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2014
Annual
Report
ABN 42 000 837 472
Kingsgate is a highly successful gold
mining, development and exploration
company with two operating gold mines
and two advanced development projects.
Shareholders can look forward to the
benefits of this strong operating and
development platform, where Kingsgate
aims to build value though operating,
earnings and dividend growth for
the benefit of all stakeholders.
www.kingsgate.com.au
1
Contents
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Contents
Chairman’s Review . . . . . . . . .
Gavin Thomas Memorial . . . . . . .
2
4
Ten Year Summary . . . . . . . . .
6
Finance Report . . . . . . . . . .
8
Company Activities . . . . . . . . . 11
Operations Report . . . . . . . . . 12
Projects Report . . . . . . . . . . . 26
Exploration Report . . . . . . . . . 31
Ore Reserves and Mineral Resources
32
Corporate Governance Statement . . . 34
Senior Management . . . . . . . . . 39
Directors’ Report . . . . . . . . . . 41
48
Remuneration Report . . . . . . . . . . .
Auditor’s Independence Declaration . . 64
Financial Statements . . . . . . . . 65
Statement of Profit or Loss and Other
Comprehensive Income . . . . . . . . . .
Statement of Financial Position . . . . . . . .
Statement of Changes in Equity . . . . . . .
Statement of Cash Flows . . . . . . . . . .
66
67
68
69
Notes to the Financial Statements . . . 70
Directors’ Declaration . . . . . . . . 116
Independent Auditor’s Report . . . . . 117
Shareholder Information . . . . . . . 119
Corporate Information . . . . . . . . 121
2
Chairman’s Review
Kingsgate had a
strong operating
year with a record
production of
209,500 ounces.
Ross Smyth-Kirk
Director
www.kingsgate.com.au
Chairman’s
Review
This continued volatility and weakness in the
gold price has meant that gold producers and
your Company in particular has been focused
on operating efficiencies and cost reduction
initiatives in order to maintain a sustainable
business and build the platform for future growth.
Kingsgate is one of many resource companies
whose earnings and share price performance has
been affected by the weakening gold price and
the downturn in the global industry.
With lower earnings and the current uncertainty
and volatility in the metal markets your Company
did not elect to pay a dividend during the financial
year.
Chatree had a strong year producing 134,546
ounces of gold. The good production performance
was achieved despite some operational hurdles
during the year. In particular, I want to emphasise
the value and ongoing strength of Chatree given
that its total cash costs for the year were $728
per ounce, which shows that it remains a
profitable asset even in a sub US$1,200/oz gold
market. The Chatree mine lease area is also
surrounded by highly prospective exploration
ground that is currently under application. Any
discoveries within these application areas should
substantially extend the mine life at Chatree.
Challenger gold production of 74,954 ounces
was 13 percent higher than last year due to the
transition in the mine plan to focus primarily
on the higher grade Challenger West ore body.
Similarly, this move away from Challenger Deeps
to the higher grade Challenger West ore body
is likely to deliver reduced production costs
and further savings. While it’s pleasing to see
Challenger performing better I want to make it
clear that in light of current market conditions
that the ongoing viability of the Challenger Gold
Mine is being closely examined and a decision
about its future will be made in the current year.
When putting pen to paper for this year’s
Chairman’s Review, I was reminded of the now
famous comment made by Her Majesty The Queen
in reference to the year 1992, when she described
it as an Annus Horribilis. I can confidently say that
both Kingsgate and the resource sector would
agree that 2014 was just that.
In June this year, Kingsgate lost its long serving
Managing Director and Chief Executive Officer,
Gavin Thomas, who succumbed to a lengthy
battle with cancer.
A few words here do not do justice to the
enormous legacy Gavin leaves and the profound
impact he had not only on Kingsgate, but on the
broader mining industry. Gavin was declared a
mining legend by his peers for good reason, but
more than that he was a mate. A bloody good
mate.
When things like this happen it’s important to
keep focus on what matters when times are
tough, and Kingsgate has maintained its resolve
through the loss of Gavin Thomas and through a
difficult operating environment to honour his
legacy and will emerge bigger, better and stronger
than ever before.
This resolve is underpinned by the fact that
Kingsgate had a strong operating year with a
record production of 209,500 ounces.
However, lower metal prices and industry cost
pressures, which had a negative impact on earnings
and generated an underlying pre-tax loss for the
Group of $5.2 million. These factors also
contributed to a non-cash impairment to the
carrying value of Group assets, particularly assets
relating to the Bowdens Silver Project. The
impairments were the major contributor to the
after tax loss of $96.3 million for the year.
Commodity prices remained under pressure
with the gold price trading in a range of between
US$1,200/oz and US$1,400/oz per ounce and
finishing the year at US$1,327/oz. Subsequently
the price has weakened down around US$1,200/
oz, although a weakening Australian dollar has
provided some respite for Australian based
producers.
3
Chairman’s Review
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Chatree had
a strong year
producing
134,546 ounces
of gold.
At Nueva Esperanza, the feasibility study was
completed delivering a project with strong growth
potential based on a 3 million tonne per annum
heap leach operation delivering 7.5 million ounces
of silver equivalent per year, on average. An
addendum to an approved Environmental Impact
Assessment was submitted to the Chilean
authorities and is expected during the current
financial year.
Further optimisation work on mining, metallurgy
and infrastructure will be undertaken during this
time and exploration drilling on some potentially
exciting gold targets within the lease area has
commenced.
Importantly, I want to emphasise the point that
Nueva Esperanza is shaping up to be a real
“Bridgehead” project for Kingsgate, as work
steadily continues and more positive results are
realised we will be looking for ways to capitalise
and grow this project. I am supremely confident
as was Gavin Thomas, that Nueva Esperanza will
turn out to be a significant contributor to the
company’s growth and should provide strong
returns for shareholders.
The ongoing work at Bowdens has confirmed the
major elements of the feasibility study with the
more detailed power and water options being
finalised. Environmental monitoring and field data
collection is on-ongoing with the Environmental
Impact Statement (“EIS”) scheduled for
completion and further review in the current year.
As we look to the future the Board of Kingsgate is
determined to re-establish the path to building
shareholder wealth via profits and dividends
despite a difficult external environment.
In that regard I want to offer a very personal
thanks to management and all of the Kingsgate,
Akara and Challenger personnel and the project
teams from Nueva Esperanza and Bowdens for
their part in delivering the operational perfor-
mance, and I want to say a heartfelt thanks and
goodbye to a colleague, family man and great
mate – R.I.P Gavin Thomas.
continuedu
4
Chairman’s Review
Gavin Thomas
B.Sc (Geology); FAusIMM
29 December 1950 – 4 June 2014
Gavin Thomas was not only big in stature, he
was a man with a big brain and a big heart.
Gavin Thomas was born on December 29, 1950
to Ken Thomas, founder of the trucking empire
TNT - Thomas Nationwide Transport and his
geologist wife, Anne. He had two sisters, Megan
and Elizabeth, and brothers Rhody and Andrew.
A brilliant geologist, Gavin loved mining. He
also loved life and shared this enthusiasm
and warmth with his family and friends and
colleagues.
Gavin had a very successful career developing
mining companies from the exploration phase
into mid-tier gold and/or copper production
entities. He had international experience in
exploring for, evaluating, developing, operating
and reclaiming mines in North America, South
America, Australia, the Southwest Pacific, Asia
and Europe.
Gavin’s contribution to the industry was
extraordinary in both dedication and discovery.
Following graduating in geology from Macquarie
University in Sydney in 1970, his early career
saw him working in Papua New Guinea (“PNG”)
where, as part of a CRA Exploration team, he
was the first white man many thousands of
people in PNG had ever seen. During his career
he lived or worked in PNG for 27 years – a
country he loved.
His early recognition and the understanding
of the potential of epithermal style mineralisa-
tion was founded in PNG and, as Exploration
Manager at Kennecott Exploration, culminated
with the discovery of Lihir Island, one of the
worlds’ largest gold deposits. Gavin became a
world authority on this style of mineralisation.
He took this knowledge to other countries
around the Pacific Rim and to Europe where
further discoveries were made working with
Nuigini Mining and later at Equatorial Mining in
South America, with a particular focus on Chile.
He was early to recognise the huge potential
of the Cerro Negro gold deposit in Argentina,
owned at the time by Andean Resources.
He joined Kingsgate in 2004 and took the
Company from a single gold mine operation
at Chatree in Central Thailand to a company
with assets on three continents. He expanded
Chatree, which has produced 1.5 million ounces
of gold under his direction and became recog-
nised internationally as the safest gold mine in
the world.
www.kingsgate.com.au
Gavin commanded respect and admiration
in the boardrooms of Australia, London,
Switzerland and the US and he would walk into
a room or meeting and immediately fill it with
his presence. He had an innate sense of adven-
ture, an enormous capacity for hard work and
all entwined with his love of travel.
Gavin was a well-read man not just in Science
but also in English Literature. One of his
favourite writers was the Welsh poet
Dylan Thomas.
Gavin’s leaves an enormous legacy not just to
the mining industry but in his own special way
he touched the lives of many. It truly can be said
that Gavin was larger than life and the world a
lesser place following his departure.
A good man, great friend, loving husband and
doting father.
Gavin is survived by his wife Barbara and their
three daughters Ellen, Laura and Jenni, son in
law Dr Tim Matthews and baby granddaughter,
Imogen Anne.
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5
Chairman’s Review
He joined Kingsgate in 2004 and took the
Company from a single gold mine operation
at Chatree in Central Thailand to a company
with assets on three continents.
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2,378
2,193
0.9
6,176
6,235
0.9
12.9
79.4%
2,709
3,521
1.3
7,051
5,699
0.9
11.9
79.9%
134,546
992,255
133,681
1,000,569
1,947
6,259
3.2
4,986
5,116
0.9
11.6
84.4%
121,372
918,314
2,352
6,128
2.6
5,301
2,533
1.1
15.7
87.2%
76,248
549,699
2,699
6,432
2.4
6,583
2,705
1.7
14.9
90.4%
132,628
549,522
(12 months)
(12 months)
(12 months)
(5 months)
1,674
4,069
2.4
3,874
1,878
1.7
15.8
91.2%
93,002
293,472
375
2,507
6.7
977
2,474
1.1
6.8
88.4%
74,137
232,039
546
4,390
8.0
1,523
2,405
1.2
9.2
90.0%
85,994
290,897
734
5,121
7.0
1,951
2,000
2.4
14.5
90.1%
588
4,915
8.4
1,521
1,829
2.4
13.0
90.8%
140,071
459,702
126,550
353,275
Ten Year Summary
for the year ended 30 June 2014
PRODUCTION – Chatree
Ore mined (‘000 bank cubic metres)
Waste mined (‘000 bank cubic metres)
Waste to ore ratio
Ore mined (‘000 tonnes)
Ore treated (‘000 tonnes)
Head grade – Gold grams / tonne
Head grade – Silver grams / tonne
Gold recovery (%)
Gold poured (ounces)
Silver poured (ounces)
PRODUCTION – Challenger
Ore mined (‘000 tonnes)
Ore treated (‘000 tonnes)
Head grade – Gold grams / tonne
Gold recovery (%)
Gold poured (ounces)
Silver poured (ounces)
PROFIT & LOSS (A$’000)
Sales revenue
Operating expenses
Administration expenses
Other (expenses) / income
EBITDA
Impairment losses
Depreciation & amortisation
EBIT
Net finance (costs) / income
Profit / (loss) before income tax
Income tax (expense) / benefit
Net profit / (loss) after income tax
Non-controlling interests
500
506
4.8
96.1%
74,954
2,677
328,326
(244,289)
(15,304)
(4,449)
64,284
(86,698)
(57,741)
(80,155)
(13,250)
(93,405)
(2,886)
(96,291)
–
502
557
3.9
94.5%
66,216
3,466
329,282
(192,331)
(15,515)
(24,804)
96,632
(332,808)
(90,377)
(326,553)
(16,222)
(342,775)
16,504
(326,271)
–
607
645
4.6
92.4%
87,388
4,971
357,372
(171,505)
(12,737)
(6,398)
166,732
–
(67,553)
99,179
(7,902)
91,277
(16,271)
75,006
153
75,159
87,031
97,817
856,313
1,041,161
157,544
115,102
272,646
768,515
–
232
289
4.3
92.2%
36,886
2,581
172,356
(86,147)
(11,304)
(28,424)
46,481
–
(27,772)
18,709
(922)
17,787
3,092
20,879
269
21,148
35,864
70,280
688,919
795,063
99,896
88,243
188,139
606,924
7,109
599,815
1,386
638
813
34,026
33,647
135,275
18.7
15.0
175,480
(74,305)
(3,615)
618
98,178
–
(14,004)
84,174
(1,823)
82,351
(9,285)
73,066
–
73,066
49,098
54,203
265,774
369,075
11,064
41,968
53,032
316,043
–
316,043
1,091
335
408
46,468
29,082
99,996
75.2
35.0
Net profit / (loss) attributable to owners of Kingsgate Consolidated Limited
(96,291)
(326,271)
BALANCE SHEET (A$’000)
Current assets – cash
Current assets – other
Non-current assets
Total assets
Total borrowings
Other liabilities
Total liabilities
Shareholders’ equity
Non-controlling interests
53,632
87,878
501,669
643,179
153,632
76,790
230,422
412,757
–
30,494
103,660
625,172
759,326
199,758
95,594
295,352
463,974
–
Equity attributable to equity holders of Kingsgate Consolidated Limited
412,757
463,974
768,515
OTHER INFORMATION
Average realised gold price on physical deliveries (US$ / ounce)
Cash cost (US$ / ounce)
Total cost (US$ / ounce)
Operating cashflow (A$’000)
Dividends paid (Cash & DRP) (A$’000)
Number of issued shares (‘000) – Ordinary
Basic earnings per share (A$ Cents)
Dividends per share declared for the year (A$ Cents)
1,291
936
1,167
37,163
–
223,585
(55.9)
–
1,588
874
1,318
88,785
22,738
152,192
(215.0)
5.0
1,663
721
1,028
165,247
22,025
151,264
52.5
20.0
Chatree – Ore mined (‘000 tonnes) 5
Challenger – Ore mined (‘000 tonnes) 5
Sales revenue 5
113,015
(65,599)
(4,595)
3,509
46,330
–
(11,575)
34,755
(1,698)
33,057
(535)
32,522
–
32,522
29,680
27,848
217,445
274,973
2,144
27,789
29,933
245,040
–
904
400
487
18,058
–
96,136
34.9
15.0
74,285
(55,743)
(4,065)
46,653
61,130
–
(9,284)
51,846
(3,974)
47,872
(11,675)
36,197
–
36,197
40,226
16,397
146,626
203,249
1,599
20,637
22,236
181,013
–
824
457
556
18,657
–
92,680
51.7
–
52,044
(64,908)
(2,264)
10,413
(4,715)
–
(8,446)
(13,161)
(2,544)
(15,705)
3,115
(12,590)
–
5,148
13,756
206,082
224,986
21,220
19,532
40,752
184,234
–
417
440
524
(19,888)
4,513
92,680
(17.3)
–
72,782
(47,761)
(1,158)
1,361
25,224
–
(7,805)
17,419
(757)
16,662
16,662
–
–
10,391
10,805
143,401
164,597
–
36,589
36,589
128,008
–
355
206
247
21,889
8,669
88,592
19.3
10.0
64,299
(47,366)
(1,404)
2,471
18,000
–
(8,720)
9,280
(889)
8,391
8,391
–
–
8,391
32,119
12,162
91,727
136,008
–
14,779
14,779
121,229
–
401
212
262
22,184
11,973
85,949
9.8
7.0
(12,590)
16,662
Total assets 5
245,040
181,013
184,234
128,008
121,229
Average realised gold price on physical deliveries 5
7
Ten Year Summary
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
14
13
12
11
10
09
08
07
06
05
1,674
4,069
2.4
3,874
1,878
1.7
15.8
91.2%
93,002
293,472
375
2,507
6.7
977
2,474
1.1
6.8
88.4%
74,137
232,039
546
4,390
8.0
1,523
2,405
1.2
9.2
90.0%
85,994
290,897
734
5,121
7.0
1,951
2,000
2.4
14.5
90.1%
588
4,915
8.4
1,521
1,829
2.4
13.0
90.8%
140,071
459,702
126,550
353,275
Chatree – Ore mined (‘000 tonnes) 5
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Challenger – Ore mined (‘000 tonnes) 5
113,015
(65,599)
(4,595)
3,509
46,330
–
(11,575)
34,755
(1,698)
33,057
(535)
32,522
–
32,522
29,680
27,848
217,445
274,973
2,144
27,789
29,933
245,040
–
74,285
(55,743)
(4,065)
46,653
61,130
–
(9,284)
51,846
(3,974)
47,872
(11,675)
36,197
–
36,197
40,226
16,397
146,626
203,249
1,599
20,637
22,236
181,013
–
52,044
(64,908)
(2,264)
10,413
(4,715)
–
(8,446)
(13,161)
(2,544)
(15,705)
3,115
(12,590)
–
(12,590)
5,148
13,756
206,082
224,986
21,220
19,532
40,752
184,234
–
72,782
(47,761)
(1,158)
1,361
25,224
–
(7,805)
17,419
(757)
16,662
–
16,662
–
16,662
10,391
10,805
143,401
164,597
–
36,589
36,589
128,008
–
64,299
(47,366)
(1,404)
2,471
18,000
–
(8,720)
9,280
(889)
8,391
–
8,391
–
8,391
32,119
12,162
91,727
136,008
–
14,779
14,779
121,229
–
Sales revenue 5
Total assets 5
Equity attributable to equity holders of Kingsgate Consolidated Limited
412,757
463,974
768,515
245,040
181,013
184,234
128,008
121,229
Average realised gold price on physical deliveries 5
904
400
487
18,058
–
96,136
34.9
15.0
824
457
556
18,657
–
92,680
51.7
–
417
440
524
(19,888)
4,513
92,680
(17.3)
–
355
206
247
21,889
8,669
88,592
19.3
10.0
401
212
262
22,184
11,973
85,949
9.8
7.0
PRODUCTION – Chatree
Ore mined (‘000 bank cubic metres)
Waste mined (‘000 bank cubic metres)
Waste to ore ratio
Ore mined (‘000 tonnes)
Ore treated (‘000 tonnes)
Head grade – Gold grams / tonne
Head grade – Silver grams / tonne
Gold recovery (%)
Gold poured (ounces)
Silver poured (ounces)
PRODUCTION – Challenger
Ore mined (‘000 tonnes)
Ore treated (‘000 tonnes)
Head grade – Gold grams / tonne
Gold recovery (%)
Gold poured (ounces)
Silver poured (ounces)
PROFIT & LOSS (A$’000)
Sales revenue
Operating expenses
Administration expenses
Other (expenses) / income
EBITDA
Impairment losses
Depreciation & amortisation
EBIT
Net finance (costs) / income
Profit / (loss) before income tax
Income tax (expense) / benefit
Net profit / (loss) after income tax
Non-controlling interests
BALANCE SHEET (A$’000)
Current assets – cash
Current assets – other
Non-current assets
Total assets
Total borrowings
Other liabilities
Total liabilities
Shareholders’ equity
Non-controlling interests
OTHER INFORMATION
Cash cost (US$ / ounce)
Total cost (US$ / ounce)
Operating cashflow (A$’000)
Average realised gold price on physical deliveries (US$ / ounce)
Dividends paid (Cash & DRP) (A$’000)
Number of issued shares (‘000) – Ordinary
Basic earnings per share (A$ Cents)
Dividends per share declared for the year (A$ Cents)
134,546
992,255
133,681
1,000,569
(12 months)
(12 months)
(12 months)
(5 months)
2,378
2,193
0.9
6,176
6,235
0.9
12.9
79.4%
500
506
4.8
96.1%
74,954
2,677
328,326
(244,289)
(15,304)
(4,449)
64,284
(86,698)
(57,741)
(80,155)
(13,250)
(93,405)
(2,886)
(96,291)
–
53,632
87,878
501,669
643,179
153,632
76,790
230,422
412,757
–
1,291
936
1,167
37,163
–
223,585
(55.9)
–
2,709
3,521
1.3
7,051
5,699
0.9
11.9
79.9%
502
557
3.9
94.5%
66,216
3,466
329,282
(192,331)
(15,515)
(24,804)
96,632
(332,808)
(90,377)
(326,553)
(16,222)
(342,775)
16,504
(326,271)
–
30,494
103,660
625,172
759,326
199,758
95,594
295,352
463,974
–
1,588
874
1,318
88,785
22,738
152,192
(215.0)
5.0
1,947
6,259
3.2
4,986
5,116
0.9
11.6
84.4%
121,372
918,314
607
645
4.6
92.4%
87,388
4,971
357,372
(171,505)
(12,737)
(6,398)
166,732
–
(67,553)
99,179
(7,902)
91,277
(16,271)
75,006
153
75,159
87,031
97,817
856,313
1,041,161
157,544
115,102
272,646
768,515
–
1,663
721
1,028
165,247
22,025
151,264
52.5
20.0
2,352
6,128
2.6
5,301
2,533
1.1
15.7
87.2%
76,248
549,699
232
289
4.3
92.2%
36,886
2,581
172,356
(86,147)
(11,304)
(28,424)
46,481
–
(27,772)
18,709
(922)
17,787
3,092
20,879
269
21,148
35,864
70,280
688,919
795,063
99,896
88,243
188,139
606,924
7,109
599,815
1,386
638
813
34,026
33,647
135,275
18.7
15.0
2,699
6,432
2.4
6,583
2,705
1.7
14.9
90.4%
132,628
549,522
175,480
(74,305)
(3,615)
618
98,178
–
(14,004)
84,174
(1,823)
82,351
(9,285)
73,066
–
73,066
49,098
54,203
265,774
369,075
11,064
41,968
53,032
316,043
–
316,043
1,091
335
408
46,468
29,082
99,996
75.2
35.0
Net profit / (loss) attributable to owners of Kingsgate Consolidated Limited
(96,291)
(326,271)
8
Finance Report
Finance
Report
Summary
Earnings
Kingsgate has recorded the following financial
performance for the year to 30 June 2014:
〉〉 Revenue of $328.3 million.
〉〉
EBITDA (before significant items) of
$66.4 million.
〉〉
〉〉
Loss before tax and significant items of
$5.2 million.
Loss after tax and significant items of
$96.3 million.
〉〉 Non-cash asset impairments and other
significant items of $88.2 million pre-tax,
with $84.6 million relating to the Bowdens
Silver Project.
〉〉 No dividends have been declared.
Higher gold sales of 216,887 ounces (2013:
195,948 ounces) and a reduction in total cash
costs at Chatree Gold Mine (“Chatree”) to
US$728 per ounce (2013: US$746 per ounce)
had a positive impact on the underlying earnings
of the Group - though this was offset by a lower
realised gold price of US$1,291 per ounce (2013:
US$1,588 per ounce).
The increase in gold sales reflected a 13%
increase in production at Challenger compared
to the prior year due to higher grade of ore
mined and processed. Production at Chatree
was consistent with the prior year, increasing by
0.6%, reflecting increased throughput offset by
slightly lower grade of ore processed.
The significant and sustained decline in the
silver price resulted in an impairment to the
carrying value of the Bowdens Silver Project
(“Bowdens”) of $84.6 million pre-tax. This
impairment was the major contributor to the
after tax loss of $96.3 million for the year.
Cost of sales
Cost of sales before depreciation increased by
27% to $244.3 million compared to last year,
which largely reflects increased mining costs at
Challenger - where development costs are no
longer capitalised due to the short-term nature
of this operation. The total unit cash costs for
Chatree for the year were US$728 per ounce
(US$617 per ounce excluding royalties), down
from US$746 per ounce in 2013. The total unit
cash costs for Challenger for the year were
US$1,310 per ounce (2013: US$1,135 per
ounce), with the increase mainly due to higher
mining costs. On a unit cost basis, total cash
costs for the Group were US$936 per ounce, up
from US$874 per ounce last year.
Depreciation and amortisation
The decrease in depreciation and amortisation to
$57.7 million (2013: $90.4 million) reflects the
impairment of the Challenger Mine in the
previous financial year and the resulting decrease
in the carrying value of assets to be depreciated.
Impairment
The carrying value of the Bowdens Silver Project
has been reviewed in response to the significant
and sustained decline in the silver price. This
review indicated that, while Bowdens is expected
to generate positive cash flows, the estimated
fair value no longer supported the full recovery
of the carrying value. As a result the Group
recorded an impairment charge of $84.6 million
pre-tax against the acquisition, exploration,
evaluation and development costs for Bowdens.
The impairment is a non-cash item and has no
impact on the Company’s debt covenants.
Finance costs
Finance costs decreased to $13.9 million (2013:
$18.8 million). Finance costs comprise interest
on borrowings the Group has in place, unwinding
of the discount on provisions as required by
Accounting Standards, foreign currency move-
ments on foreign currency denominated loans
and amortisation of borrowings establishment
fees. The main reason for the decrease in finance
costs from the previous financial year was due to
the decrease in the level of borrowings and
accelerated amortisation of borrowing costs in
the previous financial year. The accelerated
amortisation related to capitalised borrowing
costs being expensed in full, a result of the
establishment of new loan facilities.
www.kingsgate.com.au
9
Finance Report
Cash Flow
Operating cash inflow was $37.2 million.
Net investing cash outflow was $43.5 million, a
significant decrease from the prior year outflow
of $145 million. The main reasons for the
decrease were no further development work for
Challenger Deeps which were completed in the
previous financial year and a general reduction in
capital expenditure on all projects in the current
financial year.
Operating Profit and Cash Flow
Net cash inflows from financing activities was
$30.9 million, including a drawdown of $26.1
million of the convertible revolving credit loan
facility net of transaction costs and proceeds
from an equity raising of $56.5 million net of
costs, and repayment of $51.6 million of the
corporate loan and convertible revolving credit
facilities.
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Income tax
Kingsgate’s Thai subsidiary company, Akara
Resources Public Company Limited (“Akara”),
has received approval from The Royal Thai Board
of Investment (“BOI”) subject to meeting
certain conditions and based on an annual
production limit of 178,416 ounces of gold and
583,733 ounces of silver, for:
a) An eight year full corporate tax holiday
commencing at first gold pour on metal
sales. The full tax holiday expired in
November 2009;
b) A further five years half tax holiday; and
c) Other benefits.
The promotional period began on 27 November
2001.
On 18 June 2010, Akara also received a BOI
promotion for the Chatree North gold processing
plant. Based on an annual production limit from
the new processing plant of 185,200 ounces of
gold and 1,080,400 ounces of silver, Akara is
entitled to:
a) An eight year tax holiday on income derived
from the new processing plant with tax
savings limited to the capital cost of the new
treatment plant;
b) 25% investment allowance on the capital
cost of certain assets of the new processing
plant; and
c) Other benefits.
The taxable loss from the Australian operations
has not been recognised as a deferred tax asset,
though it has been added to the Group’s brought
forward tax losses, leaving a balance of $251
million of taxable losses (unrecognised tax asset
of $75 million) to be carried forward to future
years.
n
o
i
l
l
i
M
$
A
240
200
160
120
80
40
0
-40
-80
-120
-160
-200
-240
-280
-320
-360
36
19
33 18
73
46
25
165
75
89
21 34 28
19
19
37
-96
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
-326
Profit/(loss)
Operating Cash Flow
Cash Dividend Paid
Operating and Investing Cash Flow
n
o
i
l
l
i
M
$
A
250
200
150
100
50
0
-50
-100
-150
-200
-250
-300
165
89
37
19
18
46
34
-48
-32
37
-43
-108
-145
-221
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
Operating Cash Flow
Investing Cash Flow
10
Finance Report
Financial Position
Shareholders’ equity at 30 June 2014 was $413
million (2013: $464 million). The decrease of $51
million reflects the year’s loss and foreign
exchange losses on translation of foreign opera-
tions offset by equity raised during the year.
Dividends
No dividends were declared for the year ended 30
June 2014 (2013: nil).
Financing Arrangements
Senior corporate loan facility
The outstanding balance of the senior corporate
loan facility is $35 million which consists of two
tranches:
〉〉
Tranche A is an amortising loan facility with a
balance of $10 million to be repaid during the
2015 financial year.
〉〉
Tranche B is a $25 million Akara Pre-IPO
Bond with a maturity date of 31 July 2015.
The current intention is for this tranche to be
repaid from proceeds raised through the
Akara IPO, although at Kingsgate’s election
repayment can be made by Kingsgate either
in cash or Kingsgate shares.
This facility was established in April 2014 and
replaced a three year corporate loan facility
(2013: $20 million drawn down) and a five year
convertible loan facility (2013: $35 million drawn
down).
The Group also had a three year $25 million
Convertible Revolving Credit Facility which was
relinquished during the current financial year
(2013: undrawn).
Multi-currency and syndicated
loan facilities
Akara has an amortising multi-currency loan
facility with 4.5 years remaining. It is currently
drawn to the equivalent of $106.2 million,
following a repayment of $5 million since 30
June 2014. Akara also has an additional undrawn
Thai Baht denominated working capital facility
equivalent to $16 million.
Hedging
As at 30 June 2014, the Group has 12,000 ounces
of gold sold forward at an average price of
approximately A$1,406 per ounce. This is sched-
uled to be delivered over the September 2014
quarter as part of the mitigation of Australian
gold price risk and is associated with forecast
production from the Challenger Mine. In addition
there is a residual forward sale from the
Dominion merger with 2,500 ounces at A$1,163
per ounce remaining. Since the end of the year a
further 22,000 ounces of gold have been sold
forward for delivery during the December 2014
half year at a price of A$1,419 per ounce.
www.kingsgate.com.au
Company
Activities
for the year ended 30 June 2014
11
Company Activities
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Operations Report 12
Chatree Gold Mine, Thailand . . . . . . . . . . . 12
Challenger Gold Mine, South Australia . . . . . . . . 20
Projects Report 26
Bowdens Silver Project, New South Wales . . . . . . 26
Nueva Esperanza Project, Chile . . . . . . . . . . 28
Exploration Report 31
Ore Reserves and Mineral Resources . . . . . . . . . 32
Competent Persons Statement . . . . . . . . . . . 33
Corporate Governance Statement 34
Senior Management
39
12
Operations Report
Operations
Report
www.kingsgate.com.au
u
Chatree
Gold Mine
Thailand
Summary
Chatree continued as Kingsgate’s primary
production asset throughout the year, producing
134,546 ounces of gold and 992,255 ounces of
silver. Strong production performance was
achieved despite some operational difficulties.
Poor equipment availability within the mining
contractors’ fleet continued to impact mine
production throughout the year. This was
particularly evident with the RH90 excavators.
This is being addressed by the implementation
of a number of joint maintenance improvement
projects between our contractor and their main
maintenance supplier.
During the year, the mining sequence was
modified to focus on the higher grade ore of
A Pit and near surface oxide zones around the
property. This has led to the delay of some
longer term waste stripping.
Disappointingly, Chatree recorded two Lost
Time Injuries (“LTI”) during the year. The injuries
were considered to be avoidable and Chatree
management and staff remain committed to
practicing safety as its core value and in demon-
strating world’s best practice for safety.
Chatree – Production
1,100
1,000
)
0
0
0
‘
(
s
e
c
n
u
O
900
800
700
600
500
400
300
200
100
0
2
3
2
4
7
3
9
3
9
2
3
3
1
0
5
5
0
5
5
6
7
1
2
1
8
1
9
4
3
1
1
0
0
1
5
3
1
2
9
9
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
Gold Production
Silver Production
Chatree – Ore Mined and Treated
)
0
0
0
‘
(
s
e
n
n
o
T
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
3.0
2.0
1.0
0
)
d
l
o
g
e
n
n
o
t
/
s
m
a
r
g
(
e
d
a
r
G
e
r
O
4
7
4
,
2
7
7
9
4
7
8
,
3
8
7
8
,
1
3
8
5
,
6
5
0
7
,
2
1
0
3
,
5
3
3
5
,
2
6
8
9
,
4
6
1
1
,
5
1
5
0
,
7
9
9
6
,
5
6
7
1
,
6
5
3
2
,
6
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
Ore Mined
Ore Treated
Ore Grade
Chatree – Cash Costs and Total Costs
e
c
n
u
o
/
$
S
U
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
185
251
143
99
87
102
73
457
401
335
479
618
767
728
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
Cash Cost
(incl. Royalties)
Non-Cash Cost
(incl. D&A)
Realised Gold Price
13
Operations Report
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Production and Costs
Production for the year was 134,546 ounces
of gold and 992,255 ounces of silver.
Total mill throughput of 6.2 million tonnes was
9.4% higher than 2013 and 0.6% above budget.
The overall plant availability of 97.5% was
slightly lower than the previous years’ 98.1%.
Total cash costs for the year were $US728 per
ounce ($US617 per ounce exclusive of Thai
royalties). The average royalty paid to the Thai
Government was $US111 per ounce of gold. Total
production costs after depreciation and amorti-
sation were $US979 per ounce of gold produced.
At year end, 9.7 million tonnes of ore was stock-
piled with an average contained gold grade of
0.54 grams per tonne (“g/t”) representing
167,359 ounces of gold.
Operational Performance
During the year 6.2 million tonnes of ore was
mined, with a waste-to-ore strip ratio of 1.9:1.
This figure was above budget by 18,000 tonnes.
The average grade of mined ore was 0.83g/t gold
and 11.81g/t silver.
Total volume of material mined at Chatree for the
year was 6.6 million Bank Cubic Metres (“BCM”),
including 2.4 million BCM of ore. This was below
the budget level and the shortfall was due to
delays in the development of the marginal Q
Central Pit due to the fall in gold price, and the
poor availability of the primary excavator fleet.
An additional 572,000 BCM of laterite and clay
material was excavated and used for the construc-
tion of the third lift of TSF#2 and reconstruction
of Highway 1301 in the C-North pit area.
Approximately 1.3 million loose cubic metres
of ore was relocated from the Marginal Grade
Stockpiles to the primary crusher to supplement
ore from the mining pits.
The main areas mined during the year were:
〉〉 A Pit where 6.4 million BCM of material was
mined (2.2 million BCM of ore) at a stripping
ratio of 1.9:1 waste to ore; and
〉〉 Q Prospect where 180,000 BCM of metal-
lurgical bulk sample material was mined
(134,000 BCM of ore) at a stripping ratio
of 0.4:1 waste to ore.
The mechanical reliability and hence availability
of the in-pit excavators continued to be a source
of concern. There were a number of significant
failures within both the O&K RH90 and RH40
excavator fleets during the year, with failed slew
bearings and structural failures of the booms
and sticks causing most of the down time.
continuedu
14
Operations Report
Approximately one day of production was lost
due to rainfall during the year. Total rainfall for
the year was 1.3 metres. September 2013 had
the highest monthly rainfall total on record, with
over 0.5 metres of rainfall. This was offset by a
very dry first half of 2014.
Upon completion of mining of the C North
Cutback, it was backfilled to allow the reinstate-
ment of Highway 1301 as well as to improve
access for waste rock haulage to TSF#2. The
reinstatement of the section of Highway 1301
that passes through the C North was commenced
during the year. This project will be completed
during the first quarter of the 2015 financial year.
The third lift of TSF#2 was constructed from
November 2013 to March 2014 and will provide
an additional 6.2 Mt of storage capacity. Waste
rock from A Pit is being continuously sent to
TSF#2 at a rate of approximately 7,000 BCM per
day for the construction of the downstream
embankment. No additional closure material was
placed in TSF#1 during the year. This is to allow
for additional tailings placement and hence
reduce the requirement for run of mine waste.
www.kingsgate.com.au
15
Operations Report
Physicals
2013/14
2012/13
% Change
Work on optimising the drilling and blasting
parameters continued throughout the year. This
included trialling larger blast hole sizes, varying
the sub-drill depth and burden to spacing ratios.
The new plant, Plant #2, continues to perform
very well with an availability of 97.5% against a
budget of 98.2%. The original design throughput
was 2.7 million tonnes of ore per annum (Mtpa)
and it is has been consistently operating at
3.59Mtpa or 33% above design throughput.
Plant #1 continues to perform very well with an
availability of 98.0% against a budget of 98.2%.
The original design throughput was 2.3Mtpa
and it is currently operating at 2.65Mtpa or 15%
above design. Work continued throughout the
year to eliminate processing bottlenecks and
maximise recoveries.
The combined plants are currently operating at
25% above design. A study was completed
during the year that has identified the next best
expansion opportunities with minimum capital
expenditure. These opportunities are being
accessed with plant upgrades aimed to continue
to increase throughput into the future.
Waste mined
Ore mined
Waste:ore ratio
Ore mined
Ore treated
Head grade (gold)
Head grade (silver)
Gold recovery
Gold poured
Silver poured
* After waste capitalised to TSF
Cost Category
Cash operating cost
By product credit**
Depreciation / amortisation
Total production cost
** Net of silver royalties
bcm
bcm
tonnes
tonnes
Au g/t
Ag g/t
%
ounces
ounces
2,193,404*
3,521,003*
2,377,718
2,708,634
0.9:1*
6,175,657
6,234,869
0.9
12.9
79.4
134,546
992,255
1.3:1*
7,051,488
5,699,014
0.9
11.9
79.9
133,681
1,000,569
-38%
-12%
-31%
-12%
9%
0%
8%
-1%
1%
-1%
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2013/14
2012/13
$US/oz Gold
Produced
$US/oz Gold
Produced
% Change
617
(142)
226
979
620
(180)
185
952
0
7%
22%
3%
continued
16
Operations Report
As of the end of June 2014, the Mineral Resource
estimate at Chatree using a 0.3g/t Au cut-off
grade totals 3.84 million ounces of gold and
37.66 million ounces of silver in 181.3 million
tonnes of rock. This resource includes a deple-
tion of production to the end of June 2014, and
represents a decrease of 190,000 ounces of gold
and an increase of 4.86 million ounces of silver
when compared to the April 2013 Mineral
Resource estimate for Chatree at the same
cut-off grade.
Safety
Chatree Exploration
Disappointingly, Chatree recorded two LTI’s
during the year. The injuries were considered to
be totally avoidable and Chatree management
and staff remain totally committed to living
safety as our first value, with everyone home
safe every day.
Chatree has achieved two million man hours of
operations and construction activity since its last
LTI. Management continues to be grateful to all of
our employees and contractors for the attention
to safety and care for each other.
In recognition of our safety standards and
emergency response preparedness, Chatree Mine
received the “Thailand National Occupational
Health and Safety Award 2014” on 3rd July 2014.
This year is the seventh year that we have
received the Occupational Health and Safety
Award consecutively and also received the
consolation prize of the Emergency Response
Team Competition in the Thailand National
Occupational Health and Safety Week on
5th July 2014.
Exploration activities within the Chatree Mining
Leases remained the dominant focus for the
exploration team during the year, albeit at a
reduced level of expenditure. The volatility in
gold price during the year resulted in exploration
activity focusing on the drilling of near surface
oxide gold targets and shallow Inferred Resources
that lay within close proximity to current pit
designs. Although the targets are incremental to
the global Mineral Resource and Reserves, they
provide a valuable low cost value driven opportu-
nity to the operation. Drilling during the year has
successfully identified new shallow gold minerali-
sation immediately adjacent to A Pit and also
within the Q Prospect area with highlights
including:
〉〉 04791RC – 21 metres @ 2.6g/t gold from
1 metre at A North East; and
〉〉 04751RC – 14 metres @ 5.3g/t gold from
10 metres at Q Prospect.
Other drilling targeting Inferred Resources within
the A Pit and Q Prospect pit designs also returned
significant assay results with highlights including:
〉〉 07584RC – 11 metres @ 3.14g/t gold from
109 metres in Q Prospect; and
〉〉 07597RC – 26 metres @ 2.16g/t gold from
42 metres in A Pit.
Exploration drilling activities in the coming year
will continue to focus on resource/reserve
expansion targets within the Chatree Mining
Leases and is currently scheduled to test the
areas adjacent to the K West, K East and
southern extensions of A Pits.
www.kingsgate.com.au
17
Operations Report
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Operations Report
Chatree Sustainability
Chatree adheres to Kingsgate’s Sustainability
Policy. The primary aim of the policy is to
manage the Chatree asset ethically, so the
people of Thailand and the Company prosper
together, enjoying safe, fair and rewarding
working relationships and a healthy living
environment.
The following sustainability section is a
summary of a separate detailed document
termed “The 2014 Akara Resources Sustain-
ability Report”, which is published in both
English and Thai language and available from
the Company.
Community
Chatree Gold Mine is located 280 kilometres
north of Bangkok on the provincial border
between Phichit and Phetchabun provinces. The
many villages around Chatree still lead a
predominantly agrarian lifestyle, with rice
growing as the main activity. It is important
therefore, that Chatree is a good corporate
citizen for our immediate neighbours and in
Thailand generally. Chatree has as a primary goal
to minimise the impact of mining operations to
those living and working nearby. We seek to
achieve this through regular meetings and
consultation with local government and village
groups and through assisting the community in
times of need.
www.kingsgate.com.au
Community Funds
Corporate social responsibility at Chatree is a
continual commitment by our business to
behave ethically and contribute to economic
development in the local area improving the
quality of life of our workforce and their families
as well as the local communities in which we
operate. In order to facilitate this, we have
established four funds; these are made up of an
EIA Fund for any environmental impact, an Or
Bor Tor Fund (sub-district fund), a Village Fund
and an Akara for Communities Fund. Commit-
tees have been formed to manage each fund
which is made up of government officials, village
leaders, and employees from Chatree to ensure
transparency and diligent project management.
Employees
The Chatree workforce totalled 1,034 at the end
of the financial year comprising of 372 Akara
employees, 658 with our mining contractor
LotusHall and four expatriates. Turnover for
Akara permanent employees during the financial
year was 12.3% which includes a redundancy
program. Chatree has received its fifth Welfare
and Relations Award from the Department of
Labour Protection and Welfare, as well as the
Skill Development Promotion Award from the
Department of Skill Development in 2013.
Chatree has also maintained its certificate of
SA8000 since 2009.
Our business is focused on our employee engage-
ment and our objective is to ensure that our
employees are appropriately placed in roles that
are in line with our commercial goals. Akara
Resources offers comprehensive training in
relevant safety and job-related areas to all our
people. We also assist our employees to obtain
tertiary education qualifications. Akara
Resources sponsored a total of 53 employees. To
date, one employee was sponsored for a doctoral
degree, 34 employees have been sponsored for
19
Operations Report
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cyanide discharge presents no environmental
hazard. Ongoing cyanide destruction is also
assisted by numerous introduced micro-organ-
isms which are able to degrade free cyanide to
carbon dioxide and ammonia.
Incident Reporting
There were 48 environmental events during the
year. All were minor relating to hydrocarbon
leaks and spills, all of which were contained.
There were no reportable incidents.
Rehabilitation
No contaminated land issues arose during the
period. The rehabilitation program is ongoing
with areas contoured and planted as soon as is
practicable. Trials of various species are under-
taken to ensure the optimal results for each
location. Many species of trees and grass have
been sown successfully across the site. Some
8.16 hectares were rehabilitated last year and
15.93 hectares of rehabilitation is planned for
the present year.
Dust Management
Chatree’s aim is to produce minimal dust and
noise and thereby reduce neighbouring concerns
by maintaining all mine roadways in good order
through regular gravel sheeting and watering.
Effective noise barriers have been developed
around operations. In some circumstances,
operations have been restricted to daylight
hours. Dust monitoring stations have been
established in nine surrounding villages. All
results from the regular monitoring and
sampling program have been within required
quality standards.
continuedu
Masters level degrees, nine employees for
Bachelor level degrees, eight employees for
Diploma Certificates and one employee was
sponsored for a MBA short course.
Water
While rainfall can occur year round, it is gener-
ally concentrated in the annual monsoon. The
responsible management of water is therefore of
utmost importance to Chatree Mine and to the
surrounding area. Chatree operates on a nil-
release basis, and all rain water on the mine lease
is harvested with no water leaving the site. This
requires continuous management of usage,
quality and storage. A total of 27 surface water
and 88 groundwater quality sampling sites have
been established, all of which are regularly
monitored and sampled. To date, no results from
any of these sites have caused concern.
To gauge any potential drawdown impact on
local groundwater, the mine regularly monitors
75 water table measuring stations, located on
the mine site and in surrounding villages. Water
levels rise and fall seasonally but no long-term
adverse trends have been identified.
A total of 2,846,390 tonnes of makeup water
was used to process the 6,234,868 tonnes of
ore during the financial year. Water usage per
tonnes of ore was reduced onsite via recycling of
water from the Tailings Storage Facility via the
decant water return system. The excess makeup
water is stored in a number of the historic
mining pits for use in the process plant.
Environmental Audit
In March 2014 the 13th annual Tailings Storage
Facility Audit was undertaken. Knight Piésold
found that the tailings facility continues to be
operated at best practice and that the
Processing Department demonstrates a good
understanding of the facility.
In January 2014, Environ Australia Pty Ltd under-
took the 12th “whole of site” environmental
audit of the Chatree Mine. The audit is designed
to assess compliance with conditions in the
Mining Leases, corporate commitments made in
the current Environmental Impact Assessment,
adherence to board environmental policy, obser-
vance of the Australian Minerals Industry Code
for Environmental Management and Enduring
Value and our environmental performance
overall. The audit concluded that, the operations
of the Chatree Gold Project comply with appli-
cable statutory requirements as well as volun-
tary environmental commitments made by
Akara Resources Public Company Limited. The
audit also indicates that the project operations
are being carried out in accordance with the
requirements of the Australian Minerals Industry
Code for Environmental Management, and that
the responsibilities of Kingsgate, as a Code
signatory, are being addressed.
Cyanide Management
Chatree continues to meet all requirements of
The International Cyanide Management Code for
gold mining operations. The Code mandates
strict protocols for the manufacture, transport,
storage and use of cyanide. The cyanide code
audit was carried out in late 2013. The certifica-
tion of the new processing plant and the
re-certification of the old processing plant were
announced on 25th June 2014 by the Interna-
tional Cyanide Management Institute.
Readings of discharge to the tailings storage
facility are taken every 60 minutes. Of the 8,760
readings taken during the year, a total of 99%
showed the discharge of cyanide did not exceed
the 20 mg/L CNTOT standard. The highest
monthly reading obtained was 13.1 mg/L CNTOT
with an annual average of 9.7 mg/L CNTOT.
Birds continue to nest and breed near the
tailings storage facility, confirming that our
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Challenger
Gold Mine
South Australia
Summary
〉〉
The Challenger Mine produced 74,954
ounces of gold for the year, with an average
milled grade of 4.78 grams per tonne (“g/t”),
and a total operating cash cost of US$1,310
per ounce. Note that all mine development
expenditure is currently being expensed and
is included in the operating cost.
〉〉 During the year, the mine underwent a
transition in mine plan to focus 100% on the
higher grade Challenger West ore body. The
transition was completed at the end of the
second quarter, as expected. However,
higher than planned dilution in the produc-
tion stopes resulted in mine head grades
underperforming against the reserve.
The mining service contractor was changed
to Byrnecut on the 1 August 2013 and had a
positive impact on safety, cost and mine
productivity.
The third lift to Tailings Storage Facility
Number Two (“TSF#2”) was completed
during the year to provide adequate storage
capability to the end of the current planned
mine life.
〉〉
〉〉
〉〉 Capitalised expenditure for the mine was
$2.8 million, down from $57.5 million in the
prior year mainly due to all development
expenditure being expensed during the year.
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tonnes
tonnes
Au g/t
%
ounces
Physicals
Ore mined
Ore treated
Head grade (gold)
Gold recovery
Gold poured
Cost Category
Total cash cost**
By product credit*
Depreciation / amortisation – operating
Total production cost
2013/14
499,938
506,027
4.8
96.1
74,954
2013/14
$US/oz Gold
produced
1,310
(1)
194
1,504
* Net of silver royalties
** Includes mine development costs
Operational Performance
Significant milestones at Challenger for the year
included the transition to the Challenger West
mine plan and the change in mining services
contractor to Byrnecut. Both measures had a
significant impact on reducing the cost per
ounce of gold produced.
Byrnecut commenced operations on the
1 August 2013. This had a positive impact on
safety, cost and particularly in mine productivity
where Byrnecut has been able to achieve signifi-
cant productivity increases per man shift which
has seen production levels and development
rates remain higher than previous levels with a
reduction of 33% in the size of the workforce.
Mine production for the year totalled 499,938
tonnes of ore at a reconciled grade of 4.78g/t.
Dilution was higher than planned in some of the
stopes due to poorer than anticipated ground
conditions and interaction with intrusive struc-
tures. Dilution reduction has received significant
focus from the technical team with a number of
strategies targeting a reduction in the minimum
mining width and improvements in design
parameters.
Developing the high-grade Challenger West
shoot has continued to be the primary focus for
the past year, supplemented by ore from the M1
and M2 ore bodies. The Challenger West ore
source supplied 72% of total ore production at
an average grade of 5.3g/t, M2 supplied 23% at
4.0g/t, and M1 5% at 3.7g/t.
The focus for the 2015 financial year will be
solely on extraction of ore from Challenger
West.
continued
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Operations Report
Long section showing FY 2014 development advance
Development
A total of 6,034 metres of underground mine
development was achieved for the year with
development rates steadily improving throughout
the course of the year. The average development
performance exceeded 600 metres per month in
the last quarter of the year. This productivity
improvement was enhanced through the imple-
mentation of independent firing in Challenger
West, and the upgrade of the jumbo fleet.
Split firing was trialled late in the year to reduce
dilution in development ore. Where practical, it
will be implemented more fully in the coming year.
Occupational Health
and Safety
During 2014 there were four incidents resulting
in lost time injuries, nine restricted work injuries,
and four medically treated injuries, an overall
increase of 34% on the previous years’ 12
recordable injuries. Total injuries reported have
also increased marginally over the previous year.
As the majority of the years’ recordable injuries
have been attributed to manual handling injuries,
a renewed focus has been placed on manual
handling and manual work.
Changes to the South Australian state’s safety
legislation came into effect during the year.
The Work Health Safety and Environment
Department has implemented relevant changes
to site processes. To this end, a review of the
site’s Safety Management Plan and Safety
Management System was undertaken to ensure
compliance to new legislation.
Mine rescue services training and ongoing
operational and personal development training
for employees and contractors will continue
across the site.
Challenger Geology
and Exploration
General
Significant geological highlights at Challenger
for the year included the successful implementa-
tion of the new mine plan to focus on Challenger
West and the development of the 135 Level
which demonstrated continuity of the M1 & M2
lode systems below the 215 Shear at the current
base of the mine. Development subsequently
ceased at the lower levels of the mine following
the transition to Challenger West.
Diamond drilling was brought in-house in
August 2013, following the change of mining
services contractor to Byrnecut. This has
resulted in a significant reduction in overall
cost of diamond drilling.
The focus remains on resource development
priorities, although limitations due to site avail-
ability and interaction with active development
continue to allow opportunities for drilling the
peripheral targets.
Ground conditions
The host rock is massive garnet gneiss with an
average uniaxial compressive strength of 183
MPa. In the upper levels, a relative paucity of
continuous structures leads to very good
ground conditions, rarely requiring additional
ground support outside the normal ground
support standard. Following the transition
to mining solely upper level resources from
Challenger West, additional ground support has
only been required when developing under hori-
zontal ultramafic lamprophyres, in large spans, or
to support stope walls to inhibit over-break to
development shoulders or intrusive contacts.
www.kingsgate.com.au Seismicity
Challenger has never experienced a significant
seismic event and seismicity at the mine is very
low. One seismic array is currently operational at
depth underground, providing Continuous infor-
mation on mine seismicity. The Institute of Mine
Seismicity, process the seismic data weekly and
provide weekly, monthly and quarterly reporting.
Resource development
Underground diamond drilling focused primarily
on resource development of Challenger West, as
production focus switched from the lower mine
M1 and M2 shoots to higher grade Challenger
West lodes above the 500mRL.
A total of 28,199 metres of BQ drill core was
drilled from underground during the year,
comprising 9,557 metres of development drilling
into targets within the 2013 reserve base and
18,642 metres of exploration drilling into
targets outside the 2013 reserves.
Challenger West
Development and resource development drilling
was conducted targeting Challenger West from
the 1130mRL down to the 50mRL. Drilling
continues to reveal significant changes in lode
geometry both up and down plunge from the
800-790 levels where mining of Challenger West
commenced.
The narrow widths and extreme boudinaging
which is characteristic of the high-strain Chal-
lenger West lodes continues to present chal-
lenges for successful delineation and modelling
of the economic mineralisation, both geometri-
cally and numerically.
Other shoot systems
Drilling continues to delineate opportunities on
parallel shoot systems in and around Challenger
West including the Aminus and Aminus Corridor
shoots and more broadly on the Challenger West
system at Challenger NW and Challenger SW.
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Surface Drilling
Challenger matrix
The Challenger Matrix drilling campaign
commenced late in the year with 2,285 metres of
the 3,617 metre program completed by year end.
The objective was to systematically drill the area
to the north of Challenger to attempt to locate a
new stand-alone ore body in an area that is
untested in many places from original surface
drilling. The campaign targeted the potential
continuation of the F3 fold, which is not well
defined from original surface drilling. Target
zones included Challenger Far West, Challenger
North West and Challenger North.
Visual inspection and logging of drill chips
identified “Challenger Style” vein quartz-feld-
spar with cordierite plus sulphides in some holes,
however most were narrow zones (1-2 metres
with <40% veining). Samples were processed at
the Challenger lab and assays were received for
the first three holes by year-end with no signifi-
cant intersections. The initial interpretation is
encouraging but unfortunately no thick inter-
sections with >50% veining (M1-style) have been
identified so far.
The Challenger Matrix model can be expanded
upon from its current form if the recent drilling
identifies an antiformal feature at Challenger
North. Further drill targeting could be
conducted on the northern limb which has
historically been the most endowed location at
Challenger at all scales in the other shoots.
Potential remains for further unidentified ore
shoots within the Challenger Matrix structural
framework where historical surface drilling has
been relatively sparse, or where the shoots have
a greater unrealised endowment at depth than
apparent in the associated surface drilling of the
features. These include zones proximal to
existing underground infrastructure with little
or no underground drill testing in the past.
continuedu
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Operations Report
Challenger Sustainability
Employees
The Challenger workforce totalled 215 at the end
of the financial year comprising of 94 Kingsgate
personnel (employees and casual contractors to
fill vacancies); and 121 contractors. Contractors
on site include Byrnecut with 108 personnel
providing mining services; Sodexo with 10
personnel providing catering and cleaning
services; and Powerwest with three personnel
for power generation services. AWG air-leg and
rise mining services ceased in April 2014.
Turnover for Challenger permanent employees
during the financial year was 29%, with 28
terminations and 29 new starters.
Community
The remoteness of Challenger mine (270 km
by road from the nearest town at Glendambo),
reduces the capacity for local involvement with
surrounding communities. Challenger continued
to support its nearest communities with local
sponsorships including:
〉〉 Children’s Charity Network;
〉〉 Kingoonya Amateur Racing Club;
〉〉
The Royal Flying Doctor Service; and
〉〉
The Coober Pedy Amateur Racing Club.
Challenger is located within the Commonwealth
Government, Woomera Prohibitive Area. The
Department of Defence (“DOD”) continues to
utilise the area for rocket testing and other
commercial activities. In the last 12 years, there
has been no significant impact on mine opera-
tions by the DOD.
Challenger Mine has fostered strong relations
with the University of Adelaide over the past
10 years. Each year, selected students from the
Schools of Geology and Mining Engineering
undertake field trips to
Challenger, to experience a very comprehensive
and hands-on introduction to mining. Kingsgate
offers annual academic bursaries and prizes to
students in both disciplines.
Environment
Water usage
A total of 406,540 tonnes of water was used
to process 506,031 tonnes of ore during the
financial year with a ratio of 0.80 tonnes of
water to one tonne of ore. This compares to
436,540 tonnes to process 556,631 tonnes of
ore in the previous year at a ratio of 0.78 tonnes
water per tonne of ore and is the lowest water
volume extracted over the past six years. Water
usage was reduced onsite via recycling of super-
natant water from TSF#2 via the decant water
return system.
A supplementary groundwater abstraction bore
RBDW3 was changed from a dewatering bore to
a water supply bore to supplement the supply of
potable water made available to the accom-
modation camp and the processing plant.
Incidents
A total of 25 environmental incidents were
recorded internally during the reporting period,
however, there were no environmental incidents
required to be reported to government regula-
tors with the incidents assessed as being low
risk. All incidents were investigated and were
closed out before the end of the financial year.
Environmental compliance audit
An independent environmental compliance audit
was undertaken by environmental consultants
Outback Ecology (a subsidiary of MWH Australia
Pty Ltd) in February 2014. The compliance report
was submitted to the Department for Manufac-
turing, Innovation, Trade, Resources and Energy
(“DMITRE”) as part of the annual Mining and
Rehabilitation Compliance Report (“MARCR”)
in April 2014. The compliance audit identified
action tasks that are in various stages of
completion.
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Operations Report
Environmental Monitoring Programs
Flora and fauna
Independent environmental specialists under-
took environmental surveys during the spring of
2013. The surveys report that mining operations
at Challenger have no significant impacts on
flora and fauna assemblages and communities
surrounding the mine site.
Full details of all environmental monitoring
reports and a detailed review of all environ-
mental issues are contained within the 2014
MARCR. The MARCR can be downloaded from
DMITRE’s website www.minerals.dmitre.sa.gov.
au and can be found using the search word
“Challenger”.
Water quality
The Annual Groundwater Review Report indi-
cated that groundwater samples collected from
the mine site’s groundwater monitoring
network (CNWAD and metals) all generally
remain below the relevant guidelines, and in
many instances near or below the Limit of
Reporting.
Concentrations of CNWAD analysed from
groundwater samples collected from monitoring
bores surrounding the Integrated Waste
Landform (“IWL”) suggest the natural attenua-
tion of cyanide is occurring and containment
measures in place for process water and tailings
slurry are performing as designed.
Cyanide management
Groundwater monitoring bores located around
the IWL were sampled quarterly in-line with
Challenger’s approved PEPR. The supernatant
pool water was well managed throughout the
year with the cyanide concentration remaining
below the adopted guideline limit of 0.5mg/L
within the TSF. To date, the cyanide groundwater
quality has remained below the revised reporting
limit of 0.08 mg/L.
Rehabilitation
Ecosystem function analysis was conducted on
seven previously established monitoring sites
and two new monitoring sites at Challenger in
July 2013. Natural acacia and chenopod sites
located within the mining lease were monitored
and compared with the eastern and western IWL
monitoring sites. The three rehabilitation areas
were also compared against the completion
criteria thresholds set for rehabilitation on the
Challenger mine site. Of the seven criteria, the
IWL Eastern Wing landform and the IWL
Western Wing landform met five of the criteria
and TSF#2 achieved three of the completion
criteria standards.
Some progressive rehabilitation was undertaken
throughout the year including capping the
surface of TSF#1 with fresh waste rock. There is
approval to raise the level of TSF#1 further, but
at this stage no decision has been made.
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Dust monitoring
The triennial noise and hygiene survey is sched-
uled for the following reporting period (late
2014). Dust monitoring was conducted on a
quarterly basis throughout the reporting period
and included both respirable and particulate
dust monitoring. All respirable dust results were
below the set exposure standards for atmos-
pheric contaminates. Higher than limit inhalable
dust results were recorded from the laboratory
technician and crusher operator, who wear P2
dust masks as personal protective equipment to
reduce the amount of dust inhaled. Under-
ground dust results were all below the recom-
mended limits.
Emissions
Data was collated from 1st July 2013 to 30th
June 2014 for the National Pollutant Inventory
emissions data and was submitted under the
National Greenhouse and Energy Reporting
(“NGER”) Act 2007. The NGER report contains
information in relation to the greenhouse gas
emissions, energy production and energy
consumption of Challenger. Total estimated
emissions for 2014 were 38,500t, a 2% reduc-
tion on the estimated level for 2013.
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Bowdens
Silver Project
NSW, Australia
Summary
Kingsgate Bowdens Pty Limited holds six
Exploration Licences (“ELs”) located in the Lue/
Rylstone area of central western NSW. EL 5920
is divided into two separate areas, one containing
the Bowdens project, adjacent to the village of
Lue, and the second to the west of the town
of Rylstone.
Silver mineralisation was discovered at Bowdens
in the mid 1980’s. Programs of geophysical and
geochemical exploration have been undertaken
in various forms since that time.
Steady progress was made towards the
completion of the Definitive Feasibility Study
(“DFS”) and the Environmental Impact Statement
(“EIS”) during 2014, which were synchronised to
deliver cost savings and operational efficiencies.
The synchronisation of the two key studies at
Bowdens was part of a broader suite of measures
adopted by Kingsgate during the year to manage
the ongoing volatility of the metal price.
In December 2013, Kingsgate completed four
diamond and eight RC drill holes comprising
2,795 metres as a part of the plant sterilisation
drilling program. The sterilisation drilling
program confirmed that there is no significant
mineralisation under the proposed plant site.
Further exploration within the tenement
holdings included structural mapping and a data
review to assist in identifying regional targets
throughout the exploration licence areas.
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The preparation for lodgement of the EIS to the
NSW Department of Planning continues and it
is envisaged that it will be completed in the
current year.
Data collection for flora and fauna, surface water,
groundwater, meteorology, ambient noise and
dust levels continue routinely. Similar studies of
cultural heritage, social-economic impact, traffic
impact, soil type and agricultural suitability have
also been undertaken on the project site.
There have been no serious safety incidents
reported to date. At the end of June 2014, there
were over 940 days free of Lost Time Injury since
Kingsgate exploration and pre-development
activities began on site.
Environmental, regulatory and NSW Government
approvals remain a key determinant for the
timing of project development at Bowdens,
including recent NSW Land and Environment
Court decisions. All of these elements are being
included in the preparation of the EIS, and are
helping shape its final form.
Community relations were undertaken through-
out the year utilising a variety of techniques
including: letters, telephone calls, industry
presentations, site tours, and community and
governmental meetings. To date, more than
60 people have taken a tour of the Bowdens
Silver Project.
Community consultation remains an important
aspect for the project and a series of community
based events are planned prior to the EIS lodge-
ment to ensure that all the stakeholders of the
Bowdens Silver Project are able to comment on
this important regional project.
continuedu
Geology
The Bowdens Silver Project is located on the
eastern margin of the Lachlan fold-belt and its
contact with the younger, on-lapping late
Permian, sedimentary units of the Shoalhaven
Group within the Sydney Basin. Bowdens is
hosted within flat-lying Early Permian Rylstone
Volcanics. The Rylstone Volcanics are partially
overlain by a sequence of marine sediments of
the Sydney Basin (Shoalhaven Group). The
Rylstone Volcanics range from 10 to 200 metres
thick and are dominated by silica rich volcani-
cally derived rocks.
The silver mineralisation occurs as flat-lying to
moderately dipping zones of disseminations and
silicic fracture-filling and is closely associated
with sulphides of iron, arsenic, lead and zinc.
High grade silver mineralisation is also hosted in
steeply-dipping fracture zones which contain
banded sulphide veins.
Resource
A resource estimate was completed in October
2012 in-line with the JORC 2012 code and the
total measured, indicated and inferred resource
(at 30 grams per tonne silver equivalent (AgEq)
lower cut-off grade) is 182 million ounces of AgEq.
No changes have been made to the estimation
during 2013–2014, as no additional resource
drilling was undertaken.
Definitive Feasibility Study,
Environmental Impact
Statement and Approvals
During 2014, the synchronisation of both the
DFS and EIS identified two long lead items
that needed detailed design work before final
completion.
These two areas are the ground and surface
water management, and the preferred route for
the 132kW power transmission line. Specialist
consultants are finalising detailed studies on
these areas.
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Nueva Esperanza
Project
Chile
Summary
The Nueva Esperanza Project is 100% owned by
Kingsgate since February 2012. The project is
located in the Maricunga Gold Belt near
Copiapó, a regional mining centre in Northern
Chile. The gold and silver-rich mineralisation is
hosted by the Esperanza high-sulphidation
epithermal alteration system associated with
the Cerros Bravos volcanic complex.
The project consists of three well-defined miner-
alised deposits and a number of undeveloped
exploration targets. The main deposits are
Arqueros, Chimberos and Teterita. Arqueros was
previously mined on a limited scale by under-
ground methods and Chimberos was exploited
as an open pit mine, delivering about 40 million
ounces of silver in 1998/1999. All three deposits
have a combined Mineral Resources of approxi-
mately 93 million ounces of silver equivalent or
1.6 million ounces of gold equivalent (EQ60)1.
A feasibility study at Nueva Esperanza was
completed in March 2014, demonstrating that
open cut mining at three million tonnes per year
and processing by heap leaching with cyanide is
technically feasible and economically viable.
Environmental approvals to commence
construction and mining at Nueva Esperanza
were granted in July 2013 for the original
Arqueros project. A modification of the approval
has been applied for to incorporate the heap
leach process, on-site power generation and
additional waste dumps and open cut mining for
all three deposits.
1
Equivalence is based on gold/silver price
ratio of 60. Gold equivalence = gold
content plus (silver content divided by 60),
whereas Silver equivalent = silver content
plus (gold content times 60).
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The silver and gold mineralisation is hosted
within tertiary-aged volcanic units at Arqueros
and Teterita, and in Paleozoic sediments at
Chimberos. The alteration and mineralisation are
all Miocene in age and associated with the
Cerros Bravos paleovolcano.
Mineralisation comprises two main compo-
nents; silver-rich horizontal units termed
‘mantos’ (Spanish for blanket) and a series of
near-vertical, cross-cutting gold-rich structures.
The mantos silver mineralisation is hosted by
vuggy silica within dacitic lapilli tuff. Mantos
occurs at Arqueros and Teterita where the
mineralising process has replaced horizontal
porous tuffs. At Chimberos, silver mineralisation
is hosted in vuggy silica hydrothermal breccia
superimposed on folded Paleozoic sediments.
The vertical gold-rich mineralisation, also charac-
terised by vuggy silica, is well-developed at
Arqueros. It has been interpreted as feeders for
mineralising fluids. Nonetheless, this style of
mineralisation has not yet been observed at
Teterita.
Resource
Kingsgate has previously published the
combined Measured, Indicated and Inferred
Mineral Resource for the Nueva Esperanza
Project (refer to page 32), based on the resource
block modelling of Arqueros, Chimberos and
Teterita. This has been estimated at a cut-off
grade of 0.5 grams per tonne (g/t), gold equiva-
lent (AuEq60) to be 28.9 million tonnes at
0.27g/t gold and 84g/t silver.
This represents about 250,000 ounces of gold
and 78.5 million ounces of silver. The Measured
and Indicated Mineral Resource was estimated
at 22.8 million tonnes at 0.26g/t gold and 89g/t
silver, representing 190,000 ounces of gold and
65.1 million ounces of silver. The Measured,
Indicated and Inferred Resource may be
expressed in gold or silver equivalent ounces as:
〉〉 Gold equivalent ounces (AuEQ60): 1.6
million ounces at 1.7g/t gold equivalent; and
〉〉 Silver equivalent ounces (AgEQ60): 93.5
million ounces at 100g/t silver equivalent.
continuedu
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Feasibility Study
Environmental Study
A Definitive Feasibility Study has been
completed with the focus on the open cut
mining of the Arqueros, Chimberos and Teterita
deposits to extract three million tonnes of ore
annually for processing by heap leaching with
cyanide to produce an average silver-rich doré
of approximately 7.4 million silver equivalent
ounces (AgEq60). Power will be generated
on-site and water pumped from near-by water
bores.
Kingsgate’s strategic plan is to bring the project
into production with an initial mine life of six
years, which will provide an operating base to
explore and identify additional areas of minerali-
sation within the current exploration license
areas. There is a potential upside to the project’s
economic viability and mine life through:
〉〉 Conversion of Inferred Resources within the
global resource base; and
〉〉 Definition of resources at already identified
exploration targets within the Mining Lease.
The key conclusions of the study are presented
in the Table opposite. The initial capital expendi-
ture is US$143 million plus working capital (first
fill, spares and operating costs) of approximately
US$11 million.
The existing environmental approval for the
project that was granted in July 2013, has been
modified to take into account the process route
change to heap leaching, on-site power genera-
tion, additional waste dumps for Teterita and
Chimberos, and the mining of those deposits.
The modified environmental plan has been
submitted to the Chilean authorities for
approval, which once received will facilitate the
process of applying for a license to operate and
various permits associated with the mine site
and associated infrastructure.
Initial mine life
> 6 years
Extendable through conversion of
inferred resources, and development
of satellite mineralisation
Annualised production
3 million tonnes
Optimised for maximum revenue
Silver & gold recovered
(annual average)
6.3 million oz silver; and
17,900 oz gold
7.4 million oz silver equivalent; or
123,500 oz gold equivalent
Silver & gold recovered
(life of mine)
38.2 million oz silver; and
107,900 oz gold
44.6 million oz silver equivalent; or
744,200 oz gold equivalent
Life of mine strip ratio
5.7 (waste/ore)
Includes ramps and banks
Initial capital cost
(Capex)
US$143 million
Based on contract mining
Total capital (life of mine)
US$160 million
Includes US$17 million sustaining capital
Recovery
Average cash
operating cost
71% silver and
75% gold
Gold mineralisation only present at
Arqueros and Chimberos
US$11.35/oz AgEq; or
US$681/oz AuEq
Includes all royalties & mining tax but
excludes sustaining capital
www.kingsgate.com.au
31
Exploration Report
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Exploration
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Summary
Kingsgate has a portfolio of exploration tene-
ments and applications in Thailand, Chile, Lao
PDR and Australia. Exploration in Australia is
currently only conducted in the vicinity of the
Challenger Mine in South Australia and the
Bowdens Silver Project in New South Wales.
Kingsgate’s South East Asian exploration team
continues to focus on exploration opportunities
in Thailand and surrounding countries. Strategi-
cally, the team has turned the majority of their
attention to projects which have the capacity to
add value to the Company through exploration
drilling and subsequent resource expansion.
These projects include the granted Mining
Leases at Chatree and the granted Sayabouly
Concession in the Lao PDR.
LAO PDR Exploration
Within the Lao PDR, exploration activity focused
within the granted concession area at the Phulon
multi-element Prospect and the new Nahkan
Gold Prospect.
The Phulon Prospect represents an extensive
Copper (Cu), Platinum (Pt) and Nickel (Ni) surface
anomaly which has been tested with broad spaced
trenches. Results include 2.0 metres at 1.73 ppm
Pt and a broad zone Ni mineralisation including
51 metres at 1.0% Ni and 34 metres at 1.1% Ni.
The style of mineralisation is thought to be similar
to Copper and Platinum Group Element deposits
such as the Great Dyke Deposits in Zimbabwe.
Surface 3D induced polarisation geophysics has
identified several targets below these results
which support drill testing in the future.
At the Nahkan Prospect, recent field activities
have discovered high grade gold in quartz veins in
several creek systems. Preliminary reconnaissance
trenches in areas adjacent to these creeks have
successfully defined a potential source to some
of the high grade gold observed within the quartz
veins. Highlight channel samples include 4 metres
at 12.8g/t gold, 5 metres at 6.7g/t gold and
4 metres at 7.5g/t gold.
The veins are hosted within a granodiorite
intrusion that underlies several metres of
overburden. Geophysics in the form of gradient
array induced polarisation (“IP”) was recently
completed over the Nahkan Prospect and the
results show good correlation with several of the
quartz vein systems observed in the trenches. IP
is considered to be a useful tool for the targeting
of additional trenches across the vein system
and subsequent drilling after the wet season.
Outside of these active areas, the South East
Asian exploration team continues to review new
opportunities throughout Thailand, Lao PDR and
their neighbouring countries.
continuedu
32
Ore Reserves and Mineral Resources
Ore Reserves and Mineral Resources
as at 30 June 2014
Challenger, Chatree and Nueva Esperanza Ore Reserves
Source
Challenger
Chatree
Nueva Esperanza
Total
Category
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Tonnes
(Million)
Gold
(g/t)
Silver
(g/t)
Lead
(%)
Zinc
(%)
Au Equiv
(g/t)
Ag Equiv
(g/t)
Gold
(M oz)
Silver
(M oz)
Au Equiv
(M oz)
Ag Equiv
(M oz)
Grade
Contained Metal
0.06
0.78
0.84
42.4
12.0
54.4
–
17.1
17.1
42.5
29.9
72.3
5.63
5.78
5.77
0.80
0.77
0.80
–
0.27
0.27
0.81
0.61
0.73
–
–
–
9.69
7.70
9.25
–
97
97
9.68
59
30
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5.63
5.78
5.77
0.88
0.83
0.87
–
1.89
1.89
0.89
1.57
1.17
355
364
363
108
102
107
–
113
113
109
116
112
0.01
0.14
0.16
1.09
0.30
1.39
–
0.15
0.15
1.10
0.59
1.69
–
–
–
13.2
3.0
16.2
–
53.5
53.5
13.2
56.5
69.7
0.01
0.14
0.16
1.20
0.32
1.52
–
1.04
1.04
1.21
1.51
2.72
0.7
9.1
9.8
148
39.5
187
–
62.5
62.5
148.4
111.1
259.6
Challenger, Chatree and Nueva Esperanza Mineral Resources (inclusive of Ore Reserves)
Tonnes
(Million)
Gold
(g/t)
Silver
(g/t)
Lead
(%)
Zinc
(%)
Au Equiv
(g/t)
Ag Equiv
(g/t)
Gold
(M oz)
Silver
(M oz)
Au Equiv
(M oz)
Ag Equiv
(M oz)
Grade
Contained Metal
0.37
1.59
0.58
2.54
86.7
49.7
44.9
181.3
1.5
21.3
6.1
28.9
88.6
72.6
51.6
212.7
7.34
7.87
7.88
7.80
0.71
0.64
0.58
0.66
0.01
0.28
0.30
0.27
0.73
0.69
0.63
0.69
–
–
–
–
7.71
5.94
4.63
6.46
101
88
67
84
9.26
29.9
12.0
17.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7.34
7.87
7.88
7.80
0.77
0.69
0.62
0.71
1.69
1.75
1.42
1.67
0.82
1.16
0.79
0.93
462
496
496
491
95.0
84.7
76.0
87.5
102
105
85
100
96.7
99.6
81.8
94.1
0.09
0.40
0.15
0.64
1.98
1.02
0.84
3.84
0.00
0.19
0.06
0.25
2.07
1.62
1.04
4.73
–
–
–
–
21.5
9.5
6.7
37.7
4.9
60.3
13.1
78.3
26.4
69.8
19.8
115.9
0.09
0.40
0.15
0.64
2.15
1.10
0.89
4.15
0.08
1.20
0.28
1.56
2.32
2.70
1.32
6.34
5.5
25.3
9.3
40.1
265
135
109.7
510
4.9
71.8
16.7
93.3
275
232
136
643
Source
Challenger
Chatree
Nueva Esperanza
Total
Category
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
www.kingsgate.com.au
www.kingsgate.com.au 33
Ore Reserves and Mineral Resources
Bowdens Mineral Resources
Grade
Contained Metal
Source
Bowdens
Category
Measured
Indicated
Inferred
Total
Tonnes
(Million)
Gold
(g/t)
Silver
(g/t)
23.6
28.4
36.0
88.0
–
–
–
–
56.6
48.0
41.0
47.4
Lead
(%)
0.31
0.27
0.30
0.29
Zinc
(%)
0.41
0.36
0.40
0.39
Au Equiv
(g/t)
Ag Equiv
(g/t)
Gold
(M oz)
Silver
(M oz)
Au Equiv
(M oz)
Ag Equiv
(M oz)
1.64
1.40
1.27
1.41
74.5
63.6
58.0
64.4
–
–
–
–
43.0
43.8
47.5
134.1
1.25
1.28
1.47
4.00
57
58
68
182
Group Total Mineral Resources
300.7
0.49
25.9
–
–
1.07
85.3
4.73
250.04
10.34
825
Notes to the Ore Reserves and Mineral Resources Table:
Some rounding of figures may cause numbers to not add correctly
(1) Nueva Esperanza Equivalent factors:
• Silver Equivalent: AgEq (g/t) = Ag (g/t) + Au (g/t) x 60
• Gold Equivalent: AuEq (g/t) = Au (g/t) + Ag (g/t) / 60
Calculated from prices of US$1380/oz Au and US$21.50/oz Ag, and metallurgical
recoveries of 70% Au and 75% Ag estimated from test work by Kingsgate.
(2) Bowdens equivalent factors:
• Silver equivalent: AgEq (g/t) = Ag (g/t) + 27.5 x Pb (%) + 22.8 x Zn (%)
Calculated from prices of US$26.33/oz Ag, US$1250/oz Au, US$2206/t Pb, US$2111/t
Zn and metallurgical recoveries of 72% Ag, 75% Pb, and 66% Zn estimated from test
work by Kingsgate.
• Gold equivalent: AuEq (g/t) / 46
Calculated from prices of US$1200/oz Au, US$26.33/oz Ag
(3) Chatree Equivalent factors:
• Chatree gold Equivalent: AuEq/t = Au (g/t) + Ag (g/t) / 123
• Silver Equivalent: AgEq g/t = Au (g/t) x 123 + Ag g/t
Calculated from prices of US$1350/oz Au and US$21.50/oz Ag and metallurgical
recoveries of 83.2% Au and 42.6% silver based on metallurgical test-work and plant
performance.
(4) Challenger Equivalent factors:
• Silver Equivalent: AgEq/t = Au (g/t) x 63
Calculated from prices of US$1350/oz Au and US$21.50/oz Ag and consistent metal-
lurgical recoveries for gold and silver.
(5) Cut-off grades for Resources are:
Chatree 0.30 g/t Au, Nueva Esperanza 0.5g/t AuEq, Bowdens 30g/t AgEq, Challenger
underground 5.0 g/t Au, Challenger open pit 1.5 g/t Au and Challenger stockpile
variable.
(6) Cut-off grades for Reserves are:
Chatree 0.35g/t Au, Nueva Esperanza 0.5g/t AuEq, Bowdens 30g/t AgEq, Challenger
underground 5.0 g/t Au, Challenger stockpile variable.
(7) In the Company’s opinion all the elements included in the metal equivalent calculations
have a reasonable potential to be recovered.
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Competent Persons Statement
All of the Company’s Mineral Resources and Ore
Reserves are internally peer reviewed at the time of
estimation and are subject to ongoing review, as and
when required. Should any Mineral Resources or Ore
Reserves be utilised within a Bankable or Definitive
Feasibility Study, it is expected that an audit by inde-
pendent experts would be conducted. For both mine
sites, ongoing reconciliations between Mineral
Resource, Ore Reserve, mining production, mill feed
tonnes and grade are completed on a regular basis and,
to date, there have been no material differences
identified in any of these processes.
The information relating to Nueva Esperanza Mineral
Resources and Ore Reserves is extracted from an ASX
announcement by Kingsgate titled “Nueva Esperanza,
Chile – Definitive Feasibility Study Delivers Strong
Results” from 17 March 2014.
The information relating to Bowdens Mineral Resources
is extracted from an ASX announcement by Kingsgate
titled “Bowdens Mineral Resource Report 2013” from
18 October 2013.
The above-mentioned announcements are available to
view on Kingsgate’s public website (http://kingsgate
consolidated.com.au). The Company confirms that is not
aware of any new information or data that materially
affects the information included in the original market
announcement and, in the case of estimates of Mineral
Resources or Ore Reserves that all material assumptions
and technical parameters underpinning the estimates in
the relevant market announcements 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
altered from the original announcement.
In this report, information concerning Chatree Explora-
tion Results, Mineral Resources and Ore Reserves
estimates is based on information compiled by the
following Competent Persons: Ron James, Brendan
Bradley, Maria Munoz, Rob Kinnard and Suphanit
Suphananthi who are employees of the Kingsgate
Group. All except Brendan Bradley are members of The
Australasian Institute of Mining and Metallurgy;
Brendan Bradley is a member of the Australian Institute
of Geoscientists. These people qualify as Competent
Persons as defined in the Australasian Code for
Reporting of Exploration Results, Mineral Resources
and Ore Reserves (the JORC Code, 2012 edition) and
possess relevant experience in relation to the minerali-
sation of being reported herein as Exploration Results,
Mineral Resources and Ore Reserves. Each Competent
Person has consented to the public reporting of these
statements and the inclusion of the material in the
form and context in which it appears.
Additional information on the compilation of Chatree
Mineral Resources and Ore Reserves can be found in
Table 1 that was appended to an ASX announcement
by Kingsgate titled “Chatree 2013 Mineral Resources
and Ore Reserves” on 29 July 2013.
In this report, information concerning Challenger
Exploration Results, Mineral Resources and Ore
Reserves estimates is based on information compiled by
Stuart Hampton and Luke Phelps who are employees of
the Kingsgate Group. Both are members of The Australa-
sian Institute of Mining and Metallurgy. These people
qualify as Competent Persons as defined in the Australa-
sian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (the JORC Code, 2012
edition) and possess relevant experience in relation to
the mineralisation being reported herein as Exploration
Results, Mineral Resources and Ore Reserves. Each
Competent Person has consented to the public
reporting of these statements and the inclusion of the
material in the form and context in which it appears.
Additional information on the compilation of Challenger
Mineral Resources and Ore Reserves can be found in
Table 1 that was appended to an ASX announcement by
Kingsgate titled “Challenger Gold Operations Mineral
Resources Update” on 30 September 2013.
34
Corporate Governance Statement
Corporate Governance
Statement
Corporate Governance Practices
This statement provides an outline of the main
corporate governance policies and practices that
the Company had in place during the financial
year.
The Board places considerable importance on
high standards of ethical behaviour, governance
and accountability. The Board is committed to
ensuring its corporate governance policies
adhere, as much as is practicable, to the ASX
Corporate Governance Council’s Corporate
Governance Principles and Recommendations.
The Board has recognised the need for the
continual development of the Company’s
corporate governance policies and practices,
particularly in view of the Australian Securities
Exchange Corporate Governance Principles and
Recommendations with 2010 Amendments.
Roles and Responsibilities
of the Board
The Board of Directors is accountable to share-
holders for the proper and prudent investment
and preservation of shareholder funds.
The Board is responsible for:
〉〉 Overseeing the Company, including its
control and accountability systems;
〉〉
Providing leadership of the Company within
a framework of prudent and effective
controls which enable risks to be assessed
and managed;
〉〉 Providing input into and final approval of
management’s development of corporate
strategy and performance objectives;
〉〉 Reviewing, ratifying and monitoring systems
of risk management and internal control,
codes of conduct and legal compliance;
〉〉 Setting the Company’s direction, strategies
and financial objectives;
〉〉
Ensuring compliance with regulatory and
ethical standards;
〉〉 Approving and monitoring the progress of
major capital expenditure, capital manage-
ment and acquisitions and divestitures;
www.kingsgate.com.au
〉〉 Approving and monitoring financial and
other reporting;
〉〉 Appointing, terminating and reviewing the
performance of the Chief Executive Officer;
〉〉 Ratifying the appointment and the termina-
tion of senior executives;
〉〉 Monitoring senior executives’ performance
and implementation of strategy; and
〉〉
Ensuring appropriate resources are available
to senior executives.
Responsibility for the day-to-day management
of the Company is delegated to the Chief
Executive Officer and the senior executives.
In carrying out its duties the Board meets formally
at least nine times per year. Additional meetings
are held to address specific issues or are held as
the need arises. Directors also participate in
meetings of various Board committees. In the
financial year ending 30 June 2014, the Board met
fifteen times and there were eight Committee
meetings.
Composition of the Board
The Board may, in accordance with the Company’s
constitution, be comprised of a minimum of three
and a maximum of ten Directors.
The roles of the Non-Executive Chairman and the
Chief Executive Officer are exercised by different
individuals.
During the majority of the 2014 financial year
there were five Directors. Details of the Directors
who held office during the 2014 financial year,
including their qualifications, experience and the
period for which each Director has held office is
set out on page 47 of this Report. On 1 June
2014, Mr Gavin Thomas resigned from the Board
as Managing Director of the Company. On 1 July
2014, Mr Peter Warren was appointed as a
Non-Executive Director.
At each Annual General Meeting of the
Company, one third of the Directors (or the
number nearest one-third) must retire from
office. In addition any other Director who has
held office (without re-election) for three years
or more must also retire from office. The
Directors to retire at any Annual General
Meeting must be those who have been in office
the longest since their last election. The retire-
ment of Directors who were elected on the same
day, must be determined by lot (unless they
agree otherwise between themselves). A retiring
Director is eligible for re-election.
A Director appointed to fill a casual vacancy or
as an addition to the existing Directors will hold
office until the next Annual General Meeting at
which he or she may be re-elected.
Any Director appointed as an additional or
casual Director, is not to be taken into account
in determining the Directors who are required to
retire by rotation.
Director Independence
The Board considers that independence from
management and non-alignment with other
interests or relationships with the Company is
essential for impartial decision-making and
effective governance.
Directors are deemed to be independent if they
are independent of management and have no
material business or other relationship with the
Company that could materially impede their
objectivity or the exercise of independent judge-
ment or materially influence their ability to act in
the best interests of the Company.
For the 2014 financial year, four of the Compa-
ny’s Directors (including the Non-Executive
Chairman) were considered by the Board to be
independent throughout the year. Those Direc-
tors were Mr Ross Smyth-Kirk, Mr Peter McAleer,
Mr Craig Carracher and Mr Peter Alexander.
Mr Peter Warren has provided consultancy
services to the Company within the last three
years. Notwithstanding this, he is considered to
be an independent Director because the services
have been provided with respect to a specific
project which would not interfere with his
capacity to bring an independent judgement
to bear on issues before the Board.
In assessing independence, the Board has
regard to whether any Director:
35
Corporate Governance Statement
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〉〉
Is a substantial shareholder of the Company
or an officer of, or otherwise associated
directly with, a substantial shareholder of
the Company;
〉〉
Is employed, or has previously been
employed in an executive capacity by the
Company, and there has not been a period
of at least three years between ceasing such
employment and serving on the Board;
〉〉 Has within the last three years been a prin-
cipal of a material professional adviser or a
material consultant to the Company, or an
employee materially associated with the
above mentioned adviser / consultant;
〉〉
Is a material supplier or customer of the
Company, or an officer of or otherwise
associated directly or indirectly with a
material supplier or customer; and
〉〉 Has a material contractual relationship with
the Company other than as a Director.
The concept of ‘materiality’ is considered from
both the Company and the individual Director
perspective. The determination of materiality
requires consideration of both quantitative and
qualitative elements. An item is presumed to be
quantitatively immaterial if it is equal or less
than 5% of the appropriate base amount. It is
presumed to be material (unless there is qualita-
tive evidence to the contrary) if it is equal to or
greater than 10% of the appropriate base
amount. Qualitative factors considered include
whether a relationship is strategically important,
the competitive landscape, the nature of the
relationship and the contractual or other
arrangements governing it and other factors.
Appointment of Directors
Nominations of new Directors, recommended
by the Nomination Committee, are considered
by the full Board.
The Nomination Committee employs external
consultants to access a wide base of potential
Directors, considering their range of skills and
experience required in light of the:
〉〉 Current composition of the Board;
〉〉 Need for independence;
〉〉
〉〉 Strategic direction and progress of the
The Company’s Diversity Policy;
Company; and
〉〉 Nature of the Company’s business.
The Board assesses nominated Directors against
a range of criteria including experience, profes-
sional expertise, personal qualities, potential
conflicts of interest and their capacity to
commit themselves to the Board’s activities.
Performance Review of the
Board and Senior Executives
Each year the Board receives reports from
management detailing interactions with and
outlining the expressed views of the Company’s
shareholders. The Nomination Committee is
responsible for evaluation of the Board, its
committees and its key executives.
Performance evaluations of the Board, its
committees, the individual Directors and key
executives were undertaken in the 2014 financial
year in accordance with the above processes.
The Chief Executive Officer undertakes an
annual review of the performance of each senior
executive against individual tasks and objectives.
Independent Professional Advice
Directors are able to access members of the
management team at any time to request
relevant information.
It is also Board policy that Directors may seek
independent advice at the Company’s expense.
Board Committees
To assist the Board in fulfilling its responsibili-
ties, the Board has established three commit-
tees to consider certain issues and functions.
These committees are as follows:
〉〉 Audit Committee;
〉〉 Remuneration Committee; and
〉〉 Nomination Committee.
Each committee operates under its own charter.
Audit Committee
The members of the Audit Committee as at the
date of this Report are:
〉〉 Mr Peter Warren (Chairman of Audit
Committee);
〉〉 Mr Peter McAleer; and
〉〉 Mr Ross Smyth-Kirk.
The Committee has appropriate financial exper-
tise. All members of the Committee are financially
literate and have an appropriate understanding of
the industry in which the Company operates.
The Audit Committee’s role is to assist the Board
to fulfil its responsibilities associated with the
Company’s accounts, its external financial
reporting, its internal control structure, risk
management systems and audit function. The
primary functions of the Audit Committee are to:
〉〉 Review the financial information provided by
the Board to shareholders and other parties
ensuring that it is true and fair and complies
with relevant accounting standards;
〉〉
Ensure that corporate risk management
policies and internal controls are in place
and are maintained in accordance with appro-
priate standards and statutory requirements;
〉〉 Oversee and evaluate the quality of the
audits conducted by the external auditors;
〉〉 Provide for open communication between
the external auditors and the Board for the
exchange of views and information; and
〉〉 Recommend to the Board the nomination
and remuneration of the external auditors
and ensure their independence and integrity.
In fulfilling its responsibilities, the Audit
Committee has rights of access to management
and to auditors (external and internal) without
management present and may seek explanations
and additional information.
The Audit Committee met three times during
the 2014 financial year.
The Audit Committee operates in accordance
with a charter published in the ‘Corporate
Governance’ section of the Company’s website.
Auditor Independence
and Engagement
The charter adopted by the Audit Committee
confirms its role in assisting the Board in respect
of the appointment, compensation, retention
and oversight of the Company’s external
auditors. The external auditors are required to
confirm that they have maintained their inde-
pendence in accordance with the Corporations
Act 2001 (Cth) and the rules of professional
accounting bodies.
The performance of the external auditor is
reviewed annually and applications for tender
of external audit services are requested when
deemed appropriate, taking into consideration
assessment of performance, existing value and
tender costs.
An analysis of fees paid to the external auditors,
including a breakdown of fees for non-audit
services, is provided in the Directors’ Report. It
is the policy of the external auditors to provide
an annual declaration of their independence to
the Audit Committee.
The external auditor is requested to attend the
Company’s Annual General Meeting and be
available to answer shareholder questions about
the conduct of the audit and the preparation
and content of the Audit Report.
continuedu
Directors' Report
36
PricewaterhouseCoopers was appointed as
external auditor of the Company for the 2014
financial year.
Risk Oversight and Management
The Board, through the Audit Committee, is
responsible for ensuring that there are adequate
policies in place in relation to risk management,
compliance and internal control systems.
Kingsgate has a systematic and structured risk
oversight and management program that
involves a detailed analysis of material risks to
the business and operates at various levels
underpinned by specific systems and procedures.
Risk monitoring, managing, mitigating and
reporting is conducted regularly and includes
the following:
〉〉 Regular internal management reporting;
〉〉 Reporting at Board and Committee meetings
by relevant managers;
〉〉 Site visits by the Board and senior
management;
〉〉
〉〉
Internal and external audits; and
Training, procedural manuals and meetings.
The Board has received assurance from the Chief
Executive Officer and the Chief Financial Officer
that the solvency declaration provided in accord-
ance with section 295A of the Corporations Act
2001 (Cth) is founded on a sound system of risk
management and internal control and that the
system is operating effectively in all material
respects in relation to financial reporting risks.
A summary of the Company’s Risk Oversight and
Management Policy is published in the ‘Corporate
Governance’ section of the Company’s website.
Remuneration Committee
The members of the Remuneration Committee
as at the date of this Report are:
〉〉 Mr Ross Smyth-Kirk (Chairman of Remunera-
tion Committee)
〉〉 Mr Peter Alexander;
〉〉 Mr Peter McAleer; and
〉〉 Mr Peter Warren.
The Remuneration Committee’s role is to
oversee the Company’s remuneration and
compensation plans.
To ensure that the review of remuneration
practices and strategies on which decision
making is based is objective and well founded,
the Remuneration Committee engages external
remuneration consultants.
The Remuneration Committee supports and
advises the Board in fulfilling its responsibilities
to shareholders by:
〉〉
Ensuring shareholder and employee interests
are aligned;
〉〉
Ensuring the Company is able to attract,
develop and retain talented employees;
〉〉 Recommending to the Board, with the Chief
Executive Officer, an appropriate executive
remuneration policy;
〉〉 Determining the remuneration of Directors;
〉〉 Having regard to the Company’s Diversity
Policy, including issues relating to remunera-
tion by gender;
〉〉 Reviewing and approving the remuneration
of those reporting directly to the Chief
Executive Officer and other senior execu-
tives, as appropriate; and
〉〉 Reviewing all equity based plans for approval
by the Board.
The Remuneration Committee operates in
accordance with the Company’s Remuneration
Policy. The policy is designed so that it motivates
senior executives to pursue the long-term growth
and success of the Company and demonstrates a
clear relationship between senior executives’
performance and remuneration.
The Remuneration Committee met four times
during the 2014 financial year.
The Remuneration Committee operates in accord-
ance with a charter published in the ‘Corporate
Governance’ section of the Company’s website.
Nomination Committee
The members of the Nomination Committee as
at the date of this Report are:
〉〉 Mr Ross Smyth-Kirk (Chairman of Nomina-
tion Committee)
〉〉 Mr Peter McAleer; and
〉〉 Mr Peter Warren.
The role of the Nomination Committee supports
and advises the Board in fulfilling its responsi-
bility to ensure that it comprises individuals who
are best able to discharge the responsibilities of
the Directors, having regard to the law and the
highest standards of governance, by:
〉〉 Assessing the skills required on the Board;
〉〉 Reviewing the structure, size and composi-
tion of the Board;
〉〉
From time to time assessing the extent to
which the required skills are represented on
the Board and ensuring an appropriate
succession planning is in place;
〉〉
〉〉
Establishing processes for the review of the
performance of individual Directors and the
Board as a whole, its committees and key
executives; and
Establishing processes for the identification
of suitable candidates for appointment to
the Board.
To ensure that the Board has an appropriate mix
of skills and experience, the Nomination
Committee will consider men and women from
diverse backgrounds for Board membership who
have demonstrated high levels of integrity and
performance in improving shareholder returns,
and who can apply such skills and experience to
the benefit of the Company.
The Nomination Committee met once during
the 2014 financial year.
The Nomination Committee operates in accord-
ance with a charter published in the ‘Corporate
Governance’ section of the Company’s website.
Ethical Standards and Code
of Conduct
The Board and the Company’s employees are
expected to maintain the highest level of corpo-
rate ethics and personal behaviour.
The Company has established a Code of
Conduct which provides an ethical and legal
framework for all employees in the conduct of
its business. The Code of Conduct defines how
the Company relates to its employees, share-
holders and the community in which the
Company operates.
The core values of the Code of Conduct are:
〉〉 Honesty and Integrity;
〉〉
〉〉
Fairness and Respect; and
Trust and Openness.
The Code of Conduct provides clear directions on
conducting business internationally, interacting
with governments, communities, business
partners and general workplace behaviour having
regard to the best practice corporate governance
models. The Code of Conduct sets out a behav-
ioural framework for all employees in the context
of a wide range of ethical and legal issues.
The Code of Conduct is published in the ‘Corpo-
rate Governance’ section of the Company’s
website.
Diversity
The Company has a policy to improve the diver-
sity of its workforce over time by identifying
women and individuals from under-represented
backgrounds for recruitment, and by rewarding
www.kingsgate.com.auCorporate Governance Statement 37
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and promoting employees on the basis of perfor-
mance. Because the Company, at this stage of
its development, has a small Board of Directors,
and a small management team which is
geographically dispersed and because of the
industry in which the Company operates, the
Board does not consider it to be practicable to
set measurable objectives to achieve greater
gender diversity at this time.
The Company aims to foster continuous improve-
ment in the area of diversity; building on achieve-
ment realised through the implementation of
historical diversity initiatives, by applying princi-
ples successfully used at our leading operation in
this area, to other parts of the business.
Our flagship ‘Chatree’ Mine in Thailand continues
to maintain equal representation by women on
the senior management team. Recruitment,
training and promotion principles employed at
Chatree are currently being applied to our ‘Chal-
lenger’ Mine in Australia, where we currently
have 15.3% representation of women across the
senior management and professional categories
and to other parts of the business.
The Company is seeking to improve the diversity
of its workforce over time by identifying women
and individuals from under-represented back-
grounds for recruitment, whilst continuing to
reward and promote employees on the basis of
performance.
Of note, the 2014 financial year has been charac-
terised by a significant reduction in employee
numbers within the Company limiting opportu-
nity through non-replacement of roles. There is
currently no representation by women on our
Board of Directors. Whilst this is in part reflective
of the relatively small size of the Board and stage
of development of key elements of the business,
it forms part of an overall business review process
to consider the issue of gender diversity at this
level and will be the subject of ongoing review.
The Board maintains this approach to be more
practicable than the setting of measurable
objectives at this stage. In addition, the Board
acknowledges the benefits of seeking to improve
gender diversity at all levels in the Company over
time and will keep this issue under review.
The Company considers that it will benefit from
its ongoing commitment to promote a diverse
workforce with treatment of employees and
future employees on the basis of merit, abilities
and potential, regardless of gender, colour,
ethnic or national origin, race, disability, age,
sexual orientation, gender reassignment, socio-
economic background, religious or political
belief, non/trade union membership, family
circumstances or other irrelevant distinction.
The Company has set various criteria and proce-
dures in order to support equality and diversity
in the workforce and applies these principles to:
〉〉 Provide fair access to workplace opportuni-
ties and benefits, including internal promo-
tion, leadership development, flexible work
practices and fair and comparable wages;
〉〉 Attracting and retaining a skilled and diverse
workforce;
〉〉 Creating an inclusive workplace culture where
discriminatory behaviour is unacceptable; and
〉〉 Providing an effective grievance mechanism
for employees.
Current Proportion of Women
Employees (Australian based employees)
Board
Senior Executives
Senior Managers
Managers
Professionals
Non-professionals
Total Workforce
0.0%
0.0%
0.0%
1.8%
6.3%
7.2%
15.3%
Share Trading Policy
In the interests of shareholder confidence and
compliance with insider trading laws, the
Company has formal policies governing the
trading of the Company’s securities by Directors,
officers and employees. Details of Directors’
shareholdings are disclosed in the Directors’
Report.
The policy prohibits Directors and employees
from engaging in short-term trading of any of
the Company’s securities and buying or selling
the Company’s securities if they possess unpub-
lished, price-sensitive information.
Directors and senior management may buy or
sell Company securities in the four week period
following significant announcements by the
Company, including the release of the quarterly
report, half-yearly results, the preliminary annual
results and the lodgement of the Company’s
Annual Report (subject to the prohibition of
dealing in the Company’s securities if they
possess unpublished price sensitive information).
Directors and senior management must also
receive approval from the Chairman before
buying or selling Company securities.
The Company’s Share Trading Policy is available
in the ‘Corporate Governance’ section of the
Company’s website.
Communication with
Shareholders and Continuous
Disclosure
The Company is committed to providing relevant
and timely information to its shareholders in
accordance with its continuous disclosure
obligations under the ASX Listing Rules and the
Corporations Act 2001 (Cth).
Information is communicated to shareholders
through the distribution of the Company’s
Annual Report and other communications. All
releases are posted on the Company’s website
and released to the ASX in a timely manner.
The Company has practices in place throughout
the year governing who may authorise and make
disclosures and the method by which the market
is to be informed of any price sensitive
information.
The Company Secretary is responsible for
communications with the ASX and ensuring that
the Company meets its continuous disclosure
obligations.
The Company’s Continuous Disclosure is avail-
able in the ‘Corporate Governance’ section of
the Company’s website.
Annual General Meeting
All shareholders are encouraged to attend and
participate in the Company’s Annual General
Meeting. Shareholders may attend in person or
send a proxy as their representative.
The Company’s external auditor is routinely
invited to and attends the Annual General
Meeting in order to respond to questions raised
by shareholders relating to the content and
conduct of the audit and accounting policies
adopted by the Company in relation to the
preparation of the financial statements.
Corporate Governance
Disclosure
The Company’s governance policies and proce-
dures comply in all substantial respects with the
Australian Securities Exchange Corporate
Governance Principles and Recommendations,
second edition with 2010 Amendments. The
Company will report against the third edition
with respect to the 2015 financial year. The
following table compares the ASX Recommenda-
tions and the Company’s corporate governance
policies and practices.
continuedu
Corporate Governance Statement
38
ASX Corporate Governance Principles and Recommendations
Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions.
Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions.
Companies should provide the information indicated in the Guide to reporting on Principle 1.
A majority of the Board should be independent Directors.
The Chair should be an independent Director.
The roles of Chair and Chief Executive Officer should not be exercised by the same individual.
The Board should establish a Nomination Committee.
Companies should disclose the process for evaluating the performance of the Board, its committees and individual Directors.
Companies should provide the information indicated in the Guide to reporting on Principle 2.
Companies should establish a code of conduct and disclose the code or a summary of the code as to:
〉 the practices necessary to maintain confidence in the Company’s integrity;
〉 the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and
〉 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
√
√
√
√
√
√
√
√
√
√
Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the
Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them.
√
*
Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the Board in accordance with the diversity
policy and progress towards achieving them.
Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and
women on the Board.
Companies should provide the information indicated in the Guide to reporting on Principle 3.
The Board should establish an Audit Committee.
The Audit Committee should be structured so that it:
〉 consists only of Non-Executive Directors;
〉 consists of a majority of independent Directors;
〉 is chaired by an independent Chair, who is not Chair of the Board; and
〉 has at least three members.
The Audit Committee should have a formal charter.
Companies should provide the information indicated in the Guide to reporting on Principle 4.
Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at
senior executive level for that compliance and disclose those policies or a summary of those policies.
Companies should provide the information indicated in the Guide to reporting on Principle 5.
Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general
meetings and disclose their policy or a summary of that policy.
6.2
Companies should provide the information indicated in the Guide to reporting on Principle 6.
Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.
The Board should require management to design and implement the risk management and internal control system to manage the Company’s material
business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the
effectiveness of the Company’s management of its material business risks.
The Board should disclose whether it has received assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent)
that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control
and that the system is operating effectively in all material respects in relation to financial reporting risks.
Companies should provide the information indicated in the Guide to reporting on Principle 7.
The Board should establish a Remuneration Committee.
The Remuneration Committee should be structured so that it:
〉 consists of a majority of independent Directors;
〉 is chaired by an independent Chair; and
〉 has at least three members.
Companies should clearly distinguish the structure of Non-Executive Directors’ remuneration from that of Executive Directors and senior executives.
Companies should provide the information indicated in the Guide to reporting on Principle 8.
*
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
1.1
1.2
1.3
2.1
2.2
2.3
2.4
2.5
2.6
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
5.1
5.2
6.1
7.1
7.2
7.3
7.4
8.1
8.2
8.3
8.4
*
As the Company, at this stage of its development, has a small Board of Directors, and a small management team which is geographically dispersed and because of the
industry in which the Company operates, the Board does not consider it to be practicable to set measurable objectives to achieve greater gender diversity at this time.
However, the Board acknowledges the benefits of seeking to improve gender diversity at all levels in the Company over time and will continue to keep this issue under review.
www.kingsgate.com.auCorporate Governance Statement Senior
Management
39
Senior Management
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Kingsgate’s executives have a comprehensive range of skills and experience including mine development and operations, exploration, finance and administration.
They are supported by highly qualified specialists, whose backgrounds cover the full scope of mining resources activities.
Senior members of Kingsgate’s management team are:
Tim Benfield
Dip CSM (mining), MBA, MAusIMM
Ross Coyle
BA, FCPA, FGIA
Ronald James
BSc (Geology), MAusIMM, MAIG
Chief Operating Officer
Tim Benfield joined Kingsgate in February 2012
as Chief Operating Officer. Tim is a mining
engineer with over 22 years’ underground and
open pit experience in the mining industry in
both operational and corporate roles. He has
operational and project development experience
in Australia, Africa and Saudi Arabia. This
includes 10 years with Barrick Gold of Australia
where he provided support to four operating
mines and two development projects. Tim was
most recently General Manager of the Pajingo
Gold mine in Queensland for Evolution Mining
Limited.
General Manager Finance and Administration
Company Secretary
Ross Coyle joined Kingsgate in March 2011
following the Company’s acquisition of
Dominion Mining Limited and was with the
Dominion group for over 25 years. He is a
qualified accountant and has over 31 years’
experience in finance and accounting within
the resource industry. He was Finance Director
of Dominion from 1996. Ross was appointed
Kingsgate’s Company Secretary in September
2011.
Joel Forwood
Bsc (Hons) FFin
General Manager Corporate and Markets
Joel Forwood joined Kingsgate in November
2010 and has over 28 years’ experience in the
resource and investment industries covering
investor relations, funds management and
exploration. For over 13 years, he has been
leading investor relations at a number of listed
companies, most recently for Lihir Gold Limited.
Prior to this he was a fund manager with
Queensland Investment Corporation (QIC)
following his early career in mineral exploration
with BHP and corporate development with RGC.
General Manager Exploration and Resource
Development
Ron James has 31 years of experience in
exploration and mining at management level
inclusive of setting up gold mines and
exploration projects from their earliest stages
through to development and sustainability.
Before joining Kingsgate, he was Chief Mine
Geologist at the Gold Ridge Mine in the Solomon
Islands and later Group Exploration Manager
for Ross Mining NL. Ron is familiar with the
technical and operating requirements for
emerging projects in a variety of terrains and
environments and has a strong focus on
maximising returns from ore bodies through
optimum waste and ore classification as well
as increasing reserves from near-mine resource
development.
Brett Dunstone
Dip. (Hospitality)- William Angliss College
B.Bus. Victoria University (part complete)
General Manager – Human Resources
Brett Dunstone joined Kingsgate in December
2012 and has over 26 years’ experience in senior
human resource management roles across a
diverse industry portfolio. Brett was formerly
head of Human Resources for Crown Casino,
Melbourne, the Myer group, key Village
Roadshow entities and head of Employee Rela-
tions for the Coles Myer group. Brett has experi-
ence in supporting both large and emerging
resource company development projects locally
and overseas (BHP Billiton, Woodside, Equinox
Minerals and Chalice Gold).
continuedu
40
Senior Management
Michael Monaghan
Dip Eng (Mining) Dip Business MAusIMM MAICD
SME
Chief Operating Officer and General Manager
– Akara Resources PCL
Mike Monaghan joined Kingsgate as the General
Manager of Chatree Gold Mine in October 2012.
He is a mining engineer with 29 years of manage-
ment experience in both underground and open
cut operations across a number of commodities
as well as commissioning, mine management,
turnaround management and environmental and
safety compliance in Australia, Africa and
Europe. Mike was most recently Mining Manager
at Geita Gold Mine in Tanzania for AngloGold
Ashanti Limited. Prior to that he held General
Manager and Mining Manager positions at
Etruscan Resources Youga Gold Mine in Burkina
Faso and Red back Mining’s Chirano Gold Mine
in Ghana.
Pakorn Sukhum
BSc (Hons) University of London, UK
MBA Sasin Graduate Institute of Business
Administration Thailand
Chief Executive Officer – Akara Resources PCL
Pakorn Sukhum joined the management team of
Akara Resources PCL as Chief Executive Officer
at the end of 2009. He brings to Akara over 25
years of industrial commercial managerial experi-
ence in various industries such as metallurgy,
chemicals and ceramics in international and
domestic markets of Thailand, having held
senior management positions in both Thai and
Multinational joint venture companies such as
Basell Poyolefins, Bayer AG as well as Padeang
Industry of Thailand. His major contributions
and responsibilities have ranged from project
management, commercial marketing and sales
to business development.
www.kingsgate.com.au Directors’
Report
for the year ended 30 June 2014
41
Directors’ Report
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Remuneration Report . . . . . . . . . . . . . .
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Auditor's Independence Declaration 64
42
Directors’
Report
Your Directors present their report on the Group
consisting of Kingsgate Consolidated Limited
and the entities it controlled at the end of, or
during the year ended 30 June 2014.
Directors
The following persons were Directors of
Kingsgate Consolidated Limited during the
whole of the financial year and up to the date
of this report:
〉〉 Ross Smyth-Kirk Non-Executive Chairman
〉〉 Peter Alexander Non-Executive Director
〉〉 Craig Carracher Non-Executive Director
〉〉 Peter McAleer Non-Executive Director
〉〉 Peter Warren Non-Executive Director
(appointed 1 July 2014)
〉〉 Gavin Thomas
Executive Director
(resigned 1 June 2014)
Principal activities
The principal activities of Kingsgate Consoli-
dated Limited are mining and mineral explora-
tion in Australia, South East Asia and South
America.
Dividends
Dividends paid to members during the financial
year were as follows:
Review of operations
and results
Operational Performance
Kingsgate is a gold mining, development and
exploration company based in Sydney, Australia.
Kingsgate owns and operates two gold mines;
the world class Chatree Mine in Thailand and the
underground Challenger Mine in South Australia.
In addition, the Company has two advanced
development projects; the Nueva Esperanza
Silver / Gold Project, in the highly prospective
Maricunga Gold / Silver Belt in Chile, and the
Bowdens Silver Project in New South Wales,
Australia.
Group gold production was 209,500 ounces,
an increase of 5% on the previous corresponding
year. The contribution from Chatree was
134,546 ounces with 74,954 ounces from
Challenger.
Chatree gold production was 1% higher than the
previous corresponding year mainly as a result of
an increase in throughput from the combined
Chatree process plants despite lower gold grade
and recovery.
Challenger gold production was 13% higher than
the previous corresponding year with higher
gold grade and recovery more than offsetting
lower throughput. During the year, the transi-
tion to a new mine plan focusing primarily on
the higher grade Challenger West ore body was
completed.
The after tax loss of $96.3 million for the year is
primarily due to a non-cash impairment charge
of $84.6 million against the carrying value of the
Bowdens Silver Project. The Board believes that
the Bowdens Project remains an important asset
in the Kingsgate development portfolio,
however, in accordance with current accounting
standards Kingsgate is required to assess the
carrying value of its operating and development
projects within a set valuation framework (refer
to Note 5 for further detail).
The development projects continued to
advance during the year. At Nueva Esperanza,
the Definitive Feasibility Study (“DFS”) was
completed for a project based on heap leach
and on-site power generation. The results of
the study support the technical viability and
financial robustness of the project. At Bowdens,
the feasibility work focused on mine planning,
infrastructure and metallurgy and has
confirmed the optimum process route. Work
will now focus on completion and lodgement of
the Environmental Impact Statement (“EIS”) by
the end of calendar year 2014.
No final dividend was declared for the year ended 30 June 2013
No interim dividend was declared for the year ended 30 June 2014
Total dividends
2014
$’000
–
–
–
2013
$’000
15,148
7,590
22,738
Directors’ Reportwww.kingsgate.com.au 43
Chatree
Chatree continued as Kingsgate’s primary
production asset throughout the year,
producing 134,546 ounces of gold and 992,255
ounces of silver. The process plant treated 6.2
million tonnes at a head grade of 0.86 grams
per tonne (“g/t”) with a recovery of 79.4%. The
strong production performance was achieved
despite poor equipment availability within the
mining contractor’s fleet, particularly with the
RH90 excavators. This is being addressed by the
implementation of a number of joint mainte-
nance improvement projects between our
contractor and their main maintenance supplier.
The process plant performed well during the
year with total mill throughput of 6.2 million
tonnes, 9.4% higher than 2013. The overall plant
availability of 97.5% was slightly lower than the
previous year’s 98.1%. The operating throughput
of the combined process plants of around 6.2
million tonnes per annum, is some 24% above
the annual “nameplate” throughput rate of 5.0
million tonnes per annum and is expected to
continue to operate at this rate.
Total cash costs for the year were US$728 per
ounce (US$617 per ounce exclusive of Thai
royalties). The average royalty paid to the Thai
Government was $US111 per ounce of gold. Total
production costs after depreciation and amorti-
sation were US$979 per ounce of gold produced.
At year end, 9.7 million tonnes of ore was stock-
piled with an average contained gold grade of
0.54g/t representing 167,359 ounces of gold.
Challenger
The Challenger Mine produced 74,964 ounces of
gold for the year with an average grade processed
of 4.78g/t and a total cash cost of US$1,310 per
ounce.
Significant milestones were achieved at Chal-
lenger with the transition to the Challenger
West mine plan and a change of underground
mining services contractor. Both measures had
a significant impact on reducing the operating
cost per ounce of gold produced.
The mine head grade increased over the 2014
year following the move to 100% Challenger
West ore by the end of the December quarter.
However, higher than planned dilution in the
production stopes resulted in mine head grades
underperforming against the reserve grade.
The mining service contractor was changed
to Byrnecut on 1 August 2013. This had a
positive impact on safety, cost and mine produc-
tivity. This has allowed production levels and
development rates to remain at historic levels
whilst reducing the underground workforce by
around 33%.
Nueva Esperanza Silver / Gold Project
The Nueva Esperanza Silver / Gold Project
advanced during the year with the completion
of a DFS to mine and process the Arqueros,
Chimberos and Teterita deposits. The study
confirmed that open pit mining and processing
via heap leach is technically feasible and
economically viable.
The key conclusions of the study were based on
processing three million tonnes of ore by heap
leach to produce 6.3 million ounces of silver and
17,900 ounces of gold per annum, on average,
for over six years. The initial capital cost, based
on contract mining, is estimated at US$140
million with average operating costs of
US$27.65 per tonne or US$9.55 per ounce of
silver (including gold as a by-product credit).
The existing environmental approvals for Nueva
Esperanza were granted in July 2013 for the
original Arqueros project. A modification of the
approval has been lodged to incorporate the
heap leach process, on-site power generation
and additional waste dumps and open cut
mining for Chimberos and Teterita.
Bowdens Silver Project
The Bowdens Project continued to advance
during the year with field programs supporting
the feasibility and environmental studies.
Major elements of the feasibility study have
been completed encompassing detailed process
design based on using the most recent metal-
lurgical test results, capital and operating cost
estimates, infrastructure requirements and mine
optimisation. Work is continuing on two of the
more detailed studies required for the Environ-
mental Impact Statement (“EIS”), the proposed
route for the 132kv transmission line and
ground and surface water studies. Progress in
these two key areas will underpin the work
already undertaken in other EIS study areas such
as, air, ecology, noise, soils and visual amenity.
The preparation for lodgement of an EIS to the
NSW Department of Planning continues. Data
for flora and fauna, surface water, groundwater,
meteorology, ambient noise and dust levels are
collected routinely. Further investigations of
cultural heritage, social-economic impact, traffic
impact, soil type and agricultural suitability have
also been undertaken.
With the fall in metal prices in late 2013, work
and expenditure on the DFS and EIS have been
phased to coordinate the two programs with
completion and lodgement of the EIS now
expected by the end of calendar year 2014.
Exploration
The Group has a portfolio of exploration tene-
ments and applications in Australia, Thailand,
Chile and Lao PDR.
There was a significant reduction in exploration
activity during the year with a re-focusing of
priorities that matched corporate context and
resources. Some encouraging results were
recorded from gold exploration at the Sayabouly
project in Lao PDR where initial and follow-up
trenching has continued to identify high grade
quartz veins with channel sample results
including 5 metres at 6.7 grams per tonne gold,
4.0 metres at 7.5 grams per tonne gold.
continuedu
Directors’ ReportDirectors' Report
44
Financial results
Kingsgate made an after tax loss of $96.3 million for the full year to 30 June 2014 compared to an after tax loss of $326.3 million for the previous
corresponding year.
Net (loss) / profit after tax ($’000)
Dividends paid (Cash & DRP) ($’000)
Share price 30 June ($)
Basic (loss) / earnings per share (Cents)
Diluted (loss) / earnings per share (Cents)
EBITDA before significant items
2014
2013
(96,291)
(326,271)
–
0.86
(55.9)
(55.9)
22,739
1.27
(215.0)
(215.0)
2012
75,006
22,026
4.85
52.5
52.5
2011
20,879
33,647
8.00
18.7
18.6
2010
73,066
29,082
9.47
75.2
74.5
Before pre-tax significant items, the pre-tax loss of the Group was $5.2 million. Pre-tax significant items are detailed below.
EBITDA before significant items was $66.4 million down from $118.6 million in the previous year.
Consolidated
Loss before tax
Significant items (pre-tax)
Foreign exchange (gain) / loss
Write off of capitalised borrowing fees following loan refinancing
Realised gain on delivery against hedge contracts
Change in fair value of undesignated gold contracts held for trading
Change in fair value of available-for-sale financial assets
Share of loss in associate
Loss on sale of exploration assets (Quadrio Resources Limited)
Divestment transaction costs
Impairment of Challenger Gold Project
Impairment of Bowdens Silver Project
Impairment of capitalised exploration
Impairment of associate
(Loss) / Profit before tax and significant items
Borrowing costs
Depreciation and amortisation
EBITDA before significant items
2014
$’000
2013
Restated
$’000
(93,405)
(342,775)
(2,595)
–
(1,175)
369
284
413
–
4,246
–
84,586
2,112
–
(5,165)
13,860
57,741
66,436
745
5,722
–
(1,414)
855
1,353
16,709
1,111
311,850
–
20,421
537
15,114
13,087
90,377
118,578
EBITDA before significant items is a financial measure which is not prescribed by International Financial Reporting Standards (“IFRS”) and represents
the profit under IFRS adjusted for specific significant items. The table above summarises key items between statutory profit before tax and EBITDA
before significant items. The EBITDA before significant items has not been subject to any specific auditor review procedures by our auditor but has been
extracted from the accompanying audited financial statements.
Directors’ Reportwww.kingsgate.com.au
45
Revenue
Gold revenue increased by 0.7% to $305.2
million and silver revenue decreased by 11.9% to
$23.2 million. Total sales revenue for the Group
was $328.3 million for the year, down 0.3% from
the previous year.
The increase in gold revenue reflects an increase
in gold sold from both Chatree and Challenger
offset by a lower gold price.
The average US$ gold price received was
US$1,291/oz (2013: US$1,588/oz). The decrease
in silver revenue reflects a lower silver price
received of US$21/oz (2013: US$28/oz).
Costs
The overall increase in cost of sales to $301.9
million including royalties and depreciation and
amortisation, largely reflects increased through-
put and production from the Chatree Mine due
to the expanded Chatree process plant. On a
unit cost basis, total cash costs for the Group
were US$936/oz up from $US888/oz in the
previous year. The total unit cash costs for
Challenger for the year were US$1,310/oz
(2013: US$1,135/oz), with the increase due to
expensing of direct mine development costs
applicable to Challenger Mine. The total unit
cash costs for Chatree for the year were
US$728/oz down from US$767/oz in 2013.
Depreciation and amortisation
The decrease in depreciation and amortisation
to $57.7 million is mainly a result of the asset
impairment of the Challenger assets in the 2013
financial year which resulted in a lower deprecia-
tion charge against the Challenger asset. This
lower charge offset the effect of a full year of
depreciation for Chatree Plant #2 and amortisa-
tion of the capital cost of the Chatree Tailings
Storage Facility #2.
Cash flow
Operating cash inflow was $37.2 million. Net
investing cash outflow was $43.5 million. Net
cash inflows from financing activities was $30.9
million, including a drawdown of $26.1 million of
the convertible revolving credit loan facility net
of transaction costs, repayment of $51.6 million
of the corporate loan facility and convertible
revolving credit facility and proceeds from an
equity raising of $56.5 million net of costs.
Material business risks
The Group uses a range of assumptions and
forecasts in determining estimates of produc-
tion and financial performance. There is uncer-
tainty associated with these assumptions that
could result in actual performance differing from
expected outcomes.
The material business risks that may have an
impact on the operating and financial prospects
of the Group are:
Revenue
Revenue, and hence operating margins, are
exposed to fluctuations including currency in
the gold price and to a degree in the silver price.
Management continually monitors operating
margins and responds to changes to commodity
prices as necessary to address this risk, including
reviewing mine plans and entering into forward
gold sale contracts.
Changes in the gold and silver price also impact
assessments of the feasibility of exploration and
the Group’s two development projects, Nueva
Esperanza and Bowdens.
Mineral reserves and resources
Ore reserves and mineral resources are estimates.
These estimates are substantially based on inter -
pretations of geological data obtained from drill
holes and other sampling techniques. Actual
mineralisation or geological conditions may be
different from those predicted and as a conse-
quence there is a risk that any part, or all of
mineral resources, will not be converted into
reserves.
Market price fluctuations of gold and silver as
well as increased production and capital costs,
may render ore reserves unprofitable to develop
at a particular site for periods of time.
Replacement of depleted reserves
The Group aims to continually replace reserves
depleted by production to maintain production
levels over the long term. Reserves can be
replaced by expanding known ore bodies,
locating new deposits or making acquisitions.
As a result, there is a risk that depletion of
reserves will not be offset by discoveries or
acquisitions. The mineral base may decline if
reserves are mined without adequate replace-
ment and as a consequence the Group may not
be able to sustain production beyond the current
mine lives, based on current production rates.
Mining risks and insurance risks
The mining industry is subject to significant
risks and hazards, including environmental
hazards, industrial accidents, unusual or unex-
pected geological conditions, unavailability of
materials and unplanned equipment failures.
These risks and hazards could result in signifi-
cant costs or delays that could have a material
adverse impact on the Group’s financial perfor-
mance and position.
The Group maintains insurance to cover some
of these risks and hazards at levels that are
believed to be appropriate for the circumstances
surrounding each identified risk. However, there
remains the possibility that the level of insur-
ance may not provide sufficient coverage for
losses related to specific loss events.
Production and cost estimates
The Group prepares estimates of future produc-
tion, cash costs and capital costs of production
for each operation though there is a risk that
such estimates will not be achieved. Failure to
achieve production, cost estimates or material
increases in costs could have an adverse impact
on future cash flows, profitability, results of
operations and financial position.
Environmental, health and safety
regulations
The Group’s mining and processing operations
and exploration activities are subject to exten-
sive laws and regulations. Delays in obtaining,
or failure to obtain government permits and
approvals may adversely affect operations,
including the ability to continue operations.
Community relations
The Group has established community relations
functions that have developed a community
engagement framework, including a set of
principles, policies and procedures designed to
provide a structured and consistent approach to
community activities.
A failure to appropriately manage local commu-
nity stakeholder expectations may lead to
disruptions in production and exploration
activities.
Risk management
The Group manage the risks listed above, and
other day-to-day risks through an established
management framework. The Group has policies
in place to manage risk in the areas of health and
safety, environment and equal employment
opportunity.
continuedu
Directors’ ReportDirectors' Report 46
Management and the Board regularly review the
risk portfolio of the business and the effective-
ness of the Group’s management of those risks.
Significant change in the state
of affairs
Likely developments and
expected results of operations
Finance
At the end of the year Kingsgate’s drawn debt
facilities consisted of:
Senior corporate facility
The balance of the senior corporate loan facility
outstanding is $35 million which consists of two
tranches:
〉〉
Tranche A is an amortising loan facility with a
balance of $10 million to be repaid during the
2015 financial year.
〉〉
Tranche B is an $25 million Akara Resources
PCL (“Akara”) Pre-IPO Bond with a maturity
date of 31 July 2015. The current intention is
for this tranche to be repaid from proceeds
raised through the Akara IPO although at
Kingsgate’s election repayment can be made
by Kingsgate either in cash or Kingsgate
shares.
Multi-currency, syndicated loan facility
Kingsgate’s Thai operating subsidiary, Akara
Resources PCL (“Akara”), has an amortising
multi-currency loan facility with 4.5 years
remaining. It is currently drawn to the equivalent
of $111.2 million, following the commencement
of quarterly repayments in November 2013.
Akara also has an additional undrawn Thai Baht
denominated working capital facility equivalent
to $16 million.
Hedging
As at 30 June 2014, the Group has 12,000
ounces of gold sold forward at an average price
of approximately A$1,406 per ounce. This is
scheduled to be delivered over the September
2014 quarter as part of the mitigation of
Australian gold price risk and is associated with
forecast production from the Challenger Mine.
In addition there is a residual forward sale from
the Dominion merger with 2,500 ounces at
A$1,163 per ounce remaining. Since the end of
the year a further 22,000 ounces of gold have
been sold forward for delivery during the
December 2014 half year at a price of A$1,419
per ounce.
There were no significant changes in the state
of affairs of the Group that occurred during the
financial year not otherwise disclosed in this
report or the consolidated financial statements.
Matters subsequent to the end
of the financial year
No other matter or circumstance has arisen
since 30 June 2014 that has significantly
affected, or may significantly affect:
〉〉
the Group’s operations in future financial
years;
〉〉
〉〉
the results of those operations in future
financial years; or
the Group’s state of affairs in future financial
years.
Environmental regulation
The Group is subject to environmental regula-
tion in respect to its gold mining operations and
exploration activities in Australia, Thailand, Chile
and Lao PDR. For the year ended 30 June 2014,
the Group has operated within all environmental
laws.
Directors’ meetings
The numbers of meetings of the Company’s
Board of Directors and of each Board Committee
held during the year ended 30 June 2014, and
the numbers of meetings attended by each
Director were:
The outlook for the Group in fiscal year 2015
is for gold production to be in the range of
195,000 to 215,000 ounces. At the Chatree
Mine in Thailand, gold production is expected to
be between 130,000 to 140,000 ounces. At the
Challenger Mine in South Australia production
for the year is expected to be in the range of
65,000 ounces to 75,000 ounces of gold.
Following completion of the DFS at Nueva Esper-
anza in Chile, additional environmental approvals
were required to be submitted and the approvals
are expected to take around six months. During
this time optimisation work on mining, infra-
structure and metallurgy will continue. In
addition, exploration drilling of gold targets at
Chimberos and three satellite prospects is sched-
uled to commence in early September.
The major elements of the DFS for the Bowdens
Silver Project in New South Wales were
completed during the year. The current work
program at Bowdens is focused on the comple-
tion and lodgement of an EIS by the end of the
2014 calendar year.
Kingsgate has lodged a draft prospectus with
Thai authorities for the listing of its Thai oper-
ating subsidiary, Akara Resources PCL, via an
IPO on the Stock Exchange of Thailand. The
Board of Kingsgate is fully committed to the IPO
and following approval of the offer document,
Kingsgate will have 12 months to initiate this.
The actual timing of the listing will depend on
market conditions and other factors following
the approval of the offer document.
Director
R Smyth-Kirk
P Alexander
C Carracher
P McAleer
G Thomas
Board
Meetings
Audit Committee
Meetings
Nomination
Committee
Meetings
Remuneration
Committee
Meetings
A
15
15
15
15
14
B
15
15
15
15
14
A
3
–
3
3
–
B
3
–
3
3
–
A
1
–
1
1
–
B
1
–
1
1
–
A
4
4
4
4
–
B
4
3
4
4
–
Number of meetings held while in office
A:
B: Meetings attended
Directors’ Reportwww.kingsgate.com.au 47
Information on Directors
Ross Smyth-Kirk
B Com, CPA, F Fin
Chairman – Non-Executive
Ross Smyth-Kirk was a founding Director of
the former leading investment management
company, Clayton Robard Management Limited
and has had extensive experience over a number
of years in investment management including a
close involvement with the minerals and mining
sectors. He has been a Director of a number of
companies over the past 34 years in Australia
and the UK. Mr Smyth-Kirk was previously
Chairman of the Australian Jockey Club Limited
and retired in May 2013 as a Director of Argent
Minerals Limited.
Responsibilities:
Chairman of the Board, member of the Audit
Committee and Chairman of the Remuneration
Committee and Nomination Committee.
Peter McAleer
B Com (Hons), Barrister-at-Law (Kings Inns –
Dublin, Ireland)
Non-Executive Director
Peter McAleer was until the end of May 2013,
the Senior Independent Director and Chairman
of the Audit Committee of Kenmare Resources
PLC (Ireland). He is now a member of the
Advisory Panel to the Board of Kenmare. Previ-
ously, he was Chairman of Latin Gold Limited,
Director and Chief Executive Officer of Equato-
rial Mining Limited and was a Director of Minera
El Tesoro (Chile).
Responsibilities:
Member of the Audit Committee, Remuneration
Committee and Nomination Committee.
Craig Carracher
LLB (Sydney), BCL (Oxford)
Peter Warren
B Com, CPA
Non-Executive Director
Craig Carracher graduated from Sydney Uni -
versity Law School with an LLB (First Class
Honours) (1991) and the University Medal and
also graduated on a Commonwealth Scholarship
with a BCL Law Degree from Magdalen College,
Oxford University (First Class Honours) (1993).
He has considerable commercial experience in
Asia and was managing partner of an interna-
tional law firm based in Thailand for many years.
Mr Carracher has held numerous directorships of
listed and private groups throughout Asia. He
was previously Group General Counsel with
Consolidated Press Holdings Limited, Managing
Director of Asian private equity firm Arctic
Capital based in Hong Kong, Special Advisor to
the Chairman of the Australian Securities and
Investment Commission and Associate to the
former Chief Justice of the Supreme Court of
New South Wales. Mr Carracher is Managing
Director of Telopea Capital Partners, an Asia
focused private equity group based in Sydney.
Mr Carracher is also a Non-Executive Director of
the ASX listed Sunland Group Limited.
Responsibilities:
Chairman of the Audit Committee, member of
the Nomination and Remuneration Committees
(resigned from each of these committees effec-
tive 1 July 2014).
Peter Alexander
Ass. Appl. Geol
Non-Executive Director
Peter Alexander has had 41 years’ experience in
the Australian and off-shore mining and explora-
tion industry. He was Managing Director of
Dominion Mining Limited for 10 years prior to
his retirement in January 2008. Mr Alexander
was appointed a Non-Executive Director of
Dominion Mining Limited in February 2008 and
resigned on 21 February 2011. Mr Alexander is
Chairman of the ASX listed company Doray
Minerals Limited, a Director of ASX listed
companies Fortunis Resources Limited and
Caravel Minerals Limited.
Responsibilities:
Member of the Remuneration Committee.
(appointed 1 July 2014)
Non-Executive Director
Peter Warren was the Chief Financial Officer and
Company Secretary of Kingsgate Consolidated
Limited for six years up until his retirement in
2011. He is a CPA of over 40 years standing,
with an extensive involvement in the resources
industry. He was Company Secretary and Chief
Financial Officer of Equatorial Mining Limited
and of the Australian subsidiaries of the Swiss
based Alusuisse Group and has held various
financial and accounting positions for Peabody
Resources and Hamersley Iron. Mr Warren is a
Director of Kingsgate’s wholly owned subsidiary,
Akara Resources Public Company Limited.
Responsibilities:
Chairman of the Audit Committee (appointed
1 July 2014), member of the Nomination and
Remuneration Committees effective 1 July 2014.
Gavin Thomas
BSc FAusIMM
(resigned 1 June 2014)
Managing Director
Gavin Thomas had a successful career in devel-
oping mining companies from the exploration
phase into mid-tier gold and/or copper production
entities. He had over 43 years of international
experience in exploring for, evaluating, devel-
oping, operating and reclaiming mines in North
America, South America, Australia, the Southwest
Pacific, Asia and Europe. Amongst other things he
was credited with the discovery of the Lihir gold
deposit in Papua New Guinea, one of the largest
gold deposits in the world. In particular he had
extensive experience in Thailand, south-west
Pacific and South America. Mr Thomas was previ-
ously Chairman of the TSX listed company
Mercator Minerals and Chairman of the formerly
ASX listed company Laguna Resources NL.
Responsibilities:
Managing Director and Chief Executive Officer.
Ross Coyle
BA, FCPA, FGIA
Company Secretary
Before joining Kingsgate Consolidated Limited
Mr Coyle was Finance Director and Company
Secretary of Dominion Mining Limited.
continuedu
Directors’ ReportDirectors' Report 48
Remuneration Report
Dear Shareholder
I am pleased to present our Remuneration Report for 2014.
During the 2014 financial year, the Company’s remuneration practices have reflected the market conditions in which we operate.
No salary increases or bonuses were paid at our Australian based operations and increases in Thailand were relatively modest
compared with historical practice. As such, you will see that many remuneration arrangements remain unchanged from the 2013
financial year report.
For a majority of the period, Directors and senior management voluntarily reduced their salaries / fees by 10%. At the Challenger
Mine in South Australia, all employees also voluntarily reduced their salaries by 10% from 1 February 2014 to the end of the
financial year.
Benchmarking of salaries for all roles has been undertaken to ensure that we remain a competitive employer in the market while
continuing to meet all legislative and regulatory requirements.
A specific review of the existing Long-Term Incentive (“LTI”) program for Key Management Personnel (“KMP”) was externally
commissioned, the recommendations and outcomes of which are detailed in this report.
We are confident our remuneration practices are sound, market competitive and demonstrate a clear link between executive and
shareholder returns. Our discipline in this area has been combined with significant change management initiatives to ensure that
cost reductions within our business have been in line with market conditions.
We will continue to consider your feedback as shareholders and review our remuneration policies and framework to meet future
market changes.
Thank you for your interest in this report.
Ross Smyth-Kirk
Chairman
Remuneration Committee
Directors’ Reportwww.kingsgate.com.au 49
Introduction
Remuneration Policy
Remuneration Governance
This Remuneration Report forms part of the
Directors’ Report. It outlines the Remuneration
Policy and framework applied by the Company
as well as details of the remuneration paid to
Key Management Personnel (“KMP”). KMP are
defined as those persons having the authority
and responsibility for planning, directing and
controlling the activities of the Company,
directly or indirectly, including Directors and
members of Executive Management.
The information provided in this report has been
prepared in accordance with s300A and audited
as required by section 308 (3c) of the Corpora-
tions Act 2001.
The objective of the Company’s remuneration
philosophy is to ensure that Directors and senior
staff are remunerated fairly and responsibly at a
level that is competitive, reasonable and appro-
priate, in order to attract and retain suitably
skilled and experienced people.
Voting and comments made at
the Company’s 2013 AGM
The table below provides a summary of the
Board’s action and/or comments in response to
concerns raised by shareholders at the 2013
AGM in relation to remuneration.
The Remuneration Policy remains unchanged
from last financial year and has been designed to
align the interests of shareholders, Directors,
and employees. This is achieved by setting a
framework to:
〉〉 help ensure an applicable balance of fixed
and at-risk remuneration, with the at-risk
component linking incentive and perfor-
mance measures to both Group and indi-
vidual performance;
〉〉 provide an appropriate reward for Directors
and Executive Management to manage and
lead the business successfully and to drive
strong, long-term growth in line with the
Company’s strategy and business objectives;
〉〉
encourage executives to strive for superior
performance;
〉〉
facilitate transparency and fairness in execu-
tive remuneration policy and practices;
〉〉 be competitive and cost effective in the
current employment market; and
〉〉
contribute to appropriate attraction and
retention strategies for Directors and
executives.
In consultation with external remuneration
consultants, the Group has structured an execu-
tive remuneration framework that is market
competitive and complimentary to the business
strategy of the organisation.
The framework is intended to provide a mix of
fixed and variable remuneration, with a blend of
short and long-term incentives as appropriate.
As executives gain seniority within the Group,
the balance of this mix shifts to a higher propor-
tion of “at risk” rewards (refer to chart – Remu-
neration Reward Mix on page 50).
Role of the Remuneration Committee
The Remuneration Committee is a committee
of the Board and has responsibility for setting
policy for determining the nature and amount
of emoluments of Board members and senior
executives. The Committee makes recommenda-
tions to the Board concerning:
〉〉 Non-Executive Director fees;
〉〉
remuneration levels of Executive Directors
and other Key Management Personnel;
〉〉
〉〉
〉〉
the executive remuneration framework and
operation of the incentive plan;
key performance indicators and performance
hurdles for the executive team; and
the engagement of specialist external
consultants to design or validate method-
ology used by the Company to remunerate
Directors and employees.
In forming its recommendations the Committee
takes into consideration the Group’s stage of
development, remuneration in the industry and
performance. The Corporate Governance State-
ment provides further information on the role
of this committee.
Remuneration consultants
The Group engages the services of independent
and specialist remuneration consultants from
time to time. Under the Corporations Act 2001,
remuneration consultants must be engaged by
the Non-Executive Directors and reporting of
any remuneration recommendations must be
made directly to the Remuneration Committee.
The Remuneration Committee engaged the
services of the Godfrey Remuneration Group Pty
Ltd during 2014 to review its remuneration
practice revisions and to provide further valida-
tion in respect of both the executive short-term
and long-term incentive plan design method-
ology and standards. These recommendations
covered the remuneration of the Group’s Non-
Executive Directors and Key Management
Personnel.
Concern
Action or Comment
Key issues raised were:
〉〉
a lack of understanding of the TSR Alpha™ concept
recommended as the LTI performance assessment
process.
The Remuneration Committee noted continuing confusion over the TSR Alpha™ concept as the methodology
for assessment of Long-Term Incentive (“LTI”) performance measurement. As indicated, the Committee
engaged an independent remuneration specialist to review the existing practices, the results are detailed
later in this report.
continuedu
Directors’ ReportDirectors' Report 50
Under the terms of the engagement, the
Godfrey Remuneration Group Pty Ltd provided
remuneration recommendations as defined in
section 9B of the Corporations Act 2001 and was
paid $13,420 in financial year 2014 for these
services. The Company did not pay Godfrey
Remuneration Group Pty Ltd any further fees in
relation to other services.
The Godfrey Remuneration Group Pty Ltd has
confirmed that the above recommendations
have been made free from undue influence by
members of the Group’s Key Management
Personnel.
The following arrangements were implemented
by the Remuneration Committee to ensure that
the remuneration recommendations were free
from undue influence:
〉〉
the Godfrey Remuneration Group Pty Ltd
was engaged by, and reported directly to, the
Chair of the Remuneration Committee. The
agreement for the provision of remuneration
consulting services was executed by the
Chair of the Remuneration Committee under
delegated authority on behalf of the Board;
and
〉〉
any remuneration recommendations by the
Godfrey Remuneration Group Pty Ltd were
made directly to the Chair of the Remunera-
tion Committee.
As a consequence, the Board is satisfied that the
recommendations contained in this report were
made free from undue influence from any
members of the Group’s Key Management
Personnel.
Remuneration Reward Mix (based on the achievement of STI / LTI targets)
MD/CEO
COO/CFO
49%
29%
22%
57%
29%
14%
Other Direct Reports to MD/CEO
60%
25%
15%
Total Fixed Remuneration (TFR)
Base salary and superannuation
Short-Term
Incentive (STI)
Long-Term
Incentive (LTI)
*The above reward mix remains unchanged from financial year 12/13 due to there being no increase in salaries or
any STI’s being paid to executives. Additionally the Total Fixed Remuneration shown and subsequent relativities are
based on contracted base salary / superannuation payment rates. The actual paid base salary component was
reduced by 10% for a majority of the financial year 13/14 for these executives.
Executive Director and Key Management Personnel Remuneration
The executive pay and reward framework is
comprised of three components:
〉〉
fixed remuneration including
superannuation;
〉〉
〉〉
short-term performance incentives; and
long-term incentives through participation in
the Executive Rights Plan.
Reward mix
The above chart represents the remuneration
reward mix for the various Key Management
Personnel based on achievement of all stretch
targets.
Fixed remuneration
Total fixed remuneration (“TFR”) is structured
as a total employment cost package, including
base pay and superannuation. Base pay may be
delivered as a mix of cash, statutory and salary
sacrificed superannuation, and prescribed
non-financial benefits at the executive’s
discretion.
Executives are offered a competitive base pay.
Base pay for senior executives is reviewed
annually to ensure their pay is competitive with
the market. An executive’s pay is also reviewed
on promotion. During the financial year 13/14
there were no executive promotions or any
increases made to fixed remuneration.
Director’s fees and senior management base
salaries were reduced by 10% for a majority of
the period.
The AON Hewitt / McDonald survey continues
to be the primary benchmarking tool for assess-
ment payment relativity for all roles throughout
the business with the Godfrey Remuneration
Group used to validate rates for specific roles
as required.
With Director’s fees reduced by 10%, overall
Non-Executive Director Remuneration remains
below the ASX 101-200 average and a majority
of peer group companies.
The Board annually reviews and determines
the fixed remuneration for the CEO / Managing
Director. The CEO / Managing Director does
the same for his direct reports. The Executive
Management group reviews and recommends
fixed remuneration for other senior manage-
ment, for the CEO / Managing Director’s
approval. There are no guaranteed increases
to fixed remuneration incorporated into any
senior executives’ agreements.
The following summarises the performance of
the Group over the last five years:
Directors’ Reportwww.kingsgate.com.au 51
Revenue (‘000s)
Net profit / (loss) after income tax (‘000s)
Share price at year end ($ / share)
Dividends paid (cents / share)
KMP short-term employee benefits
2010
2011
2012
2013
2014
175,480
73,066
9.47
35.0
2,943
172,356
20,879
8.00
15.0
4,459
357,372
75,006
4.85
20.0
4,456
329,282
(326,271)
1.27
5.0
4,671
328,326
(96,291)
0.86
Nil
4,328
Short-Term Incentives
Linking current financial year earnings of executives to their performance and the performance of the Group is the key objective of our Short-Term Incentive
(“STI”) plan. The Board set key performance measures and indicators for individual executives on an annual basis that reinforce the Group’s business plan and
targets for the year.
Key features of the STI Plan remain unchanged from financial year 12/13 and are outlined in the table on the following table.
Overview of the STI Plan
What is the STI plan
and who participates?
How much can the
executives earn under
the STI Plan?
The STI Plan is a potential annual reward for eligible Executive Key Management Personnel for achievement of predetermined individual
Key Performance Indicators (KPIs) aligned to the achievement of business objectives for the assessment period (financial year
commencing 1 July).
Threshold – Represents the minimum acceptable level of performance that needs to be achieved before any Individual Award would be
payable in relation to that Performance Measure.
Managing Director / CEO – up to 15% of TFR. COO & CFO – up to 12.5% of TFR. Other Key Management Personnel – up to 10% of
TFR.
Target – Represents a challenging but achievable level of performance relative to past and otherwise expected achievements. It will
normally be the budget level for financial and other quantitative performance objectives.
Managing Director / CEO – up to 30% of TFR. COO & CFO – up to 25% of TFR. Other Key Management Personnel – up to 20% of TFR.
Stretch (Maximum) – Represents a clearly outstanding level of performance which is evident to all as a very high level of achievement.
Managing Director / CEO – up to 60% of TFR. COO & CFO – up to 50% of TFR. Other Key Management Personnel – up to 40% of TFR.
(TFR – Total Fixed Remuneration)
Is there Board discretion
in the payment of an
STI benefit?
Yes, the plan provides for Board discretion in the approval of STI outcomes.
What are the
performance conditions?
For Key Management Personnel between 70% – 80% of potential STI weighting (dependent upon role) is assessed against specific
predetermined KPIs by role with 20% – 30% being based on company performance indicators.
How are performance
targets set and
assessed?
Individual performance targets are set by the identification of key achievements required by role in order to meet business objectives
determined for the upcoming assessment period in advance. The criteria for Key Management Personnel are recommended by the
Managing Director / CEO for sign off by the Remuneration Committee and in the case of the Managing Director / CEO, are recom-
mended by the Chairman by sign off by the Remuneration Committee.
The relative achievement at the end of the financial period is determined by the above authorities with final sign off by the Remuneration
Committee after confirmation of financial results and individual / company performance against established criteria.
The Remuneration Committee is responsible for assessing whether the KPIs are met. To assist in this assessment, the committee
receives detailed reports on performance from management which are verified by independent remuneration consultants if required.
The committee has the discretion to adjust STIs in light of unexpected or unintended circumstances.
How is the STI delivered?
STIs are paid in cash after the conclusion of the assessment period and confirmation of financial results / individual performance and
subject to tax in accordance with prevailing Australian tax laws.
What happens in the
event of cessation of
employment?
Executives are required to be employed for the full 12 months of the assessment period before they are eligible to be considered to
receive benefits from the STI plan.
continuedu
Directors’ ReportDirectors' Report 52
Long-Term Incentives
The Kingsgate Long-Term Incentive (“LTI”) plan is also referred to as the Executive Rights Plan. The objectives of the LTI Plan are to retain key executives
and to align an at-risk component of certain executives’ remuneration with shareholder returns.
Key features of the LTI Plan are outlined in the table as follows:
Overview of the LTI Plan
What is the LTI Plan
and who
participates?
What is awarded
under the LTI Plan?
Kingsgate executives can be granted Kingsgate Consolidated Limited rights each year, although an award of rights does not confer any
entitlement to receive any subsequent awards. In awarding rights the Board takes into account such matters as the position of the
eligible person, the role they play in the Company, their current level of fixed remuneration, the nature of the terms of employment and
the contribution they make to the Group. Currently only members of the Executive Management group and key site based operational
senior management are eligible to participate in the LTI plan.
Two types of rights are offered under the LTI Plan: deferred rights and performance rights.
How much can the
executives earn
under the LTI Plan?
Managing Director / CEO – up to 45% of TFR as performance rights only.
COO / CFO / Executive Management – up to 12.5% of TFR as deferred rights and additionally, up to 12.5% of TFR as performance
rights.
What are the
performance and
vesting conditions?
Deferred rights – vesting is time based (three years after the granting of the deferred right).
Performance rights – refer to Vesting Schedule for Performance Rights later in this report.
Is there a cost to
participate?
The rights are issued for nil consideration and are granted in accordance with performance guidelines established by the Remuneration
Committee and approved by the Board.
What are the
specific perfor-
mance / vesting
criteria?
Deferred rights are subject to three year vesting periods. There are no performance conditions attached to the deferred rights.
Performance rights are subject to a three year performance measurement period from 1 July in the year when the grant occurs.
How does the LTI
vest?
Performance rights vest subject to the achievement of a hurdle based on total shareholder return. Further information on the vesting
scale is below.
Is the LTI subject to
retesting?
What criteria are
used for assess-
ment and who
assesses
performance?
There is no retesting of either the deferred rights or performance rights.
Performance is assessed against a TSR Alpha™ measure prescribed in the Vesting Schedule for Performance Rights later in this
report. The Remuneration Committee signs off performance assessment based on recommendations by the Managing Director / CEO
with advice from Godfrey Remuneration Group Pty Ltd in terms of TSR Alpha™ relative performance.
Is this criteria
intended to be used
for future years?
No, the Board has endorsed the application of TSR Alpha™ for financial year 12/13 and 13/14 executive performance rights but has
approved a shift to financial year 14/15 performance rights being measured against the S&P/ASX All Ordinaries Gold (AUD) index (gold
production only and to include dividends paid), resulting from a review of recommendations by the Godfrey Remuneration Group.
How is the LTI
delivered?
What happens in
the event of bonus
shares, rights
issues or other
capital
reconstructions?
On vesting the first $1,000 value of each of the deferred rights and performance rights awards is paid in cash, e.g. if both deferred and
performance rights vested at the same time then the participant would receive two x $1,000 with the remaining value of the award
received as shares in the Company as per below.
Number of shares = (number of vested rights x share price on vesting date – $2,000) ÷ share price on vesting date.
If between the grant date and the date of conversion of vested rights into cash and restricted shares there are bonus shares, rights
issues or other capital reconstructions that affect the value of Kingsgate Consolidated shares, the Board may, subject to the ASX
Listing Rules make adjustments to the number of rights and / or the vesting entitlements to ensure that holders of rights are neither
advantaged or disadvantaged by those changes.
Directors’ Reportwww.kingsgate.com.au Takeover or Scheme
of Arrangement?
Unvested rights vest in the proportion that the share price has increased since the beginning of the vesting period. All vested rights
need to be exercised within three months of the takeover.
What happens
in the event of
cessation of
employment?
Unvested rights are forfeited on dismissal for cause. In all other termination circumstances any unvested rights granted in the year of
the cessation of employment are forfeited in the proportion that the remainder of the year bears to a full year. Unvested rights that are
not forfeited are retained by the participant and are subsequently tested for vesting at the end of the vesting period.
Executive performance rights vesting
scale for financial year 14/15
Diagram 1 below provides an overview of the
performance rights vesting scale to be applied
to financial year 14/15 performance rights issue.
Diagram 1: Overview of Performance Rights Vesting Scale
TSR Performance
75th Percentile of TSR Performance
Stretch Return
Vesting Scale
100% Vesting
Pro-rata
Vesting
Pro-rata vesting between
50th and 75th Percentile
of TSR Performance
e
c
n
a
m
r
o
f
r
e
P
R
S
T
e
v
i
t
a
e
R
l
50th Percentile of TSR Performance
Target Return
50% Vesting
Performance Rights Issue 3 years Vesting Period
0% Vesting
Year 1
Year 2
Year 3
Vesting schedule for performance rights
to be issued for financial year 14/15
Following a review by the Remuneration
Committee of recommendations by the Godfrey
Remuneration Group, the Board has approved
the assessment of relative Total Shareholder
Return “TSR” of Kingsgate against S&P / ASX All
Ordinaries Gold (AUD) index of companies, as
represented in Diagram 1. The Board chose to
replace the TSR Alpha™ measurement with this
new measure to:
〉〉 provide a genuine measure of performance
by senior management against companies
operating in the same market segment;
〉〉
〉〉
〉〉
retain the key values of the previous TSR
Alpha™ measure which is to only reward
senior management for over performance;
retain a focus on performance from an
investors perspective albeit within a defined
market segment; and
create a simple and easy system to interpret
for management and shareholders alike.
Vesting schedule for performance rights
issued for financial year 12/13 and
financial year 13/14
These performance rights continue to be subject
to a hurdle that is derived for the three year
vesting period using the external performance
measuring metric, TSR Alpha™.
Total Shareholder Return measures the
percentage return received by a shareholder
from investing in a company’s shares over a
period of time. Broadly, it is share price growth
plus dividends over the period. TSR Alpha™
takes into account market movement over the
vesting period and the additional return (risk
premium) that shareholders expect from the
share market performance over the vesting
period. In essence it measures whether share-
holders have received a return over the period
that is consistent with their expectations (TSR
Alpha™ of zero) or more or less.
53
continuedu
Directors’ ReportDirectors' Report
54
Directors and Key Management Personnel details
Except where noted, the named persons held their current positions for the whole of the year and up to the date of this report.
Non-Executive Directors
Ross Smyth-Kirk
Non-Executive Chairman
Peter McAleer
Craig Carracher
Peter Alexander
Peter Warren
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed 1 July 2014)
Gavin Thomas
Managing Director and Chief Executive Officer (resigned 1 June 2014)
Senior Executives
Tim Benfield
Chief Operating Officer
Duane Woodbury
Chief Financial Officer (resigned 2 July 2014)
Ron James
Ross Coyle
Joel Forwood
Brett Dunstone
General Manager Exploration and Resource Development
General Manager Finance and Administration and Company Secretary
General Manager Corporate and Markets
General Manager Human Resources
Michael Monaghan
Chief Operating Officer and General Manager – Akara Resources PCL
Changes since the end of the reporting period
Peter Warren was appointed to the position of Non-Executive Director effective 1 July 2014. Duane Woodbury resigned from the position of Chief Financial
Officer effective 2 July 2014.
Contract terms of the Executive Directors and Key Management Personnel
Remuneration and other key terms of employment for the Executive Director and Senior Executives are summarised as follows.
Name
Gavin Thomas 1
Tim Benfield 1
Duane Woodbury 1
Ron James 1
Ross Coyle 1
Joel Forwood 1
Brett Dunstone 1
Michael Monaghan
Term of
agreement
Fixed annual remuneration
including superannuation
Notice period by
Executive
Notice period by
the Company
Open
Open
Open
Open
Open
Open
Open
Open
FY 2014
FY 2013
2$919,185
$1,080,000
$463,833
$463,833
$371,000
$362,083
$306,583
$285,308
$500,000
$500,000
$400,000
$390,000
$330,000
$307,000
3$531,525
3$531,522
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
12 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
1
2
3
Amount shown includes a voluntary 10% reduction in fixed remuneration effective for the period from 1 October 2013.
Amount shown is for the period to the date of resignation being 1 June 2014.
Paid in US dollars and based on the exchange rate as at 30 June 2014 of 0.9.
Directors’ Reportwww.kingsgate.com.au
Fixed annual remuneration, inclusive of the required superannuation contribution amount is reviewed annually by the Board
following the end of the financial year. The amounts set out above are the Executives’ total fixed remuneration as at 30 June 2014.
In the event of the completion of a takeover (relevant interest exceeds 50%) the executive will receive a lump sum gross payment
equal to between six to 12 months of the Total Remuneration Package (all executives are entitled to 12 months except Ross
Coyle, Joel Forwood and Ron James who are entitled to six months). If within six months after the completion of the takeover the
executive elects to terminate his employment or his employment is terminated by the Company the executive will not be entitled
to any notice of termination or payment in lieu of notice.
Non-Executive Directors fees
Non-Executive Directors, including the Chairman, are paid fixed fees for their services to the Company plus statutory superannua-
tion contributions the Company is required by law to make on their behalf. Those fees are inclusive of any salary-sacrificed contri-
bution to superannuation that a Non-Executive Director wishes to make.
The level of Non-Executive Directors fees is set so as to attract the best candidates for the Board while maintaining a level
commensurate with boards of similar size and type. The Board may also seek the advice of independent remuneration consult-
ants, including survey data, to ensure Non-Executive Directors’ fees and payments are consistent with the current market.
Non-Executive Directors’ base fees inclusive of committee membership but not including statutory superannuation are outlined
as follows. Note that from the period 1 October 2013, all Non-Executive Directors fees were voluntarily reduced by 10%:
Chairman
Directors
1
Excludes Director fees paid by subsidiary.
Financial
year ended
30 June 2014 1
$
Financial
year ended
30 June 2013 1
$
148,000
277,500
160,000
300,000
425,500
460,000
The aggregate remuneration of Non-Executive Directors is set by shareholders in general meeting in accordance with the Consti-
tution of the Company, with individual Non-Executive Directors remuneration determined by the Board within the aggregate
total. The aggregate amount of Non-Executive Directors’ fees approved by shareholders on 13 November 2008 is $1,000,000.
Non-Executive Directors do not receive any additional fees for serving on committees of the Company.
There are no retirement allowances for Non-Executive Directors.
55
continuedu
Directors’ ReportDirectors' Report 56
Additional statutory disclosures
Details of remuneration
Details of the nature and amount of each major element of the remuneration of the Directors and the Group executive managers are set out in the
following tables:
Short-term benefits
Post-employment
benefits
Share-based
payment
Year ended
30 June 2014
Cash salary
and fees6
Cash bonus
Non-monetary
benefits1
Super-
annuation
Termination
benefits5
Amortised value
of rights2
(accounting
expense)
Name
$
$
$
$
$
$
Non-Executive Directors
Ross Smyth-Kirk
Paid by Company
Paid by subsidiary6
Peter McAleer3
Craig Carracher
Paid by Company
Paid by subsidiary6
Peter Alexander
Sub-total Non-Executive
Directors Compensation
Executive Director
Gavin Thomas
Paid by Company
Paid by subsidiary6
Other Key Management Personnel
Tim Benfield
Duane Woodbury
Ron James
Ross Coyle
Paid by Company
Paid by subsidiary6
Joel Forwood
Brett Dunstone
Michael Monaghan
Sub-total Executive Director
and other KMP Compensation
TOTAL
148,000
57,706
92,500
79,206
39,492
92,500
509,404
888,090
40,514
446,061
439,833
371,000
328,071
44,599
281,583
267,536
531,525
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,335
–
–
–
–
–
1,335
67,038
–
–
6,419
2,602
–
–
–
–
90,967
11,635
Total
$
163,025
57,706
92,500
101,056
39,492
101,056
554,835
13,690
–
–
21,850
–
8,556
44,096
–
–
–
–
–
–
–
–
–
–
–
–
–
–
35,000
–
1,727,632 7
–
(164,159)4
–
2,553,601
40,514
17,772
26,673
–
35,012
–
25,000
17,772
–
–
367,836 8
–
–
–
–
–
–
65,872
18,735
89,840
88,680
–
75,037
17,094
26,185
529,705
859,496
463,442
451,763
44,599
381,620
302,402
660,312
3,638,812
4,148,216
90,967
90,967
87,694
89,029
157,229
2,095,468
217,284
6,287,454
201,325
2,095,468
217,284
6,842,289
1
2
3
4
5
6
7
8
Non-monetary benefits relate to car parking, travel and life insurance.
Amortised value of rights comprises the fair value of performance and deferred rights expensed during the year. This is an accounting expense and does not reflect the
value to the executive of rights that vested in the financial year. Refer to the table on page 60 for the value of rights that have vested.
Consulting Fees of $92,500 were paid or payable to Norwest Mining Consultants Ltd, of which Peter McAleer is an officer and director.
Amortised value is net of write-back of expense incurred in prior periods relating to unvested rights that were forfeited during the year.
Benefits paid were in accordance with employment contract.
Fees paid by subsidiary relate to director fees paid by Akara Resources PCL.
Includes payment of accrued annual leave and long service leave of $539,633.
Includes accrued annual leave of $42,836.
Directors’ Reportwww.kingsgate.com.au 57
Total
$
186,658
100,000
109,000
109,000
504,658
Short-term benefits
Post-
employment
benefits
Share-based
payment
Cash salary
and fees
Cash bonus
Non-monetary
benefits1
Super-
annuation
Amortised value
of rights2
(accounting
expense)
$
$
$
$
$
160,000
100,000
90,500
100,000
450,500
1,055,000
483,524
475,000
400,000
365,000
305,000
168,355
781,245
4,033,124
4,483,624
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12,258
–
–
–
12,258
14,400
–
18,500
9,000
41,900
–
–
–
–
–
68,587
25,000
410,974
1,559,561
–
6,157
2,478
13,189
11,928
43,591
29,205
16,476
26,398
–
25,000
25,000
9,611
–
21,029
136,367
109,093
106,366
38,132
–
–
521,029
643,922
511,571
509,555
380,060
221,557
810,450
175,135
127,485
821,961
5,157,705
187,393
169,385
821,961
5,662,363
Year ended
30 June 2013
Name
Non-Executive Directors
Ross Smyth-Kirk
Peter McAleer3
Craig Carracher
Peter Alexander
Sub-total Non-Executive
Directors Compensation
Executive Director
Gavin Thomas
Other Key Management Personnel
Tim Benfield
Duane Woodbury
Ron James
Ross Coyle
Joel Forwood
Brett Dunstone
Phil MacIntyre (retired 30 June 2013)
Sub-total Executive Director
and other KMP Compensation
TOTAL
1
2
3
Non-monetary benefits relate to car parking, travel, life insurance, relocation, and accommodation allowance provided by the Company. Relocation and accommodation
allowance is applicable to interstate recruitment of relevant personnel.
Amortised value of rights comprises the fair value of performance and deferred rights expensed during the year. This was the first year rights were issued. This is an
accounting expense and does not reflect the value to the executive of rights that vested in the financial year.
Consulting Fees of $100,000 were paid or payable to Norwest Mining Consultants Ltd, of which Peter McAleer is an officer and director.
continuedu
Directors’ ReportDirectors' Report 58
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Executive Director
Gavin Thomas
Other Key Management Personnel
Tim Benfield
Duane Woodbury
Ron James
Ross Coyle
Joel Forwood
Brett Dunstone
Mike Monaghan
Fixed
remuneration
2014
At risk – STI
2014
At risk – LTI*
2014
106%
88%
98%
81%
82%
80%
94%
82%
–
–
–
–
–
–
–
14%
-6%
12%
2%
19%
18%
20%
6%
4%
*
Since the long-term incentives are provided by way of deferred rights and performance rights, the percentages disclosed reflect the value of remuneration consisting of
deferred rights and performance rights, based on the value of deferred rights and performance rights expensed during the year. Where applicable, the expenses include
negative amounts for expenses reversed during the year due to resignation.
Directors’ Reportwww.kingsgate.com.au 59
Share rights held by Key Management Personnel
Details of each grant of share rights included in the Key Management Personnel remuneration tables above are noted in the following tables.
The percentage of rights granted to Key Management Personnel on issue that have vested and the percentage that was forfeited because the person
did not meet the service criteria is set out below:
Name
G Thomas
Deferred
Deferred
Performance
Performance
T Benfield
Deferred
Deferred
Performance
Performance
D Woodbury
Deferred
Deferred
Deferred
Deferred
Performance
Performance
R James
Deferred
Deferred
Deferred
Deferred
Performance
Performance
R Coyle
Deferred
Deferred
Deferred
Deferred
Performance
Performance
J Forwood
Deferred
Deferred
Deferred
Performance
Performance
B Dunstone
Deferred
Performance
M Monaghan
Deferred
Deferred
Share rights
Financial year
granted
Number
granted
Vested
%
Vested
number
Forfeited
%
Forfeited
number
Financial year
that rights
may vest
2013
2013
2013
2014
2013
2014
2013
2014
2013
2013
2013
2014
2013
2014
2013
2013
2013
2014
2013
2014
2013
2013
2013
2014
2013
2014
2013
2013
2014
2013
2014
2014
2014
2013
2014
52,181
53,901
222,955
768,380
14,204
49,407
28,409
98,814
13,298
13,736
14,204
49,407
28,409
98,814
10,638
10,989
11,364
39,526
22,728
79,051
10,372
10,714
11,080
38,538
22,159
77,075
9,066
9,375
32,609
18,750
65,217
30,336
60,672
7,500
42,850
100
–
–
–
–
–
–
–
100
–
–
–
–
–
100
–
–
–
–
–
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
52,181
–
–
–
–
–
–
–
13,298
–
–
–
–
–
10,638
–
–
–
–
–
10,372
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
100
100
–
53,901
222,955
768,380
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2014
2015
2016
2017
2016
2017
2016
2017
2014
2015
2016
2017
2016
2017
2014
2015
2016
2017
2016
2017
2014
2015
2016
2017
2016
2017
2015
2016
2017
2016
2017
2017
2017
2016
2017
continuedu
Directors’ ReportDirectors' Report
60
Value of share rights
Name
G Thomas
Deferred
Deferred
Performance
Performance
T Benfield
Deferred
Deferred
Performance
Performance
D Woodbury
Deferred
Deferred
Deferred
Deferred
Performance
Performance
R James
Deferred
Deferred
Deferred
Deferred
Performance
Performance
R Coyle
Deferred
Deferred
Deferred
Deferred
Performance
Performance
J Forwood
Deferred
Deferred
Deferred
Performance
Performance
B Dunstone
Deferred
Performance
M Monaghan
Deferred
Deferred
Financial year
that rights
may vest
Number
granted
Fair value
per right at
grant date5
$
2014
2015
2016
2017
2016
2017
2016
2017
2014
2015
2016
2017
2016
2017
2014
2015
2016
2017
2016
2017
2014
2015
2016
2017
2016
2017
2015
2016
2017
2016
2017
2017
2017
2016
2017
52,181
53,901
222,955
768,380
14,204
49,407
28,409
98,814
13,298
13,736
14,204
49,407
28,409
98,814
10,638
10,989
11,364
39,526
22,728
79,051
10,372
10,714
11,080
38,538
22,159
77,075
9,066
9,375
32,609
18,750
65,217
30,336
60,672
7,500
42,850
4.73
4.38
1.92
0.74
5.17
1.47
3.21
0.74
5.91
5.57
5.17
1.39
3.21
0.74
5.91
5.57
5.17
1.34
3.21
0.74
5.91
5.57
5.17
1.47
3.21
0.74
5.57
5.17
1.47
3.21
0.74
1.47
0.74
5.17
1.47
Share rights
Total
fair value at
grant date5
$
246,815
236,087
428,074
564,759
73,438
72,628
91,193
72,628
78,590
76,511
73,438
68,676
91,193
73,122
62,872
61,209
58,750
52,965
72,955
58,102
61,301
56,679
57,281
56,651
71,131
56,650
50,497
48,469
47,935
60,188
47,934
44,594
44,594
38,775
62,990
Maximum
value yet
to vest2
$
Value at
vesting date3
$
Value at
lapse date4
$
–
–
–
–
36,719
56,892
68,851
60,524
–
–
73,438
68,676
91,193
73,122
–
–
29,375
41,489
48,636
48,419
–
–
28,641
44,377
47,421
47,208
–
24,234
37,549
40,125
39,945
34,932
37,162
19,388
49,342
66,009
–
–
–
–
39,887
164,987
568,601
–
–
–
–
16,822
–
–
–
–
–
13,457
–
–
–
–
–
13,121
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Directors’ Reportwww.kingsgate.com.au 61
1
2
3
4
5
The minimum value of the rights yet to vest is nil, as the rights will be forfeited if the Key Management Personnel fails to meet a vesting condition.
The maximum value of the share rights yet to vest has been determined as the fair value of the rights at the grant date that is yet to be expensed.
The value at vesting date (30 June 2014) is the number of rights vesting multiplied by the Company’s share price on the vesting date. As rights convert
to ordinary shares on the vesting date, this date is also the exercise date. No payment by the holder of the right is required on vesting of the right.
The value at lapse date is the number of rights lapsing multiplied by the Company’s share price at the close of business on that day.
The fair value of the performance rights was estimated using Monte Carlo simulation; taking into account the terms and conditions upon which the
awards were granted (refer to Note 24 of the Financial Statements).
Movement in LTI rights for the year ended 30 June 2014
Performance rights
The number of performance rights held during the financial year by each Director of Kingsgate and each of the specified executives of
the Group, including their personally-related entities, are set out as follows:
2014
Directors
Ross Smyth-Kirk
Peter McAleer
Craig Carracher
Peter Alexander
Gavin Thomas
Other Key Management Personnel
Tim Benfield
Duane Woodbury
Mike Monaghan
Ron James
Ross Coyle
Joel Forwood
Brett Dunstone
Balance at start
of year
Granted during
the year
Converted
during the year
Other changes
during the year
Balance at year
end
Vested and
exercisable at
year end
–
–
–
–
–
–
–
–
222,955
768,380
28,409
28,409
–
22,728
22,159
18,750
–
98,814
98,814
–
79,051
77,075
65,217
60,672
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(991,335)
–
–
–
–
–
–
–
–
–
–
–
–
127,223
127,223
–
101,779
99,234
83,967
60,672
–
–
–
–
–
–
–
–
–
–
–
–
continuedu
Directors’ ReportDirectors' Report 62
Deferred rights
The number of deferred rights held during the financial year by each Director of Kingsgate and each of the specified executives of the Group, including their
personally-related entities, are set out as follows:
2014
Directors
Ross Smyth-Kirk
Peter McAleer
Craig Carracher
Peter Alexander
Gavin Thomas
Other Key Management Personnel
Tim Benfield
Duane Woodbury
Mike Monaghan
Ron James
Ross Coyle
Joel Forwood
Brett Dunstone
Balance at start
of year
Granted during
the year
Converted
during the year
Other changes
during the year
Balance at year
end
Vested and
exercisable at
year end
–
–
–
–
106,082
14,204
41,238
7,500
32,991
32,166
18,441
–
–
–
–
–
–
49,407
49,407
42,850
39,526
38,538
32,609
30,336
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(53,901)
52,181
52,181
–
–
–
–
–
–
–
63,611
90,645
50,350
72,517
70,704
51,050
30,336
–
13,298
–
10,638
10,372
–
–
Share holdings
The number of shares in the Company held during the financial year by each Director of Kingsgate and each of the other Key Management Personnel of the
Group, including their personally-related entities are set out as follows:
2014
Directors
Ross Smyth-Kirk
Peter McAleer
Craig Carracher
Peter Alexander
Gavin Thomas
Other Key Management Personnel
Tim Benfield
Duane Woodbury
Ron James
Ross Coyle
Joel Forwood
Brett Dunstone
Mike Monaghan
*Gavin Thomas resigned 1 June 2014 and at the time of his resignation he held 765,448 shares.
Balance at start
of year
Received during
year on exercise
of options
Other changes
during the year
Balance at
year end
4,586,271
100,000
110,000
36,525
1,047,937
–
–
–
14,427
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
490,454
5,076,725
–
–
9,962
*(1,047,937)
–
–
–
100,000
110,000
46,487
–
–
–
–
3,147
17,574
–
–
–
–
–
–
Directors’ Reportwww.kingsgate.com.au
63
Loan to Director
There were no new loans made to Directors or other Key Management Personnel at any time during the year.
2014
Name
G Thomas
*
**
This loan was repaid in full in August 2013.
Interest payable at annual interest rate of 11%.
Balance at
start of year
Loan
repayments
for the year
Interest paid
and payable for
the year**
Interest
not charged
Balance at
end of year
Highest
indebtedness
during the year
$
$
$
160,000
*(160,000)
4,436
$
–
$
$
–
160,000
Insurance of officers
During the financial year, the Group paid premiums to insure Directors and Officers of the Group. The contracts include a prohibition on disclosure of the
premium paid and nature of the liabilities covered under the policy.
Directors’ interest in contracts
No material contracts involving Directors’ interests were entered into since the end of the previous financial year or existed at the end of the financial year
other than the transactions detailed in the note to the accounts.
Non-audit services
Details of amounts paid or payable to the auditor for non-audit services provided during the year are detailed in Note 30: Auditors Remuneration.
The Directors are satisfied that the provision of non-audit services during the period by the auditor is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services disclosed in Note 30: Auditors Remuneration to the financial statements do not compromise the external
auditor’s independence, based on the Auditor’s representations and advice received from the Audit Committee, for the following reasons:
〉〉
〉〉 none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for
all non-audit services have been reviewed to ensure they do not impact the integrity and objectivity of the auditor; and
Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work,
acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards.
A copy of the Auditors’ Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 64.
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the “rounding off”
of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Class Order to the nearest thousand
dollars, or in certain cases, to the nearest dollar.
Auditors
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors.
Ross Smyth-Kirk
Director
Sydney
5 September 2014
Directors’ ReportDirectors' Report 64
Auditor’s Independence Declaration
Auditor’s
Independence
Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Kingsgate Consolidated Limited for the year ended 30 June 2014,
I declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001
in relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Kingsgate Consolidated Limited and the entities it controlled during
the period.
Brett Entwistle
Partner
PricewaterhouseCoopers
Sydney
5 September 2014
www.kingsgate.com.au
Financial
Statements
for the year ended 30 June 2014
65
Financial Statements
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Consolidated Statement of Profit or Loss and
Other Comprehensive Income 66
3. Critical accounting estimates, assumptions and
judgements . . . . . . . . . . . . . . . . . 78
Consolidated Statement of Financial Position 67
Consolidated Statement of Changes in Equity
68
Consolidated Statement of Cash Flows 69
Notes to the Financial Statements 70
Basis of preparation . . . . . . . . . . . . . . 70
1.
2.
4.
5.
6.
7.
8.
9.
Segment information . . . . . . . . . . . . . 79
Revenue and expenses . . . . . . . . . . . . .
80
Income tax . . . . . . . . . . . . . . . . . 83
Cash and cash equivalents and restricted cash . . . . 86
Receivables . . . . . . . . . . . . . . . . .
86
Inventories . . . . . . . . . . . . . . . . . 87
Significant accounting policies . . . . . . . . . .
70
10. Other assets . . . . . . . . . . . . . . . . 87
A. Principles of consolidation . . . . . . . . . .
70
B. Foreign currency translation . . . . . . . . . 71
C. Revenue . . . . . . . . . . . . . . . . 71
Income tax . . . . . . . . . . . . . . . 71
D.
E. Leases . . . . . . . . . . . . . . . . . 72
F. Divestment transaction costs . . . . . . . . 72
Impairment of assets . . . . . . . . . . . . 72
G.
72
H. Cash and cash equivalents . . . . . . . . . .
Trade and other receivables . . . . . . . . . 72
I.
J.
Inventories . . . . . . . . . . . . . . . 72
K. Non-derivative financial assets . . . . . . . . 72
L. Derivative financial instruments . . . . . . . .
73
M. Property, plant and equipment . . . . . . . . 73
N. Deferred stripping costs . . . . . . . . . . 74
O. Deferred mining services costs . . . . . . . . 74
P. Exploration, evaluation and feasibility expenditure . 74
Q. Mine properties. . . . . . . . . . . . . . 74
R.
Investment in associates . . . . . . . . . . 75
S. Trade and other payables . . . . . . . . . . 75
T. Borrowings . . . . . . . . . . . . . . . 75
U. Borrowing costs . . . . . . . . . . . . . 75
V. Provisions . . . . . . . . . . . . . . . . 75
W. Restoration and rehabilitation provision . . . . .
75
X. Employee benefits. . . . . . . . . . . . . 76
Y. Dividends . . . . . . . . . . . . . . . .
76
Z. Earnings per share . . . . . . . . . . . . . 76
AA. Contributed equity . . . . . . . . . . . . 76
BB. Goods and services tax (GST) . . . . . . . . .
76
CC. Operating segment reporting. . . . . . . . . 76
DD. New accounting standards and interpretations . . 77
78
EE. Parent entity financial information . . . . . . .
11. Available-for-sale financial assets . . . . . . . . . 88
12. Property plant and equipment . . . . . . . . . . 88
13. Exploration, evaluation and development . . . . . . 89
14.
Investment in associate . . . . . . . . . . . . 90
15. Payables . . . . . . . . . . . . . . . . . .
16. Borrowings . . . . . . . . . . . . . . . . .
90
91
17. Provisions . . . . . . . . . . . . . . . . . 93
18. Contributed equity . . . . . . . . . . . . . . 93
19. Reserves and accumulated losses . . . . . . . . .
20. Commitments for expenditure . . . . . . . . . .
94
95
21. Controlled entities . . . . . . . . . . . . . . 96
22. Dividends . . . . . . . . . . . . . . . . . 97
23. Related parties . . . . . . . . . . . . . . . 97
24. Employee benefits and share-based payments . . . . 97
25. Reconciliation of loss after income tax to
net cash flow from operating activities . . . . . . .
99
26. Events occurring after reporting date . . . . . . . 99
27. Contingent liabilities . . . . . . . . . . . . . 99
28. Financial risk management and instruments . . . . 100
29. Key Management Personnel disclosures. . . . . . 105
30. Auditors’ remuneration . . . . . . . . . . . 106
31. Loss per share . . . . . . . . . . . . . . .
106
32. Parent entity financial information . . . . . . . 107
33. Deed of cross guarantee . . . . . . . . . . . 107
34.
Impact of adopting Interpretation 20 and
voluntary change in accounting policy for deferred
cost of divestment . . . . . . . . . . . . .
110
Directors' Report
66
Financial Statements
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
for the year ended 30 June 2014
Sales revenue
Cost of sales
Gross profit
Exploration expenses
Corporate and administration expenses
Other income and expenses
Foreign exchange gain / (loss)
Share of loss in associate
Impairment losses – Challenger Gold Project
Impairment losses – Bowdens Silver Project
Impairment losses – exploration assets
Impairment of investment in associate
Loss before finance costs and income tax
Finance income
Finance costs
Net finance costs
Loss before income tax
Income tax (expense) / benefit
Loss after income tax
Other comprehensive income
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations (net of tax)
Change in fair value of available-for-sale financial assets (net of tax)
Total other comprehensive (loss) / income for the year
Total comprehensive loss for the year
Loss attributable to:
Owners of Kingsgate Consolidated Limited
Total comprehensive loss attributable to:
Owners of Kingsgate Consolidated Limited
Loss per share
Basic loss per share
Diluted loss per share
Note
5 (a)
5 (b)
5 (c)
5 (d)
14 (a)
5 (e)
5 (e)
5 (e)
5 (e)
5 (f)
6
2014
$’000
2013
Restated
$’000
328,326
(301,891)
329,282
(282,501)
26,435
46,781
(210)
(23,966)
2,102
2,595
(413)
–
(84,586)
(2,112)
–
(675)
(22,263)
(15,490)
(745)
(1,353)
(311,850)
–
(20,421)
(537)
(80,155)
(326,553)
610
(13,860)
(13,250)
(93,405)
(2,886)
2,587
(18,809)
(16,222)
(342,775)
16,504
(96,291)
(326,271)
(26,427)
–
(26,427)
40,311
(91)
40,220
(122,718)
(286,051)
(96,291)
(326,271)
(122,718)
(286,051)
Cents
Cents
31
31
(55.9)
(55.9)
(215.0)
(215.0)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
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Consolidated Statement
of Financial Position
as at 30 June 2014
Assets
Current assets
Cash and cash equivalents
Receivables
Inventories
Other assets
Total current assets
Non-current assets
Restricted cash
Inventories
Available-for-sale financial assets
Investment in associate
Property, plant and equipment
Exploration, evaluation and development
Other assets
Deferred tax assets
Total non-current assets
TOTAL ASSETS
Liabilities
Current liabilities
Payables
Borrowings
Derivatives held for trading
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
67
Financial Statements
Note
2014
$’000
*2013
Restated
$’000
*1 July 2012
Restated
$’000
7
8
9
10
7
9
11
14
12
13
10
6 (g)
15
16
17
15
16
6 (g)
17
53,632
13,360
47,917
26,601
30,494
9,431
62,032
32,197
87,031
12,226
56,079
29,512
141,510
134,154
184,848
5,489
49,805
270
1,072
170,658
251,633
13,537
9,205
501,669
5,474
44,731
767
1,485
190,231
361,195
10,894
10,395
–
30,314
1,751
–
239,237
566,568
8,232
10,211
625,172
856,313
643,179
759,326
1,041,161
25,478
42,978
623
1,148
3,115
41,185
84,101
1,271
272
3,797
73,342
130,626
4,800
110,654
8,628
32,998
157,080
5,921
115,657
9,552
33,596
164,726
42,597
35,697
2,685
11,655
2,993
95,627
6,681
121,847
29,110
19,381
177,019
230,422
295,352
272,646
412,757
463,974
768,515
18
19 (a)
19 (b)
677,109
(8,356)
(255,996)
605,504
18,175
(159,705)
599,618
(20,407)
189,304
412,757
463,974
768,515
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
*
Comparative information has been restated to reflect the adoption of Interpretation 20 – Stripping Costs in the Production Phase of a Surface Mine and change in
accounting policies in respect of deferred cost of divestment (refer to Note 34 for details).
68
Financial Statements
Consolidated Statement
of Changes in Equity
for the year ended 30 June 2014
Balance at 1 July 2012 (Restated)
Loss after income tax
Total other comprehensive income for the year
Total comprehensive income / (loss) for the year
Transaction with owners in their capacity as owners:
Contributions of equity, net of transaction costs
Issue of ordinary shares as part consideration for the
settlement of a legal dispute
Dividends provided for or paid
Movement in share-based payment reserve
Total transactions with owners
Balance at 30 June 2013 (Restated)
Balance at 1 July 2013 (Restated)
Loss after income tax
Total other comprehensive loss for the year
Total comprehensive loss for the year
Transaction with owners in their capacity as owners:
Contributions of equity, net of transaction costs
Issue of ordinary shares to repay funds drawn down under the
convertible revolving credit facility, net of transaction costs
Share placement and rights issue, net of transaction costs
Movement in share-based payment reserve
Total transactions with owners
Balance at 30 June 2014
Note
19 (a)
19 (b)
18
18
22
19 (a)
19 (a)
19 (b)
18
18
18
19 (a)
Contributed
equity
$’000
Reserves
$’000
Retained profits
/ Accumulated
losses
$’000
Total equity
$’000
599,618
(20,407)
189,304
768,515
–
–
–
4,374
1,512
–
–
5,886
–
40,220
40,220
–
–
–
(1,638)
(1,638)
(326,271)
–
(326,271)
40,220
(326,271)
(286,051)
–
–
(22,738)
–
4,374
1,512
(22,738)
(1,638)
(22,738)
(18,490)
605,504
18,175
(159,705)
463,974
605,504
18,175
(159,705)
463,974
–
–
–
597
14,548
56,460
–
71,605
–
(96,291)
(26,427)
–
(96,291)
(26,427)
(26,427)
(96,291)
(122,718)
–
–
–
(104)
(104)
–
–
–
–
–
597
14,548
56,460
(104)
71,501
677,109
(8,356)
(255,996)
412,757
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
www.kingsgate.com.au
www.kingsgate.com.au 69
Financial Statements
2013
Restated
$’000
332,624
(220,120)
2,587
(10,120)
(16,186)
88,785
(7,035)
(127,706)
(3,948)
(6,402)
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326,801
(281,306)
610
(7,815)
(1,127)
37,163
(11,465)
(30,310)
(2,185)
504
Consolidated Statement
of Cash Flows
for the year ended 30 June 2014
Note
2014
$’000
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services tax)
Interest received
Finance costs paid
Income tax paid
Net cash inflow from operating activities
25
Cash flows from investing activities
Payments for property, plant and equipment
Payments for exploration, evaluation and development
Interest capitalised to expansion and development projects
Deposits and debt service reserve account
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from corporate borrowings, net of transaction costs
Proceeds from subsidiary (Akara Resources PCL) borrowings, net of transaction costs
Repayment of corporate borrowings
Repayment of subsidiary (Akara Resources PCL) borrowings
Proceeds from the issue of shares (net of transaction costs)
Dividends paid
Net cash inflow / (outflow) from financing activities
Net increase / (decrease) in cash held
Cash at the beginning of the year
Effects of exchange rates on cash and cash equivalents
Cash at the end of the year
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
(43,456)
(145,091)
26,085
–
(32,000)
(19,671)
56,460
14,326
119,642
(35,000)
(81,250)
–
–
(19,409)
30,874
(1,691)
24,581
30,494
(1,443)
53,632
(57,997)
87,031
1,460
30,494
7
70
Notes to the
Financial Statements
for the year ended 30 June 2014
The Financial Report of Kingsgate Consolidated
Limited (Kingsgate or the “Company”) for the
year ended 30 June 2014 was authorised for
issue in accordance with a resolution of Direc-
tors on 5 September 2014.
Kingsgate is a Company limited by shares incor-
porated in Australia whose shares are publicly
traded on the Australian Securities Exchange
using the ASX code KCN. The consolidated
financial statements of the Company as at and
for the year ended 30 June 2014 comprise the
Company and its subsidiaries (together referred
to as the “Group” and individually as “Group
entities”). A description of the nature of the
Group’s operations and its principal activities
is included in the Directors’ Report.
1. Basis of preparation
The general purpose financial statements have
been prepared in accordance with Australian
Accounting Standards, other authoritative
pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.
The Company is a for-profit entity for the
purpose of preparing the financial statements.
Compliance with IFRS
The financial statements comply with Inter-
national Financial Reporting Standards (“IFRS”)
adopted by the International Accounting
Standards Board (“IASB”).
Historical cost convention
The financial statements have been prepared
under the historical cost convention, as
modified by the revaluation of available-for-sale
financial assets and financial instruments
(including derivative instruments) at fair value
through profit or loss.
Functional and presentation currency
The financial statements of the Group entities
are measured using the currency of the primary
economic environment in which the entity
operates (“the functional currency”). The
consolidated financial statements are presented
in Australian dollars, which is the Company’s
functional currency and presentation currency.
Rounding of amounts
The Company is of a kind referred to in ASIC
Class Order 98/100 dated 10 July 1998 and in
accordance with that Class Order, all financial
information presented in Australian dollars has
been rounded to the nearest thousand, or in
certain cases, the nearest dollar.
Critical accounting estimates
The preparation of financial statements requires
the use of certain critical accounting estimates.
It also requires management to exercise its
judgement in the process of applying the
Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or
areas where assumptions and estimates are
significant to the financial statements are
disclosed in Note 3.
2. Significant accounting
policies
The principal accounting policies adopted in the
preparation of the financial statements are set
out below. These policies have been consistently
applied to all the years presented.
a . Principles of consolidation
(i)
Business combinations
Business combinations are accounted for using
the acquisition method as at the acquisition
date, which is the date on which control is
transferred to the Group. Control is the power to
govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
In assessing control, the Group takes into
consideration potential voting rights that
currently are exercisable.
The consideration transferred for the acquisition
of a subsidiary comprises the fair values of the
assets transferred, the liabilities incurred and the
equity interests issued by the Group. The consid-
eration transferred does not include amounts
related to the settlement of a pre-existing
relationship. Such amounts are generally recog-
nised in profit or loss.
Costs related to the acquisition other than those
associated with the issue of debt or equity
securities, that the Group incurs in connection
with a business combination are expensed as
incurred. Any contingent consideration payable
is recognised at fair value at the acquisition date.
Acquisitions of non-controlling interests are
accounted for as transactions with owners in
their capacity as owners and therefore no
goodwill is recognised as a result of such trans-
actions. The non-controlling interest in the
acquiree is based on the fair value of the
acquiree’s net identifiable assets. The adjust-
ments to non-controlling interests are based on
the proportionate amount of the net assets of
the subsidiary.
The acquisition of an asset or group of assets
that is not a business is accounted for by allo-
cating the cost of the transaction to the net
identifiable assets and liabilities acquired based
on their fair values.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group.
The financial statements of subsidiaries are
included in the consolidated financial state-
ments from the date that control commences
until the date that control ceases.
The accounting policies of subsidiaries have
been changed when necessary to align them
with the policies adopted by the Group. Losses
applicable to the non-controlling interests in a
subsidiary are allocated to the non-controlling
interests even if doing so causes the non-
controlling interests to have a deficit balance.
Intra-group balances and transactions, and any
unrealised gains arising from intra-group trans-
actions, are eliminated in preparing the consoli-
dated financial statements. Unrealised losses
are also eliminated unless the transaction
provides evidence of the impairment of the asset
transferred.
Notes to the Financial Statementswww.kingsgate.com.au 71
b . Foreign currency translation
Transactions and balances
(i)
Foreign currency transactions are translated
into the respective functional currencies of the
Group entities at exchange rates on the dates of
the transactions. Foreign exchange gains and
losses resulting from the settlement of such
transactions and from the translation at
year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are
recognised in the profit or loss; except when
they are deferred in equity as qualifying cash
flow hedges and qualifying net investment
hedges or, are attributable to part of the net
investment in a foreign operation.
Translation differences on assets and liabilities
carried at fair value are reported as part of the
fair value gain or loss. Translation differences on
non-monetary assets and liabilities such as
equities held at fair value through profit or loss
are recognised in profit or loss as part of the fair
value gain or loss. Translation differences on
non-monetary assets are included in the fair
value reserve in equity.
Exchange gains and losses which arise on
balances between Group entities are taken to
the foreign currency translation reserve where
the intra-group balances are in substance part of
the Group’s net investment. Where as a result of
a change in circumstances, a previously desig-
nated intra-group balance is intended to be
settled in the foreseeable future, the intra-group
balance is no longer regarded as part of net
investment. The exchange differences for such
balance previously taken directly to the foreign
currency translation reserves are recognised in
the profit or loss.
(ii)
Foreign operations
The results and financial position of all the
Group entities (none of which has the currency
of a hyperinflationary economy) that have a
functional currency different from the presenta-
tion currency are translated into the presenta-
tion currency as follows:
〉〉
the assets and liabilities of the foreign opera-
tions, including goodwill and fair value
adjustments arising on acquisition, are
translated at the year-end exchange rate;
〉〉
〉〉
the income and expenses of foreign opera-
tions are translated at average exchange
rates (unless this is not a reasonable approxi-
mation of the cumulative effect of the rate
prevailing on the transaction dates, in which
case income and expenses are translated at
the dates of the transactions); and
foreign currency differences are recognised in
other comprehensive income, and presented
in the foreign currency translation reserve.
c . Revenue
Revenue is measured at the fair value of the
consideration received or receivable. Sales
revenue represents the net proceeds receivable
from the buyer.
Gold and silver sales
Gold and silver revenue is recognised when the
refinery process has been finalised at which
point the sale transaction to a third party is also
completed. Transportation and refinery costs
are expensed when incurred.
Income tax
d .
Income tax expense comprises current and
deferred tax. Current tax and deferred tax is
recognised in profit or loss except to the extent
that it relates to a business combination, or
items recognised directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or
receivable on the taxable income or loss for the
year using tax rates enacted or substantively
enacted at the reporting date, and any adjust-
ment to tax payable in respect of previous years.
Deferred tax is provided using the liability
method, providing for temporary differences
between the carrying amounts of assets and
liabilities for financial reporting purposes and
the amounts used for taxation purposes. The
amount of deferred tax provided is based on the
expected manner of realisation or settlement of
the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted
at the reporting date.
A deferred tax asset is recognised for unused tax
losses, tax credits and deductible temporary
differences, to the extent that it is probable that
future taxable profits will be available against
which they can be utilised. Deferred tax assets are
reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the
related tax benefit will be realised.
Deferred tax is not recognised for:
〉〉
〉〉
temporary differences on the initial recogni-
tion of assets or liabilities in a transaction
that is not a business combination and that
affects neither accounting nor taxable profit
or loss;
temporary differences related to invest-
ments in subsidiaries where the Company is
able to control the timing of the reversal of
the temporary differences and it is probable
that they will not reverse in the foreseeable
future; and
〉〉
taxable temporary differences arising on the
initial recognition of goodwill.
Deferred tax assets and liabilities are offset if
there is a legally enforceable right to offset
current tax liabilities and assets and, they relate
to income taxes levied by the same tax authority
on the same taxable entity.
Additional income tax expenses that arise from
the distribution of cash dividends are recognised
at the same time that the liability to pay the
related dividend is recognised.
Tax consolidation
The Company and its wholly-owned Australian
resident entities formed a tax-consolidation
group with effect from 1 July 2003 and are
therefore taxed as a single entity from that date.
The head entity within the tax-consolidation
group is Kingsgate Consolidated Limited.
Current tax expense or benefit, deferred tax
assets and deferred tax liabilities arising from
temporary differences of the members of the
tax-consolidation group are recognised in the
separate financial statements of the members
of the tax-consolidation group using the “stand
alone taxpayer” approach by reference to the
carrying amounts in the separate financial
statements of each entity and the tax values
applying under tax consolidation.
Current tax assets or liabilities and deferred tax
assets arising from unused tax losses assumed
by the head entity from the subsidiaries in the
tax-consolidation group, are recognised as
amounts receivable or payable to other entities
in the tax-consolidation group in conjunction
with any tax funding agreement amounts.
The Company recognises deferred tax assets
arising from unused tax losses of the tax-consoli-
dation group to the extent that it is probable
that future taxable profits of the tax-consolida-
tion group will be available against which the
asset can be utilised.
Tax funding and sharing agreements
The members of the tax-consolidation group
have entered into a funding agreement that sets
out the funding obligations of members of the
tax-consolidation group in respect of tax
amounts. The tax funding arrangements require
payments; to or from, the head entity equal to
the current tax liability or asset assumed by the
head entity and any deferred tax asset assumed
by the head entity, resulting in the head entity
recognising an intra-group receivable or payable
in the separate financial statements of the
members of the tax-consolidation group equal in
amount to the tax liability or asset assumed. The
intra-group receivables or payables are at call.
continuedu
Notes to the Financial StatementsNotes to the Financial Statements 72
d .
Income tax continued
The head entity recognises the assumed current
tax amounts as current tax liabilities or assets
adding to its own current tax amounts, since
they are also due to or from the same taxation
authority. The current tax liabilities or assets are
equivalent to the tax balances generated by
external transactions entered into by the tax-
consolidation group.
The amounts receivable or payable under the tax
funding agreement are due upon receipt of the
funding advice from the head entity, which is
issued as soon as practicable after the end of
each financial year. The head entity may also
require payment of interim funding amounts to
assist with its obligations to pay tax
instalments.
The members of the tax-consolidation group
have also entered into a tax sharing agreement.
The tax sharing agreement provides for the
determination of the allocation of income tax
liabilities between the entities should the head
entity default on its tax payment obligations.
No amounts have been recognised in the consol-
idated financial statements in respect of this
agreement as payment of any amounts under
the tax sharing agreement is considered remote.
e . Leases
Leases of property, plant and equipment where
the Group as lessee, has substantially all the
risks and rewards of ownership are classified as
finance leases. Finance leases are capitalised at
the lease’s inception at the fair value of the
leased property or, if lower, the present value
of the minimum lease payments. The corre-
sponding rental obligations, net of finance
charges, are included in other short-term and
long-term payables. Each lease payment is
allocated between the liability and finance cost.
The finance cost is charged to the profit or loss
over the lease period so as to produce a con-
stant periodic rate of interest on the remaining
balance of the liability for each period.
The property, plant and equipment acquired
under finance leases is depreciated over the
asset’s useful life or over the shorter of the
asset’s useful life and the lease term if there is
no reasonable certainty that the Group will
obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks
and rewards of ownership are not transferred to
the Group as lessee are classified as operating
leases. Payments made under operating leases
(net of any incentives received from the lessor)
are charged to the profit or loss on a straight-
line basis over the period of the lease.
f . Divestment transaction costs
Transaction costs directly relating to the partial
divestment of an interest in a subsidiary are
expensed as incurred in the years prior to the
disposal where control is retained.
Impairment of assets
g .
Assets are tested for impairment whenever
events or changes in circumstances indicate
that the carrying amount may not be recover-
able. An impairment loss is recognised for the
amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes
of assessing impairment, assets are grouped at
the lowest levels for which there are separately
identifiable cash inflows which are largely inde-
pendent of the cash inflows from other assets
or groups of assets (cash-generating units).
Non-financial assets other than goodwill that
suffered impairment are reviewed for possible
reversal of the impairment at each reporting
date.
h . Cash and cash equivalents
Cash and cash equivalents includes cash on
hand, deposits held at call with financial institu-
tions, other short-term, highly liquid invest-
ments 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, and bank
overdrafts. Bank overdrafts are shown within
borrowings in current liabilities in the statement
of financial position.
i . Trade and other receivables
Trade and other receivables are recognised
initially at fair value and subsequently measured
at amortised cost using the effective interest
method, less provision for impairment. Receiva-
bles are due for settlement no more than 90
days from the date of recognition.
Collectability of trade and other receivables is
reviewed on an ongoing basis. Debts which are
known to be uncollectible are written off by
reducing the carrying amount directly. An allow-
ance account is used when there is objective
evidence that the Group will not be able to
collect all amounts due according to the original
terms of the receivables. Significant financial
difficulties of the debtor, probability that the
debtor will enter bankruptcy or financial reor-
ganisation, and default or delinquency in
payments more than 60 days overdue are
considered indicators that the trade and other
receivable is impaired. The amount of the
impairment allowance is the difference between
the asset’s carrying amount and the present
value of estimated future cash flows, discounted
at the original effective interest rate. Cash flows
relating to short-term receivables are not
discounted if the effect of discounting is
immaterial.
The amount of the impairment loss is recognised
in the income statement within other expenses.
When a trade and other receivable for which an
impairment allowance had been recognised
becomes uncollectible in a subsequent period, it
is written off against the allowance account.
Subsequent recoveries of amounts previously
written off are credited against other expenses
in the income statement.
Inventories
j .
Raw materials and stores, work in progress
and finished goods (including gold bullion), are
stated at the lower of cost and net realisable
value. Cost comprises direct materials, direct
labour and an appropriate proportion of variable
and fixed overhead expenditure, the latter being
allocated on the basis of normal operating
capacity. Costs are assigned to individual items
of inventory on the basis of weighted average
costs. Costs of purchased inventory are deter-
mined after deducting rebates and discounts.
Net realisable value is the estimated selling price
in the ordinary course of business less the
estimated costs of completion and the esti-
mated costs necessary to make the sale.
Stockpiles represent ore that has been extracted
and is available for further processing. If there is
significant uncertainty as to whether the stock-
piled ore will be processed it is expensed as
incurred. Where the future processing of this
ore can be predicted with confidence, e.g.
because it exceeds the mine’s cut-off grade, it is
valued at the lower of cost and net realisable
value. If the ore will not be processed within the
12 months after the reporting date, it is included
within non-current assets. Work in progress
inventory includes ore stockpiles and other
partly processed material. Quantities are
assessed primarily through surveys and assays,
and truck counts.
k . Non-derivative financial assets
Classification and recognition
The Group classifies its investments and other
financial assets in the following categories:
financial assets at fair value through profit or
loss, loans and receivables and available-for-sale
financial assets. The classification depends on
the purpose for which the investments were
acquired. The Group determines the classifica-
tion of its investments at initial recognition and,
Notes to the Financial Statementswww.kingsgate.com.au 73
in the case of assets classified as held-to-matu-
rity, re-evaluates this designation at each
reporting date.
The Group initially recognises loans and receiv-
ables and deposits on the date that they are
originated. All other financial assets (including
assets designated at fair value through profit or
loss) are recognised initially on the trade date at
which the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial asset when
the contractual rights to the cash flows from the
asset expire, or it transfers the rights to receive
the contractual cash flows on the financial asset
in a transaction in which substantially all the
risks and rewards of ownership of the financial
assets are transferred.
Financial assets and liabilities are offset and the
net amount presented in the statement of
financial position when, and only when, the
Group has a legal right to offset the amounts
and intends either to settle on a net basis or to
realise the asset and settle the liability
simultaneously.
(i)
Financial assets at fair value through
profit or loss
Financial assets at fair value through profit or
loss are financial assets held for trading if
acquired principally for the purpose of selling in
the short term. Derivatives are also categorised
as held for trading unless they are designated as
hedges.
Attributable transaction costs are recognised in
the profit or loss when incurred. Assets in this
category are classified as current assets if they
are expected to be settled within 12 months,
otherwise they are classified as non-current.
(ii)
Loans and receivables
Loans and receivables are non-derivative finan-
cial assets with fixed or determinable payments
that are not quoted in an active market. They
are included in current assets, except for those
with maturities greater than 12 months after
the reporting date which are classified as non-
current assets.
Loans and receivables are measured at amor-
tised cost using the effective interest method,
less any impairment losses.
(iii) Available-for-sale financial assets
Available-for-sale financial assets, comprising
principally marketable equity securities, are
non-derivative financial assets that are either
designated in this category or not classified in
any of the other categories. They are included in
non-current assets unless management intends
to dispose of the investment within 12 months
of the reporting date. Investments are desig-
nated as available-for-sale if they do not have
fixed maturities and fixed or determinable
payments and management intends to hold
them for the medium to long term.
Subsequent to initial recognition, available-for-
sale financial assets are measured at fair value
and changes therein, other than impairment
losses, are recognised as a separate component
of equity net of attributable tax. When an asset
is derecognised the cumulative gain or loss in
equity is transferred to the income statement.
Impairment
The Group assesses at each reporting date
whether there is objective evidence that a
financial asset or group of financial assets is
impaired. In the case of equity securities classi-
fied as available-for-sale, a significant or
prolonged decline in the fair value of a security
below its cost is considered as an indicator that
the securities are impaired. If any such evidence
exists for available-for-sale financial assets, the
cumulative loss measured as the difference
between the acquisition cost and the current
fair value, less any impairment loss on that
financial asset previously recognised in profit or
loss, is removed from equity and recognised in
the income statement. Impairment losses recog-
nised in the profit or loss on equity instruments
classified as available-for-sale are not reversed
through the income statement.
If there is evidence of impairment for any of the
Group’s financial assets carried at amortised
cost, the loss is measured as the difference
between the asset’s carrying amount and the
present value of estimated future cash flows,
excluding future credit losses that have not been
incurred. The cash flows are discounted at the
financial asset’s original effective interest rate.
The loss is recognised in the income statement.
l . Derivative financial instruments
Derivative financial instruments are used by the
Group to protect against the Group’s Australian
dollar gold price risk exposures. The Group does
not apply hedge accounting and accordingly all
fair value movements on derivative financial
instruments are recognised in the profit or loss.
Derivative financial instruments are stated at
fair value on the date a derivative contract is
entered into and are subsequently remeasured
to their fair value at each reporting date. The
resulting gain or loss is recognised in the income
statement immediately.
m . Property, plant and equipment
Property, plant and equipment are stated at
historical cost less depreciation. Historical cost
includes expenditure that is directly attributable
to the acquisition of the items.
Subsequent costs are included in the asset’s
carrying amount or recognised as a separate
asset, as appropriate, only when it is probable
that future economic benefits associated with
the item will flow to the Group and the cost of
the item can be measured reliably. The carrying
amount of any component accounted for as a
separate asset is derecognised when replaced.
All other repairs and maintenance are charged to
the income statement during the reporting
period in which they are incurred.
Depreciation
Depreciation and amortisation of mine build-
ings, plant, machinery and equipment is
provided over the assessed life of the relevant
mine or asset, whichever is the shorter.
Depreciation and amortisation is determined on
a units-of-production basis over the estimated
recoverable reserves from the related area. In
some circumstances, where conversion of
resources into reserves is expected, some
elements of resources may be included. For mine
plant, machinery and equipment, which have an
expected economic life shorter than the life of
the mine, a straight line basis is adopted.
The expected useful lives are as follows:
〉〉 mine buildings – the shorter of applicable
mine life and 25 years;
〉〉 plant, machinery and equipment – the
shorter of applicable mine life and 3–15
years depending on the nature of the asset.
The estimated recoverable reserves and life of
each mine and the remaining useful life of each
class of asset are reassessed at least annually.
Where there is a change in the reserves during
the period, depreciation and amortisation rates
are adjusted prospectively from the beginning of
the reporting period.
Major spares purchased specifically for a
particular plant are capitalised and depreciated
on the same basis as the plant to which they
relate.
Impairment
An asset’s carrying amount is written down
immediately to its recoverable amount if the
asset’s carrying amount is greater than its
estimated recoverable amount (Note 2g).
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 74
m . Property, plant and equipment continued
Derecognition
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected to arise from
the continued use of the asset.
Any gain or loss arising on derecognition of the
asset (calculated as the difference between the
net disposal proceeds and the carrying amount
of the item) is included in the profit or loss in the
period the item is derecognised.
n . Deferred stripping costs
As part of its mining operations, the Group
incurs stripping (waste removal) costs both
during the development phase and production
phase of its operations.
Stripping costs incurred during the production
phase are generally considered to create two
benefits, being either the production of inven-
tory in the period or improved access to the ore
to be mined in the future. Where the benefits
are realised in the form of inventory produced in
the period, the production stripping costs are
accounted for as part of the cost of producing
those inventories. Where production stripping
costs are incurred and the benefit is improved
access to the ore to be mined in the future, the
costs are recognised as a non-current asset,
referred to as a “production stripping asset”,
if the following criteria are all met:
〉〉
Future economic benefits (being improved
access to the ore body) associated with the
stripping activity are probable;
〉〉
〉〉
The component of the ore body for which
access has been improved can be accurately
identified; and
The costs associated with the stripping
activity associated with that component can
be reliably measured.
The amount of stripping costs deferred is based
on the ratio obtained by dividing the volume of
waste mined by the volume of ore mined for
each component of the mine. Stripping costs
incurred in the period are deferred to the extent
that the actual current period waste to ore ratio
exceeds the life of component expected waste
to ore (“life of component”) ratio.
A component is defined as a specific volume of
the ore body that is made more accessible by the
stripping activity. An identified component of
the ore body is typically a subset of the total ore
body of the mine. It is considered that each mine
may have several components, which are identi-
fied based on the mine plan. The mine plans and
therefore the identification of specific compo-
nents will vary between mines as a result of both
the geological characteristics and location of
the ore body. The financial considerations of the
mining operations may also impact the identifi-
cation and designation of a component.
The identification of components is necessary
for both the measurement of costs at the initial
recognition of the production stripping asset,
and the subsequent depreciation of the produc-
tion stripping asset.
The life of component ratio is a function of an
individual mine’s design and therefore changes
to that design will generally result in changes to
the ratio. Changes in other technical or economic
parameters that impact reserves will also have an
impact on the life of component ratio even if
they do not affect the mine’s design. Changes to
the life of component ratio are accounted for
prospectively from the date of change.
The production stripping asset is initially
measured at cost, which is the accumulation of
costs directly incurred to perform the stripping
activity that improves access to the identified
component of ore. If incidental operations are
occurring at the same time as the production
stripping activity, but are not necessary for the
production stripping activity to continue as
planned, these costs are not included in the cost
of the stripping activity asset.
The production stripping asset is amortised over
the expected useful life of the identified compo-
nent of the ore body that is made more acces-
sible by the activity, on a units of production
basis. Economically recoverable reserves are
used to determine the expected useful life of the
identified component of the ore body. The
production stripping asset is then carried at cost
less accumulated amortisation and any impair-
ment losses.
The production stripping asset is included in
“Exploration, Evaluation and Development”.
These costs form part of the total investment in
the relevant cash generating unit to which they
relate, which is reviewed for impairment in
accordance with the Group’s impairment
accounting policy (Note 2g).
o . Deferred mining services costs
Provisions to the group of mining services by its
contractor do not systematically align with the
billing made by the contractor employed for
these services. When there is a material differ-
ence between the provisions of the mining
services and the amount paid for these services,
a portion of the billing is deferred on the state-
ment of financial position. These amounts are
subsequently recognised in the profit or loss.
Mining services are recognised in the profit or
loss on a systematic basis based on bank cubic
metres mined by the contractor.
p .
Exploration, evaluation and
feasibility expenditure
Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred
by, or on behalf of the Group is accumulated
separately for each area of interest. Such
expenditure comprises direct costs and depre-
ciation and does not include general overheads
or administrative expenditure not having a
specific nexus with a particular area of interest.
Exploration expenditure for each area of interest
is carried forward as an asset provided the rights
to tenure of the area of interest are current and
one of the following conditions is met:
〉〉
the exploration and evaluation expenditures
are expected to be recouped through suc-
cessful development and exploitation of the
area of interest, or alternatively by its sale,
or;
〉〉
exploration and evaluation activities in the
area of interest have not at the reporting
date reached a stage which permits a reason-
able assessment of the existence or other-
wise of economically recoverable reserves,
and active and significant operations in, or in
relation to, the area of interest are
continuing.
Exploration expenditure is written off when
it fails to meet at least one of the conditions
outlined above or an area of interest is aban-
doned. The carrying value of exploration and
evaluation assets is assessed in accordance with
AASB 6 Exploration for and Evaluation of Mineral
Resources and the Group’s impairment policy
(Note 2g).
Feasibility expenditure
Feasibility expenditure represents costs related
to the preparation and completion of a feasi-
bility study to enable a development decision to
be made in relation to an area of interest and
capitalised as incurred.
At the commencement of production; all past
exploration, evaluation and feasibility expendi-
ture in respect of an area of interest that has
been capitalised is transferred to mine proper-
ties where it is amortised over the life of the area
of interest to which it relates on a unit-of-
production basis.
q . Mine properties
Mine properties represents the accumulated
exploration, evaluation, land and development
expenditure incurred by or on behalf of the
Group in relation to areas of interest in which
mining of a mineral resource has commenced.
Notes to the Financial Statementswww.kingsgate.com.au 75
When further development expenditure is
incurred in respect of a mine property after
commencement of production, such expendi-
ture is carried forward as part of the mine
property only when substantial future economic
benefits are thereby established. Otherwise,
such expenditure is classified as part of the cost
of production.
Amortisation of costs is provided on the units-
of-production method with separate calcula-
tions being made for each component. The
units-of-production basis results in an amortisa-
tion charge proportional to the depletion of the
estimated recoverable reserves. In some circum-
stances, where conversion of resources into
reserves is expected, some elements of
resources may be included. Development and
land expenditure still to be incurred in relation to
the current recoverable reserves are included in
the amortisation calculation. Where the life of
the assets is shorter than the mine life, their
costs are amortised based on the useful life of
the assets.
The estimated recoverable reserves and life of
each mine and the remaining useful life of each
class of asset are reassessed at least annually.
Where there is a change in the reserves during a
six month period, depreciation and amortisation
rates are adjusted prospectively from the begin-
ning of that reporting period.
Investment in associates
r .
The Group’s investment in an associate is
accounted for using the equity method. An
associate is an entity in which the Group has
significant influence.
Under the equity method, the investment in the
associate is carried on the statement of financial
position at cost plus post-acquisition changes in
the Group’s share of net assets of the associate.
The income statement reflects the Group’s share
of the results of operations of the associate. The
Group recognises its share of any changes and
discloses this when applicable, in the statement
of changes of equity. Unrealised gains and losses
resulting from transactions between the Group
and the associate are eliminated to the extent of
the interest in the associate.
The Group’s share of profit of an associate is
included in the income statement. This is the
profit attributable to equity holders of the
associate and therefore, is profit after tax and
non-controlling interests in the subsidiaries of
the associate. After application of the equity
method, the Group determines whether it is
necessary to recognise an additional impairment
loss on its investment in its associate. The Group
determines at each reporting date whether
there is any objective evidence that the invest-
ment in the associate is impaired. If this is the
case, the Group calculates the amount of the
impairment as the difference between the
recoverable amount of the associate and its
carrying value and recognises the amount in the
income statement.
Upon loss of significant influence over the
associate, the Group measures and recognises
any remaining investment at its fair value. Any
difference between the carrying amount of the
associate upon loss of significant influence and
the fair value of the retained investment and
proceeds from disposal is recognised in profit
or loss.
s . Trade and other payables
Trade and other payables represent liabilities for
goods and services provided to the Group prior
to the end of financial year which are unpaid. The
amounts are unsecured and are usually paid
within 30 days of recognition.
t . Borrowings
Borrowings are initially recognised at fair value,
net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost.
Any difference between the proceeds (net of
transaction costs) and the redemption amount
is recognised in the profit or loss over the period
of the borrowings using the effective interest
method. Fees paid on the establishment of loan
facilities are recognised as transaction costs to
the extent that it is probable that some or all of
the facility will be drawn down. In this case, the
fee is deferred until the draw down occurs. To
the extent there is no evidence that it is
probable that some or all of the facility will be
drawn down, the fee is capitalised and amor-
tised over the period of the facility to which it
relates.
Preference shares which are mandatorily
redeemable on a specific date are classified as
liabilities. The dividends on these preference
shares are recognised in the profit or loss as
finance costs.
Borrowings are removed from the statement of
financial position when the obligation specified
in the contract is discharged, cancelled or
expired. The difference between the carrying
amount of a financial liability that has been
extinguished or transferred to another party and
the consideration paid, including any non-cash
assets transferred or liabilities assumed, is
recognised in other income or finance costs.
Borrowings are classified as current liabilities
unless the Group has an unconditional right to
defer settlement of the liability for at least 12
months after the reporting date.
u . Borrowing costs
Borrowing costs directly attributable to the
acquisition, construction or production of
qualifying assets are added to the cost of those
assets, until such time as the assets are substan-
tially ready for their intended use.
Where the funds used to finance a qualifying
asset form part of general borrowings, the
amount capitalised is calculated using a weighted
average of rates applicable to the relevant
borrowings during the period. Where funds
borrowed are directly attributable to a qualifying
asset, the amount capitalised represents the
borrowing costs specific to those borrowings.
All other borrowing costs are recognised as
expenses in the period in which they are incurred.
v . Provisions
Provisions for legal claims and service warranties
are recognised when the Group has a present
legal or constructive obligation as a result of
past events, it is probable that an outflow of
resources will be required to settle the obliga-
tion and the amount has been reliably esti-
mated. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations,
the likelihood that an outflow will be required in
settlement is determined by considering the
class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow
with respect to any one item included in the
same class of obligations may be small.
Provisions are measured at the present value of
management’s best estimate of the expenditure
required to settle the present obligation at the
reporting date. The discount rate used to deter-
mine the present value reflects current market
assessments of the time value of money and the
risks specific to the liability. The increase in the
provision due to the passage of time is recog-
nised as finance costs.
w .
Restoration and rehabilitation
provision
The estimated costs of decommissioning and
removing an asset and restoring the site are
included in the cost of the asset as at the date
the obligation first arises and to the extent that
it is first recognised as a provision. This restora-
tion asset is subsequently amortised on a units-
of-production basis.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 76
w .
Restoration and rehabilitation provision continued
The corresponding provision of an amount
equivalent to the restoration asset created is
reviewed at the end of each reporting period.
The provision is measured at the best estimate
of the present value amount required to settle
the present obligation at the end of the
reporting period based on current legal and
other requirements and technology, discounted
where material using national government bond
rates at the reporting date with terms to
maturity and currencies that match, as closely
as possible, the estimated future cash outflows.
Where there is a change in the expected restora-
tion, rehabilitation or decommissioning costs,
an adjustment is recorded against the carrying
value of the provision and any related restora-
tion asset, and the effects are recognised in the
income statement on a prospective basis over
the remaining life of the operation.
The unwinding of the effect of discounting on
the rehabilitation provision is included within
finance costs in the income statement.
Costs incurred that relate to an existing condi-
tion caused by past operations, but do not have
a future economic benefit are expensed as
incurred.
x . Employee benefits
(i)
Wages and salaries, annual leave
and sick leave
Liabilities for wages and salaries (including
non-monetary benefits and annual leave)
expected to be settled within 12 months of the
reporting date are recognised in provisions for
employee benefits in respect of employees’
services up to the reporting date and are
measured at the amounts expected to be paid
when the liabilities are settled. Liabilities for sick
leave are recognised when the leave is taken and
are measured at the rates paid or payable.
(ii)
Long service leave and severance pay
The liability for long service leave and severance
pay is recognised in the provision for employee
benefits and measured as the present value of
expected future payments to be made in respect
of services provided by employees up to the
reporting date. Consideration is given to the
expected future wage and salary levels, experi-
ence of employee departures and periods of
service. Expected future payments are
discounted using market yields at the reporting
date on national government bonds with terms
to maturity and currency that match, as closely
as possible, the estimated future cash outflows.
(iii) Cash bonuses
(ii) Diluted earnings per share
Cash bonuses are expensed in the income state-
ment at reporting date.
A liability is recognised for the amount expected
to be paid if the Group has a present legal or
constructive obligation to pay this amount as a
result of past service provided by the Directors
or employees and the obligation can be esti-
mated reliably.
(iv) Retirement benefit obligations
Contributions to defined contribution superan-
nuation plans are recognised as an expense in
the income statement as they become payable.
(v) Share-based payment transactions
The Group provides benefits to employees
(including Directors) in the form of share-based
payments, whereby employees render services in
exchange for shares or rights over shares
(“equity settled transactions”).
The fair value of these equity settled transac-
tions is recognised as an employee benefit
expense with a corresponding increase in equity.
The fair value is measured at grant date and
recognised over the period during which the
employees become unconditionally entitled.
The fair value at grant date is determined using
pricing model that takes into account the
exercise price, the term, the share price at the
grant date, the expected price volatility of the
underlying share, the expected dividend yield
and the risk free interest rate.
Upon the exercise of the equity settled reward,
the related balance of the share-based payments
reserve is transferred to share capital.
y . Dividends
Dividends are recognised as a liability in the
period in which they are declared.
z . Earnings per share
Basic earnings per share
(i)
Basic earnings per share is calculated by
dividing:
〉〉
the profit attributable to owners of the
Company, excluding any costs of servicing
equity other than ordinary shares; and
〉〉 by the weighted average number of ordinary
shares outstanding during the financial year,
adjusted for bonus elements in ordinary
shares issued during the year and excluding
treasury shares.
Diluted earnings per share adjusts the figures
used in the determination of basic earnings per
share to take into account:
〉〉
the after income tax effect of interest and
other financing costs associated with
dilutive potential ordinary shares; and
〉〉
the weighted average number of additional
ordinary shares that would have been
outstanding assuming the conversion of all
dilutive potential ordinary shares.
aa . Contributed equity
Issued ordinary share capital is classified as
equity and is recognised at the fair value of the
consideration received by the Group. Incre-
mental costs directly attributable to the issue
of shares and share options are recognised as a
deduction, net of tax from the proceeds.
bb . Goods and Services Tax (GST)
Revenues, expenses and assets are recognised
net of the amount of associated GST, unless the
GST incurred is not recoverable from the
taxation authority. In this case it is recognised
as part of the cost of acquisition of the asset or
as part of the expense.
Receivables and payables are stated inclusive of
the amount of GST receivable or payable. The
net amount of GST recoverable from or payable
to, the taxation authority is included with other
receivables or payables in the statement of
financial position.
Cash flows are presented on a gross basis. The
GST components of the cash flows arising from
investing or financing activities which are recov-
erable from, or payable to the taxation authority,
are presented as operating cash flows.
Commitments and contingencies are disclosed
net of the amount of GST recoverable from, or
payable to, the taxation authority.
cc . Operating segment reporting
Operating segments are reported in a manner
consistent with the internal reporting provided
to the chief operating decision maker. The chief
operating decision maker, who is responsible for
allocating resources and assessing performance
of the operating segments, has been identified
as the Board of Directors.
Segment results that are reported to the Board
of Directors include items directly attributable
to a segment as well as those that can be allo-
cated on a reasonable basis. The operating
segments are disclosed in Note 4.
Notes to the Financial Statementswww.kingsgate.com.au 77
establish the principle for the basis of depre-
ciation and amortisation as being the
expected pattern of consumption of the
future economic benefits on an asset.
The IASB has clarified that the use of
revenue-based methods to calculate the
depreciation of an asset is not appropriate
because revenue generated by an activity
that includes the use of an asset generally
reflects factors other than the consumption
of the economic benefits embodied in the
asset.
The IASB also clarified that revenue is gener-
ally presumed to be an inappropriate basis
for measuring the consumption of the
economic benefits embodied in an intangible
asset. This presumption, however, can be
rebutted in certain limited circumstances.
IFRS 15 Revenue from Contracts with
Customers (effective from 1 July 2017). IFRS
15 establishes principles for reporting useful
information to users of financial statements
about the nature, amount, timing and uncer-
tainty of revenue and cash flows arising from
an entity’s contracts with customers.
IFRS 15 supersedes:
(a) IAS 11 Construction Contracts
(b) IAS 18 Revenue
The core principle of IFRS 15 is that an entity
recognises revenue to depict the transfer of
promised goods or services to customers in
an amount that reflects the consideration to
which the entity expects to be entitled in
exchange for those goods or services. An
entity recognises revenue in accordance with
that core principle by applying the following
steps:
(a) Step 1: Identify the contract(s) with a
customer.
(b) Step 2: Identify the performance obliga-
tions in the contract.
(c) Step 3: Determine the transaction price.
(d) Step 4: Allocate the transaction price to
the performance obligations in the
contract.
(e) Step 5: Recognise revenue when (or as)
the entity satisfies a performance
obligation.
The Group does not expect the adoption of this
standard to have a significant impact as gold
and silver sales are only made with reputable
institutions using a market price and on rela-
tively short trading terms.
Apart from the ‘own credit risk’ require-
ments, classification and measurement of
financial liabilities is unchanged from existing
requirements.
When adopted, the standard will affect in
particular the Group’s accounting for its
available-for-sale financial assets, since AASB
9 only permits the recognition of fair value
gains and losses in other comprehensive
income if they relate to equity investments
that are not held for trading.
There will be no impact on the Group’s
accounting for financial liabilities, as the new
requirements only affect the accounting for
financial liabilities that are designated at fair
value through profit or loss and the Group
does not have any such liabilities.
The application date for the Group is 1 July
2018.
〉〉
〉〉 Annual Improvements to IFRSs 2010-2012
Cycle (effective 1 July 2014). This standard
sets out amendments to International Finan-
cial Reporting Standards (IFRS) and the
related bases for conclusions and guidance
made during the International Accounting
Standards Board’s Annual Improvements
process. These amendments have not yet
been adopted by the AASB.
The following items are addressed by this
standard:
〉〉
IFRS 2 – Clarifies the definition of
“vesting conditions” and “market condi-
tion” and introduces the definition of
“performance condition” and “service
condition”.
〉〉
〉〉
〉〉
IFRS 3 – Clarifies the classification
requirements for contingent considera-
tion in a business combination by
removing all references to IAS 37.
IFRS 8 – Requires entities to disclose
factors used to identify the entity’s
reportable segments when operating
segments have been aggregated. An
entity is also required to provide a recon-
ciliation of total reportable segments’
asset to the entity’s total assets.
IAS 16 & IAS 38 – Clarifies that the
determination of accumulated deprecia-
tion does not depend on the selection of
the valuation technique and that it is
calculated as the difference between the
gross and net carrying amounts.
〉〉 Amendments to AASB 116 and AASB 138.
Clarification of Acceptable Methods of
Depreciation and Amortisation (Amend-
ments to AASB 116 and AASB 138, effective
1 July 2016). AASB 116 and AASB 138 both
dd . New accounting standards and
(i)
interpretations
New and amended standards adopted
by the Group
Except for the adoption of Interpretation 20
– Stripping Costs in the Production Phase of a
Surface Mine and Recoverable Amount Disclo-
sures for Non-Financial Assets (Amendments to
IAS36) (refer to Note 34), the Group did not
adopt any new or revised accounting standards,
amendments or interpretations from 1 July 2013
which had a material effect on the financial
position or performance of the Group.
(ii)
New accounting standards and
interpretations not yet adopted
The Group has not elected to early adopt any
new standards, amendments or interpretations
that are issued but are not yet effective. Certain
new accounting standards and interpretations
have been published that are not mandatory for
30 June 2014 reporting periods and have not yet
been applied in the financial statements. The
Group’s assessment of the impact of these new
standards and interpretations is set out below:
〉〉 AASB 2012-3 Amendments to Australian
Accounting Standards – Offsetting Financial
Assets and Financial Liabilities. Effective 1
July 2014 ASSB 2012-3 adds application
guidance to AASB 132 Financial Instruments:
Presentation to address inconsistencies
identified in applying some of the offsetting
criteria of AASB 132, including clarifying the
meaning of “currently has a legally enforce-
able right to set-off” and that some gross
settlement systems may be considered
equivalent to net settlement.
〉〉 AASB9 Financial Instruments. AASB 9
includes requirements for the classification
and measurement of financial assets. It was
further amended by AASB 2010-7 to reflect
amendments to the accounting financial
liabilities.
The revised IFRS 9 will eventually replace
AASB 139 and all previous versions of IFRS 9.
The revised standard includes changes to the:
〉〉
classification and measurement of
financial assets and financial liabilities
expected credit loss impairment model
〉〉
〉〉 hedge accounting.
Financial assets are measured at amortised
cost, fair value through profit or loss, or fair
value through other comprehensive income,
based on both the entity’s business model
for managing the financial assets and the
financial asset’s contractual cash flow
characteristics.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 78
ee . Parent entity financial information
The financial information for the parent entity
Kingsgate Consolidated Limited, disclosed in
Note 32 has been prepared on the same basis as
the consolidated financial statements except as
set out below:
Investments in subsidiaries
Investments in subsidiaries are accounted for at
cost in the financial statements of Kingsgate.
Share-based payments
The issue by the Company of equity instruments
to extinguish liabilities of a subsidiary under-
taking in the Group is treated as a capital contri-
bution to that subsidiary undertaking.
3. Critical accounting
estimates, assumptions
and judgements
Estimates and judgements are continually
evaluated and are based on historical experience
and other factors, including expectation of
future events that may have a financial impact
on the Group and that are believed to be reason-
able under the circumstances. The Group makes
estimates and assumptions concerning the
future. Actual results may differ from these
estimates under different assumptions and
conditions. The estimates and assumptions that
could materially affect the financial position and
results are discussed below:
(i)
Mineral resources and ore
reserves estimates
The Group determines and reports ore reserves
under the Australian Code for Reporting of
Mineral Resources and Ore Reserves December
2012, known as the JORC Code. The information
on mineral resources and ore reserves was
prepared by or under the supervision of Compe-
tent Persons as defined in the JORC Code.
There are numerous uncertainties inherent in
estimating mineral resources and reserves and
assumptions that are valid at the time of estima-
tion may change significantly when new infor-
mation becomes available.
Changes in reported ore reserves may affect the
Group’s financial position and results, including
asset carrying value, depreciation and amortisa-
tion expenses using units-of-production
method, provision for restoration and rehabilita-
tion and deferred stripping costs if the life of
component ratios are revised.
(ii) Exploration and evaluation assets
Exploration and evaluation expenditure for each
area of interest is carried forward as an asset
provided certain conditions are met (Note 2p).
Exploration and evaluation assets are assessed
for impairment when facts and circumstances
suggest that the carrying amount of an explora-
tion and evaluation asset may exceed its recov-
erable amount. These calculations and reviews
require the use of assumptions and judgement.
The related carrying amounts are disclosed in
Note 13.
(iii) Production stripping
The Group defers mining costs incurred during
the production stage of its operations which are
calculated in accordance with accounting policy
Note 2n. Changes in an individual mine’s design
will generally result in changes to the life of
component waste to ore (life of component)
ratio. Changes in other technical or economic
parameters that impact reserves will also have
an impact on the life of component ratio even if
they do not affect the mine’s design. Changes to
deferred stripping resulting from a change in life
of component ratios are accounted for
prospectively.
(iv) Impairment of assets
The Group assesses each cash-generating unit
half-yearly, to determine whether there is an
indication of impairment. Where an indicator of
impairment exists, a formal estimate of the
recoverable amount is made, which is deemed as
being the higher of the fair value less cost to sell
and value in use calculated in accordance with
accounting policy Note 2g.
In the current period fair value less cost to sell
has been used in respect of development
projects and value in use for operating projects.
These assumptions require the use of estimates
and assumptions such as discount rates (2014 :
post tax real rates of 8.3% to 10.3%), exchange
rates (2014 : balance date spot rate), commodity
prices (2014 : balance date spot price), future
operating development and sustaining capital
requirements, mineral resources and reserves
and operating performance (including the
magnitude and time of related cash flows). For
details of impairment assessment for the current
year, refer to Note 5j.
(v) Restoration and rehabilitation
provision
Significant judgement is required in determining
the restoration and rehabilitation provision as
there are many transactions and factors that will
affect the ultimate liability payable to rehabili-
tate the mine site. Factors that will affect this
liability include change in mineral resources and
reserves estimates, changes in technology,
commodity price changes and changes in
interest rates.
A change in any, or a combination of, the key
assumptions used to determine the provisions
could have a material impact on the carrying
value of the provisions (see Note 17). The provi-
sion recognised for each site is reviewed at each
reporting date and updated based on the facts
and circumstances available at the time.
Changes to the estimated future costs for
operating sites are recognised in the statement
of financial position by adjusting both the
restoration and rehabilitation asset and
provision.
(vi) Units-of-production method
of depreciation
The Group applies the units-of-production
method for depreciation and amortisation of its
mine properties, mine buildings, plant and equip-
ment. These calculations require the use of esti-
mates and assumptions and significant judge-
ment is required in assessing the estimated
recoverable reserves used in the determination
of the depreciation and amortisation charges.
Factors that must be considered in determining
estimated recoverable reserves (which includes
both reserves and resources) and production
capacity are the history of converting resources
to reserves and the relevant time frames, antici-
pated mining method and costs, the complexity
of metallurgy, markets, and future developments.
Revision of estimated recoverable reserves
and resource
Estimated recoverable reserves and resource are
used as a basis for depreciating assets on a unit
of production basis. During the year the esti-
mated recoverable reserves and resource at
Chatree were revised. The net effect of this
change in the current financial year was an
increase in depreciation expense of $1,520,000.
Assuming no subsequent change to estimated
recoverable reserves and resource it is estimated
that future depreciation expense would increase
by between $2,500,000 and $3,500,000 per
annum until the end of the mine life.
Notes to the Financial Statementswww.kingsgate.com.au 79
4. Segment information
The Group’s operating segments are based
on the internal management reports that are
reviewed and used by the Board of Directors
(chief operating decision maker). The operating
segments represent the Group’s operating
mines and projects and include the following:
〉〉 Chatree Mine, Thailand;
〉〉 Challenger Mine, South Australia, Australia;
〉〉 Bowdens Silver Project, New South Wales,
Australia;
〉〉 Nueva Esperanza Silver / Gold Project, Chile;
and
〉〉
Exploration, South East Asia.
Information regarding the results of each report-
able segment is included as follows:
Operations
Development
Exploration
Corporate
Total Group
(vii) Share-based payments
The Group measures share-based payments
at fair value at the grant date. The fair value is
determined by an external valuer using a Monte
Carlo simulation model or other valuation tech-
nique appropriate for the instrument being
valued.
(viii) Deferred tax balances
Deferred tax assets in respect of tax losses for
the Kingsgate tax-consolidation group (Note 6)
are not recognised in the financial statements
as management considers that it is currently
not probable that future taxable profits will
be available to utilise those tax losses.
Management reviews on a regular basis the
future profitability of the entities included in
the tax-consolidation group to consider if tax
losses should be recognised and to ensure that
any tax losses recognised will be utilised.
Deferred tax balances for temporary differences
in respect of Akara Resources Public Company
Limited are measured based on their expected
rate of reversal which is different for the
two Royal Thai Board of Investment (“BOI”)
activities (Note 6).
2014
External sales revenue
Other revenue
Chatree
$’000
Challenger
$’000
Bowdens
$’000
221,969
106,357
483
117
Nueva
Esperanza
$’000
–
–
–
(3,691)
–
(11)
$’000
$’000
$’000
–
–
–
(791)
(2,112)
–
–
980
980
(16,132)
–
(57)
328,326
1,580
329,906
64,284
(86,698)
(57,741)
–
–
–
(66)
(84,586)
(19)
Total segment revenue
222,452
106,474
Segment EBITDA
Impairment
87,248
–
(2,284)
–
Depreciation and amortisation
(41,855)
(15,799)
Profit / (loss) before finance cost
and income tax
Finance income
Finance costs
Net finance costs
45,393
(18,083)
(84,671)
(3,702)
(2,903)
(16,189)
(80,155)
269
(11,348)
(11,079)
62
(348)
(286)
8
(8)
–
99
(5)
94
9
–
9
163
(2,151)
610
(13,860)
(1,988)
(13,250)
Profit / (loss) before tax
34,314
(18,369)
(84,671)
(3,608)
(2,894)
(18,177)
(93,405)
Other segment information
Segment assets
Segment liabilities
Segment intercompany assets / (liabilities)
479,575
(160,930)
57,878
28,314
(20,068)
(74,535)
30,483
(6,470)
(29,311)
69,829
(4,634)
(53,782)
3,305
(828)
(14,213)
31,673
(37,492)
113,963
643,179
(230,422)
–
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 80
4. Segment information continued
2013 Restated
External sales revenue
Other revenue
Segment EBITDA
Impairment
Depreciation and amortisation
Profit / (loss) before finance cost
and income tax
Finance income
Finance costs
Net finance costs
Total segment revenue
226,990
103,030
Operations
Development
Exploration
Corporate
Total Group
Nueva
Esperanza
$’000
–
–
–
Chatree
$’000
Challenger
$’000
Bowdens
$’000
$’000
$’000
$’000
226,759
102,523
231
507
95,208
–
(31,745)
16,656
(311,850)
(58,474)
–
–
–
(234)
–
(18)
–
51
51
–
(129)
(129)
(11,631)
(537)
(108)
329,282
660
329,942
96,632
(332,808)
(90,377)
(3,070)
–
(32)
(297)
(20,421)
–
63,463
(353,668)
(252)
(3,102)
(20,718)
(12,276)
(326,553)
2,103
(11,239)
(9,136)
153
(141)
12
6
(6)
–
–
(1,258)
(1,258)
10
–
10
315
(6,165)
2,587
(18,809)
(5,850)
(16,222)
Profit / (loss) before tax
54,327
(353,656)
(252)
(4,360)
(20,708)
(18,126)
(342,775)
Other segment information
Segment assets
Segment liabilities
Segment intercompany assets / (liabilities)
531,622
(204,412)
46,588
42,892
(29,077)
(61,501)
106,564
(1,346)
(21,909)
63,378
(5,734)
(42,533)
4,618
(1,331)
(14,775)
10,252
(53,452)
94,130
759,326
(295,352)
–
Customer A
Customer B
5. Revenue and expenses
a) Sales revenue
Gold sales
Silver sales
Total sales revenue
Revenue
% of External Revenue
2014
$’000
221,969
106,357
2013
$’000
226,759
102,523
2014
%
68
32
2013
%
69
31
2014
$’000
2013
$’000
305,163
23,163
302,996
26,286
328,326
329,282
Notes to the Financial Statementswww.kingsgate.com.au 81
2014
$’000
215,370
22,773
6,146
57,602
2013
Restated
$’000
174,834
25,838
(8,341)
90,170
301,891
282,501
15,304
4,246
1,426
2,851
139
23,966
15,515
1,111
2,096
3,334
207
22,263
2014
$’000
2013
$’000
–
1,175
(369)
(284)
1,580
2,102
–
84,586
2,112
–
86,698
13,852
1,137
1,056
(2,185)
13,860
(16,709)
–
1,414
(855)
660
(15,490)
311,850
–
20,421
537
332,808
15,161
1,017
7,594
(4,963)
18,809
b) Cost of sales
Direct costs of mining and processing
Royalties
Inventory movements
Depreciation (operations)
Total costs of sales
c) Corporate and administration expenses
Administration
Divestment transaction costs – (refer to Note 34)
Technical support and business development
Statutory and professional fees
Depreciation
Total corporate and administration expenses
d) Other income and expenses
Net (loss) on the sale of exploration assets
Realised gain on delivery against hedge contracts
(Loss) / gain on the change in fair value of undesignated gold contracts held for trading
(Loss) on the change in fair value of available-for-sale financial assets
Other revenue
Total other income and (expense)
e)
Impairment
Challenger Gold Project
Bowdens Silver Project
Exploration assets
Investment in associate – Caravel Minerals
Total impairment
f) Finance costs
Interest and finance charges
Unwinding of discount
Amortisation of deferred borrowing costs
Less: borrowing costs capitalised (i)
Total finance costs
(i) Capitalised borrowing costs
The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s outstanding
borrowings during the year, in this case 8.21% (2013: 10.7%).
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 82
5. Revenue and expenses continued
g) Depreciation and amortisation
Property, plant and equipment
Mine properties
Less: Depreciation capitalised
Total depreciation and amortisation expenses
Included in:
Costs of sales depreciation
Corporate depreciation
h) Employee benefits expenses
Included in:
Costs of sales
Corporate and administration expenses
Total employee benefits expenses
i) Other items
Operating lease rentals
Total other items
j) Significant items
Foreign exchange (gain) / loss
Write off of capitalised borrowing fees
Realised gain on delivery against hedge contracts
Change in fair value of undesignated gold contracts held for trading
Change in fair value of available-for-sale financial assets
Share of loss in associate (refer Note 14a)
Loss on sale of exploration assets
Divestment transaction costs
Impairment of Challenger Gold Project
Impairment of Bowdens Silver Project
Impairment of capitalised exploration
Impairment of associate
Total significant items (pre-tax)
2014
$’000
2013
Restated
$’000
18,337
39,716
(312)
57,741
57,602
139
18,499
72,159
(281)
90,377
90,170
207
2014
$’000
2013
$’000
22,949
11,694
34,643
625
625
18,668
11,464
30,132
915
915
2014
$’000
2013
Restated
$’000
(2,595)
–
(1,175)
369
284
413
–
4,246
–
84,586
2,112
–
88,240
745
5,722
–
(1,414)
855
1,353
16,709
1,111
311,850
–
20,421
537
357,889
Notes to the Financial Statementswww.kingsgate.com.au 83
Impairment – Bowdens Silver Project
In accordance with AASB 136 – Impairment of
Assets an impairment charge has been made
against the carrying value of the Bowdens Silver
Project (“Bowdens”) as a result of the signifi-
cant and sustained decline in the silver price.
An impairment is recognised when the carrying
amount exceeds the recoverable amount. The
recoverable amount for Bowdens has been
determined on its fair value less transaction
costs (“FV”) using peer group analysis.
While Bowdens is expected to generate positive
cash flows, the estimated fair value no longer
supports the full recovery of the carrying value.
As a result of this assessment, the Group has
recorded an impairment charge of $84,586,000
pre-tax related to the carrying value of the
Bowdens acquisition, exploration, evaluation
and development costs.
The fair value estimates are derived from observ-
able trading valuations of a comparable peer
group in active markets. Given the advanced
stage of the project and the level of technical
work completed on the Environmental Impact
Statement, it was considered appropriate to
compare Bowdens with a subset of the peer
group with more advanced projects which had
either completed a preliminary economic assess-
ment or a feasibility study.
The key criteria for the selection of the peer
group were as follows:
〉〉 public company listed on a major exchange;
〉〉
assets must contain silver as a primary
commodity, although many are polymetallic;
〉〉
〉〉
〉〉
assets must be pre-production;
resource must be of significant size to
generate a meaningful valuation; and
all other metals are converted to silver
equivalent.
The fair value of Bowdens Silver Project is
assessed as being equal to its carrying amount
of $30,030,000 after impairment as at 30 June
2014. The fair value has been assessed by calcu-
lating the enterprise value per ounce resource of
equivalent silver of the peer group and applying
the median of these values ($0.17) to the
Bowdens silver equivalent resource (detailed in
the previously published 2013 Ore Reserves and
Mineral Resources Statement) less estimated
transaction costs.
The assessment of other Group projects was
based on either value in use or fair value. These
assessments demonstrated that the recoverable
amount exceeded the carrying amount and
therefore impairments were not required.
6. Income tax
a)
Income tax expense
Current tax
Deferred tax
Income tax (benefit) / expense
Deferred tax expense / (benefit) included in tax expense comprises:
(Increase) / decrease in deferred tax assets
Increase / (decrease) in deferred tax liabilities
Deferred tax
b) Numerical reconciliation of income tax expense to prima facie tax payable
(Loss) / profit from continuing operations before income tax
Tax at Australian rate of 30%
Tax effect of amounts not deductible / assessable in calculating taxable income
Non-deductible expenses
Non-deductible amortisation
Non-deductible interest expense to preference shareholders
Share-based payment remuneration
Impairment of investment in associate
Share of loss of associate
Differences in Thailand tax rates
Non-temporary differences affecting the tax expense
Prior year adjustment to tax return
Tax benefit of tax losses and deductible temporary differences not brought to account
Deferred tax asset written off in the current year
Non-deductible impairment of Bowdens Silver Project
Income tax (benefit) / expense
2014
$’000
2013
Restated
$’000
2,858
28
2,886
(3,320)
3,348
3,731
(20,235)
(16,504)
32,486
(52,721)
28
(20,235)
(93,405)
(28,021)
(342,775)
(102,832)
1,209
1,433
322
134
–
124
2,367
1,210
157
275
161
406
(9,087)
(14,832)
398
(19)
11,017
–
25,376
2,886
332
–
58,495
37,757
–
(16,504)
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 84
6. Income tax continued
Akara Resources Public Company Limited
(“Akara”), a controlled entity, has received
approval from The Royal Thai Board of Invest-
ment (“BOI”) of the Office of the Prime Minister
for promotion of the Chatree Mine. Subject to
meeting the BOI conditions and based on an
annual production limit of 178,416 ounces of
gold and 583,733 ounces of silver, Akara‘s
Chatree Mine is entitled to:
i) An eight year full corporate tax holiday
commencing at first gold pour on metal
sales. The full tax holiday expired in
November 2009;
ii) A further five years half tax holiday; and
iii) Other benefits.
The start of the promotion period was
27 November 2001.
Akara also received on 18 June 2010 a BOI
promotion for the Chatree North gold
processing plant. Based on annual production
limit from the new processing plant of 185,200
ounces of gold and 1,080,400 ounces of silver,
Akara is entitled to:
i) An eight year tax holiday on income derived
from the new processing plant with tax
savings limited to the capital cost of the new
treatment plant;
ii) 25% investment allowance on the capital
cost of certain assets of the new processing
plant; and
iii) Other benefits.
The start of the promotion period was
1 November 2012.
c) Tax recognised in other comprehensive income
Available-for-sale investment revaluation reserve
Foreign exchange losses recognised directly in foreign currency translation reserves
Total tax recognised in other comprehensive income
d) Deferred tax liabilities offset
Deferred tax liabilities amounting to $298,000 (2013: $853,000) have been offset against deferred tax asset.
e) Unrecognised deferred tax assets
Tax losses – Australian entities
Tax losses – other entities
Temporary difference
Subtotal
Unrecognised deferred tax assets
2014
$’000
2013
$’000
–
–
–
(39)
566
527
250,948
2,360
112,983
211,548
1,309
130,113
366,291
342,970
109,651
102,760
f) Tax consolidation group
Kingsgate Consolidated Limited and its wholly-owned Australian subsidiary have implemented the tax consolidation legislation as of 1 July 2003. The
accounting policy in relation to this legislation is set out in Note 2d.
On adoption of the tax consolidation legislation, the entities in the tax-consolidation group entered into a tax sharing agreement which, in the opinion of the
Directors, limits the joint and several liabilities of the wholly-owned entities in the case of default by the head entity, Kingsgate Consolidated Limited.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Kingsgate for any current tax payable
assumed and are compensated for any current tax receivable and deferred assets relating to the unused tax losses or unused tax credits that are transferred to
Kingsgate under the tax legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial
statements.
The amount receivable / payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as
practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax
instalments.
Notes to the Financial Statementswww.kingsgate.com.au 85
Assets
Liabilities
Net
g)
Recognised deferred tax assets
and liabilities
Deferred tax assets / liabilities:
Derivatives
Employee benefits
Provision for restoration and rehabilitation
Provision for obsolescence
Unrealised exchange (gains) / losses
Other items
Available-for-sale financial assets
Mine properties and exploration
Total deferred tax assets / (liabilities)
Set off tax
2014
$’000
189
1,814
4,774
348
855
806
419
7,880
17,085
(7,880)
2013
Restated
$’000
2014
$’000
2013
Restated
$’000
2014
$’000
2013
Restated
$’000
384
1,789
5,167
309
1,265
1,147
334
3,706
–
–
–
–
(834)
(285)
–
–
–
–
–
(2,020)
(467)
–
189
1,814
4,774
348
21
521
419
384
1,789
5,167
309
(755)
680
334
(15,389)
(10,771)
(7,509)
(7,065)
14,101
(3,706)
(16,508)
7,880
(13,258)
3,706
577
–
577
843
–
843
Net deferred tax assets (liabilities)
9,205
10,395
(8,628)
(9,552)
Movement in deferred tax balances
2014
Balance at
1 July
Recognised in
profit or loss
Recognised
in other
comprehensive
income
Foreign
exchange
Balance at
30 June
Deferred tax assets / liabilities:
Derivatives
Employee benefits
Provision for restoration and rehabilitation
Provision for obsolescence
Unrealised exchange losses
Other items
Mine properties and exploration
Available-for-sale financial assets
Net deferred tax assets
2013 Restated
Deferred tax assets / liabilities:
Derivatives
Employee benefits
Provision for restoration and rehabilitation
Provision for obsolescence
Unrealised exchange losses
Other items
Tax losses
Mine properties and exploration
Available-for-sale financial assets
Net deferred tax assets
384
1,789
5,167
309
(755)
680
(7,065)
334
843
808
1,571
3,390
278
2,790
1,096
36,334
(65,205)
39
(195)
88
(178)
64
776
(126)
(542)
85
(28)
(424)
124
1,428
(5)
(2,979)
(428)
(36,334)
58,597
256
–
–
–
–
–
–
–
–
–
–
–
–
–
(566)
–
–
–
39
(18,899)
20,235
(527)
–
(63)
(215)
(25)
–
(33)
98
–
(238)
–
94
349
36
–
12
–
(457)
–
34
189
1,814
4,774
348
21
521
(7,509)
419
577
384
1,789
5,167
309
(755)
680
–
(7,065)
334
843
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 86
7. Cash and cash equivalents and restricted cash
Current
Cash on hand
Deposits at call
Total cash and cash equivalents
Non-current
Restricted cash
Total restricted cash – non-current
2014
$’000
2013
$’000
17
53,615
53,632
5,489
5,489
18
30,476
30,494
5,474
5,474
Cash on hand
These are petty cash balances held by subsidiaries.
Deposits at call
The deposits at call are bearing floating interest rates and they may be accessed daily.
Restricted cash
Under the terms of the loan facilities (see Note 16), the Group is required to maintain a minimum cash balance of US$5,000,000 in respect of Akara.
Risk exposure
The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 28.
8. Receivables
Trade receivables
Other debtors
Total receivables
2014
$’000
2,203
11,157
13,360
2013
$’000
–
9,431
9,431
Trade receivables
Trade receivables represent gold sales at the end of the financial year, where payment was yet to be received. No trade receivables were past due or impaired
as at 30 June 2014 (2013: nil).
Other debtors
Other debtors mainly relate to GST / VAT receivables and diesel fuel tax credits.
Risk exposure
The Group’s exposure to credit and currency is disclosed in Note 28.
Notes to the Financial Statementswww.kingsgate.com.au 9. Inventories
Current
Raw materials and stores
Livestock
Provision for obsolescence
Stockpiles and work in progress
Gold bullion
Total inventories – current
Non-current
Stockpiles
Total inventories – non-current
10. Other assets
Current
Prepaid mining services
Prepayments
Other deposits
Total other assets – current
Non-current
Prepayments
Other deposits
Total other assets – non-current
87
2014
$’000
2013
$’000
14,130
22
(1,756)
32,790
2,731
47,917
49,805
49,805
10,656
-
(1,566)
48,329
4,613
62,032
44,731
44,731
2014
$’000
2013
Restated
$’000
11,750
11,996
2,855
26,601
7,333
6,204
13,537
15,921
12,489
3,787
32,197
4,380
6,514
10,894
Prepayments
Non-current prepayments include prepaid royalties in respect of the Nueva Esperanza Silver / Gold Project in Chile and electricity and fuel supplies for
Chatree Mine in Thailand.
Other deposits
Other deposits current includes cash held on deposit with financial institutions that is restricted to use on community projects in Thailand.
Other deposits non-current includes $1,828,000 restricted cash deposits against bank guarantees supporting the rehabilitation bond requirements against
the Group’s mining operations and $3,680,000 of security deposits.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 88
11. Available-for-sale financial assets
Equity securities
At the beginning of the year
Revaluation
Disposal
At the end of the year
12. Property, plant and equipment
Opening balance
Cost
Accumulated depreciation and amortisation
Accumulated impairment
Net book amount
Year ended 30 June
Opening net book amount
Additions
Reclassified
Disposals
Impairment
Depreciation and amortisation expense
Foreign currency exchange differences
Closing net book amount
Cost
Accumulated depreciation and amortisation
Accumulated impairment
Net book amount
2014
$’000
2013
$’000
767
(284)
(213)
270
1,751
(984)
–
767
2014
$’000
2013
$’000
326,684
(71,556)
(64,897)
286,590
(47,353)
–
190,231
239,237
190,231
12,043
(303)
(16)
–
(18,337)
(12,960)
239,237
15,465
(2,039)
(630)
(64,897)
(18,499)
21,594
170,658
190,231
320,915
(85,360)
(64,897)
326,684
(71,556)
(64,897)
170,658
190,231
Notes to the Financial Statementswww.kingsgate.com.au 89
13. Exploration, evaluation and development
Exploration &
evaluation
$’000
Feasibility
expenditure
$’000
Mine
properties
$’000
Total
$’000
At 30 June 2012
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2013 (Restated)
Opening net book amount
Additions
Reclassified
Disposals
Impairment
Depreciation and amortisation expense
Foreign currency exchange differences
Closing net book amount
At 30 June 2013 (Restated)
Cost
Accumulated depreciation and amortisation
Accumulated impairment
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Reclassified
Disposals
Impairment
Depreciation and amortisation expense
Foreign currency exchange differences
Closing net book amount
At 30 June 2014
Cost
Accumulated depreciation and amortisation
Accumulated impairment
Net book amount
57,512
–
57,512
57,512
7,938
–
(20,084)
(27,526)
–
1,242
121,557
–
513,576
(126,077)
692,645
(126,077)
121,557
387,499
566,568
121,557
19,234
–
(1,023)
–
–
3,173
387,499
103,260
2,039
(6,949)
(239,848)
(72,159)
25,330
566,568
130,432
2,039
(28,056)
(267,374)
(72,159)
29,745
19,082
142,941
199,172
361,195
46,608
–
(27,526)
142,941
–
–
645,008
(205,988)
(239,848)
834,557
(205,988)
(267,374)
19,082
142,941
199,172
361,195
19,082
1,904
–
–
(12,004)
–
(488)
142,941
11,139
(1,157)
(7)
(74,694)
–
(1,055)
199,172
17,541
303
(344)
–
(39,716)
(10,984)
361,195
30,584
(854)
(351)
(86,698)
(39,716)
(12,527)
8,494
77,167
165,972
251,633
48,024
–
(39,530)
151,861
–
(74,694)
644,133
(238,313)
(239,848)
844,018
(238,313)
(354,072)
8,494
77,167
165,972
251,633
Capitalised borrowing costs
Included in exploration evaluation and development is an amount of $2,185,000 that represents borrowing costs capitalised during the year ($4,963,000
during the year ended 30 June 2013). The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average
interest rate applicable to the entity’s outstanding borrowings during the year, in this case 8.21% (2013: 10.7%).
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 90
14. Investment in associate
a) Reconciliation of movement in investment accounted for using the equity method
Investment in Caravel Minerals Limited
At the beginning of the year
Acquisition
Share of associate’s loss
Additional impairment in associate
At the end of the year
b) Summarised financial information of associate
The Group’s share of the results of its associate and its aggregate assets and liabilities are as follows:
2014
$’000
2013
$’000
1,485
–
(413)
–
1,072
–
3,375
(1,353)
(537)
1,485
Caravel Minerals Limited – 2014
Caravel Minerals Limited – 2013
c) Fair value of listed investment in associate
Caravel Minerals Limited
d) Contingent liabilities
Caravel Minerals Limited had no material contingent liabilities.
15. Payables
Current
Trade payables
Other payables and accruals
Total payables – current
Non-current
Other payables
Total payables – non-current
Ownership
Interest %
27.04
35.54
Assets
$’000
1,839
3,007
Group’s share of:
Liabilities
$’000
Revenue
$’000
146
384
108
199
2014
$’000
1,485
Loss
$’000
413
1,353
2013
$’000
1,485
2014
$’000
2013
$’000
15,318
10,160
25,478
4,800
4,800
25,620
15,565
41,185
5,921
5,921
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 28.
Notes to the Financial Statementswww.kingsgate.com.au
91
16. Borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings.
For more information about the Group’s exposure to interest rate and liquidity risk, see Note 28.
2014
$’000
2013
$’000
Current
Secured bank loans
Preference shares in controlled entity
Total borrowings – current
Non-current
Secured bank loans
Preference shares in controlled entity
Total borrowings – non-current
Borrowings
Secured bank loans
Preference shares in controlled equity
Total borrowings
Secured bank loans
Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
Corporate loan facility (Tranche A)
Convertible loan facility (Tranche B)
Multi-currency and syndicated loan facilities
Less capitalised borrowing costs
Total
1
2
3
BBSY means bank bill swap bid rate
THBFIX means Thai Baht interest rate fixing
LIBOR means London interbank offered rate
33,514
9,464
42,978
110,572
82
110,654
144,086
9,546
153,632
Currency
AUD
AUD
Nominal
interest
BBSY1 + margin
BBSY1 + margin
Thai Baht
THBFIX2+ margin
USD
LIBOR3 + margin
Financial
year of
maturity
Face value
$’000
2015
2016
2018
2018
10,000
25,000
47,059
64,109
73,613
10,488
84,101
115,575
82
115,657
189,188
10,570
199,758
Carrying
amount
$’000
10,000
25,000
47,059
64,109
(2,082)
144,086
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 92
16. Borrowings continued
Senior corporate facility
$35,000,000 under the Senior Corporate Loan Facility consisting of two tranches:
〉〉
Tranche A is an amortising loan facility with a balance of $10,000,000 to be repaid during the 2015 financial year.
〉〉
Tranche B is $25,000,000 Akara Resources PCL (“Akara”) Pre-IPO Bond with a maturity date of 31 July 2015.
The current intention is for this tranche to be repaid from proceeds raised through the Akara IPO although at Kingsgate’s election repayment can
be made by Kingsgate either in cash or Kingsgate shares.
As security for the above facility the lender has a fixed and floating charge over Kingsgate including its shares in its material subsidiaries.
Multi-currency, syndicated loan facility
Kingsgate’s Thai operating subsidiary, Akara, has an amortising multi-currency loan facility with 4.5 years remaining. It is currently drawn to the equivalent
of $111,168,000, following the commencement of quarterly repayments in November 2013. Akara also has an additional undrawn Thai Baht denominated
working capital facility equivalent to $16,000,000.
As security against the above facility the lender has a fixed and floating charge over the land, buildings and machinery in Thailand owned by Akara and its
material subsidiaries.
Convertible revolving credit facility
The Group had a three year $25,000,000 Convertible Revolving Credit Facility available during the year. This facility was replaced by the above facilities
following the Group’s corporate debt restructure in the second half of the 2014 financial year.
Restricted funds
Under the terms of the loan facilities, the Group is required to maintain a minimum cash balance of US$5,000,000 ($5,489,000) in respect of Akara.
Preference shares in controlled entity
Terms and repayment schedule
Terms and conditions of outstanding preference shares in controlled entity were as follows:
Preference shares in controlled entity
Thai Baht
12%
n/a
9,546
9,546
Currency
Interest rate
Financial year
of maturity
Face value
$’000
Carrying amount
$’000
Notes to the Financial Statementswww.kingsgate.com.au 93
2014
$’000
2013
$’000
Note
(1x), 24
(1w)
(1x), 24
3,115
3,115
27,731
5,267
32,998
28,180
10
1,102
(1,561)
27,731
3,797
3,797
28,180
5,416
33,596
14,899
10,979
839
1,463
28,180
2013
$’000
599,618
3,330
–
–
–
1,512
–
1,044
–
2014
Shares
2013
Shares
2014
$’000
152,191,905
151,263,789
605,504
–
761,448
59,430,588
11,774,572
92,872
–
95,000
–
–
–
–
–
166,668
–
–
–
–
59,430
15,000
487
–
113
–
(3,425)
223,584,937
152,191,905
677,109
605,504
17. Provisions
Current
Employee benefits
Total provisions – current
Non-current
Restoration and rehabilitation
Employee benefits
Total provisions – non-current
Movements in the restoration and rehabilitation provision:
Restoration and rehabilitation
At the beginning of the financial year
Revision of rehabilitation provision
Unwind of discount rate for provision
Foreign currency exchange differences
At the end of the financial year
18. Contributed equity
Opening balance
Dividend reinvestment plan
Share placement and rights issue
Issue of ordinary shares to repay funds drawn down under the convertible revolving credit facility
Issue of ordinary shares related to Executive Rights Plan
Issue of ordinary shares as part consideration for the settlement of a legal dispute
Issue of ordinary shares related to consultancy services
Options expired / lapsed
Share issue costs
Closing balance
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so as to maintain a strong capital base
sufficient to continue future exploration and development of its projects. In order to maintain or adjust the capital structure, the Group may issue new
shares or sell assets. The Group’s focus has been to utilise surplus cash from operations and raise additional funds as required from debt or equity markets to
fund capital investment, working capital and exploration and evaluation activities, including for the Nueva Esperanza Project in Chile and the Bowdens Silver
Project in New South Wales, Australia.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 94
19. Reserves and accumulated losses
(a) Reserves
Foreign currency translation reserve
Share-based payment reserve
General reserve
Total reserves
Movements:
Foreign currency translation reserve
At the beginning of the financial year
Exchange differences on translation of foreign controlled entities (net of tax)
At the end of the financial year
Available-for-sale investment revaluation reserve
At the beginning of the financial year
Net change
At the end of the financial year
Share-based payment reserve
At the beginning of the financial year
Performance rights issued to preference shareholder exercised
Share-based payment expense
Transfer to share capital (conversion of performance rights)
Transfer to share capital (options lapsed)
Transfer to other expenses
At the end of the financial year
General reserve
At the beginning of the financial year
Net change
At the end of the financial year
Foreign currency translation reserve
2014
$’000
(12,574)
8,598
(4,380)
(8,356)
13,853
(26,427)
(12,574)
–
–
–
8,702
–
448
(487)
–
(65)
8,598
(4,380)
–
(4,380)
2013
Restated
$’000
13,853
8,702
(4,380)
18,175
(26,458)
40,311
13,853
91
(91)
–
10,340
(1,512)
918
–
(1,044)
–
8,702
(4,380)
–
(4,380)
Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve, as described in Note 2b.
Available-for-sale investment revaluation reserve
Changes in the fair value of investments classified as available-for-sale financial assets are taken to the available-for-sale investment revaluation reserve as
described in Note 2k (iii).
Share-based payment reserve
The share-based payments reserve is used to recognise the fair value of options, deferred rights and performance rights issued but not exercised.
General reserve
The general reserve represents changes in equity as a result of changes in non-controlling interests in prior periods.
Notes to the Financial Statementswww.kingsgate.com.au 95
2014
$’000
(159,705)
(96,291)
–
2013
Restated
$’000
189,304
(326,271)
(22,738)
(255,996)
(159,705)
2014
$’000
2013
$’000
–
–
553
110
663
1,655
316
1,971
1,475
1,475
1,064
553
1,617
2,190
–
2,190
(b) Accumulated losses
(Accumulated losses) / retained profits at the beginning of the year
Net loss attributable to members of Kingsgate Consolidated Limited
Dividends paid
Accumulated losses
20. Commitments for expenditure
Capital commitments
Within 1 year
Total capital commitments
Operating leases
Within 1 year
Later than 1 year but not later than 5 years
Total operating leases
Exploration commitments
Within 1 year
Later than 1 year but not later than 5 years
Total exploration commitments
Capital commitments
Commitments for the plant, equipment and mine properties contracted as at the reporting date but not recognised as liabilities.
Operating leases
Commitments for minimum lease payments are in relation to non-cancellable operating leases. Operating leases for the current year primarily relates
to Challenger Mine’s power generation operating leases.
Exploration commitments
In order to maintain current rights of tenure to exploration tenements, the Group has exploration expenditure requirements up until expiry of the leases.
These obligations, which are subject to renegotiation upon expiry of the leases, are not provided for in the financial statements.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 96
21. Controlled entities
Entity
Parent Entity
Kingsgate Consolidated Limited
Subsidiaries
Dominion Mining Limited
Challenger Gold Operations Pty Ltd
Gawler Gold Mining Pty Ltd
Dominion Copper Pty Ltd
Dominion Metals Proprietary Ltd
Yilgarn Metals Limited
Kingsgate Treasury Pty Ltd
Kingsgate Bowdens Pty Ltd
Kingsgate Capital Pty Ltd
Kingsgate Nominees Pty Ltd
Kingsgate South America Pty Ltd
Laguna Resources NL
Laguna Exploration Pty Ltd
Akara Resources Public Company Limited (i)
Issara Mining Ltd
Suan Sak Patana Ltd
Phar Mai Exploration Ltd
Richaphum Mining Ltd
Phar Lap Ltd
Phar Rong Ltd
Asia Gold Limited
Dominion (Lao) Co., Ltd
Laguna Chile Ltda
Minera Kingsgate Limitada
Kingsgate Peru SRL
Minera Kingsgate Argentina S.A.
Equity holding
Country of
Incorporation
Class of
shares
2014
%
2013
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Mauritius
Laos
Chile
Chile
Peru
Argentina
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
(i)
Akara Mining Limited changed its name to Akara Resources Public Company Limited on 29 August 2013.
Notes to the Financial Statementswww.kingsgate.com.au 97
2014
$’000
–
–
–
2013
$’000
15,148
7,590
22,738
22. Dividends
No final dividend was declared for the year ended 30 June 2013
No interim dividend was declared for the year ended 30 June 2014
Total dividends
The Group’s franking credit balance as at 30 June 2014 is $880,548 (2013: $880,548).
23. Related parties
Transaction with related parties
Information on remuneration of Directors and Key Management Personnel is disclosed in Note 29 and the Remuneration Report.
Controlling entity
The ultimate parent entity of the Group is Kingsgate Consolidated Limited.
24. Employee benefits and share-based payments
Employee benefit and related on-costs liabilities
Provision for employee benefits – current
Provision for employee benefits – non-current
Total employee provisions
Share-based payments
The following share-based payments were made during the year:
〉〉 performance and deferred rights issued to employees $292,614 (2013: $917,397);
〉〉 performance rights issued to consultants $155,610 (2013: $0); and
〉〉
shares issued as part consideration of a legal dispute $0 (2013: $1,512,000).
Superannuation
2014
$’000
2013
$’000
3,115
5,267
8,382
3,797
5,416
9,213
The Group makes contributions on behalf of employees to externally managed defined contribution superannuation funds. Contributions are based on
percentages of employee’s wages and salaries and include any salary-sacrifice amounts. Contributions to defined contribution plans for 2014 were
$1,744,000 (2013: $1,663,000).
Kingsgate executive option plan
The terms of the options issued pursuant to the plan are as follows:
i) each option will entitle the holder to subscribe for one ordinary share of the Company;
ii) options are granted under the plan for no consideration; and
iii) options granted under the plan carry no dividend or voting rights.
Executive Rights Plan
On 1 July 2012, the Company introduced an Executive Rights Plan which involves the grant of two types of rights being performance rights and deferred
rights. Subject to the satisfaction of the performance condition at the end of a three year measurement period in respect of performance rights and the
service condition at the end of the three year vesting period in respect of deferred rights, the rights will vest. The first $1,000 of value per individual award is
settled by cash with the balance settled by shares.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 98
24. Employee benefits and share-based payments continued
Performance rights
Kingsgate issued the following performance rights during the year:
Type
Performance rights
Performance rights
Grant date
7/13 November 2013
26 November 2013
Vesting date
1 July 2016
1 July 2016
Number
479,643
768,380
The Executives Rights Plan entitles participants to receive rights to fully paid ordinary shares in the Company (performance rights). The performance
measures for the performance rights issued in the 2013 and 2014 financial years is subject to a hurdle derived from a three year vesting period using the
internal performance measuring metric, TSR Alpha™. This measure is based on total shareholder return over that vesting period.
The fair value of the performance rights was estimated using Monte Carlo simulations, taking into account the terms and conditions upon which the awards
were granted.
The following table lists the inputs to the model used for the performance rights granted for the year:
Number of rights issued
Grant date
Spot price ($)
Risk-free rate (%)
Term (years)
Volatility (%)
Exercise price
Fair value ($)
479,643
7/13 November 2013
768,380
26 November 2013
1.24
2.9
2.6
60 – 65
–
0.72 – 0.75
1.24
2.9
2.6
60 – 65
–
0.72 – 0.75
The volatility above was determined with reference to the historical volatility of the Company’s share price from June 2008 to November 2013.
Deferred rights
Kingsgate issued the following deferred rights during the year:
Type
Deferred rights
Deferred rights
Deferred rights
Total
Grant date
Vesting date
Fair value
Number
7 November 2013
13 November 2013
4 November 2013
1 July 2016
1 July 2016
1 July 2016
$1.47
$1.34
$1.39
215,874
63,241
49,407
328,522
The fair value of the deferred rights was estimated based on the share price less the present value of projected dividends over the expected term of each
deferred right.
The following table lists the inputs to the model used for the deferred rights granted for the year:
Number of rights issued
Grant date
Spot price ($)
Term (years)
Dividends ($)
215,874
7 November 2013
63,241
13 November 2013
49,407
4 November 2013
$1.47
2.6
–
$1.34
2.6
–
$1.39
2.6
–
Notes to the Financial Statementswww.kingsgate.com.au 25. Reconciliation of loss after income tax to net cash flow
from operating activities
Loss for the year
Depreciation and amortisation
Share-based payments
Gain on disposal of property, plant and equipment
Impairment – Bowdens
Impairment – exploration
Impairment – Challenger Gold Project
Impairment in associate – Caravel Minerals
Unwind of discount rate for provision
Loss on sale of exploration assets
Amortisation of deferred borrowing costs
Unrealised (gains) / losses
Share of associate’s loss
Net exchange differences
Change in operating assets and liabilities
(Increase) / decrease in receivables
(Increase) / decrease in prepayments
(Increase) / decrease in inventories
Increase / ( decrease) in current tax liabilities
Increase / ( decrease) in creditors
Increase / ( decrease) in provisions
Increase / ( decrease) in deferred tax liabilities
Net cash inflow from operating activities
99
2014
$’000
2013
Restated
$’000
(96,291)
(326,271)
57,741
448
–
84,586
2,112
–
–
1,137
–
1,056
(522)
413
(670)
(4,321)
2,900
1,583
930
(14,163)
43
181
37,163
90,377
917
70
–
20,421
311,850
537
1,017
16,709
7,594
(559)
1,353
2,147
5,644
(85)
(8,930)
(11,792)
(3,181)
1,143
(20,176)
88,785
26. Events occurring after reporting date
No matter or circumstance has arisen since 30 June 2014 that has significantly affected, or may significantly affect:
〉〉
the Group’s operations in future financial years;
〉〉
〉〉
the results of those operations in future financial years; or
the Group’s state of affairs in future financial years.
27. Contingent liabilities
The Group had contingent liabilities at 30 June 2014 in respect of guarantees. Bank guarantees have been given by Kingsgate’s controlled entities to partici-
pating banks in the syndicated loan facility and corporate loan facility as described in Note 16 as part of the security package. These guarantees may give
rise to liabilities in the parent entity if the controlled entities do not meet their obligations under the terms of the loans subject to guarantees. No material
losses are anticipated in respect of the above contingent liabilities.
Included in non-current other asset is $1,828,000 relating to restricted cash deposits against bank guarantees supporting the rehabilitation bond require-
ments against the Group’s mining operations.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 100
28. Financial risk management and instruments
Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk, fair value risk, and interest rate risk),
credit risk and liquidity risk.
At this point, the Directors believe that it is in the interest of shareholders to expose the Group to foreign currency risk, price risk except in specific circum-
stances and interest rate risk. Therefore, the Group does not employ any derivative hedging of foreign currency or interest rate risks. The Group has entered
into forward gold sale contracts to manage Australian gold price risk in respect of the forecast production from the Challenger Mine (refer “commodity price
risk” section below). The Directors and management monitor these risks, in particular market forecasts of future movements in foreign currency and price
movements and if it is to be believed to be in the interests of shareholders will implement risk management strategies to minimise potential adverse effects
on the financial performance of the Group.
Risk management is carried out by the senior executive team. The Board provides written principles for overall risk management, as well as policies covering
specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments,
and investment of excess liquidity.
The Group holds the following financial instruments:
Financial assets
Cash and cash equivalents
Receivables
Restricted cash
Available-for-sale financial assets
Other financial assets
Total financial assets
Financial liabilities
Payables
Borrowings
Derivatives held for trading
Total financial liabilities
(a) Market risk
Foreign exchange risk
2014
$’000
2013
$’000
53,632
13,360
5,489
270
9,059
81,810
30,494
9,431
5,474
767
10,301
56,467
(30,278)
(155,714)
(623)
(47,106)
(202,565)
(1,271)
(186,615)
(250,942)
The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the US dollar and
Thai Baht and as discussed earlier, no financial instruments are employed to mitigate the exposed risks. This is the Group’s current policy and it is reviewed
regularly including forecast movements in these currencies by management and the Board. Current year foreign exchange risks arise primarily from:
〉〉
the sale of gold, which is in US dollars;
〉〉 payables denominated in US dollars; and
〉〉
cash balances in US dollars.
The functional currency of the Thai subsidiaries is Thai Baht. The Company’s functional currency is Australian dollars.
Notes to the Financial Statementswww.kingsgate.com.au The Group’s exposure to US dollar foreign currency risk at the reporting date was as follows:
Cash and cash equivalents
Restricted cash
Receivables
Payables
Total exposure to foreign currency risk
101
2014
$’000
2013
$’000
2,175
5,489
113
(451)
7,326
483
5,474
127
(1,016)
5,068
The Group’s sale of gold produced from Chatree Gold Mine is in US dollars, however the functional currency of the subsidiary company that owns the
Chatree Gold Mine is Thai Baht and therefore, the Group’s profit is sensitive to movement in those currencies.
If the spot Australian dollar weakened / strengthened by one cent against the US dollar with all other variables held constant, the Group’s revenue for the
year would have been $2,357,000 higher / $2,357,000 lower (2013: $2,510,000 higher / $2,456,000 lower).
The Group’s current exposure to other foreign exchange movements is not material.
Commodity price risk
At 30 June 2014 the Group’s subsidiary, Challenger Gold Operations Pty Ltd, has forward sold 14,500 ounces of gold at an average price of $1,364 per ounce.
Subsequent to year-end the Group forward sold a further 22,000 ounces of gold over a 12 month period at an average price of $1,419 per ounce to manage
Australian gold price risk associated with forecast production from the Challenger Mine.
The following table sets out an aging of forward gold sale contracts in place at year end:
As at 30 June 2014
Within one year
As at 30 June 2013
Within one year
Gold for
physical delivery
ounces
Contracted sales
price
A$/oz
Value of
committed sales
$’000
14,500
1,364
19,779
6,500
1,159
7,534
The following table displays fluctuations in the fair value of the Group’s gold forward contracts due to movements in the spot price of gold with all other
variables held constant. The 5% sensitivity is based on reasonable possible changes, over a financial year, using the observed range of actual historical prices.
Mark to market movement of the fair value of gold forward contracts
5% increase in the spot price of gold
5% decrease in the spot price of gold
Equity price risk
2014
$’000
2013
$’000
(779)
1,240
(611)
(2,217)
The Group is exposed to equity securities price risk, which arises from investments classified on the statement of financial position as available-for-sale
financial assets.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 102
28. Financial risk management and instruments continued
A 10% increase / (decrease) of the share price for the equity securities at 30 June 2014 would have increased / (decreased) equity / profit by the amounts
shown as follows:
Available-for-sale financial asset – 2014
Available-for-sale financial asset – 2013
Interest rate risk
+10%
-10%
Profit
$’000
Equity
$’000
Profit
$’000
Equity
$’000
27
–
–
77
(27)
(77)
–
–
The Group’s exposure to interest rate risk for classes of financial assets and financial liabilities, at 30 June 2014 and 30 June 2013 are set out as follows:
2014
Financial assets
Cash and cash equivalents
Receivables
Restricted cash
Available-for-sale financial assets
Other financial assets
Total financial assets
Financial liabilities
Payables
Borrowings
Derivatives held for trading
Total financial liabilities
Net financial (liabilities) / assets
2013
Financial assets
Cash and cash equivalents
Receivables
Restricted cash
Available-for-sale financial assets
Other financial assets
Total financial assets
Financial liabilities
Payables
Borrowings
Derivatives held for trading
Total financial liabilities
Floating
interest rate
$’000
Fixed interest
maturing in
1 year or less
$’000
Non-interest
bearing
$’000
Total
$’000
53,614
–
5,489
–
8,664
67,767
–
(146,168)
–
(146,168)
(78,401)
30,476
–
5,474
–
9,764
45,714
–
–
–
–
–
–
–
–
(9,546)
–
(9,546)
(9,546)
–
–
–
–
–
–
–
(191,995)
(10,570)
–
–
18
13,360
–
270
395
14,043
53,632
13,360
5,489
270
9,059
81,810
(30,278)
–
(623)
(30,278)
(155,714)
(623)
(30,901)
(186,615)
(16,858)
(104,805)
18
9,431
–
767
537
10,753
(47,106)
–
(1,271)
30,494
9,431
5,474
767
10,301
56,467
(47,106)
(202,565)
(1,271)
(191,995)
(10,570)
(48,377)
(250,942)
Net financial (liabilities) / assets
(146,281)
(10,570)
(37,624)
(194,475)
Notes to the Financial Statementswww.kingsgate.com.au 103
The weighted average rate on floating rate borrowings was 4.86% for the year ended 30 June 2014 (2013: 5.87%).
A change of 100 basis points (“bps”’) in interest rate at the reporting date would have increased (decreased) profit or loss by the amounts shown below.
This analysis assumes that all other variables, in particular foreign exchange rates, remain constant.
Variable rate instrument – 2014
Variable rate instrument – 2013
100 bps
increase
Profit
$’000
1,462
1,920
100 bps
decrease
Profit
$’000
(1,462)
(1,920)
(b) Credit risk
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers including,
outstanding receivables and committed transactions.
The Group has no significant concentrations of credit risk. The sale of gold and other cash transactions are limited to counterparties with sound credit ratings.
The maximum exposure to credit risk is represented by the carrying value of the Group’s financial assets in the statement of financial position. The maximum
exposure to credit risk at reporting date was:
Cash and cash equivalents
Receivables
Restricted cash
Other financial assets
Total exposure to credit risk at year end
2014
$’000
53,632
13,360
5,489
9,059
81,540
2013
$’000
30,494
9,431
5,474
10,301
55,700
(c) Liquidity risk
The Group’s liquidity requirements are based upon cash flow forecasts which are based upon forward production, operations, exploration and capital projec-
tions. Liquidity management, including debt / equity management, is carried out under policies approved by the Board and forecast material liquidity
changes are discussed at Board meetings. The following table analyses the Company’s financial assets and liabilities into relevant maturity groupings based
on the remaining period at the reporting date. The amounts disclosed are the contractual undiscounted cash flows.
Carrying
amount
$’000
1 year
or less
$’000
1–2 years
$’000
2–5 years
$’000
More than
5 years
$’000
2014
Payables
Borrowings
Derivatives held for trading
Total financial liabilities 2014
2013
Payables
Borrowings
Derivatives held for trading
30,278
155,714
623
186,615
47,106
202,565
1,271
25,478
52,720
623
78,821
41,185
94,432
1,271
Total financial liabilities 2013
250,942
136,888
806
54,464
–
55,270
1,731
30,458
–
32,189
3,994
64,514
–
68,508
5,104
85,138
–
90,242
–
–
–
–
865
13,521
–
14,386
Total
$’000
30,278
171,698
623
202,599
48,885
223,549
1,271
273,705
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 104
28. Financial risk management and instruments continued
(d) Fair value measurements
The carrying values of financial assets and liabilities of the Group approximate their fair values. Fair values of financial assets and liabilities have been
determined for measurement and / or disclosure purposes.
Fair value hierarchy
The Group classifies assets and liabilities carried at fair value using a fair value hierarchy that reflects the significance of the inputs used in determining
that value. The table following analyses financial instruments carried at fair value, by the valuation method. The different levels in the hierarchy have been
defined as follows:
〉〉
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
〉〉
Level 2:
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly
(derived from prices); and
〉〉
Level 3:
inputs for the asset or liability that are not based on observable market data (unobservable inputs).
30 June 2014
Available-for-sale financial assets
Derivatives held for trading
Total as at 30 June 2014
30 June 2013
Available-for-sale financial assets
Derivatives held for trading
Total as at 30 June 2013
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
270
–
270
767
–
767
–
(623)
(623)
–
(1,271)
(1,271)
–
–
–
–
–
–
270
(623)
(353)
767
(1,271)
(504)
Notes to the Financial Statementswww.kingsgate.com.au 105
2014
$
4,328,212
201,325
2,095,468
217,284
2013
$
4,671,017
169,385
–
821,961
6,842,289
5,662,363
29. Key Management Personnel disclosures
(a) Directors
The following persons were Directors of Kingsgate during the financial year:
〉〉 Ross Smyth-Kirk
〉〉 Peter Alexander
〉〉 Craig Carracher
〉〉 Peter McAleer
〉〉 Gavin Thomas
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director (resigned 01 June 2014)
(b) Other Key Management Personnel
〉〉
Tim Benfield
〉〉 Duane Woodbury
〉〉 Ron James
〉〉 Ross Coyle
〉〉
Joel Forwood
〉〉 Brett Dunstone
Chief Operating Officer
Chief Financial Officer
General Manager Exploration and Resources Development
General Manager Finance and Administration and Company Secretary
General Manager Corporate and Markets
General Manager Human Resources
(c) Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Termination benefits
Share-based payments
Total Key Management Personnel compensation
(d) Loans with Key Management Personnel
Aggregates for Key Management Personnel:
Balance at
start of year
$
Loan
repayments
for the year
$
*Interest paid
and payable for
the year
$
Interest not
charged
$
Balance at end
of year
$
Number in
Group at the
end of the year
160,000
(160,000)
–
–
4,436
2,603
–
–
–
160,000
–
1
2014
2013
*
Interest payable at annual interest rate of 11%.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 106
30. Auditors’ remuneration
Audit and other assurance services
PricewaterhouseCoopers Australian Firm
Audit and review of the financial reports
Related Practices of PricewaterhouseCoopers Australian Firm
Audit and review of the financial statements
Non-PricewaterhouseCoopers Audit Firm
Audit and review of the financial reports
Total remuneration for audit services
Other services
PricewaterhouseCoopers Australian Firm
Other services
Related Practices of PricewaterhouseCoopers Australian Firm
Transaction services (IPO)
Other services
Total remuneration for non-audit related services
Taxation services
PricewaterhouseCoopers Australian Firm
Tax compliance services
Related Practices of PricewaterhouseCoopers Australian Firm
Tax compliance services
Total remuneration for tax related services
31. Loss per share
Basic loss per share
Diluted loss per share
Net loss used to calculate basic and diluted earnings per share
2014
$
2013
$
503,000
890,179
278,871
296,108
–
6,641
781,871
1,192,928
112,150
17,207
141,957
21,352
275,459
–
10,950
28,157
89,345
133,775
40,316
42,744
129,661
176,519
2014
Cents
(55.9)
(55.9)
2013
Restated
Cents
(215.0)
(215.0)
$’000
$’000
(96,291)
(326,271)
Number
Number
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share
172,237,245
151,766,220
Adjustment for calculation of diluted earnings per share: options
–
–
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating
diluted earnings per share
172,237,245
151,766,220
Diluted loss per share
As the Group made a loss for the year, diluted loss per share is the same as basic loss per share as the impact of dilution would be to reduce the loss per share.
Notes to the Financial Statementswww.kingsgate.com.au 32. Parent entity financial information
As at, and throughout the financial year ending 30 June 2014, the parent entity of the Group was Kingsgate.
Summary of financial information
Results of parent entity
Loss for the year
Other comprehensive loss
Total comprehensive loss
Financial position of parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising:
Issued capital
Reserve
Accumulated losses
Total financial equity
107
2014
$’000
2013
$’000
(114,554)
(385,898)
–
(91)
(114,960)
(385,989)
142,681
209,627
71,021
95,849
677,109
8,298
(571,629)
170,816
290,509
132,736
133,743
605,504
8,337
(457,075)
113,778
156,766
Contingent liabilities of the parent entity
Bank guarantees have been given by Kingsgate’s controlled entities to participating banks in the syndicated loan facility and revolving loan facility as
described in Note 16 as part of the security package.
These guarantees may give rise to liabilities in the parent entity if the controlled entities do not meet their obligations under the terms of the loans subject
to guarantees. No material losses are anticipated in respect of the above contingent liabilities.
33. Deed of cross guarantee
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiaries listed below are relieved from the Corporations Act
2001 requirements for preparation, audit and lodgement of financial reports, and Directors’ Reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee (“Deed”). The effect of the Deed is
that the Company guarantees to each creditor payment in full of any debt in the event of the winding up of any of the subsidiaries under certain provisions
of the Corporations Act 2001. If a winding up occurs under other provisions of the Corporations Act 2001, the Company will only be liable in the event that
after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up.
The subsidiaries subject to the Deed are:
〉〉 Dominion Mining Limited;
〉〉 Dominion Gold Operations Pty Ltd; and
〉〉 Gawler Gold Mining Pty Ltd.
The above companies represent a ‘closed group’ for the purpose of the Class Order, and as there are no other parties to the Deed of Cross Guarantee
that are controlled by Kingsgate Consolidated Limited, they also represent the ‘extended closed group’.
A consolidated income statement and other comprehensive income, a summary of movements in consolidated accumulated losses, and consolidated
statement of financial position, comprising the Company and controlled entities which are a party to the Deed, after eliminating all transactions between
parties to the Deed of Cross Guarantee, is set out as follows:
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 108
33. Deed of cross guarantee continued
Income statement and other comprehensive income
Sales revenue
Cost of sales
Gross profit
Exploration expenses
Corporate and administration expenses
Other income and expenses
Foreign exchange gain / (loss)
Impairment losses – Challenger Gold Project
Impairment losses – Bowdens Silver Project
Impairment losses – Laguna Silver Project
Impairment losses – exploration assets
Loss before finance costs and income tax
Finance income
Finance costs
Net finance costs
Loss before income tax
Income tax (expense) / benefit
Loss after income tax
Other comprehensive (loss) / income
Items that may be reclassified to profit and loss
Change in fair value of available-for-sale financial assets (net of tax)
Total other comprehensive (loss) / income for the year
Total comprehensive loss for the year
Loss attributable to:
Owners of Kingsgate Consolidated Limited
Total comprehensive loss attributable to:
Owners of Kingsgate Consolidated Limited
Summary of movements in consolidated retained earnings
Accumulated losses
Accumulated losses at beginning of year
Loss for the year
Dividends paid
Accumulated losses at end of the year
2014
$’000
2013
Restated
$’000
106,357
(124,717)
102,522
(130,350)
(18,360)
(27,828)
(164)
(13,895)
4,119
(1,453)
–
(81,299)
(4,344)
–
–
(15,652)
(13,272)
3,911
(311,850)
–
–
(6,141)
(115,396)
(370,832)
2,139
(7,540)
(5,401)
1,606
(11,672)
(10,066)
(120,797)
6,517
(380,898)
20,504
(114,280)
(360,394)
–
–
(391)
(391)
(114,280)
(360,785)
(114,280)
(360,394)
(114,280)
(360,785)
2014
$’000
2013
Restated
$’000
(458,278)
(114,280)
–
(75,146)
(360,394)
(22,738)
(572,558)
(458,278)
Notes to the Financial Statementswww.kingsgate.com.au 109
Statement of financial position as at 30 June 2014
2014
$’000
2013
Restated
$’000
Assets
Current assets
Cash and cash equivalents
Receivables
Inventories
Other assets
Total current assets
Non-current assets
Available-for-sale financial assets
Property, plant and equipment
Exploration, evaluation and development
Investment in subsidiaries
Other assets
Deferred tax assets
Total non-current assets
TOTAL ASSETS
Liabilities
Current liabilities
Payables
Borrowings
Derivatives held for trading
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
30,878
125,518
5,831
792
163,019
270
2,169
3,700
54,654
1,582
3,327
65,702
228,721
70,313
9,847
623
2,502
83,285
24,854
(192)
7,925
32,587
115,872
112,849
10,047
171,986
7,722
1,553
191,308
767
6,525
12,378
106,619
1,582
(881)
126,990
318,298
93,988
55,000
1,271
2,920
153,179
-
2,116
7,440
9,556
162,735
155,563
677,109
8,298
(572,558)
605,504
8,337
(458,278)
112,849
155,563
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 110
34. Impact of adopting Interpretation 20 and voluntary change in accounting policy
for deferred cost of divestment
Impact of Adopting Interpretation 20
The Group has adopted Interpretation 20 – Stripping Costs in the Production Phase of a Surface Mine as of 1 July 2013.
In open pit mining operations, it is necessary to remove overburden and other waste materials in order to access ore from which minerals can be
extracted economically. The process of removing overburden and waste materials is referred to as stripping. The Group capitalises pre-production
stripping costs incurred during the development of a mine (or pit) as part of the investment in construction of the mine. These costs are subse-
quently amortised over the life of the mine (or pit) on a units of production basis. This accounting treatment is unchanged by the implementation
of Interpretation 20 which specifies the accounting for production stripping only.
The Group’s accounting policy for production stripping costs for the financial year ended 30 June 2013 and previous financial reporting periods, was
to defer costs where this was the most appropriate basis for matching the costs against the related economic benefits and where the effect was
material. The amount of stripping costs deferred was based on the ratio obtained by dividing the amount of waste tonnes mined by the quantity of
ore for the life of mine (or pit/stage). Production stripping costs incurred in the period were deferred to the extent that the current period actual
waste ore ratio exceeded the average life of mine (or pit/stage) expected ratio. Such deferred costs were then charged to profit or loss to the extent
that, in subsequent periods, the current period actual ratio fell below the average life of mine (or pit/stage) expected ratio until those deferred costs
were fully depleted. No production stripping liabilities were recognised. The life of mine (or pit/stage) ratio was based on economically recoverable
reserves of the mine.
Interpretation 20 now provides specific guidance on how to account for production stripping costs. It requires such costs to be capitalised as an
asset (referred to as the “production stripping asset”) when the recognition criteria set out in Interpretation 20 are met. Interpretation 20 differs
from the life of mine average waste tonnes mined to ore ratio approach in a number of ways – these include:
i) the level at which production stripping costs are to be assessed, which includes the recognition of an asset at a component level rather than a life
of mine level and;
ii) the way in which the production stripping asset is to be depreciated.
Identification of Components
Interpretation 20 requires the identification of different components of the ore body. Interpretation 20 defines a component as a specific volume of
the ore body that is made more accessible by the stripping activity. An identified component of the ore body is generally a subset of the total ore
body of the mine. It is considered that each mine may have several components, which are to be identified based on the mine plan. The mine plans
and therefore the identification of specific components will vary between mines as a result of both the geological characteristics and location of the
ore body. The financial considerations of the mining operations may also impact the identification and designation of a component.
The identification of components is necessary for both the measurement of costs at the initial recognition of the asset and the subsequent deprecia-
tion of the asset.
Depreciation Methodology
Interpretation 20 also changes the manner in which the production stripping asset is depreciated. Under the previous method, the production strip-
ping asset was released to the profit or loss when the actual ratio fell below the average expected ratio. Under Interpretation 20, the production
stripping asset is depreciated over the expected useful life of the identified component of the ore body that is made more accessible by the activity,
on a units of production basis.
Transition
Interpretation 20 is not to be retrospectively applied; instead it is applied prospectively from the beginning of the earliest comparative period
presented. Therefore, the impact of adoption for the Group is calculated as of 1 July 2012, being the beginning of the earliest comparative period
presented in these financial statements. On implementation of Interpretation 20, production stripping costs which had been capitalised up to 30
June 2012 using the Group’s previous policy, could only be carried forward if there remained an identifiable component of the ore body to which the
opening carried forward balance could be associated. Given the way in which production stripping costs have been previously accumulated and
capitalised, and the way in which the components of the mine have been identified under Interpretation 20, it was determined that no adjustment to
the deferred stripping asset at 30 June 2012 was required. Prior to the adoption of Interpretation 20, the Group disclosed the production stripping
assets as part of “Other Assets”. On adoption, these assets were reclassified as “Exploration, Evaluation and Development”.
Accounting Policy
The Group’s accounting policy under Interpretation 20 has been revised and is included in Note 2n.
Notes to the Financial Statementswww.kingsgate.com.au 111
Impact of Voluntary Change in Accounting Policy – Deferred Transaction Costs of Divestment
The Group has implemented a voluntary change in accounting policy in respect of deferral of transaction costs relating to the partial divestment
of its interest in its subsidiary, Akara Resources PCL (“Akara”), without losing control. This change is effective 1 July 2013.
The Group has been implementing a strategy to list Akara on the Thai Stock Exchange (“SET”) since 2011 and lodged a prospectus with the
SET and the Thai Securities Exchange Commission (“SEC”) in September 2013. The approval process is continuing and Kingsgate expect the
prospectus to be approved before the end of 2014. Once approval is received the Group has 12 months to complete the listing process.
A new prospectus would need to be lodged for approval if the listing is not completed within this timeframe.
The timing of the listing has been longer than expected due to:
〉〉
Time taken to resolve a dispute with the previous Akara preference shareholder, which was achieved in August 2011.
〉〉
Longer than expected approval process with the SEC and SET.
The Group’s accounting policy for divestment of transaction costs for the financial year ended 30 June 2013 and previous financial reporting
periods was to defer such costs on the basis that:
〉〉
The Group was in the process of implementing its strategy to divest a non-controlling interest in Akara via an Initial Public Offering (“IPO”) in
Thailand and that the transaction would be completed in the near term.
〉〉
The Group would retain control of Akara so there would be no impact on the income statement from these transaction costs, as these costs
would be recognised in equity as a transaction cost with outside equity interests upon the successful listing of Akara.
The Group’s accounting policy for transaction costs incurred prior to a partial divestment for the financial year ended 30 June 2013 and previous
financial reporting periods was to defer such costs until the divestment took place. The new accounting policy is to expense as incurred transac-
tion costs relating to the potential partial divestment of an interest in a subsidiary in the years prior to the disposal where control is retained. The
Group believes the new accounting policy will provide more reliable and relevant information to the users of the financial report:
〉〉
〉〉 Deferral of cost could be seen as judgmental and although KCN had applied its accounting policy correctly at each reporting period, an
Expensing costs as incurred is simpler and easier for readers of the financial statements to understand.
“expense as incurred” model would remove this estimate and provide for a more “prudent” and conservative approach and reflects the longer
than expected timeframe taken to achieve this transaction.
〉〉
The divestment costs are disclosed separately within Note 5 “Revenue and Expenses” so the level of information available to readers of the
financial statements has not been reduced from that under the previous policy.
Transition
This change in accounting policy has been applied retrospectively from the beginning of the earliest comparative period presented being 1 July
2012. On implementation of the revised policy, divestment costs deferred up to 30 June 2012 under the Group’s previous policy have been
expensed via opening retained earnings. This adjustment reduced opening retained earnings at 1 July 2012 by $7,298,000. The 2013 Group
income statement has been restated by $1,111,000 to reflect the cost of divestment incurred in that year (refer to Note 5c), this impacts closing
retained earnings as well.
Accounting Policy
The Group’s accounting policy in respect of deferred costs of divestment has been revised and is included in Note 2f.
Financial Impacts
In accordance with the transitional provisions of Interpretation 20 and change in accounting policies for deferred cost of divestment, these
policies have been applied prospectively from the start of the comparative period, being 1 July 2012. The impact of these changes in accounting
requirements on the:
〉〉
Income Statement for the year ended 30 June 2013;
〉〉 Statement of Financial Position as at 30 June 2013;
〉〉 Statement of Financial Position as at 1 July 2012;
〉〉 Statement of Cash Flows for the year ended 30 June 2013; and
〉〉
Earnings per share for the year ended 30 June 2013.
is set out as follows:
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 112
34. Impact of adopting Interpretation 20 and voluntary change in accounting policy
for deferred cost of divestment continued
a)
Group Income Statement
year ended 30 June 2013
Sales revenue
Cost of sales
Gross profit
Exploration expenses
Corporate and administration expenses
Other income and expenses
Foreign exchange loss
Share of loss in associate
Impairment losses
Impairment of investment in associate
As reported
year to
30 June 2013
Interpretation
20
Restatement
Deferred Cost
of Divestment
Restatement
As restated
year to
30 June 2013
$’000
$’000
$’000
$’000
329,282
(280,452)
48,830
(675)
(21,152)
(15,490)
(745)
(1,353)
(332,271)
(537)
–
(2,049)
(2,049)
–
–
–
–
–
–
–
–
–
–
–
(1,111)
–
–
–
–
–
329,282
(282,501)
46,781
(675)
(22,263)
(15,490)
(745)
(1,353)
(332,271)
(537)
Loss before finance costs and income tax
(323,393)
(2,049)
(1,111)
(326,553)
Finance income
Finance costs
Loss before income tax
Income tax benefit
Loss after income tax
Earnings per share (cents per share)
Basic loss per share
Diluted loss per share
2,587
(18,809)
–
–
–
–
2,587
(18,809)
(339,615)
(2,049)
(1,111)
(342,775)
15,889
615
–
16,504
(323,726)
(1,434)
(1,111)
(326,271)
(213.3)
(213.3)
(0.9)
(0.9)
(0.8)
(0.8)
(215.0)
(215.0)
The Interpretation 20 restatement impact to loss after income tax reflects the net impact of the change in production stripping costs capitalised for the
year, and the depreciation charged in the year.
The change in accounting policy for deferred cost of divestment impact to loss after income tax reflects divestment cost capitalised in the year under the
previous accounting policy and now expensed.
Notes to the Financial Statementswww.kingsgate.com.au
113
b)
Group Statement of Financial Position
at 30 June 2013
As reported
at 30 June 2013
Interpretation
20
Restatement
Deferred Cost
of Divestment
Restatement
As restated
at 30 June 2013
$’000
$’000
$’000
$’000
Current assets
Cash and cash equivalents
Receivables
Inventories
Other assets
Total current assets
Non-current assets
Restricted cash
Inventories
Available-for-sale financial assets
Investment in associate
Property, plant and equipment
Exploration, evaluation and development
Other assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Payables
Borrowings
Derivatives held for trading
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
30,494
9,431
62,032
40,605
142,562
5,474
44,731
767
1,485
190,231
336,546
37,797
10,395
627,426
769,988
41,185
84,101
1,271
272
3,797
130,626
5,921
115,657
10,228
33,596
165,402
296,028
473,960
–
–
–
–
–
–
–
–
–
–
24,649
(26,903)
–
(2,254)
(2,254)
–
–
–
–
–
–
–
–
(676)
–
(676)
(676)
–
–
–
(8,408)
(8,408)
–
–
–
–
–
–
–
–
–
30,494
9,431
62,032
32,197
134,154
5,474
44,731
767
1,485
190,231
361,195
10,894
10,395
625,172
(8,408)
759,326
–
–
–
–
–
–
–
–
–
–
–
–
41,185
84,101
1,271
272
3,797
130,626
5,921
115,657
9,552
33,596
164,726
295,352
(1,578)
(8,408)
463,974
605,504
18,319
(149,863)
473,960
–
(144)
(1,434)
(1,578)
–
–
(8,408)
(8,408)
605,504
18,175
(159,705)
463,974
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 114
34. Impact of adopting Interpretation 20 and voluntary change in accounting policy
for deferred cost of divestment continued
c)
Group Statement of Financial Position
at 1 July 2012
As reported
at 1 July 2012
Interpretation
20
Restatement
Deferred Cost
of Divestment
Restatement
As restated
at 1 July 2012
$’000
$’000
$’000
$’000
Current assets
Cash and cash equivalents
Receivables
Inventories
Other assets
Total current assets
Non-current assets
Inventories
Available-for-sale financial assets
Property, plant and equipment
Exploration, evaluation and development
Other assets
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Payables
Borrowings
Derivatives held for trading
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings / (accumulated losses)
Total equity
87,031
12,226
56,079
38,720
194,056
30,314
1,751
239,237
545,032
27,858
10,211
854,403
1,048,459
42,597
35,697
2,685
11,655
2,993
95,627
6,681
121,847
29,110
19,381
177,019
272,646
775,813
599,618
(20,407)
196,602
775,813
–
–
–
(1,910)
(1,910)
–
–
–
21,536
(19,626)
–
1,910
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7,298)
(7,298)
–
–
–
–
–
–
–
87,031
12,226
56,079
29,512
184,848
30,314
1,751
239,237
566,568
8,232
10,211
856,313
(7,298)
1,041,161
–
–
–
–
–
–
–
–
–
–
–
–
42,597
35,697
2,685
11,655
2,993
95,627
6,681
121,847
29,110
19,381
177,019
272,646
(7,298)
768,515
–
–
(7,298)
(7,298)
599,618
(20,407)
189,304
768,515
Notes to the Financial Statementswww.kingsgate.com.au 115
d)
Group Statement of Cash Flows
for the year ended 30 June 2013
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
Net decrease in cash and cash equivalents
As reported
12 months to
30 June 2013
Interpretation
20
Restatement
Deferred Cost
of Divestment
Restatement
As restated
12 months to
30 June 2013
$’000
$’000
$’000
$’000
85,020
(141,326)
(1,691)
(57,997)
4, 876
(4,876)
–
–
(1,111)
1,111
–
–
88,785
(145,091)
(1,691)
(57,997)
Prior to the adoption of Interpretation 20, all cash outflows associated with production stripping were disclosed as operating activities. On adoption of
Interpretation 20, the cash outflows that were initially recognised as part of the stripping activity assets were reclassified to investing activities.
Prior to the change in accounting policy for deferred cost of divestment, all cash outflows relating to the deferred cost of divestment were disclosed as
investing activities. Following the adoption of the revised accounting policy, all cash outflows relating to the cost of divestment have been reclassified to
operating activities.
e)
Earnings Per Share
for the year ended 30 June 2013
Basic loss per share
Diluted loss per share
As reported
year to
30 June 2013
Cents
Interpretation
20
Restatement
Cents
Deferred Cost
of Divestment
Restatement
Cents
As restated
year to
30 June 2013
Cents
(213.3)
(213.3)
(0.9)
(0.9)
(0.8)
(0.8)
(215.0)
(215.0)
$’000
$’000
$’000
$’000
Loss after income tax
(323,726)
(1,434)
(1,111)
(326,271)
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
151,766,220
Adjustment for calculation of diluted earnings per share: options
–
Weighted average number of ordinary shares and potential ordinary shares used as
the denominator in calculating diluted earnings per share
151,766,220
–
–
–
–
–
–
151,766,220
–
151,766,220
Number
Number
Number
Number
Notes to the Financial StatementsNotes to the Financial Statements 116
Directors’ Declaration
Directors’
Declaration
In the Directors’ opinion:
a) the financial statements and notes that are set out on pages 66 to 115 and the Remuneration
Report in the Directors’ Report, are in accordance with the Corporations Act 2001, including:
i) giving a true and fair view of the Group’s financial position as at 30 June 2014 and of its perfor-
mance for the financial year ended on that date; and
ii) complying with Australian Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements;
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; and
c) at the date of this declaration, there are reasonable grounds to believe that the members of the
extended closed group identified in Note 33 will be able to meet any obligations or liabilities to which
they are, or may become, subject by virtue of the deed of cross guarantee described in Note 33.
Note 1 confirms that the financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001
from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2014.
This declaration is made in accordance with a resolution of the Directors.
Ross Smyth-Kirk
Director
Dated at Sydney on 5 September 2014
On behalf of the Board
www.kingsgate.com.au Independent
Auditor’s Report
Independent auditor’s report to the members
of Kingsgate Consolidated Limited
Report on the financial report
We have audited the accompanying financial report of Kingsgate Consolidated Limited (the company),
which comprises the consolidated statement of financial position as at 30 June 2014, the consolidated
statement of profit or loss and other comprehensive income, consolidated statement of changes in
equity and consolidated statement of cash flows for the year ended on that date, a summary of signifi-
cant accounting policies, other explanatory notes and the directors’ declaration for Kingsgate group
(the consolidated entity). The consolidated entity comprises the company and the entities it
controlled at year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial State-
ments, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
117
Independent Auditor’s Report
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Notes to the Financial Statements
118
Independent Auditor’s Report
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act
2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of Kingsgate Consolidated Limited is in accordance with the Corporations Act
2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(b)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 48 to 63 of the directors’ report for the
year ended 30 June 2014. The directors of the company are responsible for the preparation and presen-
tation 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.
Auditor’s opinion
In our opinion, the remuneration report of Kingsgate Consolidated Limited for the year ended 30 June
2014 complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Brett Entwistle
Partner
Sydney
5 September 2014
www.kingsgate.com.au
119
Shareholder Information
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Shareholder
Information
As at 26 September 2014
Substantial shareholders
Substantial shareholders and their associates who have notified the Company are listed below:
Holder
Van Eck Associates Corporation (at 22 Sep 2014)
Resource Capital Funds (at 15 Apr 2014)
Distribution of equity securities
Size of Holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 +
Total
Number of shares
held as disclosed
in notices to the
Company
10,654,665
9,301,618
Percentage
13.4
6.0
Number of
shareholders of
fully paid
ordinary shares
5,728
4,978
1,547
1,751
129
14,133
Number of
option holders
Number of
performance
rights holders
Number of
deferred rights
holders
–
–
–
–
1
1
–
–
–
4
2
6
–
–
–
10
–
10
continuedu
Notes to the Financial Statements
120
Shareholder Information
20 largest shareholders
20 largest shareholders of quoted ordinary shares
Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Merrill Lynch (Australia) Nominees Pty Limited
Arinya Investment Pty Ltd
Citicorp Nominees Pty Limited
Silver Standard Australia (BVI) Inc.
Bruce Clayton Bird
Lujeta Pty Ltd
Guina Developments Pty Ltd
BNP Paribas Noms Pty Ltd < DRP >
Elizabeth Aprieska
UBS Nominess Pty Ltd
Christopher Komor
Yandal Investments Pty Ltd
ABN Amro Clearing Sydney Nominees Pty Ltd
QIC Limited
Maminda Pty Ltd
Bahulu Holdings Pty Ltd
CS Fourth Nominees Pty Ltd
Unquoted equity securities
There was one option holder holding 3,333,334 options.
There were 6 performance rights holders holding 567,874 performance rights.
There were 10 deferred rights holders holding 498,721 deferred rights.
Unquoted equity security holdings greater than 20%
Number of
shares
40,989,015
27,038,959
17,836,092
13,578,340
4,996,944
4,938,690
3,440,367
3,207,110
2,468,063
2,200,000
1,868,068
1,274,590
1,139,284
1,097,462
1,000,000
948,851
807,546
792,833
765,448
551,751
Percentage
18.33
12.09
7.98
6.07
2.23
2.21
1.54
1.43
1.10
0.98
0.84
0.57
0.51
0.49
0.45
0.42
0.36
0.35
0.34
0.25
Options
Investec Bank (Australia) Ltd
Number
Expiry Date
Strike Price
3,333,334
22 Sep 2016
$10.50
There were no persons holding more than 20% of performance rights or deferred rights other than rights issued under the Executive Rights Plan.
Voting rights
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.
Options
No voting rights.
Performance rights
No voting rights.
Deferred rights
No voting rights.
www.kingsgate.com.au
www.kingsgate.com.au
Corporate
Information
Kingsgate Consolidated Limited
ABN 42 000 837 472
Directors
Ross Smyth-Kirk (Chairman)
Peter Alexander (Non-Executive Director)
Craig Carracher (Non-Executive Director)
Peter McAleer (Non-Executive Director)
Peter Warren (Non-Executive Director)
Company Secretary
Ross Coyle
Stock Exchange Listing
Kingsgate Consolidated Limited is a Company
limited by shares, listed on the Australian Stock
Exchange under the code KCN. The Company’s
shares also trade in the United States of America
over-the-counter (OTC) as an American Deposi-
tory Receipt (ADR) under the code OTC: KSKGY.
Registered Office and
Principal Business Address
Kingsgate Consolidated Limited
Suite 801, Level 8, 14 Martin Place
Sydney NSW 2000
Australia
Tel:
Fax:
Email:
+61 2 8256 4800
+61 2 8256 4810
info@kingsgate.com.au
Bangkok Office
Akara Resources Public Company Limited
19th Floor, Sathorn Thani Building 2
No. 92/54-55 North Sathorn Road
Kwaeng Silom, Khet Bangrak
Bangkok 10500
Thailand
Tel:
Fax:
+66 2 233 9469
+66 2 236 5512
Chatree Mine Office
Akara Resources Public Company Limited
No. 99 Moo 9, Tambon Khao Chet Luk
Amphur Thap Khlo
Phichit 66230
Thailand
Tel:
Fax:
+66 56 614 500
+66 56 614 195
Thailand Exploration Office
Issara Mining Limited
156/9-10 Moo 11, Tambol Dong Khui
Amphur Chon Daen
Phetchabun 67190
Thailand
Tel:
Fax:
+66 56 649 253
+66 56 649 082
Challenger Mine
Challenger Gold Operations Pty Ltd
C/- Suite 3/39 14 Clarke Street
Norwood SA 5067
Australia
Tel:
Fax:
+61 8 8450 0100
+61 8 8234 3956
Chile Office
Laguna Resources Chile Ltda
San Pio X 2460 oficina 1202
Providencia, Santiago
Chile
Tel:
+56 2 2231 7565
121
Corporate Information
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Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Australia
Postal address:
Locked Bag A14
Sydney South NSW 1235
Australia
+61 1300 554 474
+61 2 9287 0303
Tel:
Fax:
Email: registrars@linkmarketservices.com.au
Web: www.linkmarketservices.com.au
ADR Depository
(American Depository Receipts)
The Bank of New York Mellon
ADR Division
101 Barclay Street, 22nd Floor
New York NY 10286
USA
Tel:
+1 212 815 2293
Auditor
PricewaterhouseCoopers
201 Sussex Street
Sydney NSW 2000
Australia
Tel:
Fax:
+61 2 8266 0000
+61 2 8266 9999
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