Scotgold Resources Annual Report 2015

Plain-text annual report

Annual Report 2015 ACN 42 127 042 773 Contents Company Information �� 1 Review of Operations �� 2 Directors’ Report �� 13 Auditor’s Independence Declaration �� 22 Statement of Comprehensive Income �� 24 Statement of Financial Position �� 25 Statement of Changes in Equity �� 26 Statement of Cash Flows �� 27 Notes to Financial Statements �� 28 Directors’ Declaration �� 45 Independent Auditor’s Report �� 46 Shareholder Details �� 48 Interest in Exploration Leases �� 50 Corporate Governance Statement �� 51 Company Information – Scotland �� 52 Photographs contained in this Annual Report are for illustration purposes only and are not necessarily assets of the Company. Company 01 Information ABN Directors 42 127 042 773 Nathaniel le Roux Richard Gray Non-Executive Chairman Managing Director Company Secretary Registered Office Share Registry Auditor Bankers Chris Sangster Phillip Jackson Richard Harris Peter Newcomb 24 Colin Street Perth, WA 6005 Telephone: Facsimile: Email: Non-Executive Director Non-Executive Director Non-Executive Director +61 8 9222 5850 +61 8 9222 5810 sgz@scotgoldresources�com Computershare Investor Services Pty Ltd Level 11 172 St Georges Terrace Perth, WA 6000 Telephone: Facsimile: +61 8 9323 2000 +61 8 9323 2033 HLB Mann Judd Level 4, 130 Stirling Street Perth, WA 6000 Telephone: Facsimile: +61 8 9227 7500 +61 8 9227 7533 Westpac Banking Corporation 116 James Street Northbridge, WA 6000 Securities Exchange Listing Scotgold Resources Limited shares are listed on the Australian Securities Exchange and on the AIM board of the London Stock Exchange� The home exchange is Perth, Western Australia� ASX Code: AIM Code: Shares Shares SGZ SGZ Website www�scotgoldresources�com 1 SCOTGOLD ANNUAL REPORT I 2015 of Operations ABOUT SCOTGOLD Scotgold Resources Limited was established in 2007 and listed on the Australian Securities Exchange (ASX:SGZ) 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 listing, has been the advancement of the Cononish Gold and Silver Project in Scotland’s Grampian Highlands to a production decision and the ongoing exploration of the highly prospective tenements comprising the Grampian Gold Project (which is described in greater detail below) with the view of identifying further project opportunities� Although the Company’s initial application for planning permission to develop the project in 2010 was rejected, the Company submitted a revised application and on 25th October 2011, the Board of the Loch Lomond and the Trossachs Parks (“the Parks Board”) 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� During 2014, the Company made an application to vary this planning permission (relating to hours of operation of the processing plant and work on site) and on 24 January 2015, the Board of the Loch Lomond and the Trossachs National Park again voted unanimously to approve the Company’s application� As a variation to a condition of the existing consent, this approval also has the effect of extending the date by which development should commence to January 2018� The Company continues to examine financing options to bring the project to a development decision� The Grampian Gold Project comprises Crown Option agreements covering some 4100 km2 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�8 Moz 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� OPERATIONAL REVIEW CONONISH GOLD AND SILVER PROJECT During the year, the Company focussed on the completion the Bankable Feasibility Study (“BFS”), following a review and optimisation of the 2013 Cononish development plan� This BFS now forms the basis for discussions with possible finance providers in order to advance the project to production� The key inputs to the BFS included • A revised Mineral Resource Estimate for the project completed by CSA Global (UK) Limited • A gap analysis of the 2013 Cononish Development Plan to identify areas requiring further input to meet BFS standards • A trade off study examining alternative mining methods and means of access to optimise project returns • A variation to the existing planning permission to facilitate 24 hour/6 day plant operations (as opposed to 16 hour/6 day) Based on the results of the above studies, a Bankable Feasibility Study (BFS) was completed for the project by Bara Consulting UK Ltd, highlights of which are shown in Table 1� 2 SCOTGOLD ANNUAL REPORT I 2015Review02Review of Operations 02 Table 1: Cononish Gold and Silver Project BFS Highlights PRODUCTION Average Production Average LoM Grade (Au Eq) Average Metal Produced Life of Mine 72,000 tonne per annum 11�8 gram/tonne 23,370 ounces equivalent gold* per annum 8 years FINANCIAL (at Gold US$1,100/oz & Silver US$15/oz) Peak Funding Requirement Total LoM Capital Expenditure £18�5M £24M Unit Operating Costs EBITDA NPV (10%) pre-tax £327/ ounce equivalent gold (US$523/ ounce equivalent gold) £67M £23M IRR pre-tax 45% Payback Period 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. * Ounces equivalent gold = ounces gold + ounces silver*15/1100 – ratio calculated at base case prices of $1100/oz Au 19 months and $15.00/oz Ag SCOTGOLD ANNUAL REPORT I 2015 REVIEW OF OPERATIONS 3 3 The study demonstrates: • Robust Project economics using a base case gold price of US$1,100/ounce (£688/ounce) with an EBITDA of £67�4M, a pre-tax free cashflow of £43�4M, pre-tax NPV(10%) of £22�5M and a pre-tax IRR of 45%� • Low operating costs with Life of Mine (‘LoM’) average of £327/ounce equivalent gold (US$523/ounce equivalent gold) (including Royalties) and Project breakeven (0% IRR) at US$689/ ounce equivalent gold • Peak Funding Requirement of £18�5M and all in LoM Capital including contingencies, replacements etc� of £24�0M • Average annual gold production of 23,370 ounce equivalent gold with peak production in Year 2 of 28,540 ounce equivalent gold� • Average LoM grade of 11�8 grams equivalent gold / tonne and peak grade of 15�4 grams equivalent gold / tonne in year 2� • Rapid Implementation schedule of 16 months post contract and finance completion and short Payback Period of 19 months from full production� Details of the material assumptions considered in the derivation of the production target and forecast financial information above and the BFS Study Executive Summary are provided on Scotgold’s website at scotgoldresources.com – ASX releases – 05/08/2015 – Cononish Gold and Silver Project Bankable Feasibility Study and Bankable Feasibility Study – Executive Summary� Mineral Resources The new Mineral Resource Estimate (‘MRE’) for the Cononish Gold and Silver Project was compiled by CSA Global (UK) Limited (see ASX release: Resource Estimate Update – 22/01/2015) and utilised a detailed three dimensional (3D) geological model (as opposed to the previous two dimensional polygonal estimate (JORC 2004))� This 3D geological model more accurately estimated the volume of the vein deposit, as well as assisted in the interpretation of other key geological features, such as faults and dykes� The new MRE also incorporated advances in geological interpretation and geostatistical evaluation, including the use of local uniform conditioning to optimise the grade tonnage distribution for the Selective Mining Unit (SMU) dimensions achievable with the planned underground mining method� The MRE is classified as Measured, Indicated and Inferred Resources, (based on guidelines recommended in the JORC Code (2012)), is reported at a cut-off grade of 3�5 g/t gold and is presented in Table 2 below� Table 2 also serves as the Company’s Annual Mineral Resource statement� Table 2: Annual Mineral Resource Statement as at 30/06/2015 Cononish Main Vein Gold and Silver Mineral Resources (reported at a 3�5 g/t Au cut-off) compiled 12/01/2015� Cononish Gold Project Mineral Resource Estimate as at 12/01/2015 Reported at a cut-off grade of 3.5 g/t gold K Tonnes Grade Au g/t Metal AuKoz Grade Ag g/t Metal Ag Koz In situ Dry BD Classification Measured in situ Indicated in situ 60 474 Indicated – Mined Stockpile 7 Sub- total M & I Inferred –in situ Total MRE 541 75 617 15�0 14�3 7�9 14�3 7�4 13�4 29 217 2 248 18 266 71�5 58�7 39�0 59�9 21�9 55�3 139 895 9 1,043 53 1,096 2�72 2�72 2�72 2�72 2�72 2�72 Reported from 3D block model with grades estimated by Ordinary kriging with 15 ml x 15 ml SMU Local Uniform Conditioning Adjustment. Minimum vein width is 1.2m. Totals may not appear to add up due to appropriate rounding. 4 SCOTGOLD ANNUAL REPORT I 2015Review of Operations02Mineral Resources reported as at 30/06/2014 totalled (including Measured, Indicated and Inferred categories) 460,600t @ 11�7g/t Au and 45g/t Ag at a 3�5g/t cut off� (This estimate was compiled in accordance with the JORC (2004) Code and is superseded by the recent update)� A comparison of key parameters between the two estimates is given below: • Gold metal content of the Measured and Indicated Resource increased by 201% to 248 K oz; • Average gold grade of the Measured and Indicated Resource increased by 9% to 14�3 g/t; • Measured and Indicated Resource tonnes increased by 176% to 541 K tonnes; • Total MRE tonnes increased by 34% to 617 K tonnes; and • Average gold grade of the Total MRE increased by 18% to 13�4 g/t gold; The Cononish mineralisation remains open at depth down plunge and to the west along strike� There is therefore potential to add to the resource by further extensional drilling� 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� Extensive gold-in-soil anomalies, mineralisation associated with outcrops and trenching and geophysical anomalies close to the current resource clearly warrant further follow up� In addition, 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� Long section showing Mineral Resource by classification Ore Reserves As part of initial work towards developing the BFS, Bara Consulting UK Ltd completed a thorough review of the 2013 Cononish Development plan in order to identify opportunities to not only improve on the plan but to also improve the confidence in the plan� As a result of this review, further work was undertaken on the mining methodology, access design, geotechnical evaluation and overall mine design� The outcome of this work was that a revised Development plan was completed in all areas to at least a Prefeasibility Study level and consequently the Company estimated an Ore Reserve in accordance with the JORC 2012 code based on the Mineral Resource Estimate (MRE) issued in January 2015� The new Reserve Estimate is shown in table 3 below�Table 3 also serves as the Company’s Annual Ore Reserve statement as at 30/06/2015� 5 SCOTGOLD ANNUAL REPORT I 2015Review of Operations02Table 3 Annual Ore Reserve Statement as at 30/06/2015 Classification As at 25 May 2015 (JORC 2012 Code) Tonnes (‘000) Au Grade (g/t) Au Metal (k oz) Ag Grade (g/t) Ag Metal (k oz) (Bara Consulting Limited Ore Reserve Statement dated May 2015) As at 30 April 2013 (JORC 2004 Code) Tonnes (‘000) Au Grade (g/t) Au Metal (k oz) Ag Grade (g/t) Ag Metal (k oz) (Development Plan dated 30 April 2013) Variance - Increase / (Decrease) 2013 to 2015 Tonnes (‘000) Au Grade (g/t) Au Metal (k oz) Proven 65 11�5 24 51�5 108 Probable 490 11�1 174 47�2 743 Total 555 11�1 198 47�7 851 200 11 71 45 289 200 11 71 45 289 0 0 0 0 0 n/a n/a n/a 145% 1% 145% 177% 1% 179% Note: the Ore Reserve estimates reported in the Development Plan dated 30/04/2013 under the JORC 2004 code are no longer applicable (as discussed in the 2014 Annual Report) but are presented here for comparative purposes only. For greater detail on the parameters derived from this work and used for the Ore Reserve estimation process, refer to ASX release (26/05/2015 – Cononish Gold Project Study Update and Reserve Estimate) on the Company’s website� The most significant factor underlying the increase in the 2015 Ore Reserve estimate is the Mineral Resource Estimate (MRE) published in January 2015� The increased confidence in this MRE and the consequent increase in material classified as Indicated, together with the work done to verify the modifying factors, has resulted in the estimation of both Proven and Probable categories of Ore Reserve� There were no Ore Reserves reported for the project as of 30/06/2014� Bankable Feasibility Study A summary of the key attributes of the project from the BFS are given below • Mineralization occurs in a narrow (average width of about 2 m) near vertical quartz vein� • The project has a resource estimate in Measured, Indicated and Inferred categories (see ASX release “Resource Estimate Update” dated 22/01/2015) of 541,000 tonnes at a gold grade of 14�3 g/t and a silver grade of 59�7 g/t� The average Bulk Density is 2�72 tonne/m3� • After taking into account various modifying factors, the proven and probable ore reserves (see ASX release “Cononish Gold Project Study Update and Reserve Estimate” dated 26/05/2015), comprises 555,000 tonnes at a gold grade of 11�1 g/t and a silver grade of 47�7 g/t� • Proven and probable ore reserves represent 12% and 88% of the reported production target respectively� No inferred resources are considered in the BFS� • Access will be from the existing exploration adit and footwall ramps will provide access to ore drives at a 15m vertical interval� A rock pass system has been included to improve ore handling and the transfer of waste� • The mining method will be a retreat top down Long Hole Open Stoping method using conventional trackless equipment� Shrinkage stoping was investigated but was only economically viable in the very narrowest (<1�4 m) areas of the mine and was therefore not considered further� 6 SCOTGOLD ANNUAL REPORT I 2015Review of Operations02• Full production will be at 72,000 tonnes per annum� The life of mine at full production based on the current reserves in the Proven and Probable categories is approximately 8 years� The mining production schedule adequately takes into account the constraints mentioned below� Average gold and silver production will be approximately 22,208 ounces gold and 85,081 ounces silver per annum respectively or 23,370 ounce equivalent gold • Mining permission has been granted but with certain conditions which have been accommodated within the mine plan� Approximately 129,000 tonnes of tailings (after taking into account the mass pull) is scheduled to be stored in old stopes towards the end of the mine’s life, enabling the full capacity of the Tailings Management Facility (‘TMF’) to be restricted to 400,000 tonnes and minimising surface impact� • Waste is only trucked to surface when required for the building of the TMF and various screening berms (73,000 tonnes)� All other waste will be stored in old stopes (163,000 tonnes)� • Based on extensive testwork by Lakefield, Gekko and AMMTEC, the plant is designed as a conventional gravity and flotation plant� 25% of the gold will be recovered on site, it is estimated, into a doré bar with the balance produced as concentrate to be treated off site� Overall estimated recovery is 93% for gold and 90% for silver The doré and concentrate will be sold “at the gate” to third party processors� • The process plant will be housed in a single multi-use building which will also contain a workshop and office area� This is designed to have minimal visual and noise impact on the surrounding area� Views of 3D model showing mine access infrastructure and stope layout 7 SCOTGOLD ANNUAL REPORT I 2015Review of Operations02Financial Results The following costs have been estimated at an accuracy of between -5% and +15% and include appropriate contingencies: • Peak funding requirement (pre production expenditure): £18�5 million� • Total LoM Capital Expenditure: £24 million� • Average operating cost: £110 per tonne treated (including marketing, interest and royalty charges)� It should be noted that transport, smelting and refining charges where reflected as cost of sales in the PFS� These costs have been included as part of operating costs in the BFS� • Average operating cost: £327 (US$ 523) per ounce equivalent gold (on the same basis as above)� • All in cost including capital £455 (US$ 729) per ounce equivalent gold� The following financial results were estimated using a gold price of US$ 1,100/ounce, a silver price of US$ 15/ ounce and a US$/£ exchange rate of 1�6: • EBITDA • Pre-tax NPV@10% • Pre-tax IRR • Post-tax NPV@10% • Post-tax IRR • Average profit margin • Payback * Note post-tax calculations are based on a hypothetical all equity funding scenario and as such are illustrative only. £67�4 million £22�9 million 45% £18�5 million* 41%* 53% 19 months Table 4 shows the pre-tax cashflow sensitivity to gold price� Table 4 Pre Tax Cashflow Sensitivity PRE-TAX CASHFLOW SENSITIVITY TO GOLD PRICE Gold Price US$700/ ounce £1�5M Pre Tax Cashflow US$900/ ounce US$1,000/ ounce US$1,100/ ounce US$1,200/ ounce US$1,300/ ounce US$1,500/ ounce £22�5M £32�9 £43�4M £53�9 £64�3M £85�3M NPV (10%) (£4M) IRR 0% £9M 25% 16�1 35% £23M 45% 29�8 54% £37M 64% £50M 82% Planning status During 2014, the Company held discussions with the Planning Authority regarding the variation of condition 13 of the Planning Consent relating to the hours of operation of the processing plant and subsequently submitted an application to vary this condition� The application was unanimously approved at a meeting of the Planning Authority Board and the relevant legal agreements were approved on 6 February 2015� The variation provides for a change to the hours of work permitted for the operation of the processing plant to a 24/6 basis (excluding Sundays and public holidays) compared to the previously permitted 16/6 basis (excluding Sundays and public holidays) and will facilitate smoother plant operations and possible capital expenditure reductions in respect of the processing plant� The decision notice granting planning permission to the project issued by the Planning Authority on 13 February 2012 (and subsequently re-issued on 6 February 2015) requires a number of ‘suspensive’ conditions to be satisfied prior to the start of development� Written submissions for all these conditions have been made (excluding those to be made immediately prior to the start of development) and 64% of the submissions have been accepted by the Planning Authority and the conditions discharged� Finalisation of the discussions with the Planning Authority relating to the discharge of the outstanding conditions will re-commence once further progress towards completing finance for the project has been made� 8 SCOTGOLD ANNUAL REPORT I 2015Review of Operations02 As such, all necessary permitting has either been granted or can be completed within a short time frame 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� The Company continues in discussion with possible finance providers to examine financing options to bring the project to a development decision� 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 Gold and Silver 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 the 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� Regional geology showing ares under option within Dalradian Group In order to advance its understanding of the regional setting, over the past four 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 9 SCOTGOLD ANNUAL REPORT I 2015Review of Operations02infill sampling program in the anomalous result areas in order to further target areas for detailed fieldwork and prospecting� To date a further 450 samples have been taken in the infill program with the program expected to be completed by year end� Interpretation of the stream sediment results is on-going, in conjunction with work undertaken by Drs� Gumiel and Arias (see below)� 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� Principal anomalies identified in the vicinity of Cononish Gold and Silver 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 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: 10 SCOTGOLD ANNUAL REPORT I 2015Review of Operations021 ) 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)� 2 ) 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� The Company recently engaged the services of Drs� Gumiel and Arias of Consulting de Geología y Minería, S�L�, to conduct a structural study of the Cononish deposit and Tyndrum area� Dr� Gumiel is an expert in structural geology and the structural control of mineral deposits with over 38 years’ experience in research and mining exploration� Dr� Arias has over 15 years’ experience as a specialist in database management of geological-mining data, Geographical Information Systems (GIS) and 3D geological modelling� The study aims to place structural and geochemical controls on the distribution of gold across the Cononish/Tyndrum area� The structural and geochemical criteria for the Tyndrum area are anticipated to be applicable across the Grampian Project region to aid and focus regional exploration� In addition, significant work has been undertaken on the existing database to develop 2D and 3D representations of data� The final results of this study are expected shortly� 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. Note: No new exploration results are presented in this report� All results have been previously notified under JORC 2004 and are contained in Scotgold Annual reports 2008 - 2014 and various corresponding ASX releases The information in this report that relates to the 2015 Mineral Resources for Cononish Gold Project (refer ASX release - Resource Estimate Update – 22/01/2015) is based on information compiled by Malcolm Titley, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Titley is employed by CSA Global (UK) Limited, an independent consulting company. Mr Titley 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 Titley 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 the 2015 Ore Reserves for Cononish Gold Project (refer ASX announcement dated 26/05/2015) is based on information compiled by Pat Willis, a Competent Person who is registered as a Professional Engineer (Pr.Eng.) with the Engineering Council for South Africa (ECSA) and a Fellow in good standing and Past President of the Southern Africa Institute of Mining and Metallurgy (FSAIMM). Mr Willis is employed by Bara Consulting Limited, an independent consulting company. Mr Willis 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 Willis consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 11 SCOTGOLD ANNUAL REPORT I 2015Review of Operations02Further, the Company confirms it is not aware of any new information or data that materially affects the information contained in the original announcements and that all material assumptions and technical parameters underpinning the estimate of Resources and Reserves continue to apply and have not materially changed. 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 1 although as previously noted, the Inverliever option area will reduce in size on finalization of matters with the Crown Estates 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 quarter Note 1: The size of the Inverliever option agreement will be reduced from 864km2 to 660km2 on finalisation of agreements with the Crown During 2014, the Crown indicated it was undertaking a review of the grant and renewal of its Option Agreements� The Crown indicated by letter of 21 January 2015, subject to the conclusion of the appropriate legal agreements that it intended to re-grant all the Company’s existing Options subject to a reduction in area in the Inverliever option area� By letter of 14 September 2015, the Crown have offered to renew the existing Options (including the area reduction mentioned) under the existing process pending finalisation of the legal agreements relating to the new regime� 12 SCOTGOLD ANNUAL REPORT I 2015Review of Operations02Directors’ Report 03 for the year ended 30 June 2015 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 2015� 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: John Bentley Non Executive Chairman Alexander Littlejohn Non Executive Chairman Nathanial le Roux Non Executive Chairman Chris Sangster Richard Gray Managing Director Managing Director Nathanial le Roux Non Executive Director Chris Sangster Phillip Jackson Richard Harris Non Executive Director Non Executive Director Non Executive Director In office from 17/02/2009 10/10/2014 18/03/2015 17/10/2007 10/10/2014 10/10/2014 10/10/2014 14/08/2007 10/10/2014 In office to 10/10/2014 14/12/2014 present 10/10/2014 present 18/03/2015 present present present PARTICULARS OF CURRENT DIRECTORS AND COMPANY SECRETARY Nathaniel le Roux Non-Executive Chairman MSc (Hons) Qualifications and experience Mr Nathaniel “Nat” le Roux spent most of his career in financial markets and was Chief Executive of IG Group plc between 2002 and 2006� He is an independent director of the London Metal Exchange and a trustee of various charities� Nat was born in Scotland and went to school in Edinburgh� He holds an MA in Law from Cambridge University and an MSc is Anthropology from University College London� Interest in Shares and Options Fully Paid Shares �� 456,564,373 Special Responsibilities None� Directorships held in ASX listed entities None� 13 SCOTGOLD ANNUAL REPORT I 2015Richard Gray Managing Director BSc (Hons) ARSM, MBA Qualifications and experience Mr Richard Gray most recently served as Head of Mining & Expansion at Avocet Mining PLC� He has extensive international experience, in both underground and open pit mine operations, and brings considerable operational knowledge and management experience and skills to the Company, particularly in the development and implementation of gold mining projects� He has previously held various roles at both majors and juniors within the gold mining sector and his successful career has included 15 years working in South Africa for Gencor Ltd and 10 years in West Africa for Golden Star Resources Ltd� Whilst at Golden Star he served as General Manager of Bogoso Gold Limited, General Manager of Golden Star Wassa Limited and Senior Vice President Operations of Golden Star Resources Ltd� He holds a BSc (Hons) Mining Engineering from the Royal School of Mines, Imperial College and an MBA from the Graduate School of Business, Cape Town University� Interest in Shares and Options Fully Paid Shares �� 2,912,946 Special Responsibilities Mr Gray is the CEO / Managing Director and is responsible for the day to day running of the company� Directorships held in ASX listed entities None� Christopher Sangster Non-executive 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� 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 �� 17,150,213 Special Responsibilities None� Directorships held in ASX listed entities None� 14 Directors’ Reportfor the year ended ended 30 June 201503SCOTGOLD ANNUAL REPORT I 2015Phillip 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 managing legal counsel for a major international mining company, and in private practice specialised in small to medium resource companies� Mr Jackson was managing region legal counsel Asia-Pacific for a leading oil services company for 13 years� He is now General Counsel for a major international oil and gas company� He has been a Director of a number of Australian public companies, particularly mining companies� He has been Chairman of Aurora Minerals Limited since it listed in 2004 and Desert Energy Limited, since it listed in August 2007� His experience includes management, finance, accounting and human resources� Interest in Shares and Options Fully Paid Shares �� 4,331,250 Special Responsibilities Mr Jackson is Chairman of the Audit Committee� Directorships held in ASX listed entities Company Name Aurora Minerals Limited Peninsula Mines Limited Predictive Discovery Limited Richard Harris Non-Executive Director BSC (Hons) Qualifications and experience Appointed 24 September 2003 12 December 2006 4 December 2014 Mr Richard Harris is a mining engineer with over 30 years’ experience in the mining and finance industries as a mining analyst and public company director� He has considerable experience evaluating mining projects, advising, restructuring and raising capital for mining companies� Previously he was a director of Australian silver miner Alcyone Resources Ltd in 2009 after organising a syndicate group which recapitalized and relisted the company� In 2005 - 2008 as Managing Director (later Executive Chairman) he founded and listed as an IPO, Eleckra Mines Limited on the ASX� He holds a BSc (Hons) degree in Mining Engineering from University of Wales� Interest in Shares and Options Fully Paid Shares ��42,999,999 Special Responsibilities None� Directorships held in ASX listed entities None� 15 Directors’ Reportfor the year ended ended 30 June 201503SCOTGOLD ANNUAL REPORT I 201503 Directors’ Report for the year ended ended 30 June 2015 16 SCOTGOLD ANNUAL REPORT I 2015 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 Australia and New Zealand with forty 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 twenty years has been in the resources industry in Western Australia� 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 3,000,000 153,161 7,111,111 30,000,000 $0�080 £0�031 £0�045 $0�0069 31 March 2022 7 December 2015 28 March 2016 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 4,300 km2� PRINCIPAL ACTIVITIES The principal activity of the consolidated entity during the year was mineral exploration in Scotland� Operating Results The consolidated loss after income tax for the financial year was $2,112,965 (2014: $1,466,149)� Financial Position At 30 June 2015 the Company had cash reserves of $802,649 (2014: $640,857)� 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� 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� 17 Directors’ Reportfor the year ended ended 30 June 201503SCOTGOLD ANNUAL REPORT I 2015MEETINGS OF DIRECTORS The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2015, and the number of meetings attended by each Director� These meetings included matters relating to the Remuneration and Nomination Committees of the Company� Number eligible to attend Number attended John Bentley Alexander Littlejohn Nathaniel le Roux Richard Gray Richard Harris Chris Sangster Phillip Jackson - 1 3 3 3 3 3 - 1 3 3 3 3 3 AUDIT COMMITTEE The Audit Committee is comprised of Mr Jackson who chaired one meeting of the audit committee during the year ended 30 June 2015� REMUNERATION REPORT (audited) This report details the nature and amount of remuneration for each director and executive of Scotgold Resources Limited� 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� Performance-based remuneration The company does not pay any performance-based component of salaries� Details of remuneration for year ended 30 June 2015 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 Richard Gray is on a contract dated 23 March 2015 which provides for a fixed salary and benefits, with a termination period of six months� The remuneration is reviewed annually� At the date of this report the annual remuneration for Richard Gray is £100,000� In the event of a termination of contract giving less notice than provided for in this contract, the remaining notice period will be paid in full� 18 Directors’ Reportfor the year ended ended 30 June 201503SCOTGOLD ANNUAL REPORT I 2015Non-Executive Directors The Company’s constitution provides that the Non-Executive Directors may collectively be paid as remuneration for their services a fixed sum not exceeding the aggregate sum determined by a general meeting� The aggregate remuneration has been set at an amount of $300,000 per annum� A Director may be paid fees or other amounts as the Directors determine where a Director performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director� A Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any special duties� Executive Directors may be paid on commercial terms as the Directors see fit� The total remuneration paid to key management personnel is summarised below: Director/Secretary Associated Company Fees $ Consulting $ Total $ Year ended 30 June 2014 John Bentley Chris Sangster Phillip Jackson Peter Newcomb Holihox Pty Ltd Symbios Pty Ltd Ptarmigan Natural Resources Ltd Ptarmigan Natural Resources Ltd Year ended 30 June 2015 John Bentley Sandy Littlejohn Nat le Roux Richard Gray Richard Harris Chris Sangster Chris Sangster Phillip Jackson Peter Newcomb Post-employment Holihox Pty Ltd Symbios Pty Ltd Golden Matrix Holdings Pty Ltd 91,982 - 33,000 - 124,982 16,531 12,532 29,799 - 27,265 92,646 - 35,850 - 214,623 - 241,348 - 170,100 411,448 - - - 139,292 - 142,874 61,590 - 170,100 513,856 91,982 241,348 33,000 170,100 536,430 16,531 12,532 29,799 139,292 27,265 235,520 61,590 35,850 170,100 728,479 Key management personnel share holdings Balance 30 June 2013 Date of appointment Purchase and Sales Date of resignation Balance 30 June 2014 Year ended 30 June 2014 John Bentley Chris Sangster Phillip Jackson Peter Newcomb 1,962,500 6,438,250 750,000 2,787,968 11,938,718 - - - - - 1,471,875 4,828,688 562,500 7,466,545 14,329,608 - - - - - 3,434,375 11,266,938 1,312,500 10,254,513 26,268,326 Year ended 30 June 2015 John Bentley Sandy Littlejohn Nat le Roux Richard Gray Richard Harris Chris Sangster Phillip Jackson Peter Newcomb Balance 30 June 2014 Date of appointment Purchase and Sales Date of resignation Balance 30 June 2015 3,434,375 - - - - 11,266,938 1,312,500 10,254,513 26,268,326 - 2,666,667 87,333,333 - 29,874,933 - - - 119,874,933 9,111,228 2,666,667 369,231,040 2,912,946 13,125,066 5,883,275 3,018,750 1,666,666 407,615,638 (12,545,603) (5,333,334) - - - - - - (17,878,937) - - 456,564,373 2,912,946 42,999,999 17,150,213 4,331,250 11,921,179 535,879,960 19 Directors’ Reportfor the year ended ended 30 June 201503SCOTGOLD ANNUAL REPORT I 2015Directors’ option holdings No options were held by Directors in the years ended June 2014 and June 2015� Related party transactions now disclosed in remuneration report� The consolidated entity does not have any full time Executive officers, other than the Managing Director as detailed above� Aggregate amounts payable to Directors and their personally related entities� Consolidated Entity 2015 $ Consolidated Entity 2014 $ Accounts payable 54,182 187,653 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 2015 and forms part of the Directors’ report� 20 Directors’ Reportfor the year ended ended 30 June 201503SCOTGOLD ANNUAL REPORT I 2015 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� Richard Gray Managing Director Dated at Tyndrum, Scotland, this 29th day of September 2015 21 Directors’ Reportfor the year ended ended 30 June 201503SCOTGOLD ANNUAL REPORT I 2015 22 SCOTGOLD ANNUAL REPORT I 2015 Auditor’s Independence Declaration 04 for the year ended 30 June 2015 SCOTGOLD ANNUAL REPORT I 2015 23 05 Statement of comprehensive Income for the year ended 30 June 2015 Revenue Administration costs Interest expense Unwinding of convertible note discount Depreciation and profit on disposal of property, plant and equipment Exploration expensed as incurred Employee and consultant costs Listing and share registry costs Legal fees Borrowing costs Share-based payments Office and communication costs Other expenses CONSOLIDATED 2015 $ 2014 $ 10,607 20,413 Notes 2 11 3 19 (380,663) (91,909) (110,338) (19,097) (393,196) (290,597) (174,758) (185,448) (174,419) (13,615) (106,503) (183,029) (301,644) (192,959) - (20,545) - (236,399) (199,137) (93,416) (5,545) (121,154) (105,642) (255,001) LOSS BEFORE INCOME TAX BENEFIT (2,112,965) (1,511,029) Income tax benefit LOSS FOR THE YEAR Other Comprehensive Income Items that may be reclassified to Profit or Loss 4 - 44,880 (2,112,965) (1,466,149) Exchange difference on translation of foreign subsidiaries 25,466 (14,633) Total comprehensive result for the year (2,087,499) (1,480,782) Basic (loss) per share (cents per share) 23 (0�25) (0�44) These financial statements should be read in conjunction with the accompanying notes 24 SCOTGOLD ANNUAL REPORT I 2015Statement of financial Position 06 as at 30 June 2015 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets Total Current Assets NON-CURRENT ASSETS Trade and other receivables Plant and equipment Mineral exploration and evaluation Total Non Current assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Other current liabilities Interest bearing liabilities TOTAL LIABILITIES Interest bearing liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY Notes 5 6 7 6 8 9 10 10 11 11 12 13 13 CONSOLIDATED 2015 $ 802,649 38,440 23,712 2014 $ 640,857 169,989 13,026 864,801 823,872 102,649 104,605 90,335 121,301 14,794,913 13,894,769 15,002,167 14,106,405 15,866,968 14,930,277 343,853 71,920 - 415,773 1,353,783 1,353,783 353,598 69,060 3,031,286 3,453,944 - - 1,769,556 3,453,944 14,097,412 11,476,333 22,711,529 18,463,121 1,463,805 978,169 (10,077,922) (7,964,957) 14,097,412 11,476,333 These financial statements should be read in conjunction with the accompanying notes 25 SCOTGOLD ANNUAL REPORT I 201507 Statement of changes in Equity for the year ended 30 June 2015 CONSOLIDATED Total Equity Year Ended 30 June 2014 Balance 1 July 2013 Placements (Note 12) Entitlements Issue Options issued Share issue expenses Total comprehensive result for the year As at 30 June 2014 Year Ended 30 June 2015 Balance 1 July 2014 Placements (Note 12) Entitlements Issue (Note 12) Options issued Share issue expenses Equity portion of notes issued (Note 11) Total comprehensive result for the year As at 30 June 2015 Reserves Year Ended 30 June 2014 Balance 1 July 2013 Options issued Total comprehensive result for the year As at 30 June 2014 Year Ended 30 June 2015 Issued Capital $ Accumulated Losses $ Reserves $ Total Equity $ 16,766,418 925,270 830,872 - (59,439) - 18,463,121 18,463,121 1,586,215 2,861,177 - (198,984) - - 22,711,529 Options Reserve $ 917,000 121,154 - 1,038,154 (6,498,808) - - - - (1,466,149) (7,964,957) (7,964,957) - - - - - (2,112,965) (10,077,922) 871,648 - - 121,154 - (14,633) 978,169 978,169 - - 103,615 - 356,555 25,466 1,463,805 Convertible Note Reserve $ Foreign Currency Translation Reserve $ - - - - (45,352) - (14,633) (59,985) (59,985) - - 25,466 (34,519) 11,139,258 925,270 830,872 121,154 (59,439) (1,480,782) 11,476,333 11,476,333 1,586,215 2,861,177 103,615 (198,984) 356,555 (2,087,499) 14,097,412 Total Reserves $ 871,648 121,154 (14,633) 978,169 978,169 103,615 356�555 25,466 1,463,805 Balance 1 July 2014 Options issued Equity portion of notes issued (Note 11) Total comprehensive result for the year As at 30 June 2015 1,038,154 103,615 - - 1,141,769 - - 356,555 - 356,555 These financial statements should be read in conjunction with the accompanying notes 26 SCOTGOLD ANNUAL REPORT I 2015Statement of Cash Flows 08 for the year ended 30 June 2015 CONSOLIDATED 2015 $ 2014 $ Notes CASH FLOWS FROM OPERATING ACTIVITIES Payment to suppliers Interest income received (1,106,066) (1,044,010) 5,709 9,756 Net Cash Outflow From Operating Activities 19 (1,100,357) (1,034,254) CASH FLOWS FROM INVESTING ACTIVITIES Payments for exploration expenditure Purchase of property, plant and equipment (1,274,409) (596,402) (2,400) 2,641 Net Cash Outflow From Investing Activities (1,276,809) (593,761) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares and options Share and option issue transaction costs Borrowings net of costs Loan repayments 4,136,178 1,756,142 (198,984) 1,600,000 (3,031,286) (59,439) - - Net Cash Inflow From Financing Activities 2,505,908 1,696,703 Net increase in cash held 128,742 68,688 Effect of exchange rate fluctuations on cash and cash equivalents 33,050 1,916 Cash and cash equivalents at the beginning of this financial year 640,857 570,253 Cash and cash equivalents at the end of this financial year 5 802,649 640,857 These financial statements should be read in conjunction with the accompanying notes 27 SCOTGOLD ANNUAL REPORT I 201509 Notes to and forming part of the Financial Statements for the year ended 30 June 2015 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 consolidated entity’s assets and the discharge of their liabilities in the normal course of business� The Board considers that the consolidated entity is a going concern and recognises that additional funding is required to ensure that the consolidated entity 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 2015 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 consolidated entity 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 that may cast significant doubt in relation to the consolidated entity’s ability to continue as a going concern and whether it will therefore realise its assets and extinguish its liabilities in the normal course of business� Statement of Compliance The financial report was authorised for issue on 29 September 2015� 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 2015, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the consolidated entity’s 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� 28 SCOTGOLD ANNUAL REPORT I 2015The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2015� 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 the consolidated entity’s 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� 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� 29 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015The 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 / accumulated losses� 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� Exploration and evaluation expenditure is reclassified to development expenditure once the technical feasibility and commercial viability of extracting the related mineral reserve is demonstrable� A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest� Restoration, rehabilitation and environmental costs necessitated by exploration and evaluation activities are expensed as incurred and treated as exploration and evaluation expenditure� e ) Impairment of Assets At each reporting date, the Directors review the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired� If such an indication exists, the recoverable amount of the assets, being the higher of the asset’s fair value less costs to sell and value-in-use, is compared to the asset’s carrying value� Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income� Where it is not possible to estimate the recoverable amount of an individual asset, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs� f ) Provisions Provisions are recognised where there is a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured� g ) Cash and Cash Equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value� h ) Revenue Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets� 30 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015i ) 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� 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� 31 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015The 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� Impairment of mineral exploration and evaluation At 30 June 2015, the Group had capitalised mineral exploration and evaluation expenditure of $14,794,913 (2013: $13,894,769)� The Company announced on ASX on 5 August 2015, a Bankable Feasibility Study on the Cononish Gold and Silver Project which reported a base case (US$1,100 per ounce) net present value of the project of £23 million� 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 £23 million� This is in excess of the carrying value of the associated exploration expenditures at 30 June 2015 and therefore, in accordance with AASB 136, no impairment has been recorded� NOTE 2 – REVENUE Revenue Interest received Other income Total revenue 32 2015 $ 2014 $ 5,709 4,898 10,607 9,758 10,655 20,413 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015NOTE 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 NOTE 4 - INCOME TAX 2015 $ 174,419 174,419 14,534 4,530 33 19,097 2014 $ 5,545 5,545 17,589 5,562 35 23,186 - 2,641 2015 $ 2014 $ The prima facie tax benefit at 30% on loss from ordinary activities is reconciled to the income tax benefit in the financial statements as follows: Loss from ordinary activities Prima facie income tax benefit at 30% Tax effect of permanent differences Option based payments Share issue costs amortised R & D tax offset refund received Other non-deductible expenses 2,112,965 1,466,149 633,890 439,845 (31,085) 24,389 - (144) (36,346) 48,772 (44,880) (465) Income tax benefit adjusted for permanent differences 627,050 406,926 Deferred tax asset not brought to account (627,050) (362,046) Income tax benefit INCOME TAX BENEFIT - 44,880 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 1,941,836 1,701,215 66,151 30,845 2,007,987 1,732,060 33 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015The potential deferred tax asset has not been brought to account in the financial report at 30 June 2015 as the Directors do not believe it is appropriate to regard the realisation of the asset as probable� This asset will only be obtained if: a) The company and its controlled entity derive future assessable income of an amount and type sufficient to enable the benefit from the deductions for the tax losses and the unrecouped exploration expenditure to be realised; b) The company and its controlled entity continue to comply with the conditions for deductibility imposed by tax legislation; and c) No changes in tax legislation adversely affect the company and its controlled entity in realising the benefit from the deductions for the tax losses and unrecouped exploration expenditure� 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 NOTE 7 – OTHER CURRENT ASSETS Prepayments NOTE 8 – PLANT AND EQUIPMENT Plant and equipment Cost Accumulated Depreciation Movement for the year Opening balance Additions Disposals Depreciation expensed Closing balance 34 2015 $ 2014 $ 802,649 640,857 2015 $ 2014 $ 35,095 3,345 38,440 37,626 132,363 169,989 102,649 90,335 2015 $ 2014 $ 23,712 13,026 2015 $ 2014 $ 351,550 (246,945) 104,605 349,150 (227,849) 121,301 121,301 2,401 - (19,097) 104,605 144,487 - - (23,186) 121,301 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015 NOTE 9 – MINERAL EXPLORATION AND EVALUATION Opening balance Total expenditure during the year Expenditure expensed as incurred Closing balance 2015 $ 2014 $ 13,894,769 13,348,454 1,293,340 (393,196) 546,315 - 14,794,913 13,894,769 The ultimate recoupment of exploration expenditure carried forward is dependent upon successful development and commercial exploitation, or sale of the respective areas� NOTE 10 – TRADE AND OTHER PAYABLES Trade creditors Other accruals Trade creditors and accruals relating to exploration expenditure Trade creditors and accruals relating to administration 2015 $ 343,853 71,920 415,773 140,927 274,846 415,773 2014 $ 353,598 69,060 422,658 106,246 316,412 422,658 Trade creditors are non-interest bearing and are normally settled on 30 day terms (2014: 30 days)� NOTE 11 – INTEREST BEARING LIABILITIES Convertible Notes 2015 $ 2014 $ 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)� $1,000,000 has been advanced to the Company under the Convertible Note Agreements� The funds raised by the Convertible Notes were used as part-repayment of the RMB Facility 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�006 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� The Company has also entered into a Convertible Note Agreement on the terms and conditions set out in the Company’s announcement on 30 March 2015� $600,000 has been advanced to the Company under the Convertible Note Agreement� The funds raised by the Convertible Note were used for working capital purposes� The Convertible Note has a repayment date of 30 September 2016, with an interest rate of 1% per annum� The holder 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�005 per share� The balance outstanding at 30 June 2015 is made up as follows: Principal sum drawn Equity component taken to reserves Unwinding of discount First draw Second draw 1,000,000 (243,121) 91,708 848,587 600,000 (113,434) 18,630 505,196 Total 1,600,000 (356,555) 110,338 1,353,783 35 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015NOTE 12 – ISSUED CAPITAL a) Issued capital 2015 $ 2014 $ 1,135,392,472 ordinary shares fully paid (2014: 483,889,318) 22,711,529 18,463,121 (b) Movements in ordinary share capital of the Company were as follows: Date Details Shares Value (cents) $ Balance at 30 June 2013 211,565,739 16,766,418 20/09/2013 Placement 06/01/2014 Entitlements Issue 23/01/2014 Entitlements Issue Shortfall 05/03/2014 Placement 21/03/2014 Placement Transaction costs arising on share issues 10,000,000 148,519,802 17,654,502 90,000,000 6,149,275 - 483,889,318 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 Balance at 30 June 2014 483,889,318 18,463,121 06/08/2014 Placement 06/08/2014 Placement 24/09/2014 Placement 26/11/2014 Entitlements Issue 15/12/2014 Entitlements Issue Shortfall 06/05/2015 Placement 56,874,933 18,765,318 9,000,000 194,965,196 281,897,707 90,000,000 0�7500 1�0000 0�8000 0�6000 0�6000 1�0000 Transaction costs arising on share issues Balance at 30 June 2015 - 1,135,392,472 Shares issued for non-cash consideration amounted to $311,215 during the year� 426,562 187,653 72,000 1,169,791 1,691,386 900,000 (198,984) 22,711,529 (c) Movements in options were as follows: Balance at 30 June 2013 Options vesting – Incentive options Options expiring 7 June 2014 Balance at 30 June 2014 Balance at 30 June 2014 Options vesting – Incentive options Options expiring 30 September 2017 Balance at 30 June 2015 36 Number $ 51,802,604 - (15,316,110) 917,000 121,154 - 36,486,494 1,038,154 36,486,494 1,038,154 - 30,000,000 13,615 90,000 66,486,494 1,141,769 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015 Option exercise dates and prices Number Exercise Price Expiry Date 26,222,222 3,000,000 153,161 7,111,111 30,000,000 £0�0450 $0�0800 £0�0310 £0�0450 £0�0069 24 July 2015 31 March 2022 7 December 2015 28 March 2016 30 September 2017 (d) Voting and dividend rights Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held� At shareholder’s 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 Options vesting – Incentive options Reserve arising on Black Scholes valuation of options Balance at end of the year Convertible Note Reserve Balance at beginning of the year Reserve arising on issue of convertible notes Balance at end of the year Nature and purpose of reserves Foreign currency translation reserve 2015 $ 2014 $ (7,964,957) (6,498,808) (2,112,965) (1,466,149) (10,077,922) (7,964,957) (59,985) 25,466 (34,519) 1,038,154 13,615 90,000 (45,352) (14,633) (59,985) 917,000 121,154 - 1,141,769 1,038,154 - 356,555 356,555 - - - 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� Convertible Note Reserve The convertible note reserve is used to account for the equity component of the convertible notes� 37 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015NOTE 14 – SHARE BASED PAYMENTS During the current and prior year share based payments in the form of shares and options were made as follows� Grant Date Purpose of issue Options 8/10/2012 Consultants incentive options 24/9/2014 RMB Facility extension options 2015 Number - 30,000,000 30,000,000 Shares 6/8/2014 Directors’ fees settled in shares 18,765,318 6/8/2014 Consultant’s fee settled in shares 24/9/2014 RMB Facility extension shares 6,874,933 9,000,000 2015 Value each (cents) - - Total ($) 187,653 51,562 72,000 346,402,251 311,215 2014 Value each (cents) 8�0 - Total ($) - - - 2014 Number 3,000,000 - 3,000,000 - - - - 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 2015� Grant date Vesting date Number Volatility Value date Expiry date Price (cents) Non- marketability discount 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 8�0 8�0 8�0 30% 30% 30% 3,000,000 Value 2014 $ 44,923 44,923 31,308 Value 2015 $ - - 13,615 121,154 13,615 RMB facility extension option 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 2014 $ 24/9/14 24/9/14 30,000,000 120% 24/9/14 22/9/17 1�3 30% 30,000,000 - - Value 2015 $ 90,000 90,000 The share options outstanding at the end of the year had a weighted average exercise price of 1�9 cents per option (2014: 6�9 cents per option)� The weighted average fair value of options granted or vested during the year was 0�3 cents per option (2014: 4�0 cents per option)� 38 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015NOTE 15 - COMMITMENTS FOR EXPENDITURE (a) Mineral Tenement Leases In order to maintain current rights of tenure to mining tenements, the consolidated entity will be required to outlay in the year ending 30 June 2016 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 Licence Fee $ 31,250 31,250 93,750 135,000 156,250 Total $ 58,250 58,250 174,750 291,250 The Company has a number of avenues available to continue the funding of its current exploration program and as and when decisions are made, the Company will disclose this information to shareholders� NOTE 16 - CONTINGENT LIABILITIES The Company has entered into a donations agreement with the Strathfillan Community Development Trust (”SCDT”) pursuant to which the Company will work with SCDT to provide additional facilities and opportunities for the community served by SCDT and provide funding in respect of the same of up to £350,000� This liability is contingent upon starting the development as defined under the Planning conditions and Decision letter� Scotgold Resources Limited and its controlled entities have no other known material contingent liabilities as at 30 June 2015� NOTE 17 - INVESTMENT IN CONTROLLED ENTITIES Parent Scotgold Resources Limited 42 127 042 773 Australia 100% $ N/A Registered Number Country of Incorporation Interest Held Value of investment Subsidiary Scotgold Resources Limited SGZ France SAS Scotgold Resources Portugal Subsidiary of subsidiary Fynegold Exploration Limited SC 309525 804 686 582 513 303 057 Scotland France Portugal 100% 100% 100% 5,491,881 288,434 1,490 SC 084497 Scotland 100% - NOTE 18 - SEGMENT INFORMATION Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker� The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Scotgold Resources Limited� 39 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015NOTE 19 - NOTES TO THE STATEMENT OF CASH FLOWS Reconciliation of loss after income tax to net operating cash flows Loss from ordinary activities Depreciation Profit on sale of fixed assets Exploration expenditure expensed Share-based payments Unwinding of convertible note discount Non-cash movement on reserves Movement in assets and liabilities Receivables Other current assets Payables Revaluation effect of foreign currency working capital Net cash used in operating activities NOTE 20 - KEY MANAGEMENT PERSONNEL (a) Directors The names and positions of Directors in office at any time during the financial year are: 2015 $ 2014 $ (2,112,965) (1,466,149) 19,097 - 393,196 311,215 110,338 103,615 23,186 (2,641) - 423,832 121,154 (1,175,504) (900,618) 119,236 (10,686) (41,566) 8,164 (151,052) 11,592 22,374 (16,550) (1,100,356) (1,034,254) John Bentley Non Executive Chairman Alexander Littlejohn Non Executive Chairman Nathanial le Roux Non Executive Chairman Chris Sangster Richard Gray Managing Director Managing Director Nathanial le Roux Non Executive Director Chris Sangster Phillip Jackson Richard Harris Non Executive Director Non Executive Director Non Executive Director (b) Remuneration Polices In office from 17/02/2009 10/10/2014 18/03/2015 17/10/2007 10/10/2014 10/10/2014 10/10/2014 14/08/2007 10/10/2014 In office to 10/10/2014 14/12/2014 present 10/10/2014 present 18/03/2015 present present present 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� 40 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015The 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 (e) Aggregate amounts payable to Directors and their personally related entities� Consolidated 2015 $ 479,236 61,590 - 187,653 728,479 2014 $ 536,430 - - - 536,430 Accounts payable NOTE 21 - RELATED PARTY INFORMATION Consolidated Entity Consolidated Entity 2015 $ 54,182 2014 $ 187,653 Transactions within the Consolidated Entity Aggregate amount receivable within the consolidated entities at balance date Non-current receivables 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 Earnings used in calculation of earnings per share Weighted average number of ordinary shares outstanding during the year used in the calculation of basic loss per share There are no potential ordinary shares on issue at the date of this report� Parent Entity 2015 $ Parent Entity 2014 $ 16,546,972 14,765,935 Consolidated 2015 $ 36,250 36,250 2014 $ 33,100 33,100 Consolidated 2015 $ 2014 $ (2,112,965) (1,466,149) Number Number 840,098,450 328,829,995 41 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015NOTE 24 - FINANCIAL INSTRUMENTS (a) Financial Risk Management Policies The consolidated entity’s financial instruments consist mainly of deposits with banks, accounts receivable, accounts payable and hire purchase liabilities� The Board’s overall risk management strategy seeks to assist the Group in meeting its financial targets, whilst maintaining potential adverse effects on financial performance� The Group has developed a framework for a risk management policy and internal compliance and control systems that covers the organisational, financial and operational aspects of the group’s affairs� The Chairman is responsible for ensuring the maintenance of, and compliance with, appropriate systems� Financial Risk Exposures and Management The main risks the group is exposed to through its financial instruments are interest rate risk, foreign currency risk and liquidity risk� Interest Rate Risk The consolidated entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of change in the market, interest rate and the effective weighted average interest rate on these financial assets, is as follows: Financial Assets Cash at Bank Trade and other receivables Total Financial Assets Financial Liabilities RMB Loan Trade and other payables Total Financial Liabilities Weighted Average Effective Interest Rate 2015 2014 Floating Interest Rate 2015 $ 2014 $ 1�03% - 1�93% - 802,649 141,089 943,738 640,857 260,324 901,181 4�68% - 6�70% - - 3,031,286 343,853 343,853 353,598 3,384,884 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 2015 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� 42 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows: Currency £ Sterling € Euro Foreign currency Liabilities 2015 $ 223,847 81,757 305,604 Assets 2015 $ 514,960 95,560 610,520 Liabilities 2014 $ Assets 2014 $ 3,338,417 175,824 - - 3,338,417 175,824 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� 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� 43 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015NOTE 26 - PARENT ENTITY DISCLOSURES 2015 $ 2014 $ 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 subsidiaries Total Non Current assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Interest bearing loan Total Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses TOTAL EQUITY Financial Performance Loss for the year attributable to the parent Write down of loans attributable to losses of subsidiaries Other comprehensive income Total comprehensive loss 249,160 5,121 530,256 117,792 254,281 648,048 8,008 5,781,805 9,517,270 6,143 5,491,881 8,580,077 15,307,083 14,078,101 15,561,364 14,726,149 110,169 218,373 1,353,783 3,031,286 1,463,952 3,249,659 1,463,952 3,249,659 14,097,412 11,476,490 26,789,021 22,540,613 1,498,324 1,038,154 (14,189,933) (12,102,277) 14,097,412 11,476,490 1,243,811 1,204,873 843,844 275,753 - - 2,087,655 1,480,626 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� 44 Notes to and forming part of the Financial Statements for the year ended ended 30 June 201509SCOTGOLD ANNUAL REPORT I 2015Director’s Declaration 10 1� 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 2015 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 2015� This declaration is made in accordance with a resolution of the Board of Directors� Richard Gray Managing Director Dated at Tyndrum, Scotland, this 29th day of September 2015 45 SCOTGOLD ANNUAL REPORT I 2015 11 Independent Auditor’s Report 46 SCOTGOLD ANNUAL REPORT I 2015Independent Auditor’s Report 11 47 SCOTGOLD ANNUAL REPORT I 201512 Shareholder Details ANALYSIS OF SHAREHOLDING Shareholding 1 - 1,001 - 5,001 - 1,000 5,000 10,000 10,001 - 100,000 100,001 - or more Shareholding 1 - 1,001 - 5,001 - 1,000 5,000 10,000 10,001 - 100,000 100,001 - or more Total on Issue Voting Rights Number of Shareholders ASX 66 70 117 620 235 1,108 AIM 4 2 6 48 91 151 Total 70 72 123 668 326 1,259 Number of Shares 13,127 243,630 1,007,727 23,839,052 706,884,748 731,988,284 1,127 4,160 44,435 2,313,689 14,254 247,790 1,052,162 26,152,741 401,040,777 1,107,925,525 403,404,188 1,135,392,472 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 Mr & Mrs Graham Donaldson Directors’ Shareholding 456,564,373 42,999,999 34,111,775 40�2% 3�8% 3�0% The interest of each director in the share capital of the Company is detailed in the Directors’ Report� 48 SCOTGOLD ANNUAL REPORT I 2015 Shareholder Details 12 Shares % Rank 456,564,373 40�2% TOP TWENTY SHAREHOLDERS Name Mr Nat Le Roux HSDL Nominees Limited Barclayshare Nominees Limited Golden Matrix Holdings Pty Ltd 42,599,800 36,195,163 32,999,999 Td Direct Investing Nominees (Europe) Limited 25,781,103 Hargreaves Lansdown (Nominees) Limited <15942> Hargreaves Lansdown (Nominees) Limited Mr Graham Donaldson + Mrs Christine Donaldson Hsdl Nominees Limited Investor Nominees Limited HSBC Custody Nominees (Australia) Limited - A/C 2 Investor Nominees Limited Jim Nominees Limited Jim Nominees Limited Share Nominees Ltd Mr Richard Robin David Nairn Mrs Dorita Maria Thomson Hargreaves Lansdown (Nominees) Limited Mr Richard Milne Harris Secure Nominees Limited 23,791,793 23,600,834 23,366,937 23,284,820 21,862,373 21,055,480 18,167,453 17,042,341 14,878,328 13,474,628 13,000,000 12,611,832 10,196,438 10,000,000 9,995,000 3�8% 3�2% 2�9% 2�3% 2�1% 2�1% 2�1% 2�1% 1�9% 1�9% 1�6% 1�5% 1�3% 1�2% 1�1% 1�1% 0�9% 0�9% 0�9% 850,468,695 74�9% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 AIM ASX ASX AIM ASX ASX ASX AIM ASX ASX AIM ASX ASX ASX ASX AIM AIM ASX AIM ASX 49 SCOTGOLD ANNUAL REPORT I 201513 Interest in Exploration Leases Scotland Location Cononish Glen Orchy Cononish Glen Orchy Glen Lyon Inverliever Knapdale Ochils Agreement Landholder Lease Option Agreement Option Agreement Option Agreement Option Agreement Option Agreement Grant Date 23 July 2009 5 November 2013 5 November 2013 5 November 2013 5 August 2013 5 August 2013 Area 20 km2 975 km2 1,369 km2 660 km2 676 km2 426 km2 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� 50 SCOTGOLD ANNUAL REPORT I 2015Corporate Governance Statement 14 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� The statement reports on Scotgold Resources Limited’s key governance principles and practices� Details of the Corporate Governance Statement can be found on the Scotgold Resources Limited’s website at www�scotgoldresources�com�au/corporate/corporate-governance/ 51 SCOTGOLD ANNUAL REPORT I 201515 Company Information Scotland Exploration Office Upper Tyndrum Station Tyndrum, Stirlingshire Scotland FK20 8RY Phone +44(0) 183 840 0306 Nominated Adviser (NOMAD) Westhouse Securities Limited Beaufort House 15 St� Botolph Street London EC3A 7BB Phone +44(0) 207 601 6114 Share Registry Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ Phone +44(0) 870 703 6300 Auditor Scott-Moncrieff Exchange Place 3 Semple Street Edinburgh EH3 8BL Phone +44(0) 131 473 3500 Solicitors Harper McLeod LLP The Ca’d’oro Glasgow G1 3PE Phone +44(0) 141 221 8888 Bankers Bank of Scotland Shandwick Place Edinburgh EH11 1YH Phone +44(0) 870 850 1671 Media Bankside Consultants 6 Middle Street London EC1A Phone +44(0) 207 367 8888 52 SCOTGOLD ANNUAL REPORT I 201524 Colin Street, West Perth, WA 6005 Telephone +61 8 9222 5850 Facsimile +61 8 9222 5810 Email sgz@scotgoldresources�com www.scotgoldresources.com

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