ABN : 42 127 042 773
ANNUAL REPORT
2019
CONTENTS
AND CONTROLLED ENTITIES
Company Information
Operations and Strategic Review (including Corporate Social Responsibility Report)
Directors’ Report (including Remuneration Report – audited)
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Details
Corporate Governance Statement
3
5
15
29
30
31
32
33
34
72
73
77
78
Scotgold Resources Limited
Page 2
COMPANY INFORMATION
AND CONTROLLED ENTITIES
Company / Group /
Economic Entity
ABN
Directors
Scotgold Resources Limited and controlled entities
Scotgold Resources Limited, incorporated in Australia - 42 127 042 773
Nathaniel le Roux
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William (Bill) Styslinger
Ian Proctor
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Company Secretary and Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (appointed 14 August 2019)
Company Secretary
Richard Barker
Registered Office
Suite 4, 189 Stirling Highway,
Nedlands,
Western Australia, 6009
Telephone:
+61 8 9463 3260
Email: sgz@scotgoldresources.com
Share Registry
Auditor
Bankers
Computershare Investor Services Pty Ltd
Level 11
172 St Georges Terrace
Perth, WA 6000
Telephone:
+61 8 9323 2000
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco, WA 6008
Telephone:
+61 8 6382 4600
Westpac Banking Corporation
1257 Hay Street
West Perth
WA 6005
Securities Exchange
Listing
AIM board of the London Stock Exchange.
AIM Code:
“SGZ”
Bank of Scotland
The Mound,
Edinburgh
Scotland EH1 1YZ
Scotgold Resources Limited
Page 3
COMPANY INFORMATION
AND CONTROLLED ENTITIES
Nominated Adviser
and Broker
SP Angel Corporate Finance LLP
Prince Frederick House,
35-39 Maddox Street,
London, W1S 2PP
Lawyers
Australian Law -
Steinepreis Paganin
Level 4, The Read Buildings,
16 Milligan Street,
Perth WA 6000
English Law -
Fox Williams LLP
10 Finsbury Square
London
EC2A 1AF
Scots Law -
Reul Advisory LLP
PO Box 13766
North Berwick
East Lothian
EH39 9AW
Website
www.scotgoldresources.com
Scotgold Resources Limited
Page 4
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
OPERATIONS REVIEW
BACKGROUND –
Scotgold Resources Limited (“the Company”) was established in 2007 and is listed on the AIM market of the London
Stock Exchange (AIM:SGZ). The Company delisted from the Australian Securities Exchange on 21 October 2016.
The Company’s principal objectives have continued to be:
a) the advancement of the Cononish Gold and Silver Project in Scotland’s Grampian Highlands; and
b) the ongoing exploration of the highly prospective tenements comprising the Grampian Gold Project with
the view to identifying further project opportunities.
Corporate Social Responsibility (“CSR”)
The Company recognises its responsibilities to the Community, the Environment, its Employees and the Workplace
with respect to sustainable development, safety and community development. The CSR Committee held its first
meeting on 10th May 2019, noting its purpose as reviewing and monitoring relevant policies, programmes and
activities of the Scotgold Resources Group on behalf of the Board of Directors of the Company to ensure these
responsibilities are met. The CSR Committee may investigate any concerns regarding activities of the Company that
relate to sustainable development and community development.
Peter Hetherington chaired the first meeting in May 2019 and subsequent to adopting the Charter, three broad areas
of focus were proposed and agreed:
Health, Safety and Welfare of the Community, Employees, Consultants and Visitors
Stewardship of the Environment
Corporate Citizenship and Societal Interaction
These areas are presented on the Scotgold website alongside details of how complaints will be handled.
Through the year to August 2019, our activities with regard to CSR have included the following:
Compliance with all relevant health & safety, employment and data protection legislation
Revision of the Employee Handbook to ensure clear information on policies and procedures is provided to
every employee
An Occupational Health Scheme has been put in place, recognising the importance of monitoring and
securing the health of the workforce
An ongoing training and development programme for SGZ Cononish staff, plus provision of training as
required for all Scotgold employees
Working with the statutory agencies, including the Health and Safety Executive, Scottish Environmental
Protection Agency and Loch Lomond and the Trossachs National Park, to build a professional relationship
through a proactive approach to achieving short and long term compliance.
Provision of accommodation for staff living over 25 miles away and working on shifts.
Meetings with local housing and planning authorities with regard to increasing the supply of social housing
in the area
Continuing to support young people by working with universities to provide opportunities for research and
work experience
Complying with equality and data protection legislation in recruitment whilst having a particular focus on
employing local people
Instigation of quarterly Community Meetings to enable local people to understand developments and to
present their views
Working with the Scottish Business Pledge, delivering on all nine elements.
Scotgold Resources Limited
Page 5
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Cononish Gold and Silver Project –
On 15th February 2012, the Board of the Loch Lomond and the Trossachs National Parks (“NPA”) issued the Decision
Notice granting planning permission for the development of the Project. 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 had the effect of extending the date by which development should commence to January
2018.
In January 2015 the Company completed a Mineral Resource Estimate and subsequently, in August 2015 completed
a Bankable Feasibility Study for the Cononish Project. On 24 February 2016 the Company announced its intention to
conduct a Bulk Processing Trial (“BPT”) and on 27 August 2016 the first official gold pour from the BPT was announced.
Experience from the BPT led to a radical rethink of the tailings disposal methodology and a study was conducted to
determine the suitability of dry stack tailings disposal for the project. The benefits of the dry stack system include
substantially reduced upfront capital costs, scalability and the potential for significant environmental benefits. The study
determined that dry stacking was feasible and a number of options using this methodology were then modelled in the
Update to the Bankable Feasibility Study, announced in March 2017. The ‘phased’ approach was determined as the
Company’s preferred option to take the project forward.
Subsequently, the Company submitted a revised application for planning permission to incorporate the new tailings
disposal methodology. The application was unanimously approved in February 2018 by the National Parks Authority
(“NPA”) Board and a Decision Notice was received in October 2018.
Concurrently with the permitting process, the Company secured funding for the project in May 2018 consisting of
approximately £4m of equity and £5m of debt. With the permitting pre-commencement conditions satisfied and funding
secured, project development activities commenced in January 2019.
Grampian Gold Project –
The Grampian Gold Project comprises Crown Option agreements covering approximately 2,900 km2 in the south west
Grampians of Scotland and covers some of the most prospective areas of the Dalradian Series in the UK. This is a
sequence of highly folded and metamorphosed sedimentary and volcanic rocks of late Precambrian to Early Cambrian
age, which extends into regions that were contiguous at the time of its formation. This includes the western extension
to the eastern seaboard of Canada and the Appalachian belt in the US, and the eastern extension into Norway and
Sweden. The British Geological Survey has identified the Dalradian sequence as 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. 0.8Moz of gold) and Curraghinalt (c. 4M oz
of gold).
The Company has historically undertaken regional stream sediment sampling programs over the wider Grampian
gold project area and identified a number of high grade outcrops in the vicinity of the Cononish project. In the current
reporting period work has focused on orientation surveys over the known Cononish deposit in order to better
understand the significance of these anomalies and improve our exploration methodology going forward.
Portuguese and French projects –
In May 2016, the Company announced the acquisition of the Pomar licence area in eastern central Portugal by its
wholly owned Portuguese subsidiary, Scotgold Resources Portugal Ltda. In May 2017, the Company was granted
the Vendrennes PER (Permit Exclusif de Recherche / exclusive exploration licence) in France. In March 2018 the
Company announced the entering of an “earn in” agreement for Pomar. However, during the year, PanEx Resources
Limited, the counterparty to that agreement, resolved to withdraw from the agreement.
Scotgold Resources Limited
Page 6
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
On 18 July 2019, the Company announced its decision not to extend the Pomar licence and the intention to apply to
the Director General of Energy and Geology to terminate the licence. Accordingly, deferred exploration expenditure of
$118,402 attributable to the Pomar licence was written off during the year.
The Company withdrew its interest in the Vendrennes licence and placed SGZ France SAS into voluntary liquidation
during the year. The liquidation process was concluded on 1 October 2019.
Corporate Activities-
The terms of the secured loan facility made available to SGZ Cononish Limited were amended during the year so
that by the end of the year, the facility totalled £6.0 million at a nominal interest rate of 9% per annum, to be drawn
down in tranches which are repayable with accumulated interest 24 months after the date of drawdown. By the end
of the reporting period, £2.0 million of that facility had been drawn down by SGZ Cononish Limited.
CONONISH GOLD AND SILVER PROJECT
The Bankable Feasibility Study (BFS) for “The Cononish Gold and Silver Project” was conducted by Bara Consulting
Ltd and published in August 2015. An update was published in March 2017 following input from the Bulk Processing
Trial in 2017, particularly with regard to tailings storage options.
The report highlighted that the Phased Project approach using a Dry Stack tailings storage system produced improved
economic returns and reduced the development peak funding requirements.
Under the then assumed start date of November 2018, the phases were scheduled as follows:
→ Phase 1 (December 2019 - February 2022): After a 4 month ramp up and commissioning period, the mine is
intended to operate at a production level of 3,000 tonnes per month (36,000 tonnes per annum).
→ Phase 2 (March 2022 - End of Life of Mine): The mining is intended to reach a steady state level of production at
6,000 tonnes per month (72,000 tonnes of ore per annum).
Phase 2 is intended to be organically funded by Phase 1 and the Company anticipates being in a position where profits
generated by Phase 1 can be invested into the development requirements of Phase 2 within 2.5 years of first
production.
Following the submission of a new planning application to accommodate the revised phased project and a successful
fund raising in May 2018, the Company took the decision to proceed with Phase 1 and work during the current reporting
period has focussed on the preparation for and initiation of project development activities.
Whilst progressing the planning application process, the Company committed funds to the ordering of the owner
operated mining fleet, which was received in late 2018. The Company also advanced the processing plant tendering
process and selected a preferred bidder.
Following receipt of the positive Planning Decision Notice in October 2018 and subsequent satisfaction of certain pre-
commencement conditions in December 2018, mine development activities commenced in January 2019. With the
limited mining expertise available locally, the Company focussed on local recruitment and training programs and is now
successfully operating 24hr/day with a two-shift system.
Work also continued with the preferred bidder for the process plant to conduct confirmatory metallurgical testwork, and
complete final design and equipment selection, culminating in a fixed price order being placed.
The process plant design facilitated the detailed design of the plant building and associated infrastructure. This
highlighted the challenges of the plant’s location in terms of topography, ground and weather conditions. As a result,
together with certain engineering practicalities, a decision was taken to complete the full Phase 2 design for the building,
associated infrastructure and significant elements of the processing plant, including the crushing and dewatering
circuits.
Scotgold Resources Limited
Page 7
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
The execution of the earthworks required for the building platform, together with the preparations for the tailings dry
stacks and associated drainage and settlement systems, have been carefully considered to ensure compliance with
stringent planning conditions appropriate for an environmentally sensitive area of the National Park.
Subsequent to the reporting period, in August 2019 the Company provided a project update indicating first production
was expected at end February 2020, revised cost estimates and re-evaluating the project economics using a
£1,200/oz gold price. Based on these assumptions, the key project parameters are given below:
Cononish Key Parameters:
Estimated Reserves
550,000t
Head Grade Au
11.8g/t
Life of Mine
9 years
Total Capital
£26.8m
Ave. Annual Production
23,370oz
Ave. Operating Cost
£398/oz
Ave. Capital Cost
£146/oz
Total Cost
£544/oz
Employees @ full production
63
The above key parameters were derived by Scotgold management using revised cost and gold price estimates and
using BFS Update production schedule.
Details of the material assumptions considered in the derivation of the production target and forecast financial
information above and the BFS Study Update Executive Summary are provided on Scotgold’s website at
www.scotgoldresources.com.
Cononish Mineral Resources
The Mineral Resource Estimate (“MRE”) is classified as Measured, Indicated and Inferred Mineral Resources,
(adhering to guidelines set out in the JORC Code (2012 Edition)), and is reported at a cut-off grade of 3.5 g/t gold as
is presented in the Table below. The Table also serves as the Company’s Annual Mineral Resource Statement.
Scotgold Resources Limited
Page 8
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Table: Latest Annual Mineral Resource Statement
Cononish Main Vein Gold and Silver Mineral Resources, estimated in accordance with the JORC code (2012
Edition) and reported at a 3.5 g/t Au cut-off as at 12/01/2015, which remain current subject to the depletion of
approximately 6.5kt from the Indicated Resources – Mined Stockpile
K Tonnes
Classification
Scotgold Resources Limited - Cononish Gold Project
Mineral Resource Estimate as at 12 January, 2015
Reported at a cut-off grade of 3.5 g/t gold
Grade
Grade
Ag g/t
Au g/t
71.5
15.0
58.7
14.3
39.0
7.9
59.9
14.3
21.9
7.4
55.3
13.4
Measured - In-situ
Indicated - In situ
Indicated - Mined Stockpile
Sub-total M&I
Inferred - In-situ
Total MRE
Reported from 3D block model with grades estimated by Ordinary Kriging with 15 m x 15 m SMU Local Uniform
Conditioning adjustment. Minimum vein width is 1.2 m.Totals may not appear to add up due to appropriate rounding.
Metal
Ag Koz
139
895
9
1,043
53
1,096
Metal
Au Koz
29
217
2
248
18
266
In-situ
Dry BD
2.72
2.72
2.72
2.72
2.72
2.72
60
474
7
541
75
617
Note: Mineral Resources presented above include Ore Reserves stated below.
There has been no change in the Mineral Resources reported previously as at 30/06/2018.
An internal review of the Mineral Resource Estimate concluded that the estimation techniques and parameters
employed remained appropriate.
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 Mineral Resources, Scotgold believes that there is additional resource
development potential close to the Cononish mine, subject to appropriate and successful further work. Extensive
gold-in-soil anomalies, mineralisation associated with outcrops and trenches, 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. At this stage, such indications are highly conceptual and there is no guarantee that further exploration will
define additional Mineral Resources.
Cononish Ore Reserves
As part of initial work towards developing the 2015 BFS, Bara Consulting Ltd (“Bara Consulting”) 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 an Ore Reserve Estimate was completed on 25 May 2015, in accordance with the
JORC code (2012 Edition) based on the Mineral Resource Estimate (MRE) issued in January 2015. The subsequent
addendum to the Bankable Feasibility Study resulted in no change to the Ore Reserve. Hence there is no change to
the Ore Reserves reported previously for the project as at 30/06/2018.
An internal review of the Ore Reserve Statement concluded that the modifying factors used in determining the Ore
Reserve remained appropriate.
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Table: Latest Annual Ore Reserve Statement
As at 25 May 2015 (JORC 2012 Code)
Classification
Tonnes (‘000)
Au Grade (g/t)
Au Metal (k oz)
Ag Grade (g/t)
Ag 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
(Bara Consulting Limited Ore Reserve Statement dated May 2015)
For greater detail on the parameters derived from this work and used for the Ore Reserve estimation process, please
refer to the Company’s announcement on 26/05/2015 – Cononish Gold Project Study Update and Reserve Estimate;
and to the subsequent announcement on 16/03/2017 - Update to Cononish Bankable feasibility study on the
Company’s website.
The Ore Reserve statement above does not take account of the depletion of the surface stockpile through the BPT.
At 30 June 2019, approximately 6.5kt had been removed from the stockpile and the reserves will be adjusted on full
depletion of the stockpile.
Both the Mineral Resource Estimate and Ore Reserve statement were compiled by suitably qualified Independent
Competent Persons as identified at the time of their release.
GRAMPIAN GOLD PROJECT
The Company continues to actively pursue exploration activities on its substantial land position (approx. 2,900 km2)
in the Dalradian Belt of the south west Grampians, a terrain highly prospective for both gold and 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.
Scotgold has historically used various traditional exploration techniques to identify anomalies with a view to
generating drill targets and, potentially, future mineral resources. Principal amongst these has been soil and stream
sediment sampling to identify gold-bearing zones. It is recognised however that the history of glaciation over the last
30,000 years has spread anomalous sediment particles across the region, making interpretation difficult.
In addition to the above, geochemical techniques that rely on a full digest of the sample are known to be susceptible
to very fine gold “nuggets”, such that very large samples are required to produce representative results. The sample
sizes required are much larger than those typically collected during exploration programmes.
Scotgold recognised that a different survey technique was required in order to counter the above challenges and
generate geochemical anomalies representative of the geology and mineralisation in the bedrock (for soils) and
catchment area (for streams). Scotgold worked with Dr Russell Birrell of Glob-ex Solutions, a leading exploration
geochemist, to apply modern partial leach techniques that analyse for mobile metal ions on the surface of sediment
particles. This technique is known as “ionic leach geochemistry”.
Ionic Leach™ is a static sodium cyanide leach using the chelating agents of ammonium chloride, citric acid and
EDTA with the leachant buffered at an alkaline pH (pH 8.5). Samples are digested as collected so there is very little
opportunity to lose or introduce elements during the partial leach process. This innovative leach technique is designed
for near surface soil samples. It is designed to improve geochemical mapping and enhance the potential to detect
and resolve geochemical anomalies for a range of commodity elements.
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Separately, the Company historically evaluated Very Low Frequency (“VLF”) / magnetics and Induced Polarisation
(“IP”) Gradient Array geophysical surveys with limited success. The techniques worked well to map the bedrock
geology but failed to “see” deep enough to help define the geology in three dimensions.
Orientation surveys have been conducted over the known Cononish Project Orebody, in order to evaluate the efficacy
of the new exploration techniques in identifying bedrock mineralisation and to establish optimum parameter settings,
such as sample spacing, as well as data processing methods.
The results of the initial orientation drainage survey were a success in both proving the application of the new
technique, and in providing higher resolution anomalies over the wider Cononish area. The technique produces a
strong positive anomaly in the area bounded by the drainages to the north east and south west of the estimated
Cononish Project Orebody. The same techniques and parameters were then applied in the Beinn Udlaidh area to
the north of Cononish. The Company is particularly encouraged by the scale of the Beinn Udlaidh anomaly produced.
Previous drainage surveys did not produce such clear cut and unambiguous results.
Having established an anomalous area through stream sediment sampling, the next level of detail was obtained by
conducting a systematic soil sampling campaign over the area. Not only has this new technique been able to map
mineralised sections of the Cononish Vein, it has identified further anomalies associated with off-setting faults and
structures in the immediate vicinity. These new anomalies are associated with the Mother Vein and so-called Barren
Vein structures interpreted from the extrapolation of mapped veins.
Following these encouraging results from orientation surveys conducted over the Cononish orebody and within the
wider Glen Orchy Central license block, the methods were applied over additional areas of interest within the
company's licenses, with 3 main areas covered during the reporting period:
1. North East Strike extension of Cononish. This has indicated a strong previously unidentified anomaly around
1Km north east of the Cononish orebody associated with the Mother Vein. This anomaly appears to have a NW-SE
orientation and further work will be conducted to verify its significance.
2. Coire nan Sionnach. This area had been identified as prospective by previous programs, however, this latest
work indicates the anomaly is relatively limited in extent. This area is now considered a lower priority.
3. Inverchorachan. This area was known to contain isolated anomalous gold grades from historical work. As a
result, it was selected as a project for two masters students to conduct a field work project to support their studies,
which included the use of the "Ionic Leach" sampling techniques. The relatively small area covered by soil sampling
has returned strongly anomalous values and the stream sediment sampling undertaken indicates the anomalous
zone could be extensive. Of note, are the highest gold and silver values of 124.5 ppb and 420 ppb respectively which
were detected as part of this most recent sampling. For comparison, the highest values for gold and silver detected
within the Cononish area to date using Ionic Leach are 39.9 ppb Au and 240 ppb Ag. This area will now be considered
a high priority for further soil sampling to the south west of the newly identified anomaly, in addition to infill stream
sediment sampling.
Scotgold is pleased to report on the successful identification of new exploration techniques. The application of these
techniques will ensure a more efficient, systematic and targeted approach to future exploration. Ionic leach stream
sediment sampling can be used to define prospective catchment areas at the district and regional scale that will allow
focus on the best areas. Ionic leach soil sampling can then be used, together with geological mapping, to identify the
prospective areas at the prospect scale. The identified ground geophysics techniques can be used to map the
bedrock geology in three dimensions and allow for optimal drill hole planning.
PORTUGUESE AND FRENCH PROJECTS
In May 2016, the Company announced the acquisition of the Pomar licence area in eastern central Portugal by its
wholly owned Portuguese subsidiary, Scotgold Resources Portugal Ltda.
The Pomar licence area includes the historic antimony mines of das Gatas, Pomar and Casalinho, in addition to
numerous small scale trials and occurrences.
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Evaluation of styles of mineralization during initial site visits indicated the potential for undiscovered gold prospects
in zones with quartz-only mineralization in addition to the known gold bearing felsic dykes traversing the area and
potential extensions to the known antimony occurrences.
In March 2018 the Company announced the entering of an “earn in” agreement for Pomar. However, during the year,
PanEx Resources Limited, the counterparty to that agreement, resolved to withdraw from the agreement.
On 18 July 2019, the Company announced its decision not to extend the Pomar licence and the intention to apply to
the Director General of Energy and Geology to terminate the licence. Accordingly, deferred exploration expenditure
of $118,402 attributable to the Pomar licence was written off during the year.
In May 2017, the Company was granted the ‘Vendrennes’ Permit Exclusif de Recherche (“PER”) / exclusive
exploration licence in France, applied for in 2015.
The Company withdrew its interest in the Vendrennes licence and placed SGZ France SAS into voluntary liquidation
during the year. The liquidation process was concluded on 1 October 2019.
.
TENEMENT DETAILS
United Kingdom -
The Company holds a lease (100%) from the Crown Estate Scotland 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 thirteen Mines Royal Option Agreements (100%) with the Crown Estate Scotland as detailed
below:
No.
1
2
3
4
5
6
7
8
9
10
11
12
Name
Knapdale South
Knapdale North
Inverliever West
Inverliever East
Glen Orchy West
Glen Orchy Central
Glen Orchy East
Glen Lyon West
Glen Lyon North
Glen Lyon South
Glen Lyon East
Ochills West
Area
250 km2
250 km2
250 km2
233 km2
103 km2
242 km2
241 km2
246 km2
244 km2
243 km2
247 km2
189 km2
13
Ochills East
150 km2
Location
county of Argyll, Scotland UK
county of Argyll, Scotland UK
counties of Dunbarton, Argyll and Perth, Scotland UK
counties of Dunbarton, Argyll and Perth, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
counties of Perth and Argyll, Scotland UK
county of Clackmannan, Perth, Kinross and Stirling,
Scotland UK
county of Clackmannan, Perth, Kinross and Stirling,
Scotland UK
Portugal –
As at 30 June 2019, the Company held a 100% interest in the Pomar Licence with a period of validity of 3 years from
May 2016 (and an option to extend) in eastern central Portugal, near Castelo Branco though its subsidiary Scotgold
Resources Portugal Ltda.
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Subsequent to 30 June 2019, the Company announced its intention not to extend the Pomar Licence.
France –
The Company held a 100% interest in the Vendrennes PER (Permit Exclusif de Recherche or Exploration Licence)
through its subsidiary SGZ France SAS.
The Company withdrew its interest in the Vendrennes Licence during the year.
No other beneficial interests are held in any farm-in or farm-out agreements and no other beneficial interests in farm-
in or farm out agreements were acquired or disposed of during the period.
Competent Persons Statement:
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 - 2018 and various corresponding market 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. Further, 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.
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
STRATEGIC REVIEW
The Company continues to review its corporate governance, structure, policies and practices with a view to maintaining
and enhancing shareholder value.
The Company has adopted the QCA code of corporate governance and appointed an advisory service to assist with
UK regulatory compliance issues as an AIM listed company. During the period the Company formally established a
Corporate Social Responsibility Committee and is pleased to include its maiden report.
The Company predominantly operates in remote areas of Scotland, much of which face socio-economic challenges
and are designated as “deprived”. As such the Company works with Scottish Enterprise and other agencies to ascertain
what governmental aid may be available and in October 2018 the Company was awarded a grant of up to £430,000,
under the “Regional Selective Assistance” (RSA) scheme, This award is subject to certain conditions relating to capital
expenditure and job creation at the Cononish Project and the first £50,000 tranche was disbursed in August 2019.
With effect from 1st January 2018, the Company established a new 100% owned subsidiary, SGZ Cononish Ltd to
develop its flagship asset, the Cononish Gold and Silver Project. Its existing 100% owned subsidiary, Scotgold
Resources Ltd (Scotland) was renamed SGZ Grampian Limited and continues to hold and operate the Scottish
exploration licence.
Operationally, the Company’s immediate focus remains the development of the Cononish Gold and Silver Project,
which commenced in January 2019. However, to provide longevity beyond Cononish, and potentially growth in overall
production, the Company is developing a pipeline of projects that we anticipate will meet our criteria. During the
period the Company chose to focus on our Grampian Project which now consists of 13 Option Agreements
("Exploration Licences") covering some 2,900 km2 in Scotland and includes the highly prospective ground in the
vicinity of Cononish.
The fundamental technical work completed on Cononish in 2015, with the revised Mineral Resource Estimate and
Ore Reserve Estimate, underpinned the Updated Bankable Feasibility Study (BFS) completed in March 2017. This
study amply demonstrated the project’s technical and financial viability and funding was raised in May 2018. The key
remaining impediment to commencement of development remained planning consent and in October 2018 the
Decision Notice was issued by the NPA relating to the planning application (approved by the NPA Board in February
2018). Once the pre-commencement conditions had been satisfied in late December 2018, the Company
commenced development activities. In August 2019 the Company announced that an additional £2.65m of funding
had been secured to address an increased capital cost estimate and a two month delay to first gold production, now
scheduled for the end of February 2020. Construction delays, particularly due to inclement weather, remain a risk
factor.
The Updated BFS also demonstrated the increased value of Cononish given the improved gold market, particularly
in GB Pound terms. The gold price has climbed from £948.87/oz to £1,114.87/oz over this reporting period and
reached £1,278.06/oz in September 2019. In August 2019 the Company also provided an updated estimate of the
expected financial returns, based on the increased capital estimates, revised construction schedule and a gold price
assumption of £1,200/oz. The Company currently expects project returns in line with these estimates.
The work completed on advancing our future pipeline of projects has again been modest due to the need to focus
cash and management resources on the advancement of Cononish. Notwithstanding this, the Company has identified
the analysis of soil and stream samples using ionic leach as providing a cost effective and efficient method of
identifying anomalous zones. Using this new methodology the Company has to date identified potential extensions
to the Cononish orebody and a potentially new prospect at Inverchorachan. These programs will continue to be
expanded and are expected to provide the Company with significant number of prospective drill targets in due course.
The coming period will be dominated by the Cononish development activities and we look forward to reporting the
production of first gold.
Scotgold Resources Limited
Page 14
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
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 2019. All amounts are presented in Australian
Dollars, unless otherwise stated.
DIRECTORS
The following persons were Directors of Scotgold Resources Limited during the whole of the financial year and up to
the date of this report unless otherwise stated:
In office from
In office to
Nathaniel le Roux
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
Ian Proctor
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Company Secretary/ Non-Exec Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
18/03/2015
10/10/2014
10/10/2014
14/08/2007
09/10/2017
18/06/2018
18/06/2018
14/08/2019
present
present
present
present
present
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 has spent most of his career in financial markets and was Chief Executive of IG Group
plc between 2002 and 2006. He served as an independent director of the London Metal Exchange from 2008-2016
and is a trustee of various charities. Nat was born in Scotland and was educated in Edinburgh. He holds an MA in
Law from Cambridge University and an MSc in Anthropology from University College London.
Other Directorships in past three years: None
Interest in Shares and Options
Fully Paid Shares
Special Responsibilities
Overall strategic guidance and UK Capital markets.
22,618,223
A company controlled by Mr le Roux made available a secured loan facility of £6.0 million to SGZ Cononish Limited
during the year for mine development and working capital purposes. The loan is secured over all the assets of that
company as well as all the assets of its fellow subsidiary, SGZ Grampian Limited.
Richard Gray
Managing Director
BSc (Hons)
Qualifications and experience
Mr Richard Gray 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
Scotgold Resources Limited
Page 15
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
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 14 years in West Africa for Golden Star Resources Ltd and Avocet Mining. 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.
Other Directorships in past three years: None
Interest in Shares and Options
Fully Paid Shares
Options
96,738
1,008,939
These options include 1,000,000 options granted as share-based payment on 1 May 2018 subject to shareholder
approval.
Special Responsibilities
Mr Gray is the CEO / Managing Director and is responsible for the day to day running of the company.
Chris Sangster
Non-Executive Director
BSc (Hons), ARSM, GDE
Qualifications and experience
Chris has a BSc Hons in Mining Engineering from the Royal School of Mines, Imperial College in London and a GDE
in Mineral Economics from the University of Witwatersrand. Chris has extensive experience worldwide in gold,
diamond and base metal production environments. Since 1999, he has held positions of Vice President Mining
Services at KCM PLC and Principal Mining Engineer for Australian Mining Consultants. In 2007, Chris co-founded
Scotgold Resources and was its CEO / Managing Director until October 2014. He is a Non-executive Director of
Ariana Resources and is also an Associate Consultant for Bara Consulting Limited.
Other Directorships in past three years: None
Interest in Shares and Options
Fully Paid Shares
Options
Special Responsibilities
202,045
4,000
Advice on technical and planning matters. Mr Sangster provides consulting services at commercial rates to the
Company under a management agreement with the Company.
Phillip Jackson
Non-Executive Director
BJuris LLB MBA FAICD
Qualifications and experience
Mr Jackson is a barrister and solicitor with over 25 years legal and international corporate experience, especially in
the areas of commercial and contract law, mining law and corporate structuring. He has worked extensively in the
Middle East, Asia and the United States of America. In Australia, he was formerly managing legal counsel for a major
international mining company, and in private practice specialised in small to medium resource companies.
Scotgold Resources Limited
Page 16
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
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 Peninsula Mines Limited, since it listed in August 2007.
His experience includes management, finance, accounting and human resources. He is a director of ASX listed
companies Aurora Minerals Limited, Peninsula Mines Limited, and Predictive Discovery Limited.
Other Directorships in past three years: None
Interest in Shares and Options
Fully Paid Shares
Special Responsibilities
43,313
Mr Jackson is Chairman of the Audit Committee and is responsible for legal matters.
Richard Barker
Company Secretary & Non-Executive Director
BJuris LLB
Qualifications and experience
Mr Barker is an Australian lawyer with 15 years’ experience working with top Australian Law firms in NSW and
WA. For the past 6 years Mr Barker has provided corporate compliance and company secretarial services for both
listed (ASX and AIM) and unlisted private companies. Mr Barker has extensive experience providing advice and
services on equity raisings and corporate governance matters.
Other Directorships in past three years: None
Special Responsibilities
Mr Barker is a member of the Audit Committee and deals with company secretarial matters.
Peter Hetherington
Non-Executive Director
B. Econ., Mstrs (Fin)
Qualifications and experience
Mr Hetherington is the Chief Executive Officer of Schroders Personal Wealth. Prior to this he was Chief Executive
Officer of IG Group Holdings Plc. He graduated from Nottingham University with a degree in Economics, and from
the London Business School with a Masters in Finance. Mr Hetherington also served as an officer in the Royal Navy
prior to joining IG.
Other Directorships in past three years:
Deal City Limited
Dot Trading Registry Limited
DotBroker Registry Limited
DotCFD Registry Limited
Scotgold Resources Limited
Page 17
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Registry
(Services)
Domaigns
DotForex Registry Limited
DotMarkets Registry Limited
DotSpreadbetting Registry Limited
Extrabet Financial Limited
Extrabet Limited
Financial Domaigns
Limited
Financial Domaigns Limited
Financial Domaigns Registrar
Limited
Financial
Holdings Limited
Fox Japan Holdings
Fox Sub 2 Limited
Fox Sub Limited
IG Asia Pte Limited
IG Bank S.A
IG Finance
IG Finance Two
IG Finance 5 Limited
IG Finance 8 Limited
IG Finance 9 Limited
IG Finance Four
IG Finance Three
IG Forex Limited
IG Group Holdings Plc
IG Group Limited
IG Index Limited
IG Infotech (India) Private Limited
IG Limited
IG Markets Limited
IG Markets South Africa Limited
IG Services Limited
IG Spread Betting Limited
ITS Market Solutions Limited
LLC IG Dev
Market Data Limited
Nadex Clearing, LLC
Nadex Domains Inc
American
North
Exchange Inc
Extrabet Financial Limited
ITS Market Solutions Limited
Derivatives
Interest in Shares and Options
Fully Paid Shares
4,088,961
Scotgold Resources Limited
Page 18
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
William Styslinger
Non-Executive Director
BSc Engineering
Qualifications and experience
Mr Styslinger is a director of Nasdaq listed Casa Systems Inc, and served as Chairman, President and Chief
Executive Officer of SeaChange International Inc, a Nasdaq listed provider of multiscreen video software and
services, from its inception in July 1993 until his retirement in November 2011.
Other Directorships in past three years: None
Interest in Shares and Options
Fully Paid Shares
Options
Special Responsibilities
Mr Styslinger is a member of the Audit Committee.
Other Directorships in past three years:
Metrosoft, Inc.
5,646,400
320,000
Ian Proctor
Non-Executive Director
ACA
Qualifications and experience
Ian Proctor is a Chartered Accountant and currently the Chief Executive Officer of Sky Betting and Gaming (“SBG”),
having previously held the position of Chief Financial Officer of SBG for over 10 years.
Other Directorships in past three years: None
Interest in Shares and Options
Fully Paid Shares
Other Directorships in past three years:
1,155,884
The Pavilion Stirling Ltd
Hestview Ltd
Bonne Terre Limited
Core Gaming Limited
Cyan Blue Core Limited
Cyan Bidco Limited
Cyan Blue Holdco 1 Limited
Cyan Blue Holdco 2 Limited
Cyan Blue Holdco 3 Limited
Cyan Blue Holdco 4 Limited
Cyan Blue Topco Limited
Cyan Blue VLNco Limited
Scotgold Resources Limited
Page 19
AND CONTROLLED ENTITIES
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
Cyan Blue International Holdings
Limited
Stars Group UK 1 Limited
Stars Group UK 2 Limited
Stars Group Holdings (UK) Limited
Cyan Blue International Limited
Cyan Blue Odds Limited
Cyan Blue Manco Limited
Cyan Blue Odds Australia Pty
Limited
SHARES UNDER OPTION
At the date of this report unissued shares of the Company under option are:
Number of shares under option
Exercise price Expiry date
Vested and exercisable
30,000
2,483,681
$8.00
£0.40
31 March 2020
31 December 2019
Granted but not vested
120,000
Granted subject to shareholder
approval and not yet vested
£0.34
16 April 2024
1,000,000
£0.30
1 May 2028
OPERATING AND FINANCIAL REVIEW
A review of the operations of the consolidated entity during the financial year is contained in the Operations and
Strategic Review 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 2,900km2.
PRINCIPAL ACTIVITIES
The principal activities of the consolidated entity during the year were the development of the Cononish gold and
silver mine, pursuant to obtaining planning permission, and mineral exploration.
Operating Results
The consolidated loss after income tax for the financial year was $3,518,455 (2018: $1,899,667).
Financial Position
At 30 June 2019 the Company had cash reserves of $3,917,920 (2018: $11,207,036).
Dividends
No dividends were paid during the year and no recommendation is made as to dividends.
Scotgold Resources Limited
Page 20
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
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 complete development of the Cononish silver and gold mine and to continue its exploration
activities.
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June
2019, and the number of meetings attended by each Director. These meetings included matters relating to the
Remuneration and Nomination Committees of the Company.
Nathaniel le Roux
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
AUDIT COMMITTEE
Number eligible
to attend
Number
attended
6
6
6
6
6
6
6
6
6
6
6
6
5
6
The Audit Committee is comprised of Mr Jackson (Chairman), Mr Barker and William Styslinger. One meeting of the
audit committee was held during the year ended 30 June 2019.
The Audit Committee Report for the year ended 30 June 2019 can be found under Principle Ten in the QCA Corporate
Governance Statement of
the Company web-site at
https://www.scotgoldresources.com/wp-content/uploads/2019/11/SGZ-Corporate-Governance-Statement-
FINAL.pdf.
the Company, which can be
found on
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. No advice has been sought in the current year.
The maximum aggregate amount of Directors’ fees that can be paid is set at $300,000 and may be increased from
time to time, subject to approval by shareholders in general meeting. Fees for Non-Executive Directors are not linked
Scotgold Resources Limited
Page 21
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
to the performance of the consolidated entity. The Annual Report, containing this Remuneration Report, is presented
and considered at the Annual General Meeting, however, no shareholder approval is required.
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 the size of the Company.
All remuneration paid to key management personnel is valued at cost to the company and expensed, unless it has
been incurred in connection with activities which are capitalised as deferred exploration.
The group does not operate an Employee Share Scheme and there are no deferred shares.
Performance-based remuneration
The company does not pay any performance-based component of remuneration, with the exception of certain share-
based payments as disclosed below.
Details of remuneration for year ended 30 June 2019
Directors’ Remuneration
No salaries, commissions, bonuses or superannuation were paid or payable to Directors during the year except for
Richard Gray, who was salaried. 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 Director
Richard Gray (Managing Director) is on a contract dated 22 September 2017 which provides for a fixed salary and
benefits, with a termination period of three months. The remuneration is reviewed annually. At the date of this report
the annual remuneration for Richard Gray is £135,000 ($243,902) plus pension contribution. 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.
In the year ended 30 June 2018, Mr Gray was granted 1,000,000 options to acquire shares in the company at an
exercise price of 30p per share. The options vest on the later of one year from date of grant or the commencement
of gold production from the Cononish mine. The options will expire 10 years after the date of grant, being 1 May
2028. The grant of the options is subject to shareholder approval which, at the date of this report is outstanding.
A charge of $200,954 has been recognised for the period from the date of grant of the options to 30 June 2019.
Non-Executive Directors
i) Chris Sangster earns fees from the Company as a consultant on technical issues. In addition to his director’s fees,
Mr Sangster earned fees of $87,826 in the year ended 30 June 2019 (2018 - $115,614).
ii) Through his service company, Barston Corporation Pty Ltd, Richard Barker also acts as Company Secretary. In
addition to his director’s fees, Mr Barker earned fees related to Company Secretary services of $39,996 in the year
ended 30 June 2019 (2018 - $39,996).
Scotgold Resources Limited
Page 22
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
iii) The loan owing by the Company to the Chairman and major shareholder, Nat le Roux was repaid in full during the
year. Mr le Roux made available to SGZ Cononish Limited a secured loan facility in May 2018. During the year,
amendments were made to the facility terms and an amount of £2.0 million of the facility was drawn down. Details of
the secured loan facility are set out in Note 12.
Loans to Directors
There are no loans due from Company Directors.
Shareholder approval of Directors’ remuneration
The Company’s constitution provides that the 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. The Directors may approve a Managing Director whose fee or salary
is agreed by the Directors within such aggregate sum. 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:
Short-term benefits
Fees
Consulting /
Salary
$
Director/Executive
Associated Company
Year ended 30 June 2018
Nat le Roux *
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
Holihox Pty Ltd
Barston Corp. Pty Ltd
Director/Executive
Associated Company
Year ended 30 June 2019
Nat le Roux *
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
Holihox Pty Ltd
Barston Corp. Pty Ltd
$
-
-
17,420
18,192
12,554
-
-
48,166
$
-
-
17,968
18,000
18,065
-
-
54,033
Retirement
Benefits
$
-
3,471
-
-
-
-
-
3,471
Retirement
Benefits
$
-
8,491
-
-
-
-
-
8,491
Share -
based
payments
$
-
52,870
-
-
-
-
-
52,870
Share-
Based
payments
$
-
148,084
-
-
-
-
-
148,084
Total
$
-
229,892
133,034
18,192
52,550
-
-
433,668
Total
$
-
426,030
105,794
18,000
58,061
-
-
607,885
-
173,551
115,614
-
39,996
-
-
329,161
-
269,455
87,826
-
39,996
-
-
397,277
Short-term benefits
Fees
Consulting /
Salary
$
* Mr le Roux has waived his director fees for the time being
Scotgold Resources Limited
Page 23
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
The proportion of remuneration linked to performance and the fixed proportion of remuneration are as follows:
Director/Executive
Associated Company
Year ended 30 June 2019
Nat le Roux *
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
Holihox Pty Ltd
Barston Corp. Pty Ltd
Share-based payments
Fixed proportion
2018
$
2019
$
Linked to performance
2019
$
2018
$
100%
65%
100%
100%
100%
100%
100%
100%
77%
100%
100%
100%
100%
100%
-
35%
-
-
-
-
-
-
23%
-
-
-
-
-
The share-based payments made to key management personnel comprise options over ordinary shares of the
company as follows:
Name
Number of
options
granted
Grant date
Vesting date and
exercisable date
Expiry date Exercise
price
Richard Gray
1,000,000
1 May 2018
Later of 1 May 2019
and commencement
of production at
Cononish mine
1 May 2028
£0.30
Fair value
Per option
at grant
date
£0.172
The grant of these options is subject to shareholder approval, which had not yet been obtained at 30 June 2019 nor
by the date of this report. Each option entitles the holder to one ordinary unissued share at a strike price of £0.30.
The vesting of the options is dependent upon satisfaction of the non-market vesting condition of achieving
commencement of production at the Cononish Mine. Options are exercisable by the holder with effect from the vesting
date. There have been no alterations to the terms and conditions of the options since the date of grant thereof.
Options carry no dividend or voting rights.
No options over ordinary shares were granted to key management personnel, nor were cancelled or lapsed as part
of remuneration during the year ended 30 June 2019.
Additional information
The earnings of the consolidated entity for the five years to 30 June 2019 are as follows:
Sales revenue
EBITDA
EBIT
(Loss) after income tax
2019
$
-
(3,285,036)
(3,416,512)
(3,518,455)
2018
$
-
(1,657,616)
(1,727,523)
(1,899,667)
2017
$
-
(1,124,095)
(1,227,227)
(1,348,167)
2016
$
-
(1,273,707)
(1,289,083)
(1,505,592)
2015
$
-
(1,891,621)
(1,910,718)
(2,112,965)
Scotgold Resources Limited
Page 24
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Voting at the 2018 Annual General Meeting
The Remuneration Report for the year ended 30 June 2018 was adopted unanimously at the 2018 Annual General
Meeting on a show of hands.
Key management personnel share holdings
Balance 30
June 2017
Share
Consolidation
Rights issue/
Placing
At date of
resignation/
appointment
Balance 30 June
2018
Year ended 30 June 2018
Nat le Roux
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
632,220,806
5,204,240
18,204,484
4,331,250
-
-
-
659,960,780
Balance 30
June 2018
(625,898,598)
(5,152,197)
(18,022,439)
(4,287,937)
-
-
-
(653,361,171)
15,996,015
44,695
20,000
-
-
-
-
16,060,710
Acquisitions
Subscription
Year ended 30 June 2019
Nat le Roux
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
22,318,223
96,738
202,045
43,313
-
3,231,818
1,990,555
27,882,692
300,000
-
-
-
-
-
-
300,000
-
-
-
-
-
-
2,727,274
2,727,274
Key management personnel option holdings
Year ended 30 June 2018
-
-
-
-
-
3,231,818
1,990,555
5,222,373
At date of
resignation/
appointment
-
-
-
-
-
-
-
-
22,318,223
96,738
202,045
43,313
-
3,231,818
1,990,555
27,882,692
Balance 30
June 2019
22,618,223
96,738
202,045
43,313
-
3,231,818
4,717,829
30,909,966
Nat le Roux
Richard Gray
Chris Sangster
William Styslinger
Free
attaching
options
45,656,433
291,294
493,333
-
46,441,060
Expiry or
exercise
of options1
(45,656,433)
(291,294)
(493,333)
-
(46,441,060)
Rights
Issue2
Balance 30
June 2018
1,744,657
8,939
4,000
320,000
2,077,596
1,744,657
8,939
4,000
320,000
2,077,596
1 Includes those options cancelled due to the share consolidation
2 The Rights Issue options are exercisable at 40p and expire 31 December 2019
Scotgold Resources Limited
Page 25
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Year ended 30 June 2019
Nat le Roux
Richard Gray
Chris Sangster
William Styslinger
Free
attaching
options
1,744,657
8,939
4,000
320,000
2,077,596
Expiry or
exercise
of options
Issues of
options
Balance 30
June 2019
-
-
-
-
-
-
-
-
-
-
1,744,657
8,939
4,000
320,000
2,077,596
An agreement to dispose of all the options held by Mr Nat le Roux options was concluded on 14 May 2019, but the
transfer of those options only occurred on 18 July 2019.
The 1,000,000 options granted to Mr Richard Gray in May 2018 subject to shareholder approval are not reflected
above. Such approval is outstanding as at 30 June 2019.
Aggregate amounts payable to Directors and their related entities:
Consolidated Entity
2019
$
Consolidated Entity
2018
$
Accounts payable
14,393
29,477
There were no performance related payments made during the year. The grant of 1,000,000 share options made to
Mr Gray, the Managing Director, in May 2018 is subject to shareholder approval which, at the date of this report is
outstanding.
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.
SUBSEQUENT EVENTS
On 18 July 2019, the consolidated entity announced its decision not to extend the Pomar licence and the intention to
apply to the Director General of Energy and Geology to terminate the licence.
On 7 August 2019, SGZ Cononish Limited received £50,000 from Scottish Enterprise in the form of the first payment
of the Regional Selective Assistance grant.
On 14 August 2019, Ian Proctor was appointed as a Non-Executive Director.
On 28 August 2019, the consolidated entity announced an increase of £1,500,000 in the amount available under the
secured loan facility provided by Bridge Barn Limited and the subscription by investors, including key management
personnel, for 3,285,783 new ordinary shares in the Company at a subscription price of £0.35 per share.
Scotgold Resources Limited
Page 26
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
At the same time, the terms of the secured loan facility were amended to extend the repayment period of each tranche
drawn down on the facility from 24 months to 36 months.
The first of five shipments of components of the processing plant to be installed at the Cononish mine arrived at
Grangemouth on 28 August 2019, with all seaborne components being received by 12 October 2019.
On 19 September 2019, SGZ Cononish Limited signed a contract with Robinsons Scotland Limited for the
construction of a dedicated plant building to house the processing plant as well as the construction of the
infrastructure for the tailings management facility at the Cononish mine.
The voluntary liquidation of SGZ France SAS was concluded on 1 October 2019.
On 24 October 2019, the Company announced the conclusion of the thirteen new exploration agreements and the
replacement of the five agreements in effect at 30 June 2019, with the effective date of these new exploration
agreements being retrospective to 5 November 2018.
There are no matters or circumstances that have arisen after the reporting 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.
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
The Perth, Australia affiliate of BDO International, BDO Audit (WA) Pty Ltd are the auditors of the Company.
NON-AUDIT SERVICES
The Directors have considered the position and are satisfied that the provision of the non-audit services is compatible
with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are
satisfied that the provision of non-audit services by BDO Corporate Tax (WA) Pty Ltd, set out below, did not
compromise the auditor independence requirements of the Corporations Act 2001, for the following reasons:
All non-audit services have been reviewed by the audit committee to ensure they do not impact the
impartiality and objectivity of the auditor; and
None of the services undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants.
BDO Corporate Tax (WA) Pty Ltd provides income tax services to the Company – 2019: $8,488 (2018: $3,519).
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration has been received for the year ended 30 June 2019 and forms part of the
Directors’ report.
Scotgold Resources Limited
Page 27
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 28
AUDITOR’S INDEPENDENCE DECLARATION
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 29
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Interest income
Other income
Gain on loan renegotiation
Administration costs
Interest expense
Depreciation and loss on disposal of plant and equipment
Pre-development costs expensed as incurred
Exploration expensed as incurred
Deferred mineral exploration and evaluation costs written
Employee and consultant costs, excluding share-based payments
Share-based payments
Listing and share registry costs
Legal fees
Office and communication costs
Other expenses
AND CONTROLLED ENTITIES
Notes
2
2
3
16
2019
$
6,314
-
-
(527,619)
(101,943)
(208,608)
(1,253,211)
(28,194)
(118,402)
(615,809)
(200,954)
(164,991)
(50,282)
(96,587)
(158,169)
2018
$
969
1,666
263,707
(514,758)
(172,144)
(69,907)
-
(68,009)
-
(438,955)
-
(313,221)
(226,734)
(112,727)
(249,554)
LOSS BEFORE INCOME TAX
(3,518,455)
(1,899,667)
Income tax benefit
LOSS FOR THE YEAR
Other Comprehensive Income
4
-
-
(3,518,455)
(1,899,667)
Items that may be reclassified to Profit or Loss
Exchange difference on translation of foreign subsidiaries
Total comprehensive result for the year
(726,967)
109,191
(4,245,422)
(1,790,476)
Basic (loss) per share (cents per share)
25
(7.84)
(7.92)
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 30
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 2019
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventory
Other current assets
Total Current Assets
NON-CURRENT ASSETS
Trade and other receivables
Plant and equipment
Mineral exploration and evaluation
Mine development expenditure
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Other current liabilities
Borrowings
Total Current Liabilities
NON-CURRENT LIABILITIES
Borrowings
Provisions
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
AND CONTROLLED ENTITIES
Notes
2019
$
2018
$
5
6
7
5
8
9
10
11
11
12
12
13
14
15
15
3,917,920
57,970
29,724
93,273
4,098,887
11,207,036
59,267
62,850
53,082
11,382,235
1,511,493
996,562
2,034,815
20,293,754
24,836,624
97,894
226,042
16,685,135
-
17,009,071
28,935,511
28,391,306
581,947
63,123
174,838
819,908
294,262
43,529
1,740,867
2,078,658
4,212,914
238,690
4,451,604
-
-
-
5,271,512
2,078,658
23,663,999
26,312,648
41,098,558
(448,311)
(16,986,248)
39,706,967
73,474
(13,467,793)
23,663,999
26,312,648
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 31
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Issued
Capital
Accumulated
Losses
Options
Reserve
Share-
based
payment
reserve
Foreign
Currency
Translation
Reserve
Total Equity
YEAR ENDED 30 JUNE 2018
$
$
$
$
$
$
Balances at 1 July 2017
Total comprehensive result for the year
27,216,549
-
Transactions with owners in their capacity as owners:
4,612,375
7,971,620
12,187
-
(105,764)
39,706,967
Issue of shares
Placements
Options exercised
Options expired
Share issue expenses
Balances at 30 June 2018
(11,658,126)
(1,899,667)
-
-
-
90,000
-
(13,467,793)
YEAR ENDED 30 JUNE 2019
39,706,967
Balances at 1 July 2018
Total comprehensive result for the year
-
Transactions with owners in their capacity as owners:
1,390,854
Issue of shares
737
Options exercised
Share-based payments
-
41,098,558
Balances at 30 June 2019
(13,467,793)
(3,518,455)
-
-
-
(16,986,248)
224,769
-
-
-
-
(90,000)
-
134,769
134,769
-
-
-
-
134,769
-
-
-
-
-
-
-
-
-
-
(170,486)
109,191
15,612,706
(1,790,476)
-
-
-
-
-
(61,295)
4,612,375
7,971,620
12,187
-
(105,764)
26,312,648
(61,295)
(726,967)
26,312,648
(4,245,422)
-
-
205,182
205,182
-
-
-
(788,262)
1,390,854
737
205,182
23,663.999
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 32
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Notes
2019
$
2018
$
CASH FLOWS FROM OPERATING ACTIVITIES
Payment to suppliers
Interest income received
(3,057,998)
6,314
(1,744,357)
969
Net Cash Outflow from Operating Activities
21
(3,051,684)
(1,743,388)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure
Payments for mine development activities
Purchase of plant and equipment
Lodging of deposits as security for obligations
Net Cash Outflow from Investing Activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares and options
Share and option issue transaction costs
Repayment of current borrowings
Proceeds on draw-down of first tranche of non-current borrowings
Net proceeds from Hire Purchase borrowings
Net Cash Inflow from Financing Activities
Net (decrease)/increase in cash held
(487,024)
(5,263,745)
(1,072,636)
(1,409,024)
(247,268)
-
(6,172)
-
(8,232,429)
(253,440)
1,391,591
-
(1,815,521)
3,729,952
731,122
12,596,182
(105,764)
-
-
-
4,037,144
12,490,418
(7,246,969)
10,493,590
Effect of exchange rate fluctuations on cash and cash equivalents
(42,147)
141,114
Cash and cash equivalents at the beginning of this financial year
11,207,036
572,332
Cash and cash equivalents at the end of this financial year
3,917,920
11,207,036
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 33
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
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, Scotland, France and
Portugal. The entity’s principal activity is mine development.
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 Limited 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. At balance sheet date, the consolidated entity had current assets
of $4,098,887 (2018 : $11,382,235), including available cash and cash equivalents of $3,917,920 (2018 :
$11,207,036), and current liabilities of $819,908 (2018 : $2,078,658).
The Board reviews cash flows covering a period of 12 to 18 months and while the Board considers that the
consolidated entity is a going concern it also recognises that significant funds will be required in the development of
the Cononish mine, regional exploration activities and general working capital. In addition to existing cash reserves
the consolidated entity has further available funds by way of a secured £5.5m ($9.94m) loan facility not yet drawn
down.
Going Concern
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal
business activities and the realisation of assets and the settlement of liabilities in the normal course of business.
As at 30 June 2019, the consolidated entity had cash balances of $3,917,920 (30 June 2018 : $11,207,036) and for
the financial year then ending, incurred net cash outflows from operating and investing activities of $11,284,113
(2018 : $1,996,828). The consolidated entity is currently commencing construction of the Cononish gold mine, and
first cash inflows are expected in the first quarter of calendar year 2020. The ability of the consolidated entity to
continue as a going concern is dependent on the successful commissioning of the Cononish mine, including the
timing of the project generating positive cash flows and the construction costs being in line with budget, or in the case
where there is a delay in commissioning, the ability of the consolidated entity to put in place additional financing to
address any adverse effects of that delay.
These conditions indicate a material uncertainty that may cast significant doubt over the ability of the consolidated
entity to continue as a going concern and therefore its ability to realise its assets and discharge its liabilities in the
normal course of business.
Scotgold Resources Limited
Page 34
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
The Directors believe that the consolidated entity has sufficient financing available to continue as a going concern
for the following reasons:
As announced on 28 August 2019, the secured loan facility available from Bridge Barn Limited increased
by £1,500,000, bringing the total available facility to £7,500,000. Of that amount, £2,000,000 had been
drawn down at 30 June 2019;
As also announced on the same date, the consolidated entity has been successful in raising further capital
in an equity raising exercise subsequent to the reporting date, in an amount of £1,150,000;
The amount of any additional cost which may be incurred as a result of a delay in commissioning is mitigated
by the fact that the contract between SGZ Cononish Limited and the supplier of the processing plant to be
commissioned provides that of the total contract value of USD3,862,668, USD115,880 ($165,245) will only
be payable on successful completion of commissioning of the processing plant and USD193,133 ($275,408)
will only be payable on the subsequent issuing by SGZ Cononish Limited of a certificate of completion in
respect of the installation and commissioning of the processing plant; and
As at the date of signing of this report, there are 2,459,151 outstanding options with an exercise price of
£0.40 per option. Each option entitles the holder thereof to acquire one ordinary share in the Company and
is exercisable on or before 31 December 2019. The number of options outstanding includes 1,744,657
options acquired by an institutional investor from Nat le Roux in terms of an agreement concluded on 14 May
2019, in respect of which transfer was completed on 18 July 2019. These options are all “in-the-money” at
the date of signing of this report. Should all the outstanding options be exercised, the expected inflow of cash
will be £983,660 ($1,777,164).
The expiry date of the options precedes the commencement date of the period during which the Directors
estimate that the peak funding requirement in respect of the development of the Cononish mine will be
reached.
Should the consolidated entity not be able to continue as a going concern it may be required to realise its assets and
discharge its liabilities other than in the ordinary course of business, and at amounts that differ from those in the
financial statements. The financial statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or liabilities that might be necessary should the consolidated entity be unable
to continue as a going concern.
Scotgold Resources Limited
Page 35
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Statement of Compliance
The financial report was authorised for issue on 8 November 2019.
The financial report complies with Australian Accounting Standards as issued by the Australian Accounting Standards
Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board.
Adoption of new and revised standards
Changes in accounting policies on initial application of Accounting Standards
In the year ended 30 June 2019, the Directors have reviewed all of the new and revised Accounting 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 amounts recognised in the
financial statements.
The following new or amended standards have been adopted during the year ended 30 June 2019:
AASB 9 Financial Instruments (which became effective for financial years commencing after 1 January 2018)
AASB 9 replaced AASB 139 Financial Instruments: Recognition and Measurement and, in particular, the provisions
of AASB 139 relating to the recognition, classification and measurement of financial assets and financial liabilities,
derecognition of financial instruments, impairment of financial assets and hedge accounting.
The accounting policies implemented on adoption of the provisions of AASB 9 are set out in the Accounting Polices
section below.
Adoption of AASB 9 has not resulted in any reclassification of financial instruments or any adjustments to previously
reported figures.
AASB 15 Revenue from contracts with Customers (which became effective for financial years commencing
after 1 January 2018)
AASB 15 replaces all existing revenue requirements in Australian Accounting Standards and applies to all revenue
arising from contracts with customers, unless the contracts are in the scope of other standards, such as AASB 117
(or AASB 16 Leases, once applied). The core principle of AASB 15 is that an entity recognises revenue to depict the
transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity
expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with the
core principle by applying the following steps:
► Step 1: Identify the contract(s) with a customer
► Step 2: Identify the performance obligations in the contract
► Step 3: Determine the transaction price
► Step 4: Allocate the transaction price to the performance obligations in the contract
► Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
The adoption of AASB 15 has had no impact on the consolidated entity.
Scotgold Resources Limited
Page 36
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
New Accounting Standards and Interpretations
The Directors are also reviewing all new Accounting Standards and Interpretations that have been issued but are not
yet effective for the year ended 30 June 2019.
AASB 16 Leases (Application date: Financial years commencing after 1 January 2019)
AASB 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance
leases under AASB 117 Leases. The Standard includes two recognition exemptions for lessees – leases of ‘low-
value’ assets (e.g. personal computers) and short-term leases (e.g. leases with a lease term of 12 months or less).
At the commencement date of a lease, a lessee will recognise a liability to make lease payments (e.g. the lease
liability) and an asset representing the right to use the underlying asset during the lease term (e.g. the right-of-use
asset). Lessees will be required to separately recognise the interest expense on the lease liability and the
depreciation expense on the right-of-use asset. Lessees will be required to remeasure the lease liability upon the
occurrence of certain events (e.g. a change in the lease term, a change in future lease payments resulting from a
change in an index or rate used to determine those payments). The lessee will generally recognise the amount of
the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting is substantially
unchanged from today’s accounting under AASB 117. Lessors will continue to classify all leases using the same
classification principle as in AASB 117 and distinguish between two types of leases: operating and finance leases.
The consolidated entity is currently evaluating the impact of the new standard.
In addition, the consolidated entity is also currently evaluating the impact of the following new standards:
Effective 1 January 2019:
AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over income tax treatments;
AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment features with negative compensation;
AASB 2017-7 Amendments to Australian Accounting Standards – Long-term interests in associates and joint
ventures;
AASB 2018-1 Amendments to Australian Accounting Standards – Annual improvements 2015-2017 Cycle (covering
issues in AASB 3 Business Combinations, AASB 11 Joint Arrangements, AASB 112 Income Taxes and AASB 123
Borrowing Costs);
AASB 2018-2 Amendments to Australian Accounting Standards – Plan Amendment, Curtailment or Settlement;
AASB 2018-3 Amendments to Australian Accounting Standards – Reduced Disclosure Requirements;
Interpretation 23 Uncertainty over income tax treatments.
Effective 1 January 2020:
AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business;
AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material;
Conceptual Framework;
Scotgold Resources Limited
Page 37
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework.
Effective 1 January 2021:
AASB 17 Insurance Contracts
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 consistency 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
reporting 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 taxable 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.
Scotgold Resources Limited
Page 38
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
The carrying amount of plant and equipment is reviewed annually by the 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 employment and subsequent disposal of the assets. 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.
The present value of decommissioning liabilities attributable to items of plant and equipment, as well as any changes
in the present value of such liabilities arising due to changes in the cash flows used to determine such liabilities or
the discount rate applied to cash flows used to determine such liabilities, is included in the cost of that item of plant
and equipment.
(d) Depreciation
The depreciable amount of all fixed assets including capitalised lease assets, but excluding computers, is depreciated
on a reducing balance basis commencing from the time the asset is held ready for use. Computers are depreciated
on a straight-line basis over their useful lives to the consolidated entity commencing from the time the asset is held
ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset:
Plant and equipment
Motor vehicles
Office furniture and equipment
Depreciation Rate:
15 – 50%
25%
15 – 50%
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting 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.
(e) 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. Revenues earned from the sale of materials
produced in connection with exploration activities are applied against the accumulated deferred expenditure with the
result of reducing those expenditures.
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.
Scotgold Resources Limited
Page 39
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Mineral exploration and evaluation expenditure, of which the Bulk Processing Trial is an integral part, is reclassified
to mine 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. Likewise, fixed asset depreciation is
charged directly to profit and loss in the period in which it is charged.
(f) Mine development expenditure
When an exploration area of interest meets certain criteria, including the determination of technical feasibility and
commercial viability and the obtaining of all planning consents and approvals, the deferred exploration and evaluation
costs attributable to that area of interest are reclassified as mine development expenditure.
All subsequent expenditure on mine development activities is capitalised. When production commences, mine
development expenditure is amortised over the life of the mine to which the development expenditure relates
according to the rate of depletion of the economically recoverable reserves of that mine.
The present value of restoration, decommissioning and environmental monitoring liabilities attributable to mine
development activities, as well as any changes in the present value of such liabilities arising due to changes in the
cash flows used to determine such liabilities or the discount rate applied to cash flows used to determine such
liabilities, is included in mine development expenditure.
(g)
Impairment of Assets
At each reporting date, the Directors review the carrying values of 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.
(h) 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.
The consolidated entity has specific obligations in respect of restoration, decommissioning and environmental
monitoring arising as a result of the undertaking of mine development activities. The extent of the liability arising in
respect of these obligations is determined for each reporting period based on the extent of mine development
activities undertaken by the end of that reporting period and the timing and amount of cash flows expected to be
expended in future to meet such obligations. These expected cash flows are discounted to net present value at a
current pre-tax rate and provided for, with a corresponding addition to mine development expenditure or specific
items of property, plant and equipment required to be decommissioned in future.
Scotgold Resources Limited
Page 40
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
The unwinding of the discount is expensed as incurred and recognised in profit or loss as a finance cost. The
estimated future costs of restoration, decommissioning and environmental monitoring are reviewed annually and
adjusted as appropriate, Changes in the estimated expected future costs, or in the discount rate applied to determine
the net present value of those expected future costs are added to or deducted from mine development expenses, or
items of property, plant and equipment required to be decommissioned in future.
(i)
Cash and Cash Equivalents
Cash and cash equivalents include 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.
(j)
Inventory
Inventory is valued at the lower of cost and net realisable value
(k)
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one party to the contract and a financial
liability or equity instrument of the counterparty to that contract.
(l)
Financial assets
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through
other comprehensive income (OCI) or fair value through profit or loss.
The classification of financial assets at initial recognition depends on the contractual cash flow characteristics of the
financial asset and the business model adopted by the consolidated entity for managing them. With the exception of
trade receivables that do not contain a significant financing component, the consolidated entity initially measures a
financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction
costs. Trade receivables that do not contain a significant financing component are measured at the transaction price
determined under AASB 15.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to
give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding.
This assessment is referred to as the SPPI test and is performed at an instrument level.
For purposes of subsequent measurement, financial assets are classified in four categories:
- Financial assets at amortised cost;
- Financial assets at fair value through OCI with recycling of cumulative gains and losses;
- Financial assets at fair value through OCI with no recycling of cumulative gains and losses on derecognition;
and
- Financial assets at fair value through profit or loss.
All of the financial assets of the consolidated entity have been classified within the category of financial assets at
amortised cost.
Financial assets are measured at amortised cost if both of the following conditions are met:
- The financial asset is held in a business model with the objective to hold financial assets to collect contractual
cash flows; and
Scotgold Resources Limited
Page 41
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments
of principal and interest on the principal amount outstanding;
As the consolidated entity is engaged in the principal activities of mine development and mineral exploration, the
holding of financial assets is effected with the objective of collecting the contractual cash flows applicable to those
financial assets for deployment in the mine development or mineral exploration and evaluation activities of the
consolidated entity.
Financial assets at amortised cost are subsequently measured using the effective interest rate method and are
subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or
impaired.
When the consolidated entity has transferred its rights to receive cash flows from an asset or has entered into a pass-
through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it
has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of
the asset, the consolidated entity continues to recognise the transferred asset to the extent of its continuing
involvement. In that case, the consolidated entity also recognises an associated liability. The transferred asset and
the associated liability are measured on a basis that reflects the rights and obligations that the consolidated entity
has retained.
The consolidated entity recognises an allowance for expected credit losses (ECLs) for all debt instruments not held
at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the consolidated entity expects to receive, discounted at an
approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of
collateral held or other credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit
risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within
the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in
credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of
the exposure, irrespective of the timing of the default (a lifetime ECL).
For trade receivables and contract assets, the consolidated entity applies a simplified approach in calculating ECLs.
Therefore, the consolidated entity does not track changes in credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each reporting date.
(m) Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans
and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at the fair value of consideration received and, in the case of loans and
borrowings and payables, net of directly attributable transaction costs. The financial liabilities of the consolidated
entity include trade and other payables and borrowings.
Subsequent to initial recognition, the measurement of financial liabilities depends on their classification, with the
classification categories being:
- Financial liabilities at fair value through profit or loss; or
-
Loans and borrowings.
Scotgold Resources Limited
Page 42
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss.
As at 30 June 2019, no financial liabilities are held for trading or have been designated upon initial recognition as at
fair value through profit or loss.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using
the effective interest rate method. Gains and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the effective interest rate amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are
an integral part of the effective interest rate. The effective interest rate amortisation is included as finance costs in
the statement of comprehensive income.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of
the original liability and the recognition of a new liability. The difference in the respective carrying amounts is
recognised in the statement of comprehensive income.
Loans and borrowings are classified as current liabilities unless the consolidated entity has an unconditional right to
defer settlement of the liability for at least 12 months after the reporting date.
(n) Revenue
No revenue from the sale of goods or services is currently recognised by the consolidated entity. Revenues earned
from the sale of materials produced in connection with BPT activities are viewed as an integral part of mineral
exploration and evaluation activities and are applied against the accumulated deferred mineral exploration and
expenditures with the result of reducing those expenditures.
Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial
assets.
(o) 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.
(p)
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.
(q) Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
Scotgold Resources Limited
Page 43
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
(r)
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.
(s) 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.
(t)
Foreign currency translation
The presentation currency of the consolidated financial statements is Australian dollars. In addition, functional
currency is determined for each entity in the Group 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 reporting date.
All exchange differences in the consolidated financial report are taken to profit or loss with the exception of differences
on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken
directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss.
Tax charges and credits attributable to exchange differences on those borrowings are also recognised in equity.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported
as part of the fair value gain or loss.
The functional currency of the foreign operations SGZ Grampian Limited and SGZ Cononish Limited is Pounds
Sterling (£). The functional currency of SGZ France SAS and Scotgold Resources Portugal is the Euro (€).
As at the reporting date the assets and liabilities of these subsidiaries are translated into the presentation currency
of the consolidated financial statements at the rate of exchange ruling at the reporting 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.
Scotgold Resources Limited
Page 44
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
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 consolidated entity losing
control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-
controlling interests and is 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 consolidated entity losing significant influence or joint
control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.
(u) 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.
Determination of date of reclassification to mine development expenditure
During the year, exploration and evaluation expenditure attributable to the Cononish area of interest was reclassified
to mine development expenditure pursuant to the making of a judgement by the Directors that the criteria to be met
to make such reclassification had been met on 19 December 2018. In making that judgement, the Directors took into
account the requirements set out in the provisions of various agreements entered into by SGZ Cononish Limited
dealing with the rights of SGZ Cononish Limited to conduct mining activities at the Cononish mine, the conditions to
be met by that company prior to being permitted to conduct mining activities and whether all of these conditions had
been met.
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.
In particular, pursuant to the making of a judgement that exploration and evaluation expenditure attributable to the
Cononish area of interest met the criteria for reclassification to mine development expenditure on 19 December 2018,
the attributable balance of exploration and evaluation expenditure proposed to be so reclassified was tested for
impairment at the date of reclassification by reference to value-in-use calculations performed using a life-of-mine
model of the Cononish mine incorporating key assumptions such as gold and silver market prices, any premia
obtainable over spot market prices, mining rates, ore grades, plant processing recoveries and efficiencies, exchange
rates, staffing levels and equipment operating efficiencies, among others. The formulation of these key assumptions
involved the use by the Directors of judgements as to current and expected general macro-economic conditions and
expected conditions in the gold mining industry as well as factors specific to the Cononish mine such as mineral
resources and reserves estimates and ore grades.
Where the Directors adjudge that it is necessary to make material changes to key assumptions employed in the life-
of-mine model, then these new key assumptions are incorporated into the life-of-mine model and the resultant value-
in-use valuation produced by the life-of-mine model is then used as the basis for determining the necessity for and
amount of any impairment.
Scotgold Resources Limited
Page 45
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
As at 30 June 2019, the gross asset base of the consolidated entity directly attributable to the Cononish mine
amounted to $23,602,730 (2018: 16,152,682). The Directors do not believe that there is any necessity to impair the
carrying value of that asset base at 30 June 2019.
In the case of impairment of mineral exploration and evaluation, 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.
At 30 June 2019, the consolidated entity had capitalised mineral exploration and evaluation expenditure of
$2,034,815 (2018: $16,685,135). The Directors do not believe any indications of impairment are present.
Provision for restoration and decommissioning
A provision has been made for the present value of anticipated costs of restoration and decommissioning at the
Cononish mine at the end of mining operations there as well as to carry out after-care and monitoring for an agreed
period subsequent to such cessation. As at each reporting date, the consolidated entity recognises the best estimate
of the Directors in respect of the liability for restoration and decommissioning which has been incurred up to and
including that reporting date, which best estimate is determined by reference to the extent of mine development
activity (or when production is underway, mining activity) undertaken up to that date as well as the obligations set out
in the applicable legislation and agreements to which the consolidated entity is a party. Key assumptions employed
in determining the best estimate in respect of liability for restoration and decommissioning include discount rates, the
life-of-mine and the extent of obligations undertaken, all or any of which may change in the future and accordingly
affect the carrying amount of the provision for restoration and decommissioning.
Based on the extent of mine development activities carried out up to and including that date, the provision for
restoration and decommissioning at 30 June 2019 was $238,690 (2018 - $Nil).
Mineral reserves and resources
There are numerous risks inherent in estimating ore reserves and resources and the associated life-of-mine plan. A
number of assumptions must be made when estimating ore reserves and resources, including assumptions as to
exchange rates, gold and silver prices and any premia over market spot prices which may be obtained, extraction
costs and recovery and production rates. Any such assumptions and estimates may change as new information
becomes available. Apart from possibly resulting in changes to judgements as to the economic viability of the
orebody, these changes may further change the estimate of life-of-mine, thereby changing the timing and amount to
be recognised as a provision in respect of restoration and decommissioning and changing the basis of amortisation
of mine development expenditure once production commences.
Share-based payments
In determining the amount to be recognised in respect of share-based payments during each reporting period, it is
necessary to perform a valuation of instruments such as share options or warrants granted as share-based payments
for services received.
The consolidated entity determines such valuation using the “Black Scholes” model. Inputs into that model include
assumptions which require judgement on the part of the Directors. In addition, once such value has been determined,
in accounting for these options the Directors must exercise judgement as to number of share-based payment
instruments granted which are likely to vest and the likelihood that any non-market vesting conditions will be met.
Scotgold Resources Limited
Page 46
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Recognition of deferred tax assets
The Directors exercise judgement as to the likelihood that taxable income will arise in future against which assessable
losses can be offset in order to reduce the liability for income tax on that taxable income. Where such taxable income
is adjudged to be likely to arise, a deferred tax asset will be recognised to the extent of the future taxation saving.
As at 30 June 2019, the amount of deferred tax assets recognised was $Nil (2018 - $Nil).
NOTE 2 – OTHER INCOME
Other income
Interest received
Other income
Gain on loan renegotiation
Total other income
NOTE 3 - LOSS FROM ORDINARY ACTIVITIES BEFORE TAX EXPENSES
Expenses
Interest expensed
Total borrowing cost expensed
Depreciation of non-current assets
Plant and equipment
Motor vehicles
Office furniture and equipment
Total depreciation of non-current assets
Loss on disposal of non-current assets
Plant and equipment
Motor vehicles
Office furniture and equipment
Total loss on disposal of non-current assets
2019
$
6,314
-
-
6,314
2019
$
101,943
101,943
121,381
9,140
955
131,476
72,078
2,727
2,327
77,132
2018
$
969
1,666
263,707
266,342
2018
$
172,144
172,144
68,171
1,718
18
69,907
-
-
-
-
Scotgold Resources Limited
Page 47
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
NOTE 4 - INCOME TAX
The prima facie tax benefit at 27.5% (2018 : 27.5%) on loss from ordinary activities is reconciled to the income tax
benefit in the financial statements as follows:
Loss from ordinary activities
2019
$
(3,518,455)
2018
$
(1,899,667)
Prima facie income tax benefit at 27.5% (2018 : 27.5%)
967,575
522,408
Tax effect of permanent differences
Share issue costs amortised
Other non-deductible expenses
60,421
-
29,018
-
Income tax benefit adjusted for permanent differences
1,027,996
551,426
Deferred tax asset not brought to account
Income tax benefit
INCOME TAX BENEFIT
(1,027,996)
-
(551,426)
-
The directors estimate the cumulative unrecognised deferred tax asset attributable to the Company and its
controlled entities at 27.5% is as follows:
UNRECOGNISED DEFERRED TAX ASSETS
Revenue losses after permanent differences
Capital raising costs yet to be claimed
2019
$
3,198,284
-
3,198,284
2018
$
2,637,395
55,150
2,692,545
The potential deferred tax asset has not been brought to account in the financial report at 30 June 2019 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)
(b)
(c)
The Company and its controlled entities derive future assessable income of an amount and type sufficient
to enable the benefit from the deductions for the tax losses and the un-recouped exploration expenditure
to be realised;
The Company and its controlled entities continue to comply with the conditions for deductibility imposed
by tax legislation; and
No changes in tax legislation adversely affect the Company and its controlled entities in realising the
benefit from the deductions for the tax losses and un-recouped exploration expenditure.
Franking Credits
No franking credits are available at the reporting date for the subsequent financial year.
Scotgold Resources Limited
Page 48
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
NOTE 5 – TRADE AND OTHER RECEIVABLES
Current
GST / VAT receivable
Other receivables
Non-current
Bond on Tenement
Rehabilitation, restoration and land management Bond deposits
Performance Bond deposits
2019
$
47,940
10,030
57,970
-
1,457,292
54,201
1,511,493
2018
$
56,424
2,843
59,267
97,894
-
-
97,894
During the year SGZ Cononish Limited entered into a Section 75 Agreement with the owner of the land on which the
Cononish mine is situated, the Loch Lomond and the Trossachs National Park Authority and the Crown Estate
Scotland in respect of the development of the Cononish gold and silver mine. This agreement sets out obligations on
the part of SGZ Cononish Limited to undertake restoration, decommissioning and environmental aftercare and
monitoring on cessation of operations at the end of the life of the Cononish mine as well as obligations to implement
a plan for the management of the Greater Cononish Glen in which the Cononish mine is situated (the “Greater
Cononish Glen Management Plan”).
The Bond which was in place prior to the concluding of the Section 75 Agreement was refunded to SGZ Cononish
Limited and the following amounts were lodged as security for the performance by that company of its obligations:
-
-
£537,918 ($971,848) in respect of obligations to undertake restoration, decommissioning and environmental
aftercare and monitoring on cessation of operations at the Cononish mine; and
£268,693 ($485,444) in respect of obligations in terms of the Greater Cononish Glen Management Plan.
As part of the agreement with Roads Scotland in respect of the upgrading of the Dalrigh junction on the A82 road
between Tyndrum and Crianlarich to ensure safe access from that road to the Cononish Mine, SGZ Cononish Limited
lodged a deposit of £30,000 ($54,201) as security for the performance by SGZ Cononish Limited of its obligations to
maintain the Dalrigh junction for a period of five years from the completion of the upgrade.
NOTE 6 – INVENTORY
Inventory of gold concentrates
Inventory of mining consumables
NOTE 7 – OTHER CURRENT ASSETS
Prepayments
2019
$
-
29,724
29,724
2019
$
93,273
2018
$
62,850
-
62,850
2018
$
53,082
Scotgold Resources Limited
Page 49
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
NOTE 8 – PLANT AND EQUIPMENT
Plant and equipment
Cost
Accumulated Depreciation
Movement for the year ended 30 June 2018
Cost
Opening balance
Additions
Closing balance
Accumulated depreciation
Opening balance
Depreciation expensed
Closing balance
Plant and
equipment
Motor
vehicles
560,212
-
560,212
296,782
68,171
364,953
83,918
6,109
90,027
64,208
1,718
65,926
Movement for the year ended 30 June 2019
2019
$
1,304,305
(307,743)
996,562
Furniture and
office
equipment
11,163
-
11,163
4,463
18
4,481
Plant and
equipment
Motor
vehicles
Furniture and
office
equipment
560,212
1,018,612
(289,640)
(67,593)
1,221,591
364,953
121,381
(217,562)
13,504
282,276
90,027
46,827
(54,442)
(11,064)
71,348
65,926
9,140
(51,715)
1,088
24,439
11,163
7,197
(6,746)
(248)
11,366
4,481
955
(4,419)
11
1,028
Cost
Opening balance
Additions
Disposals
Foreign exchange movement
Closing balance
Accumulated depreciation
Opening balance
Depreciation expensed
Disposals
Foreign exchange movement
Closing balance
Net carrying value
At 30 June 2019
At 30 June 2018
939,315
46,909
10,338
996,562
195,259
24,101
6,682
226,042
Fixed assets with a net carrying value of $842,517 are the subject of hire purchase agreements and serve as security
for the repayment of amounts owing in terms of these agreements.
Scotgold Resources Limited
Page 50
2018
$
661,402
(435,360)
226,042
Total
655,293
6,109
661,402
365,453
69,907
435,360
Total
661,402
1,072,636
(350,828)
(78,905)
1,304,305
435,360
131,476
(273,696)
14,603
307,743
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
NOTE 9 – MINERAL EXPLORATION AND EVALUATION
Opening balance
Net (gain)/loss from the BPT
Additional expenditure deferred during the year
Reclassification to mine development expenditure
Write-off of deferred expenditure attributable to Pomar licence
Foreign exchange movement
Closing balance
2019
$
16,685,135
(5,360)
641,623
(15,180,832)
(118,402)
12,651
2,034,815
2018
$
16,346,365
(280,331)
619,101
-
-
-
16,685,135
The ultimate recoupment of exploration expenditure carried forward is dependent upon successful development and
commercial exploitation, or sale of the respective areas.
The net gain of $5,360 (2018 : $280,331) from the BPT is an integral part of the Company’s mineral exploration and
evaluation activities and includes $68,684 of revenue from Dore sales (2018: $203,177) and $63,324 of production
costs (2018 : $557,477). There were no concentrate sales during the year, compared to a level of $634,631 in 2018.
The criteria to reclassify mineral exploration and evaluation expenditure to mine development expenditure in respect
of the Cononish gold and silver mine project of SGZ Cononish Limited were met on 19 December 2018 and
$15,180,832 of deferred mineral exploration and evaluation expenditure was accordingly reclassified to mine
development expenditure on that date.
This amount includes deferred expenditure on minor preliminary works commenced on the development of the
Cononish Mine of $130,635.
Pursuant to the taking of a decision by management not to extend the Pomar exploration licence in Portugal,
$118,402 of deferred mineral and evaluation expenditure attributable to that licence was written-off during the year.
NOTE 10 – MINE DEVELOPMENT EXPENDITURE
Reclassification from mineral exploration and evaluation expenditure
Expenditure incurred subsequent to reclassification
Share-based payment costs capitalised
Provision for restoration and decommissioning (see Note 13)
Foreign exchange movement
Closing balance
2019
$
15,180,832
5,606,392
4,228
238,690
(736,388)
20,293,754
The criteria for reclassifying mineral exploration and evaluation expenditure attributable to the Cononish mine project
were met on 19 December 2018, with a consequent transfer of $15,180,832 of deferred costs. Subsequently, an
amount of $5,606,392 was expended on mine development activities and capitalised into this asset. As the transfer
occurred in the current financial period, no amounts are presented for the year ended 30 June 2018.
Share-based payment costs capitalised as mine development expenditure relates to options granted to senior
management to incentivise the meeting of the corporate target of producing first gold at the Cononish mine in
February 2020.
Scotgold Resources Limited
Page 51
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
NOTE 11 – TRADE AND OTHER PAYABLES
Trade creditors
Other accruals
Trade creditors and accruals relating to exploration expenditure
Trade creditors and accruals relating to development expenditure
Trade creditors and accruals relating to administration
2019
$
581,947
63,123
645,070
144,910
385,770
114,390
645,070
Trade creditors are non-interest bearing and are normally settled on 30 days terms (2018 : 30 days).
NOTE 12 – BORROWINGS
Non-current
Secured loan facility
Hire purchase agreement facilities
Current
Shareholder loan
Hire purchase agreement facilities
2019
$
3,655,221
557,693
4,212,914
2019
$
-
174,838
174,838
2018
$
294,262
43,529
337,791
42,814
-
294,977
337,791
2018
$
-
-
-
2018
$
1,740,867
-
1,740,867
Total borrowings
4,387,752
1,740,867
All of the borrowings are denominated in £ (Pounds sterling).
Shareholder loan
On 14 March 2017 the Company entered into a short-term loan agreement for £1,000,000 with Nat le Roux, the
Company’s non-executive Chairman and major shareholder. Pursuant to the amendment of the loan terms on 20
March 2018 in terms of which all interest (including accrued interest) was waived and the date of repayment was
extended to 30 September 2018 (which gave rise to the gain on renegotiation recognised in 2018), the principal was
repaid on 26 September 2018.
The movements on the loan are as follows:
Opening balance
Interest at effective rate
Gain on loan renegotiation
Foreign exchange movement
Loan repayment
Closing balance
Scotgold Resources Limited
2019
$
1,740,867
43,384
-
31,270
(1,815,521)
-
2018
$
1,742,964
170,883
(263,707)
90,727
-
1,740,867
Page 52
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Loan from company controlled by shareholder
The terms of the secured loan facility agreement entered into on 18 May 2018 between SGZ Cononish Limited and
Bridge Barn Limited, a wholly owned and controlled company of Nat le Roux, the Company's Non-Executive
Chairman and major shareholder, were amended during the year as follows:
(a)
(b)
On 2 October 2018, the period of availability of the facility was extended to 12 months, with the facility to
be drawn down in three tranches each repayable 24 months after date of drawdown of that specific
tranche; and
On 26 February 2019, the amount available to be drawn down under the facility was increased from
£5,000,000 to £ 6,000,000, the number of tranches to be drawn down increased from three to four and
the terms of payment of the interest on amounts drawn-down were amended to provide for repayment of
interest on each tranche as at the date of repayment of that tranche.
No amounts had been drawn down on the facility as at the date of any of these amendments, with the first tranche
of £2,000,000 being drawn down on 13 May 2019 and no other drawdowns being made during the year.
The terms of the secured loan as at 30 June 2019 are accordingly as follows:
i)
ii)
iii)
iv)
v)
An overall facility amount of £6,000,00 to be drawn down in two tranches of £ 2,000,000 followed by two
tranches of £1,000,000;
The period of availability of the first tranche ended on 30 June 2019, with the second tranche being
available for a period of six months after the date of drawdown of the first tranche and the period of
availability of the subsequent tranches being the period of six months from the date of draw-down of the
immediately preceding tranche;
Nominal interest rate is 9.0% applied to all amounts drawn down;
Each tranche, together with accumulated interest thereon, is repayable 24 months after the date of
drawdown of that tranche; and
Security for repayment is provided by way of Debenture over all of the assets and undertakings of the
Company's wholly owned subsidiaries, SGZ Grampian Limited and SGZ Cononish Limited, including the
transfer of security of the issued capital of each of these subsidiaries.
The movements on the secured facility loan agreement during the year are as follows:
First tranche drawn down on 13 May 2019
Interest at effective rate
Foreign exchange movement
Closing balance
2019
$
3,729,952
41,626
(116,357)
3,655,221
The effective interest rate on the secured loan facility is 8.63%. As set out in the note on matters subsequent to the
end of the financial year the amount available in terms of the secured loan facility agreement was increased in August
2019.
Scotgold Resources Limited
Page 53
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Hire purchase facilities
Subsidiaries of the Company have entered into hire purchase agreements with financial institutions to finance the
purchase of motor vehicles and mobile plant during the year, as follows:
Subsidiary company
Assets financed
Non-current portion of liability
Current portion of liability
Total liability as at 30 June 2019
Date of agreement
Period of agreement in months
Effective interest rate
Net carrying value of assets at 30 June 2019
SGZ Cononish Limited
Three items
of mobile
plant
$
346,296
75,965
422,261
Dacia
Duster
vehicle
$
18,876
4,606
23,482
174,636
89,706
264,342
13/03/2019 10/01/2019 29/04/2019
36
4.39%
350,528
60
9.92%
455,383
60
6.86%
18,814
SGZ Grampian Limited
Dacia Duster
One item
vehicle
of mobile
plant
$
$
17,885
4,561
22,446
01/11/2018
60
7.84%
17,792
Total
$
557,693
174,838
732,531
842,517
The respective assets financed in terms of each hire purchase agreement constitute the sole security for repayment
of the amounts owing in respect of each of these agreements.
The movements during the year on those respective hire purchase agreements are as follows:
Subsidiary company
Assets financed
Net amount financed
Interest at effective rate
Repayments
Foreign exchange movement
Closing balance at 30 June 2019
NOTE 13 – PROVISIONS
One item
of mobile
plant
$
SGZ Cononish Limited SGZ Grampian Limited
Dacia Duster
Three items
vehicle
of mobile
plant
$
449,462
12,833
(28,257)
(11,777)
422,261
Dacia
Duster
vehicle
$
24,804
764
(2,459)
373
23,482
$
24,667
1,181
(3,456)
54
22,446
283,245
2,155
(16,884)
(4,174)
264,342
Provision for restoration and decommissioning
2019
$
Total
$
782,178
16,933
(51,056)
(15,524)
732,531
2018
$
Balance at 30 June 2019
238,690
-
This provision represents the best estimate of the present value of expenditures required to effect restoration of the
Cononish mine area at the end of mining operations at the mine as well as to carry out aftercare and monitoring
activities in terms of the Decommissioning and Restoration Plan formulated in accordance with the requirements set
out in the Section 75 Agreement entered into by SGZ Cononish Limited on 12 September 2018, based on the mine
development activities carried out up to and including 30 June 2019.
In arriving at the amount of the provision, an inflation rate of 2.0% has been applied to estimated future costs stated
at current levels and the resultant cashflows have been discounted back to 30 June 2019 using a discount rate of
1.32%.
Scotgold Resources Limited
Page 54
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
No provision was made during the year ended 30 June 2018.
NOTE 14 – ISSUED CAPITAL
Ordinary shares – fully paid
(a)
Voting and dividend rights
2019
No. of
shares
45,639,546
2018
No. of
shares
2019
$
2018
$
42,911,254
41,098,558
39,706,967
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of shares held. The ordinary shares have no par value and the company does not have a
limited amount of authorised capital.
Article 16 of the Constitution specifies that on a show of hands every member present in person, by attorney or by
proxy shall have one vote for every fully paid share held or in the case of a 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 share.
(b)
Movements in ordinary share capital of the Company were as follows:
During the year ended 30 June 2018:
Date
Details
Shares
04/07/2017
25/08/2017
02/10/2017
08/11/2017
28/11/2017
21/12/2017
21/12/2017
04/01/2018
23/03/2018
17/05/2018
17/05/2018
Balance at 30 June 2017
Options conversion
Total before consolidation
1 for 100 share consolidation
Total after share consolidation
Options conversion
Options conversion
Options conversion
Rights issue
Rights issue costs
Placing
Options conversion
Placing
Placing costs
Balance at 30 June 2018
1,593,220,666
50,000
1,593,270,666
(1,577,337,734)
15,932,932
4,402
1,575
500
10,625,940
1,800,000
450
14,545,455
42,911,254
Value
(cents)
1.6695
1.6955
1.7074
1.7374
1.7363
1.7236
1.8333
1.7990
$
27,216,549
837
27,217,386
-
27,217,386
7,464
2,689
867
4,612,375
(83,343)
775,620
330
7,196,000
(22,421)
39,706,967
During the year ended 30 June 2019:
Date
Details
Shares
Value
(cents)
$
19/09/2018
09/10/2018
09/01/2019
Balance at 30 June 2018
Options conversion
Share subscription
Options conversion
Balance at 30 June 2019
42,911,254
331
2,727,274
687
45,639,546
0,7251
0.5100
0.7234
Shares issued for non-cash consideration amounted to Nil during the year (2018: Nil).
Scotgold Resources Limited
39,706,967
240
1,390,854
497
41,098,558
Page 55
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
(c)
Movements in options were as follows:
During the year ended 30 June 2018
Details
Number
$
Balance at 30 June 2017
Options exercised
Options expired 22 September 2017
Options expired 30 September 2017
Options before share consolidation
1 for 100 share consolidation
Total after share consolidation
Options issued with Rights issue
Options issued with placement
Conversion of options
Balance at 30 June 2018
During the year ended 30 June 2019
156,457,334
(56,477)
(30,000,000)
(123,400,857)
3,000,000
(2,970,000)
30,000
2,125,149
360,000
(450)
2,514,699
224,769
-
(90,000)
-
134,769
-
134,769
-
-
-
134,769
Details
Number
$
Balance at 30 June 2018
Conversion of options during first half of year
Conversion of options during second half of year
Balance at 30 June 2019
2,514,699
(331)
(687)
2,513,681
134,769
-
-
134,769
Option exercise dates and prices
Number
30,000
2,483,681
2,513,681
Exercise Price
Expiry Date
Reserve $
$8.00
£0.40
31 March 2022
31 December 2019
134,769
-
134,769
Details of options issued to key management and senior managers are set out in Note 16.
NOTE 15 – RESERVES AND ACCUMULATED LOSSES
Accumulated Losses
Balance at beginning of the year
Net loss from ordinary activities
Options expiry
Balance at end of the year
2019
$
2018
$
(13,467,793)
(3,518,455)
-
(16,986,248)
(11,658,126)
(1,899,667)
90,000
(13,467,793)
Scotgold Resources Limited
Page 56
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
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 expiry
Balance at end of the year
Share-based payment Reserve
Balance at beginning of the year
Issue of options for services rendered (Note 16)
Balance at end of the year
Nature and purpose of reserves
Foreign currency translation reserve
2019
$
2018
$
(61,295)
(726,967)
(788,262)
(170,486)
109,191
(61,295)
134,769
-
134,769
-
205,182
205,182
224,769
(90,000)
134,769
-
-
-
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 other than options issued as share
based payment for services received by the consolidated entity.
Share-based Payment Reserve
The share-based payment reserve arises on the granting of share options or similar instruments to employees and
other parties providing similar services.
NOTE 16 – SHARE-BASED PAYMENTS
On 1 May 2018 an Incentive Option Agreement was announced by the Company, whereby 1,240,000 options to
acquire shares were agreed to be granted to executive management upon the commencement of gold production.
The options will be exercisable at £0.30. The options are subject to shareholder approval and will expire on 1 May
2028. These options vest on the later of one year after the date of award thereof and the date of commencement of
gold production at Cononish mine. As at 30 June 2019, only 1,000,000 of these options are expected to vest in future
due to an executive manager leaving before 30 June 2019 and not meeting the service conditions attached to the
options.
Scotgold Resources Limited
Page 57
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
In addition, on 16 April 2019, the Company granted 280,000 options to acquire shares to senior managers as part of
a package to incentivise management to meet the targeted date of first gold production at the Cononish mine, at a
strike price of £0.34 per share. These options expire on 16 April 2024 and vest on the later of 30 June 2020 and the
date of achievement of agreed production targets. As at 30 June 2019, only 120,000 of these options are expected
to vest in future due to a senior manager leaving before 30 June 2019 and not meeting the service conditions attached
to the options.
As at 30 June 2019, the share options granted to management for services rendered and expected to vest in future
have the following expiry date and exercise prices:
Grant date
1 May 2018
16 April 2019
Number of
options
1,000,000
120,000
Expiry date
1 May 2028
16 April 2024
Exercise price
per option
£0.30
£0.34
Fair value
per option
£0.172
£0.137
The options were valued using the “Black-Scholes” model, employing the following key inputs and assumptions:
Expected volatility
Risk-free rate
Life of option
Valuation date
Granted 1 May 2018
55%
1.39%
10 years
1 May 2018
Granted 16 April 2019
45%
1.22%
5 years
16 April 2019
The average strike price at 30 June 2019 of the 1,120,000 options outstanding at that date and expected to vest in
future is £0.304.
NOTE 17 - COMMITMENTS FOR EXPENDITURE
Mineral Tenement Leases
As at 30 June 2019, the consolidated entity held five licences in Scotland. In December 2018, an application was
made to the Crown Estate Scotland to exchange these licenses for thirteen licences broadly covering the same
area as the original, but with some decrease in overall land holding.
On making that application, the following programme of exploration costs was proposed:
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
Contract for purchase of processing plant
Minimum
expenditure
(est.)
$
5,824,554
2,590,561
7,427,403
15,842,518
Licence Fee
(est.)
Total
(est.)
$
117,435
117,435
352,305
587,175
$
5,941,989
2,707,996
7,779,708
16,429,693
On 14 February 2018, SGZ Cononish Limited entered into a contract with Appropriate Process Technologies Pty
Limited for the fabrication of a processing plant to be used for processing ore at the Cononish mine.
Scotgold Resources Limited
Page 58
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
The total contract value is 3,862,667 US Dollars (“USD”), with regular milestone payments and a final retention
payment being provided for in the terms of the contract. As at 30 June 2019, an amount of $1,487,122
(USD1,042,919) in respect of contracted milestone payments and final retention payments was payable after 30 June
2019, with all payments expected to be made by the end of March 2020.
Greater Cononish Glen Management Plan
As part of the Section 75 Agreement entered into between SGZ Cononish Limited, the owner of the land on which
the Cononish mine is situated, the Loch Lomond and the Trossachs National Park Authority and the Crown Estate
Scotland in respect of the development of the Cononish mine, SGZ Cononish Limited has assumed obligations to
implement a plan for the management of the greater Cononish glen in which the Cononish mine is situated.
The costs of meeting these obligations are expected to be incurred 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
Later than 5 years
Minimum royalty payments
$
269,864
123,546
23,375
85,351
502,136
In terms of the lease agreement between SGZ Cononish Limited and the owners of the land on which the Cononish
mine is situated, an annual rental, indexed to the United Kingdom Retail Price Index (“RPI”) is payable annually up
to 23 July 2030. The amount payable for the year ended 30 June 2019 amounted to $33,588 and the amount paid in
July 2019 amounted to $34,694.
Assuming a 2.0% per annum increase in the RPI in future, the amounts payable in respect of annual rental shall be
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
Later than 5 years
Certain Rent payments
$
34,694
35,388
110,467
241,632
422,181
The lease agreement between SGZ Cononish Limited and the Crown Estate Commissioners in respect of the
Cononish mine provides for the payment of a minimum amount of Certain Rent at a rate of £150,000 per annum,
payable half-yearly on 1 January and 1 July of each year, with Certain Rent being adjusted to a level of 30% of the
average annual anticipated Royalty Rent on the second anniversary of the signing of the Section 75 Agreement
entered into with the owner of the land on which the Cononish Mine is situated, the Loch Lomond and the Trossachs
National Park Authority and the Crown Estate Scotland and indexed in accordance with the United Kingdom RPI with
effect from the third anniversary of such signing.
Scotgold Resources Limited
Page 59
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Using the expected levels of annual Royalty Rent levels set out in the latest life-of-mine model, and assuming an
annual increase in the RPI of 2%, the following amounts are estimated to be payable as Certain Rent after 30 June
2019:
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
Later than 5 years
Rental of immovable property
$
271,003
397,563
1,978,673
3,695,284
6,342,253
Rental payments expected to be incurred in terms of rental agreements in place in respect of immovable property
after 30 June 2019 are 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
Rental of mobile equipment
$
57,310
60,923
182,770
301,003
Rental payments in respect of agreements for the rental of mobile equipment utilised in mining activities are due to
be made after 30 June 2019 as follows:
Not later than one year
Later than 1 year but not later than 2 years
NOTE 18 - CONTINGENT LIABILITIES
$
161,879
40,469
202,348
SGZ Cononish Limited has entered into certain agreements which provide for the making of future payments
contingent upon commencement of production at the Cononish mine as follows:
(a)
A donations agreement with the Strathfillan Community Development Trust (”SCDT”) was concluded during
the year pursuant to which £240,000 is payable to SCDT in annual instalments of £15,000 per annum upon
the Cononish mine reaching an ore processing rate of 3,000 tonnes per month (“tpm”), increasing to £30,000
per annum in any year upon reaching an ore processing rate of 6,000tpm, plus two lump sum payments of
£125,000, the first being payable on the first anniversary of commencement of production at the Cononish
mine, and the second lump sum being payable on the fifth anniversary of commencement of commercial
production at the Cononish mine or on the commencement of an ore processing rate of 6,000tpm, whichever
is the earlier.
(b)
Clause 18 of the Section 75 Agreement entered into with the owner of the land on which the Cononish mine
is situated, the Loch Lomond and the Trossachs National Park Authority and the Crown Estate Scotland in
respect of the development of the Cononish mine provides for the payment of up to £425,000 to Loch Lomond
Scotgold Resources Limited
Page 60
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
and the Trossachs Countryside Trust, payable in annual instalments of £25,000 per annum upon the
commencement of production at the Cononish mine, increasing proportionately up to £50,000 per annum as
processing of ore increases from 3,000 to 6,000 tpm. An amount of £25,000 becomes payable two years
after date of commencement of development if production has not commenced by that time and, in the event
of cessation of mining operations, the minimum amount payable shall be £250,000.
The agreement of lease between SGZ Cononish Limited and the owner of the land on which the Cononish
mine is located provides that royalties at rates of between 3.5% and 10% shall be payable to the landowner
on the net realisable value of any minerals produced at the Cononish Mine other than gold, silver or other
precious metals, subject to the payment of a minimum royalty of £26,505 per annum, indexed to the United
Kingdom Retail Price Index, with effect from the date of commencement of production at the Cononish mine.
In terms of the lease between SGZ Cononish Limited and the Crown Estate Commissioners, Royalty Rent
at a rate of 4% of the net realisable value arising on the sale of gold and silver from the Cononish mine shall
be payable half yearly in arrears, subject to the payment of a minimum amount in the form of Certain Rent
(described more fully in Note 17).
(c)
(d)
In consideration of Scottish Enterprise being willing to offer SGZ Cononish Limited up to £430,000 in the form of
Regional Selective Assistance grants under the terms and conditions of the offer letter issued by Scottish Enterprise
dated 14 November 2018, the Company has provided a guarantee to Scottish Enterprise as security for any amounts
of such grants received by SGZ Cononish Limited which may become repayable by that company to Scottish
Enterprise under the terms and conditions of that offer letter. As at 30 June 2019, no grants had been received by
SGZ Cononish Limited from Scottish Enterprise. A grant payment of £50,000 was received on 7 August 2019.
Scotgold Resources Limited and its controlled entities have no other known material contingent liabilities as at 30
June 2019.
NOTE 19 - INVESTMENT IN CONTROLLED ENTITIES
Parent
Scotgold Resources Limited
42 127 042 773
Australia
100%
Registered
Number
Country of
Incorporation
Interest Held
Subsidiary
SGZ Grampian Limited
SGZ France SAS
Scotgold Resources Portugal Ltda
SGZ Cononish Limited
Fynegold Exploration Limited
SC 309525
804 686 582
513 303 057
SC 569264
SC 084497
Scotland
France
Portugal
Scotland
Scotland
100%
100%
100%
100%
100%
The Scottish subsidiary Scotgold Resources Limited changed its name to SGZ Grampian Limited during the year.
NOTE 20 - 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.
Scotgold Resources Limited
Page 61
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
The structure of internal reporting changed during the year in order to report the mine development and corporate
activities carried out by SGZ Cononish Limited separately from the mineral and exploration activities undertaken by
SGZ Grampian Limited. The comparative segment information for the year ended 30 June 2018 has been restated
accordingly.
Year ended 2018
Scotland
Mining
$
Scotland
Australia
Other
Total
Exploration
$
$
$
$
Segment other income
Segment loss
-
796,852
968
459,074
1
586,139
-
57,602
969
1,899,667
Segment assets
Segment non-current assets
Segment liabilities
16,152,682
15,493,781
245,386
12,039,947
1,390,414
56,515
58,892
6,474
1,759,067
139,785
118,402
17,690
28,391,306
17,009,071
2,078,658
Included in segment result:
Interest expense
Depreciation
Capitalised exploration
Mine development costs
Acquisition of fixed assets
-
34,381
-
-
-
-
35,043
275,857
-
6,074
172,144
483
-
-
-
-
-
62,913
-
-
172,144
69,907
338,770
-
6,074
All of the segment liabilities at 30 June 2018 were current.
Year ended 2019
Segment other income
Segment loss
Scotland
Mining
$
24
2,608,799
Scotland
Australia
Other
Total
Exploration
$
$
$
$
6,289
52,293
1
670,480
-
186,883
6,314
3,518,455
Segment assets
Segment non-current assets
Segment liabilities
Segment non-current liabilities
23,602,730
22,388,271
4,808,425
4,259,083
5,252,032
2,440,389
429,788
192,521
Included in segment result:
Interest expense
Depreciation
Capitalised exploration
Mine development costs
Acquisition of fixed assets
55,223
94,521
-
5,849,310
636,762
3,336
36,544
636,263
-
435,874
74,334
7,964
23,127
-
43,384
411
-
-
-
6,415
-
10,172
-
28,935,511
24,836,624
5,271,512
4,451,604
-
-
-
-
-
101,943
131,476
636,263
5,849,310
1,072,636
Scotgold Resources Limited
Page 62
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
The following material agreements were in place at 30 June 2019 in each segment:
Scotland – Mining
Location
Agreement
Grant Date
Cononish Glen Orchy
Cononish Glen Orchy
Cononish Glen Orchy
Landholder Lease
Crown Lease
Section 75 Agreement
23 July 2009
31 May 2012
12 September 2018
Scotland exploration
Location
Agreement
Grant Date
Cononish Glen Orchy
Glen Lyon
Inverliever
Knapdale
Ochils
Option Agreement
Option Agreement
Option Agreement
Option Agreement
Option Agreement
5 November 2015
5 November 2015
5 November 2015
5 November 2015
5 November 2015
Area
20 sq km
Area
975 sq km
1,369 sq km
660 sq km
676 sq km
426 sq km
Portugal
Location
Agreement
Grant Date
Area
Pomar MN/PP/001/16
Exploration Contract
21 April 2016
264 sq km
During the year, an application was made to divide the existing five Crown Option agreements in respect of
exploration into thirteen agreements as well as to extend the effective period of those agreements as follows:
Existing agreement
Cononish Glen Orchy
Area
Replacement agreements Area
975 sq km Glen Orchy Central
Glen Lyon
Inverliever
Knapdale
Ochills
Glen Orchy East
Glen Orchy West
1,369 sq km Glen Lyon North
Glen Lyon East
Glen Lyon South
Glen Lyon West
660 sq km Inverliever West
Inverliever East
676 sq km Knapdale South
Knapdale North
426 sq km Ochills East
Ochills West
242 sq km
241 sq km
103 sq km
244 sq km
247 sq km
243 sq km
246 sq km
250 sq km
233 sq km
250 sq km
250 sq km
150 sq km
189 sq km
The thirteen new exploration agreements were concluded on 24 October 2019, with the effective date thereof being
retrospective to 5 November 2018. The portion of the licence costs attributable to the period of use from 5 November
2018 to 30 June 2019 has been accrued at 30 June 2019.
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
Scotgold Resources Limited
Page 63
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
holder to explore for gold and silver and on the grant of planning permission (and other conditions), to take out a
lease for exploitation of these metals.
Additionally, surface rights (and other minerals rights) are generally held by the landowner with whom access and
lease agreements must separately be obtained. The Company holds a 21 year lease, dated 2009 with the Cononish
landowner. At the option of the Company, the lease may be extended for a further 21 years.
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.
NOTE 21 - NOTES TO THE STATEMENT OF CASH FLOWS
Reconciliation of loss after income tax to net operating cash flows
Loss from ordinary activities
(3,518,455)
(1,899,667)
2019
$
2018
$
Depreciation
Loss on disposal of plant and equipment
Interest expense
Exchange loss on repayment of loan
Share-based payments
Deferred mineral exploration and evaluation costs written off
Exploration expenditure expensed
Gain on loan renegotiation
Movement in assets and liabilities
Receivables
Inventory
Other current assets
Payables
Revaluation effect of foreign currency working capital
Net cash used in operating activities
131,476
77,132
101,943
31,270
200,954
118,402
-
-
(2,857,278)
1,355
-
(12,593)
(183,168)
-
(3,051,684)
69,907
-
-
-
-
-
68,009
(263,707)
(2,025,458)
(17,157)
159,398
(36,813)
282,257
(105,615)
(1,743,388)
Scotgold Resources Limited
Page 64
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
NOTE 22 - KEY MANAGEMENT PERSONNEL
(a) Directors
The names and positions of Directors in office at any time during the financial year are:
In office from
In office to
Nathaniel le Roux
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Company Secretary and
Non- Executive Director
Non-Executive Director
Non-Executive Director
18/03/2015
10/10/2014
10/10/2014
14/08/2007
09/10/2017
18/06/2018
18/06/2018
(b) Remuneration Polices
present
present
present
present
present
present
present
Remuneration policies are disclosed in the Remuneration Report which is contained in the Directors’ Report.
(c) Key management personnel remuneration
Remuneration was by way of fees paid monthly in respect of invoices issued to the Company by the Directors or
Companies associated with the Directors in accordance with agreements between the Company and those entities.
The Directors are entitled to reimbursement of out-of-pocket expenses incurred whilst on company business.
The aggregate compensation made to key management personnel of the group is set out below.
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2019
$
451,310
8,491
148,084
607,885
2018
$
377,327
3,471
52,870
433,668
(d) Aggregate amounts payable to Directors and their personally related entities for remuneration.
Accounts payable
Consolidated Entity
2019
$
14,393
2018
$
29,477
Scotgold Resources Limited
Page 65
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
NOTE 23 - RELATED PARTY INFORMATION
a) Transactions within the Consolidated Entity
Aggregate amount receivable within the consolidated entities
at balance date
Parent Entity
2019
$
2018
$
Total non-current receivables
Write down of loans attributable to losses of subsidiaries
Non-current receivables in parent entity
32,135,303
(14,304,488)
17,830,815
32,166,970
(9,936,324)
22,230,646
Interest charged within the consolidated entities
793,221
-
b) Transactions with Directors
Each of the Directors is a related party. The following directors have entered into transactions with group companies.
i)
ii)
iii)
Chris Sangster provides technical consulting services to the Company. Fees are charged at commercial,
arm’s length rates in accordance with time incurred. Details of fees earned are provided in the
Remuneration Report. Refer also the Remuneration Report.
Richard Barker provides services of Company Secretary through his service company Barston
Corporation Pty Ltd. Services are charged at commercial, arm’s length rates. Details of fees earned are
provided in the Remuneration Report. Refer also the Remuneration Report.
Nat le Roux received repayment of loan funds previously advanced and provided further loan funds to
the consolidated entity on commercial terms. The details of the loan repaid and the further loan funds
provided are shown in Note 12. Refer also the Remuneration Report.
NOTE 24 - REMUNERATION OF AUDITORS
Auditing and reviewing of the financial statements of Scotgold
Resources Limited and of its controlled entities.
Other services (tax)
Consolidated
2019
$
35,560
8,488
44,048
2018
$
19,605
3,519
23,124
Scotgold Resources Limited
Page 66
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
NOTE 25 - LOSS PER SHARE
Consolidated
2019
$
2018
$
Earnings used in calculation of loss per share
(3,518,455)
(1,899,667)
Weighted average number of ordinary shares outstanding
during the year used in the calculation of basic loss per share
Number
Number
44,891,914
23,978,240
There are 3,633,681 potential ordinary shares as at 30 June 2019 (30 June 2018 : 2,514,699). The issuing of these
potential ordinary shares would be anti-dilutive.
NOTE 26 - FINANCIAL INSTRUMENTS
(a) Financial Risk Management Policies
The consolidated entity’s financial instruments consist mainly of deposits with banks, accounts receivable, accounts
payable, hire purchase liabilities and a secured loan facility provided by a major shareholder.
The Board’s overall risk management strategy seeks to assist the consolidated entity in meeting its financial targets,
whilst minimising potential adverse effects on financial performance. The consolidated entity 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 affairs of the consolidated entity. The Chairman is responsible for ensuring
the maintenance of, and compliance with, appropriate systems.
(b) Financial Risk Exposures and Management
The main risks the consolidated entity is exposed to through its financial instruments are interest rate risk, foreign
currency risk and liquidity risk.
Interest Rate Risk
Interest rate risk comprises cash flow interest rate risk and fair value interest rate risk.
Cash flow interest rate risk is the risk that movements in interest rates will result in increased cash outflows on floating
rate financial liabilities of the consolidated entity.
As all of the interest-bearing financial liabilities of the consolidated entity are fixed rate liabilities, the consolidated
entity has no exposure to cash flow interest rate risk at 30 June 2019 in respect of its financial liabilities. Interest rates
applicable to the commercial call account held by the consolidated entity vary with market rates, but the consolidated
entity currently holds funds on that account pending deployment of these funds in mine development or exploration
and evaluation activities and is not dependent upon interest received on the account as a source of income.
Fair value interest risk is the risk that movements in market interest rates will affect the fair value of fixed interest
financial instruments of the consolidated entity.
Scotgold Resources Limited
Page 67
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
The interest rate profile of the financial assets and liabilities of the consolidated entity is as follows:
Financial Assets
Cash at Bank
Trade and other receivables
Non-current Bond obligation deposits
Total Financial Assets
Financial Liabilities
Trade and other payables
Hire purchase agreements
Secured loan facility
Shareholder loan
Total Financial Liabilities
Weighted Average
Effective Interest
Rate
2019
2018
0.05%
-
1.25%
0.03%
-
0.03%
-
7.77%
8.63%
10%
-
-
-
10%
2019
$
3,917,920
57,970
1,511,493
5,487,383
581,947
732,531
3,655,221
-
4,969,699
2018
$
11,207,036
59,267
97,894
11,364,197
294,262
-
-
1,740,867
2,035,129
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 consolidated financial statements.
Interest Rate Sensitivity Analysis
The consolidated entity 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 2019 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. If the draw-down on the secured loan facility had been made on 1 July
2018 instead of 13 May 2019, the interest charge for the year attributable to the secured loan facility would have
been $310,074. In that case, had there been an increase of 100 basis points in the interest rate applicable to the
secured loan facility, then the interest charge for the year would have been $343,019, resulting in a decrease in
equity of $32,945 and a corresponding increase in the secured loan facility balance of $32,945.
Foreign Currency Risk
The consolidated entity undertakes certain transactions denominated in foreign currencies, hence exposures to
exchange rate fluctuations arise. In order to partially mitigate the impact of fluctuations in foreign exchange rates
related to this exposure, management have a policy of holding sufficient cash in various currencies to settle firm
commitments and other anticipated cash outflows. Aside from this, the group does not engage in any hedging
transactions.
.
Scotgold Resources Limited
Page 68
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
The carrying amounts of the foreign currency denominated monetary assets and monetary liabilities of the
consolidated entity at the reporting date are as follows:
Currency
£ Sterling
€ Euro
USD US Dollars
Foreign currency
Liabilities
2019
$
5,163,200
75,153
-
5,238,353
Assets
2019
$
4,527,250
6,415
921,142
5,454,807
Liabilities
2018
$
276,572
17,690
-
294,262
Assets
2018
$
11,318,329
21,383
-
11,339,712
The consolidated entity is exposed to risk in the form of variability of future payments in terms of the contract for the
purchase of the processing plant for the Cononish mine, which is denominated in US Dollars.
Movements in the Australian Dollar : US Dollar exchange rate could result in an increase in the amounts payable
after 30 June 2019 in terms of this contract, details of which are set out in Note 17. A 10% depreciation of the
Australian Dollar against the US Dollar would result in an increase in the aggregate amount to be paid after the
reporting date in terms of that contract of $148,712.
Other than translational risk, the consolidated entity has no other significant exposure to foreign currency risk at the
reporting date.
Liquidity Risk
The group manages liquidity risk by monitoring forecast cash flows.
As at 30 June 2019 the consolidated entity had an amount of £4,000,000 (30 June 2018 : £5,000,000) available to
be drawn down on the secured loan facility from Bridge Barn Limited.
Credit Risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at the reporting 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 or United Kingdom Financial Conduct 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 consolidated entity in order to maximise the return to shareholders and ensure
that the consolidated entity can fund its operations and continue as a going concern.
Scotgold Resources Limited
Page 69
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
Management effectively manages the capital of the consolidated entity by assessing the financial risks of the
consolidated entity 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 consolidated entity
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 the reporting date and has no financial
assets where the carrying amount exceeds net fair values at the reporting date.
NOTE 27 - MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR
On 18 July 2019, the consolidated entity announced its decision not to extend the Pomar licence and the intention to
apply to the Director General of Energy and Geology to terminate the licence.
On 7 August 2019, SGZ Cononish Limited received £50,000 from Scottish Enterprise in the form of the first payment
of the Regional Selective Assistance grant.
On 14 August 2019, Ian Proctor was appointed as a Non-Executive Director.
On 28 August 2019, the consolidated entity announced an increase of £1,500,000 in the amount available under the
secured loan facility provided by Bridge Barn Limited and the subscription by investors, including key management
personnel, for 3,285,783 new ordinary shares in the Company at a subscription price of £0.35 per share. At the same
time, the terms of the secured loan facility were amended to extend the repayment period of each tranche drawn
down on the facility from 24 months to 36 months
The first of five shipments of components of the processing plant to be installed at the Cononish mine arrived at
Grangemouth on 28 August 2019, with all seaborne components being received by 12 October 2019.
On 19 September 2019, SGZ Cononish Limited signed a contract with Robinsons Scotland Limited for the
construction of a dedicated plant building to house the processing plant as well as the construction of the
infrastructure for the tailings management facility at the Cononish mine.
The voluntary liquidation of SGZ France SAS was concluded on 1 October 2019.
On 24 October 2019, the Company announced the conclusion of the thirteen new exploration agreements and the
replacement of the five agreements in effect at 30 June 2019, with the effective date of these new exploration
agreements being retrospective to 5 November 2018.
There are no matters or circumstances that have arisen after the reporting 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.
Scotgold Resources Limited
Page 70
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2019
AND CONTROLLED ENTITIES
NOTE 28 - PARENT ENTITY DISCLOSURES
Financial Position
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Total Current Assets
NON CURRENT ASSETS
Plant and equipment
Investment in subsidiary
Loan to subsidiaries
Total Non-Current assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Borrowings
Total Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Financial Performance
2019
$
2018
$
34,988
31,382
66,370
21,367
31,051
52,418
7,964
5,781,978
17,830,815
23,620,757
6,474
5,781,978
22,230,646
28,019,098
23,687,127
28,071,516
23,128
-
23,128
18,000
1,740,867
1,758,867
23,128
1,758,867
23,663,999
26,312,649
45,176,049
339,951
(21,852,001)
23,663,999
43,784,458
134,769
(17,606,578)
26,312,649
Loss for the year attributable to the parent
Total comprehensive loss
4,245,423
4,245,423
1,700,475
1,700,475
The loss attributable to the parent entity includes write down of loans to subsidiaries caused by subsidiary losses of
$4,368,164 (2017: $1,205,482). During the year, the parent entity issued a guarantee to Scottish Enterprise in respect
of any amounts of grants received from that entity by SGZ Cononish Limited which may become repayable (see Note
18). No grants had been received by SGZ Cononish Limited as at 30 June 2019. The parent entity has no other
contingent liabilities or commitments for acquisition of plant and equipment.
Scotgold Resources Limited
Page 71
DIRECTORS’ DECLARATION
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 72
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 73
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 74
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 75
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 76
SHAREHOLDER DETAILS
ANALYSIS OF SHAREHOLDING
Voting Rights
AND CONTROLLED ENTITIES
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)
b)
for every fully paid share held by him one vote
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 William Styslinger
Mr Peter Hetherington
Mr Charles Outhwaite
Directors’ Shareholding
22,618,223
5,646,400
4,088,961
1,883,115
46.21%
11.54%
8.35%
3.85%
The interest of each director in the share capital of the Company is detailed in the Directors’ Report.
Scotgold Resources Limited
Page 77
CORPORATE GOVERNANCE STATEMENT
AND CONTROLLED ENTITIES
The Board of Directors of Scotgold Resources Limited is responsible for the corporate governance of the Company.
The Board guides and monitors the business and affairs of Scotgold Resources Limited on behalf of the shareholders
by whom they are elected and to whom they are accountable. This statement reports on Scotgold Resources
Limited’s key governance principles and practices.
Details of the governance arrangements of the consolidated entity can be found on the Company web-site at
https://www.scotgoldresources.com/investors/corporate-governance/.
The consolidated entity has adopted the principles set out in the Quoted Companies Alliance Corporate Governance
Code 2018 (“the QCA Code”). The QCA Corporate Governance Statement of the Company can be found on the
Company
https://www.scotgoldresources.com/wp-content/uploads/2019/11/SGZ-Corporate-
web-site
Governance-Statement-FINAL.pdf.
at
Scotgold Resources Limited
Page 78