Annual Report
2020
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
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3
10
17
18
34
38
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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 7,000 shareholders including a strong Australian and
international 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. Ore from Darlot is processed at the 0.83Mtpa Carbon-
in-Pulp (CIP) and Carbon-in-Leach (CIL) gold processing plant located
on-site, which is currently operating at a throughput rate of 1.0Mtpa.
Red 5 has delivered an increase in Mineral Resources and Ore
Reserves at Darlot with an objective to further increase mine life
through the conversion of additional Mineral Resources to Ore
Reserves, new discoveries and bolt-on acquisitions in the region.
In addition, a final feasibility study has been completed for a stand-
alone 4Mtpa bulk mining and processing operation at the KOTH
project, located 80kms south of the Darlot mine. The feasibility study
outlined an ore reserve of 2.4Moz of contained gold for the KOTH
project. Early project development works have commenced and
subject to debt financing and a final investment decision, first gold
production is scheduled for the June 2022 quarter.
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.
2020 Annual Report
At the end of the reporting period,
the Company stands on the cusp
of achieving its goal of establishing
two independent production hubs
in the prolific Eastern Goldfields
region of Western Australia.
Red 5 Chairman,
Kevin Dundo
2020 HIGHLIGHTS
WEST AUSTRALIAN GOLD OPERATIONS
Mining and Processing
\ Proactive response to the COVID-19 global pandemic, with the
successful implementation of a Management Response Plan to ensure
the health, safety and well-being of our people and minimising
operational disruptions.
\ Gold production of 92,779oz for FY20, recovered from a total of 943,861
tonnes of ore processed at an average head grade of 3.3g/t Au.
\ Darlot processing plant consistently operated above its design capacity
of 0.83Mtpa.
\ Operational changes implemented, improving mine dilution performance
and enhancing the long-term stability of the Darlot mining operation.
\ Transitional production strategy implemented for FY21, based on the
Great Western satellite mine to feed the Darlot Mining Hub mine plan.
Current underground mining at King of the Hills (KOTH) to be
progressively scaled down in 1H FY21 ahead of the planned start of
construction activities for the stand-alone bulk mining and processing
operation at KOTH.
King of the Hills (KOTH) Bulk Mining Feasibility Study
\ Final Feasibility Study for the bulk mining operation at KOTH completed
in September 2020.
\ Second-hand 240-room camp accommodation, office and wastewater
treatment plant purchased ahead of the planned commencement of early
works at KOTH in the December 2020 Quarter.
\ Commercial processes underway for crusher and mill purchase and
tendering of EPC and mine services contracts for KOTH.
Exploration and Resource Development
\ Updated JORC 2012 Ore Reserve and Mineral Resource estimates
completed for the Darlot Gold Mine.
\ Updated JORC 2012 KOTH bulk mining Mineral Resource estimate
completed for the Eastern Margin Contact Zone, containing 4.1 million
ounces of contained gold.
\ Maiden JORC Resource estimates completed for the Cerebus-Eclipse
and Centauri satellite deposits, further extending the pipeline of potential
early mill feed sources for the proposed KOTH bulk mining operation.
\ Acquisition of several highly prospective tenements within economic
trucking distance of the Darlot mill, including the Great Western, Cables
and Mission gold deposits and the Emperor and King of the West group
of tenements.
FINANCIAL RESULTS
\ Total gold sales of 92,953 ounces for $200.33 million for FY20.
\ Equity capital raising of $125 million completed in March 2020.
\ Net profit after tax of $4.54 million for the 12 months to 30 June 2020.
2020 Annual Report
1
Message to Shareholders FROM THE CHAIRMAN
Dear Shareholders
Despite what has been an eventful
and at times turbulent macro
environment, overall, the 2020
financial year has been a successful
period for Red 5. At the end of the
reporting period, the Company
stands on the cusp of achieving its
goal of establishing two independent
production hubs in the Eastern
Goldfields region of Western
Australia.
The Company has completed the
Final Feasibility Study (FFS) for the
integrated bulk open pit and
underground mining and processing
operation at King of the Hills (KOTH).
The KOTH mine development, in
conjunction with our existing Darlot
mining operation, has the potential to
increase our group production profile
and elevate Red 5 into the ranks of
Australia’s mid-tier gold producers.
During the year, Red 5 increased the
bulk Mineral Resource base at KOTH
by 31% to 4.1 million ounces of
contained gold, cementing its status
as one of the top-20 potential gold
mines in Australia.
Red 5’s progress over the past year is
reflected by the strong support for a
$125 million capital raising completed
in March 2020, which significantly
strengthened the Company’s balance
sheet and placed us in a strong
position as we progress towards the
KOTH development and steps to
secure project debt funding.
I am pleased to say that Red 5
responded proactively to the
COVID-19 global pandemic and to
date, there has been no direct impact
on gold production as a result of
COVID-19. Red 5 continues to
actively monitor the evolving situation
to minimise any risk to our operations,
our people or to the communities in
which we operate.
Gold production for FY20 was below
target totalling 92,779 ounces. Our efforts
to achieve target were adversely impacted
by production and mine scheduling
delays, short-term crusher and ball mill
performance issues at Darlot and lower
grades than planned at KOTH. Red 5 has
since implemented measures to stabilise
production and improve predictability.
The Company completed a detailed review
of the Darlot gold mining operations late in
the reporting period, with changes
implemented resulting in an improvement
in mine dilution and recoveries.
Red 5 has also articulated a transitional
production strategy that maps out a clear
direction for the Company over the next
18-24 months as we move towards the
targeted start of construction at KOTH.
With the Darlot processing plant currently
receiving around half of its feed from
KOTH, Red 5 is working to expand the
Darlot underground mining activity and
introduce satellite feed to underpin a
long-term, stand-alone processing
operation with no ongoing contribution
from KOTH.
The first step in this transition will be the
start of open pit mining at the nearby
Great Western deposit, which Red 5
acquired in April 2020, where we are
expecting first ore to the Darlot mill in the
December 2020 Quarter.
In addition, we will progressively scale-
down underground ore production at
KOTH in the first half of FY21 to coincide
with the planned start of site construction
for the bulk mining operation. Red 5
mining personnel at KOTH will be utilised
at the Darlot and Great Western mining
operations during FY21 until the start of
the planned stand-alone bulk mining
operation at KOTH.
Another key element of our Darlot Mining
Hub strategy centres on exploration and
resource development, with an increase in
both Reserves and Resources at Darlot
during the reporting period, net of mining
depletion.
A multi-pronged exploration program is
underway at Darlot comprising both
underground exploration drilling and near-
mine regional surface exploration. Red 5
acquired several highly prospective
tenements during the year that lie within
economic trucking distance of the Darlot
mill and these targets will be
progressively tested over the coming
months.
In addition to our core Western Australian
assets, Red 5 also retains an interest in
the Siana Gold Project in the Philippines,
where mining operations were suspended
in April 2017. We are continuing to
evaluate opportunities to maximise the
value from these assets for shareholders.
As we look to the future, the coming 12
months is set to be a transformational
period for Red 5 with the imminent
delivery of the KOTH development and
with existing cash resources and planned
debt financing facilities positioning the
Company to efficiently transition into
production at KOTH in the first half of the
2022 calendar year.
The exceptional progress we have made
over the past year is due to the hard work
and commitment of the Red 5 team, led
by our Managing Director Mark Williams. I
would like to extend my sincere thanks to
the entire team for their efforts,
particularly given the challenges
presented by the COVID-19 pandemic.
I would also like to acknowledge the
strong support of our shareholders
throughout the year.
With the foundations put in place to date,
Red 5 has a clear pathway to emerge as a
significant mid-tier gold producer at a
time of record strength in the Australian
gold sector.
Kevin Dundo
Chairman
18 September 2020
2
2020 Annual Report
Message to Shareholders FROM THE MANAGING DIRECTOR
The past financial year has seen Red 5 make
significant progress towards realising the
Company’s vision of becoming 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.
The continued growth in the Company’s
market capitalisation and profile during the
year reflected an enormous amount of hard
work, dedication and commitment by all
members of the Red 5 team. Our employees
have been supported by an equally dedicated
group of contractors who have helped
oversee a growing and diversifying business
which includes the full spectrum of activities
required for a successful gold mining
business – from grass-roots exploration
through to the mining, processing and
production of gold.
Of the many achievements during the year,
one of the most important has been the Final
Feasibility Study (FFS) for the bulk mining
and processing operation at King of the Hills
(KOTH). This represents an outstanding
achievement in a year that has seen so much
uncertainty and upheaval in the form of the
COVID-19 pandemic.
Red 5’s mining operations over the past year
delivered total gold production from Darlot
and KOTH of 92,779 ounces at an all-in
sustaining cost (AISC) of A$1,798 per ounce
of gold sold.
Exploration success, particularly at KOTH,
has been one of the keys to Red 5’s growth
over the past few years. Our exploration,
geology and mining teams once again
delivered significant uplifts in both the KOTH
bulk Mineral Resource and the Darlot
Reserve and Resource base, as well as
maiden Mineral Resource estimates for
several near-mine open pit deposits
surrounding KOTH.
Exploration will remain a key focus in FY21,
particularly at Darlot where several strategic
bolt-on acquisitions were made during the
year to significantly expand the Company’s
tenement position. Red 5’s exploration
strategy at Darlot is aimed at establishing the
Darlot Gold Mine as a stand-alone mining
and processing hub, with a targeted 5-10
year mine life, with no ongoing contribution of
ore from the stand-alone KOTH operation.
Darlot and KOTH locations, showing historical production from key gold deposits in the region.
HEALTH AND SAFETY
The Company’s Darlot mine is certified to OHSAS 18001, a leading health and safety
standard and work has commenced on upgrading management systems to the new
ISO 45001 standard, which provides additional benefits including:
\ implementation of a more integrated approach to health and safety management, with
our company leaders driving performance;
\ an emphasis on identifying potential risks and employing pre-emptive measures; and
\ inclusion of suppliers and contractors in the management of health and safety.
The Company continues to strive to develop a culture of safety leadership within the
organisation and firmly embed safety management as a line management responsibility.
This is achieved through:
\ utilisation of fit-for purpose management systems aligned to critical control
management; and
\ continued support for the Red 5 behaviour based programme, Vital Behaviours, to
embed the right safety behaviours and choices at crucial moments at work.
2020 Annual Report
3
Message to Shareholders FROM THE MANAGING DIRECTOR (cont.)
Red 5 ensures compliance with all
occupational health regulations. All
monitoring is undertaken according to the
Company’s risk based hygiene
management plan, developed with
occupational hygienist consultation and
expertise.
Red 5 continues to proactively manage the
potential impact of the COVID-19 global
pandemic on the Company’s operations.
The Management Response Plan
implemented in February 2020 is focused
on ensuring the health and safety of Red 5
personnel and limiting the disruption risk to
mining and processing operations. This
plan has been progressively developed in
line with the formal guidance of State and
Federal health authorities, close
coordination with the Australian Resources
and Energy Group (AMMA) and under the
Company’s existing Emergency
Management Policies. Red 5 continues to
fully adhere to all relevant government
regulations.
There has been no direct material impact
from COVID-19 on the Company’s
operational performance to date.
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 milling 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 year.
Following the identification of a large-scale
potential bulk mining opportunity at KOTH
during FY19, Red 5 has during the recent
reporting period, increased the total bulk
Mineral Resource to 4.1 million ounces of
contained gold and has completed the
KOTH FFS.
WEST AUSTRALIAN GOLD OPERATIONS
Production summary
A total of 92,779 ounces of gold was recovered for the 12 months to 30 June 2020 with ore
sourced from the Darlot gold mine and from KOTH.
A summary of key production statistics for FY-20 is provided below:
Darlot Gold Mine – Mine production statistics
Mined tonnes
Mined grade
Contained gold in ore
KOTH Gold Mine – Mine production statistics
Total mined tonnes
Mined grade
Contained gold in ore
Ore trucked to Darlot for processing
Total mined tonnes
Mined grade
Contained gold in ore
Ore stockpiled at KOTH
Total mined tonnes
Mined grade
Contained gold in ore
FY-20
574,980t
3.46g/t
63,921oz
FY-20
567,121t
2.57g/t
46,920oz
436,292t
2.71g/t
38,075oz
130,829t
2.10g/t
8,845oz
FY-19
496,896t
4.43g/t
70,801oz
FY-19
403,355t
3.15g/t
40,844oz
395,113t
3.16g/t
40,099oz
26,676t
1.48g/t
1,267oz
In the latter part of the year, Red 5 undertook a comprehensive peer review (mine) and
external review (geology) of mining operations and implemented the following operational
initiatives:
\ Addressed gaps in stope design, geology and mining management systems that were
contributing to mine grade and dilution under performance;
\ Added specific personnel resources to improve Resource modelling and grade control;
\ At KOTH, adjusted stope designs to a combination of bulk mining and high-grade
narrow vein stopes to deliver planned ore grades of ~3g/t Au;
\ Introduced Short Interval Control and communication between key production areas,
ensuring that volume and grade are delivered to plan;
\ Implemented crusher improvements and reduced screen/material size, increasing
throughput;
\ Improved ROM pad and haulage contractor management;
\ Made improvements to the transparency of mine reconciliation processes; and
\ Commissioned an external technical review to assess modelling and reconciliation
processes.
Following the progressive implementation of these changes, the Darlot mine has produced
at forecast rates with average head grades improving to ~3.5g/t in June 2020. The variation
in grade delivery also improved from 30% to 5%, resulting from reduced dilution and
improving mill feed predictability.
4
2020 Annual Report
Message to Shareholders FROM THE MANAGING DIRECTOR (cont.)
Processing
Crusher and mill availabilities were 79.6% and 98.1% respectively
for FY20. A total of 943,861 tonnes of ore was milled at a
throughput of 111 dry tonnes per hour.
Darlot mill processing statistics
Void
Void
Planned
Stoping
Ore milled
Average head grade
Recovery
Gold recovered
Gold sales
FY-20
943,861t
3.30g/t
92.6%
92,779oz
92,953oz
FY-19
907,004t
3.79g/t
92.4%
102,012oz
98,240oz
Since its acquisition by Red 5 in October 2017, the Darlot
processing plant has generally operated efficiently, however, a
series of unplanned outages in the second half of the financial year
had a considerable impact on the performance of the current year
operations. Several preventative maintenance initiatives were
executed during the year to improve the long-term reliability of the
mill, including:
\ A review and trial of Primary Ball Mill liner design, improving
flow and stability and reducing or removing pegging and
blockages at the discharge grates;
\ Crushing plant structural reinforcement/realignment to reduce
spillage, improve conveyor alignment and reduce belt failures,
resulting in improved throughput;
\ Replacement of the armoured chain conveyor for the apron
feeder including increasing the size of the Haglan Drive,
resulting in improvements in hydraulics, power and delivery;
\ Introduction of a tank refurbishment program, including
upgrades to the Leach Tank 1 agitator with central oxygen
injection and complete rebuilds of Absorption Tanks A2 and A8.
This has reduced downtime and increased absorption time to
maintain high recovery levels; and
\ Installation of primary and secondary gravity concentrators with
the installation of a new Falcon unit.
Mining activities - Darlot
The high-grade Oval West deposit was the primary ore source from
the Darlot Gold Mine, with bulk stoping continuing throughout most
of FY20. The majority of high-grade stopes at Oval West were
largely depleted by the end of the reporting period.
Bulk stoping was also undertaken in the Centenary (Lillie, Walters
and Lords) and Burswood orebodies. Airleg mining was
undertaken at the Pederson, Hurst, Metzke and Federation areas.
Additional remnant stoping fronts were identified in the Centenary
orebody during the year and mined as a sub-level cave. Results
were positive during the extraction period and mill performance
confirmed higher grades than expected. Further similar remnant
areas have been identified in close proximity and re-risked by grade
control drilling for extraction in FY21. Airleg mining in the BO1040
and Hurst resulted in positive reconciliations with visible gold
retrieved on numerous occasions.
Cross-section of BO1080 Panel A & B
FY21 Remnant Production
Centenary
Stope Voids
BO_1080 West
Stopes
BO_1080 East
Stopes
Millennium Decline
FY21 Centenary remnant stopes
Mining activities – King of the Hills
Mining at KOTH comprised bulk underground stoping, narrow vein
stoping and airleg mining. Bulk stoping was undertaken at the
W4920, the first level at KOTH designed specifically for bulk
stoping, as well as on the W4954 B1, W4970 and W4952 levels.
Additional stoping was undertaken on the W5010, W4975, W4950
and E5050 levels from a mixture of bulk and narrow stopes. Narrow
vein stopes were focused on the high-grade lodes on the north side
of W4920 level with the Jon, Janos and Jaqen lodes. At the end of
the reporting period, development had reached the W4985 level
including the primary ventilation network.
With the acquisition of the Great Western project in April 2020, the
opportunity is being taken to commence open pit mining from the
December Quarter 2020 and progressively scale down
underground ore production at KOTH in the second half of CY2020.
This will coincide with the planned start of site construction for the
proposed bulk mining operation at KOTH.
2020 Annual Report
5
Message to Shareholders FROM THE MANAGING DIRECTOR (cont.)
FEASIBILITY STUDIES – KING OF THE HILLS PROJECT
The Final Feasibility Study (FFS) for the stand-alone integrated bulk open pit and
underground mining and processing operation at KOTH was a key focus for Red 5
throughout FY20. The FFS was completed in mid-September 2020.
As part of early works commitments, Red 5 acquired a 240-room portable accommodation
complex, five laundries, a wastewater treatment plant and a 1,050 m2 modular office
building. This infrastructure is being delivered to the KOTH site and will be progressively
installed. This will allow the Company to commence early site works at KOTH in the
December 2020 Quarter.
Negotiations are also being finalised for final purchase agreements of a Single-Stage
Semi-Autogenous Grinding (SAG) mill and a gyratory crusher.
Significant infrastructure already exists at King of the Hills including the mine portal and underground
development.
EXPLORATION AND
RESOURCE DEVELOPMENT
DARLOT
Underground exploration
Underground exploration during FY20
focused on the Lords Felsics orebody,
situated along the moderately northwest
dipping Lords Fault which hosts the Lords
South and Lords South Lower orebodies
up-dip. The Lords Felsics orebody consists
of flat lying extensional veins hosted in both
magnetic dolerite and felsic porphyry
intrusives within dolerite. The veins occur as
tensional lodes between the Lords and
parallel Pipeline Fault that was identified
with 3D seismic data. Drilling successfully
extended the high-grade central corridor of
the orebody to the north and south as well
as down-dip along the Lords Fault.
Drilling at Lords Felsics also targeted the
Pipeline structure 200m east of the current
Lords South Lower mine workings at the
600mRL (860m below surface). The
structure is sub-parallel to the steep
west-dipping Lords Structure. This drilling
targeted the expected intersection of the
Pipeline and flat Chappel lode up-dip of the
existing Resource. The Pipeline was
intersected at a greater depth than
modelled with several mineralised zones
present, thereby extending the Resource.
For FY21, approximately 22,500m of
underground exploration drilling has been
initially planned for Darlot, targeting Oval
North West, Middle Walters South along the
Eldorado trend, Lords Felsics Northern
Extension, Eldorado North and Oval
Flattening.
Second-hand portable accommodation units comprising 240 rooms.
6
2020 Annual Report
Message to Shareholders FROM THE MANAGING DIRECTOR (cont.)
Surface exploration
Great Western
KING OF THE HILLS
Bulk Mineral Resource update
Red 5 signed an Option Agreement to
purchase the Great Western project in
November 2019 and subsequently undertook
a programme of diamond and reverse
circulation due diligence drilling. The Great
Western gold deposit is located within 80km
trucking distance of the Darlot Mill and
represents a potential source of mill feed for
the Darlot Mining Hub strategy.
Results from RC drilling confirmed the widths
and grade of the main Great Western
laminated quartz vein, with best results
including:
\ 9.0m @ 3.30g/t Au from 49.0m
(19GWRC001)
\ 14.0m @ 2.52g/t Au from 79.0m
(19GWRC002)
\ 8.0m @ 1.22g/t Au from 42.0m
(19GWRC003)
\ 20.0m @ 6.07g/t Au from 113.0m
(19GWRC003)
Cables and Mission
Red 5 signed an Option Agreement to
purchase the Cables and Mission project,
located 10km from Darlot, in December 2019,
and undertook a program of due diligence
drilling to validate historical drilling results and
determine the potential of the Cables and
Mission deposits.
This program comprised six reverse
circulation drill holes for 858m, with best
intercepts of:
\ 7m @ 5.7g/t Au (20MIRC0001)
Red 5 completed an 85,000-metre underground diamond drilling program at KOTH
during FY20 aimed at:
\ Converting as much of the existing Underground Resource into Ore Reserves for
inclusion in the FFS;
\ Reassessing the final pit shape to determine whether more of the underground
Resource can be included in the pit due to grade uplift in both the North and South;
and
\ Testing potential extensions of the existing underground Resource along strike and
down-dip.
In addition, the Company completed assaying of its inventory of ~32,000m of previously
unassayed drill core from 518 historical diamond drill holes, confirming the presence of
significant gold mineralisation and revealing significant zones in areas that had been
assigned zero grade in the May 2019 Resource model.
Following the completion of these programs, in March 2020 Red 5 reported an updated
bulk mining Mineral Resource estimate for the KOTH Gold Project comprising 90.7 million
tonnes at 1.4g/t Au for an estimated 4.07 million ounces of contained gold.
Compared to the May 2019 Mineral Resource estimate, the March 2020 Mineral
Resource model delivered a significant increase in the open pit component of the Mineral
Resource (and a reduction in the underground Mineral Resource). This is due to a large
proportion of the contained ounces within and outside of the May 2019 Underground
Resource estimate now falling into the much larger optimised pit shell.
Regional satellite deposits
During the reporting period, Red 5 completed regional surface drilling programmes at
several near-mine targets at KOTH, aimed at defining potential open pit ore sources.
These drilling programs underpinned the delivery of maiden JORC 2012 Mineral
Resource estimates for the Cerebus-Eclipse and Centauri near-mine deposits at KOTH,
adding to the previously reported Resources for the Rainbow and Severn deposits
delivered in FY19.
These satellite deposits are an important element of Red 5’s proposed mining strategy
for the KOTH Project, with the potential to provide open pit mill feed and cash flow in the
early stages of a proposed bulk mining operation.
\ 4m @ 14.7g/t Au (20MIRC0002)
Down-plunge deeps exploration
Red 5 has identified the potential to further expand on the bulk Mineral Resource at
KOTH by targeting the northerly down-plunge extension along the granodiorite intrusion.
This opportunity was identified from a series of historical diamond drill holes undertaken
by previous owners in 2008 and 2010 which returned high-grade results including 4.0m
@ 30.7g/t Au (TARD4041) and 1.0m @ 13.6g/t Au (TARD4007).
A three-hole “proof of concept” drill program was undertaken by Red 5 to follow-up this
potential. The results further enhance the potential to extend the Resource area at KOTH
and highlight the northerly plunge of the granodiorite intrusive margins as a compelling
Resource extension target.
\ 5m @ 3.7g/t Au (20CBRC0003)
The Cables and Mission deposits are hosted
within similar rock units, including magnetic
dolerite, that host the Centenary orebody,
10km to the south. These magnetic dolerite
units are an important host rock in the Darlot
mine area and have historically produced high
gold grades with good recoveries (typically
>93%) through the Darlot processing plant.
Red 5 plans to undertake additional drilling
programs and other feasibility activities to
enable the estimation of a JORC 2012
compliant Mineral Resource.
2020 Annual Report
7
Message to Shareholders FROM THE MANAGING DIRECTOR (cont.)
50 000mE
50 800mE
51 600mE
5 200mRL
4 800mRL
4 400mRL
3
4
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KHRD0278
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Long section through looking west, displaying drill trace of KHRD0278 (blue) relative to the underground workings (grey), historical TARD holes (green)
and granodiorite (pink).
Location of the Cerebus-Eclipse, Centauri, Rainbow and Severn near-mine deposits at KOTH.
8
2020 Annual Report
Message to Shareholders FROM THE MANAGING DIRECTOR (cont.)
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 maintaining dewatering of the open pit, infrastructure maintenance,
monitoring of geotechnical issues and community and government relations activities.
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.
CORPORATE
Capital raising
In March 2020 the Company undertook a $125 million capital raising in two tranches via a
share placement to sophisticated and professional investors to underpin the Company’s
growth objectives. The placement was oversubscribed with both existing shareholders and
new Australian and international institutional investors participating.
The placement significantly de-risks the funding requirements to develop the integrated
bulk open pit and underground mining and stand-alone processing operation at KOTH.
Bolt-on acquisitions to expand Darlot Mining Hub
Red 5 acquired a number of new tenements surrounding the Darlot processing plant during
the year, as part of its strategy to expand the Darlot Mineral Resource base, which includes
ongoing near-mine and regional exploration as well as the consolidation of strategic
opportunities.
Strategic project acquisitions during the year included:
\ Sub-lease over the 13 blocks of Exploration Licence E37/1220 (Sub-lease Area) south
of latitude -27°45’, which hosts the Cables and Missions gold deposits.
\ 100% interest in Mining Lease M37/54, containing the Great Western gold deposit,
located approximately 80km by road to the south of the Darlot processing plant.
\ Extensive tenement package including the highly prospective Emperor and King of the
West Projects. The Emperor tenements are adjacent to Red 5’s existing Ockerburry
project and the King of the West tenement is located ~7km south of the Great Western
project.
Financial
The Group recorded sales revenue of $200.3 million. Net cash flow from operating activities
was $51.5 million with $122.3 million in cash and in metal accounts at year end. The net
profit after tax for the year ended 30 June 2020 was $4.54 million in comparison to a net
loss after tax for the year ended 30 June 2019 of $3.03 million.
In August 2019, Red 5 entered into an agreement with Macquarie Bank Limited to provide
the Company with an A$20 million working capital facility, which allowed the refinancing of
a gold loan facility and strengthened Red 5’s balance sheet and operating liquidity.
The Company is also well advanced with
negotiations with prospective financiers to
secure the debt funding component for the
KOTH development. We expect to
commence early site works in the
December 2020 Quarter.
In parallel with these activities, we remain
firmly focused on delivering strong and
reliable gold production based on the
transitional production strategy announced
in June 2020. This strategy will see the
Darlot mill being fed by three mines in FY21,
with the commencement of open pit mining
at the Great Western deposit in the
December 2020 Quarter and the
progressive scale-down and suspension of
mining at KOTH.
In addition, we have a multi-pronged
exploration programme underway at Darlot,
aiming to establish the Darlot Gold Mine as
a stand-alone mining and processing hub,
with an aspirational objective of a 5-10 year
mine life.
This programme comprises three separate
work streams – underground drilling to
expand the Darlot Mineral Resource, with
22,500m of underground drilling planned for
FY21; the development of regional targets
within trucking distance of the Darlot mill,
with over 50,000m of drilling currently
planned across the Cables and Mission,
Great Western and Ockerburry targets; and
the evaluation of further new bolt-on
acquisitions and prospective tenement
applications.
There is no doubt that it will be an intensely
active and productive year ahead. The
positive outlook for the Company is due to
the outstanding efforts and achievements of
the hard-working Red 5 team, and I would
like to sincerely thank all of our staff and
contractors for their efforts over the past
year.
I would also like to thank our shareholders
for your continued support.
Summary and outlook
With the completion of the FFS for the KOTH bulk mine development and backed by the
recent $125 million capital raising, the coming 12 months are expected to be a period of
substantial growth for Red 5 as the Company prepares to make the transition to operating
two independent mining and processing hubs in the Eastern Goldfields.
Mark Williams
Managing Director
18 September 2020
2020 Annual Report
9
MINERAL RESOURCES AND ORE RESERVES STATEMENT
WESTERN AUSTRALIAN GOLD OPERATIONS
During the 2020 financial year, Red 5 reported an updated Mineral Resource estimate for the King of the Hills (KOTH) gold project. Drilling
and resource definition programmes completed during the reporting period resulted in an updated open pit and underground Mineral
Resource estimate for KOTH totalling 90.7Mt at 1.4g/t Au for 4.1Moz of contained gold as at May 2020. In addition, Red 5 also reported
maiden JORC 2012 Mineral Resource estimates for the Centauri and Cerebus-Eclipse satellite deposits at KOTH.
Red 5 acquired the Great Western project in April 2020 which contains a JORC 2012 resource of 62koz of contained gold. Red 5 also
acquired an exclusive sub-lease over the southern portion of Exploration Licence E37/1220 which contains the Cables and Missions
resources with a JORC 2004 resource of 185koz of contained gold.
The Company’s Mineral Resource and Ore Reserve estimates, net of mining depletion, as at 30 June 2020 are detailed below.
DARLOT GOLD MINE JORC 2012 UNDERGROUND RESOURCES AND RESERVES AS AT 30 JUNE 2020
Total Mineral Resources - Darlot Gold Mine as at 30 June 2020
Cut off
Au g/t
Mining
method
Classification
Tonnes (kt)
Au g/t
Contained
Au (koz)
Project
Darlot
Great Western
Underground sub-total
Darlot
Great Western
Open pit sub-total
Broken stocks
ROM stockpile
Stocks sub-total
Total
Measured
2.0
UG
Indicated
Inferred
Measured
1.5
UG
Indicated
Inferred
Measured
0.5
OP
Indicated
Inferred
Measured
0.5
OP
Indicated
Inferred
Var
Var
UG
UG
Measured
Measured
Measured
0.5-2.0
All
Indicated
Inferred
7
5,706
3,287
-
17
101
9,119
-
890
1,790
130
330
130
3,270
5
66
71
78
6,596
5,077
11,752
9.8
4.4
3.5
-
4.0
2.9
4.1
-
1.2
0.8
2.6
3.2
1.5
0.8
2.7
1.5
1.6
4.2
4.0
2.6
3.4
2.2
811
375
-
2
9
1,200
-
36
46
11
34
6
132
0.5
3.2
3.7
6
847
421
1,273
Grand total
0.5-2.0
All
10
2020 Annual Report
MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.)
Total Mineral Resources - Darlot Gold Mine as at 30 June 2019
Cut off
Au g/t
Mining
method
Classification
Tonnes (kt)
Au g/t
Contained
Au (koz)
Project
Darlot
Underground – sub-total
Broken stocks
ROM stockpile
Stocks sub-total
Total
Grand total
Difference
Measured
2.0
UG
Indicated
Inferred
Var
Var
UG
UG
Measured
Measured
Measured
0.5/2.0
All
Indicated
Inferred
0.5/2.0
All
Measured
0.5-2.0
All
Indicated
Inferred
7
4,465
2,914
7,386
3
8
11.0
18.0
4,465
2,914
7,397
60
2,131
2,163
4,355
9.8
4.8
3.7
4.4
5.4
3.7
4.2
6.4
4.8
3.7
4.4
-2.1
-0.8
-1.1
-1.0
2.0
694
344
1,040
1
1
2
3.6
694
344
1,042
2
153
77
232
Grand total (difference)
0.5-2.0
All
Darlot Ore Reserves as at 30 June 2020
Project
Darlot
Total
Mining
Method
UG
Cut Off
Au (g/t)
2.0 - 2.3
2.0 - 2.3
Variable
Variable
Variable
Darlot Ore Reserves as at 30 June 2019
Darlot
Total
Difference
Total
Production FY20
UG
UG
2.0 - 2.3
2.0 - 2.3
Variable
Variable
Variable
2.0 - 2.3
2.0 - 2.3
Variable
Variable
Variable
Classification
Tonnes (kt)
Au (g/t)
Contained Au
(koz)
Recovered Au
metal (koz)
Proved
Probable
Broken stocks
ROM stockpile
Proved
Probable
Broken stocks
ROM stockpile
Proved
Probable
UG broken
stocks
ROM stockpile
11.9
2,607
5.3
65.9
2,690
1.4
1,700
3
8
1,713
10
907
2
58
977
575
2.2
2.8
2.7
1.5
2.8
7.9
3.7
5.4
3.7
3.7
-5.7
-0.9
-2.7
-2.2
-0.9
3.5
0.8
234
0.5
3.2
239
0.3
200
1
1
201
0.5
34
-1
2
38
64
0.8
219
0.4
3.0
223
0.3
188
1
1
189
0.5
31
-1
2
34
57
2020 Annual Report
11
MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.)
KING OF THE HILLS JORC 2012 UNDERGROUND RESOURCES AND RESERVES AS AT 30 JUNE 2020
KOTH Resources as at 30 June 2020
Project
KOTH
Cut off
Au g/t
Mining
method
0.4
OP*
1.0
UG*
Total KOTH at 30 June 2020
Variable
All
KOTH - Regional Resources as at 30 June 2020
Rainbow
0.6
OP
Severn
Centauri
0.4
OP
0.5
OP
Cerebus-Eclipse
0.5
OP
Total regional resources at 30 June 2020
Variable
OP
Total KOTH and KOTH regional resources as at 30 June 2020
OP
All projects at 30 June 2020
Variable
KOTH stockpiles (OP)
KOTH broken stocks
KOTH stocks at Darlot ROM
Total KOTH and KOTH regional resources
1.0
UG
0.0
Variable
Variable
Variable
Variable
OP
UG
UG
All
Total KOTH and KOTH regional resources at 30 June 2019
Variable
All
Difference
Total KOTH and KOTH regional resource
Variable
All
Production for FY20
12
2020 Annual Report
Classification
Tonnes (kt)
Au g/t
Contained
Au (koz)
Indicated
Inferred
Sub total
Indicated
Inferred
Sub total
Indicated
Inferred
Total
Indicated
Inferred
Sub total
Indicated
Inferred
Sub total
Indicated
Inferred
Sub total
Indicated
Inferred
Sub total
Indicated
Inferred
Total
Indicated
Inferred
Sub total
Indicated
Inferred
Sub total
Indicated
Measured
Measured
Sub total
Measured
Indicated
Inferred
Total
Indicated
Inferred
Sub total
Measured
Indicated
Inferred
Sub Total
65,800
14,600
80,400
4,000
6,300
10,300
69,800
20,900
90,700
1,380
200
1,580
480
440
920
1,390
320
1,710
2,160
650
2,810
5,410
1,610
7,020
71,210
16,210
87,420
4,000
6,300
10,300
2,810
162
13
2,985
175
81,005
22,510
103,690
54,997
13,540
68,537
175
26,008
8,970
35,153
567
1.3
1.4
1.3
2.2
2.0
2.1
1.3
1.6
1.4
1.3
1.4
1.3
1.7
1.5
1.6
1.5
1.3
1.5
1.3
1.1
1.3
1.4
1.3
1.4
1.3
1.4
1.3
2.2
2.0
2.1
0.5
1.6
2.4
0.6
1.6
1.3
1.6
1.4
1.4
1.8
1.5
1.6
-0.1
-0.3
-0.1
2.6
2,720
650
3,370
290
410
700
3,010
1,060
4,070
58
9
67
27
21
48
68
13
81
89
23
112
242
67
308
2,962
717
3,678
290
410
700
40
8
1
49
9
3,341
1,127
4,476
2,438
790
3,228
9
903
336
1,249
47
MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.)
KOTH Reserves as at 30 June 2020
Cut Off
Au (g/t)
Mining
Method
Classification
Tonnes (kt)
Au (g/t)
Contained
Au (koz)
Recovered Au
metal (koz)
Project
KOTH 1
Regional
Broken stocks
ROM stockpile
Total
2.0
0.43
0.37
Variable
Variable
KOTH Reserves as at 30 June 2019
KOTH
Regional
Broken stocks
ROM stockpile
Total
Difference
KOTH
Regional
Broken stocks
ROM stockpile
Total
Production for FY20
2.0
-
-
Variable
Variable
2.0
Variable
Variable
UG
OP
OP
UG
UG
UG
OP
OP
UG
UG
UG
OP
OP
UG
UG
Probable
Probable
Probable
Probable
Probable
199
36,000
1.4
162
12.5
36,376
Probable
1,301
Probable
Probable
Probable
Probable
Probable
Probable
-
-
8.1
29.5
1,339
-1,102
36,000
1.4
154.3
-17
35,037
567
2.8
1.3
1.0
1.6
2.4
1.3
3.2
-
-
3.3
1.9
3.2
-0.4
1.3
1.0
-1.7
0.5
-1.9
2.6
18.1
1,448
44.2
8
0.9
1,519
16.9
1,354
41.3
7.6
0.9
1,421
133
125
-
-
1
2
-
-
1
2
136
127
-115
1,448
44
7
-1
1,383
47
-108
1,354
41
7
-1
1,293
36
1 Subsequent to the end of the financial year, current underground mining at KOTH will be progressively scaled-down in the second half of the
2020 calendar year in advance of the planned commencement of construction activities for a proposed stand-alone bulk mining and
processing operation (refer to ASX release dated 16 July 2020). In September 2020 Red 5 reported the results of the KOTH final feasibility
study which included a Probable Open Pit and Underground Ore Reserve for the KOTH project of 64.6Mt grading 1.2g/t Au for 2.4Moz of
contained gold (refer to ASX release dated 15 September 2020, KOTH Final Feasibility Study delivers 2.4Moz Ore Reserve, underpinning an
initial 16-year mine life and confirming a clear pathway to production in 2022).
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 2020 has been
undertaken, with no resultant change from the figures quoted as at 30 June 2019.
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 2020. 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.
2020 Annual Report
13
MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.)
SIANA JORC 2012 OPEN PIT MINERAL RESOURCE AND ORE RESERVE AS AT 30 JUNE 2020
Siana Open Pit Mineral Resource as at 30 June 2020
Estimate
30 June 2020 JORC 2012
Classification
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
650
30
290
970
3.7
2.8
1.1
2.9
7.9
1.2
6.6
7.3
Contained
Au (koz)
Contained
Ag (koz)
77
3
10
90
164
1
61
226
There were no changes to the Siana Open Pit Mineral Resource as reported at 30 June 2019.
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 2020
Estimate
Classification
30 June 2020 JORC 2012
Probable 1
ROM stockpile
Total
Cut Off
Au (g/t)
-
0.7
0.7
Tonnes (kt)
Au g/t
Ag g/t
-
290
290
-
1.1
1.1
-
6.6
6.6
Contained
Au (koz)
Contained
Ag (koz)
-
10
10
-
61
61
1 No JORC 2012 Open Pit Reserve is reported as at 30 June 2020 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 2019.
SIANA JORC 2012 UNDERGROUND MINERAL RESOURCE AND ORE RESERVE AS AT 30 JUNE 2020
Siana Underground Mineral Resource as at 30 June 2020
Estimate
Classification
30 June 2020 JORC 2012
Indicated
Inferred
Total
Cut Off Au
(g/t)
2.4
2.4
2.4
Tonnes (kt)
Au g/t
Ag g/t
3,400
500
3,900
5.2
9.3
5.7
7.2
11.2
7.7
Contained
Au (koz)
Contained
Ag (koz)
566
153
719
779
186
964
There were no changes to the Siana Underground Mineral Resources as reported at 30 June 2019.
Siana Underground Ore Reserve as at 30 June 2020
Estimate
30 June 2020 JORC 2012
Classification
Probable
Total
Cut Off Au
(g/t)
Tonnes (kt)
Au g/t
Ag g/t
2.4
2.4
3,010
3,010
4.1
4.1
6.7
6.7
Contained
Au (koz)
Contained
Ag (koz)
396
396
644
644
There were no changes to the Siana Underground Ore Reserve as reported at 30 June 2019.
MAPAWA JORC 2012 OPEN PIT MINERAL RESOURCE
Mapawa JORC 2012 Resource as at 30 June 2020
Estimate
Classification
30 June 2020 JORC 2012
Indicated
Inferred
Total
Cut Off Au
(g/t)
0.7
0.7
0.7
Tonnes (kt)
Au g/t
Ag g/t
3,270
5,560
8,830
1.0
1.0
1.0
3.5
2.5
2.9
Contained
Au (koz)
Contained
Ag (koz)
103
185
289
371
438
809
There were no changes to the Mapawa Open Pit Mineral Resources as reported at 30 June 2019.
14
2020 Annual Report
MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.)
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
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 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.
Ore Reserve for Siana gold operations
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 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.
2020 Annual Report
15
MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.)
General notes on Mineral Resources and Ore Reserves
Notes on Mission and Cables gold deposits
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. Figures take into account mining
depletion as at 30 June 2020. Broken stocks for KOTH includes material at
surface and underground.
1. The information that relates to the JORC 2004 Cables and Mission
resources refer to ASX releases Option Agreement signed to purchase
Cables and Mission gold deposits, dated 2 December 2019, and Red 5
exercises option to complete acquisition of the Cables and Mission gold
deposits, dated 22 May 2020.
Notes on Siana Open Pit JORC 2012 Mineral Resources and
Ore Reserves
1. Mineral Resources at the Siana open pit is extracted from the report
titled Siana Gold Project – Open Pit Mining Review and Reserve
Update, released on 24 September 2015.
2. 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 2020.
Notes on Siana Underground JORC 2012 Mineral Resources
and Ore Reserves
1. The information that relates to Mineral Resources for the Siana
Underground is extracted from the report titled Siana Underground
Mineral Resource dated 23 February 2016.
2. The information that relates to Ore Reserves at the Siana Underground
is extracted from the report titled Siana Gold Project: Underground
Mine Approved for Development Following Completion of Positive
Updated Feasibility Study dated 14 June 2016.
Notes on Mapawa JORC 2012 Mineral Resources
1. The information that relates to the Mineral Resources at the Mapawa
Project is extracted from the report titled Maiden 289,000oz Gold
Resource for Mapawa LSY Deposit, dated 21 October 2015.
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.
The estimates and supporting data and documentation are
reviewed by qualified Competent Persons (including estimation
methodology, sampling, analytical and test data).
Notes on Darlot JORC 2012 Mineral Resources and Ore
Reserves
1. The information reported that relates to the Mineral Resources and Ore
Reserves for the Darlot Underground deposit relates to updates since
the ASX release titled Resource and Reserve growth to support
long-term Mining Hub Strategy at Darlot Gold Mine dated 10 February
2020.
2. For the information reported for Great Western resource figures refer to
the Terrain Minerals ASX release dated 27 March 2017 titled JORC 2012
Resource Update and Red 5’s ASX release dated 3 April 2020 titled
Red 5 exercises option to complete acquisition of the Great Western
62koz gold deposit and Completion of Acquisition of Great Western
Project, dated 9 April 2020 .
3. The updates to the Underground Reserves are based on a gold price of
A$2000.
4. Underground reserves have planned dilution varying between 10 to
20% with planned mining recovery of 95%.
Notes on KOTH JORC 2012 Mineral Resources and Ore
Reserves
Mineral Resources:
1. The information that relates to KOTH refer to ASX release dated 19
March 2020 titled King of the Hills Mineral Resource increases to
4.1Moz.
2. The information that relates to Rainbow and Severn refer to ASX release
dated 1 May 2019 titled Maiden JORC open pit Resources defined for
near-mine regional deposits at King of the Hills.
3. The information that relates to Centauri and Cerebus-Eclipse refer to
ASX release dated 1 May 2019 titled Maiden JORC open pit Resources
defined for near-mine regional deposits at King of the Hills.
Ore Reserves:
1. Gold price of A$2,000 used in the calculations of the KOTH
Underground Ore Reserves.
2. Current processing recoveries at the Darlot processing plant for KOTH
ore 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 up to 20% has been applied.
5. As at 31 December 2020 the KOTH underground reserve as per Truck
to Darlot business model will be suspended.
6. The information relating to Open Pit reserve figures for KOTH and
Rainbow are quoted from the KOTH PFS work completed in July 2019.
Refer to ASX release dated 1 August 2019, titled Maiden 1.45Moz open
pit Ore Reserve for King of the Hills Confirms Exceptional Bulk Mining
Opportunity.
7. As at 30 June 2019 there were no Open Pit Reserves at the King of the
Hills operations.
16
2020 Annual Report
TENEMENT SCHEDULE 18 September 2020
WESTERN AUSTRALIA
Project
Tenement number
Darlot Gold Mine
E36/0865, E36/0941, E36/0944, E36/0945, E36/0964, E36/0968,
E36/0969, E36/0980, E37/1054, E37/1086, E37/1247, E37/1253,
E37/1268, E37/1269, E37/1296, E37/1297, E37/1298, E37/1319,
E37/1321, E37/1322, E37/1350, E37/1352, E37/1369, E37/1378,
E37/1395, L37/0109, L37/0110, L37/0118, L37/0206, L37/0207,
L37/0223, L37/0224, L37/0230, L37/0231, L37/0237, M37/0054,
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, P36/1889,
P37/8698, P37/8699, P37/8700, P37/8701, P37/8716, P37/8788,
P37/8789, P37/9210
E36/0997, E36/0999, E36/1002, E37/1393, E37/1398, E37/1400,
G37/0037, E37/1413, E37/1415, L37/0238, P37/9345
E37/1220
Red 5 interest
100%
100% (Applications pending)
Right to explore and mine
Sub-Lease Area
King of the Hills Project
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%
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,
P37/9269, P37/9270, P37/9271, P37/9272, P37/9273, P37/9274,
P37/9275, P37/9276, P37/9277, P37/9278, P37/9279, P37/9280,
P37/9281, P37/9282, P37/9283, P37/9284, P37/9286, P37/9287,
P37/9289, P37/9291
E37/1385, E37/1409, E37/1410, P37/9285, P37/9288, P37/9290,
P37/9292, P37/9293, P37/9294, P37/9295, P37/9392, P37/9393,
P37/9394, P37/9395, P37/9396, P37/9397, P37/9398, P37/9399,
P37/9400, P37/9401, P37/9402, P37/9403, P37/9404, P37/9405,
P37/9406, P37/9407, P37/9408, P37/9409, P37/9410
100% with a portion of tenements
at 49% via agreement
100%
100% (Applications pending)
Montague Project
M57/0429, M57/0485, E57/0793
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
Equity interest
Red 5
40%
40%
40%
Other
SHIC 60%
SHIC 60%
SHIC 60%
Abbreviations
M: Mining Lease
P: Prospecting Licence
E: Exploration Licence
L: Miscellaneous Licence
Greenstone: Greenstone Resources Corporation
SHIC:
MPSA:
APSA:
Surigao Holdings and Investments Corporation
Mineral Production Sharing Agreement
Application for MPSA
2020 Annual Report
17
DIRECTORS’ REPORT
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 2020.
Mark Williams
Executive Director
Appointment
date
Non-Executive Director from January 2014
and Managing Director since April 2014
1.
DIRECTORS AND
COMPANY SECRETARY
Special
responsibilities
Managing Director
Qualifications
Dip CSM Mining, GAICD
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:
Experience
Kevin Anthony Dundo
Mark James Williams
Ian Keith Macpherson
John Colin Loosemore
Steven Lloyd Tombs
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
Appointment
date
Special
responsibilities
Non-Executive Director since March 2010
and Non-Executive Chairman since
November 2013
Member of the Remuneration and
Nomination Committee; Member of the Audit
Committee; and Member of the Health,
Safety, Environment and Community (HSEC)
Committee.
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.
Other listed
company
directorships
Ian Macpherson
Non-Executive Director
Appointment
date
Special
responsibilities
April 2014
Chairman of the Audit Committee; and
Member of the Remuneration and
Nomination Committee
Qualifications
B.Comm, CA
Qualifications
B.Com, LLB, FCPA
Experience
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); Cash Converters International Limited
(since February 2015); and Avenira Limited
(since October 2019).
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
2020 Annual Report
DIRECTORS’ REPORT (cont.)
1.
DIRECTORS AND
COMPANY SECRETARY (cont.)
Colin Loosemore Non-Executive Director
December 2014
Appointment
date
Special
responsibilities
Chairman of the Health, Safety, Environment
and Community (HSEC) Committee; and
Member of the Audit Committee.
Experience
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
Chairman of the Remuneration and
Nomination Committee
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.
1.2.
INFORMATION ON COMPANY SECRETARY
Frank Campagna
Company Secretary
Appointment
date
June 2002
Qualifications
B.Bus (Acc), CPA
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
1,600,409
-
Mark Williams
11,125,287
6,050,864
Ian Macpherson
1,144,124
Colin Loosemore
8,490,878
Steven Tombs
2,284,445
-
-
-
-
-
-
-
-
-
-
-
-
-
2020 Annual Report
19
DIRECTORS’ REPORT (cont.)
1.
1.4
DIRECTORS AND COMPANY SECRETARY (cont.)
DIRECTOR’S MEETINGS
The number of meetings of the Board of Directors of Red 5 and of each Board committee held during the year ended 30 June 2020 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
12
12
12
12
12
12
12
12
12
12
2
-
2
2
-
2
-
2
1
-
2
-
2
2
-
2
-
2
2
-
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 reasonable in respect of the
Company’s circumstances, which are of importance or relevant to the commercial operation of developing listed resources companies.
PRINCIPAL ACTIVITIES
2.
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.
RESULTS OF OPERATIONS
3.
A net profit of the consolidated entity after income tax for the year ended 30 June 2020 was $4,544,000 (30 June 2019: loss of
$3,030,000). The current year results include an underlying EBITDA (a) of $53,978,000 (2019: $30,938,000).
Sales revenue
Cost of sales (excluding depreciation)
Other income
Administration and other expenses (excluding depreciation)
Care and maintenance (excluding depreciation)
Exploration expenditure
Underlying EBITDA
30 June 2020
30 June 2019
$’000
200,332
(128,992)
1,498
(9,287)
(4,875)
(4,698)
53,978
$’000
153,965
(105,716)
750
(9,042)
(5,729)
(3,290)
30,938
(a) Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) is an unaudited non - IFRS measure and is a common
measure used to assess profitability before the impact of different financing methods, income taxes, depreciation of property, plant and
equipment and amortisation of intangible assets, fair value movements and ineffective cashflow hedges.
The underlying EBITDA reconciles to the profit before tax as follows:
Underlying EBITDA
Financing income
Financing expenses
Ineffective portion of cashflow hedges
Fair value loss on financial liabilities
Depreciation and amortisation
Profit/(loss) before income tax expense
20
2020 Annual Report
30 June 2020
30 June 2019
$’000
53,978
336
(2,381)
(6,810)
(967)
(32,984)
11,172
$’000
30,938
38
(2,249)
(456)
(1,646)
(37,225)
(10,600)
DIRECTORS’ REPORT (cont.)
3.
RESULTS OF OPERATIONS (cont.)
Exploration and Resource Development
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.
Covid-19 response
We will continue to enforce travel restrictions, testing, quarantine,
and trace and isolate regimes to ensure the health and well-being
of our people and keep our sites operating.
Red 5 continues to proactively manage the potential impact of the
COVID-19 global pandemic on the Company’s operations. The
Management Response Plan implemented in February 2020 is
focused on ensuring the health and safety of Red 5 personnel and
limiting the disruption risk to mining and processing operations.
This plan has been progressively developed in line with the formal
guidance of State and Federal health authorities, close
coordination with the Australian Resources and Energy Group
(AMMA) and under the Company’s existing Emergency
Management Policies.
The ongoing focus to protect the health and safety of our
employees and other stakeholders through the COVID-19
pandemic has pleasingly resulted in no cases identified at Darlot
and King of the Hills operations nor the Siana gold project in the
Philippines to this point and there has been no material impact
from COVID-19 on the Company’s operational performance.
Darlot and King of the Hills gold operations
A total of 92,779 ounces of gold was recovered for the 12 months
to 30 June 2020 with ore sourced from the Darlot Gold Mine and
from KOTH. A summary of key production statistics for the year
ended 30 June 2020 and 30 June 2019 is provided below:
Year ended
Units
30 June 2020
30 June 2019
Mined tonnes
Mined grade
Tonnes milled
Average head grade
Recovery
Gold recovered
Gold operational sales
t
g/t
t
g/t
%
oz
oz
1,142,101
900,251
3.01
3.86
943,861
907,004
3.30
92.6
92,779
92,953
3.79
92.4
102,012
98,240
Siana Gold Project, Philippines
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.
Consolidation of the Group’s Mineral Resources and Ore Reserves
across the operations remains a strong focus for Red 5. The
Company acquired a number of new tenements surrounding the
Darlot processing plant during the year, as part of its multi-strand
strategy to expand the Darlot Mineral Resource base, which
includes ongoing near-mine and regional exploration as well as
the consolidation of strategic opportunities.
With the acquisition of the Great Western project in April 2020, the
opportunity is being taken to commence open pit mining from the
December Quarter 2020 and progressively scale down
underground ore production at KOTH in the second half of
CY2020. This will coincide with the planned start of site
construction for the proposed bulk mining operation at KOTH.
Red 5 signed an Option Agreement to purchase the Cables and
Mission project, located 10km from Darlot, in December 2019, and
undertook a program of due diligence drilling to validate historical
drilling results. The option was exercised in May 2020 and Red 5
plans to undertake additional drilling programs and other
feasibility activities to enable the estimation of a JORC 2012
compliant Mineral Resource.
Feasibility studies – King of the Hills project
The Final Feasibility Study (FFS) for the stand-alone integrated
bulk open pit and underground mining and processing operation
at KOTH was a key focus for Red 5 throughout FY20. The FFS was
completed in September 2020.
Corporate
In March 2020, the Company undertook a $125 million capital
raising in two tranches via a share placement to sophisticated and
professional investors to underpin the Company’s growth
objectives. The placement was oversubscribed with both existing
shareholders and new Australian and international institutional
investors participating.
The placement significantly de-risks the funding requirements to
develop the integrated bulk open pit and underground mining and
stand-alone processing operation at KOTH.
3.2
FINANCIAL REVIEW
The consolidated entity recorded a net profit after tax of
$4,544,000 (2019: Loss of $3,030,000). Gold and silver sales for
the reporting period before hedging movements totalled
$215,946,000 (2019: $156,309,000).
Income statement
The Group recorded a net profit after tax for the year ended 30
June 2020 of $4,544,000 in comparison to a net loss after tax for
the year ended 30 June 2019 of $3,030,000.
2020 Annual Report
21
DIRECTORS’ REPORT (cont.)
RESULTS OF OPERATIONS (cont.)
3.
Darlot and King of the Hills recorded a gross profit for the period
of $39,226,000 (30 June 2019: $11,168,000). A combined 92,953
ounces of gold were sold during the year, which together with
silver sales and hedging adjustments resulted in total revenue of
$200,232,000. Cost of sales for the period of $161,106,000
comprised production costs, royalties, movement in stockpiles
and depreciation charge. The higher sales revenue during the year
is reflective of higher gold prices.
The Group’s net profit for the period was mainly driven by gross
profit from operations, offset by administrative expenses,
exploration expenditure, ineffective portion of cashflow hedges,
Siana project 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
and Macquarie working capital facility interest.
Balance sheet
Total assets increased from $177,147,000 to $343,395,000 at 30
June 2020. The net increase in total assets was mainly driven by
the cash received pursuant the $125,000,000 capital raising and
associated capitalised King of the Hills final feasibility study and
exploration expenditure for project acquisitions resource drilling.
Total liabilities were $147,346,000, an increase of $49,580,000
from 30 June 2019. This was mainly driven by a negative mark-to-
market adjustment on gold hedges ($28,604,000) due to
increased forward curve on gold prices and from the $20,000,000
drawn down on the working capital facility with Macquarie; offset
by the repayment of the gold loan facility of 5,015 ounces and the
repayment of the deferred consideration relating to the Darlot
acquisition. Additionally, with the change in accounting for leases
from 1 July 2019, the Company has recognised lease liabilities of
$11,110,000 at 30 June 2020.
Cash flow
During the year, cash and cash equivalents increased by
$105,573,000. Free Cash inflows from operating activities for the
period were $51,512,000. Cash receipts from customers of
$204,479,000 reflect the sale of gold and silver which benefited
from higher gold prices during the year. This was offset by cash
outflows of $152,967,000, driven by higher operational costs
resulting from the Company’s ramp-up to full production.
Net cash outflows used in investing activities for the period were
$54,548,000, reflecting sustaining and growth capital including
the Tailings Storage Facility No. 4 construction, development
costs at both Darlot and King of the Hills mines, Final Feasibility
Study costs, project acquisitions and deferred consideration paid
associated with the acquisition of the Darlot and King of the Hills
mines.
The net cash from financing activities of $108,470,000 reflects the
net proceeds received from the capital raising, the proceeds from
the $20,000,000 Macquarie working capital facility offset by
$8,000,000 principal repayments and associated interests, the
repayment of 5,015 ounces of the gold loan facility and
repayments of lease liabilities.
22
2020 Annual Report
DIVIDENDS
4.
No amounts were paid by way of dividend since the end of the
previous financial year (2019: 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.
PERFORMANCE RIGHTS
6.
At the date of this report, there were 25,683,329 performance
rights convertible into ordinary fully paid shares.
Vesting date: 30 June 2021
(subject to performance conditions)
Vesting date: 30 June 2022
(subject to performance conditions)
Number
15,241,298
10,442,031
25,683,329
In September 2020 a total of 10,991,282 performance rights
(Performance Rights) that were issued to key management
personnel, senior management and operating personnel in 2018
were vested following the partial achievement of performance
conditions (being Total Shareholder Return outperformance
against the All Ordinaries Gold Index and increases in ore
reserves) measured over the three years ended 30 June 2020.
Upon vesting, 10,991,282 Performance Rights have been
exercised into an equivalent number of ordinary fully paid shares
in accordance with the terms of the Plan. The balance of 7,327,519
Performance Rights were forfeited due to performance conditions
not being met.
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 $238,068 (2019: $205,408).
DIRECTORS’ REPORT (cont.)
8.
EVENTS SUBSEQUENT TO THE
END OF THE FINANCIAL YEAR
On 15 September 2020, the Company announced the Final
Feasibility Study (FFS) for a proposed new 4Mtpa bulk mining and
processing operation at the King of the Hills (KOTH) Gold Project,
located in the Eastern Goldfields region of Western Australia.
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 2020 and 30 June 2019 and unless otherwise
indicated, KMPs for the entire period:
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 2020.
11. REMUNERATION REPORT (AUDITED)
This remuneration report for the year ended 30 June 2020 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.
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.
11.2 REMUNERATION GOVERNANCE
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.
2020 Annual Report
23
DIRECTORS’ REPORT (cont.)
11. REMUNERATION REPORT (AUDITED) (cont.)
11.3 PRINCIPLES OF REMUNERATION
11.4.2 Short-term incentives linked to annual planning
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, which represents the 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.
11.4 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 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.
11.4.1 Fixed Remuneration
Fixed remuneration comprises director’s fees, consulting fees,
salaries, and superannuation contributions.
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, in
terms of gold production, operating costs, and EBITDA, 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 generally 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.
11.4.3 Long-term incentives through participation
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.
24
2020 Annual Report
DIRECTORS’ REPORT (cont.)
11. REMUNERATION REPORT (AUDITED) (cont.)
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 are granted with a measurement period of three years with vesting
conditions comprising Total Shareholder Return (TSR) outperformance against the All Ordinaries Gold Index and agreed operational
measures including gold production, operating costs, ore reserves, safety performance and strategic targets. The TSR measure is
subject to a positive TSR gate and the other measures are subject to a production or financial gate. The Group’s 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 Rights Plan. The primary purpose of this plan is 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 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.
11.5 GROUP PERFORMANCE
The following table summarises key measures of Group performance for FY20 and the previous four financial years.
ASX Share price at year end
Profit/(loss) before income tax attributable to owners of
the company ($’000)
2020
$0.20
2019
$0.18
2018
$0.08
2017
$0.03
2016
$0.09
11,172
(10,600)
(14,387)
(110,124)
24,787
Dividends paid ($’000)
-
-
-
-
-
11.5.1 STI performance pay outcome
The short term incentive bonus component of remuneration is based on achievement of group and specific role related operational
targets for the year ended 30 June 2020 including achievement of core EBITDA targets, completion of strategies relating to the Siana
assets and progress in the evaluation and development of the King of the Hills bulk mining and processing operation, the achievement
of gold production and operating 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 60.1% 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 was met and the EBITDA target was exceeded. The Committee has
elected that the STI award for Mr Williams for the year ended 30 June 2020 would be cash settled in full. For Mr Tasovac and Mr
Shadlow, 50% of the performance bonus is payable in share rights (both service rights and deferred rights), with the other 50% to be
paid in cash.
Based on these results the Board has awarded an STI to eligible KMPs as follows:
Executive KMP STI Awards for 2020
Mark Williams
John Tasovac
Brendon Shadlow
Cash Bonus
$
Deferred Rights (a)
$
Service Rights (b)
$
208,818
52,253
40,933
-
26,127
20,467
-
26,127
20,467
(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 11.7.
(b) Service rights are subject to a 12-month service test following the end of the measurement period. See valuation of rights on section 11.7.
The Remuneration Committee exercised its discretion based on Company performance and Group objectives achieved in assessing the
performance of the executive KMP’s against the 2020 STI objectives.
2020 Annual Report
25
DIRECTORS’ REPORT (cont.)
11. REMUNERATION REPORT (AUDITED) (cont.)
11.5.2 LTI performance pay outcome
In accordance with the terms of the Red 5 Rights Plan (Plan), a total of 9,496,400 performance rights (Performance Rights) that were
issued to key management personnel in 2018 reached the end of their performance period. As at the date of this report, 5,697,840
Performance Rights have vested following the partial achievement of performance conditions (being Total Shareholder Return
outperformance against the All Ordinaries Gold Index and increases in ore reserves) measured over the three years ended 30 June
2020. The Board made a vesting determination based on the achievement of performance conditions over the measurement period and
also taking into account, amongst other factors considered relevant, Company performance from the perspective of shareholders over
the measurement period.
The balance of 3,798,560 Performance Rights were forfeited due to performance conditions not being met.
Based on the above, the following was the LTI awarded to KMPs.
Executive KMP LTI Awards for 2020 Series
2020
Mark Williams
John Tasovac
Brendon Shadlow
Total
Maximum number of
performance rights
Number awarded in
the year
% of maximum
potential LTI achieved
% of LTI not achieved
in the year
5,616,400
2,400,000
1,480,000
9,496,400
3,369,840
1,440,000
888,000
5,697,840
60
60
60
60%
40
40
40
40%
Details of LTI performance rights issued during the year are shown at section 11.8.4.
11.6 KEY MANAGEMENT PERSONNEL SERVICE
AGREEMENTS
11.6.1 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.
The current fee policy is as follows:
\ 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 may seek
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 $238,068 (2019: $205,408) 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.
26
2020 Annual Report
DIRECTORS’ REPORT (cont.)
11. REMUNERATION REPORT (AUDITED) (cont.)
11.6.2 Executive Directors – Managing Director
Mark Williams
Fixed remuneration for the year and
statutory superannuation: $602,250
Brendon Shadlow
Fixed remuneration for the year and
statutory superannuation: $374,000
Mr Williams’ agreement is for an indefinite period.
Mr Shadlow’s agreement is for an indefinite period.
Mr William’s total remuneration was increased to $602,250
effective 1 July 2019 as recommended by the Remuneration
and Nomination Committee and adopted by the Board of
Directors. In addition to his cash remuneration Mr Williams is
entitled to:
Mr Shadlow’s total remuneration was increased to $374,000
effective 1 July 2019 as recommended by the Remuneration
and Nomination Committee and adopted by the Board of
Directors. In addition to his cash remuneration Mr Shadlow is
entitled to:
\ Performance bonus: short term incentive bonus determined
\ 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.
11.6.4 Transactions with Key Management Personnel
and their related parties
The Non-Executive Directors 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.
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.
11.6.3 Executives
John Tasovac
Fixed remuneration for the year and
statutory superannuation: $405,150
Mr Tasovac’s agreement is for an indefinite period.
Mr Tasovac’s total remuneration was increased to $405,150
effective 1 July 2019 as recommended by the Remuneration
and Nomination Committee and adopted by the Board of
Directors. 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.
2020 Annual Report
27
DIRECTORS’ REPORT (cont.)
11. REMUNERATION REPORT (AUDITED) (cont.)
11.7 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 2020.
2020
Name
Short term
Long term
s
e
e
f
’
s
r
o
t
c
e
r
i
d
r
o
s
e
i
r
a
l
a
S
$
/
s
e
s
n
e
p
x
E
s
e
c
n
a
w
o
l
l
a
$
s
u
n
o
b
h
s
a
C
$
d
e
r
r
e
f
e
D
)
b
(
s
t
h
g
i
r
$
e
c
i
v
r
e
S
)
c
(
s
t
h
g
i
r
$
g
n
i
t
l
u
s
n
o
C
s
e
e
f
$
n
o
i
t
a
u
n
n
a
r
e
p
u
S
$
g
n
o
l
d
n
a
l
a
u
n
n
A
e
v
a
e
l
e
c
i
v
r
e
s
$
e
c
n
a
m
r
o
f
r
e
P
)
d
(
e
s
n
e
p
x
e
s
t
h
g
i
r
$
e
c
n
a
m
r
o
f
r
e
P
)
e
(
d
e
t
i
e
f
r
o
f
s
t
h
g
i
r
$
l
a
t
o
T
$
Executive Director
Mark Williams
577,250 (a)
Non-Executive Directors
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steven Tombs
Executives
120,000
103,750
95,000
91,250
John Tasovac
380,150 (a)
-
-
-
-
-
-
208,818
47,191
117,978
-
-
-
-
-
-
-
-
-
-
-
-
52,253
48,037
54,775
Brendon Shadlow
340,000
3,600
40,933
40,691
50,562
-
-
-
-
11,400
9,856
9,025
16,223
10,210
25,000
45,123
303,427
(88,444)
1,236,343
-
-
-
-
-
-
-
-
-
-
-
-
131,400
113,606
104,025
117,683
-
-
25,000
11,020
137,135
(50,400)
657,970
34,000
16,329
118,504
(31,080)
613,539
Total
1,707,400
3,600 302,004
135,919
223,315
16,223
124,491
72,472
559,066
(169,924)
2,974,566
(a) Includes salary, superannuation contributions above concessional cap.
(b) Includes deferred rights granted in FY2020 vesting immediately and have provisionally been valued at $0.20 (Red 5 share price as at 30
June 2020) these rights will be re-valued upon shareholders’ approval at the Annual General Meeting; and deferred rights granted in FY2019
which were trued up from the provisional price of $0.18 (Red 5 share price as at 30 June 2019) to the issue price of $0.30 on 20 November
2019 when approved at the Annual General Meeting.
(c) Includes service rights granted during FY2019 subject to a 12-month service test, they have been valued at $0.30 (Red 5 share price as at
20 November 2019). Service rights granted during FY2020 are subject to a 12-month service test and have not been recognised at 30 June
2020.
(d) Relates to performance rights expense for the 2020, 2021 and 2022 series.
(e) Performance Rights that were issued to key management personnel, senior management and operating personnel in 2018 have been
partially forfeited following the partial achievement of performance conditions measured over the three years ended 30 June 2020
(See section 11.6.2)
28
2020 Annual Report
DIRECTORS’ REPORT (cont.)
11. REMUNERATION REPORT (AUDITED) (cont.)
2019
Short term
r
o
s
e
i
r
a
l
a
S
’
s
r
o
t
c
e
r
i
d
$
s
e
e
f
s
u
n
o
b
h
s
a
C
$
d
e
r
r
e
f
e
D
)
b
(
s
t
h
g
i
r
$
e
c
i
v
r
e
S
)
c
(
s
t
h
g
i
r
$
g
n
i
t
l
u
s
n
o
C
s
e
e
f
$
n
o
i
t
a
n
m
r
e
T
i
s
t
i
f
e
n
e
b
$
n
o
i
t
a
u
n
n
a
-
r
e
p
u
S
$
Name
Executive Director
Long term
d
n
a
l
a
u
n
n
A
e
c
i
v
r
e
s
g
n
o
l
$
e
v
a
e
l
d
e
s
a
b
e
r
a
h
S
)
c
(
s
t
n
e
m
y
a
p
$
l
a
t
o
T
$
Mark Williams
522,500 (a)
140,000
61,277
56,892
Non-Executive Directors
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steven Tombs
Executives
John Tasovac
Steven Tombs
120,000
105,000
95,000
82,500
-
-
-
-
-
-
-
-
-
-
-
-
324,393
65,000
28,639
25,285
18,333
-
-
-
-
-
-
-
-
3,900
-
-
-
-
-
-
-
-
-
10,091(d)
-
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
Brendon Shadlow
302,292
60,000
30,337
Total
1,570,018
265,000
120,253
82,177
3,900
10,091
140,904
61,784
271,065
2,525,192
(a) Includes salary, superannuation contributions above concessional cap.
(b) Includes deferred rights granted in FY2019 vesting 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; and deferred rights granted in FY2018
which were trued up from the provisional price of $0.08 (Red 5 share price as at 30 June 2018) to the issue price of $0.07 at date of grant.
(c) Includes service rights granted during FY2018 subject to a 12-month service test, they have been valued at $0.07 (Red 5 share price at date
of grant). Service rights granted during FY2019 are subject to a 12-month service test and were not recognised at 30 June 2019.
(d) Relates to performance rights expense for the 2020 and 2021 series.
(e) Annual leave paid out on the retirement of Mr Tombs.
11.7.1 The relative proportions of remuneration that are linked to performance and those that are fixed
are as follows:
Executive Director
Mark Williams
Non-Executive Directors
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steven Tombs
Executives
John Tasovac
Steven Tombs (a)
Brendon Shadlow
Fixed
At risk – short term incentives
At risk – long term incentives
2020
2019
2020
2019
2020
2019
52%
60%
30%
27%
18%
13%
100%
100%
100%
100%
63%
-
64%
100%
100%
100%
100%
67%
53%
75%
-
-
-
-
24%
-
22%
-
-
-
-
21%
-
20%
-
-
-
-
13%
-
14%
-
-
-
-
12%
47%
5%
(a) Prior to Mr Tombs’ appointment as a non-executive director.
2020 Annual Report
29
DIRECTORS’ REPORT (cont.)
11. REMUNERATION REPORT (AUDITED) (cont.)
11.8 ADDITIONAL DISCLOSURES RELATING TO OPTIONS, PERFORMANCE RIGHTS AND SHARES
11.8.1 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.
11.8.2 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:
2020
Kevin Dundo
Mark Williams
Ian Macpherson
Colin Loosemore
Steven Tombs
John Tasovac
Brendon Shadlow
Total
Balance at
previous year
reporting date
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
6,634,764
659,957
6,824,212
2,000,997
722,424
-
18,272,763
-
3,369,840
-
-
-
1,440,000
888,000
5,697,840
-
786,516
-
-
-
365,168
337,078
170,000
334,167
484,167
1,666,666
283,448
-
-
1,600,409
11,125,287
1,144,124
8,490,878
2,284,445
2,527,592
1,225,078
1,488,762
2,938,448
28,297,813
11.8.3 Shares issued, Service and Deferred Rights
Service rights issued and
vested: Mark Williams (a)
Deferred rights issued and
vested: Mark Williams (b)
Service rights issued and
vested: John Tasovac (a)
Deferred rights issued and
vested: John Tasovac (b)
Service rights issued and
vested: Brendon Shadlow (a)
Deferred rights issued and
vested: Brendon Shadlow (b)
Grant Date
Vesting Date
Fair Value at
Grant Date
Granted
Exercised up to
reporting date
Outstanding at
reporting date
5-Dec-19
30-Jun-20
$117,944
393,258
(393,258)
5-Dec-19
6-Dec-19
$117,944
393,258
(393,258)
5-Dec-19
30-Jun-20
$54,775
182,584
(184,584)
5-Dec-19
6-Dec-19
$54,775
182,584
(184,584)
5-Dec-19
30-Jun-20
$50,562
168,539
(168,539)
5-Dec-19
6-Dec-19
$50,562
168,539
(168,539)
-
-
-
-
-
-
(a) 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.
(b) 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 $359,234 (2019: $202,430). The fair
value is based on observable market share price at the date of grant.
30
2020 Annual Report
DIRECTORS’ REPORT (cont.)
11. REMUNERATION REPORT (AUDITED) (cont.)
11.8.4 Performance Rights held by key management personnel under the LTI
The number of performance rights in Red 5 held as at the date of this report by key management personnel are set out below:
2020
Mark Williams
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steven Tombs
John Tasovac
Brendon Shadlow
Total
Received
through issuing
of performance
rights (a)
Balance at
1 July 2019
Performance
rights vested
and exercised (b)
Performance
rights
forfeited (b)
Balance at
reporting date
9,637,208
2,030,056
(3,369,840)
(2,246,560)
6,050,864
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,015,667
2,948,788
831,461
764,045
(1,440,000)
(888,000)
(960,000)
(592,000)
2,447,128
2,232,833
16,601,663
3,625,562
(5,697,840)
(3,798,560)
10,730,825
(a)
Performance Rights 2022 series
Tranche A
Tranche B
Tranche C
Mark Williams
John Tasovac
Brendon Shadlow
Total rights
Value per right
Valuation per tranche
1,015,028
415,731
382,023
1,812,782
$0.251
$455,008
406,012
166,292
152,809
725,113
$0.256
406,012
166,292
152,809
725,113
$0.256
$185,629
$185,629
Tranche D
203,004
83,146
76,404
362,554
$0.256
$92,814
TSR ranking relative
to TSR of S&P/ASX
All Ordinaries Gold
Total Return Index
Growth in the
Company’s Ore
Reserves (excluding
50% of acquired Ore
Reserves)
Operating Costs as
% of Budgeted
Operating Costs
Safety
Compliance
Total
2,030,056
831,461
764,045
3,625,562
$919,080
In addition,
vesting of the
performance
rights is also
conditional on the
following being
exceeded:
Condition criteria
TSR >
Index TSR
+20%
TSR >
Index TSR
+10%
TSR < or
equal to
Index TSR
100%
Stretch:
35%
100%
Stretch:
80%
All criteria to be
100%
met:
50%
Target:
20%
50%
Target:
90%
50%
nil
Threshold:
15%
25%
Threshold:
95%
25%
< 15%
nil
> 95%
nil
- No fatalities
1. A positive
- Maintenance of
the ISO14001
and ISO 18001
certifications
- Year on year
improvement in
safety
performance
Company TSR
for the
measurement
period; and
2. 80% of
budgeted gold
production by
30 June 2020.
(b) In accordance with the terms of the Red 5 Rights Plan, performance rights that were issued to key management personnel, senior
management have vested following the partial achievement of performance conditions measured over the three years ended 30 June 2020.
Unmet performance conditions have lapsed, as a result these performance rights have been forfeited.
End of Audited Remuneration Report
2020 Annual Report
31
DIRECTORS’ REPORT (cont.)
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
$126,436 (2019: $142,298) for non-audit services. Further details
of remuneration of the auditors are set out in Note 25.
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.
15. ROUNDING OFF
The company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191
and in accordance with that instrument, all financial information
has been rounded off to the nearest thousand dollars, unless
otherwise stated.
Signed in accordance with a resolution of the Directors.
Kevin Dundo
Chairman
Perth, Western Australia
24 September 2020
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 2020.
32
2020 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 2020, 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
R Gambitta
Partner
Perth
24 September 2020
PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01
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.
2020 Annual Report
33
Consolidated Statement of
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2020
CONSOLIDATED
30 June 2020
30 June 2019
Note
5(a)
5(b)
5(c)
5(d)
5(e)
13
5(f)
5(f)
16(ii)
6
Sales revenue
Cost of sales
Gross profit
Other income and expenses
Other income
Administration and other expenses
Care and maintenance
Exploration expenditure
Financing income
Financing expenses
Ineffective portion of cashflow hedges
Fair value loss on financial liabilities
Total other income and expenses
Profit/(loss) before income tax expense
Income tax (expense)/benefit
Net profit/(loss) after income tax for the year
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
Ineffective portion of cash flow hedges
Total comprehensive loss for the year
Net profit/(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
Earnings/(loss) per share attributable to shareholders
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
23
23
The accompanying notes form part of these financial statements.
34
2020 Annual Report
$’000
200,332
(161,106)
39,226
1,498
(9,425)
(5,607)
(4,698)
336
(2,381)
(6,810)
(967)
(28,054)
11,172
(6,628)
4,544
2,855
(52)
(21,550)
6,354
(7,849)
85
4,459
4,544
153
(8,002)
(7,849)
Cents
0.33
0.32
$’000
153,965
(142,168)
11,168
750
(9,184)
(6,360)
(3,290)
38
(2,249)
(456)
(1,646)
(22,397)
(10,600)
7,570
(3,030)
4,437
(35)
(4,617)
720
(2,525)
178
(3,208)
(3,030)
283
(2,808)
(2,525)
Cents
(0.26)
(0.26)
Consolidated Statement of FINANCIAL POSITION as at 30 June 2020
CONSOLIDATED
30 June 2020
30 June 2019
Note
$’000
$’000
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
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
Liabilities
Current Liabilities
Trade and other payables
Financial liability
Income tax payable
Employee benefits
Derivative financial instruments
Provisions
Lease liabilities
Total Current Liabilities
Non-Current Liabilities
Employee benefits
Provisions
Derivative financial instruments
Lease liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Other equity
Reserves
Accumulated losses
7
8
9
8
10
11
12
13
6
14
16
15
19
20
17
18
19
17
20
18
21
22
Total Equity Attributable to Equity Holders of the Company
Non-controlling interests
Total Equity
The accompanying notes form part of these financial statements.
116,220
11,797
36,160
164,177
257
90,517
24,310
27,715
32,361
4,058
179,218
343,395
41,921
11,853
1,791
4,896
28,983
1,116
5,932
96,492
156
41,128
4,392
5,178
50,854
147,346
196,049
383,887
930
11,654
(196,876)
199,595
(3,546)
196,049
10,647
14,718
22,567
47,932
188
76,175
19,729
23,883
5,294
3,946
129,215
177,147
41,442
10,143
1,564
4,393
5,311
1,116
1,327
65,296
83
31,429
-
959
32,471
97,767
79,380
260,515
930
22,969
(201,335)
83,079
(3,699)
79,380
2020 Annual Report
35
Consolidated Statement of CHANGES IN EQUITY for the year ended 30 June 2020
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT ENTITY
Issued
capital
Accumulated
losses
Other
equity
Foreign
currency
translation
reserve
Hedging
reserve
Share-
based
payments
and other
reserves
$’000
$’000
$’000
$’000
$’000
260,515
(201,335)
930
25,204
(3,398)
-
4,459
Balance at 1 July 2019
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
Ineffective portion of cash flow hedges
transferred to profit or loss
Total comprehensive income/ (loss)
for the period
Issue of ordinary shares
Share issue expenses
Issue of deferred and service rights (STI)
Vested service and deferred rights
converted to ordinary shares (STI)
Performance rights (LTI) forfeited
Share based payments (LTI)
-
-
-
-
129,677
(6,610)
-
305
-
-
-
-
-
4,459
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Non-
controlling
interest
$’000
(3,699)
85
68
-
-
Total
$’000
79,380
4,544
2,803
(21,550)
6,354
$’000
1,163
-
(52)
-
-
-
2,787
-
-
-
-
(21,550)
6,354
2,787
(15,196)
(52)
153
(7,849)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
374
(305)
(361)
1,438
-
-
-
-
-
-
129,677
(6,610)
374
-
(361)
1,438
Balance at 30 June 2020
383,887
(196,876)
930
27,991
(18,594)
2,257
(3,546)
196,049
Balance at 1 July 2018
260,365
(197,868)
Effect of change in accounting standard
-
(282)
Net profit/(loss) for the year
260,365
(198,150)
-
(3,208)
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 (loss) / income
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
Shares based payments (LTI)
Expired performance rights – transfer from
reserves
-
-
-
-
-
-
(82)
68
-
-
-
-
-
-
(3,208)
-
-
-
-
23
930
-
930
-
-
-
-
-
-
-
-
-
-
-
20,874
-
20,874
-
4,330
-
-
-
498
-
498
-
-
(4,617)
264
457
4,330
(3,896)
-
-
-
-
-
-
-
-
-
-
435
-
435
-
(35)
-
-
-
(35)
298
82
(68)
640
(25)
(3,982)
-
(3,982)
178
81,252
(282)
80,970
(3,030)
105
4,400
-
-
-
(4,617)
264
457
283
(2,526)
-
-
-
-
-
298
-
-
640
(2)
Balance at 30 June 2019
260,515
(201,335)
930
25,204
(3,398)
1,163
(3,699)
79,380
The accompanying notes form part of these financial statements.
36
2020 Annual Report
Consolidated Statement of CASH FLOWS for the year ended 30 June 2020
CONSOLIDATED
30 June 2020
30 June 2019
Note
$’000
$’000
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
Net cash from operating activities
30
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 issues of shares
Payments for share issue transaction costs
Proceeds from borrowings
Repayments of borrowings
Payment of facility fee on borrowings
Payments of interest
Repayment of gold loan
Proceeds from sale of royalty
Payments of lease liabilities
Net cash from financing activities
Net increase in cash and cash equivalents
Cash at the beginning of the period
Effect of exchange rate fluctuations on cash held
16
204,479
-
(149,298)
(4,698)
789
-
240
51,512
(14,322)
(12,653)
-
(21,755)
(818)
(5,000)
(54,548)
125,000
(6,610)
20,000
(8,000)
(481)
(1,260)
(11,079)
-
(9,100)
108,470
105,434
10,647
139
150,396
229
(124,975)
(3,290)
948
-
38
23,182
(5,350)
(42,927)
21,530
(5,294)
(4,500)
-
(36,541)
-
-
8,220
-
-
(861)
-
11,000
(1,535)
16,824
3,465
7,148
34
Cash and cash equivalents at the end of the year
7
116,220
10,647
The accompanying notes form part of these financial statements.
2020 Annual Report
37
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020
REPORTING ENTITY
1.
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 2020 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.
2.1
BASIS OF PREPARATION
STATEMENT OF COMPLIANCE
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 24 September 2020.
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.
2.3 BASIS OF MEASUREMENT
The consolidated financial statements have been prepared on the
historical cost basis, except for derivative financial instruments
and certain other financial assets and liabilities which are required
to be measured at fair value. 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.
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.
2.6 ROUNDING OFF
The company is of a kind referred to in ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016/191
and in accordance with that instrument, all financial information
has been rounded off to the nearest thousand dollars, unless
otherwise stated.
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 35.
SIGNIFICANT ACCOUNTING POLICIES
4.
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.
4.1
PRINCIPLES OF CONSOLIDATION
The consolidated financial report incorporates the assets and
liabilities of all entities controlled by the Company as at 30 June
2020 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.
38
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
4.
SIGNIFICANT ACCOUNTING
POLICIES (cont.)
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 are measured at cost less accumulated
depreciation and any accumulated impairment losses. Items of
plant and equipment are depreciated using a combination of units
of production, 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.
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, other than
costs relating to acquisitions. 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.
2020 Annual Report
39
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
4.
SIGNIFICANT ACCOUNTING
POLICIES (cont.)
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. 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 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.
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.
40
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
4.
SIGNIFICANT ACCOUNTING
POLICIES (cont.)
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.
Cashflow hedges
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 Monte Carlo 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.
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
2020
34.18
0.67
2019
37.69
0.71
2020
34.22
0.68
2019
36.03
0.70
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.
2020 Annual Report
41
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
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.
4.18 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.
4.
SIGNIFICANT ACCOUNTING
POLICIES (cont.)
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 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.
42
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
4.
SIGNIFICANT ACCOUNTING
POLICIES (cont.)
Rehabilitation and mine closure provisions
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.
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)
\ 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.
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.
2020 Annual Report
43
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
4.
SIGNIFICANT ACCOUNTING
POLICIES (cont.)
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,
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.
4.19 NEW AND REVISED STANDARDS AND
INTERPRETATIONS
Certain new accounting standards and interpretations have been
published that are not effective for the 30 June 2020 reporting
period. The Group has elected not to early adopt any of the new
standards or interpretations.
Changes in significant accounting policies
AASB 16 – Leases (effective from 1 July 2019)
The Group has adopted AASB 16 from 1 July 2019 using the
modified retrospective method of adoption. The Group has not
restated comparatives for the reporting period as permitted under
the specific transitional provisions in the standard. The
reclassifications and the adjustments arising from the new leasing
rules are therefore recognised in the opening balance sheet on 1
July 2019.
On adoption, the Group recognised lease liabilities in relation to
leases which had previously been classified as ‘operating leases’
under the principles of AASB 117 Leases. These liabilities were
measured at the present value of the remaining lease payments,
discounted using the lessee’s incremental borrowing rate as of 1
July 2019. The weighted average lessee’s incremental borrowing
rate applied to the lease liabilities on 1 July 2019 was 6.0 percent.
The impact on the statement of financial position as at 1 July 2019
on adoption of AASB 16 are noted below:
As at 1 July 2019
Assets
Right-of-use assets - buildings
Right-of-use assets - plant and equipment
Total right-of-use assets
Liabilities
Lease liability - current
Lease liability - non-current
Total lease liability
$’000
73
15,835
15,908
(7,107)
(8,801)
(15,908)
AASB 16 Leases – Summary of new accounting policy
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Group
recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the
lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate.
Assets and liabilities arising from a lease are initially measured on
a present value basis. Lease liabilities include the net present
value of the following lease payments:
\ fixed payments (including in-substance fixed payments), less
any lease incentives receivable
\ variable lease payment that are based on an index or a rate
\ amounts expected to be payable by the lessee under residual
value guarantees
\ the exercise price of a purchase option if the lessee is
reasonably certain to exercise that option, and
\ payments of penalties for terminating the lease, if the lease
term reflects the lessee exercising that option.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to
reflect the lease payments made.
\ Right-of-use assets were measured at an amount equal to the
lease liabilities.
\ For leases that were classified as finance leases under the
previous standard (AASB 117 Leases) there were no changes
to the carrying amounts of the right-of-use assets and lease
liabilities.
44
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
As a practical expedient, AASB 16 permits a lessee not to
separate non-lease components, and instead account for any
lease and associated non-lease components as a single
arrangement. The Group has not used this practical expedient.
For a contracts that contain a lease component and one or more
additional lease or non-lease components, the Group allocates
the consideration in the contract to each lease component on the
basis of the relative stand-alone price of the lease component and
the aggregate stand-alone price of the non-lease components.
Leases accounting policy applicable up to 30 June 2019
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.
SIGNIFICANT ACCOUNTING
POLICIES (cont.)
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
\ The lease term has changed or there is a significant event or
change in circumstances resulting in a change in the
assessment of exercise of a purchase option, in which case
the lease liability is remeasured by discounting the revised
lease payments using a revised discount rate.
\ The lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual
value, in which case the lease liability is remeasured by
discounting the revised lease payments using an unchanged
discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised
discount rate is used).
\ A lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease
liability is remeasured based on the lease term of the modified
lease by discounting the revised lease payments using a
revised discount rate at the effective date of the modification.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before
the commencement day, less any lease incentives received and
any initial direct costs. They are subsequently measured at cost
less accumulated depreciation and impairment losses.
Whenever the Group incurs an obligation for costs to dismantle
and remove a leased asset, restore the site on which it is located
or restore the underlying asset to the condition required by the
terms and conditions of the lease, a provision is recognised and
measured under AASB 137. To the extent that the costs relate to a
right-of-use asset, the costs are included in the related right-of-
use asset, unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease.
The Group applies AASB 136 to determine whether a right-of-use
asset is impaired and accounts for any identified impairment loss
as described in the ‘Property, Plant and Equipment’ policy (as
outlined in the financial report for the annual reporting period).
Variable rents that do not depend on an index or rate are not
included in the measurement the lease liability and the right-of-
use asset. The related payments are recognised as an expense in
the period in which the event or condition that triggers those
payments occurs and are included in profit or loss.
2020 Annual Report
45
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
5.
REVENUE AND EXPENSES
(a) Revenue
Gold and silver sales
Realised losses on cashflow hedges
(b) Cost of sales
Operating costs
Depreciation and amortisation
(c) Other income
Discount forfeited on payment of deferred consideration
Other income
(d) Administration and other expenses
Employee and consultancy expenses
Share-based payments
Corporate costs
Legal fees
Travel and accommodation
Property and other indirect taxes
Depreciation
Acquisition related costs
VAT receivable impairment
Other administration overheads
(e) Care and maintenance (1)
Fuel and utilities
Employee benefit expenses
Other costs
External services
Depreciation
Materials and consumables used
Excise tax and custom duties
Movement in stock
(f) Finance income / (expenses)
Interest income
Unrealised gains on fuel hedges
Interest expense on borrowings
Amortisation of borrowing costs
Unwinding of discount on rehabilitation provision
Unwinding of interest on gold loan
Unwinding of discount on deferred consideration on acquisitions
(1) Care and maintenance costs relating to Siana.
46
2020 Annual Report
Consolidated
Year ended 30 June
2020
$’000
215,946
(15,614)
200,332
(128,992)
(32,114)
(161,106)
750
748
1,498
(3,475)
(1,812)
(1,554)
(627)
(487)
(234)
(138)
(51)
-
(1,047)
(9,425)
(1,167)
(1,064)
(1,034)
(977)
(732)
(275)
(320)
(38)
(5,607)
223
113
336
(1,463)
(334)
(316)
(196)
(72)
(2,381)
(2,045)
2019
$’000
156,309
(2,343)
153,965
(105,716)
(36,452)
(142,168)
-
750
750
(3,302)
(938)
(1,032)
(421)
(353)
(610)
(142)
(1,398)
(377)
(611)
(9,184)
(1,362)
(1,003)
(831)
(1,677)
(631)
(461)
(7)
(381)
(6,360)
38
-
38
(297)
-
(599)
(1,074)
(279)
(2,249)
(2,211)
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
6
INCOME TAX (PRIMA FACIE)
Consolidated
Year ended 30 June
Current income tax
Current income tax charge
Adjustment for prior period
Deferred income tax
Deferred income tax
Adjustment for prior period
Income tax charge
A reconciliation between income tax charge and the numerical profit/(loss)
before income tax at the applicable income tax rate is as follows:
Profit/(loss) before income tax
At statutory income tax rate of 30% (2019: 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)
Change in estimates
Prior period adjustment
Income tax benefit
Tax losses and temporary differences not brought to account (tax
effected)
Deductible temporary differences
Tax losses
2020
$’000
(1,791)
1,564
(227)
(4,577)
(1,824)
(6,401)
(6,628)
11,172
(3,352)
(2,134)
(376)
1,221
-
(1,727)
(260)
(6,628)
47,616
7,770
2019
$’000
(989)
-
(989)
8,559
-
8,559
7,570
(10,600)
3,180
(3,058)
(521)
3,325
4,069
-
575
7,570
45,125
8,957
Some of the potential deferred tax assets attributable to tax losses and deductable temporary differences have not been brought to
account at 30 June 2020. 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.
2020 Annual Report
47
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
INCOME TAX (PRIMA FACIE) (cont.)
6
Movement in deferred tax balances:
Property, plant and equipment and intangible assets
Exploration and evaluation assets
Provisions and employee benefits
Derivative financial instruments
Leases
Other items
Recognised
in other
comprehensive
income
$’000
-
-
-
6,513
-
-
6,513
Net balance at
1 July 2019
$’000
(5,694)
(1,588)
9,547
1,456
-
225
3,946
Recognised in
profit or loss
Net balance at
30 June 2020
$’000
(2,840)
(6,421)
3,266
2,043
(135)
(2,314)
(6,401)
$’000
(8,534)
(8,009)
12,813
10,012
(135)
(2,089)
4,058
Property, plant and equipment
and intangible assets
Exploration and evaluation assets
Inventories
Other assets
Provisions and employee benefits
Derivative financial instruments
Finance leases
Step up/(down)
at formation of
tax consolidated
group (a)
Recognised
in other
comprehensive
income
Net balance at
1 July 2018
Recognised in
profit or loss
Net balance at
30 June 2019
$’000
$’000
$’000
$’000
$’000
(9,830)
-
(1,970)
-
5,777
-
(47)
(1,357)
-
1,970
(1,044)
4,453
-
47
(6,070)
4,069
-
-
-
-
-
1,456
-
1,456
5,493
(1,588)
-
1,269
(683)
-
-
4,491
(5,694)
(1,588)
-
225
9,547
1,456
-
3,946
(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.
7.
CASH AND CASH EQUIVALENTS
Cash at bank
Cash on deposit
Cash on hand
CONSOLIDATED
30 June 2020
30 June 2019
$’000
68,754
47,465
1
116,220
$’000
10,646
-
1
10,647
48
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
8
TRADE AND OTHER RECEIVABLES
Current assets
Trade debtors (a)
Prepayments
GST receivable
Sundry debtors
Interest receivable
Non-current assets
VAT receivable
Security deposits
CONSOLIDATED
30 June 2020
30 June 2019
$’000
6,242
3,526
1,629
303
97
11,797
62
195
257
$’000
11,384
2,530
494
308
2
14,718
4
184
188
(a) Trade debtors includes amounts receivable for 2,347 ounces sold on 30 June 2020, equivalent to $6.08 million (30 June 2019: 5,109 ounces
equivalent to $10.287 million).
9
INVENTORIES
Stores, spares and consumables at cost
Run of mine stockpiles at cost (2019: at net realisable value)
Gold in circuit at cost (2019: at net realisable value)
Crushed ore stockpile at cost (2019: at net realisable value)
Gold Bullion at cost (2019: at net realisable value)
CONSOLIDATED
30 June 2020
30 June 2019
$’000
11,305
15,506
8,786
380
183
36,160
$’000
12,487
4,023
3,823
581
1,653
22,567
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. No net realisable value adjustments were made during the year
(30 June 2019: $3.88 million).
During the year $0.360 million relating to inventory on the acquisition of the Darlot mine was written off (refer to note 11).
2020 Annual Report
49
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
10
PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
Plant and
equipment
Fixtures and
fittings
Right of use
assets
Assets under
construction
$’000
$’000
$’000
$’000
$’000
Total
$’000
Cost
Balance at 1 July 2019
13,121
132,318
1,896
-
1,748
149,083
Recognised on transition to AASB 16
at 1 July 2019
Additions (a)
Disposals (b)
Transfer from assets under construction
Reclassification to right of use assets
Reclassification to intangible assets
(refer to note 11)
Reclassification to exploration and
evaluation assets
-
-
-
-
-
-
-
Effect of movements in exchange rates
143
-
7,738
(1,140)
259
(3,214)
(2,056)
-
4,582
Balance at 30 June 2020
13,264
138,487
Balance at 1 July 2018
12,844
Additions
Disposals (b)
Transfer from assets under construction
Reclassification to intangible assets
Effect of movements in exchange rates
Balance at 30 June 2019
Accumulated depreciation
Balance at 1 July 2019
Depreciation for the year
Disposals
Reclassification to right of use assets
Reclassification to intangible assets
(refer to note 11)
49
-
-
-
228
13,121
(4,354)
(2,023)
-
-
-
117,683
4,657
-
2,612
(118)
7,484
132,318
(66,908)
(6,513)
608
1,465
82
Effect of movements in exchange rates
(98)
(2,473)
Balance at 30 June 2020
(6,475)
(73,739)
Balance at 1 July 2018
Depreciation for the year
Reclassification to intangible assets
Effect of movements in exchange rates
(2,207)
(2,000)
-
(147)
(52,910)
(10,094)
36
(3,940)
-
30
-
-
-
-
-
88
2,014
2,084
-
-
49
(377)
140
1,896
(1,646)
(76)
-
-
-
(80)
(1,802)
(1,503)
(81)
62
(124)
Balance at 30 June 2019
(4,354)
(66,908)
(1,646)
Carrying amounts
At 1 July 2018
At 30 June 2019
At 30 June 2020
10,637
8,767
6,789
64,773
65,410
64,748
581
250
212
15,908
1,956
-
-
3,214
-
-
2
21,080
-
-
-
-
-
-
-
-
(8,052)
-
(1,465)
-
(1)
(9,518)
-
-
-
-
-
-
-
11,562
-
6,591
-
(259)
-
15,908
16,315
(1,140)
-
-
(14)
(2,070)
(976)
116
7,206
2,989
1,523
(127)
(2,661)
(144)
168
1,748
-
-
-
-
-
-
-
-
-
-
-
-
2,989
1,748
7,206
(976)
4,931
182,051
135,600
6,229
(127)
-
(639)
8,020
149,083
(72,908)
(16,664)
608
-
82
(2,652)
(91,534)
(56,620)
(12,175)
98
(4,211)
(72,908)
78,980
76,175
90,517
(a) During the year ended 30 June 2020 additions included accommodation facility for the KOTH plant construction, leased assets, sustaining
capital and tailing storage facility improvements.
(b) Includes processing plant equipment and tailing storage facility 2 written off at Darlot mine. (30 June 2019: assets under construction at the
Siana project written off).
50
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
11
INTANGIBLE ASSETS
Cost
Balance at 1 July 2019
Additions
Reclassification from assets under construction (refer to note 10)
Reclassification of asset retirement obligation (refer to note 10)
Rehabilitation change due to change in estimate (refer to note 17)
Rehabilitation change in variables (refer to note 17)
Effect of movements in exchange rates
Balance at 30 June 2020
Balance at 1 July 2018
Additions
Reclassification from property, plant and equipment
Reclassification from assets under construction
Rehabilitation change in variables (refer to note 17)
Balance at 30 June 2019
Accumulated depreciation
Balance at 1 July 2019
Amortisation
Reclassification of rehabilitation asset (refer to note 10)
Effect of movements in exchange rates
Balance at 30 June 2020
Balance at 1 July 2018
Amortisation
Reclassification from property, plant and equipment
Balance at 30 June 2019
Carrying amounts
At 1 July 2018
At 30 June 2019
At 30 June 2020
Mineral Rights and
Asset Retirement
Obligation
$’000
30,357
360
-
2,056
4,626
4,543
103
42,045
31,267
-
118
-
(1,028)
30,357
Mineral Rights and
Asset Retirement
Obligation
$’000
(11,793)
(6,664)
(82)
(4)
Software
$’000
1,768
233
14
-
-
-
-
2,015
948
299
377
144
-
1,768
Software
$’000
(603)
(604)
-
-
Total
$’000
32,125
593
14
2,056
4,626
4,543
103
44,060
32,215
299
495
144
(1,028)
32,125
Total
$’000
(12,396)
(7,268)
(82)
(4)
(18,543)
(1,207)
(19,750)
(1,472)
(10,285)
(36)
(11,793)
29,795
18,564
23,502
(20)
(521)
(62)
(603)
928
1,165
808
(1,492)
(10,806)
(98)
(12,396)
30,723
19,729
24,310
2020 Annual Report
51
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
12 MINE DEVELOPMENT
(a) Mine development
Opening balance
Development expenditure incurred in current period
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 2020
30 June 2019
$’000
$’000
143,990
12,634
5,688
162,312
120,107
9,052
5,438
134,597
27,715
69,501
3,712
73,213
69,501
-
3,712
73,213
-
27,715
113,512
21,397
9,081
143,990
97,172
14,251
8,684
120,107
23,883
63,574
5,927
69,501
63,574
-
5,927
69,501
-
23,883
13
EXPLORATION AND EVALUATION ASSETS
Opening balance
Exploration and evaluation expenditure incurred in current period (a)
Capitalised exploration costs transferred from assets under construction
Exploration expenditure transferred to profit or loss (b)
Closing Balance
CONSOLIDATED
30 June 2020
30 June 2019
$’000
5,294
30,789
976
(4,698)
32,361
$’000
-
8,584
-
(3,290)
5,294
(a) During the year ended 30 June 2020, $20.427 million for final feasibility studies, drilling and related costs at King of the Hills gold project
were capitalised (30 June 2019: $5.294 million). In addition, $5.665 million was capitalised relating to the acquisition and drilling costs at
satellite deposits acquired by Darlot (2019: nil); and exploration of $4.608 million (2019: $3.290 million).
(b) The carrying value of exploration costs totalling $4.698 million were expensed (30 June 2019: $3.290 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.
52
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
14
TRADE AND OTHER PAYABLES
Current
Creditors and accruals
Deferred considerations relating to acquisitions (a)
Royalties and other indirect taxes
Insurance payable
Other creditors
CONSOLIDATED
30 June 2020
30 June 2019
$’000
35,899
-
1,994
1,641
2,387
41,921
$’000
29,980
5,678
2,202
651
2,931
41,442
(a) During the year ended 30 June 2020, $5.0 million was paid to Gold Fields pursuant to the October 2017 acquisition agreement for the
Darlot gold mine. The payment to Gold Fields finalises all obligations of Red 5 to Gold Fields under the acquisition agreement for Darlot.
15
INCOME TAX PAYABLE
Income tax payable
16
FINANCIAL LIABILITY
Nominal Interest Rate
Loan Term
Carrying Value
Current borrowings
Non-current borrowings
CONSOLIDATED
30 June 2020
30 June 2019
$’000
1,791
1,791
$’000
1,564
1,564
(i) Macquarie working
capital facility
30 June 2020
$’000
BBSY bid rate +4.5%
(ii) Gold loan
facility
30 June 2019
$’000
12%
22 months
12 months
11,853
11,853
-
11,853
10,143
10,143
-
10,143
(i) During August 2019 the company entered into working capital facility agreement of $20.0 million with Macquarie Bank Limited at a rate of
the month-end BBSY 1-month rate plus 4.5%. Interest on the loan is payable monthly in arrears during the term of the loan. Borrowing costs
of $0.481 million to secure this funding have been offset against the principal borrowings amount and are amortised using the effective
interest rate method. The interest expense for the period was $0.862 million.
The working capital facility is secured over the Company’s Australian assets and contains financial covenants customary for loans of this
type. A breach of covenant may require the Company to repay the facility earlier than indicated in the above table. There have been no
breaches in the financial covenants of any loans and borrowings in the current or prior period.
(ii) In the prior financial year , 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 had 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 was 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 was 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. On 22 August 2019 the
principle and final interest obligation was repaid.
2020 Annual Report
53
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
FINANCIAL LIABILITY (cont.)
16
The movement of the gold loan facility was as follows:
Gold loan facility movement
Opening balance
Unwinding of interest
Interest payments made
Realised loss/(gain) on interest payment
Fair value movement of financial liability
Repayment of loan
Closing balance
17
PROVISIONS
CONSOLIDATED
30 June 2020
30 June 2019
$’000
10,143
196
(291)
64
967
(11,079)
-
$’000
8,220
1,073
(861)
65
1,646
-
10,143
Total
$’000
32,545
902
(854)
4,626
4,543
316
166
42,244
Rehabilitation
provision (a)
MCC final
acquisition (b)
Documentary
stamp duty (c)
Withholding
tax
Other
provisions
$’000
29,320
-
-
4,626
4,543
316
109
38,914
$’000
1,116
-
-
-
-
-
-
1,116
$’000
1,075
90
-
-
-
-
57
1,222
$’000
504
-
-
-
-
-
-
$’000
530
812
(854)
-
-
-
-
504
488
Opening balance
Provisions made
Provisions utilised
Change in rehabilitation estimate
Change in rehabilitation variables
Unwinding of discount
Foreign currency translation
adjustment
Closing balance
(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 2020
30 June 2019
$’000
1,116
41,128
42,244
$’000
1,116
31,429
32,545
54
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
LEASE LIABILITIES
18
Lease liabilities include electricity and gas power plants, vehicles and equipment. Lease liabilities expire between November 2020 and
August 2022 and bear interest between 4.5% and 7.5%. 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 leases are secured by the lessor’s title to the leased assets.
The fair value of the lease liabilities approximates their carrying values.
The following schedule outlines the total minimum loan payments due for the lease obligations over their remaining term:
Future minimum
lease payments
Interest
Present value of
minimum lease payments
2020
$’000
6,385
6,330
-
12,715
6,385
6,330
12,715
2019
$’000
1,448
993
-
2,441
1,448
993
2,441
2020
$’000
453
1,152
-
1,605
453
1,152
1,605
2019
$’000
121
34
-
155
121
34
155
2020
$’000
5,932
5,178
-
11,110
5,932
5,178
11,110
2019
$’000
1,327
959
-
2,286
1,327
959
2,286
Year ended 30 June
Less than one year
Between one and five years
More than five years
Current
Non-current
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
Current
Non-current
CONSOLIDATED
30 June 2020
30 June 2019
$’000
2,600
1,416
1,036
5,052
4,896
156
5,052
$’000
2,074
1,343
1,059
4,476
4,393
83
4,476
CONSOLIDATED
30 June 2020
30 June 2019
$’000
(5,311)
(28,064)
(33,375)
(28,983)
(4,392)
(33,375)
$’000
762
(6,073)
(5,311)
(5,311)
-
(5,311)
Forward contracts designated as hedges
As at 30 June 2020 the Group had a hedge liability position reflecting a negative mark-to-market value of gold contracts.
As at year end metal hedges comprise forward contracts for 67,000 ounces of gold (2019: 30,100 ounces) at an average price of
$2,089 per ounce (2019: $1,844) for the period July 2020 to September 2021.
2020 Annual Report
55
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
21 CONTRIBUTED EQUITY
(a)
Share capital
1,958,845,338 (30 June 2019: 1,243,166,958) ordinary fully paid shares
(b) Movements in ordinary share capital
On issue 1 July 2018
Deferred rights vested and converted to shares
Performance rights vested and converted to shares
On issue at 30 June 2019
On issue at 1 July 2019
Capital raising for cash
Shares issued as consideration for acquisition of satellite gold deposits for the
Darlot Mining Hub
Service rights vested
Deferred rights vested and converted to shares
Share issue costs
On issue at 30 June 2020
1,240,693
1,174
1,300
1,243,167
1,243,167
694,444
19,316
1,174
744
-
1,958,845
CONSOLIDATED
30 June 2020
30 June 2019
$’000
383,887
CONSOLIDATED
Thousand Shares
$’000
260,515
$’000
260,365
82
68
260,515
260,515
125,000
4,677
82
223
(6,610)
383,887
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.
(c)
Other equity
Opening balance 1 July 2019 (a)
Balance 30 June 2020
CONSOLIDATED
Thousand Shares
30 June 2020 $’000
581
581
930
930
(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)
Deferred retirement benefit
Share-based payment reserve and other reserves (b)
Hedging reserve (c)
CONSOLIDATED
30 June 2020
30 June 2019
$’000
27,991
54
2,203
(18,594)
11,654
$’000
25,204
106
1,057
(3,398)
22,969
(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) The share-based payment reserve includes performance rights, service and deferred rights reserve. It arises on the granting and vesting of
equity instruments. Refer note 31 for further details. It also includes other reserves for defined retirement benefit fund for Philippines
employees of $0.054 million (2019: $0.106 million). 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.
56
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
EARNINGS PER SHARE
23
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 profit/(loss) after income tax attributable to members of the parent
company
Weighted average number of ordinary shares (‘000)
Issued ordinary shares at 1 July
Effect of shares issued 16 July 2019
Effect of shares issued 6 December 2019
Effect of shares issued 3 April 2020
Effect of shares issued 9 April 2020
Effect of shares issued 13 May 2020
Effect of shares issued 27 May 2020
Effect of shares issued 31 July 2018
Effect of shares issued 7 December 2018
Weighted average number of ordinary shares at 30 June (basic)
Weighted-average number of ordinary shares (basic):
Effect of performance rights contingently issuable
Effect of service rights contingently issuable
Weighted average number of ordinary shares at 30 June (diluted)
Basic profit/(loss) per share (cents per share)
Diluted profit/(loss) per share (cents per share)
CONSOLIDATED
30 June 2020
30 June 2019
$’000
4,459
$’000
(3,208)
CONSOLIDATED
Weighted average
number of shares
2020
2019
1,243,167
1,240,693
1,126
423
41,704
2,617
70,012
743
-
-
1,359,792
1,359,792
29,199
1,267
1,390,258
0.33
0.32
-
-
-
-
-
-
1,193
663
1,242,549
1,242,549
25,958
667
1,269,174
(0.26)
(0.26)
For fully diluted profit/(loss) per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of
dilutive potential ordinary shares. The Group’s potentially dilutive securities consist of performance and service rights.
2020 Annual Report
57
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
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 Director
Mark Williams – Managing Director
Non-Executive Directors
Kevin Dundo
Ian Macpherson
Colin Loosemore
Steve Tombs
Other executives
John Tasovac – Chief Financial Officer
Brendan Shadlow – General Manager Operations
Company Secretary
Frank Campagna – Company Secretary
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
CONSOLIDATED
30 June 2020
30 June 2019
$
$
2,388,461
124,491
72,472
389,142
2,974,566
2,051,439
140,904
61,784
271,065
2,525,192
Loans to key management personnel
There were no loans to key management personnel during the period.
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.
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.
58
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
25 REMUNERATION OF THE AUDITOR
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
26 CAPITAL AND OTHER COMMITMENTS
Capital expenditure commitments
Contracted but not provided for:
- not later than one year
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
2020
$
151,931
38,693
117,940
8,496
-
317,060
2019
$
136,904
35,090
130,749
7,705
3,844
314,292
CONSOLIDATED
30 June 2020
30 June 2019
$’000
$’000
295
295
229
229
5,146
5,932
-
-
5,146
4,193
586
4,779
-
-
5,932
4,090
-
4,090
27 CONTINGENT LIABILITIES
The consolidated entity had no material contingent liabilities as at the reporting date and as at the end of the year.
2020 Annual Report
59
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
SEGMENT INFORMATION
28
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.
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.
Australia (a)
Philippines
$’000
$’000
Other (b)
$’000
(i) Segment performance
Year ended 30 June 2020
Revenues (c)
Segment result before tax
Included within segment result:
Other income
Interest income
Finance expenses
Exploration costs expensed
Depreciation and amortisation
Year ended 30 June 2019
Revenues (c)
Segment result before tax
Included within segment result:
Other income
Interest income
Finance costs
Exploration costs expensed
VAT receivable impairment
Depreciation and amortisation
(ii) Segment Assets
As at 30 June 2020
Segment assets
Additions to non-current assets:
Plant and equipment expenditure
Intangible assets
Development expenditure
As at 30 June 2019
Segment assets
Additions to non-current assets:
Plant and equipment expenditure
Intangible assets
Development expenditure
Total
$’000
200,332
200,332
11,172
1,498
336
(2,381)
(4,698)
(32,984)
153,509
153,509
-
-
-
-
(6,179)
(16,243)
447
7
(20)
(89)
(732)
-
-
750
309
(1,581)
-
(86)
-
-
(8,108)
(13,057)
(10,600)
208
7
(16)
(105)
(377)
(638)
-
11
(1,386)
-
-
(86)
750
38
(2,249)
(3,291)
(377)
(37,232)
200,332
200,332
33,594
301
20
(780)
(4,609)
(32,166)
153,509
153,509
10,565
542
20
(847)
(3,186)
-
(36,508)
184,555
60,672
98,168
343,395
31,657
9,751
12,540
553
-
94
13
11
-
32,223
9,762
12,634
113,350
58,966
4,831
177,147
6,039
284
21,393
176
-
5
14
15
-
6,229
299
21,398
60
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
28
SEGMENT INFORMATION (cont.)
(iii) Segment Liabilities
As at 30 June 2020
Segment liabilities
As at 30 June 2019
Segment liabilities
Australia (a)
Philippines
$’000
$’000
Other (b)
$’000
Total
$’000
122,511
8,945
15,890
147,346
65,218
8,282
24,267
97,767
(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. In the previous year the segment liability included the deferred
consideration payable to the sellers relating to the acquisitions of Darlot project.
(c) Revenue is attributable to two customers 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
2020
2019
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.
2020 Annual Report
61
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
30 RECONCILIATION OF NET CASH FLOWS FROM OPERATING ACTIVITIES
CONSOLIDATED
30 June 2020
30 June 2019
Operating profit/(loss) after income tax
Amortisation and depreciation
Non-cash stockpile movements
Ineffective portion of cashflow hedges
VAT receivable impairment
Deferred tax
Share based payment
Tax expense
Interest expenses
Unrealised exchange gain
Accrued gold loan interests
Unwinding of asset retirement obligation
Unwinding deferred consideration
Change in value of gold loan
Amortisation of borrowing costs
Unrealised gains on fuel hedges
Discount forfeited on payment of deferred consideration
Changes in operating assets and liabilities:
(Increase)/decrease in inventories
Decrease/(increase) in receivables
Increase in payables
Increase/(decrease) in income tax payable
Increase/(decrease) in provisions
Net cash inflow from operating activities
$’000
4,544
32,984
(1,250)
6,353
320
6,401
1,451
-
1,463
(50)
131
316
72
967
334
(113)
(750)
(13,593)
2,921
8,281
227
503
51,512
$’000
(3,030)
37,232
(4,751)
457
377
(10,015)
938
-
297
3
213
599
279
1,646
-
-
-
(965)
(3,246)
2,470
825
(147)
23,182
62
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
SHARE-BASED PAYMENT ARRANGEMENTS
31
The following is the movement of performance rights during the period:
Movement of Performance Rights year ended 30 June 2020
Performance rights Series
2020 Series
2021 Series
2022 Series
Total
Balance at
1 July 2019
18,318,801
15,241,298
Granted (a)
Vested (b)
-
-
(10,991,282)
-
-
-
10,442,031
Forfeited (c)
(7,327,519)
-
-
Balance at
30 June 2020
-
15,241,298
10,442,031
33,560,099
10,442,031
(10,991,282)
(7,327,519)
25,683,329
Movement of Performance Rights year ended 30 June 2019
Performance rights Series
2020 Series
2021 Series
Total
Balance at
1 July 2018
18,243,200
Granted
2,675,601
-
15,241,298 (d)
Vested (e)
(1,300,000)
-
Forfeited (e)
(1,300,000)
-
Balance at
30 June 2019
18,318,801
15,241,298
18,243,200
17,916,899
(1,300,000)
(1,300,000)
33,560,099
(a) Performance rights granted during the year ended 30 June 2020:
Performance rights were granted to the Managing Director, Key Management Personnel, Senior Management and other operational
employees during the period. The performance rights are split into four tranches based on different performance conditions measured
over a period commencing 1 July 2019 to the vesting date which is 30 June 2022 if the conditions are met.
Details of the performance rights granted during the period are summarised below:
Performance Rights (2022 series)
Tranche A
Tranche B
Tranche C
Tranche D
Total
Number of
performance rights
Value per right
Valuation per tranche
5,221,017
$0.251
$1,310,475
2,088,403
$0.256
$534,631
2,088,403
$0.256
$534,631
1,044,208
10,442,031
$0.256
$267,317
Condition criteria
TSR ranking relative
to TSR of S&P/ASX
All Ordinaries Gold
Total Return Index
Growth in the
Company’s Ore
Reserves (excluding
50% of acquired 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
$2,647,055
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 2020.
(b) In accordance with the terms of the Red 5 Rights Plan, performance rights that were issued to key management personnel, senior
management have vested following the partial achievement of performance conditions measured over the three years ended
30 June 2020 and were converted to shares subsequent to 30 June 2020.
(c) Unmet performance conditions have lapsed as at 30 June 2020, as a result they have been forfeited.
2020 Annual Report
63
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
SHARE-BASED PAYMENT ARRANGEMENTS (cont.)
31
(d) Details of Performance rights granted during the year ended 30 June 2019 are summarised below:
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 (excluding
50% of acquired 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.
Senior Management (2021 series)
Number of
performance rights
Value per right
Valuation per tranche
Condition criteria
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
1,122,050
11,220,490
$0.057
$127,917
$0.057
$63,957
$572,252
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
64
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
SHARE-BASED PAYMENT ARRANGEMENTS (cont.)
31
(e) 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.
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 for performance
rights outstanding as at 30 June 2020:
Model Inputs
Grant date
Value of the underlying security at grant date
Exercise price
Dividend yield
Risk free rate
Volatility
Performance period (years)
Commencement of measurement period
Vesting date
Remaining performance period (years)
Weighted average fair value per option
No. performance rights
Total Valuation
Performance Rights
(2022 series)
Managing Director
(2021 series)
Senior Management
(2021 series)
20 Nov 2019
21 Nov 2018
11 Dec 2018,
12 & 19 April 2019
$0.30
nil
nil
0.71%
$0.07
nil
nil
2.12%
$0.079
nil
nil
1.95%
Tranche A: 70%
Tranches B C D: 70%
Tranche A: 70%
Tranches B C D: 80%
Tranche A: 70%
Tranches B-D: 80%
3.00
1 July 2019
30 June 2022
2.61
$0.25
10,442,031
$2,647,055
3.00
1 July 2018
30 June 2021
2.61
$0.043
4,020,808
$172,895
3.00
1 July 2018
30 June 2021
2.53
$0.051
11,220,490
$572,245
Shares issued, Service and Deferred Rights
Grant Date
Vesting
Date
Fair Value at
Grant Date
Granted
Exercised up to
reporting date
Forfeited
Outstanding at
30 June 2020
Service rights issued and
vested: Mark Williams (a)
Deferred rights issued and
vested: Mark Williams (b)
Service rights issued and
vested: John Tasovac (a)
Deferred rights issued and
vested: John Tasovac (b)
Service rights issued and
vested: Brendon Shadlow (a)
Deferred rights issued and
vested: Brendon Shadlow (b)
5-Dec-19
30-Jun-20
$117,944
393,258
(393,258)
5-Dec-19
6-Dec-19
$117,944
393,258
(393,258)
5-Dec-19
30-Jun-20
$54,775
182,584
(184,584)
5-Dec-19
6-Dec-19
$54,775
182,584
(184,584)
5-Dec-19
30-Jun-20
$50,562
168,539
(168,539)
5-Dec-19
6-Dec-19
$50,562
168,539
(168,539)
-
-
-
-
-
-
-
-
-
-
-
-
(a) 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.
(b) 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 was $0.381 million, (2019: $0.298 million).
The fair value is based on observable market share price at the date of grant.
2020 Annual Report
65
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
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 two customers in Australia and has managed its exposure to credit risk by analysing the creditworthiness of the
customer.
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 2020
30 June 2019
$’000
11,797
116,220
257
$’000
14,718
10,647
188
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.
66
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
FINANCIAL RISK MANAGEMENT OVERVIEW (cont.)
32
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of
netting agreements:
Carrying
amount
$’000
Contractual
cash flows
$’000
41,921
11,110
53,031
41,441
2,286
43,727
(41,921)
(12,715)
(54,636)
(41,441)
(2,441)
(43,882)
6 months
or less
$’000
(41,921)
(4,601)
(46,522)
(41,441)
(799)
(42,240)
6 – 12 months
$’000
More than
1 year
$’000
-
(1,784)
(1,784)
-
(649)
(649)
-
(6,330)
(6,330)
-
(993)
(993)
CONSOLIDATED
As at 30 June 2020
Trade and other payables
Lease liabilities
As at 30 June 2019
Trade and other payables
Finance lease liabilities
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.
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 2020 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 2020:
Maturity
0-6 months
7-12 months
More than 1 year
As at 30 June 2020
As at 30 June 2019
Gold price sensitivity
7
41
No. of contracts
Gold sold
67,000 oz
$’000
(13,652)
$’000
(15,330)
30,100 oz
(5,311)
-
$’000
(4,392)
-
The carrying amount of derivative financial instruments are valued using appropriate valuations models with inputs such as forward gold
prices. The potential effect of using reasonably possible alternative assumptions in these models, based on changes in the forward gold
price by 10 per cent while holding all other variables constant, is shown in the following table:
30 June 2020
Derivative financial instruments
30 June 2019
Derivative financial instruments
Other Comprehensive Income
Carrying amount
$’000
10% increase
$’000
10% decrease
$’000
33,375
(12,134)
12,134
5,311
(5,556)
5,556
2020 Annual Report
67
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
32
FINANCIAL RISK MANAGEMENT OVERVIEW (cont.)
CURRENCY RISK
The consolidated entity is exposed to currency risk on investments and purchases that are denominated in a currency other than the
respective functional currencies of the subsidiaries within the consolidated entity being Australian Dollar (A$) 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 2020
A$’000
30 June 2019
A$’000
268
-
(625)
(357)
614
524
(568)
570
A 10 per cent strengthening of the Australian dollar against the United States dollar on the 30 June 2020 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 2019.
30 June 2020 – US$
30 June 2019 – US$
CONSOLIDATED
Profit or loss
A$’000
(36)
(57)
A 10 per cent weakening of the Australian dollar against the above currencies at 30 June 2020 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.
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:
CONSOLIDATED
Carrying amount
30 June 2020
30 June 2019
$’000
104,367
195
104,562
$’000
10,646
184
10,830
Cash and cash equivalents
Security deposits
68
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
FINANCIAL RISK MANAGEMENT OVERVIEW (cont.)
32
Cash flow sensitivity analysis for variable rate instruments
An increase of 100 basis points or decrease of 50 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 in 2020 an average of 0.5% interest rate is in place
across all cash balances and that all other variables remain constant. In 2019 the analysis assumed an increase or decrease of 100
basis points in interest rates.
CONSOLIDATED
30 June 2020
Profit or loss
Equity
100bp increase
$’000
50bp/100bp
decrease
$’000
100bp increase
$’000
50bp/100bp
decrease
$’000
Variable rate instruments
1,046
(523)
1,046
(523)
30 June 2019
Variable rate instruments
NET FAIR VALUES
108
(108)
108
(108)
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.
FAIR VALUE MEASUREMENT
33
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 $33.375 million (30 June 2019: liability of $5.311 million);
\ Embedded derivative on gold loan, nil (30 June 2019: $1.646 million).
34 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.
2020 Annual Report
69
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
34 DEED OF CROSS GUARANTEE (cont.)
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.
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 2020 is set out as follows:
(a)
Statement of Other Comprehensive Income
CLOSED GROUP
Year ended
30 June 2020
30 June 2019
$’000
138,744
(97,994)
40,750
734
(21,492)
(4,608)
15,384
211
(1,674)
(1,463)
13,921
(6,628)
7,293
(21,550)
6,354
(7,903)
$’000
113,915
(83,002)
30,913
364
(36,540)
(3,186)
(8,449)
30
(1,917)
(1,887)
(10,336)
7,570
(2,766)
(4,617)
720
(6,663)
Sales revenue
Cost of sales
Gross profit/(loss)
Other income and expenses
Other income
Administration and other expenses
Exploration expenditure
Operating profit/(loss)
Finance income
Finance expenses
Net financing expense
Profit/(loss) before tax
Income tax (expense)/benefit
Profit/(loss) after tax for the year
Other comprehensive income/(loss)
Changes in fair value of cashflow hedges, net of tax
Ineffective portion of cash flow hedges
Total comprehensive loss for the year
70
2020 Annual Report
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
34 DEED OF CROSS GUARANTEE (cont.)
(b)
Statement of Financial Position
CLOSED GROUP
Year ended
30 June 2020
30 June 2019
Assets
Cash and cash equivalents
Trade and other receivables
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
Income tax payable
Lease liabilities
Derivative financial instruments
Total current liabilities
Trade and other payables
Employee benefits
Provisions
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
$’000
104,681
10,165
20,065
134,911
232,153
58,776
2,140
658
4,058
297,785
432,696
21,639
5,047
1,791
3,779
28,983
61,239
129,281
-
24,710
5,172
11,853
4,392
175,408
236,647
196,049
383,887
930
(16,337)
(172,431)
196,049
$’000
8,366
12,840
14,471
35,677
126,022
31,675
2,333
658
3,946
164,634
200,311
22,042
4,385
1,564
1,084
-
29,075
59,484
83
15,914
921
10,143
5,311
91,856
120,931
79,380
260,515
930
(2,341)
(179,724)
79,380
2020 Annual Report
71
Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.)
35 PARENT ENTITY DISCLOSURES
PARENT ENTITY
30 June 2020
30 June 2019
$’000
$’000
(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
Low value and short term leases:
- Not later than one year
Total financial commitments
(d) Contingent liabilities
93,589
308,560
402,149
200,261
5,839
206,100
383,887
930
(16,337)
(172,431)
196,049
7,293
(15,196)
(7,903)
-
-
426
165,611
166,037
85,347
1,310
86,657
260,515
930
(2,341)
(179,724)
79,380
1,875
(3,896)
(2,021)
62
62
The parent entity did not have any contingent liabilities at 30 June 2020 (2019: $nil)
SUBSEQUENT EVENTS
36
King of the Hills processing plant construction
On 15 September 2020, the Company announced the Final Feasibility Study (FFS) for a proposed new 4Mtpa bulk mining and
processing operation at the King of the Hills (KOTH) Gold Project, located in the Eastern Goldfields region of Western Australia.
72
2020 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 2020 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 2020.
Signed in accordance with a resolution of the Directors.
Kevin Dundo
Chairman
Perth, Western Australia
24 September 2020
2020 Annual Report
73
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).
The Financial Report comprises:
• Consolidated Statement of financial position as at 30
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 2020 and of its
financial performance for the year ended on that
date; and
•
complying with Australian Accounting Standards
and the Corporations Regulations 2001.
June 2020
• 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 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
(including Independence Standards) (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, Mine
Development and Exploration and Evaluation
Assets
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.
74
2020 Annual Report
INDEPENDENT AUDITOR’S REPORT (cont.)
Sales Revenue ($200.332 million)
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
($200.332m).
We focused on the following judgements the
Group applied in determining sales revenue:
• Assessing the revenue recognised against
the requirements of AASB 15 Revenue form
Contracts with Customers;
• 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, we
tested against the recognition criteria of AASB 15 checking
control had passed to the customer;
• We compared realised hedging gains and losses to
counterparty statements for gold forward hedges during
the year;
•
For gold forward hedges not realised as at 30 June 2020,
we checked open positions to counterparty statements,
reassessed the fair value of the open positions on a
sample basis 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.
• Working with our valuation specialists, we evaluated the
hedge documentation and hedge accounting for
compliance with AASB 9 Financial Instruments.
Property, Plant and Equipment ($90.517m), Mine Development ($27.715m) and Exploration and Evaluation
Assets ($32.361m)
Refer to Notes 10, 12 & 13 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
($90.517m), Mine Development ($27.715m) and
Exploration and Evaluation Assets ($32.361m),
together represent 43.9% of total assets.
The Group applied judgement in the
identification and allocation of cost between
operating expenditure and capitalised
expenditure. The risks we focused on included:
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;
•
For a sample of supplier and contractor invoices we
checked the timing and nature of recorded expenditure
against the details of the service description on the invoice
or contract;
2020 Annual Report
75
INDEPENDENT AUDITOR’S REPORT (cont.)
The key audit matter
How the matter was addressed in our audit
• The existence of capital expenditure;
• The capital nature of expenditure,
particularly the determination of capitalised
Exploration and Evaluation assets in
accordance with the group’s accounting
policies and the criteria in AASB 6
Exploration for and Evaluation of Mineral
Resources.
• 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;
• Evaluating the Group’s accounting policy to recognise
Exploration and Evaluation Assets using the criteria in
AASB 6 Exploration for and Evaluation of Mineral
Resources. This included assessment of the Group’s
determination of its areas of interest for consistency with
the definition in the standard;
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, Resources
and Reserves Statement and Corporate Directory. The Chairman’s Review, Managing Director’s Report, 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.
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.
76
2020 Annual Report
INDEPENDENT AUDITOR’S REPORT (cont.)
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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of Red 5
Limited for the year ended 30 June 2020, 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
the Directors’ report for the year ended 30 June 2020
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
24 September 2020
2020 Annual Report
77
STATEMENT OF SHAREHOLDERS as at 18 September 2020
DISTRIBUTION OF SHARE AND RIGHTS 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.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Ltd
JP Morgan Nominees Australia Pty Ltd
UBS Nominees Pty Ltd
Gwynvill Trading Pty Ltd
HSBC Custody Nominees (Australia) Limited
BNP Paribas Noms Pty Ltd
Gary B Branch Pty Ltd
National Nominees Limited
BNP Paribas Nominees Pty Ltd
Brispot Nominees Pty Ltd
CS Fourth Nominees Pty Ltd
VSG Resources Pty Ltd
CS Third Nominees Pty Ltd
Provedore Holdings Pty Ltd
Dampier Consulting Pty Ltd
John Colin Loosemore & Susan Loosemore
VSG Resources Pty Ltd
Neweconomy Com Au Nominees Pty Ltd
VSG Resources Pty Ltd
717
1,586
979
2,875
788
6,945
829
Shares
642,128,651
341,672,500
238,128,076
46,444,896
28,717,449
27,447,035
23,353,345
19,113,250
19,042,334
13,698,390
13,165,935
12,938,878
11,190,476
9,426,180
7,300,000
6,757,837
6,465,537
6,171,679
5,983,431
5,549,623
-
-
-
2
52
54
%
32.59
17.34
12.08
2.36
1.46
1.39
1.19
0.97
0.97
0.70
0.67
0.66
0.57
0.48
0.37
0.34
0.33
0.31
0.30
0.28
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.
1,484,695,502
75.36
78
2020 Annual Report
STATEMENT OF SHAREHOLDERS as at 18 September 2020 (cont.)
SUBSTANTIAL SHAREHOLDERS
The following shareholders have lodged a notice of substantial shareholding in the Company.
Shareholder
Franklin Resources Inc
Bank of America Corporation
Ruffer LLP
Electrum Strategic Opportunities Fund II LP
UNQUOTED SECURITIES
The following classes of unquoted securities are on issue:
Number of shares
233,466,976
115,562,576
112,942,901
111,111,112
%
11.85
5.86
5.73
5.64
Security
Number on issue
Name of holder
Performance rights (2021)
Performance rights (2022)
15,241,298
10,442,031
Mark Williams
-
Number
4,020,808
-
%
26.38
-
Holders of greater than 20% of each class of security
CORPORATE GOVERNANCE STATEMENT
The Company’s 2020 corporate governance statement can be viewed at
https://www.red5limited.com/site/about-red5/corporate-governance
CORPORATE DIRECTORY
BOARD OF DIRECTORS
MANILA OFFICE
BANKERS
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
Greenstone Resources Corporation
Unit 507-508, 5th Floor
Coherco Financial Tower
Investment corner Trade Sts.
Madrigal Business Park
Ayala, Alabang
Muntinlupa City
Philippines 1780
Telephone: (63-2) 8804 5600
Facsimile: (63-2) 8807 6658
SHARE REGISTRY
Automic Pty Ltd
Level 2
267 St Georges Terrace
Perth WA 6000
Telephone: 1300 288 664
E-mail: hello@automicgroup.com.au
Web-site: www.automicgroup.com.au
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
2020 Annual Report
79
ABN 73 068 647 610
www.red5limited.com