Annual Report
2019
OUR VISION
CORPORATE PROFILE
Our vision is to be a successful
multi-operational exploration and
mining company, providing benefits
to all stakeholders through the
consistent application of technical
excellence and responsible and
sustainable industry practices.
CONTENTS
Chairman’s Review
Managing Director’s Report
Resources and Reserves Statement
Tenement Schedule
Financial Report
Directors’ Report
Annual Financial Statements
Notes to Financial Statements
Statement of Shareholders
Corporate Directory
Red 5 Limited (ABN 73 068 647 610) is an Australian-based gold
producer with established mining projects located in the Eastern
Goldfields of Western Australia and in the Philippines.
The Company is listed on the Australian Securities Exchange (Ticker:
RED) with around 4,800 shareholders and has a strong institutional
shareholder base.
Red 5 owns and operates the Darlot Gold Mine located approximately
900 kilometres north-east of Perth in the Leonora-Leinster mineral
province of Western Australia and the nearby King of the Hills (KOTH)
Gold Project. Red 5 has progressed a production ramp-up at these
operations and delivered a substantial increase in Mineral Resources and
Ore Reserves with clear visibility to further increase mine life through the
conversion of additional Mineral Resources to Ore Reserves, new
discoveries and potential bolt-on acquisitions in the region.
In addition, a pre-feasibility study has been completed on an open pit
bulk mining opportunity and stand-alone processing operation at the
KOTH project. A final feasibility study incorporating underground and
satellite resources is expected to be completed by mid-2020.
Through its Philippine-affiliated company Greenstone Resources
Corporation, the Red 5 Group holds an interest in the Siana Gold Project,
located on the island of Mindanao in the Philippines, which is held under
a Mineral Production Sharing Agreement (MPSA). Mining operations at
the Siana Gold Project are currently suspended pending an improvement
in operating conditions in the Philippines. The Siana Gold Project
comprises an open pit and underground mine, CIL process plant and
1.1Moz JORC Resource inventory.
The Group’s second principal asset in the Philippines is the Mapawa
MPSA, located 20kms north of Siana, which has the potential to be
developed as a satellite source of ore feed for the Siana processing
plant. Mapawa hosts a known gold porphyry system with numerous
high-grade gold occurrences throughout the project area.
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2019 Annual Report
FINANCIAL RESULTS
\ Total gold sales of 98,240 ounces for $153.5 million for
FY-19 (excluding $21.53 million pre-operational sales at
King of the Hills offset against mine development costs
equivalent to 12,861oz).
\ Net loss after tax of $3.03 million for the 12 months to
30 June 2019.
These achievements and Red 5’s emergence
as one of the Australian gold sector’s up-and-
coming growth stories, with a clear pathway
to becoming a multi-asset, mid-tier producer,
have been reflected in the increase in the
Company’s market capitalisation from
~$80 million last year to over $370 million
at the time of writing this report.
Red 5 Chairman, Kevin Dundo
2019 HIGHLIGHTS
WEST AUSTRALIAN GOLD OPERATIONS
Mining and Processing
\ Gold production of 102,012oz for FY-19, recovered from a
total of 900,251 tonnes of ore processed at an average
head grade of 3.86g/t Au.
\ Darlot processing plant operating at a steady-state
throughput of ~1.0Mtpa in the latter part of the reporting
period.
\ Strong operating performance at the Darlot underground
mine, with bulk stoping commenced at the new Oval West
discovery and other mining areas performing in
accordance with the mine plan.
\ Growing production from King of the Hills (KOTH), with
bulk underground mining ramping up during the March
2019 Quarter, underpinning an expected increase in future
production and reduction in capital and operating costs.
Exploration and Resource Development
\ Significant bulk mining opportunity identified at KOTH,
with drilling and resource development programs
culminating in the delivery of a combined open pit and
underground Mineral Resource estimate of 66.0Mt grading
1.5g/t Au for 3.11Moz of contained gold.
\ Open pit Probable Ore Reserve for KOTH delivered
subsequent to the end of the reporting period, comprising
36.0Mt grading 1.25g/t Au for 1.45Moz of contained gold.
\ Maiden JORC 2012 open pit Mineral Resources
estimated for the Rainbow and Severn deposits,
located immediately south of existing mining
operations at KOTH, totalling 114,900oz of
contained gold.
\ Final Feasibility Study for proposed open pit
and underground bulk mining operation
scheduled for completion by mid CY2020.
\ Significant potential for further resource
growth at KOTH, with a large
proportion of the prospective
Eastern Margin Contact remaining
largely untested by drilling.
2019 Annual Report
1
MESSAGE TO SHAREHOLDERS FROM THE CHAIRMAN
Dear Shareholders
The past financial year has seen a
significant advancement in Red 5’s
development into a multi-asset
Australian gold producer.
In addition to the successful ramp-up of
production at the Darlot and King of the
Hills (KOTH) gold mines in Western
Australia to over 100,000oz per annum,
we have made significant progress in
advancing the opportunity for large-
scale bulk mining at KOTH.
These achievements have been
reflected in the increase in the
Company’s market capitalisation from
~$80 million last year to over $370
million at the time of writing this report.
This growth in shareholder value has been a product of the Company’s decision in
acquiring the Darlot and KOTH mining assets and its vision in launching aggressive
exploration programs to unlock their value. A considerable amount of hard work has
been undertaken to ensure that we have hit our operational targets while also
pursuing a broader growth vision underpinned by the significant opportunity that
has emerged at KOTH.
At the same time, we have enjoyed the tailwinds of a strong Australian dollar gold
price which has traded at record highs this past year.
From an operational perspective, our Eastern Goldfields assets delivered a strong
performance over the past year. Darlot has continued to form the backbone of our
production profile in FY-19, with mining operations primarily focused on the high-
grade Oval orebody.
We have also seen a growing contribution from KOTH, with mining transitioning from
narrow high-grade gold veins early in the reporting period, to bulk underground
stoping in the second half, as our understanding of the KOTH orebody grew. These
bulk stopes are expected to increase ore production at KOTH, as well as delivering
improved operational efficiencies and lower operating costs.
The Darlot processing plant – the cornerstone of our existing “Truck-to-
Darlot” business model – performed well, with over 900,000 tonnes of
ore processed and gold recoveries averaging 92.4%.
While we are proud of our production performance over FY-19, it
is clearly our exploration success at KOTH that has provided
momentum to the Company’s growth strategy.
We are excited by the emerging opportunity at KOTH,
which has the potential to transform Red 5 into a
mid-tier gold producer through the development of a
second, stand-alone gold mining and processing
hub in the Eastern Goldfields.
After first flagging the potential for bulk mining
at KOTH in September 2018, Red 5 has
made rapid progress to define this
opportunity, with ongoing work
programs culminating in the delivery
of an updated open pit and
underground Mineral Resource
estimate totalling 66Mt grading
1.5g/t Au for 3.11Moz of
contained gold.
2
2019 Annual Report
MESSAGE TO SHAREHOLDERS FROM THE CHAIRMAN (continued)
Outside of our core Western Australian
assets, we also retain exposure to
potential future upside at our Siana Gold
Project in the Philippines, with mining
operations currently suspended. The
project includes a large resource
inventory and existing infrastructure and
we are carefully evaluating how best to
maximise value from this project for
shareholders.
A $20 million working capital facility
entered into with Macquarie Bank
Limited subsequent to year-end has
allowed us to refinance, on improved
terms, the existing gold loan facility
while also strengthening our balance
sheet and operating liquidity.
The foundations of the Company’s
strong production base, together with
our existing cash and available financing
facilities, means we are in a strong
position to continue to execute our
growth strategy, maintain exploration
momentum and deliver the Final
Feasibility Study for an expanded
operation at KOTH, setting the scene for
what is shaping up as another
transformational 12 months for Red 5.
The significant achievements of the
past year and the strong position we
find ourselves in is in no small part
thanks to the leadership, commitment
and dedication of our Managing
Director, Mark Williams, and the
exceptional efforts of our hard-working
team of staff and contractors. We have
delivered a huge work program over the
past 12 months and I would like to
sincerely thank each and every person
for their efforts.
I would also like to thank you, our
shareholders, for your strong ongoing
support. I believe we can look forward
to the future with great excitement, and I
look forward to sharing this next growth
phase with you all.
Kevin Dundo
Chairman
25 September 2019
The upgraded Mineral Resource
demonstrates the scale and potential of
KOTH and provided the foundation for a
maiden open pit Ore Reserve estimate
delivered subsequent to the end of the
reporting period comprising 36.0Mt
grading 1.25g/t Au for 1.45Moz of
contained gold.
This places KOTH as one of the more
significant Reserve endowed gold
mines in Australia, with substantial
upside potential from the future
inclusion of the 1.1Moz underground
Resource, regional oxide deposits and
ongoing exploration.
The open pit Ore Reserve was
supported by a Pre-Feasibility Study,
released in early August 2019, that
outlined potential for a 10-year open pit
operation delivering average annual
life-of-mine production of 140,000oz
recovered, at an average AISC of
A$1,167 per ounce.
This Pre-Feasibility Study represents an
important stepping-stone for Red 5,
laying the foundations to unlock the
broader value at KOTH by developing
an integrated open pit and underground
bulk mining operation. A Final Feasibility
Study for this integrated mine
development is underway and is
scheduled for completion by mid
CY2020.
In parallel with the Final Feasibility
Study, Red 5 also believes there is
significant potential to continue to
grow the resource base at KOTH,
with a large proportion of the
prospective Eastern Margin
Contact remaining largely
untested by drilling.
2019 Annual Report
3
MESSAGE TO SHAREHOLDERS FROM THE MANAGING DIRECTOR
The 2019 financial year has been a strong
period for Red 5. Operationally, the
Company delivered solid production
performances from Darlot and King of the
Hills (KOTH), while from an exploration and
growth perspective the Company achieved
a significant breakthrough in identifying
what is shaping up as a potentially
transformational bulk mining opportunity
at KOTH.
EASTERN GOLDFIELDS,
WESTERN AUSTRALIA
Red 5 holds an extensive 365km2 strategic
footprint in the world-class Leonora-
Leinster mineral district of Western
Australia, which includes the operating
Darlot and KOTH gold mines. Mining
operations continued at both mines
throughout the reporting period, with KOTH
ore trucked to Darlot for processing
through the processing plant.
In addition to its operating gold mines, Red
5’s tenements also offer significant
exploration upside, with active exploration
programs being undertaken at both Darlot
and KOTH during the financial year.
These programs led to the identification of
a large-scale potential bulk mining
opportunity at KOTH during the year,
resulting in the delivery of a 3.11Moz
Mineral Resource estimate. The Company
is now undertaking feasibility studies aimed
at assessing the potential for a stand-alone
bulk open pit and underground mining
operation at KOTH.
Figure 1: Darlot and King of the Hills Project locations, showing historical production.
WEST AUSTRALIAN GOLD OPERATIONS
Production summary
A total of 102,012 ounces of gold was recovered for the 12 months to 30 June 2019
with ore sourced predominantly from the Darlot Gold Mine and a growing contribution
from KOTH.
A summary of key production statistics for FY-19 is provided below:
Mined tonnes
Mined grade
Tonnes milled
Average head grade
Recovery
Gold recovered
Gold sales
FY-19
900,251t
3.86g/t
907,004t
3.79g/t
92.4%
102,012oz
98,240oz
FY-18
402,271t
3.42g/t
458,835t
3.50g/t
93.5%
48,259oz
47,286oz
Processing
The Darlot processing plant performed solidly
during the period and gold recoveries were
generally in line with expectations.
Major works during the reporting period included
the completion of the final raise on Tailing
Storage Facility (TSF) #2 and an intermediate lift
on TSF #3, which will provide capacity through
to the end of the 2019 calendar year.
Preliminary works and scoping were also
completed for a new TSF #4, located adjacent to
the current TSF #3 which will have a total design
capacity of ~5Mt and will see production
through to 2025. Construction of TSF #4
commenced in late July 2019 and is expected to
take ~5 months to complete.
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2019 Annual Report
MESSAGE TO SHAREHOLDERS FROM THE MANAGING DIRECTOR
(continued)
A refurbished Knelson Gravity Concentrator
was installed on the primary milling circuit
during the June 2019 Quarter. This
concentrator, coupled with a new Falcon
unit on the secondary circuit, is expected
to see lower final tail solid grade and
improve gold bullion smelting.
Continuous improvement projects included
refurbishment of adsorption and leach
tanks, improvement of oxygen addition to
the leach circuit, an additional cross belt
magnet, as well as optimising the existing
triple deck screen on the crushing circuit.
With KOTH ore production targeting up to
600ktpa (see below), initiatives are being
evaluated to assess the benefits of whether
to incrementally increase plant capacity at
Darlot (currently 1Mtpa with 600ktpa
coming from Darlot) or focus on
maximising grade recoveries, subject to
cost-benefit analysis.
Mining activities
Bulk stoping commenced at the high-grade
Oval West deposit (identified by Red 5 in
February 2018) during the reporting period,
with stoping also undertaken within the
Grace, Marsh, Lillee and Bradman
orebodies.
Airleg mining also commenced at Darlot in
January 2019, targeting near-surface
remnant ore from previously mined areas.
At the end of the reporting period the
Company had four active airleg mining
stopes in production. The airleg program is
being conducted concurrently with further
engineering and geological assessments to
identify additional opportunities for narrow
vein mining.
Further rehabilitation work continued to
advance remnant mining opportunities in
the Thomson orebody and capital
development towards the Burswood,
progressing these mining fronts as part of
the FY20 mine plan.
W4954 2nd Bulk Stope
80,332t @ 3.29g/t
W4975 2nd Bulk Stope
62,456t @ 2.63g/t
Lemonwood Bulk Stope
31,778t @ 3.35g/t (mined)
W4920 Concept Bulk Stopes
420,000t in Total
W4925 Concept Bulk Stopes
90,532t in total
Figure 2: West facing isometric of North East bulk mining area.
KING OF THE HILLS PROJECT
Mining activities
Airleg mining was undertaken on high-grade narrow mineralised veins at KOTH, with
production from these veins totalling 41,646 tonnes grading 5.07g/t Au for 6,795 ounces for
the financial year.
High-grade narrow vein stoping was undertaken in the Riverrun, Theon, Regal, Baelor and
Westeros lodes.
Following identification of the potential for bulk underground stoping at KOTH, a trial bulk
stope was completed at Lemonwood in the December 2018 Quarter. From the success of
this initial bulk stope, bulk underground mining was expanded at KOTH throughout the
remainder of the reporting period.
Selective bulk stoping is expected to underpin ore production from KOTH under Red 5’s
current Truck-to-Darlot business model over FY20, ensuring a strong production outlook
for the mine while the Company completes the current strategic review of a potential
broader bulk mining opportunity (see below).
The bulk stopes, which have been designed using a +2.5g/t cut-off grade as part of the
current Truck-to-Darlot business model, range in size from 30,000-80,000 tonnes and
will underpin planned production of between 30,000-35,000 tonnes per month,
supplemented by 15,000-20,000 tonnes per month from high-grade narrow vein stopes
and development ore.
The bulk stopes will be mined utilising the existing mine fleet currently on-site at KOTH,
with the increased tonnages mined arising from the improved efficiencies of bulk mining.
Larger sized ore drives can be mined without the dilution that exists for narrow vein mining,
allowing the larger loaders from the existing mining fleet to be used for stoping.
This is expected to result in higher ore production rates being achieved with a lower cost
per tonne, with increased production rate up to ~50,000 tonnes per month, compared with
~35,000 tonnes per month under the previous mine plan.
A large-scale pilot ore sorting trial was conducted at KOTH during the September 2019
Quarter to further evaluate the potential benefits and applicability of the ore sorting
technology. The on-site pilot test work is a progressive step forward from the prior smaller
scale test work undertaken in a Perth laboratory environment.
2019 Annual Report
5
MESSAGE TO SHAREHOLDERS FROM THE MANAGING DIRECTOR
(continued)
EXPLORATION AND RESOURCE DEVELOPMENT
King of the Hills
Bulk mining potential
Exploration drilling at the KOTH mine during the year delivered an important breakthrough
in the Company’s understanding of the structure and controls of gold mineralisation in
the region.
The drilling confirmed the presence of a significant gold-bearing zone of tension veins and
stockworks located close to an existing mining area. It also demonstrated that drilling in a
northerly/southerly direction in the region of the granitoid/ultramafic contact is optimal for
identifying these vein stockworks, which would otherwise be missed by drilling
perpendicular to the contact. This contact has 4km of strike and at least 500m vertical
extent on the eastern side of the granitoid, with a similar extent on the western side.
To define the potential bulk mining opportunity, Red 5 commenced a 30,000m drill program
in November 2018 to target the Eastern Margin Contact.
Bulk Mineral Resource
In December 2018, the Company delivered an initial, proof-of-concept bulk Mineral
Resource comprising 28.7Mt at 2.0g/t Au for 1.88Moz of contained gold. This Resource
was based on underground drilling completed by Red 5 together with historical drilling
data, and covered 2,200m of the strike of the Eastern Margin Contact to a depth below pit
of 130m in the south and 300m in the north. The mineralisation within this initial Resource
remained open both down-dip and along strike in both directions.
Based on the strength of the initial
Resource estimate, the Company initiated
a bulk mining pre-feasibility study aimed
at assessing the potential to establish
KOTH as a stand-alone mining and
processing operation.
In May 2019, Red 5 delivered an updated
bulk Mineral Resource estimate of 66.0Mt
at 1.5g/t Au for 3.11Moz of contained gold,
with 76% of the Resource classified in the
higher-confidence “Indicated Resource”
category.
The updated KOTH Resource was based
on drilling completed up to 14 February
2019, with an additional 44 new drill holes
for 8,029m along with the additional
detailed geological work undertaken since
the previous Resource announcement on
4 December 2018.
The increase in geological confidence
also allowed for the increase in the
Indicated classification.
Figure 3: Plan view (mine grid) displaying the block model for all material above 0.4 g/t.
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2019 Annual Report
MESSAGE TO SHAREHOLDERS FROM THE MANAGING DIRECTOR
Open pit Ore Reserve and
pre-feasibility study
Subsequent to the end of the reporting
period, Red 5 delivered a maiden open
pit Probable Ore Reserve for the KOTH
open pit and Rainbow satellite deposit of
37.4Mt grading 1.24g/t Au for 1.5Moz of
contained gold.
This Ore Reserve was supported by an
open pit Pre-Feasibility Study (PFS),
which delivered key highlights of:
\ A bulk open pit mining operation,
underpinned by a maiden 1.45Moz
Probable Ore Reserve;
\ Construction of a new 4Mtpa CIL
processing plant on site, which will
provide processing capacity for the
integrated KOTH bulk mining
strategy, consisting of the KOTH
open pit, satellite starter pits, as
well as maintaining or expanding
output from the existing bulk
underground mine;
\ Average annual gold production of
140,000 ounces over a mine life of
10 years. The current higher-grade
underground mining operation is
likely to be able to be reconfigured
to add additional annual production
ounces, to be assessed as part of
studies for the Final Feasibility
Study (FFS);
\ Forecast capital cost of A$218M,
which includes pre-strip costs of
A$24M and owners’ costs;
\ Estimated average all-in sustaining
cost (AISC) of A$1,167 per ounce
over the life-of-mine (LOM);
\ Technically low-risk project
development, with extensive mining
history providing well-established
metallurgy and recovery metrics.
The Red 5 Board has given approval to
proceed with a FFS on the integrated
bulk open pit opportunity and
underground mining operations at
KOTH. The FFS is scheduled for
completion by the middle of the 2020
calendar year, with an estimated cost
of $4M.
(continued)
KOTH Open Pit
KOTH PFS
Pit Design
KOTH Underground
Plunge +25 : Azimuth 020
0
500
Metres
Figure 4: KOTH Current pit (translucent blue), underground workings and PFS pit design (shown as gold shape).
The Company sees significant potential
project upside to the PFS, with key additional
elements to be included in the FFS
comprising:
\ Indicated and Inferred Mineral Resource
of 17.5Mt @ 2.0g/t Au for 1.11Moz of
contained gold (1.0g/t Au cut-off) outside
of the current KOTH optimised pit shell,
which will be the basis of the
underground mine;
\ Underground exploration upside, with a
significant proportion of the prospective
Eastern Margin Contact remaining largely
untested by drilling;
\ Regional satellite deposits, including
Severn, Centauri and Cerebus-Eclipse,
which offer the opportunity for early gold
production and cash-flow;
\ Regional exploration upside, with key
targets including Cavalier, Puzzles and
other prospects along the Ursus and
Tarmoola Fault Zones. These and other
targets are being systematically explored.
KOTH regional Mineral Resources
Red 5 completed maiden JORC 2012 Mineral
Resource estimates for the Rainbow and
Severn near-mine deposits at KOTH,
calculated on drilling completed by previous
owners. This work highlights the potential to
define near-mine open pit Resources that will
support the broader bulk mining strategic
review currently underway at KOTH.
The combined Rainbow and Severn open
pit Resources, which total approximately
114,900 ounces of contained gold, provide
solid support to the Company’s strategy to
define opportunities to provide early mill
feed for a potential stand-alone processing
plant at KOTH.
The Rainbow deposit is located 3.5km
south of the Tarmoola open pit at KOTH,
proximal to a NW-striking shear that splays
off the Ursus Fault Zone. The Severn
deposit is located 4.6km south-east of the
Tarmoola open pit, and is situated along
the NNW-striking Tarmoola Fault Zone.
KOTH regional exploration
Red 5 commenced a 13,300m regional
exploration drilling program in March 2019
to test five high-priority near-mine regional
gold targets at KOTH: Cerebus, Eclipse,
Centauri, Cavalier and Puzzles.
The five targets are typified by shallow,
regolith-hosted coherent gold anomalism,
with all targets open along strike and
completely untested down-dip in the
unweathered basement rock. The host
setting of each target shows characteristics
analogous to Tarmoola-KOTH and
Gwalia-style gold mineralisation, and all
present significant discovery opportunities.
The drilling program is targeting
opportunities for generating early mill feed
for a potential stand-alone gold processing
facility at KOTH.
2019 Annual Report
7
MESSAGE TO SHAREHOLDERS FROM THE MANAGING DIRECTOR
(continued)
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Cavalier
Rainbow North
Severn
Rainbow
Puzzle
PokerFault
6835000mN
6830000mN
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(
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6825000mN
Reserves (JORC 2012)
Resource Targets
Prospects
Major Fault
Minor Fault
0
310000mE
4
Kilometres
315000mE
320000mE
325000mE
Figure 5: KOTH Project – Regional plan showing location of KOTH Gold Mine, Tier-1 RC drilling targets, structural trends and other prospects, with regional
magnetics overlay.
Darlot exploration
Lords Extension
Underground exploration drilling at the
near-mine Lords Extension target, located
approximately 200m north of the existing
Mineral Resource boundary, delivered
promising early results, with assay
results including:
CAX0049
\ 5.1m at 2.1g/t Au from 429.1m (includes
0.3m at 12.1g/t Au with visible gold);
\ 1.07m at 4.2g/t Au from 451.08m;
\ 11.06m at 4.4g/t Au from 461.8m
(includes 0.55m at 36g/t Au).
CAX0051
\ 4.5m at 4.3g/t Au from 453.6m; and
\ 0.9m at 9.8g/t Au from 479.6m.
The results indicate the potential to
expand the Darlot Reserve base, with the
mineralisation hosted within favourable
felsic units and remaining open along
strike. Three additional holes are planned
as part of the current drill program.
Significantly, the results also provide
additional host units for future exploration
targeting, in addition to the favourable
magnetic dolerite unit currently
being mined.
8
2019 Annual Report
MESSAGE TO SHAREHOLDERS FROM THE MANAGING DIRECTOR
(continued)
Oval Flattening
Drilling at the Oval Flattening target
successfully intersected a new 77m wide
zone of favourable magnetic dolerite
host rock.
The 1,250m hole, which was partially
funded by the WA Government’s
Exploration Incentive Scheme (EIS), was
targeting the known mineralised Oval Fault
structure in a previously untested area to
the south-west of the Darlot/Centenary
system. Interpretation of 3D seismic data
showed that the fault flattened
considerably across a zone of 150m, which
presents a favourable mineralisation target.
A follow-up hole is planned to test the Oval
Fault further up-dip where it intersects the
favourable magnetic dolerite unit.
Target generation
Extensive near-mine targeting activities
were also completed during the year,
including the ongoing structural and
lithological interpretation of 3D seismic
data as well as analysis and integration of a
substantial underground and surface
geochemical database.
Drill targets have been generated, targeting
extensions to known mineralisation within
the mine space, as well as several targets
within a 20km mine radius focused on
favourable structural trap sites within the
underexplored eastern limb of the folded
Mount Pickering magnetic dolerite.
Ockerburry Hill Project
Red 5’s Ockerburry Hill exploration licence
(EL36/865), located 20km west of Darlot,
covers a highly prospective part of the
Yandal Greenstone Belt and includes the
Ockerburry Fault System and other
interpreted mineralised structures.
Encouraging historical drilling results have
been returned from two key exploration
targets – the Dingo Ridge Prospect
(previously drilled by WMC, Goldfields and
Aragon Resources) and the Spargos
Prospect (previously drilled by Homestake).
Darlot Open Pit
l e n n i u m D e c l
M i
l
i n e
Burswood
Filbandit
Trinidad
C e n t e n a r y D e c l i n e
Pederson
Bradman/Lillee/
Grace/Marsh/
Border
Lords South
CAX0049
11.06m @4.36g/t Au
CAX0051
4.90m @4.29g/t Au
Thomson
Oval
Walters
L
o
r
d
s
F
a
ult
0
metres
View towards 243°
-500
-1000
400
Figure 6: Darlot – Lords Extension Target delivering initial success.
SIANA GOLD PROJECT, PHILIPPINES
Through its Philippine-affiliated company Greenstone Resources Corporation, the Red 5
Group holds an interest in the Siana Gold Project, located on the island of Mindanao in the
Philippines, which is held under a Mineral Production Sharing Agreement (MPSA). Mining
operations at the Siana Project are currently suspended, pending an improvement in
operating conditions in the Philippines.
Ongoing activities at the Siana project during the year included ongoing dewatering of the
open pit, infrastructure maintenance, monitoring of geotechnical issues and community
and government relations activities.
In 2018, Greenstone Resources was issued with a Clearance and Notice to Proceed from
the Philippines Mines and Geoscience Bureau (MGB) to construct and operate Tailings
Storage Facility 6 (TSF6) at Siana.
The Philippines Environmental Management Bureau has also amended the co-ordinates of
the Environmental Compliance Certificate for the Siana Gold Project to include the
proposed area of TSF6, which will allow construction and operation of TSF 6 to proceed,
subject to the completion of standard local construction permitting requirements. TSF 6,
which is the initial tailings storage facility planned for Siana, has an expected capacity of
1 million tonnes of tailings.
Greenstone Resources is evaluating its preferred plan and options for the Siana Gold
Project, including a revised mining strategy for the Siana open pit mine and required
funding for the potential future recommencement of operations. An important part of these
considerations will be the current Philippine Government’s mining policy.
2019 Annual Report
9
MESSAGE TO SHAREHOLDERS FROM THE MANAGING DIRECTOR
(continued)
CORPORATE
Board and Management
Changes
General Manager - Operations Steve
Tombs retired from the Group’s executive
management team in July 2018, having
played a key role in the successful
integration, consolidation and ramp-up of
the Darlot and King of the Hills operations
following their acquisition in October 2017.
Mr Tombs was appointed as a non-
executive director of the Company with
effect from 1 August 2018.
Brendon Shadlow, previously Mining
Manager for Red 5, assumed the role of
General Manager - Operations.
Financial
The Group recorded sales revenue of
$153.51 million, excluding $21.53 million in
pre-operational sales at King of the Hills
(KOTH) offset against mine development
costs. Net cash flow from operating
activities of $23.18 million with $24.87
million in cash and in metal accounts
achieved at period end. The net loss after
tax for the year ended 30 June 2019 of
$3.03 million in comparison to a net loss
after tax for the year ended 30 June 2018 of
$11.93 million.
In September 2018, Red 5 entered into a
gold loan facility of 5,015 ounces with
Malaysian-based investment fund, Asian
Investment Management Services Ltd. The
facility was repaid in full in August 2019
from proceeds of a $20 million working
capital facility secured from Macquarie
Bank Limited.
Summary and outlook
Building on the rapidly evolving bulk mining opportunity identified at KOTH during FY-19,
the coming financial year is set to be a significant period in Red 5’s history as we work to
deliver the Final Feasibility Study (FFS) for an integrated bulk open pit and underground
stand-alone mining operation.
This FFS is scheduled for completion mid-way through the 2020 calendar year, and is
expected to provide a blueprint for KOTH’s future development pathway and map Red 5’s
route to becoming a multi-asset, mid-tier Australian gold producer.
In parallel with the completion of the FFS, we will also continue to progress near-mine and
regional exploration programs at KOTH to further build the Resource inventory. We have
numerous compelling targets that are yet to be tested, including the majority of the
prospective Eastern Margin Contact, offering outstanding potential to increase the current
3.11 million ounce Resource base.
These growth programs will be supported by expected good gold production and
cash flow from both the Darlot and KOTH mining operations. Ongoing operational and
cost efficiency programmes are underway aimed at reducing operating costs, with
the commencement of bulk stoping at KOTH expected to drive enhanced operational
efficiencies.
We also retain significant value with our interests in the Siana Gold Project in the
Philippines, and we are actively assessing how best to progress this asset to deliver
optimal value for shareholders.
Supported by these strong foundations, the Company commences FY20 with a strong
outlook underpinned by stable gold production, an outstanding large-scale expansion
opportunity at KOTH and exceptional exploration upside.
This strong position is thanks to the hard work and dedication of the entire Red 5 team, and
I would like to sincerely thank all of our staff and contractors for the efforts over the past
year. I would also like to thank our shareholders for your continued support.
We can be proud of our achievements over the past year, but I am confident that this is the
start of a transformational period of growth and development for Red 5.
Mark Williams
Managing Director
25 September 2019
10
2019 Annual Report
MINERAL RESOURCES AND ORE RESERVES STATEMENT
WESTERN AUSTRALIAN GOLD OPERATIONS
During the 2019 financial year, Red 5 delivered an updated Mineral Resource estimate for the King of the Hills (KOTH) gold project. Drilling
and Resource definition programs completed during the reporting period resulted in the delivery of an updated open pit and underground
Mineral Resource estimate for KOTH totalling 66.0Mt at 1.5g/t Au for 3.11Moz of contained gold as at May 2019. In addition, Red 5 also
delivered a maiden JORC 2012 Mineral Resource estimates for the Severn and Rainbow satellite deposits at KOTH.
The Company’s Mineral Resource and Ore Reserve estimates, net of mining depletion, as at 30 June 2019 are detailed below:
DARLOT GOLD MINE JORC 2012 UNDERGROUND RESOURCE AND RESERVE AS AT 30 JUNE 2019
Darlot Mineral Resource as at 30 June 2019
Estimate
Classification
Cut Off Au (g/t)
Tonnes (kt)
Au (g/t)
30 June 2019
JORC 2012
30 June 2018
JORC 2012
Difference
Measured
Indicated
Inferred
UG broken stocks
ROM stockpile
Total
Measured
Indicated
Inferred
UG broken stocks
ROM stockpile
Total
Measured
Indicated
Inferred
UG broken stocks
ROM stockpile
Total
2.0
2.0
2.0
Variable
Variable
Variable
2.0
2.0
2.0
Variable
Variable
Variable
-
-
-
Variable
Variable
Variable
7
4,465
2,914
3
8
7,397
7
4,122
2,080
20
20
6,249
-
343
834
-17
-12
1,148
9.8
4.8
3.7
5.4
3.7
4.4
10.1
5.1
4.0
2.0
2.3
4.7
-0.3
-0.3
-0.3
3.4
1.4
-0.3
Contained
Au (koz)
2.0
694
344
0.6
1.0
1,041
2.0
677
269
1.4
1.8
951
-
17
75
-1
-1
90
Darlot Ore Reserve as at 30 June 2019
Estimate
Classification
Cut Off Au (g/t)
Tonnes (kt)
Au (g/t)
Contained
Au (koz)
Recovered
Au metal (koz)
30 June 2019
JORC 2012
Proved
Probable
UG broken stocks
ROM stockpile
Total
Proved
Probable
UG broken stocks
ROM stockpile
Total
Proved
Probable
UG broken stocks
ROM stockpile
Total
30 June 2018
JORC 2012
Difference
Production FY19
2.0 - 2.3
2.0 - 2.3
Variable
Variable
Variable
2.4
2.4
Variable
Variable
Variable
Variable
Variable
Variable
Variable
Variable
1.4
1,700
3.4
8.2
1,713
10
1,870
20
20
1,920
-9
-170
-17
-12
-207
497
7.9
3.7
5.4
3.7
3.7
3.9
3.6
2.0
2.3
3.5
4.0
0.1
3.4
1.4
0.2
4.4
0.3
200
1
1
201
1
215
1
2
219
-0.7
-15
0
-1
-18
71
2019 Annual Report
0.3
188
1
1
189
1
202
1
2
206
-0.7
-14
0
-1
-17
67
11
MINERAL RESOURCES AND ORE RESERVES STATEMENT
(continued)
KING OF THE HILLS JORC 2012 UNDERGROUND RESOURCE AND RESERVE AS AT 30 JUNE 2019
KOTH JORC 2012 Mineral Resource as at 30 June 2019
Estimate
Classification
Cut Off Au (g/t)
Tonnes (kt)
Au (g/t)
Contained
Au (koz)
30 June 2019
JORC 2012
30 June 2018
JORC 2012
Difference
Indicated
Inferred
Sub Total
Indicated
Inferred
Sub Total
Indicated
Inferred
UG broken stocks
ROM stockpile
Total
Indicated
Inferred
UG broken stocks
ROM stockpile
Total
Indicated
Inferred
UG broken stocks
ROM stockpile
Total
KOTH JORC 2012 All material within A$1,800 Pit Shell
0.4
0.4
0.4
45,500
3,000
48,500
KOTH JORC 2012 All material outside A$1,800 Pit Shell
1.0
1.0
1.0
7,600
9,900
17,500
1.3
1.6
1.3
2.0
1.9
2.0
Total Open Pit and Underground KOTH Resource as at May 2019
0.4-1.0
0.4-1.0
Variable
Variable
Variable
2.0
2.0
-
-
Variable
Variable
Variable
Variable
Variable
Variable
53,100
12,900
8
29
66,038
2,535
1,358
-
11
3,904
50,565
11,542
8
18
62,134
1.4
1.8
3.3
1.9
1.5
5.3
5.2
-
1.6
5.2
-3.9
-3.4
3.3
0.3
-3.7
KOTH Regional JORC 2012 Mineral Resource as at 30 June 2019
Project
Rainbow
Severn
All Regional Projects
Classification
Cut Off Au (g/t)
Tonnes (kt)
Au (g/t)
Indicated
Inferred
Sub Total
Indicated
Inferred
Sub Total
Indicated
Inferred
Sub Total
0.6
0.6
0.6
0.4
0.4
0.4
Variable
Variable
Variable
1,380
200
1,580
480
440
920
1,860
640
2,500
1.3
1.4
1.3
1.7
1.5
1.6
1.4
1.5
1.4
1,850
150
2,000
500
610
1,110
2,350
760
0.9
1.8
3,113
432
226
-
0.6
659
1,918
534
0.9
1.2
2,454
Contained
Au (koz)
57.7
9.3
67.0
27.1
20.8
47.9
84.8
30.1
114.9
12
2019 Annual Report
MINERAL RESOURCES AND ORE RESERVES STATEMENT
(continued)
Total KOTH and Regional JORC 2012 Mineral Resource as at 30 June 2019
Project
Grand Total
Classification
Cut Off Au (g/t)
Tonnes (kt)
Au (g/t)
Indicated
Inferred
Sub Total
Variable
Variable
Variable
54,960
13,540
68,500
1.4
1.8
1.5
Contained Au
(koz)
2,435
790
3,225
KOTH Ore Reserve as at 30 June 2019 ¹
Estimate
Classification
Cut Off Au (g/t)
Tonnes (kt)
Au (g/t)
Contained Au
(koz)
Recovered Au
metal (koz)
30 June 2019
JORC 2012
Proved
Probable
30 June 2018
JORC 2012
Difference
UG broken stocks
ROM stockpile
Total
Proved
Probable
UG broken stocks
ROM stockpile
Total
Proved
Probable
UG broken stocks
ROM stockpile
Total
Production FY19
-
2.0
Variable
Variable
Variable
-
2.4
Variable
Variable
Variable
-
Variable
Variable
Variable
Variable
-
1,301
8.1
29.5
1,339
-
710
-
10
720
-
591
8
19
619
403
-
3.2
3.3
1.9
3.2
-
3.9
-
1.9
3.8
-
-0.7
3.3
0.0
-0.6
3.2
-
133
1
2
136
-
88
-
1
89
-
45
1
1
47
41
-
125
1
2
127
-
82
-
1
83
-
43
1
1
44
38
1 Subsequent to the end of the 2019 financial year, Red 5 reported a maiden Probable Ore Reserve for the KOTH open pit of 36.0Mt grading
1.25g/t Au for 1.45Moz of contained gold (see ASX Announcement dated 1 August 2019). This KOTH open pit Ore Reserve includes some
material reported in the above table as Underground Ore Reserves as at 30 June 2019. The mine plan proposed within the Open Pit
Pre-Feasibility Study (PFS) means that these underground ounces would be extracted via open pit mining rather than underground mining as
previously envisaged. The PFS pit design depletes the 30 June 2019 Underground Ore Reserves by 290kt at 3.9g/t Au (40koz contained
gold). Red 5 considers this depletion to be material to the underground operation, however these underground Reserves are scheduled for
late 2021 and Red 5’s current (2019) underground mine development plan includes defining underground Reserves outside of the PFS pit
design. Red 5 will be updating the underground Reserves as part of the KOTH Final Feasibility Study (FFS), targeted for completion in
mid-2020 calendar year.
PHILIPPINE OPERATIONS
SIANA GOLD PROJECT
An annual review and update to the Siana Mineral Resource and Ore Reserve estimates for the year ended 30 June 2019 has been
undertaken, with no resultant change from the figures quoted as at 30 June 2018.
Open pit mining operations at the Siana project were suspended in April 2017 due to ongoing uncertainty regarding regulatory and
government mining policy in the Philippines. Red 5’s Philippine-affiliated company, Greenstone Resources Corporation, subsequently
received clearance to proceed with the construction and operation of a new tailings storage facility for the Siana mine. Greenstone
Resources Corporation is evaluating its preferred plan and options for the Siana Gold Project. Due to the present lack of available tailings
storage capacity, no JORC 2012 Ore Reserve estimate is reported for the Siana open pit as at 30 June 2019. The Siana Underground Ore
Reserve is not impacted by the lack of surface tailings storage capacity, as the underground development is based on cemented tailings
produced through the Siana processing plant being back-filled into stoped-out areas. The non-reporting of an open pit Reserve does not
impact the reporting of the remaining Siana open pit and underground Resources.
2019 Annual Report
13
MINERAL RESOURCES AND ORE RESERVES STATEMENT
(continued)
SIANA JORC 2012 OPEN PIT MINERAL RESOURCE AND ORE RESERVE AS AT 30 JUNE 2019
Siana Open Pit Mineral Resource as at 30 June 2019
Estimate
Classification
30 June 2019
JORC 2012
Indicated
Inferred
ROM stockpile
Total
Cut Off
Au (g/t)
0.7
0.7
0.7
0.7
Tonnes (kt)
Au g/t
Ag g/t
Contained
Au (koz)
Contained
Ag (koz)
650
30
290
970
3.7
2.8
1.1
2.9
7.9
1.2
6.6
7.3
77
3
10
90
164
1
61
226
There were no changes to the Siana Open Pit Mineral Resource as reported at 30 June 2018.
The reporting methodology for the Open Pit Indicated and Inferred Resource only reports material within the pit design as at July 2016 at a
0.7 g/t gold cut-off grade. All Indicated and Inferred material below the design pit has been reported within the JORC 2012 underground
Resource model at a 2.4 g/t gold cut-off grade.
Siana Open Pit Ore Reserve as at 30 June 2019
Estimate
30 June 2019
JORC 2012
Classification
Probable 1
ROM stockpile
Total
Cut Off Au
(g/t)
-
0.7
0.7
Tonnes (kt)
Au g/t
Ag g/t
Contained Au
(koz)
Contained Ag
(koz)
-
290
290
-
1.1
1.1
-
6.6
6.6
-
10
10
-
61
61
1 No JORC 2012 Open Pit Reserve is reported as at 30 June 2019 for the Siana project, pending construction of a new TSF.
There were no changes to the Siana Open Pit Reserve as reported at 30 June 2018.
SIANA JORC 2012 UNDERGROUND MINERAL RESOURCE AND ORE RESERVE AS AT 30 JUNE 2019
Siana Underground Mineral Resource as at 30 June 2019
Estimate
Classification
30 June 2019
JORC 2012
Indicated
Inferred
Total
Cut Off Au
(g/t)
2.4
2.4
2.4
Tonnes (kt)
Au g/t
Ag g/t
Contained Au
(koz)
Contained Ag
(koz)
3,400
500
3,900
5.2
9.3
5.7
7.2
11.2
7.7
566
153
719
779
186
964
There were no changes to the Siana Underground Mineral Resources as reported at 30 June 2018.
Siana Underground Ore Reserve as at 30 June 2019
Estimate
Classification
30 June 2019
JORC 2012
Probable
Total
Cut Off Au
(g/t)
2.4
2.4
Tonnes (kt)
Au g/t
Ag g/t
Contained Au
(koz)
Contained Ag
(koz)
3,010
3,010
4.1
4.1
6.7
6.7
396
396
644
644
There were no changes to the Siana Underground Ore Reserve as reported at 30 June 2018.
MAPAWA JORC 2012 OPEN PIT MINERAL RESOURCE
Mapawa JORC 2012 Resource as at 30 June 2019
Estimate
Classification
30 June 2019
JORC 2012
Indicated
Inferred
Total
Cut Off
Au (g/t)
0.7
0.7
0.7
Tonnes (kt)
Au g/t
Ag g/t
Contained Au
(koz)
Contained Ag
(koz)
3,270
5,560
8,830
1.0
1.0
1.0
3.5
2.5
2.9
103
185
289
371
438
809
There were no changes to the Mapawa Open Pit Mineral Resources as reported at 30 June 2018.
14
2019 Annual Report
MINERAL RESOURCES AND ORE RESERVES STATEMENT
(continued)
Competent Person’s Statement for JORC 2012 Resource and Reserve
Mineral Resource
Mr Byron Dumpleton confirms that he is the
Competent Person for the Mineral Resources
summarised in this report and Mr Dumpleton
has read and understood the requirements of
the 2012 Edition of the Australasian Code for
Reporting of Exploration Results, Mineral
Resources and Ore Reserves (JORC Code,
2012 Edition). Mr Dumpleton is a Competent
Person as defined by the JORC Code, 2012
Edition, having five years’ experience that is
relevant to the style of mineralisation and type
of deposit described in this report and to the
activity for which he is accepting responsibility.
Mr Dumpleton is a Member of the Australian
Institute of Geoscientists, No. 1598. Mr
Dumpleton is a full time employee of Red 5.
Mr Dumpleton has reviewed this report and
consents to the inclusion of the matters based
on his supporting information in the form and
context in which it appears.
Mr Dumpleton verifies that the Exploration
Results and Mineral Resource estimate
section of this report is based on and fairly and
accurately reflects in the form and context in
which it appears, the information in his
supporting documentation relating to Open Pit
and Underground Mineral Resource estimates.
Ore Reserve for Darlot and
KOTH Gold Operations
Ore Reserve for
Siana Gold Operations
Mr Brendon Shadlow confirms that he is the
Competent Person for the underground and
open pit Ore Reserve estimates summarised in
this report and Mr Shadlow has read and
understood the requirements of the 2012
Edition of the Australasian Code for Reporting
of Exploration Results, Mineral Resources and
Ore Reserves (JORC Code, 2012 Edition). Mr
Shadlow is a Competent Person as defined by
the JORC Code, 2012 Edition, having five
years’ experience that is relevant to the style of
mineralisation and type of deposit described
in the report and to the activity for which he is
accepting responsibility. Mr Shadlow is a
Member of the Australasian Institute of Mining
and Metallurgy, No. 202880. Mr Shadlow is a
full time employee of Red 5. Mr Shadlow has
reviewed this report and consents to the
inclusion of the matters based on his
supporting information in the form and context
in which it appears.
Mr Steve Tombs confirms that he is the
Competent Person for the underground and
open pit Ore Reserve estimates summarised
in this report and Mr Tombs has read and
understood the requirements of the 2012
Edition of the Australasian Code for Reporting
of Exploration Results, Mineral Resources
and Ore Reserves (JORC Code, 2012 Edition).
Mr Tombs is a Competent Person as defined
by the JORC Code, 2012 Edition, having five
years’ experience that is relevant to the style
of mineralisation and type of deposit
described in the report and to the activity for
which he is accepting responsibility. Mr
Tombs is a Fellow of the Australasian Institute
of Mining and Metallurgy, No. 105785. Mr
Tombs is a non-executive director of Red 5.
Mr Tombs has reviewed this report and
consents to the inclusion of the matters
based on his supporting information in the
form and context in which it appears.
Mr Shadlow verifies that the Ore Reserve
section of this report is based on and fairly and
accurately reflects in the form and context in
which it appears, the information in his
supporting documentation relating to the
Ore Reserves.
Mr Tombs verifies that the Ore Reserve
section of this report is based on and fairly
and accurately reflects in the form and
context in which it appears, the information in
his supporting documentation relating to the
Ore Reserves.
Red 5 confirms that it is not aware of any new information or data that materially affects the information included in the original ASX market
announcements and that all material assumptions and technical parameters underpinning the estimates in the relevant ASX market
announcements continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent
Persons findings are presented have not been materially modified from the original market announcements.
General notes on Mineral Resources
and Ore Reserves
Mineral Resources are quoted as inclusive of Ore
Reserves and Ore Reserves are quoted as
inclusive of Mineral Resources. Discrepancy in
summation may occur due to rounding. All ROM
stocks and underground stocks quoted are
classified as Indicated material and as a Probable
reserve. Figures take into account mining
depletion as at 30 June 2019.
Notes on Darlot Underground JORC 2012 Mineral Resources and Ore Reserves
Mineral Resources:
1. The updated JORC 2012 Underground Reserve expected marginal cut off will range between
<2.0 to 2.3 g/t Au.
2. The Darlot Resource figures quoted are the sum of the Centenary, Pederson, Pederson South,
Lords South Lower, Oval and Burswood underground mine working areas.
3. Most of the Mineral Resources are currently being mined, and the Burswood deposit is situated
adjacent to current underground workings and mine development has commenced to target
this deposit.
Ore Reserves:
1. Gold price of A$1,650 used in the calculations of the Darlot Ore Reserves.
2. Current processing recoveries at the Darlot processing plant range between 93% to 94% for Au.
3. No Inferred Resources have been used in the derivation of the Ore Reserve estimate.
4. External dilution of 14% has been applied.
2019 Annual Report
15
MINERAL RESOURCES AND ORE RESERVES STATEMENT
(continued)
Notes on KOTH Underground JORC 2012 Mineral Resources
and Ore Reserves
Notes on Siana Underground JORC 2012 Mineral Resources
and Ore Reserves
Mineral Resources:
1. The updated JORC 2012 Underground Reserve expected mining cut
off is 2.0 g/t Au.
2. ROM stocks are reported as Indicated material.
Ore Reserves:
1. Gold price of A$1,650 used in the calculations of the KOTH Ore
Reserves.
2. Current processing recoveries at the Darlot processing plant for KOTH
ore range between 93% to 94% for Au.
1. The resource for this model has only been reported below the Stage 4
Final Open Pit (-130m level) for the June 2016 figures.
2. The Underground Mineral Resource estimate was prepared by Mining
One Pty Ltd.
3. For grade estimation, the updated Siana underground resource has
been constrained based on the geological interpretation which
coincides with a nominal 1.0 g/t Au threshold grade. Zones of internal
waste within some zones graded less than 1.0 g/t Au over a nominal
two metres length and were interpreted and estimated separately.
4. The Siana Underground Resource model is suitable for underground
3. No Inferred Resources have been used in the derivation of the Ore
mining evaluation below the Stage 4 final open pit.
Reserve estimate.
5. Reserves have been reported below the Stage 4 Final Pit (-130m level)
4. External dilution of 20% has been applied.
as at March 2016 design.
Notes on Siana Open Pit JORC 2012 Mineral Resources and
Ore Reserves
1. The Open Pit Resource has only been reported above the June 2016
stage 4 pit design.
2. The resource gold cut-off is based on the Open Pit Ore Reserve
marginal cut-off grade of 0.7 g/t gold whilst operating which was based
on a gold price of US$1,200/oz and silver price of US$15/oz, along
with a PHP:USD exchange rate of 47:1.
3. The Open Pit resource model has been lithologically defined and is
suitable for bulk mining evaluation and not suited for “narrow vein”
mine evaluation.
4. Within the open pit resource block model a 15% upgrade factor on
gold values above 1.2 g/t has been applied. Actual mill reconciliation is
closer to 25%. As a result, the variance between the upgrade factor
and mill reconciliation has been used as a de facto dilution factor. The
Siana Open Pit Ore Reserve was mined using conventional open pit
mining methods using top hammer drill rigs, CAT 40 tonne articulated
Dump Trucks and 85 tonne class hydraulic excavators. The same
conventional open pit methods will be used upon recommencement of
open pit mining operations.
5. ROM material ounces quoted in the open pit reserve table are based
on contained metal. Processing recoveries of 85% for gold and 40%
for silver are used mine and financial planning.
6. No Inferred Resources have been used in the derivation of the Ore
Reserve estimate. A cut-off grade of 2.4 g/t Au has been applied for
the underground ore reserves.
7. Reserve ounces quoted are based on contained metal. Processing
recoveries of 89% for gold and 45% for silver are used mine and
financial planning.
Notes on Mapawa JORC 2012 Mineral Resources
1. The Mapawa LSY deposit was independently estimated by geological
consultants, Optiro Pty Ltd
2. The figures take into account historic mining depletion.
Governance and internal controls
Mineral Resources and Ore Reserves are estimated either by
suitably qualified consultants or internal personnel in accordance
with the applicable JORC Code and using industry standard
techniques and internal guidelines for the estimation and reporting
of Mineral Resources and Ore Reserves. All data is collected in
accordance with applicable JORC Code requirements. Ore
Reserve estimates are based on pre-feasibility or feasibility studies
which consider all material factors.
6. Following the suspension of mining operations at the Siana project and
pending construction of a new TSF, no JORC 2012 Open Pit Reserve
statement has been reported as at 30 June 2019.
The estimates and supporting data and documentation are
reviewed by qualified Competent Persons (including estimation
methodology, sampling, analytical and test data).
16
2019 Annual Report
TENEMENT SCHEDULE
as at 24 September 2019
WESTERN AUSTRALIA
Project
Tenement number
Darlot Gold Mine
E36/0865, E36/0941, E37/1247, E37/1268, E37/1269, E37/1296, E37/1297,
E37/1298, E37/1352, L37/0109, L37/0110, L37/0118, L37/0206, L37/0207,
L37/0223, L37/0224, L37/230, L37/231, L37/0237, M37/0155, M37/0252,
M37/0373, M37/0417, M37/0418, M37/0419, M37/0420, M37/0584,
M37/0592, M37/0608, M37/0667, M37/0774, M37/0775, M37/1217,
P36/1879, P36/1883, P36/1884, P37/8698, P37/8699, P37/8700,
P37/8701, P37/8716, P37/8788, P37/8789
Red 5 interest
100%
L37/0238, E36/0944, E36/0945, E36/0951, E36/0964, E36/0966, E36/0967,
E36/0968, E36/0970, E36/0980, P36/1889, L37/0238, E37/1350, E37/1378,
P37/9210
100% (Applications pending)
M37/0552, M37/0631, M37/0709, M37/1045
M37/0246, M37/0265, M37/0320, M37/0343, M37/0345, M37/0393,
M37/0776
49%
83.5%
King of the Hills Project
M37/0421, M37/0632
L37/0211, M37/0021, M37/0067, M37/0076, M37/0090, M37/0179,
M37/0201, M37/0222, M37/0248, M37/0330, M37/0394, M37/0407,
M37/0410, M37/0416, M37/0429, M37/0449, M37/0451, M37/0457,
M37/0496, M37/0529, M37/0544, M37/0547, M37/0548, M37/0551,
M37/0570, M37/0571, M37/0572, M37/0573, M37/0574, M37/0905,
M37/1050, M37/1051, M37/1081, M37/1105, M37/1165, P37/8391,
P37/8392, P37/8393, P37/8394, P37/9157, P37/9160, P37/9161
100% with portion of tenements at
49% via agreement
100%
L37/0245, E37/1385, P37/9269 – P37/9295
100% (Applications pending)
Montague Project
M57/429, M57/485, E57/793
25% free carried
PHILIPPINES
Project
Tenement number
Registered holder
Siana Gold Project
MPSA 184-2002-XIII
APSA 46-XIII
Mapawa Gold Project
MPSA 280-2009-XIII
Greenstone
Greenstone
Greenstone
Red 5
40%
40%
40%
Other
SHIC 60%
SHIC 60%
SHIC 60%
Equity interest
Abbreviations
M: Mining Lease
Greenstone: Greenstone Resources Corporation
P: Prospecting Licence
SHIC: Surigao Holdings and Investments Corporation
E: Exploration Licence
MPSA: Mineral Production Sharing Agreement
L: Miscellaneous Licence
APSA: Application for MPSA
2019 Annual Report
17
DIRECTORS’ REPORT
for the year ended 30 June 2019
The Directors of Red 5 Limited (“Red 5” or “parent entity”) submit
their report on the results and state of affairs of Red 5 and its
subsidiaries (“the Group” or the “consolidated entity”) for the year
ended 30 June 2019.
Mark Williams
Executive Director
Appointment
date
Non-Executive Director from January 2014
and Managing Director since April 2014
1. DIRECTORS AND COMPANY
SECRETARY
The names of the Directors of Red 5 in office during the course of
the financial year and at the date of this report are as follows:
Kevin Anthony Dundo
Mark James Williams
Ian Keith Macpherson
John Colin Loosemore
Steven Lloyd Tombs (appointed on 1 August 2018)
Unless otherwise indicated, all Directors held their position as a
Director throughout the entire financial period and up to the date
of this report.
1.1.
INFORMATION ON DIRECTORS
Kevin Dundo
Non-Executive Chairman
Other listed
company
directorships
Special
responsibilities
Managing Director
Qualifications
Dip CSM Mining, GAICD
Experience
Mr Williams was previously General Manager
of the Tampakan Copper-Gold Project in the
southern Philippines from 2007 to 2013. He
has over 20 years of mining experience
operating within a diverse range of open cut,
underground, quarrying and civil engineering
environments across the developed markets
of Australia, United Kingdom and New
Zealand as well as the emerging markets of
Philippines, Vietnam, Thailand and South
Pacific.
Mr Williams has not held directorships in any
other listed companies in the past 3 years.
Appointment
date
Non-Executive Director since March 2010
and Non-Executive Chairman since
November 2013
Special
responsibilities
Member of the Remuneration and
Nomination Committee;
Member of the Audit Committee; and
Member of the Health, Safety, Environment
and Community (HSEC) Committee.
Ian Macpherson Non-Executive Director
Appointment
date
Special
responsibilities
April 2014
Chairman of the Audit Committee; and
Chairman of the Remuneration and
Nomination Committee.
Qualifications
B.Com, LLB, FCPA
Qualifications
B.Comm, CA
Experience
Mr Dundo practices as a lawyer and
specialises in commercial and corporate
areas with experience in the mining sector,
the service industry and the financial
services industry.
Other listed
company
directorships
Director of Imdex Limited (since January
2004); and
Cash Converters International Limited (since
February 2015).
Experience
Other listed
company
directorships
Mr Macpherson is a Chartered Accountant
with over 35 years’ experience in the
provision of financial and corporate advisory
services. He was a former partner at Arthur
Anderson & Co managing a specialist
practice providing corporate and financial
advice to the mining and mineral exploration
industry. Mr Macpherson established Ord
Partners in 1990 (later to become Ord
Nexia) and has specialised in the area of
corporate advice with particular emphasis
on capital structuring, equity and debt
raising, corporate affairs and stock
exchange compliance for publicly
listed companies.
Director of RBR Group Ltd (since October
2010).
18
2019 Annual Report
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
1.2.
INFORMATION ON
COMPANY SECRETARY
Frank Campagna Company Secretary
Appointment
date
June 2002
Qualifications
B.Bus (Acc), CPA
Experience
Mr Campagna is a Certified Practicing
Accountant with over 25 years’ experience
as Company Secretary, Chief Financial
Officer and Commercial Manager for listed
resources and industrial companies. He
presently operates a corporate consultancy
practice which provides corporate
secretarial and advisory services to both
listed and unlisted companies.
1.3. DETAILS OF DIRECTORS’ INTERESTS
IN THE SECURITIES OF RED 5
AS AT THE DATE OF THIS REPORT
ARE AS FOLLOWS:
Director
Fully paid
shares
Performance
rights
Service
rights
Deferred
rights
Kevin Dundo
1,430,409
-
Mark Williams
6,634,764
9,637,208
Ian Macpherson
659,957
Colin Loosemore
6,824,212
Steven Tombs
2,000,667
-
-
-
-
-
-
-
-
-
-
-
-
-
Colin Loosemore Non-Executive Director
Appointment date December 2014
Special
responsibilities
Chairman of the Health, Safety, Environment
and Community (HSEC) Committee;
Member of the Remuneration and
Nomination Committee; and
Member of the Audit Committee.
Qualifications
B.Sc.Hons., M.Sc., DIC., FAusIMM
Experience
Mr Loosemore is a geologist with over 40
years’ experience in multi-commodity
exploration including over 30 years as a
director of public exploration companies
within Australia and overseas. He graduated
from London University in 1970 and the
Royal School of Mines in 1977. Mr
Loosemore was most recently Managing
Director of Archipelago Resources plc
where he oversaw development of the Toka
Tindung Gold Mine in Sulawesi, Indonesia.
Other listed
company
directorships
Mr Loosemore has not held directorships in
any other listed companies in the last
3 years.
Steven Tombs
Non-Executive Director
Appointment
date
August 2018
Special
responsibilities
-
Qualifications
B.Sc.Hons, FAusIMM
Experience
Other listed
company
directorships
Mr Tombs is a Mining Engineer with over 40
years’ experience in the mining industry in
Australia and overseas. Mr Tombs graduated
from Nottingham University in 1976 and was
previously Red 5’s General Manager at
Darlot and the Underground Project Manager
at Siana. Mr Tombs previously held Senior
Management positions at AngloGold
Ashanti, Placer Dome and Newcrest in the
Eastern Goldfields.
Mr Tombs has not held directorships in any
other public companies in the last 3 years.
2019 Annual Report
19
DIRECTORS’ REPORT
1.4. DIRECTOR’S MEETINGS
for the year ended 30 June 2019 (continued)
The number of meetings of the Board of Directors of Red 5 and of each Board committee held during the year ended 30 June 2019 and
the number of meetings attended by each Director whilst in office are as follows:
Director
Kevin Dundo
Mark Williams
Ian Macpherson
Colin Loosemore
Steven Tombs
Board meetings
Audit Committee
Remuneration and
Nomination Committee
HSEC Committee
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
10
10
10
10
9
10
10
10
10
8
2
-
2
2
-
2
-
2
2
-
3
-
3
3
-
3
-
3
3
-
1
-
-
1
-
1
-
-
1
-
1.5. CORPORATE GOVERNANCE
In recognising the need for high standards of corporate behaviour and accountability, the Directors of the Company support the
principles of sound corporate governance. The Board recognises the recommendations of the Australian Securities Exchange
Corporate Governance Council, and considers that Red 5 is in compliance with those guidelines to the extent possible, which are of
importance or relevant to the commercial operation of developing listed resources companies.
2. PRINCIPAL ACTIVITIES
The principal activities of Red 5 and the consolidated entity (which includes associated entities of Red 5) during the financial period
were gold mining and mineral exploration.
3. RESULTS OF OPERATIONS
A net loss of the consolidated entity after income tax for the year ended 30 June 2019 was $3,030,385
(30 June 2018: loss of $11,927,573).
3.1 OPERATING REVIEW
During the year, Red 5 delivered steady-state gold production from its Eastern Goldfields gold operations, generating positive free
cashflows at the Darlot and King of the Hills gold mines.
With the ramp-up of mining at King of the Hills completed during December 2018, the Company was able to achieve commercial
production on 1 December 2018, a significant milestone for the Group.
Mining operations at the Siana gold project in the Philippines remained suspended pending an improvement in operating conditions in
the Philippines. Ongoing activities at Siana include dewatering of the open pit, infrastructure maintenance and monitoring of
geotechnical issues.
(a) Mining Activities
Darlot Gold Mine
Darlot continued to primarily source ore from the high-grade Oval West deposit for the end of the year. Airleg mining continued to ramp
up with four active airleg mining stopes in production, at an estimated rate of 4,000 tonnes per month and expected to ramp up to 6,000
tonnes. The airleg program is being conducted concurrently with engineering and geological assessments to identify additional
opportunities for narrow vein mining.
Further rehabilitation work continued to advance remnant mining opportunities in the Thomson orebody and capital development
towards the Burswood deposit, progressing these mining fronts as part of the FY2020 mine plan.
20
2019 Annual Report
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
3. RESULTS OF OPERATIONS (continued)
King of the Hills
The transition to bulk mining at King of the Hills (KOTH) entered
an important phase during the last quarter of FY2019 with the
majority of stope ore coming from bulk sources. Related
efficiencies began to be realised with record (under Red 5
ownership) quarterly production tonnes, drilling and ounces
delivered from the mine.
Bulk stope optimisation continued to provide value throughout
the year. During the last quarter of FY2019, a total of 5,356oz was
processed, making this a record for ounces produced from
KOTH for Red 5.
The period was marked by significant improvement in the
understanding of the complex local geology as well as process
improvements across technical services. These improvements
are expected to deliver significant ongoing material benefits to
the operation.
Development of the first specifically bulk mining level continued
as planned and reached a significant drill platform location. The
platform will be used to test open mineralisation down-dip and
represents a key milestone for the long-term bulk mining strategy
for KOTH.
(b)
Processing and Production
The Darlot processing plant performed well during the year with a
total of 907,004 tonnes of ore processed. The average head grade
and recovery was 3.79g/t Au and 92.4% respectively, resulting in
the production of a total of 102,012 ounces of gold.
Summary of Australian production:
Mined tonnes
Average grade
Tonnes milled
Average head grade
Recovery
Gold recovered
Units
t
g/t
t
g/t
%
oz
FY 2019
900,251
3.86
900,004
3.79
92.4
102,012
The newly scoped Tailings Storage Facility #4 construction
commenced in July 2019 and is expected to take 5 months to
complete. During the year a refurbished Knelson Gravity
Concentrator was installed on the primary milling circuit. This
concentrator, coupled with the already installed new Falcon unit
on the secondary circuit, should see lower final tail solid grade
and improve gold bullion smelting. Continuous improvement
projects include refurbishment of adsorption and leach tanks,
improvement of oxygen addition to the leach circuit, an additional
cross belt magnet, as well as optimising the existing triple deck
screen on the crushing circuit.
Exploration and Resource Development
(c)
Darlot
During the year, drilling at the Oval Flattening target successfully
intersected a new 77m wide zone of favourable magnetic dolerite
host rock.
The 1,250m hole, which was partially funded by the WA
Government’s Exploration Incentive Scheme (EIS), was targeting
the known mineralised Oval Fault structure in a previously
untested area to the south-west of the Darlot/Centenary system.
Interpretation of 3D seismic data showed that the fault flattened
considerably across a zone of 150m, which presents a favourable
mineralisation target.
Extensive near-mine targeting activities were also completed
during the last quarter of FY2019, including the ongoing structural
and lithological interpretation of the 3D seismic data as well as
analysis and integration of a substantial underground and surface
geochemical database. Drill targets have been generated,
targeting extensions to known mineralisation within the mine
space, as well as several targets within a 20km mine radius
focused on favourable structural trap sites within the
underexplored eastern limb of the folded Mount Pickering
magnetic dolerite.
King of the Hills
Updated Mineral Resource Estimate for Eastern Margin Contact
during the last quarter of FY2019, Red 5 reported an updated bulk
mining Mineral Resource estimate for the Eastern Margin Contact
zone at KOTH.
Mineral Resource estimates for the Rainbow and Severn near-
mine deposits at KOTH, calculated on drilling completed by past
owners. This work highlights the potential to define near-mine
open pit resources that have the potential to support the broader
bulk mining strategic review currently underway at KOTH. Red 5 is
currently undertaking a major 13,300m regional drilling program
to test five additional priority nearmine targets at KOTH.
(d)
Siana Gold Project, Philippines
Red 5’s Philippine-affiliated company, Greenstone Resources
Corporation, is continuing to evaluate its preferred plan and
options for the Siana Gold Project, including a revised mining
strategy for the Siana open pit mine and required funding for the
potential future recommencement of operations. An important
part of these considerations will be the current Philippine
Government’s mining policy.
While mining operations remain suspended at Siana, ongoing
activities include dewatering of the open pit, infrastructure
maintenance and geotechnical monitoring.
(e)
Corporate
General Manager - Operations, Steven Tombs retired from the
Group’s executive management team effective from 31 July 2018.
Given his intimate knowledge of the Red 5 Group assets and his
vast mining and operational experience, Mr Tombs was appointed
as a Non-Executive Director, effective from 1 August 2018.
2019 Annual Report
21
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
3. RESULTS OF OPERATIONS (continued)
3.2
FINANCIAL REVIEW
The consolidated entity recorded a net loss after tax of
$3,030,385 (2018: Loss of $11,927,574.).
This was offset by a decrease in employee benefits and the
reduction of liabilities due to the King of the Hills deferred
consideration payment made during the year, as well as a
reduction of deferred tax liability ($6,069,001) mainly as a result of
forming a tax consolidated group.
(a)
Gold sales
(d)
Cash flow
During the year, cash and cash equivalents increased by
$3,464,030.
Free cash inflows from operating activities for the period were
$23,180,689. Cash receipts from customers of $150,396,145
reflect the sale of gold and silver. This was offset by cash outflows
of $127,215,456, driven by higher operational costs resulting from
the Company’s ramp-up to full production and increased
exploration expenditure.
Net cash outflows used in investing activities for the period were
$36,540,439, reflecting sustaining and growth capital on the
Darlot processing plant and Darlot mine, as well as development
costs, pre-operational expenditure and deferred consideration
associated with the King of the Hills project.
The net cash from financing activities of $16,823,780 reflects the
proceeds from the sale of the Mt Cattlin royalty ($11,000,000);
and the gold loan facility ($8,219,786) offset by repayments of
finance lease liabilities and payment of interest on the gold loan.
4. DIVIDENDS
No amounts were paid by way of dividend since the end of the
previous financial year (2018: Nil). At the time of this report the
Directors do not recommend the payment of a dividend.
5. OPTIONS GRANTED OVER SHARES
No options were granted during or since the end of the financial
year. No person entitled to exercise the options has any right by
virtue of the option to participate in any share issue of Red 5 or
any other corporation.
6. PERFORMANCE RIGHTS
At the date of this report, there were 33,560,099 performance
rights convertible into ordinary fully paid shares.
Vesting date: 30 June 2020 (subject to
performance conditions)
Vesting date: 30 June 2021 (subject to
performance conditions)
Number
18,218,801
15,241,298
33,460,099
Gold and silver sales for the reporting period before hedging
movements totalled $156,308,315 (2018: $77,149,429) which
excludes $21,529,789 of sales from the King of the Hills operation
which have been offset against mine development costs.
(b)
Income statement
The Group recorded a net loss after tax for the year ended 30
June 2019 of $3,030,385 in comparison to a net loss after tax for
the year ended 30 June 2018 of $11,927,574 and a net loss before
tax of $10,600,218 (2018: loss $14,387,213).
Darlot and King of the Hills recorded a gross profit for the period
of $11,342,129 (30 June 2018: gross loss of $3,625,718). A
combined 98,240 ounces of gold were sold during the year, which
together with silver sales and hedging adjustments resulted in
total revenue of $153,508,715. Cost of sales for the period of
$142,166,586 comprised production costs, royalties, movement in
stockpiles and depreciation charge. The higher sales and cost of
sales during the year is reflective of full twelve months of Darlot
operation and the achievement at King of the Hills of commercial
production on 1 December 2018 compared to the previous year
where the Company had only 9 months of operations in Australia
and the Philippines.
The Group’s net loss for the period was mainly driven by
administrative expenses, exploration expenditure, Siana project
care and maintenance expenses and fair value loss on financial
liabilities attributable to high forward gold prices. Financing
expenses included unwinding of the effective interest rate of the
gold loan. This was offset by gross profit from operations and
income tax benefits primarily due to the reset of the cost base of
property, plant and equipment and other liabilities as a result of
forming a tax consolidation group.
(c)
Balance sheet
Total assets increased from $173,271,787 to $177,147,101 at 30
June 2019. The net increase in total assets was mainly driven by
mine development connected with the King of the Hills pre-
operational expenditure and capitalised exploration expenditure
for resource drilling, a build-up of inventories associated with the
Company’s ramp-up to full production and deferred tax assets.
This was offset by a decrease in current trade and other
receivables due to the $11,000,000 received in July 2018 for the
sale of the Mt Cattlin royalty.
Total liabilities were $97,766,795, an increase of $5,746,306 from
30 June 2018. This was mainly driven by a negative mark-to-
market adjustment on gold hedges ($6,072,867) and entering into
a gold loan facility of 5,015 ounces ($10,143,415) fully repaid
subsequent to year-end in August 2019.
22
2019 Annual Report
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
7.
INDEMNIFICATION AND
INSURANCE OF DIRECTORS,
OFFICERS
The Company has made an agreement indemnifying all the
Directors and officers of the Company against all losses or
liabilities incurred by each Director or officer in their capacity as
Directors or officers of the Company to the extent permitted by
the Corporations Act 2001. The indemnification specifically
excludes wilful acts of negligence. The Company paid insurance
premiums in respect of Director’s and Officer’ Liability Insurance
contracts for current officers of the Company, including officers of
the Company’s controlled entities. The liabilities insured are
damages and legal costs that may be incurred in defending civil or
criminal proceedings that may be brought against the officers in
their capacity as officers of entities in the Group. During the
financial year, Red 5 paid premiums of $205,408 (2018: $204,283).
8. EVENTS SUBSEQUENT TO
THE END OF THE FINANCIAL YEAR
Working Capital Facility:
In August 2019, the Company entered into an agreement with
Macquarie Bank Limited to provide the Company with a $20
million Working Capital Facility. This facility includes a hedging
amounting to approximately 13,000 ounces per quarter over the
term of the loan. Proceeds from the Working Capital Facility were
partially applied to full repayment in August 2019 of the Gold Loan
Facility with Malaysian-based investment fund, Asian Investment
Management Services Ltd.
9. LIKELY DEVELOPMENTS AND
EXPECTED RESULTS OF
OPERATIONS
In the opinion of the Directors there is no information available
as at the date of this report on any likely developments which
may materially affect the operations of the Group other than
detailed in the subsequent events and the expected results of
those operations.
10. ENVIRONMENTAL REGULATIONS
The consolidated entity is subject to significant environmental
regulation in respect to its mineral exploration activities. These
obligations are regulated under relevant government authorities
within Australia and Philippines. The consolidated entity is a
party to exploration and development licences and has beneficial
interests in Mineral Production Sharing Agreements. Generally,
these licences and agreements specify the environmental
regulations applicable to exploration and mining operations in the
respective jurisdictions. The consolidated entity aims to ensure
that it complies with the identified regulatory requirements in each
jurisdiction in which it operates.
Compliance with environmental obligations is monitored by the
Board of Directors. No environmental breaches have been
notified to the consolidated entity by any government agency
during the year ended 30 June 2019.
11. REMUNERATION REPORT
(AUDITED)
This remuneration report for the year ended 30 June 2019 outlines
the remuneration arrangements in place for Directors and
Executives of Red 5 in accordance with the requirements of the
Corporations Act 2001 and its Regulations.
This report sets out the current remuneration arrangements for
Directors and executives of Red 5. For the purposes of this
report, key management personnel (KMP) are defined as those
persons having authority and responsibility for planning, directing
and controlling major activities of the consolidated entity, including
any Director (whether Executive or Non-Executive) of Red 5.
The report contains the following sections:
11.1
Key Management Personnel covered by this
Remuneration Report
11.2 Remuneration Governance
11.3
Principles of Remuneration
11.4
Services from Remuneration Consultants
11.5
Executive Remuneration Framework
11.6 Group Performance
11.7 Key Management Personnel Service Agreements
11.8
Summary of Remuneration
11.9
Additional Disclosures Relating to Options,
Performance Rights and Shares
11.1 KEY MANAGEMENT PERSONNEL
COVERED BY THIS REMUNERATION
REPORT
The following were KMPs of the Group at any time during the year
ended 30 June 2019 and 30 June 2018 and unless otherwise
indicated, KMPs for the entire period:
Non – Executive Directors
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steven Tombs (a)
Executive Directors
Mark Williams – Managing Director
Executives
John Tasovac - Chief Financial Officer
Brendon Shadlow (b) – General Manager Operations
(a) Steven Tombs retired from the Group’s executive management
team on 31 July 2018 and was appointed Non-Executive Director
effective from 1 August 2018.
(b) Brendon Shadlow was appointed General Manager Operations
on 1 August 2018.
There were no other changes to KMPs after the reporting date
and before the date of the financial report.
2019 Annual Report
23
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
11.2 REMUNERATION GOVERNANCE
11.4 SERVICES FROM REMUNERATION
CONSULTANTS
During the previous financial year, the Remuneration Committee
engaged Godfrey Remuneration Group (GRG) as independent
remuneration consultants to provide a market benchmarking
report on chief executive officer remuneration levels and a review
of short term and long term incentive schemes for senior
executives and plan documents. Remuneration recommendations
were provided to the Remuneration Committee as an input into
the decision making process. The Remuneration Committee
considered the recommendations in conjunction with other
factors in making its remuneration determinations. The
Remuneration Committee is satisfied that the advice received
from GRG is free from undue influence from the KMP to whom the
remuneration recommendations apply, as GRG were engaged by
and reported directly to the Chair of the Remuneration Committee
with no involvement by the KMP. GRG also made the required
independence declarations in their reports, which indicated that
the consultant viewed the advice as free from undue influence
from the KMP that were the subject of the advice. The fee for this
service was $3,200 (2018: $24,700)
11.5 EXECUTIVE REMUNERATION
FRAMEWORK
Red 5’s remuneration policy for the Managing Director and senior
executives is designed to promote superior performance and
long-term commitment to Red 5, while building sustainable
shareholder value. Remuneration packages are set at levels that
are intended to attract and retain executives capable of managing
Red 5’s operations. The Managing Director and senior executives
receive a base remuneration which is market related, together
with performance-based remuneration linked to the achievement
of pre-determined milestones and targets.
The structure of remuneration packages for the Managing
Director and other senior executives comprises:
\ Fixed remuneration;
\ Short-term incentives linked to annual planning and longer-
term objectives; and
\ Long-term incentives through participation in performance-
based equity plans, with the prior approval of shareholders to
the extent required.
The proportion of fixed and variable remuneration is established
for the Managing Director and senior executives by the
Remuneration and Nomination Committee and is linked to both
relevant market practices and the degree to which the Board
intends participants to focus on short and long-term outcomes.
The Remuneration and Nomination Committee (the Committee) of
the Board of Directors (the Board) is responsible for determining
the remuneration arrangements for KMPs and making
recommendations to the Board. The Committee is comprised of
three Non-Executive Directors.
The Committee reviews remuneration levels and other terms of
employment on a periodic basis having regard to relevant
employment market conditions, strategy of the Group,
qualifications and experience of the KMPs and performance
against targets set for each year.
The Committee also advises on the appropriateness of
remuneration packages of the Group given trends in comparative
peer companies both locally and internationally, with the overall
objective of ensuring maximum stakeholder benefit from the
retention of a high-quality board and executive team.
Overall remuneration policies are determined by the Board and
are adapted to reflect competitive market and business
conditions. Within this framework, the Committee considers
remuneration policies and practices generally, and determines
specific remuneration packages and other terms of employment
for the Managing Director and senior executives. Executive
remuneration and other terms of employment are reviewed
annually by the Committee having regard to performance,
relevant comparative information and expert advice.
11.3 PRINCIPLES OF REMUNERATION
Directors and executives remuneration
Red 5’s remuneration policies are designed to align executives’
remuneration with shareholders’ interests and to retain
appropriately qualified executive talent for the benefit of Red 5.
The main principles of the policy are:
\ fixed remuneration should be set around the middle of the
relevant market data, at P50/50th percentile;
\ reward reflects the competitive market in which Red 5
operates;
\ for executives, individual reward should be linked to
performance criteria through variable remuneration, and
\ at target, which is intended to be a challenging but
achievable performance, the combination of fixed
remuneration and the outcomes of variable remuneration
should position Total Remuneration Packages between
P50 and P75 of the market,
\ variable remuneration should generally be offered in the
form of separate short (1 year) and long term (3 year)
incentives; and
\ Non-Executive Directors should not receive remuneration
related to performance or participate in any executive
incentive plan.
24
2019 Annual Report
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
11.5.1 Fixed Remuneration
11.5.3 Long-term incentives through participation
Fixed remuneration comprises director’s fees, consulting fees,
salaries, and superannuation contributions.
11.5.2 Short-term incentives linked to
annual planning and longer-term objectives
The objective of short-term incentives is to link achievement of
Red 5’s annual targets for outcomes linked to Red 5’s strategy, or
which clearly build shareholder value, with the remuneration
received by executives charged with meeting those targets. The
short-term incentive is an “at risk” component of remuneration for
key management personnel and is payable based on
performance against key performance indicators set at the
beginning of each financial year. Targets are intended to be
challenging but achievable and may or may not be linked to
budget, depending on whether or not the budget is viewed by the
Board as meeting this definition.
Performance incentives may be offered to the Managing Director
and senior executives through the operation of incentive
schemes. The short-term incentive is offered annually, set as a
percentage of annual salary, payment of which is conditional
upon the achievement of agreed key performance indicators
(KPIs) for each executive, which comprise a combination of
agreed milestones and financial measures. These milestones are
selected from group, functional/unit and individual level
objectives, each weighted to reflect their relative importance and
each with targets linked to the Board’s expectations and with
threshold, target and stretch levels set where possible (some KPIs
are binary and are either achieved or not achieved).
The KPIs comprise financial and non-financial objectives and
include out-performance against the annual operating budget,
health and safety targets and specific operations-related
milestones. Measures chosen directly align the individual’s reward
to the KPIs of the group and to its strategy and performance. The
plan also has a financial gate to ensure that no performance
bonus is payable when it would be inappropriate or unaffordable
to do so. Any award under the STI for the Managing Director and
executives is subject to deferral at a rate of 50% of the award, to
be delivered in the form of Service or Deferred Rights, subject to
shareholder approval, if required.
The Service and Deferred Rights are intended to prevent the
equity being sold for a period of 12 to 24 months (respectively)
Service rights are subject to a 12-month service test. The purpose
of deferral is to manage the risk of short-termism inherent in
setting short term objectives, to promote sustainable value
creation and to build further alignment with shareholders.
in performance-based equity plans
The objective of long-term incentives is to promote alignment
between executives and shareholders through the holding of
equity. As such, long term incentives are only granted to
executives who are able to directly influence the generation of
shareholder wealth, or who are in a position to contribute to
shareholder wealth creation.
As the operations of the Group expand, the Board continues to
progressively develop remuneration policies and practices that
appropriately link remuneration to company performance and
shareholder wealth, given the circumstances of Red 5 at the time.
This includes a long-term incentive scheme whereby Performance
Rights will be granted with a measurement period of three years
with vesting conditions comprising TSR and agreed operational
measures including gold production and strategic targets. The
TSR measure is subject to a positive TSR gate and that other
measures are subject to a production or financial gate. The
Group’s Total Shareholder Return (TSR) is measured as a
percentile ranking compared to the S&P/ASX All Ordinaries
Gold Index.
Share-based compensation
The Board has adopted the Red 5 Employee Share Option Plan
(ESOP) and a Rights Plan. The primary purposes of these plans
are to increase the motivation of employees, promote the
retention of employees, align employee interests with those of
Red 5 and its shareholders and to reward employees who
contribute to the growth of Red 5. The Red 5 Rights Plan is
appropriately utilised for offers of both deferred short term
incentives (Service and Deferred Rights) and long term incentives
(Performance Rights). Specific performance hurdles or vesting
schedules are determined by the Board at the time of grant under
the ESOP or Rights Plan in the case of LTI, and are aligned with
the stage of development and operations of the Group and
market conditions and practices.
Red 5’s share trading policy prohibits key management
personnel that are granted share-based payments as part of
their remuneration, from entering into other arrangements that
limit their exposure to losses that would result from share price
decreases. Entering into such arrangements is also prohibited
by law.
2019 Annual Report
25
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
11.6 GROUP PERFORMANCE
The following table summarises key measures of Group performance for FY19 and the previous four financial years.
ASX Share price at year end
(Loss)/profit before income tax
attributable to owners of the
company ($)
Dividends paid ($)
2019
$0.18
2018
$0.08
2017
$0.03
2016
$0.09
2015
$0.09
(10,600,218)
(14,387,213)
(110,124,206)
24,787,481
(60,304,510)
-
-
-
-
-
11.6.1 STI performance pay outcome
Short term incentive bonus component of remuneration based on achievement of group and specific role related operational targets for
the year ended 30 June 2019 including achievement of core EBITDA targets, completion of strategies relating to the Siana assets, the
achievement of gold production and cost targets for the financial year and individual effectiveness. A gate of 80% of budgeted gold
production level applies to all KPIs.
The amount vested represents 89.7% of the available target bonus with the balance being forfeited due to performance criteria not
being met. The financial gate of a minimum level of gold production based on a challenging work plan and operating budget was
exceeded. 50% of the performance bonus is payable in share rights for Mr Williams, Mr Tasovac and Mr Shadlow, with the issue of
share rights to Mr Williams subject to shareholder approval.
Based on these results the Board has awarded an STI to eligible KMPs as follows:
Executive KMP STI Awards for 2019
Mark Williams
John Tasovac
Brendon Shadlow
Cash Bonus
$
140,000
65,000
60,000
Deferred Rights (a)
No.
Service Rights (b)
No.
393,258
182,584
168,539
393,258
182,584
168,539
(a) Deferred rights vest immediately and are subject to a 24-month disposal restriction following the end of the measurement period. See
valuation of rights on section 11.8.
(b) Service rights are subject to a 12-month service test following the end of the measurement period. See valuation of rights on section 11.8.
The Remuneration Committee exercised some discretion based on Company performance and Group objectives achieved in assessing
the performance of the executive KMP’s against the 2019 STI objectives.
11.6.2 LTI performance pay outcome
No LTI performance pay vested during the year, other than 50% of Mr Steven Tombs’ performance rights that were awarded to him on
his retirement on 31 July 2018 in recognition of his contribution to the Company.
Executive KMP LTI Awards for 2019
2019
Steven Tombs
Maximum number of
performance rights
Number awarded
in the year
% of maximum
potential LTI achieved
% of LTI not
achieved in the year
2,600,000
1,300,000
50
50
Details of LTI performance rights issued during the year are shown at section 11.9.4.
11.7 KEY MANAGEMENT PERSONNEL SERVICE AGREEMENTS
11.7.1 Non-Executive Directors’ remuneration
In accordance with current corporate governance practices, the structure for the remuneration of Non-Executive Directors and senior
executives is separate and distinct. Shareholders approve the maximum aggregate remuneration payable to Non-Executive Directors,
with the current approved limit being $650,000 per annum. The remuneration and nomination committee recommend the actual
payments to Directors and the Board is responsible for ratifying any recommendations.
26
2019 Annual Report
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
The current fee policy is as follows:
11.7.3 Executives
John Tasovac
Fixed remuneration for the year and
statutory superannuation: $361,350
Mr Tasovac’s agreement is for an indefinite period.
In addition to his cash remuneration Mr Tasovac is entitled to:
\ Performance bonus: short term incentive bonus
determined as a percentage of annual salary and based
on the achievement of pre-determined milestones which
are selected from group, functional and individual level
objectives, each weighted to reflect their relative
importance.
\ Equity compensation: entitlement to participate in the
ESOP or PR Plan with performance hurdles or vesting
schedules determined at time of grant.
Termination provisions: termination by the Company (other
than for unsatisfactory performance, gross misconduct or long
term incapacity) upon giving 6 months’ notice or payment in
lieu of notice.
Brendon Shadlow
Fixed remuneration for the year and
statutory superannuation: $328,500
Mr Shadlow’s agreement is for an indefinite period.
In addition to his cash remuneration Mr Shadlow is entitled to:
\ Performance bonus: short term incentive bonus
determined as a percentage of annual salary and based
on the achievement of pre-determined milestones which
are selected from group, functional and individual level
objectives, each weighted to reflect their relative
importance.
\ Equity compensation: entitlement to participate in the
ESOP or PR Plan with performance hurdles or vesting
schedules determined at time of grant.
Termination provisions: termination by the Company (other than
for unsatisfactory performance, gross misconduct or long-term
incapacity) Mr Shadlow is entitled to three months’ notice or
payment in lieu of notice. Mr Shadlow may terminate the
agreement by giving three months’ notice.
Steven Tombs
(Retired on 31 July 2018)
On 31 July 2018 Steven Tombs ceased to be an employee. He
was appointed as a Non-Executive Director on 1 August 2018.
\ The Chair receives fees of $120,000 per annum plus
superannuation;
\ Non-Executive Directors receive $90,000 per annum plus
superannuation;
\ Chairs of Board committees receive:
\ $10,000 per annum plus superannuation for the audit
committee, and
\ $ 5,000 per annum plus superannuation for other
committees;
\ Committee members are not paid any additional fee;
\ Non-Executive Directors are entitled to statutory
superannuation benefits; and
\ The Board approves any consultancy arrangements for
Non-Executive Directors who provide services outside of and
in addition to their duties as Non-Executive Directors.
Non-Executive Directors are not entitled to participate in
performance-based remuneration schemes. However, the Board
seeks annual shareholder approval for a Non-Executive Directors’
share plan, under which Non-Executive Directors can elect to
receive a portion of their existing Directors fees in shares in
Red 5. All Directors are entitled to have premiums on indemnity
insurance paid by Red 5. During the financial year, Red 5 paid
premiums of $205,408 (2018: $204,283) to insure the Directors
and other officers of the consolidated entity. The liabilities insured
are for costs and expenses that may be incurred in defending civil
or criminal proceedings that may be brought against the officers
in their capacity as officers of entities in the consolidated entity.
11.7.2 Executive Directors – Managing Director
Mark Williams
Fixed remuneration for the year and statutory
superannuation: $547,500
Mr Williams’ agreement is for an indefinite period.
In addition to his cash remuneration Mr Williams is entitled to:
\ Performance bonus: short term incentive bonus determined
as a percentage of annual salary and based on the
achievement of pre-determined milestones which are
selected from group, functional and individual level
objectives, each weighted to reflect their relative
importance. One half of any performance bonus is payable
in cash and one half is to be satisfied by the issue of Share
Rights which are subject to service or escrow conditions.
\ Equity compensation: entitlement to be granted
indeterminate rights which can be delivered in either cash or
shares. The rights are granted annually with a measurement
period of three years with vesting conditions comprising
outperformance against TSR and agreed operational
measures including gold production targets.
Termination provisions: termination by the Company (other than
for unsatisfactory performance, gross misconduct or long term
incapacity) upon giving 12 months’ notice or payment in lieu of
notice and by Mr Williams giving 3 months’ notice.
2019 Annual Report
27
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
11.7.4 Transactions with Key Management Personnel and their related parties
The Non-Executive Directors Mr Kevin Dundo; Mr Ian Macpherson; Mr Colin Loosemore and Mr Steven Tombs invoice through their
private companies for Directors fees, they are not separate entities that provide consulting services to the Company. Mr Dundo; Mr
Macpherson; Mr Loosemore and Mr Tombs meet the definition and maintain their status as Independent Non-Executive Directors, thus
retain objectivity and their ability to meet their oversight role.
Steve Tombs a Director charged the Group director’s fees, as part of his remuneration, for the year totalling $90,338 (2018: $Nil) and
$3,900 for consulting fees. At year-end, there was no amount outstanding (2018: Nil).
These transactions were entered on normal commercial terms.
11.8 DETAILS OF REMUNERATION
The following table discloses details of the nature and amount of each element of the remuneration paid to key management personnel
including the Directors of Red 5 for the year ended 30 June 2019.
2019
Short term
Salaries
or
directors’
fees
Deferred
and
Service
rights (b)
Cash
Bonus
Consulting
fees
Termination
benefits
Super-
annuation
Long term
Annual
and long
service
leave
Share
based
payments (c)
Name
$
$
$
Executive Director
Mark Williams
522,500 (a)
140,000
118,169
Non-Executive Directors
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steven Tombs
Executives
120,000
105,000
95,000
82,500
-
-
-
-
-
-
-
-
John Tasovac
324,393
65,000
53,924
Steven Tombs
18,333
-
-
Brendon Shadlow
302,292
60,000
30,337
$
-
-
-
-
3,900
-
-
-
$
-
-
-
-
-
-
10,091(d)
$
$
$
Total
$
25,000
25,230
131,215
962,114
11,400
9,975
9,025
7,838
36,957
14,501
-
26,208
-
-
-
-
-
-
-
-
131,400
114,975
104,025
94,238
18,620
69,403
568,297
8,750
9,184
45,500
97,175
24,947
452,968
Total
1,570,018
265,000
202,430
3,900
10,091
140,904
61,784
271,065
2,525,192
(a) Includes salary, superannuation contributions above concessional cap.
(b) Deferred rights vest immediately and have provisionally been valued at $0.18 (Red 5 share price as at 30 June 2019). These rights will be
re-valued upon shareholders’ approval at the Annual General Meeting. Service rights have been valued at $0.07, they are subject to a
12-month service test and have not been recognised at 30 June 2019.
(c) Relates to performance rights expense for the 2020 and 2021 series.
(d) Annual leave paid out on the retirement of Mr Tombs.
28
2019 Annual Report
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
Consulting
fees
Termination
benefits
Super-
annuation
2018
Name
Short term
Salaries or
directors’
fees
$
Cash
Bonus
$
Deferred
and
Service
rights
$
Executive Director
Mark Williams
455,634(a)
132,801(h)
132,801(h)
Non-Executive Directors
Kevin Dundo
Ian Macpherson
Colin Loosemore
Executives
90,000
78,750
71,250
-
-
-
-
-
-
John Tasovac
265,000 (f)
59,022(h)
59,023(h)
Steven Tombs
248,750 (g)
127,883
-
Total
1,209,384
319,706
191,824
Long term
Annual
and long
service
leave
Share
based
payments
$
$
$
Total
$
25,000
20,115
73,636 (b)
839,987
10,688
9,500
8,550
-
-
-
22,500 (c)
123,188
21,250 (d)
109,500
18,750 (e)
98,550
25,092
24,344
22,197
16,172
41,962
472,296
45,458
462,607
103,174
58,484
223,556
2,106,128
$
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
(a) Includes salary, superannuation contributions above concessional cap.
(b) Relates to performance rights expense for the 2020 series.
(c) Mr Kevin Dundo was issued 487,013 ordinary shares at a deemed issue price of 4.62 cents in lieu of his September 2017 quarter’s
Directors fees.
(d) Mr Ian Macpherson was issued 459,957 ordinary shares at a deemed issue price of 4.62 cents in lieu of his September 2017 quarter’s
Directors fees.
(e) Mr Colin Loosemore was issued 405,844 ordinary shares at a deemed issue price of 4.62 cents in lieu of his September 2017 quarter’s
Directors fees.
(f)
Includes salary and superannuation contributions above the concessional cap from 15 August 2017 when Mr Tasovac was appointed as
Chief Financial Officer.
(g) Includes salary and superannuation contributions above the concessional cap from 1 October 2017 when Mr Tombs was appointed as
General Manager Operations.
(h) Relating to short-term incentives linked to annual planning and longer-term objectives. Refer to section 11.5.2.
11.8.1 The relative proportions of remuneration that are linked to performance and those that
are fixed are as follows:
Fixed
At risk – short term incentives
At risk – long term incentives
Executive Director
Mark Williams
Non-Executive Directors
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steven Tombs
Executives
John Tasovac
Steven Tombs (a)
Brendon Shadlow
2019
2018
60%
60%
100%
100%
100%
100%
67%
53%
75%
100%
100%
100%
-
66%
63%
-
2019
27%
-
-
-
-
21%
-
20%
2018
31%
-
-
-
-
25%
27%
-
2019
13%
-
-
-
-
12%
47%
5%
(a) Prior to Mr Tombs’ appointment as a non-executive director.
2019 Annual Report
2018
9%
-
-
-
-
9%
10%
-
29
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
11.9 ADDITIONAL DISCLOSURES RELATING TO OPTIONS, PERFORMANCE RIGHTS
AND SHARES
11.9.1 Options granted to key management personnel
No options over ordinary shares were granted during the year to executive officers of Red 5 as part of their remuneration.
No shares were issued during the year as a result of the exercise of options granted as part of remuneration. There were no alterations
to the terms and conditions of options granted as remuneration since their grant date. There were no forfeitures during the period.
11.9.2 Share holdings of key management personnel
The numbers of shares in Red 5 held during the financial year by key management personnel, including personally related entities are
set out below:
2019
Kevin Dundo
Mark Williams
Ian Macpherson
Colin Loosemore
Steven Tombs
John Tasovac
Brendon Shadlow
Total
Balance at
1 July 2018
Received through
vesting and exercise
of performance rights
Received through
vesting and exercise
of service and
deferred rights
Other purchases
during the year
Balance at
reporting date
1,430,409
5,009,294
459,957
6,824,212
700,997
-
-
-
-
-
-
1,300,000
-
-
-
1,625,470
-
-
-
722,424
-
-
-
200,000
-
-
-
-
1,430,409
6,634,764
659,957
6,824,212
2,000,997
722,424
-
14,424,839
1,300,000
2,347,894
200,000
18,272,763
11.9.3 Shares issued, Service and Deferred Rights
Grant Date
Vesting Date
Fair Value
at Grant Date
Granted
Exercised up to
reporting date
Outstanding at
reporting date
Shares issued: Steven Tombs (a)
20-Sep-17
31-Jul-18
$68,250
1,300,000
(1,300,000)
Service rights issued and
vested: Mark Williams (b)
Deferred rights issued and
vested: Mark Williams (c)
Service rights issued and
vested: John Tasovac (b)
Deferred rights issued and
vested: John Tasovac (c)
6-Dec-18
6-Dec-18
$66,400
812,735
(812,735)
6-Dec-18
16-Jul-19
$66,400
812,735
(812,735)
6-Dec-18
6-Dec-18
$29,511
361,212
(361,212)
6-Dec-18
16-Jul-19
$29,511
361,212
(361,212)
-
-
-
-
-
(a) Issue of fully paid ordinary shares to Mr Steven Tombs following the early vesting and exercise of performance rights in accordance with the
discretionary provisions of the Red 5 Limited Rights Plan.
(b) Deferred Rights issued under the Red 5 Limited Rights Plan which vest immediately upon issue and automatically exercised into restricted
shares which are subject to disposal restrictions until 30 June 2020.
(c) Service Rights issued under the Red 5 Limited Rights Plan which vested on 16 July 2019 and automatically exercised into restricted shares
which are subject to disposal restrictions until 30 June 2021.
Share based payments expense for the shares issued, service and deferred rights for KMP’s was $330,087 (2018: $223,556). The fair
value is based on observable market share price at the date of grant.
30
2019 Annual Report
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
11.9.4 Performance Rights held by key management personnel under the LTI
The number of performance rights in Red 5 held during the financial year by key management personnel are set out below:
2019
Mark Williams
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steven Tombs
John Tasovac
Brendon Shadlow
Total
Balance at
1 July 2018
Received
through issuing of
performance rights
Performance
rights vested and
exercised
Performance
rights cancelled
Balance at
reporting date
5,616,400 (a)
4,020,808 (b)
-
-
-
2,600,000
2,400,000 (c)
1,480,000 (c)
12,096,400
-
-
-
-
-
-
-
-
(1,300,000)
(1,300,000)
9,637,208
-
-
-
-
-
-
-
-
1,615,667(d)
1,468,788 (d)
-
-
-
-
4,015,667
2,948,788
7,105,263
(1,300,000)
(1,300,000)
16,601,663
Particulars of performance rights in Red 5 held during the year are as follows:
(a) Managing Director (2020 series)
Number of performance
rights
Value per right
Valuation per tranche
Condition criteria
Tranche A
Tranche B
Tranche C
Tranche D
Total
2,956,000
$0.037
$109,372
1,182,400
$0.042
$49,661
1,182,400
$0.042
$49,661
295,600
$0.042
$12,415
TSR ranking relative
to TSR of S&P/ASX
All Ordinaries Gold
Total Return Index
Growth in the
Company’s Ore
Reserves
Operating Costs as
% of Budgeted
Operating Costs
Safety
Compliance
TSR >
Index TSR
+20%
TSR >
Index TSR
+10%
TSR < or
equal to
Index TSR
100% Stretch:
100% Stretch:
100% All criteria to be
35%
80%
50%
Target:
20%
50%
Target:
90%
50%
nil
Threshold:
15%
25% Threshold:
25%
95%
< 15%
nil
>95%
nil
met:
- No fatalities
- Implement
and manage a
company-wide
safety
management
system
- Year on year
improvement
in safety
performance
5,616,400
$221,109
In addition,
vesting of the
performance
rights is also
conditional on
the following
being exceeded:
1. A positive
Company TSR
for the
measurement
period; and
2. 80% of
budgeted gold
production by
30 June 2018.
2019 Annual Report
31
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
(b)
Managing Director (2021 series)
Number of
performance rights
Value per right
Valuation per tranche
Condition criteria
Tranche A
Tranche B
Tranche C
Tranche D
Total
2,010,404
$0.038
$76,395
804,162
$0.048
$38,600
804,162
$0.048
$38,600
402,080
$0.048
$19,300
TSR ranking relative
to TSR of S&P/ASX
All Ordinaries Gold
Total Return Index
Growth in the
Company’s Ore
Reserves
Operating Costs as
% of Budgeted
Operating Costs
Safety
Compliance
TSR >
Index TSR
+20%
TSR >
Index TSR
+10%
TSR < or
equal to
Index TSR
100%
Stretch:
35%
100%
Stretch:
80%
100%
50%
Target:
20%
50%
Target:
90%
50%
nil
Threshold:
15%
25%
Threshold:
95%
25%
< 15%
nil
>95%
nil
All criteria to be
met:
- No fatalities
- Maintenance
of the
ISO14001 and
ISO 18001
certifications
- Year on year
improvement
in safety
performance
4,020,808
$172,895
In addition,
vesting of the
performance
rights is also
conditional on
the following
being exceeded:
1. A positive
Company TSR
for the
measurement
period; and
2. 80% of
budgeted gold
production by
30 June 2019.
(c)
Executives (2020 series)
John Tasovac
Number of
performance rights
Value per right
Valuation per tranche
Brendon Shadlow
Number of
performance rights
Value per right
Valuation per tranche
Tranche A
Tranche B
Tranche C
Tranche D
Total
1,200,000
$0.049
$58,800
Tranche A
740,000
$0.049
$36,260
480,000
$0.056
$26,880
480,000
$0.056
$26,880
240,000
$0.056
$13,440
2,400,000
$126,000
Tranche B
Tranche C
Tranche D
Total
296,000
$0.056
$16,576
296,000
$0.056
$16,576
148,000
$0.056
$8,288
1,480,000
$77,700
TSR ranking relative
to TSR of S&P/ASX
All Ordinaries Gold
Total Return Index
Growth in the
Company’s Ore
Reserves
Operating Costs as
% of Budgeted
Operating Costs
Safety
Compliance
Condition criteria
TSR > Index
TSR +20%
100%
Stretch:
35%
100%
TSR > Index
TSR +10%
50%
Target:
20%
50%
Stretch:
80%
Target:
90%
50%
TSR < or
equal to
Index TSR
nil
Threshold:
15%
25%
Threshold:
90%
25%
< 15%
nil
> 95%
nil
32
2019 Annual Report
100%
All criteria to be met:
- No fatalities
- Maintenance of
the ISO14001 and
ISO 18001
certifications
- Year on year
improvement in
safety
performance
John Tasovac
Number of
performance rights
Value per right
Valuation per tranche
Number of
performance rights
Value per right
Valuation per tranche
Condition criteria
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
11. REMUNERATION REPORT (AUDITED) (continued)
(d)
Executives (2021 series)
Tranche A
Tranche B
Tranche C
Tranche D
Total
807,833
$0.045
$36,352
323,133
$0.057
$18,419
323,133
$0.057
$18,419
161,568
$0.057
$9,209
Brendon Shadlow
Tranche A
Tranche B
Tranche C
Tranche D
734,394
$0.045
$33,048
TSR ranking relative
to TSR of S&P/ASX
All Ordinaries Gold
Total Return Index
293,758
$0.057
$16,744
293,758
$0.057
$16,744
146,878
$0.057
$8,372
Growth in the
Company’s Ore
Reserves
Operating Costs as
% of Budgeted
Operating Costs
Safety
Compliance
TSR > Index
TSR +20%
TSR > Index
TSR +10%
TSR < or
equal to
Index TSR
100%
50%
Stretch:
35%
Target:
20%
nil
Threshold:
15%
100%
50%
25%
Stretch:
80%
Target:
90%
Threshold:
95%
50%
25%
100%
All criteria to be met:
- No fatalities
- Maintenance of
the ISO14001 and
ISO 18001
certifications
- Year on year
improvement in
safety
performance
End of Audited Remuneration Report
< 15%
nil
> 95%
nil
1,615,667
$82,399
Total
1,468,788
$74,908
2019 Annual Report
33
DIRECTORS’ REPORT
for the year ended 30 June 2019 (continued)
NON-AUDIT SERVICES
12.
During the year, Red 5’s external auditors, KPMG, have provided
other services in addition to their statutory audit function. Non
audit services provided by the external auditors comprised
$142,298 (2018: $544,200) for non-audit services. Further details
of remuneration of the auditors are set out in Note 25.
The Board has considered the non-audit services provided during
the year and is satisfied that the provision of those services is
compatible with the general standard of independence for
auditors imposed by the Corporations Act and did not
compromise the auditor independence requirements of the
Corporations Act, for the following reasons:
\ All non-audit services were subject to the corporate
governance guidelines adopted by Red 5;
\ Non-audit services have been reviewed by the audit
committee to ensure that they do not impact the impartiality
or objectivity of the auditor; and
\ The non-audit services provided do not undermine the general
principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants, as they did
not involve reviewing or auditing the auditor’s own work,
acting in a management or decision making capacity, acting
as an advocate for Red 5 or jointly sharing economic risks
and rewards.
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act is included
immediately following the Directors’ Report and forms part of the
Directors’ Report.
ENVIRONMENTAL REGULATIONS
13.
The consolidated entity is subject to significant environmental
regulation in respect to its mineral exploration activities. These
obligations are regulated under relevant government authorities
within Australia and Philippines. The consolidated entity is a
party to exploration and development licences and has beneficial
interests in Mineral Production Sharing Agreements. Generally,
these licences and agreements specify the environmental
regulations applicable to exploration and mining operations in the
respective jurisdictions. The consolidated entity aims to ensure
that it complies with the identified regulatory requirements in each
jurisdiction in which it operates.
Compliance with environmental obligations is monitored by the
Board of Directors. No environmental breaches have been
notified to the consolidated entity by any government agency
during the year ended 30 June 2019.
14. AUDITOR’S INDEPENDENCE
DECLARATION
A copy of the auditor’s independence declaration as required
under Section 307C of the Corporations Act is included
immediately following the Directors’ Report and forms part of the
Directors’ Report.
Signed in accordance with a resolution of the Directors.
Kevin Dundo
Chairman
Perth, Western Australia
25 September 2019
34
2019 Annual Report
AUDITOR’S INDEPENDENCE DECLARATION
Lead Auditor’s Independence
Declaration under Section 307C
of the Corporations Act 2001
To the Directors of Red 5 Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Red 5 Limited for the financial year
ended 30 June 2019, there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the Corporations Act 2001
in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
KPM_INI_01
R Gambitta
Partner
Perth
25 September 2019
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
2019 Annual Report
35
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
for the year ended 30 June 2019
COMPREHENSIVE INCOME
Sales revenue
Cost of sales
Gross profit/(loss)
Other income and expenses
Other income
Administration and other expenses
Care and maintenance
Exploration expenditure
Financing income
Financing expenses
Fair value loss on financial liabilities
Total other income and expenses
Loss before income tax expense
Income tax benefit
Net loss after income tax for the year
Note
5(a)
5(b)
5(c)
5(d)
5(e)
13
5(f)
5(f)
16
6
Other comprehensive income/(loss)
Items that are or may be reclassified subsequently to profit or loss:
Movement in foreign currency translation reserve
Re-measurement of defined retirement benefit
Changes in fair value of cashflow hedges, net of tax
20
Ineffective portion of cash flow hedges
Total comprehensive loss for the year
Net loss after income tax attributable to:
Non-controlling interest
Members of parent entity
Total comprehensive profit/(loss) attributable to:
Non-controlling interest
Members of parent company
Loss per share attributable to shareholders
Basic and diluted loss per share (cents per share)
23
CONSOLIDATED
30 June 2019
30 June 2018
$
153,508,715
(142,166,586)
11,342,129
749,844
(9,184,414)
(6,360,424)
(3,290,425)
37,762
(2,248,909)
(1,645,781)
$
76,862,188
(80,487,906)
(3,625,718)
13,872,892
(11,992,903)
(6,079,136)
(5,559,594)
46,874
(1,049,628)
-
(21,942,347)
(10,761,495)
(10,600,218)
(14,387,213)
7,569,833
(3,030,385)
2,459,639
(11,927,574)
4,436,883
(35,462)
(4,616,538)
720,472
(760,883)
78,333
497,966
-
(2,525,030)
(12,112,158)
177,578
(3,207,963)
(3,030,385)
283,212
(2,808,242)
(2,525,030)
Cents
(0.24)
(294,522)
(11,633,052)
(11,927,574)
(312,783)
(11,799,375)
(12,112,158)
Cents
(1.07)
The accompanying notes form part of these financial statements.
36
2019 Annual Report
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2019
CONSOLIDATED
30 June 2019
30 June 2018
Note
$
$
Current Assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Inventories
Total Current Assets
Non-Current Assets
Trade and other receivables
Property, plant and equipment
Intangible assets
Mine development
Exploration and evaluation assets
Deferred tax asset
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Financial liability
Income tax payable
Employee benefits
Derivative financial instruments
Provisions
Finance lease liabilities
Total Current Liabilities
Non-Current Liabilities
Trade and other payables
Employee benefits
Provisions
Deferred tax liability
Finance lease liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Other equity
Reserves
Accumulated losses
Total Equity Attributable to Equity Holders of the Company
Non-controlling interests
Total Equity
7
8
20
9
8
10
11
12
13
6
14
16
15
19
20
17
18
14
19
17
6
18
21
22
10,646,524
14,717,791
-
22,567,345
47,931,660
188,484
76,174,763
19,729,098
23,883,367
5,293,602
3,946,127
129,215,441
177,147,101
41,440,696
10,143,415
1,564,236
4,392,842
5,311,188
1,116,104
1,327,089
65,295,570
-
82,913
31,429,171
-
959,141
32,471,225
97,766,795
7,148,401
21,023,209
761,679
16,656,227
45,589,516
1,637,280
78,980,717
30,723,465
16,340,809
-
-
127,682,271
173,271,787
38,971,154
-
739,121
5,218,185
-
1,116,104
1,077,448
47,122,012
5,503,646
349,465
31,575,769
6,069,001
1,400,597
44,898,478
92,020,490
79,380,306
81,251,297
260,515,091
930,285
22,969,539
260,364,664
930,285
21,806,876
(201,335,478)
(197,868,185)
83,079,437
(3,699,131)
79,380,306
85,233,640
(3,982,343)
81,251,297
The accompanying notes form part of these financial statements.
2019 Annual Report
37
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2019
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT ENTITY
Issued
capital
Accumulated
losses
Other
equity
Foreign
currency
translation
reserve
Share-based
payments
and other
reserves
Non-
controlling
interest
Hedging
reserve
$
$
$
$
$
$
$
Total
$
Balance at 1 July 2018
260,364,664
(197,868,185)
930,285
20,873,985
497,966
434,925
(3,982,343)
81,251,297
Effect of change in accounting standard
-
(282,080)
-
-
-
-
-
(282,080)
260,364,664
(198,150,265)
930,285
20,873,985
497,966
434,925
(3,982,343)
80,969,217
Net profit/(loss) for the year
Other comprehensive (loss)/
income for the period
Foreign currency translation differences
Change in fair value of cash flow
hedges, net of tax
Prior year Ineffective portion of
cash flow hedges
Ineffective portion of cash flow hedges
transferred to profit or loss
Total comprehensive
income/ (loss) for the period
Issue of deferred and service rights (STI)
Vested deferred rights converted
to ordinary shares
Vested performance rights (LTI)
converted to ordinary shares
Share based payments (LTI)
Expired performance rights
– transfer from reserves
-
-
-
-
-
-
-
82,177
68,250
-
-
(3,207,963)
-
-
-
-
(3,207,963)
-
-
-
-
22,750
-
-
-
-
-
-
-
-
-
-
-
-
4,330,398
-
-
-
177,578
(3,030,385)
(34,611)
105,634
4,401,421
-
-
-
(4,616,538)
263,713
456,759
-
-
-
-
-
-
(4,616,538)
263,713
456,759
4,330,398 (3,896,066)
(34,611)
283,212
(2,525,030)
-
-
-
-
-
-
-
-
-
-
298,040
(82,177)
(68,250)
639,975
(24,646)
-
-
-
-
-
298,040
-
-
639,975
(1,896)
Balance at 30 June 2019
260,515,091 (201,335,478) 930,285 25,204,383 (3,398,100) 1,163,256 (3,699,131) 79,380,306
Balance at 1 July 2017
236,674,602
(186,314,081)
930,285
21,614,725
Net profit/(loss) for the year
Other comprehensive (loss) / income
for the period
Total comprehensive
(loss) / income for the period
Shares issued during the period
Share based payments (LTI)
Service rights converted to
ordinary shares (STI)
Issue of deferred and service
rights (STI)
Expired performance rights
– transfer from reserves
Rights issue
Shares issued on acquisition
of Darlot & King of the Hills
Share issue costs
-
-
-
(11,633,052)
-
(11,633,052)
62,500
-
78,840
-
-
12,741,752
11,000,000
(193,030)
-
-
-
-
78,948
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
221,855
(3,669,560)
69,457,826
-
(294,522)
(11,927,574)
(740,740)
497,966
76,453
(18,261)
(184,582)
(740,740)
497,966
76,453
(312,783)
(12,112,156)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
317,465
(78,840)
52,606
(102,008)
-
-
-
-
-
-
-
-
62,500
317,465
-
52,606
(23,060)
- 12,741,752
- 11,000,000
-
(193,030)
Balance at 30 June 2018
260,364,664 (197,868,185) 930,285 20,873,985
497,966
434,925 (3,982,343) 81,251,297
The accompanying notes form part of these financial statements.
38
2019 Annual Report
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2019
Cash flows from operating activities
Cash received from customers
Proceeds from royalty agreements
Payments to suppliers and employees
Payments for exploration and evaluation
Sundry receipts
Income tax paid
Interest received
Interest paid
CONSOLIDATED
30 June 2019
30 June 2018
Notes
$
$
150,396,145
228,550
78,415,614
2,329,733
(124,876,002)
(58,425,038)
(3,290,425)
947,954
(163,852)
37,762
(99,443)
(4,127,877)
795,922
-
46,133
(38,726)
Net cash from operating activities
23,180,689
18,995,761
Cash flows used in investing activities
Payments for property, plant equipment and intangibles
Payments for mine development and pre-operational cost
Receipts from sales offset against mine development
Payments for exploration and evaluation
Payments for acquisition of King of the Hills assets
Payments for acquisition of Darlot
Net cash used in investing activities
Cash flows from financing activities
Proceeds from sale of royalty
Proceeds from gold loan
Payments of interest on gold loan
Payments of finance lease liabilities
Proceeds from issues of shares
Payments for share issue transaction costs
Net cash from financing activities
(5,349,548)
(42,927,078)
21,529,789
(5,293,602)
(4,500,000)
-
(4,115,524)
(25,596,573)
13,713,264
-
(7,000,000)
(6,742,265)
(36,540,439)
(29,726,098)
11,000,000
8,219,786
(860,785)
(1,535,221)
-
-
16,823,780
-
-
-
(561,147)
12,741,752
(193,031)
11,987,574
16
Net increase in cash and cash equivalents
3,464,030
1,257,237
Cash at the beginning of the period
Effect of exchange rate fluctuations on cash held
7,148,401
34,093
5,393,463
497,701
Cash and cash equivalents at the end of the year
7
10,646,524
7,148,401
The accompanying notes form part of these financial statements.
2019 Annual Report
39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019
The gold loan facility was fully repaid during August 2019.
Management has prepared a cash flow forecast for the next
twelve months which anticipates the Group is able to pay its
debts as and when they fall due during that period. Key
assumptions in the cashflow forecast include:
\ Continued suspension of mining operations at the
Siana Gold Project;
\ Forecast gold production is expected to continue to increase
as the King of the Hills operations mature, and steady levels
of production are expected at Darlot as higher-grade areas
are mined;
\ Positive cashflows generated from the Darlot Gold Mine and
King of the Hills Gold Projects;
\ Scheduled repayments of deferred consideration and
repayments of the working capital facility.
The Directors believe the Group will be able to continue as a
going concern and recognise that:
\ The Darlot Gold Mine and King of the Hills Gold Project are
expected to continue providing steady gold production, and
positive cash flow generation for the Company;
\ The Group has the ability to raise additional funding through
debt or equity or a combination of both, should it be required;
\ The repayment of Gold Fields deferred consideration can be
satisfied in either cash or shares at a 15% discount to the
30-day VWAP at their election as noted in the announcement
dated 3 August 2017.
Notwithstanding the risks associated with the key assumptions
noted above, the Directors are confident that the Group has
sufficient working capital for at least a year from the date this
financial report is approved.
2.3 Basis of measurement
The consolidated financial statements have been prepared on the
historical cost basis, except for share based payments. Share
based payments are measured at fair value. The methods used to
measure fair values of share based payments are discussed
further in the Note 4.12. Rehabilitation provisions are based on net
present value and are discussed in Note 4.14.
2.4
Functional and presentation currency
The consolidated financial report is presented in Australian
dollars, which is the Group’s presentation currency. The functional
currency of the Parent Company and the Australian subsidiaries
in which the Group holds its Australian assets is Australian
dollars, and the functional currency of the Company’s other
foreign subsidiaries is Philippine pesos. The functional currency
of each of the Group’s entities is measured using the currency of
the primary economic environment in which that entity operates.
1. REPORTING ENTITY
Red 5 Limited (“parent entity”) is a for profit company limited by
shares incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange. The Consolidated
Financial Report for the year ended 30 June 2019 comprise the
Company and its subsidiaries (together referred to as the “Group”
and individually as “Group entities”) and the Group’s interest in
associates and jointly controlled entities. The Group is primarily
involved in the exploration and mining of gold.
2. BASIS OF PREPARATION
Statement of compliance
2.1
The consolidated financial statements are general purpose
financial statements which have been prepared in accordance
with Australian Accounting Standards (AASBs) adopted by the
Australian Accounting Standards Board (AASB) and the
Corporations Act 2001. The consolidated financial statements
comply with International Financial Reporting Standards (IFRSs)
adopted by the International Accounting Standards Board (IASB).
The consolidated financial statements were authorised for issue
by the Board of Directors on 25 September 2019.
2.2 Going concern
The Directors believe it is appropriate to prepare the
consolidated financial report on a going concern basis, which
contemplates continuity of normal business activities and the
realisation of assets and settlement of liabilities in the ordinary
course of business.
The Group’s principal cash flow generating assets are the Darlot
Gold Project and King of the Hills located in Western Australia. In
addition, the Group also has the Siana Gold project located in the
Philippines where mining operations remain in suspension.
At 30 June 2019 the Group had current assets of $47.93 million
and current liabilities of $65.29 million comprised of the gold loan
of $10.14 million (fully paid during August 2019), a deferred
consideration of $5.00 million payable in cash or shares to Gold
Fields Australia Ltd in October 2019, hedging liabilities at fair
value of $5.31 million and employee benefits of $3.50 million
relating mainly to annual leave payable over the year.
During the year ended 30 June 2019, there was a reduction in
working capital as a result of continued mine development of King
of the Hills. The Group achieved commercial production at King of
the Hills on 1 December 2018 and maintained a steady state
production at Darlot and King of the Hills gold mine throughout
the year. In order to fund its mine development and exploration
the Company entered into a gold loan facility with Asian
Investment Management Services Ltd (AIMSL) for 5,015 gold
ounces during September 2018. Subsequent the year-end, the
Company entered into a 2-year $20 million Working Capital
Facility with Macquarie Bank Limited (MBL). The facility allows the
refinancing, on improved terms of the AIMS gold loan and
strengthens the Company’s balance sheet and operating liquidity.
40
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
2. BASIS OF PREPARATION (continued)
2.5 Use of estimates and judgements
The preparation of the Consolidated Financial Statements
requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues,
expenses, assets and liabilities, and the accompanying
disclosures, and the disclosure of contingent liabilities at the date
of the consolidated financial statements. Estimates and
assumptions are continually evaluated and are based on
management’s experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances. Uncertainty about these assumptions
and estimates could result in outcomes that require a material
adjustment to the carrying amount of assets or liabilities affected
in future periods.
In particular, the Group has identified a number of areas where
significant judgements, estimates and assumptions are required.
Further information on each of these areas and how they impact
the various accounting policies are described with the associated
accounting policy note within the related qualitative and
quantitative note as described below.
3. REMOVAL OF PARENT ENTITY
FINANCIAL STATEMENTS
The Group has applied amendments to the Corporations Act 2001
that remove the requirement for the Group to lodge parent entity
financial statements. Parent entity financial statements have been
replaced by the specific parent entity disclosures in Note 36.
4. SIGNIFICANT ACCOUNTING
POLICIES
The accounting policies set out below have been applied
consistently to all periods presented in these financial statements,
and have been applied consistently by the consolidated entity.
Principles of consolidation
4.1
The consolidated financial report incorporates the assets and
liabilities of all entities controlled by the Company as at 30 June
2019 and the results of all controlled entities for the year then
ended. The Company and its controlled entities together are
referred to in this financial report as the consolidated entity. The
financial statements of controlled entities are prepared for the
same reporting period as the parent entity, using consistent
accounting policies. Intra-group balances and transactions, and
any unrealised income and expenses arising from intra-group
transactions are eliminated in preparing the consolidated financial
statements.
Where control of an entity is obtained during a financial period, its
results are included only from the date upon which control
commences. Where control of an entity ceases during a financial
period, its results are included for that part of the period during
which control existed. Non-controlling interests in equity and
results of the entities which are controlled by the consolidated
entity are shown as a separate item in the consolidated financial
statements.
4.2
Finance income and expenses
Finance income comprises interest income on funds invested.
Interest income is recognised as it accrues, using the effective
interest rate method. Finance expenses comprise interest
expense on borrowings and amortisation of loan borrowing
costs. Loan borrowing costs are amortised using the effective
interest rate method.
4.3
Property, plant and equipment
Property, plant and equipment include land and buildings,
plant and equipment, fixtures and fittings and assets under
construction. All assets acquired are initially recorded at their
cost of acquisition, being the fair value of the consideration
provided plus incidental costs directly attributable to
the acquisition.
Land and buildings are measured at cost less accumulated
depreciation on the buildings. Buildings are depreciated on a
straight-line basis over the life of mine.
Plant and equipment is measured at cost less accumulated
depreciation and any accumulated impairment losses. Items of
plant and equipment are depreciated using a combination of the
straight line and diminishing value methods commencing from the
time they are installed and ready for use, or in respect of internally
constructed assets, from the date the asset is completed and
ready for use. Depreciation of the processing plant is based on
life of mine. The expected useful lives of plant and equipment are
between 3 and 13 years. Depreciation methods, useful lives and
residual values are reviewed at each reporting date and adjusted
if appropriate.
Fixtures and fittings include office equipment and computer
hardware and is depreciated on a straight-line basis over their
expected useful lives between 3 and 13 years.
4.4
Intangible assets
Intangible assets include mineral rights, asset retirement
obligation and software. Intangible assets other than goodwill, are
initially recorded at their cost of acquisition, being the fair value of
the consideration provided plus incidental costs directly
attributable to the acquisition. Capitalised software and asset
retirement obligation are amortised on a straight-line basis over
three years commencing when it is available for use. Mineral
rights acquired is amortised over the life of mine.
4.5
Inventories
Gold in circuit, bullion on hand and ore stockpiles are physically
measured or estimated and valued at the lower of cost and net
realisable value. Cost represents the weighted average cost and
comprises direct material, labour and an appropriate portion of
fixed and variable production overhead expenditure on the basis
of normal operating capacity, including depreciation and
amortisation incurred in converting materials to finished products.
2019 Annual Report
41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
4. SIGNIFICANT ACCOUNTING
POLICIES (continued)
Inventories of consumable supplies and spare parts expected to
be used in production are valued at the lower of cost and net
realisable value. Any provision for obsolescence or damage is
determined by reference to specific stock items identified. The
carrying value of those items identified, if any, is written down to
net realisable value.
4.6
Exploration and evaluation assets
Exploration and evaluation assets incurred are accumulated at
cost in respect of each identifiable area of interest. Costs incurred
in respect of generative, broad scale exploration activities are
expensed in the period in which they are incurred. Costs incurred
for each area of interest where a resource or reserve, estimated in
accordance with JORC guidelines has been identified, are
capitalised. The costs are only carried forward to the extent they
are expected to be recouped through the successful development
of the area, or where further work is to be performed to provide
additional information.
When production commences, the accumulated costs for the
relevant area of interest will be amortised over the life of the area
according to the rate of depletion of reserves. A regular review is
undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to
that area of interest. Accumulated costs in relation to an
abandoned area will be written off in full to the Statement of Profit
or Loss and Other Comprehensive Income in the year in which the
decision to abandon the area is made.
4.7 Mine development
Pre-Production
Costs incurred in the development of a mine before production
commences are capitalised as part of the mine development
costs. All development costs incurred, including sale of products
during the development phase prior to reaching commercial
production capacity (production start date), within that area of
interest are capitalised and carried at cost. Costs are amortised
from the commencement of commercial production over the
productive life of the project on a unit-of-production basis, based
on reserves.
Post-Production
Costs incurred in developing further areas of the mine are
capitalised as part of the mine development costs and are
amortised over the productive life of the project on a unit-of-
production basis, based on reserves.
Deferred waste mining costs
Post-production stripping is generally considered to create two
benefits, being either the production of inventory or improved
access to the ore to be mined in the future. Where the benefits are
realised in the form of inventory produced in the period, the
production stripping costs are accounted for as part of the cost of
producing those inventories.
42
2019 Annual Report
Where the benefits are realised in the form of improved access to
ore to be mined in the future, the costs are recognised as a
non-current asset, if the following criteria is met:
\ Future economic benefits (being improved access to the ore
body) are probable,
\ The component of the ore body for which access will be
improved can be accurately identified, and
\ The costs associated with the improved access can be
reliably measured.
If all of the criteria are not met, the production stripping costs are
charged to profit or loss as they are incurred.
Depreciation of the stripping activity asset is determined on a unit
of production basis over the life of the asset based on reserves
for each area of interest.
4.8
Impairment
At each reporting date, the consolidated entity reviews and tests
the carrying value of assets when events or changes in
circumstances indicate that the carrying amount may not be
recoverable. Where an indicator of impairment exists, the
consolidated entity makes a formal estimate of recoverable
amount. Where the carrying amount of an asset exceeds its
recoverable amount the asset is considered impaired and is
written down to its recoverable amount. Impairment losses are
recognised in the Statement of Profit or Loss and Other
Comprehensive Income unless the asset has previously been
revalued, in which case the impairment loss is recognised as a
reversal to the extent of that previous revaluation with any excess
recognised through the Statement of Profit or Loss and Other
Comprehensive Income.
Calculation of recoverable amount
Recoverable amount is the greater of fair value less costs of
disposal and value in use. It is determined for an individual asset,
unless it does not generate cash inflows that are largely
independent of those from other assets or groups of assets, in
which case, the recoverable amount is determined for the
cash-generating unit to which the asset belongs. 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.
4.9
Income tax
Income tax expense comprises current and deferred tax. Income
tax expense is recognised in profit or loss except to the extent
that it relates to items recognised directly in equity, in which case
it is recognised in equity.
Current tax is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantively enacted at
reporting date, and any adjustment to tax payable in respect of
previous years. Deferred income tax is provided using the
balance sheet liability method on all temporary differences at the
balance sheet date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
4. SIGNIFICANT ACCOUNTING
Cashflow hedges
POLICIES (continued)
Deferred income tax assets are recognised for all deductible
temporary differences, carry forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax assets and
unused tax losses can be utilised. A deferred income tax asset is
not recognised where the deferred income tax asset relating to
the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss.
The carrying amount of deferred income tax assets is reviewed at
each balance date and reduced to the extent it is no longer
probable that sufficient taxable profit will be available to allow all
or part of the deferred income tax to be utilised. Deferred income
tax assets and liabilities are measured at the tax rates that are
expected to apply to the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have
been enacted at the balance date. Income taxes relating to
items recognised directly in equity are recognised in equity and
not in the Statement of Profit or Loss and Other
Comprehensive Income.
4.10 Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in
equity and debt securities, trade and other receivables, cash and
cash equivalents, loans and borrowings and trade and other
creditors. Non-derivative financial instruments are recognised
initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, non-derivative financial
instruments are measured as described below.
Trade and other receivables are carried at amortised cost. Trade
receivables are non-interest bearing. Loans and borrowings are
measured at amortised cost using the effective interest method,
less any impairment losses. Liabilities for trade creditors and
other amounts are carried at amortised cost. Trade payables are
non-interest bearing and are normally settled on 30 day terms.
For the purposes of the statement of cash flows, cash includes
deposits at call which are readily convertible to cash on hand and
which are used in the cash management function on a day to day
basis, net of outstanding bank overdrafts.
Derivative financial instruments
Derivatives financial instruments are recognised initially at fair
value; any attributable transaction costs are recognised in profit
and loss as incurred. Subsequent to initial recognition,
derivatives are measured at fair-value.
When a derivative is designated as a cash flow hedging
instrument, the effective portion of changes in the fair value of the
derivative is recognised in other comprehensive income and
accumulated in the hedging reserve. Any ineffective portion of
changes in the fair value of the derivative is recognised
immediately in profit or loss.
4.11 Employee benefits
Provision for employee entitlements represents the amount which
the consolidated entity has a present obligation to pay resulting
from employees’ service provided up to the balance date.
Liabilities arising in respect of employee benefits expected to be
settled within twelve months of the balance date are measured at
their nominal amounts based on remuneration rates which are
expected to be paid when the liability is settled. All other employee
benefit liabilities are measured at the present value of the
estimated future cash outflow to be made in respect of services
provided by employees up to the balance date. Obligations for
contributions to defined contribution superannuation funds are
recognised as an expense in the Statement of Profit or Loss and
Other Comprehensive Income as incurred.
4.12 Share based payments
The consolidated entity may provide benefits to employees
(including Directors) and other parties as necessary in the form of
share-based payments, whereby employees render services in
exchange for shares or rights over shares (“equity settled
transactions”).
The cost of these equity settled transactions with employees is
measured by reference to the fair value at the date they are
granted. The value is determined using a Black-Scholes model or
equivalent valuation technique. The cost of equity settled
transactions is recognised, together with a corresponding
increase in equity, over the period in which the performance
conditions are fulfilled, ending on the date on which the relevant
employees become fully entitled to the award (“vesting date”).
The cumulative expense recognised for equity settled
transactions at each reporting date until vesting date reflects the
extent to which the vesting period has expired and the number of
awards that, in the opinion of the Directors, will ultimately vest.
No adjustment is made for the likelihood of market performance
conditions being met as the effect of these conditions is included
in the determination of fair value at grant date. No expense is
recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition.
Where an equity-settled award is cancelled, it is treated as if it
had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award, and designated
as a replacement award on the date that it is granted, the
cancelled and new award are treated as if they were a
modification of the original award.
2019 Annual Report
43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
4. SIGNIFICANT ACCOUNTING
POLICIES (continued)
4.13 Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
statement of financial position date are translated to Australian
dollars at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in the
Statement of Profit or Loss and Other Comprehensive Income.
Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction. Non-monetary
assets and liabilities denominated in foreign currencies that are
stated at fair value are translated to Australian dollars at foreign
exchange rates ruling at the dates the fair value was determined.
The following significant exchange rates have been applied.
AUD
Philippine Peso
USD
Average Rate
Year-End Spot Rate
2019
37.69
0.71
2018
39.88
0.77
2019
36.03
0.70
2018
39.35
0.74
Financial statements of foreign operations
Each entity in the consolidated entity determines its functional
currency, being the currency of the primary economic
environment in which the entity operates, reflecting the underlying
transactions, events and conditions that are relevant to the entity.
The functional currency of the Australian entities is the Australian
dollar and the functional currency of the Philippine entities is the
Philippine Peso. The assets and liabilities of foreign operations,
including goodwill and fair value adjustments arising on
consolidation, are translated from the entity’s functional currency
to the consolidated entity’s presentation currency of Australian
dollars at foreign exchange rates ruling at reporting date. The
revenues and expenses of foreign operations are translated to
Australian dollars at the exchange rates approximating the
exchange rates ruling at the date of the transactions. Foreign
exchange differences arising on translation are recognised
directly in a separate component of equity.
4.14 Rehabilitation costs
Full provision for rehabilitation costs is made based on the net
present value of the estimated cost of restoring the environmental
disturbance that has occurred up to the balance date. Increases
due to additional environmental disturbances are capitalised and
amortised over the remaining lives of the operations where they
have future economic benefit, else they are expensed. These
increases are accounted for on a net present value basis.
Annual increases in the provision relating to the change in the net
present value of the provision and inflationary increases are
accounted for in the Statement of Profit and Loss as an interest
expense. The estimated costs of rehabilitation are reviewed
annually and adjusted as appropriate for changes in legislation,
technology or other circumstances.
4.15 Provisions
A provision is recognised in the Statement of Financial Position
when the consolidated entity has a present legal or constructive
obligation as a result of a past event and it is probable that an
outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the
expected future cash flows at the pre-tax rate that reflects current
market assessments of the time value of money and where
appropriate, the risk specific to the liability.
4.16 Earnings per share
Basic earnings per share is determined by dividing net operating
results after income tax attributable to members of the parent
entity, excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares
outstanding during the financial year.
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 shares assumed to have been
issued for no consideration in relation to potential
ordinary shares.
4.17 Leases
Assets held under finance leases are recognised as a finance
lease obligation at the present value of the minimum lease
payments. Lease payments are apportioned between finance
charges and reduction of the lease obligation to achieve a
constant rate of interest on the remaining liability. Finance
charges are recorded as a finance expense to profit and loss,
unless they are attributable to qualifying assets, in which case
they are capitalised.
4.18 Business combinations
The Group accounts for business combinations using the
acquisition method when control is transferred to the Group. The
consideration transferred in the acquisition is generally measured
at fair value, as are the identifiable net assets acquired. Any
goodwill that arises is tested annually for impairment. Any gain on
a bargain purchase is recognised in profit or loss immediately.
Transaction costs are expensed as incurred, except if related to
the issue of debt or equity securities.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss.
44
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
4. SIGNIFICANT ACCOUNTING
Rehabilitation and mine closure provisions
POLICIES (continued)
Any contingent consideration is measured at fair value at the date
of acquisition. If an obligation to pay contingent consideration
that meets the definition of a financial instrument is classified as
equity, then it is not remeasured and settlement is accounted for
within equity. Otherwise, other contingent consideration is
remeasured at fair value at each reporting date and subsequent
changes in the fair value of the contingent consideration are
recognised in profit or loss.
4.19 Accounting estimates and judgements
The selection and disclosure of the consolidated entity’s critical
accounting policies and estimates and the application of these
policies, estimates and judgements is the responsibility of the
Board of Directors. The estimates and judgements that may have
a significant impact on the carrying amount of assets and
liabilities are discussed below.
Impairment of Assets
At each reporting date, the group makes an assessment for
impairment of all assets if there has been an impairment indicator
by evaluating conditions specific to the Group and to the
particular assets that may lead to impairment. The recoverable
amount of Property, Plant & Equipment and Mine Development
Expenditure relating to the Siana gold project is determined as
the higher of value-in-use and fair value less costs of disposal.
Value-in-use is generally determined as the present value of the
estimated future cash flows. Present values are determined using
a risk adjusted discount rate appropriate to the risks inherent
in the asset.
Given the nature of the Group’s mining activities, future changes
in assumptions upon which these estimates are based may give
rise to a material adjustment to the carrying value. This could lead
to the recognition of impairment losses in the future. The
inter-relationship of the significant assumptions upon which
estimated future cash flows are based is such that it is
impracticable to disclose the extent of the possible effects of a
change in a key assumption in isolation.
Future cash flow estimates are based on expected production
volumes and grades, gold price and exchange rate estimates,
budgeted and forecasted development levels and operating
costs. Management is required to make these estimates and
assumptions which are subject to risk and uncertainty. As a result
there is a possibility that changes in circumstances may alter
these projections, which could impact on the recoverable amount
of the assets. In such circumstances, some or all of the carrying
value of the assets may be impaired. Impairment losses are
recognised in the Statement of Profit or Loss unless the asset has
previously been revalued.
As set out in note 4.14, this provision represents the discounted
value of the present obligation to restore, dismantle and
rehabilitate certain items of property, plant and equipment. The
discounted value reflects a combination of the Group’s
assessment of the costs of performing the work required, the
timing of the cash flows and the discount rate.
A change in any, or a combination, of the three key assumptions
used to determine the provisions could have a material impact to
the carrying value of the provision. In the case of provisions for
assets which remain in use, adjustments to the carrying value of
the provision are offset by a change in the carrying value of the
related asset. Where the provisions are for assets no longer in use
or for obligations arising from the production process, the
adjustment is reflected directly in the Statement of Profit or Loss.
Reserves and resources
The Group determines and reports ore reserves under the
Australian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves Code (“JORC”) as revised
December 2012 JORC for underground reserves and the JORC
2012 edition for open pit reserves. The JORC code requires the
use of reasonable investment assumptions to calculate reserves.
Reserves determined in this way are taken into account in the
calculation of depreciation of mining plant and equipment (refer to
4.3), amortisation of capitalised development expenditure (refer to
note 4.7), and impairment relating to these assets.
Changes in reported reserves may affect the Group’s financial
results and financial position in a number of ways, including:
\ Asset carrying values may be impacted due to changes in
estimated cash flows;
\ Depreciation and amortisation charged in the statement of
profit or loss and other comprehensive income may change
where such charges are calculated using the units of
production basis.
\ Deferred waste amortisation, based on estimates of reserve
to waste ratios.
\ Decommissioning, site restoration and environmental
provisions may change where changes in estimated reserves
alter expectations about the timing or cost of these activities.
Going Concern
A key assumption underlying the preparation of the financial
statements is that the Group will continue as a going concern.
An entity is a going concern when it is considered to be able to
pay its debts as and when they are due, and to continue in
operation without any intention or necessity to liquidate or
otherwise wind up its operations. A significant amount of
judgement has been required in assessing whether the Group
is a going concern, as set out in note 2.2.
2019 Annual Report
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
4. SIGNIFICANT ACCOUNTING
POLICIES (continued)
Share based payment transactions
The Group measures the cost of equity settled transactions with
employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined
by using Monte Carlo. This estimate also requires determination
of the most appropriate inputs to the valuation model including
the expected life of the share option, volatility and dividend yield
and making assumptions about them. The assumptions and
models used for estimating fair value for share-based payment
transactions are disclosed in, as discussed in note 31.
Production start date
The Group assesses the stage of each mine under development/
construction to determine when a mine moves into the production
phase, this being when the mine is substantially complete and
ready for its intended use. The criteria used to assess the start
date are determined based on the unique nature of each mine
development/construction project, such as the complexity of the
project and its location. The Group considers various relevant
criteria to assess when the production phase is considered to
have commenced.
Some of the criteria used to identify the production start date
include, but are not limited to:
\ Level of capital expenditure incurred compared with the
original construction cost estimate;
\ Completion of a reasonable period of testing of the mine plant
and equipment;
\ Ability to produce metal in saleable form (within
specifications); and
\ Ability to sustain ongoing production of metal.
When a mine development project moves into the production
phase, the capitalisation of certain mine development costs
ceases and costs are either regarded as forming part of the cost
of inventory or expensed, except for costs that qualify for
capitalisation relating to mining asset additions or improvements,
underground mine development or mineable reserve
development. It is also at this point that depreciation/amortisation
commences.
Commercial production start date for King of the Hills Gold
Project was achieved on 1 December 2018.
Capitalised exploration and evaluation assets
The future recoverability of capitalised exploration and evaluation
expenditure is dependent on a number of factors, including
whether the Group decides to exploit the related lease itself or, if
not, whether it successfully recovers the related exploration and
evaluation asset through sale.
Factors which could impact the future recoverability include the
level of proved, probable and inferred mineral resources, future
technological changes which could impact the cost of mining,
46
2019 Annual Report
future legal changes (including changes to environmental
restoration obligations) and changes to commodity prices. To the
extent that capitalised exploration and evaluation expenditure is
determined not to be recoverable in the future, this will reduce
profits and net assets in the period in which this determination is
made. In addition, exploration and evaluation expenditure is
capitalised if activities in the area of interest have not yet reached
a stage which permits a reasonable assessment of the existence
or otherwise of economically recoverable reserves. To the extent
that it is determined in the future that this capitalised expenditure
should be written off, this will reduce profits and net assets in the
period in which this determination is made.
4.20 New and revised Standards and
Interpretations
Certain new accounting standards and interpretations have been
published that are not effective for the 30 June 2019 reporting
period. The Group does not intend to early adopt any of the new
standards or interpretations.
The Group has not elected to early adopt any new standards or
amendments.
Changes in significant accounting policies
AASB 15 – Revenue from contracts with customers
The Group has initially adopted AASB 15 Revenue from Contracts
with Customers from 1 July 2018. A number of other new
standards are effective from 1 July 2018 but they do not have a
material effect on the Group’s financial statements.
The effect of initially applying this standard is mainly attributed to
the later recognition of revenue from gold bullion sold.
AASB 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaced
AASB 118 Revenue, AASB 111 Construction Contracts and
related interpretations.
The Group has adopted AASB 15 using the cumulative effect
method (without practical expedients), with the effect of initially
applying this standard recognised at the date of initial application
(i.e. 1 July 2018). Accordingly, the information presented for 2017
has not been restated – i.e. it is presented, as previously reported,
under AASB 118, AASB 111 and related interpretations. The
details and quantitative impact of the changes in accounting
policies are discussed below.
Gold sales
Previously, the Group recognised revenue from gold sales when
all risks and rewards transferred; no further processing was
required by the Group; the quality and quantity of the gold had
been determined; and the sale was probable. Under AASB 15, the
Group recognises revenue when control has passed to the buyer;
the Company has no significant continuing involvement; and the
amount of revenue and costs incurred or costs to be incurred in
respect of the transaction can be measured reliably.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
4. SIGNIFICANT ACCOUNTING
POLICIES (continued)
The Group’s assessment is that this occurs when the sales
contract has been entered into and the customer has physical
possession of the gold.
The impact of the change in accounting policy is that gold in
transit (which represents gold that has not been preliminarily
turned out by the Group’s refiner prior to period end) is no longer
recognised as revenue. Revenue recognition will now be delayed
until the gold has been physically delivered and the buyer has
committed to the purchase.
The following table summarises the impact, net of tax, of
transition to AASB 15 on retained earnings at 1 July 2018:
Impact on retained earnings at 1 July 2018
Impact of adopting
AASB 15 at 1 July 2018
$
The Group will recognise right-of-use assets and lease liabilities
for the arrangements assessed as leases on transition unless they
are short term, low value, or previously did not meet the definition
of a lease for arrangements in place at 30 June 2019. AASB 16
will be applied to all new arrangements entered into from 1 July
2019. Many activities of the Group’s operations are conducted by
contractors including mining, mine development, infrastructure
and site services. Where contracts require payment of fixed
charges that relate to use of equipment or property, they will be
deemed to contain leases under AASB 16 and the present value
of the fixed charges will be recognised as a right-of-use asset
along with a lease liability.
The nature of expenses relating to such fixed charges which
would have been recognised as an expense attributable to the
function, will change to depreciation for right-of-use assets and
interest expense on lease liabilities. The variable charges required
to be paid under the contracts will continue to be recognised as
an expense in profit or loss or capitalised as incurred depending
on the purpose for which the activity was undertaken.
Retained earnings
Impact at 1 July 2018
(282,080)
(282,080)
The Group is currently undertaking an analysis of the financial
reporting impact, noting that:
\ the group has not finalised the testing and assessment of all
contracts, including contracts related to the acquired
subsidiaries and assets;
\ the group anticipates that some contracts under review may
have an effect such as the power station, the gas storage
facility and the mining contract; and
\ the preliminary accounting policies remain subject to change
and will be finalised and disclosed in its 2019 Half-year
Financial Report along with initial application of the standard.
The Group is continuing its work on quantifying the impact of
this standard.
AASB 9 Financial Instruments (effective from 1 January 2018)
AASB 9 Financial Instruments – published in July 2014, replaces
the existing guidance in IAS 39 Financial Instruments: Recognition
and Measurement. AASB 9 includes revised guidance on the
classification and measurement of financial instruments, including
a new expected credit loss model for calculating impairment of
financial assets, and the new general hedge accounting
instruments from IAS39. AASB 9 is effective for annual reporting
periods beginning on or after 1 January 2018, with early adoption
permitted. The Group has assessed the potential impact its
consolidated financial statements resulting from the application of
AASB9 and determined that it has no material impact.
The following table summarises the impacts of adopting AASB 15
on the Group’s statement of financial position as at 30 June 2019
and its statement of profit or loss and OCI for the year ended for
each of the lines affected. There was no material impact of the
Group’s statement of cash flows for the year ended 30 June 2019.
Impact on the consolidated statement of financial position
Impact of
adopting
AASB 15 at
1 July 2018
$
Balance
after
adjustment
$
As reported
$
21,023,209 (2,607,012)
18,416,197
16,656,227
2,324,931
18,981,158
Assets
Trade and other
receivables
Inventory
Equity
Accumulated losses
(197,868,185)
(282,080)
(198,150,265)
AASB 16 – Leases (effective from 1 July 2019)
AASB 16 Leases eliminates the distinction between operating and
finance leases and brings all leases (other than short term and
low value leases) onto the balance sheet. A lessee recognises a
right-of-use asset representing its right to use the underlying
asset and a lease liability representing its obligation to make lease
payments. The standard is applicable to annual reporting periods
beginning on or after 1 January 2019. AASB 16 will result in higher
assets and liabilities on the balance sheet and the cumulative
effect of adopting AASB 16 will be recognised as an adjustment
to the opening balance of retained earnings at 1 July 2019 with no
restatement of comparative information.
2019 Annual Report
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
5
REVENUE AND EXPENSES
Consolidated Year ended
30 June 2019
30 June 2018
$
$
(a) Revenue
Gold and silver sales
Realised losses on cashflow hedges
Ineffective portion of changes in fair value of cashflow hedges
(b) Cost of sales
Operating costs
Depreciation and amortisation
(c) Other income
Other income
Gain on sale of Mt Cattlin royalty
Royalty income
(d) Administration and other expenses
Employee and consultancy expenses
Acquisition related costs
Share-based payments
Property and other indirect taxes
Legal fees
Regulatory expenses
Travel expenses
Insurance costs
Occupancy costs
Investor relations
Superannuation contributions
Depreciation
Foreign exchange (losses)/gains
VAT receivable impairment
Gold Fields management fees
Royalties expense
Other administration overheads
(e) Care and maintenance (1)
External services
Fuel and utilities
Employee benefit expenses
Other costs
Depreciation (2)
Materials and consumables used
Excise tax and custom duties
Movement in stock
(1) Care and maintenance costs relating to Siana.
(2) In the previous year depreciation was disclosed within cost of sales.
48
2019 Annual Report
156,308,315
(2,342,841)
(456,759)
153,508,715
(105,714,770)
(36,451,816)
(142,166,586)
749,844
-
-
749,844
(3,134,307)
(1,398,208)
(938,015)
(609,784)
(420,663)
(418,401)
(353,082)
(224,466)
(209,621)
(179,359)
(168,016)
(142,303)
(3,487)
(376,598)
-
-
(608,104)
(9,184,414)
(1,675,742)
(1,361,947)
(1,003,277)
(831,386)
(638,371)
(461,304)
(7,091)
(381,306)
(6,360,424)
77,149,429
(287,241)
-
76,862,188
(67,232,470)
(13,255,437)
(80,487,906)
822,485
11,000,000
2,050,407
13,872,892
(3,741,782)
(1,536,812)
(356,796)
(260,951)
(443,611)
(506,084)
(246,749)
(245,384)
(228,545)
(270,340)
(115,370)
(139,520)
(7,961)
(1,994,363)
(425,124)
(303,222)
(1,170,289)
(11,992,903)
(1,881,397)
(1,493,627)
(1,302,457)
(625,464)
-
(422,663)
(578,656)
225,128
(6,079,136)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
5
REVENUE AND EXPENSES (continued)
(f) Finance income / (expenses)
Interest income
Unwinding of discount on rehabilitation provision
Unwinding of discount on deferred consideration on acquisitions
Unwinding of interest on gold loan
Other interest expense
6
INCOME TAX (PRIMA FACIE)
Current income tax
Current income tax charge
Deferred income tax
Income tax benefit
Consolidated Year ended
30 June 2019
30 June 2018
$
37,762
37,762
(599,295)
(278,926)
(1,073,238)
(297,450)
(2,248,909)
(2,211,147)
$
46,874
46,874
(497,109)
(453,501)
-
(99,018)
(1,049,628)
(1,002,754)
Consolidated Year ended
30 June 2019
30 June 2018
$
$
(988,966)
8,558,799
7,569,833
(739,121)
3,198,760
2,459,639
A reconciliation between income tax expense and the numerical profit/(loss)
before income tax at the applicable income tax rate is as follows:
Loss before income tax
(10,600,218)
(14,387,213)
At statutory income tax rate of 30% (2018: 30%)
Deferred tax asset not recognised
Items not allowable for income tax purposes:
Non-deductible expenses
Utilisation of carry forward tax losses not brought to account
Reset of the cost base of assets and liabilities (a)
Prior period adjustment
Current year deferred tax not brought to account
Income tax benefit
Tax losses and temporary differences not brought to
account (tax effected)
3,180,065
(3,058,187)
(521,653)
3,325,246
4,069,092
575,270
-
7,569,833
4,316,164
-
(729,990)
1,650,379
-
-
(5,236,552)
2,459,639
Deductible temporary differences
Tax losses
45,125,302
8,956,549
43,033,653
13,599,522
Some of the potential deferred tax assets attributable to tax losses and deductable temporary differences have not been brought to
account at 30 June 2019. The Directors do not believe it is appropriate to regard realisation of the full deferred tax assets at this point in
time because (i) it is not probable that future Australian taxable profits will be available against which the Group can use all the benefits
there from or (ii) uncertainty with respect to recoverability in the Philippines.
2019 Annual Report
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
INCOME TAX (PRIMA FACIE) (continued)
6
Movement in deferred tax balances:
Step up/(down)
at formation of
tax consolidated
group (a)
Recognised
in other
comprehensive
income
Net balance
at 1 July 2018
$
$
Property, plant and equipment and
intangible assets
(9,829,859)
(1,356,688)
Exploration and evaluation assets
-
-
Inventories
Other assets
(1,970,108)
1,970,108
-
(1,043,886)
Provisions and employee benefits
5,777,308
4,453,216
$
-
-
-
-
-
Derivative financial instruments
-
-
1,456,329
Finance leases
(46,342)
46,342
-
Recognised in
profit or loss
Net balance at
30 June 2019
$
$
5,492,899
(5,693,648)
(1,588,081)
(1,588,081)
-
1,268,317
(683,428)
-
-
-
224,431
9,547,096
1,456,329
-
(6,069,001)
4,069,092
1,456,329
4,489,707
3,946,127
Property, plant and equipment and intangible assets
Inventories
Provisions and employee benefits
Finance leases
Net balance at
1 July 2017
$
Acquired in
business
combination (b)
$
Recognised in
profit or loss
$
Net balance at
30 June 2018
$
-
-
-
-
-
(9,829,859)
2,559,860
(9,829,859)
(2,308,273)
5,430,231
-
338,165
347,077
(46,342)
(1,970,108)
5,777,308
(46,342)
(9,267,761)
3,198,760
(6,069,001)
(a) Red 5 Limited resolved to form a tax consolidated group incorporating all its Australian subsidiaries, with an effective date of
1 November 2017. In accordance with the tax consolidation legislation, the head entity of the Australian tax consolidated group,
will assume the deferred tax assets and liabilities initially recognised by wholly owned members of the tax consolidated group.
The deferred tax liability at 30 June 2018 of $6,069,001 relating to the Darlot Mining Company Pty Ltd acquisition has decreased,
primarily due to the reset of the cost base of property, plant and equipment other assets and liabilities as a result of forming the
tax consolidation group and the timing differences in the current year (refer note 34). Tax sharing and tax funding deeds have
been finalised.
(b) Deferred tax arising on acquisition of Darlot Mining Company Pty Ltd.
7
CASH AND CASH EQUIVALENTS
Cash at bank
Cash on hand
CONSOLIDATED
30 June 2019
$
10,645,904
620
10,646,524
30 June 2018
$
7,147,804
597
7,148,401
50
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
8
TRADE AND OTHER RECEIVABLES
Current assets
Trade debtors (a)
Prepayments
Sundry debtors (b)
GST receivable
Interest receivable
Non-current assets
VAT receivable
Security deposits
CONSOLIDATED
30 June 2019
$
30 June 2018
$
11,383,649
2,530,142
308,177
493,543
2,280
14,717,791
3,601
184,883
188,484
5,889,446
1,725,991
11,649,312
1,756,180
2,280
21,023,209
1,452,397
184,883
1,637,280
(a) Trade debtors includes amounts receivable for 5,109 ounces sold on 29 June 2019, equivalent to $10.29 million (30 June 2018: 1,150
ounces equivalent to $1.96 million). The remainder includes the metal account in the Philippines.
(b) Sundry debtors at 30 June 2018 included the amount receivable of $11.0 million for the sale of the Mt Cattlin royalty and received
during July 2018.
9
INVENTORIES
Stores, spares and consumables at cost
Run of mine stockpiles at net realisable value (2018: at cost)
Gold in circuit at net realisable value (2018: at cost)
Gold Bullion at net realisable value (2018: at cost)
Crushed ore stockpile at net realisable value (2018: at cost)
CONSOLIDATED
30 June 2019
$
12,486,932
4,023,658
3,823,407
1,652,772
580,576
30 June 2018
$
10,605,056
3,222,496
2,828,675
-
-
22,567,345
16,656,227
Stores, spares and consumables represent materials and supplies consumed in the production process. All stocks have been
calculated as the lower of cost and net realisable value, representing the estimated selling price in the ordinary course of business less
any further costs expected to be incurred in respect of such disposal. At year end a net realisable value adjustment amounted to
$3.88 million (30 June 2018: Nil) was made, which is included in the operating cost in the statement of profit or loss and other
comprehensive income.
2019 Annual Report
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
10 PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
$
Plant and
equipment
$
Fixtures and
fittings
$
Assets under
construction
$
Total
$
Cost
Balance at 1 July 2018
12,844,246
117,683,167
2,084,281
2,988,639
135,600,333
Additions
Disposals (a)
Transfer from assets under construction
Reclassification to intangible assets
Effect of movements in exchange rates
227,919
49,000
4,657,125
-
-
-
-
2,611,832
(117,716)
7,483,416
273
-
1,523,093
(127,356)
49,485
(2,661,317)
(377,317)
139,745
(143,584)
168,308
6,229,491
(127,356)
-
(638,617)
8,019,388
Balance at 30 June 2019
13,121,165
132,317,824
1,896,467
1,747,783
149,083,239
Balance at 1 July 2017
2,507,926
83,754,947
1,659,648
-
87,922,521
Acquired through business combinations
and asset acquisition (b)
Additions
Additions to rehabilitation asset
Disposals
10,149,500
32,570,566
223,272
2,459,662
-
-
117,716
-
Effect of movements in exchange rates
(36,452)
(1,219,724)
24,500
479,839
-
(58,105)
(21,601)
127,694
42,872,260
2,865,758
6,028,531
-
-
117,716
(58,105)
(4,813)
(1,282,590)
Balance at 30 June 2018
12,844,246
117,683,167
2,084,281
2,988,639
135,600,333
Accumulated depreciation
Balance at 1 July 2018
Depreciation for the year
2,206,531
52,910,038
1,503,047
2,000,478
10,093,842
Reclassification to intangible assets
-
(36,301)
Effect of movements in exchange rates
146,618
3,941,397
Balance at 30 June 2019
4,353,627
66,908,976
1,645,873
Balance at 1 July 2017
Depreciation for the year
Disposals
1,225,239
42,798,033
1,410,245
994,420
10,742,095
-
-
Effect of movements in exchange rates
(13,128)
(630,090)
Balance at 30 June 2018
2,206,531
52,910,038
1,503,047
Carrying amounts
At 1 July 2017
At 30 June 2018
At 30 June 2019
1,282,687
40,956,914
10,637,715
64,773,129
8,767,538
65,408,848
249,403
581,234
250,594
81,073
(62,369)
124,122
166,368
(58,095)
(15,471)
-
-
-
-
-
-
-
-
-
-
-
56,619,616
12,175,393
(98,670)
4,212,137
72,908,476
45,433,517
11,902,883
(58,095)
(658,689)
56,619,616
42,489,004
2,988,639
78,980,717
1,747,783
76,174,763
(a) Includes assets under construction at the Siana project written off.
(b) During the year ended 30 June 2019 additions included finance leased assets, sustaining capital and tailing storage facility improvements.
During the year ended 30 June 2018, additions included property, plant and equipment totalling $40,155,560 acquired through the
acquisition of Darlot Mining Company Pty Ltd and $2,716,700 as a result of assets acquired for King of the Hills project (refer note 34).
52
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
11
INTANGIBLE ASSETS
Cost
Balance at 1 July 2018
Additions
Reclassification from property, plant and equipment
Reclassification from assets under construction
Rehabilitation change in estimate (refer to note 17)
Balance at 30 June 2019
Balance at 1 July 2017
Acquired through business combination and asset
acquisition (a)
Additions
Balance at 30 June 2018
Accumulated depreciation
Balance at 1 July 2018
Amortisation
Reclassification from property, plant and equipment
Balance at 30 June 2019
Balance at 1 July 2017
Amortisation
Balance at 30 June 2018
Carrying amounts
At 1 July 2017
At 30 June 2018
At 30 June 2019
Mineral Rights
and Asset Retirement
Obligation
$
31,267,350
-
117,716
-
(1,027,593)
30,357,473
-
31,267,350
-
31,267,350
1,472,066
10,285,021
36,301
11,793,388
-
1,472,066
1,472,066
-
29,795,284
18,564,085
Software
$
948,189
299,049
377,317
143,584
-
1,768,139
-
-
948,189
948,189
20,008
520,749
62,369
603,126
-
20,008
20,008
-
928,181
1,165,013
Total
$
32,215,539
299,049
495,033
143,584
(1,027,593)
32,125,612
-
31,267,350
948,189
32,215,539
1,492,074
10,805,770
98,670
12,396,514
-
1,492,074
1,492,074
-
30,723,465
19,729,098
(a) Mineral rights of $4,773,646 were acquired through the acquisition of Darlot Mining Company Pty Ltd and $26,493,704 through the
acquisition of assets of the King of the Hills project.
2019 Annual Report
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
12 MINE DEVELOPMENT
(a) Mine Development
Opening balance
Development expenditure incurred in current period (1)
Foreign currency translation adjustment
Closing Balance
Accumulated amortisation
Opening balance
Amortisation for the period
Foreign currency translation adjustment
Closing balance
Mine development net book value
(b) Deferred mining waste costs
Opening balance
Foreign currency translation adjustment
Closing balance
Accumulated amortisation
Opening balance
Amortisation for the period
Foreign currency translation adjustment
Closing balance
Deferred mining waste costs net book value
Total mine development net book value
CONSOLIDATED
30 June 2019
$
30 June 2018
$
113,512,485
21,397,289
9,080,162
143,989,936
97,171,676
14,251,327
8,683,566
120,106,569
23,883,367
63,574,195
5,927,106
69,501,301
102,879,591
12,151,523
(1,518,629)
113,512,485
98,587,876
-
(1,416,200)
97,171,676
16,340,809
64,538,070
(963,875)
63,574,195
63,574,195
64,538,070
-
5,927,106
69,501,301
-
-
(963,875)
63,574,195
-
23,883,367
16,340,809
(1) Includes King of the Hills mine development expenditure which has been offset by pre-operational sales of $21.5 million (30 June 2018:
$13.7 million) and $7.8 million of processing costs (30 June 2018: $3.0 million) up to 1 December 2018 when commercial production
commenced.
13 EXPLORATION AND EVALUATION ASSETS
Opening balance
Exploration and evaluation expenditure incurred in current period (a)
Exploration expenditure transferred to profit or loss (b)
Closing Balance
CONSOLIDATED
30 June 2019
$
-
8,584,027
(3,290,425)
5,293,602
30 June 2018
$
-
5,559,594
(5,559,594)
-
(a) During the year ended 30 June 2019, $5.29 million for pre-feasibility studies, drilling and related costs at King of the Hills gold project were
capitalised (2018: Nil).
(b) The carrying value of exploration costs totalling $3.29 million were expensed (2018: $5.56 million). These costs were associated with drilling
and studies at the Darlot gold project where no further work will be performed in that particular area.
54
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
14 TRADE AND OTHER PAYABLES
Current
Creditors and accruals
Deferred considerations relating to acquisitions
Royalties and other indirect taxes
Insurance payable
Other creditors
Non-current
Darlot acquisition - Deferred considerations
15
INCOME TAX PAYABLE
Income tax payable
CONSOLIDATED
30 June 2019
$
30 June 2018
$
29,980,061
5,677,692
2,202,151
651,367
2,929,425
41,440,696
-
-
31,743,128
4,395,120
933,049
214,880
1,684,977
38,971,154
5,503,646
5,503,646
CONSOLIDATED
30 June 2019
$
1,564,236
1,564,236
30 June 2018
$
739,121
739,121
16 FINANCIAL LIABILITY
During September 2018, the Company entered into a gold loan facility of 5,015 gold ounces with a Malaysian-based fund, Asian
Investment Management Services Ltd (AIMSL). The facility has a 12-month term repayable at maturity and attracts quarterly interest
gold payments secured by a security interest in the Company’s operating subsidiary companies on a limited recourse basis. The
effective interest rate of the gold loan facility is 16.1% which was derived by the movement in the forward gold price at inception. The
subsequent fair value measurement of the facility is dependent on forward commodity prices. The loan has been classified at amortised
cost and the embedded derivative relating to the forward prices of the loan has been recorded at fair value through profit or loss.
CONSOLIDATED
30 June 2019
$
30 June 2018
$
Value at inception
Unwinding of interest
Interest payments made
Realised loss/(gain) on interest payment
Fair value movement of the financial liability
Closing balance
Allocated as follows:
Loan at amortised cost
Fair value movement of the financial liability
2019 Annual Report
8,219,786
1,073,238
(860,785)
65,395
1,645,781
10,143,415
8,497,634
1,645,781
10,143,415
-
-
-
-
-
-
-
-
-
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
17 PROVISIONS
Opening balance
Provisions made
Provisions utilised
Change in estimates
Unwinding of discount
Foreign currency translation
adjustment
Rehabilitation
provision (a)
MCC final
acquisition (b)
Documentary
stamp duty (c)
Withholding
tax
Other
provisions
$
$
$
$
29,573,183
1,116,104
1,164,580
504,441
-
-
(1,027,593)
599,296
174,829
-
-
-
-
-
-
(188,385)
-
-
98,709
-
-
-
-
-
$
333,565
196,546
-
-
-
-
Total
$
32,691,873
196,546
(188,385)
(1,027,593)
599,296
273,538
Closing balance
29,319,715
1,116,104
1,074,904
504,441
530,111
32,545,275
(a) Rehabilitation provision
Mining activities within the Group are required by law to undertake rehabilitation as part of their ongoing operations. The rehabilitation
provision represents the present value of rehabilitation costs, which are expected to be incurred when the rehabilitation work following the
cessation of operations is expected to be completed. This provision has been created based on the Group’s internal estimates which are
reviewed over time as the operation develops. The accretion of the effect of discounting on the provision is recognised as a financial
expense. In addition, the rehabilitation obligation has been recognised as an intangible asset and has been amortised over the life of the
mines on units of production basis.
(b) MCC final acquisition provision
Provision for expected tax liability arising from the acquisition of Merrill Crow Corporation’s (MCC) holding of Siana Gold Project in 2010.
(c) Documentary stamp duty provision
Provision for documentary stamp duty on cash advances to Philippines subsidiaries.
Current
Non-current
CONSOLIDATED
30 June 2019
$
1,116,104
31,429,171
32,545,275
30 June 2018
$
1,116,104
31,575,769
32,691,873
18 FINANCE LEASE LIABILITIES
Finance leases include obligations of the Company under vehicle finance leases and equipment hire leases. They expire between 31
October 2019 and 31 October 2021 and bear interest between 4.5% and 6.75%. Ownership of the vehicles and equipment will revert to
the Company at the end of the leases at no additional cost. The Company’s obligations under the finance leases are secured by the
lessor’s title to the leased assets. The fair value of the finance lease liabilities approximates their carrying values.
The following schedule outlines the total minimum loan payments due for the finance lease obligations over their remaining terms.
Finance lease liabilities are payable as follows:
Less than one year
Between one and five years
More than five years
Current
Non-current
Future minimum lease
payments
2019
$
2018
$
1,447,670
1,199,957
993,237
1,493,137
-
-
Interest
Present value of minimum
lease payments
2019
$
120,581
34,096
-
2018
$
2019
$
2018
$
122,509
1,327,089
1,077,448
92,540
959,141
1,400,597
-
-
-
2,440,907
2,693,094
154,677
215,049
2,286,230
2,478,045
1,447,670
1,199,957
993,237
1,493,137
2,440,907
2,693,094
120,581
34,096
154,677
122,509
1,327,089
1,077,448
92,540
959,141
1,400,597
215,049
2,286,230
2,478,045
56
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
19 EMPLOYEE BENEFITS
Provision for annual leave
Provision for long-service leave
Provision for bonuses
Current
Non-current
20 DERIVATIVE FINANCIAL INSTRUMENTS
Opening balance
Change in fair value of cashflow hedges
Closing balance
Forward contracts designated as hedges
CONSOLIDATED
30 June 2019
$
30 June 2018
$
2,074,198
1,342,850
1,058,707
4,475,755
4,392,842
82,913
4,475,755
1,749,626
1,842,890
1,975,134
5,567,650
5,218,185
349,465
5,567,650
CONSOLIDATED
30 June 2019
$
761,679
(6,072,867)
(5,311,188)
30 June 2018
$
-
761,679
761,679
As at 30 June 2019 the Group had a net hedge liability position reflecting the negative mark-to-market value of gold contracts. As at
year end metal hedges comprise forward contracts for 30,100 ounces of gold at an average price of price of $1,844 per ounce for the
period July 2019 to December 2019.
21 CONTRIBUTED EQUITY
CONSOLIDATED
30 June 2019
$
30 June 2018
$
(a) Share capital
1,243,166,958 (30 June 2018: 1,240,693,011) ordinary fully paid shares
260,515,091
260,364,664
(b) Movements in ordinary share capital
CONSOLIDATED
30 June 2019
30 June 2018
No. Shares
$
No. Shares
$
On issue 1 July
1,240,693,011
260,364,664
763,826,663
236,674,602
Shares issued on acquisition of Darlot and King of the Hills
Rights issue
Shares issued to directors
Service rights vested
Performance rights vested and converted to shares
Deferred rights vested and converted to shares
Share issue costs
On issue at 30 June
-
-
-
-
-
-
-
-
1,300,000
1,173,947
-
68,250
82,177
-
220,000,000
11,000,000
254,835,049
12,741,752
1,352,814
678,485
-
-
-
62,500
78,840
-
-
(193,030)
1,243,166,958
260,515,091
1,240,693,011
260,364,664
Ordinary shares entitle the holder to participate in dividends and proceeds on the winding up of the parent entity in proportion to the
number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or
by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
2019 Annual Report
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
21 CONTRIBUTED EQUITY (continued)
(c)
Other equity
Opening balance 1 July 2018 (a)
Balance 30 June 2019
CONSOLIDATED
Shares
581,428
581,428
$
930,285
930,285
(a) Red 5 has provided for 581,428 shares to be issued at a value of $930,285 to settle the outstanding tax liability in relation to the acquisition
of Merrill Crowe Corporation (MCC) in a previous financial year.
22 RESERVES
Foreign currency translation reserve (a)
Share-based payment reserve and other reserves (b)
Hedging reserve (c)
CONSOLIDATED
30 June 2019
$
25,204,383
1,163,256
(4,854,429)
21,513,210
30 June 2018
$
20,873,985
434,925
497,966
21,806,876
(a) The foreign currency translation reserve comprises foreign exchange differences arising from the translation of the financial statements of
foreign operations where the functional currency is different to the presentation currency of the reporting entity.
(b) Share-based payment reserve, includes performance rights, service and deferred rights reserve of $1,057,345 (2018: $294,403). It arises on
the granting and vesting of equity instruments. Refer note 31 for further details. And also includes other reserves for defined retirement
benefit fund for Philippines employees of $105,911 (2018: $140,522). The movement in other reserves arises from the re-measurement of
liabilities resulting from a change in assumptions used in an actuarial report calculation.
(c) The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments (net of tax) used
in cash flow hedges pending subsequent recognition in profit or loss.
58
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
23 EARNINGS PER SHARE
Earnings per share (“EPS”) is the amount of post-tax profit or loss attributable to each share. The Group presents basic and diluted EPS
data for ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by
the weighted average number of ordinary shares outstanding during the period.
Diluted EPS takes into account the dilutive effect of all potential ordinary shares, being unlisted employee performance and service
rights on issue.
Net loss after income tax
Weighted average number of ordinary shares
Issued ordinary shares at 1 July
Effect of shares issued 11 August 2017
Effect of shares issued 2 October 2017
Effect of shares issued 5 October 2017
Effect of shares issued 31 July 2018
Effect of shares issued 7 December 2018
CONSOLIDATED
30 June 2019
$
(3,207,963)
30 June 2018
$
(11,927,574)
CONSOLIDATED
2019 Weighted
average No. of shares
2018 Weighted
average No. of shares
1,240,693,011
-
-
-
1,193,151
662,556
763,826,663
602,272
353,849,680
997,005
-
-
Weighted average number of ordinary shares at 30 June
1,242,548,718
1,119,275,620
Basic profit/(loss) per share (cents per share)
(0.26)
(1.07)
There have been no transactions involving ordinary shares between the reporting date and the date of completion of these financial
statements which would materially impact on the above EPS calculations.
The potential ordinary shares existing as at balance date are not dilutive, therefore dilutive earnings per share is equal to basic
earnings per share.
24 RELATED PARTIES
The following were key management personnel of the consolidated entity at any time during the reporting period and unless otherwise
indicated, were key management personnel for the entire reporting period:
Executive Directors
Mark Williams – Managing Director
Non-Executive Directors
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steve Tombs (appointed 1 August 2018)
Other executives
John Tasovac – Chief Financial Officer
Brendon Shadlow – General Manager Operations (from 1 August 2018)
Steve Tombs – General Manager Operations (up to 31 July 2018)
Company Secretary
Frank Campagna – Company Secretary
2019 Annual Report
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
24 RELATED PARTIES (continued)
Compensation of key management personnel
A summary of the compensation of key management personnel is as follows:
Key management personnel
Short term benefits including service and deferred rights
Post-employment benefits
Long term benefits
Share based payments
Loans to key management personnel
There were no loans to key management personnel during the period.
CONSOLIDATED
30 June 2019
$
30 June 2018
$
2,051,439
140,904
61,784
271,065
2,525,192
1,720,914
103,174
58,484
223,556
2,106,128
Transactions with Key Management Personnel and their related parties
The Non-Executive Directors Mr Kevin Dundo, Mr Ian Macpherson, Mr Colin Loosemore and Mr Steven Tombs invoice through their
private companies for Directors fees, they are not separate entities that provide consulting services to the Company. Mr Dundo,
Mr Macpherson, Mr Loosemore and Mr Tombs meet the definition and maintain their status as Independent Non-Executive Directors,
thus retain objectivity and their ability to meet their oversight role.
Steve Tombs a Director charged the Group director’s fees, as part of his remuneration, for the year totalling $90,338 (2018: $Nil) and
$3,900 for consulting fees. At year-end, there was no amount outstanding (2018: Nil).
These transactions were entered on normal commercial terms.
Transactions with related parties in the wholly owned group
During the financial year, unsecured loan advances were made between the parent entity and its controlled entities. All such loans were
interest free. Intra entity loan balances have been eliminated in the financial report of the consolidated entity. The ownership interests in
related parties in the wholly owned group are set out in Note 29.
25 REMUNERATION OF THE AUDITOR
CONSOLIDATED
30 June 2019
$
30 June 2018
$
136,904
35,090
130,749
7,705
-
3,844
314,292
163,277
34,017
151,034
8,366
384,800
-
741,494
Amounts paid or due and payable to the auditor for:
Auditing and reviewing financial reports
– KPMG Australia
– overseas KPMG firms
Taxation advisory services
– KPMG Australia
– overseas KPMG firms
Other advisory services
– KPMG Australia fees paid on completion of royalty sale
– Other advisory services
60
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
26 CAPITAL AND OTHER COMMITMENTS
Capital expenditure commitments
Contracted but not provided for:
- not later than one year
Operating lease commitments
Non-cancellable operating lease rentals:
- not later than one year
- later than one year but not later than two years
- later than two years but not later than five years
Contractual expenditure commitments
Non-capital expenditure commitments:
- not later than one year
- later than one year but not later than two years
- later than two years but not later than five years
Tenement expenditure commitments:
- not later than one year
- later than one year but not later than two years
CONSOLIDATED
30 June 2019
$
30 June 2018
$
229,159
229,159
302,439
48,601
-
351,040
672,822
672,822
371,805
61,375
-
433,180
5,932,447
5,984,176
-
-
-
-
5,932,447
5,984,176
4,089,826
-
4,089,826
4,005,135
63,396
4,068,531
27 CONTINGENT LIABILITIES
The consolidated entity had no material contingent liabilities as at the reporting date and as at the end of the year.
28 SEGMENT INFORMATION
The Group is managed primarily on the basis of its production, development and exploration assets in both Australia and the
Philippines. Operating segments are therefore determined on the same basis.
During the previous year ended 30 June 2018 a new operating segment was added following the acquisition of Darlot Mining Company
Pty Ltd and King of the Hills, forming the Australia segment.
Unless otherwise stated, all amounts reported to the Board of Directors as the chief decision maker with respect to operating segments
are determined in accordance with accounting policies that are consistent to those adopted in the consolidated annual financial
statements of the Group.
2019 Annual Report
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
28 SEGMENT INFORMATION (continued)
(i)
Segment performance
Year ended 30 June 2019
Revenues (c)
Australia (a)
Philippines
Other (b)
$
153,508,715
153,508,715
$
-
-
$
-
-
Total
$
153,508,715
153,508,715
Segment result before tax
10,564,883
(8,107,962)
(13,057,139)
(10,600,218)
Included within segment result:
Other income
Interest income
Finance expenses
Exploration costs expensed
Doubtful debts written off
542,223
19,984
(847,519)
(3,185,758)
-
Depreciation and amortisation
(36,507,696)
207,510
7,274
(15,634)
(104,667)
(376,598)
(638,371)
111
10,505
(1,385,755)
-
-
749,844
37,763
(2,248,909)
(3,290,425)
(376,598)
(86,423)
(37,232,489)
Year ended 30 June 2018
Revenues (c)
66,756,930
66,756,930
10,392,499
10,392,499
287,241
287,241
77,436,670
77,436,670
Segment result before tax
(11,296,331)
(7,743,128)
4,652,246
(14,387,213)
Included within segment result:
Other income
Sale of Mt Cattlin royalty
Interest income
Finance costs
Exploration costs expensed
VAT receivable impairment
Depreciation and amortisation
(ii)
Segment Assets
As at 30 June 2019
Segment assets
Additions to non-current assets:
Plant and equipment expenditure
Intangible assets
Development expenditure
As at 30 June 2018
Segment assets
Additions to non-current assets:
Plant and equipment expenditure
Intangible assets
Development expenditure
381,996
-
26,972
(574,786)
(5,200,196)
-
(12,633,504)
415,996
-
10,575
(15,191)
(359,398)
(1,994,363)
(751,476)
2,074,900
11,000,000
9,327
(746,892)
-
-
2,872,892
11,000,000
46,874
(1,336,869)
(5,559,594)
(1,994,363)
(9,977)
(13,394,957)
Australia (a)
Philippines
$
$
Other (b)
$
Total
$
113,349,993
58,965,928
4,831,180
177,147,101
6,039,439
284,125
21,392,513
175,701
-
4,775
14,350
14,924
-
6,229,491
299,049
21,397,289
99,265,860
60,997,918
13,008,009
173,271,787
48,576,622
31,997,649
12,042,638
423,553
-
108,885
18,330
217,890
-
49,018,507
32,215,539
12,151,523
62
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
28 SEGMENT INFORMATION (continued)
(iii)
Segment Liabilities
As at 30 June 2019
Segment liabilities
As at 30 June 2018
Segment liabilities
Australia (a)
Philippines
$
$
Other (b)
$
Total
$
65,218,304
8,282,057
24,266,434
97,766,795
72,924,962
7,486,764
11,608,765
92,020,490
(a) Australia segment consists of the Darlot Mining Company Pty Ltd and the King of the Hills gold project.
(b) Includes corporate costs of the group and inter-company transactions. The segment liability includes the deferred consideration payable to
the sellers relating to the acquisitions of Darlot project.
(c) Revenue is attributable to one customer only.
29
INVESTMENTS IN CONTROLLED ENTITIES
Name of controlled entities
Bremer Resources Pty Ltd
Estuary Resources Pty Ltd
Greenstone Resources (WA) Pty Ltd
Oakborough Pty Ltd
Opus Resources Pty Ltd
Red 5 Philippines Pty Ltd
Red 5 Mapawa Pty Ltd
Red 5 Dayano Pty Ltd
Darlot Mining Company Pty Ltd
Bremer Binaliw Corporation
Red 5 Mapawa Inc
Red 5 Dayano Inc
Red 5 Asia Inc
Greenstone Resources Corporation (a)
Surigao Holdings and Investments Corporation (a)
Country of
incorporation
Class of shares
2019 %
2018 %
Equity holding
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Philippines
Philippines
Philippines
Philippines
Philippines
Philippines
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
40
40
100
100
100
100
100
100
100
100
100
100
100
100
100
40
40
(a) The Company holds a 40% direct interest in Greenstone Resources Corporation (GRC) and a 40% interest in Surigao Holdings and
Investments Corporation (SHIC) voting stock. Agreements are in place which deals with the relationship between Red 5 and other
shareholders of these entities. In accordance with Australian accounting standard, AASB 10 Consolidated Financial Statements, Red 5 has
consolidated these companies in these financial statements.
2019 Annual Report
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
30 RECONCILIATION OF NET CASH FLOWS FROM OPERATING ACTIVITIES
CONSOLIDATED
Operating profit/(loss) after income tax
Amortisation and depreciation
Non-cash stockpile movements
Ineffective portion of cashflow hedges
VAT receivable impairment
Deferred tax benefit
Share based payment
Interest expenses
Unrealised exchange gain
Accrued gold loan interests
Unwinding of asset retirement obligation
Unwinding deferred consideration
Change in value of gold loan
Changes in operating assets and liabilities
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Increase/(decrease) in income tax payable
Increase/(decrease) in provisions
Net cash inflow/(outflow) from operating activities
31 SHARE-BASED PAYMENT ARRANGEMENTS
Performance rights granted during the period
30 June 2019
$
(3,030,385)
37,232,490
(4,751,782)
456,759
376,598
(10,015,128)
938,015
297,450
3,487
212,453
599,295
278,926
1,645,781
(965,546)
(3,245,784)
2,469,544
825,115
(146,599)
23,180,689
30 June 2018
$
(11,927,574)
13,394,957
1,015,228
-
1,994,363
(2,459,639)
356,796
792,885
7,961
-
-
-
-
4,939,210
(12,405,710)
21,675,623
-
1,611,661
18,995,761
Performance rights were granted to the Managing Director and to Senior Management during the period. The rights of the first offer to
Senior Management is split into four tranches based on different performance conditions measured over a period commencing 1 July
2018 to the vesting date which is 30 June 2021 if the conditions are met.
The rights of the offer to the Managing Director and to Senior Management are also split into four tranches based on different
performance conditions measured over a period commencing 1 July 2018 to the vesting date which is 30 June 2021 if the conditions
are met.
64
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
31 SHARE-BASED PAYMENT ARRANGEMENTS (continued)
Details of the performance rights are summarised below:
(a)
Managing Director (2021 series)
Number of
performance rights
Value per right
Valuation per tranche
Condition criteria
Tranche A
Tranche B
Tranche C
Tranche D
Total
2,010,404
$0.038
$76,395
804,162
$0.048
$38,600
804,162
$0.048
$38,600
402,080
$0.048
$19,300
TSR ranking relative
to TSR of S&P/ASX
All Ordinaries Gold
Total Return Index
Growth in the
Company’s Ore
Reserves
Operating Costs as
% of Budgeted
Operating Costs
Safety
Compliance
TSR >
Index TSR
+20%
TSR >
Index TSR
+10%
TSR < or
equal to
Index TSR
100%
Stretch:
35%
100%
Stretch:
80%
100%
50%
Target:
20%
50%
Target:
90%
50%
nil
Threshold:
15%
25%
Threshold:
95%
25%
< 15%
nil
>95%
nil
All criteria to be
met:
- No fatalities
- Maintenance
of the
ISO14001 and
ISO 18001
certifications
- Year on year
improvement
in safety
performance
4,020,808
$172,895
In addition,
vesting of the
performance
rights is also
conditional on
the following
being exceeded:
1. A positive
Company TSR
for the
measurement
period; and
2. 80% of
budgeted gold
production by
30 June 2019.
(b)
Senior Management (2020 series)
Number of
performance rights
Value per right
Valuation per tranche
Condition criteria
Tranche A
Tranche B
Tranche C
Tranche D
Total
1,337,798
$0.049
$65,552
535,121
$0.056
$29,967
535,121
$0.056
$29,967
267,561
$0.056
$14,983
TSR ranking relative
to TSR of S&P/ASX
All Ordinaries Gold
Total Return Index
Growth in the
Company’s Ore
Reserves
Operating Costs as
% of Budgeted
Operating Costs
Safety
Compliance
TSR >
Index TSR
+20%
TSR >
Index TSR
+10%
TSR < or
equal to
Index TSR
100%
Stretch:
35%
100%
Stretch:
80%
100%
50%
Target:
20%
50%
Target:
90%
50%
nil
Threshold:
15%
25%
Threshold:
95%
25%
< 15%
nil
>95%
nil
All criteria to be
met:
- No fatalities
- Maintenance
of the
ISO14001 and
ISO 18001
certifications
- Year on year
improvement
in safety
performance
2,675,601
$140,469
In addition,
vesting of the
performance
rights is also
conditional on
the following
being exceeded:
1. A positive
Company TSR
for the
measurement
period; and
2. 80% of
budgeted gold
production by
30 June 2019.
2019 Annual Report
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
31 SHARE-BASED PAYMENT ARRANGEMENTS (continued)
(c)
Senior Management (2021 series)
Number of
performance rights
Value per right
Valuation per tranche
Tranche A
Tranche B
Tranche C
Tranche D
Total
5,610,244
$0.045
$252,461
2,244,098
$0.057
$127,917
2,244,098
$0.057
$127,917
1,122,050
11,220,490
$0.057
$63,957
$572,245
Condition criteria
TSR ranking relative
to TSR of S&P/ASX
All Ordinaries Gold
Total Return Index
Growth in the
Company’s Ore
Reserves
Operating Costs as
% of Budgeted
Operating Costs
Safety
Compliance
TSR >
Index TSR
+20%
TSR >
Index TSR
+10%
TSR < or
equal to
Index TSR
100%
Stretch:
35%
100%
Stretch:
80%
100%
50%
Target:
20%
50%
Target:
90%
50%
nil
Threshold:
15%
25%
Threshold:
95%
25%
< 15%
nil
>95%
nil
All criteria to be
met:
- No fatalities
- Maintenance
of the
ISO14001 and
ISO 18001
certifications
- Year on year
improvement
in safety
performance
Fair Value of Performance Rights
The fair value at grant date of Tranches A which have market-based performance conditions, was estimated using a Monte Carlo
simulation. The fair value at grant date of Tranches B, C and D, which have market and non-market-based performance conditions, were
valued using a single share price barrier model incorporating a Monte Carlo simulation.
The table below summarises the terms and conditions of the grant and the assumptions used in estimating fair value:
Model Inputs
Grant date
Value of the underlying security at grant date
Exercise price
Dividend yield
Risk free rate
Volatility
Performance period (years)
Managing
Director
Senior Management
(2020 series)
Senior Management
(2021 series)
21 November 2018
15 November 2018
11 December 2018,
12 & 19 April 2019
$0.07
nil
nil
2.12%
Tranche A: 70%
Tranches B C D: 80%
3.00
$0.07
nil
nil
2.16%
70%
2.75
Commencement of measurement period
1 July 2018
2 October 2017
Vesting date
30 June 2021
30 June 2020
Remaining performance period (years)
Weighted average fair value per option
No. performance rights
Total Valuation
2.61
$0.043
4,020,808
$172,895
1.62
$0.058
2,675,601
$140,469
66
2019 Annual Report
$0.079
nil
nil
1.95%
Tranche A: 70%
Tranches B-D: 80%
3.00
1 July 2018
30 June 2021
2.53
$0.051
11,220,490
$572,245
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
31 SHARE-BASED PAYMENT ARRANGEMENTS (continued)
The following unvested performance rights were outstanding:
Balance at the start of the period
Granted during the period
Vested during the period
Expired during the period
Balance at the end of the period
CONSOLIDATED
30 June 2019
30 June 2018
Number
18,243,200
17,916,899
(1,300,000)
(1,300,000)
33,560,099
Number
6,000,000
18,243,200
-
(6,000,000)
18,243,200
Share-based payments expense of performance rights for the year ended 30 June 2019 was $638,079 (30 June 2018: $317,465).
Shares issued, Service and Deferred Rights
Grant Date
Vesting Date
Fair Value at
Grant Date
Number
Granted
Number
Exercised
Number
Outstanding
at 30 June
2019
Non-Executive Director Shares (a)
20-Sep-17
31-Jul-18
$68,250
1,300,000
(1,300,000)
-
Managing Director and Senior
Management Service Rights (b)
Managing Director and Senior
Management Deferred Rights (c)
6-Dec-18
1-Jul-19
$82,177
1,173,950
-
1,173,950
6-Dec-18
6-Dec-18
$82,177
1,173,950
(1,173,950)
-
(a) Issue of fully paid ordinary shares to Mr Steve Tombs following the early vesting and exercise of performance rights in accordance with the
discretionary provisions of the Red 5 Limited Rights Plan.
(b) Service rights granted were subject to a 12-month service period before they can be exercised.
(c) Deferred rights issued under the Red 5 Limited Rights Plan which vest immediately upon issue and automatically exercised into restricted
shares which are subject to disposal restrictions until 30 June 2020.
Share based payments expense for the shares issued, service and deferred rights was $298,040 (2018: $52,606). The fair value is
based on observable market share price at the date of grant.
32 FINANCIAL RISK MANAGEMENT
Overview
This note presents information about the consolidated entity’s exposure to credit, liquidity and market risks, their objectives, policies
and processes for measuring and managing risk, and the management of capital.
The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management
monitors and manages the financial risks relating to the operations of the consolidated entity through regular reviews of the risks.
Credit risk
Credit risk is the risk of financial loss to the consolidated entity if a customer or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the consolidated entity receivables from customers and investment securities. For
the company it arises from receivables due from subsidiaries.
Presently, the consolidated entity undertakes exploration, mining and gold production activities.
The Group sells gold to one customer in Australia and has managed its exposure to credit risk by analysing the creditworthiness
of the customer.
2019 Annual Report
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
32 FINANCIAL RISK MANAGEMENT (continued)
Cash and cash equivalents
The consolidated entity limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have an
acceptable credit rating. Any excess cash and cash equivalents are maintained in short term deposits with more than one major
Australian commercial bank at interest rates maturing over 30 to 120 day rolling periods.
Trade and other receivables
The Group’s trade and other receivables relate mainly to gold sales and sales tax refunds. The Group has determined that its exposure
to trade receivable credit risk is low, given that it sells gold bullion to a single reputable refiner with short contractual payment terms and
sales tax refunds are due from Government tax bodies namely the Australian Tax Office and the Philippines Bureau of Internal Revenue.
Exposure to credit risk
The carrying amount of the consolidated entity’s financial assets represents the maximum credit exposure. The maximum exposure to
credit risk at the reporting date was:
Trade and other receivables
Cash and cash equivalents
Non-current receivables
Liquidity risk
CONSOLIDATED
Carrying amount
30 June 2019
$
14,717,791
10,646,524
188,484
30 June 2018
$
21,023,209
7,148,401
1,937,280
Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The consolidated
entity approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the consolidated entity.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by
continuously monitoring forecast and actual cash flows.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements:
CONSOLIDATED
As at 30 June 2019
Carrying
amount
$
Contractual
cash flows
$
6 months
or less
$
6 – 12 months
$
Trade and other payables
41,440,696
(41,440,696)
(41,440,696)
Finance lease liabilities
2,286,230
(2,440,907)
(798,581)
43,726,926
(43,881,603)
(42,239,277)
-
(649,089)
(649,089)
More than
1 year
$
-
(993,237)
(993,237)
As at 30 June 2018
Trade and other payables
44,474,800
(44,474,800)
(38,971,154)
-
(5,503,646)
Finance lease liabilities
2,478,045
(2,693,094)
(620,229)
46,852,845
(47,167,894)
(39,591,383)
(579,728)
(579,728)
(1,493,137)
(6,996,783)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
consolidated entity income or the value of its holdings of financial instruments. Changes in the market gold price will affect the
derivative valuation at each reporting date. The objective of market risk management is to manage and control market risk exposures
within acceptable parameters, while optimising the return. The consolidated entity enters into derivative financial instruments to hedge
such transactions.
68
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
32 FINANCIAL RISK MANAGEMENT (continued)
Hedge accounting
The Group’s risk management policy is to hedge between 25 to 70% of gold sales in local currency over a rolling 24 month period.
At 30 June 2019 the Group held gold forward contracts to hedge the exposure of future gold sales. The following table sets out the
current hedge position and fair value as at 30 June 2019:
No. of contracts
41
19
As at 30 June 2019
As at 30 June 2018
Currency risk
Maturity
0-6 months
7-12 months
More than 1 year
Gold sold
30,100 oz
($5,311,188)
24,500 oz
$761,679
-
-
-
-
The consolidated entity is exposed to currency risk on investments and purchases that are denominated in a currency other than the
respective functional currencies of the subsidiaries within the consolidated entity being Australian Dollar (A$) and Philippine Pesos. The
currencies in which these transactions primarily are denominated are United States dollars (US$).
The consolidated entity has not entered into any derivative financial instruments to hedge such transactions. The Company’s
investments in its subsidiaries are not hedged as those currency positions are considered to be long term in nature.
Exposure to currency risk
The consolidated entity’s exposure to US$ foreign currency risk at balance date was as follows, based on notional amounts:
Cash
Trade debtors
Trade payables
Gross balance sheet exposure
Sensitivity analysis
CONSOLIDATED
Carrying amount
30 June 2019
A$
30 June 2018
A$
614,121
524,355
(568,010)
570,465
1,265,136
3,264,296
(70,208)
4,459,224
A 10 per cent strengthening of the Australian dollar against the United States dollar on the 30 June 2019 would have increased/
(decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis
was performed on the same basis for 2018.
30 June 2019 – US$
30 June 2018 – US$
CONSOLIDATED
Profit or loss
A$
(57,047)
(445,922)
A 10 per cent weakening of the Australian dollar against the above currencies at 30 June 2019 would have had the equal but opposite
effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.
Interest rate risk
The consolidated entity is exposed to interest rate risk, primarily on its cash and cash equivalents which is the risk that a financial
instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments. The
consolidated entity does not use derivatives to mitigate these exposures.
2019 Annual Report
69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
32 FINANCIAL RISK MANAGEMENT (continued)
The consolidated entity adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalents in short term
deposits with more than one counterparty at interest rates maturing over 90 day rolling periods. At the reporting date the interest rate
profile of the consolidated entity and the Company’s interest-bearing financial instruments were:
Cash and cash equivalents (a)
Security deposits
CONSOLIDATED
Carrying amount
30 June 2019
$
10,645,904
184,883
10,830,787
30 June 2018
$
3,499,974
184,883
3,684,857
(a) Amount excludes non-interest-bearing bank accounts.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit or loss by the
amounts shown below. This analysis assumes that all other variables remain constant. The analysis was performed on the same
basis for 2018.
CONSOLIDATED
30 June 2019
Profit or loss
Equity
100bp increase
$
100bp decrease
$
100bp increase
$
100bp decrease
$
Variable rate instruments
108,308
(108,308)
108,308
(108,308)
30 June 2018
Variable rate instruments
36,849
(36,849)
36,849
(36,849)
Net Fair values
The carrying value of financial assets and liabilities equates their fair value.
Capital management
The consolidated entity’s objective when managing capital is to safeguard its ability to continue as a going concern, so as to maintain a
strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain or adjust the capital
structure, the consolidated entity may return capital to shareholders, issue new shares or sell assets to reduce debt.
Risk management is facilitated by regular monitoring and reporting by the board and key management personnel.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
70
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
33 FAIR VALUE MEASUREMENT
The fair values of financial assets and financial liabilities carried at amortised cost approximate their carrying value.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique.
Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2 - Valuation techniques for which the lowest - level input that is significant to the fair value measurement is directly or
indirectly observable
Level 3 - Valuation techniques for which the lowest - level input that is significant to the fair value measurement is unobservable
The following financial assets and liabilities are classified as level 2:
\ Derivative Financial Instruments, liability of $5.31 million (30 June 2018: asset of $0.76 million);
\ Embedded derivative on gold loan, liability of $1.65 million (30 June 2018: $Nil).
34 ACQUISITIONS
(a)
Acquisition of Darlot Mining Company Pty Ltd
On 2 October 2017 the Group acquired 100% of the shares of Darlot Mining Company Pty Ltd (Darlot) from a subsidiary of
Gold Fields Limited.
The acquisition provides the company with immediate production and cash-flow, an extensive strategic footprint in the Leonora-Leinster
mineral district of Western Australia and the ability to leverage this position by pursuing a regional consolidation strategy aimed at
establishing the Darlot mill as a central processing hub.
The Company has determined that the acquisition of Darlot was a business combination in accordance with AASB 3, Business
Combinations, and as such has accounted for it in accordance with this standard using the acquisition method with the Company’s
wholly owned subsidiary Opus Resources Pty Limited being the acquirer. The Company incurred transaction costs of $474,965 relating
to the acquisition. Transaction costs are expensed in accordance with AASB 3, Business Combinations.
In the nine months to 30 June 2018, Darlot contributed revenue of $66,613,710 and loss after tax of $12,743,369 to the Group’s results.
If the acquisition had occurred on 1 July 2017, management estimates that consolidated revenue would have been $100.8 million and
consolidated loss for the year would have been $12.4 million. In determining these amounts, management has assumed that the fair
value adjustments, determined provisionally, that arose on the date of acquisition would have been the same if the acquisition had
occurred on 1 July 2017.
The following table summarizes the fair value of the consideration paid and the preliminary estimates of the fair values of identified
assets acquired and liabilities assumed from Darlot.
Purchase consideration:
Cash
Shares issued (130,000,000 ordinary shares) (a)
Deferred consideration (payable as cash or shares at the seller’s option) (b) (c)
2018
$
6,742,265
6,500,000
5,199,982
18,442,247
(a) The fair value of ordinary shares issued was based on the listed share price of the Company at 2 October 2017 of $0.05 per share.
(b) The deferred consideration payable for the acquisition of Darlot is payable in the future and has been discounted. The amount payable is
$5.0 million if the seller opts to receive cash due in one or two years from the date of acquisition at the vendor’s election.
(c) If the seller opts to receive shares in Red 5 Ltd, these will be issued at a 15% discount to the volume weighted average price (VWAP) in
two years from the date of acquisition.
2019 Annual Report
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
34 ACQUISITIONS (continued)
Fair value of net assets acquired:
Assets
Trade and other receivables
Inventory
Property, plant and equipment
Mineral rights
Liabilities
Trade and other payables
Provisions
Employee benefits
Environmental rehabilitation and other provisions
Deferred tax liabilities
Net assets acquired
Goodwill / bargain purchase gain
Measurement of fair values
2018
$
81,175
8,695,359
40,155,560
4,773,646
(7,615,806)
(200,178)
(3,488,128)
(14,691,620)
(9,267,761)
18,442,247
-
The valuation techniques used for measuring the fair value of material assets acquired were as follows:
Inventories – Market comparison technique: the fair value is determined based on the estimated selling price in the ordinary course of
business less the estimated costs of completion and sale, and a reasonable profit margin based on the effort required to complete and
sell the inventories.
Property, plant and equipment – market value technique using and independent valuer: the valuation model considers market prices for
similar items when they are available, and current replacement cost when appropriate. Current replacement cost reflects adjustments
for physical deterioration as well as functional and economic obsolescence.
Mineral rights – market comparison technique: the valuation considers the value of the resource acquired to comparative market values
of similar resources.
Fair values have been measured on a provisional basis
If new information obtained within one year of the date of acquisition about facts and circumstances that existed at the date of
acquisition identifies adjustments to the above amounts, or any additional provisions that existed at the time, then the accounting for the
acquisition will be revised.
(b)
Acquisition of King Of The Hills Gold Project
On 2 October 2017 the Group acquired the assets of the King Of The Hills gold project located in the Eastern Goldfields of Western
Australia, from Saracen Minerals Holdings Limited.
The acquisition comprises an operational shaft and underground development together with supporting site infrastructure adjacent to
the Goldfields Highway and mining centre of Leonora.
The Company has determined that the acquisition of King Of The Hills was an asset acquisition.
72
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
34 ACQUISITIONS (continued)
The following table summarises the fair value of the consideration paid:
Purchase consideration:
Cash
Shares issued
Deferred consideration (payable as cash or shares at the seller’s option)
Fair value of net assets acquired:
Assets
Property, plant and equipment
Mineral rights
Liabilities
Trade and other payables
Environmental rehabilitation and other provisions
Net assets acquired
Goodwill / bargain purchase gain
2018
$
7,000,000
4,500,000
4,245,283
15,745,283
2,716,700
26,493,704
(817,915)
(12,647,206)
15,745,283
-
35 DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785 the wholly owned subsidiaries listed below are relieved
from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and Directors’ reports.
It is a condition of the Instrument that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the
Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries
under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be
liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the
event that the Company is wound up.
The subsidiaries subject to the Deed are:
\ Opus Resources Pty Ltd
\ Darlot Mining Company Pty Ltd
Opus Resources Pty Ltd and Darlot Mining Company Pty Ltd both became party to the Deed of Cross Guarantee on 30 June 2018.
2019 Annual Report
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
35 DEED OF CROSS GUARANTEE (continued)
Statement of Other Comprehensive Income
(a)
A consolidated statement of comprehensive income and a consolidated statement of financial position, comprising of the Company and
controlled entities which are party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee, for the
year ended 30 June 2019 is set out as follows:
Sales revenue
Cost of sales
Gross profit/(loss)
Other income and expenses
Other income
Administration and other expenses
Exploration expenditure
Operating loss
Finance income
Finance expenses
Net financing expense
Loss before tax
Income tax benefit
Net loss after tax for the year
Other comprehensive income/(loss)
Changes in fair value of cashflow hedges
Ineffective portion of cash flow hedges
Total comprehensive loss for the year
CLOSED GROUP
YEAR ENDED
30 June 2019
$
113,915,014
(83,002,694)
30,912,320
364,423
(36,539,642)
(3,185,758)
(8,448,657)
29,520
(1,916,965)
(1,887,445)
30 June 2018
$
80,331,974
(85,416,690)
(5,084,716)
13,338,005
(16,699,344)
(4,727,541)
(13,173,596)
34,103
(1,071,870)
(1,037,767)
(10,336,102)
(14,211,363)
7,569,833
2,459,639
(2,766,269)
(11,751,724)
(4,616,538)
720,472
(6,662,335)
497,966
-
(11,253,758)
74
2019 Annual Report
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
35 DEED OF CROSS GUARANTEE (continued)
(b)
Statement of Financial Position
Assets
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments
Inventories
Total current assets
Trade and other receivables
Property, plant and equipment
Intangible assets
Investments
Deferred tax asset
Total non-current assets
Total assets
Liabilities
Trade and other payables
Employee benefits
Provisions
Income tax payable
Finance lease liabilities
Total current liabilities
Trade and other payables
Employee benefits
Provisions
Deferred tax liability
Finance lease liabilities
Financial liability
Derivative financial instruments
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Other equity
Reserves
Accumulated losses
Total equity
CLOSED GROUP
YEAR ENDED
30 June 2019
$
30 June 2018
$
8,366,567
12,839,812
-
14,470,738
35,677,117
126,022,513
31,675,268
2,332,883
658,386
3,946,127
3,159,373
16,336,552
761,679
10,291,681
30,549,285
83,031,598
33,934,769
4,229,761
658,386
-
164,635,177
121,854,514
200,312,294
152,403,799
22,042,325
4,384,662
-
1,564,236
1,083,533
29,074,756
59,484,243
82,913
15,914,409
-
921,064
10,143,415
5,311,188
91,857,232
120,931,988
79,380,306
260,515,091
930,285
(2,340,753)
(179,724,317)
35,080,754
5,214,697
1,271,464
739,121
667,476
42,973,512
5,503,646
349,465
15,125,662
6,069,001
1,131,216
-
-
28,178,990
71,152,502
81,251,297
260,364,664
930,285
792,369
(180,836,021)
79,380,306
81,251,297
2019 Annual Report
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2019 (continued)
36 PARENT ENTITY DISCLOSURES
(a) Finance position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Contributed equity
Other equity
Reserves
Accumulated losses
Total equity
(b) Finance performance
Profit/(loss) for the year
Other comprehensive income
Total comprehensive profit/(loss) for the year
(c) Financial commitments
Operating leases:
-Not later than one year
-Later than one year but not later than two years
-Later than two years but not later than five years
Total financial commitments
PARENT ENTITY
30 June 2019
$
30 June 2018
$
425,753
165,610,946
166,036,699
85,346,683
1,309,710
86,656,393
260,515,090
930,285
(2,340,754)
(179,724,315)
79,380,306
1,874,650
(3,896,066)
(2,021,417)
61,586
-
-
61,586
12,491,568
94,384,458
106,876,026
20,121,083
5,503,646
25,624,729
260,364,664
930,285
792,369
(180,836,021)
81,251,297
(11,388,001)
497,966
(10,890,035)
147,178
61,753
-
208,931
(d)
Contingent liabilities
The parent entity did not have any contingent liabilities at 30 June 2019 (2018: $nil)
37 SUBSEQUENT EVENTS
Working Capital Facility
The Company entered into an agreement with Macquarie Bank Limited to provide the Company with a A$20 million Working Capital
Facility. This facility includes a hedging amounting to approximately 13,000 ounces per quarter over the term of the loan. The Working
Capital Facility allows the refinancing, on improved terms of the current Gold Loan Facility with Malaysian-based investment fund, Asian
Investment Management Services Ltd and strengthens the Company’s balance sheet and operating liquidity. Subsequent to year-end,
the Gold Loan Facility was fully repaid in August 2019.
76
2019 Annual Report
DIRECTORS’ DECLARATION
The Board of Directors of Red 5 Limited declares that:
(a) the consolidated financial statements, accompanying notes and the remuneration disclosures that are contained in the
Remuneration Report in the Directors’ Report are in accordance with the Corporations Act 2001, including:
\ giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance for the financial year
ended on that date; and
\ complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2.1; and
(c) there are reasonable grounds to believe that the Group will be able to pay its debts as and when they fall due.
(d) At the date of the declaration, the Company is within the class of companies affected by ASIC Corporations (Wholly owned
Companies) Instrument 2016/785. The nature of the deed of cross guarantee is such that each company which is party to the
deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.
The Board of Directors has received the declaration by the Managing Director and Chief Financial Officer required by Section 295A
of the Corporations Act 2001, for the year ended 30 June 2019.
Signed in accordance with a resolution of the Directors.
Kevin Dundo
Chairman
Perth, Western Australia
25 September 2019
2019 Annual Report
77
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
To the shareholders of Red 5 Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of Red 5 Limited
(the Company).
In our opinion, the accompanying Financial Report of
the Company is in accordance with the Corporations Act
2001, including:
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 ended on that date; and
The Financial Report comprises:
Consolidated Statement of financial position as at
30 June 2019
Consolidated Statement of profit or loss and
other comprehensive income, Consolidated
Statement of changes in equity, and Consolidated
Statement of cash flows for the year then ended
Notes including a summary of significant
complying with Australian Accounting Standards
and the Corporations Regulations 2001.
accounting policies
Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year‐end or from time to time
during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of
the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical
responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
Sales Revenue
Property, plant and equipment and Mine
development
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in
our audit of the Financial Report of the current
period.
These matters were addressed in the context of our
audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide
a separate opinion on these matters.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
78
2019 Annual Report
INDEPENDENT AUDITOR’S REPORT (continued)
Sales revenue ($153.5m)
Refer to Note 5(a) to the Financial Report
The key audit matter
How the matter was addressed in our audit
Existence and accuracy of sales revenue was considered
to be a key audit matter. Gold sales revenue from its
Darlot and King of the Hills (KOTH) operations was the
most significant item in the consolidated statement of
profit or loss ($153.5 million).
We focused on the following judgements the Group
applied in determining sales revenue:
Assessing the revenue recognised upon the
adoption of AASB 15 Revenue from Contracts with
Customers. This has resulted in a delay in revenue
recognition from the previous standard AASB 118
Revenue;
The application of hedge accounting for gold
forward contracts in accordance with AASB 9
Financial Instruments. The Group engages external
experts to prepare hedge documentation and
determine hedge ineffectiveness.
Our procedures included:
For gold sales recognised during the year we
obtained the sales invoice and compared the
ounces of gold sold to third party statements
from the refinery and cash received in the bank;
For a sample of sales recorded close to year end
(both 30 June 2018 and 2019), we tested against
the recognition criteria in each period. This
included comparing the Group’s revenue
recognition criteria against the requirements of
AASB 15 to determine control had passed to the
customer;
We evaluated the transition adjustment made as
a result of adopting AASB 15;
For gold sales from KOTH close to the date of
commercial production, we checked those prior
to 1 December 2018 to determine they were
offset against capitalised expenditure;
We compared realised hedging gains and losses
to counterparty statements for gold forward
hedges realised during the year, which have
been recorded in gold sales;
For gold forward hedges not yet realised as at 30
June 2019, we checked open positions to
counterparty statements, recalculated the fair
value of the open positions (recorded as
derivative financial instrument asset or liability)
and checked the hedge effectiveness;
We assessed the scope, objectivity and
competence of the Group’s external experts
responsible for preparation of hedge
documentation and effectiveness assessment.
We evaluated the hedge documentation and
hedge accounting for compliance with AASB 9
Financial Instruments.
2019 Annual Report
79
INDEPENDENT AUDITOR’S REPORT (continued)
Property, plant and equipment ($76.2 million) and Mine Development ($23.9 million)
Refer to Notes 10 and 12 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Existence, accuracy and valuation of expenditure
capitalised as an asset as part of the Group’s mining
operations was considered to be a key audit matter.
Property, Plant and Equipment ($76.1 million) and Mine
Development ($23.9 million), together represent 57% of
total assets.
The Group used judgement in the identification and
allocation of cost between operating and capital
expenditure. The risks we focused on include:
the existence of expenditure capitalised;
Our procedures included:
Test of controls and inputs relating to the
authorisation and accuracy of the recording,
classification and payment of expenditure;
Assessment of the allocation of costs between
operating expenditure (including inventory
stockpiles), capital expenditure and exploration
& evaluation assets by inspecting documentation
on a sample basis and assessing the nature of the
underlying activity;
the capital nature of expenditure particularly the
determination of when the King of the Hills (KOTH)
project was considered capable of operating at
commercial production and in a manner intended
by the Group;
Challenge of the Group’s determination of
commercial production declaration from 1
December 2018 by evaluating the criteria by
which the declaration was made against
underlying documentation; and
the methodology used to allocate costs between
operating expenditure (including inventory
stockpiles), capital expenditure and exploration &
evaluation assets; and
the assessment of the existence of impairment or
reversal indicators of the non‐financial assets
contained within Group’s CGUs including Siana and
Darlot/KOTH CGUs.
Selecting a sample of supplier, contractor and
customer invoices raised during the year and pre
and post commercial production. We checked
the timing and nature of recorded expenditure
against the details of the service description on
the invoice or contract.
Challenging the Group’s assertion as to the
presence of no impairment or reversal indicators.
This included assessing the status of the Siana
mine, financial performance against forecasts
and comparing forecast prices to published views
of market commentators on future trends.
Other Information
Other Information is financial and non‐financial information in Red 5 Limited’s annual reporting which is
provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other
Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors' Report and
Corporate Directory. The Chairman’s Address, Managing Director’s Review, Resources and Reserves Statement,
Tenement Schedule and Statement of Shareholders are expected to be made available to us after the date of the
Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express
an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
80
2019 Annual Report
INDEPENDENT AUDITOR’S REPORT (continued)
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing
so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other Information, and
based on the work we have performed on the Other Information that we obtained prior to the date of this
Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group and Company’s ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless they either intend to liquidate
the Group and Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
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 Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This
description forms part of our Auditor’s Report.
2019 Annual Report
81
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of Red 5
Limited for the year ended 30 June 2019, complies with
Section 300A of the Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report included
in pages 23 to 33 of the Directors’ report for the year
ended 30 June 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
KPMG
R Gambitta
Partner
Perth
25 September 2019
82
2019 Annual Report
STATEMENT OF SHAREHOLDERS
as at 24 September 2019
DISTRIBUTION OF SHARE AND OPTION HOLDERS
Number of holders
Fully paid shares
Unlisted rights
1
1,001
5,001
10,001
100,001
-
-
-
-
1,000
5,000
10,000
100,000
and over
Including holdings of less than a marketable parcel
TWENTY LARGEST HOLDERS OF FULLY PAID SHARES
Shareholder
1.
2.
3.
4.
5.
6.
7.
8.
9.
HSBC Custody Nominees (Australia) Limited
Saracen Mineral Holdings Limited
JP Morgan Nominees Australia Pty Ltd
Citicorp Nominees Pty Ltd
UBS Nominees Pty Ltd
CS Third Nominees Pty Ltd
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Gwynvill Trading Pty Ltd
10. Gary B Branch Pty Ltd
11.
BNP Paribas Noms Pty Ltd
12.
CS Fourth Nominees Pty Ltd
13. Morgan Stanley Australia Securities (Nominees) Pty Ltd
14.
Brispot Nominees Pty Ltd
15.
Dog Meat Pty Ltd
16.
Ponderosa Investments (WA) Pty Ltd
17.
Beehive Shares Pty Ltd
18.
Neweconomy Com Au Nominees Pty Ltd
19.
Bart Superannuation Pty Ltd
20.
John Colin Loosemore & Susan Loosemore
699
1,093
608
1,771
659
4,830
930
Shares
301,247,871
130,600,000
108,395,452
70,625,479
41,800,164
39,945,410
29,473,405
24,956,441
18,435,228
16,500,000
15,245,715
12,396,522
10,458,196
9,091,753
8,000,000
6,270,000
6,232,621
6,067,467
5,933,334
5,632,204
-
-
-
-
32
32
%
24.21
10.50
8.71
5.68
3.36
3.21
2.37
2.01
1.48
1.33
1.23
1.00
0.84
0.73
0.64
0.50
0.50
0.49
0.48
0.45
867,307,262
69.72
2019 Annual Report
83
STATEMENT OF SHAREHOLDERS
as at 24 September 2019 (continued)
CLASSES OF SHARES AND VOTING RIGHTS
At meetings of members or classes of members, each member entitled to vote may vote in person or by proxy or attorney. On a show
of hands every holder of ordinary shares present at a meeting in person or by proxy is entitled to one vote, and on a poll, every person
present in person or by proxy has one vote for each ordinary share held.
SUBSTANTIAL SHAREHOLDERS
The following shareholders have lodged a notice of substantial shareholding in the Company.
Shareholder
Franklin Resources Inc
Saracen Mineral Holdings Limited
Regal Funds Management Pty Ltd
Ruffer LLP
UNQUOTED SECURITIES
The following classes of unquoted securities are on issue:
Number of shares
168,393,728
130,600,000
87,509,251
86,052,277
%
13.53
10.50
7.03
6.92
Security
Number on issue
Name of holder
Performance rights (2020)
Performance rights (2021)
18,318,801
15,241,298
Mark Williams
Mark Williams
Number
5,616,400
4,020,808
%
30.66
26.38
Holders of greater than 20% of each class of security
CORPORATE GOVERNANCE STATEMENT
The Company’s 2019 corporate governance statement can be viewed at http://red5limited.com/corporate-governance-1/
84
2019 Annual Report
CORPORATE DIRECTORY
BOARD OF DIRECTORS
Kevin Dundo (Chairman)
Mark Williams (Managing Director)
Ian Macpherson (Non-Executive Director)
Colin Loosemore (Non-Executive Director)
Steven Tombs (Non-Executive Director)
COMPANY SECRETARY
Frank Campagna
REGISTERED OFFICE
Level 2
35 Ventnor Avenue
West Perth Western Australia 6005
Telephone: (61-8) 9322 4455
E-mail: info@red5limited.com
Web-site: www.red5limited.com
Manila Office
Greenstone Resources Corporation
Rm. 507-508, ALPAP II Building
Trade Street, corner Investment Drive
Madrigal Business Park
Ayala, Alabang
Muntinlupa City
Philippines 1780
Telephone: (63-2) 807 2790
Facsimile: (63-2) 807 6658
SHARE REGISTRY
Security Transfer Australia Pty Ltd
770 Canning Highway
Applecross WA 6153
Telephone: 1300 992 916
Facsimile: (61-8) 9315 2233
E-mail: registrar@securitytransfer.com.au
Web-site: www.securitytransfer.com.au
BANKERS
Commonwealth Bank of Australia Limited
National Australia Bank Limited
AUDITORS
KPMG
SOLICITORS
HopgoodGanim
SyCip Salazar Hernandez & Gatmaitan (Philippines)
STOCK EXCHANGE LISTING
Australian Securities Exchange
Trading code: RED
2019 Annual Report
www.red5limited.com
ABN 73 068 647 610