Regis Resources Annual Report 2016

Plain-text annual report

20 16 ANNUAL REPORT REPORT TO SHAREHOLDERS FOR THE YEAR ENDED 30 JUNE CORPORATE INFORMATION ABN 28 009 174 761 Directors Mark Clark Paul Thomas Mark Okeby Ross Kestel James Mactier (Executive Chairman) (Executive Director) (Deputy Chairman/Lead Independent Non-Executive Director) (Independent Non-Executive Director) (Independent Non-Executive Director) Company Secretary Kim Massey Registered Office & Principal Place of Business Level 1 1 Alvan Street SUBIACO WA 6008 Share Register Computershare Investor Services Pty Limited GPO Box D182 PERTH WA 6840 Regis Resources Limited shares are listed on the Australian Securities Exchange (ASX). Code: RRL Bankers Macquarie Bank Limited Level 4, Bishops See 235 St Georges Terrace PERTH WA 6000 Auditors KPMG 235 St Georges Terrace PERTH WA 6000 REGIS RESOURCES ANNUAL REPORT 2016 1 CONTENTS Highlights Chairman's Report Corporate Duketon Gold Project Gold Exploration Gold Reserves & Resources Directors' Report Remuneration Report Financial Statements Independent Auditor's Report Additional ASX Information 3 4 6 8 12 19 20 30 42 86 88 DIRECTORS’ REPORT2 REGIS RESOURCES ANNUAL REPORT 2016 GARDEN WELL AT SUNRISE // Photo by Rob Wilson HIGHLIGHTS 2016 Total dividends paid out for FY2016 of 13 cents per share represent 13% of revenue and 58% of net profit after tax. Since the commencement of dividend payments in 2013, Regis has paid a total of $170 million in fully franked dividends. ‘‘‘‘REGIS RESOURCES ANNUAL REPORT 2016 3 DUKETON OPERATIONS Strong operational performance at Duketon in FY2016 with 305,084 ounces of gold produced at AISC of $927 per ounce. Strong operating cashflow from Duketon of $233.4 million. FY2017 production guidance increased to 300,000- 330,000 ounces of gold at AISC $980-1,050 per ounce. EXPLORATION Outstanding high grade exploration results at Tooheys Well during the year confirm a new gold project at the Duketon operations with a maiden resource of 547,000 ounces released in July 2016. Maiden reserves released for the Gloster and Baneygo Gold deposits contribute to an increase in Ore Reserves during the period of 445,000 ounces net of depletion. Exploration programmes continue to test the potential of further discoveries along the Tooheys Well to Garden Well corridor and the Rosemont to Baneygo trend. Drilling commenced on the Duketon Gold Exploration Joint Venture. CORPORATE NET PROFIT AFTER TAX UP 29% $111.8 MILLION for the financial year. REVENUE UP 8% $502 MILLION EBITDA UP 29% $234.4 MILLION REPAID BANK DEBT OF $20 MILLION during the financial year. DIVIDENDS DECLARED UP 117% 13c PER SHARE for the financial year. ‘‘4 REGIS RESOURCES ANNUAL REPORT 2016 CHAIRMAN’S REPORT Dear Shareholder, It is my pleasure to write to you about the achievements of Regis in 2016. The Company took advantage of the strong gold price environment to deliver results that have consolidated Regis’ position as one of Australia’s leading gold mining companies. The most recent example of this organic growth strategy is at the Tooheys Well gold deposit located only 2.5 kilometres from the Garden Well processing plant. Excellent results from intensive drilling at the project during the year have culminated in a maiden resource of 547,000 ounces of gold. With Tooheys Well located so close to the Garden Well processing plant, Regis is already working on this project with a view to delivering a substantial high grade mill feed satellite project for Garden Well. Gold production for 2017 is expected to be in the range of 300,000 - 330,000 ounces at an all in sustaining cost of $980 - $1,050 per ounce. This should provide an ideal platform from which we can continue to grow the Company. As always, we will continue to strive to create shareholder value as we grow the business. I would like to take this opportunity to thank the three non- executive directors who retired from the Regis board during the year. Nick Giorgetta, Frank Fergusson and Glyn Evans all provided invaluable service to the Company and helped build the foundation for the success of Regis for a long time to come. I wish them all long and happy retirements. Finally I would like to thank all Regis employees for their hard work and commitment over the last 12 months. It is through their relentless efforts that we have achieved the results I have written about above and created a culture that will see us continue to succeed in to the future. Yours sincerely Mark Clark Executive Chairman Some of the highlights of a very successful year include: Strong operational performance at Duketon with 305,084 ounces of gold produced at all in sustaining costs of $927 per ounce. Net profit after tax up 29% to $111.8 million and EBITDA up 29% to $234.4 million. A fully franked final dividend of 9 cents per share declared in July 2016 taking full year dividends to 13 cents per share. Exploration efforts at Duketon saw a 445,000 ounce (22%) increase in Ore Reserves net of mining depletion during the year. Outstanding high grade drilling results at Tooheys Well during the year confirm a new gold project at Duketon with a maiden resource of 547,000 ounces realised in July 2016. It was pleasing that the performance of the operations at Duketon saw gold production for the year exceed the guidance range of 275,000-300,000 ounces and operating costs were below the cost guidance range of $950 - $1,050 per ounce. The industry is experiencing a robust gold price and strong investor sentiment but our industry can be cyclical, so we have continued to focus on delivering operational results on a consistent basis as this is within our control. The excellent operating results at Duketon have placed the Company in a strong financial position. Regis generated a net operating cash flow of $204 million for 2016 and at the end of the financial year had cash and bullion holdings of $122.3 million and no bank debt. This strong cash flow saw continuation of Regis’ commitment to dividends with the payment of 13 cents per share. Since Regis’ maiden dividend in 2013, the Company has paid a total of $170 million (34cps) in fully franked dividends making Regis an Australian gold industry leader on dividend payment metrics. With gold production at Duketon forecast to grow over the next 3 years, the board expects that this commitment to dividends will continue. During the year the Company reported maiden reserves at the Gloster and Baneygo gold projects, adding 361,000 ounces to Regis’ ore reserves. This highlights the remarkable organic growth potential that aggressive exploration of the Duketon greenstone belts, controlled by Regis, can deliver. With Regis’ 10 million tonne per annum milling capacity in the district, these satellite deposits, and any further discoveries within trucking distance of the three processing plants, should provide significant value for the Company. REGIS RESOURCES ANNUAL REPORT 2016 5 Net profit after tax up 29% to $111.8 million and EBITDA up 29% to $234.4 million. ‘‘‘‘s n o i l l i M $ 600 500 400 300 200 100 0 600 500 120 400 100 300 s n o i l l i M $ s n o i l l i 20 0 120 100 300 80 s n o i l l i 200 60 40 100 20 0 0 s n o i l l i M $ Revenue 465 502 372 2014 Revenue 2015 2016 465 Net Profit After Tax1 372 502 112 87 CORPORATE Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the previous corresponding period. This strong result was on the back of an 8% increase in revenue to $502.0 million driven by an 8% higher delivered gold price. Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end CORPORATE of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of previous corresponding period. This strong result was on the back of an 8% increase in revenue to spot deferred contracts with a weighted average price of A$1,581 per ounce. The following graphs illustrate the strong performance of the Company across all profit measures. REGIS RESOURCES ANNUAL REPORT 2016 6 Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 Revenue ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of 465 '"(&)*+,(&-."*&/012& CORPORATE ))#$ 600 500 1"$ 502 The following graphs illustrate the strong performance of the Company across all profit measures. M $ ''$ s n o i l l i 400 300 372 Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the previous corresponding period. This strong result was on the back of an 8% increase in revenue to $502.0 million driven by an 8% higher delivered gold price. 80 200 200 Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of spot deferred contracts with a weighted average price of A$1,581 per ounce. 100 M $ 40 0 60 100 55 2014 2015 2016 The following graphs illustrate the strong performance of the Company across all profit measures. 0 '"(&)*+,(&-."*&/012& #()'$ #()&$ 2014 ))#$ 30*$7$892&:&67#7;"$;&)"*&<=0*"& 600 1"$ Net Profit After Tax1 2015 2016 Revenue 502 112 465 87 s n o i l l s i M n o $ i l l i M $ &$ 120 500 100 400 80 300 60 200 40 100 20 0 ##2%$ 372 )!$ 55 #()&$ #()&$ 2014 2014 #()'$ #()'$ 9,>,K=/K$G=C$0HBC=$ 0 M $ 2015 2015 2016 2016 2014 2015 Net Profit After Tax1 2016 112 234 46.7% EBITDA1 87 181 39.0% 2015 2016 2015 2016 EBITDA Margin (%) 50% 45% 40% 35% ) % ( e u n e v e R / A D T I B E 55 141 37.9% 2014 2014 EBITDA CORPORATE Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the $502.0 million driven by an 8% higher delivered gold price. previous corresponding period. This strong result was on the back of an 8% increase in revenue to $502.0 million driven by an 8% higher delivered gold price. Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per !"#"$%"& ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of / / spot deferred contracts with a weighted average price of A$1,581 per ounce. 0 0 $ $ !"#$ CORPORATE %&'$ '(#$ Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the spot deferred contracts with a weighted average price of A$1,581 per ounce. !(($ &($ , - , - - previous corresponding period. This strong result was on the back of an 8% increase in revenue to * * $502.0 million driven by an 8% higher delivered gold price. The following graphs illustrate the strong performance of the Company across all profit measures. )(($ . , + $ . , - + $ )#($ )(($ 1($ %($ #($ ($ Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end '(#$ !"#"$%"& !"#"$%"& #()%$ #()'$ #()&$ '"(&)*+,(&-."*&/012& 345/6-2& %&'$ #()%$ of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 '(#$ 0 $ $ $ )#($ &(($ %&'$ !"#$ ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of . . B 0 0 A - , , $ $ $ $ !"#$ )1)$ ''$ )"2%$ #!%$ %&2"4$ spot deferred contracts with a weighted average price of A$1,581 per ounce. ''$ + . . - - , - , )(($ 1($ &($ / . )%)$ , + $ * !"234$ %($ !32(4$ &(($ '(($ %(($ #(($ ($ !(($ #(($ )(($ ($ 0 / - - , $ * &(($ '(($ %(($ 0 !(($ / , - #(($ - , + )(($ * $ ($ The following graphs illustrate the strong performance of the Company across all profit measures. < E = )#($ ))#$ !($ )(($ / = C - , + $ * H 0 $ #($ C = G $ 0 F / )($ 1($ &($ %($ #($ ($ ($ #()&$ 1"$ '(4$ %'4$ %(4$ !'4$ 4 @ $ = ? / = > = ; : 9 8 7 6 5 ))2($ ($ #()%$ #()%$ 5IJ$ / - , + $ * '(($ %(($ !(($ #(($ )(($ ($ #()%$ #()'$ #()&$ !"#"$%"& 345/6-2& %&'$ )1)$ !"234$ !32(4$ '(#$ #!%$ $ !(($ '(4$ %&2"4$ #(($ %'4$ 0 / . , - - , + $ * )(($ %(4$ !'4$ )%)$ !(($ !"#$ #(($ )(($ ($ $ 0 / . , - - , + $ * #()%$ #()%$ #($ ($ 56789:$ #()'$ #()'$ #()&$ #()&$ #()%$ 56789:$+BCD,/$@4A$ #()'$ '"(&)*+,(&-."*&/012& 345/6-2& 30*$7$892&:&67#7;"$;&)"*&<=0*"& !($ ))#$ $ !($ )#($ $ = C )(($ B H 0 $ C #($ 1($ = G &($ $ !"234$ 0 F )($ $ 0 )%)$ / $ A 4 @ $ = ? / = . , - - , + = E #()%$ 56789:$ #($ ($ ($ < ; : 9 8 7 6 5 )1)$ ''$ ))2($ !32(4$ #!%$ %&2"4$ )"2%$ '(4$ 1"$ %'4$ %(4$ )"2%$ &$ $ A 4 @ $ = ? / = > = < ; : 9 8 7 5 = C B ##2%$ H 0 #($ $ C = G $ 0 F / = E )($ ($ #()&$ #()&$ )!$ ))2($ ($ #()%$ #()'$ #()&$ #()'$ ($ #()&$ million, up 44% on the previous year. !'4$ %($ ($ * / = > $ #()%$ 56789:$ #()'$ 56789:$+BCD,/$@4A$ #()&$ #()%$ 56789:$+BCD,/$@4A$ 5IJ$ 9,>,K=/K$G=C$0HBC=$ #()'$ 6 #()%$ #()'$ #()%$ 5IJ$ #()'$ 345/6-2& 30*$7$892&:&67#7;"$;&)"*&<=0*"& EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher $ ##2%$ Australian dollar gold price but also from operational efficiencies and a commitment to cost control. B A $ )"2%$ This strong operating performance at Duketon generated net cash from operating activities of $204 = C $ $ )!$ )%)$ )1)$ #!%$ %&2"4$ '(4$ %'4$ )(($ million, up 44% on the previous year. %(4$ !32(4$ !"234$ million, up 44% on the previous year. = 0 F )($ &$ ))2($ As a result of this strong financial performance, the Company’s cash and bullion holdings have : #()'$ #()&$ #()%$ ($ !($ = C H 0 #($ = G $ / = E ($ 4 @ ? / > = < ; 9 !'4$ $ 0 / . , - - , + $ * &(($ '(($ %(($ !(($ #(($ )(($ ($ !(($ #(($ ($ $ 0 / . , - - , + $ * 1 FY2014 NPAT, EBITDA and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge 30*$7$892&:&67#7;"$;&)"*&<=0*"& Net Profit After Tax1 EBITDA1 EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher Australian dollar gold price but also from operational efficiencies and a commitment to cost control. 87 This strong operating performance at Duketon generated net cash from operating activities of $204 ##2%$ )!$ 80 200 300 100 181 120 112 234 46.7% &$ i l l i s n s o n o M M $ $ i l l i 60 100 40 141 55 37.9% 39.0% As a result of this strong financial performance, the Company’s cash and bullion holdings have increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from 2015 2014 #()&$ EBITDA 2014 2015 0 20 9,>,K=/K$G=C$0HBC=$ 0 2016 EBITDA Margin (%) 2016 EBITDA1 Earnings1 & Dividend Per Share 50% 45% 40% 35% ) % ( e u n e v e R / A D T I B E 300 20 200 10 100 0 0 e s r a n h o S i l l r i e M P $ s t n e C 141 11.0 37.9% 0 2014 2014 17.4 181 6 39.0% 2015 2015 22.4 234 46.7% 13 2016 2016 50% 45% 40% 35% ) % ( e u n e v e R / A D T I B E EBITDA EPS EBITDA Margin (%) Dividend Per Share 1 FY2014 NPAT, EBITDA and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge the previous year even after the repayment of debt and dividends. 1 FY2014 NPAT, EBITDA and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge 1 FY2014 NPAT, EBITDA and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge The Company paid a total of $50 million in fully franked dividends during the year and subsequent EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher to the end of the financial year declared a 9 cents per share fully franked final dividend. The final Australian dollar gold price but also from operational efficiencies and a commitment to cost control. This strong operating performance at Duketon generated net cash from operating activities of $204 181 e r a h S 17.4 11.0 20 300 r e P Earnings1 & Dividend Per Share EBITDA1 22.4 Earnings1 & Dividend Per Share s n o 200 10 s t n e C i l l i M $ 100 0 141 6 0 50% 45% 40% 35% ) % ( e u n e v e R / A D T I B E e r a h S r e P s t n e C 20 10 0 234 13 46.7% 2016 2016 17.4 6 11.0 0 22.4 13 37.9% 2014 39.0% 2015 As a result of this strong financial performance, the Company’s cash and bullion holdings have increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from 8 7 56789:$ 56789:$+BCD,/$@4A$ increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from 9,>,K=/K$G=C$0HBC=$ 5IJ$ 6 EBITDA EBITDA Margin (%) #()'$ #()&$ #()%$ 2014 2015 EPS Dividend Per Share the previous year even after the repayment of debt and dividends. 5 0 1 FY2014 NPAT, EBITDA and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge The Company paid a total of $50 million in fully franked dividends during the year and subsequent the previous year even after the repayment of debt and dividends. EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher to the end of the financial year declared a 9 cents per share fully franked final dividend. The final The Company paid a total of $50 million in fully franked dividends during the year and subsequent to the end of the financial year declared a 9 cents per share fully franked final dividend. The final Australian dollar gold price but also from operational efficiencies and a commitment to cost control. 17.4 20 e r Earnings1 & Dividend Per Share 2014 2015 2016 EPS Dividend Per Share This strong operating performance at Duketon generated net cash from operating activities of $204 million, up 44% on the previous year. As a result of this strong financial performance, the Company’s cash and bullion holdings have increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from the previous year even after the repayment of debt and dividends. The Company paid a total of $50 million in fully franked dividends during the year and subsequent to the end of the financial year declared a 9 cents per share fully franked final dividend. The final 22.4 13 6 a h S r e P s t n e C 10 0 11.0 0 2014 2015 2016 EPS Dividend Per Share CORPORATE Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the previous corresponding period. This strong result was on the back of an 8% increase in revenue to $502.0 million driven by an 8% higher delivered gold price. Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end CORPORATE of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of previous corresponding period. This strong result was on the back of an 8% increase in revenue to CORPORATE Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the spot deferred contracts with a weighted average price of A$1,581 per ounce. $502.0 million driven by an 8% higher delivered gold price. previous corresponding period. This strong result was on the back of an 8% increase in revenue to $502.0 million driven by an 8% higher delivered gold price. The following graphs illustrate the strong performance of the Company across all profit measures. Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per CORPORATE Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 '"(&)*+,(&-."*&/012& !"#"$%"& of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of ))#$ ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the spot deferred contracts with a weighted average price of A$1,581 per ounce. spot deferred contracts with a weighted average price of A$1,581 per ounce. previous corresponding period. This strong result was on the back of an 8% increase in revenue to )(($ !"#$ %(($ '(($ 1"$ 1($ ''$ . . / / 0 0 - - , - , $ $ %&'$ $502.0 million driven by an 8% higher delivered gold price. The following graphs illustrate the strong performance of the Company across all profit measures. #(($ %($ * * $ $ + - , + The following graphs illustrate the strong performance of the Company across all profit measures. !(($ &($ , '(#$ )#($ Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per ($ ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end '"(&)*+,(&-."*&/012& !"#"$%"& #()%$ of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 '(#$ #()%$ )#($ !"#"$%"& #()'$ #()&$ '"(&)*+,(&-."*&/012& #()'$ #()&$ ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of %&'$ 0 0 $ $ 30*$7$892&:&67#7;"$;&)"*&<=0*"& )(($ 1"$ ))#$ spot deferred contracts with a weighted average price of A$1,581 per ounce. . / = 0 C , !"#$ #($ ))#$ The following graphs illustrate the strong performance of the Company across all profit measures. #(($ %($ G ? * , - - , $ $ !($ $ B H 0 #($ $ C = 0 F / = E )($ / . , - - , + $ * ))2($ 1($ &($ %($ #($ ($ ($ ''$ )"2%$ &$ ##2%$ )!$ &(($ )(($ ($ '(#$ / !(($ - - , + $ #(($ * )(($ ($ $ 0 / . + $ * #()%$ #()'$ !"#"$%"& #()&$ %&'$ 1 FY2014 NPAT, EBITDA and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge 30*$7$892&:&67#7;"$;&)"*&<=0*"& !($ #()&$ #()'$ 9 '"(&)*+,(&-."*&/012& 8 7 ($ #()&$ #()%$ #()'$ #()&$ #()%$ 5IJ$ #()'$ 9,>,K=/K$G=C$0HBC=$ #()&$ ))#$ 30*$7$892&:&67#7;"$;&)"*&<=0*"& ##2%$ %&2"4$ EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher 0 0 0 @ @ - - , $ $ ''$ #($ )%)$ %&2"4$ Australian dollar gold price but also from operational efficiencies and a commitment to cost control. G ? G ? - - , $ ))2($ )!$ This strong operating performance at Duketon generated net cash from operating activities of $204 / / > > F F $ &$ )"2%$ ($ #()'$ #()%$ #()&$ #()'$ #()%$ 56789:$+BCD,/$@4A$ 345/6-2& )#($ $ 0 / . , ))2($ + * !"234$ )(($ 1($ )1)$ &($ %($ #($ #!%$ )"2%$ !32(4$ &$ #()&$ #()%$ #()'$ 1"$ ##2%$ '(4$ %'4$ %(4$ !'4$ $ A 4 $ = / = = < ; : 9 )!$ C = $ = C B H #($ $ 0 )($ = E ($ '(4$ $ $ A 4 %'4$ / $ . = %(4$ / = , + !'4$ * = < )($ ($ = E ($ : 9 8 7 6 #()&$ #()'$ #()&$ million, up 44% on the previous year. ($ ; #()%$ #()'$ ($ ($ 56789:$ #()%$ 56789:$+BCD,/$@4A$ #()'$ As a result of this strong financial performance, the Company’s cash and bullion holdings have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and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge 345/6-2& increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from 1 FY2014 NPAT, EBITDA and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge 30*$7$892&:&67#7;"$;&)"*&<=0*"& the previous year even after the repayment of debt and dividends. !($ $ !(($ EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher Australian dollar gold price but also from operational efficiencies and a commitment to cost control. EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher The Company paid a total of $50 million in fully franked dividends during the year and subsequent This strong operating performance at Duketon generated net cash from operating activities of $204 Australian dollar gold price but also from operational efficiencies and a commitment to cost control. to the end of the financial year declared a 9 cents per share fully franked final dividend. The final %&2"4$ )"2%$ ))2($ %'4$ '(4$ #(($ )1)$ )%)$ )!$ #($ 4 . / H G ? = = B 0 0 C C @ A - , - , $ $ $ $ #!%$ This strong operating performance at Duketon generated net cash from operating activities of $204 = 0 F !32(4$ &$ million, up 44% on the previous year. $ !"234$ + * )(($ ($ #()%$ #()'$ #()&$ million, up 44% on the previous year. < E = ($ As a result of this strong financial performance, the Company’s cash and bullion holdings have 8 increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from As a result of this strong financial performance, the Company’s cash and bullion holdings have 9,>,K=/K$G=C$0HBC=$ 56789:$+BCD,/$@4A$ 56789:$ 5IJ$ 6 5 #()'$ #()&$ #()%$ the previous year even after the repayment of debt and dividends. increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from 1 FY2014 NPAT, EBITDA and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge the previous year even after the repayment of debt and dividends. %(4$ !'4$ / > = ; : 9 7 $ = )($ / ($ ##2%$ The Company paid a total of $50 million in fully franked dividends during the year and subsequent EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher to the end of the financial year declared a 9 cents per share fully franked final dividend. The final The Company paid a total of $50 million in fully franked dividends during the year and subsequent Australian dollar gold price but also from operational efficiencies and a commitment to cost control. to the end of the financial year declared a 9 cents per share fully franked final dividend. The final This strong operating performance at Duketon generated net cash from operating activities of $204 million, up 44% on the previous year. As a result of this strong financial performance, the Company’s cash and bullion holdings have increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from the previous year even after the repayment of debt and dividends. The Company paid a total of $50 million in fully franked dividends during the year and subsequent to the end of the financial year declared a 9 cents per share fully franked final dividend. The final CORPORATE Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the previous corresponding period. This strong result was on the back of an 8% increase in revenue to $502.0 million driven by an 8% higher delivered gold price. Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 Revenue 465 502 ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of 372 spot deferred contracts with a weighted average price of A$1,581 per ounce. The following graphs illustrate the strong performance of the Company across all profit measures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and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher Australian dollar gold price but also from operational efficiencies and a commitment to cost control. This strong operating performance at Duketon generated net cash from operating activities of $204 million, up 44% on the previous year. As a result of this strong financial performance, the Company’s cash and bullion holdings have increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from the previous year even after the repayment of debt and dividends. The Company paid a total of $50 million in fully franked dividends during the year and subsequent to the end of the financial year declared a 9 cents per share fully franked final dividend. The final s n o i l l i M $ s n o i l l i M $ 600 500 400 300 200 100 0 120 100 80 60 40 20 0 s n o i l l i M $ 300 200 100 0 e r a h S r e P s t n e C 20 10 0 Net Profit After Tax1 112 87 55 141 37.9% 2014 2014 2015 2016 EBITDA1 181 39.0% 234 46.7% 50% 45% 40% 35% ) % ( e u n e v e R / A D T I B E 2015 2016 EBITDA EBITDA Margin (%) Earnings1 & Dividend Per Share 22.4 13 17.4 6 11.0 0 2014 2015 2016 EPS Dividend Per Share CORPORATE Regis reported a profit after tax of $111.8 million for the 2016 financial year, up 29% on the previous corresponding period. This strong result was on the back of an 8% increase in revenue to $502.0 million driven by an 8% higher delivered gold price. REGIS RESOURCES ANNUAL REPORT 2016 7 EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher Australian dollar gold price but also from operational efficiencies and a commitment to cost control. This strong operating performance at Duketon generated net cash from operating activities of $204 million, up 44% on the previous year. As a result of this strong financial performance, the Company’s cash and bullion holdings have increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from the previous year even after the repayment of debt and dividends. The Company paid a total of $50 million in fully franked dividends during the year and subsequent to the end of the financial year declared a 9 cents per share fully franked final dividend. The final dividend was declared after consideration of the strong cashflow and profitability from the Company’s Duketon operations in FY2016. The full year dividend of 9 cents per share coupled with the 4 cents per share interim dividend paid in February 2016, took the full year pay out to 13 cents per share. This represents a 13% payout of FY2016 revenue and 58% of net profit after tax. Since the commencement of dividend payments in 2013, the Company has paid a total of $170 million in fully franked dividends (34cps). Regis sold a total of 306,296 ounces of gold during the year at an average price of A$1,600 per ounce. The gold was delivered into a mix of spot prices and forward hedging contracts. At the end of the financial year the Company had a total hedging position of 433,770 ounces, being 80,000 ounces of flat forward contracts with a delivery price of A$1,454 per ounce and 353,777 ounces of spot deferred contracts with a weighted average price of A$1,581 per ounce. 2014 2015 2016 In June 2016 the Company repaid the $20 million debt outstanding under the Macquarie Bank financing facility. The early repayment of the loan means Regis is debt free, other than normal trade creditors and leasing arrangements. The following chart details the movement in the Company’s cash reserves over the financial year: The following graphs illustrate the strong performance of the Company across all profit measures. s n o i l l i M $ 350 300 250 200 150 100 50 0 64.5 June 2015 1 Operating cash flow differs from the statutory Statement of Cash Flow “net cash from operating activities” as it is quoted under the Appendix 5B Other ($ Exploration June 2016 Investments Other Capex )(($ Income Tax #()%$ Debt Repayment Mine Development Operations Dividends In June 2016 the Company repaid the $20 million debt outstanding under the Macquarie Bank financing facility. The early repayment of the loan means Regis is debt free, other than normal trade creditors and leasing arrangements. Cash & Gold on Hand Movements - FY 2016 233.41 (50.0) (35.2) (20.0) (18.1) (21.3) &(($ '(($ %(($ (1.8) !(($ #(($ $ 0 / . (22.9) , - - , + * $ !"#$ 122.3 (5.2) !"#"$%"& '"(&)*+,(&-."*&/012& %&'$ '(#$ ))#$ 1"$ $ 0 / . , - - , + $ * )#($ )(($ 1($ &($ %($ #($ ($ ''$ #()'$ #()&$ #()%$ #()'$ #()&$ !($ #($ )($ $ = C B H 0 $ C = G $ 0 F / = E ($ '(4$ %'4$ %(4$ !'4$ $ A 4 @ $ = ? / = > = < ; : 9 8 7 6 5 ))2($ ($ ##2%$ )!$ )"2%$ &$ classification protocol and includes movement in gold bullion on hand The following chart details the movement in the Company’s cash reserves over the financial year: 345/6-2& 30*$7$892&:&67#7;"$;&)"*&<=0*"& 1 !(($ #(($ )(($ ($ $ 0 / . , - - , + * $ )%)$ )1)$ #!%$ %&2"4$ !"234$ !32(4$ #()%$ #()'$ #()&$ 56789:$ 56789:$+BCD,/$@4A$ #()%$ 5IJ$ #()'$ 9,>,K=/K$G=C$0HBC=$ #()&$ 1 FY2014 NPAT, EBITDA and EPS adjusted to underlying result by excluding $202.7m after tax impairment charge EBITDA for the year increased by 29% to $234.4 million benefitting not only from the higher Australian dollar gold price but also from operational efficiencies and a commitment to cost control. This strong operating performance at Duketon generated net cash from operating activities of $204 million, up 44% on the previous year. As a result of this strong financial performance, the Company’s cash and bullion holdings have increased significantly. Cash and bullion at 30 June 2016 was $122.3 million, up $57.8 million from the previous year even after the repayment of debt and dividends. The Company paid a total of $50 million in fully franked dividends during the year and subsequent to the end of the financial year declared a 9 cents per share fully franked final dividend. The final 8 REGIS RESOURCES ANNUAL REPORT 2016 DUKETON GOLD PROJECT The Duketon Gold Project is located in the North Eastern Goldfields of Western Australia approximately 130 kilometres north of Laverton. The project area consists of two operating centres being the Duketon North Operations (“DNO”) comprising the Moolart Well Gold Mine and surrounding satellite deposits including the Gloster Gold Mine; and the Duketon South Operations (“DSO”) comprising the Garden Well and Rosemont Gold Mines and surrounding satellite deposits. The Duketon Project has in excess of 3,500 square kilometres of exploration and mining tenure. In 2016 the Duketon Project produced 305,084 ounces of gold which exceeded the upper end of FY2016 guidance of 275,000- 305,000 ounces. Cost efficiencies across the Duketon Project contributed to a 7% fall in all in sustaining costs which at $927 per ounce were below the lower end of annual cost guidance. In 2016 the Duketon Project produced 305,084 ounces of gold which exceeded the upper end of FY2016 guidance of 275,000-305,000 ounces. Cost efficiencies across the Duketon Project contributed to a 7% fall in all in sustaining costs which at $927 per ounce were below the lower end of annual cost guidance. Operating results for the entire Duketon Project are summarised below: Ore mined Waste mined Stripping ratio Ore mined Ore milled Head grade Recovery Gold production Cash cost Cash cost inc royalty All in Sustaining Cost Mbcm Mbcm w:o Mt g/t % koz’s A$/oz A$/oz A$/oz 2016 2015 4.63 22.62 4.89 10.79 10.25 1.03 90 305 773 845 927 4.65 23.70 5.10 11.07 9.84 1.11 88 310 826 891 994 Operating results for the entire Duketon Project are summarised below: Ore mined Waste mined Stripping ratio Ore mined Ore milled Head grade Recovery Gold production Cash cost Cash cost inc royalty All in Sustaining Cost REGIS RESOURCES ANNUAL REPORT 2016 9 DUKETON GOLD PROJECT Mbcm Mbcm w:o Mt g/t % koz’s A$/oz A$/oz A$/oz 2016 4.63 22.62 4.89 10.79 10.25 1.03 90 305 773 845 927 2015 4.65 23.70 5.10 11.07 9.84 1.11 88 310 826 891 994 Regis is expecting operations in FY2017 to build on the strong performance of the Duketon project in FY2016. Gold production and operating costs for FY2017 are expected to be in the following ranges: Gold production: 300,000 – 330,000 ounces Cash costs, including royalties: $840 - 910 per ounce All in Sustaining Cost $980 – 1,050 per ounce Forecast 2017 production growth is the result of the positive grade impact from new satellite projects Gloster and Erlistoun and the optimisation to steady state of the open pit operations at Moolart Well, Garden Well and Rosemont. Production growth is targeted to continue over the next three years as shown below. DUKETON GOLD PRODUCTION 370,000 2019 TARGET 340,000 350,000 2018 TARGET 320,000 330,000 2017 GUIDANCE 300,000 2016 ACTUAL 305,084 ) S E C N U O ( N O I T C U D O R P D L O G 380,000 360,000 340,000 320,000 300,000 280,000 260,000 240,000 220,000 200,000 2016 2017 2018 2019 Note: Midpoint of cumulative 2017-2019 production guidance/target range is based on 98% Probable Ore Reserves and 2% Inferred Mineral Resources. 10 REGIS RESOURCES ANNUAL REPORT 2016 DUKETON NORTH OPERATIONS Duketon North Operations (“DNO”) comprises the Moolart Well, Gloster, Dogbolter, Petra and Anchor pits with all ore processed through the Moolart Well processing plant. Operating results for the year to 30 June 2016 were as follows: Ore mined Waste mined Stripping ratio Ore mined Ore milled Head grade Recovery Gold production Cash cost Cash cost inc royalty All in Sustaining Cost Mbcm Mbcm w:o Mt Mt g/t % koz’s A$/oz A$/oz A$/oz 2016 1.49 5.77 3.9 2.98 2.92 0.90 91 76 706 778 934 2015 1.35 4.37 3.2 2.91 2.91 1.14 92 99 622 686 N/A During the year DNO produced 76,139 ounces at a cash cost of $778 per ounce and an all in sustaining cost of $934 per ounce. The ore feed for DNO during FY2016 was sourced entirely from the Moolart Well open pit. Production declined by 23% from the previous year as a result of a 21% decline in the processed head grade at the operation. The lower head grade was expected and reflective of the ore scheduled to be mined during the year. Production at DNO in the 2017 financial year is expected to increase with the inclusion of higher grade ore from the Gloster deposit. Mining will commence at Gloster in the September 2016 quarter with first gold expected to be produced in the December 2016 quarter. SUNSET FROM THE TOP OF MOOLART WELL TANKS REGIS RESOURCES ANNUAL REPORT 2016 11 DUKETON SOUTH OPERATIONS The Duketon South Operations (“DSO”) includes the Garden Well, Rosemont, Erlistoun, Baneygo and other satellite projects in proximity to the Garden Well processing plant. Operating results for the year to 30 June 2016 were as follows: Ore mined Waste mined Stripping ratio Ore mined Ore milled Head grade Recovery Gold production Cash cost Cash cost inc royalty All in Sustaining Cost Mbcm Mbcm w:o Mt Mt g/t % koz’s A$/oz A$/oz A$/oz 2016 3.15 16.85 5.4 7.81 7.34 1.08 90 229 795 867 924 2015 3.30 19.32 5.9 8.16 6.93 1.10 86 211 921 987 N/A Production at DSO for the year was 228,945 ounces of gold at an all-in sustaining cost of $924 per ounce which was above the annual production guidance and an 8% increase on the previous year. Production benefited from improvements to the processing facility during the year with both gold recoveries and mill throughput rates increasing at the DSO. The construction of two additional leaching tanks at the Garden Well processing facility towards the end of the financial year is expected to continue the operational improvement at the project. Mining at the Erlistoun Gold Mine is expected to commence in the second half of FY2017 and will provide higher grade ore feed to the Garden Well processing plant, displacing lower grade tonnes from the Garden Well open pit. First production from Erlistoun is expected in the June 2017 quarter. GARDEN WELL PROCESSING FACILITY WITH TWO ADDITIONAL TANKS UNDER CONSTRUCTION 12 REGIS RESOURCES ANNUAL REPORT 2016 GOLD EXPLORATION DUKETON GOLD PROJECT Regis controls a significant tenement package, encompassing 187 granted exploration, prospecting and mining licences covering 3,503 square kilometres and 39 general purpose and miscellaneous licences covering 1,202 square kilometres at the Duketon Gold Project. Intensive exploration activities were conducted at the Duketon Gold Project during the year with outstanding results achieved from drilling at new potential satellite mining operations. Significant exploration projects advanced during the year ended 30 June 2016 are outlined below. Gloster Gold Project The 100% owned Gloster gold deposit is located 26km west of Moolart Well and was acquired by Regis in June 2015. Gloster was historically mined from 1902-1908 and was extensively drilled from 1984-1996. A Resource estimate was completed in 1997 (in compliance with the 1996 JORC Code and Guidelines) for 8.28MT at a grade of 1.37g/t gold for 365,000 ounces. During the year, Regis completed an extensive RC drilling programme to infill the existing gold Resource and to test for extensions of gold mineralisation below the current historical level of drilling in the fresh rock zone. A total of 177 RC holes were drilled for 21,287 metres which enabled an updated Mineral Resource estimate of 21.3 million tonnes at a grade of 0.77 g/t gold for 528,000 ounces. In March 2016 after completion of a mining study, Regis announced a maiden Ore Reserve at Gloster of 7.0 million tonnes at 1.00g/t Au for 226,000 ounces of gold. A Mining Lease was granted over the Gloster gold deposit during the year and final statutory approvals were received in July 2016. Mining has commenced in the September 2016 quarter and first gold production is expected in the December 2016 quarter. The Gloster deposit will be mined with ore hauled overland to the 2.5-3 million tonne per annum Moolart Well processing plant and is expected to produce in the order of 70,000 ounces of gold per annum for approximately 3 years. Gloster Gold Project Site Layout Gloster Gold Project Site Layout Tooheys Well The Tooheys Well gold prospect is located on a granted mining lease, 2.5km south of the Garden Well gold mine. Gold mineralisation was previously defined in two north-south trending Western and Eastern shear zones, 100 metres apart hosted in chert and fine grained sediments. Total RC drilling of 120 holes for 19,336 metres and 7 diamond holes for 720 metres was completed during the year to follow up anomalous gold mineralisation in the Eastern and Western shear zones. This drilling has demonstrated gold mineralisation continuity both along strike and at depth in the Eastern shear zone which is now mineralised over a strike length in excess of 500 metres from 6909000mN to 6909500mN based on a 40m x 20m drilling pattern. REGIS RESOURCES ANNUAL REPORT 2016 13 GOLD EXPLORATION DUKETON GOLD PROJECT Tooheys Well The Tooheys Well gold prospect is located on a granted mining lease, 2.5km south of the Garden Well gold mine. Gold mineralisation was previously defined in two north-south trending Western and Eastern shear zones, 100 metres apart hosted in chert and fine grained sediments. Total RC drilling of 120 holes for 19,336 metres and 7 diamond holes for 720 metres was completed during the year to follow up anomalous gold mineralisation in the Eastern and Western shear zones. This drilling has demonstrated gold mineralisation continuity both along strike and at depth in the Eastern shear zone which is now mineralised over a strike length in excess of 500 metres from 6909000mN to 6909500mN based on a 40m x 20m drilling pattern. The deposit is steeply east dipping and hosted in a Banded Iron Formation (“BIF”) as shown on the cross sections below. Weathering The deposit is steeply east dipping and hosted in a Banded Iron Formation (“BIF”) as shown on extends to between 80 and 160 metres and there are significant fresh rock intersections with good consistent grade and widths of the cross sections below. Weathering extends to between 80 and 160 metres and there are mineralisation at depth. See cross sections 6909340mN and 6909380mN below. significant fresh rock intersections with good consistent grade and widths of mineralisation at depth. 14 REGIS RESOURCES ANNUAL REPORT 2016 GOLD EXPLORATION DUKETON GOLD PROJECT Subsequent to year end, the Company announced a Maiden Inferred Mineral Resource Estimate at Tooheys Well of 14.6 million tonnes at 1.16g/t gold for 547,000 ounces at a 0.4 g/t gold cut-off grade. The Company is currently testing the potential north and south of the Tooheys Well deposit. The eastern shear structure of the deposit is interpreted to join with the gold mineralised shear zones at Chert Ridge approximately 2.5 kilometres to the north at the southern end of the Garden Well deposit. The Tooheys Well mineralisation is currently defined on the northern flank of a magnetic high that extends for more than one kilometre to the south. The southern half of the magnetic high is under cover and has historically only had limited shallow drill testing. Drilling is focussed on testing the extension of mineralisation to the south along this magnetic high. REGIS RESOURCES ANNUAL REPORT 2016 15 GOLD EXPLORATION DUKETON GOLD PROJECT Subsequent to year end, the Company announced a Maiden Inferred Mineral Resource Estimate at Tooheys Well of 14.6 million tonnes at 1.16g/t gold for 547,000 ounces at a 0.4 g/t gold cut-off grade. The Company is currently testing the potential north and south of the Tooheys Well deposit. The eastern shear structure of the deposit is interpreted to join with the gold mineralised shear zones at Chert Ridge approximately 2.5 kilometres to the north at the southern end of the Garden Well deposit. The Tooheys Well mineralisation is currently defined on the northern flank of a magnetic high that extends for more than one kilometre to the south. The southern half of the magnetic high is under cover and has historically only had limited shallow drill testing. Drilling is focussed on testing the extension of mineralisation to the south along this magnetic high. Infill resource drilling and extensional drilling both immediately north and south of the more than 750 metres of strike covered by the Mineral Resource Estimate is being expedited with a view to including the results in an update to the Resource estimate to be used as Infill resource drilling and extensional drilling both immediately north and south of the more than the basis for a maiden Ore Reserve estimate. 750 metres of strike covered by the Mineral Resource Estimate is being expedited with a view to including the results in an update to the Resource estimate to be used as the basis for a maiden Ore Reserve estimate. Baneygo Gold Project The 100% owned Baneygo gold project is located 12 kilometres south of the Rosemont gold mine and is hosted in a quartz dolerite unit believed to be the same unit hosting gold at Rosemont. Regis has been drilling around the four known small deposits at Baneygo and along strike since June 2015 completing 35,820 metres of RC and diamond drilling. An additional discovery at the nearby Idaho deposit has also contributed to the size of the Baneygo project. In March 2016, Regis announced a maiden Ore Reserve at Baneygo of 3.6 million tonnes at 1.16g/t Au for 136,000 ounces of gold. The Reserve does not include Idaho, the southern extremity of which is only 700 metres along strike from the northern end of Baneygo, or the sparsely drilled but mineralised 4 kilometres along strike to the south of Baneygo. 16 REGIS RESOURCES ANNUAL REPORT 2016 GOLD EXPLORATION DUKETON GOLD PROJECT Baneygo Gold Project The 100% owned Baneygo gold project is located 12 kilometres south of the Rosemont gold mine and is hosted in a quartz dolerite unit believed to be the same unit hosting gold at Rosemont. Regis has been drilling around the four known small deposits at Baneygo and along strike since June 2015 completing 35,820 metres of RC and diamond drilling. An additional discovery at the nearby Idaho deposit has also contributed to the size of the Baneygo project. In March 2016, Regis announced a maiden Ore Reserve at Baneygo of 3.6 million tonnes at 1.16g/t Au for 136,000 ounces of gold. The Reserve does not include Idaho, the southern extremity of which is only 700 metres along strike from the northern end of Baneygo, or the sparsely drilled but mineralised 4 kilometres along strike to the south of Baneygo. Further drilling programmes are planned to test along strike extensions. Mining at the Baneygo deposit will be scheduled along with the other satellite deposits in the vicinity of the Duketon South Operations. Coopers The Coopers gold prospect is located on a granted Mining Lease, 11 kilometres south of Moolart Well and 600 metres north of Dogbolter. It is located on the same shear zone hosting those two deposits. Earlier extensive Aircore drilling and a limited 10 hole RC drilling programme by Regis on 40 metre and 80 metre spaced east-west traverses defined gold mineralisation in the oxide zone over a strike distance of 400 metres. Regis drilled 40 Aircore holes and 62 RC holes for 8,687 metres during the year to test the strike continuation and follow up anomalous gold mineralisation at Coopers. Analytical results have been received and will form the basis of a Resource estimation. A diamond drilling programme is also planned to determine bulk densities and metallurgical and geotechnical work to enable a Reserve estimate to be completed. Russell’s Find The Russell’s Find deposit is located 6.5km south of the Garden Well pit. Gold mineralisation at Russell’s Find is contained in steep east dipping quartz-carbonate-biotite veins contained in a package of moderate east dipping carbonated ultramafic with a footwall sequence of chert, BIF and fine grained silicified shale. An RC drilling programme was completed during the year to validate and extend the current JORC 2004 gold resource of 0.4 million tonnes at 3.86g/t gold for 55,000 ounces of gold using a 1g/t cut-off grade. The results from the drilling programme were used in the updated Mineral Resource estimate to 2.4 million tonnes at 1.05g/t gold for 81,000 ounces of gold using a 0.4g/t cut-off. Duketon Gold Exploration Joint Venture Regis is spending $1 million in the joint venture area over a two year period to earn a 75% interest in any mining project that is confirmed by a Regis decision to mine. A total of 9,516 first pass lag soil samples were collected on the Duketon Mining JV tenements to date to complete the first pass programme. This reconnaissance lag sampling was completed on a 400m x 100m grid, with lag sampling across mineralised trends completed on a 200m x 50m grid. Gold and pathfinder element results have been received for all of the samples collected and contouring of gold results has been completed. Numerous +75ppb gold anomalies of interest have been defined and require further investigation prior to follow up infill lag sampling/mapping and subsequent Aircore drilling. The Petra North project is located in the joint venture area immediately adjacent to Regis’ 100% owned Petra project which has a reported JORC 2012 Resource of 44,000 ounces. A preliminary Aircore drill programme was designed to test for extensions of the known mineralisation at Petra into the JV tenement. Drilling commenced in April 2016 and by year end, 86 AC holes were completed for 7,266 metres. Gold results from this drilling programme include encouraging intercepts that will be followed up with an infill drilling programme. Moolart Well Gold Project An RC drill programme was planned at the southern end of the Stirling pit at Moolart Well targeting extensions to known mineralisation encountered during mining that may extend outside of current pit designs. Drilling commenced in April 2016 and by the end of the year, 27 RC holes for 2,616 metres and 9 AC holes for 611 metres had been completed. Encouraging results were returned and follow up drilling is planned. Duketon Reserve Growth The aggressive exploration programme at the Duketon project focussed on high potential areas for Mineral Resource expansions with a view to delivering further extensions to the mine life of the current operations. The Company successfully added to the Duketon resource and reserve base when it released the annual resources and reserves update in July 2016. Group Ore Reserves increased by 6% from 2.01 million ounces to 2.13 million ounces after accounting for mining depletion of 330,000 ounces. Group Mineral Resources increased by 5% from 7.63 million ounces to 8.01 million ounces after accounting for mining depletion of 330,000 ounces. The change in the Group Ore Reserve from March 2015 to March 2016 is as follows: 31 March 2015 Depleted by Mining to 31 March 2016 31 March 2015 Net of Depletion 31 March 2016 % Variation net of Depletion REGIS RESOURCES ANNUAL REPORT 2016 17 GOLD EXPLORATION DUKETON GOLD PROJECT TOTAL ORE RESERVE TONNES (MT) GOLD GRADE (G/T) GOLD METAL (KOZ) 59.1 -10.6 48.5 60.8 21% 1.06 0.96 1.08 1.09 2,006 -326 1,680 2,125 22% The major contributors to the increase of 445,000 ounces (22%) in Ore Reserves net of depletion were: Maiden Ore Reserves of 226,000 ounces at Gloster and 136,000 ounces at Baneygo; Addition of 81,000 ounces at Rosemont through extensional drilling and improved optimisations; and Addition of 27,000 ounces at Moolart Well through infill drilling. In 2017 the Company will continue to focus on current targets yielding highly encouraging results including the Tooheys Well deposit south of Garden Well. RETIRING GM EXPLORATION, JENS BALKAU & THE EXPLORATION TEAM AT IDAHO // Photo by Peter Woodman 18 REGIS RESOURCES ANNUAL REPORT 2016 GOLD EXPLORATION MCPHILLAMYS GOLD PROJECT The McPhillamys Gold Project is located approximately 35 kilometres south east of the town of Orange and 30 kilometres west of the town of Bathurst in the Central West region of New South Wales, Australia. The project is approximately 250 kilometres west of Sydney and contains a quoted Resource of 2.2 million ounces making it one of the larger undeveloped open pit gold resources in Australia. The project area consists of four granted exploration permits covering 477 square kilometres in two discrete locations approximately 25 kilometres apart. During the year the Company focussed on securing key infrastructure requirements for the development of the project. In view of the board’s confidence that the McPhillamys Project provides an excellent medium term development proposition, a 26,000 metre infill drilling programme commenced in September 2016 aimed at Resource definition and metallurgical studies. Work will continue in FY2017 in advancing other long lead pre-feasibility and environmental impact studies. PREPARING TO BLAST AT ROSEMONT MAIN PIT // Photo by Steve Snowdon REGIS RESOURCES ANNUAL REPORT 2016 19 GOLD RESERVES AS AT 31 MARCH 2016 PROVED PROBABLE TOTAL RESERVES CUT-OFF (G/T) MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ PROJECT TYPE Moolart Well Open Pit Garden Well Open Pit Rosemont Open Pit Duketon Main Deposits Gloster Erlistoun Baneygo Petra Dogbolter Anchor Open-Pit Open-Pit Open-Pit Open-Pit Open-Pit Open-Pit Duketon Satellite Deposits >0.4 >0.4 >0.4 Total > 0.5 > 0.5 > 0.4 > 0.5 > 0.5 > 0.5 Total 1.6 2.9 3.4 7.9 - - - - - - - 0.77 0.58 1.45 0.99 - - - - - - - 39 55 157 251 - - - - - - - REGIS TOTAL 7.9 0.99 251 3.3 25.9 8.3 37.4 7.0 3.8 3.6 0.6 0.3 0.1 15.5 52.9 1.00 0.93 1.53 105 772 407 4.8 28.8 11.6 0.93 0.89 1.51 144 827 564 1.07 1,284 45.3 1.05 1,535 1.00 1.48 1.16 1.26 1.57 2.07 1.18 1.10 226 181 136 25 16 6 590 1,874 7.0 3.8 3.6 0.6 0.3 0.1 15.5 60.8 1.00 1.48 1.16 1.26 1.57 2.07 1.18 226 181 136 25 16 6 590 1.09 2,125 GOLD RESOURCES AS AT 31 MARCH 2016 PROJECT TYPE CUT-OFF (G/T) MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ MEASURED INDICATED INFERRED TOTAL RESOURCES Moolart Well Open Pit Garden Well Open Pit Rosemont Open Pit Duketon Main Deposits Gloster Open-Pit Baneygo Open-Pit Erlistoun Open-Pit Dogbolter Open-Pit Russells Find Open-Pit Petra Open-Pit King John Open-Pit Reichelts Find Open-Pit Anchor Open-Pit Duketon Satellite Deposits 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 4.5 9.4 - - - - - - - - - - 1.9 0.72 2.9 0.58 45 55 24.9 0.74 596 9.3 0.62 184 36.1 0.71 825 64.8 0.89 1,859 8.0 0.89 228 75.8 0.88 2,141 1.42 204 20.5 1.42 938 3.0 1.95 189 28.0 1.48 1,331 1.01 303 110.2 0.96 3,393 20.3 0.92 600 139.8 0.96 4,297 - - - - - - - - - - - - - - - - - - - - 14.7 0.79 374 6.6 0.73 154 21.3 0.77 528 9.2 0.96 283 1.9 0.95 11.1 0.96 340 5.7 3.5 2.1 1.2 - - 1.34 247 1.1 1.00 1.11 128 0.5 1.02 1.07 1.08 - - 71 42 - - 9 0.3 0.90 0.1 1.09 0.8 0.8 1.56 1.11 0.1 0.95 0.2 1.75 57 37 16 10 2 42 28 2 6.9 4.0 2.4 1.28 284 1.10 144 1.05 1.3 1.08 0.8 0.8 0.2 1.56 1.11 1.53 81 44 42 28 11 36.6 0.98 1,155 12.2 0.89 348 48.7 0.96 1,503 Duketon Total 9.4 1.01 303 146.8 0.96 4,548 32.4 0.91 948 188.6 0.96 5,800 McPhillamys Total 0.4 - - - 69.2 0.94 2,087 3.9 0.98 123 73.2 0.94 2,210 REGIS TOTAL 9.4 1.01 303 216.0 0.96 6,635 36.4 0.92 1,071 261.7 0.95 8,010 20 REGIS RESOURCES ANNUAL REPORT 2016 DIRECTORS’ REPORT DIRECTORS’ REPORTREGIS RESOURCES ANNUAL REPORT 2016 21 DIRECTORS’ REPORT Your directors submit their report for the year ended 30 June 2016. DIRECTORS The directors of the Company in office since 1 July 2015 and up to the date of this report are: Mr Mark Clark, B.Bus CA (Executive Chairman) Mr Clark has over 26 years of experience in corporate advisory and public company management. He was appointed to the board of Regis in May 2009 in the role of Managing Director. Prior to joining Regis Resources Limited, Mr Clark was the Managing Director of Equigold NL. He joined Equigold in 1995 and originally held the roles of Chief Financial Officer and was responsible for the financial, administration and legal functions of the company. He was closely involved in the development and operation of Equigold’s projects in both Australia and Ivory Coast. He was a director of Equigold from April 2003 and was Managing Director from December 2005 until Equigold’s merger with Lihir Gold Limited in June 2008. Prior to working at Equigold Mr Clark held a senior position at an international advisory firm, providing financial and corporate advice to clients in the mining industry. Mr Clark assumed the role of Executive Chairman immediately after the company’s AGM on 12 November 2015. During the past three years, Mr Clark has not served as a director of any other ASX listed companies. Mr Clark is a member of the Institute of Chartered Accountants in Australia. Mr Paul Thomas, BAppSc (extmet) AICD (Executive Director – appointed 12 November 2015) the company’s AGM on Mr Thomas joined Regis in March 2014 in the role of Chief Operating Officer (COO) and was appointed to the board immediately following 12 November 2015. Mr Thomas is a qualified metallurgist with extensive operating and development experience gained in a career of over 30 years in the mining industry. During this time, he has held a number of senior operations management and executive roles within Australian listed gold and base metal mining companies. Mr Thomas has various regulatory and technical qualifications in mining, processing, management and finance including a Diploma in Open Cut and Underground Mining, a Diploma of Business and a Graduate Diploma of Applied Finance and Investment. He is a Graduate Member of the Australian Institute of Company Directors. During the past three years, Mr Thomas has not served as a director of any other ASX listed companies. Mr Mark Okeby, LLM (Deputy Chairman/Lead Independent Non-Executive Director) Mr Okeby has considerable experience in the resources industry as a solicitor and as a director of listed companies. He has been an executive and non-executive director of a number of gold producers and other resource companies and has been involved in the development of a number of resource projects and with mergers and acquisitions in the resource sector. Mr Okeby was appointed Deputy Chairman/Lead Independent Director immediately after the company’s AGM on 12 November 2015 and assumes the responsibilities of Chairman in the event of the unavailability of Mr Clark at any time or in relation to any matter in which Mr Clark may be conflicted. Mr Okeby is currently a non-executive director of Red Hill Iron Limited and, during the past three years, has not served as a director of any other ASX listed companies. Mr Ross Kestel, B.Bus, CA, AICD (Independent Non-Executive Director) Mr Kestel is a Chartered Accountant and was a director of a mid-tier accounting practice for over 26 years and has a strong corporate and finance background. He has acted as a director and company secretary of a number of public companies involved in mineral exploration, mining, mine services, property development, manufacturing and technology industries. the past During non-executive director of the following ASX listed companies: three years he has also served as a Beadell Resources Limited (from February 2012 to November 2015); and Xstate Resources Limited (September 2006 to September 2013). Mr Kestel is a member of the Australian Institute of Company Directors. 22 REGIS RESOURCES ANNUAL REPORT 2016 Mr James Mactier, BAgrEc, GradDipAppFin (Independent Non-Executive Director – appointed 23 February 2016) Mr Nick Giorgetta (Independent Non-Executive Chairman/Non-Executive Director – retired 29 April 2016) Mr Mactier was joint head of the Metals and Energy Capital Division of Macquarie Bank Limited for fifteen years until his retirement in April 2015. He has wide ranging experience in project and corporate finance, resource project assessment, equity investing, commodity and currency hedging and trading in the metals and energy sectors globally. During the past three years, Mr Mactier has not served as a director of any other ASX listed company. Mr Glyn Evans, BAppSc, FAusIMM (Independent Non-Executive Director – retired 29 July 2016) Mr Evans is a geologist with over 30 years’ experience in base metal and gold mining operations. He was an executive director with ASX listed gold mining companies between 1991 and 2007. Mr Evans has a strong mine geology background, having held senior mine management positions early in his career and then ultimately managed the gold resources and reserves of both Samantha Gold NL (1987-1994) and Equigold NL (1995-2007). He also led extensive exploration programmes over his long career which culminated in significant gold discoveries including the well-known Higginsville and Chalice Mines in Western Australia and the Bonikro mine in the Ivory Coast. Mr Evans retired as non-executive director on 29 July 2016. During the past three years, Mr Evans has not served as a director of any other ASX listed companies. Mr Evans is a Fellow of the Australian Institute of Mining and Metallurgy. Mr Giorgetta joined the board of Regis Resources Limited in May 2009 as Non-Executive Chairman. Prior to this Mr Giorgetta was a founding director of Equigold NL. He is a metallurgist with over 40 years of experience in the mining industry. He began his professional career in various technical roles for a major mining company in Kalgoorlie. He later established his own metallurgical consultancy which designed and commissioned a number of gold treatment plants. From 1988 to 1994 he was Managing Director of Samantha Gold NL. He stepped down as Chairman of Regis immediately after company’s AGM on 12 November 2015 and assumed the role of non-executive director until his retirement on 29 April 2016. During the past three years, Mr Giorgetta has not served as a director of any other ASX listed companies. Mr Giorgetta is a fellow of the Australasian Institute of Mining and Metallurgy. Mr Frank Fergusson (Independent Non-Executive Director – retired 12 November 2015) Mr Fergusson is an experienced gold mining industry director and has a long track record of successful operational management. His career in the gold mining industry spans over 30 years, starting at Great Victoria Gold Mine in 1983 where he was later the project’s General Manager. He was Operations Manager at Samantha Gold NL from 1988 to 1994 and was an Executive Director from 1992 to 1994. Mr Fergusson was a founding shareholder and executive director of Equigold NL from 1994 until his retirement from the role in 2006. Mr Fergusson retired as non-executive director immediately after the company’s AGM on 12 November 2015. During the past three years, Mr Fergusson has not served as a director of any other ASX listed companies. DIRECTORS’ REPORTREGIS RESOURCES ANNUAL REPORT 2016 23 COMPANY SECRETARY Mr Kim Massey, B.Com, CA Mr Massey is a Chartered Accountant with significant experience in financial management and corporate advisory services, particularly in the resources sector, as a corporate advisor and company secretary for a number of ASX and AIM listed companies. DIVIDENDS After the balance sheet date the following dividends were proposed by the directors: CENTS PER SHARE TOTAL AMOUNT $’000 Final dividends recommended: Ordinary shares 9.00 45,006 The financial effect of these dividends has not been brought to account in the consolidated financial statements for the year ended 30 June 2016 and will be recognised in subsequent financial reports. NATURE OF OPERATIONS AND PRINCIPAL ACTIVITIES The principal activities of Regis Resources Limited (“Regis” or the “Company”) and its controlled entities (collectively, the “Group”) during the year were: production of gold from the Duketon Gold Project; exploration, evaluation and development of gold projects in the Eastern Goldfields of Western Australia; and exploration and evaluation of the McPhillamys Gold Project in New South Wales. Apart from the above, or as noted elsewhere in this report, no significant changes in the state of affairs of the Company occurred during the financial year. OBJECTIVES The Group’s objectives are to: Achieve operational predictability by optimising mining and processing facilities across the Duketon Gold Project whilst maintaining a high standard of safety; Maximise cash flow by driving the cost base lower from steady state operations and pushing for incremental capacity opportunities; Organically increase the Reserve base of the Group by bringing satellite resource positions in to the mine plan and extend the reserve base of existing operating deposits; Focus on regional exploration to add incremental ounces to the three operating mills in the district; Return value to shareholders through a commitment to dividends; and Actively pursue growth opportunities. OPERATING AND FINANCIAL REVIEW Overview of the Group Regis is a leading Australian gold producer, with its head office in Perth, Western Australia. The Company operates three wholly- owned mines at the Duketon Gold Project in the Eastern Goldfields of Western Australia. The Moolart Well Gold Mine commenced operations in July 2010, the Garden Well Gold Mine commenced in August 2012 and the Rosemont Gold Mine commenced operations in October 2013. The Group also owns the McPhillamys Gold Project, an advanced exploration project in New South Wales, 250 kilometres west of Sydney near the town of Bathurst. DIRECTORS’ REPORT24 REGIS RESOURCES ANNUAL REPORT 2016 Financial Summary KEY FINANCIAL DATA Financial results Sales revenue Cost of sales (excluding D&A)(i) Other income Corporate, admin and other costs EBITDA(i) Depreciation and amortisation (D&A) Profit before tax(i) Income tax expense Reported profit after tax Other financial information Cash flow from operating activities Net cash Net assets Basic earnings per share (cents per share) 2016 $’000 2015 $’000 CHANGE $’000 CHANGE % 500,152 (260,047) 6,294 (12,007) 234,392 (75,244) 159,101 (47,308) 111,793 204,001 96,925 481,848 22.37 464,854 (276,223) 2,452 (9,630) 181,453 (53,530) 125,024 (38,104) 86,920 141,955 29,574 409,973 17.39 35,298 16,176 3,842 (2,377) 52,939 (21,714) 34,077 (9,204) 24,873 62,046 67,351 71,875 4.98 7.6% (5.9%) 156.7% 24.7% 29.2% 40.6% 27.3% 24.2% 28.6% 43.7% 227.7% 17.5% 28.6% (i) EBITDA is an adjusted measure of earnings before interest, taxes, depreciation and amortisation. Cost of sales (excluding D&A) and EBITDA are non-IFRS financial information and are not subject to audit. These measures are included to assist investors to better understand the performance of the business Performance relative to the previous financial year Regis achieved an after tax profit of $111.8 million for the full year to 30 June 2016 which represents an improvement of 29% compared to the previous corresponding year result of $86.9 million. The strong Australian dollar gold price and commitment to maximising operational efficiencies and controlling costs are the key drivers in the current year result. SALES Sales revenue for the year ended 30 June 2016 increased by $35.3 million (8%) compared to the previous corresponding period. Gold production from the Company’s Duketon Gold Project remained steady for the year with production totalling 305,084 ounces (2015: 310,204 ounces) however the average price of gold sold during the current year was $1,600 per ounce or 8% up on the previous year’s average sale price of $1,488 per ounce. COST OF SALES Cost of sales including royalties, but before depreciation and amortisation decreased by 6% to $260.0 million. DEPRECIATION AND AMORTISATION Depreciation and amortisation charges increased by $21.7 million or 41% over the previous corresponding period as the Company’s assets mature and depreciation and amortisation rates based on the units of production method increase as reserves are depleted. CASH FLOW FROM OPERATING ACTIVITIES Cash inflow from operating activities was $204.0 million, up 44% on the previous year due to the improved gold price achieved for ounces sold and the reduced cost base of those ounces. During the current year, the Company paid $22.9 million of income taxes. The Company has used this strong cash flow from operations to repay the debt owed under the Macquarie Bank financing facility ($20 million) and return $50 million to shareholders through two fully franked dividend payments. The early repayment of the loan means Regis is debt free other than normal trade creditors and leasing arrangements. GOLD FORWARD CONTRACTS At the end of the financial year the Company had a total hedging position of 433,770 ounces, comprising 80,000 ounces of flat forward contracts with a delivery price of $1,454 per ounce and 353,770 ounces of spot deferred contracts with a weighted average forward price of $1,581 per ounce. DIRECTORS’ REPORTREGIS RESOURCES ANNUAL REPORT 2016 25 Operational statistics have been condensed to report on Duketon North Operations (“DNO”) and Duketon South Operations (“DSO”). This is due to the plan to commence a number of new mining operations at satellite pits at the Duketon Gold Project in the next several years. DNO will include Moolart Well, Gloster, Dogbolter, Petra and Anchor pit as all are processed through the Moolart Well processing plant. In the current financial year, DNO operations were solely related to Moolart Well. DSO will include Garden Well, Rosemont, Erlistoun, Baneygo and the other satellite projects in that region all processed through the Garden Well processing plant (leaching circuit). During the current financial year, DSO operations only included production from Garden Well and Rosemont. This grouping aligns with the operating segments reported in note 1. DUKETON NORTH OPERATIONS (“DNO”) Operating results for the 12 months to 30 June 2016 were as follows: Ore mined Waste mined Strip ratio Ore mined Ore milled Head grade Recovery Gold production Cash cost per ounce – pre royalties Cash cost per ounce – incl. royalties All-in Sustaining Cost (“AISC”) BCM BCM w:o Tonnes Tonnes g/t % Ounces A$/oz A$/oz A$/oz 30 JUNE 2016 30 JUNE 2015 1,486,071 5,768,217 3.9 2,981,095 2,916,006 0.90 91 76,139 $706 $778 $934 1,346,525 4,371,317 3.2 2,910,547 2,912,706 1.14 92 98,742 $622 $686 AISC not reported DNO produced 76,139 ounces of gold for the year at an all-in sustaining cost of $934 per ounce. Although production was in line with annual guidance it was 23% lower than the previous year due to a 21% decline in the head grade of the ore being milled. The lower head grade was expected and reflective of the ore scheduled to be mined during the year. Production at DNO in the 2017 financial year is expected to increase with the inclusion of higher grade ore from the Gloster deposit. Mining commenced at Gloster in the September 2016 quarter with first gold expected to be produced in the December 2016 quarter. DUKETON SOUTH OPERATIONS (“DSO”) Operating results at the Duketon South Operations for the 12 months to 30 June 2016 were as follows: 30 JUNE 2016 30 JUNE 2015 Ore mined Waste mined Strip ratio Ore mined Ore milled Head grade Recovery BCM BCM w:o Tonnes Tonnes g/t % 3,148,056 16,848,858 5.4 7,805,241 7,336,030 1.08 90 Gold production Ounces 228,945 Cash cost per ounce – pre royalties Cash cost per ounce – incl. royalties All-in Sustaining Cost (“AISC”) A$/oz A$/oz A$/oz $795 $867 $924 3,300,358 19,324,571 5.9 8,160,890 6,930,044 1.10 86 211,462 $921 $987 AISC not reported Production at DSO for the year was 228,945 ounces of gold at an all-in sustaining cost of $924 per ounce which was above the annual production guidance and an 8% increase on the previous year. Production benefited from improvements to the processing facility during the year with both gold recoveries and mill throughput rates increasing at the DSO. DIRECTORS’ REPORT26 REGIS RESOURCES ANNUAL REPORT 2016 Production Guidance BY PROJECT Regis is expecting operation in the 2017 financial year to build on the strong performance of the Duketon project in the current year where production of 305,084 ounces at AISC of $927 per ounce was achieved against guidance of 275-305,000 ounces at AISC of $970-1,070 per ounce. Gold production for the next financial year is expected to be in the following guidance range: Gold production: 300,000 – 330,000 ounces Cash cost per ounce – incl. royalties: $840 – 910 per ounce All-in sustaining cost: $980 – 1,050 per ounce Forecast 2017 production growth is the result of the positive grade impact from new satellite projects at Gloster and Erlistoun, and the optimisation of steady state of the open pit operations at Moolart Well, Garden Well and Rosemont. Exploration DUKETON OVERVIEW Intensive exploration activities were conducted at the Duketon Gold Project with outstanding results achieved from drilling at new potential satellite mining operations. Drilling activities at the Duketon Gold Project during the year ended 30 June 2016 are summarised below: TYPE Aircore RC Diamond TOTAL BY DRILLING TYPE NO. HOLES 317 1,115 26 1,458 METRES 25,388 124,701 4,604 154,693 Significant exploration projects advanced during the year ended 30 June 2016 are outlined below. All drilling results and resource estimations highlighted in this report are detailed fully in announcements to the ASX made by the Company throughout the year, along with the associated JORC 2012 disclosures. BY PROJECT PROJECT Gloster Baneygo Tooheys Well Idaho Regional Russell’s Find Moolart Well Coopers Petra North (DKJV) METRES 32,018 23,638 20,056 15,493 15,709 10,275 8,930 8,687 7,266 PROJECT Water exploration Collurabbie Kintyre Soak McKenzie’s Flat TOTAL METRES 5,520 3,496 2,201 1,404 154,693 BANEYGO GOLD PROJECT The 100% owned Baneygo gold project is located 12 kilometres south of the Rosemont gold mine and is hosted in a quartz dolerite unit believed to be the same unit hosting gold at Rosemont. Regis has been drilling around the four known small deposits at Baneygo and along strike since June 2015 completing 35,820 metres of RC and diamond drilling. An additional discovery in Idaho has also been made along this Rosemont to Baneygo trend as announced on the ASX on 14 January 2016. In March 2016, Regis announced a maiden Ore Reserve at Baneygo of 3.6 million tonnes at 1.16g/t Au for 136,000 ounces of gold. The quoted Reserve does not include Idaho, the southern extremity of which is only 700 metres along strike from the northern end of Baneygo, or the sparsely drilled but mineralised 4 kilometres along strike to the south of Baneygo. Further drilling programmes are planned to test along strike extensions. Mining at the Baneygo deposit will be scheduled along with the other satellite deposits in the vicinity of the Duketon South Operations. GLOSTER GOLD PROJECT The 100% owned Gloster gold deposit is located 26km west of Moolart Well and was acquired by Regis in June 2015. Gloster was historically mined from 1902-1908 and was extensively drilled from 1984-1996. A Resource estimate was completed in 1997 (in compliance with the 1996 JORC Code and Guidelines) for 8.28MT at a grade of 1.37g/t gold for 365,000 ounces. During the year, Regis completed an extensive RC drilling programme to infill the existing gold Resource and to test for extensions of gold mineralisation below the current historical level of drilling in the fresh rock zone. A total of 177 RC holes were drilled for 21,287 metres which enabled an updated Mineral Resource estimate of 21.3 million tonnes at a grade of 0.77 g/t gold for 528,000 ounces. The Resource estimate was completed in-house using the Ordinary Kriging estimation technique based on 73,253 metres of drilling of which approximately 30% was completed by the recent infill drill program. This estimate has been validated by an independently completed calculation using Multiple Indicator Kriging. In March 2016, Regis announced a maiden Ore Reserve at Gloster of 7.0 million tonnes at 1.00g/t Au for 226,000 ounces of gold. A Mining Lease was granted over the Gloster gold deposit during the period and final statutory approvals were received in July 2016. It is projected that mining should commence later in the September 2016 quarter with first gold production in the December 2016 quarter. The Gloster deposit will be mined with DIRECTORS’ REPORTREGIS RESOURCES ANNUAL REPORT 2016 27 ore hauled overland to the 2.5-3 million tonne per annum DNO processing plant and is expected to produce in the order of 70,000 ounces of gold per annum for approximately 3 years. TOOHEYS WELL The Tooheys Well gold prospect is located on a granted Mining Lease, 2.5km south of the Garden Well gold mine. Gold mineralisation was previously defined in two north-south trending Western and Eastern shear zones, 100 metres apart hosted in chert and fine grained sediments. Total RC drilling of 120 holes for 19,336 metres and 7 diamond holes for 720 metres were carried during the period to follow up anomalous gold mineralisation in the Eastern and Western shear zones. This drilling has demonstrated gold mineralisation continuity both along strike and at depth in the Eastern shear zone which is now mineralised over a strike length in excess of 500 metres from 690900mN to 6909500mN based on a 40m x 20m drilling pattern. Subsequent to year end, the Company announced a Maiden Inferred Mineral Resource Estimate at Tooheys Well of 14.6 million tonnes at 1.16g/t gold for 547,000 ounces at a 0.4 g/t gold cut-off grade. Infill resource drilling and extensional drilling both immediately north and south of the more than 750 metres of strike covered by the Mineral Resource Estimate is being expedited with a view to including the results in an update to the Resource estimate to be used as the basis for a maiden Ore Reserve estimate. COOPERS The Coopers gold prospect is located on a granted Mining Lease, 11 kilometres south of Moolart Well and 600 metres north of Dogbolter, and is located on the same shear zone hosting those two deposits. Earlier extensive Aircore drilling and a limited 10 hole RC drilling programme by Regis on 40 metre and 80 metre spaced east-west traverses defined gold mineralisation in the oxide zone over a strike distance of 400 metres. Regis drilled 40 Aircore holes and 62 RC holes for 8,687 metres during the period to test the strike continuation and follow up anomalous gold mineralisation at Coopers. Analytical results have been received and provide enough data to complete a Resource estimation. A diamond drilling programme is also planned to determine bulk densities and metallurgical and geotechnical work to enable a Reserve estimate to be completed. RUSSELL’S FIND The Russell’s Find deposit is located 6.5km south of the Garden Well pit. Gold mineralisation at Russell’s Find is contained in steep east dipping quartz-carbonate-biotite veins contained in a package of moderate east dipping carbonated ultramafic with a footwall sequence of chert, BIF and fine grained silicified shale. An RC drilling programme was carried out during the year to validated and extend the current JORC 2004 gold resource of 0.4 million tonnes at 3.86g/t gold for 55,000 ounces of gold using a 1g/t cut-off grade. The results from the drilling programme were used in the updated Mineral Resource estimate released to the ASX in July 2016 of 2.4 million tonnes at 1.05g/t gold for 81,000 ounces of gold using a 0.4g/t cut-off. DUKETON GOLD EXPLORATION JOINT VENTURE Regis is spending $1 million in the joint venture area over a two year period to earn a 75% interest in any mining project that is confirmed by a Regis decision to mine. A total of 9,516 first pass lag soil samples were collected on the Duketon Mining JV tenements to date to complete the first pass programme. This reconnaissance lag sampling was completed on a 400m x 100m grid, and lag sampling across mineralised trends was completed on a 200m x 50m grid. Gold and pathfinder element results have been received for all of the samples collected and contouring of gold results has been completed. Numerous +75ppb gold anomalies of interest have been defined and require further investigation prior to follow up infill lag sampling/mapping and subsequent air core drilling. The Petra North project is located in the joint venture area immediately adjacent to Regis’ 100% owned Petra project which has a reported JORC 2012 Resource of 44,000 ounces. A preliminary air core drill programme was designed to test for extensions of the known mineralisation at Petra into the JV tenement. Drilling commenced in April 2016 and by year end, 86 AC holes were completed for 7,266 metres. Gold results from this drilling programme include encouraging intercepts that will be followed up with an infill drilling programme. MOOLART WELL GOLD PROJECT An RC drill programme was planned at the southern end of the Stirling pit at Moolart Well looking for extensions of known mineralisation encountered during mining that may extend outside of current pit designs. Drilling commenced in April 2016 and by the end of the year, 27 RC holes for 2,616 metres and 9 AC holes for 611 metres had been completed. Encouraging results were returned and follow up drilling is planned. MCPHILLAMYS GOLD PROJECT The McPhillamys Gold Project is located approximately 35 kilometres south east of the town of Orange and 30 kilometres west of the town of Bathurst in the Central West region of New South Wales, Australia. The project is approximately 250 kilometres west of Sydney. The project area consists of four granted exploration permits covering 477 square kilometres in two discrete locations approximately 25 kilometres apart. Early stage feasibility work continued during the year, particularly focussed on the key infrastructure requirements for development of the project. A 26,000 metre infill drilling programme is scheduled to commence in August 2016 aimed at Resource definition and metallurgical studies. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There have been no significant changes in the state of affairs other than those listed in the review of operations above. SIGNIFICANT EVENTS AFTER THE BALANCE DATE SHARE ISSUES Subsequent to year end, 225,908 shares have been issued as a result of the exercise of employee options for proceeds of $175,000. DIRECTORS’ REPORT28 REGIS RESOURCES ANNUAL REPORT 2016 DIVIDENDS On 1 August 2016, the directors proposed a final dividend on ordinary shares in respect of the 2016 financial year. Refer to note 6. Other than the matter 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 which, in the opinion of the directors of the Group, has significantly affected or is likely 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. LIKELY DEVELOPMENTS AND EXPECTED RESULTS There are no likely developments of which the directors are aware which could be expected to significantly affect the results of the Group’s operations in subsequent financial years not otherwise disclosed in the Principal Activities and Operating and Financial Review or the Significant Events after the Balance Date sections of the Directors’ Report. ENVIRONMENTAL REGULATION AND PERFORMANCE The operations of the Group are subject to environmental regulation under the laws of the Commonwealth and the States of Western Australia and New South Wales. The Group holds various environmental licenses issued under these laws, to regulate its mining and exploration activities in Australia. These licenses include conditions and regulations in relation to specifying limits on discharges into the air, surface water and groundwater, rehabilitation of areas disturbed during the course of mining and exploration activities and the storage of hazardous substances. All environmental performance obligations are monitored by the board of directors and subjected from time to time to Government agency audits and site inspections. There have been no material breaches of the Group’s licenses and all mining and exploration activities have been undertaken in compliance with the relevant environmental regulations. SHARE OPTIONS Unissued Shares At the date of this report, the Company had the following unissued shares under listed and unlisted options. MATURITY DATE EXERCISE PRICE NUMBER OUTSTANDING Unlisted options 31 July 2017 12 September 2017 31 March 2018 14 October 2018 11 August 2019 6 January 2020 13 May 2020 TOTAL $3.50 $1.55 $2.40 $1.55 $1.40 $2.34 $2.70 35,000 1,500,000 75,000 50,000 8,595,000 1,000,000 200,000 11,455,000 Option holders do not have any right, by virtue of the option, to participate in any share issue of the Company or any related body corporate. Details of options granted to directors and other key management personnel during the year are set out in the remuneration report. Shares Issued as a Result of the Exercise of Options During the financial year, employees exercised unlisted options to acquire 72,546 fully paid ordinary shares in Regis Resources Limited at a weighted average exercise price of $2.40 per share. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Company has entered into an Indemnity Deed with each of the directors which will indemnify them against liabilities incurred to a third party (not being the Company or any related company) where the liability does not arise out of negligent conduct including a breach of good faith. The Indemnity Deed will continue to apply for a period of 10 years after a director ceases to hold office. The Company has entered into a Director’s Access and Insurance Deed with each of the directors pursuant to which a director can request access to copies of documents provided to the director whilst serving the Company for a period of 10 years after the director ceases to hold office. There are certain restrictions on the directors’ entitlement to access under the deed. In addition the Company will be obliged to use reasonable endeavours to obtain and maintain insurance for a former director similar to that which existed at the time the director ceased to hold office. The Company has, during or since the end of the financial year, paid an insurance premium in respect of an insurance policy for the benefit of the directors, secretaries, executive officers and employees of the Company and any related bodies corporate as defined in the insurance policy. The insurance grants indemnity against liabilities permitted to be indemnified by the Company under Section 199B of the Corporations Act 2001. In accordance with commercial practice, insurance policy prohibits the disclosure of the terms of the policy including the nature of the liability insured against and the amount of the premium. DIRECTORS’ REPORTREGIS RESOURCES ANNUAL REPORT 2016 29 DIRECTORS’ MEETINGS The number of directors’ meetings held (including meetings of Committees of the Board) and number of meetings attended by each of the directors of the Company during the financial year are: DIRECTORS’ MEETINGS AUDIT AND RISK MANAGEMENT COMMITTEE REMUNERATION AND NOMINATION COMMITTEE No. Eligible to Attend No. Attended No. Eligible to Attend No. Attended No. Eligible to Attend No. Attended 10 10 3 8 10 4 10 7 10 9 3 8 9 4 9 7 n/a n/a n/a 2 3 1 3 n/a n/a n/a 2 3 1 2 n/a n/a 1 3 4 1 4 n/a n/a 1 3 4 1 4 n/a n/a n/a n/a M Clark G Evans (retired 29 July 2016) F Fergusson (retired 12 November 2015) N Giorgetta (retired 29 April 2016) R Kestel J Mactier (appointed 23 February 2016) M Okeby P Thomas (appointed 12 November 2015) Committee Membership As at the date of this report, the Company had an Audit and Risk Management Committee and a Remuneration and Nomination Committee of the board of directors. Members acting on the committees of the board during the year were: AUDIT AND RISK MANAGEMENT COMMITTEE REMUNERATION AND NOMINATION COMMITTEE R Kestel (Chairman) R Kestel (Chairman) J Mactier – appointed 29 April 2016 J Mactier – appointed 29 April 2016 M Okeby M Okeby N Giorgetta – retired 29 April 2016 N Giorgetta – retired 29 April 2016 F Fergusson – retired 12 November 2015 Directors’ Interests in the Shares and Options of the Company As at the date of this report, the interests of the directors in the options of the Company were unchanged from the holdings as at 30 June 2016 as disclosed in the Remuneration Report. The directors’ interests in the shares of the Company at the date of this report are set out in the table below. NUMBER OF ORDINARY SHARES M Clark R Kestel J Mactier M Okeby P Thomas 2,460,000 75,000 - 700,000 - Auditor Independence and Non-Audit Services During the year KPMG, the Group auditor, did not perform any non-audit services in addition to the audit and review of the financial statements. A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act is attached to the Directors’ Report. Rounding off The Company is of a kind referred to in ASIC Instrument 2016/191 dated 24 March 2016 and in accordance with that Instrument, amounts in the Financial Statements and Directors’ Report have been rounded to the nearest thousand dollars, unless otherwise stated. DIRECTORS’ REPORT30 REGIS RESOURCES ANNUAL REPORT 2016 REMUNERATION REPORT (AUDITED) REGIS RESOURCES ANNUAL REPORT 2016 31 REMUNERATION REPORT AUDITED This remuneration report for the year ended 30 June 2016 outlines the remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has been audited as required by section 308(3C) of the Act. The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company. For the purposes of this report, the term “executive” includes the Executive Chairman, senior executives and company secretaries of the Parent and the Group. KEY MANAGEMENT PERSONNEL Details of KMPs of the Company and Group are set out below: NAME POSITION TERM AS KMP Non-Executive Directors M Okeby G Evans Deputy Chairman/Lead Independent Director Appointed as Deputy Chairman 12 November 2015. Previously – Non-Executive Director. Non-Executive Director Full financial year. Retired 29 July 2016. F Fergusson Non-Executive Director Retired 12 November 2015. N Giorgetta Non-Executive Director Retired as Chairman 12 November 2015 and took up the role of Non-Executive Director until his retirement on 29 April 2016. R Kestel J Mactier Executive Directors Non-Executive Director Non-Executive Director Full financial year. Appointed 23 February 2016. M Clark Executive Chairman P Thomas Executive Director Other Executives Appointed as Executive Chairman 12 November 2015. Previously – Managing Director. Appointed as Executive Director 12 November 2015. Previously – Chief Operating Officer. J Balkau General Manager - Exploration Retired 29 February 2016. P Woodman Chief Geological Officer Appointed 25 January 2016. M Evans K Massey Chief Development Officer Resigned 6 May 2016. Chief Financial Officer and Company Secretary Full financial year. << DENSITY SAMPLING TANKS 32 REGIS RESOURCES ANNUAL REPORT 2016 PRINCIPLES OF REMUNERATION The Remuneration and Nomination Committee is charged with formulating the Group’s remuneration policy, setting each director’s remuneration and reviewing the Executive Chairman’s remuneration recommendations for KMPs to ensure compliance with the Remuneration Policy and consistency across the Group. Recommendations of the Remuneration and Nomination Committee are put to the Board for approval. Remuneration levels for KMP are set to attract, retain and incentivise appropriately qualified and experienced directors and executives. Decisions as to the appropriateness of remuneration packages are based on: the state of the employment market (using independently sourced market surveys); the capability and experience of the relevant employee, their relativity within the Group and their ability to influence the Group’s performance; the Group’s overall operating and financial performance, and; total returns to shareholders on an absolute and comparative basis. Various short and long-term performance hurdles and maximum achievable remuneration levels are set for each financial year to provide guidance for management and employees. Remuneration packages include a mix of cash and longer-term performance based incentives. The Group’s financial performance over the past five years has been as follows: Revenue Net profit/(loss) after tax Basic earnings/(loss) per share (cents) Diluted earnings/(loss) per share (cents) 2016 $’000 2015 $’000 2014 $’000 2013 $’000 502,019 465,320 371,933 416,834 111,793 22.37 22.22 86,920 (147,830) 146,506 17.39 17.39 (29.68) (29.68) 30.65 30.27 2012 $’000 171,504 68,239 15.51 15.18 Net assets 481,848 409,973 321,060 538,096 235,626 Historical and current earnings are one of a number of criteria used by the Remuneration and Nomination Committee to assess the performance of directors and executives. Other criteria used in this assessment include gold production and operating costs, safety performance, execution of development projects, exploration success, growth of business through acquisitions and effectiveness of communications with regulators, shareholders, investors and other stakeholders. During the year Ernst & Young (EY) were engaged to provide advice on implementing remuneration structures in the form of Short Term Incentives (STI) and Long Term Incentives (LTI) for KMP going forward and to benchmark current remuneration against the industry. No remuneration recommendations, as defined by the Corporations Act, were provided by EY. The Remuneration and Nomination Committee consider the advice from EY along with other factors, in making its remuneration decisions. FIXED REMUNERATION Fixed remuneration consists of base remuneration (including any fringe benefit tax charges related to employee benefits), as well as employer contributions to superannuation funds. The Group allows KMP to salary sacrifice superannuation for additional benefits (on a total cost basis). Remuneration levels are reviewed annually by the Remuneration and Nomination Committee through a process that considers individual and overall performance of the Group. In addition, external consultants may provide analysis and advice to ensure the key management personnel’s remuneration is competitive in the market place, as required. REMUNERATION REPORTAUDITEDREGIS RESOURCES ANNUAL REPORT 2016 33 PERFORMANCE-LINKED REMUNERATION Performance linked remuneration includes both long-term and short term incentives and is designed to reward key management personnel for meeting or exceeding their objectives. Short-term incentives Each year the Executive Chairman reviews the performance of the KMPs and makes recommendations to the Remuneration and Nomination Committee in relation to the awarding of any short-term incentives. In addition, the Remuneration and Nomination Committee assess the actual performance of the Group, the separate departments and the individuals’ personal performance. A STI may be recommended at the discretion of the Remuneration and Nomination Committee where Group and department objectives have been met or exceeded. The Remuneration and Nomination Committee recommends the cash incentive to be paid to the executive directors for approval by the Board. No such STIs have been recommended for the 2016 financial year. Long-term incentives Options have been issued under the Regis Resources Limited 2014 Share Option Plan (the “Option Plan”). The objective of the Option Plan was to link the achievement of the Group’s operational targets with the remuneration received by the key management personnel charged with meeting those targets. The total potential long-term incentive available was set at a level so as to provide sufficient incentive to the KMP to achieve the operational targets such that the cost to the Group was reasonable in the circumstances. The Option Plan provided for key management personnel and employees to receive a set amount of options over ordinary shares for no consideration. The ability to exercise the options is conditional upon the employee remaining with the Group throughout the vesting period. There are no other performance criteria that must be met. The details of options issued to executive directors and KMP’s for the 2016 financial year are listed in Table 3. No new benefits under the Option Plan will be issued to executive directors or other KMP’s in the 2017 financial year. 2017 Executive Remuneration Incentive Plan For the 2017 and subsequent financial years, the Company has implemented an Executive Remuneration Incentive Plan for executive directors and other KMPs which sets out the performance hurdles for both STI and LTI and replaces share options with performance rights as the LTI compensation methodology. The Fixed Remuneration and STI will remain as cash payments. The objectives and principles of the Company’s new remuneration policy include: To align the objectives of executive directors and other KMP’s with the interests of shareholders and reflect Company strategy; To provide competitive rewards to attract, retain and incentivise high calibre executives; and For total remuneration to include a competitive fixed component and an “at risk” component based on performance hurdles and key performance indicators. The STI is the annual component of the “at risk” reward opportunity which is payable in cash upon the successful achievement of work related financial and non-financial key performance indicators. These KPI’s are chosen to represent the key drivers of short term success for the Company with reference to Regis’ long term strategy. The LTI refers to the “at risk” reward opportunity which takes the form of performance rights, being the issue of shares in Regis in the future, subject to meeting predetermined performance and vesting conditions. Subsequent to the end of the financial year, the Board set the following STI key performance indicators and LTI performance hurdles based upon recommendations from the Remuneration and Nomination Committee. REMUNERATION REPORTAUDITED34 REGIS RESOURCES ANNUAL REPORT 2016 REMUNERATION STRUCTURE FOR 1 JULY 2016 TO 30 JUNE 2017 COMPONENT KPI AND PERFORMANCE HURDLE Total Fixed Remuneration Salaries awarded effective 1 July used as a base for determining value component for 2017 STI’s and LTI’s Short Term Incentives (STI) and Long Term Incentives (LTI) An overarching review by the board of each individual’s performance against agreed performance measures and a review of quantitative factors around the Company’s performance and the macro economic environment will determine the achievable percentage (between 0%-100%) of the maximum potential STI and LTI available to be awarded, subject further to the level of achievement against detailed KPI’s listed below. This maximum achievable STI and LTI percentage will automatically be 0% in a given financial year in the event of a workplace fatality at any of the Company’s operations in that year. Short Term Incentives (STI) Combination of specific Company Key Performance Indicators (KPIs) KPI 1: EBITDA relative to internal targets (35%(i)); KPI 2: Production relative to stated guidance (35%(i)); and KPI 3: Safety and environmental performance targets (30%(i)). Vesting may occur after year 2 subject to the following performance hurdles measured at 30 June 2018: Long Term Incentives (LTI) Relative Total Shareholder Return (25%(i)) measured on a sliding scale against a select peer group of comparator companies. (ASX code: AQG, BDR DRM, EVN, KRM, MML, MOY, NCM, NST, OGC, PRU, RMS, RSG, SAR, SBM, SLR, TGZ, TRY); Absolute Total Shareholder Return (25%(i)); Absolute earnings per share (“EPS”) (25%(i)) measured against a pre-determined target(ii) set by the board (as an average across two 12 month periods); and Reserve growth and production replacement over the two year vesting period (25%(i)) (i) Represents the maximum award if stretch targets are met. (ii) Targets and actual outcomes for each of the STI and LTI performance measures will be disclosed in the relevant remuneration report in the year the award may vest. This is to recognise commercial sensitivity of disclosing key organisational metrics. To maximise engagement of executives and align with the long-term interests of shareholders, the initial grant of LTI’s have a two year performance/vesting period with a one year holding lock restricting trading on any shares issued under the plan. Subsequent grants of rights will apply a performance/vesting period after three years. EY also provided market data to assist the board in establishing the appropriate remuneration levels for the Company’s executive directors and other KMP’s. NAME POSITION Mark Clark Executive Chairman Paul Thomas Chief Operating Officer Peter Woodman Chief Geological Officer Kim Massey Chief Financial Officer and Company Secretary (i) Base Salaries subject to ongoing review in the ordinary course of business (ii) Potential STI’s and LTI’s are based on a % of Base Salary. BASE SALARY (AT 1 JULY 2016)(I) MAXIMUM POTENTIAL STI %(II) MAXIMUM POTENTIAL LTI %(II) 650,000 500,000 380,000 375,000 45% 35% 35% 35% 90% 65% 65% 65% The Company will be seeking shareholder approval for the establishment of a Performance Rights Plan at its next AGM and for the issue of Performance Rights to Mark Clark and Paul Thomas as directors of the Company. REMUNERATION REPORTAUDITEDREGIS RESOURCES ANNUAL REPORT 2016 35 SERVICE CONTRACTS The Group has entered into service contracts with each KMP. The service contract outlines the components of remuneration paid to each key management person but does not prescribe how remuneration levels are modified year to year. Remuneration levels are reviewed each year to take into account cost-of-living changes, any change in the scope of the role performed by the key management person and any changes required to meet the principles of the remuneration policy. No service contract specifies a term of employment or entitlement to performance based incentives, except as detailed below for the Executive Chairman. Mr Mark Clark, the Company’s Executive Chairman, is employed under a fixed term contract, with the following significant terms: Current contract has a three year term to 3 May 2018; Fixed remuneration of $650,000 per annum before superannuation (2015: $550,000) subject to annual review; and Opportunity to earn a performance based STI determined by the Board. Each key management person, except as specified below, is subject to a notice period of 1 month which the Company may pay in part or full of the required notice period. The key management personnel are also entitled to receive, on termination of employment, statutory entitlements of accrued annual and long service leave, and any accrued superannuation contributions would be paid to their fund. In the case of a genuine redundancy, executives would receive their statutory entitlements based on completed years of service. The Executive Chairman’s termination provisions are as follows: NOTICE PERIOD PAYMENT IN LIEU OF NOTICE ENTITLEMENT TO OPTIONS ON TERMINATION Employer initiated termination: without reason 3 months plus 9 months’ salary 12 months with reason Not less than 3 months Not less than 3 months 1 month to exercise, extendable at Board discretion serious misconduct 0 – 1 month Employee initiated termination 3 months 0 – 1 month Not specified Change of control 1 month plus 12 months’ salary Not specified As above As above Mr Paul Thomas, the Company’s Chief Operating Officer, is employed under a contract with the following termination provisions: NOTICE PERIOD PAYMENT IN LIEU OF NOTICE Employer initiated termination: with or without reason 3 months serious misconduct 0 – 1 month Employee initiated termination 3 months Up to 3 months 0 – 1 month Not specified Change of control 1 month plus 12 months’ salary Not specified ENTITLEMENT TO OPTIONS ON TERMINATION 1 month to exercise, extendable at Board discretion As above As above Mr Kim Massey, the Company’s Chief Financial Officer and Company Secretary is entitled to 1 months’ notice plus 12 months’ salary in the event of a change of control. NON-EXECUTIVE DIRECTORS Total remuneration for all non-executive directors, last voted upon by shareholders at the 2011 AGM, is not to exceed $500,000 per annum. At the date of this report, total non-executive directors’ base fees are $267,000 per annum excluding superannuation. Non-executive directors’ fees cover all main board activities and membership of board committees. Non-executive directors do not receive performance-related compensation and are not provided with any retirement benefits, apart from statutory superannuation. From time to time, non-executive directors may provide consulting services to the Company and in these cases they are paid consulting fees in line with industry rates. REMUNERATION REPORTAUDITED36 REGIS RESOURCES ANNUAL REPORT 2016 KEY MANAGEMENT PERSONNEL REMUNERATION TABLE 1: REMUNERATION FOR THE YEAR ENDED 30 JUNE 2016 SHORT TERM POST EMPLOYMENT SHARE-BASED PAYMENT 2016 SALARY & FEES NON-MONETARY BENEFITS* SUPER- ANNUATION OPTIONS TERMINATION PAYMENTS $ 83,333 80,000 80,000 26,767 92,000 30,295 680,875 500,000 203,334 165,641 297,500 375,000 $ - - - - - - 5,525 5,525 3,683 2,302 4,604 5,525 Non-Executive Directors N Giorgetta(i) M Okeby G Evans F Fergusson(ii) R Kestel(iii) J Mactier(iv) Executive Directors M Clark(v) P Thomas(vi) Other executives J Balkau(vii) P Woodman(viii) M Evans(ix) K Massey TOTAL $ 7,917 7,600 7,600 2,543 8,740 2,878 $ - - - - - - 30,875 401,289 47,500 853,160 $ - - - - - - - - TOTAL $ 91,250 87,600 87,600 29,310 100,740 33,173 PERFORMANCE RELATED % - - - - - - 1,118,564 1,406,185 35.88% 60.67% 19,317 51,759 116,545 394,638 15,736 163,972 - 347,651 28,262 - 100,226 430,592 13.12% 47.17% - 35,625 238,469 - 654,619 36.43% 2,614,745 27,164 214,593 1,708,649 216,771 4,781,922 * Non-monetary benefits are presented at actual cost plus any fringe benefits tax paid or payable by the Group. (i) Mr Giorgetta retired as non-executive director on 29 April 2016. (ii) Mr Fergusson retired from his position as non-executive director on 12 November 2015. (iii) Mr Kestel’s fees include an additional $12,000 for chairing the Board Committees. (iv) Mr Mactier was appointed as non-executive director on 23 February 2016. (v) Mr Clark elected to receive a portion of his superannuation entitlements above the statutorily required maximum amount as salary. (vi) Mr Thomas was appointed as Executive Director on 12 November 2015. Prior to that date Mr Thomas was Chief Operating Officer. (vii) Mr Balkau retired from his position as General Manager – Exploration on 29 February 2016. The termination payments include annual leave and long service leave accrued to the date of retirement. (viii) Mr Woodman commenced with the Company on 25 January 2016 in the role of Chief Geological Officer. (ix) Mr Evans resigned from his position as Chief Development Officer on 6 May 2016 and forfeited the share options granted and vested during the year as disclosed in Table 3. Any share-based payment expense previously recognised under AASB 2 in respect of unvested options has been reversed. The termination payments include annual leave and long service leave accrued to the date of resignation. REMUNERATION REPORTAUDITEDREGIS RESOURCES ANNUAL REPORT 2016 37 TABLE 2: REMUNERATION FOR THE YEAR ENDED 30 JUNE 2015 SHORT TERM POST EMPLOYMENT SHARE-BASED PAYMENT 2015 SALARY & FEES NON-MONETARY BENEFITS* SUPER- ANNUATION OPTIONS TERMINATION PAYMENTS $ 110,000 73,000 73,000 73,000 85,000 Non-Executive Directors N Giorgetta M Okeby G Evans F Fergusson R Kestel Executive Director $ - - - - - $ 10,450 6,935 6,935 6,935 8,075 M Clark 550,000 5,112 52,250 $ - - - - - - Other Executives J Balkau M Evans K Massey P Thomas TOTAL 295,000 321,667 310,833 400,000 5,112 5,112 5,112 5,112 28,025 53,326 30,558 29,529 71,099 71,099 38,000 416,078 2,291,500 25,560 217,692 611,602 * Non-monetary benefits are presented at actual cost plus any fringe benefits tax paid or payable by the Group. $ - - - - - - - - - - - TOTAL $ 120,450 79,935 79,935 79,935 93,075 607,362 381,463 428,436 416,573 PERFORMANCE RELATED % - - - - - - 13.98% 16.60% 17.07% 859,190 48.43% 3,146,354 REMUNERATION REPORTAUDITED38 REGIS RESOURCES ANNUAL REPORT 2016 TABLE 3: COMPENSATION OPTIONS – GRANTED, VESTED AND OUTSTANDING DURING THE YEAR GRANTED TERMS & CONDITIONS FOR EACH GRANT VESTED NO. GRANT DATE FAIR VALUE PER OPTION AT GRANT DATE EXERCISE PRICE PER OPTION EXPIRY DATE FIRST EXERCISE DATE LAST EXERCISE DATE % VESTED DURING THE YEAR NO. 2016 Executive Directors M Clark M Clark P Thomas P Thomas P Thomas Other Executives J Balkau(i) J Balkau(i) J Balkau(i) J Balkau(i) 750,000 12 Nov 15 $1.0400 $1.40 11 Aug 19 11 Aug 17 11 Aug 19 750,000 12 Nov 15 $1.2690 $1.40 11 Aug 19 11 Aug 18 11 Aug 19 250,000 12 Aug 15 $0.5804 $1.40 11 Aug 19 11 Aug 17 11 Aug 19 250,000 12 Aug 15 $0.7396 $1.40 11 Aug 19 11 Aug 18 11 Aug 19 1,500,000 12 Sep 14 - - - 12 Sep 16 12 Sep 17 100,000 12 Aug 15 $0.5804 $1.40 11 Aug 19 11 Aug 17 11 Aug 19 100,000 12 Aug 15 $0.7396 $1.40 11 Aug 19 11 Aug 18 11 Aug 19 - - - - - - - - - - - - - - 37,500 19 Aug 13 37,500 19 Aug 13 - - - - - - 31 Jul 16 31 Jul 17 31 Jul 15 31 Jul 17 37,500 50% P Woodman 500,000 25 Jan 16 $1.0032 $2.34 6 Jan 20 25 Jan 18 6 Jan 20 P Woodman 500,000 25 Jan 16 $1.2946 $2.34 6 Jan 20 25 Jan 19 6 Jan 20 200,000 12 Aug 15 $0.5804 $1.40 11 Aug 19 11 Aug 17 11 Aug 19 200,000 12 Aug 15 $0.7396 $1.40 11 Aug 19 11 Aug 18 11 Aug 19 - - - - - - - - - - - 19 Aug 13 - - - 31 Jul 15 - 50,000 50% 500,000 12 Aug 15 $0.5804 $1.40 11 Aug 19 11 Aug 17 11 Aug 19 500,000 12 Aug 15 $0.7396 $1.40 11 Aug 19 11 Aug 18 11 Aug 19 - - 50,000 19 Aug 13 50,000 19 Aug 13 - - - - - - 31 Jul 15 31 Jul 17 50,000 31 Jul 16 31 Jul 17 - - - 50% - 6,275,000 137,500 M Evans(ii) M Evans(ii) M Evans(ii) K Massey K Massey K Massey K Massey TOTAL (i) Mr Balkau retired from his position as General Manager – Exploration on 29 February 2016 as ceased to be a KMP from that date. Mr Balkau continues to work for the Company in a consulting capacity and such remains entitled to these options. (ii) Mr Evans resigned from his position as Chief Development Officer on 6 May 2016 and forfeited the right to the options that were granted and those that vested during his time as a KMP. TABLE 4: VALUE OF OPTIONS AWARDED AND EXERCISED DURING THE YEAR VALUE OF OPTIONS GRANTED DURING THE YEAR VALUE OF OPTIONS EXERCISED DURING THE YEAR REMUNERATION CONSISTING OF SHARE OPTIONS FOR THE YEAR Executive Directors M Clark(i) P Thomas(ii) Other Executives J Balkau P Woodman M Evans K Massey TOTAL $ 1,731,750 330,000 132,000 1,148,900 264,000 660,000 4,266,650 $ - - - - - - % 35.88% 60.67% 13.12% 47.17% n/a 36.43% (i) Mr Clark’s options were approved by shareholders at the 2015 AGM. (ii) Mr Thomas’ options were awarded prior to his appointment to the Board. There were no options exercised by KMPs during the year. No options were forfeited during the prior year due to performance criteria not being achieved. There have been no alterations to the terms and conditions of options awarded as remuneration since their award date. REMUNERATION REPORTAUDITEDREGIS RESOURCES ANNUAL REPORT 2016 39 TABLE 5: OPTION HOLDINGS OF KEY MANAGEMENT PERSONNEL The movement during the reporting period, by number of options over ordinary shares in Regis Resources Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows: HELD AT START OF PERIOD 1 JULY 2015 GRANTED AS REMUNERATION OPTIONS EXERCISED NET CHANGE OTHER HELD AT END OF PERIOD 30 JUNE 2016 TOTAL EXERCISABLE NOT EXERCISABLE VESTED AT 30 JUNE 2016 Executive Directors M Clark - 1,500,000 P Thomas 1,500,000 500,000 Other Executives J Balkau(i) 75,000 200,000 P Woodman(ii) n/a 1,000,000 M Evans(iii) K Massey 100,000 400,000 100,000 1,000,000 TOTAL 1,775,000 4,600,000 - - - - - - - - - - - 1,500,000 2,000,000 n/a 1,000,000 (500,000) n/a - - n/a - n/a - - n/a - n/a - 1,100,000 50,000 50,000 (500,000) 5,600,000 50,000 50,000 - - n/a - n/a - - (i) Mr Balkau retired from his position as General Manager – Exploration on 29 February 2016. (ii) Mr Woodman commenced with the Company on 25 January 2016 in the role of Chief Geological Officer. (iii) Mr Evans resigned from his position as Chief Development Officer on 6 May 2016. “Net change other” represents the number of options forfeited by Mr Evans at the time of his resignation. The 500,000 options forfeited comprise 400,000 options granted in the current financial year as disclosed in Table 3 above, and 100,000 options granted in the 2014 financial year. TABLE 6: SHAREHOLDINGS OF KEY MANAGEMENT PERSONNEL The movement during the reporting period in the number of ordinary shares in Regis Resources Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows: HELD AT 1 JULY 2015 ON EXERCISE OF OPTIONS NET CHANGE OTHER HELD AT 30 JUNE 2016 Non-Executive Directors N Giorgetta(i) M Okeby G Evans F Fergusson(ii) R Kestel J Mactier(iii) Executive Directors M Clark P Thomas Other Executives J Balkau(iv) P Woodman M Evans(v) K Massey TOTAL 16,529,671 1,200,000 3,507,815 5,003,957 - n/a 9,460,000 80,000 1,525,464 n/a 701,707 161,049 38,169,663 - - - - - - - - - - - - - 3,000,000 (500,000) (1,272,000) - 75,000 - n/a 700,000 2,235,815 n/a 75,000 - (4,500,000) 4,960,000 (80,000) - - (204,545) (161,049) - n/a - n/a - (3,642,594) 7,970,815 (i) Mr Giorgetta retired as non-executive director on 29 April 2016. (ii) Mr Fergusson retired as non-executive director on 12 November 2015. (iii) Mr Mactier was appointed as non-executive director on 23 February 2016. (iv) Mr Balkau retired as General Manager – Exploration on 29 February 2016. (v) Mr Evans resigned as Chief Development Officer on 6 May 2016. In all instances, “Net change other” relates to on-market purchases and sales of shares. REMUNERATION REPORTAUDITED40 REGIS RESOURCES ANNUAL REPORT 2016 All equity transactions with KMP other than those arising from the exercise of remuneration options have been entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length. LOANS TO KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES There were no loans made to any director, key management personnel and/or their related parties during the current or prior years. OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL Other than the ordinary accrual of personnel expenses at balance date, there are no other amounts receivable from and payable to key management personnel and their related parties. Signed in accordance with a resolution of the directors. Mr Mark Clark Executive Chairman Perth, 26 August 2016 REMUNERATION REPORTAUDITEDREGIS RESOURCES ANNUAL REPORT 2016 41 AUDITOR’S INDEPENDENCE DECLARATION Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To: the directors of Regis Resources Limited I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2016 there have been: (i) To: the directors of Regis Resources Limited no contraventions of the auditor independence requirements as set out in the Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the I declare that, to the best of my knowledge and belief, in relation to the audit for the financial audit. year ended 30 June 2016 there have been: (ii) (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 KPMG R Gambitta Partner Perth 26 August 2016 R Gambitta Partner Perth 26 August 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 42 REGIS RESOURCES ANNUAL REPORT 2016 FINANCIAL STATEMENTS FINANCIAL STATEMENTSCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016 REGIS RESOURCES ANNUAL REPORT 2016 43 Revenue Cost of goods sold Gross profit Other income Investor and corporate costs Personnel costs Share-based payment expense Occupancy costs Other corporate administrative expenses Impairment of non-current assets Other expenses Finance costs Profit before tax Income tax expense Profit from continuing operations Profit attributable to members of the parent Other comprehensive income Items that may be reclassified to profit or loss: Cash flow hedge reserve Unrealised gains on cash flow hedges Tax effect Items that will not be reclassified to profit or loss: Financial assets reserve Changes in the fair value of financial assets designated at fair value through other comprehensive income Tax effect Other comprehensive income for the period, net of tax Total comprehensive income for the period CONSOLIDATED 2016 $’000 2015 $’000 502,019 465,320 (335,136) (329,611) 166,883 135,709 6,294 2,452 NOTE 2 3 2 (1,677) (1,129) (5,304) (4,825) 24 (3,317) (1,959) (547) (457) (21) (839) (1,914) (524) (550) (47) (738) (3,365) 15 3 18 159,101 125,024 5 (47,308) (38,104) 111,793 111,793 86,920 86,920 5,006 (1,502) 4,633 (1,390) 6,747 6,747 - - - - - - TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO MEMBERS OF THE PARENT 118,540 86,920 Basic earnings per share attributable to ordinary equity holders of the parent (cents per share) Diluted earnings per share attributable to ordinary equity holders of the parent (cents per share) 4 4 22.37 17.39 22.22 17.39 The above statement of comprehensive income should be read in conjunction with the accompanying notes. FINANCIAL STATEMENTS44 REGIS RESOURCES ANNUAL REPORT 2016 CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2016 Current assets Cash and cash equivalents Gold bullion awaiting settlement Receivables Inventories Derivatives Financial assets Other current assets Total current assets Non-current assets Inventories Financial assets Property, plant and equipment Exploration and evaluation assets Mine properties under development Mine properties Total non-current assets Total assets Current liabilities Trade and other payables Interest-bearing liabilities Income tax payable Provisions Derivatives Total current liabilities Non-current liabilities Interest-bearing liabilities Deferred tax liabilities Provisions Total non-current liabilities Total liabilities NET ASSETS Equity Issued capital Reserves Retained profits/(accumulated losses) TOTAL EQUITY The above balance sheet should be read in conjunction with the accompanying notes. NOTE 7 8 9 10 21 19 10 19 11 12 13 14 16 18 17 21 18 23 17 22 22 CONSOLIDATED 2016 $’000 99,535 22,764 5,257 29,134 5,006 155 1,139 2015 $’000 51,781 12,710 4,732 30,818 - 152 939 162,990 101,132 25,866 21,377 6,442 - 187,663 208,959 123,739 118,779 1,199 68 83,358 65,874 428,267 415,057 591,257 516,189 35,155 36,104 1,125 11,123 1,903 713 787 3,522 3,622 - 50,019 44,035 1,485 20,806 37,099 59,390 21,420 1,140 39,621 62,181 109,409 106,216 481,848 409,973 431,335 431,338 28,574 18,510 21,939 (39,875) 481,848 409,973 FINANCIAL STATEMENTSREGIS RESOURCES ANNUAL REPORT 2016 45 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016 At 1 July 2015 Profit for the period Other comprehensive income Changes in the fair value of financial assets, net of tax Changes in the value of cash flow hedges, net of tax Total other comprehensive income for the year, net of tax Total comprehensive income for the year, net of tax Transactions with owners in their capacity as owners: Share-based payments expense Dividends paid ISSUED CAPITAL $’000 431,338 - - - - - - - Shares issued, net of transaction costs (3) CONSOLIDATED SHARE OPTION RESERVE FINANCIAL ASSETS RESERVE CASH FLOW HEDGE RESERVE RETAINED PROFITS/ (ACCUMULATED LOSSES) TOTAL EQUITY $’000 18,510 - - - - - $’000 $’000 $’000 $’000 - - 3,243 - - - - 3,504 3,243 3,504 (39,875) 409,973 111,793 111,793 - - - 3,243 3,504 6,747 3,243 3,504 111,793 118,540 3,317 - - - - - - - - - 3,317 (49,979) (49,979) - (3) AT 30 JUNE 2016 431,335 21,827 3,243 3,504 21,939 481,848 At 1 July 2014 Profit for the period Other comprehensive income Total comprehensive income for the year 431,304 16,551 - - - - - - Transactions with owners in their capacity as owners: Share-based payments expense Shares issued, net of transaction costs - 34 1,959 - AT 30 JUNE 2015 431,338 18,510 - - - - - - - - - - - - - - (126,795) 321,060 86,920 86,920 - - 86,920 86,920 - - 1,959 34 (39,875) 409,973 The above statement of changes in equity should be read in conjunction with the accompanying notes. FINANCIAL STATEMENTS46 REGIS RESOURCES ANNUAL REPORT 2016 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016 Cash flows from operating activities Receipts from gold sales Payments to suppliers and employees Option premium income received Interest received Interest paid Proceeds from rental income Income tax paid Net cash from operating activities Cash flows from investing activities Acquisition of property, plant and equipment Proceeds on disposal of property, plant and equipment Payments for exploration and evaluation (net of rent refunds) Payments for exploration assets (net of cash) Payments for financial assets Payments for mine properties under development Payments for mine properties Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Payment of transaction costs Payment of dividends Repayment of finance lease Repayment of borrowings Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July CASH AND CASH EQUIVALENTS AT 30 JUNE CONSOLIDATED 2016 $’000 2015 $’000 NOTE 490,098 459,750 (266,569) (316,314) 2,715 1,745 75 458 (1,063) (2,024) 8 (22,933) 10 - 7 204,001 141,955 (20,469) (19,257) 165 - (18,141) (10,292) (100) (1,812) (816) (1,557) (4) (1,800) (44,355) (43,855) (85,528) (76,765) - (3) (49,979) 37 (3) - (737) (58) (20,000) (20,000) (70,719) (20,024) 47,754 51,781 45,166 6,615 7 99,535 51,781 The above statement of cash flows should be read in conjunction with the accompanying notes. FINANCIAL STATEMENTSREGIS RESOURCES ANNUAL REPORT 2016 47 FINANCIAL STATEMENTS48 REGIS RESOURCES ANNUAL REPORT 2016 Notes to the FINANCIAL STATEMENTS FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 49 Basis of preparation Performance for the year 1. Segment Information 2. Revenue and Other Income 3. Expenses 4. Earnings per Share 5. Current Income Tax 6. Dividends 7. Cash and Cash Equivalents Operating assets and liabilities 8. Gold Bullion Awaiting Settlement 9. Receivables 10. Inventories 11. Property, Plant and Equipment 12. Exploration and Evaluation Assets 13. Mine Properties under Development 14. Mine Properties 15. Impairment of Non-Financial Assets 16. Trade and Other Payables 17. Provisions 50 51 51 52 53 55 56 56 57 58 58 58 59 59 61 62 62 64 65 65 Capital structure, financial instruments and risk 67 18. Net Debt and Finance Costs 19. Financial Assets 20. Financial Risk Management 21. Derivatives and Hedging 22. Issued Capital and Reserves Other disclosures 23. Deferred Income Tax 24. Share-based Payments 25. Related Parties 26. Parent Entity Information 27. Commitments 28. Contingencies 29. Auditor’s Remuneration 30. Subsequent Events 31. New Accounting Standards and Interpretations 67 68 69 72 73 75 75 76 78 79 80 81 81 81 81 FINANCIAL STATEMENTSNOTES TO THE50 REGIS RESOURCES ANNUAL REPORT 2016 BASIS OF PREPARATION Regis Resources Limited (“Regis” or the “Company”) is a for profit company limited by shares, incorporated and domiciled in Australia, whose shares are publicly traded on the Australian Securities Exchange. Its registered office and principal place of business is: Regis Resources Limited Level 1 1 Alvan Street Subiaco WA 6008 A description of the nature of operations and principal activities of Regis and its subsidiaries (collectively, the “Group”) is included in the Directors’ Report, which is not part of these financial statements. The financial statements were authorised for issue in accordance with a resolution of the directors on 26 August 2016. The financial report is a general purpose financial report which: has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB); has been prepared on a historical cost basis except for assets and liabilities and share-based payments which are required to be measured at fair value. The basis of measurement is discussed further in the individual notes; is presented in Australian dollars with all values rounded to the nearest thousand dollars ($’000) unless otherwise stated, in accordance with ASIC Instrument 2016/191; for consistency with the current year’s presentation; adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the operations of the Group and effective for reporting periods beginning on or after 1 July 2015. Refer to note 31 for further details; does not early adopt Accounting Standards and Interpretations that have been issued or amended but are not yet effective with the exception of AASB 9 Financial Instruments (2014) including consequential amendments to other standards which was adopted on 1 July 2015. Refer to note 31 for further details. PRINCIPLES OF CONSOLIDATION The consolidated financial statements comprise the financial statements of the Group. A list of controlled entities (subsidiaries) at year end is contained in note 25. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profits and losses resulting from intra-group transactions have been eliminated. Subsidiaries are consolidated from the date on which control is obtained to the date on which control is disposed. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. FOREIGN CURRENCIES Both the functional currency of each entity within the Group and the Group’s presentation currency is Australian dollars. Transactions in foreign currencies are initially recorded in Australian dollars at the exchange rate on that day. Foreign currency monetary assets and liabilities are translated to Australian dollars at the reporting date exchange rate. Foreign currency gains and losses are generally recognised in profit or loss. OTHER ACCOUNTING POLICIES Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial statements are provided throughout the notes to the financial statements. Where possible, wording has been simplified to provide clearer commentary on the financial report of the Group. Accounting policies determined non-significant are not included in the financial statements. There have been no changes to the Group’s accounting policies that are no longer disclosed in the financial statements. KEY ESTIMATES AND JUDGEMENTS In the process of applying the Group’s accounting policies, management has made a number of judgements and applied estimates of future events. Judgements and estimates which are material to the financial report are found in the following notes. Note 3 Expenses Note 10 Inventories Page 53 Page 59 Note 12 Exploration and evaluation assets Page 61 Note 14 Mine properties Page 62 Page 64 Page 65 Page 75 Page 76 Note 17 Provisions Note 23 Deferred income tax Note 24 Share-based payments THE NOTES TO THE FINANCIAL STATEMENTS The notes include information which is required to understand the financial statements and is material and relevant to the operations and the financial position and performance of the Group. Information is considered relevant and material if, for example: the amount is significant due to its size or nature; the amount is important for understanding the results of the Group; it helps to explain the impact of significant changes in the Group’s business; or it relates to an aspect of the Group’s operations that is important to its future performance. The notes are organised into the following sections: Performance for the year; Operating assets and liabilities; Capital structure and risk; Other disclosures. A brief explanation is included under each section. presents reclassified comparative information where required Note 15 Impairment FINANCIAL STATEMENTSNOTES TO THE REGIS RESOURCES ANNUAL REPORT 2016 51 PERFORMANCE FOR THE YEAR This section focuses on the results and performance of the Group. This covers both profitability and the resultant return to shareholders via earnings per share combined with cash generation and the return of cash to shareholders via dividends. 1. Segment Information Operating segments are reported in a manner that is consistent with the internal reporting provided to the Executive Chairman and his executive management team (the chief operating decision makers). The Group has two reportable segments which comprise the Duketon Gold Project; being Duketon North Operations (“DNO”), currently only comprising Moolart Well and Duketon South Operations (“DSO”), currently incorporating Garden Well and Rosemont. Other than the name, the segments are unchanged from those reported at 30 June 2015. A number of new mining operations at satellite pits will commence in the next several years. In addition to Moolart Well, DNO will include Gloster, Dogbolter, Petra and Anchor pits as all will be processed through the Moolart Well processing plant. DSO will add Erlistoun, Baneygo and the other satellite projects in that area to the Garden Well leaching circuit. Unallocated items comprise corporate administrative costs (including personnel costs, share based payments, occupancy costs and investor and corporate costs), interest revenue, finance costs, net gains and losses on derivatives, exploration and evaluation assets relating to areas of interest where an economically recoverable reserve is yet to be delineated, cash, derivative assets and income tax assets. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, conduct exploration and evaluation activities and develop mine properties. The following table presents financial information for reportable segments for the years ended 30 June 2016 and 30 June 2015: DUKETON NORTH OPERATIONS DUKETON SOUTH OPERATIONS UNALLOCATED TOTAL 2016 2015 2016 2015 2016 2015 2016 2015 CONTINUING OPERATIONS $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Segment revenue Sales to external customers 124,661 144,400 375,491 320,454 Other revenue - - - - Total segment revenue 124,661 144,400 375,491 320,454 Total revenue per the statement of comprehensive income - 1,867 1,867 - 500,152 464,854 466 1,867 466 466 502,019 465,320 502,019 465,320 Interest expense Impairment of non-current assets - - - - - - - - 981 21 1,677 47 981 21 1,677 47 Depreciation and amortisation 34,482 24,612 40,607 28,776 248 229 75,337 53,617 Depreciation capitalised (93) (87) Total depreciation and amortisation recognised in the statement of comprehensive income 75,244 53,530 Segment result Segment net operating profit/(loss) before tax 30,341 54,528 137,886 81,564 (9,126) (11,068) 159,101 125,024 Segment assets Segment assets at balance date 62,087 62,849 272,784 261,408 256,386 191,932 591,257 516,189 Capital expenditure for the year 18,974 6,650 41,386 57,596 17,692 13,059 78,052 77,305 FINANCIAL STATEMENTSNOTES TO THE52 REGIS RESOURCES ANNUAL REPORT 2016 2. Revenue and Other Income Accounting Policies GOLD SALES Revenue is recognised and measured at the fair value of the consideration received or receivable, when the amount of revenue can be reliably measured and it is probable that future economic benefits will flow to the Group. The specific recognition criteria for the Group’s gold sales is upon dispatch of the gold bullion from the mine site as this is the point at which the significant risks and rewards of ownership and control of the product passes to the customer. Adjustments are made for variations in gold price, assay and weight between the time of dispatch and the time of final settlement. INTEREST Interest income is recognised as it accrues using the effective interest method. Revenue Gold sales Interest Gold forward contracts CONSOLIDATED 2016 $’000 500,152 1,867 502,019 2015 $’000 464,854 466 465,320 As part of the risk management policy of the Group and in compliance with the conditions required by the Group’s financier, 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 Macquarie Bank Limited (“MBL”). 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 MBL or its agent. Open contracts at balance date are summarised in the table below: GOLD FOR PHYSICAL DELIVERY CONTRACTED GOLD SALE PRICE VALUE OF COMMITTED SALES MARK-TO-MARKET(I) 2016 2015 OUNCES OUNCES Within one year - Spot deferred contracts(ii) 353,770 135,197 - Fixed forward contracts 80,000 45,834 - Fixed forward contracts Between one and five years - Fixed forward contracts - - 20,000 80,000 2016 $/OZ 1,581 1,454 - - 2015 $/OZ 2016 2015 2016 2015 $’000 $’000 $’000 $’000 1,437 559,206 194,210 (68,594) (11,310) 1,403 116,280 64,275 (27,121) (6,263) 1,454 1,454 - - 29,070 116,280 - - (1,723) (9,316) 433,770 281,031 675,486 403,835 (95,715) (28,612) Mark-to-market has been calculated with reference to the following spot price at period end $1,774/oz $1,520/oz (i) Mark-to-market represents the value of the open contracts at balance date, calculated with reference to the gold spot price at that date. A negative amount reflects a valuation in the counterparty’s favour. (ii) The contracted gold sale price disclosed for spot deferred contracts reflects a weighted average of a range of contract prices. The range of prices at the end of the year was from $1,402/oz to $1,803/oz (2015: $1,402/oz to $1,588/oz). FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 53 CONSOLIDATED 2016 $’000 4,283 2,002 9 6,294 2015 $’000 2,367 75 10 2,452 Other income Rehabilitation provision adjustment Net gain on financial instruments at fair value through profit or loss Rental income The net gain on financial instruments at fair value through profit or loss relates to sold gold call options that do not qualify for hedge accounting. During the current financial year, the Group sold gold call options for 73,000 ounces with a weighted average exercise price of A$1,700/oz (2015: 7,000 ounces at A$1,409/oz). Offsetting the premium income received during the current year is the fair value of open contracts at balance date, recognised on the balances sheet as “derivative liabilities”. In the prior year, there were no open contracts at balance date and the net gain reflected premiums received. For more information on the measurement and recognition of derivatives, refer to note 21. 3. Expenses Accounting Policies CASH COSTS OF PRODUCTION Cash costs of production include direct costs incurred for mining, milling, laboratory and mine site administration, net of costs capitalised to pre-strip and production stripping assets. This category also includes movements in the cost of inventory and any net realisable value write downs. Cost of goods sold Cash costs of production Royalties Depreciation of mine plant and equipment Amortisation of mine properties CONSOLIDATED 2016 $’000 238,158 21,889 42,823 32,266 335,136 2015 $’000 256,192 20,031 36,710 16,678 329,611 DEPRECIATION Depreciation of mine specific plant and equipment and buildings and infrastructure is charged to the statement of comprehensive income on a unit-of-production basis over the economically recoverable reserves of the mine concerned, except in the case of assets whose useful life is shorter than the life of the mine, in which case the straight-line method is used. The unit of account is tonnes of ore milled. Depreciation of non-mine specific plant and equipment is charged to the statement of comprehensive income and exploration and evaluation assets on a straight-line basis over the estimated useful lives of each part of an item of plant and equipment in current and comparative periods as follows: Plant and equipment: 3 - 20 years Fixtures and fittings: 3 - 20 years Leasehold improvements: 10 years Depreciation methods, useful lives and residual values are reviewed at each reporting date. AMORTISATION Mine properties are amortised on a unit-of-production basis over the economically recoverable reserves of the mine concerned. The unit of account is tonnes of ore milled. FINANCIAL STATEMENTSNOTES TO THE54 REGIS RESOURCES ANNUAL REPORT 2016 Depreciation and amortisation Depreciation expense Amortisation expense Less: Amounts capitalised Depreciation and amortisation charged to the statement of comprehensive income Key estimates and assumptions UNIT-OF-PRODUCTION METHOD OF DEPRECIATION/AMORTISATION CONSOLIDATED 2016 $’000 43,071 32,266 (93) 75,244 2015 $’000 36,939 16,678 (87) 53,530 The Group uses the unit-of-production basis when depreciating/amortising life of mine specific assets which results in a depreciation/amortisation charge proportionate to the depletion of the anticipated remaining life of mine production. Each item’s economic life, which is assessed annually, has due regard for both its physical life limitations and to present assessments of economically recoverable reserves of the mine property at which it is located. Employee benefits expense Wages and salaries Defined contribution superannuation expense Share-based payments expense Other employee benefits expense Less: Amounts capitalised Employee benefits expense recognised in the statement of comprehensive income Lease payments and other expenses included in the statement of comprehensive income Minimum lease payments – operating lease Less: Amounts capitalised Recognised in the statement of comprehensive income Other expenses Gold swap fees Non-capital exploration expenditure Loss on disposal of assets Rehabilitation provision adjustment CONSOLIDATED NOTE 2016 $’000 2015 $’000 33,459 30,347 24 3,027 3,317 2,118 41,921 (3,365) 38,556 356 (107) 249 175 660 4 - 839 2,759 1,959 1,893 36,958 (2,627) 34,331 351 (105) 246 151 579 8 - 738 FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 55 4. Earnings per Share Accounting Policy Earnings per share (“EPS”) is the amount of post-tax profit 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 share options on issue. Earnings used in calculating EPS Net profit attributable to ordinary equity holders of the parent 111,793 86,920 CONSOLIDATED 2016 $’000 2015 $’000 Weighted average number of shares Issued ordinary shares at 1 July Effect of shares issued Weighted average number of ordinary shares at 30 June Effect of dilution: Share options NO. SHARES (‘000S) NO. SHARES (‘000S) 499,782 499,744 6 29 499,788 499,773 3,291 21 Weighted average number of ordinary shares adjusted for the effect of dilution 503,079 499,794 There have been no transactions involving ordinary shares between the reporting date and the date of completion of these financial statements which would impact on the above EPS calculations. FINANCIAL STATEMENTSNOTES TO THE56 REGIS RESOURCES ANNUAL REPORT 2016 5. Current Income Tax Accounting Policy CURRENT TAX Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. CONSOLIDATED The major components of income tax expense are: Current income tax Current income tax expense Adjustment in respect of income tax of previous years Deferred income tax Relating to the origination and reversal of temporary differences Adjustment in respect of income tax of previous years Income tax expense reported in the statement of comprehensive income Deferred tax payable related to items recognised in OCI during the year Net gain on revaluation of cash flow hedges Unrealised gain on financial assets Deferred tax charged to OCI A reconciliation between tax expense and the product of accounting profit before tax multiplied by the Group’s applicable income tax rate is as follows: Accounting profit before income tax At the Group’s statutory income tax rate of 30% (2015: 30%) Share-based payments Other non-deductible items Adjustment in respect of income tax of previous years Income tax expense reported in the statement of comprehensive income 2016 $’000 31,996 (1,462) 16,736 38 47,308 1,502 1,390 2,892 159,101 47,730 996 6 (1,424) 47,308 2015 $’000 26,121 4,480 11,976 (4,473) 38,104 - - - 125,024 37,507 588 3 6 38,104 6. Dividends CONSOLIDATED Declared and paid during the year: Dividends on ordinary shares Final franked dividend for 2015: 6 cents per share (2014: nil) Interim franked dividend for 2016: 4 cents per share (2015: nil) 2016 $’000 29,987 19,992 49,979 2015 $’000 - - - Proposed by the directors after balance date but not recognised as a liability at 30 June: Dividends on ordinary shares Final dividend for 2016: 9 cents per share (2015: 6 cents per share) 45,006 29,987 Dividend franking account Amount of franking credits available to shareholders of Regis Resources Limited for subsequent financial years 12,644 - The ability to utilise the franking credits is dependent upon the ability to declare dividends. FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 57 7. Cash and Cash Equivalents Accounting Policy CASH AND CASH EQUIVALENTS Cash and cash equivalents in the balance sheet comprise cash at bank and in hand. Cash at bank earns interest at floating rates based on daily bank deposit rates. At 30 June 2016, the Group had no undrawn, committed borrowing facilities available (2015: nil). Refer to note 18. Cash and cash equivalents in the balance sheet and cash flow statement Cash at bank and on hand Restrictions on cash CONSOLIDATED 2016 $’000 2015 $’000 99,535 51,781 The Group is required to maintain $161,000 (2015: $161,000) on deposit to secure a bank guarantee in relation to the Perth office lease. The amount will be held for the term of the lease. Refer to note 27. Reconciliation of profit after income tax to net cash inflow from operating activities Net profit for the year Adjustments for: Impairment of non-current assets Unwinding of discount on provisions Loss on disposal of assets Unrealised gain on derivatives Share-based payments Rehabilitation provision adjustment Depreciation and amortisation Changes in assets and liabilities (Increase)/decrease in gold bullion awaiting settlement (Increase)/decrease in receivables (Increase)/decrease in inventories (Increase)/decrease in other current assets Increase/(decrease) in income tax payable Increase/(decrease) in trade and other payables Increase/(decrease) in deferred tax liabilities Increase/(decrease) in provisions Net cash from operating activities CONSOLIDATED 2016 $’000 2015 $’000 111,793 86,920 21 933 4 713 3,317 (4,283) 75,244 (10,054) (376) (2,805) (180) 7,601 5,899 16,774 (600) 47 1,543 8 - 1,959 (2,367) 53,530 (5,105) (1,136) (9,150) 272 30,620 (21,750) 7,503 (939) 204,001 141,955 NON-CASH FINANCING AND INVESTING ACTIVITIES During the year ended 30 June 2016, the Group entered into a hire purchase arrangement for the acquisition of a Komatsu WA600 loader for the Duketon Gold Project. The amount financed was $1,222,000. In the prior year, the Group entered into a hire purchase arrangement for the acquisition of a Komatsu WA900 loader for the Duketon Gold Project. The amount financed was $2,183,000. Refer to note 18 for further details. These transactions are not reflected in the statement of cash flows. FINANCIAL STATEMENTSNOTES TO THE58 REGIS RESOURCES ANNUAL REPORT 2016 OPERATING ASSETS AND LIABILITIES This section shows the assets used to generate the Group’s trading performance and the liabilities incurred as a result. Liabilities relating to the Group’s financing activities are addressed in the capital structure and finance costs section on page 67. 8. Gold Bullion Awaiting Settlement Accounting Policy Bullion awaiting settlement comprises gold that has been received by the refiner prior to period end but which has not yet been delivered into a sale contract. Bullion awaiting settlement is initially recognised at the expected selling price and adjustments for variations in the gold price are made at the time of final settlement. Due to the short-term nature of the bullion awaiting settlement, the carrying value is assumed to approximate fair value. The maximum exposure to credit risk is the fair value. Current Gold bullion awaiting settlement CONSOLIDATED 2016 $’000 2015 $’000 22,764 12,710 At balance date, gold bullion awaiting settlement comprised 12,538 ounces valued at a weighted average realisable value of $1,815/oz (2015: 8,158 ounces at $1,558/oz). 9. Receivables Accounting Policy Receivables are initially recognised at fair value and subsequently at the amounts considered receivable (financial assets at amortised cost). Balances within receivables do not contain impaired assets, are not past due and are expected to be received when due. The Group does not have trade receivables in relation to gold sales. The only material receivables at year end are for GST and fuel tax credits receivable from the Australian Taxation Office and therefore, the Group is not generally exposed to credit risk in relation to its receivables. Due to the short-term nature of these receivables, their carrying value is assumed to approximate fair value. Current GST receivable Fuel tax credit receivable Interest receivable Dividend trust account Other receivables CONSOLIDATED 2016 $’000 2,955 1,527 140 439 196 2015 $’000 2,850 1,364 17 340 161 5,257 4,732 FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 59 10. Inventories Accounting Policy Gold bullion, gold in circuit and ore stockpiles are physically measured or estimated and valued at the lower of cost and net realisable value. Cost is determined by the weighted average method and comprises direct purchase costs and an appropriate portion of fixed and variable overhead costs, including depreciation and amortisation, incurred in converting ore into gold bullion. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs of selling the final product, including royalties. Consumable stores are valued at the lower of cost and net realisable value. The cost of consumable stores is measured on a first-in first-out basis. Inventories expected to be sold (or consumed in the case of stores) within 12 months after the balance sheet date are classified as current assets, all other inventories are classified as non-current. Current Ore stockpiles Gold in circuit Bullion on hand Consumable stores Non-current Ore stockpiles CONSOLIDATED 2016 $’000 16,733 8,957 525 2,919 29,134 2015 $’000 11,780 10,168 6,022 2,848 30,818 25,866 21,377 During the year ended 30 June 2015, a portion of ore stockpiles were reclassified as non-current as a result of the annual update of life of mine plans. These stockpiles continue to be classified as non-current as at 30 June 2016, which reflects the expected timing for the conversion to bullion and subsequent sale. At 30 June 2016, all inventory is carried at cost. At the prior year end, all inventory was carried at cost, except for the non-current ore stockpile which was held at net realisable value. During the current year, there was no expense recognised in costs of goods sold for inventories carried at net realisable value (2015: $1,810,000 expense recognised). Key estimates and assumptions INVENTORIES Net realisable value tests are performed at each reporting date and represent the estimated future sales price of the product based on prevailing spot metals process at the reporting date, less estimated costs to complete production and bring the product to sale. Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained gold ounces based on assay data, and the estimated recovery percentage. Stockpile tonnages are verified by periodic surveys. 11. Property, Plant and Equipment Accounting Policy The value of property, plant and equipment is measured as the cost of the asset, less accumulated depreciation and impairment. The cost of the asset also includes the cost of replacing parts that are eligible for capitalisation, the cost of major inspections and an initial estimate of the cost of dismantling and removing the item from site at the end of its useful life (rehabilitation provisions). Changes in the rehabilitation provisions resulting from changes in the size or timing of the cost or from changes in the discount rate are also recognised as part of the asset cost. FINANCIAL STATEMENTSNOTES TO THE60 REGIS RESOURCES ANNUAL REPORT 2016 DERECOGNITION An item of property, plant and equipment is derecognised when it is sold or otherwise disposed of, or when its use is expected to bring no further economic benefits. Any gain or loss from derecognising the asset (the difference between the proceeds on disposal and the carrying amount of the asset) is included in the income statement in the period the item is derecognised. FREEHOLD LAND LEASEHOLD IMPROVEMENTS PLANT & EQUIPMENT BUILDINGS & INFRASTRUCTURE CAPITAL WIP TOTAL CONSOLIDATED FURNITURE & EQUIPMENT $’000 $’000 $’000 $’000 $’000 $’000 $’000 Net carrying amount at 1 July 2015 16,488 409 133,541 Additions Depreciation expense Transfers between classes Rehabilitation provision adjustments Disposals - - - - - 4 8,408 613 221 47,537 10,371 208,959 1,308 12,290 22,231 (72) (30,238) (229) (12,532) - (43,071) - - - 3,101 (34) (169) 11 - - 11,501 (14,613) (253) - - - - (287) (169) Net carrying amount at 30 June 2016 16,488 341 114,609 616 47,561 8,048 187,663 At 30 June 2016 Cost 16,488 725 223,997 1,663 88,104 8,048 339,025 Accumulated depreciation - (384) (109,388) (1,047) (40,543) - (151,362) Net carrying amount 16,488 341 114,609 616 14,561 8,048 187,663 Net carrying amount at 1 July 2014 16,488 481 136,702 Additions Depreciation expense Transfers from mine properties under development Transfers between classes Rehabilitation provision adjustments Disposals - - - - - - - 8,034 (72) (26,142) - - - - 14,277 743 (65) (8) 726 69 (188) - 6 - - 54,026 3,597 212,020 3,191 8,052 19,346 (10,537) 734 529 (406) - - - (1,278) - - (36,939) 15,011 - (471) (8) Net carrying amount at 30 June 2015 16,488 409 133,541 613 47,537 10,371 208,959 At 1 July 2014 Cost 16,488 721 191,393 Accumulated depreciation - (240) (54,691) Net carrying amount 16,488 481 136,702 At 30 June 2015 Cost Accumulated depreciation Net carrying amount 16,488 721 213,694 - 16,488 (312) 409 (80,153) 133,541 1,357 (631) 726 1,432 (819) 613 74,309 3,597 287,865 (20,283) - (75,845) 54,026 3,597 212,020 76,187 10,371 318,893 (28,650) - (109,934) 47,537 10,371 208,959 FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 61 12. Exploration and Evaluation Assets Accounting Policy Exploration and evaluation expenditure is accumulated on an area of interest basis. Exploration and evaluation assets include the costs of acquiring licences, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination. Expenditure is carried forward when incurred in areas for which the Group has rights of tenure and where economic mineralisation is indicated, but activities have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active and significant operations in, or in relation to, the area of interest are continuing. Costs incurred before the Group has obtained the legal rights to explore an area are recognised in the statement of comprehensive income. Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mine properties under development. No amortisation is charged during the exploration and evaluation phase. CONSOLIDATED Reconciliation of movements during the year Balance at 1 July Expenditure for the period Acquisition of tenements Impairment Transferred to mine properties Balance at 30 June NOTE 15 14 2016 $’000 118,779 17,440 100 (21) (12,559) 123,739 2015 $’000 105,788 11,394 1,644 (47) - 118,779 ACQUISITION OF TENEMENTS The Group made an up-front payment of $100,000 as part of an agreement to enter into an exploration joint venture with Duketon Mining Limited (“DKM”) on four of DKM’s exploration licences which are in proximity to the Moolart Well project. IMPAIRMENT Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts and circumstances suggest that the carrying amount exceeds the recoverable amount. For the purposes of impairment testing, exploration and evaluation assets are allocated to cash-generating units (“CGUs”) to which the exploration activity relates. The CGU is not larger than the area of interest. Carrying value by area of interest Moolart Well CGU Garden Well CGU Duketon Gold Project satellite deposits Regional WA exploration McPhillamys 1,840 3,144 19,343 7,947 91,465 123,739 9,719 1,931 11,912 4,367 90,850 118,779 Key estimates and assumptions IMPAIRMENT OF EXPLORATION AND EVALUATION ASSETS The future recoverability of capitalised exploration and evaluation expenditure is dependent upon a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact future recoverability include the level of reserves and 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, profits and net assets will be reduced in the period in which the determination is made. FINANCIAL STATEMENTSNOTES TO THE62 REGIS RESOURCES ANNUAL REPORT 2016 Exploration expenditure commitments Exploration expenditure commitments represent tenement rentals and expenditure requirements that may be required to be met under the relevant legislation should the Group wish to retain tenure on all current tenements in which the Group has an interest. The terms and conditions under which the Group retains title to its various mining tenements oblige it to meet tenement rentals and minimum levels of exploration expenditure as gazetted by the Western Australian and New South Wales state governments, as well as local government rates and taxes. The exploration commitments of the Group not provided for in the consolidated financial statements and payable are as follows: Within one year CONSOLIDATED 2016 $’000 2,804 2015 $’000 2,255 The tenement commitments shown above represent the minimum required to be spent on all granted tenements as at reporting date. Actual expenditure will vary as a result of ongoing management of the tenement portfolio including reductions and relinquishment of tenements not considered prospective, in whole or in part. Tenement commitments are shown gross of exemptions that are likely to be available in the ordinary course of business as the financial impact of potential exemptions cannot be measured reliably in advance. 13. Mine Properties under Development Accounting Policy Mine properties under development represents the costs incurred in preparing mines for production and includes plant and equipment under construction and operating costs incurred before production commences. These costs are capitalised to the extent they are expected to be recouped through the successful exploitation of the related mining leases. Once production commences, these costs are transferred to property, plant and equipment and mine properties, as relevant, and are depreciated and amortised using the units- of-production method based on the estimated economically recoverable reserves to which they relate or are written off if the mine property is abandoned. Balance at beginning of period Pre-production expenditure capitalised Construction expenditure Transferred to property, plant and equipment Balance at end of period 14. Mine Properties Accounting Policies CONSOLIDATED 2016 $’000 68 1,131 - - 1,199 2015 $’000 14,235 68 776 (15,011) 68 PRODUCTION STRIPPING COSTS Once access to the ore is attained, all waste that is removed from that point forward is considered production stripping activity. The amount of production stripping costs deferred is based on the extent to which the current period cost per tonne of ore mined exceeds the expected cost per tonne for the life of the identified component. A component is defined as a specific volume of the ore body that is made more accessible by the stripping activity, and is identified based on the mine plan. The production stripping asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of the ore body. The production stripping asset is then carried at cost less accumulated amortisation and any impairment losses. The production stripping asset is amortised over the expected useful life of the identified component (determined based on economically recoverable reserves), on a unit of production basis. The unit of account is tonnes of ore mined. FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 63 PRE-STRIP COSTS In open pit mining operations, it is necessary to remove overburden and waste materials to access the ore. This process is referred to as stripping and the Group capitalises stripping costs incurred during the development of a mine (or pit) as part of the investment in constructing the mine (“pre-strip”). These costs are subsequently amortised over the life of mine on a units of production basis, where the unit of account is tonnes of ore milled. OTHER MINE PROPERTIES Other mine properties represents expenditure in respect of exploration, evaluation, feasibility and pre-production operating costs incurred by the Group previously accumulated and carried forward in mine properties under development in relation to areas of interest in which mining has now commenced. Other mine properties are stated at cost, less accumulated amortisation and accumulated impairment losses. Other mine properties are amortised on a unit-of-production basis over the economically recoverable reserves of the mine concerned. The unit of account is tonnes of ore milled. Net carrying amount at 1 July 2015 Additions Transfers from exploration and evaluation assets Rehabilitation provision adjustment Amortisation expense Net carrying amount at 30 June 2016 At 30 June 2016 Cost Accumulated amortisation Net carrying amount Net carrying amount at 1 July 2014 Additions Rehabilitation provision adjustment Amortisation expense Net carrying amount at 30 June 2015 At 30 June 2015 Cost Accumulated amortisation Net carrying amount At 1 July 2014 Cost Accumulated amortisation Net carrying amount PRODUCTION STRIPPING COSTS PRE-STRIP COSTS OTHER MINE PROPERTIES CONSOLIDATED $’000 20,464 5,521 - - (6,016) 19,969 36,843 (16,874) 19,969 8,103 16,231 - (3,870) 20,464 31,322 (10,858) 20,464 15,091 (6,988) 8,103 $’000 31,663 21,794 - - (16,123) 37,334 67,335 (30,001) 37,334 11,434 27,317 - (7,088) 31,663 45,541 (13,878) 31,663 18,224 (6,790) 11,434 $’000 13,747 9,935 12,559 (59) (10,127) 26,055 72,486 (46,431) 26,055 19,131 529 (193) (5,720) 13,747 50,051 (36,304) 13,747 49,715 (30,584) 19,131 TOTAL $’000 65,874 37,250 12,559 (59) (32,266) 83,358 176,664 (93,306) 83,358 38,668 44,077 (193) (16,678) 65,874 126,914 (61,040) 65,874 83,030 (44,362) 38,668 FINANCIAL STATEMENTSNOTES TO THE 64 REGIS RESOURCES ANNUAL REPORT 2016 Key estimates and assumptions PRODUCTION STRIPPING COSTS The Group capitalises mining costs incurred during the production stage of its operations in accordance with the accounting policy described above. The identification of specific components will vary between mines as a result of both the geological characteristics and location of the ore body. The financial considerations of the mining operations may also impact the identification and designation of a component. The expected cost per tonne is a function of an individual mine’s design and therefore changes to that design will generally result in changes to the expected cost. Changes in other technical or economic parameters that impact reserves will also have an impact on the expected costs per tonne for each identified component. Changes in the expected cost per tonne are accounted for prospectively from the date of change. 15. Impairment of Non-Financial Assets ACCOUNTING POLICY At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group 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. The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Total impairment losses recognised in the statement of comprehensive income for the year were as follows: Exploration and evaluation assets NOTE 12 CONSOLIDATED 2016 $’000 21 21 2015 $’000 47 47 EXPLORATION AND EVALUATION ASSETS An impairment loss of $21,000 (2015: $47,000) has been recognised in relation to tenements that were surrendered, relinquished or expired during the year. There were no other indicators of impairment identified. Key judgements DETERMINATION OF MINERAL RESOURCES AND ORE RESERVES The determination of mineral resources and ore reserves impacts the accounting for asset carrying values. The Group estimates its mineral resources and ore reserves in accordance with the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2012 (the “JORC” Code). The information on mineral resources and ore reserves was prepared by or under the supervision of Competent Persons as defined in the JORC Code. The amounts presented are based on the mineral resources and ore reserves determined under the JORC Code. There are numerous uncertainties inherent in estimating mineral resources and ore reserves, and assumptions that are valid at the time of estimation may change significantly when new information becomes available. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and may ultimately result in reserves being restated. FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 65 16. Trade and Other Payables Accounting Policies TRADE PAYABLES Trade and other payables are initially recognised at the value of the invoice received from a supplier and subsequently measured at amortised cost. They represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and generally paid within 30 days of recognition. EMPLOYEE ENTITLEMENTS A liability is recognised for the amount expected to be paid to an employee for annual leave they are presently entitled to as a result of past service. The liability includes allowances for on-costs such as superannuation and payroll taxes, as well as any future salary and wage increases that the employee may be reasonably entitled to. Current Trade payables Accrued expenses Employee entitlements – annual leave payable Other payables 17. Provisions Accounting Policies CONSOLIDATED 2016 $’000 14,182 11,241 2,727 7,005 35,155 2015 $’000 11,813 15,710 2,429 6,152 36,104 Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost. Refer to note 18. SITE REHABILITATION In accordance with the Group’s published environmental policy and applicable legal requirements, a provision for site rehabilitation is recognised in respect of the estimated cost of rehabilitation and restoration of the areas disturbed by mining activities up to the reporting date, but not yet rehabilitated. When the liability is initially recorded, the estimated cost is capitalised by increasing the carrying amount of the related mining assets. At each reporting date the site rehabilitation provision is re-measured to reflect any changes in discount rates and timing or amounts to be incurred. Additional disturbances or changes in rehabilitation costs will be recognised as additions or changes to the corresponding asset and rehabilitation provision, prospectively from the date of change. For closed sites, or where the carrying value of the related asset has been reduced to nil either through depreciation and amortisation or impairment, changes to estimated costs are recognised immediately in the statement of comprehensive income. LONG SERVICE LEAVE The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service up to reporting date, plus related on costs. The benefit is discounted to determine its present value and the discount rate is the yield at the reporting date on high-quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations. FINANCIAL STATEMENTSNOTES TO THE66 REGIS RESOURCES ANNUAL REPORT 2016 Current Dividends payable Rehabilitation Non-current Long service leave Rehabilitation Provision for rehabilitation Balance at 1 July Provisions made during the year Provisions used during the year Provisions re-measured during the year Unwinding of discount Balance at 30 June CONSOLIDATED 2016 $’000 438 1,465 1,903 1,163 35,936 37,099 42,114 - (1,018) (4,628) 933 37,401 2015 $’000 340 3,282 3,622 789 38,832 39,621 44,853 - (1,250) (3,032) 1,543 42,114 Nature and purpose of provision for rehabilitation The nature of rehabilitation activities includes dismantling and removing structures, rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation and re-vegetation of affected areas. Typically the obligation arises when the asset is installed at the production location. Key estimates and assumptions REHABILITATION OBLIGATIONS The Group assesses site rehabilitation liabilities annually. The provision recognised is based on an assessment of the estimated cost of closure and reclamation of the areas using internal information concerning environmental issues in the exploration and previously mined areas, together with input from various environmental consultants, discounted to present value. Significant estimation is required in determining the provision for site rehabilitation as there are many factors that may affect the timing and ultimate cost to rehabilitate sites where mining and/or exploration activities have previously taken place. These factors include future development/exploration activity, changes in the cost of goods and services required for restoration activity and changes to the legal and regulatory framework. These factors may result in future actual expenditure differing from the amounts currently provided. FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 67 CAPITAL STRUCTURE, FINANCIAL INSTRUMENTS AND RISK This section outlines how the Group manages its capital, related financing costs and its exposure to various financial risks. It explains how these risks affect the Group’s financial position and performance and what the Group does to manage these risks. The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stakeholders and to maintain an efficient capital structure to reduce the cost of capital. The Board’s policy in relation to capital management is to regularly and consistently monitor future cash flows against expected expenditures for a rolling period of up to 12 months in advance. The Board determines the Group’s need for additional funding by way of either share issues or loan funds depending on market conditions at the time. The Board defines working capital in such circumstances as its excess liquid funds over liabilities, and defines capital as being the ordinary share capital of the Company, plus retained earnings, reserves and net debt. In order to maintain or adjust the capital structure, the Board may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or reduce debt. There were no changes in the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. 18. Net Debt and Finance Costs Accounting Policies LOANS AND BORROWINGS All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. FINANCE LEASES – GROUP AS A LESSEE Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership for the lease item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. The carrying amounts of the Group’s current and non-current borrowings approximate their fair value. CONSOLIDATED Current interest-bearing liabilities Secured bank loan Finance lease liability Non-current interest-bearing liabilities Secured bank loan Finance lease liability NOTE 2016 $’000 - 1,125 1,125 - 1,485 1,485 Less: cash and cash equivalents Net cash/(debt) 7 99,535 96,925 2015 $’000 82 705 787 20,000 1,420 21,420 51,781 29,574 FINANCIAL STATEMENTSNOTES TO THE68 REGIS RESOURCES ANNUAL REPORT 2016 Interest-bearing liabilities SECURED BANK LOAN At balance date, the Group has less than $1,000 (2015: $20 million) outstanding on the secured bank loan provided by Macquarie Bank Limited (“MBL”) which is due for repayment on 30 June 2017. The loan attracted a variable interest rate which ranged between 4.395% and 4.730% in the current year (2015: 4.655% and 5.255%). FINANCE LEASE COMMITMENTS During the current year, the Group entered into a new hire purchase agreement for the acquisition of a Komatsu WA600 loader (2015: Komatsu WA900 loader). The agreement incorporates a fixed interest rate of 3.19% (2015: 3.35%), monthly repayments and an expiry date of 27 May 2019 (2015: 29 May 2018). Ownership of the loaders passes to the Group once all contractual payments have been made. Refer to note 27. CONSOLIDATED Finance costs Interest expense Other borrowing costs Unwinding of discount on provisions 2016 $’000 981 - 933 1,914 2015 $’000 1,677 145 1,543 3,365 BORROWING COSTS Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs are expensed as part of finance costs in the period incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. UNWINDING OF DISCOUNT ON PROVISIONS The unwinding of discount on provisions represents the cost associated with the passage of time. Rehabilitation provisions are recognised at the discounted value of the present obligation to restore, dismantle and rehabilitate each mine site with the increase in the provision due to the passage of time being recognised as a finance cost in accordance with the policy described in note 17. 19. Financial Assets Accounting Policy Financial assets are initially recognised at fair value, plus transaction costs that are directly attributable to its acquisition and subsequently measured at amortised costs or fair value depending on the business model for those assets and the contractual cash flow characteristics. EQUITY INSTRUMENTS Equity instruments are normally measured at fair value through profit or loss (“FVTPL”) unless the Group chooses, on an instrument- by-instrument basis on initial recognition, to present fair value changes in other comprehensive income (“FVOCI”). This option is irrevocable and only applies to equity instruments which are neither held for trading nor are contingent consideration in a business combination. Gains and losses on equity instruments measured at FVOCI are not recycled through profit and loss or disposal and there is no impairment accounting. All gains and losses are recorded in equity through other comprehensive income. Current Financial assets at amortised cost – term deposit Non-current Financial assets at fair value through OCI – listed shares CONSOLIDATED 2016 $’000 155 6,442 2015 $’000 152 - FINANCIAL ASSETS AT FAIR VALUE THROUGH OCI During the year, the Group made a strategic investment in Capricorn Metals Limited (“CMM”) which owns the Karlawinda Gold Project. The Group held a non-controlling interest of 9% at balance date which is carried at its fair value determined with reference to the published price quoted on the ASX, an active market (“Level 1” fair value measurement). FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 69 20. Financial Risk Management The Group holds financial instruments for the following purposes: Financing: to raise finance for the Group’s operations or, in the case of short-term deposits, to invest surplus funds. The principal types of instruments used include bank loans, cash and short-term deposits. Operational: the Group’s activities generate financial instruments, including cash, receivables and trade payables. Strategic: one of the Group’s objectives is to actively pursue growth opportunities. During the current year, this has led to the acquisition of a strategic investment in a listed company, which is classified as a financial asset at fair value through OCI. Risk management: to reduce risks arising from the financial instruments described above, including commodity swap contracts and gold call options. It is, and has been throughout the year, the Group’s policy that no speculative trading in financial instruments shall be undertaken. The Group’s holding of these financial instruments exposes it to the following risks: Credit risk Liquidity risk Market risk, including interest rate, commodity price and equity price risk This note presents information about the Group’s exposure to each of the above risks and its objectives, policies and processes for measuring and managing risk. These risks affect the fair value measurements applied by the Group. Further quantitative disclosures are included throughout this financial report. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Audit and Risk Management Committee is responsible for developing and monitoring risk management policies. The committee reports regularly to the Board of Directors on its activities. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Group’s Audit and Risk Management Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. Credit Risk Credit risk is the risk of financial loss to the Group if the counterparty to a financial asset fails to meet its contractual obligation. Credit risk arises from cash and cash equivalents. The Group has adopted the policy of dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. Cash is deposited only with institutions approved by the Board. The Group has determined that it currently has no significant exposure to credit risk as at reporting date. Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk damage to the Group’s reputation. The Group uses weekly and monthly cash forecasting to monitor cash flow requirements. Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The following table analyses the Group’s financial liabilities, including net and gross settled financial instruments, into relevant maturity periods based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and hence will not necessarily reconcile with the amounts disclosed in the balance sheet. For derivative liabilities (sold gold call options), the amounts disclosed are the net amounts that would need to be paid if the option expired out of the money. Due to their short term nature, the amounts have been estimated using the gold spot price applicable at reporting date. FINANCIAL STATEMENTSNOTES TO THEDerivative liabilities Finance leases Total 30 JUNE 2015 ($’000) 70 REGIS RESOURCES ANNUAL REPORT 2016 30 JUNE 2016 ($’000) CARRYING AMOUNT CONTRACTUAL CASH-FLOWS 6 MTHS OR LESS 6-12 MTHS 1-2 YEARS 2-5 YEARS MORE THAN 5 YEARS Trade and other payables 32,428 (32,428) (32,428) 713 2,610 35,751 (713) (2,716) (713) (597) (35,857) (33,738) - - (597) (597) - - (1,130) (1,130) - - (392) (392) - - - - CARRYING AMOUNT CONTRACTUAL CASH-FLOWS 6 MTHS OR LESS 6-12 MTHS 1-2 YEARS 2-5 YEARS MORE THAN 5 YEARS Trade and other payables Secured bank loan Finance lease Total 33,675 20,082 2,125 (33,675) (33,675) (21,865) (2,234) (467) (383) 55,882 (57,774) (34,525) - (467) (383) (850) - (20,931) (766) (21,697) - - (702) (702) - - - - ASSETS PLEDGED AS SECURITY The secured bank loan provided by MBL is secured by: a first ranking, registered fixed and floating charge over all of the assets of Regis Resources Limited and its wholly-owned subsidiary Duketon Resources Pty Limited; a first ranking, registered Mining Act (WA) mortgage over the Company’s interest in the Duketon Gold Project tenements; a fixed charge over the Proceeds Account and Gold Account; and satisfactory security over Regis’ rights under key project documents. The finance lease liabilities are secured by the related assets. Ownership of the assets remains with Komatsu until all contractual payments have been made. FINANCIAL GUARANTEE LIABILITIES As at 30 June 2016, the Group did not have any financial guarantee liabilities (2015: Nil). Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, commodity prices and equity prices will affect the Group’s income or value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Foreign currency risk: The Group is occasionally exposed to foreign currency risk when long lead items are purchased in a currency other than Australian dollars. The Group maintains all of its cash in Australian dollars and does not currently hedge these purchases. There is no significant exposure to foreign currency risk at reporting date. Interest rate risk: Since repayment of substantially all of the principal outstanding on the secured project loan facility with Macquarie Bank Limited (“MBL”) during the current year, the Group is only exposed to interest rate risk through its cash deposits, which attract variable interest rates. The Group regularly reviews its current working capital requirements against cash balances and the returns available on short term deposits. There is no significant exposure to interest rate risk at reporting date. Commodity price risk: The Group’s exposure to commodity price risk is purely operational and arises largely from gold price fluctuations or in relation to the purchase of inventory with commodity price as a significant input, such as diesel. The Group’s exposure to movements in the gold price is managed through the use of gold forward contracts (note 2) and sold call options (note 21). The gold forward sale contracts do not meet the criteria of financial instruments for accounting purposes on the basis that they meet the normal purchase/sale exemption because physical gold will be delivered into the contract. No sensitivity analysis is provided for these contracts as they are outside the scope of AASB 9 Financial Instruments (2014). The sold call options are classified as derivative financial instruments at fair value through profit or loss. Refer to note 21 for sensitivity and other analysis. The Group implemented a medium term risk management strategy during the current year to take advantage of historically low oil prices by entering into commodity swap transactions on gasoil to hedge exposure to movements in the Australian dollar price of diesel. Regis considers the gasoil component to be a separately identifiable and measurable component of diesel. This hedge arrangement fixes a significant proportion (approximately two thirds) of the total estimated annual diesel usage at the Group’s Duketon operations. Sensitivity of the Group’s profit or loss to the hedged exposures is analysed in note 21. FINANCIAL STATEMENTSNOTES TO THE REGIS RESOURCES ANNUAL REPORT 2016 71 Equity price risk: The Group acquired shares in Capricorn Metals Limited, an ASX listed entity, during the current year and as such is exposed to market price risk arising from uncertainties about future values of the investment. At the reporting date, the investment was measured at its fair value of $6,442,000. The Group has elected to present fair value changes through other comprehensive income. Accordingly, an increase or decrease of 10% in the value of the investment would only impact equity and not profit or loss. INTEREST RATE RISK At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was: Fixed rate instruments Term deposit held to maturity Finance lease liabilities Variable rate instruments Cash and cash equivalents Secured bank loan CONSOLIDATED 2016 $’000 155 (2,610) (2,455) 2015 $’000 152 (2,125) (1,973) 99,105 51,433 - (20,000) 99,105 31,433 Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change at reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments A sensitivity analysis has not been disclosed in relation to the variable interest rate cash on deposit and secured bank loan as the results have been determined to be immaterial to the statement of comprehensive income for both the current and prior financial years. Fair Values The carrying amounts and estimated fair values of all of the Group’s financial instruments recognised in the financial statements are materially the same. The methods and assumptions used to estimate the fair value of the financial instruments are disclosed in the respective notes. VALUATION OF FINANCIAL INSTRUMENTS For all fair value measurements and disclosures, the Group uses the following to categorise the method used: Level 1: the fair value is calculated using quoted prices in active markets. The Group’s investment in Capricorn Metals Limited is classified as Level 1, as it is valued based on a price quoted in an active market. Level 2: the fair value is estimated using inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). The Group’s derivative liabilities (sold gold call options) and derivative assets (cash flow hedges) are classified as Level 2, as they were valued using valuation techniques that employ the use of market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates, and spot and forward rate curves of the underlying commodity. The changes in counterparty credit risk had no material effect on the hedge effectiveness assessment for the commodity swaps designated in hedge relationships and the sold gold call options recognised at fair value. Level 3: the fair value is estimated using inputs for the asset or liability that are not based on observable market data. The Group does not have any financial assets or liabilities in this category. For financial instruments that are carried at fair value on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. There were no transfers between levels during the year. FINANCIAL STATEMENTSNOTES TO THE72 REGIS RESOURCES ANNUAL REPORT 2016 21. Derivatives and Hedging Accounting policy RECOGNITION Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value as per note 20. The method of recognising any re-measurement gain or loss depends on the nature of the item being hedged. Any changes in the fair value of a derivative instrument that does not qualify for hedge accounting are recognised immediately in the income statement. For hedge instruments, any hedge ineffectiveness is recognised directly in the income statement in the period in which it is incurred. There was no ineffectiveness on the diesel swap contracts in the current year (2015: nil). HEDGE ACCOUNTING At the start of a hedge relationship, the Group formally designates and documents the hedge relationship, including the risk management strategy for undertaking the hedge. This includes identification of the hedge instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness. Hedge accounting is only applied where effective tests are met on a prospective basis. For the purposes of hedge accounting, hedges are classified as: fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset, liability or firm commitment that could affect profit or loss; or cash flow hedges when they hedge a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions. Regis will discontinue hedge accounting prospectively only when the hedging relationship, or part of the hedging relationship no longer qualifies for hedge accounting, which includes where there has been a change to the risk management objective and strategy for undertaking the hedge and instances when the hedging instrument expires or is sold, terminated or exercised. For this purpose, the replacement or rollover of a hedging instrument into another hedging instrument is not an expiration or termination if such a replacement or rollover is consistent with our documented risk management objective. Derivatives (current assets) Designated as cash flow hedges Derivatives (current liabilities) Sold gold call options (not qualifying for hedge accounting) Hedges that meet the criteria for hedge accounting are classified and accounted for as follows: CONSOLIDATED 2016 $’000 5,006 (713) 2015 $’000 - - CASH FLOW HEDGES The Group uses cash flow hedges to mitigate the risk of variability of future cash flows attributable to diesel price fluctuations over the hedging period associated with our operations at the Duketon Gold Project, where it has highly probable purchases of diesel. For cash flow hedges, the portion of the gain or loss on the hedging instrument that is effective is recognised directly in equity, while the ineffective portion is recognised in profit or loss. Amounts recognised in equity are transferred to the income statement when the hedged transaction affects profit or loss, such as when hedged expenses are recognised or when the asset is consumed. When the hedged item is the cost of a non-financial asset or liability, the amounts taken to equity are transferred to the initial carrying amount of the non-financial asset or liability. NOTIONAL AMOUNT LINE ITEM IN THE BALANCE SHEET Cash flow hedges Diesel swap – 12 month contract expiring 30 April 2017 – fixed at $0.404/litre 2,000,000 litres/ month (20,000,000 litres) Derivatives (current assets) Diesel swap – 18 month contract expiring 31 October 2017 – fixed at $0.419/litre 2,000,000 litres/month (32,000,000 litres) Derivatives (current assets) CONSOLIDATED 2016 $’000 1,988 3,018 5,006 2015 $’000 - - - FINANCIAL STATEMENTSNOTES TO THE REGIS RESOURCES ANNUAL REPORT 2016 73 2016 CASH FLOW HEDGES Diesel swaps HEDGING GAIN/ (LOSS) RECOGNISED IN OCI INEFFECTIVENESS RECOGNISED IN PROFIT OR LOSS LINE ITEM IN THE STATEMENT OF PROFIT OR LOSS AMOUNT RECLASSIFIED FROM OCI TO PROFIT OR LOSS LINE ITEM IN THE STATEMENT OF PROFIT OR LOSS $’000 5,006 $’000 - n/a $’000 - n/a If the forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or roll over, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs. There were no such events during the current or prior year. Commodity Price Sensitivity The table below summarises the gain/(loss) impact of reasonably possible changes in market risk, relating to existing financial instruments, on net profit and equity before tax. For the purpose of this disclosure, the following assumptions were used: 10% per litre increase and decrease in the Australian dollar gasoil price (2015: not applicable) A$20 per ounce increase and decrease in the spot price of gold (2015: not applicable) Sensitivity analysis assumes hedge designations as at 30 June 2016 remain unchanged and all designations are effective 2016 CHANGE IN YEAR-END PRICE EFFECT ON PROFIT (before tax) EFFECT ON EQUITY (before tax) Cash flow hedges Diesel swaps Derivatives Sold gold call options 22. Issued Capital and Reserves Accounting Policy +10% -10% +A$20 -A$20 $’000 - - (285) 261 $’000 2,630 (2,627) - - Ordinary shares are classified as equity. Transaction costs directly attributable to the issue of shares or options are recognised as a deduction from equity, net of any related income tax effects. Ordinary shares – issued and fully paid Movement in ordinary shares on issue At 1 July 2014 Issued on exercise of options Transaction costs At 30 June 2015 Issued on exercise of options Transaction costs At 30 June 2016 CONSOLIDATED 2016 $’000 2015 $’000 431,335 431,338 NO. SHARES (‘000S) $’000 499,744 431,304 37 - 37 (3) 499,781 431,338 73 - - (3) 499,854 431,335 The holders of ordinary shares are entitled to receive dividends as declared from time to time and, on a poll, are entitled to one vote per share at meetings of the Company. The Company does not have authorised capital or par value in respect of its issued shares. FINANCIAL STATEMENTSNOTES TO THE74 REGIS RESOURCES ANNUAL REPORT 2016 Balance at 1 July 2014 Share-based payment transactions Balance at 30 June 2015 and 1 July 2015 Net gain/(loss) on financial instruments recognised in equity Tax effect of transfers and revaluations Share-based payment transactions Balance at 30 June 2016 Nature and purpose of reserves SHARE OPTION RESERVE FINANCIAL ASSETS RESERVE CASH FLOW HEDGE RESERVE TOTAL RESERVES $’000 16,551 1,959 18,510 - - 3,317 21,827 $’000 $’000 - - - 4,633 (1,390) - 3,243 - - - 5,006 (1,502) - 3,504 $’000 16,551 1,959 18,510 9,639 (2,892) 3,317 28,574 SHARE OPTION RESERVE The share option reserve is used to record the value of share-based payments provided to employees, including KMP, as part of their remuneration, as well as non-employees. FINANCIAL ASSETS RESERVE The financial assets reserve records fair value changes on financial assets designated at fair-value through other comprehensive income. CASH FLOW HEDGE RESERVE The hedging reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge relationship. FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 75 OTHER DISCLOSURES This section provides information on items which require disclosure to comply with Australian Accounting Standards and other regulatory pronouncements. 23. Deferred Income Tax Accounting Policy Deferred tax balances are determined using the balance sheet method, which provides for temporary differences at the balance sheet date between accounting carrying amounts and the tax bases of assets and liabilities. Deferred income tax liabilities are recognised for all taxable temporary differences, other than for the exemptions permitted under accounting standards. At 30 June 2016 there are no unrecognised temporary differences associated with the Group’s investment in subsidiaries (2015: $nil). 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 future taxable profits will be available to utilise these deductible temporary differences. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are only offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Deferred income tax at 30 June relates to the following: CONSOLIDATED Deferred tax liabilities Receivables Prepayments Financial assets Exploration and evaluation expenditure Mine properties under development Mine properties Gross deferred tax liabilities Set off of deferred tax assets Net deferred tax liabilities Deferred tax assets Inventories Property, plant and equipment Trade and other payables Provisions Expenses deductible over time Derivatives Tax losses carried forward Gross deferred tax assets Set off of deferred tax assets Net deferred tax assets Reconciliation of deferred tax, net: Opening balance at 1 July – net deferred tax assets/(liabilities) Income tax (expense)/ benefit recognised in profit or loss Income tax (expense)/benefit recognised in equity Closing balance at 30 June – net deferred tax (liabilities)/ assets 2016 $’000 2,752 47 2,892 14,922 360 25,007 45,980 (25,174) 20,806 2,114 2,339 892 11,569 31 214 8,015 25,174 (25,174) - (1,140) (16,774) (2,892) (20,806) 2015 $’000 1,362 - - 13,353 20 19,603 34,338 (33,198) 1,140 946 9,847 931 12,871 58 - 8,545 33,198 (33,198) - 6,363 (7,503) - (1,140) FINANCIAL STATEMENTSNOTES TO THE76 REGIS RESOURCES ANNUAL REPORT 2016 Key judgements RECOVERY OF DEFERRED TAX ASSETS Judgement is required in determining whether deferred tax assets are recognised on the balance sheet. Deferred tax assets, including those arising from unutilised tax losses, require management to assess the likelihood that the Group will generate taxable earnings in future periods, in order to utilise recognised deferred tax assets. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in Australia. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could be impacted. Additionally, future changes in tax laws in Australia could limit the ability of the Group to obtain tax deductions in future periods. TAX CONSOLIDATION The Company and its wholly-owned Australian resident entities became part of a tax-consolidated group on 14 December 2006. As a consequence, all members of the tax-consolidation group are taxed as a single entity from that date. The head entity within the tax- consolidation group is Regis Resources Limited. The head entity, in conjunction with other members of the tax-consolidated group, have entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head entity and are recognised by the Company as intercompany receivables (or payables). Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities. The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which asset can be utilised. Any subsequent period adjustment to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only. The head entity in conjunction with other members of the tax-consolidated group has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote. 24. Share-based Payments Accounting Policy The value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the options (the vesting period), ending on the date on which the relevant employees become fully entitled to the option (the vesting date). At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the product of: The grant date fair value of the option; The current best estimate of the number of options that will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and The expired portion of the vesting period. Until an option has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Recognised share-based payments expense Employee share options expense Total expense arising from share-based payment transactions CONSOLIDATED 2016 $’000 3,317 3,317 2015 $’000 1,959 1,959 The share-based payment plan is described below. There have been no cancellations or modifications to any of the plans during the current or prior years. FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 77 Employee share option plan (ESOP) The Company has one ESOP, being the Regis Resources Limited 2014 Share Option Plan (the “Option Plan”). The objective of the Option Plan is to assist in the recruitment, reward, retention and motivation of eligible persons of the Group. Under the Option Plan, the board or Remuneration and Nomination Committee may issue eligible employees with options to acquire shares in the future at an exercise price fixed by the board or Remuneration and Nomination Committee on grant of the options. The vesting of all options is subject to service conditions being met whereby the recipient must meet the eligible employee criteria as defined in the Option Plan. Summary of options granted The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options issued during the year: Outstanding at the beginning of the year 5,155,000 $2.7956 5,337,500 2016 NO. WAEP 2015 NO. WAEP $3.1666 $1.5500 10,705,000 $1.5121 1,650,000 (1,020,000) $2.4520 (1,495,000) $2.9040 (275,000) $2.4000 (37,500) $1.0000 (1,405,000) $3.4884 (300,000) $2.2300 Granted during the year Forfeited during the year Exercised during the year Expired during the year Outstanding at the end of the year 13,160,000 $1.7125 5,155,000 $2.7956 Exercisable at the end of the year 572,500 $3.5000 1,430,000 $3.4974 Weighted average share price at the date of exercise Weighted average remaining contractual life Range of exercise prices Weighted average fair value of options granted during the year Option pricing model 2016 $2.91 2015 $1.65 2.7 years 1.8 years $1.40 - $3.50 $1.55 - $4.00 $0.7941 $0.8600 The fair value of the equity-settled share options granted under the ESOP is estimated as at the date of grant using a Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used for the years ended 30 June 2016 and 30 June 2015: Dividend yield (%) Expected volatility (%) Risk free interest rate (%) Expected life of the option (years) Option exercise price ($) Weighted average share price at grant date ($) 2016 ESOP 2015 ESOP 2.91 - 4.27 0 84.73 – 103.38 76.32 – 88.51 1.57 – 2.15 2.54 – 2.72 2 – 3 years 2 – 3 years 1.40 – 2.70 1.55 1.41 – 3.19 1.51 – 1.83 The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. FINANCIAL STATEMENTSNOTES TO THE78 REGIS RESOURCES ANNUAL REPORT 2016 Key estimates and assumptions SHARE-BASED PAYMENTS The Group is required to use key assumptions, such as volatility, in respect of the fair value models used in determining share-based payments to employees in accordance with the requirements of AASB 2 Share–based payment. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity. 25. Related Parties Key management personnel compensation The key management personnel compensation included in employee benefits expense (note 3) and share-based payments (note 24), is as follows: Short-term employee benefits Post-employment benefits Termination benefits Share-based payment Total compensation CONSOLIDATED 2016 $ 2015 $ 2,641,909 2,317,060 214,593 216,771 217,692 - 1,708,649 611,602 4,781,922 3,146,354 Individual directors and executives compensation disclosures Information regarding individual directors’ and executives’ compensation and equity instrument disclosures required by s300A of the Corporations Act and Corporations Regulations 2M.3.03 are provided in the Remuneration Report section of the Directors’ Report. No director has entered into a material contract with the Group either in the current or prior financial year and there were no material contracts involving directors’ interests existing at year end. Subsidiaries The consolidated financial statements include the financial statements of Regis Resources Limited and the subsidiaries listed in the following table: NAME Duketon Resources Pty Ltd Artane Minerals NL Rosemont Gold Mines Pty Ltd LFB Resources NL COUNTRY OF INCORPORATION Australia Australia Australia Australia % EQUITY INTEREST INVESTMENT $’000 2016 100% 100% 100% 100% 2015 100% 100% 100% 100% 2016 30,575 - - 44,110 74,685 2015 30,575 - - 44,110 74,685 FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 79 Ultimate parent Regis Resources Limited is the ultimate Australian parent entity and the ultimate parent entity of the Group. Transactions with related parties A loan is made by the Company to Duketon Resources and represents the subsidiary’s share of payments for exploration and evaluation expenditure on commercial joint ventures existing between the Company and Duketon Resources. The loan outstanding between the Company and Duketon Resources has no fixed date of repayment and is non-interest-bearing. As at 30 June 2016, the balance of the loan receivable was $17,298,000 (2015: $14,978,000). A loan is made by the Company to LFB Resources and represents the subsidiary’s share of payments for exploration and evaluation expenditure. The loan outstanding between the Company and LFB Resources has no fixed date of repayment and is non-interest- bearing. As at 30 June 2016, the balance of the loan receivable was $25,481,000 (2015: $24,728,000). 26. Parent Entity Information The following details information related to the parent entity, Regis Resources Limited, at 30 June 2016. The information presented here has been prepared using consistent accounting policies as detailed in the relevant notes of this report. Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Issued capital Share option reserve Retained profits/(accumulated losses) Total equity Net profit/(loss) for the year Other comprehensive income for the period Total comprehensive income for the period 2016 $’000 162,751 458,108 620,859 49,957 56,590 106,547 2015 $’000 100,932 445,120 546,052 43,972 60,035 104,007 431,335 431,338 28,574 54,403 514,312 112,184 6,747 118,931 18,510 (7,803) 442,045 87,620 - 87,620 The parent entity has not guaranteed any loans of its subsidiaries. There are no contingent assets or liabilities of the Group or parent entity at 30 June 2016 as disclosed at note 28. All commitments are commitments incurred by the parent entity, except for $1,827,000 (2015: $1,570,000) of the exploration expenditure commitments disclosed at note 12, and $56,000 (2015: $14,000) of the operating lease commitments disclosed at note 27. FINANCIAL STATEMENTSNOTES TO THE80 REGIS RESOURCES ANNUAL REPORT 2016 27. Commitments Operating lease commitments – Group as lessee The Group leases office premises in Perth, WA and Blayney, NSW under normal commercial lease arrangements. The Perth office lease was entered into for an initial period of 5 years beginning 1 May 2010 and was renewed for a further 5 year period during the prior year. The Group is under no legal obligation to renew the lease once the extended lease term has expired. The Blayney lease is for a period of 3 years beginning 22 February 2013 and was renewed for a further 3 year period during the current year. Future minimum rentals payable under non-cancellable operating leases at 30 June are as follows: Within one year Between one and five years Total minimum lease payments CONSOLIDATED 2016 $’000 358 1,040 1,398 2015 $’000 336 1,320 1,656 Finance lease commitments - Group as lessee The Group has entered into hire purchase contracts for the purchase of two Komatsu loaders. The contracts expire on 29 May 2018 and 27 May 2019 and ownership of the loaders passes to the Group once all contractual payments have been made. (30 June 2015: 29 May 2018). CONSOLIDATED Within one year Between one and five years Total minimum lease payments Less amounts representing finance charges Present value of minimum lease payments Included in the financial statements as: Current interest-bearing liabilities Non-current interest-bearing liabilities NOTES 2016 $’000 1,194 1,522 2,716 (106) 2,610 1,125 1,485 2,610 2015 $’000 766 1,468 2,234 (109) 2,125 705 1,420 2,125 Carrying value of leased assets included in plant and equipment 11 3,008 2,210 Contractual commitments On 19 January 2010, the Group entered into an agreement with Pacific Energy (KPS) Pty Ltd (“KPS”) for the supply of electricity to the Moolart Well Gold Mine. The terms of this agreement commit the Group to purchasing a fixed amount of electricity per month for six years from 7 July 2010 (the “Effective Date”) at a price which will be reviewed annually. As at 30 June 2016, at the current contract price, the Group had commitments to purchase electricity for the remaining term of $135,000 (30 June 2015: $1,625,000). On 23 June 2011, the Group entered into an agreement with Pacific Energy (KPS) Pty Ltd (“KPS”) for the supply of electricity to the Garden Well Gold Mine. The terms of this agreement commit the Group to purchasing a fixed amount of electricity per month for 5 years from 1 September 2012 (the “Effective Date”) at a price which will be reviewed annually. The agreement was amended, effective 1 October 2013, to incorporate Rosemont Gold Mine’s power requirements. As at 30 June 2016, at the current contract price, the Group had commitments to purchase electricity for the remaining term of $5,335,000 (30 June 2015: $9,907,000). FINANCIAL STATEMENTSNOTES TO THEREGIS RESOURCES ANNUAL REPORT 2016 81 28. Contingencies As at 30 June 2016, the Group did not have any contingent assets or liabilities (30 June 2015: nil). 29. Auditor’s Remuneration Audit services KPMG Australia CONSOLIDATED 2016 $ 2015 $ Audit and review of financial statements 209,218 195,297 Other services Other assurance services Taxation compliance services Total auditor’s remuneration 30. Subsequent Events Share issues - - - - 209,218 195,297 Subsequent to year end, 225,908 shares have been issued as a result of the exercise of employee options for proceeds of $175,000. Dividends On 1 August 2016, the directors proposed a final dividend on ordinary shares in respect of the 2016 financial year. Refer to note 6. 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 which, in the opinion of the directors of the Group, has significantly affected or is likely 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. 31. New Accounting Standards and Interpretations Changes in accounting policy The Group has adopted the following new and revised accounting standards, amendments and interpretations as of 1 July 2015: AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality The adoption of these new and revised standards did not have a material impact on the Group’s financial statements. The following Australian Accounting Standard was early adopted by the Group from 1 July 2015: AASB 9 FINANCIAL INSTRUMENTS (2014) Regis has early adopted and applied all of the requirements of AASB 9 (2014), including consequential amendments to other standards, on 1 July 2015. The adoption of AASB 9 (2014) has allowed Regis to apply hedge accounting to the diesel swap contracts entered into during the current financial year. On adoption of AASB 9 (2014) Regis has reclassified its financial assets as subsequently measured at amortised cost or fair value depending on the business model for those assets and the contractual cash flow characteristics. There was no change in the classification or measurement of financial liabilities. The principal impact on Regis’ financial assets at 1 July 2015 is the reclassification of cash and cash equivalents and trade and other receivables from ‘loans and receivables’ under AASB 139 to ‘financial assets at amortised cost’ under AASB 9 (2014). In relation to the reclassification of financial assets and liabilities, there was no impact on the income statement, the statement of comprehensive income, balance sheet or statement of changes in equity on adoption of AASB 9 (2014). FINANCIAL STATEMENTSNOTES TO THE82 REGIS RESOURCES ANNUAL REPORT 2016 As a result of adopting AASB 9 (2014), the accounting policies for cash and cash equivalents (note 7), trade and other receivables (note 9) and derivative financial instruments and hedging (note 21) have been updated and are applicable from 1 July 2015. The terminology in the above policies has been updated in accordance with the requirements of AASB 9 (2014). There has been no material change to the measurement and recognition of these items. New standards and interpretations issued but not yet effective The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2016, but have not been applied in preparing this financial report. Except where noted, the Group has evaluated the impact of the new standards and interpretations listed below and determined that the changes are not likely to have a material impact on its financial statements. AASB 2014-3 AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – ACCOUNTING FOR ACQUISITIONS OF INTERESTS IN JOINT OPERATIONS [AASB 1 & AASB 11] AASB 2014-3 amends AASB 11 Joint Arrangements to provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. The amendments require: The acquirer of an interest in a joint operation in which the activity constitutes a business, as defined in AASB 3 Business Combinations, to apply all of the principles on business combination accounting in AASB 3 and other Australian Accounting Standards except for those principles that conflict with the guidance in AASB 11. The acquirer to disclose the information required by AASB 3 and other Australian Accounting Standards for business combinations. This Standard also makes an editorial correction to AASB 11. Application date of Standard: 1 January 2016 AASB 2014-4 CLARIFICATION OF ACCEPTABLE METHODS OF DEPRECIATION AND AMORTISATION (AMENDMENTS TO AASB 116 AND AASB 138) AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets both establish the principle for the basis of depreciation and amortisation as being the expected pattern of consumption of the future economic benefits of an asset. Application date for Group: 1 July 2016 The IASB has clarified that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The amendment also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances. Application date of Standard: 1 January 2016 Application date for Group: 1 July 2016 AASB 15 REVENUE FROM CONTRACTS WITH CUSTOMERS AASB 15 Revenue from Contracts with Customers replaces the existing revenue recognition standards AASB 11 Construction Contracts, AASB 118 Revenue and related Interpretations (Interpretation 13 Customer Loyalty Programmes, Interpretation 15 Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers and Interpretation 131 Revenue – Barter Transactions Involving Advertising Services and Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications Industry). AASB 15 incorporates the requirements of IFRS 15 Revenue from Contracts with Customers issued by the International Accounting Standards Board (IASB) and developed jointly with the US Financial Accounting Standards Board (FASB). AASB 15 specifies the accounting treatment for revenue arising from contracts with customers (except for contracts within the scope of other accounting standards such as leases or financial instruments). The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised good or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those good or services. An entity recognises revenue in accordance with that core principle by applying the following steps: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation AASB 2014-5 incorporates the consequential amendments to a number of Australian Accounting Standards (including Interpretations) arising from the issuance of AASB 15. The Group has evaluated the impact of the new standard and determined that the changes are not likely to have a material impact on the amount of revenue recognised from gold sales, nor is it expected that significant changes to disclosures will be required. The Group is still assessing whether the timing of revenue recognition will be materially impacted on adoption of the new standard. Application date of Standard: 1 January 2018* Application date for Group: 1 July 2018 *Early application is permitted. FINANCIAL STATEMENTSNOTES TO THE REGIS RESOURCES ANNUAL REPORT 2016 83 AASB 1057 APPLICATION OF AUSTRALIAN ACCOUNTING STANDARDS This Standard lists the application paragraphs for each other Standard (and Interpretation), grouped where they are the same. Accordingly, paragraphs 5 and 22 respectively specify the application paragraphs for Standards and Interpretations in general. Differing application paragraphs are set out for individual Standards and Interpretations or grouped where possible. The application paragraphs do not affect requirements in other Standards that specify that certain paragraphs apply only to certain types of entities. Application date of Standard: 1 January 2016 Application date for Group: 1 July 2016 AASB 2015-1 ANNUAL IMPROVEMENTS TO AUSTRALIAN ACCOUNTING STANDARDS 2012-2014 CYCLE The subjects of the principal amendments to the Standards are set out below: AASB 119 Employee Benefits The amendment clarifies that the high quality corporate bonds used to estimate the discount rate for post-employment benefit obligations should be denominated in the same currency as the liability. Further it clarifies that the depth of the market for high quality corporate bonds should be assessed at the currency level. AASB 134 Interim Financial Reporting The changes to AASB 134 clarify the meaning of ‘disclosure of information elsewhere in the interim financial report’ and require the inclusion of a cross-reference from the interim financial statements to the location of this information. Application date of Standard: 1 January 2016 Application date for Group: 1 July 2016 AASB 2015-2 AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – DISCLOSURE INITIATIVE: AMENDMENTS TO AASB 101 The Standard makes amendments to AASB 101 Presentation of Financial Statements arising from the IASB’s Disclosure Initiative project. The amendments are designed to further encourage companies to apply professional judgment in determining what information to disclose in the financial statements. For example, the amendments make clear that materiality applies to the whole of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. The amendments also clarify that companies should use professional judgment in determining where and in what order information is presented in the financial disclosures. Application date of Standard: 1 January 2016 Application date for Group: 1 July 2016 AASB 2015-9 AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – SCOPE AND APPLICATION PARAGRAPHS [AASB 8, AASB 133 & AASB 1057] This Standard inserts scope paragraphs into AASB 8 and AASB 133 in place of application paragraph text in AASB 1057. This is to correct inadvertent removal of these paragraphs during editorial changes made in August 2015. There is no change to the requirements or the applicability of AASB 8 and AASB 133. Application date of Standard: 1 January 2016 Application date for Group: 1 July 2016 AASB 16 LEASES The key features of AASB 16 (for lessee accounting) are as follows: Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. AASB 16 contains disclosure requirements for lessees. AASB 16 supersedes AASB 17 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives, and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard will be effective for annual reporting periods beginning on after 1 January 2019. Early application is permitted, provided the new revenue standard, AASB 15 Revenue from Contracts with Customers, has been applied, or is applied at the same date as AASB 16. The Group is currently assessing the impact of the new standard on its financial statements. Application date of Standard: 1 January 2019 Application date for Group: 1 July 2019 2016-1 AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – RECOGNITION OF DEFERRED TAX ASSETS FOR UNREALISED LOSSES [AASB112] This Standard amends AASB 112 Income Taxes (July 2004) and AASB 112 Income Taxes (August 2015) to clarify the requirements on recognition of deferred tax assets for unrealised losses on debt instruments measured at fair value. Application date of Standard: 1 January 2017 Application date for Group: 1 July 2017 FINANCIAL STATEMENTSNOTES TO THE 84 REGIS RESOURCES ANNUAL REPORT 2016 2016-2 AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – DISCLOSURE INITIATIVE: AMENDMENTS TO AASB 107 This Standard amends AASB 107 Statement of Cash Flows (August 2015) to require entities preparing financial statements in accordance with Tier 1 reporting requirements to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. Application date of Standard: 1 January 2017 Application date for Group: 1 January 2017 IFRS 2 (AMENDMENTS) CLASSIFICATION AND MEASUREMENT OF SHARE-BASED PAYMENT TRANSACTIONS This standard amends IFRS 2 Share-based Payments, to clarify how to account for certain types of share-based payment transactions. The amendments provide requirements on the accounting for: The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments. Share-based payment transactions with a net settlement feature for withholding tax obligations. A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash- settled to equity-settled. Application date of Standard: 1 January 2018 Application date for Group: 1 July 2018 FINANCIAL STATEMENTSNOTES TO THE REGIS RESOURCES ANNUAL REPORT 2016 85 DIRECTORS’ DECLARATION In accordance with a resolution of the directors of Regis Resources Limited, I state that: 1. In the opinion of the directors: (a) The financial statements, notes and additional disclosures included in the directors’ report designated as audited, of the Company and the consolidated entity are in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the financial year ended on that date; and (ii) Complying with Accounting Standards and the Corporations Regulations 2001; and (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2016. 3. The directors draw attention to the notes to the consolidated financial statements, which include a statement of compliance with International Financial Reporting Standards. On behalf of the board Mr Mark Clark Executive Chairman Perth, 26 August 2016 86 REGIS RESOURCES ANNUAL REPORT 2016 INDEPENDENT AUDITOR’S REPORT Independent auditor’s report to the members of Regis Resources Limited Report on the financial report We have audited the accompanying financial report of Regis Resources Limited (the company), which comprises the consolidated balance sheet as at 30 June 2016, and consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, the notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the Group comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement whether due to fraud or error. In the notes, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group’s financial position and of its performance. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. REGIS RESOURCES ANNUAL REPORT 2016 87 INDEPENDENT AUDITOR’S REPORT Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: (a) the financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. (b) the financial report also complies with International Financial Reporting Standards as disclosed in the basis of preparation. Report on the remuneration report We have audited the Remuneration Report included in pages 31 to 40 of the directors’ report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards. Auditor’s opinion In our opinion, the remuneration report of Regis Resources Limited for the year ended 30 June 2016, complies with Section 300A of the Corporations Act 2001. KPMG R Gambitta Partner Perth 26 August 2016 88 REGIS RESOURCES ANNUAL REPORT 2016 ASX ADDITIONAL INFORMATION As at 15 September 2016 the following information applied: 1. SECURITIES (a) Fully Paid Ordinary Shares The number of holders of fully paid ordinary shares in the Company is 6,562. On a show of hands every holder of fully paid ordinary shares present or by proxy, shall have one vote. Upon a poll, each share shall have one vote. The distribution of holders of fully paid ordinary shares is as follows: CATEGORY Holding between Holding between Holding between Holding between 1-1,000 Shares 1,001 - 5,000 Shares 5,001 - 10,000 Shares 10,001-100,000 Shares Holding more than 100,001 Shares Holding less than A marketable parcel NUMBER OF SHAREHOLDERS NUMBER OF SHARES 2,353 2,486 848 771 104 6,562 438 1,105,488 6,754,806 6,665,725 21,540,287 464,912,968 500,979,274 10,744 The Company’s fully paid ordinary shares are quoted on the Australian Securities Exchange using the code RRL. The top 20 shareholders are as follows: NAME National Nominees Limited HSBC Custody Nominees (Australia) Limited J P Morgan Nominees Australia Limited Citicorp Nominees Pty Limited BNP Paribas Noms Pty Ltd Rollason Pty Ltd National Nominees Limited HSBC Custody Nominees (Australia) Limited -GSCO ECA National Nominees Limited RBC Investor Services Australia Nominees Pty Limited Mr Ross Francis Stanley HSBC Custody Nominees (Australia) Limited – A/C 2 SHL Pty Ltd Rollason Pty Ltd BNP Paribas Nominees Pty Ltd AMP Life Limited Piama Pty Ltd Mutual Investments Pty Ltd Mr Mark John Clark RBC Investor Services Australia Nominees Pty Ltd NUMBER OF FULLY PAID ORDINARY SHARES HELD 148,854,404 96,479,534 81,864,198 43,175,493 16,165,496 9,550,000 3,848,598 3,801,083 3,200,000 3,065,885 3,000,000 2,879,552 2,500,000 2,389,671 2,272,413 2,063,106 2,005,556 2,000,000 1,847,274 1,710,076 PERCENTAGE INTEREST 29.71 19.26 16.34 8.62 3.23 1.91 0.77 0.76 0.64 0.61 0.60 0.57 0.50 0.48 0.45 0.41 0.40 0.40 0.37 0.34 432,672,339 86.37 REGIS RESOURCES ANNUAL REPORT 2016 89 ASX ADDITIONAL INFORMATION (b) Unlisted options UNLISTED OPTIONS OVER FULLY PAID ORDINARY SHARES NUMBER OF OPTION HOLDERS NUMBER OF OPTIONS HELD Expiry 31 July 2017 Expiry 31 March 2018 Expiry 14 October 2018 Expiry 11 August 2019 Expiry 6 January 2020 Expiry 13 May 2020 2 1 1 35,000 75,000 50,000 140 8,595,000 1 1 1,000,000 200,000 Option holders may attend and speak at general meetings of the Company. However, they do not have an entitlement to vote upon the business before the meeting either by show of hands or by poll. (c) On-market buy-back Regis announced an on-market buy-back of the Company’s ordinary shares on 30 July 2015. The Company may buy-back up to a maximum of 5% of the Company’s issued capital as at 30 July 2015, being 24,989,080 shares. As at the date of this report, the Company has not bought back any shares. 2. SUBSTANTIAL SHAREHOLDERS Substantial shareholders disclosed in substantial shareholder notices to the Company: NAME Van Eck Associates Corporation Vinva Investment Management NUMBER OF FULLY PAID ORDINARY SHARES HELD 82,311,696 25,179,406 3. CORPORATE GOVERNANCE STATEMENT The Company’s 2016 Corporate Governance Statement has been released as a separate document and is located on our website at http://www.regisresources.com.au/about-us/corporate-governance.html 90 REGIS RESOURCES ANNUAL REPORT 2016 ASX ADDITIONAL INFORMATION 4. MINERAL RESOURCES AND ORE RESERVES The JORC compliant Group Mineral Resources (inclusive of Ore Reserves) as at 31 March 2016 are estimated at 261.7 million tonnes at 0.95g/t Au for 8.01million ounces of gold compared with the estimate at 31 March 2015 of 249.1 million tonnes at 0.95g/t Au for 7.63 million ounces of gold. The change in the Group Mineral Resources is primarily the result of addition of new deposits. Group Mineral Resource 1.0Moz 0.3Moz 0.3Moz 7.6Moz 8.0Moz S E C N U O N O I L L I M 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 31 March 15 Depletion Model Update New Deposits 31 March 16 Mineral Resources are reported inclusive of Ore Reserves and include all exploration and resource definition drilling information, where practicable, up to 31 March 2016 and have been depleted for mining to 31 March 2016. Mineral Resources are constrained by optimised open pit shells developed with operating costs and a long term gold price assumption of A$2,000 per ounce for the purpose of satisfying “reasonable prospects for eventual extraction” (JORC 2012). The JORC compliant Group Ore Reserves as at 31 March 2016 are estimated at 60.8 million tonnes at 1.09g/t Au for 2.13 million ounces of gold compared with the estimate at 31 March 2015 of 59.1 million tonnes at 1.06g/t Au for 2.01 million ounces of gold. The re-estimation of Group Ore Reserves resulted in a 21% increase in tonnes and 22% increase in ounces after allowing for depletion by mining. This was primarily the result of: The inclusion of maiden Ore Reserves from Gloster and Baneygo deposits; a review of current pit design parameters including costs, metallurgical and geotechnical performance of mining projects to date; and the inclusion of further drilling results. 3.0 2.0 Group Ore Reserve 0.4Moz 0.3Moz 0.1Moz 1.0 2.0Moz 2.1Moz S E C N U O N O I L L I M 0.0 31 March 15 Depletion Model Update New Deposits 31 March 16 REGIS RESOURCES ANNUAL REPORT 2016 91 ASX ADDITIONAL INFORMATION A long term gold price of A$1,400 per ounce was used in Ore Reserve pit optimisations. Ore Reserves have been depleted for mining to 31 March 2016. Garden Well The Garden Well JORC compliant Mineral Resource as at 31 March 2016 is 75.8 million tonnes at 0.88g/t Au for 2.14 million ounces, compared to 86.7 million tonnes at 0.89g/t Au for 2.47 million ounces at 31 March 2015. The Garden Well JORC compliant Ore Reserve as at 31 March 2016 is 28.8 million tonnes at 0.89g/t Au for 0.83 million ounces, compared to 34.5 million tonnes at 0.91g/t Au for 1.01 million ounces at 31 March 2015. The change in the Garden Well Ore Reserve from March 2015 to March 2016 is as follows: 31 March 2015 Depleted by Mining to 31 March 2016 31 March 2015 Net of Depletion 31 March 2016 % Variation Net of Depletion TOTAL ORE RESERVE - GARDEN WELL TONNES (MT) GOLD GRADE (G/T) GOLD METAL (KOZ) 34.5 (5.6) 28.9 28.8 0% 0.91 0.87 0.92 0.89 1,009 (158) 851 827 -2% The re-optimisation and subsequent pit redesign at Garden Well resulted in a minor decrease in tonnes and 2% decrease in ounces after allowing for depletion by mining. This was primarily the result of review of 2016 reconciliation data against the March 2015 Ore Reserve and update of current pit design parameters including costs, metallurgical performance and infill drilling. Rosemont The Rosemont JORC compliant Mineral Resource as at 31 March 2016 is 28.0 million tonnes at 1.48g/t Au for 1.33 million ounces, compared to 28.3 million tonnes at 1.33g/t Au for 1.21 million ounces at 31 March 2015. The Rosemont JORC compliant Ore Reserve as at 31 March 2016 is 11.6 million tonnes at 1.51g/t Au for 0.56 million ounces, compared to 13.2 million tonnes at 1.35g/t Au for 0.57 million ounces at 31 March 2015. The change in the Rosemont Ore Reserve from March 2015 to March 2016 is as follows: 31 March 2015 Depleted by Mining to 31 March 2016 31 March 2015 Net of Depletion 31 March 2016 % Variation Net of Depletion TOTAL ORE RESERVE - ROSEMONT TONNES (MT) GOLD GRADE (G/T) GOLD METAL (KOZ) 13.2 (2.3) 10.9 11.6 5% 1.35 1.24 1.38 1.51 574 (91) 484 564 14% The re-optimisation and subsequent pit redesign at Rosemont resulted in a 5% increase in tonnes and 14% increase in ounces after allowing for depletion by mining, primarily due to: a review of current pit design parameters including costs, metallurgical and geotechnical performance plus an updated Mineral Resource estimate guided by reconciliation data that better reflects high-grade mineralisation; and the inclusion of further drilling results. 92 REGIS RESOURCES ANNUAL REPORT 2016 ASX ADDITIONAL INFORMATION Moolart Well The Moolart Well JORC compliant Mineral Resource as at 31 March 2016 is 36.1 million tonnes at 0.71g/t Au for 0.82 million ounces, compared to 47.3 million tonnes at 0.72g/t Au for 1.09 million ounces at 31 March 2015. The Moolart Well JORC compliant Ore Reserve as at 31 March 2016 is 4.8 million tonnes at 0.93g/t Au for 0.14 million ounces, compared to 6.5 million tonnes at 0.92g/t Au for 0.20 million ounces at 31 March 2015. The change in the Moolart Well Ore Reserve from March 2015 to March 2016 is as follows: 31 March 2015 Depleted by Mining to 31 March 2016 31 March 2015 Net of Depletion 31 March 2016 % Variation Net of Depletion TOTAL ORE RESERVE - MOOLART WELL TONNES (MT) GOLD GRADE (G/T) GOLD METAL (KOZ) 6.5 (2.7) 3.8 4.8 15% 0.92 0.89 0.95 0.93 194 (77) 117 144 14% The re-optimisation and subsequent pit redesign at Moolart resulted in a 15% increase in tonnes and 14% increase in ounces after allowing for depletion by mining. This was primarily the result of additional drilling in and around known Mineral Resources to expand and improve confidence. Duketon Satellite Deposits The combined JORC compliant Mineral Resource for Duketon satellite deposits as at 31 March 2016 is 48.7 million tonnes at 0.96g/t Au for 1.50 million ounces, compared to 13.6 million tonnes at 1.46g/t Au for 0.64 million ounces at 31 March 2015. The material change in total Mineral Resource ounces for the combined Duketon satellite deposits are as follows: Gloster: Mineral Resource purchased during the year and therefore not previously quoted by Regis. Updated to JORC 2012 utilising drilling completed by Regis in the past year. Baneygo: Mineral Resource has been updated from JORC 2004 to JORC 2012 utilising new drilling completed by Regis Resources in the past year. The combined JORC compliant Ore Reserve for Duketon satellite deposits as at 31 March 2016 is 15.5 million tonnes at 1.18g/t Au for 0.59 million ounces, compared to 4.8 million tonnes at 1.47g/t Au for 0.23 million ounces at 31 March 2015. The change in the combined satellite deposits Ore Reserve from March 2015 to March 2016 is as follows: 31 March 2015 Depleted by Mining to 31 March 2016 31 March 2015 Net of Depletion 31 March 2016 % Variation net of Depletion TOTAL ORE RESERVE - SATELLITE DEPOSITS TONNES (MT) GOLD GRADE (G/T) GOLD METAL (KOZ) 4.8 0.0 4.8 15.5 221% 1.47 - 1.47 1.18 229 0 229 590 158% There has been a 221% increase in tonnes and 158% increase in ounces at the Duketon satellite deposits. This was primarily the result of the inclusion of maiden Ore Reserve estimates based on the revised Mineral Resource estimates for Gloster and Baneygo utilising pit optimisation parameters based on nearby operating Duketon Projects. Refer to separate ASX announcements on 14 January 2016 (Baneygo Mineral Resource estimate) and 14 March 2016 (Gloster maiden Mineral Resource estimate and Ore Reserve and maiden Baneygo Ore Reserve). REGIS RESOURCES ANNUAL REPORT 2016 93 ASX ADDITIONAL INFORMATION McPhillamys The McPhillamys JORC compliant Mineral Resource at 31 March 2016 is 73.2 million tonnes at 0.94g/t Au for 2.21 million ounces, unchanged from 31 March 2015. GOVERNANCE ARRANGEMENTS & INTERNAL CONTROLS Regis has put in place governance arrangements and internal controls with respect to its estimates of Mineral Resources and Ore Reserves and the estimation process, including: oversight and approval of each annual statement by responsible senior officers; establishment of internal procedures and controls to meet JORC Code 2012 compliance in all external reporting; independent review of new and materially changed estimates; annual reconciliation with internal planning to validate reserve estimates for operating mines; and board approval of new and materially changed estimates. GROUP MINERAL RESOURCES PROJECT TYPE CUT-OFF (G/T) MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ COMPETENT PERSON1 MEASURED INDICATED INFERRED TOTAL RESOURCES Moolart Well2 Open Pit Garden Well2 Open Pit Rosemont2 Open Pit Duketon Main Deposits Gloster Open Pit Baneygo Open Pit Erlistoun Open Pit Dogbolter Open Pit Russells Find Open Pit Petra Open Pit King John Open Pit Reichelts Find Open Pit Anchor Open Pit Duketon Satellite Deposits 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 1.9 0.72 2.9 0.58 45 55 24.9 0.74 596 9.3 0.62 184 36.1 0.71 825 64.8 0.89 1,859 8.0 0.89 228 75.8 0.88 2,141 4.5 1.42 204 20.5 1.42 938 3.0 1.95 189 28.0 1.48 1,331 9.4 1.01 303 110.2 0.96 3,393 20.3 0.92 600 139.8 0.96 4,297 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 14.7 0.79 374 6.6 0.73 154 21.3 0.77 528 9.2 0.96 283 1.9 0.95 5.7 1.34 247 1.1 1.00 3.5 1.11 128 0.5 1.02 2.1 1.2 - - 1.07 1.08 - - 0.2 1.75 71 42 - - 9 0.3 0.90 0.1 1.09 0.8 1.56 0.8 1.11 0.1 0.95 57 37 16 10 2 42 28 2 11.1 0.96 340 6.9 1.28 284 4.0 1.10 144 2.4 1.05 1.3 1.08 0.8 1.56 0.8 1.11 0.2 1.53 81 44 42 28 11 36.6 0.98 1,155 12.2 0.89 348 48.7 0.96 1,503 Duketon Total 9.4 1.01 303 146.8 0.96 4,548 32.4 0.91 948 188.6 0.96 5,800 McPhillamys Total 0.4 - - - 69.2 0.94 2,087 3.9 0.98 123 73.2 0.94 2,210 REGIS TOTAL 9.4 1.01 303 216.0 0.96 6,635 36.4 0.92 1,071 261.7 0.95 8,010 A B B A A A A A A A A A B The above data has been rounded to the nearest 100,000 tonnes, 0.01 g/t gold grade and 1,000 ounces. Errors of summation may occur due to rounding. All Mineral Resources are reported inclusive of Ore Reserves to JORC Code 2012 unless otherwise noted. 1. Refer to Group Competent Person notes below. 2. Mineral Resources and Ore Reserves are reported inclusive of ROM Stockpiles at cut-off grade of 0.4g/t. 94 REGIS RESOURCES ANNUAL REPORT 2016 ASX ADDITIONAL INFORMATION GROUP ORE RESERVES PROJECT TYPE CUT-OFF (G/T)1 MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ MILLION TONNES GRADE G/T GOLD KOZ COMPETENT PERSON2 PROVED PROBABLE TOTAL RESERVES D D D D D D D D D Moolart Well3 Open Pit Garden Well3 Open Pit Rosemont3 Open Pit >0.4 >0.4 >0.4 Duketon Main Deposits Total Gloster Open-Pit > 0.5 Erlistoun Open-Pit > 0.5 Baneygo Open-Pit > 0.4 Petra Open-Pit > 0.5 Dogbolter Open-Pit > 0.5 Anchor Open-Pit > 0.5 Duketon Satellite Deposits Total 1.6 0.77 2.9 0.58 3.4 7.9 1.45 0.99 39 55 157 251 3.3 1.00 105 4.8 0.93 25.9 0.93 772 28.8 0.89 8.3 1.53 407 11.6 1.51 144 827 564 37.4 1.07 1,284 45.3 1.05 1,535 - - - - - - - - - - - - - - - - - - - - - 1.00 226 7.0 3.8 3.6 0.6 0.3 1.48 1.16 1.26 1.57 181 136 25 16 6 0.1 2.07 15.5 1.18 590 7.0 3.8 3.6 0.6 0.3 0.1 15.5 60.8 1.00 1.48 1.16 1.26 1.57 2.07 1.18 226 181 136 25 16 6 590 1.09 2,125 REGIS TOTAL 7.9 0.99 251 52.9 1.10 1,874 The above data has been rounded to the nearest 100,000 tonnes, 0.01 g/t gold grade and 1,000 ounces. Errors of summation may occur due to rounding. 1. Cut-off grades vary according to oxidation and lithology domains. Refer to Group Ore Reserves Lower Cut notes below. 2. Refer to Group Competent Person notes below. 3. Mineral Resources and Ore Reserves are reported inclusive of ROM Stockpiles at cut-off grade of 0.4g/t. GROUP ORE RESERVES LOWER CUT Reserves as at 31 March 2016 PROJECT Garden Well PROFILE Alluvial Rosemont Moolart Erlistoun Dogbolter Petra Anchor Gloster Oxide, Transitional, Fresh All Laterite, Oxide, Transitional Fresh All Oxide Transitional Fresh Oxide, Transitional Fresh Oxide, Transitional Fresh Oxide, Transitional Fresh Baneygo Oxide, Transitional Fresh DOMAIN Ultramafic Chert Low Recovery Chert and Shale Sediments Other Sediments Other LOWER CUT (G/T) 0.4 0.4 0.5 0.8 0.4 0.4 0.4 0.5 0.5 0.6 0.5 0.7 0.6 0.5 0.6 0.5 0.6 0.5 0.6 0.4 0.5 REGIS RESOURCES ANNUAL REPORT 2016 95 ASX ADDITIONAL INFORMATION COMPETENT PERSONS STATEMENT The information in this statement that relates to the Mineral Resources or Ore Reserves listed in the table below is based on work compiled by the person whose name appears in the same row. Each of these persons, other than Mr de Klerk and Mr Johnson, is a full- time employee of Regis Resources Limited. Mr de Klerk is a full-time employee of Cube Consulting Pty Ltd and Mr Johnson is a full-time employee of MPR Geological Consultants Pty Ltd. Each person named in the table below are Members of The Australasian Institute of Mining and Metallurgy and/or The Australian Institute of Geoscientists and have sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which they have undertaken to qualify as a Competent Person as defined in the JORC Code 2012. It is noted that some of the Duketon satellite deposits were previously disclosed under JORC Code 2004 requirements and have now been updated to JORC Code 2012 requirements. Each person named in the table below consents to the inclusion in this report of the matters based on their information in the form and context in which it appears. GROUP COMPETENT PERSONS Resources and Reserves as at 31 March 2016 ACTIVITY COMPETENT PERSON IDENTIFIER INSTITUTE Moolart Well Resource Jarrad Price Moolart Well Reserve Quinton de Klerk Garden Well Resource Nic Johnson Garden Well Reserve Quinton de Klerk Rosemont Resource Nic Johnson Rosemont Reserve Quinton de Klerk Erlistoun Resource Jarrad Price Erlistoun Reserve Quinton de Klerk Dogbolter Resource Jarrad Price Dogbolter Reserve Quinton de Klerk Petra Resource Jarrad Price Petra Reserve Quinton de Klerk Anchor Resource Jarrad Price Anchor Reserve Quinton de Klerk King John Resource Jarrad Price Russells Find Resource Jarrad Price Baneygo Resource Baneygo Reserve Jarrad Price Jarrad Price Reichelts Find Resource Jarrad Price Gloster Resource Gloster Reserve Coopers Resource Jarrad Price Jarrad Price Jarrad Price McPhillamys Resource Nic Johnson A D B D B D A D A D A D A D A A A A A A A A B Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australian Institute of Geoscientists Australasian Institute of Mining and Metallurgy Australian Institute of Geoscientists Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australasian Institute of Mining and Metallurgy Australian Institute of Geoscientists 96 REGIS RESOURCES ANNUAL REPORT 2016 ASX ADDITIONAL INFORMATION FORWARD LOOKING STATEMENTS This report may contain forward looking statements that are subject to risk factors associated with gold exploration, mining and production businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including but not limited to price fluctuations, actual demand, currency fluctuations, drilling and production results, Reserve estimations, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory changes, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. Forward-looking statements, including projections, forecasts and estimates, are provided as a general guide only and should not be relied on as an indication or guarantee of future performance and involve known and unknown risks, uncertainties and other factors, many of which are outside the control of Regis Resources Ltd. Past performance is not necessarily a guide to future performance and no representation or warranty is made as to the likelihood of achievement or reasonableness of any forward looking statements or other forecast.

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