ANNUAL
REPORT
2020
CONTENTS
Contents
Corporate Directory
Highlights of 2020 Financial Year
Chairperson’s Review
Review of Operations
Corporate Governance
Directors’ Report
Auditor’s Independence Declaration
Contents of Financial Statements
Consolidated Statement of Profit or Loss and other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Shareholder Information
Tenement Schedule
Page number
1
2
4
6
43
53
76
77
78
79
80
81
82
121
122
126
129
CORPORATE DIRECTORY
DIRECTORS
Andrew Boon San Teo
Non-Executive Chairperson
Roy Philip Daniel
Non-Executive Director
Simon Jon Mottram
Non-Executive Director
Raul Conde Villanueva
Executive Director
COMPANY SECRETARY
Peter Stanley Alphonso
EXECUTIVE MANAGEMENT
Raul Conde Villanueva
President Philippines subsidiaries
Patrick Warr
Chief Financial Officer
James Pingul Llorca
General Manager, Geology & Resources
PRINCIPAL & REGISTERED OFFICE
Suite A, Level 1
1 Preston Street
Como
Western Australia 6152
Postal address:
PO Box 122
South Perth
Western Australia 6951
Telephone: + 618 9474 1330
Email: admin@medusamining.com.au
Website: www.medusamining.com.au
AUSTRALIAN BUSINESS NUMBER
ABN 60 099 377 849
STOCK EXCHANGE LISTING
Australian Stock Exchange Limited (ASX)
Trading Code: MML
1
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
require
information
Shareholders who
about
dividend
their
payments or related administrative matters
should contact
the Company’s share
registry.
shareholdings,
HIGHLIGHTS OF 2020 FINANCIAL YEAR
Medusa Mining Limited (“Medusa”or the “Company”), presents its audited financial results for the
year ended 30 June 2020 (“FY2020”), with a statutory after-tax profit of US$35.4 million.
FFFYYY222000222000 HHHIIIGGGHHHLLLIIIGGGHHHTTTSSS:::
EBITDA
US$61.6M
20%
NPAT
US$35.4M
or US$372/oz
EPS
US$0.17
A$0.253/share*
FFiinnaanncciiaallss
▪ Revenues of US$147.8 million compared to US$129.3 million for the previous year,
an increase of 14%;
▪ Medusa is an unhedged gold producer and received an average gold price of
US$1,581 per ounce from the sale of 95,142 ounces of gold for the year (FY2019:
102,500 ounces at US$1,259 per ounce) from its Co-O Gold Mine in the Philippines;
▪ Earnings before interest, tax, depreciation and amortisation (“EBITDA”) of US$61.6
million (FY2019: EBITDA of US$51.4M);
▪ Basic earnings per share (“EPS”) of US$0.170 based on NPAT of US$35.4 million
(FY2019: EPS of US$0.176); and
▪ The Company had total cash and cash equivalent in gold on metal account of US$47.1
million at year end (2019: US$23.4M).
Description
Unit
FY2020
FY2019
Variance
Revenues
EBITDA
NPAT
EPS (basic)
US$
US$
US$
US$
$147.8M
$129.3M
$61.6M
$35.4M
$0.170
$51.4M
$36.5M
$0.176
$18.5M
$10.2M
($1.1M)
($0.006)
(%)
14%
20%
(3%)
(3%)
During the period,
▪ Depreciation of fixed assets and amortisation of capitalised mine development,
right of use asset and mine exploration was US$21.6 million (FY2019: US$18.8M);
▪ US$6.5 million was expended on capital works associated with the new shaft
construction and infrastructure, mine expansion and sustaining capital at the mine
and mill (FY2019: US$6.9M);
▪ Exploration expenditure, inclusive of underground diamond drilling was US$5.6
million (FY2019: US$8.9M);
▪ Capitalised mine development costs totalled US$23.7 million for the year (FY2019:
US$27.3M); and
▪ Corporate overheads of US$7.1 million (FY2019: US$8.7M).
2
HIGHLIGHTS OF 2020 FINANCIAL YEAR
OOppeerraattiioonnss
Description
Ore mined
Ore milled
Head grade
Gold recovery
Gold produced
Cash costs (*)
Gold sold
Unit
FY2020
FY2019
Variance
(%)
WMT
DMT
g/t
%
572,666
606,675
(34,009)
513,945
544,601
(30,656)
5.99
95.30
6.28
(0.29)
94.75
0.55
(6%)
(6%)
(5%)
1%
ounces
95,057
103,307
(8,250)
(8%)
US$/oz
$684
$546
($138)
(25%)
ounces
95,142
102,500
(7,358)
(7%)
Average gold price received US$/oz
$1,581
$1,259
$322
26%
(*) net of development costs and includes royalties and local business taxes.
The Company produced 95,057 ounces of gold for the year at the Co-O Mine, compared
to 103,307 ounces in FY2019 at an average recovered grade of 5.99 g/t gold (FY2019:
6.28 g/t gold).
Average cash costs was US$684 per ounce, inclusive of royalties and local business
taxes, which was higher than the previous year’s average cash costs of US$546 per
ounce, and All-in-Sustaining-Costs (“AISC”) for the year was US$1,132 per ounce of gold
(FY2019: US$1,045 per ounce).
FFYY22002211 GGuuiiddaannccee
The production guidance from the C-O Mine for Financial Year 2021 (“FY2021”) is
expected to be between 90,000 ounces to 95,000 ounces at AISC of between US$1,200
to US$1,250 per ounce of gold produced.
The slight increase in year-on-year AISC for FY21 has been anticipated, after taking into
account the ongoing impact of COVID-19 restrictions to people movement, logistics and
associated costs.
CCoorrppoorraattee
Dividend
No dividends were declared nor paid during the year.
Board Appointments:
Mr Simon Mottram was appointed as a Non-Executive Director on 11 June 2020.
Management changes:
Mr David McGowan, CEO, ceased employment on 20 July 2020. Non-Executive Chairman Mr
Andrew Teo assumed the role of Interim CEO.
3
CHAIRPERSON’S REVIEW
Dear Shareholder,
It is my pleasure to present to you the Annual Report for the 2020 Financial Year
(“FY2020”) following a period of consistent performance at Medusa Mining Limited
(“Medusa” or the “Company”).
In FY2020 we met our production guidance by producing 95,057 ounces of gold from our
Co-O Mine in the Philippines after successfully navigating a number of operating
challenges.
Through 12 months of focus and commitment across our team, we advanced our
strategy as a high-grade, unhedged, sustainable and self-funding gold producer
focussed on growth in the Asia-Pacific region.
By the end of FY2020, several milestones supporting this goal were achieved:
• Delivering a steady net profit after tax of US$35.4 million at an increased NPAT
margin of US$372 per ounce;
• Cost management saw costs increase slightly ahead of FY2020 guidance with All-
In-Sustaining-Costs of US$1,132 per ounce;
• Cash balance more than doubled year-on-year to US$47.1 million;
• Ore Reserves at Co-O stood at 332,000 ounces at a grade of 6.27 g/t gold at the
end of calendar 2019 after accounting for annual mine depletion of 104,300
ounces from a base of 350,000 ounces at the end of 2018;
• The processing mill continued to be a reliable performer, achieving average gold
recoveries of 95.3%;
• Careful management of the COVID-19 pandemic at the Co-O Mine with no active
cases recorded at site during the period;
• Enhancement of our licence to operate by continuing our high community and
environmental standards; and
• Continued project evaluation in the Asia Pacific region with the goal of achieving
operational diversification.
Despite the overall consistent performance of the business across during the year,
productivity and volume impacts were unavoidable due to the onset of COVID-19
regional restrictions. This limited the movements of people and supplies and saw the
temporary interruption of operations for three days in April 2020.
Underground development, mined ore and milled ore were all impacted in the June
quarter 2020 compared to the previous three quarters, but our Co-O team has continued
to perform admirably throughout.
These impacts and the ore depletion of areas higher in the mine saw a number of
existing shafts and portals placed on care and maintenance during the period. Mine
infrastructure has been largely consolidated around the L8 and E15 shafts.
As part of Medusa’s strategy to ensure longevity of the Co-O mine and improve
operational efficiencies, in January 2020 the Company completed a study of the
preferred option to access deeper areas of the mine below Level 12.
The study concluded the establishment of a decline would extend mine life and enhance
operational and exploration flexibility through an investment of US$48 million over 36
months.
4
CHAIRPERSON’S REVIEW
The Company commenced engagement with experienced underground mining
contractors about the decline development in the lead up to the impacts of the COVID-19
pandemic, with the project placed on hold until operating conditions stabilise.
Drilling within the Co-O Mine continued throughout the period with the aim of expanding
and extending the Resource and Reserve base of the operation.
Mineral Resources of 1.27 million ounces and Ore Reserves of 332,000 ounces as at the
end of December 2019 were released as part of the annual update in April 2020. It
continues our long record of replenishing the mine life of Co-O and leaves a good
runway for future growth.
In June 2020, Mr David McGowan tendered his resignation as Chief Executive Officer
(“CEO”) and Mr Simon Mottram joined the Board as a Non-Executive Director.
Mr Mottram is a geologist with over 25 years’ experience predominantly in base and
precious metals. Mr Mottram has held both executive and senior management roles with
several successful mining companies both in Australia and abroad, including most
recently at Avanco Resources which was acquired by OZ Minerals in 2018.
Mr McGowan left Medusa after three and a half years with the Company and fostered a
strong culture of operational planning, efficiency and meeting targets which will continue
into the future. We wish Mr McGowan best wishes for the future.
As your Chairman, I also assumed the role of Interim CEO while the search for a new
CEO is undertaken, a process which has been delayed due to the inability to facilitate
travel of potential candidates to the Philippines. Therefore the process to appoint a
permanent CEO will continue into FY2021.
I am confident FY2020 was a period in which we continued to make positive progress on
the sustainability and strength of the business.
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 FY2021.
Yours sincerely,
Andrew Teo
Chairman
5
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
o Co-O Underground Exploration
- Resource and Definition Drilling
o Co-O Surface Exploration
- Royal Crowne Vein Project
- Calavera Project
- TSF #1 Tailings Project
- West Road 17 Gold Project
o Regional Projects
- Bananghilig Gold Deposit
- Saugon Gold Deposit
• Exploration - Other Areas
o Queensland Epithermal Gold and Copper Project
o Other Areas
• Tenements
Sustainability
• Health and Safety
• Environmental Protection, Management and Monitoring
• Corporate Social Responsibility
JORC 2012 Compliance - Consents of Competent Persons
6
7
7
8
10
14
14
15
16
20
21
22
23
24
24
24
24
27
28
29
30
30
31
31
31
31
31
31
32
34
34
36
39
42
REVIEW OF OPERATIONS
HHHIIIGGGHHHLLLIIIGGGHHHTTTSSS
CCCooo---OOO OOOPPPEEERRRAAATTTIIIOOONNNSSS:::
““TThhee CCoommppaannyy aacchhiieevveedd iittss gguuiiddaannccee ttaarrggeett,, pprroodduucciinngg
9955,,005577 oouunncceess ffoorr tthhee ffiinnaanncciiaall yyeeaarr eennddiinngg 3300 JJuunnee
22002200 ddeessppiittee tthhee ddiissrruuppttiivvee CCOOVVIIDD--1199 ppaannddeemmiicc
rreessttrriiccttiioonnss..””
❑ Annual gold production totalled 95,057 ounces, in line with
FY2020 guidance with annual unhedged gold sales of 95,142
ounces;
❑ Annual All-In-Sustaining-Costs (“AISC”) were US$1,132 per
ounce, an increase of 8% from the previous year of US$1,045
includes capital costs related to
per ounce. The AISC
for
infrastructure projects and exploration expenditure
FY2020;
❑ Projects and exploration expenditure for FY2020 of US$5.6
million;
❑ Mill recoveries remained high at a consistent 95.3% for the
year;
❑ The sinking of the 35E internal inclined shaft from Level 8 to
Level 12 was completed. Connections have been established
on Levels 11 and 12, and plats developed on both Levels 11
and 12;
❑ Despite COVID-19 quarantine and travel restrictions imposed
by the authorities during FY2020, the Company’s strategy to
mitigate the restricted movement on personnel and material
proved successful in still achieving its gold production
guidance and preventing the transmission of any infection at
site.
7
REVIEW OF OPERATIONS
GGGRRROOOUUUPPP OOORRREEE RRREEESSSEEERRRVVVEEESSS AAANNNDDD MMMIIINNNEEERRRAAALLLRRREEESSSOOOUUURRRCCCEEESSS:::
““TThhee CCoommppaannyy’’ss OOrree RReesseerrvveess hhaavvee bbeeeenn rreepplleenniisshheedd ttoo
333322,,000000 oouunncceess aafftteerr mmiinniinngg ddeepplleettiioonn,, ccoommppaarreedd ttoo tthhee
pprreevviioouuss yyeeaarr’’ss eessttiimmaattee ooff 335500,,000000 oouunncceess..””
Table I: Total Mineral Resources and Ore Reserves estimates as at 31 Dec 2019 (ASX announcement dated 6 Apr 2020).
The JORC 2012 Table 1 can all be referenced through the ASX announcements.
Deposit
MINERAL RESOURCES (1,2)
Co-O Resources (1) (JORC 2012)
Category
Tonnes (4)
Grade (4)
(g/t gold)
Gold (4)
(ounces)
Measured
Indicated
418,000
9.33
125,000
1,121,000
10.75
387,000
Measured & Indicated
1,539,000
10.36
513,000
Total Co-O Resources
Measured, Indicated & Inferred
2,477,000
Inferred
938,000
Bananghilig Resources (2) (JORC 2012)
Indicated
Inferred
Total Bananghilig Resources
Indicated & Inferred
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
Royal Crowne Vein
Indicated
Inferred
Total Royal Crowne Vein (JORC 2012)
Indicated & Inferred
TOTAL RESOURCES
Measured
Indicated
Inferred
7,580,000
200,000
7,780,000
47,500
34,000
81,500
510,000
510,000
61,000
26,000
87,000
418,000
9,319,500
1,198,000
9.00
9.85
1.66
4.42
1.73
7.00
4.60
6.00
1.72
1.72
4.93
4.01
4.65
9.33
2.81
8.00
271,000
784,000
406,000
29,000
435,000
10,700
5,000
15,700
28,200
28,200
10,000
3,000
13,000
125,000
841,900
308,000
TOTAL RESOURCES
Measured, Indicated & Inferred 10,935,500
3.63
1,274,900
ORE RESERVES (2)
Co-O Reserves (2) (JORC 2012)
Proven
Probable
324,000
1,324,000
7.25
6.03
75,000
257,000
TOTAL RESERVES
Proven and Probable
1,648,000
6.27
332,000
8
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;
(4) Rounding to the nearest 1,000 may result in some slight apparent discrepancies in totals used in all
tables; and
(5) Broken stocks and pillars have been declared as Measured Resources and Proven Reserves in 2019.
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:
• Indicated Resource: a lower block cut-off of 0.75 g/t gold has been applied to mineralisation within a
US$1,500 per ounce 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 per ounce 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 ounces 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 by 25 meters; and
• a gold price of US$1,500 per ounce has been applied.
Royal Crowne Vein:
• Inferred Resource estimated only from all available drill holes as at 31 December 2019;
• a lower cut-off of 0.3 g/t gold has been applied to define the mineralisation; and
• a bulk density of 2.55 g/cm3 was used based on the average density measurements.
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 the tonnage of
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$1,350 per ounce has been applied.
9
REVIEW OF OPERATIONS
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““AAlltthhoouugghh rreessttrriicctteedd bbyy CCOOVVIIDD--1199,, rreeggiioonnaall eexxpplloorraattiioonn
ccoonnttiinnuueedd ttoo aaddvvaannccee tthhrroouugghh tthhee yyeeaarr wwiitthh mmaaiiddeenn
IInnddiiccaatteedd MMiinneerraall RReessoouurrccee ooff 1100,,000000 oouunncceess ffoorr tthhee
RRooyyaall CCrroowwnnee VVeeiinn PPrroojjeecctt wwhhiicchh rreemmaaiinnss ooppeenn aatt
ddeepptthh aanndd aalloonngg ssttrriikkee..””
Figure 1. Eastern Mindanao tenement location plan, showing consolidated tenement outlines Deposits and Projects.
10
REVIEW OF OPERATIONS
Figure 2. Location diagram of the Company’s main project areas in relation to the significantly mineralised belts of the Philippines.
11
REVIEW OF OPERATIONS
EXPLORATION - PHILIPPINES
Exploration activities in the Philippines for FY2020 focused on the evaluation of prospects within the Co-O
Mine and Royal Crowne Vein (Old Sinug-ang) areas, as well as review of Philsaga Mining Corporation
(“PMC”) granted tenements and applications.
Co-O MINE
Though restricted by the COVID-19 pandemic,the drilling program continued to focus on understanding and
defining the geological limits of the main epithermal veins, particularly to the east and down plunge of the
Great Hamish Vein (“GHV”) as well as the other major vein systems (Don Pedro, Central, and Jereme veins).
The drilling program sucessfully shows the narrow veins are returning economic grade intercepts at and below
Level 12, and remaining open down plunge to the east. Current and future drilling campaigns are focused on
the downdip extensions with the objective of increasing the resource base.
Co-O SURFACE EXPLORATION
Royal Crowne Vein Project (Old Sinug-Ang)
The Royal Crowne Vein (“RCV”) Project corresponds to a 500+ metres projected vein segment along the
northern portion of the 1,500 metres long Sinug-ang vein system that has not yet been fully tested by drilling.
The Phase 3 resource definition drilling was completed last 13 December 2019 comprising of 21 holes for a
total of 4,757 metres. The updated mineral resource of the RCV Deposit was subsequently announced on 6
April 2020 amounting to a total JORC Code 2012 Indicated and Inferred Mineral Resources estimate at
87,000 tonnes at a grade of 4.65 g/t gold, equivalent to 13,000 ounces of gold.
Further drilling is planned in FY2021 to upgrade the resource category and extend the resource base along
strike and down dip.
TSF #1 Tailings Project
The Tailings Storage Facility (“TSF”) #1 was utilised by the original processing plant since the 1980’s. The
TSF #1 material is from the earlier higher gold grade Co-O Mine ore, which was processed using now
outdated extraction techniques which were relevant at that time. A previous assessment completed in 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 resulted in 510,169 tonnes at 1.72 g/t gold, containing 28,200 ounces of gold in the Indicated category
(JORC 2012). The model reveals that higher grades are concentrated in the upper portion of the tailings
section, which will simplify mining and minimise disturbance to the lower grade base of TSF#1.
A detailed study, to determine the best option for gaining value from TSF #1 resource, including the feasibility
of mining and processing this material, is ongoing.
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 (FY2015 and FY2016) 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 initially disclosed
under JORC 2004. There have been no material changes since it was last reported.
12
REVIEW OF OPERATIONS
EXPLORATION - OTHER AREAS
Queensland Epithermal Gold & Copper Project
The Company announced on 5 July 2018 that it had 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, an epithermal gold-silver opportunity located approximately 30
km east of Mt Coolon and the Mt Clark West (EPM 26008) exploration project, a copper-gold opportunity
located approximately 24 km north-west of Nebo.
Medusa has completed drill testing of priority targets at both projects, with no significant results returned. After
evaluating all results of the first round of exploration and drilling from both projects, the Company discontinued
exploration programmes associated with the next phase of the EIA with Ellenkay. On 19 November 2019
Medusa announced to the ASX that it had withdrawn from the EIA.
Other Areas
The Company continues to evaluate opportunities within the Asia Pacific Region with the objective of growing
the Company’s portfolio.
13
REVIEW OF OPERATIONS
CCCooo---OOO OOOPPPEEERRRAAATTTIIIOOONNNSSS
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.
CCoo--OO GGoolldd PPrroodduuccttiioonn
Table II: Co-O gold production statistics for financial years ended 30 June 2019 and 2020.
Unit
June 2020
June 2019
Variance
Percent (%)
Description
Ore mined
Ore milled
Head grade
Recovery
Gold produced
Cash costs (1)
Gold sold
WMT
DMT
g/t
%
ounces
US$/oz
ounces
572,334
606,675
(34,341)
513,944
544,601
(30,657)
5.99
95.27
6.28
94.75
(0.29)
0.52
95,057
103,307
(8,250)
684
546
138
95,142
102,500
(7,358)
(6)
(6)
(5)
0
(8)
(20)
(8)
20
Average gold price received
US$/oz
1,581
1,259
322
Notes:
(1) net of development costs and includes royalties and local business taxes.
• The Company produced 95,057 ounces of gold (2019:103,307oz) for FY2020 at an average recovered
grade of 5.99 g/t gold (2019: 6.28 g/t gold) which achieved the lower end of guidance of 95,000 ounces.
• The average cash costs of US$684 per ounce, inclusive of royalties and local business taxes, was higher
than the previous year’s average cash costs of US$546 per ounce; and
• All-In-Sustaining-Costs (“AISC”) for the year was US$1,132 per ounce of gold (2019: US$1,045 per
ounce).
FY2021 Guidance
On 28 August 2020, the Company provided its production and cost guidance for FY2021 of between 90,000
ounces to 95,000 ounces at an AISC of between US$1,200 to US$1,250 per ounce.
The slight increase in year-on-year AISC for FY2021 has been anticipated, after taking into account the
ongoing impact of COVID-19 restrictions to people movement, logistics and associated costs.
14
REVIEW OF OPERATIONS
CCoo--OO MMIILLLL
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 tailings storage facility.
Diagram 1. Co-O Processing Plant flow sheet.
The Co-O Mine is 6 km from the process plant, with a 12 km haulage route due to the local topography.
The processing plant is powered from the regional grid, and in addition has its own dedicated generators that
can operate the plant at full capacity if required.
The Co-O Mill performed efficiently throughout the fiscal year with an average mill recovery of 95.3%.
Mill throughput was restricted by availability of ore from the mine, resulting in a lower utilisation of the
processing plant. Optimisation of processing plant operation and maintenance contributed to reduced cost for
contract labour for mill relines and major shutdowns as these were completed by on site personnel during
scheduled down times
Low plant utilisation is expected to continue into FY2021 while operating under current COVID-19 restrictions.
The Mill does not require any major works, upgrades or refurbishments under the current life-of-mine plan
(“LOMP”). Tailings storage facility (“TSF”) # 5 was completed during FY2017 and is expected to provide
adequate TSF capacity for next 18 months. Work has progressed on the planning and design of the next TSF
with the aim of commencing construction at the beginning of 2021.
15
Co-O Gold Project Processing Plant FlowsheetDirect FeedLEGENDSSlurryCarbonWaterEluateSAGMillJawCrusherTailsThickenerTailings DamProcess Water TankAcid WashElutionCarbon RegenerationCyanideDetoxificationCIL Tanks (8 x 380m3) ILRGravityConcentratorLeach Tanks (3 X 1200m3)ElectrowinningSmelting
REVIEW OF OPERATIONS
CCoo--OO MMIINNEE
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 10
normally average 1,000 metres from West to East. Levels are developed 50 metres apart vertically, putting
Level 10 approximately 500 metres below surface. There are 4 winzes operating between Level 8 and Level 9
with 3 of these also servicing Level 10. Another winze, the 35E internal shaft, is being developed from Level 8
to service Levels 9, 10, 11 and 12. As mining progresses winzes will be systematically deepened to also
service Levels 11 and 12.
The E15 Shaft, a man and materials shaft, was completed in November 2018. The shaft is used for
transporting people and materials underground enabling improved rock hoisting utilisation of the L8 Shaft.
Diagram 2. Shows locations of major infrastructure of the Co-O Mine.
Several projects were progressed during the year to improve access to resources down to Level 12 and to
gain the most from the hoisting system. Some the key improvement projects were:
• Development for the Level 5 pumping station. With planned increase of working areas below Level 8, the
pumping requirements will also increase from Level 10 to Surface. To augment this pumping capacity,
the Level 5 pump station is necessary.
• Planned major maintenance on the L8 winder and loading pocket was completed with minimal disruption
to production during Christmas, New Year and Easter.
• L8 Shaft structure refurbishment. Inspections on the L8 shaft structures have identified work required to
maintain the long-term functionality of the shaft. Work has commenced according to plan to progressively
replace sections of the shaft structures. This work is being conducted during weekends when there is
minimal disruption to hoisting operations.
• Completed development of Internal shaft to Level 12. To meet targeted future production levels 11 and
12 need to be developed in a timely manner. The 35E Internal Shaft has been developed to Level 12 and
development commenced to extend the other internal shafts to Level 12.
• Completion of a study to determine the best option for accessing and extracting the resources below
Level 12 and improving mining efficiency. Early site establishment works have been completed, with
development to commence once travel restrictions relating to the COVID-19 pandemic permit.
16
REVIEW OF OPERATIONS
Graph 1. Co-O Mine dry tonnes hoist for FY2020 by month.
The mine tonnes hoisted in the first half of the year was consistently above 48,000 tonnes per month, however
that decreased in the second half of the year due to:
•
the Christmas and New Year holidays in December and January, when planned lower employee
headcount reduced mine productivity and provide the opportunity for major shaft maintenance; and
• Mid-March to June when employees were restricted due to COVID-19.
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.
17
REVIEW OF OPERATIONS
Stoping methods (continued)
(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 Levels 2 and 4 to 10 during the year, as well as winzes (internal shafts)
from Level 8 down to Level 12. Most development is conducted on ore with waste development being
confined to cross-cuts, ventilation raises, internal shafts and infrastructure requirements.
A total of 33,791 metres of horizontal and vertical development was completed in FY2020. This was an
increase of 12% over the previous year. The focus is on the development of the lower sections of the mine
(Levels 8, 9, 10 and 12).
Graph 2 shows the distribution of both horizontal and vertical development through the year.
Graph 2. FY2020 mine development (horizontal and vertical) by month.
18
REVIEW OF OPERATIONS
L8 Shaft
Since the completion of the E15 shaft in 2018 the utilisation of the L8 Shaft for rock hoisting has increased,
resulting in increased hoisting.
Internal winzes (shafts) from Level 8 to Level 10
By the end of the FY2020, five primary winzes (internal inclined shafts) were in operation hoisting to Level 8.
The 17E and 29E winzes service Level 9 while the 12E, 43E and 48E winzes service both Level 9 and 10.
An improved ore pass and skip loading arrangements were implemented on the 43E and 48E internal shafts
which has improved shaft hoisting productivity.
Diamond drill stations were developed on Level 10 and will be utilised for resource drilling of the areas below
Level 10.
The 35E internal shaft has been developed down to Level 12 to allow for the commencement of horizontal
development including a diamond drill station for future resource drilling. Following the establishment of the
35E internal shaft to Level 12, the other winzes will systematically be extended down to Level 12 to assist with
development and ventilation requirements.
Decline Project (Tiger Way)
Ore and waste material from the Co-O Mine are currently hoisted to surface through existing mine
infrastructure, including the L8, Baguio, Agsao and internal shafts. These assets, however, can only effectively
facilitate mining to Level 12 (~600 metres below surface) which is the limit of the current ore reserve. Whilst
this is sufficient to underpin the current production profile in the coming years, further infrastructure is required
for accessing deeper levels of the Co-O Mine in an efficient and cost-effective manner.
The Company believes there is strong potential for this trend to continue at Level 12 and below through
ongoing exploration. The limited resource drilling completed below Level 12 is the main contributor for this
area of the mine not currently having a higher established gold endowment. Thus, a comprehensive study into
the long-term infrastructure solution at the Co-O Mine was undertaken.
The study concluded that the establishment of a decline from surface, named the “Tiger Way”, was the best
option for the Co-O Mine and the Board of Medusa has approved construction of the Tiger Way, development
of which is expected to commence after travel restrictions imposed due to the COVID-19 pandemic are
relaxed to allow greater access to site.
Developing the Tiger Way is expected to have numerous benefits, including providing enhanced access to
deeper levels of the mine, more optimal positions for in-mine and near-mine exploration, greater operational
flexibility, safety benefits and removing hoisting limitations on ore production (Diagram 2 and Figure 3).
Preparatory site works commenced during FY2020 to establish the required infrastructure Tiger Way project
development. The commencement of the development, however, has been delayed following travel
restrictions during the COVID-19 pandemic.
Primary Ventilation
Progress on the primary ventilation upgrade project has continued with the development of cross-cuts on
Level 4 and Level 5, the completion of a raise from Level 8, and commencement of a raise from Level 5 and
Level 7. The upgrade is designed to increase the airflow in the lower levels and to move the primary
ventilation circuit further east allowing better distribution of ventilation around the working areas as the ore
body plunges to the East.
19
REVIEW OF OPERATIONS
CCoo--OO MMIINNEE GGEEOOLLOOGGYY
Figure 3: Co-O Mine composite longitudinal projection showing the locations of reported significant drill intercepts (since 2010),
Underground development, E15 Shaft. The 2020 Measured, Indicated and Inferred Resources model (light green) is also
shown, demonstrating the potential for down plunge extensions at depth.
During the past year, the Company has continued its resource drilling campaign with a concentrated review of
the Great Hamish Vein (“GHV”) and Jereme Veins 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 extensive review, re-interpretations and re-modelling of the Co-O Mine underground geology
achieved several key objectives:
• Maintained the high level of confidence in the Co-O resources as per the high conversion rate of
Measured and Indicated Resource to Ore Reserves despite the depletion of high-grade broken stocks
and pillars.
• Defined the eastern geologic extension to the main GHV between Levels 12 and 16;
• Greater understanding of the structural controls on the epithermal gold system created by the diatreme
intrusive contact as indicated on geology map of Co-O deposit (Figure 5).
• The GHV at Level 16 is returning economic intercepts open to the east and down dip but with narrower
widths;
• The Jereme Vein is open to the east and down dip; and
• Further drilling has shown that an improved continuity of these veins can be achieved by the addition of
internal dilution.
The total Mineral Resources inclusive of the Ore Reserves is presented in the longitudinal section (Figure 3)
above. Drilling information revealed that there are ore shoots extension beyond the initially projected ore
boundaries.
20
REVIEW OF OPERATIONS
Figure 4: Isometric and Orthogonal views of the Co-O Mine’s 2020 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.
GGGRRROOOUUUPPP OOORRREEE RRREEESSSEEERRRVVVEEESSS AAANNNDDD MMMIIINNNEEERRRAAALLL RRREEESSSOOOUUURRRCCCEEESSS
The Annual Mineral Resources Update Statement and Annual Ore Reserves Update Statements for the
Company were released on 06 April 2020, 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 have 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 6 April 2020
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
Measured and Indicated Resources (Graph 3). 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 (~65%), after allowance for mining recovery, of Measured and Indicated Mineral
Resources to Ore Reserves. The Co-O Mine continues to maintain a minimum plus three-year mine plan, for
Measured and Indicated Resources, and more than a 5-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.
21
REVIEW OF OPERATIONS
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 2019 and has been depleted for mining to 31 December
2019.
Gold price assumptions used to estimate Mineral Resources and Ore Reserves are:
• Mineral Resources: US$1,500 per ounce gold
• Ore Reserves: US$1,350 per ounce gold
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 FY2018 - Mineral Resource and Ore Reserve ounces are classified under JORC 2012 guidelines;
FY2018 to FY2019 - Ore Reserves estimated using gold price of $1,275 per ounce: and
FY2020 - Ore Reserves estimated using gold price of $1,350 per ounce.
CCoo--OO MMIINNEE MMIINNEERRAALL RREESSOOUURRCCEESS
Total Measured, Indicated and Inferred Mineral Resources for the Co-O Mine are now estimated at 2.48 million
tonnes at a grade of 9.85 g/t gold for a total 784,000 ounces contained gold (Table I), compared to the 31
December 2018 estimate of 2.66 million tonnes at a grade of 10.41 g/t gold for a total 890,000 ounces contained
gold (Table III).
There has been a decrease in the total number of ounces in the Co-O Mine's Mineral Resources through the
mining depletion of 93,000 ounces.
While the ounces in the Measured and Indicated Resource, category have slightly decreased by 2%, the grade
remained the same at slightly above 10.0 g/t gold. In the Inferred Resource category there has been a decrease
in the ounces of 26% with a grade reduction of 8%. Overall, the total ounces have decreased by 12% while the
grade has reduced by 5%. The grade reduction is primarily the result of:
• mining depletion;
•
the conversion of a component of higher-grade Inferred Resource to the Indicated category as a result of
drilling and development;
• drilling and development resulting in information which shows that there is an improved continuity of
previously interpreted narrow veins. This enhanced continuity has been achieved through the addition of
internal dilution, which will make the resource more amendable to mining;
• drilling which has also delineated additional lower grade veins (above cut-off grade) that have been included
in the estimate as they are proximal to higher grade veins; and
•
there has been less resource drilling due to the availability of drill station development in favour of production
priorities.
22
REVIEW OF OPERATIONS
Table III: Comparison summary of total undiluted Co-O Mineral Resource estimates (31 Dec 2018 & 31 Dec 2019).
Mineral
Resource
Category (1)
31 December 2018
31 December 2019
Variance %
Tonnes
Gold (g/t)
Gold (oz)
Tonnes
Gold (g/t)
Gold (oz)
Tonnes Gold (g/t) Gold (oz)
Measured
96,000
9.57
29,000
418,000
9.33
125,000
335
(2.51)
331
Indicated (2)
1,385,000
11.03
491,000
1,121,000
10.75
387,000
(19)
(2.54)
Inferred (2)
1,179,000
9.75
369,000
938,000
9.00
271,000
Total
2,660,000
10.41
890,000
2,477,000
9.85
784,000
(20)
(7)
(8)
(5)
(21)
(26)
(12)
Notes:
(1) Mineral Resources are reported inclusive of Ore Reserves;
(2) Resources are reported to Level 16 (-595m RL).
CCoo--OO MMIINNEE OORREE RREESSEERRVVEESS
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 (see ASX
Announcement dated 6 April 2020).
The drilling program and mine development, as at 31 December 2019 has resulted in a Proven and Probable
Reserve of 332,000 ounces.
The Co-O Mine Proven and Probable Ore Reserves are now estimated at 1.65 million tonnes at a grade of
6.27 g/t gold for a total 332,000 ounces contained gold, compared to the 31 December 2018 estimate of 1.58
million tonnes at a grade of 6.86 g/t gold for a total 350,000 ounces contained gold.
There has been a decrease in total Proven and Probable ounces of 5% when compared to the 31 December
2018 Probable Reserve of 350,000 ounces. The 31 December 2019 Proven and Probable Reserve grade has
reduced by 9% from a grade of 6.86 g/t to a grade of 6.27 g/t 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 development, mapping and drilling. The basal cost assumptions are from the previous year’s
actual costs. The conversion of Measured and Indicated Resource to Reserve stands at 65%. This
conversion rate indicates a high level of resource confidence when costs and scheduling are applied to the
resource. The Co-O Ore Reserves are reported using a gold price of US$1,350 per ounce.
Table IV: Comparison summary of Co-O Mine’s Ore Reserve estimate (31 Dec 2018 & 31 Dec 2019).
Ore Reserve
Category
31 December 2018
31 December 2019
Variance %
Tonnes
Gold (g/t)
Gold (ozs)
Tonnes
Gold (g/t) Gold (ozs)
Tonnes
Gold (g/t) Gold (ozs)
Proven
93,000
9.62
29,000
324,000
7.25
75,000
248.39
(24.64)
158.62
Probable
1,491,000
Total
1,585,000
6.68
6.86
321,000
1,324,000
6.03
257,000
(11.20)
(9.73)
(19.94)
350,000
1,648,000
6.27
332,000
(3.97)
(8.60)
(5.14)
Note:
(1) Ore Reserves are reported to Level 13 (-454m RL), with very limited Reserves below Level 12 (-395m RL).
23
REVIEW OF OPERATIONS
EEEXXXPPPLLLOOORRRAAATTTIIIOOONNN AAACCCTTTIIIVVVIIITTTIIIEEESSS
EEXXPPLLOORRAATTIIOONN -- PPHHIILLIIPPPPIINNEESS
Co-O UNDERGROUND EXPLORATION
“Underground drilling during FY2020 continued to focus on
the definition and conversion of wide-spaced intersections
between Levels 10 to 12 into resources, and to develop
additional mineral resources down plunge below Level 12.”
Resource and Definition Drilling
In FY2020, 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
Resources category. During FY2020, drilling was carried out at Levels 4, 6,7, 9 and 10.
Significant drill intercepts from are presented in Figure 3; this includes results from prior to July 2019 (grey
dots).
Table VIII: Summary of Co-O Mine underground drilling for FY19-20.
Project
Purpose
Levels
Number of Holes
Meterage
Co-O Mine Underground
Definition drilling
4, 6, 7, 9 and 10
Resource drilling
10
TOTAL DRILLING
36
105
141
18,837
17,498
36,335
Details of significant intersection results obtained during the FY2020 have been reported in the September
2019, December 2019, March 2020 and June 2020 quarterly reports. Table V below summarises the more
significant drill intersections obtained in FY2020.
Table IVI: 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 4
L4-16W-001
613848
913038
L4-16W-002
613848
913038
4
4
150.00
150.00
3
20
2
-2
36.85
23.75
37.25
25.85
including
L4-23E-002
614210
912862
9
151.10
333
3
76.40
78.10
UNDERGROUND RESOURCE DRILLING - LEVEL 6
including
L6-48W-001
613535
912810
L6-59E-001
L6-59E-003
614574
912911
614571
912907
-95
-89
-89
150.10
351.50
370.00
230
349
334
2
1
1
37.55
97.90
46.20
38.30
98.50
47.15
UNDERGROUND RESOURCE DRILLING - LEVEL 7
0.40
2.10
1.00
1.10
1.70
1.00
0.70
0.75
0.60
0.95
22.73
3.98
4.96
3.09
9.02
4.22
15.87
81.33
23.77
9.87
L7-18E-001
L7-41E-002
L7-56E-001
L7-77E-002
614191
913014
-141
150.30
614372
912782
-139
60.30
614540
912840
-137
111.30
614747
912821
-134
150.00
328
320
45
19
-5
-1
-3
2
25.00
53.35
75.95
11.70
25.60
54.20
76.15
12.70
0.60
0.85
13.20
18.07
0.20
107.67
1.00
9.53
9.09
8.36
4.96
3.40
15.33
4.22
11.11
61.00
14.26
9.38
7.92
15.36
21.53
9.53
24
REVIEW OF OPERATIONS
Hole Number
East
North
RL
Depth
(metres)
Azim
(°)
Dip
(°)
From
(metres)
To
(metres)
Width
(metres)
Gold
(g/t)
Accumulations
(gm*m)
L8-56E-002
614568
912974
-189
115.60
53
0
107.35
107.90
UNDERGROUND RESOURCE DRILLING - LEVEL 8
108.40
109.80
including
L8-65E-002
L8-72E-026
614644
912853
-188
200.10
614701
912845
-189
601.10
142
152
0
-71
45.80
86.60
46.05
87.55
0.55
1.40
0.40
0.70
0.30
0.25
0.95
8.23
22.00
21.47
12.70
44.40
21.37
7.40
L8-72E-027
614700
912845
-188
601.10
197
-72
396.90
398.50
1.60
175.41
including
0.60
462.70
171.45
172.25
0.80
114.26
367.45
368.10
456.20
456.80
0.65
0.60
16.38
13.45
L8-72E-029
614698
912845
-189
127.10
213
0
121.85
123.60
402.10
403.10
543.10
543.65
UNDERGROUND RESOURCE DRILLING - LEVEL 9
including
L9-1W-003
L9-22E-004
L9-75E-003
613975
912862
-242
250.10
614144
913012
-238
138.00
614756
912953
-239
250.40
350
168
51
2
3
5
19.70
42.40
19.20
76.65
20.60
42.65
19.55
78.15
including
95.30
96.90
including
170.00
171.25
including
1.00
1.00
0.55
1.75
0.95
0.80
0.90
0.25
0.35
1.50
0.95
0.55
1.60
1.00
0.60
1.25
0.65
0.60
3.03
6.14
70.83
9.59
12.10
6.60
6.77
50.80
36.06
26.40
27.55
24.40
23.34
22.06
25.46
15.23
16.45
13.90
L9-75E-004
614757
912949
-239
250.00
154
0
42.55
44.15
1.60
145.88
including
0.90
236.79
0.70
28.99
4.53
30.80
8.59
8.89
13.32
5.34
7.03
91.41
10.65
8.07
280.66
277.62
3.03
6.14
38.96
16.78
11.50
5.28
6.09
12.70
12.62
39.60
26.17
13.42
37.34
22.06
15.28
19.04
10.69
8.34
233.41
213.11
20.29
L9-75E-005
614757
912948
-239
250.00
139
0
19.90
20.90
1.00
135.64
135.64
L10-25E-016
614177
912696
-293
550.50
359
-25
79.85
81.85
UNDERGROUND RESOURCE DRILLING - LEVEL 10
L10-25E-018
614175
912696
-293
550.00
339
L10-25E-019
614177
912696
-293
550.00
L10-25E-022
614177
912696
-293
550.10
16
9
-23
-36
-33
including
548.10
548.70
128.20
128.90
539.70
539.95
385.85
386.60
394.15
395.65
including
L10-25E-023
614176
912696
-293
551.70
357
-31
64.55
65.95
including
L10-25E-024
614176
912696
-293
551.10
349
-39
166.55
168.20
including
2.00
1.00
1.00
0.60
0.70
0.25
0.75
1.50
0.60
0.90
1.40
0.40
1.00
1.65
0.70
0.95
8.65
4.81
12.49
10.13
20.79
28.57
8.90
11.83
22.49
4.73
12.17
34.90
3.08
8.52
14.10
4.41
17.30
4.81
12.49
6.08
14.55
7.14
6.68
17.75
13.49
4.26
17.04
13.96
3.08
14.06
9.87
4.19
25
REVIEW OF OPERATIONS
Hole Number
East
North
RL
Depth
(metres)
Azim
(°)
Dip
(°)
From
(metres)
To
(metres)
Width
(metres)
Gold
(g/t)
Accumulations
(gm*m)
L10-37E-002
614365
912982
-288
250.00
321
3
59.00
59.45
UNDERGROUND RESOURCE DRILLING - LEVEL 10 (continued)
L10-37E-003
614366
912979
-288
250.10
L10-44E-002
614437
912993
-288
250.00
208.60
210.20
including
304
9
0
1
74.60
81.50
75.15
81.80
198.50
199.50
L10-44E-003
614436
912994
-288
250.00
337
0
141.75
143.70
including
L10-50E-016
614524
913102
-289
601.60
174
-50
73.15
75.05
including
L10-50E-018
614524
913102
-289
600.00
163
-48
78.65
80.10
L10-50E-019
614525
913102
-289
600.00
156
-45
L10-50E-022
614524
913102
-289
600.80
166
-38
L10-50E-025
614526
913102
-290
600.40
L10-50E-027
614526
913102
-289
550.00
153
146
-62
-48
including
85.25
80.90
86.10
82.10
including
90.95
78.70
91.55
79.65
369.20
370.20
376.45
376.70
493.05
493.75
89.60
91.00
including
L10-50E-030
614524
913102
-289
551.10
185
-43
291.10
292.40
L10-50E-031
614525
913102
-289
550.40
169
-43
69.55
71.15
including
293.50
295.15
including
415.40
416.40
L10-50E-032
614525
913102
-289
551.10
168
-57
L10-50E-033
614523
913102
-290
550.10
L10-50E-034
614524
913102
-290
550.10
L10-50E-035
614523
913102
-289
551.10
L10-50E-039
614525
913102
-290
600.30
210
193
205
144
-64
-65
-48
-78
including
78.05
78.90
133.90
134.65
75.25
85.40
86.70
75.85
86.00
87.00
306.05
306.95
85.20
86.15
143.30
144.30
75.60
76.10
579.10
580.90
including
582.20
582.90
L10-50E-041
614525
913102
-290
571.70
L10-58E-002
614599
913069
-288
250.20
178
148
-78
156.20
156.90
0
115.35
116.15
227.40
228.25
L10-7E-001
613988
912950
-291
550.10
147
-42
514.55
515.20
26
0.45
1.60
1.00
0.60
0.55
0.30
1.00
1.95
0.95
1.00
0.90
0.25
0.65
1.45
0.55
0.90
0.85
1.20
0.50
0.70
0.60
0.95
1.00
0.25
0.70
1.40
0.65
0.75
1.30
0.35
0.95
1.65
0.65
1.00
1.00
1.60
0.60
1.00
0.85
0.75
0.60
0.60
0.30
0.90
0.95
1.00
0.50
1.80
0.90
0.90
0.70
0.70
0.80
0.85
0.65
29.27
7.18
5.93
9.27
24.87
54.27
6.73
23.16
24.67
21.73
9.43
14.46
7.50
5.55
7.83
4.15
17.45
9.74
12.04
8.10
10.12
19.07
6.53
74.07
17.20
15.92
8.60
22.27
4.91
8.83
3.46
7.47
13.40
3.62
8.57
7.53
12.73
4.41
18.93
10.43
17.63
18.00
27.87
8.90
20.60
19.97
13.50
12.90
5.30
20.50
8.93
35.17
14.10
8.87
9.60
13.17
11.49
5.93
5.56
13.68
16.28
6.73
45.16
23.44
21.73
8.49
3.62
4.87
8.05
4.31
3.73
14.83
11.69
6.02
5.67
6.07
18.12
6.53
18.52
12.04
22.29
5.59
16.70
6.38
3.09
3.29
12.33
8.71
3.62
8.57
12.05
7.64
4.41
16.09
7.82
10.58
10.80
8.36
8.01
19.57
19.97
6.75
23.22
4.77
18.45
6.25
24.62
11.28
7.54
6.24
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) ≥ 6 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.
2. Intersection widths are down-hole drill widths not true widths;
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 SURFACE EXPLORATION
Exploration activities for FY2020 focused on the evaluation of prospects within the Co-O tenements, review
of Philsaga Mining Corporation (“PMC”) granted tenements and applications.
Figure 5. Active surface exploration projects within the company tenements.
27
REVIEW OF OPERATIONS
Royal Crowne Vein Project
In FY2020, a total of 21 drill holes with a total meterage of 4,757 metres were successfully completed at the
Royal Crowne Vein (“RCV”) project in the old Sinug-ang area in the Phase 3 drilling program (Figures 5 & 6).
Figure 6: Drill plan layout for the RCV Phase 4 and Follow-up Drilling Program targeting the down-dip extension of historical
significant drill intercepts targets.
The drilling program further validated the continuity of mineralisation along the projected 500 metre+ long
strike length of the RCV vein system and updated the JORC 2012 Mineral Resources with an Indicated
Resource category of 10,000 ounces of gold and an Inferred Resource of 26,000 tonnes at 4.01 g/t gold. The
total Mineral Resources as reported (ASX on the 6 April 2020) is presented in the table below (Table VII).
28
REVIEW OF OPERATIONS
Table VII: Comparison summary of total undiluted RCV Mineral Resource estimates (31 Dec 2018 & 31 Dec 2019).
Mineral
Resource
Category
31 December 2018
31 December 2019
Variance %
Tonnes
Gold (g/t) Gold (ozs)
Tonnes
Gold (g/t) Gold (ozs)
Tonnes
Gold (g/t) Gold (ozs)
Indicated
-
Inferred
311,300
Total
311,300
-
5.03
5.03
-
61,000
50,300
26,000
50,300
87,000
4.93
4.01
4.65
10,000
100
3,000
13,000
(91)
(72)
100
(20)
(8)
100
(94)
(74)
Phase 3 drilling program was designed to upgrade the resource category and test the wide-spaced drilling
continuity. A follow-up (Phase 4) resource drilling program is proposed to increase the current mineral
resource downdip extension. The drill program will target the strike length and depth extensions (Figure 6).
Calavera Prospect
The Calavera prospect is a small scale mining site located about 2 km south of Co-O Mine that has been the
focus of exploration mapping in the past. Two vein sets trending east-west and NE-SW with projected strike
lengths of 150 metres and 300 metres, respectively, were previously mapped and sampled with 11 rock chip
channel samples returning grades above 1.0 g/t gold, and peak grade of 4.46 g/t gold.
A scout drilling campaign was implemented on 27 February 2020 completing four holes totalling 1,054 metres
by 7 April 2020 (Figure 4). However, the last hole did not reach target depth, and two planned holes were not
drilled due to the implimentation of COVID-19 restictions.
Figure 7. Map showing the location of completed drill holes, significant drill intercepts and recent surface samples in the Calavera
prospect.
Drilling confirmed the geologic continuity of the NE-trending Calavera main vein (i.e. Vein 1) along a strike
length of roughly 400 metres, and down-dip to a depth of 125 metres from the surface. Mineralised
structures, however, were relatively narrow ranging from 20 cm to 100 cm, and exhibited pinch-and-swell
geometries along its strike and down-dip projections.
Corresponding assay results returned generally low grades, ranging from below detection limit (i.e. 0.005 g/t
gold) to a peak grade of 1.99 g/t gold. No further work is planned at the Calavera prospect.
29
REVIEW OF OPERATIONS
TSF #1 Tailings Project
The Tailings Storage Facility (“TSF”) #1 was utilised by the original processing plant since the 1980’s. The
TSF #1 material is from the earlier higher gold grade Co-O mine ore, which was processed using dated
extraction techniques relevant at that time. A previous assessment completed in 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 resulted in 510,169 tonnes at 1.72 g/t gold, containing 28,200 ounces of gold in the Indicated category
(JORC 2012). The model reveals that higher grades are concentrated in the upper portion of the tailings
section, which will simplify mining and minimise disturbance to the lower grade base of TSF#1.
A detailed study, to determine the best option for gaining value from TSF #1 resource, including the feasibility
of mining and processing this material, is ongoing.
West Road 17 Gold Project
A four hole scout drilling program at the West Road 17 prospect aimed at validating the geometry and grade
continuity along the projected strike and dip directions of the West Road 17 Vein System (Figure 6) was
completed last 30 July 2019 with total metreage of 1,190 metres. Majority of the 243 mineralised core
samples sent for analysis returned marginal grades with only three samples having grades above 1.0 g/t gold
with peak grade of 3.16 g/t gold along a 0.75 metres interval starting at 57.35 metres of drill hole EXP-251.
Figure 8. Geologic map showing the location of on-going and proposed drill holes at the West Road 17 prospect, and assay
results of surface channel and grab samples.
30
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 (FY2015 and FY2016) 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 initially disclosed
under JORC 2004. There have been no material changes since it was last reported.
EEXXPPLLOORRAATTIIOONN -- OOTTHHEERR AARREEAASS
QUEENSLAND EPITHERMAL GOLD & COPPER PROJECT
The Company announced on 5 July 2018 that it had 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, an epithermal gold-silver opportunity located approximately 30
km east of Mt Coolon and the Mt Clark West (EPM 26008) exploration project, a copper-gold opportunity
located approximately 24 km north-west of Nebo.
Medusa has completed drill testing of priority targets at both projects, with no significant results returned. After
evaluating all results of the first round of exploration and drilling from both projects, the Company discontinued
exploration programmes associated with the next phase of the EIA with Ellenkay. On 19 November 2019
Medusa announced to the ASX that it had withdrawn from the EIA.
OTHER AREAS
The Company continues to evaluate opportunities within the Asia Pacific Region with the objective of
achieving of growing the Company’s portfolio.
Figure 9. Country and regional area of interest considered in project generation.
31
REVIEW OF OPERATIONS
TTEENNEEMMEENNTTSS
The Company tenement portfolio is in good standing, and comprises of 17 tenements with a combined area of
412 km2 (Figure 11). This includes 4 granted tenements and 13 tenement applications. Of the granted
tenements, 3 are currently in the exploration stage, and 1 covering the Co-O Mine area is in the operation
stage.
Figure 10. Status of tenement holdings at end June 2020.
Of the Company’s pipeline of 13 tenement applications (Figures 9 & 10), 7 tenement applications (i.e. 3
APSAs and 4 EPAs) where reviewed during the COVID-19 quarantine period from late March to June 2020 as
part of the rationalisation of tenement applications.
These tenements include APSA 77, APSA 98, APSA 88, EPA 66, EPA 69, EPA 114 and EPA 186.
Preliminary results noted that APSA 77, APSA 98 and EPA 114 are the ones of geologic interest and
prospectivity. Together with APSA 12, these 4 comprise the priority tenement applications actively being
followed up with MGB for approval.
32
REVIEW OF OPERATIONS
Figure 11. The Company’s exploration pipeline of tenement application for CY 2020.
APSA 77 and APSA 98 are adjacent contiguous tenement applications located roughly 15km north of Co-O
Mines. It is an active small-scale mining (“SSM”) area, which have been the focus of sporadic exploration
activities by PMC from 2006 until 2016. 5 prospects has been identified - namely Usa, Matanog, Alikway,
Kaborobohan and Umbon, with gold mineralisation associated with gold-copper porphyry (Usa and Alikway),
epithermal veins (Matanog, Kaborobohan and Umbon), and Copper-gold skarn (Usa and Alikway).
EPA 114, on the other hand is contiguous with MPSA 262 Parcel 2 where the RCV Gold Project and the
Sinug-ang prospects are located. Both are historical SSM sites that remain active to the present time. Sinug-
ang has a target potential of 150,000 ounces to 600,000 ounces gold along a 1,500 metres strike length with
RCV as its northern most vein segment.
The Company received notice on 11 November 2019 from the MGB Region XIII office on the provisional
approval of its exploration permit application (“EPA”) covering EXPA-000066-XIII (EPA-066). Final approval of
the EPA is subject to meeting several provisions that includes amendment of the tenement boundary to
exclude areas previously designated for non-mining landuse zones by local government units, and
consequently revision of the exploration (“ExWP”) and environmental (“EnWP”) work programs and cost
estimates, including the incorporation of baseline environmental studies. The ExWP and EnWP covering the
amended tenement boundary of EXPA-000066-XIII (EPA-066) has been completed, and revised tenement
boundary is under review by MGB’s deputised geodetic engineer.
33
REVIEW OF OPERATIONS
SSSUUUSSSTTTAAAIIINNNAAABBBIIILLLIIITTTYYY
The Company believes that its business should be founded on 3 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 3 key components are:
❑ Health and Safety;
❑ Environmental Protection, Management and Monitoring; and
❑ Corporate Social Responsibility.
HHEEAALLTTHH AANNDD SSAAFFEETTYY
Safety and Health Programs have been implemented at all our sites to manage the Safety and Health of all
personnel working on those sites. These programs go beyond compliance with existing regulations with its
continuous reviews and policy amendments.
The majority of the people involved in our operations and projects are based at the Philsaga Mining
Corporation sites, which includes site contractors and suppliers.
These Safety and Health programs include:
•
•
•
•
•
•
•
•
•
•
General Safety and Health rules and specialised work rules for handling hot works, lifting activities, etc;
Provision of Management and Employee Safety Training to ensure competency on safe work practices;
Regular and comprehensive medical surveillance to monitor the health conditions of personnel
reporting and leaving work;
Refresher Courses for Employees assigned in relatively high-risk designations;
Systematic planned inspections in order address unsafe conditions in all workplaces;
Comprehensive emergency preparedness planning, monthly training, and programming at mine and
mill sites, including quarterly fire and earthquake responsiveness drills;
Hazard prevention and control, through improved hazard awareness training, program of workplace
inspections, Job Hazard Analyses, 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”) e.g. chemical spill, mine rescue
and firefighting, with the teams participating in annual national competitions;
Development and implementation of a system and operational audits; and
Greater focus on completion of improvement action plans.
The 12-month Total Reportable Injury Frequency Rate for FY2020 was 1.5 per million-man hours which is
significantly down from last year (2 per million-man hours).
Unfortunately, two occurrences of fatalities were experienced during FY2020 and a third since 1 July 2020.
During February 2020 two underground contractor personnel were fatally injured at the Co-O mine due to a
rock fall accident. On 25 August 2020, the Company notified the ASX of a fatal accident at Co-O mine when
an employee was electrocuted during an inspection process of submersible pumps at the underground Main
pump station.
As a result of the first incident, a more in- depth review of underground geotechnical conditions was done for
all workplaces. Stricter policies for unsafe acts were also implemented and more frequent safety inspections
for critical areas were established. This was adopted in tandem with the continuous provision of refresher
courses for miners. The Company is deeply saddened by the incidents and continues to provide support to the
families of the victims.
The Company hospital has been operating as a fully staffed and functional hospital during the year with
services available for all Company personnel, their families and local community residents.
34
REVIEW OF OPERATIONS
Photo 1. Firefighting Training with Bureau of Fire Protection
Photo 2. First-Aid Training with Philippine Red Cross
Photo 3. Quarterly Basic Occupational Safety and Health (BOSH) and Basic Behavioral Safety (BBS) Training
Photo 4. Chemical Spill Training and Simulation
35
REVIEW OF OPERATIONS
Photo 5. Quarterly Earthquake and Fire Drill
EENNVVIIRROONNMMEENNTTAALL PPRROOTTEECCTTIIOONN,, MMAANNAAGGEEMMEENNTT AANNDD
MMOONNIITTOORRIINNGG
Co-O Gold Project Environmental Conditions
The Company’s Co-O Gold Mine with its own processing plant has established its environmental management
strategies to comply with the mandates of the relevant regulating bodies. The continual mining operation,
though expanding to different levels, has only minimal surface disturbed areas. The Company’s environmental
protection and enhancement program and environmental mitigating measures ensured that the tenement’s
land, air and water resources were responsibly managed.
The Company’s thrust to reduce its carbon footprint is continuously conducted. At the end of 2019, a total of
1,755 hectare - plantation was established with 1,102,671 seedlings planted. The established plantation is
estimated to sequester 189,804.64 tonnes of carbon, which compensates 2019’s carbon emission of
47,990.59 tonnes of CO2 emission from the mill and mine operations. The land resource rehabilitation effort
was conducted not only at the direct impact areas within the tenement but also in host and neighbouring
communities.
Plate 1. Established Plantation within the Tenement
36
REVIEW OF OPERATIONS
Land Resource Management
In the recent year, the company established 140 - hectare fruit tree plantation at Brgy. Bayugan 3, Rosario,
and Brgy. Consuelo, Bunawan, all in Agusan del Sur. Grafted Rambutan (Nephelium lappaceum), Lansones
(Lansium domesticum), Durian (Durio zebithenus) were planted at the established sites.
One of the major collaborations the Local Government Unit took off this year in line with Philippine
Government’s Adopt-a-Watershed Program, which aims to preserve and protect the locality’s water source.
The 20 – hectare buffer zone at Maputi Watershed in Rosario, Agusan del Sur, was planted with indigenous
forest trees such as white lauan (Shorea contorta) and Molave (Vitex parviflora) to enhance plant density at
the proposed watersheds. This program covers the plantation establishment and plantation maintenance
activities for the next three years. While within the Company’s tenements, enhancement planting, slope
stabilisation and landscaping works are continuously managed.
Plate 2. Established Fruit Trees Outside Tenements
Plate 3. Landscaping at the Mill and Mine Site
Moreover, the Company continuously maintained the 5 – hectare Mangrove Reforestation site at Brgy. Wakat,
Barobo, Surigao del Sur. Seedling donation thrust also reached to 65,410 various fruit and indigenous forest
seedlings donated to the community, private and government agencies in support to its greening endeavours.
Plate 4. Mangrove Reforestation at Barobo, Surigao del Sur
37
REVIEW OF OPERATIONS
Plate 5. Agroforest Nursery
Meanwhile, the company’s Agroforest Nursery is continuously operating to support planting stock requirement
in all reforestation/greening activities of the company and its stakeholders. The nursery established at the mill
and mine sites cater up to 150,000 seedlings and 50,000 seedlings, respectively.
Water Resource Management
Adopt-a-Creek Program
In support to the Environmental Management Bureau’s flagship program in the protection of the water bodies,
the Company subscribes to its Adopt-a-Creek Program by adopting three water bodies traversing within the
mill and mine operation as well as to its adjacent areas namely- Agsao Creek, Bayugan 3 Creek and Co-O
Creek. Activities to maintain and enhance water quality includes creek clean up and riparian enhancement by
planting narra and bamboo along the embankment or the waterbody. Information Education Communication
(IEC) campaigns were conducted to the community and/resident near the water body to reiterate the value of
water resources.
Plate 6. Co-O Creek riparian enhancement
For this year, extending its thrust in the protection of the water bodies including its neighbouring community,
the Company subscribes to Rivers for Life, a collaborative project in the adoption of identified water bodies in
partnership with the Department of Environment and Natural Resources - Regional Office XIII (DENR RXII),
Provincial Environment and Natural Resources- Agusan del Sur (“PENRO-ADS”), Community Environment
and Natural Resources - Bunawan (“CENRO-Bunawan”) and Municipal Local Government of Sta. Josefa. The
program aims to improve the water quality of Simulao River adopting its 2 km stretch through the conduct of
solid waste management strategies, information education campaign, enhancement of riparian vegetation and
conduct of water quality monitoring to continually assess the effectiveness of the actions implemented.
38
REVIEW OF OPERATIONS
Environmental Monitoring
The Company continually conducts monitoring and sampling in terms of emission to water, air, and noise,
based on Environmental Management Bureau’s approved Environmental Monitoring Plan. On a monthly
basis, water samples were collected at identified sampling station for analyses of physical - chemical and
heavy metals contaminant, while on a quarterly basis ambient air is sampled for emission of air pollutants
such as Total Suspended Particulates (“TSP”), PM10, CO, NOx, and SOx. Stationary sources of air pollutants
such as generator sets, scrubbers for hydrochloric Acid, Lead and Nitrogen Oxide as well as Boilers were
sampled in a semi – annual basis. Samples analysed were within the standard set by the DENR.
Plate 7. Water Quality Monitoring
ISO 14001
On February 17 to 20, the TUV Rheiland, an ISO 140001:2015 certifying body conducted its surveillance audit
to the operating companies, Philsaga Mining Corporation (PMC) and Mindanao Mineral Processing and
Refining Corporation (MMPRC), to assess the companies’ continued compliance with the environmental
management systems standard. Both companies were commended on sustaining the mandatory ISO
standards via its compliance and implementation regarding EMS. First cycle internal audit was also conducted
in June 2020 ensuring that established systems were being sustained. During the two week audit, all health
protocols were adhered to minimise the spread of COVID-19.
CCOORRPPOORRAATTEE SSOOCCIIAALL RREESSPPOONNSSIIBBIILLIITTYY
Education
Scholarships
The company continued its commitment to provide opportunities to less privileged students from its host and
neighbouring communities who wish to pursue their tertiary courses.
The program provides assistance to scholars through Full Scholarship grants, Half Scholarship grants and
Educational Assistance.
Several of the scholars that graduated have chosen to work as teachers at Philsaga High School
Foundation. Some were also invited to work for either PMC or MMPRC. This is an excellent overall result for
the individuals, their families, the local communities and the Company.
Picture 1. Scholars who graduated
39
REVIEW OF OPERATIONS
Company Schools and Adopt-a-School programme
In prior years, the Company supported the Philsaga High School Foundation which is located close to the
mill site. In addition, it continued its “adopt-a-school” programme since July 2013 and currently supporting
13 Elementary and Primary schools in areas of Rosario and Bunawan municipalities until 2021. This
program provides school supplies and health kits to the students and instructional materials for the teachers
and staff of each adopted schools.
Health
Supplemental Feeding
PMC and MMPRC through their Social Development and Management Program conducted Supplemental
Feeding which benefits 60 undernourished children aged less than 12 months old. The activity was
conducted with the coordination of the Municipal Nutrition Officer of Bunawan and Rural Health Unit Office of
the municipality.
Medical Mission
The Company continued to support the Annual Medical Outreach Activities conducted in Barangay Bayugan
3 in partnership with the Rural Health Unit of Rosario. These services include providing Medical
Consultation, Dental Extraction and Health Profiling. Over 800 members from the community have benefitted
from the ongoing free medical consultation and medicines provided by Philsaga Mining Hospital.
Picture 2. Medical Outreach Program at PMC Mill Clinic and Bayugan 3 Health Centre.
Enterprise Development and Networking
PMC’s and MMPRC’s Livelihood Programs are focused on building partnerships, empowering individuals,
and promoting stakeholder accountability to help build self-reliant and sustainable communities. Projects
implemented under the Livelihood Program vary from animal husbandry and agronomy to establishing
cooperatives for small-scale trading. This allows stakeholders the opportunity to mature as self sufficient
entrepreneurs while improving on their business acumen with the support of technical expertise provided or
facilitated by the Company.
These programs involve working with local, regional and national authorities, local associations and local
people to assist them in developing knowledge and skills to establish small businesses.
This includes providing training in value formation, business enterprise development, project management,
simple bookkeeping and specialised production and business training.
New businesses assisted this year include coconut plantation, water refilling station, tilapia production,
Agrifarm input and farm machinery rentals and land rental.
Picture 3. Water Pump Rentals for Water Refilling Stations of Brgy. Poblacion and Brgy. Mambalili, Farmers Association
40
REVIEW OF OPERATIONS
Infrastructure Development and Support Services
PMC and MMPRC have supported programs that have improved the infrastructure and facilities within the
communities surrounding the operations. In addition to previously mentioned projects the Company has
assisted in;
• The establishment of water system at Barangay’s San Andres, Nueva Era, Bunawan Brook & Imelda all
in Bunawan, Agusan del Suro. Since the facility is being established, water service expansion will serve
to at least 758 households. Other households not connected have been provided access to stand posts
for water are installed in every Puroks.
• Solar Drier being constructed in Purok 7 Barangay Imelda, BADS. The Solar Drier will be utilised by the
farmers within the community for drying their palay and corn product.
Picture 4. Reservoir for water system at Sitio
Picture 5. Water Tank Collector for water system of Nueva Era
Tagbayangbang, Bunawan Brook, BADS
Elem. School - Nueva Era, Bunawan, BADS
Picture 6. Solar Drier at Purok 7 Brgy. Imelda, BADS
Picture 7. Pipelines (PE HOSE) water system of
Brgy. San NDRES, BADS
41
REVIEW OF OPERATIONS
JJOORRCC 22001122 CCOOMMPPLLIIAANNCCEE -- CCOONNSSEENNTTSS OOFF CCOOMMPPEETTEENNTT PPEERRSSOONNSS
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 of Geology and Resources, and is a full-time employee of Medusa Mining Limited, and is
entitled to participate in the company’s long-term incentive plan, details of which are included in Medusa’s
2020 Remuneration Report. Mr. Llorca has more than 35 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.
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. Since 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.
42
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 2020 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 21 September 2020 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 Section 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, there are certain duties and
responsibilities reserved for the Board under the Board Charter. These include:
• overseeing the Company, including its control and accountability systems;
• appointing and removing the Chief Executive Officer (“CEO”), or any Managing Director or
Executive Director (as applicable) in respect of his or her executive role;
•
ratifying the appointment and removal of the Company Secretary;
• assisting with the development of and approving the Company's corporate strategy;
• assisting with the development of and approving the Company's annual operating and capital
budget;
• approving and monitoring the progress of acquisitions/divestments;
• monitoring compliance with all 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 management’s performance and implementation of strategy and policies, ensuring
appropriate resources are available; 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.
43
CORPORATE GOVERNANCE
1.
BOARD OF DIRECTORS (continued)
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 shall be four,
currently comprising three Non-Executive Directors (Andrew Teo, Roy Daniel and Simon Mottram)
and one Executive Director (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 seeks to ensure that it comprises 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 53 to 54.
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. All Directors (other than the Managing Director, if applicable) are
subject to re-election in accordance with the Company's constitution.
44
CORPORATE GOVERNANCE
1.
BOARD OF DIRECTORS (continued)
Board independence and length of service
ASX Principles, Recommendations 2.3, 2.4 and 2.5
The Board has determined that Andrew Teo, and Roy Daniel and Simon Mottram 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 in
pages 53 to 54 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;
•
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 section 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).
45
CORPORATE GOVERNANCE
1.
BOARD OF DIRECTORS (continued)
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 with a view to ensuring that they
can add value to the Board.
The Company's Nomination Committee Charter also 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 57 to 73.
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.
Details of Directors' attendance at Board meetings and Committee meetings are set out in the
Directors' Report on page 54.
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 section 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.
46
CORPORATE GOVERNANCE
2.
BOARD COMMITTEES (continued)
Nomination Committee (continued)
ASX Principles, Recommendations 1.2 and 2.1 (continued)
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 the Company'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;
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 Andrew Teo (as Chairperson of the Nomination Committee),
Roy Daniel and Raul Villanueva. The Nomination Committee, therefore, comprises a majority of
independent Directors and is chaired by an independent chair.
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
at
www.medusamining.com.au, and includes details of, among other things, the role and responsibilities,
composition and structure of the Remuneration Committee.
the Corporate Governance
the Company’s website
page
on
of
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) and Andrew Teo. The Remuneration Committee,
therefore, comprises a majority of independent Directors and is chaired by an independent chair as
recommended by ASXCGC Recommendation 8.1.
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 pages 57 to 73. No
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.
A copy of the Company's Share Trading Policy is available on the Corporate Governance section of the
Company’s website at www.medusamining.com.au.
47
CORPORATE GOVERNANCE
2.
BOARD COMMITTEES (continued)
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 section 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 Simon Mottram. 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 53.
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 section 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 Simon Mottram.
48
CORPORATE GOVERNANCE
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 confidential 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.
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 section 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.
49
CORPORATE GOVERNANCE
3.
PROMOTING ETHICAL AND RESPONSIBLE DECISION MAKING (continued)
Diversity Policy (continued)
ASX Principles, Recommendations 1.5 and 2.2 (continued)
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 %
26
55
22
1
104
-
25%
53%
21%
1%
23%
-
Male
33
254
57
11
355
4
Male%
9%
72%
16%
3%
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 section of the
Company’s website at www.medusamining.com.au
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. As noted above, the
Board's responsibilities include reviewing and ratifying systems of risk management and internal
compliance and controls, codes of conduct, continuous disclosure, legal compliance and other
significant corporate policies.
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 section 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.
50
CORPORATE GOVERNANCE
4.
RISK MANAGEMENT (continued)
ASX Principles, Recommendations 7.1, 7.2, 7.3 and 7.4 (continued)
The Board reviews the effectiveness of the Company’s system of internal control and risk
management framework, including a review of financial, operational, compliance and risk controls, on
a continual basis to satisfy itself that it continues to be sound. 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.
The Company does not have an Internal Audit Department. However, strategy meetings at both
corporate and operational level comprising the Board and Executives and Executives and Divisional
Managers respectively, are held on a frequent basis to discuss and review amongst many items, risk
management and the Company’s internal control framework. Any agreed changes to processes are
subsequently implemented and reported back.
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
to assist with monitoring and reporting on
environmental-related risks and issues.
that aims
• Social sustainability risks: The Company is exposed to social sustainability risks. The risks
could include the potential breakdown of business relations of the Company and the possibility
that the safety of the Company's employees is adversely impacted. The Board has a focus on
maintaining strong communications with its key stakeholders, and ensuring that key business
relations are maintained. In addition, the Company has a Safety, Health and Environmental
Committee that aims to assist with monitoring and reporting on safety and health-related risks, as
well as 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 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
2020, 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.
51
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 section 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 the Shareholder Communications Policy the Company maintains a website at
www.medusamining.com.au on which the Company provides, among other things, the following
information:
•
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 section
of the Company’s website at www.medusamining.com.au.
52
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 Nov 2013)
Mr Roy Philip Daniel
Mr Simon Jon Mottram
Executive Directors:
Mr Raul Conde Villanueva
since 25 November 2015
appointed 11 June 2020
since 24 January 2013
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 40 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. Mr Teo worked in BGC in
excess of 35 years and remains a Non-Executive Director of BGC.
On 9 June 2020 Mr Teo was appointed a Non-Executive Director of Myanmar Metals Limited. During
the past three years, Mr Teo has not served as a Director of any other ASX listed entities.
Mr Teo is Chairperson of the Nomination Committee and also a member of the Audit, Remuneration,
and Safety, Health & Environment Committees.
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 39 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.
Simon Jon Mottram
B.Sc (applied geology). F.AusIMM
Independent Non-Executive Director
Mr Mottram is a geologist with over 25 years’ experience predominantly in base and precious metals.
Mr Mottram was instrumental in taking Avanco Resources Limited, an Australian listed copper
company, through discovery to production, and subsequently being acquired by OZ Minerals Limited.
Mr Mottram has held both executive and senior management roles with several successful mining
companies both in Australia and abroad, has seen a number of discoveries advanced through to
commercial mine development, and has been central to several significant exploration successes.
Mr Mottram is a graduate of Melbourne RMIT University and a Fellow of the AusIMM.
Mr Mottram is currently a director of ASX listed companies Odin Metals Ltd, and Fin Resources Ltd.
During the past three years Mr Mottram was a Director of Avanco Resources Limited.
Mr Mottram is a member of the Audit, Nomination and Safety Health and Environment Committees.
53
DIRECTORS’ REPORT
2. DIRECTORS’ INFORMATION (continued)
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 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 40 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 appointments 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.
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
Roy Daniel
Raul Villanueva
Simon Mottram (2)
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
6
6
-
6
6
6
-
2
2
-
-
2
2
-
-
2
2
-
-
2
2
-
-
3
3
3
-
3
3
3
-
2
2
2
-
2
2
2
-
Notes:
(1) Number of meetings held during the time the Director held office during the year;
(2) Mr Simon Mottram was appointed Non-Executive Director on 11 June 2020 and is a member of the Audit, Nomination and SHE Committees
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.
54
DIRECTORS’ REPORT
6.
OPERATING RESULTS
The net consolidated profit for the financial year attributable to members of Medusa Mining
Limited after provision of income tax was US$35.4 million [2019: Consolidated profit of US$36.5
million].
Key financial results:
Description
Revenues
EBITDA
NPAT
EPS (basic)
Unit
US$
US$
US$
US$
30 June 2020
30 June 2019
Variance
$147.8M
$129.3M
$61.6M
$35.4M
$0.170
$51.4M
$36.5M
$0.176
$18.5M
$10.2M
($1.1M)
($0.006)
(%)
14%
20%
(3%)
(3%)
Medusa recorded earnings before interest, tax depreciation and amortisation (“EBITDA”) of US$61.6
million for the year to 30 June 2020. EBITDA for the previous year was a profit of US$51.4 million.
Revenues increased by approximately 14% from US$129.3 million in the previous year to US$147.8
million.
Medusa is an un-hedged gold producer and received an average price of US$1,581 per ounce from the
sale of 95,142 ounces of gold for the year (previous year: 102,500 ounces at US$1,259 per ounce).
At year end, the Company had total cash and cash equivalent in gold on metal account of US$47.1
million (2019: US$23.4M).
During the year,
• depreciation of fixed assets and amortisation of capitalised mine development, right of use asset
and mine exploration was US$21.6 million (2019: US$18.8M);
• US$6.5 million was expended on capital works associated with the new shaft construction and
infrastructure, mine expansion and sustaining capital at the mine and mill (2019: US$6.9M);
• exploration expenditure, inclusive of underground diamond drilling was US$5.6 million (2019:
US$8.9M);
• capitalised mine development costs totalled US$23.7 million for the year (2019: US$27.3M); and
• corporate overheads of US$7.1 million (2019: US$8.7M).
7.
REVIEW OF OPERATIONS
Description
Ore mined
Ore milled
Gold head grade
Gold recovery
Gold produced
Cash costs (1)
Gold sold
Unit
30 June 2020
30 June 2019
Variance
(%)
WMT
DMT
g/t
%
ounces
US$/oz
ounces
572,666
513,945
5.99
95.30
95,057
$684
95,142
$1,581
606,675
544,601
6.28
94.75
103,307
$546
102,500
$1,259
(34,009)
(30,656)
(0.29)
0.55
(8,250)
($138)
(7,358)
$322
(6%)
(6%)
(5%)
1%
(8%)
(25%)
(7%)
26%
Average gold price received
US$/oz
Note: (1) Net of development costs and includes royalties and local business taxes.
The Company produced 95,057 ounces of gold for the year, compared to 103,307 ounces from the
previous corresponding period, at an average recovered grade of 5.99 g/t gold (2019: 6.28 g/t gold).
Average cash costs was US$684 per ounce, inclusive of royalties and local business taxes, which was
higher than the previous year’s average cash costs of US$546 per ounce, and All-in-Sustaining-Costs
(“AISC”) for the year was US$1,132 per ounce of gold (2019: US$1,045 per ounce).
During the year, the spread of novel coronavirus (Covid-19) was declared a pandemic in March
2020. In response to this pandemic, the Company initiated procedures and protocols at its mining
operation to protect the safety of its workers and the local community.
The Philippine government, at federal and local levels, had enacted various plans that include the
restriction of movement within the Philippines, to reduce the spread of infection of Covid -19.
These restrictions did apply to the Co-O mine site during March 2020 and the impact upon
operations was a reduction in mining activity. As announced to the ASX market on 27 July 2020,
the impact was minimal and the Company did meet its production guidance for FY20, being at the
lower level of the guidance. The All-In-Sustaining-Costs incurred was marginally above the
guidance announced.
55
DIRECTORS’ REPORT
7.
REVIEW OF OPERATIONS (continued)
The Company has undertaken the usual assessments of impairment of its assets and the going
concern assumptions as the basis for preparing the financial report as at 30 June 2020, and no
issues have been identified.
A full review and summary information concerning the Group’s operations and exploration
activities for the financial year and the results of those operations will be available in the Review
of Operations section of the 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 Simon Mottram was appointed a Non-Executive Director on 11 June 2020.
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
• Chief Executive Officer (“CEO”) Mr David McGowan, ceased employment on 20 July 2020.
Non-Executive Chairman Mr Andrew Teo assumed the role of Interim CEO.
• The Company announced to the ASX on 28 August 2020, production guidance for FY21 of
between 90,000 ounces to 95,000 ounces at All-In-Sustaining-Costs (“AISC”) of between
US$1,200 to US$1,250 per ounce.
The slight increase in year-on-year AISC for FY21 has been anticipated, after taking into
account the ongoing impact of COVID-19 restrictions to people movement, logistics and
associated costs.
Except for the above, subsequent to Balance Date, 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 la ndholdings in the Philippines and
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
Roy Daniel
Raul Villanueva
Simon Mottram (1)
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
-
-
-
-
-
-
-
-
-
Note:
(1) Mr Simon Mottram was appointed Non-Executive Director on 11 June 2020.
56
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited)
The Directors present the FY2020 Remuneration Report for Medusa Mining Ltd (“the Company”) which
sets out the remuneration information for the Directors and other key management personnel (“KMP”)
for the year ended 30 June 2020.
The information provided in this remuneration report has been prepared in accordance with the
requirements of the Corporations Act 2001 and its regulations.
Introduction
This report outlines the Company’s approach to remuneration for its executives.
The Board recognises that the success of the business depends on the quality and engagement of its
people. To ensure the Company continues to succeed and grow, it must attract, motivate and retain
skilled Directors, Executives and employees. The Board delegates responsibility in relation to
remuneration to the Remuneration Committee to ensure that people and performance are a priority.
(a) Details of Key Management Personnel
There were no loans to Key Management Personnel during the year 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);
Roy Daniel; and
Simon Mottram (appointment Non-Executive Director on 11 June 2020).
Executive Directors -
Raul Villanueva.
Executive Officers:
David McGowan (Chief Executive Officer, ceased employment on 20 July 2020);
Peter Alphonso (Chief Financial Officer/Company Secretary); and
James Llorca (General Manager, Geology & Resources).
57
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(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 2020 and the previous financial year.
Name
Year
Short term benefits
Post-
employment
benefits
Long-term benefits
Salary/ fees Directors’ fees STI - Cash (1) STI - PRs (1)
Other (2)
Super
LSL(3)
LTI - PRs (4) Options (5)
Termination
benefits
TOTAL
Proportion of
remuneration
performance
related
Directors:
Non-Executive
Andrew Teo (6)/(9)
Roy Daniel
Simon Mottram (7)
Executive
Boyd Timler (8)
Raul Villanueva
Executive Officers:
David McGowan (9)
Peter Alphonso
James Llorca
Total
Notes:
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
-
98,152
90,000
105,990
25,612
22,278
-
-
-
15,618
432,092
425,000
308,880
276,009
260,832
251,587
230,668
230,388
50,766
52,656
3,747
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,592
-
-
-
-
-
-
-
-
-
-
-
-
-
13,728
11,599
-
-
13,728
10,218
-
-
-
-
-
-
-
-
-
-
-
-
22,749
12,580
6,358
-
7,781
2,173
-
-
-
-
-
-
-
331
-
-
17,160
17,520
17,160
17,520
17,160
17,520
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,367
6,302
-
-
8,909
-
8,909
-
-
-
-
-
-
-
-
-
-
-
(9,709)
37,899
5,797
12,506
17,566
37,899
2020
1,258,084
152,665
48,048
21,817
36,888
51,480
8,367
17,818
13,654
-
-
-
-
-
-
-
277,457
-
-
-
-
-
-
-
-
-
98,152
195,990
76,378
74,934
3,747
-
-
293,406
432,092
425,000
-
-
-
-
-
-
-
-
-
-
359,672
5.7%
344,008
-
332,750
10.3%
287,915
-
306,030
10.7%
287,980
1,608,821
-
-
-
2019
1,310,880
158,646
-
-
14,753
52,891
6,302
-
88,304
277,457
1,909,233
(1) Short Term Incentive Plan (“STI”) detailed in note 13 (k)(iii);
(2) Comprises Annual Leave accrued during the year but not paid;
(3) Comprises Long Service Leave accrued during the year but not paid;
(4) KMP Performance Rights granted under the Long Term Incentive Plan are expensed over the performance period. Refer LTI Plan de tailed in note 13 (k)(iv);
(5) Comprises value of options granted and expensed in the period. Refer note 13 (f);
(6) Mr Teo assumed the role of Interim Chief Executive Officer (“CEO”) from 7 July 2018 until 28 February 2019;
(7) Mr Simon Mottram was appointed Non-Executive Director on 11 June 2020;
(8) Mr Timler retired from the Board on 6 July 2018;
(9) Subsequent to year-end, Mr McGowan ceased employment as CEO on 20 July 2020. Pursuant to his incentive plans, the Performance Rights granted are forfeited as vesting conditions will not be met.
Mr Teo assumed the role of Interim CEO following Mr McGowan’s cessation of employment.
58
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(b) Key Management Personnel remuneration (Company and consolidated) (continued)
The relative proportions of Remuneration that are linked to performance and those that are fixed are as
follows:
Name
Directors:
Non-Executive
Andrew Teo
Roy Daniel
Simon Mottram
Executive
Raul Villanueva
Executive Officers:
David McGowan
Peter Alphonso
James Llorca
Fixed
Remuneration
At Risk:
Short Term
Incentives (STI)
At Risk:
Options/Performance
Rights (LTI)
100%
100%
100%
100%
69%
74%
74%
-
-
-
-
10%
9%
9%
-
-
-
-
21%
17%
17%
(c) Company Performance
The following table illustrates the Company performance indicators over the last five years:
Metric
Unit
2020
2019
2018
2017
2016
Net Profit/(Loss) after tax (S’000)
US$
35,385
36,489
(55,554)
(56,676)
44,329
Basic earnings per share (cents)
Dividends paid per share (cents)
US$
US$
Share price at year end, 30 June (cents)
A$
17.0
17.6
(26.7)
(27.3)
21.3
-
69
-
57
-
50
-
28
-
64
(d) Remuneration options and equity-based instruments
No 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.
(e) 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.
59
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(f) Option holdings
Financial year 2019/2020:
Name
Directors:
Non-Executive
Andrew Teo
Roy Daniel
Simon Mottram (3)
Executive
Raul Villanueva
Executive Officers:
David McGowan (4)
Peter Alphonso
James Llorca
Notes:
Balance
01/07/19
Options
granted as
remuneration
Options
exercised
Options not
exercised and
lapsed
Balance
held
30/06/20
Vested &
exercisable
30/06/20 (1)
Total not
exercisable
30/06/20 (2)
-
-
-
-
500,000
165,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
500,000
300,000
200,000
165,000
99,000
66,000
500,000
300,000
200,000
(1)
(2)
(3)
(4)
Options vested and exercisable are all the options vested at the reporting date;
Options that are not exercisable have not vested at the reporting date;
Mr Simon Mottram was appointed Non-Executive Director on 11 June 2020;
Mr David McGowan, CEO ceased employment on 20 July 2020.
The above mentioned options have been issued to the Key Management Personnel on 8 January 2018
with an expiry date of 8 January 2022 on the following terms:
Tranche Exercise price Valuation per
option
Terms of issue
A
B
C
D
A$1.00
A$1.25
A$1.50
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%
o Risk free rate - 1%
o Dividend Yield - Nil
The options hold no voting or dividend rights
60
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(f) Option holdings (continued)
Financial year 2018/2019:
Name
Directors:
Non-Executive
Andrew Teo
Roy Daniel
Peter Hepburn-Brown (3)
Executive
Boyd Timler (4) (5)
Raul Villanueva(6)
Executive Officers:
David McGowan
Peter Alphonso
James Llorca
Notes:
Balance
01/07/18
Options
granted as
remuneration
Options
exercised
Options not
exercised and
lapsed
Balance
held
30/06/19
Vested &
exercisable
30/06/19 (1)
Total not
exercisable
30/06/19 (2)
-
-
-
1,200,000
500,000
500,000
330,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(840,000)
360,000
360,000
(500,000)
-
-
-
-
-
-
-
-
500,000
150,000
350,000
(165,000)
165,000
49,500
115,500
-
500,000
150,000
350,000
(1)
(2)
(3)
(4)
(5)
(6)
Options vested and exercisable are all the options vested at the reporting date;
Options that are not exercisable have not vested at the reporting date;
Mr Hepburn-Brown retired from the Board on 3 September 2018;
Mr Timler retired from the Board on 6 July 2018;
Refer below options issued to Boyd Timler; and
Refer below options issued to Raul Villanueva.
Boyd Timler:
On 24 November 2016, 1,200,000 options were issued to Boyd Timler, the company’s previous
Managing Director (who retired on 06 July 2018), subject to the rules of Medusa Mining Limited Share
Option Plan. Upon his retirement, the remaining share options yet to be vested were forfeited.
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 Risk free rate - 2.07%
o Dividend Yield - Nil
Raul Villanueva:
On 9 February 2015, 500,000 options were issued to Raul Villanueva. The options which hold no
voting or dividend rights have an expiry date of 09 February 2019 and are exercisable at A$1.00 per
option.
Under the terms of the Issue the employee 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 he remained an employee of the Company a year later
on 9 February 2018.
At reporting date, all Mr Villanueva’s options had expired.
David McGowan, Peter Alphonso and James Llorca:
Please refer to table above “Financial year 2019/2020.”
61
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(g) Performance Rights
The movement during the year in the number of Performance Rights over ordinary shares in Medusa
Mining Limited held directly, indirectly or beneficially, by each Executive, including their personally
related entities is as follows:
Financial year 2019/2020:
Name
Executive Officers:
David McGowan - STI (2)
David McGowan - LTI (2)
Peter Alphonso - STI
Peter Alphonso - LTI
James Llorca - STI
James Llorca - LTI
Balance
01/07/19
Rights
granted as
remuneration
Rights
Vested
Rights
Forfeited
Balance held
30/06/20
(unvested)
Max value yet
to vest (1)
-
-
-
-
-
-
59,000
700,000
42,000
350,000
37,000
350,000
-
-
-
-
-
-
-
-
-
-
-
-
59,000
700,000
42,000
350,000
37,000
350,000
-
-
25,658
89,501
22,603
89,501
Notes:
(1) The maximum value of deferred performance rights yet to vest has been determined as the amount of the grant date fair value of the
Performance Rights that is yet to be expensed. The value at grant date is calculated in accordance with AASB2 Share Based
Payments.
(2) Subsequent to 30 June 2020, Mr McGowan ceased employment on 20 July 2020. Pursuant to his incentive plans, the
Performance Rights granted are forfeited as vesting conditions will not be met
(3) The Terms and conditions relating to the Long Term Performance Rights are outlined in Note 13 (k)(iv) of the Remuneration Report.
(4) Model inputs for market performance rights valued using the Monte Carlo Simulations model granted during the year include:
Grant date - 13 March 2020
Life - 3 years
Share price at grant date - 44.5 cents
Share price volatility - 58%
Risk free rate - 0.55%
Dividend Yield - Nil
30 day VWAP - 51.76 cents
The fair value of Long Term Performance Rights is $0.26 per right.
(5) On 17 January 2020, the Company issued 167,000 Performance Rights to its executives pursuant to its Short-term incentive plan
based on the performance of the Company for the year ended 30 June 2019. Under the terms of the issue, the executives would be
required to remain in employment of the Company for a one-year vesting period, until 17 January 2021.
The fair value of the Short Term Performance Rights which has been recognised at grant date and based on the share price of the
Company is $0.61 per right.
(h) 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:
Balance
1/07/19
Shares held at
appointment
Bonus
issue of
shares
Shares
purchased
Options
exercised
Shares
sold
Balance
30/06/20
Financial year 2019/20:
Name
Directors:
Non-Executive
Andrew Teo
Roy Daniel
Simon Mottram (1)
Executive
120,000
815,875
-
Raul Villanueva
50,000
Executive Officers:
David McGowan (2)
-
Peter Alphonso
127,500
James Llorca
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,000
815,875
-
50,000
-
127,500
-
Notes:
(1) Mr Simon Mottram was appointed Non-Executive Director on 11 June 2020;
(2) Subsequent to 30 June 2020, Mr David McGowan ceased employment on 20 July 2020.
62
DIRECTORS’ REPORT
13.
REMUNERATION REPORT (Audited) (continued)
(h) Share holdings (continued)
Financial year 2018/19:
Name
Directors:
Non-Executive
Andrew Teo
Roy Daniel
Peter Hepburn-Brown (1)
Executive
Boyd Timler (2)
Raul Villanueva
Executive Officers:
David McGowan
Peter Alphonso
James Llorca
Balance
1/07/18
Shares held at
appointment
Bonus
issue of
shares
Shares
purchased
Options
exercised
Shares
sold
Balance
30/06/19
120,000
815,875
-
50,000
50,000
-
127,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(50,000)
-
-
-
-
120,000
815,875
-
-
50,000
-
127,500
-
Notes:
(1) Mr Hepburn-Brown retired from the Board on 3 September 2018; and
(2) Mr Timler retired from the Board on 6 July 2018.
(i) Executive Remuneration Governance
The information contained within this section provides an overview of executive remuneration
governance at Medusa Mining.
(i) 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.
(ii) Remuneration Committee
The Remuneration Committee is a sub-committee of the Board, which operates in accordance
with the Remuneration Committee Charter and the requirements of the Corporations Act 2001
and its regulations. The Remuneration Committee is responsible for making recommendations to
the Board on:
▪
The Company’s remuneration policy and structure;
▪ Executive remuneration policy for Key Management Personnel (“KMP”);
▪ Remuneration levels of the Managing Director (if applicable) and KMP;
▪ Operation of incentive plans and key performance hurdles for KMP;
▪ Equity based remuneration plans for KMP; and,
▪ Non-Executive Director (“NED”) remuneration.
The Remuneration Committee’s objective is to ensure remuneration policies and structures are
fair and competitive and aligned with the long-term interests of the company. The Remuneration
Committee periodically obtains independent remuneration information to ensure NED fees and
executive remuneration packages are appropriate and in line with the market.
63
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(i) Executive Remuneration Governance (continued)
(iii) Use of Remuneration Advisors
In FY2019, the Remuneration Committee appointed BDO Reward WA Pty Ltd (‘BDOR’) as its
external remuneration advisor to assist with the review of the overall executive remuneration
framework resulting in some changes to the Company’s approach to executive pay. The
remuneration changes to executive remuneration policy and performance management for FY2020
are covered in section (k) of the remuneration report.
BDOR’s terms of engagement included specific measures designed to protect its independence.
The Remuneration Committee recognises that, to effectively perform its role, it is necessary for
BDOR to interact with members of the Company’s management. However, to ensure BDOR
remained independent, members of the Company’s management were precluded from requesting
services that would be considered to be a “remuneration recommendation” as defined by the
Corporations Amendment (improving Accountability on Director and Executive Remuneration) Act
2011.
The information contained within this section outlines details pertaining to the executive
remuneration policy and structure for FY2020.
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:
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 Committee reviews the remuneration of Executives, including the Chief
Executive Officer, annually, 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.
(iv) Executive Remuneration Framework
The table below provides an overview of the different remuneration components within the Medusa
Mining framework.
Objective
Attraction and Retention
Remuneration
component
Purpose
Total Fixed Remuneration
(‘TFR’) consists of base
salary, any non-monetary
benefits and employer
contributions to
superannuation funds.
The level of fixed
remuneration is set to
provide a base level of
remuneration, which is
both appropriate to the
position and is competitive
in the market.
Variable Remuneration is performance linked and designed to
reward key management personnel for meeting or exceeding
their financial and personal objectives.
Current Year Performance
Short-Term Incentive
(“STI”) is an ‘at risk’ bonus
provided in the form of
cash
The STI ensures pay for
performance, for
achievement of a
combination of Company
and Individual KPIs.
Long Term Sustainable
Performance
Long-Term Incentive (“LTI”)
provided as options over
ordinary shares or
performance rights to
acquire fully paid ordinary
shares in the Company.
The LTI is focused on the
creation of long-term
shareholder wealth.
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.
64
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(i) Executive Remuneration Governance (continued)
(v) Long-term Incentives (“LTI”)
An outline of the key elements of the LTI arrangements are provided below:
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 and Company performance in setting the
performance criteria applicable to its LTI based remuneration.
Historically, LTI’s granted to key management personnel have been in the form of options over
ordinary shares. The Board has implemented new LTI measures, including a performance rights
plan in which key management personnel can participate.
(j) Non-Executive 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 paid to Non-Executive Directors are as follows:
▪ Andrew Boon San Teo (Chairperson): A$150,000 per annum;
▪ Roy Daniel: A$75,000 per annum; and
▪ Simon Mottram: A$75,000 per annum.
(k) Executive Remuneration changes for FY2020
As a result of the comprehensive review of the Company’s executive remuneration policy and practice
conducted in FY2019, a number of changes have been implemented for FY2020 with effect from 01
July 2019.
Below is a summary of the key elements of the changes to the executive remuneration approach and
the at risk remuneration structure.
(i) Fixed and Total Remuneration Approach
Total Fixed Remuneration (‘TFR’) acts as a base level reward for a competent level of
performance. It includes cash, compulsory superannuation contributions and any non-monetary
benefits. TFR will be targeted at the market median (50th percentile) with flexibility based on:
▪
▪
▪
the size and complexity of the role;
the criticality of the role to successful execution of the business strategy;
role accountabilities;
▪ skills and experience of the individual; and
▪ market pay levels for comparable roles.
The Total Remuneration Package (being TFR, STI and LTI) will be positioned at the median of the
market (50th percentile), with the opportunity to earn a total remuneration up to the upper quartile
(75th percentile) in the event that both the individual and the business exceed performance targets.
When determining the relevant market for each role, the Company will consider companies which
are similar in size, complexity of operations, sector and risk profile from which it sources talent,
and to whom it could potentially lose talent.
65
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(k) Executive Remuneration Changes for FY2020 (continued)
(ii) Executive Remuneration Framework
The total remuneration package will consist of the following elements of pay.
Remuneration Elements
Purpose
Category
Definition of Pay Category
Total Fixed Remuneration
(“TFR”)
Pay for meeting role
requirements
Fixed pay
Pay linked to the present value or
market rate of the role
Short Term Incentive
(“STI”)
Incentive for the
achievement of
annual objectives
Short term
incentive pay
Long Term Incentive &
Reward (“LTI”)
Long term
incentive pay
Incentive for
achievement of
sustained business
long term strategies
(non-market
measures)
Reward for executive
performance over the
long term (market
measures)
Long term reward
pay
Pay for delivering the annual
operational plan for the Company.
Short Term Incentive pay is linked to
the achievement of short term ‘line-
of-sight’ performance goals
It reflects ‘pay for short term
performance’.
Pay for delivering long-term business
sustainability for the Company. Long
Term Incentive pay is linked to the
achievement of long term ‘line-of-
sight’ performance goals
It reflects ‘pay for long term
performance’
Pay for creating value for
shareholders. Reward pay is linked
to shareholder returns
It reflects ‘pay for results’
(iii) Short Term Incentive Plan Outline
An outline of the key elements of the proposed Short-Term Incentive Plan as it relates to the
Company’s KMP is provided below.
Purpose
STI opportunity
Performance
targets
Performance
assessment
Motivate and reward employees for contributing to the delivery of annual business
performance.
The STI opportunity offered to each Executive as a percentage of TFR will depend on
Company and individual performance but can range from zero to a maximum of 50%
for the CEO and 40% for Executives.
STI payments will be awarded 50% cash and 50% zero exercise price options
(ZEPO’s) on above threshold performance against a range of Company and individual
performance objectives.
The payment of a short-term incentive to Executives is an at risk component of the
individuals total remuneration given that a set of performance targets must be met prior
to payment. These targets are based on metrics that are measurable, transparent and
achievable, designed to motivate and incentivise the recipient to achieve high
performance aligned with Company objectives and near-term shareholder value
creation.
The Company employs a system of continuous performance feedback to drive
performance throughout the year, however a final performance assessment occurs
annually following the completion of the financial year for each Executive. Executives
are assessed on their contribution to the achievement of Company performance
objectives and individual performance objectives.
Measurement period
The STI will be an annual plan that operates from 01 July to 30 June each year.
STI deferral
component
The equity component of the STI will vest on the twelve (12) month anniversary date of
the STI award date.
Cessation of
employment
Board discretion
Vesting of the equity component of the STI granted to Executive KMP is based on a
continuous service condition being met and is designed to act as a driver of retention
and medium-term value creation.
In the event that the Executive’s employment with the Company terminates prior to
vesting of all ZEPO’s, outstanding unvested ZEPO’s will be reviewed by the Board and
may or may not vest depending on the circumstances of the Executive’s cessation of
employment.
The payments of all STI’s are subject to Board approval. The Board has the discretion
to adjust remuneration outcomes higher or lower to prevent any inappropriate reward
outcomes, including reducing (down to zero, if appropriate) any STI payment.
66
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(k) Executive Remuneration Changes for FY2020 (continued)
As part of the annual business planning process the Board determines the key performance
indicators to reflect targets for the key performance objectives of the business for the following year.
At the end of the year, the Board makes a rigorous assessment, taking into account quantitative and
qualitative measures.
Key Result Area
Annual Measure and Rationale for Inclusion
Individual performance Measures
Each Executive KMP agrees an individual scorecard of performance objectives at
the start of the year against which their performance is assessed. A maximum of 4
key
the specific
responsibilities of each role annually.
individual performance objectives will be set based on
Rationale
Designed to specifically focus individual Executives on key performance elements
that align to the Company’s strategic plan and profitability drivers that are within the
Executives control.
Company financial
performance
Measures
Key financial measure meeting targeted All In Sustaining Cost
Rationale
Reflects the alignment of business strategy to create sustainable value for
shareholders.
Company safety and
environmental
performance
Measures
KPI for Total Injury Frequency Rate over 12 months
Rationale
Highlights performance on metrics to effectively manage the risks inherent in the
Company’s operations and to ensuring activities do not have an adverse impact on
the environment.
Company operational
performance
Measures
Key physical measure meeting targeted Gold Production
Rationale
Delivering strong production performance is a key enabler to funding the
achievement of the Company’s strategic plan and ensures management delivers on
core initiatives relating to Company strategy and operating model.
Growth of Company
future opportunities
Measures
Meeting mining inventory targets as determined by the Board of Directors.
Rationale
Demonstrates the Company’s performance in achieving the organic growth of
current assets.
Company critical
strategic objectives
Measures
Completion of critical shaft project
Rationale
Focuses achievement on key strategic enablers.
67
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(k) Executive Remuneration Changes for FY2020 (continued)
The STI award comprises a cash component of 40% and a Performance Right component of 60%. Each
Performance Right awarded incorporates a vesting condition that requires each KMP to remain an
employee of the Company for a period of twelve months from date of grant of 17 January 2020. Each
Performance Right is a right to acquire one share in the Company for nil consideration. The fair value of
the Short Term Performance Rights which has been recognised at grant date and based on the share
price of the Company is $0.61 per right in accordance with AASB 2 share based payments.
The STI award is determined following a review of the FY19 results and typically occurs in the second
quarter of the subsequent financial year. No amount is provided for or included in the financial report and
remuneration report until such a review has taken place.
Based on the assessment, the STI awarded for the 2019 financial year which were paid, and Performance
Rights (“PRs”) granted are detailed in the following table:
Name
Position
Opportunity
STI
Achieved
STI
Cash ($)
Cash ($)
Opportunity
STI
Vesting Outcome
STI
Performance
Right
Performance
Right
David McGowan
Chief Executive Officer
20,592
20,592
Peter Alphonso
Chief Financial Officer
13,728
13,728
James Llorca
GM, Geology & Resources
13,728
13,728
36,043
25,658
22,603
Note 1
Note 2
Note 2
Notes:
(1) Mr McGowan ceased employment on 20 July 2020 and is not entitled to Performance Rights as the twelve month vesting condition will
not be met.
(2) The remaining vesting condition is subject to continuous employment for 12 months from date of grant to 17 January 2021.
68
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(k) Executive Remuneration Changes for FY2020 (continued)
(iv) Long-term Incentive Plan Outline
An outline of the key elements of the Long-Term Incentive (‘LTI’) Plan as it relates to the
Company’s KMP is provided below.
Purpose
Focus Executive attention on driving sustainable long-term growth and align the
interests of Executives with those of shareholders.
LTI opportunity
The LTI opportunity is determined by the Executives role within the business and is
awarded by the offer of a number of performance rights or zero exercise price options
(‘ZEPO’s’) based on a percentage of TFR. The LTI opportunity for the CEO is 90% and
for Executives is 70%.
Performance
hurdles
In FY2020 and going forward, the Company will use a combination of non-market and
market equally weighted performance hurdles utilising the following measures:
1. Non-market measures to be determined by the Board of Directors (50%
weighting)
2. Market Measures (50% weighting):
(a) Relative Total Shareholder Return (‘TSR’); and
(b) Absolute Total Shareholder Return
Vesting
Service
conditions
Performance
conditions
Vesting of the performance rights ZEPO’s granted to Executive KMP is based on a
continuous service condition and performance conditions as detailed below
The LTI award is subject to a service condition. This condition is met if the KMP’s
employment with the Company is continuous for three years commencing on or around
the grant date and is aimed at the retention of KMP’s.
Financial and Strategic measures
The Board will determine financial and strategic measures that align with the
Company’s long-term objectives.
Relative TSR
The TSR scorecard for the three-year measurement period is determined based on a
percentile ranking of the Company’s TSR results relative to the TSR of each of the
companies in the peer group over the same three-year measurement period.
The Board considers relative TSR an appropriate performance hurdle because it
ensures that a proportion of each participant’s remuneration is linked to the
comparative return received by shareholders from holding shares in a company in the
peer group for the same period.
Absolute TSR
The increase in the Company’s absolute TSR will be measured over a three-year
period.
The Board considers absolute TSR an appropriate performance hurdle because it
ensures KMP performance is rewarded when a year-on-year improvement in
shareholder value is achieved.
Vesting
schedule
The number of ZEPO’s vested after 3 years is subject to achievement of performance
conditions as shown above
Measurement
period
Cessation of
employment
Testing occurs three years from 01 July of the relevant financial year.
In the event that the KMP’s employment with the Company terminates prior to the
vesting of all rights/options, outstanding unvested rights/options will be reviewed by the
Board and may or may not vest depending on the circumstances of the cessation of
employment.
In the case of changes of control incentives will be awarded on a pro rata basis.
Peer group
The Company’s TSR performance for rights/options issued during FY2020 will be
assessed against a peer group comprised of members of the ASX 300 Metals and
Mining Index.
On 13 March 2020, the Company issued Long Term Performance Rights to its KMP Executive
Officers, excluding Directors of the Company. Under the terms of the issue, KMP’s would be
required to remain in employment of the Company for a three-year vesting period, until 13 March
2023.
Each Performance Right is a right to acquire one share in the Company for nil consideration.
The value at grant date of Performance Rights granted as part of remuneration is calculated in
accordance with AASB2 Share Based Payments. The value for a Performance Right granted has
been calculated as $0.26 each.
69
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(k) Executive Remuneration Changes for FY2020 (continued)
(iv) Long-term Incentive Plan Outline (continued)
The terms and conditions of the Long-term performance rights include the following:
Long Term
Incentive
Measures
Financial
measure:
Earnings per
share growth
Weighting
relative to
Total PR
issued
Targets
Range of growth/change
Percentage allocation of
weighting
17%
• Negative
Zero
• 0 to 5% per annum growth
Pro rata 0% to 40%
• 5 to 10% per annum growth
Pro rata 40% to 100%
pro rata
• Greater than 10% per
100%
annum growth
16%
• Negative
Zero
• Depletion replacement to
Pro rata 0% to 40%
20% growth
• 20% to 40% growth
Pro rata 40% to 100%
• Greater than 40%
100%
17%
• < 70% of decline developed
Zero
• 70% to 85%
Pro rata 0% to 100%
• >85% of decline
100%
25%
• Below 50th percentile
• At 50th percentile
• 50th to 75th percentile
• Greater than 75th percentile
Zero
50%
Pro rata 50% to 100%
100%
Score mechanism
EPS calculation to
exclude non-recurring
items and measured
as the cumulative
annual growth rate
over a 3 year period
Based on JORC
compliant reports 2019
and 2022
Based on the decline
metres developed at end
of June 2022, based on
plan to access level 14.
70% = 3,450 metres of
decline,
85% = 4,190 metres.
Measured against Peer
Group based on 30 day
VWAP at the relative
measure points at 30
June 2019 and 30 June
2022
Company
growth:
Increase in ore
reserves
Long-term
Infrastructure
target:
Decline
development
Relative total
shareholder
returns:
Measure of
Company return
compared to
peer group.
Absolute total
shareholder
return:
Measure of
Company return
25%
• Below 20%
Zero
• Between 20 to 50%
• Greater than 50%
Pro rata 50% to 100%
100%
Measure by comparing
30 day VWAP at 30
June 2019 to 30 day
VWAP at 30 June 2022
The following companies have been identified by the Company to comprise the Peer Group. The
Remuneration Committee may recommend to the Board to either include or exclude gold mining
organisations available on this list to reflect changes in the industry:
Company
ASX Code
Austral Gold Limited
Blackham Resources Limited
Dacian Gold Limited
Emerald Resources Limited
Kingrose Mining Limited
Millennium Minerals Limited
Oceana Gold Limited
Pantoro Limited
Persues Mining Limited
Ramelius Resources Limited
Red 5 Limited
Regis Resources Limited
St Barbara Limited
Troy Resources Limited
AGD
BLK
DCN
EMR
KRM
MOY
OGC
PNR
PRU
RMS
RED
RRL
SBM
TRY
70
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(l) Statutory Remuneration Disclosures
(i) Executive Contracts
Remuneration and other terms of employment for the Executives are formalised in service
agreements. The service agreements specify the components of remuneration, benefits and notice
periods. Participation in the STI and LTI plans is subject to the Boards discretion. Other major
provisions of the agreements relating to remuneration are set out below.
David McGowan (Chief Executive Officer - ceased employment on 20 July 2020)
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 Executive Officer (“CEO”) of the Company and
is responsible for all operational aspects within the Company
Fixed remuneration:
A$500,000 per annum (inclusive of a superannuation), subject to annual review by
the Board. During the review, the Board will consider the progress of the Company
and comparable industry standards.
Variable remuneration - Short term incentive:
The Employee may be entitled to participate in the Short-Term Incentive Plan as
detailed in this report.
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 as detailed in
this report.
Termination by the Company:
The Employer may terminate the Employee's employment for any reason by giving
the Employee 3 month’s 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.
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:
A$368,000 per annum (inclusive of a superannuation), subject to annual review by
the Board. During the review, the Board will consider the progress of the Company
and comparable industry standards.
Variable remuneration - Short term incentive:
The Employee may be entitled to participate in the Short-Term Incentive Plan as
detailed in this report.
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 as detailed in
this report.
Termination by the Company:
The Employer may terminate the Employee's employment for any reason by giving
the Employee 3 month’s 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.
71
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(l) Statutory Remuneration Disclosures (continued)
(i) Executive Contracts (continued)
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$412,000 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 standards.
Variable remuneration - Short term incentive:
The Employee may be entitled to participate in the Short Term Incentive Plan as
detailed in this report.
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 as detailed in
this report.
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 month’s 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.
Raul Villanueva (Executive Director of Medusa Mining Limited and President of Philsaga Mining Corporation)
On 10 December 2012, Philsaga Mining Corporation (“PMC”) executed an employme nt contract
with Raul Villanueva.
Under the terms of the contract, PMC has primarily engaged Mr Villanueva to the position of
President of PMC. His role as President, involves managing the business affairs of PMC,
implementing administrative and operational policies, attending to industrial relation matters and
any other mining activities and associated complimentary services.
Mr Villanueva who is also a Director of Medusa Mining Limited, receives an annual salary of
$425,000 which is subject to annual reviews by the Board. During the review, the Board will
consider the progress of the Company and comparable industry standards.
PMC 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.
72
DIRECTORS’ REPORT
13. REMUNERATION REPORT (Audited) (continued)
(l) Statutory Remuneration Disclosures (continued)
(ii) 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).
(m) Related Parties
Related parties:
Andrew Teo, Roy Daniel, Peter Hepburn-Brown, Simon Mottram, Boyd Timler,
Raul Villanueva, David McGowan, Peter Alphonso and James Llorca.
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.
At the Annual General Meeting of shareholders held on 7 November 2019 a 94.7% majority voted in
favour of adopting the Remuneration Report.
End of Remuneration Report
(n) 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
24 November 2020
24 November 2020
24 November 2020
24 November 2020
8 January 2022
8 January 2022
8 January 2022
8 January 2022
TOTAL
A$1.00
A$1.25
A$1.50
A$1.75
A$1.00
A$1.25
A$1.50
A$1.75
90,000
90,000
90,000
90,000
416,250
416,250
416,250
416,250
90,000
90,000
90,000
90,000
416,250
416,250
416,250
416,250
2,025,000
2,025,000
(o) Shares issued on exercise of options/rights
During or since the end of the financial year no options were exercised.
73
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, Daniel, Villanueva, Mottram, McGowan, Alphonso and Llorca and the following former Directors and
Officers Messrs Davis, Weinberg, Angeles, Hepburn-Brown, Timler, Powell and Gregory against all liabilities
to another person (other than the Company or a related body corporate) that may arise from their position as
Directors and Officers 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 and Australia. 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.
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)
b)
c)
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;
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;
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 (Audit) Pty Ltd for non-audit services provided during
the year ended 30 June 2020:
Item description
Taxation
Remuneration consulting
IFRS Advisory
Total
Unit
US$
US$
US$
US$
2020
29,363
3,129
10,950
43,442
2019
39,745
5,429
2,874
48,048
74
DIRECTORS’ REPORT
19. AUDITOR’S INDEPENDENCE DECLARATION
The Lead Auditor’s Independence Declaration for the year ended 30 June 2020 has been received and can be
found on page 76 of this 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 31st day of August 2020
75
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 2020, 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, 31 August 2020
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.
76
CONTENTS OF FINANCIAL STATEMENTS
Contents of Financial Statements
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
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
78
79
80
81
82
121
122
77
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the year ended 30 June 2020
Revenue
Cost of sales
Gross Profit
Other income
Exploration & Evaluation expenses
Administration expenses
Other expenses
Profit/(Loss) before income tax expense
Income tax (expense)/benefit
Profit/(Loss) for the year after income tax expense
Consolidated
Note
2020
US$000
2019
US$000
2
147,829
129,320
(85,585)
(75,409)
62,244
53,911
209
(1,583)
(9,691)
282
(1,688)
(9,996)
(12,438)
(11,106)
38,741
(3,356)
35,385
31,403
5,086
36,489
2
3
4
Other comprehensive profit/(loss):
Items that may be reclassified subsequently to profit or loss:
Movement in other reserves
Exchange differences on translation of foreign operations (net of tax)
(1,269)
405
310
5,950
Total comprehensive profit/(loss) attributable to the owners
34,521
42,749
Overall operations:
Basic profit/(loss) per share
Diluted profit/(loss) per share
5
5
0.170
0.169
0.176
0.172
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
78
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2020
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
Mine Rehabilitation
Development expenditure
Deferred tax assets
Right-of-use assets
Total Non-current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade & other payables
Borrowings
Provisions
Lease Liabilities
Total Current Liabilities
NON-CURRENT LIABILITIES
Borrowings
Deferred tax liability
Provisions
Lease Liabilities
Total Non-current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained profits/(accumulated losses)
TOTAL EQUITY
Consolidated
Note
2020
US$000
2019
US$000
24 (a)
6
7
8
9
10
11
17
16
13
14
15
16
14
17
15
16
19
20
23
38,852
9,682
15,479
732
64,745
19,307
15,070
446
1,425
64,490
23,080
1,899
125,717
190,462
16,011
5,457
466
532
18,109
5,188
12,739
789
36,825
28,506
15,743
580
1,793
50,193
18,427
-
115,242
152,067
14,379
6,679
401
-
22,466
21,459
296
257
7,590
1,432
9,575
32,041
150
778
5,938
-
6,866
28,325
158,421
123,742
102,902
102,902
6,157
49,362
6,779
14,061
158,421
123,742
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
79
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2020
Share
capital
ordinary
Retained
profits/
Accumulated
losses
Share
based
payment
reserves
Other
reserves
US$000
Foreign
currency
translation
reserve
Total
Note
US$000
US$000
US$000
US$000
US$000
CONSOLIDATED
Balance at 30 June 2018
102,902
(21,370)
994
Change in accounting policy
-
(1,982)
-
Balance as at 01 July 2018
102,902
(23,352)
994
Net profit/(loss) after tax
Other comprehensive profit/(loss)
Total comprehensive profit/(loss) for the year
Transactions with owners, in their capacity as
owners, and other transfers
Share options expensed
21
Transfer from option reserve
-
-
-
-
-
-
-
-
-
317
82,843
-
(1,982)
317
80,861
-
36,489
310
310
5,950
6,260
5,950
42,749
36,489
-
36,489
-
-
-
-
132
924
(924)
-
-
-
-
132
-
Balance at 30 June 2019
102,902
14,061
202
310
6,267
123,742
Balance at 01 July 2019
Net profit/(loss) after tax
Other comprehensive profit/(loss)
Total comprehensive profit/(loss) for the year
Transactions with owners, in their capacity as
owners, and other transfers
Share options expensed
21
Transfer from option reserve
102,902
14,061
202
310
6,267
123,742
-
-
-
-
-
35,385
-
35,385
-
(84)
-
-
-
158
84
444
-
-
35,385
(1,269)
(1,269)
405
405
(864)
34,521
-
-
-
-
158
-
(959)
6,672
158,421
Balance at 30 June 2020
102,902
49,362
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
80
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers & employees
Payments for exploration & evaluation activities
Other income
Interest received
Income tax paid
Consolidated
Note
2020
US$000
2019
US$000
147,829
129,320
(84,456)
(1,583)
79
130
(71,392)
(1,688)
118
159
(5,230)
(7,334)
Net cash provided by operating activities
24(b)
56,769
49,183
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for non-current assets
Payment for development activities
(6,624)
(27,723)
(6,680)
(36,312)
Net cash provided by/(used in) investing activities
(34,347)
(42,992)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment for lease liabilities
(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
(532)
(1,076)
(1,608)
20,814
18,109
(71)
Cash and cash equivalent at the end of the year
24(a)
38,852
The above Consolidated Statement of Cash Flows should be used in conjunction with the accompanying notes.
-
324
324
6,515
11,198
396
18,109
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
Contents of Notes to the Consolidated Financial Statements
Page number
83
96
96
97
97
98
98
98
98
98
99
100
102
102
102
104
105
105
106
107
108
111
111
112
113
116
116
117
117
118
120
120
1.
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.
31.
32.
Statement of significant accounting policies
Revenue
Expenses
Taxation
Earnings/(Loss) per share
Trade and other Receivables - Current
Inventories
Other current assets
Trade and other Receivables – Non-Current
Property, plant and equipment
Development expenditure
Impairment of non-current assets
Trade and other payables
Borrowings
Provisions
Leases
Deferred tax
Auditor’s remuneration
Issued capital
Reserves
Share-based payments
Investment in subsidiaries
Retained profits and Accumulated Losses
Notes to the statement of cash flows
Financial risk management
Commitments
Contingent liabilities
Related parties
Events subsequent to reporting date
Segment information
Parent company information
Company details
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
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,
Interpretations, other authoritative
including Australian Accounting
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 31.
The financial statements were authorised by the Directors on 27 August 2020.
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 at 30 June 2020. 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 2020 is presented in note 22.
(b)
New and amended accounting standards and interpretations issued but not yet effective
There are no new standards, amendments to standards and interpretations identified that may impact
the entity in the period of initial application.
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Adoption of new and amended accounting standards
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by
the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting
period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not
been early adopted. The following Accounting Standards and Interpretations are most relevant to the
consolidated entity:
•
Interpretation 23 Uncertainty over Income Tax Treatments
The interpretation outlines recognition and measurement requirements of AASB 112 Income Taxes
and how they should be applied when there is uncertainty over income tax treaties, having no material
impact on the Group.
• AASB 16 Leases
The impact of the adoption of the standard and the new accounting policies are disclosed below.
AASB 16 Leases replaces AASB 117 Leases and Interpretation 4 in determining whether an
arrangement contains a Lease. In accordance with the transitional provisions of AASB 16, the Group
has elected to adopt AASB 16 using the modified retrospective approach, where the lease liability is
measured at the present value of future lease payments on the initial date of application, being 1 July
2019. In determining the present value, the discount rate is determined by reference to the group’s
incremental borrowing rate on the date of initial application of the standard (1 July 2019).
On transition to AASB 16 the Group has measured its right of use assets at the amount of the lease
liability, adjusted for any lease prepayments or accruals recognised under the old leasing standard,
AASB 117.
In applying the modified retrospective approach, the Group has taken advantage of the following
practical expedients:
• A single discount rate has been applied to portfolios of leases with reasonably similar
characteristics.
• Leases with a remaining term of 12 months or less from the date of application have been
accounted for as short-term leases (i.e. not recognised on balance sheet) even though the initial
term of the leases from lease commencement date may have been more than 12 months.
The weighted average incremental borrowing rate applied to lease liabilities on 1 July 2019 was 6.03%.
The Group’s operating lease commitment at 30 June 2019 can be reconciled to the aggregate lease
liability recognised in the statement of financial position at 1 July 2019 as follows:
Operating lease commitment at 30 June 2019
Add:
Adjustment as a result of recognising different treatment of extension options discounted
at an annual rate of 5.35% & 6.25%
Lease liability recognised as at 01 July 2019
of which are:
Current Liability
Non-Current Liability
Right of use asset recognised as at 01 July 2019
Changes in Accounting Policies
US$ 000
448
1,922
2,370
415
1,955
2,370
The following discloses the new accounting policies that have been applied from 1 July 2019, where
they are different to those applied in prior periods.
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c)
Adoption of new and amended accounting standards (continued)
AASB 16 Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
•
•
leases of low value assets; and
leases with a term of 12 months or less.
Initial recognition - Lease liability
Lease liabilities are measured at the present value of the contractual payments due to the lessor over
the lease term, with the discount rate determined by reference to the rate inherent in the lease unless
(as is typically the case) this is not readily determinable, in which case the group’s incremental
borrowing rate on commencement of the lease is used. Variable lease payments are only included in
the measurement of the lease liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain unchanged throughout the
lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also includes:
• amounts expected to be payable under any residual value guarantee;
•
the exercise price of any purchase option granted in favour of the group if it is reasonable certain to
assess that option; and
• any penalties payable for terminating the lease, if the term of the lease has been estimated on the
basis of termination option being exercised.
Initial recognition - Right-of-use asset
Right of use assets are initially measured at the amount of the lease liability, reduced for any lease
incentives received, and increased for:
•
•
•
lease payments made at or before commencement of the lease;
initial direct costs incurred; and
the amount of any provision recognised where the group is required to dismantle, remove or restore
the leased asset.
Subsequent measurement - lease liability and right of use asset
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant
rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are
amortised on a straight-line basis over the remaining term of the lease or over the remaining economic
life of the asset if, rarely, this is judged to be shorter than the lease term.
Subsequent measurement - changes in estimates
When the group revises its estimate of the term of any lease (because, for example, it re-assesses the
probability of a lessee extension or termination option being exercised), it adjusts the carrying amount
of the lease liability to reflect the payments to make over the revised term, which are discounted using
a revised discount rate (being the interest rate implicit in the lease for the remainder of the lease term
or, if that cannot be readily determined, the Group’s incremental borrowing rate at the re-assessment
date). An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised
carrying amount being amortised over the remaining (revised) lease term.
The carrying value of lease liabilities is also revised when the variable element of future lease
payments dependent on a rate or index is revised or there is a revision to the estimate of amounts
payable under a residual value guarantee. In both cases an unchanged discount rate is used. In both
cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised
carrying amount being amortised over the remaining (revised) lease term.
Subsequent measurement - modifications
When the group renegotiates the contractual terms of a lease with the lessor, the accounting depends
on the nature of the modification:
•
•
if the renegotiation results in one or more additional assets being leased for an amount
commensurate with the standalone price for the additional rights-of-use obtained, the modification
is accounted for as a separate lease in accordance with the above policy
in all other cases where the renegotiated increases the scope of the lease (whether that is an
extension to the lease term, or one or more additional assets being leased), the lease liability is
remeasured using the discount rate applicable on the modification date, with the right-of-use asset
being adjusted by the same amount.
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(c)
Adoption of new and amended accounting standards (continued)
Subsequent measurement - modifications (continued)
•
if the renegotiation results in a decrease in the scope of the lease, both the carrying amount of the
lease liability and right-of-use asset are reduced by the same proportion to reflect the partial of full
termination of the lease with any difference recognised in profit or loss. The lease liability is then
further adjusted to ensure it’s carrying amount reflects the amount of the renegotiated payments
over the renegotiated term, with the modified lease payments discounted at the rate applicable on
the modification date. The right-of use asset is adjusted by the same amount.
For contracts that both convey a right to the Group to use an identified asset and require services to be
provided to the group by the lessor, the Group has elected to account for the entire contract as a lease,
i.e. it does not allocate any amount of the contractual payments to, nor account separately for, any
services provided by the supplier as part of the contract.
Payments associated with short-term leases and leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12
months or less.
Changes in Critical Estimates and Judgements
Judgements:
Leases - determining the lease term.
The Group has in place a number of leases of property and equipment with terms that can be renewed
or extended, or, where no formal extension or renewal option exist, there is a practice of renewing or
extending the lease.
In determining the lease term, management is required to determine
• Whether there is an actual or implied extension or renewal option. An implied extension or renewal
option will exist if both the lessee and lessor would incur a more than insignificant penalty if the
lease were not extended or renewed; and
• Whether the Group is reasonably certain to exercise any actual or implied extension options, taking
into account all facts and circumstances relating to the lease.
Estimates:
Leases - determining the incremental borrowing rate.
Where the interest rate implicit in a lease is not known, the Group is required to determine the
incremental borrowing rate, being the rate of interest the Group would have to pay to borrow a similar
amount, over a similar term, with similar security to obtain an asset of similar value in a similar
economic environment.
As this information may not be readily available, the Group is required to estimate its incremental
borrowing rate using such information as is available and making adjustments to reflect the particular
circumstances of each lease.
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(d)
Revenue Recognition
Sale of refined gold & silver
Revenue is recognised when control of the goods has passed to the buyer based upon agreed delivery
terms. The Company’s metal sales represent sales of refined gold and silver, when control passes to
the customer which is when legal title to the refined metal transfers to the customer. The sales price is
based on prevailing market metal prices.
Judgement is required to determine when transfer of control occurs relating to the sale of the goods to
customers. Management based its assessment on a number of indicators of control, which include, but
are not limited to whether the Company has present right of payment, and whether the significant risks
and rewards and legal title have transferred to the customer.
(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.
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.
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f)
Property, Plant and Equipment (continued)
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
Building
Straight line
Straight line
Straight line
20.0% to 33%
7.5% to 20%
5.0% to 20%
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)
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is
measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable,
any lease payments made at or before the commencement date net of any lease incentives received,
any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of
costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site
or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or
the estimated useful life of the asset, whichever is the shorter. Where the Group expects to
obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated
useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease
liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-
term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these
assets are expensed to profit or loss as incurred.
(h)
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.
(i)
Operating leases
Up to the 2019 financial year, leases of property, plant and equipment were classified as either finance
leases or operating leases. From 1 July 2019, leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is available for use by the group. See Note
1 (c) and 16 for details.
(j)
Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Company prior to the
end of financial year which are unpaid and are carried at amortised cost. The amounts are unsecured and
are usually paid within 30 days of recognition. The carrying amount of trade payables approximates their
fair value.
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(k)
Borrowings
All borrowings are initially recognised at fair value less transaction costs. Borrowings are
subsequently carried at amortised cost using the effective interest rate.
(l)
Trade and other receivables
Trade and other receivables are initially measured at the transaction price and subsequently measured
at amortised cost less an allowance for uncollectable amounts. Uncollectable amounts are determined
using the expected loss impairment model. Collectability and impairment of trade receivables is
assessed on a regular basis.
In the current year, the expected credit loss on trade receivables is considered insignificant as trade
receivables represents refined gold and silver awaiting settlement which is generally expected to settle
within two days.
(m) 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.
The Company expenses 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.
(n)
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 an average rate of 26.38% (2019:22.47%). 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.
(o)
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.
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(p)
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 twelve (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.
(q) 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.
(r)
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.
(s)
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.
(t)
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.
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(t)
Foreign currency transactions and balances (continued)
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
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.
foreign operations are recognised
translation of
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.
(u)
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.
(v)
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 are classified into the following
categories upon initial recognition:
• Loans and receivables
• Financial assets at Fair-Value-Through-Profit-or-Loss (‘FVTPL’)
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.
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(v)
Financial instruments (continued)
Classification and subsequent measurement of financial liabilities (continued)
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.
(w)
Lease Liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially
recognised at the present value of the lease payments to be made over the term of the lease,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the
consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments less any
lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the
exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The
variable lease payments that do not depend on an index or a rate are expensed in the period in which
they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying
amounts are remeasured if there is a change in the following: future lease payments arising from a
change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and
termination penalties. When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is
fully written down.
(x)
Inventories
Inventories consisting of ore in stockpiles, metal-in process and finished metal are valued at the lower
of cost and net realisable value. Cost represents the weighted average cost and includes direct costs
and an appropriate portion of fixed and variable production overhead expenditure, including
depreciation and amortisation, incurred in converting materials into finished goods. Net realisable
value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and estimated costs necessary to make the sale.
Consumables are valued at the lower of cost and net realisable value. Any allowance for obsolescence
is determined by reference to stock items identified.
(y)
Share based payments
The fair value of share-based payment transactions measured at grant date are recognised as an
employee expense with a corresponding increase in equity over the period during which the employees
become unconditionally entitled to the instruments.
If the employee does not meet a non-market condition, such as a service condition or internal KPI, any
cumulative previously recognised expense is reversed.
The fair value of the share-based payment transactions granted are adjusted to reflect market vesting
conditions at the time of grant date and not subsequently adjusted. Non-market vesting conditions are
included in assumptions about the number of instruments that are expected to become exercisable and
are updated at each balance sheet date. The impact of the revision to the original estimates for non-
market conditions, if any, is recognised in the income statement with a corresponding adjustment to
equity. Changes as a result of market conditions are not adjusted after the initial grant date.
(z)
Defined Benefit Fund
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.
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1.
STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(z)
Defined Benefit Fund (continued)
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.
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.
(aa) 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(h). 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 - E15 Service Shaft
The E15 Service Shaft officially commenced operations on 27 November 2018. Depreciation of this
asset is based on the Life of Mine model which indicates a useful life of 5 years, commencing from 01
January 2019.
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 6th April 2020, 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 6th of
April 2020 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.
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(aa) Critical accounting estimates and judgments (continued)
Key estimates - Determination of ore reserves and remaining mine life (continued)
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.
Key estimates - (Covid-19) pandemic
Judgement has been exercised in considering the impacts of that the Coronavirus (Covid-19)
pandemic has had, or may have, on the Group based on known information. This consideration
includes the annual assessment of impairment of assets and the continued assumption of the going
concern basis for the preparation of the financial statements. Based on information available at the
time of signing this financial report, there is no known significant impact on the financial statements or
any significant uncertainties with respect to events or conditions which may impact the Group
unfavourably as at the reporting date or subsequently as a result of the Covid-19 pandemic.
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 or a Montel Carlo Simulation 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 21).
Key estimates - GST/VAT
The Group has net GST/VAT of $28 million that comprises tax credit certificates (“TCC”) and VAT
claimable for cash and offsets. The current asset portion of VAT $9 million comprises amounts that are
estimated to be utilised within the current period. The non-current amount of VAT receivable of $19
million represents the estimated amount utilised in future periods against tax liabilities.
Management judgment has been used to determine a provision for Philippine VAT Receivables not
recoverable in future and is based on historical and estimated amounts in future.
In FY20 an amount of approximately $9.5m relating to VAT Receivables (refer Note 9) reported in a
Philippine controlled entity has been de-recognised as an asset as the timing of utilising this amount
could not be determined at balance date. Under existing Philippine tax law, this amount continues to be
available to offset future VAT liabilities indefinitely, dependent on future VAT transactions.
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 US$23 million at 30 June 2020. 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.
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(aa) Critical accounting estimates and judgments (continued)
Key estimates - Rehabilitation Provision
The determination of the provision requires significant judgement in terms of the best estimate of the
future costs of performing the work required, the timing of the cash flows and the appropriate discount
rate.
In relation to estimating the costs of performing the work required, significant judgement and estimates
are required in relation to estimating the extent of rehabilitation activities, including area to be
rehabilitated, technological changes, regulatory changes, timing of cash flows and appropriate discount
rates.
When these estimates change or become known in the future, such differences will impact the mine
rehabilitation provision on the period in which they change or become known.
A change in any, or a combination of, the key estimates used to determine the provision could have a
material impact on the carrying value of the provision.
Key estimates - Inventories
Inventories require certain estimates and assumptions most notably in regard to grades, volumes and
densities.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile,
the number of contained ounces based on assay data, and the estimated recovery percentage.
Stockpile tonnages are verified to periodic surveys.
Net reliable value tests are performed at each reporting date and represent the estimated future sales
price of gold, less cost of completion (processing costs) and the estimated cost necessary to perform
the sale.
Key estimates - Retirement Benefit Obligation
The Retirement Benefit in Non-Current Liabilities relates to the Philippine employees’ defined benefit
plan. Refer Note 15.
(ab) 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.
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
2.
REVENUE AND OTHER INCOME
Operating activities:
Gold and silver sales
Non-operating activities:
Interest income
Foreign exchange
Total revenue and other income
3.
EXPENSES
Profit/(loss) before income tax expense/(income) has been
determined after charging/(crediting) the following items:
Depreciation & amortisation:
- Depreciation expense
- Amortisation expense
- Mine rehabilitation and right of use assets amortisation
Total depreciation & amortisation
Employee benefits expense
Interest expense & unwinding of discount on provisions (i)
Other expenses:
VAT impairment/write off (ii)
Defined benefit plans
Assets impaired
Share-based payment expense
Bad debts write off
Total other expenses
Notes:
Consolidated
Note
2020
US$000
2019
US$000
147,829
129,320
130
79
164
118
148,038
129,602
7,186
13,624
839
21,649
18,015
1,209
3,955
14,370
443
18,768
15,570
830
11,546
10,357
574
1
158
159
489
86
132
42
12,438
11,106
(i) Disclosure for rehabilitation and lease expense; and
(ii)
Included in the FY20 balance of US$11.5 million is an amount of approximately $9.5 million relating
to VAT Receivables (refer Note 9) reported in a Philippine controlled entity which has been de-
recognised as an asset as the timing of utilising this amount could not be determined at balance date.
Under existing Philippine tax law, this amount continues to be available to offset future VAT liabilities
indefinitely, dependent on future VAT transactions.
The remaining balance mainly comprises a provision for impairment.
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
4.
TAXATION
(a) The components of tax expense comprise:
Current tax
Deferred tax
Prior year adjustment
Consolidated
2020
US$000
2019
US$000
7,999
(4,627)
(16)
3,356
3,550
(8,535)
(101)
(5,086)
(b) The prima facie tax on profit before income tax is reconciled to the
income tax as follows:
Operating (loss)/profit before income tax
38,741
31,403
Prima facie income tax expense/(credit) at 30% (2019: 30%) on
operating profit
11,622
9,421
less - tax effect of:
difference of effective foreign income tax rates
Interest income
amortisation and depreciation adjustment
VAT write off
share based payments expense
bad debts
foreign exchange
charitable contribution
representation, professional fees and insurance
other
deferred tax assets not brought to account
Income tax expense/(benefit)
(100)
360
(4,530)
(3,334)
48
-
145
-
-
(360)
(495)
3,356
(41)
248
(5,861)
(3,107)
40
13
(51)
112
150
(5,992)
(18)
(5,086)
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
Total
17,306
2,747
20,053
17,447
4,701
22,148
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
Profit/(Loss) used to calculate basic and diluted EPS
35,385
36,489
Weighted average number of ordinary shares used in the calculation of
the basic earnings per share.
207,794,301
207,794,301
Weighted average unlisted options & performance rights outstanding
1,955,201
4,030,983
Weighted average of ordinary shares diluted as at 30 June 2020
209,749,502
211,825,284
1,955,201 weighted average unlisted options & performance rights outstanding for 2020 have been included
in calculating the diluted EPS because the effect is anti-dilutive.
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
6.
TRADE AND OTHER RECEIVABLES - CURRENT
GST/VAT receivables
Other receivables
Total current receivables
7.
INVENTORIES
Consumables - net realisable value
Ore stockpile - at cost
Gold Inventory - at cost
Total inventories
8. OTHER CURRENT ASSETS
Prepayments
Consolidated
2020
Note
US$000
2019
US$000
1(aa)
8,525
1,157
9,682
6,924
2,735
5,820
3,773
1,415
5,188
4,914
2,665
5,160
15,479
12,739
732
789
9.
TRADE AND OTHER RECEIVABLES - NON-CURRENT
GST/VAT receivables
Total non-current receivables
1(aa)
19,307
19,307
28,506
28,506
In FY2020 an amount of approximately $9.5 million relating to VAT Receivables
reported in a Philippine controlled entity has been de-recognised as an asset as
the timing of utilising this amount could not be determined at balance date. Under
existing Philippine tax law, this amount continues to be available to offset future
VAT liabilities indefinitely, dependent on future VAT transactions. Refer to note 3
for further details.
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
98
200,318
195,854
(132,064)
(132,064)
(58,068)
(50,941)
10,186
12,849
4,815
-
4,815
1,189
(254)
(866)
69
2,812
-
2,812
1,143
(254)
(807)
82
15,070
15,743
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
Consolidated
Note Note
2020
US$000
2019
US$000
10. PROPERTY, PLANT & EQUIPMENT (continued)
Reconciliations:
Plant & equipment:
Carrying amount at beginning of year
plus - additions
plus - net transfer from capital works in progress
less - forex differences on translation
less - disposal
less - impairment
less - depreciation
Carrying amount at end of year
Capital works in progress:
Carrying amount at beginning of year
plus - additions
less - net 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
Co-O Development expenditure:
At cost
less - provisions for impairment
less - accumulated amortisation
Net Co-O development expenditure
Royal Crowne Vein Development expenditure:
At cost
Net Royal Crowne Vein development expenditure
Total carrying amount at end of year
99
12
12
12,849
4,371
-
94
(1)
-
(7,127)
10,186
2,812
2,003
-
-
4,815
82
46
-
(59)
69
1,421
4,681
10,819
(171)
(6)
-
(3,895)
12,849
11,449
2,182
(10,819)
-
2,812
87
51
4
(60)
82
15,070
15,743
439,143
(246,260)
(129,882)
412,103
(246,260)
(116,456)
63,001
49,387
1,489
1,489
806
806
64,490
50,193
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
Consolidated
2020
2019
Note
US$000
US$000
11. DEVELOPMENT EXPENDITURE (continued)
Reconciliations:
Co-O 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
Royal Crowne Vein Development expenditure:
Carrying amount at beginning of year
plus - costs incurred
Carrying amount at end of year
Total carrying amount at end of year
12. IMPAIRMENT OF NON-CURRENT ASSETS
12
49,387
27,040
29,878
33,692
(13,426)
(14,189)
-
-
-
6
63,001
49,387
806
683
1,489
64,490
-
806
806
50,193
In accordance with the Group’s accounting policies and processes, the Group performs its impairment
assessment 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 2020 included;
• market value of the Company is lower than net assets of the Group;
•
increased expected future costs of production; and
• under-utilisation of the processing plant.
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 2021 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.
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
12. IMPAIRMENT OF NON-CURRENT ASSETS (continued)
a) Impairment testing (continued)
ii) Key Assumptions
The table below summarises the key assumptions used in the 30 June 2020 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$/ounce
%
ounces
ounces
2020
(2021 - 2024)
2019
(2020 - 2024)
1,643
1,203
14.0
1,347
1,049
17.3
332,000
350,000
77,000 - 98,000
98,000 - 105,000
The average All-In-Sustaining-Costs (“AISC”) comprises all operating, capital and overheads
expenditure averaged over the period mentioned.
Estimated potential future impacts of Covid-19 have been considered within forecast financial
information and the key assumptions table above.
Commodity prices
Commodity prices are estimated with reference to external market forecasts and reviewed at least
annually. The price applied has taken into account observable market data.
Discount rate
The future cash flows of the CGU are discounted by the estimated real after tax weighted average
cost of capital (“WACC”), pursuant to the Capital Asset Pricing Model. The nominal pre-tax WACC
has been derived from comparable company analysis, in addition to the WACC rate of the group’s
Co-O mining operations being the primary CGU.
Production activity and operating and capital costs
Life of mine production activity and operating and capital cost assumptions are based on the Group’s
latest annual budget and the LOM plan. Discounted cash flows include expected cost improvements
and sustaining capital requirements. Estimated production is assumed consistent with the capacity
constraint of the Co-O mill taken into account while assuming a constant recovery rate.
Resources and reserves
Resource and Reserve ounces were based on the Group’s JORC 2012 compliant Annual Resource
and Reserve Update Statement announced to the Australian Securities Exchange on 6th April 2020.
iii) Impacts
Due to the recoverable amount of the Group’s Co-O mining operations CGU being greater than the
estimated carrying amount, no impairment charge was required for the year ending 2020 (2019: nil).
Description
Note
Carrying amt
($’000)
Impairment
($’000)
Balance
($’000)
Carrying amt
($’000)
Impairment
($’000)
Balance
($’000)
2020
2019
Development
Plant & equipment
Inventories
Total
11
10
7
63,001
15,070
15,479
93,550
-
-
-
-
63,001
15,070
15,479
49,387
15,743
12,739
93,550
77,869
-
-
-
-
49,387
15,743
12,739
77,869
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
12. IMPAIRMENT OF NON-CURRENT ASSETS (continued)
b) Sensitivity Analysis
Variation movements in any key assumptions may result in a change to the estimated recoverable
amount which may indicate an additional impairment to non-current assets.
The changes to estimated key assumptions would have the following approximate impact on the
recoverable amount of the CGU. The impact was concluded as not material and accordingly no
impairment was required at 30 June 2020.
Assumption changes
2020
2019
Effect on recoverable amount
($’000)
Effect on recoverable amount
($’000)
US $100 per ounce increase/decrease in gold price
1% increase/decrease in the discount rate
5% increase in operating costs
+/- 29,113
+/- 2,583
-21,366
+/- 30,306
+/- 2,226
-18,596
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.
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
Unsecured liability - interest bearing loan
Total current borrowings
Non-current borrowings:
Unsecured liability - interest bearing loan
Total non-current borrowings
Total Borrowings
Secured Borrowing are bank loans secured by transportation equipment of the Group.
Interest rates on the loans range between 5.84% to 7.89% (2019: 3.50% to 4%).
15.
PROVISIONS
Current provisions:
Employee benefits
Total current provisions
Non-current provisions:
Retirement benefit
Mine rehabilitation
Total non-current provisions
102
Consolidated
2020
US$000
2019
US$000
8,509
2,683
4,168
497
154
8,879
3,195
1,515
618
172
16,011
14,379
142
5,315
5,457
296
296
156
6,523
6,679
150
150
5,753
6,829
466
466
3,904
3,686
7,590
401
401
2,459
3,479
5,938
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
15. PROVISIONS (continued)
Non-current provisions: (continued)
Retirement Benefit
The Retirement benefit in non-current liabilities relates to the Philippine 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 2019 by Actuarial Advisers, Inc. 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 - 3.54% (2019: 5.92%);
• Expected rate of salary increase - 3.00% (2019: 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.
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
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 / Contributions paid
Actuarial gain/(loss)
Closing balance
Consolidated
2020
US$000
2019
US$000
441
133
574
376
114
490
3,904
3,904
2,459
2,459
2,459
2,515
441
133
(941)
1,812
3,904
376
114
(103)
(443)
2,459
The Company has no plan assets held by trustees but an employee retirement fund amounting to
US$1,439,587 (2019: US$1,358,361) was held as at June 30, 2020. The employee retirement fund is
presented as part of cash at bank (refer to Note 24 (c).
Mine rehabilitation
Carrying amount at beginning of the year
(less)/plus - in provision
Carrying amount at end of year
3,479
207
3,686
1,645
1,834
3,479
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
16.
LEASES
Nature of leasing activities
The Group leases certain items of plant and equipment, whereby these leases comprise a mixture of fixed
and variable payments.
The Group also leases a property and the lease contracts provide for payments to increase each year by a
fixed percentage.
Right-of-use assets
1 July 2019
Additions
Amortisation
At 30 June 2020
Consolidated
Land and
buildings
US$000
Plant and
equipment
US$000
Total
US$000
359
-
(73)
286
2,011
2,370
-
(398)
1,613
-
(471)
1,899
Up to the previous financial year, leases of property, plant and equipment were classified as either finance
leases or operating leases, see note 1 (c) for details. From 1 July 2019, leases are recognised as a right-
of-use asset and a corresponding liability at the date at which the leased asset is available for use by the
Group.
Right-of-use-assets are included in the Consolidated Statement of Financial Position.
Lease Liabilities
1 July 2019
Current
Non-Current
At 30 June 2020
Consolidated
2020
US$000
2019
US$000
532
1,432
1,964
-
-
-
The Group accounts for short term leases and low value items on a straight-line basis over the lease term.
The following amounts have been included as an expense in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income during the period:
Interest expense (included in Interest expense)
Expenses relating to short term leases (included in Other expenses)
Expenses relating to low value assets that are not short-term leases (included in Other expenses)
At 30 June 2020
The Group’s total cash outflow for leases in the year ended 30 June 2020 was $531,912.
2020
US$000
126
-
-
126
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
17. DEFERRED TAX
Consolidated Group
30 June 2020
Deferred tax liability
Other
Total deferred tax liability
Deferred tax assets
Carried forward tax losses
Other
Total deferred tax asset
30 June 2019
Deferred tax liability
Capitalised exploration & evaluation expenditures
Other
Total deferred tax liability
Deferred tax assets
Carried forward tax losses
Other
Total deferred tax asset
Consolidated
Opening
balance
US$000
Forex on
translation
US$000
Credit/(charged)
to income
US$000
Closing
balance
US$000
778
778
(521)
(521)
-
-
1,826
16,601
18,427
232
-
232
-
341
341
-
118
118
-
10,059
10,059
-
(595)
(595)
(816)
5,128
4,312
(232)
660
428
1,826
7,137
8,963
257
257
1,010
22,070
23,080
-
778
778
1,826
16,601
18,427
Consolidated
2020
US$000
2019
US$000
18.
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
140,843
130,990
• other services provided by related entities of auditor:
Taxation
Remuneration consulting
IFRS Advisory
Total remuneration of the Company’s auditors
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
Total remuneration of other auditors of the Company’s Philippines subsidiaries
29,363
3,129
10,950
39,745
5,429
2,874
184,285
179,038
80,065
3,400
83,465
73,372
3,883
77,255
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
19. ISSUED CAPITAL
207,794,301 ordinary shares (30 June 2019: 207,794,301)
Total issued capital
Ordinary shares
Balance at beginning of year
Ordinary shares issued during the year:
ordinary shares issued - new issues
Balance at end of year
Ordinary shares
Consolidated
2020
US$000
2019
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/performance rights 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
Total
Total equity
Borrowings
Overall financing
Capital-to-overall financing ratio
158,421
123,742
(38,852)
(18,109)
119,569
105,633
158,421
123,742
5,753
6,829
164,174
130,571
73%
81%
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
20.
RESERVES
Share based payment reserves
Other reserves
Foreign currency translation reserve
Total Reserves
(a) Share based payment reserve
Consolidated
2020
US$000
2019
US$000
444
(959)
6,672
6,157
202
310
6,267
6,779
The share based payment reserve records items recognised as expenses on valuation of share
based payments.
Options:
Unlisted options over ordinary shares at 30 June 2020
• 3,200,000 options expiring 16 December 2018 and exercisable at A$1.00 each. During the
years 2016, 2017, 2018 and 2019, 459,500, 225,500, nil and 2,515,000 options respectively
were forfeited resulting in nil options remaining at reporting date. Refer to note 21 (i).
All options had expired at reporting date (2019: Nil).
• 1,000,000 options expiring 9 February 2019 and exercisable at A$1.00 each. During the years
2016, 2017, 2018 and 2019, nil, 350,000, nil and 650,000 options respectively were forfeited
resulting in nil options remaining at reporting date. Refer to note 21 (ii).
All options had expired at reporting date (2019: Nil).
• 1,200,000 options expiring 24 November 2020 and are exercisable at various prices as
disclosed in note 21 (iii).
840,000 options were forfeited at 30 June 2019 and 360,000 options vested at 30 June 2020 -
nil for 30 June 2020 (2019: 360,000).
• 1,665,000 options expiring 8 Jan 2022 and are exercisable at various prices as disclosed in note
21 (iv).
999,000 options were vested at reporting date (2019: 499,500)
The above unlisted options do not entitle the holders to participate in any share issue of the
Company.
Performance Rights:
Under the Performance Rights plan for long term incentives, which was approved by shareholders
on January 2015, eligible employees are granted performance rights (each being an entitlement to
an ordinary fully paid share), subject to the satisfaction of vesting conditions and on the terms and
conditions as determined by the Board.
Under the short term incentive plan for executives, agreed annually with the Board, a predetermined
amount of the award is settled in Performance Rights. Eligible employees are granted performance
rights (each being an entitlement to an ordinary fully paid share), subject to the satisfaction of
vesting conditions and on the terms and conditions as determined by the Board.
Performance Rights issued under these plans carry no voting or dividend rights and are issued for
no consideration and have a nil exercise price.
(b) Foreign Currency Translation Reserve
The foreign currency translation reserve for the group records exchange differences arising on
translation of foreign controlled subsidiaries.
(c) Other Reserves
Remeasurement gains and losses arising from changes in actuarial assumptions relating to the
retirement benefits are recognised in the period in which they occur, directly in other comprehensive
income. They are included in Other Reserves in the Statement of Changes in Equity.
107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
21.
SHARE BASED PAYMENTS
The following share-based payment arrangements existed during 30 June 2020:
(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 had expired.
(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 09 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 had expired.
(iii) On 24 November 2016, 1,200,000 options were issued to Boyd Timler, the company’s previous Managing
Director (who retired on 06 July 2018), subject to the rules of Medusa Mining Limited Share Option Plan.
Upon his retirement, the remaining share options yet to be vested were forfeited.
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
A$1.00
300,000
A$1.25
300,000
A$1.50
300,000
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. In July 2018, Mr
Timler resigned.
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 Risk free rate - 2.07%
o Dividend Yield - Nil
(Medusa is currently unlikely to pay a dividend during the life of the options).
(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
A$0.275
416,250
A$1.25
A$0.255
416,250
A$1.50
A$0.239
416,250
A$1.75
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%
o Risk free rate - 1%
o Dividend Yield - Nil
(Medusa is currently unlikely to pay a dividend during the life of the options).
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
21. SHARE BASED PAYMENTS (continued)
(v) On 13 March 2020, the Company issued 5,300,000 Long Term Performance Rights to its employees.
Under the terms of the issue, employees would be required to remain in employment of the Company for a
three-year vesting period, until 13 March 2023.
The terms of the Long-Term Incentive Rights include the following (there are no previously issued
Performance Rights from previous periods):
Long Term
Incentive
Measures
Financial
measure:
Earnings per
share growth
Company
growth:
Increase in ore
reserves
Long-term
Infrastructure
target:
Decline
development
Relative total
shareholder
returns:
Measure of
Company return
compared to
peer group.
Absolute total
shareholder
return:
Measure of
company return.
Weighting
relative to
Total PR
issued
Targets
Range of growth/change
Percentage allocation of
weighting
Score mechanism
17%
• Negative
Zero
• 0 to 5% per annum growth
Pro rata 0% to 40%
• 5 to 10% per annum growth
Pro rata 40% to 100%
pro rata
• Greater than 10% per
100%
annum growth
16%
• Negative
Zero
• Depletion replacement to
Pro rata 0% to 40%
20% growth
• 20% to 40% growth
• Greater than 40%
Pro rata 40% to 100%
100%
17%
• < 70% of decline developed
Zero
• 70% to 85%
• >85% of decline
25%
• Below 50th percentile
• At 50th percentile
• 50th to 75th percentile
• Greater than 75th percentile
25%
• Below 20%
Pro rata 0% to 100%
100%
Zero
50%
Pro rata 50% to 100%
100%
Zero
• Between 20 to 50%
Pro rata 50% to 100%
• Greater than 50%
100%
EPS calculation to exclude
non-recurring items and
measured as the cumulative
annual growth rate over a 3
year period
Based on JORC compliant
reports 2019 and 2022
Based on the decline metres
developed at end of June
2022, based on plan to access
level 14. 70% = 3,450 metres
of decline,
85% = 4,190 metres.
Measured against Peer
Group based on 30 day
VWAP at the relative
measure points at 30 June
2019 and 30 June 2022
Measure by comparing 30
day VWAP at 30 June 2019
to 30 day VWAP at 30 June
2022
The fair value of the non-market vesting conditions has been based on the share price of the Company at
grant date.
Non-market vesting conditions are included in assumptions about the number of Performance Rights that
are expected to vest. The total expense is recognised over the vesting period, which is the period over
which all the specified vesting conditions are to be satisfied. At the end of each reporting period, the
Company revises its estimates of the number of Performance Rights (and options) that are expected to
vest based on the non-market vesting conditions. It recognises the impact of the revision to the original
estimates, if any, in profit and loss, with a corresponding adjustment to equity.
The fair value of market vesting conditions has been determined at grant date by using the Monte Carlo
Simulations pricing model that takes into account the exercise price, the term of the performance right, the
share price at grant date, expected price volatility of the underlying share and the risk free rate for the
term of the performance right. The expected price volatility is based on historic volatility (based on the
remaining life of their performance right).
Include in the valuation of relative total shareholder returns is measurement of the Company to Peer
companies in the gold industry.
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
21. SHARE BASED PAYMENTS (continued)
Model inputs for market performance rights valued using the Monte Carlo Simulations model granted
during the year include:
o Grant date - 13 March 2020
o Life - 3 years
o Share price at grant date - 44.5 cents
o Share price volatility - 58%
o Risk free rate - 0.55%
o Dividend Yield - Nil
o 30 day VWAP - 51.76 cents
o Fair Value - 26 cents
(Medusa is currently unlikely to pay a dividend during the life of the Performance Rights).
(vi) On 17 January 2020, the Company issued 167,000 Performance Rights to its executives pursuant to
its Short-term incentive plan based on the performance of the Company for the year ended 30 June
2019. Under the terms of the issue, the executives would be required to remain in employment of the
Company for a one-year vesting period, until 17 January 2021. The fair value of the Performance
Rights of 61 cents has been recognised at grant date and based on the share price of the Company.
(vii) Total expenses arising from share-based payment transactions recognised during the period as part of
employee benefit expenses were as follows:
Options
Performance Rights
Total share-based payment expense
Consolidated
2020
US$000
31
127
158
2019
US$000
132
-
132
Share based options
Number of options
Weighted average
exercise price (A$)
Number of options
Weighted average
exercise price (A$)
2020
2019
Outstanding at start of year
2,025,000
Granted
Forfeited
Expired
Exercised
Outstanding at year end
Exercisable at year end
-
200,000
-
-
1,825,000
1,359,000
1.3157
-
1.6563
-
-
1.2784
1.1489
6,030,000
-
840,000
3,165,000
-
2,025,000
859,500
1.1782
-
1.5179
1.0000
-
1.3157
1.0417
During the year, 200,000 options were forfeited (2019: 840,000 options) and nil options expired (2019:
3,165,000 options).
The options outstanding at 30 June 2020 (all of which are unlisted) had a weighted average exercise
price of A$1.2784 and a weighted average remaining contractual life of 15.34 months.
Performance Rights
Number of
performance rights
Weighted average
exercise price (A$)
Number of
performance rights
Weighted average
exercise price (A$)
2020
2019
Outstanding at start of year
Granted
Forfeited
Expired
Exercised
-
5,467,000
-
-
-
Outstanding at year end
5,467,000
Exercisable at year end
-
-
0.4529
-
-
-
0.4529
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The performance rights outstanding at 30 June 2020 (all of which are unlisted) had a weighted average
exercise price of A$0.4529 and a weighted average remaining contractual life of 30.47 months.
Included under administration expense in the Statement of Profit or Loss and other Comprehensive
Income is US$158,387 (2019:US$131,708) and relates, in full, to equity-settled share-based payment
transactions relating to employees.
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
22. INVESTMENT IN SUBSIDIARIES
The following companies are controlled entities of Medusa Mining Limited as at 30 June 2020:
Controlled Entities
Date of
incorporation
Country of
incorporation
% interest held
2020
2019
Medusa Exploration & Development Corporation
29 May 2003
Philippines
Phsamed Mining Corporation
Medusa Overseas Holding Corporation
Philsaga Mining Corporation
23 Apr 2003
Philippines
08 May 2003
Philippines
17 May 2001
Philippines
Mindanao Mineral Processing and Refining Corporation
03 Nov 2005
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.
23.
RETAINED PROFITS AND ACCUMULATED LOSSES
Retained profit/(loss) at start of year
Change in accounting policy - Note 1(c)
Net profit/(loss) attributable to members of Company
Transfer from share option reserve
Retained profits/(accumulated losses) at the end of year
Consolidated
2020
US$000
2019
US$000
14,061
-
35,385
(84)
49,362
(21,370)
(1,982)
36,489
924
14,061
111
ORGANISATION CHART Philippines 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 DirectorsMEDC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
24. 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:
Profit/(Loss) after income tax
add/(less) -
Non-cash items:
- Depreciation/amortisation
- Mine rehabilitation amortisation
- Retirement Benefit
- Gain on asset disposal
- Exploration expenses
- Recognition of share-based expenses
- Impairment expense
- VAT write off
- Foreign exchange (gain) / loss
- Bad debts written off
- Inventory write 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
Net cash provided by operating activities
(c) Restricted Funds
Consolidated
2020
US$000
38,814
38
38,852
2019
US$000
18,108
1
18,109
35,385
36,489
20,809
18,325
839
574
1
1,583
158
-
11,546
(77)
159
-
(4,616)
7,971
74,332
(6,879)
58
(2,740)
(3,870)
(4,653)
521
56,769
443
489
-
-
132
-
10,357
(118)
42
81
(8,606)
3,520
61,154
7,093
3
1,484
(16,340)
-
(4,211)
49,183
The Group’s total cash assets mentioned above include restricted bank accounts as follows:
(i)
a rehabilitation fund of US$5,192,428 (2019: US$3,703,399) to be used at the end of life of mine
for environmental rehabilitation.
(ii) an employee retirement fund of US$1,439,587 (2019: US$1,358,361) established to meet
employee entitlements on retirement.
The Company has a provident fund of US$707,250 (2019: US$597,136) that is intended to be used as
payment to employees upon retirement, which is unrestricted as to withdrawal.
Total restricted funds amount to US$7,339,264.
112
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
25. 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 is the risk that a counterparty will not meet its obligations under a financial instrument or
customer contract, leading to a financial loss to the Company. Credit risk arises from the financial
assets of the Company, which comprise trade and other receivables and deposits with banks and
financial institutions.
The Company manages its credit risk on trade receivables and financial instruments by
predominantly dealing with counterparties with an investment grade credit rating. Customers who
wish to trade on unsecured credit terms are subject to credit verification procedures. Receivable
balances are monitored on an ongoing basis. As a result, the Company’s exposure to bad debts is
not significant. Medusa’s maximum credit risk is limited to the carrying amount of its financial assets.
At 30 June 2020 the Company had a provision for credit loss of nil (2019: nil). Subsequent to 30
June 2020, 100% (2019: 100%) of the trade receivables balance of nil (2019: nil) has been received.
Credit risk from balance with banks is managed by placing funds with reputable financial institutions
with strong investment grade credit ratings.
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.
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
25. FINANCIAL RISK MANAGEMENT(continued)
(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 avg
Effective interest
Floating interest
rate
Within 1 Year
Within 1 to 5
Years
Non-Interest
Bearing
Total
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
(%)
(US$000)
Financial Assets
Cash & cash equivalent
0.15
0.16
23,475 10,412
Loans and receivables
-
-
-
-
23,475 10,412
-
-
-
-
-
-
-
-
-
- 15,377
7,697
38,852
18,109
-
-
-
-
-
- 15,377
7,697
38,852
18,109
Financial Liabilities
Financial liabilities at amortised cost
Bank Loan - Current
5.84
6.29
Bank Loan - Non-current
7.89
7.89
Lease Liabilities - Current
6.03
Lease Liabilities – Non-Current
6.03
Trade & sundry payables
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,457
6,679
-
-
296
150
-
-
-
- 1,432
-
-
-
-
-
-
-
-
-
-
5,457
6,679
296
532
1,432
150
-
-
-
-
- 16,011 14,379
16,011
14,379
5,989
6,679 1,728
150 16,011 14,379
23,728
21,208
-
532
-
-
As at 30 June 2020 and 2019, all receivables were neither past due nor impaired.
Trade and sundry payables are expected to be paid as follows:
Less than 6 months
(ii) Net fair values
Consolidated
2020
US$000
2019
US$000
16,011
14,379
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 2020, the effect on profit or equity as a result of changes in the interest rate, with all other
variables remaining constant would be as follows:
114
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
25. FINANCIAL RISK MANAGEMENT (continued)
(b) Financial Instruments (continued)
(iv) Sensitivity analysis (continued)
Interest Rate Sensitivity Analysis (continued)
At 30 June 2020, the effect on profit or 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
2020
US$000
253
(253)
2019
US$000
116
(116)
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 2019 and 2020 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.
Net Financial Assets/(Liabilities) in US$000
A$
US$
PHP
TOTAL US$
Consolidated
2020
Functional currency of Group Entity
Australian Dollar
US Dollar
Philippine Peso
Total
2019
Functional currency of Group Entity
Australian Dollar
US Dollar
Philippine Peso
Total
-
-
-
-
-
-
-
-
-
12,233
-
13,047
-
25,280
5,805
-
4,209
10,014
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
Price risk sensitivity analysis
-
459
-
-
12,233
459
13,047
-
459
25,739
-
524
-
524
5,805
524
4,209
10,538
Consolidated
2020
US$000
(1,596)
(1,956)
2019
US$000
(757)
(630)
(3,552)
(1,387)
1,596
1,956
3,552
757
630
1,387
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$1,569
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$14,807 million (2019: US$13,045 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.
(2019: US$1,264)
the
for
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
Consolidated
2020
US$000
2019
US$000
195
1,113
1,308
261
1,113
1,374
26. 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.
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
-
-
-
85
363
448
From 1 Jul 2019, the Group has recognised a right-of-use asset for this lease.
(c)
Other contractual commitments:
(i) 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
853
214
1,067
1,437
1,013
2,450
(ii) 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
68
236
304
76
243
319
27. CONTINGENT LIABILITIES
The parent entity on behalf of its subsidiary Komo Diti Traders Limited has provided a performance
guarantee to its customer Heraeus Limited amounting to no more than US$9,800,000 for any deficiency
in the subsidiary’s obligations and liabilities under the Refining & Transportation Agreement with
Heraeus Limited.
The parent entity has a bank guarantee of AUD$83,630 with the Commonwealth Bank of Australia for its
head office premises. In the event that it is unable to fulfil its rental obligation with the landlord, the bank
shall release the funds for settlement.
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
28. 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);
Roy Daniel; and
Simon Mottram (appointed Non-Executive Director on 11 June 2020).
Executive Directors -
Raul Villanueva.
Executive Officers:
David McGowan (Chief Executive Officer - ceased employment on 20 July 2020);
Peter Alphonso (Chief Financial Officer/Company Secretary); 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
Termination benefits
Total
Consolidated
2020
US$000
2019
US$000
1,495
1,485
52
8
53
-
1,608
53
6
88
277
1,909
Detailed remuneration disclosures are provided in the remuneration section of the Directors’ report.
29. EVENTS SUBSEQUENT TO REPORTING DATE
• Chief Executive Officer (“CEO”) Mr David McGowan, ceased employment on 20 July 2020. Non-
Executive Chairman Mr Andrew Teo assumed the role of Interim CEO.
• The Company announced to the ASX on 28 August 2020, production guidance for FY21 of between
90,000 ounces to 95,000 ounces at All-In-Sustaining-Costs (“AISC”) of between US$1,200 to
US$1,250 per ounce.
The slight increase in year-on-year AISC for FY21 has been anticipated, after taking into account
the ongoing impact of COVID-19 restrictions to people movement, logistics and associated costs.
Except for the above, subsequent to Balance Date, 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.
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
30. 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 Mining, 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 2020:
Segment Revenue
Reconciliation of segment revenue to group revenue
add:
Interest revenue
Forex realised
Group revenue
Segment Result
Reconciliation of segment result to group result:
Mining
US$000
147,829
-
-
147,829
Exploration
US$000
Other
US$000
Total
US$000
-
-
-
-
-
147,829
130
79
209
130
79
148,038
3,611
(1,624)
(5,837)
(3,850)
add back:
Forex realised
Interest revenue
Depreciation
Amortisation
Exploration write off
Bad debts write off
VAT write off
Share based expense
Retirement expense
Income tax expense
Asset write off
Group profit/(loss)
Segment Assets
Reconciliation of segment asset to group assets:
plus: Deferred tax assets
Total group assets
Segment Liabilities
plus: Deferred tax liabilities
Total group liabilities
-
-
7,177
14,463
-
16
11,546
-
574
-
1
154,443
23,080
30,765
257
118
-
-
-
-
1,583
-
-
-
-
-
-
50
-
36
-
79
130
9
-
-
143
-
158
-
3,356
-
79
130
7,186
14,463
1,583
159
11,546
158
574
3,356
1
35,385
12,889
167,382
-
983
-
23,080
190,462
31,784
257
32,041
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
30. SEGMENT INFORMATION (continued)
12 months to June 2019:
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:
Interest revenue
Forex realised
Depreciation
Amortisation
Exploration write off
Bad debts write off
VAT write off
Inventory write off
Asset write off
Impairment
Income tax expense / (benefit)
Group profit/(loss)
Segment Assets
Reconciliation of segment asset to group assets:
plus: Deferred tax assets
Total group assets
Segment Liabilities
Reconciliation of segment liabilities to group liabilities
plus: Deferred tax liabilities
Total group liabilities
Mining
US$000
129,320
-
Exploration
US$000
Other
US$000
Total
US$000
-
129,320
-
-
282
9,329
(767)
1,789
-
-
3,943
14,813
-
43
10,357
80
6
-
-
38,571
126,563
18,427
26,410
778
-
-
-
-
1,688
-
-
-
-
-
-
921
74
-
29
-
164
118
12
-
-
-
-
-
-
-
(5,086)
(3,003)
7,003
-
1,108
-
282
129,602
10,351
164
118
3,955
14,813
1,688
43
10,357
80
6
-
(5,086)
36,489
133,640
18,427
152,067
27,547
778
28,325
Total
US$000
Revenue & non-current assets by geographical region
Australia
Philippines
Hong Kong
US$000
US$000
US$000
12 months to June 2020:
Segment Revenue
Non-Current Assets
12 months to June 2019:
Segment Revenue
Non-Current Assets
-
404
-
697
-
147,829
125,313
-
147,829
125,717
-
129,320
114,545
-
129,320
115,242
All gold and silver sales have been produced from the Co-O mine in the Philippines and were sold to one
customer.
Gold and silver sales are recognised in the mining segment as there has been no active trading of gold in
the current year. Sales revenues in the mining segment represent sales of refined product from the Co-O
Mine.
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
2020, all of the Group's revenues depended on a single customer (2019:100%).
119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2020
31. PARENT COMPANY INFORMATION
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
Profit/(Loss) for the year
Total Comprehensive Profit/(Loss)
2020
US$000
2019
US$000
12,485
27,792
678
982
6,306
29,299
1,108
1,108
26,810
28,191
102,902
102,902
444
202
11,894
11,894
(46,161)
(44,538)
(42,269)
(42,269)
26,810
28,191
(1,539)
(1,539)
(918)
(918)
On adoption of AASB 9 Financial Instruments the financial impact of applying the expected loss impairment
model to loans provided to subsidiaries was nil.
32. COMPANY DETAILS
The registered office and principal place of business of the Company is:
Suite A, Level 1
1 Preston Street
Como
Western Australia 6152
120
DIRECTOR’S DECLARATION
for the year ended 30 June 2020
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 2020 and of its performance for
the financial year ended on that date; and
(ii) Complying with Australian Accounting Standards
the Australian Accounting
Interpretations), the Corporations Regulations 2001 and other mandatory professional reporting
requirements: and
(including
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 2020.
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 31st day of August 2020
121
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 2020, 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 2020 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 (including Independence Standards) (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.
122
Carrying Value of Group’s Co-O mining operations (CGU) 30 June 2020
Key audit matter
How the matter was addressed in our audit
The Group’s carrying value of its Co-O mining
operations (CGU) is included in property, plant
and equipment (note 10) and development
expenditure (note 11).
The carrying value of mine properties is impacted
by various key estimates and judgements in
particular:
· Ore Reserves and estimates;
·
·
·
·
Amortisation rates;
Discount rate;
Assumed gold price;
Capitalisation of mining costs; and
· Mine planning.
The Group is also required to assess for indicators
of impairment at each reporting period. The
assessment of impairment indicators in relation
to the mine assets requires management to make
significant accounting judgements and estimates
which includes discount rates, commodity price
and ore reserve estimates.
This is a key audit matter due to the quantum of
the Co-O asset and the significant judgement
involved in management’s assessment of the
carrying value of the CGU. Refer to the
significant estimates and judgements used by
management in assessing the discounted future
cash flows as disclosed in note 12.
We evaluated management’s impairment model
for the Co-O mining operations (CGU) by
challenging the key estimates and assumptions
used by management in arriving at their
assessment. Our work included but was not
limited to the following procedures:
·
·
·
·
·
·
·
·
analysing management’s gold price
assumptions against external market
information and trends, to determine
whether a significant change would impact
the value of the asset;
performing a site visit to the CO-O mine
during the year;
challenging the appropriateness of
management’s reserves estimate by
assessing the significant assumptions,
methods and source data used by
management’s expert in estimating the
reserves. This included both meeting with
management’s expert and assessing the
competency and objectivity of
management’s expert;
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;
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;
reviewing and challenging management’s
methodology on the amortisation
calculation;
assessing the adequacy of the related
disclosures in note 12 to the financial
report.
123
Other information
The directors are responsible for the other information. The other information comprises the
information contained in the Directors’ report for the year ended 30 June 2020, but does not include
the financial report and our auditor’s report thereon, which we obtained prior to the date of this
auditor’s report, and the annual report, which is expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date
of this auditor’s report, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
When we read the annual report, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the directors and will request that it is corrected. If it is not
corrected, we will seek to have the matter appropriately brought to the attention of users for whom
our report is prepared.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
124
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 57 to 73 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the Remuneration Report of Medusa Mining Limited, for the year ended 30 June 2020,
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, 31 August 2020
125
ADDITIONAL SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 15 September 2020
1.
Shareholding
(a) Distribution of shareholders and shares
Distribution
1
- 1,000
1,001
- 5,000
5,001
- 10,000
10,001
- 100,000
1,000,000 and over
Total
Number of
shareholders
Number of shares
1,188
1,208
418
552
66
3,432
522,979
3,176,608
3,167,115
16,122,832
184,804,767
207,794,301
The number of shareholdings held in less than marketable parcels is 752
(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.
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
Number of
shares held
(%)
66,142,195
31.83
26,711,014
12.85
3. MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
21,865,427
10.52
4.
5.
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
6. MR CARL ERIC HOLT + MRS LORRAINE HOLT
7.
8.
9.
AMALGAMATED DAIRIES LIMITED
BERNE NO 132 NOMINEES PTY LTD <594138 A/C>
NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>
10. BNP PARIBAS NOMS PTY LTD
11. MR SAMUEL GONZALES AFDAL
12. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
13. CS THIRD NOMINEES PTY LIMITED
14. MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
15. NATIONAL NOMINEES LIMITED
16. OZLEXA PTY LTD
17. RIVERLOW PTY LTD
19,488,889
12,003,669
4,093,328
3,296,881
2,591,880
2,520,205
2,455,229
2,260,000
1,809,370
1,563,291
1,446,476
1,148,568
1,000,000
932,732
18. MR ROY PHILIP DANIEL + MRS DONNA MARY DANIEL
815,875
19. FULTON SECURITIES PTY LTD
20. JD FAMILY INVESTMENT NOMINEES PTY LTD
800,000
751,922
9.38
5.78
1.97
1.59
1.25
1.21
1.18
1.09
0.87
0.75
0.70
0.55
0.48
0.45
0.39
0.38
0.36
Total: Top 20 holders of Ordinary Fully Paid Shares
Total: Remaining Holder Balance
Total: Ordinary Fully Paid Shares
173,696,951
83.59
34,097,350
16.41
207,794,301
100.00
(d) On market buy back
There is no current on-market buy back.
126
ADDITIONAL SHAREHOLDER INFORMATION
1.
Shareholding (continued)
(e) Substantial shareholders
An extract of the Company’s register of substantial shareholders is set out below:
Name
Ruffer LLP
Arbiter Partners Capital Management LLP
Paradice Investment Management Pty Ltd
Ordinary shares held
Number of shares
(%)
33,477,713
31,045,518
11,55,331
16.11%
14.94%
5.56%
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
(%)
• 360,000 unquoted options (comprising of 4 equal tranches of 90,000
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 November 2020
Persons holding 20% or more;
Boyd Timler
• 1,,465,000 unquoted options (comprising of 4 equal tranches of
416,250 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 08 January 2022
Persons holding 20% or more;
James Llorca
David McGowan
• 79,000 short term incentive (“STI”) performance rights were granted
at a share price of $0.89, and subject to the satisfaction of remaining
as employees and any adjustments in accordance with the rules of
the Executive Incentive Plan.
The STIs will automatically vest on 21 January 2021.
Persons holding 20% or more;
360,000
100%
500,000
300,000
20%
34%
Peter Alphonso
James Llorca
42,000
37,000
53%
47%
• 4,340,000 long term incentive (“LTI”) performance rights were
granted. 50% being non-market, valued at a share price of $0.45 and
50% being market, valued using the Monte Carlo Simulation Model.
All LTIs are subject to the satisfaction of remaining as employees and
any adjustments in accordance with the rules of the Executive
Incentive Plan.
The LTIs will automatically vest on 13 March 2023.
Persons holding 20% or more;
-
-
-
3.
The name of the Company Secretary is:
Mr Peter Stanley Alphonso
4.
The Principal Registered Office of the Company is:
Suite A, Level 1
1 Preston Street
Como, WA 6152
Australia
Telephone: +618 9474 1330
Email:
Website: www.medusamining.com.au
admin@medusamining.com.au
127
ADDITIONAL SHAREHOLDER INFORMATION
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.
▪ Trading quote: MML
128
TENEMENT SCHEDULE
as at 30 June 2020
Name
Tenement ID
Registered
Holder
Company’s Interest as at
Royalty 1
Area (hectares) as at
30 June 2019
30 June 2020
30 June 2019
30 June 2020
Co-O Mine
MPSA 262-2008-XIII PMC
MPSA 299-2009-XIII PMC
Co-O
APSA 00012-XIII
APSA 00088-XIII
APSA 00098-XIII
APSA 00099-XIII
Saugon
EP 017-XIII
EPA 00066-XIII
EPA 00069-XIII (2)
EPA 00087-XIII (2)
BMMRC
Phsamed
Philcord
Philcord
PMC
PMC
Phsamed
PMC
MPSA 344-2010-XIII Philex
Tambis
Apical
Corplex
APSA 00054-XIII
APSA 00056-XIII
APSA 00077-XIII
EPA 00186-XIII
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%
-
-
-
-
1% NPI
1% NPI
-
-
-
-
7% NSR
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
3% NSR
-
4% GSR
3% GSR
-
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
2,540
85
6,208
1,235
2,118
162
810
7,111
190
APSA 00028-XIII
Apmedoro
Earning 70% (JV)
-
1. Royalties payable to registered holders, aside from the prescribed royalties’ payable to the Philippine government and the indigenous people.
2. Awaiting 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
Philex
Philex Gold Philippines Incorporated
BMMRC
Base Metals Mineral & Resources Corporation
Das-Agan
Das-Agan Mining Corporation
Phsamed Phsamed Mining Corporation
Apmedoro
APMEDORO Mining Corporation
Philcord
Mindanao Philcord Mining Corporation
Salcedo
Neptali P. Salcedo
Corplex
Corplex Resources Incorporated
Royalty
NPI
NSR
Net Profit Interest
Net Smelter Royalty
GSR
Gross Smelter Royalty
129
MEDUSA MINING LTD
ABN: 60 099 377 849
Suite 1, Level 1
1 Preston Street, Como WA 6152
PO Box 122
South Perth WA 6951
Tel: 61 8 9474 1330
Email: admin@medusamining.com.au
Website: www.medusamining.comau