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.
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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
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s
a
C
$
d
e
r
r
e
f
e
D
)
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(
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
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P
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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
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c
n
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w
o
l
l
A
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s
e
s
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e
p
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E
$
s
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o
B
h
s
a
C
$
)
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(
s
t
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g
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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