Annual
Report
2014
ACN 42 127 042 773
Contents
Section
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
Company Information
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 Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Details
Interest in Exploration Leases
Company Information – Scotland
Page
1
2
12
20
29
30
31
32
33
34
54
55
57
59
60
Photographs contained in this Annual Report are for illustration
purposes only and are not necessarily assets of the Company.
Company Information
ABN
Directors
42 127 042 773
John Bentley
Chris Sangster
Phillip Jackson
Executive Chairman
CEO / Managing Director
Non-Executive Director
Company Secretary
Peter Newcomb
Registered Office
24 Colin Street, Perth, WA 6005
Telephone
Facsimile
Email
+61 8 9222 5850
+61 8 9222 5810
sgz@scotgoldresources.com
Share Registry
Computershare Investor Services Pty Ltd
Telephone
Facsimile
Auditor
Telephone
Facsimile
Bankers
Level 2, Reserve Bank Building, 45 St Georges Terrace, Perth, WA 6000
+61 8 9323 2000
+61 8 9323 2033
HLB Mann Judd I Level 4, 130 Stirling Street, Perth, WA 6000
+61 8 9227 7500
+61 8 9227 7533
Westpac Banking Corporation I 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:
Shares
Shares
SGZ
SGZ
Website
www.scotgoldresources.com.au
COMPANY INFORMATION
1
02
Review of operations
ABOUT SCOTGOLD
Australian Securities Exchange listed Scotgold 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 principal 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 (2004)) 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.
Subsequent to an initial rejection of its application for planning permission to develop the project 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.
The Crown Estate Commissioners unconditional grant of the Crown Lease was confirmed in May 2012.
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 resources at Cavancaw
(c. 0.5M oz of gold) and Curraghinalt (c. 3.5M oz of gold).
The Company is conducting a regional stream sediment sampling program over the wider Grampian gold project
area whilst continuing to evaluate a number of previously identified high grade outcrops in the vicinity of the
Cononish project.
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SCotgold AnnuAl RepoRt I 2014
Review of operations
02
OPERATIONAL REVIEW
CONONISH GOLD AND SILVER PROJECT
Resources
Subsequent to the grant of planning permission in February 2012 and as a result of discussions with potential
financiers to the project, the Company embarked on an 18 hole (2200m) infill drilling program aimed at converting
Inferred resources to Indicated resources which was completed in October 2012. Full details of the results from the
infill program were announced in the press release of 8/10/2012 - Drilling Results.
Based on the results of the infill drilling program, 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 1 below shows the revised Mineral Resource estimate as announced in the press release of 14/11/2012 –
Cononish Resource Update. The table also serves as the Company’s Annual Mineral Resource statement.
Cononish Main Vein Gold and Silver Mineral Resources (reported at a 3.5 g/t Au cut-off) compiled 14/11/12.
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.
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
Table 1
Annual Mineral Resource Statement as at 30/06/2014
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.
Note: This information was prepared and first disclosed under the JORC Code 2004. It has not been
updated since to comply with the JORC Code 2012 on the basis that the information has not materially
changed since it was last reported.
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02
Review of operations
Figure 2
Cononish Resource classification (JORC 2004)
There has been no change to the reported Mineral Resources between 30/06/2013
and 30/06/2014, which as at 30/06/2013, totalled including Measured, Indicated
and Inferred categories, 460,600t @ 11.7g/t Au and 45g/t Ag.
The results from the 2012 infill program, importantly, substantiated and
increased 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. 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.
Ore Reserves
There are no Ore Reserves estimated in terms of the JORC (2012) code as at
30/06/2014.
Reserves reported in 2013 under the JORC 2004 code are no longer applicable.
As noted in the following section and subsequent to its internal review of both
Mineral Resources and Ore Reserves, the Company is examining a number of
different options and possible configurations for the project and has deemed it
appropriate to update both Minerals Resources and Ore Reserves to comply
with the JORC (2012) code when this work has been concluded.
4
Review of operations 02
Project status
In order to facilitate financing under current market conditions, the Company, in conjunction with its consultants,
have continued to examine and evaluate possible alternative configurations for the Cononish Gold and Silver
Project with a view to optimising returns and attempting to reduce the initial capital expenditure and the overall
funding requirement to bring the project to production.
The initial options considered to date have considered varied processing rates, strategic mining sequences
and mining selectivity. These options remain under current review and a number of other options relating to
construction, commissioning and production build up periods, as well as plant configuration, are currently being
considered for further examination and evaluation before a preferred development option can be finalised.
From the initial options considered, it was apparent that a change to the current planning condition (Condition 13)
regarding the hours of operation of the processing plant presented an attractive opportunity to be actively pursued.
Current planning conditions restrict hours of operation of the processing plant from 07h00 to 23h00 Mondays to
Saturdays with no processing on Sunday or recognised Scottish public holidays. A change to 24/6 operations
(though still with no processing on Sunday or recognised Scottish public holidays) would enable a significant
decrease in the ‘name plate’ plant hourly throughput rate, whilst maintaining previously considered annual
production rates, with attendant possible capital reductions for the processing plant and associated infrastructure.
To this end, the Company held a number of discussions with the Loch Lomond and the Trossachs National
Park Planning Authority (“the Planning Authority”). Scotgold submitted a formal letter to the Planning Authority
requesting pre-application advice regarding variation to this condition. The Company has received the response
and recently conducted a site visit with the Planning Authority and relevant other authorities in this regard and plan
to submit the requisite application to vary this condition shortly.
Contingent to continuing progress made towards varying this condition, the Company continues to assess other
potentially beneficial options for the project.
The Company is in discussion with possible plant suppliers regarding the capital costs and financing of the
possible smaller facility and is in negotiations relating to supplier financing for the mining equipment required with
the aim of achieving further reductions in the initial capital expenditure.
The decision notice granting planning permission to the project issued by the Planning Authority on 13 February
2012 required a number of ‘suspensive’ conditions to be satisfied prior to the start of development. All submissions
have been made (excluding those to be made immediately prior to the start of development) and 64% of the
conditions have been discharged. Finalisation of these discussions relating to the outstanding conditions already
submitted, has been put on hold pending the application to vary condition 13 and further progress towards
completing finance for the project.
The Company submitted an application for a licence under the Water Environment (Controlled Activities)
Regulations 2011 (CAR regulations) relating to proposed burn diversion works and all necessary permitting for
these works has been granted by the Scottish Environmental Protection Agency (SEPA).
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 construction works before work was halted. It is estimated that this work can be rapidly
completed on financing without impacting the development schedule.
As such, all necessary permitting has either been granted or can be completed within a short time frame, subject
to the approval for the variation of condition 13 (Limitation of working hours) as noted above and engineering
design work is at a stage where it can be rapidly finalised on securing finance thus ensuring 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
5
02
Review of operations
Figure 3
Map of River Vein showing selected drilling, mapping and rock chip sampling
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SCotgold AnnuAl RepoRt I 2014
Review of operations 02
GRAMPIAN GOLD PROJECT
The Company continues to actively pursue exploration activities on its substantial land position in the Dalradian
group of the south west Grampians, a terrain highly prospective for both gold and potential base metal
occurrences. The majority (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 1950s and 1970s but 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 approach to exploration.
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.
In the initial wide spaced regional program, in excess of 750 stream sediment samples were taken over the area.
Initial interpretation of these results continues and this program is now being followed up by a more detailed
infill sampling program in the anomalous result areas in order to further target areas for detailed fieldwork and
prospecting. To date a further 250 samples have been taken in the infill program with a further 237 to be taken.
In parallel with this regional program, Scotgold continues 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 and the program
confirmed the presence of a large number of high grade gold / silver vein outcrops in an area located 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, detailed rock chip sampling, initial short surface drilling and (in some cases) deeper diamond drilling and
the Company believe that further significant exploration expenditure is justified on many of these prospects when
financing is available. The most advanced of these prospects include
1)
2)
the River Vein area - diamond drilling below exceptionally high grade surface rock chip samples has
proved structural continuity of a vein structure to a depth of approximately 100m and a similar strike extent
as defined by current drilling and remains open along strike and at depth: this warrants further diamond
drilling (see Press Release – Exploration Progress at River Vein – 30/01/2012).
the Sron Garbh mafic / ultramafic complex – short surface drilling intersected highly anomalous grades of
Gold, Platinum, Palladium, Copper Nickel and Cobalt, in and close to the ‘Gabbroic / Appinitic’ zone of
the complex. Mineralisation is seen to be contained in ‘sulphide blebs’ in a ‘leopard rock’ textured zone.
These characteristics are diagnostic of the worldwide ‘magmatic Cu – Ni – PGE – Au’ group of deposits
associated with mafic / ultramafic intrusives such as Aguablanca in Spain, certain parts of the Sudbury
mines in Ontario, Canada; Voisey’s Bay in Labrador Canada and Lac des Isles in Quebec, Canada. Such
deposits occur as sulphide concentrations (massive through to disseminated sulphides) associated with
a variety of mafic and ultramafic magmatic rocks (see Press Release – Highly Anomalous Platinum Group
Metals Gold and Base metals – 07/03/2012).
3)
the Auch / Beinn Odhar veins – shallow surface drilling below one of the identified high grade outcrops
confirmed its prospectivity and a considerable number of the other currently identified outcrops require
initial short surface drilling as a precursor to further more intensive drilling.
ReVIeW oF opeRAtIonS
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02
Review of operations
Figure 4
Sron Garbh: Gold/ copper in soil anomaly contour and selected rock chip and AQ drillhole results
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SCotgold AnnuAl RepoRt I 2014
As an adjunct to field activities, Scotgold
has over the past four years co-sponsored
a doctoral research project to investigate
gold occurrences in the area in addition to
a number of related MSc dissertations on
various aspects of the mineralisation in the
Tyndrum area. The results from these research
projects are being assessed in relation to
future exploration activity.
The Company believe that the next phase of
exploration in the central ‘Tyndrum’ option area
should compromise an airborne geophysical
survey in order to assess the nature and
continuity of the structural regime in this area
with a view to determining its potential to host
similar ‘Cononish style’ deposits. Results from
the infill stream sediment sampling program
will guide further exploration effort in areas
outside the immediate Cononish area.
Competent Persons 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 2012 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 Simon
Dominy FAusIMM (CP), FGS (CGeol), FIMMM,
Executive Consultant with Snowden based
in the Loondon, UK 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 2012
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.
Review of operations 02
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02
Review of operations
Figure 5
Geological map of the Cononish Mine vicinity
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SCotgold AnnuAl RepoRt I 2014
Review of operations 02
Subsequent events
As announced on 22 September (see ASX Release - Company Update for full details), the Company entered into
the convertible note agreements (Convertible Notes) on the terms and conditions set out in the Company’s Notice
of Meeting dated 23 June 2014 and approved by Shareholders at the General Meeting on 30 July 2014.
$1 million has been advanced to the Company under the Convertible Note Agreements. The funds raised by the
Convertible Notes has been used as part-repayment of the RMB Facility as described below and the balance will
be used for working capital.
The Company announced that the RMB Facility has been partially repaid using funds advanced under the
Convertible Notes such that the £1,500,000 amount outstanding has been reduced by £320,000 to £1,180,000.
Furthermore capitalised interest outstanding on the facility has been settled.
The Company also announced that the remaining amount under the RMB Facility Agreement has been extended
to 31 December 2015 in consideration for:
(a)
(b)
the partial repayment of the RMB Facility set out in paragraph 2 above (such that the facility amount is
£1,180,000; and
the issue to RMB Australia Holdings Ltd of 9,000,000 fully paid ordinary Scotgold Shares and 30,000,000
unlisted Options exercisable at 0.69 pence on or before 22 September 2017.
The Shares and Options have been issued under the Company’s Listing Rule 7.1 capacity.
Tenement details
The Company holds a Lease (100%) from the Crown Estate Commissioners over Cononish Farm, County of Perth,
Scotland UK.
The Company holds a Lease (100%) from the landowner over Cononish Farm, County of Perth, Scotland UK.
The Company holds five Mines Royal Option Agreements (100%) with the Crown Estate Commissioners as
detailed below:
Glen Orchy:
Location – counties of Perth and Argyll, Scotland UK
Glen Lyon:
Location – counties of Perth and Argyll, Scotland UK
Inverliever:
Location – counties of Dunbarton, Argyll and Perth, Scotland UK
Knapdale:
Location – county of Argyll, Scotland UK
Ochils:
Location – county of Clackmannan, Perth, Kinross and Stirling, Scotland UK
No tenements were acquired or disposed of during the year.
No other beneficial interests are held in any farm-in or farm-out agreements.
No other beneficial interests in farm-in or farm out agreements were acquired or disposed of during the year.
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03
directors’ Report
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 2014.
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
17/02/2009
Chris Sangster
Chief Executive Officer
17/10/2007
Phillip Jackson
Non Executive Director
14/08/2007
present
present
present
PARTICULARS OF DIRECTORS AND COMPANY SECRETARY
John Bentley
Executive Chairman
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
Special Responsibilities
Overall strategic guidance and UK Capital markets.
Directorships held in ASX listed entities
None
13,703,728
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SCotgold AnnuAl RepoRt I 2014
directors’ Report 03
Christopher Sangster
CEO / Managing Director
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 Manager 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
Special Responsibilities
16,744,153
Mr Sangster is the CEO / Managing Director and is responsible for the day to day running of the company.
Directorships held in listed entities
None
Phillip Jackson
Non-executive Director
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.
dIReCtoRS’ RepoRt
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03
directors’ Report
Interest in Shares and Options
Fully Paid Shares
Special Responsibilities
4,331,250
Mr Jackson is Chairman of the Audit Committee and is responsible for legal matters.
Directorships held in listed entities
Company Name
Aurora Minerals Limited
Desert Energy Limited
Appointed
24 September 2003
12 December 2006
Peter Newcomb
Company Secretary
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.
SHARES UNDER OPTION
At the date of this report unissued shares of the Company under option are:
Number of shares under option
Exercise price
Expiry date
3,000,000
26,222,222
153,161
7,111,111
50,000,000
30,000,000
$0.080
£0.045
£0.031
£0.045
$0.012
$0.069
31 March 2022
24 July 2015
7 December 2015
28 March 2016
31 March 2015
22 September 2017
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.
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SCotgold AnnuAl RepoRt I 2014
directors’ Report 03
Operating Results
The consolidated loss after income tax for the financial year was $1,466,149 (2013: $2,583,401).
Financial Position
At 30 June 2014 the Company had cash reserves of $640,857 (2013: $570,253).
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
financial statements.
MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR
On 23 September 2014 the company announced the following
1.
CONVERTIBLE NOTES
The company has entered into convertible note agreements (Convertible Notes) on the terms and conditions
set out in the Company’s Notice of Meeting dated 23 June 2014 (and approved by Shareholders at the General
Meeting on 30 July 2014).
$1 million has been advanced to the Company under the Convertible Note Agreements. The funds raised by the
Convertible Notes has been used as part-repayment of the RMB Facility as described below and the balance will
be used for working capital.
The Convertible Notes have a repayment date of 24 months from their date of issue, with an interest rate of 1%
per annum. The holders of the Convertible Notes may elect to convert the Convertible Notes (in part or in full) into
ordinary shares in the Company at a conversion price of $0.0075 per share. For every share issued on conversion
of the Convertible Notes, one free attaching option will be issued, exercisable at $0.012 on or before 31 March
2016. Full details of the Convertible Notes and attaching options were set out in the Company’s Notice of Meeting
dated 23 June 2014.
2.
PARTIAL REPAYMENT OF RMB FACILITY
The RMB Facility has been partially repaid using funds advanced under the Convertible Notes such that the
£1,500,000 amount outstanding has been reduced by £320,000 to £1,180,000. Furthermore capitalised interest
outstanding on the facility has been settled.
3.
EXTENSION OF RMB FACILITY
The remaining amount under the RMB Facility Agreement has been extended to 31 December 2015 in
consideration for:
(a)
(b)
the partial repayment of the RMB Facility set out in paragraph 2 above (such that the facility amount is
£1,180,000; and
the issue to RMB Australia Holdings Ltd of 9,000,000 fully paid ordinary Scotgold Shares and 30,000,000
unlisted Options exercisable at 0.69 pence on or before 22 September 2017.
The Shares and Options have been issued under the Company’s Listing Rule 7.1 capacity.
dIReCtoRS’ RepoRt
15
03
directors’ Report
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 2014, 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
2
2
2
2
2
2
John Bentley
Chris Sangster
Phillip Jackson
AUDIT COMMITTEE
The Audit Committee is comprised of Mr Jackson who chaired one meeting of the audit committee during the year
ended 30 June 2014.
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.
Remuneration 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 key management personnel is valued at the cost to the company and expensed.
16
SCotgold AnnuAl RepoRt I 2014
directors’ Report 03
Performance-based remuneration
The company does not pay any performance-based component of salaries.
DETAILS OF REMUNERATION FOR YEAR ENDED 30 JUNE 2014
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.
dIReCtoRS’ RepoRt
17
03
directors’ Report
The total remuneration paid to key management personnel is summarised below:
Director/Secretary
Associated Company
Year ended 30 June 2013
Fees
$
Consulting
$
Total
$
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 2014
John Bentley
Ptarmigan Natural Resources Ltd
Chris Sangster
Phillip Jackson
Holihox Pty Ltd
Peter Newcomb
Symbios Pty Ltd
Key management personnel share holding
24,000
-
50,000
43,750
-
117,750
91,982
-
33,000
-
124,982
40,617
211,023
-
-
170,100
421,740
-
241,348
-
170,100
411,448
64,617
211,023
50,000
43,750
170,100
539,490
91,982
241,348
33,000
170,100
536,430
John Bentley
Chris Sangster
Phillip Jackson
Shane Sadleir
Peter Newcomb
John Bentley
Chris Sangster
Phillip Jackson
Peter Newcomb
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
2,277,968
26,969,699
500,000
-
(1,437,500)
362,500
510,000
(65,000)
-
-
-
14,965,981
-
14,965,981
1,962,500
6,438,250
750,000
-
2,787,968
11,938,718
Balance
30 June 2013
Purchase
and Sales
Date of
resignation
Balance
30 June 2014
1,962,500
6,438,250
750,000
2,787,968
1,471,875
4,828,688
562,500
7,466,545
11,938,718
14,329,608
-
-
-
-
-
3,434,375
11,266,938
1,312,500
10,254,513
26,268,326
Directors’ option holding
No options were held by Directors in the years ended June 2013 and June 2014.
The consolidated entity does not have any full time Executive officers, other than the Managing Director as
detailed above.
18
SCotgold AnnuAl RepoRt I 2014
Aggregate amounts payable to Directors and their personally related entities.
directors’ Report 03
Consolidated
Entity
Consolidated
Entity
2014
$
2013
$
Accounts payable
187,653
73,305
There were no performance related payments made during the year.
End of remuneration report.
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 2014 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 2014
dIReCtoRS’ RepoRt
19
04 Corporate governance Statement
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.
COMPLIANCE WITH BEST PRACTICE RECOMMENDATIONS
1.
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)
1.2
Disclose the process for evaluating the performance of senior executives.
2(h), 3(b),
Remuneration
Report
Yes
Yes
1.3
Provide the information indicated in the Guide to reporting on principle 1.
2(a), 2(h), 3(b),
Yes
2
2.1
2.2
2.3
Structure the board to add value
A majority of the board should be independent directors.
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.
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
No
Yes
Yes
3
Promote ethical and responsible decision-making
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
·
·
4(a)
Yes
20
SCotgold AnnuAl RepoRt I 2014
Corporate governance Statement 04
COMPLIANCE WITH BEST PRACTICE RECOMMENDATIONS (continued)
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.
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)
4(c)
4(c)
3.2
3.3
3.4
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.
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.
·
The audit committee should have a formal charter
Provide the information indicated in the Guide to reporting on principle 4.
4.2
4.3
4.4
3(a)
3(a)
3(a)
3(a)
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.
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
7.1
Establish policies for the oversight and management of material business
risks and disclose a summary of those policies.
6(a)
No
No
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
7.2
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.
6(a), 6(b), 6(d)
Yes
CoRpoRAte goVeRnAnCe StAtement
21
04
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.
7.4
Provide the information indicated in the Guide to reporting on principle 7.
6(c)
Yes
6(a), 6(b), 6(c),
6(d)
Yes
8
Remunerate fairly and responsibly
8.1
The Board should establish a remuneration committee.
3(c)
8.2
8.3
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
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),
No
No
Yes
Yes
2.
2(a)
THE BOARD OF DIRECTORS
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 2014
Corporate governance Statement 04
· 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.
·
·
·
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”.
CoRpoRAte goVeRnAnCe StAtement
23
04
Corporate governance Statement
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.
In accordance with the definition of independence above, and the materiality thresholds set, the following Directors
of Scotgold Resources Limited are 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.
24
SCotgold AnnuAl RepoRt I 2014
Corporate governance Statement 04
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.
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.
CoRpoRAte goVeRnAnCe StAtement
25
04
Corporate governance Statement
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.
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.
26
SCotgold AnnuAl RepoRt I 2014
Corporate governance Statement 04
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.
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.
RECOGNISING AND MANAGING RISK
6.
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.
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.
CoRpoRAte goVeRnAnCe StAtement
27
04
Corporate governance Statement
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.
OTHER INFORMATION
7.
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
28
SCotgold AnnuAl RepoRt I 2014
Auditor’s Independence declaration 05
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the consolidated financial report of Scotgold Resources Limited for the year ended
30 June 2014, I declare that to the best of my knowledge and belief, there have been no contraventions of:
a)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
b) any applicable code of professional conduct in relation to the audit.
Perth, Western Australia
30 September 2014
M R W Ohm
Partner
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
AudItoR’S IndependenCe deClARAtIon
29
06
Statement of Comprehensive Income
For the year ended 30 June 2014
Revenue
Administration costs
Interest expense
Depreciation and profit on disposal of property, plant and
equipment
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
2014
$
2013
$
20,413
15,454
(301,644)
(192,959)
(354,575)
(103,350)
(20,545)
(26,234)
(236,399)
(199,137)
(93,416)
(5,545)
(121,154)
(105,642)
(255,001)
(371,000)
(139,262)
(58,450)
(266,426)
(910,000)
(156,322)
(281,132)
LOSS BEFORE INCOME TAX BENEFIT
(1,511,029)
(2,651,297)
Income tax benefit
4
44,880
67,896
LOSS FOR THE YEAR
(1,466,149)
(2,583,401)
Other Comprehensive Income
Items that may be reclassified to Profit or Loss
Exchange difference on translation of foreign subsidiaries
(14,633)
680
Total comprehensive result for the year
(1,480,782)
(2,582,721)
Basic (loss) per share (cents per share)
23
(0.44)
(1.23)
These financial statements should be read in conjunction with the accompanying notes.
30
SCotgold AnnuAl RepoRt I 2014
Statement of Financial position
07
As at 30 June 2014
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
Notes
5
6
7
6
8
9
CONSOLIDATED
2014
$
2013
$
640,857
169,989
13,026
570,253
26,050
24,618
823,872
620,921
90,335
121,301
83,222
144,487
13,894,769
13,348,454
Total Non Current assets
14,106,405
13,576,163
TOTAL ASSETS
14,930,277
14,197,084
CURRENT LIABILITIES
Trade and other payables
Other current liabilities
Interest bearing liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
10
10
11
12
13
13
353,598
69,060
331,085
119,286
3,031,286
2,607,455
3,453,944
3,057,826
11,476,333
11,139,258
18,463,121
16,766,418
978,169
871,648
(7,964,957)
(6,498,808)
11,476,333
11,139,258
These financial statements should be read in conjunction with the accompanying notes.
CoRpoRAte goVeRnAnCe StAtement
31
08
Statement of Changes in equity
For the year ended 30 June 2014
CONSOLIDATED
Issued
Capital
Accumulated
Losses
Options
Reserve
Foreign
Currency
Translation
Reserve
Total
Equity
Year Ended 30 June 2013
$
$
$
$
$
Balance 1 July 2012
16,079,010
(3,915,407)
Placement
Options issued
Share issue expenses
Total comprehensive result
for the year
727,515
-
(40,107)
-
-
-
-
(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
Year Ended 30 June 2014
Balance 1 July 2013
16,766,418
(6,498,808)
917,000
(45,352)
11,139,258
Placements (Note 12)
Entitlements Issue
Options issued
Share issue expenses
Total comprehensive result
for the year
925,270
830,872
-
(59,439)
-
-
-
-
-
(1,466,149)
-
-
121,154
-
-
-
-
-
-
925,270
830,872
121,154
(59,439)
(14,633)
(1,480,782)
As at 30 June 2014
18,463,121
(7,964,957)
1,038,154
(59,985)
11,476,333
These financial statements should be read in conjunction with the accompanying notes.
32
SCotgold AnnuAl RepoRt I 2014
Statement of Cash Flows
09
As at 30 June 2014
Notes
CONSOLIDATED
2014
$
2013
$
CASH FLOWS FROM OPERATING ACTIVITIES
Payment to suppliers
Interest income received
(1,044,010)
(1,184,916)
9,756
8,751
Net Cash Outflow From Operating Activities
19
(1,034,254)
(1,176,165)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure
Proceeds of disposal of other fixed assets
(596,402)
(1,263,995)
2,641
-
Net Cash Outflow From Investing Activities
(593,761)
(1,263,995)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and options
Share and option issue transaction costs
Borrowings net of costs
1,756,142
(59,439)
727,515
(40,107)
-
2,230,245
Net Cash Inflow From Financing Activities
1,696,703
2,917,653
Net increase in cash held
68,688
477,493
Effect of exchange rate fluctuations on cash and cash
equivalents
1,916
20,145
Cash and cash equivalents at the beginning of this financial
year
570,253
72,615
Cash and cash equivalents at the end of this financial year
5
640,857
570,253
These financial statements should be read in conjunction with the accompanying notes.
CoRpoRAte goVeRnAnCe StAtement
33
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
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 2014, the group had cash available of $640,857, but had a working capital deficit of $2,630,072
due primarily to the loan from RMB Bank of $3,031,286. Subsequent to year end, the company completed a
placement of 56,874,933 fully paid ordinary shares at an issue price of $0.0075 to raise $426,562 and 18,765,318
fully paid ordinary shares at an issue price of $0.010 to raise $187,653.
Also subsequent to year end $1 million has been advanced to the Company under Convertible Note Agreements.
The funds raised by the Convertible Notes has been used as part-repayment of the RMB Facility as described
below and for working capital.
The RMB Facility has been partially repaid using funds advanced under the Convertible Notes such that the
£1,500,000 amount outstanding has been reduced by £320,000 to £1,180,000. Furthermore capitalised interest
outstanding on the facility has been settled.
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 2014 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.
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.
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.
34
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
Statement of Compliance
The financial report was authorised for issue on 30 September 2014.
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 2014, 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 2014. 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.
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.
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
35
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
(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.
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.
36
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
(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 relevant 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.
(m)
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.
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
37
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
Upon the exercise of the option, the balance of the share-based payments reserve relating to the option is
transferred to share capital.
(n)
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.
The functional currency of the foreign operation, Scotgold Resources is Pounds Sterling (£).
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.
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.
(o)
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.
38
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
Impairment of mineral exploration and evaluation
At 30 June 2014, the Group had capitalised mineral exploration and evaluation expenditure of $13,894,769 (2013:
$13,348,454). During the year, as part of the Company’s Notice of General Meeting lodged with ASX on 23 June
2014, a valuation was conducted of the Group’s Cononish Gold and Silver Project by an independent valuer based
in the United Kingdom. This report was on a fair market value basis and was carried out in accordance with the
principles of the VALMIN code.
The valuation was determined upon the expected value method based upon discounted cash flow analysis which
was derived by applying a discount factor of 70% to the results of the DCF analysis to arrive at a fair market value
basis. The value was based upon a post-tax NPV of £7.91 million at a discount rate of 10% which after a discount
factor of 70% arrived at a fair market valuation of £2.4 million (equivalent to $4.4 million at 30 June 2014 spot rate).
AASB 6 Exploration for and Evaluation of Mineral Resources requires an assessment of recoverable amount to be
completed whenever facts and circumstance suggest that the carrying amount of an exploration asset may exceed
its recoverable amount. Recoverable amount is defined within AASB 136 Impairment of Assets as the higher of fair
value less costs to sell and value-in-use. Value-in-use is determined on a pre-tax basis and is the present value of
the future cash flows expected to be derived from the asset or cash-generating unit.
As AASB 136 requires recoverable amount to be determined on the basis of the higher of value-in-use and fair
value less costs to sell, the directors have instructed the independent valuers to prepare the recoverable amount
calculation on the basis of value-in-use. The value determined by the independent valuers on this basis is £11
million ($20 million at 30 June 2014 spot rate). This is in excess of the carrying value of the associated exploration
expenditures at 30 June 2014 and therefore, in accordance with AASB 136, no impairment has been recorded.
NOTE 2 – REVENUE
Revenue
Interest received
Other income
Total revenue
2014
$
2013
$
9,758
10,655
20,413
9,483
5,971
15,454
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
39
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
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
Profit on disposal of property, plant and equipment
2014
$
2013
$
5,545
5,545
266,426
266,426
17,589
5,562
35
23,186
2,641
19,910
6,288
36
26,234
-
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:
2014
$
2013
$
Loss from ordinary activities
1,466,149
2,583,401
Prima facie income tax benefit at 30%
439,845
775,020
Tax effect of permanent differences
Share based payments
Share Issue Costs amortised
R & D Tax Offset refund received
Other non-deductible expenses
(36,346)
48,772
(44,880)
(465)
(273,000)
69,358
(67,896)
(265)
Income tax benefit adjusted for permanent differences
406,926
503,217
Deferred tax asset not brought to account
(362,046)
(435,321)
Income tax benefit
44,880
67,896
40
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
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:
UNRECOGNISED DEFERRED TAX ASSETS
Revenue Losses after permanent differences
Capital Raising Costs yet to be claimed
2014
$
2013
$
1,701,215
1,290,397
30,845
39,232
1,732,060
1,329,629
The potential deferred tax asset has not been brought to account in the financial report at 30 June 2014 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;
The company and its controlled entity continue to comply with the conditions for deductibility imposed
by tax legislation; and
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.
(b)
(c)
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
2014
$
2013
$
640,857
570,253
37,626
132,363
169,989
22,524
3,526
26,050
90,335
83,222
NOTE 7 – OTHER CURRENT ASSETS
Prepayments
13,026
24,618
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
41
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
NOTE 8 – PLANT AND EQUIPMENT
Plant and equipment
Cost
Accumulated Depreciation
Movement for the year
Opening balance
Additions
Disposals
Depreciation expensed
Closing balance
2014
$
2013
$
349,150
(227,849)
121,301
349,150
(204,663)
144,487
144,487
170,721
-
-
(23,186)
121,301
-
-
(26,234)
144,487
NOTE 9 – MINERAL EXPLORATION AND EVALUATION
Opening balance
Expenditure during the year
Closing balance
13,348,454
12,084,602
546,315
1,263,852
13,894,769
13,348,454
The ultimate recoupment of exploration expenditure carried forward is dependent upon successful development
and commercial exploitation, or sale of the respective areas.
As disclosed on note 1(n), an impairment assessment was conducted during the year by an independent
valuer which indicated the value-in-use associated with the Cononish project was £11 million ($20 million at 30
June 2014 spot rate) and, as this is in excess of the related carrying amount in accordance with AASB 136 no
impairment has been recorded at 30 June 2014.
NOTE 10 – TRADE AND OTHER PAYABLES
Trade creditors
Other accruals
Trade creditors and accruals relating to exploration expenditure
Trade creditors and accruals relating to administration
2014
$
2013
$
353,598
69,060
422,658
106,246
316,412
422,658
331,085
119,286
450,371
156,333
294,038
450,371
Trade creditors are non-interest bearing and are normally settled on 30 day terms (2013: 30 days).
42
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
NOTE 11 – INTEREST BEARING LIABILITIES
Financing Agreements
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 2014 in the amount of £1,500,000, together with capitalised interest of
£177,817. The carrying value of the assets pledged as security is $20,257,816 at 30 June 2014.
NOTE 12 – ISSUED CAPITAL
(a)
Issued capital
2014
$
2013
$
483,889,318 ordinary shares fully paid (2013: 211,565,739)
18,463,121
16,766,418
(b)
Movements in ordinary share capital of the Company were as follows:
Date
Details
Shares
Value
(cents)
$
Balance at 30 June 2012
196,249,629
16,079,010
7/12/2012
Placement
Transaction costs arising on share issues
15,316,110
-
4.7500
727,515
(40,107)
Balance at 30 June 2013
211,565,739
16,766,418
20/09/2013
06/01/2014
23/01/2014
05/03/2014
21/03/2014
Placement
Entitlements Issue
Entitlements Issue Shortfall
Placement
Placement
Transaction costs arising on share issues
(c)
Movements in options were as follows:
Balance at 30 June 2012
31/07/2012
Options issued – RMB borrowing costs
10/10/2012
Options issued – Incentive options
7/12/2012
Options issued – Free attaching options
7/12/2012
Options issued – Share issue costs
9/04/2013
Options issued – RMB borrowing costs
1#
2#
3#
4#
5#
Balance at 30 June 2013
Options vesting – Incentive options
Options Expiring 7 June 2014
Balance at 30 June 2014
10,000,000
148,519,802
17,654,502
90,000,000
6,149,275
-
483,889,318
-
26,222,222
3,000,000
15,316,110
153,161
7,111,111
51,802,604
-
(15,316,110)
36,486,494
2.0000
0.5000
0.5000
0.7500
0.8175
200,000
742,599
88,273
675,000
50,270
(59,439)
18,463,121
-
785,000
-
-
7,000
125,000
917,000
121,154
-
1,038,154
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
43
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
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
£0.045
£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.
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
Balance at beginning of the year
Reserve arising on translation of foreign currency subsidiary
Balance at end of the year
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
2014
$
2013
$
6,498,808
1,466,149
7,964,957
3,915,407
2,583,401
6,498,808
45,352
14,633
59,985
46,032
(680)
45,352
917,000
121,154
1,038,154
-
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 assessed value of options issued.
44
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
NOTE 14 – SHARE BASED PAYMENTS
During the current and prior year share based payments in the form of options were made as follows.
Grant Date
Purpose of issue
24/07/12
RMB borrowing costs
Share issue costs
RMB borrowing costs
7/12/12
9/04/13
8/10/12
Consultants incentive options
3,000,000
3,000,000
2014
Number
2014
Value
$
-
-
-
-
-
-
8.0
2013
Value
cents
6.8
6.9
6.6
2013
Number
26,222,222
153,161
7,111,111
-
33,486,494
Consultants incentive options vest as shown below and for the purposes of valuing the share based payment the
total value is prorated using the number of days in the vesting period to 30 June 2014.
Values were derived using the Black Scholes model using the following parameters:
Grant
Date
Vesting
Date
Number Volatility Value
date
Expiry
date
Price
(cents)
Non-
marketability
discount
Value
$
31/07/12 31/07/12
26,222,222
124% 24/07/12
24/12/15
7/12/12
7/12/12
153,161
200% 07/12/12
07/12/15
9/04/13
9/04/13
7,111,111
124% 09/04/12
28/03/16
8/10/12
31/03/13
1,000,000
111% 31/03/13
31/03/22
8/10/12
31/03/14
1,000,000
111% 31/03/14
31/03/22
8/10/12
31/03/15
1,000,000
111% 31/03/15
31/03/22
6.8
6.9
6.6
8.0
8.0
8.0
30% 785,000
30%
7,000
30% 125,000
30% 44,923
30% 44,923
30% 31,307
No share options were exercised during the year.
The share options outstanding at the end of the year had a weighted average exercise price of 6.9 cents per
option (2013: 7.0 cents per option).
The weighted average fair value of options granted during the year was 4.0 cents per option (2013: 2.7 cents per
option).
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
45
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
NOTE 15 - COMMITMENTS FOR EXPENDITURE
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 2015 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
$
27,000
27,000
81,000
135,000
Licence Fee
Total
$
31,250
31,250
93,750
156,250
$
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 2014.
NOTE 17 - INVESTMENT IN CONTROLLED ENTITY
Registered
Number
Country of
Incorporation
Interest Held
Value of
investment
Parent
Scotgold Resources Limited
42 127 042 773
Australia
100%
Subsidiary
$
N/A
Scotgold Resources Limited
SC 309525
Scotland
100%
5,491,881
Subsidiary of subsidiary
Fynegold Exploration Limited
SC 084497
Scotland
100%
-
46
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
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
Loss from ordinary activities
(1,466,149)
(2,583,401)
2014
$
2013
$
Depreciation
Profit on sale of fixed assets
Borrowing costs
Capitalised interest expense
Non-cash movement on reserves
Movement in assets and liabilities
Receivables
Other current assets
Payables
Revaluation effect of foreign currency working capital
23,186
(2,641)
-
423,832
121,154
26,234
-
266,426
110,784
917,000
(900,618)
(1,262,957)
(151,052)
11,592
22,374
(16,549)
14382
-4,249
96,178
(19,519)
Net cash used in operating activities
(1,034,254)
(1,176,165)
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
47
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
NOTE 20 - KEY MANAGEMENT PERSONNEL
(a) Directors
The names and positions of Directors in office at any time during the financial year are:
In office from
In office to
John Bentley
Non Executive Chairman
Chris Sangster
Managing Director
Phillip Jackson
Non Executive Director
17/02/2009
17/10/2007
14/08/2007
present
present
present
(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.
(d) The aggregate compensation made to key management personnel of the group is set out below.
Short-term employee benefits
Post employment benefits
Other long term benefits
Share based payments
Consolidated
2014
$
2013
$
536,430
539,490
-
-
-
-
-
-
536,430
539,490
(e) Aggregate amounts payable to Directors and their personally related entities.
Consolidated
Entity
Consolidated
Entity
2014
$
2013
$
Accounts payable
187,653
73,305
48
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
NOTE 21 - RELATED PARTY INFORMATION
Transactions within the Consolidated Entity
Aggregate amount receivable within the consolidated entities at
balance date
Parent Entity
Parent Entity
2014
$
2013
$
Non-current receivables
14,765,935
13,880,255
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
Consolidated
2014
$
33,100
33,100
2013
$
30,650
30,650
Consolidated
2014
$
2013
$
Earnings used in calculation of earnings per share
1,466,149
5.583,401
Weighted average number of ordinary shares outstanding during
the year used in the calculation of basic loss per share
328,829,995
210,642,576
Number
Number
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.
(b) 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.
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
49
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
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:
Financial Assets
Cash at Bank
Trade and other receivables
Total Financial Assets
Financial Liabilities
RMB Loan (Note 11)
Trade and other payables
Total Financial Liabilities
Weighted Average
Effective Interest Rate
2014
2013
1.93%
1.09%
-
-
Floating Interest Rate
2014
$
640,857
260,324
901,181
2013
$
570,253
109,272
679,525
6.70%
5.25%
-
-
3,031,286
353,598
3,384,84
2,607,455
331,085
2,938,540
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 2014 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
Liabilities
2014
$
Assets
2014
$
Liabilities
2013
$
Assets
2013
$
£ Sterling
3,338,417
175,824
2,994,003
257,230
Foreign currency
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.
At balance date the contracted maturity for the RMB loan of £1,500,000 was 11 August 2014.
50
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
Subsequent to year end a partial repayment of the principal has been made and a re-negotiated contracted
maturity for the balance of the RMB loan of £1,180,000 is on the earlier of capital raising of £2 million or
31 December 2015.
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
Other than as set out below 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.
On 23 September 2014 the company announced the following
CONVERTIBLE NOTES
The company has entered into convertible note agreements (Convertible Notes) on the terms and conditions
set out in the Company’s Notice of Meeting dated 23 June 2014 (and approved by Shareholders at the General
Meeting on 30 July 2014).
$1 million has been advanced to the Company under the Convertible Note Agreements. The funds raised by the
Convertible Notes will be used as part-repayment of the RMB Facility as described below and for working capital.
The Convertible Notes have a repayment date of 24 months from their date of issue, with an interest rate of 1%
per annum. The holders of the Convertible Notes may elect to convert the Convertible Notes (in part or in full) into
ordinary shares in the Company at a conversion price of $0.0075 per share. For every share issued on conversion
of the Convertible Notes, one free attaching option will be issued, exercisable at $0.012 on or before 31 March
2016. Full details of the Convertible Notes and attaching options were set out in the Company’s Notice of Meeting
dated 23 June 2014.
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
51
10
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
PARTIAL REPAYMENT OF RMB FACILITY
The RMB Facility has been partially repaid using funds advanced under the Convertible Notes such that the
£1,500,000 amount outstanding has been reduced by £320,000 to £1,180,000. Furthermore capitalised interest
outstanding on the facility has been settled.
EXTENSION OF RMB FACILITY
The remaining amount under the RMB Facility Agreement has been extended to 31 December 2015 in
consideration for:
(a)
(b)
the partial repayment of the RMB Facility set out in paragraph 2 above (such that the facility amount is
£1,180,000; and
the issue to RMB Australia Holdings Ltd of 9,000,000 fully paid ordinary Scotgold Shares and 30,000,000
unlisted Options exercisable at 0.69 pence on or before 22 September 2017.
The Shares and Options have been issued under the Company’s Listing Rule 7.1 capacity.
52
SCotgold AnnuAl RepoRt I 2014
notes to and forming part of
the Financial Statements
For the year ended 30 June 2014
10
NOTE 26 - PARENT ENTITY DISCLOSURES
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 LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Financial Performance
Loss for the year
Other comprehensive income
Total comprehensive loss
2014
$
2013
$
530,256
117,792
358,954
4,735
648,048
363,689
6,143
5,491,881
8,580,077
6,567
5,491,881
7,970,120
14,078,100
13,468,568
14,726,148
13,832,257
218,373
3,031,286
85,576
2,607,455
3,249,659
2,693,031
11,476,489
11,139,226
22,540,613
1,038,154
(12,102,278)
20,843,909
917,000
(10,621,652)
11,476,489
11,139,257
1,480,626
-
1,480,626
2,582,772
-
2,582,772
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.
noteS to And FoRmIng pARt oF the FInAnCIAl StAtementS
53
11
directors’ declaration
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
2014 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 2014.
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, 2014.
54
SCotgold AnnuAl RepoRt I 2014
Independent Auditor’s Report 12
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 consolidated statement of financial position as at 30 June 2014, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated 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 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 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 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
Independent AudItoR’S RepoRt
55
12
Independent Auditor’s Report
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a) the financial report of 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 2014 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 at 30 June
2014, the group had cash available of $640,857, but had a working capital deficit of $2,630,072 due primarily to
the loan from RMB Bank of $3,031,286. 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 2014.
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 2014 complies
with section 300A of the Corporations Act 2001.
HLB Mann Judd
Chartered Accountants
Perth, Western Australia
30 September 2014
M R W Ohm
Partner
56
SCotgold AnnuAl RepoRt I 2014
Shareholders details 13
Number of Shareholders
ASX
65
76
122
652
215
1,129
AIM
7
19
15
60
75
176
Total
72
95
137
712
290
1,305
Number of Shares
13,202
266,012
1,023,551
24,072,932
315,369,702
340,745,399
3,060
43,714
112,849
2,274,462
225,350,085
227,784,170
16,262
309,726
1,136,400
26,347,394
540,719,787
568,529,569
ANALYSIS OF SHAREHOLDING
Shareholding
1
1,001
5,001
10,001
100,001
Shareholding
1
1,001
5,001
10,001
100,001
Total on Issue
Voting Rights
-
-
-
1,000
5,000
10,000
- 100,000
-
or more
-
-
-
1,000
5,000
10,000
- 100,000
-
or more
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
Substantial Shareholders
The following substantial shareholders have notified the Company in accordance with Corporations Act 2001.
Mr Nat le Roux
Mr Richard Milne Harris
Directors’ Shareholding
87,333,333
29,874,933
15.4%
5.3%
The interest of each director in the share capital of the Company is detailed in the Directors’ Report.
ShAReholdeRS detAIlS
57
13
Shareholders details
TOP TWENTY SHAREHOLDERS
Name
Shares
%
Rank
Mr Nat le Roux
HSDL Nominees Limited
Barclayshare Nominees Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
Golden Matrix Holdings Pty Ltd
87,333,333
15.4%
27,149,555
22,918,856
21,055,480
19,874,933
TD Direct Investing Nominees (Europe) Limited
17,597,191
Westland Group Holdings Pty Ltd
Hargreaves Lansdown (Nominees) Limited <15942>
Hargreaves Lansdown (Nominees) Limited
Share Nominees Limited
Mr John Bentley
Mr Graham Donaldson & Mrs Christine Donaldson
Mr Peter John Newcomb
Investor Nominees Limited
Mr Richard Milne Harris
Secure Nominees Limited
RMB Australia Holdings Limited
HSDL Nominees Limited
Investor Nominees Limited
Mrs Dorita Maria Thomson
17,500,000
16,116,224
13,982,504
12,807,276
12,545,603
11,851,786
10,417,855
10,059,091
10,000,000
9,995,000
9,000,000
7,058,573
6,719,386
6,305,916
4.8%
4.0%
3.7%
3.5%
3.1%
3.1%
2.8%
2.5%
2.3%
2.2%
2.1%
1.8%
1.8%
1.8%
1.8%
1.6%
1.2%
1.2%
1.2%
1 ASX
2
3
AIM
AIM
4 ASX
5 ASX
6
AIM
7 ASX
8
9
10
AIM
AIM
AIM
11 ASX
12 ASX
13 ASX
14
AIM
15 ASX
16
AIM
17 ASX
18
19
AIM
AIM
20 ASX
350,288,562
61.6%
58
SCotgold AnnuAl RepoRt I 2014
Interest in exploration leases 14
Scotland
Location
Agreement
Grant Date
Cononish Glen Orchy
Landholder Lease
23 July 2009
Area
20 sq km
Cononish Glen Orchy
Option Agreement
5 November 2013
975 sq km
Glen Lyon
Inverliever
Knapdale
Ochils
Option Agreement
5 November 2013
1,369 sq km
Option Agreement
5 November 2013
864 sq km
Option Agreement
5 August 2013
Option Agreement
5 August 2013
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.
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.
InteReSt In exploRAtIon leASeS
59
15
Company Information - Scotland
Exploration Office
Nominated Adviser (NOMAD)
Share Registry
Auditor
Solicitors
Bankers
Media
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
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
60
SCotgold AnnuAl RepoRt I 2014
24 Colin Street, West Perth, WA 6005
Telephone +61 8 9222 5850
Facsimile
+61 8 9222 5810
Email sgz@scotgoldresources.com
www.scotgoldresources.com