RED 5 Limited
Annual Report 2021

Plain-text annual report

Annual Report 2021 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. CORPORATE PROFILE Red 5 Limited (ABN 73 068 647 610) is an Australian gold producer with established mines located in the Eastern Goldfields of Western Australia. The Company is listed on the Australian Securities Exchange (Ticker: RED). Red 5 owns and operates the King of the Hills (KOTH) Gold Project, located approximately 900 kilometres north-east of Perth in the Leonora-Leinster mineral province of Western Australia. Construction is progressing on a new 4.0Mtpa processing plant at KOTH, which is underpinned by an Ore Reserve of 2.4Moz of contained gold and will be fed by a bulk open pit and underground mining operation over a 16-year life of mine plan. The $226 million project is fully financed and first gold production is scheduled for the June 2022 quarter. Red 5 also owns and operates the Darlot Gold Mine located approximately 100 kilometres north of KOTH. Darlot’s processing plant is currently fed by an underground mine at Darlot and a satellite open pit mine at Great Western. Red 5 has announced that, as part of its KOTH Processing Hub Strategy, the Darlot underground mine will transition to a satellite mine for the KOTH operation in 2022, with the Darlot processing plant to be placed on care and maintenance. The Red 5 Group has recently divested its interests in the Siana Gold Project located in the Philippines to focus on its expanding gold mining operations in Western Australia. CONTENTS Message from the Chairman Report from the Managing Director Resources and Reserves Statement Tenement Schedule Financial Report Directors’ Report Annual Financial Statements Notes to Financial Statements Statement of Shareholders Corporate Directory 2 3 10 17 18 38 42 85 86 FINANCIAL AND CORPORATE \ Total gold sales of 75,907 ounces for $173.4 million for FY-21. \ Secured a $175 million KOTH project debt facility with global banking syndicate involving Macquarie Bank, BNP Paribas and HSBC. First draw- down occurred in July 2021. \ Gross profit from operations of $2.3 million for the 12 months to 30 June 2021, with a net loss after adjusting for discontinued operations (referring to the Siana Gold Project) of $43.2 million. 2021 HIGHLIGHTS WEST AUSTRALIAN GOLD OPERATIONS Mining and Processing \ Gold production of 76,104 ounces for FY-21 recovered from a total of 984,220 tonnes of ore processed at an average head grade of 2.63g/t Au. \ Mining commenced at the Great Western open pit deposit located near Darlot. \ Strong safety performance, with one Lost Time Injury (LTI) recorded across Red 5’s mining, processing and exploration activities in FY-21. \ Implementation of a revised mine plan for the Darlot gold mine as part of the new King of the Hills (KOTH) processing hub strategy. Under this plan, the Darlot underground mine will transition to become an additional high-grade feed source for the new KOTH processing plant, enabling a step-change in Darlot’s unit production costs. \ 12-month mine development program by Redpath mining contractor, planned in FY-22 to unlock Darlot’s extensive 1.3Moz Resource base. King of the Hills (KOTH) development \ Final Feasibility Study delivered a 2.4Moz Ore Reserve, underpinning an initial 16-year mine life with forecast total Life of Mine production of 2.5Moz at an average AISC of A$1,415/oz. \ Mining permit approved by the Department of Mines, Industry Regulation and Safety (DMIRS). \ Project development is well advanced, with 59% project completion achieved as at the end of August 2021. \ 5-year open pit and underground mining services contract awarded to Macmahon Contractors. \ Project development on schedule to deliver first gold production in the June Quarter 2022. Exploration and Resource Development \ +35,000m diamond and RC drilling programs commenced across key prospects within the broader Darlot area, with programs aimed at delivering resource growth and new discoveries. \ Maiden Proved and Probable Open Pit Ore Reserve delivered for Great Western of 437,500t @ 2.5g/t Au for 35,424oz of contained gold (0.72g/t Au cut-off). 2021 Annual Report 1 Message to Shareholders FROM THE CHAIRMAN Dear Shareholders Red 5 took further crucial steps during FY-21 towards its objective of becoming a leading mid-tier Australian gold producer, underpinned by the successful development and delivery of what we expect will be Australia’s next major gold mine – our flagship King of the Hills (KOTH) project in the Eastern Goldfields. Following the completion of a Final Feasibility Study (FFS) for the KOTH project in September 2020, Red 5 secured in June 2021 a highly competitive $175 million project finance package from a syndicate of lenders comprising BNP Paribas, HSBC and Macquarie. In conjunction with the debt facility, Red 5 also completed a fully underwritten $60 million entitlement offer in April 2021. With this funding in place, we are now progressing through each milestone and on track to achieve first production from the KOTH operation in the June Quarter 2022. Importantly, we have been able to achieve this progress despite the impact of the ongoing COVID-19 pandemic and against the backdrop of an increasingly competitive market in the Western Australian mining industry, which has made accessing labour, services and equipment an increasing challenge across the resources sector. The Company has been in a strong position to place orders early for key long-lead items and secure quality people and services well ahead of the tightening in the market, which we saw in the second half of last year. Gold production for FY-21 was 76,104 ounces. In August 2021 we completed a comprehensive review of our mining operations across the Eastern Goldfields, delivering a new mine plan that I believe will underpin a much more robust production and cost profile for Red 5 over the coming years. In what represents a reversal of our original operating strategy in the Eastern Goldfields, from mid next year, we will commence trucking Darlot ore to be processed at the new plant being constructed at King of the Hills. The new mill being built at KOTH is an ultramodern state-of-the-art CIL plant, with significant latent capacity and forecast production costs considerably below what we can achieve at Darlot. This will make Darlot a high-grade source of satellite ore feed for KOTH. In addition, this strategy will also enable Red 5 to transition our Darlot employees across to the KOTH operation. This provides certainty both to the Company and its employees and significantly reduces our labour-related risk for KOTH. Post year end, we were pleased to secure a binding agreement for the divestment of our interests in the Siana Gold Project in the Philippines, for a consideration of US$19 million in cash as well as a net smelter return on future gold production up to 619,000 ounces (equivalent to a face value of US$36 million at a US$1,800/oz gold price). As we look ahead to the coming financial year, Red 5 occupies a relatively unique growth space in the ASX gold sector as an existing producer with a large-scale, long-life development asset at KOTH. In addition, over the coming year, we expect to make important progress towards opening up new mining areas at Darlot as part of the new mine plan, as well as maintaining an active exploration program across our tenement portfolio. I am confident that the considerable amount of hard work being put in across the business will ultimately be reflected in a re-rating of our share price as we start production at KOTH and embark on this next exciting chapter of our journey as an Australian gold producer. In conclusion, I would like to sincerely thank the Red 5 team – including my fellow board members, our executive team and employees and contractors – for their efforts over the course of the year. I would also like to thank all our shareholders for your ongoing support. Kevin Dundo Chairman 17 September 2021 2 2021 Annual Report Message to Shareholders FROM THE MANAGING DIRECTOR The 2021 financial year has been another busy and productive period for Red 5, with the Company making positive progress towards the development of the King of the Hills (KOTH) gold project in the Eastern Goldfields region of Western Australia – the largest new gold mine currently under development in Australia. Red 5 completed a Final Feasibility Study (FFS) for the KOTH development in September 2020, which delivered a 2.4Moz Ore Reserve, underpinning an initial 16-year mine life and confirming a clear pathway to production in 2022. Since the delivery of the FFS, Red 5 has taken significant steps towards the development of the project, with the execution of a competitive $175 million project finance package from a Tier-1 banking syndicate and with construction at KOTH progressing on schedule and within budget, putting Red 5 on-track to deliver first gold production from the new KOTH bulk mining operation in the June Quarter 2022. To have achieved such progress against the backdrop of ongoing uncertainty and upheaval stemming from the COVID-19 pandemic is a testament to the dedication and commitment of the Red 5 team, and I would like to congratulate everyone on their efforts. On the mining front, Red 5’s Eastern Goldfields operations delivered total gold production over the past year from Darlot, KOTH and the newly-commissioned Great Western open pit of 76,104 ounces. Red 5 completed a comprehensive review of its operations in August 2021, which resulted in a revised mine plan for Darlot, which will see the Darlot underground transition into an additional medium-term, high-grade feed source for the new KOTH processing plant, which has latent capacity. Processing Darlot’s ore through KOTH’s new processing plant will enable us to deliver a step-change in production costs. A 12-month mine development program is also underway to unlock Darlot’s 1.3Moz Resource base and reduce reliance on mining remnant areas. We will also continue our commitment to exploration over the next 12 months, with robust exploration programs planned across our tenement portfolio in the Eastern Goldfields. 300,000mE 350,000mE E a s t e r n G o l d ? e l d s G a s P i p e l i n e Leinster Cable &Mission Red 5Ltd 185koz Resource (JORC 2004) Ockerburry Dingo Ridge Coodawa Spargos Gold?elds H i g h w a y 6,950,000mN Mission Mission Cable Darlot Red 5Ltd 2.9Moz Produced 1.3Moz Resources Darlot Darlot East JV Agnew-Lawlers Gold Fields Limited 9Moz Produced Thunderbox Northern Star Resources Ltd 1.3Moz Produced Great Western Red 5Ltd 70koz Produced NORTH 25 Kilometres Historical Production Figures have been compiled from various data sources. Given the nature of the historical production records, no responsibility is accepted for their accuracy or any error or omission. Western Australia Darlot Project King of the Hills Project King of the Hills King of the Hills Red 5Ltd 2.0Moz Produced 4.1Moz Resources Leonora Sons of Gwalia St Barbara Ltd 4.0Moz Produced 6,900,000mN Mt Zephyr JV Gale 6,850,000mN Red 5 Limited Tenements Ardea JV Tenements Gold Mine ± Process Plant Gold Mine (Closed) Gold Deposit Greenstones Granites Darlot, KOTH and Great Western locations, showing historical production from key gold deposits in the region. HEALTH AND SAFETY Using a proactive, preventative approach, the Company continues to strive to develop a culture of health and safety leadership within the organisation and firmly embed safety as a line management responsibility. 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. During the year, Red 5 achieved certification for ISO 45001:2018 at the Darlot mine. The new standard helps Red 5 achieve the intended outcomes of our OH&S management system: continual improvement of our OH&S performance, the achievement of OH&S objectives, and the fulfilment of legal and other requirements. Red 5 continues to proactively manage the potential impact of the COVID-19 global pandemic on the Company’s operations. During FY21, Red 5 responded to COVID-19 with an agile strategy, using the hierarchy of controls to manage the COVID-19 risk and keep workers safe. A practical, contextualised process was undertaken to reduce virus transmission pathways, including travel restrictions, medically managed isolation and quarantine, mask distribution and physical distancing. Rosters were adapted to minimise movement and to ensure key interstate personnel could continue to perform in their positions. There has been no direct material impact from COVID-19 on the Company’s operations to date. 2021 Annual Report 3 Message to Shareholders FROM THE MANAGING DIRECTOR (cont.) EASTERN GOLDFIELDS, WESTERN AUSTRALIA Red 5 holds an extensive 2,555km2 strategic tenement footprint in the world- class Leonora-Leinster mineral district in the northern goldfields of Western Australia, which includes the Darlot, KOTH and Great Western gold mines. During the reporting period, ore from all three operations was trucked to Darlot for milling through the processing plant. Mining operations were progressively scaled down at the KOTH underground mine over the first half of the reporting period to preserve the ore for a new on-site processing facility currently under construction. Production from Great Western was progressively scaled up to substitute this ore feed into the Darlot mill. 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. WEST AUSTRALIAN GOLD OPERATIONS Production summary A total of 76,104 ounces of gold was recovered for the 12 months to 30 June 2021, with ore sourced from Darlot and KOTH during the first half of the reporting period and from Darlot and Great Western in the second half of the reporting period. The transition of mining operations from KOTH to Great Western was undertaken to maintain throughput at the Darlot mill while preserving ore at the KOTH underground mine for processing through the new processing plant currently under construction. Production in FY2021 was impacted by a lack of labour availability at both the Darlot underground mine and the Great Western open pit during the March and June Quarters, a situation that was prevalent across the mining industry. However, these operator shortages were largely resolved in June, with mining rates at both operations achieving forecast levels for the month of June 2021. 30 25 20 15 10 5 0 ) s e c n u o 0 0 0 ‘ ( n o i t c u d o r P d o G l FY 2021 Production Statistics $2,126 7,279 $2,181 7,720 $2,402 $2,461 5,643 4,025 12,854 13,762 13,288 10,951 September 2020 December 2020 March 2021 June 2021 Darlot KOTH Great Western AISC 3.0 2.5 2.0 1.5 1.0 0.5 0 z o / 0 0 0 ’ $ A C S A I Processing A total of 984,220 tonnes of ore was milled at a throughput of 125 dry tonnes per hour. Table 1: Darlot Mill Processing Statistics Jun 2021 Quarter Mar 2021 Quarter Dec 2020 Quarter Sept 2020 Quarter FY-21 Total Units Ore milled Average head grade Recovery Gold recovered Gold sales t g/t % oz oz 214,906 246,782 262,662 259,870 984,220 2.38 92.6 15,251 14,552 2.61 92.0 2.81 90.6 2.66 91.3 2.63 91.6 19,036 21,534 20,283 76,104 19,011 22,412 19,932 75,907 Key projects completed at the Darlot mill during the period included: \ Primary gravity circuit – a new Knelson concentrator and screen were installed and commissioned on the primary mill circuit to increase overall gold recovery and reduce reagent consumption, particularly from the Great Western ore; \ Tailings Storage Facility #3 lift – an embankment lift of 2.5 metres to the west cell of TSF #3 was completed in May 2021, providing approximately another 1.0 million tonnes of storage capacity or a further 12 months under current throughputs. \ Gold room ventilation – an upgrade to the gold room ventilation system was undertaken to meet current DMIRS requirements. Mining activities - Darlot Mining during the year predominantly focused on the Thomson 980, Benaud’s Link, Walters 780, BAR, Pedersen 1110, Pedersen Lower, Grace 1140, Lillie 1060, Border 1010 and Grace/Marsh remnant area sectors. Oval stoping concluded in the December Quarter 2021, with stoping transitioning to the Bradman, Marsh and Benaud’s Link orebodies. Production in the second half was focused on the Walters 780, Grace 1140 and Thomson 980 areas, and on the GR1090 and MA1140 bulk stopes, with air-leg mining undertaken in the Hurst, Federation, Border and Benaud’s Link sectors. 4 2021 Annual Report Message to Shareholders FROM THE MANAGING DIRECTOR (cont.) Mining activities – King of the Hills The majority of the production tonnes were sourced from narrow veins. These stopes, being the Theon, Oros, Margery, Jaqe, Jojen, Janos, Tyra and Lemonwood lodes, were supplemented by the bulk stope in the W4950. Capital development was focused on the west decline, with lateral development focused on the ore drives in the Central 5125, 5180 levels and the West 4980 level. Mining operations at KOTH were suspended in January 2021. The mining contractor was fully demobilised from site, with the KOTH underground mine currently being maintained in a standby state with pumping, ventilation and electrical reticulation remaining active. Mining activities – Great Western The Red 5 and mining contractor team mobilised to the Great Western site in January 2021. Land clearing and grubbing of topsoil for the Great Western open pit, haul roads, waste storage facilities, ROM, office, workshop and turkey’s nest dam started in mid-January 2021 once the mining proposal for Great Western was approved by DMIRS. The Great Western pit design has been split into two stages in order to manage the gold production profile of the pit and therefore project cash flow. Stage 1 mining started in the first half of February 2021. Infrastructure offices, fuel farm, water supply, gensets, power reticulation, crib rooms and ablutions have now been established. Ore haulage from Great Western to the Darlot processing plant started in the second half of March 2021. Mining rates have been impacted by machine operators and labour shortages are now prevalent across the mining industry. Mining rates improved at Great Western during the June Quarter 2021, with full manning of the mining crews achieved from early June 2021, coupled with better navigation of the mining voids as well as improvements in mine design and haulage profiles. Mining activities have been prioritised in the starter Stage 1 pit to ensure that project cash flow is managed in lieu of the slower ramp-up in mining activities. Darlot – Revised Mine Plan Following an extensive review of the Darlot mine inventory, subsequent to the end of the reporting period, Red 5 announced a revised Darlot mine plan based on utilising latent capacity in the new KOTH processing plant, an approach that the Company refers to as the KOTH Processing Hub Strategy. The commencement of processing operations at KOTH in the June Quarter 2022 will provide a more cost-effective processing alternative for Darlot ore, repositioning Darlot as a high-grade satellite ore source for KOTH. Middle Walters South Wright Burswood Walters Lords South 775 Darlot’s two-year mine inventory with new mining areas to be established in FY-22. Metzke Pedersen Thompson HW Thompson Flats Thompson Remnant Fresh 2021 Annual Report 5 Message to Shareholders FROM THE MANAGING DIRECTOR (cont.) In advance of production commencing at KOTH, the following Darlot initiatives will occur in the 2022 financial year: FEASIBILITY STUDY – KING OF THE HILLS PROJECT \ A Plant Capacity Study completed by Mintrex has confirmed that the KOTH processing plant can process up to 4.7Mtpa of ore without additional capital expenditure. \ Darlot will undertake an initial 12-month phase of underground mine development to establish new mining areas and reduce the reliance on remnant stopes. The Final Feasibility Study (FFS) for the stand-alone integrated bulk open pit and underground mining and processing operation at KOTH was delivered in September 2020. Based on the FFS results, the project will provide robust financial returns from a long-life, large open pit and underground mining operation, for a relatively modest capital investment given the scale of operations envisaged. \ A workforce transition strategy is being developed for Darlot non-mining and processing personnel to relocate to KOTH, thereby reducing the labour recruitment risk for KOTH. \ From the June Quarter 2022, Darlot ore will be processed at the KOTH processing plant. The Darlot ore processed will be added to the 4Mtpa of ore proposed to be mined and processed from the KOTH open pit and underground mines. In the current gold price environment, Darlot has the potential to add significant value for a number of years as a high-grade satellite ore source for KOTH, with the cash-flow generated from operations facilitating the ongoing exploration of Darlot’s world-class mineral system. The KOTH project Life-of-Mine (LOM) plan will initially comprise a 16-year mining operation starting in 2022 and delivering LOM production of 2.5 million ounces of contained gold. The FFS paved the way for a final investment decision by the Red 5 Board, with the Company on track to deliver first gold production from the KOTH bulk mining operation in the June Quarter 2022. The Life of Mine plan involves two distinct mine production phases over its life: \ Years 1-6: mining of the south and north pits, including underground mining in Years 1-5; \ Years 7-16: cut-back of the north pit and processing low-grade stockpiles in the final years. Full details of the KOTH FFS were provided in the Company’s ASX release dated 15 September 2020. 9,500 N 10,000 N 10,500 N 11,000 N 11,500 N King of the Hills - Tarmoola Open Pit Historical Production ( 1985 -20 04 ) 1 28.4Mt @ 1.9g/t Au 1.65Moz contained gold – 5,500 Elev Current open pit Final FFS pit design – 5,000 Elev South Pit underground exploration King of the Hills underground Historical Production (2010-2020) 3.2Mt @ 3.9g/t Au 0.4Moz contained gold 2 OPEN Resource Definition Resource Definition Taramoola open pit - 285m Current UG development Final FFS UG design Final FFS pit design -450m Resource Definition Definition Exploration Area Final FFS UG design - 670m – 4,500 Elev Tarmoola Granodiorite OPEN OPEN 300 Metres 1. 1985-2004 production history compiled from various sources, including quarterly and annual reports to the ASX. 2. Underground production totals as at 30 June 2021. Due to rounding, the totals may not correspond with the sum of the individual production statistics. 6 2021 Annual Report Message to Shareholders FROM THE MANAGING DIRECTOR (cont.) KING OF THE HILLS DEVELOPMENT Following the completion of the FFS, Red 5 issued a Notice of Award for the Engineering, Procurement and Construction contract (EPC Contract) and the bulk earthworks for the process plant to MACA Interquip. The EPC contract and bulk earthworks – which encompass the KOTH processing facility, equipping of the bore fields, high voltage power distribution, workshop, warehouse and bulk earthworks – is being undertaken as a fixed‐price contract. Following approval of the Mining Proposal by DMIRS, MACA Interquip mobilised to site in December 2020. Since then, construction activities have progressed on schedule and within budget, with construction at 59% project completion as at the end of August 2021. All key permits and approvals for both construction and mining activities at KOTH are in place. The KOTH mining services contract has been awarded to Macmahon Contractors Pty Ltd and encompasses the combined open pit and underground mining operations at KOTH. Red 5 has entered into a power purchase agreement with Zenith Energy Limited, which will build, own and operate approximately 30MW of power generation capacity, comprising high-efficiency reciprocating gas fuel power generation together with a 2MW (DC) photo voltaic solar farm and a battery energy storage system, to service KOTH’s power needs. Gas will be supplied from the Goldfields Gas Pipeline, located 12 kilometres west of the mine, under separate contracts, with a gas supply agreement with Alinta Energy and a gas transport agreement with APA Group. 2021 Annual Report 7 Message to Shareholders FROM THE MANAGING DIRECTOR (cont.) EXPLORATION AND RESOURCE DEVELOPMENT Emperor West DARLOT Red 5 has an extensive drilling commitment at Darlot, with over 35,000m of diamond and RC drilling completed in the 2021 financial year across multiple near-mine and regional prospects, aimed at increasing existing Resources and making new discoveries. Great Western Red 5 delivered an updated Mineral Resource estimate for the Great Western gold deposit in October 2020, comprising 870,000 tonnes grading 2.5g/t gold for 70,300oz of contained gold. Drilling commenced at the Great Western project in the September Quarter 2020, with four drill programs undertaken to test a variety of exploration targets proximal to the deposit and to complete Resource definition drilling. The Resource drilling was designed to enhance drill information in data-poor sections of the deposit to convert these areas to Indicated classification, and to improve the accuracy of Resource estimation as part of the economic study. Cable and Mission The Cable and Mission satellite gold deposits are located approximately 10 kilometres north of the Darlot gold mine, along strike from the Taranaki Shear within the Yandal Greenstone Belt. Primary gold mineralisation at both prospects is predominantly associated with medium to high-grade quartz vein sets hosted within dolerite units, similar to the nearby Centenary orebody at the Darlot mining operations. Due to the narrow ore zones associated with the Cable and Mission deposits, a staged and decision-based in-fill drilling approach has been adopted to delineate the Mineral Resources. Phase 1 RC in-fill drilling completed at Mission has confirmed the continuity of north-trending, steeply west-dipping quartz vein sets along the known 500 metre strike extent of mineralisation. At the Cable deposit, drill holes intersected mineralisation in small parallel structures, confirming the historical model for the Cable deposit from previous owners. The drilling has confirmed the presence of an alluvial flood plain wash of up to 10 metres with areas then covered by aeolian sand dunes. The weathering profile can be up to 120 metres deep vertically due to underlying shear zones being more susceptible to weathering. Darlot East (Red 5 – Ardea JV) The Darlot East Project is located east of the Darlot mine and consists of tenements E 37/1273 and E 37/1272 for a combined total area of approximately 370km2. The project area lies within the southern end of the gold-rich Yandal greenstone belt and occupies a complex lithostructural setting which is dominated by multiple generations of granitoid emplacement and the north-west striking and easterly- dipping Celia Shear Zone, which runs along the eastern side of the tenure for approximately 25 kilometres. King of the West The King of the West prospect is located within tenement E37/1253, in close proximity to the Goldfields Highway and 10 kilometres south of the Great Western mine. The geological setting of the project area shows strong similarities to the nearby Wonder/Celtic and Great Western areas, comprising north-south trending greenstone packages intruded by granitoids which are intersected by WNW-ESE striking structures. The Emperor West target area is situated in the south-western area of the Darlot tenure and lies within the fertile and under-explored Emperor structural corridor. A number of high-resolution open file aeromagnetic surveys have been obtained that cover the project area, and interpretation and re-processing of these surveys have highlighted structural anomalies similar to those associated with nearby gold deposits. Based on this interpretation, it appears that the target area contains a significant lithological boundary between a granitic intrusion covering the southern part and mafic intrusives (dolerite/gabbro) in the northern part of the tenement. These contacts are highly prospective for gold mineralisation, as the shear zones along these contacts allow fluid flow and the difference in rheological and geochemical characteristics are favourable for generating traps for gold to precipitate. KING OF THE HILLS Bulk Mineral Resource update Subsequent to the end of the reporting period, Red 5 reported an updated bulk mining Mineral Resource estimate for KOTH, comprising 90.7 million tonnes at 1.4g/t Au for an estimated 4.12 million ounces of contained gold, with 73% of the total Mineral Resource estimate (69.6Mt @ 1.4g/t Au for 3.03Moz) in the higher-confidence “Indicated Resource” category. Importantly, the update included a 19% increase in contained ounces in the underground component of the Mineral Resource estimate, which now stands at 12.1Mt @ 2.1g/t Au for 830,000 ounces of contained gold, following the completion of underground drilling over the 2020 calendar year. The Resource remains open at depth. The updated Resource estimate is based on an additional 33,088m of diamond drill core drilled underground between February 2020 to July 2020, comprising a total of 60 resource definition drill holes for 18,129 metres and 109 grade control drill holes for 14,959 metres. Drilling planned in FY-22 In preparation for mining at KOTH, underground drilling commenced with a single rig in August 2021, with a second underground rig commencing in April 2022. Approximately 54,000 metres of drilling has been planned in the 2022 financial year, with an additional 86,000 metres in the 2023 financial year for an estimated total of 140,000 metres. Drilling will be focused on a mixture of grade control, resource definition and exploration programs. 8 2021 Annual Report Message to Shareholders FROM THE MANAGING DIRECTOR (cont.) SIANA GOLD PROJECT, PHILIPPINES Through its Philippine-affiliated company, Greenstone Resources Corporation (GRC), 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 have been suspended since April 2017, 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. Subsequent to the end of the reporting period, in July 2021 the Red 5 Group entered into a binding agreement with TVI Resource Development (Phils.) Inc. (TVIRD) to divest its interests in GRC, which holds both the Siana Gold Project and the Mapawa Gold Project in the Philippines. TVIRD is the Philippine affiliate of the Canadian-listed company, TVI Pacific Inc and has two operating mines and a number of other development projects in the Philippines with interests in gold, nickel and copper. Consideration for the acquisition comprises US$19 million cash payable upon completion and Net Smelter Return royalty of 3.25% payable for up to 619,000 ounces of gold, with an estimated future face value of US$36 million (based on a US$1,800/oz gold price) The divestment of its interests in Siana is consistent with Red 5’s strategy to focus on its KOTH and Darlot gold mines in Western Australia. CORPORATE King of the Hills project finance facility Red 5 has secured $175 million in project finance facilities from BNP Paribas, Australia branch, The Hongkong and Shanghai Banking Corporation Limited, Sydney Branch and Macquarie Bank Limited to develop KOTH. Financial close for the $175 million KOTH debt funding package was achieved on 30 June 2021, and the first draw-down occurred in July 2021. The project financing facilities have been provided on usual financial terms for a syndicate-banking group, featuring competitively priced and flexible facilities. Entitlement offer To conclude development financing for KOTH and to satisfy one of the conditions precedent for the finance facility, Red 5 also undertook in April 2021 a fully underwritten $60 million, 4-for-21 accelerated non- renounceable entitlement offer to all shareholders. In addition to funding the KOTH development, funds were also used for drilling and development programs at the Darlot project and working capital. Senior appointments Ms Andrea Sutton was appointed to the Board as an additional non-executive director in November 2020, and Mr Jason Greive was appointed Chief Operating Officer commencing in November 2020. Financial The Group recorded sales revenue of $173.4 million for the 2021 financial year. Net cash flow from operating activities was $14.6 million with $49.8 million in cash and bullion at year-end, of which $28.5 million was allocated to reserve accounts and bank guarantees for the KOTH project. For the year ended 30 June 2021, the Company recorded a gross profit from operations of $2.3 million, a net loss from operations after income tax of $9.5 million, and a net loss after adjusting for the Siana discontinued operations of $43.1 million. SUMMARY AND OUTLOOK With funding for the KOTH development in place and with the construction of this 2.4Moz, 16-year life-of-mine project progressing on schedule, the coming 12 months are set to be an exciting period for Red 5 as we prepare to commence production from one of Australia’s largest new gold mines. The KOTH site is currently a hive of activity, with the final deliveries of long-lead items arriving in the September Quarter 2021, with work programs on track to achieve first gold production from the new processing facility before the end of the 2022 financial year. A new streamlined mine plan has been developed for the Darlot mining operation, which will ultimately see ore trucked from Darlot to the new state-of-the-art processing facility at KOTH. This is expected to deliver a significant reduction in operating costs in the 2023 financial year, providing the ability for Red 5 to implement a more aggressive mine development plan to unlock the significant Resource base at Darlot to reduce the dependency on remnant stopes. In parallel with these activities, Red 5 intends to continue to maintain a strong focus on exploration and resource development, with major drilling programs either underway or imminent across the tenement portfolio. All mining, development and exploration programs will be underpinned by an unwavering focus on the Company’s environment, social and governance commitments. The coming year is set to be an exciting period for Red 5. This positive position is thanks to the exceptional hard work and commitment of the Red 5 team of staff and contractors, and I would like to thank everyone for their efforts over the past year. I would also like to thank our shareholders for their continued support. Mark Williams Managing Director 17 September 2021 2021 Annual Report 9 MINERAL RESOURCES AND ORE RESERVES STATEMENT WESTERN AUSTRALIAN GOLD OPERATIONS The Mineral Resource for the Darlot project has increased by 10% for an additional 131koz since 30 June 2020. This resource increase has been the result of several factors including updated resource models for the Centenary and Pederson deposits, improved accuracy of the lode interpretations at Darlot and from additional resource drilling during the period. Since the acquisition of the Great Western project in April 2020, Red 5 has developed the project into an Open Pit reserve in October 2020 of 437.5kt @ 2.5 g/t for 35.4koz contained ounces. Great Western is currently being mined with ore processed at the Darlot processing facility. The combined Darlot underground and Great Western open pit reserves at 30 June 2021 was 2.64Mt @ 2.6g/t for 203koz of contained ounces. During the 2021 financial year, Red 5 reported an updated Mineral Resource estimate for the King of the Hills (KOTH) gold project since the March 2020 release which was used for the KOTH Final Feasibility Study (FFS). Drilling and resource definition programmes completed post the KOTH FFS resource model resulted in an updated open pit and underground Mineral Resource estimate for KOTH totalling 90.7Mt at 1.4g/t Au for 4.12Moz of contained gold as at 30 June 2021 (refer to ASX release dated 22 July 2021). The combined open pit and underground at King of the Hills including regional open pit reserves as at 30 June 2021 was 67.5Mt @ 1.1g/t for 2.43Moz of contained ounces. The Cable and Mission JORC 2004 resource of 185koz of contained gold is not included in the Red 5 resource figures quoted as at 30 June 2021, as these resources form part of the exclusive sub-lease over the southern portion of Exploration Licence E37/1220. The Company’s Mineral Resource and Ore Reserve estimates, net of mining depletion, as at 30 June 2021 are detailed below. DARLOT GOLD MINE JORC 2012 UNDERGROUND RESOURCES AND RESERVES AS AT 30 JUNE 2021 Total Mineral Resources - Darlot Gold Mine as at 30 June 2021 Cut off Au g/t Mining Method Classification Tonnes (kt) Au g/t Contained Au (koz) Project Darlot Measured 2.0 UG Indicated Inferred Measured Great Western 1.5 UG Indicated Underground – sub-total Inferred Measured Darlot 0.5 OP Indicated Great Western 0.5 OP Indicated Inferred Measured Open pit – sub-total Broken stocks ROM stockpile Stockpiles – sub-total Total Grand total Inferred Var Var UG Measured UG & OP Measured Measured Var All Indicated Inferred 10 2021 Annual Report 3 6,357 3,967 0 58 161 10,546 0 893 1,792 87 462 42 3,276 9 61 70 159 7,771 5,962 13,892 8.4 4.3 3.5 0.0 3.1 3.0 4.0 0.0 1.2 0.8 2.7 2.3 1.2 1.2 2.5 1.0 1.2 2.1 3.8 2.7 3.3 1 871 450 0 6 15 1,343 0 36 46 8 35 2 125 1 2 3 11 947 513 1,471 MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.) Total Mineral Resources - Darlot Gold Mine as at 30 June 2020 Project Cut off Au g/t Mining Method Classification Tonnes (kt) Au g/t Contained Au (koz) Darlot and Great Western material 0.5-2.0 UG & OP Measured Indicated Inferred Underground – sub-total Broken stocks ROM stockpile Stockpiles – sub-total Var Var UG UG Measured Measured Darlot and Great Western material 0.5-2.0 All Grand total Total Mineral Resources - difference Total (difference) 0.5-2.0 All Measured Indicated Inferred Measured Indicated Inferred Grand total (difference) FY21 production Darlot Total Ore Reserve - Darlot Gold Mine as at 30 June 2021 137 6,943 5,308 12,388 5 66 71 208 6,943 5,308 12,530 -49 828 654 1,362 702 1.5 3.8 2.5 3.2 2.7 1.5 1.6 1.5 3.8 2.5 3.3 0.6 0.0 0.2 0.0 2.6 13 883 436 1,332 0.5 3 3.7 17 883 436 1,340 -6 64 77 131 59 Classification Tonnes (kt) Au g/t Contained Au (koz) Project Darlot Darlot – sub-total Great Western Great Western – sub-total Broken stocks ROM stockpile Stockpiles – sub-total Total Grand total Cut off Au g/t Mining Method 2.0 - 2.3 UG 0.5 Var. Var. OP UG UG & OP Var. All Proved Probable Proved Probable Proved Proved Proved Probable Total Ore Reserve - Darlot Gold Mine as at 30 June 2020 Darlot Darlot – sub-total Great Western Great Western – sub-total Broken stocks ROM stockpile Stockpiles – sub-total Total Grand total 2.0 - 2.3 UG 0.8 Var Var OP UG UG & OP Var. All Total Ore Reserve - difference Total (difference) 0.5-2.0 All Grand total (difference) FY21 production Darlot Hub Proved Probable Proved Probable Proved Proved Proved Probable Proved Probable 18 1,861 1,878 87 449 535 9 41 50 154 2,309 2,464 12 2,607 2,618 135 303 437 5 66 71 218 2,909 3,127 -64 -600 -663 702 5.9 2.7 2.8 2.4 1.8 1.9 2.5 1.3 1.5 2.5 2.6 2.6 2.2 2.8 2.8 2.8 2.4 2.5 2.7 1.5 1.6 2.4 2.8 2.7 0.1 -0.2 -0.2 2.6 3 164 168 7 27 33 1 2 2 12 191 203 1 234 235 12 24 35 1 3 4 16 258 274 -4 -67 -71 59 2021 Annual Report 11 MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.) KING OF THE HILLS JORC 2012 UNDERGROUND RESOURCES AND RESERVES AS AT 30 JUNE 2021 KOTH Resource as at 30 June 2021 Project Cut off Au g/t Mining Method Classification Tonnes (kt) Au g/t Contained Au (koz) KOTH as at 30 June 2021 0.4 OP Inferred Indicated Sub Total Indicated 1.0 UG Inferred Variable All KOTH OP and UG sub total KOTH - Regional as at 30 June 2021 Sub Total Indicated Inferred Indicated Rainbow Severn Centauri 0.6 OP Inferred Sub Total Indicated 0.4 OP Inferred Sub Total Indicated 0.5 OP Inferred Sub Total Indicated Cerebus-Eclipse 0.5 OP Inferred Regional Resources as at 30 June 2021 Variable OP Regional Resources as at 30 June 2021 Sub Total Indicated Inferred Total KOTH and KOTH Regional Resource as at 30 June 2021 All projects as at 30 June 2021 Variable OP Inferred Indicated KOTH Stockpiles (OP) KOTH Broken Stocks KOTH ROM Stockpiles - sub total 1.0 0.0 Variable Variable Sub Total Indicated UG Inferred OP UG UG Sub Total Indicated Measured Measured Measured Total KOTH and KOTH regional resources Variable All Indicated Inferred Grand total 12 2021 Annual Report 65,000 13,700 78,700 4,600 7,500 12,100 69,600 21,200 90,800 1,380 200 1,580 480 440 920 1,390 320 1,710 2,160 650 2,810 5,410 1,610 7,020 70,410 15,310 85,720 4,600 7,500 12,100 2,810 0 111 2,921 111 80,805 22,810 103,726 1.3 1.4 1.3 2.3 2.0 2.1 1.4 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 2.3 2.0 2.1 0.5 0.0 0.9 0.5 0.9 1.3 3.4 1.8 2,690 600 3,290 340 490 830 3,030 1,090 4,120 58 9 67 27 21 48 68 13 81 89 23 112 242 67 308 2,932 667 3,598 340 490 830 40 0 3 43 3 3,361 1,157 4,521 MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.) Total KOTH and KOTH Regional Resource as at 30 June 2020 Project Cut off Au g/t Mining Method Classification Tonnes (kt) Au g/t Contained Au (koz) Total KOTH and KOTH regional resources as at 30 June 2020 Variable All Indicated Measured Regional resources as at 30 June 2020 - sub total KOTH Stockpiles KOTH Broken Stocks KOTH ROM Stockpiles - sub total 0.0 Variable Variable OP UG UG Inferred Indicated Measured Measured Measured Total KOTH and KOTH Regional Resources Variable All Indicated Grand total Total Mineral Resource - difference Inferred Measured Total KOTH and KOTH Regional Resource Variable All Indicated Inferred Grand total Production for FY21 KOTH Reserves as at 30 June 2021 - 75,210 22,510 97,720 2,810 162 13 2,985 175 78,020 22,510 100,705 -64 2,785 300 3,021 232 - 1.3 1.6 1.4 0.5 1.6 2.4 0.6 1.6 1.3 1.6 1.4 -0.7 0.0 1.8 0.4 2.5 - 3,252 1,127 4,379 40 8 1 49 9 3,292 1,127 4,428 -6 69 30 93 18 Cut Off Au (g/t) Mining Method Classification Tonnes (kt) Au (g/t) Contained Au (koz) Recovered Au metal (koz) Project KOTH Regional Broken stocks ROM stockpile Total 1.6 0.39 0.30-0.32 Variable Variable KOTH Reserves as at 30 June 2020 KOTH Regional Broken stocks ROM stockpile Total 2 0.43 0.37 Variable Variable Total Ore Reserve - difference KOTH Regional Broken stocks ROM stockpile Total Milled for FY21 -0.4 -0.04 -0.05 Variable Variable UG OP OP UG UG UG OP OP UG UG UG OP OP UG UG Probable Probable Probable Probable Probable Probable Probable Probable Probable Probable Probable Probable Probable Probable Probable 2,400 58,500 3,700 0 111 64,711 199 36,000 1.4 162 12.5 36,375 2,201 22,500 3,699 -162 98.5 28,336 277 2.3 1.1 1 0 0.9 1.1 2.8 1.3 1 1.6 2.4 1.3 -0.5 -0.2 0 -1.6 -1.5 -0.2 2.6 180 2,090 114 0 3 166 1,931 105 0 3 2,387 2,206 18.1 1,448 44.2 8 0.9 1,519 161.9 642 69.8 -8 2.1 868 23 16.9 1,354 41.3 7.6 0.9 1,421 149 577 64 -7.6 1,872 785 21 2021 Annual Report 13 MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.) PHILIPPINE OPERATIONS SIANA GOLD PROJECT As at 30 June 2021, the Group held interests in the Siana gold project located in the Philippines. On 29 July 2021, Red 5 announced a binding agreement had been entered into to divest the Siana Gold Project to TVI Resource Development (Phils.) Inc. An annual review and update to the Siana Mineral Resource and Ore Reserve estimates for the year ended 30 June 2021 has been undertaken, with no resultant change from the figures quoted as at 30 June 2020. 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. 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 2021. 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. SIANA JORC 2012 OPEN PIT MINERAL RESOURCE AND ORE RESERVE AS AT 30 JUNE 2021 Siana Open Pit Mineral Resource as at 30 June 2021 Estimate 30 June 2021 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 Contained Au (koz) Contained Ag (koz) 650 30 290 970 3.7 2.8 1.1 2.9 7.9 1.2 6.6 7.3 77 3 10 90 164 1 61 226 There were no changes to the Siana Open Pit Mineral Resource as reported at 30 June 2020. 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 2021 Estimate Classification Probable 1 30 June 2021 JORC 2012 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 2021 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 2020. SIANA JORC 2012 UNDERGROUND MINERAL RESOURCE AND ORE RESERVE AS AT 30 JUNE 2021 Siana Underground Mineral Resource as at 30 June 2021 Estimate Classification Indicated 30 June 2021 JORC 2012 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 2020. Siana Underground Ore Reserve as at 30 June 2021 Estimate 30 June 2021 JORC 2012 Classification Probable Total Cut Off Au (g/t) 2.4 2.4 Tonnes (kt) Au g/t Ag g/t 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 2020. 14 2021 Annual Report MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.) MAPAWA JORC 2012 OPEN PIT MINERAL RESOURCE Mapawa JORC 2012 Resource as at 30 June 2021 Estimate Classification 30 June 2021 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 2020. COMPETENT PERSON’S STATEMENT FOR JORC 2012 RESOURCES AND RESERVES 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 gold operation Mr Kevin Oborne confirms that he is the Competent Person for the underground Ore Reserve estimates summarised in this report and Mr Oborne 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 Oborne 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 Oborne is a Member of the Australasian Institute of Mining and Metallurgy, No. 226591. Mr Oborne is a full time employee of Oborne Engineering Services Pty Ltd. Mr Oborne 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 Oborne 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 Great Western gold operation Mr Ashutosh Srivastava confirms that he is the Competent Person for the open pit Ore Reserve estimates summarised in this report and Mr Srivastava 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 Srivastava 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 Srivastava is a Fellow of the Australasian Institute of Mining and Metallurgy, No. 312413. Mr Srivastava is a full time employee of Red 5. Mr Srivastava 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 Srivastava 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 KOTH open pits and underground For Competent Person statements refer to ASX release dated 15 September 2020, titled 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. 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. 2021 Annual Report 15 MINERAL RESOURCES AND ORE RESERVES STATEMENT (cont.) GENERAL NOTES ON MINERAL RESOURCES AND ORE RESERVES Mineral Resources are quoted as inclusive of Ore Reserves and Ore Reserves are quoted as inclusive of Mineral Resources. Discrepancy in summation may occur due to rounding. Figures take into account mining depletion as at 30 June 2021. Figures also include ROM and Broken stocks for Darlot, Great Western and KOTH operations as at 30 June 2021. 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 dated 10 February 2020, titled Resource and Reserve growth to support long-term Mining Hub Strategy at Darlot Gold Mine. 2. For the information reported for Great Western resource and reserve figures refer to Red 5 ASX release dated 15 October 2020, titled Updated Mineral Resource and maiden Ore Reserve for Great Western gold deposit, figures quoted are post 30 June 2020. 3. The updates to the Underground Reserves are based on a gold price of A$2,150/oz. Notes on Mission and Cable gold deposits 1. The information that relates to the JORC 2004 Cable and Mission resources refer to ASX releases Option Agreement signed to purchase Cable and Mission gold deposits, dated 2 December 2019, and Red 5 exercises option to complete acquisition of the Cable 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, dated 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 2021. Notes on Siana Underground JORC 2012 Mineral Resources and Ore Reserves 4. Underground reserves have planned dilution varying between 10 to 1. The information that relates to Mineral Resources for the Siana 20% with planned mining recovery of 90 to 95%. 5. Figures quoted for ROM stockpile for resources as at 30 June 2021 include 20.2kt @ 0.4g/t for 0.3koz of subgrade stocks and historic heap leach material. Neither stockpiles are quoted as reserves. Notes on KOTH JORC 2012 Mineral Resources and Ore Reserves Mineral Resources: 1. The information that relates to KOTH resource refer to ASX release dated 21 July 2021, titled Increased Underground Resource at King of the Hills, with drilling to recommence in August 2021. 2. The information that relates to Rainbow and Severn resource 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 resource 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. The information that relates to KOTH and Rainbow open pit and KOTH underground reserves refer to ASX release dated 15 September 2020, titled 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. Red 5 confirms that all the material assumptions underpinning the Final Feasibility Study production targets on the King of the Hills project (see ASX release dated 15 September 2020), or the forecast financial information derived from a production target, in the initial public reports continue to apply and have not materially changed. 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). 16 2021 Annual Report TENEMENT SCHEDULE 20 September 2021 WESTERN AUSTRALIA Project Tenement number Darlot Gold Mine E36/0865, E36/0940, E36/0941, E36/0944, E36/0945, E36/0964, E36/0968, E36/0969, E36/0980, E36/0997, E36/0999, E36/1002, E37/1054, E37/1086, E37/1194, E37/1195, E37/1210, 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, E37/1393, E37/1395, E37/1398, E37/1400, E37/1413, G37/0037, 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, M37/0503, M37/0584, M37/0592, M37/0608, M37/0667, M37/0774, M37/0775, M37/1217, P36/1879, P36/1883, P36/1884, P36/1889, P37/8431, P37/8432, P37/8587, P37/8698, P37/8699, P37/8700, P37/8701, P37/8716, P37/8788, P37/8789, P37/9210, P37/9345 Red 5 interest 100% E36/1013, E37/1415, E37/1428, E37/1440, L37/0238, P36/1920, P36/1921 100% (Applications pending) E37/1220 E37/1271, E37/1272, E37/1273, E37/1274, E39/1706, E39/1854, E39/1985 Right to explore and mine Sub-Lease Area Farm-in agreement to earn up to 80% M37/0552, M37/0631, M37/0709, M37/1045 M37/0246, M37/0265, M37/0320, M37/0343, M37/0345, M37/0393, M37/0776 49% 84% 100% with a portion of tenements at 49% via agreement 100% M37/0421, M37/0632 E37/1385, E37/1409, E37/1410, L37/0211, L37/0248, 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, P37/9270, P37/9271, P37/9281, P37/9282, P37/9283, P37/9284, P37/9286, P37/9287, P37/9289, P37/9291, 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, P37/9491, P37/9492 King of the Hills Gold Mine Montague Project M57/0429, M57/0485, E57/0793 25% free carried P37/9285, P37/9288, P37/9290, P37/9292, P37/9293, P37/9294, P37/9295 100% (Applications pending) Abbreviations M: Mining Lease P: Prospecting Licence E: Exploration Licence L: Miscellaneous Licence The Group divested its interests in the Siana gold project and the Mapawa gold project located in the Philippines, subsequent to the end of the financial year. 2021 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 2021. 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 Andrea Jane Sutton (appointed 18 November 2020) 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; Member of the Remuneration and Nomination Committee; and Member of the Risk and Environment Committee. Qualifications B.Com, LLB, FCPA Qualifications B.Comm, CA Experience Experience Other listed company directorships 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. Director of Imdex Limited (since January 2004); Avenira Limited (since October 2019); and Cash Converters International Limited (February 2015 to November 2020). 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 2021 Annual Report DIRECTORS’ REPORT (cont.) 1. DIRECTORS AND COMPANY SECRETARY (cont.) Colin Loosemore Non-Executive Director Appointment date Special responsibilities December 2014 Chairman of the Health, Safety, Environment and Community (HSEC) Committee; and Member of the Audit Committee. Qualifications B.Sc.Hons., M.Sc., DIC., FAusIMM Experience Other listed company directorships 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. Mr Loosemore has not held directorships in any other listed companies in the last 3 years. Steven Tombs Non-Executive Director Appointment date Special responsibilities August 2018 Chairman of the Remuneration and Nomination Committee; and Member of the Risk and Environment 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. Andrea Sutton Non-Executive Director Appointment date Special responsibilities Qualifications Experience Other listed company directorships November 2020 Chairman of the Risk and Environment Committee; and Member of the Health, Safety and Community Committee. B.Eng Chemical (Hons), GradDipEcon, GAICD Ms Sutton is a qualified chemical engineer and has over 25 years’ experience with Rio Tinto and ERA. Between 2013 and 2017, Ms Sutton was Chief Executive and Managing Director of ERA, then a Non-Executive Director from 2018 to 2020. Ms Sutton had extensive executive and operational leadership roles across Rio Tinto. This experience included Head of Health, Environment, Safety and Security; General Manager Operations at the Bengalla Mine and General Manager of Infrastructure, Iron Ore. Ms Sutton is a non-executive director of DDH1 Holdings Pty Ltd (since February 2021); Iluka Resources Limited (since March 2021); and Energy Resources of Australia Ltd (October 2018 to May 2020). 1.2. INFORMATION ON COMPANY SECRETARY Frank Campagna Company Secretary Appointment date June 2002 Qualifications B.Bus (Acc), CPA Experience Mr Campagna is a Certified Practicing Accountant with over 25 years’ experience as Company Secretary, Chief Financial Officer and Commercial Manager for listed resources and industrial companies. He presently operates a corporate consultancy practice which provides corporate secretarial and advisory services to both listed and unlisted companies. 2021 Annual Report 19 DIRECTORS’ REPORT (cont.) 1. DIRECTORS AND COMPANY SECRETARY (cont.) 1.3 DETAILS OF DIRECTORS’ INTERESTS IN THE SECURITIES OF RED 5 AS AT THE DATE OF THIS REPORT ARE AS FOLLOWS: Director Kevin Dundo Mark Williams Ian Macpherson Colin Loosemore Steven Tombs Andrea Sutton Fully paid shares Performance rights Service rights Deferred rights 1,905,249 14,439,852 1,362,054 10,108,190 2,719,579 - - 3,556,158 - - - - - - - - - - - - - - - - 1.4. 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 2021 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 Andrea Sutton Board meetings Audit Committee Remuneration and Nomination Committee HSEC Committee Eligible Attended Eligible Attended Eligible Attended Eligible Attended 23 23 23 23 23 17 23 23 22 23 23 15 2 - 2 2 - - 2 - 2 2 - - 4 - 4 - 4 - 4 - 3 - 4 - 2 - - 2 - 1 2 - - 2 - 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 loss of the consolidated entity after income tax for the year ended 30 June 2021 was $43,245,000 (30 June 2020: profit of $4,544,000). The current year results include an underlying EBITDA (a) of $11,635,000 (2020: $53,978,000). 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 2021 30 June 2020 $’000 173,358 (147,848) 692 (9,281) (2,069) (3,217) 11,635 $’000 200,332 (128,992) 1,498 (9,287) (4,875) (4,698) 53,978 (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. 20 2021 Annual Report DIRECTORS’ REPORT (cont.) RESULTS OF OPERATIONS (cont.) 3. The underlying EBITDA reconciles to the profit before tax as follows: A summary of key production statistics for the year ended 30 June 2021 and 30 June 2020 is provided below: Underlying EBITDA Financing income Financing expenses Ineffective portion of cashflow hedges Fair value loss on financial liabilities 30 June 2021 30 June 2020 $’000 11,635 347 (1,345) $’000 53,978 336 (2,381) Mined tonnes Mined grade Tonnes milled Average head grade Recovery (1,410) (6,810) Gold recovered - (967) Gold operational sales Year ended Units 30 June 2021 30 June 2020 t g/t t g/t % oz oz 931,002 1,142,101 2.57 3.01 984,220 943,861 2.63 91.5 76,104 75,907 3.30 92.6 92,779 92,953 Depreciation and amortisation (23,493) (32,984) Siana Gold Project, Philippines (Loss)/profit from continuing operations before income tax expense (14,266) 11,172 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. In February 2021 the King of the Hills gold mine was put into care and maintenance until completion of the construction of the new processing plant at King of the Hills. Covid-19 response The Company 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 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 76,104 ounces of gold was recovered for the 12 months to 30 June 2021 with ore sourced from the Darlot Gold Mine, Great Western and from King of the Hills (KOTH) operation. During the year, the Group was in advanced negotiations with interested parties to divest its interests in Philippine affiliated company, Greenstone Resources Corporation (GRC). As at 30 June 2021, the assets of Siana were classified as held for sale, hence all assets and liabilities were reclassified from non-current to current, and profit or loss is now presented under discontinued operations. The Red 5 Group entered into a binding agreement in July 2021 with TVI Resource Development (Phils) Inc to divest its interests in Greenstone Resources Corporation (GRC), which holds the Siana Gold Project and the Mapawa Gold Project in the Philippines. Mining operations at the Siana gold project remained suspended during the period. Ongoing activities at Siana include dewatering of the open pit, infrastructure maintenance and monitoring of geotechnical issues. Summary of the binding offer: \ US$19 million cash payable upon completion; and \ Net Smelter Return royalty of 3.25% payable for up to 619,000 ounces of gold, with an estimated future face value of US$36 million (based on a US$1,800/oz gold price); As per the accounting standards, the royalty represents a variable consideration and is treated as a contingent asset pending re-commencement of production at Siana, hence royalty accounting value is not recorded as at 30 June 2021. Considering that the Siana net proceeds from sale are lower than the carrying value of its assets, an impairment of discontinued operations of $26.568 million was recorded as at 30 June 2021. Exploration and resource development Consolidation of the Group’s Mineral Resources and Ore Reserves across the operations remains a strong focus for Red 5. During the year, no regional drilling activities were conducted. Turnaround times for assay results remain very slow due to the current industry backlog. There are approximately 5,300 gold samples and approximately 400 multi-element samples outstanding for FY21, which cover projects from the King of the West, Darlot East and Darlot West E37/1054 air-core programs, as well as resource definition and diamond drill holes from the Mission and Cable Project areas. 2021 Annual Report 21 DIRECTORS’ REPORT (cont.) 3. RESULTS OF OPERATIONS (cont.) Income statement 3.1 Operating Review (cont.) The Mission and Cable satellite gold deposits are located approximately 10km north of the Darlot Gold Mine, along strike from the Taranaki Shear within the Yandal Greenstone Belt. Primary gold mineralisation at both prospects is predominantly associated with medium to high-grade quartz vein sets hosted within dolerite units, similar to the nearby Centenary orebody at the Darlot mining operations. Due to the narrow ore zones associated with the Mission and Cable deposits, a staged and decision-based in-fill drilling approach has been adopted to delineate the Mineral Resources. Phase 1, 20m x 40m RC in-fill drilling completed in the December 2020 Quarter at Mission has confirmed the continuity of north-trending, steeply west-dipping quartz vein sets along the known 500m strike extent of mineralisation. The Group recorded a net loss after tax for the year ended 30 June 2021 of $43,245,000 in comparison to a net profit after tax for the year ended 30 June 2020 of $4,544,000. Darlot and King of the Hills recorded a gross profit for the period of $2,308,000 (30 June 2020: $39,226,000). A combined 75,907 ounces of gold were sold during the year, which together with silver sales and hedging adjustments resulted in total revenue of $173,358,000. Cost of sales for the period of $171,050,000 comprised production costs, royalties, movement in stockpiles and depreciation charge. The Group’s net loss was mainly driven by the impairment of the available for sale Siana operation. In addition, administrative expenses, exploration expenditure, ineffective portion of cashflow hedges, Siana project expenses were paid. Feasibility studies – King of the Hills project Balance sheet 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 and was completed in September 2020. Process plant construction The Company continues to make significant progress with the development of its King of the Hills (KOTH) Gold Project in Western Australia, which has now passed the 50% project completion milestone. The KOTH Project is progressing on schedule for first gold in the June 2022 quarter and remains within budget, with key construction progress milestones. Corporate During the year, the company completed a funding package of $235 million to support the construction and development of King of the Hills, comprising equity raising and debt facilities. The equity raising included a fully underwritten $60 million, 4-for-21 accelerated non-renounceable entitlement offer to all shareholder. The debt facility of $175 million was provided from a syndicate comprising BNP Paribas, Australia branch, The Hongkong and Shanghai Banking Corporation Limited, Sydney Branch and Macquarie Bank Limited. Conditions precedent for the facility were achieved on 30 June 2021. Ms Andrea Sutton was appointed as an Independent Non- Executive Director of the Company on 18 November 2020. During the year ended 30 June 2021, Red 5’s Australian Stock Exchange classification changed from a “Mining Exploration Entity” to a “Mining Producing Entity”. 3.2 FINANCIAL REVIEW Gold sales Gold and silver sales for the reporting period totalled $173,358,000 (2020: $200,332,000). Total assets increased from $343,395,000 to $345,485,000 at 30 June 2021. The net increase in total assets was mainly driven by the $60,000,000 equity raising for the construction of the King of the Hills processing plant. This was partly offset by repayments of loans and operating costs. Total liabilities were $114,609,000, a decrease of $32,737,000 from 30 June 2020. This was mainly driven by the close out of gold hedges held during the year and the full repayment of the working capital facility with Macquarie Bank Limited; this was offset by an increase in provision for rehabilitation at King of the Hills as a result of the expansion in land disturbance for construction site areas. Cash flow During the year, cash and cash equivalents decreased by $98,805,000. Free Cash inflows from operating activities for the period were $14,555,000. Cash receipts from customers of $174,677,000 reflect the sale of gold and silver which benefited from higher gold prices during the year. This was offset by cash outflows of $160,122,000, driven by the Great Western development cost and ramp up to full production and higher operational costs. Net cash outflows used in investing activities for the period were $138,437,000, reflecting the King of the Hills processing plant ongoing construction, bank guarantees for the gas transport agreement and tailing storage facility required for the KOTH project and sustaining capital for the Darlot operations. The net cash from financing activities of $25,918,000 reflects the net proceeds received from the retail and institutional components of the $60,000,000 Entitlement Offer undertaken during the year, this was offset by the repayment of the Macquarie Bank working capital facility ($12,000,000), the closure of outstanding hedges ($4,774,000); the transfers to restricted cash and reserve project accounts ($7,500,000) required by the King of the Hills debt funding package and repayments of lease liabilities ($7,393,000). 22 2021 Annual Report DIRECTORS’ REPORT (cont.) DIVIDENDS 4. No amounts were paid by way of dividend since the end of the previous financial year (2020: Nil). At the time of this report the Directors do not recommend the payment of a dividend. OPTIONS GRANTED OVER SHARES 5. 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 18,387,760 performance rights convertible into ordinary fully paid shares. 8. EVENTS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Sale of Siana gold mine (Philippines) In July 2021 the Group entered into a binding agreement with TVI Resource Development (Phils.) Inc. (TVIRD) to divest its interests in Philippine affiliated company Greenstone Resources Corporation (GRC), which holds both the Siana Gold Project (Siana) and the Mapawa Gold Project. TVIRD is the Philippine affiliate of the Canadian-listed TVI Pacific Inc. TVIRD will become the 100% owner of GRC and therefore the divestment includes the process plant and all other infrastructure at Siana. A royalty of 3.25% payable for up to 619,000 ounces of gold will be payable to the Red 5 Group from first gold from the restart of the Siana processing plant. Vesting date: 30 June 2022 (subject to performance conditions) Vesting date: 30 June 2023 (subject to performance conditions) Number 10,442,031 7,945,729 18,387,760 Upon completion of all closing conditions of the agreement, which include certain Philippine regulatory approvals expected to be satisfied during the September 2021 quarter, the Group will receive gross proceeds of US$19 million through the repayment of outstanding shareholder advances due from its Philippine- affiliated company, Red 5 Asia Inc, which is a shareholder of GRC. 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 2019 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 2021. 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 (being operating costs performance against budget and safety compliance) 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 $318,825 (2020: $238,068). The divestment of its interests in Siana is consistent with Red 5’s strategy to focus on its King of the Hills and Darlot gold mines in Western Australia, with the aim of becoming a substantial mid-tier Australian gold producer. Project finance facility for the KOTH Project Financial close was achieved for the $175 million Project Finance Facility for the KOTH Project on 30 June 2021. Subsequent to year end, the first draw-downs were completed totalling $28.712 million. Other than the matters discussed above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. 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. 2021 Annual Report 23 DIRECTORS’ REPORT (cont.) 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 2021. REMUNERATION REPORT (AUDITED) 11. This remuneration report for the year ended 30 June 2021 outlines the remuneration arrangements in place for Directors and Executives of Red 5 in accordance with the requirements of the Corporations Act 2001 and its Regulations. This report sets out the current remuneration arrangements for Directors and executives of Red 5. For the purposes of this report, key management personnel (KMP) are defined as those persons having authority and responsibility for planning, directing and controlling major activities of the consolidated entity, including any Director (whether Executive or Non-Executive) of Red 5. The report contains the following sections: 11.1 Key Management Personnel covered by this Remuneration Report 11.2 Remuneration Governance 11.3 Services from Remuneration Consultants 11.4 Principles of Remuneration 11.5 Executive Remuneration Framework 11.6 Group Performance 11.7 Key Management Personnel Service Agreements 11.8 Details of Remuneration 11.9 Additional Disclosures Relating to Options, Performance Rights and Shares 11.1 Key Management Personnel covered by this Remuneration Report The following were KMPs of the Group at any time during the year ended 30 June 2021 and 30 June 2020 and unless otherwise indicated, KMPs for the entire period: Non – Executive Directors Kevin Dundo Ian Macpherson Colin Loosemore Steven Tombs Andrea Sutton (a) Executive Directors Mark Williams – Managing Director Executives Jason Greive (b) - Chief Operating Officer John Tasovac - Chief Financial Officer Brendon Shadlow (c) - General Manager Operations (a) Andrea Sutton was appointed as a Non-Executive Director effective on 18 November 2020. (b) Jason Greive was appointed Chief Operating Officer on 30 November 2020. (c) Brendon Shadlow was KMP until 30 November 2020. General Manager is no longer categorised as a KMP position upon appointment of the Chief Operating Officer role. 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 with an independent Chairman. 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. 24 2021 Annual Report DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) 11.3 SERVICES FROM REMUNERATION 11.5.1 Fixed Remuneration CONSULTANTS Services from Remuneration Consultants were not utilised in respect of the 2021 financial year. Fixed remuneration comprises director’s fees, consulting fees, salaries, and superannuation contributions. 11.5.2 Short-term incentives linked to annual planning 11.4 PRINCIPLES OF REMUNERATION and longer-term objectives 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 within the range of P62.5 and P75, which represents the 62.5th and 75th percentiles of the relevant market data; \ 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. 11.5 EXECUTIVE REMUNERATION FRAMEWORK Red 5’s remuneration policy for the Managing Director and senior executives is designed to promote superior performance and long-term commitment to Red 5, while building sustainable shareholder value. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing Red 5’s operations. The Managing Director and senior executives receive a base remuneration which is market related, together with performance-based remuneration linked to the achievement of pre-determined milestones and targets. The structure of remuneration packages for the Managing Director and other senior executives comprises: \ Fixed remuneration; \ Short-term incentives linked to annual planning and longer- term objectives; and \ Long-term incentives through participation in performance- based equity plans, with the prior approval of shareholders to the extent required. The proportion of fixed and variable remuneration is established for the Managing Director and senior executives by the Committee and is linked to both relevant market practices and the degree to which the Board intends participants to focus on short and long-term outcomes. The 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, group EBITDA, health and safety targets and specific operations-related milestones including project development milestones for the King of the Hills project. 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 production or 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. 2021 Annual Report 25 DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) 11.5.3 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. 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 growth in ore reserves, operating costs performance against budget, safety performance and strategic targets. The TSR measure is subject to a positive TSR gate and all measures are also 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. 11.6 GROUP PERFORMANCE The following table summarises key measures of Group performance for FY21 and the previous four financial years ASX Share price at year end Profit/(loss) after income tax attributable to owners of the company for continuing operations ($’000) Profit/(loss) after income tax attributable to owners of the company ($’000) Dividends paid ($’000) Underlying EBITDA (a) ($’000) (a) Underlying EBITDA is a non-IFRS measure which is unaudited. 11.6.1 STI performance pay outcome 2021 $0.19 2020 $0.20 2019 $0.18 2018 $0.08 2017 $0.03 (9,478) 4,544 (3,030) (11,928) (110,203) (43,245) 4,544 (3,030) (11,928) (110,203) - - - 11,635 53,978 29,890 - 297 - 14,167 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 2021 including achievement of core EBITDA targets, achievement of milestones on the development schedule for the King of the Hills project, the achievement of gold production and all-in-sustaining cost targets for the financial year and individual effectiveness. A gate of 90% of budgeted gold production level applies to all KPIs. The production gate for the year ended 30 June 2021 was not achieved and therefore no bonus was awarded for the financial year. The Committee however, elected to award Mr Greive, who had commenced employment as Chief Operating Officer during the financial year, a short-term incentive entitlement based on the Company’s revised production guidance published in January 2021. The Committee elected to make the award as 50% payable in cash and 50% payable in deferred rights. 26 2021 Annual Report DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) Based on these results the Board has awarded an STI to eligible KMPs as follows: Executive KMP STI Awards for 2021 Mark Williams Jason Greive John Tasovac Cash Bonus Deferred Rights (a) Service Rights (b) $ - 75,000 - $ - 75,000 - $ - - - (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 11.9.4. (b) Service rights, if awarded, are subject to a 12-month service test following the end of the measurement period. See valuation of rights on section 11.9.4. 11.6.2 LTI performance pay outcome In accordance with the terms of the Red 5 Performance Rights Plan (PR Plan), a total of 5,636,475 performance rights that were issued to key management personnel in 2019 reached the end of their performance period. As at the date of this report 3,945,532 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 2021. 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 1,690,943 Performance Rights were forfeited due to performance conditions not being met (being operating costs performance against budget and safety compliance). Based on the above, the following was the LTI awarded to KMPs. Executive KMP LTI Awards for 2021 Series 2021 Mark Williams Jason Greive (a) John Tasovac Total Maximum number of performance rights Number awarded in the year % of maximum potential LTI achieved % of LTI not achieved in the year 4,020,808 Not eligible 1,615,667 5,636,475 2,814,565 Not eligible 1,130,967 3,945,532 70 30 Not eligible Not eligible 70 70% 30 30% (a) Jason Greive was appointed Chief Operating Officer on 30 November 2020. Details of LTI performance rights issued during the year are shown at section 11.9.4. 2021 Annual Report 27 DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) 11.7 KEY MANAGEMENT PERSONNEL SERVICE AGREEMENTS 11.7.1 Non-Executive Directors’ remuneration In accordance with current corporate governance practices, the structure for the remuneration of Non-Executive Directors and senior executives is separate and distinct. Shareholders approve the maximum aggregate remuneration payable to Non-Executive Directors, with the current approved limit being $650,000 per annum. The Remuneration and Nomination Committee recommend the actual payments to Directors and the Board is responsible for ratifying any recommendations. The current fee policy is as follows: \ The Chair receives fees of $135,000 per annum plus superannuation; \ Non-Executive Directors receive $100,000 per annum plus superannuation; \ Chairs of Board committees receive: \ $15,000 per annum plus superannuation for the audit committee, and \ $10,000 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 $318,825 (2020: $238,068) to insure the Directors and other officers of the consolidated entity. The liabilities insured are for costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated entity. 11.7.2 Executive Directors – Managing Director Mark Williams Fixed remuneration for the year and statutory superannuation: $643,200 Mr Williams’ agreement is for an indefinite period. Mr William’s total remuneration was increased to $643,200 effective 1 July 2020 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: \ Performance bonus: short term incentive bonus determined as a percentage of annual salary and based on the achievement of pre-determined milestones which are selected from group, functional and individual level objectives, each weighted to reflect their relative importance. One half of any performance bonus is payable in cash and one half is to be satisfied by the issue of Share Rights which are subject to service or escrow conditions. \ Equity compensation: entitlement to be granted indeterminate rights which can be delivered in either cash or shares. The rights are granted annually with a measurement period of three years with vesting conditions comprising outperformance against TSR and agreed operational measures including gold production targets. \ Termination provisions: termination by the Company (other than for unsatisfactory performance, gross misconduct or long term incapacity) upon giving 12 months’ notice or payment in lieu of notice and by Mr Williams giving 3 months’ notice. 28 2021 Annual Report DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) 11.7.3 Executives Jason Greive Fixed remuneration for the year and statutory superannuation: $492,750 Mr Greive’s agreement is for an indefinite period. Mr Greive’s total annual remuneration was $290,832 (from date of appointment of 30 November 2020 to 30 June 2021) as recommended by the Remuneration and Nomination Committee and adopted by the Board of Directors. In addition to his cash remuneration Mr Greive 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 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 and by Mr Greive giving 3 months’ notice. John Tasovac Fixed remuneration for the year and statutory superannuation: $415,388 Mr Tasovac’s agreement is for an indefinite period. Mr Tasovac’s total remuneration was increased to $415,388 effective 1 July 2020 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 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 and by Mr Tasovac giving 3 months’ notice. Brendon Shadlow Fixed remuneration for the year and statutory superannuation: $385,798 (Mr Shadlow ceased to be a KMP on 30 November 2020) Mr Shadlow’s agreement is for an indefinite period. Mr Shadlow’s annual remuneration was increased to $385,798 effective 1 July 2020 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 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 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. 11.7.4 Transactions with Key Management Personnel and their related parties The Non-Executive Directors Mr Kevin Dundo, Mr Ian Macpherson and Ms Andrea Sutton invoice through their private companies for Directors fees. They are not separate entities that provide consulting services to the Company. The Non-Executive Directors Mr Colin Loosemore and Mr Steven Tombs are paid Directors fees trough the Company’s payroll. Mr Dundo, Mr Macpherson, Mr Loosemore, Mr Tombs and Ms Sutton meet the definition and maintain their status as Independent Non-Executive Directors, thus retain objectivity and their ability to meet their oversight role. 2021 Annual Report 29 DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) 11.8 DETAILS OF REMUNERATION The following table discloses details of the nature and amount of each element of the remuneration paid to key management personnel including the Directors of Red 5 for the year ended 30 June 2021. 2021 Name Executive Director 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 c n a w o l l A / s e s n e p x E $ s u n o B h s a C $ d e r r e f e D ) e ( s t h g i r $ ) f ( s t h g i r e c i v r e S $ s e e f g n i t l u s n o C $ 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 ) g ( e s n e p x e s t h g i r $ e c n a m r o f r e P ) h ( d e t i e f r o f s t h g i r $ l a t o T $ Mark Williams 618,200 (a) Non-Executive Directors Kevin Dundo Ian Macpherson Colin Loosemore Steven Tombs Andrea Sutton (b) Executives Jason Greive (c) John Tasovac 135,000 115,000 110,000 110,000 61,370 264,286 390,388 (a) - - - - - - - - Brendon Shadlow (d) 144,583 1,500 - - - - - - - - - - - - 75,000 75,000 - - - - - - - - - 617 26,744 483 8,729 - - - - - - - - - 25,000 62,743 326,378 (57,900) 974,421 12,825 10,925 10,450 10,450 5,830 - - - - - - - - - - 26,546 20,330 24,288 - - - - - - 147,825 125,925 120,450 120,450 67,200 485,450 25,000 17,245 132,669 (27,628) 565,035 16,166 18,609 50,600 - 240,670 Total 1,948,827 1,500 75,000 76,100 35,473 - 143,192 118,927 533,935 (85,528) 2,847,426 (a) Includes salary, superannuation contributions above concessional cap. (b) Andrea Sutton was appointed as a Non-Executive Director effective on 18 November 2020. (c) Jason Greive was appointed Chief Operating Officer on 30 November 2020. (d) Brendon Shadlow was KMP until 30 November 2020. General Manager is no longer categorised as a KMP position upon appointment of the Chief Operating Officer role. (e) Includes deferred rights to be granted to Mr Greive for FY2021, which will vest immediately and have provisionally been valued at $0.18 (14-day VWAP of Red 5 share price as at 30 June 2021). (f) Includes service rights granted during FY2020 subject to a 12-month service test, they have been valued at $0.26 (Red 5 share price as at 18 November 2020). No service rights were granted during FY2021. (g) Relates to performance rights expense for the 2021, 2022 and 2023 series. The fair value at grant date of Tranche A which has 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. (h) Performance Rights that were issued to key management personnel, senior management and operating personnel in 2019 have been partially forfeited following the partial achievement of performance conditions measured over the three years ended 30 June 2021 (See section 11.6.2). 30 2021 Annual Report DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) 11.8 DETAILS OF REMUNERATION 2020 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 c n a w o l l A / s e s n e p x E $ s u n o B h s a C $ ) b ( s t h g i r d e r r e f e D $ ) c ( s t h g i r e c i v r e S $ Name Executive Director Mark Williams 577,250 (a) Non-Executive Directors Kevin Dundo 120,000 Ian Macpherson 103,750 Colin Loosemore Steven Tombs 95,000 91,250 Executives 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 s e e f g n i t l u s n o C $ - - - - 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 ) 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 e c n a m r o f r e P $ l a t o T $ 25,000 45,123 303,427 (88,444) 1,236,343 11,400 9,856 9,025 16,223 10,210 - - - - - - - - - - - - 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 were 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). 2021 Annual Report 31 DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) 11.8.1 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 Andrea Sutton Executives Jason Greive John Tasovac Brendon Shadlow Fixed At risk – short term incentives At risk – long term incentives 2021 2020 2021 2020 2021 2020 72% 52% 100% 100% 100% 100% 100% 64% 70% 46% 100% 100% 100% 100% - - 63% 64% - - - - - - 30% 4% 7% 30% 28% 18% - - - - - - 24% 22% - - - - - 6% 26% 47% - - - - - - 13% 14% 11.9 ADDITIONAL DISCLOSURES RELATING TO OPTIONS, PERFORMANCE RIGHTS AND SHARES 11.9.1 Options granted to key management personnel No options over ordinary shares were held or 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. 11.9.2 Share holdings of key management personnel The numbers of shares in Red 5 held during the financial year by key management personnel, including personally related entities are set out below: 2021 Kevin Dundo Mark Williams Ian Macpherson Colin Loosemore Steven Tombs Andrea Sutton Jason Greive 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 1,600,409 11,125,287 1,144,124 8,490,878 2,284,445 - - 2,527,592 1,225,078 28,397,813 - 2,814,565 - - - - - - - - - - - - 1,130,967 1,028,151 4,973,683 102,861 80,577 (a) 183,438 304,840 500,000 217,930 1,617,312 435,134 - 1,669,048 - - 1,905,249 14,439,852 1,362,054 10,108,190 2,719,579 - 1,669,048 3,761,420 2,333,806 (b) 4,744,264 38,299,198 (a) Service and deferred rights that vested after Mr Shadlow ceased to be a KMP on 30 November 2020. (b) Represents number of shares held by Mr Shadlow on 30 June 2021, noting that he ceased to be a KMP by reporting date. 32 2021 Annual Report DIRECTORS’ REPORT (cont.) 11.9.3 Shares issued, Service and Deferred Rights Grant Date Vesting Date Fair Value at Grant Date Granted Exercised up to reporting date Outstanding at reporting date Deferred rights issued and vested: Jason Greive (a) Service rights issued and vested: John Tasovac (b) 30-Jun-21 30-Jun-21 $75,000 412,501 24-Nov-20 30-Jun-21 $26,744 102,861 - - 412,501 102,861 (a) Deferred Rights for Mr Greive issued under the Red 5 Limited Rights Plan which vest immediately upon issue and are exercised into restricted shares which are subject to disposal restrictions until 30 June 2023. As of reporting date they had not yet been exercised into restricted shares. They have been provisionally valued at $0.18 (14-day VWAP of Red 5 share price as at 30 June 2021). (b) Service Rights issued under the Red 5 Limited Rights Plan which vest only if the employee remains employed by the company as at 1 July 2021 (being a period of 1 year after the end of the award measurement period). Mr Tasovac was employed on that date and the rights vested on 30 June 2021 and automatically exercised into ordinary shares. Share based payments expense for the shares issued, service and deferred rights for KMP’s was $123,794 (2020: $359,234). The fair value is based on observable market share price at the date of grant. 11.9.4 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: 2021 Mark Williams Jason Greive John Tasovac Brendon Shadlow (c) Total Balance at prior year reporting date Received through issuing of performance rights (a) Performance rights vested and exercised (b) Performance rights forfeited (b) Balance at reporting date 6,050,864 1,526,102 (2,814,565) (1,206,243) 3,556,158 - 2,447,128 2,232,833 10,730,825 415,182 598,425 546,457 - (1,130,967) (1,028,151) - (484,700) (440,637) 3,086,166 (4,973,683) (2,131,580) 415,182 1,429,886 1,310,502 6,711,728 (a) Performance Rights 2023 series – Managing Director (Expiry date: 30 June 2023) Tranche A Tranche B Tranche C Tranche D Total rights Value per right 763,052 $0.188 Valuation per tranche $143,454 305,220 $0.195 $59,518 305,220 $0.195 $59,518 152,610 $0.195 $29,759 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% All criteria to be met: - No fatalities - Maintenance of the ISO14001 and ISO 18001 certifications - Year on year improvement in safety performance < 15% nil > 95% nil Total 1,526,102 $292,249 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. 90% of budgeted gold production by 30 June 2023. 2021 Annual Report 33 DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) (b) Performance Rights 2023 series – Other Key Management Personnel (Expiry date: 30 June 2023) Tranche A Tranche B Tranche C Tranche D Total Jason Greive John Tasovac Total rights Value per right Valuation per tranche 207,592 299,213 506,805 $0.172 $87,170 83,036 119,685 202,721 $0.179 $36,287 83,036 119,685 202,721 $0.179 $36,287 41,518 59,842 101,360 $0.179 $18,143 415,182 598,425 1,013,607 $177,887 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% All criteria to be met: - No fatalities - Maintenance of the ISO14001 and ISO 18001 certifications - Year on year improvement in safety performance < 15% nil > 95% nil 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. 90% of budgeted gold production by 30 June 2023. The Tranche A Rights have been valued using a hybrid employee share option pricing model which uses a correlated simulation that simultaneously calculates the TSR of the Company and the Index on a risk neutral basis as at the vesting date with regards to the measurement period. The percentage by which the return on the stock exceeds the total return on the Index is calculated as at the vesting date and a vesting percentage is calculated from the vesting schedule. The forecast share price at the vesting date is then used to calculate the value of the Right. The price is adjusted based on the vesting percentage, then discounted to its present value. Tranche B, Tranche C and Tranche D Rights are valued using a single share price barrier model. The model incorporates a Monte Carlo simulation and simulates the stock’s share price at the test date. Rights with market based and non-market based vesting conditions can only be exercised following the satisfaction of these exercise conditions. (a) 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 2021. Unmet performance conditions have lapsed, as a result these performance rights have been forfeited. (b) Represents number of performance rights held by Mr Shadlow on 30 June 2021, noting that he ceased to be a KMP on 30 November 2020. 34 2021 Annual Report DIRECTORS’ REPORT (cont.) 11. REMUNERATION REPORT (AUDITED) (cont.) Details of the performance rights issued previously: Managing Directors and Executives Performance Rights 2022 series (Expiry date: 30 June 2022) Tranche A Tranche B Tranche C Tranche D Mark Williams John Tasovac Brendon Shadlow Total rights Value per right 1,015,028 415,731 382,023 1,812,782 $0.251 406,012 166,292 152,809 725,113 $0.256 406,012 166,292 152,809 725,113 $0.256 Valuation per tranche $455,008 $185,629 $185,629 203,004 83,146 76,404 362,554 $0.256 $92,814 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% All criteria to be met: - No fatalities - Maintenance of the ISO14001 and ISO 18001 certifications - Year on year improvement in safety performance < 15% nil > 95% nil 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: 1. A positive Company TSR for the measurement period; and 2. 80% of budgeted gold production by 30 June 2022. End of Audited Remuneration Report 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 $173,887 (2020: $126,436) for non-audit services. Further details of remuneration of the auditors are set out in Note 25. The Board has considered the non-audit services provided during the year and is satisfied that the provision of those services is compatible with the general standard of independence for auditors imposed by the Corporations Act and did not compromise the auditor independence requirements of the Corporations Act, for the following reasons: \ All non-audit services were subject to the corporate governance guidelines adopted by Red 5; \ Non-audit services have been reviewed by the audit committee to ensure that they do not impact the impartiality or objectivity of the auditor; and \ The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity, acting as an advocate for Red 5 or jointly sharing economic risks and rewards. A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act is included immediately following the Directors’ Report and forms part of the Directors’ Report. 2021 Annual Report 35 DIRECTORS’ REPORT (cont.) 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 2021. 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 31 August 2021 36 2021 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 2021 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 31 August 2021 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 2021 Annual Report 37 Consolidated Statement of PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 30 June 2021 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 (Loss)/profit before income tax expense Income tax benefit/(expense) Net (loss)/profit from continuing operations (Loss) from discontinued operation (net of tax) Net (loss)/profit 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 Cash flow hedge movements 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 Diluted earnings/(loss) per share Basic earnings/(loss) per share – continuing operations Diluted earnings/(loss) per share – continuing operations Note 5(a) 5(b) 5(c) 5(d) 5(e) 12 5(f) 5(f) 6 23 22 22 22 22 CONSOLIDATED 30 June 2021 30 June 2020 $’000 $’000 (restated) (a) 173,358 (171,050) 2,308 692 (9,572) (2,069) (3,217) 347 (1,345) (1,410) - (16,574) (14,266) 4,788 (9,478) (33,767) (43,245) (1,722) 76 20,038 (24,853) (324) (42,921) (43,245) (364) (24,489) (24,853) Cents (2.08) (2.08) (0.44) (0.44) 200,332 (161,106) 39,226 1,051 (8,590) - (4,608) 329 (2,362) (6,810) (967) (21,957) 17,269 (6,628) 10,641 (6,097) 4,544 2,855 (52) (15,196) (7,849) 85 4,459 4,544 153 (8,002) (7,849) Cents 0.33 0.32 0.78 0.77 (a) Comparative amounts have been restated for comparability to the current year figures due to the reclassification of the results of the discontinued operation (refer note 23). The accompanying notes form part of these financial statements. 38 2021 Annual Report Consolidated Statement of FINANCIAL POSITION as at 30 June 2021 CONSOLIDATED 30 June 2021 30 June 2020 Note $’000 $’000 Assets Current Assets Cash and cash equivalents Trade and other receivables Inventories Assets held for sale Total Current Assets Non-Current Assets Trade and other receivables Property, plant and equipment Intangible assets Mine properties 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 Liabilities held for sale Total Current Liabilities Non-Current Liabilities Employee benefits Provisions Derivative financial instruments Lease liabilities Deferred tax liability Total Non-Current Liabilities Total Liabilities Net Assets Equity Contributed equity Other equity Reserves Accumulated losses 7 8 9 23 8 10 11 12 6 13 15 14 18 19 16 17 23 18 16 19 17 6 20 21 Total Equity Attributable to Equity Holders of the Company Non-controlling interests Total Equity The accompanying notes form part of these financial statements. 17,415 9,861 26,572 25,623 79,471 28,810 136,814 230 63,025 37,135 - 266,014 345,485 39,787 - - 5,498 - 1,116 3,529 3,940 53,870 421 52,161 - 6,624 1,533 60,739 114,609 230,876 442,626 930 31,027 (239,797) 234,786 (3,910) 230,876 116,220 11,797 36,160 - 164,177 257 90,517 808 51,217 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 2021 Annual Report 39 Consolidated Statement of CHANGES IN EQUITY for the year ended 30 June 2021 ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT ENTITY d e t a l u m u c c A s e s s o l r e h t O y t i u q e d e u s s I l a t i p a c y c n e r r u c n g i e r o F n o i t a l s n a r t e v r e s e r d n a s t n e m y a p s e v r e s e r r e h t o d e s a b - e r a h S g n i l l o r t n o c - n o N t s e r e t n i g n i g d e H e v r e s e r l a t o T Balance at 1 July 2020 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 Vesting of performance rights (LTI) converted to ordinary shares Vested service and deferred rights converted to ordinary shares (STI) Issue of deferred and service rights (STI) Deferred rights reversed, issued in cash instead Share based payments (LTI & STI) $’000 $’000 $’000 $’000 $’000 383,887 (196,876) 930 27,991 (18,594) - - - - - (42,921) - - - (42,921) 60,067 (2,102) 542 232 - - - - - - - - - - - - - - - - - - - - - - - (1,682) - - - - 24,786 (4,748) (1,682) 20,038 - - - - - - - - - - - - - - Balance at 30 June 2021 442,626 (239,797) 930 26,309 1,444 $’000 2,257 $’000 $’000 (3,546) 196,049 - (324) (43,245) 76 (40) (1,646) - - 76 - - (542) (232) 160 (52) 1,607 3,274 - - 24,786 (4,748) (364) (24,853) - - - - - - - 60,067 (2,102) - - 160 (52) 1,607 (3,910) 230,876 260,515 (201,335) 930 25,204 (3,398) 1,163 (3,699) 79,380 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 - - - 4,459 - - - - - - - - - - - - - - - - - - 2,787 - - - 85 4,544 (52) 68 2,803 - - (21,550) 6,354 - - - - (21,550) 6,354 2,787 (15,196) (52) 153 (7,849) - - - - - - - - - - - - - - 374 (305) (361) 1,438 2,257 - - - - - - 129,677 (6,610) 374 - (361) 1,438 (3,546) 196,049 Balance at 30 June 2020 383,887 (196,876) 930 27,991 (18,594) The accompanying notes form part of these financial statements. 40 2021 Annual Report Consolidated Statement of CASH FLOWS for the year ended 30 June 2021 CONSOLIDATED 30 June 2021 30 June 2020 Notes $’000 $’000 Cash flows from operating activities Cash received from customers Payments to suppliers and employees Payments for exploration and evaluation Sundry receipts Income tax paid Interest received Net operating cash flows used in discontinued operation Net cash from operating activities 23(c) 30 Cash flows used in investing activities Payments for property, plant equipment and intangibles Payments for mine development and pre-operational cost Payments for exploration and evaluation Payments for bank guarantee relating to King of the Hills project Payments for acquisition of King of the Hills assets Payments for acquisition of Darlot Net investing cash flows used in discontinued operation 23(c) 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 Payment for settlement for closure of hedges Payment to restricted cash 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 Cash held within assets held for sale Cash and cash equivalents at the end of the year 15 23(b) 7 174,677 (153,921) (3,217) 547 - 444 (3,975) 14,555 (99,643) (10,050) (7,579) (21,112) - - (53) (138,437) 60,066 (2,102) - (12,000) - (379) - (4,774) (7,500) (7,393) 25,918 (97,964) 116,220 (67) (774) 17,415 204,479 (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 - 116,220 The accompanying notes form part of these financial statements. 2021 Annual Report 41 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 REPORTING ENTITY 1. Red 5 Limited (“parent entity” or “the Company”) 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 2021 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 31 August 2021. 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 (refer note 4.22). 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 2021 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. 42 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (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 includes mainly capitalised software. Intangible assets are initially recorded at cost of acquisition, being the fair value of the consideration provided plus incidental costs directly attributable to the acquisition. Capitalised software is amortised on a straight-line basis over three years commencing when it is available for use. 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 PROPERTIES 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. 2021 Annual Report 43 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (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 invento- ries. 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. Mineral rights Mineral rights comprise identifiable exploration and evaluation assets, mineral resources and ore reserves, which are acquired as part of a business combination or joint venture acquisition and are recognised at fair value at the date of acquisition. Where possible, mineral interests are attributable to specific areas of interest and are classified within mine properties. It is amortised over the life of the mine. Asset retirement obligation Asset retirement obligation represents the estimated future cost of closure and rehabilitation of the mine site. It is amortised over the life of the mine. 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. 44 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 4. SIGNIFICANT ACCOUNTING POLICIES (cont.) 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 trade receivables, the Group uses the simplified approach to recognise impairments based on the lifetime expected credit loss. For other receivables, the Group applies the general approach and recognises impairments based on a 12-month expected credit loss. Impairment allowances are based on a forward- looking expected credit loss model. Where there has been a significant increase in credit risk, a loss allowance for lifetime expected credit losses is required. Exposures are grouped by external credit rating and security options and an expected credit loss rate is calculated accordingly. Where applicable, actual credit loss experience is also taken into account. For remaining receivables without an external credit rating or security option, a rating of BB (Standard and Poor’s) is used, on the basis that there is no support that it is investment grade, nor is there any evidence of default. For the purposes of the statement of cash flows, cash includes deposits at call which are readily convertible to cash on hand and which are used in the cash management function on a day to day basis, net of outstanding bank overdrafts. Derivative financial instruments Derivatives financial instruments are recognised initially at fair value; any attributable transaction costs are recognised in profit and loss as incurred. Subsequent to initial recognition, derivatives are measured at fair-value. 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. 2021 Annual Report 45 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 4. SIGNIFICANT ACCOUNTING POLICIES (cont.) The following significant exchange rates have been applied: AUD Philippine Peso USD Average rate Year-end spot rate 2021 36.17 0.75 2020 34.176 0.67 2021 36.48 0.75 2020 34.22 0.68 Financial statements of foreign operations Each entity in the consolidated entity determines its functional currency, being the currency of the primary economic environment in which the entity operates, reflecting the underlying transactions, events and conditions that are relevant to the entity. The functional currency of the Australian entities is the Australian dollar and the functional currency of the Philippine entities is the Philippine Peso. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated from the entity’s functional currency to the consolidated entity’s presentation currency of Australian dollars at foreign exchange rates ruling at reporting date. The revenues and expenses of foreign operations are translated to Australian dollars at the exchange rates approximating the exchange rates ruling at the date of the transactions. Foreign exchange differences arising on translation are recognised directly in a separate component of equity. 4.14 REHABILITATION COSTS Full provision for rehabilitation costs is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the balance date. Increases due to additional environmental disturbances are capitalised and amortised over the remaining lives of the operations where they have future economic benefit, else they are expensed. These increases are accounted for on a net present value basis. Annual increases in the provision relating to the change in the net present value of the provision and inflationary increases are accounted for in the Statement of Profit and Loss as an interest expense. The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. 4.15 PROVISIONS A provision is recognised in the Statement of Financial Position when the consolidated entity has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at the pre-tax rate that reflects current market assessments of the time value of money and where appropriate, the risk specific to the liability. 4.16 EARNINGS PER SHARE Basic earnings per share is determined by dividing net operating results after income tax attributable to members of the parent entity, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to potential ordinary shares. 4.17 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. 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 REVENUE FROM CONTRACTS WITH CUSTOMERS The Group recognises revenue when control has passed to the buyer; the Company has no significant continuing involvement; and the amount of revenue and costs incurred or costs to be incurred in respect of the transaction can be measured reliably. The Group’s assessment is that this occurs when the sales contract has been entered into and the customer has physical possession of the gold as this is the point at which the customer obtains the ability to direct the use and obtains substantially all of the remaining benefits of ownership of the asset. The transaction price is determined based on the agreed upon price and the number of ounces delivered. Payment is due upon delivery into the sales contract. As part of the risk management policy, the Group enters into gold forward contracts to manage the gold price of a proportion of anticipated gold sales. The counterparty to the gold forward contracts is BNP Paribas, Australia Branch, the Hongkong and Shanghai Banking Corporation Limited, Sydney Branch and Macquarie Bank Limited (“MBL”) (the counterparties). 46 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 4. SIGNIFICANT ACCOUNTING POLICIES (cont.) It is management’s intention to settle each contract through physical delivery of gold and as such, the gold forward sale contracts disclosed below do not meet the criteria of financial instruments for accounting purposes. This is referred to as the “normal purchase / sale” exemption. Accordingly, the contracts will be accounted for as sale contracts with revenue recognised once the gold has been delivered to the counterparties. 4.19 LEASES At the inception of a contract the Group assesses whether the contract is or contains a lease. A contract is, or contains, a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognises it as 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. 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. 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 contract that contains 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. 2021 Annual Report 47 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 4. SIGNIFICANT ACCOUNTING POLICIES (cont.) 4.20 DISCONTINUED OPERATION A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which: \ represents a separate major line of business or geographic area of operations; \ is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or \ is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and OCI is re-presented as if the operation had been discontinued from the start of the comparative year. 4.21 ASSETS HELD FOR SALE Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets or deferred tax assets which continue to be measured in accordance with the Group’s other accounting policies. Impairment losses on initial classification as held-for-sale or held-for-distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted. 4.22 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 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. 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. 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. 48 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 4. SIGNIFICANT ACCOUNTING POLICIES (cont.) 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 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. 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. 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. 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. 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. 4.23 NEW AND REVISED STANDARDS AND INTERPRETATIONS Certain new accounting standards and interpretations have been published that are not effective for the 30 June 2021 reporting period. The Group has elected not to early adopt any of the new standards or interpretations. These are not expected to have a material impact. 2021 Annual Report 49 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 5 REVENUE AND EXPENSES Consolidated Year ended 30 June 2021 30 June 2020 $’000 $’000 (restated) (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 Depreciation Property and other indirect taxes Acquisition related costs Travel and accommodation Other administration overheads (e) Care and maintenance (1) Fuel and utilities Other costs External services Materials and consumables used (f) Finance income / (expenses) Interest income Unrealised gains on fuel hedges Interest expense on borrowings and leases Amortisation of borrowing costs Unwinding of discount on rehabilitation provision Unrealised loss on fuel hedges Unwinding of interest on gold loan Unwinding of discount on deferred consideration on acquisitions 189,711 (16,353) 173,358 (147,848) (23,202) (171,050) - 692 692 (4,109) (1,767) (1,457) (878) (291) (201) (176) (59) (634) (9,572) (1,026) (160) (848) (35) (2,069) 347 - 347 (921) (150) (161) (113) - - (1,345) (998) 215,946 (15,614) 200,332 (128,992) (32,114) (161,106) 750 301 1,051 (2,981) (1,812) (1,477) (569) (138) (220) (51) (453) (889) (8,590) - - - - - 216 113 329 (1,461) (334) (299) - (196) (72) (2,362) (2,033) (1) Care and maintenance costs in 2021 relate to the King of the Hills gold mine which went into care and maintenance in February 2021. In 2020 care and maintenance costs related to the Siana mine operation and have been reclassified to profit/(loss) from discontinuing operation (refer to note 23). 50 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 6 INCOME TAX (PRIMA FACIE) Consolidated Year ended 30 June 2021 30 June 2020 Current income tax Current income tax charge Adjustment for prior period Deferred income tax Deferred income tax credit Adjustment for prior period Income tax benefit/(charge) A reconciliation between income tax charge and the numerical profit/(loss) before income tax at the applicable income tax rate is as follows: (Loss)/profit before income tax At statutory income tax rate of 30% (2020: 30%) Temporary difference not recognised / (recognised) Items not allowable for income tax purposes: Non-deductible expenses Utilisation of carry forward tax losses not brought to account Change in estimates Prior period adjustment Income tax benefit benefit/(charge) Tax losses and temporary differences not brought to account (tax effected) Deductible temporary differences Tax losses $’000 - 1,791 1,791 5,122 (2,125) (2,997) 4,788 (14,266) 4,280 1,400 (558) - - (334) 4,788 49,709 7,017 $’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 Some of the potential deferred tax assets attributable to tax losses and deductable temporary differences have not been brought to account at 30 June 2021. 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. 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 Tax loss carry forward Net balance at 1 July 2020 $’000 (8,534) (8,009) 12,813 10,012 (135) (2,089) - 4,058 Recognised in other comprehensive income $’000 - - - (8,588) - - - (8,588) Recognised in profit or loss Net balance at 30 June 2021 $’000 (13,929) (1,552) 5,958 (1,424) 1,719 1,811 10,414 2,997 $’000 (22,463) (9,561) 18,771 - 1,584 (278) 10,414 (1,533) 2021 Annual Report 51 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) INCOME TAX (PRIMA FACIE) (cont.) 6 Movement in deferred tax balances: (cont.) Property, plant and equipment and intangible assets Exploration and evaluation assets Provisions and employee benefits Derivative financial instruments Leases Other items Net balance at 1 July 2019 $’000 (5,694) (1,588) 9,547 1,456 - 225 3,946 Recognised in other comprehensive income $’000 - - - 6,513 - - 6,513 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 (a) Red 5 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 Cash held within assets held for sale 8 TRADE AND OTHER RECEIVABLES Current assets Trade debtors (a) Prepayments GST receivable Sundry debtors Interest receivable Non-current assets Restricted cash (b) VAT receivable Security deposits CONSOLIDATED 30 June 2021 30 June 2020 $’000 18,159 30 - 18,189 (774) 17,415 $’000 68,754 47,465 1 116,220 - 116,220 CONSOLIDATED 30 June 2021 30 June 2020 $’000 3,538 4,690 1,612 20 1 9,861 20,500 4 8,306 28,810 $’000 6,242 3,526 1,629 303 97 11,797 - 62 195 257 (a) Trade debtors includes amounts receivable for 1,313 ounces sold on 30 June 2021, equivalent to $3.07 million (30 June 2020: 2,347 ounces equivalent to $6.08 million). (b) Restricted cash is made up of $13.5 million transferred to a reserve account to fund the construction of the tailings storage facility at King of the Hills and $7.5 million to a debt service reserve account. 52 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 9 INVENTORIES Stores, spares and consumables at cost Run of mine stockpiles at net realisable value (2020: at cost) Gold in circuit at net realisable value (2020: at cost) Crushed ore stockpile at cost Gold Bullion at cost CONSOLIDATED 30 June 2021 30 June 2020 $’000 8,039 6,064 11,886 451 132 26,572 $’000 11,305 15,506 8,786 380 183 36,160 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. Net realisable value adjustments of $3.243 million were made during the year (30 June 2020: nil). During the year a provision of $0.683 million was made for slow-moving stores, spares and consumables inventory at the Darlot mine. 10 PROPERTY, PLANT AND EQUIPMENT Land and buildings Plant and equipment (a) Fixtures and fittings Right of use assets Assets under construction $’000 $’000 $’000 $’000 $’000 Cost Balance at 1 July 2020 13,264 138,487 2,014 Additions (b) Disposals (c) Transfer from assets under construction Transfer to assets held for sale Balance at 30 June 2021 436 - 13 (3,065) 10,648 2,025 (727) 1,867 (92,750) 48,902 29 - 78 (1,752) 369 21,080 6,224 (72) - (76) 7,206 97,765 - (1,958) (732) 27,156 102,281 Total $’000 182,051 106,479 (799) - (98,375) 189,356 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 Disposals Transfer from assets under construction Reclassification to right of use assets Reclassification of asset retirement obligation and software 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 - 30 - - - - - 88 2,014 15,908 1,956 - - 3,214 - - 2 21,080 - 6,591 - (259) - 15,908 16,315 (1,140) - - (14) (2,070) (976) 116 7,206 (976) 4,931 182,051 2021 Annual Report 53 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 10 PROPERTY, PLANT AND EQUIPMENT (cont.) Land and buildings Plant and equipment Fixtures and fittings Right of use assets Assets under construction $’000 $’000 $’000 $’000 $’000 Accumulated depreciation Balance at 1 July 2020 Depreciation for the year Disposals Transfer to assets held for sale Balance at 30 June 2021 Balance at 1 July 2019 Depreciation for the year Disposals Reclassification to right of use assets Reclassification to intangible assets (6,475) (1,600) - 2,245 (5,830) (4,354) (2,023) - - - (73,739) (7,387) 453 49,591 (31,082) (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) Carrying amounts At 1 July 2019 At 30 June 2020 At 30 June 2021 8,767 6,789 4,818 65,410 64,748 17,820 (1,802) (55) - 1,634 (223) (1,646) (76) - - - (80) (1,802) 250 212 146 (9,518) (5,995) 71 35 (15,407) - (8,052) - (1,465) - (1) (9,518) - 11,562 11,749 Total $’000 (91,534) (15,037) 524 53,505 (52,542) (72,908) (16,664) 608 - 82 (2,652) (91,534) - - - - - - - - - - - - 1,748 7,206 76,175 90,517 102,281 136,814 (a) Property, plant and equipment includes the Darlot 1.0 Mtpa processing plant facility with a net book value of $13.347 million. The Group identified indicators of impairment at year end resulting from the King of the Hills processing hub strategy announced to the market in August 2021, and performed an impairment assessment on this asset. The Group concluded that the value of the asset is recoverable as at 30 June 2021, however the Group also identified that a reasonably possible change in the gold production assumption could cause the carrying amount to exceed the recoverable amount. (b) During the year ended additions included construction of the KOTH processing plant and the completion of the accommodation facility and administration blocks at the site. It also included new leased assets, sustaining capital and tailing storage facility improvements. (c) Includes disposals of old mobile machinery. 11 MINE PROPERTIES Cost Balance at 1 July 2020 Additions Transfer from exploration and evaluation (refer to note 12) Rehabilitation change in estimate (refer to note 16) Transfer to assets held for sale Balance at 30 June 2021 Balance at 1 July 2019 (a) Additions Reclassification of rehabilitation asset Rehabilitation change in estimate (refer to note 16) Effect of movements in exchange rates Balance at 30 June 2020 54 2021 Annual Report Mine development Asset retirement obligation $’000 $’000 Mineral rights $’000 Total $’000 235,525 10,050 2,805 - (189,436) 58,944 213,491 12,634 - - 9,400 235,525 11,328 30,717 277,570 - - 13,796 (2,159) 22,965 - - 2,056 9,169 103 - - - - 30,717 30,357 360 - - - 10,050 2,805 13,796 (191,595) 112,626 243,848 12,994 2,056 9,169 9,503 11,328 30,717 277,570 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 11 MINE PROPERTIES (cont.) Accumulated depreciation Balance at 1 July 2020 Amortisation Transferred to assets held for sale Balance at 30 June 2021 Balance at 1 July 2019 (a) Amortisation Reclassification of rehabilitation asset Effect of movements in exchange rates Balance at 30 June 2020 Carrying amounts At 1 July 2019 At 30 June 2020 At 30 June 2021 Mine development Asset retirement obligation $’000 $’000 (207,810) (4,658) 184,506 (27,962) (189,608) (9,052) - (9,150) (207,810) (86) (1,756) 86 - - (82) (4) (86) Mineral rights $’000 Total $’000 (18,457) (226,353) (1,426) - (11,793) (6,664) - - (7,840) 184,592 (49,601) (201,401) (15,716) (82) (9,154) (18,457) (226,353) (1,756) (19,883) 23,883 27,715 30,982 - 11,242 21,209 18,564 12,260 10,834 42,442 51,217 63,025 (a) Certain comparative amounts have been reclassified to conform with current year presentation. 12 EXPLORATION AND EVALUATION ASSETS Opening balance Exploration and evaluation expenditure incurred in current period (a) Capitalised exploration costs transferred to mine development (refer to note 11) Capitalised exploration costs transferred from assets under construction Exploration expenditure transferred to profit or loss (b) Transferred to assets available for sale Closing balance CONSOLIDATED 30 June 2021 30 June 2020 $’000 32,361 11,187 (2,805) - (3,217) (391) 37,135 $’000 5,294 30,699 - 976 (4,608) - 32,361 (a) During the year ended 30 June 2021, $3.425 million for final feasibility studies, drilling and related costs at King of the Hills gold project were capitalised (30 June 2020: $20.427 million). In addition, $4.281 million was capitalised relating to the acquisition and drilling costs at satellite deposits acquired by Darlot (2020: $5.665 million); and exploration of $3.217 million (2020: $4.608 million). (b) The carrying value of exploration costs totalling $3.217 million were expensed (30 June 2020: $4.608 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. 2021 Annual Report 55 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 13 TRADE AND OTHER PAYABLES Current Creditors and accruals Royalties and other indirect taxes Insurance payable Other creditors 14 INCOME TAX PAYABLE Income tax payable 15 FINANCIAL LIABILITY Nominal interest rate Loan term Carrying value Current borrowings Non-current borrowings CONSOLIDATED 30 June 2021 30 June 2020 $’000 33,973 1,227 2,291 2,296 39,787 $’000 35,899 1,994 1,641 2,387 41,921 CONSOLIDATED 30 June 2021 30 June 2020 $’000 - - $’000 1,791 1,791 CONSOLIDATED 30 June 2021 30 June 2020 $’000 $’000 BBSY bid rate +4.0% BBSY bid rate +4.5% 69 months 22 months - - - - 11,853 11,853 - 11,853 In March 2021 the final instalment of the Macquarie working capital facility and the interest was repaid to Macquarie Bank. On 17 March 2021 a $175 million debt facility commitment was announced with a syndicate comprising BNP Paribas, Australia branch, The Hongkong and Shanghai Banking Corporation Limited, Sydney Branch and Macquarie Bank Limited. The key terms of the project financing facilities include: \ A$160 million senior secured project loan facility; \ A$15 million cost overrun and working capital facility; \ Loan term of 5.75 years, maturing on 30 September 2026; \ An interest rate in respect of the senior secured project loan facility of BBSY-bid plus a margin below 4.00% p.a.; and \ Guaranteed and secured on a first-ranking basis over all Australian assets of Red 5, Greenstone Resources (WA) Pty Ltd, Opus Resources Pty Ltd and Darlot Mining Company Pty Ltd. The first draw-down on the debt facility took place in July 2021 totalling $28.712 million. 56 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 16 PROVISIONS Opening balance Provisions made Provisions utilised Change in rehabilitation estimate Change in rehabilitation variables Unwinding of discount Transferred to liabilities held for sale Closing balance (a) Rehabilitation provision Rehabilitation provision (a) Documentary stamp duty (b) Withholding tax Other provisions (c) $’000 1,222 $’000 504 $’000 38,914 - - 17,422 (3,626) 179 (2,206) 50,683 - - - - - (1,222) - $’000 1,604 981 (495) - - - - - - - - - - 504 2,090 Total $’000 42,244 981 (495) 17,422 (3,626) 179 (3,428) 53,277 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) Documentary stamp duty provision: Provision for documentary stamp duty on cash advances to Philippines subsidiaries. (c) Other provisions: Includes an expected tax liability arising from the acquisition of Merrill Crow Corporation’s (MCC) holding of Siana Gold Project in 2010. Current Non-current CONSOLIDATED 30 June 2021 30 June 2020 $’000 1,116 52,161 53,277 $’000 1,116 41,128 42,244 LEASE LIABILITIES 17 Lease liabilities include electricity and gas power plants, vehicles and equipment. Lease liabilities expire between September 2021 and December 2024 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: Year ended 30 June Less than one year Between one and five years Current Non-current Future minimum lease payments Interest Present value of minimum lease payments 2021 $’000 3,917 7,760 2020 $’000 6,385 6,330 11,677 12,715 3,917 7,760 11,677 6,385 6,330 12,715 2021 $’000 388 1,136 1,524 388 1,136 1,524 2020 $’000 453 1,152 1,605 453 1,152 1,605 2021 $’000 3,529 6,624 10,153 3,529 6,624 10,153 2020 $’000 5,932 5,178 11,110 5,932 5,178 11,110 2021 Annual Report 57 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 18 EMPLOYEE BENEFITS Provision for annual leave Provision for long-service leave Provision for bonuses Current Non-current 19 DERIVATIVE FINANCIAL INSTRUMENTS Opening balance Change in fair value of cashflow hedges Settlement of cashflow hedges Closing balance Current Non-current CONSOLIDATED 30 June 2021 30 June 2020 $’000 2,912 1,634 1,373 5,919 5,498 421 5,919 $’000 2,600 1,416 1,036 5,052 4,896 156 5,052 CONSOLIDATED 30 June 2021 30 June 2020 $’000 (33,375) - 33,375 - - - - $’000 (5,311) (28,064) - (33,375) (28,983) (4,392) (33,375) During the year as part of the King of the Hills debt funding, the Group closed all existing hedge contracts and entered into new gold forward contracts amounting to 189,651 ounces of gold produced at the King of the Hills operation. The hedge contracts are priced at an average of $2,154 per ounce and for the period from October 2022 to June 2025. The new gold forward contracts are accounted for use the own use exemption. In the prior year the Group had a hedge liability position reflecting a negative mark-to-market value of gold contracts. As at year ended 30 June 2020, metal hedges comprising of forward contracts for 67,000 ounces of gold at an average price of $2,089 per ounce for the period July 2020 to September 2021. In March 2021 the remaining open hedges were closed as mentioned above. To the extent that the closure related to production hedged from July 2021 to September 2021, the gain is retained in the cashflow hedge reserve and released to the income statement once the production occurs. 20 CONTRIBUTED EQUITY (a) Share capital 2,346,323,247 (30 June 2020: 1,958,845,338) ordinary fully paid shares CONSOLIDATED 30 June 2021 30 June 2020 $’000 442,626 $’000 383,887 58 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 20 CONTRIBUTED EQUITY (cont.) (b) Movements in ordinary share capital On issue at 30 June 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 On issue at 1 July 2020 Capital raising for cash Service rights vested Deferred rights vested and converted to shares Performance rights vested and converted to shares Share issue costs On issue at 30 June 2021 CONSOLIDATED Thousand Shares 1,243,167 694,444 19,316 1,174 744 - 1,958,845 1,958,845 375,415 744 328 10,992 - 2,346,323 $’000 260,515 125,000 4,677 82 223 (6,610) 383,887 383,887 60,066 149 83 542 (2,102) 442,626 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 2020 (a) Balance 30 June 2021 CONSOLIDATED Thousand Shares 581 581 $’000 930 930 (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. 2021 Annual Report 59 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 21 RESERVES Foreign currency translation reserve (a) Deferred retirement benefit (b) Share-based payment reserve and other reserves (c) Hedging reserve (d) CONSOLIDATED 30 June 2021 30 June 2020 $’000 26,309 130 3,144 1,444 31,027 $’000 27,991 54 2,203 (18,594) 11,654 (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. This will be released to the income statement on the sale of Siana expected in FY 2022. (b) This reserve is for defined retirement benefit fund for Philippines employees of $0.130 million (2020: $0.054 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 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. (d) 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. At year-end there were no open hedges (refer note 19). EARNINGS PER SHARE 22 Earnings per share (EPS) is the amount of post-tax profit or loss attributable to each share. The Group presents basic and diluted EPS data for ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS takes into account the dilutive effect of all potential ordinary shares, being unlisted employee performance and service rights on issue. Net (loss)/profit after income tax from continuing operations attributable to members of the parent company Net loss after income tax from discontinued operations Net profit/(loss) after income tax attributable to members of the parent company CONSOLIDATED 30 June 2021 30 June 2020 $’000 (9,478) (33,767) (43,245) $’000 10,556 (6,097) 4,459 60 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 22 EARNINGS PER SHARE (cont.) Weighted average number of ordinary shares (‘000) Issued ordinary shares at 1 July Effect of shares issued 20 July 2020 Effect of shares issued 11 September 2020 Effect of shares issued 25 November 2020 Effect of shares issued 25 March 2021 Effect of shares issued 16 April 2021 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 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 CONSOLIDATED Weighted average number of shares 2021 2020 1,958,845 1,243,167 706 8,823 196 65,861 27,093 - - - - - - 2,061,524 2,061,524 - - - - - - - 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 0.78 0.77 Weighted average number of ordinary shares at 30 June (diluted) 2,061,524 Earnings per share (cents per share) Basic (loss)/profit per share Diluted (loss)/profit per share Basic (loss)/profit per share – continuing operations Diluted (loss)/profit per share – continuing operations (2.08) (2.08) (0.44) (0.44) For fully diluted (loss)/profit per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of dilutive potential ordinary shares if the Group has made a profit. The Group’s potentially dilutive securities consist of performance and service rights. 23 DISCONTINUTED OPERATION Sale of Siana gold mine (Philippines) During the year the Group has been in negotiations with interested parties to divest its interests in Philippine affiliated company Greenstone Resources Corporation (GRC), which holds both the Siana Gold Project (Siana) and the Mapawa Gold Project. In July 2021 a binding agreement with TVI Resource Development (Phils.) Inc. (TVIRD) was entered into for the sale of GRC. TVIRD is the Philippine affiliate of the Canadian-listed TVI Pacific Inc. The divestment includes the process plant and all other infrastructure at Siana. A royalty of 3.25% payable for up to 619,000 ounces of gold will be payable to the Group from first gold from the restart of the Siana processing plant. Upon completion of all closing conditions of the agreement, which include certain Philippine regulatory approvals expected to be satisfied during the September 2021 quarter, the Group will receive gross proceeds of US$19 million (approximately A$25.3 million) through the repayment of outstanding shareholder advances due from its Philippine-affiliated company, Red 5 Asia Inc, which is a shareholder of GRC. The divestment of its interests in Siana is consistent with Red 5’s strategy to focus on its King of the Hills and Darlot gold mines in Western Australia, with the aim of becoming a substantial mid-tier Australian gold producer. 2021 Annual Report 61 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 23 DISCONTINUTED OPERATION (cont.) (a) Results of discontinued operation Care and maintenance costs Impairment of discontinued operation (i) Loss from discontinued operation CONSOLIDATED 30 June 2021 30 June 2020 $’000 (7,199) (26,568) (33,767) $’000 (6,097) - (6,097) (i) Due to uncertainty of receipt of the 3.25% royalties on the ounces of gold produced by GRC in the future, an impairment loss to the write down the assets and liabilities of the discontinued operation to the lower of its carrying amount and fair value was incurred. The fair value of the discontinued operation is based on the sale proceeds of US$19 million (A$25.7 million) less selling costs of AUD equivalent of $3.5 million for brokerage and legal fees, employee separation costs and committed expenses. The fair value does not recognise future receipts from the royalty as mentioned in the sale agreement. (b) Effect of disposal of discontinued operation on the financial position of the Group CONSOLIDATED 30 June 2021 30 June 2020 Plant, property and equipment Mine properties Inventory Trade and other receivables Cash and cash equivalents Assets held for sale Trade and other payables Provisions Employee benefits Lease liabilities Liabilities held for sale Net assets held for sale (c) Cash flows (used in)/ from discontinued operation Net cash used in operating activities Net cash used in investing activities Net cash from financing activities Net cash flow for the year $’000 17,367 960 6,003 519 774 25,623 (1,514) (2,362) (58) (6) (3,940) 21,683 $’000 - - - - - - - - - - - - CONSOLIDATED 30 June 2021 30 June 2020 $’000 (3,975) (53) - (4,028) $’000 - - - - 62 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (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 Directors Mark Williams – Managing Director Non-Executive Directors Kevin Dundo Ian Macpherson Colin Loosemore Steve Tombs Andrea Sutton (appointed 18 November 2020) Other executives Jason Greive – Chief Operating Officer (commenced 30 November 2020) John Tasovac – Chief Financial Officer Brendan Shadlow – General Manager (KMP until commencement of Chief Operating Officer) Compensation of key management personnel A summary of the compensation of key management personnel is as follows: Key management personnel Short term benefits including service and deferred rights Post-employment benefits Long term benefits Share based payments Loans to key management personnel There were no loans to key management personnel during the period. CONSOLIDATED 30 June 2021 30 June 2020 $ $ 2,136,900 143,192 118,927 448,407 2,847,426 2,388,461 124,491 72,472 389,142 2,974,566 Transactions with Key Management Personnel and their related parties The Non-Executive Directors Mr Kevin Dundo, Mr Ian Macpherson and Ms Andrea Sutton invoice through their private companies for Directors fees. They are not separate entities that provide consulting services to the Company. The Non-Executive Directors Mr Colin Loosemore and Mr Steven Tombs are paid Directors fees trough the Company’s payroll. Mr Dundo, Mr Macpherson, Mr Loosemore, Mr Tombs and Ms Sutton 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. 2021 Annual Report 63 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (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 sale commitments Sale commitments: (a) - later than one year but not later than two years - later than two years but not later than five years Contractual expenditure commitments Non-capital expenditure commitments: - not later than one year Tenement expenditure commitments - not later than one year - later than one year but not later than two years CONSOLIDATED 30 June 2021 30 June 2020 $ $ 153,810 39,738 165,859 8,028 - 367,435 151,931 38,693 117,940 8,496 - 317,060 CONSOLIDATED 30 June 2021 30 June 2020 $’000 $’000 83,934 83,934 125,072 284,952 410,124 5,376 5,376 3,310 2,612 5,922 295 295 - - - 5,146 5,146 4,193 586 4,779 (a) Includes committed forward sale contracts for 189,650 ounces amounting to $410 million relating to future sales of gold from King of the Hills. The hedge contracts are fixed at an average price of $2,154 per ounce and settle between October 2022 and June 2025. The are accounted for as own use. 27 CONTINGENT LIABILITIES The consolidated entity had no material contingent liabilities as at the reporting date and as at the end of the year. 64 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (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. Due to the pending sale of the Philippines operation (refer to note 23), the Philippines segment is classified as a discontinued operation. The Australia segment is made up of the Darlot and King of the Hills operations. 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. (i) Segment performance Year ended 30 June 2021 Revenues (c) Segment result before tax Included within segment result: Other income Interest income Finance expenses Exploration costs expensed Depreciation and amortisation Impairment of discontinued operation Care and maintenance costs 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 Care and maintenance costs Australia (a) Philippines (discontinued) $’000 $’000 Other (b) $’000 Total $’000 173,358 173,358 - - - - 173,358 173,358 (4,363) (33,767) (9,903) (48,033) 527 35 (787) (3,217) (23,253) - - 200,332 200,332 - - - - - (26,568) (7,199) - - 165 312 (558) - (240) - - - - 692 347 (1,345) (3,217) (23,493) (26,568) (7,199) 200,332 200,332 33,594 (6,097) (16,325) 11,172 301 20 (780) (4,608) (32,166) - - - - - - (6,097) 750 309 (1,582) - (86) - 1,051 329 (2,362) (4,608) (32,252) (6,097) 2021 Annual Report 65 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 28 SEGMENT INFORMATION (cont.) (ii) Segment Assets As at 30 June 2021 Segment assets Additions to non-current assets: Plant and equipment expenditure Mine properties Intangible assets As at 30 June 2020 Segment assets Additions to non-current assets: Plant and equipment expenditure Mine properties Intangible assets (iii) Segment Liabilities As at 30 June 2021 Segment liabilities As at 30 June 2020 Segment liabilities Australia (a) Philippines (discontinued) $’000 $’000 Other (b) $’000 Total $’000 294,099 25,623 25,763 345,485 105,060 10,050 3 - - - 1,419 - 36 106,479 10,050 39 184,555 60,672 98,168 343,395 31,657 12,900 222 105,688 122,511 553 94 - 3,940 8,945 13 - 11 32,223 12,994 233 4,981 114,609 15,890 147,346 (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. (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 2021 2020 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. 66 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 30 RECONCILIATION OF NET CASH FLOWS FROM OPERATING ACTIVITIES CONSOLIDATED 30 June 2021 30 June 2020 Operating (loss)/profit after income tax Impairment of discontinued operation Amortisation and depreciation Ineffective portion of cashflow hedges Deferred tax Other Share based payment Interest expenses Write down of obsolete inventory Non-cash stockpile movements Unwinding of asset retirement obligation Amortisation of borrowing costs VAT receivable impairment Discount forfeited on payment of deferred consideration Changes in operating assets and liabilities: Decrease/(increase) in inventories Decrease in receivables (Decrease)/increase in payables (Decrease)/increase in income tax payable Increase in provisions Net cash flow from operating activities SHARE-BASED PAYMENT ARRANGEMENTS 31 The following is the movement of performance rights during the period: Movement of Performance Rights year ended 30 June 2021 $’000 (43,245) 26,568 23,493 (3,363) (2,997) 2,632 1,767 921 683 362 179 150 - - 9,588 1,936 (2,930) (1,791) 602 14,555 $’000 4,544 - 32,984 6,353 6,401 1,007 1,451 1,463 - (1,250) 316 334 320 (750) (13,593) 2,921 8,281 227 503 51,512 Forfeited (c) (4,572,389) - - Balance at 30 June 2021 - 10,442,031 7,945,729 Performance rights Series 2021 Series 2022 Series 2023 Series Total Balance at 1 July 2020 15,241,298 10,442,031 - 25,683,329 Granted (a) Vested (b) - - 7,945,729 7,945,729 (10,668,909) - - (10,668,909) (4,572,389) 18,387,760 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 2021 Annual Report 67 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.) SHARE-BASED PAYMENT ARRANGEMENTS (cont.) 31 (a) Performance rights granted during the year ended 30 June 2021: 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 2020 to the vesting date which is 30 June 2023 if the conditions are met. Details of the performance rights granted during the period are summarised below: Performance Rights (2023 series) – Managing Director Number of performance rights Value per right Valuation per tranche Condition criteria Tranche A Tranche B Tranche C Tranche D Total 763,052 $0.188 305,220 $0.195 305,220 $0.195 152,610 $0.195 1,526,102 $143,454 $59,518 $59,518 $29,759 $292,249 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 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. 90% of budgeted gold production by 30 June 2023. 68 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.) SHARE-BASED PAYMENT ARRANGEMENTS (cont.) 31 Performance Rights (2023 series) – Senior Management Number of performance rights Value per right Valuation per tranche Condition criteria Tranche A Tranche B Tranche C Tranche D Total 3,209,815 $0.172 1,283,924 $0.179 1,283,924 $0.179 641,964 $0.179 6,419,627 $552,089 $229,822 $229,822 $114,912 $1,126,645 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 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. 90% of budgeted gold production by 30 June 2023. (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 2021 and were converted to shares subsequent to 30 June 2021. (c) Unmet performance conditions have lapsed as at 30 June 2021, as a result they have been forfeited. (d) Details of Performance rights granted during the year ended 30 June 2020 are summarised below: Performance Rights (2022 series) Number of performance rights Value per right Valuation per tranche Condition criteria Tranche A Tranche B Tranche C Tranche D Total 5,221,017 $0.251 2,088,403 $0.256 2,088,403 $0.256 1,044,208 10,442,031 $0.256 $1,310,475 $534,631 $534,631 $267,317 $2,647,055 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 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 2022. 2021 Annual Report 69 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2020 (cont.) SHARE-BASED PAYMENT ARRANGEMENTS (cont.) 31 Fair Value of Performance Rights The fair value at grant date of Tranche A which has 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 2021: 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 Managing Director (2023 series) Senior Management (2023 series) Performance Rights (2022 series) 18 Nov 2020 $0.26 nil nil 0.105% 14 Dec 2020 $0.245 nil nil 0.105% 20 Nov 2019 $0.30 nil nil 0.71% All tranches: 80% All tranches: 80% All tranches: 70% 3.00 1 July 2020 30 June 2023 2.61 $0.192 1,526,102 $292,249 3.00 1 July 2020 30 June 2023 2.54 $0.176 6,419,627 $1,126,645 3.00 1 July 2019 30 June 2022 2.61 $0.25 10,442,031 $2,647,055 Shares issued, Service and Deferred Rights Deferred rights issued and vested: Jason Greive (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 30 June 2021 30-Jun-21 30-Jun-21 $75,000 412,501 24-Nov-20 30-Jun-21 $26,744 102,861 - - 412,501 102,861 25-Nov-20 25-Nov-20 $26,744 102,861 (102,861) - 24-Nov-20 30-Jun-21 $20,950 80,577 - 80,577 25-Nov-20 25-Nov-20 $20,950 80,577 (80,577) - (a) Service Rights issued under the Red 5 Limited Rights Plan which vest only if the employee remains employed by the company as at 1 July 2021 (being a period of 1 year after the end of the award measurement period). Both Mr Tasovac and Mr Shadlow were employed on that date and the rights vested on 30 June 2021 and automatically exercised into ordinary shares. (b) Deferred Rights issued under the Red 5 Limited Rights Plan which vest immediately upon issue and automatically exercised into restricted shares which are subject to disposal restrictions until 30 June 2022 for Mr Tasovac and Mr Shadlow and 30 June 2023 for Mr Greive. Share based payments expense for the shares issued, service and deferred rights was $0.124 million, (2020: $0.381 million). The fair value is based on observable market share price at the date of grant. 70 2021 Annual Report 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 2021 $’000 9,861 17,415 28,810 2020 $’000 11,797 116,220 257 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. 2021 Annual Report 71 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) FINANCIAL RISK MANAGEMENT (cont.) 32 The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: CONSOLIDATED As at 30 June 2021 Trade and other payables Lease liabilities As at 30 June 2020 Trade and other payables Lease liabilities MARKET RISK Carrying amount $’000 Contractual cash flows $’000 39,787 10,153 49,940 41,921 11,110 53,031 (39,787) (12,715) (52,502) (41,921) (12,715) (54,636) 6 months or less $’000 (39,787) (4,601) (44,388) (41,921) (4,601) (46,522) 6 – 12 months $’000 More than 1 year $’000 - (1,784) (1,784) - (1,784) (1,784) - (6,330) (6,330) - (6,330) (6,330) 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 2021 there were commitments over future sales of gold from the King of the Hills operation (refer to note 26). These are accounted for using own exemption and not regarded as financial instruments. The following table sets out the current hedge position and fair value as at 30 June 2021: Maturity 0-6 months 7-12 months More than 1 year As at 30 June 2021 As at 30 June 2020 Gold price sensitivity - 7 No. of contracts Gold sold - $’000 - $’000 - 67,000 oz (13,652) (15,330) $’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 2021 Derivative financial instruments 30 June 2020 Derivative financial instruments Other Comprehensive Income Carrying amount $’000 10% increase $’000 10% decrease $’000 - - - 33,375 (12,134) 12,134 72 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 32 FINANCIAL RISK MANAGEMENT (cont.) CURRENCY RISK The consolidated entity is exposed to currency risk on investments and purchases that are denominated in a currency other than the respective functional currencies of the subsidiaries within the consolidated entity being Australian Dollar (A$) and Philippine Pesos. The currencies in which these transactions primarily are denominated are United States dollars (US$). The consolidated entity has not entered into any derivative financial instruments to hedge such transactions. The Company’s investments in its subsidiaries are not hedged as those currency positions are considered to be long term in nature. Sensitivity analysis A 10 per cent strengthening of the Australian dollar against the United States dollar on the 30 June 2021 would have increased/ (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis was performed on the same basis for the prior year. 30 June 2021 – US$ 30 June 2020 – US$ CONSOLIDATED Profit or loss A$’000 3 62 A 10 per cent weakening of the Australian dollar against the above currencies at 30 June 2021 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: Cash and cash equivalents Restricted cash Security deposits CONSOLIDATED Carrying amount 2021 $’000 17,415 20,500 8,306 46,221 2020 $’000 103,344 - 195 103,539 2021 Annual Report 73 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) FINANCIAL RISK MANAGEMENT (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 2021 an average of 0.5% interest rate is in place across all cash balances and that all other variables remain constant. Prior to 2020 the analysis assumed an increase or decrease of 100 basis points in interest rates. CONSOLIDATED 30 June 2021 Variable rate instruments 30 June 2020 (restated) Variable rate instruments NET FAIR VALUES Profit or loss 100bp increase 50bp/100bp decrease $’000 462 1,035 $’000 (231) (518) Equity 100bp increase $’000 462 1,035 50bp/100bp decrease $’000 (231) (518) 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 $nil (30 June 2020: liability of $33.375 million). 74 2021 Annual Report Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 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. The subsidiaries subject to the Deed are: \ Opus Resources Pty Ltd \ Darlot Mining Company Pty Ltd \ Greenstone Resources (WA) 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. Greenstone Resources (WA) Pty Ltd became party to the Deed of Cross Guarantee on 30 June 2021. 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 2021 is set out as follows: (a) Statement of Other Comprehensive Income CLOSED GROUP Year ended 30 June 2021 30 June 2020 Sales revenue Cost of sales Gross profit Other income and expenses Other income Administration and other expenses Exploration expenditure Operating (loss)/profit Finance income Finance expenses Net financing expense Profit/(loss) before tax Income tax (expense)/benefit (Loss)/profit 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 profit/(loss) for the year $’000 173,358 (171,050) 2,308 527 (11,471) (3,217) (11,853) 347 (57,960) (57,613) (69,466) 4,788 (64,678) 24,787 (4,748) (44,639) $’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) 2021 Annual Report 75 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 34 DEED OF CROSS GUARANTEE (cont.) (b) Statement of Financial Position CLOSED GROUP Year ended 30 June 2021 30 June 2020 $’000 $’000 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 Deferred tax liability Total non-current liabilities Total liabilities Net assets Equity Contributed equity Other equity Reserves Accumulated losses Total equity 76 2021 Annual Report 17,374 9,858 26,572 53,804 50,490 136,814 100,247 658 - 288,209 342,013 40,953 5,498 - 3,529 - 49,980 - 421 52,926 - 6,624 - 1,533 61,504 111,484 230,529 444,877 930 34,041 (249,319) 230,529 104,681 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 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) 35 PARENT ENTITY DISCLOSURES PARENT ENTITY Year ended 30 June 2021 30 June 2020 $’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 3,595 154,964 158,559 4,246 3,497 7,743 442,626 930 4,587 (297,327) 150,816 (64,678) 20,039 (44,639) - - 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) - - The parent entity did not have any contingent liabilities at 30 June 2021 (2020: $nil). The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of certain subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed are disclosed in Note 34. 2021 Annual Report 77 Notes to the Consolidated FINANCIAL STATEMENTS for the year ended 30 June 2021 (cont.) SUBSEQUENT EVENTS 36 Sale of Siana gold mine (Philippines) In July 2021 the Group entered into a binding agreement with TVI Resource Development (Phils.) Inc. (TVIRD) to divest its interests in Philippine affiliated company Greenstone Resources Corporation (GRC), which holds both the Siana Gold Project (Siana) and the Mapawa Gold Project. TVIRD is the Philippine affiliate of the Canadian-listed TVI Pacific Inc. TVIRD will become the 100% owner of GRC and therefore the divestment includes the process plant and all other infrastructure at Siana. A royalty of 3.25% payable for up to 619,000 ounces of gold will be payable to the Group from first gold from the restart of the Siana processing plant. Upon completion of all closing conditions of the agreement the Group will receive gross proceeds of US$19 million through the repayment of outstanding shareholder advances due from its Philippine-affiliated company, Red 5 Asia Inc, which is a shareholder of GRC. Project finance facility for the KOTH Project Financial close was achieved for the $175 million Project Finance Facility for the KOTH Project on 30 June 2021. Subsequent to year end, the first draw-downs were completed (refer to note 15). Other than the matters discussed above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. 78 2021 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 2021 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 2021. Signed in accordance with a resolution of the Directors. Kevin Dundo Chairman Perth, Western Australia 31 August 2021 2021 Annual Report 79 INDEPENDENT AUDITOR’S REPORT Independent Auditor’s Report To the shareholders of Red 5 Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Red 5 Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including:  giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year ended on that date; and The Financial Report comprises:  Consolidated Statement of financial position as at 30 June 2021  Consolidated Statement of profit or loss and other comprehensive income, Consolidated Statement of changes in equity, and Consolidated Statement of cash flows for the year then ended  Notes including a summary of significant  complying with Australian Accounting Standards and the Corporations Regulations 2001. accounting policies  Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (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; and  Accounting for Siana Gold Project discontinued operation. 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 global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 80 2021 Annual Report INDEPENDENT AUDITOR’S REPORT (cont.) Sales Revenue ($173.358 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 is a key audit matter due to its significance to the consolidated financial statements combined with the incremental audit effort assessing the application of relevant accounting standards. Gold sales revenue from the Group’s Darlot and King of the Hills (KOTH) operations was the most significant item in the consolidated statement of profit or loss ($173.358 million). 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 in accordance with AASB 9 Financial Instruments, in particular, the early termination of the gold forward contracts during the year. The Group engages external experts to prepare hedge documentation and determine hedge ineffectiveness.  The application of the “own-use” exemption for gold forward contracts entered into as part of a new debt facility. Our procedures included:  We considered the appropriateness of the Group’s accounting policies for the recognition of sales revenue and hedge accounting against the requirements of the accounting standards  For gold sales recognised during the year we obtained the sales invoice and compared the quantity sold against 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 to the date of the third party statements;  We compared the Group’s realised cashflow hedging gains and losses to external counterparty statements for gold forward hedges during the year;  For gold forward contracts terminated early and where production designated against the hedge is expected to occur post 30 June 2021, we checked the recognition of the realised gain related to the effective component in the hedge reserve against the requirements of the accounting standard.  For new gold forward contracts where “own-use” exemption was applied, we checked the gold forward contracts, compared to the Group’s gold production forecasts and inquired with finance and operational personnel as to the intention to deliver physical gold in those contracts in accordance with the requirements of the accounting standards to apply the own-use exemption; and  We assessed the scope, objectivity and competence of the Group’s external experts engaged for the preparation of hedge documentation and effectiveness assessment. 2021 Annual Report 81 INDEPENDENT AUDITOR’S REPORT (cont.) Accounting for Siana Gold Project discontinued operation Refer to note 23 to the Financial Report. The key audit matter How the matter was addressed in our audit On 28 July 2021, the Group entered an agreement to sell Greenstone Resources Corporation (GRC), the Group’s subsidiary holding the interest in the Siana Gold Project (Siana) in the Philippines. The agreement is subject to a number of conditions including regulatory approvals. The financial results of Siana, including the impairment, are presented as discontinued operations in the Financial Report. The assets and liabilities of Siana are presented as held for sale, resulting in a classification as current. The divestment is considered a key audit matter due to the:    financial significance of Siana to the Group’s financial statements; judgement applied by the Group in the identification of assets and liabilities as held for sale for the disposal group and the presentation of its results as discontinued operations including the impairment loss on disposal. We focussed on the consistency of application of Group’s judgements; judgement involved by the Group in determining the fair value of the asset and liabilities being disposed of, in particular, the determination of the fair value of the sale consideration, given part of the consideration is a royalty based on future gold production at Siana, increasing estimation uncertainty. Our procedures included:  Reading the relevant transaction documents to understand the key terms and conditions of the divestment;  Checking the consideration for the divestment to the transaction documents and the Group’s underlying financial records;  Assessing the Group’s identification of assets and liabilities disposed of to the relevant clauses of the transaction document and underlying financial records;  Assessing the exclusion of the royalty on future gold production from the sale consideration to determine the fair value of the asset and liabilities being disposed of and the impairment loss, against the requirements of the accounting standards;  Using our tax specialists, evaluating the associated tax implications of the divestment against the requirements of the Philippines tax legislation;  Assessing the Group’s presentation of its discontinued operations including the impairment loss on disposal, against the requirements of the accounting standards;  We recalculated the loss from discontinued operation, including impairment of discontinued operation, against the recorded amount disclosed by the Group. We checked selling costs to underlying documentation such as, invoices and agreements with third parties;  We assessed the disclosures in the financial report using our understanding obtained from our testing and against the requirements of the accounting standards including the restatement of Siana as a held for sale and a discontinued operation. 82 2021 Annual Report INDEPENDENT AUDITOR’S REPORT (cont.) Other Information Other Information is financial and non-financial information in Red 5 Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Directors' Report, and the Corporate Directory. The Chairman’s Review, Managing Director’s Report, Resources and Reserves Statement, Tenement Schedule and Statement of Shareholders are expected to be made available to us after the date of the Auditor's Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will 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. 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. 2021 Annual Report 83 INDEPENDENT AUDITOR’S REPORT (cont.) Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Red 5 Limited for the year ended 30 June 2021, complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 24 to 35 of the Directors’ report for the year ended 30 June 2021 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 31 August 2021 84 2021 Annual Report STATEMENT OF SHAREHOLDERS as at 17 September 2021 DISTRIBUTION OF SHARE AND RIGHTS HOLDERS 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 CLASSES OF SHARES AND VOTING RIGHTS Number of holders Fully paid shares Unlisted rights 699 1,990 1,407 4,054 1,139 9,289 1,245 - - - 13 56 69 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. TWENTY LARGEST HOLDERS OF FULLY PAID SHARES Shareholder 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Ltd JP Morgan Nominees Australia Pty Ltd VBS Exchange Pty Ltd UBS Nominees Pty Ltd VSG Resources Pty Ltd BNP Paribas Nominees Pty Ltd Broadgate Investments Pty Ltd BNP Paribas Noms Pty Ltd CS Third Nominees Pty Ltd Gary B Branch Pty Ltd National Nominees Limited CS Fourth Nominees Pty Ltd 14. MOE Williams Pty Ltd 15. McNeil Nominees Pty Ltd 16. 17. 18. 19. 20. Provedore Holdings Pty Ltd John Colin Loosemore and Susan Loosemore BNP Paribas Nominees Pty Ltd Brazil Farming Pty Ltd BNP Paribas Nominees Pty Ltd Shares 729,354,408 282,724,219 218,590,727 102,268,703 75,145,203 45,917,962 45,222,265 34,187,439 27,013,912 23,535,264 18,500,000 16,144,583 15,313,915 9,884,405 8,888,530 8,690,477 7,697,068 7,267,294 6,900,000 6,832,351 % 30.95 12.00 9.28 4.34 3.19 1.95 1.92 1.45 1.15 1.00 0.78 0.68 0.65 0.42 0.38 0.37 0.32 0.31 0.29 0.29 1,690,078,725 71.72 2021 Annual Report 85 STATEMENT OF SHAREHOLDERS (cont.) SUBSTANTIAL SHAREHOLDERS The following shareholders have lodged a notice of substantial shareholding in the Company. Shareholder Victor Smorgon Partners Pty Ltd Franklin Resources Inc Regal Funds Management Pty Ltd UNQUOTED SECURITIES The following classes of unquoted securities are on issue: Number of shares 239,303,264 233,466,976 147,559,634 Security Number on issue Name of holder Number Performance rights (2022) Performance rights (2023) 10,442,031 7,945,729 - - - - Holders of greater than 20% of each class of security % 10.16 9.91 6.26 % - - CORPORATE GOVERNANCE STATEMENT The Company’s 2021 corporate governance statement can be viewed at https://www.red5limited.com/site/about-red5/corporate- governance CORPORATE DIRECTORY BOARD OF DIRECTORS SHARE REGISTRY Kevin Dundo (Chairman) Mark Williams (Managing Director) Ian Macpherson (Non-Executive Director) Colin Loosemore (Non-Executive Director) Steven Tombs (Non-Executive Director) Andrea Sutton (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 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 BANKERS Hongkong and Shanghai Banking Corporation Limited Macquarie Bank Limited BNP Paribas AUDITORS KPMG SOLICITORS HopgoodGanim SyCip Salazar Hernandez & Gatmaitan (Philippines) STOCK EXCHANGE LISTING Australian Securities Exchange Trading code: RED 86 2021 Annual Report ABN 73 068 647 610 www.red5limited.com 

Continue reading text version or see original annual report in PDF format above