ABN : 42 127 042 773
ANNUAL REPORT 2020
“Building Scotland’s first commercial gold mine”
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 Profit or Loss and Other 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
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5
15
39
40
41
42
43
44
92
93
97
98
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, and 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
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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
Developing Scotland’s first commercial gold mine
Phase 1 production at Cononish Gold and Silver Mine on course to commence on 30 November 2020
o Phase 1 targeting average annual gold equivalent production of 9,910oz
Phase 2 expansion of production at Cononish, targeting 100% increase in annual production to 72,000 tonnes
of ore and average annual gold equivalent production of 23,500oz, brought forward by 11 months to May 2022
o Follows post period £3m fund raise, the proceeds of which will also fund systematic exploration work
across the Company’s Scottish licences which cover ~2,900km2 of the Dalradian Belt
Recalculated model using the accelerated Phase 2 development strategy and gold and silver prices of £1,400/oz
and £19.23/oz respectively deliver highly attractive Life of Mine ('LOM') economics:
o
o
o
£178 million EBITDA;
£156 million pre-tax Cash Flow;
£127 million Net Cash Flow; and
o £96 million Pre-tax NPV (discount rate of 8%)
Encouraging results from ongoing exploration programme include the identification of gold and silver anomalies
to the north east of the Cononish mine and from the Beinn Udlaidh and Inverchorachan prospects
o Results in line with strategy to increase mineable ounces at the Cononish mine and also identify
potential new mines of Cononish scale or larger
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 development of the Cononish Gold and Silver Mine (“Cononish” or the “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, which held its
inaugural meeting on 10th May 2019, continued throughout the year to pursue its purpose of 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.
In doing so, it continued to focus on the three broad areas of:
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Health, Safety and Welfare of the Community, Employees, Consultants and Visitors;
Stewardship of the Environment; and
Corporate Citizenship and Societal Interaction
These areas are presented on the Scotgold website alongside details of how complaints will be handled.
During the latter part of the year, the CSR Committee had to deal with the unique threat to health and safety and
employee well-being posed by the Covid-19 pandemic. The Committee oversaw the performance of a detailed risk
assessment in respect of the effects of Covid-19 on the operations of the Company and the formulation and
implementation of a comprehensive set of operating procedures to deal with the pandemic based on that risk
assessment prior to resumption of mining operations at the beginning of July 2020. The CSR Committee continues
to oversee the carrying out of regular assessments of the risks posed by Covid-19 and the adjustment of the
aforementioned operating procedures in response thereto.
Cononish Gold and Silver Mine
On 15 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.
In August 2019 the Company raised a further £2.65m (£1.15M equity and an increase of £1.5m in secured debt
facilities) to ensure the Project remained fully funded to completion.
Record high rainfall in February and more latterly Covid 19 restrictions in March 2020 led to delays in the development
schedule being experienced, most notably in relation to the bulk earthworks element of the Project.
In October 2020 the Company announced that first gold production from the development of Phase 1 was expected
by 30 November 2020. Given the more recent progress made on the development of Phase 1 and the improved
gold price outlook, the Company also elected to raise a further £3m before costs to accelerate the development of
Phase 2 and provide for an expansion of the Company’s exploration programmes.
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Grampian Gold Project –
The Grampian Gold Project comprises 13 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. 4Moz of gold).
Following on from the success of the previously completed orientation surveys, Scotgold has continued to use the
ionic leach technique for regional stream sediment sampling across 6 of its 13 Crown Option areas, identifying several
drainage catchments with encouraging values that require detailed follow up work. Subsequent to the reporting
period, regional stream sediment sampling has been completed across 10 of Scotgold’s 13 Crown Option areas.
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.
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 and the process of termination is in the final
stages.
The process of voluntary liquidation of SGZ France SAS, initiated pursuant to the Company withdrawing its interest
in the Vendrennes PER, 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 £7.5 million at a nominal interest rate of 9% per annum, to be drawn
down in tranches and/or sub-tranches which are repayable with accumulated interest 36 months after the date of
drawdown. By the end of the reporting period, £4.0 million of that facility had been drawn down by SGZ Cononish
Limited and a further £2.5 million was drawn down after 30 June 2020.
Subsequent to the reporting period, net equity funding of £2.8 million was raised in October 2020.
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.
The phases were scheduled as follows:
→ Phase 1 (28 Months): 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 (7 years): 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).
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
Phase 2 was intended to be purely organically funded by Phase 1, and the Company anticipated sufficient cashflow
generated by Phase 1 to meet the development requirements of Phase 2 within 2.5 years of first production.
Subsequent to the reporting period, in October 2020 the Company reviewed this timing of Phase 2 and elected to
accelerate the development of Phase 2, such that it is now expected to be completed in May 2022 and will be funded
by a combination of £2.5M of the new equity raised in October 2020 and funds generated internally over the shortened
Phase 1 operating period.
At the same time in October 2020 the Company provided a Project update indicating first production was expected
by 30 November 2020, revised cost estimates and re-evaluating the Project economics using a £1,400/oz gold price.
Based on these assumptions, the key Project parameters are given below:
Cononish Key Parameters:
Estimated Reserves
550,000t
Head Grade Au Equiv
11.7g/t
Life of Mine
9 years
Total Capital
£34.0M
Ave. Annual Production
23,500oz
Ave. Operating Cost
£439/oz
Ave. Capital Cost
£184/oz
All In Sustaining Cost (AISC)
£461/oz
The above key parameters were derived by Scotgold management using revised cost and gold price estimates and
using the 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.
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
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.
Table: 2020 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. Mine development during the reporting period
has predominantly been in waste, with a non-material volume of Mineral Resource placed on surface stockpiles.
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
In-situ
Dry BD
2.72
2.72
2.72
2.72
2.72
2.72
Metal
Au Koz
29
217
2
248
18
266
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 30/06/2019.
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 Cononish, 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.
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
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 30/06/2019. Mine development during the reporting period
has predominantly been in waste, with a non-material volume of Ore Reserve placed on surface stockpiles
An internal review of the Ore Reserve Statement concluded that the modifying factors used in determining the Ore
Reserve remained appropriate.
Table: 2020 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 2020, 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 precious 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.
Following on from the success of the previously completed orientation surveys, Scotgold has continued to use the
ionic leach technique for regional stream sediment sampling across 6 of its 13 Crown Option areas, identifying several
drainage catchments with encouraging values that require detailed follow up work. Subsequent to the reporting
period, regional stream sediment sampling has been completed across 10 of Scotgold’s 13 Crown Option areas.
More targeted soil sampling using the ionic leach technique has been completed over prospects in the Glen Orchy
Central and Inverliever East option areas. The three main prospects covered during this reporting period are as
follows:
1. Kilbridge - This area had been identified as prospective by previous programmes; however, this latest work
indicates an anomaly that is relatively limited in extent. This area is now considered a lower priority.
2. Beinn Udlaidh - This area has been the focus of several exploration programmes in the past, with conventional
stream sediment and soil sampling as well as limited drilling completed over the prospect. The orientation
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
drainage survey confirmed the prospectivity of the area, and soil sampling using the ionic leach method was
completed during this reporting period with the objective of improving the understanding of the target area and
highlighting previously undetected anomalies. The sampling detected a linear anomaly in the centre of the
sampled area, associated with a prominent quartz vein exposed at the summit of Beinn Udlaidh as well as a
linear anomaly in the southwest of the area sampled, where there is limited rock outcrop visible at
surface. Further sampling, subsequent to the reporting period, has identified a highly anomalous area on the
southern slope of Beinn Udlaidh, further sampling is required to constrain these positive anomalies.
3.
Inverchorachan - This area had previously been sampled and mapped by students as part of their Masters
research projects. The limited study had returned highly anomalous gold and silver values across the
Inverchorachan gorge associated with the Tyndrum fault and an altered intrusive body. This initial survey area
was expanded, and results indicate that the highly anomalous area continues to the southwest along strike of
the Tyndrum fault. Subsequent to the reporting period, sampling has been completed further to the southwest
which has identified several discrete but coherent anomalies.
In addition to the above mentioned geochemistry the Company embarked on a geophysical programme to evaluate
more modern equipment to that historically trialled; including ground magnetics, Very Low Frequency (“VLF”) /
magnetics and Induced Polarisation (“IP”) Gradient Array. Subsequent to the reporting period, the ground
geophysics data reprocessing is currently in progress with promising initial results, this data will be the subject of a
future regulatory announcement.
No fieldwork was completed between 16/03/2020 and 05/06/2020 due to the coronavirus pandemic and nationwide
lockdown restrictions. This time was principally used for data analysis, procedure review and database work.
The Company is pleased to report the identification of several new anomalies across its prospects as well as
development of the understanding of areas previously identified as prospective and continues to employ a systematic
and targeted approach to exploration.
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.
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. The termination process is currently in its final
stages.
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 prior 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.
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
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 2020, the Company was in the process of terminating its 100% interest in the Pomar Licence in eastern
central Portugal, near Castelo Branco held through its subsidiary Scotgold Resources Portugal Ltda, pursuant to the
Company announcing on 18 July 2019 its intention not to extend the Pomar Licence.
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 - 2019 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
Scotgold Resources Limited
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OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
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.
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 adopted the QCA code of corporate governance in 2018 and subsequently appointed an advisory service
to assist with UK regulatory compliance issues as an AIM listed company.
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. The first and second tranches of £50,000 and £150,000 payable
under the scheme were received in August 2019 and June 2020 respectively.
With effect from 1 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 and is expected to be complete at the end of November 2020. However, to
provide longevity beyond Cononish, and potentially growth in overall production, the Company is developing a
pipeline of additional 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, then
scheduled for the end of February 2020.
The Company then encountered further schedule delays relating to the management of excavated materials (peat in
particular) and endured record high rainfall in February. Progress continued to be made however until the end of
March 2020 when all non-essential construction in Scotland was placed under lockdown due to the Covid 19
pandemic. A skeleton staff was then maintained on site to undertake environmental monitoring and other essential
maintenance activities, until June 2020 when the restrictions were lifted in stages and development activities could
recommence.
In October 2020 the Company announced that it expected to achieve first gold production at Cononish by 30
November 2020 and that it had raised a further £3m (before costs) principally to accelerate the development of Phase
2 in order that the Phase 2 production levels of 72,000tpa could be achieved as soon as practicable thereafter
(expected by May 2022).
Scotgold Resources Limited
Page 13
OPERATIONS and STRATEGIC REVIEW
AND CONTROLLED ENTITIES
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 and then again
in October 2020 the Company provided revised expected financial returns based on a gold price assumption of
£1,400/oz. These estimates demonstrate the increased value of Cononish given the steady improvement in the gold
market, particularly in GB Pound terms, as the gold price has climbed from £1,100/oz to £1,437/oz over this reporting
period and subsequently reached £1,569/oz in August 2020.
Notwithstanding the recent retreat of the spot gold price from record highs, the Company currently expects Project
returns in line with these estimates.
As discussed above, the Covid 19 pandemic has already had a modest impact on the Project development schedule
and associated capital costs, however these are not considered material to the overall expected Project returns. As
mining operations fall within the classification of manufacturing and/or construction from the Scottish Government’s
restrictions perspective, it is expected that operations will continue even under the current Tier 4 level of restrictions
currently prevailing in the area. There remains the risk of a more severe total lockdown, however it is anticipated that
any such event would be relatively short and Government financial support similar to the earlier Job Retention
Scheme would be available.
It is also expected that the Covid-19 pandemic will have a longer-term impact on global macro-economics but it is
considered that this is unlikely to be negative for the long-term outlook for the gold price.
The work completed on advancing our future pipeline of projects has during the current reporting period 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. In September 2020
the Company announced key appointments to its geoscience team, and these will be key to expanding our
exploration programmes in the coming period.
Scotgold Resources Limited
Page 14
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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 2020. 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
Appointed 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 £7.5 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.
Scotgold Resources Limited
Page 15
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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
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
105,677
1,400,000
These options include 1,000,000 options granted as share-based payment on 1 May 2018 and 400,000 options
granted as share-based payment on 1 July 2020.
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
Special Responsibilities
206,045
Advice on technical and planning matters. Mr Sangster provides consulting services at commercial rates to the
Company under a management agreement with the Company. Mr Sangster is Chairman of the Corporate and Social
Responsibility Committee.
Scotgold Resources Limited
Page 16
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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.
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 was previously Chief Executive Officer of Schroders Personal Wealth and 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.
Scotgold Resources Limited
Page 17
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
Other Directorships in past three years:
Scottish Widows Schroder Wealth Holdings Limited
Holywell Alpacas Ltd
IG Group Holdings Plc
Interest in Shares and Options
Fully Paid Shares
Special Responsibilities
AND CONTROLLED ENTITIES
4,088,961
Mr Hetherington is a member of the Corporate and Social Responsibility Committee.
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:
Metrosoft Inc.
Interest in Shares and Options
Fully Paid Shares
Special Responsibilities
5,931,400
Mr Styslinger is a member of the Audit Committee.
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.
Interest in Shares and Options
Fully Paid Shares
Other Directorships in past three years:
The Pavilion Stirling Ltd
Cyan Blue Topco Limited
Stars Group Holdings (UK) Limited
1,155,884
Scotgold Resources Limited
Page 18
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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
Granted but not vested
30,000
$8.00
31 March 2022
1,000,000
1,150,000
200,000
£0.30
£0.71
£0.71
1 May 2028
1 July 2025
31 December 2023
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 $2,504,134 (2019 - $3,518,455).
Financial Position
At 30 June 2020 the Company had cash reserves of $1,019,979 (2019 - $3,917,920).
Dividends
No dividends were paid during the year and no recommendation is made as to dividends.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In the opinion of the Directors, there were no significant changes in the state of affairs of the consolidated entity that
occurred during the financial year under review not otherwise disclosed in this report or in the consolidated financial
statements.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The Company intends to complete development of the Cononish silver and gold mine and to continue its exploration
activities.
Scotgold Resources Limited
Page 19
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
GOVERNANCE
There is no prescribed corporate governance code for AIM companies and the London Stock Exchange prefers to
give companies the flexibility to choose from a range of codes which suit their specific stage of development, sector
and size.
The Board has adopted the Quoted Companies Alliance Corporate Governance Code 2018 (“the QCA Code”) and
the principles set out therein. The Company applies these principles wherever possible, and where appropriate to its
size and available resources.
The Non-Executive Chairman, Mr Nat le Roux, has overall responsibility for the Corporate Governance of the
Company.
The QCA Code sets out ten principles which should be applied. These principles are listed below with an explanation
of how the Company applies each principle, and the reasons for any aspect of non-compliance.
Principle One: Establish a strategy and business model which promote long-term value for shareholders
The Company has a clearly defined strategy and business model that has been adopted by the Board, as set out in
the Operations and Strategic Review section of this Financial Report.
The Company is primarily focused on the development and bringing to production of the Cononish Gold and Silver
Project (“the Cononish Project”) in Scotland’s Grampian Highlands, with the objective of delivering sustainable value
for shareholders.
The progress achieved in bringing the Cononish Project to the stage of first production is set out in the Operations
and Strategic Review section of this Financial Report.
A comprehensive life-of-mine model of the Cononish Project is used to measure the quantum of value created for
shareholders. In August 2019 and again in October 2020, a comprehensive update of the life-of-mine model was
undertaken to incorporate updated assumptions in respect of gold and silver market prices, any premium 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 results produced by the updated life-of-mine modelling exercises have been communicated to all shareholders
and the general public.
In addition, in order to create sustainable long-term value for shareholders beyond the current estimated life of the
Cononish Project, the Company is carrying out on-going exploration of the highly prospective tenements comprising
the Grampian Gold Project with the view to identifying further project opportunities, employing innovative leading
edge technologies such as ionic leaching.
Principle Two: Seek to understand and meet shareholder needs and expectations
All shareholders are encouraged to attend the Company’s Annual General Meetings where they can meet and directly
communicate with the Board. After the close of business at the Annual General Meeting, the Chairman and Managing
Director deliver an up to date corporate presentation and open the floor to questions from shareholders.
Shareholders are also welcome to contact the Company via email at sgz@scotgoldresources.com with any specific
and relevant queries. The Company also provides regulatory, financial and business news updates through the
Regulatory News Service (RNS). Shareholders also have access to information through the Company’s website,
www.scotgoldresources.com.
Scotgold Resources Limited
Page 20
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The Board is responsible for ensuring that effective dialogue with shareholders takes place, and the Managing
Director ensures that any feedback or views communicated by shareholders are then disclosed to the Board for
review and discussion.
The Company’s web-site is designed to facilitate easy interaction between the Company and shareholders and other
users. Management of the web-site is located in-house to ensure that content is maintained on an up-to-date and
real-time basis and that the interaction between the user and the Company is direct and effective. The web-site is
updated on a regular basis and includes the latest corporate presentation on the Group. Contact details are also
provided on the website.
The Company makes regular investor body presentations at which feedback on the Company’s performance and
investor expectations are solicited at post-event functions and provides more frequent updates via media interviews.
The Company’s broker, SP Angel, also publishes research by a professional mining analyst which is available on the
Company’s website.
Principle Three: Take into account wider stakeholder and social responsibilities and their implications for
long-term success
The Company takes seriously its role as a responsible corporate citizen in all of the areas in which it operates and
takes regular account of the significance of social, environmental and ethical matters affecting the business of the
Group and of the regional communities in which it operates.
The Corporate and Social Responsibility Committee of the Company serves as a key vehicle through which the
Group performs its role as a responsible corporate citizen and has identified three broad areas of focus, being:
Health, Safety and Welfare of the Community, Employees, Consultants and Visitors;
Stewardship of the Environment; and
Corporate Citizenship and Societal Interaction.
The activities undertaken by the Corporate and Social Responsibility Committee are set out in the Operations and
Strategic Review section of this Financial Report.
As set out in Note 21 of this Financial Report, the Group has entered into a donations agreement with the Strathfillan
Community Development Trust (”SCDT”) in terms of which the Group will work with SCDT to provide additional
facilities and opportunities for the community served by SCDT. The obligations in terms of the agreement are
dependent upon the commencement of production at the Cononish Project and as the planned date of first production
draws closer, the Group looks forward to meeting its obligations in terms of the agreement and making the agreed
contributions to SCDT.
In addition, the Group has assumed obligations to make payments of up to £425,000 in aggregate to the Loch
Lomond and the Trossachs Countryside Trust, payable in annual instalments. As reported in Note 21 of this Financial
Report, the first payment of £25,000 was made on 23 January 2020.
In recognition of its responsibilities towards the environment as a good corporate citizen and in particular, the
ecological sensitivity of the environment in which the Cononish Project is located, the Group has committed itself to
obligations to
restore the area in which the Cononish Project operates at the end of the life of the Cononish Project once
mining activities cease and to undertake after-care and monitoring activities for an agreed period subsequent
to such cessation (see Note 16 of this Financial Report); and
implement a plan for the management and improvement of the greater Cononish glen in which the
Cononish mine is situated, the scope of which extends beyond the area in which the activities of the mine
will be conducted, to encompass the entire Cononish glen (see Note 20 of this Financial Report).
Scotgold Resources Limited
Page 21
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Funds have been lodged with relevant bodies as security for the performance by the Group of its obligations in
respect of these commitments (see Note 7 of this Financial Report).
To ensure that its operations are carried out responsibly and safely and in full compliance with all relevant legislation
and guidelines, the Group engages with legislative and regulatory bodies on an on-going basis.
Principle Four: Embed effective risk management, considering both opportunities and threats, throughout
the organisation
The mining and exploration business sector bears inherent risks, across all areas of exploration, development,
environment, and health and safety. These risks are in addition to the financial risks associated with the sector, which
are set out in Note 29 of this Financial Report.
The risk management strategy of the Board is geared towards minimising the effect of these risks on the Group
operations, through constant monitoring of risks, regular reporting of the risks and holding of meetings to ensure that
risk management principles are disseminated to and put into practice at all levels of the organisation of the Group.
All identified risk areas are monitored and mitigated on a cost-effective basis. Risk policies and procedures are
adapted to the changes in the operating environment as the Group transitions and evolves from the development
phase to on-going production operations.
To ensure that the evolution of the risk strategy and policies and procedures within that strategy match the evolution
of the business activities and operations of the Group, the Board regularly reviews the risks to which the Group is
exposed and ensures that the risk management strategy, policies and procedures of the Group are appropriate at all
times. This strategy and the policies and procedures which flow from the strategy are applied equally to employees,
consultants and contractors. The Company’s Risk Management Strategy is available on the Company’s website.
Of cardinal importance to the Group is the effective minimisation of risks related to Health and Safety, with the
responsibility for the effectiveness of Health and Safety policies lying with the Corporate and Social Responsibility
Committee. Contractors engaged in major development and construction activities as part of the Cononish Project
are required to adhere to and observe comprehensive health and safety policies and provide proof of adequate, valid
and up-to-date insurance policies providing cover in respect of injury to their own employees as well as employees
of other contractors and employees of the Group.
In addition to financial and health and safety risks, the Company is exposed to the following operational and industry
risks:
Dependence on key personnel
The future of the Group depends, in part, on its ability to attract and retain key personnel. It may not be able to hire
and retain such personnel at compensation levels consistent with its existing compensation and salary structure.
Similarly, the future of the Group depends on the continued contributions of its executive management team and
other key management and technical personnel, the loss of whose services would be difficult to replace.
Furthermore, the inability to continue to attract qualified personnel, which may become more of a factor as available
labour in the immediate catchment area is fully utilised necessitating recruitment beyond that catchment area, could
have a material adverse effect on the business of the Group.
Scotgold Resources Limited
Page 22
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Tenement application and licence renewal
The Company cannot guarantee additional applications for tenements made by the Company will ultimately be
granted, in whole or in part.
Furthermore, the Company cannot guarantee that renewals of valid tenements will be granted on a timely basis, or
at all. The Company’s right to convert its exploration licences into production concessions is contingent upon the
relevant planning authority providing approval in principal for the proposed develop. There is a risk that these
approvals may not be obtained. Several of the Company’s mining properties are subject to applications for extension.
Exploration
There can be no assurance that the future exploration of the Group’s tenements, or any other tenements that may
be acquired in the future, will result in the discovery of an economically recoverable ore deposit. Even if an apparently
viable deposit is identified, there is no guarantee that it can be economically exploited.
The future exploration activities of the Company may be affected by a range of factors including:
limitations on activities due to seasonal weather patterns;
geological conditions;
unanticipated operational and technical difficulties;
planning permission process;
many other factors beyond the control of the Company.
changing government regulations; and
industrial and environmental accidents;
Mine Development
The development of the Cononish Project in accordance with planned schedule and budget is dependent on a
number of factors including, but not limited to:
seasonal weather patterns;
unanticipated technical and operational difficulties encountered in extraction and production activities;
mechanical failure of operating plant and equipment;
access to the required level of funding; and
shortages or increases in the price of consumables, spare parts and plant and equipment;
cost overruns;
contracting risk from third parties providing essential services.
In addition to the above risks traditionally associated with mine development activities, since late March 2020 the
Group has had to manage the risks presented by the Covid-19 pandemic. Mining operations were suspended for the
period from 27 March 2020 to 30 June 2020 as a result of the pandemic, with a number of employees being
furloughed. The combination of the effects of the “traditional” risks with the less foreseeable risk of a global pandemic
have led to the expected date of first production moving out from the end of February 2020 reported in the Annual
Report of last year to the end of November 2020.
The unique risks posed by the Covid-19 pandemic are being addressed by adherence to a comprehensive set of
operating procedures formulated and implemented pursuant to the performance of a detailed risk assessment prior
to resumption of mining operations at the beginning of July 2020. Regular assessments of the risks posed by Covid-
19 are carried out, with the aforementioned operating procedures being adjusted in response thereto.
Scotgold Resources Limited
Page 23
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Once production commences, the operations of the Group may be disrupted by a variety of risks and hazards which
are beyond its control, including:
environmental hazards;
industrial accidents;
technical failures;
labour disputes;
unusual or unexpected rock formations;
flooding and extended interruptions due to inclement or hazardous weather conditions;
fires, explosions or accidents; and
the effects of the Covid-19 pandemic.
A comprehensive risk assessment of processing plant commissioning operations has been undertaken and a
comprehensive risk assessment in respect of processing plant and tailings management facility operations and
formulation of standard operating procedures for the conducting of these operations is underway as at the date of
this report, with assessment of the risks associated with the Covid-19 pandemic and development of procedures
designed to mitigate that risk being an integral component.
No assurances can be given that the Company will achieve commercial viability through the development or mining
of its projects and treatment of ore.
Operations
The operations of the Company may be affected by various factors. These include:
failure to locate or identify mineral deposits;
failure to achieve predicted grades in exploration and mining;
operational and technical difficulties encountered in mining;
difficulties in commissioning and operating plant and equipment;
mechanical failure or plant breakdown;
unanticipated metallurgical problems which may affect extraction costs;
adverse weather conditions;
industrial and environmental accidents; industrial disputes and unexpected shortages or increases in the
costs of consumables, spare parts, plant and equipment, exacerbated by the relative remoteness of the
location of the Cononish mine; and
the effects of the Covid-19 pandemic.
No assurances can be given that the Company will achieve commercial viability through the successful exploration
and / or mining of its tenement interests. Until the Company is able to realise value from its projects, it is likely to
incur ongoing operating losses, which are required to be funded by the shareholders.
Resource Estimates
In the event a resource is delineated this would be an estimate only. An estimate is an expression of judgement
based on knowledge, experience and industry practice. Estimates which were valid when originally calculated may
alter significantly when new information or techniques become available. In addition, by their very nature, resource
estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate.
As further information becomes available through additional fieldwork and analysis, the estimates are likely to
change, which may result in reassessment of the viability of mining the resource, re-estimation of life of planned
mining operations and/or scale or nature of mining operations to be conducted, thereby potentially adversely affecting
the operations of the Group and the value delivered to shareholders.
Scotgold Resources Limited
Page 24
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Operating cost risks
Operating costs are based on estimates by the Directors having reference to similar operations and the Company’s
financial modelling. Actual costs may be higher or lower than those estimates.
Higher costs will have an impact on the Company’s results as may a variety of other factors outside of the Company’s
control, such as increased competition and slower than expected take-up by customers of the Company’s products.
In addition, deviations in the profile of operating costs in terms of split between fixed and variable costs may change
the extent of exposure to risk of changes in revenue as an increase in the ratio of fixed costs to variable costs will
increase the degree of operating leverage of the Group and increase the potential effect on profitability of negative
movements in the amount of revenue generated by operations.
Environmental risk
The operations and proposed activities of the Company are subject to regulation in Scotland concerning the
environment. It is the Company’s intention to conduct its activities to the highest standard of environmental obligation,
including compliance with all environmental laws, in line with its commitment to being a responsible corporate citizen.
Failure to adhere to environmental management policies and procedures may result in an event entailing pollution of
the environment, with possible consequent financial penalties possible damage to the reputation of the Group as a
responsible corporate citizen, which may cause a loss to shareholders in the form of an adverse movement in share
price.
Commodity price volatility and exchange rate risks
The amount of revenue generated by the Group is influenced directly by the spot gold price as well as movements
in the Australian Dollar : US Dollar exchange rate.
Commodity prices fluctuate generally and are affected by many factors beyond the control of the Company. Such
factors include supply and demand fluctuations for precious and base metals, technological advancements, forward
selling activities and other macro-economic factors. In the case of gold, changes in spot price often reflect geo-
political influences as well in line with the status of the mineral as a refuge in conditions of geo-political crisis or
heightened geo-political tensions and uncertainty.
In summary, the Company’s revenue stream, and certain of its capital expenditure commitments are and will be US
Dollar denominated. However, the Company’s operating expenditure will be denominated in GBP Pounds Sterling.
To date, a large proportion of the corporate overhead costs of the Group has been denominated in Australian Dollars.
However, once production commences, the magnitude of the GBP Pounds Sterling denominated operating cost base
of the Cononish mine relative to the level of those Australian Dollar denominated corporate overhead costs will
increase the overall exposure of the Group to movements in the Australian Dollar : GBP Pound Sterling exchange
rate.
Economic
General macro-economic conditions, introduction of tax reform, new legislation, movements in interest and inflation
rates and currency exchange rates may have an adverse effect on the Company’s exploration, development and
production activities, as well as on its ability to fund those activities. An upward movement in market interest rates
may reduce the market valuation of the Cononish Project in the eyes of shareholders and potential investors.
Scotgold Resources Limited
Page 25
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Force Majeure
The current and future projects of the Group now or in the future may be adversely affected by risks outside the
control of the Company, including:
labour unrest;
civil disorder and/or war;
subversive activities or sabotage;
fires, floods, explosions or other catastrophes; and
epidemics or quarantine restrictions.
The Group has put in place insurance policies which strike the appropriate balance between extent of cover of these
risks and the cost of cover.
Government policy changes
Adverse changes in government policies or legislation may affect ownership of mineral interests, taxation, royalties,
land access, labour relations, and mining and exploration activities of the Company. It is possible that the current
system of exploration and mine permitting in Scotland may change, resulting in impairment of rights and possibly
expropriation of the Company’s properties without adequate compensation.
Uncertainty with regard to the Brexit process and the actual economic effects of Brexit, once implemented, still persist
and remain unresolved as at the date of this report. Preparations are underway to mitigate the possible effects of a
“hard” Brexit on the supply chains of the Group, as at the date of this report.
Insurance risks
The Company insures the operations of the Group in accordance with industry practice and based on an assessment
of the risk being insured against, the extent to which that insurance covers the risk and the costs of putting that
insurance cover in place. However, in certain circumstances, the Company’s insurance cover may not be of a nature
or level to provide adequate insurance cover against the manifestation of a risk in the form of a loss event and the
occurrence of that loss event could have a material adverse effect on the business, financial position and results of
the Company and thereby the value provided to shareholders.
The mining industry involves a number of industry-specific risks requiring tailored and / or specialised cover. The
depth and range of such cover available in the United Kingdom insurance market is limited and the costs of putting
in place the requisite cover to adequately address the specific identified risk may prove to be prohibitive.
Market conditions
Share market conditions may affect the value of the Company’s quoted securities regardless of the Company’s
operating performance.
Share market conditions are affected by many factors such as:
general macro-economic outlook;
introduction of tax reform or other new legislation;
interest rates and inflation rates;
changes in investor sentiment toward particular market sectors;
the demand for, and supply of, capital; and
terrorism or other hostilities.
The market price of its quoted securities may affect the ability of the Company to raise equity.
Scotgold Resources Limited
Page 26
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Principle Five: Maintain the Board as a well-functioning, balanced team led by the Chairman
The role of the Board is to agree the Group’s long-term direction and strategy and monitor achievement of its business
objectives. The Board meets formally at least four times a year for these purposes and holds additional meetings
when necessary to transact other business. When appropriate, the Board receives reports for consideration on all
significant strategic, operational and financial matters. The Board currently consists of eight Directors, seven of whom
are Non-Executive and two of whom are regarded as independent. Phillip Jackson has been appointed senior
Independent Director.
The composition of the Board and details of individual Directors are set out at the beginning of this report.
The Managing Director works full-time. The Non-Executive Directors are expected to dedicate such time as is
necessary to properly carry out their function and are expected to dedicate at least 10 days per annum to Company
business.
The QCA Code recommends a balance between Executive and Non-Executive Directors and recommends that there
be two Independent Non-Executive Directors. The Board considers each of Mr Jackson and Mr Barker to be
Independent Non-Executive Directors. Mr Styslinger, Mr Hetherington and Mr Proctor are all significant shareholders
and bring extensive experience, specialised industry knowledge, a broad range of skills and strong personal qualities
to their roles as members of the Board.
The Board will take Director independence into account when considering future appointments. All Directors are
encouraged to use their judgement and to challenge matters, whether strategic or operational, enabling the Board to
discharge its duties and responsibilities effectively. The composition of the Board will be frequently reviewed as the
Company develops.
Details of the number of meetings of the Company’s Directors held during the year ended 30 June 2020 and the
number of meetings attended by each Director are set out below. These meetings include matters relating to the
Remuneration and Nomination Committees of the Company.
Details of meetings of the Audit Committee and the Corporate and Social Responsibility Committee held during the
year ended 30 June 2020 are set out below.
Principle Six: Ensure that between them the directors have the necessary up-to-date experience, skills and
capabilities
The Board considers the current balance of sector, financial and public market skills and experience which it
embodies is appropriate for the current size and stage of development of the Company and that the Board has the
skills and experience necessary to execute the Company’s strategy and business plan and discharge its duties
effectively. Details of the current Board of Directors’ biographies are set out above. The Board annually reviews the
appropriateness and opportunity for continuing professional development, whether formal or informal. All Directors
have access to the Company Secretary who is responsible for ensuring that Board procedures and applicable rules
and regulations are observed.
The Company utilises the services of ONE Advisory Limited to provide Board support with UK Corporate Governance
and MAR compliance. The Board is kept abreast of developments regarding AIM regulations and corporate
governance.
Scotgold Resources Limited
Page 27
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Principle Seven: Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement
The ultimate measure of the effectiveness of the Board is the Company’s progress against the long-term strategy
and aims of the business. This progress is reviewed in full Board meetings held at least four times a year. Each
Executive Director’s performance is reviewed once a year by the Board as a whole.
The Nomination Committee, currently consisting of the full Board, meets as appropriate and is mindful of the formal
process of rigorous and transparent procedures for Board appointments. The Board takes succession planning into
account when making both Board and management appointments and will utilise outside agencies to assist with
recruitment when required. Board appointments are made at appropriate stages of the Group’s development.
Accordingly, the Board reviews:
the structure, size and composition of the Board;
succession planning;
leadership;
key strategic and commercial issues;
conflicts of interest;
time required from non-executive directors to execute their duties effectively;
overall effectiveness of the Board; and
its own terms of reference.
A “self-assessment” questionnaire and Board effectiveness process is being adopted in order to continually improve
the efficacy of the Board.
Principle Eight: Promote a corporate culture that is based on ethical values and behaviours
The Board recognises and strives to promote a corporate culture based on strong ethical and moral values. All
employees of the Group are encouraged to understand all aspects of the Group’s business and the Group seeks to
remunerate its employees fairly, being flexible where practicable and taking account of the size and stage of
development of the Company.
The Group gives full and fair consideration to applications for employment received regardless of age, gender, colour,
ethnicity, disability, nationality, religious beliefs, transgender status or sexual orientation. The Board takes account
of employees’ interests when making decisions, and suggestions from employees aimed at improving the Group’s
performance are welcomed.
The corporate culture of the Company is promoted to its employees through employment contracts, regular staff
meetings, and to its suppliers and contractors through its procurement policy and vetting processes. These
procedures enable the Board to determine that ethical values are recognised and respected.
In the case of the appointment of new suppliers, the approval of the appointment of each new supplier is counter-
signed by at least one senior manager and the Financial Controller, who in turn counter-sign a formal declaration
that they have no interests in or business relationships with that new supplier.
Scotgold Resources Limited
Page 28
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Principle Nine: Maintain governance structures and processes that are fit for purpose and support good
decision-making by the Board
The Board has overall responsibility for all aspects of the business. The Chairman is responsible for overseeing the
running of the Board, ensuring that no individual or group dominates the Board’s decision-making, and that the Non-
Executive Directors are properly briefed on all operational and financial matters.
The Chairman has overall responsibility for corporate governance matters in the Group and chairs the Nomination
Committee. The Chairman has the responsibility for overseeing the implementation of the strategy of the Board.
The Company Secretary is responsible for ensuring that Board procedures are followed, and applicable rules and
regulations are complied with.
Key operational and financial decisions are reserved for the Board through quarterly project reviews, annual budgets,
and quarterly budget and cash-flow forecasts and on an ad hoc basis where required. The current Board of eight
Directors contains two Independent Non-Executive Directors and it is intended to maintain this ratio. The Independent
Non-Executive Directors are responsible for bringing independent and objective judgment to Board decisions.
The Board has established Audit and Corporate and Social Responsibility Committees, chaired by Mr Phillip Jackson
and Mr Chris Sangster respectively.
The Board of Directors recognise the potential influence of a major shareholder. Accordingly, the Board and the
Company’s major shareholder, in consultation with the Company’s Nomad, are drafting a “Relationship Agreement”
which will formalise certain decision-making procedures.
The Board will conduct a review at least annually to ensure that the Company’s corporate governance framework
evolves in line with the Group’s development, strategy and business plan.
Principle Ten: Communicate how the company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
The Company regularly communicates with, and encourages feedback from, its shareholders who are its key
stakeholder group. The Company also provides regulatory, financial and business news updates through the
Regulatory News Service (RNS).
The Company’s web-site is designed to facilitate easy interaction between the Company and shareholders and other
users. Management of the web-site is located in-house to ensure that content is maintained on an up-to-date and
real-time basis and that the interaction between the user and the Company is direct and effective. Contact details
are also provided on the website.
Web-site content is regularly updated and includes the latest corporate presentation on the Group as well as RNS
announcements. Users, including all stakeholders, can register to be alerted via email when material announcements
are made. The Company’s contact details are on the website should stakeholders wish to make enquiries of
management. The Group’s financial reports are uploaded to the website as soon as practicable after announcement
to the market.
Notices of General Meetings are mailed to shareholders each year and the results of voting on all resolutions at
general meetings are announced to the market as soon as practicable after the close of the respective meetings.
The Company’s auditors engage with the Audit Committee at least once a year and offer their views and
recommendations on the strength of the financial management of the Group.
Scotgold Resources Limited
Page 29
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June
2020, 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
Ian Proctor
AUDIT COMMITTEE
Number eligible
to attend
Number
attended
6
6
6
6
6
6
6
6
6
6
6
6
6
5
6
6
The Audit Committee is comprised of Mr Jackson (Chairman), Mr Barker and Mr Styslinger. Two meetings of the
Audit Committee were held during the year ended 30 June 2020.
The Audit Committee Report for the year ended 30 June 2020 can be found in the QCA Corporate Governance
Statement
at
https://www.scotgoldresources.com/docs/QCA-2020.pdf.
Company web-site
Company,
which
found
can
the
the
on
be
of
CORPORATE AND SOCIAL RESPONSIBILITY COMMITTEE
The Corporate and Social Responsibility (“CSR”) Committee is comprised of Mr Sangster (Chairman), Mr
Hetherington and Mr Gray.
The three broad areas of focus of the CSR Committee are:
Health, Safety and Welfare of the Community, Employees, Consultants and Visitors;
Stewardship of the Environment; and
Corporate Citizenship and Societal Interaction
The CSR Committee is also charged with the responsibility of operational and environmental risk assessment. One
meeting of the CSR Committee was held during the year ended 30 June 2020.
Scotgold Resources Limited
Page 30
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
REMUNERATION REPORT (audited)
Statement from the Chairman of the Remuneration and Nomination Committee
Dear Shareholder
I am delighted to present the Directors’ Remuneration Report as Chair of the Remuneration and Nomination
Committee of Scotgold Resources Limited for the year ended 30 June 2020.
This report details the nature and amount of remuneration for each director and executive of Scotgold Resources
Limited.
Appointment of Director
Ian Proctor was appointed as a Non-Executive Director of the Company on 14 August 2019.
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 (excluding salaries of executive
directors) and may be increased from time to time, subject to approval by shareholders in general meeting. Fees for
Non-Executive Directors are not linked 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.
Share schemes
An Enterprise Management Incentive Scheme was established pursuant to Schedule 5 of the United Kingdom
Income Tax (Earnings and Pensions) Act 2003 and adopted by the Board on 30 June 2020. In terms of the rules of
the Enterprise Management Incentive Scheme, the Board may at its discretion grant Enterprise Management
Incentive Scheme options to employees of the Company and its controlled entities to acquire ordinary shares in the
Company at such exercise price and in such numbers as it considers appropriate and to attach such performance
conditions to the vesting of such options as it considers appropriate, subject to compliance with the provisions of the
abovementioned Schedule 5 and other applicable legislation.
Previously, the Group did not operate an Employee Share Scheme
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.
Scotgold Resources Limited
Page 31
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Details of remuneration for year ended 30 June 2020
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 ($253,512) plus pension contribution and leave pay
entitlement. 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. For the year ended 30 June 2020, the amount paid to Mr Gray as salary amounted
to $259,760, comprising $253,512 of annual remuneration in terms of his employment contract and an increase in
leave pay balance of $6,248.
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 options were granted subject to shareholder approval, which approval was given at the Annual General
Meeting of the Company on 26 November 2019.
A charge of $267,148 has been recognised as an expense for the period from the date of grant of the options to 30
June 2020.
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 $69,087 in the year ended 30 June 2020 (2019 - $87,826).
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 $37,328 in the year
ended 30 June 2020 (2019 - $39,996).
iii) 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, bringing
the cumulative amount drawn down under the facility to an amount of £4.0 million at 30 June 2020. Details of the
secured loan facility are set out in Note 15.
Loans due from/to Directors
There are no loans due from Company Directors.
As set out in Note 15, Bridge Barn Limited, a company controlled by Mr Nat le Roux, has provided a secured loan
facility to the consolidated entity on commercial terms throughout the year. As at 30 June 2020 the amount owing by
Scotgold Resources Limited
Page 32
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
the consolidated entity in respect of drawdowns made on that secured loan was $7,681,847 (2019 - $3,655,221).
Further drawdowns in a total amount of £2,500,000 were made on that facility after 30 June 2020, as set out in Note
30.
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, which amount excludes the salaries of executive directors. The
Directors may approve a Managing Director whose fee or salary is agreed by the Directors and falls outside the limit
of $300,000 per annum. A Director may be paid fees or other amounts as the Directors determine where a Director
performs special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A
Director may also be reimbursed for out of pocket expenses incurred as a result of their directorship or any special
duties. Executive Directors may be paid on commercial terms as the Directors see fit.
The total remuneration paid to key management personnel is summarised below:
Short-term benefits
Fees
Consulting /
Salary
$
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
Director/Executive
Associated Company
Year ended 30 June 2020
Nat le Roux *
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington *
William Styslinger *
Ian Proctor1 *
Holihox Pty Ltd
Barston Corp. Pty Ltd
$
-
-
17,968
18,000
18,065
-
-
54,033
$
-
-
18,818
18,000
17,568
-
-
-
54,386
Retirement
Benefits
$
-
8,491
-
-
-
-
-
8,491
Retirement
Benefits
$
-
10,140
-
-
-
-
-
-
10,140
Share -
based
payments
$
-
148,084
-
-
-
-
-
148,084
Share-
Based
payments
$
-
66,194
-
-
-
-
-
-
66,194
Total
$
-
426,030
105,794
18,000
58,061
-
-
607,885
Total
$
-
336,094
87,905
18,000
54,896
-
-
-
496,895
-
269,455
87,826
-
39,996
-
-
397,277
-
259,760
69,087
-
37,328
-
-
-
366,175
Short-term benefits
Fees
Consulting /
Salary
$
* Mr le Roux, Mr Hetherington, Mr Styslinger and Mr Proctor have waived their director fees for the time being
1 Appointed on 14 August 2019
Scotgold Resources Limited
Page 33
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
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 2020
Nat le Roux *
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
Ian Proctor
Holihox Pty Ltd
Barston Corp. Pty Ltd
Share-based payments
Fixed proportion
2019
$
2020
$
Linked to performance
2020
$
2019
$
100%
80%
100%
100%
100%
100%
100%
100%
100%
65%
100%
100%
100%
100%
100%
100%
-
20%
-
-
-
-
-
-
-
35%
-
-
-
-
-
-
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
These options were granted subject to shareholder approval, which was given at the Annual General Meeting of the
Company on 26 November 2019. 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 2020. As set out in Note 30, 400,000 options were granted to Richard
Gray on 1 July 2020. Each option entitles the holder to one ordinary unissued share at a strike price of £0.71.These
options vest once cumulative gold production at the Cononish Mine (excluding any gold produced prior to 1 July
2020) has exceeded a level of 500 gold equivalent ounces, which is a non-market vesting condition. The options are
exercisable by the holder with effect from the vesting date.
Of the 400,000 options granted to Richard Gray on 1 July 2020, 352,112 were issued under the Enterprise
Management Incentive Scheme.
Scotgold Resources Limited
Page 34
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Additional information
The earnings of the consolidated entity for the five years to 30 June 2020 are as follows:
Sales revenue
EBITDA
EBIT
(Loss) after income tax
Basic (loss) per share (cents per share)
Voting at the 2019 Annual General Meeting
2020
$
-
(1,105,783)
(1,834,222)
(2,504,134)
(5.04)
2019
$
-
(3,285,036)
(3,416,512)
(3,518,455)
(7.84)
2018
$
-
(1,657,616)
(1,727,523)
(1,899,667)
(7.92)
2017
$
-
(1,124,095)
(1,227,227)
(1,348,167)
(8.60)
2016
$
-
(1,273,707)
(1,289,083)
(1,505,592)
(11.80)
The Remuneration Report for the year ended 30 June 2019 was adopted unanimously at the 2019 Annual General
Meeting on a show of hands.
Key management personnel share holdings
Year ended 30 June 2020
Nat le Roux
Richard Gray
Chris Sangster
Phillip Jackson
Richard Barker
Peter Hetherington
William Styslinger
Ian Proctor
Balance 30
June 2019
Exercise of
options
Subscription
22,618,223
96,738
202,045
43,313
-
3,231,818
4,717,829
-
30,909,966
-
8,939
4,000
-
-
-
320,000
-
332,939
-
-
-
-
-
857,143
928,571
428,571
2,214,285
At date of
resignation/
appointment
-
-
-
-
-
-
-
727,273
727,273
Disposal of
shares
Balance 30
June 2020
-
-
-
-
-
-
(35,000)
-
(35,000)
22,618,223
105,677
206,045
43,313
-
4,088,961
5,931,400
1,155,844
34,149,463
Key management personnel option holdings
Year ended 30 June 2020
Balance 30
June 2019
Exercise
of options
Disposal of
options
Balance 30
June 2020
Nat le Roux
Richard Gray
Chris Sangster
William Styslinger
1,744,657
1,008,939
4,000
320,000
3,077,596
-
(8,939)
(4,000)
(320,000)
(332,939)
(1,744,657)
-
-
-
(1,744,657)
-
1,000,000
-
-
1,000,000
The 1,000,000 options granted to Mr Richard Gray in May 2018 and approved by the shareholders at the Annual
General Meeting of the Company on 26 November 2019 are now included in the table above, not previously having
been reflected therein.
Scotgold Resources Limited
Page 35
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Aggregate amounts payable to Directors and their related entities:
Consolidated Entity
2020
$
Consolidated Entity
2019
$
Accounts payable
Non-current borrowings owing to Bridge Barn Limited
Principal
Accumulated interest
Total
25,318
7,160,759
521,088
7,707,165
14,393
3,613,369
41,852
3,669,614
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 subject to shareholder approval was approved by the shareholders at
the Annual General Meeting of the Company on 26 November 2019.
Approval
This report was approved by the Board on 27 November 2020 and signed on its behalf by:
..............................................................
Nat le Roux
Chair of the Remuneration and Nomination Committee
End of Audited 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.
EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 1 July 2020, 400,000 options were granted to Mr Richard Gray, the Managing Director of the Company. Each
option entitles the holder to one ordinary unissued share at a strike price of £0.71.The vesting of these options is
subject to the non-market vesting condition of cumulative gold production at the Cononish mine (excluding any gold
produced prior to 1 July 2020) exceeding a level of 500 gold equivalent ounces. The options are exercisable by the
holder with effect from the vesting date and carry no dividend or voting rights. Of these 400,000 options, 352,112
were granted under the Enterprise Management Incentive Scheme of the Company.
On 1 July 2020, 750,000 options were granted to senior managers of the Company under the Enterprise Management
Incentive Scheme of the Company. Each option entitles the holder to one ordinary unissued share at a strike price
of £0.71. Of the 750,000 options, 400,000 vest when cumulative gold production at the Cononish mine (excluding
any gold produced prior to 1 July 2020) exceeds a level of 500 gold equivalent ounces and 350,000 vest when
cumulative gold production at the Cononish Mine (excluding any gold produced prior to 1 July 2020) exceeds a level
Scotgold Resources Limited
Page 36
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
of 10,000 gold equivalent ounces, these vesting conditions being non-market vesting conditions. The options are
exercisable by the holder with effect from the vesting date and carry no dividend or voting rights. On the granting of
these options, the 120,000 options with an exercise price of £0.34 per share granted to senior managers on 16 April
2019 and expected to vest in future were cancelled.
On 29 July 2020, 200,000 options were granted to Saint Consulting (UK) Limited, the company providing project
management services in respect of the construction of the Cononish mine processing plant building and tailings
management facility. Each option entitles the holder to one ordinary unissued share at a strike price of £0.71. The
vesting of these options is subject to the non-market vesting condition of successful completion of hot commissioning
of the Cononish mine processing plant on or before 31 December 2020, as determined by the Board. The options
are exercisable by the holder with effect from the vesting date and carry no dividend or voting rights.
Subsequent to the grant of the above options, the average weighted exercise price of the 2,350,000 options granted
as share-based payments outstanding and expected to vest in future is £0.536 (30 June 2020: £0.304).
A drawdown of £500,000 was made on the secured loan facility on 8 July 2020 and further drawdowns of £1,000,000
each were made on 12 August 2020 and 1 September 2020.
Net equity funding of £2,839,650 ($5,190,125), being £3,000,000 ($5,482,414) net of costs of £160,350 ($292,289)
was raised through the placement of 2,727,273 Ordinary shares at £1.10 per share on 12 October 2020 in order to
fund the acceleration of the Phase 2 expansion of the Cononish mine to increase the rate of production from 3,000
tpm to 6,000 tpm as well as to increase the scale of exploration activities.
On 27 October 2020, Scottish Enterprise agreed to amend the terms of the Regional Selective Assistance grant to
extend the cut-off date for submission by SGZ Cononish Limited of claims for the third and fourth tranches of that
grant from 31 October 2020 to 31 May 2021.
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 and the Edinburgh, Scotland
office of BDO LLP, 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
Scotgold Resources Limited
Page 37
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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 and corporate finance services to the Company – 2020:
$14,879 (2019 - $8,488). In addition, income tax services were provided to the Company by the Edinburgh, Scotland
office of BDO LLP – 2020: $6,434 (2019 - $Nil).
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration has been received for the year ended 30 June 2020 and forms part of the
Directors’ report.
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the company is a party for the purpose of taking responsibility on behalf of the Company for all
or any part of those proceedings.
The Company was not a party to any such proceedings during the year.
Signed in accordance with a resolution of the Directors.
..............................................................
RICHARD GRAY – Managing Director
Dated at London, England, this 27th day of November 2020
Scotgold Resources Limited
Page 38
AUDITOR’S INDEPENDENCE DECLARATION
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 39
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Interest income
Other income
Gain on loan renegotiation
Administration costs
Interest expense
Depreciation and loss on disposal of non-current assets
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
Notes
2
3
15
4
5
19
2020
$
38,989
381,708
38,383
(462,151)
(669,912)
(732,359)
-
-
-
(736,371)
(66,194)
(188,178)
(36,677)
(68,174)
(3,198)
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)
LOSS BEFORE INCOME TAX
(2,504,134)
(3,518,455)
Income tax benefit
LOSS FOR THE YEAR
Other Comprehensive Income
6
-
-
(2,504,134)
(3,518,455)
Items that may be reclassified to Profit or Loss
Exchange difference on translation of foreign subsidiaries
Total comprehensive result for the year
(226,738)
(726,967)
(2,730,872)
(4,245,422)
Basic (loss) per share (cents per share)
28
(5.04)
(7.84)
Loss per share for the year attributable to the members of Scotgold
Resources Ltd (cents per share)
(5.04)
(7.84)
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 40
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AT 30 JUNE 2020
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
Right-of-use assets
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
2020
$
2019
$
7
8
9
7
10
11
12
13
14
14
15
15
16
17
18
18
1,019,979
226,134
62,291
129,253
1,437,657
1,527,306
469,115
1,738,238
2,441,728
28,805,352
34,981,739
3,917,920
57,970
29,724
93,273
4,098,887
1,511,493
996,562
-
2,034,815
20,293,754
24,836,624
36,419,396
28,935,511
1,127,113
461,999
542,761
2,131,873
581,947
63,123
174,838
819,908
8,740,965
657,934
9,398,899
4,212,914
238,690
4,451,604
11,530,772
5,271,512
24,888,624
23,663,999
44,978,659
(596,589)
(19,493,446)
41,098,558
(448,311)
(16,986,248)
24,888,624
23,663,999
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 41
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Issued
Capital
Accumulated
Losses
Options
Reserve
Share-
based
payment
reserve
Foreign
Currency
Translation
Reserve
Total Equity
YEAR ENDED 30 JUNE 2019
$
$
$
$
$
$
Balances at 1 July 2018
Total comprehensive result for the year
39,706,967
-
Transactions with owners in their capacity as owners:
1,390,854
737
-
41,098,558
Issue of shares
Options exercised
Share-based payments
Balances at 30 June 2019
(13,467,793)
(3,518,455)
-
-
-
(16,986,248)
134,769
-
-
-
-
134,769
-
-
(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
YEAR ENDED 30 JUNE 2020
41,098,558
Balances at 1 July 2019
-
Adjustment on initial application of AASB 16
Total comprehensive result for the year
-
Transactions with owners in their capacity as owners:
2,075,997
Issue of shares
1,839,556
Options exercised
Share-based payments
-
(35,452)
Share issue expenses
44,978,659
Balances at 30 June 2020
(16,986,248)
(3,064)
(2,504,134)
-
-
-
-
(19,493,446)
134,769
-
-
-
-
-
-
134,769
205,182
-
-
-
-
78,460
-
283,642
(788,262)
-
(226,738)
23,663,999
(3,064)
(2,730,872)
-
-
-
-
(1,015,000)
2,075,997
1,839,556
78,460
(35,452)
24,888,624
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 42
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Notes
2020
$
2019
$
CASH FLOWS FROM OPERATING ACTIVITIES
Payment to suppliers
Interest income received
(1,031,667)
38,989
(3,057,998)
6,314
Net Cash Outflow from Operating Activities
24
(992,678)
(3,051,684)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for exploration expenditure
Payments for mine development activities
Purchase of plant and equipment
Expenditure on right-of-use assets
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, net of costs
Proceeds from exercise of options
Repayment of current borrowings
Proceeds on draw-down of first tranche of secured loan
Proceeds on draw-down of second tranche of secured loan
Net proceeds from Hire Purchase borrowings
Repayment of right-of-use leases
Net Cash Inflow from Financing Activities
Net decrease in cash held
(507,795)
(7,957,393)
(428,733)
(47,710)
-
(487,024)
(5,263,745)
(1,072,636)
-
(1,409,024)
(8,941,631)
(8,232,429)
2,040,545
1,839,556
-
-
3,762,227
-
(698,243)
1,391,591
-
(1,815,521)
3,729,952
-
731,122
-
6,944,085
4,037,144
(2,990,224)
(7,246,969)
Effect of exchange rate fluctuations on cash and cash equivalents
92,283
(42,147)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
3,917,920
11,207,036
1,019,979
3,917,920
These consolidated financial statements should be read in conjunction with the accompanying notes.
Scotgold Resources Limited
Page 43
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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 and mineral exploration.
The accounting policies detailed below have been consistently applied to all of the years presented unless otherwise
stated. The financial statements are for the consolidated entity consisting of Scotgold Resources 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 date, the consolidated entity had current assets of
$1,437,657 (2019 - $4,098,887), including available cash and cash equivalents of $1,019,979 (2019 - $3,917,920),
and current liabilities of $2,131,873 (2019 - $819,908).
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
at 30 June 2020, the consolidated entity had further available funds by way of a secured £3.5m ($6.27m) loan facility
not yet drawn down at that date.
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 2020, the consolidated entity had cash balances of $1,019,979 (30 June 2019 - $3,917,920) and for
the financial year then ending, incurred net cash outflows from operating and investing activities of $9,934,309 (2019
- $11,284,113). The consolidated entity is nearing completion of the processing plant installation and tailings
management facility at the Cononish Mine with the proceeds of the sale of the first gold produced expected to be
received in December 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 44
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The Directors believe that the consolidated entity has sufficient financing available to continue as a going concern
for the following reasons:
The consolidated entity is nearing completion of the processing plant installation and tailings management
facility at the Cononish Mine with the proceeds of the sale of the first gold produced expected to be
received in December 2020;
Subsequent to 30 June 2020, drawdowns in a total amount of £2,500,000 were made on the Bridge Barn
secured loan facility and an amount of £1,000,000 of that loan facility remains undrawn and is available to
be drawn down until 31 December 2021;
As set out in Note 30, equity funding, net of attributable costs, in the amount of £2,839,650 ($5,190,125) was
raised in October 2020 pursuant to a successful placement exercise, with these funds intended to be
deployed in bringing forward the Phase 2 expansion of the Cononish Mine (thereby increasing monthly
production levels from 3,000 tonnes of ore per month to 6,000 tonnes of ore per month) and conducting a
comprehensive exploration campaign; and
The extent and timing of the aforementioned exploration campaign lies solely within the discretion of
management and can be varied to respond to the effects on group cash flows of uncertainties in the operating
environment caused by the Covid-19 pandemic, which is still having a major global impact.
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.
Statement of Compliance
The financial report was authorised for issue on 27 November 2020.
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 2020, 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 other than as noted below.
Scotgold Resources Limited
Page 45
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The following new or amended standards have been adopted during the year ended 30 June 2020:
AASB 16 Leases
The consolidated entity has adopted AASB 16 with effect from 1 July 2019. The Standard replaces AASB 117
‘Leases’ and for lessees it eliminates the classifications of finance leases and operating leases. Except for short-term
leases and leases of low value assets, right-of-use assets and corresponding lease liabilities are recognised in the
statement of financial position.
Straight line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets
and an interest expense on the recognised lease liabilities.
For lessors, the standard does not substantially change how a lessor accounts for leases.
Impact of adoption
AASB 16 has been adopted using the modified retrospective approach, in terms of which comparatives have not
been restated.
The effect of adoption on opening accumulated losses is as follows:
Recognition of right-of-use assets previously recognised as operating leases under AASB 117:
Operating lease commitments as at 1 July 2019 (AASB 117)
Reassessment of non-cancellable periods of leases
Variations in lease payments due to anticipated escalation
Adjusted operating lease commitments as at 1 July 2019 (AASB 117)
Operating lease commitments discount based on the weighted average incremental borrowing
rate of 7.44% (AASB 16)
Low-value assets leases not recognised as a right-of-use asset
Operating lease payments between commencement date and date of initial application
Operating lease payments between commencement date and date of initial application
discount based on the weighted average incremental borrowing rate of 7.44% (AASB 16
Paragraph C8(B)(i))
Accumulated depreciation as at 1 July 2019 (AASB 16 Paragraph C8(B)(i))
Right-of-use assets previously accounted for as operating leases
Net carrying value at 1 July 2019 of assets financed by hire purchase agreements reclassified
as right-of-use assets at date of initial application
Right-of-use assets (AASB 16)
Lease liabilities – current (AASB 16)
Lease liabilities – non-current (AASB 16)
Reclassification of hire purchase agreements and assets financed thereby:
Net carrying value of assets at 1 July 2019
Outstanding balance on hire purchase agreements as at 1 July 2019
Net increase in opening accumulated loss at 1 July 2019
Scotgold Resources Limited
1 July 2019
$
503,351
294,821
127,217
925,389
(165,938)
(9)
195,310
(18,794)
(179,580)
756,378
842,517
1,598,895
(889,832)
(602,141)
(842,517)
732,531
(3,064)
Page 46
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
When adopting AASB 16, the consolidated entity has applied the following practical expedients:
applying a single discount rate to the portfolio of leases with reasonably similar characteristics;
accounting for leases with a remaining term of 12 months at 1 July 2019 as short-term leases; and
Using hindsight in determining the lease term when the contract contains options to extend or terminate
the lease.
The weighted average incremental borrowing rate used to measure the right-of-use assets and lease liabilities at 1
July 2019 was 7.44% per annum in respect of leases previously classified as operating leases. In the case of hire
purchase facility balances reclassified as leases on 1 July 2019, the respective interest rates implicit in those
agreements were retained (see Note 15).
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except
where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing
the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the
leased asset at the end of the lease term, the asset is depreciated over its estimated useful life. Right-of-use assets
are subject to impairment or adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-
term leases with terms of 12 months or less and leases of low value assets. Lease payments on these assets are
charged to mine development costs or expensed to profit or loss as incurred, as appropriate.
During the year, an aggregate amount of $276,732 (2019 - $Nil) paid in respect of short-term leases and leases of
low value assets was charged to mine development expenditure, with the major component of this amount being
payments in respect of mobile plant used in the construction of the Cononish Mine processing plant building and
tailings management facility hired on a weekly basis for consecutive periods of more than one month, which are all
expected to be off-hired by 31 December 2020.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined, the incremental borrowing rate of the consolidated entity.
Lease payments comprise:
fixed payments less any lease incentives receivable;
variable lease payments that depend on an index or a rate;
amounts expected to be paid under residual value guarantees;
exercise price of a purchase option when the exercise of the option is reasonably certain to occur; and
any anticipated termination penalties.
The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are
incurred.
Scotgold Resources Limited
Page 47
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following:
future lease payments arising from a change in an index or a rate used;
residual guarantee;
lease term;
certainty of a purchase option; and
termination penalties.
When a lease liability is remeasured, an adjustment is made to the corresponding right-of-use asset, or to profit or
loss if the carrying amount of the right of use asset is fully written down.
The consolidated entity has applied the provisions of AASB 2020-4 – Covid-19 Related Rent Concessions during the
year. AASB 2020-4 introduced a practical expedient that permits lessees not to assess whether a rent concession
that occurs as a direct consequence of the COVID-19 pandemic is a lease modification. The lessor of the Boomer
S1D drill rig and Scoop Tram used by the consolidated entity in its mining operations halved the monthly payments
on these items of mobile plant during the months of April 2020 to June 2020 during which mining operations were
suspended as a result of the Covid-19 pandemic. The resultant aggregate reduction in payments of $26,835
(£14,000) has been recognised as a reduction of capitalised mine development expenditure.
AASB 2017-4 Amendments to Australian Accounting Standards – Uncertainty over income tax treatments
The adoption of this standard has had no effect on the consolidated entity.
AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment features with negative
compensation
The adoption of this standard has had no effect on the consolidated entity.
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)
The adoption of this standard has had no effect on the consolidated entity.
Interpretation 23 Uncertainty over income tax treatments
The adoption of this standard has had no effect on the consolidated entity.
New Accounting Standards and Interpretations
The following new/amended accounting standards and interpretations have been issued but are not mandatory for
financial years ended 30 June 2020. They have not been adopted in preparing the financial statements for the year
ended 30 June 2020.
AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business
This standard was issued in December 2018 and clarifies the definition of a business’ in AASB 3 to assist in
determining whether a transaction should be accounted for as a business combination or as an asset acquisition.
Scotgold Resources Limited
Page 48
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The standard is effective for annual reporting periods beginning on or after 1 January 2020 and applies to acquisitions
occurring on or after the beginning of the first annual period beginning on or after 1 January 2020. No impact on the
financial statements is expected when these amendments are first adopted because they apply prospectively to
acquisitions occurring on or after the beginning of the first annual reporting period beginning on or after 1 January
2020, i.e. on or after 1 July 2020.
AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material
This standard was issued in December 2018 and clarifies the definition of what is ‘material’ to the financial statements,
including adding guidance and explanations to accompany the definition. The standard primarily affects AASB 101
and AASB 108.
The standard is effective for annual reporting periods beginning on or after 1 January 2020 and is to be applied
prospectively. Initial application is not expected to have an effect on the consolidated entity.
AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework
This Standard was issued in May 2019 and sets out amendments to Australian Accounting Standards, Interpretations
and other pronouncements to reflect the issuance of the Conceptual Framework for Financial Reporting (Conceptual
Framework) by the AASB.
The standard is effective for annual reporting periods beginning on or after 1 January 2020. Initial application is not
expected to have an effect on the consolidated entity.
AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform
This Standard was issued in October 2019 and amends AASB 7, AASB 9 and AASB 139 to modify some specific
hedge accounting requirements to provide relief from the potential effects of the uncertainty caused by the interest
rate benchmark reform. In addition, the amendments require entities to provide additional information about their
hedging relationships that are directly affected by these uncertainties.
The standard is effective for annual reporting periods beginning on or after 1 January 2020. Initial application is not
expected to have an effect on the consolidated entity as the consolidated entity does not engage in hedging activities.
AASB 2019-5 Amendments to Australian Accounting Standards - Disclosure of the Effect of New IFRS
Standards Not Yet Issued in Australia
This Standard was issued in November 2019 and clarifies that, in complying with paragraph 30 of AASB 108
Accounting Policies, Changes in Accounting Estimates and Errors, entities intending to assert compliance with IFRS
must also disclose the potential effect of IFRS standards that are yet to be issued by the AASB.
The standard is effective for annual reporting periods beginning on or after 1 January 2020. The effect on the entity
is expected to be limited to additional disclosure in respect of IFRS standards which are in effect before the equivalent
AASB standard has been issued to show the effect of application of such IFRS standards.
AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or
Non-current
This standard was issued in March 2020 and contains four main changes to the requirements for classification of
liabilities as current or non-current and specifically, the unconditional right to defer settlement, the effect of bank
covenants, the right to defer settlement vs intention to do so and early settlement by conversion to equity.
Scotgold Resources Limited
Page 49
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The standard is effective for annual reporting periods beginning on or after 1 January 2022. As these amendments
only apply for the first time to the 30 June 2023 Statement of Financial Position (and 30 June 2022 comparative
Statement of Financial Position), the entity is not yet able to make an assessment of the impacts regarding the right
to defer settlement, compliance with bank covenants, and intention to settle set out therein.
AASB 2020-3 Amendments to Australian Accounting Standards – Annual improvements 2018-2020 and Other
Amendments
This standard was issued in June 2020 and effects amendments to AASB 1, AASB 3, AASB 9, AASB 116, AASB
137 and AASB 141. The standard is effective for annual reporting periods beginning on or after 1 January 2022.
The amendments to AASB 1 apply only to entities that apply AASB 1 for the first time for the year ended 30 June 2023
and are not expected to have any impact on the consolidated entity.
There will be no impact on the financial statements of the consolidated entity when the amendments to AASB 3 are
first adopted because they apply prospectively to business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period to which this amendments applies, i.e. annual periods beginning on
or after 1 July 2022.
The amendment to AASB 9 clarifies which fees an entity includes when it applies the ‘10 percent’ test to assess
whether there has been a modification or substantial modification to a financial liability. There will be no impact on
the financial statements of the consolidated entity when these amendments are first adopted because they apply
prospectively to financial liabilities that are modified or exchanged on or after the beginning of the first annual
reporting period to which this amendment applies, i.e. annual periods beginning on or after 1 July 2022.
The amendments to AASB 116 provide that where samples are produced as a result of testing whether an asset is
functioning properly, then the revenue resulting from the sale of those samples produced while bringing the asset to
the location and condition necessary for it to be capable of operating in the manner intended by management must
be recognised in profit or loss (as opposed to being credited to the cost of that asset).
The amendments to AASB 116 apply retrospectively, but only to items of property, plant and equipment that are
brought to the location and condition necessary to be capable of operating in the manner intended by management,
on or after the beginning of the earliest period presented in the financial statements to which the amendment first
applies (i.e. 1 July 2021). However, it is intended to apply these amendments to all revenues from the sale of gold
and silver resulting produced as a result of the testing and commissioning of the Cononish Mine processing plant in
the year ended 30 June 2021.
The amendments to AASB 137 provide that the costs of fulfilling a contract need to be considered when assessing
whether a contract is onerous and sets out examples of such costs. These amendments only apply to contracts with
unfulfilled obligations at the beginning of the first annual reporting period to which the amendments apply, i.e. annual
periods beginning on or after 1 July 2022. The cumulative effect of initially applying the amendments will be
recognised as an adjustment to opening balances of retained earnings on 1 July 2022.
The amendments to AASB 141 deal with biological assets in the agriculture industry and application thereof is not
expected to have any effect on the consolidated entity.
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FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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 differences can be utilised.
The amount of benefits brought to account or which may be realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive
sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility
imposed by the law.
(c) Plant and Equipment
Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation.
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by 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
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FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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, 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
The consolidated entity held thirteen exploration licences in Scotland at 30 June 2020. The commencement date of
each of these licences is 5 November 2018, with a term of five years and an option to extend for a further period of
four years, subject to the Crown Estate Scotland being satisfied with the progress made in conducting exploration
activities in the area covered by that licence. No minimum capital expenditure figure is stipulated in any of the thirteen
licences.
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 in the
case of areas of interest in respect of which tenure is current and 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.
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.
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FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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.
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
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THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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
- 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;
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FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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.
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.
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NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
As at 30 June 2020, 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) Government grants
Grants from the government are recognised only when there is both a reasonable assurance that the entity will
comply with any conditions attached to the grant and the grant will be received.
Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match
them with the costs that they are intended to compensate.
Government grants are receivable in the form of Regional Selective Assistance provided by Scottish Enterprise in
respect of the Cononish Mine project. The Regional Selective Assistance grant is receivable in four instalments with
conditions as to capital expenditure, project funding and creation of new jobs being attached to each claim instalment.
Claims in respect of each instalment are submitted to Scottish Enterprise together with proof that the specific
conditions attached to that claim instalment have been met. Claims received are recognised as other income.
(p) 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.
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NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
(q)
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.
(r) Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
(s) 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.
(t)
Share based payments – shares and options
The fair value of shares and share options granted is recognised as an expense or as an addition to mine
development expenditure depending on the services rendered in respect of which the shares or share options are
granted, 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.
(u) 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.
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NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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.
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.
(v) 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.
(v)(i) Critical accounting estimates and associated assumptions
Estimation of useful lives of assets
The determination by the consolidated entity of the estimated useful lives and related depreciation and amortisation
charges for its plant and equipment and finite life intangible assets involves a significant amount of judgement, based
on historical experience with similar assets, available industry information with regard to similar assets and
anticipation of future events.
The useful lives determined could change significantly as a result of technical innovations or some other event. The
depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or
technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability.
Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or
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NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when
ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances
that create an economical incentive to exercise an extension option, or not to exercise a termination option, are
considered at the lease commencement date. Factors considered may include the importance of the asset to the
consolidated entity's operations; comparison of terms and conditions to prevailing market rates, incurrence of
significant penalties, existence of significant leasehold improvements and the costs and disruption to replace the
asset. The consolidated entity reassesses whether it is reasonably certain to exercise an extension option, or not
exercise a termination option, if there is a significant event or significant change in circumstances.
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated
to discount future lease payments to measure the present value of the lease liability at the lease commencement
date. Such a rate is based on what the consolidated entity estimates it would have to pay a third party to borrow the
funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and
economic environment.
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 2020 was $657,934 (2019 - $238,690).
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 premium 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.
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FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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.
(v)(ii) Critical judgements in applying the consolidated entity’s accounting policies
Determination of date of reclassification to mine development expenditure
During the prior 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.
The same judgement process will be applied in future in evaluating whether other areas of interest have met the
criteria for reclassification to mine development expenditure.
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 premium
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.
As at 30 June 2020, the gross asset base of the consolidated entity directly attributable to the Cononish mine
amounted to $33,502,849 (2019 - $23,953,258). The Directors have not identified any impairment indicators
necessitating impairment of the carrying value of that asset base at 30 June 2020.
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-
Scotgold Resources Limited
Page 60
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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 2020, the consolidated entity had capitalised mineral exploration and evaluation expenditure of
$2,441,728 (2019 - $2,034,815). The Directors do not believe any indications of impairment are present.
NOTE 2 – INTEREST INCOME
Interest income
Interest received on non-current receivables
Interest received on bank deposits
Total interest income
NOTE 3 – OTHER INCOME
Other income
Regional Selective Assistance grant payments from Scottish Enterprise
Sale of scrap metal
Total other income
NOTE 4 – INTEREST EXPENSE
Interest expense
Secured loan
Shareholder loan
Hire Purchase facilities
Right-of-use lease liability
Unwinding of discount on provision for restoration and decommissioning
Total interest expense
2020
$
36,219
2,770
38,989
2020
$
379,468
2,240
381,708
2020
$
546,747
-
-
98,956
24,209
669,912
2019
$
-
6,314
6,314
2019
$
-
-
-
2019
$
41,626
43,384
16,933
-
-
101,943
Scotgold Resources Limited
Page 61
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
NOTE 5 - DEPRECIATION AND LOSS ON DISPOSAL OF NON-CURRENT ASSETS
Depreciation of non-current assets
Plant and equipment
Motor vehicles
Office furniture and equipment
Right of Use assets
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
2020
$
2019
$
75,253
8,755
5,589
638,842
728,439
-
3,920
-
3,920
121,381
9,140
955
-
131,476
72,078
2,727
2,327
77,132
Total depreciation and loss on disposal of non-current assets
732,359
208,608
NOTE 6 - INCOME TAX
The prima facie tax benefit at 27.5% (2019 - 27.5%) on loss from ordinary activities is reconciled to the income tax
benefit in the financial statements as follows:
Loss from ordinary activities
2020
$
(2,504,134)
2019
$
(3,518,455)
Prima facie income tax benefit at 27.5% (2019 - 27.5%)
688,637
967,575
Difference in tax rate between jurisdictions
Net taxable temporary timing differences
Net deductible temporary timing differences
Tax effect of permanent differences
Share issue costs amortised
Other non-deductible expenses
Increase in assessable losses
Deferred tax asset not brought to account
Income tax benefit
(318,180)
92,172
(14)
211
(46,546)
(294,507)
167,024
(877)
16,827
(123,500)
416,280
732,542
(416,280)
-
(732,542)
-
The difference in tax rate between jurisdictions arises due to the difference in corporation tax rate between Australia
(27.5%) and the United Kingdom (19.0%). It is considered that there are sufficient assessable losses as at 30 June
2020 to offset the effect of taxable temporary differences in future.
Scotgold Resources Limited
Page 62
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
INCOME TAX BENEFIT
The directors estimate the cumulative unrecognised deferred tax asset attributable to the Company and its
controlled entities at the tax rates applicable in the respective applicable jurisdictions is as follows:
UNRECOGNISED DEFERRED TAX ASSETS
Revenue losses after permanent differences
Capital raising costs yet to be claimed
2020
$
4,187,263
634
4,187,897
2019
$
3,894,605
845
3,895,450
The potential deferred tax asset has not been brought to account in the financial report at 30 June 2020 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.
NOTE 7 – TRADE AND OTHER RECEIVABLES
Current
GST / VAT receivable
Other receivables
Non-current
Rehabilitation, restoration and land management Bond deposits
Performance Bond deposits
2020
$
191,134
35,000
226,134
2019
$
47,940
10,030
57,970
1,473,600
53,706
1,527,306
1,457,292
54,201
1,511,493
During the prior 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. That 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”).
Scotgold Resources Limited
Page 63
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The following amounts were lodged as security during the prior year for the performance by SGZ Cononish of its
obligations in terms of the Section 75 Agreement
-
-
£537,918 ($962,975) in respect of obligations to undertake restoration, decommissioning and environmental
aftercare and monitoring on cessation of operations at the Cononish mine; and
£268,693 ($481,011) in respect of obligations in terms of the Greater Cononish Glen Management Plan.
The cumulative amount of interest earned on the amounts lodged is $30,818 (2019 - $Nil).
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, during the prior year
SGZ Cononish Limited lodged a deposit of £30,000 ($53,706) 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 8 – INVENTORY
Inventory of mining consumables
NOTE 9 – OTHER CURRENT ASSETS
Prepayments
NOTE 10 – PLANT AND EQUIPMENT
Cost
Accumulated Depreciation
2020
$
62,291
62,291
2019
$
29,724
29,724
2020
$
129,253
2019
$
93,273
2020
$
791,625
(322,510)
469,115
2019
$
1,304,305
(307,743)
996,562
On initial application of AASB 16, mobile plant and motor vehicles with a net carrying value of $842,517 on 1 July
2019 were reclassified as right-of-use assets on that date. These assets are financed by hire purchase facilities which
were classified as leases on initial application of AASB 16.
Scotgold Resources Limited
Page 64
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Movement for the year ended 30 June 2019
Cost
Opening balance
Additions
Disposals
Foreign exchange movement
Closing balance
Accumulated depreciation
Opening balance
Depreciation expensed
Disposals
Foreign exchange movement
Closing balance
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
Movement for the year ended 30 June 2020
Plant and
equipment
Motor
vehicles
Furniture and
office
equipment
1,221,591
(865,168)
376,007
-
(25,679)
706,751
282,276
(59,257)
75,253
-
(6,068)
292,204
71,348
(42,620)
34,509
(6,709)
(322)
56,206
24,439
(6,014)
8,755
(2,789)
(396)
23,995
11,366
-
18,217
-
(915)
28,668
1,028
-
5,589
-
(306)
6,311
Cost
Opening balance
Reclassification as right-of-use assets
Additions
Disposals
Foreign exchange movement
Closing balance
Accumulated depreciation
Opening balance
Reclassification as right-of-use assets
Depreciation expensed
Disposals
Foreign exchange movement
Closing balance
Net carrying value
At 30 June 2020
At 30 June 2019
Total
661,402
1,072,636
(350,828)
(78,905)
1,304,305
435,360
131,476
(273,696)
14,603
307,743
Total
1,304,305
(907,788)
428,733
(6,709)
(26,916)
791,625
307,743
(65,271)
89,597
(2,789)
(6,770)
322,510
414,547
32,211
22,357
469,115
939,315
46,909
10,338
996,562
Scotgold Resources Limited
Page 65
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
NOTE 11 – RIGHT-OF-USE ASSETS
Cost
Accumulated Depreciation
The movement in Right-of-use assets for the year is as follows:
Cost
Recognition at date of initial application
Reclassification from plant and equipment on initial application
Additions after date of initial application during year
Modifications of rights during year
Foreign exchange movement
Balance at end of year
Accumulated Depreciation
Reclassification from plant and equipment on initial application
Depreciation expensed
Foreign exchange movement
Balance at end of year
2020
$
2,411,627
(673,389)
1,738,238
2020
$
756,378
907,788
552,323
257,641
(62,503)
2,411,627
65,271
638,842
(30,724)
673,389
2019
$
2019
$
-
-
-
-
-
-
-
-
-
-
-
-
Pursuant to the classification of hire purchase facilities as leases on the initial application of AASB 16, mobile plant
and motor vehicles financed by such facilities, with a net carrying value of $842,517 on 1 July 2019, were reclassified
as right-of-use assets on that date.
Included in the additions after date of initial application during year figure of $552,323 is an amount of $47,710 (2019
- $Nil) paid in respect of costs necessary to bring certain right-of-use assets to a condition in which they are ready
for their intended use and a provision for decommissioning and restoration of $27,476 (2019 - $Nil), which costs did
not form part of the cash flows of the related lease liability.
During the year, an amount of $276,732 (2019 - $Nil) paid in respect of short-term leases and leases of low value
assets was charged to mine development expenditure, being primarily payments in respect of mobile plant used in
the construction of the processing plant building and tailings management facility hired on a weekly basis for
consecutive periods of more than one month, which are all expected to be off-hired by 31 December 2020.
NOTE 12 – 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
Scotgold Resources Limited
2020
$
2,034,815
-
440,126
-
-
(33,213)
2,441,728
2019
$
16,685,135
(5,360)
641,623
(15,180,832)
(118,402)
12,651
2,034,815
Page 66
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The ultimate recoupment of exploration expenditure carried forward is dependent upon successful development and
commercial exploitation, or sale of the respective areas.
NOTE 13 – MINE DEVELOPMENT EXPENDITURE
Opening balance
Reclassification from mineral exploration and evaluation expenditure
Expenditure incurred
Share-based payment costs capitalised (see Note 19)
Provision for restoration and decommissioning (see Note 16)
Foreign exchange movement
Closing balance
2020
$
20,293,754
-
8,680,503
12,266
381,727
(562,898)
28,805,352
2019
$
-
15,180,832
5,606,392
4,228
238,690
(736,388)
20,293,754
Share-based payment costs capitalised as mine development expenditure relate to options granted to senior
management to incentivise the meeting of the corporate target of producing first gold at the Cononish mine.
Mine development expenditure includes $276,732 (2019 - $Nil) of amounts paid during the year in respect of short-
term leases and leases of low value assets, with the major component of this amount being payments in respect of
mobile plant used in the construction of the processing plant building and tailings management facility hired on a
weekly basis for consecutive periods of more than one month.
Mine development expenditure includes the following amounts in respect of the Cononish Mine which will be
transferred to plant and equipment when they have been completed and are in a condition suitable for their intended
use or in the case of capitalised mining costs, once first ore is produced:
Processing plant
Processing plant building
Tailings management facility
Capitalised mining costs
Provision for restoration and decommissioning
NOTE 14 – TRADE AND OTHER PAYABLES
Trade payables
Other accruals
Trade payables and accruals relating to exploration expenditure
Trade payables and accruals relating to development expenditure
Trade payables and accruals relating to administration
Scotgold Resources Limited
2020
$
6,026,401
2,841,013
429,080
3,650,350
610,013
13,556,857
2020
$
1,127,113
461,999
1,589,112
55,254
1,348,477
185,381
1,589,112
2019
$
3,915,037
166,049
17,007
1,303,785
238,690
5,640,568
2019
$
581,947
63,123
645,070
144,910
385,770
114,390
645,070
Page 67
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Trade payables are non-interest bearing and are normally settled on 30 days terms (2019 - 30 days).
NOTE 15 – BORROWINGS
Non-current
Secured loan facility
Right-of-use lease liabilities
Hire purchase agreement facilities
Current
Right-of-use lease liabilities
Hire purchase agreement facilities
2020
$
7,681,847
1,059,118
-
8,740,965
2020
$
542,761
-
542,761
2019
$
3,655,221
-
557,693
4,212,914
2019
$
-
174,838
174,838
Total borrowings
9,283,726
4,387,752
All of the borrowings are denominated in £ (Pounds sterling).
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 28 August 2019 the overall amount available under the facility was increased from £6,000,000 to
£7,500,000 and the period of repayment of tranches already drawn and to be drawn on the facility was
extended from a period of 24 months after date of drawdown of that specific tranche to a period of 36
months; and
On 28 April 2020 the period of availability of the third tranche of the secured loan facility was extended
from a period of six months after the date of drawdown of the second tranche of that facility to a period of
eighteen months, the period of availability of the fourth tranche was extended to end on the earlier of 31
December 2021 and the date falling twelve months after the date of drawdown of the third tranche and
SGZ Cononish Limited was given the right to draw down each of the third and fourth tranches in sub-
tranches of £500,000 each, with the sub-tranches of each tranche to be drawn down within the amended
period of availability of that particular tranche.
The amendment effected on 28 August 2019 resulted in a gain on renegotiation of repayment terms of £22,223
($38,383) being recognised in respect of the first tranche of the facility, which had been drawn down on 13 May 2019.
The amendment effected on 28 April 2020 did not give rise to a gain or loss.
The second tranche of the secured facility was received on 21 October 2019, with the reference drawdown date of
the second tranche for the purpose of calculation of interest and determining the date of repayment thereof being 25
October 2019.
Scotgold Resources Limited
Page 68
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The terms of the secured loan facility at 30 June 2020 are accordingly as follows:
i)
ii)
iii)
iv)
v)
An overall facility amount of £7,500,000 to be drawn down in two tranches of £2,000,000 (both of which
had been drawn down by 30 June 2020 in their respective periods of availability) followed by a third
tranche of £2,000,000 and a fourth tranche of £1,500,000 with the option to draw down each of the third
and fourth tranches in sub-tranches of £500,000 each;
The period of availability of the third tranche (including any sub-tranches of that third tranche) ends on 25
April 2021 and the period of availability of the fourth tranche (including any sub-tranches of that fourth
tranche) ends on the earlier of 31 December 2021 and the date falling twelve months after the date of
drawdown of the last sub-tranche of the third tranche (or the date of drawdown of the third tranche where
it is drawn down in its entirety as a single tranche);
Nominal interest rate is 9.0% applied to all amounts drawn down;
Each tranche or sub-tranche, as appropriate, together with accumulated interest thereon, is repayable 36
months after the date of drawdown of that tranche or sub-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.
Movements on the secured facility loan agreement for the year ended 30 June 2020:
Balance at beginning of year
Drawdown on 25 October 2019
Gain on amendment of repayment terms
Interest at effective rate
Foreign exchange movement
Balance at end of year
First tranche
$
3,655,221
-
(38,383)
331,536
(50,282)
3,898,092
Second
Tranche
$
-
3,762,227
-
215,211
(193,683)
3,783,755
Total
$
3,655,221
3,762,227
(38,383)
546,747
(243,965)
7,681,847
Movements on the secured facility loan agreement for the year ended 30 June 2019:
Balance at beginning of year
Drawdown on 13 May 2019
Interest at effective rate
Foreign exchange movement
Balance at end of year
First tranche
$
-
3,729,952
41,626
(116,357)
3,655,221
The effective interest rate on the secured loan facility is 8.46% (2019 – 8.63%). As set out in Note 30, after 30 June
2020 the third tranche was fully drawn down and one sub-tranche of £500,000 of the fourth tranche was drawn down.
Scotgold Resources Limited
Page 69
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Right-of-use lease liabilities
Pursuant to the implementation of AASB16 during the year, lease liabilities have been raised in respect of right-of-
use assets. In addition, on initial application of AASB 16, hire purchase facilities with an aggregate outstanding
balance of $732,531 at 1 July 2019 were reclassified as lease liabilities on that date:
Movements for the year ended 30 June 2020:
Recognition at date of initial application
Reclassification of hire purchase facilities as leases on initial application
Additions after date of initial application
Modifications to rights
Interest at effective rate
Repayments
Foreign exchange movement
Balance at end of year
$
759,442
732,531
477,137
257,641
98,956
(698,243)
(25,585)
1,601,879
The effective interest rate on the right-to-use lease liabilities is 9.88%. Right-of-use assets with an aggregate net
carrying value of $1,738,238 (2019 - $Nil) are financed by the right-of-use lease liabilities.
Hire purchase facilities
Subsidiaries of the Company are parties to hire purchase agreements with financial institutions to finance the
purchase of motor vehicles and mobile plant. On the initial application of AASB 16 on 1 July 2019, hire purchase
facilities were reclassified as leases.
On initial application of AASB 1 on 1 July 2019, the following hire purchase facilities, with an aggregate outstanding
balance of $732,531 on that date, were reclassified as lease liabilities:
Subsidiary company
Assets financed
Non-current portion of liability
Current portion of liability
Total liability as at 1 July 2019
Date of agreement
Period of agreement in months
Effective interest rate
Net carrying value of assets at 1 July 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
Scotgold Resources Limited
Page 70
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The movements on hire purchase facility borrowings for the year ended 30 June 2019 were as follows:
Subsidiary company
Assets financed
Net amount financed
Interest at effective rate
Repayments
Foreign exchange movement
Closing balance
NOTE 16 – 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
2020
$
Total
$
782,178
16,933
(51,056)
(15,524)
732,531
2019
$
Balance at end of year
657,934
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 2020.
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 2020 using a discount rate of
0.87% (2019 - 1.32%).
Movements in the provision are as follows:
Opening balance
Initial provision raised
Unwinding of discount
Adjustment for mine development progress and change in discount rate
Restoration provision attributable to right-of-use asset acquired
Foreign exchange movement
Closing balance
2020
$
238,690
-
24,209
381,727
27,476
(14,168)
657,934
2019
$
-
238,690
-
-
-
-
238,690
Scotgold Resources Limited
Page 71
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
NOTE 17 – ISSUED CAPITAL
Ordinary shares – fully paid
(a)
Voting and dividend rights
2020
No. of
shares
51,351,741
2019
No. of
shares
45,639,546
2020
$
2019
$
44,978,659
41,098,558
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 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
During the year ended 30 June 2020:
42,911,254
331
2,727,274
687
45,639,546
0.7251
0.5100
0.7234
39,706,967
240
1,390,854
497
41,098,558
Date
Details
Shares
Value
(cents)
$
28/08/2019
28/08/2019
28/08/2019
22/10/2019
20/11/2019
03/12/2019
09/12/2019
23/12/2019
07/01/2020
05/02/2020
11/03/2020
Balance at 30 June 2019
Share subscription
Expenses related to share subscription
Options conversion
Options conversion
Options conversion
Options conversion
Options conversion
Options conversion
Options conversion
Options conversion
Options conversion
Balance at 30 June 2020
45,639,546
3,285,783
23,704
826
153,000
43,968
398,137
1,744,657
59,256
2,856
8
51,351,741
0.6318
0.7169
0.7203
0.7550
0.7639
0.7639
0.7577
0.7524
0.7525
0.7500
Shares issued for non-cash consideration amounted to Nil during the year (2019 - Nil).
Scotgold Resources Limited
41,098,558
2,075,997
(35,452)
16,994
595
115,523
33,589
304,157
1,321,962
44,582
2,148
6
44,978,659
Page 72
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
(c)
Movements in options were as follows:
During the year ended 30 June 2019
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
During the year ended 30 June 2020
2,514,699
(331)
(687)
2,513,681
134,769
-
-
134,769
Details
Number
$
Balance at 30 June 2019
Options converted on 28 August 2019
Options converted on 22 October 2019
Options converted on 20 November 2019
Options converted on 3 December 2019
Options converted on 9 December 2019
Options converted on 23 December 2019
Options converted on 7 January 2020
Options converted on 5 February 2020
Options converted on 11 March 2020
Options lapsed
Balance at 30 June 2020
Option exercise dates and prices
2,513,681
(23,704)
(826)
(153,000)
(43,968)
(398,137)
(1,744,657)
(59,256)
(2,856)
(8)
(57,269)
30,000
134,769
-
-
-
-
-
-
-
-
-
-
134,769
Number
30,000
Exercise Price
$8.00
Expiry Date
31 March 2022
Reserve $
134,769
Details of options issued to key management and senior managers are set out in Note 19. The above tables of
options do not reflect movements in options issued to key management and senior managers. Details of such
movements are disclosed in Note 19.
NOTE 18 – RESERVES AND ACCUMULATED LOSSES
Accumulated Losses
2020
$
2019
$
Balance at beginning of the year
Increase in opening accumulated loss on initial application of AASB16
Net loss from ordinary activities
Balance at end of the year
(16,986,248)
(3,064)
(2,504,134)
(19,493,446)
(13,467,793)
-
(3,518,455)
(16,986,248)
Scotgold Resources Limited
Page 73
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Foreign Currency Translation Reserve
Balance at beginning of the year
Reserve arising on translation of foreign currency subsidiaries
Balance at end of the year
Share Option Reserve
Balance at beginning of the year
Balance at end of the year
Share-based payment Reserve
Balance at beginning of the year
Issue of options for services rendered (Note 19)
Balance at end of the year
Total reserves
Nature and purpose of reserves
Foreign currency translation reserve
2020
$
(788,262)
(226,738)
(1,015,000)
2019
$
(61,295)
(726,967)
(788,262)
134,769
134,769
134,769
134,769
205,182
78,460
283,642
-
205,182
205,182
(596,859)
(448,311)
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 19 – 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 were 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 2020, only 1,000,000 (2019 – 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. The granting of these 1,000,000 options was approved by the shareholders at the
Annual General Meeting of the Company on 26 November 2019.
Scotgold Resources Limited
Page 74
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
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 2020, only 120,000 (2019 – 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 2020, the share options granted to management for services rendered and expected to vest in future
have the following expiry dates 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 2020 of the 1,120,000 options outstanding at that date and expected to vest in
future is £0.304.
The movement in number of options issued as share-based payment is as follows:
Balance at beginning of the year
Grant of options on 16 April 2019
Balance at end of the year
Charges in respect of share-based payment have been recognised as follows:
2020
Number
1,120,000
-
1,120,000
2019
Number
1,000,000
120,000
1,120,000
During year ended 30 June 2019
Cumulative to 30 June 2019
During year ended 30 June 2020
Cumulative to 30 June 2020
Options granted on
1 May 2018
Charge to profit or
loss
16 April 2019
Charge to mine
development
$
200,954
200,954
66,194
267,148
$
4,228
4,228
12,266
16,494
Increase in share-
based payment
reserve
$
205,182
205,182
78,460
283,642
An Enterprise Management Incentive Scheme was established pursuant to Schedule 5 of the United Kingdom
Income Tax (Earnings and Pensions) Act 2003 and adopted by the Board on 30 June 2020. In terms of the rules of
the Enterprise Management Incentive Scheme, the Board may at its discretion grant Enterprise Management
Incentive Scheme options to employees of the Company and its controlled entities to acquire ordinary shares in the
Scotgold Resources Limited
Page 75
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Company at such exercise price and in such numbers as it considers appropriate and to attach such performance
conditions to the vesting of such options as it considers appropriate, subject to compliance with the provisions of the
abovementioned Schedule 5 and other applicable legislation.
As set out in the note on matters subsequent to the end of the financial year (Note 30), 1,150,000 options to acquire
ordinary shares in the Company at an exercise price of £0.71 per share were granted to management as share-
based payments on 1 July 2020, including 1,102,112 options granted under the Enterprise Management Incentive
Scheme. Of the 1,150,000 options issued on 1 July 2020, 225,000 of those options replaced the 120,000 options
issued on 16 April 2019, with those 120,000 options being cancelled.
On 29 July 2020, 200,000 options to acquire ordinary shares in the Company at an exercise price of £0.71 per share
were granted to Saint Consulting (UK) Limited, the company providing project management services in respect of
the construction of the Cononish Mine processing plant building and tailings management facility (see Note 30).
NOTE 20 - COMMITMENTS FOR EXPENDITURE
Mineral Tenement Leases
As at 30 June 2020, the consolidated entity held thirteen exploration licences in Scotland. The commencement
date of each of these licences is 5 November 2018, with a term of five years and an option to extend for a further
period of four years, subject to the Crown Estate Scotland being satisfied with the progress made in conducting
exploration activities in the area covered by that licence. No minimum capital expenditure figure is stipulated in
any of the thirteen licences.
The licence payments to be made in respect of the thirteen licences, under the respective assumptions that (a) all
of the licences are only held for the five year term and (b) all of the licences are extended for the further period of
four years 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
Later than 5 years
The licence payments to be made at 30 June 2019 were 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
Scotgold Resources Limited
Initial five year
term only
Extension for
further four
years
$
116,362
116,362
116,362
-
349,086
$
116,362
116,362
349,086
232,724
814,534
Initial five year
term only
Extension for
further four
years
$
117,435
117,435
234,870
-
469,740
$
117,435
117,435
352,305
352,305
939,480
Page 76
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Contract for purchase of processing plant
On 14 February 2019, SGZ Cononish Limited entered into a contract with Appropriate Process Technologies Pty
Limited for the fabrication of the processing plant to be used for processing ore at the Cononish mine.
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 2020, an amount of $450,259 (USD309,013)
in respect of contracted milestone payments and final retention payments was payable after 30 June 2020, with all
payments expected to be made by the end of February 2021. 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 then 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 certain rent payments
As at 30 June
2020
$
122,418
8,684
17,379
81,671
230,152
2019
$
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.
Assuming a 2.0% per annum increase in the RPI in future, the amounts payable in respect of the 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
As at 30 June
2020
$
34,793
35,489
110,784
242,325
423,391
2019
$
34,694
35,388
110,467
241,632
422,181
Scotgold Resources Limited
Page 77
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Certain Rent payments
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.
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
2020:
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
Assets not recognised as right-of-use assets
As at 30 June
2020
$
223,774
441,294
2,897,434
3,183,998
6,746,500
2019
$
271,003
397,563
1,978,673
3,695,284
6,342,523
The following amounts are payable in respect of the use of assets which have not been accounted for as right-of-use
assets due to the expected period of use ending before 31 December 2020 or the underlying assets being low value
assets:
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
As at 30 June
2020
$
72,292
646
1,455
6
74,399
2019
$
219,189
101,392
182,770
-
503,351
The main component of the commitment in respect of year 1 is the committed amount at 30 June 2020 in respect of
items of mobile plant hired on a weekly basis over periods of more than one month used in the construction of the
Cononish Mine processing plant building and tailings management facility.
Scotgold Resources Limited
Page 78
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Contract for construction of processing plant building and tailings management facility
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 initial contract sum was £2,307,147.
On 1 April 2020 a supplementary agreement was entered into in terms of which an amount of £195,236 was added
to the contract sum and works with a contract sum amount of £751,004 were removed from the scope of the contract,
resulting in a revised contract sum of £1,751,379.
By 30 June 2020, £934,492 of the revised contract sum had been invoiced by Robinsons Scotland Limited, with the
future payments in respect of the contract at 30 June 2020, all being subject to satisfactory performance by Robinsons
Scotland Limited and all expected to be made by 31 December 2020, amounting to £816,887 ($1,462,383).
Contract for installation of processing plant
On 5 November 2019, SGZ Cononish Limited signed a contract with Dan Herrick Construction Limited for the
installation of the processing plant purchased from Appropriate Process Technologies Pty Limited. The initial contract
amount was £552,279 and was increased to a revised contract amount of £637,199 on 10 June 2020.
By 30 June 2020, £92,565 of the revised contract sum had been invoiced by Dan Herrick Construction Limited, with
the future payments in respect of the contract at 30 June 2020, all being subject to satisfactory performance by Dan
Herrick Construction Limited and all expected to be made by 31 December 2020, amounting to £ 544,634 ($974,998).
NOTE 21 - CONTINGENT LIABILITIES
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)
(b)
A donations agreement with the Strathfillan Community Development Trust (”SCDT”) was concluded on 7
September 2018 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.
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
and the Trossachs Countryside Trust, with an amount of £25,000 payable on the first anniversary of the date
of commencement of the development of the Cononish Mine and the remainder 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. The
amount of £ 25,000 payable on the first anniversary of the date of commencement of the development of the
Cononish Mine was paid on 23 January 2020.
Scotgold Resources Limited
Page 79
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
(c)
(d)
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 20).
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 2020, the total amount of grants which
had been received by SGZ Cononish Limited from Scottish Enterprise amounted to £200,000 ($379,468).
Scotgold Resources Limited and its controlled entities have no other known material contingent liabilities as at 30
June 2020.
NOTE 22 - 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%
Scotgold Resources Limited
Page 80
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
NOTE 23 - 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.
.
Year ended 30 June 2019
Segment other income
Segment loss
Scotland
Mining
$
24
2,636,589
Scotland
Australia
Other
Total
Exploration
$
$
$
$
6,289
24,503
1
670,480
-
186,883
6,314
3,518,455
Segment assets
Segment non-current assets
Segment liabilities
Segment non-current liabilities
23,953,258
22,738,799
5,072,767
4,433,719
4,901,504
2,089,861
165,446
17,885
74,334
7,964
23,127
-
6,415
-
10,172
-
28,935,511
24,836,624
5,271,512
4,451,604
Included in segment result
and segment assets:
Interest expense
Depreciation
Capitalised exploration
Mine development costs
Acquisition of fixed assets
Year ended 30 June 2020
Segment other income
Segment loss
57,378
120,156
-
5,606,392
1,013,260
Scotland
Mining
$
456,310
1,929,931
Segment assets
Segment non-current assets
Segment liabilities
Segment non-current liabilities
33,502,849
32,482,513
11,384,404
9,385,903
Included in segment result
and segment assets:
1,181
10,909
636,263
-
59,376
43,384
411
-
-
-
-
-
-
-
-
101,943
131,476
636,263
5,606,392
1,072,636
Scotland
Australia
Other
Total
Exploration
$
$
$
$
2,767
28,497
2,808,519
2,478,996
73,087
12,996
3
493,966
104,445
20,230
62,003
-
-
51,740
3,583
-
11,278
-
459,080
2,504,134
36,419,396
34,981,739
11,530,772
9,398,899
Interest expense
Depreciation
Capitalised exploration
Mine development costs
Acquisition of fixed assets
Right-of-use assets acquired
668,345
714,163
-
8,680,503
428,733
552,323
1,567
14,276
440,126
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
669,912
728,439
440,126
8,680,503
428,733
552,323
Scotgold Resources Limited
Page 81
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The allocation of figures between the Scotland Mining and Scotland Exploration segments for the year ended 30
June 2019 has been restated to reflect the usage of mobile plant owned by SGZ Grampian Limited in mining
operations, in line with the basis of allocation employed in the year ended 30 June 2020.
The following material agreements were in place at 30 June 2020 in each segment:
Scotland – Mining
Location
Cononish Glen Orchy
Cononish Glen Orchy
Cononish Glen Orchy
Scotland – Exploration
Location
Glen Orchy Central
Glen Orchy East
Glen Orchy West
Glen Lyon North
Glen Lyon East
Glen Lyon South
Glen Lyon West
Inverliever West
Inverliever East
Knapdale South
Knapdale North
Ochills East
Ochills West
Agreement
Landholder Lease
Crown Lease
Section 75 Agreement
Agreement Date
23 July 2009
31 May 2012
12 September 2018
Agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Crown option agreement
Grant date
5 November 2018
5 November 2018
5 November 2018
5 November 2018
5 November 2018
5 November 2018
5 November 2018
5 November 2018
5 November 2018
5 November 2018
5 November 2018
5 November 2018
5 November 2018
Area
20 sq km
Area
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
Mining Leases in Scotland – general information
The mineral rights to gold and silver in most of Britain, including Scotland, are generally held by the Crown, In order
to explore for gold and silver, an option agreement is required to be concluded with the Crown which entitles the
holder to explore for gold and silver 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.
Scotgold Resources Limited
Page 82
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
NOTE 24 - NOTES TO THE STATEMENT OF CASH FLOWS
(a) Reconciliation of loss after income tax to net operating cash flows
Loss from ordinary activities
(2,504,134)
(3,518,455)
2020
$
2019
$
Depreciation
Loss on disposal of non-current assets
Interest expense
Exchange loss on repayment of loan
Share-based payments
Deferred mineral exploration and evaluation costs written off
Gain on loan renegotiation
Movement in assets and liabilities
Receivables
Other current assets
Payables
Net cash used in operating activities
(b) Non-cash investing and financing activities
Acquisition of right-of-use assets
Modification of existing leases (see Note 15)
New leases (see Note 15)
Options granted to management for no cash consideration (see Note 19)
(c) Net debt reconciliation
Cash and cash equivalents
Borrowings
Lease liabilities
Net debt
728,439
3,920
669,912
-
66,194
-
(38,383)
(1,074,052)
25,555
(19,642)
75,461
(992,678)
131,476
77,132
101,943
31,270
200,954
118,402
-
(2,857,278)
1,355
(12,593)
(183,168)
(3,051,684)
2020
$
2019
$
257,641
477,137
78,460
813,238
-
-
205,182
205,182
2020
$
1,019,979
(7,681,847)
(1,601,879)
(8,263,747)
2019
$
3,917,920
(3,655,221)
(1,491,973)
(1,229,274)
Scotgold Resources Limited
Page 83
Total
$
9,466,169
(9,892,522)
(101,943)
58,464
(469,832)
(759,442)
-
(1,229,274)
(6,054,208)
(645,703)
38,383
(257,641)
(477,137)
361,833
(8,263,747)
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
The movements in net debt are as follows:
Net debt as at 1 July 2018
Cash flows
Accrual of interest
Foreign exchange movements
Net debt as at 30 June 2019
On adoption of AASB 16:
Recognition
Reclassification
Other assets
Liabilities from financing activities
Leases
Sub-total
Borrowings
$
(1,740,867)
(2,645,553)
(101,943)
100,611
(4,387,752)
$
$
(1,740,867)
(2,645,553)
(101,943)
100,611
(4,387,752)
-
-
-
-
-
Cash and
cash
equivalents
$
11,207,036
(7,246,969)
-
(42,147)
3,917,920
-
732,531
(3,655,221)
(759,442)
(732,531)
(1,491,973)
(759,442)
-
(5,147,194)
-
-
3,917,920
Cash flows
Accrual of interest
Gain on loan renegotiation
Modification of existing leases
New leases
Foreign exchange movements
Net debt as at 30 June 2020
(3,762,227)
(546,747)
38,383
-
-
243,965
(7,681,847)
698,243
(98,956)
-
(257,641)
(477,137)
25,585
(1,601,879)
(3,063,984)
(645,703)
38,383
(257,641)
(477,137)
269,550
(9,283,726)
(2,990,224)
-
-
-
-
92,283
1,019,979
The figures in respect of borrowings for the year ended 30 June 2019 include movements on the shareholder loan
which was repaid on 26 September 2018 and hire purchase facilities.
The reclassification on adoption of AASB 16 represents the reclassification of hire purchase facility balances on 1
July 2019 pursuant to the reclassification of those hire purchase facilities as leases on that date.
NOTE 25 - KEY MANAGEMENT PERSONNEL
(a) Directors
The names and positions of Directors in office at any time during the financial year are:
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 and
Non- Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
In office from
In office to
18/03/2015
10/10/2014
10/10/2014
14/08/2007
09/10/2017
18/06/2018
18/06/2018
Appointed on 14/08/2019
present
present
present
present
present
present
present
present
Scotgold Resources Limited
Page 84
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
(b) Remuneration Polices
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
2020
$
420,561
10,140
66,194
496,895
2019
$
451,310
8,491
148,084
607,885
(d) Aggregate amounts payable to Directors and their personally related entities for remuneration.
Accounts payable
NOTE 26 - RELATED PARTY INFORMATION
Transactions with Directors
Consolidated Entity
2020
$
2019
$
25,318
14,393
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 to the Remuneration Report.
A company controlled by Nat le Roux provided loan funds to the consolidated entity on commercial terms
throughout the year. The details of the loan funds provided are shown in Note 15.
Scotgold Resources Limited
Page 85
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Aggregate amounts payable to Directors and their personally related entities:
Accounts payable
Non-current borrowings owing to Bridge Barn Limited
Principal
Accumulated interest
NOTE 27 - REMUNERATION OF AUDITORS
BDO Audit (WA) Pty Ltd and BDO Corporate Tax (WA) Pty Ltd:
Auditing and reviewing of the financial statements of Scotgold
Resources Limited and of its controlled entities.
Other services – provision of tax services
Other services – provision of corporate finance services
Consolidated Entity
2020
$
2019
$
25,318
14,393
7,160,759
521,088
7,707,165
3,613,369
41,852
3,669,614
Consolidated
2020
$
2019
$
48,964
18,783
2,530
70,277
35,560
8,488
-
44,048
The remuneration paid for the year ended 30 June 2020 includes $6,434 (2019 - $Nil) paid to the Edinburgh,
Scotland office of BDO LLP in respect of tax advisory services.
NOTE 28 – LOSS PER SHARE
Consolidated
2020
$
2019
$
Earnings used in calculation of loss per share
(2,504,134)
(3,518,455)
Weighted average number of ordinary shares outstanding
during the year used in the calculation of basic loss per share
Number
Number
49,702,739
44,891,914
There are 1,150,000 potential ordinary shares as at 30 June 2020 (30 June 2019 - 3,633,681). The issuing of these
potential ordinary shares would be anti-dilutive.
Scotgold Resources Limited
Page 86
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
NOTE 29 - FINANCIAL INSTRUMENTS
(a) Financial Risk Management Policies
The consolidated entity’s financial instruments consist mainly of deposits with banks, accounts receivable, accounts
payable, lease 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 2020
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.
The interest rate profile of the financial assets and liabilities of the consolidated entity is as follows:
Weighted Average
Effective Interest Rate
2020
2019
Financial Assets
Cash at Bank
Trade and other receivables
Non-current Bond obligation deposits
Total Financial Assets
0.05%
-
1.25%
0.05%
-
1.25%
Financial Liabilities
Trade and other payables
Right-of-use lease liabilities
Hire purchase agreements
Secured loan facility
Total Financial Liabilities
Scotgold Resources Limited
-
9.88%
-
8.46%
-
-
7.77%
8.63%
2020
$
1,019,979
226,134
1,527,306
2,773,419
1,127,113
1,601,879
-
7,681,847
10,410,839
2019
$
3,917,920
57,970
1,511,493
5,487,383
581,947
-
732,531
3,655,221
4,969,699
Page 87
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
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 2020 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. Had there been an increase of 100 basis points in the nominal interest
rate applicable to the secured loan facility at the beginning of the year, then the interest charge for the year would
have increased by $61,480 to $731,392, the gain on loan renegotiation would have been $46,612 and there would
have been a net decrease in equity of $54,687 after taking into account the effect on the foreign currency translation
reserve and a corresponding increase in the secured loan facility balance of $54,687.
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.
.
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
SEK Swedish Krone
Foreign currency
Liabilities
2020
$
11,449,509
72,969
-
-
11,522,478
Assets
2020
$
2,371,394
3,584
350,497
43,792
2,769,267
Liabilities
2019
$
5,163,200
75,153
-
-
5,238,353
Assets
2019
$
4,527,250
6,415
921,142
-
5,454,807
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 2020 in terms of this contract, details of which are set out in Note 20. 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 $45,026.
A 10% depreciation in the Australian Dollar : Pound Sterling exchange rate would result in an increase in net monetary
liabilities of $1,008,680.
Other than translational risk, the consolidated entity has no other significant exposure to foreign currency risk at the
reporting date.
Scotgold Resources Limited
Page 88
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
Liquidity Risk
The group manages liquidity risk by monitoring forecast cash flows.
As at 30 June 2020 the consolidated entity had an amount of £3,500,000 (30 June 2019 - £4,000,000) 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.
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 30 - MATTERS SUBSEQUENT TO THE END OF FINANCIAL YEAR
On 1 July 2020, 400,000 options were granted to Mr Richard Gray, the Managing Director of the Company. Each
option entitles the holder to one ordinary unissued share at a strike price of £0.71.The vesting of these options is
subject to the non-market vesting condition of cumulative gold production at the Cononish mine (excluding any gold
produced prior to 1 July 2020) exceeding a level of 500 gold equivalent ounces. The options are exercisable by the
holder with effect from the vesting date and carry no dividend or voting rights. Of these 400,000 options, 352,112
were granted under the Enterprise Management Incentive Scheme of the Company.
On 1 July 2020, 750,000 options were granted to senior managers of the Company under the Enterprise Management
Incentive Scheme of the Company. Each option entitles the holder to one ordinary unissued share at a strike price
of £0.71. Of the 750,000 options, 400,000 vest when cumulative gold production at the Cononish mine (excluding
any gold produced prior to 1 July 2020) exceeds a level of 500 gold equivalent ounces and 350,000 vest when
Scotgold Resources Limited
Page 89
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
cumulative gold production at the Cononish mine (excluding any gold produced prior to 1 July 2020) exceeds a level
of 10,000 gold equivalent ounces, these vesting conditions being non-market vesting conditions. The options are
exercisable by the holder with effect from the vesting date and carry no dividend or voting rights. On the granting of
these options, the 120,000 options with an exercise price of £0.34 per share granted to senior managers on 16 April
2019 and expected to vest in future were cancelled.
On 29 July 2020, 200,000 options were granted to Saint Consulting (UK) Limited, the company providing project
management services in respect of the construction of the Cononish mine processing plant building and tailings
management facility. Each option entitles the holder to one ordinary unissued share at a strike price of £0.71. The
vesting of these options is subject to the non-market vesting condition of successful completion of hot commissioning
of the Cononish mine processing plant on or before 31 December 2020, as determined by the Board. The options
are exercisable by the holder with effect from the vesting date and carry no dividend or voting rights.
Subsequent to the grant of the above options, the average weighted exercise price of the 2,350,000 options granted
as share-based payments outstanding and expected to vest in future is £0.536 (30 June 2020 - £0.304).
A drawdown of £500,000 was made on the secured loan facility on 8 July 2020 and further drawdowns of £1,000,000
each were made on 12 August 2020 and 1 September 2020.
Net equity funding of £2,839,650 ($5,190,125), being £3,000,000 ($5,482,414) net of costs of £160,350 ($292,289)
was raised through the placement of 2,727,273 Ordinary shares at £1.10 per share on 12 October 2020 in order to
fund the acceleration of the Phase 2 expansion of the Cononish mine to increase the rate of production from 3,000
tpm to 6,000 tpm as well as to increase the scale of exploration activities.
On 27 October 2020, Scottish Enterprise agreed to amend the terms of the Regional Selective Assistance grant to
extend the cut-off date for submission by SGZ Cononish Limited of claims for the third and fourth tranches of that
grant from 31 October 2020 to 31 May 2021.
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 90
NOTES TO AND FORMING PART OF
THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
AND CONTROLLED ENTITIES
NOTE 31 - 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 subsidiaries
Loan to subsidiaries
Total Non-Current assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Total Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
Financial Performance
2020
$
2019
$
37,086
47,129
84,215
34,988
31,382
66,370
20,230
5,781,978
19,049,817
24,852,025
7,964
5,781,978
17,830,815
23,620,757
24,936,240
23,687,127
47,616
47,616
23,128
23,128
47,616
23,128
24,888,624
23,663,999
49,056,150
418,411
(24,585,937)
24,888,624
45,176,049
339,951
(21,852,001)
23,663,999
Loss for the year attributable to the parent
Total comprehensive loss
2,733,936
2,733,936
4,245,423
4,245,423
The loss attributable to the parent entity includes write down of loans to subsidiaries caused by subsidiary losses of
$4,018,048 (2019: $4,368,164). In the prior year, the parent entity issued a guarantee to Scottish Enterprise in respect
of any amounts of grants received by SGZ Cononish Limited from that entity which may become repayable (see Note
21). Grants in a total amount of £200,000 ($379,468) had been received by SGZ Cononish Limited as at 30 June
2020. The parent entity has no other contingent liabilities or commitments for acquisition of plant and equipment.
Scotgold Resources Limited
Page 91
DIRECTORS’ DECLARATION
AND CONTROLLED ENTITIES
1.
In the opinion of the Directors of Scotgold Resources Limited (the ‘Company’):
a.
the accompanying financial statements and notes are in accordance with the Corporations Act 2001
including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020
and of its performance for the year then ended; and
ii. complying with Australian Accounting Standards, the Corporations Regulations 2001,
professional reporting requirements and other mandatory requirements.
b.
c.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
the financial statements and notes thereto are in accordance with International Financial Reporting
Standards issued by the International Accounting Standards Board.
This declaration has been made after receiving the declarations required to be made to the Directors in
accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2020.
This declaration is made in accordance with a resolution of the Board of Directors.
..............................................................
RICHARD GRAY – Managing Director
Dated at London, England, this 27th day of November 2020
Scotgold Resources Limited
Page 92
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 93
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 94
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 95
INDEPENDENT AUDITOR’S REPORT
AND CONTROLLED ENTITIES
Scotgold Resources Limited
Page 96
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
Rhodora Ltd
Directors’ Shareholding
22,618,223
5,931,400
4,088,961
1,883,115
1,744,657
41.82%
10.97%
7.56%
3.48%
3.22%
The interest of each director in the share capital of the Company is detailed in the Directors’ Report.
Scotgold Resources Limited
Page 97
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 web-site at https://www.scotgoldresources.com/docs/QCA-2020.pdf. In addition, details of the application
by the Company of the principles of the QCA Code are set out in the Directors’ Report.
Scotgold Resources Limited
Page 98