Republic Services
Annual Report 2016

Plain-text annual report

ASX:RSG | www.rml.com.au Transforming world class gold assets into an outstanding business Annual Report 2016 R e s o l u t e | A n n u a l R e p o r t 2 0 1 6 Contents Transformation A Message from the Managing Director Highlights Operations Resources & Reserves Exploration 2 4 6 10 29 32 Corporate Responsibility Environment Community Relations People and Culture Health, Safety and Security Financial Report 37 38 43 47 49 51 Corporate Directory PE Huston Directors Chairman Chief Executive Officer JP Welborn Non-Executive Director MJ Botha Non-Executive Director HTS Price Non-Executive Director PR Sullivan Secretary GW Fitzgerald Registered Office and Business Address 4th Floor, The BGC Centre 28 The Esplanade Perth, Western Australia 6000 Postal PO Box 7232 Cloisters Square Perth, Western Australia 6850 Telephone: Facsimile: E-mail: + 61 8 9261 6100 + 61 8 9322 7597 contact@rml.com.au ABN 39 097 088 689 Website Resolute Mining Limited maintains a web site where all major announcements to the ASX are available: www.rml.com.au Bankers Citibank Limited Level 23, Citigroup Centre 2 Park Street Sydney, New South Wales 2000 Investec Bank Plc Level 23, The Chifley Tower 2 Chifley Square Sydney, New South Wales 2000 Shareholders wishing to receive copies of Resolute Mining Limited ASX announcements by e-mail should register their interest by contacting the Company at contact@rml.com.au Share Registry Security Transfer Australia Pty Ltd 770 Canning Highway Applecross, Western Australia 6153 Telephone: + 61 8 9315 2333 Facsimile: + 61 8 9315 2233 registrar@securitytransfer.com.au Home Exchange Australian Securities Exchange Limited Central Park, 152-158 St Georges Terrace Perth, Western Australia 6000 Quoted on the official lists of the Australian Securities Exchange: ASX Ordinary Share Code: “RSG” Securities on Issue (03/10/2016) 735,452,008 Ordinary Shares 500,400 Unlisted Options 12,630,139 Performance Rights Auditor Ernst & Young Ernst & Young Building 11 Mounts Bay Road Perth, Western Australia 6000 Resolute Mining Limited | Annual Report 2016 Resolute Mining Limited (Resolute or the Company) is an experienced S&P/ASX 200 gold miner focused on sustainable development of its long life operations. The Company applies the operational expertise gained from more than 25 years of continuous gold production of 7 million ounces from nine separate operations to the pursuit of enduring value for its shareholders. Resolute is one of the largest gold producers listed on the ASX, with FY17 guidance of 300,000 ounces of gold production at an All-In Sustaining Cost (AISC) of A$1,280 per ounce (US$934 per ounce). Resolute’s flagship Syama Gold Mine in Mali is a robust long life asset with parallel sulphide and oxide processing plants. Processing of sulphide open pit stocks will continue in FY17 while development of the large scale underground mine progresses. The transition to open pit mining has commenced at the Ravenswood Gold Mine in Queensland and The Ravenswood Extension Project has extended the mine-life to 2029. This coincides with the completion of mining at Mt Wright in FY17 and the staged expansion of the Nolans processing plant. In Ghana, the Company has completed a feasibility study on the Bibiani Gold Project focused on the development of an underground operation requiring modest capital and using existing plant infrastructure. A program of infill and extensional drilling will be conducted in FY17 with the aim of extending the potential mine-life and enhancing project economics. Resolute controls an extensive exploration footprint along the highly prospective Syama Shear and greenstone belts in Mali and Côte d’Ivoire and is active in reviewing new opportunities to build shareholder value. An increased budget of $19 million in FY17 will allow extensive drilling of key targets at the Company’s main prospects. 1 1 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 Transformation Resolute has achieved a number of crucial milestones during FY16 as part of our transformation to establish a long life, low cost future for the business. This ongoing organisational transformation is driven by a new commitment to deliver greater value for shareholders from our operating experience and success. Key drivers in Resolute’s transformation include: Strengthening the balance sheet – all senior and secured debt repaid Developing long mine-life opportunities at our existing projects Reducing our All-In Sustaining Cost through innovation Diversifying our production base New executive team building enhanced performance-based culture Ambition to produce >450,000 ounces per annum from three operations by 2020 Prioritising shareholder returns Applying our operational expertise globally 2 2 Resolute Mining Limited | Annual Report 2016Resolute Performance Resolute’s strong operating performance at our Syama and Ravenswood Gold Mines, and the implementation of a new discipline in cost management and capital allocation, are driving a value transformation across our business. During the financial year ended 30 June 2016 (FY16) this transformation has seen the Company reduce debt, generate a record profit, complete three major project studies, strengthen the Company’s balance sheet, and revitalise and revalue our existing assets. Resolute adopted a new organisational model during FY16 with the restructure of its senior executive team which commenced with the appointment of a new Chief Executive Officer. Further changes implemented during the period created a number of new roles within six core business functions designed to drive innovation, growth, improved communication, and value for our shareholders. The senior executive team has been broadened with the number of direct reports to the Chief Executive Officer increasing from three to six with the division of responsibilities and core functions as follows: • • • • • • operations finance exploration project delivery corporate strategy people, culture and information. Resolute started the financial year with total borrowings of A$118 million with a net debt of A$64 million and ended the year with cash and bullion of A$102 million and net cash of A$75 million. The Company settled a US$20 million Gold Prepay Facility, Resolute Mining Limited | Annual Report 2016 fully repaid a US$50 million Senior Secured Cash Advance Facility, and also converted and redeemed A$15 million of outstanding Convertible Notes. This impressive turnaround in balance sheet strength allows Resolute to develop key organic growth projects with funding confidence. A record net profit after tax of A$213 million resulted in diluted earnings per share of 27.6 cents. This exceptional performance has allowed the Board to establish a gold sales-linked dividend policy which resulted in a final dividend payment for FY16 of 1.7 cents per share. The policy outlines that Resolute will seek to pay a dividend to shareholders of 2% of the gold sales revenue from the Company’s operations. The policy also features the innovative option for shareholders to receive dividends in gold. The payment of a regular dividend linked to the Company’s gold sales revenue is driven by a new commitment to deliver greater value for shareholders from our operating experience and success. Feasibility studies have been completed at all three of Resolute’s gold assets. The Board have committed to the development of a new underground mine at Syama and the recommencement of open pit mining at Ravenswood which will secure our production and cash flow generating base for more than a decade. Work will continue at Bibiani as we move towards bringing the asset back into production. FY17 will be an exciting step forward in Resolute’s future as we develop the flagship Syama underground mine, the long-life Ravenswood Extension Project, and continue to work towards a production future for Bibiani. A period of transition and transformation will continue as we focus on maintaining Resolute performance. 3 3 Resolute Mining Limited | Annual Report 2016TRANSFORMING WORLD CLASS GOLD ASSETS INTO AN OUTSTANDING BUSINESS A Message from the Managing Director Resolute is building a remarkable gold mining company. The foundations of our future success are built on 25 years of hard work and consist of the operational expertise gained from 7 million ounces of gold production from nine separate operations. This exceptional history continues in our two long life production assets in Mali and Australia, our exciting development project in Ghana, and our strong commitment to deliver enduring value to shareholders. Dear Fellow Shareholders, I am proud to present the results of the last twelve months of hard work at Resolute. One year ago in this report I discussed the opportunity Resolute had to transform itself, and the identified potential to generate exceptional returns for shareholders. The plan was to achieve this through the disciplined development of our existing gold assets combined with a strong focus on cost reduction and a commitment to prioritise strengthening the Company’s balance sheet. Implementation of this plan, assisted by the strength in the US$ gold price, has seen an increase in share price over the course of the year from A$0.30 on 1 July 2015 to a closing price of A$1.28 on 30 June 2016. The transformation of Resolute is an ongoing process and we have much yet to achieve. During the financial year, our mines at Syama in Mali and at Ravenswood in Queensland produced over 315,000 ounces of gold. Revenue from gold and silver sales was up 21% to A$555 million. Resolute achieved a record net profit of A$213 million. Gross profit from operations increased from A$71 million to A$167 million and a return on equity of 129% was achieved. Decisions to reduce capital spending and implement cost savings allowed us to use the cash generated from our operations to dramatically strengthen our balance sheet. Debt was reduced by A$91 million as we settled a US$20 million Gold Prepay Loan Facility, fully repaid a US$50 million Senior Secured Cash Advance Facility, and redeemed A$15 million of Convertible Notes. Resolute not only eliminated these debt facilities, but also ended the financial year with cash and bullion of A$102 million. This remarkable turnaround in balance sheet strength was built on operational performance, a higher US$ gold price, and budget discipline across our business. Of the A$97 million of discretionary capital identified in our budget guidance for FY16 we only spent approximately A$30 million. Resolute’s strong balance sheet has been further boosted by the recently completed A$150 million capital raising. We can now commit to exciting organic growth projects at Syama and Ravenswood, and continue our development work at Bibiani with confidence these programs are fully funded. We have embarked on a continuous improvement program designed to fundamentally raise performance across the Company. This program is both operational and cultural. Further enhancements and achievements are expected as we focus on the actions and strategies required to transform our gold assets into an outstanding business that can consistently provide exceptional rewards to our shareholders. 4 Resolute Mining Limited | Annual Report 2016A new organisational model has been implemented and a restructure of our senior executive team completed. The changes created a number of new roles within six core business functions designed to drive innovation, growth, improved communication and value for our shareholders. Resolute’s flagship project is the Syama Gold Mine in Mali. Effectively two mines in one, Syama comprises a sulphide circuit and a parallel oxide circuit, which importantly creates flexibility in gold production. During the course of the financial year stockpiled open pit ore was processed through the sulphide plant, while the parallel oxide circuit successfully completed its first full year of operation. Most importantly we completed a Definitive Feasibility Study into the development of the Syama underground mine, which confirmed a low cost 12 year mine-life which will increase total annual site production to 250,000 ounces of gold. Resolute intends to create a mine that employs the most advanced extraction and haulage technologies available to ensure a safe, productive and global best practice mine. Development of the Syama underground mine has commenced with excavation of the decline underway. In Queensland at the Ravenswood Gold Mine, we have worked hard to secure a long term production future beyond the Mt Wright underground mine. Mt Wright has been a hugely successful project for Resolute. The underground mine will close during FY17 and the commencement of mining at Nolans East represents the start of the transition back to large scale open pit mining. The Ravenswood Extension Project has provided a staged plan for the expansion of the Nolans Process plant back to its former capacity of 5 million tonnes per annum and secures a 13 year operating life for these assets. Our plans will see total annual production from Ravenswood increase to more than 130,000 ounces of gold. This is a wonderful outcome with further enhancements being explored to add additional value. In Ghana, Resolute completed a highly encouraging feasibility study for the Bibiani Gold Project. An initial Ore Reserve was established of 5.4 million tonnes at 3.7 grams per tonne containing 640,000 ounces of gold. We were delighted with the results of the study which demonstrated a viable development path for Bibiani, competitive costs, and excellent upside potential. Bibiani offers the Company an increasingly attractive growth opportunity. Further exploration which aims to upgrade resources and extend the potential mine-life are planned for the coming financial year. Resolute’s development experience and operational history in Africa provide a solid foundation for future production success at Bibiani. Resolute recognises that to operate its mines in Africa and Australia it requires the permission and goodwill of local communities. Ensuring the health, safety and security of our employees, avoiding harm to the environment and leaving a positive legacy in the communities in which we work is essential to the ongoing success of our business. The Company places a Resolute Mining Limited | Annual Report 2016 high priority on being regarded as a partner of choice for governments and communities and seeks to achieve this by building relationships through well-targeted safety, environmental and sustainable social programs. During the year Resolute recognised the remarkable achievement of two years at Syama without a Lost Time Injury. Given the complexity of our operations at Syama, the diversity of our workforce, and the remote nature of our operations, this is an exceptional accomplishment. I congratulate all our workers at Syama, and our workers across the Company, for our positive safety record. I also confirm the ongoing need for vigilance on safety and security as a priority. With the completion of three feasibility studies in the past year, at Syama, Ravenswood and Bibiani, the Company now has a clear pathway for development and growth at each of its key assets. The financial year ahead will see us continue to advance opportunities to lower costs, build production and increase the resilience of our business. Resolute’s 25 years of operating experience in Australia and Africa has allowed us to build an experienced and highly skilled management, technical, operational and support team. This accumulated expertise will be applied to strengthening our focus on wealth creation for shareholders. I believe an important element of shareholder reward from company success is the payment of a regular, sustainable, and hopefully growing, dividend. Resolute has adopted an innovative new dividend policy whereby the Company will seek to pay shareholders an annual dividend of 2% of our gold sales revenue. Shareholders have the option to receive dividends from Resolute in cash or in gold through our partnership with The Perth Mint. Following the Board’s endorsement of the new dividend policy, and based on this year’s revenue of A$555 million, a final dividend was declared of 1.7 cents per share. Resolute has raised its performance expectations and has implemented a strategy of transformational growth. While the results of this journey are intended to be positive, many of the changes required are difficult and require a unified commitment. Credit for the success enjoyed during the FY16 belongs to many, but particular appreciation goes to my colleagues in our Senior Executive Team and our site based General Managers. I take this opportunity to thank the Board, shareholders, and the wider Resolute team, for their support. I look forward to sharing success with you in the financial year ahead. John Welborn Managing Director and Chief Executive Officer 5 5 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 HIGHLIGHTS Financial Cash and bullion $102M Net profit after tax $213M Average cash price of gold sold (A$) Revenue from gold and silver sales ↑20% 6 6 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 Record gross profit from operations ↑135% to $167M Return on equity 129% Diluted earnings per share 27.6c Debt reduced ↓$91M • No secured debt as at 30 June 2016 • US$20 million Gold Prepay Loan Facility settled in full with final gold instalment delivery in October 2015 • US$50 million Senior Secured Cash Advance Facility fully repaid in June 2016 • A$15 million of Convertible Notes converted and redeemed in June 2016 Net operating cash inflows Net investing cash outflows Net financing outflows $193M $43M $79M M 7 7 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 HIGHLIGHTS Operations Yielded in excess of 315,000oz of gold All-In Sustaining Cost A$1,200/oz (US$874/oz) Successful completion of primary crusher change-out and major roaster shutdown at Syama Gold Mine in Mali Maintained steady production from Ravenswood Gold Mine in Queensland, Australia as the Mt Wright underground operation approached end of mine-life 8 8 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 HIGHLIGHTS Corporate Successful divestment of remaining interests in Tanzania completed, following closure, decommissioning and rehabilitation of Golden Pride mine Senior executive team broadened with the number of direct reports to the Chief Executive Officer increasing from three to six Gold sales-linked dividend policy established, featuring innovative option for shareholders to receive dividends in gold 9 9 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 Operations FY2016 guidance outperformed for both production and cost per ounce Three key feasibility studies were completed at Syama, Ravenswood and Bibiani Resolute’s established operations produced a total of 315,169 ounces at an All-In Sustaining Cost of A$1,200 per ounce (US$874 per ounce). In the coming financial year, Resolute’s mines at Syama in Mali and Ravenswood in Queensland are together forecast to produce a minimum of 300,000 ounces of gold at an All-In Sustaining Cost of A$1,280 per ounce (US$934 per ounce). Syama Gold Mine Mali Ghana Bibiani Gold Project Ravenswood Gold Mine Australia 10 10 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 11 11 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 OPERATIONS Syama Resolute is developing the Syama underground operation to be a long-life flagship gold mine with robust economics and enormous optionality The Syama Gold Mine (Syama) is located in the south of Mali, West Africa approximately 30 kilometres (km) from the Côte d’Ivoire border and 300km south east of the capital Bamako. Resolute has an 80% interest in the project through its equity in Sociêtê des Mines de Syama S.A. (SOMISY). The Malian Government holds a 20% interest in SOMISY. Syama benefits from two fully operational processing plants: a 2.1 million tonnes per annum (Mtpa) sulphide processing circuit and a 1.3Mtpa oxide processing circuit. 12 12 Resolute Mining Limited | Annual Report 2016Going underground at Syama developing a robust, long life flagship gold mine Resolute Mining Limited | Annual Report 2016 Life of Underground Mine All-In Sustaining Cost US$881/oz Initial 12 YEAR operating life Pre-production capital of US$95M fully funded 13 13 Resolute Mining Limited | Annual Report 2016Mining at the main Syama open pit was completed in May 2015 with ore for the sulphide circuit being sourced from the previously stockpiled sulphide ore which will provide ore feed until production from underground mining commences. Ore for the oxide circuit is sourced from current mining activity at the A21 satellite ore body. Due to the refractory nature of the sulphide ore, it is treated using conventional three-stage crushing, ball milling, sulphide flotation and dewatering, roasting, calcine leaching and elution. The oxide processing circuit is a conventional crushing, SAG milling, and leaching circuit. A Definitive Feasibility Study (DFS) completed in June 2016 confirmed a new underground operation will extend mine-life at Syama beyond 2028 and underground development commenced in September 2016. Two mines in one Operations Review Sulphide During FY16 the sulphide processing plant treated 1.50 million tonnes (Mt) (2015: 1.95Mt) of ore at an overall head grade of 3.53 grams per tonne (g/t) Au (2015: 3.77g/t Au) to produce 129,585 ounces (oz) (2015: 178,995oz) of gold at a cash cost of A$710/oz (2015: A$830/oz). The lower throughput was due to a planned change out of the primary crusher with associated changes to the crushing circuit resulting in a more reliable and cost efficient crushing operation. Gold production in the sulphide processing plant was lower than the previous year primarily as a result of the major modifications to the crushing circuit to lift capacity. A 40 day planned major roaster shutdown was also successfully completed during October and November 2015. Repairs to the refractory and modifications to the roaster air supply were completed, allowing an increase in throughput rate to be achieved. Both shutdowns will be pivotal in the success of lifting production rates in FY17. The mill availability was down on the prior year to 75.3% (2015: 89.4%) due to the planned crusher and roaster shutdowns. The overall plant recovery was higher than the previous year at 76.3% (2015 75.8%). The use of a new flotation promoter and improved grind size through more efficient cyclone classification being the key drivers. Roaster reliability and operational performance have significantly improved following the major shutdown. Feed rates have reached 26 tonnes per hour (tph) 14 (name plate design rate 24tph) which will allow the reduction of gold in circuit held in concentrate inventory during FY17. There has been no mining operations at the main Syama open pit since completion in May 2015. As such, all ore supply for the sulphide processing plant for the period was sourced from existing sulphide ore stockpiles. During the June 2016 quarter the Resolute Board approved the immediate development of the Syama underground mine and initial development commenced in mid-September 2016. The planned transition of Syama to an underground mining operation has provided an opportunity to fundamentally review all aspects of the Syama operation. This work has been ongoing since January 2016 and all key areas of the operation have begun realising value from implementation of ideas generated to date. Dedicated continuous improvement personnel have been appointed to continue to assist operational teams to drive performance and cost objectives. Sulphide and oxide ore stockpiles at year-end were approximately 7.3Mt at a grade of 1.6g/t. These ore stockpiles together with mining of sulphide ore from the satellite pits will be the primary ore source for the sulphide processing plant over the next two years whilst the development of the Syama underground is undertaken. Resolute Mining Limited | Annual Report 2016Operating Performance at a glance - Sulphide Syama – Sulphide Ore Reserves as at 30 June 2016 Units 2015/16 2014/15 Category Tonnes Grade Ounces Ore Mined Ore Milled Head Grade Recovery Rate Gold Produced Cash Cost Cash Cost Mt Mt g/t Au % oz A$/oz US$/oz All-In Sustaining Cost A$/oz All-In Sustaining Cost US$/oz 0.41 1.50 3.53 76.3 3.21 1.95 3.77 75.8 129,585 178,995 710 517 917 669 830 694 992 830 Proved (stockpiled) Probable (insitu) Underground Probable (stockpiled) 413,000 2.9 38,000 23,863,000 2.8 2,173,000 4,150,000 1.5 206,000 Total 28,426,000 2.6 2,417,000 Oxide The oxide processing circuit treated 1.26Mt (2015: 0.58Mt) at an overall head grade of 2.30g/t Au (2015: 2.72g/t Au) to produce 80,032oz (2015: 45,916oz) at a cash cost of A$1026/oz (A$675/oz). Modifications were carried out during the year to the cyclone feed distributor and mill water pumping and piping system as part of an improvement process to increase the milling rate to 1.5Mtpa during FY17. The oxide mill availability was higher than the previous year at 90.4% (2015: 89.2%), with fewer unplanned events occurring with improved preventative maintenance regimes. The leaching recovery was 86.2% (2015: 90.6%) which was lower than the previous year with treatment of transitional material affecting recovery. During the financial year, mining at the A21_10 North satellite pit located approximately 6.5km to the north of the Syama operations was the main source of ore supply to the oxide processing plant. This pit was completed during May 2016 at which time the adjacent A21_10S pit was commenced ensuring continuity of ore delivery to the plant. Total waste material mined from the A21 pits for the financial year was 4.53M bank cubic metres (BCM) of material (2015: 3.48M BCM). At the end of the financial year, the A21_10 North pit had reached the final level of 265 metres relative level (mRL) and the A21_10S pit had reached the 340mRL level. During this period 0.75M BCM of ore was mined at a grade of 2.23g/t Au (2015: 0.48M BCM @ 2.53g/t Au). African Mining Services continued to undertake all contract mining of the satellite pits. Prior to March 2016, all ore mined from the satellite pits was stockpiled near A21 before undertaking rehandle and hauling operations to the Syama oxide ROM pad stockpiles. To reduce ore handling costs through elimination of secondary loading operations, all ROM ore is now transported directly from the mining location to the Syama plant for processing. Operating Performance at a glance - Oxide Syama – Oxide Ore Reserves as at 30 June 2016 Units 2015/16 2014/15 Category Tonnes Grade Ounces Ore Mined Ore Milled Head Grade Recovery Rate Gold Produced Cash Cost Cash Cost Mt Mt g/t Au % oz A$/oz US$/oz All-In Sustaining Cost A$/oz All-In Sustaining Cost US$/oz 1.13 1.26 2.30 86.2 0.87 0.58 2.72 90.6 80,032 45,916 1,026 747 1,561 1,137 675 565 1,363 1,141 Proved (stockpiled) Probable (insitu) Probable (stockpiled) Proved (insitu) 2,790,000 263,000 2.7 1.8 240,000 15,000 4,678,000 2.5 372,000 846,000 1.8 49,000 Total 8,577,000 2.5 676,000 15 Resolute Mining Limited | Annual Report 2016Development The sulphide crushing circuit upgrade was successfully completed in October 2015 with replacement of the primary jaw crusher, upgrading the product screen and other circuit modifications. The upgrade has been successful in allowing a higher throughput rate through the crushing plant. Laboratory and pilot plant testwork programs were conducted at Outotec Oyj’s roasting test facility on improvements in the materials handling and roasting performance. The initial pilot plant testwork results were sufficiently encouraging to justify ongoing development of the program. The electrical distribution network at Syama was upgraded during the year to distribute power around the site at 11kV. The engineering design for the connection of Syama to the West African power grid was finalised and contracts developed. The execution of the power project has been deferred pending finalisation of tariff negotiations with government. SYAMA UNDERGROUND PROJECT In June 2016, Resolute completed a positive DFS for an underground mine (Syama UG) at Syama in Mali. The DFS confirmed Syama UG as a long life, low cost mine, which will continue to deliver strong operating margins for the Company for more than a decade. The highlights of the DFS included: • • • a Life of Mine All-In Sustaining Cost of US$881/oz and strong Life of Mine margins initial operating life of more than 12 years total Syama production will grow to 250,000oz (koz) per annum • • • pre-production capital of US$95 million (M) which will be fully funded from current balance sheet and future operating cash flows processing innovation will continue to enhance project economics underground development has commenced and first ore is expected to be delivered to the mill in December 2016 which allows for continuous production from Syama to be maintained • Resolute’s successful Mt Wright underground experience to deliver efficiency and productivity gains at Syama underground mine • substantial upside with opportunities to extend mine-life, increase mining recovery and further reduce the All-In Sustaining Cost. Excavation of the decline commenced in the September 2016 quarter, following mobilisation of a mining contractor to site in July 2016. First development ore is expected to be delivered in December 2016, with stoping commencing in December 2017. This timing will allow continuous production to be maintained from Syama from the current stockpiled sulphide material and ongoing satellite open pit deposits. Once in full production Syama UG will be a consistent, large scale underground operation. Resolute intends to create a mine that employs the most advanced extraction and haulage technologies available to ensure a safe, productive and global best practice mine. This approach was adopted by the Company in its development of the Mt Wright underground mine at Ravenswood where a unique mining solution was devised to ensure highly profitable extraction of a far smaller deposit. 16 Resolute Mining Limited | Annual Report 2016Key outcomes from the DFS are summarised below: Underground development Units Decline development Vertical development Level development Total development Ore production Development ore Stoping ore Total ore Metal grade (ROM) Metal contained (ROM) Metal recovery Processing recovery Metal (recovered) Operating unit cost (including pre-production) Mining Processing G&A Royalty, refining costs & silver credits Ore Mine-life (incl. pre-production) Costs Pre-production capital Pre-production operating Sustaining capital Operating cost (including royalties) All-In Sustaining Cost Outlook Commencement of the in-pit portal and decline development took place during September 2016. Scheduling is also underway to commence the development of the surface box-cut during the December 2016 quarter. Oxide ore mining will continue at the northern satellite pits with scheduled completion of the A21 pits (A21_10 South, A21_20, and A21_20 East) and the commencement of BA01 pit. Strip ratios will fluctuate during the year as A21_10 South reaches the lower elevations and BA01 commences with higher waste stripping from the surface. Throughput for the sulphide mill will increase in the coming year as a result of the crushing circuit modifications in late 2015 having increased crushed stocks available to the mill. This will facilitate further optimisation of the grinding and flotation circuits. m m m m kt kt kt g/t koz % koz US$/t US$/t US$/t US$/t years US$M US$M US$M US$M US$/oz Value 8,594 3,554 62,717 74,865 4,195 20,954 25,150 2.81 2,271 89.4% 2,030 25.2 25.0 4.9 5.8 13.0 95 13 270 1,519 881 Throughput for the oxide processing plant will maintain 1.3Mtpa rates initially, building up through circuit optimisation to 1.5Mtpa rates over FY17. Gold production will be a minimum of 200koz in FY17. Processing of Syama sulphide open pit ore stockpiles will continue and be supplemented by sulphide material from satellite open pits. Mill throughput is expected to increase as a result of the improvements made to the processing facilities in FY16. The higher grade satellite sulphide open pit feed will partially offset falling stockpile grades. Oxide production will be at similar levels to FY16. Gold sales will again exceed gold produced, as gold in circuit at Syama, which is largely comprised of sulphide concentrate stocks, is progressively reduced. These concentrate stocks are able to be reduced because the Syama roaster is now operating at around 20% above design capacity. 17 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 OPERATIONS Ravenswood The Ravenswood Extension Project extends mine-life to 2029 with a further 13 years of operations at an average annual gold production of 120,000oz and a Life of Mine All-In Sustaining Cost of A$1,166/oz. The Ravenswood Gold Mine (Ravenswood) is located approximately 95km south west of Townsville and 65km east of Charters Towers in north-east Queensland, Australia. Resolute has a 100% interest in the mine through its subsidiary Carpentaria Gold Pty Ltd. Ore for the Ravenswood Operations was primarily sourced from the Mt Wright underground mine plus a minor amount of remnant low grade stocks from various sources. The versatile Nolans process plant is currently configured for processing 1.8Mtpa of ore using two stage crushing, SAG and ball milling and carbon-in-pulp processing with a gravity circuit for recovery of free gold. 18 18 Resolute Mining Limited | Annual Report 2016Ravenswood Extension Project a long life low cost open pit operation Resolute Mining Limited | Annual Report 2016 Life of Mine All-In Sustaining Cost A$1,166/oz 13 YEAR mine-life A$134M start up capital and 5.0Mtpa processing capacity Sarsfield 1.2Moz Reserve & 2.6Moz Resource Buck Reef West 0.5Moz Reserve & 1.3Moz Resource Nolans East 71koz Reserve 19 19 Resolute Mining Limited | Annual Report 2016Operations Review During FY16 the Ravenswood operations produced 105,552oz (2015: 103,773oz) of gold at a cash cost of $1,033/oz (2015: $940/oz). The increase in ounces produced is the net result of lower production from the Mt Wright underground operation offset by higher throughput at the Nolans Process Plant enabled by the crushing circuit upgrade completed in 2015. The increased plant capacity allowed the processing of additional tonnes from available remnant low grade stocks. Ore production from the Mt Wright underground mine was 1.31Mt (2015: 1.48Mt) @ 2.38g/t Au (2015: 2.40g/t Au). The lower production was due to a reduced number of draw-points being available for production. This was in line with expectations due to the narrowing of the ore body near the bottom of the mine. Underground development was completed during the year, achieving 1,807 metres (m) (2015: 2,978m). Due to improvements in the Australian dollar gold price and design changes, the Mt Wright operation was extended down to the 500 level. The addition of the 500 level and the updated mining schedule extends the planned life of Mt Wright underground to June 2017. Mt Wright reserves at the end of June 2016 are 0.94Mt @ 2.7g/t Au, compared to 2.15Mt @ 2.5g/t Au at June 2015. The processing plant treated 1.70Mt (2015: 1.44Mt) at an average head grade of 2.05g/t Au (2015: 2.37g/t Au) including material sourced as supplementary mill feed from low grade stockpiles of 0.33Mt @ 0.65g/t Au (2015: 0.04Mt @ 1.17g/t Au). The increased mill throughput was due to an upgrade of the crushing circuit with the installation of a secondary crusher, which allowed for the processing of available remnant low grade ore stocks in addition to the primary ore from Mt Wright. The decrease in head grade was directly attributable to the addition of the lower grade ore. Recovery decreased slightly to 94.3% (2015: 94.7%) due to the addition of the low grade ore. Operating Performance at a glance - Ore Ravenswood - Ore Reserves as at 30 June 2016 Units 2015/16 2014/15 Category Tonnes Grade Ounces Ore Mined Ore Milled Head Grade Recovery Rate Gold Produced Cash Cost Cash Cost Mt Mt g/t % o A$/oz US$/oz All-In Sustaining Cost A$/oz All-In Sustaining Cost US$/oz 1.31 1.70 2.05 94.3 1.48 1.44 2.37 94.7 105,552 103,773 1,033 752 1,225 892 940 787 1,180 988 Proved Mt Wright 682,000 2.7 60,000 (insitu) Proved Sarsfield 28,450,000 0.8 747,000 (insitu) Proved Nolans 1,818,000 0.8 46,000 East (insitu) Probable Mt Wright (insitu) 248,000 2.7 21,000 Probable Mt 8,000 3.0 1,000 Wright (stockpile) Probable 18,640,000 0.7 423,000 Sarsfield (insitu) Probable Nolans 846,000 0.9 25,000 East (insitu) Total 50,692,000 0.8 1,323,000 20 Resolute Mining Limited | Annual Report 2016Development RAVENSWOOD EXTENSION PROJECT STUDY The Ravenswood Extension Project (REP) was established with the aim of maintaining continuity of production at Ravenswood as the Mt Wright underground mine prepares for closure in 2017. Resolute has recently commenced a transition back to open pit mining, with open pit operations at the Nolans East deposit having commenced in August 2016. The REP will see the eventual development of three open pits at Nolans East, Sarsfield and Buck Reef West. The REP Study identified the following development sequence: • Mt Wright underground operations continuing until eventual closure in mid-2017 • mining underway, with first ore processed in September 2016 from Nolans East • • • • increase in processing capacity to 2.8Mtpa from October 2016 approval for mining of Sarsfield open pit in January 2017 approval for mining of Buck Reef West open pit in mid-2018 expansion of mill capacity to 5.0Mtpa to commence in FY18. The REP Study envisages an expansion to 5.0Mtpa in the year following approval of the Sarsfield open pit. The Company has already commenced increasing plant throughput to 2.8Mtpa which is expected to be achieved from October 2016. In September 2016, a feasibility study into the REP was completed, which confirmed a long life, low risk, low cost development plan with robust economics. Under the REP, average annual production will increase to approximately 120koz of gold. Mine-life will be extended by 13 years with operations continuing until at least 2029. The operation will generate a Life of Mine All-In Sustaining Cost of A$1,166/oz (US$880/oz). Total Ravenswood Ore Reserves increased to 1.8 million ounces. The staged development plan requires no immediate additional capital expenditure during FY17. Start-up capital comprises only A$134M for pre-stripping and staged processing plant expansion to 5.0Mtpa. Life of Mine major project capital comprises of A$258M (including A$134M start-up) staged over six years to 2022. Significant potential remains for economic upside and further extensions. 21 21 Resolute Mining Limited | Annual Report 2016Key study outputs are summarised below. Production Underground mining Ore mined Ore grade Metal contained (ROM) Open pit mining Ore mined: Run of mine Low grade Waste mine Total movement Units kt g/t koz kt kt kt kt Life of mine strip ratio Waste:Ore Ore grade: Run of mine Low grade Metal contained (ROM) Processing Total ore processed* Metal grade (ROM) Metal contained (ROM) Processing recovery Metal (recovered) Mine-life (incl. pre-production) Cost Analysis Costs Mining Processing G&A Royalty Sustaining capital Unit costs All-In Sustaining Cost g/t g/t koz kt g/t koz % koz years A$M 566 861 207 126 30 A$M 1,790 LOM Output 931 2.72 81 35,419 35,269 96,705 167,392 1.3 0.97 0.50 1,663 58,557 0.91 1,712 90% 1,536 13.0 A$/t 9.7 14.7 3.5 2.2 0.5 A$/oz 1,166 *= Beneficiated low grade + Open pit ROM + UG ore The REP will utilise a number of innovative approaches to mine scheduling, tailings management, waste water treatment and open pit blasting practices in order to minimise initial capital costs and ensure best practice environmental and community outcomes are achieved. Mining and processing of Sarsfield ore will include a beneficiation stage for low grade ore, nominally 0.3-0.7g/t, which will reject approximately 30-40% of crushed ore, for the loss of around 4% of contained gold. Resolute is working collaboratively with the Queensland Government to achieve an amended Environmental Authority (EA) for Sarsfield by late 2016. The amended EA for the Sarsfield Expansion Project is the final approval required to allow mining activities to recommence in the Sarsfield Pit. Resolute will also commence the formal approval process for the Buck Reef West Project in late 2016. It is anticipated that this will allow final approvals to be obtained by mid-2018. The Company has worked closely with the Ravenswood community in developing its plans for the REP. Projects are being developed to preserve and rehabilitate a number of heritage buildings and artefacts in the vicinity of the proposed open pits. Resolute welcomes the opportunity provided by the REP to further enhance its legacy at Ravenswood and continue its role as a major employer in the greater Charters Towers region of Northern Queensland. 22 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 Outlook Mt Wright ore production is expected to be lower due to decreasing draw-point availability as the operation approaches completion and will cease operation in FY17. Continuous improvement efforts will focus on maintaining operational efficiencies and controlling unit costs in the mines final year of operation. Open pit mining re-commenced during the first quarter of FY17 at Nolans East. The processing plant will treat Mt Wright, Nolans East and low grade stockpiled ore. Mt Wright ore will be batch treated separately from the other ore sources due to different metallurgical requirements. A tertiary crusher and other minor process plant upgrades will be installed in the first half of FY17 to increase the nominal plant capacity to 2.8Mtpa to match planned production rates. The plant will continue to concentrate on continuous improvement efforts to focus on plant recovery and reduction of unit costs following the upgrade. Gold production is expected to be similar in FY17 with reduced production from Mt Wright underground operations offset by the commencement of Nolans East open pit production. Cash cost per ounce is expected to increase due to higher unit cost from Mt Wright. 23 23 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 OPERATIONS Bibiani Resolute is seeking to re-establish a successful underground mine at the Bibiani Gold Project in Ghana. In June 2016 a feasibility study was completed which contemplates production of up to 1.2Mtpa from Long Hole Open Stope underground mining. Processing of the ore will occur at the existing Bibiani processing plant. The majority of the US$72M of upfront capital is allocated to the refurbishment of the plant. 24 24 Resolute Mining Limited | Annual Report 2016Bibiani feasibility study confirms viable pathway to production Resolute Mining Limited | Annual Report 2016 9 month timeline to production Life of Mine All-In Sustaining Cost US$858/oz Pre-production capital of US$72M Initial Ore Reserve of containing 5.4Mt @ 3.7g/t 640,000oz of gold 25 25 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 An initial Ore Reserve of 5.4Mt at 3.7g/t containing 640koz was established. Gold production is expected to be maintained at approximately 100koz per annum, which will sustain a five year mine-life on the initial Ore Reserve. All-In Sustaining Cost is expected to be US$858/oz for Life of Mine production of 561koz of gold. Start-up capital of US$72M including US$29M of underground mining equipment has been estimated. Bibiani has a short timeline to production with only a nine month development and refurbishment period. Resolute believes that the location and characteristics of Bibiani are well matched to the technical capabilities of the Company. In addition, substantial upside remains with ongoing work scheduled to focus on upgrading and expanding the orebody to extend mine- life and reduce operating costs. A technical report on the reopening of Bibiani was completed in June 2016 and the Company is submitting applications to initiate additional drilling and conduct environmental baseline studies. 26 26 Resolute Mining Limited | Annual Report 2016Key outcomes of the study are summarised below. Underground development Ore development Waste development Vertical development Total development Ore production Development ore Stoping ore Total ore Metal grade (ROM) Metal contained (ROM) Metal recovery Processing recovery Metal (recovered) Operating unit cost (including pre-production) Mining Processing G&A Royalty and refining costs Ore Mine-life (incl. pre-production) Costs Pre-production capital Pre-production operating Sustaining capital Operating cost All-In Sustaining Cost Units m m m m kt kt kt g/t koz % koz US$/t US$/t US$/t US$/t years US$M US$M US$M US$M US$/oz Value 9,841 16,389 1,280 27,510 609 4,748 5,357 3.7 644.5 87% 560.7 34.3 21.3 11.2 8.0 6.25 71.5 10.7 89.6 391.7 $858 27 Resolute Mining Limited | Annual Report 2016Group Production Summary Ore Mined Tonnes Ore Milled Tonnes Head Grade g/t Recovery % Mine Production oz Cash Cost $/oz All-In Sustaining Cost $/oz Syama Sulphide 413,038 1,497,103 3.53 76.3 129,585 Syama Oxide 1,132,468 1,257,948 2.30 86.2 80,032 Syama sub-total 1,545,506 2,755,051 2.97 79.8 209,617 Ravenswood 1,305,585 1,700,386 2.05 94.3 105,552 TOTAL 2,851,091 4,455,437 2.61 84.1 315,169 A$710 (US$517) A$1,026 (US$747) A$830 (US$605) A$1,033 (US$752) A$898 (US$654) A$917 (US$669) A$1,561 (US$1,137) A$1,163 (US$848) A$1,225 (US$892) A$1,200 (US$874) Group Project Summary Country Mali Project Syama Finkolo Pitiangoma JV Other Tenure Côte d’Ivoire Taruga JV Other tenure Ghana Bibiani Other Tenure Granted Area km² Application Area km² Commodity Location 201 148 106 524 979 695 779 1,474 50 39 89 0 0 0 399 399 399 2,394 2,793 0 0 0 Gold Gold Gold Gold Gold Gold Gold Africa Africa Africa Africa Africa Africa Africa Sub Total Africa 2,542 3,192 Australia Ravenswood Sub Total Australia Total Resolute Tenure 1,708 1,708 4,250 456 456 3,648 Gold Queensland 28 Resolute Mining Limited | Annual Report 2016 Resources RESOLUTE MINING LIMITED MINERAL RESOURCES (Inclusive of Ore Reserves) MINERAL RESOURCES 1 MEASURED INDICATED INFERRED TOTAL Group share kt g/t koz kt g/t koz kt g/t koz kt g/t koz koz At June 2016 Ravenswood (Australia) 100% Sarsfield (insitu) 2 46,453 0.8 1,186 57,664 0.7 892 22,192 0.7 521 126,309 0.6 2,599 2,599 Buck Reef West 17,857 1.0 598 11,582 0.9 323 12,360 0.9 356 41,799 1.0 1,277 1,277 Sub Total O/C 64,310 0.9 1,784 69,246 0.5 1,215 34,552 0.8 877 168,108 0.7 3,876 3,876 Mt Wright (insitu) 3 826 2.9 78 354 3.3 38 1,079 3.1 107 2,259 3.1 223 223 Welcome Breccia Stockpiles 0 0 0.0 0.0 0 0 0 8 Sub Total UG 826 2.9 78 362 0.0 3.0 3.4 0 2,036 3.2 208 2,036 3.2 208 208 1 0 0.0 0 8 3.0 1 1 39 3,115 3.1 315 4,303 3.1 432 432 Ravenswood Total 65,136 0.9 1,862 69,608 0.6 1,254 37,667 1.0 1,192 172,411 0.8 4,308 4,308 Syama (Mali) 80% Syama UG (insitu) 5 0 0.0 0 40,857 2.8 3,736 3,048 2.2 211 43,905 2.8 3,947 3,158 Sulphide Stockpiles Sub Total (Sulphides) Syama Oxide Satellites Syama Satellite Stockpiles 413 413 3,778 263 Sub Total Satellites 4,041 Mali (other) 2.9 2.9 2.1 1.8 2.1 38 4,150 1.5 206 0 0.0 0 4,563 1.7 244 195 38 45,007 2.7 3,942 3,048 211 48,468 2.7 4,191 3,353 2.2 2.2 257 6,222 15 1,353 2.1 1.4 420 3,072 219 13,072 59 0 0.0 0 1,616 272 7,575 2.0 479 3,072 2.2 219 14,688 2.1 1.4 2.1 896 717 74 59 970 776 85% Tabakoroni 2,331 2.9 220 4,495 2.7 387 3,132 2.2 219 9,958 2.6 826 702 Syama Total 6,785 2.4 530 57,077 2.6 4,808 9,252 2.2 649 73,114 2.5 5,987 4,831 Bibiani (Ghana) Bibiani (insitu) 4 Bibiani Total 0 0 0.0 0.0 0 0 11,180 3.3 1,184 4,485 11,180 3.3 1,184 4,485 4.1 4.1 591 15,665 3.5 1,775 1,598 591 15,665 3.5 1,775 1,598 90% Total Resources 71,921 1.0 2,392 137,865 1.6 7,246 51,404 1.5 2,432 261,190 1.4 12,070 10,736 1. Mineral Resources are inclusive of Ore Reserves - differences may occur due to rounding. 2. All Resources and Reserves are reported above 1.0g/t cut-off except Nolans East and Buck Reef West above 0.5g/t cut off, and Sarsfield above 0.4g/t cut off. 3. Mt Wright Reserves are reported above 2.3g/t cut off and Resources above 1.8g/t cut off. 4. 5. Bibiani Reserves and Resources quoted above a 2.0g/t cut off. Syama Underground Reserves quoted above a 1.9g/t cut off. 29 Resolute Mining Limited | Annual Report 2016 Reserves RESERVES At June 2016 RESOLUTE MINING LIMITED ORE RESERVES PROVED PROBABLE TOTAL Group share kt g/t koz kt g/t koz kt g/t koz koz Ravenswood (Australia) Sarsfield (insitu) 2 Nolans East Sub Total O/C Mt Wright (insitu) 3 Stockpiles Sub Total UG 28,450 1,818 30,268 682 0 682 Ravenswood Total 30,950 Syama (Mali) Syama UG (insitu) 5 Sulphide Stockpiles Sub Total (Sulphides) 0 413 413 Syama Oxide Satellites 1,455 Syama Satellite Stockpiles 263 Sub Total Satellites 1,718 Mali (other) Tabakoroni Syama Total Bibiani (Ghana) Bibiani (insitu) 4 Bibiani Total Nyakafuru (Tanzania) Nyakafuru (insitu) 2 Nyakafuru Total 1,335 3,466 0 0 0 0 Total Reserves 34,416 0.8 0.8 0.8 2.7 0.0 2.7 0.9 0.0 2.9 2.9 2.3 1.8 2.2 3.1 2.6 0.0 0.0 0.0 0.0 1.0 747 18,640 46 846 793 19,486 60 0 60 248 8 256 853 19,742 0 23,863 38 38 4,150 28,013 107 2,857 15 846 122 3,703 0.7 0.9 0.7 2.7 3.0 2.7 0.7 2.8 1.5 2.6 2.3 1.8 2.2 2,173 23,863 206 4,563 2,379 28,426 209 4,312 49 1,109 258 5,421 133 1,821 2.8 163 3,156 293 33,537 2.6 2,800 37,003 0 0 0 0 5,480 5,480 0 0 3.7 3.7 0.0 0.0 644 5,480 644 5,480 0 0 0 0 423 47,090 25 2,664 448 49,754 21 1 22 930 8 938 0.8 0.8 0.8 2.7 3.0 2.7 100% 1,170 1,170 71 71 1,241 1,241 81 1 82 81 1 82 470 50,692 0.8 1,323 1,323 80% 2,173 1,738 244 195 2,417 1,934 316 64 253 51 380 304 85% 296 252 3,093 2,489 90% 580 580 98% 0 0 644 644 0 0 2.8 1.7 2.6 2.3 1.8 2.2 2.9 2.6 3.7 3.7 0.0 0.0 1,146 58,759 2.1 3,914 93,175 1.7 5,060 4,392 1. Mineral Resources are inclusive of Ore Reserves - differences may occur due to rounding. 2. All Resources and Reserves are reported above 1.0g/t cut-off except Nyakafuru, Nolans East and Buck Reef West above 0.5g/t cut off, and Sarsfield above 0.4g/t cut off. 3. Mt Wright Reserves are reported above 2.3g/t cut off and Resources above 1.8g/t cut off. 4. 5. Bibiani Reserves and Resources quoted above a 2.0g/t cut off. Syama Underground Reserves quoted above a 1.9g/t cut off 30 Resolute Mining Limited | Annual Report 2016 RESERVES At June 2016 At June 2015 RESOLUTE MINING LIMITED ORE RESERVES PROVED PROBABLE TOTAL PROVED PROBABLE TOTAL Group share kt g/t koz kt g/t koz kt g/t koz koz kt g/t koz kt g/t koz kt g/t koz koz Comment on Change Sarsfield (insitu) 2 747 18,640 423 47,090 1,170 1,170 46 846 25 2,664 71 71 793 19,486 448 49,754 1,241 1,241 60 0 60 248 8 256 21 1 22 930 8 938 Ravenswood Total 30,950 853 19,742 470 50,692 0.8 1,323 1,323 28,450 0 28,450 1,644 0 1,644 30,094 0.8 0.0 0.8 2.7 0.0 2.7 0.9 747 18,640 0 0 747 18,640 144 0 144 411 91 502 891 19,142 0 23,863 2,173 23,863 2,173 1,738 0 0.0 0 25,500 Ravenswood (Australia) Nolans East Sub Total O/C Mt Wright (insitu) 3 Stockpiles Sub Total UG Syama (Mali) Syama UG (insitu) 5 Sulphide Stockpiles Sub Total (Sulphides) Mali (other) Tabakoroni Syama Total Bibiani (Ghana) Bibiani (insitu) 4 Bibiani Total Nyakafuru (Tanzania) Nyakafuru (insitu) 2 Nyakafuru Total 28,450 1,818 30,268 682 0 682 0 413 413 1,335 3,466 0 0 0 0 0.8 0.8 0.8 2.7 0.0 2.7 0.9 0.0 2.9 2.9 2.3 1.8 2.2 3.1 2.6 0.0 0.0 0.0 0.0 1.0 38 38 4,150 28,013 206 4,563 244 195 2,379 28,426 2,417 1,934 Syama Oxide Satellites 1,455 107 2,857 209 4,312 Syama Satellite Stockpiles 263 15 846 49 1,109 Sub Total Satellites 1,718 122 3,703 258 5,421 380 304 133 1,821 2.8 163 3,156 296 252 293 33,537 2.6 2,800 37,003 3,093 2,489 0 0 0 0 5,480 5,480 0 0 644 5,480 644 5,480 0 0 0 0 Group share 100% 81 1 82 80% 253 51 85% 90% 580 580 98% 0 0 81 1 82 316 64 644 644 0 0 0.8 0.8 0.8 2.7 3.0 2.7 2.8 1.7 2.6 2.3 1.8 2.2 2.9 2.6 3.7 3.7 0.0 0.0 0.7 0.9 0.7 2.7 3.0 2.7 0.7 2.8 1.5 2.6 2.3 1.8 2.2 3.7 3.7 0.0 0.0 897 897 3,084 179 3,263 1,335 5,495 0 0 0 0 4.4 4.4 2.2 2.6 2.2 3.1 2.8 0.0 0.0 0.0 0.0 126 5,313 2,291 25,500 265 6,210 126 30,813 2.6 2,556 31,710 221 4,432 15 412 236 4,844 2.1 1.2 2.0 303 7,516 16 591 319 8,107 133 1,821 2.8 163 3,156 495 37,478 2.5 3,038 42,973 0 0 0 0 0 0 7,360 7,360 0.0 0.0 1.6 1.6 1.9 0 0 0 0 388 7,360 388 7,360 3,879 99,569 Total Reserves 34,416 1,146 58,759 2.1 3,914 93,175 1.7 5,060 4,392 35,589 1.2 1,386 63,980 0.7 0.0 0.7 1.8 2.4 1.9 0.7 2.8 1.6 100% 423 47,090 0 0 423 47,090 23 7 30 2,055 91 2,146 0.8 0.0 0.8 2.5 2.4 2.5 1,170 1,170 No change - JORC code 2004 0 0 Additional reserves from Updated Feasibility Study 1,170 1,170 167 7 174 167 Depletion due to production 7 Movement in operating stockpiles 174 453 49,236 0.8 1,344 1,344 80% 2,291 1,833 Reserves adjusted from Updated Underground Feasibility Study 391 313 Movement in operating stockpiles 2,682 2,146 524 31 419 Depletion due to production and re-optimisation 25 Movement in operating stockpiles 555 444 85% 296 252 No change - JORC code 2004 3,533 2,841 90% 0 0 98% 380 380 0 0 388 388 Reserves upgrade from Underground Pre-Feasibility Study Divested Project 5,265 4,565 Depletion due to production offset by Bibiani Upgrade 2.8 2.0 2.6 2.2 1.6 2.1 2.9 2.6 0.0 0.0 1.6 1.6 1.6 Competent Persons: The information in this report that relates to the Exploration Results, Mineral Resources and Ore Reserves is based on information compiled by Mr Richard Bray who is a Registered Professional Geologist with the Australian Institute of Geoscientists and Mr Andrew Goode, a member of The Australasian Institute of Mining and Metal- lurgy. Mr Richard Bray and Mr Andrew Goode both have more than 5 years’ experience relevant to the styles of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a Competent Person, as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Richard Bray and Mr Andrew Goode are full time employees of Resolute Mining Limited Group and each hold equity securities in the Company. They have consented to the inclusion of the matters in this report based on their information in the form and context in which it appears. This information was prepared and disclosed under the JORC code 2012 except where otherwise noted. Particularly Reserves and Resources remain 2004 JORC com- pliant and not updated to JORC code 2012 on the basis that information has not materially changed since it was last reported. 31 Resolute Mining Limited | Annual Report 2016Exploration Renewed focus to unlock value and create opportunity Resolute is committed to expanding its gold resources and production base through exploration. The main thrust of exploration activities has been on our tenure close to our existing operations or strategic joint ventures on ground that has been identified through our regional studies. An increased budget of $19 million in FY17 will allow extensive drilling of key targets at the Company’s main prospects. In Mali, deep diamond drilling at the Syama mine has outlined significant extensions to the mineralisation which are expected to extend the underground mine- life at Syama and may provide opportunity for future expansion of the underground project. In Queensland, drilling and metallurgical testwork continued at Buck Reef West to build the resource growth for the Ravenswood extension program. Resolute is exploring more than 4,200km2 of prospective tenure across two continents Mali Resolute controls an 80km strike of the highly prospective Syama Shear and surrounding Birimian Greenstone Belt Syama It is expected the Syama mineral resource will increase substantially when these results are incorporated into the next resource calculation. Results from the deep resource extension drilling program are expected to extend the underground mine-life at Syama and may provide opportunity for future expansion of the underground project. The initial success of the deep extensional drilling program will ensure that drilling will now continue throughout 2016. The planned program will now include step out positions that, based on the high grade results received to date, are expected to deliver major extensions to the Syama deposit. The Syama deep drilling program commenced in late 2015 with the ambition of substantially expanding the Syama underground resource. The positive results from the drilling program have been previously reported in three ASX announcements, 8 February 2016, 9 March 2016 and 1 August 2016. The locations of the drill intersections are shown on the longitudinal section of the Syama orebody in the figure below. All of the new intersections are located outside of the currently identified ore reserve and significantly extend the known mineralisation. Of particular relevance is the exceptional intercept in SYDD432 (62m @ 6.7g/t Au) underlining the future high grade potential of the Syama deposit at depth. SYDD428 32m 13m @ 2.7g/t Au from 323m and @ 3.1g/t Au from 377m SYRD429 28m @ 5.1g/t Au from 708m SYDD431 23m 46m @ 3.56g/t Au from 717m and @ 3.11g/t Au from 749m SYDD432 62m @ 6.71g/t Au from 651m SYRD434 31m @ 2.55g/t Au from 781m SYDD436 7m @ 5.00g/t Au from 570m 32 Longitudinal section of the Syama deposit Resolute Mining Limited | Annual Report 2016 Finkolo (Resolute 85%) Exploration continued within the Finkolo permit on a highly prospective area north of the Tabakoroni gold deposit. A large aircore drilling program on an area of greenstones where previous wide spaced drilling identified significant gold anomalism. Results from drilling returned encouraging gold assays which has extended the identified gold anomalies in the T-ramp area. A 2,000m program of reverse circulation (RC) drilling was completed at the Zekere prospect during the year. Results from this RC program were encouraging and the prospect remains a high priority for oxide resources. The current low drilling density on the 2.5km strike length of the Zekere anomaly allows for significant potential to add oxide resources at this prospect. Follow up RC drilling is planned at T-ramp and the Zekere prospects at the conclusion of the wet season. Resolute is one of the largest holders of Birimian age greenstone tenure in West Africa Pitiangoma East JV (Resolute earning 70%) An incorporated joint venture agreement on the Pitiangoma East permit was signed with TSX-V listed Legend Gold in May 2015. Pitiangoma East is located 30km south east of the Tabakoroni deposit and covers the southern extensions of the Syama formation greenstones. This permit provides Resolute access to the only section of the Syama Greenstone Belt which it did not previously control. The permit contains the BHP identified gold prospect Misséni and a number of drill targets, and is a valuable addition to the exploration portfolio. Work commenced this year with aircore drilling and an IP survey. A gradient array IP survey was completed over the Misséni prospect area with the resistivity data providing a number of anomalies which will be followed up by drill testing. In FY16 two aircore drilling programs targeting the entire width of the Misséni volcanic stratigraphy were conducted. Drilling intersected the expected intermediate volcanic package, intercalated with fine to medium grained sediments. This aircore drilling has defined a low grade gold anomalous envelope 200m wide within the Misséni volcanics over a 3km strike length. The identified anomaly is coincident with an IP resistivity low which is bounded by shear zones. This gold anomaly will be followed up by RC drilling after the conclusion of the wet season in late 2016. Mali exploration tenements, deposits and simplified geology 33 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 Resolute Mining Limited | Annual Report 2016 Australia Regional exploration in the Ravenswood area is focused on locating breccia hosted gold deposits similar to Mt Wright and Kidston Buck Reef West Diamond drilling to extend the Buck Reef West resources and for metallurgical testwork was undertaken during FY16. Drilling to test the possible mineralised extension of the Buck Reef structure between the Sarsfield and Buck Reef West pits intersected promising zones of quartz-sulphide veining and “Buck Reef style” chlorite breccia mineralisation. A 3D geological model of the Buck Reef West deposit area, constructed this year, highlighted the underground potential and in particular identified high grade drill results which are open along strike and down dip. This model was used to plan a diamond drillhole program to test underground potential at Buck Reef West in the coming months. Ravenswood locations and prospects map 34 34 Resolute Mining Limited | Annual Report 2016 Three Sisters Testing of the Three Sisters breccias complex and adjacent Town Creek Dam area commenced this year. An IP survey identified a strong chargeability high and coincident resistivity low in the south west corner of the survey area adjacent to Three Sisters breccia complex. An RC drilling program was undertaken however the assay results show scattered low level gold results with no reportable intersections. Surface mapping and geochemical sampling during the calendar year have highlighted widespread gold mineralisation at the Igloo prospect located 30km south west of Ravenswood. Work over the past few months has built an interesting picture of high grade gold (up to 116g/t) in numerous rock chip samples from brecciated and veined sediments and volcanics. An IP survey was completed over the prospect in April 2016. The results show a distinct resistivity low coincident with outcropping veined and brecciated fine grained sediments. The resistivity low is very similar to that observed at Mt Wright and could represent a buried breccia pipe with interconnected sulphides in the matrix, and a halo of disseminated pyrite responsible for the annular chargeability response. A drill program to test both the resistivity anomaly and the chargeability anomaly associated with the best outcropping mineralisation is planned to commence in the second half of 2016. Elphinstone Creek The Elphinstone Creek prospect is located immediately west of the Buck Reef West resource and therefore is a high priority target to increase the open pit resource base at Ravenswood. Work during the year included an IP survey and an initial phase of RC drilling. The results from the first round of RC drilling were very encouraging and follow up drilling is planned for late 2016. Mount Glenroy Diamond drilling of the breccia targets at Mt Glenroy was completed in late 2015. Three deep diamond drillholes into the breccia complex intersected brecciated rhyolite including a hydrothermal breccia with quartz-sulphide mineralisation. Although the geology of the system was typical of the gold mineralised breccia pipes in the region, assay results from the three drillholes were low order. Ravenswood open pit resources 35 Resolute Mining Limited | Annual Report 2016Côte d’Ivoire Resolute, a first mover into Côte d’Ivoire Takikro and granitic soils. Aircore drilling on identified gold and multi-element anomalies commenced on the Takikro research permit in December 2015. This regional spaced drilling has confirmed the mapping of sheared intermediate and felsic volcanics and sediments. Results to date have been low level, however exploration will continue on the research permit in the coming year. Taruga Joint Venture (Resolute earning 75%) Resolute entered into a joint venture with ASX listed Taruga Gold (Taruga) on two granted research permits and one research permit application. The Tiebissou research permit was granted to Taruga in late 2014 and lies adjacent to the south and west of Resolute’s Takikro Permit. Tiebissou covers a 15km strike length of the prospective Birimian lithological sequence, which hosts the Bonikro and Agbaou gold deposits. Combined with Takikro, Resolute will control a strike length of 50km of highly prospective greenstones. The second granted permit, Nielle, is located within granite and greenstone terrain adjacent to the Tongon gold mine operated by Randgold Resources Limited (Rangold). A soil sampling program on a 500 x 250m grid was completed over the prospective units on the research permit. The soil samples were analysed for gold and pathfinder elements. The results confirmed that the strong Au-As-Sb anomaly identified on the Takikro permit continues south onto the Tiebissou permit. Aircore drilling of the identified soil anomaly was completed during the year. The geology of the Tiebissou permit is largely mafic volcanics with variable shearing. The drilling intersected some zones of silica- sericite-pyrite altered and intense shearing which look interesting however the gold results were poor. Programs of stream sediment, soil sampling and rock chip sampling were undertaken on the Nielle research permit during the year. The surface geology seen in traverses confirmed the regional mapping which Resolute carried out last year and most of the soil samples occurred in residual to thinly lateritic terrains, Results from the stream sediment sampling show a cluster of weakly anomalous values in the south east corner of the permit, spatially related to the outcropping gabbro intrusive and an ultramafic package. The soil sampling has defined a low level north east trending gold anomaly on the south east side of the permit coinciding with the interpreted contact between the ultramafic package and the granite. Follow up infill sampling has been planned and completed over the three anomalies identified by regional soil and stream sediments sampling. New Projects A total of ten new research permit applications have been submitted and seven have been formally accepted by the Department of Industry and Mining. The Pongala research permit application has been granted by the Côte d’Ivoire Government. Pongala is one of the three contiguous applications over the northern extensions of the greenstone belt which hosts Randgold's Tongon operation. It is anticipated to take a further one to two months to obtain the official decree from government to enable work to commence. Côte d’Ivoire geology and project locations 36 Resolute Mining Limited | Annual Report 2016Corporate Responsibility We are safe and ethical operators, achieving sound community, environmental, and financial outcomes for our stakeholders. Resolute is committed to maintaining a social licence, to discover, develop, operate and close gold mining projects. Resolute is committed and proud to be a partner of choice for stakeholders by building relationships through well-targeted social, safety and environmental programs. Resolute aims for zero harm to the communities in which we operate, our employees and the local environment. The Company is committed to supporting our local communities by assisting with meaningful programs and projects that deliver lasting benefits. The taxes that Resolute pays as a company, those it collects from employees on behalf of government and those of suppliers dependent on the Company’s presence, are important in creating positive community benefits in host countries. A significant contributor through taxes paid in the countries in which we operate. Over $73M (last year $55M) was paid directly to governments in taxes in FY16. These taxes include company taxes, employer taxes, royalties and other licencing and statutory levies as follows: Royalties Employer Taxes Company Taxes Licencing & Statutory Taxes Patente Tax/Custom Duties Australia A$M Tanzania A$M 9.0 12.4 0.0 0.9 - 22.3 0.0 0.3 0.0 0.0 - 0.3 Mali A$M 22.3 13.2 7.0 0.1 5.9 48.5 Ghana A$M - 1.4 0.9 0.2 - 2.5 Total A$M 31.3 27.3 7.9 1.2 5.9 73.6 Resolute willingly operates under a strict Code of Conduct (Code) that underpins, guides and enhances the conduct and behaviour of directors, employees and contractors in performing their everyday roles. The Code specifically emphasises integrity and honesty and recognises that Resolute will not make any bribes or corrupt payments to government officials to obtain any improper or illegitimate benefit or advantage. The Code encourages and fosters a culture of integrity and responsibility with the focus of augmenting our reputation as a valued employer, business partner and corporate citizen in all our relationships. 37 37 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 Environment Resolute strives to balance environmental protection in a financially sound manner over the phases of exploration, operation and mine closure activities. The Resolute Environmental Policy provides for an environmental management program as it undertakes to: • • • • • • • • comply with and, where appropriate, exceed the requirements of applicable legislation, regulations and other policies, codes and standards to which we subscribe progressively develop and maintain environmental management systems that are consistent with internationally recognised standards integrate environmental processes throughout all aspects of our activities identify and assess the potential environmental effects of our activities and manage environmental risk accordingly continually improve and regularly monitor, audit and review our environmental performance, including the reduction and prevention of impacts and more efficient use of resources promote environmental awareness among our personnel and contractors to increase understanding of their roles and responsibilities in environmental management develop our people and provide resources to meet our environmental objectives promote our environmental progress and performance through liaison with, and public reporting to, governments and communities. 38 38 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 Golden Pride Mine, Tanzania Commercial sale and amicable exit from Tanzania completed Following the closure of the Golden Pride Mine (Golden Pride) and handover of this site in the previous reporting cycle, the commercial sale of Resolute assets and interests in Tanzania lead to the amicable exit from the country in FY16. This followed a review in FY15 of the effectiveness in the closure process at Golden Pride. The review found strong performance by Resolute in its commitments to: • • progressive rehabilitation environmental monitoring • management systems • development and use of a mine closure plan. Golden Pride - 1996 to 2014 Purchased exploration portfolio Defined a mineable resource Completed feasibility study Constructed the first modern gold mine in Tanzania Produced 2.2Moz gold over a 15 year mine-life Generated net cash flows of US$211M Completed award winning environmental rehabilitation program Delivered land back to our partners, the Tanzanian Government 39 39 Resolute Mining Limited | Annual Report 2016Syama, Mali Resolute is committed to actively managing and working in partnership with the Mali Government on a wide range of environmental activities including rehabilitation, water and air quality, waste and tailings management, compliance and risk management. A significant commitment this year included the fabrication and transport to Syama of a high temperature incinerator. Once commissioned in the coming months the incinerator will safely dispose of industrial wastes that are otherwise buried on site. In addition, it will benefit the community by providing safe disposal of medical waste from the site clinic. Other achievements and activities included: Rehabilitation The rehabilitation of over 22ha of waste rock dumps during FY16 following completion of mining the Syama open pit. More than 42,000 tree seedlings across 29 local species were planted in this area. Further sections of the southern and western waste rock dumps will be rehabilitated this year in line with our progressive rehabilitation policy. Water Management Regular and consistent monitoring of the surface water and groundwater is ongoing. Thematic mapping of water quality using the Geographical Information System (GIS) enables Resolute’s environmental team to proactively manage activities within acceptable values. Enhanced water balance modelling continues to guide efficient use of this important resource. During transition from open pit to underground mining at Syama, rainfall runoff in the pit is being used to supply the demand of the processing plant. This has provided a storage buffer and greatly reduced the amount of water to be pumped from the Bagoe River during FY16. An offtake line from the Bagoe supply was taken to the town of Fourou during the period. At present the system is in the commissioning stage to filter and chlorinate the supply; it will provide a secure and hygienic supply of water to the town. Tailings Management Tailings from the processing of oxide ore are routinely placed in a compartment of the storage landform whereby the decant water can be reused in the processing plant to optimal benefit. Cyanide levels in the oxide tails storage facility (TSF) are very low in the wet season, allowing this water to be reused in the flotation process at a maximum rate. This demonstrates the ability of each of the tailings streams to be blended with minimal additional treatment or cyanide destruction, to reduce operating costs and risk to the environment. Upstream raising of embankments around the external perimeter calcine TSF with insitu material was completed and the decant return reconfigured to improve pumping and reduce the area of decant water. Air Quality A network of air quality monitors located at Syama and at nearby villages transmits data to Resolute’s site office in real time, enabling an early management response. Reliability improved during the year with protection against lightning strikes for the monitors and their data telemetry. A study of soil and plant growth near Syama was completed and showed soil types and nutrients available for crops are in the normal range for the area. Compliance and Risk Management Findings from the compliance audit by the Mali Government for environmental management and social development have been provided. Only maintenance works at the fuel farm are required to be completed by the Company. Resolute welcomes and encourages regular site inspections by Mali environmental authorities to enhance collaboration. 40 Resolute Mining Limited | Annual Report 2016Ravenswood, Queensland At Ravenswood the Company continued to dedicate resources to its Safety, Health and Environmental Management System with a focus on: • detailed monthly environmental monitoring and reporting • compliance monitoring and investigations Aquatic environments, water quality data and sampling methods were appraised under a Receiving Environment Monitoring Program. The aim of the appraisal is to establish a site specific fit of water quality limits, rather than arbitrary values from the literature, for approval by the Queensland Government. • monthly inspections for safety, health, Emissions environment and training. Significant activities this year included: Future Mine Development Assessments Closure strategies to accommodate the potential for extensions to mine-life were implemented with a focus on assessments and approval of new environmental protection measures and social dispensations proposed for the recommencement of mining at the Sarsfield Open Pit. Water Management In accordance with a Transitional Environmental Program issued by the Queensland Government, Ravenswood continued to operate and adapt the groundwater recovery system near the Nolans TSF. Ambient and continuous measure of very fine dust levels (PM10) were established as a contingency for mining at the Nolans East end of the open pit. The measurements demonstrate levels comply with the model mining condition for Queensland. Compliance and Risk Management Proactive monitoring and response to water quality issues continued during the period with the Company’s commitment to ongoing groundwater recovery and environmental impact investigations. Bibiani, Ghana Environmental monitoring programs at Bibiani were maintained and actively managed according to the current status of the project. Specific activities included: • removal of scrap materials for reuse and dilapidated equipment for repair or reuse, that if left unattended might otherwise impact on the environment. • monitoring of surface and groundwater quality Compliance and Risk Management • the regular inspection of tailings embankment integrity and water levels Monitoring at surface and groundwater points found levels to be in compliance with limits. • measurement of ambient dust levels • • checking the growth of revegetated areas on the mine site timely response and control of unauthorised clearing by farmers or disturbance by artisanal miners Maintaining facilities and infrastructure to minimise environmental impact from the potential restart of the project in the future. 41 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 42 42 Resolute Mining Limited | Annual Report 2016Community Relations Resolute is a proud and responsible member of the communities in which we operate. Fostering long term relationships and partnerships with local communities is a pillar of our values and key to develop mutual understanding, cooperation, and respect. Our social investment initiatives aim to deliver significant and lasting benefits to employees, communities and key stakeholders. Resolute’s Community Policy commits the Company to: • • • recognise and respect the value of cultural heritage and cultural diversity establish enduring relationships with communities based on honesty and mutual trust support the development and implementation of sustainable social and economic initiatives within the communities through co-operation and participation • provide management systems to identify, assess, monitor and control potential impacts on communities • maintain an ‘open door’ policy whereby the local traditional leaders and community leaders have access at reasonable times to the Company’s management • ensure that employees are aware of and understand the requirements of this policy. Syama The Syama Mine Community Consultative Committee (SMCCC) held regular meetings in FY16 to address local community and environmental issues. The Company briefed community representatives on the progress of mine development, including the newly developed A21 satellite open pit. A five year plan is being developed to support the Fourou Commune with a priority effort in the town of Fourou. SOMISY provided support for sociologists and local expert consultants to develop the plan in consultation with the stakeholders across the community. Support of Community Roles and Functions Resolute made the following contributions in FY16: • • • land compensation to the village of Syama for “Friday” work assistance to the Fourou Mayoral Office for the role of Community Liaison Agent support for the annual traditional feast celebrations in Fourou and village of Bananso • pump repair in the old health centre at Fourou • • • donation of an air conditioner to Circle of Kadiolo and participation of SOMISY during the visit of the President of the Republic of Mali for the laying down the first stone of a cotton factory at Kadiolo support of International Youth Day and participation of SOMISY in its Organisation Commission for the region ongoing supply of water to the sacred fish ponds in Fourou. Community Health In January 2016 the Ebola outbreak in West Africa was officially declared over by the World Health Organisation. As a result, a number of the prescribed precautions are thought to be unwarranted. Resolute supports the ongoing vigilance of health authorities in relation to Ebola and therefore the Company takes care and responsibility with any cases of severe illness in unusual circumstances at site. Travel restrictions have eased between the previously affected countries of Guinea, Liberia and Sierra Leone. 43 Resolute Mining Limited | Annual Report 2016SOMISY has retained some of the hygiene measures, notably handwashing and checking of body temperatures. This is helping to reduce gastrointestinal complaints and provide an early diagnosis of malaria infection. Resolute’s Malian subsidiary SOMISY combats the threat of malaria by the distribution of mosquito nets, spraying of walls in living areas with residual insecticide and dosing of stagnant water bodies with larvicide. Whilst it is difficult to obtain reliable statistics for the incidence of malaria in communities receiving this support and near the mine, an improvement trend is inferred by the health of site employees. The incidence of malaria amongst employees at Syama from these same communities has shown marked improvement during FY16. SOMISY continued to support community health as follows: • • • • providing training, consumables and equipment to maternity clinics within the Fourou Commune conducting education programs and regular radio broadcasts on issues ranging from lightning awareness, malnutrition, healthy diet with local cereals, HIV, worms, sanitation and skin diseases provision of medical supplies for HIV diagnosis to five community medical centres and collaborating with government to establish an HIV medical unit in Fourou conducting regular testing of potable water from community wells and bores. Education SOMISY expatriate employees through their Child Education Sponsorship program provided learning materials, shoes and soccer balls to the primary school of Glambéré village. Further funding for the organisation of year end exams at schools in Bananso, Fourou, Gouéné, Torokoro and Watiali villages was provided. Small Business Projects SOMISY proudly supports women’s groups and their various projects in villages near Syama. Projects include: • • • • • • • collection of honey from bee keeping growing of vegetables batik fabric dying embroidery production of shea butter and soap from tree nut oil construction of a goat/sheep keeping structure and the supply of sheep construction of a cattle spray yard to benefit all parts of the rural commune. SOMISY supports people across the rural commune of Fourou to develop self-sufficiency in food production. Training in each of these projects is a critical element, particularly on the running of cooperative associations and in leadership. The mine site-catering provider at Syama supports these projects by sourcing this local produce. Community Water Supplies In FY16 SOMISY supported the local community in its application and justification for assistance from the Australian High Commission in Ghana’s Direct Aid Program. SOMISY provided supervision and support for the drilling of two water bores equipped with pumps at primary schools in the villages of Baala and Bananso, to ensure the funding from the High Commission had maximum effect. In direct response to the need and request from local Fourou women SOMISY initiated a project to provide water to the town of Fourou from the Bagoe River. Equipment to filter and chlorinate the water supply is being prepared for distribution into Fourou. 44 Resolute Mining Limited | Annual Report 2016Ravenswood, Queensland Resolute’s Queensland operations are situated near the historic gold mining town of Ravenswood and as such, the Company is committed to maintaining ongoing positive relationships with the local community and stakeholders. Resolute and its local subsidiary Carpentaria Gold Pty Ltd support the local community through various projects and initiatives: • maintain direct and transparent communications with the community through production and distribution of monthly newsletters and conducting regular social events and meetings with government representatives to keep stakeholders fully informed about company activity at Ravenswood • • • • support the Ravenswood Restoration and Preservation Association in management of heritage listed buildings within the town, and maintenance of the community garden provide educational support to the Ravenswood State School by supplying new learning materials, computers, provision of art lessons with visiting artists and assistance with swimming lessons support the first of the Young Australian, Indigenous Art, and Writers workshops held in several Charters Towers schools, Homestead and Ravenswood State Schools sponsorship of a mosaic artwork welcoming people to Ravenswood’s Community Garden with a sign created by local artist Shelley Burt and Ravenswood students • • • • • • assistance with coordinating sporting carnivals and educational events, such as National Tree Day, National Science Week and National Water Week support the Ravenswood Rural Fire Brigade as a major sponsor of its annual fundraiser provide 24-hour support to the community for medical emergencies from nurses at the mine site clinic (In FY16 approximately 350 community consultations were conducted and monthly visits from the Royal Flying Doctor Service were hosted by the Company) sponsorship of monthly morning tea events for local seniors with a Queensland Health nurse in attendance to provide consultations provision of trained staff to supervise swimming lessons in the community pool provide access to gym facilities and personal training sessions for staff and community members including those who are rehabilitating from health problems. Ravenswood is now running two “gym circuit” classes per week at its facilities due to demand • maintain on-call community support in snake handling by company personnel trained to safely catch and relocate snakes to the bush from town or homes. Bibiani, Ghana Community relations, support and consultation continued at Bibiani in FY16 through: • • • funding primary and junior high school education for children of employees and 80% community intake outreach from the Bibiani site clinic inviting the community and school children to attend monthly health checks to screen and treat patients with Hepatitis B, diabetes, malaria and worms providing a community bus service for farmers to and from Bibiani • maintaining the commitment as sole sponsor of the Gold Stars football team • drilling a second potable-water bore in the village of Lineso to meet the demand of population growth • • grading of roads and maintenance of drainage structures direct and open communication with village chiefs, community leaders and politicians. The Company’s community development team at Bibiani is preparing a needs analysis to seek views and perceptions from the local community and nearby villages in relation to its needs and Resolute’s support of water, health, education and agriculture programs. The analysis will also focus on local social issues, identify community leaders and elders and community assets such as boreholes, agricultural practices, schools and accessibility to clinics. 45 Resolute Mining Limited | Annual Report 2016Resolute Mining Limited | Annual Report 2016 Fourou Livestock Treatment Initiative This project, the Municipal Cattle Meat of Fourou (Fédération Communale de la Filière Bétail Viande de Fourou (FLBV- Fourou)) will run for three years having started in March 2015. It is centred on the village of Baloulou in the sector of Watiali within the Rural Commune of Fourou. low health coverage for their livestock. Mindful of being able to support the development of the industry by way of a community development initiative, SOMISY informed the SMCCC of its willingness to provide the commune with livestock treatment infrastructure in February 2015. Like the rest of the Region of Sikasso, the rural economy of the Circle of Kadiolo is based on the exploitation of natural resources (fish farming and cattle breeding). The regional and local socio-economic development strategies and policies recognise that the pastoral industries are flourishing and constitute the driver for other initiatives. This tallied with the findings of the PRA - Participatory Rural Appraisal (MARP - Méthode Accélérée de Recherche Participative) sponsored by SOMISY in 2012. It highlighted two issues for the people in the area in relation to their livestock industry, namely, the lack of pastoral planning and the The resulting initiative called “Cattle Spray Project in the Rural Commune of Fourou” includes two phases, being the installation of the infrastructure in the Sector of Watiali and livestock health service delivery for more than 100,000 cattle. Many consultations have occurred between the cattle breeders in collaboration with the municipal authorities and Syama management. The project is in line with the promotion policy of the industries of the Regional Council of Sikasso, its strategic framework for the development and the decrease of poverty in Mali. Allocation by SOMISY Estimated Budget in US$ Estimated Budget in FCFA Equipment Water Supply Bore Total Amount 60,820 20,145 80,965 35,481,414 11,752,800 47,234,214 The idea for this project came through the organisation of the livestock industry following the initiative of opening cattle roads within the Circle of Kadiolo in 2002 and with the support of the JEKASY Program (Swiss Cooperation). A key objective is to develop mutual aid and solidarity between the cattle breeders of the region by putting in place a collective project of development actions for the cattle market and pastoral lands. The livestock industry representatives are completing sensitisation campaigns with the pastoralists throughout the villages of the commune. SOMISY is cooperating in this project with the: • • SMCCC Fourou Chamber of Agriculture • • • Fourou Cattle Breeders Cooperative Kadiolo Inter-municipality Local Federation of the Livestock-Meat Industry • Cattle Breeding Services. The funds generated by pastoralists using the service of this project will be saved in an account at the Banque de Développement du Mali. The funds will be managed by the respect of the good practices in a collective for resources management. It applies management tools such as bank account records, registration and stock books which are subject to audit. Committee meetings for the cattle project and those of the SMCCC will overwatch the involvement of more than 1,000 cattle breeders. All participants are non-salaried volunteers and including cattle breeders residing in the Circle of Kadiolo. Syama Gold Mine Community Development Team – directions of cattle herder journeys 46 46 Resolute Mining Limited | Annual Report 2016People and Culture In line with the overarching transformation of Resolute, a cultural transformation program was initiated during FY16. This included a major revision of the organisational structure at the executive level designed to deliver key aspects of the corporate strategy. Resolute’s cultural foundations are focused on accountability and performance, innovation and agility, community and teams. Individually and collectively, the Resolute team contribute their technical expertise and leadership capability to deliver on Company strategy. The commitment to excellence by the Resolute team underpins the goal of achieving prosperity for all stakeholders and creating enduring shareholder value. Key People Priorities • • • • • To place safety, health and security at the centre of our people practice To build and encourage a diverse and inclusive workplace To develop individual, team and leadership capability across our entire workforce including the development of our in-country national employees To ensure that our business architecture and communication platforms facilitate collaboration and achievement of work outcomes To be united in our efforts to serve our teams and communities • To review and enhance our people systems 47 47 Resolute Mining Limited | Annual Report 2016Workforce Profile Resolutes's workforce consists of approximately 2,000 personnel including both direct employees, and contractors. In Mali and Ghana, 89% of our direct employees are in-country nationals. Resolute respects and encourages workplace diversity and strives to create a flexible and inclusive workplace environment. Pursuant to the Company’s Diversity Policy, the Remuneration and Nomination Committee is responsible for reviewing the progress towards achieving a number of measurable objectives and overall effectiveness of the policy. These include the proportion of women and men in the Resolute workforce at three levels in the organisation (board level, senior management and the whole organisation), including benchmarking this data against relevant industry standards where possible; and remuneration by gender. 48 48 48 Resolute Mining Limited | Annual Report 2016Health, Safety and Security The Resolute Occupational Health, Safety and Security Policy commits the Company to manage programs that: • • • • • • seek continuous improvement in its Occupational Health, Safety and Security performance taking into account evolving scientific knowledge and technology, management practices and community expectations comply with the applicable laws, regulations and standards of the countries in which it has workplaces train and ensure individual employees and contractors understand their obligations and are held accountable for their area of responsibility improve and regularly monitor, audit and review our Occupational Health, Safety and Security performance communicate and consult openly with employees, contractors, government and the community on Occupational Health, Safety and Security issues develop risk management systems to identify, assess, monitor and control hazards in the workplace. During the year the Resolute Integrated Management System (RIMS) was applied across the Company. The RIMS Standards has updated the pre-existing Standards for Safety, Health and Environmental Management to reflect the synergies of Security, Safety, Health, Community and Environment management practices related to: • • • commitment and policy planning implementation • measurement and evaluation • management review and improvement. The RIMS Standards also address the management of cyanide in alignment with the International Code for the Management of Cyanide (ICMC). The RIMS Standard acknowledges that any variation in practice to the ICMC is risk based and to be approved at executive level. The RIMS Standards now address the management of security in recognition of: • • the Resolute Code of Conduct the intent of Voluntary Principles on Security and Human Rights (VPSHR) • • • the preparedness needed in light of dynamic country and location security ratings the importance and timeliness of advisories of security threat and vulnerability assessments the need for co-operative arrangements with external parties for evacuation, contingency planning and provision of security. The RIMS Standards apply to: • • • • • personnel security physical security information communication and IT business resilience and recovery investigations and business intelligence. Resolute’s operations report against key performance indicators. Syama, Mali During FY16 Resolute enhanced the profile of its security initiatives in West Africa. The Company continues to prioritise security infrastructure, co-operative and diligent liaison with public security forces and the development of management plans that can be universally applied to existing or new projects. During the review period a major focus of the Occupational Health and Safety program was directed towards: • completion of a risk register across all departments to ensure controls are set for high risks • implementation audit of for the RIMS Standards; - completion of training in the “Incident Cause Analysis Method” accident-investigation technique training of remote site staff in accordance with National Examination Board in Occupational Safety and Health (NEBOSH) certification tracking the supervisor and manager participation in task observations ensuring the routine monitoring of occupational health and hygiene exposures advanced studies and further training offsite for clinic medical professionals. • • • • 49 Resolute Mining Limited | Annual Report 2016The Operations team at Syama includes all personnel and departments involved in sustaining the production of gold at the site. During FY16 the total recordable injury frequency rate of this team rose slightly from 1.32 to 2.68. Total recordable injuries in the reporting period also contributed to changes within the following injury frequency rates: • Lost Time Injury Frequency Rate (LTIFR) was maintained at nil throughout the year - it is noteworthy that the last LTI was recorded in April 2014 • Restricted Work Injury Frequency Rate (RWIFR) increased slightly from 0.00 to 0.3 - only one RWI occurred • Medical Treatment Injury Frequency Rate (MTIFR) increasing noticeably from 1.32 to 2.38 - Eight MTI cases were recorded in the year, whereas five MTI cases were recorded in the previous year • at year end all injury cases had fully recovered and employees were working towards normal duties. The Construction team includes all personnel predominantly contractors, typically working on a campaign basis to build new plant and equipment or to modify existing infrastructure on site. The total recordable injury frequency rate for this team improved commendably from 2.62 to 0. There were no recordable injuries in the reporting period and this contributed to the following injury frequency rates: • LTIFR remained at 0 • RWIFR remained at 0 • MTIFR reducing substantially from 2.62 to 0. Ravenswood Mine, Australia During the FY16 key drivers of Resolute’s continual improvement in safety and training included: Overall the total recordable injury frequency rate at Ravenswood increased from 19.62 to 24.34. Total recordable injuries in the reporting period also contributed to changes within the following injury frequency rates: • LTIFR rose substantially from 1.51 to 8.11 • RWIFR decreased noticeably from 12.07 to 9.74 • MTIFR increased from 6.04 to 6.49. 15 total recordable injuries occurred during the year. All injured employees have returned to work. However, two remain on restricted duties, one following a laceration and the other in follow up to a strain/sprain. Five work related LTIs occurred in FY16, whereas only one LTI occurred in FY15. Prompt reporting and management of all injuries assisted the effective recovery of employee patients. Safety initiatives at Ravenswood focus on: • • safe work behaviour and effective systems to address underlying causes of incidents and injuries change management for the transition to open pit mining • complete actions from reviews and audits. Bibiani, Ghana During FY16 the occupational health and safety program at Bibiani targeted: • • • • review and update of standards and procedures inspections and integrity checks of equipment emergency response training health surveillance of employees and nearby communities. During FY16 Bibiani remained in care and maintenance whilst development drilling for resource definition occurred in the underground mine. As a result of this level of activity relatively few staff were on site. The total recordable injury frequency rate at Bibiani decreased from 3.81 to 0.00. updating site standards to reflect changes and align with the RIMS Standards Only one recordable injury occurred leading to the following injury frequency trends for the year: progress in completion of actions arising from audits and findings from High Potential Incidents or injuries tracking and prompting of supervisors and managers to lead and be present in the field participation of the Emergency Response Team in a mines rescue challenge along with teams from other mines review and updating of procedures for equipment isolation and work permits. • LTIFR was maintained at nil throughout the year • RWIFR was maintained at nil • MTIFR decreasing markedly from 3.81 to 0.00. At the end of FY16 no employees were absent due to workplace injury. • • • • • 50 Resolute Mining Limited | Annual Report 2016Financial Report Contents Directors’ Report Auditor’s Independence Declaration 52 75 Consolidated Statement of Comprehensive Income 77 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Financial Statements Directors' Declaration Independent Auditor’s Report Shareholder Information 79 80 81 85 129 130 132 Resolute Mining Limited | Annual Report 2016 51 51 Resolute Mining Limited | Annual Report 2016Directors’ Report Your directors present their report on the consolidated entity (referred to hereafter as the “Group” or “Resolute”) consisting of Resolute Mining Limited and the entities it controlled at the end of or during the year ended 30 June 2016. Corporate Information Resolute Mining Limited ("RML" or “the Company”) is a company limited by shares that is incorporated and domiciled in Australia. Directors The names and details of the directors of Resolute Mining Limited in office during the financial year and until the date of this report are as follows. Directors were in office for the entire period unless otherwise stated. Names, qualifications, experience and special responsibilities Peter Ernest Huston (Non-Executive Chairman) B. Juris, LLB (Hons), B.Com., LLM Mr Peter Huston was appointed Chairman in 2000. After gaining admission in Western Australia as a Barrister and Solicitor, Mr Huston initially practised in the area of corporate and revenue law. Subsequently, he moved into the area of public listings, reconstructions, equity raisings, mergers and acquisitions and advised on a number of major public company floats, takeovers and reconstructions. Mr Huston is admitted to appear before the Supreme Court, Federal Court and High Court of Australia. Mr Huston was a partner of the international law firm now known as "Deacons" until 1993 when he retired to establish the boutique investment bank and corporate advisory firm known as "Troika Securities Limited". Mr Huston is a member of the Audit Committee and the Remuneration and Nomination Committee. John Paul Welborn (Managing Director and Chief Executive Officer) B.Com., FCA, FAIM, MAICD, MAusIMM, SAFin, JP Mr John Welborn was appointed to the board on 27 February 2015 as a non executive director and became the Managing Director and Chief Executive Officer on 1 July 2015. Mr Welborn is a Chartered Accountant with a Bachelor of Commerce degree from the University of Western Australia and is a Fellow of the Institute of Chartered Accountants in Australia, a Fellow of the Australian Institute of Management and is a member of the Australian Institute of Mining and Metallurgy, the Financial Services Institute of Australasia, and the Australian Institute of Company Directors. ‐ Mr Welborn has extensive experience in the resources sector as a senior executive and in corporate management, finance and investment banking. He was most recently the Managing Director of Equatorial Resources Limited and was previously the Head of Specialised Lending in Western Australia for Investec Bank (Australia) Ltd. Mr Welborn was a non-executive director of Noble Mineral Resources Limited (March 2013 to December 2013) and is currently a non-executive director of Equatorial Resources Limited (since 2010), Prairie Mining Limited (since 2009), and Orbital Corporation Limited (since 2014). Mr Welborn is a member of the Environment and Community Development Committee, the Safety, Security and Occupational Health Committee and the Financial Risk Management Committee. 52 Resolute Mining Limited | Annual Report 2016Directors’ Report Directors (continued) Peter Ross Sullivan (Non-Executive Director) B.E., MBA Mr Peter Sullivan was appointed Managing Director and Chief Executive Officer of the Company in 2001 and retired as Chief Executive Officer on 30 June 2015. Mr Sullivan is an engineer and has been involved in the management and strategic development of resource companies and projects for over 20 years. Mr Sullivan is also a director of GME Resources Limited (appointed 1996), Zeta Resources Limited (appointed 2013), Pan Pacific Petroleum NL (appointed 2014) and Panoramic Resources Limited (appointed 2015). Mr Sullivan is a member of the Financial Risk Management Committee. Marthinus (Martin) Johan Botha (Non-Executive Director) BScEng Mr Martin Botha is a non-executive director and was appointed to the board in February 2014. Mr Botha is an Engineering Surveyor by training who has 30 years experience in banking, with 24 years spent in leadership roles building Standard Bank Plc’s international operations. Mr Botha’s primary responsibilities at Standard Bank included establishing and leading the development of the core global natural resources trading and financing franchises, as well as various geographic strategies, including those in the Russian Commonwealth of Independent States, Turkey and the Middle East. Mr Botha is currently non-executive Chairman of Sberbank CIB (UK) Ltd, a securities broker regulated by the UK Financial Services Authority, and is a non-executive director of Zeta Resources Limited (appointed 2013). Mr Botha graduated with first class honours from the University of Cape Town and is based in London. Mr Botha is a member of the Audit Committee and the Chairman of the Remuneration and Nomination Committee. Henry Thomas Stuart (Bill) Price (Non-Executive Director) B.Com., FCA, MAICD Mr Bill Price is a non-executive director and was appointed to the board in 2003. Mr Price is a Fellow Chartered Accountant with over 35 years of experience in the accounting profession. Mr Price has extensive taxation and accounting experience in the corporate and mining sector. In addition to his professional qualifications, Mr Price is a member of the Australian Institute of Company Directors, a registered tax agent and registered company auditor. Mr Price is also a director of Tennis West. Mr Price is the Chairman of the Audit Committee and a member of the Remuneration and Nomination Committee. Company Secretary Greg William Fitzgerald B.Bus., C.A. Mr Greg Fitzgerald is a Chartered Accountant with over 25 years of resources related financial experience and has extensive commercial experience in managing finance and administrative matters for listed companies. Mr Fitzgerald is also the Chief Financial Officer and has been Company Secretary since 1996. Prior to his involvement with the Group, Mr Fitzgerald worked with an international accounting firm in Australia. Mr Fitzgerald is a member of the Financial Risk Management Committee. 53 Resolute Mining Limited | Annual Report 2016Directors’ Report Interests in the shares and options of Resolute and related bodies corporate As at the date of this report, the interests of the directors in shares, options and performance rights of Resolute Mining Limited and related bodies corporate were: P. Huston J. Welborn M. Botha H. Price P. Sullivan Fully Paid Ordinary Shares Performance Rights 428,182 1,600,000 - 194,745 2,643,142 4,866,069 - 1,515,000 - - 1,168,267 2,683,267 Nature of Operations and Principal Activities The principal activities of entities within the consolidated entity during the year were:  Gold mining; and,  prospecting and exploration for minerals. There has been no significant change in the nature of those activities during the year. Significant Changes in the State of Affairs There have been no significant changes in the state of affairs of the Company other than those listed above. Significant Events after Reporting Date On 30 August 2016, the Company announced a final dividend on ordinary shares in respect of the 2016 financial year of 1.7 cents per share. The dividend has not been provided for in the 30 June 2016 financial statements. Environmental Regulation performance The consolidated entity holds licences and abides by Acts and Regulations issued by the relevant mining and environmental protection authorities of the various countries in which the Group operates. These licences, Acts and Regulations specify limits and regulate the management of discharges to the air, surface waters and groundwater associated with the mining operations as well as the storage and use of hazardous materials. There have been no significant known breaches of the consolidated entity's licence conditions or of the relevant Acts and Regulations. 54 Resolute Mining Limited | Annual Report 2016 Directors’ Report Financial Position and Performance            Cash and bullion at market value increased to a total of A$102m (FY15: A$54m). FY16 net profit after tax of $213m (FY15: loss of $569m). Revenue from gold and silver sales up 20% to $555m (FY15: $462m). Gross profit from operations up 135% to a record $167m (FY15: $71m). Return on equity of 129%. Diluted earnings per share of 27.6 cents. Debt reduced by $91m during the year: o No secured debt as at 30 June 2016; o US$20m Gold Prepay Loan Facility settled in full with final gold instalment delivery in October 2015; o US$50m Senior Secured Cash Advance Facility fully repaid in June 2016; and, o A$15m of Convertible Notes converted and redeemed in June 2016. Net operating cash inflows for the year were $193m (FY15: $62m). Net investing cash outflows of $43m (FY15: $73m). Net financing outflows of $79m (FY15: $2m). Profit from discontinued operations of $45m includes the extinguishment of the net liabilities of the Tanzanian group of companies divested during the period ($4m), that group’s accumulated foreign exchange gain recognised in equity up to the date of the sale ($42m), and other expenses of $1m. Review of Operations Resolute has achieved a number of crucial milestones in 2016 on our journey to establishing a long life, low cost future for our business. Operations performed strongly, and continue to do so, and this is providing a platform to strengthen the Company’s balance sheet. This impressive and important turnaround in the Company’s position and performance in 2016 allows us to develop key organic growth projects with funding confidence. Our decision to immediately commence underground development at Syama, based on the successful Syama Underground Definitive Feasibility Study (“DFS”), will secure our production and cash flow generating base for more than a decade. The recommencement of open pit mining at Ravenswood in FY17 will assist in maintaining continuity of production as we develop a mine life beyond Mt. Wright. FY17 will continue to be exciting for shareholders as we develop the flagship Syama underground mine, deliver the Ravenswood Extension Project study, and continue to work towards a production future for Bibiani. 55 Resolute Mining Limited | Annual Report 2016Directors’ Report Review of Operations Production Strong operating performance has bolstered cash and bullion, allowing for the repayment of debt and strengthening of the Company’s financial position. Key operating performance indicators Units Syama Sulphide Syama Oxide 2016 Syama Total Ravenswood GROUP total 2015 GROUP total UG lateral development - capital UG lateral development - operating Total UG lateral development UG ore mined UG grade mined OP operating waste OP ore mined OP grade mined Total ore mined Total tonnes processed Grade processed Recovery Gold Produced Gold in circuit drawdown/(addition) Gold shipped Gold bullion in metal account movement Gold sold Achieved price Cash Cost m m m t g/t BCM BCM g/t t t g/t % oz oz oz oz oz A$/oz US$/oz A$/oz US$/oz All-in Sustaining Cost A$/oz US$/oz - - - - - - - - - - - - 456 456 958 1,351 1,351 2,020 1,807 1,807 2,978 1,305,585 1,305,585 1,481,435 2.38 2.38 2.40 235,621 4,272,758 4,508,379 150,322 599,345 749,667 2.29 2.21 2.22 - - - 4,508,379 5,524,558 749,667 1,680,036 2.22 3.17 413,038 1,132,468 1,545,506 1,305,585 2,851,091 5,568,162 1,497,103 1,257,948 2,755,051 1,700,386 4,455,437 3,965,662 3.53 76.3 2.30 86.2 2.97 79.8 2.05 94.3 2.61 84.1 3.11 82.9 129,585 80,032 209,617 105,552 315,169 328,684 8,795 (1,275) 7,520 1,644 9,164 (5,176) 138,380 78,757 217,137 107,196 324,333 323,508 4,847 6,666 11,513 4,695 16,208 (10,408) 143,227 85,423 228,650 111,890 340,540 313,100 1,632 1,190 710 517 917 669 1,632 1,190 1,026 747 1,561 1,137 1,632 1,190 830 605 1,163 848 1,608 1,172 1,033 752 1,225 892 1,624 1,184 898 654 1,200 874 1,467 1,228 845 707 1,094 915 1 – Cash cost per ounce of gold produced is calculated as costs of production relating to gold sales excluding gold in circuit inventory movements divided by gold ounces produced. 2 – All in Sustaining Costs (“AISC”) per ounce of gold produced is calculated in accordance with World Gold Council guidelines. These measures are included to assist investors to better understand the performance of the business. Cash cost per ounce of gold produced and AISC are non International Financial Reporting Standards financial information and where included in this Directors’ Report have not been subject to review by the Group’s external auditors. ‐ 56 Resolute Mining Limited | Annual Report 2016Directors’ Report Review of Operations Exploration and Development Detailed information about Resolute’s exploration and development highlights is available on the Company’s website.  During the June 2016 quarter the Company completed the Syama Underground Definitive Feasibility Study which confirmed a positive outcome. The Syama Underground will be a long life and low cost mine that will deliver a strong operating margin over the next decade. On 30 June 2016 the Resolute Board of Directors approved the immediate development of Syama Underground with excavation of the decline due to commence in the September 2016 quarter following the mobilisation of a mining contractor to site. The first development ore is expected to be delivered in December 2016, with stoping commencing in December 2017. During this period there will be continuous production from Syama through current stockpiled sulphide material and ongoing satellite open pit deposits. Key details of the DFS are as follows: o Life of Mine All-in-Sustaining-Costs of US$881 per ounce and strong Life of Mine margins; o initial operating life of more than 12 years; o total Syama Gold Mine production will grow to 250,000 ounces per annum; o pre-production capital of US$95 million which will be fully funded from the current balance sheet and future operating cash flows; o processing innovation will continue to enhance project economics; o underground development to commence immediately with first ore expected to be delivered to the mill in December 2016 which allows for continuous production from Syama to be maintained; o Resolute’s successful Mt Wright underground experience to deliver efficiency and productivity gains at Syama underground mine; and, o substantial upside with opportunities to extend mine life, increase mining recovery and further reduce All-In-Sustaining Costs.  Also at Syama, high grade intercepts returned from the ongoing deep drilling program have identified a major extension to the Syama orebody. The infill results extend the mineralised footprint and provide confidence that the Syama underground reserve estimate can be enhanced in the upper levels of the proposed development. The results confirm the consistency and continuity of mineralisation below the current Syama Underground Reserve and emphasise the possibility of future expansion and extension to the Syama Gold Mine. The deep extension drilling program is planned to continue throughout 2016 and is expected to enhance the existing resource model and deliver further mine life extension opportunities beyond the current 12-year mine life of the Syama Underground Project. In June 2016, Resolute completed a positive Feasibility Study (“Study”) for its 90% owned Bibiani project. The Study was lodged with the Government of Ghana, which owns a 10% free carried interest in Bibiani. Delivery of the Study to the Ghanaian Minerals Commission was a key commitment made by Resolute as part of the government’s approval of the Company’s acquisition of the asset in 2014. Key highlights of the Study include:  o Initial Ore Reserve of 5.4 million tonnes @ 3.7 grams per tonne containing 640,000 ounces of gold; o mine plan to produce up to 1.2 million tonnes per annum of underground ore; o initial operating life of 5 years with production of approximately 100,000 ounces per annum; o start-up capital of US$72M including US$29M of underground mining equipment; o short timeline to production expected with only a 9-month development and refurbishment period; o life of Mine All-in-Sustaining-Costs of US$858/oz; o the location and characteristics of Bibiani are well matched to the technical capabilities of the Company; and, o substantial upside remains with ongoing work scheduled to focus on upgrading and expanding the orebody to extend mine life and reduce operating costs. 57 Resolute Mining Limited | Annual Report 2016Directors’ Report Review of Operations Exploration and Development (continued)  During the year the Company continued to refine the Ravenswood Expansion Project (“REP”) with the Resolute Board of Directors approving the development of the Nolans East deposit. Work continued during the June quarter on finalising the Environmental Application (EA) amendment for the Sarsfield Expansion Project. The EA amendment is scheduled to be submitted in the September 2016 quarter. The decision to commence production from Nolans East has allowed the Company to implement a disciplined hedging program to manage gold price risk during the transition from underground to large scale open pit operations. Resolute has sold forward 36,000oz of gold at an average price of A$1,800/oz. These forward gold sales of 3,000oz per month cover the period from November 2016 to October 2017 to match approximately 50% of the production from Nolans East. Likely Developments and Expected Results  Gold production for FY17 forecast to be a minimum of 300,000oz at All-In-Sustaining-Costs of A$1,280/oz (US$934/oz).  Gold sales forecast to be 325,000oz as increased processing efficiency continues to allow a reduction of gold in circuit inventory. o At Syama, sulphide stockpiles are being managed to provide a consistent feed to the sulphide plant until the underground is developed and reaches full production. A key project underway over the first half of FY17 is to increase throughput in the sulphide circuit to an annualised 2.2Mtpa rate with work to achieve this having commenced. Mobilisation of the underground mining contractor will be largely completed during the September 2016 quarter. o At Ravenswood, preparation is well underway for the re-commencement of open pit mining operations at the Nolans East open pit. Initial mining will be from the Nolans East cutback following the mobilisation of a mining contractor to site. The Nolans process plant will be upgraded to 2.8Mtpa capacity by the addition of tertiary crushing and various minor changes in the milling circuit. Mining is expected to commence during the first quarter of FY17 with the process plant upgrade completed during the second quarter of FY17.  Capital expenditure for major growth projects is expected to be A$170M (US$124M), fully funded from existing cash reserves and operating cash flows.  Exploration budget increased to A$19M (US$14M) focused on resource and reserve expansion at Syama, Ravenswood and Bibiani. Remuneration Report The following information has been audited. This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, key management personnel of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, including any director (whether executive or otherwise) of the parent company. 58 Resolute Mining Limited | Annual Report 2016Directors’ Report Remuneration Report (continued) a) (i) Key management personnel Directors Name P. Huston J. Welborn M. Botha H. Price P. Sullivan Position held during the financial year Non-Executive Chairman Managing Director and Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director (ii) Executives Name P. Beilby G. Fitzgerald P. Henharen V. Hughes D. Kelly B. Mowat P. Venn Position held during the financial year Chief Operating Officer Chief Financial Officer and Company Secretary General Manager – Project Delivery (appointed 4 April 2016) General Manager – People, Culture and Information (appointed 27 June 2016) General Manager – Corporate Strategy (appointed 4 April 2016) General Manager - Exploration (appointed 4 April 2016) Chief Business Development Officer (up until 29 April 2016) b) Compensation of key management personnel RML Remuneration Policy The Board recognises that the performance of the Company depends upon the quality of its directors and executives. To achieve its financial and operating objectives, the Company must attract, motivate and retain highly skilled directors and executives. The Company embodies the following principles in its remuneration framework: • Provides competitive rewards to attract high calibre executives; • structures remuneration at a level that reflects the executive’s duties and accountabilities and is competitive within Australia; benchmarks remuneration against appropriate groups; and, aligns executive incentive rewards with the creation of value for shareholders. • • Remuneration and Nomination Committee The Remuneration and Nomination Committee is responsible for determining and reviewing the compensation arrangements for the directors themselves, the Chief Executive Officer and the executive team. Executive remuneration is reviewed annually having regard to individual and business performance, relevant comparative information and internal and independent external information. In accordance with best practice governance the Remuneration and Nomination Committee is comprised solely of non-executive directors. Remuneration Structure In accordance with best practice governance, the structure of non-executive director and senior executive remuneration is separate and distinct. 59 Resolute Mining Limited | Annual Report 2016Directors’ Report Remuneration Report (continued) Non-Executive Director Remuneration Objective The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Structure The Company’s constitution and the ASX Listing Rules specify that the aggregate remuneration of non- executive directors shall be determined from time to time by a general meeting. An amount not exceeding the amount determined is then divided between the directors as agreed. The latest determination was at the Annual General Meeting held on 30 November 2010 when the shareholders approved an aggregate remuneration of $600,000 per year. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The board considers fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each non-executive director receives a fee for being a director of the Company and for sitting on relevant board committees. The fee size is commensurate with the workload and responsibilities undertaken. Chief Executive Officer and Executive Remuneration Objective The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company and so as to ensure total remuneration is competitive by market standards. Structure In determining the level and make up of executive remuneration, the Remuneration and Nomination Committee uses an external consultant’s Remuneration Report to determine market levels of remuneration for comparable executive roles in the mining industry. An external advisor has been used to assist in the design and implementation of a Remuneration Framework that is in line with industry practice. It is the Remuneration and Nomination Committee’s policy that employment contracts are entered into with the Chief Executive Officer and the executive employees. Details of these contracts are outlined later in this report. Remuneration consists of the following key elements: • Fixed remuneration • Variable remuneration o o Short term incentives (STI); and, Long term incentives (LTI). The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) is established for each executive by the Remuneration and Nomination Committee and for the year ended 30 June 2016 was as follows: 60 Resolute Mining Limited | Annual Report 2016Directors’ Report Remuneration Report (continued) Fixed Remuneration Objective The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Fixed remuneration is reviewed annually by the Remuneration and Nomination Committee. The process consists of a review of individual performance, relevant experience, and relevant comparable remuneration in the mining industry. Structure Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost to the Company. Variable Remuneration – Short Term Incentive (“STI”) Objective The objective of the STI is to provide a greater alignment between performance and remuneration levels. Structure The STI is an annual “at risk” component of remuneration for executives. It is payable based on performance against key performance indicators (KPIs) set at the beginning of the financial year. STI’s are structured to remunerate executives for achieving annual Company targets and their own individual performance targets. The net amount of any STI after allowing for applicable taxation, is payable in cash. KPIs require the achievement of strategic, operational or financial measures and in most cases are linked to the drivers of business performance. For each KPI there are defined “threshold”, “target” and “stretch” measures which are capable of objective assessment. For the executives, a below “threshold” performance delivers a nil STI, a “threshold” performance delivers a STI equal to 12.5% of fixed remuneration, a “target” performance delivers a STI equal to 50% of fixed remuneration, and a “stretch” performance delivers a STI equal to 65% of fixed remuneration. Pro-rata vesting applies on a straight line basis between “threshold” and “target” and from “target” to “stretch” Performance. Target performance represents challenging but achievable levels of performance. Stretch performance requires significant performance above and beyond normal expectations and if achieved is anticipated to result in a substantial improvement in key strategic outcomes, operational or financial results, and/or the business performance of the Company. The Remuneration Committee is responsible for recommending to the Board KPIs for each executive and then later assessing the extent to which the KPIs of the executive have been achieved, and the amount to be paid to each executive. To assist in making this assessment, the Committee receives detailed reports and presentations on the performance of the business from the CEO, Company Secretary and independent remuneration consultants as required. 61 Resolute Mining Limited | Annual Report 2016Directors’ Report Remuneration Report (continued) The STI measures comprise:   Improved safety performance – measured by: o a lag indicator in the form of a specified reduction in the Total Recordable Injury Frequency Rate in comparison to prior years; and o specified lead indicators designed to be proactive and influence future events with measures being put in place to prevent incidents and injury. As part of this process, a Safety Action Performance list is prepared each year outlining a set of actions and deliverables. The achievement of defined targets relative to budget relating to: o operating cash flow; o gold production; and, o cost per tonne milled.  A personal performance metric. These measures have been selected as they can be reliably measured, are key drivers of value for shareholders and encourage behaviours in line with the Company’s core values. Changes to the STI Plan from 1 July 2016 A recently conducted independent review of the Company’s incentive plans has led to some changes that will be implemented from 1 July 2016. The intention of the proposed changes to the STI and LTI plans is to support current strategies and business objectives and to ensure both programs are correctly aligned with the creation of shareholder value. With effect from 1 July 2016, amendments have been made to:  the threshold, target, and stretch performance levels to make them more difficult to achieve. This has been balanced by increasing the reward for executive for a stretch performance to 75% (from 65%) of fixed remuneration; and  introduce Board discretion, on Managing Director and Chief Executive Officer recommendation, to modify the payment to an individual or to group participants based on performance factors, safety factors, or to recognise extraordinary occurrences which have had a positive or negative impact on results and shareholder value The individual performance measures vary according to the individual executive’s position, and reflect value accretive and/or risk mitigation achievements for the benefit of the Company within each executive’s respective areas of responsibility. They also include a discretionary factor determined by the Board designed to take into account unexpected events and achievements during the year. The aggregate of annual STI payments available for executives across the Company is subject to the approval of the Remuneration and Nomination Committee. Payments are delivered as a cash bonus and/or in the form of superannuation. Performance in the 2015/16 Year The STI payments to executives during the year under review were on average just below the target level. Gold production, operating cash flow and cost per tonne milled performance were all around the target level, but an increase in the Total Reportable Injury Frequency Rate during the year resulted in a below threshold outcome on the safety metric. It is important to note that corrective actions have been taken to improve overall safety performance. 62 Resolute Mining Limited | Annual Report 2016Directors’ Report Remuneration Report (continued) Variable Remuneration – Long Term Incentive (“LTI”) Objective The objective of the LTI plan is to reward executives in a manner, which aligns this element of remuneration with the creation of shareholder wealth. As such LTIs are provided to executives who are able to influence the generation of shareholder wealth and thus have an impact on the Company’s performance against the relevant long-term performance hurdles. Overview of the Company’s approach to Long Term Incentives a) Selecting the right plan vehicle To provide an effective tool to reward, retain and motivate executives, following receipt of advice from a remuneration consultant in 2012, the Board decided that the most appropriate LTI plan is a Performance Rights Plan. Under a Performance Rights Plan, executives are granted a right to be issued a share in the future subject to performance based vesting conditions being met. In June 2016, the Remuneration & Nomination Committee approved the engagement of Egan Associates Pty Ltd to provide the Company with CEO Remuneration benchmarking data and to conduct a review of the Company’s Incentive Plan. The engagement was directly instigated by the Committee Chairman and reports provided by Egan Associates Pty Ltd were submitted to the Chairman to ensure KMP with a vested interest were removed from this process. The Committee is satisfied the advice received from Egan Associates Pty Ltd is free from undue influence from the KMP to whom the remuneration information applies. The recommendations and background information provided on the Company’s incentive plans were provided to Resolute as an input into the decision making only. The Committee considered the recommendations, along with other factors, in making remuneration decisions. The fees paid to Egan Associates Pty Ltd for their report on CEO remuneration benchmarking and recommendations for the structuring of the Company’s incentive plans were $21,000. b) Grant Frequency and LTI quantum Executives receive a new grant of performance rights every year and the LTI forms a key component of the executive’s Total Annual Remuneration. The LTI dollar value that executives are entitled to receive is set at a fixed percentage of their fixed remuneration and has equated to 75% of fixed remuneration for the Chief Executive Officer and 50% of fixed remuneration for the other executives. This level of LTI is in line with current market practice. The number of performance rights granted up until 30 June 2016 has been determined by dividing the LTI dollar value of the award by the fair value of a Performance Right on the grant date. c) Performance Conditions Performance conditions have been selected that reward executives for creating shareholder value as determined via the change in the Company’s share price and via reserves/resources growth over a 3 year period. 63 Resolute Mining Limited | Annual Report 2016Directors’ Report Remuneration Report (continued) d) Changes to the LTI Plan from 1 July 2016 Following the receipt of feedback from a remuneration consultant and subject to shareholder approval where relevant, the following key changes have been made to the LTI plan with effect from 1 July 2016: • A cap equal to 1% of Resolute shares on issue has been placed on annual performance rights grants. The total number of performance rights on issue at any point in time is capped at 5% of Resolute shares on issue. • An increase in the threshold for the Total Shareholder Return (“TSR”) metric from P50 to P60 to make it harder for participants to meet the minimum requirement for vesting. • The methodology of valuing performance rights by reference to the fair value has been changed and future performance rights to be granted will be valued at their face value for the purposes of calculating how many performance rights are to be granted. • Inclusion in the terms of the LTI Plan the ability to adjust the number of performance rights at vesting to allow for any capital returns and dividends during the vesting period. • Inclusion in the terms of the LTI Plan a clause to allow the tax beneficial deferral of exercise of Rights following vesting conditions being met. This change is a result of tax law changes in 2015 and has been made to encourage participants to retain shares received upon vesting of performance rights as opposed to immediately selling shares to meet tax liabilities. • An increase in participation rates which will see the CEO’s LTI opportunity increased from 75% of fixed remuneration to 100% of fixed remuneration and the Executives’ LTI opportunity increased from 50% to 65%. This is designed to provide stronger alignment of executive behaviour and the creation of enduring shareholder value. The LTI performance is structured as follows: Performance Rights will vest subject to meeting service and performance conditions as defined below:   75% of the Rights will be performance tested against the relative total shareholder return (“TSR”) measure over a 3 year period; and, 25% of the Rights will be performance tested against the reserve/resource growth over a 3 year period. Reflecting on market practice the Board has decided that the most appropriate performance measure to track share price performance is via a relative TSR measure. The Company’s TSR is updated each year and is measured against a customised peer group comprising the following companies:  Alacer Gold Corporation  Beadell Resources Ltd  Endeavour Mining Corporation  Evolution Mining Ltd  Kingsgate Consolidated Ltd  Medusa Mining Ltd  Northern Star Resources Limited  OceanaGold Corporation  Perseus Mining Ltd  Ramelius Resources Ltd  Regis Resources Ltd  Saracen Mining Ltd  Silver Lake Resources Ltd  St Barbara Ltd   Teranga Gold Corporation Troy Resources Limited No performance rights (relating to TSR) will vest unless the percentile ranking of the Company’s TSR for the relevant performance year, as compared to the TSR’s for the peer group companies for that year, is at or above the 50th percentile (which has increased to the 60th percentile for grants made after 30 June 2016). 64 Resolute Mining Limited | Annual Report 2016Directors’ Report Remuneration Report (continued) The following table sets out the vesting outcome based on the company’s relative TSR performance for the year ended 30 June 2016: Relative TSR performance Less than 50th percentile At the 50th percentile Between 50th and 75th percentile Performance Vesting Outcomes 0% vesting 50% vesting For each percentile over the 50th, an additional 2% of the performance rights will vest At or above 75th percentile 100% vesting The second performance condition is reserve/resource growth net of depletion over a 3 year period. Broadly, the quantum of the increase in reserves/resources will determine the number of performance rights to vest. The following table sets out the vesting outcome based on the company’s reserve/resource growth performance: Reserves and Resource Growth Performance Performance Vesting Outcomes R&R depleted R&R maintained R&R grown by up to 30% 0% vesting 50% vesting For each 1% growth in R&R, an additional 1.67% of the performance rights will vest 100% vesting R&R grown by 30% or more e) Performance period Grants under the LTI need to serve a number of different purposes: i) Act as a key retention tool; and, ii) focus on future shareholder value generation. Therefore, the awards under the LTI relate to a 3 year period and provide a structure that is focused on long term sustainable shareholder value generation. f) LTI Vesting Outcomes for the 3 Years Ended 30 June 2016 On 1 July 2013, 3,585,228 performance rights were granted to Level 1 employees (Executives and Operations General Managers). Up until 30 June 2016, 431,632 performance rights had lapsed leaving 3,153,596 performance rights on issue. These performance rights related to the 3 year period ended 30 June 2016, and have recently been performance tested. Resolute’s TSR performance over the 3 years ended 30 June 2016 was at the 60th percentile of its peer group, resulting in a vesting outcome of 70% of the performance rights under this metric (which accounts for 75% of the performance rights issued). Resolute’s R&R growth (which accounts for 25% of the performance rights issued) over the 3 years ended 30 June 2016 was less than 0%, resulting in a nil vesting outcome for this metric. As a result of the above test results, 1,655,638 of the performance rights met the performance measures and vested whilst 1,929,590 of the performance rights did not meet the performance measures and lapsed. This equates to a vesting rate of 46% and a lapsing rate of 54%. 65 Resolute Mining Limited | Annual Report 2016Directors’ Report Remuneration Report (continued) g) Change of Control Provisions On the occurrence of a Change of Control Event, the Board will determine, in its sole and absolute discretion, the manner in which all unvested and vested Awards will be dealt with. Up until January 2012, LTI grants to executives were delivered in the form of employee share options. These options were previously issued with an exercise price at a 10% premium to the RML ordinary share price at the date the Remuneration and Nomination Committee decided to invite the eligible persons to apply for the option. These employee share options vest over a 30 month period. This option plan has been replaced by the new Performance Rights Plan. All existing options issued under the employee share option plan will continue to vest, however it is the current intention that no further options will be issued in the future. Options granted in prior periods are vested in accordance with the Resolute Mining Limited Employee Share Option Plan following a review by the relevant supervisor of the executive’s performance. If a satisfactory performance level is achieved, the relevant portions of the options vests to the executive. In order for the executive’s options to vest, the executive must successfully meet the deliverables set out in their employment contract specific to their role. The assessment of whether the executive’s role has been successfully performed (therefore allowing the options to vest) is done by way of a formal annual appraisal of the executive’s individual performance. Assessments of performance generally exclude factors external to the Company. The performance of the Chief Executive Officer is assessed by the Chairman, and the performance of the other executives is assessed by the Chief Executive Officer. The annual performance appraisal assesses each executive’s performance against the previously identified key performance indicators and also assesses progress on their development priorities and actions. The Company prohibits directors or executives from entering into arrangements to protect the value of unvested Resolute Mining Limited shares, options or performance rights that the director or executive may become entitled to as part of his/her remuneration package. This includes entering into contracts to hedge their exposure to RML rights, options or shares that may vest to him/her in the future. 66 Resolute Mining Limited | Annual Report 2016D E T A L E R E C N A M R O F R E P D E S A B E R A H S S T N E M Y A P M R E T G N O L I S T F E N E B I S T F E N E B T N E M Y O L P M E T S O P I S T F E N E B M R E T T R O H S - - - - 4 1 8 1 9 1 - - - 5 1 3 1 d n a s n o i t p O e c n a m r o f r e P s t h g R i % , e v i t n e c n I m r e T t r o h S d n a s n o i t p O i s t h g R e c n a m r o f r e P e c n a m r o f r e P e v a e L i e c v r e S g n o L e v i t n e c n I m r e T t r o h S y r a t e n o M n o N e s a B % s t h g R i $ $ $ $ e s n e p x E n o i t a u n n a r e p u S y c n a d n u d e R e s n e p x E e v a e L l a u n n A ) i i ( $ $ $ ) i ( s t i f e n e B n o i t a r e n u m e R - - - - 3 4 5 4 5 4 2 6 - 5 3 8 2 9 2 - ) 1 9 2 , 0 1 1 ( - - - - - - 0 5 2 , 6 2 1 4 1 0 , 6 6 7 2 , 1 5 1 1 5 7 , 2 3 1 - - - 6 9 9 , 4 1 3 3 9 , 2 9 7 5 3 , 3 1 9 9 2 , 0 1 - 3 8 6 1 4 5 6 5 7 , 1 8 2 2 , 9 - - 9 0 8 , 7 0 0 0 , 5 3 0 0 0 , 0 3 0 0 0 , 5 3 0 0 0 , 5 3 5 8 8 , 4 0 2 3 5 4 0 , 4 1 1 1 , 6 5 4 8 , 4 2 - - - - - - - - - - - 9 6 3 , 8 4 2 - - - - - - - - 9 8 5 , 0 4 7 4 0 , 5 5 2 4 8 2 , 4 3 5 4 4 , 9 2 8 9 1 , 4 4 8 2 6 8 5 , 3 3 2 4 , 5 0 3 4 , 0 2 4 1 1 , 6 1 2 1 9 0 , 5 8 1 0 5 7 , 9 9 - 3 5 2 , 8 2 5 0 5 , 3 1 3 6 6 , 8 0 1 - 0 0 6 , 3 1 - - - - - - 3 2 7 , 4 8 8 7 3 9 5 8 8 6 , 3 0 0 0 , 5 7 1 1 9 5 , 8 6 0 0 0 , 5 5 0 0 0 , 0 9 4 8 3 , 4 3 4 6 4 2 , 4 7 3 8 7 8 , 1 1 3 9 1 4 , 1 5 2 7 3 , 3 8 7 5 , 2 4 9 3 1 , 8 5 2 0 8 , 8 9 1 ) i i i ( n a v i l l u S n o t s u H e c i r P . P . P . H n r o b e W l . J a h t o B . M s r o t c e r i D s r e c i f f O ) v i ( n e r a h n e H ) v ( s e h g u H . P . V l d a r e g z t i F . G y b l i e B . P ) v i ( t a w o M ) i v ( n n e V . B . P ) v i ( y l l e K . D 6 1 0 2 67 : s w o l l o f s a e r a l e n n o s r e p t n e m e g a n a m y e k o t i d e d v o r p n o i t a r e n u m e r f o s l i a t e D t r o p e R ’ s r o t c e r i D Resolute Mining Limited | Annual Report 2016 P . V e n n P . B e i l b y G . F i t z g e r a d l O f f i c e r s J . l W e b o r n H . P r i c e M . B o t h a P . P . S u l l i v a n H u s t o n D i r e c t o r s 2 0 1 5 t o h e r b e n e f i t s i r e c e v e d b y t h e e x e c u t i v e . ( i ) N o n - m o n e t a r y b e n e f i t s i l n c u d e , w h e r e a p p l i c a b e l , t i h s b e n g a i n o n - m a r k e t r e a l t e d h u r d e l , t h e a c c o u n t i n g e x p e n s e i s j a d u s t e d t o r e f l e c t t h e o u t c o m e . ( i i ) T h e S h o r t T e r m I n c e n t i v e s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6 w i l l b e p a d i i n c a s h i n S e p t e m b e r 2 0 1 6 . ( i i i ) T h s i n e g a t i v e i s d u e t o t h e r e v e r s a l o f t h e e x p e n s e r e c o g n s e d i i n p r i o r y e a r s l r e a t i n g t o t h e R e s e r v e & R e s o u r c e g r o w t h m e t r i c . I n p r i o r y e a r s , i t h a d b e e n a s s u m e d t h a t t h e v e s t i n g o u t c o m e f o r t h e R & R g r o w h m e t t r i c w o u d l b e 1 0 0 % , w h s t i t h e a c t u a l r e s u l t w a s a 0 % v e s t i n g o u t c o m e f o r i t h s m e t r i c . D u e t o ( v ) M s H u g h e s w a s a p p o n i t e d o n 2 7 J u n e 2 0 1 6 . ( i v ) M r H e n h a r e n , M r K e l l y a n d M r M o w a t w e r e a p p o n i t e d o n 4 A p r i l 2 0 1 6 . ( v i ) M r V e n n w a s m a d e r e d u n d a n t e f f e c t i v e 2 9 A p r i l 2 0 1 6 . ( v i i ) T h e S h o r t T e r m I n c e n t i v e s f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 5 w e r e p a d i i n c a s h o n 1 5 S e p t e m b e r 2 0 1 5 . 68 2 8 6 , 1 7 5 3 0 7 , 7 9 7 3 7 2 , 6 6 5 2 7 , 7 3 9 5 5 , 0 0 0 9 0 , 0 0 0 5 4 5 , 4 5 8 1 7 5 , 0 0 0 4 , 8 2 3 4 , 7 2 3 - - - - 4 , 9 1 8 - t h e c o s t 1 8 7 , 5 6 4 2 0 8 , 2 1 5 2 3 8 , 6 9 9 3 7 3 , 9 6 0 - - - - t o t h e C o m p a n y o f p r o v d n g i i f r i n g e b e n e f i t s , t h e f r i n g e b e n e f i t s t a x o n t h o s e b e n e f i t s a n d a l l 2 6 , 4 2 1 2 9 , 3 8 1 3 4 , 1 8 0 7 1 , 6 4 9 - - - - 3 5 , 0 0 0 3 4 , 9 9 9 3 5 , 0 0 0 2 , 6 3 5 3 5 , 0 0 0 - 3 5 , 0 0 0 - 8 , 5 8 4 9 , 4 9 9 1 1 , 0 1 5 2 4 , 8 0 4 - - - - 6 4 6 4 6 4 - - - - - 2 0 0 , 4 9 4 2 2 6 , 6 9 8 2 5 8 , 7 2 2 - - - 6 1 7 , 8 9 9 - 5 2 5 3 5 2 - - - 5 9 - 2 7 2 8 2 7 - - - 3 7 - D i r e c t o r s ’ R e p o r t P O S T E M P L O Y M E N T L O N G T E R M S H O R T T E R M B E N E F T S I B E N E F T S I B E N E F T S I S H A R E B A S E D P A Y M E N T S P E R F O R M A N C E R E L A T E D B a s e R e m u n e r a t i o n B e n e f i t s ( i ) $ $ $ ( v i i ) A n n u a l L e a v e E x p e n s e S u p e r a n n u a t i o n L e a v e E x p e n s e $ $ $ $ O p t i o n s N o n M o n e t a r y S h o r t T e r m I n c e n t i v e L o n g S e r v c e i P e r f o r m a n c e O p t i o n s a n d $ i R g h t s % P e r f o r m a n c e R g h t s i S h o r t T e r m I n c e n t i v e , % i R g h t s P e r f o r m a n c e O p t i o n s a n d Resolute Mining Limited | Annual Report 2016 d e s i c r e x e r a e y e h t g n i r u d r a e y e h t f o d n e r a e y e h t f o ) i ( r a e y e h t f o t r a t s r a e y s n o i t p o f o e u l a V e h t t a e l b a s i c r e x e d n a d e t s e V d n e e h t t a e c n a l a B e h t g n i r u d d e s p a L e h t t a e c n a l a B e p y t s n o i t p O 6 1 0 2 - - - - $ % . o N s r o t c e r i D - - - ) 0 0 0 , 0 0 0 , 2 ( 0 0 0 , 0 0 0 , 2 d e t s i l n U ) i i ( n a v i l l u S . P - 0 0 1 0 0 1 - 0 0 0 , 0 6 0 0 0 , 0 6 - 0 0 0 , 0 6 0 0 0 , 0 6 ) 0 0 0 , 0 9 1 ( ) 0 0 0 , 0 0 1 ( ) 0 0 0 , 0 6 1 ( 0 0 0 , 0 5 2 0 0 0 , 0 6 1 0 0 0 , 0 6 1 d e t s i l n U d e t s i l n U d e t s i l n U ) v i ( l d a r e g z t i F . G ) i i i ( y b l i e B . P ) v ( n n e V . P s r e c i f f O . 1 1 0 2 y r a u n a J 5 2 d n a 0 1 0 2 r e b m e v o N 6 1 . 2 1 0 2 y r a u n a J 4 d n a 1 1 0 2 y r a u n a J . 1 1 0 2 y r a u n a J 5 2 5 2 . 1 1 0 2 y r a u n a J 5 n o n o n o n o d e t n a r g e r e w r a e y d e t n a r g e r e w r a e y d e t n a r g e r e w r a e y d e t n a r g e r e w r a e y e h t e h t e h t e h t g n i r u d d e s p a l g n i r u d d e s p a l g n i r u d d e s p a l g n i r u d d e s p a l t a h t t a h t t a h t t a h t s n o i t p o s n o i t p o s n o i t p o s n o i t p o . l i n $ s a w d e s p a l y e h t e t a d e h t t a s n o i t p o f o e u a v l e h T e h T e h T e h T e h T ) i ( ) i i ( ) i i i ( ) v i ( ) v ( 69 : s w o l l o f s a e r a l e n n o s r e p t n e m e g a n a m y e k f o l i s g n d o h n o i t p o f o s l i a t e D t r o p e R ’ s r o t c e r i D Resolute Mining Limited | Annual Report 2016 a n d t h e p o r t i o n o f t h e P e r f o r m a n c e R g h t s i i s s u e d i n D e c e m b e r 2 0 1 2 t h a t l a p s e d d u e t o t h e p e r f o r m a n c e h u r d e s l n o t i b e n g m e t . ( i i ) P e r f o r m a n c e r i g h t s v e s t i n a c c o r d a n c e w i t h t h e l R e s o u t e M n n g i i i L m i t e d R e m u n e r a t i o n P o l i c y a n d E q u i t y I n c e n t i v e l P a n w h c h i o u t l i n e t h e k e y t h e f i n a n c a i l y e a r i s n i l . N o p e r f o r m a n c e r i g h t s w e r e f o r f e i t e d d u r i n g t h e f i n a n c a i l y e a r . p e r f o r m a n c e i i n d c a t o r s t h a t n e e d t o b e s a t i s f i e d . T h e p e r c e n t a g e o f p e r f o r m a n c e r i g h t s g r a n t e d d u r i n g t h e f i n a n c a i l y e a r t h a t l a s o v e s t e d d u r i n g 70 a c c r u e d a t t h e d a t e o f h s i r e d u n d a n c y . H s i i i r e m a n n g P e r f o r m a n c e R g h t s w i i l l b e p e r f o r m a n c e t e s t e d a t t h e n o r m a l v e s t i n g d a t e s ; ( i ) P e r f o r m a n c e i R g h t s l a p s e d d u r i n g t h e c u r r e n t y e a r i l n c u d e t w o c o m p o n e n t s : a p r o - r a t a p o r t i o n o f M r V e n n s ' P e r f o r m a n c e i R g h t s t h a t h a d n o t P . B e i l b y O f f i c e r s P . V e n n G . F i t z g e r a d l J . l W e b o r n P . S u l l i v a n D i r e c t o r s 1 , 0 3 7 , 1 6 0 1 , 1 8 2 , 9 7 7 9 2 3 , 4 6 9 6 9 7 , 6 4 8 7 7 4 , 3 6 6 8 8 2 , 0 1 8 1 J u l 2 0 1 5 1 J u l 2 0 1 5 1 J u l 2 0 1 5 1 , 7 1 5 , 1 4 2 - - 1 , 5 1 5 , 0 0 0 1 J u l 2 0 1 5 1 J u l 2 0 1 5 0 . 2 5 0 . 2 5 0 . 2 5 0 . 2 5 0 . 2 5 $ N u m b e r G r a n t d a t e F a i r v a l u e o f a t g r a n t d a t e p e r f o r m a n c e r i g h t s 1 7 4 , 4 1 2 1 9 3 , 5 9 2 2 2 0 , 5 0 5 3 7 8 , 7 5 0 - $ d a t e r i g h t s a t g r a n t p e r f o r m a n c e v a l u e o f T o t a l F a i r 3 3 3 3 3 ( y e a r s ) 3 0 J u n 2 0 1 8 3 0 J u n 2 0 1 8 3 0 J u n 2 0 1 8 1 J u l 2 0 2 0 1 J u l 2 0 2 0 1 J u l 2 0 2 0 3 0 J u n 2 0 1 8 3 0 J u n 2 0 1 8 1 J u l 2 0 2 0 1 J u l 2 0 2 0 $ n i l $ n i l $ n i l $ n i l $ n i l $ p e r f o r m a n c e p e r f o r m a n c e r i g h t s d u r i n g t h e y e a r r i g h t s g r a n t e d V e s t i n g p e r i o d V e s t i n g d a t e E x p i r y o f E x e r c i s e p r i c e o f ( 7 9 4 , 3 4 6 ) ( 1 5 0 , 7 6 7 ) ( 1 7 2 , 3 0 5 ) ( 4 3 , 2 9 3 ) ( 4 9 , 7 5 4 ) ( 5 6 , 8 6 2 ) 1 , 6 1 1 , 0 0 5 1 , 8 3 5 , 8 2 8 7 8 3 , 4 7 8 ( 4 1 1 , 1 8 1 ) ( 1 3 5 , 6 9 4 ) - - 1 , 5 1 5 , 0 0 0 1 , 1 6 8 , 2 6 7 D i r e c t o r s ’ R e p o r t 2 0 1 6 t h e y e a r t h e s t a r t o f B a l a n c e a t D e t a i l s o f p e r f o r m a n c e r i g h t s l h o d n g s i o f k e y m a n a g e m e n t p e r s o n n e l a r e a s f o l l o w s : G r a n t e d d u r i n g t h e y e a r a s c o m p e n s a t i o n y e a r ( i ) y e a r d u r i n g t h e d u r i n g t h e e n d o f t h e y e a r L a p s e d V e s t e d B a l a n c e a t t h e Resolute Mining Limited | Annual Report 2016 Directors’ Report Details of shareholdings of key management personnel are as follows: 2016 Directors P. Huston P. Sullivan M. Botha H. Price J. Welborn (i) Officers P. Beilby G. Fitzgerald P. Venn Balance at the start of the year Received during the year on vesting of performance rights Received during the year on conversion of convertible notes Purchased on market during the year Other changes during the year (ii) Balance at the end of the year 428,182 3,007,448 - 194,745 350,000 20,000 - 85,000 - 135,694 - - - 56,862 49,754 43,293 - - - - 200,000 - - - - 1,000,000 - - - - - 428,182 3,143,142 - 194,745 1,550,000 500 - - - - - - - (128,293) 77,362 49,754 - (i) (ii) Mr Welborn acquired 650,000 fully paid ordinary shares in July 2015 and 350,000 fully paid ordinary shares in March 2016. These were the number of shares held by Mr Venn when he ceased employment effective April 2016. Details of convertible note holdings of key management personnel are as follows: 2016 Directors J. Welborn Officers P. Beilby P. Venn Balance at the start of the year Converted into shares during the year Other changes during the year Balance at the end of the year 200,000 (200,000) - 500 500 (500) - - (500) - - - 71 Resolute Mining Limited | Annual Report 2016Directors’ Report Executive Employment Contracts Name Title John Welborn Managing Director and Chief Executive Officer Chief Operating Officer Peter Beilby Term of Agreement Open Notice Period by Executive 6 months Open 3 months Chief Financial Officer Open 3 months Greg Fitzgerald David Kelly General Manager – Corporate Strategy General Manager – Project Delivery Paul Henharen Bruce Mowat General Manager – Exploration Vanessa Hughes General Manager – People, Culture & Information ¹ NES is the National Employment Standards. Loans to Key Management Personnel Open 3 months Open 3 months Open 1 month Open 3 months 6 months 6 months Termination Benefit¹ Notice Period by Company 12 months Redundancy as per NES Redundancy as per NES Redundancy as per NES Redundancy as per NES Redundancy as per NES Redundancy as per NES Redundancy as per NES 3 months 3 months 3 months 1 month There were no loans to key management personnel during the years ended 30 June 2016 and 30 June 2015. Company Performance The table below shows the performance of the Consolidated Entity over the last 5 years: Net profit/(loss) after tax Basic earnings/(loss) per share cents/share $'000 This is the end of the audited information. Shares under Options 30 June 2016 30 June 2015 30 June 2014 30 June 2013 30 June 2012 101,859 18.62 (568,760) (78.39) 105,443 13.29 212,927 28.31 29,156 5.20 Unissued ordinary shares of Resolute Mining Limited under option at the date of this report are as follows: Grant date Expiry date 4/01/2012 26/01/2017 Exercise price $1.85 Number on issue 500,400 500,400 Shares issued as a result of the exercise of options: From 1 July 2015 up until the date of this report, 130,000 shares were issued following the exercise of options on 1 August 2016. The remaining 45,000 options lapsed. 72 Resolute Mining Limited | Annual Report 2016 Directors’ Report Shares under Options (continued) Performance rights at the date of this report are as follows: Grant date Vesting date 1/07/2014 1/07/2015 28/08/2015 30/06/2017 30/06/2018 30/06/2017 Exercise price - - - Number on issue 2,250,597 5,083,995 4,883,803 12,218,395 Indemnification and Insurance of Directors and Officers RML maintains an insurance policy for its directors and officers against certain liabilities arising as a result of work performed in the capacity as directors and officers. The company has paid an insurance premium for the policy. The contract of insurance prohibits disclosure of the amount of the premium and the nature of the liabilities insured. Indemnification of Auditors To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial year. Auditor Independence Refer to page 75 for the Auditor’s Independence Declaration to the Directors of Resolute Mining Limited. Directors’ Meetings The number of meetings and resolutions of directors (including meetings of committees of directors) held during the year and the number of meetings (or resolutions) attended by each director were as follows: Full Board Audit Environment & Community Development Remuneration & Nomination Safety, Security & Occupational Health Financial Risk Management P. Huston P. Sullivan M. Botha J. Welborn H. Price Number of meetings (or resolutions) held 24 24 24 24 24 24 5 n/a 5 n/a 5 5 n/a n/a n/a 4 n/a 4 5 n/a 5 n/a 5 5 n/a n/a n/a 4 n/a 4 n/a 17 n/a 17 n/a 17 The details of the functions of the other committees of the Board are presented in the Corporate Governance Statement. 73 Resolute Mining Limited | Annual Report 2016 Directors’ Report Corporate Governance Statement RML provides disclosure of the Company’s Corporate Governance Statement on the Company’s website at https://www.rml.com.au/corporate-governance.html. Rounding RML is a Company of the kind specified in Australian Securities and Investments Commission Corporations (Rounding in Financial Directors’ Reports) Instrument 2016/191. In accordance with that class order, amounts in the financial report and the Directors' Report have been rounded to the nearest thousand dollars unless specifically stated to be otherwise. Non-Audit Services Non-audit services were provided by the entity’s auditor, Ernst & Young. 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. Ernst & Young Australia received or are due to receive $21,950 for the provision of taxation planning advice and other review services in the year ended 30 June 2016 (2015: $89,800). Signed in accordance with a resolution of the directors. J.P. Welborn Director Perth, Western Australia 30 August 2016 74 Resolute Mining Limited | Annual Report 201675 Resolute Mining Limited | Annual Report 2016Table of Contents Financial Statements Notes to the Financial Statements Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement About this Report A Earnings for the Year A.1 Segment revenue and expenses A.2 Dividends paid or proposed A.3 Earnings/(loss) per share A.4 Taxes B Production and Growth Assets B.1 Mine properties and property, plant and equipment B.2 Exploration and evaluation assets B.3 Impairment of non-current assets B.4 Segment expenditure, assets and liabilities Debts and Capital C C.1 Cash C.2 Interest bearing liabilities C.3 Financing facilities C.4 Contributed equity C.5 Other reserves D Other Assets and Liabilities D.1 Receivables D.2 Inventories D.3 Financial assets and liabilities D.4 Payables D.5 Unearned revenue D.6 Provisions E Other Items E.1 Contingent liabilities E.2 Leases and other commitments E.3 Auditor remuneration E.4 Subsidiaries and non-controlling interests E.5 Joint operations E.6 Discontinued operations E.7 Subsequent events E.8 Related party disclosures E.9 Parent entity information E.10 Employee benefits and share based payments E.11 Other accounting policies Other Directors’ Declaration Independent Auditor’s Report Shareholder Information 76 Resolute Mining Limited | Annual Report 2016Consolidated Statement of Comprehensive Income Note 2016 $'000 2015 $'000 Continuing Operations Revenue from gold and silver sales Costs of production relating to gold sales Gross profit before depreciation, amortisation and other operating costs Depreciation and amortisation relating to gold sales Other operating costs relating to gold sales Gross profit from operations Other income Other expenses Exploration and business development expenditure Administration and other corporate expenses Treasury - realised losses Fair value movements and unrealised treasury transactions Asset impairment expenses Depreciation of non mine site assets Finance costs Profit/(loss) before tax from continuing operations Tax expense A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.4 554,624 (313,217) 241,407 (39,121) (35,585) 459,147 (256,935) 202,212 (101,493) (29,800) 166,701 70,919 512 (7,741) (7,626) (5,970) (22,846) 54,303 - (94) (9,082) 12,135 (1,084) (7,327) (6,820) (579) (47,860) (571,601) (102) (11,063) 168,157 (563,382) - (105) Profit/(loss) for the year from continuing operations 168,157 (563,487) Discontinued Operation Profit/(loss) after tax for the discontinued operation E.6 44,770 (5,273) Profit/(loss) for the year Profit/(loss) attributable to: Members of the parent Non-controlling interest 212,927 (568,760) E.4 181,713 31,214 212,927 (502,637) (66,123) (568,760) 77 Resolute Mining Limited | Annual Report 2016Consolidated Statement of Comprehensive Income (continued) Note 2016 $'000 2015 $'000 Profit/(loss) for the year (brought forward) 212,927 (568,760) Other comprehensive (loss)/income Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations: - Members of the parent - Transferred to profit and loss - disposed subsidiaries Changes in the fair value/realisation of available for sale financial assets, net of tax Items that may not be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations: - Non-controlling interest Other comprehensive (loss)/income for the period, net of tax (2,005) (39,402) 41,361 - 59 (11,615) (2,879) (44,227) 1,739 31,485 Total comprehensive income/(loss) for the period 168,700 (537,275) Total comprehensive income/(loss) attributable to: Members of the parent Non-controlling interest Earnings/(loss) per share for net profit/(loss) attributable to the ordinary equity holders of the parent: Basic earnings/(loss) per share Diluted earnings/(loss) per share Earnings/(loss) per share for net profit/(loss) from continuing operations attributable to the ordinary equity holders of the parent: Basic earnings/(loss) per share Diluted earnings/(loss) per share 140,365 28,335 168,700 (469,413) (67,862) (537,275) A.3 A.3 28.31 cents 27.59 cents (78.39) cents (78.39) cents 21.34 cents 20.79 cents (77.57) cents (77.57) cents The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 78 Resolute Mining Limited | Annual Report 2016Consolidated Statement of Financial Position Note 2016 $'000 2015 $'000 Current assets Cash Receivables Inventories Available for sale financial assets Other current assets Total current assets Non current assets Receivables Other financial assets Exploration and evaluation Development Property, plant and equipment Total non current assets Total assets Current liabilities Payables Interest bearing liabilities Provisions Financial derivative liabilities Unearned revenue Total current liabilities Non current liabilities Financial derivative liabilities Interest bearing liabilities Provisions Total non current liabilities Total liabilities Net assets Equity attributable to equity holders of the parent Contributed equity Reserves Accumulated losses Total equity attributable to equity holders of the parent Non-controlling interest Total equity C.1 D.1 D.2 D.3 D.1 D.3 B.2 B.1 B.1 D.4 C.2 D.6 D.3 D.5 D.3 C.2 D.6 C.4 C.5 E.4 79,873 7,005 186,012 427 2,177 275,494 - 3,699 46,292 117,190 61,656 228,837 504,331 33,367 26,678 28,328 151 - 88,524 264 - 65,139 65,403 153,927 350,404 395,198 33,263 (32,080) 396,381 (45,977) 350,404 9,885 11,451 194,606 114 3,535 219,591 558 3,584 33,951 90,469 66,318 194,880 414,471 36,485 99,430 32,151 - 3,307 171,373 - 14,286 63,586 77,872 249,245 165,226 380,305 73,026 (213,793) 239,538 (74,312) 165,226 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 79 Resolute Mining Limited | Annual Report 2016A t 1 J u l y 2 0 1 4 L o s s f o r t h e p e r i o d S h a r e s i s s u e d A t 3 0 J u n e 2 0 1 6 S h a r e - b a s e d p a y m e n t s t o l e m p o y e e s A t 3 0 J u n e 2 0 1 5 S h a r e - b a s e d p a y m e n t s t o l e m p o y e e s t r a n s a c t i o n c o s t s C h a n g e s i n t h e p r o p o r t i o n h e d l b y n o n - c o n t r o l l i n g i n t e r e s t E q u i t y p o r t i o n o f c o m p o u n d f i n a n c a i l i n s t r u m e n t s , n e t o f t a x a n d O t h e r c o m p r e h e n s v e i ( l o s s ) / i n c o m e , n e t o f t a x T o t a l c o m p r e h e n s v e i ( l o s s ) / i n c o m e f o r t h e p e r i o d , n e t o f t a x P r o f i t f o r t h e p e r i o d O t h e r c o m p r e h e n s v e i l o s s , n e t o f t a x T o t a l c o m p r e h e n s v e i ( l o s s ) / i n c o m e f o r t h e p e r i o d , n e t o f t a x 3 8 0 , 3 0 5 ( 1 2 7 ) - - - - - - - - - ( 1 1 , 6 1 5 ) ( 1 1 , 6 1 5 ) - 3 8 0 , 3 0 5 1 1 , 4 8 8 3 9 5 , 1 9 8 1 4 , 8 9 3 - - - - ( 6 8 ) - - 5 9 5 9 - T h e a b o v e c o n s o l i d a t e d s t a t e m e n t o f c h a n g e s i n e q u i t y s h o u d l b e r e a d i 3 8 4 - - 3 8 4 - - - - 3 8 4 - - - - - j n c o n u n c t i o n w i t h 5 , 9 8 7 - - - - - - 5 , 9 8 7 5 , 9 8 7 - - - - - 1 0 , 5 0 7 2 , 8 1 2 - - - - - 7 , 6 9 5 1 2 , 0 9 2 1 , 5 8 5 - - - - t h e a c c o m p a n y n g i n o t e s . - - - 4 1 , 3 6 1 4 1 , 3 6 1 - 1 4 , 9 1 4 5 6 , 2 7 5 ( 2 1 3 , 7 9 3 ) ( 7 4 , 3 1 2 ) ( 3 , 2 0 5 ) - - ( 5 0 2 , 6 3 7 ) - ( 5 0 2 , 6 3 7 ) 3 , 2 0 5 - - ( 6 4 , 3 8 4 ) 1 , 7 3 9 ( 6 6 , 1 2 3 ) 1 4 , 8 6 8 ( 3 2 , 0 8 0 ) ( 4 5 , 9 7 7 ) ( 4 1 , 4 0 7 ) ( 4 1 , 4 0 7 ) - - - 1 8 1 , 7 1 3 - 1 8 1 , 7 1 3 - - 2 8 , 3 3 5 ( 2 , 8 7 9 ) 3 1 , 2 1 4 - - 3 5 0 , 4 0 4 1 , 5 8 5 1 4 , 8 9 3 1 6 8 , 7 0 0 ( 4 4 , 2 2 7 ) 2 1 2 , 9 2 7 2 9 2 , 0 4 9 ( 1 3 , 1 3 3 ) 6 9 9 , 3 0 5 1 6 5 , 2 2 6 2 , 8 1 2 3 8 4 - ( 5 3 7 , 2 7 5 ) 3 1 , 4 8 5 ( 5 6 8 , 7 6 0 ) 80 C o n s o l i d a t e d S t a t e m e n t o f C h a n g e s i n E q u i t y A t 1 J u l y 2 0 1 5 3 8 0 , 3 0 5 ( 1 2 7 ) 3 8 4 5 , 9 8 7 1 0 , 5 0 7 5 6 , 2 7 5 ( 2 1 3 , 7 9 3 ) ( 7 4 , 3 1 2 ) 1 6 5 , 2 2 6 e q u i t y r e s e r v e g a i n / ( l o s s ) r e s e r v e r e s e r v e n o t e s e q u i t y e q u i t y r e s e r v e b e n e f i t s r e s e r v e t r a n s l a t i o n C o n t r i b u t e d N e t u n r e a l i s e d C o n v e r t i b l e S h a r e o p t i o n s E m p l o y e e e q u i t y F o r e i g n c u r r e n c y e a r n i n g s R e t a i n e d i n t e r e s t N o n - c o n t r o l l i n g T o t a l ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 Resolute Mining Limited | Annual Report 2016 Consolidated Cash Flow Statement Note 2016 $'000 2015 $'000 Cash flows from operating activities Receipts from customers Payments to suppliers, employees and others Exploration expenditure Interest paid Interest received Income tax paid Net cash flows from operating activities Cash flows used in investing activities Payments for property, plant & equipment Proceeds from sale of available for sale financial assets Payments for development activities Payments for evaluation activities Proceeds from sale of property, plant & equipment Proceeds from sale of other assets Payments for other financial assets Other investing activities Net cash flows used in investing activities Cash flows from financing activities Repayment of borrowings Repayment of lease liability Proceeds from finance facilities Net cash flows used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Exchange rate adjustment Cash and cash equivalents at the end of the period Cash and cash equivalents comprise the following: Cash at bank and on hand Bank overdraft C.1 554,624 (347,715) (8,115) (6,043) 46 - 192,797 (13,709) - (18,339) (12,669) 4,078 - (254) (2,407) (43,300) (74,171) (4,688) - (78,859) 70,638 (19,735) 2,514 53,417 C.1 C.2 79,873 (26,456) 53,417 462,232 (384,817) (8,998) (6,252) 27 (331) 61,861 (6,690) 23,252 (59,507) (33,200) 2,258 3,087 - (1,899) (72,699) (11,228) (5,461) 14,411 (2,278) (13,116) (7,344) 725 (19,735) 9,885 (29,620) (19,735) The above consolidated cash flow statement should be read in conjunction with the accompanying notes. 81 Resolute Mining Limited | Annual Report 2016 About this Report The financial report of Resolute Mining Limited and its controlled entities (“Resolute”, “consolidated entity” or the “Group”) for the year ended 30 June 2016 was authorised for issue in accordance with a resolution of the Directors on 25 August 2016. Resolute Mining Limited (the parent entity) is a for profit company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Group are described in the directors’ report and in the segment information in Note A.1. There has been no significant change in the nature of those activities during the year. Statement of Compliance This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Board and the Corporations Act 2001. The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The accounting policies are consistent with those disclosed in the 30 June 2015 Financial Report, except for the impact of all new or amended Standards and Interpretations. The adoption of these Standards and Interpretations did not result in any significant changes to the Group’s accounting policies. The financial report includes financial information for Resolute Mining Limited (“RML”) as an individual entity and the consolidated entity consisting of RML and its subsidiaries. Where appropriate, comparative information has been reclassified. Basis of Preparation These financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities (including derivative instruments) at fair value through profit and loss. The financial report comprises the financial statements of the Group and its subsidiaries as at 30 June each year. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date at which control is transferred out of the Group. Profit or loss and each component of other comprehensive income (“OCI”) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Interests in associates are equity accounted and are not part of the consolidated Group. Rounding of Amounts The financial report has been prepared in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated. 82 Resolute Mining Limited | Annual Report 2016About this Report Currency Items in the financial statements of each of the Group’s entities are measured in their respective functional currencies. Resolute Mining Limited’s functional and presentation currency is Australian dollars. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the rates of exchange ruling at that date. Exchange differences in the consolidated financial statements are taken to the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity. The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:  Assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate at the date of that consolidated statement of financial position; income and expenses for each consolidated statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and, all resulting exchange differences are recognised as a separate component of equity.   On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold or borrowings repaid, a proportionate share of such exchange differences are recognised in the consolidated statement of comprehensive income as part of the gain or loss on sale. Financial and Capital Risk Management The Group's activities expose it to a variety of financial risks: market risk (including gold price risk, diesel fuel price risk, currency risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks, where considered appropriate, to minimise potential adverse effects on the financial performance of the Group. The Group may use derivative financial instruments to manage certain risk exposures. Derivatives have been used exclusively for managing financial risks, and not as trading or other speculative instruments. Risk management is carried out by the Group's Financial Risk Management Committee under policies approved by the Board of Directors. The Financial Risk Management Committee identifies, evaluates and manages financial risks as deemed appropriate. The Board provides guidance for overall risk management, including guidance on specific areas, such as mitigating commodity price, foreign exchange, interest rate and credit risks, and derivative financial instrument risk. Foreign exchange risk management The Group receives multiple currency proceeds on the sale of its gold production and significant costs for the Syama Gold Project and the Bibiani Project are denominated in AUD, USD and the local currencies of those projects, and as such movements within these currencies expose the Group to exchange rate risk. 83 Resolute Mining Limited | Annual Report 2016About this Report Financial and Capital Risk Management (continued) Foreign exchange risk management (continued) Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The risk can be measured by performing a sensitivity analysis that quantifies the impact of different assumed exchange rates on the Group’s forecast cash flows. The Group's Financial Risk Management Committee continues to manage and monitor foreign exchange currency risk. At present, the Group does not specifically hedge its exposure to foreign currency exchange rate movements. Diesel price risk management The Group is exposed to movements in the diesel fuel price. The costs incurred purchasing diesel fuel for use by the Group’s operations is significant. The Group's Financial Risk Management Committee continues to manage and monitor diesel fuel price risk. At present, the Group does not specifically hedge its exposure to diesel fuel price movements. The below risks arise in the normal course of the Group’s business. Risk information can be found in the following sections: Section C Section C Section C Section D Capital risk Interest rate risk Liquidity risk Credit risk 84 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements A: Earnings for the Year In this section Results and the performance of the Group, with segmental information highlighting the core areas of the Group’s operations. It also includes details about the Group’s tax position. A.1 Segment revenues and expenses Operating segment information The Group has identified three operating segments based on the internal reports that are reviewed and used by the chief executive officer and his executive team (the chief operating decision maker) in assessing performance and in determining the allocation of resources. Operating segments are identified by management as being operating mine sites and are managed separately and operate in different regulatory and economic environments. Performance is measured based on gold sold and cost of production per ounce. The accounting policies used by the Group in reporting segments are the same as those used in the preparation of financial statements. Inter-entity gold sales are recognised based on the prevailing spot price. The price is aimed to reflect what the segment would have achieved if it sold its gold to external parties at arm’s length. Income tax expense is calculated based on the segment operating net profit using a notional charge of the respective tax jurisdiction. No effect is given for taxable or deductible temporary differences. The following items and associated assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: • Realised and unrealised treasury transactions, including derivative contract transactions; • Finance costs - including adjustments on provisions due to discounting; and, • Net gains/losses on disposal of available-for-sale investments. Recognition and measurement Revenue from gold and other sales Revenue is recognised when the risk and reward of ownership has passed from the Group to an external party and the selling price can be determined with reasonable accuracy. Sales revenue represents gross proceeds receivable from the customer. Revenue from the sale of by-products such as silver is included in sales revenue. Interest Revenue is recognised as interest accrues using the effective interest method. Borrowing costs Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed and are included in profit or loss as part of borrowing costs. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity's outstanding borrowings during the period. 85 Resolute Mining Limited | Annual Report 2016i i A d m n s t r a t i o n a n d o t h e r c o r p o r a t e e x p e n s e s S h a r e - b a s e d p a y m e n t s e x p e n s e O t h e r m a n a g e m e n t a n d i i a d m n s t r a t i o n e x p e n s e s R o y a l t y e x p e n s e O p e r a t i o n a l s u p p o r t c o s t s O t h e r o p e r a t i n g c o s t s l r e a t i n g t o g o d l s a e s l C o s t s o f p r o d u c t i o n G o d l i n c i r c u i t i n v e n t o r i e s m o v e m e n t C o s t s o f p r o d u c t i o n l r e a t i n g t o g o d l s a e s l T o t a l s e g m e n t g o l d a n d s i l v e r s a l e s r e v e n u e l E x p o r a t i o n a n d i b u s n e s s l d e v e o p m e n t e x p e n d i t u r e D e p r e c a t i o n i a n d a m o r t i s a t i o n l r e a t i n g t o g o d l s a e s l D e p r e c a t i o n i o f i m n e s i t e p r o p e r t i e s , l p a n t a n d i e q u p m e n t A m o r t i s a t i o n o f l e v a u a t i o n , l d e v e o p m e n t a n d r e h a b i l i t a t i o n c o s t s E a r n i n g s / ( l o s s ) b e f o r e i n t e r e s t , t a x , d e p r e c i a t i o n a n d a m o r t i s a t i o n G o d l a n d s i l v e r s a e s l a t s p o t t o e x t e r n a l c u s t o m e r s ( a ) R e v e n u e ( ( 2 8 , 1 6 1 ) ( 1 1 , 2 5 3 ) ( 1 6 , 9 0 8 ) 4 9 , 7 6 1 ( 2 , 8 9 4 ) ( 1 , 7 2 2 ) ( 1 , 7 2 2 ) ( 9 , 0 1 4 ) - - ( 9 , 0 1 4 ) ( 1 1 7 , 0 3 4 ) ( 1 0 9 , 0 5 4 ) ( 7 , 9 8 0 ) 1 8 0 , 4 2 5 1 8 0 , 4 2 5 ' $ 0 0 0 A U S T R A L A I ) A . 1 S e g m e n t r e v e n u e s a n d e x p e n s e s ( c o n t i n u e d ) F o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6 R A V E N S W O O D N o t e s t o i t h e F n a n c a i l S t a t e m e n t s A : E a r n n g s i f o r t h e Y e a r ( 1 0 , 9 6 0 ) ( 7 , 9 8 3 ) ( 2 , 9 7 7 ) 1 4 8 , 1 3 2 ( 1 , 7 1 8 ) ( 3 4 5 ) - ( 1 , 7 1 8 ) ( 2 6 , 5 6 0 ) ( 1 , 8 7 6 ) ( 2 4 , 6 8 4 ) ( 1 9 6 , 1 8 3 ) ( 2 2 , 1 4 0 ) ( 1 7 4 , 0 4 3 ) 3 7 2 , 9 3 8 3 7 2 , 9 3 8 ( M A L I ) ' $ 0 0 0 S Y A M A - - - ( 1 , 8 4 5 ) ( 1 , 8 4 5 ) - - - - - - - - - - - - - - ( 5 , 0 8 3 ) ( 2 , 5 4 2 ) ( 2 , 5 3 0 ) ( 1 , 0 4 0 ) ( 1 , 4 9 0 ) ( 1 1 ) ( 1 1 ) - - - - - - 1 , 2 6 1 1 9 2 , 2 2 6 - - - ( 3 9 , 1 2 1 ) ( 1 9 , 2 3 6 ) ( 1 9 , 8 8 5 ) - - - - - - - - - - 1 , 2 6 1 1 , 2 6 1 ( 7 , 6 2 6 ) ( 5 , 9 7 0 ) ( 1 , 0 4 0 ) ( 4 , 9 3 0 ) ( 3 5 , 5 8 5 ) ( 1 , 8 8 7 ) ( 3 3 , 6 9 8 ) ( 3 1 3 , 2 1 7 ) ( 3 0 , 1 2 0 ) ( 2 8 3 , 0 9 7 ) 5 5 4 , 6 2 4 5 5 4 , 6 2 4 ( G H A N A ) ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 I B B A N I I U N A L L O C A T E D ( b ) / C O R P O T H E R T R E A S U R Y T O T A L S e g m e n t o p e r a t i n g r e s u l t b e f o r e t r e a s u r y , o t h e r i n c o m e / ( e x p e n s e s ) a n d t a x 2 1 , 6 0 0 1 3 7 , 1 7 2 ( 1 , 8 4 5 ) ( 5 , 0 8 3 ) 1 , 2 6 1 1 5 3 , 1 0 5 86 Resolute Mining Limited | Annual Report 2016 L A T O T Y R U S A E R T R E H T O P R O C / ) b ( D E T A C O L L A N U I I N A B B I 0 0 0 $ ' 0 0 0 $ ' ) A N A H G ( A M A Y S 0 0 0 $ ' ) I L A M ( 0 0 0 $ ' ) I A L A R T S U A ( r a e Y e h t r o f i s g n n r a E : A s t n e m e t a t S l i a c n a n F e h t i o t t s e o N D O O W S N E V A R 6 1 0 2 e n u J 0 3 d e d n e r a e y e h t r o F ) d e u n i t n o c ( s e s n e p x e d n a s e u n e v e r t n e m g e S 1 . A 7 4 9 9 6 6 3 2 1 5 0 0 0 $ ' 5 0 1 , 3 5 1 ) 0 6 9 , 7 ( ) 2 2 1 , 1 ( ) 2 8 0 , 9 ( ) 3 3 3 , 2 2 ( ) 3 1 5 ( ) 6 4 8 , 2 2 ( 1 3 2 , 2 9 9 5 , 6 2 1 2 2 , 7 1 ) 5 1 4 ( 7 6 6 , 8 ) 5 8 5 ( ) 6 5 1 , 7 ( ) 1 4 7 , 7 ( 3 0 3 , 4 5 ) 4 9 ( 0 7 7 , 4 4 7 2 9 , 2 1 2 0 0 0 $ ' 1 6 2 , 1 7 4 9 9 3 4 3 9 8 4 ) 0 6 9 , 7 ( ) 2 2 1 , 1 ( ) 2 8 0 , 9 ( ) 3 3 3 , 2 2 ( ) 3 1 5 ( ) 6 4 8 , 2 2 ( - - 1 2 2 , 7 1 ) 5 1 4 ( 7 6 6 , 8 ) 5 8 5 ( 3 7 4 , 5 2 - ) 5 8 5 ( - - ) 0 9 2 , 5 ( ) 3 8 0 , 5 ( ) 5 4 8 , 1 ( 2 7 1 , 7 3 1 0 0 6 , 1 2 ) d r a w r o f t h g u o r b ( x a t d n a ) s e s n e p x e ( / e m o c n i r e h t o , y r u s a e r t e r o f e b t l u s e r g n i t a r e p o t n e m g e S - - - - - - - - - - - - - - - - - ) 4 6 ( ) 4 6 ( ) 4 9 ( 0 7 7 , 4 4 9 2 5 , 9 3 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 3 2 , 2 4 0 5 , 6 2 - 5 3 7 , 8 2 ) 2 9 0 , 7 ( ) 2 9 0 , 7 ( - - - - 3 2 3 2 - - - - - - 5 9 - - - - 5 9 - - - - - ) 5 4 8 , 1 ( 5 1 8 , 8 5 1 8 1 7 , 1 2 l s e b a m u s n o c l e t e o s b o d n a s t n e m e v o m e u a v l l e b a s i l a e r t e n s e i r o t n e v n I r e h t O s e c n a a b l y n a p m o c r e t n i n o i n a g e g n a h c x e i n g e r o f d e s i l a e r n U s n o i t c a s n a r t y r u s a e r t d e s i l a e r n u d n a s t n e m e v o m e u a v l r i a F t n e m p u q e i d n a t n a p l , y t r e p o r p f o l e a s n o s s o L s t c a r t n o c d r a w r o f n o s e s s o l d e s i l a e r n U i n a g e g n a h c x e i n g e r o f d e s i l a e r n U n a o l y a p e r p l d o g f o t n e m y a p e r n o s s o l d e s i l a e R s s o l e g n a h c x e i n g e r o f d e s i l a e R s e s s o l d e s i l a e r - y r u s a e r T s t e s s a l i a c n a n i f l e a s r o f l e b a l i a v a f o l e a s n o t i f o r P e m o c n i r e h t O e m o c n i r e h t o l a t o T s e e f d n a t s e r e t n I e m o c n i t s e r e t n I n o i t e r c c a i i n o s v o r p n o i t a r o t s e r d n a n o i t a t i l i b a h e R s t s o c e c n a n F i n o i t a r e p o d e u n i t n o c s d i e h t r o f x a t r e t f a t i f o r P s t e s s a e t i s i e n m n o n f o i n o i t a c e r p e D r a e y e h t r o f ) s s o l ( / t i f o r P s e s n e p x e r e h t O 87 s e s n e p x e x a t i l g n d o h h t i W Resolute Mining Limited | Annual Report 2016 i i A d m n s t r a t i o n a n d o t h e r c o r p o r a t e e x p e n s e s S h a r e - b a s e d p a y m e n t s e x p e n s e O t h e r m a n a g e m e n t a n d i i a d m n s t r a t i o n e x p e n s e s R o y a l t y e x p e n s e O p e r a t i o n a l s u p p o r t c o s t s O t h e r o p e r a t i n g c o s t s l r e a t i n g t o g o d l s a e s l C o s t s o f p r o d u c t i o n G o d l i n c i r c u i t i n v e n t o r i e s m o v e m e n t C o s t s o f p r o d u c t i o n l r e a t i n g t o g o d l s a e s l T o t a l s e g m e n t g o l d a n d s i l v e r s a l e s r e v e n u e D e p r e c a t i o n i a n d a m o r t i s a t i o n l r e a t i n g t o g o d l s a e s l D e p r e c a t i o n i o f i m n e s i t e p r o p e r t i e s , l p a n t a n d i e q u p m e n t A m o r t i s a t i o n o f l e v a u a t i o n , l d e v e o p m e n t a n d r e h a b i l i t a t i o n c o s t s l E x p o r a t i o n a n d i b u s n e s s l d e v e o p m e n t e x p e n d i t u r e E a r n i n g s / ( l o s s ) b e f o r e i n t e r e s t , t a x , d e p r e c i a t i o n a n d a m o r t i s a t i o n S e g m e n t o p e r a t i n g r e s u l t b e f o r e t r e a s u r y , o t h e r i n c o m e / ( e x p e n s e s ) a n d t a x G o d l a n d s i l v e r s a e s l a t s p o t t o e x t e r n a l c u s t o m e r s ( a ) R e v e n u e ( 7 , 4 9 0 ( 3 5 , 4 7 8 ) ( 1 5 , 4 8 0 ) ( 1 9 , 9 9 8 ) 4 2 , 9 6 8 ( 2 , 1 1 6 ) ( 1 , 4 2 0 ) ( 1 , 4 2 0 ) ( 7 , 3 6 0 ) - - ( 7 , 3 6 0 ) ( 9 3 , 4 0 8 ) 4 , 1 3 9 ( 9 7 , 5 4 7 ) 1 4 7 , 2 7 2 1 4 7 , 2 7 2 ' $ 0 0 0 A U S T R A L A I ) A . 1 S e g m e n t r e v e n u e s a n d e x p e n s e s ( c o n t i n u e d ) F o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 5 R A V E N S W O O D N o t e s t o i t h e F n a n c a i l S t a t e m e n t s A : E a r n n g s i f o r t h e Y e a r 5 6 , 3 9 0 ( 6 6 , 0 1 5 ) ( 3 5 , 7 9 6 ) ( 3 0 , 2 1 9 ) 1 2 2 , 4 0 5 ( 1 , 8 9 8 ) ( 4 9 1 ) ( 1 , 8 9 8 ) ( 2 2 , 4 4 0 ) ( 1 , 4 8 7 ) ( 2 0 , 9 5 3 ) - ( 1 6 3 , 5 2 7 ) 1 4 , 3 2 4 ( 1 7 7 , 8 5 1 ) 3 1 0 , 7 6 1 3 1 0 , 7 6 1 ( M A L I ) ' $ 0 0 0 S Y A M A - - - - - - - - - - - - - - - - - ( 8 , 2 2 2 ) 1 , 1 1 4 5 6 , 7 7 2 - - - ( 8 , 2 2 2 ) ( 4 , 7 2 0 ) ( 3 , 5 0 2 ) ( 1 , 6 6 7 ) ( 1 , 8 3 5 ) - - - - - - - - - - - 1 , 1 1 4 - - - - - - - - - - 1 , 1 1 4 1 , 1 1 4 ( 1 0 1 , 4 9 3 ) ( 5 1 , 2 7 6 ) ( 5 0 , 2 1 7 ) 1 5 8 , 2 6 5 ( 7 , 3 2 7 ) ( 6 , 8 2 0 ) ( 1 , 6 6 7 ) ( 5 , 1 5 3 ) ( 2 9 , 8 0 0 ) ( 1 , 4 8 7 ) ( 2 8 , 3 1 3 ) ( 2 5 6 , 9 3 5 ) 1 8 , 4 6 3 ( 2 7 5 , 3 9 8 ) 4 5 9 , 1 4 7 4 5 9 , 1 4 7 ( G H A N A ) ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 88 I B B A N I I U N A L L O C A T E D ( b ) / C O R P O T H E R T R E A S U R Y T O T A L Resolute Mining Limited | Annual Report 2016 L A T O T Y R U S A E R T R E H T O P R O C / ) b ( D E T A C O L L A N U I I N A B B I 6 2 4 6 5 4 0 0 0 $ ' 2 7 7 , 6 5 9 7 1 2 9 , 1 1 ) 7 6 9 , 9 ( ) 6 9 0 , 1 ( 5 3 1 , 2 1 ) 3 6 0 , 1 1 ( ) 1 3 2 , 0 1 ( ) 9 3 0 , 1 6 5 ( ) 1 3 3 ( ) 1 0 6 , 1 7 5 ( 7 3 2 ) 6 1 8 ( ) 9 7 5 ( ) 9 8 3 , 8 ( ) 9 1 5 , 2 1 ( ) 2 5 9 , 6 2 ( ) 0 6 8 , 7 4 ( ) 3 7 2 , 5 ( ) 2 0 1 ( ) 5 0 1 ( ) 4 8 0 , 1 ( 0 0 0 $ ' 4 1 1 , 1 6 2 4 6 - 7 4 1 2 9 , 1 1 ) 7 6 9 , 9 ( ) 6 9 0 , 1 ( 8 5 0 , 2 1 ) 3 6 0 , 1 1 ( - - - - 7 3 2 ) 6 1 8 ( ) 9 7 5 ( - ) 9 1 5 , 2 1 ( ) 2 5 9 , 6 2 ( ) 1 7 4 , 9 3 ( - - - - - - - - - - - - - 0 0 0 $ ' ) 2 2 2 , 8 ( - - - - - - - - - - 0 0 0 $ ' ) A N A H G ( - - - - - - - ) 2 0 1 ( ) 4 8 1 ( ) 5 0 1 ( ) 3 7 2 , 5 ( - - - - - - - - - - 0 0 1 - - - - - - - - - A M A Y S 0 0 0 $ ' ) I L A M ( 0 9 3 , 6 5 - - - - ) 5 3 9 , 9 ( ) 1 3 3 ( ) 6 6 2 , 0 1 ( - - ) 3 0 7 , 8 7 ( - ) 1 3 2 , 0 1 ( ) 1 0 4 , 2 7 4 ( ) 3 0 7 , 8 7 ( ) 2 3 6 , 2 8 4 ( - - - ) 0 0 0 , 1 ( - - - - ) 6 8 3 , 7 ( ) 3 0 0 , 1 ( - - - - ) 6 8 3 , 7 ( ) 3 0 0 , 1 ( r a e Y e h t r o f i s g n n r a E : A s t n e m e t a t S l i a c n a n F e h t i o t t s e o N D O O W S N E V A R 5 1 0 2 e n u J 0 3 d e d n e r a e y e h t r o F ) d e u n i t n o c ( s e s n e p x e d n a s e u n e v e r t n e m g e S 1 . A 0 0 0 $ ' 0 9 4 , 7 - - 5 4 - 2 3 7 7 - - - - - - - - - - ) I A L A R T S U A ( ) d r a w r o f t h g u o r b ( x a t d n a ) s e s n e p x e ( / e m o c n i r e h t o , y r u s a e r t e r o f e b t l u s e r g n i t a r e p o t n e m g e S e m o c n i t s e r e t n I t n e m p o e v e d l d n a n o i t a u a v e l , n o i t a r o p x e l , t n e m p u q e i , t n a p l , y t r e p o r p f o t n e m r i a p m I n o i t e r c c a i i n o s v o r p n o i t a r o t s e r d n a n o i t a t i l i b a h e R s t s o c e c n a n F i e m o c n i r e h t o l a t o T s e e f d n a t s e r e t n I l s e b a m u s n o c l e t e o s b o d n a s t n e m e v o m e u a v l l e b a s i l a e r t e n s e i r o t n e v n I s e c n a a b l y n a p m o c r e t n i n o s s o l e g n a h c x e i n g e r o f d e s i l a e r n U s n o i t c a s n a r t y r u s a e r t d e s i l a e r n u d n a s t n e m e v o m e u a v l r i a F s s o l e g n a h c x e i n g e r o f d e s i l a e r n U n o i t a r e p o d e u n i t n o c s d i e h t r o f x a t r e t f a s s o L s t e s s a e t i s i e n m n o n f o n o i t i a c e r p e D r a e y e h t r o f ) s s o L ( / t i f o r P e s n e p x e x a T s e s n e p x e x a t i g n d o h h l t i W n a o l y a p e r p l d o g f o t n e m y a p e r n o s s o l d e s i l a e R s e s s o l d e s i l a e r - y r u s a e r T s t n e m t s e v n i y t i u q e l d o g f o t n e m r i a p m I i n a g e g n a h c x e i n g e r o f d e s i l a e R s e s n e p x e t n e m r i a p m i t e s s A l e b a v e c e r i s t n u o c c a f o t n e m r i a p m I s t e s s a l i a c n a n i f l e a s r o f l e b a l i a v a t n e m p u q e i d n a t n a p l , y t r e p o r p f o f o l e a s n o t i f o r P l e a s n o t i f o r P e m o c n i r e h O t e m o c n i d n e d v D i i ) 0 6 7 , 8 6 5 ( ) 1 4 9 , 7 3 ( ) 2 5 1 , 4 2 ( ) 3 0 6 , 8 7 ( ) 8 2 6 , 4 3 4 ( 4 6 5 , 6 g n i t a r e p O f i e h C e h t y b t a m r o f i s h t n i d e s y a n a l s i n o i t a m r o f n i i s h t r e v e w o h , 8 B S A A y b d e n i f e d s a t n e m g e s g n i t a r e p o n a t n e s e r p e r t o n s e o d n o i t a m r o f n i i s h T . s r e m o t s u c l a r e v e s m o r f d e v i r e d s i t n e m g e s l e b a t r o p e r h c a e r o f s e a s l l a n r e t x e m o r f e u n e v e R ) a ( ) b ( . s t n e m e a t t s l i a c n a n i f e h t o t s t n e m g e s g n i t a r e p o e h t f o s n o i t i s o p d n a s t l u s e r e h t f o n o i t a i l i c n o c e r e h t f o t r a p s m r o f d n a , r e k a M n o s c e D i i 89 Resolute Mining Limited | Annual Report 2016 Notes to the Financial Statements A: Earnings for the Year A.2 Dividends paid or proposed Proposed dividends on ordinary shares: Final dividend for 2016: 1.7 cents per share (2015: nil) 2016 $'000 11,148 2015 $'000 - The dividend has not been provided for in the 30 June 2016 financial statements. A.3 Earnings/(loss) per share Basic earnings/(loss) per share Profit/(loss) attributable to ordinary equity holders of the parent for basic earnings per share ($'000) Weighted average number of ordinary shares outstanding during the period used in the calculation of basic EPS 181,713 (502,637) 641,788,233 641,189,223 Basic earnings/(loss) per share (cents per share) 28.31 (78.39) Diluted earnings/(loss) per share Profit/(loss) used in calculation of diliuted earnings per share ($'000) Weighted average number of ordinary shares outstanding during the period used in the calculation of basic EPS Weighted average number of notional shares used in determining diluted EPS (i) Weighted average number of ordinary shares outstanding during the period used in the calculation of diluted EPS Number of potential ordinary shares that are not dilutive and hence not included in calculation of diluted EPS Diluted earnings/(loss) per share (cents per share) Measurement 181,713 (502,637) 641,788,233 16,874,755 641,189,223 n/a 658,662,988 641,189,223 675,400 18,656,733 27.59 (78.39) Basic earnings per share (“EPS”) is calculated as net profit attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted EPS is calculated as the net profit attributable to members, adjusted for: • • • costs of servicing equity (other than dividends) and; the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and, other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. i) Dilutive instruments have not been included in the calculation of diluted earnings per share for 2015 because the result for the year was a loss. ii) Between the reporting date and the date of completion of these financial statements there have been the following transactions involving ordinary shares or potential ordinary shares: a) 130,000 fully paid ordinary shares were issued to Level 2 employees as a result of two employee option holders exercising their options by paying $1.18 per share. 90 Resolute Mining Limited | Annual Report 2016 Notes to the Financial Statements A: Earnings for the Year A.3 Earnings/(loss) per share (continued) Information on the classification of securities Options and performance rights granted to employees (including Key Management Personnel) as described in E.10 are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent they are dilutive. These securities have not been included in the determination of basic earnings per share. A.4 Taxes (a) Income tax expense Deferred tax expense from continuing operations Current income tax benefit from discontinued operation Total tax expense (b) Numerical reconciliation of income tax expense to prima facie tax expense 2016 $'000 - - - 2015 $'000 (105) 1,057 (952) Profit/(loss) from continuing operations before income tax expense Profit/(loss) from discontinued operation before income tax expense Profit/(loss) before income tax expense 168,157 44,770 212,927 (563,382) (6,330) (569,712) Prima facie income tax expense/(benefit) at 30% (2015: 30%) 63,879 (170,914) (Deduct)/add: - (unrecognised tax losses and other temporary differences utilised) / tax losses and other temporary differences not recognised - difference on foreign exchange gain from divestment of discontinued operation - effect of different rates of tax on overseas income - effect of share based payments expense not deductible - prior year over provision - other Income tax expense attributable to net profit/(loss) Reconciled as: Income tax expense attributable to continuing operations Income tax benefit attributable to a discontinued operation (c) Amounts recognised directly in equity Amounts debited/(credited) directly to equity (18,091) (12,746) (35,197) 1,054 - 1,101 - - - - - 251,432 - (82,460) 1,502 (1,132) 620 (952) 105 (1,057) (952) (105) 91 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements A: Earnings for the Year A.4 Taxes (d) Tax losses (tax effected) - Revenue losses Australia Tanzania (divested during the year) Mali Ghana - Capital losses Australia Total tax losses not used against deferred tax liabilities for which no deferred tax asset has been recognised (potential tax benefit at the prevailing tax rates of the respective jurisdictions) (tax effected) (e) Movements in the deferred tax assets balance Balance at the beginning of the year (Charged)/credited to equity Credited/(charged) to the income statement Balance as at the end of the year The deferred tax assets balance comprises temporary differences attributable to: Receivables Inventories Available for sale financial assets Mineral exploration and development interests Property, plant and equipment Payables Provisions Interest bearing liabilities Temporary differences not recognised Set off of deferred tax liabilities pursuant to set off provisions Net deferred tax assets 2016 $'000 2015 $'000 43,924 - 65,471 39,466 148,861 46,559 10,787 63,289 37,326 157,961 54,717 49,789 203,578 207,750 - (165) 165 - - 105 (105) - 87,344 1,086 8,846 175,895 54,498 752 22,938 - (340,532) 10,827 (10,827) - 227,782 8,963 8,981 168,546 52,192 730 21,341 4,726 (486,612) 6,649 (6,649) - 92 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements A: Earnings for the Year A.4 Taxes (continued) (f) Movements in the deferred tax liabilities balance There were no movements in the deferred tax liabilities balance in the current or prior year. The deferred tax liabilities balance comprises temporary differences Receivables Inventories Mineral exploration and development interests Property, plant and equipment Set off of deferred tax liabilities pursuant to set off provisions Net deferred tax liabilities (g) The equity balance comprises temporary differences attributable to: Convertible notes equity reserve Option equity reserve Unrealised loss reserve Net temporary differences in equity Set-off of deferred tax liabilities pursuant to set-off provisions Total temporary differences in equity FRANKING CREDITS 2016 $'000 2015 $'000 1,082 2,304 7,436 5 10,827 (10,827) - 194 2,566 (20) 2,740 20 2,760 - - 6,644 5 6,649 (6,649) - 194 2,566 (38) 2,722 38 2,760 The amount of franking credits available for subsequent financial years is as follows. The amount has been determined using a tax rate of 30%. 108 103 Recognition and measurement The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and by unused tax losses (if appropriate). The Group records its best estimate of these items based upon the latest information available and management’s interpretation of enacted tax laws. Whilst the Group believes it has adequately provided for the outcome of these matters, future results may include favourable or unfavourable adjustments as assessments are made, or resolved. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for deductible temporary differences, unused tax losses and unused tax credits only if it is probable that sufficient future taxable income will be available to utilise those temporary differences and losses. 93 Resolute Mining Limited | Annual Report 2016 Notes to the Financial Statements A: Earnings for the Year A.4 Taxes (continued) Recognition and measurement Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither taxable profit or loss; or the accounting profit or loss arising from taxable differences related to investment in subsidiaries, associates and interests in joint ventures to the extent that: • the Group is able to control the reversal of the temporary difference; and • the temporary difference is not expected to reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantially enacted by the end of the reporting period. Deferred tax assets and liabilities are offset only if certain criteria are met. Income taxes relating to items recognised directly in equity are recognised in equity. Tax consolidation RML and its wholly-owned Australian controlled entities implemented the tax consolidation legislation as of 1 July 2002 and the entities in the tax consolidated group entered into a tax sharing agreement, which limits the joint and several liability of the wholly owned entities in the case of a default by the head entity, Resolute Mining Limited. The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate Resolute Mining Limited for any current tax payable assumed and are compensated by Resolute Mining Limited for any current tax receivable. Key estimates and judgements The recognition basis of deductible temporary differences and unused tax losses in the form of deferred tax assets is reviewed at the end of each reporting period and de-recognised and to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Pursuant to the Establishment Convention between the State of Mali and Societe des Mines de Syama S.A. (owner of the Syama gold mine), there is an income tax holiday for 5 years post the declaration of “first commercial production” at Syama, which commenced on 1 January 2012. A deferred income tax asset has not been recognised for these amounts at reporting date as realisation of the benefit is not regarded as probable. The future benefit will only be obtained if: future assessable income is derived of a nature and an amount sufficient to enable the benefit to be (i) realised; (ii) and, (iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit. the conditions for deductibility imposed by tax legislation have been continued to be complied with; Unrecognised temporary differences As at 30 June 2016, aggregate unrecognised temporary differences of $4.460m (2015: $16.883m) are in respect of investments in foreign controlled entities for which no deferred tax assets have been recognised for amounts which arise upon translation of their financial statements. 94 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements B: Production and Growth Assets In this section Included in this section is relevant information about recognition, measurement, depreciation, amortisation and impairment considerations of the core producing and growth (exploration and evaluation) assets of Resolute. B.1 Mine properties and property, plant and equipment Recognition and measurement Stripping activity asset The Group incurs waste removal costs (stripping costs) in the creation of improved access and mining flexibility in relation to ore to be mined in the future. The costs are capitalised as a stripping activity asset, where certain criteria are met. Once the Group has identified its production stripping for each surface mining operation, it identifies the separate components for the ore bodies in each of its mining operations. An identifiable component is a specific volume of the ore body that is made more accessible by the stripping activity. The costs of each component are amortised on a units of production basis in applying a stripping ratio. Development expenditure Areas in Development (i) Costs incurred in preparing mines for production including the required plant infrastructure. Areas in Production (ii) Represent the accumulation of all acquired exploration, evaluation and development expenditure in which economic mining of a mineral reserve has commenced. Amortisation of costs is provided on the unit-of- production method. Property, plant and equipment Property, plant and equipment are stated at cost less any accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises: • Its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates; • Any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management; and, • The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Depreciation is provided on a straight-line basis on all property plant and equipment other than land. Major depreciation periods are: Motor vehicles Office equipment Plant and equipment Life 3 years 3 years Life of mine years Method Straight line Straight line Straight line 95 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements B: Production and Growth Assets B.1 Mine properties and property, plant and equipment (continued) Key estimates and judgements Stripping activity assets Judgement is required to identify a suitable production measure to be used to allocate production stripping costs between inventory and any stripping activity asset(s) for each component. The Group considers that the ratio of the expected volume of waste to be stripped for an expected volume of ore to be mined for a specific component of the ore body, to be the most suitable production measure. An identifiable component is a specific volume of the ore body that is made more accessible by the stripping activity. Judgement is also required to identify and define these components, and also to determine the expected volumes (e.g. tonnes) of waste to be stripped and ore to be mined in each of these components. These assessments are based on the information available in the mine plan which will vary between mines for a number of reasons, including, , the geological characteristics of the ore body, the geographical location and/or financial considerations. Stripping ratio The Group has adopted a policy of deferring production stage stripping costs and amortising them on a units-of-production basis. Significant judgement is required in determining the contained ore units for each mine. Factors that are considered include: • • • • • Any proposed changes in the design of the mine; estimates of the quantities of ore reserves and mineral resources for which there is a high degree of confidence of economic extraction; future production levels; future commodity prices; and, future cash costs of production and capital expenditure. Determining the beginning of production The Group ceases capitalising pre-production costs and begins depreciation and amortisation of mine assets at the point commercial production commences. This is based on the specific circumstances of the project, and considers when the mine’s plant becomes ‘available for use’ as intended by management which includes consideration of the following factors: • • • • • the level of redevelopment expenditure compared to project cost estimates; completion of a reasonable period of testing of the mine plant and equipment; mineral recoveries, availability and throughput levels at or near expected/feasibility study levels; the ability to produce gold into a saleable form (where more than an insignificant amount is produced); and, the achievement of continuous production. Estimation of mineral reserves and resources – refer to B3 96 Resolute Mining Limited | Annual Report 2016- 9 6 4 , 0 9 8 1 9 , 0 6 ) 4 7 7 , 2 ( - - 1 1 0 , 3 1 8 7 , 9 3 ) 5 6 3 , 3 1 ( ) 5 6 3 , 3 1 ( ) 0 7 4 , 8 1 ( ) 3 2 6 ( 5 3 0 , 1 0 9 1 , 7 1 1 7 2 7 , 4 8 4 ) 7 3 5 , 7 6 3 ( 0 9 1 , 7 1 1 - - ) 3 5 3 ( 4 7 0 , 9 2 9 3 4 , 2 4 ) 5 6 3 , 3 1 ( 4 7 0 , 9 2 - - 8 5 4 , 7 8 7 3 1 , 1 2 ) 4 7 7 , 2 ( ) 0 7 4 , 8 1 ( ) 3 2 6 ( 8 8 3 , 1 6 1 1 , 8 8 8 1 3 , 6 6 9 0 7 , 3 1 ) 6 1 7 ( ) 3 7 3 , 9 1 ( - 1 1 1 , 6 ) 0 5 4 ( ) 5 7 3 , 2 ( 2 9 ) 2 5 1 ( ) 1 5 1 ( 6 7 8 , 2 - - - - - - - - - 8 1 7 , 1 6 5 6 , 1 6 2 1 8 9 2 , 3 9 7 4 4 7 , 2 - - 0 2 9 ) 8 2 1 ( - - - 9 1 1 1 8 0 3 9 , 7 4 7 1 6 , 3 1 ) 4 1 1 ( ) 6 0 0 , 6 1 ( - - ) 3 1 7 ( 1 8 4 , 8 - - - - - - 0 6 3 , 1 7 8 7 , 6 4 8 4 2 6 1 0 , 8 8 8 2 , 2 4 4 ) 2 7 1 , 4 5 3 ( 6 1 1 , 8 8 7 5 8 , 5 5 4 ) 1 0 2 , 4 9 3 ( 6 5 6 , 1 6 7 6 1 , 6 2 ) 9 6 8 , 2 2 ( 8 9 2 , 3 2 1 0 , 7 ) 8 6 2 , 4 ( 4 4 7 , 2 5 6 3 , 3 ) 4 5 5 , 2 ( 1 1 8 9 9 4 , 3 0 4 ) 2 1 7 , 6 5 3 ( 7 8 7 , 6 4 4 1 8 , 5 1 ) 8 9 7 , 7 ( 6 1 0 , 8 e r u t i d n e p x e t n e m p o l e v e D n o i t c u d o r p n I t n e m p i u q E d n a t n a l P l a t o T 0 0 0 $ ' g n i p i r t S e n M i t e s s A y t i v i t c A s e i t r e p o r P 0 0 0 $ ' 0 0 0 $ ' l a t o T 0 0 0 $ ' d e s a e L s t e s s A 0 0 0 $ ' e c i f f O r o t o M & t n a l P t n e m p i u q E s e l c i h e V t n e m p i u q E s g n i d l i u B 0 0 0 $ ' 0 0 0 $ ' 0 0 0 $ ' 0 0 0 $ ' e c n a n i f d n a n o i t a s i t r o m a o t d e g r a h c s t n u o m A n o i t c u d o r p f o s t s o c o t d e s i t r o m a s t n u o m A l s e a s l d o g o t g n i t l a e r e s n e p x e i n o i t a c e r p e D s t s o c n o i t a r o t s e r d n a n o i t a t i l i b a h e r o t s t n e m t s u d A j l n o i t a s n a r t y c n e r r u c i n g e r o F s n o i t a g i l b o i n o i t a c e r p e d l d e t a u m u c c a f o t e n e n u J 0 3 t A t n e m r i a p m i d n a i n o i t a c e r p e d d e t l a u m u c c A t n u o m a i g n y r r a c t e N 6 1 0 2 e n u J 0 3 t s o C 97 s n o i t i d d A l s a s o p s D i e u a v l n w o d e t i r i w g n n e p O 6 1 0 2 e n u J 0 3 s t e s s A h t w o r G d n a n o i t c u d o r P : B s t n e m e t a t S l i a c n a n F e h t i o t s e t o N ) d e u n i t n o c ( i t n e m p u q e d n a t n a l p , y t r e p o r p d n a s e i t r e p o r p e n M 1 . B i Resolute Mining Limited | Annual Report 2016 i B . 1 M n e p r o p e r t i e s a n d p r o p e r t y , p l a n t a n d e q u p m e n t i ( c o n t i n u e d ) N o t e s t o i t h e F n a n c a i l S t a t e m e n t s B : P r o d u c t i o n a n d G r o w t h A s s e t s i D s p o s a s l A d d i t i o n s T r a n s f e r s t o i n v e n t o r y I m p a i r e d d u r i n g t h e y e a r C o s t 3 0 J u n e 2 0 1 5 N e t c a r r y n g i a m o u n t A c c u m u a l t e d d e p r e c a i t i o n a n d i m p a i r m e n t A t 3 0 J u n e n e t o f a c c u m u a l t e d d e p r e c a i t i o n o b l i g a t i o n s F o r e g n i c u r r e n c y t r a n s a l t i o n j A d u s t m e n t s t o r e h a b i l i t a t i o n a n d r e s t o r a t i o n c o s t s r e a l t i n g t o g o d l s a e s l D e p r e c a i t i o n e x p e n s e A m o u n t s a m o r t i s e d t o c o s t s o f p r o d u c t i o n 3 0 J u n e 2 0 1 5 O p e n n g w i r i t e d o w n l v a u e 8 , 4 8 1 ( 7 , 0 6 4 ) 1 5 , 5 4 5 4 7 , 9 3 0 ( 3 3 6 , 3 0 6 ) 3 8 4 , 2 3 6 ( 3 , 0 2 3 ) 3 , 9 4 3 9 2 0 2 , 8 7 6 ( 4 , 1 7 5 ) 7 , 0 5 1 6 , 1 1 1 ( 2 2 , 2 7 2 ) 2 8 , 3 8 3 6 6 , 3 1 8 ( 3 7 2 , 8 4 0 ) 4 3 9 , 1 5 8 8 7 , 4 5 8 ( 3 3 5 , 7 0 2 ) 4 2 3 , 1 6 0 8 , 4 8 1 1 , 1 2 2 4 7 , 9 3 0 1 2 , 9 0 6 - - - ( 1 , 5 3 1 ) ( 1 4 9 ) - - - 9 , 0 3 9 ( 4 5 , 6 5 9 ) ( 1 , 1 5 0 ) ( 1 4 0 , 9 9 9 ) 2 1 5 , 9 2 9 6 , 9 0 3 - - - - 9 2 0 1 5 8 - - - ( 5 3 5 ) ( 1 7 8 ) - - 1 , 2 3 3 2 4 2 2 , 8 7 6 4 6 0 6 , 1 1 1 ( 2 6 ) 6 6 , 3 1 8 1 4 , 6 2 0 - - - ( 3 6 1 ) ( 1 1 0 ) - - 2 , 5 7 8 3 0 9 - - - ( 3 , 3 6 2 ) ( 1 , 7 7 8 ) ( 4 5 3 ) 1 1 , 7 3 0 - - ( 5 1 , 4 4 8 ) ( 2 , 0 4 0 ) ( 1 4 2 , 7 7 7 ) 2 4 0 , 5 0 9 7 , 4 5 4 - - - - 8 7 , 4 5 8 ( 2 , 0 2 4 ) 3 , 1 9 5 ( 5 2 , 2 1 9 ) - - - ( 2 8 3 , 4 8 3 ) ( 4 , 7 8 2 ) 5 7 , 6 7 2 3 6 9 , 0 9 9 3 , 0 1 1 ( 3 6 , 4 3 9 ) 3 9 , 4 5 0 3 , 0 1 1 ( 3 0 3 ) - - ( 2 8 , 2 7 0 ) ( 8 , 1 6 8 ) 1 8 , 6 4 6 2 1 , 1 0 6 - - - ( 9 3 , 2 2 2 ) 9 3 , 2 2 2 - 9 0 , 4 6 9 ( 4 6 5 , 3 6 3 ) 5 5 5 , 8 3 2 1 , 2 8 1 0 - - - - - ( 9 3 , 2 2 2 ) 2 4 , 8 2 1 6 7 , 1 2 0 - 9 0 , 4 6 9 ( 1 , 0 4 6 ) 3 , 1 9 5 ( 5 2 , 2 1 9 ) ( 2 8 , 2 7 0 ) ( 3 8 4 , 8 7 3 ) ( 4 , 7 8 2 ) 1 0 1 , 1 3 8 4 5 7 , 3 2 5 - - ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 B u i l d i n g s E q u i p m e n t V e h i c l e s E q u i p m e n t l P a n t & M o t o r O f f i c e ' $ 0 0 0 A s s e t s L e a s e d P l a n t a n d E q u i p m e n t ' $ 0 0 0 T o t a l ' $ 0 0 0 ' $ 0 0 0 P r o p e r t i e s A c t i v i t y A s s e t ' $ 0 0 0 A s s e t ' $ 0 0 0 T o t a l i M n e S t r i p i n g S t r i p i n g A c t i v i t y I n p r o d u c t i o n D e v e l o p m e n t D e v e l o p m e n t e x p e n d i t u r e 98 Resolute Mining Limited | Annual Report 2016 Notes to the Financial Statements B: Production and Growth Assets B.2 Exploration and evaluation assets Exploration and evaluation (at cost) Balance at the beginning of the year - Expenditure during the year - Adjustments to rehabilitation obligations - Impaired during the year - Foreign currency translation Balance at the end of the year Recognition and measurement 2016 $'000 33,951 10,404 1,431 - 506 46,292 2015 $'000 42,665 20,142 (1,365) (33,389) 5,898 33,951 Exploration expenditure is expensed to the consolidated statement of comprehensive income as and when it is incurred and included as part of cash flows from operating activities. Exploration costs are only capitalised to the consolidated statement of financial position if they result from an acquisition. Evaluation expenditure is capitalised to the consolidated statement of financial position. Evaluation is deemed to be activities undertaken from the beginning of the pre-feasibility study conducted to assess the technical and commercial viability of extracting a mineral resource before moving into the Development phase. The criteria for carrying forward the costs are: • Such costs are expected to be recouped through successful development and exploitation of the area of interest, or alternatively by its sale; or • Evaluation activities in the area of interest which has not yet reached a state 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 are continuing. Costs carried forward in respect of an area of interest which is abandoned are written off in the year in which the abandonment decision is made. Exploration commitments It is difficult to accurately forecast the nature or amount of future expenditure, although it will be necessary to incur expenditure in order to retain present interests in mineral tenements. Expenditure commitments on mineral tenure can be reduced by selective relinquishment of exploration tenure or by the renegotiation of expenditure commitments. The approximate level of exploration expenditure expected in the year ending 30 June 2017 for the consolidated entity is approximately $18.720m (2016: $11.825m). This includes the minimum amounts required to retain tenure. There are no material exploration commitments further out than one year. 99 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements B: Production and Growth Assets B.3 Impairment of non-current assets Recognition and measurement Impairment testing The carrying values of non-current assets are reviewed for impairment when indicators of impairment exist or changes in circumstances indicate the carrying value may not be recoverable. At a minimum the Group performs its impairment testing twice annually at 30 June and 31 December. 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 and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of an asset is the greater of the 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. Recognised Impairment No impairment was recognised in 2016. Furthermore, the assessment carried out for 30 June 2016 also concluded that a reversal of prior period impairment charges would be inappropriate. In 2015, the Group carried out recoverable amount assessments for all of its cash generating units (“CGUs”), and this resulted in impairment charges for Syama, Bibiani and the Nyakafuru tenement (the latter which had been included in the Corporate/Other segment). Included in the events which triggered a review were a lower USD gold price, significant revision of the life-of-mine plan at the Syama Gold Mine, and the sustained difference in the carrying amount of the net assets of the group and its quoted market capitalisation. The key change to the life-of-mine plan at Syama over the 2014/2015 year was the cessation of the Stage 2 cutback and the decision to exploit the ore reserves beneath the Stage 1 open cut pit by way of an underground mining operation. After reflecting the write-down of certain assets arising from the Group’s revised operating plans, the Group conducted carrying value analysis and non-current asset impairments of $561 million, as summarised in the table below: 2015 $'000 Exploration and evaluation expenditure Development expenditure Property, plant and equipment Total impairment Tax Total impairment (after tax) Syama Bibiani 23,978 358,720 89,703 472,401 - 472,401 - 25,628 53,075 78,703 - 78,703 Nyakafuru 9,411 524 - 9,935 - 9,935 Total 33,389 384,872 142,778 561,039 - 561,039 Key estimates and judgements Determination of mineral resources and ore reserves The determination of reserves impacts the accounting for asset carrying values, depreciation and amortisation rates, deferred stripping costs and provisions for decommissioning and restoration. The information in this report as it relates to ore reserves, mineral resources or mineralisation is reported in accordance with the Aus.IMM “Australian Code for reporting of Identified Mineral Resources and Ore Reserves”. The information has been prepared by or under supervision of competent persons as identified by the Code. 100 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements B: Production and Growth Assets B.3 Impairment of non-current assets (continued) Key estimates and judgements Determination of mineral resources and ore reserves There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at the time of estimation which 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 the reserves being restated. The reserves and resources for each project and area of interest is set out in the Annual Report. Impairment of mine properties, plant and equipment The future recoverability of capitalised mine properties and plant and equipment is dependent on a number of key factors including; gold price, discount rates used in determining the estimated discounted cash flows of CGUs, foreign exchange rates, the level of proved and probable reserves and measured, indicated and inferred mineral resources, the estimated value of unmined inferred mineral properties included in the determination of fair value less cost to dispose (“fair value”), future technological changes which could impact the cost of mining, and future legal changes (including changes to environmental restoration obligations). The costs to dispose have been estimated by management based on prevailing market conditions. Fair value is estimated based on discounted cash flows using market based commodity price and exchange assumptions, estimated quantities of recoverable minerals, production levels, operating costs and capital requirements, based on CGU life analysts’ valuations, and the market value of the Company’s securities. The fair value methodology adopted is categorised as Level 3 in the fair value hierarchy. When LOM plans do not fully utilise existing mineral properties for a CGU, and options exist for the future extraction and processing of all or part of those resources, an estimate of the value of mineral properties is included in the determination of fair value. The Group considers this valuation approach to be consistent with the approach taken by market participants. mine (LOM) plans. Consideration is also given to of ‐ ‐ The Group has estimated its unmined resource values based on a dollar value per gold equivalent ounce basis individually for each CGU, taking into account a range of factors although principally the current market rate for similar resources. However, where the value per ounce from the other reserves/resources included in the CGU’s discounted cash flow model (if applicable) is less than this market rate determination, the lower value per ounce from the CGU's discounted cash flow model is used when calculating that CGU’s value of unmined ounces. The value per ounce is also discounted accordingly for any future costs which would be required to exploit the insitu resources. In determining the fair value of CGUs, future cash flows were discounted using rates based on the Group’s estimated weighted average cost of capital. When it is considered appropriate to do so, an additional premium is applied with regard to the geographic location and nature of the CGU. Life-of-mine operating and capital cost assumptions are based on the Group’s latest budget and LOM plans. Operating cost assumptions reflect the expectation that costs will, over the long term, have a degree of positive correlation to the prevailing commodity price and exchange rate assumptions. 101 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements B: Production and Growth Assets B.3 Impairment of non-current assets (continued) Key estimates and judgements Key Assumptions: The table below summarises the key assumptions used in the year end carrying value assessments: Gold price (US$ per ounce): Discount rate % (post tax) Value of unmined resources (US$ per ounce): Operating and capital costs: 2016: $1,050 - $1,280 (2015: $1,070 - $1,310) 2016: 10% - 16% (2015: 10% - 13%) 2016: $68 - $83 (2015: $0 - $43) Commodity price and foreign exchange rates are estimated with reference to external market forecasts, and updated at least twice annually. The rates applied to the valuation have regard to observable market data. In determining the fair value of CGUs, the future cash flows were discounted using rates based on the Group’s estimated real weighted average cost of capital, with an additional premium applied having regard to the geographic location of the CGU. Of the individual CGUs that recognised impairments, Syama applied a discount rate in a range of 10%-13%, whilst Bibiani and Nyakafuru‘s recoverable amount was determined in the prior year using the estimated value of unmined resources. Life-of-mine operating and capital cost assumptions are based on the Group’s latest budget and life-of-mine plans. Operating cost assumptions reflect the expectation that costs will, over the long term, have a degree of positive correlation to the prevailing commodity price and exchange rate assumptions. Sensitivity analysis Any variation in the key assumptions used to determine fair value would result in a change of the assessed fair value. It is estimated that changes in the key assumptions would have the following approximate impact on the fair value of each CGU that has been subject to impairment in the accounts: Change of: Increase Decrease Increase Decrease Syama $’000 Bibiani $’000 2.5% - gold price 1.0% - discount rate 2.5% - value of unmined resources 2016 85,343 (25,247) N/A 2015 79,742 (11,394) N/A 2016 (90,473) 27,473 N/A 2015 (100,636) 12,545 N/A 2016 N/A N/A 4,716 2015 N/A N/A (2,430) 2016 N/A N/A (4,716) 2015 N/A N/A 2,430 Changes in the specific assumptions above are assumed to move in isolation, while all other assumptions are held constant. 102 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements B: Production and Growth Assets B.4 Segment expenditure, assets and liabilities For the year ended 30 June 2016 Capital expenditure Segment assets in continuing operations operations RAVENSWOOD (AUSTRALIA) $'000 SYAMA (MALI) $'000 6,586 59,682 47,226 28,705 343,042 81,677 For the year ended 30 June 2015 Capital expenditure Segment assets in continuing operations Segment assets in discontinued operation Total segment assets Segment liabilities in continuing operations Segment liabilities in discontinued operation Total segment liabilities RAVENSWOOD (AUSTRALIA) $'000 10,377 91,723 - 91,723 44,603 - 44,603 SYAMA (MALI) $'000 54,913 249,644 - 249,644 92,244 - 92,244 BIBIANI (GHANA) $'000 9,283 63,736 17,114 BIBIANI (GHANA) $'000 19,111 52,653 - 52,653 17,148 - 17,148 CORP/OTHER TREASURY $'000 675 37,871 7,910 $'000 - - - CORP/OTHER TREASURY $'000 6 18,989 1,462 20,451 6,541 5,773 12,314 $'000 - - - - 82,936 - 82,936 TOTAL $'000 45,250 504,331 153,927 TOTAL $'000 84,407 413,009 1,462 414,471 243,472 5,773 249,245 103 Resolute Mining Limited | Annual Report 2016 Notes to the Financial Statements C: Cash, Debt and Capital In this section Cash, debt and capital position of the Group at the end of the reporting period. C.1 Cash Cash at bank and on hand Reconciliation to cash flow statement For the purpose of the cash flow statement, cash and cash equivalents comprise the following at 30 June: Cash at bank and on hand Bank overdraft 2016 $'000 2015 $'000 79,873 9,885 79,873 (26,456) 53,417 9,885 (29,620) (19,735) The credit quality of cash and cash equivalents can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Cash at bank & short term deposits Counterparties with external credit ratings A BBB Counterparties without external credit ratings Total cash at bank & short term deposits Recognition and measurement 79,285 113 9,074 226 475 585 79,873 9,885 Cash and cash equivalents in the statement of financial position comprise cash at bank and short-term deposits with an original maturity of three months or less. Cash and cash equivalents are stated at face value in the statement of financial position. Fair value and foreign exchange risk The carrying amount of cash and cash equivalents approximates their fair value. The Group held A$37.0 million of cash and cash equivalents at 30 June 2016 (2015: A$4.9 million) in currencies other than Australian dollars or a different currency to that of the functional currency of the company which holds the item. These exposures are predominantly US dollars (2016: A$28.1 million; 2015: A$3.4 million equivalent) and Euro (2016: A$8.6 million; 2015: A$1.2 million equivalent). Average interest rates earned on cash and cash equivalents during the period was 0.7% (2015: 0.8%). 104 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements C: Cash, Debt and Capital C.1 Cash (continued) Reconciliation of net profit/(loss) from continuing operations after income tax to the net operating cash flows 2016 $'000 2015 $'000 Net profit/(loss) from ordinary activities after income tax 212,927 (568,760) Add/(deduct): Share based payments including employee long term incentive costs Dividend income Profit on sale of inventory Loss/(profit) on sale of property, plant and equipment Profit on sale of available for sale financial assets Rehabilitation and restoration provision accretion Rehabilitation and restoration provision adjustment from non operating Rehabilitation and restoration cash expenditure Depreciation and amortisation Gain on sale of the Resolute Pty Ltd group Foreign exchange (gains)/losses Realised foreign exchange losses on debt repayments Foreign exchange loss on deregistration of controlled entity Inventory net realisable value movements Impairment of development (Reversal of provision)/impairment of accounts receivable Impairment of property, plant and equipment Impairment of gold equity investments Non cash finance costs Changes in operating assets and liabilities: Decrease/(increase) in receivables Decrease/(increase) in inventories Decrease/(increase) in prepayments Increase in stripping activity asset Decrease in payables Decrease in current tax balances (Decrease)/increase in operating provisions Net operating cash flows 1,040 - - 585 (99) 1,122 - (93) 39,215 (46,151) (25,888) 20,795 3,086 (26,599) - (529) - - 577 5,811 43,361 1,231 (26,487) (5,247) - (5,858) 192,798 1,667 (64) (2,027) (225) (11,921) 1,115 (1,763) (5,053) 101,595 - 39,538 - - 8,389 418,262 11,042 142,777 331 2,698 (16,744) (48,273) (771) (13,311) (7,512) (1,404) 12,275 61,861 105 Resolute Mining Limited | Annual Report 2016M o v e m e n t i n b a n k o v e r d r a f t , i l n c u d n g i f o r e g n i e x c h a n g e m o v e m e n t s M a r k t o m a r k e t m o v e m e n t i n g o d l u n s o d l M o v e m e n t i n g o d l i s h p p e d b u t u n s o d l a n d h e d l i n m e t a l a c c o u n t s R e c o n c i l i a t i o n o f c a s h f l o w b y s e g m e n t t o t h e c a s h f l o w s t a t e m e n t : C a s h f l o w s i f r o m d s c o n t i n u e d o p e r a t i o n E x c h a n g e r a t e j a d u s t m e n t i n c a s h o n h a n d M o v e m e n t i n c a s h a n d c a s h e q u i v a l e n t s p e r c o n s o l i d a t e d c a s h f l o w s t a t e m e n t ( 1 3 , 1 1 6 ) ( 1 7 , 1 8 6 ) ( 3 , 7 3 0 ) ( 5 9 7 ) ( 1 5 3 ) ( 1 8 , 2 6 5 ) 106 a c c o u n t s C a s h f l o w b y s e g m e n t , i l n c u d n g i g o d l b u l l i o n , a n d g o d l i s h p p e d b u t u n s o d l a n d h e d l i n m e t a l 2 6 , 9 2 8 1 4 , 5 5 4 ( 3 8 , 1 3 9 ) ( 2 , 7 4 2 ) 2 6 , 2 1 4 2 6 , 8 1 5 M o v e m e n t i n b a n k o v e r d r a f t , i l n c u d n g i f o r e g n i e x c h a n g e m o v e m e n t s M a r k t o m a r k e t m o v e m e n t i n g o d l u n s o d l M o v e m e n t i n g o d l i s h p p e d b u t u n s o d l a n d h e d l i n m e t a l a c c o u n t s R e c o n c i l i a t i o n o f c a s h f l o w b y s e g m e n t t o t h e c a s h f l o w s t a t e m e n t : F o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 5 C a s h f l o w s i f r o m d s c o n t i n u e d o p e r a t i o n E x c h a n g e r a t e j a d u s t m e n t i n c a s h o n h a n d M o v e m e n t i n c a s h a n d c a s h e q u i v a l e n t s p e r c o n s o l i d a t e d c a s h f l o w s t a t e m e n t 7 0 , 6 3 8 ( 2 , 3 7 4 ) 1 , 6 5 5 3 , 1 6 4 8 4 2 2 , 0 7 4 C a s h f l o w b y s e g m e n t , i l n c u d n g i g o d l b u l l i o n , a n d g o d l i s h p p e d b u t u n s o d l a n d h e d l i n m e t a l a c c o u n t s 5 1 , 8 3 3 1 0 7 , 7 8 4 ( 1 1 , 9 9 4 ) ( 5 , 6 5 8 ) ( 9 5 , 9 3 0 ) 4 6 , 0 3 5 F o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6 ' $ 0 0 0 ( A U S T R A L A I ) C a s h f l o w b y s e g m e n t C . 1 C a s h ( c o n t i n u e d ) N o t e s t o i t h e F n a n c a i l S t a t e m e n t s C : C a s h , D e b t a n d C a p i t a l R A V E N S W O O D ( M A L I ) ' $ 0 0 0 S Y A M A ( G H A N A ) ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 ' $ 0 0 0 I B B A N I I U N A L L O C A T E D ( b ) / C O R P O T H E R T R E A S U R Y T O T A L Resolute Mining Limited | Annual Report 2016 Notes to the Financial Statements C: Cash, Debt and Capital C.2 Interest bearing liabilities Current Lease liabilities - ref C3.1 Bank overdraft - ref C3.2 Borrowings - ref C3.3 Non-Current Lease liabilities - ref C3.1 Convertible notes - ref C3.4 2016 $'000 2015 $'000 222 26,456 - 26,678 - - - 4,519 29,620 65,291 99,430 222 14,064 14,286 Recognition and measurement All loans and borrowings are initially recognised at fair value less transaction costs and subsequently at amortised cost. Any difference between the proceeds received and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. The component of convertible notes that exhibit characteristics of a liability are recognised as a liability net of transaction costs. On issuance of the convertible notes, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and that amount is carried as a long- term liability on an amortised cost basis until extinguished on conversion or redemption. The accretion of the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds received from the issue of the convertible notes are allocated to the conversion option that is recognised and included in shareholders' equity, net of transaction costs. The carrying amount of the conversion option is not re- measured in subsequent periods. Interest on the liability component of the instruments is recognised as an expense in the consolidated statement of comprehensive income except for when the borrowing costs are associated with a qualifying asset, in which case the borrowing costs are capitalised and amortised over the useful life of the qualifying asset. Finance leases, which effectively transfer to the consolidated entity all of the risks and benefits incidental to ownership of the leased item, are capitalised at the present value of the minimum lease payments, disclosed as leased property, plant and equipment, and amortised over the period the consolidated entity is expected to benefit from the use of the leased assets. Lease payments are allocated between interest expense and reduction in the lease liability. 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. The Group’s interest bearing liabilities have a fair value of $26.816m (2015: $118.302m) compared to the carrying value of $26.678m (2015: $113.716m). The differences between the fair value and carrying amount are capitalised borrowing costs. The total assets of the entities over which security exists amounts to $481.143m. $61.395m of these assets relate to property plant and equipment. The Group held nil interest bearing liabilities at 30 June 2016 (2015: A$65 million) in currencies other than Australian dollars or a different currency to that of the functional currency of the company which holds the item. The 2015 exposure was entirely US dollars. Average interest rates charged on interest bearing liabilities at period end was 8.0% (2015: 6.1%). 107 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements C: Cash, Debt and Capital C.2 Interest bearing liabilities (continued) Maturity profile of interest-bearing liabilities The maturity profile of the Group’s interest-bearing liabilities in total and for finance leases is as follows: 2016 $'000 2015 $'000 - 28,047 - 28,047 (1,369) 26,678 224 - 224 (2) 222 17,408 85,175 18,834 121,417 (7,701) 113,716 4,738 223 4,961 (220) 4,741 Borrowings Due within 1 to 3 months Due within 4 months to one year Due between one and five years Total contractual repayments Less finance charges Total interest bearing liabilties Finance Leases Due within one year Due between one and five years Total minimum lease payments Less finance charges Present value of minimum lease payments C.3 Financing facilities C3.1 Hire-purchase agreements Carpentaria Gold Pty Ltd (“CGPL”), a wholly owned subsidiary of RML, entered into hire purchase agreements with the Commonwealth Bank of Australia for the purchase of mining equipment which is being used at Mt Wright, Ravenswood. Monthly instalments are required under the terms of the contracts which expire in August 2016. RML has provided an unsecured parent entity guarantee to this financier in relation to this finance facility. C3.2 Bank overdraft This facility is in place and is subject to an annual revision in approximately June 2017. The maximum limit of this facility is $34.200m (AUD equivalent), and as at 30 June 2016 $7.745m (AUD equivalent) of the facility was unused. 108 Resolute Mining Limited | Annual Report 2016 Notes to the Financial Statements C: Cash, Debt and Capital C.3 Financing facilities (continued) C3.3 Syndicated facilities RML has entered into a Letter of Credit Facility Agreement with Citibank N.A. (relating to the Ravenswood Project) and a Letter of Credit Facility Agreement with Sociêtê General Ghana Limited (relating to the Bibiani Project). The facilities comprise A$27.828m of Environmental Performance Bond Facilities. Both of these facilities are fully drawn and expire on 31 December 2016. The Citibank N.A. Letter of Credit Facility Agreement and hedging facilities provided by Investec Bank Plc and Citibank N.A. are secured by the following: (i) (ii) (iii) (iv) (v) (vi) (vii) Cross Guarantee and Indemnity given by RML (“the Borrower”), Carpentaria Gold Pty Ltd, Resolute (Somisy) Limited, Resolute (Treasury) Pty Ltd and Resolute (Bibiani) Limited; Share Mortgage granted by RML over all of its shares in Carpentaria Gold Pty Ltd; Share Mortgage granted by the Borrower over all of its shares in Resolute (Bibiani) Limited and Resolute (Somisy) Limited; Fixed and Floating Charge granted by Resolute (Treasury) Pty Ltd over all its current and future assets including bank accounts and an assignment of all Hedging Contracts; Mining Mortgage and Fixed and Floating Charge granted by Carpentaria Gold Pty Ltd, including mining mortgage over key Carpentaria Gold Pty Ltd mining tenements and charge over all the current and future assets of Carpentaria Gold Pty Ltd including bank accounts and an assignment of all Hedging Contracts; Mortgage of Contractual Rights granted by Resolute Mining Limited in favour of the Security Trustee over a loan provided to Sociêtê des Mines de Syama SA; Mortgage of Contractual Rights granted by Resolute (Bibiani) Limited in favour of the Security Trustee over a loan provided to Drilling and Mining Services Limited, Mensin Gold Bibiani Limited and Noble Mining Ghana Limited; and, (viii) Mortgage of Contractual Rights granted by Resolute (Treasury) Pty Ltd in favour of the Security Trustee over a loan provided to Mensin Gold Bibiani Limited. Pursuant to the Syndicated Facilities Agreement and Letter of Credit Facility Agreement with Citibank N.A, the following ratios are required: (i) (ii) (iii) (iv) (v) (Interest Cover Ratio): the ratio of EBITDA to Net Interest Expense will be greater than 5.00 times; (Net Debt to EBITDA): the ratio of Net Debt to EBITDA will be less than 2.00 times; (Consolidated Gearing): the ratio of Net Debt to Equity will be less than 1.00 times; (Loan Life Cover Ratio): will be equal to or greater than 1.50:1; and, (Reserve Tail Ratio): will exceed 30%. There have been no breaches of these ratios. The Societe General Ghana Limited Letter of Credit Facility Agreement is supported by a guarantee provided by Resolute Mining Limited. C3.4 Convertible Notes On 15 December 2014, the Group issued 15,000,000 unsecured convertible notes which had a coupon rate of 10% p.a., payable quarterly in arrears, raising $15m (less costs). The notes were convertible into ordinary shares, one for one, at the option of the holder and were not due to be repaid until their expiry in December 2017. In April 2016, a decision was made to approach note holders to allow for early redemption of the notes. An Amendment Deed to the Notes Trust Deed was authorised by a special resolution passed by Holders of at least 75% of the Notes and, following the consent received from the Company’s secured credit providers, was executed. On the 23 June 2016, 14,050,000 note holders chose to convert into ordinary shares with the balance redeeming for $1.06 per Note, which was comprised of the principal component and early redemption fee. 109 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements C: Cash, Debt and Capital C.4 Contributed Equity Ordinary share capital: 655,632,994 ordinary fully paid shares (2015: 641,189,223) Movements in contributed equity, net of issuing costs: Balance at the beginning of the year Conversion of convertible notes into 14,050,000 shares at $1.06 per share Balance at the end of the year 2016 $'000 2015 $'000 395,198 380,305 380,305 14,893 395,198 380,305 - 380,305 Recognition and measurement Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Terms and conditions of contributed equity Ordinary shares have the right to receive dividends as declared and in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Rights of employee share based payment recipients Refer to E.10 for details of the employee share based payment plans which includes option and performance rights plans. Each option entitles the holder to purchase one share. The names of all persons who currently hold employee share options or performance rights, granted at any time, are entered into the register kept by the Company, pursuant to Section 215 of the Corporations Act 2001. Persons entitled to exercise these options and holders of performance rights have no right, by virtue of the options, to participate in any share issue by the parent entity or any other body corporate. C.5 Other reserves Reserve Net unrealised gain/(loss) reserve Nature and purpose This reserve records fair value changes on available for sale investments. Convertible notes equity reserve This reserve records the value of the equity portion (conversion rights) of the convertible notes. Share options equity reserve The equity reserve records transactions between owners as owners. Employee equity benefits reserve This reserve is used to recognise the fair value of options and performance rights granted over the vesting period of the securities provided to employees. Foreign currency translation reserve Represents exchange differences arising on translation of foreign controlled entities. 110 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements C: Cash, Debt and Capital Key financial and capital risks in this section Liquidity risk management Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, or having the availability of funding through an adequate amount of undrawn committed credit facilities. Interest rate risk management Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to the potential renewals of existing positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest rates. There is no intention at this stage to enter into any interest rate swaps. Capital risk management The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain a capital structure that is appropriate for the Group’s current and/or projected financial position. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders (if any), return capital to shareholders, buy back its shares, issue new shares, borrow from financiers or sell assets to reduce debt. The Group monitors the adequacy of capital by analysing cash flow forecasts over the term of the Life of Mine for each of its projects. To a lesser extent, gearing ratios are also used to monitor capital. Appropriate capital levels are maintained to ensure that all approved expenditure programs are adequately funded. This funding is derived from an appropriate combination of debt and equity. The gearing ratio at 30 June 2016 is 0% (2015: 36%). The Group is not subject to any externally imposed capital requirements. The gearing ratio is calculated as net debt divided by total capital. Net debt is defined as interest bearing liabilities less cash, cash equivalents and market value of bullion on hand. Total capital is calculated as ‘equity’ as shown in the Consolidated Statement of Financial Position (including non controlling interest) plus net debt. ‐ The following table summarises the post-tax effect of the sensitivity of the Group’s debt, cash and capital items on profit and equity at reporting date to movements that are reasonably possible in relation to interest rate risk and foreign exchange currency risk. Carrying Amount $'000 79,873 9,885 113,716 Interest rate risk -1% +1% Foreign exchange risk +10% -10% Profit $'000 Equity $'000 Profit $'000 Equity $'000 Profit $'000 Equity $'000 Profit $'000 Equity $'000 (350) (350) (34) - (34) (350) (350) 350 350 350 350 4,218 4,218 4,218 4,218 (3,451) (3,451) (3,451) (3,451) (34) - (34) 34 - 34 34 - 34 578 (5,078) (4,500) 578 (5,078) (4,500) (473) 4,155 3,682 (473) 4,155 3,682 30 June 2016 Cash Total increase/(decrease) 30 June 2015 Cash Interest bearing liabilities Total increase/(decrease) 111 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements D: Other assets and liabilities In this section Other assets and liabilities position at the end of the reporting period. D.1 Receivables Current Trade receivables Non-Current Trade receivables Allowance for impairment loss 2016 $'000 7,005 7,005 - - - 2015 $'000 11,451 11,451 10,851 (10,293) 558 The credit quality of receivables can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Trade receiv able s Counterparties with external credit ratings AA+ Counterparties without external credit ratings * Group 1 Group 2 Total trade re ce ivable s 157 294 6,848 - 11,159 10,849 7,005 22,302 *Group 1 refers to existing counterparties with no defaults in the past. Group 2 refers to existing counterparties where difficulty in recovering these debts in the past has been experienced. Recognition and measurement Trade receivables are initially recognised at fair value and subsequently at amortised cost less a provision for any uncollectible debts. Trade receivables are due for settlement no more than 30 days from the date of recognition. Fair value and foreign exchange risk The carrying amount of receivables approximates their fair value. The Group held nil receivables at 30 June 2016 (2015: A$1.7 million) in currencies other than Australian dollars or in a different currency to that of the functional currency of the company which holds the item. In 2015, the exposure was predominantly Tanzanian shillings (2016: nil; 2015: A$1 million equivalent). 112 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements D: Other assets and liabilities D.1 Receivables (continued) Movements in the allowance for impairment loss is as follows: At start of year Reversal of provision/(Charge for the year) Recognised as a bad debt Divestment of discontinued operation Foreign exchange translation At e nd of ye ar 2016 $'000 (10,293) 529 - 10,427 (663) - As at 30 June, the aging analysis of current and non-current sundry debtors is as follows: 0-30 days 31-60 days 61-90 days 61-90 days (Past due but not impaired) +91 days (Past due but not impaired) +91 days (Considered impaired) Total 2,462 1,624 42 - 2,876 - 7,005 2015 $'000 (12,478) (11,044) 13,167 - 62 (10,293) 6,295 2,822 1,574 101 1,217 10,293 22,302 Payment terms on amounts past due but not impaired have not been re-negotiated, however the Group maintains direct contact with the relevant debtor and is satisfied that net receivables will be collected in full. D.2 Inventories Ore stockpiles -At cost -At net realisable value Total ore stockpiles Gold bullion on hand - at cost¹ Gold in circuit - at cost Consumables at cost 30,699 14,972 45,671 16,164 73,683 50,494 186,012 18,226 13,500 31,726 29,769 75,971 57,140 194,606 ¹ Resolute retains 12,632oz of gold bullion on hand at 30 June 2016 with a market value of $22m (2015: 28,840oz with a market value of $44m). Recognition and measurement Finished goods (bullion), gold in circuit and stockpiles of unprocessed ore are stated at the lower of cost and estimated net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to ore stockpiles and gold in circuit items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business (excluding derivatives) less the estimated costs of completion and the estimated costs necessary to make the sale. Consumables have been valued at cost less an appropriate provision for obsolescence. Cost is determined on a first-in-first-out basis. 113 Resolute Mining Limited | Annual Report 2016 Notes to the Financial Statements D: Other assets and liabilities D.3 Financial assets and liabilities Available for sale financial assets Shares at fair value - listed Other financial assets Environmental bond - restricted cash Financial derivative liabilities Gold forwards at fair value - current Gold forwards at fair value - non-current 2016 $'000 427 427 2015 $'000 114 114 3,699 3,584 151 264 415 - - - Gold forward sales are deliverable at an average price of A$1,800 an ounce for a total of 36,000 ounces between November 2016 and October 2017 at the rate of 3,000 ounces per month. Recognition and measurement Available-for-sale financial assets Available for sale financial assets consist of investments in ordinary shares. Comprising principally of marketable equity securities, they are classified as non-current assets unless management intends to dispose of the investment within 12 months of the consolidated statement of financial position date. Investments are initially recognised at fair value plus transaction costs. Unrealised gains and losses arising from changes in the fair value of classified as available-for-sale are recognised in equity in the available-for-sale investments revaluation reserve. A significant or prolonged decline in the fair value of a security results in the impairment charge being removed from equity and recognised in the consolidated statement of comprehensive income. The fair value of the listed securities are based on quoted market prices and accordingly is a level 1 measurement basis on the fair value hierarchy. Restricted cash The environmental bond represents a receivable carried at amortised cost using the effective interest method. The Ghanaian Environmental Protection Authority holds $3.699m (AUD equivalent) of restricted cash as security for the rehabilitation and restoration provision of Mensin Gold Bibiani Limited’s Bibiani project. There is no external credit rating basis for the Ghanaian Environmental Protection Authority. The average interest rate earned on the environmental bond during the period was 0.0% (2015: 0.4%). Use of derivative instruments to assist in managing gold price risk As part of the Group’s risk management practices, selected financial instruments (such as gold forward sales contracts, gold call options and gold put options) may be used from time to time to reduce the impact a declining gold price has on project life revenue streams. Within this context, the programs undertaken are project specific and structured with the objective of retaining as much upside to the gold price as possible, and in any event, limiting derivative commitments to no more than 50% of the Group’s gold reserves. The value of these financial instruments at any given point in time, will in times of volatile market conditions, show substantial variation over the short term. The hedging facilities provided by the Group's counterparties do not contain margin calls. The Group does not hedge account for these instruments. No gold was delivered into forward sales contracts during the year or in the prior year. Movements in fair value are accounted for through the consolidated statement of comprehensive income. 114 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements D: Other assets and liabilities D.4 Payables Trade creditors Accruals 2016 $'000 11,547 21,820 33,367 2015 $'000 15,742 20,743 36,485 Recognition and measurement Liabilities for trade creditors and other amounts are carried at amortised cost which is the amount initially recognised, minus repayments whether or not billed to the consolidated entity. Payables to related parties are carried at the principal amount. Interest, when charged by the lender, is recognised as an expense on an accruals basis. Payables are non-interest bearing and generally settled on 30-90 day terms. Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value. D.5 Unearned revenue Gold prepay loan Recognition and measurement 2016 $'000 2015 $'000 - 3,307 In October 2013, Resolute drew down on a US$20 million extension on an existing secured loan facility jointly provided by Barclays Bank PLC (“Barclays”) and Investec Bank Plc (“Investec”). The loan was repaid in gold ounces in 24 equal instalments of 660 ounces per month between November 2013 and October 2015 inclusive. The secured loan was classified as unearned revenue on the Statement of Financial Position as Barclays and Investec prepaid Resolute for a fixed quantity of gold ounces. Resolute had a legal obligation to deliver gold ounces, and recognised revenue as and when it made the repayments in gold ounces. 115 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements D: Other assets and liabilities D.6 Provisions Current Site restoration Employee entitlements ¹ Dividend payable Withholding taxes Other provisions Non-Current Site restoration Employee entitlements 2016 $'000 1,503 26,111 83 240 391 28,328 63,864 1,275 65,139 2015 $'000 510 25,581 83 4,916 1,061 32,151 62,097 1,489 63,586 ¹ Resolute Mining’s 80% owned subsidiary Societe des Mines de Syama SA (“SOMISY”) received notifications from the Nationale de Prévoyance Sociale (“INPS”) alleging SOMISY owed contributions to the INPS department on salaries paid by SOMISY to its expatriate employees between January 2005 and July 2013. Malian Legislation requires the remittance of 24% of an employee’s gross salary and a mandatory health insurance levy to the INPS department and is a form of social tax. In accordance with the Establishment Convention between SOMISY and the State of Mali, SOMISY is exempt from paying INPS contributions and the mandatory health insurance levy on expatriate employees during the Syama Mine Development Period. In accordance with the Establishment Convention, SOMISY did not remit INPS on expatriate salaries during the Mine Development Period, and then commenced remitting INPS on expatriate salaries after the cessation of the Mine Development Period. SOMISY has acted in accordance with the Establishment Convention at all times. The INPS department’s claims are for the period during the Mine Development Period only, so SOMISY has no additional or ongoing exposures related to this matter. SOMISY unsuccessfully appealed against this INPS assessment, with a Malian Court of Appeal ruling in favour of the INPS department on the basis that it was not a government department and hence not a party to the Establishment Convention, so it was not obliged to follow its terms and conditions. As a result of the Court ruling and subsequent failed attempts to negotiate an immediate settlement, the Resolute group recorded a A$15m current liability in its June 2015 Financial Statements. Recent attempts by the INPS to collect the assessed amounts triggered further negotiations between the INPS and SOMISY and in June 2016, a Settlement Agreement was executed by the parties to record an agreed instalment plan that will see SOMISY fully discharge this disputed liability by paying A$11.7m to INPS in quarterly instalments between 1 July 2016 and 30 June 2018. The instalments payable are A$4.9m in the September 2016 quarter, A$1.5m in the December 2016 quarter followed by 6 quarterly instalments of A$0.9m each. The Settlement Agreement incorporated the waiving of some penalties included in the assessments and has reduced the quantum of the liability recorded in the Resolute group’s accounts as at 30 June 2016 by approximately A$3.3m to A$11.7m. Resolute continues to strongly dispute the validity of the INPS assessments and negotiations with the State of Mali are ongoing to recover the INPS contributions paid or to be paid to ensure the State of Mali does not breach the terms of the Establishment Convention. Up to 30 June 2016, CFA 1.947b (A$4.357m) has been paid to the INPS department (paid in the year ended 30 June 2013) and successful negotiations will see the monies paid to date returned to SOMISY. 116 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements D: Other assets and liabilities D.6 Provisions (continued) Recognition and measurement Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, 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, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost. Employee benefits Provision is made for employee benefits accumulated as a result of employees rendering services up to the end of the reporting period. These benefits include wages, salaries, termination gratuity and relocation costs, annual leave and long service leave. Restoration obligations The Group records the present value of the estimated cost of obligations, such as those under the consolidated entity’s Environmental Policy, to restore operating locations in the period in which the obligation is incurred. The nature of restoration activities includes dismantling and removing structures, rehabilitating mines, dismantling operating facilities, closure of plant and waste sites and restoration, reclamation and revegetation of affected areas. Site restoration Balance at the beginning of the year Rehabilitation and restoration provision accretion Change in scope of restoration provision Utilised during the year Foreign exchange translation Divestment of discontinued operation Balance at the end of the year Reconciled as: Current provision Non-current provision Total provision Key estimates and judgements Restoration 2016 $'000 2015 $'000 62,607 1,122 808 (93) 1,164 (241) 65,367 1,503 63,864 65,367 63,451 1,115 45 (5,053) 3,049 - 62,607 510 62,097 62,607 In determining an appropriate level of provision consideration is given to the expected future costs to be incurred, the timing of these expected future costs (largely dependent on the life of the mine), and the estimated future level of inflation. The discount rate used in the calculation of these provisions is consistent with the risk free rate. The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factors including changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine-sites. The expected timing of expenditure can also change, for example in response to changes in reserves or to production rates. Changes to any of the estimates could result in significant changes to the level of provisioning required, which would in turn impact future financial results. 117 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements D: Other assets and liabilities Key financial and capital risks in this section Interest rate risk, diesel price risk and foreign exchange risk management Refer to About the Report and Section C for details of how these risks are managed. Credit risk management The Group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of the financial assets. Credit risk is managed on a Group basis. Credit risk predominately arises from cash, cash equivalents (refer to C1), gold bullion held in metal accounts, derivative financial instruments, deposits with banks and financial institutions and receivables from statutory authorities. For derivative financial instruments, management mitigates some credit risk by using a number of different hedging counterparties. Credit risk further arises in relation to financial guarantees given to certain parties. Such guarantees are only provided in exceptional circumstances and are subject to Financial Risk Management Committee approval. With the exception of those items disclosed in C3 and a Resolute Mining parent company guarantee provided to Macquarie Bank Limited relating to their provision of a hedging facility, no guarantees have been provided to third parties as at the reporting date. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. The following table summarises the post-tax effect of the sensitivity of the Group’s other asset and liability items not previously reported on profit and equity at reporting date to movements that are reasonably possible in relation to commodity risk and foreign exchange currency risk: Carrying Amount $'000 427 3,699 33,368 12,009 114 3,584 36,485 30 June 2016 Available for sale financial assets Other financial assets Payables Total increase/(decrease) 30 June 2015 Trade and other receivables Available for sale financial assets Other financial assets Payables Total increase/(decrease) Foreign exchange risk -10% +10% Gold price risk -10% +10% Profit Equity $'000 $'000 Profit $'000 Equity $'000 Profit $'000 Equity $'000 Profit $'000 Equity $'000 - 288 (339) (51) 78 - 279 (242) 115 - 288 (339) (51) 78 - 279 (242) 115 - (235) 277 42 (64) - (228) 198 (94) - (235) 277 42 (64) - (228) 198 (94) (30) - - (30) - (8) - - (8) (30) - - (30) - (8) - - (8) 30 - - 30 - 8 - - 8 30 - - 30 - 8 - - 8 118 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements E: Other items In this section Information on items which require disclosure to comply with Australian Accounting Standards and the Australian Corporations Act 2001.This section includes group structure information and other disclosures. E.1 Contingent liabilities Contingent liabilities Amounts Potentially Payable to historical Bibiani Creditors In June 2014, Mensin Gold Bibiani Limited, Drilling and Mining Services Limited and Noble Mining Ghana Limited (collectively referred to as the “Companies”) entered into court approved Schemes of Arrangement (“Scheme”) with their creditors and employees (“Scheme Creditors”). The Scheme outlines the timing and amounts of payments to be made by the Companies to a Scheme Fund and a Future Fund who in turn are responsible for making payments to the Scheme Creditors. The Scheme Creditors arise from transactions that occurred prior to the Companies becoming part of the Resolute group. The Scheme Fund and the Future Fund are administered by Ferrier Hodgson. The implementation of the Scheme has had the effect of removing from the Companies’ balance sheets all historical liabilities relating to amounts payable to Scheme Creditors and replacing this with an obligation to fund the Scheme Fund and Future Fund as and when necessary. The unconditional obligations to make payments to the Scheme Fund have been paid prior to 30 June 2016. In addition to those recorded payments and liabilities, the following contingent liabilities to provide funding to the Scheme Fund and Future Fund exist at year end: • • Potential payment to the Scheme Fund of US$3.600m ($4.854m) if, following receipt of the Feasibility Study, the board of Resolute, in its absolute discretion, makes a decision to proceed with the development of Bibiani; and Potential payment to a Future Fund of up to US$7.800m ($10.516m) conditional upon the generation of Free Cashflow from Bibiani mine operations for the period of 5 years from the date that Commercial Production is declared. Free Cashflow means 25% of the sum of Project Revenue for that period less Permitted Payments for that period, which includes: - operational expenses and capital costs paid in connection with the mining operations; and, - repayment of principal and interest relating to funds advanced by Resolute up to the commencement of mining operations. E.2 Leases and other commitments Operating leases Due within one year Due between one and five years Aggregate lease expenditure contracted for at balance date but not provided for 2016 $'000 608 613 1,221 2015 $'000 525 1,045 1,570 119 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements E: Other items E.2 Leases and other commitments (continued) Commitments Other commitments not disclosed elsewhere in this report include: Randgold/Syama Royalty Pursuant to the terms of the Syama Sale and Purchase agreement, Randgold Resources Limited will receive a royalty on Syama production, where the gold price exceeds US$350 per ounce, of US$10 per ounce on the first million ounces of gold production attributable to Resolute Mining Limited (“RML”) and US$5 per ounce on the next three million attributable ounces of gold production. As at 30 June 2016, Resolute’s 80% attributable share of Syama’s project to date gold production was 903,599 ounces of gold. Other contracted expenditure commitments Due within one year Aggregate lease expenditure contracted for at balance date but not provided for E.3 Auditor remuneration Auditing Taxation planning advice and review and other services 2016 $'000 - - 2015 $'000 1,155 1,155 2016 $ 182,000 21,950 203,950 2015 $ 320,000 89,800 409,800 Amounts received or due and receivable by a related overseas office of Ernst & Young, from entities in the consolidated entity or related entities: Auditing (Ernst & Young, Ghana and Tanzania) Total amounts received or due and receivable by Ernst & Young globally 38,800 210,375 242,750 620,175 Amounts received or due and receivable by non Ernst & Young firms for auditing 67,130 32,055 120 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements E: Other items E.4 Subsidiaries and non-controlling interests Subsidiaries The following were controlled entities during the year and have been included in the consolidated accounts. All entities in the consolidated entity carry on business in their place of incorporation. Name of Controlled Entity and Country of Incorporation Consolidated Entity Company Holding the Investment Percentage of Shares Held by Consolidated Entity 2016 % 2015 % Amber Gold Cote d’Ivoire SARL, Cote d'Ivoire Carpentaria Gold Pty Ltd, Aust. Drilling and Mining Services Limited, Ghana Excalibur Cote d’Ivoire SARL, Cote d'Ivoire Goudhurst Pty Ltd, Aust. (a) Mabangu Exploration Limited, Tanzania Mabangu Mining Limited, Tanzania Mensin Gold Bibiani Limited, Ghana Nimba Resources SARL, Cote d'Ivoire Noble Mining Ghana Limited, Ghana Resolute (Bibiani) Limited, Jersey (a) Resolute (CDI Holdings) Limited, Jersey (a) Resolute CI SARL, Cote d'Ivoire Resolute Exploration SARL, Mali Resolute (Finkolo) Limited, Jersey (a) Resolute (Ghana) Limited, Ghana Resolute Mali S.A.,Mali Resolute Pty Ltd, Aust. Resolute (Somisy) Limited, Jersey (a) Resolute (Tanzania) Limited, Tanzania Resolute (Treasury) Pty Ltd, Aust. (a) Societe des Mines de Finkolo SA, Mali Societe des Mines de Syama S.A., Mali Resolute (CDI Holdings) Limited Resolute Mining Limited Resolute (Bibiani) Limited Resolute (CDI Holdings) Limited Resolute (Treasury) Pty Ltd Resolute (Tanzania) Limited Resolute (Tanzania) Limited Resolute (Bibiani) Limited Resolute (CDI Holdings) Limited Resolute (Bibiani) Limited Resolute Mining Limited Resolute Mining Limited Resolute (CDI Holdings) Limited Resolute (Finkolo) Limited Resolute Mining Limited Resolute Mining Limited Resolute (Somisy) Limited Resolute Mining Limited Resolute Mining Limited Resolute Pty Ltd Resolute Mining Limited Resolute (Finkolo) Limited Resolute (Somisy) Limited 100 100 100 100 100 - - 90 100 100 100 100 100 100 100 100 100 - 100 - 100 85 80 100 100 100 100 100 100 100 90 - 100 100 100 100 100 100 100 100 100 100 100 100 85 80 (a) Entities not separately audited. Entity’s audit scope is limited to the purpose of inclusion in the consolidated entity's accounts. Material partly owned subsidiaries Accumulated share of (deficiency)/equity attributable to material Non-Controlling Interest: Societe des Mines de Syama SA ("Somisy") Mensin Gold Bibiani Limited ("Mensin") Societe des Mines de Finkolo SA ("Finkolo") Total Non-Controlling Interest Profit/(loss) allocated to material Non-Controlling Interest: Somisy Mensin Finkolo Total Non-Controlling Interest 2016 $'000 2015 $'000 (46,838) (2,211) 3,072 (45,977) 31,380 (23) (144) 31,214 (76,020) (1,497) 3,205 (74,312) (58,431) (7,692) - (66,123) 121 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements E: Other items E.4 Subsidiaries and non-controlling interests (continued) The summarised financial information of subsidiaries with non-controlling interests is provided below. This information is based on amounts before inter-company eliminations. Summarised Statement of Comprehensive Income 2016 $'000 2015 $'000 2016 $'000 2015 $'000 2016 $'000 2015 $'000 Somisy Mensin Finkolo Revenue Gain/(loss) for the period Total comprehensive income/(loss) for the period 372,938 156,902 156,902 310,761 (292,157) (292,157) - (236) (236) - (71,830) (71,830) - (957) (957) - - - Summarised Statement of Financial Position Current assets Non-current assets Current liabilities Non-current liabilities - External Non-current liabilities - Intra Resolute Mining Limited Group Total (deficiency)/equity 240,457 157,936 (59,054) (33,237) (502,507) (196,405) 194,043 115,610 (70,333) (32,169) (540,643) (333,492) 3,341 58,856 (2,203) (14,504) (424,356) (378,866) 3,570 47,067 (1,514) (12,674) (403,406) (366,957) 42 21,897 (29) - (25,542) (3,632) 37 21,341 (9) - (23,961) (2,592) Summarised Statement of Cash Flow Operating Investing Net increase/(decrease) in cash and cash equivalents Somisy Mensin Finkolo 125,041 (17,257) 107,784 63,640 (49,086) 14,554 (2,377) (9,617) (11,994) (2,777) (35,362) (38,139) (1,013) (567) (1,580) (1,380) (496) (1,876) E.5 Joint operations The consolidated entity has an interest in the following material joint operations whose principal activities are to explore for gold. Entity Holding Interest Other Participant/Joint Operation Resolute Mining Limited Mabangu Mining Limited Mabangu Mining Limited Resolute (Tanzania) Limited Etruscan Resources Bermuda Ltd/N’Gokoli Est JV¹ Sub Sahara Resources (Tanzania) Limited/Nyakafuru JV¹ Yellowstone Limited /Mega JV ABG Exploration Limited/GP West JV¹ Percentage of Interest Held 2016 % 60% 2015 % 60% 0% 0% 0% 66% 49% 70% ¹ Interests in joint operations greater than 50% have been accounted for as joint operations as all decision making requires unanimous agreement. 122 Resolute Mining Limited | Annual Report 2016 Notes to the Financial Statements E: Other items E.6 Discontinued operations On 12 December 2014, the formal handover of the Golden Pride site and all remaining infrastructure to the Madini Institute to set up a mining institute of learning was completed, as agreed with the Government of Tanzania. This ended Resolute’s presence on site at Golden Pride after 15 years and production of over 2.2 million ounces of gold. This arm of the business, previously represented as the Golden Pride operating segment, has been classified as a discontinued operation and is no longer presented as a segment. In October 2015, Resolute completed the divestment of Resolute Pty Ltd, the company holding all of Resolute’s subsidiaries, assets, liabilities, contingent liabilities, and mineral rights in Tanzania (the “RPL group”). Resolute entered into an agreement with Cienega S.A.R.L. whereby Cienega S.A.R.L. acquired the RPL group for nominal initial consideration, with a potential deferred consideration equal to 50% of the proceeds of the sale of any mineral rights, related physical assets, and other specific legal actions. The results for the year are presented below: Revenue Expenses Gain on sale of the Resolute Pty Ltd group (i) Accounts receivable impairment expenses and inventory net realisable value movements Profit/(loss) before tax from a discontinued operation Tax benefit Profit/(loss) for the period from a discontinued operation Earnings/(loss) per share: Basic earnings/(loss) per share of discontinued operation Diluted earnings/(loss) per share of discontinued operation The net cash flows of the discontinued operation are as follows: Operating cash flows Financing cash flows Net cash outflow 2016 $'000 - (1,381) 46,151 - 44,770 - 44,770 2015 $'000 3,085 (8,606) (809) (6,330) 1,057 (5,273) 6.97 cents 6.80 cents (0.82) cents (0.82) cents (2,374) - (2,374) (17,186) - (17,186) (i) The net liabilities of the RPL Group sold for nil consideration totalled $3.615 million. Additionally, the RPL Group’s accumulated foreign exchange gain recognised in equity was $42.488 million and has now been recycled to profit and loss. E.7 Subsequent events On 1 August 2016, 130,000 fully paid ordinary shares were issued to Level 2 employees as a result of two employee option holders exercising their options by paying $1.18 per share. As at the date of this report 655,762,994 shares were on issue. On 30 August 2016, the Company announced a final dividend on ordinary shares in respect of the 2016 financial year of 1.7 cents per share. The dividend has not been provided for in the 30 June 2016 financial statements. 123 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements E: Other items E.8 Related party disclosures (i) (ii) (iii) (iv) RML is the ultimate Australian holding company and there is no controlling entity of RML at 30 June 2016. During the year ended 30 June 2016, 200,000 ordinary fully paid shares were issued to Mr Welborn upon conversion of his convertible notes. During the year ended 30 June 2016, 500 ordinary fully paid shares were issued to Mr Beilby upon conversion of his convertible notes. During the year ended 30 June 2015, 500 convertible notes were issued at $1.00 per note to each of Mr Beilby, Mr Fitzgerald and Mr Venn. E.9 Parent entity information Current assets Total assets Current liabilities Total liabilities Net assets Issued capital Accumulated losses Convertible note equity reserve Share option equity reserve Employee equity benefits reserve Reserves - unrealised gain/(loss) Total shareholders equity Profit/(loss) of Resolute Mining Limited Total comprehensive profit/(loss) of Resolute Mining Limited 2016 $'000 2015 $'000 73 306,678 (646) (651) 306,027 395,196 (100,906) 549 5,793 5,364 31 306,027 156,591 156,591 326 215,214 (66,647) (80,716) 134,498 380,305 (257,497) 549 5,793 5,364 (16) 134,498 (382,307) (382,307) Refer to E1 for the contingent liabilities and commitments of Resolute Mining Limited. The parent company guarantees provided by Resolute Mining Limited as outlined in C3 have a nil written down value as at 30 June 2016 (2015: nil). E.10 Employee benefits and share based payments Employee benefits charged to profit and loss Salaries Superannuation Share based payments expense 58,833 2,870 1,716 63,419 65,181 3,029 2,489 70,699 Share based payments Equity-based compensation benefits are provided to employees via the Group’s share option plan and performance rights plan. The Group determines the fair value of securities issued as an expense in the profit and loss over the vesting period with a corresponding increase in equity. 124 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements E: Other items E.10 Employee benefits and share based payments (continued) Key management personnel Details of remuneration provided to key management personnel are as follows: 2016 $ Short-term employee benefits Post-employment benefits Long-term employment benefits Share-based payments 2,931,464 431,383 41,878 407,916 3,812,641 2015 $ 3,044,367 177,634 53,902 1,304,005 4,579,908 Key estimates and judgements Share based payments The Group measures the cost of equity settled share based payment transactions with reference to the fair value at the grant date using a Black Scholes formula or Monte Carlo simulation. The valuations take into account the terms and conditions upon which the instruments were granted such as the exercise price, the term of the option or performance right, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option or performance right, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option or performance right. Employee share option plan The maximum number of options that can be issued under the Employee Share Option Plan is capped at 5% of the ordinary shares on issue. The options do not provide any dividend or voting rights. The options are not quoted on the ASX. One third of the options issued pursuant to the Plan are able to be exercised 6 months after issue, a further one third 18 months after issue and the remaining one third 30 months after issue. Employees will only be able to exercise the options allocated to them if they meet certain performance criteria. Option Category Opening Number of Options 2016 Lapsed During the Year Closing Number of Options Opening Number of Options 2015 Lapsed During the Year Closing Number of Options Fair value of option at grant date H I J K L M N - 33,000 90,000 - (33,000) (90,000) 2,000,000 (2,000,000) (756,333) - 756,333 130,000 647,400 (102,000) 3,656,733 (2,981,333) - - - - - 130,000 545,400 675,400 450,000 39,000 90,000 2,000,000 815,666 130,000 689,400 4,214,066 - - (450,000) (6,000) - 33,000 90,000 2,000,000 756,333 130,000 647,400 (557,333) 3,656,733 (42,000) (59,333) - 0.61 0.73 0.70 0.72 0.66 0.98 Weighted average exercise price 1.46 1.39 1.72 1.42 1.18 1.46 The weighted average remaining contractual life for the share options outstanding as at 30 June 2016 is 0.5 years (2015: 0.57 years). 125 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements E: Other items E.10 Employee benefits and share based payments (continued) Performance rights plan A Performance Rights Plan was approved by shareholders and implemented in 2012. The performance rights plan is broken down between: Performance rights plan category Level 1 Level 2 Type of employee Executives and Operations General Managers Employees that report to a Level 1 employee Plan category Grant and frequency¹ Performance measures Level 1 Annually set at 75% of fixed remuneration for the CEO, 50% for Executives and 30% for Operations General Managers • 75% of the rights will be performance tested against the relative total shareholder return (“TSR”) measure over a 3 year period; and • 25% of the rights will be performance tested against the reserve/ resource growth over a 3 year period. • Service Performance period 3 years 3 years Level 2 Annually set at 20% of fixed remuneration ¹ Grant sizes have been changed from 1 July 2016 onwards. Refer to the Remuneration Report for further details. Performance rights on issue Level 1 Level 1 Level 2 Level 1 Level 2 As at 30 June 2016 Changes during current period Increase through issue of performance rights to eligible employees (Level 1) Increase through issue of performance rights to eligible employees (Level 2) Decrease through conversion of shares upon vesting of performance rights (Level 1) Decrease through lapsing of performance rights (Level 1) Decrease through lapsing of performance rights (Level 1) Decrease through lapsing of performance rights (Level 1) Decrease through lapsing of performance rights (Level 1) Decrease through lapsing of performance rights (Level 2) Decrease through lapsing of performance rights (Level 2) Issue Date Total Number Fair Value per Right at Grant Date 1/07/2013 1/07/2014 27/08/2014 1/07/2015 28/08/2015 3,153,596 2,250,597 1,502,764 5,083,995 4,883,803 16,874,755 $0.43 $0.50 $0.56 $0.25 $0.25 $0.35 Vesting Date 30/06/2016 30/06/2017 30/06/2016 30/06/2018 30/06/2017 5,588,771 $0.25 30/06/2018 5,838,967 $0.25 30/06/2017 (393,771) (1,193,207) (23,147) (135,237) (504,776) (16,518) (955,164) $1.46 $1.46 $0.43 $0.50 $0.25 $0.56 $0.25 30/06/2015 30/06/2015 30/06/2016 30/06/2017 30/06/2018 30/06/2016 30/06/2017 126 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements E: Other items E.10 Employee benefits and share based payments (continued) The following table lists the key variables used in the valuation of performance rights: Hurdle Number of performance rights issued Underlying share price ($) Exercise price ($) Risk free rate Volatility factor Dividend yield Period of the rights from grant date (years) Effect of performance hurdles Reserve and resources rights 1,397,193 TSR rights For the year ended 30 June 2016 Service rights 5,838,967 4,191,578 Total 11,427,738 Reserve and resources rights 772,107 TSR rights For the year ended 30 June 2015 Service rights 1,544,023 2,316,321 Total 4,632,451 0.31 - 2.08% 78% 0% 3 0.31 - 2.08% 78% 0% 3 0.25 - 1.79% 74% 0% 2 0.62 - 2.64% 64% 0% 3 0.62 - 2.64% 64% 0% 3 0.56 - 2.53% 62% 0% 2 Not reflected in valuation due to non-market condition Reflected in valuation through Monte Carlo simulation Weighted average Not reflected in valuation due to non- market condition Reflected in valuation through Monte Carlo simulation Weighted average Value of performance right at grant date (Level 1) Value of performance right at grant date (Level 2) $0.31 $0.25 $0.23 n/a $0.25 $0.25 $0.61 $0.56 $0.47 $0.50 n/a $0.56 E.11 Other accounting policies Derivatives Derivatives are categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets or liabilities if they are either held for trading or are expected to be realised within 12 months of the consolidated statement of financial position date. Items of this nature are recorded at their fair values through profit or loss. Investments in associates The Group’s investment in associates is accounted for using the equity method of accounting in the consolidated financial statements. An associate is an entity over which the Group has significant influence and that are neither subsidiaries nor joint arrangements. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. 127 Resolute Mining Limited | Annual Report 2016Notes to the Financial Statements E: Other items E.11 Other accounting policies New and amended Accounting Standards and Interpretations issued but not yet effective A number of new Standards, amendment of Standards and interpretations have recently been issued but are not yet effective and have not been adopted by the Group as at the financial reporting date. The potential effect of these Standards is yet to be fully determined. However, it is not expected that the new or amended Standards will significantly affect the Group’s accounting policies, financial position or performance, except for the following: Detail instruments, replacing AASB 139 Financial A finalised version of AASB 9 which contains accounting requirements for Instruments: financial Recognition and Measurement. The standard contains requirements in the areas of classification and measurement, impairment, hedge accounting and de-recognition. AASB 11 Joint Arrangements now provides guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. The impact of this change to the Group is that such acquisitions will be accounted for as business combinations and not asset acquisitions. AASB 15 provides a single, principles-based five-step model to be applied to all contracts with customers. Guidance is provided on topics such as the point in which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters. New disclosures about revenue are also introduced. IFRS 16 provides a new lessee accounting model which requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities. Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. IFRS 16 contains disclosure requirements for lessees. includes non-cancellable lease payments Title AASB 9 – Financial Instruments Application Date for Group 1 2018 July AASB 2014-3 - Accounting for Acquisitions of Interests in Joint Operations (AASB1 & AASB11) AASB 15 - Revenue from Contracts with Customers AASB16 – Leases 1 July 2018 1 July 2018 1 July 2019 128 Resolute Mining Limited | Annual Report 2016Directors’ Declaration In accordance with a resolution of the directors of Resolute Mining Limited, I state that: In the opinion of the directors: (a) The financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and, (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; (b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed throughout this report; (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and, (d) this declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2016. On behalf of the Board J.P. Welborn Director Perth, Western Australia 30 August 2016 129 Resolute Mining Limited | Annual Report 2016130 Resolute Mining Limited | Annual Report 2016131 Resolute Mining Limited | Annual Report 2016Shareholder Information Substantial shareholders as at 30 September 2016 Ordinary shares ICM Limited Wellington Management Group LLP Number held Percentage 184,236,154 103,336,772 28.0% 15.7% Distribution of equity securities as at 30 September 2016 Size of Holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Ordinary Shares 1,392 1,972 820 1,152 175 Total equity security holders Number of equity security holders with less than a marketable parcel 5,511 532 Voting rights (a) Ordinary shares Under the Company's Constitution, all ordinary shares issued by the Company carry one vote per share without restriction. Twenty largest shareholders as at 30 September 2016 Name Number of % of Issued Capital Ordinary Shares 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 ICM Limited Van Eck Associates Corporation Alliance Life Common Fund Ltd. Wellington Management Group LLP Vinva Investment Management Dimensional Fund Advisors LP Zeta Resources Limited Ruffer LLP The Vanguard Group, Inc. Bankinter Gestion de Activos, SGIIC Baker Steel Capital Managers LLP OppenheimerFunds, Inc. ICM Investment Management Limited Massachusetts Financial Services Company CQS Investment Management Limited Schroder Investment Management Limited Peter Sullivan Colonial First State Asset Management (Australia) Limited Pacific Life Fund Advisors LLC Fidelity Investments 103,807,994 103,336,772 44,373,560 38,596,543 32,254,742 29,688,907 29,434,000 22,980,500 12,569,352 11,796,233 8,408,900 7,240,478 6,620,600 4,627,635 4,000,000 3,305,663 3,072,051 2,922,895 2,745,266 2,386,108 474,168,199 15.75% 15.68% 6.73% 5.86% 4.90% 4.51% 4.47% 3.49% 1.91% 1.79% 1.28% 1.10% 1.00% 0.70% 0.61% 0.50% 0.47% 0.44% 0.42% 0.36% 71.96% 132 Resolute Mining Limited | Annual Report 2016 R e s o l u t e | A n n u a l R e p o r t 2 0 1 6 ASX:RSG | www.rml.com.au 

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