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OU R
VIS ION
is to continue to build a safe, quality
mining and exploration company focused
OU R
MIS S ION
is to generate accretive earnings
value for our Shareholders through
on creating value for Shareholders.
operational e(cid:909)ectiveness, gro(cid:90)th
opportunities and exploration with a
prime focus on success and meeting
Shareholder expectations.
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.
3
TABLE OF
CONTENTS
Key Highlights
Chairman’s Address
Safety
People & Culture
Sustainability
Operations Review
Resources and Reserves
Risk Management
Directors’ Report
Remuneration Report
Financial Report
Shareholder Information
Tenement Schedule
Glossary
Corporate Directory
4
7
8
10
12
14
22
26
30
42
74
134
136
156
157
SCOPE OF THIS REPORT
The Northern Star 2019 Annual Report presents the operating
and financial results for the period 1 July 2018 to 30 June
2019. Except where otherwise stated in the Company’s
Corporate Governance Statement, the Company has followed
the ASX Corporate Governance Council’s Principles and
Recommendations (fourth edition) during FY19.
NORTHERN STAR RESOURCES LIMITED
ABN: 43 092 832 892
4
2019 ANNUAL REPORT | COMPANY H IGH LIGH TS
5
SAFETY
ENVIRONMENT
& SOCIAL
FINANCIAL
PERFORMANCE
OPERATIONS
& ASSETS
We strive for safety
excellence across the business
Our Sustainability Vision
is core to our strategy
Delivering the highest
rates of financial returns
Our number one STARR Core Value is
Safety
64% below sector
average TRIFR
3.3 (sector 9.1)
45% reduction
in LTIFR
to 0.5 (sector 1.6)
2nd place overall
at MERC
Western Australian Mining Emergency
Response Competition – Surface in 2019
A$1.34B
Economic Value
Add in FY19
NST has added over A$5.25B into the
economies in which it operates since FY11
SDG Alignment
NST aligned to the
United Nations
Sustainable
Development Goals
Materially adverse
environmental incidents
0
Regulator fines
for environmental
incidents or non-
compliance
A$0
FY19 COMPANY
HIGHLIGHTS
62% Total
Shareholder
Return in FY19
Outperforming the ASX Accumulation Index
by 51% in FY19
50% increase
in Final Dividend
to A7.5¢ per Share
FY19 Dividends declared of A13.5¢ per Share
8% increase
in EBITDA
to A$479M in FY19
Group
35% increase
in Reserves
16% Reserve grade
up from FY18
31% increase in
Resources
Pogo
Maiden Reserve of 1.5Moz
A$50M capital investment
in FY19
Jundee
5% Record Production
under NST ownership
of 299koz Au sold in FY19
300% increase in Reserves
under NST ownership
to 1.6Moz
Kalgoorlie
29% Record Production
under NST ownership
of 340koz Au sold in FY19
506% increase in Reserves
under NST ownership
to 2.2Moz
6
2019 ANNUAL REPORT | CHAIRMAN'S ADDRESS
7
Dear Shareholder
As I write to you, I have just returned from the Diggers & Dealers
mining forum in Kalgoorlie, where Northern Star won the coveted
Dealer of the Year Award for our acquisition of the Pogo gold
mine in (cid:36)laska(cid:17) (cid:55)he honour re(cid:565)ected the a(cid:69)ilit(cid:92) of (cid:92)our team to
identify a great opportunity, the world-class nature of the Pogo
mine and its ability to generate superior returns for Northern Star
Shareholders.
Of course, gold production
is just a link in the chain
for Northern Star. As we
have always maintained,
the ultimate objective is to
ma(cid:91)imise financial returns
while adhering to our ESG
policies.
The Pogo acquisition speaks volumes about Northern Star, the
Company’s commercial strategy, its approach to investing in
assets and its commitment to the highest environmental, social
and governance (ESG) standards. At every level, Pogo meets or
exceeds our requirements and illustrates how the right merger
and ac(cid:84)uisition activit(cid:92) can create significant value for investors
and other stakeholders alike.
Pogo represented a textbook opportunity to combine Northern
Star’s highly regarded operational skills with a Tier-1 gold deposit
in a Tier-1 location. It is the perfect recipe.
I am delighted to report that the widespread reforms we are
introducing at the mine are already generating strong results, as
evidenced by rising productivity, increasing production and falling
costs. There is unquestionably more to be done on these fronts.
But we are only nine months into what we said at the outset
would be an 18-month process.
The world-class nature of Pogo is demonstrated by the huge
exploration success we have enjoyed in such a short time. With
just six months of drilling, we have generated a maiden JORC
Reserve of 1.5 million ounces. And the JORC Resource has been
increased 43 per cent to 5.95Moz at the highly impressive grade
of 9.6gpt.
(cid:58)e(cid:519)ve al(cid:90)a(cid:92)s defined a (cid:55)ier(cid:16)(cid:20) asset as one (cid:90)hich is capa(cid:69)le of
producing ~300,000oz a year for 10 years. The operational results
to date, the (cid:69)enefits (cid:90)e are seeing from our change program and
the significant e(cid:91)ploration success alread(cid:92) (cid:565)o(cid:90)ing through sho(cid:90)
we are well on track to establishing that platform at Pogo.
Pogo is forecast to produce 200,000oz-240,000oz in the 12
months to 30 June, 2020. Importantly, production in the second
half of the year is forecast to be in the range of 120,000oz-
140,000oz, further demonstrating the highly favourable trends
being seen as we implement our operating model.
(cid:51)ogo is still a (cid:90)ork in progress(cid:17) (cid:37)ut the (cid:69)enefits for our
Shareholders were clear from the time of the acquisition, as
shown by the fact that we raised A$175 million at A$6.70 a share
in a placement to help fund the acquisition. In late July 2019,
Northern Star shares traded at a record closing price of A$13.97.
In times of a strong gold price, much
is often made of rising production and
total revenues. But all too often in the gold
industr(cid:92), increases in these figures don(cid:519)t lead to
increases in cash in the bank. Northern Star’s strong
performance in this regard is highlighted by the fact that
our cash and investments rose by A$73 million to A$361
million in the recent June quarter alone. And this increase
came despite paying A$38 million in dividends and A$22 million
in tax.
This demonstrates the exceptional cash-generating capacity
of our business. It also demonstrates Northern Star’s overall
financial strength, (cid:90)ith no de(cid:69)t, consistent dividends e(cid:84)ual to (cid:25)
per cent of our annual revenue, the ability to invest in organic
gro(cid:90)th and outstanding free cash(cid:565)o(cid:90) generation(cid:17)
(cid:55)he com(cid:69)ination of this strong financial position and our
commitment to operating only in Tier-1 locations enables
Northern Star to comply with some of the most ambitious ESG
requirements in our industry. There is no doubt that Tier-1
locations provide a far preferable environment in which to meet
our (cid:40)(cid:54)(cid:42) filters compared (cid:90)ith so man(cid:92) other parts of the (cid:90)orld(cid:17)
In conclusion, it has been another stellar year for your Company.
We acquired our third major operating asset and we have made
huge strides in applying our expertise and systems to help unlock
its full value. Our Australian operations are at the top of their
game and our balance sheet is in outstanding shape.
So much of the credit for these achievements must go to our
highl(cid:92) talented and committed management team, sta(cid:909) and
contractors. This is ultimately a people business. And our people
are second to none. On behalf of the Board, a huge thank you for
your hard work over the past year.
I would also like to thank our Shareholders for the enormous
support we have received, particularly in relation to Pogo. It is very
comforting to kno(cid:90) that our (cid:54)hareholders are firml(cid:92) (cid:69)ehind the
Company when we are making an investment of that scale and
nature.
I look forward to reporting to you throughout what I expect will be
another highly successful year for Northern Star.
While we are delighted with the progress at Pogo, we are in the
enviable position of being able to invest in our new asset knowing
that our Australian mines are performing extremely well, especially
during a time of record-high Australian gold prices.
Yours faithfully
The Jundee and Kalgoorlie operations sold a combined 639,243oz
at all-in sustaining cost of A$1,167/oz (US$817/oz) in the past
financial (cid:92)ear, achieving the top end of the (cid:25)(cid:19)(cid:19),(cid:19)(cid:19)(cid:19)o(cid:93)(cid:16)(cid:25)(cid:23)(cid:19),(cid:19)(cid:19)(cid:19)o(cid:93)
guidance range. They are forecast to produce 600,000oz-
660,000oz in the year to June 30, 2020.
BILL BEAMENT
Executive Chairman
26 August 2019
“This is ultimately
a people business.
And our people are
second to none.”
8
Safety
Safety Measures
Lead Indicators are a positive initiative to measure and provide focus
on future safety performances across the business and improve the
safety culture amongst our workers.
At Northern Star we have shifted our focus by using Lead Indicators to
drive continuous improvement. A key performance indicator driven by
these (cid:47)ead Indicators is the significant reduction in in(cid:77)ur(cid:92) statistics(cid:17)
(cid:43)(cid:68)(cid:93)(cid:68)r(cid:71) (cid:918)(cid:71)ent(cid:76)fi(cid:70)(cid:68)t(cid:76)(cid:82)n (cid:68)n(cid:71) (cid:48)(cid:68)n(cid:68)(cid:74)e(cid:80)ent - key to identifying hazards
and putting e(cid:909)ective controls in place to reduce the likelihood of harm
to people, the environment and property. Personnel at all levels have
an e(cid:91)pectation to engage in continuous ha(cid:93)ard identification and
management.
Task Observations - a formal process where workers are observed
completing a specific task to ensure all aspects are performed in the
correct manner. Task Observations are integral and allow us to detect
at risk acts, procedures, job hazard analysis and standards before they
result in an incident occurring, as well as recognise safe acts made by
workers.
Active Field Leadership - allows managers and supervisors to assess
and measure the e(cid:909)ectiveness of implemented ha(cid:93)ard controls in the
field (cid:90)hilst providing guidance and leadership(cid:17)
Inspections - a formal process allowing us to identify hazards in the
(cid:90)orkplace and measure ho(cid:90) e(cid:909)ectivel(cid:92) ha(cid:93)ards are (cid:69)eing managed in
continuously changing conditions. Inspections are vital ensuring both
legislative and Company requirements are met.
CHART 1 LOST TIME INJURY FREQUENCY RATE
3
2
1
0
FY17
FY18
FY19
LTIFR Sector
UG Metalliferous
LTIFR NST
CHART 2 TOTAL RECORDABLE INJURY FREQUENCY RATE
15
10
5
0
FY17
FY18
FY19
TRIFR Sector
UG Metalliferous
TRIFR NST
2019 ANNUAL REPORT | SAFETY
9
Emergency Response and Crisis Management
Northern Star is committed to developing the capabilities of our
emergency response team across our operations. In the last 12
months we have worked tirelessly to build an internal structure to
support our (cid:38)ertificate III in (cid:48)ine (cid:40)mergenc(cid:92) (cid:53)esponse and (cid:53)escue in
Australia.
(cid:55)he training o(cid:909)ers a holistic vie(cid:90) of all aspects of emergenc(cid:92) rescue
from fighting (cid:90)ildfire to road crash rescue, the a(cid:69)ilit(cid:92) to search and
rescue underground, respond to aviation incidents and provide
emergenc(cid:92) medical first response(cid:17)
We strive for excellence and have participated in several mines rescue
events, committing to developing the emergency response skills
and leadership capabilities within our team. We attended the Mining
Emergency Response Competition (MERC) – Surface, in Western
Australia this year (as pictured), and achieved overall ranking placed
second.
This has been a great achievement for the team but also an
acknowledgment that we are developing team capabilities to ensure
we are prepared to respond to any incident. The surface and
underground competitions always test our ability to work as a unit, the
scenarios are very realistic and highlight most emergency situations
that could potentially occur.
To support our emergency services, it has been our goal to establish
strong communication channels between sites and management to
ensure we have a supportive and positive relationship well before a
critical incident. Our leaders have participated in world-class training
on crisis and emergency management. From business as usual to
emergency response, emergency management, strategic planning to
crisis management, we have developed strong leadership on sites to
enable resilience and understanding of impacts and requirements in
all roles across operations.
Despite having operations across two continents our preparedness
empo(cid:90)ers us to manage our risks (cid:90)ith kno(cid:90)ledge and confidence,
knowing that we can support our employees at any site.
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.
STARR
It’s what we stand for.
Training
(cid:55)as(cid:78) (cid:54)(cid:83)ecific (cid:55)raining
(cid:55)ask specific training across the (cid:69)usiness has (cid:69)een mapped to the
relevant National Standard in Australia, enabling employees to cross–
pollinate across our sites, gaining experience and knowledge with
minimal disruption to our business operations.
Interactive computer-based training programs have been designed
specificall(cid:92) for plant operators and supervisors(cid:17) (cid:55)he material is
process plant specific and covers the characteristics of all unit
operations, including safety and procedural. This includes critical
process variables, control loops and interlocks, and alarm response
requirements. The interactive program is available through eLearning.
In the past year, employees have attained a total of 13,660 task-based
competencies. These competencies were either newly achieved or
refreshed.
Incident Investigation
“By focusing on controls
Highly specialised, tailor-made incident investigation training
continued across the business to improve and upskill the workforce.
SAFETY SNAPSHOT
13,660
task-based competencies
attained by workers
7%
significant reduction
in injury statistics to 3.3
64% below industry average of 9.1
1,337
employees trained
in Northern Star’s key safety
measures
of elimination, substitution
and engineering, Northern
Star will continue to
lead the industry on
underground safety
performance.”
– Melissa Collins
Principal - Health & Safety
Northern Star focused on incident investigation training for
supervisors, to improve the quality of the investigations and to
develop actions that can prevent recurrence of similar incidents. This
can lead to improved safety, reduced damage and better productivity.
6.3% of our employees were trained across 5 sites and 2 continents
during FY19.
Internal Auditor Training
Internal auditor training was introduced to improve auditing skills
in relation to safety, across the business. Our internal auditors can
no(cid:90) perform an e(cid:909)ective, value(cid:16)adding audit against the (cid:38)ompan(cid:92)(cid:519)s
standards and processes in relation to safety.
10
2019 ANNUAL REPORT | PEOPL E & CULTUR E
11
People
& Culture
Culture
In (cid:41)e(cid:69)ruar(cid:92) (cid:21)(cid:19)(cid:20)(cid:28) (cid:90)e conducted our first engagement and culture
survey, followed by direct employee feedback sessions across all sites.
As part of the recommendations and areas of focus, an Employee
Experience position was formed to ensure consistent, aligned
experiences of stakeholders across all Northern Star operations.
Underpinned by our STARR Core Values, the culture program is
focused on achieving a ‘One Team’ approach.
People Performance
Northern Star’s expansion into North America has only strengthened
our belief that our people, values and culture are at the heart of
our success. The appointment of an Executive Manager – Capability
(cid:9) (cid:38)ulture further re(cid:565)ected this commitment (cid:90)ithin the (cid:69)usiness
and resulted in a number of key developments. This role allows a
streamlined focus on organisational culture, attraction, retention,
development, talent identification, mental health and (cid:90)ell(cid:69)eing(cid:17)
(cid:36)fter a significant (cid:92)ear of gro(cid:90)th, as at (cid:22)(cid:19) (cid:45)une (cid:21)(cid:19)(cid:20)(cid:28) (cid:49)orthern (cid:54)tar
employed 1,743 people across all sites. This includes an increase of
6% in graduates and 68% in apprentices.
Mental Health & Wellness
FY19 saw the launch of Mindsight, our
purpose designed mental health and
wellness program. Mental health is one
of the most significant issues impacting
society and the communities in which
we live. This has been highlighted by
the impact of FIFO Work Practices
Mental Health Inquiry undertaken by
the Western Australian Government.
At the core of Mindsight, Northern Star is setting a target for 20% of
our workforce to be accredited in Mental Health First Aid by 2020 to
provide critical support, understanding and referral to colleagues,
families and community members. Three months into the launch of
the program at 30 June 2019, we have trained 149 employees (8.5%
of our workforce) with strong demand across all sites to participate
in the training. Regular wellness tips, TelePsych assessments, our
Employee Assistance Program and manager training form part of
Mindsight.
Leadership Development
& Talent ID Program
Northern Star launched a pilot Talent ID program with 120 employees.
Psychometric assessments incorporating personality, key drivers,
critical reasoning, and other technical and experience factors were
combined to generate personalised development plans – fast
tracking career growth and enabling succession mapping. This has
been enhanced through an additional 5 tier leadership development
program inclusive of agile decision making, people management,
strategic thinking, and project and resource management.
ALIGNING FOR GROWTH
PERFORMANCE
Superior performance
enables growth
G
R
O
W
T
H
STRATEGY
Developing and execution
of a strategy delivers growth
CULTURE
Preserving culture protects
the growth outcomes
CORE VALUES
Our Core Values are the
foundations of our growth
It matters and starts with you.
Together we can.
The responsibility lies with you.
To get it you must give it.
We deliver on our promises.
PEOPLE & CULTURE SNAPSHOT
16.4%
Female
employment participation
160
Mental Health
First Aiders trained
and accredited as at the
Report date
68%
increase in
Apprentices
>80%
Employees are
shareholders
HUMAN CAPITAL - DEVELOPING CAPABILITY FOR GROWTH
ATTRACT
Global Company
Strong Growth
Tier-1 Operations
Job Security
Underground Specialists
E
M
P
L
O
Y
E
E
W
E
L
L
B
E
I
N
G
RETAIN
Work/life balance
High Performance Culture
Career Advancement
Incentive Plans (STI and LTIs)
Over 80% of employees are
Shareholders
DEVELOP
High Potential Talent Screening
Fast track development
Bespoke Leadership Programs
Coaching and Mentoring Framework
Cross-site exchange
Our people, values
and culture are at the
heart of our success.
12
2019 ANNUAL REPORT | SUSTAINABI LITY
13
Sustainability
Our Sustainability Vision is core to our strategy
and integrated across our business.
We consider good governance united with social and environmental
responsibility to be a key enabler of sustainable growth, and by
operating our business in this manner, we can optimise:
• Business growth and performance
• Management of environmental impacts
• Identification of stakeholder shared value opportunities
• Management of social impacts
In early 2019, we took the step of announcing our support for the
United Nations Sustainable Development Goals (UN SDGs). The UN
SDGs present a powerful platform for businesses to help overcome
some of the most significant economic, social and environmental
challenges faced in recent history. We will be reporting on our
alignment and contribution to the UN SDGs in our forthcoming
Sustainability Report covering calendar year 2019, to be released in
early 2020.
Our Sustaibability Reports can be accessed at www.nsrltd.com/
investor-media/reports/annual-reports/.
FIGURE 1 UNITED NATIONS SUSTAINABLE DEVELOPMENT
GOALS
“Sustainability to Northern
Star is 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.”
– Dr Guy Singleton
Social Responsibility & External
Relations Manager
SUSTAINABILITY SNAPSHOT
View our most recent Sustainability Report
Visit www.nsrltd.com/sustainabilityreport2018
2019
First stand-alone
ESG Investor Roadshow
United Nations SDGs
aligned reporting
2018
First disclosure
of climate related risk
OUR
SUSTAINABILITY
JOURNEY
2010
Purchase of the Paulsens
gold mine from Intrepid.
2017
Release of the Company’s
Inaugural Sustainability
Report, highlighting key
ESG performance.
2017
Alignment of reporting
structures for key
ESG functions (Safety,
Governance and
Sustainability) to either
CEO or Executive
Chairman.
2019
Release of the Company’s
Sustainability Report
independent of the
Annual Financial Report.
Board level ESG&S
Committee formed.
2019 + BEYOND
Disclosure of progress
against the SDGs.
Adoption of the TCFD
reporting recommendations.
2003
IPO, East Kimberley
focused exploration
Company targeting nickel
and gold.
2014
Purchase of the Kanowna
Belle/Kundana & Jundee
mines from Barrick &
Newmont respectively.
2017
Inaugural participation
in the Dow Jones/
RobecoSAM Sustainability
Survey.
2018
Purchase of the Pogo
mine in Alaska from
Sumitomo.
First disclosure of climate
related risk.
2019
Announced alignment
with the United Nations
Sustainable Development
Goals.
First ESG Investor
Roadshow.
Modern Slavery
Statement Released.
14
15
OPERATIONS
REVIEW
16
2019 ANNUAL REPORT | OPERATIONS REVIEW | OPERATIONS
17
Operations
Overview
Northern Star is an ASX 100 gold production and exploration
company with three Tier-1 assets located in Tier-1 locations in highly
prospective and low sovereign risk regions of Australia and North
America. Northern Star has a Mineral Resource base of 20.8 million
ounces, and Ore Reserves of 5.4 million ounces, including a maiden
Reserve at Pogo of 1.5Moz1.
As the second largest Australian gold producer, Northern Star
continues to deliver on its strategic objective of being a safe, quality
gold company that delivers outstanding value to its Shareholders.
During FY19, the Company sold 840,580 ounces of gold from its West
Australian and Alaskan operations.
Northern Star has a continued focus on organic growth of Resources
and Reserves through highly successful exploration programs and
by thoroughly appraising our existing mines to significantly extend
their operating lives. The Company continues to advance exploration
activities at Pogo, Jundee, Kalgoorlie and Tanami - see pages 20 and
21 of this Report for further details. In parallel, Northern Star is well
positioned to continue to grow Resources and Reserves, production
and free cashflow through investment in and acquisition of Tier-1
assets in Tier-1 jurisdictions.
1 As at 30 June 2019 - see ASX release of 1 August 2019.
“The Northern Star
business model
delivers significant
Shareholder returns -
best in class returns.”
– Luke Creagh
Chief Operating Officer
TABLE 1 MINE OPERATIONS REVIEW
Measure
Jundee
Total Material Mined
Total Material Milled
Gold Grade
Gold Recovery
Gold Produced
Gold Sold
Revenue
Cost of Sales
Depreciation & Amortisation
EBITDA
tonnes
tonnes
grams/tonne
%
ounce
ounce
A$000's
A$000's
A$000's
A$000's
All in Sustaining Cost
A$/ounce sold
2,092,558
2,207,099
4.6
90%
295,053
299,236
527,863
309,119
55,696
274,440
981
Kalgoorlie
Operations
2,983,567
2,993,777
3.8
91%
334,527
340,007
620,245
513,032
141,939
249,149
1,330
Pogo^
Total*^
783,505
796,318
8.1
89%
183,555
201,337
253,057
279,333
47,449
18,002
1,705
5,859,630
5,997,195
4.7
90%
813,134
840,580
1,401,165
1,101,484
245,084
541,591
1,296
FY19 Operations
Northern Star operational performance for FY19 was delivered by
our Australian assets, the Jundee and Kalgoorlie Operations; and our
North American asset, the Pogo Operation located in Alaska, USA.
Ownership of Pogo transferred to Northern Star on 28 September
2018, however financial benefit from the operation was effective from
1 July 2018. Our two development assets, the Tanami and Paulsens
projects, continued with exploration activity throughout the year.
During FY19, our three producing assets combined to sell a record
840,580koz at an AISC of A$1,296/oz, with our Australian assets
achieving the top end of FY19 guidance with 639,243oz sold at an
AISC of A$1,167/oz. Over the year, 6 million tonnes were milled at an
average head grade of 4.7gpt Au for 813,133 ounces Au recovered.
Unprocessed ore stocks available for mill feed at the end of FY19
contained 84,857 ounces Au. Gold in circuit at the end of FY19 totalled
21,753 ounces. These items are reflected in the accounts as ore
stockpile and gold in circuit at cost, respectively.
Jundee Operations produced and sold record ounces under Northern
Star ownership at 295,053oz and 299,236oz respectively. Production
was primarily from underground ore sources and was supported
by the commencement of open pit mining at Ramone in the June
quarter. It was a standout year of performance at Jundee with no Lost
Time Injuries (LTIs), record underground tonnes mined (2.1Mt), record
stope tonnes mined (1.5Mt) and record tonnes milled (2.2Mt).
Kalgoorlie Operations continued its strong performance with
FY19 achieving record production at the top end of guidance with
340,007oz sold at AISC of A$1,330oz. Production was delivered by
the underground operations at Kanowna Belle, Kundana, EKJV and
SKO; underpinned by outstanding infrastructure including processing
capacity of 3.2Mtpa with two fully utilised process plants Kanowna
Belle (2.0Mtpa) and Jubilee (1.2Mtpa).
Since acquisition, Pogo has been transitioning to the Northern Star
business model and results in FY19 reflected strong operational gains
at all levels. Key changes over this period included a new development
fleet for introduction of jumbo bolt and meshing techniques,
transition to longhole stoping (LHS) methodology and increased
diamond drilling to 8 underground drills. The implementation of the
Northern Star business model continues in FY20, with Pogo on track
to further improve productivity metrics to demonstrate a +1Mtpa
production rate.
OPERATIONS SNAPSHOT
840,580koz
record sold
from 3 tier-1
assets in FY19
A$95M
investment in
growth capital
in FY19
* Northern Star completed the Pogo acquisition on 28 September 2018 but received financial benefit from 1 July 2018. All operational physical metrics presented are inclusive of
September 18 quarter results of Pogo operations (i.e. Total Material Mine, Total Material Milled, Gold Grade, Gold Recovery, Gold Produced, Gold Sold and AISC/oz).
^ Financial performance metrics presented above (i.e. Revenue, Cost of Sales, Depreciation & Amortisation and Mine Operations EBITDA) are exclusive of September 18 quarter results of
Pogo operations.
Record
throughput
of 2.1Mt at Jundee &
2Mt at Kanowna Belle
FY20
In FY20, an expansionary capital budget of A$116M has been
approved to underpin substantial organic growth opportunities at the
operations including:
• A$44M developing and bringing online new mining areas at Pogo.
This also includes A$7M on processing infrastructure to de-
bottleneck the front end of the plant and increase capacity
• A$24M development and infrastructure to bring Moonbeam
underground online in Kalgoorlie
• A$7M development for drill drives and access for new areas at 51%
EKJV Operation
• A$37M excavation of exploration drill platforms at Jundee as well
as setting up access to new mining areas
The Company will also invest a record A$76 million in exploration at
Pogo, Jundee and South Kalgoorlie Operations.
FY20 Production and Cost Guidance
FY20 Group guidance is 800,000–900,000oz at an AISC of
A$1,200-A$1,300/oz, as announced to the ASX on 1 August 2019.
TABLE 2 FY20 PRODUCTION & COST GUIDANCE
FY20
Production
AISC
Guidance Range
Oz
Oz
A$/oz
A$/oz
Jundee
260,000
280,000
1,115
1,195
Kalgoorlie Operations
340,000
380,000
1,260
1,370
Pogo
200,000
240,000
1,210
1,320
NST TOTAL
800,000
900,000
1,200
1,300
18
2019 ANNUAL REPORT | OPERATIONS REVIEW | OPERATIONS
19
Operations cont’d
TABLE 3 FINANCIAL OVERVIEW
Revenue
EBITDA1
Net profit2
Underlying net profit after tax3
Cash flow from operating activities
Cash flow used in investing activities
Sustaining capital
Non sustaining capital
Exploration
Acquisition of assets
Acquisition of businesses
Payments for investments
Proceeds from sale of business
Other investing
Free cash flow4
Underlying free cash flow5
Average gold price per ounce (A$)
Gold mined (ounces)6
Gold sold (ounces)6
All-In Sustaining Costs (AISC) per ounce sold (A$)6
Cash and cash equivalents (A$ million)
Basic earnings Per Share (cents)
FY19
$’000
1,401,165
479,735
154,711
179,234
379,197
(648,136)
(104,582)
(95,092)
(87,168)
(1,726)
(350,550)
(10,056)
-
1,038
(268,939)
145,793
1,764
904,651
840,580
1,296
266
24.4
FY18
$’000
964,025
443,268
194,113
211,522
353,061
Change
$’000
437,140
36,467
(39,402)
(32,288)
26,136
(247,294)
(400,842)
(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
(18,618)
(30,261)
(41,795)
2,274
(333,089)
20,557
(533)
624
(374,706)
(40,189)
60
292,397
270,470
267
(177)
(7.7)
Change
(%)
45%
8%
(20)%
(15)%
7%
162%
22%
47%
92%
(57)%
1,908%
(67)%
(100)%
151%
(354)%
(22)%
4%
48%
47%
26%
(40)%
(24)%
Unless otherwise stated, the metrics for the year ended 30 June 2019 as presented in the Financial Overview Table are exclusive of the September 18 quarter results of the Pogo operations.
1 EBITDA is earnings before interest, depreciation, amortisation and impairment and is calculated as follows: 30 Jun 2019 - Profit before Income tax ($214.8 million) plus depreciation ($77.4
million), amortisation ($170.1 million), impairment ($9.9 million) and finance costs ($11.6 million) less interest income ($4.1 million). 30 Jun 2018 - Profit before Income tax ($277.8 million)
plus depreciation ($43.1 million), amortisation ($114.6 million), impairment ($11.8 million) and finance costs ($3.5 million) less interest income ($7.5 million).
2 Net Profit is calculated as net profit after taxation.
3 Underlying Net Profit is calculated as follows: 30 June 2019 - Net Profit after tax ($154.7 million) plus M&A ($6.7 million), plus impairment ($9.9 million), plus fair value adjustment on SGI
warrants ($4.4 million loss), plus loss take-up on associates ($3.5 million). 30 June 2018 - Net Profit after tax ($194.1 million), plus M$A ($5.2 million), plus impairment ($11.8 million), plus
fair value adjustment on SGI warrants ($0.9 million gain), plus loss take-up on associates ($1.4 million).
4 Free Cash Flow is calculated as operating cash flow less investing cash flow. 30 Jun 19 - operating cash flow ($379.2 million) less investing cash flow ($648.1 million). 30 Jun 18 - operating
cash flow ($353.1 million) less investing cash flow ($247.3 million).
5 Underlying Free Cash Flow is calculated as follows: 30 June 2019 - free cash flow ($268.9 million) plus M&A ($355.2 million), plus payments for Tanami put option ($20.0 million), plus
payments for investments in associate and equity securities ($10.1 million), plus FY18 tax ($2.7 million), plus bullion awaiting settlement adjustments ($32.9 million), less working capital
adjustments ($6.2 million).
30 June 2018 - free cash flow ($105.8 million) plus M&A ($21.5 million), plus payments for investments ($30.6 million), plus FY17 tax ($35.2 million), less bullion awaiting settlement
adjustments ($2.5 million), less working capital adjustments ($4.6 million).
6 Gold mined, Gold sold & AISC/oz presented are inclusive of September 18 quarter results of Pogo operations.
EBITDA, Underlying Net Profit, Underlying Free Cash Flow and All-in Sustaining Costs (AISC) are unaudited non IFRS measures.
“Group EBITDA is up 8% on FY18 with all operations
delivering strong operating cash flows.”
– Ryan Gurner
Chief Financial Officer
Forward Looking Statements
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, Resource and Reserve estimations, loss of market,
industry competition, environmental risks, physical risks, legislative,
fiscal and regulatory changes, economic and financial market
conditions in various countries and regions, political risks, project
delay or advancement, approvals and cost estimates.
Profit
For FY19, the Group reported a profit after tax of $154.7 million, a
20% reduction from FY18 (FY18: $194.1 million). Profit after tax for
the Australian operations was $174.7 million and Pogo operations
reported a loss after tax of $20.0 million. Revenue increased 45%
to $1,401 million primarily driven by the average realised gold price
per ounce being 4% higher (FY19: $1,764; FY18: $1,704) and a 37%
increase in gold sold (FY19: 781,013oz (excludes September 18
quarter ounces for pogo); FY18: 570,110oz) driven by the acquisition
of Pogo in September 2018. Cost of sales increased 77% to $1,101
million (FY18: $624 million) driven primarily by the acquisition of Pogo
operations and increased production at the Australian operations
which achieved record production during 2019 with a 12% increase
in gold sold (FY19: 639,243oz; FY18: 570,110oz). Higher non-cash
depreciation and amortisation charges were incurred during 2019
relating primarily to the finalisation of the purchase price allocation
on the acquisition of Pogo operations and Kalgoorlie operations,
which during 2019 included full year charges from South Kalgoorlie
operations, which was acquired in April 2018. Finance charges were
higher during 2019 (FY19: $11.6 million; FY18: $3.5 million) as the
Company finalised a new credit facility.
Group EBITDA was $479.7 million for the year ended 30 June
2019, which was an increase of 8% over the corresponding prior
period. Finance costs increased by 234% (FY19: $11.6 million; FY18:
$3.5 million) which was due to additional accretion charged on
rehabilitation liabilities acquired from the Pogo acquisition and also
additional finance charges on the Group’s financing facilities. An
impairment charge of $9.9 million was recorded on exploration and
evaluation assets (FY18: $11.8 million).
Balance Sheet
Current assets as at the 30 June 2019 decreased by 19% against the
prior year balance date. The decrease was largely a result of cash
and cash equivalents decreasing by $176.8 million following the
completion of the Pogo acquisition, in addition the payment of $70.3
million in dividends during the year.
Non-current assets increased by $531.2 million primarily from the
acquisition of Pogo. A total of $40.3 million was added to exploration
and evaluation assets through the Company’s continued investment
in organic growth. Payments of $10.1 million for investments in
associates and equity investments carried at fair value were made in
the current period (FY18: $30.6 million).
Current liabilities increased by 9.2% as at 30 June 2019 principally
due equipment replacement at Pogo operations, which have
been financed and non-current liabilities increased $115.1 million
principally due to the recognition of a $75.2 million closure liability at
Pogo on acquisition.
During the year the Company Issued 26,119,402 shares at A$6.70 per
share as part of Pogo acquisition.
Cash Flow
Cash flows from operating activities for the 12 months ended 30
June 2019 was $379.2 million which is $26.1 million higher than the
previous financial year driven principally by increased revenues from
higher gold sold and gold price received for the year. This was offset
by higher payments to suppliers and employees which now includes
Pogo operations.
Cash flows from investing activities increased by 162% as a result of
the $350.5 million Pogo acquisition in September 2018 (FY18: $17.5
million on South Kalgoorlie and Western Tanami acquisitions). In
addition, payments for exploration and evaluation increased by $41.8
million (FY19: $87.2 million; FY18: $45.3 million), of which $18.8 million
related to exploration at Pogo since acquisition and $20.0 million paid
for an additional 15% interest in the Central Tanami Project.
Cash flows from financing activities included proceeds from issue of
shares of $177.4 million relating predominantly to the capital raising
associated with the Pogo acquisition (FY18: $4.6 million) and dividends
totalling $70.3 million (FY18: $63.3 million) paid to Shareholders.
20
2019 ANNUAL REPORT | OPER ATI ONS R EVIEW | EXPL ORAT ION
21
Exploration
USA ALASKA
AUSTRALIA
Paraburdoo
Halls
Creek
Wiluna
Paraburdoo
Kalgoorlie
Coolgardie
Wiluna
PERTH
Coolgardie
Kalgoorlie
PERTH
Halls
Creek
Lajamanu
ALICE SPRINGS
Lajamanu
Northern Star operates three concentrated
operational centres – Jundee and Kalgoorlie in
Western Australia, and Pogo in Alaska. In addition,
Northern Star continues exploration projects at
the Tanami Project and Paulsens.
Fairbanks
Delta Junction
1
Pogo Operations
+8MOZ GOLD CAMP
ALICE SPRINGS
USA ALASKA
ANCHORAGE
Valdez
Kilometres
250
500
Miles
155
310
0
0
Kilometres
250
500
Miles
155
310
0
0
Fairbanks
Seward
Delta Junction
1
ANCHORAGE
Valdez
Seward
Juneau
AUSTRALIA
Lajamanu
Halls
Creek
5
Following completion of the Pogo acquisition in September 2018,
underground drilling e(cid:91)panded significantl(cid:92) (cid:90)ith a focus on (cid:53)esource
definition and conversion across all ma(cid:77)or ore s(cid:92)stems (cid:11)(cid:47)iese, (cid:54)outh
Pogo, Fun Zone, North Zone and X-Vein) in the underground mining
areas.
Juneau
Surface drilling activity also increased substantially with the discovery
of the ne(cid:90) (cid:38)entral (cid:57)eins (cid:93)one leading to the definition of a maiden
Resource for the discovery.
2
Jundee Operations
+10MOZ GOLD CAMP
Jundee Operations
Jundee Operations Resource extension drilling within the mine was
successful with increases in the Mineral Resource and Ore Reserve
inventory. Exploration drilling from the 39 Level drill drive platform
slowed during FY19 with the focus on the growth of new mineralised
areas at Lyons South, Cardassian and Throssel trends.
Exploration of the Zodiac discovery continued with a program of deep
exploration wedge drill holes in the initial discovery area. Adjacent to
Zodiac is a large mineralised corridor which will be the focus of future
long-term exploration programs. Underground development to provide
a range of new drilling platforms across the Jundee mine is in progress
as part of a renewed exploration focus inside the mine corridor.
4
Paraburdoo
2
Wiluna
Coolgardie
Kalgoorlie
3
PERTH
ALICE SPRINGS
Jundee Regional
(cid:54)urface e(cid:91)ploration of defined anomalies from the (cid:69)road scale
regional aircore drilling programs in the Ramone area continued with
success at Ziggy-Marley, Mosely and Tosh prospects.
Fairbanks
Drilling beneath the new Ramone open pit has progressed rapidly to
define a potential underground mining target (cid:90)ith the (cid:53)amone s(cid:92)stem
open in all directions.
ANCHORAGE
Delta Junction
(cid:49)umerous significant ne(cid:90) drilling targets in the surrounding (cid:39)eep (cid:58)ell
area (cid:90)ill (cid:69)e the focus of resource definition drilling in the coming (cid:92)ears(cid:17)
Seward
Valdez
Juneau
Kilometres
250
500
Miles
155
310
0
0
South Kalgoorlie Operations
Underground and surface diamond drilling increased Ore Reserves
within the northern portion of the mine with new underground drilling
platforms completed.
Extensions to the Northern Ore Zone and Jubilee Resources were
achieved with underground drilling activity increasing to continue the
expansion of the in-mine Mineral Resource inventory.
Regional exploration within the extensive South Kalgoorlie tenement
package began to generate early success with potential new
discoveries at Clonago, Samphire and Glasswing prospects. Resource
definition and e(cid:91)ploration drilling programs (cid:90)ill e(cid:91)pand into additional
areas FY20.
4
Paulsens
+3MOZ GOLD CAMP
At Paulsens, analysis of the 3D seismic survey information led to
surface drilling of new exploration targets south of the Paulsens Mine.
(cid:40)(cid:91)tensions to the (cid:48)ine (cid:54)e(cid:84)uence lithologies (cid:90)ere identified (cid:90)ith
further drilling planned into new target areas.
5
Tanami Project
+5MOZ GOLD CAMP
Central Tanami (Northern Star 40%)
Work continued on regional aircore drilling and geophysical programs
across the project highlighting the under-explored nature of the
region. Drilling programs at Hurricane-Repulse and Jims achieved
excellent results highlighting potential Resource extensions.
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 together with
regional aircore geochemical programs were completed across the
tenure package during (cid:41)(cid:60)(cid:20)(cid:28) as part of the greenfield assessment
of a 9,000km2 footprint within prospective terrains that are largely
unexplored.
Western Tanami (Northern Star 100%)
Regional airborne and ground geophysical programs were completed
across the (cid:58)estern (cid:55)anami (cid:51)ro(cid:77)ect tenure to refine e(cid:91)ploration targets(cid:17)
3
Kalgoorlie Operations
+19MOZ GOLD CAMP
Kalgoorlie Operations
The Kanowna Belle and Kundana Operations continued in-mine
exploration programs that maintained the existing Mineral Resources.
At Kanowna Belle Operations, exploration outlined resource growth in
the upper levels of the mine and the expansion of the Velvet discovery
continued.
In-mine exploration within the East Kundana Joint Venture (EKJV) area
(NST: 51%) in the Kundana region was successful with growth in the
total Resource inventory for Pegasus-Rubicon-Hornet complex and
the emergence of the new Falcon discovery.
Exploration within the Northern Star’s 100% owned Kundana
tenements was successful and outlined the extensions to the
Moonbeam, Xmas and Strzelecki areas. Extensional drilling at the new
Pope John mine commenced late in FY19.
Kanowna Belle
Regional exploration in the area surrounding the Kanowna Belle mine
continued during FY19 with drilling programs at Red Eye, Red Hill and
Ariel completed.
Exploration continued within the Acra Joint Venture (NST: 75%) with
Pioneer Resources Limited.
Kundana EKJV (Northern Star 51%)
(cid:56)nderground e(cid:91)ploration drilling defined a maiden (cid:53)esource for the
new Falcon discovery situated between the existing Pegasus and
Raleigh mining areas.
Carbine
Surface drilling below the existing Carbine and Phantom open pits
continued to achieved success in parallel structures that will require
further extensional drilling.
Regional exploration of the Carbine and Carnage exploration tenure
expanded with a range of new targets generated along the Carbine
trend.
Initial success (cid:90)as achieved (cid:90)ith a large ne(cid:90) target identified in the
Fremlin area. Surface drilling programs at Fremlin and Bald Hill have
commenced and were in progress at 30 June 2019.
22
2019 ANNUAL REPORT | RESOUR CES AND RESERVES
23
Resources and
Reserves
As at 30 June 2019, Northern Star’s Consolidated Group Mineral
Resource Estimate (inclusive of Ore Reserves) was 156 million tonnes at
4.1 grams per tonne gold for 20.8 million ounces (refer Table 4) and the
Consolidated Group Ore Reserve Estimate is 38.2 million tonnes at 4.4
grams per tonne gold for 5.4 million ounces (refer Table 5).
The substantial inventory growth stems from Northern Star’s exploration
success at its Jundee and Kalgoorlie Operations and the acquisition of the
Pogo Project and mining depletion of 915koz.
Group Mineral Resources increased significantly by 4.9 million ounces
gold from 15.9 million ounces gold as at 30 June 2018 to the current 20.8
million ounces gold Measured, Indicated and Inferred Mineral Resource.
Group Proved and Probable Ore Reserve increased by 1.4 million ounces
gold from 4 million ounces gold as at 30 June 2018 to the current 5.4
million ounces gold Proven and Probable Reserve at 30 June 2019.
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 announcement 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 Michael Mulroney, a Competent Person who is a Member
of the Australasian Institute of Mining and Metallurgy and a full-time
employee of Northern Star Resources Limited. Mr Mulroney 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
Mulroney consents to the inclusion in this announcement of the matters
based on this information in the form and context in which it appears.
The information in this announcement that relates to Ore Reserve
estimations for the Company’s Project areas is based on information
compiled by Jeff Brown (Australia) and Bradley Valiukas (Pogo),
Competent Persons who are a Member of the Australasian Institute of
Mining and Metallurgy and are full-time employees of Northern Star
Resources Limited. Mr Brown and Mr Valiukas have sufficient experience
which is relevant to the style of mineralisation and type of deposit
under consideration and to the activity being undertaken to qualify as a
Competent Persons as defined in the 2012 Edition of the “Australasian
Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves”. Mr Brown and Mr Valiukas consents to the inclusion in this
announcement of the matters based on this information in the form and
context in which it appears.
The information in this announcement 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 announcement 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 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 Resources
Limited. 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 announcement 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 entitled “Quarterly Report for the
Period Ending 31 March 2014” released on 1 May 2014 and, in the case
of estimates of Mineral Resources, 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.
24
2019 ANNUAL REPORT | RESOU RCES AND RESERVES
25
TABLE 4 MINERAL RESOURCES
MINERAL RESOURCES As at 30 June 2019
TABLE 5 ORE RESERVES
ORE RESERVES As at 30 June 2019
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
Gold in Circuit
Sub-Total Kundana
EAST KUNDANA JOINT VENTURE
Surface
Underground
Stockpiles RHP
Stockpiles Raleigh
Stockpiles GEM (100%)
Gold in Circuit
Sub-Total East Kundana JV
SKO GOLD PROJECT
Surface
Underground
Surface
Underground
Surface
Underground
Surface
Underground
Stockpiles
Jubilee ROM stocks
Gold in Circuit
Sub-Total SKO
POGO PROJECT
Stockpiles
Gold in Circuit
Sub-Total Pogo
CARBINE PROJECT
Sub-Total Carbine
PAULSENS PROJECT
Stockpiles
Gold in Circuit
Sub-Total Paulsens
ASHBURTON PROJECT
Surface
Stockpiles
Sub-Total Ashburton
CENTRAL TANAMI PROJECT JV
Underground
Stockpiles
Sub-Total Central Tanami JV
WESTERN TANAMI PROJECT
Underground
Stockpiles
Sub-Total Western Tanami
MEASURED
TONNES GRADE OUNCES
(000's)
(gpt)
(000's)
INDICATED
TONNES GRADE OUNCES
(000's)
(gpt)
(000'S)
INFERRED
TONNES GRADE OUNCES
(000's)
(gpt)
(000's)
TOTAL RESOURCES
TONNES GRADE OUNCES
(000's)
(gpt)
(000's)
303
85
557
-
945
65
2,637
145
-
2,847
-
350
94
-
444
-
1,034
61
21
1
-
1,116
-
1,577
100
81
-
1,758
-
-
-
-
-
-
-
-
-
260
11
-
272
-
-
-
2,502
560
3,062
107
375
482
1.1
2.8
0.9
-
1.3
2.3
3.5
2.3
-
3.5
-
4.9
3.1
-
4.6
-
7.5
3.8
4.2
5.0
-
7.3
-
3.3
1.7
1.8
-
3.2
-
-
-
-
-
-
-
-
-
5.7
1.6
-
5.6
-
-
-
2.9
0.7
2.5
7.8
1.4
2.8
11
8
16
4
38
5
294
11
9
318
-
55
9
1
66
-
251
7
3
0
-
261
-
168
6
5
5
183
-
-
-
3
3
-
-
-
-
48
1
0
49
-
-
-
232
13
245
27
17
44
4,420
25,207
-
-
9,626
882
7,531
-
-
8,413
-
4,248
-
-
4,248
119
2,666
-
-
-
-
2,785
475
8,047
-
-
-
8,522
-
7,200
-
-
7,200
1,008
503
1,511
129
116
-
-
245
7,104
-
7,104
4,430
-
4,430
1,079
-
1,079
1.5
3.9
-
-
217
3,166
-
-
3.6 3,383
1,360
9,946
-
-
11,307
1.4
3.4
-
-
3.1
1.3
3.7
-
-
3.3
-
4.3
-
-
4.3
2.4
5.1
-
-
-
-
4.9
1.6
3.0
-
-
-
2.9
59
1,074
-
-
1,133
49
635
-
-
684
-
578
-
-
578
8
269
-
-
-
-
277
52
1,024
-
-
-
1,076
12.0
9.5
-
-
9.5
136
3,584
-
-
3,720
1.8
4.7
4.6
2.0
5.1
-
-
2.3
3
116
118
54
16
-
-
70
6,083
35,238
557
-
41,878
2,104
15,522
145
-
17,771
-
8,831
94
-
8,925
227
5,354
61
21
1
-
5,663
1,489
20,328
100
81
-
21,999
354
18,973
-
-
19,328
1,055
1,260
2,315
989
477
11
-
1,477
1.5
3.7
0.9
-
3.4
2.1
3.6
2.3
-
3.4
-
4.9
3.1
-
4.8
4.1
6.2
3.8
4.2
5.0
-
6.1
1.7
3.0
1.7
1.8
-
2.9
287
4,248
16
4
4,555
140
1,784
11
9
1,943
-
1,378
9
1
1,389
30
1,064
7
3
0
-
1,103
80
1,977
6
5
5
2,072
12.0
9.5
-
-
9.6
136
5,810
-
3
5,949
2.9
5.2
4.1
2.1
5.5
1.6
-
3.2
99
209
308
67
84
1
0
152
1,157
5,354
-
-
6,511
-
4,232
-
-
4,232
108
1,654
-
-
-
-
1,761
1,015
10,704
-
-
-
11,719
354
11,774
-
-
12,128
47
757
804
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
4,842
-
4,842
1,449
-
1,449
2.9
-
2.9
5.8
-
5.8
453
-
453
271
-
271
11,774
560
12,334
2.9
0.7
2.8
1,085
13
1,097
2,636
375
3,011
6.0
1.4
5.4
506
17
523
3.0
3.5
-
-
3.5
-
5.5
-
-
5.5
5.6
6.4
-
-
-
-
6.3
1.8
3.0
-
-
-
3.0
86
855
-
-
941
-
745
-
-
745
21
544
-
-
-
-
566
28
785
-
-
-
813
-
9.6
-
-
-
2,226
-
-
9.6 2,226
3.0
5.8
3.9
3.1
5.3
-
-
4.2
2.4
-
2.4
2.8
-
2.8
6.0
-
6.0
96
94
190
13
20
-
-
33
546
-
546
400
-
400
208
-
208
NST ATTRIBUTABLE 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
Gold in Circuit
Sub-Total Kundana
EAST KUNDANA JOINT VENTURE
Surface
Underground
Stockpiles RHP
Stockpiles Raleigh
Stockpiles GEM (100%)
Gold in Circuit
Sub-Total East Kundana JV
SKO GOLD PROJECT
Surface
Underground
Surface
Underground
Surface
Underground
Surface
Underground
Stockpiles
Jubilee ROM stocks
Gold in Circuit
Sub-Total SKO
POGO PROJECT
Stockpiles
Gold in Circuit
Sub-Total Pogo
CARBINE PROJECT
Stockpiles
Sub-Total Carbine
PAULSENS PROJECT
Stockpiles
Gold in Circuit
Sub-Total Paulsens
ASHBURTON PROJECT
Surface
Stockpiles
Sub-Total Ashburton
CENTRAL TANAMI PROJECT JV
Underground
Stockpiles
Sub-Total Central Tanami JV
WESTERN TANAMI PROJECT
Underground
Stockpiles
Sub-Total Western Tanami
TONNES
(000's)
PROVED
GRADE
(gpt)
OUNCES
(000's)
TONNES
(000's)
PROBABLE
GRADE
(gpt)
OUNCES
(000's)
TOTAL RESERVE
GRADE
(gpt)
TONNES
(000's)
OUNCES
(000's)
303
85
557
-
945
-
1,626
145
-
1,771
-
198
94
-
293
-
784
61
21
1
-
866
-
418
100
81
-
600
-
-
-
-
-
-
-
-
-
-
-
11
-
11
-
-
-
-
-
-
-
-
-
1.1
2.8
0.9
-
1.3
-
3.2
2.3
-
3.3
-
4.0
3.1
-
3.8
-
6.6
3.8
4.2
5.0
-
6.3
-
3.6
1.7
1.8
-
3.3
-
-
-
-
-
-
-
-
-
-
-
1.6
-
1.6
-
-
-
-
-
-
-
-
-
11
8
16
4
38
-
169
11
9
188
-
26
9
1
36
-
166
7
3
0
1
177
-
48
6
5
5
63
-
-
-
3
3
-
-
-
-
-
-
1
-
1
-
-
-
-
-
-
-
-
-
2,212
10,155
-
-
12,367
852
3,789
-
-
4,641
-
4,195
-
-
4,195
68
2,099
-
-
-
-
2,168
-
2,701
-
-
-
2,701
-
6,103
-
-
6,103
1,099
-
-
1,099
-
396
-
-
396
-
-
-
-
-
-
-
-
-
1.6
4.6
-
-
4.0
2.6
3.4
-
-
3.2
-
4.1
-
-
4.1
5.8
5.3
-
-
-
-
5.3
-
2.9
-
-
-
2.9
-
7.5
-
-
7.5
2.5
-
-
2.5
-
4.3
-
-
4.3
-
-
-
-
-
-
-
-
-
112
1,488
-
-
1,600
2,515
10,240
557
-
13,312
70
410
-
-
480
-
552
-
-
552
13
358
-
-
-
-
371
-
254
-
-
-
254
-
1,470
-
-
1,470
89
-
-
89
-
54
-
-
54
-
-
-
-
-
-
-
-
-
852
5,415
145
-
6,412
-
4,393
94
-
4,487
68
2,883
61
21
1
-
3,034
-
3,119
100
81
-
3,300
-
6,103
-
-
6,103
1,099
-
-
1,099
-
396
11
-
407
-
-
-
-
-
-
-
-
-
1.5
4.5
0.9
-
3.8
2.6
3.3
2.3
-
3.2
-
4.1
3.1
-
4.1
5.8
5.6
3.8
4.2
5.0
-
5.6
-
3.0
1.7
1.8
-
3.0
-
7.5
-
-
7.5
2.5
-
-
2.5
-
4.3
1.6
-
4.2
-
-
-
-
-
-
-
-
-
123
1,495
16
4
1,638
70
578
11
9
668
-
578
9
1
588
13
523
7
3
0
1
547
-
301
6
5
0
317
-
1,470
-
3
1,472
89
-
-
89
-
54
1
-
55
-
-
-
-
-
-
-
-
-
NORTHERN STAR TOTAL
10,926
3.4
1,206
75,163
4.2 10,050
69,941
4.2
9,503
156,026
4.1 20,760
Note:
1. Mineral Resources are inclusive of Ore Reserves
2. Mineral Resources are reported at various gold price guidelines:
Competent Person:
1. Michael Mulroney
a. A$1,750/oz Au - All Australian assets except Ashburton; b. A$1,850 /oz Au -Ashburton; US$1,300/oz Au - USA assets
3. Rounding may result in apparent summation differences between tonnes, grade and contained metal content
4. Numbers are 100% NST attributable
NORTHERN STAR TOTAL
4,486
3.5
505
33,668
4.5
4,870
38,155
4.4
5,375
Note:
1. Ore Reserves are reported at the gold price of A$1,500/oz Au (Australia) or US$1,150/oz Au (USA)
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% NST attributable
Competent Persons:
1. Jeff Brown - Australian Operations
2. Bradley Valiukas - Pogo Operation
26
27
RISK
MANAGEMENT
28
2019 ANNUAL REPORT | RISK MANAGEMENT
29
Risk Management
Our vision is to continue to build a safe, quality mining and exploration
company, focused on creating value for Shareholders. To achieve
this, Northern Star maintains an ongoing commitment to enhancing
how we identify, assess and mitigate our risks. The continuous review
of our risks means that our Board receives the most up to date
information about the business, enabling them to make strategic
decisions regarding risks which affect the Company now, but also
those which have potential to impact our success in the future.
The following table is a summary of:
• the Company’s safety risk, assessed as being the highest inherent
risk on the corporate risk register as well as the Company’s number
one STARR Core Value; and
• the environmental risks1 and social risks2 to which the
Company has a material exposure3, disclosed in accordance
with Recommendation 7.4 in the ASX Corporate Governance
Council Principles & Recommendations (4TH edition) (ASX
Recommendations).
TABLE 6 SUMMARY OF COMPANY’S EXPOSURE TO MATERIAL RISKS AND MITIGATING PRACTICES
RISK
A
DESCRIPTION
CONTRIBUTING FACTORS
IMPACT
MITIGATING PRACTICES
B
Operational
safety risk as a
direct result of
failing to manage
recognised safety
hazards
• Work in underground
environment, at height, in
confined spaces
• Work in extreme temperatures
(hot and cold work environments)
• Exposure to hazardous energy
• Near miss
• First aid injury
• Restricted work injury
• Lost time injury
• Disabling injury
• Fatality
SAFETY
Climate change
resulting in
material change
in water balance
that negatively
impacts
operations
ENVIRONMENTAL
sources
• Exposure to and use of chemicals,
dangerous goods and explosives
• Ground seismicity
• Open pit flooding/damage to pit
walls
• Travel on public roads, in remote
locations, by air
• Natural disaster (eg. forest fire)
• Wildlife encounter
• Changing (warming) climatic
conditions occurring within
operational areas can alter water
availability, by either reducing
water available for ore processing
through reduced rainfall or
increasing water discharge needs
beyond permitting allowances
through ice melt and increasing
rainfall.
• Production loss
• Inability to obtain
abstraction and
discharge permits
• Locating alternative
water sources
• Significant increase in
discharge rates,
• Inability to dewater
mines or expand
processing capacity
• Risk-based management
plans and administration (eg.
ventilation, work at height,
adverse temperature)
• Mining controls (eg. ground
support, remote equipment,
extraction sequencing, mine
design)
• Employee Competency and
training
• OHS Electronic management
systems and databases
• Contractor assessment and
management
• Audit and review processes
• Emergency management systems
• Compliance with regulator
approved Ground Water
Operating Strategies
• Continuous quarterly ground
water reviews and modelling
interpretations
• Increased alternative water usage
through pit water harvesting and
increased mine dewatering water
- replacing fresh water extraction
• Monitor seasonal rainfall patterns
and review modelling data against
accepted climate predictions
• Implement and review Company
Water Management Standard
and Energy and Climate Change
Standard
1
2
3
“environmental risks” is defined in the ASX Recommendations as the potential negative consequences (including systemic risks and the risk of consequential regulatory responses) to the
Company if its activities adversely affect the natural environment or if its activities are adversely affected by changes in the natural environment. This includes the risks associated with
the Company polluting or degrading the environment, adding to the carbon levels in the atmosphere, or threatening a region’s biodiversity or cultural heritage. It also includes the risks
for the entity associated with climate change, reduced air quality and water scarcity.
“social risks” is defined in the ASX Recommendations as the potential negative consequences (including systemic risks and the risk of consequential regulatory responses) to the Company
if its activities adversely affect human society or if its activities are adversely affected by changes in human society. This includes the risks associated with the Company or its suppliers
engaging in modern slavery, aiding human conflict, facilitating crime or corruption, mistreating employees, customers or suppliers, or harming the local community. It also includes the
risks for the entity associated with large scale mass migration, pandemics or shortages of food, water or shelter.
“material exposure” is defined in the ASX Recommendations as a real possibility that the risk in question could materially impact the Company’s ability to create or preserve value for
Shareholders over the short, medium or longer term
TABLE 6 CONTINUED SUMMARY OF COMPANY’S EXPOSURE TO MATERIAL RISKS AND MITIGATING PRACTICES
RISK
A
DESCRIPTION
CONTRIBUTING FACTORS
IMPACT
MITIGATING PRACTICES
B
Loss of social
licence to
operate (i.e.
systematic and
widespread loss
of community
confidence)
• Breach of licence to operate
• Significant safety event
• Failure to meet conditions of land
access / heritage agreement
• Significant environmental event
• Negative political coverage
• Increased scrutiny entering
foreign jurisdiction
• Reputational damage
• Regulated operating
conditions
• Significant reduction in
share price
• Increased difficulty in
raising capital
• Negative impact on
operations
• Limits BD opportunities
with counterparties
• Risk assessments systems and
procedures in place
• Dedicated ESR resource &
execution of ESR Plan
• Implementation of Social
Responsibility Standards
• Community consultation and
consistent communications with
regulators and government
• Heritage management plans
• Mature management of NST
assets illustrating consistent
social/operating performance
• Standalone Sustainability Report
aligned to SDGs
• Board ESG & Safety committee
established
• Change management practices in
new jurisdiction
• Inclusion of local suppliers during
tender processes
• Commitment to living STARR Core
Values
• Lack of opportunities, adequate
• Loss of corporate
• Succession planning for key
coaching/investment and
development
knowledge
company positions
• Dilution of capability
• Dynamic company with high-
Loss of key
personnel as a
result of failure
to retain and
develop key
employees
SOCIAL
• Reduction in university graduates
• Residential requirement for many
employees
• Underground specialisation
having a narrow and therefore
highly competitive market
and capacity
• Negative impact on
Company culture,
brand, performance
performance culture
• Diverse assets offering ongoing
opportunities
• Robust recruitment process
• Employee incentive programs
• Six-tier leadership development
programs
• Implementation of remuneration
review
• Coaching and mentoring
framework
• Culture survey conducted and
culture plan launched
• Talent ID program fast-track high
potential employees
• Appointment of full time
Employee Experience role
• Health & wellbeing program;
Mental Health First Aiders
• Antivirus and advanced external
firewalls
• Cloud-based services for critical
systems
• Improved backup and recovery
systems
• ICT security audits
• ICT security awareness training
for employees
• Security Incident Monitoring
System
Loss of personal
information due
to cyber attack or
failure of critical
ICT infrastructure
• Increasing cyber-risks
• Employee security practices
• Hardware failure
• Communications link failure
• Notifiable data breach
• Loss of access to IT
services and data
• Loss of funds from
fraudulent activity
Column A indicates the assessed current inherent risk rating as High, Medium or Low
Column B indicates the assessed residual risk rating after taking into account current mitigating practices, as High, Medium or Low
30
31
Safety
Performance
Safety
Performance
DIRECTORS’
REPORT
32
2019 ANNUAL REPORT | DIRECTOR S’ REPOR T
33
Directors’ Report
BILL BEAMENT
B.Eng-Mining (Hons),
MAICD
Executive Chairman
JOHN FITZGERALD
CA, Fellow FINSIA, GAICD
Lead Independent
Director
CHRISTOPHER ROWE
BA, MA Economics and Law
Independent Non-
Executive 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 Trustee of the Channel 7
Telethon Trust.
Mr Fitzgerald has over 25 years’
resource financing e(cid:91)perience
and has provided project
finance and corporate advisor(cid:92)
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.
Experience and
expertise
Mr Rowe was the founding
Chairperson of Northern Star
(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 (1979 to 1990). Mr Rowe
gained broad resources
industry experience with TSX
and US oil and gas entities in
the 1990s.
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 WA as a member and
as Deputy Chairman.
PETER O’CONNOR
MA, Economics and Political
Science; Barrister-at Law
Independent Non-
Executive Director
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.
SHIRLEY IN’T VELD
B.Com LLB (Hons)
Independent Non-
Executive Director
MARY HACKETT
B.Eng-Mech, FEIAUST
Independent Non-
Executive Director
NICK CERNOTTA
B.Eng-Mining
Independent Non-
Executive Director
Experience and
expertise
Experience and
expertise
Ms In’t Veld was the CEO of
Verve Energy, a WA utility, for
five (cid:92)ears(cid:17) (cid:51)rior to this (cid:48)s
In’t Veld 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’t Veld is also Deputy
Chairperson of CSIRO, a
Director of NBN Co Ltd and
a member of the Takeovers
Panel.
Ms Hackett has an extensive
career in the resource sector,
spanning more than 30 years,
with senior executive roles in
Brown & Root, Woodside, and
General Electric. Her most
recent role being Vice President
of General Electric Oil&Gas for
Australasia.
Ms Hackett is a founding
Director of the LNG Marine Fuel
Institute and the Chair Elect
of the Future Energy Exports
Cooperative Research Centre.
A fellow of Engineers Australia,
Ms Hackett holds a degree in
Mechanical Engineering from
University College Galway,
Ireland.
Experience and
expertise
Mr Cernotta is a mining
engineer having held senior
operational and executive
roles in Australia and overseas
over a 30 plus year period. He
has considerable experience
in the management and
operation of large resource
projects, with a track record for
improving safety performance,
managing costs and improving
operational e(cid:605)ciencies, across
multiple commodities and
international jurisdictions.
Most recently Mr Cernotta
served as Director of
Operations at Fortescue Metals
Group, COO (Underground,
International and Engineering)
at MacMahon Holdings Limited
and most relevant as Director
of Operations for Barrick
(cid:11)(cid:36)ustralia (cid:51)acific(cid:12) (cid:51)t(cid:92) (cid:47)td, a
subsidiary of Barrick Gold Corp,
with international assets in
Africa, PNG and Saudi Arabia.
Board skills matrix
Board skills matrix
Board skills matrix
Board skills matrix
Board skills matrix
Board skills matrix
Board skills matrix
Executive leadership, technical
skills, HSE, major projects and
construction, capital markets,
commodities exposure and
strategy, gained and developed
during his experience described
above.
Finance, commerce &
accounting, capital markets,
commodities exposure,
previous board experience, risk
management & compliance,
strategy, and ethics & integrity,
gained and developed during his
experience described above.
Previous board experience,
HSE, and ethics & integrity,
gained and developed during
his experience described
above.
Executive leadership, capital
markets, previous board
experience, strategy, board
dynamics, issues management,
and ethics & integrity, gained
and developed during his
experience described above.
Executive leadership,
previous board experience
and board dynamics, gained
and developed during her
experience described above.
HSE, major projects &
construction, risk management
& compliance, and ethics &
integrity, gained and developed
during her experience
described above.
Executive leadership, HR &
workplace relations, HSE, risk
management & compliance and
strategy, gained and developed
during his experience described
above.
BOARD DIVERSITY
– GENDER
29%
71%
Male (5)
Female (2)
BOARD DIVERSITY
– TENURE
43%
29%
14%
14%
YEARS
0–2 (3)
7–10 (1)
3–4 (0)
10+ (2)
5–6 (1)
34
2019 ANNUAL REPORT | DIRECTOR S’ REPOR T
35
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, FY19. Throughout the report, the consolidated entity is
referred to as the Group.
Directors
The Directors of Northern Star during the whole of FY19 were:
• Bill Beament – Executive Chairman
• John Fitzgerald – Lead Independent Director
• Christopher Rowe – Non-Executive Director
• Peter O’Connor – Non-Executive Director
• Shirley In’t Veld – Non-Executive Director
New Directors since 1 July 2019
The Company welcomed Mary Hackett and Nick Cernotta to the Board
as Non-Executive Directors, effective 1 July 2019.
Company Secretary
Hilary Macdonald LLB (Hons), FGIA was the Company Secretary (in
addition to her role as General Counsel) for the full financial year
ended 30 June 2019 (appointed Company Secretary on 23 February
2018). Ms Macdonald is a corporate and resources lawyer with more
than 25 years’ experience in the UK and Australia with particular focus
on corporations compliance and governance.
TABLE 7 DIRECTORSHIPS OF LISTED COMPANIES HELD BY MEMBERS OF THE BOARD FOR THE PERIOD 1 JULY 2016 TO 30 JUNE 2019
DIRECTOR
John Fitzgerald
Christopher Rowe
Peter O’Connor
Shirley In’t Veld
LISTED ENTITY
APPOINTMENT
Exore Resources Ltd (Chairman)
Current, appointed 24 December 2015
Danakali Ltd
Current, appointed 19 February 2015
Carbine Resources Limited (Chairman)
From 13 April 2016 to 23 March 2018
Target Energy Limited (Chairman)
From 1 January 2010 to 22 September 2017
Neurotech International Limited (Chairman)
From 15 January 2016 to 16 April 2019
APA Group
Current, appointed 19 March 2018
Duet Company Limited
(delisted from ASX on 16 May 2017)
From 2 April 2013 to 15 May 2017
Nick Cernotta
Pilbara Minerals Limited
Current, appointed 6 February 2017
Panoramic Resources Limited
Current, appointed 2 May 2018
New Century Resources Ltd
Current, appointed 28 March 2019
ServTech Global Holdings Ltd (Chairman)
From 17 October 2016 to 22 November 2017
TABLE 8 COMMITTEE STRUCTURE DURING FY19
DIRECTOR
STATUS
REMUNERATION
AUDIT & RISK
NOMINATION
ESG & SAFETY
Bill Beament
Executive Chairman
John Fitzgerald
Lead Independent
Director
Christopher Rowe
Independent
Peter O’Connor
Independent
Shirley In’t Veld
Independent
Chairperson
Attendance at meetings of Directors during FY19
The Board has established standing committees to assist the Board to
discharge its responsibilities.
The Board had a Remuneration Committee, an Audit & Risk
Committee, a Nomination Committee and an ESG & Safety Committee
for the whole of FY19.
Attendance of Directors at Committee meetings during FY19 is set out
below.
In addition, all the Non-Executive Directors attended four meetings
of the Non-Executive Directors during FY19, held separately to the
full Board meetings and without the Executive Chairman or the
Chief Executive Officer in attendance. A standing item on the agenda
for Non-Executive Director meetings is appraisal of the Executive
Chairman and the Chief Executive Officer’s performance during each
quarter, and the functionality of the Executive Chairman and the Chief
Executive Officer roles.
TABLE 9 MEETINGS OF BOARD & COMMITTEES HELD AND ATTENDED DURING FY19
Chairperson
Chairperson
DIRECTOR
BOARD
REMUNERATION
AUDIT & RISK
NOMINATION
ESG & SAFETY
Chairperson
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
Bill Beament
John Fitzgerald
Christopher Rowe
Peter O’Connor
Shirley In’t Veld
12
12
12
12
12
12
12
12
11
12
-
6
6
-
6
-
6
6
-
6
-
4
-
4
4
-
4
-
3
4
4
4
4
4
4
4
4
4
4
4
3
3
3
3
3
3
3
3
2
2
- indicates Director is not a member of the relevant committee
36
2019 ANNUAL REPORT | DIRECTOR S’ REPOR T
37
Directors’ Report
Board Skills Matrix
The Company’s Board is accountable to Shareholders for the operations,
performance and growth of Northern Star. The composition of the Board
is vital in discharging this duty. The Board’s composition is reviewed and
assessed regularly by the Nomination Committee to ensure the Board
is of a composition, size and with capacity to commit the time required
to effectively discharge its responsibilities and duties. The Nomination
Committee aims to ensure that an appropriate balance of skills,
experience, expertise and diversity (of experience, thought, problem-
solving approaches, age, gender, nationality, cultural background and
perspective informed by life experience) is represented on the Board.
This may result in a Non-Executive Director with a longer tenure
remaining in office to bring that experience and depth of understanding
to matters brought before the Board, or a Non-Executive Director having
limited ASX Board experience but a significant executive career to draw
from.
The Board has devised a board skills matrix to measure hard skills that
are considered relevant to the nature of the Company and industry
in which it operates, and soft skills that are considered desirable for
effective Directors.
A skills gap analysis is undertaken in relation to the board skills matrix
annually, to ensure that the skills included in the matrix, and the Board’s
skills shown in the matrix results:
• meet the current needs of the Company’s operations;
• meet the evolving needs of the Company, as Company strategy is
implemented and strategic emphasis or direction changes; and
• are appropriate to meet the changing environment and corporate
landscape in which the Company operates.
To the extent a gap is identified in the Board’s skills, discussion follows on
how and when to prioritise addressing the gap, and whether professional
development initiatives can assist and or whether expanding the Board
or Board renewal is the appropriate response.
The review of the board skills matrix during the FY19 financial year:
• concluded that no change to the selection of skills used in the
matrix was warranted; and
• revealed an opportunity to strengthen the Board’s technical skillset
base, and with a wider scope of international experience where
possible.
The Company’s business as underground mining specialists expanded
into the US during the financial year, with the acquisition of the Pogo
mine in Alaska on 28 September 2018. The Company ran an international
recruitment process during the financial year with the assistance of a
specialist external recruitment consultant, culminating in the Company
appointing two additional Directors on 1 July 2019 who have proven
executive careers and subject matter expertise in engineering and
project management (Australia and various other geographic locations).
In addition, to enhance shareholder confidence in the Company’s
corporate governance practices, the two new Directors appointed were
both independent, bringing the number of independent Non-Executive
Directors to six, balanced against the single non-independent Executive
Director in the role of Executive Chairman. Shareholders will be asked to
re-elect the new Directors at the 2019 Annual General Meeting.
“The Nomination Committee
aims to ensure that an
appropriate balance of skills,
experience, expertise and
diversity (of experience,
thought, problem-solving
approaches, age, gender,
nationality, cultural background
and perspective informed by
life experience) is represented
on the Board.”
– Hilary Macdonald
General Counsel & Company
Secretary
Why Northern Star selected the skills in the Board
Skills Matrix
The following table explains what skills are considered by the Board
to be important for the role of Director at Northern Star and why they
therefore appear in the board skills matrix. Each of the Directors’ profiles
on page 32 and 33 brings out the prominent skills held by each Director,
in the context of the board skills matrix results.
The Board has reviewed additional skills to add to the board skills matrix,
such as tax risk management and compliance, and public policy and
regulation, opting instead for the ability to bring in subject matter experts
to advise the Board as needed.
Each Director has self-assessed their skills and experience against
the board skills matrix by giving a rating per skill of between 0 (for no
applicable skills or experience) to 5 (expert skills and experience).
38
2019 ANNUAL REPORT | DIRECTOR S’ REPOR T
39
IMPORTANCE OF BOARD SKILL
BOARD
SKILL AND DESCRIPTION
IMPORTANCE OF BOARD SKILL
BOARD
Directors’ Report
TABLE 10 BOARD SKILLS MATRIX
SKILL AND DESCRIPTION
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.
A director’s ability to draw on executive experience in attracting, leading
and retaining a high performing team to deliver on the Company’s
strategic o(cid:69)(cid:77)ectives, and understanding(cid:18)in(cid:565)uencing organisational culture,
is integral to (cid:49)orthern (cid:54)tar sustaining its financial and operational results
and people management.
(cid:41)(cid:76)n(cid:68)n(cid:70)e(cid:15) (cid:70)(cid:82)(cid:80)(cid:80)er(cid:70)e (cid:68)n(cid:71) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)nt(cid:76)n(cid:74)
Financial accounting and reporting, internal
financial and risk controls, corporate finance and,
restructuring corporate transactions (eg: JVs,
listings etc).
(cid:40)n(cid:89)(cid:76)r(cid:82)n(cid:80)ent(cid:68)(cid:79)(cid:15) (cid:54)(cid:82)(cid:70)(cid:76)(cid:68)(cid:79) (cid:9) (cid:42)(cid:82)(cid:89)ern(cid:68)n(cid:70)e (cid:11)(cid:40)(cid:54)(cid:42)(cid:12)
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
developing appropriate policy parameters.
HR and workplace relations
Board Remuneration Committee membership
or, succession planning, remuneration and talent
management (including incentive programs,
superannuation etc), the legislative and
contractual framework governing remuneration
and, the legislative framework for workplace
relations.
(cid:43)e(cid:68)(cid:79)th(cid:15) (cid:54)(cid:68)(cid:73)et(cid:92) (cid:9) (cid:40)n(cid:89)(cid:76)r(cid:82)n(cid:80)ent (cid:11)(cid:43)(cid:54)(cid:40)(cid:12)
Workplace health, safety and environmental
experience, implementing health, safety and
(cid:90)ell(cid:69)eing strategies, proactive identification and
prevention of health, safety and environmental
risks.
IT and 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
innovation to deliver business improvement.
Major projects and construction
Contract negotiations, project management,
projects involving large-scale outlays and projects
with long-term investment horizons.
(cid:38)(cid:68)(cid:83)(cid:76)t(cid:68)(cid:79) (cid:80)(cid:68)r(cid:78)ets
Expertise and commitment to sustainability
initiatives, social responsibility, and investor
engagement.
(cid:41)inancial acumen, demonstrated (cid:69)(cid:92) a director(cid:519)s e(cid:91)perience in financial
accounting and reporting, corporate finance and internal financial
controls, provides the director (cid:90)ith the tools to interpret financial
performance, discipline in costs control, and rigour in risk identification
and mitigation, evidenced in (cid:49)orthern (cid:54)tar(cid:519)s financial results and gold
price hedging practices.
Experience of a director related to workplace environmental compliance,
and communit(cid:92) relations and government a(cid:909)airs, is integral to the
critical evaluation of frameworks and processes designed to ensure that
all regulatory obligations are met and Northern Star’s social licence to
operate in the communities in which it operates, is earned and further
developed.
Finance, Commerce &
Accounting
ESG, Legal & Regula-
tory, Policy
A director’s previous executive experience in industrial relations and
employee relations, including remuneration benchmarking and incentive
structures, informs the Board in relation to strategies to counter the
tightening labour market facing Northern Star, and provides a deeper level
of understanding at Board level on the integration risks and successes
following the acquisition of new projects.
HR & Workplace
Relations
Experience of a director related to workplace health and safety reporting
and measurement, the importance of tracking near misses, and
awareness of environment measurement and risk within Northern Star’s
operations, provides a more informed platform for the Board to critically
appraise safety statistics, and health and environmental risks faced by
Northern Star.
HSE
A director’s awareness of the importance of digital technology to
support Northern Star’s growth and drive competitive advantage in its
underground and processing operations particularly, and knowledge
and experience in use and governance of critical information technology,
supports Northern Star’s drive for continuous improvement in exploration
and production methods, safety performance and business systems. A
director’s sound understanding of potential cyber risk exposure assists in
prioritising risk mitigation steps and expenditure.
Experience in the delivery of large-scale capital projects and expertise
in project governance and risk management informs the Board when
Northern Star is contemplating long term investment projects or large-
scale capital investment.
Given Northern Star’s share register composition, a director’s experience
with equity and debt funding strategies, an understanding of local and
overseas capital and debt markets, and experience in capital and debt
raising and management and investor relations is key to the Board
developing Northern Star’s strategy, and investor communications.
Technical skills
Advanced technical understanding of geology,
mining engineering or processing.
(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:71)(cid:76)t(cid:76)es e(cid:91)(cid:83)(cid:82)s(cid:88)re
Executive expertise in commodities, mining or
resources sectors.
Previous board experience
Serving on Boards of varying size and
composition, in varying industries and for a range
of organisations. An awareness of global practices
and benchmarking and, some international
experience.
(cid:53)(cid:76)s(cid:78) (cid:80)(cid:68)n(cid:68)(cid:74)e(cid:80)ent (cid:68)n(cid:71) (cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:68)n(cid:70)e
Northern Star is a global underground mining specialist; a director’s
understanding and appreciation of mining engineering, design, method
and risk is an essential component behind Northern Star’s operational and
financial success(cid:30) so too is other su(cid:69)(cid:77)ect matter e(cid:91)pertise such as financial
acumen and legal knowledge supporting tenure acquisition and risks
raised during due diligence.
A director’s experience in gold price hedging, and foreign exchange risk
management assists the (cid:49)orthern (cid:54)tar (cid:37)oard in financial management
and risk mitigation strategies, particularly given Pogo gold sales are in
USD.
Preparedness for a well-informed discussion, awareness of the pitfalls of
groupthink and agility in risk assessment and decision making, are key
skills required of all directors on the Northern Star Board.
Applying broad based risk management
frameworks in various regulatory or business
environment, identifying key risks to an
organisation related to key areas of operations,
monitoring risk and compliance.
(cid:48)aintaining e(cid:909)ective risk identification, management and internal
control, and the understanding of specialist risks such as corporate tax
requirements and tax risk management, are a cornerstone of Northern
Star’s Audit and Risk Committee directors, particularly in the dual
jurisdictions of Australia and Alaska in which operations are presently.
Strategy
Identifying and critically assessing strategic
opportunities and threats to the organisation
and, developing and implementing successful
strategies in the context of an organisation’s
policies and business objectives.
(cid:37)(cid:82)(cid:68)r(cid:71) (cid:71)(cid:92)n(cid:68)(cid:80)(cid:76)(cid:70)s
A director’s experience in developing and implementing successful
strategy, and the ability to provide oversight of management for the
delivery of strategic objectives, is a fundamental requirement of every
Northern Star director, to add value to the Board.
Constructively challenge and contribute to
(cid:37)oard discussions and communicate e(cid:909)ectivel(cid:92)
with management and other directors. Build
consensus, negotiate and obtain stakeholder
support for Board decisions.
A Northern Star director is regularly called on to demonstrate skills in
understanding and in(cid:565)uencing other directors(cid:30) the a(cid:69)ilit(cid:92) to disagree
agreeably, and the capacity to assimilate large volumes of information in a
short period of time for e(cid:909)ective discussion, in the evaluation of potential
transactions or other business decisions.
(cid:918)ss(cid:88)es (cid:80)(cid:68)n(cid:68)(cid:74)e(cid:80)ent
Constructively manage major issues, provide
leadership around solutions and contribute to a
communications strategy with stakeholders.
Ethics and integrity
Model correct behaviours as a director and,
continue to self-educate on legal responsibility,
maintain (cid:37)oard confidentialit(cid:92), declare con(cid:565)icts
etc.
(cid:40)(cid:91)perience (cid:90)ith communit(cid:92) relations and government a(cid:909)airs, investor
relations and oversight and management of compliance frameworks
provide a Northern Star director with preparedness for a corporate or
other crisis outside the normal path of operations.
A director with experience in governance in ASX listed and other complex
organisations, (cid:90)ith commitment to ensuring e(cid:909)ective governance
structures and maintaining e(cid:909)ective risk management and internal
controls, assists in setting the framework for and regulating Northern
Star’s decision- making practices.
LEGEND
(cid:40)(cid:91)pert
(cid:40)(cid:91)tensive
(cid:54)u(cid:605)cient
(cid:54)ome(cid:90)hat
(cid:37)asic
(cid:49)one
40
2019 ANNUAL REPORT | DIRECTOR S’ REPOR T
41
Directors’ Report
Principal activities
During FY19 the principal activities of the Group were:
• exploration, development, mining and processing of gold deposits
and sale of refined gold derived from the Jundee and Kalgoorlie
operations in Western Australia and from the Pogo Operations in
Alaska; and
• exploration in relation to gold deposits in Western Australia, the
Northern Territory and Alaska.
There were no significant changes to the Group’s activities during
FY19 other than acquiring the Company’s first operations outside
Western Australia – the Pogo Operations in Alaska.
Dividends paid
TABLE 11 DIVIDENDS PAID TO MEMBERS DURING FY19
Final ordinary dividend for FY18 of 5 cents
(2017: 6 cents) per fully paid Share paid on 28
September 2018
Interim ordinary dividend for FY19 of 6 cents
(2018: 4.5 cents) per fully paid Share paid on
4 April 2019
FY19
A$’000
FY18
A$’000
31,973
36,190
38,367
27,143
Total
70,340
63,333
Dividends recommended but not yet paid
Since the end of FY19 the Directors have recommended the payment
of a final fully franked ordinary dividend of $48 million (7.5 cents per
fully paid Share) to be paid on 20 November 2019 out of retained
earnings at 30 June 2019.
Review of operations
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 FY19
were the acquisition of the Pogo Operations in Alaska, United
States from Sumitomo Metal Mining Co., Ltd (85% interest and the
mine operator) and Sumitomo Corporation (15% interest) for total
consideration of US$260 million on 28 September 2018, through the
purchase of all the shares on issue in each of Sumitomo Metal Mining
Pogo LLC (now named Northern Star (Pogo) LLC) and SC Pogo LLC
(now named Northern Star (Pogo Two) LLC). Northern Star received
the full financial benefit of the Pogo operations from 1 July 2018.
For further details of this acquisition refer to note 13 of the financial
statements.
Events since the end of FY19
No matter or circumstance has arisen since 30 June 2019 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 of Australia, Western Australian, Northern
Territory, State of Alaska and Federal US 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 FY19. The Group continues to comply with environmental
regulations.
Insurance of officers and indemnities
During FY19 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 FY19
are disclosed in Note 21 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 73.
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 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 2019 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.
A final fully franked
This report is made in accordance with a resolution of Directors dated
26 August 2019.
ordinary dividend of A$48
million (7.5¢ per fully
paid Share) has been
declared for payment on
20 November 2019.
BILL BEAMENT
Executive Chairman
26 August 2019
42
43
TABLE OF
CONTENTS
Introduction from the Chairperson
of the Remuneration Committee
Details of the Key Management Personnel
Executive KMP Remuneration Policy
and Relationship with Performance
Executive KMP Remuneration for FY19
Executive KMP Realised Remuneration
for FY19
Short Term Incentives –
performance against STI Targets for FY19
Short Term Incentives paid in FY19
Pogo Completion Bonus paid in FY19
Long Term Incentives –
LTI Performance Rights
FY20 Remuneration Framework –
Key Changes from FY19
FY20 Executive KMP Fixed and Variable
KMP Remuneration Changes
Non-Executive Directors’ Remuneration
Other Statutory Disclosures
Statutory Remuneration Disclosures
Contractual Arrangements with
Executive KMP
44
48
48
50
52
54
56
56
57
58
62
63
65
66
70
Other Transactions with KMP and
comment on previous disclosures of
“Related Party” Transactions with Bill Beament 71
Auditor’s Independence Declaration
73
REMUNERATION
REPORT
44
2019 ANNUAL REPORT | REMUNER ATI ON R EPOR T
45
Remuneration
Report
Dear Shareholder
On behalf of the Board, I am pleased to present the Northern Star
Resources Limited Remuneration Report for FY19.
Since the acquisition of the Paulsens mine in 2010, Northern Star has
delivered sector leading results by acquiring and investing in Tier-1
assets. To date this strategy has seen Northern Star deliver a total
shareholder return (TSR) of 26,877% for its Shareholders.
CHART 3 NST SHARE PRICE VS ASX ACCUMULATION (ASX
ACC) INDEX
NST TSR of 26,877%
since the Paulsens acquisition
30,000
25,000
20,000
15,000
10,000
5,000
0
APR 10 APR 11 APR 12 APR 13 APR 14 APR 15 APR 16 APR 17 APR 18 APR 19
NST AU Equity
ASX ACC Index
In 2014, Northern Star acquired the Kalgoorlie and Jundee operations
and since that time Northern Star has led the global gold industry by
delivering the highest rates of financial returns as measured (cid:69)(cid:92) (cid:53)eturn
on Equity of (30%) and a Return on Invested Capital of (27%).
CHART 4 5YR AVERAGE RETURN ON EQUITY VS GDX GOLD
INDEX
NST 30%
Sector Average -1.7%
40%
30%
20%
10%
0%
-10%
-20%
CHART 5 5YR AVERAGE RETURN ON INVESTED CAPITAL VS
GDX GOLD INDEX
NST 27%
Sector Average -1.3%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
$8,000
$7,000
$6,000
$5,000
$4,000
M
$
A
$3,000
$2,000
$1,000
$0
In the first half of (cid:41)(cid:60)(cid:20)(cid:28) (cid:49)orthern (cid:54)tar ac(cid:84)uired the (cid:51)ogo (cid:42)old (cid:48)ine
and our proven integration and operating business model is currently
being implemented at the Pogo operations in Alaska. This acquisition
now puts the business in the enviable position of having three Tier-1
assets in Tier-1 jurisdictions and has propelled Northern Star to
become the second largest listed gold producer on the Australian
Securities Exchange. Our primary focus is to deliver similar returns to
our Shareholders over the coming years. Northern Star continues to
operate (cid:69)(cid:92) the mantra of (cid:69)eing a (cid:69)usiness first and a mining compan(cid:92)
second.
(cid:55)his strateg(cid:92) again in (cid:41)(cid:60)(cid:20)(cid:28) has delivered a further significant increase
in value for its Shareholders through accretive organic and inorganic
growth. Our strategy of balancing organic growth with well executed
M&A has generated over A$7.2B of value for Shareholders since the
first ac(cid:84)uisition in (cid:21)(cid:19)(cid:20)(cid:19), (cid:90)ith less than (cid:26)(cid:8) of this value uplift (cid:69)eing
derived from equity issues.
Performance Outcomes in FY19
In 2019, Northern Star continued to deliver strong results. Our
people are responsible for driving and achieving these impressive
results. The strong leadership and proven expertise of the Executive
(cid:38)hairman and the (cid:38)hief (cid:40)(cid:91)ecutive (cid:50)(cid:605)cer in particular have (cid:69)een
integral to sustained performance. The Company’s evolution since
2010 via organic growth and disciplined, selective acquisitions
has built a diverse range of teams with operational and specialist
expertise. The Board recognises that to continue this extraordinarily
successful growth trajectory and to achieve its strategic objectives,
Northern Star must continue to attract, motivate, retain and reward
exceptional people who have accountability for all decisions and the
accompanying risk management challenges, and whose interests are
aligned with our Shareholders.
Maintained focus on our culture and our key areas of performance
is re(cid:565)ected in our safet(cid:92) and financial results for (cid:41)(cid:60)(cid:20)(cid:28)(cid:17) (cid:60)our (cid:37)oard
believes that the remuneration outcomes for FY19 recognise the
performance for FY19.
Notwithstanding outstanding
performance in many areas of the
business, the total STI awarded to the
KMP was 40% out of a total possible 70%
for Company KPIs. Maximum individual KPI
satisfaction (30%) was fully achieved. The Board did
not exercise its discretion to vary the level of the FY19
STI award (positive or negative) when considering overall
Shareholder value generated over the performance period.
See pages 54 and 55 of this Report for further details of the STI
performance targets and performance outcome.
PERFORMANCE SNAPSHOT
LTIFR reduced by
During FY19, the Company continued to deliver strong performance
against many but not all of the stretch targets. The following FY19 STI
targets were achieved:
Cashflow from
operations
ASX Accumulation Index return
of 99% over same time frame
CHART 6 VALUE CREATION FOR SHAREHOLDERS SINCE 2010
$7,254
$7,451
Over A$7.2B of value has been
created through executing organic
and inorganic growth and 61% of all
equity capital raised returned to
Shareholders in dividends since 2010
Remuneration Outcomes FY19
Short Term Incentives
$11
$474
$288
Starting Market
Cap (30/6/10)
Equity Issued
Dividend
Paid/Declared
Value Add
Market Cap
at 30/06/19
This strategy has been achieved through operational excellence,
investing heavily into exploration, growing production, optimising
assets, developing an e(cid:91)ceptional management team and financial
discipline.
The Northern Star business is driven by its STARR Core Values. Safety,
Teamwork, Accountability, Respect and Results. Safety is central to
our culture, and commitment to continual safety improvement is at
the core of Northern Star. This importance is not lost on us and in
CY18 saw a 75% reduction in the total recordable injury frequency
rate (cid:11)(cid:55)(cid:53)I(cid:41)(cid:53)(cid:12) to (cid:22)(cid:17)(cid:26), this figure sitting (cid:25)(cid:21)(cid:8) (cid:69)elo(cid:90) the sector average
of 9.6, with further reduction to 3.3 during the 6-month period to 30
June 2019.
The focus on Northern Star’s culture and the way we operate is
essential to the successful organic growth and integration of new
projects and people. All employees are made aware that our STARR
Core Values must form the basis of all behaviours and actions.
• Safety performance, which was excellent with a continued
improvement year on year resulting in injury frequency rates at
a third of industr(cid:92) (cid:69)enchmark(cid:17) (cid:55)he (cid:55)(cid:53)I(cid:41)(cid:53) of (cid:22)(cid:17)(cid:22) against the (cid:56)(cid:42)
(cid:48)etalliferous Industr(cid:92) Inde(cid:91) of (cid:28)(cid:17)(cid:20) is a significant achievement(cid:30)
• (cid:49)o significant environmental or communit(cid:92) incidents at an(cid:92) of our
operations in (cid:36)ustralia or (cid:36)laska(cid:30)
• Female employment participation for the workforce increased from
19.04% to 22.2%. (This excludes the underground workforce, which
missed the FY19 target of 10% with NSMS female participation at
9.5% as a result of NSMS replacing the incumbent underground
contractors at South Kalgoorlie and Pogo operations). This is above
the industry average of 16%1.
The FY19 STI target for Production was only partially achieved, as
despite the Australian operations achieving the top end of production
guidance, Pogo fell short due to delays in the delivery of new plant
and e(cid:84)uipment (cid:11)part of our significant capital investment since
acquiring control on 28 September 2018), and the implementation of
new mining methods.
The following FY19 STI targets were not achieved, and no portion of
the STI attributable to those targets was paid:
• (cid:49)(cid:51)(cid:36)(cid:55) did not e(cid:91)ceed the e(cid:91)ceptional (cid:41)(cid:60)(cid:20)(cid:27) (cid:49)(cid:51)(cid:36)(cid:55)(cid:30) and
• Falling short of costs guidance.
Reserves increased by
1
Industry average figures taken from McDonald Gold & General Mining Industries Remuneration Report (Australasia) April 2019. Excluding causal employees.
2 Cash at bullion (A$310M) and liquid investments (A$51M) as at 30 June 2019, plus an undrawn revolver facility (A$200M)
45%0.5 (sector 1.6/ FY18: 0.9)
7.4%A$379M (FY18: A$353M)
A$561M
at 30 June 2019
5%A$0.11 per Share
(FY18: A$0.105)
31%to 20.8Moz
35%to 5.4Moz
Liquidity2
Record dividends
Record group sales
840,580oz
(FY18: 570,110oz)
Resources increased by
46
2019 ANNUAL REPORT | REMUNER ATI ON R EPOR T
47
Pogo Acquisition & Completion Bonus
The acquisition of Pogo was announced on 30 August 2018 after
a si(cid:91) month negotiation and due diligence period(cid:17) (cid:55)he significance
of this acquisition and the purchase terms achieved by the
(cid:38)ompan(cid:92) (cid:90)as re(cid:565)ected in the e(cid:91)ceptionall(cid:92) strong (cid:54)hareholder
support for an accompan(cid:92)ing e(cid:84)uit(cid:92) raise and a significant
and sustained re-rating of the Share price. The acquisition was
completed within one month, on 28 September 2018. The due
diligence process identified compelling operational advantages
involving an immediate change to the mining method in order to
increase gold production and reduce costs(cid:17) (cid:42)iven the significant
amount of work involved in securing this opportunity and the
highl(cid:92) successful completion of the transaction(cid:30) (cid:90)here(cid:69)(cid:92) the
Northern Star share price increased 16.6% on announcement
and generated over A$711M of value for existing Shareholders,
the Board decided to award those responsible for driving this
achievement (cid:90)ith a one(cid:16)o(cid:909) cash (cid:69)onus(cid:17) (cid:55)hese (cid:51)ogo (cid:36)c(cid:84)uisition
(cid:9) (cid:38)ompletion (cid:37)onuses re(cid:565)ected the significant (cid:90)orkload,
commitment and acumen involved in the assessment, negotiation
and completion of the acquisition in addition to delivering on
business as usual responsibilities in Australia.
The implementation of the Company’s business model at Pogo is
on track to achieve ke(cid:92) o(cid:69)(cid:77)ectives, (cid:90)ith results re(cid:565)ecting strong
operational gains at all levels, in line with the 18-month transition
plan announced at completion(cid:17) Immediate and significant
improvement in productivities, production and costs are expected
to further improve during FY20 and FY21.
Long Term Incentives
No LTI grant was made in FY19.
FY20 Remuneration decisions
The Northern Star Board recognises that the remuneration
framework is key to promoting engagement and accountability,
and encouraging and rewarding appropriate behaviours, in
line with our STARR Core Values. To ensure that the framework
continues to support the achievement of our strategy, the
Board undertook a comprehensive Company-wide review of the
framework during 2019, taking the following into account:
• (cid:40)(cid:91)ecutive (cid:46)(cid:48)(cid:51) (cid:11)and other senior e(cid:91)ecutive(cid:12) fi(cid:91)ed and varia(cid:69)le
remuneration has not changed since (cid:21)(cid:19)(cid:20)(cid:25)(cid:30)
• (cid:55)here has (cid:69)een significant organic and inorganic gro(cid:90)th in the
Company’s operations and a large increase in size and scale of
the business, expanding the KMP and senior leadership team’s
responsi(cid:69)ilities and risk management (cid:69)ase(cid:30)
• Acquiring Pogo has also deepened the complexity of the
Company’s business. It has added State of Alaska and US
(cid:41)ederal corporate, financial, safet(cid:92) and environmental
compliance and disclosure o(cid:69)ligations(cid:30) a significant increase in
e(cid:91)ploration scale and potential(cid:30) people and culture integration,
and operationally, fundamentally improving mining methods
and other disciplines in the mine, in order to realise Pogo’s
potential on a sustaina(cid:69)le (cid:69)asis(cid:30) and
• The current LTI performance period ends on 16 October
2019 and as a result, a fresh LTI plan is warranted. The
Remuneration Committee is appreciative of the feedback
received from (cid:54)hareholders (cid:90)hich (cid:90)ill (cid:69)e re(cid:565)ected in a ne(cid:90)
plan to be put to Shareholders for approval at the Annual
(cid:42)eneral (cid:48)eeting in (cid:49)ovem(cid:69)er (cid:21)(cid:19)(cid:20)(cid:28)(cid:17) (cid:55)his report e(cid:91)plains
the new remuneration framework and the rationale for the
increase in fi(cid:91)ed and varia(cid:69)le remuneration for the (cid:40)(cid:91)ecutive
KMP from 1 July 2019. The fact that KMP renumeration has
not changed since 2016 and that during that time the size and
complexity of the business has materially increased, has meant
that significant changes are re(cid:84)uired to (cid:46)(cid:48)(cid:51) remuneration
to ensure our remuneration policy objectives are met, as
detailed in this Report. Benchmarking and structuring advice
from external remuneration advisers indicated that the
senior leadership team including the KMP remuneration at
maximum performance for FY19 was well below the Company’s
target of 75th percentile when performance meets stretch
targets. When developing the changes to the Executive KMP
remuneration framework, the Remuneration Committee has
taken into account market (cid:69)enchmark data, significant e(cid:91)ternal
labour demand pressure, the poaching risk and competition
for our e(cid:91)ceptional people, and the (cid:38)ompan(cid:92)(cid:519)s financial
strength and success delivered by employees to date.
I would like to thank Shirley In’t Veld who chaired the
Remuneration Committee during FY193 and was integral to the
review process.
Yours faithfully
Nick Cernotta
Chairperson – Remuneration Committee
3 Shirley In’t Veld resigned as Chairman of the Remuneration Committee with
effect on 26 July 2019 as a result of the committee restructure process that was
undertaken when the Board was expanded
48
2019 ANNUAL REPORT | REMUNER ATI ON REPOR T
49
Remuneration Report
Details of the Key Management Personnel
Financial Performance over the past 5 years
The following Executives and Non-Executive Directors (NEDs) were considered Key Management Personnel (KMP) for FY19 or appointed since the
end of FY19. Former Executives and NEDs who were KMP for FY18 are also covered by this Report, where required.
TABLE 12 NST FY PERFORMANCE VS ASX FY ACCUMULATION INDEX PERFORMANCE
DIRECTOR
Bill Beament
John Fitzgerald
Chris Rowe
Peter O’Connor
Shirley In’t Veld
Mary Hackett
Nick Cernotta
ROLE
Executive Chairman
Lead Independent Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
The following people held their Executive KMP positions during the last financial year.
EXECUTIVE KMP
Stuart Tonkin
Luke Creagh
Michael Mulroney
Ryan Gurner
Hilary Macdonald
ROLE
Chief Executive Officer
Chief Operating Officer
Chief Geological Officer
Chief Financial Officer
APPOINTMENT DATE
20 August 2007
30 November 2012
20 February 2003
21 May 2012
1 September 2016
1 July 2019
1 July 2019
APPOINTMENT DATE
29 October 2016
1 November 2018
1 June 2015
16 October 2018
General Counsel & Company Secretary
23 February 2018
FORMER EXECUTIVE KMP
ROLE
Shaun Day
Chief Financial Officer
PERIOD OF APPOINTMENT
Appointed 13 October 2014
Ceased 16 October 2018
Executive KMP Remuneration Policy and
relationship with performance
Executive KMP Remuneration Policy
Our Remuneration Policy is designed to support our Vision – to
continue to build a safe quality mining and exploration company
focused on creating value for Shareholders, and our Mission – to
generate accretive earnings value for our Shareholders through
operational effectiveness, growth opportunities and exploration with
a prime focus on success and meeting Shareholder expectations. Our
strategy is clear: to develop a responsible Company that is attractive
to global investors. Our Executive KMP Remuneration Policy and
practices underpin our business strategy, which includes:
1. Sustaining critical mass – maintaining gold production from three
Tier-1 mining operations.
2. Maintaining a geographically diversified asset base through our
portfolio of Tier-1 operating mines.
3. Ensuring our assets have significant mine lives.
4. Maintaining low cost operations – constantly driving efficiencies
and productivity to achieve the lowest possible all-in sustaining
costs.
5. Upholding strong financial disciplines – continuing to deliver
superior results and maintaining our track record of paying fully-
franked dividends to Shareholders.
Implementing our strategy
Imperative for the implementation of Northern Star’s business
strategy is:
• The quality of our workforce.
• The delivery of sustainable operations – we are highly focused on
safety and committed to strong environmental management and
social responsibility.
• Investing in exploration to maximise the value of our existing
assets by examining known in-mine, near-mine and regional
targets.
• Using management experience to make well-informed decisions
and implement our initiatives in a timely and prudent manner.
“Our strategy is clear:
to develop a responsible
Company that is attractive
to global investors.”
– Stuart Tonkin
Chief Executive Officer
Total Shareholder return 4
125%
NST FY Performance vs ASX FY Accumulation Index Performance
1%
ASX Accumulation Index return 5
13%
14%
55%
11%
62%
(7%)
FY19
FY18
FY17
FY16
FY15
72%
6%
Northern Star Outperformance 6
51%
41%
(20%)
124%
66%
CHART 7 NST FY PERFORMANCE VS ASX FY ACCUMULATION INDEX PERFORMANCE
NST FY19 62%
NST AU Equity
ASA30 Index
NST FY18 55%
NST FY16 125%
NST FY17 (7%)
NST FY15 72%
ASA Index FY19 11%
ASA Index FY15 6%
ASA Index FY16 1%
ASA Index FY17 13%
ASA Index FY18 13%
JUN 14
JUN 15
JUN 16
JUN 17
JUN 18
JUN 19
CHART 8 FINANCIAL PERFORMANCE OVER 5 YEARS
9
1
1
0
1
.
5
0
1
3
8
3
9
7
3
5
4
.
6
9
5
3
9
5
3
3
5
3
FY15
FY16
FY177
FY18
FY19
FY15
FY16
FY177
FY18
FY19
Dividends per Share (¢)8
Cashflow from operations ($M)
5
6
1
1
.
6
2
7
.
%
5
2
1
%
2
7
1
2
2
.
4
9
4
.
5
7
4
.
%
2
6
%
5
5
%
7
FY15
FY16
FY177
FY18
FY19
FY15
FY16
FY177
FY18
FY19
Share price (30 June) ($)
Total Shareholder Return4
4 Total Shareholder Return (TSR) is calculated as the change in share price plus dividends paid during the year, divided by the share price at the beginning of the year
5 The Australian Accumulation ll Ordinaries Index is a total return index based on the Australian All Ordinaries Index with dividends reinvested
6 Northern Star Outperformance is defined as the Share price performance above this index and does not include dividends that Northern Star has paid to Shareholders
7
Includes divestment of Plutonic operations
8 Dividends per Share are those paid per Share in FY19
9 Dividends of $0.05 per Share paid in September 2018 and $0.06 per Share paid in April 2019
50
2019 ANNUAL REPORT | REMUNER ATI ON REPOR T
51
Remuneration Report
Executive KMP Remuneration Policy and relationship with performance cont’d
TABLE 14 REMUNERATION MIX FOR EXECUTIVE KMP IN FY19
TABLE 13 EXECUTIVE REMUNERATION POLICY OBJECTIVES & PRACTICES ALIGNED TO THEM
REMUNERATION POLICY OBJECTIVE
PRACTICES ALIGNED WITH REMUNERATION POLICY OBJECTIVE
Retain an experienced, cohesive, proven
high performance multi-disciplinary
team to deliver the Company’s strategic
objectives
• Provide remuneration that is internally fair.
• Ensure remuneration is competitive with the external gold industry market.
• Provide total remuneration opportunities sufficient to attract and retain proven and experienced
Executive KMP who are at risk of becoming global company poaching targets.
Align Executive KMP interests with
Shareholders
• A significant proportion of remuneration is performance-based and delivered in shares, aligning Executive
KMP reward with increased value for Shareholders.
• The LTI plan uses performance metrics measured against stretch targets that reward for longer term
value, consistent with our business strategy.
Focus on safety
• Safety performance metrics, covering employee and contractors, in order to measure performance over
different time horizons for sound risk management and to ensure outcomes cannot be gamed for a short-
term result that may not have regard for the longer term.
Focus on sustained costs and production
performance
• STI including:
– Challenging annual production targets;
– Deliver on competitive production costs.
Focus on our people and create a desirable
Company culture
• Provide incentives that promote a healthy culture to attract and retain a diverse and inclusive workforce in
line with the STARR Core Values.
• Encourage engagement with and the development and retention of its people to ensure a sustainable
supply of diverse talent.
Focus on social licence
• STI includes reward for zero harm to the environment, community relations and improving gender
diversity throughout the organisation.
FIXED REMUNERATION (TFR)
SHORT TERM INCENTIVES (STI)
LONG TERM INCENTIVES (LTI)
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.
To provide an annual, market competitive
cash incentive to reward high performing,
engaged Executive KMP incorporating
performance metrics aligned with the
creation of Shareholder wealth. This is
to ensure executives have their eye on
the ball for the Company’s near-term
deliverables.
To focus Executive KMP on drivers
of Shareholder value over a three-
year period from the single grant of
performance rights in FY17, to retain
executive KMP and motivate with market
competitive incentives to pursue the long-
term growth and success in line with the
Company’s strategy, vision and mission.
Fixed remuneration is set at a level that
takes into account the role responsibilities
and individual capabilities, benchmarked
against market data for comparable roles
in a similar industry sector and with a
similar market capitalisation.
STI opportunity is based on a % of TREM10
having regard to market practice for roles
and service period at the time of award,
with a range of percentages.
The Remuneration Committee is
responsible for assessing performance
against KPIs and determining the STI to be
awarded.
LTIs promote alignment with long term
Company performance over three years
using performance metrics aligned with
Shareholder returns.
The Remuneration Committee is
responsible for assessing performance
against these metrics and determining the
LTI to be awarded.
Purpose
Northern
Star
approach
Annual performance review conducted by
the CEO and/or Remuneration Committee
and periodic remuneration reviews are
conducted as appropriate, benchmarked
against market data for comparable roles
in a similar industry sector and with similar
market capitalisation.
Executive KMP remuneration for FY19
Assessment
The mix and level of fixed and variable performance-based remuneration for the Executive KMP is set with the objective of:
• attracting and retaining high performing employees; and
• driving superior performance and achievement of the Company’s strategic objectives.
The remuneration mix is weighted towards variable remuneration awarded in equity, to motivate, focus and reward for achievement of strategic
objectives and to ensure alignment with Shareholders.
An additional cash bonus was paid during the year to recognise the significant additional work undertaken and the successful completion of the
Pogo acquisition. Further details about the Pogo Acquisition and Completion Bonus are provided on page 56.
Pages 58 - 63 of this Report gives details of the review of Executive KMP remuneration in FY20 conducted by the Remuneration Committee to date,
to ensure the remuneration framework continues to meet its objectives.
Fixed remuneration comprises cash salary
and direct costs of providing employee
benefits, including superannuation, office
car parking, private health insurance11,
salary continuance insurance12, deemed
premiums paid for D&O Insurance and
FBT.
Delivery
Balanced scorecard using a combination
of Company (financial and non-financial)
and individual performance measures:
• Safety – TRIFR (15%)
• Financial – NPAT (10%)
• Financial – production Koz (25%)
• Financial – production costs AISC/oz (10%)
• Social licence – environment and social
outcomes; gender diversity (10%)
• Personal objectives (30%)
Threshold, target and in some cases,
maximum (stretch) targets are set for
each performance measure to drive
desired business and individual outcomes.
The annual budget generally forms the
basis for target performance. Individual
performance measures for the Executive
KMP are personal stretch targets
applicable to their role, and are set to
reflect business priorities. The relative
weightings of each performance measure
also depend on the Company’s strategic
goals.
Performance period – one year.
100% of STI outcomes paid in cash after
the end of the financial year.
Board retains discretion over award
and forfeiture of STIs for Executive KMP
and other employees, including upon
termination of employment. Discretion is
only exercised by the Board in exceptional
circumstances, in which case the use
of discretion and the impact is clearly
disclosed in the Company’s relevant
remuneration report.
Vesting is subject to meeting Total
Shareholder Return measures (against
an industry specific peer group) and long-
term safety performance:
• Financial – Absolute TSR (60%)
• Financial – Relative TSR (20%)
• Safety – LTIFR (20%)
The performance measures have been
set to align with the long-term goals
and performance of Northern Star. The
majority of the LTI is aimed at generating
strong Shareholder returns. Safety is the
other performance measure for LTI, as this
is the Company’s number one STARR Core
Value. A Safety performance measure is
included for both the LTI and STI to ensure
that the Executive Chairman’s variable
remuneration included a Safety-related
performance component (as the Executive
Chairman was not eligible to receive an
STI).
Performance period – three years.
Awards of performance rights.
Each performance right when vested
is convertible into one fully paid Share.
Shares resulting from vested performance
rights which are exercised are:
• 50% unrestricted;
• 25% subject to 1-year holding lock;
• 25% subject to 2-year holding lock.
Performance rights do not entitle the
holder to receive dividends.
Board retains discretion to waive forfeiture
upon termination of employment, in
appropriate circumstances. Discretion is
only exercised by the Board in exceptional
circumstances, in which case the use
of discretion and the impact is clearly
disclosed in the Company’s relevant
remuneration report.
10 TREM means total remuneration comprising base salary and superannuation (only)
11 All permanent Northern Star employees (other than those on probation) receive private health insurance benefits
12 All permanent Northern Star employees receive salary continuance insurance
52
2019 ANNUAL REPORT | REMUNER ATI ON REPOR T
53
Remuneration Report
Executive KMP realised remuneration for FY19 (voluntary, face value disclosure)
Table 15 below discloses cash remuneration paid and equity vested (on a face value basis) to Executive KMP in FY19 (compared to FY18).
The purpose of this table is to clearly illustrate:
• the alignment between Shareholders and Executive KMP in terms of share price growth.
• full year take home pay (in cash and vested performance shares) by the current Executive KMP, including their previous roles with the Company
in FY18 and/or FY19 (as applicable).
This table has not been prepared in accordance with statutory obligations and Australian Accounting Standards. It differs from the Table 21 on
pages 66 and 67 of this Report, which presents the remuneration outcomes prepared in accordance with statutory obligations and Australian
Accounting Standards. Table 15 is a voluntary disclosure provided to improve transparency and to ensure that Shareholders are able to clearly
understand the actual remuneration outcomes for Executive KMP in FY19 (benchmarked against those in FY18).
TABLE 15 TOTAL REMUNERATION PAID OR REALISABLE FOR PERFORMANCE ASSESSED IN FY19 AND FY18
EXECUTIVE CHAIRMAN
REMUNERATION OUTCOMES
FY19
$’000
FY18
$’000
FY19 VS
FY18
CHIEF GEOLOGICAL OFFICER14
REMUNERATION OUTCOMES
TFR – salary, super & other benefits
772
742
4.1%
TFR – salary, super & other benefits
STI – cash
-
-
-
STI – cash
LTI – performance shares
1,305
1,622
(19.5%)
LTI – performance shares
160
0
100%
Pogo Bonus
FY19
$’000
386
93
657
50
FY18
$’000
389
137
0
0
FY19 VS
FY18
(0.9%)
(32.0%)
100%
100%
Pogo Bonus
Total
Performance shares price growth
2,913
5,078
(42.6%)
Performance shares price growth
1,466
0
100%
Total including share price growth
5,151
7,443
(30.8%)
Total including share price growth
2,652
526
403.9%
CHIEF EXECUTIVE OFFICER
REMUNERATION OUTCOMES
TFR – salary, super & other benefits
STI – cash
LTI – performance shares
Pogo Bonus
Total
FY19
$’000
630
152
873
125
FY18
$’000
627
224
0.4%
TFR – salary, super & other benefits
(32.0%)
STI – cash
1,082
(19.3%)
LTI – performance shares
0
100%
Pogo Bonus
1,780
1,932
(7.9%)
Total
Performance shares price growth
1,948
3,385
(42.5%)
Performance shares price growth
Total including share price growth
3,728
5,318
(29.9%)
Total including share price growth
1,124
1,364
(17.6%)
CHIEF OPERATING OFFICER13
REMUNERATION OUTCOMES
FY19
$’000
FY18
$’000
FY19 VS
FY18
GENERAL COUNSEL & CO. SEC.16
REMUNERATION OUTCOMES
FY19
$’000
TFR – salary, super & other benefits
STI – cash
LTI – performance shares
Pogo Bonus
Total
Performance shares price growth
378
64
282
80
804
628
345
85
349
0
779
3.4%
(29.6%)
(19.4%)
100%
(0.2%)
TFR – salary, super & other benefits
367
STI – cash
LTI – performance shares
Pogo Bonus
Total
1,094
(42.5%)
Performance shares price growth
0
0
0%
Total including share price growth
1,432
1,873
(24.9%)
Total including share price growth
494
417
18.5%
13 Appointed COO on 1 November 2018. This Table includes actual remuneration earned in previous role, General Manager Business Development, from 1 July 2018 to 31 October 2018
14 Mr Mulroney was not an employee on 9 October 2014, therefore did not receive a grant of FY15 long term incentives
15 Appointed CFO on 16 October 2018. This Table includes actual remuneration earned in previous role, General Manager Finance, from 1 July 2018 to 15 October 2018
16 Appointed GC on 12 December 2016; Co Sec on 23 February 2018. Ms Macdonald was an external consultant and not an employee on 9 July 2015, therefore did not receive a grant of
FY15 or FY16 long term incentives
321
54
224
25
624
500
254
57
255
0
565
798
26.4%
(4.9%)
(12.1%)
100%
10.3%
(37.3%)
FY18
$’000
326
90
0
0
FY19 VS
FY18
12.3%
(31.1%)
0%
100%
62
0
65
494
417
18.5%
Northern Star has materially outperformed the ASX accumulation index and delivered best in class returns for its shareholders. In terms of LTIs
paid in FY19 and FY18 two tranches of LTI’s were awarded due to timing and vesting dates for the FY16 and FY15 LTI tranches. The returns and
levels of outperformance are illustrated in and Chart 9 for the FY16 tranche and in Chart 10 for the FY15 tranche.
CHART 9 FY16 PERFORMANCE SHARES NST
NST FY Performance vs ASX FY Accumulation Index Performance
OUTPERFORMANCE VS ASX ACCUMULATION INDEX
CHART 10 FY15 PERFORMANCE SHARES NST
OUTPERFORMANCE VS ASX ACCUMULATION INDEX
223% increase in Share
price over performance period
Face Value at
Vesting Date $7.05
315% increase in Share price
over performance period
Face Value at
Vesting Date $4.94
2,238
2,364
(5.3%)
Total
1,186
526
125.3%
Face Value at
Grant Date $2.18
Face Value at
Grant Date $1.19
NST Outperformance vs Accumulation Index
NST Outperformance vs Accumulation Index
FY19 VS
FY18
CHIEF FINANCIAL OFFICER15
REMUNERATION OUTCOMES
FY19
$’000
FY18
$’000
FY19 VS
FY18
NST AU Equity
ASA30 Index
NST AU Equity
ASA30 Index
Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Jan 18 Apr 18 Jul 18
Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17
TFR is Total Fixed Remuneration earned during the relevant financial year. TFR comprises gross base salary, superannuation capped at $30,000,
and includes non-monetary benefits provided by the Company, such as office car parking bay, the deemed premiums for Directors and Officers
Indemnity insurance, private health insurance, salary continuance insurance, and the applicable fringe benefits tax paid on these non-monetary
benefits.
STI is Short Term Incentive awards paid in cash during the relevant financial year. The STI paid in FY19 was the FY18 STI award (paid in August
2018). The STI paid in FY18 was the FY17 STI award (paid in August 2017). The Executive Chairman is ineligible for STI awards.
LTI is the face value at grant date of the Long Term Incentive awards that vested during the relevant financial year. The LTI performance shares
that vested in FY19 were the FY16 LTI performance shares issued on 9 July 2015, measured on 30 June 2018 (which vested on 20 July 2018). The
LTI performance shares that vested in FY18 were the FY15 LTI performance shares issued on 9 October 2014, measured on 30 June 2017 (which
vested on 23 August 2017).
Pogo Bonus is the Pogo Acquisition & Completion Bonus, being a one-off discretionary cash bonus awarded to employees that were critical to the
Company securing the Pogo operations, which included the Executive KMP, to reflect the significant workload, commitment and acumen involved in
the assessment, negotiation and completion of the acquisition.
Performance shares price growth is the increase in value over the three year performance period for the FY16 LTI performance shares (which
vested during FY19) and for the FY15 performance shares (which vested during FY18), calculated as the difference between the face value at the
grant date and the face value at the vesting date, using a 5-day VWAP – to demonstrate the alignment of the LTIs with the growth in Shareholder
wealth.
54
2019 ANNUAL REPORT | REMUNER ATI ON REPOR T
55
Remuneration Report
Short Term Incentives – performance against STI Targets for FY19
COMPANY TARGETS
WEIGHT
TOTAL
BY OPERATION
DESCRIPTION OF THRESHOLD AND
MAXIMUM
Achieve TRIFR of 7.5 or less (50%)
Achieve TRIFR of 5 or less (100% at 5,
pro rata)
OUTCOME
DESCRIPTION OF PERFORMANCE OUTCOME
THRESHOLD
MAXIMUM
TRIFR of 3.3 was achieved. This is an outstanding result, being <1/3 of the industry benchmark (UG Metalliferous Industry Index of
9.1). There were no fatalities.
Group
Group
Maintain or exceed FY18 NPAT
NPAT did not exceed prior year’s NPAT, despite Australian operations exceeding budget.
Top end of guidance production was achieved at the Australian operations with 639,243oz (rounded up to 640koz) Production met.
17.5%
17.5%
Australia
600koz (0%) pro rata to 640koz (100%),
pro rata up to 650koz (125%)
7.5%
Pogo
250koz (0%) pro rata to 260koz (100%),
pro rata up to 270koz (125%)
7%
Australia
AISC within stated guidance
>A$1,125/oz (0%), ≤A$1,125/oz (100%)
3%
Pogo
AISC within stated guidance
>US$880/oz (0%), ≤US$880/oz (100%)
Pogo produced of 201,337oz in Au.
Due to lower production.
Due to lower production.
Safety – TRIFR
Financial – NPAT
15%
10%
Gold production – koz
25%
Costs – AISC/oz
10%
Social Licence
10%
2.5%
2.5%
2.5%
2.5%
No significant environmental incidents
No adverse environmental incidents
No significant community incidents
No adverse community incidents.
NSR female employment >20%
NSMS female employment >10%
Female employment metrics were exceeded by NSR at 22.2%,
Female employment metrics were not achieved for NSMS at 9.5%, due to NSMS replacing incumbent underground contractors at
SKO & Pogo
Total Company Target
70%
Total Company Outcome
INDIVIDUAL TARGETS
WEIGHT SUMMARY OF INDIVIDUAL TARGETS
(ABOVE ORDINARY DUTIES)
OUTCOME
DESCRIPTION OF PERFORMANCE OUTCOME
%
Y / N
Stuart Tonkin (CEO)
30%
People succession and development; actions to implement
5-year strategy; underground mining improvements; post
completion integration of Pogo
Luke Creagh (COO)
30%
Underground mining improvements; actions to implement
5-year strategy; post completion Pogo integration
Michael Mulroney (CGO)
30%
Exploration budget management; innovation in discovery;
geological team skills development; post completion Pogo
integration
Ryan Gurner (CFO)
30%
Improvements in financial reporting, costs management,
transaction ready
Hilary Macdonald (GC/CS)
30%
Elevate company secretary support to the Board, and
disclosures; drive multiple external legal workflows; post M&A
regulatory compliance
Delivered on strategy actions with post completion Pogo integration and whole of business improvements made; significant
additional responsibilities with an additional 350 personnel at Pogo and contractors, overseeing change in mining methods,
geological, financial, safety and legal familiarisation and improvements in Pogo post completion.
Increased the level of assessment in the business in relation to culture and capability with the hire of an executive manager to drive
gap analysis and improvements in people performance, attraction and retention with commensurate benefits in safety, personnel
retention and results. Monthly site visits to Pogo did not compromise outstanding achievements in oversight for the Kalgoorlie and
Jundee operations in terms of productivity and capability, and safety achievements across the business.
Successful post completion integration of Pogo; business improvements made simultaneously at Pogo post completion; managing
the skillset analysis and training needs of incumbent Pogo personnel and sourcing experienced trainers to boost Pogo capability
for increased productivity, automation training, and replacing the incumbent underground mining services contractor at Pogo,
changes to technical business model at Pogo, involving monthly site visits to Pogo which did not impact on level of support and site
presence at the Kalgoorlie and Jundee operations.
Focused efforts on post completion Pogo integration with a rapid conversion of Pogo Resources and Reserves to JORC 2012
standard within a short timeframe in order to enhance the understanding of the Pogo potential and growth opportunities.
Established growth drilling programmes at Pogo; implementation of geological control standards at Pogo and significantly
improving geological practices and disciplines at Pogo, whilst overseeing Kalgoorlie and Jundee growth.
Assumed CFO role seamlessly, with post completion work at Pogo not derogating from the quality of the Finance team’s support
of the Group’s Kalgoorlie and Jundee operations. Post completion Pogo achievements beyond business as usual duties included
replacement of existing business systems at Pogo with a superior product; establishing new banking relationships and significant
equipment lease arrangements in the US. Improving standards of oversight and governance over employee pension plan savings
of US$52M; achieving significant savings following a strategic review of material procurement contracts and negotiations with key
Pogo suppliers. Improving costs control as a result of recruiting to increase the subject matter expert capabilities within the Finance
team particularly in relation to internal tax advisory capability.
Performance over and above ordinary duties included delivery of the dual role, with improved Board governance support and
proxy adviser engagement, and post completion Pogo transaction integration. This involved upskilling in US State and Federal
safety, corporations and employment legislation, tenure management in Alaska; working with the Pogo safety, HR, geological,
procurement, environmental departments and suppliers in transitioning Pogo to Northern Star’s policies and procedures to reflect
US State and Federal law and customary practices. Settlement of Pogo vendors’ legacy litigation matters on appropriate terms
within 6 months of acquiring Pogo, involving site visits to Pogo and numerous meetings in the US with the Pogo vendors’ multiple
law firms for a seamless handover of all legal matters. This enhanced the business’ understanding of its legal responsibilities in the
US without compromising the quality and timing of business as usual legal advisory work to the Jundee and Kalgoorlie operations.
Individual Target
30%
TOTAL STI TARGET
100% OVERALL PERFORMANCE
Individual Outcome
TOTAL STI OUTCOME
30%
30%
30%
30%
30%
30%
70%
ACHIEVED
%
Y / N
15%
0%
0%
0%
0%
2.5%
2.5%
2.5%
0%
40%
56
2019 ANNUAL REPORT | REMUNER ATI ON REPOR T
57
Remuneration Report
Short Term Incentives paid in FY19
Following the acquisition of Pogo, during FY19, the Remuneration
Committee adjusted the FY19 STI framework to reflect the expanded
operations and ensure that the revised targets were no less
challenging than those which were originally set.
CHART 11 FINAL STI OUTCOMES FOR FY19 (PAID IN AUGUST 2019)17
The preceding table details the extraordinary tasks and achievements
of the Executive KMP in the period following completion of the Pogo
acquisition, from 28 September 2018 to 30 June 2019, which were
over and above the ordinary duties of the Executive KMP in relation to
the business.
$151,900
Stuart Tonkin Chief Executive Officer
$63,551
Luke Creagh Chief Operating Officer
$93,100
Michael Mulroney Chief Geological Officer
$53,871
Ryan Gurner Chief Financial Officer
$62,125
Hilary Macdonald General Counsel & Company Secretary
17 Executive Chairman is not eligible to receive an STI
Pogo Completion Bonus Paid In FY19
STI Amount ($)
On 30 August 2018 Northern Star announced its intention to
acquire the high-grade 4.1Moz Pogo underground gold mine in
Alaska for US$260.3M (A$360.4M). It was further announced that
completion of the transaction was to occur within a month of the
acquisition announcement. This would allow the mine operations
to be substantially overhauled, mine plans developed, exploration
to increase as soon as possible, and conversion of non-JORC Code
resources and reserves to JORC 2012 Mineral Resources and Ore
Reserves, to allow improvements in production and gold sales, and
transparency in reporting on progress at Pogo, for the benefit of
Shareholders, as quickly as possible.
Our people who faced significant challenges including operational,
legal, compliance, cultural and people flexibility challenges,
managed to have the transaction completed within the timeframe
foreshadowed to the market, on 28 September 2018. This was a
phenomenal achievement, as it was a highly ambitious target by any
company’s standards.
Our track record in having a short timeline between execution of sale
agreement and completion of the deal, was a point of advantage in
the vendor’s selection of Northern Star as the successful buyer over
a large field of competition bidding for the Pogo mine. The expedited
process allowed Northern Star to secure the purchase of the asset for
its Shareholders.
In recognition of the significant value delivered to Shareholders in
the accelerated execution of the transaction, the Board decided to
award those involved a cash bonus. It is also worth noting that the
transaction generated A$711M in value on the day of announcement
for Shareholders. The total Pogo Acquisition & Completion Bonus
paid to employees heavily involved in the assessment, negotiation
and completion of the Pogo acquisition was A$656,408 or 0.1% of the
uplift on the first day of trading post-announcement. Bonuses paid to
KMP and the total of bonuses paid to other employees is indicated in
the table below.
CHART 12 POGO ACQUISITION & COMPLETION BONUS PAID TO KMP AND OTHER EMPLOYEES
$126,408
Total paid to other employees
$160,000
Bill Beament Executive Chairman
$125,000
Stuart Tonkin Chief Executive Officer
$80,000
Luke Creagh Chief Operating Officer 18
$50,000
Michael Mulroney Chief Geological Officer
$25,000
Ryan Gurner Chief Financial Officer 19
$65,000
Hilary Macdonald General Counsel & Company Secretary
$25,000
Shaun Day Former Chief Financial Officer 20
18 Paid in respect of previous role, General Manager Business Development. Appointed Chief Operating Officer on 1 November 2018
19 Paid in respect of previous role, General Manager Finance. Appointed Chief Financial Officer on 16 October 2018
20 Paid in respect of then current role as Chief Financial Officer. Mr Day ceased as Chief Financial Officer on 16 October 2018
Long Term Incentives – LTI performance rights
LTI – FY19
No long term incentives were granted in FY19. The most recent grant
was in FY17.
LTI granted in FY17
A single tranche of performance rights21 was granted to each of the
Executive KMP (and other senior management) under the Company’s
FY17 Long Term Incentive Plan during FY17, which remain subject
to vesting upon satisfaction of performance hurdles over a three-
year performance period. The performance period for the safety
performance hurdle ended on 30 June 2019 and has been satisfied.
The performance hurdles for Absolute and Relative TSR will be
assessed on 16 October 2019. An ASX release will communicate
the outcome to Shareholders, in a transparent manner, for their
information.
Vesting of the LTIs will occur subject to achievement of the
performance hurdles set out in the following table. Upon vesting
the employee may give the Company an exercise notice and the
corresponding number of Shares will be issued to the employee. No
additional service condition applies after vesting.
After vesting and following delivery of an exercise notice by the
employee to the Company no later than 21 December 2022:
• 50% of the resulting Shares will have no disposal restrictions;
• 25% of the resulting Shares will be restricted from disposal for 12
months; and
• 25% of the resulting Shares will be restricted from disposal for 24
months.
TABLE 16 FY17 LTI PERFORMANCE RIGHTS - PERFORMANCE HURDLES
ELEMENT
WEIGHT
TARGET
VESTING – PRO RATA
ACHIEVED
Financial –
Absolute TSR
60%
Absolute TSR of 15%
compound annual
growth rate (CAGR)
<10% = 0% vest
=10% = 50% vest
>10% to <15% = pro-rata vest
≥15% = 100% vest
Financial –
Relative TSR
20%
Relative TSR of ≥50%
of peer group22
<50th percentile = 0%
=50th percentile = 50%
>50th to <75th percentile = pro-rata
≥75th percentile = 100%
to be measured
at 16 October
2019
to be measured
at 16 October
2019
PROGRESS
SO FAR
ON TRACK
ON TRACK
Safety – Reduction
in LTIFR
20%
20% year on year
reduction in LTIFR
from current levels
(at 30 June 2019)
>2.5 = 0%
=2.5 = 50%
<2.5 to ≥2.1 = pro-rata
≤2.0 = 100%
20%
ACHIEVED
TOTAL
100%
TBA
ON TRACK
21 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 relation 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 (and other senior management employees). 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 being
exercised. 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 having regard to the employee’s role, the length of the remaining performance period and other factors leading to the exit of the employee from the Company.
22 Peer group comprises the following ASX, LSE and TSX companies: 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, selected on the basis of the Company’s operations and market capitalisation.
58
2019 ANNUAL REPORT | REMUNER ATI ON REPOR T
59
Remuneration Report
FY20 remuneration framework –
key changes from FY19
Your Board acknowledges that the remuneration framework is key to
promoting engagement, retention, accountability, encouraging and
rewarding appropriate behaviours, and discouraging inappropriate
behaviours, in line with our STARR Core Values.
To ensure that Northern Star’s remuneration framework continues
to support the achievement of Northern Star’s strategy, the Board
undertook a comprehensive review in 2019, taking into account:
• Executive KMP (and other senior management) fixed and variable
remuneration has not changed since 2016;
• The Company’s financial and non-financial performance and
growth in the scale of its operations to include Pogo in Alaska.
• The added complexity of now operating in multiple jurisdictions,
and the associated challenges, for example in travel time,
significant time commitments on site for all of the KMP and
senior leadership team during the post completion integration
phase which is ongoing; corporate and tax compliance, safety and
employment statutory regimes and practices, and the regulatory
framework in which we now operate;
• Our high performing employees are operating in an increasingly
tight and competitive labour market for their proven skills; and
• The upcoming expiry of the 2016 AGM approval under the
ASX Listing Rules for the existing LTI plan, and the need for an
appropriate replacement incentive plan to incentivise, motivate
and retain Executive KMP (and other senior management
employees).
The FY20 Incentive Plan will be put to Shareholders for approval
together with the proposed grants of incentives to the Executive
Chairman at the Annual General Meeting to be held in November
2019. No incentives will be granted under the FY20 Incentive Plan until
after the Annual General Meeting.
“Northern Star’s
remuneration framework
continues to support the
achievement of Northern
Star’s strategy....”
– Nick Cernotta
Non-Executive Director and
Chairperson Remuneration
Committee
The structure of the FY20 Incentive Plan and framework was designed
to reflect the Company’s long-term strategy and the human capital
needs of the business to deliver strategy. This is imperative to retain
and incentivise the Company’s high-performance team and to drive
the link between the Executive KMP remuneration, the Company’s
performance and delivery of long term Shareholder value.
This section of the Report explains the FY20 remuneration framework
and the rationale for the changes made to the FY19 remuneration
framework. The Board have received guidance and relevant industry
benchmarking and structuring advice from external remuneration
advisers (detailed on page 65 of this Report), to ensure that Executive
KMP and other senior executives are appropriately motivated and
aligned to Shareholders’ interests.
TABLE 17 KEY CHANGES TO THE FY19 REMUNERATION FRAMEWORK AND RATIONALE FOR CHANGES
FY19 REMUNERATION
FRAMEWORK
Remuneration positioning
Market Position Originally set at the 75TH percentile of
comparator companies for maximum
performance in 2016
FY20 REMUNERATION FRAMEWORK23
RATIONALE FOR CHANGE
To be at least at the 75TH percentile of comparator
companies for maximum performance
To offer remuneration
packages that are effective
in retaining an experienced,
cohesive, proven high
performance multi-disciplinary
team to deliver the Company’s
strategic objectives as
well as delivering value for
Shareholders.
Short Term Incentive
Delivery
100% cash
50% cash (may elect to receive as Performance Rights)
50% Performance Rights (half vest after one year with
the remaining rights vesting after a further year)
Improved alignment with
Shareholder interests.
Allocation
methodology
Varying percentages of TREM24
according to role
Varying percentages of TREM according to role
performed
No change.
Performance
Measures and
targets
Refer to table on page 54
Performance
period
1 year
Escrow
N/A
Company performance - 70%
Individual performance - 30%
Company measurable objectives are risk management,
production performance and financial management.
A minimum of three individual measurable objectives
are applied at CEO discretion to employees most in
a position to influence behaviours and outcomes,
including female participation, culture and growth in
Reserves and Resources.
The objectives are measurable
and targets designed to
motivate and influence
behaviours, with weighting
towards financial metrics.
1 year
No change.
The 50% of the STI that is delivered in performance
rights is subject to a one year escrow.
Requires STI performance
rights to be held for longer.
Change of
Control
Board discretion to award
• Automatic vesting on a takeover bid to acquire 50% or
more of the issued capital and the takeover bid becomes
unconditional
• Scheme of Arrangement to be treated similarly, if
Company is the entity the subject of the Scheme
The Board retains discretion as to when to apply
Clawback and Malus, such as in instances of:
• Material financial misstatements;25
• Major negligence
• Significant legal, regulatory and/or policy non-compliance
• Significant harmful act by an individual
in which case all employee’s Performance Rights must
be forfeited (Malus). If Performance Rights have been
exercised into Shares and sold, clawback of the sale
proceeds net of tax may occur at the Board’s discretion
Following the issue of Shares resulting from the vesting
and exercise of performance rights, dividends are
payable to the employee in respect of those Shares
Board discretion to award or forfeit on a case by
case basis – forfeit pro rata according to balance of
performance period; longevity in role and reasons for
leaving are taken in to account.
Flexibility provided in the Board having discretion on
who participates, allocation methodology, quantum,
performance hurdles, vesting, application of service
condition and treatment on exit of employee from the
Company
Aligns Executive KMP with
Shareholders.
Aligned with Shareholders
expectations that financial
rewards should not be retained
where for example significant
corporate misconduct or
catastrophic incident occurs.
Aligns Executive KMP with
Shareholders.
Added equity component (and
escrow inherent in that) leads
to a slightly different approach.
No change as considered
sound practice.
Clawback/
Malus
None
Dividends
Treatment
of unvested
awards upon
employee exit
Board
Discretion
Following the issue of Shares
resulting from the vesting and
exercise of performance rights,
dividends are payable to the
employee in respect of those Shares
Board discretion to award or forfeit
on a case by case basis – typically
forfeit all
Flexibility provided in the Board
having discretion on who
participates, allocation methodology,
quantum, performance hurdles,
vesting, application of service
condition and treatment on exit of
employee from the Company
23 Proposed grant of equity to Executive Chairman under FY20 Incentive Plan will be put to Shareholder approval at AGM in November 2019
24 TREM means total remuneration comprising base salary and superannuation (only)
25 Otherwise than as a result of a change in the Accounting Standards
60
2019 ANNUAL REPORT | REMUNER ATI ON REPOR T
61
Minimum shareholding condition
All employees are encouraged to become Shareholders in the
Company, on the basis that movement in share price over time
directly aligns with returns to Shareholders.
The Company has implemented a minimum holding policy, requiring
the Executive KMP and other senior leaders to establish within 3 years
from a date to be set by the Remuneration Committee, and thereafter
maintain, a minimum level of security ownership as follows:
• Executive Chairman and CEO – equal to 100% of Fixed
Remuneration; and
• COO, CFO, CGO, GC & Co Sec and CDO – equal to 50% of Fixed
Remuneration,
which condition may be extended to other permanent employees of
the Company by decision of the Remuneration Committee.
Shares (whether acquired on or off market or through incentive plans
from time to time) and vested incentives all count towards establishing
the minimum holding. Increases in base salary will result in an
increase in the minimum holding, and fluctuations in the Northern
Star share price are taken into account with six monthly monitoring
and adjustment of the minimum holding (in both cases re-setting the
three year period for the adjusted component). The Chairman of the
Remuneration Committee has discretion to temporarily exempt an
employee from compliance with the minimum holding condition in
exceptional hardship circumstances such as where a court order must
be complied with, and, the Securities Trading Policy and the insider
trading regime of the Corporations Act prevail over the minimum
holding condition. The minimum holding condition will apply following
the grant of incentives under the FY20 Incentive Plan to be put to
Shareholders at the 2019 Annual General Meeting.
Remuneration Report
TABLE 17 KEY CHANGES TO THE FY19 REMUNERATION FRAMEWORK AND RATIONALE FOR CHANGES CONT’D
FY19 REMUNERATION
FRAMEWORK
Long Term Incentive
FY20 REMUNERATION FRAMEWORK23
RATIONALE FOR CHANGE
Performance Rights
Performance Rights
No change
Type of equity
instrument
Allocation
methodology
No LTI grants were made in FY19
Opportunity
(value)
Performance
measures
N/A
N/A
Performance
period
3 years
Escrow
Shares resulting from vested
performance rights which are
exercised are:
• 50% unrestricted;
• 25% subject to 1-year holding lock;
and
• 25% subject to 2-year holding lock.
Varying percentages of TREM according to role
performed, divided by face value of equity instrument
on the grant date (20 trading day VWAP prior to grant
date)
Annual grant, based on percentages of TREM shown on
page 62
• ROIC - 25% weighting
• Relative TSR - 50% weighting, measured against the
GDX (Van Eck Gold Miners ETF). If TSR is negative after
the 3 year performance period, reduce calculated
performance rights by 50%
• Strategic hurdles - 25% weighting, comprising organic
Reserves growth and production growth
3 years with annual grants
50% of the Shares resulting from vested performance
rights which are exercised are subject to a 1-year
holding lock
Considered a more
transparent approach and
simple to understand
Ensures variable remuneration
is allocated transparently year
on year
The objectives are measurable
and targets designed to
motivate and influence
behaviours, with weighting
towards financial metrics.
Ensures variable remuneration
is allocated transparently year
on year.
The Board considers it
advantageous to ensure
that Shares issued upon
the vesting and exercise
of LTI performance rights
are required to be held by
Executive KMP for 1 year
following issue. This achieves a
higher level of alignment with
Shareholders.
Change of
Control
Upon a takeover bid being
announced the Executive KMP
LTIs will automatically vest with no
restrictions on selling and no service
condition applies
When takeover bid for 50% or more becomes
unconditional and bidder has a relevant interest in
over 50% of the issued capital of the Company, vesting
is automatic on a pro-rata basis according to the
balance of the performance period remaining, with
Board retaining absolute discretion to increase to 100%
vesting
Discretion is only exercised
by the Board in exceptional
circumstances, in which case
the use of discretion and the
impact is clearly disclosed
in the Company’s relevant
remuneration report.
Clawback/
Malus
None
Hedging Policy
Individuals cannot hedge equity that
is unvested
Minimum
Holding
Requirement
None
The Board retains discretion as to when to apply
Clawback and Malus, such as in instances of:
• Material financial misstatements;32
• Major negligence
• Significant legal, regulatory and/or policy non-compliance
• Significant harmful act by an individual
in which case all the employee’s Performance Rights
must be forfeited (Malus)
If Performance Rights have been exercised into Shares
and sold, clawback of the sale proceeds net of tax may
occur at the Board’s discretion
Individuals cannot hedge equity that is unvested
KMP have 3 years to satisfy condition, to hold Shares or
performance rights equating to a specified percentage
of fixed remuneration. KMP excluding EC and CEO is
50% of fixed remuneration. EC and CEO is 100% of
fixed remuneration. Six monthly adjustment for Share
price movements.
Aligned with Shareholders
expectations that financial
rewards should not be retained
where for example significant
corporate misconduct or
catastrophic incident occurs.
No change - considered sound
practice
This achieves a higher level of
alignment with Shareholders
23 Proposed grant of equity to Executive Chairman under FY20 Incentive Plan will be put to Shareholder approval at AGM in November 2019
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Remuneration Report
FY20 Executive KMP fixed and variable KMP remuneration changes
Review and changes to Executive KMP fixed and
variable remuneration
The Board has conducted a thorough salary review across the
business and recommends adjusting select salaries to remain market
competitive and protect retention of key leaders whilst delivering on
business objectives and the added complexity. The increase in the
proportion of performance-based variable remuneration from FY20
means the majority of Executive KMP remuneration will be at risk, with
the greater proportion based on LTI, with a view to better incentivising
the achievement of the Company’s long term objectives.
The table below is voluntary and has been included in this Report to
improve clarity and transparency around how Northern Star rewards
Executive KMP to the extent that a final position has been reached.
This table has not been prepared in accordance with statutory
obligations or Australian Accounting Standards.
The rationale for change is centred on remaining market competitive,
and critically, retaining the high-performance management team
to deliver the Company strategic objectives for the benefit of
Shareholders. Northern Star benchmarks its remuneration against
ASX listed resource companies, the ASX50-100 companies and
internationally listed companies in the gold sector.
The raise in remuneration levels closer to at least the 75th percentile
of market has followed considerable consultation with regard being
given to relevant industry benchmarking and remuneration structural
advice from external remuneration advisers, taking into account
the increased scale and complexity in the Company’s operations
now including Pogo. The Board believes these changes in FY20 will
appropriately motivate the Executive KMP, assist to mitigate the risk
of key personnel being poached by competitors and additionally
improves their alignment to Shareholders’ interests.
TABLE 18 FY20 CHANGES TO EXECUTIVE KMP FIXED AND VARIABLE REMUNERATION
Executive KMP26
FY19
base
salary
FY17-19
maximum
STI as a %
of TREM
FY17-19
maximum
LTI as a %
of TREM
FY17-19 max
performance-
based pay as
a % of TREM27
FY20 base
salary
FY20
maximum
STI as a %
of TREM
FY20
maximum
LTI as a %
of TREM
FY20 max
performance-
based pay as
a % of TREM28
Bill Beament
Executive Chairman
Stuart Tonkin
Chief Executive Officer
Luke Creagh
Chief Operating Officer
Ryan Gurner
Chief Financial Officer
Hilary Macdonald
General Counsel &
Company Secretary
$725,000
nil
281%
281%
TBC*
TBC*
TBC*
$590,000
35%
125%
160%
TBC*
TBC*
TBC*
TBC*
TBC*
$350,000
25%
$300,000
25%
$325,000
25%
75%
55%
55%
100%
$540,000
100%
100%
200%
80%
$400,000
75%
100%
175%
80%
$400,000
50%
75%
125%
26 For FY20, Michael Mulroney, Chief Geological Officer, will not be included in the Company’s Executive KMP, since he no longer falls within the definition of key management personnel
under AASB 124 Related Party Disclosures (being “those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly,
including any director (whether executive or otherwise) of that entity”)
27 Equity component of performance-based remuneration allocated using a fair value allocation method
28 Equity component of performance-based remuneration allocated using a face value allocation method
* The EC and CEO fixed and variable remuneration for FY20 is under discussion and will be disclosed subsequent to the release of this Annual Report in accordance with the ASX Listing
Rules and best practice
Non-Executive Directors’
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 NEDs 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. NEDs 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 at the Annual General
Meeting on 12 November 2014).
A review of Non-Executive Director
remuneration was undertaken in July 2019,
in light of there being no increases to
Company NED fees since April 2017, the
substantial increase in the Company’s size
and complexity and taking into account
comparable companies with similar market
capitalisation as at 30 June 2019. There is
no change to the base cash fee of $125,000
per annum. A further $50,000 per annum
per Director will be paid in equity, subject to
Shareholder approval in November 2019.
The Minimum Holding Condition Policy
will apply to the Non-Executive Directors
requiring them each to retain a minimum
holding equating to one year of base fees,
and allowing three years to satisfy the Policy.
The Remuneration Committee considered
that Non-Executive Directors should be
remunerated in line with the Company’s
remuneration framework which targets
payment to employees in the 50-75th
percentile of relevant peers based on third
party-provided comparative market data for
the ASX50-100.
TABLE 19 BOARD AND BOARD COMMITTEE NON-EXECUTIVE DIRECTOR FEES
Board fee
Non-Executive Director base fee
Equity
Additional fees
FROM 1 JULY 2019
FY19
$125,00029
$50,000
$125,000
Nil
Lead Independent Director
$40,00030
Audit & Risk Committee
Chair
Remuneration Committee
Chair
Member
ESS Committee (formerly
ESG & Safety Committee)31
Member
Chair
Member
Nomination Committee
Chair
Member
$35,000
$20,000
$30,000
$15,000
$15,000
$7,500
Nil
Nil
$35,000
$25,000
$15,000
$25,000
$10,000
$25,000
$10,000
Nil
Nil
29 The increases in the Committee and Lead Independent Director fees will be satisfied in equity under a Non-Executive Directors Share Plan, and subject to the Minimum Holding Condition
Policy
30 The increase in the Lead Independent Director fee was to recognise the additional requirements around governance matters as well as the need to attend meetings of the Company’s
Alaskan subsidiaries
31 The ESG and Safety Committee has been reconstituted as an ESS committee dealing with environment, social and safety matters only, with governance matters to be dealt with by the full
Board at Board meetings. Fee reduced to reflect the time involved in this role
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Non-Executive Directors’ Remuneration Cont’d
TABLE 20 FY19 NON-EXECUTIVE DIRECTORS’ REMUNERATION
Name
Year
Base fee
Remuneration
Committee
Audit
Committee
ESG & Safety
Committee
Nomination
Committee
Superannuation
Total
Christopher
Rowe
2019
114,155
2018
114,155
Peter O’Connor
2019
125,000
2018
125,000
John Fitzgerald32
2019
146,119
2018
146,119
9,132
9,132
-
-
9,132
9,132
Shirley In't Veld
2019
114,155
22,831
2018
114,212
3,753
David Flanagan33
2019
-
2018
95,146
TOTAL
2019
499,429
2018
594,632
-
19,015
41,096
41,033
32 Base fee in this table includes Lead Independent Director fee
33 Resigned on 20 April 2018
-
-
15,000
15,000
22,831
22,831
13,699
13,699
-
-
51,530
51,530
21,267
-
9,315
-
8,507
-
8,507
-
-
-
47,596
-
-
-
-
-
-
-
-
-
-
-
-
-
13,733
11,712
-
-
17,726
16,918
15,123
12,503
-
10,839
46,582
51,972
158,288
135,000
149,315
140,000
204,315
195,000
174,315
144,167
-
125,000
686,233
739,167
The Board makes its decisions after it considers the issues and the
advice from the Remuneration Committee and consultants.
During FY19, PwC were engaged to review the Company’s executive
remuneration framework and to assist with the implementation of the
changes to the Executive KMP remuneration framework outlined in
this report. The advice from PwC included:
• benchmarking data for Executive Chairman, Chief Executive Officer
and other Executive remuneration;
• information and insights with respect to market practices
and trends in remuneration within ASX listed and global gold
companies, and
• benchmarking data for NED remuneration.
Their analysis was considered by the Remuneration Committee in
forming their views on benchmarking matters
In addition, PwC delivered a remuneration recommendation in
accordance with Division 1, Part 1.2, 9B (1) of the Corporations Act
2001 (Cth). The fee for the remuneration recommendation delivered
by PwC was $25,000 (excluding GST). The fee for the additional work
conducted by PwC was $145,913 (excluding GST).
The engagement of PwC was initiated by the Remuneration
Committee, based on the protocols governing the engagement and
processes.
The Board was satisfied that remuneration recommendations
received were free from any undue influence by Key Management
Personnel to whom the advice may relate, because strict protocols
were observed and complied with regarding any interaction between
PwC and management, and because all remuneration advice was
provided to the Remuneration Committee Chair.
Other Statutory Disclosures
The Remuneration Committee comprises three independent Non-
Executive Directors, namely Nick Cernotta (Chairman), John Fitzgerald
(Lead Independent Director) and Chris Rowe. The CEO and others are
invited to attend all or part of the Committee meetings as required
but have no vote on matters before the Committee.
The Committee meets several times a year to review and makes
recommendations to the Board in accordance with the Remuneration
Committee Charter to ensure that KMP remuneration remains
aligned to business needs and performance. A copy of the Charter is
available under the Corporate Governance section of the Company’s
website available at www.nsrltd.com. The Committee is responsible for
robust governance of the interconnection between performance and
remuneration, with particular focus on:
• 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);
• superannuation arrangements; and
• overseeing remuneration by gender.
The Board and the Remuneration Committee use remuneration
consultants’ advice and recommendations from time to time. The
Remuneration Committee observes the following protocols:
• remuneration consultants are engaged by and report directly to
the Remuneration Committee;
• the Committee must, in deciding whether to approve the
engagement, have regard to any potential conflicts of interest
including factors that may influence independence such as
previous and future work performed by the adviser. and any
relationships that exist between any executive KMP and the
consultant;
• communication between the remuneration consultants and
Executive KMP is restricted to minimise the risk of undue influence
on the remuneration consultant;
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Remuneration Report
Statutory remuneration disclosures
The following table details the statutory remuneration disclosures calculated with reference to the Corporations Act and Australian Accounting
Standards, in Australian dollars. The figures provided in relation to share-based payments represent the amortised fair value of equity instruments
granted to Executive KMP.
TABLE 21 STATUTORY EXECUTIVE REMUNERATION EXPENSES34
FIXED REMUNERATION
VARIABLE REMUNERATION
TOTAL REMUNERATION
Name
Year
Cash salary
Other benefits35
Long service leave36
Post-employment
benefits37
Pogo Completion
bonus
STI cash payment
Performance
shares38
Performance
rights39
$
$
$
$
Executive Directors
Bill Beament
Executive Chairman
Other Executive KMP
Stuart Tonkin
Chief Executive Officer
Luke Creagh41
Chief Operating Officer
Michael Mulroney
Chief Geological Officer
Ryan Gurner43
Chief Financial Officer
Hilary Macdonald
General Counsel &
Company Secretary
Shaun Day46
Former Chief Financial
Officer
Liza Carpene47
Former Company
Secretary
TOTAL
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
725,000
699,99140
590,000
590,000
231,096
-
350,000
350,000
211,233
-
325,000
113,082
109,932
375,000
-
194,795
2,542,261
2,322,868
17,350
11,931
9,774
7,136
9,775
-
5,688
9,247
8,723
-
11,639
3,331
57,367
13,432
-
189,229
120,316
234,306
12,916
49,240
66,610
-
-
-
-
-
-
-
-
-
-
-
-
-
79,526
49,240
30,000
30,000
30,000
30,000
19,808
-
30,000
30,000
21,123
-
30,000
10,438
8,795
30,000
-
19,479
169,726
149,917
$
160,000
-
125,000
-
-
-
50,000
-
-
-
65,000
-
25,000
-
-
-
425,000
-
$
-
-
151,900
223,510
42,13542
-
93,100
136,990
37,93144
-
62,125
31,35945
-
133,599
-
-
387,191
525,458
$
-
182,699
-
122,202
-
-
-
91,954
-
-
-
-
-
98,004
-
20,437
-
515,296
$
2,230,704
1,208,904
639,533
313,823
134,358
-
360,464
176,882
77,779
-
136,628
23,328
41,399
188,294
-
64,836
3,620,865
1,976,067
Total
$
3,175,970
2,182,765
1,612,817
1,286,671
437,172
-
889,252
795,073
356,789
-
630,392
181,537
242,493
838,330
-
488,776
7,344,885
5,773,152
Performance
related
% of total
75%
64%
57%
51%
40%
-
57%
51%
32%
-
42%
30%
27%
50%
-
17%
60%
52%
34 This table represents remuneration for FY19 or part thereof during which a person was a KMP
38 Issued in FY16 which became eligible for measurement as at 30 June 2018, and vested on 20 July 2018. See details on page 70 regarding the limited recourse loan related to these Shares
35 Other Benefits include telephone allowance, salary continuance insurance, private health insurance, D+O Insurance and parking – as well as any termination payments paid during FY19
39 Approved on 29 November 2016 (Bill Beament) and 21 December 2016 (other executive KMP) during FY17 which will be tested for vesting on 16 October 2019
36 Recognised in accordance with the Company’s long service leave policy. Refer to Note 9(g) to the Financial Statements for further details.
37 Superannuation, which is capped at $30,000 for each member of the executive KMP
40 Cash salary received is lower than base salary due to a period of unpaid leave taken during FY18
41 Appointed as Chief Operating Officer on 1 November 2018. Remuneration disclosed in table is pro rata for the period since appointment as Chief Operating Officer.
43 Appointed as Chief Financial Officer on 16 October 2018. Remuneration disclosed in table is pro rata for the period since appointment as Chief Financial Officer.
46 Shaun Day resigned as Chief Financial Officer on 16 October 2018. Remuneration disclosed in this table is pro rata for the period up to his cessation as Chief Financial Officer. Other
Benefits includes a $54,811 termination payment. The Board excercised discretion to forfeit 165,000 performance shares held by Mr Day so that Mr Day only received performance
shares reflective of his pro rata service period up to the date that his employment with the Company ceased, on 15 January 2019.
47 Liza Carpene ceased as Company Secretary on 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.
42 Full year STI earnt was $63,551
44 Full year STI earnt was $53,871
45 Full year STI earnt was $90,125
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Remuneration Report
Statutory remuneration disclosures cont’d
Allocation methodology for grant of LTI performance rights in FY17
The quantum of LTI Performance Rights which were granted to the Executive KMP in FY17 was determined according to the fair value of Shares
on the grant date divided by a portion of their respective TREM48. The maximum possible total value of the performance rights is the assessed fair
value at the respective grant dates of the performance rights (Executive Chairman: $1.548, other Executive KMP: $1.151) multiplied by the number
of performance rights granted, under guidance from external remuneration advisors.
The fair value of performance shares at grant date was 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.
The model inputs for the FY17 performance rights included:
TABLE 22 MODEL INPUTS FOR FAIR VALUE ASSESSMENT
Exercise price
Approval/Grant Date
Expiry date
Share price at grant date
Expected volatility of the Shares49
Expected dividend yield
Risk-free interest rate
Executive Chairman –
Bill Beament
Nil
29 November 2016
21 December 2022
$3.60
25%
1.94%
1.91%
Other Executive KMP
Nil
21 December 2016
21 December 2022
$3.15
25%
2.22%
2.03%
TABLE 23 LTI PERFORMANCE RIGHTS AND SHARES YET TO VEST
Name
LTI Plan
Grant
Date
Performance
Period
Fair value
per Right
Fair value
of Rights
%
Performance
Achieved50
No.
Vested
No.
Forfeited
/ Lapsed
No.
Rights
held at
30 June
2019
Bill Beament
Stuart Tonkin
Luke Creagh
Michael
Mulroney
Ryan Gurner
Hilary
Macdonald
Shaun Day
FY17 LTI
Performance
Rights Plan
21
December
2016
FY17 LTI
Performance
Rights Plan
21
December
2016
FY17 LTI
Performance
Rights Plan
21
December
2016
FY17 LTI
Performance
Rights Plan
21
December
2016
FY17 LTI
Performance
Rights Plan
21
December
2016
FY17 LTI
Performance
Rights Plan
21
December
2016
FY17 LTI
Performance
Rights Plan
21
December
2016
3 years
3,000,000
$1.5484
$4,645,200 Nil
Nil
Nil
3 years
1,100,000
$1.1512
$1,266,320 Nil
Nil
Nil
3 years
350,000
$1.1512
$402,920
Nil
Nil
Nil
3 years
620,000
$1.1512
$713,744
Nil
Nil
Nil
3 years
190,000
$1.1512
$218,728
Nil
Nil
Nil
3 years
235,000
$1.1512
$270,532
Nil
Nil
Nil
3 years
495,000
$1.1512
$569,844
Nil
Nil
165,00051
48 TREM means total remuneration comprising base salary and superannuation (only)
49 Expected volatility of the Company’s Shares is based on the historic volatility (based on the remaining life of the performance rights)
50 Performance period does not end until 16 October 2019. Refer to Table 16 on page 57 for details of performance achieved to date.
51 Ceased as Chief Financial Officer on 16 October 2018. The Board excercised discretion to forfeit 165,000 performance shares held by Mr Day so that Mr Day only received performance
shares reflective of his pro rata service period up to the date that his employment with the Company ceased, on 15 January 2019.
TABLE 24 FULLY PAID ORDINARY SHARES HELD BY THE KMP52 ON 1 JULY 2018 AND ON 30 JUNE 2019
Name
Directors
Bill Beament
John Fitzgerald
Christopher Rowe
Peter O'Connor
Shirley In’t Veld
Executive KMP
Stuart Tonkin
Luke Creagh
Michael Mulroney
Ryan Gurner
Hilary Macdonald
Shaun Day
TOTAL
Balance on 1 July 2018
Other changes during FY19
Balance on 30 June 2019
9,743,588
60,000
1,750,000
500,000
50,000
(6,601,795)
nil
(150,000)
(100,000)
nil
3,141,793
60,000
1,600,000
400,000
50,000
1,302,655
(1,152,655)
150,000
128,978
300,898
102,713
nil
320,694
14,259,526
(128,978)
(300,898)
(102,713)
n/a
(320,694)
(8,857,733)
nil
nil
nil
nil
nil53
5,401,793
None of the Shares above are held nominally by any of the KMP.
TABLE 25 LTIs HELD BY THE EXECUTIVE KMP ON 1 JULY 2018 AND ON 30 JUNE 2019
Name
Bill Beament
Stuart Tonkin
Luke Creagh
Michael Mulroney
Ryan Gurner
Hilary Macdonald
Shaun Day
TOTAL
Balance
1 July 2018
597,836
399,877
128,978
300,898
102,713
nil
320,694
1,850,996
FY16 Performance Shares
(vested 20 July 2018)54
Balance
30 June 2019
nil
nil
nil
nil
nil
nil
nil
Nil
FY17 Performance Rights
(unvested)
Balance on
30 June 2019
3,000,000
1,100,000
350,000
620,000
190,000
235,000
495,00055
5,990,000
Balance on
1 July 2018
3,000,000
1,100,000
350,000
620,000
190,000
235,000
660,000
6,155,000
There were no options or performance shares held by any KMP from the beginning to the end of FY19 other than the FY16 performance shares
which vested on 20 July 2018.
52 Including their close family members and entities controlled by them
53 Balance at 16 October 2018 when Shaun Day ceased as Chief Financial Officer (and ceased to be a KMP)
54 FY16 Long term incentive performance shares issued on 9 July 2015, measured on 30 June 2018, vested on 20 July 2018, as disclosed in the 2018 Remuneration Report. No escrow applied
to the performance shares. (Ms Macdonald was an external consultant and not an employee on 9 July 2015, therefore received no grant of FY16 long term incentives.)
55 Balance at 16 October 2018 when Shaun Day ceased as Chief Financial Officer (and ceased to be a KMP). The Board excercised discretion to forfeit 165,000 performance shares held by
Mr Day so that Mr Day only recieved performance shares reflective of his pro rata service period up to the date that his employment with the Company ceased, on 15 January 2019.
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Statutory remuneration disclosures cont’d
Loans to Executive KMP under the FY15 and FY16 LTI Performance Share grants
The details of interest free non-recourse loans provided to Executives under previous LTI Performance Share grants are as follows:
TABLE 26 OUTSTANDING LOANS TO EXECUTIVE KMP
Name
Opening balance
on 1 July 2018
Repayments during FY19
Bill Beament
2,509,832
(1,380,541)
Closing balance
on 30 June 2019
1,129,291
Contractual arrangements with Executive KMP
The table below provides a summary of the key provisions of contractual arrangements between the Company and the Executive KMP applicable in
FY19.
TABLE 27 SUMMARY OF CURRENT CONTRACTUAL ARRANGEMENTS WITH EXECUTIVE KMP (APPLICABLE IN FY19)
ELEMENT
EXECUTIVE CHAIRMAN
OTHER EXECUTIVE KMP
Contract duration
No fixed term, subject to termination
with or without cause
No fixed term, subject to termination
with or without cause
Termination notice period by the Company
Termination notice period by individual
Fixed remuneration
12 months
3 months
6 months
3 months
Refer to the statutory remuneration
table on pages 66-67
Refer to the statutory remuneration
table on pages 66-67
STI opportunity
Not eligible to receive STI payments
LTI opportunity
Eligible to participate in LTI plan.
Maximum LTI opportunity is 281% of TREM.
The Board retains discretion in the award and
allocation of LTIs based on the Company’s
performance.
Eligible to receive STI payments. Maximum STI
opportunity is:
• 35% of TREM56 for CEO and CGO; and
• 25% of TREM for COO, CFO and GC/Co Sec.
The Board retains discretion in the award and
allocation of STIs based on the individual’s and
the Company’s performance.
Eligible to participate in LTI plan.
Maximum LTI opportunity is:
• 125% of TREM for CEO;
• 115% of TREM for CGO;
• 75% of TREM for COO;
• 55% of TREM for CFO and GC/Co Sec.
The Board retains discretion in the award and
allocation of LTIs based on the Company’s
performance.
Impact on performance-based remuneration
upon termination (without cause)
Impact on performance-based remuneration
upon termination (with cause) or by individual
Other
LTI forfeiture is at the discretion of the Board.
STI entitlement and LTI forfeiture is at the
discretion of the Board.
All unvested LTIs will lapse, at the discretion of
the Board.
Vested LTIs remain with the individual.
STI is not awarded, and all unvested LTIs will
lapse, at the discretion of the Board.
Vested LTIs remain with the individual.
Contract also contains provisions regarding
leave entitlements, duties, confidentiality,
intellectual property, moral rights, restrictions
during and after employment and other
ancillary clauses.
Contract also contains provisions regarding
leave entitlements, duties, confidentiality,
intellectual property, moral rights, restrictions
during and after employment and other
ancillary clauses.
56 TREM means total remuneration comprising base salary and superannuation
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 of 23% held
by Mr Beament in AUD Pty Ltd, the sole Shareholder of Australian
Underground Drilling Pty Ltd (AUD), being a supplier of goods
and services to the Company, did not require reporting under the
Accounting Standards. For the purposes of the 2019 Annual Report,
the Company is of the same view, having applied the necessary criteria
under the Australian Accounting Standards for FY19.
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. Mr
Beament’s continued Shareholding in AUD also remains 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.
The Independent Directors’ unanimous view remains that the
continuing contractual relationship between the Company and AUD
is more beneficial to the Company than terminating the contract
would be. The results of the multiple party tender process conducted
in FY18 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
and remains 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). The
addition of Pogo has increased the diversity and improved the risk
mitigation strategy further.
72
2019 ANNUAL REPORT | AUDITOR’S I NDEPENDENCE DECLARATION
73
Remuneration Report
Auditor’s Independence Declaration
“Northern Star Resources has an excellent track
record of adding value through exploration at its
existing Australian assets and last year made its
first international acquisition acquiring the Pogo
Mine in Alaska from Sumitomo.
We remain optimistic that Northern Star Resources
can extract significant value from this asset as
it looks to implement its world class operating
practices to improve costs and productivity at the
operation, as well as invigorate exploration around
the asset”
– Evy Hambro and Olivia Markham
Blackrock Investment Management (UK) Limited
Investment Manager’s Report
20 August 2019
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
The Directors
Northern Star Resources Limited
Level 1, 388 Hay Street
Subiaco WA 6008
26 August 2019
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 2019, 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 Asia Pacific Limited and the Deloitte Network.
74
75
TABLE OF
CONTENTS
(cid:38)onsolidated statement of profit or loss
and other comprehensive income
76
(cid:38)onsolidated statement of financial position 77
Consolidated statement of changes in equity 78
(cid:38)onsolidated statement of cash (cid:565)o(cid:90)s
Notes to the consolidated
financial statements
Directors’ declaration
Independent auditor’s report
to the members
80
82
128
129
FINANCIAL
REPORT
76
77
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME For the year ended 30 June 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at June 2019
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 for the year
Other comprehensive income (OCI)
Items that may be reclassified to profit or loss
Share of other comprehensive income of associates and joint ventures
accounted for using the equity method
Exchange differences on translation of foreign operations
Items that may not be reclassified to profit or loss
Changes in the fair value of financial assets at fair value through OCI
Income tax relating to these items
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of the Company
Notes
3
6(a)
5
6(b)
6(c)
6(d)
7
30 June 2019
$’000
30 June 2018
$’000
1,401,165
(1,101,484)
964,025
(623,803)
299,681
340,222
1,911
(65,277)
(9,929)
(11,602)
8,784
(56,004)
(11,753)
(3,477)
214,784
277,772
(60,073)
154,711
(83,659)
194,113
232
10,091
(12,134)
116
(1,695)
(218)
-
(100)
30
(288)
153,016
193,825
153,016
193,825
Cents
Cents
Earnings per share for profit attributable to the
ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
22(a)
22(b)
24.4
24.0
32.1
31.5
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax asset
Total current assets
Non-current assets
Trade and other receivables
Derivative financial instruments
Financial assets at fair value through other comprehensive income
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 2019
$’000
30 June 2018
$’000
8(c)
8(a)
9(f)
9(e)
8(a)
8(b)
15(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)
266,179
67,731
113,631
6,285
442,997
31,136
83,941
-
453,826
558,074
1,438
1,333
23,027
27,861
501,084
266,038
356,361
12,867
1,190,009
1,688
5,712
42,132
15,399
139,044
225,735
212,788
16,298
658,796
1,643,835
1,216,870
149,710
23,899
-
44,872
218,481
24,505
220,345
65,569
310,419
140,073
7,610
14,959
37,459
200,101
9,513
128,686
57,134
195,333
528,900
395,434
1,114,935
821,436
473,708
42,099
599,128
1,114,935
291,290
15,388
514,758
821,436
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
2019 ANNUAL REPORT | FINANCIAL REPORT
78
79
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2019
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2019
NATURE AND PURPOSES OF RESERVES:
Financial assets at FVOCI
The Group has elected to recognise changes in the fair value of certain investments in equity securities in OCI, as explained in note 8(b).
These changes are accumulated within the FVOCI reserve within equity.
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 20.
Foreign currency translation
Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive income and accumulated
in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of.
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Financial
assets at
fair value
through OCI
$’000
Share
based
payments
reserve
$’000
Foreign
currency
translation
reserve
$’000
Share
capital
$’000
Notes
Retained
earnings
$’000
Total
equity
$’000
Balance at 1 July 2017
217,811
5,487
7,779
45
383,978
615,100
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Transactions with owners in their
capacity as owners:
Contributions of equity, net of
transaction costs and tax
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
-
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
Balance at 1 July 2018
291,290
5,417
10,144
(173)
514,758
821,436
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Transactions with owners in their
capacity as owners:
Contributions of equity, net of
transaction costs and tax
Dividends provided for or paid
Employee share and option plans -
value of employee services
Exercise of employee share awards
Share plan loan repayment
Tax
-
-
-
-
(12,018)
(12,018)
10(a)
171,009
12(b)
9(e)
-
1,306
10,103
-
-
182,418
-
-
-
-
-
-
-
-
-
-
-
-
7,090
(9,994)
6,365
24,944
28,405
-
154,711
154,711
10,324
-
(1,695)
10,324
154,711
153,016
-
-
-
-
-
-
-
-
171,009
(70,340)
-
-
-
-
(70,340)
8,396
109
6,365
24,944
(70,340)
140,483
Balance at 30 June 2019
473,708
(6,601)
38,549
10,151
599,128
1,114,935
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
2019 ANNUAL REPORT | FINANCIAL REPORT
80
81
CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2019
CONTENTS OF THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
Notes
30 June 2019
$’000
30 June 2018
$’000
1,359,249
(892,979)
4,937
(1,660)
966,770
(520,486)
7,415
(527)
(90,350)
(100,111)
Net cash inflow from operating activities
8(c)
379,197
353,061
Cash flows from investing activities
Payments for property, plant and equipment
Payments for exploration and evaluation
Payments for mine properties
Payments for investments
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
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issues of shares and other equity securities
Principal elements of finance lease payments
Dividends paid to Company’s shareholders
Net cash inflow/(outflow) from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial period
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
9(a)
9(b)
13
14
12(b)
8(c)
(67,906)
(87,168)
(131,768)
(10,056)
(350,550)
(1,726)
-
1,038
(35,579)
(45,373)
(115,215)
(30,613)
(17,461)
(4,000)
533
414
(648,136)
(247,294)
177,395
(17,458)
(70,340)
89,597
(179,342)
442,997
2,524
266,179
4,626
(7,123)
(63,333)
(65,830)
39,937
403,060
-
442,997
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
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
Interests in other entities
UNRECOGNISED ITEMS
16 Contingent liabilities
17 Commitments
18 Events occurring after the reporting period
OTHER INFORMATION
19 Related party transactions
20 Share-based payments
21 Remuneration of auditors
22 Earnings per share
23 Deed of cross guarantee
24 Parent entity financial information
25 Summary of significant accounting policies
PAGE
82
82
82
85
86
86
87
88
90
95
105
106
106
109
109
110
111
112
113
113
114
114
115
115
116
117
118
119
122
123
2019 ANNUAL REPORT | FINANCIAL REPORT
82
83
1 Critical estimates and judgements
(a) Critical accounting estimates and assumptions
(I) DETERMINATION OF MINERAL RESOURCES AND ORE RESERVES
2 Segment information cont’d
(b) Segment results
The segment information for the year ended 30 June 2019 is as follows:
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 rates, 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
Exploration and evaluation expenditure
Business combination
Mine rehabilitation provision
Impairment of assets
note 6(a)
note 9(b)
note 13
note 9(g)
note 25(d); 9(c)
2019
Segment net operating profit
(loss) before income tax
Depreciation and amortisation
Impairment
Finance costs
Segment EBITDA
Pogo
$’000
Kalgoorlie
Operations
$’000
Jundee
$’000
Exploration
$’000
Total
$’000
(31,938)
47,449
-
2,491
104,920
141,939
-
2,290
217,834
55,696
-
910
(16,568)
120
9,929
504
274,248
245,204
9,929
6,195
18,002
249,149
274,440
(6,015)
535,576
Total segment assets
521,819
349,540
157,927
267,046
1,296,332
Total segment liabilities
(136,732)
(191,643)
(92,905)
(22,475)
(443,755)
Pogo’s revenue is generated from production activities located in the United States of America (USA). Its non-current assets are also held in
the USA. Total non-current assets for Pogo as at 30 June 2019 was $482.1 million (2018: nil). All other segments are Australian.
HO W NU MBERS ARE CALC ULATED
The segment information for the year ended 30 June 2018 is as follows:
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
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
-
1,502
239,511
44,518
-
864
(3,754)
(11,753)
976
-
142
-
11,753
-
-
322,050
156,162
11,753
2,606
492,571
9,226
201,088
284,893
(2,636)
The Group’s Executive Committee consisting of the Executive Chairman, Chief Executive Officer, Chief Financial Officer, Chief Operating
Officer and Chief Geological Officer examine the Group’s performance and have identified four reportable operating segments relating to the
operations of the business:
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)
(a) Description of segments and principal activities
The Group’s reportable operating segments are:
1. Pogo, Alaska USA - Mining and processing of gold
2. Kalgoorlie Operations, WA Australia - Mining and processing of gold
3.
4. Exploration - Exploration and evaluation of gold mineralisation
Jundee, WA Australia - Mining and processing of gold
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 Pogo gold mine, refer to note 13 for further details. Following the
completion of the Pogo transaction and review by the Executive Committee the Group now has seven operating segments (East Kundana JV,
Kanowna Belle, Millennium, Jundee, South Kalgoorlie, Pogo, and Exploration). As in the prior year, Kanowna Belle, East Kundana JV, Millennium
and South Kalgoorlie is considered as and has been presented as one reporting segment (Kalgoorlie Operations). Following review by the
Executive Committee, Paulsens and Tanami have been included in the Exploration segment for the year ended 30 June 2019.
Exploration compromises all projects in the exploration and evaluation phase of the Group. These include the Mt Olympus, Fortescue JV and
Electric Dingo projects as well as ongoing exploration programmes at the Group’s respective sites.
An analysis of segment revenues is presented in note 3.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
84
85
2 Segment information cont’d
(c) Segment EBITDA
Segment EBITDA is a non-IFRS 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, less interest income.
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 for the year ended 30 June 2019 as follows:
Segment EBITDA
Other income and expense
Finance costs
Depreciation
Amortisation
Corporate and technical services
Share based payments
Impairment of assets
Profit before income tax
(d) Segment assets
30 June 2019
$’000
30 June 2018
$’000
535,576
1,911
(11,602)
(77,432)
(170,051)
(45,293)
(8,396)
(9,929)
492,571
8,785
(3,477)
(43,149)
(114,640)
(39,139)
(11,426)
(11,753)
214,784
277,772
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.
Reportable segments’ assets are reconciled to total assets as follows:
Segment assets
Unallocated:
Financial assets at fair value through OCI
Investment in equity accounted associates
Cash and cash equivalents
Derivative financial instruments
Trade and other receivables
Current tax asset
Property, plant and equipment
30 June 2019
$’000
30 June 2018
$’000
1,296,332
698,695
23,027
27,861
227,252
1,333
53,945
6,285
7,800
42,132
15,399
435,181
5,712
17,641
-
2,110
Total assets as per the Consolidated Statement of Financial Position
1,643,835
1,216,870
Investments in equity securities (classified as financial assets at fair value through OCI) and in associates held by the Group are not
considered to be segment assets as they are managed by the corporate treasury function.
2 Segment information cont’d
(e) Segment liabilities
Reportable segments’ liabilities are reconciled to total liabilities as follows:
Segment liabilities
Unallocated:
Trade and other payables
Provisions
Current tax liabilities
Deferred tax (net)
30 June 2019
$’000
30 June 2018
$’000
(443,755)
303,533
(5,751)
(13,825)
-
(65,569)
5,444
14,364
14,959
57,134
Total liabilities as per the Consolidated Statement of Financial Position
(528,900)
395,434
3 Revenue
ACCOUNTING POLICY
(I) SALE OF GOODS
The Group primarily generates revenue from the sale of gold and silver bullion. The Group delivers dore bars to refiners, who convert the
product into investment grade bullion for a fee, which is subsequently sold either to the refinery or third parties (financial institutions).
Revenue from the sale of these goods is recognised when control over the inventory has transferred to the customer. Control is generally
considered to have passed when:
• physical possession and inventory risk is transferred (including via a third-party transport provider arranged by the refinery):
• payment terms for the sale of goods can be clearly identified through the sale of metal credits received or receivable for the transfer of
control of the asset;
•
•
the Group can determine with sufficient accuracy the metal content of the goods delivered; and
the refiner has no practical ability to reject the product where it is within contractually specified limits.
Where the economic inflows arise from other by-products, for example from the presence of other valuable metals, these amounts are
credited to the costs of producing the primary products to the extent the amounts generated are not considered significant.
(II) SALE OF SERVICES
Tolling revenue is recognised as the tolling services are performed. The number of units processed is considered to be the most direct
measurement of value delivered to the customer under the contractual arrangements and therefore tolling revenue is earned per tonne of
ore processed.
The Group adopted AASB 15 from 1 July 2018. The adoption of this standard had no material impact for the year ended 30 June 2019.
The Group derives the following types of revenue:
Sale of gold
Sale of silver
Toll treatment
Total revenue
30 June 2019
$’000
30 June 2018
$’000
1,378,004
2,401
20,760
1,401,165
941,296
1,873
20,856
964,025
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
86
87
3 Revenue cont’d
(a) Segment revenue
The total of revenue, broken down by operating segment, is shown in the following table. All revenue is from external customers. No revenue
is generated by the Exploration operating segment.
2019
2018
Paulsens
$’000
Pogo
$’000
Kalgoorlie
Operations
$’000
-
253,057
39,997
-
620,245
438,261
Jundee
$’000
Total
$’000
527,863
1,401,165
485,767
964,025
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 Pogo underground gold mine in Alaska. The acquisition was carried out through NST’s wholly owned subsidiary
Northern Star (Alaska) LLC. This entity acquired all of the shares of Sumitomo Metal Mining Pogo LLC and SC Pogo LLC (subsequently
renamed to Northern Star (Pogo) LLC and Northern Star (Pogo Two) LLC). 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 16 to 19 of this Report.
5 Other income and expense items
Net gain/(loss) on disposal of property, plant and equipment
Interest income
Other
INTEREST
Interest income is recognised as it accrues using the effective interest method.
OTHER
30 June 2019
$’000
30 June 2018
$’000
(276)
4,064
(1,877)
1,911
(24)
7,523
1,285
8,784
6 Expenses
(a) Cost of sales
Mining
Processing
Site services
Employee benefit expenses
Depreciation
Amortisation
Government royalty expense
Change in inventories
30 June 2019
$’000
30 June 2018
$’000
363,715
179,069
47,518
223,692
76,310
168,773
25,052
17,355
199,902
105,282
19,643
130,459
41,823
113,363
23,285
(9,954)
1,101,484
623,803
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 in Australia are payable on sales and therefore recognised as the sale occurs. Production Royalties
in Alaska are based on taxable profit and are consequently treated as an income tax.
Other includes the Group’s share of net profit or loss from equity accounted investments (2019: $3.5 million loss; 2018:$1.4 million loss)
(b) Corporate and technical services
Administration and technical services
Depreciation
Employee benefit expenses
Share based payments
Amortisation
Acquisition and integration costs
30 June 2019
$’000
30 June 2018
$’000
28,912
1,122
18,883
8,396
1,278
6,686
65,277
20,716
1,326
16,102
11,426
1,278
5,156
56,004
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
88
89
6 Expenses cont’d
ACCOUNTING POLICY
Share-based compensation benefits are provided to employees via Option, Share and Performance Rights Plans as discussed in note 20.
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))
(d) Finance costs
Interest expense
Provisions: unwinding of discount (note 9(g))
Finance charges
PROVISION - UNWINDING OF DISCOUNT
30 June 2019
$’000
30 June 2018
$’000
9,929
9,929
11,753
11,753
30 June 2019
$’000
30 June 2018
$’000
1,660
5,624
4,318
11,602
527
2,291
659
3,477
The Group records the present value of the estimated cost of legal and constructive obligations to rehabilitate operating locations and
decommission assets 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
1,188,292
695,037
7
Income tax expense
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.
7
Income tax expense cont’d
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)
30 June 2019
$’000
30 June 2018
$’000
70,672
(569)
70,103
(10,578)
548
(10,030)
73,612
(173)
73,439
(13,642)
23,862
10,220
Income tax expense
60,073
83,659
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30.0% (2018 - 30.0%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Share based payments
Sundry items
Adjustment for current tax of prior periods
Non-deductible amounts
Subtotal
Difference in overseas tax rates
Income tax expense
30 June 2019
$’000
30 June 2018
$’000
214,784
64,435
277,772
83,331
(2,681)
(1,196)
(569)
2,588
500
-
(172)
-
62,577
83,659
(2,504)
60,073
-
83,659
The tax rate for Australian Operations remains at 30%. The blended tax rate for Alaskan Operations are subject to the following taxes:
Federal and State Income Taxes, Alaska Mining Licence Tax and Alaska Production Royalty Tax.
(c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting year and not
recognised in net profit or loss or other comprehensive income but directly
debited or credited to equity:
Deferred tax: financial assets at fair value through OCI
Deferred tax: share based payments
Notes
30 June 2019
$’000
30 June 2018
$’000
9(e)
9(e)
(116)
(24,944)
(25,060)
(30)
-
(30)
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
90
2019 ANNUAL REPORT | FINANCIAL R EPOR T
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8 Financial assets and financial liabilities
8 Financial assets and financial liabilities cont’d
(cid:55)his note provides information a(cid:69)out the (cid:42)roup(cid:519)s financial instruments, including(cid:29)
•
•
•
•
an overvie(cid:90) of all financial instruments held (cid:69)(cid:92) the (cid:42)roup
specific information a(cid:69)out each t(cid:92)pe of financial instrument
accounting policies
information a(cid:69)out determining the fair value of the instruments, including (cid:77)udgements and estimation uncertaint(cid:92) involved(cid:17)
(cid:55)he (cid:42)roup holds the follo(cid:90)ing financial instruments(cid:29)
Assets at
FVOCI
$’000
Assets at
FVPL
$’000
Notes
Financial
assets at
(cid:68)(cid:80)(cid:82)rt(cid:76)se(cid:71)
cost
$’000
FINANCIAL ASSETS
2019
Cash and cash equivalents
Trade and other receivables*
(cid:39)erivative financial instruments
Financial assets at fair value through other
comprehensive income
2018
Cash and cash equivalents
Trade and other receivables*
(cid:39)erivative financial instruments
Financial assets at fair value through other
comprehensive income
(cid:13) (cid:40)(cid:91)cluding prepa(cid:92)ments and goods and services ta(cid:91) recovera(cid:69)le(cid:17)
8(c)
8(a)
(cid:27)(cid:11)(cid:69)(cid:12)
8(c)
8(a)
(cid:27)(cid:11)(cid:69)(cid:12)
-
-
-
23,027
23,027
-
-
(cid:16)
(cid:23)(cid:21),(cid:20)(cid:22)(cid:21)
42,132
Total
$’000
266,179
54,557
1,333
23,027
-
-
1,333
-
266,179
54,557
-
-
1,333
320,736
345,096
-
-
(cid:24),(cid:26)(cid:20)(cid:21)
(cid:16)
442,997
23,461
(cid:16)
(cid:16)
442,997
23,461
(cid:24),(cid:26)(cid:20)(cid:21)
(cid:23)(cid:21),(cid:20)(cid:22)(cid:21)
FINANCIAL LIABILITIES
2019
(cid:55)rade and other pa(cid:92)a(cid:69)les(cid:13)(cid:13)
Borrowings
2018
(cid:55)rade and other pa(cid:92)a(cid:69)les(cid:13)(cid:13)
Borrowings
(cid:13)(cid:13) (cid:40)(cid:91)cluding non(cid:16)financial lia(cid:69)ilities
Notes
(cid:27)(cid:11)d(cid:12)
8(e)
(cid:27)(cid:11)d(cid:12)
8(e)
Liabilities at
(cid:68)(cid:80)(cid:82)rt(cid:76)se(cid:71)
cost
$’000
147,319
48,404
195,723
(cid:20)(cid:22)(cid:27),(cid:20)(cid:25)(cid:21)
17,123
155,285
Total
$’000
147,319
48,404
195,723
138,162
17,123
155,285
(cid:55)he (cid:42)roup(cid:519)s e(cid:91)posure to various risks associated (cid:90)ith the financial instruments is discussed in note (cid:20)(cid:20)(cid:17) (cid:55)he ma(cid:91)imum e(cid:91)posure to credit risk
at the end of the reporting period is the carr(cid:92)ing amount of each class of financial assets mentioned a(cid:69)ove(cid:17)
(a) Trade and other receivables
ACCOUNTING POLICY
(cid:55)rade receiva(cid:69)les are recognised initiall(cid:92) at fair value and su(cid:69)se(cid:84)uentl(cid:92) measured at amortised cost using the e(cid:909)ective interest method, less
provision for impairment(cid:17)
Trade receivables
(cid:54)undr(cid:92) de(cid:69)tors
Goods and services tax recoverable
(cid:51)repa(cid:92)ments
Other receivables
30 June 2019
30 June 2018
Current
$’000
47,318
6,008
4,735
8,439
1,231
Non-
current
$’000
-
-
-
1,438
-
Total
$’000
Current
$’000
47,318
15,156
6,008
4,735
9,877
1,231
6,207
5,904
1,771
2,098
Non-
current
$’000
-
-
-
1,688
-
Total
$’000
15,156
6,207
5,904
3,459
2,098
67,731
1,438
69,169
31,136
1,688
32,824
(I) CLASSIFICATION AS TRADE AND OTHER RECEIVABLES
If collection of the amounts is e(cid:91)pected in one (cid:92)ear or less the(cid:92) are classified as current assets(cid:17) If not, the(cid:92) are presented as non(cid:16)current
assets(cid:17) (cid:55)rade receiva(cid:69)les are generall(cid:92) due for settlement (cid:90)ithin (cid:22)(cid:19) da(cid:92)s and therefore are all classified as current(cid:17)
(II) FAIR VALUE OF TRADE AND OTHER RECEIVABLES
(cid:36)s the ma(cid:77)orit(cid:92) of receiva(cid:69)les are short term in nature, their carr(cid:92)ing amount is assumed to (cid:69)e the same as their fair value(cid:17)
(cid:11)(cid:69)(cid:12) (cid:41)inancial assets at fair value through other comprehensive income
(cid:41)inancial assets at fair value through other comprehensive income (cid:11)(cid:41)(cid:57)(cid:50)(cid:38)I(cid:12) comprises e(cid:84)uit(cid:92) securities (cid:90)hich are not held for trading, and
(cid:90)hich the (cid:42)roup has irrevoca(cid:69)l(cid:92) elected at initial recognition to recognise is this categor(cid:92)(cid:17)
(cid:55)hese are strategic investments and the (cid:42)roup considers this classification to (cid:69)e more relevant(cid:17) (cid:53)efer to note (cid:21)(cid:24) for further information on
accounting policies for financial assets and note (cid:27)(cid:11)f(cid:12) in relation to fair value measurements(cid:17)
(cid:55)he adoption of (cid:36)(cid:36)(cid:54)(cid:37) (cid:28) has had no material impact for the (cid:42)roup(cid:17)
(cid:41)(cid:57)(cid:50)(cid:38)I assets include the follo(cid:90)ing classes of financial assets(cid:29)
Non-current assets
(cid:47)isted e(cid:84)uit(cid:92) securities
(I) CLASSIFICATION OF FINANCIAL ASSETS AS FVOCI
30 June 2019
$’000
30 June 2018
$’000
23,027
42,132
(cid:55)he financial assets are presented as non(cid:16)current assets unless the(cid:92) mature or management intends to dispose of them (cid:90)ithin (cid:20)(cid:21) months of
the end of the reporting period(cid:17)
(II) AMOUNTS RECOGNISED IN PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
(cid:39)uring the (cid:92)ear, the follo(cid:90)ing losses (cid:90)ere recognised in profit or loss and other comprehensive income(cid:17)
(cid:42)ains(cid:18)(cid:11)losses(cid:12) recognised in other comprehensive income
30 June 2019
$’000
30 June 2018
$’000
(12,134)
(100)
5,712
466,458
514,302
ACCOUNTING POLICY
92
2019 ANNUAL REPORT | FINANCIAL R EPOR T
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8 Financial assets and financial liabilities cont’d
8 Financial assets and financial liabilities cont’d
(c) Cash and cash equivalents
ACCOUNTING POLICY
(cid:11)d(cid:12) (cid:55)rade and other pa(cid:92)a(cid:69)les
ACCOUNTING POLICY
(cid:38)ash and cash e(cid:84)uivalents includes cash on hand, deposits held at call (cid:90)ith financial institutions, other short(cid:16)term, highl(cid:92) li(cid:84)uid investments
(cid:90)ith original maturities of three months or less that are readil(cid:92) converti(cid:69)le to kno(cid:90)n amounts of cash and (cid:90)hich are su(cid:69)(cid:77)ect to an
insignificant risk of changes in value(cid:17)
(cid:55)hese amounts represent lia(cid:69)ilities for goods and services provided to the (cid:42)roup prior to the end of financial (cid:92)ear (cid:90)hich are unpaid(cid:17)
(cid:55)he amounts are unsecured and are usuall(cid:92) paid (cid:90)ithin (cid:25)(cid:19) da(cid:92)s of recognition(cid:17) (cid:55)rade and other pa(cid:92)a(cid:69)les are presented as current lia(cid:69)ilities
unless pa(cid:92)ment is not due (cid:90)ithin (cid:20)(cid:21) months from the reporting date(cid:17)
(cid:38)ash at (cid:69)ank and in hand
(cid:39)eposits at call
Restricted cash
(I) RECONCILIATION TO THE STATEMENT OF CASH FLOWS
(cid:53)econciliation of profit after ta(cid:91) to net cash (cid:565)o(cid:90) from operating activities(cid:29)
(cid:51)rofit for the (cid:92)ear
(cid:36)d(cid:77)ustment for
(cid:39)epreciation and amortisation
(cid:49)on(cid:16)cash emplo(cid:92)ee (cid:69)enefits e(cid:91)pense (cid:16) share(cid:16)(cid:69)ased pa(cid:92)ments
(cid:53)eha(cid:69)ilitation provision (cid:16) un(cid:90)inding of discount
(cid:49)et (cid:11)gain(cid:12)(cid:18) loss on sale of non(cid:16)current assets
(cid:55)ransaction costs (cid:90)ritten o(cid:909)
Impairment of assets during the period
(cid:41)air value ad(cid:77)ustment to derivatives
(cid:54)hare of losses of associates and (cid:77)oint ventures
(cid:38)hange in operating assets and lia(cid:69)ilities(cid:29)
Increase in trade and other receivables
(cid:11)Increase(cid:12)(cid:18)decrease in inventories
(Increase) in deferred tax assets
(cid:11)(cid:39)ecrease(cid:12)(cid:18)increase in trade and other pa(cid:92)a(cid:69)les
(cid:11)(cid:39)ecrease(cid:12)(cid:18)increase in current ta(cid:91) lia(cid:69)ilit(cid:92)(cid:18)asset
(cid:11)(cid:39)ecrease(cid:12)(cid:18)increase in deferred ta(cid:91) lia(cid:69)ilities
Increase in provisions
(cid:49)et cash in(cid:565)o(cid:90) from operating activities
30 June 2019
$’000
30 June 2018
$’000
263,134
-
3,045
240,982
202,015
-
266,179
442,997
30 June 2019
$’000
30 June 2018
$’000
154,711
194,113
247,484
8,396
5,624
276
-
9,929
4,379
3,530
(32,679)
11,463
(10,578)
(5,050)
(21,244)
1,614
1,342
157,790
11,426
2,291
24
571
11,753
(870)
1,371
(5,557)
(12,378)
(14,080)
(3,474)
(25,852)
23,480
12,453
(cid:55)he(cid:92) are recognised initiall(cid:92) at their fair value and su(cid:69)se(cid:84)uentl(cid:92) measured at amortised cost using the e(cid:909)ective interest method(cid:17)
(cid:55)rade pa(cid:92)a(cid:69)les
(cid:36)ccruals
(cid:51)a(cid:92)roll ta(cid:91) and other statutor(cid:92) lia(cid:69)ilities
(cid:50)ther pa(cid:92)a(cid:69)les
30 June 2019
$’000
30 June 2018
$’000
59,941
63,401
2,391
23,977
54,391
54,936
1,911
28,835
149,710
140,073
(cid:55)he carr(cid:92)ing amounts of trade and other pa(cid:92)a(cid:69)les are considered to (cid:69)e the same as their fair values, due to their short(cid:16)term nature(cid:17)
(e) Borrowings
ACCOUNTING POLICY
(cid:37)orro(cid:90)ings are initiall(cid:92) recognised at fair value, net of transaction costs incurred(cid:17) (cid:37)orro(cid:90)ings are su(cid:69)se(cid:84)uentl(cid:92) measured at amortised cost(cid:17)
(cid:47)eases of propert(cid:92), plant and e(cid:84)uipment (cid:90)here the (cid:42)roup, as lessee, has su(cid:69)stantiall(cid:92) all the risks and re(cid:90)ards of o(cid:90)nership are classified
as finance leases(cid:17) (cid:41)inance leases are capitalised under plant and e(cid:84)uipment at the lease(cid:519)s inception at the fair value of the leased propert(cid:92) or,
if lo(cid:90)er, the present value of the minimum lease pa(cid:92)ments(cid:17) (cid:55)he corresponding rental o(cid:69)ligations, net of finance charges, are included
in borrowings.
(cid:37)orro(cid:90)ings are classified as current lia(cid:69)ilities unless the (cid:42)roup has an unconditional right to defer settlement of the lia(cid:69)ilit(cid:92) for at least
(cid:20)(cid:21) months after the reporting date(cid:17)
(cid:47)ease lia(cid:69)ilities
Total secured borrowings
30 June 2019
30 June 2018
Current
$’000
23,899
23,899
Non-
current
$’000
24,505
24,505
Total
$’000
48,404
48,404
Current
$’000
7,610
7,610
Non-
current
$’000
9,513
9,513
Total
$’000
17,123
17,123
379,197
353,061
(I)
SECURED LIABILITIES AND ASSETS PLEDGED AS SECURITY
(cid:47)ease lia(cid:69)ilities are e(cid:909)ectivel(cid:92) secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the
event of default.
94
95
8 Financial assets and financial liabilities cont’d
8 Financial assets and financial liabilities cont’d
(e) Borrowings cont’d
(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
(III) FAIR VALUE
30 June 2019
$’000
30 June 2018
$’000
26,436
24,220
50,656
(2,252)
48,404
8,223
10,062
18,285
(1,162)
17,123
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 report period, the Group had:
• Undrawn A$200.0 million revolving credit facility (2018: A$90.0 million);
(f) Recognised fair value measurements cont’d
Recurring fair value measurements
At 30 June 2018
Financial assets
Derivatives
Derivative financial asset - warrants
Financial assets at fair value through OCI
Australian listed equity securities
Total financial assets
Level 1
$’000
Level 2
$’000
Total
$’000
-
5,712
5,712
42,132
42,132
-
5,712
42,132
47,844
There were no transfers between levels 1 and 2 for recurring fair value measurements during the year.
Level 1: The fair value of financial instruments traded in active markets 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 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:
• A$5.0 million bank guarantee facility drawn down by A$3.3 million (2018: A$5.0 million drawn down by A$3.3 million);
•
specific information about the following non-financial assets and non-financial liabilities
• A$5.0 million bank guarantee facility drawn down by A$4.5 million (2018: A$5.0 million drawn down by A$4.5 million);
• US$72.0 million bank guarantee and stand by letter of credit facility drawn down by US$71.9 million (2018: nil); and
• US$3.0 million bank guarantee and stand by letter of facility drawn down by US$1.3 million (2018: nil).
(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 2019
Financial assets
Derivatives
Derivative financial asset - warrants
Financial assets at fair value through OCI
Australian listed equity securities
Total financial assets
Level 1
$’000
Level 2
$’000
Total
$’000
-
1,333
1,333
23,027
23,027
-
1,333
23,027
24,360
-
-
property, plant and equipment
exploration and evaluation assets
- mine properties assets
-
-
-
tax balances
inventories
provisions
accounting policies
information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved.
•
•
(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 25 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.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
96
97
9 Non-financial assets and liabilities cont’d
9 Non-financial assets and liabilities cont’d
(a) Property, plant and equipment cont’d
ACCOUNTING POLICY CONT’D
(a) Property, plant and equipment cont’d
(I) LEASED ASSETS
At 30 June 2018
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2018
Opening net book amount
Additions
Acquired as part of asset acquisition
Acquired as part of business
combination (note 13)
Disposals
Transfer to mine
properties
Transfers
Depreciation
charge
Closing net book amount
At 30 June 2019
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 30 June 2019
Opening net book amount
Additions
Acquired as part of business
combination (note 13)
Exchange differences
Disposals
Transfers
Depreciation charge
Land &
buildings
$’000
Plant &
equipment
$’000
Motor
vehicles
$’000
Office
equipment
$’000
Capital
work in
progress
$’000
Total
$’000
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
3,729
73,206
2,505
1,270
-
664
1,364
-
-
-
243
25,991
(1,231)
-
753
52,464
(2,190)
(38,798)
4,320
111,875
-
10
296
(62)
-
2,258
(1,378)
3,629
-
2
155
-
-
888
(783)
24,141
50,649
57
3,376
-
(4,172)
(56,363)
104,851
50,649
976
31,182
(1,293)
(4,172)
-
-
(43,149)
1,532
17,688
139,044
Land &
buildings
$’000
Plant &
equipment
$’000
Motor
vehicles
$’000
Office
equipment
$’000
Capital
work in
progress
$’000
Total
$’000
53,214
609,437
(11,193)
(189,510)
42,021
419,927
12,546
(6,933)
5,613
10,304
(4,089)
27,308
712,809
-
(211,725)
6,215
27,308
501,084
Land &
buildings
$’000
Plant &
equipment
$’000
Motor
vehicles
$’000
Office
equipment
$’000
4,320
111,875
-
-
29,626
279,015
878
-
9,163
(1,966)
8,100
(1,634)
94,962
(72,391)
3,629
-
786
27
(96)
3,398
(2,131)
5,613
1,532
-
3,961
118
(410)
1,958
(944)
6,215
Capital
work in
progress
$’000
17,688
114,859
4,070
172
-
(109,481)
Total
$’000
139,044
114,859
317,458
9,295
(2,140)
-
-
(77,432)
27,308
501,084
Closing net book amount
42,021
419,927
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
Accumulated depreciation
Net book amount
(b) Exploration and evaluation assets
ACCOUNTING POLICY
30 June 2019
$’000
30 June 2018
$’000
63,113
(17,142)
45,971
22,861
(8,311)
14,550
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.
Opening balance at 1 July
Expenditure for the period
Acquired as part of asset acquisition (i)
Acquired as part of business combination (ii)
Transfer to mine properties
Impairment (iii)
Exchange differences
Closing balance
(I) ASSET ACQUISITION
30 June 2019
$’000
30 June 2018
$’000
225,735
67,904
1,726
-
(19,591)
(9,929)
193
137,638
76,373
13,136
36,800
(26,459)
(11,753)
-
266,038
225,735
During the year, the Company completed the acquisition of the Stone Boy project through the purchase of 100% of the fully paid ordinary
shares in Stone Boy Inc from Sumitomo Exploration Corporation for total consideration of US$1.2 million (A$1.7 million). For details of the
acquisition refer to note 14 of the financial statements.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
98
2019 ANNUAL REPORT | FINANCIAL R EPOR T
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 Non-financial assets and liabilities cont’d
9 Non-financial assets and liabilities cont’d
(cid:11)(cid:69)(cid:12) (cid:40)(cid:91)ploration and evaluation assets cont(cid:519)d
(II) BUSINESS COMBINATION
(cid:11)c(cid:12) (cid:48)ine properties cont(cid:519)d
(I) BUSINESS COMBINATION
(cid:50)n (cid:21)(cid:28) (cid:48)arch (cid:21)(cid:19)(cid:20)(cid:27), the (cid:38)ompan(cid:92) also completed the ac(cid:84)uisition of the (cid:54)outh (cid:46)algoorlie (cid:50)perations from (cid:58)estgold (cid:53)esources (cid:47)td for
(cid:7)(cid:26)(cid:27)(cid:17)(cid:22) million consideration through the purchase of (cid:20)(cid:19)(cid:19)(cid:8) of the full(cid:92) paid ordinar(cid:92) shares in (cid:39)ioro (cid:40)(cid:91)ploration (cid:51)t(cid:92) (cid:47)td(cid:17) (cid:41)or details of the
ac(cid:84)uisition refer to note (cid:20)(cid:22) of the financial statements(cid:17)
(cid:50)n (cid:21)(cid:27) (cid:54)eptem(cid:69)er (cid:21)(cid:19)(cid:20)(cid:27), (cid:49)orthern (cid:54)tar (cid:53)esources (cid:11)(cid:522)(cid:49)(cid:54)(cid:55)(cid:523)(cid:12) completed the ac(cid:84)uisition of the (cid:51)ogo underground mine in (cid:36)laska(cid:17) (cid:55)he ac(cid:84)uisition
(cid:90)as carried out through (cid:49)(cid:54)(cid:55)(cid:519)s (cid:90)holl(cid:92) o(cid:90)ned (cid:56)(cid:54) su(cid:69)sidiar(cid:92) (cid:49)orthern (cid:54)tar (cid:11)(cid:36)laska(cid:12) (cid:47)(cid:47)(cid:38)(cid:17) (cid:55)his entit(cid:92) ac(cid:84)uired all of the shares of (cid:54)umitomo
(cid:48)etal (cid:48)ining (cid:51)ogo (cid:47)(cid:47)(cid:38) and (cid:54)(cid:38) (cid:51)ogo (cid:47)(cid:47)(cid:38)(cid:17) (cid:53)efer to note (cid:20)(cid:22) of the (cid:41)inancial (cid:53)eport for further details(cid:17)
(III) IMPAIRMENT
(II)
IMPAIRMENT
(cid:36)t each reporting date the (cid:42)roup undertakes an assessment of the carr(cid:92)ing amount of its e(cid:91)ploration and evaluation assets(cid:17) (cid:39)uring the
(cid:92)ear the (cid:42)roup identified indicators of impairment on certain e(cid:91)ploration and evaluation assets under (cid:36)(cid:36)(cid:54)(cid:37) (cid:25) (cid:40)(cid:91)ploration for and (cid:40)valuation
of (cid:48)ineral (cid:53)esources(cid:17) (cid:36)s a result of this revie(cid:90), an impairment loss of (cid:7)(cid:28)(cid:17)(cid:28) million (cid:11)(cid:21)(cid:19)(cid:20)(cid:27)(cid:29) (cid:7)(cid:20)(cid:20)(cid:17)(cid:27) million(cid:12) has (cid:69)een recognised in the statement
of profit or loss and other comprehensive income in relation to areas of interest (cid:90)here no future e(cid:91)ploration and evaluation activities
are e(cid:91)pected(cid:17)
(cid:11)c(cid:12) (cid:48)ine properties
ACCOUNTING POLICY
(cid:48)ine properties includes aggregate e(cid:91)penditure in relation to mine construction, mine development, e(cid:91)ploration and evaluation e(cid:91)penditure
(cid:90)here a development decision has (cid:69)een made and ac(cid:84)uired mineral interests(cid:17)
(cid:40)(cid:91)penditure incurred in constructing a mine (cid:69)(cid:92), or on (cid:69)ehalf of, the (cid:42)roup is accumulated separatel(cid:92) for each area of interest in (cid:90)hich
economicall(cid:92) recovera(cid:69)le reserves and resources have (cid:69)een identified(cid:17) (cid:55)his e(cid:91)penditure includes direct costs of construction, drilling costs
and removal of over(cid:69)urden to gain access to the ore, (cid:69)orro(cid:90)ing costs capitalised during construction and an appropriate allocation of
attributable overheads.
(cid:48)ine development represents e(cid:91)penditure in respect of e(cid:91)ploration and evaluation, over(cid:69)urden removal (cid:69)ased on underl(cid:92)ing mining
activities and related mining data and construction costs and development incurred (cid:69)(cid:92) or on (cid:69)ehalf of the (cid:42)roup previousl(cid:92) accumulated and
carried for(cid:90)ard in relation to properties in (cid:90)hich mining has no(cid:90) commenced(cid:17) (cid:54)uch e(cid:91)penditure comprises direct costs and an appropriate
allocation of directl(cid:92) related overhead e(cid:91)penditure(cid:17)
(cid:36)ll e(cid:91)penditure incurred prior to commencement of production from each development propert(cid:92) is carried for(cid:90)ard to the e(cid:91)tent to (cid:90)hich
recoupment out of future revenue from the sale of production, or from the sale of the propert(cid:92), is reasona(cid:69)l(cid:92) assured(cid:17) (cid:58)hen further
development e(cid:91)penditure is incurred in respect of a mine propert(cid:92) after commencement of commercial production, such e(cid:91)penditure
is carried for(cid:90)ard as part of the cost of the mine propert(cid:92) onl(cid:92) (cid:90)hen future economic (cid:69)enefits are reasona(cid:69)l(cid:92) assured, other(cid:90)ise the
e(cid:91)penditure is classified as part of the cost of production and e(cid:91)pensed as incurred(cid:17) (cid:54)uch capitalised development e(cid:91)penditure is added to
the total carr(cid:92)ing value of mine development (cid:69)eing amortised(cid:17)
(cid:48)ine development costs (cid:11)as transferred from e(cid:91)ploration and evaluation and(cid:18)or mines under construction(cid:12) are amortised on a units(cid:16)of(cid:16)
production (cid:69)asis over the life of mine to (cid:90)hich the(cid:92) relate(cid:17) In appl(cid:92)ing the units of production method, amortisation is calculated using
the e(cid:91)pected total contained ounces as determined (cid:69)(cid:92) the life of mine plan specific to that mine propert(cid:92)(cid:17) (cid:41)or development e(cid:91)penditure
undertaken during production, the amortisation rate is (cid:69)ased on the ratio of total development e(cid:91)penditure (cid:11)incurred and anticipated(cid:12) over
the e(cid:91)pected total contained ounces as estimated (cid:69)(cid:92) the relevant life of mine plan to achieve a consistent amortisation rate per ounce(cid:17) (cid:55)he
rate per ounce is t(cid:92)picall(cid:92) updated annuall(cid:92) as the life of mine plans are revised(cid:17)
(cid:48)ineral interests comprise identifia(cid:69)le e(cid:91)ploration and evaluation assets, mineral resources and ore reserves, (cid:90)hich are ac(cid:84)uired as part of a
(cid:69)usiness com(cid:69)ination or (cid:77)oint venture ac(cid:84)uisition and are recognised at fair value at the date of ac(cid:84)uisition(cid:17) (cid:58)here possi(cid:69)le, mineral interests
are attri(cid:69)uta(cid:69)le to specific areas of interest and are classified (cid:90)ithin mine properties(cid:17)
(cid:50)pening (cid:69)alance at (cid:20) (cid:45)ul(cid:92)
(cid:40)(cid:91)penditure for the period
(cid:55)ransfer from e(cid:91)ploration and evaluation
(cid:36)c(cid:84)uired as part of (cid:69)usiness com(cid:69)ination (cid:11)i(cid:12)
(cid:49)et transfer from propert(cid:92), plant and e(cid:84)uipment
(cid:36)mortisation
(cid:40)(cid:91)change di(cid:909)erences
Closing balance
30 June 2019
$’000
30 June 2018
$’000
212,788
144,604
19,591
140,531
-
157,477
123,240
26,459
13,945
4,172
(165,340)
(112,505)
4,187
-
356,361
212,788
(cid:36)t each reporting date, the (cid:42)roup assesses (cid:90)hether there is an(cid:92) indication that an asset, or group of assets is impaired(cid:17) If an(cid:92) such indication
e(cid:91)ists, the recovera(cid:69)le amount of the asset is estimated to determine the e(cid:91)tent of the impairment loss (cid:11)if an(cid:92)(cid:12) (cid:90)hich is the amount (cid:69)(cid:92) (cid:90)hich
the assets carr(cid:92)ing value e(cid:91)ceeds its recovera(cid:69)le amount(cid:17) (cid:58)here the asset does not generate cash in(cid:16)(cid:565)o(cid:90)s that are independent from other
assets, the (cid:42)roup estimates the recovera(cid:69)le amount of the cash(cid:16)generating unit (cid:11)(cid:38)(cid:42)(cid:56)(cid:12) to (cid:90)hich the asset (cid:69)elongs(cid:17)
(cid:55)he recovera(cid:69)le amount is the higher of (cid:518)fair value less costs to sell(cid:519) (cid:11)(cid:41)(cid:57)(cid:47)(cid:38)(cid:54)(cid:12) and (cid:518)value in use(cid:519)(cid:17)
(cid:58)here an impairment loss su(cid:69)se(cid:84)uentl(cid:92) reverses for assets other than good(cid:90)ill, the carr(cid:92)ing amount of the asset (cid:11)or (cid:38)(cid:42)(cid:56)(cid:12) is increased to the
revised estimate of its recovera(cid:69)le amount, (cid:69)ut onl(cid:92) to the e(cid:91)tent that the increased carr(cid:92)ing amount does not e(cid:91)ceed the carr(cid:92)ing amount
that (cid:90)ould have (cid:69)een determined had no impairment loss (cid:69)een recognised for the asset (cid:11)or (cid:38)(cid:42)(cid:56)(cid:12) in prior (cid:92)ears(cid:17) (cid:36) reversal of an impairment
loss is recognised in profit or loss immediatel(cid:92)(cid:17)
Impairment testing re(cid:84)uires assets to (cid:69)e grouped together into the smallest group that generates cash in(cid:565)o(cid:90)s from continuing use that are
largel(cid:92) independent of the cash in(cid:565)o(cid:90)s of other assets or cash generating units(cid:17) (cid:55)he (cid:42)roup generall(cid:92) considers each of its operating mine
sites to (cid:69)e a separate (cid:38)(cid:42)(cid:56)(cid:17) (cid:39)epending on the location of the mine, as (cid:90)ell as other e(cid:91)ternal factors, the (cid:38)(cid:42)(cid:56) ma(cid:92) include more than one
operating mine and also include processing facilities(cid:17)
(d)
Intangible assets
ACCOUNTING POLICY
(cid:55)he (cid:42)roup(cid:519)s intangi(cid:69)le asset relates to the tolling s(cid:92)nergies its o(cid:69)tained from the (cid:54)outh (cid:46)algoorlie (cid:50)peration (cid:11)(cid:522)(cid:54)(cid:46)(cid:50)(cid:523)(cid:12) ac(cid:84)uisition completed
on (cid:21)(cid:28) (cid:48)arch (cid:21)(cid:19)(cid:20)(cid:27)(cid:17) (cid:55)he (cid:69)enefit re(cid:565)ects the e(cid:91)pected cost savings to the (cid:38)ompan(cid:92) of processing ore through the (cid:45)u(cid:69)ilee mill rather under toll
agreements (cid:90)ith third parties(cid:17)
(cid:55)he tolling (cid:69)enefits ac(cid:84)uired as part of the (cid:54)(cid:46)(cid:50) ac(cid:84)uisition has (cid:69)een recognised at fair value at the ac(cid:84)uisition date(cid:17) (cid:55)his fair value re(cid:565)ects
e(cid:91)pectations a(cid:69)out the pro(cid:69)a(cid:69)ilit(cid:92) that the e(cid:91)pected future economic (cid:69)enefits em(cid:69)odied in the tolling (cid:69)enefits (cid:90)ill (cid:565)o(cid:90) to the (cid:38)ompan(cid:92)(cid:17) (cid:55)he
tolling service could also (cid:69)e sold to third parties given the active tolling market locall(cid:92)(cid:17)
(cid:55)he useful life of the tolling (cid:69)enefits is considered to (cid:69)e (cid:24) (cid:92)ears(cid:17) (cid:55)he amortisation on this intangi(cid:69)le asset has (cid:69)een allocated on a s(cid:92)stematic
(cid:69)asis over its useful life commencing from ac(cid:84)uisition date(cid:17)
Intangible assets
Year ended 30 June 2018
(cid:36)c(cid:84)uisition of (cid:69)usiness (cid:11)note (cid:20)(cid:22)(cid:12)
(cid:36)mortisation charge
(cid:38)losing net (cid:69)ook amount
As 30 June 2018
Cost
(cid:36)ccumulated amortisation and impairment
Total
Tolling
synergies
$’000
(cid:20)(cid:26),(cid:20)(cid:24)(cid:25)
(cid:11)(cid:27)(cid:24)(cid:27)(cid:12)
(cid:20)(cid:25),(cid:21)(cid:28)(cid:27)
17,156
(cid:11)(cid:27)(cid:24)(cid:27)(cid:12)
16,298
100
2019 ANNUAL REPORT | FINANCIAL R EPOR T
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 Non-financial assets and liabilities cont’d
9 Non-financial assets and liabilities cont’d
(cid:11)d(cid:12)
Intangi(cid:69)le assets cont(cid:519)d
ACCOUNTING POLICY CONT’D
Intangible assets
Year ended 30 June 2019
(cid:50)pening net (cid:69)ook amount
(cid:36)mortisation charge
(cid:38)losing net (cid:69)ook amount
At 30 June 2019
Cost
(cid:36)ccumulated amortisation and impairment
Total
(cid:36)mortisation e(cid:91)pense in relation to tolling (cid:69)enefit is included in costs of sales (cid:11)(cid:21)(cid:19)(cid:20)(cid:28)(cid:29) (cid:7)(cid:22)(cid:17)(cid:23) million(cid:30) (cid:21)(cid:19)(cid:20)(cid:27)(cid:29) (cid:7)(cid:19)(cid:17)(cid:28) million(cid:12)
(e) Tax balances
(I) CURRENT TAX ASSET/(LIABILITY)
(cid:50)pening (cid:69)alance at (cid:20) (cid:45)ul(cid:92)
(cid:55)a(cid:91) paid
Current tax
(cid:36)d(cid:77)ustment for current ta(cid:91) on prior periods
Closing balance
(II) DEFERRED TAX ASSETS
(cid:55)he b(cid:68)(cid:79)(cid:68)n(cid:70)e (cid:70)(cid:82)(cid:80)(cid:83)r(cid:76)ses te(cid:80)(cid:83)(cid:82)r(cid:68)r(cid:92) (cid:71)(cid:76)(cid:909)eren(cid:70)es (cid:68)ttr(cid:76)b(cid:88)t(cid:68)b(cid:79)e t(cid:82)(cid:29)
(cid:40)mplo(cid:92)ee (cid:69)enefits
Provisions
(cid:36)ccruals
Financial assets at fair value through OCI
(cid:48)ine properties
Other
Other
(cid:54)hare (cid:69)ased pa(cid:92)ments
Sub-total other
Total deferred tax assets
(cid:54)et(cid:16)o(cid:909) of deferred ta(cid:91) lia(cid:69)ilities pursuant to set(cid:16)o(cid:909) provisions
Net deferred tax assets
Tolling
synergies
$’000
(cid:20)(cid:25),(cid:21)(cid:28)(cid:27)
(cid:11)(cid:22),(cid:23)(cid:22)(cid:20)(cid:12)
(cid:20)(cid:21),(cid:27)(cid:25)(cid:26)
17,156
(4,289)
12,867
(cid:11)e(cid:12) (cid:55)a(cid:91) (cid:69)alances cont(cid:519)d
(II) DEFERRED TAX ASSETS CONT’D
Movements
At 1 July 2017
(cid:11)(cid:38)harged(cid:12)(cid:18)credited
(cid:16) to profit or loss
(cid:16) ad(cid:77)ustments to prior (cid:92)ear
(cid:16) ac(cid:84)uisition of su(cid:69)sidiar(cid:92)
At 30 June 2018
(cid:11)(cid:38)harged(cid:12)(cid:18)credited
(cid:16) to profit or loss
(cid:16) directl(cid:92) to e(cid:84)uit(cid:92)
At 30 June 2019
(III) DEFERRED TAX LIABILITIES
(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)ee
benefits
$’000
(cid:51)r(cid:82)(cid:89)(cid:76)s(cid:76)(cid:82)ns
$’000
(cid:918)n(cid:89)est(cid:16)
(cid:80)ents
$’000
Mine
(cid:51)r(cid:82)(cid:83)ert(cid:76)es
$’000
Other
$’000
Total
$’000
6,357
24,549
1,979
5,937
1,768
40,590
(cid:11)(cid:20),(cid:28)(cid:26)(cid:28)(cid:12)
(cid:11)(cid:21),(cid:22)(cid:21)(cid:28)(cid:12)
(cid:20),(cid:27)(cid:19)(cid:25)
(cid:16)
(cid:22)(cid:22)(cid:24)
(cid:25),(cid:27)(cid:21)(cid:23)
(cid:16)
(cid:26),(cid:28)(cid:23)(cid:25)
8,498
39,319
(cid:11)(cid:22)(cid:21)(cid:27)(cid:12)
(cid:16)
(cid:26),(cid:26)(cid:27)(cid:19)
(cid:16)
8,170
47,099
(cid:16)
(cid:16)
-
(cid:20),(cid:19)(cid:27)(cid:23)
(cid:16)
1,084
(cid:16)
(cid:16)
(cid:28),(cid:22)(cid:21)(cid:19)
(cid:23)(cid:25)(cid:26)
(cid:16)
3,608
11,555
(cid:11)(cid:27)(cid:22)(cid:28)(cid:12)
(cid:16)
2,769
(cid:21),(cid:27)(cid:27)(cid:20)
(cid:21)(cid:23),(cid:28)(cid:23)(cid:23)
39,380
(cid:20)(cid:22),(cid:25)(cid:23)(cid:21)
(cid:23)(cid:25)(cid:26)
(cid:27),(cid:21)(cid:27)(cid:20)
62,980
(cid:20)(cid:19),(cid:24)(cid:26)(cid:27)
(cid:21)(cid:23),(cid:28)(cid:23)(cid:23)
98,502
30 June 2019
$’000
30 June 2018
$’000
(14,959)
90,350
(70,672)
1,566
6,285
(40,811)
100,111
(73,612)
(647)
(14,959)
30 June 2019
$’000
30 June 2018
$’000
8,170
47,099
3,004
1,084
2,769
62,126
7,619
28,757
36,376
8,498
39,319
7,073
-
3,608
58,498
4,482
-
4,482
98,502
62,980
(98,502)
(62,980)
-
-
(cid:55)he b(cid:68)(cid:79)(cid:68)n(cid:70)e (cid:70)(cid:82)(cid:80)(cid:83)r(cid:76)ses te(cid:80)(cid:83)(cid:82)r(cid:68)r(cid:92) (cid:71)(cid:76)(cid:909)eren(cid:70)es (cid:68)ttr(cid:76)b(cid:88)t(cid:68)b(cid:79)e t(cid:82)(cid:29)
(cid:51)ropert(cid:92), plant and e(cid:84)uipment
Inventories
(cid:40)(cid:91)ploration and evaluation
(cid:48)ine properties
Other
Financial assets at fair value through OCI
Intangible assets
Other
(cid:39)eferred (cid:38)onsideration received from (cid:51)lutonic (cid:54)ale
Sub-total other
Total deferred tax liabilities
(cid:54)et(cid:16)o(cid:909) of deferred ta(cid:91) lia(cid:69)ilities pursuant to set(cid:16)o(cid:909) provisions
Net deferred tax liabilities
OFFSETTING WITHIN TAX CONSOLIDATED GROUP
30 June 2019
$’000
30 June 2018
$’000
30,570
5,949
59,276
65,384
3,461
5,113
56,407
51,145
161,179
116,126
2,082
60
-
750
2,892
2,199
1,089
229
471
3,988
164,071
120,114
(98,502)
(62,980)
65,569
57,134
(cid:49)orthern (cid:54)tar (cid:53)esources (cid:47)imited and its (cid:90)holl(cid:92)(cid:16)o(cid:90)ned (cid:36)ustralian su(cid:69)sidiaries have applied (cid:36)ustralia(cid:519)s ta(cid:91) consolidation legislation (cid:90)hich
means that the (cid:36)ustralian entities are ta(cid:91)ed as a single entit(cid:92)(cid:17) (cid:36)lso, (cid:49)orthern (cid:54)tar (cid:53)esources (cid:47)imited(cid:519)s (cid:56)(cid:54) entities are regarded as a single
ta(cid:91)pa(cid:92)er in the (cid:56)(cid:54) for income ta(cid:91) purposes(cid:17) (cid:41)or accounting purposes, deferred ta(cid:91) assets and deferred ta(cid:91) lia(cid:69)ilities, relating to the same
ta(cid:91)ation authorities, have (cid:69)een o(cid:909)set in the consolidated financial statements(cid:17)
102
2019 ANNUAL REPORT | FINANCIAL R EPOR T
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 Non-financial assets and liabilities cont’d
9 Non-financial assets and liabilities cont’d
(cid:11)e(cid:12) (cid:55)a(cid:91) (cid:69)alances cont(cid:519)d
(III) DEFERRED TAX LIABILITIES CONT’D
(cid:48)(cid:82)(cid:89)e(cid:80)ents
(cid:36)t (cid:20) (cid:45)ul(cid:92) (cid:21)(cid:19)(cid:20)(cid:26)
(cid:38)harged(cid:18)(cid:11)credited(cid:12)
(cid:16) profit or loss
(cid:16) ad(cid:77)ustment to prior (cid:92)ear
(cid:16) to other comprehensive income
(cid:16) ac(cid:84)uisition of su(cid:69)sidiar(cid:92) (cid:11)note (cid:20)(cid:22)(cid:12)
(cid:40)(cid:91)(cid:83)(cid:79)(cid:82)r(cid:68)t(cid:76)(cid:82)n
and
e(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)t(cid:76)(cid:82)n
$’000
Mine
(cid:83)r(cid:82)(cid:83)ert(cid:76)es
$’000
(cid:51)r(cid:82)(cid:83)ert(cid:92)(cid:15)
(cid:83)(cid:79)(cid:68)nt (cid:68)n(cid:71)
e(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)ent
$’000
(cid:918)n(cid:89)ent(cid:82)r(cid:76)es
$’000
Other
$’000
Total
$’000
(cid:23)(cid:19),(cid:23)(cid:19)(cid:24)
(cid:23)(cid:20),(cid:20)(cid:25)(cid:26)
(cid:20),(cid:23)(cid:20)(cid:20)
(cid:23),(cid:19)(cid:21)(cid:22)
(cid:21),(cid:28)(cid:22)(cid:19)
(cid:27)(cid:28),(cid:28)(cid:22)(cid:25)
(cid:11)f(cid:12)
Inventories cont(cid:519)d
ACCOUNTING POLICY CONT’D
Current assets
(cid:38)onsuma(cid:69)le stores
(cid:50)re stockpiles
Gold in circuit
Finished goods - dore
(cid:20)(cid:23),(cid:28)(cid:22)(cid:27)
(cid:16)
(cid:16)
(cid:20),(cid:19)(cid:25)(cid:23)
(cid:28),(cid:23)(cid:27)(cid:20)
(cid:11)(cid:22)(cid:24)(cid:22)(cid:12)
(cid:16)
(cid:27)(cid:24)(cid:19)
At 30 June 2018
56,407
51,145
(cid:38)harged(cid:18)(cid:11)credited(cid:12)
(cid:16) profit or loss
(cid:16) ad(cid:77)ustment to prior (cid:92)ear
(cid:16) directl(cid:92) to e(cid:84)uit(cid:92)
(cid:16) ac(cid:84)uisition of su(cid:69)sidiar(cid:92) (cid:11)note (cid:20)(cid:22)(cid:12)(cid:13)
At 30 June 2019
(cid:21),(cid:27)(cid:25)(cid:28)
(cid:21),(cid:21)(cid:24)(cid:20)
(cid:16)
(cid:16)
(cid:16)
59,276
(cid:16)
(cid:16)
(cid:20)(cid:20),(cid:28)(cid:27)(cid:27)
65,384
(cid:11)(cid:22)(cid:28)(cid:26)(cid:12)
(cid:16)
(cid:16)
(cid:21),(cid:23)(cid:23)(cid:26)
3,461
(cid:11)(cid:23),(cid:23)(cid:21)(cid:27)(cid:12)
(cid:20),(cid:19)(cid:25)(cid:25)
(cid:16)
(cid:22)(cid:19),(cid:23)(cid:26)(cid:20)
30,570
(cid:28)(cid:26)
(cid:16)
(cid:16)
(cid:28)(cid:28)(cid:22)
5,113
(cid:27)(cid:22)(cid:25)
(cid:16)
(cid:16)
(cid:16)
(cid:11)(cid:21)(cid:24)(cid:27)(cid:12)
(cid:16)
(cid:11)(cid:22)(cid:19)(cid:12)
(cid:20),(cid:22)(cid:23)(cid:25)
3,988
(cid:11)(cid:28)(cid:27)(cid:19)(cid:12)
(cid:16)
(cid:11)(cid:20)(cid:20)(cid:25)(cid:12)
(cid:16)
(cid:21)(cid:22),(cid:27)(cid:25)(cid:20)
(cid:11)(cid:22)(cid:24)(cid:22)(cid:12)
(cid:11)(cid:22)(cid:19)(cid:12)
(cid:25),(cid:26)(cid:19)(cid:19)
120,114
(cid:24)(cid:23)(cid:27)
(cid:20),(cid:19)(cid:25)(cid:25)
(cid:11)(cid:20)(cid:20)(cid:25)(cid:12)
(cid:23)(cid:21),(cid:23)(cid:24)(cid:28)
5,949
2,892
164,071
(cid:13) (cid:57)ariance from (cid:69)alance to note (cid:20)(cid:22) relates to movement in foreign currenc(cid:92) rates from ac(cid:84)uisition date (cid:11)(cid:21)(cid:27) (cid:54)eptem(cid:69)er (cid:21)(cid:19)(cid:20)(cid:27)(cid:12) to (cid:92)ear end(cid:17)
RECOVERY OF DEFERRED TAXES
(cid:39)eferred ta(cid:91) assets are recognised onl(cid:92) if it is pro(cid:69)a(cid:69)le that future ta(cid:91)a(cid:69)le amounts (cid:90)ill (cid:69)e availa(cid:69)le to utilise those temporar(cid:92) di(cid:909)erences
and losses(cid:17) (cid:39)eferred ta(cid:91) assets, including those arising from unutilised ta(cid:91) losses (cid:11)(cid:90)here applica(cid:69)le(cid:12), re(cid:84)uire management to assess the
likelihood that the (cid:42)roup (cid:90)ill compl(cid:92) (cid:90)ith the relevant ta(cid:91) legislation and (cid:90)ill generate su(cid:605)cient ta(cid:91)a(cid:69)le earnings in future (cid:92)ears in order to
recognise and utilise those deferred ta(cid:91) assets(cid:17) (cid:40)stimates of future ta(cid:91)a(cid:69)le income are (cid:69)ased on forecast cash (cid:565)o(cid:90)s from operations and
e(cid:91)isting ta(cid:91) la(cid:90)s in each (cid:77)urisdiction(cid:17) (cid:55)hese assessments re(cid:84)uire the use of estimates and assumptions such as e(cid:91)change rates, commodit(cid:92)
prices and operating performance over the life of the assets(cid:17) (cid:55)o the e(cid:91)tent that cash (cid:565)o(cid:90)s and ta(cid:91)a(cid:69)le income di(cid:909)er significantl(cid:92) from
estimates, the a(cid:69)ilit(cid:92) of the (cid:42)roup to realise the deferred ta(cid:91) assets reported at the reporting date could (cid:69)e impacted(cid:17) (cid:36)dditionall(cid:92), future
changes in ta(cid:91) la(cid:90)s in the (cid:77)urisdictions in (cid:90)hich the (cid:42)roup operates could limit the a(cid:69)ilit(cid:92) of the (cid:42)roup to o(cid:69)tain ta(cid:91) deductions in
future (cid:92)ears(cid:17)
(f)
Inventories
ACCOUNTING POLICY
(cid:42)old (cid:69)ullion, gold in circuit and ore stockpiles are ph(cid:92)sicall(cid:92) measured or estimated and valued at the lo(cid:90)er of cost and net realisa(cid:69)le value(cid:17)
(cid:38)ost represents the (cid:90)eighted average cost and includes direct purchase costs and an appropriate portion of fi(cid:91)ed and varia(cid:69)le production
overhead e(cid:91)penditure, including depreciation and amortisation, incurred in converting materials into finished goods(cid:17)
(cid:48)aterials and supplies are valued at the lo(cid:90)er of cost and net realisa(cid:69)le value(cid:17) (cid:36)n(cid:92) allo(cid:90)ance for o(cid:69)solescence is determined (cid:69)(cid:92) reference to
specific stock items identified(cid:17) (cid:36) regular and on(cid:16)going revie(cid:90) is undertaken to esta(cid:69)lish the e(cid:91)tent of surplus items and an allo(cid:90)ance is made
for an(cid:92) potential loss on their disposal(cid:17)
(cid:49)et realisa(cid:69)le value is the estimated selling price in the ordinar(cid:92) course of (cid:69)usiness less the estimated costs of completion and the estimated
costs necessar(cid:92) to make the sale(cid:17)
(cid:50)re stockpiles (cid:90)hich are not e(cid:91)pected to (cid:69)e processed in the (cid:20)(cid:21) months after the reporting date are classified as non(cid:16)current inventor(cid:92)(cid:17)
(cid:55)here is a reasona(cid:69)le e(cid:91)pectation the processing of these stockpiles (cid:90)ill have a future economic (cid:69)enefit to the (cid:42)roup and accordingl(cid:92) values
these stockpiles at the lo(cid:90)er of cost and net realisa(cid:69)le value(cid:17)
30 June 2019
$’000
30 June 2018
$’000
39,613
42,526
31,492
-
113,631
17,044
33,396
31,362
2,139
83,941
(I) AMOUNTS RECOGNISED IN PROFIT OR LOSS
(cid:58)rite(cid:16)do(cid:90)ns of inventories consuma(cid:69)le to net realisa(cid:69)le value amounted to (cid:7)(cid:20)(cid:17)(cid:25) million (cid:11)(cid:21)(cid:19)(cid:20)(cid:27) (cid:16) (cid:7)(cid:20)(cid:17)(cid:19) million(cid:12)(cid:17) (cid:55)hese (cid:90)ere recognised as an
e(cid:91)pense during the (cid:92)ear ended (cid:22)(cid:19) (cid:45)une (cid:21)(cid:19)(cid:20)(cid:28) and included in (cid:518)cost of sales(cid:519) in profit or loss(cid:17)
(g) Provisions
ACCOUNTING POLICY
(cid:51)rovisions are recognised (cid:90)hen the (cid:42)roup has a present legal or constructive o(cid:69)ligation as a result of past events, it is pro(cid:69)a(cid:69)le that an
out(cid:565)o(cid:90) of resources (cid:90)ill (cid:69)e re(cid:84)uired to settle the o(cid:69)ligation and the amount can (cid:69)e relia(cid:69)l(cid:92) estimated(cid:17) (cid:51)rovisions are not recognised for
future operating losses(cid:17)
(cid:51)rovisions are measured at the present value of managements (cid:69)est estimate of the e(cid:91)penditure re(cid:84)uired to settle the present o(cid:69)ligation
at the end of the reporting period(cid:17) (cid:55)he discount rate used to determine the present value is a pre(cid:16)ta(cid:91) rate that re(cid:565)ects current market
assessments of the time value of mone(cid:92) and the risks specific to the lia(cid:69)ilit(cid:92)(cid:17)
(cid:53)eha(cid:69)ilitation costs include the dismantling and removal of mining plant, e(cid:84)uipment and (cid:69)uilding structures, (cid:90)aste removal and reha(cid:69)ilitation
of the site in accordance (cid:90)ith the re(cid:84)uirements of the mining permits(cid:17) (cid:54)uch costs are determined using estimates of future costs, current
legal re(cid:84)uirements and technolog(cid:92)(cid:17)
(cid:53)eha(cid:69)ilitation costs are recognised in full at present value as a non(cid:16)current lia(cid:69)ilit(cid:92)(cid:17) (cid:36)n e(cid:84)uivalent amount is capitalised as part of the cost of
the asset (cid:90)hen an o(cid:69)ligation arises to decommission or restore a site to a certain condition after a(cid:69)andonment as a result of (cid:69)ringing the
assets to its present location(cid:17) (cid:55)he capitalised cost is amortised over the life of the pro(cid:77)ect and the provision is accreted periodicall(cid:92) as the
discounting of the lia(cid:69)ilit(cid:92) un(cid:90)inds(cid:17) (cid:55)he un(cid:90)inding of the discount is recorded as a finance cost(cid:17)
(cid:36)n(cid:92) changes in the estimates for the costs or other assumptions against the cost of relevant assets are accounted for on a prospective
(cid:69)asis(cid:17) In determining the costs of site restoration there is uncertaint(cid:92) regarding the nature and e(cid:91)tent of the restoration due to communit(cid:92)
e(cid:91)pectations and future legislation(cid:17)
(cid:40)mplo(cid:92)ee entitlements
Rehabilitation
Other
30 June 2019
Non-
current
$’000
Current
$’000
Total
$’000
Current
$’000
30 June 2018
Non-
current
$’000
39,069
794
-
219,551
5,803
-
39,863
219,551
5,803
31,615
757
-
127,929
5,844
-
Total
$’000
32,372
127,929
5,844
44,872
220,345
265,217
37,459
128,686
166,145
104
105
9 Non-financial assets and liabilities cont’d
(g) Provisions cont’d
(I)
EMPLOYEE ENTITLEMENTS - LEAVE OBLIGATIONS
The leave obligations cover the Group’s liability for long service leave and annual leave.
10 Equity
ACCOUNTING POLICY
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.
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-rata payments in certain
circumstances. The entire amount of the annual leave provision of $19.3 million (2018 - $17.7 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 2019
$’000
30 June 2018
$’000
(a) Share capital
Ordinary shares
Fully paid
Total share capital
Current leave obligations expected to be settled after 12 months
8,008
6,784
(II)
INFORMATION ABOUT INDIVIDUAL PROVISIONS AND SIGNIFICANT ESTIMATES
(I) MOVEMENTS IN ORDINARY SHARES:
30 June 2019
Shares
30 June 2018
Shares
30 June 2019
$’000
30 June 2018
$’000
639,592,634
612,823,852
639,592,634
612,823,852
473,708
473,708
291,290
291,290
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.
(III) MOVEMENTS IN PROVISIONS
Movements in each class of provision during the financial year, other than employee entitlements, are set out below:
2019
Carrying amount at start of year
- additional provisions recognised
Amounts used during the year
- acquired through business combination (note 13)
- unwinding of discount
Exchange differences
Carrying amount at end of year
2018
Carrying amount at start of 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
Rehabilitation
$’000
127,929
8,511
-
75,216
5,624
2,271
Other
$’000
5,844
3,423
(3,464)
-
-
-
219,551
5,803
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
Details
Opening balance 1 July 2017
Employee Share Plan issues
Equity issue net of transaction costs
Performance Share Plan issues
Exercise of options
Balance 30 June 2018
Employee Share Plan issues
Equity issue net of transaction costs
Performance Share Plan issues
Exercise of options
Balance 30 June 2019
Equity issue
Number
of shares
600,542,315
1,462,967
9,523,810
-
1,294,760
612,823,852
140,444
26,119,402
-
508,936
Total
$’000
217,811
6,765
59,810
6,298
606
291,290
1,306
171,009
9,454
649
639,592,634
473,708
On 3 September 2018, the Company issued 26,119,402 fully paid ordinary shares at an issue price of $6.70 per share as part of the
settlement with Sumitomo Metal Mining Co., Ltd (85%) and Sumitomo Corporation (15%) to acquire the Pogo underground mine. 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 20.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
106
RI S K
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.
107
11 Financial risk management cont’d
(a) Market risk
(III) PRICE RISK EXPOSURE CONT’D
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 financial assets at fair value through OCI and investments accounted for using the equity method.
All of the Group’s equity investments are publicly traded on the Australian Securities Exchange or TSX Venture Exchange.
Risk
Exposure arising from
Measurement of risk
How the risk is managed
(b) Credit risk
Market risk
- foreign exchange
Market risk
- interest rate
Market risk
- security prices
Future commercial transactions
Cash flow forecasting
Borrowings at variable rates
Sensitivity analysis
Net-off foreign exchange exposures
and natural hedge mechanisms
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 hedging instruments
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
Management 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, 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 Management 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) Market risk
(I)
FOREIGN EXCHANGE RISK
The Group operates internationally and its exposure to foreign exchange risk is primarily the US$. Foreign exchange risk arises from future
commercial transactions and recognised assets and liabilities denominated in a currency that is not the functional currency of the relevant
entity. The carrying value of financial instruments that are held in a currency other than the entities functional currency are not material.
The Group’s US operations give rise to a foreign currency exposure, however the impacts of translating these entities into the Australian
Dollar presentational currency are recorded through the foreign currency translation reserve in equity.
(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 9 Financial Instruments. The Group’s contractual sales commitments are
disclosed in note 17.
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 (Moody’s)
AA
Counterparties without external credit rating *
Other
Total trade receivables
Cash at bank and short-term bank deposits
AAA
AA
A
* Other - counterparties with no defaults in the past
(III) IMPAIRED TRADE RECEIVABLES
30 June 2019
$’000
30 June 2018
$’000
44,431
11,563
2,887
47,318
-
234,739
31,440
266,179
3,593
15,156
10,000
432,997
-
442,997
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 2019 (2018: nil). No allowance for expected credit losses
has been recognised as the duration off associated exposure is short and/or the probability of default is negligible.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
108
109
11 Financial risk management cont’d
(c) 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 short term
on-demand cash balance of $263.1 million (2018: deposits at call of $202.0 million and on-demand cash balance of $240.9 million) that
available 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.
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.
(I)
FINANCING ARRANGEMENTS
The Group had access to the following undrawn borrowing facilities at the end of the reporting year:
(b) Dividends
(I) ORDINARY SHARES
Floating rate
- Expiring beyond one year (financing facility)
The credit facilities may be drawn at any time.
Refer to note 8(e) for full details of financing facilities available to the Group.
(II) MATURITIES OF FINANCIAL LIABILITIES
30 June 2019
$’000
30 June 2018
$’000
200,000
90,000
Final dividend for the year ended 30 June 2018 of 5 cents (2017: 6 cents)
per fully paid share paid on 28 September 2018 (2017: 13 September 2017)
Interim dividend for the year ended 30 June 2019 of 6 cents (2018: 4.5 cents)
per fully paid share paid on 4 April 2019 (2018: 13 April 2018)
The tables below analyse the Group’s financial liabilities into relevant maturity groupings based on their contractual maturities.
(II) DIVIDENDS NOT RECOGNISED AT THE END OF THE REPORTING PERIOD
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 2019
Trade and other payables
Finance lease liabilities
Total non-derivatives
At 30 June 2018
Trade and other payables
Finance lease liabilities
Total non-derivatives
149,710
13,216
162,926
140,073
4,411
144,484
-
13,220
13,220
-
19,437
19,437
-
3,812
3,812
-
7,209
7,209
-
4,783
4,783
-
2,853
2,853
-
-
-
-
-
-
149,710
50,656
149,710
48,404
200,366
198,114
140,073
18,285
140,073
17,123
158,358
157,196
The weighted average interest rate on finance lease liabilities was 4.46% (2018: 4.55%).
In addition to the above dividends, since year end the Directors have recommended
the payment of a final dividend of 7.5 cents per fully paid ordinary share (2018 - 5 cents),
as at 30 June 2019, fully franked based on tax paid at 30%. The aggregate amount of the
proposed dividend expected to be paid on 20 November 2019 out of retained earnings
at 30 June 2019, 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 $208.6 million (2018: $146.6 million)
GR OU P ST RU CT UR E
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 15.
30 June 2019
$’000
30 June 2018
$’000
31,973
36,190
38,367
27,143
70,340
63,333
30 June 2019
$’000
30 June 2018
$’000
47,969
30,667
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
110
111
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 application of acquisition accounting requires significant judgements and estimates to
be made, which are discussed further below. The Group engages independent third parties to assist with the determination of the fair value
of assets acquired, liabilities assumed, non-controlling interest, if any, and goodwill, based on recognised business valuation methodologies.
The income valuation method represents the present value of future cash flows over the life of the asset using:
• financial forecasts, which rely on management’s estimates of reserve quantities and exploration potential, costs to produce and develop
reserves, revenues, and operating expenses;
•
long-term growth rates;
• appropriate discount rates; and
• expected future capital requirements.
The market valuation method uses prices paid for a similar asset by other purchasers in the market, normalised for any differences between
the assets. The cost valuation method is based on the replacement cost of a comparable asset at the time of the acquisition adjusted for
depreciation and economic and functional obsolescence of the asset and estimates of residual values.
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.
If the initial accounting for the business combination is not complete by the end of the reporting period in which the acquisition occurs, an
estimate will be recorded. Subsequent to the acquisition date, but not later than one year from the acquisition date, the Group will record any
material adjustments to the initial estimate based on new information obtained that would have existed as of the date of the acquisition.
(a) Pogo gold operations
(I)
SUMMARY OF THE ACQUISITION
On 28 September 2018, Northern Star completed the acquisition of the Pogo gold project in Alaska from Sumitomo Metal Mining Co., Ltd
(85% interest and the mine operator) and Sumitomo Corporation (15% interest) for US$260.3 million (A$360.4 million).
Details of the purchase consideration and the net identifiable assets acquired are as follows:
Purchase consideration
Cash Paid
The assets and liabilities recognised as a result of the acquisition are as follows:
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Mine properties
Trade and other payables
Deferred tax liability
Provision for rehabilitation
Borrowings
Net identifiable assets acquired
$’000
360,426
Fair value
$’000
9,876
3,416
40,337
317,458
140,531
(33,051)
(41,272)
(75,216)
(1,653)
360,426
13 Business combination cont’d
(a) Pogo gold operations cont’d
(II) ACQUIRED RECEIVABLES
The fair value of acquired trade receivables is $3.4 million. The gross contractual amount for trade receivables due is $3.4 million, of which
none is expected to be uncollectible.
(III) REVENUE AND PROFIT CONTRIBUTION
The acquired business contributed revenues of $253.1 million and a net loss of $31.9 million to the Group for the period from
1 October 2018 - 30 June 2019.
If the acquisition had occurred on 1 July 2018, consolidated pro-forma revenue and net loss for the year ended 30 June 2019 would have
been $351.1 million and $42.6 million respectively. These amounts have been calculated using the subsidiary’s results and adjusting for
differences in the accounting policies between the Group and the subsidiary.
(b) Purchase consideration - cash outflow
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration
Less: Balances acquired
Cash and cash equivalents
Net outflow of cash - investing activities
ACQUISITION-RELATED COSTS
30 June 2019
$’000
30 June 2018
$’000
360,426
9,876
350,550
-
-
-
Acquisition-related costs of $4.6 million are included in acquisition and integration in profit or loss.
We note that fair values assigned to identifiable assets and liabilities above are presented on a provisional basis. The Group will recognise any
adjustments to these provisional values as a result of completing fair value accounting within 12 months following the acquisition date.
(c) South Kalgoorlie Operations
On 29 March 2018, the Company completed the acquisition of the South Kalgoorlie Operations from Westgold Resources Ltd. The total cash
consideration paid by Northern Star was $78.3 million. Details of this acquisition were disclosed in note 13 of the Group’s annual financial
statements for the year ended 30 June 2018.
No adjustments were made to the fair values assigned to identifiable assets and liabilities in note 13 of the Group’s annual financial
statements for the year ended 30 June 2018.
14 Asset acquisition
On 23 April 2019 the Company acquired from SC Minerals America Inc, SMM Exploration Corp and Stone Boy Inc. the Stone Boy
project mining claims Fog, Shaw, Skippy and Ink including the Brink exploration camp, and acquired Stone Boy Inc., for consideration of
US$1.2 million. Stone Boy Inc. (together with SC Minerals America Inc. and SMM Exploration Corp), remain the current owners of the Monte
Cristo Project which is subject of an Option Agreement dated 29 August 2016 with Great American Minerals Exploration Inc (GAME). GAME
hold an option to purchase the Monte Cristo Project and is currently sole funding exploration expenditure on the Monte Cristo ground
pursuant to its rights to purchase the Monte Cristo Project.
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 determined that the transaction did 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.
Details of this acquisition were disclosed in note 14 of the Group’s annual financial statements for the year ended 30 June 2018.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
112
113
15 Interests in other entities
(a) Material subsidiaries
15 Interests in other entities cont’d
(c)
Interests in associates and joint ventures
The Group’s principal subsidiaries at 30 June 2019 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.
Ownership interest held by the Group
Set out below are the associates of the Group as at 30 June 2019 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.
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
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Northern Star (Hampton Gold Mining Areas) Limited
England & Wales
Northern Star (Holdings) Pty Ltd
Northern Star (Alaska) Incorporated
Northern Star (Alaska) LLC
Northern Star (Pogo) LLC
Northern Star (Pogo Two) LLC
Stone Boy Inc.
Australia
United States of America
United States of America
United States of America
United States of America
United States of America
2019
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
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
100.0
100.0
100.0
-
-
-
All subsidiaries above that are incorporated in Australia are each a party to a Deed of Cross Guarantee dated 14 May 2014, as varied, for the
purposes of relief from the requirements for preparation, audit and lodgement of financial reports under ASIC Corporations (Wholly-owned
Companies) Instrument 2016/785. For further information refer to note 23.
Place of
business/
country of
incorporation
Name of entity
% of ownership
interest
Nature of
relationship
Measurement
method
2018
%
2019
%
18.9
21.8
Superior Gold Inc.
Canada
Echo Resources Ltd
Australia
Total equity
accounted
investments
19.2
Associate (1)
Equity method
14,547
22,980
11,603
15,399
-
Associate (2)
Equity method
19,254
-
16,258
-
27,861
15,399
Quoted fair value
Carrying amount
2019
$’000
2018
$’000
2019
$’000
2018
$’000
(1) Superior Gold Inc. is a gold producer that operates the Plutonic gold mine in Western Australia. 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 a Director on the board of the company. The Group also holds 13.9 million call options with a strike price of US$1.5166.
(2) Echo Resources Ltd is a gold exploration company that owns the Yandal gold project in Western Australia. The Yandal gold project is located in close
proximity to the Group’s existing Jundee gold mine.
U NREC OGNI SED I TEMS
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.
16 Contingent liabilities
(a) Contingent liabilities
The Group had contingent liabilities at 30 June 2019 in respect of:
(b)
Joint arrangements
Name of entity
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 by the group
2019
%
66.49
20.00
51.00
89.91
71.17
75.50
80.00
75.00
40.00
30.00
2018
%
65.90
20.00
51.00
87.70
67.34
75.50
80.00
20.00
40.00
49.00
On 31 July 2015, Northern Star Resources Ltd (“NSR”), completed settlement with Tanami Gold NL (“TAM”) to progressively acquire a
60% interest in the Central Tanami Project (“CTP”).
As part of the acquisition, NSR 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 NSR 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 NSR 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 had 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.
The total undiscounted amount of payments that the Group could be required to make to TAM upon the exercise of the second put option
is $32 million.
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 25.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
114
115
17 Commitments
(a) Capital commitments
Significant capital expenditure contracted for at the end of the reporting year but not recognised as liabilities is as follows:
OT HER I NF ORMA TI ON
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.
Property, plant and equipment
(b) Non-cancellable operating leases
30 June 2019
$’000
30 June 2018
$’000
23,387
22,005
19 Related party transactions
(a) Subsidiaries
Interests in subsidiaries are set out in note 15(a).
(b) Key management personnel compensation
The Group leases various offices and equipment under non-cancellable operating leases expiring within two to ten 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
(c) Gold delivery commitments
Australian dollar gold delivery commitments as at 30 June 2019 were as follows:
Within one year
Later than one year but not later than five years
US dollar gold delivery commitments as at 30 June 2019 were as follows:
Within one year
Later than one year but not later than five years
18 Events occurring after the reporting period
Subsequent to the period ended 30 June 2019 the Company announced:
30 June 2019
$’000
30 June 2018
$’000
21,271
21,051
11,916
54,238
21,942
6,783
7,079
35,804
Gold for
physical
delivery
(Ounces)
158,798
160,000
Gold for
physical
delivery
(Ounces)
42,500
-
Weighted
average
contracted
sales price
(A$)
Value of
committed
sales
(A$000s)
1,799
1,841
285,652
294,531
Weighted
average
contracted
sales price
(US$)
Value of
committed
sales
(US$000s)
1,284
-
54,551
-
•
a final fully franked dividend of 7.5 cents per share to Shareholders on the record date of 30 October 2019, payable on
20 November 2019; and
• on 1 July 2019, the Company announced the appointment of two Non-Executive Directors, Mary Hackett and Nick Cernotta.
Short-term employee benefits
Employee entitlements
Post-employment benefits
Share-based payments
30 June 2019
$’000
30 June 2018
$’000
3,889,933
3,620,232
304,009
216,308
198,836
201,888
3,620,865
2,491,364
8,031,115
6,512,320
(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 AUD Pty Ltd, the sole Shareholder of Australian Underground Drilling Pty Ltd (AUD), being
a supplier of goods and services to the Company, did not require reporting under the Accounting Standards. For the purposes of the 2019
Annual Report, the Company is of the same view, having applied the necessary criteria under the Australian Accounting Standards for FY2019.
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. Mr Beament’s continued Shareholding in AUD also remains 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. The independent Directors’ unanimous view remains that the continuing contractual relationship
between the Company and AUD is more beneficial to the Company than terminating the contract would be. The results of the multiple party
tender process conducted in FY18 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 and remains 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). The addition of Pogo has increased the diversity and improved the risk
mitigation strategy further
The following transaction occurred with relates parties:
Shirley In’tVeld:
•
is a board member of CSIRO. During the year, a revenue amount of $177,678 was paid to this business for consulting services provided at
normal commercial rates (2018: $75,000).
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
116
117
20 Share-based payments
(a) Employee Option Plan
20 Share-based payments cont’d
(d) Performance Rights cont’d
Set out below are summaries of options granted under the Employee Option Plan:
The model inputs for performance rights granted on 30 July 2018 included:
As at 1 July
Exercised during the year *
Forfeited during the year
Cancelled during the year
As as 30 June
2019
2018
Average
exercise price
per Share
option
2.18
2.18
2.18
-
-
Average
exercise price
per Share
option
1.58
1.28
-
2.18
2.18
Number
of options
758,688
(714,668)
(44,020)
-
-
Number
of options
2,673,638
(1,791,241)
-
(123,709)
758,688
(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
Nil
30-Jul-18
30-Jul-24
$7.13
20%
1.59%
2.09%
Nil
30-Jul-18
30-Jul-24
$7.13
35%
1.59%
2.09%
The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2019 was $7.049 [2018 - $4.414).
There were no share options outstanding at the end of the year (2018: 758,688 share options with an exercise price of $2.18 and an expiry
date of 31 July 2018)
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 2019 is 10,198,000 (2018: 10,047,140).
Total share based payments expense for the year ended 30 June 2019 was $8.4 million (2018: $11.4 million)
(b) Employee Share Plan
21 Remuneration of auditors
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 $9.38 (2018: $6.33) per share.
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
2019
2018
(I) AUDIT AND OTHER ASSURANCE SERVICES
Number of shares issued under the plan to participating employees on 24 May 2019 (2018: 13 June)
137,786
144,754
(c) Performance Share Plan
No performance shares were issued in FY2019.
Total performance shares on issue at 30 June 2019 is 1,091,001 (2018: 5,031,535), with a corresponding total non-recourse loan value of
$1,176,511 (2018: $7,542,509).
(d) Performance Rights
On 30 July 2018, 404,990 Category B performance rights were issued to the senior management of the Company. During the year,
26,330 of these Category B performance rights were cancelled. Balance on issue as at 30 June 2019 in relation to FY2019 issue is 378,660.
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 date of the performance rights granted during the year ended 30 June 2019 was $3.361.
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.
Audit and review of financial statements
Other assurance services
Other
Total remuneration for audit and other assurance services
(II) OTHER SERVICES
Other assurance and advisory services
Total remuneration for other services
30 June 2019
$
30 June 2018
$
371,864
306,200
31,500
403,364
-
-
39,500
345,700
14,600
14,600
Total remuneration of Deloitte Touche Tohmatsu Australia
403,364
360,300
(b) Network firms of Deloitte Touche Tohmatsu
(I) AUDIT AND OTHER ASSURANCE SERVICES
Audit and review of financial statements
Total remuneration of network firms of Deloitte Touche Tohmatsu Australia
Total auditors’ remuneration
135,960
135,960
539,324
-
-
360,300
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.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
118
119
22 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
23 Deed of cross guarantee
The Australian incorporated subsidiaries detailed in note 1 are each a party to a Deed of Cross Guarantee dated 14 May 2014, as varied
(Deed), and have the benefit of ASIC relief from the requirements to prepare and lodge with ASIC audited financial reports in accordance with
Part 2M.3 of the Corporations Act, pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 dated 17 December 2016
(Instrument).
Under the Deed, each entity in the Group guarantees to each creditor payment in full of any debt in the event of winding up of any of the
entities under certain provisions of the Corporations Act. In the event of a winding up of an entity under other provisions of the Corporations
Act, the other entities in the Group will only be liable to make up any shortfall of funds if after six months any creditor has not been paid
in full. The effect of the covenants given by the entities under the Deed is to make the Company Group akin to a single legal entity from a
financial perspective.
The Deed was varied on 21 May 2019 to comply with updated ASIC Pro Forma 24 issued on 28 September 2016, and the following
subsidiaries were joined to the Deed by way of Assumption Deed dated 21 May 2019:
Total basic earnings per share attributable to the ordinary equity holders of the Company
24.4
32.1
30 June 2019
Cents
30 June 2018
Cents
• Northern Star (Western Tanami) Pty Limited;
• Northern Star (South Kalgoorlie) Pty Ltd;
• Northern Star (HBJ) Pty Ltd; and
• Northern Star (Holdings) Pty Ltd.
(b) Diluted earnings per share
Total diluted earnings per share attributable to the ordinary equity holders of the Company
24.0
31.5
(c) Reconciliation of earnings used in calculating earnings per share
30 June 2019
Cents
30 June 2018
Cents
(a) Consolidated income statement, statement of comprehensive income and summary of movements
in consolidated retained earnings
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 2019, comprising the Company and its subsidiaries
which are a party to the Deed, after eliminating all transactions between parties to the Deed.
30 June 2019
$’000
30 June 2018
$’000
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
Basic earnings per share
Profit/(loss) attributable to the ordinary equity holders of the Company used in
calculating basic earnings per share:
From operations
Diluted earnings per share
Profit attributable to the ordinary equity holders of the Company
Used in calculating basic earnings per share
(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
154,711
194,113
154,711
194,113
2019
Number
2018
Number
634,560,508
604,546,244
-
758,688
10,198,000
10,047,140
644,758,508
615,352,072
Revenue
Other income
Cost of sales
Other expenses from ordinary activities
Finance costs
Share of net profits of associates and joint ventures 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
Financial assets at fair value through OCI
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
30 June 2019
$’000
30 June 2018
$’000
1,148,108
2,916
964,025
8,749
(824,951)
(620,723)
(66,329)
(8,698)
(3,530)
247,516
(72,008)
175,508
(62,671)
(2,846)
(1,371)
285,163
(83,659)
201,504
30 June 2019
$’000
30 June 2018
$’000
175,508
201,504
(12,134)
232
116
(11,786)
(100)
(218)
30
(288)
163,722
201,216
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
120
121
23 Deed of cross guarantee cont’d
23 Deed of cross guarantee cont’d
(a) Consolidated income statement, statement of comprehensive income and summary of movements
(b) Consolidated Statement of Financial Position cont’d
in consolidated retained earnings cont’d
SUMMARY OF MOVEMENTS IN CONSOLIDATED RETAINED EARNINGS
Retained earnings at the beginning of the financial year*
Profit for the period
Dividends provided for or paid
Retained earnings at the end of the financial year
30 June 2019
$’000
30 June 2018
$’000
515,044
175,508
(70,340)
620,212
383,978
201,504
(63,333)
522,149
* Variance in opening retained earnings for the financial year ended 30 June 2019 is due to the addition to the deed of the four subsidiaries mentioned above.
(b) Consolidated Statement of Financial Position
Set out below is a Consolidated Statement of Financial Position as at 30 June 2019 of the closed group consisting of Northern Star Resources
Limited the above mentioned entities.
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax asset
Total current assets
Non-current assets
Trade and other receivables
Investments accounted for using the equity method
Investment in subsidiaries
Financial assets at fair value through OCI
Exploration and evaluation assets
Property, plant and equipment
Mine properties
Derivative financial instruments
Intangible assets
Total non-current assets
Total assets
30 June 2019
$’000
30 June 2018
$’000
234,739
60,337
89,224
6,285
442,995
29,143
57,837
-
390,585
529,975
31,016
27,861
360,426
23,027
247,211
178,609
215,550
1,333
12,867
94,946
19,399
-
42,132
172,450
109,790
199,722
5,712
-
1,097,900
644,151
1,488,485
1,174,126
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
30 June 2019
$’000
30 June 2018
$’000
115,901
19,043
-
36,507
171,451
17,439
35,079
138,876
191,394
125,868
7,610
14,959
37,459
185,896
9,513
58,716
91,174
159,403
362,845
345,299
1,125,640
828,827
473,708
31,720
620,212
1,125,640
291,290
15,388
522,149
828,827
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
122
123
24 Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
24 Parent entity financial information cont’d
(e) Determining the parent entity financial information cont’d
(II) TAX CONSOLIDATION LEGISLATION CONT’D
30 June 2019
$’000
30 June 2018
$’000
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.
BALANCE SHEET
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Reserves
Financial assets at fair value through OCI
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
291,609
702,319
993,928
(61,060)
(310,897)
(371,957)
451,814
306,527
758,340
(69,608)
(402,188)
(471,796)
473,708
291,290
(6,601)
38,549
59
116,256
5,417
10,144
(173)
(20,134)
621,971
286,544
325,081
68,132
312,830
67,844
(b) Guarantees entered into by the parent entity
Refer to note 23 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 16 for details of contingent liabilities relating to the parent entity as at 30 June 2019 or 30 June 2018. 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 17 for commitments of the Group for the acquisition of property, plant and equipment as at 30 June 2019 or 30 June 2018.
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.
25 Summary of significant accounting policies
This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements to
the extent they have not already been disclosed in the other notes above. 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
The financial statements have been prepared on a historical cost basis, except for the following:
•
financial assets at fair value through other comprehensive income, financial assets and liabilities (including derivative
instruments); and
(e) Determining the parent entity financial information
(III) NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP
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.
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.
(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.
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 2019 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.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
124
125
25 Summary of significant accounting policies cont’d
25 Summary of significant accounting policies cont’d
(a) Basis of preparation cont’d
(b) Principles of consolidation cont’d
(IV) NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED CONT’D
(II)
JOINT ARRANGEMENTS (CONTINUED) JOINT OPERATIONS
Title of standard
AASB 16 Leases
Nature of change
AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the Consolidated
Statement of Financial Position by lessees, 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 only exceptions are short-term and low-value leases.
Impact
The Group has set up a project team which reviewed all of the Group’s leasing arrangements over the last year
in light of the new lease accounting rules in AASB 16. 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 $54.2 million, see
note 16. Of these commitments, approximately $1.4 million relate to short-term and low value leases which will
both be recognised on a straight-line basis as expense in profit or loss.
For the remaining lease commitments the Group expects, on 1 July 2019, to recognise right-of-use assets of
approximately $52.0 million, lease liabilities of $54.4 million (after adjustments for prepayments and accrued
lease payments recognised as at 30 June 2019) and deferred tax assets of $0.7 million. Overall net assets will be
approximately $1.6 million lower, and net current assets will be $22.3 million lower due to the presentation of a
portion of the liability as a current liability.
The Group expects that net profit after tax will decrease by approximately $1.2 million for 2020 as a result
of adopting the new rules. Adjusted EBITDA used to measure segment results is expected to increase by
approximately $25.2 million, as the operating lease payments were included in EBITDA, but the amortisation of the
right-of-use assets and interest on the lease liability are excluded from this measure.
Northern Star Resources Limited 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, joint venture
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 dollar
($), which is Northern Star Resources Limited’s functional and presentation currency.
Operating cash flows will increase and financing cash flows decrease by approximately $23.9 million as repayment
of the principal portion of the lease liabilities will be classified as cash flows from financing activities.
(d)
Impairment of assets
Mandatory
application date/
Date of adoption
by Group
The Group will apply the standard from its mandatory adoption date of 1 July 2019.
The Group intends to apply the simplified transition approach and will not restate comparative amounts for
the year prior to first adoption. Right-of-use assets for property leases will be measured on transition as if the
new rules had always been applied. All other right-of-use assets will be measured at the amount of the lease
liability on adoption (adjusted for any prepaid or accrued lease expenses).
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 years and on foreseeable future transactions.
(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.
Intercompany 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 2019 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.
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.
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.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 126
127
25 Summary of significant accounting policies cont’d
25 Summary of significant accounting policies cont’d
(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.
(e)
Investments and other financial assets
(I) CLASSIFICATION
From 1 July 2018, the Group classifies its financial assets in the following measurement categories:
•
•
those to be measured subsequently at fair value (either through OCI or through profit or loss), and
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that
are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account
for the equity investment at fair value through other comprehensive income (FVOCI).
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
(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 (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of
principal and interest.
DEBT INSTRUMENTS
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow
characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal
and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective
interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses)
together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the consolidated statement of
profit or loss.
•
•
FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows
represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI,
except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in
profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity
to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using
the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are
presented as separate line item in the consolidated statement of profit or loss.
FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment
that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which
it arises.
EQUITY INSTRUMENTS
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value
gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following
the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the
Group’s right to receive payments is established.
Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the consolidated statement of profit or loss as
applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from
other changes in fair value.
(III) IMPAIRMENT
From 1 July 2018, the Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at
amortised cost and FVOCI. The Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
2019 ANNUAL REPORT | FINANCIAL REPORTNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
128
2019 (cid:36)(cid:49)(cid:49)(cid:56)(cid:36)(cid:47) (cid:53)(cid:40)(cid:51)(cid:50)(cid:53)(cid:55) (cid:95) I(cid:49)(cid:39)(cid:40)(cid:51)(cid:40)(cid:49)(cid:39)(cid:40)(cid:49)(cid:55) (cid:36)(cid:56)(cid:39)I(cid:55) (cid:50)(cid:53)(cid:519)(cid:54) (cid:53)(cid:40)(cid:51)(cid:50)(cid:53)(cid:55)
129
DIRECTORS’ DECLARATION
In the (cid:39)irectors(cid:519) opinion(cid:29)
(cid:11)a(cid:12) (cid:55)he financial statements and notes set out on pages (cid:26)(cid:23) to (cid:20)(cid:22)(cid:22) are in according (cid:90)ith the Corporations Act 2001, including(cid:29)
(cid:11)i(cid:12) (cid:38)ompl(cid:92)ing (cid:90)ith (cid:36)ccounting (cid:54)tandards, the (cid:38)orporations (cid:53)egulations (cid:21)(cid:19)(cid:19)(cid:20) and other mandator(cid:92) professional reporting re(cid:84)uirements,
and
(cid:11)ii(cid:12) (cid:42)iving a true and fair vie(cid:90) of the consolidated entit(cid:92)(cid:519)s financial position as at (cid:21)(cid:19) (cid:45)une (cid:21)(cid:19)(cid:20)(cid:28) and of its performance for the (cid:92)ear ended on
that date, and
(cid:11)(cid:69)(cid:12) (cid:55)here are reasona(cid:69)le grounds to (cid:69)elieve that the (cid:38)ompan(cid:92) (cid:90)ill (cid:69)e a(cid:69)le to pa(cid:92) its de(cid:69)ts as and (cid:90)hen the(cid:92) (cid:69)ecome due and pa(cid:92)a(cid:69)le, and
(cid:11)c(cid:12) (cid:36)t the date of this declaration, there are reasona(cid:69)le grounds to (cid:69)elieve that the mem(cid:69)ers of the e(cid:91)tended closed group identified in note (cid:21)(cid:22)
(cid:90)ill not (cid:69)e a(cid:69)le to meet an(cid:92) o(cid:69)ligations or lia(cid:69)ilities to (cid:90)hich the(cid:92) are, or ma(cid:92) (cid:69)ecome, su(cid:69)(cid:77)ect (cid:69)(cid:92) the virtue of the deed of cross guarantee
described in note 23.
(cid:49)ote (cid:21)(cid:24)(cid:11)a(cid:12) confirms that the financial statements also compl(cid:92) (cid:90)ith International (cid:41)inancial (cid:53)eporting (cid:54)tandards as issued (cid:69)(cid:92) the International
(cid:36)ccounting (cid:54)tandards (cid:37)oard(cid:17)
(cid:55)he (cid:39)irectors have (cid:69)een given the declarations (cid:69)(cid:92) the (cid:38)hief (cid:40)(cid:91)ecutive (cid:50)(cid:605)cer and (cid:38)hief (cid:41)inancial (cid:50)(cid:605)cer re(cid:84)uired (cid:69)(cid:92) section (cid:21)(cid:28)(cid:24)(cid:36) of the
Corporations Act 2001.
(cid:55)his declaration is made in accordance (cid:90)ith a resolution of (cid:39)irectors(cid:17)
BILL BEAMENT
(cid:40)(cid:91)ecutive (cid:38)hairman
(cid:21)(cid:25) (cid:36)ugust (cid:21)(cid:19)(cid:20)(cid:28)
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
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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 2019, 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
information, and the directors’ declaration.
accounting policies and other explanatory
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 2019 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.
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130
2019 (cid:36)(cid:49)(cid:49)(cid:56)(cid:36)(cid:47) (cid:53)(cid:40)(cid:51)(cid:50)(cid:53)(cid:55) (cid:95) I(cid:49)(cid:39)(cid:40)(cid:51)(cid:40)(cid:49)(cid:39)(cid:40)(cid:49)(cid:55) (cid:36)(cid:56)(cid:39)I(cid:55) (cid:50)(cid:53)(cid:519)(cid:54) (cid:53)(cid:40)(cid:51)(cid:50)(cid:53)(cid:55)
131
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
Accounting for mine properties
Key Audit Matter
How the scope of our audit responded to the
Key Audit Matter
Acquisition
Operations
Accounting
–
Pogo
Effective 28 September 2018, the Group
acquired the Pogo Operations for a total
consideration of $360.426 million.
Further details of the key assumptions
applied by management as part of the
acquisition accounting, by material asset
class is disclosed in Note 13.
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, life of mine, operating
costs and gold price;
assumptions relating to the useful
lives and residual values applicable
to plant and equipment;
timing and quantum of deferred
taxes;
scope and quantum of costs, and
timing
activities; and
calculation of discount rates applied
to each valuation.
rehabilitation
the
of
Our procedures, performed in conjunction with our
valuation specialists, included but were not limited to:
liabilities associated with
reviewing the purchase contract to understand the
nature of the entities being acquired and the
consideration payable for the acquisition;
obtaining a copy of the external valuation report to
assess the determination of the fair values of the
assets and
the
acquisition;
assessing the independence, competence and
objectivity of experts used by management;
assessing the identification of assets and liabilities
acquired, and
the
methodologies and assumptions utilised by
management and their experts in relation to the
following:
the appropriateness of
Property, plant and equipment: assessing
key assumptions for reasonableness
including residual values of the assets and
life of mine;
Mine properties: assessing assumptions
for reasonableness, such as life of mine,
gold price, processing costs, grades and
ore volumes, as well as the method used
in determining the fair values;
Rehabilitation Provision: agreeing
rehabilitation cost estimates to underlying
support, which included reports from
external experts;
Taxation: assessing the calculation of tax
and the recognition of deferred taxes.
Assessing the weighted average return on assets
(WARA) analysis for reasonableness that was
performed by management’s external expert to
check the allocation between property, plant and
equipment and mine properties;
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.
As at 30 June 2019 the carrying value of
mine properties amounts to $356.361
million as disclosed in Note 9(c). During the
year the Group incurred $144.604 million of
to mine
capital expenditure
properties
related
amortisation expenses of $165.340 million.
related
recognised
and
The accounting for underground mining
operations includes a number of estimates
and judgements, including:
the allocation of mining costs
between operating and capital
expenditure; and
the units of
determination 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.
Rehabilitation provision
As at 30 June 2019 a rehabilitation
provision of $219.551 million has been
recognised as disclosed in Note 9(g).
Judgement is required in the determination
of the rehabilitation provision, including:
assumptions relating to the manner
rehabilitation will be
in which
undertaken,
scope and quantum of costs, and
timing
activities.
rehabilitation
the
of
In respect of the allocation of mining costs our
procedures included, but were not limited to:
obtaining an understanding and testing 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; and
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.
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 and resources 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.
Our procedures included, but were not limited to:
obtaining an understanding of the key
controls management has in place to estimate
the rehabilitation provision;
agreeing rehabilitation cost estimates to
underlying support, including where applicable
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) to the financial
statements.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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•
132
2019 (cid:36)(cid:49)(cid:49)(cid:56)(cid:36)(cid:47) (cid:53)(cid:40)(cid:51)(cid:50)(cid:53)(cid:55) (cid:95) I(cid:49)(cid:39)(cid:40)(cid:51)(cid:40)(cid:49)(cid:39)(cid:40)(cid:49)(cid:55) (cid:36)(cid:56)(cid:39)I(cid:55) (cid:50)(cid:53)(cid:519)(cid:54) (cid:53)(cid:40)(cid:51)(cid:50)(cid:53)(cid:55)
133
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
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 2019, 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
intentional omissions,
involve collusion,
fraud may
misrepresentations, or the override of internal control.
forgery,
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.
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 44 to 72 of the Director’s Report for
the year ended 30 June 2019.
In our opinion, the Remuneration Report of Northern Star Resources Limited, for the year ended 30
June 2019, 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, 26 August 2019
•
•
•
•
•
•
134
2019 ANNUAL REPOR T | SHAREHOLDER INF ORMATI ON
135
135
SHAREHOLDER INFORMATION
SHAREHOLDER INFORMATION
The shareholder information set out below was applicable as at 22 August 2019.
Table 30 Restricted securities
Table 28 Distribution of equity securities
Ordinary shares
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Shares
2,834,630
12,150,292
9,815,266
36,951,943
577,840,503
639,592,634
%
0.44
1.90
1.53
5.78
90.35
100.00
There were no holders of less than a marketable parcel of ordinary shares.
Table 29 20 largest quoted equity security holders
No. holders
6,056
4,725
1,280
1,370
166
%
44.54
34.75
9.41
10.08
1.22
Class
Shares 1
Shares 2
Shares 3
Shares 4
Number
86,310
116,494
134,196
1,091,001
Date escrow period ends
26 June 2020
13 June 2021
24 May 2022
Upon repayment in full of the limited recourse loan
1
2
3
4
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.
Shares issued under the Employee Share Plan Rules No. 3 (approved in June 2017) on 24 May 2019.
Shares issued under the Performance Share Plan Rules on 20 November 2013 (115,000)
9 October 2014 (677,083) and on 9 July 2015 (298,918).
13,597
100.00
Table 31 Unquoted equity securities
Performance rights issued under the Northern Star
Long Term Incentive Plan
Number
Holders
10,183,2575
60
Ordinary shares
5 Number of unissued ordinary shares under the performance rights. No person holds 20% or more of these securities.
Rank Name
A/C designation
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
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