Kingsgate Consolidated Limited Annual Report 2017

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FY2017 Annual Report · Kingsgate Consolidated Limited

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ABN 42 000 837 472

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2017
Annual Report

www.kingsgate.com.au

THAILANDCHILECHATREENUEVA ESPERANZA1

Contents

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Contents

Chairman’s Review . . . . . . . . .

Five Year Summary . . . . . . . . .

Finance Report . . . . . . . . . .

Operations Report

Chatree Gold Mine . . . . . . . . . . .

Projects Report

Nueva Esperanza . . . . . . . . . . .

Exploration Report

Chile . . . . . . . . . . . . . . . .

Ore Reserves and Mineral Resources

Competent Persons Statement . . .

Senior Management . . . . . . . . . 20

Directors’ Report . . . . . . . . . . 21
29
Remuneration Report . . . . . . . . . .

Auditor’s Independence Declaration . . 42

Financial Statements . . . . . . . . 43

Consolidated Statement of Profit or Loss
and Other Comprehensive Income . . . . .

Consolidated Statement of Financial Position .

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows . . .

Notes to the Financial Statements . . . 48

Directors’ Declaration . . . . . . . . 89

Independent Auditor’s Report . . . . . 90

Shareholder Information . . . . . . . 96

Corporate Information . . . . . . . . 98

Photo:
Akara and Lotus Hall staff,
local community members
and schools paying their
respects to King Bhumibol
the Great (King Rama IX) at
the Chatree Gold Mine

Cover Photo:
Geological field assistant
outcrop sampling at
Nueva Esperanza

Chairman’s Review

After I discussed in some
detail last year the sheer
disappointment at the Thai
Government’s decision to
close the Chatree Gold Mine
prematurely on 31 December
2016, I am heartened by the
stoic efforts of your Board and
Management over the course of
the year, which in simple terms,
from the announcement of
closure in May 2016 managed
to completely repay an
A$80 million debt and end up
with A$38 million in cash at
31 December 2016.

This was no mean feat either, with an ageing
mining fleet, geotechnical issues, rainfall events
and a fast approaching closure date it really was
a herculean effort, but it was aided by an already
known slightly higher grade portion of the
deposit and the sale of some assets.

The results speak for themselves, with Chatree
operating under a revised mine plan up until
31 December 2016, produced 89,875 ounces of
gold, and 808,100 ounces of silver. The process
plant treated 2.8 million tonnes of ore at a
head grade of 1.23 grams per tonne gold with
a recovery of 83.8%. Chatree benefited from
consistent access to higher grades and reduced
strip ratios. Of course, the premature closure
meant that all meaningful capital investment
was halted, and as a consequence operational
margins improved.

Total cash costs for the year were US$549 per
ounce (US$436 per ounce exclusive of Thai
royalties). The average royalty paid to the Thai
Government was US$113 per ounce of gold.
Total production costs after depreciation and
amortisation were US$975 per ounce of gold
produced.

It is interesting to note that royalties from
Chatree over the previous year totalled over 10%
of the total mining royalties received by the Thai
Government.

So the logical question for Chatree is what
happens now?

Your Board and Management have been
diligently working through a range of scenarios
to remedy the situation.

As a consequence on 3 April 2017, as part of
its response to forced closure, your Company
advised that it will be seeking a range of
remedies, including compensation, from the
Thai Government for the measures taken against
Chatree in violation of the Thai-Australia Free
Trade Agreement (‘TAFTA’).

TAFTA was signed in 2004 between Thailand
and Australia to promote and improve the
environment for bilateral services, trade and
investment. TAFTA came into force in 2005,
and contains provisions specifically relating to
investment protection.

Amongst other things, the provisions guarantee
certain rights to Australian investors in Thailand,
including the right to seek impartial resolution
of disputes with the Thai Government relating to
covered investments by way of arbitration before
an international tribunal.

As part of the requirements relating to
expropriation of assets, your Company is entitled
to full compensation from the Thai Government.
No such compensation has been forthcoming.

As a first step, Kingsgate has notified the Prime
Minister of the Kingdom of Thailand that it
wishes to engage in consultations as required
under TAFTA. Over the past several months your
Company has been in consultations with the
Thai Government, to seek both restitution and
compensation with respect to Chatree.

While the consultations period has now expired
Kingsgate has reserved its rights under TAFTA.

Your Board is confident that this is the right
mechanism to seek the amount of compensation
your Company deserves.

www.kingsgate.com.au

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Chairman’s Review

On a brighter note, work is continuing at Nueva
Esperanza with exciting, generative exploration
aimed at unlocking the full potential of the
district, and it continues to impress with a new
silver discovery in calendar 2017, at Cerro Blanco
West. Cerro Blanco West is a priority drill-target
to be followed up in the spring of 2017/2018
with a view to expanding the foot-print of the
currently defined mineralisation.

In total during the 2016–17 field season that
started in September 2016, your Company
completed 57 RC exploration drill holes totalling
11,398 metres and 10 diamond holes totalling
1,830 metres.

Your Company was also pleased to appoint
Ausenco to complete the detailed engineering
and technical components for the Nueva
Esperanza Project Feasibility Study during
the year.

The Ausenco appointment comes after a
rigorous selection process that considered
economic, technical, and other key project
related criteria. The work is scheduled for
completion in the first half of 2018.

In the year ahead your Company will be focused
on improving the value of the Nueva Esperanza
Project, motivating our people to do more with
less, and optimising our structure to rebuild
shareholder wealth. Those of you who have been
long term shareholders will know that this has
always been the philosophy of this Company.

As Kingsgate continues to push for restitution/
compensation for Chatree, the Board remains
more resolute than ever to ensure your Company
continues to rebuild and reposition itself and
delivers shareholder wealth.

I would once again like to thank all the
Management and personnel of Kingsgate,
Akara and Nueva Esperanza, for their sustained
efforts in delivering an outstanding operational
performance in what we hope will be the last of
our difficult years for some time to come.

I look forward to updating shareholders on our
progress in the near future.

Ross Smyth-Kirk
Director

Kingsgate field crews fly camping in the northern Maricunga as part of the regional exploration program
4

Five Year Summary

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)

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
Net profit/(loss) attributable to owners of Kingsgate Consolidated Limited

BALANCE SHEET (A$’000)

Current assets - cash and cash equivalent
Current assets - other
Non-current assets
Total assets
Liabilities - borrowings
Liabilities - other
Total liabilities
Shareholders' equity

OTHER INFORMATION

Average gold price received (US$/ounce)
Cash cost (US$/ounce)
Total cost (US$/ounce)
Operating cashflow (A$'000)
Dividends paid (Cash & DRP) (A$'000)
Number of ordinary shares ('000)
Basic earnings per share (A$ Cents)
Dividends per share declared for the year (A$ Cents)

2013

2014

2015

2016

*2017
(6 months to 31/12/16
– see note below)

2,709
3,521
1.3
7,051
5,699
0.9
11.9
79.9
133,681
1,000,569

2,378
2,193
0.9
6,176
6,235
0.9
12.9
79.4
134,546
992,255

1,831
1,133
0.6
4,768
5,283
0.9
13.1
79.3
125,094
850,003

1,208
2,965
2.5
3,168
5,515
0.7
11.5
79.8
97,510
675,579

992
876
0.9
2,589
2,773
1.2
22.2
83.8
89,875
808,100

(12 months)

(*8.5 months)

–

502
557

3.9

94.5
66,216

329,282
(192,538)
(15,516)
(24,804)
96,424
(332,808)
(90,965)
(327,349)
(16,222)
(343,571)
16,504
(327,067)
–
(327,067)

30,494
99,087
628,870
758,451
199,758
95,594
295,352
463,099

1,588
869
1,311
92,734
22,738
152,192
(215.0)
5.0

500
506

4.8

96.1
74,954

328,326
(244,366)
(15,304)
(4,449)
64,207
(86,698)
(58,986)
(81,477)
(13,250)
(94,727)
(2,886)
(97,613)
–
(97,613)

53,632
82,170
505,293
641,095
153,632
76,790
230,422
410,673

1,291
936
1,167
38,608
–
223,585
(56.7)
–

509
515

5.0

96.7
80,151

313,162
(225,175)
(13,825)
(4,704)
69,458
(148,181)
(53,950)
(132,673)
(14,319)
(146,992)
(651)
(147,643)
–
(147,643)

55,472
75,905
413,633
545,010
142,623
77,754
220,377
324,633

1,208
833
1,023
76,646
–
223,585
(66.0)
–

518
386

4.0

96.0
48,992

253,328
(196,244)
(14,372)
(2,848)
39,864
(210,969)
(46,177)
(217,282)
(12,129)
(229,411)
(40)
(229,451)
–
(229,451)

36,314
56,796
159,395
252,505
98,097
62,044
160,141
92,364

1,135
851
1,085
46,493
–
223,585
(102.6)
–

–
–

–

–
–

176,119
(97,925)
(11,964)
(3,188)
63,042
–
(51,307)
11,735
(3,631)
8,104
(1,016)
7,088
–
7,088

22,007
6,544
105,750
134,301
11,571
21,870
33,441
100,860

1,250
549
975
56,952
–
223,585
3.2
–

The Thai Government announced on 10 May 2016, that Chatree must cease operations by 31 December 2016.

*
Akara Resources Public Company Limited (‘Akara’) a subsidiary of Kingsgate Consolidated Limited ceased operating at Chatree on 31 December 2016 in accordance with the
closure orders. As a result, Chatree was placed on Care and Maintenance effective 1 January 2017.

www.kingsgate.com.au

Finance Report

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Cash flow

Net operating cash inflow was $57.0 million
(2016: $46.5 million). The increase of $10.5
million reflects a decrease in mining costs in
Chatree, lower interest payments due to the
reduction in borrowings over the year. Net
investing cash inflow was $15.0 million (2016:
cash outflow $17.1 million), up $32.1 million,
representing lower project work at the Nueva
Esperanza Gold/Silver Project offset by proceeds
of $5 million from the sale of the Bowdens Silver
Project and $11.5 million decrease in deposits
and restricted cash. Net cash outflow from
financing activities was $85.9 million (2016:
$48.6 million), including debt repayment of
$85.0 million with $75.0 million against the
Akara multi-currency loan facility and $10.0
million against the corporate revolving credit
facility. As a result both of these facilities were
repaid in full.

Financial position

Cash at year end was $22.0 million with a further
$2.8 million of deposits which subsequent to
year end have been released for general use.

On 29 August 2017, Kingsgate executed a $15.0
million Standby Loan Facility (‘SLF’). The SLF is
available to be drawn against within a 12 month
period from the date of the agreement subject
to demonstrating an acceptable repayment plan.
It has a minimum draw of $10.0 million and is to
be repaid in full six months after drawdown.

Dividends

No dividends were declared for the year ended
30 June 2017 (2016: nil).

Finance Report

Summary
〉〉 Revenue of $176.1 million;
〉〉

EBITDA (before significant items) of
$63.0 million;

〉〉 Gross profit of $27.3 million generated from

Chatree Gold Mine;

〉〉 No dividends have been declared.

Revenue

Total sales revenue for the Group was $176.1
million for the year, down from $253.3 million
in the previous year though sales revenue
generated from Chatree increased by 1%,
reflecting consistent access to higher grade ore
and higher gold and silver prices. Production
from Chatree was for only six months following
the Thai Government announcement on 10
May 2016 that Chatree must cease operations
by 31 December 2016. The overall decrease in
sales revenue reflected nil contribution from
Challenger following the sale of this operation in
March 2016.

The average gold price received was US$1,250
per ounce (2016: US$1,135 per ounce). The
average silver price received was US$18 per
ounce (2016: US$15 per ounce).

Cost of sales
The overall decrease in cost of sales to $148.9
million also reflects Chatree ceasing operations
on 31 December 2016 and nil contribution from
Challenger.

Income tax
On 18 June 2010, Kingsgate’s Thai subsidiary
company, Akara Resources Public Company
Limited (‘Akara’), received approval from The
Royal Thai Board of Investment (‘BOI’), for a
promotion in respect of 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:

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;

a 25% investment allowance on the capital
cost of certain assets of the new
processing plant; and

other benefits.

The taxable losses from the Australian opera-
tions are only recognised to the extent of
deferred tax liabilities. The balance of tax losses
has been added to the Group’s brought-forward
tax losses, leaving a balance of $295 million of
taxable losses (unrecognised tax asset of $89
million) to be carried forward to future years.

A tax expense of $1.0 million was incurred which
related to withholding tax on dividends received
by Kingsgate from the Thailand operations.

Operations Report

Operations
Report

Chatree
Gold Mine
Thailand

Summary

Akara Resources Public Company Limited
(‘Akara’), a subsidiary of Kingsgate Consolidated
Limited, ceased operating the Chatree Gold
Mine (‘Chatree’) on 31 December 2016 in
accordance with the closure order by the
Thai Government. As previously reported by
Kingsgate, the Thai Government announced
in May 2016, that it would end all gold mining
in Thailand by 31 December 2016, which
includes Chatree.

In addition, the Prime Minister of Thailand issued
a Section 44 Order, under the Thai Constitution
in December 2016 that ordered all gold mining
generally to cease by 31 December 2016. Akara
has complied with the Thai Government’s
position and Chatree was placed on Care and
Maintenance, effective 1 January 2017.

www.kingsgate.com.au

Notably, Akara generated sufficient cash flow
prior to the mine closure to meet all of its
obligations and extinguish its debt.

Approximately A$2.0 million was spent on
progressively decommissioning the plant during
the first three months of 2017, which included
the cleaning of mills, circuits and tanks to ensure
that the site is environmentally safe and that the
remaining infrastructure is properly secured. The
disposal of stores and inventory has been done in
accordance with the relevant environmental
regulations and where possible surplus/re-usable
consumables have been on-sold to third parties.

Akara staffing levels were also reduced at the
completion of the plant decommissioning phase,
down from a peak workforce of over 1,000
people, including contractors. Akara now has
approximately 25 full time employees. Mine
related redundancies were paid during the year,
and Akara has now met all staff related redun-
dancy obligations with respect to closure.

Key impacts of the premature closure of Chatree
in addition to the loss of several thousand direct
and indirect regional jobs include the forfeiture of
significant royalty payments to the Thai

Final night of operations7

Operations Report

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Government, and the discontinuation of many
community-based health, education and infra-
structure programs funded by Akara.

At the point of decommissioning, approximately
US$6.5 million of gold and silver inventory in the
form of high-grade sludge (equivalent to approxi-
mately 4,750 ounces of gold and 34,800 ounces
of silver) remains at the Chatree site. To date,
Akara has not been given permission to transport
the material for treatment and refining.

As a first step, Kingsgate notified the Prime
Minister of the Kingdom of Thailand that it
wishes to engage in consultations as required
under TAFTA.

On 20 April 2017, Kingsgate received a formal
response from the Government of Thailand
acknowledging the request for consultations
under TAFTA. The letter signed by the Thai
Minister of Industry stated that the Thai
Government was currently considering Kings-
gate’s request for consultations and that
relevant government agencies would require
some time for internal consultation and to seek
the necessary policy outcomes. The letter
further stated that they were predisposed to
seek an amicable solution to the matter.

These efforts included numerous unanswered
requests for meetings with Thailand’s Prime
Minister and members of his Cabinet.

Regrettably, Kingsgate believes that the only
option to resolve the situation is to exercise its
rights as a protected Australian investor under
TAFTA.

TAFTA was signed in 2004 between Thailand and
Australia to promote and improve the
environment for bilateral services, trade and
investment. TAFTA entered into force in 2005.

TAFTA contains a range of provisions specifically
relating to investment protection. Amongst

Since receiving this letter Kingsgate has met
with representatives of the Thai Government
on two occasions in Bangkok, the first on 27
June 2017, and the second on 16 August 2017.
At both meetings Kingsgate asserted its claim
for both financial compensation and restitution
of Chatree.

continuedu

Empty A Pit as Chatree placed on Care and Maintenance
8

Operations Report

Production and costs

Safety

There were two Lost Time Injuries recorded
during the year. The first, on 21 November 2016,
related to a mechanic receiving minor leg burns
from a caustic solution released under pressure
from a valve on Elution Circuit Number 2 and the
second, also on 21 November, relates to a forklift
driver getting his boot stuck under a foot pedal
resulting in a hairline fracture in his right leg.

Management would once again like to commend
employees and contractors for their attention to
safety and care for each other.

While these negotiations are still in the early
stages there has been some initial steps taken by
the Thai Government to restore the mine. Resti-
tution of the mine in the first instance would
allow Kingsgate to process the gold and silver
sludge secured at the mine, which would improve
the balance sheet. If however, a mutually
agreeable outcome is not reached with respect
to Chatree, Kingsgate can exercise its rights
under TAFTA to proceed to international
arbitration. Kingsgate continues to reserve its
rights under the TAFTA for such an eventuality.

It is important to note, that the Thai Government
has throughout the year expressed that the
closure is in no way a reflection of the way the
mine is operated which validates Kingsgate’s
view that the mine is and always has been a
socially responsible, internationally accredited
mining operation employing modern techniques.
Chatree even while on Care and Maintenance
continues to comply with stringent health and
environmental laws, and remains one of the most
heavily regulated mining operations in the world.

Community support also remains very high for
the mine and a number of private and
government sponsored surveys taken around
Chatree throughout the year have shown
favourable levels of support levels of ~75% or
greater for the mine to continue/-reopen.

Despite its premature closure, the Chatree Gold
Mine continued as Kingsgate’s primary
production asset throughout the year. Kingsgate
successfully implemented a revised mine plan up
until 31 December 2016 that generated suffi-
cient cash flow to cover all of Akara’s liabilities
and obligations.

Up until 31 December 2016, Chatree produced
89,875 ounces of gold and 808,100 ounces of
silver.

The process plant treated 2.8 million tonnes of
ore at a head grade of 1.23 grams per tonne gold
with a recovery of 83.8%.

Chatree benefited from consistent access to
high grades and reduced strip ratios.
Additionally, the actions of the Thai Government
to halt operations at the end of 2016 have also
seen the operation halt all meaningful capital
investment, and as a consequence operational
margins improved.

www.kingsgate.com.au

Acacia seedlings on the waste rock pilesAkara Officers inspecting gold doré bars at Chatree9

Operations Report

Rehabilitation

Akara completed the rehabilitation work on
waste rock piles in A-West (located to the west of
A Pit) at the end of May 2017. Bulldozers were
used to adjust the slope of the pile to the appro-
priate angle. A trial planting of vegetation (Acacia
species) has shown positive germination in rocky
areas with little or no topsoil. In addition, Acacia
seeds have also been sown along the
embankment of Q Pit, and additional trees
covering a total of 1,000 square metres have
been planted in the area. This flora regeneration
will be monitored periodically and additional
hardy, fast growing species like Neem, Burma,
Padauk and Cassie trees will be planted in areas
where Acacia germination is low.

The same species have also been planted along
the embankment of TSF2 to increase natural
foliage in the area. These trees cover an area of
approximately 1,300 square metres.

Akara has a regular dialogue with the
Department of Industries and Mines in relation
to the ongoing Care and Maintenance of
Chatree and other ongoing rehabilitation
measures that may be required.

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continued

Akara Officers inspecting the germination of Acacia seeds on the waste rock piles (A-west)
10

Projects Report

Projects
Report

Nueva Esperanza
Chile

Summary

Kingsgate’s focus remains firmly on the
development of the exciting Nueva Esperanza
Project which, subject to financing and
approvals, provides Kingsgate with a solid
platform for growth potential in Chile, and
indeed South America.

The Nueva Esperanza Project was acquired by
Kingsgate in 2012 (100% owned) through the
consolidation of tenements and resources in
2011. 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 highly prospective Maricunga Belt in Chile
which has already delivered defined total
resources of ~100 Moz is known for its historic

bonanza silver and large scale gold
production and is further characterised by
epithermal gold styles in the north.

The next step is to complete the mine
design with new parameters that will lead
to a cost update which will deliver a
Bankable Feasibility Study in 2018.

Cerro Blanco

Teterita

Cimberos West

Huantajaya

Potosi

www.kingsgate.com.au

Projects Report

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continuedu

Chimberos Pit

Projects Report

Engineering studies

During the period 2016–17, an update of the
previous Pre-Feasibility Study was carried out,
and was delivered in December 2016. This
update confirmed that the Project is technically
and economically feasible.

During February–March 2017, the bidding for
the tender to complete the Feasibility Study was
released and companies recognised in the
engineering and EPC/EPCM projects market
were invited to apply.

After a rigorous evaluation process, the
Feasibility Study was awarded to Ausenco, and
works commenced in May on a range of works
which include but are not limited to:
〉〉 geological modelling and a review of current

reserves and resources;

〉〉 process plant design and flowsheet;
〉〉 power line & water line optimal routes and

availability;

〉〉

infrastructure associated with the Project;
and

supervision of metallurgical tests, to confirm
previous results at ALS in Perth.

The Feasibility Study results are expected to be
received in late 2017 or early 2018.

www.kingsgate.com.au

480 000mE

485 000mE

490 000mE

Nueva Esperanza Project
Nueva Esperanza Project
Resources Total
Resources Total
Gold: 0.50Moz
Gold: 0.53Moz
Silver: 83.2Moz
Silver: 90.0Moz
AuEq60: 1.89Moz
AuEq60: 1.9Moz

Teterita
Teterita
AuEq60: 0.28Moz
AuEq60: 0.3Moz

Teterita
Chimberos

Cerro Blanco

Huantajaya

Potosi

Arqueros

Rosa

Cerro Amarillo

Boulder

Hoyo Negro

Rie

Grandote

Carachitos

7 055 000mN

Chimberos Gold
Chimberos Gold
AuEq60: 0.48Moz
AuEq60: 0.48Moz

Chimberos Silver
Chimberos Silver
AuEq60: 0.16Moz
AuEq60: 0.16Moz

Arqueros
Arqueros
AuEq60: 0.97Moz
AuEq60: 0.97Moz

Carachita W

7 050 000mN

Carachapampa

NUEVA ESPERANZA, CHILE
GOLD-SILVER PROJECT
Location & Resources

Deposits
Prospects

Potosi

0.5

1.0

1.5

2.0

2.5 Kilometres

Nueva Esperanza - Exploration RC drill rig13

Projects Report

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Kingsgate supported Mr. Manuel Quispe by
signing a petition requesting that he be recog-
nised as a member of the Colla community and
further recognised as a “Living Human Treasure”,
as awarded by the Council of Arts and Culture
every year.

Environmental studies

During 2016–2017, Kingsgate’s work continued
with its consultants on the Environmental
Impact Assessment (‘EIA’). The EIA was delivered
to the SEIA (‘Social and Environmental Impact
Assessment’) on 5 July 2017. Kingsgate will
continue to liaise with SEIA about the ongoing
requirements of the EIA to ensure that any
issues arising are addressed.

Community studies

During this period, work with the six identified
communities within the Project footprint also
continued. The final modification of the Arqueros
Project was presented to the six communities
and the protocol process started with four of
those communities. Several meetings have been
carried out with the aim of seeking feedback that
can then be incorporated into the protocol
process to better define individual areas of claim
for use in the preparation of the Environmental
Impact Assessment.

The communities were very grateful for the
support and ongoing communication provided
by Kingsgate during and after a period of major
flooding in May 2017. Petrol, bales, non-perishable
food were all donated to flood affected
communities.

Stakeholders and communities

COMUNA DE DIEGO DE ALMAGROMayor of Diego de AlmagroColla CommunityGeox cultuxialColla CommunityDiego de AlmagroColla CommunityAyllu ChiyaguaCOMUNA DE COPIAPÓMayor of CopiapóGovernment AgenciesColla CommunityRuna Urka,Sinchy Wayraand Pai Ote
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Exploration Report

Exploration
Report

Overview

Given the current situation in Thailand, explo-
ration was entirely focused in Chile during the
year. The focus was primarily on exploration in and
around the Nueva Esperanza Project. Kingsgate
also initiated a Greenfields regional exploration
program in the northern Maricunga belt in Chile
exploring for other epithermal systems with
similar characteristics to Nueva Esperanza.

Brownfields exploration
Nueva Esperanza

The FY17 exploration strategy was to continue
the FY16 program and step back and evaluate the
Nueva Esperanza district in a systematic manner.
This approach involved compiling various datasets
and building detailed layers of geological infor-
mation to generate new drill targets.

Blast hole drill program
As a result of the previous year’s successful
blast hole drill program a second phase was
completed. An additional 322 short holes were
drilled to infill to a higher density anomalous
areas identified by the phase I program. Several
additional areas of interest were also infilled to
provide more complete coverage in areas
considered prospective for mineralisation.

Figure 1: Nueva Esperanza target location map (Resource areas in capital letters)

www.kingsgate.com.au

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Exploration Report

Table 1: Cerro Blanco West drill results

Hole Id

KRC-036

KRC-046
including

KRC-051

KRC-052
including

KRC-053

KRC-054

KRC-055

KRC-056

KRC-057

SCB-011

Interval
(m)

AuEq60
(g/t)

60
32

60
20

0.60

1.13
1.91

0.12

0.36
0.56

0.74

0.24

1.08

0.42

1.40

1.38

0.65

0.63

Ag
(g/t)

35.60

67.57
114.66

7.09

21.18
33.42

44.17

13.76

64.85

24.91

84.04

82.32

45.27

36.95

Au
(g/t)

NSV

NSV
NSV

NSV

NSV
NSV

NSV

From
(m)

40
68

40
72

136

To
(m)

118

100
100

100
92

112

180

Dip
(˚)

-70

-70
-70

-70

-70
-70

-70

-60

Azimuth
(˚)

090

270
270

090

270
270

270

090

270

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Note: Hole SCB-011 was not drilled by Kingsgate and the historical result noted above cannot be verified.
NSV – No significant values.

The drill program was designed to explore for
new targets under post-mineral cover
comprising of scree and colluvium. The targets
are based on multi-element geochemical and
geological vectors in combination with surface
lithological and structural mapping.

Numerous gold and silver anomalies were
generated or better defined by the phase II
program some of which will be systematically
explored in the 2017–18 field season. The most
exciting result was a sample that returned
8.8g/t gold from the Carachitas zone.

Geophysical survey
A combined IP/Resistivity Survey was conducted
in early 2017 over the core of the Nueva
Esperanza property. Approximately 40 line
kilometres were surveyed along nine east-west
lines spaced at 500 metres. The survey has
highlighted a number of highly resistive features,
consistent with silicic alteration, some of which
have been drill tested with encouraging results
received. Several resistivity targets remain to be
drill tested in the 2017-18 field season.

Drilling
During the 2016-17 field season, which started
in September 2016, the Company completed 57
RC exploration drill holes totalling 11,398
metres and 10 diamond holes totalling 1,830
metres. Nine principal target areas were drill
tested throughout the field season. The most
encouraging new zone of mineralisation is Cerro
Blanco West.

Cerro Blanco West:

Eight Reverse Circulation (‘RC’) holes (See Figure
2) totalling 1,226 metres were completed on the
new Cerro Blanco West target prior to drilling
being halted by the early onset of winter condi-
tions in May 2017.

Initial drilling returned the following intercepts:
〉〉 Hole KRC-046 intercepted 60 metres
grading 67.57g/t Ag (1.13g/t AuEq602)
from 40 metres to 100 metres, including
32 metres at 114.66g/t Ag (1.91g/t AuEq60)
from 68 metres to 100 metres;

〉〉 Hole KRC-055 intercepted 50 metres

grading 84.04g/t Ag (1.40g/t AuEq60)
from 62 metres to 112 metres; and
〉〉 Hole KRC-056 intercepted 18 metres

grading 82.32g/t Ag from (1.38g/t AuEq60)
46 metres to 64 metres.

Cerro Blanco West is a blind exploration target
located approximately 800 metres southwest of
Cerro Blanco, a large topographic high preserving
shallow-level opaline and steam-heated alteration.

Drilling targeted the northern part of a 0.4 km
by 1.4 km, north striking geophysical anomaly
defined by the 2017 IP and Resistivity Survey.
The anomaly comprises a corridor of shallow
(<200 metres depth) high resistivity response,
lying within the favourable 4,000 to 4,200 metre
elevation interval which hosts most of the signif-
icant mineralisation defined to date in the Nueva
Esperanza and adjacent La Coipa districts. No
historic drilling was previously completed within
the immediate footprint of the target
geophysical anomaly.

Follow-up drilling, designed to expand the miner-
alised footprint and ascertain the geometry of
mineralisation was completed on three east-west
fences spaced 50 metres apart.

All drill-holes intersected similar style silver miner-
alisation, with sectional interpretation indicating
a broadly sub-horizontal, oxidised, ‘manto’ like
zone generally ranging from 20 metres to
60 metres in thickness (See Figure 3). Results
of the drilling are summarised in Table 1.

Drilling was completed on the following targets;
Carachitas Central, Arqueros, Arqueros SW,
Teterita, Huantajaya, Cerro Blanco, Potosí, Cerro
Gaston, and Cerro Blanco West (See Figure 1).
The most encouraging exploration results
to-date have come from Cerro Blanco West.

Mineralisation, characterised by strong pervasive
iron-oxide development, is hosted in silicic and
advanced-argillic altered, variably shallow-dipping,
stratified dacitic tuffs immediately above their
contact with underlying strongly pyritized,
coherent to coarsely brecciated dacite porphyry.
The dacite porphyry is interpreted to be a
flow-dome forming the stratigraphic footwall
to the bedded tuff sequence.

Mineralisation remains open to the north, west
and south although weaker silver intersections
in some of the more eastern holes suggest
possible local attenuation of mineralisation
towards the east. Silver intersections from two
RC drill holes collared approximately 200 metres
further to the east on the lower western flanks
of Cerro Blanco (Hole KRC-036 and historical
Hole SCB-011) probably occur at the same
stratigraphic horizon and suggest possible
improvement of Ag grades further to the east.

Exploration Report

Excellent potential is considered to remain
over some 400 metres of untested strike of
the resistive corridor immediately south of
the current drilling, where the high resistivity
feature projects towards an approximate north
striking silicic ledge ‘feeder’ system controlling
Au-Ag mineralisation in the Rifle Ridge prospect
area.

Historic drill-intercepts reported from the Rifle
Ridge prospect include 25 metres grading at
1.47g/t Au, 17.4g/t Ag (1.93g/t AuEq60) in Hole
ERFR-1, and 16 metres grading at 1.71g/t Au and
51.75g/t Ag (for 2.57g/t AuEq60) in Hole SRR-006.

The notable increase in gold values associated
with mineralisation to the south at the Rifle
Ridge prospect is thought to augur well for
improved gold tenor in any potential southern
extension to the mineralisation so far inter-
sected at Cerro Blanco West.

Cerro Blanco West is a priority drill-target to be
followed up in the 2017–18 field season with a
view to expanding the foot-print of the currently
defined mineralisation.

Carachitas:

Carachitas is located approximately 2.3 km
southeast of the Arqueros deposit.

Ten shallow RC holes totalling 1,062.10 metres
were completed in the vicinity of several
Air-blast anomalies and the earlier scout RC
drilling. Results from the most encouraging drill
hole are noted below.
〉〉 Hole KRC-023 returned 10 metres grading
6.66g/t Au and 31.81g/t Ag or 7.13g/t
AuEq60 from 12 metres (the interval
is oxidised).

Figure 2: Cerro Blanco West drill hole location map

www.kingsgate.com.au

Figure 3: Cerro Blanco West geological cross section

Exploration Report

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Regional exploration, Chile

Forward program, Chile

The northern part of the belt is emerging as a
relatively underexplored area that contains a
number of significant precious metal deposits
including Gold Field’s Salares Norte Project and
Kinross’s La Coipa mine.

Over the last year the area has been investigated
by compiling various geological data in
conjunction with analysing updated satellite
imagery and claim information. Areas of high-
level epithermal alteration were investigated and
numerous concessions were applied for. All areas
were explored, several areas were voluntarily
relinquished, others prioritised for follow-up in
the 2017–18 field season. Several additional
areas have since been applied for which will be
investigated in the coming months.

The Company is also in discussions with a number
of third parties regarding possible exploration
Joint Ventures in the northern Maricunga.

Kingsgate remains committed to progressing
exploration, feasibility studies and permitting
aspects into FY18. In addition to the ongoing
exploration program a yet to be defined number
of infill drill holes will be completed on the three
resource zones, Arqueros, Teterita and
Chimberos to increase the confidence in
the resources and geological models.

Follow up exploration will continue on the
various targets already identified including
Cerro Blanco West and focus on building a
target pipeline at Nueva Esperanza and elsewhere
in Chile. It is anticipated fieldwork will recom-
mence at Nueva Esperanza in September 2017.

Notes:

1. Gold Equivalent: AuEq (g/t) = Au (g/t) + (Ag (g/t) ÷ 60).

Carachitas was historically highlighted by limited
RC scout-drilling in 2015, which returned an
intercept of 38 metres grading 2.30g/t Au and
22.0g/t Ag (Hole ECCR-02) from a depth of 14
metres – see Kingsgate ASX Release titled ‘New
Gold Discovery at Nueva Esperanza Project,
Chile’ dated 15 December 2015.

Further work will be completed at Carachitas
in the upcoming 2017-18 field season to better
understand the zone.

Huantajaya:

This target is located approximately 600 metres
southwest of the Chimberos Gold deposit.

Several diamond drill holes testing the depth
projection of outcropping zones of mineralised
breccia’s. Three holes intercepted the targeted
silicified and oxidised breccia at depth with the
following intercepts:
〉〉 Hole KDD-1 intercepted 24.0 metres grading

1.81g/t Au and 86.24g/t Ag or 3.25g/t
AuEq602 from 101 metres;

〉〉 Hole KDD-2 intercepted 11.0 metres grading

2.07g/t Au and 57.03g/t Ag or 3.02g/t
AuEq60 from 153 metres; and

〉〉 Hole KDD-3 intercepted 3.0 metres grading
3.33g/t Au and 31.48g/t Ag or 3.85g/t
AuEq60 from 146 metres.

Additional drilling along strike from the holes
noted above produced disappointing results
and the target has been downgraded.

Ore Reserves and Mineral Resources

as at 30 June 2017

Chatree and Nueva Esperanza Ore Reserves

Grade

Contained Metal

Source

Chatree

Nueva Esperanza

Total

Category

Proved

Probable

Total

Tonnes
(Million)

26.1

9.3

35.4

Gold
(g/t)

0.77

0.80

0.78

Silver
(g/t)

Au Equiv
(g/t)

Ag Equiv
(g/t)

Gold
(M oz)

Silver
(M oz)

Au Equiv
(M oz)

Ag Equiv
(M oz)

6.70

7.04

6.79

0.82

0.85

0.83

102

116

106

0.65

0.24

0.89

6.2

2.1

8.3

0.70

0.25

0.95

34.6

130

Notes to the Chatree Ore Reserves Table above:
(1)

For the material in the table above to become a JORC 2012 Ore Reserve, the Thai
Department of Primary Industries and Mines need to grant the Chatree Gold Mine
a Metallurgical Licence.

(2)

The information in the table above is not currently an Ore Reserve under JORC reporting
requirements.

Competent Persons Statement

The information relating to Nueva Esperanza Ore
Reserves is extracted from an ASX announcement
by Kingsgate titled “Nueva Esperanza Pre-Feasibility
Study” published 14 April 2016. The information
relating to Nueva Esperanza Mineral Resources is
extracted from an ASX announcement by Kingsgate
titled “Nueva Esperanza Mineral Resource Update”
published 14 April 2016.

Previous announcements referred to in this report are
available to view on Kingsgate’s public website (www.
kingsgate.com.au). The Company confirms that it is not
aware of any new information or data that materially
affects the information included in the original market
announcement, and 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 announcements.

The information in this report that relates to the
Chatree Mineral Resource is based on information
compiled by Ron James and Maria Muñoz, who were
previously employees of the Kingsgate Group. Both
Ron James and Maria Muñoz who are now consultant
geologists, are members of The Australasian Institute
of Mining and Metallurgy and qualify as Competent
Persons. Mr James and Ms Muñoz have sufficient
experience that is relevant to the style of mineralisation
and type of deposit under consideration, and to the
activity being undertaken to qualify as a Competent
Person as defined in the 2012 Edition of the
“Australasian Code for Reporting of Mineral Resources
and Ore Reserves.” Mr James and Ms Muñoz have
consented to the public reporting of these statements

and the inclusion of the material in the form and
context in which it appears.

The information in this report that relates to the
Chatree Ore Reserve estimates is based on information
compiled by Saowalak Tantakoon, a mining engineer
who is a full time employee of Akara Resources, and
who is under the supervision of Ron James, who is a
member of the Australasian Institute of Mining and
Metallurgy. Mr James is a former employee and now a
consultant to the Kingsgate Group, and has sufficient
relevant experience in the style of mineralisation and
type of deposit under consideration to qualify as a
Competent Person as defined in the 2012 Edition
of the “Australasian Code for Reporting of Mineral
Resources and Ore Reserves.” Ms Tantakoon and Mr
James have consented to the public reporting of these
statements and the inclusion of the material in the
form and context in which it appears.

Senior Management

Senior
Management

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 as at the time of this report are:

Ross Coyle
BA, FCPA, FGIA

Alistair Waddell
BSc (Hons), MAusIMM

Leonardo Hermosilla
M.Eng Metallurgical Engineer

Chief Financial Officer and
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 35 years’ experience
in finance and accounting within the resource
industry. He was Finance Director of Dominion
from 1996. Ross was appointed Kingsgate’s
Chief Financial Officer in November 2014.

Vice-President
Corporate Development & Exploration
Alistair Waddell joined Kingsgate in April 2016 as
Vice-President Corporate Development & Explo-
ration. He is a Geologist with over 20 years’ of
diverse resource industry experience, including
senior roles with both junior and senior mining
companies providing a broad vision of many
aspects of the business. He was a founder and
former President and CEO of TSX-V listed
GoldQuest Mining Corp. principally focused on
exploration in the Dominican Republic. Most
recently, he was Vice President - Greenfields
Exploration for Kinross Gold Corp. responsible
for all global Greenfields exploration.

Alistair brings with him excellent experience and
a broad knowledge of Latin America and is a key
driver of the Nueva Esperanza Project.

General Manager – Kingsgate Chile NL
Vice-President – Project Development
Leonardo Hermosilla was appointed as Vice
President – Project Development in December
2016. Leonardo is based in Santiago, Chile,
and his responsibilities include the delivery of
feasibility and development outcomes for the
100% owned Nueva Esperanza Project in Chile.
Leonardo is a highly experienced Metallurgical
Engineer with over 30 years’ of operational and
development experience in South America,
Canada and South Africa having worked for
various multi-national mining and EPCM firms
including Barrick, Anglo American, Hatch,
Kvaerner and Ausenco. Leonardo’s project
leadership, technical experience and extensive
industry knowledge in South America make
him a valuable addition and key member of the
executive team.

www.kingsgate.com.au

Directors’ Report

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for the year ended 30 June 2017

Corporate Governance Statement
Kingsgate Consolidated Limited is committed to ensuring that its policies and practices reflect
the highest standard of corporate governance.

The Board has adopted a comprehensive framework of Corporate Governance Guidelines which
can viewed at www.kingsgate.com.au/corporate-governance

Directors' Report
22

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 2017.

Directors

The following persons were Directors of
Kingsgate Consolidated Limited during the
financial year and up to the date of this report,
except where noted otherwise:

〉〉 Ross Smyth-Kirk1
〉〉 Peter Alexander
〉〉 Peter McAleer2
〉〉 Peter Warren
〉〉 Sharon Skeggs

Executive Chairman

Non-Executive Director

role changed from Non-Executive Chairman to
Executive Chairman on 2 May 2017.

granted leave of absence from February 2016 due
to ill health and resigned 24 November 2016.

Principal activities

The principal activities of Kingsgate Consolidated
Limited during the reporting period were mining,
project development and mineral exploration in
Thailand and Chile.

Dividends
〉〉 No final dividend was declared for the year
ended 30 June 2016 (30 June 2015: nil).

〉〉 No interim dividend was declared for the year

ended 30 June 2017 (30 June 2016: nil).

Review of operations
and results

Operational performance
Kingsgate is a gold and silver mining, development
and exploration company based in Sydney,
Australia. Kingsgate owns the Chatree Gold Mine
(‘Chatree’) in Thailand. In addition, the Company
has an advanced development project; the Nueva
Esperanza Gold/Silver Project, in the highly
prospective Maricunga Gold/Silver Belt in Chile.

Group gold production for the full-year was
89,875 ounces from Chatree.

The Thai Government announced on 10 May
2016, that Chatree must cease operations by
31 December 2016. In addition, the Prime
Minister of Thailand issued a Section 44 Order,
under the Thai Constitution in December 2016
that ordered all gold mining generally to cease
by 31 December 2016.

Akara Resources Public Company Limited (‘Akara’)
a subsidiary of Kingsgate Consolidated Limited
ceased operating at Chatree on 31 December
2016 in accordance with the closure orders.
As a result, Chatree was placed on Care and
Maintenance effective 1 January 2017. Notably,
Akara generated sufficient cash flow prior to the
mine closure to meet all of its obligations and
extinguish its debt. This included repayment
of the equivalent of A$75.0 million in a
combination of discretionary and scheduled
payments against an amortising multi-currency
(non-recourse) loan facility and the payment
of mine related redundancies totalling the
equivalent of A$5.0 million. Approximately

A$2.0 million was spent on progressively decom-
missioning the plant, which included the
cleaning of mills, circuits and tanks to ensure
that the site is environmentally safe and that the
infrastructure is properly secured. The disposal
of stores and inventory has been done in
accordance with relevant environmental regula-
tions, and where possible surplus/re-usable
consumables have been sold to third parties.

There were 25 full time employees remaining at
Akara at the completion of the plant decommis-
sioning phase, down from a peak workforce of
over 1,000 people, including contractors. At the
point of decommissioning, approximately $8.3
million of gold and silver inventory in the form of
high-grade sludge (equivalent to approximately
4,750 ounces of gold and 34,800 ounces of
silver) remains at the Chatree site. To date, Akara
has not been given permission to transport the
material for treatment and refining.

On 3 April 2017, as part of its response to forced
closure, Kingsgate advised that it will be seeking a
range of remedies, including compensation, from
the Thai Government for the measures taken
against Chatree in violation of the Thai-Australia
Free Trade Agreement (‘TAFTA’). As a first step,
Kingsgate has notified the Prime Minister of the
Kingdom of Thailand that it wishes to engage in
consultations as required under TAFTA.

For more than a year, Kingsgate has made
sustained, good faith efforts to engage with
the Thai Government in relation to the measures
against Chatree that ultimately resulted in its
premature closure on 31 December 2016. These
efforts included numerous unanswered requests
for meetings with Thailand’s Prime Minister and
members of his Cabinet. Regrettably, Kingsgate
believes that the only option to resolve the
situation is to exercise its rights as a protected
Australian investor under TAFTA.

TAFTA was signed in 2004 between Thailand
and Australia to promote and improve the
environment for bilateral services, trade and
investment. TAFTA came into force in 2005.
TAFTA contains a range of provisions specifically
relating to investment protection. Amongst

Directors’ Reportwww.kingsgate.com.au23

Chatree operations
Notwithstanding the current situation in
Thailand with Chatree, Kingsgate successfully
implemented a revised mine plan up until
31 December 2016 that generated sufficient
cash flow to cover all of Akara’s liabilities and
obligations.

Up until 31 December 2016, Chatree produced
89,875 ounces of gold and 808,100 ounces of
silver. The process plant treated 2.8 million
tonnes of ore at a head grade of 1.23 grams
per tonne of gold with a recovery of 83.8%.

Chatree benefited from consistent access
to high grades and reduced strip ratios.
Additionally, the actions of the Thai Government
to halt operations at the end of 2016 have also
seen the operation halt all meaningful capital
investment, and as a consequence operational
margins improved.

other things, these provisions guarantee
certain rights to Australian investors in Thailand,
including the right to seek impartial resolution
of disputes with the Thai Government relating
to covered investments by way of arbitration
before an international tribunal. On 20 April
2017, Kingsgate received a formal response from
the Government of Thailand acknowledging the
request for consultations under TAFTA.

Since receiving this letter Kingsgate has met with
representatives of the Thai Government on two
occasions in Bangkok, the first on 4 July 2017, and
the second on 16 August 2017. At both meetings
Kingsgate asserted its claim for both financial
compensation and restitution of Chatree. While
these negotiations are still in the early stages,
Kingsgate has reserved its legal position under
TAFTA and allowed a further limited period of
dialogue with the Thai Government.

Just prior to the meeting of 16 August 2017
Kingsgate was informed that the Thai Government
had lifted the ‘temporary suspension’ of all
unexpired gold mining licences in Thailand,
including those held by the Company’s subsidiary,
Akara Resources Public Company Limited. Further,
Kingsgate was advised that Akara’s application for
renewal of its Metallurgical Processing Licence,
which expired on 31 December 2016, could now
be processed.

While these developments appeared positive, it
became clear during the course of discussions
with the Government’s representatives, that
the Government would not be offering any
monetary compensation for the substantial
losses that Kingsgate has already suffered as a
result of the unlawful closure and expropriation
of the Chatree Mine, nor for the substantial
expenses that would be incurred in connection
with restarting operations at Chatree.

Group available cash at the end of June 2017
was $22.0 million with a further $2.8 million of

deposits which subsequent to year end have
been released for general use.

Based on cash flow forecasts, the Directors
believe the Group has sufficient cash resources
to settle its liabilities and commitments and
to support its ongoing activities for at least
12 months from date of this report.

In the short-term the Group will continue negotia-
tions with the Thai Government to re-open the
Chatree Gold Mine which includes realising value
from the sale of the stored gold and silver sludge
which will improve the cash position of the Group.

The Group has also considered funds that will be
required in the longer term including the funding
of the rehabilitation obligations of the Chatree
Gold Mine and the funding of the Nueva
Esperanza Gold/Silver Project. In addition to the
current cash reserves, further funds can be
generated through various options that are
available to the Group including:
〉〉

realising the value of assets including
reviewing the possibility of the sale of
Chatree Gold Mine infrastructure assets
which include plant and equipment and
non-strategic land and property;

〉〉 pursuing available legal and other avenues
for compensation including action for
damages against the Thai Government;

〉〉

reviewing the potential for and timing of an
equity raising; and/or

considering options that might include the
sale of assets, or entering into farm-in agree-
ments with other parties.

The Group can also reduce its current planned
ongoing expenditure to suit available cash
resources and the timing of cash flows.

On 29 August 2017 Kingsgate executed a $15.0
million Standby Loan Facility (‘SLF’). The SLF is
available to be drawn against within a 12 month
period from the date of the agreement subject
to demonstrating an acceptable repayment plan.
It has a minimum draw of $10.0 million and is to
be repaid in full six months after drawdown. It is
currently envisaged that use of this facility will
not be required during the 2018 financial year.

continuedu

Directors’ ReportDirectors' Report24

Nueva Esperanza Gold/Silver Project
At Nueva Esperanza, Kingsgate is continuing
the exciting, generative exploration aimed at
unlocking the full potential of the district.
The highly prospective 45 square kilometre
alteration footprint at Nueva Esperanza hosts
three existing deposits and numerous explo-
ration targets that Kingsgate is systematically
exploring through surface sampling, geophysical
surveys and drilling.

The exploration drilling campaign commenced in
September 2016, when the team was remobilised
to the Nueva Esperanza camp and fieldwork was
initiated. The field season generally runs from
September to May each year when winter
snowfalls restrict site activities from June
through August.

The principal focus was a Reverse Circulation (‘RC’)
drill program which tested a number of targets on
the eastern side of the Nueva Esperanza district.
In addition to the RC drilling, an Air-Blast drill

Financial results

Net profit/(loss) after tax ($’000)

EBITDA ($’000)

Dividends paid (Cash & DRP) ($’000)

Share price 30 June ($)

Basic earnings/(loss) per share (Cents)

Diluted earnings/(loss) per share (Cents)

(‘RAB’) program was concluded which followed-up
on the initial campaign completed in quarter 1,
2016. A total of 322 RAB holes were completed to
infill anomalous areas identified during the initial
program, and test several new targets.

By the end of the field season, a total of 11,398
metres (57 holes) of Reverse Circulation drilling
for exploration, and 1,830 metres (10 holes) of
diamond drilling for exploration and metallurgical
sampling had been completed at Nueva Esperanza.

As a result, calendar 2017 has produced
some encouraging drill intercepts from the
Huantajaya, Carachitas and more recently the
new Cerro Blanco West exploration targets.
(See ASX:KCN releases titled ‘Chile – Drill
Results from District Exploration’ dated
27 February 2017, and ‘New Silver Discovery
at Nueva Esperanza, Chile’ dated 17 July 2017).

essentially a process to amend the existing
permit footprint and incorporate a dry stacked
tailing design. Kingsgate was also pleased to
appoint Ausenco to complete the detailed
engineering and technical components for the
Nueva Esperanza Project Feasibility Study in
June 2017, with this work expected to be
completed in early calendar 2018.

Regional exploration
Kingsgate has been building its regional explo-
ration portfolio in the northern Maricunga Belt.
The Company currently has a number of licences
and areas under application to the north of Nueva
Esperanza. The concessions and concession
applications cover large areas of intense, high-
level alteration considered prospective for
epithermal precious-metal deposits.

The environmental impact submission (‘DIA’)
for Nueva Esperanza was submitted to Chilean
regulatory agencies on 5 July 2017. The DIA is

Kingsgate has also initiated some preliminary
discussions in relation to possible exploration
Joint Ventures in the northern Maricunga.

2017

7,088

63,042

–

0.20

3.17

2016

2015

2014

2013

(229,451)

(147,643)

(97,613)

(327,067)

39,864

69,458

64,207

–

*0.41

(102.6)

–

0.70

(66.0)

–

0.86

(56.7)

96,424

22,739

1.27

(215.0)

* Price at 10 May 2016 as shares were suspended from 13 May 2016 to 16 October 2016.

Directors’ Reportwww.kingsgate.com.auEBITDA before significant items

The pre-tax profit for the Group before significant items was $8.1 million up from a loss of $18.4 million in the previous year.

EBITDA before significant items was $63.0 million (2016: $39.9 million).

Significant items are detailed below.

2017
$’000

7,088

1,016

8,104

–

2016
$’000

(229,451)

(229,411)

227,564

(411)

(16,645)

461

8,104

(18,442)

3,631

51,307

63,042

12,129

46,177

39,864

Costs
The overall decrease in cost of sales to $148.9 million (including royalties, depreciation and
amortisation) attributable to Chatree reflects Chatree ceasing operations on 31 December 2016.

Total cash costs per ounce

Group

Chatree

Challenger

2017
US$/oz

549

–

2016
US$/oz

Movement in unit cost
US$/oz

851

895

763

(302)

(346)

–

Profit/(loss) after income tax

Income tax expense

Profit/(loss) before income tax

Significant items
Impairment of Chatree Gold Mine

Impairment reversal of Challenger Gold Mine

Impairment reversal of Bowdens Silver Project

Impairment of capitalised exploration

Profit/(loss) before tax and significant items

Net finance costs

Depreciation and amortisation

EBITDA before significant items

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 loss
after 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.

Revenue
Total sales revenue for the Group was $176.1
million for the year, down from $253.3 million in
the previous year. Sales revenue generated from
Chatree increased by 1%, reflecting consistent
access to higher grade ore and higher gold and
silver prices.

The average US dollar gold price received was
US$1,250 per ounce (2016: US$1,135 per
ounce). The average silver price received was
US$18 per ounce (2016: US$15 per ounce).

Directors’ ReportDirectors' Report
26

Depreciation and amortisation
The increase in depreciation and amortisation
to $51.1 million is a result of Chatree ceasing
operations on 31 December 2016.

Cash flow
Net operating cash inflow was $57.0 million
(2016: $46.5 million). The increase of $10.5
million reflects an increase in sales revenue
and a decrease in mining costs in Chatree,
lower interest payments due to the reduction
in borrowings over the year, offset by Challenger
cash inflow generated in the previous year.
Net investing cash inflow was $15.0 million
(2016: $17.1 million outflow), up $32.1 million,
representing lower project work at the Nueva
Esperanza Gold/Silver Project offset by proceeds
of $5 million from the sale of the Bowdens Silver
Project and $11.5 million decrease in deposits
and restricted cash. Net cash outflow from
financing activities was $85.9 million (2016:
$48.6 million), including repayment of $85.0
million of the multi-currency loan facility and
revolving credit facility.

Material business risks

The Group uses a range of assumptions and
forecasts in determining estimates of production
and financial performance. There is uncertainty
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, were
exposed to fluctuations in the gold price and
to a degree in the silver price including foreign
currency rate movement affecting US dollar
denominated metal prices.

Changes in the gold and silver price also impact
assessments of the feasibility of exploration and
the Group’s development project, Nueva
Esperanza.

Production and cost estimates
The Group prepares estimates of future
production, 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 or cost estimates
could have an adverse impact of future cash
flows, profitability, results of operations and
financial position.

Maintaining title
The Group’s production, development and explo-
ration activities are subject to obtaining and
maintaining the necessary titles, authorisations,
permits and licences, and associated land access
arrangements with the local community, which
authorise those activities under the relevant law
(‘Authorisations’). There can be no guarantee
that the Group will be able to successfully obtain
and maintain relevant Authorisations to support
its activities, or that renewal of existing Authori-
sations will be granted in a timely manner or on
terms acceptable to the Group.

Authorisations held by or granted to the Group
may also be subject to challenge by third parties
which, if successful, could impact on Kingsgate’s
exploration, development and/or mining
activities.

Political, economic, social
and security risks
Kingsgate’s production, development and explo-
ration activities are subject to the political,
economic, social and other risks and uncertainties
in the jurisdictions in which those activities are
undertaken. Such risks are unpredictable and
have become more prevalent in recent years.
In particular, in recent years there has been
an increasing social and political focus on:
〉〉

the revenue derived by governments and
other stakeholders from mining activities; and

〉〉

resource nationalism, greater limits on
foreign ownership of mining or exploration
interests and/or forced divestiture (with or
without adequate compensation), and broad
reform agenda in relation to mining legis-
lation, environmental stewardship and local
business opportunities and employment.

Mineral resources and ore reserves
Ore reserves and mineral resources are
estimates. These estimates are substantially
based on interpretations 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 consequence there is a risk
that any part, or all of the 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
replacement 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
unexpected geological conditions, unavailability
of materials and unplanned equipment failures.
These risks and hazards could result in signif-
icant 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
insurance may not provide sufficient coverage
for losses related to specific loss events.

Reliance on contractors
Some aspects of Kingsgate’s production, devel-
opment and exploration activities are conducted
by contractors. As a result, the Group’s business,
operating and financial performance and results
are impacted upon by the availability and perfor-
mance of contractors and the associated risks.

Directors’ Reportwww.kingsgate.com.au27

Matters subsequent to the end
of the financial year

Likely developments and
expected results of operations

On 29 August 2017 Kingsgate executed a $15.0
million Standby Loan Facility (‘SLF’) to assist
with working capital requirements and for
general corporate purposes. The SLF is available
to be drawn against within a 12 month period
from the date of the agreement subject to
demonstrating an acceptable repayment plan.
It has a minimum draw of $10.0 million and is to
be repaid in full six months after drawdown. It is
currently envisaged that use of this facility will
not be required during the 2018 financial year.

On 16 August 2017 Kingsgate was informed
that the Thai Government had lifted the
‘temporary suspension’ of all unexpired gold
mining licences in Thailand, including those held
by the Company’s subsidiary, Akara Resources
Public Company Limited. Further, Kingsgate was
advised that Akara’s application for renewal of
its Metallurgical Processing Licence, which
expired on 31 December 2016, could now be
processed.

In light of the foregoing, the Kingsgate Board
has determined that it is in the interests of the
Company to further explore this matter, together
with a number of other unresolved issues. Accord-
ingly, Kingsgate has reserved its legal position
under TAFTA and allowed a further limited period
of dialogue with the Thai Government.

No matter or circumstance has arisen since
30 June 2017 that has significantly affected,
or may significantly affect:
〉〉

the Group’s operations in future financial
periods;

〉〉

the results of those operations in future
financial periods; or

the Group’s state of affairs in future financial
periods.

Kingsgate continues to reserve its rights under
the Thai-Australia Free Trade Agreement as it
continues to negotiate with the Thai Government
for both restitution of the Chatree Gold Mine and
associated compensation. While these negotia-
tions are still in the early stages there has been
some initial steps taken by the Thai Government
to restore the mine. Restitution of the mine in the
first instance would allow Kingsgate to process
the gold and silver sludge secured at the mine,
which would improve the balance sheet.
If however, a mutually agreeable outcome is not
reached with respect to the Chatree Gold Mine,
Kingsgate can exercise its rights under TAFTA to
proceed to international arbitration. Work will
continue on the Nueva Esperanza Gold/Silver
Development Project in Chile, with further
targeted exploration drilling undertaken in
conjunction with advancement of feasibility
works. Exploration works will recommence in
September 2017, following the winter recess and
will be aimed at following up on some positive
results in calendar 2017 from several targets
including Cerro Blanco West, Huantajaya, and
Carachitas. The Nueva Esperanza Feasibility
Study has commenced and it is expected to be
completed by early calendar 2018.

Kingsgate remains focused on ongoing cost
saving initiatives. Further cost reductions will be
implemented in FY18.

Environmental regulation

The Group is subject to environmental regula-
tions in respect to its gold mining operations
and exploration activities in Thailand, Chile and
the Lao PDR. For the year ended 30 June 2017,
the Group has operated within all environmental
laws.

As evidenced by the decision by the Thai
Government that the Chatree Gold Mine must
cease operation by 31 December 2016 there can
be no certainty as to what changes, if any, will
be made to relevant laws in the jurisdictions
where the Company has current interests, or
other jurisdictions where the Company may
have interest in the future, or the impact that
relevant changes may have on Kingsgate’s
ability to own and operate its mining and related
interests and to otherwise conduct its business
in those jurisdictions.

Environmental, health
and safety regulations
The Group’s mining and processing operations
and exploration activities are subject to
extensive 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
community stakeholder expectations may lead
to disruptions in production, development 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.

Management and the Board regularly review
the risk portfolio of the business and the effec-
tiveness of the Group’s management of those
risks.

Significant change in the state of affairs
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.

continuedu

Directors’ ReportDirectors' Report28

Directors’ meetings

The number of meetings of the Company’s Board of Directors and of each Board Committee held
during the year ended 30 June 2017, and the number of meetings attended by each Director were:

Directors

Board
Meetings

Audit

Nomination

Remuneration

Meetings of Committees

Ross Smyth-Kirk

Peter Alexander

Peter McAleer *

Peter Warren

Sharon Skeggs

–

A
B

Number of meetings attended
Number of meetings held during the time the Director held office or was a member of the committee during
the year
granted leave of absence from February 2016 due to ill health and resigned 24 November 2016

Information on Directors/Company Secretary

Ross Smyth-Kirk
B Com, CPA, F Fin

Peter Alexander
Ass. Appl. Geol

Non-Executive Director
Peter Alexander has had 44 years’ experience in
the Australian and offshore mining and explo-
ration 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 a
Non-Executive Director of the ASX listed
companies Doray Minerals Limited and Caravel
Minerals Limited. He was previously Chairman of
Doray Minerals Limited and a Director of Fortunis
Resources Limited.

Executive Chairman
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 37 years in Australia
and the United Kingdom. Mr Smyth-Kirk was
previously Chairman of the Australian Jockey
Club Limited and retired in May 2013 as a
Director of Argent Minerals Limited. Mr Smyth-
Kirk is Chairman of Kingsgate’s wholly owned
subsidiary, Akara Resources Public Company
Limited.

Responsibilities

Chairman of the Board, member of the Audit
Committee, Chairman of the Nomination and
Remuneration Committees.

Sharon Skeggs

Non-Executive Director
Sharon Skeggs has had a distinguished career in
business management, in London and Australia,
for over 37 years. She is an expert in business
strategy and communications.

For the past seven years Ms Skeggs has
consulted to a number of major companies
including Telstra, Westpac, News Limited, Visa
(Australia & Asia) and Woolworths on a variety
of corporate matters including business and
marketing strategies, change management,
communication programs and cost reduction
initiatives. She was previously a Director for
Saatchi & Saatchi (Australia) for 15 years and
the Australian Jockey Club.

Responsibilities

Member of the Audit, Remuneration and
Nomination Committees.

Peter Warren
B Com, CPA

Non-Executive Director
Peter Warren was 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 for 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 and member of
the Nomination and Remuneration Committees.

Responsibilities

Member of the Remuneration Committee.

Ross Coyle
BA, FCPA, FGIA

Company Secretary
Ross Coyle is a CPA with over 30 years’
experience in the resources sector. He joined
Kingsgate in March 2011 and was reappointed
Company Secretary on 7 December 2015, having
previously served in this office from September
2011 to November 2014. He is also Kingsgate’s
Chief Financial Officer.

Directors’ Reportwww.kingsgate.com.au
Remuneration Report

Dear Shareholder

I am pleased to present our Remuneration Report for 2017.

During the 2017 financial year, the Company’s remuneration practices have reflected the market conditions in which we operate.

We are confident our remuneration practices are sound, market competitive and demonstrate a clear link between executive’s
performance and shareholder returns. Benchmarking of salaries for all roles is routinely undertaken to ensure that we remain a
competitive employer in the market while continuing to meet all legislative and regulatory requirements.

The Group’s framework for awarding Long Term Incentives (‘LTI’) was subject to a comprehensive review by the Board during the
2016 financial year with the decision made to reintroduce the previously implemented Employee Share Option Plan (‘ESOP’). No
options were granted during the year and no Short Term Incentives were awarded during the year.

We will continue to consider your feedback as shareholders and review our remuneration and incentive policies and framework to
meet future market changes.

Thank you for your interest in this report.

Ross Smyth-Kirk
Chairman
Remuneration Committee

continuedu

Directors’ ReportDirectors' Report30

Introduction

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
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
Executives are remunerated fairly and respon-
sibly at a level that is competitive, reasonable
and appropriate, in order to attract and retain
suitably skilled and experienced people.

Remuneration Policy

The Remuneration Policy remains unchanged
from last financial year. The Remuneration Policy
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
individual 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
executive 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
executive remuneration framework that is
market competitive and aligned with 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
proportion of ‘at risk’ rewards.

Remuneration Governance

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 Executives.
The Committee makes recommendations to the
Board concerning:
〉〉 Non-Executive Director fees;
〉〉

remuneration level of Executive Directors
and other KMP;

〉〉

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
Statement 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 Godfrey Remuneration Group Pty Ltd
in the 2013/2014 financial year to review its
remuneration practice revisions and to provide
further validation in respect of both the
executive short-term and long-term incentive
plan design methodology and standards. These
recommendations covered the remuneration of
the Group’s Non-Executive Directors and KMP.

Godfrey Remuneration Group Pty Ltd confirmed
that the recommendations from that review
were made free from undue influence by
members of the Group’s KMP.

The following arrangements were implemented
by the Remuneration Committee to ensure that
the remuneration recommendations were free
from undue influence:
〉〉 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
Godfrey Remuneration Group Pty Ltd were
made directly to the Chair of the Remuner-
ation Committee.

As a consequence, the Board is satisfied that the
recommendations contained in the report were
made free from undue influence from any
members of the Group’s KMP.

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 and Options.

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 executives is reviewed annually to
ensure their pay is competitive with the market.
An executive’s pay is also reviewed on promotion.

The Board annually reviews and determines the
fixed remuneration for the CEO. The CEO does
the same for his direct reports. The Executive
Management group reviews and recommends
fixed remuneration for other senior management,
for the CEO’s approval. There are no guaranteed
increases to fixed remuneration incorporated into
any senior executives’ agreements. There were
no remuneration increases for KMP during the
2016/2017 financial year.

Directors’ Reportwww.kingsgate.com.au
31

The following summarises the performance of the Group over the last five years:

Revenue (‘000s)

Net profit/(loss) after income tax (‘000s)

EBITDA (‘000s)

Share price at year end ($/share)

Dividends paid (cent/share)

KMP short term employee benefits (‘000s)

* see page 36 for table outlining the short term employee benefits

2017

2016

2015

2014

2013

176,119

7,088

63,042

0.20

Nil

2,099*

253,328

(229,451)

39,864

0.41

Nil

2,358

313,162

(147,643)

69,458

0.70

Nil

3,425

328,326

(97,613)

64,207

0.86

Nil

4,471

329,282

(327,067)

96,424

1.27

5.0

4,671

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 Remuneration Committee set key performance measures and indicators for the individual executives on an annual basis that reinforce the
Group’s business plan and targets for the year. No short-term incentives were awarded during the financial year.

The Board has discretion to issue cash bonuses to employees for individual performance outside the STI Plan.

The structure of the STI Plan remains unchanged from financial year 2015/2016 and its key features are outlined in the table below:

What is the STI plan
and who participates?

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).

How much can the
executives earn under
the STI Plan?

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 KMP – 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 KMP – 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 KMP – 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 KMP 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 KMP are recommended by the Managing Director/CEO for
sign off by the Remuneration Committee and in the case of the Managing Director/CEO, are recommended 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 lights of unexpected or unintended circumstances.

continuedu

Directors’ ReportDirectors' Report32

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 taxation laws. The STIs are then in effect paid and expensed in the financial year
subsequent to the measurement year.

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.

Long-Term Incentives
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.
The previously operating Kingsgate Long-Term Incentive (‘LTI’) plan, also referred to as the Executive Rights Plan, has been terminated. All outstanding
performance rights and deferred rights vested on 1 July 2016 and the performance rights subsequently lapsed. The Executive Rights Plan was replaced by the
Kingsgate Employee Share Option Plan (‘ESOP’). The rules and terms and conditions of the ESOP have been independently reviewed.

Under the terms of the ESOP long-term incentives can be provided to certain employees through the issue of options to acquire Kingsgate shares. Options
are issued to employees to provide incentives for employees to deliver long-term shareholder returns.

No executive was the recipient of options during the 2016/2017 financial year.

Key features of the ESOP LTI Plan are outlined in the following table:

What is the LTI Plan
and who
participates?

Kingsgate executives and other eligible employees can be granted options to acquire Kingsgate Consolidated Limited fully paid shares.
In granting the options 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.

What are the
performance and
vesting conditions?

The period over which the options vest is at the discretion of the Board though in general it is 1–3 years. The executive and eligible
employee must still be employed by the Company at vesting date.

Is there a cost to
participate?

The options may at the discretion of the Board be issued for nil consideration and are granted in accordance with performance guide-
lines established by the Remuneration Committee and approved by the Board.

What happens in
the event of bonus
shares, rights
issues or other
capital
reconstructions?

If between the grant date and the date of conversion of options into 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 adjust-
ments 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.au33

Options
Options are issued to executives to provide long-term incentives for executives to deliver long-term shareholder returns. Details of options issued as
remuneration to the Key Management Personnel (Alistair Waddell, Vice-President Corporate Development & Exploration) are set out below.

Grant date

29 Apr 2016

Exercise period

Exercise price ($)

Number of options
granted

Value of option at
grant date ($)

Number of options
vested during the
year

1 July 2017 - 30 June 2019

1 July 2018 - 30 June 2020

1 July 2019 - 30 June 2021

0.40

0.50

0.60

500,000

0.23

0.24

0.22

–

Options granted carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share. Further information on the options
is set out in Note 24 to the financial statements.

Directors and Key Management Personnel
Except where noted, the named persons held their current positions for the whole of the year and up to the date of this report.

Chairman

Ross Smyth-Kirk

Executive Chairman – Role changed from Non-Executive Chairman 2 May 2017

Non-Executive Directors

Peter Alexander

Non-Executive Director

Peter McAleer*

Non-Executive Director

Peter Warren

Non-Executive Director

Sharon Skeggs

Non-Executive Director

Senior Executives

Ross Coyle

Chief Financial Officer and Company Secretary

Jamie Gibson

General Manager Corporate and External Relations

Alistair Waddell

Vice President Corporate Development & Exploration Chile

Leonardo Hermosilla

Vice President Project Development Chile – commenced 12 December 2016

Greg Foulis

Tim Benfield

Chief Executive Officer – resigned 30 April 2017 and relinquished his responsibilities as KMP on that date.

Chief Operating Officer – ceased employment 9 August 2016

* granted leave of absence from February 2016 due to ill health and resigned 24 November 2016

Changes since the end of the reporting period
There have been no changes to Directors and Key Management Personnel since the end of the reporting period.

continuedu

Directors’ ReportDirectors' Report
34

Contract terms of the Executive Directors and Key Management Personnel
Remuneration and other key terms of employment for the Senior Executives are summarised in the following table.

Name

Ross Smyth-Kirk

Ross Coyle

Jamie Gibson

Alistair Waddell

Leonardo Hermosilla

Greg Foulis

Tim Benfield

Term of
agreement

Fixed annual remuneration
including superannuation

Notice period by
Executive

Notice period by
the Company8

FY 20171

FY 20161

$157,6802

–

$405,0003

$190,000

N/A

C$370,0004

CLP168,497,3045

N/A

$600,0006

$600,000

$500,5047

$450,5047

Open

N/A9

3 months

1 month

3 months

1 month

3 months

N/A9

6 months

1 month

6 months

1 month

12 months

6 months

1
2

3
4
5
6
7
8
9

Amount shown are annual salaries as at year end or date ceased employment with the Group.
Amount shown includes a voluntary 10% reduction in fixed remuneration effective from 1 October 2013. Role changed from Non-Executive Chairman to Executive
Chairman on 2 May 2017. Refer to ‘details of remuneration’ table on page 36 for remuneration for the period while serving as Non-Executive Chairman.
A voluntary 10% reduction in fixed remuneration effective from 1 October 2015.
Canadian dollars. Commenced 1 April 2016.
Chilean pesos. Commenced 12 December 2016.
Resigned 30 April 2017 and relinquished his responsibilities as KMP on that date.
A voluntary 10% reduction in fixed remuneration effective from 1 October 2015 to 30 April 2016. Ceased employment 9 August 2016.
Notice period by the Company in respect of benefits payable in the event of an early termination only.
Temporary role as Executive Chairman. Role reverts to Non-Executive Chairman at the discretion of the Board.

Fixed annual remuneration, inclusive of the required superannuation contribution amount is reviewed annually by the Board following the end of the
financial year.

In the event of the completion of a takeover (relevant interest exceeds 50%) certain executives will receive a lump sum gross payment equal to between
six to twelve months of the Total Remuneration Package. 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.

Directors’ Reportwww.kingsgate.com.au
35

Non-Executive Directors fees

Non-Executive Directors are paid fixed fees for their services to the Company plus statutory superannuation contributions the Company is required by law to
make on their behalf. Those fees are inclusive of any salary-sacrificed contribution 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 consultants, 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% and this reduction is still in place as at the date of this report.

Chairman

Directors

Financial
year ended
30 June 2017 1
$

Financial
year ended
30 June 2016 1
$

120,3292
270,000

144,000

360,000

390,329

504,000

1
2

On an annualised basis for all Directors and excludes Director fees paid by subsidiary.
Amount shown is for the period up to 2 May 2017, being the date the Chairman’s role changed from Non-Executive to Executive.

The aggregate remuneration of Non-Executive Directors is set by shareholders in general meeting in accordance with the Constitution 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.

continuedu

Directors’ ReportDirectors' Report36

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 Key Management Personnel are set out in the
following tables:

Year ended
30 June 2017

Name

Non-Executive Chairman
Ross Smyth-Kirk3

Non-Executive Directors
Peter Alexander
Peter McAleer4
Peter Warren
Sharon Skeggs

Sub-total Non-Executive
Directors Compensation

Executive Chairman
Ross Smyth-Kirk3

Other KMPs
Ross Coyle

Jamie Gibson

Alistair Waddell
Leonardo Hermosilla5

Greg Foulis6
Tim Benfield7

Sub-total other KMP
Compensation

TOTAL

Short-term benefits

Long-term
benefits

Post-
employment

Share-based
payment

Cash salary
and fees

Cash bonus

Other
benefits2

Non-
monetary
benefits1

Other
benefits2

Super-
annuation

Options

Total

120,329

90,000

–

90,000
90,000

390,329

23,671

370,000

173,516

376,390

187,105

470,833

51,966

1,653,481

2,043,810

–

–
–

–

–
–

–

7,018

26,518

3,025

13,161

4,249

54,011

1,308

–

–
–

1,308

257

–

257

1,565

–

–
–

–

8,733

1,209

964

–

(1,553)

–

9,353

11,431

8,550

–

8,550
8,550

37,081

2,249

35,000

16,484

–

29,167

3,218

–

–
–

–

189,813

–

133,068

98,550

–

98,550
98,550

428,718

26,177

420,751

191,249

593,685

190,130

511,608

59,433

86,118

189,813

1,993,033

123,199

189,813

2,421,751

1 Non-monetary benefits relate primarily to car parking.
2

Represents annual leave (short term), health insurance supplement (short term), and long service leave (long term) entitlements, measured on an accrual basis, and reflects
the movement in the entitlements over the 12 month period.
Total remuneration for the year for Ross Smyth-Kirk for Non-Executive and Executive roles was $159,245, including cash salary and fees of $144,000, non-monetary
benefits of $1,565 and superannuation of $13,680.

4 Granted leave of absence from February 2016 due to ill health and resigned 24 November 2016.
5
6
7

Commenced 12 December 2016.
Resigned 30 April 2017 and relinquished his responsibilities as KMP on that date.
Ceased employment 9 August 2016.

Directors’ Reportwww.kingsgate.com.au
37

Short-term benefits

Long-term
benefits

Post-employment
benefits

Share-based payment

Year ended
30 June 2016

Cash salary
and fees

Cash
bonus

Other
benefits2

Non-
monetary
benefits1

Other
benefits2

Super-
annuation

Termination
benefits3

Amortised
value of
rights4
(accounting
expense)

Options

Total

Name

Non-Executive Chairman
Ross Smyth-Kirk
Paid by Company
Paid by subsidiary5

Non-Executive Directors
Peter Alexander
Peter McAleer6
Sharon Skeggs

Peter Warren
Paid by Company
Paid by subsidiary5

Sub-total Non-Executive
Directors Compensation

Other KMPs
Greg Foulis
Ross Coyle7
Paid by Company
Paid by subsidiary5
Tim Benfield8
Alistair Waddell
Ron James9

Joel Forwood10
Paul Mason11

Sub-total other KMP
Compensation

TOTAL

144,000
25,414

90,000

90,000
18,125

547,539

565,000

381,250
3,940

443,696

95,950

317,083

53,877

35,000

1,895,796

2,443,335

–
–

–

–
–

–

–
–

–

–
–

–

–
–

–

26,792

–
(24,906)
–

(15,173)

9,219

(86,782)

3,959

(1,003)

(87,894)

2,617
–

–

–
–

2,617

–

–
–

–

–
–

–

–
–

–

1,499

–
6,940
–

5,967

137

87,169

(10,324)

(3,675)

13,680
–

8,550

–

8,550

8,550
–

39,330

35,000

35,000
–

19,308

–

35,000

28,750

35,000

–
–

–

–
–

–

–
–

254,102

–

–
–

–

(35,910)12

–

(35,910)

–

58,539
–

75,049

–
–

–

–
–

–

–
–

–

31,636

(53,682)12

–

160,297
25,414

98,550

90,000

98,550

62,640
18,125

553,576

628,291

456,823
3,940

782,949

136,942

298,788

246,024

65,322

216,099

(46,337)12

–

87,713

188,058

470,201

33,569

31,636

2,619,079

(87,894)

2,617

87,713

227,388

470,201

(2,341)

31,636

3,172,655

1 Non-monetary benefits relate primarily to car parking.
2

3
4

Represents annual leave (short term) and long service leave (long term) entitlements, measured on an accrual basis, and reflects the movement in the entitlements over the
12 month period.
Benefits paid were in accordance with employment contract.
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 39 for the value of rights that have vested.
Fees paid by subsidiary relate to director fees paid by Akara Resources PCL. The payment of these fees ceased in November 2015.
5
Consulting Fees of $90,000 were paid or payable to Norwest Mining Consultants Ltd, of which Peter McAleer is an officer and director.
6
Appointed Company Secretary 7 December 2015.
7
Ceased employment 9 August 2016.
8
9
Ceased employment 31 May 2016.
10 Ceased employment 30 September 2015.
11 Resigned Company Secretary 7 December 2015.
12 Amortised value is net of write-back of expense incurred in prior periods relating to unvested rights that were forfeited during the year.

continuedu

Directors’ ReportDirectors' Report38

The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

Name

Non-Executive Director
Peter Warren

Executive Director
Ross Smyth-Kirk

Other Key Management Personnel
Ross Coyle

Jamie Gibson

Alistair Waddell

Leonardo Hermosilla

Greg Foulis

Tim Benfield

Fixed remuneration
2017

STI/cash bonus
2017

At risk – LTI
2017

100%

68%

100%

–

–
32%1
–

–

The percentages disclosed reflect the value of options expensed during the year.

Share rights held by Key Management Personnel
Details of each grant of share rights included in the Key Management Personnel remuneration tables are noted in the following tables. Note that no deferred
or performance rights were granted in the 2016/2017 financial year. All outstanding performance rights and deferred rights vested on 1 July 2016; the perfor-
mance rights subsequently lapsed.

The percentage of rights granted to Key Management Personnel on issue that have vested is set out below:

Name

P Warren
Performance

R Coyle
Deferred
Performance

T Benfield
Deferred
Performance

Financial
year granted

Number
granted

Vested
%

Vested
number

Lapsed
%

Lapsed
number

Forfeited
%

Forfeited
number

2014

95,000

–

100

(95,000)

2014
2014

38,538
77,075

49,407
98,814

100
–

38,538
–

49,407
–

–
100

–
(77,075)

–
(98,814)

–

–
–

–

–
–

Financial
year that
rights
may vest

2017

2017
2017

Directors’ Reportwww.kingsgate.com.au
39

Value of share rights

Name

P Warren
Performance

R Coyle
Deferred
Performance

T Benfield
Deferred
Performance

Financial year
that rights
may vest

Number
granted

Fair value
per right at
grant date1
$

Total
fair value at
grant date1
$

Maximum
value yet
to vest2
$

Value at
vesting date3
$

Value at
lapse date4
$

2017

95,000

1.26

119,700

2017
2017

38,538
77,075

49,407
98,814

1.47
0.74

56,651
56,650

72,628
72,628

–

–
–

–

38,950

15,801
–

20,257
–

–
31,601

–
40,514

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.
1
2
3

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.
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 (1 July 2016) 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.

Movement in LTI Rights for the year ended 30 June 2017
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:

2017

Non-Executive Director
Peter Warren

Other Key Management Personnel
Ross Coyle

Tim Benfield

Deferred rights

Balance at
start of year

Granted during
the year

Converted
during the year

Lapsed/
forfeited during
the year

Balance at
year end

Vested and
exercisable at
year end

95,000

77,075

98,814

–

(95,000)

(77,075)

(98,814)

–

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:

2017

Other Key Management Personnel
Ross Coyle
Tim Benfield1

Balance at
start of year

Granted during
the year

Converted
during the year

Forfeited during
the year

Balance at
year end

Vested and
exercisable at
year end

38,538

49,407

–

(38,538)

–

–
49,4071

–

The closing balance represents the balance at the date of departure from the Group. The deferred rights were subsequently converted to shares in February 2017.

continuedu

Directors’ ReportDirectors' Report40

Options

The number of options 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:

2017

Other Key Management Personnel
Alistair Waddell

Share holdings

2017

Executive Chairman
Ross Smyth-Kirk

Non-Executive Directors
Peter Alexander

Peter McAleer

Sharon Skeggs

Peter Warren

Other Key Management Personnel
Ross Coyle
Greg Foulis2
Tim Benfield

Balance at start
of year

Granted during
the year

Converted
during the year

Forfeited during
the year

Balance at year
end

Vested and
exercisable at
year end

1,500,000

–

1,500,000

–

Received
during year on
conversion of
deferred rights

Other changes
during the year1

Balance at
year end

–

38,538

–

(100,000)

–

(100,000)

(12,816)

5,076,725

46,487

–

19,347

145,000

84,953

–

Balance at
start of year

5,076,725

46,487

100,000

19,347

145,000

46,415

100,000

12,816

1
2

Other changes during the year relates to departure from the Group.
Greg Foulis ceased to be a KMP as at 30 April 2017 and shares held by his spouse were subsequently sold on 3 May 2017.

Loan to Director
There were no loans made to Directors or other Key Management Personnel at any time during the year.

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.

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.

Directors’ Reportwww.kingsgate.com.au41

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 Auditors’ representations and advice received from the Audit Committee, for the following reasons:
〉〉

all non-audit services have been reviewed to ensure they do not impact the integrity and objectivity of the auditor; and

〉〉 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
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 Auditor’s Independence Declaration as required under section 307c of the Corporations Act 2001 is set out on page 42.

Rounding of amounts

The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that
instrument, amounts in the Directors’ Report and Financial Report are rounded to the nearest thousand dollars except where otherwise indicated.

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
31 August 2017

Directors’ ReportDirectors' Report42

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 2017,
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.

Marc Upcroft
Partner
PricewaterhouseCoopers
Sydney
31 August 2017

One International Towers Sydney, Watermans Quay, Barangaroo, GPO Box 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

www.kingsgate.com.auFinancial
Statements

for the year ended 30 June 2017

Financial Statements

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Financial Statements

Consolidated Statement of Profit or Loss
and Other Comprehensive Income

for the year ended 30 June 2017

Continuing operations
Sales revenue
Costs of sales

Gross profit/(loss)

Exploration expenses
Care and maintenance expenses
Corporate and administration expenses
Other income and expenses
Foreign exchange (loss)/gain
Impairment losses – Chatree Gold Mine
Impairment losses – exploration assets

Profit/(loss) before finance costs and income tax

Finance income
Finance costs

Net finance costs

Profit/(loss) before income tax
Income tax (expense)/benefit

Profit/(loss) from continuing operations after income tax

Discontinued operations
Profit from discontinued operations after income tax

Profit/(loss) for the year

Other comprehensive income
Items that will never be reclassified to profit and loss
Change in fair value of employee provisions (net of tax)
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations (net of tax)

Total other comprehensive income/(loss) for the year

Total comprehensive income/(loss) for the year

Profit/(loss) attributable to:
Owners of Kingsgate Consolidated Limited

Continuing operations
Discontinued operations

Total comprehensive income/(loss) attributable to:
Owners of Kingsgate Consolidated Limited

Continuing operations
Discontinued operations

Earnings per share

Basic and diluted earnings/(loss) per share from continuing operations
Basic and diluted earnings per share from discontinued operations

Basic and diluted earnings/(loss) per share from continuing operations and discontinued operations

Note

2017
$’000

2016
$’000

5a
5b

5c
5d

5i
5i

19a

31
31

176,119
(148,850)

27,269

(9,035)
(894)
(18,837)
16,311
(3,079)
–
–

11,735

385
(4,016)

(3,631)

8,104
(1,016)

7,088

–

7,088

–

1,245

8,333

7,088
–

8,333
–

174,412
(184,867)

(10,455)

(552)
–
(17,449)
(2,612)
3,655
(227,564)
(461)

(255,438)

406
(12,359)

(11,953)

(267,391)
3,209

(264,182)

34,731

(229,451)

201

(3,000)

(2,799)

(232,250)

(264,182)
34,731

(266,981)
34,731

Cents

3.17
–

3.17

(118.1)
15.5

(102.6)

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

www.kingsgate.com.au

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Consolidated Statement
of Financial Position

as at 30 June 2017

Assets
Current assets
Cash and cash equivalents

Restricted cash

Receivables

Inventories

Available-for-sale financial assets

Other assets

Total current assets

Non-current assets
Receivables

Property, plant and equipment

Exploration, evaluation and development

Other assets

Total non-current assets

TOTAL ASSETS

Liabilities
Current liabilities
Payables

Borrowings

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

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Financial Statements

Note

2017
$’000

2016
$’000

22,007

–

1,959

–

4,585

28,551

4,748

2,597

83,767

14,638

36,314

7,004

12,273

26,060

540

10,919

93,110

4,015

44,278

96,972

14,130

105,750

159,395

134,301

252,505

3,742

657

947

5,346

3,946

10,914

–

13,235

28,095

33,441

100,860

21,313

98,097

10,555

129,965

4,074

–

119

25,983

30,176

160,141

92,364

19a

19b

677,015

52,384

677,042

50,949

(628,539)

(635,627)

100,860

92,364

Financial Statements

Consolidated Statement
of Changes in Equity

for the year ended 30 June 2017

Balance at 1 July 2015

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:

Movement in contributed equity

Movement in share-based payment reserve

Total transaction with owners

Balance at 30 June 2016

Balance at 1 July 2016

Profit after income tax
Total other comprehensive income for the year

Total comprehensive income for the year

Transaction with owners in their capacity as owners:
Movement in contributed equity
Movement in share-based payment reserve

Total transaction with owners

Balance at 30 June 2017

Contributed
equity
$’000

Reserves
$’000

Accumulated
losses
$’000

Total equity
$’000

Note

677,109

53,700

(406,176)

324,633

–

(67)

–

(67)

–

(2,799)

–

(229,451)

–

(229,451)

(2,799)

(229,451)

(232,250)

–

(67)

(19)

677,042

50,949

(635,627)

92,364

677,042

50,949

(635,627)

92,364

–
–

–

(27)
–

(27)

–
1,245

1,245

–
190

190

7,088
–

7,088

–
–

–

7,088
1,245

8,333

(27)
190

163

677,015

52,384

(628,539)

100,860

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
s
t
n
e
m
e
t
a
t
S

a
c
n
a
n
F

Consolidated Statement
of Cash Flows

for the year ended 30 June 2017

Cash flows from operating activities
Receipts from customers

Payments to suppliers and employees

Interest received

Finance costs paid

Income tax paid

Financial Statements

Note

2017
$’000

2016
$’000

176,285

(115,382)

385

(3,275)

(1,061)

255,082

(203,241)

427

(5,775)

–

Net cash inflow from operating activities

56,952

46,493

Cash flows from investing activities
Payments for property, plant and equipment

Payments for exploration, evaluation and development

Decrease/(increase) in deposits

Decrease in restricted cash

Proceeds from sale of Bowdens

Proceeds from sale of Challenger

Proceeds from sale of available-for-sale financial assets

Net cash outflow from investing activities

Cash flows from financing activities
Proceeds from corporate borrowings, net of transaction costs

Repayment of corporate borrowings

Repayment of subsidiary (Akara Resources PCL) borrowings

Share acquisition for the settlement of vested deferred rights

Net cash outflow from financing activities

Net decrease in cash held

Cash at the beginning of the year

Effects of exchange rate 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.

(30)

(2,692)

4,526

7,004

5,000

750

432

(275)

(35,898)

(1,139)

–

20,000

250

–

14,990

(17,062)

586

(11,479)

(75,015)

(27)

3,051

(19,043)

(32,528)

(67)

(85,935)

(48,587)

(13,993)

36,314

(314)

22,007

(19,156)

55,472

(2)

36,314

Notes to the
Financial Statements

for the year ended 30 June 2017

The Financial Report of Kingsgate Consolidated
Limited (Kingsgate or the ‘Company’) for the year
ended 30 June 2017 was authorised for issue in
accordance with a resolution of Directors on
29 August 2017.

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 2017 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

Funding of future operations of the Group

The consolidated financial statements of the
Group have been prepared on a going concern
basis, which indicates continuity of business
activities and the realisation of assets and
settlement of liabilities in the normal course
of business.

As previously advised, on 10 May 2016 the Thai
Government announced that the Chatree Gold
Mine operated by Kingsgate’s subsidiary Akara
Resources Public Company Limited (‘Akara’)
would only be able to continue to operate until
31 December 2016.

The Chatree Gold Mine in its capacity as Kings-
gate’s primary production asset was the main
cash contributor for the Group.

On 3 April 2017, as part of its response to forced
closure, Kingsgate advised that it will be seeking a
range of remedies, including compensation, from
the Thai Government for the measures taken
against the Chatree Gold Mine in violation of the
Australia-Thai Free Trade Agreement (‘TAFTA’).
Kingsgate has since met with representatives of
the Thai Government on two occasions in
Bangkok, the first on 4 July 2017, and the second
on 16 August 2017. During the second meeting

Kingsgate was informed that the Thai Government
had lifted the ‘temporary suspension’ of the
Chatree Gold Mine and that the application for
renewal of its Metallurgical Processing Licence,
which expired on 31 December 2016, could now
be processed. In light of the foregoing, Kingsgate
has determined that it is in the interests of the
Group to further explore this matter and accord-
ingly, Kingsgate has allowed a further limited
period of dialogue with the Thai Government.

As part of this process Kingsgate has formally
requested the Thai Government to immediately
grant the authorisations and licences required
to process the gold and silver sludge containing
approximately 4,750 ounces of gold and 34,800
ounces of silver with a value of around $8.3
million which is stored at the Chatree Gold Mine
processing plant.

Group available cash at the end of June 2017
was $22.0 million with a further $2.8 million
of deposits which subsequent to year end have
been released for general use.

In the short-term the Group will continue negoti-
ations with the Thai Government to re-open the
Chatree Gold Mine which includes realising value
from the sale of the stored gold and silver sludge
which will improve the cash position of the
Group.

The Group has also considered funds that will be
required in the longer term including the funding
of the rehabilitation obligations of the Chatree
Gold Mine and the funding of the Nueva Esper-
anza Gold/Silver Project. In addition to the
current cash reserves, further funds can be
generated through various options that are
available to the Group including:
〉〉

realising the value of assets including
reviewing the possibility of the sale of
Chatree Gold Mine infrastructure assets
which include plant and equipment and
non-strategic land and property;

〉〉 pursuing available legal and other avenues
for compensation including action for
damages against the Thai Government;

〉〉

reviewing the potential for and timing of
an equity raising; and/or

considering options that might include the
sale of assets, or entering into farm-in agree-
ments with other parties.

The Group can also reduce its current planned
ongoing expenditure to suit available cash
resources and the timing of cash flows.

The Directors believe that the Group will be
successful in managing the above matters and
on this basis the Financial Report has been
prepared on a going concern basis.

The general purpose financial statements have
been prepared in accordance with the 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 Interna-
tional 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 consoli-
dated statements are presented in Australian
dollars, which is the Company’s functional
currency and presentation currency.

Notes to the Financial Statementswww.kingsgate.com.au49

Rounding of amounts

The Company is of a kind referred to in
ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191 and in
accordance with that instrument, amounts in
the Directors’ Report and Financial Report are
rounded to the nearest thousand dollars except
where otherwise indicated.

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 acqui-
sition 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 value of the
assets transferred, the liabilities incurred and
the equity interests issued by the Group. The
consideration transferred does not include
amounts related to the settlement of a
pre-existing relationship. Such amounts are
generally recognised 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 transactions. The

non-controlling interest in the acquiree is based
on the fair value of the acquiree’s net identifiable
assets. The adjustments 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 allocating the cost of
the transaction to the net identifiable assets and
liabilities acquired based on their fair values.

intra-group balances are in substance part of the
Group’s net investment. Where as a result of a
change in circumstances, a previously designated
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) Subsidiaries

(ii)

Foreign operations

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 transac-
tions are eliminated in preparing the consolidated
financial statements. Unrealised losses are also
eliminated unless the transaction provides
evidence of the impairment of the asset
transferred.

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

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 presen-
tation currency are translated into the
presentation 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 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 adjustment to tax
payable in respect of previous years. Deferred
tax is provided using the liability method,

continuedu

Notes to the Financial StatementsNotes to the Financial Statements50

d .

Income tax continued

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 recog-
nition 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-consoli-
dation 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 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.

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-consolidated 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 consolidated financial state-
ments 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
constant 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 year prior to the
disposal where control is retained.

Impairment of assets

g .
Assets other than goodwill and indefinite life
intangible assets are tested for impairment
whenever events or changes in circumstances
indicate that the carrying amount may not be
recoverable. An impairment loss is recognised
for the amount by which the assets carrying
amount exceeds it recoverable amount. The
recoverable amount is the higher of an asset’s
fair 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 independent 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
investments with original maturities of three
months or less that are readily convertible to
known amounts of cash and which are subject

Notes to the Financial Statementswww.kingsgate.com.au51

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. Receiv-
ables 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
allowance 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 reorganisation, 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 determined 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 estimated 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 classification of its investments
at initial recognition and, in the case of assets
classified as held-to-maturity, 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
financial 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
amortised 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
classified 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.

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu52

k . Non-derivative financial assets continued

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
buildings, 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 costs associated with the stripping
activity associated with that component can
be reliably measured.

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).

De-recognition

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
inventory 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 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 identified
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 production
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
component of the ore body that is made more
accessible 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 impairment losses.

Notes to the Financial Statementswww.kingsgate.com.au53

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
difference between the provisions of the mining
services and the amount paid for these services,
a portion of the billing is deferred on the
statement 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 expend-
iture comprises direct costs and depreciation and
does not include general overheads or adminis-
trative 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
successful 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
reasonable assessment of the existence
or otherwise of economically recoverable
reserves, and active and significant opera-
tions 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
abandoned. 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 expend-
iture in respect of an area of interest that has
been capitalised is transferred to mine
properties 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.

When further development expenditure is
incurred in respect of a mine property after
commencement of production, such expenditure
is carried forward as part of the mine property
only when substantial future economic benefits
are thereby established. Otherwise, such expend-
iture is classified as part of the cost of production.

Amortisation of costs is provided on the units-of-
production method with separate calculations
being made for each component. The units-of-
production basis results in an amortisation charge
proportional to the depletion of the estimated
recoverable reserves. In some circumstances,
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 recov-
erable 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
beginning of that reporting period.

Investment in associates

r .
Investments in associates are 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 investment 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 recog-
nises 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 the 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 drawdown 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 amortised
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

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu54

t . Borrowings continued

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 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 obligation and the amount
has been reliably estimated. 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
determine 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
recognised 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 at the date the
obligation first arises and to the extent that it is
first recognised as a provision. This restoration
asset is subsequently amortised on a units-of-
production basis.

The corresponding provision of an amount equiv-
alent to the restoration asset created is reviewed
at the end of each reporting period. The provision
is measured at the best estimate of 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 resto-
ration, rehabilitation or decommissioning costs,
an adjustment is recoded against the carrying
value of the provision and any related restoration
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 condition
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,
experience 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

Cash bonuses are expensed in the income
statement 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
estimated reliably.

(iv) Retirement benefit obligations

Defined contribution plan

Contributions to defined contribution superan-
nuation plans are recognised as an expense in
the income statement as they become payable.

Defined benefit plan

The Company’s Thai subsidiary, Akara Resources
Public Company Limited, have a defined benefit
plan which is the amount of pension benefit that
an employee will receive on retirement, usually
dependent on one or more factors such as age,
years of service and compensation.

Retirement benefit

Under labour laws applicable in Thailand,
employees completing 120 days of service are
entitled to severance pay on termination or
retrenchment without cause or upon retirement
age of 60. The severance pay will be at the rate
according to number of years of service as
stipulated in the Labor Law which is currently
at a maximum rate of 300 days of final salary.

The liability recognised in the statement of
financial position in respect of defined benefit
pension plans is the present value of the defined
benefit obligation at the end of the reporting
period, together with adjustments for unrecog-
nised past-service costs. The defined benefit
obligation is calculated annually by independent
actuaries using the projected unit credit
method. The present value of the defined
benefit obligation is determined by discounting
the estimated future cash outflows using
market yield of government bonds that are
denominated in the currency in which the
benefits will be paid, and that have terms to
maturity approximating to the terms of the
related pension liability.

Actuarial gains and losses arising from
experience adjustments and changes in actuarial
assumptions are charged or credited to equity in
other comprehensive income in the period in
which they arise.

Notes to the Financial Statementswww.kingsgate.com.au55

Past-service costs are recognised immediately in
profit or loss, unless the changes to the pension
plan are conditional on the employees remaining
in service for a specified period of time (the
vesting period). In this case, the past-service
costs are amortised on a straight-line basis over
the vesting period.

Other long-term benefits – Gold

The Company’s Thai subsidiary, Akara Resources
Public Company Limited, has a policy to give gold
to employees who have worked for the Company
for 10 years, 15 years and 20 years,
in the amounts of Baht 0.5, Baht 1 and Baht 1.5
respectively.

The liability recognised in the statement of
financial position in respect of other long-term
benefit plan is the present value of the other
long-term benefit obligation at the end of the
reporting period, together with adjustments
for unrecognised past-service costs. The other
long-term benefit obligation is calculated
annually by independent actuaries using the
projected unit credit method. The present value
of the other long-term benefit obligation is
determined by discounting the estimated future
cash outflows using market yield of government
bonds that are denominated in the currency in
which the benefits will be paid, and that have
terms to maturity approximating to the terms
of the related pension liability.

Actuarial gains and losses arising from experience
adjustments and changes in actuarial assump-
tions are charged or credited to the statement
of comprehensive income in the period in which
they arise.

Past-service costs are recognised immediately in
profit or loss.

(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
a 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.

(ii) Diluted earnings per share

Diluted earnings per share adjust 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 and 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
allocated on a reasonable basis. The operating
segments are disclosed in Note 4.

dd . New accounting standards

(i)

and interpretations
New and amended standards adopted
by the Group

The Group has adopted the following new and
revised accounting standards, amendments and
interpretations as of 1 July 2016:
〉〉 AASB 2014-4: Amendments to Australian
Accounting Standards – Clarification of
Acceptable Methods of Depreciation and
Amortisation

〉〉 AASB 2015-2: Amendments to Australian

Accounting Standards – Disclosure Initiative:
Amendments to AASB 101

The adoption of these new and revised
standards did not have a material impact
on the Group’s financial statements.

(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 2017 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:

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu56

dd . New accounting standards and interpretations continued

〉〉 AASB 9 Financial Instruments and AASB

Step 3:

Determine the transaction price.

Share-based payments

2010-7 and AASB 2012-6 Amendments to
AAS’s arising from AASB 9

AASB 9 includes requirements for the classifi-
cation and measurement of financial assets. It
was further amended by AASB 2010-7 to reflect
amendments to the accounting treatment of
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; and

〉〉 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.

Apart from the ‘own credit risk’ requirements,
classification and measurement of financial
liabilities is unchanged from existing
requirements.

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.

〉〉 AASB 15: Revenue from Contracts

with Customers

IFRS 15 establishes principles for reporting
useful information to users of financial state-
ments about the nature, amount, timing and
uncertainty of revenue and cash flows arising
from an entity’s contracts with customers.

IFRS 15 supersedes:

(a)

IAS 11 Construction Contracts; and

(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:

Step 1:

Step 2:

Identify the contract(s) with a
customer.

Identify the performance obligations
in the contract.

Step 4:

Step 5:

Allocate the transaction price to
the performance obligations in the
contract.

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
relatively short trading terms.

The application date for the Group is 1 July 2018.

〉〉 AASB 16: Leases

This Standard sets out the principles for the
recognition, measurement, presentation and
disclosure of leases. The objective is to ensure
that lessees and lessors provide relevant infor-
mation in a manner that faithfully represents
those transactions. This information gives a
basis for users of financial statements to assess
the effect that leases have on the financial
position, financial performance and cash flows
of an entity.

The Group does not expect the adoption of this
standard to have a significant impact as the
Group does not expect to have any material
lease contracts in place on the application date
of this Standard.

The application date for the Group is 1 July 2019.

〉〉 AASB 2: Clarifications of classification and
measurement of share based payment
transactions

This Standard amends IFRS 2: Share-based
payment to clarify how to account for certain
types of share based payment transactions.

The Group does not expect the adoption of this
Standard to have a significant impact as the use
of share-based payments by the Group in recent
years had been minimal and any impact of a
change in accounting for them would be
immaterial.

The application date for the Group is 1 July 2018.

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.

The issue by the Company of equity instruments
to extinguish liabilities of a subsidiary under-
taking in the Group is treated as a capital
contribution 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
reasonable 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)

Uncertainty in relation to Chatree
Gold Mine assets and liabilities
As noted in the Directors’ Report, following a
decision made by the Thai Government, the
Chatree Gold Mine ceased operations on 31
December 2016 when it was placed on Care and
Maintenance effective 1 January 2017.

In preparing the consolidated financial state-
ments of the Group, with the exceptions of
certain assets which are available for sale in their
current conditions and current receivables which
are expected to be received in the short-term, all
assets of the Chatree Gold Mine have been
written down to nil value (an impairment charge
of $227,564,000 was recorded against the
Group’s carrying value of Chatree Gold Mine
assets in the year ended 30 June 2016).

In respect of rehabilitation liabilities, the Group
revised its previous estimates and reduced its
total rehabilitation liability to approximately
$14 million. This is based on management’s
rehabilitation plan which will be a revision from
the initial plan submitted to the Thai Authorities
in 2007. Management believes the revised plan
will be commercially viable, cost effective and
will meet all obligations in the context of the
early mine closure that has been imposed on the
Group with the overall objective to leave the site
in a safe and stable condition that is consistent
with the surrounding physical environment, be
of benefit to the local community, and not
require significant ongoing maintenance.

The future of the Chatree Gold Mine remains
unclear and there is a significant uncertainty
around the carrying values of assets and liabil-
ities. The ultimate impact on the Group’s
financial position will depend on the sale of

Notes to the Financial Statementswww.kingsgate.com.au57

(v) Restoration and rehabilitation

provision

Significant estimates and assumptions are
required in determining the provision for mine
rehabilitation as there are many transactions
and other factors that will affect the ultimate
liability payable to rehabilitate the mine sites.
Factors that will affect this liability include
changes in technology, changes in regulations,
price increases, changes in timing of cash flows
which are based on life of mine plans and
changes in discount rates. When these factors
change or become known in the future, such
differences will impact the mine rehabilitation
provision in the period in which they change or
become known. The rehabilitation provision
relating to the Chatree Gold Mine takes into
account the premature shut-down of the mine.

plant and equipment and non-strategic land and
property and outcomes from discussions with
the Thai Government, including:
〉〉

agreeing a rehabilitation plan, costing and
timing in the context of the early mine closure;
〉〉 potential re-opening of the mine if permitted

by the Thai Government; and

〉〉 pursuing available legal and other avenues
for compensation including action for
damages against the Thai Government.

The Group has considered the status of its
discussions with the Thai Government and the
status of its legal process and has concluded
that the position adopted for financial reporting
purposes and described above reflects a prudent
approach in respect of its assets and liabilities
including potential contingent assets and liabil-
ities. At balance sheet date, the Group has not
considered that it was appropriate to record a
reversal of any impairment previously recog-
nised. Additional Information regarding the
Group’s available legal and other avenues for
compensation have not been disclosed on the
basis that it could seriously prejudice the
Group’s position in these matters.

(ii) Mineral resources and ore

reserves estimates

The Group estimates its ore reserves and mineral
resources annually at 30 June each year, and
reports in the following October, based on
information compiled by Competent Persons as
defined and in accordance with the Australasian
code for reporting Exploration Results, Mineral
Resources and Ore Resources (JORC code 2012).
The estimated quantities of economically recov-
erable reserves are based upon interpretations
of geological models and require assumptions to
be made regarding factors such as estimates of
short and long-term exchange rates, estimates
of short and long-term commodity prices, future
capital requirements and future operating
performance. Changes in reported reserves
estimates can impact the carrying value of
property, plant and equipment (including explo-
ration and evaluation assets), the provision for
rehabilitation obligations, the recognition of
deferred tax assets, as well as the amount of
depreciation charged to the income statement.

(iii) Exploration and evaluation assets
Judgement is required to determine whether
future economic benefits are likely, from either
exploitation or sale, or whether activities have
not reached a stage that permits a reasonable
assessment of the existence of reserves. In
addition to these judgements, the Group has to
make certain estimates and assumptions. The
determination of a JORC resource is itself an
estimation process that involves varying degrees
of uncertainty depending on how the resources
are classified (i.e. measured, indicated or
inferred). The estimates directly impact when
the Group capitalises exploration and evaluation
expenditure. The capitalisation policy requires
management to make certain estimates and
assumptions as to future events and circum-
stances, in particular, the assessment of
whether economic quantities of reserves will be
found. Any such estimates and assumptions may
change as new information becomes available.

The recoverable amount of capitalised expend-
iture relating to undeveloped mining projects
(projects for which the decision to mine has not
yet been approved at the required authorisation
level within the Group) can be particularly
sensitive to variations in key estimates and
assumptions. If a variation in key estimates or
assumptions has a negative impact on recov-
erable amount it could result in a requirement
for impairment.

(iv) Impairment of non-current
assets, determination of
recoverable amounts

Significant judgements and assumptions are
required in making estimates of the recoverable
amounts. This is particularly so in the assessment
of long life assets. It should be noted that the
CGU recoverable amounts are subject to varia-
bility in key assumptions including, but not
limited to, gold and silver prices, currency
exchange rates, discount rates, production
profiles and operating and capital costs. A
change in one or more of the assumptions used
to estimate the recoverable amounts would
result in a change in the CGU’s recoverable
amounts. If the variation in assumption had a
negative impact on the recoverable amount it
could indicate a requirement for an impairment of
non-current assets. For further details regarding
the impairment testing refer to Note 14.

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu58

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 Gold Mine, Thailand; and
〉〉 Nueva Esperanza Gold/Silver Project, Chile.

Information regarding the results of each reportable segment is included as follows:

2017

External sales revenue

Other income

Total segment revenue

Segment EBITDA

Depreciation and amortisation

Segment result (Operating EBIT)

Finance income

Finance costs

Net finance costs

Profit/(loss) before tax

Other segment information

Segment assets

Segment liabilities

includes foreign exchange loss of $3,079,000 for the Group.

Operation

Development

Corporate

Total

Chatree
$’000

176,119

15,425

191,544

90,718

(51,205)

Nueva
Esperanza
$’000

$’000

–

994

(9,035)

–

(18,641)1
(102)

176,119

16,419

192,538

63,042

(51,307)

39,513

(9,035)

(18,743)

11,735

–

39,513

(9,035)

(18,743)

385

(4,016)

(3,631)

8,104

12,342

(26,203)

103,164

(5,868)

18,795

(1,370)

134,301

(33,441)

Notes to the Financial Statementswww.kingsgate.com.au
59

2016

External sales revenue

Other income

Total segment revenue

Segment EBITDA

Impairment/impairment reversal*

Depreciation and amortisation

Segment result (Operating EBIT)

Finance income

Finance costs

Net finance costs

Loss before tax

Other segment information

Segment assets

Segment liabilities

Operation

Development

Exploration

Corporate

Continuing
operations

Discontinued
operations

Total

Chatree
$’000

174,412

521

174,933

29,830

(227,564)

(44,370)

(242,104)

–

(242,104)

Nueva
Esperanza
$’000

–

(3)

–

(3)

–

(3)

$’000

–

(561)

(461)

–

174,412

523

78,916

467

253,328

990

174,935

79,383

254,318

(12,226)1
–

(83)

17,040

(228,025)

(44,453)

22,824

17,056

(1,724)

39,864

(210,969)

(46,177)

(1,022)

(12,309)

(255,438)

38,156

(217,282)

–

406

(12,359)

(11,953)

(209)

(176)

439

(12,568)

(12,129)

(1,022)

(12,309)

(267,391)

37,980

(229,411)

106,562

(141,354)

106,125

(6,038)

1,137

(53)

38,681

(12,696)

252,505

(160,141)

–

252,505

(160,141)

*
1

Related to the sale of Challenger Gold Mine.
Includes foreign exchange gain of $3,655,000 for the Group.

Customer A

Customer B

5. Revenue and expenses

a) Sales revenue
Gold sales

Silver sales

Sales revenue from continuing operations

Sales revenue from discontinued operations

Revenue

% of External Revenue

2017
$’000

176,119

–

2016
$’000

174,412

78,916

2017
%

100

–

2017
$’000

155,947

20,172

176,119

–

2016
%

2016
$’000

159,972

14,440

174,412

78,916

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu
60

5 . Revenue and expenses continued

b) Cost of sales

Direct costs of mining and processing

Royalties

Inventory movements

Depreciation (operations)

Cost of sales from continuing operations

Cost of sales from discontinued operations

c) Corporate and administration expenses

Administration

Technical support and business development

Statutory and professional fees

Depreciation

Corporate and administration expenses from continuing operations

Corporate and administration expenses from discontinued operations

d) Other income and expenses
Net gain on sale of fixed assets

Realised loss on delivery against hedge contracts

Change in fair value of available-for-sale assets

Revision of rehabilitation provision

Other revenue

Other income and expenses from continuing operations

Other income and expenses from discontinued operations

e) Finance costs

Interest and finance charges

Foreign exchange loss on loans

Unwinding of discount

Amortisation of deferred borrowing costs

Finance costs from continuing operations

Finance costs from discontinued operations

f) Depreciation and amortisation

Property, plant and equipment

Mine properties

Less: depreciation capitalised

Depreciation and amortisation expenses

Included in:

Costs of sales depreciation

Care and maintenance expenses

Corporate depreciation

2017
$’000

2016
$’000

60,162

15,642

22,121

50,925

112,854

14,693

12,950

44,370

148,850

184,867

–

57,331

11,964

911

5,860

102

18,837

–

(108)

14,045

2,315

16,311

–

3,507

182

246

4,016

–

36,172

15,135

–

51,307

13,860

1,016

2,490

17,449

903

(2,325)

(810)

–

505

(2,612)

467

6,795

3,257

748

1,559

12,359

209

15,801

30,467

(91)

46,177

50,925

45,954

280

102

–

223

Notes to the Financial Statementswww.kingsgate.com.au61

2017
$’000

2016
$’000

3,178

4,929

8,110

339

–

18,024

–

7,178

25,202

457

227,564

461

228,025

(17,056)

2017
$’000

2016
$’000

1,135

(119)

1,016

–

2,067

(2,186)

(119)

309

(269)

(3,209)

3,249

14,465

(14,734)

(269)

g) Employee benefits expenses

Included in:

Costs of sales

Care and maintenance expenses

Corporate and administration expenses

Total employee benefits expenses

h) Other items

Operating lease rentals

Total other items

i) Significant items

Impairment of Chatree Gold Mine

Impairment of capitalised exploration

Total significant items (pre-tax) from continuing operations

Total significant items (pre-tax) from discontinued operations

6. Income tax

Income tax expense
Current tax

Deferred tax

Total income tax expense

Income tax expense/(benefit) from continuing operations

Income tax expense from discontinued operations

Deferred tax expense/(benefit) included in tax expense comprises:

Increase in deferred tax assets

Increase in deferred tax liabilities

Deferred tax

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu62

6 .

Income tax continued

b) Numerical reconciliation of income tax expense to prima facie tax payable

Profit/(loss) from continuing operations before income tax

Profit/(loss) from discontinued operations before income tax

Total profit/(loss) 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

Tax benefit of tax losses not brought to account in the prior year recognised this year

Tax benefit of tax losses not brought to account

Witholding tax on dividends received from Thailand operations

Temporary difference adjustment (Thailand)

Other temporary difference adjustment

impairment of Chatree Gold Mine

impairment reversal of Bowdens Silver Project

impairment of exploration

Income tax expense

2017
$’000

2016
$’000

8,104

–

8,104

2,431

226

–

370

(57)

(3,015)

–

1,061

–

1,016

(267,431)

37,980

(229,411)

(68,823)

468

129

364

100

(3,620)

6,719

–

1,046

271

68,269

(4,994)

111

Kingsgate’s Thai controlled entity Akara Resources Public Company Limited (‘Akara’) received on 18 June 2010 approval from The Royal Thai Board of Investment
(‘BOI’) for promotion of 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:

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;

25% investment allowance on the capital cost of certain assets of the new processing plant; and

other benefits.

The start of the promotion period was 1 November 2012.

c) Tax recognised in other comprehensive income

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 $8,181,000 (2016: $11,007,000) have been offset against deferred tax assets.

2017
$’000

2016
$’000

–

Notes to the Financial Statementswww.kingsgate.com.au63

2017
$’000

2016
$’000

295,219

301,841

604

1,278

502

1,278

297,101

303,621

88,674

90,7031

e) Unrecognised deferred tax assets and tax liabilities

Tax losses – Australian entities

Tax losses – other entities

Temporary difference

Subtotal

Unrecognised deferred tax assets

Amount excludes potential deductible temporary differences in respect of Akara for $45,350,000 arising from an impairment charge recognised during the year.
It is not probable that there will be sufficient future assessable income available against which this deferred tax asset could be utilised.

As at 30 June 2017 Akara has undistributed earnings of $15,042,000 which, if paid out as dividends, and if not paid out from one of the BOI activity, would
be subject to withholding tax in the hands of its Australian parent entity.

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.

Recognised deferred tax assets
and liabilities

2017
$’000

2016
$’000

2017
$’000

2016
$’000

2017
$’000

2016
$’000

Assets

Liabilities

Net

Deferred tax assets/(liabilities)

Employee benefits

Unrealised exchange (gains)/losses

Other items

Available-for-sale financial assets

Tax losses

Total deferred tax assets/(liabilities)

Set off tax

Net deferred tax assets/(liabilities)

Deferred tax assets/(liabilities) expected to be recovered
within 12 months

Deferred tax assets/(liabilities) expected to be recovered
after more than 12 months

Total deferred tax assets/(liabilities)

3,998

255

321

3,516

8,181

(8,181)

–

8,181

158

5,722

631

660

3,836

11,007

(11,007)

–

208

10,799

11,007

–

(8,181)

–

(8,181)

8,181

–

(8,181)

–

(10,824)

(302)

–

(11,126)

11,007

(119)

–

(11,126)

(4,183)

255

321

3,516

–

158

(5,102)

329

660

3,836

(119)

–

(119)

208

(327)

(119)

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu64

6 .

Income tax continued

Movement in deferred tax balances

2017

Deferred tax assets/(liabilities):

Employee benefits

Unrealised exchange losses

Other items

Available-for-sale financial assets

Tax losses

Net deferred tax assets/(liabilities)

2016

Deferred tax assets/(liabilities):
Employee benefits

Provision for restoration and rehabilitation

Unrealised exchange losses

Other items

Available-for-sale financial assets

Mine properties and exploration

Tax losses

Net deferred tax assets/(liabilities)

Current
Cash on hand

Deposits at call

Restricted cash

Total current

Cash on hand

7. Cash and cash equivalents and restricted cash

Balance at
1 July

Recognised in
profit or loss

Recognised
in other
comprehensive
income

Foreign
exchange

Balance at
30 June

158

(5,102)

329

660

3,836

(119)

1,009

2,368

(4,479)

308

417

(11)

–

(388)

(67)

919

(74)

(339)

(320)

119

(851)

(2,368)

(623)

243

(12)

3,836

246

–

(4,183)

255

321

3,516

–

158

–

(5,102)

329

660

–

3,836

(119)

2017
$’000

2016
$’000

22,000

–

22,007

36,301

7,004

43,318

These are petty cash balances held by subsidiaries.

These deposits are at call, interest bearing and
may be accessed daily.

The Group’s exposure to interest rate risk and a
sensitivity analysis for financial assets and
liabilities are disclosed in Note 28.

Deposits at call

Risk exposure

Notes to the Financial Statementswww.kingsgate.com.au8. Receivables

Current
Other debtors

Financial assets measured at fair value through profit or loss (Bowdens receivable)

Total receivables – current

Non-current
Other debtors

Total receivables – non-current

Other debtors

Risk exposure

Other debtors mainly relate to GST/VAT
receivables.

The Group’s exposure to credit and currency
risks are disclosed in Note 28.

9. Inventories

Current
Raw materials and stores

Stockpiles and work in progress

Gold bullion

Provision for obsolescence

Impairment

Total inventories – current

* Impairment relates to ore stockpiles and work in progress at Chatree Gold Mine.

10. Other assets

Current
Prepayments

Other deposits

Total other assets – current

Non-current
Prepayments

Other deposits

Total other assets – non-current

2017
$’000

2016
$’000

1,959

–

1,959

4,748

7,273

5,000

12,273

4,015

2017
$’000

2016
$’000

–

12,664

69,812

6,525

(4,763)

(58,178)*

26,060

2017
$’000

2016
$’000

690

3,895

4,585

14,568

14,638

2,365

8,554

10,919

14,060

14,130

Prepayments
Non-current prepayments include prepaid royalties and water rights in respect of the Nueva Esperanza Gold/Silver Project in Chile.

Other deposits
Other deposits current includes $3,468,000 of security deposits in Thailand.

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu66

11. Available-for-sale financial assets

Equity securities – current
At the beginning of the financial year

Revaluation

Disposal

At the end of the financial 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

Disposal group

Impairment

Depreciation and amortisation expense

Foreign currency differences

Closing net book amount

Cost

Accumulated depreciation and amortisation

Accumulated impairment

Net book amount

* Related to the sales of Challenger Gold Mine and Bowdens Silver Project.

2017
$’000

2016
$’000

540

(108)

(432)

–

1,350

(810)

–

540

2017
$’000

2016
$’000

263,453

(34,915)

(184,260)

365,349

(111,958)

(64,897)

44,278

188,494

44,278

(18,837)

(99)

–

(36,172)

13,364

188,494

619

(7,491)

(77)

(834)*

(119,363)

(15,710)

(1,360)

2,597

44,278

244,466

(57,609)

(184,260)

263,453

(34,915)

(184,260)

2,597

44,278

Notes to the Financial Statementswww.kingsgate.com.au67

13. Exploration, evaluation and development

Exploration &
evaluation
$’000

Feasibility
expenditure
$’000

Mine
properties
$’000

Total
$’000

At 30 June 2015
Cost

Accumulated depreciation and amortisation

Accumulated impairment

Net book amount

Year ended 30 June 2016
Opening net book amount

Additions

Reclassified

Disposal groups

Impairment

Depreciation and amortisation expense

Foreign currency exchange differences

Closing net book amount

At 30 June 2016
Cost

Accumulated depreciation and amortisation

Accumulated impairment

Net book amount

Year ended 30 June 2017
Opening net book amount

Additions

Reclassified

Disposal

Depreciation and amortisation expense

Foreign currency exchange differences

Closing net book amount

At 30 June 2017
Cost

Accumulated depreciation and amortisation

Accumulated impairment

Net book amount

* Related to the sales of Challenger Gold Mine and Bowdens Silver Project.

50,298

–

(49,418)

175,439

–

(97,337)

720,474

(300,923)

(355,498)

946,211

(300,923)

(502,253)

880

78,102

64,053

143,035

880

(510)

–

(461)

–

78,102

5,816

601

–

1,436

64,053

29,710

7,400

(8,599)*

(50,023)

(30,467)

(1,057)

143,035

35,617

7,491

(8,599)

(50,484)

(30,467)

379

85,955

11,017

96,972

39,991

160,649

–

(39,991)

(74,694)

327,638

(26,750)

(289,871)

528,278

(26,750)

(404,556)

–

85,955

11,017

96,972

85,955

1,669

–

(2,782)

–

(1,866)

82,976

11,017

–

18,837

(13,812)

(15,135)

(116)

791

96,972

1,669

18,837

(16,594)

(15,135)

(1,982)

83,767

39,991

157,670

–

(39,991)

(74,694)

332,953

(42,291)

(289,871)

530,614

(42,291)

(404,556)

–

82,976

791

83,767

Notes to the Financial StatementsNotes to the Financial StatementscontinueduIn assessing additional value, the Directors note
that In the Independent Expert’s report dated
13 October 2016 contained in the Target’s
Statement released on 17 October 2016 it was
stated that the value a willing and knowledgeable
buyer would place on both of these options
would be between $16.3 million to $22.2 million.

The analysis undertaken by management on
Nueva Esperanza does not currently include the
potential reduction in capital expenditure of
US$13 million by using certain plant and
equipment from the Chatree Gold Mine that was
applied in the Independent Expert’s Report.
Management is continuing its assessment of the
viability of this option.

The key assumptions to which the model is most
sensitive includes:
〉〉 gold and silver prices;
〉〉 production and capital costs;
〉〉 discount rate; and
〉〉

reserves and resources.

Sensitivity analysis

Any variation in the key assumptions used to
determine the recoverable amount would result
in a change of the estimated recoverable
amount. If the variation in assumption had a
negative impact on the recoverable amount it
could indicate a requirement for an impairment
of non-current assets.

14.

Impairment assessment

For the purposes of assessing impairment,
assets are grouped at the lowest levels for which
there are separately identifiable cash inflows
which are largely independent of the cash
inflows from other assets or groups of assets
(cash generating units ‘CGUs’).

internally maintained budgets, mine models and
project evaluations performed by the Group in
its ordinary course of business.

The table below summarises the key assump-
tions used in the carrying value assessments:

+FY 2018 long
term average

US$1,250

US$20

Methodology
An impairment is recognised when the carrying
amount exceeds the recoverable amount.

Gold (US$ per ounce)

Silver (US$ per ounce)

The recoverable amount of the Nueva Esperanza
Gold/Silver Project has been estimated using a
fair value less costs of disposal basis. The costs
of disposal have been estimated by management
based on prevailing market conditions.

The recoverable amounts of the CGUs has been
estimated based on discounted cash flows using
market based commodity price and exchange
rate assumptions, estimated quantities of
recoverable minerals, production levels,
operating costs and capital requirements,
based on latest life of mine plans.

The recoverable amount estimate for Nueva
Esperanza Gold/Silver Project is considered to
be level 3 fair value measurement (as defined
by accounting standards) as it is derived from
valuation techniques that include inputs that are
not based on observable market data. The Group
considers the inputs and the valuation approach
to be consistent with the approach taken by
market participants.

Significant judgements and assumptions
are required in making estimates of the
recoverable amounts. This is particularly so in
the assessment of long life assets. It should
be noted that the CGU recoverable amounts
are subject to variability in key assumptions
including, but not limited to, gold and silver
prices, currency exchange rates, discount
rates, production profiles and operating and
capital costs. A change in one or more of the
assumptions used to estimate the recoverable
amounts would result in a change in the CGU’s
recoverable amounts.

Key assumptions
In determining each key assumption,
management has used external sources of
information and utilised experts within the
Group to validate entity specific assumptions
such as reserves and resources. Production and
capital costs are based on the Group’s estimate
of forecast geological conditions, capacity of
existing plant and equipment and future
production levels. This information is obtained
from external experts where applicable,

The Group receives long term forecast price data
from multiple externally verifiable sources when
determining its pricing forecasts. For the Nueva
Esperanza Project, gold and silver prices
forecast that result in the recoverable amount
exceeding the book value are generally achieved
when the high end of the range is adopted.

The foreign exchange rates used in the models
are AUD/USD of 0.77 based on exchange rates
current at period end.

Nueva Esperanza
Gold/Silver Project

Post tax real
discount rate

8.5%

The Group has applied post-tax real discount
rates to discount the forecast future attrib-
utable post-tax cash flows. The equivalent
pre-tax real discount rates applied to the Nueva
Esperanza Gold/Silver Project is 12.3%. The
post-tax discount rate applied to the future cash
flow forecasts represent an estimate of the rate
the market would apply having regard to the
time value of money and the risks specified to
the asset for which the future cash flow
estimate have not been adjusted.

The recoverable amount of Nueva Esperanza at
30 June 2017 was determined based on a fair
value less costs of disposal model. Based on the
assumption noted above, the fair value of Nueva
Esperanza as at 30 June 2017 is assessed as
being above its carrying value of $97,296,000
resulting in no impairment.

In reaching the conclusions regarding the
carrying value of the Nueva Esperanza Project,
the Directors consider that the Nueva Esperanza
concession offers additional value from:
〉〉

identified resources for Aqueros, Chimberos
and Teterita not currently included in the life
of mine plan; and

〉〉

exploration potential from the area immedi-
ately surrounding these three established
projects.

Notes to the Financial Statementswww.kingsgate.com.au69

It is estimated that the following reasonably possible changes in the key assumptions would have the following approximate post-tax impact on the
recoverable amount of the CGU as at 30 June 2017:

US$100/oz increase/decrease in gold price

US$1/oz increase/decrease in silver price

5% increase/decrease in operating costs

5% increase/decrease in capital expenditure

Nueva Esperanza Gold/
Silver Project
$’000

14,630

24,065

24,449

11,925

In respect of Nueva Esperanza, although the recoverable amount exceeds the carrying amount, applying any negative sensitivity to the cash flow forecasts
would result in a material decrease in the recoverable amount and a likely impairment.

It must be noted that each of the sensitivities above assumes that the specific assumption moves in isolation, whilst all other assumptions are held constant.
In reality, a change in one of the aforementioned assumptions may accompany a change in another assumption which may have an offsetting impact. Action
is also usually taken to respond to adverse changes in economic assumptions that may mitigate the impact of any such change.

15. Payables

Current
Trade payables

Other payables and accruals

Total payables – current

Non-current
Other payables

Total payables – non-current

The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 28.

2017
$’000

2016
$’000

1,103

2,639

3,742

3,946

12,342

8,971

21,313

4,074

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu70

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.

Current
Secured bank loans

Preference shares in controlled entity

Finance lease liabilities

Other loan

Total borrowings – current

Non-current
Finance lease liabilities

Preference shares in controlled entity

Total borrowings – non-current

Borrowings
Secured bank loans

Preference shares in controlled entity

Finance lease liabilities

Other loan

Total borrowings

2017
$’000

2016
$’000

–

413

244

657

736

10,178

10,914

–

10,178

1,149

244

11,571

85,240

10,171

1,549

1,137

98,097

–

85,240

10,171

1,549

1,137

98,097

Preference shares in controlled entity
Terms and conditions of outstanding preference shares in controlled entity were as follows:

Currency

Interest rate

Financial year
of maturity

Face value
$’000

Carrying
amount
$’000

Preference shares in controlled entity

Thai Baht

12%

n/a

10,168

10,178

The terms of the preference shares were amended during the year through a change made to the Shareholders Agreement of Akara Resources Public
Company Limited resulting in the preference shares being repayable at the earliest on 30 July 2019.

Finance lease liabilities
The Group has various items of plant and equipment with a carrying amount of $1,150,000 under finance leases.

Finance lease liabilities are payable as follows:

Within 1 year

Later than 1 year but not later than 5 years

Total

Future minimum
lease payments

$’000

461

770

1,231

Interest

$’000

Present value of minimum
lease payments

$’000

413

736

1,149

Notes to the Financial Statementswww.kingsgate.com.auNote

2x,24

17. Provisions

Current
Employee benefits

Restoration and rehabilitation

Total provisions – current

Non-current
Employee benefits

Restoration and rehabilitation

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

Current year use of rehabilitation

Unwind of discount rate for provision

Disposal on sale of Challenger Gold Mine

Foreign currency exchange differences

At the end of the financial year

18. Contributed equity

Opening balance

Share acquisition for the settlement of vested deferred rights

2017
Shares

2016
Shares

223,584,937

–

2017
$’000

2016
$’000

309

638

947

13,149

13,235

30,192

(14,045)

(2,631)

246

–

13,787

2017
$’000

677,042

(27)

6,280

4,275

10,555

25,917

25,983

34,641

2,691

–

952

(7,851)

(241)

30,192

2016
$’000

677,109

(67)

Closing balance

223,584,937

677,015

677,042

During the year, the Company acquired 110,683 shares in Kingsgate Consolidated Limited on market for consideration of $27,000. These shares were
distributed to rights holders as settlement of vested deferred rights.

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 maintain future exploration and development of its projects. In order to maintain or adjust the capital structure, the Group may return capital to
shareholders, issue new shares or sell assets. The Group’s focus over the financial year was to utilise surplus cash from operations and asset sale to repay all
outstanding liabilities and obligations relating to the Chatree Mine operation, repay corporate debt and fund development and exploration activities, for the
Nueva Esperanza Project in Chile.

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu72

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

Share-based payment reserve
At the beginning of the financial year

Share-based payment expense

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

2017
$’000

46,479

9,246

(3,341)

2016
$’000

45,234

9,056

(3,341)

52,384

50,949

45,234

1,245

46,479

9,056

190

9,246

(3,341)

–

(3,341)

48,234

(3,000)

45,234

9,008

9,056

(3,542)

201

(3,341)

Foreign currency translation reserve

Share-based payment reserve

General reserve

Exchange differences arising on translation of
the foreign controlled entities are taken to the
foreign currency translation reserve, as
described in Note 2b.

The share-based payment reserve is used to
recognise the fair value of deferred rights,
performance rights and options issued but not
exercised.

The general reserve represents changes in equity
as a result of changes in non-controlling
interests in prior periods and revaluation of
employee benefit obligations in current year.

(b) Accumulated losses

Accumulated losses at the beginning of the year

Net profit/(loss) attributable to members of Kingsgate Consolidated Limited

Accumulated losses

2017
$’000

(635,627)

7,088

2016
$’000

(406,176)

(229,451)

(628,539)

(635,627)

Notes to the Financial Statementswww.kingsgate.com.au73

2017
$’000

2016
$’000

309

349

343

373

716

Equity holding

Country of
Incorporation

Class of
shares

2017
%

2016
%

Australia

Thailand

Mauritius

Laos

Chile

Ordinary

100

20. Commitments for expenditure

Operating leases
Within one year

Later than one year but not later than five years

Total operating leases

21. Controlled entities

Entity

Parent Entity
Kingsgate Consolidated Limited

Subsidiaries
Dominion Mining Ltd

Gawler Gold Mining Pty Ltd

Dominion Metals Proprietary Ltd

Kingsgate Treasury Pty Ltd

Kingsgate Capital Pty Ltd

Kingsgate Chile NL

Laguna Exploration Pty Ltd

Akara Resources Public Company Limited

Issara Mining Limited

Suan Sak Patana Ltd

Phar Mai Exploration Ltd

Richaphum Mining Ltd

Phar Lap Ltd

Phar Rong Ltd

Asia Gold Ltd

Dominion (Lao) Co., Ltd

Laguna Chile Ltda

22. Dividends

No final dividend was declared for the year ended 30 June 2016 (30 June 2015: nil).

No interim dividend was declared for the year ended 30 June 2017 (30 June 2016: nil).

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.

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu74

24. Employee benefits and share-based payments

Employee benefits and related on-costs liabilities

Provision for employment benefits – current

Provision for employee benefits – non-current

Total employee provisions

2017
$’000

2016
$’000

309

395

6,280

6,346

Superannuation
The Group makes contributions on behalf of employees to externally managed defined contribution superannuation funds. Contributions are based on
percentages of employee wages and salaries and include any salary-sacrifice amounts. Contributions to defined contribution plans for 2017 were $417,000
(2016: $1,423,000).

Retirement benefit and other long-term benefits (Akara Resources PCL)

Opening balance

Service costs

Interest

Actuarial gain

Benefits paid

Foreign currency exchange differences

Other changes

Closing balance

The principal actuarial assumptions used were as follows:

Discount rate

Inflation rate

2017
$’000

5,417

–

(5,343)

(62)

(12)

–

2016
$’000

4,091

1,637

145

–

(405)

(51)

–

5,417

–

4.1%

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.

Performance rights
Kingsgate issued the following performance rights during financial year 2013/2014:

Performance rights

Grant date

7/13 November 2013

26 November 2013

Vesting date

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.

Notes to the Financial Statementswww.kingsgate.com.au75

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

–

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.

The balance of the performance rights is summarised in the table below:

Outstanding balance at the beginning of the year

Performance rights granted during the year

Vested during the year

Lapsed during the year

Forfeited during the year

Outstanding balance at the end of the year

Deferred rights
Kingsgate issued the following deferred rights during financial year 2013/2014:

2017
Number

270,889

–

(270,889)

–

2016
Number

507,202

–

(92,045)

(144,268)

270,889

Deferred rights

Total

Grant date

Vesting date

Fair value

Number

7 November 2013

13 November 2013

4 November 2013

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 using Monte Carlo simulations model.

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 StatementsNotes to the Financial Statementscontinuedu76

24 . Employee benefits and share-based payments continued

The outstanding balance of the deferred rights is summarised in the table below:

Outstanding balance at the beginning of the year

Deferred rights granted during the year

Vested during the year

Lapsed during the year

Forfeited during the year

Outstanding balance at the end of the year

2017
Number

111,660

–

(111,660)

–

2016
Number

236,637

–

(52,842)

–

(72,135)

111,660

Employee Share Option Plan
On 29 April 2016, Kingsgate granted 1,500,000 employee options. The terms of the options issued pursuant to the plan are as follows:
〉〉

Each option will entitle the holder to subscribe for one ordinary share of the Company;

〉〉 Options are granted under the plan for no consideration; and
〉〉 Options granted under the plan carry no dividend or voting rights.

Expiry date

Exercise price

Balance
start of year

Granted
during year

Expired
during year

Balance
end of year

Vested and
exercisable at
end of year

Grant date

29 Apr 2016

30 June 2019

30 June 2020

30 June 2021

$0.40

$0.50

$0.60

Number

500,000

Number

–

500,000

–

Fair value of options granted

The fair value at grant date of the options is determined using the Black-Scholes option pricing model which incorporates the following inputs:

Number of options issued

500,000

Term (years)

Exercise price ($)

Dividend yield ($)

Spot price ($)

Volatility (%)

Risk free rate (%)

Fair value ($)

Outstanding balance at the beginning of the year

Options granted during the year

Vested during the year

Lapsed during the year

Forfeited during the year

3.17

0.40

–

0.455

65–75

1.86

0.23

4.17

0.50

–

0.455

65–75

1.85

0.24

5.17

0.60

–

0.455

65–75

1.85

0.22

500,000

–

Outstanding balance at the end of the year

500,000

The volatility above was determined with reference to the historical volatility of the Company’s share price from April 2013 to April 2016.

Notes to the Financial Statementswww.kingsgate.com.au

25. Reconciliation of loss after income tax to net cash flow

from operating activities

Profit/(loss) for the year

Depreciation and amortisation

Share-based payments

Impairment

Unwind of discount rate for provision

Amortisation of deferred borrowing costs

Unrealised losses/(gains)

Net exchange differences

Other revenue

Change in operating assets and liabilities:

(Increase)/decrease in receivables

(Increase)/decrease in prepayments

(Increase)/decrease in inventories

Increase/(decrease) in creditors

Increase/(decrease) in provisions

Increase/(decrease) in deferred tax liabilities

Net cash inflow from operating activities

2017
$’000

7,088

51,307

190

–

246

–

3,888

(14,045)

3,738

1,658

25,758

(16,956)

(5,882)

(119)

56,952

2016
$’000

(229,451)

46,177

210,969

952

1,559

810

123

–

9,039

3,736

13,622

(9,244)

(1,578)

(269)

46,493

26. Events occurring after reporting date

On 29 August 2017 Kingsgate executed a $15.0 million Standby Loan Facility (‘SLF’) to assist with working capital requirements and for general corporate
purposes. The SLF is available to be drawn against within a 12 month period from the date of the agreement subject to demonstrating an acceptable
repayment plan. It has a minimum draw of $10.0 million and is to be repaid in full six months after drawdown. It is currently envisaged that use of this facility
will not be required during the 2018 financial year.

On 16 August 2017 Kingsgate was informed that the Thai Government had lifted the “temporary suspension” of all unexpired gold mining licences in Thailand,
including those held by the Company’s subsidiary, Akara Resources Public Company Limited. Further, Kingsgate was advised that Akara’s application for
renewal of its Metallurgical Processing Licence, which expired on 31 December 2016, could now be processed.

In light of the foregoing, the Kingsgate Board has determined that it is in the interests of the Company to further explore this matter, together with a number
of other unresolved issues. Accordingly, Kingsgate has reserved its legal position under TAFTA and allowed a further limited period of dialogue with the Thai
Government.

No other matter or circumstance has arisen since 30 June 2017 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 assets and liabilities

The Group had no contingent assets or liabilities at 30 June 2017.

28. Financial risk management and instruments

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 and interest rate risk. Therefore, the
Group does not employ any derivative hedging of foreign currency or interest rate risks. The Directors and management monitors these risks, in particular
market forecasts of future movements in foreign currency and, if it is to be believed to be in the best interests of shareholders, will implement risk
management strategies to minimise potential adverse effects on the financial performance of the Group.

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu78

28 . Financial risk management and instruments continued

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, credit risk, 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

Total financial liabilities

Market risk
Foreign exchange risk

2017
$’000

2016
$’000

22,007

6,707

–

3,965

32,679

36,314

16,288

7,004

540

8,624

68,770

(7,688)

(11,571)

(25,387)

(98,097)

(19,259)

(123,484)

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. Currently foreign exchange risks arise primarily from:
〉〉 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.

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

2017
$’000

2016
$’000

671

–

(1,671)

1,819

7,004

(4,493)

(947)

4,389

The Group’s sale of gold produced from Chatree Gold Mine are in US dollars, however the functional currency of the subsidiary company that owns Chatree
Gold Mine is Thai Baht and therefore, the Group’s profit is sensitive to movement in those currencies.

The Group’s current exposure to other foreign exchange movements is not material.

Notes to the Financial Statementswww.kingsgate.com.au79

One cent weakened in Australian dollar against the US dollar

One cent strengthened in Australian dollar against the US dollar

Impact on post tax loss

2017
$’000

2,292

(2,292)

2016
$’000

1,743

(1,743)

Impact on other
comprehensive income

2017
$’000

2016
$’000

–

Interest rate risk
The Group’s exposure to interest rate risk for classes of financial assets and financial liabilities, at 30 June 2017 and 30 June 2016 are set out as follows:

Fixed interest maturing in

Floating
interest rate
$’000

1 year or less
$’000

1–2 years
$’000

2–5 years
$’000

Non-interest
bearing
$’000

Total
$’000

2017
Financial assets
Cash and cash equivalents

Receivables

Other financial assets

Total financial assets

Financial liabilities
Payables

Borrowings

Total financial liabilities

Net financial assets/(liabilities)

2016
Financial assets
Cash and cash equivalents

Receivables

Restricted cash

Available-for-sale financial assets

Other financial assets

Total financial assets

Financial liabilities
Payables

Borrowings

Total financial liabilities

Net financial liabilities

22,000

–

3,694

25,694

–

(1,393)

24,301

36,303

–

7,004

–

8,316

51,623

–

(87,859)

(36,236)

–

(10,171)

–

(10,178)

6,707

271

6,985

(7,688)

–

22,007

6,707

3,965

32,679

(7,688)

(11,571)

(7,688)

(19,259)

(703)

13,420

–

16,288

–

540

308

36,314

16,288

7,004

540

8,624

17,147

68,770

(25,387)

(67)

(25,387)

(98,097)

(25,454)

(123,484)

(8,307)

(54,714)

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu80

28 . Financial risk management and instruments continued

A change of 100 basic 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 – 2017

Variable rate instrument – 2016

100 bps increase
Profit
$’000

100 bps decrease
Profit
$’000

–

853

–

(853)

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 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

2017
$’000

22,007

6,707

–

3,965

32,679

2016
$’000

36,314

16,288

7,004

8,624

68,230

Liquidity risk
The Group’s liquidity requirements are based upon cash flow forecasts which are based upon exploration and capital projections. 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. The borrowings of the Group are repayable on demand, however the
contractual amounts for borrowings also include the interests that are expected to be repaid until the repayment of these debts based on the cash flow
forecast prepared by the Group.

2017
Payables
Borrowings

Total financial liabilities

2016
Payables

Borrowings

Total financial liabilities

Carrying
amount
$’000

1 year
or less
$’000

1–2 years
$’000

2–5 years
$’000

More than
5 years
$’000

Total
$’000

7,688
11,571

19,259

25,387

98,097

123,484

3,742
1,925

5,667

21,313

100,610

121,923

–
1,990

1,990

–

3,946
10,270

14,216

4,074

–

4,074

–
–

–

7,688
14,185

21,873

25,387

100,610

125,997

Notes to the Financial Statementswww.kingsgate.com.au81

Fair value measurements
The carrying value of financial assets and liabilities of the Group approximate their fair values. Fair values of financial assets and liabilities have been deter-
mined 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 process)
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 2017
Available-for-sale financial assets

Receivable

30 June 2016
Available-for-sale financial assets

Receivable

Level 1
$’000

Level 2
$’000

Level 3
$’000

Total
$’000

–

540

–

5,000

–

540

5,000

29. Key Management Personnel disclosures

Executive Chairman

Ross Smyth-Kirk

Executive Chairman – Role changed from Non-Executive Chairman 2 May 2017

Non-Executive Directors

Peter Alexander

Non-Executive Director

Peter McAleer*

Non-Executive Director

Peter Warren

Non-Executive Director

Sharon Skeggs

Non-Executive Director

* granted leave of absence from February 2016 due to ill health and resigned 24 November 2016.

Key Management Personnel

Ross Coyle

Chief Financial Officer and Company Secretary

Jamie Gibson

General Manager Corporate and External Relations

Alistair Waddell

Vice President Corporate Development & Exploration Chile

Leonardo Hermosilla

Vice President Project Development Chile – commenced 12 December 2016

Greg Foulis

Tim Benfield

Chief Executive Officer – resigned 30 April 2017 and relinquished his responsibilities as KMP on that date.

Chief Operating Officer – ceased employment 9 August 2016

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu82

29 . Key Management Personnel disclosures continued

Key Management Personnel Compensation

Short-term employee benefits

Post-employment benefits

Termination benefits

Share-based payments

Other long term benefits

2017
$

2,099,386

123,199

–

189,813

9,353

2016
$

2,358,058

227,388

470,201

29,295

87,713

Total Key Management Personnel compensation

2,421,751

3,172,655

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

Total remuneration for audit services

Other services
PricewaterhouseCoopers Australian Firm

Other services

Related practices of PricewaterhouseCoopers Australian Firm

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

2017
$

2016
$

284,000

592,840

146,462

295,782

430,462

888,622

–

35,401

42,205

77,606

79,500

30,600

55,769

135,269

47,164

77,764

Notes to the Financial Statementswww.kingsgate.com.au83

2017
Cents

3.17

–

3.17

2016
Cents

(118.1)

15.5

(102.6)

$’000

7,088

–

(264,182)

34,731

Number

223,584,937

223,575,540

–

223,584,937

223,575,540

2017
$’000

2016
$’000

(1,420)

–

(1,420)

16,791

126,170

66,127

66,255

(18,442)

–

(18,442)

37,271

136,149

74,869

74,977

677,015

8,567

(625,667)

677,042

8,377

(624,247)

59,915

61,172

31. Earnings per share

Basic and diluted earnings/(loss) per share from continuing operations

Basic and diluted earnings/(loss) per share from discontinued operations

Basic and diluted earnings/(loss) per share from continuing operations and discontinued operations

Net profit/(loss) used to calculate basic and diluted earnings per share

Continuing operations

Discontinued operations

Weighted average number of ordinary shares used as the denominator: basic

Adjustment for dilutive effect

Weighted average number of ordinary shares used as the denominator: diluted

32. Parent entity financial information

As at, and throughout the financial year ending 30 June 2017, 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 equity

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu84

Notes to the Financial Statements

32 . Parent entity financial information continued

Contingent liabilities of the parent entity
There are cross guarantees given by Kingsgate, Dominion Mining Limited and Gawler Gold Mining Pty Ltd as described in Note 33. No deficiencies of assets
exist in any of these companies. No liability was recognised by the parent entity or the Group in relation to this guarantee, as the fair value of the guarantees
is immaterial.

As at 30 June 2017, the parent entity had no contractual commitments for the acquisition of property, plant or equipment.

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 on 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; 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:

www.kingsgate.com.auIncome statement and other comprehensive income

Sales revenue

Costs of sales

Gross profit

Exploration expenses

Corporate and administration expenses

Other income and expenses

Foreign exchange (loss)/gain

Impairment losses – investment in Chatree Gold Mine

Impairment losses – investment in Bowdens Silver Project

Impairment losses – investment in Nueva Esperanza Gold/Silver Project

Impairment reversal – investment in Challenger Gold Mine

Reversal/(write-off) on loan to subsidiaries

2017
$’000

–

(9,595)

5,563

(3,219)

–

(4,247)

–

11,599

2016
$’000

78,916

(57,331)

21,585

(80)

(10,196)

30,979

1,962

(2,091)

(9,217)

(6,750)

411

(41,180)

Loss before financial costs and income tax

101

(14,577)

Finance income

Finance costs

Net finance costs

Loss before income tax

Income tax expense

Loss after income tax

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 the financial year

Loss for the year

Accumulated losses at end of the financial year

292

(1,389)

(1,097)

(996)

–

(996)

271

(4,337)

(4,066)

(18,643)

–

(18,643)

(996)

(18,643)

(996)

(18,643)

(996)

(18,643)

2017
$’000

2016
$’000

(621,885)

(996)

(603,242)

(18,643)

(622,881)

(621,885)

Notes to the Financial StatementsNotes to the Financial Statementscontinuedu86

33 . Deed of cross guarantee continued

Statement of financial position

Assets
Current Assets
Cash and cash equivalents

Receivables

Other assets

Total current assets

Non-current assets
Property, plant and equipment

Investment in subsidiaries

Other assets

Total non-current assets

TOTAL ASSETS

Liabilities
Current liabilities
Payables

Borrowings

Provisions

Total current liabilities

Non-current liabilities
Payables

Provisions

Total non-current liabilities

TOTAL LIABILITIES

NET ASSETS

Equity
Contributed equity

Reserves

Accumulated losses

TOTAL EQUITY

2017
$’000

2016
$’000

15,726

3,433

422

30,356

78,950

543

19,581

109,849

109,257

109,379

128,960

65,667

244

220

66,131

128

66,259

62,701

28,528

28,666

138,515

63,452

11,069

352

74,873

108

74,981

63,534

677,015

8,567

(622,881)

677,042

8,377

(621,885)

62,701

63,534

Notes to the Financial Statementswww.kingsgate.com.au87

34. Discontinued operations

a . Accounting for discontinued operations
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs of disposal. A gain is recog-
nised for any subsequent increases in fair value less costs of disposal of an asset (or disposal group), but not in excess of any cumulative impairment loss
previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date
of derecognition.

b . Details of discontinued operations

Challenger Gold Mine

On 30 October 2015, Kingsgate announced an Option Agreement was reached with a 50/50 Joint Venture between Diversified Minerals Pty Ltd and WPG
Resources Limited (‘Purchasers’), whereby the Purchasers would acquire 100% of the Challenger Gold Mine and certain exploration licences for consideration
of $1,000,000 and a $25 per ounce revenue royalty on future production in excess of 30,000 ounces from the Challenger SSW Zone. The Option Agreement
was exercised on 11 December 2015. A Share Purchase Agreement was executed on 19 February 2016 and the sale was completed on 15 March 2016.

Bowdens Silver Project

On 25 February 2016, Kingsgate announced a Share Purchase Agreement was entered into to sell an 85% interest in the Bowdens Silver Project for a cash
consideration of $20 million to Silver Investment Holdings Australia Limited (‘SIHA’). This arrangement was subsequently varied with SIHA agreeing to
purchase 100% of the project for a total consideration of $25 million. On 29 June 2016, the Company completed the sale of the project. At that date
$5 million of the consideration was outstanding and was paid in September.

Challenger Gold Mine and Bowdens Silver Project were not previously classified as held-for-sale or as a discontinued operation. The comparative consolidated
statement of profit or loss and other comprehensive income has been restated to show the discontinued operation separately from continuing operations.

c . Results of the discontinued operations
The results of the discontinued operations for the year until disposal are presented below:

s
t
n
e
m
e
t
a
t
S

a
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N

Sales revenue

Cost of sales

Gross profit

Exploration expenses

Corporate and administration expenses

Other income and expenses

Reversal of impairment/(impairment)

Profit/(loss) before finance costs and income tax from discontinued operations

Finance income

Finance cost

Net finance costs

Profit before income tax

Income tax expense

Profit/(loss) after income tax from discontinued operations

Earnings per share for profit from discontinued operations

Basic earnings per share (Note 31)

Diluted earnings per share (Note 31)

2016
$’000

78,916

(57,331)

21,585

(49)

(903)

467

17,056

38,156

(209)

(176)

37,980

(3,249)

34,731

Cents

15.5

continuedu

Notes to the Financial Statements

34 . Discontinued operations continued

d . Cash flow information of the discontinued operations
The net cash flows of discontinued operations are as follows:

Net cash flows from operating activities

Net cash flows from investing activities

Net cash flows for the year

e . Details of the sale of the discontinued operations

Consideration

Carrying amount of net assets sold

Gain on sale before income tax

Income tax expense

Gain on sale after income tax

The carrying amounts of assets and liabilities of the discontinued operations as at the date of the sale were:

Receivables

Inventories

Exploration, evaluation and development

Property, plant and equipment

Other assets

Deferred tax asset

Provisions

Net assets

2016
$’000

13,610

(2,742)

10,868

2016
$’000

26,000

(26,000)

–

2016
$’000

4,339

22,331

873

3,069

3,249

(7,896)

26,000

www.kingsgate.com.au89

Directors’ Declaration

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o
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Directors’
Declaration

In the Directors’ opinion:

the financial statements and notes that are set out on pages 44 to 88 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 2017 and of its
performance for the financial year ended on that date; and

(ii) complying with Australian Accounting Standards, the Corporation Regulations 2001 and

other mandatory professional reporting requirements.

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

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 Executive Chairman and Chief Financial Officer for the financial year ended 30 June 2017.

This declaration is made in accordance with a resolution of the Directors.

Ross Smyth-Kirk
Director
Dated at Sydney on 31 August 2017
On behalf of the Board

Independent Auditor’s Report

Independent
Auditor’s Report

Independent auditor’s report to the
members of Kingsgate Consolidated Limited

Report on the audit of the financial report

Our opinion
In our opinion:

The accompanying financial report of Kingsgate Consolidated Limited (the Company) and its controlled entities (together the
Group) is in accordance with the Corporations Act 2001, including:

(a)

giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year
then ended

(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.

What we have audited
The Group financial report comprises:
〉〉

the consolidated statement of financial position as at 30 June 2017

〉〉

the consolidated statement of changes in equity for the year then ended

the consolidated statement of cash flows for the year then ended

the consolidated statement of profit or loss and other comprehensive income for the year then ended

the notes to the consolidated financial statements, which include a summary of significant accounting policies

the directors’ declaration.

Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the financial report section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

One International Towers Sydney, Watermans Quay, Barangaroo, GPO Box 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

www.kingsgate.com.au91

Independent Auditor’s Report

Independence
We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.

Our audit approach
An audit is designed to provide reasonable
assurance about whether the financial report
is free from material misstatement. Misstate-
ments may arise due to fraud or error. They are
considered material if individually or in aggregate,
they could reasonably be expected to influence
the economic decisions of users taken on the
basis of the financial report.

We tailored the scope of our audit to ensure that
we performed enough work to be able to give an
opinion on the financial report as a whole, taking
into account the geographic and management
structure of the Group, its accounting processes
and controls and the industry in which it operates.

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Materiality

Audit scope

Key audit matters

〉〉 Amongst other relevant topics,
we communicated the following
key audit matters to the Audit and
Risk Committee:
〉〉 Recoverable amount of Nueva
Esperanza Gold/Silver Project
〉〉 Carrying amount of assets and
liabilities associated with the
Chatree Gold Mine

〉〉

Funding of future operations
of the Group.

〉〉

These are further described in
the Key audit matters section of
our report.

〉〉

For the purpose of our audit we
used overall Group materiality
of $1.3 million, which represents
approximately 1% of the Group’s
total assets.

〉〉 We chose Group’s total assets
because, in our view, it is the
benchmark which best reflects
the expected requirements of
users of the Group’s financial
report. We applied this threshold,
together with qualitative consid-
erations, to determine the scope
of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the
effect of misstatements on the
financial report as a whole.
〉〉 We chose total assets as the

materiality benchmark rather than
a profit measure given the closure
of the Chatree Gold Mine and the
Group’s focus on the development
of the Nueva Esperanza Gold/
Silver Project.

〉〉 We utilised a 1% threshold based
on our professional judgement,
noting it is within the range of
commonly acceptable thresholds.

〉〉 Our audit focused on where the
Group made subjective judge-
ments; for example, significant
accounting estimates involving
assumptions and inherently
uncertain future events.

〉〉

The Australian engagement team
directed the involvement of the
Thai component audit team,
which performed audit procedures
on the financial information of
Akara Resources Public Company
Limited, given its financial signifi-
cance to the Group.

The component auditor in Chile,
operating under instructions, also
performed specified audit proce-
dures over the Group’s Chilean
operations’ financial information.

The Australian engagement team
determined the required level of
involvement in the work performed
by the Thai and Chilean component
audit teams, in order to be satisfied
that sufficient appropriate audit
evidence had been obtained for our
opinion on the Group financial
report as a whole.

continuedu

Independent Auditor’s Report

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the
outcomes of a particular audit procedure is made in that context.

Key audit matter

How our audit addressed the key audit matter

Recoverable amount of Nueva Esperanza
Gold/Silver Project

(Refer to Critical accounting estimates,
assumptions and judgements in note 3(ii) and
3(iii) and to note 14 of the financial report)

The assessment of the recoverable amount of
the Nueva Esperanza Gold/Silver Project was a
key audit matter given the significance of the
carrying value of this CGU, which amounted to
$97.2 million as at 30 June 2017, including the
largest non-current asset in the balance sheet.

The determination of the recoverable amount
of an exploration CGU is subject to significant
judgements and assumptions by the Group as
described in the notes to the financial report.

Impairment testing was required to be
completed by the Group at balance sheet
date because the net assets of the Group are
currently significantly higher than its market
capitalisation and the results of the previous
impairment testing highlighted the sensitivity of
the results to the valuation assumptions made.

We considered the Group’s assessment of the recoverable amount of the
Nueva Esperanza Gold/Silver CGU and its conclusion that no impairment
was required at 30 June 2017. We considered a recent independent
valuation of the project and the internal assessment made by the Group.

An Independent Expert’s Report was prepared for the Target’s Statement
issued in October 2016 in response to a take-over offer in relation to the
Group. This Report included a valuation of the Nueva Esperanza Gold/
Silver project which indicated a value for the project up to $98.8 million.
We considered the relevance of that report at 30 June 2017 in light of
potential changes to the project economics and key assumptions made
since that date.

In respect of the internal assessment of the recoverable amount made by
the Group, we performed the following:
〉〉 Considered whether the discounted cash flows model used to
estimate the “fair value less costs of disposal” (the impairment
model) was consistent with the requirements of Australian
Accounting Standards.

〉〉 Considered whether the forecast cash flows used in the impairment
model were reasonable and based on supportable assumptions by:
〉〉

comparing long term gold/silver pricing data used in the
impairment model to independent analyst forecasts

〉〉

comparing the project and operating parameters, including
capital and operating costs, used in the model, to the pre-feasi-
bility studies completed by the Group

assessing the Group’s discount rate calculations, including having
regard to the inputs utilised in the Group’s weighted average cost
of capital such as peer company betas, and risk free rate, assisted
by PwC valuation experts

reconciling the costs until commencement of construction of the
project to the latest cash flows forecast prepared by the Group,
and

〉〉 obtaining an understanding from management of the status and
results of the work being undertaken as part of the Definitive
Feasibility Study.

〉〉

Tested the internal mathematical accuracy of the impairment model’s
calculations.

〉〉 Considered the value and valuation methods used to assess the

additional resource and exploration potential of the Nueva Esperanza
Gold/Silver project.

〉〉

Evaluated the adequacy of the disclosures made in note 14, including
those regarding the key assumptions and sensitivities to changes in
such assumptions, in light of the requirements of Australian
Accounting Standards.

www.kingsgate.com.au93

Independent Auditor’s Report

Key audit matter

How our audit addressed the key audit matter

We updated our understanding in respect of the situation regarding the
Chatree Gold Mine by making enquiries of management and the directors
as to their knowledge and understanding of the situation and by reading
selected material correspondence between the Group and the Thai
Government.

We assessed the adequacy of the overall accounting position adopted
by the Group at 30 June 2017 as described in note 3(i) in respect of the
carrying amount of assets and liabilities in light of the requirements of
the Australian Accounting Standards.

In respect of the carrying amount of the assets associated with the
Chatree Gold Mine,
we performed the following:
〉〉 Assessed the Group’s judgement as to whether the circumstances
that led to the previously recognised impairment charge have
changed and whether a reversal of this impairment should be
recognised.

〉〉 Considered whether remaining assets such as inventory, plant and
equipment, and gold/silver sludge should be recognised at nil.
〉〉 Assessed if other assets which have been recognised at their short-
term realisable value have a carrying amount based on supportable
assumptions.

In respect of the carrying amount of the liabilities associated with the
Chatree Gold Mine, we assessed the Group’s rehabilitation plans prepared
in the context of the early closure of the mine and the overall accounting
positon adopted by the Group at year end in respect of the Chatree Gold
Mine obligations. We checked the mathematical accuracy of the under-
lying calculations.

We considered the status in respect of the Group pursuing available legal
and other avenues for compensation, including action for damages
against the Thai Government, and in light of the requirement to disclose
contingent assets in the financial report in accordance with Australian
Accounting Standards.

Carrying amount of assets and liabilities
associated with the Chatree Gold Mine

(Refer to note 3 (i) of the financial report)

The Group’s Chatree Gold Mine in Thailand
was placed on care and maintenance as a result
of a decision made by the Thai Government to
cease all gold mining activities in Thailand by
31 December 2016. An impairment charge of
$227.6 million was recorded against the
Group’s carrying value of Chatree Gold Mine
assets in the year ended 30 June 2016 as a
result of that decision.

The Group also revised the related rehabilitation
liability to reflect the early closure of the mine.
The total rehabilitation liability, amounting to
approximately $14 million at 30 June 2017, is
based on management’s rehabilitation plan
which is a revision from the initial plan
submitted to the Thai Authorities in 2007.

On 16 August 2018, the Group was advised
that the “temporary suspension” of the
Chatree Gold Mine had been lifted. The Group
is continuing its negotiations with the Thai
Government on this matter.

The Group is also pursuing available legal and
other avenues for compensation, including
action for damages against the Thai Govern -
ment. We focused our current year audit on
whether any assets should be recognised at
30 June 2017 and on whether contingent assets
should be disclosed in the financial statements
as a result of these activities.

The carrying amount of assets and liabilities of
the Chatree Gold Mine and associated disclo-
sures were considered to be a key audit matter
because there remains significant uncertainty in
respect of the rights and obligations of the
Group in relation to the mine and the potential
magnitude of a potential reversal of impairment,
changes in the rehabilitation liability and
potential recognition of contingent assets
on the financial statements and the financial
position of the Group.

continuedu

Notes to the Financial Statements94

Independent Auditor’s Report

Key audit matter

Funding of future
operations of the Group

(Refer to note 1 of the financial report)

The Group’s operations changed significantly
during the year as a result of the Chatree Gold
Mine being placed on care and maintenance.
As the Group currently has no revenue gener-
ating activities, we focused on the Group’s
preparation of the financial report on a going
concern basis, which contemplates that the
Group will continue to meet its commitments,
realise its assets and settle its liabilities in the
normal course of business.

This was a key audit matter due to the level
of cash available at balance sheet date, the level
of judgement involved in the Group forecasting
future cash flows for a period of at least
12 months from the date of the financial
report (cash flow forecasts), the uncertainties
associated with the future of the Chatree Gold
Mine, and due to the importance of the going
concern assumption when preparing the
financial report.

How our audit addressed the key audit matter

In assessing the appropriateness of the Group’s going concern assumption
used in preparing the financial report, we have performed the following:

〉〉

Evaluated the Group’s plans and its assessment of the going concern
assumption, including considering the main assumptions in the
Group’s cash flow forecast until end of September 2018.

〉〉 Selected elements of the cash flow forecasts to existing contracts

and agreements requiring payments to be made.

〉〉 Considered the forecast expenditure in the cash flow forecast and the

extent to which it is committed or could be considered as
discretionary.

〉〉 Considered the cash inflows included in the cash flows forecast,

including (where possible) reconciling these elements to actual cash
flows received subsequent to year end.

〉〉

Examined the documentation relating to the preference share liability
and tested the Group’s assessment that it has the unconditional right
to defer payment of this liability such that there are no capital repay-
ments required within the cash flow forecast period.

Enquired of management and the directors as to their knowledge of
events and conditions, beyond the current cash flows forecast
prepared that may impact the going concern assumption.

〉〉 Considered post-balance sheet date events to the extent they were

relevant to the going concern assumption.

〉〉

Evaluated the adequacy of the disclosures made in note 1 of the
financial report, including the basis for the directors’ conclusion that
the Group is a going concern.

Other information
The directors are responsible for the other information. The other information included in the Group’s annual report for the year
ended 30 June 2017 comprises the Director’s report (but does not include the financial report and our auditor’s report thereon),
which we obtained prior to the date of this auditor’s report. We also expect other information to be made available to us after the
date of this auditor’s report, including Chairman’s review, Five year summary, Finance report, Operations report, Project report,
Exploration report, Ore reserves and mineral resources, Senior Management, Shareholder information and Corporate information.

Our opinion on the financial report does not cover the other information and we do not and will not express an opinion or any
form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in
the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.

When we read the other information not yet received as identified above, if we conclude that there is a material misstatement
therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appro-
priate action to take.

www.kingsgate.com.au95

Independent Auditor’s Report

Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards
Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report.

Report on the remuneration report

Our opinion on the remuneration report
We have audited the remuneration report included in pages 29 to 40 of the directors’ report for the year ended 30 June 2017.

In our opinion, the remuneration report of Kingsgate Consolidated Limited for the year ended 30 June 2017 complies with section
300A of the Corporations Act 2001.

Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our
audit conducted in accordance with Australian Auditing Standards.

PricewaterhouseCoopers

Marc Upcroft
Partner
PricewaterhouseCoopers
Sydney
31 August 2017

Notes to the Financial Statements96

Shareholder Information

Shareholder
Information

As at 28 September 2017

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

20 largest shareholders

20 largest shareholders of quoted ordinary shares

Shareholder

HSBC Custody Nominees (Australia) +
J P Morgan Nominees Australia Limited
Merrill Lynch (Australia) Nominees Pty Limited
Citicorp Nominees Pty Limited
Argonaut Securities Pty Limited
L&M Group Limited
Arinya Investments Pty Ltd
Elizabeth Anne Bird
BT Portfolio Services Limited
Lujeta Pty Ltd
Jamari Pty Ltd
Philip Storr
Elizabeth Aprieska
Frank Markert Pty Ltd
Ian Gillespie-Jones
Ali Beydoun
Andrew Lenox Hewitt
Yandal Investments Pty Ltd
Slick Solutions Pty Ltd
Rellav Pty Ltd

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

Number of
shareholders
of fully paid
ordinary shares

Number of
option holders

Number of
vested deferred
rights holders

4,654

3,348

1,096

1,530

184

10,812

–

Number of
shares

33,110,524
21,068,629
14,274,277
13,964,851
7,159,303
5,000,000
4,996,944
4,249,943
3,100,000
2,068,063
1,612,794
1,500,000
1,412,590
1,220,000
1,200,722
1,200,000
1,000,000
1,000,000
950,000
896,368

Percentage

14.81
9.42
6.38
6.25
3.20
2.24
2.23
1.90
1.39
0.92
0.72
0.67
0.63
0.55
0.54
0.54
0.45
0.45
0.42
0.40

www.kingsgate.com.au
97

Shareholder Information

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Unquoted equity securities

There was one option holder holding 1,500,000 options.

Unquoted equity security holdings greater than 20%

Options
On 29 April 2016, Kingsgate granted 1,500,000 employee options.

Grant Date

Expiry date

Exercise price

29 Apr 2016

30 June 2019

30 June 2020

30 June 2021

$0.40

$0.50

$0.60

Number

500,000

Voting rights

a) 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.

b) Options

No voting rights.

c) Deferred rights (vested)

No voting rights.

Notes to the Financial Statements

Corporate Information

Corporate
Information

Kingsgate Consolidated Limited
ABN 42 000 837 472

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

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

Chile Office
Laguna Resources Chile Ltda

San Pio X 2460 oficina 1202
Providencia, Santiago
Chile

Tel:

+56 2 2231 7565

+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

One International Towers Sydney
Watermans Quay
Barangaroo NSW 2000
Australia

Tel:
Fax:

+61 2 8266 0000
+61 2 8266 9999

Directors

Ross Smyth-Kirk

Chairman

Peter Alexander

Non-Executive Director

Sharon Skeggs

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
Securities Exchange (ASX) under the code KCN.
The Company’s shares also trade in the United
States of America over-the-counter (OTC) as an
American Depository 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

+61 2 8256 4800
Tel:
Email:
info@kingsgate.com.au
Web: www.kingsgate.com.au

www.kingsgate.com.au

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Designed and Produced by APM Graphics Management > 1800 806 930

Suite 801, Level 8
14 Martin Place
Sydney NSW 2000
Australia

+61 2 8256 4800
Tel:
Email:
info@kingsgate.com.au
Web: www.kingsgate.com.au