2013
Annual
Report
ABN 42 127 042 773
Contents
Section
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
Company Information
Chairmans Letter
Review of Operations
Directors’ Report
Corporate Governance Statement
Auditor’s Independence Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Details
Interest in Exploration Leases
Company Information - Scotland
Photographs contained in this Annual Report are for illustration
purposes only and are not necessarily assets of the Company.
Page
1
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Company
Information
ABN
Directors
42 127 042 773
John Bentley
Chris Sangster
Phillip Jackson
Executive Chairman
CEO / Managing Director
Non-Executive Director
Secretary
Peter Newcomb
Registered Office
Share Registry
Auditor
Bankers
24 Colin Street, West Perth, WA 6005
Telephone
Facsimile
Email
+61 8 9222 5850
+61 8 9222 5810
sgz@scotgoldresources.com
Computershare Investor Services Pty Ltd
Level 2, Reserve Bank Building
45 St Georges Terrace, Perth, WA 6000
Telephone
Facsimile
+61 8 9323 2000
+61 8 9323 2033
HLB Mann Judd
Level 4, 130 Stirling Street, Perth, WA 6000
Telephone
Facsimile
+61 8 9227 7500
+61 8 9227 7533
Westpac Banking Corporation
116 James Street, Northbridge, WA 6000
Securities Exchange Listing
Scotgold Resources Limited shares are listed on the Australian
Securities Exchange and on the AIM board of the London Stock
Exchange. The home exchange is Perth, Western Australia
ASX Code
AIM Code
Website
SGZ
SGZ
www.scotgoldresources.com
COMPANY INFORMATION
1
02
Chairmans'
Letter
Dear Shareholders,
During the first nine months of the financial year for
your Company up until the middle of April, considerable
progress was made on all fronts in preparing the
Cononish gold and silver project for development and
on the financing of that development.
An infill drilling programme was completed with a total
of 18 holes being drilled into the Cononish ore body
with the objective of converting inferred resources to
measured and indicated in order to provide greater
confidence to both prospective debt and equity
providers. The results of the drilling campaign exceeded
expectations, with a total of 27.6k ozs being added to
measured and indicated resources and an increase of
16% to the resource blocks impacted by the infill drilling,
thereby demonstrating the robustness of the resource
numbers and giving encouragement that the grade of
the inferred resources may be higher than the current
JORC numbers.
Progress was also made with fulfilling the detailed
conditions attached to the planning consent. Since
the year end all submissions have been made and the
majority have been discharged or are awaiting discharge.
These conditions included all third party consents from
Network Rail, the Forestry Commission and the Scottish
Environmental Protection Agency.
In addition, detailed preparatory work was undertaken by
AMEC, the tailings dam consultant, with a view to being
ready to start the development of the mine in Q4 2013
whilst discussions with Consulmet, the metallurgical
plant contractor, were advanced to the stage where
detailed contract negotiations could take place.
The above work was brought together in the final
Development Study which was undertaken by AMC and
published in early April. Details of its positive findings are
given under the CEO’s report below.
On the financing side, agreement in principle was
reached with RMB Resources Ltd (“RMB”) for RMB to
provide a gold prepayment facility amounting to $12.2m
including a $4.5m overrun facility, this while the price of
gold was $1,612/oz.
Thus everything was in place by early April for an
equity placing to finance the development when almost
overnight the gold price declined rapidly from around
$1,600/oz to $1,300/oz resulting in a total withdrawal of
investors from any new equity raisings in the sector. It was
clear that financing would be unobtainable in the short
term particularly as the debt capacity fell sharply on the
back of the fall in gold price and your board immediately
put in place various measures to cut ongoing costs and
to seek alternative routes to financing the project.
The Board’s priority remains the preservation of
stakeholders’ interest and the development of the
Cononish mine. Since the financial year end the
Company has closed a small equity placement with
a potential strategic partner and the board is actively
pursuing further financing. In December 2013 the
Company’s existing £1.5m loan facility with RMB is
due for repayment and the board is actively working
with RMB to evaluate the options available to move the
Company and primarily the Cononish project forward to
all stakeholders’ benefit.
The Cononish gold and silver project, although small
by international standards, has the ability to provide a
post tax 23% rate of return at $1,300/oz which is at
the lower end of the current trading range for gold and,
importantly, it has all the consents necessary to allow it
to be in production within 18 months of development
financing being secured.
2
Scotgold ANNuAL REPORT I 2013
John Bentley
Chairman
Review of
Operations
03
The Crown Estate Commissioners unconditional
grant of the Crown Lease was confirmed in May
2012.
The Company conducted an infill drilling program at
Cononish during 2012 to increase confidence in the
resource for potential lenders and the results were
incorporated into a revised resource estimate. This
formed the basis for the Final Cononish Development
Study completed by AMC Consultants uK Limited
(AMC) in April 2013.
From the positive results of this study, conducted at
a base case gold price of $1300 / oz, it is anticipated
that production of gold and silver could commence
at Cononish within 18 months of securing financing
for the project.
The Grampian Gold Project comprises Crown
Option agreements of some 4,200km2 in the south
west Grampians of Scotland and covers some of the
most prospective areas of the Dalradian geological
sequence in the uK. This sequence extends
westward from the uK to the eastern seaboard
of Canada and the Appalachian belt in the uS,
and eastward into Sweden and Norway, has been
identified by the British Geological Survey as being
highly prospective for both significant gold and base
metal deposits. On a more local scale, the Dalradian
sequence extends to the south west from Scotland
into Northern Ireland where it hosts other gold
deposits at Cavancaw (399,800 oz of gold) which
has been operating as an open cut mine since 2006,
Curraghinalt (2,700,000 oz of gold), and at Clontibret
(1,030,000 oz of gold).
OPERATING AND FINANCIAL REVIEW
ABOuT SCOTGOLD
listed Scotgold
Australian Securities Exchange
Resources Limited (ASX:SGZ) was established in
2007 and listed on the ASX in January 2008. The
company’s shares were admitted to trading on
the AIM market of the London Stock Exchange
(AIM:SGZ) in February 2010. The Company’s principle
objective, since 2008, has been the advancement of
the Cononish Gold and Silver Project in Scotland’s
Grampian Highlands to a production decision and
exploration of the highly prospective tenements
comprising the Grampian Gold Project with the view
of identifying further project opportunities.
Scotgold has focused initially on the development
of the Cononish Gold and Silver Project and has
identified resources (estimated in accordance with
the JORC Code) in the Measured, Indicated and
Inferred categories (see later for breakdown) of
169,200 oz of gold and 631,300 oz of silver at 3.5g/t
gold cut-off. The Final Cononish Development Study
completed in April 2013 has identified Probable
Reserves (included in the Resources quoted above)
of 196,000 t at 11.0 g/t Au and 45 g/t Ag for 71,000
ozs Au and 289,000 ozs Ag.
Subsequent to an initial rejection of its application for
planning permission in 2010, the Company submitted
a revised application and on 13th October 2011, the
Director of Planning issued a report to the Parks
Board recommending approval of the application
and at a special meeting on 25th October 2011, the
Board of the Parks Authority unanimously approved
the application subject to the conclusion of various
legal agreements and agreement on a number of
outstanding conditions. These were successfully
concluded and on 15th February 2012, the Parks
Board issued the Decision Letter granting planning
permission for the development.
REVIEW OF OPERATIONS
REVIEW OF OPERATIONS
3
3
03
Review of Operations
Figure 1
Scotgold’s Grampian Gold Project licence areas in relation to regional geology and structures,
gold deposits and operating gold mines in Scotland and Ireland.
OPERATIONAL REVIEW
Subsequent to the grant of planning permission and as a result of discussions with potential financiers to the project,
the Company embarked on an 18 hole (2,200m) infill drilling program aimed at converting Inferred resources to
Indicated resources.
Results from this program were incorporated into an updated Resource statement which then informed the ‘Final
Cononish Development’ study completed in April 2013.
Work also continued to advance all aspects of the project in preparation for commencement of development including
submissions for the discharge all outstanding planning conditions and advancing aspects of final engineering designs
for tender.
Regional stream sediment sampling and other exploration activities continued on the Grampian Gold Project.
CONONISH GOLD AND SILVER PROJECT
Infill drilling
In order to improve confidence in the resource and increase Measured and Indicated resources, the Company
conducted an infill diamond drilling program with 18 holes (2,200m) drilled of which two were abandoned.
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Scotgold ANNuAL REPORT I 2013
Review of Operations
03
Selected results from the program are shown in Table 1 and Figure 2 below
table 1: Selected Infill drilling results (> 3.0 g/t Au)
Hole
CF 12 - 01
CF 12 - 02
CF 12 - 03
CF 12 - 04
CF 12 - 06
CF 12 - 07
CF 12 - 09
CF 12 - 10
CF 12 – 14
CF 12 – 17
CF 12 – 18
From
(m)
112.4
105.0
125.0
107.0
112.3
104.8
64.0
66.9
to
(m)
114.7
107.6
130.4
112.6
115.6
106.9
69.0
69.8
101.9
107.3
86.8
83.3
88.4
86.1
d/H
Width (m)
Est. true
thick.(m)
Au g/t
Ag g/t
comment
2.3
2.6
5.4
5.6
3.3
2.0
4.9
2.9
5.4
1.8
2.8
2.0
2.4
3.3
3.8
2.6
1.9
2.4
1.3
3.8
1.4
2.6
13.95
14.21
27.21
14.90
27.43
5.24
22.47
9.84
4.53
25.59
5.09
47.6
39.7
44.1
40.8
68.6
37.2
45.9
35.7
53.6
52.5
20.5
West Raise Area
West Raise Area
West Raise Area
West Raise Area
West Raise Area
West Raise Area
West Raise Area
West Raise Area
East Raise Area
East Raise Area
East Raise Area
Full details of the results from the infill program were announced in the press releases of 8/10/2012 - Drilling Results
and 31/07/2013 - Quarterly Activities Report.
These results continued to give encouragement regarding the potential of the Inferred resource (quoted with a grade
range of between 10 – 15 g/t Au) as when included into the updated Resource estimate (see below), an increase of
15.9% and 16.5% in the tonnage and contained ounces respectively was estimated in the Inferred blocks impacted
by the drilling.
Figure 2
West Raise area infill drilling results > 3.5g/t
REVIEW OF OPERATIONS
5
03
Review of Operations
Resource Update
Based on the results of the infill drilling (excluding those in the East Raise area for which results had not been received
at the time of the update), Dr Simon Dominy of Snowden Mining Industry Consultants Pty Ltd (Snowden) compiled
an updated Resource estimate reported in accordance with The JORC 2004 Code.
Table 2 below shows the revised Mineral Resource estimate compiled by Snowden.
Reported using the 2004 JORC Code (JORC, 2004). Tonnages and contained ounces rounded to the nearest 100
t or 100 oz. Gold grade rounded to the nearest 0.1 g/t Au. The Inferred Resource grade is reported with a grade
range to indicate the likely upside due to the information effect.
table 2: cononish Main Vein gold and Silver Mineral Resources (reported at a 3.5 g/t Au cut-off)
grade (g/t)
ounces (oz)
grade (g/t)
ounces (oz)
classification
tonnes (t)
Measured (M)
53,100
Indicated (I)
142,900
Total M. and I.
196,000
gold
14.1
12.7
13.1
gold
24,000
58,600
82,600
Inferred
264,600
10.2 (10 – 15)
86,600
Silver
61.2
49.9
53.0
34.9
Silver
104,500
229,500
334,000
297,300
Scotgold Note: Incorporating the grade range, the Inferred Mineral Resource is estimated to lie between 85,000
oz Au and 127,000 oz Au. It should be noted that any upside may not exist or it may only be present in a portion of
the resource.
The Mineral Resources quoted in Table 2 are inclusive of those Mineral Resources modified to produce the Ore
Reserves quoted below (see Final Cononish Development Study).
The total resource including Measured, Indicated and Inferred categories now stands at 169,200ozs Au and
631,300ozs Ag.
As a result of the drilling program, Measured and Indicated Resources increased to 82,600 ozs Au from 55,000ozs
Au - an increase of 27,600 ozs Au (50%) - all in the Indicated category from the corresponding Inferred Resource
blocks estimated in 2009.
The results, importantly, substantiate and increase the grades and tonnages in previously classified Inferred category
blocks with an increase in tonnage of 15.9% and 16.5% in contained ozs in the blocks impacted and give significant
encouragement to the Board regarding confidence in the potential conversion of other Inferred blocks which may
occur as future mine development progresses.
In addition to the currently defined resources, Scotgold believes that there is potential to define further resources
close to the Cononish mine, subject to appropriate further work. The extensive gold-in-soil anomalies, mineralisation
associated with outcrops and trenching and geophysical anomalies in close proximity to the current resource clearly
warrant further follow up during the development stage. Snowden noted in the initial resource estimate in 2008
“based on our experience of the Cononish vein system, we believe that there is an Exploration Target around the
mine (within 2kms) of between 0.5 Mt to 1.0 Mt at a grade of between 10 g/t Au to 15 g/t Au for up to 320,000 oz
Au. Much of this potential is based on the along strike and down dip extensions of the Cononish vein, but there are
indications that other reefs are present in the area too. At this stage, such figures are highly conceptual and there is
no guarantee that further exploration will define additional resources.”
6
Scotgold ANNuAL REPORT I 2013
Review of Operations
03
Final Cononish Development Study
The Company commissioned AMC to complete the Final Cononish Development Study in December 2012. The
overall study was compiled by AMC with input from Scotgold’s processing, tailings and environmental consultants
and the Company.
Table 2 shows the current Resource Statement and the study assumes 100% conversion of Inferred Resources at
stated tonnages and grades.
The study proposes a mining production rate of 72,000 tpa from underground operations, subsequent to a one year
pre production and commissioning period.
A conventional gravity / flotation concentrator is planned, which will treat 72,000 tpa. It is estimated that about 25%
of gold will be recovered by gravity for smelting on site to a doré bar. The balance of the gold reports to a sulphide
rich concentrate which will be treated through a third party facility remote from site.
The overall recovery from the processing plant is predicted at 93% for Au and 90% for Ag to doré and concentrate.
Recovered production (to doré and concentrate) is estimated at 19,000 ounces of gold and 73,000 ounces of
silver annually.
Total recovered production to doré and concentrate over the project life is estimated to be 121,800 ounces of gold
and 469,700 ounces of silver.
AMC has declared ore reserves for the project as shown in Table 3 below
table 3: cononish ore Reserves (reported at a 3.5 g/t Au cut-off).
Reserve category
tonnes (t)
Au g/t
Proven
Probable
Total
0
200,000
200,000
0.0
11.0
11.0
Au (oz)
0
71,000
71,000
Ag g/t
0.0
45.0
45.0
Ag (oz)
0
289,000
289,000
Notes:
1. The Reserve was estimated using; gold price of US$1,300/oz, silver price of US$22.50/oz and an Exchange Rate of GBP:USD of 1:1.6
2. A mining study on the Cononish Gold Project was carried out by AMC Consultants (UK) Limited. This study utilised the Mineral Resource
estimation by Simon Dominy of Snowden Mining Industry Consultants Pty Ltd, November 2012. The Ore Reserves were estimated by Martin
Staples of AMC Consultants (UK) Limited in April 2013.
3. Reported at a diluted Au cut-off grade of 3.3 g/t
Pre-production project expenditure is estimated at £22M, including an overall 15% contingency allowance on capital
expenditure (excluding working capital and fixed bond amounts).
Overall ‘cash’ operating costs (exclusive of smelter transport and royalty charges) are estimated at approximately
£86.50 per tonne of material with an average operating ‘cash’ cost (including smelter, transport and royalty charges)
of uS$698 (£436 / oz) Au equivalent.
Operating costs are estimated with an overall 16.6% contingency allowance.
The Executive Summary of AMC’s Development Study can be found on Scotgold’s website at
www.scotgoldresources.com under ASX announcements.
Key project financial parameters are shown in Table 4 below using a base case gold price of uS$1,300 / oz and the
then current (London PM fix 24/04/2012) spot prices.
REVIEW OF OPERATIONS
7
03
Review of Operations
table 4: Project Financial Highlights
Unit
uS$
uS$
£
£
£
£
%
uS$/oz Au eq2
Months
Base case gold
Spot gold4
$1,300
$22.50
1.60
£812
£22.3M
£11.8M
£26.3M
25.9%
698
33
$1,428
$22.50
1.53
£935
£22.3M
£21.1M
£39.8M
37.4%
720
26
Gold Price $ / oz
Silver Price $ / oz
uS$ : £ exchange rate used
Gold Price £ / oz
Total Pre Production Costs
Pre-tax Net Present Value (NPV 10 )
Free Cashflow
Pre tax Internal Rate of Return
Average Operating cash cost1
Payback from start of production
Notes:
1. Average operating cash cost is calculated from total operating (non capital) costs (including smelter, transport, royalty costs) divided by
recovered Au equivalent ozs. – see Note 2
2. Au equivalent ozs. Gold equivalent ozs are calculated: Recovered gold ozs + (Recovered silver ounces / 57.8) where the number 57.8
represents the ratio of base case gold price used to silver price used. This ratio was calculated using base case prices of US$1300/oz Au and
US$22.5 / oz Ag
3. NPV10 represents the project Net Present Value calculated at a 10% discount rate.
4. Spot gold price – London pm fix – 24/04/2013
At base case prices, the project generates £26.3M pre tax free cashflow with a pre-tax Net Present Value10 of
£11.8M and a pre tax Internal rate of return (IRR) of 25.9%.
Scotgold has estimated anticipated project post tax returns at varying gold prices as shown in Table 5 and Figure 3.
table 5: Estimated Post tax returns
Au price uS$ /oz
Au price £ /oz
NPV10 £M
Free Cashflow £M
1200
750
5.6
16.9
1300
813
9.5
22.4
1400
875
13.3
28.8
1500
938
17.2
33.3
1600
1000
21.1
38.9
Post tax IRR
18.1%
23.5%
28.8%
33.8%
39.0%
Note – post tax returns assume 100% project basis before corporate costs
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Scotgold ANNuAL REPORT I 2013
Review of Operations
03
Figure 3
Post tax ‘ungeared’ project returns
Scotgold has carried out a sensitivity to Inferred resource grade to demonstrate the impact of the grade range
quoted in the Resource statement (between 10g/t Au and 15 g/t Au) and have estimated that a 10% increase in the
Inferred resource grade, (should it be realised), equates approximately to an additional $50 / oz on the gold price.
It is the Company’s opinion that project returns, under current gold price scenarios, are highly attractive and remain
confident in its progression to development.
Project development
The decision notice granting planning permission to the project issued by the Planning Authority on 13 February
2012 required a number of conditions to be satisfied prior to the start of development. In conjunction with Scotgold’s
planning and other consultants, all submissions have now been made, 64% of the conditions have been discharged
and the Company awaits discharge of the remaining conditions subject to further discussion with the Planning
Authority.
The Company also recently submitted its application for a licence under the Water Environment (Controlled Activities)
Regulations 2011 relating to proposed burn diversion works. The licence grant is currently in draft format and is
expected to be formalised shortly.
In January 2013, AMEC Earth and Environmental (AMEC) commenced detailed engineering design of the Tailings
Management Facility. Final designs and tender documents were at an advanced stage with six companies pre-
qualified to tender for the works before work was halted in April 2013. Conclusion of this aspect of the development
program is expected within one month of resumption of project development.
A non binding letter of intent was signed with Consulmet, the Company’s metallurgical design consultants, regarding
the final design of the processing plant which will commence when further financing is secured.
As such, all necessary permitting has either been granted or due to be granted shortly and engineering design work
at a stage where it can be rapidly finalised on securing finance and thus ensure a rapid start to development.
Given the advanced state of project development, the Company believe Cononish could be in production within 18
months of obtaining financing.
REVIEW OF OPERATIONS
9
03
Review of Operations
Financing
On completion of the Final Cononish Development Study and subject to an offer for finance by RMB Resources
(RMB) via the gold pre payment facility previously mandated, it had been Scotgold’s intention to seek the balance of
finance through a combination of equity and possible further debt opportunities.
The quantum of the prepayment facility contemplated by RMB is estimated on the forward price based on the spot
gold price ‘on the day’ and other factors. The decline in the gold price in April 2013 negatively impacted on the
amount potentially available from such a facility and hence increased the amount to be sourced from other avenues
by the Company. It was the Directors’ view, that under the prevailing market conditions, this approach to successfully
finance the project would be severely challenging and decided to defer an approach to the market until market
conditions were more receptive.
At present, market conditions for raising finance for the project remain difficult and the Company continues to
evaluate a number of strategic alternatives to finance the project to progress to production within the shortest
timeframe possible.
Subsequent to year end, ZIO Holdings Ltd took a 4.5% holding in the Company through an equity placement with
a view to making further investments in the Company, subject to due diligence and any relevant shareholder and
regulatory approvals.
GRAMPIAN GOLD PROJECT
The Company continues to actively pursue exploration activities on its substantial land position, of which 85% of
the area currently under option to Scotgold is located outside the Loch Lomond and the Trossachs National Park.
The company’s strategy has been to advance the Cononish Project to production whilst conducting early stage
regional exploration over the wider Grampian Gold project area in conjunction with follow up work on the more
advanced prospects close to the Cononish project area.
The Grampian Gold project encompasses a large area of the highly prospective Dalradian sequence. Basic
exploration data, including gravity and airborne magnetics, is available from government surveys carried out
between 1950’s and 1970’s and is of a quality and spacing that does not adequately reflect the prospectivity of
the area. This and the general lack of previous exploration over the area (other than early stage exploration in the
vicinity of the Cononish project) has dictated the Company’s initial approach to exploration over the area.
In order to advance its understanding of the regional setting, over the past three years, the Company has embarked
on a regional scale stream sediment sampling program.
To date, in excess of 750 stream sediment samples have been taken over the area with the majority of results
received. Initial interpretation of these results is ongoing and the program is to be followed up by a more detailed infill
stream sediment sampling program in anomalous result areas in order to further target areas for detailed fieldwork
and follow up.
In parallel with this regional program, Scotgold has continued to evaluate previously identified high grade outcrop
samples identified by previous exploration close to the Cononish project.
Initially, the company conducted a re-sampling program to verify previously identified occurrences (see Figure 4)
and the program has confirmed the presence of a large number of high grade gold / silver vein outcrops in an area
between two major regional faults, the Tyndrum – Glen Fyne fault and the Ericht - Laidon fault and associated with
the fractures probably generated by movements along these faults.
Considerable follow up work has been carried out to examine the extent of these occurrences through further
fieldwork, initial short surface drilling and deeper drilling. As an adjunct to the Company’s efforts, Scotgold currently
co-sponsors a doctoral research project to investigate gold occurrences in the area and results from that research
should be available shortly.
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Scotgold ANNuAL REPORT I 2013
Review of Operations
03
Results over the Tyndrum area continue to be encouraging and the Company believe that the next phase of
exploration in this part of their option areas should compromise an airborne geophysical survey in order to assess the
nature and continuity of these structures with a view to determining their potential to host ‘Cononish’ style deposits.
Key prospects are shown in Figure 5.
Competent Person’s Statement:
The information in this report that relates to exploration results is based on information compiled by Mr David
Catterall, Pr Sci Nat, who is a member of the South African Council for Natural Scientific Professions. Mr Catterall is
employed as a consultant to Scotgold Resources Ltd. Mr Catterall has sufficient experience which is relevant to the
style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify
as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves’. Mr Catterall consents to the inclusion in the report of the matters based on
his information in the form and context in which it appears.
The information in this report that relates to mineral resources is based on resource estimates compiled by EurGeol
Dr S C Dominy FAusIMM (CP), FGS (CGeol), FIMMM (CEng), FAIG (RPGeo), Executive Consultant with Snowden
based in the Ballarat, Australia office. Dr. Dominy has sufficient experience that is relevant to the style of deposit
under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the
2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore reserves. Dr
Dominy consents to the inclusion in the report of the matters based on this information in the form and context in
which it appears.
The information in this report that relates to ore reserves is based on information compiled by Mr. Martin W Staples
BSc, FAusIMM., Director and Principal Mining Engineer with AMC Consultants (UK) Ltd based in the Maidenhead,
UK office. Mr. Staples has sufficient experience which is relevant to the style of mineralization and type of deposit
under consideration and to the activity which he is undertaking to qualify as Competent Person as defined in the
2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.
Mr. Staples consents to the inclusion in the report of the matters based on his information in the form and context
in which it appears.
REVIEW OF OPERATIONS
11
03
Review of Operations
Figure 4
Historical outcrop and boulder sampling
12
Scotgold ANNuAL REPORT I 2013
Review of Operations
03
Figure 5
Principal prospects in the Tyndrum area
REVIEW OF OPERATIONS
13
04 Directors'’ Report
Your Directors submit their report on the consolidated entity consisting of Scotgold Resources Limited and its
controlled entities (“Scotgold”) for the financial year ended 30 June 2013.
DIRECTORS
The following persons were Directors of Scotgold Resources Limited during the whole of the financial year and up to
the date of this report unless otherwise stated;
In office from
In office to
John Bentley
Executive Chairman
Chris Sangster
Chief Executive Officer
Phillip Jackson
Non Executive Director
Shane Sadleir
Non Executive Director
17/02/2009
17/10/2007
14/08/2007
12/03/2009
present
present
present
17/04/2013
PARTICULARS OF DIRECTORS AND COMPANY SECRETARY
John Bentley I Executive Chairman I B.Tech (Hons) Brunel University
Qualifications and experience
Mr Bentley has over 40 years experience in the natural resources sector. He was Managing Director of Gencor’s
Brazilian mining company, Sao Bento Mineracao, from 1988 to 1993 when he became Chief Executive of Engen’s
Exploration & Production division. In 1996 he was instrumental in floating Energy Africa Ltd on the Johannesburg
stock exchange and became Chief Executive for the following five years building it into one of the leading African
independent oil and gas companies.
More recently Mr Bentley was Executive Chairman of FirstAfrica Oil plc and a Non-Executive Director of Adastra
Minerals Ltd. He currently serves on the board of a number of resource companies including as Chairman of Faroe
Petroleum Plc, Deputy Chairman of Wentworth Resources Ltd and Non-Executive Director of Kea Petroleum Plc.
Mr Bentley holds a degree in Metallurgy from Brunel university.
Interest in Shares and Options
Fully Paid Shares
1,962,500
Special Responsibilities
Overall strategic guidance and uK Capital markets.
Directorships held in ASX listed entities
None
14
Scotgold ANNuAL REPORT I 2013
Directors'’ Report
04
Christopher Sangster I CEO / Managing Director I BSc (Hons), ARSM, GDE
Qualifications and experience
Mr Sangster is a mining engineer with over 30 years experience in the mining industry. He has a Bachelor of Science
(Honours) Degree in Mining Engineering from the Royal School of Mines, Imperial College in London and a GDE
in Mineral Economics from the university of Witwatersrand. He currently lives close to the Company’s exploration
licences at Comrie in Scotland with his wife and family.
Mr Sangster’s career covers extensive production and technical experience at senior levels in both junior and multi-
national companies in gold, diamonds and base metals in Africa, uK and Canada and covers a wide range of mining
applications.
Between 1996 and 1999 Mr Sangster was General Manger for Caledonia Mining Corporation for the Cononish
Gold Project and a Director of Fynegold Exploration, where he was responsible for all aspects of the project
including feasibility study preparation, project due diligence, finance negotiations, exploration initiatives and planning
permission applications.
After 1999, Mr Sangster moved to the Zambian Copperbelt with Anglo American Plc / KCM Plc where he attained
the position of Vice President of Mining Services and in 2005 joined Australian Mining Consultants as a Principal
Mining Engineer. More recently, Mr Sangster was employed as General Manager for AIM – listed company European
Diamonds Plc.
Interest in Shares and Options
Fully Paid Shares
6,438,250
Special Responsibilities
Mr Sangster is the CEO / Managing Director and is responsible for the day to day running of the company.
Directorships held in ASX listed entities
None
Phillip Jackson I Non-executive Director I BJuris LLB MBA FAICD
Qualifications and experience
Mr Jackson is a barrister and solicitor with over 25 years legal and international corporate experience, especially
in the areas of commercial and contract law, mining law and corporate structuring. He has worked extensively in
the Middle East, Asia and the united States of America. In Australia, he was formerly a managing legal counsel for
Western Mining Corporation, and in private practice specialised in small to medium resource companies.
Mr Jackson was Managing Region Legal Counsel: Asia-Pacific for Baker Hughes Incorporated for 13 years. He is
now Legal Manager for a major international oil and gas company. He has been a Director of a number of Australian
public companies, particularly mining companies. He has been Chairman of Aurora Minerals Limited since it listed in
2004 and Desert Energy Limited, since it listed in August 2007.
His experience includes management, finance, accounting and human resources.
Interest in Shares and Options
Fully Paid Shares
1,750,000
Special Responsibilities
DIRECTORS’ REPORT
15
04
Directors'’ Report
Mr Jackson is Chairman of the Audit Committee and is responsible for legal matters.
Directorships held in ASX listed entities
company Name
Appointed
Aurora Minerals Limited
24 September 2003
Desert Energy Limited
12 December 2006
Peter Newcomb I Company Secretary I FCA (ICAEW)
Qualifications and experience
Mr Newcomb is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the
Institute of Chartered Accountants in Australia with over thirty five years professional and commercial experience.
He has worked in a number of industries and locations including London, Scotland, Singapore and Perth. The
majority of his experience over the last fifteen years has been in the resources industry in Western Australia. Mr
Newcomb is also Finance Director and Company Secretary of Taruga Gold Limited and Company Secretary of
Athena Resources Limited.
OPERATING AND FINANCIAL REVIEW
A review of the operations of the consolidated entity during the financial year is contained in the Review of Operations
section of this Financial Report. The Company’s strategy in Scotland continues to focus on advancing the 100%
owned Cononish Gold and Silver Project to production whilst continuing to explore its large, highly prospective land
position around Cononish and elsewhere in Scotland which extends to some 4,300km2.
PRINCIPAL ACTIVITIES
The principal activity of the consolidated entity during the year was mineral exploration in Scotland.
Operating Results
The consolidated loss after income tax for the financial year is $2,583,401 (2012: $1,265,173).
Financial Position
At 30 June 2013 the Company has cash reserves of $570,253 (2012: $72,615).
Dividends
No dividends were paid during the year and no recommendation is made as to dividends.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors, there were no significant changes in the state of affairs of the consolidated entity that
occurred during the financial year under review not otherwise disclosed in this report or in the consolidated accounts.
MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR
On 12 September 2013 the Company announced it had agreed to issue 10 million fully paid ordinary Scotgold
shares to Zio Holdings Ltd (Company No. 077015) a company incorporated in Mauritius (“Zio”), at an issue price of
$0.02 each to raise $200,000.
Additionally, Scotgold agreed to give Zio a non-exclusive right to conduct due diligence enquiries into Scotgold and
the Cononish Project with a view to Zio making further investments in Scotgold, subject to any relevant shareholder
or regulatory approvals.
16
Scotgold ANNuAL REPORT I 2013
Directors'’ Report
04
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Company intends to continue its exploration activities with a view to the commencement of mining operations
as soon as possible.
Further information on likely developments in the operations of the consolidated entity and the expected results
of operations have not been included in this report because the Directors believe it would be likely to result in
unreasonable prejudice to the Company.
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June
2013, and the number of meetings attended by each Director. These meetings included matters relating to the
Remuneration and Nomination Committees of the Company.
Number eligible
to attend
Number
attended
John Bentley
Chris Sangster
Phillip Jackson
Shane Sadleir
4
4
4
2
AUDIT COMMITTEE
4
4
4
2
The Audit Committee is comprised of Mr Jackson who chaired one meeting of the audit committee during the year
ended 30 June 2013.
REMUNERATION REPORT (audited)
This report details the nature and amount of remuneration for each director and executive of Scotgold
Resources Limited.
The information provided in the remuneration report includes remuneration disclosures that are required under
Accounting Standards AASB 124 “Related Party Disclosures”. These disclosures have been transferred from the
financial report and have been audited.
Remunerations policy
The board policy is to remunerate Directors at market rates for time, commitment and responsibilities. The Board
determines payments to the Directors and reviews their remuneration annually, based on market practice, duties and
accountability. Independent external advice is sought when required. The maximum aggregate amount of Directors’
fees that can be paid is subject to approval by shareholders in general meeting, from time to time. Fees for Non-
Executive Directors are not linked to the performance of the consolidated entity. However, to align Directors’ interests
with shareholders interests, the Directors are encouraged to hold securities in the Company.
The Company’s aim is to remunerate at a level that will attract and retain high-calibre Directors and employees.
Company officers and Directors are remunerated to a level consistent with size of the Company.
All remuneration paid to Directors and Executives is valued at the cost to the company and expensed.
Performance-based remuneration
The company does not pay any performance-based component of salaries.
DIRECTORS’ REPORT
17
04 Directors'’ Report
Details of remuneration for year ended 30 June 2013
Directors’ Remuneration
No salaries, commissions, bonuses or superannuation were paid or payable to Directors during the year. Remuneration
was by way of fees paid monthly in respect of invoices issued to the Company by the Directors or companies
associated with the Directors in accordance with agreements between the Company and those entities.
Details of the agreements are set out below.
Agreements in respect of remuneration of Directors:
Executive Directors
Chris Sangster is on a contract dated 28 January 2009 which provides for a fixed salary and benefits, with a
termination period of six months. John Bentley (through Ptarmigan Natural Resources Ltd) is on a contract dated 17
February 2009 which provides for a fixed fee, with a termination period of six months. In both cases the remuneration
is reviewed annually. At the date of this report the annual remuneration for Chris Sangster is £132,000 and for John
Bentley is £33,000. In the event of a termination of contract giving less notice than provided for in these contracts,
the remaining notice period will be paid in full.
Non-Executive Directors
The Company’s constitution provides that the Non-Executive Directors may collectively be paid as remuneration
for their services a fixed sum not exceeding the aggregate sum determined by a general meeting. The aggregate
remuneration has been set at an amount of $300,000 per annum. A Director may be paid fees or other amounts as
the Directors determine where a Director performs special duties or otherwise performs services outside the scope
of the ordinary duties of a Director. A Director may also be reimbursed for out of pocket expenses incurred as a result
of their directorship or any special duties. Executive Directors may be paid on commercial terms as the Directors
see fit.
The total remuneration paid to Directors and Executives is summarised below:
director/Secretary Associated company
Fees
consulting
total
Year ended 30 June 2012
John Bentley
Ptarmigan Natural Resources Ltd
Chris Sangster
Phillip Jackson
Holihox Pty Ltd
Shane Sadleir
Mineral Products Holdings Pty Ltd
Peter Newcomb
Symbios Pty Ltd
Year ended 30 June 2013
John Bentley
Ptarmigan Natural Resources Ltd
Chris Sangster
Phillip Jackson
Holihox Pty Ltd
Shane Sadleir
Mineral Products Holdings Pty Ltd
Peter Newcomb
Symbios Pty Ltd
24,000
-
42,000
42,000
-
108,000
24,000
-
50,000
43,750
-
117,750
68,250
297,244
-
-
166,050
531,544
40,617
211,023
-
-
170,100
421,740
92,250
297,244
42,000
42,000
166,050
639,544
64,617
211,023
50,000
43,750
170,100
539,490
18
Scotgold ANNuAL REPORT I 2013
Directors'’ Report
04
The consolidated entity does not have any full time Executive officers, other than the Managing Director as
detailed opposite page.
There were no performance related payments made during the year.
ENVIRONMENTAL ISSUES
The consolidated entity has conducted exploration activities on mineral tenements. The right to conduct these
activities is granted subject to environmental conditions and requirements. The consolidated entity aims to ensure
a high standard of environmental care is achieved and, as a minimum, to comply with relevant environmental
regulations. There have been no known breaches of any of the environmental conditions.
INDEMNIFICATION OF DIRECTORS
During the financial year, the Company has not given an indemnity or entered into an agreement to indemnify any of
the Directors.
AUDITOR
HLB Mann Judd continues in office in accordance with section 327 of the Corporations Act 2001.
NON-AUDIT SERVICES
There were no non-audit services provided during the current year by our auditors, HLB Mann Judd.
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration has been received for the year ended 30 June 2013 and forms part of the
Directors’ report.
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the company is a party for the purpose of taking responsibility on behalf of the Company for
all or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
Signed in accordance with a resolution of the Directors.
CHRIS SANGSTER
Managing Director
Dated at Tyndrum, Scotland, this 30th day of September 2013
DIRECTORS’ REPORT
19
05 Corporate Governance Statement
The Board of Directors of Scotgold Resources Limited is responsible for the corporate governance of the Company.
The Board guides and monitors the business and affairs of Scotgold Resources Limited on behalf of the shareholders
by whom they are elected and to whom they are accountable. This statement reports on Scotgold Resources
Limited’s key governance principles and practices.
1. COMPLIANCE WITH BEST PRACTICE RECOMMENDATIONS
The Company, as a listed entity, must comply with the Corporations Act 2001 and the Australian Securities Exchange
Limited (ASX) Listing Rules. The ASX Listing Rules require the Company to report on the extent to which it has followed
the Corporate Governance Recommendations published by the ASX Corporate Governance Council (ASXCGC).
Where a recommendation has not been followed, that fact is disclosed, together with the reasons for the departure.
The table below summaries the Company’s compliance with the Corporate Governance Council’s Recommendations:
ASX corporate governance council Recommendations
Reference comply
1
Lay solid foundations for management and oversight
1.1 Establish the functions reserved to the board and those delegated to senior
executives and disclose those functions.
2(a)
Yes
1.2
Disclose the process for evaluating the performance of senior executives.
1.3 Provide the information indicated in the Guide to reporting on principle 1.
2
Structure the board to add value
2.1 A majority of the board should be independent directors.
2.2
2.3
The chair should be an independent director.
The roles of chair and chief executive officer should not be exercised by the
same individual.
2.4
The Board should establish a nomination committee.
2.5 Disclose the process for evaluating the performance of the board, its
committees and individual directors.
2.6
Provide the information indicated in the Guide to reporting on principle 2.
Promote ethical and responsible decision-making
3
3.1 Establish a code of conduct and disclose the code or a summary as to:
• the practices necessary to maintain confidence in the company’s
integrity;
• the practices necessary to take into account the company’s legal
obligations and the reasonable expectations of its stakeholders; and
• the responsibility and accountability of individuals for reporting and
investigating reports of unethical practices
2(h), 3(b),
Remuneration
Report
2(a), 2(h), 3(b),
2(e)
2(c), 2(e)
2(b), 2(c)
2(d)
2(h)
2(b), 2(c), 2(d),
2(e), 2(h)
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
4(a)
Yes
20
Scotgold ANNuAL REPORT I 2013
Corporate Governance Statement
05
COMPLIANCE WITH BEST PRACTICE RECOMMENDATIONS (continued)
3.2
3.3
3.4
ASX corporate governance council Recommendations
Reference comply
Establish a policy concerning diversity and disclose the policy or a summary of
that policy. The policy should include requirements for the board to establish
measurable objectives for achieving gender diversity for the board to assess
annually both the objectives and progress in achieving them.
Disclose in each annual report the measurable objectives for achieving gender
diversity set by the board in accordance with the diversity policy and progress
towards achieving them.
4(c)
No
4(c)
No
Disclose in each annual report the proportion of women employees in the whole
organisation, women in senior executive positions and women on the board.
4(c)
3.5 Provide the information indicated in the Guide to reporting on principle 3.
4(a), 4(c)
4
Safeguard integrity in financial reporting
4.1
The Board should establish an audit committee.
3(a)
4.2
The audit committee should be structured so that it:
• consists only of non-executive directors;
• consists of a majority of independent directors;
• is chaired by an independent chair, who is not chair of the Board; and
• has at least three members.
4.3
The audit committee should have a formal charter
4.4 Provide the information indicated in the Guide to reporting on principle 4.
5
Make timely and balanced disclosure
5.1
Establish written policies designed to ensure compliance with ASX Listing Rule
disclosure requirements and to ensure accountability at senior executive level
for that compliance and disclose those policies or a summary of those policies.
3(a)
No
3(a)
3(a)
5(a), 5(b)
5.2 Provide the information indicated in the Guide to reporting on principle 5.
5(a), 5(b)
6
Respect the rights of shareholders
6.1
Design a communications policy for promoting effective communication with
shareholders and encouraging their participation at general meetings and
disclose the policy or a summary of that policy.
5(a), 5(b)
6.2 Provide the information indicated in the Guide to reporting on principle 6.
5(a), 5(b)
7
Recognise and manage risk
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
7.1
Establish policies for the oversight and management of material business risks
and disclose a summary of those policies.
6(a)
Yes
7.2
7.3
The Board should require management to design and implement the risk
management and internal control system to manage the company’s material
business risks and report to it on whether those risks are being managed
effectively. The Board should disclose that management has reported to it as to
the effectiveness of the company’s management of its material business risks.
The Board should disclose whether it had received assurance from the chief
executive officer and the chief financial officer that the declaration provided in
accordance with section 295A of the Corporations Act is founded on a sound
system of risk management and internal control and that the system is operating
effectively in all material respects in relation to financial reporting risks.
7.4 Provide the information indicated in the Guide to reporting on principle 7.
6(a), 6(b), 6(d)
Yes
6(c)
Yes
6(a), 6(b), 6(c),
6(d)
Yes
CORPORATE GOVERNANCE STATEMENT
21
05
Corporate Governance Statement
COMPLIANCE WITH BEST PRACTICE RECOMMENDATIONS (continued)
ASX corporate governance council Recommendations
Reference
comply
7.3
The Board should disclose whether it had received assurance from the chief
executive officer and the chief financial officer that the declaration provided in
accordance with section 295A of the Corporations Act is founded on a sound
system of risk management and internal control and that the system is operating
effectively in all material respects in relation to financial reporting risks.
6(c)
7.4 Provide the information indicated in the Guide to reporting on principle 7.
6(a), 6(b), 6(c),
6(d)
8
Remunerate fairly and responsibly
8.1
The Board should establish a remuneration committee.
3(c)
8.2
The remuneration committee should be structured so that it:
• consist of a majority of independent directors
• is chaired by the independent chairman
• has at least three members
8.3
Clearly distinguish the structure on non-executive directors’ remuneration from
that of executive directors and senior executives.
3(c),
Remuneration
Report
8.4 Provide the information indicated in the Guide to reporting on principle 8.
3(c),
Yes
Yes
No
No
Yes
Yes
2. THE BOARD OF DIRECTORS
2(a) Roles and Responsibilities of the Board
The Board is accountable to the shareholders and investors for the overall performance of the Company
and takes responsibility for monitoring the Company’s business and affairs and setting its strategic direction,
establishing and overseeing the Company’s financial position.
The Board is responsible for:
• Appointing, evaluating, rewarding and if necessary the removal of the Chief Executive Officer (“CEO”)
and senior management;
• Development of corporate objectives and strategy with management and approving plans, new
investments, major capital and operating expenditures and major funding activities proposed by
management;
• Monitoring actual performance against defined performance expectations and reviewing operating
information to understand at all times the state of the health of the Company;
• Overseeing the management of business risks, safety and occupational health, environmental issues
and community development;
• Satisfying itself that the financial statements of the Company fairly and accurately set out the financial
position and financial performance of the Company for the period under review;
• Satisfying itself that there are appropriate reporting systems and controls in place to assure the Board
that proper operational, financial, compliance, risk management and internal control process are in
place and functioning appropriately;
• Approving and monitoring financial and other reporting;
• Assuring itself that appropriate audit arrangements are in place;
22
Scotgold ANNuAL REPORT I 2013
Corporate Governance Statement
05
•
Ensuring that the Company acts legally and responsibly on all matters and assuring itself that the
Company has adopted a Code of Conduct and that the Company practice is consistent with that
Code; and other policies; and
• Reporting to and advising shareholders.
Other than as specifically reserved to the Board, responsibility for the day-to-day management of the
Company’s business activities is delegated to the Chief Executive Officer and Executive Management.
2(b) Board Composition
The Directors determine the composition of the Board employing the following principles:
•
•
•
•
•
the Board, in accordance with the Company’s constitution must comprise a minimum of three
Directors;
the roles of the Chairman of the Board and of the Chief Executive Officer should be exercised by
different individuals;
the majority of the Board should comprise Directors who are non-executive;
the Board should represent a broad range of qualifications, experience and expertise considered of
benefit to the Company; and
the Board must be structured in such a way that it has a proper understanding of, and competency
in, the current and emerging issues facing the Company, and can effectively review management’s
decisions.
The Board is currently comprised of two Non-Executive Directors and two Executive Directors. The skills,
experience, expertise, qualifications and terms of office of each director in office at the date of the annual
report is included in the Directors’ Report.
The Company’s constitution requires one-third of the Directors (or the next lowest whole number) to retire
by rotation at each Annual General Meeting (AGM). The Directors to retire at each AGM are those who have
been longest in office since their last election. Where Directors have served for equal periods, they may
agree amongst themselves or determine by lot who will retire. A Director must retire in any event at the third
AGM since he or she was last elected or re-elected. Retiring Directors may offer themselves for re-election.
A Director appointed as an additional or casual Director by the Board will hold office until the next AGM
when they may be re-elected.
The Chief Executive Officer is not subject to retirement by rotation and, along with any Director appointed
as an additional or casual Director, is not to be taken into account in determining the number of Directors
required to retire by rotation.
2(c) Chairman and Chief Executive Officer
The Chairman is responsible for:
•
•
•
•
•
•
leadership of the Board;
the efficient organisation and conduct of the Board’s functions;
the promotion of constructive and respectful relations between Board members and between the
Board and management;
contributing to the briefing of Directors in relation to issues arising at Board meetings;
facilitating the effective contribution of all Board members; and
committing the time necessary to effectively discharge the role of the Chairman.
CORPORATE GOVERNANCE STATEMENT
23
05
Corporate Governance Statement
The Chief Executive Officer is responsible for:
•
•
implementing the Company’s strategies and policies; and
the day-to-day management of the Company’s business activities
2(d) Nomination Committee
The Company does not comply with ASX Recommendation 2.4. The Company is not of a relevant size to
consider formation of a nomination committee to deal with the selection and appointment of new Directors
and as such a nomination committee has not been formed.
Nominations of new Directors are considered by the full Board in accordance with the Company’s “Selection
of New Directors Policy”.
2(e) Independent Directors
The Company recognises that independent Directors are important in assuring shareholders that the Board
is properly fulfilling its role and is diligent in holding senior management accountable for its performance.
The Board assesses each of the directors against specific criteria to decide whether they are in a position
to exercise independent judgment.
Directors of Scotgold Resources Limited are considered to be independent when they are independent
of management and free from any business or other relationship that could materially interfere with, or
could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent
judgement.
In making this assessment, the Board considers all relevant facts and circumstances. Relationships that the
Board will take into consideration when assessing independence are whether a Director:
•
•
•
•
•
is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a
substantial shareholder of the Company;
is employed, or has previously been employed in an executive capacity by the Company or another
Company member, and there has not been a period of at least three years between ceasing such
employment and serving on the Board;
has within the last three years been a principal of a material professional advisor or a material consultant
to the Company or another Company member, or an employee materially associated with the service
provided;
is a material supplier or customer of the Company or other Company member, or an officer of or
otherwise associated directly or indirectly with a material supplier or customer; or
has a material contractual relationship with the Company or another Company member other than as
a Director.
The Board currently includes one independent non-executive Director.
24
Scotgold ANNuAL REPORT I 2013
Corporate Governance Statement
05
In accordance with the definition of independence above, and the materiality thresholds set, the following
Director of Scotgold Resources Limited is considered to be independent:
Name
Position
Phillip Jackson
Non Executive Director
The term in office held by each director in office at the date of this report is as follows:
John Bentley
Chris Sangster
Phillip Jackson
In office since
17/02/2009
17/10/2007
14/08/2007
2(f) Avoidance of conflicts of interest by a Director
In order to ensure that any interests of a Director in a particular matter to be considered by the Board are
known by each Director, each Director is required by the Company to disclose any relationships, duties or
interests held that may give rise to a potential conflict. Directors are required to adhere strictly to constraints
on their participation and voting in relation to any matters in which they may have an interest.
2(g) Board access to information and independent advice
Directors are able to access members of the management team at any time to request relevant information.
There are procedures in place, agreed by the Board, to enable Directors, in furtherance of their duties, to
seek independent professional advice at the company’s expense.
2(h) Review of Board performance
The performance of the Board is reviewed regularly by the Chairman. The Chairman conducts performance
evaluations which involve an assessment of each Board member’s performance against specific and
measurable qualitative and quantitative performance criteria. The performance criteria against which
directors and executives are assessed is aligned with the financial and non-financial objectives of Scotgold
Resources Limited. Directors whose performance is consistently unsatisfactory may be asked to retire.
3. BOARD COMMITTEES
3(a) Audit Committee
The audit committee is comprised of one independent non-executive director, Mr Jackson who chaired one
meeting of the audit committee between commencement of the financial year and the date of this report.
The role and responsibilities of the Audit Committee are summarised below.
The Audit Committee is responsible for reviewing the integrity of the Company’s financial reporting and
overseeing the independence of the external auditors. The Board sets aside time to deal with issues and
responsibilities usually delegated to the Audit Committee to ensure the integrity of the financial statements
of the Company and the independence of the auditor.
CORPORATE GOVERNANCE STATEMENT
25
05
Corporate Governance Statement
The Board reviews the audited annual and half-year financial statements and any reports which accompany
published financial statements and recommends their approval to the members. The Board also reviews
annually the appointment of the external auditor, their independence and their fees.
The Board is also responsible for establishing policies on risk oversight and management. The Company
has not formed a separate Risk Management Committee due to the size and scale of its operations.
3(b) External Auditors
The Company’s policy is to appoint external auditors who clearly demonstrate quality and independence.
The performance of the external auditor is reviewed annually and applications for tender of external audit
services are requested as deemed appropriate, taking into consideration assessment of performance,
existing value and tender costs. It is a legal requirement to rotate engagement Partners on listed companies
at least every five years.
An analysis of fees paid to the external auditors is provided in the notes to the financial statements in the
financial report. There were no non-audit services provided by the auditors during the year.
There is no indemnity provided by the company to the auditor in respect of any potential liability to third
parties.
The external auditor is requested to attend the annual general meeting and be available to answer
shareholder questions about the conduct of the audit and preparation and content of the audit report.
3(c) Remuneration Committee
The role of a Remuneration Committee is to assist the Board in fulfilling its responsibilities in respect of
establishing appropriate remuneration levels and incentive policies for employees.
The Board has not established a separate Remuneration Committee due to the size and scale of its
operations. This does not comply with Recommendation 8.1 however the Board as a whole takes
responsibility for such issues.
The responsibilities include setting policies for senior officers remuneration, setting the terms and conditions
for the CEO, reviewing and making recommendations to the Board on the Company’s incentive schemes
and superannuation arrangements, reviewing the remuneration of both executive and non-executive
directors and undertaking reviews of the CEO’s performance.
The Company has structured the remuneration of its senior executive, where applicable, such that it
comprises a fixed salary, statutory superannuation and participation in the Company’s employee share
option plan. The Company believes that by remunerating senior executives in this manner it rewards
them for performance and aligns their interests with those of shareholders and increases the Company’s
performance.
Non-executive directors are paid their fees out of the maximum aggregate amount approved by shareholders
for non-executive director remuneration. The Company does not adhere to Recommendation 8.2 Box 8.2
‘Non-executive directors should not receive options or bonus payments’. The Company may, in the future,
granted options to non-executive directors. The Board is of the view that options (for both executive and
non-executive directors) are a cost effective benefit for small companies such as Scotgold Resources
Limited that seek to conserve cash reserves. They also provide an incentive that ultimately benefits both
shareholders and the optionholders, as optionholders will only benefit if the market value of the underlying
shares exceeds the option strike price. ultimately, shareholders will make that determination.
The remuneration received by directors and executives in the current period is contained in the “Remuneration
Report” within the Directors’ Report of the Annual Report.
26
Scotgold ANNuAL REPORT I 2013
Corporate Governance Statement
05
4. ETHICAL AND RESPONSIBLE DECISION MAKING
4(a) Code of Ethics and Conduct
The Board endeavours to ensure that the Directors, officers and employees of the Company act with
integrity and observe the highest standards of behaviour and business ethics in relation to their corporate
activities. The “Code of Conduct” sets out the principles, practices, and standards of personal behaviour
the Company expects people to adopt in their daily business activities.
All Directors, officers and employees are required to comply with the Code of Conduct. Senior managers are
expected to ensure that employees, contractors, consultants, agents and partners under their supervision
are aware of the Company’s expectations as set out in the Code of Conduct.
All Directors, officers and employees are expected to:
•
•
•
•
comply with the law;
act in the best interests of the Company;
be responsible and accountable for their actions; and
observe the ethical principles of fairness, honesty and truthfulness, including prompt disclosure of
potential conflicts.
4(b) Policy concerning trading in Company securities
The Company’s “Dealings in Company Shares and Options Policy” applies to all Directors, officers and
employees. This policy sets out the restrictions on dealing in securities by people who work for, or are
associated with the Company and is intended to assist in maintaining market confidence in the integrity
of dealings in the Company’s securities. The policy stipulates that the only appropriate time for a Director,
officer or employee to deal in the Company’s securities is when they are not in possession of price sensitive
information that is not generally available to the market.
As a matter of practice, Company shares may only be dealt with by Directors and officers of the Company
under the following guidelines:
•
•
•
no trading is permitted in the period of 14 days preceding release of each quarterly report, half-yearly
report and annual financial report of the Company or for a period of 2 trading days after the release of
such report;
guidelines are to be considered complementary to and not replace the various sections of the
Corporations Act 2001 dealing with insider trading; and
prior approval of the Chairman, or in his absence, the approval of two directors is required prior to any
trading being undertaken.
4(c) Policy concerning gender diversity
Scotgold is committed to establishing a policy concerning diversity and disclosure of the policy. The policy
will include requirements for the board to establish measurable objectives for achieving gender diversity and
for the Board to assess annually the objectives and report in the Annual Report.
As a company with a small market capitalisation, the company has a small board. The company has
no established policy in relation to gender diversity at present but is aware of the principle and will be
alert for opportunities when board changes are contemplated. Given the size of the company and the
limited number of employees, reporting the numbers of employees by gender is not regarded as a
meaningful statistic.
CORPORATE GOVERNANCE STATEMENT
27
05
Corporate Governance Statement
5. TIMELY AND BALANCED DISCLOSURE
5(a) Shareholder communication
The Company believes that all shareholders should have equal and timely access to material information
about the Company including its financial situation, performance, ownership and governance. The
Company’s “ASX Disclosure Policy” encourages effective communication with its shareholders by requiring
that Company announcements:
•
•
•
•
•
•
be factual and subject to internal vetting and authorisation before issue;
be made in a timely manner;
not omit material information;
be expressed in a clear and objective manner to allow investors to assess the impact of the information
when making investment decisions;
be in compliance with ASX Listing Rules continuous disclosure requirements; and
be placed on the Company’s website promptly following release.
Shareholders are encouraged to participate in general meetings. Copies of addresses by the Chairman or
Chief Executive Officer are disclosed to the market and posted on the Company’s website. The Company’s
external auditor attends the Company’s annual general meeting to answer shareholder questions about the
conduct of the audit, the preparation and content of the audit report, the accounting policies adopted by
the Company and the independence of the auditor in relation to the conduct of the audit.
5(b) Continuous disclosure policy
The Company is committed to ensuring that shareholders and the market are provided with full and timely
information and that all stakeholders have equal opportunities to receive externally available information
issued by the Company. The Company’s “ASX Disclosure Policy” described in 5(a) reinforces the Company’s
commitment to continuous disclosure and outline management’s accountabilities and the processes to be
followed for ensuring compliance.
The policy also contains guidelines on information that may be price sensitive. The Company Secretary
has been nominated as the person responsible for communications with the ASX. This role includes
responsibility for ensuring compliance with the continuous disclosure requirements with the ASX Listing
Rules and overseeing and coordinating information disclosure to the ASX.
6. RECOGNISING AND MANAGING RISK
The Board is responsible for ensuring there are adequate policies in relation to risk management, compliance and
internal control systems. The Company’s policies are designed to ensure strategic, operational, legal, reputation and
financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement
of the Company’s business objectives. A written policy in relation to risk oversight and management has been
established (“Risk Management and Internal Control Policy”). Considerable importance is placed on maintaining a
strong control environment. There is an organisation structure with clearly drawn responsibilities.
28
Scotgold ANNuAL REPORT I 2013
Corporate Governance Statement
05
6(a) Board oversight of the risk management system
The Board is responsible for approving and overseeing the risk management system. The Board reviews,
at least annually, the effectiveness of the implementation of the risk management controls and procedures.
The principle aim of the system of internal control is the management of business risks, with a view to
enhancing the value of shareholders’ investments and safeguarding assets. Although no system of internal
control can provide absolute assurance that the business risks will be fully mitigated, the internal control
systems have been designed to meet the Company’s specific needs and the risks to which it is exposed.
Annually, the Board is responsible for identifying the risks facing the Company, assessing the risks and
ensuring that there are controls for these risks, which are to be designed to ensure that any identified risk
is reduced to an acceptable level.
The Board is also responsible for identifying and monitoring areas of significant business risk. Internal
control measures currently adopted by the Board include:
•
•
at least quarterly reporting to the Board in respect of operations and the Company’s financial position,
with a comparison of actual results against budget; and
regular reports to the Board by appropriate members of the management team and/or independent
advisers, outlining the nature of particular risks and highlighting measures which are either in place or
can be adopted to manage or mitigate those risks.
6(b) Risk management roles and responsibilities
The Board is responsible for approving and reviewing the Company’s risk management strategy and policy.
Executive management is responsible for implementing the Board approved risk management strategy
and developing policies, controls, processes and procedures to identify and manage risks in all of the
Company’s activities.
The Board is responsible for satisfying itself that management has developed and implemented a sound
system of risk management and internal control.
6(c) Chief Executive Officer and Chief Financial Officer Certification
The Chief Executive Officer and Chief Financial Officer, or equivalent, provide to the Board written certification
that in all material respects:
•
•
•
the Company’s financial statements present a true and fair view of the Company’s financial condition
and operational results and are in accordance with relevant accounting standards;
the statement given to the Board on the integrity of the Company’s financial statements is founded
on a sound system of risk management and internal compliance and controls which implements the
policies adopted by the Board; and
the Company’s risk management an internal compliance and control system is operating efficiently
and effectively in all material respects.
6(d) Internal review and risk evaluation
Assurance is provided to the Board by executive management on the adequacy and effectiveness of
management controls for risk on a regular basis.
7. OTHER INFORMATION
Further information relating to the company’s corporate governance practices and policies has been made publicly
available on the company’s web site at www.scotgoldresources.com
CORPORATE GOVERNANCE STATEMENT
29
Auditor's Independence Declaration
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Scotgold Resources Limited for the year ended 30 June 2013,
I declare that to the best of my knowledge and belief, there have been no contraventions of:
a)
b)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
HLB Mann Judd (WA Partnership) ABN 22 193 232 714
Level 4 130 Stirling Street Perth 6000 PO Box 8124 Perth BC 6849 Western Australia. Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
Liability limited by a scheme approved under Professional Standards Legislation
HLB Mann Judd (WA Partnership) is a member of
International, a world-wide organisation of accounting firms and business advisers
30
Scotgold ANNuAL REPORT I 2013
Statement of Comprehensive Income
for the year ended 30 June 2013
07
Revenue
Administration costs
Interest expense
Depreciation and loss on disposal of fixed assets
Employee and consultant costs
Listing and share registry costs
Legal fees
Borrowing costs
Share based payments
Office and communication costs
Other expenses
Notes
2
3
CONSOLIDATED
2012
$
2013
$
15,454
29,124
(354,575)
(103,350)
(26,234)
(371,000)
(139,262)
(58,450)
(266,426)
(910,000)
(156,322)
(281,132)
(393,551)
-
(25,165)
(407,100)
(135,796)
(185,046)
-
-
(152,547)
(69,643)
LOSS BEFORE INCOME TAX
(2,651,297)
(1,339,724)
Income tax benefit
LOSS FOR THE YEAR
Other Comprehensive Income
4
67,896
74,551
(2,583,401)
(1,265,173)
-
-
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS
Exchange loss on translation of foreign subsidiaries
680
(1,662)
COMPREHENSIVE RESuLT FOR THE YEAR
(2,582,721)
(1,266,835)
Basic loss per share (cents per share)
22
1.23
0.67
These financial statements should be read in conjunction with the accompanying notes.
STATEMENT OF COMPREHENSIVE INCOME
31
08 Statement of Financial Position
as at 30 June 2013
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other current assets
Total Current Assets
NON CURRENT ASSETS
Trade and other receivables
Plant and equipment
Mineral exploration and evaluation
Total Non Current assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Other current liabilities
Interest bearing liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
CONSOLIDATED
2013
$
2012
$
Notes
5
6
7
6
8
9
10
10
11
12
13
13
570,253
26,050
24,618
72,615
46,731
20,369
620,921
139,715
83,222
144,487
76,923
170,721
13,348,454
12,084,602
13,576,163
12,332,246
14,197,084
12,471,961
331,085
119,286
2,607,455
227,147
127,243
-
3,057,826
354,390
11,139,258
12,117,571
16,766,418
16,079,010
871,648
(46,032)
(6,498,808)
(3,915,407)
11,139,258
12,117,571
These financial statements should be read in conjunction with the accompanying notes.
32
Scotgold ANNuAL REPORT I 2013
Statement of Financial Position
as at 30 June 2013
Statement of Changes in Equity
for the year ended 30 June 2013
09
Issued
Capital
$
Accumulated
Losses
$
Options
Reserve
$
CONSOLIDATED
Foreign
Currency
Translation
Reserve
$
Total Equity
$
14,299,263
(2,650,234)
1,409,081
203,963
214,747
(48,044)
-
-
-
-
-
-
-
-
-
-
-
(44,370)
11,604,659
-
-
-
-
1,409,081
203,963
214,747
(48,044)
(1,662)
(1,266,835)
(46,032)
12,117,571
Year Ended 30 June 2012
Balance 1 July 2011
Rights Issue
Rights Issue Shortfall allocation
Options exercised
Share issue expenses
Total comprehensive result for the year
-
(1,265,173)
As at 30 June 2012
16,079,010
(3,915,407)
Year Ended 30 June 2013
Issued
Capital
$
Accumulated
Losses
$
Options
Reserve
$
CONSOLIDATED
Foreign
Currency
Translation
Reserve
$
Total Equity
$
Balance 1 July 2012
16,079,010
(3,915,407)
Placement
Options issued
Share issue expenses
727,515
-
(40,107)
-
-
-
Total comprehensive result for the year
-
(2,583,401)
-
-
917,000
-
-
(46,032)
12,117,571
-
-
-
727,515
917,000
(40,107)
680
(2,582,721)
As at 30 June 2013
16,766,418
(6,498,808)
917,000
(45,352)
11,139,258
These financial statements should be read in conjunction with the accompanying notes.
STATEMENT OF CHANGES IN EQuITY
33
1 0
Statement of Financial Position
as at 30 June 2013
CONSOLIDATED
2013
$
2012
$
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Payment to suppliers
Interest income received
(1,184,916)
(1,273,624)
8,751
28,951
Net Cash Outflow From Operating Activities
18
(1,176,165)
(1,244,673)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure
Payment for other fixed assets
(1,263,995)
(1,391,102)
-
(22,769)
Net Cash Outflow From Investing Activities
(1,263,995)
(1,413,871)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and options
Share and option issue transaction costs
Borrowings net of costs
727,515
(40,107)
2,230,245
1,827,791
(48,044)
-
Net Cash Inflow From Financing Activities
2,917,653
1,779,747
Net decrease/(increase) in cash held
477,493
(878,797)
Effect of exchange rate fluctuations on cash and cash equivalents
20,145
744
Cash and cash equivalents at the beginning of this financial year
72,615
950,668
Cash and cash equivalents at the end of this financial year
5
570,253
72,615
These financial statements should be read in conjunction with the accompanying notes.
34
Scotgold ANNuAL REPORT I 2013
Statement of Financial Position
as at 30 June 2013
Notes to and Forming
Part of the Financial Statements
1 1
NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
These financial statements are general purpose financial statements, which have been prepared in accordance with
the requirements of the Corporations Act 2001, Accounting Standards and Interpretations and comply with other
requirements of the law. Cost is based on the fair value of the consideration given in exchange for assets.
The financial statements have also been prepared on a historical cost basis. The financial statements are presented
in Australian dollars.
The company is a listed public company, incorporated in Australia and operating in Australia and Scotland. The
entity’s principal activity is mineral exploration.
The accounting policies detailed below have been consistently applied to all of the years presented unless otherwise
stated. The financial statements are for the consolidated entity consisting of Scotgold Resources and its subsidiaries.
Reporting Basis and Conventions
The financial statements have been prepared on the basis of accounting principles applicable to a going concern,
which assumes the commercial realisation of the future potential of the Company’s assets and the discharge of their
liabilities in the normal course of business.
At 30 June 2013, the group had cash available of $570,253, but had a working capital deficit of $2,436,905 due
primarily to the loan from RMB Bank of $2,607,455 which is due for repayment on the earlier of capital raising of £2
million or 31 December 2013.
The Board considers that the Company is a going concern and recognises that additional funding is required to
ensure that the Company can continue to fund its operations and further develop their mineral exploration and
evaluation assets during the twelve month period from the date of this financial report. Such additional funding as
occurred during the year ended 30 June 2013 as disclosed in Note 12, can potentially be derived from either one or
a combination of the following:
•
The placement of securities under the ASX Listing Rule 7.1 or otherwise;
• An excluded offer pursuant to the Corporations Act 2001; or
•
The sale of assets.
In addition, on 16 September 2013, the company announced it had issued 10 million fully paid ordinary shares to Zio
Holdings Ltd (Company No. 077015) a company incorporated in Mauritius (“Zio”), at an issue price of $0.02 each to
raise $200,000. Additionally, Zio is conducting non-exclusive due diligence on the Cononish project which may lead
to further funding to develop the project and repay the RMB debt.
Accordingly, the Directors believe the Company will obtain sufficient funding to enable it and the consolidated entity
to continue as going concerns and that it is appropriate to adopt that basis of accounting in the preparation of the
financial report.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
35
1 1 Notes to and Forming
Part of the Financial Statements
However, the existence of the above conditions constitute a material uncertainty in relation to the company’s ability
to continue as a going concern and whether it will therefore realise its assets and extinguish its liabilities in the normal
course of business.
Statement of Compliance
The financial report was authorised for issue on 30 September 2013.
The financial report complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report,
comprising the financial statements and notes thereto, complies with International Financial Reporting Standards
(IFRS).
Adoption of new and revised standards
Changes in accounting policies on initial application of Accounting Standards
In the year ended 30 June 2013, the Directors have reviewed all of the new and revised Standards and Interpretations
issued by the AASB that are relevant to its operations and effective for the current annual reporting period.
It has been determined by the Directors that there is no impact, material or otherwise, of the new and revised Standards
and Interpretations on its business and, therefore, no change is necessary to consolidated entity accounting policies.
The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet
effective for the year ended 30 June 2013. As a result of this review the Directors have determined that there is no
impact, material or otherwise, of the new and revised Standards and Interpretations on its business and, therefore,
no change necessary to the consolidated entity’s accounting policies.
Accounting Policies
(a) Basis of Consolidation
A controlled entity is any entity controlled by Scotgold Resources Limited. Control exists where Scotgold
Resources Limited has the capacity to dominate the decision-making in relation to the financial and operating
policies of another entity so that the other entity operates with Scotgold Resources Limited to achieve the
objectives of Scotgold Resources Limited. All controlled entities have a 30 June financial year-end.
All intercompany balances and transactions between entities in the consolidated entity, including any unrealised
profit or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed
where necessary to ensure consistencies with those policies applied by the parent entity.
Where controlled entities have entered or left the consolidated entity during the year, their operating results have
been included from the date control was obtained or until the date control ceased.
(b) Income Tax
The charge for current income tax expenses is based on the profit for the year adjusted for any non-assessable
or disallowable items. It is calculated using tax rates that have been enacted or are substantively enacted by
the balance date.
Deferred tax is accounted for using the liability method in respect of temporary differences arising between the
tax bases of assets and liabilities and their carrying amount in the financial statements. No deferred income tax
will be recognised from the initial recognition of an asset or liability, excluding a business combination, where
there is no effect on accounting or taxable profit or loss.
36
Scotgold ANNuAL REPORT I 2013
Notes to and Forming
Part of the Financial Statements
1 1
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or
liability is settled. Deferred tax is credited in the statement of comprehensive income except where it relates to
items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available
against which deductible temporary difference can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption
that no adverse change will occur in income taxation legislation and the anticipation that the consolidated entity
will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions
of deductibility imposed by the law.
(c) Plant and Equipment
Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation.
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of
the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected
net cash flows which will be received from the assets employment and subsequent disposal. The expected net
cash flows have been discounted to their present values in determining recoverable amounts.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future benefits associated with the item will flow to the consolidated entity and the
cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of
comprehensive income during the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including capitalised lease assets, but excluding computers, is
depreciated on a reducing balance commencing from the time the asset is held ready for use. Computers are
depreciated on a straight line basis over their useful lives to the consolidated entity commencing from the time
the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
class of Fixed Asset:
Plant and Equipment
depreciation Rate:
15 – 50%
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains
and losses are included in the statement of comprehensive income. When revalued assets are sold, amounts
included in the revaluation reserve relating to that asset are transferred to retained earnings.
(d) Exploration and Evaluation Expenditure
Exploration and evaluation expenditure incurred is either written off as incurred or accumulated in respect of
each identifiable area of interest. Tenement acquisition costs are initially capitalised. Costs are only carried
forward to the extent that they are expected to be recouped through the successful development of the areas,
sale of the respective areas of interest or where activities in the area have not yet reached a stage which permits
reasonable assessment of the existence of economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the
decision to abandon the areas is made.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
37
1 1
Notes to and Forming
Part of the Financial Statements
When production commences, the accumulated costs for the relevant area of interest are amortised over the life
of the area according to the rate of depletion of the economically recoverable reserves.
A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry
forward costs in relation to that area of interest.
Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are
expensed as incurred and treated as exploration and evaluation expenditure.
(e)
Impairment of Assets
At each reporting date, the Directors review the carrying values of its tangible and intangible assets to determine
whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable
amount of the assets, being the higher of the asset’s fair value less costs to sell and value-in-use, is compared
to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed
to the statement of comprehensive income.
Where it is not possible to estimate the recoverable amount of an individual asset, the consolidated entity
estimates the recoverable amount of the cash-generating unit to which the asset belongs.
(f) Provisions
Provisions are recognised where there is a legal or constructive obligation, as a result of past events, for which
it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
(g) Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk
of change in value.
(h) Revenue
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the
financial assets.
(i) Goods and Services Tax (GST) and Value Added Tax (VAT)
Revenues, expenses and assets are recognised net of the amount of GST or VAT, except where the amount
of GST or VAT incurred is not recoverable from the relevany authority. In these circumstances the GST or VAT
is recognised as part of the cost of acquisition of the asset or as part of an item in expenses. Receivables and
payables in the statement of financial position are shown inclusive of GST or VAT.
(j)
Issued Capital
Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any
transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the
share proceeds received.
(k) Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
(l) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources and
assessing performance of the operating segments has been identified as the Board of Directors of Scotgold
Resources Limited.
38
Scotgold ANNuAL REPORT I 2013
Notes to and Forming
Part of the Financial Statements
1 1
(m) Critical accounting estimates and judgements
The application of accounting policies requires the use of judgements, estimates and assumptions about
carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
Key Estimates – Impairment
The Directors assess impairment at each reporting date by evaluating conditions specific to the consolidated
entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of
the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a
number of key estimates.
No impairment has been recognised in respect of costs carried forward as exploration assets. The ultimate
recoupment of value is dependent on the successful development and commercial exploitation or sale of the
respective areas.
(n) Share based payments – shares and options
The fair value of shares and share options granted is recognised as an expense with a corresponding increase in
equity. Fair value is measured at grant date and recognised over the period during which the grantees become
unconditionally entitled to the shares or share options.
The fair value of share grants at grant date is determined by reference to the share price at that time.
The fair value of share options at grant date is determined using a Black-Scholes option pricing model that takes
into account the exercise price, the term of the option, any vesting and performance criteria, the share price at
grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk free rate
for the term of the option.
upon the exercise of the option, the balance of the share-based payments reserve relating to the option is
transferred to share capital.
(o) Foreign currency translation
Both the functional and presentation currency of Scotgold Resources Limited and its subsidiaries is Australian
dollars. Each entity in the Group determines its own functional currency and items included in the financial
statements of each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange
rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance date.
All exchange differences in the consolidated financial report are taken to profit or loss with the exception of
differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity.
These are taken directly to equity until the disposal of the net investment, at which time they are recognised in
profit or loss.
Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss.
As at the balance date the assets and liabilities of these subsidiaries are translated into the presentation currency
of Scotgold Resources Limited at the rate of exchange ruling at the balance date and income and expense
items are translated at the average exchange rate for the period, unless exchange rates fluctuated significantly
during that period, in which case the exchange rates at the dates of the transactions are used.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
39
1 1
Notes to and Forming
Part of the Financial Statements
The exchange differences arising on the translation are taken directly to a separate component of equity, being
recognised in the foreign currency translation reserve.
On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular
foreign operation is recognised in profit or loss.
In addition, in relation to the partial disposal of a subsidiary that does not result in the Group losing control
over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-
controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of
associates or jointly controlled entities that do not result in the Group losing significant influence or joint control),
the proportionate share of the accumulated exchange differences is reclassified to profit or loss.
NOTE 2 – REVENUE
Revenue
Interest received
Other income
Total revenue
NOTE 3 – LOSS FROM ORDINARY ACTIVITIES BEFORE TAX EXPENSES
Expenses
Borrowing costs expensed
Total borrowing cost expensed
Depreciation of non-current assets
Plant and Equipment
Motor vehicles
Office furniture and equipment
Total depreciation of non-current assets
Loss on disposal of fixed assets
2013
$
2012
$
9,483
5,971
15,454
29,124
-
29,124
266,426
266,426
-
-
19,910
6,288
36
26,234
22,028
7,060
42
29,130
-
(3,965)
40
Scotgold ANNuAL REPORT I 2013
Notes to and Forming
Part of the Financial Statements
1 1
NOTE 4 - INCOME TAX
The prima facie tax benefit at 30% on loss from ordinary activities is reconciled to the income tax benefit in the
financial statements as follows:
Loss from ordinary activities
2013
$
2012
$
2,583,401
1,266,835
Prima facie income tax benefit at 30%
775,020
380,050
Tax effect of permanent differences
RMB options valuation
Share Issue Costs amortised
R & D Tax Offset refund received
Other non-deductible expenses
(273,000)
69,358
(67,896)
(265)
-
66,952
(74,551)
(159)
Income tax benefit adjusted for permanent differences
503,217
372,292
Deferred tax asset not brought to account
(435,321)
(297,741)
INCOME TAX BENEFIT
The directors estimate the cumulative unrecognised deferred tax asset attributable to the company and its controlled
entity at 30% is as follows:
67,896
74,551
UNRECOGNISED DEFERRED TAX ASSETS
Revenue Losses after permanent differences
Capital Raising Costs yet to be claimed
1,290,397
39,232
1,329,629
824,884
96,558
921,442
The potential deferred tax asset has not been brought to account in the financial report at 30 June 2013 as the
Directors do not believe it is appropriate to regard the realisation of the asset as probable. This asset will only be
obtained if:
a) The company and its controlled entity derive future assessable income of an amount and type sufficient to enable
the benefit from the deductions for the tax losses and the unrecouped exploration expenditure to be realised;
b) The company and its controlled entity continue to comply with the conditions for deductibility imposed by tax
legislation; and
c) No changes in tax legislation adversely affect the company and its controlled entity in realising the benefit from
the deductions for the tax losses and unrecouped exploration expenditure.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
41
1 1
Notes to and Forming
Part of the Financial Statements
Franking Credits
No franking credits are available at balance date for the subsequent financial year.
NOTE 5 – CASH AND CASH EQUIVALENTS
Cash at bank and on hand
NOTE 6 – TRADE AND OTHER RECEIVABLES
Current
GST / VAT Receivable
Other receivables
Non-current
Bond on Tenement
2013
$
2012
$
570,253
72,615
22,524
3,526
26,050
42,793
3,938
46,731
83,222
76,923
NOTE 7 – OTHER CURRENT ASSETS
Prepayments
24,618
20,369
NOTE 8 – PLANT AND EQUIPMENT
Plant and equipment
Cost
Accumulated Depreciation
Movement for the year
Opening balance
Additions
Disposals
Depreciation expensed
Closing balance
42
Scotgold ANNuAL REPORT I 2013
349,150
(204,663)
144,487
349,150
(178,429)
170,721
170,721
-
-
(26,234)
144,487
173,116
38,263
(11,528)
(29,130)
170,721
Notes to and Forming
Part of the Financial Statements
1 1
NOTE 9 – MINERAL EXPLORATION AND EVALUATION
Opening balance
Expenditure during the year
Closing balance
2013
$
2012
$
12,084,602
10,526,320
1,263,852
1,558,282
13,348,454
12,084,602
The ultimate recoupment of exploration expenditure carried forward is dependent upon successful development and
commercial exploitation, or sale of the respective areas.
NOTE 10 – TRADE AND OTHER PAYABLES
Trade creditors
Other accruals
331,085
119,286
450,371
227,147
127,243
354,390
Trade creditors are non-interest bearing and are normally settled on 30 day terms (2102: 30 days).
NOTE 11 – INTEREST BEARING LIABILITIES
Financing Agreements
On 2 July 2012 the company announced that an agreement had been reached with RMB Resources for a £1.18m
financing facility. This facility is a convertible loan structured as a secured corporate loan with share options which
provides for RMB to acquire 26,222,222 Scotgold shares at £0.045.
On 4 December 2012 the company announced that an agreement had been reached with RMB Resources to
extend the £1.18m financing facility by £0.32m to £1.50m. Funds were advanced on 9 April 2013 and options for
RMB to acquire a further 7,111,111 Scotgold shares at £0.045 were issued on that date.
The facility is repayable, together with capitalised interest, on 31 December 2013.
Interest is charged at average LIBOR three months rate plus 5% for the first facility of £1.18m and at average LIBOR
three months rate plus 9.5% for the extension of £0.32m.
The loan is secured over the shares in the subsidiary company Scotgold Resources Limited (SC 309525) together
with a floating charge over the assets of that company.
The facility is fully drawn down at 30 June 2013 in the amount of £1,500,000.
The carrying value of the assets pledged as security is $13,462,030 at 30 June 2013.
An undertaking of the facility agreement was to raise additional equity funds no later than 15 May 2013.
The company is in breach of this undertaking.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
43
1 1
Notes to and Forming
Part of the Financial Statements
NOTE 12 – ISSUED CAPITAL
(a) Issued capital
2013
$
2012
$
211,565,739 ordinary shares fully paid (2012: 196,249,629)
16,766,418
16,079,010
(b) Movements in ordinary share capital of the Company were as follows:
Date
Details
No of Shares
Value
(cents)
$
Balance at 30 June 2011
161,304,411
14,299,263
04/08/2011
Options conversion
24/08/2011
Options conversion
26/08/2011
Rights Issue
22/09/2011
Rights Issue Shortfall allocation
17/10/2011
Options conversion
03/11/2011
Options conversion
15/11/2011
Options conversion
15/02/2012
Options conversion
02/04/2012
Options conversion
10/04/2012
Options conversion
17/04/2012
Options conversion
30/04/2012
Options conversion
31/05/2012
Options conversion
Transaction costs arising on share issues
Balance at 30 June 2012
17,491
7,128
28,181,626
4,079,256
922
270,000
25,721
10,207
253,193
26,937
82,137
1,986,850
3,750
-
196,249,629
8.0
8.0
5.0
5.0
8.0
8.0
8.0
8.0
8.0
8.0
8.0
8.0
8.0
1,399
570
1,409,081
203,963
74
21,600
2,058
817
20,255
2,155
6,571
158,948
300
(48,044)
16,079,010
Balance at 30 June 2012
196,249,629
16,079,010
7/12/2012
Placement
15,316,110
4.75
Transaction costs arising on share issues
Balance at 30 June 2013
-
211,565,739
727,515
(40,107)
16,766,418
44
Scotgold ANNuAL REPORT I 2013
Notes to and Forming
Part of the Financial Statements
1 1
No of Options
21,452,221
(17,491)
(7,128)
(922)
(270,000)
(25,721)
(10,207)
(253,193)
(26,937)
(82,137)
(1,986,850)
(3,750)
(18,767,885)
-
-
26,222,222
3,000,000
15,316,110
153,161
7,111,111
51,802,604
Issue
Price
Value
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
785,000
-
-
7,000
125,000
917,000
(c) Movements in options were as follows:
Date
Details
Balance at 30 June 2011
04/08/2011
Options conversion
24/08/2011
Options conversion
17/10/2011
Options conversion
03/11/2011
Options conversion
15/11/2011
Options conversion
15/02/2012
Options conversion
02/04/2012
Options conversion
10/04/2012
Options conversion
17/04/2012
Options conversion
30/04/2012
Options conversion
31/05/2012
Options conversion
30/04/2012
Expiry
Balance at 30 June 2012
Balance at 30 June 2012
31/07/2012
Options issued – RMB borrowing costs
10/10/2012
Options issued – Incentive options
7/12/2012
7/12/2012
9/04/2013
Options issued – Free attaching options
Options issued – Share issue costs
Options issued – RMB borrowing costs
1
2
3
4
5
Balance at 30 June 2013
Option exercise dates and prices
Exercise on or before
Exercise price
1
2
3
4
5
24 July 2015
31 March 2022
7 June 2014
7 December 2015
28 March 2016
(d) Voting and dividend rights
£0.045
$0.080
£0.031
£0.031
£0.045
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the
number of shares held.
At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each
shareholder has one vote on a show of hands.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
45
w
1 1
Notes to and Forming
Part of the Financial Statements
NOTE 13 – RESERVES AND ACCUMULATED LOSSES
Accumulated Losses
Balance at beginning of the year
Net loss from ordinary activities
Balance at end of the year
Foreign Currency Translation Reserve
2013
$
2012
$
3,915,407
2,583,401
6,498,808
2,650,234
1,265,173
3,915,407
Balance at beginning of the year
Reserve arising on translation of foreign currency subsidiary
Balance at end of the year
46,032
(680)
45,352
44,370
1,662
46,032
Share Option Reserve
Balance at beginning of the year
Reserve arising on Black Scholes valuation of options
Balance at end of the year
Nature and purpose of reserves
Foreign currency translation reserve
-
917,000
917,000
-
-
-
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
financial statements of foreign subsidiaries.
Share Option Reserve
The share option reserve is used to record the deemed valuation of options issued.
NOTE 14 – SHARE BASED PAYMENTS
During the year share based payments in the form of options were made as follows.
31/07/2012
Options issued – RMB borrowing costs
7/12/2012
9/04/2013
Options issued – Share issue costs
Options issued – RMB borrowing costs
Shares
Value
26,222,222
153,161
7,111,111
785,000
7,000
125,000
917,000
46
Scotgold ANNuAL REPORT I 2013
w
Notes to and Forming
Part of the Financial Statements
1 1
Values were derived using the Black Scholes model using the following parameters:
Date
Number
Volatilty
Value
date
Exercise
date
Price
(cents)
Non-
market
discount
31/07/2012
26,222,222
124% 24/07/12
24/12/15
7/12/2012
9/04/2013
153,161
7,111,111
200% 07/12/12
07/12/15
124% 09/04/12
28/03/16
6.8
6.9
6.6
30%
30%
30%
Value
785,000
7,000
125,000
NOTE 15 - COMMITMENTS FOR EXPENDITURE
(a) Mineral Tenement Leases
In order to maintain current rights of tenure to mining tenements, the consolidated entity will be required to
outlay in the year ending 30 June 2013 amounts of $58,250 in respect of minimum tenement expenditure
requirements and lease rentals. The obligations are not provided for in the financial report and are payable
as follows:
Not later than one year
Later than 1 year but not later than 2 years
Later than 2 years but not later than 5 years
Minimum
expenditure
$
Licence Fee
$
27,000
27,000
81,000
31,250
31,250
93,750
135,000
156,250
Total
$
58,250
58,250
174,750
291,250
The Company has a number of avenues available to continue the funding of its current exploration program and
as and when decisions are made, the Company will disclose this information to shareholders.
NOTE 16 - CONTINGENT LIABILITIES
The Company has entered into a donations agreement with the Strathfillan Community Development Trust (”SCDT”)
pursuant to which the Company will work with SCDT to provide additional facilities and opportunities for the
community served by SCDT and provide funding in respect of the same of up to £350,000. This liability is contingent
upon starting the development as defined under the Planning conditions and Decision letter.
Scotgold Resources Limited and its controlled entities have no other known material contingent liabilities as at 30
June 2013.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
47
1 1
Notes to and Forming
Part of the Financial Statements
NOTE 17 - INVESTMENT IN CONTROLLED ENTITY
Parent
Registered
Number
Country of
Incorporation
Interest
Held
Value of
investment
$
Scotgold Resources Limited
42 127 042 773
Australia
100%
N/A
Subsidiary
Scotgold Resources Limited
SC 309525
Scotland
100% 5,491,881
Subsidiary of subsidiary
Fynegold Exploration Limited
SC 084497
Scotland
100%
-
NOTE 18 - SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of Directors of Scotgold Resources Limited.
NOTE 19 - NOTES TO THE STATEMENT OF CASH FLOWS
Reconciliation of loss after income tax to net operating cash flows
2013
$
2012
$
Loss from ordinary activities
(2,583,401)
(1,265,173)
Depreciation and loss on disposals
Borrowing costs
Capitalised interest expense
Non-cash movement on reserves
Movement in assets and liabilities
Receivables
Other current assets
Payables
Net cash used in operating activities
48
Scotgold ANNuAL REPORT I 2013
26,234
266,426
110,784
917,000
25,165
-
-
-
(1,262,957)
(1,240,008)
(2,630)
22,118
67,304
141,616
8,738
(155,019)
(1,176,165)
(1,244,673)
Notes to and Forming
Part of the Financial Statements
1 1
NOTE 20 - KEY MANAGEMENT PERSONNEL
(a) Directors
The names and positions of Directors in office at any time during the financial year are:
John Bentley
Chris Sangster
Phillip Jackson
Shane Sadleir
Executive Chairman
Managing Director
Non Executive Director
Non Executive Director
17/02/2009
17/10/2007
14/08/2007
12/03/2009
present
present
present
17/04/2013
In office from
In office to
(b) Remuneration Polices
Remuneration policies are disclosed in the Remuneration Report which is contained in the Directors’ Report.
(c) Directors’ Remuneration
No salaries, commissions, bonuses or superannuation were paid or payable to Directors during the year.
Remuneration was by way of fees paid monthly in respect of invoices issued to the Company by the Directors
or Companies associated with the Directors in accordance with agreements between the Company and those
entities.
The Directors are entitled to reimbursement of out-of-pocket expenses incurred whilst on company business.
The total remuneration paid to directors is summarised below:
Year ended 30 June 2012
Fees
$
Consultancy
$
Total
$
Director/Secretary
Associated company
John Bentley
Chris Sangster
Phillip Jackson
Shane Sadleir
Ptarmigan Natural Resources Ltd
Holihox Pty Ltd
Mineral Products Holdings Pty Ltd
Peter Newcomb
Symbios Pty Ltd
Year ended 30 June 2013
John Bentley
Chris Sangster
Phillip Jackson
Shane Sadleir
Ptarmigan Natural Resources Ltd
Holihox Pty Ltd
Mineral Products Holdings Pty Ltd
Peter Newcomb
Symbios Pty Ltd
24,000
-
42,000
42,000
-
108,000
68,250
297,244
-
-
166,050
531,544
92,250
297,244
42,000
42,000
166,050
639,544
Fees
$
Consultancy
$
Total
$
24,000
-
50,000
43,750
-
117,750
40,617
211,023
-
-
170,100
421,740
64,617
211,023
50,000
43,750
170,100
539,490
No other benefits are payable or were paid to key management personnel.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
49
1 1
Notes to and Forming
Part of the Financial Statements
(d) Shareholding
John Bentley
Chris Sangster
Phillip Jackson
Shane Sadleir
John Bentley
Chris Sangster
Phillip Jackson
Shane Sadleir
Balance 30
June 2011
Purchase and
Sales
Options
exercised
Balance 30
June 2012
1,125,000
5,625,000
2,187,500
14,478,481
23,415,981
225,000
532,000
-
-
757,000
112,500
281,250
-
125,000
518,750
1,462,500
6,438,250
2,187,500
14,603,481
24,691,731
Balance 30
June 2012
Purchase and
Sales
Date of
resignation
Balance 30
June 2013
1,462,500
6,438,250
2,187,500
14,603,481
24,691,731
500,000
-
(437,500)
362,500
425,000
-
-
-
14,965,981
14,965,981
1,962,500
6,438,250
1,750,000
-
10,150,750
(e) Aggregate amounts payable to Directors and their personally related entities
Accounts payable
73,305
64,495
Consolidated
Entity
2013
$
Consolidated
Entity
2012
$
(f) Optionholding
John Bentley
Chris Sangster
Phillip Jackson
Shane Sadleir
John Bentley
Chris Sangster
Phillip Jackson
Shane Sadleir
Balance 30
June 2011
Converted
during the year
Expired
during the year
Balance 30
June 2012
112,500
562,500
218,750
1,447,848
2,341,598
112,500
281,250
-
125,000
518,750
-
281,250
218,750
1,322,848
1,822,848
-
-
-
-
-
Balance 30
June 2012
Converted
during the year
Expired
during the year
Balance 30
June 2013
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50
Scotgold ANNuAL REPORT I 2013
Notes to and Forming
Part of the Financial Statements
1 1
NOTE 21 - RELATED PARTY INFORMATION
Transactions within the Consolidated Entity
Aggregate amount receivable within the consolidated entities at balance date
Parent Entity
2013
$
Parent Entity
2012
$
Non-current receivables
13,880,255
12,089,670
NOTE 22 - REMUNERATION OF AUDITORS
Auditing and reviewing of the financial statements of Scotgold
Resources Limited and of its controlled entities.
NOTE 23 - LOSS PER SHARE
2013
$
30,650
30,650
2012
$
27,150
27,150
2013
Number
2012
Number
Weighted average number of ordinary shares outstanding
during the year used in the calculation of basic loss per share
210,642,576
189,392,568
There are no potential ordinary shares on issue at the date of this report.
NOTE 24 - FINANCIAL INSTRUMENTS
(a) Financial Risk Management Policies
The consolidated entity’s financial instruments consist mainly of deposits with banks, accounts receivable,
accounts payable and hire purchase liabilities.
The Board’s overall risk management strategy seeks to assist the Group in meeting its financial targets, whilst
maintaining potential adverse effects on financial performance. The Group has developed a framework for a risk
management policy and internal compliance and control systems that covers the organisational, financial and
operational aspects of the group’s affairs. The Chairman is responsible for ensuring the maintenance of, and
compliance with, appropriate systems.
Financial Risk Exposures and Management
The main risks the group is exposed to through its financial instruments are interest rate risk, foreign currency
risk and liquidity risk.
Interest Rate Risk
The consolidated entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will
fluctuate as a result of change in the market, interest rate and the effective weighted average interest rate on
these financial assets, is as follows:
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
51
1 1
Notes to and Forming
Part of the Financial Statements
Financial Assets
Cash at Bank
Total Financial Assets
Financial Liabilites
RMB Loan (Note 11)
Total Financial Liabilitiess
Weighted Average Effective
Interest Rate
2013
2012
Floating Interest Rate
2012
$
2013
$
1.09%
3.16%
570,253
570,253
72,615
72,615
5.25%
2,607,455
2,607,455
-
-
The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the
statement of financial position and in the notes to and forming part of the financial statements.
Interest Rate Sensitivity Analysis
The Group has performed a sensitivity analysis relating to its exposure to interest rate risk. This sensitivity analysis
demonstrates the effect on the current year results and equity which could result in a change in these risks.
At 30 June 2013 the effect on the loss and equity as a result of a change in the interest rate of 1% with all other
variables remaining constant is not material.
Foreign Currency Risk
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate
fluctuations arise.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the
reporting date is as follows:
Currency
£ Sterling
Foreign currency
Liabilities
2013
$
Assets
2013
$
Liabilities
2012
$
Assets
2012
$
2,994,003
257,230
277,457
104,800
Other than translational risk the Group has no significant exposure to foreign currency risk at the balance date.
Liquidity Risk
The group manages liquidity risk by monitoring forecast cash flows.
The contracted maturity for the RMB loan of $2,607,455 is on the earlier of capital raising of £2 million or 31
December 2013.
52
Scotgold ANNuAL REPORT I 2013
Notes to and Forming
Part of the Financial Statements
1 1
Credit Risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date, is the
carrying amount net of any provisions for doubtful debts, as disclosed in the statement of financial position and notes
to the financial statement.
In the case of cash deposited, credit risk is minimised by depositing with recognised financial intermediaries such as
banks, subject to Australian Prudential Regulation Authority supervision.
The consolidated entity does not have any material risk exposure to any single debtor or group of debtors under
financial instruments entered into by it.
Capital Management Risk
Management controls the capital of the Group in order to maximise the return to shareholders and ensure that the
group can fund its operations and continue as a going concern.
Management effectively manages the Group’s capital by assessing the Group’s financial risks and adjusting its capital
structure in response to changes in these risks and in the market. These responses include the management of
expenditure and debt levels and share and option issues.
There have been no changes in the strategy adopted by management to control capital of the Group since the
prior year.
Net Fair Values
For financial assets and liabilities, the net fair value approximates their carrying value. The consolidated entity has no
financial assets or liabilities that are readily traded on organised markets at balance date and has no financial assets
where the carrying amount exceeds net fair values at balance date.
NOTE 25 - MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR
On 12 September 2013 the Company announced it had agreed to issue 10 million fully paid ordinary Scotgold
shares to Zio Holdings Ltd (Company No. 077015) a company incorporated in Mauritius (Zio), at an issue price of
AuD$0.02 each to raise AuD$200,000.
Additionally, Scotgold agreed to give Zio a non-exclusive right to conduct due diligence enquiries into Scotgold and
the Cononish Project with a view to Zio making further investments in Scotgold, subject to any relevant shareholder
or regulatory approvals.
There are no other matters or circumstances that have arisen after the balance date that have significantly affected,
or may significantly affect, the operations of the consolidated entity, the results of those operations, or the state of
affairs of the consolidated entity in future periods.
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
53
1 1 Notes to and Forming
Part of the Financial Statements
NOTE 26 - PARENT ENTITY DISCLOSURES
2013
$
2012
$
Financial Position
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Total Current Assets
NON CURRENT ASSETS
Plant and equipment
Investment in subsidiary
Loan to subsidiary
Total Non Current assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Interest bearing loan
Total Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Financial Performance
Loss for the year
Impairment of loans to subsidiaries
Total comprehensive income
358,954
4,735
363,689
29,661
5,255
34,916
6,567
5,491,881
7,970,120
7,067
5,491,881
6,660,641
13,468,568
12,159,589
13,832,257
12,194,505
85,576
2,607,455
2,693,031
2,693,031
76,934
-
76,934
76,934
11,139,257
12,117,571
20,843,909
20,156,501
917,000
-
(10,621,652)
(8,038,930)
11,139,257
12,117,571
2,101,646
481,076
2,582,722
600,362
354,474
954,836
The parent entity has not entered into any guarantees in relation to debts of its subsidiaries, has no contingent
liabilities, and has no commitments for acquisition of property, plant and equipment.
54
Scotgold ANNuAL REPORT I 2013
Directors' Declaration
1 2
In the opinion of the Directors of Scotgold Resources Limited (the ‘Company’):
(a) the accompanying financial statements and notes are in accordance with the Corporations Act 2001 including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its
performance for the year then ended; and
(ii) complying with Australian Accounting Standards, the Corporations Regulations 2001, professional
reporting requirements and other mandatory requirements.
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
(c) the financial statements and notes thereto are in accordance with International Financial Reporting Standards
issued by the International Accounting Standards Board.
This declaration has been made after receiving the declarations required to be made to the Directors in accordance
with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2013.
This declaration is made in accordance with a resolution of the Board of Directors.
CHRIS SANGSTER
Managing Director
Dated at Tyndrum, Scotland, this 30th day of September, 2013.
DIRECTORS’ DECLARATION
55
1 3
Independent Auditor's Report
INDEPENDENT AUDITOR’S REPORT
To the members of Scotgold Resources Limited
Report on the Financial Report
We have audited the accompanying financial report of Scotgold Resources Limited (“the company”), which comprises
the statement of financial position as at 30 June 2013, the statement of comprehensive income, the statement
of changes in equity and the statement of cash flows for the year then ended, notes comprising a summary of
significant accounting policies and other explanatory information, and the directors’ declaration for the consolidated
entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to
time during the financial year.
Directors’ responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control
as the directors determine is necessary to enable the preparation of the financial report that is free from material
misstatement, whether due to fraud or error.
In Note 1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial
Statements, that the consolidated financial report complies with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit
in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether
the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the company’s preparation and fair presentation of the financial report 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 company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
Our audit did not involve an analysis of the prudence of business decisions made by directors or management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
HlB Mann Judd (WA Partnership) ABN 22 193 232 714
level 4, 130 Stirling Street Perth WA 6000. Po Box 8124 Perth Bc 6849 telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.
Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au
liability limited by a scheme approved under Professional Standards legislation
HlB Mann Judd (WA Partnership) is a member of
International, a worldwide organisation of accounting firms and business advisers.
56
Scotgold ANNuAL REPORT I 2013
Independent Auditor's Report
Independent Auditor's Report
1 3
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s Opinion
In our opinion:
(a)
the financial report of Scotgold Resources Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Emphasis of matter
Without modifying our opinion, we draw attention to Note 1 in the financial report, which indicates that as at 30
June 2013, the Group had cash available of $570,253 but had a working capital deficit of $2,436,905. These
conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that may
cast significant doubt about the company’s ability to continue as a going concern and therefore, the company may
be unable to realise its assets and discharge its liabilities in the normal course of business.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2013.
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.
Auditor’s Opinion
In our opinion, the Remuneration Report of Scotgold Resources Limited for the year ended 30 June 2013 complies
with section 300A of the Corporations Act 2001.
HLB MANN JUDD
Chartered Accountants
M R W Ohm
Partner
Perth, Western Australia, 30 September 2013
INDEPENDENT AuDITOR’S REPORT
57
1 4
Shareholder Details
ANALYSIS OF SHAREHOLDING AT 30 SEPTEMBER 2013
Shareholders
1
1,001
5,001
-
-
-
1,000
5,000
10,000
10,001
- 100,000
100,001
-
or more
Total Shareholders
Shares
1,001
5,001
-
-
5,000
10,000
10,001
- 100,000
100,001
-
or more
Total Shares
Voting Rights
Number of Shareholders
ASX
65
81
144
698
182
1,170
AIM
9
27
16
69
64
185
Total
74
108
160
767
246
1,355
ASX
285,718
1,214,154
25,410,648
78,771,179
105,694,400
Number of Shares
AIM
71,685
127,537
2,318,914
113,349,140
115,871,339
Total
357,403
1,341,691
27,729,562
192,120,319
221,565,739
Article 16 of the Constitution specifies that on a show of hands every member present in person, by attorney or by
proxy shall have :
a) for every fully paid share held by him one vote
b) for every share which is not fully paid a fraction of the vote equal to the amount paid up on the share over the
nominal value of the shares
Directors’ Shareholding
The interest of each director in the share capital of the Company is detailed at Note 19.
58
Scotgold ANNuAL REPORT I 2013
Shareholder Details
Shareholder Details
1 4
TOP TWENTY SHAREHOLDERS
Name
HSDL Nominees Limited
Barclayshare Nominees Limited
ZIO Holdings Limited
Shares
%
Rank
12,882,709
12,279,888
5.81%
5.54%
10,000,000
4.51%
Secure Nominees Limited
9,995,000
4.51%
TD Direct Investing Nominees (Europe) Limited
8,496,299
3.83%
Hargreaves Lansdown (Nominees) Limited <15942>
7,655,557
3.46%
Giltspur Nominees Limited
6,321,501
2.85%
HSBC Custody Nominees (Australia) Limited - A/C 2
4,055,480
1.83%
Transact Nominees Limited
3,894,901
1.76%
Hargreaves Lansdown (Nominees) Limited
3,882,242
1.75%
L R Nominees Limited
3,691,848
1.67%
Tied Nominees Pty Ltd
3,688,029
1.66%
Mr Jason Khoo
Ms Dorita Thomson
3,604,761
1.63%
3,603,380
1.63%
Hargreaves Lansdown (Nominees) Limited
3,469,018
1.57%
HSBC Client Holdings Nominee (uk) Limited <731504>
3,384,329
1.53%
HSDL Nominees Limited
3,202,341
1.45%
Brewin 1762 Nominees Limited
2,620,135
1.18%
Banquest Pty Limited
2,503,811
1.13%
Robertson Architectural Services Pty Ltd
2,500,000
1.13%
111,731,229
50.43%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
AIM
AIM
ASX
AIM
AIM
AIM
AIM
ASX
AIM
AIM
AIM
ASX
ASX
ASX
AIM
AIM
AIM
AIM
ASX
ASX
SHAREHOLDER DETAILS
59
1 5 Interest in Exploration Leases
1 5
Scotland
Location
Cononish Glen Orchy
Cononish Glen Orchy
Glen Lyon
Inverliever
Knapdale
Ochils
Agreement
Landholder Lease
Option Agreement
Option Agreement
Option Agreement
Option Agreement
Option Agreement
Grant Date
23 July 2009
5 November 2012
5 November 2012
5 November 2012
5 August 2012
5 August 2012
Area
20 sq km
975 sq km
1,369 sq km
864 sq km
676 sq km
426 sq km
Mining Leases in Scotland – general information
The mineral rights to gold and silver in most of Britain, including Scotland, are generally held by the Crown, In order
to explore for gold and silver, an option agreement is required to be concluded with the Crown which entitles the
holder to explore for gold and silver (subject to access agreements with the landowner (see below)) and on the grant
of planning permission (and other conditions), to take out a lease for exploitation of these metals.
Surface rights (and other minerals rights) are generally held by the landowner with whom access and lease agreements
must separately be obtained.
Mineral developments in Scotland are governed by the Town and Country Planning (Scotland) Act, with responsibility
for planning control exercised by the local Authority. Statutory designations inform as to the appropriate levels of
environmental assessment to be carried out.
60
Scotgold ANNuAL REPORT I 2013
Interest in Exploration Leases
Company Information - Scotland
Exploration Office
Nominated Adviser (NOMAD)
Share Registry
upper Tyndrum Station
Tyndrum, Stirlingshire
Scotland
FK20 8RY
Phone +44(0) 183 840 0306
Westhouse Securities Limited
Heron Tower
110 Bishopsgate
London
EC2N 4AY
Phone +44(0) 207 601 6114
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Phone +44(0) 870 703 6300
Auditor
Solicitors
Bankers
Media
Scott-Moncrieff
Exchange Place 3
Semple Street
Edinburgh
EH3 8BL
Phone +44(0) 131 473 3500
Harper McLeod LLP
The Ca’d’oro
Glasgow
G1 3PE
Phone +44(0) 141 221 8888
Bank of Scotland
Shandwick Place
Edinburgh
EH11 1YH
Phone +44(0) 870 850 1671
Bankside Consultants
6 Middle Street
London
EC1A
Phone +44(0) 207 367 8888
COMPANY INFORMATION - SCOTLAND
61
24 Colin Street, West Perth, WA 6005
Telephone +61 8 9222 5850
Facsimile +61 8 9222 5810
Email sgz@scotgoldresources.com
www.scotgoldresources.com