Northern Star Resources
Annual Report 2018

Plain-text annual report

2018 ANNUAL REPORT Northern Star Resources Limited is an Australian mid-cap gold miner that is positioned among the top 25 gold miners globally with costs in the lowest quartile of its peer group, no debt, asset diversity and an exciting pipeline of organic growth opportunities – another year of stellar achievements FRONT COVER: 2018 - The Year of Processing. In 2018 Northern Star set records at both its Jundee and Kalgoorlie Operations with both sites achieving record hard rock annual throughput; the highest recorded level of throughput in the 25 year history at both operations. Charles Munson, Process Technician, Jundee adsorption tanks. TABLE OF CONTENTS Key Highlights Chairman’s Address Sustainability Report Operations Review Directors’ Report Remuneration Report Financial Report Independent Auditor’s Report Shareholder Information Tenement Schedule Glossary Corporate Directory SCOPE OF THIS REPORT 3 4 6 8 22 32 39 52 111 116 118 122 123 The Northern Star 2018 Annual Report presents the operating and financial results for the period 1 July 2017 to 30 June 2018. Except where otherwise stated in the Company’s Corporate Governance Statement, the Company has followed the ASX Corporate Governance Council’s Principles and Recommendations (third edition) during FY2018. The reporting structure also addresses Northern Star’s values and reflects the principles of the Global Reporting Initiative (GRI) general reporting guidelines. NORTHERN STAR RESOURCES LIMITED ABN: 43 092 832 892 4 Our VISION is to continue to build a safe, quality mining and exploration Our MISSION is to generate earning accretive value for our Shareholders Company focussed on creating value through operational effectiveness, growth for Shareholders. opportunities and exploration with a prime focus on success, to deliver on our targets. Financial Performance Operational Performance Net Profit of $194M up 3% on FY2017 EBITDA $443M up 4% on FY2017 Earnings Per Share of 32.1cents up 2% on FY2017 FY2018 Dividend payout of 9.5 cents per Share up 6% from FY2017 Jundee & Kalgoorlie Ops both achieved 300kozpa run rate Record production run rate of 184koz achieved in Q42018 Reserves increased to 4Moz and Resources to 15.9Moz Successful integration of the South Kalgoorlie Operations 5 5 STARR It’s what we stand for. Environment & Social Our STARR CORE VALUES It’s what we stand for 50% reduction in LTIFR to 0.9 v sector average of 2.7 $865M contribution into the Australian economy in FY2018 19% FY2018 female participation above industry average of 17% Expanded the Indigenous Ranger program across our operations SAFETY It matters and starts with you. TEAMWORK Together we can. ACCOUNTABILITY The responsibility lies with you. RESPECT To get it you must give it. RESULTS We deliver on our promises. 6 “Northern Star’s definition of ongoing success extends well beyond financial returns...” Annual Report | CHAIRMAN'S AddRESS 7 Dear Shareholders, Looking back on the past financial year, some might say that Northern Star has become somewhat predictable. Our recipe for growth is now clearly mapped out: we invest in exploration at and around our Tier-1 projects in Tier-1 locations and we grow the mineral inventory and optimise operations which enables us to increase production and free cashflow. Then we return to the start of the process and seek to repeat it. The events of FY2018 illustrate this approach. We began the year with a game-changing declaration: our exploration program had been so successful that we had accumulated Resources of 10.2 million ounces. Along the way, Reserves had tripled to 3.5Moz. As spectacular as these numbers were, their real value lay in the fact that they underpinned 10-year mine lives at our Tier- 1 Jundee and Kalgoorlie operations. And this in turn enabled us to increase production to our target rate of 600,000 ounces a year. But as we always say at Northern Star, we are a business first and a mining company second. Given this mantra, the increased production was not in itself, the key accomplishment. Rather, it was the resulting step-change in free cashflow and overall financial returns which established that we had achieved our objective. This is demonstrated by our financial and operational results for the year to June 30, 2018. These have seen Northern Star continue to grow its underlying free cashflow, production, Resources and Reserves on a per share basis. It is important to note that the strength of our performance last year was driven not only by our exploration and operational success, but by the overall business first approach which is the focus of our Company. Northern Star’s definition of ongoing success extends well beyond financial returns, as the above measures demonstrate. Its recipe for achieving sustainable success contains many more ingredients than exploration and production. And the beneficiaries of the Company’s success are far larger in number and nature than shareholders alone. The Company’s contribution to the Australian economy, as measured in economic terms, in the past year reached $865 million, this being the total of all outgoings on government royalties, tax, wages, goods and services, interest and dividends. This was in addition to our significant donations, sponsorships and a host of intangible contributions such as providing for employees to undertake voluntary community work. At the time of writing, we had just set out our strategy and goals for the new financial year. It is, in many respects, a case of history repeating. Our production guidance has been increased to 600,000-640,000oz, which reflects in part the latest growth in our Resource inventory to 15.9Moz, including Reserves of 4Moz. But much of our focus will now return to exploration as we seek to repeat our strategy of growing our inventory, which will in turn enable us to further increase production and free cashflow. In FY2019, we have allocated a record $60 million to exploration, most of which will be spent converting a significant slice of Resources to Reserves. Our performance on so many levels was undoubtedly enhanced by the fact that we did not record any environmental or heritage incidents during the year and we continued to foster and grow healthy stakeholder relationships. Admittedly, this is somewhat predictable. But we believe that predictable growth – particularly at a time when so many of our global peers are enduring predictable contraction - gives Northern Star an enviable point of difference. Northern Star’s over-arching belief that strong environmental, social and corporate governance drives performance, rather than being a by-product of it, was reflected in the formation of the Board-level ESG & Safety Committee and with the ESR department reporting directly to me as Executive Chairman. I am delighted to report that our founding Chairman and current Non-Executive Director, Chris Rowe, has decided to remain on the Board, accepting the role as Chairman of the ESG & Safety Committee. The Company will benefit enormously from his significant experience as a member of this committee and being the former Deputy Chairman of the Environmental Protection Authority of Western Australia and as Counsel Assisting the Royal Commission into “WA Inc”. This wealth of experience, combined with the incorporation of climate change risks into the corporate risk register, significantly boosts Northern Star’s ESG capabilities. The credit for our success in executing this strategy goes to our remarkable team of managers, staff, contractors and suppliers. I would like to thank them enormously for their initiative, skill and hard work over the past year. I also thank our Shareholders for their support as we have implemented our strategy. Yours faithfully, BILL BEAMENT Executive Chairman 22 August 2018 8 SUSTAINABILITY REPORT NORTHERN STAR’S SUSTAINABLE BUSINESS CHARTER PURPOSE: To continue to build a safe, quality mining and exploration Company, focussed on creating value for Shareholders. STRATEGY: To develop a responsible Company that is attractive to global investors. SUSTAINABILITY VISION: Delivering responsible environmental and social business practices that lead to both the creation of strong economic returns for our Shareholders, and shared value for our stakeholders. “Operating sustainably with sound business ethics and strong governance ensures long-term success for our Company, our people, the communities in which we operate and the land on which we work. Generating profit is simply not enough. To be truly successful, we must deliver a safe, efficient and respectful business”. Bill Beament Executive Chairman 10 FY2018 Sustainability Performance Snapshot SECTOR LEADING SAFETY PERFORMANCE STRONG SOCIO-ECONOMIC RETURN Our number one core value is Safety LTIFR FY2018 0.9 (Sector 2.7) (FY2017: 1.8) TRIFR FY2018 3.2 (Sector 9.6) (FY2017: 14.3) *TRIFR and LTIFR are calculated based on number of recordable injuries per million hours worked Strong Socio-Economic Return As we grow, so does our contribution to society FY2018 $865 million in payments (WA Government royalties, tax, wages, goods and services, interest and dividends) 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 ) z o ( d e r e v o c e R d o G l 1000 900 800 700 600 500 400 300 200 100 0 2011 2012 2013 2014 2015 2016 2017 2018 Gold Recovered Economic Contribution i E c o n o m c C o n t r i b u t i o n ( $ M ) Annual Report | SUSTAINABILITY REPORT 11 ENVIRONMENTAL RESPONSIBILITY RECORD PRODUCTION RESULTS Environmental Responsibility Number of materially adverse environmental incidents Number of regulator fines for environmental incident/non-compliance 0 0 Value of regulator fines for environmental incident/non- conformance $NIL Record Production Results FY2018 gold production up 11% from FY2017 to 575, 121 ounces at an all-in sustaining cost of $1,029/oz (US$761/oz*) *AUD/USD exchange rate of $0.74 Reserves increased to 4Moz and Resources to 15.9Moz No debt $512 million in cash, bullion and investments (30 June 2018) 12 About this Report This report provides guidance on Northern Star’s performance within key areas of Environmental, Social and Governance (ESG). 2018 marks the second year that Northern Star has published a Sustainability Report as part of communicating our strategy for achieving our Company purpose and Sustainability Vision. After publishing our inaugural Sustainability Report as a standalone document in 2017, the decision was made to incorporate this report into our 2018 Annual Report. This highlights the value Northern Star places on our social licence to operate. We have prioritised this report to sustainability topics based on our growing understanding of stakeholder priorities and related key areas of interest. Where we operate Tanami Project +3Moz Gold Camp Paulsens Operations +5Moz Gold Camp DARWIN Wyndham Derby Broome Halls Creek Port Hedland Newman Paraburdoo Jundee Operations +10Moz Gold Camp Carnarvon Meekatharra Kalgoorlie Operations +19Moz Gold Camp Mt Magnet Geraldton PERTH Esperance KILOMETRES 0 250 500 CAIRNS BRISBANE ADELAIDE SYDNEY CANBERRA MELBOURNE HOBART Annual Report | SUSTAINABILITY REPORT 13 Governance Northern Star’s annual Corporate Governance Statement released on 23 August 2018 explains our corporate governance compliance in detail, located on the Northern Star website, under Corporate Governance. Code of Conduct Constitution STARR Core Values Bill Beament Executive Chairman John Fitzgerald Lead Independent Director Christopher Rowe Independent Non-Executive Director Peter O’Connor Independent Non-Executive Director Shirley In’tVeld Independent Non-Executive Director Board Charter Audit & Risk Committee Charter Nomination Committee Charter Remuneration Committee Charter ESG & Safety Committee Charter Audit & Risk Committee Nomination Committee Remuneration Committee ESG & Safety Committee Non-Executive directors Board of Directors Charters Board Committees Core Corporate Governance Policies Risk Management Policy Safety & Health Policy Continuous disclosure Policy Anti-Bribery & Anti-Corruption Policy Risk Management Standard Environmental Policy Compliance Procedures Shareholder Communication Policy Privacy Policy donations & Sponsorship Policy Procedure for Selection, Appointment & Rotation of External Auditor Securities Trading Policy Stakeholder Policy diversity Policy Policy & Procedure for Selection & Appointment of directors Whistleblower Policy Process for Performance Evaluation Equal Employment Opportunity Policy Policy on Assessing director Independence Travel Policy 14 Environmental Performance Northern Star monitors, reviews and reports its performance against its environmental commitments. We strive to meet and where possible exceed our legal and permit obligations to deliver the best possible environmental and social outcomes. Number of materially adverse environmental incidents Number of regulator fines for environmental incident/non-compliance 0 0 Value of regulator fines for environmental incident/ non-conformance $NIL “We strive to meet and where possible exceed our legal and permit obligations to deliver the best possible environmental and social outcomes.” Air quality and emissions TABLE 3.1 GHG EMISSIONS FY2018 Total Scope 1 GHG Emissions (t CO2-e) FY2018 Total Scope 2 GHG Emissions (t CO2-e) 189,486 119,717 We report our Company-wide Scope 1 and Scope 2 greenhouse gas (GHG) emissions to the Australian Government’s Clean Energy Regulator, via the National Greenhouse and Energy Reporting Scheme (NGERS). The bulk of our Scope 1 carbon emissions (generated by us) come from diesel and gas used to generate electricity and power our mining equipment fleet. The bulk of our Scope 2 carbon emissions (generated by others, for us) come from the purchasing of electricity, and the transporting of goods via truck courier to our remote operations. FIGURE 3.1 MAIN SCOPE 1 GHG EMISSION SOURCES BY FACILITY The largest single point source of Scope 1 GHG emissions comes from our Jundee mine via the power plant that supports the processing mill and mine. In 2017, we switched from diesel to less carbon-intensive gas. Our new 18mw reciprocating engine gas power plant produces the bulk of electricity for Jundee, with diesel now only used during times of abnormally high-power demand. Main scope 1 GHG emission sources by facilityJundeePaulsensKal ops Annual Report | SUSTAINABILITY REPORT 15 FIGURE 3.2 MAIN SCOPE 2 GHG EMISSION SOURCES BY FACILITY Water Main scope 2 GHG emission sources by facility FIGURE 3.3 TOTAL FRESH WATER CONSUMPTION (KL) Total fresh water consumption (KL) 4,000,000 3,000,000 2,000,000 1,000,000 0 Kanowna Belle Jubilee FY2017 FY2018 Our total fresh water consumption was reduced for FY2018 by 26% (3,490,709KL to 2,570,955KL) as we improved milling efficiency at the Jundee processing plant, and ceased processing ore at the Paulsens processing plant in January. We introduced a Water Management Standard in FY2018, which establishes a governance framework driving responsible water usage across the Company. Waste TABLE 3.3 WASTE ROCK ANd TAILINGS FY2018 Waste Rock Produced (tonnes) FY2018 Tailings Produced (wet tonnes) 2,246,745 4,217,545 We followed the Waste Management Standard in FY2018 to improve our management of waste and deliver associated environmental and health benefits. Rehabilitation and closure preparedness We rehabilitated over 180 hectares of land in FY2018, around the Jundee, Kalgoorlie and South Kalgoorlie mines. In FY2018, we continued to improve and implement our reclamation liability models for rehabilitating all areas impacted by our business activities. The Kanowna Belle processing plant in Kalgoorlie is powered by mains power from the state electricity grid, and this is responsible for much of our Scope 2 GHG emissions. Northern Star has established an Innovation Board, chaired by the Executive Chairman with its members comprising senior management employees, the objective of which is to regularly assess and drive technical innovation projects to increase operational efficiencies across the business. The Innovation Board continues to assess options for further GHG emission reductions through the consideration of heat exchange and solar power generation technology. We report on our emissions per substance to the Australian Government’s National Pollution Inventory. This information is publicly available and can be accessed at www.npi.gov.au Energy use and production Our primary source of energy production is the gas-fired power plant at the Jundee operation, which produced 514,215GJ of electrical energy in FY2018. The majority of our Kalgoorlie operation’s energy supply comes from the state power grid. Over 90% of our total energy consumption is from our Jundee, Kanowna Belle, Kundana, Millennium and South Kalgoorlie operations. TABLE 3.2 ENERGY PROdUCEd FY2018 Total Energy Produced (GJ) FY2018 Total Energy Consumed (GJ) 718,020 4,447,650 16 Climate change Northern Star acknowledges that there is climate change risk associated with all business activity and that the assessment, management and considered acceptance of this risk ensures both the sustainability and growth of our business. Governed by our Risk Management Policy, senior management and functional experts document and review our risk registers, which are regularly reported to the Audit and Risk Committee. In 2018, several climate-related risks (water and energy pricing) were included in our corporate risk register, to assess the potential impact of climate change projections on our business. Below are our highest priority climate-related business risks. TABLE 3.4 CLIMATE CHANGE RISKS Risk description Contributing factors Impact Current mitigating practices Future mitigating practices Reduced water availability. Changing precipitation patterns can exacerbate water stress and impact availability of water available for ore processing. Climate change related reduction in seasonal rainfall and associated groundwater recharge. Production loss. Inability to access groundwater abstraction permits for processing of ore. Implementation of a Company-wide Water Standard as part of the Environmental Management System. Having to locate alternative water sources further afield from existing plant infrastructure. Review reputable climate science data on temperature increase scenarios and correlated rainfall pattern change predictions. Use findings to conduct risk assessments of water availability changes. Reduce utilisation of high-carbon energy. Regular field monitoring of groundwater resources, including results analysis, modelling and interpretation. Full compliance with regulator approved ground water operating strategies. Increase utilisation of pit-water for processing. Maintain a water balance model and water use forecast. Implementation of the Innovation Board in relation to Climate Change, to identify opportunities to become more energy efficient and adopt lower carbon means of generating energy. Uncertain energy market pricing. Energy prices may increase due to carbon charges and/ or adoption of more carbon-efficient energy source alternatives. Increasing public and political support to adopt less carbon intensive means of generating energy to meet the national Renewable Energy Target. Increase cost of energy per unit. Annual Report | SUSTAINABILITY REPORT 17 Safety Performance Zero Harm Targets, Enabling Culture, Continual Improvement Our STARR core values – leadership, culture and safety To live by these values we take a considered and proactive approach to developing a performance mindset and the right behaviours in our organisation. To achieve this we have a clear people strategy that focuses on the pillars of leadership, culture and safety. Our leadership – visible and engaging Visible leadership is integral to building a healthy culture and a safe working environment. It requires ongoing nurturing and development, and in recognising this we have a suite of leadership initiatives that develop our leadership capability. Coupled with the right business tools and processes we aim to ensure leaders can make quality, well- informed decisions, and drive positive safety performance. Two of our fundamental leadership initiatives are our Active Field Leadership and Leadership Development Programs. Active Field Leadership supports our leaders in having “active” conversations with both contractors and staff, in the field, to improve our communication and sharpen our focus on safety and quality. Safety Teamwork Accountability Respect The Leadership Development Program allows our leaders to fulfil their potential by giving them skills and knowledge to improve engagement, lead change, and further develop the capabilities and performance of their teams. Results Thirty-nine of our leaders also participated in the Company’s High Performing Team program, which aims to provide a greater understanding of individual strengths and how these can be applied in a practical environment to ensure a direct correlation between individual performance and Company objectives. Our culture “Where are all the people? That is where you as a leader Culture is the combination of values, beliefs and attitudes that drive the behaviour of our Company. need to be!” Our Company leaders take the responsibility for setting the values, beliefs and attitudes that generate Northern Star’s culture. Everyone who is a part of Northern Star is expected to contribute to - and own - our culture. Culture is what you do, what you say and what you ignore or walk past. - Stuart Tonkin Chief Executive Officer Northern Star 18 TRAINING EMERGENCY PREPAREdNESS Our crisis management plan details the roles, responsibilities and processes our team will follow in the event of a significant emergency or crisis. The team includes representatives from operations, legal, commercial, safety, environment, community, media and government relations. All Northern Star sites participate in annual training and simulation exercises involving both the mine and corporate crisis management teams. Our sites are required to identify, mitigate and control risk specific to their operation. For relevant risks, an emergency management plan is required to ensure we respond quickly through adequate preparation and clear points of escalation. HEALTH ANd SAFETY REPRESENTATIVES The Company is focussed on how we are developing the workforce’s ownership for their own safety and that of their co-workers. Our focus is centred on delivering safety leadership at all levels of the business to strengthen the culture of, and commitment to, zero harm. Executive responsibility for safety sits with the CEO, however we believe our Health and Safety Representatives play a vital role in helping to achieve this. Each year, our CEO meets in a dedicated forum at each site with all our nominated representatives across the business, providing the opportunity to openly discuss and engage, further reinforcing the importance Northern Star places on safety. Our target is to achieve an injury free workplace and Northern Star is committed to providing a workplace where zero harm is the accepted norm, supported by a system that is fit for purpose for our business. Conducting thorough and detailed investigations, sharing what we have learnt and implementing meaningful corrective actions will further ensure everyone across our sites returns home safely. SAFETY PERFORMANCE During FY2018, Northern Star reduced the Lost Time Injury Frequency Rate (LTIFR*) by 50% to 0.9 (Sector 2.7/ FY2017: 1.8) and the Total Recordable Injury Frequency Rate (TRIFR*) by 75% to 3.2 (Sector 9.6/ FY2017: 14.3). Both measures have improved beyond our set targets and are tracking at half the industry average. *Note: LTIFR/TRIFR are calculated based on the number of recordable injuries per million hours worked. Like leadership, culture needs to be developed and enhanced. Northern Star is committed to the development and training of all of our people so that they have the skills and tools they need to live our values, contribute to performance, and enhance our culture. This commitment is supported by extensive competency-based training through a combination of both on-the-job learning and education via our Learning Management System (LMS). Our LMS provides a centralised source of information and training, consistently across the whole Company. We are also committed to simplifying our business as a way of minimising risk, and giving our employees the opportunity to achieve their best every day. HEALTH ANd WELLBEING A healthy workforce has the dual benefits of supporting better business performance and more sustainable communities. Recognising this, we have implemented a series of programs that promote, maintain and enhance a healthy lifestyle for our people. Northern Star is committed to continuous improvement in this. We aim to provide our employees with the necessary education and information to self-manage their own fitness for work. In line with our Occupational Health and Safety (OHS) Strategic Plan we are establishing a Mental Health Working group to provide awareness, support and proactive management of mental wellbeing across the Company. CONTRACTOR MANAGEMENT Northern Star sites operate in partnership with contractors and suppliers. Our OHS Management System defines the requirements, consistent with our Code of Conduct, policies and standards to which all Northern Star business partners must subscribe. All potential business partners are required to complete our pre- qualification check and are comprehensively evaluated against criteria including safety, health, environment and community criteria, as well as risk management, internal auditing and employee management. Our safety – everyone has a voice We understand that our core business means we operate in sometimes hazardous environments, and we have a responsibility to ensure that our people are equipped to manage those hazards so they can go home from work unharmed. Our safety record is sector leading, and continuous improvement is our focus. Northern Star has committed to a three-year plan to drive a step change in safety performance: • Develop (FY2018) – the right guidance material so that all sites have improved tools to identify and control hazards and manage risk efficiently; • Consolidate (FY2019) – ensure the processes are implemented correctly and are adding value across the Company; and • Improve (FY2020) – identifying areas for improvement and implementing those changes. Annual Report | SUSTAINABILITY REPORT 19 People Performance Our workforce At Northern Star, our people are the most important asset to our business and we are committed to fostering a culture of highly motivated and valued employees who are provided with the right opportunities for development in order to reach their full potential. Our direct Aboriginal employment rate as of 30 June 2018 was 0.79%. This figure does not account for mining contractors at Jundee or South Kalgoorlie, or the engagement of Aboriginal ranger teams for environmental works at Paulsens, Jundee, Kalgoorlie, and Central Tanami. We had 1,213 direct employees and 820 contractors as of 30 June 2018, taking our total workforce to 2,033. Developing our people FIGURE 3.4 EMPLOYEE NUMBERS Employee numbers – June 2018 350 300 250 200 150 132 160 100 3 209 50 86 0 158 133 103 102 10 21 11 8 9 68 CORP JUN KB RAL RHP MIL PAU SKO CTP WTP Northern Star NSMS Our employees are split between residential (69%) and fly-in-fly-out (31%) working arrangements, with 83% of our Kalgoorlie workforce residing in the Kalgoorlie Boulder Region. Diversity In FY2018, we increased our female participation rate by over 2% to 19.04%, exceeding the industry average for the same period. One Director and three senior management positions are held by women, as reported to the Australian Government’s Workplace Gender Equality Agency. FY2018 saw us continue to build on the capabilities of our diverse group of leaders, which contributes directly to us reaching the Company’s strategic objectives as well as continuing to deliver greater value to our Shareholders. Graduates and apprentices In FY2018, we increased our graduate intake by 30% to 30 and increased our apprentice intake by 220% to 16. Northern Star continues to support the industry’s future through maintaining high numbers of quality graduates into our Graduate Program across the disciplines of mining, geology, geotechnical, metallurgy and survey. Over the two-year program, graduates receive extensive practical experience, developmental training and mentoring and support from our industry experts, which aims to provide the foundations for our young professionals to lead the way in the growth and development of the future of the mining industry. Graduate intake increased by 30% Apprentice intake increased by 220% female participation rate increased to 19.04% 20 Social Performance Our Sustainability Vision drives us to generate strong economic returns for Shareholders and shared value for our stakeholders. Our external stakeholders have different needs and understandings of what shared value looks like, and we work hard to understand our stakeholders’ needs and find creative ways to develop and achieve shared goals. We also understand that our business can impact on people and communities, and we work to deliver best practice social impact analysis and management for the areas in which we operate. Economic value add $865M Corporate tax and Government royalties up 31% Community investment up 28% “We work hard to understand our stakeholders’ needs and find creative ways to develop and achieve shared goals.” External stakeholder engagement The Company’s approach to stakeholder engagement is set out in our Stakeholder Policy (see our website). Our employees all work under our Stakeholder Mapping and Stakeholder Engagement Standards to ensure individual and collective stakeholder points of interest in our business are identified and appropriately addressed. All our operating mines and processing facilities have dedicated Environment and Social Responsibility (ESR) teams who act as the point of contact for external stakeholders. At a corporate level, engagement of our financial and non-financial stakeholders is managed by our Investor Relations Officer and Social Responsibility & External Relations Manager respectively. We have implemented grievance mechanisms across all our operations, proactively encouraging stakeholders to formally raise a grievance or make a complaint if they have concerns about our business, in the knowledge that their matter will be respectfully dealt with. In FY2018 no grievances were received from external stakeholders. Community investment In 2018, we invested $668,158 in a range of community initiatives that align with our Community Investment Framework. For FY2019, we have revised our Sponsorship and Donations Policy to further increase our investment in the communities in which we operate. In addition to our financial contribution to communities, our people are now encouraged to take a day’s paid volunteer leave to support a worthwhile not for profit cause. FIGURE 3.5 SOCIOECONOMIC BREAKdOWN Socioeconomic breakdownCOMMUNITYCOMMUNITYINVESTMENTHEALTH &WELLNESSENVIRONMENTINDIGENOUSEDUCATION &DEVELOPMENTEMPLOYEE INITIATIVES$191,000 $251,000 $19,000$93,000 $110,000 $3,000 Annual Report | SUSTAINABILITY REPORT 21 Socioeconomic impact breakdown Northern Star acknowledges the importance of generating economic value not just for its Shareholders, but for all Stakeholders. In recent years, Northern Star has generated some of the highest returns to Shareholders of any gold production company in Australia. We are immensely proud of the fact that a fair Share of our revenue is returned to external Stakeholders such as governments and community organisations, in the form of state royalties, corporate taxes, wages, direct donations and goods and service payments. In FY2018, we paid over $120 million to governments in gold royalties and corporate tax, with these figures increased from FY2017 by 9.5% to $23.3 million and 37% to $100.1 million respectively. Since 2014, we have been supporting Aboriginal rangers with professional fee for service environmental compliance work. This began at our Jundee mine with the Wiluna Martu people, and has grown to now include Aboriginal Rangers at all our producing mines. Our partnership with the Wiluna Martu and Desert Support Services was awarded the WA Government 2017 Community Partnership Award Merit Certificate. Responsible heritage management is consistently raised as a material issue by our first people’s stakeholders. Our Management of Cultural and Heritage Sites Standard ensures we take a respectful approach to interacting with areas of cultural concern and any landforms or artefacts that reside within them. FIGURE 3.6 ECONOMIC VALUE Add Economic value add DIVIDENDS DECLARED TO SHAREHOLDERS $63.3M CORPORATE TAX AND WA GOVERNMENT ROYALTIES $123.4M GOODS AND SERVICES PAYMENTS $516.3M ECONOMIC VALUE Add $865M COMMUNITY INVESTMENT $0.67M TOTAL EMPLOYEE COSTS $162.2M TABLE 3.5 ECONOMIC VALUE Add Value-add area FY2018$(M) FY2017 Variance Corporate Tax and WA Government Royalties $123.4M 31% increase Community Investment $0.67M 28% increase Total Employee Costs $162.2M 32% increase Goods and Service Payments $516.3M 5% decrease Indigenous peoples We acknowledge the many first peoples of Australia whose lands we are privileged to operate on. Supporting their enduring connection to country and culture aligns with our core values, and providing economic opportunity for Indigenous people is a key way for us to create shared value for society. FY2018 heritage incidents Number of heritage incidents* Number of heritage-related infringements** Cost of heritage-related infringements 0 0 $NIL *direct unauthorised physical damage to a site of specific heritage value **regulator administered penalty for breech of heritage-related legislation Human rights We acknowledge human rights as a legitimate set of moral principles of which every human being is inherently entitled to regardless of their personal, social, economic, cultural or geographic circumstances. Northern Star commits to, as a minimum, always complying with the United Nations Universal Declaration of Human Rights and the Guiding Principles on Business and Human Rights. Northern Star supports the Australian Government’s introduction of Modern Slavery legislation. In the interim, we continue to undertake due diligence on select suppliers of goods and services to our business to identify and mitigate any risks of inadvertently supporting human rights breaches in our supply chain. Tax transparency We continue to voluntarily publish the Company’s annual Tax Corporate Governance Statements as part of our commitment to transparency. Our voluntary reporting under the Australian Voluntary Tax Transparency Code is located on the Northern Star website, under Corporate Governance. 22 OPERATIONS REVIEW 24 Overview Northern Star is an ASX 100 gold production and exploration Company. Northern Star has a Mineral Resource base of 15.9 million ounces, and Ore Reserves of 4.0 million ounces,1 located in highly prospective regions of Western Australia and the Northern Territory. As the third largest Australian gold producer, Northern Star continues to deliver on its strategic objective of being a significant gold company delivering outstanding value to its Shareholders. During FY2018, the Company produced 575,121 ounces of gold from its Western Australian Jundee, Kalgoorlie and Paulsens Operations. The Company continues to advance exploration activities at the Tanami Project in Western Australia and the Northern Territory. In parallel, Northern Star has delivered on its objective of organically growing its Resources and Reserves bases through highly successful exploration programs, and by thoroughly appraising our existing mines to extend their operating lives. This has enabled the Company to develop a strong organic pipeline of future projects for the business. In FY2019, the Company will invest $60 million in exploration and $74 million in expansionary capital to generate the mines of the future, grow production to 600,000ozpa and follow up the significant successes achieved in FY2018. (1) As at 30 June 2018 – see ASX Release dated 2 August 2018 “During FY2018, the Company produced 575,121 ounces of gold from its Western Australian Jundee, Kalgoorlie and Paulsens Operations.” Tanami Project Paulsens Jundee Kalgoorlie Operations Annual Report | OPERATIONS REVIEW 25 Mine Operation Review TABLE 4.1 MINE OPERATION Total material mined Total material milled Head grade Gold recovery Gold produced Gold sold Revenue Cost of sales Depreciation & amortisation EBITDA[1] Measure tonnes tonnes grams/tonne % ounce ounce $000's $000's $000's $000's All-in sustaining cost $/ounce sold Jundee 1,678,592 1,839,273 5.4 89% 283,288 284,745 485,767 245,392 44,518 284,893 870 Kalgoorlie* Paulsens 1,963,768 2,028,158 4.4 93% 269,396 261,589 438,261 302,005 63,375 199,431 1,174 174,974 233,292 3.8 78% 22,436 23,776 39,997 71,701 40,930 9,226 1,450 Total 3,817,334 4,100,723 4.8 91% 575,121 570,110 964,025 619,098 148,823 493,550 1,029 Substantial growth opportunities exist within Northern Star’s existing portfolio of assets. A further $74 million has been budgeted for expansionary capital in FY2019, major items include $34 million on dual purpose drill drives to deliver significant Reserve/Resource and production growth; $20 million on ancillary projects for future years’ production growth; and $11 million on a new 10-year capacity tailings facility for Kanowna Belle processing plant. * Results above exclude South Kalgoorlie Operations (1) EBITDA is earnings before interest, tax, depreciation, amortisation and impairment. FY2018 Performance has been generated from the Jundee, Kanowna Belle, East Kundana JV, Millennium, and Paulsens gold mines. In FY2018, a total of 570,110 ounces of gold was sold at an average price of $1,704 (FY2017: $1,675). All-in sustaining costs for FY2018 were $1,029 per ounce (FY2017: $1,032). During FY2018, 4.1 million tonnes were milled at an average head grade of 4.8gpt Au for 575,121 ounces Au recovered. Unprocessed ore stocks available for mill feed at the end of FY2018 contained 78,787 ounces Au. Gold in circuit at the end of FY2018 totalled 27,523 ounces. These items are reflected in the financial statements as ore stockpile and gold in circuit at cost, respectively. Jundee Operations saw a number of achievements during FY2018 with delivery of strong gold production, extension of mine life through Reserve growth and improvement in operating cost base through productivity and procurement initiatives. A $15 million mill expansion project was completed ahead of schedule and under budget, resulting in a greater than 50% throughput increase to over 2 million tonnes per annum. Several records under Northern Star ownership were achieved at Jundee, including underground stope tonnes mined, total tonnes mined, and underground hard rock milled. Kalgoorlie Operations comprises the Kanowna Belle, Kundana, and East Kundana Joint Venture (EKJV) (NST: 51%) operating areas. During FY2018, Kalgoorlie Operations produced record ounces under Northern Star ownership, had record yearly throughput through the Kanowna Belle mill and achieved commercial production at the Millennium mine in the June Quarter. The HBJ underground mine and Jubilee mill were added to the Kalgoorlie Operations portfolio through the purchase of Westgold Resources Limited’s South Kalgoorlie Operations at the end of the March Quarter. 26 Financial Overview TABLE 4.2 FINANCIAL OVERVIEW Revenue EBITDA [1] Net Profit [2] Cash flow from operating activities Cash flow used in investing activities Sustaining capital Non sustaining capital Exploration Acquisition of Western Tanami project Acquisition of South Kalgoorlie Operations Payments for available-for-sale financial assets Proceeds from sale of business Other investing Free Cash Flow [3] Underlying Free Cash Flow [4] Average gold price per ounce ($) Gold mined (ounces) Gold sold (ounces) All-in Sustaining Costs (AISC) per ounce sold ($) Cash and cash equivalents ($ million) Earnings Per Share (cents) FY2018 $’000 964,025 442,953 194,113 353,061 (247,294) (85,963) (64,831) (45,373) (4,000) (17,461) (30,613) 533 414 105,767 185,982 1,704 612,254 570,110 1,029 443 32.1 FY2017 $’000 869,407 424,182 188,897 349,595 (227,456) (87,380) (83,200) (56,423) - - (1,000) - 547 122,139 172,339 1,673 545,892 506,894 1,013 403 31.5 Change $’000 94,618 18,772 5,216 3,466 (19,838) 1,417 18,369 11,050 (4,000) (17,461) (29,613) 533 (133) (16,372) 13,643 31 66,362 63,216 16 40 1.0 Change (%) 11% 4% 3% 1% 9% (2)% (22)% (20)% 100% 100% 2,961% 100% (24)% (13)% 8% 2% 12% 13% 2% 10% 2% Key highlights presented in the table above are from continuing operations. Forward looking statements (1) EBITDA is earnings before interest, tax, depreciation, amortisation and impairment and is calculated as follows: Profit before Income tax plus depreciation, amortisation, impairment and finance costs less interest income. (2) Net Profit is calculated as net profit after taxation. (3) Free Cash Flow is calculated as operating cash flow minus investing cash flow. (4) Underlying Free Cash Flow is calculated as follows: 30 June 2018 - free cash flow ($105.8 million), plus M&A ($21.5 million), plus payments for available-for-sale investments ($30.6 million), plus FY2017 tax ($35.2 million), less bullion awaiting settlement ($2.5 million), less working capital adjustments ($4.6 million). 30 June 2017 - free cash flow ($122.1 million), plus bullion awaiting settlement ($12.1 million), plus stamp duty paid on prior acquisitions ($1.7 million), plus payments for available-for-sale investments ($1.0 million), plus FY2016 tax ($33.6 million), plus working capital adjustments ($1.8 million). Northern Star has prepared this public report based on information available to it. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this public report. To the maximum extent permitted by law, none of Northern Star, its directors, employees or agents, advisers, nor any other person accepts any liability, including, without limitation, any liability arising from fault or negligence on the part of any of them or any other person, for any loss arising from the use of this public report or its contents or otherwise arising in connection with it. This public report is not an offer, invitation, solicitation or other recommendation with respect to the subscription for, purchase or sale of any security, and neither this public report nor anything in it shall form the basis of any contract or commitment whatsoever. This public report may contain forward looking statements that are subject to risk factors associated with gold exploration, mining and production businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including but not limited to price fluctuations, actual demand, currency fluctuations, drilling and production results, Reserve estimations, loss of market, industry EBITDA, Underlying Free Cash Flow and All-in Sustaining Costs (AISC) are unaudited non IFRS competition, environmental risks, physical risks, legislative, fiscal and regulatory changes, measures. economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. Annual Report | OPERATIONS REVIEW 27 The Group’s operating and financial performance for Cash flow Cash flows from operating activities for FY2018 was $353.1 million which was $3.5 million higher than FY2017, driven by higher revenues due to higher gold sold and gold price received for FY2018 and higher interest income. This was offset by higher payments to suppliers and employees, and corporate taxes. Cash flows for investing activities increased by 9% as a result of an additional $21.5 million spent on Western Tanami and South Kalgoorlie acquisitions (FY2017: nil). In addition, payments for available-for-sale assets increased by $29.6 million (FY2018: $30.6 million; FY2017: $1.0 million). Cash flows from financing activities included payments for leased equipment of $7.1 million (FY2017: $8.7 million) and dividends totalling $63.3 million (FY2017: $60.0 million) paid to Shareholders. FY2019 production and cost guidance The following guidance was announced to the ASX on 18 July 2018: TABLE 4.3 FY2019 GUIdANCE Production ounces AISC/oz $ Jundee 280,000 - 300,000 895 - 980 Kalgoorlie Operations 320,000 - 340,000 1,140 - 1,250 Total 600,000 - 640,000 1,025 - 1,125 FY2018 reflects continued focus on productivity and cost reduction whilst maintaining growth options through acquisitions and on-going exploration. Profit For FY2018, the Group reported a profit after tax from continuing operations of $194.1 million (FY2017: $188.9 million). Revenue from continuing operations increased 11% to $964.0 million driven by the average realised gold price per ounce being 2% higher (FY2018: $1,704; FY2017: $1,673) and a 13% increase in gold sold (FY2018: 570,110oz; FY2017: 506,894oz). The profit for FY2018 was also impacted by the South Kalgoorlie acquisition, with the Group carrying full mining costs while honouring third-party toll treating contracts. EBITDA from continuing operations was $442.9 million for FY2018, which was an increase of 4% from FY2017. Finance costs increased by 18% (FY2018: $3.2 million; FY2017: $2.7 million) which is due to additional accretion charged on rehabilitation liabilities acquired from Western Tanami Project and South Kalgoorlie Operations. An impairment charge of $11.8 million was recorded on exploration and evaluation assets (FY2017: $8.4 million). Balance sheet Current assets as at 30 June 2018 increased by 15% against FY2017 balance date. This was largely a result of cash and cash equivalents increasing by $39.9 million. Non-current assets increased by $220.0 million primarily from the acquisitions of South Kalgoorlie and Western Tanami. A total of $76 million was added to exploration and evaluation assets through the Company’s continued investment in organic growth, and as a result of the exercise of the first put option by Tanami Gold NL under the Heads of Agreement for the Central Tanami Project. Payments of $30.6 million for available-for-sale financial assets was made in FY2018 (FY2017: $1.0 million) Current liabilities increased by 14% as at the end of FY2018, principally due to the recognition of a $20 million payable to Tanami Gold NL upon exercise of the first put option mentioned above. Current tax liabilities decreased to $14.9 million. During FY2018 the Company issued 9,523,810 Shares at a deemed issue price of $6.28 per Share as part of the acquisition of South Kalgoorlie Operations from Westgold Resources Limited. 28 Exploration Review Kalgoorlie Operations The Kundana and Kanowna Belle Operations continued large exploration programs that delivered further growth to the existing Mineral Resources. At Kanowna Belle Operations, exploration outlined resource growth across the mine and the expansion of the Velvet discovery continued. Jundee Operations Jundee Operations resource extension drilling within the mine was highly successful with significant increases in the Mineral Resource and Ore Reserve inventory. Exploration drilling from the 39 Level drill drive platform slowed during FY2018 with the focus on the growth of the Armada and Revelation trends. In-mine exploration within the EKJV area (NST: 51%) in the Kundana region was successful in maintaining the growth in the total Resource inventory for Pegasus-Rubicon-Hornet complex and further expanding mineralisation at the Raleigh deposit. Initial exploration of the new Zodiac discovery has defined a large mineralised corridor which will be the focus of future long-term exploration programs. Underground development to provide new drilling platforms for exploration of the Zodiac system has commenced. Exploration within the Northern Star’s 100% owned Kundana tenements was successful in maintaining the Resources at Millennium, Pope John, Barkers and Strzelecki areas. Extensional drilling at the new Millennium mine commenced late in FY2018. South Kalgoorlie Operations Following the completion of the acquisition, underground diamond drilling focussed on ore reserve definition within the mine whilst planning for new underground drilling platforms was completed. With establishment of the new platforms, underground drilling activity will increase to expand in-mine Mineral Resource inventory. A full review of the regional exploration targets within the extensive South Kalgoorlie tenement package is underway with a range of resource definition and exploration drilling programs expected to be undertaken in FY2019. Jundee Regional Surface exploration of defined anomalies from the broad scale regional aircore drilling programs had immediate success with the new Ramone discovery. The Ramone discovery has progressed rapidly to a maiden open pit Ore Reserve within 12 months with the Ramone system open in all directions. Numerous significant new drilling targets in the surrounding Deep Well area will be the focus of resource definition drilling in the coming years. Kalgoorlie Regional Tanami Kanowna Belle Regional exploration in the area surrounding the Kanowna Belle mine expanded during FY2018 with drilling programs at Red Eye, Woodline, Red Hill and White Feather completed. Exploration commenced within the Acra Joint Venture (NST: 20% increasing to 75%) with Pioneer Resources Limited. Central Tanami (Northern Star 25%) Work continued on historical geological datasets across the project highlighting the under-explored nature of the region. Major geophysical and geochemical programs were completed prior to the commencement of regional and resource drilling programs late in FY2018 to identify opportunities for growth. Kundana EKJV (Northern Star 51%) Surface and underground exploration drilling continued the growth of the Raleigh South area which is emerging as a significant extension to the original Raleigh deposit. Carbine Ongoing extensional drilling at Paradigm continued with further success leading to an upgraded open pit Ore Reserve announced. Initial drilling below the existing Carbine and Phantom open pits achieved early success that will require further extensional drilling. Regional exploration of the Carbine and Carnage exploration tenure expanded during FY2018 with a range of new targets generated. Tanami Regional (Northern Star 100%) Northern Star holds a substantial strategic land position in the Tanami region to complement existing activities at the Central Tanami Joint Venture. Regional airborne and ground geophysical programs were completed or in progress at 30 June 2018 as part of the greenfield assessment of a 9,000km2 footprint within prospective terrains that are largely unexplored. Western Tanami (Northern Star 100%) Post completion of the Western Tanami Project acquisition, initial drilling programs were completed at the Road Runner and Pebbles prospects located south of the existing Coyote mine site. Following a review of all historical exploration data, a regional geophysical program commenced and was in progress at 30 June 2018. Pilbara Regional Surface sampling and exploration drilling targeting extensions to the Paulsens Mine sequence and regional targets across the Wyloo Dome area continued. Paulsens Operations At Paulsens, underground and surface drilling targeted exploration targets south of the Paulsens Mine. Following the completion of site operations, an extensive 3D seismic survey was undertaken over the mine corridor with initial processing of the acquired data in progress. Annual Report | OPERATIONS REVIEW 29 Resources and Reserves As at 30 June 2018, Northern Star’s Consolidated Group Mineral Resource Estimate (inclusive of Ore Reserves) was 174.2 million tonnes at 2.8 grams per tonne gold for 15.9 million ounces (refer Table 4.4 below) and the Consolidated Group Ore Reserve Estimate is 32.7 million tonnes at 3.8 grams per tonne gold for 4.0 million ounces (refer Table 4.5 below). The substantial inventory growth stems from Northern Star’s exploration success at its Jundee and Kalgoorlie Operations, the acquisition of the Western Tanami Project and South Kalgoorlie Operations and mining depletion of 612,000 ounces. Group Mineral Resources increased significantly by 5.7 million ounces gold from 10.2 million ounces gold as at 30 June 2017 to the current 15.9 million ounces gold Measured, Indicated and Inferred Mineral Resource. Group Proved and Probable Ore Reserve increased by 0.5 million ounces gold from 3.5 million ounces gold as at 30 June 2017 to the current 4.0 million ounces gold Proven and Probable Reserve at 30 June 2018. Mineral resource and ore reserve governance and internal controls Northern Star ensures that the Mineral Resource and Ore Reserve estimates quoted are subject to governance arrangements and internal controls activated at a site level and at the corporate level. Internal and external reviews of Mineral Resource and Ore Reserve estimation procedures and results are carried out through a technical review team that is comprised of highly competent and qualified professionals. These reviews have not identified any material issues. The Company has finalised its governance framework in relation to the Mineral Resource and Ore Reserve estimates in line with the expansion of its business. Northern Star reports its Mineral Resources and Ore Reserves on an annual basis in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code) 2012 Edition. Mineral Resources are quoted inclusive of Ore Reserves. Competent Persons named by Northern Star are Members or Fellows of the Australasian Institute of Mining and Metallurgy and/or the Australian Institute of Geoscientists and qualify as Competent Persons as defined in the JORC Code. Competent persons statements The information in this public report that relates to Mineral Resource estimations, exploration results, data quality and geological interpretations for the Company’s project areas is based on information compiled by Brook Ekers, a Competent Person who is a Member of the Australian Institute of Geoscientists and a full-time employee of Northern Star. Mr Ekers has sufficient experience that is relevant to the styles of mineralisation and type of deposits under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves for the Company’s project areas. Mr Ekers consents to the inclusion in this public report of the matters based on this information in the form and context in which it appears. The information in this public report that relates to Ore Reserve estimations for the Company’s Project areas is based on information compiled by Jeff Brown, a Competent Person who is a Member of the Australasian Institute of Mining and Metallurgy and a full-time employee of Northern Star. Mr Brown has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Brown consents to the inclusion in this public report of the matters based on this information in the form and context in which it appears. The information in this public report that relates to Ore Reserve estimations for the Company’s Ashburton Project is based on information compiled by Shane McLeay, a Competent Person who is a Member of the Australasian Institute of Mining and Metallurgy. Mr McLeay has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr McLeay consents to the inclusion in this public report of the matters based on this information in the form and context in which it appears. The information in this public report that relates to the Central and Western Tanami Gold Projects is extracted from the Tanami Gold NL ASX announcement entitled Quarterly Report for the Period Ending 31 March 2014 released on 1 May 2014 and is available to view on www.tanami.com.au. The information in this public report that relates to mineral resource estimations, data quality, geological interpretations and potential for eventual economic extraction for the Groundrush deposit at the Central Tanami Gold Project based on information compiled by Brook Ekers a Competent Person who is a Member of the Australian Institute of Geoscientists and a full-time employee of Northern Star. Mr Ekers has sufficient 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. Mr Ekers consents to the inclusion in this public report of the matters based on this information in the form and context in which it appears. The Company confirms that it is not aware of any further new information or data that materially affects the information included in the original market announcement by Tanami Gold NL entitled Quarterly Report for the Period Ending 31 March 2014 released on 1 May 2014 and, in the case of estimates of Mineral Resources or Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. To the extent disclosed above, the Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement. 30 TABLE 4.4 MINERAL RESOURCES MINERAL RESOURCES As at 30 June 2018 NST ATTRIBUTABLE INCLUSIVE OF RESERVE JUNdEE GOLd PROJECT Surface Underground Stockpiles Gold in Circuit Sub-Total Jundee KANOWNA GOLd PROJECT Surface Underground Stockpiles Gold in Circuit Sub-Total Kanowna KUNdANA GOLd PROJECT Surface Underground Stockpiles Sub-Total Kundana Gold CARBINE PROJECT Surface Underground Sub-Total Carbine EAST KUNdANA JOINT VENTURE Surface Underground EKJV Stockpiles GEM Stockpiles Gold in Circuit Sub-Total East Kundana JV PAULSENS PROJECT Surface Underground Stockpiles Gold in Circuit Sub-Total Paulsens ASHBURTON PROJECT Surface Stockpiles Sub-Total Ashburton CENTRAL TANAMI PROJECT JV Underground Stockpiles Sub-Total Western Tanami WESTERN TANAMI PROJECT Underground Stockpiles Sub-Total Western Tanami SKO GOLd PROJECT Surface Underground Stockpiles Jubilee ROM stocks Gold in Circuit Sub-Total SKO MEASURED Tonnes Grade Ounces INDICATED Tonnes Grade Ounces INFERRED Tonnes Grade Ounces TOTAL RESOURCES Tonnes Grade Ounces (000’s) (gpt) (000’s) (000’s) (gpt) (000’s) (000’s) (gpt) (000’s) (000’s) (gpt) (000’s) 218 2,711 - - 2,929 1,362 10,448 - - 11,810 - 443 831 - 1,274 - 7,735 23 - 7,758 - 1,088 15 1,103 - - - - 1,310 18 5 - 1,333 - 260 11 - 272 - - - 1,564 350 1,914 107 375 482 348 651 368 169 - 1,536 - 4.5 1.0 - 2.4 - 2.6 3.7 - 2.6 - 4.1 4.2 4.1 - - - - 7.1 5.3 5.0 - 7.0 - 5.7 1.6 - 5.6 - - - 2.9 0.7 2.5 7.8 1.4 2.8 3.2 5.0 1.1 2.4 - 3.4 - 64 26 8 98 - 638 3 11 651 - 145 2 147 4,470 20,218 - - 24,688 1,507 9,152 - - 10,659 - 4,850 - 4,850 - - - 1,008 422 1,430 - 298 3 1 - 302 - 48 1 - 49 - - - 145 8 153 27 17 44 36 105 13 13 - 168 148 2,919 - - - 3,067 129 116 - - 245 7,104 - 7,104 2,769 - 2,769 1,079 - 1,079 20,517 6,484 - - - 27,000 1.5 4.2 - - 3.7 2.4 2.5 - - 2.5 - 4.8 - 4.8 3.0 6.0 3.9 4.8 6.2 - - - 6.1 3.1 5.3 - - 4.2 2.4 - 2.4 2.8 - 2.8 6.0 - 6.0 1.8 3.3 - - - 2.1 117 725 - - 842 - 755 - 755 96 82 178 23 580 - - - 603 13 20 - - 33 546 - 546 250 - 250 208 - 208 1,169 686 - - - 1,855 1.3 3.5 - - 3.3 1.1 2.2 - - 1.6 - 4.1 - 4.1 1.4 6.2 1.6 1.6 5.4 - - - 4.6 2.0 5.1 - - 2.3 58 1,181 - - 1,239 121 202 - - 323 - 593 - 593 315 72 387 10 135 - - - 145 54 16 - - 70 5,832 31,109 831 - 37,772 4,837 19,720 23 - 24,581 - 10,434 15 10,449 8,099 782 8,881 349 4,998 18 5 - 5,369 989 477 11 - 1,477 1.5 4.0 1.0 - 3.5 1.5 2.5 3.7 - 2.3 276 3,956 26 8 4,267 238 1,565 3 11 1,817 - 4.5 4.2 4.5 - 1,493 2 1,495 1.6 6.1 2.0 3.0 6.3 5.3 5.0 - 6.1 2.1 5.5 1.6 - 3.2 411 153 564 33 1,013 3 1 - 1,050 67 84 1 - 152 3,330 2,833 - - 6,164 - 4,495 - 4,495 7,091 360 7,451 201 769 - - - 970 860 100 - - 960 14,227 - 14,227 2.5 - 2.5 1,122 - 1,122 21,331 - 21,331 2.4 - 2.4 1,668 - 1,668 3,026 - 3,026 1,449 - 1,449 17,283 7,939 - - - 25,222 2.9 - 2.9 5.8 - 5.8 1.8 2.4 - - - 2.0 283 - 283 271 - 271 7,359 350 7,709 2,636 375 3,011 1,023 622 - - - 1,645 38,148 15,074 368 169 - 53,759 2.9 0.7 2.8 6.0 1.4 5.4 1.8 2.9 1.1 2.4 - 2.1 678 8 686 506 17 523 2,228 1,414 13 13 - 3,668 NORTHERN STAR TOTAL 15,672 3.2 1,612 82,891 3.1 8,199 75,775 2.5 6,078 174,338 2.8 15,890 Note: 1. Mineral Resources are inclusive of Reserves. 2. Mineral Resources are reported at various gold price guidelines (a. $1,750/oz Au- Jundee, Kanowna, Kundana Gold, Competent Persons: 1. Brook Ekers. Carbine, East Kundana JV, Jundee, Paulsens b. $1,850 /oz Au -Ashburton). 3. Rounding may result in apparent summation differences between tonnes, grade and contained metal content. 4. Numbers are 100 % Northern Star attributable. Annual Report | OPERATIONS REVIEW 31 Tonnes (000’s) PROVED Grade Ounces (gpt) (000’s) Tonnes (000’s) PROBABLE Grade Ounces TOTAL RESERVE Grade Tonnes Ounces (gpt) (000’s) (000’s) (gpt) (000’s) TABLE 4.5 ORE RESERVES ORE RESERVES As at 30 June 2018 NORTHERN STAR ATTRIBUTABLE INCLUSIVE OF RESERVE JUNdEE GOLd PROJECT Surface Underground Stockpiles Gold in Circuit Sub-Total Jundee KANOWNA GOLd PROJECT Surface Underground Stockpiles Gold in Circuit Sub-Total Kanowna KUNdANA GOLd PROJECT Surface Underground Stockpiles Sub-Total Kundana Gold CARBINE PROJECT Surface Underground Stockpiles Sub-Total Carbine EAST KUNdANA JOINT VENTURE Surface Underground EKJV Stockpiles GEM Stockpiles Gold in Circuit Sub-Total East Kundana JV PAULSENS PROJECT Surface Underground Stockpiles Gold in Circuit Sub-Total Paulsens ASHBURTON PROJECT Surface Stockpiles Sub-Total Ashburton WESTERN TANAMI PROJECT Underground Stockpiles Sub-Total Western Tanami SKO GOLd PROJECT Surface Underground Stockpiles Jubilee ROM stocks Gold in Circuit Sub-Total SKO - 443 831 - 1,274 - 2,672 23 - 2,695 - 330 15 345 - - - - - 920 18 5 - 942 - - 11 - 11 248 - 248 - - - - - 323 169 - 491 - 4.5 1.0 - 2.4 - 2.7 3.7 - 2.9 - 4.9 4.2 4.9 - - - - - 7.2 5.3 5.0 - 7.1 - - 1.6 - 1.6 3.6 - 3.6 - - - - - 1.3 2.4 - 1.7 3.5 - 64 26 8 98 - 235 3 11 249 - 52 2 54 - - - - - 212 3 1 - 216 - - 1 - 1 29 - 29 - - - - - 13 13 - 26 2,357 8,566 - - 10,923 1,002 3,811 - - 4,813 - 4,818 - 4,818 1,099 - - 1,099 68 2,125 - - - 2,194 - 396 - - 396 160 - 160 - - - - 2,321 - - - 2,321 1.5 5.0 - - 4.3 2.1 2.9 - - 2.7 - 3.8 - 3.8 3 - - 2.5 5.8 5.9 - - - 5.9 - 4.3 - - 4.3 4.1 - 4.1 - - - - 3.1 - - - 3.1 117 1,378 - - 1,495 2,357 9,008 831 - 12,197 69 352 - - 421 - 587 - 587 89 - - 89 13 401 - - - 414 - 54 - - 54 21 - 21 - - - - 235 - - - 235 1,002 6,483 23 - 7,508 - 5,148 15 5,163 1,099 - - 1,099 68 3,045 18 5 - 3,136 - 396 11 - 407 408 - 408 - - - - 2,321 323 169 - 2,812 1.5 5.0 1.0 - 4.1 2.1 2.8 3.7 - 2.8 - 3.9 4.2 3.9 3 - - 2.5 5.8 6.3 5.3 5.0 - 6.2 - 4.3 1.6 - 4.2 3.8 - 3.8 - - - - 3.1 1.3 2.4 - 2.9 117 1,442 26 8 1,593 69 587 3 11 670 - 639 2 641 89 - - 89 13 613 3 1 - 630 - 54 1 - 55 50 - 50 - - - - 235 13 13 - 261 673 26,723 3.9 3,316 32,730 3.8 3,990 NORTHERN STAR TOTAL 6,007 Note: 1.  Ore Reserves are reported at the gold price of $1,500/oz Au, except Ashburton which is reported at $1,600/oz. 2.  Rounding may result in apparent summation differences between tonnes, grade and contained metal content. 3.  Ounces are estimates of metal contained in the Ore Reserve and do not include allowances for processing losses. 4.  Numbers are 100 % Northern Star attributable. Competent Persons: 1. Jeff Brown (All Reserves except Ashburton). 2. Shane McLeay (Ashburton only). 32 DIRECTORS’ AND REMUNERATION REPORT 34 DIRECTORS’ REPORT Your Directors present their report on the consolidated entity consisting of Northern Star and the entities it controlled at the end of, or during, FY2018. Throughout the report, the consolidated entity is referred to as the Group. Directors Dividends recommended but not yet paid– Northern Star Since the end of FY2018 the Directors have recommended the payment of a final fully franked ordinary dividend of $31 million (5 cents per fully paid Share) to be paid on 28 September 2018 out of retained earnings at 30 June 2018. The Directors of Northern Star during the whole of FY2018 and up to the date of this report were: Review of operations • Bill Beament • John Fitzgerald • Christopher Rowe • Peter O’Connor • Shirley In’tVeld Information on the operations and financial position of the Group and its business strategies and prospects is set out in the Operations Review section of this Annual Report. Significant changes in the state of affairs Significant changes in the state of affairs of the Group during FY2018 were the acquisition of: Director for part of FY2018 David Flanagan was a Non-Executive Director from the beginning of FY2018 until his resignation on 20 April 2018. • the South Kalgoorlie Operations from Westgold Resources Ltd for total consideration of $78.3 million through the purchase of all the fully paid ordinary Shares on issue in Dioro Exploration Pty Ltd; and Company Secretary Hilary Macdonald LLB (Hons), FGIA was appointed as Company Secretary on 23 February 2018 in addition to her existing role as General Counsel. Ms Macdonald is a corporate and resources lawyer with over 25 years’ experience in private practice and industry who qualified as a solicitor in London. She was admitted to the Supreme Court of England and Wales in 1990, and admitted to the Supreme Court of Western Australia in 1995. Principal activities During FY2018 the principal activities of the Group were: • exploration, development, mining and processing of gold deposits and sale of refined gold derived from the Jundee, Kundana (100% owned and 51% owned operations), Kanowna Belle, Paulsens, and South Kalgoorlie operations, and • exploration in relation to gold deposits in Western Australia and in the Northern Territory. There were no significant changes to the Group’s activities during FY2018. Dividends paid – Northern Star TABLE 5.1 dIVIdENdS PAId TO MEMBERS dURING FY2018 Final ordinary dividend for FY2017 of 6 cents (2016: 4 cents) per fully paid Share paid on 13 September 2017 Interim ordinary dividend for FY2018 of 4.5 cents (2017: 3 cents) per fully paid Share paid on 13 April 2018 FY2018 $’000 FY2017 $’000 36,190 24,022 27,143 18,012 Special dividend (2016: 3 cents per fully paid Share paid on 2 November 2016) - 18,016 Total 63,333 60,050 • the Western Tanami Project through the purchase of 100% of the fully paid ordinary Shares in Tanami Exploration NL for total consideration of $4.0 million from Tanami Gold NL. For details of these acquisitions refer to note 13 and 14 of the financial statements. Events since the end of FY2018 On 9 July 2018, Northern Star executed a self-arranged three bank syndicated facility with Australian and international banks. The new facilities include a three-year $200 million revolving credit facility and contingent instrument facilities. No other matter or circumstance has arisen since 30 June 2018 that has significantly affected the Group’s operations, results or state of affairs, or may do so in future years. Likely developments and expected results of operations There are no likely developments to disclose in the Group’s operations in future financial years. Performance in relation to environmental regulation The Group’s exploration, mining and processing operations are subject to Commonwealth and Western Australian legislation which regulates the environmental aspects of the Group’s activities, including discharges to the air, surface water and groundwater, and the storage and use of hazardous materials. The Group is not aware of any material breach of environmental legislation and regulations applicable to the Company’s operations during FY2018. The Group continues to comply with environmental regulations. Annual Report | dIRECTORS’ REPORT 35 Board skills matrix Executive Leadership Finance, Commerce & Accounting ESG, Legal & Regula- tory, Policy HR & Workplace Relations HSE Skill and description Board Skill and description Board HR & Workplace Relations HSE Finance, Commerce & Technical Skills Accounting ESG, Legal & Regula- Commodities tory, Policy Exposure HR & Workplace Relations HSE Commodities Exposure ESG, Legal & Regula- tory, Policy Major Projects & Construction Board Dynamics HR & Workplace Relations Capital markets HSE Technical Skills Issues Management Commodities Exposure Executive Capital markets Leadership HSE HSE Technical Skills Finance, Commerce & Accounting IT & Innovation Strategy Commodities Exposure Commodities Exposure ESG, Legal & Regula- Board Dynamics tory, Policy Major Projects & Construction HR & Workplace Issues Management Relations Capital markets HSE Technical Skills Commodities Exposure Previous Board Experience Issues Management Risk Management & Compliance Strategy Board Dynamics Issues Management Issues Management HR & Workplace Relations Capital markets HSE Technical Skills Commodities Exposure Executive Risk Management & Leadership Compliance Finance, Commerce & Strategy Accounting ESG, Legal & Regula- Board Dynamics tory, Policy HR & Workplace Issues Management Relations HSE Ethics & Integrity HSE Technical Skills Commodities Exposure Strategy Board Dynamics Issues Management IT & Innovation Major Projects & Construction Capital markets Technical Skills Commodities Exposure HSE Commodities Exposure Board Dynamics Issues Management Previous Board Experience Risk Management & Compliance Commodities Exposure Strategy Board Dynamics Issues Management Executive leadership Evaluating the performance of senior management, overseeing strategic human capital planning, industrial relations, organisational change management programmes and sustainable success in business at a senior level. Finance, commerce & accounting Financial accounting and reporting, internal financial and risk controls, corporate finance and, restructuring corporate transactions (eg: JVs, listings etc). Executive Leadership Executive Leadership Executive Leadership Finance, Commerce & Accounting IT & Innovation ESG Experience in integrating environmental, social and governance (ESG) principles into Company decision-making, working in a legal and/or regulatory environment and/or dealing with ESG / legal / regulatory matters in an executive role in an organisation, and identifying key issues and IT & Innovation Finance, Commerce & Executive developing appropriate policy parameters. Accounting Leadership HR & workplace relations Board Remuneration Committee membership or, succession planning, remuneration and talent management (including incentive programs, superannuation etc), the legislative and contractual Major Projects & IT & Innovation framework governing remuneration and, the Previous Board Construction ESG, Legal & Regula- legislative framework for workplace relations. Experience tory, Policy Finance, Commerce & Accounting Executive Leadership Executive Leadership IT & Innovation HSE Workplace health and safety and environmental experience, implementing health safety and wellbeing strategies, proactive identification and prevention of health, safety and environmental risks. IT & Innovation Finance, Commerce & Accounting Previous Board Major Projects & ESG, Legal & Regula- Experience Construction tory, Policy Risk Management & Capital markets HR & Workplace Compliance Ethics & Integrity Relations IT & innovation Executive knowledge and experience in the management of information technology including but not limited to IT strategies and networks, data storage, data security, cyber security and experience in applying new technologies and Executive Technical Skills Capital markets Leadership innovation to deliver business improvement. Strategy Risk Management & Previous Board Ethics & Integrity Compliance Experience Major Projects & Construction Major projects & construction Contract negotiations, project management, projects involving large-scale outlays and projects with long-term investment horizons. IT & Innovation IT & Innovation Major Projects & ESG, Legal & Regula- Construction tory, Policy Previous Board Experience Previous Board Experience Capital markets Risk Management & HR & Workplace Compliance Relations Ethics & Integrity Executive Leadership Ethics & Integrity Strategy Technical Skills HSE Executive Leadership IT & Innovation Finance, Commerce & Commodities Accounting IT & Innovation Exposure Board Dynamics Previous Board Experience Major Projects & Construction Issues Management Previous Board Experience Capital markets Expertise and commitment to sustainability initiatives, social responsibility, and investor engagement. Finance, Commerce & Accounting Executive Leadership ESG, Legal & Regula- tory, Policy IT & Innovation Major Projects & Construction Finance, Commerce & Accounting ESG, Legal & Regula- tory, Policy Technical skills Advanced technical understanding of geology, HR & Workplace Relations mining engineering or processing. ESG, Legal & Regula- tory, Policy Finance, Commerce & Accounting HR & Workplace Relations IT & Innovation Major Projects & Construction Commodities exposure Executive Leadership Executive expertise in commodities, mining or HSE resources sectors. HR & Workplace Relations Capital markets Technical Skills Capital markets Previous Board Experience Risk Management & Compliance ESG, Legal & Regula- tory, Policy Major Projects & Construction Capital markets HR & Workplace Relations Risk Management & Compliance Major Projects & Construction Capital markets Technical Skills Previous board experience Serving on Boards of varying size and composition, in varying industries and for a range of Finance, Commerce & Executive Risk Management & Strategy Previous Board organisations. An awareness of global practices Accounting Leadership Compliance Experience IT & Innovation and benchmarking and, some international experience. HSE Technical Skills Commodities Exposure Strategy Ethics & Integrity Board Dynamics Risk Management & Compliance Risk management & compliance Applying broad based risk management Board Dynamics Strategy frameworks in various regulatory or business ESG, Legal & Regula- Finance, Commerce & environment, identifying key risks to an tory, Policy Accounting Major Projects & IT & Innovation organisation related to key areas of operations, Construction Ethics & Integrity monitoring risk and compliance. Executive Leadership Previous Board Experience Issues Management Board Dynamics Commodities Exposure Finance, Commerce & Accounting Technical Skills Strategy Strategy HSE Identifying and critically assessing strategic ESG, Legal & Regula- opportunities and threats to the organisation and, tory, Policy developing and implementing successful strategies Major Projects & IT & Innovation in the context of an organisation’s policies and Construction business objectives. HR & Workplace Relations Capital markets Previous Board Experience Risk Management & Compliance Board Dynamics ESG, Legal & Regula- tory, Policy Board dynamics Constructively challenge and contribute to Issues Management Commodities HR & Workplace Finance, Commerce & Exposure Board discussions and communicate effectively Relations Accounting Technical Skills Capital markets with management and other Directors. Build consensus, negotiate and obtain stakeholder support for Board decisions. Risk Management & Previous Board Compliance Experience Major Projects & Construction Strategy Ethics & Integrity Ethics & Integrity Issues management Constructively manage major issues, provide leadership around solutions and contribute to a communications strategy with stakeholders. HR & Workplace Relations Capital markets Technical Skills ESG, Legal & Regula- tory, Policy Major Projects & Issues Management Construction HSE Risk Management & Compliance Ethics & integrity Model correct behaviours as a Director and, continue to self-educate on legal Ethics & Integrity responsibility, maintain Board confidentiality, declare conflicts etc. Capital markets Technical Skills Ethics & Integrity Previous Board Experience Risk Management & Compliance Ethics & Integrity Strategy Board Dynamics Issues Management Ethics & Integrity Ethics & Integrity Previous Board Experience Risk Management & Compliance Ethics & Integrity LEGENd Strategy Board Dynamics Expert Extensive Risk Management & Compliance Sufficient Strategy Board Dynamics Issues Management Somewhat Basic None Commodities Exposure Ethics & Integrity Strategy Board Dynamics Issues Management DIRECTORS’ REPORT36 Information on Directors on 30 June 2018 The following information is current as at the date of this report. BILL BEAMENT B.Eng-Mining (Hons) JOHN FITZGERALD CA, Fellow FINSIA, GAICD CHRISTOPHER ROWE BA, MA Economics and Law Executive Chairman Lead Independent director Experience and expertise Experience and expertise Mr Beament is a mining engineer with more than 20 years’ experience in the resource sector. Previously he held several senior management positions, including General Manager of Operations for Barminco Limited with overall responsibility for 12 mine sites across Western Australia, and General Manager of the Eloise Copper Mine in Queensland. Mr Beament is also currently the Chairman of the Western Australian School of Mines Alumni Patrons Group, and a Director of the Channel 7 Telethon Trust. Mr Fitzgerald has over 25 years’ resource financing experience and has provided project finance and corporate advisory services to a large number of companies in the resource sector. He has previously held senior positions at NM Rothschild & Sons, Investec Bank Australia, Commonwealth Bank, HSBC Precious Metals and Optimum Capital. Mr Fitzgerald is a Chartered Accountant, a Fellow of the Financial Services Institute of Australasia and a graduate member of the Australian Institute of Company Directors. Other listed company directorships Other listed company directorships None. Special responsibilities Member of the Nomination Committee and ESG & Safety Committees. Novo Litio Limited (Chairman) since 24 December 2015. Danakali Ltd (Non-Executive Director) since 19 February 2015. Carbine Resources Limited (Chairman) from 13 April 2016 to 23 March 2018. Atherton Resources Limited (Chairman) from 14 December 2009 to 9 November 2015. Special responsibilities Lead Independent Director Chairman of the Audit & Risk and Nomination Committees Member of the Remuneration Committee and ESG & Safety Committee Independent Non-Executive director Experience and expertise Mr Rowe was the founding Chairman of Northern Star and held that position from 2003 to 2016. A Graduate of Cambridge University, Mr Rowe consulted to the oil, gas and hard rock sectors of the resource industry before becoming the Executive Chairman of Cultus Petroleum NL in 1979, where he served until 1990. During his tenure the Company participated in a number of commercial discoveries in Australia, New Zealand and the USA. Mr Rowe has studied at Clemson University, South Carolina USA, and gained broad resources industry experience with TSX and US oil and gas entities in the 1990’s. Mr Rowe is currently a Director of unlisted Blue Ocean Monitoring Ltd. In addition to his resource related activities, Mr Rowe acted as a Counsel Assisting the Royal Commission into Commercial Activities of Government and Other Matters (“WA INC”), and served on the Environmental Protection Authority of Western Australia as both a member and as Deputy Chairman. Other listed company directorships Target Energy Limited (Chairman) from 1 January 2010 to 22 September 2017. Special responsibilities Chairman of the ESG & Safety Committee Member of the Remuneration Committee and Nomination Committee DIRECTORS’ REPORTAnnual Report | dIRECTORS’ REPORT 37 SHIRLEY IN’TVELD BCOM LLB (HONS) DAVID FLANAGAN CITWA, BSC WASM, FAICD, AUSIMM PETER O’CONNOR MA, Economics and Political Science; Barrister-at Law Independent Non-Executive director Independent Non-Executive director Independent Non-Executive director until his resignation on 20 April 2018 Experience and expertise Experience and expertise Experience and expertise Mr O’Connor has extensive global experience in the funds management industry, both public and private companies in developed and emerging economies. He was co- founder, Director and deputy chairman of IMS Selection Management Ltd which had $10 billion under management or advice from 1998 to 2008. Following the sale of IMS to BNP Paribas in 2008, he was deputy chairman of FundQuest UK Ltd with $10 billion under management, and FundQuest globally had $35 billion of assets under management from 2008 to 2010. Mr O’Connor was the Lead Director and then Chairman of TSX-listed Neo Material Technologies from 1993 to 2012. Mr O’Connor is also a Director of unlisted Blue Ocean Monitoring Ltd. Other listed company directorships Neurotech International Limited (Chairman) since 15 January 2016. Special responsibilities Member of the Audit & Risk, Nomination, and ESG & Safety Committees Ms In’tVeld was the CEO of Verve Energy, a WA utility, for five years. Prior to this Ms In’tVeld held a number of senior commercial, legal and marketing positions with Alcoa, WMC Resources Ltd, Bond Corporation and BankWest, including Managing Director of Alcoa of Australia Rolled Products based in Geelong. Ms In’tVeld is also Deputy Chairperson of CSIRO, a Director of NBN Co Ltd and a member of the Takeovers Panel. David Flanagan is a geologist with more than 25 years’ experience in the multi commodity mining and mineral exploration industry in Australia, Indonesia and Africa. Mr Flanagan is currently Chancellor of Murdoch University, Western Australia. Other listed company directorships Battery Minerals Limited (Managing Director) since 11 October 2016. Other listed company directorships APA Group since 19 March 2018. Atlas Iron Limited from 15 September 2004 to 5 August 2016. Duet Company Limited from 2 April 2013 to 15 May 2017 (delisted from ASX on 16 May 2017). Special responsibilities Chairman of the Remuneration Committee Member of the Audit & Risk, Nomination, and ESG & Safety Committees Special responsibilities Chairman of the Remuneration Committee and Member of the Nomination Committee (until his resignation on 20 April 2018) DIRECTORS’ REPORT38 Attendance at meetings of Directors during FY2018 The Board has established standing committees to assist the Board to discharge its responsibilities. The Board had an Audit & Risk Committee, a Remuneration Committee and a Nomination Committee for the whole of FY2018. Since the end of FY2018, in July 2018 the Board established the ESG & Safety Committee, which comprises the full Board and is chaired by Christopher Rowe. Attendance of Directors at Committee meetings during FY2018 is set out below. In addition all the Non-Executive Directors attended four meetings of the Non-Executive Directors held separately to the full Board meetings and independently of management. TABLE 5.2 MEETINGS OF BOARd COMMITTEES Meetings of Board Committees Board meetings Audit & risk Nomination Remuneration A 14 14 13 13 13 11 B 14 14 14 14 14 11 A * 4 * 4 4 * B * 4 * 4 4 * A 2 2 1 2 2 1 B 2 2 2 2 2 1 A * 2 1 * 1 1 B * 2 2 * 1 1 Bill Beament John Fitzgerald Christopher Rowe Peter O’Connor Shirley In’tVeld David Flanagan (resigned 20/4/2018) A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the committee during FY2018 * = Not a member of the relevant committee The ESG and Safety Committee was established on 19 July 2018 hence no meetings during FY2018 Directors’ report Annual Report | REMUNERATION REPORT 39 REMUNERATION REPORT The Directors present the Northern Star Resources Limited 2018 Remuneration Report, detailing the Company’s remuneration policy and framework, and remuneration paid to Key Management Personnel. KMP Remuneration for FY2018 and FY2019 in a snapshot The following charts illustrate remuneration earned during FY2017 and FY2018 for the current executive KMP, including: • total fixed remuneration received (inclusive of superannuation and other benefits); • cash STI received as a result of a combination of Company and individual performance; and • performance rights and performance shares that vested during FY2018 at fair value. Figures have been rounded to the closest thousand – see the remuneration table in table 5.8 for further detail. Board policy for KMP remuneration Our Remuneration Committee is made up of three independent Non- Executive Directors: • Shirley In’tVeld (Chairman and CEO), • John Fitzgerald; and • Christopher Rowe. The Committee meets several times a year to review and makes recommendations to the Board in accordance with the Remuneration Committee Charter to ensure KMP remuneration remains aligned to business needs and performance. The Committee is responsible for: • the Company’s remuneration policy and framework (including determining short term incentives (STIs) key performance indicators and long-term incentives (LTIs) performance hurdles, and vesting of STIs/LTIs); • senior executives’ remuneration and incentives (including KMP and other senior management); • Non-Executive Director individual remuneration, and the aggregate pool for approval by Shareholders (as required); Bill Beament Executive Chairman FY2018 791 791 815 0 183 0 183 0 299 1209 1209 848 ($000s) 2183 2183 1961 • superannuation arrangements; and • overseeing remuneration by gender. The Committee and the Board developed the Remuneration Framework to ensure it: 0 183 0 183 0 299 0 299 0 299 0 299 FY2017 FY2017 FY2018 FY2018 0 299 0 299 314 220 314 220 314 220 314 220 314 220 314 220 0 183 224 122 0 183 224 122 217 200 0 183 1209 848 1209 848 1209 848 1287 1209 1287 848 1226 1209 848 1287 1209 1226 848 1287 1226 848 1287 1226 1209 1287 1226 1287 848 1226 1287 1226 1226 314 Stuart Tonkin Chief Executive Officer 314 220 791 815 791 815 791 815 627 791 815 627 590 791 815 627 224 122 791 0 183 590 217 200 815 627 224 122 590 217 200 815 0 299 627 224 122 590 217 200 134 98 188 838 418 791 0 183 627 224 122 134 98 188 838 418 590 217 200 142 160 132 855 422 627 224 122 815 0 299 590 217 200 134 98 188 838 418 142 160 132 855 422 627 224 122 Shaun Day Chief Financial Officer 590 217 200 134 98 188 838 418 142 160 132 855 422 590 217 200 134 98 188 838 418 142 160 132 855 422 137 92 177 795 134 98 188 838 627 418 224 122 142 160 132 855 422 137 92 177 795 134 98 188 838 418 133 67 124 710 142 160 132 855 590 422 220 217 200 134 98 188 838 418 137 92 177 795 133 67 124 710 142 160 132 855 422 137 92 177 795 142 160 132 855 133 67 124 710 137 92 177 795 133 67 124 710 134 98 188 838 137 92 177 795 133 67 124 710 137 92 177 795 133 67 124 710 137 92 177 795 133 67 124 710 133 67 124 710 182 23 182 23 182 182 23 23 182 182 23 23 182 Hilary Macdonald General Counsel & Company 182 23 Secretary (appointed 23 February 2018) 23 389 386 389 386 389 386 418 0 389 386 31 0 422 389 386 31 389 0 386 0 31 386 31 0 389 0 31 31 0 386 Michael Mulroney Chief Geological Officer 142 160 132 855 137 92 177 795 133 67 124 710 FY2018 FY2017 FY2017 1287 1226 127 127 389 386 127 127 127 127 127 127 389 314 422 220 31 0 31 1961 2183 2183 1961 1961 2183 2183 ($000s) 2183 2183 1961 1961 1961 1961 2183 1961 ($000s) ($000s) ($000s) FY2018 127 0 182 23 31 LEGENd Total Fixed Remuneration STI Cash Performance shares Performance rights • is competitive and reasonable to enable the Company to attract, retain and drive high performing individuals, reflective of the market for a position’s responsibility. Target positioning of total remuneration against market is generally between the 50th and 75th percentile. External independent written reports are occasionally commissioned to monitor market levels of remuneration for comparable executive KMP roles; • reflects the Company’s STARR Core Values, the Company’s strategic and business objectives, and the creation and maximisation of Shareholder value. The Board considers that a mix of fixed salary and variable performance-based remuneration drives superior performance and achievement of the Company’s strategic goals, whilst avoiding escalation of fixed remuneration costs; long term incentives are currently measured over a three-year period, designed to promote long term stability in Shareholder returns; • is transparent and easily understood; and • is acceptable to Shareholders. The Committee did not engage external remuneration consultants to provide a remuneration recommendation during FY2018. The Board retains discretion in the award and allocation of STIs and LTIs based on performance reported by the Executive Chairman and the Chief Executive Officer. The Remuneration Committee is responsible for assessing performance against KPIs and determining the STI and LTI to be awarded and paid. Discretion is retained by the Board to cancel performance-based remuneration, or waive forfeiture upon termination of employment, in appropriate circumstances. The Remuneration Committee Chairman and Lead Independent Director are currently engaging with the Executive Chairman in relation to the framework and possible terms for a FY2020 Long Term Incentive plan for consideration by Shareholders at the annual general meeting in November 2019. The Company’s long term strategy, the needs of the business from a human capital perspective in order to deliver on that strategy, the imperative to retain and continue to incentivise the Company’s high performance team, and the link between executive KMP remuneration and the Company’s performance, are expected to be significant drivers behind the structure of the FY2020 Long Term Incentive plan and remuneration framework generally. 40 The consequences of the relationship between the Company’s policy for determining executive KMP remuneration and the Company’s performance is demonstrated below, highlighting the effect on Shareholder wealth in FY2018, and in the previous 4 financial years: TABLE 5.3 PERFORMANCE OVER 5 YEARS Net profit after tax ($m) Cashflow from operations ($m) Underlying free cashflow ($m) AISC/oz ($) EBITDA margin Share price (30 June) ($) Basic EPS ($) Dividends per Share ($) Gold sold (oz) Average realised gold price/oz ($) 2018 194 353 186 1,029 46% 7.26 0.32 0.105 570,110 1,704 2017* 215 359 176 1,032 52% 4.75 0.36 0.100 526,515 1,675 2016 151 383 224 1,041 45% 4.94 0.25 0.060 561,153 1,578 2015 92 359 186 1,065 37% 2.21 0.16 0.045 580,784 1,453 2014 22 80 45 1,094 30% 1.26 0.05 0.035 210,055 1,410 *Includes divestment of Plutonic operations. Underlying free cash flow is net cash flow from operation activities less net cash flow from investing activities adjusted for outflows/inflows not directly related to FY2018 operational performance. AISC/oz is All-in-sustaining costs per ounce sold. EBITDA margin is total revenue divided by EBITDA. EBITDA is earnings before interest, tax, depreciation, amortisation and impairment and is calculated as follows: Profit before income tax plus depreciation, amortisation, impairment and finance costs, less interest income. Basic EPS is calculated as net profit after tax divided by the weighted average number of ordinary Shares. Dividends per Share are those paid per Share in FY2018. FY2018 remuneration framework TOTAL FIXEd REMUNERATION (TFR) Comprises base salary, superannuation and other non-cash benefits (including private health and salary continuance insurance) Objective Links to FY2018 performance To provide a base level of remuneration which is both appropriate for the responsibility of the position and competitive in the market for the individual’s experience and value to the Company Any review conducted takes into account the individual’s performance, coupled with benchmarking against market data for comparable roles in companies in a similar industry sector and with similar market capitalisation SHORT TERM INCENTIVES (STI) (EXECUTIVE CHAIRMAN IS NOT ELIGIBLE) Cash payments based on the following percentage of TFR: • 35% - CEO, CFO, CGO; • 25% - Company Secretary Objective Links to FY2018 performance To provide a market competitive incentive to reward high performing, engaged executive KMP, aligned with the creation of Shareholder wealth through the achievement of annual performance hurdles Annual performance of the Company and the individual’s performance as measured at 30 June 2018. 65% attributable to Company performance: KPI 1 (10%) - Safety: • Target 25% • Reduce FY2017 14.3 TRIFR by ≥15% (50% at 12.20 TRIFR) to ≥25% (100% at 10.70 TRIFR) and pro rata in between KPI 2 (15%) - Financial outcome: • Achieve FY2018 Budget NPAT as approved by the Board (confidential) KPI 3 (15%) - Production: • Achieve gold sold 525Koz (0%) to 550Koz (100%), pro-rata up to 575Koz (120%) KPI 4 (15%) - Costs: • AISC within stated guidance $1,000/oz to $1,050/oz KPI 5 (10%) - Social Licence: • No significant environmental or community incidents and maintain female participation >17.10%. 35% attributable to individual performance: • Personal KPIs being achieved • Personal performance being at least satisfactory. RemuneRation RepoRt Annual Report | REMUNERATION REPORT 41 LONG TERM INCENTIVES (LTI) - FY2016 PERFORMANCE SHARES Tranche of performance shares granted in FY2016 which became eligible for measurement as at 30 June 2018 (and vested on 20 July 2018) Objective Links to FY2018 performance To retain executive KMP and motivate with market competitive incentives to pursue the long-term growth and success of the Company Hurdle 1: Relative Total Shareholder Return (40%): • Target ≥50% of peers (ASX: EVN, IGO, NCM, OGC, RRL, RSG, SAR, SBM); where the Company’s percentile is greater than or equal to 50, but less than 75, the actual percentile is the percentage that the hurdle is satisfied - e.g., where the Company is on the 50th percentile, the hurdle is satisfied to the extent of 50%. Where the Company’s percentile is greater than or equal to 75, the hurdle is 100% satisfied Hurdle 2: Total Shareholder Return (40%): • Target ≥15% compound annual growth rate Hurdle 3: Resource / Reserve replacement (20%): • Maintaining at least 2 years of Reserves and 6 years of Resources based on the annualised budgeted production The Board reserves the right to vest LTIs at its discretion. Each performance share represented a legal interest in a fully paid ordinary Share in the Company upon issue. The holder subscribed for the performance shares at market value, funded by an interest free, limited recourse loan from the Company, such that if the performance shares are forfeited or do not vest, this is treated as full repayment against the loan balance. During FY2018 and following vesting, while a loan balance remains outstanding, any dividends paid on the performance shares will be automatically applied towards the repayment of the loan and a holding lock applies to secure repayment of the loan. LONG TERM INCENTIVES (LTI) – FY2017 PERFORMANCE RIGHTS One tranche of performance rights granted under the Company’s FY2017 Long Term Incentive Plan during FY2017 with a three-year performance period. The quantity granted to executive KMP is based on the following percentage of TFR: • Executive Chairman 281% • CEO 125% • CFO 115% • CGO 115% • Company Secretary 75% (resigned 23 February 2018) • Company Secretary 55% (appointed 23 February 2018) Objective Links to FY2018 performance To retain executive KMP and motivate with market competitive incentives to pursue the long-term growth and success of the Company Vesting will occur subject to achievement of the following performance hurdles to be measured as at 16 October 2019: Total Shareholder Return (60%): • target 15% compound annual growth rate; • vesting: <10%=0%, 10%=50%, pro-rata >10% to <15%, ≥15%=100% Relative Total Shareholder Return (20%): • target ≥50% of peers (Acacia Mining PLC, Alacer Gold Corp, Alamos Gold Inc, B2Gold Corp, Centamin PLC, Centerra Gold Inc, Detour Gold Corp, Dundee Precious Metals Inc, Endeavour Mining Corp, Eldorado Gold Corp, Evolution Mining Ltd, Gold Fields Limited, IAMGOLD Corp, New Gold Inc, OceanaGold Corp, Regis Resources Limited, Resolute Mining Limited, Saracen Mineral Holdings Ltd, SEMAFO Inc, St Barbara Limited); and • vesting: <50th percentile = 0%, 50th percentile = 50%, pro-rata >50th to <75th percentile, ≥75th percentile = 100% Safety (20%): • target 20% year on year reduction in LTIFR from current levels (measured at 30 June 2019). • vesting: >2.5 = 0%, 2.5 = 50%, pro-rata <2.5 to ≥2.1, ≤2.0 = 100% Upon vesting, 50% of the resulting Shares will have no disposal restrictions. 25% are restricted from disposal until 17 October 2020, and 25% are restricted until 17 October 2021. The Board reserves the right to vest LTIs at its discretion. A performance right is a right which, upon the satisfaction or waiver of the relevant vesting conditions entitles its holder to receive fully paid ordinary Share for nil consideration. Shareholders approved the 2017 Long Term Incentive Plan, and in relations to the Executive Chairman, the performance hurdles and disposal restrictions at the 2016 Annual General Meeting. The same performance hurdles and disposal restrictions are applicable to the other members of the executive KMP. On vesting, each performance right will automatically convert into one fully paid ordinary Share. The performance rights do not carry any voting rights or rights to receive a dividend prior to vesting. If an executive KMP ceases employment before the performance rights vest, the rights will be forfeited, except in limited circumstances that are approved by the Board on a case-by-case basis. RemuneRation RepoRt42 FY2019 remuneration framework TOTAL FIXEd REMUNERATION (TFR) Base salary, superannuation and other non-cash benefits (including private health and salary continuance insurance) Objective Links to FY2019 performance To provide a base level of remuneration which is both appropriate for the responsibility of the position and competitive in the market for the individual’s experience and value to the Company Any review conducted takes into account the individual’s performance, coupled with benchmarking against market data for comparable roles in companies in a similar industry sector and with similar market capitalisation SHORT TERM INCENTIVES (STI) (EXECUTIVE CHAIRMAN IS NOT ELIGIBLE) Cash payments based on the following percentage of TFR: • 35% - CEO, CFO, CGO • 25% - Company Secretary Objective Links to FY2019 performance To provide a market competitive incentive to reward high performing, engaged executive KMP, aligned with the creation of Shareholder wealth through the achievement of annual performance hurdles Annual performance of the Company and the individual’s performance to be measured at 30 June 2019. 70% attributable to Company performance: KPI 1 (15%) – Safety • Target: TRIFR <7.5 (50%), TRIFR<5.0 (100%) KPI 2 (10%) - Financial outcome: • Target: Achieve FY2019 Budget NPAT as approved by the Board (confidential); KPI 3 (25%) – Production • Target: 600Koz (0%) – 640Koz (100%), pro-rata up to 650Koz (125%) KPI 4 (10%) - Costs: • Target: AISC within stated guidance $1,025/oz to $1,125/oz KPI 5 (10%) - Social Licence: • Target: No significant environmental or community incidents, and >15% female employment with target >20% 30% attributable to individual performance: • Personal KPIs being achieved • Personal performance being at least satisfactory. The Board reserves the right to vest LTIs at its discretion. LONG TERM INCENTIVES (LTI) – PERFORMANCE RIGHTS One tranche of performance rights granted under the Company’s FY2017 Long Term Incentive Plan during FY2017 with a three-year performance period. The quantity granted to executive KMP is based on the following percentage of TFR: • 281% - Executive Chairman • 125% - CEO • 115% - CFO, CGO • 75% - Company Secretary (resigned 23 February 2018) • 55% - Company Secretary (appointed 23 February 2018) Objective Links to FY2019 performance To retain executive KMP and motivate with market competitive incentives to pursue the long-term growth and success of the Company Vesting will occur subject to achievement of the following performance hurdles to be measured as at 16 October 2019: Total Shareholder Return (60%): • target 15% compound annual growth rate; • vesting: <10%=0%, >10%=50%, pro-rata 10% to <15%, ≥15%=100% Relative Total Shareholder Return (20%): • target ≥50% of peers (Acacia Mining PLC, Alacer Gold Corp, Alamos Gold Inc, B2Gold Corp, Centamin PLC, Centerra Gold Inc, Detour Gold Corp, Dundee Precious Metals Inc, Endeavour Mining Corp, Eldorado Gold Corp, Evolution Mining Ltd, Gold Fields Limited, IAMGOLD Corp, New Gold Inc, OceanaGold Corp, Regis Resources Limited, Resolute Mining Limited, Saracen Mineral Holdings Ltd, SEMAFO Inc,); • vesting: <50th percentile = 0%, 50th percentile = 50%, pro-rata >50th to <75th percentile, ≥75th percentile = 100% Safety (20%): • target 20% year on year reduction in LTIFR from current levels (measured at 30 June 2019). • vesting: >2.5 = 0%, 2.5 = 50%, pro-rata <2.5 to ≥2.1, ≤2.0 = 100% Upon vesting, 50% of the resulting Shares will have no disposal restrictions. 25% are restricted from disposal until 17 October 2020, and 25% are restricted until 17 October 2021. See page 41 for performance rights description. The Board reserves the right to vest LTIs at its discretion. RemuneRation RepoRt Annual Report | REMUNERATION REPORT 43 FY2018 and FY2019 remuneration for executive KMP The table below shows the following for each of the executive KMP: • Short term employee benefits paid during FY2018, divided into cash salary, short term incentive cash payments and other benefits, including non- monetary benefits such as private health insurance and salary continuance insurance. There were no executive KMP salary increases in FY2018. • Post-employment benefits paid during FY2018 (superannuation is capped at $30,000 for each member of the executive KMP); • Termination benefits paid during FY2018 (shown in Other Benefits); • Details of the remuneration expense recognised for the executive KMP measured in accordance with the requirements of the Australian Accounting Standards for: – Share based payments – performance shares issued to executive KMP in FY2015 which became eligible for measurement as at 30 June 2018, and vested on 20 July 2018. The fair value at grant date is independently determined using a Monte Carlo simulation model (market based vesting conditions) and a Black Scholes Model (non-market vesting conditions) that takes into account the exercise price, the term of the performance share, the impact of dilution (where material), the Share price at grant date and expected price volatility of the underlying Share, the expected dividend yield, the risk free rate for the term of the performance share and the correlations and volatilities of the peer group companies; and – Share based payments – performance rights issued to each of the executive KMP on 29 November 2016 (Bill Beament) and 21 December 2016 (other executive KMP) during FY2017 which are measured for vesting purposes on 16 October 2019. The assessed fair value at the respective grant dates of the performance rights granted during FY2017 was as follows: TABLE 5.4 FAIR VALUE Fair Value 29 Nov 2016 (Bill Beament) $1.548 21 dec 2016 (other executive KMP) $1.151 – The fair value at grant date is independently determined using a Monte Carlo simulation model (market based vesting conditions) and a Black Scholes Model (non-market vesting conditions) that takes into account the term of the performance rights, the impact of dilution (where material), the Share price at grant date and expected volatility of the underlying performance right, the expected dividend yield, the risk-free rate for the term of the performance right and the correlations and volatilities of the peer group companies. – The model inputs for the FY2017 performance rights included: TABLE 5.5 MOdEL INPUTS Exercise price Grant date Expiry date Share price at grant date Expected volatility of the Company’s Shares Expected dividend yield Risk-free interest rate 29 Nov 2016 (Bill Beament) 21 dec 2016 (other executive KMP) Nil Nil 29 November 2016 21 December 2016 21 December 2022 21 December 2022 $3.60 25% 1.94% 1.91% $3.15 25% 2.22% 2.03% – The expected volatility is based on the historic volatility (based on the remaining life of the performance rights). • In relation to the FY2017 performance rights granted to the executive KMP, the maximum possible total value of the performance rights is the fair value (Executive Chairman: $1.548, other executive KMP: $1.151) multiplied by the number of performance rights granted to that KMP. TABLE 5.6 PERFORMANCE RIGHTS Bill Beament Stuart Tonkin Shaun Day Michael Mulroney Liza Carpene Hilary Macdonald Performance rights granted Value per right ($) Maximum value ($) 3,000,000 1,100,000 660,000 620,000 350,000 235,000 1.5484 1.1512 1.1512 1.1512 1.1512 1.1512 4,645,200 1,266,320 759,792 713,744 402,920 270,532 RemuneRation RepoRt44 TABLE 5.7 REMUNERATION EXPENSES Key management personnel Remuneration expense - fixed remuneration Remuneration expense – variable remuneration Total remuneration Cash salary (base salary excl. super & other benefits) Cash salary (paid) Other benefits^ Long service leave Post employment benefits STI cash payment (vested on 20 July 2018) (measured 16 October 2019) Performance related Performance shares* Performance rights Name Year $ $ $ $ $ $ $ % of total Executive directors Bill Beament Other executive KMP Stuart Tonkin Shaun Day Michael Mulroney Hilary Macdonald** Liza Carpene*** Total Total 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 725,000 725,000 590,000 590,000 375,000 375,000 350,000 350,000 325,000 - 300,000 300,000 699,991# 722,221 590,000 552,594## 375,000 375,000 350,000 350,000 113,082 - 194,795 300,000 2,665,000 2,322,868 2,340,000 2,299,815 11,931 5,869 7,136 7,085 13,432 16,685 9,247 6,050 3,331 - 189,229 13,173 234,305 48,862 49,240 56,437 - - - - - - - - - - 49,240 56,437 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 10,438 - 19,479 30,000 149,918 150,000 This table represents remuneration for FY2018 or part thereof during which a person was a KMP ^ Other Benefits include telephone allowance, salary continuance insurance, health insurance and parking * see details on page 47 regarding the limited recourse loan related to these Shares ** Appointed Company Secretary 23 February 2018. Remuneration disclosed in table is pro rata for the period since appointment as Company Secretary. *** Resigned as Company Secretary 23 February 2018. Other Benefits includes a $150,000 termination payment (in addition to a payment of $48,587 made for accrued annual leave, which is not reflected as remuneration in this table) and a $25,000 payment in respect of a nominee Directorship. No performance shares or performance rights were forfeited upon resignation. # Cash salary received is lower than base salary due to a period of unpaid leave taken during FY2018 ## Remuneration adjusted due to promotion from Chief Operating Officer to Chief Executive Officer on 29 November 2016 ### Full year STI earnt was $90,125 $ - - - - 223,510 217,000 133,599 141,750 136,990 133,000 31,359### 82,500 525,458 574,250 182,699 299,035 122,202 199,652 98,004 159,899 91,954 67,311 - - 20,437 70,045 515,297 795,940 1,208,904 847,889 313,823 220,106 188,294 132,064 176,882 124,060 23,328 - 64,836 70,034 1,976,067 1,394,152 Total $ 2,182,765 1,961,450 1,286,672 1,226,437 838,330 855,397 795,073 710,421 181,537 - 488,776 565,752 5,773,153 5,319,457 64% 58% 51% 52% 50% 51% 51% 46% 30% - 17% 39% 52% 52% RemuneRation RepoRt Annual Report | REMUNERATION REPORT 45 TABLE 5.7 REMUNERATION EXPENSES Key management personnel Remuneration expense - fixed remuneration Remuneration expense – variable remuneration Total remuneration Cash salary (base salary excl. super & other benefits) Cash salary (paid) Other benefits^ leave benefits STI cash payment Long service Post employment Name Year $ $ $ $ $ Executive directors Bill Beament Other executive KMP Stuart Tonkin Shaun Day Michael Mulroney Hilary Macdonald** Liza Carpene*** Total Total 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 725,000 725,000 590,000 590,000 375,000 375,000 350,000 350,000 325,000 - 300,000 300,000 699,991# 722,221 590,000 552,594## 375,000 375,000 350,000 350,000 113,082 - 194,795 300,000 49,240 56,437 - - - - - - - - - - 11,931 5,869 7,136 7,085 13,432 16,685 9,247 6,050 3,331 - 189,229 13,173 234,305 48,862 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 10,438 - 19,479 30,000 149,918 150,000 2,665,000 2,322,868 2,340,000 2,299,815 49,240 56,437 $ - - 223,510 217,000 133,599 141,750 136,990 133,000 31,359### - - 82,500 525,458 574,250 Performance shares* (vested on 20 July 2018) Performance rights (measured 16 October 2019) $ $ Total $ Performance related % of total 182,699 299,035 122,202 199,652 98,004 159,899 91,954 67,311 - - 20,437 70,045 515,297 795,940 1,208,904 847,889 313,823 220,106 188,294 132,064 176,882 124,060 23,328 - 64,836 70,034 1,976,067 1,394,152 2,182,765 1,961,450 1,286,672 1,226,437 838,330 855,397 795,073 710,421 181,537 - 488,776 565,752 5,773,153 5,319,457 64% 58% 51% 52% 50% 51% 51% 46% 30% - 17% 39% 52% 52% RemuneRation RepoRt 46 More detail on FY2018 executive KMP performance related remuneration: SHORT TERM INCENTIVES (STIs) – PERFORMANCE dURING FY2018: COMPANY PERFORMANCE (65%) TABLE 5.8 EXECUTIVE KMP PERFORMANCE AGAINST FY2018 KPIs AS AT 30 JUNE 2018 Key performance indicators KPI 1: Safety KPI 2: Financial Outcome KPI 3: Production KPI 4: Costs KPI 5: Social Licence 10% 15% 15% 15% 10% Weighting Measure Achievement 100% achieved Reduce FY2017 14.3 TRIFR by ≥15% (50% at 12.20 TRIFR) to ≥25% (100% at 10.70 TRIFR) and pro rata in between Achieve FY2018 Budget NPAT as approved by the Board 100% achieved Achieve 525Koz (0%) to 550Koz (100%), pro-rata up to 575Koz (120%) 120% achieved AISC within stated guidance $1,000 to $1,050 No significant environmental or community incidents, and maintain female participation >17.10% 100% achieved 100% achieved 105% of 65% Company performance achieved INdIVIdUAL PERFORMANCE (35%) TABLE 5.9 EXECUTIVE KMP PERFORMANCE AGAINST FY2018 KPIs AS AT 30 JUNE 2018 Name Position Bill Beament Executive Chairman Stuart Tonkin Chief Executive Officer Shaun Day Chief Financial Officer Michael Mulroney Chief Geological Officer Hilary Macdonald General Counsel & Company Secretary (appointed 23 February 2018) FY2017 STI achieved % N/A 100% Company and individual 100% Company and individual 100% Company and individual N/A FY2017 STI paid1 $ N/A 217,000 141,750 133,000 N/A FY2018 STI achieved % N/A 100% Company and individual 100% Company and 75% individual 100% Company and individual 100% Company and individual FY2018 STI paid2 % N/A 223,510 133,599 136,990 90,125 Liza Carpene Company Secretary (resigned 23 February 2018) 100% Company and individual 82,500 N/A N/A 1 STI measured as at 30 June 2017 and paid in FY2018. 2 STI paid in FY2019 inclusive of superannuation. LONG TERM INCENTIVES (LTIs) FY2016 PERFORMANCE SHARES – PERFORMANCE dURING FY2018 TABLE 5.10 LTIs PERFORMANCE SHARES FY2016 Hurdles Hurdle 1 Hurdle 2 Hurdle 3 LTIs performance shares FY2016 – performance period 1 July 2015 to 30 June 2018 Criteria* Performance results as at 30 June 2018 Relative Total Shareholder Return (40%): target ≥50% of peers (ASX: EVN, IGO, NCM, OGC, RRL, RSG, SAR, SBM); Achieved 50% Northern Star ranked 50th percentile in peer group after 3 years Total Shareholder Return (40%): target ≥15% compound annual growth rate; Achieved 100% Exceeded 15% CAGR - 287% increase over 3 years Resource / Reserve replacement (20%): maintaining at least 2 years of Reserves and 6 years of Resources based on the annualised budgeted production Achieved 100% Reserves and Resources Update effective 30 June 2018 exceeds requirement * the Relative Total Shareholder Return target is ≥50% of peers. Where the Company's percentile is greater than or equal to 50, but less than 75, the actual percentile is the percentage that the hurdle is satisfied - e.g., where the Company is on the 50th percentile, the hurdle is satisfied to the extent of 50%. Where the Company's percentile is greater than or equal to 75, the hurdle is 100% satisfied. On 30 June 2018 the hurdle was on the 50th percentile and therefore the hurdle was satisfied to the extent of 50%. RemuneRation RepoRt Annual Report | REMUNERATION REPORT 47 Although the Relative Total Shareholder Return hurdle was achieved as to 50%, the Board exercised its discretion to waive this hurdle in light of the Company’s considerable outperformance of Hurdles 2 and 3 over the measurement period, as well as significantly stronger performance than the expanded peer group being used to measure FY2017 LTIs. Therefore, all performance hurdles were either achieved by the Company or waived by the Board, and the Board resolved that 100% allocation for each holder will vest. The FY2016 performance shares therefore all vested 100% on 20 July 2018. As at 1 July 2017 an interest free limited recourse loan to executive KMP of $7,875,088 in aggregate remained outstanding, and on 30 June 2018 an interest free limited recourse loan to five members of the executive KMP of $5,699,385 in aggregate, remained outstanding. The difference between the amount of interest paid and payable for FY2018 (nil) and the amount of interest that would have been charged on an arm’s-length basis in FY2018, is $300,850. No write-downs or allowances for doubtful receivables have been recognised in relation to any loans made to executive KMP. Refer to section 3 of the Financial Report for loan terms. TABLE 5.11 LTIs HELd BY THE EXECUTIVE KMP ON 1 JULY 2017 ANd ON 30 JUNE 2018 Name Position Bill Beament Executive Chairman Stuart Tonkin Chief Executive Officer Shaun Day Chief Financial Officer Michael Mulroney Chief Geological Officer Hilary Macdonald Liza Carpene TOTAL General Counsel & Company Secretary (appointed 23 February 2018) Company Secretary (resigned 23 February 2018) 1 Number held at resignation date 2 Number held at appointment date FY2016 performance shares (vested 20 July 2018) FY2017 performance rights Balance on 1 July 2017 Balance on 30 June 2018 Balance on 1 July 2017 Balance on 30 June 2018 597,836 399,877 320,694 300,898 - 597,836 399,877 320,694 300,898 - 3,000,000 1,100,000 660,000 620,000 235,0002 3,000,000 1,100,000 660,000 620,000 235,000 140,703 140,7031 350,000 350,0001 1,760,008 1,760,008 5,965,000 5,965,000 TABLE 5.12 FULLY PAId ORdINARY SHARES HELd BY THE KMP (INCLUdING THEIR CLOSE FAMILY MEMBERS ANd ENTITIES CONTROLLEd BY THEM) ON 1 JULY 2017 ANd ON 30 JUNE 2018 KMP Name directors Christopher Rowe Bill Beament (Executive Chairman) John Fitzgerald Peter O'Connor Shirley In’tVeld David Flanagan (resigned 20 April 2018) Executive KMP Stuart Tonkin Shaun Day Michael Mulroney Hilary Macdonald Liza Carpene (resigned 23 February 2018) 1 Number held at resignation date Balance on 1 July 2017 Other changes during FY2018 Balance on 30 June 2018 2,485,000 10,743,588 60,000 500,000 50,000 - 1,302,655 1,042,916 300,898 - 931,675 (735,000) (1,000,000) - - - - - (722,222) - - (931,675)1 1,750,000 9,743,588 60,000 500,000 50,000 - 1,302,655 320,694 300,898 - - There were no options or deferred Shares held by any KMP from the beginning to the end of FY2018. None of the Shares above are held nominally by any of the KMP. RemuneRation RepoRt48 Non-Executive Director remuneration The Board’s objective is to set aggregate remuneration at a level which provides the Company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to Shareholders. All Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment which summarises the Board policies and terms, including remuneration, relevant to the office of Director. Non-Executive Directors receive a board fee and fees for chairing or participating on Board committees, detailed in the table below. They do not receive performance-based pay or retirement allowances. The fees are inclusive of superannuation. The Executive Chairman does not receive Board or committee fees. Non-Executive Directors’ fees are paid within an aggregate remuneration limit of $1,250,000 (inclusive of superannuation) per annum (approved in general meeting on 12 November 2014). The Board takes into account comparable companies with similar market capitalisation, and the responsibilities and experience of the Non- Executive Directors, when reviewing Non-Executive Director remuneration. TABLE 5.13 BOARd FEES Board fees Non-Executive Directors Additional fees Lead Independent Director Audit & Risk committee – Chairman Audit & Risk committee – member Nomination committee – Chairman Nomination committee – member Remuneration committee – Chairman Remuneration committee – member ESG & Safety committee – Chairman ESG & Safety committee – member From 1 July 2018 From 1 July 2017 to 30 June 2018 $125,000 $125,000 $35,000 $25,000 $15,000 Nil Nil $25,000 $10,000 $25,000 $10,000 $35,000 $25,000 $15,000 Nil Nil $25,000 $10,000 n/a n/a TABLE 5.14 FY2018 NON-EXECUTIVE dIRECTORS’ REMUNERATION FY2018 Non-Executive directors’ remuneration Board of directors fee Audit Committee Nomination Committee Remuneration Committee Superannuation Total* Year 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 Christopher Rowe Peter O’Connor John Fitzgerald Shirley In'tVeld David Flanagan# Total Non- Executive director remuneration $ 125,000 144,781 125,000 119,959 143,082 128,292 112,549 91,712 93,333 91,712 598,964 576,456 $ - 6,041 15,000 15,000 25,000 22,831 15,000 8,144 - - 55,000 52,016 $ - - - - - - - - - - - - * ESG and Safety Committee was established subsequent to 30 June 2018, therefore no fees paid # Resigned 20 April 2018 $ 10,000 7,479 - 2,014 10,000 10,509 4,110 - 20,822 12,710 44,932 32,712 $ - - - - 16,918 15,353 12,508 9,486 10,845 9,920 40,271 34,759 $ 135,000 158,301 140,000 136,973 195,000 176,985 144,167 109,342 125,000 114,342 739,167 695,943 RemuneRation RepoRt Annual Report | REMUNERATION REPORT 49 Contractual arrangements with executive KMP TABLE 5.15 ELEMENT OF REMUNERATION Element of remuneration Fixed remuneration Contract duration Notice by the individual Notice by the Company Summary of contractual terms Refer to table 5.7 Indefinite subject to termination with or without cause 3 months 6 months (Executive Chairman: 12 months) Termination of employment by the Company (without cause) STI entitlement and LTI forfeiture is at the discretion of the Board Termination of employment (with cause) or by the individual STI is not awarded, and all unvested LTIs will lapse, at the discretion of the Board. Vested LTIs remain with the individual. OTHER TRANSACTIONS WITH KMP ANd COMMENT ON PREVIOUS dISCLOSURES OF “RELATEd PARTY” TRANSACTIONS WITH BILL BEAMENT The Company has in place policies and procedures which govern transactions involving KMPs and their related parties, and these policies and procedures restrict the involvement of the KMP or related party in the negotiation, awarding or direct management of the resultant contract. In the Company’s 2017 Annual Report, specifically Note 18 to the Consolidated Financial Statements, the Company reported that the beneficial minority interest held by Mr Beament in: (a) (b) Premium Mining Personnel Pty Ltd, and AUD Pty Ltd, the sole Shareholder of Australian Underground Drilling Pty Ltd (AUD), both suppliers of goods and services to the Company, did not require reporting under the Accounting Standards. For the purposes of the 2018 Annual Report, the Company is of the same view, having applied the necessary criteria under the Australian Accounting Standards for FY2018. With effect from 1 July 2018, the Company now has no contractual relationship with Premium Mining Personnel Pty Ltd and Mr Beament has no Shareholding in any of its related bodies corporate. Mr Beament’s continued Shareholding in AUD is the subject of regular review by the independent Directors. They recognise that, notwithstanding the position under the Australian Accounting Standards, good corporate governance would normally be exhibited by the absence of a key executive holding a 23% interest in a drilling contract with a material supplier to the Company. AUD is a material supplier due to the aggregate total of fees paid, the nature of the services provided to the Company by the supplier, and the place the supplier has in the Company’s risk mitigation strategy, in seeking to maintain diversity amongst its suppliers where it is commercially feasible to do so, to ensure that there is no reliance by the Company on one supplier for a particular service across all the Company’s operations. However, in this particular case, the independent Directors’ unanimous view after having made inquiries of management, is that the continuing contractual relationship between the Company and AUD is more beneficial to the Company than terminating the contract, or not entering into a fresh contract with AUD, would be. The results of the multiple party tender process demonstrated that there was no comparable supplier with the capacity at the time of tender to provide the services to the Company’s Kalgoorlie Operations for the same quality, productivity rates and price offered by AUD. Further, the selection of AUD was consistent with the Company-wide risk mitigation strategy in striving for diversity in its supply chain, having regard to the other suppliers providing underground diamond drilling services to the Company’s other operations (in which Mr Beament has no shareholding or other basis for inferring a significant influence). Consequently, the previous discussions within the Board regarding possible divestment of the Shareholding by Mr Beament or termination of or non-renewal of, the supply contract by the Company, have culminated in a decision by the Independent Directors to accept the position, because they believe it is in the best interests of the Company’s Shareholders to do so. The Company’s policies and procedures continue to apply to ensure that Mr Beament is not involved in the negotiation, awarding of contracts or direct management of the contract with AUD. RemuneRation RepoRt50 Other statutory disclosures INSURANCE OF OFFICERS ANd INdEMNITIES During FY2018 the Company has paid a premium to insure the Directors and Officers of the Company and its controlled entities. Details of the premium are subject to a confidentiality clause under the contract of insurance. The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the Directors and Officers in their capacity as officers of entities in the Group, to the extent permitted by the Corporations Act. In addition similar liabilities are insured for Officers holding the position of nominee Director for the Company in other entities. PROCEEdINGS ON BEHALF OF THE COMPANY No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to 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 part of those proceedings. NON-AUdIT SERVICES The Company may decide to employ the Auditor on assignments additional to their statutory audit duties where the Auditor’s expertise and experience with the Company and/or Group are important. Details of the amounts paid or payable to the Auditor (Deloitte Touche Tohmatsu) for the audit and non-audit services provided during FY2018 are disclosed in note 22 to the financial statements. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for Auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the Auditor did not compromise the Auditor independence requirements of the Corporations Act 2001 because none of the services undermine the general principles relating to Auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. AUdITOR INdEPENdENCE dECLARATION A copy of the Auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 51. ROUNdING The Company is of a kind referred to ASIC Legislative Instrument 2016/191, relating to the “rounding off” of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. CORPORATE GOVERNANCE STATEMENT Northern Star and the Board are committed to achieving and demonstrating the highest standards of corporate governance. In addition to the Sustainability Report included in this Annual Report, a description of the Company’s current corporate governance practices is set out in the Corporate Governance Statement (http://www.nsrltd.com/about/corporate-governance/). Northern Star has elected to publish the 2018 Tax Corporate Governance Statement on a voluntary basis as a part of our commitment to tax transparency. The report includes information recommended to be disclosed under the Australian voluntary Tax Transparency Code (TTC). The report can be found on the Company website under Corporate Governance - Rules and Special Reports. This report is made in accordance with a resolution of Directors dated 22 August 2018. BILL BEAMENT Executive Chairman Perth, Western Australia 22 August 2018 RemuneRation RepoRt AUDITORS’ INDEPENDENCE DECLARATION Annual Report | AUdITORS’ INdEPENdENCE dECLARATION 51 Annual Report | AUdITORS’ INdEPENdENCE dECLARATION 51 Deloitte Touche Tohmatsu ABN 74 490 121 060 Brookfield Place, Tower 2 123 St Georges Terrace Perth, WA, 6000 Australia Phone: +61 8 9365 7000 www.deloitte.com.au The Directors Northern Star Resources Limited Level 1, 388 Hay Street Subiaco WA 6008 22 August 2018 Dear Directors Auditor’s Independence Declaration to Northern Star Resources Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Northern Star Resources Limited and its controlled entities. As lead audit partner for the audit of the financial report of Northern Star Resources Limited and its controlled entities for the financial year ended 30 June 2018, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU David Newman Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Auditors’ independence declArAtion 52 TABLE OF CONTENTS 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 to the members 54 55 56 57 58 110 111 FINANCIAL REPORT 54 ConsolidAted stAtement of PRofit oR loss And otheR ComPRehensive heAding as at 30 June 2018 inCome For the year ended 30 June 2018 continuing operations Sales revenue Cost of sales Other income and expense Corporate and technical services Impairment of assets Finance costs Profit before income tax Income tax expense Profit from continuing operations Discontinued operations Profit from discontinued operation Profit for the year Other comprehensive income Items that may be reclassified to profit or loss Changes in the fair value of available-for-sale financial assets Share of other comprehensive income of associates and joint ventures accounted for using the equity method Income tax relating to these items Other comprehensive income for the year, net of tax notes 30 June 2018 $’000 30 June 2017 $’000 3 6(a) 5 6(b) 6(c) 6(d) 7 15(b) 964,025 (624,118) 869,407 (556,789) 339,907 312,618 8,784 6,934 (56,004) (11,753) (3,162) (34,647) (13,723) (2,678) 277,772 268,504 (83,659) 194,113 (79,607) 188,897 - 194,113 26,413 215,310 (100) 2,193 (218) 30 (288) 45 (658) 1,580 Total comprehensive income for the year 193,825 216,890 Total comprehensive income for the year is attributable to: Owners of the Company Total comprehensive income for the year attributable to owners of Northern Star Resources Limited arises from: Continuing operations Discontinued operations 193,825 216,890 193,825 - 193,825 190,477 26,413 216,890 cents cents Earnings per Share for profit from continuing operations attributable to the ordinary equity holders of the Company: Basic earnings per Share Diluted earnings per Share Earnings per Share for profit attributable to the ordinary equity holders of the Company: Basic earnings per Share Diluted earnings per Share 23(a) 23(b) 23(a) 23(b) 32.1 31.5 32.1 31.5 31.5 30.8 35.9 35.1 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. ConsolidAted stAtement of finAnCiAl Position as at 30 June 2018 heAding as at 30 June 2018 Annual Report | financial report 55 aSSetS current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-current assets Trade and other receivables Derivative financial instruments Available-for-sale financial assets Investments accounted for using the equity method Property, plant and equipment Exploration and evaluation assets Mine properties Intangible assets Total non-current assets total assets liaBilitieS Current liabilities Trade and other payables Borrowings Current tax liabilities Provisions Total current liabilities Non-current liabilities Borrowings Provisions Deferred tax liabilities Total non-current liabilities Total liabilities net assets eQUitY Share capital Reserves Retained earnings Total equity notes 30 June 2018 $’000 30 June 2017 $’000 8(c) 8(a) 9(f) 8(a) 11(a) 8(b) 16(c) 9(a) 9(b) 9(c) 9(d) 8(d) 8(e) 9(e) 9(g) 8(e) 9(g) 9(e) 10(a) 442,997 31,136 83,941 558,074 1,688 5,712 42,132 15,399 139,044 225,735 212,788 16,298 403,060 24,254 58,851 486,165 3,508 4,921 11,619 18,779 104,851 137,638 157,477 - 658,796 438,793 1,216,870 924,958 140,073 105,465 7,610 14,959 37,459 5,541 40,811 23,141 200,101 174,958 9,513 128,686 57,134 5,677 79,877 49,346 195,333 134,900 395,434 309,858 821,436 615,100 291,290 15,388 514,758 217,811 13,311 383,978 821,436 615,100 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 56 ConsolidAted stAtement of ChAnges in equity For the year ended 30 June 2018 Share capital $’000 Available for sale reserve $’000 Share based payments reserve $’000 notes Balance at 1 July 2016 214,950 3,952 4,294 Profit for the period Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Dividends provided for or paid 12(b) Employee Share and option plans - value of employee services Exercise of employee Share awards Share plan loan repayment - - - - 622 2,239 - 2,861 - 1,535 1,535 - - - - - Balance at 30 June 2017 217,811 5,487 - - - - 3,573 (2,239) 2,151 3,485 7,779 Balance at 1 July 2017 217,811 5,487 7,779 Profit for the period Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Dividends provided for or paid Employee Share and option plans - value of employee services Exercise of employee Share awards Share plan loan repayment 10(a) 12(b) - - - 59,810 - 6,765 6,904 - 73,479 - (70) (70) - - - - - - - - - - - 4,661 (6,802) 4,506 2,365 Other reserves $’000 Retained earnings $’000 total equity $’000 - - 45 228,718 451,914 215,310 215,310 - 1,580 45 215,310 216,890 - - - - - 45 45 (60,050) (60,050) - - - 4,195 - 2,151 (60,050) (53,704) 383,978 615,100 383,978 615,100 - 194,113 194,113 (218) - (288) (218) 194,113 193,825 - - - - - - - (63,333) 59,810 (63,333) - - - (63,333) 11,426 102 4,506 12,511 Balance at 30 June 2018 291,290 5,417 10,144 (173) 514,758 821,436 NATuRE AND PuRPOSES OF RESERvES: Available-for-sale financial assets Changes in the fair value of investments that are classified as available-for-sale financial assets (e.g. equity securities), are recognised in other comprehensive income and accumulated in a separate reserve within equity. Amounts are reclassified to profit or loss when the associated assets are sold or impaired. Share based payments The Share based payments reserve relates to Shares, performance Shares, performance rights and Share options granted by the Company to its employees. Further information about Share based payments to employees is set out in note 21. The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. ConsolidAted stAtement of CAsh flows For the year ended 30 June 2018 Annual Report | financial report 57 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest paid Income taxes paid Net cash inflow from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for exploration and evaluation Payments for mine properties Payments for available-for-sale financial assets Payments for acquisition of business, net of cash acquired Payments for acquisition of assets, net of cash acquired Proceeds from disposal of business Proceeds from sale of property, plant and equipment Proceeds from sale of investments Net cash outflow from investing activities Cash flows from financing activities Proceeds from issues of Shares and other equity securities Finance lease payments Dividends paid to Company’s Shareholders Net cash outflow from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at end of year Details of cash flows related to discontinued operations in the prior year are presented in note 15. notes 30 June 2018 $’000 30 June 2017 $’000 966,770 (520,486) 7,415 (527) (100,111) 353,061 (35,579) (45,373) (115,215) (30,613) (17,461) (4,000) 533 414 - 892,637 (466,539) 6,051 (319) (73,100) 358,730 (40,153) (56,423) (135,345) (1,000) - - 18,089 547 9,897 (247,294) (204,388) 4,626 (7,123) (63,333) (65,830) 39,937 403,060 442,997 2,151 (8,724) (60,050) (66,623) 87,719 315,341 403,060 8(c) 9(a) 9(b) 13 14 15 12(b) 8(c) The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 58 Contents of the notes to the ConsolidAted finAnCiAl stAtements 1 Critical estimates and judgements How nUmBerS are calcUlated 2 segment information 3 Revenue 4 Significant changes in the current reporting period 5 Other income and expense items 6 7 8 Expenses Income tax expense Financial assets and financial liabilities 9 Non-financial assets and liabilities 10 equity riSk 11 financial risk management 12 Capital management GroUp StrUctUre 13 Business combination 14 Asset acquisition 15 discontinued operation 16 Interests in other entities UnrecoGniSed itemS 17 Contingent liabilities 18 Commitments 19 Events occurring after the reporting period otHer information 20 Related party transactions 21 Share-based payments 22 Remuneration of auditors 23 Earnings per Share 24 deed of cross guarantee 25 Parent entity financial information 26 Summary of significant accounting policies PAge 59 59 59 62 62 63 63 65 66 71 81 83 83 86 87 87 89 89 91 94 94 94 95 95 95 97 98 99 100 103 104 Annual Report | financial report 59 notes to the ConsolidAted finAnCiAl stAtements 1 Critical estimates and judgements (a) Critical accounting estimates and assumptions (i) determination of mineral reSoUrceS and ore reServeS The Group reports its Mineral Resources and Ore Reserves in accordance with the Joint Ore Reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves - the JORC Code. The information on Mineral Resources and Ore Reserves is prepared by Competent Persons as defined by the JORC Code. There are numerous uncertainties inherent in estimating Mineral Resources and Ore Reserves. Assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may, ultimately, result in the reserves being restated. Such changes may impact asset carrying values, depreciation and amortisation rotes, deferred development costs and provisions for restoration. Other critical accounting judgements, estimates and assumptions are discussed in the following notes: Unit of production method of depreciation/amortisation Share based payments Exploration and evaluation expenditure Recovery of deferred tax assets Mine rehabilitation provision Impairment of assets note 6(a) note 6(b); 21 note 9(b) note 9(e) note 9(g) note 26(d); 9(c) How numbers are CalCulated This section provides additional information about those individual line items in the financial statements that the directors consider most relevant in the context of the operations of the entity, including: (a) accounting policies that are relevant for an understanding of the items recognised in the financial statements. These cover situations where the accounting standards either allow a choice or do not deal with a particular type of transaction (b) analysis and sub-totals, including segment information (c) information about estimates and judgements made in relation to particular items. 2 segment information (a) Description of segments and principal activities The Group’s Executive Committee consisting of the Executive Chairman, Chief Executive Officer, Chief Financial Officer and Chief Geological Officer, examine the Group’s performance and have identified five operating segments relating to the continuing operations of the business: l. Paulsens, WA Australia - Mining and processing of gold 2. Kalgoorlie operations, WA Australia - Mining and processing of gold 3. Jundee, WA Australia - Mining and processing of gold 4. Tanami, NT Australia - Exploration and evaluation of gold mineralisation 5. Exploration - Exploration and evaluation of gold mineralisation An operating segment is a component of the Group that engages in business activities from which it may earn revenues or incur expenses. During the current period, the Group completed the acquisition of the South Kalgoorlie operations (SKO), refer to note 13 for further details. In addition, the Group declared commercial production at the Millennium deposit in April 2018. Following the completion of the SKO transaction and Millennium entering commercial production, the Group now has eight segments (Paulsens, East Kundana JV, Kanowna Belle, Millennium, Jundee, South Kalgoorlie, Tanami and Exploration), however following a review by the Executive Committee on the Group’s strategic direction Kanowna Belle, East Kundana JV, Millennium and South Kalgoorlie has been presented as one reporting segment (Kalgoorlie operations). Exploration compromises all projects in the exploration, evaluation and feasibility phase of the Group, excluding Tanami. These include the Mt Olympus, Fortescue JV and Electric Dingo projects as well as ongoing exploration programmes at the Group’s respective sites. During the prior year the Group completed a sales process in relation to its Plutonic operations in WA, which is consequently classified as a discontinued operation as at 30 June 2017. Further information on Plutonic and the disposal process is included in note 15. An analysis of segment revenues is presented in note 3. 60 notes to the ConsolidAted finAnCiAl stAtements 2 segment information continued (b) Segment results The segment information for the year ended 30 June 2018 is as follows: 2018 Segment net operating profit (loss) before income tax Depreciation and amortisation Impairment Finance costs Segment EBITDA paulsens $’000 kalgoorlie operations $’000 Jundee $’000 Tanami $’000 Exploration $’000 total $’000 (31,802) 129,848 40,930 69,738 - 98 - 1,187 239,511 44,518 - 864 (3,754) (11,753) 976 - 142 - 11,753 - - 322,050 156,162 11,753 2,291 492,256 9,226 200,773 284,893 (2,636) Total segment assets 2,193 334,701 135,833 233 225,735 698,695 Total segment liabilities (6,014) (177,006) (82,662) (37,851) - (303,533) The segment information for the year ended 30 June 2017 is as follows: 2017 Segment net operating profit (loss) before income tax Depreciation and amortisation Impairment Finance costs Segment EBITDA paulsens $’000 kalgoorlie operations $’000 Jundee $’000 Tanami $’000 Exploration $’000 total $’000 4,218 24,952 4,923 100 158,138 51,338 - 921 143,549 68,929 - 769 (3,309) (8,445) - - - - 8,445 - - 294,151 145,219 13,368 1,790 454,528 34,193 210,397 213,247 (3,309) Total segment assets 48,700 188,336 105,079 255 137,638 480,008 Total segment liabilities (19,039) (111,100) (77,593) (649) - (208,381) Annual Report | financial report 61 notes to the ConsolidAted finAnCiAl stAtements 2 segment information continued (c) Segment EBITDA Segment EBITDA is a non-lFRS measure, being earnings before interest, tax, depreciation and amortisation and is calculated as follows: profit before income tax plus depreciation, amortisation, impairment and finance costs. Interest income, finance charges, interest expense and acquisition costs are not allocated to the operating segments as this type of activity is driven by the corporate treasury function which manages the cash position of the Group. Segment EBITDA reconciles to profit before income tax from continuing operations for the year ended 30 June 2018 as follows: Segment EBITDA Other income Finance costs Depreciation Amortisation Corporate and technical services Share based payments Impairment of assets 30 June 2018 $’000 30 June 2017 $’000 492,256 454,528 8,784 (3,162) (43,149) (114,640) (39,138) (11,426) (11,753) 6,934 (2,678) (25,455) (120,066) (26,841) (4,195) (13,723) Profit before income tax from continuing operations 277,772 268,504 (d) Segment assets Segment assets are measured in the same way as in the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. Operating segments’ assets are reconciled to total assets as follows: Segment assets Unallocated: Available-for-sale financial assets Investment in equity accounted associates Derivative financial instruments Cash and cash equivalents Trade and other receivables Property, plant and equipment Total assets as per the Consolidated Statement of Financial Position 30 June 2018 $’000 30 June 2017 $’000 698,695 480,008 42,132 15,399 5,712 435,181 17,641 2,110 1,216,870 11,619 18,779 4,921 390,868 17,687 1,076 924,958 Investments in equity securities (classified as available-for-sale financial assets) held by the Group are not considered to be segment assets as they are managed by the corporate treasury function. (e) Segment liabilities Operating segments’ liabilities are reconciled to total liabilities as follows: Segment liabilities Unallocated: Trade and other payables Provisions Current tax liabilities Deferred tax liabilities (net) 30 June 2018 $’000 30 June 2017 $’000 303,533 208,381 5,444 14,364 14,959 57,134 4,410 6,910 40,811 49,346 Total liabilities as per the Consolidated Statement of Financial Position 395,434 309,858 62 notes to the ConsolidAted finAnCiAl stAtements 3 revenue accoUntinG policY Revenue is recognised to the extent that it is probable that the economic benefit will flow to the entity and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. Revenue is recognised when there has been a transfer of risks and rewards from the Group to an external party, no further processing is required by the Group, quality and quantity of the goods has been determined with reasonable accuracy, the selling price is fixed or determinable and collectability is probable. The point at which risk and rewards passes for the majority of the Group’s commodity sales is when a contract for sale is entered into. If required, adjustments are made for variations in commodity price, assay and weight between the time of dispatch and the time of final settlement. Tolling revenue is recognised as the tolling services are performed. Tolling revenue is earned per tonne of ore processed. Tolling revenue of $19.5 million for the year ended 30 June 2017 was originally netted against the processing costs to which they relate, and included in cost of sales. Tolling revenue has been reclassified in the comparative information to align with the current period presentation where it has been presented as a separate component of revenue. This reclassification of comparative information has no impact on gross or net profit, or the consolidated statement of financial position or cash flows. The Group derives the following types of revenue: Sale of gold Sale of silver Toll treatment Total revenue from continuing operations (a) Segment revenue 30 June 2018 $’000 30 June 2017 $’000 941,296 1,873 20,856 964,025 847,964 1,987 19,456 869,407 The total of revenue, broken down by operating segment, is shown in the following table. All revenue is from external customers and from one geographical location (Australia). No revenues are generated by the Tanami or Exploration operating segments. 2018 2017 paulsens $’000 39,997 93,564 kalgoorlie operations $’000 438,261 396,188 Jundee $’000 485,767 379,655 total $’000 964,025 869,407 4 Significant changes in the current reporting period The financial position and performance of the Group was particularly affected by the following events and transactions during the reporting period: • • the acquisition of the Western Tanami Project through the purchase of 100% of the fully paid ordinary Shares in Tanami Exploration NL for total consideration of $4.0 million from Tanami Gold NL. For details of the acquisition refer to note 14 of the financial statements. the acquisition of the South Kalgoorlie Operations from Westgold Resources Ltd for total consideration of A$78.3 million through the purchase of 100% of the fully paid ordinary Shares in Dioro Exploration Pty Ltd. For details of the acquisition refer to note 13 of the financial statements. For a detailed discussion about the Group’s performance and financial position please refer to our operating and financial review on pages 24 to 27. notes to the ConsolidAted finAnCiAl stAtements 5 Other income and expense items Net gain/(loss) on disposal of property, plant and equipment Interest income Other intereSt Annual Report | financial report 63 30 June 2018 $’000 30 June 2017 $’000 (24) 7,523 1,285 8,784 350 6,245 339 6,934 Interest income is recognised as it accrues using the effective interest method. otHer Other includes the Group’s Share of net profit or loss from equity accounted investments (2018: $1.4 million loss; 2017: $0.1 million gain) 6 Expenses (a) Cost of sales Mining Processing Site services Employee benefit expenses Depreciation Amortisation Government royalty expense Change in inventories 30 June 2018 $’000 30 June 2017 $’000 199,902 105,282 19,957 130,460 41,823 113,363 23,285 (9,954) 624,118 188,273 90,762 18,171 92,940 25,153 120,066 20,434 990 556,789 depreciation/amortiSation metHod Items of property, plant and equipment and mine properties are depreciated/amortised over their useful lives. The Group uses the unit-of- production basis when depreciating/amortising mine specific assets which results in a depreciation/amortisation charge proportional to the depletion of the anticipated remaining life of mine which is referenced to the estimated economic reserve and resources of the property to which the assets relate. Each item’s economic life, which is assessed annually has due regard to both its physical life limitations and to present assessments of economically recoverable reserves and resources of the mine property at which it is located. Depreciation of non-mine specific property, plant and equipment is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term as follows: Land and buildings 5 - 20 years Plant and equipment 2 - 20 years Motor Vehicles Office equipment 4 - 10 years 2 - 10 years Depreciation methods, useful lives and residual values are reviewed at each reporting date. roYaltieS Royalties under existing royalty regimes are payable on sales and are therefore recognised as the sale occurs. tollinG revenUe Refer to note 3 for further information in relation to the classification of tolling revenue. 64 notes to the ConsolidAted finAnCiAl stAtements 6 Expenses continued (b) Corporate and technical services Administration and technical services Depreciation Employee benefit expenses Share based payments Amortisation Acquisition costs accoUntinG policY 30 June 2018 $’000 30 June 2017 $’000 20,716 1,326 16,102 11,426 1,278 5,156 56,004 13,742 302 13,918 4,195 - 2,490 34,647 Share-based compensation benefits are provided to employees via Option, Share and Performance Rights Plans as discussed in note 21. The fair value of Shares and options granted under these Plans are recognised as a Share based payments expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the Shares or options granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non- market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of Shares and options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of Shares and options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss with a corresponding adjustment to equity. (c) Impairment of assets Exploration and evaluation assets (note 9(b)) Mine properties (note 9(c)) Available-for-sale financial assets (d) Finance costs Interest expense Provisions: unwinding of discount (note 9(g)) Finance charges proviSion - UnwindinG of diScoUnt 30 June 2018 $’000 30 June 2017 $’000 11,753 - - 8,445 4,923 355 11,753 13,723 30 June 2018 $’000 30 June 2017 $’000 212 2,291 659 3,162 240 1,790 648 2,678 The Group records the present value of the estimated cost of legal and constructive obligations to rehabilitate operating locations in the period in which the obligation is incurred. The unwinding of the effect of discounting the provision is recorded as a finance charge in profit or loss. Total expenses 695,037 607,837 Annual Report | financial report 65 notes to the ConsolidAted finAnCiAl stAtements 7 Income tax expense This note provides an analysis of the Group’s income tax expense, showing what amounts are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It explains significant estimates made in relation to the Group’s tax position. (a) Income tax expense cUrrent tax Current tax on profits for the year Adjustments for current tax of prior periods Total current tax deferred income tax Decrease (increase) in deferred tax assets (note 9(e)) Increase in deferred tax liabilities (note 9(e)) Total deferred tax expense/(benefit) Income tax expense Income tax expense is attributable to: Profit from continuing operations Profit from discontinued operations (note 15) (b) Accounting policy 30 June 2018 $’000 30 June 2017 $’000 73,612 (173) 73,439 (13,642) 23,862 10,220 78,030 (403) 77,627 852 11,654 12,506 83,659 90,133 83,659 - 83,659 79,607 10,526 90,133 The income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. 66 notes to the ConsolidAted finAnCiAl stAtements 7 Income tax expense continued (c) Numerical reconciliation of income tax expense to prima facie tax payable Profit from continuing operations before income tax expense Profit from discontinuing operations before income tax expense Tax at the Australian tax rate of 30.0% (2017 - 30.0%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Share based payments Sundry items Recognition of deferred tax assets not recoverable in prior periods Adjustment for current tax of prior periods Income tax expense (d) Amounts recognised directly in equity 30 June 2018 $’000 30 June 2017 $’000 277,772 - 277,772 83,331 500 - - (172) 83,659 268,504 36,940 305,444 91,633 473 107 (1,677) (403) 90,133 Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity: Deferred tax: available-for-sale financial assets 9(e) (30) 658 notes 30 June 2018 $’000 30 June 2017 $’000 8 Financial assets and financial liabilities This note provides information about the Group’s financial instruments, including: • • • • an overview of all financial instruments held by the Group specific information about each type of financial instrument accounting policies information about determining the fair value of the instruments, including judgements and estimation uncertainty involved. The Group holds the following financial instruments: financial aSSetS 2018 Cash and cash equivalents Trade and other receivables* Derivative financial instruments Available-for-sale financial assets 2017 Cash and cash equivalents Trade and other receivables* Derivative financial instruments Available-for-sale financial assets * excluding prepayments assets at fvoci $’000 assets at fvpl $’000 notes Financial assets at amortised cost $’000 total $’000 8(c) 8(a) 11(a) 8(b) 8(c) 8(a) 11(a) 8(b) - - - 42,132 42,132 - - - 11,619 11,619 - - 5,712 - 442,997 29,365 - - 442,997 29,365 5,712 42,132 5,712 472,362 520,206 - - 4,921 - 403,060 25,164 - - 403,060 25,164 4,921 11,619 4,921 428,224 444,764 notes to the ConsolidAted finAnCiAl stAtements 8 Financial assets and financial liabilities continued financial liaBilitieS 2018 Trade and other payables Borrowings 2017 Trade and other payables Borrowings Annual Report | financial report 67 notes 8(d) 8(e) 8(d) 8(e) Liabilities at amortised cost $’000 140,073 17,123 157,196 105,465 11,218 116,683 total $’000 140,073 17,123 157,196 105,465 11,218 116,683 The Group’s exposure to various risks associated with the financial instruments is discussed in note 11. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial assets mentioned above. (a) Trade and other receivables accoUntinG policY Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables Sundry debtors Goods and services tax recoverable Prepayments Other receivables 30 June 2018 non- current $’000 - - - 1,688 - current $’000 15,156 6,207 5,904 1,771 2,098 total $’000 Current $’000 30 June 2017 non- current $’000 total $’000 15,156 16,084 - 16,084 6,207 5,904 3,459 2,098 287 5,296 660 1,927 1,570 - 1,938 - 1,857 5,296 2,598 1,927 31,136 1,688 32,824 24,254 3,508 27,762 (i) claSSification aS trade and otHer receivaBleS If collection of the amounts is expected in one year or less they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are generally due for settlement within 30 days and therefore are all classified as current. (ii) fair valUe of trade and otHer receivaBleS As the majority of receivables are short term in nature, their carrying amount is assumed to be the same as their fair value. 68 notes to the ConsolidAted finAnCiAl stAtements 8 Financial assets and financial liabilities continued (b) Available-for-sale financial assets accoUntinG policY Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long-term. Financial assets that are not classified into any of the other categories (at FVTPL loans and receivables or held-to-maturity investments) are included in the available-for-sale category. Refer to note 26 for further information on accounting policies for financial assets and note 8(f) in relation to fair value measurements. Available-for-sale financial assets include the following classes of financial assets: Non-current assets Listed equity securities 30 June 2018 $’000 30 June 2017 $’000 42,132 11,619 (i) claSSification of financial aSSetS aS availaBle-for-Sale The financial assets are presented as non-current assets unless they mature or management intends to dispose of them within 12 months of the end of the reporting period. (ii) amoUntS recoGniSed in profit or loSS and otHer compreHenSive income During the year, the following gains were recognised in profit or loss and other comprehensive income. Gains/(losses) recognised in other comprehensive income (100) 2,193 30 June 2018 $’000 30 June 2017 $’000 (c) Cash and cash equivalents accoUntinG policY Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Cash at bank and in hand Deposits at call 30 June 2018 $’000 30 June 2017 $’000 240,982 202,015 442,997 223,045 180,015 403,060 notes to the ConsolidAted finAnCiAl stAtements 8 Financial assets and financial liabilities continued (c) Cash and cash equivalents continued (i) reconciliation to tHe Statement of caSH flowS Reconciliation of profit after tax to net cash flow from operating activities: Profit for the year Adjustment for Depreciation and amortisation Non-cash employee benefits expense - Share-based payments Rehabilitation provision - unwinding of discount Net (gain) / loss on sale of non-current assets Transaction costs written off Impairment of assets during the period Fair value adjustment to derivatives Share of profits of associates and joint venture Gain on disposal of subsidiary Change in operating assets and liabilities: Decrease in trade and other receivables (lncrease)/decrease in inventories (Increase)/decrease in deferred tax assets (Decrease)/increase in trade and other payables (Decrease)/increase in current tax liability/asset Increase in deferred tax liabilities Increase in provisions Net cash inflow from operating activities (ii) riSk expoSUre Annual Report | financial report 69 30 June 2018 $’000 30 June 2017 $’000 194,113 215,310 157,790 11,426 2,291 24 571 11,753 (870) 1,371 145,519 4,195 1,926 (353) - 13,723 25 (72) - (30,418) (5,557) (12,378) (14,080) (3,474) (25,852) 23,480 12,453 (12,138) 3,996 814 2,792 4,915 11,963 (3,467) 353,061 358,730 The Group’s exposure to interest rate risk is discussed in note 11. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. (d) Trade and other payables accoUntinG policY These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 60 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. Trade payables Accruals Payroll tax and other statutory liabilities Other payables 30 June 2018 $’000 30 June 2017 $’000 54,391 54,936 1,911 28,835 50,417 44,305 1,577 9,166 140,073 105,465 The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature. Other payables includes $20 million payable to Tanami Gold NL (‘’TAM”). In accordance with the joint venture agreement between TAM and the Company, TAM was granted two put options. The first put option allowed TAM the right but not the obligation to sell 15% of the Central Tanami Project to the Company for $20 million in cash or Northern Star Shares at any time up to the earlier of three years after completion of the acquisition (31 July 2018) or commercial production being achieved (sometime after 31 July 2018). On 27 June 2018, TAM announced its intention to exercise the first put option on or immediately prior to 31 July 2018 in accordance with the terms of the joint venture agreement between TAM and the Company. On 31 July 2018, TAM exercised the first put option. 70 notes to the ConsolidAted finAnCiAl stAtements 8 Financial assets and financial liabilities continued (e) Borrowings accoUntinG policY Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised under plant and equipment at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in borrowings. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Lease liabilities Total secured borrowings 30 June 2018 30 June 2017 current $’000 7,610 7,610 non- current $’000 9,513 9,513 total $’000 17,123 17,123 Current $’000 5,541 5,541 non- current $’000 5,677 5,677 total $’000 11,218 11,218 (i) SecUred liaBilitieS and aSSetS pledGed aS SecUritY Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. (ii) finance leaSeS The Group has entered into various loan agreements for the purchase of mobile equipment. The interest rates are fixed and payable over a period of up to 36 months from the inception of the lease. Commitments in relation to finance leases are payable as follows: Within one year Later than one year but not later than five years Minimum lease payments Future finance charges Total lease liabilities Representing lease liabilities: Current Non-current (iii) fair valUe 30 June 2018 $’000 30 June 2017 $’000 8,223 10,062 18,285 (1,162) 17,123 7,610 9,513 17,123 5,918 5,981 11,899 (681) 11,218 5,541 5,677 11,218 For the majority of the borrowings, the fair values are not materially different to their carrying amounts, since the interest payable on those borrowings is either close to current market rates or the borrowings are of a short-term nature. Refer above for differences as at year end. (iv) financinG arranGementS At the end of the reporting period, the Group had an undrawn $90 million (2017: $100 million) revolving credit facility and a $5 million guarantee facility which was drawn down by $3.3 million (2017: $5 million drawn down by $3.9 million). During the current period, the Group entered into an additional guarantee facility for $5 million which was drawn down by $4.5 million. Annual Report | financial report 71 notes to the ConsolidAted finAnCiAl stAtements 8 Financial assets and financial liabilities continued (f) Recognised fair value measurements (i) fair valUe HierarcHY This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the Group has classified its financial instruments into the three levels prescribed under the accounting standards. An explanation of each level follows underneath the table. Recurring fair value measurements at 30 June 2018 Financial assets Financial assets at FVPL Australian listed equity securities Derivatives Derivative financial asset - warrants Total financial assets Recurring fair value measurements at 30 June 2017 Financial assets Financial assets at FVPL Australian listed equity securities Derivatives Derivative financial asset - warrants Total financial assets Level 1 $’000 Level 2 $’000 total $’000 42,132 - 42,132 5,712 5,712 Level 1 $’000 Level 2 $’000 - 42,132 5,712 47,844 total $’000 11,619 - 11,619 - 11,619 4,921 4,921 4,921 16,540 Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Valuation inputs include underlying spot prices, implied volatility, discount curves and time until expiration, expressed as a percent of a year. 9 Non-financial assets and liabilities This note provides information about the Group’s non-financial assets and liabilities, including: • specific information about the following non-financial assets and non-financial liabilities exploration and evaluation assets • property, plant and equipment • • mine properties assets • • • provisions tax balances inventories • • accounting policies information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved. 72 notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (a) Property, plant and equipment accoUntinG policY Property, plant and equipment is carried at historical cost less accumulated depreciation and impairment losses. Refer to note 26 for further information on accounting policies associated with impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. at 30 June 2017 Cost or fair value Accumulated depreciation Net book amount Year ended 30 June 2017 Opening net book amount Additions Disposals Transfers Assets included in a disposal group classified as held for sale and other disposals Depreciation charge Closing net book amount Land & buildings $’000 Plant & equipment $’000 motor vehicles $’000 Office equipment $’000 capital work in progress $’000 total $’000 10,691 (6,962) 159,010 (85,804) 3,729 73,206 7,379 (4,874) 2,505 3,083 (1,813) 24,141 - 204,304 (99,453) 1,270 24,141 104,851 4,858 71,594 1,728 1,158 - (168) - (25) - - 2,437 50,202 - 24,553 1,731 640 (26,959) (1,167) (22,831) 58 - (929) - (528) (1,539) - - - 35 3 81,775 50,202 (193) - (1,478) (25,455) 3,729 73,206 2,505 1,270 24,141 104,851 Land & buildings $’000 Plant & equipment $’000 motor vehicles $’000 Office equipment $’000 capital work in progress $’000 total $’000 at 30 June 2018 Cost or fair value Accumulated depreciation Net book amount 13,541 238,841 (9,221) (126,966) 4,320 111,875 9,050 (5,421) 3,629 4,735 (3,203) 17,688 283,855 - (144,811) 1,532 17,688 139,044 Annual Report | financial report 73 notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (a) Property, plant and equipment continued Land & buildings $’000 Plant & equipment $’000 motor vehicles $’000 Office equipment $’000 3,729 73,206 2,505 1,270 - 664 1,364 - 753 - - 243 25,991 (1,231) 52,464 - (2,190) (38,798) 4,320 111,875 - 10 296 (62) 2,258 - (1,378) 3,629 - 2 155 - 888 - (783) capital work in progress $’000 24,141 50,649 57 3,376 - (56,363) (4,172) - total $’000 104,851 50,649 976 31,182 (1,293) - (4,172) (43,149) 1,532 17,688 139,044 Year ended 30 June 2018 Opening net book amount Additions Acquired as part of asset acquisition Acquired as part of business combination Disposals Transfers Transfer to mine properties Depreciation charge Closing net book amount (i) leaSed aSSetS Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the lease property, or, if lower, the present value of the minimum lease payments. The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term. Plant and equipment includes the following amounts where the Group is a lessee under a finance lease: Cost Accumulation depreciation Net book amount (b) Exploration and evaluation assets accoUntinG policY 30 June 2018 $’000 30 June 2017 $’000 22,861 (8,311) 14,550 20,969 (7,091) 13,878 Exploration and evaluation assets include the costs of acquiring licences, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination. Exploration and evaluation expenditure is capitalised on an area of interest basis. Costs incurred before the Group has obtained the legal rights to explore an area are recognised in the statement of profit or loss and other comprehensive income. Exploration and evaluation assets are only recognised if the rights of the area of interest are current and either, the expenditures are expected to be recouped through successful development and exploitation of the area of interest or activities in the area of interest have not at the reporting date; reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. Once a development decision has been made all past exploration and evaluation expenditure in respect of an area of interest that has been capitalised is transferred to mine properties where it is amortised over the life of the area of interest to which it relates on a unit-of- production basis. No amortisation is charged during the exploration and evaluation phase. The application of the above accounting policy requires management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of whether economic quantities of reserves will be found. Any such estimates and assumptions may change as new information becomes available, which may require adjustments to the carrying value of assets. Capitalised exploration and evaluation expenditure is assessed for impairment when an indicator of impairment exists, and capitalised assets are written off where required. 74 notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (b) Exploration and evaluation asset continued Opening balance at 1 July Expenditure for the period * Acquired as part of asset acquisition (i) Acquired as part of business combination (ii) Assets included in a disposal group classified as held for sale Transfer to mine properties Impairment (iii) Closing balance 30 June 2018 $’000 30 June 2017 $’000 137,638 76,373 13,136 36,800 - (26,459) (11,753) 98,420 57,809 2,917 - (560) (12,503) (8,445) 225,735 137,638 * Includes $20 million in relation TAM put option exercisable. Refer to note 8(d) for further details. (i) aSSet acQUiSition During the year, the Company completed the acquisition of the Western Tanami Project through the purchase of 100% of the fully paid ordinary Shares in Tanami Exploration NL from Tanami Gold NL for total consideration of $4.0 million. For details of the acquisition refer to note 14 of the financial statements. (ii) BUSineSS comBination On 29 March 2018, the Company also completed the acquisition of the South Kalgoorlie Operations from Westgold Resources Ltd for $78.3 million consideration through the purchase of 100% of the fully paid ordinary Shares in Dioro Exploration Pty Ltd. For details of the acquisition refer to note 13 of the financial statements. (iii) impairment At each reporting date the Group undertakes an assessment of the carrying amount of its exploration and evaluation assets. During the year the Group identified indicators of impairment on certain exploration and evaluation assets under AASB 6 Exploration for and Evaluation of Mineral Resources. As a result of this review, an impairment loss of $11.8 million (2017: $8.4 million) has been recognised in the statement of profit or loss and other comprehensive income in relation to areas of interest where no future exploration and evaluation activities are expected. (c) Mine properties accoUntinG policY Mine properties includes aggregate expenditure in relation to mine construction, mine development, exploration and evaluation expenditure where a development decision has been made and acquired mineral interests. Expenditure incurred in constructing a mine by, or on behalf of, the Group is accumulated separately for each area of interest in which economically recoverable reserves and resources have been identified. This expenditure includes direct costs of construction, drilling costs and removal of overburden to gain access to the ore, borrowing costs capitalised during construction and an appropriate allocation of attributable overheads. Mine development represents expenditure in respect of exploration and evaluation, overburden removal based on underlying mining activities and related mining data and construction costs and development incurred by or on behalf of the Group previously accumulated and carried forward in relation to properties in which mining has now commenced. Such expenditure comprises direct costs and an appropriate allocation of directly related overhead expenditure. All expenditure incurred prior to commencement of production from each development property is carried forward to the extent to which recoupment out of future revenue from the sale of production, or from the sale of the property, is reasonably assured. When further development expenditure is incurred in respect of a mine property after commencement of commercial production, such expenditure is carried forward as part of the cost of the mine property only when future economic benefits are reasonably assured, otherwise the expenditure is classified as part of the cost of production and expensed as incurred. Such capitalised development expenditure is added to the total carrying value of mine development being amortised. Annual Report | financial report 75 notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (c) Mine properties Mine development costs (as transferred from exploration and evaluation and/or mines under construction) are amortised on a units-of- production basis over the life of mine to which they relate. In applying the units of production method, amortisation is calculated using the expected total contained ounces as determined by the life of mine plan specific to that mine property. For development expenditure undertaken during production, the amortisation rate is based on the ratio of total development expenditure (incurred and anticipated) over the expected total contained ounces as estimated by the relevant life of mine plan to achieve a consistent amortisation rate per ounce. The rate per ounce is typically updated annually as the life of mine plans are revised. Mineral interests comprise identifiable exploration and evaluation assets, mineral resources and ore reserves, which are acquired as part of a business combination or joint venture acquisition and are recognised at fair value at the date of acquisition. Where possible, mineral interests are attributable to specific areas of interest and are classified within mine properties. Opening balance at 1 July Expenditure for the period Transfer from exploration and evaluation Acquired as part of business combination Net transfer from property, plant and equipment Impairment Amortisation Closing balance (i) impairment 30 June 2018 $’000 30 June 2017 $’000 157,477 123,240 26,459 13,945 4,172 - (112,505) 131,953 138,010 12,503 - - (4,923) (120,066) 212,788 157,477 At each reporting date, the Group assesses whether there is any indication that an asset, or group of assets is impaired. If any such indication exists, the recoverable amount of the asset is estimated to determine the extent of the impairment loss (if any) which is the amount by which the assets carrying value exceeds its recoverable amount. Where the asset does not generate cash in-flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. The recoverable amount is the higher of ‘fair value less costs to sell’ (FVLCS) and ‘value in use’. Where an impairment loss subsequently reverses for assets other than goodwill, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately. Impairment testing requires assets to be grouped together into the smallest group that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash generating units. The smallest group of assets that generates cash inflows for the Group is defined by the location of the gold processing facility that produces saleable material. Therefore, Jundee operations, Kalgoorlie operations and Paulsens operations represent individual CGUs of the Group. In FY2017 an impairment expense of $4.9 million was recognised in relation to Paulsens following the re-assessment of the life of mine. No impairment was recognised in relation to any CGU in the current year. 76 notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (d) Intangible assets accoUntinG policY The Group’s intangible asset relates to the tolling synergies it obtained from the South Kalgoorlie Operation (“SKO”) acquisition completed on 29 March 2018. The benefit reflects the expected cost savings to the Company of processing ore through the Jubilee mill rather under toll agreements with third parties. The tolling benefits acquired as part of the SKO acquisition has been recognised at fair value at the acquisition date. This fair value reflects expectations about the probability that the expected future economic benefits embodied in the tolling benefits will flow to the Company. The tolling service could also be sold to third parties given the active tolling market locally. The useful life of the tolling benefits is considered to be 5 years. The amortisation on this intangible asset has been allocated on a systematic basis over its useful life commencing from acquisition date. Intangible assets at 30 June 2018 Cost Accumulation amortisation and impairment Net book amount Year ended 30 June 2018 Acquisition of business (note 13) Amortisation charge Closing net book amount Amortisation expense in relation to tolling benefit is included in costs of sales (2018: $0.9 million; 2017: nil) (e) Tax balances (i) cUrrent tax liaBilitY Opening balance at 1 July Tax paid Current tax Adjustment for current tax on prior periods Closing balance tolling synergies $’000 17,156 (858) 16,298 17,156 (858) 16,298 30 June 2018 $’000 30 June 2017 $’000 (40,811) 100,111 (73,612) (647) (14,959) (35,896) 73,100 (78,030) 15 (40,811) notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (e) Tax balances continued (ii) deferred tax aSSetS The balance comprises temporary differences attributable to: Employee benefits Provisions Accruals Available-for-sale financial assets Mine properties Other Other Total deferred tax assets Set-off of deferred tax liabilities pursuant to set-off provisions Net deferred tax assets Annual Report | financial report 77 30 June 2018 $’000 30 June 2017 $’000 8,498 39,319 7,073 - 3,608 58,498 4,482 62,980 6,357 24,549 - 1,979 5,937 38,822 1,768 40,590 (62,980) (40,590) - - movements At July 2016 (Charged) /credited - to profit or loss - adjustments to prior year at 30 June 2017 (Charged) /credited - to profit or loss - adjustments to prior year - acquisition of subsidiary at 30 June 2018 Employee benefits $’000 Provisions $’000 Invest- ments $’000 mine properties $’000 Other $’000 total $’000 8,442 31,031 302 - 1,629 41,404 (2,085) (6,482) - - 6,357 24,549 1,677 - 1,979 5,937 - 5,937 101 38 (852) 38 1,768 40,590 1,806 - 335 6,824 - 7,946 8,498 39,319 (1,979) (2,329) - - - - - 9,320 467 - 3,608 11,555 13,642 467 8,281 62,980 78 notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (e) Tax balances continued (iii) deferred tax liaBilitieS The balance comprises temporary differences attributable to: Property, plant and equipment Inventories Exploration and evaluation Mine properties Other Available-for-sale financial assets Intangible assets Other Accrued income Deferred consideration received from Plutonic Sale Sub-total other Total deferred tax liabilities Set-off of deferred tax liabilities pursuant to set-off provisions Net deferred tax liabilities Offsetting within tax consolidated group 30 June 2018 $’000 30 June 2017 $’000 3,461 5,113 56,407 51,145 116,126 2,199 1,089 229 - 471 3,988 1,411 4,023 40,405 41,167 87,006 2,229 - - 230 471 2,930 120,114 89,936 (62,980) 57,134 (40,590) 49,346 Northern Star Resources Limited and its wholly-owned Australian subsidiaries have applied the tax consolidation legislation which means that these entities are taxed as a single entity. As a consequence, the deferred tax assets and deferred tax liabilities of these entities have been offset in the consolidated financial statements. Movements At 1 July 2016 Charged/ (credited) - profit or loss - adjustment to prior year - to other comprehensive income at 30 June 2017 Charged/ (credited) - profit or loss - adjustment to prior year - to other comprehensive income - acquisition of subsidiary Exploration and evaluation $’000 mine properties $’000 Property, plant and equipment $’000 Inventories $’000 Other $’000 total $’000 25,710 41,036 1,554 8,102 1,571 77,973 14,695 - - 481 (350) - (143) (4,079) - - - - 701 - 658 11,655 (350) 658 40,405 41,167 1,411 4,023 2,930 89,936 14,938 - - 1,064 9,481 (353) - 850 (397) - - 2,447 3,461 97 - - 993 5,113 (258) - (30) 1,346 3,988 23,861 (353) (30) 6,700 120,114 at 30 June 2018 56,407 51,145 Annual Report | financial report 79 notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (e) Tax balances continued recoverY of deferred taxeS Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets, including those arising from unutilised tax losses (where applicable), require management to assess the likelihood that the Group will comply with the relevant tax legislation and will generate sufficient taxable earnings in future years in order to recognise and utilise those deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and existing tax laws in each jurisdiction. These assessments require the use of estimates and assumptions such as exchange rates, commodity prices and operating performance over the life of the assets. To the extent that cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the deferred tax assets reported at the reporting date could be impacted. Additionally, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future years. (f) Inventories accoUntinG policY Gold bullion, gold in circuit and ore stockpiles are physically measured or estimated and valued at the lower of cost and net realisable value. Cost represents the weighted average cost and includes direct purchase costs and an appropriate portion of fixed and variable production overhead expenditure, including depreciation and amortisation, incurred in converting materials into finished goods. Materials and supplies are valued at the lower of cost and net realisable value. Any allowance for obsolescence is determined by reference to specific stock items identified. A regular and on-going review is undertaken to establish the extent of surplus items and an allowance is made for any potential loss on their disposal. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Ore stockpiles which are not expected to be processed in the 12 months after the reporting date are classified as non-current inventory. There is a reasonable expectation the processing of these stockpiles will have a future economic benefit to the Group and accordingly values these stockpiles at the lower of cost and net realisable value current assets Consumable stores Ore stockpiles Gold in circuit Finished goods - dore 30 June 2018 $’000 30 June 2017 $’000 17,044 33,396 31,362 2,139 83,941 13,409 27,132 18,310 - 58,851 (i) amoUntS recoGniSed in profit or loSS Write-downs of inventories consumable to net realisable value amounted to $1.0 million (2017 - $4.3 million). These were recognised as an expense during the year ended 30 June 2018 and included in ‘cost of sales’ in profit or loss. (g) Provisions accoUntinG policY Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of managements best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. Refer to note 26 for further information on accounting policies associated with rehabilitation costs. 80 notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (g) Provisions continued Employee entitlements Rehabilitation Other 30 June 2018 non- current $’000 current $’000 total $’000 Current $’000 31,615 757 - 127,929 5,844 - 32,372 127,929 5,844 20,595 - 2,546 30 June 2017 non- current $’000 1,247 78,630 - total $’000 21,842 78,630 2,546 37,459 128,686 166,145 23,141 79,877 103,018 (i) emploYee entitlementS - leave oBliGationS The leave obligations cover the Group’s liability for long service leave and annual leave. The current portion of this liability includes all of the accrued annual leave, the unconditional entitlements to long service leave where employees have completed the required period of service and also those where employees are entitled to pro-rota payments in certain circumstances. The entire amount of the annual leave provision of $17.7 million (2017 - $12.5 million) is presented as current, as the Group does not have an unconditional right to defer settlement for any of these obligations. Based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not to be expected to be taken or paid within the next 12 months. 30 June 2018 $’000 30 June 2017 $’000 Current leave obligations expected to be settled after 12 months 6,784 3,000 (ii) information aBoUt individUal proviSionS and SiGnificant eStimateS Rehabilitation provision The Group assesses its mine rehabilitation provision annually. Significant judgement is required in determining the provision for mine rehabilitation and closure as there are many factors that will affect the ultimate liability payable to rehabilitate the mine sites, including future disturbances caused by further development, changes in technology, changes in regulations, price increases, changes in timing of cash flows which are based on life of mine plans and changes in discount rates. When these factors change or become known in the future, such differences will impact the mine rehabilitation provision in the period in which the change becomes known. Long service leave The liability for long service leave and other long-term benefits is measured at the present value of the estimated future cash outflows to be made by the Group for those employees with greater than 5 years’ service up to the reporting date. Long-term benefits not expected to be settled within 12 months are discounted using the rates attaching to high quality corporate bonds at the reporting date, which most closely match the terms of maturity of the related liability. In determining the liability for these long-term employee benefits, consideration has been given to expected future increases in wage and salary rates, the Group’s experience with staff departures and periods of service. Related on-costs are also included in the liability. Annual Report | financial report 81 notes to the ConsolidAted finAnCiAl stAtements 9 Non-financial assets and liabilities continued (g) Provisions continued (iii) movementS in proviSionS Movements in each class of provision during the financial year, other than employee entitlements, are set out below: 2018 Carrying amount at the start of the year - additional provisions recognised Amounts used during the year - acquired through asset acquisition - acquired through business combination - unwinding of discount Carrying amount at end of year 2017 Carrying amount at the start of the year - additional provisions recognised Amounts used during the year - unwinding of discount Carrying amount at end of year 10 equity accoUntinG policY Rehabilitation $’000 78,630 11,255 (661) 9,930 26,484 2,291 Other $’000 2,546 5,972 (2,674) - - - 127,929 5,844 Rehabilitation $’000 77,436 232 (828) 1,790 78,630 Other $’000 4,192 2,295 (3,941) - 2,546 Ordinary Shares are classified as equity. They entitle the holder to participate in dividends and have no par value. Incremental costs directly attributable to the issue of new Shares or options are shown in equity as a deduction, net of tax, from the proceeds. (a) Share capital Ordinary Shares Fully paid Total Share capital 30 June 2018 Shares 30 June 2017 Shares 30 June 2018 $’000 30 June 2017 $’000 612,823,852 600,542,315 612,823,852 600,542,315 291,290 291,290 217,811 217,811 82 notes to the ConsolidAted finAnCiAl stAtements 10 equity continued (a) Share capital (i) MOvEMENTS IN ORDINARY ShARES: 2017 details Opening balance 1 July 2016 Employee Share Plan issues Performance Share Plan issues Exercise of options Balance 30 June 2017 Employee Share Plan issues Equity issue net of transaction costs Performance Share Plan issues Exercise of options Balance 30 June 2018 Equity issue Number of Shares total $’000 600,396,469 214,950 - - 145,846 622 2,161 78 600,542,315 217,811 1,462,967 9,523,810 - 1,294,760 6,765 59,810 6,298 606 612,823,852 291,290 On 29 March 2018, the Company issued 9,523,810 fully paid ordinary Shares at an issue price of $6.28 per Share as part of the settlement with Westgold Resourced Ltd to acquire the South Kalgoorlie Operations. Refer to note 13 of the financial statements for further details. Option and Share Plan Information relating to the Employee Option Plan, Employee Share Plan and LTI Incentive Plan including details of options issued, exercised and lapsed during the financial year, options outstanding at the end of the financial year and Shares issued during the year, is set out in note 21. Annual Report | financial report 83 notes to the ConsolidAted finAnCiAl stAtements risk This section of the notes discusses the Group’s exposure to various risks and shows how these could affect the group’s financial position and performance. 11 Financial risk management This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial performance. Current year profit and loss information has been included where relevant to add further context. Risk Exposure arising from Measurement of risk how the risk is managed Market risk - foreign exchange Market risk - interest rate Market risk - security prices Future commercial transactions Cash flow forecasting Borrowings at variable rates Sensitivity analysis Material expenses and revenues are denominated in Australian Dollars. Fixed interest rates over term of borrowings on plant and equipment Investments in equity securities Sensitivity analysis Management of equity investments Market risk - commodity price risk Fluctuations in the prevailing market prices of gold Sensitivity analysis Gold forward contracts Credit risk Cash and cash equivalents and trade and other receivables Aging analysis and credit ratings Diversification of bank deposits and credit risk Liquidity risk Borrowings and other liabilities Rolling cash flow forecasts Management of availability of committed borrowing facilities and maturity The Board has the overall responsibility for the establishment and oversight of the risk management framework. The Audit and Risk Committee is responsible for developing and monitoring risk management policies. The Committee reports regularly to the Board on its activities. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Group’s Audit and Risk Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. (a) Derivatives Where derivatives do not meet the hedging criteria, they are classified as ‘held for trading’ for accounting purposes. On 23 February 2017, as part of Superior Gold Inc. successful listing on the TSX Venture Exchange, the Company received 14,429,521 warrants as part of the consideration for the sale of the Plutonic operations. The warrants had the following terms, exercisable at USD$1.52 on or before 23 February 2022. In June 2017, 468,960 warrants were transferred by the Company to the transaction adviser as part of the fee consideration in relation to the Plutonic operations sale. Consequently, as at 30 June 2017 the Company held 13,960,561 warrants. No changes in the number of warrants held for the year ended 30 June 2018. The assumptions used for the valuation of the warrants received are as follows: Underlying Security spot price Strike/exercise price Valuation date Grant date Expected volatility Expiry date Risk free interest rate Fair value of one warrant Rate of conversion AUD:USD Fair value of one warrant (AUD) US$0.92827 US$1.5166 30 June 2018 23 February 2017 60% 23 February 2022 2.29% US$0.3029 $0.7403 $0.4092 A total of A$5.7 million has been included as a derivative financial asset as at 30 June 2018 (2017: $4.9 million). 84 notes to the ConsolidAted finAnCiAl stAtements 11 Financial risk management continued (a) Derivatives continued Movements in derivative asset Opening balance Fair value on issue date Movements in fair value of warrants Closing balance (i) claSSification of derivativeS 30 June 2018 $’000 30 June 2017 $’000 4,921 - 791 5,712 - 4,946 (25) 4,921 Derivatives are classified as held for trading and accounted for at fair value through profit or loss unless they are designated as hedges. They are presented as current assets or liabilities if they are expected to be settled within 12 months after the end of the reporting period. (ii) fair valUe meaSUrementS For information about the methods and assumptions used in determining the fair value of derivatives please refer to note 8(f). (b) Market risk (i) foreiGn excHanGe riSk At reporting date the Group has minimal exposure to foreign currency risk. The Group’s operations are all located within Australia and material expenses and revenues are denominated in Australian Dollars, the Company’s functional currency. (ii) caSH flow and fair valUe intereSt rate riSk At reporting date the Group has minimal exposure to interest rate risk. The majority of the Group’s borrowings relate to the purchases of plant and equipment under finance lease arrangements which have fixed interest rates over their term and therefore not subject to interest rate risk as defined in AASB 7. (iii) price riSk Exposure The Group is exposed to the risk of fluctuations in the prevailing market prices for the gold and silver currently produced from its operating mines. The Group manages this risk through the use of gold forward contracts. These contracts are accounted for as sale contracts with revenue recognised once gold has been physically delivered into the contract. The physical gold delivery contracts are considered a contract to sell a non-financial item and therefore do not fall within the scope of AASB 139 Financial Instruments: Recognition and Measurement. As at reporting date the Group has contractual sale commitments of 259,018 ounces of gold at an average price of A$1,752 per ounce (2017: 365,000 ounces at A$1,747 per ounce). The Group is also exposed to equity securities price risk arising from investments held by the Group and classified in the statement of financial position as available-for-sale financial assets and investments accounted for using the equity method. All of the Group’s equity investments are publicly traded on the Australian Stock Exchange or TSX Venture Exchange. Sensitivity The table below summarises the impact of increases/decreases of the gold price on the Group’s post-tax profit for the year. The analysis is based on the assumption that the gold price had increased/decreased by A$100 per ounce (2017: increased/decreased by A$100 per ounce) with all other variables held constant. Gold price - increase A$100 Gold price - decrease A$100 Impact on post-tax profit 2018 $’000 20,984 (20,984) 2017 $’000 15,703 (15,703) Annual Report | financial report 85 notes to the ConsolidAted finAnCiAl stAtements 11 Financial risk management continued (c) Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligation resulting in financial loss to the Group. Credit risk arises from cash and cash equivalents and credit exposures to gold sales counterparties and financial counterparties. (i) riSk manaGement The Group has adopted the policy of dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. Cash is deposited only with institutions approved by the Board, typically with a current minimum credit rating of A (or equivalent) as determined by a reputable credit rating agency e.g. Standard & Poor’s. Permitted instruments by which the Group hedges gold price risk are entered into with financial counterparties with a minimum credit of A (or equivalent). The Group has established limits on aggregate funds on term deposit or invested in money markets to be placed with a single financial counterparty and monitors credit and counterparty risk using credit default swaps. The Group sells the majority of its unhedged gold and silver to a single counterparty with settlement terms of no more than 2 days. The counterparty currently has an AA+ long term rating and AAA short term rating. The Group does not have any other significant credit risk exposure to a single counterparty or any group of counterparties having similar characteristics. (ii) credit QUalitY The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Trade receivables Counterparties with external credit rating AA Counterparties without external credit rating* Other Total trade receivables Cash at bank and short-term bank deposits AAA AA * Other - counterparties with no defaults in the past (iii) impaired trade receivaBleS 30 June 2018 $’000 30 June 2017 $’000 11,563 14,100 3,593 15,156 10,000 432,997 442,997 1,984 16,084 - 403,060 403,060 In determining the recoverability of trade and other receivables, the Group performs a risk analysis considering the type and age of the outstanding receivable and the creditworthiness of the counterparty. If appropriate, an impairment loss will be recognised in profit or loss. The Group does not have any impaired Trade and other receivables as at 30 June 2018 (2017: nil). (d) Liquidity risk The Group manages liquidity risk by monitoring immediate and forecasted cash requirements and ensures adequate cash reserves are maintained to pay debts as and when due. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. At the end of the reporting period the Group held deposits at call of $202.0 million (2017: $180.0 million) that are expected to readily generate cash inflows for managing liquidity risk. Due to the dynamic nature of the underlying businesses, the Group maintains flexibility in funding by maintaining availability under committed credit facilities. Management monitors rolling forecasts of the Group’s available cash reserve (comprising the undrawn borrowing facilities below and cash and cash equivalents) on the basis of expected cash flows. The Group’s liquidity management policy involves seeking to maintain a minimum available cash of at least 30 days costs of goods sold plus net interest costs. 86 notes to the ConsolidAted finAnCiAl stAtements 11 Financial risk management continued (d) Liquidity risk continued (i) financinG arranGementS The Group had access to the following undrawn borrowing facilities at the end of the reporting period: floating rate - Expiring beyond one year (financing facility) The credit facilities may be drawn at any time. (ii) matUritieS of financial liaBilitieS 30 June 2018 $’000 30 June 2017 $’000 90,000 100,000 The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. Contractual maturities of financial liabilities Less than 6 months $’000 6-12 months $’000 Between 1 and 2 years $’000 Between 2 and 5 years $’000 Over 5 years $’000 total contractual cash flows $’000 Carrying amount liabilities $’000 at 30 June 2018 Trade and other payables Finance lease liabilities Total non-derivatives At 30 June 2017 Trade and other payables Finance lease liabilities Total non-derivatives 140,073 4,411 144,484 105,465 3,398 108,863 - 3,812 3,812 - 2,521 2,521 - 7,209 7,209 - 3,258 3,258 - 2,853 2,853 - 2,722 2,722 - - - - - - 140,073 18,285 140,073 17,123 158,358 157,196 105,465 11,899 105,465 11,218 117,364 116,683 The weighted average interest rate on finance lease liabilities was 4.55% (2017: 5.92%) 12 Capital management (a) Risk management The Group’s objectives when managing capital are to • safeguard their ability to continue as a going concern, so that they can continue to provide returns for Shareholders and benefits for other stakeholders, and • maintain an optimal capital structure to reduce the cost of capital and maximise returns to Shareholders and benefits for other stakeholders. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to Shareholders, return capital to Shareholders or issue new Shares. Total capital is equity, as shown in the statement of financial position. The Group is not subject to any externally imposed capital requirements. notes to the ConsolidAted finAnCiAl stAtements 12 Capital management (b) Dividends (i) ordinarY SHareS Final dividend for the year ended 30 June 2017 of 6 cents (2016: 4 cents) per fully paid Share paid on 13 September 2017 (2016: 13 October 2016) Special dividend (2016: 3 cents per fully paid Share paid on 2 November 2016) Interim dividend for the year ended 30 June 2018 of 4.5 cents (2017: 3 cents) per fully paid Share paid on 13 April 2018 (2017: 6 April 2017) (ii) dividendS not recoGniSed at tHe end of tHe reportinG period In addition to the above dividends, since year end the Directors have recommended the payment of a final dividend of 5 cents per fully paid ordinary Share (2017 - 6 cents), fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 28 September 2018 out of retained earnings at 30 June 2018, but not recognised as a liability at year end, is (iii) frankinG creditS At balance date the value of franking credits available (at 30%) was $146.6 million (2017: $73.7 million) Annual Report | financial report 87 30 June 2018 $’000 30 June 2017 $’000 36,190 - 36,190 24,022 18,016 42,038 27,143 18,012 63,333 60,050 30 June 2018 $’000 30 June 2017 $’000 30,667 36,190 Group struCture This section provides information which will help users understand how the Group structure affects the financial position and performance of the Group as a whole. In particular, there is information about: • • • changes to the structure that occurred during the year as a result of business combinations and the disposal of a discontinued operation interests in joint operations interests in associates. A list of significant subsidiaries is provided in note 16. 13 Business combination accoUntinG policY The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: fair values of the assets transferred; liabilities incurred to the former owners of the acquired business; equity interests issued by the Group; fair value of any asset or liability resulting from a contingent consideration arrangement; and fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition- by-acquisition basis either at fair value or at the non-controlling interest’s proportionate Share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the acquisition date fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. 88 notes to the ConsolidAted finAnCiAl stAtements 13 Business combination continued (a) South Kalgoorlie Operations (i) SUmmarY of tHe acQUiSition On 29 March 2018, the Company completed the acquisition of the South Kalgoorlie Operations from Westgold Resources Ltd. The total consideration paid by the Company was $78.3 million. Details of the purchase consideration and the net identifiable assets acquired are as follows: Purchase consideration Cash and cash equivalents* Equity** Working Capital Total purchase consideration * Cash consideration ($20.0 million), less retention amount recorded in trade and other payables ($1.0 million) less working capital payment ($1.5 million) = $17.5 million per statement of cash flows. ** Acquisition date fair value - 9,523,810 Shares multiplied by NST Share price 29 March 2018 (acquisition date) $6.28. The assets and liabilities recognised as a result of the acquisition are as follows: Inventories Property, plant and equipment Deferred tax asset Exploration and evaluation assets Mine properties Intangible assets: tolling benefits Trade and other payables Provision for employee benefits Deferred tax liability Provision for rehabilitation Net identifiable assets acquired $’000 20,000 59,810 (1,539) 78,271 Fair value $’000 12,657 31,182 8,281 36,800 13,945 17,156 (7,449) (1,118) (6,699) (26,484) 78,271 Acquisition related costs of $3.1 million have been excluded from the consideration transferred and have been recognised as an expense in the statement of profit or loss and other comprehensive income for the year ended 30 June 2018. (ii) revenUe and profit contriBUtion The acquired business contributed a net loss of $5.0 million to the Group for the period from 29 March 2018 to 30 June 2018, with nil revenues as the Group honoured third-party toll treating contracts, which are due to expire in the September quarter. Annual Report | financial report 89 notes to the ConsolidAted finAnCiAl stAtements 14 asset acquisition On 28 November 2017, the Company completed the acquisition of Tanami Exploration NL from Tanami Gold NL. The total cash consideration paid by the Company was $4.0 million. The Group has determined that the transaction does not constitute a business combination in accordance with AASB 3. The acquisition of the net assets meets the definition of, and has been accounted for, as an asset acquisition. When an asset acquisition does not constitute a business combination, the assets and liabilities are assigned a carrying amount based on their relative fair values in an asset purchase transaction and no deferred tax will arise in relation to the acquired assets and assumed liabilities as the initial recognition exemption for deferred tax under AASB 112 is applied. No goodwill arises on the acquisition and transactions costs of the acquisition are included in the capitalised cost of the asset. Details of the fair values of assets acquired as at date of purchase are as follows: Purchase consideration Cash Acquisition costs Trade and other receivables Inventories Property, plant and equipment Exploration and evaluation assets Trade and other payables Provisions Net identifiable assets acquired 15 Discontinued operation accoUntinG policY $’000 4,000 203 4,203 Fair value $’000 40 55 976 13,136 (74) (9,930) 4,203 A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit or loss. (a) Description On 17 February 2016 the Group announced its intention to sell the Plutonic gold mine and initiated an active process to locate a buyer and complete the sale. The Sale and Purchase Agreement in relation to the disposal of the Plutonic operations was executed on 15 August 2016 with the disposal completed with an effective date of 30 September 2016. Consequently the Plutonic operations is reported as a discontinued operation during the year ended 30 June 2017. Financial information relation to the discontinued operation for the period to the date of disposal and the comparative period are set out below. 90 notes to the ConsolidAted finAnCiAl stAtements 15 Discontinued operation continued (b) Financial performance and cash flow information The financial performance and cash flow information presented are for the year ended 30 June 2018 and year ended 30 June 2017. Revenue (note 3) Expenses Profit/(loss) before income tax Income tax (expense)/benefit Profit/(loss) after income tax of discontinued operation Gain on sale of the subsidiary after income tax (see (c) below) Profit/(loss) from discontinued operation Net cash inflow from operating activities Net cash (outflow) from investing activities Net cash (outflow) from financing activities Net cash outflow from the disposal Group (c) Details of the sale of the subsidiary Consideration received or receivable: Cash Equity Derivative financial assets (note 11(a)) Receivables Fair value of contingent consideration Total disposal consideration Carrying amount of net assets sold Gain on sale before income tax Income tax expense on gain Gain on sale after income tax 30 June 2018 $’000 30 June 2017 $’000 - - - - - - - - - - - 33,812 (27,291) 6,521 (1,956) 4,565 21,848 26,413 9,135 (4,918) (975) 3,242 30 June 2018 $’000 30 June 2017 $’000 - - - - - - - - - - 18,089 28,559 4,946 533 1,570 53,697 (23,279) 30,418 (8,570) 21,848 The consideration in respect of the sale of the Plutonic gold operations was disclosed to the Australian Securities Exchange on 1 August 2016. As previously disclosed, if the purchaser (Superior Gold Inc., parent entity of Billabong Gold Pty Ltd) of the Plutonic Gold operations listed on the Toronto Stock Exchange or TSX Venture Exchange, together referred to as ‘TSX’, six months after completion of the Sale and Purchase Agreement (‘SPA’), it was required to issue Shares to the Company to the value of A$25.0 million at the “Go Public” issue price or Shares delivering 33% interest to the Company (whichever is greater). On the 23 February 2017, Superior Gold Inc. successfully listed on the TSX Venture Exchange. As apart of the successful listing and pricing of the initial public offering, the Company’s equity investment in Superior Gold Inc. was valued at A$28.6 million representing 33% interest to the Company. On 28 February 2017, the Company reduced its interest in Superior Gold Inc. to 19.7% by selling 10 million ordinary Shares. In June 2017, 512,780 Shares were transferred by the Company to the transaction adviser as part of the fee consideration for the Plutonic operations sale. Consequently, as at 30 June 2017 the Company held 18,346,261 Shares, representing 19.2% interest to the Company. No further changes in Shares held for the year ended 30 June 2018. In addition, on completion of the listing process, the Company received one 5 year warrant for every two Shares issued to the Company exercisable at a 100% premium of the IPO price. This equated to 14,429,521 warrants with a valuation of A$4.9 million. In June 2017, 468,960 warrants were transferred by the Company to the transaction adviser as part of the fee consideration in relation to the Plutonic operations sale. Consequently, as at 30 June 2017 the Company held 13,960,561 warrants. No further changes to the number of warrants held for the year ended 30 June 2018. Annual Report | financial report 91 notes to the ConsolidAted finAnCiAl stAtements 15 Discontinued operation continued (c) Details of the sale of the subsidiary continued A further element of consideration relates to a milestone payment capped at A$10.0 million where A$2.5 million is payable for each additional 250,000 ounces of NI 43-101 compliant indicated resources (or better) identified by Billabong Gold Pty Ltd on the Project tenements as at 23 February 2016 in excess of 1,694,000 ounces JORC 2012 measured, indicated or inferred Mineral Resources. As at 30 June 2017 the Company recognised a receivable of A$1.6 million in respect of this contingent consideration element. Based on Minerals Resources as at 31 December 2017, the Company has recognised the full value of A$2.5 million as a receivables as at 30 June 2018. The carrying amounts of assets and liabilities as at the date of sale (30 September 2016) were: Property, plant and equipment Inventories Exploration & evaluation assets Mine properties total assets Employee benefits obligations Rehabilitation provision Borrowings Total liabilities net assets 16 Interests in other entities (a) Material subsidiaries 30 September 2016 $’000 12,875 11,920 7,992 20,832 53,619 (5,916) (23,189) (1,235) (30,340) 23,279 The Group’s principal subsidiaries at 30 June 2018 are set out below. Unless otherwise stated, they have Share capital consisting solely of ordinary Shares that are held directly by the Group, and the proportion of ownership interests held equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of business. Name of entity Northern Star Mining Services Pty Ltd Northern Star (Kanowna) Pty Ltd Kundana Gold Pty Ltd Gilt-Edged Mining Pty Ltd EKJV Management Pty Ltd Kanowna Mines Pty Ltd GKL Properties Pty Ltd Northern Star (Tanami) Pty Ltd Northern Star (Western Tanami) Pty Ltd Northern Star (South Kalgoorlie) Pty Ltd Northern Star (HBJ) Pty Ltd Place of business/ country of incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Northern Star (Hampton Gold Mining Areas) Limited England & Wales Ownership interest held by the group 2018 % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 2017 % 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 - - - - All subsidiaries listed above, except for Northern Star (Western Tanami) Pty Ltd, Northern Star (South Kalgoorlie) Pty Ltd, Northern Star (HBJ) Pty Ltd and Northern Star (Hampton Gold Mining Areas) Ltd have been granted relief from the necessity to prepare financial reports in accordance with ASIC Instrument 2016/785 issued by the Australian Securities and Investments Commission. For further information refer to note 24. 92 notes to the ConsolidAted finAnCiAl stAtements 16 Interests in other entities continued (b) Joint arrangements FMG JV Mt Clement JV East Kundana Production JV Kanowna West JV Kalbara JV West Kundana JV Zebina JV Acra JV Robertson JV Cheroona JV Principal Activities Exploration Exploration Exploration & Production Exploration Exploration Exploration Exploration Exploration Exploration Exploration Ownership interest held 2018 % 65.90 20.00 51.00 87.70 67.34 75.50 80.00 20.00 40.00 49.00 2017 % 65.24 20.00 51.00 83.92 62.97 75.50 80.00 20.00 40.00 49.00 The joint arrangements listed above are classified as joint operations and are not separate legal entities. They are contractual arrangements between participants for the sharing of costs and outputs and do not themselves generate revenue and profit. The joint operations are of the type where initially one party contributes tenements with the other party earning a specified percentage by funding exploration activities; thereafter the parties often Share exploration and development costs and output in proportion to their ownership of joint venture assets. The joint operations are accounted for in accordance with the Group’s accounting policy set out in note 26. (c) Interests in associates and joint ventures Set out below are the associates of the Group as at 30 June 2018 which, in the opinion of the Directors, are material to the Group. The entities listed below have Share capital consisting solely of ordinary Shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held. Place of business/ country of incorporation Name of entity % of ownership interest Nature of relationship Measurement method 2018 % 19.2 Superior Gold Inc. Canada Total equity accounted investments 2017 % 19.2 Associate (1) Equity method 22,980 18,896 15,399 18,779 15,399 18,779 Quoted fair value Carrying amount 2018 $’000 2017 $’000 2018 $’000 2017 $’000 (1) Superior Gold Inc. is a gold producer that operates the Plutonic gold mine in Western Australia. The Company completed the sale of the Plutonic gold operations with an effective date of 30 September 2016. Refer to note 15 for further details. Although the Group holds less than 20% of the equity Shares of Superior Gold Inc. and has less than 20% of the voting power at Shareholder meetings, the Group exercises significant influence through the appointment of an officer of the Company as a nominee director on the board of Superior Gold Inc. Annual Report | financial report 93 notes to the ConsolidAted finAnCiAl stAtements 16 Interests in other entities continued (c) Interests in associates and joint ventures continued (i) SUmmariSed financial information for aSSociateS and Joint ventUreS The tables below provide summarised financial information for those joint ventures and associates that are material to the Group. The information disclosed reflects the amounts presented in the financial statements of the relevant associates and joint ventures and not the Company’s Share of those amounts. They have been amended to reflect adjustments made by the entity when using the equity method, including fair value adjustments and modifications for differences in accounting policy. Summarised balance sheet Current assets Non-current assets Current liabilities Non-current liabilities net assets Reconciliation to carrying amounts: Opening net assets (2017: 23 February) Profit/(loss) for the period Other comprehensive income closing net assets Group Share in % Group’s Share in $ Acquisition fair value adjustment Carrying amount Summarised statement of comprehensive income Revenue Profit/(loss) from continuing operations Profit/(loss) for the period Other comprehensive income Total comprehensive income/(loss) Superior Gold Inc. 30 June 2018 $’000 30 June 2017 $’000 51,566 95,663 (34,011) (49,167) 55,883 72,637 (20,091) (37,315) 64,050 71,114 66,618 (7,152) (1,137) 58,329 19.2% 11,186 4,213 15,399 66,028 364 226 66,618 19.2% 13,091 5,688 18,779 90,752 43,592 (7,152) (7,152) (1,137) (8,289) 364 364 226 590 94 notes to the ConsolidAted finAnCiAl stAtements unreCoGnised items This section of the notes provides information about items that are not recognised in the financial statements as they do not (yet) satisfy the recognition criteria. 17 Contingent liabilities (a) Contingent liabilities The Group had contingent liabilities at 30 June 2018 in respect of: On 31 July 2015, Northern Star Resources Ltd (“NST”), completed settlement with Tanami Gold NL (“TAM”) to progressively acquire a 60% interest in the Central Tanami Project (“CTP”). As part of the acquisition, NST has granted TAM two put options to sell the remaining 40% interest in the CTP following completion. The first put option grants TAM the right to sell 15% of CTP for $20 million in cash or NST Shares at TAM’s election, at any time from completion up until three years after the completion of the initial acquisition. If commercial production is achieved more than three years after completion, TAM may exercise this option at any time up to 30 calendar days following achievement of commercial production. The second put option grants TAM the right to sell 25% of CTP for $32 million in cash or NST Shares at TAMs election at any time from completion up to six calendar months after the achievement of commercial production. On 27 June 2018, TAM announced its intention to exercise the first put option on or immediately prior to 31 July 2018 in accordance with the terms of the joint venture agreement between TAM and the Company. As such, the Company has recognised a $20 million payable as at 30 June 2018. Refer to note 4 for further details. On 31 July 2018, TAM exercised the first put option under the joint venture agreement electing to take cash consideration. The total undiscounted amount of payments that the Group could be required to make to TAM upon the exercise of the second put options is $32 million. 18 Commitments (a) Capital commitments Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows: Property, plant and equipment (b) Non-cancellable operating leases 30 June 2018 $’000 30 June 2017 $’000 22,005 27,242 The Group leases various offices and equipment under non-cancellable operating leases expiring within two to eight years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years 30 June 2018 $’000 30 June 2017 $’000 21,942 6,783 7,079 35,804 16,567 14,859 8,378 39,804 notes to the ConsolidAted finAnCiAl stAtements 18 Commitments continued (c) Gold delivery commitments Within one year Later than one year but not later than five years 19 Events occurring after the reporting period Subsequent to the period ended 30 June 2018 the Company announced: Annual Report | financial report 95 Gold for physical delivery (Ounces) 179,018 80,000 Weighted average contracted sales price (a$) value of committed sales ($000) 1,748 1,761 312,846 140,915 • a final fully franked dividend of 5 cents per Share to Shareholders on the record date of 7 September 2018, payable on 28 September 2018; and • on 9 July 2018, the Company executed a self-arranged three bank syndicated facility with Australian and international banks. The new facilities include a three year $200 million revolving credit facility and contingent instrument facilities. otHer inFormation This section of the notes includes other information that must be disclosed to comply with the accounting standards and other pronouncements, but that is not immediately related to individual line items in the financial statements. 20 Related party transactions (a) Subsidiaries Interests in subsidiaries are set out in note 16(a). (b) Key management personnel compensation Short-term employee benefits Employee entitlements Post-employment benefits Share-based payments Detailed remuneration disclosures are provided in the remuneration report on pages 39 to 50. 30 June 2018 $ 30 June 2017 $ 3,631,932 3,414,079 198,836 190,188 226,469 184,761 2,491,364 2,190,093 6,512,320 6,015,402 96 notes to the ConsolidAted finAnCiAl stAtements 20 Related party transactions continued (c) Transactions with other related parties (i) pUrcHaSeS from entitieS controlled BY keY manaGement perSonnel The Company has in place policies and procedures which govern transactions involving KMPs and their related parties, and these policies and procedures restrict the involvement of the KMP or related party in the negotiation, awarding or direct management of the resultant contract. In the Company’s 2017 Annual Report, specifically note 18 to the Consolidated Financial Statements, the Company reported that the beneficial minority interest held by Mr Beament in: (a) Premium Mining Personnel Pty Ltd, and (b) AUD Pty Ltd, the sole Shareholder of Australian Underground Drilling Pty Ltd (AUD), both suppliers of goods and services to the Company, did not require reporting under the Accounting Standards. For the purposes of the 2018 Annual Report, the Company is of the same view, having applied the necessary criteria under the Accounting Standards for the financial year. With effect from 1 July 2018, the Company now has no contractual relationship with Premium Mining Personnel Pty Ltd and Mr Beament has no Shareholding in any of its related bodies corporate. Mr Beament’s continued Shareholding in AUD is the subject of regular review by the Independent Directors. They recognise that, notwithstanding the position under the Accounting Standards, good corporate governance would normally be exhibited by the absence of a key executive holding a 23% interest in a drilling contract with a material supplier to the Company. AUD is a material supplier due to the aggregate total of fees paid, the nature of the services provided to the Company by the supplier, and the place the supplier has in the Company’s risk mitigation strategy, in seeking to maintain diversity amongst its suppliers where it is commercially feasible to do so, to ensure that there is no reliance by the Company on one supplier for a particular service across all the Company’s operations. However, in this particular case, the Independent Directors’ unanimous view after having made inquiries of management, is that the continuing contractual relationship between the Company and AUD is more beneficial to the Company than terminating the contract, or not entering into a fresh contract with AUD, would be. The results of the multiple party tender process demonstrated that there was no comparable supplier with the capacity at the time of tender to provide the services to the Company’s Kalgoorlie Operations for the same quality, productivity rates and price offered by AUD. Further, the selection of AUD was consistent with the company-wide risk mitigation strategy in striving for diversity in its supply chain, having regard to the other suppliers providing underground diamond drilling services to the Company’s other operations (in which Mr Beament has no shareholding or other basis for inferring a significant influence). Consequently, the previous discussions within the Board regarding possible divestment of the shareholding by Mr Beament or termination of or non-renewal of, the supply contract by the Company, have culminated in a decision by the independent Directors to accept the position, because they believe it is in the best interests of the Company’s Shareholders to do so. The Company’s policies and procedures continue to apply to ensure that Mr Beament is not involved in the negotiation, awarding of contracts or direct management of the contract with AUD. The following transactions occurred with related parties: Shirley ln’tVeld: • is a board member of CSIRO. During the year, a revenue amount of $75,000 was paid to this business for consulting services provided at normal commercial rates (2017: $96,492). (d) Outstanding balances arising from sales/purchases of goods and services The following balances are outstanding at the end of the reporting period in relation to transactions with related parties: Current payables (purchases of goods and services) Related entities of key management personnel 30 June 2018 $ 30 June 2017 $ - 25,000 Annual Report | financial report 97 notes to the ConsolidAted finAnCiAl stAtements 21 Share-based payments (a) Employee Option Plan Set out below are summaries of options granted under the Employee Option Plan: As at 1 July Exercised during the year Cancelled during the year As at 30 June Average exercise price per Share option 1.58 1.28 2.18 2.18 2018 2017 Average exercise price per Share option 1.88 1.56 1.59 Number of options 2,673,638 (1,791,241) (123,709) Number of options 3,495,147 (204,342) (617,167) 758,688 1.58 2,673,638 Share options outstanding at the end of the year have the following expiry dates and exercise prices: Grant date 19 November 2014 9 July 2015 Total (b) Employee Share Plan Expiry date Exercise price Expiring 31 July 2017 Expiring 31 July 2018 1.28 2.18 Share options 30 June 2018 Share options 30 June 2017 - 758,688 758,688 1,791,241 882,397 2,673,638 Under the Employee Share Plan, eligible employees may be granted up to $1,000 of fully paid ordinary Shares in the Company annually for no cash consideration. The number of Shares issued to participants in the scheme is the offer amount divided by the weighted average price at which the Company’s Shares are traded on the ASX during the week up to and including the date of grant. The fair value of Shares issued during the year was $6.33 (2017: $4.74) per Share. 2018 2017 Number of Shares issued under the plan to participating employees on 13 June 2018 (2017: 26 June) 144,754 131,250 In addition to the above, on 31 July 2017, a further 1,334,894 (2017: nil) Shares were issued to employees as part of June 2017 Employee Share Plan. The number of Shares issued to participants in the scheme is the offer amount, which is dependant on number of years the individual employee has been employed with the Company, divided by the weighted average price at which the Company’s Shares are trade on the ASX during the week up to and include the grant date. The fair value the Shares issued in relation to this plan was $4.37 (2017: nil). (c) Performance Share Plan No performance Shares were issued in FY2018. Total performance Shares on issue at 30 June 2018 is 5,031,535 (2017: 9,409,586), with a corresponding total non-recourse loan value of $7,542,509 (2017: $12,066,557). (d) Performance Rights On 22 December 2017, 505,940 Category B performance rights were issued to the senior management of the Company. The Company may issue performance rights to one or more eligible employee under the Long Term Incentive Plan. A performance right is a conditional right which, upon the satisfaction or waiver of the relevant vesting conditions, and, if required by the Company the exercise of that right, entitles its holder to received one Share. The assessed fair value at grant dates of the performance rights granted during the year ended 30 June 2018 was as follows: Fair value 22 Dec 17 $3.639 98 notes to the ConsolidAted finAnCiAl stAtements 21 Share-based payments continued (d) Performance Rights The fair value at grant date is independently determined using a Monte Carlo simulation model (market based vesting conditions) and a Black Scholes Model (non market vesting conditions) that takes into account the term of the performance rights, the impact of dilution (where material), the Share price at grant date and expected volatility of the underlying Share, the expected dividend yield, the risk-free rate for the term of the performance right and the correlations and volatilities of the peer group companies. The model inputs for performance rights granted on 22 December 2017 included: (a) Exercise price (b) Grant date (c) Expiry date (d) Share price at grant date (e) Expected volatility of the Company’s Shares (f) Expected dividend yield (g) Risk-free interest rate Tranche A Tranche B Tranche C Nil 22-Dec-17 22-Dec-23 $5.96 25% 2.00% 2.16% Nil 22-Dec-17 22-Dec-23 $5.96 25% 2.00% 2.16% Nil 22-Dec-17 22-Dec-23 $5.96 45% 2.00% 2.16% The expected volatility is based on the historic volatility (based on the remaining life of the performance rights). Total performance rights on issue at 30 June 2018 is 10,047,140 (2017: 9,577,150). Total Share based payments expense for the year ended 30 June 2018 was $11.4 million (2017: $4.2 million). 22 remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non- related audit firms: (a) Deloitte Touche Tohmatsu (i) aUdit and otHer aSSUrance ServiceS Audit and other assurance services Audit and review of financial statements Other assurance services Other Total remuneration for audit and other assurance services (ii) taxation ServiceS Total remuneration for taxation services (iii) otHer ServiceS Other services Other assurance and advisory services Total remuneration for other services Total remuneration of Deloitte Touche Tohmatsu Total auditors’ remuneration 2018 $ 2017 $ 306,200 270,222 39,500 - 345,700 270,222 - 14,600 14,600 - - - 360,300 270,222 360,300 270,222 It is the Group’s policy to employ Deloitte Touche Tohmatsu on assignments additional to their statutory audit duties where Deloitte Touche Tohmatsu expertise and experience with the Group are important. These assignments are principally tax advice and due diligence reporting on acquisitions, or where Deloitte Touche Tohmatsu is awarded assignments on a competitive basis. It is the Group’s policy to seek competitive tenders for all major consulting projects. Annual Report | financial report 99 notes to the ConsolidAted finAnCiAl stAtements 23 Earnings per Share Basic earnings per Share is calculated by dividing: • the profit attributable to owners of the Company • by the weighted average numbers of ordinary Shares outstanding during the financial year, excluding treasury Shares. Diluted earnings per Share adjusts the figures used in the determination of basic earnings per Share to take into account: • • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary Shares, and the weighted average number of additional ordinary Shares that would have been outstanding assuming the conversion of all dilutive potential ordinary Shares. (a) Basic earnings per Share From continuing operations attributable to the ordinary equity holders of the Company From discontinued operation Total basic earnings per Share attributable to the ordinary equity holders of the Company (b) Diluted earnings per Share From continuing operations attributable to the ordinary equity holders of the Company From discontinued operation Total diluted earnings per Share attributable to the ordinary equity holders of the Company (c) Reconciliation of earnings used in calculating earnings per Share Basic earnings per Share Profit attributable to the ordinary equity holders of the Company used in calculating basic earnings per Share: From continuing operations From discontinued operation Diluted earnings per Share Profit from continuing operations attributable to the ordinary equity holders of the Company Used in calculating basic earnings per Share Profit from discontinued operation Profit attributable to the ordinary equity holders of the Company used in calculating diluted earnings per Share 30 June 2018 cents 30 June 2017 Cents 32.1 - 32.1 31.5 4.4 35.9 30 June 2018 cents 30 June 2017 Cents 31.5 - 31.5 30.8 4.3 35.l 30 June 2018 $ 30 June 2017 $ 194,113 - 194,113 188,897 26,413 215,310 194,113 - 188,897 26,413 194,113 215,310 100 notes to the ConsolidAted finAnCiAl stAtements 23 Earnings per Share continued (d) Weighted average number of Shares used as the denominator Weighted average number of ordinary Shares used as the denominator in calculating basic earnings per Share Adjustments for calculation of diluted earnings per Share: Options Performance rights Weighted average number of ordinary and potential ordinary Shares used as the denominator in calculating diluted earnings per Share 24 deed of cross guarantee 2018 Number 2017 Number 604,546,244 600,533,924 758,688 10,047,140 2,673,638 9,577,150 615,352,072 612,784,712 Northern Star Resources Limited and the following entities are parties to a deed of cross guarantee under which each Company guarantees the debts of the others: Closed Group: Northern Star Mining Services Pty Ltd; Northern Star (Kanowna) Pty Ltd; Kanowna Mines Pty Ltd; Gilt-Edged Mining Pty Ltd; and Northern Star (Tanami) Pty Ltd Extended Closed Group: GKL Properties Pty Ltd; Kundana Gold Pty Ltd; and EKJV Management Pty Ltd Annual Report | financial report 101 notes to the ConsolidAted finAnCiAl stAtements 24 deed of cross guarantee continued (a) Consolidated income statement, statement of comprehensive income and summary of movements in consolidated retained earnings The above companies represent a ‘closed group’ for the purposes of the revised AISC Instrument, and as there are no other parties to the deed of cross guarantee that are controlled by Northern Star Resources Limited, they also represent the ‘extended closed group’. Set out below is a consolidated statement of profit or loss, a Consolidated Statement of Profit or Loss and Other Comprehensive Income and a summary of movements in consolidated retained earnings for the year ended 30 June 2018 of the closed group consisting of Northern Star Resources Limited and the above listed entities. conSolidated Statement of profit or loSS Revenue from continuing operations Other income Cost of sales Other expenses from ordinary activities Finance costs Share of net profits of associates and joint venture partnership accounted for using the equity method Profit before income tax Income tax expense Profit for the year conSolidated Statement of profit or loSS and otHer compreHenSive income Profit for the year Other comprehensive income Available-for-sale financial assets Share of other comprehensive income of associates and joint ventures Income tax relating to components of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year SUmmarY of movementS in conSolidated retained earninGS Retained earnings at the beginning of the financial year Profit for the year Dividends provided for or paid Retained earnings at the end of the financial year 30 June 2018 $’000 964,025 8,749 (620,723) (62,671) (2,846) (1,371) 285,163 (83,659) 201,504 201,504 (100) (218) 30 (288) 201,216 383,978 201,504 (63,333) 522,149 102 notes to the ConsolidAted finAnCiAl stAtements 24 deed of cross guarantee continued (b) Consolidated Statement of Financial Position Set out below is a Consolidated Statement of Financial Position as at 30 June 2018 of the closed group consisting of Northern Star Resources Limited the above listed entities. cUrrent aSSetS Cash and cash equivalents Trade and other receivables Inventories Total current assets non-cUrrent aSSetS Trade and other receivables Investments accounted for using the equity method Available-for-sale financial assets Exploration and evaluation assets Property, plant and equipment Mine properties Derivative financial instruments Total non-current assets total assets cUrrent liaBilitieS Trade and other payables Borrowings Current tax liabilities Provision Total current liabilities non-cUrrent liaBilitieS Borrowings Deferred tax liabilities Provisions Total non-current liabilities Total liabilities net assets eQUitY Contributed equity Other reserves Retained earnings Total equity 30 June 2018 $’000 442,995 29,143 57,837 529,975 94,946 19,399 42,132 172,450 109,790 199,722 5,712 644,151 1,174,126 125,868 7,610 14,959 37,459 185,896 9,513 58,716 91,174 159,403 345,299 828,827 291,290 15,388 522,149 828,827 For the year ended 30 June 2017, the consolidated statement of profit or loss and other comprehensive income and statement of financial position for the closed Group is materially consistent with those of the consolidated entity. notes to the ConsolidAted finAnCiAl stAtements 25 Parent entity financial information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Balance SHeet Current assets Non-current assets total assets Current liabilities Non-current liabilities Total liabilities SHareHolderS’ eQUitY Issued capital Reserves Available-for-sale financial assets Share-based payments Share of other comprehensive income of associates and joint ventures accounted for using the equity method Retained earnings Profit for the year Total comprehensive income Annual Report | financial report 103 30 June 2018 $ 30 June 2017 $ 451,814 306,527 758,340 (69,608) (402,188) (471,796) 432,932 261,541 694,472 (97,735) (390,548) (488,283) 291,290 217,811 5,417 10,144 (173) (20,134) 5,201 7,778 45 (24,646) 286,544 206,189 68,132 65,605 67,844 67,186 (b) Guarantees entered into by the parent entity Refer to note 24 for details of guarantees entered into by the parent entity in relation to the debts of its subsidiaries. (c) Contingent liabilities of the parent entity Refer to note 17 for details of contingent liabilities relating to the parent entity as at 30 June 2018 or 30 June 2017. For information about guarantees given by the parent entity, please see above. (d) Contractual commitments for the acquisition of property, plant or equipment Refer to note 18 for commitments of the Group for the acquisition of property, plant and equipment as at 30 June 2018 or 30 June 2017. (e) Determining the parent entity financial information The financial information for the parent entity, Northern Star Resources Limited, has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) inveStmentS in SUBSidiarieS, aSSociateS and Joint ventUre entitieS Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Northern Star Resources Limited. (ii) tax conSolidation leGiSlation Northern Star Resources Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Northern Star Resources Limited, and the controlled entities in the tax consolidated Group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated Group continues to be a stand-alone taxpayer in its own right. 104 notes to the ConsolidAted finAnCiAl stAtements 25 Parent entity financial information continued (e) Determining the parent entity financial information continued (ii) tax conSolidation leGiSlation continUed In addition to its own current and deferred tax amounts, Northern Star Resources Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated Group. The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Northern Star Resources Limited for any current tax payable assumed and are compensated by Northern Star Resources Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Northern Star Resources Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the Group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. 26 Summary of significant accounting policies This note provides a list of all significant accounting policies adopted in the preparation of these consolidated financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the Group consisting of Northern Star Resources Limited and its subsidiaries. (a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Northern Star Resources Limited is a for-profit entity for the purpose of preparing the financial statements. (i) compliance witH ifrS Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company and the Group complies with international financial reporting standards (IFRS). (ii) HiStorical coSt convention These financial statements have been prepared under the historical cost basis, except for the following: available-for-sale financial assets, financial assets and liabilities (including derivative instruments); and assets held for sale - measured at the lower of cost and fair value less cost of disposal. (iii) new and amended StandardS adopted BY tHe GroUp The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Any significant impact of the accounting policies of the Group from the adoption of these Accounting Standards and Interpretations are disclosed below. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group. (iv) new StandardS and interpretationS not Yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below. Annual Report | financial report 105 notes to the ConsolidAted finAnCiAl stAtements 26 Summary of significant accounting policies continued (a) Basis of preparation continued Title of standard AASB 9 Financial Instruments Nature of change Impact Mandatory application date/ Date of adoption by Group AASB 9 addresses the classification, measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The Group has reviewed its financial assets and liabilities and is expecting the following impact from the adoption of the new standard on 1 July 2018: Must be applied for financial years commencing on or after 1 January 2018. Based on the transitional provisions in the completed AASB 9, early adoption in phases was only permitted for annual reporting periods beginning before 1 February 2015. After that date, the new rules must be adopted in their entirety. Expected date of adoption by the Group: 1 July 2018. The majority of the Groups debt instruments are currently classified as available-for-sale (AFS) financial assets would appear to satisfy the conditions for classification as at fair value through other comprehensive income (FVOCI) and hence there will be no change to the accounting for these assets. The other financial assets held by the Group include: • equity instruments currently classified as AFS for which a FVOCI election is available • equity investments currently measured at fair value through profit or loss (FVPL) which would likely continue to be measured on the same basis under AASB 9, and Accordingly, the Group does not expect the new guidance to have a significant impact on the classification and measurement of its financial assets. There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The new impairment model requires the recognition of impairment provisions based on expected credit losses (ECL) rather than only incurred credit losses as is the case under AASB 139. It applies to financial assets classified at amortised cost, debt instruments measured at FVOCI, contract assets under AASB 15 Revenue from Contracts with Customers, lease receivables, loan commitments and certain financial guarantee contracts. While the Group has not yet undertaken a detailed assessment of how its impairment provisions would be affected by the new model, it may result in an earlier recognition of credit losses. The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of the new standard. 106 notes to the ConsolidAted finAnCiAl stAtements 26 Summary of significant accounting policies continued (a) Basis of preparation continued Nature of change Impact During the current year we completed our assessment of the impact on our consolidated financial statements. The assessment is as follows: Bullion (gold and silver) sales, along with tolling revenue will not be affected by AASB 15. Mandatory application date/ Date of adoption by Group Mandatory for financial years commencing on or after 1 January 2018, but available for early adoption. Expected date of adoption by the Group: 1 July 2018. Title of standard AASB 15 Revenue from Contracts with Customers AASB 16 leases The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers revenue arising from the sale of goods and the rendering of services and AASB 111 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. The standard permits either a full retrospective or a modified retrospective approach for the adoption. AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The exceptions are short-term and low-value leases. Mandatory for financial years commencing on or after 1 January 2019. At this stage, the Group does not intend to adopt the standard before its effective date. The Group intends to apply the simplified transition approach and will not restate comparative amounts for the year prior to first adoption. The standard will affect primarily the accounting for the Group’s operating leases. As at the reporting date, the Group has non-cancellable operating lease commitments of $35,803,602, see note 18. Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under AASB 16 and will be recognised on a straight-line basis as an expense in profit or loss. However, the Group has not yet assessed what other adjustments, if any, are necessary for example because of the change in the definition of the lease term and the different treatment of variable lease payments and of extension and termination options. It is therefore not yet possible to estimate the amount of right-of-use assets and lease liabilities that will have to be recognised on adoption of the new standard and how this may affect the Group’s profit or loss and classification of cash flows going forward. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. Annual Report | financial report 107 notes to the ConsolidAted finAnCiAl stAtements 26 Summary of significant accounting policies continued (b) Principles of consolidation (i) SUBSidiarieS Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. lntercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Northern Star Resources Limited (‘Company’ or ‘parent entity’) as at 30 June 2018 and the results of all subsidiaries for the year then ended. Northern Star Resources Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. (ii) Joint arranGementS Under AASB 11 Joint Arrangements investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. Northern Star Resources Limited has only joint operations. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Joint operations Northern Star Resources Limited recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its Share of any jointly held or incurred assets, liabilities, revenues and expenses. These have been incorporated in the financial statements under the appropriate headings. Details of the joint operation are set out in note 16(b). (iii) cHanGeS in ownerSHip intereStS The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Northern Star Resources Limited. When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. (c) Foreign currency translation (i) fUnctional and preSentation cUrrencY Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars ($), which is Northern Star Resources Limited’s functional and presentation currency. (d) Impairment of assets At each reporting date, the Group reviews the carrying amounts of its tangible and other intangible assets to determine whether there is any indication that those assets might be impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any) which is the amount by which the assets carrying value exceeds its recoverable amount. Where the asset does not generate cash in-flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell (FVLCS) and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately. 108 notes to the ConsolidAted finAnCiAl stAtements 26 Summary of significant accounting policies continued (d) Impairment of assets continued Where an impairment loss subsequently reverses for assets other than goodwill, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or CGU) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately. Estimates of quantities of recoverable minerals, production levels, operating costs and capital requirements are sourced from out planning process, including the LOM plans, five-year plans, one-year budgets and CGU-specific studies. The determination of FVLCS for each CGU are considered to be Level 3 fair value measurements in both years, as they are derived from valuation techniques that include inputs that are not based on observable market data. The Group considers the inputs and the valuation approach to be consistent with the approach taken by market participants. (e) Investments and other financial assets (i) claSSification The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loons and receivables, • • • held-to-maturity investments, and • available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at the end of each reporting period. See note 8 for details about each type of financial asset. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are expected to be settled within 12 months, otherwise they are classified as non-current. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets. Loans and receivables are included in trade and other receivables and receivables in the Statement of Financial Position. Available-for-sale financial assets Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long-term. (ii) meaSUrement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value are recognised as follows: • • for ‘financial assets at fair value through profit or loss’ - in profit or loss within other income or other expenses for available-for-sale financial assets that are monetary securities denominated in a foreign currency - translation differences related to changes in the amortised cost of the security are recognised in profit or loss and other changes in the carrying amount are recognised in other comprehensive income • for other monetary and non-monetary securities classified as available for sale - in other comprehensive income. Annual Report | financial report 109 notes to the ConsolidAted finAnCiAl stAtements 26 Summary of significant accounting policies continued (e) Investments and other financial assets continued (ii) meaSUrement continUed Dividends on financial assets at fair value through profit or loss and available-for-sale equity instruments are recognised in profit or loss as part of revenue from continuing operations when the group’s right to receive payments is established. Interest income from financial assets at fair value through profit or loss is included in the net gains/(losses). Interest on available-for- sale securities calculated using the effective interest method is recognised in the income statement as part of revenue from continuing operations. (iii) impairment The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired. (f) Provision tor rehabilitation Rehabilitation costs include the dismantling and removal of mining plant, equipment and building structures, waste removal and rehabilitation of the site in accordance with the requirements of the mining permits. Such costs are determined using estimates of future costs, current legal requirements and technology. Rehabilitation costs are recognised in full at present value as a non-current liability. An equivalent amount is capitalised as part of the cost of the asset when an obligation arises to decommission or restore a site to a certain condition after abandonment as a result of bringing the assets to its present location. The capitalised cost is amortised over the life of the project and the provision is accreted periodically as the discounting of the liability unwinds. The unwinding of the discount is recorded as a finance cost. Any changes in the estimates for the costs or other assumptions against the cost of relevant assets are accounted for on a prospective basis. In determining the costs of site restoration there is uncertainty regarding the nature and extent of the restoration due to community expectations and future legislation. (g) Rounding of amounts The Company is of a kind referred to ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. (h) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Statement of Financial Position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. 110 diReCtoRs’ deClARAtion In the Directors’ opinion: (a) the financial statements and notes set out on pages 54 to 109 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the year ended on that date, and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and (c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 24 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 24. Note 26(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of Directors. Bill Beament Executive Chairman Perth, Western Australia 22 August 2018 indePendent AuditoR’s RePoRt to the membeRs Annual Report | independent aUditor’S report 111 Deloitte Touche Tohmatsu ABN 74 490 121 060 Brookfield Place, Tower 2 123 St Georges Terrace Perth, WA, 6000 Australia Phone: +61 8 9365 7000 www.deloitte.com.au Independent Auditor’s Report to the members of Northern Star Resources Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Northern Star Resources Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity, and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year then ended; 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 auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 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 for 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. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 112 indePendent AuditoR’s RePoRt to the membeRs Key Audit Matter Acquisition Accounting – South Kalgoorlie Operations How the scope of our audit responded to the Key Audit Matter Our procedures, performed in conjunction with our valuation experts, included but were not limited to: As disclosed in Note 13, effective 29 March 2018 the Group acquired the South Kalgoorlie Operations, for a purchase price of $78.3 million. Further details of the acquisition accounting, by material asset class, is disclosed in Note 13. Significant judgement is required by management in assessing the fair values of identifiable assets and liabilities including:       assumptions relating to forecast cash flows, including ore volumes and grades, processing costs, toll treating costs, gold price and foreign exchange rates; resource multiples applied, and resource conversion factors; assumptions relating to the manner in which rehabilitation will be undertaken; scope and quantum of costs, and timing of the rehabilitation activities; and calculation of discount rates applied to each valuation.     reviewing the purchase contract to understand the entities being acquired and the consideration payable for the acquisition; obtaining a copy of the external valuation report to critically assess the determination of the fair values of the assets and liabilities associated with the acquisition; assessing the independence, competence and objectivity of experts used by management; assessing the identification of assets and liabilities acquired, and the appropriateness of the methodologies and assumptions utilised by management and their experts in relation to the following:  Tolling benefit: challenging the forecast cash flows associated with the Tolling Benefit, including comparing processed ore volume to underlying mine plans, processing costs to historic actual costs, and toll treating costs to current actual costs.  Mineral interest: assessing key assumptions for reasonableness, such as gold price, foreign exchange rates, processing costs, and ore volumes.  Mineral Resources: assessing the reasonableness of resource multiples applied, by comparing them to recent transactions, and challenging the resource conversion factor.  Rehabilitation Provision: agreeing rehabilitation cost estimates to underlying support, which included reports from external experts.  evaluating discount rates used by assessing the cost of capital applied in each valuation by comparing them to market data and industry research. We also assessed the appropriateness of the disclosures included in Note 13 to the financial statements. Annual Report | independent aUditor’S report 113 indePendent AuditoR’s RePoRt to the membeRs Key Audit Matter Accounting for mine properties How the scope of our audit responded to the Key Audit Matter In respect of the allocation of mining costs our procedures included, but were not limited to: As at 30 June 2018 the carrying value of mine properties amounts to $212.8 million as disclosed in Note 9 (c). During the year the group incurred $123.2 million of capital expenditure related to mine properties and recognised related amortisation expenses of $112.5 million. The accounting for underground mining operations includes a number of significant estimates and judgements, including:   the allocation of mining costs between operating and capital expenditure; and determination of the units of production used to amortise mine properties. A key driver of the allocation of costs between operating and capital expenditure is the physical mining data associated with the different underground mining activities including the development of declines, lateral and vertical development, as well as capital non-sustaining costs.     obtaining an understanding of the key controls management has in place in relation to the capitalisation of underground mining expenditure and the production of physical underground mining data; testing the mining costs through agreeing to source data on a sample basis, or completion of substantive analytical procedures; assessing the appropriateness of the allocation of costs between operating and capital expenditure based on the nature of the underlying activity, and recalculating the allocation based on the underlying physical data; and testing on a sample basis the underlying capitalisation models for mathematical accuracy. In respect of the group’s unit of production amortisation calculations our procedures included, but were not limited to:    obtaining an understanding of the key controls management has in place in relation to the calculation of the unit of production amortisation rate; testing the mathematical accuracy of the rates applied; and agreeing the inputs to source documentation, including: - the allocation of contained ounces to the specific mine properties; the contained ounces to the applicable reserves statement; and the anticipated development expenditure to life of mine models, which were assessed for reasonableness compared to historical development expenditure for the respective operations. - - We also assessed the appropriateness of the disclosures included in Note 9 (c) to the financial statements. Rehabilitation provision Our procedures included, but were not limited to: As at 30 June 2018 a rehabilitation provision of $127.9 million has been recognised as disclosed in Note 9 (g). Significant judgement is exercised in the determination of the rehabilitation provision, including:  assumptions relating to the manner in which rehabilitation will be undertaken, scope and quantum of costs, and timing of the rehabilitation activities.         obtaining an understanding of the key controls management has in place to estimate the rehabilitation provision; agreeing rehabilitation cost estimates to underlying support, including reports from external experts; assessing the independence, competence and objectivity of experts used by management; confirming the closure and related rehabilitation dates are consistent with the latest estimates of life of mines; comparing the inflation and discount rates to available market information; and testing the mathematical accuracy of the rehabilitation provision. We also assessed the appropriateness of the disclosures included in Note 9 (g) and Note 26 (f) to the financial statements. 114 indePendent AuditoR’s RePoRt to the membeRs Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. 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. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:  Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.  Conclude on the appropriateness of the director’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Annual Report | independent aUditor’S report 115 indePendent AuditoR’s RePoRt to the membeRs  Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.  Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 39 to 50 of the Director’s Report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Northern Star Resources Limited, for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU David Newman Partner Chartered Accountants Perth, 22 August 2018 116 shAReholdeR infoRmAtion The Shareholder information set out below was applicable as at 14 August 2018. A. Distribution of equity securities Analysis of numbers of equity security holders by size of holding: holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over total Shares 2,400,045 12,068,795 10,256,661 41,100,269 547,507,960 613,333,730 Ordinary Shares % 0.39 1.97 1.67 6.70 89.27 100.00 No. holders 4,900 4,585 1,334 1,505 185 % 39.17 36.65 10.66 12.03 1.48 12,509 100.00 There were no holders of less than a marketable parcel of ordinary Shares. B. Equity security holders Twenty largest quoted equity security holders Name a/c HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Limited Citicorp Nominees Pty Limited National Nominees Limited BNP Paribas Nominees Pty Ltd Mr William James Beament BNP Paribas Noms Pty Ltd Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited National Nominees Limited Mr Hendrius Petrus Indrisie William James Beament AMP Life Limited HSBC Custody Nominees (Australia) Limited-GSCO ECA Stuart Peter Tonkin Pacific Custodians Pty Limited NST Employee Sub Register Mr John Gerard Farrell UBS Nominees Pty Ltd Rosiano Pty Ltd Mr Joseph Mario Cervelli & Mrs Deborah Beghilde Cervelli 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Ordinary Shares Number held % issued capital 289,952,710 104,827,349 50,513,846 15,023,250 8,510,747 7,691,585 4,413,610 4,232,482 4,125,942 2,992,194 2,011,628 1,952,003 1,905,934 1,602,893 1,302,655 1,273,356 1,254,128 997,409 930,950 850,213 47.27 17.09 8.24 2.45 1.39 1.25 0.72 0.69 0.67 0.49 0.33 0.32 0.31 0.26 0.21 0.21 0.20 0.16 0.15 0.14 total Balance of register Grant total 506,364,884 106,968,846 82.56 17.44 613,333,730 100.00 Annual Report | SHareHolder information 117 shAReholdeR infoRmAtion B. Equity security holders continued Restricted securities class Shares1 Shares2 Shares3 Shares Number 84,868 109,200 145,696 4,632,260 Latest date that voluntary escrow period ends 29 June 2019 26 June 2020 13 June 2021 Upon repayment in full of the limited recourse loan unquoted equity securities Performance rights issued under the Northern Star Long Term Incentive Plan Number holders 10,418,4204 66 Shares issued under the Employee Share Plan Rules No. 2 (approved in December 2011) on 29 June 2016 Shares issued under the Employee Share Plan Rules No. 3 (approved in June 2017) on 26 June 2017 Shares issued under the Employee Share Plan Rules No. 3 (approved in June 2017) on 30 July 2018 1 2 3 4 Number of unissued ordinary Shares under the performance rights. No person holds 20% or more of these securities. C. Substantial holders Substantial holders in the Company are set out below: Van Eck Associates Corporation BlackRock Group D. Voting rights Ordinary Shares Number 85,502,777 77,406,423 % 13.94% 12.62% The voting rights attaching to each class of equity securities are set out below: • Ordinary Shares: On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each Share shall have one vote. • Performance rights: No voting rights E. On-market buy-back There is no current on-market buy-back of the Company’s equity securities. 118 tenement sChedule Tenement interest Project & Location nSt Status Tenement interest Project & Location nSt Status E27/278 E27/438 E27/491 E27/520 E27/548 E27/579 E28/1746 E28/2483 E08/2499 E08/2659 E08/2755 (A) E08/2760 E47/3305 L08/103 L08/168 (A) P08/653 EL24177 EL25171 EL27590 EL29595 EL24174 EL24193 EL26270 EL26286 EL26498 EL26541 EL26635 EL29592 L16/57 L16/75 M16/548 P24/4602 P24/4629 P24/4630 P24/4688 P24/4760 P24/4761 P24/4762 P24/4763 P24/4807 P24/4814 P24/4815 P24/4889 P24/4890 P24/4891 P24/4894 P24/4895 P24/4898 P24/4899 P24/4907 P24/4964 P24/4965 P24/5022 P24/5121 P24/5122 P24/5123 P24/5124 P24/5241 (A) P24/5243 (A) P24/5248 (A) M24/319 M24/972 (A) P24/4409 P24/4565 P24/4566 P24/4603 P24/4637 P24/4681 20% 20% 20% 20% 20% 20% 20% 20% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Acra - Kalgoorlie Acra - Kalgoorlie Acra - Kalgoorlie Acra - Kalgoorlie Acra - Kalgoorlie Acra - Kalgoorlie Acra - Kalgoorlie Acra - Kalgoorlie Ashburton - Ashburton Ashburton - Ashburton Ashburton - Ashburton Ashburton - Ashburton Ashburton - Ashburton Ashburton - Ashburton Ashburton - Ashburton Ashburton - Ashburton Boulder Ridge - Tanami Boulder Ridge - Tanami Boulder Ridge - Tanami Boulder Ridge - Tanami Browns Range - Tanami Browns Range - Tanami Browns Range - Tanami Browns Range - Tanami Browns Range - Tanami Browns Range - Tanami Browns Range - Tanami Browns Range - Tanami Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carbine Zuleika - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Holder & Earning-In Holder & Earning-In Holder & Earning-In Holder & Earning-In Holder & Earning-In Holder & Earning-In Holder & Earning-In Holder & Earning-In Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder P24/4682 P24/4683 P24/4684 P24/4685 P24/4686 P24/4687 EL10355 EL10411 EL22229 EL22378 EL23342 EL9763 EL26925 EL26926 EL28474 EL8797 MLS119 MLS120 MLS121 MLS122 MLS123 MLS124 MLS125 MLS126 MLS127 MLS128 MLS129 MLS130 MLS131 MLS132 MLS133 MLS153 MLS167 MLS168 MLS180 E51/1391 E51/1837 E51/1838 100% 100% 100% 100% 100% 100% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 100% 100% 100% Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Carnage - Kalgoorlie Cave Hill - Tanami Cave Hill - Tanami Cave Hill - Tanami Cave Hill - Tanami Cave Hill - Tanami Cave Hill - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Central - Tanami Cheroona - East Murchison Cheroona - East Murchison Cheroona - East Murchison M15/1413 51% East Kundana JV - Kalgoorlie M15/993 51% East Kundana JV - Kalgoorlie M16/181 51% East Kundana JV - Kalgoorlie M16/182 51% East Kundana JV - Kalgoorlie M16/308 51% East Kundana JV - Kalgoorlie M16/309 51% East Kundana JV - Kalgoorlie M16/325 51% East Kundana JV - Kalgoorlie M16/326 51% East Kundana JV - Kalgoorlie M16/421 51% East Kundana JV - Kalgoorlie M16/428 51% East Kundana JV - Kalgoorlie M24/924 51% East Kundana JV - Kalgoorlie E08/1650 EL22061 EL9843 E08/1915 E08/2000 E08/2065 E08/2114 E47/1773 E47/2236 E52/2786 100% 25% 25% 65.19% 65.19% 65.19% 65.19% 65.19% 65.19% 65.19% Electric Dingo - Ashburton Farrands Hill - Tanami Farrands Hill - Tanami FMG JV - Ashburton FMG JV - Ashburton FMG JV - Ashburton FMG JV - Ashburton FMG JV - Ashburton FMG JV - Ashburton FMG JV - Ashburton Holder Holder Holder Holder Holder Holder Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Earning-in Holder & Farm-Out Holder & Farm-Out Holder & Farm-Out Holder & Production Joint Venture Holder & Production Joint Venture Holder & Production Joint Venture Holder & Production Joint Venture Holder & Production Joint Venture Holder & Production Joint Venture Holder & Production Joint Venture Holder & Production Joint Venture Holder & Production Joint Venture Holder & Production Joint Venture Holder & Production Joint Venture Holder Holder & Earning-in Holder & Earning-in Earning-In Earning-In Earning-In Earning-In Earning-In Earning-In Earning-In Annual Report | tenement ScHedUle 119 tenement sChedule Tenement interest Project & Location nSt Status Tenement interest Project & Location nSt Status EL23932 EL25009 EL27367 EL29593 ML22934 E53/1872 E53/1922 E53/1923 E53/1938 E53/1939 E53/1976 E53/1977 G53/20 L53/100 L53/102 L53/112 L53/113 L53/117 L53/136 L53/137 L53/138 L53/142 L53/143 L53/153 L53/169 L53/174 L53/52 L53/60 L53/68 L53/69 L53/70 L53/71 L53/72 L53/73 L53/75 L53/99 M53/155 M53/156 M53/182 M53/191 M53/192 M53/196 M53/197 M53/198 M53/199 M53/221 M53/226 M53/228 M53/229 M53/230 M53/235 M53/236 M53/237 M53/245 M53/246 M53/247 M53/248 M53/249 M53/250 M53/326 M53/347 M53/372 M53/412 M53/413 M53/414 M53/441 M53/446 M53/451 100% 100% 100% 100% 25% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Gardiner - Tanami Gardiner - Tanami Gardiner - Tanami Gardiner - Tanami Groundrush - Tanami Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Holder Holder Holder Holder Holder & Earning-in Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder M53/452 M53/461 M53/477 M53/478 M53/479 M53/480 M53/492 M53/535 M53/536 M53/537 M53/538 M53/539 M53/540 M53/541 M53/552 M53/588 M53/589 M53/611 M53/707 M53/708 M53/711 M53/712 M53/836 M53/874 M53/895 M53/911 M53/929 M53/935 M53/940 M53/966 P53/1672 M27/181 E24/212 (A) E24/213 (A) E27/457 E27/542 E27/557 E27/587 E27/598 (A) E27/599 (A) E27/589 E31/1159 L26/198 L27/49 L27/50 L27/51 L27/60 L27/61 L27/62 L27/83 L27/87 M24/640 M27/103 M27/122 M27/123 M27/127 M27/128 M27/133 M27/157 M27/159 M27/164 M27/175 M27/18 M27/182 M27/191 M27/197 M27/198 M27/202 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 62.97% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Jundee - East Murchison Kalbara JV - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder & Earning-In Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder 120 tenement sChedule Tenement interest Project & Location nSt Status Tenement interest Project & Location nSt Status M27/219 M27/22 M27/228 M27/23 M27/232 M27/245 M27/272 M27/287 M27/37 M27/378 M27/406 M27/420 M27/438 M27/49 M27/496 M27/53 M27/57 M27/63 M27/92 P24/4498 P24/4499 P24/4818 P24/4819 P24/4820 P24/4995 P26/4064 P26/4065 P26/4127 P26/4129 P26/4132 P26/4156 P27/1878 P27/1880 P27/1881 P27/2025 P27/2026 P27/2099 P27/2100 P27/2101 P27/2102 P27/2222 P27/2223 P27/2302 P27/2303 P27/2375 (A) P27/2379 (A) P27/2380 (A) P27/2381 (A) P27/2382 (A) M27/114 M27/196 M27/41 M27/414 M27/415 M27/47 M27/493 M27/494 M27/498 (A) M27/499 (A) M27/495 M27/59 M27/72 M27/73 P27/1826 P27/1827 P27/1828 P27/1829 E24/151 100% 100% 100% 100% 100% 40% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 83.92% 80% Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna - Kalgoorlie Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-In Kanowna West JV - Kalgoorlie Holder & Earning-in Kanowna West JV - Kalgoorlie Holder & Earning-in Kanowna West JV - Kalgoorlie Holder & Earning-in Kanowna West JV - Kalgoorlie Holder & Earning-in KRGP - Kalgoorlie Holder E27/343 M27/497 (A) P27/1743 E24/152 E24/153 E24/206 (A) E26/140 E26/194 E26/198 E26/199 E26/200 L16/104 L16/105 L16/106 L16/28 L16/38 L16/39 L16/69 L24/205 L24/206 M15/1351 M15/669 M16/157 M16/260 M16/366 M16/367 M16/408 M16/436 M16/438 M16/440 M16/441 M16/72 M16/73 M16/74 M16/75 M16/87 M16/97 M24/142 M24/435 M24/606 M24/626 M26/680 M26/681 M26/687 M26/688 P16/2575 P16/3032 P24/4969 P24/4970 P24/4971 P24/4972 P24/5242 (A) M08/191 M08/192 M08/193 E52/1941 E52/3024 E52/3025 E52/3026 M52/639 M52/640 M52/734 M52/735 E08/1649 E08/1744 E08/1745 E08/1845 E08/2555 80% 80% 80% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 20% 20% 20% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% KRGP - Kalgoorlie KRGP - Kalgoorlie KRGP - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Kundana - Kalgoorlie Mt Clement - Ashburton Mt Clement - Ashburton Mt Clement - Ashburton Mt Olympus - Ashburton Mt Olympus - Ashburton Mt Olympus - Ashburton Mt Olympus - Ashburton Mt Olympus - Ashburton Mt Olympus - Ashburton Mt Olympus - Ashburton Mt Olympus - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Free-Carried Interest Free-Carried Interest Free-Carried Interest Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Annual Report | tenement ScHedUle 121 tenement sChedule Tenement interest Project & Location nSt Status Tenement interest Project & Location nSt Status E08/2556 E08/2558 E08/2559 E08/2560 E08/2655 E08/2791 E47/1553 E47/3396 L08/113 L08/12 L08/13 L08/14 L08/148 L08/15 L08/81 L08/91 L08/92 M08/196 M08/222 M08/515 M08/99 P47/1637 E52/2509 E15/1211 E15/985 E25/268 E25/543 E26/122 E26/139 E26/206 E26/213 (A) L15/221 L15/356 L25/48 L26/122 L26/123 L26/233 L26/260 L26/273 L26/276 M15/1204 M15/1272 M15/1361 M15/1847 (A) M15/1833 M15/1834 (A) M15/1842 (A) M15/1843 (A) M15/26 M15/456 M15/469 M15/518 M15/533 M15/637 M15/652 M15/663 M15/717 M15/724 M15/726 M15/740 M15/753 M15/937 M15/938 M25/357 M26/118 M26/132 M26/143 M26/204 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Paulsens - Ashburton Peak Hill South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder & Farm-Out Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder M26/224 M26/245 M26/328 M26/41 M26/433 M26/452 M26/458 M26/482 M26/534 M26/567 M26/782 P15/4848 P15/4849 P15/4979 P15/4980 P15/4981 P15/4982 P15/4983 P15/4984 P15/5049 P15/5050 P15/5235 P15/5910 P26/4019 EL28282 EL23933 (A) EL23935 (A) EL24179 (A) EL24941 (A) EL24947 (A) EL25003 (A) EL25004 (A) EL25157 (A) EL25158 (A) EL25159 (A) EL25160 (A) EL25172 (A) EL28613 (A) EL28868 (A) EL29619 (A) EL29621 (A) EL31796 (A) EL31997 (A) EL31998 (A) EL31999 (A) EL30132 (A) M16/213 M16/214 M16/218 M16/310 E80/1481 E80/1483 E80/1737 E80/3388 E80/3389 E80/3665 E80/5039 L80/45 L80/46 L80/51 M80/559 M80/560 M80/561 M80/563 P80/1840 P80/1841 South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie South Kalgoorlie Suplejack - Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami Tanami 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 25% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 25% 100% 100% 100% 100% 100% 100% 100% 100% 75.50% West Kundana JV - Kalgoorlie 75.50% West Kundana JV - Kalgoorlie 75.50% West Kundana JV - Kalgoorlie 75.50% West Kundana JV - Kalgoorlie Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Western Tanami 100% Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder & Earning-in Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder & Earning-in Holder Holder Holder Holder Holder Holder Holder Holder Holder & Earning-In Holder & Earning-In Holder & Earning-In Holder & Earning-In Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder Holder 122 GLOSSARY Au Auditor Board CEO Company Director EPS ESR FY2017 FY2018 FY2019 gpt Group The chemical symbol for gold The auditor of the Company duly appointed under the Corporations Act 2001 Board of Directors Chief Executive Officer Northern Star Resources Limited ABN 43 092 832 892 A director of the Company duly appointed under the Corporations Act 2001 Earnings per Share Environment & Social Responsibility Financial year ending 30 June 2017 Financial year ending 30 June 2018 Financial year ending 30 June 2019 Grams per tonne Northern Star Resources Limited and all of its wholly owned subsidiaries Indicated Mineral Resource As defined in the JORC Code Inferred Mineral Resource As defined in the JORC Code JORC Code Australasian Code for Reporting of Exploration Results, Minerals Resources and Ore Reserves 2012 Edition, prepared by the Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia K Thousand Key Management Personnel or KMP Defined in the Australian Accounting Standards koz LTIFR M or m Thousand ounces Lost Time Injury Frequency Rate; calculated based on the number of lost time injuries occurring in a workplace per 1 million hours worked Million Measured Mineral Resource As defined in the JORC Code Mineral Resource As defined in the JORC Code Northern Star Northern Star Resources Limited ABN 43 092 832 892 NSMS NST Officer Northern Star Mining Services Pty Ltd, a wholly owned subsidiary of the Company, dedicated to underground mining operations Northern Star Resources Limited ABN 43 092 832 892 An officer of the Company defined under the Corporations Act 2001 Ore Reserve As defined in the JORC Code Probable Ore Reserve As defined in the JORC Code Proved Ore Reserve As defined in the JORC Code Quarter or Q Share Shareholder TRIFR $ Financial year quarter, commencing either 1 July, 1 October, I January or 1 April Fully paid ordinary share in Northern Star Resources Limited A shareholder of Northern Star Resources Limited Total recordable injury frequency rate Means Australian dollars, unless the context says otherwise. All A$ to $US currency conversions used in this Annual Report are at $0.74. CORPORATE DIRECTORY dIRECTORS Bill Beament John Fitzgerald Christopher Rowe Peter O’Connor Shirley In’tVeld COMPANY SECRETARY Hilary Macdonald (Executive Chairman) (Lead Independent Director) (Non-Executive Director) (Non-Executive Director) (Non-Executive Director) REGISTEREd OFFICE & PRINCIPAL PLACE OF BUSINESS Level 1, 388 Hay Street Subiaco WA 6008 Australia Telephone: +61 8 6188 2100 Facsimile: +61 8 6188 2111 Website: Email: www.nsrltd.com info@nsrltd.com SHARE REGISTRY Link Market Services Limited Level 12, QV1 Building 250 St Georges Terrace Perth WA 6000 Australia Telephone: +61 1300 554 474 Website: www.linkmarketservices.com.au SECURITIES EXCHANGE ASX Limited Level 40, Central Park 152-158 St Georges Terrace Perth WA 6000 Australia ASX COdE: NST AUdITORS Deloitte Touche Tohmastu Brookfield Place, Tower 2 123 St Georges Terrace Perth WA 6000 Australia Raising the Aboriginal flag in Centennial Park Kalgoorlie, as part of National Reconciliation Week, 2018. BACK COVER: Members of the Jundee Emergency Response Team, from left to right: Audie Trutwein (ERT Captain), Sandra Wagner (ERT medic) and Leon Mussel (ERT Co-ordinator). The Jundee Emergency Response Team won the Mines Emergency Response Competition (MERC) in November 2017. www.nsrltd.com 

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