Regis Resources
Annual Report 2017

Plain-text annual report

2017 ANNUAL REPORT CORPORATE INFORMATION ABN 28 009 174 761 Directors Mark Clark Paul Thomas Mark Okeby Ross Kestel James Mactier Fiona Morgan (Executive Chairman) (Executive Director) (Deputy Chairman/Lead Independent Non-Executive Director) (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 T R O P E R L A U N N A 7 1 0 2 / / S E C R U O S E R S I G E R CONTENTS Highlights Chairman's Report Corporate Duketon Gold Project Gold Exploration Reserves & Resources Directors’ Report Remuneration Report (Audited) Auditor’s Independence Declaration Financial Statements Notes to the Financial Statements Directors' Declaration Independent Auditor’s Report 2 4 6 8 11 19 21 35 49 50 56 96 97 ASX Additional Information 102 2 HIGHLIGHTS CORPORATE 24% 24% Gloster ore delivery to the Moolart Well ROM // Photo by John Dumancic 8% 8% 8% 8% 15% 15% NET PROFIT AFTER TAX NET PROFIT AFTER TAX REVENUE REVENUE REVENUE REVENUE EBITDA EBITDA DIVIDENDS DIVIDENDS Net profit after tax up 24% to $138.2 million for the financial year. Net profit after tax up 24% to $138.2 million for the financial year. Revenue up 8% to $542.2 million. Revenue up 8% to $542.2 million. EBITDA up 8% to $253.3 million. EBITDA up 8% to $253.3 million. Dividends declared for FY2017 up 15% to 15.0 cents per share. Dividends declared for FY2017 up 15% to 15.0 cents per share. CASH AND BULLION Cash and Bullion increased to $151.7 million at 30 June 2017, up $28.4 million for the year. CASH AND BULLION Cash and Bullion increased to $151.7 million at 30 June 2017, up $28.4 million for the year. 2017 2017 2016 2016 APPOINTMENT Appointment of Fiona Morgan to the Board. $151.7 million $151.7 million 123.3 million 123.3 million REGIS RESOURCES // 2017 ANNUAL REPORT3 DUKETON OPERATIONS Record gold production at Duketon in FY2017 with 324,353 ounces of gold produced at AISC of $945 per ounce. Strong operating cashflow from Duketon of $256.1 million. Commencement of mining and first production from the Gloster and Erlistoun satellite deposits. FY2017 production guidance increased to 335,000-365,000 ounces of gold at AISC $940-1,010 per ounce. EXPLORATION Maiden reserve released for the Tooheys Well Gold Project contributes to an increase in Ore Reserves during the period of 388,000 ounces net of depletion. RC drilling programme at Rosemont Underground delivers gold intercepts with excellent widths and grades. Infill drilling programme at McPhillamys provides basis for maiden Reserve estimate of 2.03 million ounces released in September 2017. Acquisition of the Blayney Gold Project, located contiguous to the McPhillamys Project for $3.25 million. REGIS RESOURCES // 2017 ANNUAL REPORT4 CHAIRMAN’S REPORT Dear Shareholder, On behalf of the Board of Directors of Regis Resources it is my pleasure to present to you the Company’s 2017 Annual Report. Last year I wrote that our focus would be on delivering operational excellence and organic growth to our business. So it is pleasing that this year we achieved production of 324,353 ounces which was 6% higher than last year as the Company’s organic growth strategy takes effect. This excellent result also further consolidates Regis’ position as one of Australia’s leading gold mining companies. Some of the highlights of a very successful year include: Outstanding operational performance at Duketon with record gold production of 324,353 ounces at all in sustaining costs of $945 per ounce. The successful start-up of new mines at Gloster and Erlistoun validating the strategy of blending higher grade satellite ore feed to existing operations. Net profit after tax up 24% to $138.2 million and EBITDA up 8% to $253.3 million. A fully franked final dividend of 8 cents per share declared in August 2017 taking full year dividends to 15 cents per share. The release of a maiden Reserve at Tooheys Well of 7.1 million tonnes at 1.61g/t Au for 366,000 ounces of gold more than replaces mining depletion for the year. Infill drilling programme at McPhillamys completed during the year and the progression of two long term water supply options culminated in the declaration of a maiden Reserve estimate of 2.03 million ounces in September 2017. On the back of record production at Duketon, the Company achieved strong financial results. Regis generated a net operating cash flow of $206.1 million for FY2017 and at the end of the financial year had cash and bullion holdings of $151.7 million and no bank debt. The Company declared full year dividends of 15 cents per share for 2017. This represents a payout ratio of 14% of revenue and 54% of profit after tax for FY2017 which further enhances Regis’ status as an Australian gold industry leader on dividend payment metrics. Since Regis’ maiden dividend in 2013, the Company has paid a total of $245 million (49cps) in fully franked dividends. It is pleasing to note that the Company’s record gold production was achieved with the addition of higher grade ore feed from the Gloster and Erlistoun open pits. The commencement of mining at these satellite operations during the year was the culmination of a strategy embarked on two years ago to blend higher grade satellite mill feed to the existing processing plants at Moolart Well, Rosemont and Garden Well. With a full year of production from Erlistoun and Gloster in FY2018, production is expected to increase and be in the range of 335,000 - 365,000 ounces at an all in sustaining cost of $940 - $1,010 per ounce. Gold production at these levels is expected to be maintained in the medium term with the introduction of Tooheys Well ore in future years. The addition of 366,000 ounces of gold to Regis’ Ore Reserves with the release of the maiden Reserve at Tooheys Well during the year further demonstrates the excellent organic growth potential that aggressive exploration of the prospective Duketon greenstone belts controlled by Regis can deliver. Further regional exploration programmes are planned in FY2018 together with drilling programmes at the Rosemont deposit targeting the release of a maiden underground resource later this year. A significant amount of work was undertaken during the year on the McPhillamys project in NSW. A 45,000 metre infill drilling programme was completed during the year with the results used to estimate a maiden Reserve of 2.03 million ounces in September 2017. The development of the project represents an outstanding organic growth opportunity for Regis and we look forward to pushing ahead with the final elements of the DFS and then submitting permitting applications immediately thereafter. Regis sits in an enviable position in the Australian gold industry. We have a blend of quality operating and development assets that provide the platform for future organic growth. Our strong balance sheet and robust cash flows underpin our commitment to paying dividends to shareholders as well as provide the opportunity for further growth outside our current projects. None of the achievements of the last 12 months would be possible without the hard work and dedication of the Regis team. I would like to thank all Regis employees and contractors for their relentless efforts and commitment over the last 12 months and look forward to continuing to build on this success in 2018. Yours sincerely Mark Clark Executive Chairman REGIS RESOURCES // 2017 ANNUAL REPORTIt is pleasing that this year we achieved production of 324,353 ounces which was 6% higher than last year. s n o s n o i l l i i l l i M M $ $ Revenue Revenue 502 502 465 465 544 544 600 600 500 500 400 400 372 372 300 300 200 200 100 100 0 0 2014 2014 2015 2015 2016 2016 2017 2017 6 CORPORATE Driven by record production at the Duketon Gold Project, Regis reported a 24% increase in profit after tax for the 2017 financial year of $138.2 million. EBITDA EBITDA 300 300 250 250 200 200 181 181 141 141 s n o s n o i l l i i l l i 234 234 253 253 100 100 80 80 60 60 46.6% 46.6% 46.6% 46.6% ) ) % % ( ( e e u u n n e e v v e e R R / / A A D D T T I I B B E E 20 20 This strong result was on the back of an 8% increase in gold revenue to $542.0 million driven by a 6% higher delivered gold price and a 4% higher sales volume. Accordingly EBITDA increased by 8% from the previous period to $253.3 million for FY2017. 37.9% 38.9% 37.9% 38.9% M M $ $ 100 100 40 40 150 150 Regis sold a total of 319,407 ounces of gold during the year at an average price of A$1,691 per ounce. The Company delivered the gold produced during the year into a combination of spot deferred contracts and at the prevailing spot price. At the end of the financial year the Company had a total hedging position of 396,406 ounces of spot deferred contracts with a delivery price of A$1,551 per ounce. 2016 2016 2014 2014 2015 2015 2017 2017 0 0 0 0 EBITDA EBITDA EBITDA Margin (%) EBITDA Margin (%) 50 50 The following graphs illustrate the strong performance of the Company across several profit metrics. 600 600 500 500 400 400 300 300 200 200 100 100 0 0 300 300 250 250 200 200 150 150 100 100 50 50 0 0 s n o i l l i s n o M $ i l l i M $ s n o i l l i M $ s n o i l l i M $ Revenue Revenue 502 502 465 465 544 544 372 372 2014 2014 2015 2015 2016 2016 2017 2017 EBITDA EBITDA 234 234 253 253 100 100 80 80 181 181 141 141 37.9% 38.9% 37.9% 38.9% 2015 2015 2014 2014 EBITDA EBITDA 60 46.6% 46.6% 60 46.6% 46.6% 40 40 20 20 0 0 2016 2017 2016 EBITDA Margin (%) 2017 EBITDA Margin (%) Net Profit After Tax Net Profit After Tax 138 138 112 112 87 87 55 55 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 s n o s n o i l l i i l l i M M $ $ 2014 2014 2015 2015 2016 2016 2017 2017 e r a h S r e P s t n e C e r a h S r e P s t n e C 30 30 25 25 20 20 15 15 10 10 5 5 0 0 Earnings & Dividend Earnings & Dividend Per Share Per Share 27.6 27.6 22.4 22.4 17.4 17.4 11 11 0 0 6 6 15 15 13 13 2014 2014 2015 2015 2016 2016 2017 2017 EPS EPS Dividend Per Share Dividend Per Share ) % ) % ( e u n e v e R / A D T I B E ( e u n e v e R / A D T I B E FY2014 NPAT, EBITDA & EPS adjusted to underlying result by excluding $202.7m after tax impairment charge s n o i s n l o l i i l M l i $ M $ 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 e r a e r h a S h S r e r P e s P t n s t e n C e C 30 30 25 25 20 20 15 15 10 10 5 0 5 0 Net Profit After Tax Net Profit After Tax 138 138 112 112 87 87 55 55 2014 2014 2015 2015 2016 2016 2017 2017 Earnings & Dividend Earnings & Dividend Per Share Per Share 27.6 27.6 22.4 22.4 15 15 13 13 11 11 17.4 17.4 6 6 0 0 EPS EPS 2014 2014 2015 2015 2016 2016 2017 2017 Dividend Per Share Dividend Per Share REGIS RESOURCES // 2017 ANNUAL REPORT Net cash from operating activities of $206.1 million was in line with 2016 as higher production at the project was offset by higher start up stripping at the new satellite operations. Robust operating cashflows from the project generated an increase in the Company’s cash and bullion holdings to $151.7 million, up $28.4 million from the previous year even after the payment of dividends, start-up capital expenditure at Gloster and Erlistoun and the extensive resource drilling programmes at Duketon and McPhillamys. 20 15 8 9 7 Dividends Declared The Company paid a total of $80.1 million in fully franked dividends during the year and subsequent to the end of the financial year declared an 8 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 FY2017. The full year dividend of 8 cents per share coupled with the 7 cents per share interim dividend paid in February 2017, took the full year pay out to 15 cents per share. This represents a 14% payout of FY2017 revenue and 54% of net profit after tax. Since the commencement of dividend payments in 2013, the Company has paid a total of $245 million in fully franked dividends (49cps). Interim Final 2016 2015 2017 4 6 7 0 5 e r a h S r e P s t n e C 10 Dividends Declared Cumulative Dividends Paid e r a h S r e P s t n e C 20 15 10 5 0 9 4 6 8 7 2015 2016 2017 Interim Final s n o i l l i M $ 300 250 200 150 100 50 0 245 170 75 75 105 2013 2014 2015 2016 2017 The following chart details the movement in the Company’s cash reserves over the financial year: Cumulative Dividends Paid 300 250 200 400 s n o i l l i M 350 $ 150 100 245 Cash & Gold on Hand - FY 2017 170 $256.1 75 75 105 50 300 0 2013 2014 ($80.1) 2015 2016 2017 250 200 s n o i l l i M $ 150 100 50 ($49.6) ($35.6) ($24.9) ($36.2) $4.3 ($5.7) $151.7 $123.3 Ju ne 2016 O perations Dividen ds Mine D evelop m ent Exploration & Evaluation Other Capex Inco m e Tax Invest m ents Other Ju ne 2017 Operating cash flow differs from the statutory Statement of Cash Flow “net cash from operating activities” as it is quoted under the Appendix 5B classification protocol and includes movement in gold bullion on hand REGIS RESOURCES // 2017 ANNUAL REPORT 8 DUKETON GOLD PROJECT The Duketon Gold Project is located in the North Eastern Goldfields of The Duketon Gold Project is located in the North Eastern Goldfields of Western Australia Western Australia approximately 130 kilometres north of Laverton. 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 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 satellite deposits including the Erlistoun Gold Mine. The Duketon Project has in excess of 1,000 Operations (“DSO”) comprising the Garden Well and Rosemont Gold Mines and surrounding satellite deposits including the Erlistoun Gold Mine. The Duketon Project has in excess of 1,000 square kilometres of exploration and square kilometres of exploration and mining tenure. mining tenure. In 2017 the Duketon Project produced 324,353 ounces of gold which was at the upper end of FY2017 guidance of 300,000-330,000 ounces and the highest ever production since operations commenced in 2010. As expected the project benefited from the introduction of higher grade ore feed from the commencement of operations at satellite deposits, Gloster and Erlistoun. Milled grade across the Duketon Project increased by 8% to 1.11g/t and validated the strategy of pursuing organic growth through aggressive regional exploration programmes across Duketon. All in sustaining costs were $945 per ounce which was below the lower end of FY 2017 cost guidance and reflected the excellent cost control at the operations. 4 REGIS RESOURCES // 2017 ANNUAL REPORT In 2017 the Duketon Project produced 324,353 ounces of gold which was at the upper end of FY2017 guidance of 300,000-330,000 ounces and the highest ever production since operations commenced in 2010. As expected the project benefited from the introduction of higher grade ore feed from the commencement of operations at satellite deposits, Gloster and Erlistoun. Milled grade across the Duketon Project increased by 8% to 1.11g/t and validated the strategy of pursuing organic growth through aggressive regional exploration programmes across Duketon. All in sustaining costs were $945 per ounce which was below the lower end of FY2017 cost guidance and reflected the excellent cost control at the operations. 9 Operating results for the entire Duketon Project are summarised below: Ore mined Waste mined Stripping ratio Ore mined Ore milled Head grade Recovery Gold production Cash cost Cash cost inc royalty All in Sustaining Cost Mbcm Mbcm w:o Mt g/t % koz’s A$/oz A$/oz A$/oz 2017 4.56 25.55 5.60 10.85 9.78 1.11 93 324 790 864 945 2016 4.63 22.62 4.89 10.79 10.25 1.03 90 305 773 845 927 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 2017 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 2017 1.74 7.77 4.5 3.37 2.95 1.14 94 101 621 697 785 2016 1.49 5.77 3.9 2.98 2.92 0.90 91 76 706 778 934 Annual production for FY2017 at DNO was 100,875 ounces at a cash cost of $621 per ounce and an all in sustaining cost of $785 per ounce. Production at DNO increased by 32% from the previous year due to the commencement of mining operations at the Gloster satellite deposit in October 2016. Gloster ore is hauled approximately 26 kilometres by road train to the processing facility at Moolart Well where it is blended with ore from that operation. The ore from Gloster milled during 2017 was of a higher grade and softer, oxide material than the ore available from Moolart Well. As a result the head grade at DNO increased by 27% and mill throughput improved slightly from the previous year even though Gloster contributed to production for only 9 months of the year. AISC for DNO dropped 16% on the back of the increased gold production and despite the higher strip ratio incurred in starting up operations at Gloster. REGIS RESOURCES // 2017 ANNUAL REPORT DUKETON SOUTH OPERATIONS 10 The Duketon South Operations (“DSO”) includes the Garden Well, Rosemont, Erlistoun, Baneygo and other satellite projects in proximity to the Garden Well processing plant. Operating results for the year to 30 June 2017 were as follows: Ore mined Waste mined Stripping ratio Ore mined Ore milled Head grade Recovery Gold production Cash cost Cash cost inc royalty All in Sustaining Cost Mbcm Mbcm w:o Mt Mt g/t % koz’s A$/oz A$/oz A$/oz 2017 2.82 17.78 6.3 7.48 6.83 1.10 93 223 867 940 1,017 2016 3.15 16.85 5.4 7.81 7.34 1.08 90 229 795 867 924 Production at DSO for the year was 223,478 ounces of gold at an all-in sustaining cost of $1,017 per ounce. Gold production was slightly lower than the previous year due to a 7% reduction in mill throughput as a result of the Rosemont operation transitioning to harder, fresh ore during the year. Mining of softer oxide material in the Rosemont southern extension commenced towards the end of the year resulting in improved throughput. Mining at the Erlistoun satellite project commenced in December 2016 with ore carted to the Garden Well processing plant (8 kilometres to the north). Ore supply from Erlistoun, whilst contributing positively to DSO grade, was continuous but in modest tonnages as the open cut advances to main ore zones. The contribution from Erlistoun is expected to improve in FY2018 as operations move towards steady state and ore supply becomes continuous. AISC was up 10% on the prior year as a result of high, start up strip ratios at Erlistoun and the Rosemont southern extension. FY2018 GUIDANCE With a full year of production expected from the Gloster and Erlistoun satellite deposits, Regis is expecting production at Duketon to increase in FY2018. Gold production and operating costs for FY2018 are expected to be in the following ranges: Gold production: 335,000 – 365,000 ounces Cash costs, including royalties: $770 – 840 per ounce All in Sustaining Cost: $940 – 1,010 per ounce ) d e u n i t n o c ( T C E J O R P D L O G N O T E K U D / / S E C R U O S E R S I G E R GOLD EXPLORATION Duketon Gold Project 11 Regis controls a significant tenement package, encompassing 192 granted exploration, prospecting and mining licences covering 1,031 square kilometres and 38 miscellaneous licences covering 427 square kilometres at the Duketon Gold Project. Regis’ exploration effort in recent years has been successful in extending the reserve base of the Company and replacing annual production. The successful replenishment and extension of Reserves is reflective of the advantage the significant tenure position on prospective geology and the proximity to the 10Mtpa milling capacity provides at Duketon. Duketon Gold Reserves 2009-2017 3,000 2,500 2,000 1,500 1,000 500 0 -500 -1,000 -1,500 ’ ) s 0 0 0 ( s e c n u O s e v r e s e R 3.4Moz 2.2Moz 0.6Moz 2009 Reserve Mining Depletion Discovery Current Reserves 1.9Moz REGIS RESOURCES // 2017 ANNUAL REPORT Significant exploration projects advanced during the year ended 30 June 2017 are outlined below. announced a maiden Ore Reserve of 7.1MT at 1.61g/t Au for 366,000 ounces of gold at a 0.5g/t Au lower cut. Tooheys Well 12 The Tooheys Well gold project is 100% owned and located on a granted mining lease, 2.5 kilometres south of the Gold mineralisation has been defined in two north-south trending Western and Eastern shear Garden Well gold mine. In June 2017, after extensive drilling, Regis announced a maiden Ore Reserve of 7.1MT at 1.61g/t zones 100 metres apart hosted in Banded Iron Formation (BIF), chert and fine grained sediments. Au for 366,000 ounces of gold at a 0.5g/t Au lower cut. The eastern shear zone mineralisation appears to have a steep dip of 80-90ᵒ to the east. Host Gold mineralisation has been defined in two north-south trending Western and Eastern shear zones 100 metres apart rocks are BIF/chert and shale and weathering extends to 80 to 100 metres vertical depth. Gold hosted in Banded Iron Formation (BIF), chert and fine grained sediments. The eastern shear zone mineralisation appears to have a steep dip of 80-90˚ to the east. Host rocks are BIF/chert and shale and weathering extends to 80 mineralisation is associated with pyrrhotite hosted in BIF which appears to be the dominant to 100 metres vertical depth. Gold mineralisation is associated with pyrrhotite hosted in BIF which appears to be the lithology at Tooheys Well. The pyrrhotite phase is restricted to BIFs and has replaced magnetite dominant lithology at Tooheys Well. The pyrrhotite phase is restricted to BIFs and has replaced magnetite during during hydrothermal alteration. hydrothermal alteration. It is planned that open cut mining will provide a supplementary higher-grade ore supply for the existing Garden Well It is planned that open cut mining will provide a supplementary higher-grade ore supply for the processing plant. Mining is expected to commence in the March 2018 quarter (subject to final statutory approvals) existing Garden Well processing plant. Mining is expected to commence in the March 2018 with ore haulage and gold production to follow in the December 2018 quarter. Utilisation of Regis’ 5Mtpa Garden Well quarter (subject to final statutory approvals) with ore haulage and gold production to follow in the processing plant will see Tooheys Well produce in the order of 90,000 ounces of gold per annum over the life of the mine, displacing lower grade ore from Garden Well from the mill. December 2018 quarter. Utilisation of Regis’ 5Mtpa Garden Well processing plant will see Tooheys Well produce in the order of 90,000 ounces of gold per annum over the life of the mine, displacing lower grade ore from Garden Well from the mill. Rosemont Underground Resource Drilling An RC drill programme was undertaken during the current year to test for underground mineralisation at Rosemont South and below the centre of the Main Pit where numerous high 8 ) d e u n i t n o c ( N O I T A R O L P X E D L O G / / S E C R U O S E R S I G E R Rosemont Underground Resource Drilling An RC drill programme was undertaken during the current year to test for underground mineralisation at Rosemont grade intercepts were recorded during exploration and resource development programmes prior South and below the centre of the Main Pit where numerous high grade intercepts were recorded during exploration to mining. This programme also leveraged off the knowledge of structural orientation and and resource development programmes prior to mining. This programme also leveraged off the knowledge of controls over high grade zones of mineralisation seen in grade control drilling in the open pit structural orientation and controls over high grade zones of mineralisation seen in grade control drilling in the open pit workings immediately above the targeted underground areas. workings immediately above the targeted underground areas. 13 Drilling has been conducted from within the open pit mine, considerably shortening the depth of Drilling has been conducted from within the open pit mine, considerably shortening the holes required to test high grade shoots 100-200 metres vertically below the final pit design depth of holes required to test high grade depth. Shorter holes also allow the use of RC rigs rather than diamond drill rigs however the shoots 100-200 metres vertically below the drilling activities must fit within mining operations and as a result, the drill programme has final pit design depth. Shorter holes also extended beyond the end of the current year. allow the use of RC rigs rather than diamond drill rigs however the drilling activities must fit within mining operations and as a result, Early holes drilled to date are encouraging for underground opportunities across the deposit. the drill programme has extended beyond Drilling will continue in FY2018 with a focus on establishing continuity and geometry of high grade the end of the current year. mineralisation. A programme of diamond drilling will commence shortly to both verify existing RC derived high grade intercepts and to also gain structural and geotechnical information. Early holes drilled to date are encouraging for underground opportunities across the deposit. Drilling will continue in FY2018 with a focus on establishing continuity and geometry of high grade mineralisation. A programme of diamond drilling will commence shortly to both verify existing RC derived high grade intercepts and to also gain structural and geotechnical information. 9 10 REGIS RESOURCES // 2017 ANNUAL REPORT 14 ) d e u n i t n o c ( N O I T A R O L P X E D L O G / / S E C R U O S E R S I G E R 10 On completion of these programmes, it is anticipated Regis will be in a position to estimate a maiden underground resource in relation to the initial areas drilled to date below and to the south of Rosemont Main Pit. Duketon Gold Exploration Joint Venture Lag sampling and air core drilling programmes were completed on a number of prospects in the Duketon Gold Exploration Joint Venture during the current year, including Petra North, Hack Bore, Commonwealth, Bella Well and Bandya. Regis has met its joint venture expenditure obligations to spend at least $1 million over a 2 year period to earn a 75% interest in any mining project that is confirmed by a Regis decision to mine. The 2 year term expires in October 2017 and without finding any significant targets for further follow up, limited future work is planned. Duketon Reserve Growth The aggressive exploration programme at the Duketon project continues to focus 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 2017. Duketon Ore Reserves increased by 18% from 2.13 million ounces to 2.18 million ounces after accounting for mining depletion of 331,000 ounces. Duketon Mineral Resources increased from 5.80 million ounces to 5.85 million ounces. The change in the Duketon Ore Reserve from March 2016 to March 2017 is as follows: 31 March 2016 Depleted by Mining to 31 March 2017 31 March 2016 Net of Depletion 31 March 2017 % Variation net of Depletion TOTAL ORE RESERVE TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) 60.8 -9.6 51.2 59.3 13% 1.09 1.07 1.09 1.14 2,125 -331 1,794 2,182 18% The major contributors to the increase of 388,000 ounces in Ore Reserves net of depletion were: Maiden Ore Reserve of 366,000 ounces at Tooheys Well; and Addition of 52,000 ounces at Gloster and 12,000 ounces at Erlistoun through extensional drilling and improved optimisations. McPhillamys Gold Project The 100% Regis owned McPhillamys Gold Project is one of Australia’s larger undeveloped open McPhillamys Gold Project pittable gold resources. The project is located approximately 250 kilometres west of Sydney in The 100% Regis owned McPhillamys Gold Project is one of Australia’s larger undeveloped open pittable gold resources. Central West NSW, a well-established mining district. The project is located approximately 250 kilometres west of Sydney in Central West NSW, a well-established mining district. 15 An RC and diamond drill programme was completed during the year (153 holes for 45,411 metres) with the aim being to infill the current drill pattern to a nominal 50m x 25m spacing for an updated Mineral Resource Estimate (MRE) and was used as a basis for the maiden reserve estimation. An RC and diamond drill programme was completed during the year (153 holes for 45,411 metres) with the aim being to infill the current drill pattern to a nominal 50m x 25m spacing for an updated Mineral Resource Estimate (MRE) and was used as a basis for the maiden reserve estimation. 12 REGIS RESOURCES // 2017 ANNUAL REPORT A cross section of the McPhillamys gold deposit is shown below: A cross section of the McPhillamys gold deposit Significant McPhillamys drill hole results in plan view A cross section of the McPhillamys gold deposit is shown below: Subsequent to the end of the year, the Company announced a maiden ore Reserve estimate at McPhillamys of 60.1 million tonnes at 1.05g/t for 2,034,000 ounces of gold. A pre-feasibility study completed in conjunction with the Reserve estimate shows the project supports a large scale open pit gold mine. The project will be developed as a 7 million tonne per annum mining and processing operation with gold production averaging 192,000 ounces per annum over a nine year mine life. The capital cost of development is estimated at $215 million with life of mine all in sustaining cost of operation forecast to be $990 per ounce. At a $1,600 per ounce gold price, the project has a pre-tax, post capex net present value of $525 million. Key life of mine physical results from the study, at a processing throughput of 7Mtpa, are summarised below: 13 MINING Waste volume (BCM millions) Ore volume (BCM millions) Volume total (BCM millions) W:O Strip Ratio MILLING Dry Tonnes Per Hour Plant Availability Ore Milled (Tonnes millions) Milled Grade (g/t) Recovery Ounces Recovered Mine life (years) 91.6 21.3 112.9 4.29 841 95.0% 60.1 1.05 85.0% 1,728,264 13 9 16 ) d e u n i t n o c ( N O I T A R O L P X E D L O G / / S E C R U O S E R S I G E R Life of mine gold production is shown below: Annual Gold Production and Milled Grade Ounces Recovered Milled Grade (g/t) 250 200 ’ ) s 0 0 0 ( s e c n u O 150 100 50 0 1 2 3 4 5 6 7 8 9 17 u A t / g 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 1.01 0.93 0.95 0.94 0.90 177,647 181,016 210,461 210,877 179,298 192,720 224,493 142,688 209,062 As part of advancing the development of the McPhillamys Gold Project, Regis announced in July Ounces 2017 that it was progressing two long term water supply options for the project. The first option is Recovered Milled a non-binding heads of agreement with Centennial Coal Company Limited (“Centennial”) and Grade (g/t) Energy Australia Pty Ltd (“EA”) for Regis to utilise water from the Mt Piper Power Station and Springvale Mine near Lithgow. The parties to the non-binding heads of agreement are proceeding As part of advancing the development of the McPhillamys Gold Project, Regis announced in July 2017 that it was progressing two long term water supply options for the project. The first option is a non-binding heads of agreement to work towards finalising a binding agreement as soon as possible with completion targeted for with Centennial Coal Company Limited (“Centennial”) and Energy Australia Pty Ltd (“EA”) for Regis to utilise water from the September 2017 quarter. the Mt Piper Power Station and Springvale Mine near Lithgow. The parties to the non-binding heads of agreement are proceeding to work towards finalising a binding agreement as soon as possible with completion targeted for the Concurrent with progressing the above water supply agreement, Regis has contractually secured September 2017 quarter. approximately 4.5GLpa of water through long term lease and acquisition of Water Access Concurrent with progressing the above water supply agreement, Regis has contractually secured approximately Licenses over ground water allocations in a zone of the Lachlan catchment approximately 80 4.5GLpa of water through long term lease and acquisition of Water Access Licenses over ground water allocations in kilometres from McPhillamys. a zone of the Lachlan catchment approximately 80 kilometres from McPhillamys. 1.09 1.46 1.10 1.17 A definitive feasibility study (DFS) into the development of the project is expected to be completed in the December 2017 quarter. Subject to the completion of the DFS the following development timetable is targeted: 15 REGIS RESOURCES // 2017 ANNUAL REPORT 18 ) d e u n i t n o c ( N O I T A R O L P X E D L O G / / S E C R U O S E R S I G E R Garden Well processing plant // Photo by Christine Darbyshire A definitive feasibility study (DFS) into the development of the project is expected to be completed in the December 2017 quarter. Subject to the completion of the DFS the following development timetable is targeted: Submission of permitting applications – March 2018 quarter Commencement of construction – December 2018 quarter First gold production – December 2019 quarter Acquisition of the Blayney Gold Project During the year, Regis executed an agreement to acquire an Exploration License located immediately west of the McPhillamys project license. The Exploration License, referred to as the Blayney Gold Project, covers 493 square kilometres and hosts two gold deposits. Regis paid the acquisition cost of $3.25 million in cash on completion of the transaction. The Blayney Gold Project is reported under the JORC Code 2004, to host Mineral Resources at two gold deposits. Discovery Ridge has an Indicated and Inferred MRE of 13.84MT at 1.1g/t Au for 501,000 ounces and Bald Hill has an Inferred MRE of 37.0MT at 0.5g/t Au for 595,000 ounces. Discovery Ridge is a shear hosted gold deposit located in strongly foliated, fine-grained metasediments of the Ordovician Coombing and Adaminaby Formations. Regis believes the deposit has the potential to augment its McPhillamys Gold Project. It appears to be a robust resource and is located 32 kilometres away by major highway. The Company intends to study the deposit with a view to generating a satellite open pit operation to be developed contemporaneously with the McPhillamys project. To that end, a 6,000 metre infill drilling programme consisting of RC and diamond drilling is planned to commence at Discovery Ridge early in the first half of the 2018 financial year. The programme is aimed at providing enough information to allow the estimation of a maiden reserve at Discovery Ridge. GROUP MINERAL RESERVES As at 31 March 2017 PROJECT TYPE CUT-OFF (g/t)² TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) COMPETENT PERSON PROVED PROBABLE TOTAL ORE RESERVE 19 Moolart Well Open-Pit Open-Pit Open-Pit > 0.4 > 0.4 > 0.4 1.8 6.1 1.9 0.98 0.76 1.53 57 149 92 1.0 0.82 17.6 7.8 0.92 1.40 27 520 350 2.8 0.92 23.7 0.88 9.7 1.42 83 669 442 Sub Total 9.7 0.95 298 26.4 1.06 897 36.1 1.03 1,195 Garden Well Rosemont Duketon Main Deposits Tooheys Well Open-Pit Gloster Erlistoun Baneygo Petra Dogbolter Anchor Open-Pit Open-Pit Open-Pit Open-Pit Open-Pit Open-Pit > 0.5 > 0.5 > 0.5 > 0.4 > 0.5 > 0.5 > 0.5 - - 0.2 0.85 - - - - - - - - - - Duketon Satellite Deposits Sub Total 0.2 0.85 McPhillamys Open-Pit > 0.4 - - - 6 - - - - - 6 - 7.1 7.1 4.1 3.6 0.6 0.3 0.1 1.61 1.06 1.43 1.16 1.26 1.57 2.07 366 243 190 136 25 16 6 7.1 7.3 4.1 3.6 0.6 0.3 0.1 1.61 1.05 1.43 1.16 1.26 1.57 2.07 366 248 190 136 25 16 6 23.0 1.33 981 23.2 1.32 987 60.1 1.05 2,034 60.1 1.05 2,034 Regis Grand Total 10.0 0.95 304 109.5 1.11 3,912 119.4 1.10 4,216 D D D D D D D D D D D GROUP MINERAL RESOURCES As at 31 March 2017 GOLD MEASURED INDICATED INFERRED TOTAL RESOURCE PROJECT TYPE CUT- OFF (g/t) TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) COMPETENT PERSON Moolart Well Open-Pit Garden Well Open-Pit Rosemont Open-Pit 0.4 0.4 0.4 5.2 6.8 2.4 0.87 0.76 1.45 144 164 111 17.1 0.70 384 12.2 0.71 52.5 0.83 1,401 10.8 0.78 20.5 1.30 858 1.8 1.72 278 271 97 34.5 0.73 806 70.1 0.82 1,837 24.7 1.34 1,066 Duketon Main Deposits Sub Total 14.3 0.91 420 90.2 0.91 2,643 24.7 0.81 646 129.2 0.89 3,709 Tooheys Well Open-Pit 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 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 - - 0.2 0.85 - - 0.0 0.95 - - - - - - - - - - - - - 6 - 0 - - - - - - 15.9 1.17 15.0 0.83 9.2 6.0 3.5 2.1 1.2 - - 0.96 1.31 1.11 1.07 1.08 - - 0.2 1.75 598 399 283 253 128 71 42 - - 9 1.1 6.1 1.9 0.8 0.5 0.3 0.1 0.8 0.8 0.1 0.89 31 17.0 1.16 630 0.66 129 21.3 0.78 534 0.95 1.05 1.02 0.90 1.09 1.56 1.11 0.95 57 28 16 10 2 42 28 2 11.1 0.96 340 6.9 4.0 2.4 1.3 0.8 0.8 0.2 1.28 1.10 1.05 1.08 1.56 1.11 1.53 282 144 81 44 42 28 11 Duketon Satellite Deposits Duketon Sub Total 0.2 0.85 6 53.0 1.05 1,784 12.5 0.86 346 65.7 1.01 2,136 Total 14.5 0.91 426 143.1 0.96 4,427 37.2 0.83 991 194.9 0.93 5,845 McPhillamys Total 0.4 - - - 67.7 1.05 2,282 1.2 0.64 25.46 68.9 1.04 2,307 Regis Grand Total 14.5 0.91 426 210.9 0.99 6,709 38.4 0.82 1,017 263.8 0.96 8,152 A A A A A A A A A A A A A A REGIS RESOURCES // 2017 ANNUAL REPORTGarden Well Open Pit // Photo by Sarah Parfett Directors' Report DIRECTORS' REPORT 21 Your directors submit their report for the year ended 30 June 2017. DIRECTORS The directors of the Company in office since 1 July 2016 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 Resources Limited in May 2009 in the role of Managing Director. Mr Clark assumed the role of Executive Chairman at Regis immediately after the company’s AGM on 12 November 2015. Prior to joining Regis, 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. 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) GAICD (Executive Director) Mr Thomas joined Regis in March 2014 in the role of Chief Operating Officer (COO) and was appointed to the board immediately following the company’s AGM on 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. REGIS RESOURCES // 2017 ANNUAL REPORTMr Mark Okeby, LLM (Deputy Chairman/Lead Independent Non-Executive Director) 22 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, MAICD (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. During the past three years he has also served as a non-executive director of Beadell Resources Limited (from February 2012 to November 2015). Mr Kestel is a member of the Australian Institute of Company Directors. Mr James Mactier, BAgrEc, GradDipAppFin GAICD (Independent Non-Executive Director) 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. He is a Graduate Member of the Australian Institute of Company Directors. During the past three years, Mr Mactier has not served as a director of any other ASX listed company. Ms Fiona Morgan, CPEng, BE(Hons), FIEAust, GAICD (Independent Non-Executive Director – appointed 18 November 2016) Ms Morgan is a Chartered Professional Engineer with over 23 years’ experience in the mining industry, including working on gold, nickel, coal and iron ore projects. Ms Morgan is the Managing Director and Chief Executive Officer of Mintrex Pty Ltd, a highly regarded and longstanding consulting engineering company which has successfully undertaken a broad suite of technical services to Australian and international clients developing resource projects. She has a wide range of experience in operations and project management, maintenance, research and design of both underground and surface mining infrastructure. During the past three years, Ms Morgan has not served as a director of any other ASX listed company. Fiona is a Fellow of the Institution of Engineers Australian and a graduate member of the Australian Institute of Company Directors. 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. REGIS RESOURCES // DIRECTORS' REPORT (continued)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. 23 DIVIDENDS After the balance sheet date the following dividends were proposed by the directors: Final dividends recommended: Ordinary shares CENTS PER SHARE TOTAL AMOUNT $’000 8.00 40,143 The financial effect of these dividends has not been brought to account in the consolidated financial statements for the year ended 30 June 2017 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: Continue to optimise mining and processing operations across the Duketon Gold Project whilst maintaining a high standard of safety; Maximise cash flow by this process of optimisation and the blending of ore feed from satellite resources across the Duketon tenure; Organically increase the Reserve base of the Group by discovering and developing satellite resource positions, extending the reserve base of existing operating deposits; Focus on regional exploration to add incremental ounces and mine life to the three operating mills in the district; Advance the economic study of the McPhillamys Gold Project in NSW with a view to developing a significant long life gold mine at the project; Return value to shareholders through a commitment to dividends; and Actively pursue inorganic growth opportunities. REGIS RESOURCES // 2017 ANNUAL REPORTOPERATING AND FINANCIAL REVIEW 24 Overview of the Group Regis is a leading Australian gold producer, with its head office in Perth, Western Australia. The Company operates within two distinct project areas at the Duketon Gold Project in the Eastern Goldfields of Western Australia. The Duketon North Operations (DNO) comprises the Moolart Well Gold Mine and the Gloster Gold Mine. The Duketon South Operations contains the Garden Well Gold Mine, the Rosemont Gold Mine and the Erlistoun Gold Mine. 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. Financial Summary KEY FINANCIAL DATA Financial results Sales revenue 2017 $’000 2016 CHANGE CHANGE $’000 $’000 % 542,218 500,152 42,066 Cost of sales (excluding D&A)(i) (278,374) (260,047) (18,327) Other income Corporate, admin and other costs EBITDA(i) Depreciation and amortisation (D&A) Profit before tax Income tax expense Reported profit after tax Other financial information Cash flow from operating activities Net cash Net assets 4,962 6,294 (15,504) (12,007) 253,302 234,392 (57,581) (75,244) 196,137 159,101 (1,332) (3,497) 18,910 17,663 37,036 (57,974) (47,308) (10,666) 138,163 111,793 26,370 206,082 204,001 117,081 96,925 2,081 20,156 538,392 481,848 56,544 Basic earnings per share (cents per share) 27.59 22.37 5.22 8.4% 7.0% (21.2%) 29.1% 8.1% (23.5%) 23.3% 22.5% 23.6% 1.0% 20.8% 11.7% 23.3% (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 a 24% increase in net profit after tax for the current year in comparison to the prior year result of $111.8 million. This result is a reflection of the continued successful expansion of the Company’s Duketon Gold Project. Operations commenced at two new satellite deposits during the period which had a positive impact on production while costs remained very competitive. The expanded life of mine reserve footprint at the Duketon Gold Project has reduced the impact of depreciation and amortisation expense on net profit by 24%. Sales The Company achieved record gold production for the year ended 30 June 2017 of 324,353 ounces which translated into an increase of 8.4% in gold sales revenue. Total sales exceeded the prior year in terms of both volume and price with 322,355 ounces of gold sold at an average price of $1,682 per ounce in 2017 (2016: 310,676 ounces at $1,610 per ounce). The Company delivered gold produced into a combination of spot deferred contracts and the prevailing spot price. The total hedging position at the end of the year was 396,406 ounces of spot deferred contracts with an average delivery price of $1,551 per ounce (2016: 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). REGIS RESOURCES // DIRECTORS' REPORT (continued)Cost of Sales Costs of sales including royalties, but before depreciation and amortisation increased marginally (7%) due to the higher start up strip ratios associated with the commencement of mining at the new satellite projects. Mining volumes were up 10% compared to the previous year as Gloster and Erlistoun were brought into production. The satellite projects contributed a higher grade ore feed which meant costs on a per ounce basis increased to a lesser extent. 25 Depreciation and Amortisation The expansion of the Duketon reserves at both the northern and southern operations has resulted in a decrease in the depreciation and amortisation expense for the year by 23.5% over the prior year as the value of capitalised assets is realised over a comparatively longer period. Cash Flow from Operating Activities Cash flow from operating activities continued to be strong in 2017 at $206.1 million. This represented only a modest increase on the prior year as the Group’s improved profitability lead to the payment of $36.2 million of income taxes, up 58% on the prior year. The Company continued to provide strong returns to shareholders through the payment of two fully franked dividends in 2017 totalling $80.1 million. Duketon North Operations (“DNO”) Operating results for the 12 months to 30 June 2017 were as follows: Ore mined Waste mined Strip ratio Ore mined Ore milled Head grade Recovery Gold production Cash cost per ounce – pre royalties Cash cost per ounce – incl. royalties All-in Sustaining Cost (“AISC”) 30 JUNE 2017 30 JUNE 2016 BCM BCM w:o 1,742,903 1,486,071 7,768,536 5,768,217 4.5 3.9 Tonnes 3,368,392 2,981,095 Tonnes 2,950,400 2,916,006 g/t % 1.14 94 0.90 91 Ounces 100,875 76,139 A$/oz A$/oz A$/oz $621 $697 $785 $706 $778 $934 Gold production at DNO was up 32% on the prior year as a result of the commencement of mining operations at the Gloster satellite deposit in October 2016. Gloster ore is hauled approximately 26 kilometres by road train to the processing facility at Moolart Well where it is blended with ore from that operation. The ore from Gloster milled during 2017 was of a higher grade and softer, oxide material than the ore available from Moolart Well. As a result the head grade at DNO increased by 27% and mill throughput improved slightly from the previous year even though Gloster contributed to production for only 9 months of the year. AISC for DNO dropped 16% on the back of the increased gold production and despite the higher strip ratio incurred in starting up operations at Gloster. REGIS RESOURCES // 2017 ANNUAL REPORT26 Garden Well Crushing Circuit // Photo by Sarah Parfett Duketon South Operations (“DSO”) Operating results at the Duketon South Operations for the 12 months to 30 June 2017 were as follows: Ore mined Waste mined Strip ratio Ore mined Ore milled Head grade Recovery Gold production Cash cost per ounce – pre royalties Cash cost per ounce – incl. royalties All-in Sustaining Cost (“AISC”) 30 JUNE 2017 30 JUNE 2016 BCM BCM w:o 2,817,291 3,148,056 17,783,273 16,848,858 6.3 5.4 Tonnes 7,481,128 7,805,241 Tonnes 6,830,460 7,336,030 g/t % 1.10 93 1.08 90 Ounces 223,478 228,945 A$/oz A$/oz A$/oz $867 $940 $1,017 $795 $867 $924 DSO reported a slight increase in head grade of 2% over the prior period and improved recoveries, but a 7% drop in mill throughput contributed to a 2% drop in gold production. Mill throughput at Rosemont was affected with the operation transitioning to harder, fresh ore during the year. Mining of softer oxide material in the Rosemont southern extension commenced towards the end of the year resulting in improved throughput. Mining at the Erlistoun satellite project commenced in December 2016 and ore was carted to the Garden Well processing plant (8 kilometres to the north). Ore supply from Erlistoun, whilst contributing positively to DSO grade, was continuous but in modest tonnages as the open cut advances to main ore zones. AISC was up 10% on the prior year as a result of high, start up strip ratios at Erlistoun and the Rosemont southern extension. REGIS RESOURCES // DIRECTORS' REPORT (continued)Exploration During the year, a total of 213,008 metres of exploration drilling was completed across the Group’s tenements in Western Australia and New South Wales. The table below breaks down the drilling activity (in metres) by Prospect: 27 PROSPECT Tooheys Well McPhillamys Rosemont Hack Bore Reichelts Commonwealth Petra North Garden Well Mt Maiden Gloster Erlistoun McKenzie Well Bella Well Old Peculiar Bandya Beamish Mourillian King John Kintyre Chert Ridge Mason Hill Moolart Well Total AIRCORE RC DIAMOND - - - 10,526 3,858 9,674 4,506 - 3,192 - 835 3,007 2,932 - - 797 1,482 - 643 - 172 - 51,254 4,184 42,175 4,330 6,815 708 - 4,396 966 3,932 2,971 - - 2,887 2,400 1,334 - 1,175 - 522 - 108 - 41,227 - - - - - - - - - - - - - - - - - - - - TOTAL 51,254 45,411 42,175 14,856 10,673 10,382 4,506 4,396 4,158 3,932 3,806 3,007 2,932 2,887 2,400 2,131 1,482 1,175 643 522 172 108 41,624 130,157 41,227 213,008 Significant projects advanced during the year ended 30 June 2017 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. Tooheys Well Gold Project The Tooheys Well gold project is 100% owned and located on a granted mining lease, 2.5 kilometres south of the Garden Well gold mine. In June 2017, after extensive drilling, Regis announced a maiden Ore Reserve of 7.1MT at 1.61g/t Au for 366,000 ounces of gold at a 0.5g/t Au lower cut. Gold mineralisation has been defined in two north-south trending Western and Eastern shear zones 100 metres apart hosted in Banded Iron Formation (BIF), chert and fine grained sediments. The eastern shear zone mineralisation appears to have a steep dip of 80-90˚ to the east. Host rocks are BIF/chert and shale and weathering extends to 80 to 100 metres vertical depth. Gold mineralisation is associated with pyrrhotite hosted in BIF which appears to be the dominant lithology at Tooheys Well. The pyrrhotite phase is restricted to BIFs and has replaced magnetite during hydrothermal alteration. It is planned that open cut mining will provide a supplementary higher-grade ore supply for the existing Garden Well processing plant. Mining is expected to commence in the March 2018 quarter (subject to final statutory approvals) with ore haulage and gold production to follow in the December 2018 quarter. Utilisation of Regis’ 5Mtpa Garden Well processing plant will see Tooheys Well produce in the order of 90,000 ounces of gold per annum over the life of the mine, displacing lower grade ore from Garden Well from the mill. REGIS RESOURCES // 2017 ANNUAL REPORT28 Rosemont Main Pit Underground Resource Drilling An RC drill programme was undertaken during the current year to test for underground mineralisation below the centre of the Main Pit where numerous high grade intercepts were recorded during exploration and resource development programmes prior to mining. This programme also leveraged off the knowledge of structural orientation and controls over high grade zones of mineralisation seen in grade control drilling in the open pit workings immediately above the targeted underground areas. Drilling has been conducted from within the open pit mine, considerably shortening the depth of holes required to test 100-200 metres vertically below the final pit design depth. Shorter holes also allow the use of RC rigs rather than diamond drill rigs however the drilling activities must fit within mining operations and as a result, the drill programme has extended beyond the end of the current year. In addition, Regis will shortly commence diamond drilling at Rosemont to both verify existing RC derived high grade intercepts and to also gain structural and geotechnical information. On completion of the first phase of the diamond drilling programme, it is anticipated Regis will be in a position to estimate a maiden underground resource in relation to the initial areas drilled to date below and to the south of Rosemont Main Pit. Reichelts Find The Reichelts Find project is located 12 kilometres south of the Garden Well gold mine. Prior production is believed to have included small scale underground mining between 1912 and 1939 and a small oxide open pit operated by Ashton Mining in the late 1980’s. Gold mineralisation at Reichelts Find is hosted by a strongly sheared ultramafic- mafic-sediment package. Locally, gold is hosted by quartz veins and surrounding localised shear zones. Current JORC 2012 resources, reported at a 0.4g/t Au cut-off grade, are 0.8MT at 1.11g/t Au for 28,000 ounces. A first pass RC drill programme of 88 holes for 6,815 metres has been completed to target mineralisation below the existing pit for both open pit and high-grade underground resources. A wide spaced air core programme targeting extensions of gold mineralisation north of Reichelts Find was also completed during the year and returned anomalous intercepts. The results of both programmes will be reviewed and followed up with further drilling in due course. Duketon Gold Exploration Joint Venture Lag sampling and air core drilling programmes were completed on a number of prospects in the Duketon Gold Exploration Joint Venture during the current year, including Petra North, Hack Bore, Commonwealth, Bella Well and Bandya. The Joint Venture required Regis to spend at least $1 million over a 2 year period to earn a 75% interest in any mining project that is confirmed by a Regis decision to mine. The 2 year term expires in October 2017 and over $2 million has been expended to 30 June 2017 without finding any significant targets for further follow up. Limited work is planned to be undertaken subsequent to year end and as such, all costs incurred have been written off in the current year. REGIS RESOURCES // DIRECTORS' REPORT (continued)29 McPhillamys Drilling // Photo by Tom Ridges McPhillamys Gold Project NSW The 100% Regis owned McPhillamys Gold Project is one of Australia’s larger undeveloped open pittable gold resources. The project is located approximately 250 kilometres west of Sydney in Central West NSW, a well-established mining district. Regis has reported a mineral resource estimate of 73.2MT at 0.94g/t Au for 2.2Moz at a 0.4g/t Au cut-off grade. An RC and diamond drill programme was completed during the year (153 holes for 45,411 metres) with the aim being to infill the current drill pattern to a nominal 50m x 25m spacing for an updated MRE and ultimately to be used as a basis for reserve estimation. It was also designed to look for high grade extensions to the mineralisation at depth. Results from the centre of the project have returned large scale +1g intercepts and continue to correlate well with historic drilling. At year end an RC rig was on site conducting sterilisation drilling for planned infrastructure sites. Subsequent to the end of the year, Regis announced that it had advanced the development of the McPhillamys Gold Project by progressing two long term water supply options for the project. The first option is a non-binding heads of agreement with Centennial Coal Company Limited (“Centennial”) and Energy Australia Pty Ltd (“EA”) for Regis to utilise water from the Mt Piper Power Station and Springvale Mine near Lithgow. The parties to the non-binding heads of agreement are proceeding to work towards finalising a binding agreement as soon as possible with completion targeted for the September 2017 quarter. Concurrent with progressing the above water supply agreement, Regis has contractually secured approximately 4.5GLpa of water through long term lease and acquisition of Water Access Licenses over ground water allocations in a zone of the Lachlan catchment approximately 80 kilometres from McPhillamys. During the current year, significant work was completed towards finalising the Environmental Impact Statement (“EIS”) for the development of the project. Regis is aiming to submit a Conceptual Project Development Plan (“CPDP”) to the NSW Department of Planning and Environment (“DPE”) in the September 2017 quarter. This will commence the approvals process for the development of the project. It is then expected that the EIS will be submitted to the DPE by the end of the December 2017 quarter. The Company is undertaking a definitive feasibility study (“DFS”) into the development of a 7Mtpa mining and processing operation at McPhillamys. The DFS is expected to be completed in the December 2017 quarter. REGIS RESOURCES // 2017 ANNUAL REPORTAcquisition of the Blayney Gold Project 30 During the year, Regis executed an agreement to acquire an Exploration License located immediately west of the McPhillamys project license. The Exploration License, referred to as the Blayney Gold Project, covers 493 square kilometres and hosts two gold deposits. Regis paid the vendor, Aeris Resources Limited (ASX: AIS), $3.25 million in cash on completion of the transaction. The Blayney Gold Project is reported, by Aeris Resources Limited under the JORC Code 2004, to host Mineral Resources at two gold deposits. Discovery Ridge has an Indicated and Inferred MRE of 13.84MT at 1.1g/t Au for 501,000 ounces and Bald Hill has and Inferred MRE of 37.0MT at 0.5g/t Au for 595,000 ounces. Discovery Ridge is a shear hosted gold deposit located in strongly foliated, fine-grained metasediments of the Ordovician Coombing and Adaminaby Formations. Regis believes the deposit has the potential to augment its McPhillamys Gold Project. It appears to be a robust resource and is located 32 kilometres away by major highway. The Company intends to study the deposit with a view to generating a satellite open pit operation to be developed contemporaneously with the McPhillamys project. To that end, a 6,000 metre infill drilling programme consisting of RC and diamond drilling is planned to commence at Discovery Ridge early in the first half of the 2018 financial year. The programme is aimed at providing enough information to allow the estimation of a maiden reserve at Discovery Ridge. 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 Option issue On 5 July 2017, 1,790,000 unlisted employee options were issued under the Regis Resources Employee Share Option Plan. The options are exercisable on or before 1 July 2021 at an exercise price of $3.90. Share issue Subsequent to year end, 762,250 shares have been issued as a result of the exercise of employee options for proceeds of $234,500. Dividends On 28 August 2017, the directors proposed a final dividend on ordinary shares in respect of the 2017 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. 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. REGIS RESOURCES // DIRECTORS' REPORT (continued)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. 31 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 Unlisted options 14 October 2018 11 August 2019 6 January 2020 13 May 2020 1 July 2021 Total EXERCISE PRICE NUMBER OUTSTANDING $1.55 $1.40 $2.34 $2.70 $3.90 25,000 7,137,500 1,000,000 200,000 1,790,000 10,152,500 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 1,165,762 fully paid ordinary shares in Regis Resources Limited at a weighted average exercise price of $2.35 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, the insurance policy prohibits disclosure of the terms of the policy including the nature of the liability insured against and the amount of the premium. REGIS RESOURCES // 2017 ANNUAL REPORTDIRECTORS’ MEETINGS 32 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, NOMINATION AND DIVERSITY COMMITTEE No. Eligible to Attend No. Attended No. Eligible to Attend No. Attended No. Eligible to Attend No. Attended 9 1 9 9 5 9 9 9 1 9 9 5 8 9 n/a n/a 2 2 n/a 2 n/a n/a n/a 2 2 n/a 1 n/a n/a n/a 7 7 n/a 7 n/a n/a n/a 7 7 n/a 7 n/a M Clark G Evans (retired 29 July 2016) R Kestel J Mactier F Morgan (appointed 18 November 2016) M Okeby P Thomas Committee Membership As at the date of this report, the Company had an Audit and Risk Management Committee and a Remuneration, Nomination and Diversity Committee of the board of directors. Members acting on the committees of the board during the year were: AUDIT AND RISK MANAGEMENT COMMITTEE REMUNERATION, NOMINATION AND DIVERSITY COMMITTEE R Kestel (Chairman) R Kestel (Chairman) J Mactier M Okeby J Mactier M Okeby 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 2017 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. M Clark R Kestel J Mactier F Morgan M Okeby P Thomas NUMBER OF ORDINARY SHARES 2,460,000 75,000 - 513,230 700,000 - REGIS RESOURCES // DIRECTORS' REPORT (continued)AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES During the year KPMG, the Group auditor, provided the following non-audit services. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. 33 KPMG Australia received or are due to receive the following amounts for the provision of non-audit services: Tax compliance services IT advisory services $ 6,509 15,888 22,397 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. Garden Well Gold Pour // Photo by Sarah Parfett T R O P E R L A U N N A 7 1 0 2 / / S E C R U O S E R S I G E R Garden Well open pit // Photo by Sarah Parfett Remuneration Report (audited) REMUNERATION REPORT (AUDITED) 35 This remuneration report for the year ended 30 June 2017 outlines the remuneration arrangements of the Company and the Group. This remuneration report for the year ended 30 June 2017 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 and their movements during the year ended 30 June 2017 are set out below: NAME POSITION TERM AS KMP Non-Executive Directors M Okeby G Evans R Kestel J Mactier F Morgan Executive Directors M Clark P Thomas Other Executives P Woodman K Massey Deputy Chairman Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Executive Chairman Executive Director Full financial year Retired 29 July 2016 Full financial year Full financial year Appointed 18 November 2016 Full financial year Full financial year Chief Geological Officer Full financial year Chief Financial Officer and Company Secretary Full financial year Remuneration Report (audited) REGIS RESOURCES // 2017 ANNUAL REPORTPRINCIPLES OF REMUNERATION 36 The Remuneration, Nomination and Diversity 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, Nomination and Diversity 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. We reward executives with a level and mix of remuneration appropriate to their position, responsibilities and performance, in a way that aligns with the business strategy. 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 Short Term Incentives (“STI”) and Long Term Incentives (“LTI”) and replaces share options with performance rights as the LTI compensation methodology. Fixed Remuneration and STI awards are in the form of cash payments. The objectives and principles of the Company’s 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 (“KPI”). 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. Executive remuneration levels are reviewed annually by the Remuneration, Nomination and Diversity Committee with reference to the remuneration guiding principles and market movements. Gloster Construction // Photo by Stan Yates ) d e u n i t n o c ( ) D E T I D U A ( T R O P E R N O I T A R E N U M E R / / S E C R U O S E R S I G E R The chart below provides a summary of the structure of executive remuneration in the 2017 and subsequent financial years: 37 FIXED REMUNERATION Base salary + superannuation + benefits VARIABLE REMUNERATION STI plan Cash LTI plan Performance rights To maximise engagement of executives and align with the long-term interests of shareholders, the initial grant of LTI’s in 2017 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 performance rights will apply a performance/vesting period of three years. REMUNERATION MIX – TARGET 38% 43% 33% 50% Executive Chairman 19% Other Executives 17% Fixed remuneration STI LTI REGIS RESOURCES // 2017 ANNUAL REPORTELEMENTS OF REMUNERATION 38 Fixed remuneration Fixed remuneration consists of base remuneration (including any fringe benefits 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, Nomination and Diversity 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 KMP’s remuneration is competitive in the market place, as required. Performance linked remuneration Performance linked remuneration includes both STI and LTI and is designed to reward KMP for meeting or exceeding their objectives. Short Term Incentive Under the STI plan, all executives have the opportunity to earn an annual incentive which is delivered in cash. The STI recognises and rewards annual performance. How is it paid? Any STI award is paid in cash after the assessment of annual performance. How much can executives earn? In 2017, the Executive Chairman had a maximum STI opportunity of 45% of fixed remuneration and other executives had a maximum STI opportunity of 35% of fixed remuneration. An overarching review by the board of each individual’s performance against agreed performance measures and a review of qualitative factors around the Company’s performance and the macro economic environment will determine the achievable percentage (between 0%-100%) of the maximum potential STI available to be awarded, subject further to the level of achievement against detailed KPI’s listed below. This maximum achievable STI 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. How is performance measured? A combination of specific Company Key Performance Indicators (KPIs) are chosen to reflect the core drivers of short term performance and also to provide a framework for delivering sustainable value to the Group and its shareholders. The following KPIs were chosen for the 2017 financial year: 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)). When is it paid? What happens if executive leaves? The STI award is determined after the end of the financial year following a review of performance over the year against the STI performance measures by the Remuneration, Nomination and Diversity Committee. The Board approves the final STI award based on this assessment of performance and the award is paid in cash three months after the end of the performance period. If an executive resigns or is terminated for cause before the end of the financial year, no STI is awarded for that year. If an executive ceases employment during the performance period by reason of redundancy, ill health, death, or other circumstances approved by the Board, the executive will be entitled to a pro-rata cash payment based on assessment of performance up to the date of ceasing employment for that year (subject to Board discretion). What happens if there is a change of control? In the event of a change of control, a pro-rata cash payment will be made based on assessment of performance up to the date of the change of control (subject to Board discretion). (i) Represents the maximum award if stretch targets are met. REGIS RESOURCES // REMUNERATION REPORT (AUDITED) (continued)Long Term Incentives Under the LTI plan, annual grants of performance rights are made to executives to align remuneration with the creation of shareholder value over the long-term. 39 How is it paid? How much can executives earn? Executives are eligible to receive performance rights (being the issue of shares in Regis in the future). In 2017, the Executive Chairman had a maximum LTI opportunity of 90% of fixed remuneration and other executives had a maximum LTI opportunity of 65% of fixed remuneration. An overarching review by the board of each individual’s performance against agreed performance measures and a review of qualitative factors around the Company’s performance and the macro economic environment will determine the achievable percentage (between 0%-100%) of the maximum potential LTI available to be awarded, subject further to the level of achievement against detailed KPI’s listed below. This maximum achievable 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. How is performance measured? The vesting of performance rights are subject to a number of vesting conditions. The performance rights issued in 2017 are subject to the following vesting conditions: 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)) When is performance measured? The performance rights issued in 2017 have a two year performance period with the vesting of the rights tested as at 30 June 2018. All subsequent issues of performance rights will have a three year performance period. Any performance rights that do not vest will lapse after testing. There is no re-testing of performance rights. What happens if executive leaves? What happens if there is a change of control? Are executives eligible for dividends? Where an executive ceases to be an employee of any Group Company: due to resignation or termination for cause, then any unvested rights will automatically lapse on the date of the cessation of employment; or due to any other reason, then a proportion of any unvested rights will lapse equivalent to the proportion of time remaining in the period during which the relevant vesting conditions must be satisfied and the remaining unvested rights will continue and are still capable of vesting in accordance with the relevant vesting conditions at the end of that period, unless the Board determines otherwise. If a matter, event, circumstance or transaction occurs that the Board reasonably believes may lead to a change of control, the Board may in its discretion determine the treatment and timing of such treatment of any unvested rights and must notify the holder of any changes to the terms of the rights as a result of such a decision. If a change of control occurs and the Board hasn’t made such a decision, all unvested rights will vest and be automatically exercised. Executives are not eligible to receive dividends on unvested performance rights. (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. REGIS RESOURCES // 2017 ANNUAL REPORTPERFORMANCE AND EXECUTIVE REMUNERATION OUTCOMES IN 2017 40 Actual remuneration earned by executives in 2017 The actual remuneration earned by executives in the year ended 30 June 2017 is set out in Tables 1 to 7 below. This provides shareholders with a view of the remuneration actually paid to executives for performance in 2017 year and the value of LTIs that vested during the period. Performance against STI measures A combination of financial and non-financial measures is used to measure performance for STI rewards. Company performance against those measures is as follows for 2017: KEY PERFORMANCE INDICATOR WEIGHTING METRIC ACHIEVEMENT KPI 1: EBITDA 35% Achieve FY2017 Budget EBITDA KPI 2: Production 35% Production within stated guidance KPI 3: Safety and Environment 30% Reduction in safety and environmental measures Stretch target achieved – 100% award Threshold target achieved – 43% award Threshold target achieved – 50% award Based on this assessment, the STI payments for FY2017 to Executives were recommended as detailed in the following table: NAME POSITION ACHIEVED STI STI AWARDED Mark Clark Paul Thomas Executive Chairman Chief Operating Officer Peter Woodman Chief Geologist Kim Massey Chief Financial Officer & Company Secretary % 65% 65% 65% 65% $ 205,320 125,474 91,253 91,253 Performance against LTI measures LTIs awards granted in 2017 will be subject to testing at the end of the two year performance period on 30 June 2018. In November 2016, after receiving approval from shareholders at the AGM, 401,999 performance rights were granted in total to the Executive Directors, Mr Mark Clark and Mr Paul Thomas, and to other executives, Mr Kim Massey and Mr Peter Woodman, under the Group’s Executive Incentive Plan (“EIP”). Further details of the grant, including performance conditions and the calculation of fair value is disclosed in the Note 24 to the financial statements. As of 30 June 2017 no performance rights had vested and become exercisable. Statutory performance indicators We aim to align our executive remuneration to our strategic and business objectives and the creation of shareholder wealth. The table below shows measures of the Group’s financial performance over the past five years as required by the Corporations Act 2001. However these measures are not necessarily consistent with the measures used in determining the variable amounts of remuneration to be awarded to KMPs, as discussed above. As a consequence, there may not always be a direct correlation between the statutory key performance measures and the variable remuneration awarded. 2017 $’000 2016 $’000 2015 $’000 2014 $’000 2013 $’000 Revenue 543,799 502,019 465,320 371,933 416,834 Net profit/(loss) after tax 138,163 111,793 86,920 (147,830) 146,506 Basic earnings/(loss) per share (cents) Diluted earnings/(loss) per share (cents) 27.59 27.29 22.37 22.22 17.39 17.39 (29.68) (29.68) 30.65 30.27 Net assets 538,392 481,848 409,973 321,060 538,096 REGIS RESOURCES // REMUNERATION REPORT (AUDITED) (continued)PERFORMANCE AND EXECUTIVE REMUNERATION ARRANGEMENTS IN 2018 Following a review by the Remuneration, Nomination and Diversity Committee subsequent to the end of the 2017 financial year, the Board resolved to set STI and LTI hurdles as follows for the 2018 financial year: 41 COMPONENT LINKS TO FY2018 PERFORMANCE Total Fixed Remuneration (TFR) Salaries awarded effective 1 July 2017 used as basis for determining the value component for FY2018 STI and LTI. The maximum STI and LTI opportunity that each KMP can earn remains unchanged, except for Mr Thomas whose maximum STI and LTI opportunity was increased to 40% and 75% of TFR, respectively, for the 2018 year. Short Term Incentives (STI) The following KPIs were chosen for the 2018 financial year: Long Term Incentives (LTI) KPI 1: Achieve FY2018 Budget EBITDA as approved by the Board (35%(i)); KPI 2: Production relative to stated guidance (35%(i)); and KPI 3: Safety and environmental performance measures (30%(i)). At the time of preparation of this report, the allocation of the LTIs for FY2018 had not been determined by the board, however the vesting conditions will remain unchanged from those used for the 2017 award. The LTI awards to be issued in FY2018 will have a three year performance period. (i) Represents the maximum award if stretch targets are met. 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 $766,500 per annum inclusive of superannuation (2016: $711,750) subject to annual review; and Opportunity to earn a performance based STI and LTI 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 AND RIGHTS ON TERMINATION Employer initiated termination: without reason with reason serious misconduct 3 months plus 9 months’ salary Not less than 3 months 0 – 1 month 12 months Not less than 3 months 0 – 1 month Options – 1 month to exercise, extendable at Board discretion Rights – refer to LTI details above Employee initiated termination 3 months Not specified Change of control 1 month plus 12 months’ salary Not specified As above As above REGIS RESOURCES // 2017 ANNUAL REPORT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 ENTITLEMENT TO OPTIONS AND RIGHTS ON TERMINATION Employer initiated termination: with or without reason serious misconduct 3 months 0 – 1 month Up to 3 months 0 – 1 month Options – 1 month to exercise, extendable at Board discretion Rights – refer to LTI details above Employee initiated termination 3 months Not specified As above Change of control 1 month plus 12 months’ salary Not specified 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 $362,000 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. The Board has resolved not to increase non-executive director fees for 2018 other than Mr Okeby who will receive an additional $10,000 per annum as Lead Independent Director. Garden Well Processing Plant // Photo by Christine Darbyshire 42 ) d e u n i t n o c ( ) D E T I D U A ( T R O P E R N O I T A R E N U M E R / / S E C R U O S E R S I G E R KEY MANAGEMENT PERSONNEL REMUNERATION Table 1: Remuneration for the year ended 30 June 2017 43 SHORT TERM POST EMPLOYMENT LONG-TERM BENEFITS SHARE-BASED PAYMENT 2017 SALARY & FEES CASH REWARDS NON- MONETARY BENEFITS* SUPER- ANNUATION ACCRUED ANNUAL & LONG SERVICE LEAVE# OPTIONS & RIGHTS+ TOTAL PERFORMANCE RELATED $ Non-Executive Directors G Evans(i) R Kestel(ii) J Mactier F Morgan(iv) M Okeby(iii) 7,083 97,000 85,000 52,362 117,076 $ - - - - - Executive Directors M Clark(v) 653,420 205,320 P Thomas(v) 521,590 125,474 Other Executives K Massey(v) 373,076 91,253 P Woodman(v) 367,261 91,253 $ - - - - - 3,734 3,734 3,734 3,734 $ 673 9,215 8,075 4,974 8,075 32,083 33,125 29,115 34,075 $ - - - - - $ - - - - - $ % 7,756 106,215 93,075 57,336 125,151 - - - - - 78,441 902,692 1,875,690 59.07% 54,296 336,693 1,074,912 43.00% 47,724 322,906 867,808 32,406 468,703 997,432 47.72% 56.14% Total 2,273,868 513,300 14,936 159,410 212,867 2,030,994 5,205,375 * # + Non-monetary benefits are presented at actual cost plus any fringe benefits tax paid or payable by the Group. Long term benefits for accrued annual and long service leave are the movements in the provision, net of any leave taken. Represents the statutory remuneration expensed based on fair value at grant date of options and rights over the vesting period of the award. No options or rights vested during the year for KMPs apart from Mr Thomas and Mr Massey as detailed in Table 3. Table 3 reflects the realised benefits of share-based payments for the year. (i) Mr Evans retired as non-executive director on 29 July 2016. (ii) Mr Kestel’s fees include an additional $12,000 for chairing the Board Committees. (iii) Mr Okeby’s fees includes an additional $32,076 for consulting services provided in his capacity as a director. (iv) Ms Morgan was appointed as non-executive director on 18 November 2016. (v) Mr Clark, Mr Thomas, Mr Woodman and Mr Massey elected to receive a portion of their superannuation entitlements above the statutorily required maximum amount as salary. REGIS RESOURCES // 2017 ANNUAL REPORT44 Historical items found at Gloster // Photo by Stan Yates Table 2: Remuneration for the year ended 30 June 2016 SHORT TERM POST EMPLOYMENT LONG-TERM BENEFITS SHARE- BASED PAYMENT 2016 SALARY & FEES $ Non-Executive Directors N Giorgetta 83,333 M Okeby G Evans 80,000 80,000 F Fergusson 26,767 R Kestel J Mactier 92,000 30,295 Executive Directors M Clark 618,363 P Thomas 452,527 Other Executives J Balkau 197,144 P Woodman 150,879 M Evans 280,811 K Massey 333,908 NON- MONETARY BENEFITS* SUPER- ANNUATION ACCRUED ANNUAL LEAVE^ OPTIONS TERMINATION PAYMENTS TOTAL PERFORMANCE RELATED $ - - - - - - 5,525 5,525 3,683 2,302 4,604 5,525 $ 7,917 7,600 7,600 2,543 8,740 2,878 $ - - - - - - $ - - - - - - 30,875 62,512 401,289 47,500 47,473 853,160 $ - - - - - - - - $ % 91,250 87,600 87,600 29,310 100,740 33,173 - - - - - - 1,118,564 35.88% 1,406,185 60.67% 19,317 6,190 51,759 116,545 394,638 15,736 14,762 163,972 - 347,651 28,262 16,689 - 100,226 430,592 13.12% 47.17% - 35,625 41,092 238,469 - 654,619 36.43% Total 2,426,027 27,164 214,593 188,718 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. Accrued annual leave was disclosed as part of “Salary & Fees” in the prior year financial statements, but has been split out in the comparative table above for consistency with the current year disclosure. REGIS RESOURCES // REMUNERATION REPORT (AUDITED) (continued)Table 3: Voluntary information – Non-IFRS – Remuneration received by executives for the year ended 30 June 2017 The amounts disclosed below as executive KMP remuneration for 2017 reflect the realised benefits received by each KMP during the reporting period. The remuneration values disclosed below have been determined as follows: 45 Fixed remuneration Fixed remuneration includes base salaries received, payments made to superannuation funds, the taxable value of non-monetary benefits received and any once-off payments such as sign-on bonuses or termination benefits, see Table 1 above for details. Fixed remuneration excludes any accruals of annual or long service leave. Short-term incentives The cash STI benefits represent the bonuses that were awarded to each KMP in relation to the prior financial year and which were paid in the current financial year. There were no cash STI benefits awarded in relation to the year ended 30 June 2016 and as such the value of this benefit received in the current year is nil. Long-term incentives The value of vested options was determined based on the intrinsic value of the options at the date of vesting, being the difference between the share price on that date and the exercise price payable by the KMP. The options that vested during the current year were granted in August 2013 (Mr Massey) and September 2014 (Mr Thomas). FIXED REMUNERATION AWARDED STI (CASH) VESTED LTI TOTAL VALUE Executive Directors M Clark P Thomas Other Executives K Massey P Woodman Total Executive KMP Non-executive directors Total KMP remuneration $ 756,546 592,297 432,609 432,609 2,214,061 389,533 2,603,594 $ - - - - - - - $ - 3,375,000 55,000 - $ 756,546 3,967,297 487,609 432,609 3,430,000 5,644,061 - 389,533 3,430,000 6,033,594 The amounts disclosed above are not the same as the remuneration expensed in relation to each KMP in accordance with the accounting standards ($5,205,375 for 2017, see Table 1 above). The directors believe that the remuneration received is more relevant to users for the following reasons: The statutory remuneration expensed is based on fair value determined at grant date and does not reflect the fair value of the equity instruments when they are actually received by the KMPs. The statutory remuneration shows benefits before they are actually received by the KMPs. Where options or performance rights do not vest because a market-based performance condition is not satisfied (e.g. absolute TSR), the Company must still recognise the full amount of expenses even though the KMPs will never receive any benefits. Share-based payment awards are treated differently under the accounting standards depending on whether the performance conditions are market conditions (no reversal of expense) or non-market conditions (reversal of expense where shares fail to vest), even though the benefit received by the KMP is the same (nil where equity instruments fail to vest). The information in this section has been audited together with the rest of the remuneration report. REGIS RESOURCES // 2017 ANNUAL REPORTTables 4 & 5: Rights and options over equity instruments granted as compensation 46 All rights and options refer to rights and options over ordinary shares of Regis Resources Limited, which are exercisable on a one-for-one basis. There were no options granted to KMPs as compensation during the current year. Details on options granted as compensation in previous years and which have vested during or remain outstanding at the end of the year are provided below. OPTIONS GRANTED & OUTSTANDING TERMS & CONDITIONS FOR EACH GRANT VESTED FAIR VALUE PER OPTION AT GRANT DATE EXERCISE PRICE PER OPTION NO. GRANT DATE EXPIRY DATE VESTING DATE % VESTED DURING THE YEAR NO. % FORFEITED DURING THE YEAR M Clark M Clark 750,000 12 Nov 15 $1.04 $1.40 11 Aug 19 11 Aug 17 750,000 12 Nov 15 $1.27 $1.40 11 Aug 19 11 Aug 18 P Thomas 250,000 12 Aug 15 $0.58 $1.40 11 Aug 19 11 Aug 17 P Thomas 250,000 12 Aug 15 $0.74 $1.40 11 Aug 19 11 Aug 18 - - - - - - - - P Thomas 1,500,000 12 Sep 14 $0.87 $1.55 12 Sep 17 12 Sep 16 1,500,000 100% P Woodman 500,000 25 Jan 16 $1.00 $2.34 6 Jan 20 25 Jan 18 P Woodman 500,000 25 Jan 16 $1.29 $2.34 6 Jan 20 25 Jan 19 K Massey 500,000 12 Aug 15 $0.58 $1.40 11 Aug 19 11 Aug 17 K Massey 500,000 12 Aug 15 $0.74 $1.40 11 Aug 19 11 Aug 18 - - - - - - - - K Massey 50,000 19 Aug 13 $1.94 $3.50 31 Jul 17 31 Jul 16 50,000 50% Total 5,550,000 1,550,000 - - - - - - - - - - All options expire at the earlier of their expiry date or termination of the individual’s employment. Options granted as compensation do not have any vesting conditions other than a continuing employment service condition. Details on performance rights that were granted as compensation to each KMP during the reporting period are as follows: RIGHTS GRANTED NUMBER OF RIGHTS GRANTED DURING 2017 TO: VESTING CONDITION GRANT DATE FAIR VALUE AT GRANT DATE TEST DATE M CLARK P THOMAS K MASSEY P WOODMAN % VESTED DURING THE YEAR % FORFEITED DURING THE YEAR Relative TSR 18 Nov 16 $1.51 30 Jun 18 42,000 23,833 17,333 17,333 Absolute TSR 18 Nov 16 $0.97 30 Jun 18 42,000 23,833 17,333 17,333 Earnings per share 18 Nov 16 $2.56 30 Jun 18 42,000 23,833 17,333 17,333 Ore reserves 18 Nov 16 $2.56 30 Jun 18 42,000 23,834 17,334 17,334 Value of rights granted during the year $319,326 $181,205 $131,785 $131,785 168,000 95,333 69,333 69,333 - - - - - - - - The two year performance period during which the performance rights are tested ends on 30 June 2018 with the testing to occur within 60 days after that date. Any performance rights that do not vest will lapse after testing. There is no re-testing of performance rights. In addition to a continuing employment service condition, vesting of the performance rights is conditional upon the Group achieving certain performance hurdles. Details of the performance criteria are included in the long-term incentives discussion on page 39. The value of rights granted during the year is the fair value of the rights calculated at grant date. The total value of the rights granted is included in the table above. This amount is allocated to remuneration over the vesting period (i.e. in years 1 July 2016 to 30 June 2018). No performance rights were exercised during the year. REGIS RESOURCES // REMUNERATION REPORT (AUDITED) (continued)Table 6: Rights and options over equity instruments 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: 47 HELD AT START OF PERIOD HELD AT END OF PERIOD VESTED AT 30 JUNE 2017 1 JULY 2016 GRANTED AS REMUNERATION EXERCISED NET CHANGE OTHER 30 JUNE 2017 TOTAL EXERCISABLE NOT EXERCISABLE Options M Clark 1,500,000 P Thomas(i) 2,000,000 K Massey(ii) 1,100,000 P Woodman 1,000,000 Rights M Clark P Thomas K Massey P Woodman - - - - - - - (1,500,000) - - 168,000 95,333 69,333 69,333 (100,000) - - - - - 1,500,000 500,000 1,000,000 1,000,000 168,000 95,333 69,333 69,333 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (i) The intrinsic value of options exercised by Mr Thomas during the year was $3,375,000. Mr Thomas exercised his options using the cashless exercise feature available under the Regis ESOP and was issued with 899,225 ordinary shares as a result. No amounts remain unpaid on the shares issued. (ii) The intrinsic value of options exercised by Mr Massey during the year was $55,000. Mr Massey exercised his options using the cashless exercise feature available under the Regis ESOP and was issued with 17,062 ordinary shares as a result. No amounts remain unpaid on the shares issued. There were no options granted to KMPs during the year. No options or rights 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. Table 7: 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: Non-Executive Directors M Okeby G Evans(i) R Kestel J Mactier F Morgan(ii) Executive Directors M Clark P Thomas Other Executives P Woodman K Massey Total HELD AT 1 JULY 2016 ON EXERCISE OF OPTIONS NET CHANGE OTHER HELD AT 30 JUNE 2017 700,000 2,235,815 75,000 - n/a 4,960,000 - - - - - - - - - - 700,000 (2,235,815) - - n/a 75,000 - 513,230 513,230 (2,500,000) 2,460,000 899,225 (899,225) - - 17,062 (17,062) - - - 7,970,815 916,287 (5,138,872) 3,748,230 (i) Mr Evans retired as a non-executive director on 29 July 2016. “Net change other” reflects the number of shares held at this date. (ii) Ms Morgan was appointed as non-executive director on 18 November 2016. “Net change other” represents the number of shares held at this date. In all instances, “Net change other” relates to on-market purchases and sales of shares. REGIS RESOURCES // 2017 ANNUAL REPORT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. 48 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 From the date of her appointment as a director, services totalling $335,302 have been provided on normal commercial terms to the Group by Mintrex Pty Ltd, of which Ms Morgan is a managing director, chief executive officer and a shareholder. There was no outstanding balance payable as at 30 June 2017. Other than the ordinary accrual of personnel expenses at balance date and transactions disclosed above, 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, 28 August 2017 REGIS RESOURCES // REMUNERATION REPORT (AUDITED) (continued)AUDITOR’S INDEPENDENCE DECLARATION 49 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 of Regis Resources Limited for the financial year ended 30 June 2017 there have been: i. ii. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. KPMG R Gambitta Partner Perth 28 August 2017 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 // 2017 ANNUAL REPORT Rosemont Main Pit sump // Photo by Amanda Gould Financial Statements CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 June 2017 51 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/(losses) on cash flow hedges Realised gains transferred to net profit 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 (loss)/income for the period, net of tax Total comprehensive income for the period NOTE 2 3 2 24 15 3 18 5 CONSOLIDATED 2017 $’000 2016 $’000 543,799 502,019 (335,827) (335,136) 207,972 166,883 4,962 6,294 (2,117) (5,521) (3,222) (585) (312) (2,939) (936) (1,165) 196,137 (57,974) 138,163 138,163 (1,677) (5,304) (3,317) (547) (457) (21) (839) (1,914) 159,101 (47,308) 111,793 111,793 (641) (4,177) 1,424 5,006 - (1,502) (2,180) 4,633 654 (4,920) 133,243 (1,390) 6,747 118,540 Total comprehensive income attributable to members of the parent 133,243 118,540 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 27.59 27.29 22.37 22.22 The above statement of comprehensive income should be read in conjunction with the accompanying notes. Financial Statements REGIS RESOURCES // 2017 ANNUAL REPORTCONSOLIDATED BALANCE SHEET 52 As at 30 June 2017 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 Intangible assets 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 Total equity NOTE 7 8 9 10 21 19 10 19 11 12 13 14 16 18 17 21 18 23 17 22 22 CONSOLIDATED 2017 $’000 119,428 24,934 6,833 39,328 260 263 1,197 2016 $’000 99,535 22,764 5,257 29,134 5,006 155 1,139 192,243 162,990 35,452 - 182,388 151,735 - 123,244 802 493,621 685,864 43,719 1,506 2,193 4,607 102 52,127 841 49,403 45,101 95,345 147,472 25,866 6,442 187,663 123,739 1,199 83,358 - 428,267 591,257 35,155 1,125 11,123 1,903 713 50,019 1,485 20,806 37,099 59,390 109,409 538,392 481,848 431,491 26,876 80,025 431,335 28,574 21,939 538,392 481,848 The above balance sheet should be read in conjunction with the accompanying notes. REGIS RESOURCES // 2017 ANNUAL REPORTCONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2017 53 CONSOLIDATED SHARE- BASED PAYMENT RESERVE FINANCIAL ASSETS RESERVE CASH FLOW HEDGE RESERVE RETAINED PROFITS/ (ACCUMULA- TED LOSSES) ISSUED CAPITAL TOTAL EQUITY $’000 $’000 $’000 $’000 $’000 $’000 431,335 21,827 3,243 3,504 21,939 481,848 At 1 July 2016 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 Shares issued, net of transaction costs 156 - - - - - - (1,526) - - - (3,394) (1,526) (3,394) 138,163 138,163 - - - (1,526) (3,394) (4,920) (1,526) (3,394) 138,163 133,243 3,222 - - - - - - - - - 3,222 (80,077) (80,077) - 156 At 30 June 2017 431,491 25,049 1,717 110 80,025 538,392 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 431,338 18,510 - - 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 - - - - - Transactions with owners in their capacity as owners: Share-based payments expense Dividends paid Shares issued, net of transaction costs (3) 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 The above statement of changes in equity should be read in conjunction with the accompanying notes. - - - - - - - - - - - - - - REGIS RESOURCES // 2017 ANNUAL REPORTCONSOLIDATED STATEMENT OF CASH FLOWS 54 For the year ended 30 June 2017 NOTE CONSOLIDATED 2017 $’000 2016 $’000 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 7 Cash flows from investing activities Acquisition of property, plant and equipment Proceeds on disposal of property, plant and equipment 540,048 490,098 (300,416) (266,569) 1,302 1,504 (126) - (36,230) 206,082 2,715 1,745 (1,063) 8 (22,933) 204,001 (23,395) (20,469) 2 165 Payments for exploration and evaluation (net of rent refunds) (32,366) (18,141) Payments for acquisition of exploration assets (net of cash) Payments for financial assets Proceeds on disposal of 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 (3,370) - 4,154 (9,506) (100) (1,812) - (816) (40,301) (44,355) (104,782) (85,528) 175 (19) - (3) (80,077) (49,979) (1,486) (737) - (20,000) (81,407) (70,719) 19,893 99,535 47,754 51,781 Cash and cash equivalents at 30 June 7 119,428 99,535 The above statement of cash flows should be read in conjunction with the accompanying notes. REGIS RESOURCES // 2017 ANNUAL REPORTRosemont North Pit // Photo by Amanda Gould Ore haulage from Erlistoun to Garden Well // Photo by Sarah Parfett Notes to the Financial Statements 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 58 59 59 60 62 64 65 66 66 68 68 68 69 70 71 72 72 74 75 75 Capital structure, financial instruments and risk 77 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 77 78 79 82 84 85 85 87 90 91 92 93 93 93 93 BASIS OF PREPARATION 58 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 28 August 2017. 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; presents reclassified comparative information where required 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 2016. 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. 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)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. 59 Note 3 Note 10 Note 12 Note 14 Note 15 Note 17 Note 23 Note 24 Expenses Inventories Exploration and evaluation assets Mine properties Impairment Provisions Deferred income tax Share-based payments Page 62 Page 69 Page 71 Page 72 Page 74 Page 75 Page 85 Page 87 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. 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 comprising Moolart Well and Gloster and Duketon South Operations (“DSO”), currently incorporating Garden Well, Rosemont and Erlistoun. The segments are unchanged from those reported at 30 June 2016. A number of new mining operations at satellite pits will commence in the next several years. In addition to Moolart Well and Gloster, DNO will include Dogbolter, Petra and Anchor pits as all will be processed through the Moolart Well processing plant. DSO will add Baneygo and Tooheys Well 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. REGIS RESOURCES // 2017 ANNUAL REPORTThe following table presents financial information for reportable segments for the years ended 30 June 2017 and 30 June 2016: 60 DUKETON NORTH OPERATIONS DUKETON SOUTH OPERATIONS UNALLOCATED TOTAL 2017 2016 2017 2016 2017 2016 2017 2016 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Continuing Operations Segment revenue Sales to external customers 170,065 124,661 372,153 375,491 Other revenue - - - - Total segment revenue 170,065 124,661 372,153 375,491 - 1,581 1,581 - 542,218 500,152 1,867 1,581 1,867 1,867 543,799 502,019 Total revenue per the statement of comprehensive income 543,799 502,019 Interest expense Impairment of non-current assets - - - - - - - - 126 2,939 981 21 126 2,939 981 21 Depreciation and amortisation 18,061 34,482 39,392 40,607 218 248 57,671 75,337 Depreciation capitalised Total depreciation and amortisation recognised in the statement of comprehensive income Segment result Segment net operating profit/(loss) before tax Segment assets (90) (93) 57,581 75,244 80,724 30,341 127,455 137,886 (12,042) (9,126) 196,137 159,101 Segment assets at balance date 82,066 62,087 308,108 272,784 295,690 256,386 685,864 591,257 Capital expenditure for the year 18,436 18,974 46,622 41,386 32,306 17,692 97,364 78,052 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 CONSOLIDATED 2017 $’000 2016 $’000 542,218 500,152 1,581 1,867 543,799 502,019 REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)Gold forward contracts 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”). 61 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) 2017 2016 ounces ounces 2017 $/oz 2016 $/oz 2017 2016 2017 2016 $’000 $’000 $’000 $’000 Within one year – Spot deferred contracts(ii) 396,406 353,770 1,551 1,581 614,718 559,206 (25,386) (68,594) – Fixed forward contracts - 80,000 - 1,454 - 116,280 - (27,121) 396,406 433,770 614,718 675,486 (25,386) (95,715) Mark-to-market has been calculated with reference to the following spot price at period end $1,615/oz $1,774/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 $1,408/oz to $1,810/oz (2016: $1,402/oz to $1,803/oz). Other income Rehabilitation provision adjustment Net gain on financial instruments at fair value through profit or loss Ineffectiveness on commodity swap contracts designated as cash flow hedges Rental income CONSOLIDATED 2017 $’000 2,977 1,913 72 - 2016 $’000 4,283 2,002 - 9 4,962 6,294 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 35,000 ounces with a weighted average exercise price of $1,716/oz (2016: 73,000 ounces at A$1,700/oz). Offsetting the premium income received during the current year is the fair value of open contracts at balance date, recognised on the balance sheet as “derivative liabilities”. For more information on the measurement and recognition of derivatives, refer to note 21. REGIS RESOURCES // 2017 ANNUAL REPORT3. EXPENSES 62 Accounting Policies Cash costs of production Cash costs of production is a component of cost of goods sold and includes 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 Depreciation CONSOLIDATED 2017 $’000 2016 $’000 255,074 238,158 23,300 31,484 25,969 21,889 42,823 32,266 335,827 335,136 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. Depreciation and amortisation Depreciation expense Amortisation expense Less: Amounts capitalised Depreciation and amortisation charged to the statement of comprehensive income CONSOLIDATED 2017 $’000 31,702 25,969 (90) 57,581 2016 $’000 43,071 32,266 (93) 75,244 REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)KEY ESTIMATES AND ASSUMPTIONS Unit-of-production method of depreciation/amortisation 63 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 Employee bonuses 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 NOTE 24 CONSOLIDATED 2017 $’000 2016 $’000 35,700 33,459 3,235 3,222 335 2,425 44,917 (4,826) 3,027 3,317 - 2,118 41,921 (3,365) 40,091 38,556 380 (114) 266 49 804 83 936 356 (107) 249 175 660 4 839 REGIS RESOURCES // 2017 ANNUAL REPORTNo. shares 4. EARNINGS PER SHARE 64 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 and performance rights on issue. Earnings used in calculating EPS Net profit attributable to ordinary equity holders of the parent 138,163 111,793 CONSOLIDATED 2017 $’000 2016 $’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 Performance rights NO. SHARES NO. SHARES ('000s) ('000s) 499,854 499,782 928 6 500,782 499,788 5,225 247 3,291 - Weighted average number of ordinary shares adjusted for the effect of dilution 506,254 503,079 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)5. CURRENT INCOME TAX Accounting Policy Current tax 65 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. 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/(receivable) related to items recognised in OCI during the year Net (loss)/gain on revaluation of cash flow hedges Net (loss)/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% (2016: 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 CONSOLIDATED 2017 $’000 2016 $’000 30,198 (3,635) 29,614 1,797 57,974 (1,424) (654) (2,078) 196,137 58,841 966 5 (1,838) 57,974 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 REGIS RESOURCES // 2017 ANNUAL REPORT6. DIVIDENDS 66 Declared and paid during the year: Dividends on ordinary shares Final franked dividend for 2016: 9 cents per share (2015: 6) Interim franked dividend for 2017: 7 cents per share (2016: 4) CONSOLIDATED 2017 $’000 2016 $’000 45,007 35,070 80,077 29,987 19,992 49,979 Proposed by the directors after balance date but not recognised as a liability at 30 June: Dividends on ordinary shares Final dividend for 2017: 8 cents per share (2016: 9 cents per share) 40,143 45,006 Dividend franking account Amount of franking credits available to shareholders of Regis Resources Limited for subsequent financial years 5,625 12,644 The ability to utilise the franking credits is dependent upon the ability to declare dividends. 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 and short-term deposits with an original maturity of 3 months or less that are readily convertible to known amounts of cash and which are subject to insignificant changes in value. Cash at bank earns interest at floating rates based on daily bank deposit rates. Short- term deposits are made for varying periods of between one and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. At 30 June 2017, the Group had no undrawn, committed borrowing facilities available (2016: nil). Refer to note 18. Cash and cash equivalents in the balance sheet and cash flow statement Cash at bank and on hand Short-term deposits Restrictions on cash CONSOLIDATED 2017 $’000 69,428 50,000 119,428 2016 $’000 99,535 - 99,535 The Group is required to maintain $161,000 (2016: $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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)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 (loss)/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 Non-cash financing and investing activities CONSOLIDATED 2017 $’000 2016 $’000 67 138,163 111,793 2,939 1,039 83 (683) 3,222 (2,977) 57,581 21 933 4 713 3,317 (4,283) 75,244 (2,170) (10,054) (365) (376) (18,669) (2,805) (64) (7,308) 7,539 29,053 (1,301) (180) 7,601 5,899 16,774 (600) 206,082 204,001 During the year ended 30 June 2017, the Group entered into a hire purchase arrangement for the acquisition of a second Komatsu WA600 loader for the Duketon Gold Project. The amount financed was $1,222,000 (2016: first Komatsu Loader $1,222,000). Refer to note 18 for further details. These transactions are not reflected in the statement of cash flows. REGIS RESOURCES // 2017 ANNUAL REPORTOPERATING ASSETS AND LIABILITIES 68 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 77. 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. CONSOLIDATED 2017 $’000 2016 $’000 Current Gold bullion awaiting settlement 24,934 22,764 At balance date, gold bullion awaiting settlement comprised 15,487 ounces valued at a weighted average realisable value of $1,610/oz (2016: 12,538 ounces at $1,815/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 Security deposit for land acquisition Interest receivable Dividend trust account Other receivables CONSOLIDATED 2017 $’000 3,323 1,570 974 217 498 251 2016 $’000 2,955 1,527 - 140 439 196 6,833 5,257 REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)10. INVENTORIES Accounting Policy 69 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 2017 $’000 2016 $’000 25,894 16,733 6,098 4,254 3,082 8,957 525 2,919 39,328 29,134 35,452 25,866 At 30 June 2016, there was no expense recognised in costs of goods sold for inventories carried at net realisable value. At 30 June 2017, a portion of ore stockpiles were reclassified as non-current as a result of the annual update of life of mine plans and written down to net realisable value resulting in an expense totalling $1,440,000 being recognised in cost of goods sold. During the year, all other inventories were carried at cost. (2016: all inventory is carried at cost). 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. REGIS RESOURCES // 2017 ANNUAL REPORT11. PROPERTY, PLANT AND EQUIPMENT 70 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. 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 FURNITURE & EQUIPMENT BUILDINGS & INFRASTRUCTURE CAPITAL WIP TOTAL CONSOLIDATED $’000 $’000 $’000 Net carrying amount at 1 July 2016 16,488 Additions Depreciation expense Transfers to mine properties Transfers between classes Rehabilitation provision adjustments Disposals - - - - - - 341 28 114,609 6,400 (76) (21,306) - 10 - - - 4,551 55 (85) $’000 616 108 (176) - 52 - - $’000 $’000 $’000 47,561 8,048 187,663 9,361 8,327 24,224 (10,144) - (31,702) - (18) 3,259 (7,872) 2,251 - - - (18) - 2,306 (85) Net carrying amount at 30 June 2017 16,488 303 104,224 600 52,288 8,485 182,388 At 30 June 2017 Cost 16,488 762 234,758 Accumulated depreciation - (459) (130,534) Net carrying amount 16,488 303 104,224 Net carrying amount at 1 July 2015 16,488 409 133,541 1,817 (1,217) 600 613 221 102,539 8,485 364,849 (50,251) - (182,461) 52,288 8,485 182,388 47,537 10,371 208,959 1,308 12,290 22,231 Additions Depreciation expense Transfers between classes Rehabilitation provision adjustments Disposals - - - - - 4 8,408 (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 1 July 2015 Cost 16,488 721 213,694 Accumulated depreciation - (312) (80,153) Net carrying amount 16,488 409 133,541 1,432 (819) 613 76,187 10,371 318,893 (28,650) - (109,934) 47,537 10,371 208,959 At 30 June 2016 Cost 16,488 725 223,997 Accumulated depreciation - (384) (109,388) Net carrying amount 16,488 341 114,609 1,663 (1,047) 616 88,104 8,048 339,025 (40,543) - (151,362) 47,561 8,048 187,663 REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)12. EXPLORATION AND EVALUATION ASSETS Accounting Policy 71 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. 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 Acquisition of tenements NOTE 15 14 CONSOLIDATED 2017 $’000 123,739 31,976 3,382 (2,917) (4,445) 151,735 2016 $’000 118,779 17,440 100 (21) (12,559) 123,739 During the year, the Group acquired the Blayney Gold Project tenement from Aeris Resources Limited for $3.25 million (paid in cash), paid $100,000 to Delta Gold Pty Ltd to acquire its 28.78% beneficial interest in the Bandya Joint Venture tenements (taking the Group’s interest in these tenements to 100%) and paid $20,000 to Hot Holdings Pty Ltd to acquire its 49% beneficial interest in an exploration license (taking the Group’s interest in this license to 100%). 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 Duketon North Operations Duketon South Operations Duketon Gold Project satellite deposits Regional WA exploration NSW exploration 8,868 14,281 12,757 9,267 106,562 151,735 1,840 3,144 19,343 7,947 91,465 123,739 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. REGIS RESOURCES // 2017 ANNUAL REPORTExploration expenditure commitments 72 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 2017 $’000 2,317 2016 $’000 2,804 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. NOTE 14 CONSOLIDATED 2017 $’000 1,199 9,158 (1,111) (9,246) 2016 $’000 68 1,131 - - - 1,199 Balance at beginning of period Pre-production expenditure capitalised Transferred to inventory Transferred to mine properties Balance at end of period 14. MINE PROPERTIES Accounting Policies 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)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. 73 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. CONSOLIDATED PRODUCTION STRIPPING COSTS PRE-STRIP COSTS OTHER MINE PROPERTIES Net carrying amount at 1 July 2016 Additions Transfers from exploration and evaluation assets Transfers from pre-production Transfers from property, plant and equipment Rehabilitation provision adjustment Amortisation expense Net carrying amount at 30 June 2017 At 30 June 2017 Cost Accumulated amortisation Net carrying amount 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 At 1 July 2015 Cost Accumulated amortisation Net carrying amount $’000 19,969 22,398 - 4,321 - - (4,801) 41,887 63,563 (21,676) 41,887 20,464 5,521 - - (6,016) 19,969 36,843 (16,874) 19,969 31,322 (10,858) 20,464 $’000 37,334 11,213 - 3,606 - - (11,334) 40,819 82,154 (41,335) 40,819 31,663 21,794 - - (16,123) 37,334 67,335 (30,001) 37,334 45,541 (13,878) 31,663 $’000 26,055 7,535 4,445 1,319 18 11,000 (9,834) 40,538 TOTAL $’000 83,358 41,146 4,445 9,246 18 11,000 (25,969) 123,244 96,803 242,520 (56,265) (119,276) 40,538 123,244 13,747 9,935 12,559 (59) (10,127) 26,055 72,486 (46,431) 26,055 50,051 (36,304) 13,747 65,874 37,250 12,559 (59) (32,266) 83,358 176,664 (93,306) 83,358 126,914 (61,040) 65,874 REGIS RESOURCES // 2017 ANNUAL REPORTKEY ESTIMATES AND ASSUMPTIONS 74 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 Exploration and evaluation assets NOTE 12 CONSOLIDATED 2017 $’000 2,939 2016 $’000 21 An impairment loss of $343,000 (2016: $21,000) has been recognised in relation to tenements that were surrendered, relinquished or expired during the year. An impairment loss of $2,596,000 was recognised for the tenements relating to the Duketon Gold Exploration Joint Venture. The Joint Venture required Regis to spend at least $1 million over a 2 year period to earn a 75% interest in any mining project that is confirmed by a Regis decision to mine. The 2 year term expires in October 2017 and at 30 June 2017 no significant targets had been found. Limited work is planned to be undertaken subsequent to year end and as such, all costs incurred have been written off in the current 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)16. TRADE AND OTHER PAYABLES Accounting Policies Trade payables 75 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 2017 $’000 16,892 16,628 2,881 7,318 43,719 2016 $’000 14,182 11,241 2,727 7,005 35,155 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. REGIS RESOURCES // 2017 ANNUAL REPORTLong service leave 76 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 Current Dividends payable Long service leave 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 2017 $’000 498 156 3,953 4,607 1,423 43,678 45,101 37,401 12,439 (1,138) (2,110) 1,039 47,631 2016 $’000 438 - 1,465 1,903 1,163 35,936 37,099 42,114 - (1,018) (4,628) 933 37,401 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)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. 77 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 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. Current interest-bearing liabilities Finance lease liability Non-current interest-bearing liabilities Finance lease liability NOTE CONSOLIDATED 2017 $’000 2016 $’000 1,506 1,125 841 1,485 Less: cash and cash equivalents Net cash 7 119,428 117,081 99,535 96,925 REGIS RESOURCES // 2017 ANNUAL REPORTInterest-bearing liabilities 78 Finance lease commitments The Group has hire purchase contracts for three Komatsu loaders. The Group’s obligations are secured by the lessors’ title to the leased assets. Ownership of the loaders passes to the Group once all contractual payments have been made. Refer to note 27. Finance costs Interest expense Unwinding of discount on provisions Borrowing costs CONSOLIDATED 2017 $’000 126 1,039 1,165 2016 $’000 981 933 1,914 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. CONSOLIDATED 2017 $’000 2016 $’000 Current Financial assets at amortised cost – term deposit 263 155 Non-current Financial assets at fair value through OCI – listed shares - 6,442 Financial assets at fair value through OCI During the year, the Group disposed of its investment in Capricorn Metals Limited (“CMM”). At 30 June 2016, the Group held a non-controlling interest of 9% which was carried at its fair value determined with reference to the published price quoted on the ASX, an active market (“Level 1” fair value measurement). REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)20. FINANCIAL RISK MANAGEMENT The Group holds financial instruments for the following purposes: 79 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. 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 and commodity 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 and gold bullion awaiting settlement. 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 and gold sales settled 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 given banks have investment grade credit ratings. 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. REGIS RESOURCES // 2017 ANNUAL REPORT30 JUNE 2017 ($’000) CARRYING AMOUNT CONTRACTUAL CASH-FLOWS 6 MTHS OR LESS 6-12 MTHS 1-2 YEARS 2-5 YEARS MORE THAN 5 YEARS 80 Trade and other payables 40,764 (40,764) (40,764) Derivative liabilities Finance leases Total 102 2,347 (102) (2,414) (102) (811) 43,213 (43,280) (41,677) - - (747) (747) - - (820) (820) - - (36) (36) - - - - 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) Derivative liabilities Finance lease Total 713 2,610 35,751 (713) (2,716) (713) (597) (35,857) (33,738) - - (597) (597) - - (1,130) (1,130) - - (392) (392) - - - - Assets pledged as security The hedging facility 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 2017, the Group did not have any financial guarantee liabilities (2016: 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)The Group implemented a medium term risk management strategy during the prior 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. 81 Interest rate risk At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was: Fixed rate instruments Term deposits Finance lease liabilities Variable rate instruments Cash and cash equivalents CONSOLIDATED 2017 $’000 50,263 (2,347) 47,916 2016 $’000 155 (2,610) (2,455) 69,167 99,105 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. 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. REGIS RESOURCES // 2017 ANNUAL REPORT21. DERIVATIVES AND HEDGING 82 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. 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) CONSOLIDATED 2017 $’000 2016 $’000 260 5,006 Sold gold call options (not qualifying for hedge accounting) (102) (713) Hedges that meet the criteria for hedge accounting are classified and accounted for as follows: 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)NOTIONAL AMOUNT LINE ITEM IN THE BALANCE SHEET CONSOLIDATED 2017 $’000 2016 $’000 83 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) Diesel swap – 8 month contract expiring 30 June 2018 – fixed at $0.487/litre 2,000,000 litres/month (16,000,000 litres) Derivatives (current assets) Diesel swap – 12 month contract expiring 30 June 2018 – fixed at $0.4825/litre 2,000,000 litres/month (24,000,000 litres) Derivatives (current assets) - 1,988 260 3,018 - - - - 260 5,006 The terms of the commodity swap match the terms of the expected highly probable forecast transactions. For the year ended 30 June 2017, hedge ineffectiveness of $72,000 was recognised in the statement of profit or loss as detailed in the table below (2016: nil). The above hedging relationships affected profit or loss and other comprehensive income as follows: 2017 CASH FLOW HEDGES HEDGING GAIN/ (LOSS) RECOGNISED IN OCI INEFFECTIVENESS RECOGNISED IN PROFIT OR LOSS LINE ITEM IN THE STATEMENT OF PROFIT OR LOSS Diesel swaps $’000 (641) $’000 72 Other income 4,177 Cost of goods sold AMOUNT RECLASSIFIED FROM OCI TO PROFIT OR LOSS $’000 LINE ITEM IN THE STATEMENT OF PROFIT OR LOSS 2016 CASH FLOW HEDGES 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 Diesel swaps $’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. REGIS RESOURCES // 2017 ANNUAL REPORTCommodity Price Sensitivity 84 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 as disclosed for the prior year. Due to the immaterial value of exposures at 30 June 2017, no sensitivity analysis has been disclosed. For the purpose of this disclosure for the 2016 year, the following assumptions were used: 10% per litre increase and decrease in the Australian dollar gasoil price A$20 per ounce increase and decrease in the spot price of gold Sensitivity analysis assumes hedge designations as at 30 June 2016 remain unchanged and all designations are effective 2016 Cash flow hedges Diesel swaps Derivatives Sold gold call options CHANGE IN YEAR-END PRICE EFFECT ON PROFIT (BEFORE TAX) EFFECT ON EQUITY (BEFORE TAX) +10% -10% +A$20 -A$20 $’000 - - (285) 261 $’000 2,630 (2,627) - - 22. ISSUED CAPITAL AND RESERVES Accounting Policy 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 2015 Issued on exercise of options Transaction costs At 30 June 2016 Issued on exercise of options Transaction costs At 30 June 2017 CONSOLIDATED 2017 $’000 2016 $’000 431,491 431,335 NO. SHARES (‘000s) $’000 499,781 431,338 73 - - (3) 499,854 431,335 1,166 - 175 (19) 501,020 431,491 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)SHARE-BASED PAYMENT RESERVE FINANCIAL ASSETS RESERVE CASH FLOW HEDGE RESERVE TOTAL RESERVES 85 $’000 18,510 - - 3,317 21,827 - - 3,222 25,049 $’000 - 4,633 (1,390) - 3,243 (2,180) 654 - 1,717 $’000 - 5,006 (1,502) - 3,504 (4,818) 1,424 - 110 $’000 18,510 9,639 (2,892) 3,317 28,574 (6,998) 2,078 3,222 26,876 Balance at 1 July 2015 Net gain on financial instruments recognised in equity Tax effect of transfers and revaluations Share-based payment transactions Balance at 30 June 2016 and 1 July 2016 Net loss on financial instruments recognised in equity Tax effect of transfers and revaluations Share-based payment transactions Balance at 30 June 2017 Nature and purpose of reserves Share-based payment reserve The share-based payment reserve is used to record the value of share-based payments and performance rights 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. 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 2017 there are no unrecognised temporary differences associated with the Group’s investment in subsidiaries (2016: $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. REGIS RESOURCES // 2017 ANNUAL REPORTDeferred income tax at 30 June relates to the following: 86 CONSOLIDATED Deferred tax liabilities Receivables Inventories Prepayments Financial assets Property, plant and equipment 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 KEY JUDGEMENTS Recovery of deferred tax assets 2017 $’000 2,389 469 74 78 10,083 22,529 - 36,973 72,595 2016 $’000 2,752 - 47 2,892 - 14,922 360 25,007 45,980 (23,192) (25,174) 49,403 20,806 - - 940 14,763 8 31 7,450 23,192 2,114 2,339 892 11,569 31 214 8,015 25,174 (23,192) (25,174) - - (20,806) (1,140) (31,411) (16,774) 2,814 (2,892) (49,403) (20,806) 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)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. 87 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-based payments expense Performance rights expense Total expense arising from share-based payment transactions CONSOLIDATED 2017 $’000 2,928 294 3,222 2016 $’000 3,317 - 3,317 There have been no cancellations or modifications to any of the plans during the current or prior years. REGIS RESOURCES // 2017 ANNUAL REPORTEmployee share option plan (ESOP) 88 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, Nomination and Diversity Committee may issue eligible employees with options to acquire shares in the future at an exercise price fixed by the board or Remuneration, Nomination and Diversity 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: WAEP $2.7956 $1.5121 $2.4520 $2.4000 $3.4884 $1.7125 $3.5000 2016 $2.91 2017 NO. WAEP 2016 NO. Outstanding at the beginning of the year 13,160,000 $1.7125 5,155,000 Granted during the year - - 10,705,000 Forfeited during the year (1,035,000) $1.7570 (1,020,000) Exercised during the year (2,680,000) $2.3473 (275,000) Expired during the year - - (1,405,000) Outstanding at the end of the year 9,445,000 $1.5274 13,160,000 Exercisable at the end of the year - - 572,500 Weighted average share price at the date of exercise Weighted average remaining contractual life Range of exercise prices 2017 $3.85 2.2 years 2.7 years $1.40 - $2.70 $1.40 - $3.50 Weighted average fair value of options granted during the year n/a $0.7941 Option pricing model The fair value of the equity-settled share options granted under the ESOP is estimated as at the date of grant using a Black-Scholes option pricing model taking into account the terms and conditions upon which the options were granted. There were no new grants of employee options during the year ended 30 June 2017. The following table lists the inputs to the model used for the year ended 30 June 2016: Dividend yield (%) Expected volatility (%) Risk free interest rate (%) Expected life of the option (years) Option exercise price ($) Weighted average share price at grant date ($) 2016 ESOP 2.91 - 4.27 84.73 – 103.38 1.57 – 2.15 2 – 3 years 1.40 – 2.70 1.41 – 3.19 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. REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)Performance Rights In November 2016, 401,999 performance rights were granted to the executive directors, Mr Mark Clark and Mr Paul Thomas, and other executives, Mr Kim Massey and Mr Peter Woodman under the Group’s Executive Incentive Plan (“EIP”). The performance conditions that the Board has determined will apply to the Performance Rights are summarised below: 89 TRANCHE WEIGHTING PERFORMANCE CONDITIONS Tranche A 25% of the Performance Rights The Company’s relative total shareholder return (“TSR”) measured against the TSR’s of 18 comparator mining companies Tranche B 25% of the Performance Rights Tranche C 25% of the Performance Rights The Company’s absolute TSR measured against specific thresholds The growth in the Company’s earnings per share (“EPS”) measured against specific thresholds Tranche D 25% of the Performance Rights The growth in the Company’s Ore Reserve measured against specific thresholds The fair value at grant date of Tranches A and B was estimated using a Monte Carlo simulation, and a Black Scholes option pricing model was used to estimate the fair value at grant date of Tranches C and D. The table below details the terms and conditions of the grant and the assumptions used in estimating fair value: ITEM Grant date Value of the underlying security at grant date Exercise price Dividend yield Risk free rate Volatility Performance period (years) Commencement of measurement period Test date Remaining performance period (years) TRANCHE A & B TRANCHE C & D 18 November 2016 18 November 2016 $2.740 nil 4.23% 1.75% 60% 2 $2.740 nil 4.23% 1.75% 60% 2 1 July 2016 1 July 2016 30 June 2018 30 June 2018 1.61 1.61 The weighted average fair value of the Performance Rights granted during the year was $1.90. 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. REGIS RESOURCES // 2017 ANNUAL REPORT25. RELATED PARTIES 90 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 Long-term benefits Termination benefits Share-based payment Total compensation CONSOLIDATED 2017 $ 2016 $ 2,802,104 2,453,191 159,410 212,867 - 214,593 188,718 216,771 2,030,994 1,708,649 5,205,375 4,781,922 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 COUNTRY OF INCORPORATION % EQUITY INTEREST INVESTMENT $’000 2017 2016 2017 2016 Duketon Resources Pty Ltd Australia Artane Minerals NL Australia Rosemont Gold Mines Pty Ltd Australia LFB Resources NL Australia 100% 100% 100% 100% 100% 100% 100% 100% 30,575 30,575 - - 44,110 74,685 - - 44,110 74,685 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 2017, the balance of the loan receivable was $24,157,000 (2016: $17,298,000). 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 2017, the balance of the loan receivable was $38,775,000 (2016: $25,481,000). REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)Transactions with key management personnel From the date of her appointment as a director, services totalling $335,302 have been provided on normal commercial terms to the Group by Mintrex Pty Ltd, of which Ms Morgan is a managing director, chief executive officer and a shareholder. There was no outstanding balance payable as at 30 June 2017. 91 Other than the ordinary accrual of personnel expenses at balance date and transactions disclosed above, there are no other amounts receivable from and payable to key management personnel and their related parties. 26. PARENT ENTITY INFORMATION The following details information related to the parent entity, Regis Resources Limited, at 30 June 2017. 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-based payment reserve Retained profits Total equity Net profit for the year Other comprehensive income for the period Total comprehensive income for the period CONSOLIDATED 2017 $’000 190,919 518,194 2016 $’000 162,751 458,108 709,113 620,859 51,984 85,933 137,917 49,957 56,590 106,547 431,491 431,335 26,876 112,829 571,196 28,574 54,403 514,312 138,503 112,184 (4,920) 6,747 133,583 118,931 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 2017 as disclosed at note 28. All commitments are commitments incurred by the parent entity, except for $1,351,000 (2016: $1,827,000) of the exploration expenditure commitments disclosed at note 12, and $35,000 (2016: $56,000) of the operating lease commitments disclosed at note 27. REGIS RESOURCES // 2017 ANNUAL REPORT27. COMMITMENTS 92 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 2017 $’000 373 683 1,056 2016 $’000 358 1,040 1,398 Finance lease commitments - Group as lessee The Group has entered into hire purchase contracts for the purchase of three Komatsu loaders. The contracts expire on 29 May 2018, 27 May 2019 and 4 July 2019 and ownership of the loaders passes to the Group once all contractual payments have been made. (30 June 2016: 29 May 2018). 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 NOTE CONSOLIDATED 2017 $’000 1,558 856 2,414 (67) 2,347 1,506 841 2,347 2016 $’000 1,194 1,522 2,716 (106) 2,610 1,125 1,485 2,610 Carrying value of leased assets included in plant and equipment 11 3,425 3,008 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 2017, the Group had nil commitments to purchase electricity as the new contract is being negotiated. (30 June 2016: $135,000). 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 2017, at the current contract price, the Group had commitments to purchase electricity for the remaining term of $762,000 (30 June 2016: $5,335,000). REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)28. CONTINGENCIES As at 30 June 2017, the Group did not have any contingent assets or liabilities (30 June 2016: nil). 93 29. AUDITOR’S REMUNERATION Audit services KPMG Australia CONSOLIDATED 2017 $ 2016 $ Audit and review of financial statements 217,299 209,218 Other services IT advisory services Taxation compliance services Total auditor’s remuneration 30. SUBSEQUENT EVENTS Option issue 15,888 6,509 - - 239,696 209,218 On 5 July 2017, 1,790,000 unlisted employee options were granted under the Regis Resources Employee Share Option Plan. The options are exercisable on or before 1 July 2021 at an exercise price of $3.90. Share issue Subsequent to year end, 762,250 shares have been issued as a result of the exercise of employee options for proceeds of $234,500. Dividends On 28 August 2017, the directors proposed a final dividend on ordinary shares in respect of the 2017 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 2016: AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 The adoption of these new and revised standards did not have a material impact on the Group’s financial statements. REGIS RESOURCES // 2017 ANNUAL REPORTNew standards and interpretations issued but not yet effective 94 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 2017, 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 2016-1 Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses This standard makes amendments to AASB 112 Income Taxes to clarify the accounting for 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 AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 The amendments to AASB 107 Statement of Cash Flows are part of the IASB’s Disclosure Initiative and help users of financial statements better understand changes in an entity’s debt. The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). Application date of Standard: 1 January 2017 Application date for Group: 1 July 2017 AASB 15 Revenue from Contracts with Customers AASB 15 replaces all existing revenue requirements in Australian Accounting Standards (AASB 111 Construction Contracts, AASB 118 Revenue, AASB Interpretation 13 Customer Loyalty Programmes, AASB Interpretation 15 Agreements for the Construction of Real Estate, AASB Interpretation 18 Transfers of Assets from Customers and AASB Interpretation 131 Revenue – Barter Transactions Involving Advertising Services) and applies to all revenue arising from contracts with customers, unless the contracts are in the scope of other standards, such as AASB 117 (or AASB 16 Leases, once applied). AASB 15 establishes a five step model to account for revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under AASB 15 the revenue recognition model will change from one based on the transfer of risk and reward of ownership to the transfer of control of ownership. 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 assessing the impact of the new rules on the timing of revenue recognition where recognition of gold sales revenue will depend on the passing of control rather than the passing of risks and rewards. Application date of Standard: 1 January 2018* Application date for Group: 1 July 2018 *Early application is permitted. AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments clarify that a full gain or loss is recognised when a transfer to an associate or joint venture involves a business as defined in AASB 3 Business Combinations. Any gain or loss resulting from the sale or contribution of assets that does not constitute a business, however, is recognised only to the extent of unrelated investors’ interests in the associate or joint venture. AASB 2015-10 defers the mandatory effective date (application date) of AASB 2014-10 so that the amendments are required to be applied for annual reporting periods beginning on or after 1 January 2018 instead of 1 January 2016. Application date of Standard: 1 January 2018 Application date for Group: 1 July 2018 REGIS RESOURCES // NOTES TO THE FINANCIAL STATEMENTS (continued)AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share- based Payment Transactions This standard amends AASB 2 Share-based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments provide requirements on the accounting for: 95 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 AASB 16 Leases AASB 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under AASB 117 Leases. The standard includes two recognition exemptions for lessees – leases of ‘low-value’ assets (e.g., personal computers) and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the re-measurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting is substantially unchanged from today’s accounting under AASB 117. Lessors will continue to classify all leases using the same classification principle as in AASB 117 and distinguish between two types of leases: operating and finance leases. The standard will primarily affect the accounting for the Group’s operating leases. As at the reporting date, the Group has non-cancellable operating lease commitments of $1.1 million, see note 27. To date, work has focussed on the identification of the provisions of the standard which will most impact the Group. In the year ended 30 June 2018, work on the issues and their resolution will continue including a detailed review of contracts and their financial reporting impacts. Some of these commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under AASB 16. Given the Group’s current level of exposure, the impact of adoption of AASB 16 on the financial statements is not expected to be material. Application date of Standard: 1 January 2019 Application date for Group: 1 July 2019 IFRIC 23 Uncertainty over Income Tax Treatments The Interpretation clarifies the application of the recognition and measurement criteria in IAS 12 Income Taxes when there is uncertainty over income tax treatments. The Interpretation specifically addresses the following: Whether an entity considers uncertain tax treatments separately. The assumptions an entity makes about the examination of tax treatment by taxation authorities. How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. How an entity considers changes in facts and circumstances. Application date of Standard: 1 January 2019 Application date for Group: 1 July 2019 REGIS RESOURCES // 2017 ANNUAL REPORTDIRECTORS’ DECLARATION 96 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 2017 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 2017. 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, 28 August 2017 REGIS RESOURCES // 2017 ANNUAL REPORTINDEPENDENT AUDITOR’S REPORT 97 Independent Auditor’s Report To the shareholders of Regis Resources Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Regis Resources Limited. In our opinion, the accompanying Financial Report of Regis Resources Limited is in accordance with the Corporations Act 2001, including • giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises the: • Consolidated balance sheet as at 30 June 2017 • Consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended • Notes including a summary of significant accounting policies • Directors’ Declaration The Group consists of Regis Resources Limited (the Company) and the entities it controlled at the year end and from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Company in accordance with the Corporations Act 2001 and the relevant ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code). We have fulfilled our other ethical responsibilities in accordance with the Code. Key Audit Matters The Key Audit Matters we identified are: • Valuation and classification of low grade ore stockpiles • Valuation of exploration and evaluation assets Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Profession Standards Legislation. REGIS RESOURCES // 2017 ANNUAL REPORT 98 Valuation and classification of low grade ore stockpiles AU $35,452 thousand Refer to Note 10 to the financial report The key audit matter How the matter was addressed in our audit Significant judgment is required to be exercised by management in assessing the value and classification of low grade ore stockpiles which will be used to produce gold bullion in the future. The valuation and classification of low grade ore stockpiles is a key audit matter because: • Additional low grade stockpiles have been created following the commencement of mining activities at new ore deposits; and • Significant judgment is required by us in evaluating and challenging the Group’s assessment. The Group’s assessment is based on a model which estimates future revenue expected to be derived from gold contained in the low grade ore stockpiles, less selling costs and future processing costs to convert stockpiles into gold bullion. We placed particular focus on those judgments listed below which impact the valuation and classification of ore stockpiles: • • • Forecast processing costs of low grade ore stockpiles. Forecast quantity of gold contained within the low grade ore stockpiles. Future commodity prices expected to prevail when the gold from existing low grade ore stockpiles is processed and sold. • Estimated timing of conversion of low grade ore stockpiles into gold bullion, which drives the classification of low grade ore stockpiles as current or non-current assets. For this key audit matter, our procedures included: • Testing the Group’s key controls around inventory reconciliations which utilise underlying data such as production and processing costs, geological survey reports, mill production reports and metallurgical survey reports. • Assessing the methodology and key assumptions in the Group’s model used to determine the value of low grade ore stockpiles by: • • • comparing forecast processing costs to previous actual costs, and for consistency with management’s latest life of mine plan, and our knowledge of industry trends comparing forecast quantity of gold contained within stockpiles to management’s geological survey results and historical trends comparing commodity prices to published external analysts’ data for prices expected to prevail in the future • Critically evaluating the Group’s classification of low grade ore stockpiles as current/non- current by assessing the estimated timing of processing the stockpiles against the Group’s latest life of mine plan and the historical operating capacity of the Group’s processing plants. REGIS RESOURCES // INDEPENDENT AUDITOR’S REPORT (continued) 99 Valuation of exploration and evaluation (“E&E”) assets AU $151,735 thousand Refer to Note 12 to the financial report The key audit matter How the matter was addressed in our audit Our audit procedures included: • We tested the Group’s compliance with minimum expenditure requirements for a sample of exploration licenses • We obtained corporate budgets which we compared for consistency to areas of interest with capitalised E&E, for evidence of the ability to fund the continuation of activities • We compared the documentation from the sources listed below for information regarding the results of activities, the potential for commercially viable quantities of reserves to exist and for the Group’s intentions to continue activities in relation to certain areas of interest. We corroborated this through interviews of key operational and finance personnel • Internal management plans • Minutes of board meetings • Reports lodged with relevant government authorities • Announcements made by the Group to the ASX • Draft and final commercial arrangements for securing water sources for the McPhillamys project. The valuation of E&E assets is a key audit matter due to: • • the significance of the E&E balance (being 22% of the Group’s total assets); and the greater level of audit effort to evaluate the Group’s application of the requirements of the industry specific accounting standard AASB 6 Exploration for and Evaluation of Mineral Resources, in particular the presence of impairment indicators. The presence of impairment indicators would necessitate a detailed analysis by the Group of the value of E&E, therefore given the criticality of this to the scope and depth of our work, we involved senior team members to challenge the Group’s determination that no such indicators existed. In assessing the presence of impairment indicators, we focused on those that may draw into question the commercial continuation of E&E activities for areas of interest within the Duketon region of WA as well as the McPhillamys project of NSW where significant capitalised E&E exists. In performing the assessments above, we paid particular attention to: • The Group’s compliance with key license conditions to maintain current rights to tenure for an area of interest, particularly minimum expenditure requirements • The ability of the Group to fund the continuation of activities for all areas of interest • Results from latest activities regarding the potential for a commercially viable quantity of reserves and the Group’s intention to continue E&E activities in each area of interest as a result. This includes the Group’s progress in securing a viable water source required for mining operations at McPhillamys REGIS RESOURCES // 2017 ANNUAL REPORT 100 Other Information Other Information is financial and non-financial information in Regis Resources Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report. The remaining Other Information, which includes the Chairman’s Report, Corporate, Duketon Gold Project, Gold Exploration, Gold Reserves & Resources and Additional ASX information is expected to be made available to us after the date of the Auditor's Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, the auditor does not express any form of assurance conclusion thereon, with the exception of the Remuneration Report. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and • assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report. A further description of our responsibilities for the Audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf. This description forms part of our Auditor’s Report. REGIS RESOURCES // INDEPENDENT AUDITOR’S REPORT (continued) 101 Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Regis Resources Limited for the year ended 30 June 2017, complies with Section 300A of the Corporations Act 2001. Director’s responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in the Director’s report for the year ended 30 June 2017. Our responsibility is to express an opinion on the Remuneration Report, based on our Audit conducted in accordance with Australian Auditing Standards. KPMG R Gambitta Partner Perth 28 August 2017 REGIS RESOURCES // 2017 ANNUAL REPORT 102 ASX ADDITIONAL INFORMATION As at 18 September 2017 the following information applied: 1. SECURITIES (a) Fully Paid Ordinary Shares The number of holders of fully paid ordinary shares in the Company is 7,479. 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 2,426 2,997 1,030 922 104 1,126,830 8,242,538 7,963,525 24,380,329 462,189,392 7,479 503,902,614 458 11,629 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 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA LIMITED CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED BNP PARIBAS NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD ROLLASON PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED–GSCO ECA BNP PARIBAS NOMINEES PTY LTD AMP LIFE LIMITED NUMBER OF FULLY PAID ORDINARY SHARES HELD 199,685,931 80,719,862 64,315,073 31,116,984 11,965,347 7,500,445 5,950,000 4,693,309 4,024,000 2,569,824 HSBC CUSTODY NOMINEEES (AUSTRALIA) LIMITED 2,565,622 SHL PTY LTD 2,500,000 PERCENTAGE INTEREST 39.63% 16.02% 12.76% 6.18% 2.37% 1.49% 1.18% 0.93% 0.80% 0.51% 0.51% 0.50% REGIS RESOURCES // 2017 ANNUAL REPORTNAME NATIONAL NOMINEES LIMITED ROLLASON PTY LTD MR MARK JOHN CLARK BAINPRO NOMINEES PTY LIMITED MUTUAL INVESTMENT PTY LTD SBN NOMINEES PTY LIMITED <10004 ACCOUNT> ECAPITAL NOMINEES PTY LIMITED CITICORP NOMINEES PTY LIMITED NUMBER OF FULLY PAID ORDINARY SHARES HELD PERCENTAGE INTEREST 103 2,451,252 2,389,671 2,387,274 2,386,351 2,000,000 1,768,000 1,706,858 1,485,747 0.49% 0.47% 0.47% 0.47% 0.40% 0.35% 0.34% 0.29% TOP 20 SHAREHOLDERS OF ORDINARY FULLY PAID SHARES (TOTAL) 434,181,550 86.16% (b) Unlisted options UNLISTED OPTIONS OVER FULLY PAID ORDINARY SHARES Expiry 14 October 2018 Expiry 11 August 2019 Expiry 6 January 2020 Expiry 13 May 2020 Expiry 1 July 2021 NUMBER OF HOLDERS NUMBER OF OPTIONS HELD 1 129 1 1 12 25,000 4,455,000 1,000,000 200,000 1,790,000 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) Unlisted performance rights PERFORMANCE RIGHTS ISSUED UNDER EMPLOYEE INCENTIVE SCHEME Unvested 2016 performance rights (Test date: 30 June 2018) NUMBER OF HOLDERS NUMBER OF RIGHTS HELD 4 401,999 Performance rights do not carry a right to vote. Voting rights will be attached to the unissued shares when the performance rights have been exercised. 2. SUBSTANTIAL SHAREHOLDERS The substantial shareholders as disclosed in substantial shareholder notices received by the Company are: NAME Van Eck Associates Corporation Vinva Investment Management 3. ON-MARKET BUY-BACK There is no current on-market buy-back of the Company’s securities. 4. CORPORATE GOVERNANCE STATEMENT NUMBER OF FULLY PAID ORDINARY SHARES HELD PERCENTAGE INTEREST 52,916,826 10.56% 25,615,451 5.11% The Company’s 2017 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 REGIS RESOURCES // 2017 ANNUAL REPORT5. MINERAL RESOURCES AND ORE RESERVES 104 The JORC compliant Group Mineral Resources (inclusive of Ore Reserves) as at 31 March 2017 are estimated to be 268.0 million tonnes at 0.93g/t Au for 8.05 million ounces of gold compared with the estimate at 31 March 2016 of 261.7 million tonnes at 0.95g/t Au for 8.01 million ounces of gold. The change in the Group Mineral Resources is primarily due to the addition of Tooheys Well. Group Mineral Resource 0.33 0.25 0.63 8.01 8.05 s e c n u O n o i l l i M 9 8 7 6 5 4 3 2 1 0 31 Mar 16 Depletion Model Update New Deposits 31 Mar 17 Mineral Resources are reported inclusive of Ore Reserves and include all exploration and resource definition drilling information, where practicable, up to 31 March 2017 and have been depleted for mining to 31 March 2017. Duketon Ore Reserve 3 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). 2 s e c n u O n o M 1 Duketon Ore Reserves 0.33 0.02 0.37 The JORC compliant Duketon Ore Reserves as at 31 March 2017 are estimated at 59.3 million tonnes at 1.14g/t Au for 2.18 million ounces of gold, compared with the estimate at 31 March 2016 of 60.8 million tonnes at 1.09g/t Au for 2.13 million ounces of gold. 2.18 2.13 i l l i The change in the Duketon Ore Reserve from March 2016 to March 2017 is as follows: TOTAL ORE RESERVE 0 31 Mar 16 Depletion 31 March 2016 Depleted by Mining to 31 March 2017 31 March 2016 Net of Depletion 31 March 2017 % Variation net of Depletion Model Update New Deposits TONNES (Mt) 31 Mar 17 60.8 (9.6) 51.2 59.3 13% GOLD GRADE (g/t) GOLD METAL (koz) 1.09 1.07 1.09 1.14 2,125 (331) 1,794 2,182 18% The re-estimation of Duketon Ore Reserves resulted in a 13% increase in tonnes and 18% increase in ounces after allowing for depletion by mining. This was primarily the result of: The inclusion of maiden Ore Reserve from Tooheys Well; 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, particularly at Gloster. REGIS RESOURCES // ASX ADDITIONAL INFORMATION (continued) Group Mineral Resource 0.33 0.25 0.63 8.01 8.05 31 Mar 16 Depletion Model Update New Deposits 31 Mar 17 Duketon Ore Reserve 105 0.33 0.02 0.37 2.13 2.18 s e c n u O n o i l l i M s e c n u O n o i l l i M 9 8 7 6 5 4 3 2 1 0 3 2 1 0 31 Mar 16 Depletion Model Update New Deposits 31 Mar 17 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 2017. Garden Well The Garden Well JORC compliant Mineral Resource as at 31 March 2017 is 70.1 million tonnes at 0.82g/t Au for 1.84 million ounces, compared to 75.8 million tonnes at 0.88g/t Au for 2.14 million ounces at 31 March 2016. The Garden Well JORC compliant Ore Reserve as at 31 March 2017 is 23.7 million tonnes at 0.88g/t Au for 0.67 million ounces, compared to 28.8 million tonnes at 0.89g/t Au for 0.83 million ounces at 31 March 2016. The change in the Garden Well Ore Reserve from March 2016 to March 2017 is as follows: 31 March 2016 Depleted by Mining to 31 March 2017 31 March 2016 Net of Depletion 31 March 2017 % Variation Net of Depletion TOTAL ORE RESERVE - GARDEN WELL TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) 28.8 (4.3) 24.5 23.7 (3%) 0.89 0.94 0.88 0.88 827 (131) 696 669 (3%) The re-optimisation and subsequent pit redesign at Garden Well resulted in a 3% decrease in tonnes and 3% decrease in ounces after allowing for depletion by mining. This was primarily the result of a change in geotechnical parameters on the east wall resulting in the base of the pit design lifting slightly. REGIS RESOURCES // 2017 ANNUAL REPORT Rosemont 106 The Rosemont JORC compliant Mineral Resource as at 31 March 2017 is 24.7 million tonnes at 1.34g/t Au for 1.07 million ounces, compared to 28.0 million tonnes at 1.48g/t Au for 1.33 million ounces at 31 March 2016. The Rosemont JORC compliant Ore Reserve as at 31 March 2017 is 9.7 million tonnes at 1.42g/t Au for 0.44 million ounces, compared to 11.6 million tonnes at 1.51g/t Au for 0.56 million ounces at 31 March 2016. The change in the Rosemont Ore Reserve from March 2016 to March 2017 is as follows: 31 March 2016 Depleted by Mining to 31 March 2017 31 March 2016 Net of Depletion 31 March 2017 % Variation Net of Depletion TOTAL ORE RESERVE - ROSEMONT TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) 11.6 (2.2) 9.4 9.7 2% 1.51 1.49 1.51 1.42 564 (107) 458 442 (3%) The re-optimisation and subsequent pit redesign at Rosemont resulted in a 2% increase in tonnes and 3% decrease in ounces after allowing for depletion by mining, primarily due to the inclusion of further drilling results. Moolart Well The Moolart Well JORC compliant Mineral Resource as at 31 March 2017 is 34.5 million tonnes at 0.73g/t Au for 0.81 million ounces, compared to 36.1 million tonnes at 0.71g/t Au for 0.82 million ounces at 31 March 2016. The Moolart Well JORC compliant Ore Reserve as at 31 March 2017 is 2.8 million tonnes at 0.92g/t Au for 0.08 million ounces, compared to 4.8 million tonnes at 0.93g/t Au for 0.14 million ounces at 31 March 2016. The change in the Moolart Well Ore Reserve from March 2016 to March 2017 is as follows: 31 March 2016 Depleted by Mining to 31 March 2017 31 March 2016 Net of Depletion 31 March 2017 % Variation Net of Depletion TOTAL ORE RESERVE - MOOLART WELL TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) 4.8 (2.1) 2.8 2.8 0% 0.93 0.92 0.93 0.92 144 (61) 83 83 0% The re-optimisation and subsequent pit redesign at Moolart resulted in no change for tonnes or ounces after allowing for depletion by mining. Duketon Satellite Deposits The combined JORC compliant Mineral Resource for Duketon satellite deposits as at 31 March 2017 is 65.7 million tonnes at 1.01g/t Au for 2.14 million ounces, compared to 48.7 million tonnes at 0.96g/t Au for 1.50 million ounces at 31 March 2016. The material change in total Mineral Resource ounces for the combined Duketon satellite deposits are as follows: Tooheys Well: Maiden Mineral Resource estimate and subsequent Mineral Resource estimate from infill drilling update during the year. Gloster: Mineral Resource has been updated 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 2017 is 23.2 million tonnes at 1.32g/t Au for 0.99 million ounces, compared to 15.5 million tonnes at 1.18g/t Au for 0.59 million ounces at 31 March 2016. REGIS RESOURCES // ASX ADDITIONAL INFORMATION (continued) The change in the combined satellite deposits Ore Reserve from March 2016 to March 2017 is as follows: 31 March 2016 Depleted by Mining to 31 March 2017 31 March 2016 Net of Depletion 31 March 2017 % Variation net of Depletion TOTAL ORE RESERVE - SATELLITE DEPOSITS 107 TONNES (Mt) GOLD GRADE (g/t) GOLD METAL (koz) 15.5 (1.0) 14.5 23.2 56% 1.18 1.03 1.19 1.32 590 (33) 557 987 73% There has been a 56% increase in tonnes and 73% increase in ounces at the Duketon satellite deposits. This was primarily the result of the inclusion of a maiden Ore Reserve estimate based on the revised Mineral Resource estimate for Tooheys Well (refer to separate ASX announcement on 6 June 2017). McPhillamys The McPhillamys JORC compliant Mineral Resource at 31 March 2017 is 73.2 million tonnes at 0.94g/t Au for 2.21 million ounces, unchanged from 31 March 2015. Infill drilling conducted over the last 9 months lead to an updated Mineral Resource estimate on 8 September 2017 of 68.9 million tonnes at 1.04g/t Au for 2.31 million ounces. This update is a 5.9% reduction in ore tonnes, a 10.6% increase in ore grade for an overall increase in ounces of 4.4%. A maiden Ore Reserve Estimate of 60.1 million tonnes at 1.05g/t AU for 2.03 million ounces was also announced on 8 September 2017 for the McPhillamys Gold Project (MGP). Regis has undertaken studies to a pre-feasibility level into the development of the MGP. The project study considers Regis' intention to develop, construct and operate a 7.0 Mtpa open pit gold mine including the process facility and supporting infrastructure. The study has been prepared in conjunction with Cube Consultants Pty Ltd (Cube) and Mintrex Pty Ltd (Mintrex). The study assesses the technical and financial viability of the project to a PFS level and supports the estimation of a JORC compliant maiden Ore Reserve. Work will continue towards completion of a Definitive Feasibility Study (DFS) in the December 2017 quarter. Regis has also recently announced the execution of a non-binding heads of agreement with Centennial Coal Company Limited and Energy Australia Pty Ltd (refer separate ASX announcement 4th July 2017) to utilise water from the Mt Piper Power Station and Springvale Mine near Lithgow. Regis also has a second water option in contractually securing ~4.5GLpa of water through long term lease and acquisition of unused Water Access Licenses over ground water allocations in a zone of the Lachlan catchment approximately 80km from McPhillamys. 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. REGIS RESOURCES // 2017 ANNUAL REPORT 108 E C R U O S E R L A T O T D E R R E F N I D E T A C I D N I D E R U S A E M T N E T E P M O C L A T E M D L O G E D A R G D L O G S E N N O T L A T E M D L O G E D A R G D L O G S E N N O T L A T E M D L O G E D A R G D L O G S E N N O T L A T E M D L O G E D A R G D L O G S E N N O T F F O - T U C s e c r u o s e R i l a r e n M p u o r G 7 1 0 2 h c r a M 1 3 t a s A ² N O S R E P ) z o k ( A A A A A A A A A A A A A A 6 0 8 7 3 8 , 1 6 6 0 , 1 9 0 7 , 3 0 3 6 4 3 5 0 4 3 2 8 2 4 4 1 1 8 4 4 2 4 8 2 1 1 6 3 1 , 2 5 4 8 , 5 7 0 3 , 2 2 5 1 , 8 ) t / g ( 3 7 0 . 2 8 0 . 4 3 . 1 9 8 0 . 6 1 . 1 8 7 0 . 6 9 0 . 8 2 . 1 0 1 . 1 5 0 . 1 8 0 . 1 6 5 . 1 1 1 . 1 3 5 . 1 1 0 . 1 3 9 0 . 4 0 . 1 6 9 0 . ) t M ( 5 . 4 3 1 . 0 7 7 . 4 2 8 7 2 1 7 2 7 9 ) z o k ( . 2 9 2 1 6 4 6 . 0 7 1 3 . 1 2 1 . 1 1 . 9 6 0 4 . 4 . 2 3 . 1 8 0 . 8 0 . 2 . 0 1 3 9 2 1 7 5 8 2 6 1 0 1 2 2 4 8 2 2 7 . 5 6 . 9 4 9 1 6 4 3 1 9 9 . 9 8 6 6 4 . 5 2 8 . 3 6 2 7 1 0 , 1 ) t / g ( 1 7 0 . 8 7 0 . 2 7 . 1 1 8 0 . 9 8 0 . 6 6 0 . 5 9 0 . 5 0 . 1 2 0 . 1 0 9 0 . 9 0 . 1 6 5 . 1 1 1 . 1 5 9 0 . 6 8 0 . 3 8 0 . 4 6 0 . 2 8 0 . ) t M ( 2 . 2 1 . 8 0 1 8 . 1 ) z o k ( 4 8 3 1 0 4 , 1 8 5 8 7 . 4 2 3 4 6 , 2 1 . 1 1 . 6 9 . 1 8 0 . 5 . 0 3 . 0 1 . 0 8 0 . 8 0 . 1 . 0 5 . 2 1 2 . 7 3 2 . 1 8 9 5 9 9 3 3 8 2 3 5 2 8 2 1 1 7 2 4 - - 9 4 8 7 , 1 7 2 4 , 4 2 8 2 , 2 4 . 8 3 9 0 7 , 6 ) t / g ( 0 7 0 . 3 8 0 . 0 3 . 1 1 9 0 . 7 1 . 1 3 8 0 . 6 9 0 . 1 3 . 1 1 1 . 1 7 0 . 1 8 0 . 1 - - 5 7 . 1 5 0 . 1 6 9 0 . 5 0 . 1 9 9 0 . ) t M ( 1 . 7 1 5 . 2 5 5 . 0 2 4 4 1 4 6 1 1 1 1 ) z o k ( 2 . 0 9 0 2 4 . 9 5 1 . 0 5 1 2 9 . 0 6 . 5 . 3 1 . 2 2 . 1 - - 2 . 0 . 0 3 5 - 6 - 0 - - - - - - 6 . 7 7 6 - 1 . 3 4 1 6 2 4 . 9 0 1 2 6 2 4 ) t / g ( 7 8 0 . 6 7 0 . 5 4 . 1 1 9 0 . - 5 8 0 . - 5 9 0 . - - - - - - 5 8 0 . 1 9 0 . - 1 9 0 . ) t M ( ) t / g ( E P Y T t i P - n e p O t i P - n e p O t i P - n e p O ¹ l l e W t r a l o o M ¹ l l e W n e d r a G ¹ t n o m e s o R T C E J O R P 2 . 5 8 . 6 4 . 2 3 . 4 1 - 2 . 0 - . 0 0 - - - - - - - 2 . 0 5 . 4 1 5 . 4 1 . 4 0 . 4 0 . 4 0 . 4 0 . 4 0 . 4 0 . 4 0 . 4 0 . 4 0 . 4 0 . 4 0 . 4 0 . 4 0 l a t o T b u S s t i s o p e D n i a M n o t e k u D t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O ³ l l e W s y e h o o T ¹ r e t s o l G o g y e n a B ¹ n u o t s i l r E r e t l o b g o D d n i F s l l e s s u R n h o J g n i K a r t e P d n i F s t l e h c i e R r o h c n A . 4 0 t i P - n e p O l a t o T l a t o T d n a r G ⁴ s y m a l l i h P c M n o t e k u D s i g e R l a t o T b u S s t i s o p e D e t i l l e t a S n o t e k u D . t / g . 4 0 f o e d a r g f f o - t u c t a s e l i p k c o t S M O R f o e v i s u l c n i d e t r o p e r e r a s e v r e s e R e r O d n a s e c r u o s e R l a r e n M i . s e t o N n o s r e P t n e t e p m o C p u o r G o t r e f e R . 7 1 0 2 r e b m e t p e S 8 d e t r o p e r s A . 7 1 0 2 e n u J 6 d e t r o p e r s A . 1 . 2 . 3 . 4 . s e c n u o 0 0 0 , 1 d n a e d a r g d l o g t / g 1 0 0 . , s e n n o t 0 0 0 , 0 0 1 t s e r a e n e h t o t d e d n u o r n e e b s a h a t a d e v o b a e h T . g n i d n u o r o t e u d r u c c o y a m n o i t a m m u s f o s r o r r E . d e t o n e s i w r e h t o s s e l n u 2 1 0 2 e d o C C R O J o t s e v r e s e R e r O f o e v i s u l c n i d e t r o p e r e r a s e c r u o s e R l a r e n M i l l A REGIS RESOURCES // ASX ADDITIONAL INFORMATION (continued) ³ N O S R E P ) z o k ( D D D D D D D D D D D 3 8 9 6 6 2 4 4 5 9 1 , 1 6 6 3 8 4 2 0 9 1 6 3 1 5 2 6 1 6 7 8 9 4 3 0 2 , 6 1 2 , 4 109 T N E T E P M O C L A T E M D L O G E D A R G D L O G S E N N O T L A T E M D L O G E D A R G D L O G S E N N O T L A T E M D L O G E D A R G D L O G S E N N O T E V R E S E R E R O L A T O T E L B A B O R P D E V O R P ) t / g ( 2 9 0 . 8 8 0 . 2 4 . 1 3 0 . 1 1 6 . 1 5 0 . 1 3 4 . 1 6 1 . 1 6 2 . 1 7 5 . 1 7 0 2 . 2 3 . 1 5 0 . 1 0 1 . 1 ) t M ( 8 . 2 7 . 3 2 . 7 9 1 . 6 3 1 . 7 3 7 . 1 . 4 6 . 3 . 6 0 3 . 0 1 . 0 2 . 3 2 1 . 0 6 . 4 9 1 1 ) z o k ( 7 2 0 2 5 0 5 3 7 9 8 6 6 3 3 4 2 0 9 1 6 3 1 5 2 6 1 6 1 8 9 4 3 0 2 , 2 1 9 , 3 ) t / g ( 2 8 0 . 2 9 0 . 0 4 . 1 6 0 . 1 1 6 . 1 6 0 . 1 3 4 . 1 6 1 . 1 6 2 . 1 7 5 . 1 7 0 2 . 3 3 . 1 5 0 . 1 1 1 . 1 ) t M ( 0 . 1 . 6 7 1 8 7 . 4 . 6 2 1 . 7 1 . 7 1 . 4 6 . 3 . 6 0 3 . 0 1 . 0 . 0 3 2 1 . 0 6 ) z o k ( 7 5 9 4 1 2 9 8 9 2 - 6 - - - - - 6 - . 5 9 0 1 4 0 3 ) t / g ( 8 9 0 . 6 7 0 . 3 5 . 1 5 9 0 . - 5 8 0 . - - - - - 5 8 0 . - 5 9 0 . ) t M ( 8 . 1 1 . 6 9 . 1 7 . 9 - 2 . 0 - - - - - - 2 . 0 . 0 0 1 . 4 0 > . 4 0 > . 4 0 > 5 . 0 > 5 . 0 > 5 . 0 > . 4 0 > 5 . 0 > 5 . 0 > 5 . 0 > ² ) t / g ( F F O - T U C E P Y T t i P - n e p O t i P - n e p O t i P - n e p O ¹ l l e W t r a l o o M ¹ l l e W n e d r a G ¹ t n o m e s o R T C E J O R P l a t o T b u S s t i s o p e D n i a M n o t e k u D s e v r e s e R e r O p u o r G 7 1 0 2 h c r a M 1 3 t a s A t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O t i P - n e p O ⁴ l l e W s y e h o o T ¹ n u o t s i l r E o g y e n a B ¹ r e t s o l G a r t e P r e t l o b g o D r o h c n A . 4 0 > t i P - n e p O l a t o T d n a r G ⁵ s y m a l l i h P c M s i g e R l a t o T b u S s t i s o p e D e t i l l e t a S n o t e k u D . s e t o N t u C r e w o L s e v r e s e R e r O p u o r G o t r e f e R . s n i a m o d y g o l o h t i l d n a n o i t a d i x o o t g n i d r o c c a y r a v s e d a r g f f o - t u C . t / g . 4 0 f o e d a r g f f o - t u c t a s e l i p k c o t S M O R f o e v i s u l c n i d e t r o p e r e r a s e v r e s e R e r O d n a s e c r u o s e R l a r e n M i . s e t o N n o s r e P t n e t e p m o C p u o r G o t r e f e R . 7 1 0 2 r e b m e t p e S 8 d e t r o p e r s A . 7 1 0 2 e n u J 6 d e t r o p e r s A . 1 . 2 . 3 . 4 . 5 . s e c n u o 0 0 0 , 1 d n a e d a r g d l o g t / g 1 0 0 . , s e n n o t 0 0 0 , 0 0 1 t s e r a e n e h t o t d e d n u o r n e e b s a h a t a d e v o b a e h T . g n i d n u o r o t e u d r u c c o y a m n o i t a m m u s f o s r o r r E REGIS RESOURCES // 2017 ANNUAL REPORT Group Ore Reserves Lower Cut 110 Reserves as at 31 March 2017 PROJECT Garden Well PROFILE Alluvial DOMAIN LOWER CUT (g/t) Oxide, Transitional, Fresh Ultramafic Chert Low Recovery Chert and Shale Rosemont Moolart Well Erlistoun All All All Dogbolter Oxide Transitional Fresh Petra Oxide, Transitional Fresh Anchor Oxide, Transitional Gloster Baneygo Tooheys Well McPhillamys Fresh All Oxide, Transitional Fresh Oxide Transitional Fresh Fresh All Competent Persons Statement Sediments Other Sediments Other Low Recovery 0.4 0.4 0.5 0.8 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 0.4 0.5 0.5 0.6 0.8 0.6 0.4 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. REGIS RESOURCES // ASX ADDITIONAL INFORMATION (continued) ACTIVITY COMPETENT PERSON IDENTIFIER INSTITUTE Moolart Well Resource Jarrad Price Moolart Well Reserve Quinton de Klerk Garden Well Resource Jarrad Price Garden Well Reserve Quinton de Klerk Rosemont Resource Jarrad Price Rosemont Reserve Quinton de Klerk Tooheys Well Resource Jarrad Price Tooheys Well 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 Jarrad Price Reichelts Find Resource Jarrad Price Gloster Resource Jarrad Price Coopers Resource Jarrad Price McPhillamys Resource Jarrad Price A D A D A D A D A D A D A D A D A A A A A A A Australasian Institute of Mining and Metallurgy 111 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 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 McPhillamys Reserve Quinton de Klerk D Australasian Institute of Mining and Metallurgy 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. REGIS RESOURCES // 2017 ANNUAL REPORTThis page has been intentionally left blank. Level 1, 1 Alvan Street SUBIACO WA 6008 T +61 8 9442 2200 F +61 8 9442 2290 E enquiries@regisresources.com www.regisresources.com.au