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Annual Report 2018

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ASX:RSG | www.rml.com.au Mine Gold. Create Value. 2018 Annual Report for the period 1 July 2018 to 31 December 2018 Contents About Resolute FY18 Highlights Managing Director’s Review Health and Safety Operations Overview Syama Gold Mine Ravenswood Gold Mine Bibiani Gold Mine Ore Reserves and Mineral Resources 1 3 4 6 7 8 14 16 17 Financial Overview People Sustainability Community Development Environment Governance Risk Management Financial Report Shareholder Information 21 23 25 26 28 30 33 37 124 Scope of this Report The Resolute 2018 Annual Report presents the operating and financial results for the six-month period from 1 July 2018 to 31 December 2018 and has been prepared for Resolute’s stakeholders in line with Resolute’s statutory and regulatory obligations. As part of the process of seeking a listing on the London Stock Exchange (LSE), and to synchronise the consolidation of Resolute’s African subsidiary companies’ accounts, Resolute has chosen to move from a 30 June year end for financial reporting purposes to the more conventional calendar reporting period for LSE companies of a 31 December year end. This change has resulted in this Annual Report covering a transitional six-month reporting period. Resolute is committed to the ambition of being an innovative, multi-mine, low cost, African-focused gold producer. The information contained within this report outlines Resolute’s financial performance and provides details on our efforts to deliver enduring value to all our stakeholders in a manner that reflects the Company’s values. All references to Resolute, the Company, we, us and our refer to Resolute Mining Limited (ABN 097 088 689) and its subsidiaries. All dollar figures are in Australian dollar currency unless otherwise stated. All references to FY18 are for the six-month period from 1 July 2018 to 31 December 2018 while all references to FY19 are for the 12-month period from 1 January 2019 to 31 December 2019 unless otherwise stated. Resolute Mining Limited | 2018 Annual Report About Resolute Resolute is a successful gold miner with more than 30 years of experience as an explorer, developer, and operator of gold mines in Australia and Africa which have produced more than 8 million ounces of gold. Resolute currently owns three gold mines, the Syama Gold Mine in Mali (Syama), the Ravenswood Gold Mine in Australia (Ravenswood) and the Bibiani Gold Mine in Ghana (Bibiani). Resolute has a pathway to annual gold production in excess of 500,000 ounces (oz) from a Global Mineral Resource base of 16.6 million ounces (Moz) of gold. Ravenswood has been consistent performer and an integral part of Resolute’s business for more than a decade. The highly successful Mt Wright Underground Mine continues to produce as the Company transitions back to a large scale, low cost open pit mining operation which will extend the mine life to at least 2032. Syama is a world class, robust, long-life asset capable of producing more than 300,000oz of gold per annum from existing processing infrastructure. Resolute is currently commissioning the world’s first fully automated underground gold mine at Syama which will deliver a low cost, large scale operation with a mine life beyond 2032. Bibiani is a potential long life, high margin operation and represents a growth opportunity for Resolute. A portfolio of strategic investments in highly prospective, well managed African-focused gold exploration companies has been established to provide a pipeline of future development opportunities. Syama Gold Mine Mali Ghana Bibiani Gold Mine Ravenswood Gold Mine Australia Resolute’s Vision To be an innovative, multi-mine, low cost, African-focused gold producer Resolute’s Values BOLD We are determined and unwavering in character, ideas and action AGILE We adopt new methods, systems and technology to improve performance COURAGEOUS We take smart risks and make tough decisions UNITED We work together to achieve what is best for Resolute and our communities 1 1 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report Investing for Growth 2 2 Resolute Mining Limited | Annual Report 2018FY18 Highlights Gold Production: 129,199oz Revenue: $223 million Investing Cash Flows: $181 million Cash, Bullion and Listed Investments: $117 million All-In Sustaining Cost: A$1,449/oz (US$1,050/oz) Gross Profit from Operations: $24 million Total Economic Contributions: $187 million Gold in Circuit Inventory: 73,835oz valued at $134 million Total Recordable Injury Frequency Rate: down to 1.98 Syama Underground – Commencement of Sublevel Caving: on time and on budget Investing for Growth 3 3 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report Managing Director’s Review Over the last 30 years, Resolute has mined more than 8 million ounces of gold from 9 mines in Australia and Africa. The operational expertise we have developed over this time provides a strong foundation for our future success. Resolute is proud to be commissioning the world’s first fully automated underground mine which will be powered by the world’s largest site-based hybrid power plant at Syama in Mali. The successful delivery of our Syama Underground Mine will allow us to spread our wings and capitalise on exciting opportunities to develop and operate large scale, low cost, long life Resolute gold mines. Our ambitions are founded in our strong commitment to deliver enduring value to shareholders and to the communities in which we operate. Dear Fellow Shareholders, It gives me great pleasure to present Resolute’s 2018 Annual Report, a pivotal six-month period which saw the Company achieve a major milestone with the commencement of sublevel caving at Syama on time and on budget. Investing for growth was the theme of Resolute’s 2018 Financial Year. The Company continues to generate positive operating cash flows while making significant investments across our portfolio. We have a clear pathway to annual production of more than 500,000 ounces of gold from long-life, low cost operations at the Syama Gold Mine in Mali, the Ravenswood Gold Mine in Australia and the Bibiani Gold Mine in Ghana. During the six-month financial period covered by this report, our operations at Syama and Ravenswood produced 129,199 ounces of gold at an All-In Sustaining Cost of A$1,449 per ounce (equivalent to US$1,050 per ounce). Revenue of $223 million generated a gross profit from operations of $24 million. The Company’s strong balance sheet and ongoing positive operational cash flows allowed us to make major investments during the period of $181 million. These investments in the business are transforming Resolute. Our Syama Underground Mine is now in an advanced stage of commissioning, the Ravenswood Expansion Project is undergoing optimisation to enhance returns, operational readiness planning continues at Bibiani, and our investment in junior explorers continues to deliver promising results. We have continued to improve the Company’s systems and processes with a strong focus on innovation and adopting best practice technologies. Importantly, our safety performance strengthened with a material reduction in Total Recordable Injury Frequency Rate from the prior 12-month period. Safe work practices are at the core of our business and we will continue to focus on delivering positive safety outcomes. 4 4 Resolute Mining Limited | 2018 Annual ReportAt our flagship operation, the Syama Gold Mine in Mali, we commenced sublevel caving at the new Syama Underground Mine on time and on budget during December 2018. Syama is a world class, long life, low cost asset that will deliver long term benefits to our shareholders, stakeholders, and local Mali communities. The team is now focused on the implementation of our fully automated mining system and ramping up production. The performance of our new open-pit satellite mine at Tabakoroni, 35km south of Syama, has been particularly positive with high grade oxide ore enabling us to achieve record production from our oxide processing circuit. Resolute seeks to be a leader in sustainable and responsible economic growth in Africa. In November, we announced plans to build the world’s largest fully integrated solar hybrid power plant to power Syama. The new 50 megawatt hybrid power plant, which includes the latest in solar and battery technologies will deliver a substantial saving on power costs at Syama. At our Ravenswood Gold Mine in Queensland, Australia, we received an extension of the Queensland Government’s support for the project with the extension of Prescribed Project status to November 2020. The prolonged life of the Mt Wright Underground Mine, and the collaborative and proactive approach to receiving regulatory approvals for our expansion plans, is allowing further enhancement opportunities to be identified and progressed. A strategic review of the Ravenswood Expansion Project commenced shortly after the conclusion of the 2018 Financial Year and is focused on optimisation to maximise value for shareholders. At our Bibiani Gold Mine in Ghana, we commenced operational readiness planning during the 2018 Financial Year in preparation for a re-start of a potential ~100,000 ounce per annum gold mine at All-In Sustaining Costs of ~US$750 per ounce over a ~10-year mine life. EExploration continued to create value with tremendous success from drilling campaigns undertaken across the Company’s Mali tenement package. We continued to grow our gold inventory (net of depletion) which now stands at 16.6Moz of Global Mineral Resources (including 5.8Moz of Ore Reserves). Exceptional drilling results from Tabakoroni are building confidence in the potential for a future stand-alone underground mining operation at this Syama satellite. Multi-rig exploration drilling programs will continue at Syama, Nafolo, and Tabakoroni during the 2019 Financial Year with a view to further extending existing regional oxide and sulphide resources. an expanded revolving credit facility. I thank Investec, BNP Paribas, Nedbank and Citibank for their ongoing confidence in Resolute as we deliver on our growth agenda. We continue to actively and responsibly manage our gold sales and undertake modest hedging activity at gold prices above our budgeted gold price. Our active gold sales and hedging activity allows us to take advantage of gold price volatility, maximise revenues and protect Resolute’s balance sheet and near-term cash flows. We are also progressing workstreams to enable us to list the Company on the London Stock Exchange during the first half of 2019. The London Stock Exchange is a natural home for large mining companies with African exposure and I am pleased that LSE-focused investors will soon have the opportunity to invest in Resolute. Resolute recognises that our ability to operate is dependent on the support of national governments and the local communities surrounding our mines. We are committed to partnering with host governments and local communities to deliver sustainable economic and social value. The ongoing success of our business requires us to ensure the health, safety, and security of our employees, minimise harm to the environment, and leave a positive legacy in the communities in which we work. We look forward to building on the US$2 billion of economic contributions we have made in Africa and Australia to date and delivering programs that provide meaningful long-term benefits to the communities in which we operate. We have made significant progress during the 6 months covered in this report and have a strong platform to deliver sustainable returns for our shareholders from our long life mines. I take this opportunity to recognise the efforts of the entire Resolute team, led by our Board, my colleagues in the senior executive group, and our site-based general managers. The efforts of our employees and contractors has enabled Resolute to generate positive operating cash flows while investing for growth. I am proud of Resolute’s progress and am optimistic for our future as we progress the ramp-up the Syama Underground Mine to full production, complete the strategic review of our Ravenswood operation, increase our profile in global capital markets through listing on the London Stock Exchange and deliver on our growth agenda to generate long-term returns for our shareholders. I hope you enjoy reading the 2018 Annual Report. Strong support from our bankers has allowed the Company to maximise our financial flexibility through John Welborn Managing Director and Chief Executive Officer 5 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report Health and Safety Resolute is committed to ensuring the highest health and safety standards across the business. Our R-CARE program embodies an emotive and personal set of beliefs and behaviours to ensure everyone contributes in a positive manner to health and safety. Resolute’s commitment to the highest health and safety standards is embodied in its R-CARE program which is based on the four key principles/actions for all employees and contractors being Committed, Accountable, Responsible and Empowered. Committed • To working safely, all of the Responsible • To our families. time. • To taking pride, in everything we do. • To improving the way we work. Accountable • To the people we work • To the way we treat others. • For learning from our mistakes. Empowered • To speak up and share our with. ideas. • For the quality of our work. • To stop anything we believe • To the expectations of our is unsafe. business. • To challenge the things, we could do better. In FY18, we improved our safety performance achieving a significant reduction in our total recordable injury frequency rate to 1.98 (as at 31 December 2018) from 3.23 as at 30 June 2018. A key driver of this has been a targeted program focused on reducing recordable injuries associated with Resolute’s contractors. The company-wide focus on effective management of sub-contractors will continue during 2019 along with management of key operational risks across the Company’s operations. Whilst we are proud of our improved safety performance in FY18, we recognise that a relentless focus on improvement is required to achieve an injury free workplace. We continue to work on continual improvement in safety practices. Key components of this is a more focused effort on regular inspections of workplaces, safety interactions and ongoing contractor management. 6 6 Resolute Mining Limited | 2018 Annual ReportOperations Overview Resolute Mining Limited | 2018 Annual Report Units Syama Sulphide Syama Oxide Syama Total Ravenswood Total Total Ore Mined Total Ore Processed Grade Processed Recovery Gold Recovered Gold in Circuit Drawdown/(Addition) Gold Produced (Poured) Cash Cost AISC t t g/t % oz oz oz A$/oz US$/oz A$/oz US$/oz 256,009 608,519 864,528 615,855 1,480,383 867,348 720,603 1,587,951 1,178,817 2,766,768 1.94 70.2 37,935 (679) 3.36 84.1 65,379 (9,326) 2.58 78.4 103,314 (10,005) 1.01 92.7 1.91 83.4 35,594 138,908 296 (9,709) 37,256 56,053 93,309 35,890 129,199 1,454 1,052 1,627 1,178 845 611 992 718 1,088 787 1,244 901 1,677 1,215 1,853 1,341 1,252 910 1,449 1,050 In FY18, a total of 129,199 ounces of gold were produced (poured) at an All-In Sustaining Cost (AISC) of A$1,449/ oz (US$1,050/oz). 128,275 ounces of gold were sold at an average realised price of A$1,734/oz (US$1,253/oz). Syama Underground Mine is now in an advanced commissioning phase as the fully autonomous mining system is introduced and the mine ramps up to its full production rate of 2.4Mtpa. During FY18, 2.8 million tonnes (Mt) of ore was milled at an average grade of 1.91 g/t of gold for 138,908 ounces of gold recovered. An additional 9,709 ounces was held in circuit at the end of FY18 relative to 30 June 2018, taking the Company’s gold in circuit balance to 73,835 ounces valued at $134 million. At Syama, FY18 production was 93,309oz at an AISC of A$1,244/oz (US$901/oz). The highlight of FY18 was the successful commencement of long hole open stoping and sublevel caving at the Syama Underground Mine. First ore was delivered on time and on budget from the sublevel cave in December 2018 and marked a pivotal moment in the history of the Company. The During FY18, a satellite oxide mining operation was established at Tabakoroni, 35km south of Syama. Tabakoroni is now providing 100% of oxide mill feed and has performed extremely strongly since processing of this material commenced in November 2018. Gold production from Ravenswood for FY18 was 35,890oz at an AISC of A$1,853/oz (US$1,341/oz). Underground ore production from Mt Wright was supplemented by processing of low-grade open pit stockpiles. Mining at Mt Wright will continue into late 2019 as preparations for the commencement of open pit mining at Buck Reef West accelerate. 7 7 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report Syama Gold Mine Syama Underground: the world’s first purpose built fully automated underground gold mine to be powered by the world’s largest site-based hybrid power station. Syama is located in the south of Mali, West Africa approximately 30km from the Côte d’Ivoire border and 300km southeast of the capital Bamako. Syama is owned by Société des Mines de Syama S.A. (SOMISY). Resolute has a 80% interest in SOMISY and the Government of Mali has a 20% interest in SOMISY. Syama is a large-scale operation which comprises two separate processing plants: a 2.4Mtpa sulphide processing circuit and a 1.5Mtpa oxide processing circuit. Ore for the sulphide circuit in FY18 was sourced from low grade stockpiled material and from the Syama Underground Mine. Ore for the oxide circuit in FY18 was provided by open pit mining at a series of satellite orebodies, including Tabakoroni which is owned by Société des Mines de Finkolo SA (SOMIFI) of which Resolute currently owns 100% through its wholly owned subsidiary, Resolute (Finkolo) Pty Ltd. The Government of Mali is entitled to a 10% free carried interest in SOMIFI. Once the Syama Underground Mine is commissioned, Syama will be capable of producing over 300,000oz of gold annually. Overview In FY18, Syama produced 93,309oz at an AISC of A$1,244/oz (US$901/oz). The highlight of the reporting period was the successful commencement of long hole open stoping and sublevel caving at the Syama Underground Mine. First ore was delivered on time and on budget from the sublevel cave in December 2018 and marked a pivotal moment in the history of the Company. Resolute also announced the signing of a Joint Development Agreement with Ignite Energy Projects Pty Ltd (Ignite Energy) for the development of a 50MW hybrid power plant comprising solar, battery and heavy fuel oil technologies. Further excellent drilling results also continued to be reported in FY18. Target Production 300 a p z o k LOM AISC US$ 746 /oz Mine Life 14years 7.9Moz Mineral Resource 3.4Moz Ore Reserve Ore Mined Ore Milled Head Grade Recovery Production Cash Cost AISC (t) (t) FY18 864,528 1,587,951 (g/t) 2.58 (%) 78.4 (oz Gold) (A$/oz) (A$/oz) 93,309 1,088 1,244 Syama Production and Cost Summary 8 8 Resolute Mining Limited | 2018 Annual ReportSulphide Operations During FY18, production from the Syama sulphide circuit was 37,256oz at an AISC of A$1,627/oz (US$1,178/oz). Gold recovery for the period was in line with expectations as the Company treated mixed ore sources; underground ore was blended with low-grade ore stockpiles which had a direct impact on recovery. AISC is forecast to decline in FY19 as increasing tonnages of higher grade material from the Syama Underground replaces low grade stockpile feed to the mill. Ore Mined Ore Milled Head Grade Recovery Production Cash Cost AISC (t) (t) FY18 256,009 867,348 (g/t) 1.94 (%) 70.2 (oz Gold) (A$/oz) (A$/oz) 37,256 1,454 1,627 Syama Sulphide Production and Cost Summary All elements of Resolute’s sulphide processing improvement project, Project 85, have been commissioned and are operating effectively. Significantly, during periods when 100% underground sulphide ore was treated at the back end of FY18, the Syama processing plant delivered recoveries greater than 85% which provides confidence in Resolute’s ability to achieve targeted recoveries from Syama. The ramp-up of the Syama Underground Mine will enable an increasing of higher grade underground ore to be fed into the mill which will drive greater gold production. Oxide Operations During FY18, production from the oxide circuit was 56,053oz at an AISC of A$992/oz (US$718/oz). Oxide production was initially sourced from stockpiled ore from the northern satellite pits (A21, Alpha, Beta and BA01), located between 4km and 8km north of the Syama processing plant. Processing of ore sourced from the new Namakan satellite open pit at Tabakoroni, located 35km south of Syama, commenced in November 2018. Ore Mined Ore Milled Head Grade Recovery Production Cash Cost AISC (t) (t) FY18 608,519 720,603 (g/t) 3.36 (%) 84.1 (oz Gold) (A$/oz) (A$/oz) 56,053 845 992 Syama Oxide Production and Cost Summary Milling characteristics of ore from Tabakoroni were better than anticipated with higher throughput achieved. This performance was further enhanced by higher processing recoveries, assisted by improved head grades of delivered ore. Gold produced (poured) improved markedly with the introduction of this higher grade oxide material from Tabakoroni. Commissioning of the gravity gold circuit was also successfully completed in conjunction with the commencement of treatment of the Tabakoroni material with an immediate positive impact. Tabakoroni will provide 100% of oxide mill feed at Syama in 2019. Namakan Open Pit at Tabakoroni 9 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report Start-Up and Commissioning of the Syama Underground Development of the Syama Underground Mine began in October 2016 and in December 2018, the Company achieved a major milestone with the extraction of first ore from the southern end of the 1105 level of the sublevel cave which marked the commencement of the main sublevel caving operation. Completed Development 1105 Level Start of Sublevel Caving December 2018 3D model of Syama Sublevel Cave showing location of first blast on level 1105 With sublevel caving having commenced, the Company’s focus is on the ramp-up of mining rates to 200,000 tonnes per month and completion of the remaining key infrastructure, including the primary ventilation fans and pump stations. Commissioning of the new automated fleet is also progressing. When fully commissioned the autonomous mining operation will comprise automated long hole production drilling, loading and haulage from the underground loading station to the Run of Mine pad above ground. In addition to lowering costs, automation will increase safety and productivity at Syama and create numerous highly skilled jobs in Mali for the life of the mine. Syama Underground crew Autonomous primary loader hauling ore from the 1105 level 10 10 Resolute Mining Limited | 2018 Annual ReportHybrid Power Plant In November 2018, Resolute announced the signing of a Joint Development Agreement with Ignite Energy for the development of a new 50 megawatt (MW) hybrid power plant at Syama which will combine solar, battery, and heavy fuel oil technologies. This innovative project is expected, when constructed, to be the world’s largest fully integrated hybrid power plant for a standalone mining operation. The new power plant will replace the existing 28MW diesel fired power station at Syama and is expected to be fully operational by the end of 2020. Proposed Solar Hybrid Power Plant Syama Plant Proposed location of the new Syama Hybrid Power Plant The new Syama power solution will be funded and constructed under an Independent Power Producer model whereby Ignite Energy, under the terms of an exclusive Power Purchase Agreement, will be responsible for the design, construction, ownership, funding, and operation of the new Solar Hybrid Power Facility on an exclusive basis and will supply power to Resolute on a guaranteed basis subject to a maximum tariff over a term of between 12 and 20 years. The new solar hybrid power solution is expected to generate savings of up to 40% on the current operating costs of power at Syama. In addition to the higher efficiencies of the solar hybrid solution, the replacement of Resolute’s existing diesel generated power plant will reduce reliance on, and exposure to, diesel prices. The new power facility will also provide significant environmental benefits including lower carbon emissions as a result of solar power generation and the greater efficiencies of integrated battery storage hybrid technology and improved engine technologies. Syama 50MW Hybrid Power Plant illustration 11 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report 12 12 Resolute Mining Limited | 2018 Annual ReportExploration Tabakoroni In December 2018, Resolute announced further exceptional drilling results from the ongoing exploration program at Tabakoroni. The potential for high grade sulphide mineralisation was initially identified during the drill out of Resolute’s existing Ore Reserves of surface oxide mineralisation at Tabakoroni. Drilling undertaken during FY18 returned wide zones of gold mineralisation at grades suitable for underground mining operations. High grade gold mineralisation has now been intersected at Tabakoroni over a strike length of more than 1.5km. Mineralisation remains open at depth and along strike to the north. Drilling to date has outlined two zones of coherent high-grade mineralisation each with a strike length of 500m with widths averaging 10 metres. Resolute sees excellent upside at Tabakoroni due to the combination of high grades, a large strike length of over 1.5km and relatively shallow drilling to a maximum depth of just 250 vertical metres. Exploration drilling at Tabakoroni will continue throughout 2019 to fully define the resource envelope. Tabakoroni Main Zone Long Section Syama Deeps and Nafolo Diamond drilling at Syama Deeps and Nafolo continued throughout FY18. Results have extended the Nafolo alteration and mineralisation footprint over a strike length of 700m and remain open downdip and to the south. Drilling results from Nafolo demonstrate potential expansions to the existing Syama mine plan from underground mining. Exploration is now focussed on identifying repetitions of the Nafolo zone to the south and north along the Syama shear. There is a 6km strike extent of major shear structure with favourable mineralisation positions to the south of Syama. Drilling along strike to the south has identified low grade zones of similar alteration and mineralisation to Syama. This program will continue throughout FY19. The upper lens of Nafolo mineralisation is contiguous with the southern extensions of the main Syama mineralisation envelope. As such, the Nafolo mineralisation can potentially be accessed from existing Syama Underground infrastructure and may form part of a future expanded mining operation. 13 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report Ravenswood Gold Mine Ravenswood is a proven producing asset with multiple open pits to support large scale, low cost, long term production. Ravenswood is located approximately 95km south-west of Townsville and 65km east of Charters Towers in north-east Queensland, Australia. Resolute owns 100% of Ravenswood through its wholly owned subsidiary, Carpentaria Gold Pty Ltd. Production from Ravenswood in FY18 was 35,890oz at an AISC of A$1,853/oz (US$1,341/oz). Underground ore production from Mt Wright was supplemented by processing stockpiled ore from the Nolans East open pit (where mining concluded in the September Quarter) and other low-grade stockpiles. Overall, production from Mt Wright was steady, with the majority of ore provided by overdraw from earlier stoping. The continued success of the overdraw indicates the contribution from Mt Wright underground will continue into late 2019 as preparations for the commencement of open pit mining at Buck Reef West accelerate. Production 115 a p z o k LOM AISC US$ 823 /oz Mine Life 14years 4.8Moz Mineral Resource 1.7Moz Ore Reserve Ore Mined Ore Milled Head Grade Recovery Production Cash Cost AISC (t) (t) FY18 615,855 1,178,817 (g/t) 1.01 (%) 92.7 (oz Gold) (A$/oz) (A$/oz) 35,890 1,677 1,853 Ravenswood Production and Cost Summary 14 14 Resolute Mining Limited | 2018 Annual ReportExploration Updated Mineral Resource estimation was undertaken at Buck Reef West early in FY18. The new estimate produced a 7% increase in Mineral Resources to 1.54Moz of gold. The drilling converted a significant quantity of the Inferred Mineral Resources to the Indicated category resulting in a 21% increase in open pit Ore Reserves to 636,000oz. A structural study was carried out on the Buck Reef West mineralisation which led to the construction of a 3D geological model. This model identified coherent and continuous high-grade gold mineralised structures which will be drill tested in 2019. Ravenswood Expansion Project At the beginning of FY18, Resolute announced an updated study for its Ravenswood Expansion Project (REP) comprising of the development of two large open pits at Buck Reef West and Sarsfield. The updated REP study outlined the Company’s plans to deliver 1.5Moz of gold production over 14 years at a Life of Mine (LOM) AISC of US$823/oz (A$1,097/oz) from US$880/oz (A$1,166/oz). Following the end of FY18, Resolute announced that it has commenced a strategic review of the REP with an initial focus on enhancing project economics by pursuing reductions in capital and operating costs. The review will also assess the potential for further growth through processing expansions, mine life extensions, and increased production capacity. Ongoing work at Ravenswood has identified new exploration targets along with opportunities for plant expansions and improved environmental outcomes. Resolute intends for the strategic review to capture these enhancements and incorporate them into an updated LOM plan expected to be finalised during FY19. Prescribed Project Status Extension In December 2018, the Queensland Government extended the Prescribed Project status of the REP to 30 November 2020. The assistance provided by the streamlined administrative process provided by Prescribed Project status has been essential in ensuring Resolute receives the regulatory approvals required for the REP and in providing opportunity for further project enhancements. Under relevant Queensland state legislation, a Prescribed Project declaration is designed to facilitate the approval process for projects deemed to be of particular economic or social significance to Queensland or a region within the state. This is achieved by empowering the Coordinator General to actively assist in the planning, delivery and coordination of all required government and regulatory approvals to ensure there are no unnecessary delays, while ensuring the project’s environmental impacts are properly managed. The extension of the Prescribed Project status will assist the Company in finalising a small number of additional regulatory approvals that are required to allow project works on an enhanced REP program to commence. Resolute to build New State School at Ravenswood Following the end of FY18, the Company announced that it had signed an agreement with the Queensland Department of Education whereby it will fund the relocation and construction of a new State School at Ravenswood. The cost to Resolute is slightly less than the capital budget allocated within the REP Study. The new learning centre will enable better separation of age-groups and provide local students with an enhanced learning experience. Students at the new school will have access to the latest technology in education which will better prepare them with the essential skills to participate in the fast-developing world of information and communications technology. Nolans Processing Plant at Ravenswood 15 Resolute Mining Limited | 2018 Annual ReportTarget Production 100 a p z o k LOM AISC US$ 764 /oz Target Mine Life 10years 2.5Moz Mineral Resource Resolute Mining Limited | 2018 Annual Report Bibiani Gold Mine Potential for a high margin, long life underground mining operation. Bibiani is situated in the western region of Ghana in West Africa. It is bordered by Burkina Faso to the north, Cote d’Ivoire to the west and Togo to the east. The Bibiani mineral concessions lie approximately 80km south west of the Ashanti capital, Kumasi. Bibiani is owned by Mensin Gold Bibiani Limited, a wholly owned subsidiary of Resolute. Resolute currently owns 100% of Mensin Gold Bibiani Limited through its wholly owned subsidiary, Resolute (Bibiani) Pty Ltd. The Government of Ghana is entitled to a 10% free carried interest in Mensin Gold Bibiani Limited. Since assuming ownership in 2014 Resolute has embarked on two surface and underground resource drilling programs to re-assess the underground mine potential and in June 2018 released an update to its June 2016 feasibility study. This update demonstrated the potential for Bibiani to produce ~100,000oz per annum at a LOM AISC of US$764/oz over a 10-year mine life. Work in FY18 focused on project execution planning and further refinement of the mining and processing strategies. 16 16 Resolute Mining Limited | 2018 Annual ReportOre Reserves and Mineral Resources Resolute’s class-leading 16.6Moz gold inventory underpins Resolute’s focus on long-life mines and supports its production ambition of +500,000oz annually. Governance and Controls Resolute reports its Mineral Resources and Ore Reserves on an annual basis, with Mineral Resources inclusive of Ore Reserves. Reporting is in accordance with the 2012 Edition of the Australasian Code for Report of Exploration Results, Mineral Resources and Ore Reserves and the ASX Listing Rules. All Competent Persons named by Resolute are suitably qualified and experienced as defined in the JORC Code 2012 Edition. Competent Persons Statement The information in this report that relates to the Mineral Resources and Ore Reserves listed in the table below is based on, and fairly represents, information and supporting documentation prepared by the Competent Person whose name appears in the same row. Each person named in the table below has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he/she has undertaken to qualify as a Competent Person as defined in the JORC Code 2012. Each person identified in the list below consents to the inclusion in this announcement of the material compiled by them in the form and context in which it appears. Activity Competent Person Employer Membership Institution Syama Resource Susan Havlin Optiro Pty Ltd Australasian Institute of Mining and Metallurgy Syama Reserve Ian Bignell Resolute Corporate Services Pty Ltd Institute of Materials, Minerals and Mining Syama Satellites Resource Nic Johnson MPR Geological Consultants Pty Ltd Australian Institute of Geoscientists Syama Tailings Facility Susan Havlin Optiro Pty Ltd Australasian Institute of Mining and Metallurgy Mt Wright Resource Nic Johnson MPR Geological Consultants Pty Ltd Australian Institute of Geoscientists Mt Wright Reserve Stuart Long Carpentaria Gold Pty Ltd Australasian Institute of Mining and Metallurgy Welcome Resource Nic Johnson MPR Geological Consultants Pty Ltd Australian Institute of Geoscientists Buck Reef West Resource Susan Havlin Optiro Pty Ltd Australian Institute of Geoscientists Buck Reef West Reserve John Millbank Proactive Mining Solutions Pty Ltd Australasian Institute of Mining and Metallurgy Sarsfield Reserve David Mackay Carpentaria Gold Pty Ltd Australasian Institute of Mining and Metallurgy Sarsfield Resource Nic Johnson MPR Geological Consultants Pty Ltd Australian Institute of Geoscientists Nolans East Reserve John Millbank Proactive Mining Solutions Pty Ltd Australasian Institute of Mining and Metallurgy Bibiani Resource Kahan Cervoj Optiro Pty Ltd Australasian Institute of Mining and Metallurgy Bibiani Reserve David Lee AMC Consultants Pty Ltd Australasian Institute of Mining and Metallurgy Tabakoroni Resource Nic Johnson MPR Geological Consultants Pty Ltd Australian Institute of Geoscientists Tabakoroni Reserve Ian Bignell Resolute Corporate Services Pty Ltd Institute of Materials, Minerals and Mining Sarsfield Mineralised Waste Susan Havlin Optiro Pty Ltd Australasian Institute of Mining and Metallurgy 17 Resolute Mining Limited | 2018 Annual ReportOre Reserves Statement ORE RESERVES PROVED PROBABLE TOTAL RESERVES Group Share As at 31 December 2018 Tonnes Grade oz Tonnes Grade oz Tonnes Grade oz oz (000s) g/t (000s) (000s) g/t (000s) (000s) g/t (000s) (000s) Australia Sarsfield Buck Reef West Stockpiles (OP) Sub Total OP Mt Wright Stockpiles (UG) Sub Total UG Australia Total Mali – Sulphide Syama Underground Syama Stockpiles Sub Total (Sulphides) Stockpiles (satellite deposits) Sub Total Satellite Deposits Mali – Oxide Tabakoroni Tabakoroni Stockpiles Sub Total Tabakoroni Mali Total Ghana Bibiani Ghana Total 31,530 970 360 32,860 160 0 160 33,030 0 100 100 970 970 1,450 320 1,770 2,830 0 0 Total Ore Reserves 35,860 0.7 1.3 0.6 0.7 2.2 0.0 2.2 0.7 0.0 2.5 2.5 1.4 1.4 3.2 2.1 3.0 2.4 0.0 0.0 0.9 720 40 10 18,250 18,590 10 760 36,850 10 0 10 0 0 0 780 36,850 0 10 10 40 40 150 20 170 220 0 0 35,040 2,270 37,310 1,630 1,630 640 0 640 39,580 6,400 6,400 1,000 82,830 0.7 1.0 1.6 0.8 0.0 0.0 0.0 0.8 2.7 1.3 2.6 1.1 1.1 2.4 0.0 2.4 2.5 3.3 3.3 1.8 360 600 0 49,780 19,570 370 960 69,720 0 0 0 160 0 160 960 69,880 2,980 35,040 100 3,080 60 60 50 0 50 2,360 37,410 2,600 2,600 2,090 320 2410 3,180 42,410 660 660 6,400 6,400 4,800 118,690 1,080 640 10 100% 1,080 640 10 1,720 1,720 10 0 10 1,730 2,980 100 10 0 10 1,730 80% 2,390 80 3,090 2,470 100 100 200 20 220 3,410 660 660 80 80 90% 180 20 200 2,750 90% 590 590 5,800 5,070 0.7 1.0 0.6 0.8 2.2 0.0 2.2 0.8 2.6 1.4 2.6 1.2 1.2 3.0 2.1 2.8 2.5 3.3 3.3 1.5 Notes: 1. Ore Reserves are as at 31 December 2018 and differences may occur due to rounding. 2. Reserves at Buck Reef West and Sarsfield are reported above 0.4 g/t cut off. 3. Mt Wright Reserves are reported above 2.3 g/t cut off. 4. Bibiani Reserves are reported above 2.75 g/t cut off. 5. Syama Underground Reserves are reported above 1.9 g/t cut off. 6. Tabakoroni Reserves are reported above 1.1g/t. 7. Syama Reserves are based on August 2017 Resource model. 18 Resolute Mining Limited | 2018 Annual Report Mineral Resource Statement MINERAL RESOURCES MEASURED INDICATED INFERRED TOTAL RESOURCES Group Share As at 31 December 2018 Tonnes Grade oz Tonnes Grade oz Tonnes Grade oz Tonnes Grade oz oz (000s) g/t (000s) (000s) g/t (000s) (000s) g/t (000s) (000s) g/t (000s) (000s) Projects where Resolute has a controlling interest Australia Sarsfield Buck Reef West 43,250 830 0.8 1.5 Sarsfield Mineralised Waste 0 0.0 Sub Total OP Mt Wright Welcome Breccia Stockpiles (UG) Sub Total UG Australia Total Mali – Sulphide Syama Underground Stockpiles (sulphide) Sub Total (Sulphides) Satellite Deposits Stockpiles (satellite deposits) Sub Total Satellite Deposits Old Tailings Mali – Oxide Tabakoroni Tabakoroni Stockpiles Sub Total Tabakoroni Mali Total Ghana Bibiani Ghana Total 44,090 290 0 0 290 44,380 8,740 100 8,840 0.8 3.6 0.0 0.0 3.6 0.8 3.3 2.5 3.3 0 0.0 970 970 1.4 1.4 0 0.0 2,800 320 3,120 12,920 0 0 2.9 2.1 2.8 3.0 0.0 0.0 1.3 Controling Interest Total 57,300 Projects where Resolute has an equity interest Sudan (Orca Gold) Galat Sufar South Wadi Doum Sudan Total DRC (Loncor Resources) Makapela DRC (Kilo Goldmines) Adumbi DRC Total Equity Interest Total 0 0 0 0.0 0.0 0.0 0 0.0 0 0.0 0 0 0.0 0.0 1.3 0 0 0 0 0 0 0 Total Mineral Resources 57,300 2,450 160,430 0.7 1.0 0.4 0.6 3.6 3.2 0.0 3.3 0.7 2.8 0.0 2.8 2.2 1.1 2.1 1,120 38,500 40 0 36,550 0 1,160 75,040 30 0 0 30 0 0 10 10 0.7 1.0 0.0 0.9 0.0 0.0 1.6 1.6 880 22,080 1,220 8,660 0 33,700 2,110 64,440 0 0 0 0 470 2,040 0 2,510 1,190 75,050 0.9 2,110 66,950 930 44,390 3.2 4,580 5,650 100% 520 103,830 0.8 2,520 2,520 280 46,040 400 33,700 1,200 183,570 60 210 0 770 2,040 10 260 2,810 1.0 0.4 0.8 3.7 3.2 1.6 3.3 1,540 1,540 400 400 4,460 4,460 90 210 0 90 210 0 300 300 1,460 186,380 0.8 4,760 4,760 500 58,780 3.2 6,010 4,810 80% 10 2,270 930 46,660 0 40 40 0 260 20 280 6,840 1,630 8,470 0 3,770 1,250 58,900 0 0 13,260 13,260 2,450 147,210 11,940 680 12,620 1.3 3.1 2.1 1.1 1.9 100 0 4,680 5,650 460 60 520 1,450 50 1,500 0 2,360 500 61,140 100 8,290 0 2,650 100 10,940 1.4 3.1 2.1 1.2 1.9 0 0.0 0 17,000 0.7 370 17,000 0.7 100 80 6,110 4,890 560 100 660 370 450 80 530 290 90% 3,770 2.2 280 3,180 2.0 200 9,740 0 2.2 2.9 3.5 3.5 1.9 1.3 2.1 1.3 0 0 280 3,180 5,480 27,320 1,490 1,490 8,440 8,440 9,080 102,710 490 40 530 2,670 250 2,920 0 2.0 1.3 3.7 3.7 1.1 1.2 1.3 1.2 0 320 200 10,060 1,170 99,140 1,010 21,690 1,010 21,690 2.4 2.1 2.3 2.5 3.6 3.6 740 660 20 20 760 680 7,900 6,400 90% 2,500 2,250 2,500 2,250 3,640 307,210 1.5 15,170 13,410 100 14,620 10 930 110 15,550 1.3 1.7 1.3 590 50 640 590 8.7 170 860 5.3 150 1,460 6.7 310 0 590 13,210 0.0 8.7 1.6 1.9 0 170 700 5,620 6,480 9,400 9,770 112,110 2.5 2.9 2.4 1.2 450 5,620 600 7,080 710 22,630 2.5 3.4 1.9 450 760 1,400 1,400 4,360 329,830 1.6 16,570 14,820 16% 590 50 640 27% 310 27% 450 760 Notes: 1. Mineral Resources include Ore Reserves and differences may occur due to rounding. 2. Resources are reported above 0.4 g/t cut-off for Sarsfield and Buck Reef West. 3. Mt Wright Resources are reported above 1.8 g/t cut off. 4. Syama Underground Resources quoted above 1.5g/t cut off. 5. Resources for Satellite deposits are reported above a cut off of 1.5g/t. 6. Resources for the Tabakoroni Open Pit are reported above a cut off of 1.0g/t. 7. Bibiani Resources are reported above 2.0 g/t cut off. 8. Galat Sufar South Resources reported above a 0.6g/t cut-off. 9. Wadi Doum Resources reported above a 0.6g/t cut-off. 10. Makapela Resources reported above a 2.75g/t cut-off. 11. Adumbi Resources reported above a 0.9g/t cut-off. 12. Mineral Resources held by Orca Gold, Loncor Resources and Kilo Goldmines are reported as NI43-101 compliant estimates. 19 Resolute Mining Limited | 2018 Annual Report Resolute Mining Limited | 2018 Annual Report 20 20 Resolute Mining Limited | 2018 Annual ReportFinancial Overview FY18 was a period of ongoing investment in growth and mine life for Resolute Revenue Gross Profit from Operations Net Loss After Tax Cash Flow from Operating Activities Cash Flow used in Investing Activities Gold Sold $’000 $’000 $’000 $’000 $’000 oz FY18 222,774 24,449 (5,324) 33,849 (181,035) 128,275 Average Realised Gold Price A$/oz / US$/oz 1,734 / 1,253 Cash, Bullion and Listed Investments Borrowings (net of in-country receivables) Gold in Circuit Inventory $’000 $’000 $’000 116,584 173,449 133,892 Financial Performance Revenue for FY18 was $223 million from gold sales of 128,275 ounces at an average realised price of A$1,734/oz (US$1,253/oz) which compares favourably to the average spot price over the period of A$1,690/oz (US$1,220/oz). Gross Profit from Operations was $24 million after depreciation and amortisation of $10 million. Resolute reported a Net Loss After Tax of $5 million which was inclusive of an adverse movement in the valuation of net realisable inventory of $29 million offset by $15.5m of unrealised foreign exchange gain on intercompany loans. Resolute continued to invest heavily in the business in FY18 with capital expenditures on development, property, plant and equipment totalling $175 million and exploration and evaluation expenditure of $10 million. Financial Position As at 31 December 2018, Resolute’s cash, bullion and listed investment position was $117m, comprised of $39 million held in cash, 22,786 ounces of gold valued at $40 million and investments valued at $38 million. Resolute has made strategic investments in multiple African-focused gold explorers with a view to extending the Company’s project pipeline and providing a source of medium-term potential growth opportunities. At 31 December 2018, the Company was invested in Orca Gold Limited (16%), Loncor Resources Inc (27%), Kilo Goldmines Limited (27%), Manas Resources Limited (23%), Mako Gold Limited (19%) and Oklo Resources Limited (10%). During FY18, Resolute entered into a US$100 million revolving credit facility (Facility) with Investec. As part of the process of the Facility was successfully syndicated with Investec, BNP Paribas, Nedbank and Citibank and the limit expanded to US$150m. The Facility has an initial three-year term, with rates, fees and terms which are extremely flexible and highly competitive. Resolute can draw on the Facility as required for any corporate funding purposes and both the credit limit and tenor remains capable of further extension. The new Facility provides Resolute with flexible access to low cost funding for new growth initiatives. The Company’s borrowings inclusive of the Facility and its Bank du Mali facility, net of in-country receivables was $173 million as at 31 December 2018. Hedging The Company continued to actively and responsibly manage its gold sales and undertake hedging above its budgeted gold price to take advantage of gold price volatility, maximise revenues and protect the Company’s balance sheet and cash flows. Resolute’s hedge book at 31 December 2018 totalled at 115,000oz committed to monthly deliveries out to December 2019 made up of 85,000oz forward sold at prices between A$1,715/oz and A$1,760/oz, and 30,000oz forward sold at US$1,250/oz. Following year end the Company forward sold an additional 60,000oz in monthly deliveries out to June 2020 made up of 30,000oz forward sold at an average price of US$1,335/ oz and 30,000oz forward sold at an average price of A$1,887/oz. Resolute’s total hedging commitments represent less than 3% of the Company’s Ore Reserves. 21 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report 2222 Resolute Mining Limited | 2018 Annual ReportPeople Our people are central to the success of our business. Resolute strives to attract, train and retain talented individuals who live our values and are committed to the delivery of our vision. Our Workforce As at 31 December 2018, Resolute had 854 direct employees and 2,151 contractors, taking our total workforce to 3,005. Resolute’s strong commitment to providing opportunities for local Malians and Ghanaians is evidenced by is strong national workforce representation at Syama and Bibiani. Diversity Resolute respects and encourages workplace diversity and strives to create a flexible and inclusive work environment. Resolute endeavours to treat all employees equally and fairly, regardless of gender, age, culture, religion or disability. Our Diversity and Inclusion Policy outlines the Company’s commitment to having a high performing workforce that is representative of the communities in which we operate. This includes, but is not limited to, representation of gender, indigenous and national workforce diversity. The policy also applies to the recruitment process, where we are committed to selecting the best candidates from a diverse field of candidates. Resolute’s overall representation of women has increased in FY18 relative to 30 June 2018 and now stands at 21.3% relative to the Workplace Gender Equality Agency (WGEA) 2016-2017 average of 16%. Women comprise 50% of Resolute’s Key Management Personnel relative to the WGEA average of 15%. Developing our People Our Malian Talent Development Program aims to advance the capabilities of Malian employees by building leadership and technical capability to position them to advance into more senior positions at Syama. In FY18, an additional 8 employees were selected participate in to the program bringing the total participant numbers to 15. Over the last 2 years that the program has been running we have seen a pleasing increase in the promotion of Malian Nationals at Syama taking the Manager roles at Syama from 27% to 31% over this period. In Australia, Resolute provided internships across maintenance, exploration and environment to six university students in FY18 and remained focused on attracting and developing indigenous students. The interns gained invaluable hands on experience at both our Ravenswood and Syama operations and in the Perth corporate office in a range of engineering and corporate functions, with one student commencing in a graduate position. The period also saw three graduates, three trainees and three apprentices appointed at Ravenswood. Composition of Employees in Africa Nationals 86.7% Mali 13.3% Expatriates Nationals 97.9% Ghana 2.1% Expatriates Resolute Managing Director and CEO, John Welborn, addresses Syama workforce 23 Resolute Mining Limited | 2018 Annual Report Resolute Mining Limited | 2018 Annual Report 2424 Resolute Mining Limited | 2018 Annual ReportSustainability Dear Fellow Shareholders, The principle of sustainability has always underpinned the way we do business at Resolute. Our community partnerships, environmental stewardship, balance sheet strength and key strategic decisions are all based on the principles of sustainable development. Effectively managing sustainability directly impacts our reputation and our ability to create value for all stakeholders. Resolute is proud of the contributions it makes to the economies of our host countries. We have been operating in Africa for more than 20 years and over this time have made economic contributions of c.$2 billion. Our license to operate carries a responsibility to contribute to local and national development and to ensure that we create a positive economic, social and environmental legacy. The core business of our operations creates jobs, purchases goods and services from local providers and builds infrastructure, enabling us to make a significant and long-term contribution to our host economies in three ways: 1. Value creation supply chain covering the direct contribution of our exploration projects and operating assets; 2. Payments of taxes, license and approval fees, and royalties; and 3. Local community and environment programs. John Welborn Managing Director and Chief Executive Officer Resolute Mining Limited | 2018 Annual Report 25 25 Resolute Mining Limited | 2018 Annual ReportCommunity Development Resolute is committed to ensuring that it manages its business in a manner which enables it to contribute to sustainable development in the local communities and host countries where it operates. The Resolute Foundation The Resolute Foundation will become the vehicle through which Resolute delivers sustainable development initiatives globally and, in doing so creates a legacy in the countries and communities in which it operates, transforming a non-renewable resource (gold in the ground) into economic growth, basic services, human development and environmental offsets. To realise its ambition, the Resolute Foundation will focus its efforts where it can make a difference and is able to make use of the inherent strengths, skills and capacities of the Company, partner organisations, host governments and local people. The Resolute Foundation will deliver significant benefits to Resolute including consistently capturing and reporting expenditure, leveraging expertise and funding from partners and enhancing its reputation as a bold, innovative and most importantly, responsible company. More Mine Gold. Create Value. Leave a Legacy The FOUNDATION The Resolute Foundation will be the vehicle through which Resolute will deliver future sustainable development initiatives at scale on a global basis. The Resolute Foundation will leverage the strengths, skills and capacities of the Company, our partners, host governments and local people to create sustainable value. The Resolute Foundation will create an enduring legacy in the countries and communities in which Resolute operates by transforming a non- renewable resource into meaningful and scalable economic growth, basic services, human development and environmental offsets. 2018 Prepare 2019 Initiate 2020-22 Consolidate 2024 Transition 2025+ Grow Community Contributions Supporting community needs and sustainable development is a Resolute priority. Resolute conducts its business activities in a manner that adds value to local communities and is committed to: • • Regularly communicating and engaging with local communities so that its relationship with them and the support is provided aligns with the respective community’s culture and values; Focusing community activities on health and well- being, water and sanitation, income generating activities and education; • Continuing to have direct involvement in community projects rather than just providing funding; • • Ensuring that there are robust processes of assessment in place to identify all potential impacts its operations may have on the communities the Company works in; Regularly reviewing assessment processes to ensure that all controls that are put in place are relevant and effective; and • Maintaining accurate records of community activities programs undertaken. 26 Resolute Mining Limited | 2018 Annual ReportSyama In addition to ongoing community engagement, community development and community health activities, FY18 saw a move towards a risk-based approach to managing relationships with local communities, with an increased emphasis on maintaining our social license to operate. Resolute aims to achieve this by minimising the negative impacts of our activities and maximising the economic and social benefits that the business can deliver locally, regionally and nationally. Recognising that building capacity within the Syama team is a key to future success, Resolute has recruited several experienced Malian Community Development Specialists. This has been supplemented with training and mentoring that will continue through 2019. With respect to other ongoing activities, the malaria prevention program was extended to include Tabakoroni Hamlet. The integrated approach, combining bio-larviciding, indoor residual spraying, bed nets and sensitisation have proven to be very effective at reducing the number of cases of malaria everywhere it has been used and similar results are anticipated for Tabakoroni. Additionally, existing medical facilities have been supplemented at Torokoro (ablutions and medical incinerator) and N’Golopene (incinerator, supplies and training), while in Fourou, a survey of community water sources completed during December will be used to design a repair-rehabilitation-addition program which will be implemented during 2019. Ravenswood In October, the sesquicentenary of gold mining at Ravenswood was celebrated, with a number of community events and the unveiling of a commemorative mosaic chair capturing the span of mining activities across the years. The Resolute community team made a significant effort to co- fund initiatives, applying for funding on behalf of the Ravenswood Restoration and Preservation Association and was awarded $87,000 in grants. Planning for the relocation of the Ravenswood State School which is required for the REP continued through FY18. Extensive consultation occurred with the Ravenswood community and the Queensland Government regarding the design of the new school. The new school will comprise the relocation of the existing heritage-listed school residence and school buildings in addition to the construction of a new state-of-the-art learning centre and administration building, separate undercover playgrounds for junior and senior students, a new covered multi-purpose court and amenities building, a large sports field and nature reserve and a new Principal’s Residence. The existing heritage-listed school residence and school buildings will be renovated and reinforced as part of the relocation. The new learning centre will enable better separation of age-groups and provide local students with an enhanced learning experience. Students at the new school will have access to the latest technology in education which will better prepare them with the essential skills to participate in the fast-developing world of information and communications technology. Resolute’s commitment to install the latest technology at the new school builds on the previous work of The Resolute Foundation in supplying tablet computers and coding robots to the Ravenswood State School. Bibiani African Environmental Research and Consulting Company, a well-regarded Ghanaian consultancy has been engaged to undertake a Health Impact Assessment (HIA) in the communities within the mine catchment. The HIA will provide a demographic and health baseline against which changes resulting from future Resolute activities can be measured and will also identify potential health initiatives that Resolute can support. In addition to initiating the HIA, the Company, through the Resolute Foundation Advisory Panel (RFAP), completed two initiatives benefiting communities within the mine catchment. Firstly, the Education Financial Assistance Sub-committee (EFAS) of RFAP received over 80 applications for financial assistance in their pursuit of various degree and diploma programs in the 2018/19 academic year. Through the selection and vetting process, EFAS shortlisted, interviewed and selected 22 students for financial support comprising of 9 continuing students from 2017 program and 13 new applicants. Secondly, the cultivation of citronella and production of citronella oil started in 2017 as an RFAP income generation activity aimed at increasing the self- funding ability of the local football team. Citronella oil is used primarily as a mosquito repellent and Citronella grass is ideally suited to the environment surrounding Bibiani. During an upgrade to security fencing along the boundary between the mine lands and the Bibiani Township the opportunity was recognised to use the land between the fence and the mine laboratory for citronella cultivation adding seven hectares to the 2.8 hectares already under cultivation. The new area is adjacent to a citronella distillation plant currently under construction which will enable RFAP to further value-add, with the first harvest through the new plant anticipated during May 2019. 27 Resolute Mining Limited | 2018 Annual ReportEnvironment Resolute is committed to applying environmental controls and procedures to minimise and mitigate its impact on land, water, air quality, climate and biodiversity and comply with the requirements of applicable legislation, regulation and rules. Approach Resolute consistently incorporates environmental considerations into all aspects of its operations. We identify and assess the potential environmental effects of our activities and manage associated risks accordingly. We regularly monitor, audit and review our environmental performance across our business and have an Environmental Management Policy that we expect our employees and contractors to adhere to. Syama Resolute’s ongoing land rehabilitation program resulted in planting activities across 17 hectares of the waste rock dump in A21 with 35 indigenous plant species. Over 10,000 trees were also produced in Fourou Community Nursery. In addition to this, 100 trees were planted by Syama Village School students to celebrate the World Environment Day event. Routine monitoring of water quality and quantity upstream and downstream of Syama and of the ambient air quality in the five villages in closest proximity was supplemented with periodic audits undertaken by the Government’s Mining and Geological Technical Service. The permitting of 5 new boreholes for the Syama camp to improve the supply of water supply was completed with the Regional Hydraulic Service. In late FY18, Resolute announced its plans for the development of a new hybrid power plant at Syama which will be operational by the end of 2020. This hybrid plant which includes solar and battery technologies will reduce Resolute’s reliance on diesel and thereby reduce its emissions. Ravenswood Routine air and water quality monitoring occurred throughout FY18 in accordance with and in addition to regulatory requirements, in order to identify any potential impacts of the operation on the surrounding environment. A two- year, in-depth investigation into surface water and groundwater quality in the receiving environment was completed in FY18 with a final report submitted to the environmental regulatory authority as part of ongoing consultation to secure relevant and effective water quality conditioning. In a commitment to continuous improvement, works commenced to optimise the site’s recycled water management system. The site’s first major sediment dam required by Ravenswood Expansion Project approvals was constructed and commissioned during FY18. Optimisation of the recycled water management system will provide additional capacity to manage water captured in the new sediment management system, as well as see improved pumping efficiency of groundwater recovery systems that work to minimise any potential impacts of the operation. In FY18, over 500 native trees were planted in Ravenswood as part of Golden Trees, a collaborative project between Resolute and the traditional owners of the land surrounding Ravenswood, the Birriah People. The new plantings will form an environmental buffer zone between the town cemetery and some of the future mining operations when work begins on the Ravenswood Expansion Project around Buck Reef West. Resolute continued to run its Environmental Graduate Program in FY18. The Graduate Environmental Officers learn environment management skills and monitoring tasks as well as conduct environmental awareness presentations. The new roles assist existing staff with the increased monitoring responsibilities of the Ravenswood Expansion Project while providing the Graduates with the opportunity to develop the skills necessary for successful careers in the environment field. Bibiani At Bibiani, a pilot irrigation farming project at Nzema Nkwanta was initiated through RFAP involving the training of 10 farmers in the district in dry season cropping. 28 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report 29 29 Resolute Mining Limited | 2018 Annual ReportGovernance Code of Conduct 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 provides that the following core principles guide employee behaviour: • • • to act with integrity and professionalism in the performance of their duties and in the proper use of company information, funds, equipment and facilities; to exercise fairness, proper courtesy and consideration in all their dealings in the course of carrying out their duties; and to avoid real, apparent or perceived conflicts of interest. Resolute aspires to achieve best practice, creating opportunities for its business partners to assist both stakeholders and communities, while operating openly, honestly, and with integrity and responsibility and maintaining a strong sense of corporate social responsibility. In maintaining its social corporate responsibility, Resolute will conduct its business ethically, adhering to the core principles stated in the Code, encourage community initiatives, consider the environment and ensure a safe, equal and supportive workplace. Conflicts of Interest Resolute recognises that proper disclosure and management of conflicts of interests is integral to its reputation and business objectives. It is Resolute’s policy that all Directors and employees (Personnel) must, wherever possible, avoid any conflict of interest, must disclose any potential for a conflict of interest, and where a conflict cannot be avoided, must manage that conflict of interest. The duty to avoid, disclose, and manage conflicts of interest does not prohibit all conflicts of interest – rather it requires that conflicts are adequately disclosed and managed when they arise. The Company’s Conflicts of Interest Policy provides specific detail and is available to view online at www. rml.com.au/corporate-governance. Insider Trading It is Resolute’s policy that directors and employees must ensure all trading of company securities they undertake complies with the Australian Corporations Act and Regulations (particularly the prohibitions on insider trading). The Company’s Securities Trading Policy provides specific detail and is available to view online at www.rml.com.au/corporate-governance. Conducting Business Overseas It is Resolute's policy that its business affairs and operations should at all times be conducted legally, ethically, and in accordance with community standards of integrity and propriety. The Code requires business dealings must be conducted in accordance with Australian and other applicable jurisdictions’ anti-bribery laws. The Company’s Anti-Bribery and Corruption Policy and Whistleblower Policy provide specific detail and are available to view online at www.rml.com.au/corporate-governance. Additional Policies In addition to those mentioned above, Resolute has implemented the following charters and additional policies all of which are available to view online at www.rml.com.au/corporate-governance: • Board Charter • Audit and Risk Committee Charter • Remuneration Committee Charter • Nomination Committee Charter • Safety, Security and Environment Committee Charter • Continuous Disclosure Policy • Communication Strategy • Diversity and Inclusion Policy • • • Performance Evaluation Process Privacy Policy Procedure for Appointment of New Directors 30 Resolute Mining Limited | 2018 Annual ReportBoard The Board of Directors is responsible for the corporate governance of the Company. The Board guides and monitors the Company’s business and affairs on behalf of Resolute shareholders by whom they are elected and to whom they are accountable. The table below sets out the detail of the tenure of each Director as at 31 December 2018. Director Martin Botha Role of Director First Appointed Qualification Non-Executive Director (appointed Chairman from 29 June 2017) February 2014 BScEng John Welborn Managing Director February 2015 Yasmin Broughton Non-Executive Director Mark Potts Non-Executive Director June 2017 June 2017 Sabina Shugg Non-Executive Director September 2018 BCom, FCA, FAIM, SAFin, MAICD, MAusIMM, JP BCom, PG Law, GAICD BSc (Hons) MBA and BSc (Mining Engineering) Peter Sullivan Non-Executive Director June 2001 BEng, MBA The table below sets out the detail of the independence of each Director as at 31 December 2018. Director Martin Botha John Welborn Yasmin Broughton Mark Potts Sabina Shugg Peter Sullivan Non-Executive Independent Yes No Yes Yes Yes Yes Yes No Yes Yes Yes No Gender Male Male Female Male Female Male The Board considered the independence of Mr Sullivan in February 2019 and determined that it considers Mr Sullivan to be an independent Director. The Company’s Board Charter outlines the functions reserved to the Board and those delegated to management. The Board Charter delineates the responsibilities and functions of the Board as being distinct from those of management. Resolute’s Board Charter is available to view online at www.rml.com.au/corporate-governance. Committees The Board has established the following sub- committees to assist with internal control and business risk management: • Audit and Risk Committee • Remuneration Committee • Nomination Committee • Safety, Security and Environment Committee Audit and Risk Committee As at 31 December 2018, the Audit and Risk Committee consisted of the following Non-Executive Directors: • Ms Y. Broughton (Chair) • Mr M. Botha • Mr M. Potts • Ms S. Shugg • Mr P. Sullivan As at 31 December 2018 all of the above listed members of the Audit and Risk Committee other than Mr Sullivan were independent. As at the date of release of this Annual Report, all of the above listed members of the Audit and Risk Committee are independent. The Audit and Risk Committee provides the Board with additional assurance regarding the reliability of the financial information for inclusion in the financial reports, and is also responsible for: • • • • • ensuring compliance with statutory responsibilities relating to accounting policy and disclosure; liaising with, discussing and resolving relevant issues with the auditors; assessing the adequacy of accounting, financial and operating controls; the review of half-year and annual financial statements before submission to the Board; and the assessment, management and monitoring of business risk. The Audit and Risk Committee Charter is available to view at www.rml.com.au/corporate-governance. 31 Resolute Mining Limited | 2018 Annual ReportRemuneration Committee As at 31 December 2018, the Remuneration Committee consisted of the following Non-Executive Directors: • Mr P. Sullivan (Chair) • Mr M. Botha • Ms Y. Broughton • Mr M. Potts • Ms S. Shugg As at 31 December 2018 all of the above listed members of the Remuneration Committee other than Mr Sullivan were independent. As at the date of release of this Annual Report, all of the above listed members of the Remuneration Committee are independent. The Remuneration Committee is responsible for recommending, monitoring and reviewing compensation arrangements for Resolute’s Directors, CEO, Executive Committee and employees, and making subsequent recommendations to the Board. The Remuneration Committee Charter is available to view online at www.rml.com.au/corporate-governance. Nomination Committee As at 31 December 2018, the Nomination Committee consisted of the following Non-Executive Directors: • Mr M. Botha (Chair) • Ms Y. Broughton • Mr M. Potts • Ms S. Shugg • Mr P. Sullivan As at 31 December 2018 all of the above listed members of the Nomination Committee other than Mr Sullivan were independent. As at the date of release of this Annual Report, all of the above listed members of the Nomination Committee are independent. The Nomination Committee ensures Board members are appropriately qualified and experienced to discharge their responsibilities and implements procedures to assess the performance of the CEO and the Executive Committee. The Nomination Committee Charter is available to view online at www.rml.com.au/corporate-governance. Safety, Security and Environment Committee As at 31 December 2018, the Safety, Security and Environment Committee consisted of the following members: • Mr J. Welborn (Chair) • Ms S. Shugg (Non-Executive Director) • Ms L. de Bruin (Chief Financial Officer) • Mr P. Beilby (Chief Operating Officer) • Mr C. Kruger (Group Manager – Health, Safety and Environment) As at 31 December 2018 and as at the date of release of this Annual Report, Ms S. Shugg is the sole Non- Executive Director on the Safety, Security and Environment Committee and is independent. As at the date of release of this Annual Report, Mr P. Beilby has retired and Mr D. Kelly, Acting Chief Operating Officer, has been appointed to the Safety, Security and Environment Committee. The Safety, Security and Environment Committee acts as a forum for presentation of the safety performance and environmental impact management of Resolute operations and is responsible for monitoring, and advising on the implementation and management of programs, relating to key health, safety, security and environmental risks. The Safety, Security and Environment Committee Charter is available to view online at www.rml.com.au/corporate-governance. Corporate Governance Statement The Board has adopted the "Corporate Governance Principles and Recommendations 3rd edition" established by the ASX Corporate Governance Council and published by the Australian Securities Exchange (ASX) in March 2014. Resolute’s Corporate Governance Statement is available to view online at www.rml.com.au/corporate-governance. 32 Resolute Mining Limited | 2018 Annual Report Risk Management Resolute has a consistent, proactive approach to risk management across operations and projects globally based on the Group’s articulated risk appetite and aligned with ISO 31000:2009 as well as the ASX Principles and Recommendations. The Board has ultimate responsibility for ensuring material risks faced by the Company are identified and ensuring appropriate control and monitoring systems are in place to manage the impact of these risks in accordance with the articulated risk appetite. The Audit and Risk Committee has the mandate from the Board to provide risk management oversight across material risks in accordance with the Risk Management Policy and Standard. The Audit and Risk Committee continues to work closely with management in relation to the assessment, monitoring and ongoing management of business risk with short, medium and longer term horizons and to carry out assessments of internal controls and processes for improvement opportunities supported by assurance gained through, for example, the risk based Internal Audit Plan. In support of this, the Committee receives reports from management on new and emerging sources of risk and related controls and mitigation measures that management have implemented. Resolute’s commitment to continuous improvement and innovation extends through to the approach taken to risk management systems and controls. KPMG is engaged to support the ongoing optimisation of the Company’s risk management and assurance framework which includes regular identification and assessment of key risks and controls (financial and non-financial) as well as strategies to appropriately manage risk across corporate activities, operations and projects. A summary of the material business risks is set out below. Risk Strategic Risks Asset Portfolio Mitigation / Comment Resolute's revenue is derived from the Syama Gold Mine in Mali and the Ravenswood Gold Mine in Queensland. Resolute assesses a range of growth opportunities to build on its existing portfolio as well as ensuring that efficient production from existing assets is maximised. Reliance on two assets in two different geographical locations requires continual focus to enable efficient operations. Whilst geographical diversity is an advantage, there is currently limited overall diversification in Resolute’s portfolio. For example, exploration activities are ongoing in Cote d'Ivoire and Egypt and a feasibility study for the re-start of the Bibiani Gold Mine in Ghana has been completed showing a viable development pathway. Further, Resolute continues to initiate and deliver projects to enhance asset reliability and effectiveness to ensure ongoing success. Financial Risks Changes to Commodity Prices, Cash Flow and Credit Risk Resolute's financial performance is closely linked to the market price of gold. Financial performance may also be impacted through foreign exchange movements, interest rate changes or where there is an inability to secure adequate funding. Resolute utilises financial and treasury planning and control procedures to monitor and manage its exposure to commodity price fluctuations and foreign exchange rates. Gold hedging may be implemented in certain defined scenarios to ensure long-term funding for new growth opportunities, support existing projects and significant capital expenditure programs. Resolute continues to maintain excellent relationships with a syndicate of international banking counterparts. 33 Resolute Mining Limited | 2018 Annual ReportRisk Fraud and Corruption Resolute is aware of the risk of internal fraud and corruption, and the various ways that such risk may transpire. Resolute is aware that the geographical diversity of its exploration and operational activities increases this risk. Operational Performance Mitigation / Comment Resolute conducts fraud risk assessments and has internal controls in place to manage the risk of fraudulent or corrupt activities including an independently operated whistle blower hotline. Resolute is aware of the importance of delivering required and/or planned operational performance, in order to meet return on investment targets and shareholder expectations. Resolute maintains its commitment to a culture of good governance and disclosure, with a priority on providing up-to-date information on activities impacting shareholders and other key stakeholders. Project Delivery Resolute understands the importance of safe and effective project delivery in enabling its growth strategy and operational performance. There is also awareness of the risks faced in delivering projects across diverse jurisdictions, and operating environments. Resolute has embedded a range of project management tools to manage and monitor pro-ject delivery. Further, the corporate governance structures provide rigour and oversight from investment commitment to project status moni-toring and strategic direction. Operational Risks Social Licence Resolute acknowledges its social responsibility to support local communities and the importance of proactive engagement in enabling ongoing success across all its current and future mining activities. Resolute is also aware of the challenges in supporting a diverse range of communities and needs. Resolute is committed to operating in a manner that allows us to approach and sustain our activities harmoniously within the community. Resolute is proactive in its engagement with local communities and stakeholders and places a high importance on its social responsibility. Environmental / Sustainability Mining activity creates environmental responsibility and Resolute understands and respects its cross jurisdictional mining obligations. Our Corporate Social Responsibility plan outlines our engagement strategy in supporting local communities. Resolute progressively develop and maintain environmental management systems that are consistent with internationally recognised standards wherever we operate. Resolute acknowledges the need to adopt new technologies to seek to mitigate the effects of climate change, for example the planned solar hybrid power plant at Syama. Resolute's Environmental Policy provides the corporate framework for managing environmental risk and monitoring and reporting against environmental obligations. 34 Resolute Mining Limited | 2018 Annual ReportRisk Safety The nature of Resolute’s activities and the environments in which mines are located, presents inherent hazards, including the risk of serious injury or fatality while working on site. The physical remoteness of operations increases the risk of commuting to site and the availability of medical assistance in the event of an incident. Resolute is also aware of the less likely risk of an outbreak of a serious illness amongst the workforce and the associated potential for large-scale disruption to operations as a consequence. Mitigation / Comment Resolute's detailed Safety, Health and Environmental Management System is consistent across all our operations and development groups. Resolute employs a wide range of industry standard safety management systems in order to ensure the safety of our workers. Resolute supports a safety conscious culture and provide appropriate training and supervision on safety management, which promotes and embeds safe operating practices. In recognition of the physical remoteness of Syama, a well-equipped medical centre has been established on site. In addition, Resolute provides health insurance coverage for not only our local workers but also for their immediate families. Security and Conflict Risk Resolute appreciates the security risk associated with gold mining and understands the external physical security risks presented by artisanal mining activities, territorial conflicts and/or terrorist actions which could impact our people, our operations and our broader supply chain. Resolute employs a range of physical, process and cyber security measures to mitigate the risk of harm to our workers and damage to our assets. Country-level information, and global trends are continuously monitored to assess the risk of terrorism. Security plans are in place to mitigate identified risks. Technology Resolute understands that innovation in mining technology is key to future competitiveness and recognises that a failure to identify and adopt more efficient techniques and technologies represents a risk to improving business processes and gaining efficiencies. Resolute continues to actively monitor technological and digital advancements that could be adopted or incorporated into our operations, particularly where new technologies offer the potential to improve safety and efficiency outcomes. Resolute continues to optimise current technology solutions to deliver efficiency across our mining and corporate processes. For example, the Syama Underground utilises leading edge technology and global specialists in designing and building the heavily automated, highly mechanised mine of the future while allowing the local workforce to be upskilled in the latest technologies in underground mining. External Risks Geopolitical, Legal and Regulatory Developments Exploring and operating in multiple jurisdictions brings greater complexity and inherent risk. Resolute's operational and exploration activities are subject to extensive regulation in the relevant jurisdictions. Resolute monitors legal and geopolitical risks as part of centralised risk management processes. These risks are carefully considered when assessing changes to operations or pursuing new growth opportunities . Changes to government, existing applicable laws and regulations, more stringent interpretations of existing laws or inconsistent interpretation or application of existing laws by relevant authorities have the potential to adversely impact Resolute's business activities. Resolute management actively engage in dialogue with Governments and policy makers at the most senior levels to discuss regulatory developments that are applicable to Resolute's business activities. 35 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report 36 36 Resolute Mining Limited | 2018 Annual ReportResolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Financial Report Contents Corporate Directory Directors’ Report Auditor’s Independence Declaration Financial Report for the six month period to 31 December 2018 Directors’ Declaration Independent Auditor’s Report 38 39 61 62 115 116 37 Corporate Directory Directors Non-Executive Chairman Managing Director and CEO Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Company Secretary Amber Stanton Martin Botha John Welborn Yasmin Broughton Mark Potts Sabina Shugg Peter Sullivan Registered Office and Business Address Level 2, Australia Place 15-17 William Street Perth, Western Australia 6000 Postal PO Box 7232 Cloisters Square Perth, Western Australia 6850 Telephone: + 61 8 9261 6100 Facsimile: + 61 8 9322 7597 Email: contact@rml.com.au ABN 39 097 088 689 Website Resolute maintains a website where all major announcements to the ASX are available: www.rml.com.au Share Registry Computershare Investor Services Pty Limited Level 11, 172 St Georges Terrace Perth, Western Australia 6000 Home Exchange Australian Securities Exchange Level 40, 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 (31/12/2018) Ordinary Shares Performance Rights 757,512,088 7,338,476 Auditor Ernst & Young Ernst & Young Building 11 Mounts Bay Rd Perth, Western Australia 6000 Shareholders wishing to receive copies of Resolute’s ASX announcements by e-mail should register their interest by contacting the Company at contact@rml.com.au 38 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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 for the six months ended 31 December 2018. As part of the process of seeking a listing on the London Stock Exchange (LSE), and to synchronise the consolidation of Resolute’s African subsidiary companies’ accounts, Resolute’s Board of Directors resolved to change from a 30 June year end to the more conventional calendar reporting period for LSE companies of a 31 December year end for financial reporting purposes. This change means that the current reporting period is a six month transitional financial period beginning on 1 July 2018 and ending on 31 December 2018. The financial period will then revert to a 12 month financial year, commencing on 1 January and ending on 31 December. Corporate Information Resolute Mining Limited (Resolute 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 in office during the six months ended 31 December 2018, 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 Marthinus (Martin) Botha (Non-Executive Chairman) BScEng Mr Martin Botha was appointed Chairman in June 2017 after being appointed to the board in February 2014. Mr Botha is an Engineering Surveyor by training with 30 years’ experience in international investment banking. A founding director in Standard Bank Plc’s London-centred international operations, Mr Botha established and led the development of the core global natural resources trading and financing franchises, as well as various geographic operations, 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 Chair of the Nomination Committee, and a member of the Audit and Risk Committee and the Remuneration Committee. John Welborn (Managing Director and Chief Executive Officer) BCom, FCA, FAIM, MAICD, MAusIMM, SAFin, JP Mr John Welborn was appointed 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 is a Director of the World Gold Council (appointed 2017) and is a non-executive director of Equatorial Resources Limited (appointed 2010), Kilo Goldmines Limited (appointed 2017), and is Chairman of Orbital Corporation Limited (appointed 2014). Mr Welborn is Chair of the Safety and Environment Committee. 39 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Directors (continued) Yasmin Broughton (Non-Executive Director) BComm, PG Law, GAICD Ms Yasmin Broughton is a Non-Executive Director and was appointed to the board in June 2017. Ms Broughton is a corporate lawyer with significant experience working as both a director and an executive in a diverse range of industries. Ms Broughton has over 15 years’ experience working with ASX-listed companies as an officer and has a deep understanding of corporate governance, including compliance and managing complex legal issues. Ms Broughton is also a non-executive director of Synergy, the Insurance Commission of Western Australia and Edge Employment Solutions Inc. Ms Broughton is Chair of the Audit and Risk Committee, and a member of the Remuneration Committee and the Nomination Committee. Mark Potts (Non-Executive Director) BSc (Hons) Mr Mark Potts is a Non-Executive Director and was appointed to the board in June 2017. Mr Potts has held senior executive and board positions, in start-ups and large corporate environments, over a 30-year career. Most recently Mr Potts was the worldwide CTO and VP for Corporate Strategy at Hewlett Packard Enterprise. Prior to Hewlett Packard, Mr Potts was the founder of several successful, venture backed start-ups, that have driven technology disruption and business innovation in varied industries. Mr Potts was a non-executive Chairman of Decimal Software Limited (2016 to December 2018) and is currently is a non-executive director of Virtual Gaming World (appointed 2017), a non-executive director of iCetana (appointed 2018), and a board adviser to Modis Australia (appointed 2010). Mr Potts is a member of the Remuneration Committee, the Audit and Risk Committee and the Nomination Committee. Sabina Shugg (Non-Executive Director) BSc (Mining Engineering), MBA Ms Sabina Shugg was appointed to the Board as a Non-Executive Director on 7 September 2018. Ms Shugg is a mining engineer with over 30 years’ experience involving senior operational roles with leading mining and consulting organisations. Ms Shugg holds a Master of Business Administration from the University of Western Australia, a Mining Engineering degree from the Western Australian School of Mines, and a Western Australian First Class Mine Manager’s Certificate of Competency. Ms Shugg currently serves on the Minerals Council of Australia Gender Diversity Working Group, the Curtin University Foundation Board, the Minerals Research Institute of Western Australia’s Productivity Committee, and is the Director of the Kalgoorlie-Boulder Mining Innovation Hub. In 2015 Ms Shugg was awarded a Member of the General Division of the Order of Australia for significant service to the mining industry through executive roles in the resources sector and as a role model and mentor to women. Ms Shugg is a member of the Remuneration Committee, the Safety and Environment Committee, the Audit and Risk Committee and the Nomination Committee. Peter Sullivan (Non-Executive Director) BEng, 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 at which point he became a Non-Executive Director of the Company. Mr Sullivan is an engineer and has been involved in the management and strategic development of resource companies and projects for over 25 years. Mr Sullivan is also a director of GME Resources Limited (appointed 1996), Zeta Resources Limited (appointed 2013), Panoramic Resources Limited (appointed 2015) and Bligh Resources Limited (appointed 2017). Mr Sullivan is Chair of the Remuneration Committee, and a member of the Audit and Risk Committee and the Nomination Committee. 40 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report General Counsel / Company Secretary Amber Stanton LLB Ms Amber Stanton is a corporate lawyer and was appointed as General Counsel / Company Secretary in August 2017. Prior to joining Resolute, Ms Stanton was a partner at two international law firms, specialising in mergers and acquisitions, capital markets, energy and resources and general corporate and commercial matters. Ms Stanton was the WA winner of the 2011 Telstra Business Women's Award (Corporate and Private Sector). 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 and related bodies corporate were: M. Botha J. Welborn Y. Broughton M. Potts S. Shugg P. Sullivan Fully Paid Ordinary Shares Performance Rights - - 4,525,000 3,029,059 - 26,825 - 2,340,674 6,892,499 - - - - 3,029,059 Nature of Operations and Principal Activities The principal activities of entities within the consolidated entity during the period were: • Gold mining; and, • • development of the Syama Underground Mine; and prospecting and exploration for minerals. There has been no significant change in the nature of those activities during the period. Significant Changes in the State of Affairs There have been no significant changes in the state of affairs of the Company other than those stated throughout this report. Significant Events after Reporting Date On 31 January 2019, Resolute forward sold 30,000 ounces (oz) of gold at an average price of US$1,335/oz in scheduled monthly deliveries of 5,000oz between July 2019 and December 2019. Additionally, on 11 February 2019, Resolute forward sold 30,000oz of gold at an average price of A$1,887/oz in scheduled monthly deliveries of 5,000oz between January 2020 and June 2020. As part of the process of syndication of the US$100m Syndicated Facility Agreement, the facility limit was expanded to US$150m with the participation of Investec, BNP Paribas, Citibank N.A. and Nedbank. The expanded facility was signed on 21 December 2018, all Conditions Precedent were satisfied as of 31 December 2018 and the expanded facility was fully available to Resolute to draw from 3 January 2019. Financial Position and Performance • Cash, bullion and listed investments of A$117m (12 months ended 30 June 2018: A$112m) • Revenue from gold and silver sales of A$223m (12 months ended 30 June 2018: A$446m) • Net cash flows from operations of A$34m (12 months ended 30 June 2018: A$28m) • Gross profit from operations of A$24m (12 months ended 30 June 2018: A$69m) • Net loss after tax of A$5m (12 months ended 30 June 2018: profit of A$78m) • Net cash flows from operations of A$34m (12 months ended 30 June 2018: A$28m) • Net investing cash outflows of A$181m (12 months ended 30 June 2018: A$269m) • Net financing cash inflows of A$122m (12 months ended 30 June 2018: A$15m outflow) 41 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Project Update Gold production for the six month period from 1 July 2018 to 31 December 2018 was 129,199oz at an All-In Sustaining Cost (AISC) of A$1,449/oz (US$1,050/oz). Units Syama Sulphide Syama Oxide Syama Total Ravenswood Summary for 1 July to 31 December 2018 UG Lateral Development UG Vertical Development Total UG Lateral Development UG Ore Mined UG Grade Mined OP Operating Waste OP Ore Mined OP Grade Mined Total Ore Mined Total Tonnes Processed Grade Processed Recovery Gold Recovered Gold in Circuit Drawdown/(addition) Gold Produced (Poured) Gold Bullion in Metal account movement (increase)/decrease Gold Sold Achieved Gold Price Cost Summary Mining Processing Administration Stockpile Adjustments Gold in Circuit Movement Cash Cost Royalties By-product Credits Sustaining Capital + Others Overhead Costs Administration Costs All-In Sustaining Cost (AISC) AISC is calculated on gold produced (poured) Depreciation and Amortisation m m m t g/t BCM BCM g/t t t g/t % oz oz o oz oz A$/oz US$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz US$/oz A$/oz A$/oz A$/oz A$/oz A$/oz A$/oz US$/oz A$/oz - - - - - 4,609 113 4,722 - - - GROUP Total 4,609 113 4,722 256,009 280,407 536,416 2.71 1.87 2.27 2,457,516 2,457,516 59,894 2,517,410 287,028 287,028 117,802 404,830 2.26 2.26 0.59 1.66 608,519 864,528 615,855 1,480,383 720,603 1,587,951 1,178,817 2,766,768 3.36 84.1 2.58 78.4 1.01 92.7 1.91 83.4 4,609 113 4,722 256,009 2.71 - - - 256,009 867,348 1.94 70.2 37,935 65,379 103,314 35,594 138,908 (679) (9,326) (10,005) 296 (9,709) 37,256 56,053 8,279 (13,684) 45,535 1,732 1,252 42,369 1,732 1,252 - 920 471 91 (28) 1,454 1,052 119 (1) 28 27 - 1,627 1,178 172 355 360 208 35 (113) 845 611 84 (1) 15 49 - 992 718 55 93,309 (5,405) 87,904 1,732 1,252 211 585 314 57 (79) 1,088 787 98 (1) 19 40 - 1,244 901 98 35,890 129,199 4,481 (924) 40,371 128,275 1,737 1,257 556 694 266 154 7 1,677 1,215 98 (10) 30 58 - 1,853 1,341 17 1,734 1,253 307 614 301 85 (55) 1,252 910 101 (3) 21 53 25 1,449 1,050 78 Table: Six months ended December 2018 Production and Costs 42 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Project Update (continued) Syama Gold Mine At the Syama Gold Mine in Mali (Syama) production in the six month period was 93,309oz at an AISC of A$1,244/oz (US$901/oz). The highlight of the reporting period was the successful commencement of long hole open stoping and sublevel caving at the Syama Underground Mine. First ore was delivered on time and on budget from the sublevel cave in December 2018 and marked a pivotal moment in the history of the Company. Sulphide Operations During the six month period ending December 2018, production from the Syama sulphide circuit was 37,256oz at an AISC of A$1,627/oz (US$1,178/oz). Gold recovery for the period was in line with expectations as the Company treated mixed ore sources; underground ore was blended with low-grade ore stockpiles which had a direct impact on the recovery. All elements of Resolute’s sulphide processing improvement project, Project 85, have been commissioned and are operating effectively. Significantly, during periods when 100% underground sulphide ore was treated, the Syama processing plant delivered recoveries greater than 85% which provides confidence in Resolute’s ability to achieve targeted recoveries from Syama. The proportion of underground ore through the mill will increase over the first half of 2019 which will reduce the level of blending of underground ore with low grade stockpiles. The ramp-up of the Syama Underground Mine will enable an increasing proportion of mill feed to be higher grade underground ore which will drive greater gold production. From June 2019 onwards, underground sulphide ore will be treated exclusively through the sulphide plant. Oxide Operations During the six month period ending 31 December 2018, production was 56,053oz at an AISC of A$992/oz (US$718/oz). Oxide production was initially sourced from stockpiled ore from the northern satellite pits (A21, Alpha, Beta and BA01), located between 4km and 8km north of the Syama processing plant. Processing of ore sourced from the new Namakan satellite open pit at Tabakoroni, located 35km south of Syama, commenced in November 2018. Milling characteristics of ore from Tabakoroni were better than anticipated with larger quantities of fully oxidised ore resulting in higher throughput, while improved grades contributed to higher processing recoveries. Gold produced (poured) improved markedly with the introduction of higher grade oxide material from Tabakoroni. Commissioning of the gravity gold circuit was also successfully completed in conjunction with the commencement of treatment of the Tabakoroni material with an immediate positive impact. Tabakoroni will provide 100% of oxide mill feed at Syama in 2019. Ongoing Development at Syama Underground Having commenced production from the sublevel cave in December 2018, work is now focused on commissioning of the new automated fleet. When fully commissioned the autonomous mining operation will comprise automated long hole production drilling, automated loading and automated haulage from the underground loading station to the Run of Mine (ROM) pad above ground. In addition to lowering costs, automation will increase safety and productivity at Syama and create numerous highly skilled jobs in Mali for the life of the mine. Solar Hybrid Power Plant Development In November 2018, Resolute announced the signing of a Joint Development Agreement with Ignite Energy Projects Pty Ltd (Ignite Energy) for the development of a new 50 megawatt (MW) independent hybrid power plant at Syama which will combine solar, battery, and heavy fuel oil technologies. This innovative project is expected, when constructed, to be the world’s largest fully integrated hybrid power plant for a standalone mining operation. The new power plant will replace the existing historic 28MW diesel fired power station at Syama and is expected to be fully operational by the end of 2020. The new Syama power solution will be funded and constructed under an Independent Power Producer model whereby Ignite Energy, under the terms of an exclusive Power Purchase Agreement, will be responsible for the design, construction, ownership, funding, and operation of the new Solar Hybrid Power Facility on an exclusive basis and will supply power to Resolute on a guaranteed basis subject to a maximum tariff over a term of between 12 and 20 years. 43 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Project Update (continued) Solar Hybrid Power Plant Development (continued) The new solar hybrid power solution is expected to generate savings of up to 40% on the current operating costs of power at Syama. In addition to higher efficiencies of the solar hybrid solution, the replacement of Resolute’s existing diesel generated power plant will reduce reliance on, and exposure to, diesel prices. The new power facility will also provide significant environmental benefits including lower carbon emissions as a result of solar power generation and the greater efficiencies of integrated battery storage hybrid technology and improved engine technologies. Exploration In December 2018, Resolute announced further exceptional drilling results from the ongoing exploration program at Tabakoroni. The potential for high grade sulphide mineralisation was initially identified during the drill out of Resolute’s existing Ore Reserves of surface oxide mineralisation at Tabakoroni. Drilling undertaken during 2018 returned wide zones of gold mineralisation at grades suitable for underground mining operations. High grade gold mineralisation has now been intersected at Tabakoroni over a strike length of more than 1.5km. Mineralisation remains open at depth and along strike to the north. Drilling to date has outlined two zones of coherent high-grade mineralisation each with a strike length of 500m with widths averaging 10 metres. The combination of a strike length of over 1.5km and the fact that drilling to date has only tested the mineralised system to a depth of 250m below surface leads Resolute to see excellent upside at Tabakoroni. Exploration drilling at Tabakoroni will continue throughout 2019 to fully define the resource envelope. Resource estimation work will be undertaken early in 2019 with the expectation a maiden underground resource at Tabakoroni being defined and announced in Q1 FY19. The maiden resource will then form the basis for initial studies of a future underground mine. Diamond drilling at Syama Deeps and Nafolo continued throughout the six month period ending 31 December 2018. Results have extended the Nafolo alteration and mineralisation footprint over a strike length of 700m and remain open downdip and to the south. Drilling results from Nafolo demonstrate potential expansions to the existing Syama mine plan from underground mining. Exploration is now focussed on looking for repetitions of the Nafolo zone to the south and north along the Syama shear. There is a 6km strike extent of major shear structure with favourable mineralisation positions to the south of Syama. Drilling along strike to the south has identified low grade zones of similar alteration and mineralisation to Syama. This program will continue throughout FY19. The upper lens of Nafolo mineralisation is contiguous with the southern extensions of the main Syama mineralisation envelope. As such the Nafolo mineralisation can potentially be accessed from existing Syama Underground infrastructure and may form part of a future expanded mining operation. Ravenswood Gold Mine Gold production from the Ravenswood Gold Mine in Australia (Ravenswood) in the six month period ending 31 December 2018 was 35,890oz at an AISC of A$1,853/oz (US$1,341/oz). Underground ore production from Mt Wright was supplemented by processing of low-grade open pit stockpiles. Mining at Mt Wright will continue into late 2019 as preparations for the commencement of open pit mining at Buck Reef West accelerate. Ravenswood Expansion Project Following the end of the six month period, Resolute announced that it has commenced a strategic review of the Ravenswood Expansion Project (REP). The initial focus of the review is to enhance project economics by pursuing reductions in capital and operating costs. The review will also assess the potential for further growth through processing expansions, mine life extensions, and increased production capacity. Ongoing work at Ravenswood has identified new exploration targets along with opportunities for plant expansions and improved environmental outcomes. Resolute intends for the strategic review to capture these enhancements and incorporate them into an updated Life-of-Mine plan expected to be finalised during 2019. 44 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Project Update (continued) Prescribed Project Status Extension In December 2018, the Queensland Government extended the Prescribed Project status of the REP to 30 November 2020. The assistance provided by the streamlined administrative process provided by Prescribed Project status has been essential in ensuring Resolute has received the regulatory approvals required for the REP and in providing opportunity for further project enhancements. Under relevant Queensland state legislation, a Prescribed Project declaration is designed to facilitate the approval process for projects deemed to be of particular economic or social significance to Queensland or a region within the state. This is achieved by empowering the Coordinator General to actively assist in the planning, delivery and coordination of all required government and regulatory approvals to ensure there are no unnecessary delays, while ensuring the project’s environmental impacts are properly managed. The extension of the Prescribed Project status will assist the Company in finalising a small number of additional regulatory approvals that will be requested to allow project works on an enhanced REP program to commence. Bibiani Gold Mine At the beginning of the six month period ending 31 December 2018, Resolute released an updated feasibility study for Bibiani which confirmed potential for a low cost, long life operation with robust economics. During the six month period ending 31 December 2018, the Company progressed project execution planning and continued to refine mining and processing strategies. Corporate During the six month period ending 31 December 2018, Resolute executed a US$150 million revolving credit facility (Facility) which was successfully syndicated with Investec, BNP Paribas, Nedbank and Citibank. The Facility has an initial three-year term, with rates, fees and terms which are extremely flexible and highly competitive. Resolute can draw on the Facility as required for any corporate funding purposes and both the credit limit and tenor remains capable of further extension. The new Facility provides Resolute with flexible access to low cost funding for new growth initiatives. The Company continued to actively and responsibly manage its gold sales and undertake hedging above its budgeted gold price to take advantage of gold price volatility, maximise revenues and protect the Company’s balance sheet and cash flows. Including hedging undertaken following year-end, Resolute’s hedge book as at 31 December 2018 stands at 125,000oz in monthly deliveries out to June 2020 and represents less than 3% of the Company’s Ore Reserves. In November 2018, the Company also announced that it had commenced preparatory work for an application for admission of its ordinary shares to the standard listing segment of the LSE for trading on its main market for listed securities. Subject to the required regulatory approvals from both the UK Financial Conduct Authority and the LSE, Resolute intends to seek admission during the first half of 2019. 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. Levels of sulphate and some trace elements have been measured above license limits at the Ravenswood operation. The operation is cooperating with the Queensland Department of Environment and Science to evaluate and control surface and groundwater quality. 45 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report The following information has been audited. The 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. The following information has been audited as required by section 308(c) of the Corporations Act 2001. The Remuneration Report is presented under the following sections: 1. Letter from the Chair of the Remuneration Committee 2. Introduction 3. Remuneration governance 4. Resolute Remuneration Policy 5. Non-Executive director remuneration arrangements and outcomes for the period 1 July to 31 December 2018 6. Additional disclosures relating to performance rights, options and shares 7. Loans to key management personnel (KMP) and their related parties 1. Letter from the Chair of the Remuneration Committee Dear Shareholders, On behalf of the Board of Directors of Resolute I am pleased to present the Company’s Remuneration Report for the six month period to 31 December 2018. Business Outcomes The period has seen positive outcomes in safety performance with excellent Total Recordable Injury Frequency Rate (TRIFR) results across all locations and at Target performance in the cash operating cost per tonne milled. The mixed business outcomes have subsequently resulted in a Short term incentive (STI) outcome that whilst above Threshold is below target at 59% Set out in the table below is commentary on the performance outcome for each component of the STI Plan. Performance Measure Company Operating Cash Flow Cash Operating Cost Per Tonne Milled Production Target (Gold Poured) Safety: TRIFR Discretionary Safety (Safety Action List) Performance Area Weighting Actual Performance Outcome Commentary 30% 30% 30% 5% 5% Below Threshold Performance Cash flows were impacted due to not achieving production as outlined below. At Target Performance Slightly below Target Performance Above Stretch Performance Below Target Performance Both operations achieved Cash Operating Cost Per Tonne Milled slightly below Target largely due to the slightly below Target Production (Gold Poured). Target outcome in relation to is largely due to the delays caused by adverse weather events in Mali in Q1, with record rainfall recorded in the wet season. All sites achieved better than target results with a reduction in the TRIFR rate by 41% from 3.30 to 1.98 Of the two key areas of focus for the 6-month period one was achieved and the second requires further work. 46 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 1. Letter from Chair (continued) Remuneration Outcomes Short term incentive plan (STIP) Actual average performance for the six month period to 31 December 2018 for the key management personnel (KMP) STIP outcome was 69.5% of Target performance. Long term incentive plan (LTIP) No LTIP grant vested at 31 December 2018. The next period in which an LTIP grant will be tested to determine the level of vesting is 30 June 2019, for awards granted on 1 July 2016. Executive salaries Benchmarking of CEO and Executive salaries has been completed against peer companies. Where applicable adjustments to annual salary conditions have been made so that the Company is providing appropriate conditions and to ensure the retention of key staff. Changes from 1 January 2019 Long term incentive plan (LTIP) Long term incentives (LTI): The existing Resource & Reserve Growth measure has been replaced with Ore Reserve Replacement (ORR) metric to focus on maintaining and growing the deposits which create value to shareholders. The LTI comparator group used to measure relative Total Shareholder Return (TSR) has been revised to ensure relevant companies are included being gold producers of a similar size and operational locations. Details of the performance criteria for the LTIP and the comparator group of companies is included in the Remuneration Report in Section 4a. Changes from 1 March 2019 Non-Executive Director Remuneration A review of Non-Executive Director (NED) fees has been completed. From 1 March 2019, the Chairman’s fee will increase to $180,000 from $175,000 and NED fees will increase from $90,000 to $100,000. In addition, the Chair of the Audit and Risk Committee will receive a Committee Chair fee of $15,000 and the Chair of the Remuneration Committee will receive a Committee Chair fee of $10,000. Yours sincerely Peter Sullivan Chair – Remuneration Committee 47 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 2. Introduction The remuneration report details the remuneration arrangements for KMP who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, including any director (whether executive or otherwise) of the parent company. For the purposes of this report, the term “Executive” includes the Chief Executive Officer (CEO), executive directors and other senior executives of the Company and the Group. Key management personnel (i) Directors Name M. Botha J. Welborn Y. Broughton M. Potts H. Price S. Shugg P. Sullivan (ii) Executives Position held during the six month period to 31 December 2018 Non-Executive Director (Non-Executive Chairman) Managing Director and Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director (resigned 25 October 2018) Non-Executive Director (appointed 7 September 2018) Non-Executive Director Name P. Beilby L. de Bruin A. Stanton Position held during the six month period to 31 December 2018 Chief Operating Officer Chief Financial Officer General Counsel and Company Secretary 3. Remuneration Governance Remuneration Committee The Remuneration Committee is responsible for determining and reviewing the compensation arrangements for directors, 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 Committee is comprised solely of non-executive directors. Nomination Committee The Nomination Committee is responsible for Board and Board Committee membership, succession planning and performance evaluation. In accordance with best practice governance the Nomination Committee is comprised solely of non-executive directors. Use of Remuneration Consultants To ensure the Remuneration Committee is fully informed when making remuneration decisions, it seeks external remuneration advice. Remuneration consultants are engaged by, and report directly to, the Committee. In selecting remuneration consultants, the Committee considers potential conflicts of interest and requires independence from the Company’s key management personnel and other executives as part of their terms of engagement. During the period, the Company engaged The Reward Practice Pty Ltd as Remuneration Consultants to assist with various remuneration matters. No remuneration recommendations, as defined by the Corporations Act, were provided by The Reward Practice Pty Ltd during the period. 48 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 3. Remuneration Governance (continued) Remuneration Structure In accordance with best practice governance, the structure of non-executive director and senior executive remuneration is separate and distinct. Remuneration Report Approval at 2018 AGM The 30 June 2018 remuneration report received positive shareholder support at the 2018 AGM with a vote of more than 91% in favour. 4. Resolute Remuneration Policy The Board recognises that the performance of the Company depends upon the quality of its executives. To achieve its financial and operating objectives, the Company embodies the following principles in its remuneration framework: The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities to ensure total remuneration is competitive by market standards. Business Objective Remuneration Objectives Competitive Remuneration Shareholder Alignment Provide rewards to attract, motivate and retain highly skilled directors and executives Align executive incentive rewards with the creation of value for shareholders It is the Remuneration 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 Component Purpose Link to Performance Fixed remuneration Short term incentive (STI) Long term incentive (LTI) 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. The objective of the annual “at risk” STI is to generate greater alignment between performance and remuneration levels to drive operational excellence. The objective of the LTI plan is to reward executives in a manner which aligns a significant portion of remuneration with the creation of shareholder wealth. Company and individual performance are considered as part of the annual remuneration review. Internal performance measures including safety, production and costs which represent key business drivers are considered and assessed to determine annual incentives. Vesting of awards is dependent upon both an external measure (total shareholder return (TSR) performance against a peer group) and an internal measure (resource and reserve growth). 49 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 4. Resolute Remuneration Policy (continued) 4a. Approach to setting remuneration In the six month period ending 31 December 2018, the Executive remuneration framework consisted of fixed remuneration and short and long-term incentives as outlined in the table below. Overall remuneration level and mix How is overall remuneration and mix determined? Remuneration levels are considered annually through a review that considers comparative market data, the performance of the Company and individual, and the broader economic environment. The Company aims to reward executives with a level and mix (proportion of fixed, short term incentives and long term incentives) of remuneration appropriate to their position, responsibilities and performance within the Company and that which is aligned with targeted market comparators. Comparative companies are based on the following: Industry peers with similar market capitalisation   Gold resource companies with African assets and comparable market capitalisation  Other industry companies with which Resolute competes for talent In 2018, remuneration benchmarking was undertaken with reference to industry peers. The Company’s policy is to position fixed remuneration around the median of direct industry peers. The chart below summarises the MD & CEO’s and other executives’ target remuneration mix for Fixed remuneration (FR), STI and LTI. The Target mix is considered appropriate for Resolute based on the Company’s current phase of growth. Target Remuneration Mix MD & CEO 40% 20% 40% Other Executives 47% 23% 30% 0% 20% 40% 60% 80% 100% FR STI LTI Fixed remuneration FR includes base salary and superannuation contributions. Fixed remuneration is reviewed annually by the Remuneration Committee. The process consists of a review of individual performance, relevant experience, and relevant comparable remuneration in the mining industry and more broadly across other sectors. What is included in fixed remuneration (FR)? How is fixed remuneration reviewed and approved? 50 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 4. Resolute Remuneration Policy (continued) 4a. Approach to setting remuneration (continued) Short Term Incentive What are the performance criteria and how do they align with business performance? The STI is payable based on performance against key Corporate and Individual performance indicators (KPIs) set at the beginning of the performance period. KPIs require the achievement of strategic, operational or financial measures and are linked to the drivers of business performance. The STI measures comprise: • Improved safety performance (10%) – measured by: • • a lag indicator in the form of a specified reduction in the Total Recordable Injury Frequency Rate in comparison to prior years; and 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: • • • operating cash flow (30%); gold poured (30%); and cost per tonne milled (30%). • A set of personal performance metrics designed to drive optimum operational performance as specifically related to each executive portfolio. Personal performance acts as a modifier to the outcome of the above safety and budget related measures. 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. The MD and Executives have a target STI opportunity of 50% of fixed remuneration, with a maximum opportunity (if all the Stretch performance is met for each KPI and individual performance is achieved at a Stretch level) of 112.5% of fixed remuneration. The STI for the period commencing 1 July 2018 was reduced by 50% of the annual opportunity to reflect the six month reporting period. For each KPI there are defined “Threshold”, “Target” and “Stretch” measures which are capable of objective assessment. The Corporate KPIs are assessed as follows on an individual KPI basis: What is the value of the STI award opportunity? How are STI payouts determined? • Below Threshold = $nil payment • Threshold performance = 25% of KPI opportunity • Target Performance = 100% of KPI opportunity • Stretch performance = 150% of KPI opportunity Pro-rata payment applies on a straight-line basis between “Threshold” and “Target” and between “Target” to “Stretch” performance. The personal KPIs are assessed as follows: • Below Threshold = $nil payment • Threshold performance = 50% of total Corporate KPI outcome • Target Performance = 100% of total Corporate KPI outcome • Stretch performance = 150% of total Corporate KPI outcome Pro-rata payment applies on a straight-line basis between “Threshold” and “Target” and between “Target” to “Stretch” Performance. Target performance represents challenging 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 overall performance of the Company. 51 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018Directors’ Report Remuneration Report (continued) 4. Resolute Remuneration Policy (continued) 4a. Approach to setting remuneration (continued) Short Term Incentive (continued) What happens to STI Awards in the event of a Termination of Employment? Subject to overarching Board discretion, to be eligible for any payment under the STI, the participant must be employed by the Company at the earlier of, the time of payment or three months after the performance period in which the STI is tested. Long Term Incentive How often are LTI grants made and what is the maximum LTI quantum? What are the performance criteria for the LTI? At Board discretion, executives receive a new grant of Performance Rights (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 maximum percentage of their fixed remuneration and equates to 100% of fixed remuneration for the MD & CEO and 65% of fixed remuneration for the other executives. For grants made for the period commencing 1 July 2018, the LTI quantum was reduced by 50% of the annual opportunity to reflect the six month reporting period. Performance conditions have been selected that reward executives for creating shareholder value as determined via the change in the Company’s share price (Relative Total Shareholder Return) and via reserves/resources growth over a 3 year period. The LTI performance is structured as follows: 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 (“rTSR”) 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. How is the performance period determined? 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. Which companies does Resolute measure their TSR against? The Company’s TSR is measured against a customised peer group which is reviewed each year which represent companies with a similar commodity, cycle of operation and asset location. For LTI grants made for the period commencing 1 July 2018 the customised peer group comprised 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 52 • 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 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 4. Resolute Remuneration Policy (continued) 4a. Approach to setting remuneration (continued) Long Term Incentive (continued) How is vesting determined? For grants made for the period commencing 1 July 2018, in order for up to 75% of the Rights to vest, the Company’s share price performance must be at or above the 60th percentile in relation to TSR as compared to its peer companies. The following table sets out the vesting schedule based on the Company’s relative TSR performance for grants tested for vesting at 30 June 2021: Relative TSR performance Less than 60th percentile At the 60th percentile Performance Vesting Outcomes 0% vesting 50% vesting Between 60th and 75th percentile Linear vesting, between 50% and 100% 75th percentile and above 100% vesting The second performance condition is resource and reserve growth net of depletion over a 3 year period. Broadly, the quantum of the increase in resources and reserves will determine up to 25% of the Rights to vest. The following table sets out the vesting schedule based on the Company’s resource and reserve growth performance for grants made for the period commencing July 2018 which will be tested for vesting at 30 June 2021: Resource and Reserve (R&R) Growth Performance R&R depleted R&R maintained Performance Vesting Outcomes 0% vesting 50% vesting R&R between maintain and 30% growth Linear vesting, between 50% and 100% R&R grown by 30% or more 100% vesting Vested, but unexercised Rights remain on foot unless Board discretion is exercised in situations such as misconduct. Unvested Rights will be forfeited unless Board discretion is exercised in circumstances such as death, retirement due to ill health and redundancy On the occurrence of a change of control event of Resolute Mining Limited, the Board will determine, in its sole and absolute discretion, the manner in which all Unvested and Vested Rights will be dealt with. What happens to LTI Awards in the event of a Termination of Employment? What happens to LTI Awards in the event of a change of control? 53 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 4. Resolute Remuneration Policy (continued) 4b. Executive Remuneration arrangements and outcomes for the period 1 July to 31 December 2018 Company Performance The table below shows the performance of the Consolidated Entity over the last 5 periods/years: Net (loss)/profit after tax $'000 6 months ended 31 December 2018 (5,324) Basic (loss)/earnings per share cents/share (0.44) Executive KMP Statutory remuneration disclosures 30 June 2018 77,837 8.85 30 June 2017 166,096 19.05 (Restated) 30 June 2016 200,732 30 June 2015 (568,760) 26.79 (78.39) Table 1 below shows the remuneration expense recognised for each KMP for the six month period 1 July 2018 to 31 December 2018. Table 2 below shows the remuneration expense recognised for each KMP for the 12-month period 1 July 2017 to 30 June 2018. Table 1 - Statutory Executive KMP remuneration for the six month period to 31 December 2018 SHORT TERM BENEFITS POST EMPLOY- MENT BENEFITS LONG TERM BENEFITS SHARE BASED PAYMENTS PERFORMANCE RELATED n o i t a r e n u m e R e s a B $ s t i f e n e B y r a t e n o M n o N ) i ( $ I ) i i ( e v i t n e c n m r e T t r o h S $ e s n e p x E e v a e L l a u n n A $ i e v a e L e c v r e S g n o L e s n e p x E $ i s t h g R e c n a m r o f r e P $ n o i t a u n n a r e p u S $ l a t o T $ J. Welborn 340,000 5,070 121,918 27,338 12,500 8,878 525,514 1,041,218 P. Beilby 177,604 5,070 64,906 18,162 12,500 5,553 97,991 381,786 L. de Bruin 180,288 5,070 76,532 15,715 12,500 5,038 73,511 368,654 A. Stanton 128,008 7,347 57,491 11,880 10,266 3,796 33,658 252,446 Total 825,900 22,557 320,847 73,095 47,766 23,265 730,674 2,044,104 , I e v i t n e c n m r e T t r o h S i s t h g R e c n a m r o f r e P 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 d n a s n o i t p O % 62 43 41 36 50 26 20 13 (i) Non-monetary benefits include, where applicable, the cost to the Company of providing fringe benefits, the fringe benefits tax on those benefits and all other benefits received by the executive. (ii) The Short Term Incentives for the six months ended 31 December 2018 will be paid in cash in March 2019. 54 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 4. Resolute Remuneration Policy (continued) 4b. Executive Remuneration arrangements and outcomes for the period 1 July to 31 December 2018 (continued) Table 2 - Statutory Executive KMP remuneration for the year ended 30 June 2018 SHORT TERM BENEFITS s t i f e n e B y r a t e n o M n o N ) i ( $ n o i t a r e n u m e R e s a B $ I ) i i ( e v i t n e c n m r e T t r o h S $ e s n e p x E e v a e L l a u n n A $ POST EMPLOY- MENT BENEFITS LONG TERM BENEFITS SHARE BASED PAYMENTS i e v a e L e c v r e S g n o L e s n e p x E $ n o i t a u n n a r e p u S $ i s t h g R e c n a m r o f r e P $ l a t o T $ J. Welborn 648,615 5,070 312,199 56,058 25,000 34,184 1,408,339 2,489,465 P. Beilby 395,438 5,070 154,608 34,397 25,000 18,495 234,761 867,769 L. de Bruin 363,462 5,070 191,895 31,096 25,000 13,582 195,286 825,391 G. Fitzgerald (iii) 19,600 5,639 - 2,818 20,012 1,082 - 49,151 A. Stanton (iv) 240,658 5,070 99,486 9,432 20,049 6,716 43,658 425,069 Total 1,667,773 25,919 758,188 133,801 115,061 74,059 1,882,044 4,656,845 PERFORMANCE RELATED I , e v i t n e c n 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 69 45 47 - 34 i s t h g R e c n a m r o f r e P d n a s n o i t p O % 57 27 24 - 10 (i) (ii) (iii) (iv) Non-monetary benefits include, where applicable, the cost to the Company of providing fringe benefits, the fringe benefits tax on those benefits and all other benefits received by the executive. The Short Term Incentives for the year ended 30 June 2018 were paid in cash on 15 September 2018. Mr Fitzgerald resigned as Company Secretary on 4 August 2017. Ms Stanton was appointed on 4 August 2017. Executive KMP actual remuneration earned STI outcomes Actual average performance for the KMPs was 69.5% of Target performance. LTI outcomes No LTI grant vested at 31 December 2018. The next period in which a LTI grant will be tested to determine the level of vesting is 30 June 2019, for awards granted on 1 July 2016. 55 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 4. Resolute Remuneration Policy (continued) 4b. Executive Remuneration arrangements and outcomes for the period 1 July to 31 December 2018 (continued) Executive Employment Contracts Remuneration arrangements for KMP are formalised in employment agreements. The following table outlines the details of contracts with key management personnel: Name Title Term of Agreement Notice Period by Executive Notice Period by Company Termination Benefit¹ John Welborn Managing Director and Chief Executive Officer Open 6 months 12 months Peter Beilby Chief Operating Officer Open 3 months 6 months Lee-Anne de Bruin Amber Stanton Chief Financial Officer Open 3 months 3 months General Counsel and Company Secretary Open 3 months 3 months Redundancy as per NES Redundancy as per NES Redundancy as per NES Redundancy as per NES ¹ NES is the National Employment Standards. 5. Non-Executive Director Remuneration Arrangements and Outcomes for the six month period to 31 December 2018 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 29 November 2016 when the shareholders approved an aggregate remuneration of $1,000,000 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. The fee size is commensurate with the workload and responsibilities undertaken. Non-executive directors do not participate in any incentive programs. Position Current Annual fee Chair of Board Other Non-Executive Directors $175,000 $90,000 56 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 5. Non-Executive Director Remuneration Arrangements and Outcomes for the six month period to 31 December 2018 (continued) Non-executive director remuneration for the six month period to 31 December 2018 SHORT TERM BENEFITS POST EMPLOYMENT BENEFITS Remuneration Non-Monetary Benefits Superannuation TOTAL $ 87,500 45,000 45,000 20,447 25,952 36,161 260,060 $ - - - - - 4,935 4,935 $ - - - 8,217 - 3,904 12,121 $ 87,500 45,000 45,000 28,664 25,952 45,000 277,116 M. Botha Y. Broughton M. Potts H. Price S. Shugg P. Sullivan Total Non-executive director remuneration for the twelve month period to 30 June 2018 SHORT TERM BENEFITS POST EMPLOYMENT BENEFITS Remuneration Non-Monetary Benefits Superannuation TOTAL $ 175,000 118,000 90,000 65,000 68,592 516,592 $ - - - - 13,600 13,600 $ - - - 25,000 7,808 32,808 $ 175,000 118,000 90,000 90,000 90,000 563,000 M. Botha Y. Broughton (i) M. Potts H. Price P. Sullivan Total (i) $28,000 included in Ms Broughton’s remuneration relates to company secretarial consultancy services provided during the 2018 financial year. 57 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 6. Additional Disclosures Relating to Performance Rights, Options and Shares No options were held by KMP during the period. Details of performance rights holdings of KMP are as follows: Granted during the period as compensation e h t f o t r a t s e h t t a e c n a l a B d o i r e p r e b m u N e t a d e u s s I e c n a m r o f r e p f o e u l a v r i a F e t a d t n a r g t a s t h g i r $ ) s r a e y ( d o i r e p g n i t s e V f o e u l a v r i a F l a t o T t a s t h g i r e c n a m r o f r e p $ e t a d t n a r g e t a d g n i t s e V e c n a m r o f r e p f o y r i p x E s t h g i r d o i r e p e h t g n i r u d d e t n a r g f o e c i r p e s i c r e x E s t h g i r e c n a m r o f r e p $ d o i r e p e h t g n i r u d d e s p a L d o i r e p e h t g n i r u d d e t s e V e h t f o d n e e h t t a e c n a l a B d o i r e p Directors J. Welborn 4,666,500 277,559 Other key management personnel P. Beilby 1,350,223 112,857 L. de Bruin 424,667 102,362 A. Stanton 162,500 76,895 26 Oct 2018 26 Oct 2018 26 Oct 2018 26 Oct 2018 0.77 212,888 3 30 Jun 2021 1 Jul 2025 $nil (117,412) (1,797,588) 3,029,059 0.92 104,167 0.92 94,480 0.92 70,974 30 Jun 2021 30 Jun 2021 30 Jun 2021 3 3 3 1 Jul 2025 1 Jul 2025 1 Jul 2025 $nil (68,356) (813,662) 581,062 $nil $nil - - - - 527,029 239,395 i. Performance rights vest in accordance with the Resolute Mining Limited Remuneration Policy and Equity Incentive Plan which outline the key performance indicators that need to be satisfied. The percentage of performance rights granted during the six month period to 31 December 2018 that also vested during the six month period to 31 December 2018 is nil. Details of shareholdings of KMP are as follows: Received during the period on the vesting of performance rights Balance at the start of the period Purchased on market during the period Other changes during the period Shares sold on market during the period Balance at the end of the period Directors M. Botha J. Welborn Y. Broughton M. Potts H. Price (ii) S. Shugg P. Sullivan - - - 2,500,000 1,797,588 202,412 - 26,825 194,745 - 2,840,674 - - - - - - - - - (194,745) - - - - - - - - - - - 4,500,000 - 26,825 - - 2,840,674 (200,000) 980,229 - - - - - - Other key management personnel P. Beilby 366,567 813,662 (ii) These were the number of shares held by Mr Price when he resigned on 25 October 2018. 58 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Remuneration Report (continued) 7. Loans to Key Management Personnel and their Related Parties There were no loans to KMP during the six months ended 31 December 2018 and year ended 30 June 2018. This is the end of the audited information. Performance Rights Outstanding performance rights at the date of this report are as follows: Grant date 24/10/16 Vesting date 30/06/19 Exercise price - 29/11/16 29/11/16 17/10/17 28/11/17 07/03/18 26/10/18 30/06/19 30/06/20 30/06/20 30/06/20 30/06/20 30/06/21 - - - - - - Number on issue 2,263,300 600,000 1,000,000 1,403,379 587,500 319,571 1,164,726 7,338,476 Indemnification and Insurance of Directors and Officers Resolute 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 period. Auditor Independence Refer to page 26 for the Auditor’s Independence Declaration to the Directors of Resolute Mining Limited. Extension of Lead Audit Partner On 5 November 2018, the Board granted approval pursuant to section 324DAC of the Corporations Act 2001 (Cth), for Mr Gavin Buckingham of Ernst & Young to play a significant role in the audit of the Company for an additional one financial year through to the financial year ending 31 December 2019. The Board considered the matters set out in section 324DAB(3) of the Act and is satisfied that the approval: is consistent with maintaining the quality of the audit provided to the Company; and (i) (ii) would not give rise to a conflict of interest situation. Reasons supporting this decision include: • • • the benefits associated with the continued retention of knowledge regarding key audit matters; the Board being satisfied with the quality of Ernst & Young and Mr Buckingham’s work as auditor; and the Company’s on-going governance processes to ensure the independence of the auditor is maintained. 59 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Directors’ Report Directors’ Meetings The number of meetings and resolutions of directors (including meetings of committees of directors) held during the six months and the number of meetings attended by each director were as follows: M. Botha P. Sullivan J. Welborn H. Price* M. Potts Y. Broughton S. Shugg^ Number of meetings held Full Board 5 5 5 2 5 3 4 5 Audit & Risk 2 2 n/a 2 2 2 n/a 2 Remuneration 2 2 n/a 1 1+ 1 1+ 2 Nomination 2 n/a n/a 2 2 2 n/a 2 * Retired from the Board on 25 October 2018. ^ Appointed to the Board on 7 September 2018. + Appointed to the Remuneration Committee on 25 October 2018. The details of the functions of the other committees of the Board are presented in the Corporate Governance Statement. Rounding Resolute 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 for the six months ended 31 December 2018. 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 nil for non-audit services in the six months ended 31 December 2018 (twelve months ended 30 June 2018: $20,000). Signed in accordance with a resolution of the directors. J.P. Welborn Managing Director and CEO Perth, Western Australia 22 February 2019 60 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Auditor’s independence declaration to the Directors of Resolute Mining Limited As lead auditor for the audit of the financial report of Resolute Mining Limited for the financial period ended 31 December 2018, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Resolute Mining Limited and the entities it controlled during the financial period. Ernst & Young Gavin Buckingham Partner 22 February 2019 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation GB:EH:RESOLUTE:258 61 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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 Period A.1 Segment revenues and expenses A.2 Dividends paid or proposed A.3 (Loss)/earnings 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 C Cash, Debt and Capital 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 Other financial assets and liabilities D.4 Prepayments D.5 Payables D.6 Provisions E Other Items E.1 Contingent liabilities E.2 Leases and other commitments E.3 Auditor remuneration E.4 Investments in associates E.5 Subsidiaries and non-controlling interests E.6 Joint 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 62 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Consolidated Statement of Comprehensive Income Revenue from contracts with customers for 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 Interest income Other income Other expenses Exploration and business development expenditure Administration and other corporate expenses Share-based payments expense Treasury - realised gains Fair value movements and unrealised treasury transactions Share of associates’ losses Depreciation of non-mine site assets Finance costs (Loss)/profit before tax Tax benefit (Loss)/profit for the period (Loss)/profit attributable to: Members of the parent Non-controlling interest 6 months to 31 December 2018 12 months to 30 June 2018 Note $'000 $'000 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/E.4 A.1 A.1 222,774 445,555 (169,319) (329,676) 53,455 115,879 (10,110) (18,896) 24,449 329 13 (6) (2,924) (8,498) (1,346) 213 (13,602) (476) (47) (5,264) (14,417) (32,138) 69,324 2,595 404 (2,449) (15,686) (14,133) (1,782) 2,096 43,396 (1,500) (130) (4,298) (7,159) 77,837 1,835 - (5,324) 77,837 E.5 (3,302) (2,022) (5,324) 65,570 12,267 77,837 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 63 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Consolidated Statement of Comprehensive Income (continued) 6 months to 31 December 2018 $'000 (5,324) 12 months to 30 June 2018 $'000 77,837 Note (Loss)/profit for the period (brought forward) Other comprehensive income/(loss) Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations: - Members of the parent Changes in the fair value/realisation of available for sale financial assets, net of tax 3,460 (1,759) - (989) Items that may not be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations: - Non-controlling interest Changes in the fair value/realisation of financial assets at fair value through other comprehensive income, net of tax (246) (1,253) (7,061) - Other comprehensive loss for the period, net of tax (3,847) (4,001) Total comprehensive (loss)/income for the period (9,171) 73,836 Total comprehensive (loss)/income attributable to: Members of the parent Non-controlling interest (6,903) (2,268) (9,171) 62,823 11,013 73,836 (Loss)/earnings per share for net (loss)/profit attributable to the ordinary equity holders of the parent: Basic (loss)/earnings per share Diluted (loss)/earnings per share A.3 A.3 (0.44) cents 8.85 cents (0.44) cents 8.72 cents The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 64 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Consolidated Statement of Financial Position As at 31 December 2018 As at 30 June 2018 Note $'000 $'000 Current assets Cash Other financial assets – restricted cash Receivables Inventories Financial assets at fair value through other comprehensive income Available for sale financial assets Prepayments and other assets Current tax asset Total current assets Non current assets Prepayments Investments in associates Deferred tax assets Other financial assets Exploration and evaluation Development Property, plant and equipment Total non current assets Total assets Current liabilities Payables Interest bearing liabilities Provisions Total current liabilities Non current liabilities Interest bearing liabilities Provisions Total non current liabilities Total liabilities Net assets Equity attributable to equity holders of the parent Contributed equity Reserves Retained earnings Total equity attributable to equity holders of the parent Non-controlling interest Total equity C.1 D.3 D.1 D.2 D.3 D.3 D.4 E.4 A.4 D.3 B.2 B.1 B.1 D.5 C.2 D.6 C.2 D.6 C.4 E.5 38,717 3,890 56,822 178,623 28,324 - 8,296 17,561 332,233 3,609 9,583 19,261 32 62,904 405,382 288,481 789,252 1,121,485 119,982 68,513 23,259 211,754 138,711 70,321 209,032 420,786 700,699 559,809 34,956 115,616 710,381 (9,682) 700,699 42,445 - 45,097 234,720 - 22,859 5,299 20,811 371,231 15,862 6,994 9,456 3,751 53,162 302,158 172,656 564,039 935,270 92,488 47,282 21,171 160,941 - 65,687 65,687 226,628 708,642 544,972 37,011 134,073 716,056 (7,414) 708,642 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 65 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Consolidated Statement of Changes in Equity y t i u q e d e t u b i r t n o C e v r e s e r ) s s o l ( / n i a g d e s i l a e r n u t e N y t i u q e s n o i t p o e r a h S / s e t o n e l b i t r e v n o C e v r e s e r e v r e s e r s t s e r e t n i g n i l l o r t n o c - n o N y t i u q e e e y o p m E l e v r e s e r s t i f e n e b e v r e s e r n o i t a l s n a r t y c n e r r u c n g i e r o F ) s e s s o l d e t a l u m u c c a ( i / s g n n r a e d e n i a t e R t s e r e t n i g n i l l o r t n o c - n o N Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 At 1 July 2018 544,972 (776) 6,371 (934) 16,576 15,774 134,073 (7,414) 708,642 Loss for the period Other comprehensive (loss)/income, net of tax Total comprehensive (loss)/income for the period, net of tax - - - (7,061) - (7,061) Shares issued 14,837 Dividends paid Share-based payments to employees - - - - - - - - - - - - - - - - - - - - - - 1,546 - (3,302) (2,022) (5,324) 3,460 - (246) (3,847) 3,460 (3,302) (2,268) (9,171) - - - - (15,155) - - - - 14,837 (15,155) 1,546 At 31 December 2018 559,809 (7,837) 6,371 (934) 18,122 19,234 115,616 (9,682) 700,699 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 66 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Consolidated Statement of Changes in Equity (continued) y t i u q e d e t u b i r t n o C e v r e s e r ) s s o l ( / n i a g d e s i l a e r n u t e N y t i u q e s n o i t p o e r a h S / s e t o n e l b i t r e v n o C e v r e s e r e v r e s e r s t s e r e t n i g n i l l o r t n o c - n o N y t i u q e e e y o p m E l e v r e s e r s t i f e n e b e v r e s e r n o i t a l s n a r t y c n e r r u c n g i e r o F ) s e s s o l d e t a l u m u c c a ( i / s g n n r a e d e n i a t e R t s e r e t n i g n i l l o r t n o c - n o N Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 At 1 July 2017 544,987 213 6,371 - 14,291 17,533 83,333 (17,530) 649,198 Profit for the year Other comprehensive loss, net of tax Total comprehensive (loss)/income for the year, net of tax - - - - (989) (989) Share issue costs (15) Dividends paid Non-controlling interest arising from change in ownership interest Share-based payments to employees - - - - - - - - - - - - - - - - - - - (934) - - - 65,570 12,267 77,837 (1,759) - (1,253) (4,001) - (1,759) 65,570 11,014 73,836 - - - - - - - - (14,830) - - (15) (14,830) - - (898) (1,832) - 2,285 - 2,285 At 30 June 2018 544,972 (776) 6,371 (934) 16,576 15,774 134,073 (7,414) 708,642 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 67 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Consolidated Cash Flow Statement 6 months to 31 December 2018 $'000 Note 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 C.1 Cash flows used in investing activities Payments for property, plant & equipment Payments for development activities Payments for evaluation activities Payments for other financial assets Repayment of loan from unrelated parties Loans to associates Proceeds from sale of property, plant & equipment Acquisition of a share of a non-controlling interest Loans advanced to other parties Other investing activities Proceeds from sale of available for sale financial assets Net cash flows used in investing activities Cash flows used in financing activities Costs of issuing ordinary shares Dividend paid Proceeds from finance facilities Net cash flows used in financing activities 12 months to 30 June 2018 $'000 447,495 (391,955) (15,686) (2,410) 2,166 (11,251) 28,359 (88,421) (138,565) (11,747) (22,878) - - 510 (1,832) (5,133) (890) - 222,738 (181,435) (2,924) (4,926) 396 - 33,849 (82,444) (92,533) (6,898) (848) 2,230 (750) - - - (209) 417 (181,035) (268,956) - (15,155) 136,732 121,577 (15) (14,830) - (14,845) Net decrease in cash and cash equivalents (25,609) (255,442) Cash and cash equivalents at the beginning of the financial period 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 C.1 The above consolidated cash flow statement should be read in conjunction with the accompanying notes. (4,837) 1,865 (28,581) 38,717 (67,298) (28,581) 247,502 3,103 (4,837) 42,445 (47,282) (4,837) 68 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 About this Report The financial report of Resolute Mining Limited and its controlled entities (“Resolute”, “consolidated entity” or the “Group”) for the six months ended 31 December 2018 was authorised for issue in accordance with a resolution of the Directors on 22 February 2019. 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 period. 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 2018 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 (“Resolute) as an individual entity and the consolidated entity consisting of Resolute 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 at fair value. The Group has changed its financial year end from 30 June to 31 December, which enables Resolute to align its financial reporting period with its subsidiaries in Mali. This change means the financial report of the Group is transitional from 1 July 2018 to 31 December 2018. The comparatives for the financial performance in these financial statements are therefore for a twelve month period ended 30 June 2018. 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. 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. Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss with the exception of monetary items classified as net investment in a foreign operation. These are recognised in OCI until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in OCI. 69 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 About this Report (continued) Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in OCI or profit or loss are also recognised in OCI or profit or loss, respectively). 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 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 Audit and Risk Committee under policies approved by the Board of Directors. The Audit and Risk 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 proceeds on the sale of its gold production in USD and AUD and significant costs for the Syama Gold Project and the Bibiani Project are denominated in AUD, EUR, USD and the local currencies of those projects, and as such movements within these currencies expose the Group to exchange rate risk. 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 Audit and Risk 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 Audit and Risk 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 D Capital risk, Interest rate risk, Liquidity risk, Foreign currency risk Credit risk, Foreign currency risk 70 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the period 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 poured and cost of production per ounce poured. The accounting policies used by the Group in reporting segments are the same as those used in the preparation of financial statements. 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: Finance costs - including adjustments on provisions due to discounting; • Realised and unrealised treasury transactions; • • Share of associates’ losses and, • Net gains/losses on disposal of available-for-sale investments. Recognition and measurement Revenue from gold and other sales The Group adopted AASB 15 - Revenue from contracts with customers using the modified retrospective approach from 1 July 2018. Revenue from gold and other sales represents revenue from contracts with customers and is recognised at the point in time when the Group transfers control of products to a customer. For sales of gold bullion, control is obtained when the gold is credited to the metals account of the customer. Revenue is recognised at the amount to which the Group expects to be entitled. Revenue from the sale of by-products such as silver is included in sales revenue. Interest 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. Key estimates and judgements Revenue from contracts with customers Judgment is required to determine the point at which the customer obtains control of gold. Factors including transfer of legal title, transfer of significant risks and rewards of ownership and the existence of a present right to payment for the gold typically result in control transferring on delivery of the gold. 71 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the period A.1 Segment revenues and expenses (continued) For the six months ended 31 December 2018 Ravenswood (Australia) Syama (Mali) Bibiani (Ghana) Unallocated (b) Corporate / Other Treasury Total $'000 $'000 $'000 $'000 $'000 $'000 Revenue Gold and silver sales at spot to external customers (a) Total segment gold and silver sales revenue 70,504 152,270 70,504 152,270 Costs of production (60,193) (101,538) Gold in circuit inventories movement (5,364) (2,224) Costs of production relating to gold sales (65,557) (103,762) - - - - - - - - - - - - - - - - (1) (1) (4,159) (1,346) (3,521) (9,709) (165) (5,500) (3,686) (15,209) (2,216) (2,123) - - (1,007) (55) (1,182) (680) (1,962) 31,121 (1,182) (6,186) (117) (3,369) (506) (6,118) (623) (9,487) - - - - - - - - - - - - - - - - - - - - - 222,774 222,774 (161,731) (7,588) (169,319) (13,230) (5,666) (18,896) (8,498) (1,346) (2,924) 21,791 (3,486) (6,624) (10,110) (2,585) 21,634 (1,182) (6,186) - 11,681 Royalty expense Operational support costs Other operating costs relating to gold sales Administration and other corporate expenses Share-based payments expense Exploration and business development expenditure (Loss)/earnings before interest, tax, depreciation and amortisation Amortisation of evaluation, development and rehabilitation costs Depreciation of mine site properties, plant and equipment Depreciation and amortisation relating to gold sales Segment operating result before treasury, other (expenses)/income and tax 72 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the period A.1 Segment revenues and expenses (continued) For the six months ended 31 December 2018 Ravenswood (Australia) Syama (Mali) Bibiani (Ghana) Corporate/ Other Treasury $'000 $'000 $'000 $'000 $'000 Total $'000 Unallocated (b) Segment operating result before treasury, other (expenses)/income and tax (brought forward) Interest income Other income Interest and fees Rehabilitation and restoration provision accretion Finance costs Realised foreign exchange loss Realised gain on forward contracts Treasury - realised gains Inventories net realisable value movements and obsolete consumables Unrealised foreign exchange loss Unrealised foreign exchange gain on intercompany balances Fair value movements and unrealised treasury transactions Other expenses Share of associates' losses Depreciation of non-mine site assets Income Tax (expense)/benefit (Loss)/profit for the six months ended 31 December 2018 (2,585) 21,634 (1,182) (6,186) - 11,681 - - - - - - (478) (415) (478) (415) - - - - - - (412) (28,745) - - - - (412) (28,745) - - - - - - - - - - - - - - - - - - - (4,283) (6) - - - - - - - - - - - - - - - - - (47) 6,118 329 13 329 13 (4,371) (4,371) - (893) (4,371) (5,264) (139) (139) 352 213 352 213 - (29,157) (1,477) (1,477) 17,032 17,032 15,555 (13,602) - (476) - - (6) (476) (47) 1,835 (3,475) (11,809) (1,188) (115) 11,263 (5,324) 73 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the period A.1 Segment revenues and expenses (continued) For the 12 months ended 30 June 2018 Ravenswood (Australia) Syama (Mali) Bibiani (Ghana) Unallocated (b) Corporate / Other Treasury Total $'000 $'000 $'000 $'000 $'000 $'000 Revenue Gold and silver sales at spot to external customers (a) Total segment gold and silver sales revenue Costs of production 138,463 307,092 138,463 307,092 (120,011) (237,453) Gold in circuit inventories movement 12,478 15,310 Costs of production relating to gold sales (107,533) (222,143) Royalty expense (6,915) (19,309) Operational support costs (256) (5,651) - - - - - - - - - - - - - - - - (7) (7) (6,972) (1,782) (7,171) (24,960) (4,664) (2,497) - - (7,364) (1,044) (2,381) (4,897) 11,731 56,448 (2,381) (13,658) (1,297) (3,498) (1,274) (8,348) (2,571) (11,846) - - - - - - 9,160 44,602 (2,381) (13,658) - - - - - - - - - - - - - - - - 445,555 445,555 (357,464) 27,788 (329,676) (26,224) (5,914) (32,138) (14,133) (1,782) (15,686) 52,140 (4,795) (9,622) (14,417) 37,723 Other operating costs relating to gold sales Administration and other corporate expenses Share-based payments expense Exploration and business development expenditure Earnings/(loss) before interest, tax, depreciation and amortisation Amortisation of evaluation, development and rehabilitation costs Depreciation of mine site properties, plant and equipment Depreciation and amortisation relating to gold sales Segment operating result before treasury, other income/(expenses) and tax 74 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the period A.1 Segment revenues and expenses (continued) For the 12 months ended 30 June 2018 Segment operating result before treasury, other income/(expenses) and tax (brought forward) Interest income Other income Gain on sale of property, plant and equipment Total other income Interest and fees Rehabilitation and restoration provision accretion Finance costs Realised foreign exchange gain Realised loss on forward contracts Treasury - realised gains Inventories net realisable value movements and obsolete consumables Unrealised foreign exchange gain Unrealised foreign exchange gain on intercompany balances Fair value movements and unrealised treasury transactions Other expenses Share of associates' losses Depreciation of non mine site assets Profit/(loss) for the year Ravenswood (Australia) Syama (Mali) Bibiani (Ghana) Corporate/ Other Treasury $'000 $'000 $'000 $'000 $'000 Total $'000 Unallocated (b) 9,160 44,602 (2,381) (13,658) - 37,723 - - 324 324 - - - - - - (899) (606) (899) (606) - - - - - - 1,283 11,542 - - - - 1,283 11,542 - - - - - - - - - - - - - - - - - (675) (1,774) - - - - - - - - - - - - - - (3) - - 2,595 2,595 80 - 80 80 324 404 (2,793) (2,793) - (1,505) (2,793) (4,298) 2,311 (215) 2,096 2,311 (215) 2,096 - 12,822 287 287 30,287 30,287 (3) 30,574 43,396 - - - (2,449) (1,500) (1,500) (130) - (130) 9,868 54,863 (4,155) (13,791) 31,052 77,837 75 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the period A.1 Segment revenues and expenses (continued) (a) Revenue from external sales for each reportable segment is derived from several customers. (b) This information does not represent an operating segment as defined by AASB 8, however this information is analysed in this format by the Chief Operating Decision maker, and forms part of the reconciliation of the results and positions of the operating segments to the financial statements. A.2 Dividends paid or proposed Proposed dividends on ordinary shares: Final dividend for 6 months ended 31 December 2018: 0.0 cents per share (12 months ended 30 June 2018: 2.0 cents per share) 6 months to 31 December 2018 $'000 12 months to 30 June 2018 $'000 - 14,830 A dividend has not been declared for the six month period ended 31 December 2018 (which is a transitional six month reporting period as opposed to a full financial year). The company’s dividend policy of paying a minimum of 2% of sales as a dividend will continue based on a 31 December financial year going forward. On this basis, a dividend for the year ended 31 December 2019, if declared, would be paid in March 2020. A.3 (Loss)/earnings per share Basic (loss)/earnings per share (Loss)/Profit attributable to ordinary equity holders of the parent for basic (loss)/earnings per share ($'000) Weighted average number of ordinary shares outstanding during the period used in the calculation of basic EPS Basic (loss)/earnings per share (cents per share) 6 months to 31 December 2018 12 months to 30 June 2018 (3,302) 65,570 755,294,647 740,664,832 (0.44) 8.85 Diluted (loss)/earnings per share (Loss)/profit used in calculation of diluted 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 ¹ 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 (loss)/earnings per share (cents per share) (3,302) 65,570 755,294,647 740,664,832 n/a 11,307,704 755,294,647 751,972,536 7,338,476 (0.44) - 8.72 ¹ Dilutive instruments have not been included in the calculation of diluted earnings per share for 31 December 2018 because the result for the period was a loss. Measurement Basic earnings per share (“EPS”) is calculated as net (loss)/profit attributable to members, adjusted to exclude preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted EPS is calculated as the net (loss)/profit attributable to members, adjusted for: • • • 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. 76 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the Period A.3 (Loss)/earnings 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 options and performance rights have not been included in the determination of basic earnings per share. A.4 Taxes a) Income tax expense Current tax expense/(benefit) Deferred tax (benefit)/expense Total tax benefit b) Numerical reconciliation of income tax expense to prima facie tax expense (Loss)/profit before income tax expense Prima facie income tax (benefit)/expense at 30% (12 months ended 30 June 2018: 30%) (Deduct)/add: - net movement in temporary differences and tax losses not recognised/recognised - effect of different rates of tax on overseas income - effect of share based payments expense not deductible - other permanent differences Income tax (benefit)/expense attributable to net loss 6 months to 31 December 2018 $'000 12 months to 30 June 2018 $'000 7,970 (9,805) (1,835) (7,159) (2,148) (803) 2,830 447 (2,161) (1,835) (5,877) 5,877 - 77,837 23,351 (19,907) - 705 (4,149) - 77 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the Period A.4 Taxes (continued) c) Tax losses (tax effected) Revenue losses - Australia - Mali - Ghana Capital losses - Australia Total tax losses Total tax losses – recognised (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) d) Movements in the deferred tax assets balance Balance at the beginning of the period Credited/(charged) to the income statement Balance as at the end of the period 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 Temporary differences not recognised Carried forward tax losses – recognised (Australia) Set off of deferred tax liabilities pursuant to set off provisions Net deferred tax assets 6 months to 31 December 2018 $'000 12 months to 30 June 2018 $'000 15,148 23,649 21,573 60,370 52,314 112,684 (6,118) 11,997 - 23,158 35,155 52,314 87,469 - 106,566 87,469 9,456 9,805 19,261 81,866 1,008 9,320 128,373 53,731 30 174 15,333 (5,877) 9,456 82,958 1,008 9,320 137,472 53,731 30 9,504 (244,811) (267,616) 29,691 6,118 (16,548) 19,261 26,407 - (16,951) 9,456 78 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the period A.4 Taxes (continued) e) Movements in the deferred tax liabilities balance The deferred tax liabilities balance comprises temporary differences attributable to: 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 f) 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 6 months to 31 December 2018 $'000 12 months to 30 June 2018 $'000 1,553 8,191 6,804 - 16,548 (16,548) - 194 2,566 64 2,824 (64) 2,760 1,553 8,191 7,207 - 16,951 (16,951) - 194 2,566 64 2,824 (64) 2,760 FRANKING CREDITS The amount of franking credits available for subsequent financial years is as follows. The amount has been determined using a tax rate of 30%. 108 108 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). 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. 79 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements A: Earnings for the period A.4 Taxes (continued) Recognition and measurement (continued) 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 Resolute 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 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. 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 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 was an income tax holiday for 5 years post the declaration of “first commercial production” at Syama, which commenced on 1 January 2012. The tax holiday came to an end on 31 December 2016 and taxable profits arising after that date are subject to tax in accordance with the Establishment Convention. A deferred income tax asset of $13.1 million has been recognised at 31 December 2018 in relation to deductible temporary differences and a further $6.1m in relation to carried forward Australian tax losses. Realisation of sufficient taxable profit in future periods is 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 realised; the conditions for deductibility imposed by tax legislation have been continued to be complied with; and, (i) (ii) (iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit. 80 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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 orebodies 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 a) Areas in Development Costs incurred in preparing mines for production including the required plant infrastructure. b) Areas in Production 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 / unit of production Method Straight line Straight line Unit of production 81 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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. tones) 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 specific asset 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 B.3 82 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements B: Production and Growth Assets B.1 Mine properties and property, plant and equipment (continued) Plant and Equipment Development Expenditure t n e m p u q E & i t n a l P s g n d i l i u B s e l c i h e V r o t o M i t n e m p u q E e c i f f O s t e s s A d e s a e L l a t o T s e i t r e p o r P e n M i y t i v i t c A g n p i r t S i t e s s A l a t o T $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 7,777 160,385 1,000 2,838 656 172,656 301,389 769 302,158 - 116,758 - - (86) (6,490) (17) (78) - - - - - - - - - - - - - - - - - 116,758 89,656 10,738 100,394 (6,671) - - - - - - - (3,520) (3,520) (3,516) 1,408 - - (3,516) 1,408 339 5,413 35 123 (172) 5,738 8,345 113 8,458 6 months to 31 December 2018 Opening write down value Additions Depreciation expense Amounts amortised to costs of production relating to gold sales Amortisation expense Adjustments to rehabilitation and restoration obligations Foreign currency translation At 31 December net of accumulated depreciation Cost 17,629 684,573 8,030 276,066 1,018 5,819 2,883 484 288,481 397,282 8,100 405,382 9,921 22,254 740,196 768,638 12,210 780,848 Accumulated depreciation and impairment Net carrying amount (9,599) (408,507) (4,801) (7,038) (21,770) (451,715) (371,356) (4,110) (375,466) 8,030 276,066 1,018 2,883 484 288,481 397,282 8,100 405,382 83 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements B: Production and Growth Assets B.1 Mine properties and property, plant and equipment (continued) Plant and Equipment Development Expenditure t n e m p u q E & i t n a l P s g n d i l i u B s e l c i h e V r o t o M i t n e m p u q E e c i f f O s t e s s A d e s a e L l a t o T s e i t r e p o r P e n M i y t i v i t c A g n p i r t S i t e s s A l a t o T $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 7,637 77,543 - - 88,004 (20) 750 246 - 112 (46) (207) (273) 2,845 1,293 90,068 143,641 15,971 159,612 - 88,362 122,117 33,307 155,424 (167) (9,284) (22) (174) (429) (10,076) - - - - - - - - - - - - - - - - - - - - - - - 23,368 - - - - - 23,368 - - - - (48,936) (48,936) (4,471) 6,856 - - (4,471) 6,856 12 months to 30 June 2018 Opening write down value Additions Disposals Depreciation expense Transfers from exploration and evaluation Amounts amortised to costs of production relating to gold sales Amortisation expense Adjustments to rehabilitation and restoration obligations Foreign currency translation At 30 June net of accumulated depreciation 307 4,142 26 101 (1) 4,575 9,878 427 10,305 Cost 17,199 553,642 7,777 160,385 1,000 5,705 2,838 656 172,656 301,389 769 302,158 9,724 21,928 608,198 669,230 49,705 718,935 Accumulated depreciation and impairment Net carrying amount (9,422) (393,257) (4,705) (6,886) (21,272) (435,542) (367,841) (48,936) (416,777) 7,777 160,385 1,000 2,838 656 172,656 301,389 769 302,158 84 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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 period Expenditure during the period Adjustments to rehabilitation obligations Transfers to areas in development Foreign currency translation Balance at the end of the period Recognition and measurement 6 months to 31 December 2018 $’000 12 months to 30 June 2018 $’000 53,162 7,098 (184) - 2,828 62,904 64,879 14,592 (4,743) (23,368) 1,802 53,162 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 period/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 is 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 level of exploration expenditure expected in the twelve months ending 31 December 2019 for the consolidated entity is approximately $16.515m (actual expenditure for the six months ended 31 December 2018: $7.1m). This includes the minimum amounts required to retain tenure. There are no material exploration commitments further out than one year. 85 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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 or a reversal of a prior period impairment may exist or changes in circumstances indicate the carrying value may not be recoverable. At a minimum the Group makes this assessment twice annually at 30 June and 31 December. No indicators of impairment or indicators for reversal of prior period impairment loss were identified. 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 loss or reversal of prior period impairment loss was recognised in the six months to 31 December 2018. 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. 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. 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 Cash Generating Units (“CGUs”), foreign exchange rates, the level of proved and probable reserves and measured, indicated and inferred mineral resources that may be 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 are estimated by management based on prevailing market conditions. When applicable, 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 mine (LOM) plans. Consideration is also given to analysts’ valuations, and the market requirements, based on CGU life value of the Company’s securities. The fair value methodology adopted is categorised as Level 3 in the fair value hierarchy (in accordance with Australian Accounting Standards). of ‐ ‐ 86 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements B: Production and Growth Assets B.4 Segment expenditure, assets and liabilities For the 6 months to 31 December 2018 Capital expenditure Segment assets of continuing operations Segment liabilities of continuing operations Ravenswood (Australia) $’000 7,708 Syama (Mali) $’000 176,466 Bibiani (Ghana) $’000 6,233 Corp/ Other $’000 23,106 88,442 764,239 99,655 169,149 52,934 213,327 12,463 142,062 Treasury Total $’000 - $’000 213,513 - - 1,121,485 420,786 For the 12 months to 30 June 2018 Capital expenditure Segment assets of continuing operations Segment liabilities of continuing operations Ravenswood (Australia) $’000 21,162 Syama (Mali) $’000 161,855 Bibiani (Ghana) $’000 9,822 Corp/ Other $’000 29,204 98,435 638,125 87,337 111,373 63,068 137,287 10,503 15,770 Treasury Total $’000 - - - $’000 222,043 935,270 226,628 87 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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 6 months to 31 December 2018 12 months to 30 June 2018 $'000 38,717 $'000 42,445 For the purpose of the cash flow statement, cash and cash equivalents comprise the following at the end of each period: Cash at bank and on hand Bank overdraft 38,717 (67,298) (28,581) 42,445 (47,282) (4,837) 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 and short term deposits Counterparties with external credit ratings AA- A B Counterparties without external credit ratings Total cash at bank and short term deposits Recognition and measurement 13 32,759 - 5,945 38,717 495 40,269 - 1,681 42,445 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$30.5 million of cash and cash equivalents at 31 December 2018 (12 months to June 2018: A$30.4 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 (6 months to December 2018: A$28.7 million; 12 months to June 2018: A$11.9 million equivalent) and Euro 6 months to December 2018: A$0.03 million; 12 months to June 2018: A$5.0 million equivalent). Average interest rates earned on cash and cash equivalents during the period was 0.98% (12 months to June 2018: 2.4%). 88 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements C: Cash, Debt and Capital C.1 Cash (continued) Reconciliation of net (loss)/profit from continuing operations after income tax to the net operating cash flows Net (loss)/profit from ordinary activities after income tax Add/(deduct): Share based payments including employee long term incentive costs Loss on sale of property, plant and equipment Profit on sale of available for sale financial assets Rehabilitation and restoration provision accretion Rehabilitation and restoration cash expenditure Depreciation and amortisation Foreign exchange gains Inventory net realisable value movements Share of associates’ losses Non cash finance costs Changes in operating assets and liabilities: Increase in receivables Decrease/(increase) in inventories Decrease/(increase) in prepayments (increase)/decrease in stripping activity asset Increase in payables Decrease/(increase) in current tax balances (Increase)/decrease in deferred tax balances Increase/(decrease) in operating provisions Net operating cash flows 6 months to 31 December 2018 12 months to 30 June 2018 $'000 (5,324) 1,346 6 (352) 893 (237) 10,157 $'000 77,837 1,782 587 - 1,505 (1,223) 14,547 (15,555) (30,574) 29,157 (12,822) 476 16 1,500 42 (10,021) (32,949) 7,781 4,745 (7,029) 20,303 (8,905) (2,577) 15,681 24,112 3,838 (24,488) (9,439) 3,088 33,849 6,751 (2,447) 28,359 89 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements C: Cash, Debt and Capital C.1 Cash (continued) Cash flow by segment Ravenswoo d (Australia) Syama (Ghana) Bibiani (Ghana) $’000 $’000 $’000 Unallocated (b) Corp/ Other $’000 Treasury $’000 Total $’000 For the 6 months to 31 December 2018 Cash flow by segment, including gold bullion, and gold shipped but unsold and held in metal accounts Reconciliation of cash flow by segment to the cash flow statement: Movement in gold poured but unsold at market value Mark to market movement in gold unsold Movement in bank overdraft, including foreign exchange movements Exchange rate adjustment in cash on hand Movement in cash and cash equivalents per consolidated cash flow statement For the 12 months to 30 June 2018 Cash flow by segment, including gold bullion, and gold shipped but unsold and held in metal accounts Reconciliation of cash flow by segment to the cash flow statement: Movement in gold poured but unsold at market value Mark to market movement in gold unsold Movement in bank overdraft, including foreign exchange movements Exchange rate adjustment in cash on hand Movement in cash and cash equivalents per consolidated cash flow statement (29,758) (98,594) (7,776) (21,126) 154,696 (2,558) (514) (2,763) (20,016) 242 (25,609) (12,074) (112,182) (17,550) (47,887) (14,424) (204,117) (40,726) (605) (12,724) 2,730 (255,442) 90 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements C: Cash, Debt and Capital C.2 Interest bearing liabilities Interest bearing liabilities (current) Bank overdraft - ref C3.1 Insurance premium funding Interest bearing liabilities (non-current) Borrowings 6 months to 31 December 2018 12 months to 30 June 2018 $’000 $’000 67,298 1,215 68,513 47,282 - 47,282 138,711 - 207,224 47,282 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. Resolute has a Security Trust Deed in place with various banks. The total assets of the entities over which security exists amounts to $1,075m (12 months to June 2018: $875m). $262m (12 months to June 2018: $152m) of these assets relate to property plant and equipment. Finance leases 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. Interest bearing liabilities The Group’s interest bearing liabilities have a fair value equal to the carrying value. The Group held $139m of interest bearing liabilities at 31 December 2018 (12 months ended June 2018: Nil) in currencies other than Australian dollars or a different currency to that of the functional currency of the company which holds the item. Average interest rates charged on interest bearing liabilities at period end was 5.97% (2018: 8.0%). During the six month period to 31 December 2018, Resolute entered into a US$100m Revolving Loan Facility agreement with Investec Australia Limited. As part of the process of syndication of the Syndicated Facility Agreement, the facility limit was expanded to US$150m. The expanded facility was signed on 21 December 2018, all Conditions Precedent were satisfied as of 31 December 2018 and the expanded facility was fully available to Resolute to draw from 3 January 2019. 91 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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: 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 liabilities C.3 Financing facilities C3.1 Bank overdraft 6 months to 31 December 2018 12 months to 30 June 2018 $'000 $'000 1,776 76,258 149,486 227,520 (20,296) 207,224 - 49,184 - 49,184 (1,902) 47,282 The current facility with the Bank Du Mali SA is in place and is subject to an annual revision in approximately September 2019. As at 31 December 2018 A$2.6m of the facility was unused. C3.2 Syndicated facilities Resolute established a new three-year US$100m revolving credit facility with Investec Australia Limited (“Investec”) as Facility A of a new Syndicated Facility Agreement (the “SFA”) on 13 July 2018. As part of the process of syndication of the Syndicated Facility Agreement, the facility limit was expanded to US$150m with the participation of Investec, BNP Paribas, Citibank N.A. and Nedbank Limited. The expanded facility was signed on 21 December 2018, all Conditions Precedent were satisfied as of 31 December 2018 and the expanded facility was fully available to Resolute to draw from 3 January 2019. The A$35.0m Letter of Credit Facility with Citibank N.A., now forms part of the new Syndicated Facility Agreement as Facility B. The Letter of Credit Facility relates mainly to Environmental Performance Bonds for the Ravenswood Project. A$29.4m of this facility has been drawn and expires on 31 December 2019; The Syndicated Facility Agreement, Citibank N.A. Letter of Credit Facility and hedging facilities provided by Investec Bank Plc, Société Générale and Citibank N.A. are secured by the following: (i) Cross Guarantee and Indemnity given by Resolute (“the Borrower”), Carpentaria Gold Pty Ltd, Resolute (Somisy) Limited, Resolute (Treasury) Pty Ltd and Resolute (Bibiani) Limited; (ii) Share Mortgage granted by Resolute over all of its shares in Carpentaria Gold Pty Ltd; (iii) Share Mortgage granted by the Borrower over all of its shares in Resolute (Bibiani) Limited and Resolute (Somisy) Limited; (iv) 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; (v) 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; (vi) Mortgage of Contractual Rights granted by Resolute Mining Limited in favour of the Security Trustee over a loan provided to Société des Mines de Syama SA; (vii) 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. 92 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements C: Cash, Debt and Capital C.3 Financing facilities (continued) C3.2 Syndicated facilities (continued) Pursuant to the Syndicated Facilities Agreement, the following ratios are required: (Interest Cover Ratio): the ratio of EBITDA to Net Interest Expense will be greater than 5.00 times; (i) (ii) (Net Debt to EBITDA): the ratio of Net Debt to EBITDA will be less than 2.00 times; (iii) (Consolidated Gearing): the ratio of Net Debt to Equity will be less than 1.00 times; and (iv) (Reserve Tail Ratio): will exceed 30%. There have been no breaches of these ratios. The A$9.5m (US$7m) Letter of Credit Facility Agreement with Société General Ghana Limited relates to Environmental Performance Bonds for the Bibiani Project. This facility is fully drawn and expires on 31 December 2019. The Société General Ghana Limited Letter of Credit Facility Agreement is also supported by a guarantee provided by Resolute Mining Limited. C.4 Contributed Equity Ordinary share capital: 757,512,088 ordinary fully paid shares (2018: 741,477,595) Movements in contributed equity, net of issuing costs: Balance at the beginning of the period Issue of shares to Level 1 and 2 employees (net of costs) Issue of shares to Orca Gold1 Issue of shares to Loncor2 Issue of shares to Manas Resources3 Balance at the end of the period 6 months to 31 December 2018 12 months to 30 June 2018 $'000 559,809 $'000 544,972 544,972 544,987 - 11,774 2,646 417 (15) - - - 559,809 544,972 ¹This relates to the purchase of 16,182,480 shares in Orca Gold Inc which resulted in the issue of 8,953,421 Resolute shares. 2This relates to the purchase of 25,000,000 shares in Loncor Resources Inc which resulted in the issue of 2,012,466 Resolute shares. 3This relates to the purchase of 79,290,000 shares in Manas Resources Limited which resulted in the issue of 317,160 Resolute shares. 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. 93 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements C: Cash, Debt and Capital C.5 Other reserves Reserve Nature and purpose Net unrealised gain/(loss) reserve Convertible notes/Share options equity reserve Employee benefits equity reserve This reserve records fair value changes on financial assets at fair value through other comprehensive income. This reserve records the value of the equity portion (conversion rights) of the convertible notes and records the fair value of share options issued. 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. Non-controlling interest’s reserve This reserve records the difference between the fair value of the amount by which the non-controlling interests were adjusted to record their initial relative interest and the consideration paid for Resolute’s acquisition for that share of the interest. Key financial and capital risks associated with Cash, Debt and Capital 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 31 December 2018 is 24% (twelve months ended 30 June 2018: 0%). The Group is not subject to any externally imposed capital management 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 controlling interest) plus net debt. Statement of Financial Position (including non 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. ‐ Interest rate risk Foreign exchange risk -1% +1% -10% +10% Carrying Amount Profit Equity Profit Equity Profit Equity Profit Equity $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 38,717 138,711 (227) (992) (227) (992) 227 992 227 992 2,221 2,221 (1,817) (1,817) 11,028 11,028 (9,023) (9,023) (1,219) (1,219) 1,219 1,219 13,249 13,249 (10,840) (10,840) 42,445 (279) (279) (279) (279) 279 279 279 279 2,260 2,260 2,260 2,260 (1,849) (1,849) (1,849) (1,849) 31 December 2018 Cash Interest bearing liabilities Total (decrease)/increase 30 June 2018 Cash Total (decrease)/increase 94 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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 Trade receivables Taxation receivables ¹ Loans advanced to other parties ² 6 months to 31 December 2018 12 months to 30 June 2018 $'000 2,757 50,316 3,749 56,822 $'000 1,783 38,181 5,133 45,097 ¹ The taxation receivables primarily relate to indirect taxes owing to the group by the State of Mali. ² $2,999,471 (30 June 2018: $5,132,579) relates to loan advanced to a supplier which is secured over assets that the loan was used to purchase. Interest at the rate of 9.5% per annum as determined off a reference rate, is charged on the balance outstanding and the loan is repayable by the supplier by way of deduction from future amounts payable under the contract. The balances outstanding at 31 December 2018 is expected to be repaid within the next 12 months and therefore the loan has been classified as current. The remaining $750,000 (30 June 2018: nil) relates to a loan advanced to Kilo Goldmines Ltd (a Canadian company listed on the TSX-V). The loan bears interest at 10% per annum, is repayable in March 2019 and is secured against all the assets of Kilo Goldmines Ltd including a pledge of the shares in Kilo Goldmines Inc a wholly owned subsidiary of Kilo Goldmines Ltd. The credit quality of receivables can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Counterparties with external credit ratings AA+ Counterparties without external credit ratings * Group 1 Group 2 6 months to 31 December 2018 12 months to 30 June 2018 $'000 $'000 1,822 1,061 54,544 456 56,822 43,689 347 45,097 *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 expected credit losses. Trade receivables are due for settlement no more than 30 days from the date of recognition. Taxation receivables are considered statutory in nature and therefore not accounted for as financial assets under AASB 9. Taxation receivables are initially recognised and subsequently measured at amortised cost. Fair value and foreign exchange risk The carrying amount of receivables approximates their fair value. The Group always recognises the lifetime expected credit loss for trade receivable carried at amortised cost. The expected credit losses on these financial assets are estimated based on the Group’s historic credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as forecast conditions at the reporting date. For all other receivables measured at amortised cost, the Group recognises lifetime expected credit losses when there has been a significant increase in credit risk since initial recognition. If the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for the financial instrument at an amount equal to expected credit losses within the next 12 months. The Group held $1.9m in receivables at 31 December 2018 (12 months to June 2018: $1.8m) in currencies other than Australian dollars or in a different currency to that of the functional currency of the company which holds the item. 95 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements D: Other assets and liabilities D.1 Receivables (continued) As at balance date, the aging analysis of current and non-current sundry debtors is as follows: 0-30 days (Past due but not impaired) 31-60 days (Past due but not impaired) 61-90 days (Past due but not impaired) +91 days (Past due but not impaired) +91 days (Considered impaired) 6 months to 31 December 2018 12 months to 30 June 2018 $'000 4,356 68 1,683 222 177 6,506 $'000 6,639 132 94 - 51 6,916 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 bullion on hand - at net realisable value¹ Gold in circuit - at cost Gold in circuit - at net realisable value² Consumables at cost 6 months to 31 December 2018 12 months to 30 June 2018 $'000 $'000 27,347 14,524 41,871 16,553 4,980 9,598 66,736 38,885 178,623 38,296 35,946 74,242 28,675 - 72,830 - 58,973 234,720 ¹ Resolute retained 22,768oz of gold bullion on hand at 31 Dec 2018 with a market value of $39.5m (12 months to June 2018: 21,962oz with a market value of $37.1m). ² Included in gold in circuit is inventory with carrying value of $56m that is expected to be processed after 12 months. 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. 96 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements D: Other assets and liabilities D.3 Other financial assets and liabilities Financial assets at fair value through other comprehensive income (current) Shares at fair value - listed 28,324 - 6 months to 31 December 2018 12 months to 30 June 2018 $'000 $'000 Available for sale financial assets (current) Shares at fair value - listed Other financial assets (current) - 22,859 Environmental bond - restricted cash (face value approximates fair value) 3,890 - Other financial assets (non-current) Environmental bond - restricted cash Other - 32 32 3,707 44 3,751 Recognition and measurement Financial assets at fair value through other comprehensive income These financial assets consist of investments in ordinary shares, comprising principally of marketable equity securities. Investments are initially recognised at fair value plus transaction costs. Unrealised gains and losses arising from changes in the fair value of these investments are recognised in equity in the financial assets revaluation reserve. Amounts recognised are not recycled to the statement of comprehensive income in future periods. 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 $3.891m (AUD equivalent) of restricted cash as security for the rehabilitation and restoration provision of Mensin Gold Bibiani Limited’s Bibiani Gold Mine. 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% (12 months to June 2018: 0.0%). 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 did not hedge account for these instruments. Movements in fair value are accounted for through the consolidated statement of comprehensive income. D.4 Prepayments Non-current prepayments relate to payments made for the acquisition of plant and equipment. 97 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements D: Other assets and liabilities D.5 Payables Trade creditors Accruals 6 months to 31 December 2018 12 months to 30 June 2018 $'000 46,922 73,060 119,982 $'000 36,234 56,254 92,488 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. 6 months to 31 December 2018 12 months to 30 June 2018 $'000 $'000 3,888 13,384 135 364 5,488 23,259 68,891 1,430 70,321 5,330 12,517 135 473 2,716 21,171 64,257 1,430 65,687 D.6 Provisions Current Site restoration Employee entitlements Dividend payable Withholding taxes Other provisions Non-Current Site restoration Employee entitlements 98 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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 The Group does not expect its long service leave or annual leave benefits to be settled wholly within 12 months of each reporting date. The Group recognises a liability for long service leave and annual leave measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. 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 period Rehabilitation and restoration provision accretion Change in scope of restoration provision Utilised during the period Foreign exchange translation Balance at the end of the period Reconciled as: Current provision Non-current provision Total provision 6 months to 31 December 2018 12 months to 30 June 2018 $'000 $'000 69,587 893 1,224 (237) 1,312 72,779 3,888 68,891 72,779 65,425 1,505 2,113 (1,223) 1,767 69,587 5,330 64,257 69,587 99 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements D: Other assets and liabilities D.6 Provisions (continued) Key estimates and judgements Restoration 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. Key financial risks associated with other assets and liabilities Interest rate risk, diesel price risk and foreign exchange risk management Refer to About this Report (page 34) and Section C (page 53) 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 Audit and Risk Committee approval. With the exception of those items disclosed in C3, 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. Foreign exchange risk management The following table summarises the sensitivity to a reasonably possible change in foreign exchange rates with all other variables held constant: Carrying Amount $'000 5,824 3,749 683,685 119,982 3,751 5,133 574,677 92,278 Foreign exchange risk -10% +10% Profit $'000 303 150 53,175 (1,489) 52,139 288 243 44,697 (1,123) 44,105 Equity $'000 303 150 53,175 (1,489) 52,139 288 243 44,697 (1,123) 44,105 Profit $'000 (248) (122) Equity $'000 (248) (122) (43,507) (43,507) 1,218 1,218 (42,659) (42,659) (236) (199) (236) (199) (36,570) (36,570) 919 919 (36,086) (36,086) 31 December 2018 Other financial assets Loans advanced to other parties Loans to subsidiaries Payables Total increase/(decrease) 30 June 2018 Other financial assets Loans advanced to other parties Loans to subsidiaries Payables Total increase/(decrease) 100 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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 enabled Resolute to secure, with the endorsement of the Ghanaian government, ultimate ownership of the Bibiani gold mine with protection from those liabilities which had been incurred at a time when the mine was owned by Noble. The Scheme sets out the timing and amounts of payments to be made by the Companies to a Scheme Fund and to a Future Fund, from which funds, payments are to be made 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 effectively 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 were paid in 2014. In addition to those unconditional obligations to pay into the Scheme Fund, the Scheme imposed following contingent liabilities to provide funding to the Scheme Fund and Future Fund: • 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. • • The Scheme provided that if Commercial Production had not been achieved by June 2019, then the Bibiani gold mine had to be sold and the proceeds applied in the manner set out in the Scheme. Even in the event that the Board makes a decision to proceed with mining at Bibiani, it is clear that Commercial Production will not be able to be achieved by June 2019. Therefore, in order to avoid the need to sell the Bibiani gold mine, an Amended Scheme has been proposed to Scheme Creditors, which will allow additional time to, effectively, commence mining at Bibiani. In consideration for the Scheme Creditors agreeing to the extended timeframe to commence mining, the Amended Scheme will provide that upon the Amended Scheme becoming operative, the payment of US$3.600m ($4.854m) will become payable (ie it will not be dependent upon the decision of the board of Resolute to proceed with the development of Bibiani). The meetings of Scheme Creditors to consider the Amended Scheme are scheduled for early April 2019, and if the Scheme Creditors approve the Amended Scheme, it is expected that the Amended Scheme will become operative in May 2019, triggering the obligation to make the payment US$3.600m ($4.854m) within about 2 months thereafter. Notwithstanding the Scheme’s approval by the court, the creditors, and the Ghanaian Minister of Mines, two Ghanaian creditors have sought to circumvent the operation of the Scheme and are seeking to enforce a winding up order against Mensin, on the basis of a debt incurred prior to implementation of the Scheme. Resolute is defending Mensin’s right to unencumbered ownership of Bibiani which was a key element of the Scheme supported by both Resolute and the Ghanaian government. 101 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items 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 Commitments Other commitments not disclosed elsewhere in this report include: Randgold/Syama Royalty 6 months to 31 December 2018 12 months to 30 June 2018 $'000 1,807 7,130 8,937 $'000 3,253 12,917 16,170 Pursuant to the terms of the Syama Sale and Purchase Agreement, Randgold Resources Limited 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 and US$5 per ounce on the next three million attributable ounces of gold production. As at 31 December 2018, Resolute’s 80% attributable share of Syama’s project to date gold production was 1,287,453 ounces of gold, therefore the royalty is currently US$5 per ounce. Other contracted expenditure commitments Due within one year Aggregate lease expenditure contracted for at balance date but not provided for Gold contracts 6 months to 31 December 2018 12 months to 30 June 2018 $'000 6,775 6,775 $'000 8,780 8,780 As part of its risk management policy, the Group enters into gold forward contracts to manage the gold price of a proportion of anticipated sales of gold. As at 31 December 2018, 125,000 ounces remains outstanding. The gold forward contracts disclosed below did not meet the criteria of financial instruments for accounting purposes on the basis that they met the normal purchase/sale exemption because physical gold would be delivered into the contract. Accordingly, the contracts were accounted for as sale contracts with revenue recognised in the period in which the gold commitment was met. Gold for Physical Delivery Ounces Contracted Gold Sale Price per Ounce ($A) Value of Committed sales $’000 31 December 2018 USD Within one year Within one year Within one year Within one year AUD Within one year Within one year Within one year 102 6,000 2,000 2,000 30,000 40,000 20,000 35,000 30,000 85,000 1,817.17 1,799.66 1,789.74 1,772.30 1,715.00 1,728.16 1,783.20 10,903,020 3,599,320 3,579,480 53,169,000 71,250,820 34,300,000 60,485,600 53,496,000 148,281,600 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items E.3 Auditor remuneration Auditing Other assurance services Taxation planning advice and review and other services 6 months to 31 December 2018 12 months to 30 June 2018 $ 140,500 46,300 - 186,800 $ 175,500 - 20,000 195,500 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 Amounts received or due and receivable by non Ernst & Young firms for auditing 21,267 208,067 28,451 27,860 223,360 47,446 103 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items E.4 Investments in associates 6 months to 31 December 2018 12 months to 30 June 2018 6 months to 31 December 2018 12 months to 30 June 2018 6 months to 31 December 2018 12 months to 30 June 2018 Kilo Goldmines Ltd Manas Resources Ltd Loncor Resources Inc 46,568,000 46,568,000 603,189,835 523,899,835 51,000,000 51,000,000 - 24,700,000 - - - - Continuing Operations Shares held in associates (No. of shares) CA$0.135 warrants, expiring 25 August 2018 (No. of warrants) Percentage of ownership (%) 27.44% 27.44% 22.82% 19.90% 27.22% 27.22% Carrying Value $'000 2,893 $'000 3,077 $'000 1,541 (b) Movements in the carrying amount of the Group's investment in associates At 1 July Purchase of investment Share of loss after income tax 3,077 - (184) 3,986 - (909) 1,263 417 (139) $'000 1,263 1,854 - (591) $'000 5,149 $'000 2,654 2,654 2,647¹ (153) - 2,654 - 2,654¹ At 31 December ¹ On 13 July 2018, Resolute paid Loncor Resources Inc for 25 million shares acquired during the year, via the issue of 2,012,466 Resolute shares. 2,893 1,263 5,148 1,541 3,077 (c) Market value of investments in associates Market value of the Group's investment 726 1,195 2,413 3,143 3,977 3,927 (d) Summarised financial information The following table illustrates summarised financial information relating to the Group's associates: Extract from the associates' statement of financial position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Share of associates' net assets 376 710 1,086 1,006 - 1,006 80 22 388 742 1,130 253 2 255 875 240 8,852 839 9,691 155 - 155 9,536 2,176 9,500 244 9,744 169 - 169 9,575 1,905 1,673 40,336 42,009 1,514 25 1,539 40,470 11,014 Extract from the associates' statement of comprehensive income: Revenue (Loss)/profit before tax, (loss)/profit for the year and total comprehensive loss Recognition and measurement - - - - - (696) (3,248) (62) (2,844) (286) 2,539 37,998 40,537 1,745 11 1,756 38,781 10,555 - 30 The fair value less cost to dispose (“FVLCD”) for the investments in associates has been determined based on valuation multiples based on comparable companies. The fair value methodology adopted is categorised as Level 3 in the fair value hierarchy. In determining the FVLCD, estimates were made in relation to the underlying resource/reserves and the valuation multiple. 104 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items E.5 Subsidiaries and non-controlling interests Subsidiaries The following were controlled entities during the period 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 ACN 627 384 098 Pty Ltd, Aust. Resolute Mining Limited Amber Gold Cote d’Ivoire SARL, Cote d'Ivoire Resolute (CDI Holdings) Pty Ltd Carpentaria Gold Pty Ltd, Aust. Resolute Mining Limited Drilling and Mining Services Limited, Ghana Resolute (Bibiani) Pty Ltd Excalibur Cote d’Ivoire SARL, Cote d'Ivoire Geb and Nut Resources SARL, Cote d'Ivoire1 Resolute Corporate Services Pty Ltd, Aust. 2 (a) Resolute (CDI Holdings) Pty Ltd Resolute Cote D’Ivoire SARL Resolute (Treasury) Pty Ltd Mensin Gold Bibiani Limited, Ghana Resolute (Bibiani) Pty Ltd Nimba Resources SARL, Cote d'Ivoire Resolute (CDI Holdings) Pty Ltd Noble Mining Ghana Limited, Ghana Resolute (Bibiani) Pty Ltd, Aust. 3 (a) Resolute Burkina Faso Pty Ltd, Aust. Resolute (Bibiani) Pty Ltd Resolute Mining Limited Resolute Mining Limited Resolute Burkina SARL, Burkina Faso Resolute Mining Limited Resolute Canada Pty Ltd, Aust. Resolute Canada 2 Pty Ltd, Aust. Resolute (CDI Holdings) Pty Ltd, Aust. 4 (a) Resolute Mining Limited Resolute Mining Limited Resolute Mining Limited Resolute Cote D’Ivoire SARL, Cote d'Ivoire Resolute (CDI Holdings) Pty Ltd Resolute Egypt (Australia) Pty Ltd, Aust. Resolute Mining Limited Resolute Egypt (Australia) 2 Pty Ltd, Aust. Resolute Egypt Pty Ltd, Egypt Resolute Exploration SARL, Mali Resolute (Finkolo) Pty Limited, Aust. 5 (a) Resolute (Ghana) Limited, Ghana Resolute Mali S.A.,Mali Resolute (Somisy) Pty Ltd, Aust.6 (a) Resolute Sudan Pty Ltd, Aust. Resolute Sudan 2 Pty Ltd, Aust. Resolute Mining Limited Resolute Egypt (Australia) Pty Ltd Resolute Egypt (Australia) 2 Pty Ltd Resolute (Finkolo) Pty Ltd Resolute Mining Limited Resolute Mining Limited Resolute (Somisy) Pty Ltd Resolute Mining Limited Resolute Mining Limited Resolute Mining Limited Resolute (Treasury) Pty Ltd, Aust. (a) Resolute Mining Limited RSG Tanzania Pty Ltd, Aust. RSG Tanzania 2 Pty Ltd, Aust. Resolute Mining Limited Resolute Mining Limited Société des Mines de Finkolo S.A., Mali Resolute (Finkolo) Pty Ltd Société des Mines de Syama S.A., Mali Resolute (Somisy) Pty Ltd (a) Entities not separately audited. Entity’s audit scope is limited to the purpose of inclusion in the consolidated entity's accounts. 1 Resolute’s shareholding in this company is subject to a dispute. 2 Previously Goudhurst Pty Ltd, Aust. 3 Previously Resolute (Bibiani) Limited, Jersey 4 Previously Resolute (CDI Holdings) Limited, Jersey 5 Previously Resolute (Finkolo) Limited, Jersey 6 Previously Resolute (Somisy) Limited, Jersey Percentage of Shares Held by Consolidated Entity 6 months to 31 December 2018 12 months to 30 June 2018 % 100 100 100 100 100 80 100 90 100 100 100 100 100 100 100 100 100 100 100 50 50 100 100 100 100 100 100 100 100 100 100 90 80 % 100 100 100 100 100 80 100 90 100 100 100 100 100 100 100 100 100 100 100 50 50 100 100 100 100 100 100 100 100 100 100 90 80 105 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items E.5 Subsidiaries and non-controlling interests (continued) Material partly owned subsidiaries Accumulated share of (deficiency)/equity attributable to material Non-Controlling Interest: Société des Mines de Syama SA ("SOMISY") Mensin Gold Bibiani Limited ("Mensin") Société des Mines de Finkolo SA ("Finkolo") Total Non-Controlling Interest (Loss)/profit allocated to material Non-Controlling Interest: SOMISY Mensin Finkolo Total Non-Controlling Interest 6 months to 31 December 2018 12 months to 30 June 2018 $'000 $'000 (11,181) (1,661) 3,160 (9,682) (3,351) - 1,329 (2,022) (7,510) (1,700) 1,796 (7,414) 12,775 (183) (325) 12,267 The summarised financial information of subsidiaries with non-controlling interests is provided below. This information is based on amounts before inter-company eliminations. 6 months to 31 December 2018 $'000 12 months to 30 June 2018 $'000 6 months to 31 December 2018 $'000 12 months to 30 June 2018 $'000 6 months to 31 December 2018 $'000 12 months to 30 June 2018 $'000 SOMISY Mensin Finkolo 130,670 306,626 (17,779) 64,659 (17,779) 64,659 - 12 12 - 21,518 - (1,734) 14,903 (3,219) (1,734) 14,903 (3,219) 240,277 293,236 4,304 4,086 34,046 5,857 569,763 395,841 94,788 84,695 44,534 26,363 (137,721) (110,494) (2,607) (2,694) (40,666) (8,492) (38,949) (37,946) (9,430) (9,502) (2,073) - (660,928) (550,974) (487,077) (457,440) (64,650) (55,125) Statement of Comprehensive Income Revenue (Loss)/gain for the period Total comprehensive (loss)/income for the period 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 (27,558) (10,337) (400,022) (380,855) (28,809) (31,397) Summarised Statement of Cash Flow Operating 58,623 82,298 (223) (1,550) 9,518 (8,076) Investing Net (decrease)/increase in cash and cash equivalents (157,625) (176,896) (6,233) (12,829) (9,110) (13,480) (99,002) (94,598) (6,456) (14,379) 408 (21,556) 106 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items E.6 Joint operations The consolidated entity has an interest in the following joint operations whose principal activities are to explore for gold. Entity Holding Interest Other Participant/Joint Operation Percentage of Interest Held 6 months to 31 December 2018 % 12 months to 30 June 2018 % Resolute Mining Limited Etruscan Resources Bermuda Ltd/N’Gokoli Est JV¹ 60% 60% ¹ Interests in joint operations greater than 50% have been accounted for as joint operations as all decision making requires unanimous agreement. E.7 Subsequent events On 31 January 2019, Resolute forward sold 30,000 ounces of gold at an average price of US$1,335 per ounce in scheduled monthly deliveries of 5,000 ounces between July 2019 and December 2019. Additionally, on 11 February 2019, Resolute forward sold 30,000 ounces of gold at an average price of A$1,887 per ounce in scheduled monthly deliveries of 5,000 ounces between January 2020 and June 2020. As part of the process of syndication of the US$100m Syndicated Facility Agreement, the facility limit was expanded to US$150m with the participation of Investec, BNP Paribas, Citibank N.A. and Nedbank. The expanded facility was signed on 21 December 2018, all Conditions Precedent were satisfied as of 31 December 2018 and the expanded facility was fully available to Resolute to draw from 3 January 2019. E.8 Related party disclosures Resolute is the ultimate Australian holding company and there is no controlling entity of Resolute at 31 December 2018. E.9 Parent entity information Current assets Total assets Current liabilities Total liabilities Net assets Issued capital Accumulated losses Convertible note/Share option equity reserve Employee equity benefits reserve Reserves - unrealised (loss)/gain Total shareholders equity Profit of Resolute Mining Limited Total comprehensive profit of Resolute Mining Limited 6 months to 31 December 2018 12 months to 30 June 2018 $'000 1,468 470,150 (2,564) (2,569) 467,581 559,852 (103,976) 6,342 5,364 (1) $'000 181 460,338 (1,323) (1,329) 459,009 545,014 (97,710) 6,342 5,364 (1) 467,581 459,009 5,320 5,320 8,035 8,035 Refer to E1 for the contingent liabilities and commitments of Resolute Mining Limited. The parent company guarantees provided by Resolute Mining Limited are outlined in C3. 107 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items E.10 Employee benefits and share based payments Salaries Superannuation Share based payments expense Total employee benefits charged to profit and loss Share based payments 6 months to 31 December 2018 12 months to 30 June 2018 $'000 39,019 1,577 1,566 $'000 58,523 2,714 2,307 42,162 63,544 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 and recognises an expense in the profit and loss over the vesting period with a corresponding increase in equity. Key management personnel Details of remuneration provided to key management personnel are as follows: Short-term employee benefits Post-employment benefits Long-term employment benefits Share-based payments 6 months to 31 December 2018 12 months to 30 June 2018 $ $ 1,507,394 3,115,873 59,887 23,265 147,869 74,058 730,674 1,882,044 2,321,220 5,219,844 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. 108 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items E.10 Employee benefits and share based payments (continued) Performance rights plan The performance rights plan is broken down between: Performance Rights Plan Category Type of employee Band 1 Band 2 Band 3 Band 4 Special Managing Director and CEO Executive Team reporting to MD Site General Managers Other Participants as recommended by the MD Special, one-off awards as recommended by the MD Plan category Band 1 Grant and frequency Annually set at 100% of fixed remuneration for the Managing Director & CEO Band 2 Annually set at 65% of fixed remuneration Band 3 Annually set between 30% and 50% of fixed remuneration Band 4 Annually set between 10% and 20% of fixed remuneration Special Varies • • • • • • • • • Performance period 3 years Performance measures • 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. 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. 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. 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. 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. 3 years 3 years 3 years 3 years 109 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items E.10 Employee benefits and share based payments (continued) Performance rights on issue Band 1 to 4 Band 1 Band 1 Band 2 to 4 Band 1 Band 2 to 4 Band 2 to 4 Band 1 As at 31 December 2018 Opening number of performance rights Decrease through conversion of shares upon vesting of performance rights (Level 1) Decrease through lapsing of performance rights (Level 1) Decrease through conversion of shares upon vesting of performance rights (Level 2) Decrease through lapsing of performance rights (Band 1 to 4) Decrease through lapsing of performance rights (Band 1 to 4) Decrease through lapsing of performance rights (Band 1 to 4) Decrease through lapsing of performance rights (Band 1 to 4) Decrease through conversion of shares upon vesting of performance rights (Band 1) Decrease through lapsing of performance rights (Band 1 to 4) Decrease through lapsing of performance rights (Band 1 to 4) Decrease through lapsing of performance rights (Band 1 to 4) Increase through issue of performance rights to eligible employees (Band 1 to 4) Decrease through lapsing of performance rights (Band 1 to 4) Decrease through lapsing of performance rights (Band 1 to 4) Increase through issue of performance rights to eligible employees (Band 1) Closing number of performance rights Issue Date Total Number Fair Value per Right at Grant Date 24/10/16 2,263,300 29/11/16 600,000 29/11/16 1,000,000 17/10/17 1,403,379 28/11/17 07/03/18 26/10/18 26/10/18 587,500 319,571 887,167 277,559 7,338,476 $1.27 $1.20 $1.18 $0.81 $0.74 $0.85 $0.92 $0.77 $0.75 Vesting Date 30/06/19 30/06/19 30/06/20 30/06/20 30/06/20 30/06/20 30/06/21 30/06/21 Date of Change Total Number 11,307,704 Fair Value per Right at Grant Date Vesting Date 24/08/18 (3,829,341) $0.25 30/06/18 24/08/18 (321,706) $0.25 30/06/18 24/08/18 10/09/18 18/09/18 21/10/18 (421,482) (6,926) (6,703) (5,927) 15/12/18 (22,281) 24/08/18 (400,000) 10/07/18 10/09/18 21/10/18 26/10/18 21/10/18 15/12/18 26/10/18 (16,513) (26,667) (26,667) 887,167 (26,667) (23,074) 277,559 7,338,476 $1.89 $1.27 $1.27 $1.27 $1.27 $1.18 $0.81 $0.81 $0.81 $0.92 $0.81 $0.81 30/06/18 30/06/19 30/06/19 30/06/19 30/06/19 30/06/18 30/06/20 30/06/20 30/06/20 30/06/21 30/06/20 30/06/20 $0.77 30/06/21 110 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items E.10 Employee benefits and share based payments (continued) The following table lists the key variables used in the valuation of performance rights: Hurdle Number of performance rights issued Underlying share price ($) Exercise price ($) Risk free rate Volatility factor Dividend yield Period of the rights from grant date (years) 26 October 2018 Issue 26 October 2018 Issue 6 months to 31 December 2018 Reserve and resources rights 221,792 1.28 - 2.01% 36% 1.42% Reserve and resources rights 69,390 1.08 - 2.01% 59% 1.42% TSR rights 665,375 1.28 - 2.01% 36% 1.42% TSR rights Total 1,164,726 208,169 1.08 - 2.01% 59% 1.42% 3 3 2.68 2.68 Effect of performance hurdles Value of performance right at grant date (Band 1 to 4) Value of performance right at grant date (Band 1) Fair value of performance rights granted $0.92 $0.77 Hurdle Number of performance rights issued Underlying share price ($) Exercise price ($) Risk free rate Volatility factor Dividend yield Period of the rights from grant date (years) 12 months to 30 June 2018 17 October 2017 Issue 28 November 2017 Issue Reserve and resources rights Reserve and resources rights TSR rights 481,658 1.19 - 1.92% 78% 1.80% 1,444,976 1.19 - 1.92% 78% 1.80% 146,875 1.04 - 1.82% 78% 1.80% TSR rights 440,625 1.04 - 1.82% 78% 1.80% 7 March 2018 Issue Reserve and resources rights TSR rights 79,893 1.21 - 2.04% 36% 1.42% 239,678 1.21 - 2.04% 36% 1.42% 3 3 2.59 2.59 2.32 2.32 Total 2,833,705 Effect of performance hurdles Value of performance right at grant date (Band 1 to 4) Value of performance right at grant date (Band 1) Value of performance right at grant date (Band 1 to 4) Fair value of performance rights granted $0.81 $0.74 $0.85 111 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items 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. New and amended Accounting Standards and Interpretations A number of new Standards, amendment of Standards and interpretations have recently been issued that were effective for the period ended 31 December 2018 or effective in future periods (and have not been adopted by the Group as at the financial reporting date). Details of these are provided below: Title Application Date for Group Detail The Group has adopted AASB 9 which replaces AASB 139 Financial Instruments: Recognition and Measurement. In accordance with the transitional provisions in AASB 9, comparative figures have not been restated. The standard contains requirements in the areas of classification and measurement, impairment, hedge accounting and de-recognition. Existing financial assets and liabilities of the Group were assessed in terms of the requirements of AASB 9. In this regard, the Group has determined that the adoption of AASB 9 has impacted the classification of financial asset and liabilities as follows: Class of financial instrument presented in the statement of financial position Original measurement category under AASB 9 (i.e. prior to 1 July 2018) New measurement category under AASB 9 (i.e. from 1 July 2018) Cash and cash equivalents Loans and receivables Trade and other receivables Loans and receivables Available for sale financial assets Available for sale financial assets Other financial assets Loans and receivables Trade and other payables Interest bearing loans and borrowings Financial liability at amortised cost Financial liability at amortised cost Financial assets at amortised cost Financial assets at amortised cost Financial assets at fair value through other comprehensive income (held for strategic purposes) Financial assets at amortised cost Financial liability at amortised cost Financial liability at amortised cost The Group adopted AASB 9 retrospectively. The change in classification has not resulted in any re-measurement adjustments at 1 July 2018. There was no impact on hedging as the Group does not apply hedge accounting. The adoption of AASB 9 has changed the Group’s accounting for impairment losses for financial assets by replacing AASB 139’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. AASB 9 requires the Group to recognise an allowance for ECLs for all debt instruments not held at fair value through profit or loss and contract assets in the scope of AASB 15. As all of the Group’s trade receivables and other current receivables which the Group measures at amortised cost are short term (i.e., less than 12 months) and the Group’s credit rating and risk management policies in place, the change to a forward-looking ECL approach did not have a material impact on the amounts recognised in the financial statements. AASB 9 – Financial Instruments 1 July 2018 112 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018Notes to the Financial Statements E: Other items (continued) E.11 Other accounting policies (continued) New and amended Accounting Standards and Interpretations (continued) Title Application Date for Group Detail AASB 15 - Revenue from Contracts with Customers 1 July 2018 Amendments to AASB 28: Long-term interest in associated and joint ventures 1 January 2019 Amendments to AASB 10 and AASB 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 1 January 2019 AASB Interpretation 23 - Uncertainty over Income Tax Treatments 1 January 2019 AASB 15 was issued in December 2015 and establishes a five-step model to account for revenue arising from contracts with customers. Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. Under AASB 15 the revenue recognition model will change from one based on the transfer of risk and reward of ownership to the transfer of control of ownership. The Group adopted AASB 15 as of 1 July 2018. Adoption of AASB 15 did not result in any impact. Refer to Note A.1 for additional information. The amendments clarify that an entity applies AASB 9 to long-term interest in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in AASB 9 applies to such long-term interests. The amendment also clarified that, in applying AASB 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the associate or joint venture that arise from applying AASB 28 Investments in Associates and Joint Ventures. The amendments should be applied retrospectively and are effective from 1 January 2019, with early application permitted. Since the Group does not have such long-term interest in its associate and joint venture, the amendments will not have an impact on its consolidated financial statements. The amendments address the conflict between AASB 10 and AASB 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in AASB 3, between an investor and its associate or joint venture, is recognised in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however, is recognised only to the extent of unrelated investors’ interests in the associate or joint venture. The AASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts the amendments must apply them prospectively. The Group will apply these amendments when they become effective. The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of AASB 12 and does not apply to taxes or levies outside the scope of AASB 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. ► Whether an entity considers uncertain tax treatments separately ► The assumptions an entity makes about the examination of tax treatments by taxation authorities ► How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates ► How an entity considers changes in facts and circumstances. The Group is in the process of assessing the impact of the new interpretation. 113 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Notes to the Financial Statements E: Other items (continued) E.11 Other accounting policies (continued) New and amended Accounting Standards and Interpretations (continued) Title Detail Application Date for Group AASB16 – Leases 1 January 2019 AASB 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. The depreciation of the right of use asset and interest on the lease liability will be recognised in the consolidated income statement. Transition to AASB 16 The standard has an effective date for the Group of 1 January 2019. AASB 16 introduces a single lessee accounting model, requiring the recognition of assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is of low value. A lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligations to make lease payments. The Group is party to contracts for leases of property, plant and equipment; including but not limited to: office premises, mining equipment and contractor-provided equipment. Adoption of the new lease standard is expected to result in lower operating costs and higher finance and depreciation costs as the accounting profile of the lease payments changes under the new model. The statement of financial position will also be impacted, with an increase to both non-current assets (right-of-use assets) and liabilities (lease liabilities) expected. Cash flows from operating activities will increase as affected lease payments will be now be classified as financing cash flows. Conversely, cash flows from financing activities will decrease for the same reason. The Group has progressed its assessment of the impact of the new lease standard. During the six month period ended 31 December 2018, the Group has developed an implementation plan and review framework to facilitate analysis of its contract population. The Group has conducted a preliminary review of its lease population for the potential application of AASB 16 and identified areas for further analysis, including embedded leases as prescribed under the new standard. Implementation of the project plan will continue into the second half of FY2019. It has not yet been determined whether the impact of adopting the new accounting standard will have a material effect on the Group’s financial statements. Information regarding the Group’s operating lease commitments can be found in Note E.2. The impact of adopting AASB 16 on 1 January 2019 will be measured and disclosed in the Group interim financial statements for the six months ended 30 June 2019. 114 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 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. ii. giving a true and fair view of the consolidated entity’s financial position as at 31 December 2018 and of its performance for the period ended on that date; and, complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; b. c. d. the financial statements and notes also comply with International Financial Reporting Standards as disclosed throughout this report; 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, 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 period ended 31 December 2018. On behalf of the Board J.P. Welborn Managing Director and CEO Perth, Western Australia 22 February 2019 115 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au Independent auditor's report to the members of Resolute Mining Limited Report on the audit of the financial report Opinion We have audited the financial report of Resolute Mining Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 31 December 2018, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the six month period then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the consolidated financial position of the Group as at 31 December 2018 and of its consolidated financial performance for the six month period ended on that date; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation GB:EH:RESOLUTE:257 116 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 1. Physical existence and valuation of ore stock piles and gold in circuit Why significant How our audit addressed the key audit matter As at 31 December 2018 the Group had ore stockpiles and gold in circuit inventories of $41,871,000 and $76,334,000 respectively (refer to Note D2). Critical to the determination of the carrying value of ore stockpiles and gold in circuit inventories is the cost and net realisable value assumptions adopted by the Group in measuring the ore stockpiles and gold in circuit and the determination of the physical existence of the ore stockpiles (tonnes) and gold in circuit (ounces). We focused on this matter because of the: ► ► ► Significant judgment required to assess the quantity of ore stockpiles and the quantity and recoverable metal content for gold in circuit. This includes determination of estimated grades, recovery rates and other geophysical properties. Significant estimates and judgments involved in the valuation of ore stockpiles and gold in circuit including the allocation of operating costs to various stock types included in ore stockpiles and gold in circuit inventories. Significant estimates involved in the determination of the net realisable value of ore stockpiles and gold in circuit, including the appropriateness of the estimated recoverable gold, selling price in the ordinary course of business and estimated costs of completion necessary to make the sale. Our audit procedures included the following: ► ► ► ► ► Obtained an understanding of the Group’s processes and controls in place for determining the physical quantities and metal contents of stockpiles and gold in circuit, which included observation of the stockpile surveys at both the Syama and Ravenswood mine sites during the financial period. Assessed the qualifications, competence and objectivity of the Group’s internal experts involved in determining the quantity and recoverable metal content for ore stockpiles and gold in circuit. Agreed the estimated grades, recovery rates and other geophysical properties against the underlying reports prepared by the Group’s internal experts and assessed the reasonableness of this information based on the current operations. Assessed the accuracy of the inventory valuation models including assessing the nature of costs allocated to inventories in determining the unit cost of inventories. Assessed the carrying value of inventories at 31 December 2018 to evaluate whether they were valued at the lower of cost and net realisable value. This included evaluating the assumptions and methodologies used by the Group, in particular those relating to the forecast gold price, costs to complete and gold recoveries. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation GB:EH:RESOLUTE:257 117 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 2. Impairment assessment of non-current assets Why significant How our audit addressed the key audit matter As at 31 December 2018 the Group had non- current assets of $756,767,000 comprising capitalised development expenditure, property, plant and equipment and capitalised exploration and evaluation expenditure (refer to Notes B1 and B2). At the end of each reporting period, the Group exercises judgment in determining whether there is any indication of impairment or indication that an impairment loss recognised in prior periods should be reversed. If any such indicators exist, the Group estimates the recoverable amount of that asset. No indicators of impairment or indicators of reversal of prior period impairment were identified in the current period (refer to Note B3) We focused on this matter because of the significant judgment involved in considering if indicators of impairment or indicators that an impairment loss recognised in prior periods should be reversed, were present. We evaluated the Group’s assessment as to the presence of any indicators of impairment or indicators that an impairment loss recognised in prior periods should be reversed. Our audit procedures included the following: ► Comparison of the Group’s market capitalisation relative to its net assets. ► Reading operational reports, board reports, minutes and market announcements. ► Consideration of changes to reserves and resources and other macro-economic factors including the gold price. ► Consideration of the status of capital projects via discussions with management, review of operational reports and minutes and site visits. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation GB:EH:RESOLUTE:257 118 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 3. Rehabilitation and restoration provisions Why significant How our audit addressed the key audit matter As a consequence of its operations, the Group incurs obligations to rehabilitate and restore its mine sites. Rehabilitation activities are governed by local legislative requirements. As at 31 December 2018 the Group’s consolidated statement of financial position includes provisions of $72,779,000 in respect of these obligations (refer to Note D6). We focused on this matter because estimating the costs associated with these future activities requires judgment and estimation for factors such as timing of when rehabilitation will take place, the extent of the rehabilitation and restoration activities and economic assumptions relating to inflation and discount rates are taken into account to determine the provision amount. We evaluated the assumptions and methodologies used by the Group in determining their rehabilitation obligations. Our audit procedures included the following: ► ► ► Assessed the qualifications, competence and objectivity of the Group’s external and internal experts, the work of whom, formed the basis of the Group’s rehabilitation cost estimates. We assessed the appropriateness of the cost estimates, including comparing these to historical rehabilitation costs incurred. Considered the estimated timing of when the rehabilitation cash flows will be incurred based on the life of mine and the resultant inflation and discount rate assumptions used in the Groups cost estimates, having regard to available economic data relating to future inflation and discount rates. Evaluated the adequacy of the Group’s disclosures relating to rehabilitation obligations and considered the appropriateness of the accounting for the changes in the rehabilitation and restoration provision. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation GB:EH:RESOLUTE:257 119 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 4. Taxation Why significant How our audit addressed the key audit matter The Group has operations in multiple countries, each with its own taxation legislation. The nature of the Group’s activities give rise to various taxation obligations including corporate income tax, royalties, employment related taxes, and other indirect taxes. As set out in the Consolidated Statement of Financial Position the Group has a current tax receivable of $17,561,000 and recognised deferred tax assets of $19,261,000 as at 31 December 2018. In addition, the Group has recognised a tax benefit of $1,835,000 in the Consolidated Statement of Comprehensive Income for the six month period ended 31 December 2018 Our audit procedures in relation to current and deferred tax included the following: ► Involved our tax specialists in the interpretation of enacted tax laws in these multiple jurisdictions, where necessary, including the related judgments and interpretations made by the Group. ► Considered the appropriateness of the Group’s assumptions and estimates in relation to tax positions, assessed those assumptions and considered the advice the Group received from external experts to support the accounting for the tax positions in accordance with enacted laws. Further, as set out in Note A4 the Group has significant unrecognised tax assets at 31 December 2018. ► Where external experts were engaged by the Group, we assessed their qualifications, competence and objectivity. We focused on this matter because the: ► Group is required to exercise significant judgment with regards to interpretation of enacted tax laws in these multiple countries. The Group engages external independent tax advisors to assist with the interpretation of tax laws when appropriate. ► Determination of the probability of the Group deriving taxable income in the future to utilise deferred tax assets is highly judgmental. This is subject to numerous assumptions around the future profitability of the Group’s mining assets, which in turn is primarily dependent upon assumptions including future production levels, gold prices and exchange rates, operating and capital development costs. In respect of deferred tax assets recognised and unrecognised at 31 December 2018, our audit procedures included the following: ► Evaluated the appropriateness of the Group’s assessment of the probability of the Group deriving assessable income in the future to utilise the recognised deferred tax assets. ► Assessed the adequacy of the Group’s disclosures relating to current and deferred tax in the 31 December 2018 financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation GB:EH:RESOLUTE:257 120 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Company’s 2018 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation GB:EH:RESOLUTE:257 121 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► ► ► ► ► ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated to the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation GB:EH:RESOLUTE:257 122 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the Directors' report for the six month period ended 31 December 2018. In our opinion, the Remuneration Report of Resolute Mining Limited for the six month period ended 31 December 2018, complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Ernst & Young Gavin Buckingham Partner Perth 22 February 2019 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation GB:EH:RESOLUTE:257 123 Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 Shareholder Information Substantial Shareholders as at 28 February 2019 Shareholder ICM Limited Van Eck Associates Corporation Dimensional Fund Advisors LP Distribution of Equity Securities as at 28 February 2019 Size of Holding 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over Total Equity Security Holders Number of Equity Security Holders with less than a Marketable Parcel Voting Rights for Ordinary Shares Ordinary Shares 137,526,167 84,303,918 48,089,068 Percentage of Issued Capital 18.14% 11.12% 6.34% Ordinary Shares Percentage of Issued Capital 1,607 2,564 1,325 1,992 264 7,752 Holders 750 0.10% 0.99% 1.41% 8.17% 89.33% 100.00% Under the Company's Constitution, all ordinary shares issued by the Company carry one vote per share without restriction. Twenty Largest Shareholders as at 28 February 2019 Name 1 2 3 4 5 ICM Limited Van Eck Associates Corporation Dimensional Fund Advisors LP L1 Capital Pty Ltd. The Vanguard Group Inc 6 Wellington Management Company LLP 7 8 9 BlackRock, Inc. Ellerston Capital Limited Lemanik S.A. 10 State Street Corporation 11 Baker Steel Capital Managers LLP 12 Realindex Investments Pty Ltd 13 Investec Group 14 NAB Equities 15 16 17 LSV Asset Management Segall Bryant & Hamill LLC Stabilitas GmbH 18 Deutsche Bank AG Group 19 Accident Compensation Corporation 20 IFM Investors 124 Ordinary Shares 137,526,167 84,303,918 48,089,068 34,993,722 28,991,578 25,477,134 18,929,720 16,321,814 14,741,433 13,129,322 11,176,000 10,798,293 8,476,509 8,231,996 7,108,665 6,822,297 5,800,000 5,734,811 5,311,774 5,268,017 497,232,238 Percentage of Issued Capital 18.14% 11.12% 6.34% 4.62% 3.82% 3.36% 2.50% 2.15% 1.94% 1.73% 1.47% 1.42% 1.12% 1.09% 0.94% 0.90% 0.77% 0.76% 0.70% 0.69% 65.59% Resolute Mining Limited | 2018 Annual Report | Financial Report – for the six months ended 31 December 2018 ASX:RSG | www.rml.com.au 

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