MEDUSA MINING LIMITED
ABN: 60 099 377 849
Suite 10, 100 Mill Point Road
South Perth WA 6151
PO Box 122
South Perth WA 6951
Telephone: +61 8 9474 1330
Facsimile: +61 8 6474 1342
Email: admin@medusamining.com.au
Internet: www.medusamining.com.au
ANNOUNCEMENT
27 September 2018
2018 ANNUAL REPORT
(ASX: MML)
Please find attached a pdf version of Medusa's 2018 Annual Report which is also viewable on the
Company’s website at www.medusamining.com.au
For further information please contact:
Investors:
Patrick Chang
Corporate Development Officer
+61 8 9474 1330
Media:
Michael Vaughan
Fivemark Partners
+61 422 602 720
For personal use only Central Vein
Jeremy Vein
Don Pedro Vein
Great Hamish Vein
Great Hamish Vein
Hanging Wall
MEDUSA
ANNUAL
REPORT
2018
For personal use only CONTENTS
Contents
Corporate Directory
Highlights of Financial Year
Chairman’s Review
Contents of Review of Operations
Review of Operations
Corporate Governance Statement
Directors’ Report
Auditor’s Independence Declaration
Contents of Financial Statements
Statement of Profit or Loss and other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Additional Shareholder Information
Tenement Schedule
Page number
1
2
4
5
6
48
57
74
75
76
77
78
79
80
114
115
121
123
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CORPORATE DIRECTORY
DIRECTORS
Andrew Boon San Teo
Non-Executive Chairperson
Raul Conde Villanueva
Executive Director
Roy Philip Daniel
Non-Executive Director
COMPANY SECRETARY
Peter Stanley Alphonso
EXECUTIVE MANAGEMENT
Raul Conde Villanueva
President Philippines subsidiaries
Peter Stanley Alphonso
Chief Financial Officer
David Angus McGowan
Chief Operating Officer
James Piñgul Llorca
General Manager, Geology & Resources
Patrick Chang
Corporate Development Officer & Investor Relations
PRINCIPAL & REGISTERED OFFICE
Suite 10, 100 Mill Point Road
South Perth
Western Australia 6151
Postal address:
PO Box 122
South Perth
Western Australia 6951
Telephone: + 618 9474 1330
Facsimile: + 618 9474 1342
Email: admin@medusamining.com.au
Website: www.medusamining.com.au
AUSTRALIAN BUSINESS NUMBER
ABN 60 099 377 849
AUDITORS
Australia:
BDO (WA) PTY LTD
38 Station Street
Subiaco
West Perth WA 6008
Philippines:
RSB & Associates
18 Floor Cityland Condominium 10 - Tower 1
Makati City Philippines 1200
SOLICITORS
Australia:
Ashurst Australia
Level 10, Brookfield II
123 St Georges Terrace
Perth WA 6000
Philippines:
BMD Law Offices
18 Floor Cityland Condominium 10 - Tower 1
Makati City Philippines 1200
BANKERS
Commonwealth Bank
150 St George’s Terrace
Perth WA 6000
SHARE REGISTRY
Computershare Investor Services
Level 11, Reserve Bank Building
172 St George’s Terrace
Perth WA 6000
Telephone: + 618 9323 2000
Facsimile: + 618 9323 2033
Investor enquiries: 1300 557 010
Shareholders who require information about their
shareholdings,
related
administrative matters should contact the Company’s
share registry.
payments
dividend
or
STOCK EXCHANGE LISTING
Australian Stock Exchange Limited (ASX)
Trading Code: MML
Page 1 of 123
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HIGHLIGHTS OF FINANCIAL YEAR 2018
FINANCIALS
Description
Revenues
EBITDA (1)
NPAT (1)
EPS (basic)
Notes:
Unit
US$
US$
US$
US$
30 June 2018
30 June 2017 (2)
Variance
US$124.6M
US$100.1M
US$24.5M
(US$25.3M)
(US$29.8M)
(US$55.6M)
(US$56.7M)
US$4.5M
US$1.1M
(US$0.267)
(US$0.273)
US$0.006
(%)
24%
15%
2%
2%
(1)
includes asset impairment losses of US$81.1M for year ended 30 June 2018 and US$70.8M for year ended 30 June 2017;
(2) Restated accounts relating to prior year adjustments due to change in accounting policy. EBITDA, NPAT and EPS (basic) previously reported
were (US$35.2M), (US$62.1M) and (0.299) respectively.
❑ Revenues of US$124.6 million compared to US$100.1 million for the previous year, an increase of
24%.
Medusa is an un-hedged gold producer and received an average gold price of US$1,293 per ounce
from the sale of 96,056 ounces of gold for the year (2017: 79,194 ounces at US$1,256 per ounce);
❑ Earnings before interest, tax, depreciation and amortisation (“EBITDA”) of (US$25.3 million) which
includes asset impairment losses of US$81.1 million (2017: EBITDA of (US$29.8M) which includes
asset impairment losses of (US$70.8M));
❑ Basic earnings per share (“EPS”) of (US$0.267) on a weighted average basis, based on NPAT of
(US$55.6 million) (2017: EPS of (US$0.273) based on NPAT of (US$56.7M));
❑ The Company increased cash and cash equivalent in gold on metal account to US$15.1 million at
30 June 2018 (2017: US$11.5M);
❑ Depreciation of fixed assets and amortisation of capitalised mine development and mine exploration
was US$29.2 million (2017: US$18.0M);
❑ US$14.6 million was expended on capital works associated with the new shaft construction and
infrastructure, mine expansion and sustaining capital at the mine and mill (2017: US$16.2M);
❑ Exploration expenditure, inclusive of underground diamond drilling, was US$5.4 million (2017:
US$12.3M);
❑ Capitalised mine development costs totalled US$24.5 million for the year (2017: US$27.6M); and
❑ Corporate overheads of US$7.3million (2017: US$6.7M).
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HIGHLIGHTS OF FINANCIAL YEAR 2018
OPERATIONS
Description
Ore mined
Ore milled
Head grade
Recovery
Gold produced
Cash costs (¹)
Gold sold
Avg gold price received
Note:
Unit
WMT
DMT
g/t
%
ounces
US$/oz
ounces
US$/oz
June 2018
June 2017
Variance
(%)
550,400
494,989
564,965
(14,565)
499,733
(4,744)
6.33
94.7%
95,705
$562
96,056
$1,293
5.33
94.3%
80,743
$595
79,194
$1,256
1.00
0.4%
14,962
($33)
16,862
$37
(3%)
(1%)
(19%)
-
19%
(6%)
21%
3%
(1)
Net of development costs and includes royalties and local business taxes.
❑ The Company produced 95,705 ounces of gold for the year at an average recovered grade of 6.33
g/t gold which was above the upgraded production guidance (June 2017: 80,743 oz at an average
recovered grade of 5.33 g/t gold);
❑ The average cash costs of US$562 per ounce, inclusive of royalties and local business taxes, was
lower than the previous year’s average cash costs of US$595 per ounce; and
❑ All-In-Sustaining-Costs (“AISC”) for the year was US$1,083 per ounce of gold (2017: US$1,374 per
ounce).
CORPORATE
Dividend:
No dividends were declared nor paid during the year.
Board appointment/resignations:
❑ Mr Ciceron Angeles, a Non-Executive Director retired from the Board on 31 October 2017;
❑ Mr Peter Hepburn-Brown re-joined the Medusa Board as a Non-Executive Director on 15 June 2018;
and
❑ On 15 June 2018, Mr Boyd Timler advised that he would be retiring as Managing Director effective
6 July 2018.
Management changes:
❑ Mr Andrew Teo assumed the role of Interim Chief Executive Officer following the retirement of Mr
Boyd Timler, whilst the search for a replacement CEO is undertaken; and
❑ Mr David McGowan, previously General Manager - Engineering, was promoted to the role of Chief
Operating Office on 15 June 2018.
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CHAIRMAN’S REVIEW
Dear Shareholder,
I am delighted to present the Annual Report for the 2018 Financial Year (“FY”) following a strong year at Medusa Mining
Limited (“Medusa” or the “Company”). In FY18 we maintained our position as a high-grade, sustainable and self-funding
gold producer. We concluded FY18 on a positive note by achieving the following milestones:
• Production of 95.7koz, exceeding both our initial and upgraded guidance, exclusive of the E15 Service Shaft (E15”);
• All-In-Sustaining-Costs (“AISC”) in-line with our revised guidance of between US$1,000/oz to US$1,150/oz;
• Continued ore reserves and mineral resources delineation to best plan and schedule long-term mining operations;
• Exploration work on our near-mine projects resulted in the identification of promising drill ready targets which we
look forward to test in the current FY;
• Development of the Company’s culture by ensuring there is ownership at all levels of the organisation in achieving
our goals and vision of sustainable, profitable growth with our established licence to operate in the Philippines;
• The Company has maintained its licence to operate by maintaining high community, safety and environmental
standards; and
• An early stage but important step towards diversification through an exploration farm-in agreement in Queensland,
Australia, which were announced in early July 2018.
Medusa continued to generate free cash from its activities. The year started with a cash position (and equivalents)
of US$11.5M and as at 1 July 2018, Medusa was at US$15.1M. This was achieved after all internal capital
requirements, including the E15, as well as US$6.9M reduction in creditor/borrowings during the year.
Medusa’s key infrastructure project - the E15 Service Shaft, is expected to achieve practical completion in October
2018. It is anticipated that the E15 will increase the Co-O mine’s overall skipping capacity by alleviating the burden
of manpower and material movements. Completion of this infrastructure will also facilitate the establishment of
more ideally located drilling stations for continued expansion of the Co-O resources. In addition, the Company has
also commenced the construction of winzes from Level 10 to lower levels. This focus will ensure the deeper high-
grade ore reserve blocks are sufficiently developed when the E15 is commissioned.
The exploration push has been channelled into defining the mineral resource limits of the Co-O mine. By year-end
we will have a greater understanding of the controls on the vein system with the completion of the resource drilling
program from Levels 8 and 9 indicating that the epithermal vein system is still open at depth and to the east.
Results show the main Great Hamish vein on Level 16 extends at depth and to the east on Level 16, but the other
main veins between Level 8 and Level 12 have taken up the gold endowment to the north and east that remain
open down plunge. This drilling resulted in a resource grade improvement of almost 14% with a slight reduction
on tonnes and ounces based on vein width. The reserves now sit at 1.52 million tonnes, grading 6.69 g/t, for
327,000 ounces of gold. This year’s drilling program focused on better understanding the orebody characteristics
to mitigate risk to gain higher levels of resource confidence. The indicated resource to reserve conversion was
76% for the April 2017 reporting.
Our near mine surface exploration program has identified two promising targets which we plan on drill testing in
the current Financial Year. Both prospects are located within a 3km radius of our existing operation and on granted
MPSAs, thereby significantly enhancing the potential to contribute to mill feed should exploration be successful.
The Royal Crowne Vein Prospect corresponds to a 200 metres plus projected vein segment along the northern
portion of the 1,500 metres long Sinug-ang vein system that has not been fully tested by drilling. The prospect is
located within a historic small-scale mining site noted for its high-grade (i.e. >5 g/t gold) narrow intermediate
sulphidation gold-sulphide vein deposits.
The Durian Prospect is defined by an oblong-shaped moderate to high IP chargeability anomalous zones with
coincident low resistivity anomalous zones. The geometry of the IP chargeability anomaly suggests potential gold
epithermal vein mineralisation associated with either a diatreme structure and/or a shallow intrusion.
The tenement rationalisation has resulted in our regional tenement position being refocused from 596km2 to
410km2, retaining just the prospective ground. Going forward, regional focus in the short-term will remain in the
Co-O mine and near mine vicinity.
We concluded FY18 with above guidance production and an enhanced cash and bullion position. I am confident
we are on the right path of continued and sustainable success. On behalf of the Board and all employees, I would
like to thank all our valued shareholders for your continued and ongoing investment in Medusa and I look forward
to the Company’s next phase of growth in FY19.
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REVIEW OF OPERATIONS
Contents of Review of Operations
Page number
Highlights
- Co-O Operations
- Group Ore Reserves and Mineral Resources
- Exploration Activities
Co-O Operations
- Co-O Gold Production
- Co-O Mill
- Co-O Mine
- Co-O Mine Geology
Group Ore Reserves and Mineral Resources
- Co-O Mine Mineral Resources
- Co-O Mine Ore Reserves
Exploration Activities
-
Exploration - Philippines
- Co-O Exploration
- Resource Definition Drilling
- Co-O Regional
Durian Project
Old Sinug-ang & Royal Crowne Vein Projects
- Regional Projects
Bananghilig Gold Deposit
Saugon Gold Deposit
TSF #1 Tailings Project
-
Exploration - Overseas
Cambodia Gold Project
Queensland Epithermal Gold & Prophyry Copper Project
- Rationalisation of Tenement
Sustainability
Health and Safety
Environmental Management and Monitoring
Community Participation, Programmes and Benefits
Employment, Local Suppliers & Payment of Local Taxes and Wages
JORC 2012 Compliance - Consents of Competent Persons
6
6
7
9
13
13
14
15
20
22
24
24
25
25
25
25
33
35
35
37
37
37
37
38
38
38
39
41
41
42
45
47
47
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REVIEW OF OPERATIONS
HIGHLIGHTS
Co-O OPERATIONS:
“For the financial year ending 30 June 2018 the Company
achieved production of 95,705 ounces, above the guidance of
85,000 to 95,000 ounces of gold; an 18% increase on the
previous year.”
❑ Annual gold production totalled 95,705 ounces, with annual gold sales of 96,056
ounces at cash costs of US$ 562 per ounce;
❑ The annual AISC was US$1,083 per ounce, an improvement of 21% from the
previous year. The ASIC includes continued capital costs portions related to the
infrastructure projects progressed and exploration expenditure in FY 2017/18;
❑ Mill recoveries remained high at 94.7% for the year;
❑ Diversion and catchment dams and channels were constructed at the Tails Storage
Facility (“TSF”) to improve water catchment and recycling, and diversion of creeks
and rain water away from the TSF infrastructure;
❑ The E15 Service Shaft (“E15”) sinking operations were completed and shaft fit out
is in progress with expected completion in the second half of 2018;
❑ There are now four winzes (internal inclined shafts) operating from Level 8 down to
Level 9, Three of these winzes also service level 10. Another winze is in
development from Level 8, down to the Level 12, it will also service Levels 9, 10 and
11;
❑ Level 9 is now operational with development and stoping operation occurring on all
major vein structures; and
❑ Development on Level 10 has advanced with the 12E winze now linked with the E15
Service Shaft and ore development commencing.
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REVIEW OF OPERATIONS
GROUP ORE RESERVES AND MINERAL RESOURCES:
“The company has also maintained its ore reserves position
at 327,000 ounces compared to FY 2016/17 reserve ounces of
345,000 ounces.”
“The Company’s ore reserves are currently estimated at 327,000
ounces, after mining depletion, compared to FY 2016/17 reserve
ounces of 345,000 ounces. These ore reserve only accounted for
8 months of drilling and development (30 April 2017 to December
2017 data cut-off date) to ensure the annual resources and
reserves update was better aligned to the full year financial
reporting.”
Table I. Total Mineral Resources and Ore Reserves estimates as at 31 December 2017.
Category
Tonnes 4
Grade 4
(g/t gold)
Gold 4
(ounces)
Deposit
MINERAL RESOURCES 1,2
Co-O Resources 1 (JORC 2012)
Indicated
Inferred
1,389,000
1,141,000
Total Co-O Resources
Indicated & Inferred
2,530,000
Bananghilig Resources 2 (JORC 2012)
Indicated
Inferred
7,580,000
200,000
Total Bananghilig Resources
Indicated & Inferred
7,780,000
Saugon Resources 3 (JORC 2004)
Indicated
Inferred
Total Saugon Resources
Indicated & Inferred
TSF#1 Tailings Resources (JORC 2012)
Indicated
Total TSF#1 Tailings Resources
Indicated
TOTAL RESOURCES
TOTAL RESOURCES
Indicated
Inferred
47,500
34,000
81,500
510,000
510,000
9,526,500
1,375,000
10.93
10.30
10.65
1.66
4.42
1.73
7.00
4.60
6.00
1.72
1.72
3.05
9.32
488,000
378,000
865,000
406,000
29,000
435,000
10,700
5,000
15,700
28,200
28,200
932,900
412,000
TOTAL RESOURCES
Indicated & Inferred
10,901,500
3.84
1,344,900
ORE RESERVES 2
Co-O Reserves 2 (JORC 2012)
Probable
1,520,000
6.69
327,000
TOTAL RESERVES
Probable
1,520,000
6.69
327,000
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REVIEW OF OPERATIONS
Notes:
1 Mineral Resources are inclusive of Ore Reserves;
2 Co-O and Bananghilig Mineral Resources and Co-O Ore Reserves estimated under guideline of JORC 2012;
3 Saugon Mineral Resources were previously prepared and first disclosed under the JORC 2004 and have not been updated to
comply with JORC 2012 on the basis that the information has not materially changed since it was last reported; and
4 Rounding to the nearest 1,000 may result in some slight apparent discrepancies in totals used in all tables.
Mineral Resources:
Co-O:
- a minimum lower block cut-off of 3.2 gram*metres/tonne accumulation, which incorporates minimum mining widths of 1.25 metres
or 1.5 metres (depending on vein attitude) above cut-off grade, in its derivation;
- various high cut gold grades, up to 300 g/t gold, have been applied to different veins; and
- a gold price of US$1,500 per ounce has been applied.
Bananghilig:
- Indicted Resource: a lower block cut-off of 0.75 g/t gold has been applied to mineralisation within a US$1,500/oz Whittle pit shell,
reflective of open pit mining costs;
- Inferred Resource: a lower block cut-off of 3.0 g/t gold has been applied to mineralisation outside of the US$1,500/oz Whittle pit
shell, to a maximum depth of 100 metres below the pit shell walls and base, reflective of underground mining costs;
- a high cut of 40 g/t gold has been applied to all mineralisation;
- allowance for artisanal mining depletion of 18,300 oz gold applied within the Whittle pit shell; and
- a gold price of US$1,500 per ounce has been applied.
Saugon:
- a lower cut-off of 2.0 g/t gold has been applied; and
- a gold price of US$1,500 per ounce has been applied.
TSF#1 Tailings:
- a lower cut-off of 0.85 g/t gold has been applied;
- a Bangka drilling was undertaken using grid spacing of 25 metres by 25 metres; and
- a gold price of US$1,500 per ounce has been applied
Ore Reserves:
Ore Reserves are a subset of Mineral Resources
Co-O:
- minimum mining widths of 1.25 metres (stopes ≥50°) and 1.5 metres (stopes <50°) have been applied, and where the vein width
was equal to, or greater than, the minimum mining width, an extra 0.25 metres dilution was added to the hanging wall;
- a further 10% dilution has been allowed for slabbing in mining of low angle stopes under draw;
- shape dilution of 7% of extra tonnage at 2 g/t gold applied, to reflect pinch and swell of veins, and faulting;
- an allocation for extra development ‘on-vein’ at a grade of 2 g/t gold has been applied;
- an allocation for extra development ‘off-vein’ at a grade of 1 g/t gold has been applied;
- 85% mining recovery for stopes <10 g/t gold;
- 90% mining recovery for stopes ≥10 g/t gold;
- all pillars in the mine were manually assessed and a 50% recovery factor was applied to all pillars;
- stopes containing <500 tonnes were removed to account for ore loss;
- a cut-off grade of 4.0 g/t gold has been applied to all stopes; and
- a gold price of US$1,275 per ounce has been applied.
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REVIEW OF OPERATIONS
EXPLORATION ACTIVITIES:
“The Company’s rationalised tenement portfolio has not
changed and covers approximately 410 km2 of the richly
endowed and highly prospective Central Pacific Cordillera of
Eastern Mindanao.”
Figure 1: Eastern Mindanao tenement location plan, showing consolidated tenement outlines, mines, deposits and prospects.
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REVIEW OF OPERATIONS
Figure 2: Location diagram of the Company’s main project areas in relation to the significantly mineralised belts of the Philippines.
EXPLORATION - PHILIPPINES
Co-O MINE
The drilling program designed to focus on better understanding the geological limits of the main epithermal veins,
particularly the eastern and down plunge limits of the Great Hamish Vein (“GHV”) has been successful at fulfilling
this objective. Importantly it shows the vein is again returning high grade economic intercepts at and below Level
12, and remaining open to the east and down dip.
The drilling has also continued to confirmed the interpretation of the structural controls. This is validated with the
results seen on the Jereme (“JV”) and Don Pedro (“DPV”) veins to the east from Level 8 to Level 11 having yielded
high-quality intercepts and resources. Both veins are open to the east and down dip for future resource expansion.
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REVIEW OF OPERATIONS
Co-O REGIONAL
Exploration activities for fiscal year (“FY”) 2017/18 focused on the evaluation of prospects within the Co-O and
Tambis tenements, review of Philsaga Minng Corporation (“PMC”) granted tenements and applications. Exploration
highlights of these exploration initiatives are as follows:
BANANGHILIG GOLD DEPOSIT
There has been no development or material change on the Bananghilig Deposit since the Company completed an
exhaustive two-year (2015 to 2016) review of the Bananghilig B1 (“Bananghilig”) gold deposit which resulted in a
mineral resource estimate reported in 2016 in accordance with the guidelines of JORC 2012.
The total Indicated and Inferred Mineral Resources for the Bananghilig Gold Deposit, at a block cut-off grade of
0.75 g/t gold for Indicated (open-pit material), and 3.0 g/t gold for Inferred (underground material), is estimated at
7.78 million tonnes at a grade of 1.73 g/t gold (435,000 ounces contained gold). The details of the study have been
reported by the Company in September 2016.
SAUGON GOLD DEPOSIT
The Saugon Inferred Mineral Resource (81,500 tonnes at a grade of 5.97 g/t gold for a total of 15,700 ounces
contained gold) has remained unchanged from 2013. This information was prepared and first disclosed under JORC
2004. It has not been updated since to comply with the JORC 2012 on the basis that the information has not
materially changed since it was last reported.
TSF #1 TAILINGS PROJECT
The Tailings Storage Facility (“TSF”) #1 was the TSF utilized by the original processing plant since the 1980s. The
TSF #1 material is from the earlier higher gold grade Co-O mine ore and coupled with old extraction techniques
used at that time. Previous assessment completed on October 2015, focused on metallurgical testing using samples
collected from auger drill holes.
The drilling results were modelled in Surpac and a resource estimation using a lower cut-off grade of 0.85 g/t gold
gave 510,169 tonnes with 1.72 g/t gold containing 28,200 ounces of gold in the Indicated category that is compliant
to the JORC 2012 code reporting standard. The geological model interpretation reveals that concentration of the
higher grades at the upper portion of the tailings section will simplify mining, minimizing the need of disturbing the
lower grade basal tailings material.
A more detailed study in underway into the feasibility of mining and processing this material, including detailed
metallurgical testing. The objective of this work is to determine the best option for gaining value from TSF #1
resource.
DURIAN PROJECT
This is a new project within the tenements resulting from a detailed review of exploration geophysical data that
showed the presence of a convergent semi-circular shaped moderate to high IP chargeability anomaly within a 1km
radius north of Co-O Mine. The Co-O Vein System is emplaced along the peripheral southern portion of this IP
anomaly. The geometry and tenor of the IP anomaly coupled with the lithologic distribution suggest the potential
presence of a structurally controlled vein-style mineralisation associated with a diatreme and/or shallow intrusion.
The North and Northeast portions of the IP anomaly - which is underlain by argillic altered andesitic volcanics with
minor quartz-sulfide stockworks, has not been drill tested. A six hole 2,500 metre scout drilling program is planned
for the first half of the next fiscal year, to test the potential presence of a vein-style mineralisation analogous to the
Co-O Vein System at the west and east portions of the identified IP anomaly.
OLD SINUG-ANG & ROYAL CROWNE VEIN PROJECTS
Two scout drilling programs were scheduled for implementation in FY 2017/18 targeting the Sinug-ang (i.e.
Banbanon Vein segment) and Calavera Vein Systems located within MPSA 262-P2, which is roughly within a 2km
radial distance from Co-O Mine. These were later suspended due to unresolved access concerns with local
stakeholders. Fortunately by the 4th Quarter of the fiscal year, a successful breakthrough discussions with
stakeholders enabled access into the Old Sinug-ang area where the 500 metre long northern segment of the Sinug-
ang Vein System - referred to as the North Sinug-ang Vein Segment, traverses.
The Old Sinug-ang area is a historic small scale mining (“SSM”) site extracting narrow (i.e. < 1 metre wide), high
grade (i.e. > 5.0 g/t gold) veins, that has been actively producing gold since the late 1980’s. A 200 metre plus
segment named the Royal Crowne Vein, of the 500 metre long North Sinug-ang Vein remains untested by drilling.
This prospect is roughly 3km from the PMC Mill site.
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REVIEW OF OPERATIONS
EXPLORATION - OVERSEAS
CAMBODIA GOLD PROJECT
On 10 January 2018 the company announced that it had entered into a Memorandum of Understanding (“MOU”)
with SEA Resources Pty Ltd, Sovann Resources Co., LTD (a related Cambodian entity of SEA Resources Pty Ltd)
and the shareholders of Sovann (collectively, referred to as “SEA”) regarding an exploration opportunity in the Prek
Kampi region of Cambodia.
Under the terms of the MOU, Medusa and SEA had until 1 March 2018 to finalise the Earn-in Agreement. The Earn-
in Agreement was not finalised by 1 March 2018. As a result, the MOU expired and Medusa will not pursue this
exploration opportunity as mutally agreed by both SEA and the Company. A public disclosure was made on the
(ASX) as at 2 March 2018.
Medusa remains committed to expanding its presence in Asia Pacific as part of its longer-term strategic
diversification plan.
QUEENSLAND EPITHERMAL GOLD & PROPHYRY COPPER PROJECT
The company announce as at 5 July 2018 that it has entered into an earn-in agreement (EIA) with Ellenkay Gold
Pty Limited (Ellenkay) regarding two exploration projects in Central Queensland, Australia.
The Hill 212 (EPM 26217) exploration project is an epithermal gold-silver opportunity approximately 30km east of
Mt Coolon. The Mt Clark West (EPM 26008) exploration project is a porphyry copper-gold opportunity approximately
24km northwest of Nebo. Both projects have well defined drill targets generated through previously completed
geochemical and geophysical work programs.
Ellenkay currently has a 100% interest in both projects and under the terms of the EIA, Medusa may earn an equity
position of up to 90% in either or both projects by managing and funding work programs through to the completion
of a Pre-Feasibility Study.
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REVIEW OF OPERATIONS
Co-O OPERATIONS
The Co-O Gold Mine (Figures 1 and 2) is operated by Philsaga Mining Corporation under Mineral Production
Sharing Agreement (“MPSA”) 262-2008-XIII, which covers 2,539 hectares.
Co-O GOLD PRODUCTION
Table II. Co-O gold production statistics for financial years ended 30 June 2017 and 2018.
Description
Ore mined
Ore milled
Head grade
Recovery
Gold produced
Cash costs (1)
Gold sold
Average gold price received
Note:
Unit
June 2018
June 2017
Variance
WMT
DMT
g/t
%
ounces
US$/oz
ounces
US$/oz
550,400
494,989
564,965
(14,565)
499,733
(4,744)
6.33
94.7%
95,705
$562
96,056
$1,293
5.33
94.3%
80,743
$595
79,194
$1,256
1.00
0.3%
14,962
$33
16,862
$37
(%)
(3%)
(1%)
19%
-
19%
6%
21%
3%
(i) Net of capitalised development costs and includes royalties and local business taxes.
• The Co-O Mine produced 95,705 ounces of gold at an average head grade of 6.33 g/t gold for the year. This
is 19% higher than the previous year reflecting the focus on controlling dilution and mining higher quality ore;
• The average cash cost for the year of US$562 per ounce, is 6% lower than the previous year due primarily to
higher gold production resulting from better ore grades; and
• All-In-Sustaining-Costs (“AISC”) for the year was US$1,083 per ounce of gold and includes cash production
costs, royalties, mine development, capital works (including the E15 Service Shaft) and associated sustaining
capital, exploration expenditure and corporate overheads.
FY2018-19 Production Guidance
The production guidance for the fiscal year (“FY”) 2018/19 at the Co-O mine is expected to be between 90,000 to
100,000 ounces at AISC of between US$1,050 to US$1,150 per ounce.
The guidance is provided on the expectation that the E15 Service Shaft will achieve practical completion in October
2018 and provide a meaningful contribution in the second half of FY 2018/19, following commissioning.
As stated above, the guided AISC includes cash production costs, royalties, mine development, capital works
(including the E15 Service Shaft) and associated sustaining capital, exploration expenditure and corporate
overheads.
The Company has budgeted significantly increased exploration expenditure associated with:
• Testing potential depth extensions of the Co-O orebody, resulting from better drilling positions available on
L10; and
• Testing high grade priority targets near Co-O, including the Royal Crown Vein and Durian, as highlighted in
the June 2018 Quarter report.
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Co-O MILL
The Co-O Processing Plant is a conventional gold mill, comprising a single stage jaw crusher, SAG mill and
conventional CIL circuit, with a gravity gold & intense cyanide leach system. Tailings are treated and thickened
before discharge to a multi-celled tails storage facility.
Diagram 1: Co-O Process Plant flow chart.
The Co-O mine is 6km from the process plant, with a 12km haulage route due to the geography and topography.
The processing plant is powered from the regional grid, but also has its own dedicated gensets that can run the
plant at full capacity if required. The majority of the power is from the area grid.
The Co-O Mill performed efficiently throughout the fiscal year with mill recovery of 94.7%, with head grades of
6.33 g/t gold.
Mill throughputs was restricted by availability of ore from the mine, resulting in low utilisation of the processing
plant. Optimisation of processing plant operation and maintenance resulted to reduced cost for contract labour for
mill relines and major shutdowns as these were completed by on site personnel during scheduled down time.
Low utilisation is expected to continue into the FY 2018/19 period, improving in the March quarter when the E15
Service Shaft is expected to be fully operational enabling greater hoisting capacity from the L8 Shaft.
The Mill does not require any major works, upgrades or refurbishments for the current Life-Of-Mine-Plan
(“LOMP”). Tails Storage Facility (“TSF”) #5 was completed last year and expected to provide adequate TSF
capacity for next 3 years. Work has already commenced on the planning and design of TSF #6.
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Co-O Gold Project Processing Plant FlowsheetDirect FeedLEGENDSSlurryCarbonWaterEluateSAGMillJawCrusherTailsThickenerTailings DamProcess Water TankAcid WashElutionCarbon RegenerationCyanideDetoxificationCIL Tanks (8 x 380m3) ILRGravityConcentratorLeach Tanks (3 X 1200m3)ElectrowinningSmeltingFor personal use only
REVIEW OF OPERATIONS
Picture 1: Co-O Processing Plant.
Co-O MINE
The Co-O Mine is a shaft access, underground track mine, utilising battery powered locomotives and 1.2 tonne
mine cars. Ore and waste are mined using air-leg mining and is extracted from the mine via the main L8 Production
Shaft, two 60 degree inclined shafts; Baguio and Agsao, and through the original portals.
Diagram 2 is a representative drawing of the primary infrastructure of the Co-O mine. The primary Levels from 1
to 9 normally average 1,000 metres from West to East. Levels are developed 50 meters apart vertically, putting
Level 8 approximately 450 metres below surface. There are four winzes operating between Level 8 and Level 9
with three of these also servicing Level 10. Another winze is being developed from Level 8 to service Levels 9,
10, 11 and 12. When complete the other winzes will be systematically deepened to also service Levels 11 and
12.
The E15 Service Shaft, a new man and materials shaft, is being developed from the surface to Level 10. The
sinking and excavation portion of the was completed during the year and is now being fitted out, commissioning
of the shaft is expected to be completed in late 2018. When operational the E15 Service Shaft will transport the
majority men and materials underground enabling the L8 Shaft to be utilised more for hoisting of rock.
As reserves are diminished from the upper levels, the utilisations of the Portals, Agsao and Baguio shafts for
hoisting of ore will reduce partially offsetting the increased skipping expected from L8 Shaft.
Diagram 2: Shows location of major infrastructure in the Co-O mine.
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During the FY2018 the underground mine was limited by hoisting capacity and limited number of high grade
stopes in the upper levels of the mine. Access to high grade areas on levels 8 and 9 coupled with the
implementation of improvement projects resulted in better than guidance result for the year.
Some the key improvement projects were;
•
•
Commissioning and implementation of the Level 8 pump station. The construction and installation of new
pumping station on Level 8 has been completed at end of 2016/17. Commissioning was completed in July
2017 and have operated at design capacity since. Since commission flooding on levels 8 and 9 have almost
been eliminated and savings in power and pump maintenance are evident. The pump station is currently
operating at high than design capacity and with increase production occurring at level 8 and below, the pump
station will be expanded to cater for the increased pumping requirement;
Refurbishment of Level 5 Pump Station. This involved increasing the size of the pump station excavation to
allow good mounting of the pumps and better access for good maintenance practices. This work was
completed in November 2017 and has significantly reduced the incidence of flooding on levels 3, 4, 5, and
6. The system is proving to be reliable and effective making the old stage pumping system redundant, and
reduced costs through reduced power consumption and reduced pump maintenance;
• Major Shaft maintenance projects were carried out during periods of low productivity such as Christmas-
New Year and Easter. This work was planned in advance and executed as planned, minimising disruption
to mines planned production;
•
•
•
•
•
•
Greater utilisation of old empty stopes for backfilling reducing the hoisting of waste to the surface;
L8 shaft productivity improvement project. Through the findings of investigation into lost time incidents, a
new shaft management system was implemented, which gave better availability for hoisting of rock. Further
investigations identified traffic congestion on level 8 as a major impairment in improving hoisting productivity
of the shaft. Changes have been made to better control traffic on Level 8, allowing more rock to be tipped
into the shaft passes;
Focus on underground development to gain access to future stoping areas, this included the development
of internal shafts from Level 8 to Levels 9 and 10, and the subsequent horizontal development;
Improved loading of internal shaft skips, A review of the operations of the internal shafts on 8 level showed
the productivity of the shafts could be improved through better ore pass and loading arrangements. A new
design has been developed and being implemented in to the shafts as they are developed. Trials on the 43E
Winze indicate improved shaft hoisting productivity and less congestion on the level resulting in improved
productivity from level haulage;
Level 9 is now operational with development and stoping operation occurring on all major vein structures
and all internal Winzes have been connected with horizontal development; and
Integration of the long-range planning, short-range planning and mine geology data has improved the
planning and scheduling process of the mine. This is being expanded to include project management to
improve the design, planning and implementation of future infrastructure projects.
Graph 1: Co-O Mine tonnes hoist for FY17/18 by month.
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The mine tonnes hoisted were more consistent this year with each month hoisting between 45,000 to 50,000
tonnes per month. The exceptions were December and January when miner attendance at the mine is low due to
the Christmas - New Year holiday. Major Shaft maintenance was carried out during this period. While productivity
from L8 shaft improved in the last quarter, it was offset by reduction in hoisting from the Portals and Baguio Shaft.
Production from level 3 was completed in December 2017 the level has now been sealed up.
Stoping methods
Two mining methods are currently utilised at the Co-O Mine:
Diagram 3: Schematic diagram of a shrink stope.
Diagram 4: Schematic diagram of a room and pillar (slot) stope.
(i) Shrink stope mining
This method is predominantly used on steeply dipping veins with a minimum mining width of 1.25 metres.
(Diagram.3). Mining commences from the bottom and progresses upwards and the broken ore is left in the
stope to provide ground support. The volume of ore expands after blasting by about 30% and this material
needs to be progressively drawn from the stope during operation. Once blasting has reached the crown
pillar, the remaining 70% of ore can be drawn quickly at low cost.
(ii) Room and pillar (slot) mining
This method is used on the low-angle veins where the ore would not naturally flow to the draw points.
(Diagram. 4). The broken ore needs to be scraped to the haulage Level by mechanical slushers, and pillars
need to be left behind for ground support. The minimum mining width for low angle veins is 1.5 metres,
hence the higher dilution is partly responsible for the overall lower than average grade achieved from the
upper parts of the mine where the low angle veins are prominent. The ratio of room and pillar stopes to
shrink stopes will likely decrease with depth.
Development
Development and stoping continued on Levels 2, 4 ,5 ,6 ,7 ,8 ,9 and 10 during the year, as well as winzes
(internal shafts) from Level 8 down to Levels 9, 10 and 11. Most development is conducted on ore with waste
development being confined to cross-cuts, ventilation raises, internal shafts and infrastructure requirements.
A total of 25,945 metres of horizontal and vertical development was completed in FY 2017/18. This was an
increase of 16% metres over the previous year. The focus is on the development of the lower sections of the
mine (Levels 7, 8, 9 and 10).
Graph 2 shows the distribution of both horizontal and vertical development through the year. The increase in
vertical development reflects the introduction of more efficient blocking raises for the shrinkage stopes. The
amount of horizontal development reflects the push to develop the lower levels.
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Graph 2: FY17-18 mine development (horizontal and vertical) by month.
L8 Shaft
Major planned maintenance on the shaft and the winder were carried out during scheduled maintenance days
(Sundays and over the festive period Christmas - New Year. This work included rope changeout, change out of
winder braking components, replacements of worn components in the shaft. The disciplined approach to
inspections and planned maintenance has seen maintenance down time for the shaft reduce.
A similar disciplined approach to the planning of hoisting materials and closer management of the man carrying
duties of the shaft have resulted in better utilisation of the shaft for rock hoisting duties. Productivity improvement
project were also carried out which have seen the daily shaft hoisting tonnes consistently match the technical
limits for the shaft.
When the E15 Service Shaft is operational, the L8 Shaft hoisting capacity will improve further as it will become
utilised more for hoisting.
E15 Service Shaft
All critical parts, including the lower shaft steel work have arrived on site and final assembly of the E15 Service
Shaft is well underway (Figure 1). The Company expects all outstanding construction work to be completed in
October for commissioning.
Once fully operational, the E15 Service Shaft is expected to take the burden of manpower and material
movements from the L8 Shaft, allowing for a significant increase in L8’s skipping capacity and expediting
development and production on the lower mine levels. Importantly, completion of this key infrastructure would
also facilitate the establishment of more ideally located drilling stations for continued expansion of the Co-O
Resources and Reserves in due course.
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Picture 2: E15 Service Shaft - Head Frame and winder houses.
Picture 3: Current progress of E15 Service Shaft installation.
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Internal Winzes (shafts) from Level 8 to Level 10
By the end of the FY 2017/18, five primary winzes (internal inclined shafts) were in operation hoisting from Levels
to Level 8, the 17E, 29E and 48E winzes service Level 9 while the 12E winze and 43E winzes service both Level
9 and 10. The 48E winze has reach the 10 level but not yet fitted out with the loading pocket.
Development on Level 9 is now advanced such that it is now operational with development and stoping operation
occurring on all major vein structures.
Development of Level 10 has commenced with the 12E winze now linked to the E15 Service Shaft, work is also
progressing on development to link 12E, 35E, 43E and 48E winzes and to establish diamond drill stations.
The 35E is being developed and has reach Level 9 and continuing to be developed to Level 12. Once complete
the other winzes will systematically be extended to 12 Level.
Primary Ventilation
The initial primary ventilation upgrade project was completed last year, work has continued to further improve the
primary ventilation in the lower levels. Work has commenced to establish a primary ventilation circuit in the eastern
area of the mine which will allow better distribution of ventilation around the working areas.
Co-O MINE GEOLOGY
The detailed discussions and interpretations of the Co-O geology and mineralisation were initially reported on 14
August 2012 and are also contained, with plans and sections, in the 2012 to 2017 Annual Reports.
Figure 3: Co-O Mine composite longitudinal projection showing the locations of reported significant drill intercepts (since 2010), underground
development, E15 Service Shaft. The 2018 Indicated and Inferred resource model (red) is also shown, demonstrating the potential for
down plunge extensions at depth.
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During the past 8 months, the Company continued its resource drilling campaign with an intensive review of the
Great Hamish Vein (“GHV”) with particular attention to the identification of structures and vein textures and their
relationships with mineralisation and gold grades in the eastern extension. The key points from the review, re-
interpretations and re-modelling of the Co-O Mine underground geology achieved a number of key objectives:
• Maintained a higher Level of confidence in the Co-O resources as per the high conversion rate to reserves;
• Greater understanding of the structural controls on the epithermal gold system created by the Diatreme
Intrusive contact as indicated on Figures 4 & 5; Idealized Long-section and cross-sections of the Co-O
deposit; Figure 5 is a representation of Level 10 and how the Diatreme is influencing the pinch out of Great
Hamish Vein. Figures 6 & 7 indicate the geological complexity of the Co-O vein system, it’s primary veins
and the numerous associated splay veins; and
• Defined and confirmed the eastern geologic limit to the main GHV between Levels 10 and 14.
Figure 4: Cross-sections at 614720mE (±40 metres) and 614960mE (±40 metres), through the L8-64E and L8-82E Drill Chamber positions
respectively, showing the ore corridor (green rectangle), its proximity to the diatreme, and the existing drilling (grey hole traces). The drilling
revealed other veins that still has to be named and shows that the potential extensions to the Co-O vein systems downdip is still open.
Figure 5: Level 10 plan showing the Co-O major vein systems and its relation to the “Shatter Zone” and the Diatreme to the East.
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Figure 6: Isometric and Orthogonal views of the Co-O Mine’s 2018 resource model, major veins (GHV, Jereme, Central and Don Pedro Veins) in
colour and associated sub-parallel and link veins in translucent grey, plus underground development and production shafts.
GROUP ORE RESERVES AND MINERAL RESOURCES
The Annual Mineral Resources Update Statement and Annual Ore Reserves Update Statements for the Company
were released on 3 April 2018, and include Material Information for the individual deposits, including a Material
Information Summary pursuant to ASX Listing Rules 5.8 and 5.9 and the Assessment and Reporting Criteria in
accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(“JORC 2012”).
The Mineral Resources and Ore Reserves Statements have been prepared in accordance with the JORC 2012 for
the Co-O Mine and the Bananghilig B1 deposit, however the Saugon Mineral Resources was prepared and first
disclosed under JORC 2004 and has not been updated to comply with JORC 2012 on the basis that the information
has not materially changed since it was last reported.
Refer to the Company’s Annual Update Statement of Mineral Resources and Ore Reserves dated 3 April 2018 for
background information and material information relating to the resources and reserves estimates.
The Company conducts regular internal and external reviews of Mineral Resource and Ore Reserve estimation
procedures to validate the quality and integrity of these procedures. External consultants are also regularly
contracted to conduct independent reviews of Mineral Resource and Ore Reserve estimation procedures and
results. The reviews have not identified any material issues with these procedures or results.
The Co-O Mine has a long history of Ore Reserve replacement by way of diamond drilling and conversion of
Indicated Resources (Graph 4). The Company remains confident in the long-term future of the Co-O Mine given the
current Mineral Resource inventory, the nature of the geology and mineralisation and the historic conversion rate
(~70%), after allowance for mining recovery, of Indicated Mineral Resources to Ore Reserves. The Co-O Mine
continues to maintain a minimum plus three year mine plan, for Indicated Resource, and more than a five year life,
considering the resource endowment. This is typical of the way these types of narrow vein, high-grade gold mines
have operated for many years.
Mineral Resource and Ore Reserve Assumptions
Mineral Resources are reported inclusive of Ore Reserves and includes all exploration and resource definition
drilling information up to 31 December 2017 and has been depleted for mining to 31 December 2017.
Gold price assumptions used to estimate Mineral Resources and Ore Reserves are:
•
•
Mineral Resources - US$1,500 per ounce gold
Ore Reserves - US$1,275 per ounce gold
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Graph 3: Production, Ore Reserves and Mineral Resources status since 2007, demonstrating the Co-O Mine’s history of increasing resources and
replacing mine depletion.
Notes:
FY2008 to FY2013 - Ore Reserve ounces are classified under JORC 2004 guidelines;
FY2014 to FY2017 - Mineral Resource and Ore Reserve ounces are classified under JORC 2012 guidelines; and
FY2018
- Ore Reserves estimated using gold price of $1,275 per ounce (FY2017 reserves at $1,250 per ounce).
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Co-O MINE MINERAL RESOURCES
Total Inferred and Indicated Mineral Resources for the Co-O Mine are now estimated at 2.53 million tonnes at an
average grade of 10.65 g/t gold for a total 0.86 million ounces contained gold, compared to the 30 April 2017
estimate of 2.18 million tonnes at an average grade of 12.29 g/t gold for a total 0.86 million ounces contained gold
(Table III).
The changes in the Co-O Mine’s Mineral Resources (a net addition of 6,000 ounces) are primarily due to the
successful infill and resource drilling that defined new and additional resources.
While the total ounces in the Indicated Resource category has been increased by 7%, the grade has decreased by
9.7%. The overall grade of the total combined Indicated Resource and Inferred Resource has decreased by 13.3%.
Note that in this annual reporting drilling was limited to a period of 8 months (April to December 2017) due to the
close off date for reporting being previously bought forward to 30 April 2017 to better align with financial reporting.
Traditionally the Co-O Mine has mined material from outside of the Indicated Resource. This material comes from
the Inferred Resource category, and from unclassified mineralised veins exposed through development, at a
proportion of up to 25% of ore supply to the mill. No attempt has been made in the estimation of Indicated Resource
or Ore Reserve to make an allowance for this activity.
Table III: Comparison summary of total undiluted Co-O Mineral Resource estimates for 30 Apr 2017 & 31 Dec 2017
Mineral Resource
Category 1
Indicated 2
Inferred 2
Total
Notes:
30 Apr 2017
31 Dec 2017
Variance
Tonnes
Au (g/t)
Au (oz)
Tonnes
Au (g/t)
Au (oz)
Tonnes
Au (g/t)
Au (oz)
1,172,000
12.11
456,000
1,389,000
10.93
488,000
18.5%
(9.7%)
7.0%
1,003,000
12.50
403,000
1,141,000
10.30
378,000
13.8%
(17.6%)
(6.2%)
2,175,000
12.29
859,000
2,530,000
10.65
865,000
16.3%
(13.3%)
0.7%
1 Mineral Resources are reported inclusive of Ore Reserves; and
2 Resources are reported to Level 16 (-595m RL), with very limited Resources below Level 14 (-495m RL).
Co-O MINE ORE RESERVES
A detailed review of all Co-O Mine and milling production data, including mining and metallurgical performances to
determine appropriate physical mining parameters, cut-off grades and dilutions has been completed for this latest
update to the Mineral Resource and Ore Reserve statement.
The Co-O Mine Probable Ore Reserves are now estimated at 1.52 million tonnes at a grade of 6.69 g/t gold for a
total 327,000 ounces contained gold, compared to the 30 April 2017 estimate of 1.64 million tonnes at a grade of
6.54 g/t gold for a total 345,000 ounces contained gold.
The changes in the Co-O Mine Ore Reserves are primarily due to: mining depletion; modified vein interpretations
through increased geological knowledge of the different vein sets obtained by further underground mapping and
drilling; revision of mineability of remnant ore in some stopes, and a restriction of recoverable pillars mostly to the
three major veins in the mine (i.e. GHV, Jereme & Central veins), with some high-grade pillars from minor veins.
The Co-O Ore Reserves are reported using a gold price of US$1,275 per ounce.
Carras Mining Pty Ltd (“Carras”) of Perth, Western Australia, was contracted to undertake the Co-O Mine Ore
Reserves estimate for FY2017. Carras was assisted by Philsaga’s long-term planning engineers and senior
underground mine geologists.
Table IV: Comparison Summary of the Co-O Mine’s Ore Reserve estimate for 30 Apr 2017 to 31 Dec 2017.
Ore Reserve
Category 1
Probable 1
Total
Notes:
30 Apr 2017
31 Dec 2017
Variance
Tonnes
Au (g/t)
Au (oz)
Tonnes
Au (g/t)
Au (oz)
Tonnes
Au (g/t)
Au (oz)
1,640,000
6.54
345,000
1,520,000
6.69
327,000
(7.3%)
2.3%
(5.2%)
1,640,000
6.54
345,000
1,520,000
6.69
327,000
(7.3%)
2.3%
(5.2%)
1 Ore Reserves are reported to Level 13 (-454m RL) with very limited Reserves below Level 12 (-395m RL).
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EXPLORATION ACTIVITIES
EXPLORATION - PHILIPPINES
Co-O EXPLORATION
“The underground drilling during 2018-19 will continue to focus
on the definition and conversion wide-spaced intersections
between Levels 8 to 16 into resources, and to develop
additional mineral resources.”
RESOURCE DEFINITION DRILLING
In FY 2017/18, continued focus on the underground drilling and development was primarily to probe the eastern
and downdip extensions of GHV, Jereme Vein as well as upgrade Inferred resources, into the Indicated category.
This drilling was carried out from drilling chambers at Levels 6, 7 and 8.
The resource definition drilling from drill chambers 64E and 82E to the east, on Levels 8 (Figure 3), showed
significant intercepts of the GHV at Levels 8 to 12. The veins system shows it is still open for further exploration at
depth, while the GHV between Levels 10 and 14 gave less than favourable results due to the presence of the
diatreme. Consequently, there has not been an overall increase in the total mineral resources from the GHV.
However, on the same position at Levels 8 to 12, the northern veins comprising of Jereme, Don Pedro and other
splays show significant new intercepts. The significant drill intercepts are presented in Figure 3; this includes results
from prior to October 2017 (grey dots).
Table V: Summary of Co-O Mine underground drilling (8 months covering May to Dec 2017)
Project
Purpose
Number of Holes
Meterage
Co-O Mine Underground
Resource and definition drilling
53
14,136
Details of significant intersection results obtained during the FY 2017/18 have been reported in the September
2017, December 2017, March 2018 and June 2018 quarterly reports.
Table VI below summarises the more significant drill intersections obtained during the year.
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Table VI: Co-O Mine - significant underground drill hole results of ≥ 6 gram-metres.
Hole
Number
East
North
RL
Depth
(metres)
Azim
(°)
Dip
(°)
From
(metres)
To
(metres)
Width
(metres)
Gold
(g/t)
Accumulations
(gm*m)
UNDERGROUND RESOURCE DRILLING - LEVEL 6
L6-11E-001
614094
912891
-94
126.1
322
0
L6-15W-002
613824
912914
-97
50.9
4
1
L6-20W-001
613784
912900
L6-22E-001
614245
912900
-98
-93
100.1
130.3
184
12
-1
3
29.70
90.30
91.30
0.00
23.85
8.50
16.50
43.75
50.80
30.30
91.30
92.05
0.40
24.85
9.00
17.50
44.00
51.90
111.30
111.70
L6-22E-002
614246
912899
-93
150.2
37
1
110.65
110.90
L6-28W-001
613711
912954
L6-29E-001
614289
913003
-97
-93
85.8
150
351
28
L6-32W-003
613635
912820
-96
151.9
352
L6-32W-004
613637
912815
-97
101.1
150
L6-32W-005
613635
912815
-97
150.3
194
-1
1
0
0
0
L6-47E-001
614406
912869
L6-52E-001
614510
912815
-91
-90
200.8
150
28
134
0
0
142.40
142.80
43.00
34.20
43.60
34.60
142.20
142.70
7.85
23.35
64.70
89.60
14.00
23.70
45.70
62.15
63.75
95.80
42.60
47.80
8.15
23.55
65.30
90.65
15.00
24.00
46.05
62.70
64.50
96.40
43.65
48.80
L6-58E-001
614563
912855
-89
200.2
11
-1
101.80
102.20
L6-58E-002
614565
912853
-89
200
41
0
145.35
145.55
102.80
103.05
182.05
182.50
153.20
154.20
154.20
154.40
174.65
175.00
L6-62E-001
614604
912806
-88
200
50
1
112.80
113.00
127.60
127.80
182.40
182.65
183.45
183.70
UNDERGROUND RESOURCE DRILLING - LEVEL 7
L7-35E-001
614367
913088
-141
L7-38E-001
614349
912845
-137
118.2
120.6
148
324
1
0
L7-39E-001
614393
912852
-138
75.1
356
2
L7-39E-002
614392
912852
-138
75.1
323
0
21.80
67.20
68.45
75.60
75.80
77.60
22.00
67.75
68.90
75.80
76.65
78.60
119.40
120.25
12.20
37.10
38.10
41.20
43.60
58.60
58.90
11.20
39.65
12.40
38.10
38.30
41.40
43.80
58.90
59.25
11.40
39.85
0.60
1.00
0.75
0.40
1.00
0.50
1.00
0.25
1.10
0.40
0.25
0.40
0.60
0.40
0.50
0.30
0.20
0.60
1.05
1.00
0.30
0.35
0.55
0.75
0.60
1.05
1.00
0.40
0.25
0.45
0.20
1.00
0.20
0.35
0.20
0.20
0.25
0.25
0.20
0.55
0.45
0.20
0.85
1.00
0.85
0.20
1.00
0.20
0.20
0.20
0.30
0.35
0.20
0.20
10.36
35.85
5.85
16.01
3.61
6.75
12.88
25.17
4.03
12.88
3.24
10.53
3.55
4.74
3.08
15.55
7.04
13.47
33.35
58.88
11.06
6.28
92.29
10.51
13.8
7.5
3.3
38
8.09
7.67
5.77
4.49
6.22
35.85
4.39
6.4
3.61
3.38
12.88
6.29
4.43
5.15
0.81
4.21
2.13
1.9
1.54
4.67
1.41
8.08
35.02
58.88
3.32
2.2
50.76
7.88
8.28
7.87
3.3
15.2
2.02
3.45
1.15
4.49
420.17
84.03
3.77
10.53
3.45
18.91
3.36
4.07
4.26
11.4
22.4
10.03
11.03
3.4
11.7
3.37
21.66
11.74
12.66
23.06
7.37
10.44
3.1
1.32
2.11
0.69
4.73
0.84
0.81
2.34
5.13
4.48
8.53
11.03
2.89
2.34
3.37
4.33
2.35
2.53
6.92
2.58
2.09
0.62
Page 26 of 123
For personal use only
REVIEW OF OPERATIONS
Hole
Number
East
North
RL
Depth
(metres)
Azim
(°)
Dip
(°)
From
(metres)
To
(metres)
Width
(metres)
Gold
(g/t)
Accumulations
(gm*m)
L7-41E-001
614376
912777
-139
65
L7-52E-001
614519
912970
-139
152.3
160
136
-1
-1
L7-52E-003
614523
912973
-139
151.3
71
-1
48.35
48.60
25.20
11.30
34.80
35.20
36.60
37.10
37.40
91.65
13.20
19.15
31.30
31.60
48.60
49.60
25.80
11.50
35.20
36.00
37.10
37.40
37.75
91.85
13.65
19.45
31.60
32.60
114.30
114.80
L7-54E-001
614520
912876
-137
151.1
47
0
86.60
86.90
L7-60E-001
614561
912715
-136
150.1
26
-1
L7-60E-002
614562
912715
-136
150
53
0
L7-65E-001
614662
912765
-135
150.3
14
-1
L7-65E-001
L7-65E-002
614662
912765
-135
150.6
26
0
131.05
132.05
132.05
132.25
141.60
141.85
0.00
22.75
29.20
79.90
84.90
86.35
87.90
0.60
23.20
29.40
80.20
85.35
87.00
88.10
144.45
145.45
145.45
146.25
0.00
93.00
52.50
76.00
54.85
0.20
94.05
52.70
76.35
55.20
UNDERGROUND RESOURCE DRILLING - LEVEL 8
L8-28E-029
614265
912866
-191
551.6
242
-29
L8-28E-030
614268
912865
-191
L8-2W-017
613991
913098
-188
L8-2W-020
613992
913098
-188
550.6
576.1
584.3
177
221
204
-53
-14
-28
26.75
50.60
52.60
63.35
69.75
27.00
51.60
52.80
63.65
70.20
529.10
529.50
294.90
295.50
169.60
170.00
362.70
363.70
L8-2W-021
613994
913097
-188
551.6
179
-20
25.55
25.85
L8-2W-022
613993
913098
-188
L8-2W-023
613993
913098
-189
480.6
550.6
186
174
-34
-35
199.45
199.70
292.90
293.20
293.20
293.80
310.80
311.80
382.90
383.15
509.50
510.50
510.50
510.70
204.50
205.20
110.80
111.80
230.70
231.20
243.50
243.90
L8-2W-024
613992
913098
-189
551.4
198
-35
269.30
269.65
272.85
273.15
0.25
1.00
0.60
0.20
0.40
0.80
0.50
0.30
0.35
0.20
0.45
0.30
0.30
1.00
0.50
0.30
1.00
0.20
0.25
0.60
0.45
0.20
0.30
0.45
0.65
0.20
1.00
0.80
0.20
1.05
0.20
0.35
0.35
0.25
1.00
0.20
0.30
0.45
0.40
0.60
0.40
1.00
0.30
0.25
0.30
0.60
1.00
0.25
1.00
0.20
0.70
1.00
0.50
0.40
0.35
0.30
84.99
4.29
5.36
4.91
18.74
4.54
90.98
64.46
98.7
7.1
43.43
4.21
10.38
10.47
36.49
3.98
16.9
7.17
6
10.57
6.28
5.21
7.05
5.22
3.07
23.64
3.32
6.39
31.57
7.27
9.17
31.77
6.41
4.64
27.73
8.23
4.94
7.74
6.66
4.31
4.46
21.25
4.29
3.22
0.98
7.5
3.63
45.49
19.34
34.55
1.42
19.54
1.26
3.11
10.47
18.25
1.19
16.9
1.43
1.5
6.34
2.83
1.04
2.11
2.35
2
4.73
3.32
5.11
6.31
7.63
1.83
11.12
2.24
1.16
27.73
1.65
1.48
3.48
2.66
2.59
1.78
11.71
11.71
6.86
3.85
6.97
3.21
13.01
30.23
21.88
5.92
21.93
125.3
6.6
77.01
10.96
3.32
2.06
0.96
2.09
1.93
13.01
7.56
21.88
1.18
15.35
125.3
3.3
30.8
3.84
1
Page 27 of 123
For personal use only
REVIEW OF OPERATIONS
Hole
Number
East
North
RL
Depth
(metres)
Azim
(°)
Dip
(°)
From
(metres)
To
(metres)
Width
(metres)
Gold
(g/t)
Accumulations
(gm*m)
L8-2W-025
613991
913098
-189
L8-2W-026
613994
913098
-189
554.1
551.1
216
166
-32
-31
277.30
277.65
277.65
278.65
311.35
312.35
53.75
54.00
106.00
106.30
194.40
194.70
320.50
320.95
L8-2W-028
613994
913099
-189
L8-2W-029
613993
913098
-189
551.1
551.1
147
165
-34
-37
401.50
402.50
248.05
248.45
251.10
251.90
L8-2W-030
613993
913098
-189
551.1
175
-41
76.75
77.75
L8-45E-030
614462
913038
-191
L8-45E-031
614462
913037
-191
572.1
551.1
230
220
-57
-48
250.10
251.10
217.90
218.60
37.70
38.25
143.50
143.80
309.85
310.80
L8-45E-032
614464
913037
-191
550.4
192
-69
110.80
111.80
L8-45E-033
614465
913036
-190
551.4
179
-7
89.85
90.20
162.40
162.80
232.40
232.90
238.05
239.05
319.90
320.90
144.80
145.30
146.95
147.40
157.85
158.40
327.00
328.10
346.60
346.90
363.50
364.60
364.60
364.90
454.90
455.10
L8-45E-034
614464
913036
-191
500.1
201
-33
82.50
83.10
161.70
162.60
163.20
163.45
188.10
188.75
188.95
189.90
189.90
190.40
289.75
290.00
290.00
291.00
383.00
383.30
L8-45E-035
614464
913036
-191
500.1
192
-38
162.10
162.75
165.45
165.70
185.40
186.40
192.45
193.25
217.90
218.10
219.40
220.40
229.15
230.15
277.25
278.25
282.30
283.20
315.20
315.50
362.80
363.40
363.40
363.70
363.70
364.70
32.10
40.15
44.70
32.50
40.60
44.90
141.25
142.25
154.50
154.70
L8-45E-036
614462
913036
-191
509.9
217
-24
0.35
1.00
1.00
0.25
0.30
0.30
0.45
1.00
0.40
0.80
1.00
1.00
0.70
0.55
0.30
0.95
1.00
0.40
0.50
1.00
1.00
0.35
0.50
0.45
0.55
1.10
0.30
1.10
0.30
0.20
0.60
0.90
0.25
0.65
0.95
0.50
0.25
1.00
0.30
0.65
0.25
1.00
0.80
0.20
1.00
1.00
1.00
0.90
0.30
0.60
0.30
1.00
0.40
0.45
0.20
1.00
0.20
15.73
319.15
5.51
319.15
6.35
7.83
4.93
3.83
3.13
7.03
7.13
5.4
79.25
6.6
23.04
39.3
4.94
3.66
30.47
4.26
7.96
31.93
25.06
25.89
5.52
62.55
4.47
21.94
42
73.87
48.55
8.13
3.19
8.34
10.08
4.03
58.71
230.09
5.73
4.2
7.33
29.58
4.65
4.66
5.24
8.3
19.67
4.6
19.58
3.28
11.79
107.53
25.44
4.16
9.42
15.49
4.54
3.82
5.76
6.35
1.96
1.48
1.15
1.41
7.03
2.85
4.32
79.25
6.6
16.13
21.61
1.48
3.48
30.47
1.7
3.98
31.93
25.06
9.06
2.76
28.15
2.46
24.13
12.6
81.26
14.56
1.63
1.91
7.51
2.52
2.62
55.77
115.05
1.43
4.2
2.2
19.23
1.16
4.66
4.19
1.66
19.67
4.6
19.58
2.95
3.54
64.52
7.63
4.16
3.77
6.97
0.91
3.82
1.15
Page 28 of 123
For personal use only
REVIEW OF OPERATIONS
Hole
Number
East
North
RL
Depth
(metres)
Azim
(°)
Dip
(°)
From
(metres)
To
(metres)
Width
(metres)
Gold
(g/t)
Accumulations
(gm*m)
170.70
171.30
171.30
171.50
208.20
208.90
220.75
221.10
227.00
227.20
227.20
227.80
228.45
228.65
228.65
229.65
419.10
419.95
497.30
497.80
L8-45E-037
614462
913036
-191
501.1
206
-32
36.80
37.20
127.70
128.70
128.70
129.70
129.70
130.70
130.70
131.45
150.30
150.65
161.00
161.50
170.40
170.65
198.75
199.35
201.35
201.70
256.90
257.10
L8-45E-038
614465
913036
-191
500.1
181
-29
130.70
130.95
142.30
143.30
157.30
158.20
160.10
161.10
175.90
176.10
188.15
188.50
233.50
233.90
354.45
354.95
420.70
421.40
441.00
441.20
L8-45E-039
614465
913036
-190
500.1
182
-20
129.25
130.00
164.70
165.70
165.70
165.90
179.10
179.30
333.40
333.70
L8-45E-040
614467
913036
-190
500.1
151
-7
111.80
112.25
112.90
113.40
124.40
124.60
133.10
133.55
134.60
135.65
135.65
135.90
137.60
138.45
138.45
139.20
139.20
139.50
140.20
140.75
151.75
152.10
152.10
153.10
155.40
155.80
159.30
159.50
159.50
160.50
161.20
161.50
226.70
226.90
314.10
315.10
315.10
316.10
316.10
316.45
L8-45E-041
614468
913037
-190
509.1
144
-7
95.00
95.40
0.60
0.20
0.70
0.35
0.20
0.60
0.20
1.00
0.85
0.50
0.40
1.00
1.00
1.00
0.75
0.35
0.50
0.25
0.60
0.35
0.20
0.25
1.00
0.90
1.00
0.20
0.35
0.40
0.50
0.70
0.20
0.75
1.00
0.20
0.20
0.30
0.45
0.50
0.20
0.45
1.05
0.25
0.85
0.75
0.30
0.55
0.35
1.00
0.40
0.20
1.00
0.30
0.20
1.00
1.00
0.35
0.40
5.68
4.18
12.81
4.33
25.45
13
9.37
3.17
329.76
3.25
33.64
3.47
50.11
28.92
8.73
3.12
37.58
8.45
33.55
6.53
23.9
5.73
11.82
41.64
3.33
7.19
8.59
3.69
37.99
37.78
3.67
15.73
4.38
28.97
8.61
3.44
6.81
115.21
8.15
24.55
3.38
29.85
3.09
3.73
13.19
15.73
80.11
5.85
23.78
208.61
6.05
95.15
7.61
13.67
3.54
21.48
39.91
3.41
0.84
8.97
1.52
5.09
7.8
1.87
3.17
280.3
1.63
13.46
3.47
50.11
28.92
6.55
1.09
18.79
2.11
20.13
2.29
4.78
1.43
11.82
37.48
3.33
1.44
3.01
1.48
19
26.45
0.73
11.8
4.38
5.79
1.72
1.03
3.06
57.6
1.63
11.05
3.55
7.46
2.63
2.8
3.96
8.65
28.04
5.85
9.51
41.72
6.05
28.55
1.52
13.67
3.54
7.52
15.96
Page 29 of 123
For personal use only
REVIEW OF OPERATIONS
Hole
Number
East
North
RL
Depth
(metres)
Azim
(°)
Dip
(°)
From
(metres)
To
(metres)
Width
(metres)
Gold
(g/t)
Accumulations
(gm*m)
95.70
96.45
122.65
123.05
124.90
125.55
125.55
126.00
208.45
209.45
269.45
269.65
350.75
351.80
L8-45E-042
614465
913037
-190
503.1
191
-31
123.30
124.00
124.15
124.45
124.45
125.00
125.00
125.45
173.10
174.00
174.00
174.25
186.65
187.65
188.50
189.50
293.25
294.00
495.50
496.20
L8-45E-043
614467
913037
-190
551.1
146
-16
117.10
117.65
120.15
120.35
123.20
123.90
142.25
142.50
156.10
156.65
162.15
163.10
163.10
163.90
163.90
164.30
164.65
165.60
183.80
184.40
223.55
223.75
0.75
0.40
0.65
0.45
1.00
0.20
1.05
0.70
0.30
0.55
0.45
0.90
0.25
1.00
1.00
0.75
0.70
0.55
0.20
0.70
0.25
0.55
0.95
0.80
0.40
0.95
0.60
0.20
6.97
51.51
12.07
20.16
4.75
13.26
5.33
13.65
4.92
4.51
5.54
9.64
5.64
13.58
11.12
7.39
4.16
6.02
3.32
8.44
5.03
9.87
6.95
12.18
13.6
15.25
3.25
3.05
5.23
20.6
7.85
9.07
4.75
2.65
5.6
9.56
1.48
2.48
2.49
8.68
1.41
13.58
11.12
5.54
2.91
3.31
0.66
5.91
1.26
5.43
6.6
9.74
5.44
14.49
1.95
0.61
227.15
227.60
0.45
1091.21
491.04
L8-45E-044
614468
913037
-191
550
148
-23
62.60
63.15
118.15
118.95
119.50
119.70
120.70
120.95
129.70
130.25
143.45
143.65
159.30
159.50
159.50
160.50
168.30
168.85
168.85
169.40
170.15
170.90
170.90
171.55
171.55
171.75
225.15
226.00
250.45
251.45
340.50
341.05
341.05
341.90
341.90
342.50
344.35
344.65
L8-45E-045
614466
913036
-191
550
169
-28
123.60
124.20
134.45
134.65
144.40
144.90
146.40
146.75
155.00
155.85
155.85
156.50
167.35
168.00
429.00
429.25
L8-45E-046
614466
913036
-191
551.1
175
-31
126.70
127.70
0.55
0.80
0.20
0.25
0.55
0.20
0.20
1.00
0.55
0.55
0.75
0.65
0.20
0.85
1.00
0.55
0.85
0.60
0.30
0.60
0.20
0.50
0.35
0.85
0.65
0.65
0.25
1.00
3.47
6.81
15.6
5.46
9.69
4.85
36.91
4.64
5.11
3.57
87.16
3.92
4.35
29.97
6.78
32.61
168.6
29.25
3.63
4.68
20.78
5.22
5.08
11.65
12.2
6.36
3.47
15.26
1.91
5.45
3.12
1.37
5.33
0.97
7.38
4.64
2.81
1.96
65.37
2.55
0.87
25.47
6.78
17.94
143.31
17.55
1.09
2.81
4.16
2.61
1.78
9.9
7.93
4.13
0.87
15.26
Page 30 of 123
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REVIEW OF OPERATIONS
Hole
Number
East
North
RL
Depth
(metres)
Azim
(°)
Dip
(°)
From
(metres)
To
(metres)
Width
(metres)
Gold
(g/t)
Accumulations
(gm*m)
131.40
131.65
148.75
149.45
163.75
164.35
176.05
176.25
178.45
178.70
193.35
193.65
326.65
327.05
L8-45E-047
614466
913037
-191
551.1
175
-37
118.35
118.55
118.75
119.00
128.90
129.10
147.40
147.90
241.85
242.10
242.10
242.70
242.70
243.05
243.05
244.05
319.90
320.45
404.50
404.75
L8-45E-048
614465
913037
-191
551.1
181
-42
105.55
106.05
L8-45E-049
614465
913038
-192
41.1
202
-42
L8-45E-050
614463
913039
-191
600
241
-50
L8-45E-051
614462
913037
-191
550.8
230
-27
130.85
131.30
131.30
132.30
145.55
145.90
280.70
281.10
306.40
307.15
403.30
403.80
406.10
406.45
2.85
33.60
5.30
44.30
3.55
33.80
5.65
44.55
132.80
133.80
133.80
134.35
134.35
135.10
2.70
44.75
45.60
3.30
45.35
45.90
119.65
120.40
169.40
169.65
L8-45E-052
614467
913037
-191
551.1
156
-31
140.90
141.35
161.10
161.60
165.40
166.00
188.10
189.10
191.60
192.05
371.10
371.65
371.65
372.30
372.30
372.55
417.80
418.55
460.45
461.45
405.80
406.10
263.00
264.00
82.25
83.40
82.70
84.00
L8-64E-034
614725
913101
-188
L8-82E-004
614904
913105
-186
L8-82E-008
614901
913103
-187
585.3
608.1
610.7
184
119
185
-32
-31
-45
L8-82E-009
614902
913103
-186
602.5
175
-46
344.60
345.40
L8-82E-010
614902
913103
-186
602.5
164
-46
345.40
345.70
82.00
82.80
83.90
82.80
83.10
84.80
360.50
360.70
0.25
0.70
0.60
0.20
0.25
0.30
0.40
0.20
0.25
0.20
0.50
0.25
0.60
0.35
1.00
0.55
0.25
0.50
0.45
1.00
0.35
0.40
0.75
0.50
0.35
0.70
0.20
0.35
0.25
1.00
0.55
0.75
0.60
0.60
0.30
0.75
0.25
0.45
0.50
0.60
1.00
0.45
0.55
0.65
0.25
0.75
1.00
0.30
1.00
0.45
0.60
0.80
0.30
0.80
0.30
0.90
0.20
9.79
8.41
3.44
136.28
3.48
4.36
12.11
3.78
6.78
28.21
17
55.6
6.7
10.43
26.3
4.97
4.97
3.17
4.34
3.26
7.03
9.77
15.57
18.5
5.7
5.67
21.77
20.94
4.16
3.18
5.97
4.91
8.67
8.23
42.63
29.33
3.17
12.17
6.75
4.43
7.4
6.47
117.46
44.83
6.33
5.45
3.82
3.59
6.41
11.16
23.22
6.02
5.16
7.16
18.67
23.36
7.96
2.45
5.89
2.06
27.26
0.87
1.31
4.84
0.76
1.7
5.64
8.5
13.9
4.02
3.65
26.3
2.73
1.24
1.59
1.95
3.26
2.46
3.91
11.68
9.25
1.99
3.97
4.35
7.33
1.04
3.18
3.28
3.68
5.2
4.94
12.79
22
0.79
5.48
3.38
2.66
7.4
2.91
64.6
29.14
1.58
4.09
3.82
1.08
6.41
5.02
13.93
4.82
1.55
5.73
5.6
21.02
1.59
Page 31 of 123
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REVIEW OF OPERATIONS
Hole
Number
East
North
RL
Depth
(metres)
Azim
(°)
Dip
(°)
From
(metres)
To
(metres)
Width
(metres)
Gold
(g/t)
Accumulations
(gm*m)
L8-82E-011
614901
913102
-186
600
L8-82E-013
614902
913103
-186
605.5
186
161
-41
-40
360.70
361.70
70.15
41.30
41.90
66.60
70.35
41.50
42.50
67.15
123.40
124.40
124.40
124.60
153.20
153.45
193.00
193.20
193.60
193.90
548.60
548.80
L8-82E-014
614903
913103
-186
605.5
152
-41
11.65
11.85
L8-82E-015
614903
913103
-186
598.7
154
-39
119.30
119.50
120.35
121.00
126.25
126.45
177.05
177.25
191.00
191.50
198.90
199.10
L8-82E-016
614901
913103
-186
602.1
176
-34
L8-82E-017
614901
913102
-186
600
185
-28
L8-82E-018
614901
913103
-186
L8-82E-019
614900
913103
-186
550.6
300.4
186
200
-25
-22
119.50
120.10
120.55
120.90
120.90
121.65
123.10
123.35
165.20
165.75
186.95
187.40
191.05
191.60
46.40
88.45
92.50
84.85
87.30
96.55
46.80
89.10
92.85
85.35
88.25
96.90
148.05
148.55
467.25
468.00
52.65
6.60
75.95
98.60
99.60
53.60
6.80
76.50
99.60
100.65
100.65
101.60
101.60
102.05
102.80
103.20
106.25
107.15
117.55
118.50
118.50
119.20
151.60
151.85
197.90
198.60
L8-82E-020
614902
913103
-186
L8-82E-021
614903
913103
-186
300.1
301.1
171
158
-23
-23
54.70
54.20
55.20
54.45
L9-20E-001
614167
912821
-244
L9-20E-002
614164
912825
-244
L9-23E-001
614258
913073
-244
L9-23E-002
614257
913072
-244
135.7
156.1
150.1
150.1
18
344
166
186
-1
-1
0
0
L9-38E-002
614385
913021
-242
91.2
182
-1
194.75
194.95
195.15
195.60
101.50
101.80
154.80
155.10
55.60
40.75
55.05
77.15
83.80
56.25
41.75
55.80
78.15
84.80
1.00
0.20
0.20
0.60
0.55
1.00
0.20
0.25
0.20
0.30
0.20
0.20
0.65
0.20
0.20
0.50
0.20
0.20
0.60
0.35
0.75
0.25
0.55
0.45
0.55
0.40
0.65
0.35
0.50
0.95
0.35
0.50
0.75
0.95
0.20
0.55
1.00
1.05
0.95
0.45
0.40
0.90
0.95
0.70
0.25
0.70
0.50
0.25
0.20
0.45
0.30
0.30
0.65
1.00
0.75
1.00
1.00
6.52
3.24
10.46
7.52
4.02
9.73
29.37
23.36
49.12
4.42
3.29
25.75
71.63
4.68
5.21
40.17
37.18
22.65
6.4
77.74
13.99
3.23
12.96
161.91
3.62
7.93
5.69
16.92
4.84
3.03
9.62
26.15
57.74
6.25
3.34
17.33
25.68
19.9
8.85
12.65
16.36
26.31
14.62
37.36
17.11
54.96
21.4
64.44
6.61
9.79
3.35
3.87
18.16
5.63
7.24
4.4
11.95
6.52
0.65
2.09
4.51
2.21
9.73
5.87
5.84
9.82
1.33
0.66
5.15
46.56
0.94
1.04
20.09
7.44
4.53
3.84
27.21
10.49
0.81
7.13
72.86
1.99
3.17
3.7
5.92
2.42
2.88
3.37
13.07
43.3
5.94
0.67
9.53
25.68
20.9
8.41
5.69
6.54
23.68
13.89
26.15
4.28
38.47
10.7
16.11
1.32
4.41
1
1.16
11.8
5.63
5.43
4.4
11.95
Page 32 of 123
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REVIEW OF OPERATIONS
Notes:
1. Composited intercepts’ 'weighted average grades' calculated by using the following parameters:
(i) no upper gold grade cut-off applied;
(ii) ≥ 3 gram*metres; and
(iii) a maximum of 1.0 metre of down-hole internal dilution at ≤ 3 g/t gold.
Only down-hole intercepts with composited grades ≥ 6 gram*metres are reported in the above table.
Intersection widths are down-hole drill widths not true widths;
2.
3. Analysis by Classical Fire Assay technique and AAS finish and carried out by Philsaga Mining Corporation’s on-site laboratory;
4. Some results reported above may differ slightly from those previously reported, as a result of the inclusion of subsequent additional
check analyses, which forms part of the Company’s ongoing QAQC protocols; and
5. Grid coordinates and elevation in metres relative to the Mine Datum.
Co-O REGIONAL
Exploration activities for FY 2017/18 focused on the evaluation of prospects within the Co-O and Tambis tenements,
review of Philsaga Minng Corporation (“PMC”) granted tenements and applications. Exploration highlights of these
exploration initiatives are as follows:
Figure 7: Active surface exploration projects within the company tenements.
Page 33 of 123
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REVIEW OF OPERATIONS
Figure 8: Map showing the IP chargeability anomaly at a depth slice of -45m, Co-O veins (coloured red) at Level 1 and proposed
areas to be drill tested (i.e. West and East Blocks).
Page 34 of 123
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REVIEW OF OPERATIONS
DURIAN PROJECT
This is a new project withing the tenements resulting from a detailed review of exploration geophysical data that
showed the presence of a convergent semi-circular shaped moderate to high IP chargeability anomaly within a 1-
km radius north of Co-O Mine (Figure 8). The Co-O Vein System is emplaced along the peripheral southern portion
of this IP anomaly. The geometry and tenor of the IP anomaly coupled with the lithologic distribution suggest the
potential presence of a structurally-controlled vein-style mineralisation associated with a diatreme and/or shallow
intrusion.
The North and Northeast portions of the IP anomaly - which is underlain by argillic altered andesitic volcanics with
minor quartz-sulfide stockworks, has not been drill-tested. A 6-hole 2,500 metres scout drilling program is planned
for the first quarter of the next fiscal year, to test the potential presence of a vein-style mineralisation analogous to
the Co-O Vein System at the west and east portions of the identified IP anomaly.
OLD SINUG-ANG & ROYAL CROWNE VEIN PROJECTS
Two scout drilling programs were scheduled for implementation in FY 2017/18 targeting the Sinug-ang (i.e.
Banbanon Vein segment) and Calavera Vein Systems located within MPSA 262-P2, which is roughly within a 2-km
radial distance from Co-O Mine (Figure 7). These were later suspended due to unresolved access concerns with
local stakeholders. Fortunately by the 4th Quarter of the fiscal year, a successful breakthrough discussions with
stakeholders enabled access into the Old Sinug-ang area where the 500 metres long northern segment of the
Sinug-ang Vein System - referred to as the North Sinug-ang Vein Segment, traverses.
The Old Sinug-ang area is a historic small scale mining site extracting narrow (i.e. < 1 metre wide), high grade (i.e.
> 5.0 g/t gold) veins, that has been actively producing gold since the late 1980’s until the present (Figure 9).
A 200 metres plus segment - called the Royal Crowne Vein, of the 500 metres long North Sinug-ang Vein remains
untested by drilling. This prospect is roughly 3km areal distance from the PMC Mill site.
Figure 9: Map showing the location of high-grade small-scale mine workings and the projected
undrilled segment of the Royal Crowne Vein in the Old Sinug-ang area.
Page 35 of 123
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REVIEW OF OPERATIONS
A two-phase drilling program is proposed for implementation in FY 2018/19 to test the gold resource potential of
the Royal Crowne Vein (Figure 9).
Phase 1 comprises of a 4 hole 1,000 metres Scout Drilling Program with the objective of validating the along strike,
dip and grade continuity of gold mineralisation along the Royal Crowne Vein.
Phase 2 comprises of a 5 hole 1,520 metres Resource Infill Drilling Program aimed at achieving a preliminary JORC
2012 compliant resource for the Royal Crowne Vein. Implementation of Phase 2 is contingent on the success of
Phase 1.
Figure 10: Map showing the location of proposed Phase 1 and Phase 2 drill holes testing the
Royal Crowne Vein.
Page 36 of 123
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REVIEW OF OPERATIONS
REGIONAL PROJECTS
BANANGHILIG GOLD DEPOSIT
There has been no development or material change on the Bananghilig Deposit since the Company completed an
exhaustive two-year (2015 to 2016) review of the Bananghilig B1 (“Bananghilig”) gold deposit which resulted in a
mineral resource estimate reported in 2016 in accordance with the guidelines of JORC 2012.
The total Indicated and Inferred Mineral Resources for the Bananghilig Gold Deposit, at a block cut-off grade of
0.75 g/t gold for Indicated (open-pit material), and 3.0 g/t gold for Inferred (underground material), is estimated at
7.78 million tonnes at a grade of 1.73 g/t gold (435,000 ounces contained gold). The details of the study have been
reported by the Company in September 2016.
SAUGON GOLD DEPOSIT
The Saugon Inferred Mineral Resource (81,500 tonnes at a grade of 5.97 g/t gold for a total of 15,700 ounces
contained gold) has remained unchanged from 2013. This information was prepared and first disclosed under JORC
2004. It has not been updated since to comply with the JORC 2012 on the basis that the information has not
materially changed since it was last reported.
TSF #1 TAILINGS PROJECT
The Tailings Storage Facility (“TSF”) #1 was the TSF utilized by the original processing plant since the 1980s. The
TSF #1 material is from the earlier higher gold grade Co-O mine ore and coupled with old extraction techniques
used at that time. Previous assessment completed on October 2015, focused on metallurgical testing using samples
collected from auger drill holes.
The drilling results were modelled in Surpac and a resource estimation using a lower cut-off grade of 0.85 g/t gold
gave 510,169 tonnes with 1.72 g/t gold containing 28,200 ounces of gold in the Indicated category that is compliant
to the JORC 2012 code reporting standard. The geological model interpretation reveals that concentration of the
higher grades at the upper portion of the tailings section will simplify mining, minimizing the need of disturbing the
lower grade basal tailings material.
A more detailed study in underway into the feasibility of mining and processing this material, including detailed
metallurgical testing. The objective of this work is to determine the best option for gaining value from thTSF #1
resource.
Page 37 of 123
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REVIEW OF OPERATIONS
EXPLORATION - OVERSEAS
CAMBODIA GOLD PROJECT
On 10 January 2018 the company announced that it had entered into a Memorandum of Understanding (“MOU”)
with SEA Resources Pty Ltd, Sovann Resources Co., LTD (a related Cambodian entity of SEA Resources Pty Ltd)
and the shareholders of Sovann (collectively, referred to as “SEA”) regarding an exploration opportunity in the Prek
Kampi region of Cambodia.
The MOU provided a non-binding framework to guide Medusa and SEA in the negotiation of an Earn-in Agreement
under which Medusa could acquire up to a 70% interest in a metallic mineral exploration licence applied for by SEA
in the Prek Kampi region of Cambodia.
Under the terms of the MOU, Medusa and SEA had until 1 March 2018 to finalise the Earn-in Agreement. The Earn-
in Agreement was not finalised by 1 March 2018. As a result, the MOU expired and Medusa will not pursue this
exploration opportunity as mutally agreed by both SEA and the company. A public disclosure was made on the
Australian Stock Exchange on 2 March 2018.
Medusa remains committed to expanding its presence in South East Asia as part of its longer-term strategic
diversification plan.
QUEENSLAND EPITHERMAL GOLD & PROPHYRY COPPER PROJECT
The company announce as at 5 July 2018 that it has entered into an earn-in agreement (EIA) with Ellenkay Gold
Pty Limited (Ellenkay) regarding two exploration projects in Central Queensland, Australia (Figure 11).
The Hill 212 (EPM 26217) exploration project is an epithermal gold-silver opportunity approximately 30km east of
Mt Coolon. The Mt Clark West (EPM 26008) exploration project is a porphyry copper-gold opportunity approximately
24km northwest of Nebo. Both projects have well defined drill targets generated through previously completed
geochemical and geophysical work programs.
Figure 11: Location map showing the two projects (red dots).
Page 38 of 123
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REVIEW OF OPERATIONS
Ellenkay currently has a 100% interest in both projects and under the terms of the EIA, Medusa may earn an equity
position of up to 90% in either or both projects by managing and funding work programs through to the completion
of a Pre-Feasibility Study.
Medusa must spend a combined minimum of A$1 million on exploration activities across both projects in the first
year before it is able to withdraw. Following this minimum expenditure commitment, Medusa can increase its interest
in the projects by electing to meet and satisfying the following expenditure and development milestones:
Milestone
Year 2
Year 3
Pre-Feasibility Study
Mt Clark West
Hill 212
Medusa project equity
Expenditure
Medusa project equity
Expenditure
49%
70%
90%
A$750,000
A$750,000
Fund study
49%
70%
90%
A$750,000
A$750,000
Fund study
Following the completion of a Pre-Feasibility Study, Medusa can elect to sole fund a Feasibility Study on either or
both projects. Medusa will manage the exploration program during the earn-in period and expects to be drilling
the first of the projects before the end of the current September quarter.
Hill 212
The project area features multiple epithermal-style veins and potentially represents the upper levels of an epithermal
system. Exploration work by previous explorers include mapping (1:2,000 scale) over ~1km x 800 metres, rock chip
and soil sampling, as well as limited drilling (two RC holes for a total of 168 metres, with peak results of 1.01 g/t
gold at 4 metres). Historical exploration work had identified gold mineralisation and classic epithermal textures.
Medusa will be testing for potential grade improvement at depth below the base of oxidation.
Mt Clark West
The project area features large scale, pervasive hydrothermal alteration and porphyry-style stockwork quartz
veining with well-developed boxworks. Historical work included field mapping and rock chip sampling, soil sampling,
geophysical surveys, magnetic inversion modelling plus IP and resistivity modelling. This work has highlighted a
number of coincident geophysical and geochemical anomalies and delineated, drill ready targets.
RATIONALISATION OF TENEMENT
There have been no physical changes on the company’s tenement for the FY 2017/18.
Ongoing rationalisation of the Company’s tenement application pipeline focused on desktop review and
reconnaissance field validation of the district geology around the Co-O Mine (Figure 2). During this fiscal year, four
(4) tenement application grounds - APSA 12-XIII, APSA 99-XIII, EPA 66-XIII and APSA 54-XIII (Figure 12), were
reviewed and field evaluated with potential drillable target identified in the Kabaywa Prospect within APSA 12-XIII.
The Kabaywa Prospect is a small scale mining site extracting gold from narrow high-grade intermediate sulphidation
epithermal vein deposits (Figure 12) and located ~10km from Co-O,. The deposit comprises of a main 500 metres
long NE-trending high-grade quartz-sulphide vein structure with at least 2 shorter sub-parallel 100 metres to 200
metres long vein structures towards the southeast. Grab and channel samples taken from these veins consistently
returned grades above 1.0 g/t gold with peak grades of 86.3 g/t gold.
Figure 12: Location and geologic map of the Kabaywa Prospect with reference to adjacent tenement grounds showing mapped
vein structures and sample locations with associated assay results for samples above 1 g/t gold.
Page 39 of 123
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REVIEW OF OPERATIONS
A significant portion of APSA 12-XIII, APSA 99-XIII, EPA 66-XIII and APSA 54-XIII that were field evaluated were
noted as non-prospective being underlain by clastic and non-clastic un-mineralised sedimentary rocks (Figure 6).
While prospective andesitic volcanic rocks hosting potential vein-style and diatreme-related mineralisation
unconformably underlies these sedimentary rocks, the thickness of the sedimentary rock cover - especially in EPA
66-XIII, ranges from 200 metres to more than 500 metres thick making exploration drilling particularly challenging
and financially prohibitive in these areas.
Figure 13: Status of tenement holdings at end June 2018.
Page 40 of 123
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REVIEW OF OPERATIONS
SUSTAINABILITY
The Company continue to believe that its business should be founded on four key components that encompass our
commitment to all stakeholders. Improvements are still being made to organisational coherence, proper internal
procedures, regular checks and balances, performance and efficiencies. The four key components are:
❑ Health and Safety;
❑ Environmental Protection, Management and Monitoring;
❑ Viable and sustainable operation; and
❑ Community Participation, Development Programmes and Benefits
HEALTH AND SAFETY
A Safety and Health Program was implemented to manage the Safety and Health of all personnel working at the
Philsaga Mining Corporation sites. This program includes;
• Comprehensive and continued safety awareness at the mine and mill sites;
• Comprehensive emergency preparedness planning and training and programs at mine and mill sites, including
fire and earthquake responsiveness drills;
• Regular comprehensive health checks for all employees;
• Expanded mining and safety training activities for all underground personnel, including bi-annual refresher
training;
• Hazard prevention and control, through improved hazard awareness training, program of work place
inspections, conducting Job Hazard Analysis, thorough investigation of incidents, continual communication with
the workforce and implementation of the corrective/improvement actions.;
• Continued regular training for the Emergency Response Team (“ERT”) like chemical spill, mine rescue and
firefighting, with the teams participating in annual national competitions; and
The 12 month Lost Time Accident Frequency Rate for FY 2017/18 was 1.1 per million man hours while this has
increased from the previous year the severity rate significantly reduced from 495 in FY 2016/17 to 17 in FY 2017/18.
As the Safety and Health Program continues and matures the Lost Time Accident Frequency Rate is expected to
reduce.
The Company hospital has been operating as a fully staffed and functional hospital during the year with services
available for Company personnel and their families, and other local residents.
Photo 1: First aid training.
Photo 2: Safety Tool Box Training.
Photo 3: Practical Fire Fighting Training.
Page 41 of 123
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REVIEW OF OPERATIONS
ENVIRONMENTAL MANAGEMENT AND MONITORING
The Company is committed to its environmental protection, management and to complying with all applicable
statutory and regulatory environmental obligations.
Code of Conduct
Environmental responsibility forms an important part of the Company's Code of Conduct. The Code of Conduct
outlines the Company's commitment to appropriate and ethical corporate practices and describes how the Company
expects its Directors and employees to behave in the conduct of the Company's business activities.
In accordance with the Code of Conduct, the Company:
•
is fully aware of its obligations to comply with relevant statutory and regulatory requirements with respect to
the environment; and
• monitors appropriately its environmental management and performance, and is committed to ensuring proper
rehabilitation of the sites where the Company has been conducting its exploration or operational activities.
Safety, Health and Environment Committee
On 27 August 2010, as part of its commitment to environmental performance, the Board approved the establishment
of a Safety, Health and Environment Committee. The role and responsibility of the Safety, Health and Environment
Committee is set out in a formal charter adopted by the Board, which is summarised in the Corporate Governance
Statement of this Annual Report.
The charter reflects the Company's commitment to achieving continuous improvement in targeting high
environmental performance and best practice.
Photo 4: Seedling Nursery.
Co-O Gold Project Environmental Conditions
The Company's flagship Co-O Gold Project has established processing facilities which are subject to regular
inspections by the various authorities and which have achieved a high Level of recognition for adherence to statutory
requirements.
The Company's mining operations are underground resulting in very small surface footprints for each operation.
Rehabilitation of any disturbed areas around new operations is part of the Company's normal operating procedure.
Water samples are taken on a daily basis to monitor water quality in and around the Company's facilities and the
samples collected were analysed, with the results submitted to the relevant authorities.
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Photo 5: Composting
The Company has also adopted the National Greening Program and Adopt-a-Forest Program of the Philippines
Government. For this fiscal year, Philsaga Mining Corporation and Mindanao Mineral Processing and Refining
Corporation has established 10 hectare enhancement site using indigenous forest trees and a new 150 hectare
Mining Forest Program site at Brgy. Consuelo, Bunawan and Brgy. Bayugan 3, Agusan del Sur.
Photo 6A: Reforestation activities
Photo 6B: Reforestation activities
The Company has its own two nurseries producing local tree species for reforestation projects as well as the rubber
tree seedlings necessary for the establishment of the rubber livelihood programs of the surrounding communities.
At the end of the financial year, the nursery held over 160,000 seedlings.
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The Co-O Gold Project operates under the terms of an Environmental Compliance Certificate (“ECC”) which was
amended by the Philippines Environmental Management Bureau (“EMB”) on October 9, 2012. The conditions of
the ECC require the Company to:
▪
institute a number of commitments, mitigating measures and monitoring requirements to minimise any adverse
impact of the project to the environment throughout its implementation, including:
- observing good vegetative practices, proper land use and sound soil management;
- conducting an effective information, education and communication programme to inform and educate all
stakeholders, especially local residents, on the project’s mitigating measures;
-
rehabilitating roads with minimal land and ecological disturbance; and
- establishing a reforestation and carbon sink programme to mitigate greenhouse gas emissions of the
project;
▪
▪
ensure that its mining and milling processing operations conform with the provisions of R.A. No, 6969 (Toxic
Substances and Hazardous and Nuclear Wastes Control Act of 1990), R.A. No. 9003 (Ecological Solid Waste
Management Act of 2000), R.A. No. 9275 (Philippine Clean Water Act of 2004), and R.A. No. 8749 (Philippine
Clean Air Act of 1999);
comply with the environmental management and protection requirements of the Philippine Mining Act of 1995
(RA. No. 7942) and its Revised Implementing Rules and Regulations (D A, O No, 96-40, as amended), as well
as the pertinent provisions of the Memorandum of Agreement between the EMB and Mines and Geosciences
Bureau (“MGB”) executed on 16 April 1998, which include:
- submitting an Environmental Protection and Enhancement Programme with the Final Mine Rehabilitation
and/or Decommissioning Plan integrated thereto, to the MGB, for approval;
- setting up a Contingent Liability and Rehabilitation Fund and Environmental Trust Fund;
- maintaining the existing Mine Environmental Protection and Enhancement Office to competently handle
the environmental aspects of the project;
- establishing a Mine Rehabilitation Fund Committee and Multipartite Monitoring Team;
- submitting a Social Development and Management Programme; and
- designating a Community Relations Officer;
•
ensure that the Company's contractors and subcontractors properly comply with the relevant conditions of the
ECC; and protect the headwaters and natural springs/wells within the project site that are being utilised as
sources of potable water by the community.
Regular water testing and in-house testing of cyanide is conducted in conjunction with 24 hour monitoring of Tailings
Dams.
Ambient Air Quality Monitoring and Stack Emission Testing are regularly conducted. An EMB accredited third party
environmental consultant is commissioned to conduct the monitoring and analyses.
The Co-O Gold Project remains compliant with all material environmental laws and regulations. The operations are
subject to regular inspections and monitoring by the MGB to ensure compliance. No material failures to comply with
the above requirements, or material issues, were identified by the inspections that occurred during the financial
year.
Coconet and Geonet (water hyacinth) are the medium used as covering materials installed in landslip prone area
as erosion control. Planting of vetiver, kakawate and brazilian peanut were employed as cover crop. The Company
has likewise established Hazardous Waste Storage Facility and Materials Recovery Facility to ensure proper
handling storage and disposal of hazardous and domestic wastes generated by the operations. It maintains a
“Reduce, Re-Use and Recycle” policy for all solid wastes.
Climate Change
It is a condition of the ECC for operation of the Co-O Mine that it establishes a reforestation and carbon sink
programme to mitigate greenhouse gas emissions of the project. The Company has complied with this condition,
and all other conditions imposed on it under the ECC.
The Company’s carbon sink programme significantly out performs its annual carbon footprint.
The Company uses grid hydro power at both the Co-O Mine and Mill as its primary power source ensuring carbon
dioxide emissions are minimised.
ISO 14001
On March 29, 2018, the operating companies, Philsaga Mining Corporation and Mindanao Mineral Processing and
Refining Corporation, renewed their ISO 14000 commitment, both were issued Certificates of compliance with the
standards of ISO 14001:2015, demonstrating continued compliance with good environmental management systems
as well as good environmental controls and protection.
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COMMUNITY PARTICIPATION, PROGRAMMES AND BENEFITS
COMMITMENT
Since 2001, Philsaga Mining Corporation has established an enviable record in the local communities in which it
operates. This record is acknowledged by municipal and regional governments, and at a national Level.
It is the Company’s objective to build on this record and strengthen reciprocal relationships between the Company
and other organisations and the communities in which it operates.
EDUCATION
Scholarships
The company continued its commitment to provide opportunities to less privileged students who wish to pursue
their tertiary courses from its host and neighbouring communities. Currently the program is providing the following
assistance to scholars:
• 22 Students with Full Scholarship grant;
• 6 Students with Half Scholarship grant; and
• 11 Students with Educational Assistance.
Several of the scholars that graduated have already began working in Philsaga Mining Corporation or teaching at
Philsaga High School Foundation.
Company schools and Adopt-a- School programme
As in past years, the Company supported the Philsaga High School Foundation at the mill and the Upper Co-O
Elementary School at the Co-O Mine. In addition, it continued its “adopt–a-school” programme, in July 2018
extended it program to support for 13 schools in the Rosario and Bunawan municipalities until 2021.
Photo 7: MOA signing and Launching of Adopt- A- School Program last July 24, 2018.
LIVELIHOOD PROJECTS
Rice production financing
This project has continued through the year aimed at progressively developing debt free farming communities
through the provision of financing arrangements to qualified farmers.
Rubber tree plantation
The Company has continued to assist with the supply of rubber tree seedlings and other inputs to indigenous
landowners for the establishment of rubber plantations that provide income for 50-60 years from around year seven.
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COMMUNITY DEVELOPMENT AND ASSISTANCE PROGRAMMES
The Company continued to provide assistance with a number for community-based projects.
Teacher training
The Company continued to support teacher salaries for volunteer teachers as well as teacher training to improve
teacher knowledge and skills in conjunction with the Department of Education.
Honoraria to Teachers and Day care centre workers
Support was provided for the monthly subsidies of 119 volunteer teachers from local and neighbouring communities
within the province of Agusan del Sur.
Community health
The Company provides general health and dental services to its employees and dependants, as well as residents
of surrounding communities and nearby municipalities.
In addition to the 16 bed hospital at the Co-O Mine site, the Company provides a clinic at the mill site for employees
and local residents.
Fruit tree programmes
The adoption of four sitios (or small villages) aims to provide a sustainable livelihood by planting of fruit trees suitable
in the area. The programs have the technical support of the Department of Agriculture and the Department of Trade
and Industry conducts various financial seminars.
Institutional partnering
The Company partners with various local government departments such as Department of Social Work and
Development, Department of Labour and Employment, Department of Trade and Industry, Department of
Agriculture and Department of Education to achieve common goals. The same goes for various indigenous cultural
communities.
The Company has likewise created an informal partnership with Caraga State University by means of supporting
all its environmental and bio-diversity studies, monitoring and geo-tagging of the flora and fauna found in the mill
and mine sites.
Support to Community Infrastructure
The Company continued to support sustainable infrastructure projects that will support to the livelihood of the local
communities. Project completed this year were;
•
•
•
•
Improvement of potable water supply of Nueva Era, wherein 1500 community residents can benefit;
Improvement of potable water Supply of San Andres wherein at least 2600 community residents can benefit;
Improvement of potable water supply Bunawan Brook with at least 2500 community residents benefitted; and
implemented the installation of Street Lights in Barangay Poblacion, Libertad Imelda and Mambalili wherein
173 street lights were installed.
Photo 8: Turnover of Potable Water Supply of Nueva Era Photo 9: Street Lights of Barangay Libertad
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Livelihood and Skill Development Program
The Company’s livelihood program is awarded to the mining community which depends on its geographical
orientation, availability of raw materials and feasibility of their product. The program aims on building partnership,
empowering individuals and promoting stakeholders to be self-reliant and sustainable communities.
This year’s program included assisting in the establishment of fish pond for Tilapia production, purchase of farm
machinery for Farmers Associations, Entrepreneurial Skills training and Technology Training on rubber plantation
management and tapping
EMPLOYMENT, LOCAL SUPPLIERS & PAYMENT OF LOCAL TAXES
& WAGES
The Company is one of the largest tax payers in the district and the province of Agusan del Sur. The annual local
government budgets of the Municipality of Bunawan, Municipality of Rosario and the Province of Agusan del Sur
are supported the annual taxes and fees paid by the operating companies.
The Company has a strong policy of “buy and manufacture locally” whenever possible for the provision of goods
and services to the project to maximise the multiplier effect locally.
JORC 2012 COMPLIANCE - CONSENTS OF COMPETENT PERSONS
Medusa Mining Limited
Information in this report relating to Exploration Results and all geological work on Co-O Mineral Resources and
Bananghilig Mineral Resources, Saugon and TSF #1 Tailings Project has been reviewed by Mr James Llorca, and
is based on information compiled by Philsaga Mining Corporation's Co-O mine-site and exploration technical
personnel.
Mr Llorca is a Fellow of The Australian Institute of Geoscientists (AIG), a Fellow of the Australasian Institute of
Mining and Metallurgy (AusIMM), and a Chartered Professional in Geology with the AusIMM. Mr Llorca is General
Manager, Geology and Resources, and is a full-time employee of Medusa Mining Ltd, and has more than 30 years
of sufficient experience which is relevant to the styles of mineralisation and type of deposit under consideration and
to the activities for which he is undertaking to qualify as a “Competent Person” as defined in the 2012 Edition of the
“Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.”
Mr Llorca consents to the inclusion in the report of the matters based on his information in the form and context in
which it appears.
Carras Mining Pty Ltd
Information in this report relating to Co-O Mineral Resources, Co-O Ore Reserves and Bananghilig Mineral
Resources is based on information compiled by Dr Spero Carras of Carras Mining Pty Ltd, who worked at the Co-
O mine-site with Philsaga geologists and engineers. Philsaga's mine planning engineers also worked at Carras'
Perth office.
Dr Carras is a Fellow of the Australasian Institute of Mining & Metallurgy and has more than 30 years of experience
which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he
is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves”.
Dr Carras consents to the inclusion in the report of the matters based on his information in the form and context in
which it appears. During 2016, Dr Carras was retained by Medusa Mining Ltd to assist in defining the requirements
of Co-O underground infrastructure and its implementation.
FORWARD LOOKING STATEMENTS
This report contains certain forward-looking statements. The words 'anticipate', 'believe', 'expect', 'project', 'forecast', 'estimate',
'likely', 'intend', 'should', 'could', 'may', 'target', 'plan' and other similar expressions are intended to identify forward-looking
statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking
statements.
Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties
and other factors, many of which are beyond the control of Medusa, and its officers, employees, agents and associates, that may
cause actual results to differ materially from those expressed or implied in such statements.
Actual results, performance or outcomes may differ materially from any projections and forward-looking statements and the
assumptions on which those assumptions are based.
You should not place undue reliance on forward-looking statements and neither Medusa nor any of its directors, employees,
servants or agents assume any obligation to update such information.
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CORPORATE GOVERNANCE
Medusa Mining Limited ("Medusa" or "the Company"), as a listed entity, must comply with the Corporations Act 2001
(Cth) ("Corporations Act"), the Australian Securities Exchange ("ASX") Listing Rules ("ASX Listing Rules") and other
Australian and international legal, regulatory and governance requirements.
The Board of Directors of the Company ("Board") is committed to achieving and maintaining high standards of corporate
governance. The Board operates in accordance with a set of corporate governance principles that take into account
relevant practice recommendations, having regard to the particular circumstances of the Company’s business, operations
and the interests of its shareholders and other stakeholders. These include the ASX Corporate Governance Council’s
("ASXCGC") third edition of the Corporate Governance Principles and Recommendations ("ASX Principles").
The Company's practices are largely consistent with the recommendations set out in the ASX Principles and, except as
disclosed below, the Company believes it complied with each of those recommendations throughout the financial
year ended 30 June 2018 and to the date of this statement. Details of the Company's compliance with the ASX
Principles are set out below, including details of specific disclosures required by the ASX Principles.
This statement is current as at 29 August 2018 and has been approved by the Board. Further information on the
Company’s corporate governance policies and practices is publicly available on the Corporate Governance page of the
Company’s website at www.medusamining.com.au.
1.
BOARD OF DIRECTORS
Role and Responsibilities of the Board
ASX Principles, Recommendations 1.1, 1.3
The Board has adopted a Board Charter that sets out, among other things, its specific powers, duties and
responsibilities, as well as matters delegated to the Chief Executive Officer or Managing Director (as applicable)
and those specifically reserved for the Board.
The Board’s primary role is to guide and monitor the business and affairs of the Group on behalf of the
shareholders by whom the Board is elected and to whom it is accountable.
In addition to matters required by law to be approved by the Board, the following key duties and responsibilities
are reserved for the Board under the Board Charter:
•
•
•
•
•
•
oversight of the Company, including its control and accountability systems;
appointing and removing the Chief Executive Officer or Managing Director (as applicable) in respect of his
or her executive role;
ratifying the appointment and removal of the Company Secretary;
providing input into and final approval of the Company’s corporate strategy;
providing input into and final approval of the annual operating and capital budget of the Company;
approving and monitoring the progress of acquisitions and divestments (as applicable);
• monitoring compliance with the Company’s legal and regulatory obligations;
•
reviewing and ratifying systems of risk management and internal compliance and controls, codes of conduct,
continuous disclosure, legal compliance and other significant corporate policies;
• monitoring senior management's performance and implementation of strategy and policies, and ensuring
appropriate resources are available to senior management; and
•
approving and monitoring financial and other reporting to the market, shareholders, employees and other
stakeholders.
The Board has delegated responsibilities for the day to day operational, corporate, financial and administrative
activities of the Group to the Chief Executive Officer or Managing Director (as applicable) and the Chief Financial
Officer.
A copy of the Company's Board Charter is available on the Corporate Governance page of the Company’s
website at www.medusamining.com.au.
Agreements with Directors and Senior Executives
The Board Charter provides that:
•
•
a new Director will receive a formal letter of appointment setting out the key terms and conditions relative to
their appointment; and
the Chief Executive Officer must have a formal employment agreement describing their term of office, duties,
rights and responsibilities, among other things.
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Composition of the Board
ASX Principles, Recommendations 2.2 and 2.5
In assessing the composition of the Board, the Directors have regard to the following principles:
•
•
•
•
•
the Chairperson should be an independent Non-Executive Director;
the role of the Chairperson and the Managing Director should not be exercised by the same person;
the Board should comprise of at least three Directors, increasing where additional expertise is considered
desirable in certain areas, when an outstanding candidate is identified, or to ensure a smooth transition
between outgoing and incoming Non-Executive Directors;
the majority of the Board should comprise independent Non-Executive Directors who satisfy the criterion for
independence (see below for the criterion for determining when a Director is considered to be independent);
and
the Board should comprise Directors with an appropriate range of skills, qualifications, expertise and
experience.
For the time being, the Board has determined that the number of Directors on the Board should be four,
comprised of three Non-Executive Directors (being Andrew Teo, Roy Daniel and Peter Hepburn-Brown) and one
Executive Director (being Raul Villanueva). The Board reviews its size and composition annually to ensure that
it has the appropriate balance of skills, qualifications, expertise and experience. When a vacancy exists, or
where the Board considers that it would benefit from the services of a new Director with particular skills,
qualifications, expertise and experience, the Board will endeavour to select and appoint appropriate candidates
with the relevant skills, qualifications, expertise and experience.
The Board will comprise Directors having the appropriate mix of skills, qualifications, expertise and experience
to operate effectively and efficiently, and so that it can adequately discharge its responsibilities and duties. The
Board considers that this is achieved by the Directors having substantial skills and experience in the following:
•
•
•
industry knowledge - mineral exploration and marketing, mine development and geology;
accounting, finance and investments - financial reporting, tax and governance;
legal - legal, risk and regulatory knowledge; and
• business management - management experience, other relevant board experience and business
administration.
Collectively, the Directors have a broad range of skills, qualifications, expertise and experience relevant to the
business and operations of the Company, as identified above - details relevant to the position of each Director
who is in office at the date of this statement, and the period of office held by each Director, is included in the
Directors’ Report on pages 57 to 58. Section 3 of this Corporate Governance Statement provides further
information on the mix of skills and diversity the Board seeks to achieve in membership of the Board.
Directors appointed by the Board are subject to election by shareholders at the next annual general meeting
following their appointment. With the exception of the Managing Director, all Directors are subject to re-election
in accordance with the Company's constitution.
Board independence and length of service
ASX Principles, Recommendations 2.3, 2.4 and 2.5
The Board has determined that Andrew Teo, Roy Daniel, and Peter Hepburn-Brown are independent Non-
Executive Directors. [The Board has made this determination having regard to the criteria set out below, and
confirms that none of its independent Directors has any interest, position, association or relationship of the type
described below. In addition, the length of service of each Director is set out on page 57 of the Company's
Directors' Report, which forms part of the Annual Report.]
The Board is, therefore, comprised of a majority of independent Directors. Further, the Board is chaired by
Andrew Teo, an independent Non-Executive Director.
When determining whether a Director is independent, the Board considers all relevant facts and circumstances.
The Board considers that a Director will be independent if he or she is a person who:
•
is not a substantial shareholder of the Company, or an officer of, or otherwise associated directly with, a
substantial shareholder of the Company;
• has not, within the last three years, been employed in an executive capacity by the Company or any of its
child entities;
• has not, within the last three years, been a partner, director or senior employee of a provider of material
professional services to the Company or any of its child entities or a material consultant to the Company, or
an employee materially associated with the service provided;
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•
is not, and has not within the last three years been, in a material business relationship (eg as a supplier or
customer) with the Company or any of its child entities, or an officer of, or otherwise associated with, someone
with such a relationship;
• has no material contractual relationship with the Company or its child entities, other than as a Director;
• does not have close family ties with any person who falls into a category listed directly above;
• has not been a Director of the Company for such a period that his or her independence may have been
compromised; and
•
is free from any interest and any business or other relationship which could, or could reasonably be perceived
to, materially interfere with the Director's ability to act in the best interest of the Company.
The Board does not consider Raul Villanueva as an independent Director because he is currently employed in
an executive capacity by Medusa as an Executive Director.
The test of whether a relationship or business is material is based on the nature of the relationship or business
and the circumstances and activities of the Director. Materiality is considered from the perspective of the
Company, the persons or organisations with which the Director has an affiliation and from the perspective of the
Director. To assist in assessing the materiality of a supplier or customer the Board has adopted the following
materiality thresholds:
• a material customer is a customer of the Company that accounts for more than 5% of the Group's
consolidated gross revenue; and
• a supplier is material if the Company accounts for more than 5% of the supplier's consolidated gross revenue.
Chairperson, Managing Director and Company Secretary
ASX Principles, Recommendations 1.4 and 2.5
The roles of Chairperson and Managing Director are separate roles and held by different individuals.
The Chairperson, Andrew Teo, is responsible for, among other things, leadership and effective performance of
the Board and overseeing the provision of information by management to the Board and ensuring the adequacy
of that information. The Managing Director (if applicable) is responsible for the day-to-day management of the
Company.
The Chairperson's and Managing Director's responsibilities are set out in more detail in the Board Charter, which
is available on the Corporate Governance page of the Company’s website at www.medusamining.com.au.
The Company Secretary, Peter Alphonso, is responsible for the corporate secretarial functions of the Company,
financial and statutory reporting and also directing and monitoring all financial aspects of the Company's
overseas operations. The decision to appoint or remove the Company Secretary is to be made by the Board, as
set out in the Board Charter, and the Company Secretary reports and is accountable to the Board (through the
Chairperson).
Training and performance evaluation
ASX Principles, Recommendations 1.6, 1.7 and 2.6
Under the terms of the Company's Nomination Committee Charter, the Nomination Committee reviews potential
Board candidates' skills, knowledge, and expertise so that they can add value to the Board. The Company's
Nomination Committee Charter requires the Nomination Committee to establish evaluation methods of rating the
performance of the Directors and to conduct assessments of Directors as to whether they have devoted sufficient
time in fulfilling their duties as Directors.
The Director evaluation methods established by the Company’s Nomination Committee included a review of the
performance of the Board and each of its Committees against the requirements of their respective charters and
the individual performances of the Non-Executive Chairperson and each Director.
During the reporting period, the Nomination Committee met on one occasion to evaluate the performance of the
Board, its Committees and individual Directors in accordance with the above evaluation process.
Details of the process for evaluating the performance of Senior Executives and Directors, and the conduct of that
process in the reporting period, are included in the Remuneration Report, which forms part of the Directors'
Report on pages 61 to 71.
Details of Directors' attendance at Board meetings are set out in the Directors' Report on page 59.
Board access to independent advice
Each Director is entitled to seek such independent professional advice as they consider necessary in the
furtherance of his or her duties as a Director at the Company’s expense. Any Director seeking independent
advice must first discuss the request with the Chairperson, who will facilitate obtaining such advice.
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2.
BOARD COMMITTEES
Nomination Committee
ASX Principles, Recommendations 1.2 and 2.1
The Board has established a Nomination Committee, which operates under a Nomination Committee Charter
approved by the Board. A copy of the Nomination Committee Charter is available on the Corporate Governance
page of the Company’s website at www.medusamining.com.au, and includes details of, among other things, the
role and responsibilities, composition and structure of the Nomination Committee.
The role of the Nomination Committee Charter is to assist the Board in fulfilling its corporate governance
obligations and responsibilities by:
• monitoring the size and composition of the Board, including giving due consideration to the value of diversity
of backgrounds and experiences among the members of the Board;
•
•
recommending individuals for nomination as members of the Board and Committees; and
reviewing the performance of the Board to ensure that its members remain committed and are adequately
discharging their duties and responsibilities.
In selecting individuals for nomination as a Director, the Nomination Committee Charter provides that the
potential candidate will, among other things, have the required skills, knowledge, and expertise to add value to
the Board. In performing its duties prescribed under its Charter, the Nomination Committee conducts appropriate
checks prior to selecting individuals for nomination, which will include checks such as the person's character,
experience, education, criminal record and bankruptcy history. The Nomination Committee is empowered to
engage external consultants in their search for a new Director.
The Nomination Committee Charter provides that any notice of general meeting where the election or re-election
of a Director (as the case may be) is to be put to Medusa's shareholders should include the following information,
so as to enable shareholders to make an informed decision about their election or re-election (as the case may
be):
• biographical details, including competencies and qualifications and information sufficient to enable an
assessment of the independence of the candidate;
• details of relationship between the candidate and Medusa, as well as Directors of Medusa;
• other Directorships held;
• particulars of other positions which involve significant time commitments;
•
the term of office currently served by any Directors subject to re-election; and
• any other particulars required by law.
• Such information is also provided by way of ASX announcement when any appointment is made by the
Board.
The Nomination Committee consists of Peter Hepburn-Brown (as Chairperson of the Nomination Committee),
Andrew Teo and Raul Villanueva. The Nomination Committee, therefore, comprises a majority of independent
Directors and is chaired by an independent chair.
Two meetings of the Nomination Committee were held during the reporting period and details of the members’
attendance at these meetings are included in the Directors' Report on page 59.
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Remuneration Committee
ASX Principles, Recommendations 8.1, 8.2, and 8.3
The Board has established a Remuneration Committee, which operates under a Remuneration Committee
Charter approved by the Board. A copy of the Remuneration Committee Charter is available on the Corporate
Governance page of the Company’s website at www.medusamining.com.au, and includes details of, among
other things, the role and responsibilities, composition and structure of the Remuneration Committee.
The role of the Remuneration Committee is to assist the Board in fulfilling its corporate governance
responsibilities with respect to remuneration by reviewing and making appropriate recommendations on:
•
the remuneration packages of Executive Directors, Non-Executive Directors and Senior Executives;
• employee incentive plans and benefit programs, including the appropriateness of performance hurdles and
total payments proposed;
•
remuneration, recruitment, retention and termination policies and procedures;
• superannuation arrangements;
• employee equity based plans and schemes; and
•
remuneration by gender.
The members of the Remuneration Committee, who are all Non-Executive Directors, are Roy Daniel (as
Chairperson of the Remuneration Committee), Andrew Teo and Raul Villanueva. The Remuneration Committee,
therefore, comprises a majority of independent Directors and is chaired by an independent chair as
recommended by ASXCGC Recommendation 8.1. One meeting of the Remuneration Committee was held
during the reporting period and details of the members’ attendance at this meeting are included in the Directors’
Report on page 59.
The Board's policy is that reviews of remuneration packages and policies applicable to Executive Directors, Non-
Executive Directors and Senior Executives are to be conducted on an annual basis by the Remuneration
Committee.
Details on the Company's remuneration policies, including how the structure of the remuneration of Non-
Executive Directors is distinguished from that of Executive Directors and Senior Executives, are included in the
Remuneration Report, which forms part of the Directors’ Report on page Nos 61 to 71. Schemes for the provision
of retirement benefits, other than the provision of superannuation, are provided by the Company for the benefit
of Non-Executive Directors.
Consistent with section 206J of the Corporations Act, it is the Company's policy to prohibit Directors and Senior
Executives from dealing in financial products issued or created over or in respect of the Company's securities
(eg hedges or derivatives), where that dealing has the effect of reducing or eliminating the risk associated with
any equity incentives that the Company may offer from time to time. This is further detailed in the Directors'
Report on page 68. A copy of the Company's Share Trading Policy is available on the Corporate Governance
page of the Company’s website at www.medusamining.com.au.
Audit Committee
ASX Principles, Recommendation 4.1
The Board has established an Audit Committee, which operates under an Audit Committee Charter approved by
the Board. A copy of the Audit Committee Charter is available on the Corporate Governance page of the
Company’s website at www.medusamining.com.au, and includes details of, among other things, the role and
responsibilities, composition and structure of the Audit Committee.
The role of the Audit Committee is to assist the Board to meet its oversight responsibilities in relation to the
Company's financial reporting, compliance with legal and regulatory requirements, internal control framework
and audit functions.
The Audit Committee's role also includes assessing the performance of the external auditor and, as appropriate,
making recommendations to the Board on the appointment, re-appointment or replacement of the external
auditor.
The members of the Audit Committee, who are all Non-Executive Directors, are Roy Daniel (Chairperson of the
Audit Committee), Andrew Teo, and Peter Hepburn Brown. The composition of the Audit Committee is entirely
made up of independent Directors and is chaired by an independent chair, who is not the chair of the Board, as
recommended by ASXCGC Recommendation 4.1.
Details of the qualifications of each member of the Audit Committee are included in the Directors’ Report on page
57. Three meetings of the Audit Committee were held during the reporting period and details of the members’
attendance at these meetings are included in the Directors’ Report on page 59.
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CORPORATE GOVERNANCE
Safety, Health and Environmental Committee
The Board has established a Safety, Health and Environmental Committee, which operates under a Safety,
Health and Environmental Committee Charter approved by the Board.
A copy of the Safety, Health and Environmental Committee Charter is available on the Corporate Governance
page of the Company’s website at www.medusamining.com.au.
The role of the Safety, Health and Environmental Committee is to provide oversight of the Company's policies
and systems relating to safety, health and the environment, as well as target high safety, health and
environmental performance and best practices. The Safety, Health and Environmental Committee is mandated
by the Board to:
•
facilitate company-wide communication of a high performance safety, health and environmental culture and
an awareness of seeking best practice and measurable goals;
• ensure adequate resources are available to management to implement appropriate safety, health and
environment systems;
• oversee management implementation of a safety, health and environment performance measurement
system that can determine safety, health and environment performance and whether there is continuous
improvement;
• use safety, health and environment performance measures to monitor compliance with legal requirements
and internal targets, as well as to communicate Medusa's safety, health and environmental commitment to
shareholders, stakeholders and employees;
• oversee management implementation of a safety, health and environment compliance audit programme,
including evaluation of risk exposures and control actions and also receive regular reports of the impact of
proposed regulatory changes, material claims and ways to achieve continuous improvement in the areas of
safety, health and environment;
•
receive quarterly safety, health and environment performance reports from management that include
environmental, health and safety issues of a material nature, details of accidents and incidents and statistics
concerning relative performance and continuous improvement; and
• provide feedback to management of safety, health and environment goals, policies, practices and systems.
The Safety, Health and Environmental Committee consisted of Raul Villanueva (as Chairperson of the Safety,
Health and Environmental Committee), Andrew Teo, Roy Daniel and Peter Hepburn-Brown (appointed 15 June
2018). Three meetings of the Safety, Health and Environmental Committee were held during the reporting period
and details of the members’ attendance at these meetings are included in the Directors’ Report on page 59.
3.
PROMOTING ETHICAL AND RESPONSIBLE DECISION MAKING
Code of Conduct
ASX Principles, Recommendation 3.1
The Company has a formal Code of Conduct, which outlines the Company's commitment to appropriate ethical
and responsible decision making and corporate practices.
The Code of Conduct describes how the Company expects its Directors and employees to behave in the conduct
of the Company's business activities. The Code of Conduct covers matters including:
• general principles;
• compliance with laws and regulations;
• political contributions;
• unacceptable payments;
• giving or receiving gifts;
• protection of Company assets;
• proper accounting;
• dealing with auditors;
• unauthorised public statements;
• conflict of interest;
•
•
the use of inside information;
trading of the Company’s shares;
• alcohol and drug abuse;
• equal opportunity and employee discrimination,
• environmental responsibilities;
• occupational health and safety; and
• economy and efficiency.
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CORPORATE GOVERNANCE
All employees are required to comply with the Code of Conduct. Any breach of applicable laws, prevailing
business ethics or other aspects of the Code of Conduct will result in disciplinary action, which may include,
depending on the severity of the breach, termination of employment. Under the Code of Conduct, all employees
are requested to report immediately any circumstances which may involve deviation from the Code of Conduct
to the Managing Director or Company Secretary of the Company, who are responsible for investigating and
reporting any unethical practices to the Board.
A copy of the Code of Conduct is available on the Corporate Governance page of the Company’s website at
www.medusamining.com.au.
Diversity Policy
ASX Principles, Recommendations 1.5 and 2.2
Recommendation 1.5 of the ASX Principles provides that a company should establish a policy concerning
diversity and disclose that policy or a summary of it. Such a policy is to include requirements for the Board to
establish measurable objectives for achieving gender diversity for the Board to assess annually in respect of
both the objectives and progress in achieving them.
The Board is committed to engaging directors, management and employees with the highest qualifications, skills
and experience to develop a cohesive team that is best placed to achieve business success regardless of age,
nationality, race, gender, religious beliefs, sexuality, physical ability or cultural background. The Board has not
adopted a formal diversity policy as recommended by Recommendation 1.5 of the ASX Principles as it believes
its current processes and policies for recruitment and appointment are appropriate and adequately take into
account diversity among a number of factors considered by the Company in ensuring its Directors and workforce
have an appropriate mix of qualifications, experience and expertise. The Board does, however, recognise that
diversity makes an important contribution to corporate success and the Company considers diversity as one of
a number of factors when seeking to appoint Directors, filling Senior Management roles and positions and
reviewing recruitment, retention and management practices, notwithstanding the absence of a formal diversity
policy.
Recommendation 1.5 of the ASX Principles provides that a company should disclose in its annual report the
measurable objectives for achieving gender diversity set by the board in accordance with the diversity policy and
its progress towards achieving them. The Board has not at this stage adopted a formal diversity policy for the
reasons set out above and, consequently, has not set measurable objectives under such a policy. The Board
considers that it is not necessary to set measurable objectives for achieving gender diversity as recommended
by the ASX Principles.
While the Company considers diversity is important, the priority for the Company when recruiting is ensuring an
appropriate mix of qualifications, experience and expertise regardless of age, however, generally make it clear
when seeking to appoint additional Directors, senior management and employees that women are encouraged
to apply for roles and that the Company is an equal opportunity employer.
In accordance with Recommendation 1.5 of the ASX Principles, the Medusa workforce gender profile is set out
in the following table:
Role type
Technical
Supervisory/professional
Middle management
Senior management
Total
Board members
Female
Female %
Male
Male%
15
69
15
1
91
-
38%
24%
25%
8%
23%
-
24
224
46
11
305
4
62%
76%
75%
92%
77%
100%
For the purposes of the above table, "Senior Management" includes executives as well as senior personnel that
play a significant role in management of the operations.
Share Trading Policy
Whilst the Board encourages its Directors and employees to own securities in the Company, it is also mindful of
the responsibility of the Company, its Directors and employees not to contravene the Corporation Act's "insider
trading" provisions.
The Board has approved a Share Trading Policy that applies to all Directors and all employees of the Company.
In summary, the policy prohibits Directors and employees from trading in the Company's securities:
• when aware of non-public price sensitive information, until such time as that information has become
generally available; and
•
as part of active trading with a view to deriving profit related income.
A Director or employee wishing to deal in the Company's shares must first notify the Chief Executive Officer or
Managing Director (as applicable) and confirm that the employee is not aware of any non-public price sensitive
information. The Share Trading Policy is subject to the overriding application of the insider trading laws.
A copy of the Share Trading Policy is available on the Corporate Governance page of the Company’s website at
www.medusamining.com.au.
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CORPORATE GOVERNANCE
4.
RISK MANAGEMENT
ASX Principles, Recommendations 7.1, 7.2, 7.3 and 7.4
The Board recognises that risk oversight is a core function of the Board that serves in protecting and enhancing
shareholder wealth.
Having regard to the size of the operations of the Company, the nature of its activities and the composition of the
Board, a "Risk Committee" has not been established. However, in order to comply with the spirit of
Recommendation 7.1 (and Recommendation 7.1(b) in particular), the full Board has the responsibility to perform
the functions of the Risk Committee.
The Board has approved a Risk Management Policy that outlines the Company's policies for the oversight and
management of material business risks and the design, implementation and monitoring of an internal compliance
and control framework.
A copy of the Risk Management Policy is available on the Corporate Governance page of the Company’s website
at www.medusamining.com.au.
The Board is ultimately responsible for the oversight and management of material business risks, as
contemplated by the Board Charter. However, the design and implementation of the risk management policy
and the day to day management of risk is the responsibility of the Chief Executive Officer or Managing Director
(as applicable), with the assistance of Senior Management. The Board reviews the effectiveness of the
Company’s system of internal control, including a review of financial, operational, compliance and risk controls
on a continual basis. In addition, the Chief Executive Officer also undertakes the monitoring of business activities
to periodically reassess risks and the effectiveness of controls to manage such risks
The Chief Executive Officer or Managing Director (as applicable) is responsible for reporting directly to the Board
on all matters associated with risk management and in fulfilling his duties, the Chief Executive Officer or
Managing Director (as applicable) has unrestricted access to all Company employees, contractors and records
and may obtain independent expert advice on any matters he deems appropriate.
Whilst the Board acknowledges that it is responsible for the overall internal control framework, it is also cognisant
that no cost-effective internal control system will preclude all errors and irregularities.
The Company's main business risks are determined by the nature of its business activities and assets. There
are numerous factors (both external and internal) that could influence the risk profile of the Company.
As required by Recommendation 7.4 the Board has identified the following risk factors that could influence the
risk profile of the Company:
• Economic risks: The Company may be exposed to general economy wide risks, which include the state
or health of the industry sector, foreign exchange and interest rates, equity and commodity prices and a
nation's economic well-being. These risks are specifically contemplated by, and set out in, the Company's
Risk Management Policy.
• Environmental risks: The Company's activities are expected to have an impact on the environment, and
the Company may be responsible for environmental liabilities associated with its mining activities. The
Company aims to monitor environmental risks and obligations so as to remain compliant with applicable
environmental laws. The Company also has a Safety, Health and Environmental Committee that aims to
assist with monitoring and reporting on environmental-related risks and issues.
• Social sustainability risks: The Company does not believe that it has material exposure to social
sustainability risks. The Company has a Code of Conduct for employees dealing with stakeholders and
ensures integrity and fair dealing in business affairs.
The Company’s risk management system is continuously developing and will evolve with the evolution and
growth of the Company’s activities.
Chief Executive Officer or Managing Director (as applicable) and Chief Financial Officer assurance
ASX Principles, Recommendations 4.2, 7.2, and 7.3
Before the adoption by the Board of the Company's financial statements for the year ended 30 June 2018, the
Board receives written declarations from the Chief Executive Officer or Managing Director (as applicable) and
Chief Financial Officer, in accordance with section 295A of the Corporations Act, that the financial records of
the Company have been properly maintained in accordance with section 286 of the Corporations Act and that
the Company’s financial statements and notes comply with the accounting standards and present a true and
fair view of the consolidated entity’s financial position and performance for the financial period.
The Chief Executive Officer or Managing Director (as applicable) and the Chief Financial Officer have also to
state in writing to the Board that the above declaration is founded on a sound system of risk management and
internal control and that the system is operating effectively in all material respects in relation to financial reporting
risks. In addition, during the reporting period the Chief Executive Officer or Managing Director (as applicable)
and the Chief Financial Officer report to the Board as to the effectiveness of the Company's management of its
material business risks.
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CORPORATE GOVERNANCE
5.
CONTINUOUS DISCLOSURE
ASX Principles, Recommendation 5.1
The Company is subject to continuous disclosure obligations under the ASX Listing Rules and the Corporations
Act. Subject to limited exceptions, the Company must immediately notify the market, through ASX, of any
information that a reasonable person would expect to have a material effect on the price or value of its securities.
The Board has approved a Continuous Disclosure Policy to reinforce the Company's commitment to complying
with its continuous disclosure obligations and outline management's accountabilities and the processes to be
followed for ensuring compliance. A copy of the Continuous Disclosure Policy is available on the Corporate
Governance page of the Company’s website at www.medusamining.com.au.
The Chief Executive Officer or Managing Director (as applicable) and Company Secretary are responsible for
ensuring that the Continuous Disclosure Policy is implemented and enforced, and that the Company complies with
its continuous disclosure obligations.
6.
SHAREHOLDER COMMUNICATION
ASX Principles, Recommendations 4.3, 6.1, 6.2, 6.3 and 6.4
The Board recognises the important rights of its Shareholders and strives to effectively communicate with
Shareholders clearly and effectively.
The Board has approved a Shareholder Communications Policy to promote effective communications with its
shareholders and encourage effective participation at general meetings. As contemplated by the Shareholder
Communications Policy, the Company Secretary is charged with ensuring that materials detailed in the policy
(including announcements in accordance with the Company's continuous disclosure and periodic disclosure
obligations) are made available on the Company's website, and that relevant communications are distributed to
shareholders in accordance with the Listing Rules and Corporations Act.
In accordance with
www.medusamining.com.au on which the Company provides, among other things, the following information:
the Shareholder Communications Policy
the Company maintains a website at
•
information about its Directors;
• a copy of its constitution, Board and other applicable Charters, and other corporate governance
documentation referred to in this Corporate Governance Statement;
• company announcements released to ASX for disclosure and related information (including presentations
and briefings to analysts and media);
• notices of meetings and explanatory materials;
• quarterly reports, containing details of the Company’s activities and consolidated statements of cash flows;
• half-yearly reports, containing consolidated financial information and a brief overview of the Company’s
activities;
• annual reports, which include a review of the Company’s operations and financial results for the year; and
• general information about the history of the Company, an overview of its projects and a high level summaries
of some concepts fundamental to its business.
Shareholders may also elect to receive information from, and make contact with, the Company and its share
registry by email. Contact email addresses for the Company and the share registry are set out on the Company's
website.
Annual reports are distributed in hard copy to shareholders who have registered their election with the Company's
share registry to receive the annual report in hard copy.
The Board encourages attendance and participation of shareholders at general meetings of the Company and
Company allows for reasonable opportunity for communication and questions at general meetings. In addition,
the Company’s external auditor attends the Company’s annual general meeting to answer shareholder questions
about the conduct of the audit, the preparation and content of the audit report, the accounting policies adopted by
the Company and the independence of the auditor in relation to the conduct of the audit.
A copy of the Shareholder Communications Policy is available on the Corporate Governance page of the
Company’s website at www.medusamining.com.au
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DIRECTORS’ REPORT
1.
DIRECTORS
The names of Directors in office at any time during or since the end of the financial year are:
Name of Director
Period of Directorship
Non-Executive Directors:
Mr Andrew Boon San Teo (Chairperson)
since 15 February 2010 (Chairperson since 22 November 2013)
Mr Ciceron Angeles
Mr Roy Philip Daniel
from 28 June 2011 to 31 October 2017
since 25 November 2015
Mr Peter Gordon Hepburn-Brown
appointed 15 June 2018
Executive Directors:
Mr Boyd Walter Timler (Managing Director) (1)
since 09 January 2017
Mr Raul Conde Villanueva
since 24 January 2013
Notes:
(1) on 15 June 2018, Mr Boyd Timler tendered his retirement as Managing Director effective 06 July 2018 .
Each of the Directors, unless otherwise stated above, has been in office since the start of the financial year
to the date of this report.
2.
DIRECTORS’ INFORMATION
Mr Andrew Boon San Teo
B. Com, UWA, (CPA)
Independent Non-Executive Chairperson
Mr Teo is an accountant with 39 years of extensive and diversified experience in accounting, treasury, corporate,
legal and business administration across several industries, including the mining industry. He was, until his
retirement in March 2018, Chief Financial Officer/Executive Director of BGC (Australia) Pty Ltd., one of Australia’s
largest privately owned companies, with annual turnover in excess of $2 billion and 7,000 plus staff (including
sub-contractors). Mr Teo worked in BGC in excess of 35 years. Mr Teo remains a Non-Executive Director of BGC.
During the past three years, Mr Teo has not served as a Director of any other ASX listed entities. Mr Teo is a
member of the Audit, Remuneration, Nomination and Safety, Health & Environment Committees.
Mr Ciceron. A. Angeles
BSc (Geology), Mapp Sc (Mineral Exploration), FAusIMM (CP), FSEG.
Independent Non-Executive Director
Philippines based, Mr Angeles is a geologist with over 36 years of experience in gold and base metal exploration
in Asia, mainly Philippines, Indonesia, China, Malaysia and Iran. His specialisations include epithermal gold-
silver, porphyry copper-gold and Carlin styles of mineralisation.
Mr Angeles obtained his Mapp Sc in Mineral Exploration from the University of New South Wales, Australia in
1985 and is a Fellow and accredited Chartered Professional (CP) in the discipline of geology of the Australasian
Institute of Mining and Metallurgy (AusIMM) and a Fellow of the Society of Economic Geologists. He was also the
Asia Exploration Manager for Newcrest Mining during which time Newcrest brought the Gosowong Gold Mine into
production.
During the past three years, Mr Angeles has not served as a Director of any other ASX listed entities.
Mr Angeles is Chairperson of the Nomination Committee and a member of the Audit and Remuneration
Committees. Mr Angeles retired from the Board on 31 October 2017.
Mr Roy Philip Daniel
B. Com, UWA
Independent Non-Executive Director
Mr Roy Daniel was appointed Non-Executive Director on 25 November 2015. Mr Daniel’s previous association
with the Company was as the Chief Financial Officer from December 2004 until his retirement from office in June
2013. He was also an executive member of the Board from April 2006 until June 2011.
Mr Daniel has been associated with the resource and mining industry for over 37 years and has held various
senior management and accounting positions at corporate level with overseas and Australian companies. His
association with the Company since its formative years has proven invaluable, and his financial business acumen
and corporate experience has complemented and strengthened the Board.
During the past three years, Mr Daniel has not served as a Director of any other ASX listed entities.
Mr Daniel is Chairperson of both the Audit and Remuneration Committees and also serves as a member on the
Nomination and Safety, Health & Environment Committee.
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DIRECTORS’ REPORT
Mr Peter Gordon Hepburn-Brown
B App Sc - Mining Engineering (1980), Grad Dip Human Resources (1996), Member of Inst of Engineers, Australia
Independent Non-Executive Director
Mr Peter Hepburn-Brown was appointed Non-Executive Director on 15 June 2018. His previous association with
the Company dates back to September 2009 when he was first appointed as a non-executive member of the
Board. In July 2010, Mr Hepburn-Brown assumed the role of Executive Director (Operations) and served in that
position until June 2011, where he was then appointed Managing Director of Medusa until his retirement from
office in August 2014.
Mr Hepburn-Brown has more than 37 years of mining experience, including senior management and Board
positions in Australia and overseas. He has successfully brought many operations into development, and brings
significant and relevant experience, including hands-on shaft sinking and air leg mining in narrow vein mines.
He is currently Non-Executive Director of Calidus Resources Ltd and Focus Minerals Ltd.
Mr Hepburn-Brown is a member of the Audit, Remuneration and Health, Safety & Environment Committees.
Mr Boyd Walter Timler
B.Sc. (Geology), U of A, GAICD.
Managing Director
Mr Boyd Timler joined Medusa as CEO on 21 March 2016 and was appointed Managing Director of Medusa on
09 January 2017.
Mr Timler brings extensive operational experience to Medusa, having spent the first 15 years of his career working
in underground narrow high-grade gold projects culminating at Kinross Gold’s Hoyle Pond Mine in Canada, and
subsequently at Placer Dome following a joint venture between the two. He has held senior level positions at
operations in Canada, USA, Australia, Tanzania, Zambia and Brazil, and has taken expansion projects from pre-
feasibility through board approval to operations.
Previously, Mr Timler also held the positions of Chief Operating Officer of Beadell Resources Limited, Managing
Director at Lumwana Mining Company, in Zambia, and has also served as General Manager at various mine sites
owned in Australia and Africa. Mr Timler holds a B.Sc. Specialization in Geology from the University of Alberta,
and is a GAICD with over 30 years of progressive international experience in exploration, technical services,
operations, project evaluations and senior/executive management.
During the past three years, Mr Timler has not served as a Director of any other ASX listed entities.
Mr Timler is a member of the Safety, Health and Environment Committee and retired as Managing Director of
Medusa Mining Ltd on 06 July 2018 (refer ASX announcement dated 15 June 2018).
Attorney Raul Conde Villanueva
LL.B., Attorney and Counselor-at-Law
Executive Director
Attorney Raul Villanueva was appointed an Executive Director of Medusa on 24 January 2013 following his
appointment as President of the Company’s Philippines operating company, Philsaga Mining Corporation
(“Philsaga”) in December 2012.
Attorney Villanueva who has Bachelor degrees in Economics, Military Science & Tactics, and Law has been a
member of the Integrated Bar of the Philippines and an Attorney and Counselor-at-Law since 1994. He brings a
focused approach to improving the operating systems and professionalism of the Company, based on his
education and several years of experience in law as well as managing companies and will further align the
objectives of the Medusa Group of Companies.
During the past three years, Mr Villanueva has not served as a Director of any other ASX listed entities
Attorney Villanueva is Chairperson of the Safety, Health and Environment Committee and is a member of the
Nomination Committee.
3.
COMPANY SECRETARY
Mr Peter Stanley Alphonso
B. Com, UWA, (CPA)
Mr Peter Alphonso was appointed Company Secretary on 11 December 2007 and as Chief Financial Officer on
01 July 2013.
Mr Alphonso has over 36 years of experience with the auditing, engineering and communications industries, with
the majority of his experience centred on the gold and nickel sectors of the mining industry. Mr Alphonso’s
experience has included associations with Coopers and Lybrand, Western Mining Corporation, Great Central
Mines and Ti-west Joint Venture.
As Company Secretary Mr Peter Alphonso is responsible for the corporate secretarial functions of the Company,
financial and statutory reporting of the Company as well as directing and monitoring of all financial aspects of the
Company’s overseas operations.
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DIRECTORS’ REPORT
4.
MEETINGS OF DIRECTORS
The number of meetings held during the financial year by Company Directors and the number of those
meetings attended by each Director was:
Name of Director
Andrew Teo
Ciceron Angeles (2)
Roy Daniel
Boyd Timler
Board Meetings
Audit
Committee
Remuneration
Committee
SHE
Committee
Nomination
Committee
Number (1)
Attended Number (1)
Attended Number (1)
Attended Number (1)
Attended Number (1)
Attended
6
2
6
6
6
2
6
5
3
2
3
-
3
2
3
-
1
-
1
1
-
-
1
-
1
1
-
-
3
-
3
3
3
-
3
-
3
3
3
-
2
-
2
-
2
-
2
-
2
-
2
-
6
Raul Villanueva
Peter Hepburn-Brown (3)
Notes:
(1) Number of meetings held during the time the Director held office during the year;
(2) Mr Ciceron Angeles retired from the Board on 31 October 2017; and
(3) Mr Peter Hepburn-Brown appointed Non-Executive Director on 15 June 2018.
5
-
-
-
-
-
-
5.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the course of the financial year were mineral exploration,
evaluation, development and mining/production of gold. There were no significant changes in the nature of
the activities of the Group during the year.
6.
OPERATING RESULTS
The net consolidated loss for the financial year attributable to members of Medusa Mining Limited after
provision of income tax was (US$55.6) million [2017: Consolidated loss of (US$56.7) million].
Key financial results:
Description
Revenues
EBITDA (1)
NPAT (1)
EPS (basic)
Notes:
Unit
US$
US$
US$
US$
30 June 2018
30 June 2017 (2)
Variance
US$124.6M
US$100.1M
US$24.5M
(US$25.3M)
(US$55.6M)
(US$0.267)
(US$29.8M)
(US$56.7M)
US$4.5M
US$1.1M
(US$0.273)
US$0.006
(%)
24%
15%
2%
2%
includes asset impairment losses of (US$81.1M) for year ended 30 June 2018 and (US$70.8M) for year ended 30 June 2017; and
(1)
(2) Restated accounts relating to p(rior year adjustments due to change in accounting policy. EBITDA, NPAT and EPS (basic) previously reported were
(US$35.2M), (US$62.1M) and US$0.299) respectively.
Medusa recorded a loss before interest, tax depreciation and amortisation (“EBITDA”) of (US$25.3) million for the
year to 30 June 2018 and includes asset impairment losses of (US$81.1M). EBITA for the previous year was a
loss of (US$29.8) million and includes asset impairment losses of (US$70.8M).
Revenues increased by approximately 24% from US$100.1 million in the previous year to US$124.6 million.
Medusa is an un-hedged gold producer and received an average price of US$1,293 per ounce from the sale of
96,056 ounces of gold for the year (previous year: 79,194 ounces at US$1,256 per ounce).
At year end, the Company had total cash and cash equivalent in gold on metal account of US$15.1 million (2017:
US$11.5M).
During the year,
•
•
the Company produced 95,705 ounces of gold for the year, compared to 80,743 ounces from the previous
corresponding period, at an average recovered grade of 6.33 g/t gold (June 2017: 5.33 g/t gold);
the average cash costs of US$562 per ounce, inclusive of royalties and local business taxes was lower than
the previous year’s average cash costs of US$595 per ounce;
• All in Sustaining Costs (“AISC”) for the year was US$1,083 per ounce of gold (2017: US$1,374 per ounce);
• depreciation of fixed assets and amortisation of capitalised mine development and mine exploration was
US$29.2 million (2017: US$18.0M);
• US$14.6 million was expended on capital works associated with the new shaft construction and
infrastructure, mine expansion and sustaining capital at the mine and mill (2017: US$16.2M);
• exploration expenditure, inclusive of underground diamond drilling was US$5.4 million (2017: US$12.3M);
• capitalised mine development costs totalled US$24.5 million for the year (2017: US$27.6M); and
• corporate overheads of US$7.3million (2017: US$6.7M).
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DIRECTORS’ REPORT
7.
REVIEW OF OPERATIONS
A review and summary information concerning the Group’s operations and exploration activities for the
financial year and the results of those operations are set out in the Chairperson’s Review which will be
available in the Full Annual Report.
8.
DIVIDENDS
No dividends were declared during the financial year.
9.
SIGNIFICANT CHANGE IN STATE OF AFFAIRS
Significant changes in the state of affairs of the Group during the financial year were as follows:
• Mr Ciceron Angeles, a Non-Executive Director retired from the Board on 31 October 2017;
The Company advised the market on 15 June 2018,
•
•
•
the appointment of Mr Peter Hepburn-Brown as Non-Executive Director of the Company;
the appointment of Mr David McGowan (previously General Manager, Engineering) as Chief Operating
Officer of Medusa; and
that Mr Boyd Timler had tendered his resignation as Managing Director effective 06 July 2018.
In the opinion of the Directors, there were no other significant changes in the state of the affairs of the Group
that occurred during the financial year.
10.
EVENTS SUBSEQUENT TO BALANCE DATE
Subsequent to Balance Date, Mr Boyd Timler resigned as Managing Director of Medusa on 06 July
2018 (refer ASX announcement dated 15 June 2018); and
On 5 July 2018 the Company announced that it had entered into an earn in agreement regarding earn in of
up to 90% in two exploration projects in Queensland Australia. The earn in requires the Company to manage
and fund exploration programs through to completion of a Pre-Feasibility Study. The Company must spend
a combined minimum of A$1 million on both projects before it is able to withdraw.
There has not arisen in the interval between the end of the financial year and the date of this report any
other item, transaction or event of a material and/or unusual nature likely, in the opinion of the Directors of
the Company, to affect significantly the operations of the Group, the results of those operations, or the state
of affairs of the Group in subsequent financial years.
11.
FUTURE DEVELOPMENTS, BUSINESS STRATEGIES AND PROSPECTS
The Group will continue its focus on organic growth within its land-holdings in the Philippines and also source
mineral properties within the Asia Pacific region with a view to developing properties capable of economic
production.
12. DIRECTORS’ INTEREST
The relevant interest of each Director in the share capital of the Company at the date of this report is as
follows:
Name of Director
Andrew Teo
Ciceron Angeles (1)
Roy Daniel
Peter Hepburn-Brown (2)
Boyd Timler
Raul Villanueva
No. of fully paid ordinary
shares
No. of options over
ordinary shares
No. of performance rights
over ordinary shares
120,000
-
815,875
-
50,000
50,000
-
-
-
-
1,200,000
500,000
-
-
-
-
-
-
Notes:
(1) Mr Ciceron Angeles retired from the Board on 31 October 2017;
(2) Mr Peter Hepburn-Brown joined the Board on 15 June 2018.
Page 60 of 123
For personal use only
DIRECTORS’ REPORT
13. REMUNERATION REPORT (AUDITED)
(a) Details of Key Management Personnel
The Directors of Medusa Mining Ltd (‘the Group’) present the Remuneration Report for Key Management
Personnel, prepared in accordance with the Corporations Act 2001 and the Corporations Regulations 2001.
Other than the Executive Directors and Executive Officers listed below, no other person is concerned in, or
takes part in, the management of the Group; or has authority or responsibility for planning, directing and
controlling the activities of the Group.
There were no loans to Key Management Personnel during the period and there were no transactions or
balances with Key Management Personnel other than those disclosed in this Report.
Directors:
Non-Executive Directors -
Andrew Teo, Chairperson;
Ciceron Angeles (retired from the Board on 31 October 2017);
Roy Daniel;
Peter Hepburn-Brown (joined the Board on 15 June 2018).
Executive Directors -
Boyd Timler, Managing Director; and
Raul Villanueva, President of Philsaga Mining Corporation.
Executive Officers:
Peter Alphonso, Company Secretary/Chief Financial Officer;
David McGowan, Chief Operating Officer; and
James Llorca, General Manager, Geology & Resources.
Page 61 of 123
For personal use only
DIRECTORS’ REPORT
(b) Key Management Personnel remuneration (Company and consolidated)
The following tables provides the details of the remuneration of all Directors and Executive Officers of the Group and the nature and amount of the elements of their remuneration
(in US$’s) for the year ended 30 June 2018 and the previous financial year.
Name
Year
Short term benefits
Post-
employment
benefits
Long-term benefits
Equity-settled
share-based payments
Salary/ fees
Directors’
fees
Non-
monetary
Bonus (1)
Other (2) Superannuation
Incentive
plans
LSL(3)
Shares/
units
Options/
rights (4)
Cash-settled
share-based
payments
Termination
benefits
TOTAL
Proportion of
remuneration
performance
related
Value of
options as
proportion of
remuneration
Directors:
Non-Executive
Andrew Teo
Ciceron Angeles (5)
Roy Daniel
Peter Hepburn-Brown (6)
Executive
Boyd Timler(9)
Raul Villanueva
Executive Officers:
Peter Alphonso
David McGowan (7)
James Llorca (8)
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
25,134
96,275
-
76,820
-
19,699
22,308
57,615
22,701
46,092
-
-
385,980
395,623
425,000
425,000
263,937
266,268
238,940
102,310
238,940
174,925
57,833
57,615
2,488
-
-
-
-
-
-
-
-
-
-
-
Total
Notes:
2018
1,600,632
176,295
2017
1,432,526
192,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,760
14,511
-
-
-
14,704
-
7,623
-
-
-
-
7,352
15,780
-
7,885
7,352
13,837
-
3,458
-
-
-
-
-
-
-
-
18,380
26,887
-
-
18,380
26,781
18,380
9,719
18,380
21,126
66,168
44,128
73,520
-
18,966
84,513
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,469
6,760
-
-
-
-
6,469
6,760
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
193,500
-
-
32,077
-
97,201
-
97,201
-
226,479
193,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
121,409
76,820
19,699
79,923
80,534
103,707
2,488
-
455,631
623,633
425,000
425,000
335,567
299,809
377,653
119,914
375,710
199,509
2,193,691
-
-
-
-
-
-
-
-
8.1%
-
-
-
4.4%
-
2.0%
-
2.0%
-
3.0%
-
-
-
-
-
-
-
-
-
31.0%
-
-
9.6%
-
25.7%
-
25.9%
-
10.3%
1,928,315
-
10.0%
(1) Bonuses are generally paid in October and relate to the previous year’s financial results ;
(2) Comprises Annual Leave accrued during the year but not paid ;
(3) Comprises Long Service Leave accrued during the year but not paid;
(4) Comprises value of options granted but not yet vested;
(5) Mr Ciceron Angeles retired from the Board on 31 October 2017;
(6) Mr Peter Hepburn-Brown joined the Board on 15 June 2018;
(7) Mr David McGowan commenced employment on 01 February 2017; and
(8) Mr James Llorca commenced employment on 10 October 2016.
(9) Mr Boyd Timler was paid US$277,457 as a retirement benefit subsequent to 30 June 2018.
.
Page 62 of 123
For personal use only
DIRECTORS’ REPORT
The relative proportions of Remuneration that are linked to performance and those that are fixed are as follows:
Name
Fixed Remuneration At Risk: Short Term
Incentives (STI)
At Risk: Options
(LTI)
Directors:
Non-Executive
Andrew Teo
Ciceron Angeles
Roy Daniel
Peter Hepburn-Brown
Executive
Boyd Timler
Raul Villanueva
Executive Officers:
Peter Alphonso
David McGowan
James Llorca
100.0%
100.0%
100.0%
100.0%
91.9%
100.0%
86.0%
72.3%
72.1%
-
-
-
-
8.1%
-
4.4%
2.0%
2.0%
-
-
-
-
-
-
9.6%
25.7%
25.9%
(c) Remuneration options and equity-based instruments
The following options or other equity-based instruments or rights over any of them, were granted by the
Company or any entity controlled by the Company as remuneration during or since the end of the financial
year;
Name
Tranche
Number
granted
Grant
Date
Value per
Option at
Grant Date
Value of
Options at
Grant Date
Exercise
Price
(A$)
Expiry Date
Executive Officers:
Peter Alphonso
A
B
C
D
41,250
08 Jan 2018
A$0.275
A$11,344
A$1.00
08 Jan 2022
41,250
08 Jan 2018
A$0.255
A$10,519
A$1.25
08 Jan 2022
41,250
08 Jan 2018
A$0.239
A$9,859
A$1.50
08 Jan 2022
41,250
08 Jan 2018
A$0.225
A$9,281
A$1.75
08 Jan 2022
Total
165,000
A$41,003
US$ equivalent at Grant Date
US$32,077
David McGowan
A
B
C
D
125,000
08 Jan 2018
A$0.275
A$34,375
A$1.00
08 Jan 2022
125,000
08 Jan 2018
A$0.255
A$31,875
A$1.25
08 Jan 2022
125,000
08 Jan 2018
A$0.239
A$29,875
A$1.50
08 Jan 2022
125,000
08 Jan 2018
A$0.225
A$28,125
A$1.75
08 Jan 2022
Total
500,000
A$124,250
US$ equivalent at Grant Date
US$97,201
James Llorca
A
B
C
D
125,000
08 Jan 2018
A$0.275
A$34,375
A$1.00
08 Jan 2022
125,000
08 Jan 2018
A$0.255
A$31,875
A$1.25
08 Jan 2022
125,000
08 Jan 2018
A$0.239
A$29,875
A$1.50
08 Jan 2022
125,000
08 Jan 2018
A$0.225
A$28,125
A$1.75
08 Jan 2022
Total
500,000
A$124,250
US$ equivalent at Grant Date
US$97,201
Page 63 of 123
For personal use only
DIRECTORS’ REPORT
Name
Tranche
Year 1: 30%
Vesting and
Vesting date
08 Jan 2019
Year 2: 30%
Vesting and
Vesting date
08 Jan 2020
Year 3: 40%
Vesting and
Vesting date
08 Jan 2021
Executive Officers:
Peter Alphonso
David McGowan
James Llorca
A
B
C
D
Total
A
B
C
D
12,375
12,375
12,375
,12,375
49,500
37,500
37,500
37,500
37,500
12,375
12,375
12,375
,12,375
49,500
37,500
37,500
37,500
37,500
16,500
16,500
16,500
16,500
66,000
50,000
50,000
50,000
50,000
Total
125,000
125,000
200,000
A
B
C
D
37,500
37,500
37,500
37,500
37,500
37,500
37,500
37,500
50,000
50,000
50,000
50,000
Total
125,000
125,000
200,000
Total
Expiry Date
41,250
08 Jan 2022
41,250
41,250
41,250
165,000
125,000
125,000
125,000
125,000
500,000
125,000
125,000
125,000
125,000
500,000
08 Jan 2022
08 Jan 2022
08 Jan 2022
08 Jan 2022
08 Jan 2022
08 Jan 2022
08 Jan 2022
08 Jan 2022
08 Jan 2022
08 Jan 2022
08 Jan 2022
(d) Shares issued on exercise of options granted as remuneration
During the financial year, no fully paid ordinary shares were issued on the exercise of options previously
granted as remuneration to Directors and Executives.
(e) Option/rights holdings
The movement during the year in the number of options/rights over ordinary shares in Medusa Mining Limited
held directly, indirectly or beneficially, by each Director and Executive, including their personally related entities
is as follows:
Financial year 2017/2018
Balance
01/07/17
Options/rights
granted as
remuneration
Options/
rights
exercised
Options/ Rights
not exercised
and lapsed
Balance
held
30/06/18
Vested &
exercisable
30/06/18 (1)
Total not
exercisable
30/06/18 (2)
Name
Directors:
Non-Executive
Andrew Teo
Ciceron Angeles (3)
Roy Daniel
Peter Hepburn-Brown (4)
Executive
Boyd Timler
Raul Villanueva
Executive Officers:
Peter Alphonso
David McGowan
-
-
-
-
1,200,000
500,000
-
-
-
-
-
-
165,000
-
165,000
500,000
-
-
-
-
-
-
-
-
James Llorca
Notes:
(1) Options vested and exercisable are all the options vested at the reporting date;
(2) Options that are not exercisable have not vested at the reporting date;
(3) Mr Ciceron Angeles retired from the Board on 31 October 2017; and
(4) Mr Peter Hepburn-Brown joined the Board on15 June 2018.
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,200,000
360,000
840,000
500,000
500,000
-
330,000
165,000
165,000
500,000
500,000
-
-
500,000
500,000
Page 64 of 123
For personal use only
DIRECTORS’ REPORT
Financial year 2016/2017
Name
Directors:
Non-Executive
Andrew Teo
Ciceron Angeles
Roy Daniel
Executive
Boyd Timler (3)
Raul Villanueva
Executive Officers:
Peter Alphonso
Robert Gregory (4)
Balance
01/07/16
Options/rights
granted as
remuneration
Options/
rights
exercised
Options/ Rights
not exercised
and lapsed
Balance
held
30/06/17
Vested &
exercisable
30/06/17 (1)
Total not
exercisable
30/06/17 (2)
-
-
-
-
500,000
165,000
150,000
-
-
-
1,200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,200,000
-
1,200,000
500,000
300,000
200,000
165,000
165,000
99,000
99,000
66,000
66,000
Notes:
(1) Options vested and exercisable are all the options vested at the reporting date;
(2) Options that are not exercisable have not vested at the reporting date;
(3) Mr Boyd Timler was appointed Managing Director on 09 January 2017; and
(4) Mr Robert Gregory ceased employment on 16 March 2016.
(f) Share holdings
The movement during the year in the number of ordinary shares in Medusa Mining Limited held directly,
indirectly or beneficially, by each Director and key management personnel, including their personally related
entities are as follows:
Financial year 2017/18
Name
Directors:
Non-Executive
Andrew Teo
Ciceron Angeles (1)
Roy Daniel
Peter Hepburn-Brown (2)
Executive
Boyd Timler
Raul Villanueva
Executive Officers:
Peter Alphonso
David McGowan
James Llorca
Balance
30/06/17
Shares held at
appointment
Bonus
issue of
shares
Shares
purchased
Options
exercised
Shares
sold
Balance
30/06/18
120,000
-
815,875
-
50,000
50,000
127,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,000
-
815,875
-
50,000
50,000
127,500
-
-
Notes:
(1) Mr Ciceron Angeles retired from the Board on 31 October 2017; and
(2) Peter Hepburn-Brown joined the Board on 15 June 2018.
Financial year 2016/17
Balance
30/06/16
Shares held at
appointment
Bonus
issue of
shares
Shares
purchased
Options
exercised
Shares
sold
Balance
30/06/17
Name
Directors:
Non-Executive
Andrew Teo
Ciceron Angeles
Roy Daniel
Executive
Boyd Timler (1)
Raul Villanueva
95,000
-
815,875
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
25,000
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,000
-
815,875
50,000
50,000
127,500
Executive Officers:
Peter Alphonso
127,500
Notes:
(1) Mr Boyd Timler was appointed Managing Director on 09 January 2017.
Page 65 of 123
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DIRECTORS’ REPORT
(g) Remuneration policies
Remuneration Committee
The Remuneration Committee of the Board of Directors is responsible for determining, reviewing and
making recommendations to the Board on compensation arrangements for the Non-Executive Directors,
Managing Director, Executive Directors and Executive Officers.
The Remuneration Committee assesses the appropriateness of the nature and amount of emoluments
of such officers on an annual basis by reference to relevant market conditions. It is empowered to engage
the assistance of external consultants specialising in remuneration of executives and personnel in the
mining industry to provide analysis and advice to ensure executive remuneration packages reflect
relevant international employment market conditions. During the financial year, the Board did not obtain
any independent advice from external consultants.
Remuneration Philosophy
The main objective is the retention of a high quality Board and executive team, to maximise value of the
shareholders’ investment. Remuneration levels are therefore competitively set to attract, retain and
motivate appropriately qualified and experienced Directors and Executives.
In determining the level and make up of remuneration levels for Executives of the Group, the
remuneration policy has been structured to increase goal congruence between shareholders and
Executives and includes the payment of bonuses based on achievement of specific goals related to the
performance of the Group and also the issue of incentive options or equity based instruments to
encourage alignment of personal and shareholder interests.
Non-Executive Directors remuneration:
The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to
attract and retain Non-Executive Directors of the highest calibre.
Non-Executive Directors’ fees are paid within the aggregate amount approved by shareholders from time
to time. Total remuneration for all Non-Executive Directors, last approved by shareholders on 18
November 2009, is not to exceed A$400,000 per annum. The amount of aggregate remuneration sought
to be approved by shareholders and the manner in which it is apportioned amongst Directors is reviewed
annually.
The Board considers the amount of Director fees being paid by comparable international resource
companies with similar responsibilities, and the experience of each Non-Executive Director when
undertaking the review process.
Directors’ fees cover all main Board activities and membership of Board Committees. No retirement
benefits are provided for any Non-Executive Directors’ retirement or termination and Non-Executive
Directors do not receive performance related compensation remuneration.
Director fees currently paid to Non-Executive Directors are as follows:
▪ Andrew Boon San Teo (Chairperson): A$150,000 per annum;
▪ Ciceron Angeles: A$75,000 per annum;
▪ Roy Daniel: A$75,000 per annum; and
▪ Peter Hepburn-Brown: A$75,000 per annum.
Executive Remuneration:
Objective
The Company’s aim is to ensure Executives perform at a high level by incentivising them with the level
and mix of remuneration commensurate with their position and responsibilities. These incentives include,
▪
▪
to rewarding Executives for individual performances; and
ensuring total remuneration is competitive by international market standards.
Remuneration is made up of a fixed component as well as a variable component which is performance
linked and only granted when considered appropriate by the Board.
The remuneration of Executives, including the Managing Director, is reviewed annually by the
Remuneration Committee, with the review taking into consideration the contribution of the individuals
commensurate with the performance of the business unit within their responsibility, the overall
performance of the Company and comparable employment market conditions internationally.
Page 66 of 123
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DIRECTORS’ REPORT
Fixed Remuneration
Fixed remuneration consists of base salary, any non-monetary benefits and employer contributions to
superannuation funds.
The level of fixed remuneration is set so as to provide a base level of remuneration which is both
appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by
the Remuneration Committee.
When appropriate, external remuneration consultants provide analysis and independent advice to ensure
that Executives’ remuneration levels are competitive in the international market place. During the
financial year, the Board did not obtain any independent advice from external consultants.
Variable Remuneration
Variable remuneration is performance linked and includes both short-term and long-term incentives and
is designed to reward key management personnel for meeting or exceeding their financial and personal
objectives. The short-term incentive is an ‘at risk’ bonus provided in the form of cash whilst the long-term
incentive is provided as options over ordinary shares or performance rights to acquire fully paid ordinary
shares in the Company.
▪
Short-term Incentives (“STI”)
Each year, the Board sets key performance indicators (“KPIs”) for key management personnel.
The KPIs generally include measures relating to the Group, the relevant segment, and the
individual, and include financial, people, strategy and risk measures. The measures are chosen
as they directly align the individual’s reward to the KPIs of the Group and to its strategy and
performance.
During the financial year, the Board set the following KPIs that applied to each member of Key
Management Personnel:
- The Group meeting or exceeding annual production targets set by the Board based on a
combination of physical parameters that include development meterage achieved, total ore
mined and milled and ounces produced during the financial year. This KPI was chosen as
the Board considers it to be the most significant Group controlled factor directly impacting
the profitability of the Group;
- The Group's exploration drilling rates based on drilling targets set by the Board. This KPI
was chosen as the Board considers exploration rates to be a key factor supporting the
identification and development of the Group's growth projects and sustaining the Group's
production into the future;
- The Group's level of compliance with its sustainability policy as outlined in the Review of
Operations. This includes compliance with environmental obligations and health and safety
regulations and guidelines and is assessed by reference to the level of non-compliance (if
any) by the Group with its obligations. This KPI was chosen as the Company is committed
to its environmental performance and considers health and safety to be a leading indicator
of management and operational performance.
At the end of the financial year the Board assesses the actual performance of the Group, the
relevant segment and individual against the KPIs set at the beginning of the financial year. Should
the Group achieve the set KPIs, the Board may reward the Key Management Personnel with a
bonus during the salary review. Any bonus payable must fall within 0.5% of net profit after tax of
the Group and not exceed 50% of an individual’s fixed remuneration. The Board retains absolute
discretion over payment of these bonuses and can adjust payments (within the above caps) to
take into account the overall performance of the Group, personal performance and prevailing
market conditions.
This method of assessment was chosen as it provides the Board with an objective assessment
of the Group’s performance against identifiable factors that relate to the group’s profitability and
the sustainability of the Group’s operations.
STIs were granted to key management personnel in the subsequent period since the end of the
financial year ended 30 June 2017.
▪
Long-term Incentive (“LTI”)
Historically, LTIs granted to key management personnel have been in the form of options over
ordinary shares. The Board is currently considering whether to adopt other LTI measures,
including a performance rights plan in which key management personnel can participate.
The primary objective of Medusa’s LTI based remuneration is and will continue to be, to reward
key management personnel in a manner which aligns this element of remuneration with the
creation of shareholder wealth. The Board takes into account and will continue to take into
account, appropriate measures of shareholder wealth, including those outlined in section 13(h)
below and Company performance in setting the performance criteria applicable to its LTI based
remuneration.
Page 67 of 123
For personal use only
DIRECTORS’ REPORT
(h) Company performance
In considering the Company’s performance and benefits for shareholder wealth, the Remuneration
Committee takes into account the following indices in respect of the current financial year and the
previous four financial years.
Year ended 30 June
Note
2014
2015
2016
2017
2018
Basic earnings per share (EPS)
Share price at 30 June
Share price increase
Total shareholder returns (TSR)
(1)
(2)
(3)
US$0.154
(US$1.050)
US$0.211
(US$0.273)
(US$0.267)
A$1.85
A$0.30
19.4%
A$0.84
A$0.64
A$0.28
(A$1.01)
(A$0.20)
(A$0.36)
(54.6%)
(23.8%)
(56.3%)
A$0.50
A$0.22
78.6%
(1) Basic EPS is calculated as net profit after tax divided by the weighted average number of ordinary shares;
(2) Share price movement during the financial year; and
(3) TSR is defined as the growth/decline (in percentage terms) in the share price, taking into account dividends paid over the previous financial
year ending 30 June. No dividends were paid during the current, 2017, 2016, 2015 or 2014 financial years.
(i) Board policy in relation to limiting exposure to risk in securities
Under the Company's Securities Trading Policy, Directors and Executives are prohibited from dealing in
financial products issued or created over or in respect of Medusa securities (eg hedges or derivatives)
which have the effect of reducing or eliminating the risk associated with any equity incentives that Medusa
may offer from time to time (for example, a person may be granted an equity incentive award that vests at
a time in the future subject to achieving certain performance goals; certain financial institutions offer
products which act as an insurance policy if the performance goals are not met, thereby reducing the "at-
risk" element of the person's incentive arrangements).
Page 68 of 123
For personal use only
DIRECTORS’ REPORT
(j) Employment contracts
Executives
Boyd Timler (Managing Director)
Contract description: Employment contract between the Company and Boyd Timler (“Employee”).
Term:
Services:
Remuneration:
Termination:
Commencement date of 21 March 2016 until the Employee is terminated.
The Employee is employed as Managing Director (“MD”) of the Company and is responsible to the
Board for the general control and management of the Group (at all times subject to the direction of
the Board) and the operation and strategic development of the Group, which includes being
responsible for the technical input into the mining, milling, safety and exploration functions of the
Employer.
Fixed remuneration:
The Employee's annual Remuneration Package is A$550,000, inclusive of a superannuation and
is subject to annual review by the Board. During the review, the Board will consider the progress
of the Company and comparable industry standard.
Variable remuneration - Short term incentive:
The Employee may be entitled to an annual bonus at the discretion of the Board. In determining
eligibility, the Board will consider without limitation, the performance of the Company, the
Employee’s performance and prevailing market conditions.
Variable remuneration - Long term incentive:
The Company may grant the employee share options or performance rights in accordance with
Medusa’s Share option and performance rights plans.
Termination by the Company:
The Employer may terminate the Employee's employment for any reason by giving the Employee
four months written notice or payment in lieu of notice, or a combination of notice and payment in
lieu of notice.
The Company may immediately terminate the agreement in certain circumstances, including if the
Employee is in default of its obligations and does not remedy that default in addition to other
standard default situations.
Termination by the Employee:
The Employee may terminate the agreement at any time by giving the Company 3 months’ written
notice.
David McGowan (Chief Operating Officer)
Contract description: Employment contract between the Company and David McGowan (“Employee”).
Term:
Services:
Remuneration:
Termination:
Commencement date of 01 February 2017 until the Employee is terminated.
The Employee is employed as Chief Operating Officer (“COO”) of the Company and is responsible
for all operational aspects within the Company
Fixed remuneration:
The Employee's annual Remuneration Package is A$350,000, inclusive of a superannuation and
is subject to annual review by the Board. During the review, the Board will consider the progress
of the Company and comparable industry standard.
Variable remuneration - Short term incentive:
The Employee may be entitled to an annual bonus at the discretion of the Board. In determining
eligibility, the Board will consider without limitation, the performance of the Company, the
Employee’s performance and prevailing market conditions.
Variable remuneration - Long term incentive:
The Company may grant the employee share options or performance rights in accordance with
Medusa’s Share option and performance rights plans.
Termination by the Company:
The Employer may terminate the Employee's employment for any reason by giving the Employee
3 months written notice or payment in lieu of notice, or a combination of notice and payment in lieu
of notice.
The Company may immediately terminate the agreement in certain circumstances, including if the
Employee is in default of its obligations and does not remedy that default in addition to other
standard default situations.
Termination by the Employee:
The Employee may terminate the agreement at any time by giving the Company 3 months’ written
notice.
Page 69 of 123
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DIRECTORS’ REPORT
James Llorca (General Manager, Geology & Resources)
Contract description: Employment contract between the Company and James Llorca (“Employee”).
Term:
Services:
Remuneration:
Termination:
Commencement date of 10 October 2016 until the Employee is terminated.
The Employee is employed as General Manager, Geology & Resources of the Company and is
responsible all matters pertaining to geology in the Company.
Fixed remuneration:
The Employee's annual Remuneration Package is A$350,000, inclusive of a superannuation and
is subject to annual review by the Board. During the review, the Board will consider the progress
of the Company and comparable industry standard.
Variable remuneration - Short term incentive:
The Employee may be entitled to an annual bonus at the discretion of the Board. In determining
eligibility, the Board will consider without limitation, the performance of the Company, the
Employee’s performance and prevailing market conditions.
Variable remuneration - Long term incentive:
The Company may grant the employee share options or performance rights in accordance with
Medusa’s Share option and performance rights plans.
Termination by the Company:
The Employer may terminate the Employee's employment for any reason by giving the Employee
3 months written notice or payment in lieu of notice, or a combination of notice and payment in lieu
of notice.
The Company may immediately terminate the agreement in certain circumstances, including if the
Employee is in default of its obligations and does not remedy that default in addition to other
standard default situations.
Termination by the Employee:
The Employee may terminate the agreement at any time by giving the Company 3 months’ written
notice.
Peter Alphonso (Company Secretary/Chief Financial Officer)
Contract description:
Employment contract between the Company and Peter Alphonso (“Employee”).
Term:
Role:
No set term and the agreement will continue until Employee is terminated.
The Employee is as Company Secretary/Chief Financial Officer and is responsible for the
day to day management of all financial, administrative and corporate functions of the
Company.
Remuneration:
Fixed remuneration:
Termination:
A$400,000 per annum (inclusive of superannuation), subject to annual review by the
Board. During the review, the Board will consider the progress of the Company and
comparable industry standard.
Variable remuneration - Short term incentive:
The Employee may be entitled to an annual bonus at the discretion of the Board. In
determining eligibility, the Board will consider without limitation, the performance of the
Company, the Employee’s performance and prevailing market conditions.
Variable remuneration - Long term incentive:
The Company may grant the employee share options or performance rights in accordance
with Medusa’s Share option and performance rights plans.
Termination by the Company:
The Employer may terminate the Employee's employment for any reason (other than as
set out below in relation to a “Material Diminution” or default by the Employee) by giving
the Employee 3 months written notice or payment in lieu of notice, or a combination of
notice and payment in lieu of notice.
The Company may immediately terminate the agreement in certain circumstances,
including if the Employee is in default of its obligations and does not remedy that default
in addition to other standard default situations.
Termination by the Employee:
The Employee may terminate the agreement at any time by giving the Company 3 months’
written notice.
Termination by reason of Material Diminution:
A “Material Diminution” is a change in the Employee’s status as Company Secretary/Chief
Financial Officer of the Company, including a material change in his authority in respect of
the business of the Company or a change in his reporting relationship with the Board.
If a Material Diminution occurs, within 3 months of this occurring, the Employee may give
the Company 2 weeks’ written notice of termination of this agreement. Subject to the
Corporations Act, the Company must make a payment to the Employee in lieu of a notice
period equal to 12 months.
Page 70 of 123
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DIRECTORS’ REPORT
(j) Employment contracts (continued)
Executives
Raul Villanueva
(Executive Director of Medusa Mining Limited and President of Philsaga Mining Corporation)
On 10 December 2012, Philsaga executed an employment contract with Raul Villanueva.
Under the terms of the contract, Philsaga has engaged Mr Villanueva to adopt the role of President of
Philsaga as well as assume the position of Executive Director on the Board of Medusa Mining Limited,
supervise and manage the business affairs of the corporation, implement administrative and operational
policies, attend to industrial relation matters and any other mining activities and associat ed complimentary
services.
Mr Villanueva receives a monthly salary of US$35,416.67 which is subject to annual reviews by the Board.
Philsaga will additionally reimburse Mr Villanueva for all reasonable expenses incurred in the performance
of his services including entertainment, accommodation, meals, telephone and travelling.
Apart from the Key Management Personnel related transactions with the Company or its controlled and affiliated
entities disclosed in this note, no Key Management Personnel has entered into a material contract with the
Company since the end of the financial year and there were no material contracts involving Management
Personnel’s’ interests subsisting at year end.
(k) Related Parties
Related parties:
Andrew Teo, Ciceron Angeles, Raul Villanueva, Roy Daniel, Peter Hepburn-Brown, Boyd Timler,
Peter Alphonso, James Llorca and David McGovern.
Type of transaction:
Director and Officers Protection Deed (“Deed”)
Transaction details:
The Deed entered into by the Company with each of the Directors of the Company, indemnifies the
Directors to the extent permitted by law, against any liability, which he may incur whilst carrying out
his duties as a Director of the Company and against any costs and expenses incurred in defending
legal proceedings brought against him as a Director.
The Deed requires the Company to maintain in force Directors’ and Officers’ Liability Insurance,
with an agreed cover level, for the duration of the Directors’ term of office and a period of 7 years
thereafter.
The Deed also provides for the Directors to have access to the Company’s documents (including
Board papers) for a period of 7 years after he ceases to be a Director, subject to certain
confidentiality and other requirements being observed.
End of Remuneration Report
(l) Un-issued shares under options/rights
At the date of this report, details of un-issued ordinary shares of the Company under option are as follows:
Expiry date
Exercise price
No. of options/rights
No. of shares issued if
options/rights exercised
Employee options
16 December 2018
9 February 2019
24 November 2020
24 November 2020
24 November 2020
24 November 2020
08 January 2022
08 January 2022
08 January 2022
08 January 2022
TOTAL
A$1.00
A$1.00
A$1.00
A$1.25
A$1.50
A$1.75
A$1.00
A$1.25
A$1.50
A$1.75
2,515,000
2,515,000
650,000
300,000
300,000
300,000
300,000
416,250
416,250
416,250
416,250
650,000
300,000
300,000
300,000
300,000
416,250
416,250
416,250
416,250
6,030,000
6,030,000
(m) Shares issued on exercise of options/rights
During or since the end of the financial year no options were exercised.
Page 71 of 123
For personal use only
DIRECTORS’ REPORT
14.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
Indemnification
The Company has agreed to indemnify the following current Directors and Officers of the Company, Messrs
Teo, Angeles, Daniel, Timler, Villanueva, Alphonso, Llorca and McGowan and the following former Directors
and Officers Messrs Tomlinson, Jones, Hepburn-Brown, Weinberg, Davis, Powell and Gregory and against all
liabilities to another person (other than the Company or a related body corporate) that may arise from their
position as Directors of the Company and its controlled entities, except where the liability arises out of conduct
involving a wilful breach of duty or improper use of information to gain a personal advantage.
No amount has been paid under any of these indemnities during the financial year under review.
Insurance premiums
During the year, the Company paid an insurance premium for Directors’ and Officers’ Liability Insurance policy,
which cover all Directors, Company Secretaries and other Officers of the Company and its related entities.
Details of the nature of the liabilities covered and the amount of premium paid in respect of the Directors’ and
Officers’ Liability Insurance policies are not disclosed, as such disclosure is prohibited under the terms of the
policy.
15.
INDEMNIFICATION OF AUDITORS
Medusa Mining Limited (“Medusa”) has agreed to indemnify its auditors, BDO Audit (WA) Pty Limited (“BDO”)
to the extent permitted by law, against any claim by a third party arising from MML’s breach of their agreement.
MML will meet the full amount of any such liabilities including a reasonable amount of legal costs.
During the financial year, the Company has not paid any premium in respect to any insurance for BDO or a body
corporate related to BDO and there were no officers of the Company who were former partners or directors of
BDO, whilst BDO conducted audits of the Group.
16.
ENVIRONMENTAL REGULATIONS
The Group's operations are subject to a number of environmental regulations in relation to its exploration, mining
and processing activities in the Philippines. Details of these regulations are set out in the Review of Operations,
under the section titled Environmental Management and Monitoring in the Final Annual Report.
The Directors are not aware of any significant breaches of environmental regulations during the financial year.
17.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company
for all or any part of those proceedings.
The Company was not a party to any such proceedings during the financial year.
Page 72 of 123
For personal use only
DIRECTORS’ REPORT
18. NON-AUDIT SERVICES
During the year, affiliated entities of BDO Audit (WA) Pty Limited (“BDO”), the Company’s auditors, performed
certain other services in addition to their statutory duties.
The Board has considered and is satisfied that the provision of non-audit services during the year by the auditor
is compatible with and did not compromise, the auditor independence requirements of the Corporations Act for
the following reasons:
a) all non-audit services are reviewed and approved by the Board prior to commencement to ensure they do
not adversely affect the integrity and objectivity of the auditor;
b) the nature of the non-audit services provided do not compromise the general principles relating to auditor
independence as set out in APES 110: Code of Ethics for Professional Accountants set by the Accounting
Professional and Ethical Standards Board;
c) The services of the affiliated entities of the BDO Group have not involved reviewing or auditing BDO’s own
work or acting in a managerial or decision-making capacity within the Group; and
d) There is no reason to question the veracity of BDO’s Independence Declaration.
The following fees were paid affiliated entities of BDO for non-audit services provided during the year ended 30
June 2018.
Taxation and other services
Total non-audit services
(*) relates to non-audit services performed in FY17 by Grant Thornton, a company
related to Grant Thornton Audit Pty Ltd, the Company’s previous auditors.
2018
(US$)
40,309
40,309
2017 (*)
(US$)
15,500
15,500
19. AUDITOR’S INDEPENDENT DECLARATION
The Lead Auditor’s Independence Declaration for the year ended 30 June 2018 has been received and can be
found on page 74 of the Financial Report.
20. ROUNDING OFF AMOUNTS
The Group is of a kind referred to in ASIC Legislative Instrument 2016 /191 and accordingly, amounts in the
Financial Report and Directors’ Report have been rounded to the nearest $1,000 or in certain cases, to the
nearest dollar to reflect where rounding in ‘000 is not permitted.
Signed in accordance with a resolution of the Board of Directors
Andrew Teo
Chairperson
Dated at Perth this 29th day of August 2018
Page 73 of 123
For personal use only
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY NEIL SMITH TO THE DIRECTORS OF MEDUSA MINING LIMITED
As lead auditor of Medusa Mining Limited for the year ended 30 June 2018, I declare that, to the best
of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Medusa Mining Limited and the entities it controlled during the period.
Neil Smith
Director
BDO Audit (WA) Pty Ltd
Perth, 29 August 2018
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
Page 74 of 123
For personal use only CONTENTS OF FINANCIAL STATEMENTS
as at 30 June 2018
Contents
Page number
1.
2.
3.
4.
5.
6.
7.
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
Consolidated Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
76
77
78
79
80
114
115
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For personal use only
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the year ended 30 June 2018
Revenue
Cost of sales
Gross Profit
Exploration & Evaluation expenses
Administration expenses
Impairment expense
Other expenses
(Loss) before income tax expense
Income tax (expense)/benefit
Consolidated
2018
Note
US$000
2017
Restated *
US$000
2
124,593
100,091
(83,311)
(67,152)
41,282
32,939
(1,186)
(1,645)
(15,362)
(7,992)
3,12
(81,100)
(70,800)
(955)
(1,557)
(57,321)
(49,055)
4
1,767
(7,621)
(Loss) for the year after income tax expense
(55,554)
(56,676)
Other comprehensive (loss):
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (net of tax)
(2,200)
(1,896)
Total comprehensive (loss) attributable to the owners
(57,754)
(58,572)
Overall operations:
Basic (loss) per share
Diluted (loss) per share
The above consolidated Statement of Profit or Loss and Comprehensive Income
should be read in conjunction with the accompanying notes.
* Restated - Refer Note 1(k) for further details.
5
5
(0.267)
(0.267)
(0.273)
(0.273)
Page 76 of 123
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2018
CURRENT ASSETS
Cash & cash equivalents
Trade & other receivables
Inventories
Other current assets
Total Current Assets
NON-CURRENT ASSETS
Trade & other receivables
Property, plant & equipment
Intangible assets
Development expenditure
Deferred tax assets
Total Non-current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade & other payables
Borrowings
Provisions
Total Current Liabilities
NON-CURRENT LIABILITIES
Borrowings
Deferred tax liability
Provisions
Total Non-current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained profits/ (accumulated losses)
2018
Consolidated
2017
Restated *
Note
US$000
US$000
2016
Restated *
US$000
23 (a)
6
7
8
9
10
11
16
13
14
15
14
16
15
18
19
22
11,198
19,462
12,240
792
43,692
21,728
12,957
609
29,878
10,059
75,231
118,923
24,797
6,335
386
31,518
170
232
4,160
4,562
36,080
11,214
11,963
16,993
571
40,741
24,050
41,745
720
66,439
1,662
134,616
175,357
19,570
6,979
364
26,913
3,521
245
4,231
7,997
9,517
25,977
24,304
636
60,434
22,915
53,065
552
83,446
2,208
162,186
222,620
13,438
6,064
346
19,848
1,503
245
2,591
4,339
34,910
24,187
82,843
140,447
198,433
102,902
102,902
102,902
1,311
(21,370)
3,547
33,998
5,152
90,379
TOTAL EQUITY
82,843
140,447
198,433
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
* Restated - Refer Note 1(k) for further details.
Page 77 of 123
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2018
Share
capital
ordinary
Retained
profits/
Accumulated
losses
Share
option
reserves
Foreign
currency
translation
reserve
Total
Note
US$000
US$000
US$000
US$000
US$000
CONSOLIDATED
Balance at 30 June 2016
102,902
152,384
739
4,413
260,438
Change in accounting policy - Note 1(k)
-
(62,005)
-
-
(62,005)
Balance at 30 June 2016 (Restated *)
102,902
90,379
739
4,413
198,433
Net loss after tax (Restated *)
Other comprehensive (loss)
Total comprehensive loss for the year (Restated *)
Transactions with owners, in their capacity as
owners, and other transfers
Share options expensed
20
Transfer from option reserve
-
-
-
-
-
(56,676)
-
(56,676)
-
-
-
-
(56,676)
(1,896)
(1,896)
(1,896)
(58,572)
-
586
295
(295)
-
-
586
-
Balance at 30 June 2017 (Restated *)
102,902
33,998
1,030
2,517
140,447
Balance at 30 June 2017 (Restated *)
102,902
33,998
1,030
2,517
140,447
Net loss after tax
Other comprehensive (loss)
Total comprehensive loss for the year
Transactions with owners, in their capacity as
owners, and other transfers
Share options expensed
Transfer from option reserve
20
-
-
-
-
-
(55,554)
-
(55,554)
-
-
-
-
(55,554)
(2,200)
(2,200)
(2,200)
(57,754)
-
186
150
(186)
-
-
150
-
Balance at 30 June 2018
102,902
(21,370)
994
317
82,843
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
* Restated - Refer Note 1(k) for further details.
Page 78 of 123
For personal use only
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers & employees
Payments for exploration & evaluation activities
Interest received
Consolidated
2018
Note
US$000
2017
Restated *
US$000
120,966
111,981
(75,246)
(1,186)
87
(56,283)
(4,453)
73
Net cash provided by operating activities
23(b)
44,621
51,318
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for non-current assets
Payment for development activities
Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
(Payment of)/receipt from bank loans
Net cash (used in)/provided by financing activities
Net increase/(decrease) in cash held
Cash and cash equivalent at the beginning of the year
Exchange rate adjustment
(14,753)
(27,402)
(17,374)
(33,370)
(42,155)
(50,744)
(3,995)
(3,995)
(1,529)
11,214
1,513
2,933
2,933
3,508
9,517
(1,811)
Cash and cash equivalent at the end of the year
23(a)
11,198
11,214
The above consolidated statement of cash flows should be used in conjunction with the accompanying notes.
* Restated - Refer Note 1(k) for further details.
Page 79 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
Contents of notes to the financial statements
Page number
1.
Statement of significant accounting policies
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Revenue
Expenses
Taxation
Earnings /(Loss) per share
Current receivables
Inventories
Other current assets
Non-current receivables
Property, plant and equipment
Development expenditure
Impairment of non-current assets
Trade and other Payables
Borrowings
Provisions
Deferred tax
Auditor’s remuneration
Issued capital
Reserves
Share-based payments
Investment in Subsidiaries
Retained profits
Notes to the statement of cash flows
Financial risk management
Commitments
Related Parties
Events subsequent to reporting date
Segment information
Parent company information
Company details
81
92
92
93
93
94
94
94
94
94
95
96
98
98
98
100
100
101
102
102
104
105
105
106
109
110
110
111
113
113
Page 80 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The financial report is a general purpose financial report, which has been prepared in accordance with Australian
Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of
the Australian Accounting Standards Board (AASB) and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a
financial report containing relevant and reliable information about transactions, events and conditions to which
they apply. Medusa Mining Limited is a for profit entity for the purpose of preparing the financial statements.
Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply
with International Financial Reporting Standards (IFRS). Material accounting policies adopted in the preparation
of this financial report are presented below. They have been consistently applied unless otherwise stated.
The financial report covers the Group of Medusa Mining Limited (“Medusa”) and controlled entities. Medusa is
a listed public company, incorporated and domiciled in Australia.
The separate financial statements of the parent entity, Medusa Mining Limited, have not been presented within
this financial report as permitted by the Corporations Act 2001. A summary of Financial information for the parent
is included in note 29.
The financial statements were authorised by the Directors on 28 August 2018.
Basis of preparation
Reporting Basis and Conventions
The financial report has been prepared on an accruals basis and is based on historical costs modified, where
applicable, by the measurement at fair value of selected non-current assets, financial assets and financial
liabilities.
(a)
Principles of consolidation
The Group’s financial statements consolidate those of the Parent Company and all of its subsidiaries as
of 30 June 2018. The Parent controls a subsidiary if it is exposed, or has rights, to variable returns from
its involvement with the subsidiary and has the ability to affect those returns through its power over the
subsidiary. All subsidiaries have a reporting date of 30 June.
All transactions and balances between Group companies are eliminated on consolidation, including
unrealised gains and losses on transactions between Group companies. Where unrealised losses on
intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment
from a group perspective. Amounts reported in the financial statements of subsidiaries have been
adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year
are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.
Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss
and net assets that is not held by the Group. The Group attributes total comprehensive income or loss
of subsidiaries between the owners of the parent and the non-controlling interests based on their
respective ownership interests.
A list of controlled entities during the year ended 30 June 2018 is presented in note 21.
(b)
Comparative figures
Where required by Accounting Standards, comparative figures have been adjusted to conform to
changes in presentation for the current financial year and change in exploration accounting policy
explained further in Note 1(k).
(c)
New standards and interpretations not yet adopted
The following standards, amendments to standards and interpretations have been identified as those
which may impact the entity in the period of initial application. They are available for early adoption at 30
June 2018, but have not been applied in preparing this financial report.
The AASB has issued a number of new and amended Accounting Standards and Interpretations that
have mandatory application dates for future reporting period, some of which are relevant to the Group.
The Group has decided not to early adopt any of the new and amended pronouncements. The Group’s
assessment of the new and amended pronouncements that are relevant to the Group but applicable in
future reporting periods is set out below:
Page 81 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
AASB 9 Financial Instruments
AASB 9 introduces new requirements for the classification and measurement of financial assets and
liabilities. These requirements improve and simplify the approach for classification and measurement of
financial assets compared with the requirements of AASB 139.
The effective date is for annual reporting periods beginning on or after 1 January 2018.
The entity is undergoing an assessment of the impact of AASB 9. However, based on the entity’s
preliminary assessment, the Standard is not expected to have a material impact on the transactions and
balances recognised in the financial statements when it is first adopted for the year ending 30 June 2019.
AASB 15 Revenue from Contracts with Customers
AASB 15 replaces AASB 118: Revenue, AASB 111 Construction Contracts and some revenue-related
Interpretations. In summary, AASB 15:
•
•
•
•
establishes a new revenue recognition model;
changes the basis for deciding whether revenue is to be recognised over time at a point in time;
provides a new and more detailed guidance on specific topics (e.g. multiple element arrangements,
variable pricing, rights of return and warranties); and
expands and improves disclosures about revenue.
The effective date is for annual reporting periods beginning on or after 1 January 2018.
The entity is undergoing an assessment of the impact of AASB 15. However, based on the entity’s
preliminary assessment, the Standard is not expected to have a material impact on the transactions and
balances recognised in the financial statements when it is first adopted for the year ending 30 June 2019.
AASB 16 Leases
The new AASB 16:
•
•
•
•
•
replaces AASB 117 Leases and some lease-related Interpretations;
requires all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low
value asset leases;
provides new guidance on the application of the definition of lease and on sale and lease back
accounting;
largely retains the existing lessor accounting requirements in AASB 117; and
requires new and different disclosures about leases.
The effective date is for annual reporting periods beginning on or after 1 January 2019.
The entity is undergoing an assessment of the impact of AASB 16. However, based on the entity’s
preliminary assessment, the Standard is not expected to have a material impact on the transactions and
balances recognised in the financial statements when it is first adopted for the year ending 30 June 2020.
Page 82 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(d)
Revenue recognition
Revenue from the sale of goods is recognised in the relevant reporting period when there has been a
significant transfer of risks and rewards to the customer and no further processing is required by the
Group’s operations. In addition, the quality and quantity of the goods must be determined with reasonable
accuracy, the price is known or determinable and collectability is probable. The point, at which risk
passes, for the Group’s sales, is for the majority of the time, upon receipt of the bill of lading or equivalent
when the commodity is actually delivered for shipment.
Revenue is measured at the fair value of the consideration received or receivable.
Gold and silver sales
Revenue from the production of gold and silver is recognised when the group had a significant transfer
of risk and rewards to the buyer.
Bill and hold sales
Bill and hold sales in which delivery is delayed at the buyer’s request but the buyer takes title and accepts
billing revenue is recognised when the buyer takes title, provided:
a)
It is probable that delivery will be made;
b) The item on hand, identified and ready for delivery to the buyer at the time the sale is recognised;
c) The buyer specifically acknowledges the deferred delivery instructions; and
d) The usual payment terms apply.
Interest Revenue
Interest revenue is recognised using the effective interest rate method, which for floating rate financial
assets, is the rate inherent in the instrument.
(e)
Income tax
The income tax expense (credit) for the year comprises current income tax expense (credit) and deferred
tax expense (credit).
Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated
using applicable income tax rates enacted, or substantively enacted, as at reporting date. Current tax
liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the
relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances
during the year as well as unused tax losses.
Current and deferred income tax expense (income) is charged or credited outside profit or loss when the
tax relates to items that are recognised outside profit or loss.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax
assets also result where amounts have been fully expensed but future tax deductions are available. No
deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a
business combination, where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period
when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted
at the reporting date. Their measurement also reflects the manner in which management expects to
recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the
extent that it is probable that future taxable profit will be available against which the benefits of the
deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and
joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of
the temporary difference can be controlled and it is not probable that the reversal will occur in the
foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is
intended that net settlement or simultaneous realisation and settlement of the respective asset and
liability will occur.
Page 83 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is
intended that net settlement or simultaneous realisation and settlement of the respective asset and liability
will occur.
Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred
tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where it is intended that net settlement or simultaneous
realisation and settlement of the respective asset and liability will occur in future periods in which
significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
(f)
Property, Plant and Equipment
Each class of Property, plant and equipment is carried at cost less, where applicable, any
accumulated depreciation and impairment losses.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured reliably. All other repairs and maintenance
are charged to profit or loss during the financial period in which they are incurred.
Depreciation
Plant and equipment (excluding the Co-O mine) is depreciated applying the straight-line method over
their estimated useful lives, commencing from the time the asset is held ready for use.
Co-O mine’s useful life is estimated to approximate the expected life of the mine, the depreciation rate is
based on a charge proportional to the depletion of estimated recoverable gold ounces contained in
indicated and inferred resources.
Depreciation rates and methods are reviewed annually for appropriateness. When changes are made,
adjustments are reflected prospectively in current and future periods only.
The depreciation rates used for each class of depreciable assets are:
Class of fixed asset
Depreciation method
Depreciation rate (%)
Plant and equipment (excluding Co-O mine)
Office furniture and fittings
Land and building
Straight line
Straight line
Straight line
20% to 33%
7.5% to 20%
5%
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These
gains and losses are included in profit or loss.
Capital works in progress is included in Property, Plant and Equipment. Depreciation of the asset is
applied when construction is completed and the asset is ready for use.
(g)
Impairment of non-financial assets
At each reporting date, the Group reviews the carrying values of its tangible and intangible assets to
determine whether there is any indication that those assets have been impaired. If such an indication
exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell
and value in use i.e. discounted cash flows, is compared to the asset’s carrying value. Any excess of the
asset’s carrying value over its recoverable amount is expensed in profit or loss.
Impairment testing is performed annually for intangible assets with indefinite lives.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
(h)
Operating leases
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor,
are charged as straight line over the length of the lease.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line
basis over the life of the lease term.
(i)
Trade and other payables
Payables are initially recognised at fair value and due to their short-term nature, subsequently are measured
at amortised cost and not discounted.
Page 84 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(j)
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost, using
the effective interest rate method, less any provision for impairment. Trade receivables are generally due
for settlement within 30 days.
Collectability of trade receivables is reviewed on an on-going basis. Debts which are known to be
uncollectible are written off by reducing the carrying amount directly. A provision for impairment of trade
receivables is raised when there is objective evidence that the consolidated entity 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 receivable
may be 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.
Other receivables are recognised at amortised cost, less any provision for impairment.
(k) Exploration and evaluation expenditure
Exploration and Evaluation expenditure (“E&E”) incurred by or on behalf of the Group was accumulated
separately for each area of interest. Such expenditure comprises direct costs and does not include general
overheads or administrative expenditure not having a specific nexus with a particular area of interest.
Effective 1 July 2017 the Company has revised its policy to expense all costs incurred in respect of the
acquisition of exploration and evaluation activities and ongoing exploration activities in the period in which
they are incurred.
When production commences, the accumulated development for the relevant area of interest will be
amortised over the life of the area according to the rate of depletion of reserves.
In accordance with AASB 108, Accounting Policies, Changes in Accounting Estimates and Errors, brought
forward balances to 30 June 2017 are accounted for retrospectively and reflected against Retained
Earnings. Exploration during the year ended 30 June 2018 is expensed in the Consolidated Statement of
Profit or Loss and Other Comprehensive Income.
This voluntary change in accounting policy involves restating the following balances:
30 Jun 2017
30 Jun 2016
Statement of financial position
Previous
amount
US$000
Increase/
(Decrease)
US$000
Restated
amount
US$000
Previous
amount
US$000
Increase/
(Decrease)
US$000
Restated
amount
US$000
Exploration
Development
Exploration, evaluation &
development expenditure
Total Assets
Net Assets
Retained Earnings
56,553
66,439
(56,553)
-
-
66,439
62,006
83,446
(62,006)
-
-
83,446
122,992
231,910
197,000
90,550
(56,553)
(56,553)
(56,553)
(56,552)
66,439
175,357
140,447
33,998
145,452
284,625
260,438
152,384
(62,006)
(62,005)
(62,005)
(62,005)
83,446
222,620
198,433
90,379
Total Equity
197,000
(56,553)
140,447
260,438
(62,005)
198,433
Statement of profit or loss and
other comprehensive income
Previous
amount
US$000
Increase/
(Decrease)
US$000
Restated
amount
US$000
Previous
amount
US$000
Increase/
(Decrease)
US$000
Restated
amount
US$000
30 Jun 2017
30 Jun 2016
-
(67,152)
(73,281)
-
(73,281)
Cost of Sales
Exploration & evaluation
expenses
Impairment
(67,152)
(7,098)
(70,800)
Profit/loss after tax
Basic earnings/loss per share
(US$ per share)
Diluted earnings/loss per share
(US$ per share)
5,453
-
(1,645)
(70,800)
-
-
(62,129)
5,453
(56,676)
44,329
(472)
-
(472)
(472)
-
43,857
(0.299)
0.026
(0.273)
0.213
(0.002)
0.211
(0.299)
0.026
(0.273)
0.209
(0.002)
0.207
Due to the voluntary change in Accounting policy regarding Exploration expenditure being expensed as
incurred, the Consolidated Statement of Cash Flows discloses the expenditure as an Operating activity
instead of an Investing Activity.
Page 85 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
(l) Development expenditure
Development expenditure represents the accumulated exploration, evaluation, land and development
expenditure incurred by or on behalf of the Group in relation to areas of interest in which mining of a mineral
resource has commenced.
When further development expenditure is incurred in respect of a mine property after commencement of
production, such expenditure is carried forward as part of the mine property only when substantial future
economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of
production. All horizontal development drives which include permanent rail and associated infrastructure,
are capitalised.
Amortisation of costs is provided on the unit-of-production method with separate calculations being made
for each mineral resource at a rate of 18.80% (2017:12.25%). The unit-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. 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 the mine and the remaining useful life of each class of asset
is reassessed at least annually. Where there is a change in the reserves/resources amortisation rates are
correspondingly adjusted.
(m) Rehabilitation costs
Rehabilitation costs that are expected to be incurred are provided for as part of the cost of the exploration,
evaluation, development, construction or production phases that give rise to the need for restoration.
Accordingly, these costs are recognised gradually over the life of the facility as these phases occur. The
costs include obligations relating to reclamation, waste site closure, plant closure and other costs
associated with the rehabilitation of the site.
These estimates of the rehabilitation obligation are based on anticipated technology and legal
requirements and future costs, which have been discounted to their present value. Any changes in the
estimates are adjusted on a progressive basis. In determining the rehabilitation obligations, the entity has
assumed no significant changes will occur in the relevant Federal, State or foreign legislation in relation to
rehabilitation of such minerals projects in the future. At the reporting date, the group does not consider it
has any significant unsatisfied obligations in respect to rehabilitation costs.
(n) Employee benefits
This provision is made for the Group liability for employee benefits arising from services rendered by
employees to reporting date. Employee benefits expected to be settled within 12 months together with
entitlements arising from wages, salaries and annual leave which will be settled after 12 months, have
been measured at the amounts expected to be paid when the liability is settled plus related on-costs.
Other employee benefits payable later than 12 months have been measured at the present value of the
estimated future cash outflows to be made for those benefits.
Contributions are made by the Group to several employee superannuation funds and are charged as
expenses when incurred.
In respect of defined benefit plans, the cost of providing the benefits is determined using the projected unit
credit method. Actuarial valuations are conducted every two years, with valuations performed on an annual
basis. Consideration is given to any event that could impact the funds up to the end of the reporting period
where the interim valuation is performed at an earlier date.
The amount recognised in the Statement of Financial Position represents the present value of the defined
benefit obligations adjusted for any unrecognised actuarial gains and losses and unrecognised past service
costs less the fair value of the plan’s assets. Any asset recognised is limited to unrecognised actuarial
losses, plus the present value of available refunds and reductions in future contributions to the plan.
Actuarial gains and losses are amortised over the expected average remaining working lives of the
participating employees in the plan. Gains or losses on the curtailment or settlement of a defined benefit
plan are recognised in the profit or loss when the Group demonstrates commitment to the curtailment or
settlement.
Past service costs are recognised when incurred to the extent that benefits are vested and are otherwise
amortised on a straight-line basis over the vesting period.
Page 86 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(o) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (“GST”),
except where the amount of GST incurred is not recoverable from the relevant taxing authority. In these
circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item
of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST
recoverable from, or payable to, the taxing authorities is included as a current asset or liability in the
Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis.
The GST components of cash flows arising from investing and financing activities which are recoverable
from, or payable to, the taxing authorities are classified as operating cash flows.
(p) Operating Segments
Operating Segments are identified on the basis of internal management reports that are regularly reviewed
by the entity’s chief operating decision maker, for the purposes of allocating resources and assessing
performance.
Segment revenues and expenses are those directly attributable to the segments. Segment assets consist
principally of cash, receivables, other financial assets, property, plant and equipment, net of allowances
and accumulated depreciation and mineral properties. Segment liabilities consist principally of accounts
payable and provisions.
(q) Earnings per share
Basic earnings per share ("EPS") is calculated by dividing the net profit or loss attributable to members of
the Company for the reporting period, after excluding any costs of servicing equity (other than ordinary
shares and converting preference shares classified as ordinary shares for EPS calculation purposes), by
the weighted average number of ordinary shares of the Company, adjusted for any bonus issue.
Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after-tax effect of financing
costs associated with potential ordinary shares and the effect on revenues and expenses of conversion to
ordinary shares associated with potential ordinary shares, by the weighted average number of ordinary
shares and potential ordinary shares adjusted for any bonus issue.
Page 87 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
(r)
Foreign currency transactions and balances
Functional and presentation currency
The functional currency of each of the Group’s entities is the currency of the primary economic environment
in which that entity operates. Though the Group’s main functional currencies are the Australian dollar, US
dollar and Philippines Peso, the presentation currency for the Group is US dollar. The reason for using US
dollar as the presentation currency is that the US dollar is the primary currency used in the global gold
market.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing
at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange
rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the
date of the transaction.
Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values
were determined.
Exchange differences arising on the translation of monetary items are recognised in the profit before
income tax in the Statement of Profit or Loss and other Comprehensive Income.
Group companies
The financial results and position of foreign operations whose functional currency is different from the
Group’s presentation currency are translated as follows:
-
-
assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;
income and expenses are translated at average exchange rates for the period where this approximates
rate at the transaction date; and
retained earnings are translated at the exchange rates prevailing at the date of the transaction.
-
Exchange differences arising on translation of foreign operations are recognised in other comprehensive
income and accumulated in the foreign currency translation reserve in the Statement of Financial Position.
These differences are reclassified from equity to profit or loss (as a reclassification adjustment) in the
period in which the operation is disposed.
The functional currency of the parent entity, Medusa Mining Limited is Australian dollar, Komo Diti Traders
Limited is United States dollar, Mindanao Mineral Processing and Refining Corporation and Philsaga
Mining Corporation in United States dollar and the remaining entities are Philippine pesos.
(s) Cash and cash equivalents
For the purpose of the Statement of Cash Flows, cash and cash equivalents include:
-
-
cash on hand and at call deposits with bank or financial institutions, net of bank overdrafts; and
investments in money market instruments with less than 30 days to maturity.
These amounts are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value.
Page 88 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t)
Financial instruments
Recognition, Initial Measurement and Derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument, and are measured initially at fair value adjusted by transactions
costs, except for those carried at fair value through profit or loss, which are measured initially at fair value.
Subsequent measurement of financial assets and financial liabilities are described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability
is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and Subsequent Measurement of Financial Assets
For the purpose of subsequent measurement, financial assets other than those designated and effective
as hedging instruments are classified into the following categories upon initial recognition:
Loans and receivables
Financial assets at Fair-Value-Through-Profit-or-Loss (‘FVTPL’)
•
•
• Held-To-Maturity (‘HTM’) investments; or
• Available-For-Sale (‘AFS’) financial assets
All financial assets except for those at FVTPL are subject to review for impairment at least at each reporting
date to identify whether there is any objective evidence that a financial asset or a group of financial assets
is impaired. Different criteria to determine impairment are applied for each category of financial assets,
which are described below.
All income and expenses relating to financial assets that are recognised in profit or loss are presented
within finance costs, finance income or other financial items, except for impairment of trade receivables
which is presented within other expenses.
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial recognition, these are measured at amortised cost using the
effective interest method, less provision for impairment. Discounting is omitted where the effect of
discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall
into this category of financial instruments.
Individually significant receivables are considered for impairment when they are past due or when other
objective evidence is received that a specific counterparty will default. Receivables that are not considered
to be individually impaired are reviewed for impairment in groups, which are determined by reference to
the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss
estimate is then based on recent historical counterparty default rates for each identified group.
Classification and subsequent measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables.
Financial liabilities are measured subsequently at amortised cost using the effective interest method,
except for financial liabilities held for trading or designated at FVTPL, that are carried subsequently at fair
value with gains or losses recognised in profit or loss. All derivative financial instruments that are not
designated and effective as hedging instruments are accounted for at FVTPL.
(u)
Inventories
Raw materials and stores, ore stockpiles and work in progress and finished gold stocks are physically
measured or estimated and valued at the lower of cost and net realisable value. Net realisable value less
costs to sell is assessed annually based on the amount estimated to be obtained from sale of the item of
inventory in the normal course of business, less any anticipated costs to be incurred prior to its sale. Cost
comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead
expenditure and depreciation and amortisation relating to mining activities, 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. 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.
Inventories of consumable supplies and spare parts expected to be used in production are valued at the
lower of weighted average cost, which includes the cost of purchase as well as transportation and statutory
charges, or net realisable value. Any provision for obsolescence is determined by reference to specific
stock items identified. Gold inventory is comprised of gold in circuit and gold dore held at site where risk
and reward has not passed to the customer. During the exploration and development phase, where the
cost of extracting the ore exceeds the likely recoverable amount, work in progress inventory is written down
to net realisable value.
Page 89 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
(v) Share based payments
The fair value of the equity to which employees become entitled is measured at grant date and recognised
as an expense over the vesting period, with a corresponding increase to an equity account.
The fair value of options is ascertained using a Black-Scholes pricing model. The number of shares and
options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised
for services received as consideration for the equity instruments granted shall be based on the number of
equity instruments that eventually vest.
(w) Defined Benefit Fund
The Group has a funded non-contributory retirement plan for employees in the Philippines. The cost of
providing benefits is determined using the Projected Unit Credit Method which reflects services rendered
by employees to the date of valuation and incorporates assumptions concerning employees’ projected
salaries.
The retirement benefit obligation recognised in the Statement of Financial Position represents the present
value of the defined benefit obligation as adjusted for unrecognised past service cost, and as reduced by
the fair value of plan assets.
The funding policy is to contribute an amount based on the actuarial valuation report which is carried out
at regular intervals.
(x) Critical accounting estimates and judgments
The Directors evaluate estimates and judgments incorporated into the financial report based on historical
knowledge and best available current information. Estimates assume a reasonable expectation of future
events and are based on current trends and economic data, obtained both externally and within the Group.
Key estimates - Impairment of non-financial assets
The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that
may lead to impairment of non-financial assets (refer note 1(g)). Where an impairment trigger exists, the
recoverable amount of the asset is determined. Value-in-use calculations performed in assessing
recoverable amounts incorporate a number of key estimates. Refer to details of key elements and carrying
values of non-financial assets at note 12.
Key estimates - Recoverability of long lived assets
Certain assumptions are required to be made in order to assess the recoverability of capitalised
development expenditure. Key assumptions include the future price of gold, future cash flows, an estimated
discount rate and estimates of ore reserves. In addition, cash flows are projected over the life of mine,
which is based on proved and probable ore reserves. Estimates of ore reserves in themselves are
dependent on various assumptions, in addition to those described above, including cut-off grades.
Changes in these estimates could materially impact on ore reserves, and could therefore affect estimates
of future cash flows used in the assessment of recoverable amount.
The Group has used the Reserve Statement released on 3 April 2018, taking into account ore utilised
throughout the period and replenished to estimate the recoverable amount of long lived assets. Estimates
of ore reserves in themselves are dependent on various assumptions, in addition to those described above,
including cut-off grades. Changes in these estimates could impact on ore reserves, and could therefore
affect estimates of future cash flows used in the assessment of recoverable amount.
Key estimates - Determination of ore reserves and remaining mine life
The Group estimates its ore reserves and mineral resources based on information compiled on 3rd of April
2018 by Competent Persons (as defined in accordance with the Australian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves as revised June 2012 code (the JORC code)).
Reserves determined in this way are taken into account in the calculation of depreciation of mining plant
and equipment (refer to note 10), amortisation of capitalised development expenditure (refer to note 11),
and impairment relating to these assets (refer to note 12).
In estimating the remaining life of the mine for the purpose of amortisation and depreciation calculations,
due regard is given, not only to the amount of remaining recoverable gold ounces contained in proved and
probable ore reserves, but also to limitations which could arise from the potential for changes in technology,
demand, and other issues which are inherently difficult to estimate over a lengthy time frame.
Where a change in estimated recoverable gold ounces contained in proved and probable ore reserves is
made, depreciation and amortisation is accounted for prospectively,
The determination of ore reserves and remaining mine life affects the carrying value of a number of the
consolidated entity’s assets and liabilities including deferred mining costs and the provision for
rehabilitation.
Page 90 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(x) Critical accounting estimates and judgments (continued)
Key estimates - Development expenditure
Development activities commence after project sanctioning by the appropriate level of management.
Judgement is applied by management in determining when a project is economically viable. In exercising
this judgment, management is required to make certain estimates and assumptions similar to those
described above for capitalised exploration and evaluation expenditure. Any such estimates and
assumptions may change as new information becomes available. If, after having commenced the
development activity, a judgement is made that a development asset is impaired, the impairment change
is included in profit or loss.
Key estimates - Share based payments
The consolidated entity measures the cost of equity-settled transactions with employees by reference to
the fair value of the equity instruments at the date at which they are granted. The fair value is determined
by using the Black-Scholes model taking into account the terms and conditions upon which the instruments
were granted. The accounting estimates and assumptions relating to equity-settled share-based payments
would have no impact on the carrying amounts of assets and liabilities within the next annual reporting
period but may impact profit or loss and equity. (Refer to note 20).
Key estimates - GST/VAT
The Group has net GST/VAT of US$36 million that comprises tax credit certificates (“TCC”) and VAT
claimable for cash. The current asset portion of VAT US$14 million comprises amounts that are estimated
to be utilised by TCC to offset various indirect taxes within the current period. The non-current amount of
VAT receivable of US$22 million represents the estimated amount utilised in future periods against tax
liabilities.
Key estimates - Deferred tax asset
Significant judgement is required in determining deferred tax assets and liabilities. There are many
transactions and calculations during the ordinary course of business for which the ultimate tax
determination is uncertain.
In addition, deferred tax assets are recognised for deductible temporary differences and unused tax losses
only if it is probable that future forecast taxable profits are available to utilise those temporary differences
and losses, and the tax losses continue to be available having regard to the relevant tax legislation
associated with their recoupment.
The Group has recognised a deferred tax asset of $10m at 30 June 2018. The utilisation of this deferred
tax asset amount depends upon future taxable amounts in excess of profits arising from the reversal of
temporary differences. The Group believes this amount to be recoverable based on taxable income
projections.
(y) Rounding of amounts
The Group is of a kind referred to in ASIC Legislative Instrument 2016 /191 and accordingly, amounts in
the Financial Report and Directors’ Report have been rounded to the nearest $1,000 or in certain cases,
to the nearest dollar to reflect where rounding in ‘000 is not permitted.
Page 91 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
2.
REVENUE
Operating activities:
Gold and silver sales
Non-operating activities:
Interest revenue
Other
Total revenue
3.
EXPENSES
Profit/(loss) before income tax expense/(income) has
been determined after charging/(crediting)
the
following items:
Depreciation & amortisation:
- Depreciation expense
- Amortisation expense
Total depreciation & amortisation
Employee benefits expense
Defined contribution plans
Defined benefit plans
Foreign exchange gain
Assets written off
Interest expense
Tax dispute charge - Philippines
Share-based payment expense
Impairment expense
Operating lease rental:
- minimum lease payments
* Restated - Refer Note 1(k) for further details.
Consolidated
2018
Note
US$000
2017
Restated *
US$000
124,506
99,783
87
-
74
234
124,593
100,091
3,703
25,530
29,233
2,303
15,738
18,041
14,569
11,811
455
488
88
-
2,861
5,161
150
115
498
-
472
1,305
-
586
12
81,100
70,800
63
65
Page 92 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
4.
TAXATION
(a) The components of tax expense comprise:
Current tax
Deferred tax
Consolidated
2018
US$000
2017
US$000
6,641
(8,408)
(1,767)
7,120
501
7,621
(b) The prima facie tax on profit before income tax is reconciled to the
income tax as follows:
Operating (loss) / profit before income tax
(57,321)
(49,055)
Prima facie income tax expense/(credit) at 30% (2017: 30%) on
operating profit
(17,196)
(14,717)
less – tax effect of:
other non-deductible/(non-assessable) expenses
difference of effective foreign income tax rates
Non-Assessable Income
Impairment of assets and other
Amortisation and Depreciation Adjustment
share based payments expense
non-deductible foreign expenditure
foreign exchange
charitable contribution
under/over
inventory written off
deferred tax assets not brought to account
Income tax expense/(benefit)
(c) Deferred tax assets not brought to account, the benefits of which will
only be realised if the conditions for deductibility set out in Note 1(e)
occur:
- Temporary differences
- Australian tax losses
1,257
-
-
13,709
-
45
-
-
369
(288)
-
337
(1,767)
-
-
(39)
23,347
-
176
-
-
157
(1,635)
-
332
7,621
75,602
4,411
80,013
23,817
4,074
27,891
The benefit of tax losses will only be obtained if:
(i)
the Group derives future assessable income of a nature & of an amount sufficient to enable the benefit to be realised;
(ii)
the Group continues to comply with the conditions for deductibility imposed by the law; and
(iii) no changes in tax legislation adversely affect the Group in realising the benefit.
5.
EARNINGS / (LOSS) PER SHARE
(Loss) used to calculate basic and diluted EPS
(55,554)
(56,676)
Weighted average number of ordinary shares used in the calculation of
the basic earnings per share.
Weighted average unlisted options outstanding
207,794,301
207,794,301
-
-
Weighted average of ordinary shares diluted as at 30 June 2018
207,794,301
207,794,301
4,913,567 weighted average unlisted options outstanding for 22,018 have not been included in calculating the
diluted EPS because the effect is anti-dilutive.
Page 93 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
6.
CURRENT RECEIVABLES
Gold awaiting settlement
GST/VAT receivables
Other receivables
Total current receivables
Refer ageing analysis in Financial Instruments Note 24(b)
7.
INVENTORIES
Consumables – net realisable value
Ore stockpile - at cost
Gold Inventory - at cost
Total inventories
8.
OTHER CURRENT ASSETS
Prepayments
9.
NON-CURRENT RECEIVABLES
GST/VAT receivables
Total non-current receivables
10. PROPERTY, PLANT & EQUIPMENT
Plant & equipment:
At cost
less - provision for impairment
less - accumulated depreciation
Total plant & equipment at net book value
Capital works in progress:
At cost
less - provision for impairment
Total capital works in progress at net book value
Furniture & fittings:
At cost
less - provision for impairment
less - accumulated depreciation
Total furniture & fittings at net book value
Total carrying amount at end of year
Reconciliations:
Plant & equipment:
Carrying amount at beginning of year
plus - additions
plus - transfer from capital works in progress
plus - forex differences on translation
less - disposal
less - impairment
less - depreciation
Carrying amount at end of year
Note
1(x)
Consolidated
2018
US$000
2017
US$000
3,852
14,311
1,299
19,462
7,954
1,571
2,715
12,240
312
9,944
1,707
11,963
10,775
3,402
2,816
16,993
792
571
1(x)
21,728
21,728
24,050
24,050
151,827
(103,360)
(47,046)
1,421
40,154
(28,705)
11,449
1,088
(254)
(747)
87
148,057
(83,265)
(43,539)
21,253
29,809
(9,549)
20,260
1,030
(254)
(544)
232
12,957
41,745
21,253
3,851
353
413
(854)
(20,095)
(3,500)
1,421
32,703
6,521
-
(286)
-
(15,392)
(2,292)
21,254
12
Page 94 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
10. PROPERTY, PLANT & EQUIPMENT (continued)
Reconciliations: (continued)
Capital works in progress:
Carrying amount at beginning of year
plus - additions
less - transfer to plant and equipment
less - impairment
Carrying amount at end of year
Furniture & fittings:
Carrying amount at beginning of year
plus - additions
plus - forex differences on translation
less - depreciation
Carrying amount at end of year
Total carrying amount at end of year
11. DEVELOPMENT EXPENDITURE
Development expenditure:
At cost
less - provisions for impairment
less - accumulated amortisation
Net development expenditure
Development expenditure:
Carrying amount at beginning of year
plus - costs incurred
less - amortisation expense
less - impairment
less - forex differences upon translation
Carrying amount at end of year
* Restated - Refer Note 1(k) for further details.
Consolidated
2018
Note
US$000
2017
Restated *
US$000
20,260
10,698
(353)
12
(19,156)
11,449
232
58
-
(203)
87
20,286
9,522
-
(9,548)
20,260
76
133
33
(10)
232
12,957
41,745
378,405
(246,260)
(102,267)
29,878
66,439
28,690
(24,552)
(40,969)
270
29,878
349,445
(205,291)
(77,715)
66,439
83,446
37,503
(15,738)
(39,422)
650
66,439
12
Page 95 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
12.
IMPAIRMENT OF NON-CURRENT ASSETS
In accordance with the Group’s accounting policies and processes, the Group performs its impairment testing
annually at 30 June. Non-financial assets are reviewed at each reporting period to determine whether there is
an indication of impairment.
When indicators of impairment exist, a formal estimate of the recoverable amount is made. External and internal
indicators of impairment as at 30 June 2018 included;
• long range planning and scheduling meeting the JORC 12 Compliances:
• increased expected future costs of production:
• reduction in the group’s market capitalisation relative to the carrying values of non-current assets; and
• completion delays for the E15 Shaft.
Due to the indicators above, the Group assessed the recoverable amounts of its major Cash-Generating-Unit
(“CGU”), relating to the Co-O mining operations.
a)
Impairment testing
i) Methodology
Impairment is recognised when the carrying amount exceeds the recoverable amount. The recoverable
amount being the value in use of the CGU has been estimated using the discounted cashflows method
based on the Group’s recoverable minerals.
Value in use is estimated based on discounted cash flows using market based commodity price,
estimated quantities of recoverable minerals, production
levels, operating costs and capital
requirements. When Life of Mine (LOM) plans fully utilise the existing mineral resource and the Group
have demonstrated an ability to replenish resources, an estimated replenishment rate has been applied
to unmined resources.
Estimates of quantities of recoverable minerals, production levels, operating costs and capital
requirements are sourced from the Group planning and budgeting process, mill capacity levels and
mining plans for the following year. The 2018 budget and mine plan were developed in the context of the
current gold price environment.
Significant judgements and assumptions are made by the Group to determine value in use. This includes
assessing variable key assumptions such as gold market prices, cost structures, production utilisation
and capacity, available minerals and discount rates. Any change in these variable assumptions can
cause adverse changes in one or more of the assumptions used to estimate value in use.
ii) Key Assumptions
The table below summarises the key assumptions used in the 30 June 2018 carrying value
assessments. Comparison to the prior period has been provided.
Assumptions
Average gold price
Average AISC
Pre-Tax discount rate (%)
Probable reserves
Production capacity per annum
Unit
US$/ounce
US$/ounce
%
ounces
ounces
2018
(2018 - 2024)
2017
(2017 - 2021)
1,250
1,080
18.3
1,250
895
16.5
327,000
345,000
50,000 - 100,000
86,000 - 127,000
Average All-In-Sustaining-Cost (“AISC”) comprises all operating, capital and overheads expenditure
averaged over the period mentioned.
Commodity prices
Commodity prices are estimated with reference to external market forecasts and reviewed at least
annually. The price applied has taken into account observable market data.
Discount rate
The future cash flows of the CGU are discounted by the estimated real after tax weighted average cost
of capital (“WACC”), pursuant to the Capital Asset Pricing Model. The denominal pre-tax WACC has
been derived from comparable company analysis, in addition to the WACC rate of the group’s Co-O
mining operations being the primary CGU.
Page 96 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
12.
IMPAIRMENT OF NON-CURRENT ASSETS (continued)
a)
Impairment testing (continued)
ii) Key Assumptions (continued)
Production activity and operating and capital costs
Life of mine production activity and operating and capital cost assumptions are based on the Group’s
latest budget, including the five-year budget and separately estimated LOM plan. Discounted cash flows
include expected cost improvements and sustaining capital requirements. Estimated production is
assumed consistent with the capacity constraint of the Co-O mill taken into account while assuming a
constant recovery rate.
Resources and reserves
Resource and Reserve ounces were based on the Group’s JORC 2012 compliant Annual Resource and
Reserve Update Statement announced to the Australian Securities Exchange on 03 April 2018.
iii) Impacts
Due to the estimated carrying amount being less than the recoverable amount of the Group’s Co-O
mining operations CGU a current asset impairment charge of US$ 0.9 and a non-current assets
impairment charge of US$80.2 million was required for the year ending 2018 (2017: current 6.4 million,
non-current 64.4 million):
2018
2017
Description
Note
Carrying
amount
($’000)
Impairment
Balance
($’000)
($’000)
Carrying
amount
($’000)
Impairment
Balance
($’000)
($’000)
Development
Plant & equipment
Consumables
Total
11
10
7
3
70,847
(40,969)
29,878
105,861
(39,422)
66,439
52,208
(39,251)
12,957
66,686
(24,941)
41,745
8,834
(880)
7,954
17,212
(6,437)
10,775
131,889
(81,100)
50,789
189,759
(70,800)
118,959
b) Sensitivity Analysis
Variation movements in any key assumptions may result in a change to the estimated recoverable amount
which may indicate an additional impairment to non-current assets.
The changes to estimated key assumptions would have the following approximate impact on the
recoverable amount of the CGU in its functional currency that has been subject to impairment in the 30
June 2018 statutory accounts:
Assumption changes
2018
2017
Effect on recoverable amount
Effect on recoverable amount
US $100 per ounce increase/decrease in gold price
+/- 27,628
1% increase/decrease in the discount rate
5% increase in operating costs
+/- 971
-22,341
($’000)
($’000)
+/- 33,076
+/- 2,778
-14,221
In addition to the above, the level of production activity is also a key assumption in the determination of
recoverable amount. Should the Group recognise decreases/increases in processing capacity, changes in
recoverable amount estimates may arise. Due to the number of factors that could impact production activity,
assessment to sensitivity has not been determined for these factors.
The sensitivities above assume specific assumption moves are in isolation, whilst all other assumptions are
held constant. In reality, a change in one of the aforementioned assumptions may accompany a change in
another assumption.
Page 97 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
13.
TRADE & OTHER PAYABLES
Trade Creditors
Accruals
Income Tax payable
Withholding Tax
Other Creditors
Total Creditors
14. BORROWINGS
Current borrowings:
Secured liability - interest bearing loan
Total current borrowings
Non-current borrowings:
Secured liability - interest bearing loan
Unsecured liability - interest bearing loan
Total non-current borrowings
Total Borrowings
Consolidated
2018
US$000
2017
US$000
14,978
1,044
5,726
2,810
239
17,254
1,321
7
859
129
24,797
19,570
6,335
6,335
170
-
170
6,979
6,979
986
2,535
3,521
6,505
10,500
Secured Borrowing are bank loans secured by transportation equipment of the Group. Interest rates
on the loans range between 3.50% to 4% (2017: 2.75% to 4%).
15.
PROVISIONS
Current provisions:
Employee benefits
Total current provisions
Non-current provisions:
Retirement Benefit
Mine Rehabilitation
Total non-current employee benefits
Retirement Benefit
386
386
2,515
1,645
4,160
364
364
2,184
2,047
4,231
The Retirement benefit in non-current liabilities relates to the based employees defined benefit plan.
The most recent actuarial valuations of plan assets and the present value of the defined benefit obligation were
carried out at 30 June 2017. The present value of the defined benefit obligation and the related current service
cost and past service cost was measured using the Projected Unit Credit Method.
The principal assumptions used for the purposes of the actuarial valuations were as follows:
• Discount rate applied - 5.08% (2017: 4.65%);
• Expected rate of salary increase - 3.00% (2017: 3.00%)
Assumptions were developed by management with the assistance of independent actuarial appraisers. Discount
factors are determined close to year-end by reference to high quality 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 obligation. Other assumptions are based on management’s historical experience.
Page 98 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
15. PROVISIONS (continued)
Non-current provisions: (continued)
Retirement Benefit (continued)
Amounts recognised in profit or loss in respect of these defined benefit plans
are as follows:
Current service cost
Interest on obligation
Total
The amount included in the statements of financial position arising from the
entity’s obligation in respect of its defined benefit plans is as follows:
Present value of defined benefit obligation
Unrecognised actuarial loss
Unamortised past service cost, non-vested
Total
Movements in the present value of the defined benefit obligation in the current
period were as follows:
Opening balance
Current service cost
Interest costs
Benefits paid
Actuarial loss
Closing balance
Consolidated
2018
US$000
2017
US$000
382
89
471
401
90
491
2,515
2,184
-
-
-
-
2,515
2,184
2,184
1,955
382
89
(140)
-
401
90
(390)
128
2,515
2,184
The Company has no plan assets held by trustees but an employee retirement fund amounting to US$1,303,428
(2017: US$986,040) was held as at June 30, 2018. The employee retirement fund is presented as part of cash at
bank (refer to Note 23 (c).
Mine Rehabilitation
Carrying amount at beginning of the year
(less)/plus - increase in provision
Carrying amount at end of year
2,047
(402)
1,645
362
1,685
2,047
Page 99 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
Consolidated
Opening
balance
US$000
Forex on
translation
US$000
Credit/(charged)
to income
US$000
Closing
balance
US$000
16. DEFERRED TAX
Consolidated Group
30 June 2018
Deferred tax liability
Capitalised exploration & evaluation expenditures
245
(13)
232
Deferred tax assets
Carried forward tax losses
Other
Total deferred tax asset
30 June 2017
Deferred tax liability
1,662
1,662
8,397
8,397
10,059
10,059
Capitalised exploration & evaluation expenditures
290
Deferred tax assets
Carried forward tax losses
Other
Total deferred tax asset
274
1,934
2,208
-
-
-
-
(45)
245
(274)
(272)
(546)
-
1,662
1,662
Consolidated
2018
US$
2017
US$
17. AUDITORS’ REMUNERATION
Remuneration received or due and receivable by the Company’s
auditors, BDO Audit (WA) Pty Limited for:
• auditing or reviewing the financial reports
189,164
• other services provided by related practice of auditor - taxation & compliance
40,309
Total remuneration of the Company’s auditors
229,473
-
-
-
Remuneration of other auditors of the Company’s Philippines and Hong Kong
subsidiaries for:
• auditing or reviewing the financial reports
• other services provided by related practice of auditor - taxation & compliance
60,881
5,788
65,212
41,144
Total remuneration of other auditors of the Company’s Philippines subsidiaries
66,669
106,356
Remuneration received or due and receivable by the Company’s
auditors, Grant Thornton Audit Pty Ltd for:
• auditing or reviewing the financial reports
• other services provided by related practice of auditor - taxation & compliance
Total remuneration of the Company’s auditors
35,212
111,593
-
15,500
35,212
127,093
Page 100 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
18.
ISSUED CAPITAL
207,794,301 ordinary shares (30 June 2017: 207,794,301)
Total issued capital
Ordinary shares
Balance at beginning of year
Ordinary shares issued during the year:
(i) ordinary shares issued - new issues
Balance at end of year
Ordinary shares
Consolidated
2018
US$000
2017
Restated *
US$000
102,902
102,902
102,902
102,902
102,902
102,902
-
-
102,902
102,902
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the
company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares
have no par value.
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.
No ordinary shares were issued during the year or during the prior year.
Capital Management
Management controls the capital of the Group by monitoring performance against budget to provide the
shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going
concern.
The Group's liabilities and capital includes ordinary share capital, options and financial liabilities, supported
by financial assets.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting
its capital structure in response to changes in these risks and in the market. These responses include the
management of debt levels, distributions to shareholders and share issues.
Capital for the reporting period under review is summarised as follows:
Total equity
Cash and cash equivalents
Capital
Total equity
Borrowings
Overall financing
Capital-to-overall financing ratio
Consolidated
2018
US$000
2017
US$000
82,843
140,447
(11,198)
(11,214)
71,645
129,233
82,843
6,505
140,447
10,500
89,348
150,947
80%
86%
Page 101 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
19. RESERVES
Share option reserves
Foreign currency translation reserve
Total Reserves
(a) Option and performance rights reserve
Consolidated
2018
US$000
2017
US$000
994
317
1,311
1,030
2,517
3,547
The option reserve records items recognised as expenses on valuation of share-based payments.
Unlisted options over ordinary shares at 30 June 2018
(unless otherwise stated, all unlisted options and performance rights have full vesting rights)
•
•
•
•
3,200,000 options expiring 16 December 2018 and exercisable at A$1.00 each. During the years 2016, 2017 and
2018, 459,500, 225,500 and nil respectively were forfeited resulting in 2,515,000 options remaining at reporting
date. Refer to note 20 (i).
(2,515,000 options were vested at reporting date (2017: 1,618,500)).
1,000,000 options expiring 9 February 2019 and exercisable at A$1.00 each. During the years 2016, 2017 and
2018, nil, 350,000 and nil respectively were forfeited resulting in 650,000 options remaining at reporting date.
Refer to note 20 (ii).
(650,000 options were vested at reporting date (2017: 450,000)).
1,200,000 options expiring 24 November 2020 and are exercisable at various prices as disclosed in note 20 (iii).
(360,000 options were vested at reporting date (2017: nil)).
1,665,000 options expiring 8 Jan 2022 and are exercisable at various prices as disclosed in note 20 (iv).
The above unlisted options do not entitle the holders to participate in any share issue of the Company.
(b) Foreign Currency Translation Reserve
The foreign currency translation reserve for the group records exchange differences arising on translation
of foreign controlled subsidiaries.
20.
SHARE BASED PAYMENTS
The following share-based payment arrangements existed during 30 June 2018:
(i) On 16 December 2014, 3,200,000 options were issued to Australian and Philippine based employees. The options,
which hold no voting or dividend rights have an expiry date of 16 December 2018 and are exercisable at A$1.00 per
option. Under the terms of the Issue the employees would be required to remain in the employment of the Company
at 16 December 2015 to achieve 30% vesting of the options, at 16 December 2016 to achieve 30% vesting of the
options, with full vesting if they remain employees of the Company a year later on 16 December 2017. At reporting
date, all options remain unexercised.
(ii) On 9 February 2015, 1,000,000 options were issued to Australian and Philippine based employees. The options which
hold no voting or dividend rights have an expiry date of 9 February 2019 and are exercisable at A$1.00 per option.
Under the terms of the Issue the employees would be required to remain in the employment of the Company at 9
February 2016 to achieve 30% vesting of the options, at 9 February 2017 to achieve 30% vesting of the options, with
full vesting if they remain employees of the Company a year later on 9 February 2018. At reporting date, all options
remain unexercised.
(iii) On 24 November 2016, 1,200,000 options were issued to Boyd Timler, the company’s current Managing Director,
subject to the rules of Medusa Mining Limited Share Option Plan. The options which hold no voting or dividend rights
have an expiry date of 24 November 2020 and are exercisable as follows:
Tranche Options
Exercise price Valuation per
option
Terms of issue
A
B
C
D
300,000
300,000
300,000
300,000
A$1.00
A$1.25
A$1.50
A$1.75
A$0.200
A$0.170
A$0.147
A$0.128
Under the terms of the issue, the employee would be required to
remain in the employment of the company at 24 November 2017 to
achieve 30% vesting of options, at 24 November 2018 to achieve 30%
vesting of options with full vesting if Mr Timler remains an employee
of the company a year later on 24 November 2019.
The Options were valued using a Black Scholes pricing model. The valuation per tranche was calculated under this
valuation model (using historical share price volatility measures) and applying the following inputs:
o Weighted average life of option - 48 months
o
Share price volatility
- 65%
o
o
Risk free rate
Dividend Yield
- 2.07%
- Nil
(Medusa is currently unlikely to pay a dividend during the life of the Options).
Page 102 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
20.
SHARE BASED PAYMENTS (continued)
(iv)
On 8 January 2018, 1,665,000 options were issued to Australian and Philippine based employees. The options
which hold no voting or dividend rights have an expiry date of 8 January 2022 and are exercisable as follows:
Tranche Options
Exercise price Valuation per
option
Terms of issue
A
B
C
D
416,250
A$1.00
416,250
A$1.25
416,250
A$1.50
416,250
A$1.75
A$0.275
A$0.255
A$0.239
A$0.225
Under the terms of the issue, the employees would be required to
remain in the employment of the company at 8 January 2019 to
achieve 30% vesting of options, at 8 January 2020 to achieve 30%
vesting of options with full vesting if they remain an employee of the
company a year later on 8 January 2021. At reporting date, all options
remain unexercised.
The Options were valued using a Black Scholes pricing model. The valuation per tranche was calculated under
this valuation model (using historical share price volatility measures) and applying the following inputs:
o Weighted average life of option - 48 months
o
Share price volatility
- 99%
Risk free rate
Dividend Yield
o
- 1%
o
- Nil
(Medusa is currently unlikely to pay a dividend during the life of the Options).
1.0000
1.3750
1.0000
-
-
1.1031
1.0000
Share based options
Outstanding at start of year
Granted
Forfeited
Expired
Exercised
2018
2017
Number of options &
performance rights
Weighted average
exercise price (A$)
Number of options &
performance rights
Weighted average
exercise price (A$)
4,365,000
1,665,000
-
-
-
1.1031
1.3750
-
-
-
3,740,500
1,200,000
(575,500)
-
-
Outstanding at year end
Exercisable at year end
6,030,000
3,325,000
1.1782
1.0406
4,365,000
2,091,000
During the year 2018, no options were forfeited (2017: 575,000) and no options expired (2017: nil).
The options outstanding at 30 June 2018 (all of which are unlisted) had a weighted average exercise
price of A$1.1782 and a weighted average remaining contractual life of 20.83 months.
Included under administration expense in the Statement of Profit or Loss and other Comprehensive
Income is US$149,996 (2017:US$586,148) and relates, in full, to equity-settled share-based payment
transactions relating to employees.
Page 103 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
21.
INVESTMENT IN SUBSIDIARIES
The following companies are controlled entities of Medusa Mining Limited as at 30 June 2018:
Controlled Entities
Date of
incorporation
Country of
incorporation
% interest held
2018
2017
Medusa Exploration & Development Corporation
29 May 2003
Philippines
Phsamed Mining Corporation
Medusa Overseas Holding Corporation
23 Apr 2003
Philippines
08 May 2003
Philippines
Philsaga Mining Corporation
17 May 2001
Mindanao Mineral Processing and Refining Corporation
03 Nov 2005
Philippines
Philippines
Komo Diti Traders Limited
23 Jan 2017
Hong Kong
40%
40%
40%
40%
100%
100%
40%
40%
40%
40%
100%
100%
Medusa Mining Limited ("Medusa") holds 40% of the issued shares of Medusa Exploration and Development Corporation
("MEDC"). As Medusa has various agreements in place and pursuant to local statutory provisions, Medusa has effective sole
rights to the economic returns of MEDC and its subsidiary companies. In such circumstances, the assets and liabilities of MEDC
and its subsidiaries have been attributed 100% to the Consolidated Entity.
Page 104 of 123
ORGANISATION CHARTPhilippines entities:- Mindanao Mineral Processing & Refining Corporation ("MMPRC") - Processing Company- Medusa Overseas Holding Corporation ("MOHC") - Holding Company- Medusa Exploration & Development Corporation ("MEDC") - Company providing geological services- Phsamed Mining Corporation ("Phsamed") - Mining and Exploration Company- Philsaga Mining Corporation ("PMC") - Mining and Exploration CompanyHong Kong entity:- Komo Diti Traders Limited ("KDTL") - Trading Company100%Phsamed20%MOHCKDT60%100%100%100%PMCMEDUSA MINING LIMITED80%40%MMPRC3 x Filipino DirectorsMEDCFor personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
22.
RETAINED PROFITS AND ACCUMULATED LOSSES
Retained profit at start of year
Net (loss) attributable to members of Company
Transfer from share option reserve
Retained profits and accumulated losses at the end of year
* Restated - Refer Note 1(k) for further details
23.
NOTES TO STATEMENT OF CASH FLOWS
(a) Reconciliation of cash:
For the purposes of the Statement of Cash Flows, cash includes cash on
hand and short-term deposits at call, net of outstanding bank overdrafts.
Cash at the end of the financial year as shown in the Statement of Cash
Flows is reconciled to the related items in the Statement of Financial Position
as follows:
Cash at bank
Cash on hand
Total cash assets
(b) Reconciliation of profit /(loss) after income tax to net cash
provided by operating activities:
Loss) after income tax
add/(less)-
Non-cash items:
- Depreciation/amortisation
- Retirement Benefit
- Gain on asset disposal
- Exploration expenses written off
- Recognition of share-based expenses
- Impairment expense
- Other write off
- Foreign exchange (gain) / loss
- Bad debts written off
- Income tax deferred
- Income tax credit/(expense)
add/(less) -
Changes in assets & liabilities
- (increase)/decrease in trade & other receivables
- (increase)/decrease in prepayments
- (increase)/decrease in inventories
- (decrease)/increase in trade & other payables
- (increase)/decrease in deferred taxes assets
- increase/(decrease) in deferred taxes liabilities
- increase/(decrease) in exploration & evaluation
Net cash provided by operating activities
Consolidated
2018
US$000
2017
Restated *
US$000
33,998
(55,554)
186
(21,370)
90,379
(56,676)
295
33,998
11,197
1
11,198
11,213
1
11,214
(55,554)
(56,676)
29,232
18,041
488
1
1,186
150
81,100
1
88
-
(8,409)
6,642
54,925
(6,423)
(221)
4,753
1,182
(8,397)
(12)
(1,186)
44,621
498
-
1,645
586
70,800
346
(234)
126
16,635
(24,256)
27,511
14,241
64
7,311
6,099
431
114
(4,453)
51,318
Page 105 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
(c) Restricted Funds
The Group’s total cash assets mentioned above include restricted bank accounts as follows:
(i)
A rehabilitation fund of US$1,130,409 (2017: US$1,113,763) to be used at the end of life of mine for
environmental rehabilitation.
(ii) An employee retirement fund of US$1,303,428 (2017: US$986,040) established to meet employee
entitlements on retirement.
(iii) The Company has a provident fund of US$1,549,867 (2017: US$1,210,707) that is intended to be
used as payment to employees upon retirement, which is unrestricted as to withdrawal.
24.
FINANCIAL RISK MANAGEMENT
(a) Financial Risk Management Policies
The Group’s financial instruments consist mainly of deposits with banks, local money market instruments,
short-term investments, accounts receivable and payable.
The main purpose of non-derivative financial instruments is to raise finance for Group operations.
The Group does not speculate in the trading of derivative instruments.
(i)
Treasury risk management
Senior executives of the Group regularly analyse financial risk exposure and evaluate treasury
management strategies in the context of the most recent economic conditions and forecasts.
The Group’s overall risk management strategy is outlined in the Corporate Governance Statement
in the Director’s Report.
(ii) Financial risk exposures and management
The main risks the Group is exposed to through its financial instruments are interest rate risk, foreign
currency risk, liquidity risk, credit risk and price risk.
Interest rate risk
Interest rate risk is managed by investing cash with major financial institutions in both cash on deposit
and term deposit accounts. Interest rates on major deposits that are re-invested, are at a fixed rate
on a monthly basis.
Price risk
The Group sells its gold produced at spot rate and no forward contracts or hedging is utilised. Whilst
the Group is cognizant of its exposure to fluctuations in the gold price, the current policy of the Board
is not to hedge primarily because the Group produces gold in the current economic environment at
a very low cash cost. The Board’s risk management policy acknowledges that as market factors are
dynamic in nature all risk positions are monitored to ensure that the Group ‘s activities are consistent
with the approach and strategy approved by the Board. The Board therefore regularly reviews the
spot price of gold to consider whether it should adopt any measures to mitigate risk.
Liquidity risk
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate
unutilised borrowing facilities are maintained.
Credit risk
Credit risk refers to the risk that counterparty will default on, its contractual obligations resulting in
financial loss to the Group. The Group has adopted the policy of only dealing with credit worthy
counterparties and obtaining sufficient collateral or other security where appropriate, as a means of
mitigating the risk of financial loss from defaults.
The maximum credit risk on financial assets of the Group which have been recognised in the
Statement of Financial Position, other than investment in shares, is generally the carrying amount,
net of any provisions for impairment.
There are no other material amounts of collateral held as security.
The Company holds bullion in an unallocated account (referred to as “Gold awaiting settlement” in
the Current Receivables of the Statement of Financial Position) with a single reputable refiner.
The consolidated group does not have any other material credit risk exposure to any single
receivable or group of receivables under financial instruments entered into by the consolidated
group.
Page 106 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
24.
FINANCIAL RISK MANAGEMENT (continued)
(a) Financial Risk Management Policies (continued)
(ii) Financial risk exposures and management (continued)
Foreign currency risk
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities
denominated in a currency that is not the entity’s functional currency. The risk can be measured by
performing a sensitivity analysis that quantifies the impact of different assumed exchange rates on the
Group’s forecast cash flows.
Whilst the Group is aware of its exposure to fluctuations in foreign currency, the current policy of the
Board is not to hedge.
(b) Financial instruments
(i)
Financial instrument composition and maturity analysis
The tables below reflect the undiscounted contractual settlement terms for financial instruments of a
fixed period of maturity, as well as management’s expectations of the settlement period for all other
financial instruments. As such, the amounts may not reconcile to the Statement of Financial Position.
Consolidated Group
Weighted average Floating interest
Effective interest
rate
Within 1 Year
Within 1 to 5
Years
Non-Interest
Bearing
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
(%)
(US$000)
Financial Assets
Cash & cash equivalent
0.17
0.32
10,002
4,098
Loans and receivables
-
-
-
-
10,002
4,098
-
-
-
-
-
-
-
-
-
Financial Liabilities
Financial liabilities at amortised cost
Bank Loan - Current
Bank Loan - Non-current
Trade & sundry payables
3.65
3.50
-
3.50
3.73
-
-
-
-
-
-
-
-
-
Receivables are expected to be collected as follows:
Less than 6 months
6 months to 1 year
-
-
-
-
1,196
7,116
11,198
11,214
5,151
1,970
5,151
1,970
6,347
9,086
16,349
13,184
-
-
-
-
6,335
7,172
170
3,740
6,335
7,172
-
-
-
-
-
170
3,740
-
- 24,797 19,570
24,797
19,570
6,335
7,172
170
3,740 24,797 19,570
31,302
30,482
Consolidated
2018
US$000
2017
US$000
5,151
1,970
-
-
5,151
1,970
As at 30 June 2018 and 2017, all receivables were neither past due nor impaired.
Trade and sundry payables are expected to be paid as follows:
Less than 6 months
24,797
19,570
Page 107 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
(ii) Net fair values
The fair value of cash and cash equivalents and non- interest bearing monetary financial assets and
liabilities approximates their carrying value. The fair value of financial assets and financial liabilities is
based upon market prices where a market exists or by discounting the expected future cash flows by
the current interest rates for assets and liabilities with similar risk profiles.
(iii) Sensitivity analysis
The Group has performed sensitivity analysis relating to its exposure to interest rate risk, foreign
currency risk and price risk at reporting date. This sensitivity analysis demonstrates the effect on the
current year results and equity, which could result from a change in these risks.
Interest Rate Sensitivity Analysis
At 30 June 2018, the effect on profit and equity as a result of changes in the interest rate, with all
other variables remaining constant would be as follows:
Change in profit/(loss) before income tax/equity
- increase in interest rate by 100 basis points
- decrease in interest rate by 100 basis points
Consolidated
2018
US$000
90
(90)
2017
US$000
55
(55)
Foreign currency risk sensitivity analysis
Foreign exchange risk arises from future commercial transactions and recognised assets and
liabilities denominated in a currency that is not the consolidated entity’s functional currency. The
consolidated entity operates internationally and is exposed to foreign exchange risk arising from the
United States dollar. No programs for hedging foreign exchange risk were implemented by the
consolidated entity in the 2017 and 2018 financial years.
The following table shows the foreign currency risk on the financial assets and liabilities of the Groups
operations denominated in currencies other than the functional currency of the operations.
Consolidated
2018
Functional currency of Group Entity
Australian Dollar
US Dollar
Philippine Peso
Total
2017
Functional currency of Group Entity
Australian Dollar
US Dollar
Philippine Peso
Total
Change in profit /(loss) before income tax/equity:
- strengthening of A$ to US$ by 15%
- strengthening of Philippine Peso to US$ by 15%
Total
- weakening of A$ to US$ by 15%
- weakening of Philippine Peso to by 15%
Total
Net Financial Assets/(Liabilities) in US$000
A$
US$
PHP
TOTAL US$
-
-
-
-
-
-
-
-
531
-
3,420
3,951
457
-
204
661
-
128
-
128
-
175
-
175
531
128
3,420
4,079
457
175
204
836
Consolidated
2018
US$000
2017
US$000
(69)
(512)
(581)
69
512
581
(60)
6
(54)
60
(6)
54
Page 108 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
24. FINANCIAL RISK MANAGEMENT (continued)
(b) Financial instruments (continued)
(iii) Sensitivity Analysis (continued)
Price risk sensitivity analysis
The policy of the Company is to sell gold at spot price and has not entered in hedging contracts. The
Company’s revenues were exposed to fluctuations in the price of gold. If the average selling price of gold
of US$1,293 (2017: US$1,256) for the financial year had increased/decreased by 10% the change in the
profit before income tax for the consolidated group would have been an increase/decrease of US$12.391
million (2017: US$9.947 million). The above interest rate, foreign exchange rate and price risk sensitivity
analysis has been performed on the assumption that all other variables remain unchanged.
25. COMMITMENTS
(a) Exploration commitments:
The Group has certain obligations to perform minimum exploration work to
maintain rights of tenure to its exploration tenements. These obligations may
vary from time to time in accordance with tenements held and are expected to
be fulfilled in the normal course of operations of the Group so as to avoid
forfeiture of any tenement.
These obligations are not provided in the financial report and are payable:
-
-
no later than 1 year
1 year or later and no later than 5 years
Total exploration commitments
(b) Operating lease expense commitments:
Non-cancellable operating lease contracted for but not capitalised in the
financial statements.
The Group leases office premises an operating lease expiring in July 2019.
Under the terms of the operating leases, the Group is provided with a right of
renewal and the lessor has the right to increments in lease payments on an
annual basis based on movements in the Consumer Price Index.
These obligations are not provided in the financial report and are payable:
-
-
no later than 1 year
1 year or later and no later than 5 years
Total operating lease expense commitments
(c) Other contractual commitments:
(ii) On 26 March 2008, Philsaga was granted Mineral Production Sharing
Agreement (“MPSA”) number 262-2008-XIII over the Co-O mine. Under
the terms of the Agreement Philsaga is committed to mine related
expenditure in the Philippines as follows:
These obligations are not provided in the financial report and are payable:
-
-
no later than 1 year
1 year or later and no later than 5 years
Total other contractual commitments
(iii)
On 24 November 2009 Philsaga was granted Mineral Production
Sharing Agreement (“MPSA”) number 299-2009-XIII over the Co-O
mine. Under the terms of the Agreement Philsaga is committed to
mine related expenditure in the Philippines as follows:
These obligations are not provided in the financial report and are payable:
-
-
no later than 1 year
1 year or later and no later than 5 years
Total other contractual commitments
Consolidated
2018
US$000
2017
US$000
141
1,134
1,275
206
1,079
1,285
63
-
63
54
214
268
186
223
409
65
67
132
160
216
376
80
353
433
Page 109 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
26. RELATED PARTIES
Related parties’ transactions of Medusa Mining Limited fall into the following categories:
Key Management Personnel related parties
The following were key management personnel of the Group at any time during the reporting period and
unless otherwise indicated were key management personnel for the entire period.
Directors
Non-Executive Directors:
Andrew Teo, Chairperson;
Ciceron Angeles (retired from the Board on 31 October 2017);
Roy Daniel; and
Peter Hepburn-Brown
Executive Directors:
Mr Boyd Timler, Managing Director; and
Mr Raul Villanueva, President Philsaga Mining Corporation.
Executives
Peter Alphonso, Company Secretary/ Chief Financial Officer;
David McGowan, Chief Operating Officer; and
James Llorca, General Manager, Geology & Resources.
Details of Key Management Personnel’s remuneration, shareholdings and option holdings are set out in
the Remuneration Report section of the Directors’ Report.
Key management personnel compensation:
Short term employee benefits
Post-employment benefits
Long-term benefits
Equity-settled share based payments
Total
Consolidated
2018
US$000
2017
US$000
1,887
1,644
74
6
226
85
7
194
2,193
1,930
Detailed remuneration disclosures are provided in the remuneration section of the Directors’ report.
27. EVENTS SUBSEQUENT TO REPORTING DATE
Subsequent to Balance Date, Mr Boyd Timler resigned as Managing Director of Medusa on 06 July 2018
(refer ASX announcement dated 15 June 2018); and
On 5 July 2018 the Company announced that it had entered into an earn in agreement regarding earn in
of up to 90% in two exploration projects in Queensland Australia. The earn in requires the Company to
manage and fund exploration programs through to completion of a Pre -Feasibility Study. The Company
must spend a combined minimum of A$1 million on both projects before it is able to withdraw.
There has not arisen in the interval between the end of the financial year and the date of this report any
other item, transaction or event of a material and/or unusual nature likely, in the opinion of the Directors of
the Company, to affect significantly the operations of the Group, the results of those operations, or the
state of affairs of the Group in subsequent financial years.
Page 110 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
28. SEGMENT INFORMATION
The Consolidated Group has identified its reportable operating segments based on the internal management
reports that are reviewed and used by the Managing Director/Chief Executive Officer (the chief operating
decision maker) and his management team in assessing performance and in determining the allocation of
resources.
The Group segments are structured as Mine, Exploration and Other. Currently the only operational mine is the
Co-O mine. Other incorporates the Parent Entity’s activities
Segment Result, Segment Assets and Segment Liabilities
The measurement of segment results is in line with the basis of information presented to management for
internal management reporting purposes.
Segment Result is based on the net of revenues and expenditure corresponding to the specific segment.
Segment Revenues represent gold and silver sales at spot prices.
Segments Assets are allocated to segments based on their nature and physical location.
Segment Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability
and the operations of the segment. Segment Liabilities include trade and other payables.
The following items of revenue, expenses, assets and liabilities are not allocated to operating segments, as they
are not considered part of the core operations of any segment:
-
-
-
-
income tax expense;
gain on disposal of assets;
deferred tax assets and liabilities;
interest revenue;
-
intercompany receivables and payables.
12 months to June 2018:
Segment Revenue
Reconciliation of segment revenue to group revenue
add:
Interest revenue
Group revenue
Segment Result
Reconciliation of segment result to group result:
add back:
Gain on disposal of asset
Other revenue
Interest revenue
Other
less:
Depreciation
Amortisation
Exploration write off
Impairment
Income tax expense
Group loss
Segment Assets
Mining
Exploration
Gold Trading
Other
Total
US$000
US$000
US$000
US$000
US$000
124,506
124,506
(287,283)
(65)
123,857
(5,347)
(168,838)
87
87
124,593
2
3,685
25,529
1,186
81,100
87
(88)
16
1,767
87
(88)
3,703
25,529
1,186
81,100
1,767
(55,554)
102,374
79
4,044
2,367
108,864
Reconciliation of segment asset to group assets:
plus: Deferred tax assets
10,059
Total group assets
Segment Liabilities
31,239
23
3,476
1,110
35,848
Reconciliation of segment liabilities to group liabilities
plus: Deferred liabilities
232
Total group liabilities
232
36,080
Page 111 of 123
10,059
118,923
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
12 months to June 2017:
Mining
Exploration
Gold Trading
Other
Total
US$000
US$000
US$000
US$000
US$000
Segment Revenue
80,322
19,461
99,783
Reconciliation of segment revenue to group revenue
add:
Interest revenue
Other
Group revenue
Segment Result
Reconciliation of segment result to group
result:
add back:
Gain on disposal of asset
Other revenue
Interest revenue
less:
Depreciation
Amortisation
Exploration write off
Impairment
Income tax expense
Group loss
Segment Assets
(163,101)
(25)
19,252
4,025
(139,849)
74
234
100,091
1
2,290
15,738
1,645
70,800
234
74
12
(7,621)
234
74
2,303
15,738
1,645
70,800
(7,621)
(56,676)
167,088
82
5,581
944
173,695
Reconciliation of segment asset to group
assets:
plus: Deferred tax assets
1,662
Total group assets
Segment Liabilities
1,662
175,357
33,901
7
30
727
34,665
Reconciliation of segment liabilities to group liabilities
plus: Deferred liabilities
245
Total group liabilities
245
34,910
Revenue and non-current assets by geographical region
Australia
Philippines
Hong Kong
US$000
US$000
US$000
Total
US$000
12 months to June 2018:
Segment Revenue
Non-Current Assets
12 months to June 2017:
Segment Revenue
Non-Current Assets
-
127
-
110
-
124,506
53,816
-
124,506
53,943
80,322
112,142
19,461
-
99,783
112,252
In accordance with AASB 8 disclosure requirements Non-Current Assets shown in geographical information
include tangible and intangible assets but exclude financial instruments, deferred tax assets, post-employment
benefit assets and rights arising under insurance contracts.
The Group sells its gold on the open market. Selection of a customer is at the Group’s discretion and there is
no commitment to exclusive sales to a particular customer. During the financial year ended 30 June 2018, all
of the Group's revenues depended on a single customer (2017:100%).
Page 112 of 123
For personal use only NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
29. PARENT COMPANY INFORMATION
2018
US$000
2017
US$000
2,241
30,088
1,110
1,110
767
30,829
727
727
28,978
30,102
102,902
102,902
994
11,894
(44,544)
(42,269)
1,030
11,894
(43,455)
(42,269)
28,977
30,102
(1,275)
(1,275)
(1,381)
(791)
Parent Entity:
Current Assets
Total Assets
Current Liabilities
Total Liabilities
Net Assets
Issued capital
Option premium reserve
Foreign exchange reserve
Accumulated losses
Dividends paid
Total Equity
(Loss) for the year
Total Comprehensive (Loss)
30. COMPANY DETAILS
The registered office and principal place of business of the Company is:
Suite 10
100 Mill Point Road
South Perth
Western Australia 6151
Page 113 of 123
For personal use only DIRECTOR’S DECLARATION
for the year ended 30 June 2018
1.
In the opinion of the Directors’ of Medusa Mining Limited:
a) The consolidated financial statements and notes of Medusa Mining Limited are in accordance with the
Corporations Act 2001, including:
(i) Giving a true and fair view of its 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 (including the Australian Accounting Interpretations), the
Corporations Regulations 2001 and other mandatory professional reporting requirements: and
b) There are reasonable grounds to believe that Medusa Mining Limited will be able to pay its debts as and when
they become due and payable.
2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
Chairman and Chief Financial Officer for the financial year ended 30 June 2018.
3. Note 1 confirms that the consolidated financial statements also comply with International Financial Reporting
Standards.
Signed in accordance with a resolution of the Directors
Andrew Teo
Chairperson
Dated the 29th day of August 2018
Page 114 of 123
For personal use only Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Medusa Mining Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Medusa Mining Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2018, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
Page 115 of 123
For personal use only 30 June 2017 Disclaimer of opinion – prior period error
Key audit matter
How the matter was addressed in our audit
The financial report of the Group for the year ended 30
Our audit procedures to address the key audit matter
June 2017 was audited by another auditor who
included, but were not limited to
expressed a disclaimer of opinion dated 29 September
2017 on that financial report.
(cid:120)
discussing with management the detailed
process and steps taken to identify and
The first element of the disclaimer of opinion related
quantify the prior period error;
to the auditor being unable to confirm or verify by
alternative means the completeness and accuracy of
the restatements for the years ended 30 June 2015 and
30 June 2016 assessed by the directors and disclosed as
a prior period error in the financial statements for the
year ended 30 June 2017.
(cid:120)
verifying an 80% coverage sample of
capitalised exploration and development
expenditure for the years ended 30 June 2015
and 30 June 2016 by the Group’s Philippine
auditors obtaining a detailed listing of all
supplier invoices accounted for by job code in
The restatements related to the reclassification
these years and performing the following:
between capitalised exploration expenditure and
capitalised development expenditure.
(cid:120)
testing that the amount of exploration
and development expenditure incurred
We considered this to be a key audit matter due to the
had been appropriately classified to the
significance of the reclassification of these assets to
correct project code by reviewing job
the Group, and the risk that we would be unable to
coding, job description and manager
obtain sufficient appropriate audit evidence to remove
approval of the expense coding;
the disclaimer of opinion from our audit report at 30
June 2018.
(cid:120)
vouching exploration and development
expenditure additions to supporting third
party documentation (including supplier
invoices, contracts, drilling reports);
(cid:120)
selecting a sub-sample from the Group’s
Philippine auditor’s sample of testing of
capitalised exploration and development
expenditure and verifying to supporting
documentation for accuracy.
(cid:120)
reviewing expenses relating to capitalised
development expenditure and ensuring
the amounts were validly capitalised and
appropriately classified as development
expenditure;
(cid:120)
comparing the outcome of the above
procedures to disclosure made by
management in the financial report at 30 June
2017.
As a result of the above, this matter has now been
resolved and our audit opinion for 30 June 2018 is not
modified in respect of this matter.
Page 116 of 123
For personal use only 30 June 2017 Disclaimer of opinion - impairment
Key audit matter
How the matter was addressed in our audit
The financial report of the Group for the year ended 30
Our audit procedures to address the key audit matter
June 2017 was audited by another auditor who
expressed a disclaimer of opinion dated 29th September
2017 on that financial report.
The second element of the disclaimer of opinion
related to the auditor being unable to determine the
portion of the impairment expense recognised in the 30
June 2017 financial statements which could be
attributable to the prior financial year.
We considered this to be a key audit matter due to the
significance of the impairment expense in the
comparative year ended 30 June 2017, and the risk
that we would be unable to obtain sufficient
appropriate audit evidence to remove the disclaimer of
opinion from our audit report at 30 June 2018.
included, but were not limited to:
(cid:120)
(cid:120)
reviewing working paper files at 30 June 2017 of
the predecessor auditor;
reviewing the impairment models prepared by
management at 30 June 2016 and 30 June 2017
and reviewing the reasonableness of the model
inputs including gold price, forecast ounces
produced, forecast gold price and costs;
(cid:120)
discussing with management reasons relating to
the timing of the impairment expense, primarily
relating to delays in sinking of the new E15 shaft,
delays in mine development and production, and
changes in other model inputs;
(cid:120)
corroborating the above with the management of
the Group’s Philippine entities including a visit to
the CO-O mine site;
(cid:120)
comparing the timing of events to
announcements made by the Group to the
Australian Securities Exchange;
(cid:120)
consulting with BDO’s accounting technical team
to confirm the Group impairment model meets
the requirements of the Accounting Standard
AASB136 and the impairment model supports the
impairment expense recognised in the 30 June
2017 financial statements.
As a result of the above, this matter has now been
resolved and our audit opinion for 30 June 2018 is not
modified in respect of this matter.
Page 117 of 123
For personal use only 30 June 2017 Disclaimer of opinion – Carrying value of exploration and evaluation expenditure
Key audit matter
How the matter was addressed in our audit
The financial report of the Group for the year ended 30
Our audit procedures to address the key audit matter
June 2017 was audited by another auditor who
included, but were not limited to:
expressed a disclaimer of opinion dated 29 September
2017 on that financial report.
(cid:120)
obtaining and reviewing management’s workings
relating to the change in accounting policy and
The third element of the disclaimer of opinion related
ensuring that the change has been effected 1
to the directors not undertaking an impairment
July 2017 whereby the capitalised exploration
assessment in line with Accounting Standard AASB 136
and evaluation expenditure balance brought
Impairment of Assets in respect of the exploration and
forward to 30 June 2017 has been accounted for
evaluation assets recognised in accordance with
retrospectively and reflected against retained
Accounting Standard AASB 6 Exploration for and
earnings;
Evaluation of Mineral Resources.
(cid:120)
testing that all exploration and evaluation
We considered this to be a key audit matter due to the
expenditure incurred during the year ended 30
significance of the amount of capitalised exploration
June 2018 has been expensed to the Statement of
and evaluation expenditure, and the Group’s
Profit and Loss and Other Comprehensive Income;
announcement to the ASX on 13 December 2017 to
and
change its accounting policy to expense all exploration
and evaluation expenditure as incurred, rather than it
being capitalised in the Statement of Financial
Position.
(cid:120)
determining whether the change in accounting
policy has been formalised and reviewing the
adequacy of the related disclosures in note 1(k)
in the financial report at 30 June 2018.
As a result of the above, this matter has now been
resolved and our audit opinion for 30 June 2018 in not
modified in respect of this matter.
Impairment assessment of the Group’s Co-O mining operations (CGU) 30 June 2018
Key audit matter
How the matter was addressed in our audit
The Group’s carrying value of its Co-O mining
We evaluated management’s impairment model for
operations (CGU) is included in property, plant and
the Co-O mining operations (CGU) by challenging the
equipment (note 10) and development expenditure
key estimates and assumptions used by management
(note 11).
Management identified indicators of impairment arising
in arriving at their assessment. Our work included
but was not limited to the following procedures:
from a delay in a capital works project at the CO-O
(cid:120)
analysing management’s gold price assumptions
mine, increased expected future costs of production
against external market information and trends,
and a reduction in the group’s market capitalisation
to determine whether a significant change would
relative to the carrying value of non-current assets.
impact the value of the asset;
Therefore management performed an impairment
assessment using a value-in-use discounted cash flow
model of the Group’s Co-O mining operations (CGU)
and, as a result, recognised an impairment loss during
(cid:120)
(cid:120)
the year as disclosed in note 12.
performing a site visit to the CO-O mine;
challenging the appropriateness of management’s
reserves estimate by assessing the significant
assumptions, methods and source data used by
Page 118 of 123
For personal use only Key audit matter
How the matter was addressed in our audit
We considered this to be a key audit matter due to the
management’s expert in estimating the reserves.
significant judgements and estimates used by
This included both meeting with management’s
management in assessing the discounted future cash
expert and assessing the competency and
flows as disclosed in note 12.
objectivity of management’s expert;
(cid:120)
(cid:120)
evaluating forecasted production and operating
costs against the Board approved mine plan;
challenging the appropriateness of management’s
discount rate used in the impairment model in
conjunction with our internal valuation experts;
(cid:120)
challenging management’s sensitivity assessment
by performing our own sensitivity analysis in
respect of the key assumptions to indicate if
there would be a significant change to the value
of the asset.
(cid:120)
assessing the adequacy of the related disclosures
in note 12 to the financial report.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2018, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Page 119 of 123
For personal use only Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included on pages 7 to 17 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of Medusa Mining 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.
BDO Audit (WA) Pty Ltd
Neil Smith
Director
Perth, 29 August 2018
Page 120 of 123
For personal use only ADDITIONAL SHAREHOLDER INFORMATION
for the year ended 30 June 2018
The shareholder information set out below was applicable as at 15 September 2018.
1.
Shareholding
(a)
Distribution of shareholders and shares
Distribution
1
1,001
5,001
- 1,000
- 5,000
- 10,000
10,001
- 100,000
1,000,000 and over
Total
Number of
shareholders
Number of shares
1,296
1,369
477
689
105
3,936
594,228
3,692,101
3,649,059
20,807,533
179,051,380
207,794,301
The number of shareholdings held in less than marketable parcels is 1,497
(b)
Voting rights
The voting rights attaching to ordinary shares are, on a show of hands, every member present in person or
by proxy shall have one vote and upon a poll, each share shall have a vote.
(c)
Twenty largest shareholders
Total number of ordinary shares on issue - 207,794,301
Name of shareholders
1.
2.
3.
4.
5.
6.
7.
8.
9.
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
Merrill Lynch (Australia) Nominees Pty Limited
J P Morgan Nominees Australia Limited
Zero Nominees Pty Ltd
Peter Alfred Ternes
BNP Paribas Nominees Pty Ltd
Amalgamated Dairies Limited
Miningnut Pty Ltd
10.
Berne No 132 Nominees Pty Ltd <594138 A/C>
11. Mr Samuel Gonzales Afdal
12. Mr Carl Eric Holt & Mrs Lorraine Holt
13.
14.
15.
National Nominees Limited
Neweconomy Com Au Nominees Pty Limited <900 Account>
National Nominees Limited
16. Mr Peter Alfred Ternes
17.
18.
19.
20.
BNP Paribas Noms Pty Ltd
Riverlow Pty Ltd
Ozlexa Pty Ltd
Piama Pty Ltd
Total: Top 20 holders of Ordinary Fully Paid Shares
Total: Remaining Holder Balance
Total: Ordinary Fully Paid Shares
(d)
On market buy back
There is no current on-market buy back.
Number of
shares held
52,836,427
27,150,789
23,555,389
19,689,284
6,053,305
4,320,00
3,852,752
3,296,881
2,850,000
2,591,880
2,260,000
1,757,907
1,591,183
1,548,804
1,360,484
1,350,000
1,211,898
932,732
900,000
850,000
(%)
25.43
13.07
11.34
9.48
2.91
2.08
1.85
1.59
1.37
1.25
1.09
0.85
0.77
0.75
0.65
0.65
0.58
0.45
0.43
0.41
159,959,715
47,834,586
76.98
23.02
207,794,301
100.00
Page 121 of 123
For personal use only ADDITIONAL SHAREHOLDER INFORMATION
for the year ended 30 June 2018
(e)
Substantial shareholders
An extract of the Company’s register of substantial shareholders is set out below:
Name
Ruffer LLP
Arbiter Partners
Ordinary shares held
Number of shares
Percentage
28,934,848
27,765,486
13.92%
13.36%
2.
UNQUOTED EQUITY SECURITIES AND RESTRICTED SECURITIES
The following classes of unquoted equity securities and restricted securities are on issue:
Type of securities
Number of securities
% held
•
•
•
2,515,000 unquoted options to subscribe for ordinary shares
exercisable at $1.00 per share, with an expiry date of 16
December 2018
Persons holding 20% or more;
650,000 unquoted options to subscribe for ordinary shares
exercisable at $1.00 per share, with an expiry date of 9 February
2019
Persons holding 20% or more;
-
-
Raul Conde Villanueva
Gary Raymond Powell
500,000
150,000
77%
23%
1,200,000 unquoted options (comprising of 4 equal tranches of
300,000 options per tranche) to subscribe for ordinary shares
exercisable at the following tranche prices of $1.00, $1.25, $1.50
and $1.75 per share respectively, with an expiry date of 24
February 2020
Persons holding 20% or more;
Boyd Walter Timler
1,200,000
100%
3.
The name of the Company Secretary is:
Mr Peter Alphonso
4.
The Principal Registered Office of the Company is:
Suite 10,
100 Mill Point Road
South Perth, WA 6151
Australia
Telephone: +618 9474 1330
Facsimile: +618 9474 1342
Email:
admin@medusamining.com.au
5.
The Register of the Company’s securities is held at the following address:
Computershare Investor Services Pty Limited
Level 11
172 St George’s Terrace
Perth, WA 6000
Australia
Telephone: +618 9323 2000
Facsimile: +618 9323 2033
Investor enquiries: 1300 557 010
6.
Stock Exchange Listings
Quotation has been granted for all the ordinary shares of the Company on:
The Australian Stock Exchange Limited (“ASX”)
- Trading quote: MML
Page 122 of 123
For personal use only TENEMENT SCHEDULE
APPENDIX B: TENEMENT SCHEDULE (as at 30 June 2018)
Registered
Holder
Company’s Interest at
Royalty 1
Area (hectares) at
30 Jun 2017
30 Jun 2018
30 Jun 2017
30 Jun 2018
Name
Tenement ID
Co-O Mine
MPSA 262-2008-XIII
Co-O
MPSA 299-2009-XIII
APSA 00012-XIII
APSA 00088-XIII
APSA 00098-XIII
APSA 00099-XIII
Saugon
EP 017-XIII
Tambis
Apical
Corplex
EPA 00066-XIII
EPA 00069-XIII 2
EPA 00087-XIII 2
MPSA 344-2010-XIII
APSA 00028-XIII
APSA 00054-XIII
APSA 00056-XIII
APSA 00077-XIII
EPA 00186-XIII
PMC
PMC
BMMRC
Phsamed
Philcord
Philcord
PMC
PMC
Phsamed
PMC
Philex
Apmedoro
Corplex
Corplex
Corplex
Corplex
Sinug-ang
EPA 00114-XIII
Salcedo/PMC
NOTES:
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Earning 70% (JV)
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
-
1% NPI
1% NPI
-
-
-
-
7% NSR
-
3% NSR
-
4% GSR
3% NSR
-
2,539
2,200
340
4,742
507
592
3,132
6,769
2,519
87
6,208
1, 235
2,118
162
810
7,111
190
2,539
2,200
340
4,742
507
592
3,132
6,769
2,519
87
6,208
1,235
2,118
162
810
7,111
190
1. Royalties payable to registered holders, aside from the prescribed royalties payable to the Philippine government and the Indigenous people.
2. Awaiting for approval and confirmation by MGB of area reduction.
ABBREVIATIONS:
Tenement Types
MPSA
Granted Mineral Production Sharing Agreement
EP
Granted Exploration Permit
APSA
EPA
Application for Mineral Production Sharing Agreement
Application for Exploration Permit
Registered Holders
PMC
Philsaga Mining Corporation
BMMRC
Base Metals Mineral & Resources Corporation
Philex
Philex Gold Philippines Incorporated
Phsamed
Phsamed Mining Corporation
Das-Agan
Das-Agan Mining Corporation
Philcord
Corplex
Royalty
NPI
NSR
Mindanao Philcord Mining Corporation
Apmedoro
APMEDORO Mining Corporation
Corplex Resources Incorporated
Salcedo
Neptali P. Salcedo
Net Profit Interest
Net Smelter Royalty
GSR
Gross Smelter Royalty
Page 123 of 123
For personal use only MEDUSA
MEDUSA MINING LTD
Suite 10, Mill Point Road
South Perth
Western Australia 6151
PO Box 122
South Perth
Western Australia 6951
Telephone: +618 9474 1330
Facsimile: +618 9474 1342
Email: admin@medusamining.com.au
Web: www.medusamining.com.au
For personal use only