ABN 42 000 837 472
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Annual Report
Photo: Nueva Esperanza Project, Chile
www.kingsgate.com.au
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Contents
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Contents
Chairman’s Review ......................................................
Operations Report
Chatree Gold Mine ..................................................................
Projects Report
Nueva Esperanza ...................................................................
2
4
8
Ore Reserves and Mineral Resources .......................... 12
Competent Persons Statement .................................... 13
Directors’ Report ........................................................... 14
20
Remuneration Report ..............................................................
Auditor’s Independence Declaration ............................. 29
Financial Statements
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 ..................................
30
31
32
33
Notes to the Financial Statements ............................... 34
Directors’ Declaration .................................................. 70
Independent Auditor’s Report ........................................ 71
Shareholder Information ............................................... 77
Corporate Information ................................................... 78
2
Chairman’s Review
Chairman’s Review
Glacial speed is a term I’ve found
myself saying a few times this
year, and while outwardly it may
appear that things are moving
very slowly with your Company,
I can assure you that we are
making good progress.
Working capital will include continuing care
and maintenance expenditure on the Chatree
processing plant, and other areas at Chatree
as required. It will also allow Kingsgate to
investigate and assess other potential mining
exploration and or development prospects.
Your Board anticipates that any remaining
balance of the proceeds, after expenses of the
sale and after providing for the aforementioned
expenditure, will be distributed to shareholders.
Expressions of interest for the sale of the Project
are currently being sought from interested parties,
and I have been heartened by the level of interest
shown in the Project from all sectors of the mining
industry.
I am also acutely aware that while we are
carefully and methodically working through
these scenarios to restore value to your
Company that we need to be cutting overheads
even further and saving every dollar we can.
In the past year, I along with your Board
have implemented the following cost saving
measures:
〉〉
〉〉
〉〉
〉〉
〉〉
closure of the corporate office in Bangkok;
the ongoing rationalisation of superfluous
land and equipment at Chatree;
the relocation to a smaller more cost
effective corporate office in Sydney;
the review and cancellation of a number of
corporate services that are no longer
required; and
a further reduction in staff numbers both in
Thailand and Sydney, including redundancies
of senior management that took effect in
Sydney in August 2018.
Last year I outlined that your Board and
management have been diligently working
through a range of scenarios to remedy the
situation with the unlawful closure of the
Chatree Gold Mine (“Chatree”) by the Thai
Government. So let me give you a progress
report, starting with our action to recover the
losses and value of the Chatree closure via
arbitral proceedings that have commenced
under the Australia-Thailand Free Trade
Agreement (“TAFTA”).
Kingsgate maintains that we have a strong case
if we go to arbitration over Chatree.
While I am restrained in terms of what I can
say publicly in relation to TAFTA, we are very
well prepared for the arbitral proceedings in
November next year, if there is no amicable
commercial settlement prior. An important
point to consider is that Kingsgate still has
good communication lines open with the Thai
Government, and settlement discussions are
ongoing in parallel with TAFTA.
The other opportunity we have to restore value
to your Company over the closure of Chatree is
the Political Risk Insurance Policy (“PRI”) that
we had in place at the time of the mine closure.
Again, while I can’t say too much about that
matter given its confidentiality provisions, I can
say that Kingsgate is very confident of its claim,
and we are getting the necessary resources
together to see it through to the end. The hearing
for this matter is set down for June next year.
That brings me to Nueva Esperanza. Your Board
took the decision to appoint a Corporate Adviser
to advise and assist in the sale of the Project. The
reason for the sale is to:
〉〉
〉〉
repay the Company’s loan from Investec
Australia Limited (“Investec”);
fund both the Company’s ongoing TAFTA
and PRI Claims; and
〉〉 provide the Company with ongoing working
capital.
www.kingsgate.com.au
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Chairman’s Review
Other notable events during the year include the
Metal Tiger failed Board spill attempt.
Is that worth a mention?
Not really.
I will say this however, their stop-start approach
to their own assets in Thailand in recent months
highlights that there are no quick fixes to be had,
and that your Board is the right Board, with the
right plan, to restore value to your Company.
In that regard, I would like to sincerely thank all
shareholders for your support during the year.
Once again I know it hasn’t been easy but I can
assure you the glacier is moving.
I would also like to thank all the management
and personnel of Kingsgate, Akara, and Nueva
Esperanza for their efforts during another
difficult year. Your support is appreciated.
I firmly believe 2019 will be a better year for
Kingsgate, as we will hopefully see some rewards
for all of the hard work that has been put in
over the last few years to not only ensure that
your Company survives, but to reward you the
shareholders for your continued loyalty. I look
forward to the day when Kingsgate like the
legendary phoenix, has well and truly risen from
the ashes.
Ross Smyth-Kirk
Executice Chairman
Kingsgate and Laguna Resources staff discussing the Nueva Esperanza Project in Santiago, Chile.
4
Operations Report
Operations
Report
Chatree
Gold Mine
Thailand
Summary
Akara Resources Public Company Limited
(“Akara”), a subsidiary of Kingsgate, ceased
operating the Chatree Gold Mine on
31 December 2016, in accordance with the
closure order by the Thai Government. Chatree
was placed on Care and Maintenance effective
1 January 2017. Approximately 25 full time staff
remain at the Chatree Gold Mine to manage the
ongoing Care and Maintenance and rehabili-
tation works.
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
Government, and the discontinuation of many
community-based health, education and infra-
structure programs funded by Akara.
At mine closure, approximately A$7.1 million
(net of government royalties) of gold and silver
inventory in the form of high-grade sludge
remained at the Chatree site. Akara has made
some progress in having the sludge released for
sale.
Akara is currently working with the Thai
Department of Industry and Mines, and the
sludge has been assayed so that it may be
released for processing and commercial sale.
To assist with this process, Akara Resources has
been negotiating terms and conditions with a
Thai based refinery to process the sludge.
However, as previously stated there can be no
guarantee that this will occur.
www.kingsgate.com.au
Akara Resources staff inspecting rehabilitation works at Chatree. 5
Operations Report
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Chatree Closure Remedies
Political Risk Insurance (“PRI”)
In October 2017, Kingsgate commenced
proceedings in the New South Wales Supreme
Court against Zurich Insurance Australia Ltd,
and other named insurers, under a Political Risk
Insurance Policy (with a maximum liability of
US$200 million) that was held by the Company
when the Thai Government expropriated the
Chatree Gold Mine in May 2016.
On 27 March 2018, Kingsgate engaged in the
confidential Court-ordered mediation of its
claim against Zurich Australia Limited, and other
named insurers for recovery under its Political
Risk Insurance Policy. The dispute was not
settled during the course of the mediation.
On 6 July 2018, a Directions Hearing was held in
the Supreme Court of New South Wales for the
Company’s PRI claim. The Court listed the
Proceedings for trial, for up to fifteen days
commencing on 3 June 2019.
Kingsgate remains open to achieving a
settlement, but in the meantime will continue to
prosecute its claim against the insurers in the
Supreme Court of New South Wales.
Australia – Thailand Free Trade
Agreement (“TAFTA”)
On 2 November 2017, Kingsgate commenced
arbitral proceedings against the Kingdom of
Thailand under the Australia-Thailand Free Trade
Agreement, in order to recover the substantial
losses that it has suffered, and continues to
suffer, as a result of the measures taken by the
Thai Government.
The TAFTA Tribunal has adopted a Procedural
Calendar which provides that the merits of the
TAFTA Claim will be heard between 18 November
and 29 November 2019.
However, the Tribunal has also ordered that the
Proceedings are to be kept confidential, except
where disclosure is required to fulfil a legal duty.
The Kingsgate Board remains committed to
seeking a negotiated settlement of the
investment dispute with the Kingdom of
Thailand.
Kingsgate has appointed the leading interna-
tional law firm Clifford Chance to represent it,
and Dr. Andrew Bell S.C. as Senior Counsel on
both claims.
Management would like to commend employees
and contractors for their attention to safety and
care for each other throughout the year.
continuedu
The A Pit, post mine closure clearly shows what a great job the Akara team did managing a steep pit to get profitable ore before 1 January 2017.
6
Operations Report
A Short Case Study
Closure of the Chatree Gold Mine
The two year anniversary since the Thai Government closed the Chatree Gold Mine is sadly
approaching. To better understand what’s been happening in the community around the mine since
then, Akara Resources staff have been talking to some of the locals to hear what they had to say.
by the Office of the Basic Education
Commission to merge with other schools due
to the sharp fall in the number of students.
As for those who have decided not to move out
of the local area, the chance of finding jobs that
pay as much as they once earned from Akara is
almost non-existent.
For example, Mrs Kamlai Srisart, a former
employee at the Chatree Gold Mine, is unable
to move out of her village to look for new job
opportunities because she cannot leave her two
children with their father alone. Finding a job
that pays as little as a couple hundred baht is her
daily struggle.
Social Impact
When the mine was closed the obvious
and largest impact was on the mine workers
themselves. More than 1,000 direct jobs were
lost, with several thousand more in support
services around the mine also coming to an end.
Approximately 80 percent of the mine workforce
originated from local villages. Since Chatree was
the largest employer in the area, there simply
wasn’t enough demand for labor in the local
economy to absorb the thousands of unemployed,
and thus many people had to look for employment
in other cities.
Faced with higher living costs in big cities like
Bangkok, parents hardly earn enough to bring
their children with them, and in many cases have
to leave their children behind in the care of their
grandparents. To a greater extent, some couples
have to live apart for the sake of a pay cheque.
Sadly, it’s also been reported that some of them
have ended their marriages as a result.
While some parents can afford to bring their
children with them, local schools like the Baan
Dong Long School in the adjacent Tai Dong Sub
District, Phetchabun Province, have been asked
www.kingsgate.com.au
7
Operations Report
Economic Impact
Not only thousands of lives of the former Akara
employees that have been hard hit, but the
impact has been felt throughout the wider
region.
“I used to make 5,000–6,000
baht/day but now I can make a
little over 1,000 baht.”
Many businesses shut down not long after the
suspension order came into effect. Since mine
workers were the main driver of the local
economy, businesses, be it large or small, have
lost more than half their income.
“If the situation still continues
like this, I will have to close
down my business.”
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“Villagers just walk around and
ask for prices but many times
they end up buying nothing.”
“People have reduced their
spending by more than half.”
Royalties paid to the local governments by the
Chatree Gold Mine also brought a large number
of infrastructure developments in the region.
However, the closure order placed on the gold
mine has also halted many projects such as the
construction of a reservoir in Thap Khlo District
in the Phichit Province. This reservoir was going
to supply water to 12 villages in the area during
times of drought. This is an example of only one
important project among several projects which
could have been implemented if the mine was
still running.
Many life quality improvement programs were
also made possible by both direct and indirect
financial support from Chatree.
Without the Chatree Gold Mine, the Phichit
Province has lost 5–10 percent of its gross
provincial product (GPP).
Without the Chatree Gold Mine, the largest gold
mine in the country, the Thai Government has also
lost on average up to approximately 25 percent of
total royalties collected annually (based on
historic royalties collected from 2003–2016).
Mineral Royalty of Thailand 2003–16
(Ref: Website of Department of Primary Industries
and Mines)
Rock Salt 486,409
Basalt 493,129
Zinc 567,128
Gypsum 2,888,606
Gold Metal
4,300,510
Lignite
7,724,773
While Kingsgate remains committed to resolving
the matter with the Thai Government, it’s never
forgotten the impact of the closure on the lives
of the people that both worked at and lived
around the mine.
Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Gold Metal
(‘000 baht)
Total Royalty
(‘000 baht)
% of
(%)
47,647
64,910
63,098
60,407
74,128
119,679
363,282
410,134
419,771
817,107
521,188
485,846
333,447
519,865
1,136,422
1,377,491
1,503,334
1,620,631
1,675,388
1,807,732
4.19%
4.71%
4.20%
3.73%
4.42%
6.62%
2,420,391
15.01%
2,720,126
15.08%
2,797,594
15.00%
3,247,381
25.16%
2,969,498
17.55%
3,155,308
15.40%
3,040,039
10.97%
4,502,350
11.55%
–
3,836,914
0.00%
Note: Figures rounded to nearest whole number.
Silver Ore 409,486
Shale 389,648
Iron Ore 287,252
Limestone 11,949,189
Mrs Kamlai Srisart (Former Akara Employee)“I used to earn more than ten thousand baht each month when I was working with Akara. But for people my age who only studied until grade 4, it is not easy for me to look for a new job in the city so I just take whatever jobs that come along the way that will pay for my living. Now I only make around 200 baht per day which is barely enough to feed four mouths so I had to ask my daughter to quit her school to help me earn another income even though she has a good academic outlook.”Mr Chaliang Baisee (Former Akara Employee)Kamlai is not alone; Mr Chaliang Baisee, a former driver at Akara, said his life has been much more difficult after he lost his job at the mine. He had invested all money from his severance pay in a small fish farming business in the hope that it would substitute for his lost income, but unfortunately it has become a failure due to falling fish prices.
8
Projects Report
Projects
Report
Nueva Esperanza
Gold/Silver
Chile
Summary
Nueva Esperanza is a feasibility-stage
development project in Chile with a resource
base of approximately 1.9 million ounces gold
equivalent (see tables and notes on pages
12–13). During the year Kingsgate appointed
a Corporate Adviser to advise and assist in the
sale of the Project.
The reason for the sale is to:
〉〉
〉〉
repay the Company’s loan from Investec
Australia Limited (“Investec”) which is due
for repayment in early 2019;
fund both the Company’s ongoing TAFTA
and PRI Claims; and
〉〉 provide the Company with ongoing working
capital.
Working capital will include continuing
care and maintenance expenditure on the
Chatree processing plant, and other areas
at Chatree as required. It will also allow
Kingsgate to investigate and assess other
potential mining exploration and or
development prospects.
Cerro Blanco
Teterita
Cimberos West
Huantajaya
Potosi
www.kingsgate.com.au
9
Projects Report
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Chimberos Pit
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Projects Report
The Company anticipates that any remaining
balance of the proceeds, after expenses of the
sale and after providing for the aforementioned
expenditure, will be distributed to shareholders.
Expressions of interest for the sale of the Project
are currently being sought from interested
parties.
Feasibility
Given that Expressions of Interest in the Project
are currently being sought, work has been
suspended on the Definitive Feasibility Study
(“DFS”), which remains substantially
incomplete, pending the outcome of this
process. There is still material modelling/
assumptions that require further investigation
(both CAPEX and OPEX related) before the DFS
can be completed.
Permitting
Kingsgate is pleased to advise that the
Environmental Impact Assessment (“EIA”) for
Nueva Esperanza was completed on time and
was submitted to the Chilean regulatory
agencies on 29 June 2018. The Chilean
regulatory agencies publicly confirmed their
acceptance of the EIA for assessment in early
August 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
Rie
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
0.5
1.0
1.5
2.0
2.5 Kilometres
Nueva Esperanza – Exploration RC drill rig Exploration
Nine Reverse Circulation (“RC”) follow-up drill
holes totalling 1,136 metres were completed on
the Cerro Blanco West target in late 2017,
following up on eight initial exploration holes
previously reported (See Kingsgate ASX Release
titled “New Silver Discovery at Nueva Esperanza,
Chile” dated 17 July 2017). The best holes were:
〉〉 KRC-066, intercepted 18 metres at
207.54g/t Ag;
〉〉 KRC-058, intercepted 42 metres at
41.58g/t Ag;
In addition to these RC holes, additional
exploration work completed during the year
concentrated on three key areas in and around
the Project footprint:
〉〉 North-East Nueva Esperanza where
abundant siliceous material is evident as a
surface lag (bedrock-derived stony material
selectively sampled and analysed as an
indicator of bedrock geochemistry);
〉〉 Chimberos East, along the boundary with
Kinross Gold Corporation’s Huemul claims
where a strong quartz stockwork appears to
be widespread; and
The Antonella claims/tenements surrounding
the neighbouring ‘Atletico Madrid’ block
located approximately 6kms to the south of
the Nueva Esperanza Project, which contain
abundant siliceous breccia and vuggy-silica.
〉〉 KRC-059, intercepted 30 metres at
〉〉
32.26g/t Ag;
〉〉 KRC-063, intercepted 12 metres at
44.35g/t Ag; and
〉〉 KRC-065, intercepted 22 metres at
46.01g/t Ag.
Full details of these drill results can be found as
reported (See Kingsgate ASX Release titled
“Step-out Drilling Expands New Silver Rich Zone
at Nueva Esperanza, Chile” dated 8 January
2018). These results follow a number of
encouraging drill intercepts in calendar 2017.
11
Projects Report
Assay Results
A total of 796 rock chip samples were collected
during 2017 – 2018.
Notable highlights include more recent results
from the Antonella exploration tenements:
〉〉 2 rock chip assays with 23.9g/t Au and
7.93g/t Ag and 5.39g/t Au and 26.5g/t Ag;
〉〉 2 rock chip assays with 764g/t Ag and
719g/t Ag respectively; and
〉〉 5 rock chip samples greater than 10g/t Ag
including a sample with 34g/t Ag.
Regional Exploration
Kingsgate has been building its regional
exploration 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.
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Chimberos Pit, Nueva Esperanza
12
Ore Reserves and Mineral Resources
Ore Reserves and Mineral Resources
as at 30 June 2018
Chatree and Nueva Esperanza Ore Reserves
Grade
Contained Metal
Source
Chatree
Nueva Esperanza
Total
Category
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Tonnes
(Million)
Gold
(g/t)
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)
–
–
–
–
17.1
17.1
–
17.1
17.1
–
–
–
–
0.5
0.5
–
0.5
0.5
–
–
–
–
87
87
–
87
87
–
–
–
–
2.0
2.0
–
2.0
2.0
–
–
–
–
117
117
–
117
117
–
–
–
–
0.30
0.30
–
0.30
0.30
–
–
–
–
47.8
47.8
–
47.8
47.8
–
–
–
–
1.10
1.10
–
1.10
1.00
–
–
–
–
64.3
64.3
–
64.3
64.3
Chatree and Nueva Esperanza Mineral Resources (inclusive of Ore Reserves)
Source
Chatree
Nueva Esperanza
Total
Category
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Grade
Contained Metal
Tonnes
(Million)
Gold
(g/t)
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)
73.2
49.8
40.6
163.6
1.6
27.2
10.6
39.4
74.8
77.0
51.2
0.69
0.64
0.59
0.65
0.01
0.46
0.3
0.39
0.68
0.58
0.53
0.60
6.20
5.58
4.50
5.59
93
73
43
66
8.06
29.4
12.5
17.3
0.74
0.68
0.62
0.69
1.56
1.67
1.0
1.48
0.76
1.03
0.70
0.85
100
93
85
94
94
100
60
89
100
95
80
93
1.63
1.02
0.77
3.42
0.0005
0.40
0.09
0.49
1.63
1.42
0.86
3.91
14.6
8.9
5.9
29.4
4.8
63.8
14.8
83.4
19.4
72.7
20.7
112.8
1.74
1.09
0.81
3.64
0.08
1.46
0.33
1.88
1.82
2.55
1.14
5.51
237
148
111
496
4.8
87.9
20.0
112.7
241
236
131
608
Total
203.0
www.kingsgate.com.au
www.kingsgate.com.au 13
Ore Reserves and Mineral Resources
Notes to the Ore Reserves and Mineral Resources Tables on page 12:
(1)
Rounding of figures causes some numbers to not add correctly.
(2)
(3)
Nueva Esperanza Equivalent factors:
Silver Equivalent: AgEq (g/t) = Ag (g/t) + Au (g/t) x 60.
Gold Equivalent: AuEq (g/t) = Au (g/t) + Ag (g/t) / 60.
Calculated from prices of US$1200/oz Au and US$19.00/oz Ag, and metallurgical
recoveries of 80% Au and 84% Ag estimated from test work by Kingsgate.
Chatree Equivalent factors:
Gold Equivalent: AuEq/t = Au (g/t) + Ag (g/t) /136.
Silver Equivalent: AgEq g/t = Au (g/t) x 136 + Ag g/t.
Calculated from prices of US$1200/oz Au and US$19.00/oz Ag and metallurgical
recoveries of 83.3% Au and 38.7% Ag based on metallurgical testwork and plant
performance.
(4)
(5)
Cut-off grades for Resources are:
Chatree 0.30 g/t Au, Nueva Esperanza 0.5g/t AuEq.
Nueva Esperanza Reserves are based on a floating cut-off grade method. In this
method each Resource block is subjected to a series of estimates to generate
revenue and cost fields that are used to determine a breakeven cut-off grade.
(6) Cut-off grade for Chatree Ore Reserves is 0.35 g/t Au.
(7)
(8)
It is in the Company’s opinion that all the elements included in the metal equivalent
calculations have a reasonable potential to be recovered.
Please refer to ASX:KCN release published 14 April 2016 titled, “Nueva Esperanza
Pre-Feasibility Study Confirms Kingsgate Growth Strategy” for details on Mineral
Resources, Ore Reserves and JORC 2012 Table 1.
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R
Chatree Ore Reserves (with a Metallurgical Licence granted)
The table below shows what the Chatree Reserve would be if the Metallurgical Licence was granted in the future.
Grade
Contained Metal
Source
Chatree
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
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, who is a consultant geologist
to the Kingsgate Group. Ron James is a member of
The Australasian Institute of Mining and Metallurgy,
and qualifies as a Competent Person. Mr James has
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 has 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 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.
14
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 2018.
Directors
The following persons were directors of
Kingsgate Consolidated Limited during the
financial year and up to the date of this report:
〉〉 Ross Smyth-Kirk
〉〉 Peter Alexander
〉〉 Peter Warren
〉〉 Sharon Skeggs
Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Principal activities
The principal activities of Kingsgate Consolidated
Limited during the reporting period was the
advancement of the Nueva Esperanza Gold/Silver
Project (“Nueva Esperanza”) in Chile.
In addition the Company initiated:
1.
legal proceedings against named insurers for
a claim under a Political Risk Insurance Policy
that was held by the Company when the Thai
Government unlawfully expropriated the
Chatree Gold Mine in May 2016;
2. arbitral proceedings against the Kingdom of
Thailand under the Australia-Thailand Free
Trade Agreement; and
3. the sale of Nueva Esperanza.
Dividends
〉〉 No final dividend was declared for the year
ended 30 June 2017 (30 June 2016: nil).
〉〉 No interim dividend was declared for the year
ended 30 June 2018 (30 June 2017: 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; Nueva
Esperanza, in the highly prospective Maricunga
Gold/Silver Belt in Chile.
Chatree: Akara Resources Public Company
Limited (“Akara”), a subsidiary of Kingsgate,
ceased operating the Chatree Gold Mine on
31 December 2016, in accordance with the
unlawful closure order by the Thai Government.
Chatree was placed on Care and Maintenance
effective 1 January 2017. Approximately 25 full
time staff are currently employed at the Chatree
Gold Mine to manage the ongoing Care and
Maintenance and rehabilitation works.
At mine closure, approximately A$7.1 million
(net of government royalties) of gold and silver
inventory in the form of high-grade sludge
remained at the Chatree site. Akara has made
some progress in having the sludge released for
sale. Akara is currently working with the Thai
Department of Industry and Mines, and the
sludge has been assayed so that it may be
released for processing and commercial sale.
To assist with this process, Akara Resources
has been negotiating terms and conditions
with a Thai based refinery to process the sludge.
However, there can be no guarantee that this
will occur.
Chatree Closure Remedies
Political Risk Insurance (“PRI”): In October
2017, Kingsgate commenced proceedings in the
New South Wales Supreme Court against Zurich
Insurance Australia Ltd, and other named
insurers, under a Political Risk Insurance Policy
(with a maximum cover of US$200 million) that
was held by the Company when the Thai
Government unlawfully expropriated the
Chatree Gold Mine in May 2016.
On 27 March 2018, Kingsgate engaged in the
confidential Court-ordered mediation of its
claim against Zurich Australia Limited, and other
named insurers for recovery under its Political
Risk Insurance Policy. The dispute was not
settled during the course of the mediation.
On 6 July 2018, a Directions Hearing was held in
the Supreme Court of New South Wales for the
Company’s PRI claim. The Court listed the
Proceedings for trial, for up to fifteen days
commencing on 3 June 2019.
The Kingsgate Board considers that Kingsgate is
covered under the PRI Policy, but remains open
to achieving a settlement. In the meantime the
Company will continue to prosecute its claim
against the insurers in the Supreme Court of
New South Wales. There is no guarantee of a
successful outcome for such proceedings.
Australia – Thailand Free Trade Agreement
(“TAFTA”): On 2 November 2017, Kingsgate
commenced arbitral proceedings against the
Kingdom of Thailand under the Australia-
Thailand Free Trade Agreement, in order to
recover the substantial losses that it has
suffered, and continues to suffer, as a result of
the unlawful expropriation of the Chatree Mine
by the Thai Government.
The TAFTA Tribunal has adopted a Procedural
Calendar which provides that the merits of the
TAFTA Claim will be heard between 18 November
and 29 November 2019.
However, the Tribunal has also ordered that the
proceedings are to be kept confidential, except
where disclosure is required to fulfil a legal duty.
The Kingsgate Board considers that the
Company’s prospects of successfully prose-
cuting its claim against Thailand are excellent,
but remains committed to seeking a negotiated
settlement of the investment dispute with the
Kingdom of Thailand.
Kingsgate has appointed the leading interna-
tional law firm Clifford Chance to represent it,
and Dr. Andrew Bell S.C. as Senior Counsel on
both claims. There can be no guarantee that
Kingsgate will be successful with its claim.
Directors’ Reportwww.kingsgate.com.au 15
Nueva Esperanza
Nueva Esperanza is a feasibility-stage devel-
opment project in Chile with a resource base
of approximately 1.9 million ounces gold equiv-
alent1. A Corporate Adviser has been appointed
to advise and assist in the sale of Nueva
Esperanza. The reasons for the sale are to:
〉〉
repay the Company’s $15 million loan which
is due for repayment in November 2018;
〉〉
fund both the Company’s ongoing TAFTA
and PRI Claims; and
〉〉 provide the Company with ongoing working
capital.
Working capital will include continuing care
and maintenance expenditure on the Chatree
processing plant, and other areas at Chatree as
required. It will also allow Kingsgate to investigate
and assess other potential mining exploration and
or development prospects. The Company antici-
pates that any remaining balance of the proceeds,
after expenses of the sale and after providing for
the aforementioned expenditure, will be
distributed to shareholders. Expressions of
interest for the sale of Nueva Esperanza are being
sought from interested parties with a number of
non-binding indicative offers now received.
Feasibility
Given that expressions of interest in the Project
are currently being sought, work has been
suspended on the Definitive Feasibility Study
(“DFS”), which remains substantially incomplete,
pending the outcome of this process. There is
still material modelling/assumptions that require
further investigation (both CAPEX and OPEX
related) before the DFS can be completed.
Permitting
Kingsgate is pleased to advise that the Environ-
mental Impact Assessment (“EIA”) for Nueva
Esperanza was completed on time and was
submitted to the Chilean regulatory agencies on
29 June 2018. The Chilean regulatory agencies
publicly confirmed their acceptance of the EIA for
assessment in early August 2018.
Exploration
Nine Reverse Circulation (“RC”) follow-up drill
holes totalling 1,136 metres were completed on
the Cerro Blanco West target in late 2017,
following up on eight initial exploration holes
previously reported (See Kingsgate ASX Release
titled “New Silver Discovery at Nueva Esperanza,
Chile” dated 17 July 2017). The best holes were:
〉〉 KRC-066, intercepted 18 metres
at 207.54g/t Ag;
〉〉 KRC-058, intercepted 42 metres
at 41.58g/t Ag;
〉〉 KRC-059, intercepted 30 metres
at 32.26g/t Ag;
〉〉 KRC-063, intercepted 12 metres
at 44.35g/t Ag; and
〉〉 KRC-065, intercepted 22 metres
at 46.01g/t Ag.
Full details of these drill results can be found
as reported (See Kingsgate ASX Release titled
“Step-out Drilling Expands New Silver Rich Zone
at Nueva Esperanza, Chile” dated 8 January 2018).
These results follow a number of encouraging drill
intercepts in calendar 2017.
In addition to these RC holes, additional
exploration work completed during the year
concentrated on three key areas in and around
the Project footprint:
〉〉 North-East Nueva Esperanza where
abundant siliceous material is evident as a
surface lag (bedrock-derived stony material
selectively sampled and analysed as an
indicator of bedrock geochemistry);
〉〉 Chimberos East, along the boundary with
Kinross Gold Corporation’s Huemul claims
where a strong quartz stockwork appears to
be widespread; and
〉〉
The Antonella claims/tenements surrounding
the neighbouring ‘Atletico Madrid’ block
located approximately 6kms to the south of
Nueva Esperanza, which contain abundant
siliceous breccia and vuggy-silica.
Assay Results
A total of 796 rock chip samples were collected
during 2017–2018.
Notable highlights include more recent results
from the Antonella exploration tenements:
〉〉 2 rock chip assays with 23.9g/t Au and
7.93g/t Ag and 5.39g/t Au and 26.5g/t Ag;
〉〉 2 rock chip assays with 764g/t Ag and
719g/t Ag respectively; and
〉〉 5 rock chip samples greater than 10g/t Ag
including a sample with 34g/t Ag.
These results were reported in the June 2018
quarterly activities report released 31 July 2018.
The spring exploration program commencing in
September/October will look to further inves-
tigate these promising results, and to continue
to unlock the prospectivity around the Cerro
Blanco West exploration target.
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.
1.
The resource base of 1.9 million ounces of gold equivalent is broken down as follows: Measured – 0.08 Moz, Indicated – 1.46 Moz and Inferred – 0.33 Moz. Gold Equivalent
is based on the following: AuEq (g/t) = Au (g/t) + Ag (g/t) / 60. Calculated from prices of US$1,200/oz Au and US$19.00/oz Ag, and metallurgical recoveries of 80% Au and
84% Ag estimated from test work by Kingsgate (See ASX:KCN released titled “Kingsgate Mineral Resources and Ore Reserves 2017” dated 5 October 2017).
continuedu
Directors’ ReportDirectors' Report 16
Cost Savings Measures
Your Directors are acutely aware of the need to
further reduce costs while work continues to
prosecute both the PRI and TAFTA claims. In that
regard, the following measures have been imple-
mented over the financial year:
〉〉
closure of the corporate office in Bangkok;
〉〉
〉〉
the ongoing rationalisation of superfluous
land and equipment at Chatree;
the relocation to a smaller more cost
effective corporate office in Sydney;
〉〉
〉〉
the review and cancellation of a number
of corporate services that are no longer
required;
a further reduction in staff numbers both in
Thailand and Sydney, including redundancies
of senior management that took effect in
Sydney at the end of August 2018.
Financing
On 29 August 2017 the Group executed a
$15 million Standby Loan Facility (“SLF”) to
assist with working capital requirements and for
general corporate purposes. The SLF was drawn
down in full on 2 May 2018 and is to be repaid
six months after drawdown. As indicated above,
the Group is currently renegotiating the terms
of the SLF including extending its term to suit
available resources and the timing of the sale of
Nueva Esperanza.
Financial results
Net (loss)/profit after tax ($’000)
EBITDA ($’000)
Dividends paid (Cash & DRP) ($’000)
Share price 30 June ($)
Basic (loss)/earnings per share (Cents)
Diluted (loss)/earnings per share (Cents)
2018
(76,722)
(71,706)
–
0.28
(34.26)
(34.26)
2017
7,088
63,042
–
0.20
3.17
3.17
2016
2015
2014
(229,451)
(147,643)
39,864
69,458
–
*0.41
(102.6)
(102.6)
–
0.70
(66.0)
(66.0)
* Price at 10 May 2016 as shares were suspended from 13 May 2016 to 16 October 2016.
EBITDA before significant items
The pre-tax loss for the Group before significant items was $34.1 million down from a profit of $8.1 million in the previous year.
EBITDA before significant items was ($29.1) million (2017: $63.0 million).
Significant items are detailed below.
(Loss)/profit after income tax
Income tax expense
(Loss)/profit before income tax
Significant item
Impairment losses – Nueva Esperanza
(Loss)/profit before tax and significant item
Net finance costs
Depreciation and amortisation
EBITDA before significant items
2018
$’000
(76,722)
–
(76,722)
42,652
(34,070)
3,189
1,827
(29,054)
(97,613)
64,207
–
0.86
(56.7)
(56.7)
2017
$’000
7,088
1,016
8,104
–
8,104
3,631
51,307
63,042
Directors’ Reportwww.kingsgate.com.au The Group will continue:
〉〉
identifying expenditure that can be reduced
and/or deferred;
〉〉
realising the value of assets including
reviewing the possibility of the sale of the
Chatree Gold Mine infrastructure assets,
which include plant and equipment and
non-strategic land and property; and
〉〉 pursuing other funding options which may
include entering into an agreement with a
litigation funder on a non-recourse basis to
fund the legal and other ancillary costs
associated with the PRI and TAFTA claims.
The Directors believe that the Group will be
successful in managing the above matters and
they have prepared the financial report on a
going concern basis. Accordingly no adjust-
ments have been made to the financial report
relating to the recoverability and classification
of the asset carrying amounts or the amounts
and classification of liabilities that might be
necessary should the Group not continue as
a going concern.
As required by accounting standards the audited
financial statements include an impairment
charge against Nueva Esperanza of $42,652,000
(refer to Note 31).
The carrying value of Nueva Esperanza, after the
impairment, is at the lower end of the range of
indicative offers received from potential
purchasers. The Group will continue to work
with the bidders for the Project and its advisers
with a view to achieving sale proceeds in excess
of the current book value.
The attached financial report for the year ended
30 June 2018 contains an independent auditor’s
report which includes an emphasis of matter
paragraph in regard to the existence of a
material uncertainty that may cast significant
doubt about the Group’s ability to continue as a
going concern. For further information, refer to
Note 1(a)(i) to the financial report, together with
the auditor’s report.
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 on page 16
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 preliminary final report.
Considering the financial position of the Group
at 30 June 2018 and absent of any settlement in
the short term of either the PRI Claim, the TAFTA
Claim, or realisation of the value from the sale of
the stored gold sludge, a process has been
initiated for the sale of Nueva Esperanza.
The sale of Nueva Esperanza will require share-
holders’ approval. It is anticipated that the Group
will be able to submit its proposal to the share-
holders early in the 2019 calendar year. There is
an uncertainty as to whether the sale of the
Project will be completed within the required
timeframe and whether the shareholders will
approve the sale.
Based on the cash flow forecast prepared for the
Group and based on the timing of the expected
sale of the Project, the Group will also need to
obtain additional funding of approximately
$5,000,000 and in addition will need to renego-
tiate the terms of the Standby Loan Facility
(“SLF”) including extending its term.
As a result of these matters, there is a material
uncertainty related to events or conditions
that may cast significant doubt on whether
the Group will continue as a going concern and,
therefore, whether it will realise its assets and
settle its liabilities and commitments in the
normal course of the business and at the
amounts stated in the financial report.
It is anticipated that the proceeds from the sale
of Nueva Esperanza will allow the Group to
continue as a going concern. Funds from the
sale should be sufficient to fund the future costs
for the ongoing PRI and TAFTA Claims, and
provide the Group with ongoing working capital.
Working capital will include continuing care and
maintenance expenditure on the Chatree
processing plant, and other areas at Chatree as
required. It will also allow the Group to inves-
tigate and assess other potential mining
exploration and development prospects. It is
anticipated that any remaining balance of the
proceeds, after expenses of the sale and after
providing for the aforementioned expenditure,
will be distributed to shareholders.
17
MATERIAL BUSINESS RISKS
The material business risks that may have an
impact on the operating and financial prospects
of the Group are:
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 conse-
quence 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.
Mining risks and insurance risks
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 activities are
conducted by contractors. As a result, the Group’s
business performance is impacted upon by the
availability and performance of contractors and
the associated risks.
Maintaining title
The Group’s activities are subject to obtaining
and maintaining the necessary titles, authorisa-
tions, 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 success-
fully obtain and maintain relevant Authorisations
to support its activities, or that renewal of
existing Authorisations 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.
continuedu
Directors’ ReportDirectors' Report 18
Political, economic, social
and security risks
Kingsgate’s activities are subject to the political,
economic, social and other risks and uncertainties
in the jurisdictions in which those activities are
undertaken.
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 activities are subject to extensive
laws and regulations. Delays in obtaining, or
failure to obtain government permits and
approvals may adversely affect the Group.
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.
Matters subsequent to the
end of the financial year
No matter or circumstance has arisen since
30 June 2018 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.
Likely developments
and expected results
Kingsgate continues to prosecute its claim
under the Australia-Thailand Free Trade
Agreement (“TAFTA”) as it remains committed
to negotiations with the Thai Government for
both restitution of the Chatree Gold Mine and
associated compensation.
On 2 November 2017, Kingsgate commenced
arbitral proceedings against the Kingdom of
Thailand under TAFTA, in order to recover the
substantial losses that it has suffered, and
continues to suffer, as a result of the unlawful
expropriation of the Chatree Mine by the Thai
Government.
The TAFTA Tribunal has adopted a Procedural
Calendar which provides that the merits of the
TAFTA Claim will be heard between 18 November
and 29 November 2019.
A failure to appropriately manage local
community stakeholder expectations may lead
to disruptions in the Group’s activities.
However, the Tribunal has also ordered that the
proceedings are to be kept confidential, except
where disclosure is required to fulfil a legal duty.
The Kingsgate Board considers that the
Company’s prospects of successfully prose-
cuting its claim against Thailand are excellent,
but remains committed to seeking a negotiated
settlement of the investment dispute with the
Kingdom of Thailand.
Kingsgate has commenced proceedings in the
New South Wales Supreme Court against Zurich
Insurance Australia Ltd, and other named
insurers, under a Political Risk Insurance Policy
(with a maximum cover of US$200 million) that
was held by the Company when the Thai
Government unlawfully expropriated the
Chatree Gold Mine in May 2016. On 6 July 2018,
a Directions Hearing was held in the Supreme
Court of New South Wales for the Company’s
PRI claim. The Court listed the Proceedings for
trial, for up to fifteen days commencing on
3 June 2019.
The Kingsgate Board considers that Kingsgate is
covered under the PRI Policy, but remains open
to achieving a settlement. In the meantime, the
Company will continue to prosecute its claim
against the insurers in the Supreme Court of
New South Wales. There is no guarantee of a
successful outcome for such proceedings.
Kingsgate remains focused on ongoing cost
saving initiatives. Further cost reductions will be
implemented in FY19.
Environmental laws
The Group is subject to various environmental
laws in respect to its activities in Thailand and
Chile. For the year ended 30 June 2018, the
Group has operated within all applicable environ-
mental laws and regulations.
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 effectiveness
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.
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 2018, 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 Warren
Sharon Skeggs
A
11
11
11
11
B
11
11
11
11
A
2
–
2
2
B
2
–
2
2
A
1
–
1
1
B
1
–
1
1
A
–
–
–
–
B
–
–
–
–
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.
Directors’ Reportwww.kingsgate.com.au 19
Information on Directors/
Company Secretary
Ross Smyth-Kirk
B Com, CPA, F Fin
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 38 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
Sharon Skeggs
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.
Non-Executive Director
Sharon Skeggs has had a distinguished career in
business management, in London and Australia,
for over 38 years. She is an expert in business
strategy and communications. For the past eight
years Ms Skeggs has consulted to a number of
major companies including Telstra, Westpac,
News Limited and Visa (Australia & Asia) on a
variety of corporate matters including business
and marketing strategies, change management,
communication programs and cost reduction
initiatives. She was previously a Director of
Saatchi & Saatchi (Australia) for 15 years, where
she was responsible for highly successful
communication campaigns, shifting stakeholder
perceptions via PR and social media, for major
Australian companies.
Responsibilities
Member of the Audit, Remuneration and
Nomination Committees.
Chairman of the Board, member of the Audit
Committee, Chairman of the Nomination and
Remuneration Committees.
Peter Warren
B Com, CPA
Peter Alexander
Ass. Appl. Geol
Non-Executive Director
Peter Alexander has had 45 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. He was
previously Chairman of Doray Minerals Limited
and Caravel Minerals Limited and a Director of
Fortunis Resources Limited.
Responsibilities
Member of the Remuneration Committee.
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.
continuedu
Directors’ ReportDirectors' Report
20
Remuneration Report
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.
Directors’ Reportwww.kingsgate.com.au 21
The following summarises the performance of the Group over the last five years:
Revenue (‘000s)
Net (loss)/profit after income tax (‘000s)
EBITDA (‘000s)
Share price at year end ($/share)
Dividends paid (cent/share)
KMP short term employee benefits (‘000s)
* see page 25 for table outlining the short term employee benefits.
2018
–
(76,722)
(71,706)
0.28
Nil
*1,604
2017
176,119
7,088
63,042
0.20
Nil
2,099
2016
2015
2014
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
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 since 30 June 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 light of unexpected or unintended circumstances.
How is the STI delivered?
STIs are paid in cash after the conclusion of the assessment period and confirmation of financial results/individual performance and
subject to tax in accordance with prevailing Australian 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.
continuedu
Directors’ ReportDirectors' Report 22
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 2018 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 perfor-
mance 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
guidelines 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
adjustments to the number of rights and/or the vesting entitlements to ensure that holders of rights are neither advantaged or
disadvantaged by those changes.
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. These options
were forfeited during the year as a result of the recipient resignation.
Grant date
Exercise period
Exercise price
($)
Number of options
granted
Value of option at
grant date ($)
Number of options
vested during
the year
Number of options
forfeited during
the year
29 Apr 2016
1 July 2017 – 30 June 2019
29 Apr 2016
1 July 2018 – 30 June 2020
29 Apr 2016
1 July 2019 – 30 June 2021
0.40
0.50
0.60
500,000
500,000
500,000
0.23
0.24
0.22
500,000
–
–
500,000
500,000
500,000
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 21 to the financial statements.
Directors’ Reportwww.kingsgate.com.au 23
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
Non-Executive Directors
Peter Alexander
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 – ceased employment 4 March 2018
Leonardo Hermosilla
Vice President Project Development Chile
Changes since the end of the reporting period
Other than Ross Coyle and Jamie Gibson being made redundant effective 31 August 2018, there were no changes to Directors and Key Management
Personnel since the end of the reporting period.
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
Term of
agreement
Fixed annual remuneration
including superannuation
Notice period by
Executive
Notice period by
the Company6
FY 20181
FY 20171
$157,6802
$157,6802
N/A7
$405,0003
$405,0003
$190,000
$190,000
C$370,0004
C$370,0004
3 months
3 months
3 months
CLP170,435,0225
CLP168,497,3045
1 month
Open
Open
Open
Open
Open
N/A7
6 months
6 months
6 months
1 month
1
2
3
4
5
6
7
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.
A voluntary 10% reduction in fixed remuneration effective from 1 October 2015.
Canadian dollars. Ceased employment 4 March 2018.
Chilean pesos.
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.
continuedu
Directors’ ReportDirectors' Report 24
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.
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 2018 1
$
Financial
year ended
30 June 2017 1
$
–
270,000
2120,329
270,000
270,000
390,329
1
2
On an annualised basis for all Directors.
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.
Directors’ Reportwww.kingsgate.com.au 25
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 2018
Name
Non-Executive Directors
Peter Alexander
Peter Warren
Sharon Skeggs
Sub-total Non-Executive
Directors Compensation
Executive Chairman
Ross Smyth-Kirk
Other KMPs
Ross Coyle
Jamie Gibson
Alistair Waddell3
Leonardo Hermosilla
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
$
90,000
90,000
90,000
270,000
144,000
380,000
173,516
260,978
353,108
1,311,602
1,581,602
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,941
1,502
(8,958)
12,511
18,996
18,996
–
–
–
–
3,657
–
–
–
–
3,657
3,657
–
–
–
–
–
10,824
1,800
601
–
13,225
13,225
8,550
8,550
8,550
25,650
13,680
25,000
16,484
–
–
–
–
–
–
–
–
–
(104,013)
–
98,550
98,550
98,550
295,650
161,337
429,765
193,302
148,608
365,619
55,164
(104,013)
1,298,631
80,814
(104,013)
1,594,281
1
2
Non-monetary benefits relate primarily to car parking.
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.
3
Ceased employment 4 March 2018.
continuedu
Directors’ ReportDirectors' Report 26
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
40
26,518
3,025
13,161
4,249
54,011
54,011
1,308
–
–
–
–
1,308
257
–
–
–
–
–
–
257
1,565
–
–
–
–
–
–
–
8,733
1,209
964
–
(1,553)
–
9,353
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), 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.
3
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 27
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Executive Director
Ross Smyth-Kirk
Other Key Management Personnel
Ross Coyle
Jamie Gibson
Alistair Waddell
Leonardo Hermosilla
Fixed remuneration
2018
STI/cash bonus
2018
At risk – LTI
2018
100%
100%
100%
170%
100%
–
–
–
–
–
–
–
–
(70%)1
–
1
Ceased employment 4 March 2018. The percentages disclosed reflect the value of options credited to the income statement during the year as a result of the options issued
to the employee being forfeited.
Movement in LTI for the year ended 30 June 2018
Options
The number of options held during the financial year by each of the specified executives of the Group, including their personally-related entities, are set out
as follows:
2018
Other Key Management Personnel
Alistair Waddell
2
Balance at the start of the year, unvested.
Share holdings
2018
Executive Chairman
Ross Smyth-Kirk
Non-Executive Directors
Peter Alexander
Sharon Skeggs
Peter Warren
Other Key Management Personnel
Ross Coyle
Balance at
start of year
Granted during
the year
Vested during
the year
Forfeited during
the year
Balance
at year end
Vested and
exercisable at
end of year
1,500,0002
–
500,000
1,500,000
–
–
Balance at
start of year
Other changes
during the year
Balance at
year end
5,076,725
46,487
19,347
145,000
84,953
–
–
–
–
–
5,076,725
46,487
19,347
145,000
84,953
continuedu
Directors’ ReportDirectors' Report 28
Loans to Directors
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 27: Auditors’ Remuneration. The
Directors are satisfied that the provision of non-audit services during the period by the auditor is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services disclosed in Note 27: 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 29.
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
28 September 2018
Directors’ Reportwww.kingsgate.com.au l
n
o
i
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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 2018, 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
28 September 2018
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
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
30
Financial Statements
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2018
Sales revenue
Costs of sales
Gross profit
Exploration expenses
Care and maintenance expenses
Corporate and administration expenses
Other income and expenses
Foreign exchange loss
Impairment losses – Nueva Esperanza
(Loss)/profit before finance costs and income tax
Finance income
Finance costs
Net finance costs
(Loss)/profit before income tax
Income tax expense
(Loss)/profit after income tax
Other comprehensive income
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations (net of tax)
Total other comprehensive income for the year
Total comprehensive (loss)/income for the year
(Loss)/profit attributable to:
Owners of Kingsgate Consolidated Limited
Continuing operations
Discontinued operations
Total comprehensive (loss)/income attributable to:
Owners of Kingsgate Consolidated Limited
Continuing operations
Discontinued operations
Earnings per share
Note
5a
5b
5c
5d
31
5e
6
16a
2018
$’000
–
–
–
(10,091)
(4,402)
(16,117)
(96)
(175)
(42,652)
(73,533)
147
(3,336)
(3,189)
(76,722)
–
(76,722)
1,662
1,662
(75,060)
(76,722)
–
(75,060)
–
2017
$’000
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
1,245
1,245
8,333
7,088
–
8,333
–
Cents
Cents
Basic and diluted (loss)/earnings per share
28
(34.26)
3.17
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
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Consolidated Statement
of Financial Position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Receivables
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
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.
31
Financial Statements
Note
2018
$’000
2017
$’000
7
8
9
8
10
11
9
12
13
14
12
13
14
15
16a
16b
11,239
678
1,966
13,883
5,468
1,111
43,297
15,124
65,000
78,883
6,663
15,297
358
22,318
4,052
11,230
14,841
30,123
52,441
26,442
22,007
1,959
4,585
28,551
4,748
2,597
83,767
14,638
105,750
134,301
3,742
657
947
5,346
3,946
10,914
13,235
28,095
33,441
100,860
677,761
53,942
677,015
52,384
(705,261)
(628,539)
26,442
100,860
32
Financial Statements
Consolidated Statement
of Changes in Equity
For the year ended 30 June 2018
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
Balance at 1 July 2017
Loss 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 2018
Contributed
equity
$’000
Reserves
$’000
Accumulated
losses
$’000
Total equity
$’000
Note
677,042
50,949
(635,627)
–
–
–
(27)
–
(27)
–
1,245
1,245
–
190
190
7,088
–
7,088
–
–
–
92,364
7,088
1,245
8,333
(27)
190
163
677,015
52,384
(628,539)
100,860
677,015
–
–
–
746
–
746
52,384
–
1,662
1,662
–
(104)
(104)
(628,539)
(76,722)
–
100,860
(76,722)
1,662
(76,722)
(75,060)
–
–
–
746
(104)
642
677,761
53,942
(705,261)
26,442
15
15
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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Consolidated Statement
of Cash Flows
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers
Receipts from workers compensation insurance claim
Payments to suppliers and employees
Interest received
Finance costs paid
Income tax paid
33
Financial Statements
Note
2018
$’000
2017
$’000
–
500
(26,943)
147
(2,483)
–
176,285
–
(115,382)
385
(3,275)
(1,061)
Net cash (outflow)/inflow from operating activities
22
(28,779)
56,952
Cash flows from investing activities
Payments for property, plant and equipment
Payments for exploration, evaluation and development
Decrease in deposits
Decrease in restricted cash
Proceeds from sale of property, plant and equipment
Proceeds from sale of Dominion Metals Pty Ltd
Proceeds from sale of Bowdens
Proceeds from sale of Challenger
Proceeds from sale of available-for-sale financial assets
Net cash inflow 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
Payments for share issue costs
Net cash inflow/(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.
(167)
–
2,930
–
72
365
–
–
–
(30)
(2,692)
4,526
7,004
–
–
5,000
750
432
3,200
14,990
16,132
(905)
(429)
–
(4)
586
(11,479)
(75,015)
(27)
–
14,794
(85,935)
(10,785)
22,007
17
11,239
(13,993)
36,314
(314)
22,007
34
Notes to the
Financial Statements
for the year ended 30 June 2018
The Financial Report of Kingsgate Consolidated
Limited (Kingsgate or the “Company”) for the
year ended 30 June 2018 was authorised for
issue in accordance with a resolution of
Directors on 28 September 2018.
$8,435,000. The Group currently does not have
sufficient cash available to fully repay these
liabilities which include the Standby Loan Facility
(“SLF”) of $15,000,000 which is required to be
repaid in full in November 2018.
As disclosed in the Preliminary Final Report
(Appendix 4E) for 2018 lodged on 30 August
2018, the results were in the process of being
audited and asset impairment assessment of
Nueva Esperanza Gold/Silver Project (“Nueva
Esperanza”) was not finalised. The asset
impair ment assessment of Nueva Esperanza has
now been completed. The fair value and recov-
erable amount of Nueva Esperanza was assessed
to be $57,860,000 as at 30 June 2018 which was
below its carrying value of $100,512,000. This
has resulted in an impairment of $42,652,000
(see Note 31).
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 2018 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
a.
Critical accounting estimates
and judgements
(i) Going concern and material uncertainty
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.
Since the closure of the Chatree Gold Mine on 31
December 2016, the Group has relied on its cash
reserves and available loan facilities to continue
as a going concern. At 30 June 2018, the Group’s
current liabilities exceeded its current assets by
Political Risk Insurance (“PRI”): In October
2017, the Group commenced proceedings in the
New South Wales Supreme Court against
insurers, under a Political Risk Insurance Policy
that has a maximum cover of US$200 million
and was held by the Group when the Thai
Government unlawfully expropriated the
Chatree Gold Mine in May 2016. Mediation
between the Group and the insurers for a
settlement of the claim took place in late March
2018. No settlement was reached.
On 6 July 2018, a Directions Hearing was held in
the Supreme Court of New South Wales for the
Company’s PRI claim. The Court listed the
Proceedings for trial, for up to fifteen days
commencing on 3 June 2019.
Australia – Thailand Free Trade Agreement
(“TAFTA”): On 2 November 2017, Kingsgate
commenced arbitral proceedings against the
Kingdom of Thailand under the TAFTA, in order
to recover the substantial losses that it has
suffered, and continues to suffer, as a result of
the unlawful expropriation of the Chatree mine
by the Thai Government.
The TAFTA Tribunal has adopted a Procedural
Calendar which provides that the merits of the
TAFTA Claim will be heard between 18 November
and 29 November 2019. However, the Tribunal
has also ordered that the proceedings are to be
kept confidential, except where disclosure is
required to fulfil a legal duty.
To date, Kingsgate has not been able to achieve
a settlement of either the TAFTA Claim or the PRI
Claim. While the Company remains open to
achieving a settlement of either or both of such
claims, it will not do so on unreasonable terms.
Gold Sludge: Gold sludge containing approxi-
mately 4,750 ounces of gold and 34,800 ounces
of silver with a value of around $7,100,000 (net
of government royalties) continues to be stored
at the Chatree Gold Mine. Following the grant
of the initial ore possession permit in July 2018
further discussions have been initiated with the
Thai Authorities, for a license to transport the
sludge for processing. There is no certainty that
the Thai Authorities will permit the sludge to be
processed.
Considering the financial position of the Group
at 30 June 2018 and absent of any settlement in
the short term of either the PRI Claim, the TAFTA
Claim, or realisation of the value from the sale of
the stored gold sludge, a process has been
initiated for the sale of Nueva Esperanza.
The sale of Nueva Esperanza will require share-
holders’ approval. It is anticipated that the
Group will be able to submit its proposal to the
shareholders early in the 2019 calendar year.
There is an uncertainty as to whether the sale of
the Project will be completed within the required
timeframe and whether the shareholders will
approve the sale.
Based on the cash flow forecast prepared for
the Group and based on the timing of the
expected sale of the Project, the Group will also
need to obtain additional funding of approxi-
mately $5,000,000 and in addition will need to
renegotiate the terms of the SLF including
extending its term.
As a result of these matters, there is a material
uncertainty related to events or conditions that
may cast significant doubt on whether the
Group will continue as a going concern and,
therefore, whether it will realise its assets and
settle its liabilities and commitments in the
normal course of the business and at the
amounts stated in the financial report.
It is anticipated that the proceeds from the sale
of Nueva Esperanza will allow the Group to
continue as a going concern. Funds from the
sale should be sufficient to fund the future costs
for the ongoing PRI and TAFTA Claims, and
provide the Group with ongoing working capital.
Working capital will include continuing care and
maintenance expenditure on the Chatree
processing plant, and other areas at Chatree
as required. It will also allow the Group to
Notes to the Financial Statementswww.kingsgate.com.au 35
investigate and assess other potential mining
exploration and development prospects. It is
anticipated that any remaining balance of the
proceeds, after expenses of the sale and after
providing for the aforementioned expenditure,
will be distributed to shareholders.
The Group will continue:
〉〉
identifying expenditure that can be reduced
and/or deferred;
〉〉
realising the value of assets including
reviewing the possibility of the sale of the
Chatree Gold Mine infrastructure assets,
which include plant and equipment and
non-strategic land and property; and
〉〉 pursuing other funding options which may
include entering into an agreement with a
litigation funder on a non-recourse basis
to fund the legal and other ancillary costs
associated with the PRI and TAFTA claims.
The Directors believe that the Group will be
successful in managing the above matters and
they have prepared the financial report on a
going concern basis. Accordingly no adjust-
ments have been made to the financial report
relating to the recoverability and classification
of the asset carrying amounts or the amounts
and classification of liabilities that might be
necessary should the Group not continue as a
going concern.
(ii)
Uncertainty in relation to Chatree
Gold Mine assets and liabilities
The Chatree Gold Mine prematurely ceased
operations on 31 December 2016 following the
Thai Government’s unlawful expropriation of the
Chatree mine. Kingsgate Consolidated Limited
and its Thai subsidiary Akara Resources Public
Company Limited have complied with the Thai
Government’s unlawful measures and the
Chatree Gold Mine was placed on Care and
Maintenance effective 1 January 2017.
In preparing the consolidated financial state-
ments of the Group with the exception of some
assets that were assessed as being recoverable
independently from the re-opening of the mine,
all assets of the Chatree Gold Mine have been
written down to nil value. In respect of rehabili-
tation liabilities, management revised its
previous estimates and reduced its total rehabili-
tation liability to approximately $14,768,000.
This is based on management’s rehabilitation
plan which is 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 Chatree Gold
Mine 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
plant and equipment and non-strategic land and
property and outcomes from discussions with
the Thai Government, including:
〉〉
agreeing on a rehabilitation plan, costing
and timing;
〉〉 potential re-opening of the mine if permitted
by the Thai Government; and
〉〉 pursuing legal avenues for compensation
including action for damages for the
unlawful expropriation of the Chatree mine
by the Government through arbitral
proceedings against the Kingdom of Thailand
under the TAFTA.
As noted above there is also uncertainty regarding
the outcome of the proceedings against the
insurers under the PRI that has a maximum cover
of US$200 million and that was held by Kingsgate
when the Thai Government unlawfully expro-
priated the Chatree Gold Mine in May 2016.
On 27 March 2018, Kingsgate engaged in the
confidential Court-ordered mediation of its
claim against Zurich Australia Limited, and other
named insurers. The dispute was not settled
during the course of the mediation.
On 6 July 2018, a Directions Hearing was held in
the Supreme Court of New South Wales for the
Company’s PRI claim. The Court listed the
Proceedings for trial, for up to fifteen days
commencing on 3 June 2019.
No asset has been recognised on the balance
sheet for this matter.
(iii) Nueva Esperanza impairment consideration
The carrying value of the cash generating unit
before impairment for Nueva Esperanza
amounted to $100,512,000 at balance sheet
date. In accordance with the accounting
standards for exploration assets, management is
required to consider if facts and circumstances
existed at balance sheet date that would require
Nueva Esperanza be tested for impairment (see
Note 31 for impairment assessment).
As noted above a process to sell the Project is
underway and as a result a fair value less costs
of disposal (FVLCD) approach to assessing the
recoverable amount of the Project is most
appropriate. In determining FVLCD management
has used and considered:
〉〉
〉〉
an assessment of the Project value based on
a discounted cash flows model using market
based commodity price and exchange rate
assumptions, estimated quantities of recov-
erable minerals, production levels, operating
costs and capital requirements, based on
latest life of mine plans; and additional value
attributable to resources and exploration
potential; and
information to date in relation to the process
supporting the proposed sale of the Project
including non-binding indicative offers
received acknowledging that:
〉〉 offers received to date to purchase the
Project are non-binding and indicative
only;
〉〉
〉〉
〉〉
further due diligence is required by
potential purchasers;
a site visit to the Project will be
required as part of the due diligence.
Due to unfavourable weather conditions,
site visits will not be possible until
October 2018;
shareholder approval for the Project
sale is required with such approval to be
considered at a general meeting likely to
be held early in the 2019 calendar year.
Based on the discounted cash flow methodology,
the fair value of Nueva Esperanza was assessed to
be $57,860,000 as at 30 June 2018 which was
below its carrying value of $100,512,000. This
has resulted in an impairment of $42,652,000.
The main factor contributing to the impairment
charge was a lower silver price (US$18/ounce)
used in this year’s impairment assessment than
2017 (US$20/ounce).
As a comparison to the sale process information
received to date, the carrying value after
impairment based on the discounted cash flow
is at the lower level of the range of non-binding
indicative offers received for the proposed sale
of the Project.
The Group will continue to work with the bidders
for the Project and its advisers with a view to
achieving sale proceeds in excess of the current
book value.
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.
continuedu
Notes to the Financial StatementsNotes to the Financial Statements 36
b. Compliance with IFRS
The financial statements comply with Interna-
tional Financial Reporting Standards (“IFRS”)
adopted by the International Accounting
Standards Board (“IASB”).
c. 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.
d. Functional and presentation currency
The financial statements of the Group entities
are measured using the currency of the primary
economic environment in which the entity
operates (“the functional currency”). The
consolidated statements are presented in
Australian dollars, which is the Company’s
functional currency and presentation currency.
e. 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.
f. Critical accounting estimates
The preparation of financial statements requires
the use of certain critical accounting estimates.
It also requires management to exercise its judge-
ment in the process of applying the Group’s
accounting policies. The areas involving a higher
degree of judgement or complexity, or areas
where assumptions and estimates are significant
to the financial statements are disclosed in Note 3.
2. Significant accounting
policies
The principal accounting policies adopted in the
preparation of the financial statements are set
out below. These policies have been consistently
applied to all the years presented.
a. Principles of consolidation
(i)
Business combinations
Business combinations are accounted for using
the acquisition method as at the acquisition
date, which is the date on which control is
transferred to the Group. Control is the power to
govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
In assessing control, the Group takes into
consideration potential voting rights that
currently are exercisable.
The consideration transferred for the acquisition
of a subsidiary comprises the fair 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 trans-
actions. The non-controlling interest in the
acquiree is based on the fair value of the
acquiree’s net identifiable assets. The adjust-
ments to non-controlling interests are based on
the proportionate amount of the net assets of
the subsidiary. The acquisition of an asset or
group of assets that is not a business is
accounted for by allocating the cost of the
transaction to the net identifiable assets and
liabilities acquired based on their fair values.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group.
The financial statements of subsidiaries are
included in the consolidated financial state-
ments from the date that control commences
until the date that control ceases.
The accounting policies of subsidiaries have been
changed when necessary to align them with the
policies adopted by the Group. Losses applicable
to the non-controlling interests in a subsidiary
are allocated to the non-controlling interests
even if doing so causes the non-controlling
interests to have a deficit balance.
Intra-group balances and transactions, and
any unrealised gains arising from intra-group
transactions 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
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)
Foreign operations
The results and financial position of all the
Group entities (none of which has the currency
of a hyperinflationary economy) that have a
functional currency different from the 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.
Notes to the Financial Statementswww.kingsgate.com.au 37
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,
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 consoli-
dated financial statements in respect of this
agreement as payment of any amounts under
the tax sharing agreement is considered remote.
e. Leases
Leases of property, plant and equipment where
the Group as lessee has substantially all the risks
and rewards of ownership are classified as finance
leases. Finance leases are capitalised at the
lease’s inception at the fair value of the leased
property or, if lower, the present value of the
minimum lease payments. The corresponding
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.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 38
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
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.
Trade and other receivables
i.
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 deter-
mined after deducting rebates and discounts.
Net realisable value is the estimated selling price
in the ordinary course of business less the
estimated costs of completion and the
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
Notes to the Financial Statementswww.kingsgate.com.au 39
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.
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 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).
Derecognition
An item of property, plant and equipment is
derecognised upon disposal or when no future
economic benefits are expected to arise from
the continued use of the asset.
Any gain or loss arising on derecognition of the
asset (calculated as the difference between the
net disposal proceeds and the carrying amount
of the item) is included in the profit or loss in the
period the item is derecognised.
n. Deferred stripping costs
As part of its mining operations, the Group
incurs stripping (waste removal) costs both
during the development phase and production
phase of its operations.
Stripping costs incurred during the production
phase are generally considered to create two
benefits, being either the production of 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 costs associated with the stripping
activity associated with that component can
be reliably measured.
The amount of stripping costs deferred is based
on the ratio obtained by dividing the volume of
waste mined by the volume of ore mined for
each component of the mine. Stripping costs
incurred in the period are deferred to the extent
that the actual current period waste to ore ratio
exceeds the life of component expected waste
to ore (“life of component”) ratio.
A component is defined as a specific volume of
the ore body that is made more accessible by the
stripping activity. An identified component of the
ore body is typically a subset of the total ore body
of the mine. It is considered that each mine may
have several components, which are 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
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 40
n. Deferred stripping costs continued
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.
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 subse-
quently recognised in the profit or loss. Mining
services are recognised in the profit or loss on a
systematic basis based on bank cubic metres
mined by the contractor.
p.
Exploration, evaluation and
feasibility expenditure
Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred
by, or on behalf of the Group is accumulated
separately for each area of interest. Such
expenditure comprises direct costs and depre-
ciation and does not include general overheads
or administrative expenditure not having a
specific nexus with a particular area of interest.
Exploration expenditure for each area of interest
is carried forward as an asset provided the rights
to tenure of the area of interest are current and
one of the following conditions is met:
〉〉
the exploration and evaluation expenditures
are expected to be recouped through
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 expend-
iture is carried forward as part of the mine
property only when substantial future economic
benefits are thereby established. Otherwise,
such expenditure is classified as part of the cost
of production.
Amortisation of costs is provided on the units-
of-production method with separate
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. Devel-
opment and land expenditure still to be incurred
in relation to the current recoverable reserves
are included in the amortisation calculation.
Where the life of the assets is shorter than the
mine life, their costs are amortised based on the
useful life of the assets.
The estimated recoverable reserves and life of
each mine and the remaining useful life of each
class of asset are reassessed at least annually.
Where there is a change in the reserves during a
six month period, depreciation and amortisation
rates are adjusted prospectively from the
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
Notes to the Financial Statementswww.kingsgate.com.au 41
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
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 resto-
ration 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.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 42
x. Employee benefits continued
(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 stipu-
lated 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.
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
assumptions are charged or credited to the
statement of comprehensive income in the
period in which they arise.
z. Earnings per share
(i)
Basic earnings per share
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
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.
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.
Notes to the Financial Statementswww.kingsgate.com.au 43
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 and
interpretations
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 2018 reporting periods and have not yet
been applied in the financial statements. The
Group’s assessment of the impact of these new
standards and interpretations is set out below:
〉〉 AASB 9 Financial Instruments and AASB
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 liabil-
ities 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 3:
Determine the transaction price.
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.
〉〉 AASB Interpretation 23 – Uncertainty over
income tax treatment
This interpretation addresses the accounting
for income taxes when tax treatments involve
uncertainty that affects the application of AASB
112 Income Taxes. The Interpretation does not
apply to taxes or levies outside the scope of
AASB 112, nor does it specifically include
requirements relating to interest and penalties
associated with uncertain tax treatments.
The Group has not yet determined the extent of
the impact, if any.
ee. Parent entity financial information
The financial information for the parent entity
Kingsgate Consolidated Limited, disclosed in
Note 29 has been prepared on the same basis as
the consolidated financial statements except as
set out below:
Investments in subsidiaries
Investments in subsidiaries are accounted for at
cost in the financial statements of Kingsgate.
Share-based payments
The issue by the Company of equity instruments
to extinguish liabilities of a subsidiary under-
taking in the Group is treated as a capital
contribution to that subsidiary undertaking.
ff. Rounding of amounts
The Company is of a kind referred to in ASIC
Legislative Instrument 2016/191, relating to the
‘rounding off’ of amounts in the financial state-
ments. Amounts in the financial statements
have been rounded off in accordance with the
instrument to the nearest thousand dollars, or in
certain cases, the nearest dollar.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu The estimates made for Nueva Esperanza are
also impacted by the status of the sale process
and the offers that have been received by the
Group which are at this stage non-binding and
indicative.
For further details regarding the impairment
testing refer to Note 31.
(iii) 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.
44
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
$15 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 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)
Impairment of non-current assets,
determination of recoverable amounts for
exploration, evaluation and development
assets (including Nueva Esperanza)
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 assump-
tions used to estimate the recoverable amounts
would result in a change in the CGU’s recov-
erable 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.
Notes to the Financial Statementswww.kingsgate.com.au 45
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 mine under care and maintenance 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:
2018
Other income
Total segment revenue
Segment EBITDA
Depreciation and amortisation
Impairment losses – Nueva Esperanza
Segment result (Operating EBIT)
Finance income
Finance costs
Net finance costs
Loss before tax
Other segment information
Segment assets
Segment liabilities
1
includes foreign exchange loss of $175,000 for the Group.
Care and
Maintenance
Chatree
$’000
Nueva
Esperanza
$’000
Corporate
$’000
Total
$’000
87
87
–
–
64
64
(3,656)
(1,591)
(10,091)
–
–
(42,652)
(15,307)1
(236)
–
151
151
(29,054)
(1,827)
(42,652)
(5,247)
(52,743)
(15,543)
(73,533)
147
(3,336)
(3,189)
(76,722)
3,293
(27,845)
63,675
(5,965)
11,915
(18,631)
78,883
(52,441)
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 46
4. Segment information continued
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
1
Includes foreign exchange loss of $3,079,000 for the Group.
Customer A
5. Revenue and expenses
a) Sales revenue
Gold sales
Silver sales
Sales revenue
b) Cost of sales
Direct costs of mining and processing
Royalties
Inventory movements
Depreciation (operations)
Cost of sales
Operation
Chatree
$’000
176,119
15,425
191,544
90,718
(51,205)
Development
Nueva
Esperanza
$’000
–
–
–
Corporate
$’000
–
994
994
(9,035)
–
(18,641)1
(102)
Total
$’000
176,119
16,419
192,538
63,042
(51,307)
39,513
(9,035)
(18,743)
11,735
385
(4,016)
(3,631)
8,104
12,342
(26,203)
103,164
(5,868)
18,795
(1,370)
134,301
(33,441)
Revenue
% of External Revenue
2018
$’000
–
2017
$’000
176,119
2018
%
–
2018
$’000
–
–
–
–
–
–
–
–
2017
%
100
2017
$’000
155,947
20,172
176,119
60,162
15,642
22,121
50,925
148,850
Notes to the Financial Statementswww.kingsgate.com.au 47
2018
$’000
2017
$’000
7,812
–
8,069
236
16,117
(112)
–
–
(135)
151
(96)
12,641
234
5,860
102
18,837
59
(108)
14,045
–
2,315
16,311
2,834
3,507
–
–
502
3,336
1,827
–
1,827
–
1,591
236
–
665
3,395
4,060
351
351
(42,652)
(42,652)
182
246
81
4,016
36,172
15,135
51,307
50,925
280
102
3,178
3
4,929
8,110
339
339
–
–
c) Corporate and administration expenses
Administration
Business development
Statutory and professional fees
Depreciation
Corporate and administration expenses
d) Other income and expenses
Net (loss)/gain on sale of fixed assets
Change in fair value of available-for-sale assets
Revision of rehabilitation provision
Loss on sale of Dominion Metals Pty Ltd
Other revenue
Other income and expenses
e) Finance costs
Interest and finance charges
Foreign exchange loss on loans
Unwinding of discount
Amortisation of deferred borrowing costs
Finance costs
f) Depreciation and amortisation
Property, plant and equipment
Mine properties
Depreciation and amortisation expenses
Included in:
Costs of sales depreciation
Care and maintenance expenses
Corporate depreciation
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 losses – Nueva Esperanza (see Note 31)
Total significant item
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 48
6. Income tax
a)
Income tax expense
Current tax
Deferred tax
Total income tax expense
Income tax expense
Deferred tax expense/(benefit) included in tax expense comprises:
Increase in deferred tax assets
Increase in deferred tax liabilities
Deferred tax
b) Numerical reconciliation of income tax expense to prima facie tax payable
(Loss)/profit 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 interest expense to preference shareholders
Share-based payment remuneration
Impairment losses – Nueva Esperanza
Tax losses not brought to account in the prior year recognised this year
Tax losses not brought to account
Withholding tax on dividends received from Thailand operations
Income tax expense
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 assets amounting to $11,149,000 (2017: $8,181,000) have been offset against deferred tax liabilities.
e) Unrecognised deferred tax assets and tax liabilities
Tax losses – Australian entities
Tax losses – other entities
Temporary difference
Subtotal
Unrecognised deferred tax assets
2018
$’000
2017
$’000
–
–
–
–
(2,968)
2,968
–
(76,722)
(23,017)
855
633
31
12,796
–
8,702
–
–
–
–
1,135
(119)
1,016
1,016
2,067
(2,186)
(119)
8,104
2,431
226
370
(57)
–
(3,015)
–
1,061
1,016
–
–
2018
$’000
2017
$’000
303,662
22,886
1,278
327,826
95,5171
295,219
604
1,278
297,101
88,6741
1
Amount excludes potential deductible temporary differences in respect of Akara for $45,350,000 arising from an impairment charge recognised in previous 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 2018 Akara has undistributed earnings of $3,885,000 which, if paid out as dividends, and if not paid out from one of the approved Royal Thai
Board of Investment (“BOI”) activity, would be subject to withholding tax in the hands of its Australian parent entity.
Notes to the Financial Statementswww.kingsgate.com.au 49
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.
g)
Recognised deferred tax assets
and liabilities
2018
$’000
2017
$’000
2018
$’000
2017
$’000
2018
$’000
2017
$’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)
94
5,354
210
321
5,170
11,149
(11,149)
–
–
11,149
11,149
91
3,998
255
321
3,516
8,181
(8,181)
–
–
8,181
8,181
–
(11,149)
–
–
–
(11,149)
11,149
–
–
(11,149)
(11,149)
–
(8,181)
–
–
–
(8,181)
8,181
–
–
(8,181)
(8,181)
94
(5,795)
210
321
5,170
91
(4,183)
255
321
3,516
–
–
–
–
–
–
–
–
–
–
–
–
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 50
6.
Income tax continued
h) Movement in deferred tax balances
2018
Deferred tax assets/(liabilities):
Employee benefits
Unrealised exchange losses
Other items
Available-for-sale financial assets
Tax losses
Net deferred tax assets/(liabilities)
2017
Deferred tax assets/(liabilities):
Employee benefits
Unrealised exchange losses
Other items
Available-for-sale financial assets
Tax losses
Net deferred tax assets/(liabilities)
Current
Cash on hand
Deposits at call
Total current
Cash on hand
7. Cash and cash equivalents and restricted cash
Balance at
1 July
$’000
Recognised in
profit or loss
$’000
Recognised
in other
comprehensive
income
$’000
Foreign
exchange
$’000
Balance at
30 June
$’000
91
(4,183)
255
321
3,516
–
158
(5,102)
329
660
3,836
(119)
3
(1,612)
(45)
–
1,654
–
(67)
919
(74)
(339)
(320)
119
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
94
(5,795)
210
321
5,170
–
91
(4,183)
255
321
3,516
–
2018
$’000
2017
$’000
8
11,231
11,239
7
22,000
22,007
Deposits at call
Risk exposure
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 25.
8. Receivables
Current
Other debtors
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 25.
2018
$’000
2017
$’000
678
678
5,468
5,468
1,959
1,959
4,748
4,748
Notes to the Financial Statementswww.kingsgate.com.au 51
2018
$’000
2017
$’000
760
1,206
1,966
15,124
–
15,124
690
3,895
4,585
14,568
70
14,638
9. Other assets
Current
Prepayments
Other deposits
Total other assets – current
Non-current
Prepayments
Other deposits
Total other assets – non-current
Prepayments
Non-current prepayments include prepaid royalties and water rights in respect of the Nueva Esperanza Gold/Silver Project in Chile.
10. 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
Depreciation and amortisation expense
Foreign currency differences
Closing net book amount
Cost
Accumulated depreciation and amortisation
Accumulated impairment
Net book amount
2018
$’000
2017
$’000
244,466
(57,609)
(184,260)
263,453
(34,915)
(184,260)
2,597
44,278
2,597
167
–
(184)
(1,827)
358
1,111
261,544
(76,173)
(184,260)
44,278
63
(18,837)
(99)
(36,172)
13,364
2,597
244,466
(57,609)
(184,260)
1,111
2,597
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 52
11. Exploration, evaluation and development
Exploration &
evaluation
$’000
Feasibility
expenditure
$’000
Mine
properties
$’000
Total
$’000
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
Year ended 30 June 2018
Opening net book amount
Impairment losses – Nueva Esperanza (see Note 31)
Disposal
Foreign currency exchange differences
Closing net book amount
At 30 June 2018
Cost
Accumulated depreciation and amortisation
Accumulated impairment
Net book amount
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
332,953
–
–
(39,991)
(74,694)
(42,291)
(289,871)
530,614
(42,291)
(404,556)
–
82,976
791
83,767
–
–
–
–
–
82,976
(42,652)
(19)
2,146
42,451
791
–
–
55
846
83,767
(42,652)
(19)
2,201
43,297
39,991
85,103
356,631
–
–
(39,991)
(42,652)
(65,914)
(289,871)
481,725
(65,914)
(372,514)
–
42,451
846
43,297
Notes to the Financial Statementswww.kingsgate.com.au 12. Payables
Current
Trade payables
Other payables and accruals
Total payables – current
Non-current
Other payables
Total payables – non-current
53
2018
$’000
2017
$’000
2,267
4,396
6,663
4,052
4,052
1,103
2,639
3,742
3,946
3,946
The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 25.
13. 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 25.
Current
Secured bank loans
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
2018
$’000
2017
$’000
14,360
465
472
15,297
323
10,907
11,230
14,360
10,907
788
472
26,527
–
413
244
657
736
10,178
10,914
–
10,178
1,149
244
11,571
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 54
13. Borrowings continued
Secured bank loans
On 29 August 2017 Kingsgate executed a $15 million Standby Loan Facility (“SLF”) to assist with working capital requirements and for general corporate
purposes. The SLF was drawn down in full on 2 May 2018 and is to be repaid six months after drawdown.
Terms and conditions of outstanding loan were as follows:
Currency
Interest rate
Financial year
of maturity
Face value
$’000
AUD
BBSY1 + margin
2019
15,000
Standby Loan Facility
Less: capitalised borrowing costs
Total
1
BBSY means bank bill swap bid rate
As security for the above facility the lender has a fixed and floating charge over Kingsgate including its shares in its material subsidiaries.
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
15,000
(640)
14,360
Carrying
amount
$’000
Preference shares in controlled entity
Thai Baht
12%
n/a
10,907
10,907
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 2022.
Finance lease liabilities
The Group has various items of plant and equipment with a carrying amount of $375,936 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
494
330
824
Interest
$’000
29
7
36
Present value of minimum
lease payments
$’000
465
323
788
Notes to the Financial Statementswww.kingsgate.com.au 55
14. 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
Foreign currency exchange differences
At the end of the financial year
15. Contributed equity
Opening balance
Issue of ordinary shares in satisfaction of utilisation fee on draw down of $15 million
Standby Loan Facility (see Note 13)
Share acquisition for the settlement of vested deferred rights
Share issue cost
Closing balance
Note
2x,21
2x,21
2w
2018
$’000
2017
$’000
358
–
358
73
14,768
14,841
13,787
–
–
–
981
14,768
309
638
947
86
13,149
13,235
30,192
(14,045)
(2,631)
246
25
13,787
2018
Shares
2017
Shares
2018
$’000
2017
$’000
223,584,937
223,584,937
677,015
677,042
2,641,003
–
–
–
–
–
750
–
(4)
–
(27)
–
226,225,940
223,584,937
677,761
677,015
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 56
16. 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
Foreign currency translation reserve
2018
$’000
48,141
9,142
(3,341)
2017
$’000
46,479
9,246
(3,341)
53,942
52,384
46,479
1,662
45,234
1,245
48,141
46,479
9,246
(104)
9,142
(3,341)
–
(3,341)
9,056
190
9,246
(3,341)
–
(3,341)
Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve, as described in Note 2b.
Share-based payment reserve
The share-based payment reserve is used to recognise the fair value of deferred rights, performance rights and options issued but not exercised.
General reserve
The general reserve represents changes in equity as a result of changes in non-controlling interests in prior periods and revaluation of employee benefit
obligations in current year.
(b) Accumulated losses
Accumulated losses at the beginning of the year
Net (loss)/profit attributable to members of Kingsgate Consolidated Limited
Accumulated losses
2018
$’000
2017
$’000
(628,539)
(76,722)
(635,627)
7,088
(705,261)
(628,539)
Notes to the Financial Statementswww.kingsgate.com.au 57
2018
$’000
2017
$’000
133
301
434
309
40
349
Equity holding
Country of
Incorporation
Class of
shares
2018
%
2017
%
Australia
Australia
Australia
Australia
Australia
Australia
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Mauritius
Chile
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
17. Commitments for expenditure
Operating leases
Within one year
Later than one year but not later than five years
Total operating leases
18. Controlled entities
Entity
Parent Entity
Kingsgate Consolidated Limited
Subsidiaries
Dominion Mining Ltd
Gawler Gold Mining Pty 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
Laguna Chile Ltda
19. Dividends
No final dividend was declared for the year ended 30 June 2017 (30 June 2016: nil).
No interim dividend was declared for the year ended 30 June 2018 (30 June 2017: nil).
20. Related parties
Transaction with related parties
Information on remuneration of Directors and Key Management Personnel is disclosed in Note 21 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 Statementscontinuedu 58
21. 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
2018
$’000
2017
$’000
358
73
431
309
86
395
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 2018 were $173,000 (2017: $417,000).
Retirement benefit and other long-term benefits (Akara Resources PCL)
Opening balance
Benefits paid
Foreign currency exchange differences
Other changes
Closing balance
2018
$’000
2017
$’000
–
–
–
–
–
5,417
(5,343)
(62)
(12)
–
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.
Grant
date
Expiry
date
Exercise
price
Balance
start of year
Vested
during year
Forfeited
during year
Balance
end of year
Vested and
exercisable at
end of year
29 Apr 2016
29 Apr 2016
29 Apr 2016
30 June 2019
30 June 2020
30 June 2021
$0.40
$0.50
$0.60
Number
500,000
500,000
500,000
Number
500,000
–
–
Number
500,000
500,000
500,000
Number
Number
–
–
–
–
–
–
Notes to the Financial Statementswww.kingsgate.com.au
59
Fair value of options granted
The fair value at grant date of the options is determined using the Black-Scholes option pricing model which incorporates the following inputs:
Number of options issued
Term (years)
Exercise price ($)
Dividend yield ($)
Spot price ($)
Volatility (%)
Risk free rate (%)
Fair value ($)
Outstanding balance at the beginning of the year (unvested)
Options granted during the year
Vested during the year
Lapsed during the year
Forfeited during the year
Outstanding balance at the end of the year
500,000
3.17
0.40
–
0.455
65–75
1.86
0.23
500,000
–
500,000
–
500,000
–
500,000
4.17
0.50
–
0.455
65–75
1.85
0.24
500,000
–
–
–
500,000
–
500,000
5.17
0.60
–
0.455
65–75
1.85
0.22
500,000
–
–
–
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.
22. Reconciliation of loss after income tax to net cash flow
from operating activities
(Loss)/profit for the year
Depreciation and amortisation
Share-based payments
Unwind of discount rate for provision
Amortisation of deferred borrowing costs
Net loss/(gain) on sale of fixed assets
Net exchange differences
Other revenue
Loss on sale of Dominion Metals Pty Ltd
Impairment losses – Nueva Esperanza
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
2018
$’000
(76,722)
1,827
(104)
–
502
112
(163)
–
135
42,652
(42)
(52)
–
3,040
36
–
2017
$’000
7,088
51,307
190
246
81
(59)
3,947
(14,045)
–
–
3,738
1,658
25,758
(16,956)
(5,882)
(119)
Net cash (outflow)/inflow from operating activities
(28,779)
56,952
Net debt reconciliation
Cash and cash equivalents
Borrowings – repayable within one year
Borrowings – repayable after one year
Net debt
Cash and cash equivalents
Gross debt – fixed interest rates
Gross debt – variable interest rates
Net debt
11,239
(15,297)
(11,230)
(15,288)
11,239
(12,167)
(14,360)
(15,288)
22,007
(657)
(10,914)
10,436
22,007
(11,571)
–
10,436
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 60
22. Reconciliation of loss after income tax to net cash flow from operating activities continued
Cash
Secured bank
loans due
within 1 year
Preference shares
in controlled
entity due
after 1 year
Finance lease
liabilities due
within 1 year
Finance lease
liabilities due
after 1 year
Other loan due
within 1 year
Net debt as at 30 June 2017
Cash flows
Foreign exchange adjustments
Other non-cash movements
$’000
$’000
22,007
(10,785)
17
–
–
(15,000)
–
640
$’000
(10,178)
–
(729)
–
Net debt as at 30 June 2018
11,239
(14,360)
(10,907)
$’000
(413)
–
(52)
–
(465)
$’000
(736)
429
(16)
–
(323)
23. Events occurring after reporting date
No matter or circumstance has arisen since 30 June 2018 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.
24. Contingent assets and liabilities
The Group had no contingent assets or liabilities at 30 June 2018.
25. Financial risk management and instruments
$’000
(244)
(228)
–
–
Total
$’000
10,436
(25,584)
(780)
640
(472)
(15,288)
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.
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. Risk management is carried out by the senior executive team.
The Group holds the following financial instruments:
Financial assets
Cash and cash equivalents
Receivables
Other financial assets
Total financial assets
Financial liabilities
Payables
Borrowings
Total financial liabilities
2018
$’000
2017
$’000
11,239
6,146
1,206
18,591
22,007
6,707
3,965
32,679
(10,715)
(26,527)
(7,688)
(11,571)
(37,242)
(19,259)
Notes to the Financial Statementswww.kingsgate.com.au
61
Market risk
Foreign exchange risk
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. Foreign exchange risk arises from future commercial transactions
and recognised assets and liabilities denominated in a currency that is not the functional currency of the relevant group entity. Currently foreign exchange
risks arise primarily from:
〉〉
cash balances in US dollars;
〉〉
receivables denominated in US dollars for Australian entities; and
〉〉 payables denominated in Australian dollars for Thailand entities.
The functional currency of the Thai subsidiaries is Thai Baht. The functional currency of the Chilean subsidiaries is the US dollar. The Company’s functional
currency is Australian dollar.
The Group’s exposure to US dollar foreign currency risk at the reporting date, expressed in Australian dollars was as follows:
Cash and cash equivalents
Receivables
Payables
Total exposure to foreign currency risk
2018
$’000
280
70,341
(70,522)
2017
$’000
671
53
(1,671)
99
(947)
The Group’s sale of gold produced from Chatree Gold Mine were 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 was sensitive to movement in those currencies.
The Group’s current exposure to foreign exchange movements is mainly related to the intercompany loan recognised in Akara Resources Public Company
Limited which is receivable from Kingsgate Treasury Pty Ltd. This loan is denominated in Australian dollar and does not form part of a net investment in a
foreign operation.
One cent weakened in Australian dollar against the US dollar
One cent strengthened in Australian dollar against the US dollar
One cent weakened in Australian dollar against the Thai baht
One cent strengthened in Australian dollar against the Thai baht
Impact on post tax loss
Impact on other
comprehensive income
2018
$’000
1,512
(1,471)
29
(29)
2017
$’000
2,292
(2,292)
–
–
2018
$’000
1,512
(1,471)
37
(37)
2017
$’000
–
–
–
–
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 62
25. Financial risk management and instruments continued
Interest rate risk
The Group’s exposure to interest rate risk for classes of financial assets and financial liabilities, at 30 June 2018 and 30 June 2017 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
2018
Financial assets
Cash and cash equivalents
Receivables
Other financial assets
Total financial assets
Financial liabilities
Payables
Borrowings
Total financial liabilities
Net financial assets/(liabilities)
2017
Financial assets
Cash and cash equivalents
Receivables
Other financial assets
Total financial assets
Financial liabilities
Payables
Borrowings
Total financial liabilities
11,231
–
918
12,149
–
(14,360)
(14,360)
(2,211)
22,000
–
3,694
25,694
–
–
–
Net financial assets/(liabilities)
25,964
–
–
–
–
–
–
–
–
–
–
(937)
(937)
(323)
(323)
–
–
–
–
–
(10,907)
(10,907)
(10,907)
–
–
–
–
–
–
–
–
–
–
–
(736)
(736)
(736)
(10,178)
(10,178)
(10,178)
8
6,146
288
6,442
(10,715)
–
(10,715)
(4,273)
7
6,707
271
6,985
(7,688)
–
11,239
6,146
1,206
18,591
(10,715)
(26,527)
(37,242)
(18,651)
22,007
6,707
3,965
32,679
(7,688)
(11,571)
(7,688)
(19,259)
(703)
13,420
–
–
–
–
–
–
(657)
(657)
(657)
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 – 2018
Variable rate instrument – 2017
100 bps increase
Profit
$’000
100 bps decrease
Profit
$’000
25
–
(25)
–
Notes to the Financial Statementswww.kingsgate.com.au 63
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
Other financial assets
Total exposure to credit risk at year end
2018
$’000
11,239
6,146
1,206
18,591
2017
$’000
22,007
6,707
3,965
32,679
Liquidity risk
The Group’s liquidity requirements are based upon cash flow forecasts. 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 base on the remaining period at the reporting date. The amounts disclosed are the contractual undis-
counted 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.
2018
Payables
Borrowings
Total financial liabilities
2017
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
10,715
26,527
37,242
7,688
11,571
19,259
6,663
17,893
24,556
3,742
1,925
5,667
–
1,637
1,637
–
1,990
1,990
4,0521
13,615
17,667
3,946
10,270
14,216
–
–
–
–
–
–
10,715
33,145
43,860
7,688
14,185
21,873
1
Related to royalties payable in respect of the Nueva Esperanza Gold/Silver Project in Chile.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 64
26. Key management personnel disclosures
Executive Chairman
Ross Smyth-Kirk
Executive Chairman
Non-Executive Directors
Peter Alexander
Non-Executive Director
Peter Warren
Non-Executive Director
Sharon Skeggs
Non-Executive Director
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 – ceased employment 4 March 2018
Leonardo Hermosilla
Vice President Project Development Chile
Key Management Personnel Compensation
Short-term employee benefits
Post-employment benefits
Share-based payments
Other long term benefits
Total Key Management Personnel compensation
27. 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 Services1
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
2018
$
2017
$
1,604,255
2,099,386
80,814
(104,013)
13,225
123,199
189,813
9,353
1,594,281
2,421,751
2018
$
2017
$
284,000
326,425
92,033
376,033
146,462
472,887
10,000
19,917
29,917
–
–
–
26,520
79,500
18,164
44,684
55,769
135,269
1
The above table does not include services provided by PricewaterhouseCoopers Australian Firm in respect of the TAFTA claim that are billed directly
to the legal firm representing the Group.
Notes to the Financial Statementswww.kingsgate.com.au 65
2018
Cents
(34.26)
$’000
(76,722)
2017
Cents
3.17
$’000
7,088
Number
Number
223,959,181
223,584,937
–
–
223,959,181
223,584,937
2018
$’000
2017
$’000
(109,652)
–
(109,652)
11,670
40,216
89,238
89,311
(1,420)
–
(1,420)
16,791
126,170
66,127
66,255
677,761
8,463
677,015
8,567
(735,319)
(625,667)
(49,095)
59,915
28. Earnings per share
Basic and diluted (loss)/earnings per share
Net (loss)/profit used to calculate basic and diluted earnings per share
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
29. Parent entity financial information
As at, and throughout the financial year ending 30 June 2018, 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
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 30. 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 2018, the parent entity had no contractual commitments for the acquisition of property, plant or equipment.
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu
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30. Deed of cross guarantee
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, 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:
Income statement and other comprehensive income
Corporate and administration expenses
Other income and expenses
Foreign exchange gain/(loss)
Impairment losses – investment in Nueva Esperanza Gold/Silver Project
(Write-off)/reversal on loan to subsidiaries
Loss before financial costs and income tax
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
2018
$’000
(10,914)
4,169
4,704
(104,414)
(5,009)
(111,464)
119
(1,086)
2017
$’000
(9,595)
5,563
(3,219)
(4,247)
11,599
101
292
(1,389)
(967)
(1,097)
(112,431)
–
(112,431)
(112,431)
(996)
–
(996)
(996)
(112,431)
(996)
(112,431)
(996)
(622,881)
(112,431)
(621,885)
(996)
(735,312)
(622,881)
Notes to the Financial Statementswww.kingsgate.com.au 67
2018
$’000
2017
$’000
10,495
15,726
294
893
3,433
422
11,682
19,581
18
28,528
–
28,546
40,228
74,170
14,832
241
89,243
–
73
73
89,316
(49,088)
52
109,257
70
109,379
128,960
65,667
244
220
66,131
43
85
128
66,259
62,701
677,761
8,463
(735,312)
677,015
8,567
(622,881)
(49,088)
62,701
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 (LIABILITIES)/ASSETS
Equity
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 68
31. 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”).
Methodology
The carrying value of the cash generating
unit before impairment for Nueva Esperanza
amounted to $100,512,000 at balance sheet
date. In accordance with the accounting
standards for exploration assets, management is
required to consider if facts and circumstances
existed at balance sheet date that would require
Nueva Esperanza be tested for impairment.
An impairment is recognised when the carrying
amount exceeds the recoverable amount.
As noted above a process to sell the Project is
underway and as a result a fair value less costs
of disposal (FVLCD) approach to assessing the
recoverable amount of the Project is most
appropriate. In determining FVLCD management
has used and considered:
〉〉
an assessment of the Project value based on
a discounted cash flows model using market
based commodity price and exchange rate
assumptions, estimated quantities of recov-
erable minerals, production levels, operating
costs and capital requirements, based on
latest life of mine plans; and additional value
attributable to resources and exploration
potential; and
〉〉
information to date in relation to the process
supporting the proposed sale of the Project
including non-binding indicative offers
received acknowledging that:
〉〉 offers received to date to purchase the
Project are non-binding and indicative
only;
〉〉
〉〉
〉〉
further due diligence is required by
potential purchasers;
a site visit to the Project will be required
as part of the due diligence. Due to un -
favourable weather conditions, site visits
will not be possible until October 2018;
shareholder approval for the Project
sale is required with such approval to be
considered at a general meeting likely to
be held early in the 2019 calendar year.
Based on the discounted cash flow methodology,
the fair value of Nueva Esperanza was assessed
to be $57,860,000 as at 30 June 2018 which was
below its carrying value of $100,512,000. This
has resulted in an impairment of $42,652,000.
The main factor contributing to the impairment
charge was a lower silver price (US$18/ounce)
used in this year’s impairment assessment than
2017 (US$20/ounce).
As a comparison to the sale process information
received to date, the carrying value after
impairment based on the discounted cash flow
is at the lower level of the range of non-binding
indicative offers received for the proposed sale of
the Project.
The Group will continue to work with the
bidders for the Project and its advisers with a
view to achieving sale proceeds in excess of the
current book value.
The recoverable amount estimate for Nueva
Esperanza is considered to be level 3 fair value
measurement (as defined by accounting
standards) as it is derived from valuation
techniques that include inputs that are not
based on observable market data. The Group
considers the inputs and the valuation approach
to be consistent with the approach taken by
market participants.
Key assumptions used in
the discounted cash flows
In determining each key assumption,
management has used external sources of
information and utilised experts available to the
Group to validate entity specific assumptions
such as reserves and resources. Production and
capital costs are based on the Group’s estimate
of forecast geological conditions, capacity of
existing plant and equipment and future
production levels. This information is obtained
from external experts where applicable, inter-
nally maintained budgets, mine models and
project evaluations performed by the Group in
its ordinary course of business.
The table below summarises the key assump-
tions used in the carrying value assessments:
Gold (US$ per ounce)
Silver (US$ per ounce)
+FY 2019 long
term average
US$1,200
US$18
The Group receives long term forecast price data
from multiple externally verifiable sources when
determining its pricing forecasts.
The foreign exchange rates used in the models
are AUD/USD of 0.74 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 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.
In reaching the conclusions regarding the
carrying value of Nueva Esperanza, the Directors
consider that Nueva Esperanza concession
offers additional value from:
〉〉
identified resources for Arqueros, Chimberos
and Teterita not currently included in the life
of mine plan; and
〉〉
exploration potential from the area
immediately surrounding these three
established projects.
In 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 $16,300,000 to $22,000,000 (the
higher value has been included in the determi-
nation of the recoverable amount at 30 June
2018).
Notes to the Financial Statementswww.kingsgate.com.au 69
Sensitivity
Significant judgements and assumptions are
required in making estimates of the recoverable
amounts.
This is particularly so in the assessment of
long life assets which are measured using a
discounted cash flows model. The CGU recov-
erable 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.
The estimates made are also impacted by the
status of the sale process and the offers that
have been received by the Group which are at
this stage non-binding and indicative.
The carrying value of Nueva Esperanza after impairment is recorded in the following balance sheet
line items of the statement of financial position of the Group.
Statement of
financial position
ASSETS
Non-current receivable and other assets
Property, plant and equipment
Exploration, evaluation and development (feasibility expenditure)
TOTAL ASSETS
LIABILITIES
Current payables
Non-current payables
TOTAL LIABILITIES
NET ASSETS
2018
$’000
20,592
220
42,451
63,263
1,351
4,052
5,403
57,860
Notes to the Financial StatementsNotes to the Financial Statementscontinuedu 70
Directors’ Declaration
Directors’
Declaration
In the Directors’ opinion:
a)
the financial statements and notes that are set out on pages 30 to 69 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 2018 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.
b)
c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the
extended closed group identified in Note 30 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 30.
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 2018.
This declaration is made in accordance with a resolution of the Directors.
Ross Smyth-Kirk
Director
Dated at Sydney on 28 September 2018
On behalf of the Board
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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 2018 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 2018
〉〉
〉〉
〉〉
〉〉
〉〉
the consolidated statement of profit or loss and other comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows 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
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
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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.
Material uncertainty related to going concern
We draw attention to Note 1 (a) (i) in the financial statements, which indicates that the Group’s current liabilities exceeded its
current assets by $8.4 million at 30 June 2018. The Group currently does not have sufficient cash available to fully repay these
liabilities which include the Standby Loan Facility (“SLF”) of $15 million which is required to be repaid in full in November 2018.
The Group will need to renegotiate the terms of the SLF including extending its term. The Group will also need to obtain additional
funding of approximately $5 million. As a result, the Group is dependent on receiving the continuing support of its lenders and on
completing the sale of the Nueva Esperanza Gold/Silver project that has been initiated by the Group. These conditions, along with
other matters set forth in Note 1 (a) (i), indicate that a material uncertainty exists that may cast significant doubt on the Group’s
ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement.
Misstatements 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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Audit scope
Key audit matters
〉〉 Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
Committee:
〉〉 Carrying amount of assets and
liabilities associated with the
Chatree Gold Mine
〉〉 Carrying value of the Nueva
Esperanza Gold/Silver Project
〉〉 Material uncertainty related to
going concern.
〉〉
These are further described in the
Key audit matters section of our
report, except for the matter
which is described in the material
uncertainty related to going concern
section.
〉〉
For the purpose of our audit we
used overall Group materiality of
$0.79 million, which represents
approximately 1% of the Group’s
total assets.
〉〉 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 statements as a whole.
〉〉 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
statements.
〉〉 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
and anticipated sale of the Nueva
Esperanza Gold/Silver Project.
〉〉 We utlised 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 specified audit proce-
dures on the financial information
of Akara Resources Public
Company Limited.
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
statements as a whole.
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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.
In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matters
described below to be the key audit matters to be communicated in our report.
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, its insurers and
the Thai Government.
We assessed the adequacy of the overall accounting position adopted by
the Group at 30 June 2018 as described in note 1 (a) (ii) 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, exploration assets and gold/silver sludge should be recog-
nised at a nil value.
〉〉 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 position adopted by the Group at year end in respect of the
Chatree Gold Mine’s obligations. We checked the mathematical accuracy
of the underlying calculations.
We considered the status of the legal claims of the Group against the
Thai Government and its insurers in light of the requirement to disclose
contingent assets in the financial statements in accordance with
Australian Accounting Standards.
We evaluated the adequacy of the disclosures made in note 1 (a) (ii) in
light of the requirements of Australian Accounting Standards.
Carrying amount of assets and liabilities
associated with the Chatree Gold Mine
(Refer note 1 (a) (ii))
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. With the exception of some
assets that may be realised independently of
re-opening the mine, all assets of the Chatree
Gold Mine have been impaired to a nil value.
The Group also revised the Chatree Gold Mine’s
rehabilitation liability to reflect the early
closure of the mine. The total rehabilitation
liability, amounting to approximately $14.8
million at 30 June 2018 is based on manage-
ment’s rehabilitation plan which is a revision
from the initial plan submitted to the Thai
Authorities in 2007.
The Group commenced arbitral proceedings
against the Kingdom of Thailand under the
Australia-Thailand Free Trade Agreement in
order to be compensated for the losses it has
incurred as a result of the expropriation of the
Chatree Gold Mine by the Thai Government.
The Group also commenced legal proceedings
against its insurers under a Political Risk
Insurance Policy that was held by the Group
when the Thai Government expropriated the
Chatree Gold Mine.
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.
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How our audit addressed the key audit matter
Carrying value of the Nueva Esperanza
Gold/Silver Project
(Refer note 1 (a) (iii) and note 31)
We considered the Group’s assessment of the recoverable amount of the
Nueva Esperanza Gold/Silver CGU and its conclusion that an impairment
charge of $42.7 million was required to be recorded.
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 ($57.9 million as at 30
June 2018, including the largest non-current
asset in the balance sheet) and given the signifi-
cance of the impairment charge recorded during
this financial year ($42.7 million).
The determination of the recoverable amount of
an exploration CGU is also subject to significant
judgements and assumptions by the Group as
described in the notes to the financial
statements.
In respect of the internal assessment of the recoverable amount made by
the Group, we performed the following:
〉〉 Considered if the fair value less costs of disposal approach used by
the Group to assessing the recoverable amount was consistent with
the requirements of Australian Accounting Standards.
〉〉 Considered whether the discounted cash flows model was consistent
with the previous model that had been used by the Group and made
enquiries to management whether the model had to be updated for
the results of the work being undertaken as part of the Definitive
Feasibility Study which remains however substantially incomplete.
〉〉 Compared long term gold/silver pricing data used in the discounted
cash flows model to independent analyst forecasts.
〉〉 Obtained and discussed with management the offers for the sale of
the project and the status of any discussions with the bidders.
〉〉 Compared the results of the discounted cash flows model with the
results of the offers received and assessed the conclusions reached
by the Group in respect of the recoverable amount.
〉〉 Recalculated the impairment charge based on the recoverable
amount and the carrying value of the CGU and checked that the
impairment charge was correctly recorded in the financial statements
of the Group.
〉〉
Evaluated the adequacy of the disclosures made in note 1 (a) (iii) and
note 31, including those regarding the key assumptions and sensi-
tivities to changes in such assumptions, in light of the requirements
of Australian Accounting Standards.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report thereon. Prior to the
date of this auditor’s report, the other information we obtained included the directors’ report. We expect the remaining other
information to be made available to us after the date of this auditor’s report, including the Chairman’s Review, the operations
report, the projects report, the exploration report, the ore reserves and mineral resources, and the competent persons statement.
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.
continuedu
76
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 the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations, or 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 20 to 28 of the directors’ report for the year ended 30 June 2018.
In our opinion, the remuneration report of Kingsgate Consolidated Limited for the year ended 30 June 2018 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
Sydney
28 September 2018
www.kingsgate.com.au 77
Shareholder Information
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Number of
shareholders
of fully paid
ordinary shares
4,366
3,040
970
1,469
187
10,032
Number of
shares
21,173,407
20,494,487
20,190,770
13,521,620
8,309,859
5,000,000
4,996,944
4,648,357
3,764,799
2,641,003
1,700,000
1,596,420
1,500,000
1,412,590
1,400,000
1,385,017
1,363,638
1,300,000
1,220,000
1,167,000
Percentage
9.36
9.06
8.93
5.98
3.67
2.21
2.21
2.05
1.66
1.17
0.75
0.71
0.66
0.62
0.62
0.61
0.60
0.57
0.54
0.52
Shareholder
Information
As at 28 September 2018
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
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Merrill Lynch (Australia) Nominees Pty Limited
Zero Nominees Pty Ltd
Elizabeth Anne Bird
Arinya Investments Pty Ltd
National Nominees Limited
Laguna Bay Capital Pty Ltd
Investec Australia Finance Pty Limited
Andrew Lenox Hewitt
Gurravembi Investments Pty Ltd
Philip Storr
Elizabeth Aprieska
Jay Evan Dale Hughes
Jamari Pty Ltd
BNP Paribas Nominees Pty Ltd
Wyong Rugby League Club Ltd
Frank Markert Pty Ltd
Paul Sze Yuen Cheung + Pauline Kwok Sim Cheung
Voting rights
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.
78
Corporate Information
Corporate
Information
Kingsgate Consolidated Limited
ABN 42 000 837 472
Thailand Office
Akara Resources Public Company Limited
No. 99 Moo 9, Tambon Khao Chet Luk
Amphur Thap Khlo
Phichit 66230
Thailand
Tel:
Fax:
+66 56 614 500
+66 56 614 190
Chile Office
Laguna Resources Chile Ltda
Av. Apoquindo 4700, oficina 602
Las Condes, Santiago
Chile
Tel:
+56 2 3245 8650
Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Australia
Postal address:
Locked Bag A14
Sydney South NSW 1235
Australia
+61 1300 554 474
+61 2 9287 0303
Tel:
Fax:
Email: registrars@linkmarketservices.com.au
Web: www.linkmarketservices.com.au
ADR Depository
(American Depository Receipts)
The Bank of New York Mellon
ADR Division
101 Barclay Street, 22nd Floor
New York NY 10286
USA
Tel:
+1 212 815 2293
Auditor
PricewaterhouseCoopers
One International Towers Sydney
Watermans Quay
Barangaroo NSW 2000
Australia
Tel:
Fax:
+61 2 8266 0000
+61 2 8266 9999
Directors
Ross Smyth-Kirk
Executive Chairman
Peter Alexander
Non-Executive Director
Peter Warren
Non-Executive Director
Sharon Skeggs
Non-Executive Director
Company Secretary
Ross Coyle (retired 1 October 2018)
Gavin Robertson (appointed 1 October 2018)
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
From 1 November 2018:
Suite 2, Level 23, 20 Bond Street
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
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