executive remuneration
arrangements for the Group in accordance with the requirements of the Corporations Act 2001 and
its regulations.
A. Remuneration philosophy
The Company’s remuneration policy is to ensure that the remuneration package properly reflects
the person’s duties and responsibilities, with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high-quality Board and executive team.
The Remuneration Committee is responsible for determining and reviewing compensation
arrangements for the directors and executives.
B. Key Management Personnel
The Key Management Personnel (KMP) of the Group comprises the non-executive directors and the
executive chairman, who have significant influence over the Group’s operating performance.
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KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (CONTINUED)
C. Remuneration structure
In accordance with best practice corporate governance, the structure of non-executive director and
executive remuneration is separate and distinct.
i) Non-executive director remuneration
Objective
The Board seeks to set aggregate remuneration at a level which provides the Company with the
ability to attract and retain non-executive directors of the highest calibre, whilst incurring a cost
which is acceptable to shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-
executive directors shall be determined from time to time by a general meeting. The current
aggregate remuneration so determined is $500,000. An amount not exceeding $500,000 is
divided between the directors as agreed.
When appropriate the Board considers advice from external consultants as well as the fees paid
to non-executive directors of comparable companies when undertaking the annual review process.
No remuneration consultants were engaged to review non-executive remuneration in 2019
Each director receives a fee for being a director of the Company. Directors who are called upon
to perform extra services beyond the director’s ordinary duties may be paid additional fees for
those services.
In order to align with shareholder interests, non-executive directors are encouraged to hold shares
in the Company.
There is no element of performance-based (‘at risk’) pay for non-executive directors.
ii) Executive remuneration
Objective
The Company aims to reward executives with a level of fixed remuneration commensurate with
their position and responsibilities within the Company and so as to align the interests of executives
with those of shareholders.
Given the stage of development of the Jervois project and the small size of the executive team,
there are no short-term incentive (STI) or long-term incentive (LTI) plans in place. Any awards
over and above contractual fixed remuneration and associated statutory entitlements are made at
the discretion of the board.
Structure
In determining the level and make-up of executive remuneration, the Board may obtain
independent advice from external consultants on market levels of remuneration for comparable
executive roles. No remuneration consultants were engaged to review executive remuneration in
2019. It is the Board’s policy that employment contracts are entered into with all the senior
executives.
The company may, at the absolute discretion of the board, introduce short term and/or long-term
incentives in the form of cash and/or shares in the Company. Entitlement to these incentives would
be based upon the employees measured contribution to the Company.
19
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (CONTINUED)
D. Relationship between remuneration and the Company’s performance
The earnings of the consolidated entity for the five years to 31 December 2019 are summarised
below:
2019
$
-
(2,545,206)
(2,494,448)
Sales revenue
EBITDA
EBIT
Profit/(Loss) after income
tax
Total KMP remuneration 1,258,694(*)
(2,328,377)
2018
$
-
(1,533,597)
(1,512,183)
2017
$
-
(1,273,802)
(1,264,772)
2016
$
-
(2,299,353)
(2,290,988)
2015
$
-
(2,413,004)
(2,430,262)
(1,229,078)
(1,264,772)
(2,262,359)
(2,430,262)
238,685
163,635
558,490
508,755
(*) Includes $1,000,000 shares issued to Mr Wood in June 2019. Mr Wood has performed the role of executive chair since
May 2016 and has not received any remuneration over and above his director fee entitlement. This award was in-lieu of
the remuneration for his significant contribution in this role over past three years, and was put to and approved by
shareholders at the 2019 Annual General Meeting.
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial
year end ($)
Total dividends declared
(cents per share)
Basic loss per share
(cents per share)
E. Employment contracts
2019
2018
2017
2016
2015
$0.23
$0.29
$0.36
$0.265
$0.10
-
-
-
-
-
(0.83)
(0.50)
(0.65)
(1.33)
(1.72)
Employment contracts have been entered into by the Group with key management personnel,
describing components and amounts of remuneration applicable to their appointment. These
contracts do not fix the amount of remuneration increases from year to year. Remuneration levels
are reviewed generally each year by the Remuneration Committee to align with changes in job
responsibilities and market salary expectations.
F. Remuneration of directors and executives
Remuneration of executive director
Denis Wood
By mutual agreement approved by the Board, Mr Denis Wood is engaged to provide services as
Executive Chairman, with an annual director’s fee of $47,250 plus $4,489 superannuation
subject to annual review. Mr Wood receives no additional remuneration for the role of chief
executive officer.
In April 2019, KGL’s remuneration committee, resolved, solely at its discretion, to grant 4,000,000
shares to Mr Denis Wood, in lieu of remuneration for his three years of services as Executive
Chairman of the Group, which he has performed for no additional fee over and above that to which
he was entitled to in his role as Director.
Over this time, Mr Wood has significantly advanced the Jervois Project, improving the quality of
the reported resources, managing and overseeing capital raising at no cost the Group, and
advancing the studies necessary to develop the Jervois project.
The share award was put to the 2019 Annual General Meeting, and shareholders approved the
issue of 4,000,000 shares in June 2019, at no cost to Mr Wood.
20
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (CONTINUED)
F. Remuneration of directors and executives (continued)
Remuneration of non- executive directors
Ferdian Purnamasidi
By mutual agreement approved by the Board, Mr Ferdian Purnamasidi is engaged to provide
services as a Non-executive Director with an annual director’s fee of $47,250 plus $4,489
superannuation subject to annual review.
Peter Hay
By mutual agreement approved by the Board, Mr Peter Hay is engaged to provide services as a
Non-executive Director with an annual director’s fee of $47,250 plus $4,489 superannuation
subject to annual review.
John Gooding
By mutual agreement approved by the Board, Mr John Gooding is engaged to provide services
as a Non-executive Director with an annual director’s fee of $47,250 plus $4,489 superannuation
subject to annual review.
Fiona Murdoch
By mutual agreement approved by the Board, Mrs Fiona Murdoch is engaged to provide services
as a Non-executive Director through her company Corporate Elements Pty Ltd with an annual
director’s fee of $47,250 plus $4,489 superannuation subject to annual review.
There have been no changes to non-executive remuneration in the current year.
All key management personnel have no entitlements to termination payments in the event of
removal for misconduct.
21
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (CONTINUED)
F. Remuneration of directors and executives (continued)
Directors received the following compensation for their services during the year.
Short-term
benefits
Cash salary
and fees
Post-
employment
benefits
Superannuation
$
$
47,250
47,250
47,250
47,250
47,250
236,250
$
47,250
23,625
47,250
47,250
26,212
26,390
217,977
4,489
4,489
4,489
4,489
4,489
22,445
$
4,489
2,244
4,489
4,489
2,490
2,507
20,708
Share-
based
payment -
shares
$
1,000,000
-
-
-
-
1,000,000
$
-
-
-
-
-
-
-
Total
% total
performance
related
$
%
1,051,739
51,739
51,739
51,739
51,739
1,258,695
95.1
-
-
-
-
$
%
51,739
25,869
51,739
51,739
28,702
28,897
238,685
-
-
-
-
-
-
Year ended
31 Dec 2019
Directors
D Wood
F Purnamasidi
P Hay
J Gooding
F Murdoch
Year ended
31 Dec 2018
Directors
D Wood
C Bain*
F Purnamasidi
P Hay
J Gooding**
F Murdoch**
* Resigned 30 June 2018
** Appointed 12 June 2018
# There are no long service leave nor annual leave entitlements to be included in post-employment benefits for any of the
directors and executives as none are entitled.
G. Cash bonuses
There were no cash bonuses granted in relation to the 2019 or 2018 financial year to any KMP.
H. Options granted as part of remuneration
No options were granted to key management personnel as compensation during the reporting period.
I. Equity instruments issued on exercise of remuneration options
There were no equity instruments issued during the period to key management personnel as a result
of options exercised that had previously been granted as compensation.
J. Option holdings of directors and key management personnel
No share options were held by any director or key management personnel at any time during the
current or prior year.
22
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
REMUNERATION REPORT (AUDITED) (CONTINUED)
K. Shareholdings of directors and key management personnel
31 December 2019
Balance 1
January 2019
Granted as
Remuneration
Entitlement
Offer
On Market
Purchases
Balance 31
December 2019
Directors
D Wood
F Purnamasidi
P Hay
J Gooding
F Murdoch
Total
22,601,709
565,790
2,118,191
-
30,000
25,315,690
4,000,000
-
-
-
-
4,000,000
3,362,713
34,210
264,773
-
3,750
3,665,446
300,000
-
-
10,000
38,000
348,000
30,264,422
600,000
2,382,964
10,000
71,750
33,329,136
No shares were held nominally at the end of the financial year.
All equity transactions with directors other than those arising from the exercise of remuneration
options have been entered into under terms and conditions no more favourable than those the entity
would have adopted if dealing at arm’s length.
L. Other transactions and balances with key management personnel
During the year, KGL engaged Core Metallurgy Pty Ltd to perform metallurgical test work on core
samples and provide a report on the optimum ore refining methodology for the Jervois project. Core
Metallurgy Pty Ltd is a director-related entity of Ms Fiona Murdoch. A total of $77,930 was accrued
during the current financial year (2018: nil). The services were provided on an arm’s length basis.
There were no other transactions with key management personnel (2018: nil). At year end, there
were no outstanding amounts receivable from or payable to key management personnel (2018: nil).
THIS IS THE END OF THE REMUNERATION REPORT (AUDITED)
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
KGL has entered into Deeds of Indemnity with the directors and the company secretary,
indemnifying them against certain liabilities and costs to the extent permitted by law.
KGL has also agreed to pay a premium in respect of a contract insuring the directors and officers
of KGL. Full details of the cover and premium are not disclosed in this report as the insurance policy
prohibits the disclosure.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to
bring proceedings on behalf of the Company, or to intervene in any proceedings to which the
Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part
of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the
Court under section 237 of the Corporations Act 2001.
EVENTS AFTER THE REPORTING PERIOD
No matters or circumstances have arisen since the end of the financial year which significantly
affected or may significantly affect the operations of the Group, the results of those operations, or
the state of affairs of the Group in future financial periods.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
The consolidated entity intends to continue its Jervois project development activities and to acquire
further suitable projects for exploration as opportunities arise.
23
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ REPORT (CONTINUED)
NON-AUDIT SERVICES
No amounts have been paid or are payable to the auditor for non-audit services provided during the
financial year, refer to Note 25 of the financial statements.
OFFICERS OF THE COMPANY WHO ARE FORMER AUDIT PARTNERS OF BDO
There are no officers of the Company who are former audit partners of BDO.
AUDITOR INDEPENDENCE
The auditor’s independence declaration as required under section 307C of the Corporations Act
2001, is set on page 26 of the financial report.
This report is made in accordance with a resolution of the directors.
On behalf of the Board,
Denis Wood
Chairman
Brisbane
Dated: 23 March 2020
24
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
COMPETENT PERSONS STATEMENT
The Jervois Resources information include at Table 1 on page 7 of the Directors’ report, were first
released to the market on 22/08/19 and complies with JORC 2012. The company confirms that it is
not aware of any new information or data that materially affects the information included in the
original market announcement and that all material assumptions and technical parameters
underpinning the estimates in the relevant market announcement continue to apply and have not
materially changed. The company confirms that the form and context in which the Competent
Person’s findings are presented have not been materially modified from the original market
announcement.
The following drill holes were originally reported on the date indicated and using the JORC code
specified in the table. Results reported under JORC 2004 have not been updated to comply with
JORC 2012 on the basis that the information has not materially changed since it was last reported.
Hole
J
KJD
KJD
KJCD
RJ
KJCD
KJCD
KJCD
KJCD
KJCD
KJD
KJD
KJCD
KJCD
KJCD
KJCD
KJCD
KJCD
KJCD
KJCD
KJD
KJCD
KJD
KJCD
KJCD
KJCD
KJCD
Date
originally
Reported
JORC
Reported
Under
Hole
Hole
Date
Date
originally
originally
Reported
Reported
JORC
JORC
Reported
Reported
Under
Under
15
17/05/2011
216
223
234
236
309
312
315
317
344
25/09/2017
12/12/2017
13/04/2018
2/10/2012
23/01/2019
26/02/2019
26/02/2019
26/04/2019
9/09/2019
346W1
09/09/19
350
352
09/09/19
09/09/2019
354X
17/10/2019
355
356
357
358
359
362
363
364
365
368
369
373
374
17/10/2019
17/10/2019
17/10/2019
17/10/2019
17/10/2019
17/10/2019
17/10/2019
17/10/2019
17/10/2019
12/11/2019
12/11/2019
12/11/2019
12/11/2019
2004
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
KJCD
KJCD
KJD
KJD
KJD
KJD
KJD
KJD
KJCD
KJD
KJCD
RJ
KJD
RJ
KJCD
KJCD
KJCD
KJD
KJD
KJD
KJD
KJD
KJD
KJD
KJD
KJD
375
376
377
378
382
383
385
388
395
396
397
12/11/2019
12/11/2019
12/11/2019
12/11/2019
12/11/2019
12/11/2019
12/11/2019
12/11/2019
04/12/2019
12/11/2019
04/12/2019
204W1
16/08/2012
220W1
12/12/2017
237W1
28/05/2014
241W1
26/02/2018
284D2
18/11/2019
312D1
26/02/3019
398
399
400
401
402
411
413
414
415
17/03/2020
17/03/2020
17/03/2020
17/03/2020
17/03/2020
17/03/2020
17/03/2020
17/03/2020
17/03/2020
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2004
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
25
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
AUDITOR'S INDEPENDENCE DECLARATION
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
DECLARATION OF INDEPENDENCE BY T R MANN TO THE DIRECTORS OF KGL RESOURCES LIMITED
As lead auditor of KGL Resources Limited for the year ended 31 December 2019, 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 KGL Resources Limited and the entities it controlled during the year.
T R Mann
Director
BDO Audit Pty Ltd
Brisbane, 23 March 2020
BDO Audit Pty Ltd ABN 33 134 022 870 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 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.
26
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
Revenue and other revenue
Employee benefits expense
Depreciation and amortisation expense
Professional and consultancy fees expense
Corporate overheads expense
Investor relations expense
Finance expense
Other expenses
Loss before income tax
Income tax benefit
Net profit / (loss) for the year
Other comprehensive income, net of tax
Total comprehensive income for the year
Note
3
4(b)
4(a)
4(c)
5
Consolidated
2018
$
2019
$
166,071
(1,807,453)
(50,758)
(275,010)
(122,072)
(54,025)
(7,634)
(177,496)
(2,328,377)
-
(2,328,377)
292,105
(817,249)
(12,414)
(289,230)
(168,860)
(85,990)
-
(147,440)
(1,229,078)
-
(1,229,078)
-
-
(2,328,377)
(1,229,078)
Loss per share for profit / (loss) from attributable to the
owners of KGL Resources Limited
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
6
6
(0.83)
(0.83)
(0.50)
(0.50)
This financial statement should be read in conjunction with the accompanying notes.
27
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2019
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets
Prepayments
Total current assets
Non-current assets
Financial assets
Property, plant and equipment
Exploration and evaluation assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Total current liabilities
Non-current liabilities
Lease liabilities
Total non-current assets
Total liabilities
Net assets
Equity
Contributed equity
Accumulated losses
Total equity
Note
7
9
10
10
11
12
13
15
16
18
17
Consolidated
2018
$
2019
$
6,726,255
171,668
476,644
104,200
7,478,767
576,202
286,623
10,169,966
104,822
11,137,613
227,996
322,357
60,140,470
5,350
60,696,173
204,979
222,798
46,253,894
13,375
46,695,046
68,174,940
57,832,659
726,465
110,933
837,398
1,575,497
-
1,575,497
71,663
71,663
909,061
-
-
1,575,497
67,265,879
56,257,162
186,537,883
(119,272,004)
67,265,879
173,200,789
(116,943,627)
56,257,162
This financial statement should be read in conjunction with the accompanying notes.
28
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2019
Cash flows from operating activities
Receipts in the course of operations
Payments to suppliers and employees
Interest received
Consolidated
Note
2019
$
2018
$
1,323,574
(2,782,591)
192,193
1,181,503
(2,791,668)
296,094
Net cash used in operating activities
8(a)
(1,266,824)
(1,314,070)
Cash flows from investing activities
Payment for exploration and evaluation assets
Payment for property, plant and equipment
Movement in financial assets
(14,464,953)
(13,308,290)
(32,957)
(167,492)
9,670,305
(1,763,906)
Net cash provided by / (used in) investing activities
(4,827,605)
(15,239,688)
Cash flows from financing activities
Proceed from issue of shares
Payment of share issue costs
Lease repayments – net of finance costs
Finance costs – leases
12,446,195
13,121,502
8(d)
8(d)
(74,101)
(120,029)
(7,583)
-
-
-
Net cash provided by / (used in) financing activities
12,244,482
13,121,502
Net increase/ (decrease) in cash and cash
equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
7
6,150,053
(3,432,256)
576,202
6,726,255
4,008,458
576,202
This financial statement should be read in conjunction with the accompanying notes.
29
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 052 658 080
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2019
Consolidated
Contributed
equity
$
Accumulated
losses
$
Total equity
$
Balance at 1 January 2019
173,200,789
(116,943,627)
56,257,162
Loss for the year
Other comprehensive income, net of tax
Total comprehensive income for the year
-
-
-
(2,328,377)
(2,328,377)
-
-
(2,328,377)
(2,328,377)
Transactions with owners in their capacity as
owners
Issue of share capital (net of costs)
13,337,094
-
13,337,094
Balance at 31 December 2019
186,537,883
(119,272,004)
67,265,879
Consolidated
Contributed
equity
$
Accumulated
losses
$
Total equity
$
Balance at 1 January 2018
160,079,287
(115,714,549)
44,364,738
Loss for the year
Other comprehensive income, net of tax
Total comprehensive income for the year
-
-
-
(1,229,078)
(1,229,078)
-
-
(1,229,078)
(1,229,078)
Transactions with owners in their capacity as
owners
Issue of share capital (net of costs)
13,121,502
-
13,121,502
Balance at 31 December 2018
173,200,789
(116,943,627)
56,257,162
This financial statement should be read in conjunction with the accompanying notes.
30
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 052 658 080
About this report
The financial statements of KGL Resources Limited for the year ended 31 December 2019 covers the
Consolidated Entity consisting of KGL Resources Limited and its controlled entities (together referred to as the
“Group”) as required by the Corporations Act 2001.
The registered office and principal place of business is Level 7, 167 Eagle Street, Brisbane, Queensland, 4000,
Australia.
The financial statements are presented in the Australian currency.
KGL Resources Limited is a Public Company, incorporated and domiciled in Australia.
The principal activity of the Group during the year was exploration and development of the Jervois multi-metal
project in the Northern Territory.
There have been no significant changes in the nature of these activities during the period.
The consolidated general-purpose financial report of the Group for the year ended 31 December 2019 was
authorised for issue in accordance with a resolution of the directors on 23 March 2020. The Directors have the
power to amend and reissue the financial report. The financial report is a general-purpose financial report which:
-
-
-
has been prepared in accordance with the requirements of the Corporations Act 2001, Australian
Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards
Board (AASB) and International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board;
adopts all new and amended Accounting Standards and Interpretations issued by the AASB and IFRS
that are relevant to the operations of the Group and effective for reporting periods beginning on or after
1 January 2019. Refer to Note 30 for further details; and
does not early adopt any Australian Accounting Standards and Interpretations that have been issued or
amended but are not yet effective. Refer to Note 29 for details on standards not early adopted.
The financial statements have been prepared on a historical cost basis. The entity is a for-profit entity for the
purposes of Australian Accounting Standards.
Key judgements and estimates
In the process of applying the Group’s accounting policies, management has made a number of judgements
and applied estimates of future events. Judgements and estimates which are material to the financial report are
found in the following notes:
Note 5: Income taxes
Note 12: Exploration and evaluation costs
Note 23: Leases
Page 34
Page 39
Page 49
Basis of consolidation
Subsidiaries are all those entities over which KGL has control. The Group controls an entity when the Group is
exposed, or has the 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 of the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
All intercompany balances and transactions, including unrealised profits arising from intragroup transactions
have been eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the
impairment of the asset transferred. The financial statements of subsidiaries are prepared for the same reporting
period as the parent, using consistent accounting policies.
31
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
1. Going Concern
The financial report has been prepared on the going concern basis, which contemplates continuity of normal
business activities and the realisation of assets and settlement of liabilities in the normal course of business.
As disclosed in the financial report, the consolidated entity incurred a net loss of $2,328,377 and net operating
cash outflows of $1,266,824 for the period ended 31 December 2019. As at 31 December 2019 the consolidated
entity has Cash of $6,726,255 and current Term Deposits of $476,644.
The ability of the consolidated entity to continue as a going concern is principally dependent upon one or more
of the following:
-
-
the ability of KGL to raise capital as and when necessary; and/or
the successful exploration and subsequent exploitation of the consolidated entity’s tenements.
These conditions give rise to material uncertainty which may cast significant doubt over the consolidated entity’s
ability to continue as a going concern.
The Directors believe that the going concern basis of preparation is appropriate due to the following reasons:
-
-
the consolidated entity has a proven history of successfully raising funds which included raising of
$12,446,195 through completion of both a share placement and an entitlement offer in 2019; and,
the Directors believe there is sufficient cash available for the consolidated entity to continue operating
until it can raise further capital to fund its ongoing activities.
Should the consolidated entity be unable to continue as a going concern, it may be required to realise its assets
and extinguish its liabilities other than in the ordinary course of business, and at amounts that differ from those
stated in the financial report.
This financial report does not include any adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts or classification of liabilities and appropriate disclosures that may be necessary
should the consolidated entity be unable to continue as a going concern.
Other accounting policies
Significant and other accounting policies that summarise the measurement basis used and are relevant to an
understanding of the financial statements are provided throughout the notes to the financial statements.
The notes to the financial statements
The notes include information which is required to understand the financial statements and is material and
relevant to the operations, financial position and performance of the Group. Information is considered relevant
and material if for example:
-
-
-
-
the amount in question is significant because of its size or nature;
it is important for understanding the results of the Group;
it helps to explain the impact of significant changes in the Group’s business for example, acquisitions
and impairment write-downs; or
it is related to an aspect of the Group’s operations that is important to its future performance.
2. Segment information
The Group identifies only one operating segment, based on the internal reports that are reviewed and used by
the Board of Directors (chief operating decision makers) in assessing performance and determining the
allocation of resources. The Group does not yet have any products or services from which it derives an income.
Accordingly, management currently identifies the Group as having only one reportable segment, being
exploration at the Jervois site in the Northern Territory. The financial results from this segment are equivalent to
the financial statements of the Group.
All assets are located in Australia.
32
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
3. Revenue and Other Revenue
Other revenue
Interest revenue – third parties
Total other revenue
Total revenue and other revenue
Recognition and measurement
Interest
Notes
Consolidated
2018
$
2019
$
166,071
166,071
292,105
292,105
166,071
292,105
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset’s net carrying amount.
All revenue is stated net of the amount of goods and services tax (GST).
4. Expenses
(a) Head office facilities overheads expense
Rental expense – minimum lease payments
Expenses relating to leases of low-value assets
Other expenses
(b)
Employee benefits expense
Salaries, wages, and related costs
Directors’ Fees (excluding superannuation)
Share based payments expense
Redundancy
Superannuation contributions (defined contribution)
(c)
Finance cost expense
Interest on lease liabilities
Other interest paid
Consolidated
2018
$
2019
$
-
21,749
100,323
122,072
418,932
236,250
1,000,000
94,380
57,891
1,807,453
7,583
51
7,634
66,537
-
102,323
168,860
418,586
217,977
-
118,708
61,978
817,249
-
-
-
Recognition and measurement
Post-employment benefits plans – defined contribution plans
The Group provides post-employment benefits through defined contribution plans.
The Group pays fixed contributions into independent entities in relation to several state plans and
insurance for individual employees. The Group has no legal or constructive obligations to pay
contributions in addition to its fixed contributions, which are recognised as an expense in the period that
relevant employee services are received.
33
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
5. Income Taxes
(a) The components of tax expenses comprise
Consolidated
2018
$
2019
$
Deferred tax arising from origination and reversal of temporary differences
Total income tax expense in profit and loss
-
-
-
-
(b) Reconciliation prima facie income tax on the loss is reconciled to the
income tax expense as follows:
Profit / (loss) before income tax
Prima facie tax benefit on loss before income tax at 27.5%
Effect of expenses that are not deductible in determining taxable profit or loss
Deferred tax assets arising from temporary differences not recognised
Income tax benefit attributable to the Group
(c) Unrecognised deferred tax assets
Prior year tax losses brought forward - gross
Total losses recognised - gross
Current year tax losses - gross
Unrecognised tax losses - gross
(2,328,377)
(1,229,078)
(640,304)
275,000
365,304
-
(337,996)
21
337,975
-
133,513,008 118,467,643
(60,042,977) (46,050,612)
15,320,183 15,045,365
88,790,214 87,462,396
Deferred tax assets not taken up – at 27.5%
24,417,309 24,052,159
Key Judgements
This future income tax benefit will only be obtained if:
(i)
(ii)
(iii)
future assessable income is derived of a nature and of an amount sufficient to enable the benefit to
be realised;
the conditions for deductibility imposed by tax legislation continue to be complied with; and
no changes in tax legislation adversely affect the Group in realising the benefit.
(d) Recognised net deferred tax assets
Deferred tax liabilities
Exploration and prospecting
Deferred tax assets
Tax losses
Provisions/accruals
Net deferred tax asset recognised
(e) Franking credits
There are no franking credits available.
34
(16,538,629) (12,719,821)
(16,538,629) (12,719,821)
16,511,818
26,811
16,538,629
12,663,918
55,903
12,719,821
-
-
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
5.
Income Taxes (continued)
Recognition and measurement
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 profit or loss is the tax payable on taxable income. Current tax
liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant
taxation authority using tax rates (and tax laws) that have been enacted or substantively enacted by the
end of the reporting period.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances
during the year as well unused tax losses.
Current and deferred income tax expense (income) is charged or credited outside profit or loss when the
tax relates to items that are recognised outside profit or loss. Except for business combinations, no
deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect
on accounting or taxable profit or loss.
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 substantively 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.
Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred
tax assets and liabilities relate 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.
The Group has not adopted the tax consolidation legislation.
6. Loss Per Share
Loss attributable to the owners of KGL Resources Limited:
Loss from continuing operations
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
Weighted average number of ordinary shares used in the calculation of
basic and diluted loss per share
35
2019
$
Consolidated
2018
$
(2,328,377)
(2,328,377)
(1,229,078)
(1,229,078)
Cents
per/share
Cents
per/share
(0.83)
(0.83)
(0.83)
(0.83)
(0.50)
(0.50)
(0.50)
(0.50)
# Shares
# Shares
279,834,473
245,836,397
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
6. Loss Per Share (continued)
At 31 December 2019, KGL had no options (2018: nil options) over unissued shares and has incurred a
net loss.
Basic EPS is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity
(other than dividends) and preference share dividends, divided by the weighted average number of
ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members, adjusted for:
- Costs of servicing equity (other than dividends) and preference share dividends
- The after-tax effect of dividends and interest associated with dilutive potential ordinary shares that have
been recognised as expenses
- Other non-discretionary changes in revenues or expenses during the period that would result from the
dilution of potential ordinary shares
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted
for any bonus element.
7.
Cash and cash equivalents
Cash at bank
Term deposits with short term maturity
Consolidated
2018
$
2019
$
3,626,255
3,100,000
6,726,255
576,202
-
576,202
Cash at bank bear floating interest rates between 0.01% and 1.00% (2018: 0% and 1.00%).
Term deposits bear fixed interest rates between 1.35% and 1.99%.
Reconciliation of Cash
The above figures are the cash at the end of the financial period as shown in the consolidated statement
of cashflows
Recognition and measurement
For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents includes cash
on hand and at bank, deposits held at call with financial institutions, other short term, highly liquid
investments with original maturities of three months or less, that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
8. Cash flow information
(a) Reconciliation of loss after tax to net cash flows from operations
2019
Consolidated
2018
$
$
Net loss for the year
(2,328,377)
(1,229,078)
Non-cash flows in loss:
Depreciation and amortisation expense
Share based payments expense
Change in operating assets and liabilities:
(Increase)/Decrease in receivables
(Increase)/Decrease in payables for exploration and evaluation assets
(classified as investing activity)
(Increase)/Decrease in prepayments
Increase/(Decrease) in payables
Net cash used by operating activities
50,758
1,000,000
12,414
-
114,955
(186,928)
737,439
(555,006)
622
(842,221)
(1,266,824)
(19,928)
664,156
(1,314,070)
36
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
8. Cash flow information (continued)
(b)
Facilities with banks
There are no borrowing facilities at reporting date (2018: Nil).
(c) Non-cash financing and investing activities
In June 2019 the Company issued 4,000,000 shares to KMP which were valued of $1,000,000. No cash
was received for the issue of these shares. There were no other non-cash financing and investing activities
in the current or prior year.
(d) Cash and Non-Cash Movements in Liabilities arising from Financing Activities
The following table reconciles the cash and non-cash movements in liabilities arising from financing
activities.
Borrowings
Lease liabilities
2018
Net cash
flows
Adoption of
AASB 16
Non-cash changes
Acquisition of
leased assets
Interest
expense
2019
-
-
(127,612)
(127,612)
225,252
225,252
77,373
77,373
7,583
7,583
182,596
182,596
9.
Trade and other receivables
GST receivable (net)
Other receivables
2019
$
132,881
38,787
171,668
Consolidated
2018
$
260,496
26,127
286,623
Other receivables are non-interest bearing and have repayment terms up to thirty days.
10. Financial assets
Current
Term Deposits
Non-current
Security Deposits
2019
$
Consolidated
2018
$
476,644
476,644
10,169,966
10,169,966
227,996
227,996
204,979
204,979
Rolling one-year interest bearing term deposits to support environmental bank guarantees with the
department of mines and other guarantees. Security deposits and guarantees of $505,452 (2018:
$204,979) have been provided to the Department of Mines and other suppliers.
37
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
11. Property, plant and equipment
Plant and Equipment
Cost
Accumulated depreciation
Net carrying amount
Right of Use Asset
Cost
Accumulated depreciation
Net carrying amount
Total property, plant and equipment
Right-to-use assets
Consolidated
2018
$
2019
$
468,802
(328,482)
803,706
(580,908)
140,320
222,798
275,370
(93,333)
182,037
-
-
-
322,357
222,798
Refer to Note 30 for details on the recognition of this class of asset and the adoption of AASB 16 Leases.
The Group has determined that it has one class of right-to-use assets those relating to equipment and
property. Comparatives have not been updated to reflect the new policy as the Group has adopted this
new standard using the modified retrospective method.
Recognition and measurement
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated
depreciation and accumulated impairment losses. The carrying amount of property, plant and equipment
is reviewed to ensure it is not in excess of the recoverable amount from these assets.
The depreciable amount of all fixed assets, excluding freehold land, is depreciated on a straight line or
declining balance basis to allocate their cost, net of their residual values, over their estimated useful lives
to the Group commencing from the time the asset is held ready for use. For plant and equipment, the
useful life is 3-10 years.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting
date.
Movements in carrying amount
2019
Balance at the beginning of the year
Adoption of AASB 16 at 1 January 2019
Additions
Depreciation
Disposals
Plant and
Equipment
Right of Use
Asset
222,798
-
78,729
(142,342)
(18,865)
-
225,252
77,373
(120,588)
-
Total
222,798
225,252
156,102
(262,930)
(18,865)
Carrying amount at the end of the year
140,320
182,037
322,357
2018
Balance at the beginning of the year
Additions
Depreciation
Carrying amount at the end of the year
66,785
164,414
(8,401)
222,798
-
-
-
-
66,785
164,414
(8,401)
222,798
38
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
12. Exploration and evaluation assets
2019
$
Consolidated
2018
$
Deferred exploration and evaluation assets
60,140,470
46,253,894
Deferred exploration and evaluation assets
Balance at beginning of the year
Current year expenditure
Balance at end of the year
46,253,894
13,886,576
60,140,470
32,387,075
13,866,819
46,253,894
Ultimate recovery of the exploration and evaluation assets is dependent upon successful development
and commercial exploitation, or alternatively, sale of the respective areas of interest.
Recognition and measurement
The Group applies AASB 6 Exploration for and Evaluation of Mineral Resources. Exploration and
evaluation 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 which permits
reasonable assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against operating results 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 transferred to
mine development and 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.
Where incidental income and other Research and Development grants are received that relate to
capitalised exploration and evaluation expenditure, these amounts are offset against the amounts
capitalised.
Key estimates and judgements
The directors determine when an area of interest should be abandoned. When a decision is made that an
area of interest is not commercially viable, all costs that have been capitalised in respect of that area of
interest are written off. The directors’ decisions are made after considering the likelihood of finding
commercially viable outcomes balanced with acceptable political and environmental assessment. No
tenements were abandoned in the current year.
Given KGL is in the process of determining the economic viability of a potential mine through its definitive
feasibility study, the directors’ believe that the Jervois project is still in the exploration phase of
development.
13. Intangible assets
Software at cost
Accumulated amortisation and impairment
Net carrying amount
Recognition and measurement
2019
$
Consolidated
2018
$
83,555
(78,205)
5,350
322,227
(308,852)
13,375
Items of computer software which are not integral to the computer hardware owned by the Group are
classified as intangible assets with a finite life. Computer software is amortised on a straight-line basis
over the expected useful life of the software being 3 years.
Movements in carrying amount
At 1 January, net of accumulated depreciation
Amortisation
At 31 December, net of accumulated depreciation
39
$
13,375
(8,025)
5,350
$
17,833
(4,458)
13,375
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
14. Interests in other entities
Subsidiaries
The subsidiaries listed below have share capital consisting solely of ordinary shares, which are held directly
by the Group. The proportion of ownership interests held equals the voting rights held by Group.
Information relating to the group’s interests in principal subsidiaries at 31 December 2019 is set out below.
Name
Jinka Minerals Ltd
Country of
Incorporation
Australia
Kentor Minerals (Aust) Pty Ltd
Australia
Kentor Minerals (NT) Pty Ltd
Australia
Kentor Minerals (WA) Pty Ltd
Australia
Kentor Energy Pty Ltd
Australia
2019
% Held
2018
% Held
100
100
100
100
100
100
100
100
100
100
Different reporting dates
Jinka Minerals Ltd has a reporting date of 30 June 2019. This entity is an unlisted public company and had
this reporting date when it was acquired in 2011. The reporting date has not been changed to coincide with
the remainder of the group since acquisition.
15. Trade and other payables
Trade payables
Employee benefits
Recognition and measurement
Trade and other payables
Consolidated
2018
2019
$
$
543,623
182,842
726,465
1,374,903
200,594
1,575,497
Trade and other payables represent liabilities for goods and services provided to the Group prior to the
year end and which are unpaid. These amounts are unsecured and have 7 to 30-day payment terms.
They are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method. No assets of the Group have been pledged as security for the trade and other payables.
Short-term employee benefits
Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee
benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12
months after the end of the annual reporting period in which the employees render the related service,
including wages, salaries and sick leave. Short-term employee benefits are measured at the
(undiscounted) amounts expected to be paid when the obligation is settled.
40
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
16. Lease liabilities
Current
Lease liabilities
Non-current
Lease liabilities
Lease liabilities
2019
$
Consolidated
2018
$
110,933
110,933
71,663
71,663
-
-
-
-
Lease liabilities have been recognised for the first time with regards to right-to-use assets relating to
property. Under AASB 117 lease liabilities were historically recognised on the finance-leased assets only.
Given the Group has used the modified retrospective method of adopting the new AASB 16 leases
standard the comparatives have not been amended to reflect the accounting policy under AASB 117.
Refer to Note 30 for further details.
17. Contributed equity
(a) Issued and paid up capital
Ordinary shares fully paid
Recognition and Measurement
2019
$
Consolidated
2018
$
186,537,883
173,200,789
Issued and paid up capital is recognised at the fair value of the consideration received by the Group.
Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction
of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that
are incurred directly in connection with the issue of those equity instruments and which would not have
been incurred had those instruments not been issued.
(b) Movements in shares on issue
Details
Beginning of the financial year
Shares issued in 2018
Share placement – Mar 2019
Shares granted as remuneration –
Jun 2019
Entitlement offer – Nov 2019
Share issue costs
Closing balance
2019
Number of
shares issued
2018
Issued
capital
$
Number of
shares issued
Issued
capital
$
260,298,421
-
21,666,666
173,200,789
-
6,500,000
226,205,484
34,092,937
-
160,079,287
13,179,400
-
4,000,000
1,000,000
25,853,016
-
5,946,195
(109,101)
-
-
-
-
-
(57,898)
311,818,103
186,537,883
260,298,421
173,200,789
(c) Terms and conditions of issued capital
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of winding up of KGL,
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. Ordinary shares entitle their holder to one vote, either in person or by
proxy, at a meeting of the Company.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
41
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
17. Contributed equity (continued)
(d) Share options
Options over ordinary shares
No options were granted, exercised or lapsed during the year (2018: nil). At the end of the financial year,
there were no options on issue unissued ordinary shares outstanding (2018: nil).
(e) Capital risk management
The capital structure of the Group consists of equity as disclosed in the statement of financial position.
Management controls the capital of the Group in order to generate long-term shareholder value,
maximising the return to shareholders and ensuring that the Group can fund its operations and continue
as a going concern.
There are no externally imposed capital requirements.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and
adjusting its capital structure in response to changes in these risks and in the market. These responses
include the management of debt levels, distributions to shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the Group
since the prior year.
18. Share based payments
The following share-based payment arrangements existed at 31 December 2019.
Share-based payments to Directors, executives and employees
Shares
During the year ended 31 December 2019, 4,000,000 shares were issued to Key Management Personnel
(KMP) in lieu of remuneration. These were issued for nil consideration. The share price at the date of
issued was $0.25. Therefore, the share-based payments expense for the year is $1,000,000.
There was no share-based payments expense for the year ended 31 December 2018.
Employee options
In the past, employee options were granted at the discretion of the Board based on a formal employee
review process. As at 31 December 2019 and 2018 there were no outstanding options.
Recognition and Measurement
Equity settled share-based payments with employees and directors are measured at the fair value of the
equity instrument at the grant date. Fair value is measured by use of a binomial model and/or monte carlo
simulation. The expected life used in the model has been adjusted, based on management’s best estimate,
for the effects of non-transferability, exercise restrictions, and behavioural considerations. The fair value
determined at the grant date of the share-based payments is expensed on a straight-line basis over the
vesting period with a corresponding increase in equity.
No expense is recognised for awards that do not ultimately vest because internal conditions were not met.
An expense is still recognised for options that do not ultimately vest because a market condition was not
met. Where options are cancelled, they are treated as if it had vested on the date of cancellation and any
unrecognised expenses are taken immediately to profit or loss. However, if new options are substituted
for the cancelled options and designated as a replacement on grant date, the combined impact of the
cancellation and replacement option are treated as if they were a modification.
Equity settled share-based payment transactions with other parties are measured at fair value of the goods
and services received, except where the fair value cannot be estimated reliably, in which case they are
measured at the fair value of the equity instruments granted, measured at the date goods or services were
obtained.
42
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
19. Financial assets and liabilities
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs,
except for those carried at fair value through profit or loss, which are measured initially at fair value.
Subsequent measurement of financial assets and financial liabilities are described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability
is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and subsequent measurement of financial assets
i)
Investments and other financial assets
Classification
The Group classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value (either through other comprehensive income (OCI),
or through profit or loss); and
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the
contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For
investments in equity instruments that are not held for trading, this will depend on whether the group has
made an irrevocable election at the time of initial recognition to account for the equity investment at fair
value through other comprehensive income (FVOCI).
The group reclassifies debt investments when and only when its business model for managing those assets
changes.
Measurement
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial
asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in
profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether
their cash flows are solely payment of principal and interest.
ii) Debt instruments
Subsequent measurement of debt instruments depends on the group’s business model for managing
the asset and the cash flow characteristics of the asset. There are three measurement categories into
which the group classifies its debt instruments:
- Amortised cost: Assets that are held for collection of contractual cash flows where those cash
flows represent solely payments of principal and interest are measured at amortised cost.
Interest income from these financial assets is included in finance income using the effective
interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or
loss and presented in other gains/(losses), together with foreign exchange gains and losses.
Impairment losses are presented as separate line item in the statement of profit or loss.
43
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
19. Financial assets and liabilities (continued)
Classification and subsequent measurement of financial assets (continued)
ii) Debt instruments (continued)
- FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial
assets, where the assets’ cash flows represent solely payments of principal and interest, are
measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the
recognition of impairment gains or losses, interest revenue and foreign exchange gains and
losses which are recognised in profit or loss.
When the financial asset is derecognised, the cumulative gain or loss previously recognised in
OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest
income from these financial assets is included in finance income using the effective interest rate
method. Foreign exchange gains and losses are presented in other gains/(losses) and
impairment expenses are presented as separate line item in the statement of profit or loss.
- FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL.
A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in
profit or loss and presented net within other gains/(losses) in the period in which it arises.
Impairment
The Group assesses, on a forward-looking basis, the expected credit losses associated with its debt
instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on
whether there has been a significant increase in credit risk.
For trade receivables, the group applies the simplified approach permitted by AASB 9, which requires
expected lifetime losses to be recognised from initial recognition of the receivables.
Classification and subsequent measurement of financial liabilities
The Group’s financial liabilities include lease liabilities and trade and other payables.
Financial liabilities are measured subsequently at amortised cost using the effective interest method.
Categories of financial instruments
Financial assets at amortised cost
Cash and cash equivalents
Term deposits
Trade and other receivables
Total financial assets
Financial liabilities measured at amortised cost
Trade and other payables
Lease liabilities
Total financial liabilities
Consolidated
2018
$
2019
$
6,726,255
576,202
704,640 10,374,945
286,623
171,668
7,602,563 11,237,770
(543,623)
(182,596)
(726,219)
(1,374,903)
-
(1,374,903)
44
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
19. Financial assets and liabilities (continued)
Other financial instruments
The carrying amount of the following financial assets and liabilities is considered a reasonable
approximation of fair value:
-
-
-
-
trade and other receivables
cash and cash equivalents
trade and other payables
lease liabilities
20. Financial risk management
(a) Financial risk management objectives and policies
Management monitors and manages the financial risks relating to the operations of the Group through
regular reviews of the risks. These risks include market risk (including interest rate risk, foreign currency
risk and commodity price risk), credit risk, and liquidity risk.
The primary responsibility for identification and control of financial risks rests with the Board. The Group’s
financial and commodity risk management program supports the achievement of the Group’s objectives
by enabling the identification and evaluation of risks, setting acceptable risk thresholds, identifying and
mapping controls against these risks and implementing policies and procedures to manage and monitor
the risks.
These written policies establish the financial and commodity risk management framework and define the
procedures and controls for the effective management of the Group’s risks that arise through the Group’s
current exploration and development activities and those risks which may arise through other mining
activities in the future.
The policy ensures all financial and commodity risks are fully recognised and treated in a manner
consistent with:
- The Board’s management philosophy;
- Commonly accepted industry practice and corporate governance; and
- Shareholders expectations of becoming a gold and copper producer.
The policies are reviewed by the Board annually, at a minimum, as the Group’s financial and commodity
risks are likely to change over time. There have been no substantive changes in the Group’s exposure to
financial instrument risks, its objectives, policies and processes for managing those risks or the methods
used to measure them from the previous period.
The Group’s principal financial instruments comprise cash at bank, trade and other receivables, trade and
other payables and borrowings.
Exposure limits are reviewed by management on a continuous basis. The Group does not enter into or
trade financial instruments for speculative purposes.
(b) Credit risk exposures
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial
loss to the Group. Credit risk arises principally from cash on deposit and trade and other receivables.
The objective of the Group is to minimize risk of loss from credit risk exposure.
The maximum exposure to credit risk, excluding the value of any collateral or other security at reporting
date, is the carrying amount of those assets, net of any impairment, as disclosed in the statement of
financial position and notes to the financial statements.
In the 2019 and 2018 years there are no concentration of credit risk in trade and other receivables as the
Group did not have customers at year end.
At year end the Group has two material exposures of $317,173 (2018: $447,712) to National Australia
Bank Limited and $6,885,726 (2018: $10,294,814) to ANZ relating to funds on deposit and cash at bank.
The Group manages its credit risk associated with funds on deposit and cash at bank by only dealing with
reputable financial institutions.
45
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
20. Financial risk management (continued)
(c) Liquidity risk
Liquidity risk is the risk that the entity will not be able to meet its financial obligations as they fall due.
The objective of managing liquidity risk is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when they fall due.
Working capital primarily comprises of cash. The Group has established a number of policies and
processes for managing liquidity risk:
- Monitoring actual against budgeted cashflows;
- Regularly forecasting long term cashflows and stress testing; and
- Regularly monitoring the availability of equity capital and current market conditions.
Maturity Analysis
The table shows the periods in which the financial liabilities mature. Contractual cash flows shown in
the table are at undiscounted values (including future interest expected to be paid). Accordingly, these
values may not agree to the carrying amount.
CONSOLIDATED
2019
Financial liabilities
Trade and other payables
Lease liabilities
2018
Financial liabilities
Trade and other payables
(d) Market risk
<12 Months
$
1-5 Years
$
>5 years
$
Total
cashflows
$
Carrying
amount
$
(543,623)
(115,967)
(659,590)
-
(78,885)
(78,885)
(1,374,903)
(1,374,903)
-
-
-
-
-
-
-
(543,623)
(194,852)
(738,475)
(543,623)
(182,596)
(726,219)
(1,374,903)
(1,374,903)
(1,374,903)
(1,374,903)
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in commodity prices (commodity price risk); foreign exchange rates (foreign currency risk) or
interest rates (interest rate risk).
The objective of market risk management is to manage and control risk exposure within acceptable
parameters whilst optimising returns.
It is the policy of the Group to manage the foreign currency risk on highly probable forecast capital
expenditure by utilising foreign currency hedging where appropriate.
At the end of the reporting periods for 2019 and 2018 there was no foreign currency that was being held
as a hedging instrument.
The Group has no exposure to foreign currency risk at reporting date.
46
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
20. Financial risk management (continued)
(d) Market risk (continued)
Interest rate risk
The Group has established a number of policies and processes for managing interest rate risk. These include monitoring risk exposure continuously and utilising fixed
rate facilities where required.
The Group’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and liabilities is set out in the following table:
CONSOLIDATED
Weighted average
interest rate
Floating
interest rate
Fixed interest maturing in:
1 year or less
$
over 1 to 5 years
$
5 years or more
$
$
0.71%
2.03%
N/A
N/A
5.31%
3,626,255
-
-
3,626,255
3,100,000
476,644
-
3,576,644
-
-
-
-
-
-
-
-
-
-
-
(182,596)
(182,596)
-
-
-
-
-
-
-
Weighted average
interest rate
Floating
interest rate
Fixed interest maturing in:
1 year or less
$
over 1 to 5 years
$
5 years or more
$
$
Non-interest
bearing
$
-
227,996
171,668
399,664
(543,623)
-
(543,623)
Non-interest
bearing
$
Total
$
6,726,255
704,640
171,668
7,602,563
(543,623)
(182,596)
(726,219)
Total
$
2019
Financial assets
Cash and cash equivalents
Term deposits
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Lease liabilities
Total financial liabilities
CONSOLIDATED
2018
Financial assets
Cash and cash equivalents
Deposits
Trade and other receivables
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
0.49%
2.19%
N/A
N/A
572,559
-
-
572,559
-
10,169,966
-
10,169,966
-
-
-
-
47
-
-
-
-
-
-
-
-
-
-
-
-
3,643
204,979
286,623
495,245
576,202
10,374,945
286,623
11,237,770
(1,374,903)
(1,374,903)
(1,374,903)
(1,374,903)
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
20. Financial risk management (continued)
(d) Market risk (continued)
Interest rate risk (continued)
The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting
date. At 31 December 2019, if interest rates had moved, as illustrated in the table below, with all other
variables held constant, net loss and other comprehensive income would have been affected as follows:
CONSOLIDATED
+0.5% (50 basis points)
-0.5% (50 basis points)
21. Fair value measurement
Net loss
Higher/(Lower)
2019
$
40,904
(40,904)
2018
$
66,691
(66,691)
Other comprehensive income
Higher/(Lower)
2019
$
2018
$
-
-
-
-
Due to their short-term nature the net fair values of financial assets and liabilities approximate their carrying
value as disclosed in the statement of financial position. No financial assets or liabilities are readily traded
on organised markets in standardised form.
Recognition and measurement
Fair values may be used for asset and liability measurement as well as for sundry disclosures.
Fair value is 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. It is based on the presumption that the
transaction takes place either in the principal market for the asset or liability or, in the absence of a principal
market, in the most advantageous market. The principal or most advantageous market must be accessible
to, or by, the group.
Fair value is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their best economic interest.
The fair value measurement of a non-financial asset takes into account the market participant's ability to
generate economic benefits by using the asset at its highest and best use or by selling it to another market
participant that would use the asset at its highest and best use.
In measuring fair value, the group uses valuation techniques that maximise the use of observable inputs and
minimise the use of unobservable inputs.
22. Commitments
Capital expenditure commitments – exploration and evaluation assets
No longer than 1 year
Between 1 and 5 years
Greater than 5 years
Consolidated
2018
$
2019
$
67,792
6,583
-
74,375
112,050
21,667
-
133,717
There are capital and rental commitments on tenements ranging from $4,000 to $40,000 per annum with
expiry terms of between 1 to 2 years.
Non-cancellable rental commitments - tenements
Commitments for rental payments in relation to tenements are payable as
follows:
No longer than 1 year
Between 1 and 5 years
Greater than 5 years
72,719
166,080
233,373
472,172
83,367
148,665
60,329
292,361
Rental commitments comprise the tenement rentals at Jervois, Unca Creek and Yambah. The annual rental
commitments on these leases range from $956 to $30,440 per annum with expiry terms of between 1 to 12
years. AASB 16 does not apply to mining tenements.
48
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
23. Leases
(a) Real estate leases
The Group leases land and buildings for its office space. The lease of office space typically runs for a period
of 3 years. The lease does not include an option to renew the lease for an additional period after the end of
the contract term. There have been no significant extensions excluded from the lease liabilities.
(b) Equipment leases
The Group leases vehicles and equipment, with lease terms of two to five years. In some cases, the Group
has options to purchase the assets at the end of the contract term; in other cases, it guarantees the residual
value of the leased assets at the end of the contract term.
The Group monitors the use of these vehicles and equipment and reassesses the estimated amount payable
under the residual value guarantees at the reporting date to remeasure lease liabilities and right-of-use
assets. As at 31 December 2019, the Group has nil amount payable under the residual guarantees.
(c) Short-term and low value asset leases
The amount of lease commitments for short-term and low value assets not recognised on balance sheet:
Low value assets payable:
- not later than 12 months
- between 12 months and 5 years
2019
$
3,544
6,203
9,747
Recognition and measurement - Policy applicable from 1 January 2019
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration. To assess whether a contract conveys the right to control the use of the
identified asset, the Group assesses whether:
-
-
-
the contract involves the use of an identified asset – this may be specified explicitly or implicitly and
should be physically distinct or represent substantially all of the capacity of a physically distinct
asset. If the supplier has a substantive substitution right, then the asset is not identified;
the Group has the right to obtain substantially all of the economic benefits from use of the asset
throughout the period of use; and
the Group has the right to direct the use of the asset. The Group has this right when it has the
decision-making rights that are most relevant to changing how and for what purpose the asset is
used. In rare cases where the decision about how and for what purpose the asset is used is
predetermined, the Group has the right to direct the use of the asset if either:
-
-
the Group has the right to operate the asset; or
the Group designed the asset in a way that predetermines how and for what purpose it will
be used.
This policy is applied to contracts entered into, or changed, on or after 1 January 2019.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of their relative stand-alone prices.
However, for the leases of land and buildings in which it is a lessee, the Group has elected not to separate
non-lease components and account for the lease and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-
of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus any initial direct costs incurred and
an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the
site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement
date to the earlier of the end of the useful life to the right-of-use or the end of the lease term. The estimated
useful lives of right-of-use assets are determined on the same basis as those of property and equipment. In
addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
49
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
23. Leases (continued)
Recognition and measurement - Policy applicable from 1 January 2019 (continued)
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing
rate as the discount rate.
Lease payments included in the measurement of the lease liability comprise the following:
-
-
fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as
at the commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Group is reasonably certain to exercise, lease
payments in an optional renewal period if the Group is reasonably curtained to exercise an extension
option, and penalties for early termination of a lease unless the Group is reasonably certain not to
terminate early.
-
-
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in the future lease payments arising from a change in an index or rate, if there is a change
in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the
Group changes its assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset
has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘property,
plant and equipment’ and lease liabilities in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognised right-of-use assets and lease liabilities for short-term leases of
equipment and leases of low-value assets, including IT equipment. The Group recognises the lease
payments associated with these leases as an expense on a straight-line basis over the lease term.
Recognition and measurement - Policy applicable before 1 January 2019
For contracts entered into before 1 January 2019, the Group determined whether the arrangement was or
contained a lease based on the assessment of whether:
-
-
fulfilment of the arrangement was dependent on the use of a specific asset or assets; and
the arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use the
asset if one of the following was met:
-
-
-
the purchaser had the ability or right to operate the asset while obtaining or controlling more than an
insignificant amount of the output;
the purchaser had the ability or right to control physical access to the asset while obtaining or
controlling more than an insignificant amount of the output; or
facts and circumstances indicated that it was remote that other parties would take more than an
insignificant amount of the output, the price per until was neither fixed per unit of output nor equal to
the current market price per unit of output.
In the comparative period, as a lessee the Group classified leases that transfer substantially all of the risks
and rewards of ownership as finance leases. When this was the case, the leased assets were measured
initially at an amount equal to the lower of their fair value and the present value of the minimum lease
payments. Minimum lease payments were the payments over the lease term that the lessee was required
to make, excluding any contingent rent.
Subsequently, the assets were accounted for in accordance with the accounting policy applicable to that
asset.
Assets held under other leases were classified as operating leases and were not recognised in the Group’s
statement of financial position. Payments made under operating leases were recognised in profit or loss on
a straight-line basis over the term of the lease. Lease incentives received were recognised as an integral
part of the total lease expense, on a straight-line basis over the term of the lease.
50
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
23. Leases (continued)
Key judgements and estimations
In determining both the right to use asset and the lease liability certain estimates and judgements were
made. These included the following:
- No impairments were identified as each of the right to use assets were allocated to a CGU and these
are impairment assessed based on value in use. No impairments to these CGU’s have been identified.
- The Group determined that the appropriate discount rate to calculate the right of use assets and liabilities
was the Group’s current incremental borrowing rate.
24. Related party transactions
Transactions between related parties are on normal commercial terms and conditions no more favourable
than those available to other parties unless otherwise stated.
Parent entity
The parent entity is KGL Resources Limited, which is incorporated in Australia.
Subsidiaries
Interests in subsidiaries are disclosed in Note 14: Interests in other entities.
Key management personnel
Information regarding the identity of Key Management Personnel and their compensation can be found in
the audited Remuneration Report contained in the Directors’ Report. The directors are the only key
management personnel.
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Share-based payments
Total key management personnel compensation
Consolidated
2018
2019
$
236,250
22,445
1,000,000
1,258,695
$
217,977
20,708
-
238,685
Detailed remuneration disclosures are provided in the remuneration report on pages 18 to 23. Note 18:
Share Based Payments expense sets out details around shares issued to KMP.
Other related party transactions
During the year, KGL engaged Core Metallurgy Pty Ltd to perform metallurgical test work on core samples
and provide a report optimum ore refining methodology. Core Metallurgy Pty Ltd is a director-related entity
of a Ms Fiona Murdoch. A total of $77,930 was accrued during the current financial year (2018: nil). The
services were provided at arm’s length pricing.
There were no other transactions with other related parties during the period.
25. Auditor’s remuneration
Amounts paid or payable to BDO Audit Pty Ltd for audit or
review of the financial statements of the entity and any other
entity in the Group
Consolidated
2019
$
2018
$
61,435
62,770
51
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
26. Contingent liabilities and contingent assets
There are no contingent assets as at 31 December 2019 and 2018.
During the year, KGL selected Macmahon Contractors to prepare a mine plan for Jervois, and this contract
designates Macmahon as the preferred mining contractor for the Jervois Project.
The contract contains several termination provisions, allowing KGL to select an alternative mining
contractor in exchange for a compensation payable to Macmahon $237,500.
27. Events after reporting date
No matters or circumstances have arisen since the end of the financial year which significantly affected or
may significantly affect the operations of the Group, the results of those operations, or the state of affairs
of the Group in future financial periods.
28. Parent entity information
The Corporations Act 2001 requirement to prepare parent entity financial statements where consolidated
financial statements are prepared has been removed and replaced by regulation 2M.3.01 which requires
the following limited disclosure in regard to the parent entity, KGL Resources Limited. The consolidated
financial statements incorporate the assets, liabilities and results of the parent entity in accordance with the
Group accounting policy. The financial information for the parent entity, KGL Resources Limited, has been
prepared on the same basis as the consolidated financial statements.
Parent entity
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Accumulated losses
Total shareholders’ equity
2019
$
2018
$
7,138,135
60,795,621
67,933,756
(361,693)
(24,364)
(386,057)
67,547,699
10,701,783
45,982,049
56,683,832
(210,024)
-
(210,024)
56,473,808
186,537,883
173,200,789
(118,990,184) (116,726,981)
56,473,808
67,547,699
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Guarantees
(2,263,203)
-
(2,263,203)
(1,195,697)
-
(1,195,697)
No guarantees have been entered into by the parent entity in relation to debts of its subsidiaries.
Contractual commitments
The parent entity has no capital commitments.
Contingent liabilities
The parent entity has no known contingent liabilities.
52
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
29. Other accounting policies
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
- where the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.
-
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the statement of financial position.
Cash flows are included in the statement of cashflows on a gross basis and the GST component of cash
flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation
authority, are classified as operating cash flows. Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation authority.
New and amended standards and interpretations not yet adopted
New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting
Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have
not been early adopted by the Group for the annual reporting period ended 31 December 2019.
From managements review of the new Australian Accounting Standards and Interpretations issued not yet
adopted there is no significant impacts on the financial performance or position of the Group envisaged.
New, revised or amending accounting standards and interpretations adopted
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
The Group applies, for the first time, AASB 16 Leases.
The adoption of these new and revised Standards and Interpretations did not have any material impact on
the amounts recognised in the financial statements of the Group for the current or prior periods except for
the application of AASB 16 Leases. The disclosures around the adoption of this standard are disclosed in
Note 30. However, the accounting policies have changed from that disclosed in the 31 December 2019
financial statements.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019, with early
adoption permitted. The Standard replaces current accounting requirements applicable to leases in AASB
117. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be
classified as operating or finance leases. The main changed introduced by the new standard include:
recognition of a right-to-use asset and liability for all leases; depreciation of right-to-use assets in line with
AASB 116 in profit or loss and unwinding of the liability in principal and interest components; and additional
disclosure requirements. The Group has adopted this standard from 1 January 2019, and it impacts are
disclosed in Note 30.
53
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
30. Change in accounting policies
Except for the changes below, the Group has consistently applied the accounting policies to all periods
presented in these consolidated financial statements.
The Group applied AASB 16 with a date of initial application of 1 January 2019. As a result, the Group has
changed its accounting policy for leases contracts as detailed below.
The Group applied AASB 16 using the modified retrospective approach, under which the right to use asset
equals the lease liability as at 1 January 2019. The details of the changes in accounting policies are
disclosed below.
Definition of a lease
Previously, the Group determined at contract inception whether an arrangement is or contains a lease under
AASB 117. Under AASB 16, the Group assess whether a contract is or contains a lease based on the
definition of a lease, as explained in Note 23.
On transition to AASB 16, the Group elected to apply the practical expedient to grandfather the assessment
of which transactions are leases. It applied AASB 16 only to contracts that were previously identified as
leases. Contracts that were not identified as leases under AASB 117 were not reassessed for whether there
is a lease. Therefore, the definition of a lease under AASB 16 was applied only to contracts entered into or
changed on or after 1 January 2019.
Operating and finance leases
The Group previously classified leases as operating or finance leases based on its assessment of whether
the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset
to the Group. Under AASB 16, the Group recognised right-of-use assets and lease liabilities for most leases
– i.e. these leases are on-balance sheet.
The Group decided to apply recognition exemptions to leases of low-value equipment. For leases of other
assets, which were classified as operating under AASB 117, the Group recognised right-of-use assets and
lease liabilities.
Leases classified as operating leases under AASB 117
At transition, lease liabilities were measured at the present value of the remaining lease payments,
discounted at the Group’s incremental borrowing rate as at 1 January 2019. Right -of-use assets are
measured at either:
- Their carrying amount as if AASB 16 had been applied since the commencement date, discounted
using the lessee’s incremental borrowing rate at the date of initial application – the Group did not
apply this approach; or
- The amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease
payments – the Group applied this approach to all leases.
The Group used the following practical expedients when applying AASB 16 to leases previously classified
as operating lease sunder AASB 117.
- Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
- Used hindsight when determining the lease term if the contract contains options to extend or
terminate the lease.
There are no variable lease payments.
54
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019
30. Change in accounting policies (continued)
Impacts on financial statements
On transition to AASB 16, the Group recognised the following:
Right to use – property assets at cost
Right to use – property assets accumulated depreciation
Lease liability – current
Lease liability – non-current
1 January
2019
$
225,252
-
225,252
(110,533)
(114,719)
(225,252)
When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate
at 1 January 2019. The weighted-average rate applied is 5.31%.
Operating lease commitment at 31 December 2018
Discounted at 5.31%
277,423
263,434
This amount differs to the amount recognised as a result of short-term leases and low-value leases not being
recognised.
55
KGL RESOURCES LIMITED AND ITS CONTROLLED ENTITIES
ABN 52 082 658 080
DIRECTORS’ DECLARATION
1.
In the opinion of the directors of KGL Resources Limited:
(a) The consolidated financial statements, comprising the statement of profit or loss and other
comprehensive income, statement of financial position, statement of changes in equity, statement
of cash flows and accompanying notes, are in accordance with the Corporations Act 2001 and:
(i) comply with Australian Accounting Standards
the Australian Accounting
Interpretations), which as stated in the notes to the financial statements constitutes compliance
with the International Financial Reporting Standards and the Corporations Regulations 2001;
and
(including
(ii) give a true and fair view of the consolidated entity’s financial position as at 31 December 2019
and of its performance for the year ended on that date.
(b) There are reasonable grounds to believe that the company will be able to pay its debts as and when
they become due and payable.
2.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001
from the chief executive officer and chief financial officer for the year ended 31 December 2019.
This declaration is made in accordance with a resolution of the directors.
On behalf of the Board
Denis Wood
Chairman
Brisbane
Dated: 23 March 2020
56
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of KGL Resources Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of KGL Resources Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 31 December 2019, 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 31 December 2019 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.
BDO Audit Pty Ltd ABN 33 134 022 870 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 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.
57
Material uncertainty related to going concern
We draw attention to Note 1 in the financial report which describes the events and/or conditions which
give rise to the existence of a material uncertainty that may cast significant doubt about the group’s
ability to continue as a going concern and therefore the group may be unable to realise its assets and
discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this
matter.
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. In addition to the matter described in the Material uncertainty
related to going concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
Recoverability of exploration and evaluation assets
Key audit matter
How the matter was addressed in our audit
Refer to note 12 in the financial report.
Our procedures included, but are not limited to the
There is significant balance of exploration and
following:
evaluation assets as at 31 December 2019.
Obtaining evidence that the Group has valid rights to
The recoverability of exploration and
explore in the areas represented by the capitalised
evaluation assets is a key audit matter due to:
exploration and evaluation expenditure by obtaining
The significance of the total balance; and
The level of procedures undertaken to
evaluate management’s application of the
requirements of AASB 6 Exploration for and
Evaluation of Mineral Resources (‘AASB 6’)
in light of any indicators of impairment
that may be present.
supporting documentation such as licence agreements
and also considering whether the Group maintains the
tenements in good standing.
Making enquiries of management with respect to the
status of ongoing exploration programs in the
respective areas of interest and assessing the Group's
cashflow forecast for the level of budgeted spend on
exploration projects.
Enquiring of management, reviewing ASX
announcements and reviewing directors' minutes to
ensure that the Group had not decided to discontinue
activities in any applicable areas of interest and to
assess whether there are any other facts or
circumstances that existed to indicate impairment
testing was required.
BDO Audit Pty Ltd ABN 33 134 022 870 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 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.
58
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 31 December 2019, but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date
of this auditor’s report, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or 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.
BDO Audit Pty Ltd ABN 33 134 022 870 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 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.
59
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 18 to 23 of the directors’ report for the
year ended 31 December 2019.
In our opinion, the Remuneration Report of KGL Resources Limited, for the year ended 31 December
2019, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit Pty Ltd
T R Mann
Director
Brisbane, 23 March 2020
BDO Audit Pty Ltd ABN 33 134 022 870 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 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.
60